SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter ended September 30, 1996 Commission File Number 0-8952
----------------------- ------
SB PARTNERS
- --------------------------------------------------------------------------
New York 13-6294787
- -------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
666 Fifth Avenue N.Y., N.Y. 10103
- --------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 408-2900
-------------------
- --------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date (applicable only to corporate
issuers).
Not Applicable<PAGE>
SB PARTNERS
INDEX
Part I Financial Information
Balance Sheets
September 30, 1996 and December 31, 1995 . . . . . 1
Statements of Operations
For the three and nine months ended September 30,
1996 and 1995 . . . . . . . . . . . . . . . . . . . 2
Statements of Changes in Partners' Capital
For the years ended December 31, 1994 and 1995
and the nine months ended September 30, 1996 . . . 3
Statements of Cash Flows
For the nine months ended September 30, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . 5 - 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 13
Part II Other Information . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>1
<TABLE>
SB PARTNERS
(a New York limited partnership)
BALANCE SHEETS
September 30, 1996 (Not Audited) and
December 31, 1995 (Audited, but not covered by the report of independent accountants)
<CAPTION>
September 30, December 31,
1996 1995
------------- -------------
<S> <C> <C>
Assets:
Investments -
Real Estate, at cost
Land $ 5,113,690 $ 12,092,365
Buildings, furnishings and improvements 44,779,470 140,331,546
Less - accumulated depreciation and valuation allowance (17,868,194) (45,560,951)
------------ ------------
32,024,966 106,862,960
Investment in joint venture 10,547,412 10,697,225
------------ ------------
42,572,378 117,560,185
Other assets-
Cash and cash equivalents 162,110 3,304,968
Accounts receivable, accrued interest and other 2,766,120 6,394,068
------------ ------------
Total assets $ 45,500,608 $127,259,221
============ ============
Liabilities:
Mortgage notes payable $ 27,173,372 $103,407,513
Accounts payable and accrued expenses 1,331,082 11,271,026
Tenants security deposits 287,890 1,306,052
------------ ------------
Total liabilities 28,792,344 115,984,591
------------ ------------
Partners' Capital:
Units of partnership interest without par value;
Limited partners - 7,753 units 16,724,544 11,291,611
General partner - 1 unit (16,280) (16,981)
------------ ------------
16,708,264 11,274,630
------------ ------------
Total liabilities & partners' capital $ 45,500,608 $127,259,221
============ ============
The accompanying notes are an integral part of these balance sheets.
</TABLE>
<PAGE>2
<TABLE>
SB PARTNERS
(a New York limited partnership)
STATEMENTS OF OPERATIONS (Not Audited)
<CAPTION>
For The Three Months For The Nine Months
Ended September 30, Ended September 30,
---------------------------- ------------------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 2,909,240 $ 5,528,258 $12,785,586 $16,814,973
Interest on short-term investments 8,588 3,230 42,785 32,054
Other 123,155 153,558 387,221 485,199
----------- ----------- ----------- -----------
Total revenues 3,040,983 5,685,046 13,215,592 17,332,226
----------- ----------- ----------- -----------
Expenses:
Interest on mortgage notes payable 1,476,089 2,911,148 6,454,228 8,656,154
Real estate operating expenses 1,908,417 2,720,011 8,489,955 7,834,844
Depreciation and amortization 632,705 1,192,966 2,847,831 3,586,184
Real estate taxes 154,803 490,251 825,686 1,449,571
Management fees 378,347 487,463 1,225,083 1,457,567
Other 23,216 51,180 394,526 358,747
----------- ----------- ----------- ----------
Total expenses 4,573,577 7,853,019 20,237,309 23,343,067
----------- ----------- ----------- ----------
Loss from operations (1,532,594) (2,167,973) (7,021,717) (6,010,841)
Equity in net income of joint venture 112,972 281,109 504,253 531,472
----------- ----------- ----------- -----------
Net loss before extraordinary items (1,419,622) (1,886,864) (6,517,464) (5,479,369)
Gain on dispositions of investments in real estate 4,415,446 0 11,951,098 0
----------- ----------- ----------- -----------
Net income (loss) 2,995,824 (1,886,864) 5,433,634 (5,479,369)
Income (loss) allocated to general partner 386 (243) 701 (707)
----------- ----------- ----------- -----------
Income (loss) allocated to limited partners $ 2,995,438 $(1,886,621) $ 5,432,933 $(5,478,662)
=========== =========== =========== ===========
Net Income (Loss) Per Unit of Limited Partnership Interest:
Loss before extraordinary items $ (183.08) $ (243.34) $ (840.53) $ (706.65)
Extraordinary income $ 569.44 $ 0.00 $ 1,541.28 $ 0.00
=========== =========== =========== ===========
Weighted Average Number of Units of Limited
Partnership Interest Outstanding
7,753 7,753 7,753 7,753
=========== =========== =========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>3
<TABLE>
SB PARTNERS
(a New York limited partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the nine months ended September 30, 1996 (Not Audited) and
for the years ended December 31, 1995 and 1994 (Audited, but not covered by the report of independent public accountants)
<CAPTION>
Limited Partners:
Units of
Partnership Cumulative
Interest Cash Accumulated
Number Amount Distributions Earnings Total
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993 7,753 $119,968,973 $(97,728,323) $ 151,495 $22,392,145
Net loss for the period - - - (7,757,685) (7,757,685)
----- ------------ ------------ ------------ -----------
Balance, December 31, 1994 7,753 119,968,973 (97,728,323) (7,606,190) 14,634,460
Net loss for the period - - - (3,342,849) (3,342,849)
----- ------------ ------------ ------------ -----------
Balance, December 31, 1995 7,753 119,968,973 (97,728,323) (10,949,039) 11,291,611
Net income for the period - - - 5,432,933 5,432,933
----- ------------ ------------ ------------ -----------
Balance, September 30, 1996 7,753 $119,968,973 $(97,728,323) $ (5,516,106) $16,724,544
===== ============ ============ ============ ===========
General Partner:
Units of
Partnership Cumulative
Interest Cash Accumulated
Number Amount Distributions Earnings Total
Balance, December 31, 1993 1 $10,000 $(24,559) $ (990) $(15,549)
Net loss for the period - - - (1,001) (1,001)
----- ------- -------- ------- --------
Balance, December 31, 1994 1 10,000 (24,559) (1,991) (16,550)
Net loss for the period - - - (431) (431)
----- ------- -------- ------- --------
Balance, December 31, 1995 1 10,000 (24,559) (2,422) (16,981)
Net income for the period - - - 701 701
----- ------- -------- ------- --------
Balance, September 30, 1996 1 $10,000 $(24,559) $(1,721) $(16,280)
===== ======= ======== ======= ========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>4
<TABLE>
SB PARTNERS
(a New York limited partnership)
STATEMENTS OF CASH FLOWS (Not Audited)
<CAPTION>
For the Nine Months Ended
September 30,
-------------------------
1996 1995
---------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss) $ 5,433,634 $(5,479,369)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Extraordinary gain on disposition of investment in real estate (11,951,098) 0
Equity in net income of joint venture (504,253) (531,472)
Depreciation and amortization 2,847,831 3,586,184
Amortization of discount on mortgage notes payable 0 289,243
Decrease in other assets 3,173,810 (194,487)
Increase in other liabilities 1,168,407 3,593,934
----------- -----------
Net cash provided by operating activities 168,331 1,264,033
----------- -----------
Cash Flows From Investing Activities:
Proceeds from dispositions of investments in real estate 92,327 0
Capital additions to real estate (1,335,369) (1,980,286)
Payments and distributions received from joint venture 703,857 775,091
----------- -----------
Net cash used in investing activities (539,185) (1,205,195)
----------- -----------
Cash Flows From Financing Activities:
Proceeds from mortgage notes payable 5,350,000 0
Proceeds from short-term loan 1,038,370 0
Retirement of mortgage note payable (5,173,235) 0
Principal payments on mortgage notes payable (2,948,769) (525,535)
Repayment of short-term loan (1,038,370) 0
----------- -----------
Net cash used in financing activities (2,772,004) (525,535)
----------- -----------
Net decrease in cash and cash equivalents (3,142,858) (466,697)
Cash and cash equivalents at beginning of period 3,304,968 1,074,985
----------- -----------
Cash and cash equivalents at end of period $ 162,110 $ 608,288
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 4,656,760 $ 6,058,623
=========== ===========
Supplemental disclosures of non-cash investing and financing activities:
The dispositions of International Jewelry Center and 1010 Market Street, to the extent of the release
from liability for the underlying mortgage notes secured by the properties, represent non-cash investing
and financing activity which has been excluded from the statements of cash flows.
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>5
SB PARTNERS
(a limited partnership)
-----------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited)
-----------------------------------------
(1) Accounting and Financial Reporting
----------------------------------
The financial statements included herein are unaudited;
however, the information reflects all adjustments (consisting solely
of normal recurring adjustments) that are, in the opinion of
management, necessary to a fair presentation of the financial
position, results of operations and cash flows for the interim
periods. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the Registrant believes that
the disclosures are adequate to make the information presented not
misleading. It is suggested that these financial statements be read
in conjunction with the financial statements and the notes thereto
included in the Registrant's latest annual report on Form 10-K.
Certain prior year amounts have been reclassified to make them
comparable with the current year presentation.
The results of operations for the three and nine month periods
ended September 30, 1996 and 1995 are not necessarily indicative of
the results to be expected for the full year.
(2) Mortgage Notes Payable
----------------------
During the nine months period ended September 30, 1996, the
Registrant refinanced the mortgage note secured by Plantation Shopping
Center. The existing mortgage note, with a balance of $5,173,000, was
retired and a short-term secured note of $5,350,000 obtained from a
bank was placed on the property. Payment terms of the new note
include interest only, based upon a fixed spread over a LIBOR index,
until the maturity of the note at the end of 1997. The Registrant
expects to evaluate the potential for a sale of the shopping center or
to refinance the new short-term loan with more conventional long term
financing prior to the maturity of the note.
<PAGE>6
(3) Gain on Disposition of Investments in Real Estate
-------------------------------------------------
As previously reported, the Registrant stopped making
regularly scheduled payments on the mortgage note secured by 1010
Market Street office building in May, 1996. The lender, Connecticut
General Life Insurance Company, filed a Notice of Default on May 9,
and a notice of Acceleration of Debt on May 22, 1996. The lender then
drew the full amount, $1,038,000, of the irrevocable letters of credit
which served as additional collateral securing the financing for the
1010 Market Street office building. The Registrant secured a short-
term loan from a bank to reimburse the draw on the letter of credit,
then repaid the short-term loan in full before the end of the second
quarter. On August 1, 1996, the lender filed a Notice of Foreclosure
Sale. Title to the property was taken by the lender on August 28,
1996 in a foreclosure sale. The Registrant had a gain of $4,415,000
as a result of the disposition of this investment in real estate. The
foreclosure will have negative tax consequences for some partners.
Also as previously reported, cash flow generated by
International Jewelry Center, located in Los Angeles, California, had
not been sufficient to carry debt service on the mortgage encumbering
the property. The Registrant ceased paying scheduled debt service in
May 1993, and since then had been paying debt service based on
available cash flow from the building. The loan was declared in
default by the lender in November 1993, and the lender filed a Notice
of Default and Election to Sell on March 3, 1995 and a Notice of
Trustee's Sale on April 24, 1996. Negotiations with the lender were
concluded on May 22, 1996, when the title to the property was
transferred to a designee of the lender. Consideration for this
conveyance was $238,000, subject to the first leasehold note and deed
of trust, the balance of which was $33,898,520, and the assumption by
the designee of the ground lease. The Registrant had a gain of
$7,536,000 associated with the disposition. The disposition will have
negative tax consequences for some partners.
Please refer also to the Liquidity and Capital Resources section of
the Management Discussion and Analysis.
(4) Commitments and Contingencies
-----------------------------
The Registrant is a party to certain actions directly related
to its normal business operations. While the ultimate outcome is not
presently determinable with certainty, the Registrant believes that
the resolution of these matters will not have a material effect on its
financial position and results of operations.
<PAGE>7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996
----------------------------------------------
General
-------
The financial statements as of and for the three months ended
September 30, 1996 reflect the operations of two office properties,
including the 1010 Market Street office building (See Footnote 3 of
the Financial Statements), one shopping center, two residential garden
apartment properties and two joint ventures. The financial statements
as of and for the nine months ended September 30, 1996 reflect the
operations of three office properties, including the International
Jewelry Center and 1010 Market Street office building (See Footnote 3
of the Financial Statements), one shopping center, two residential
garden apartment properties and two joint ventures. The
financial statements for the three and nine months ended September 30,
1995 reflect the operations of three office properties, one shopping
center, three residential garden apartment properties and two joint
ventures.
Total revenues for the three months ended September 30, 1996
decreased $2,644,000 to approximately $3,041,000 from approximately
$5,685,000 for the three months ended September 30, 1995. Net income
after gain on disposition of investments in real estate for the three
months ended September 30, 1996 increased $4,883,000 to approximately
$2,996,000 from a net loss of approximately $1,887,000 for the three
months ended September 30, 1995.
Total revenues for the nine months ended September 30, 1996
decreased $4,117,000 to approximately $13,216,000 from approximately
$17,332,000 for the nine months ended September 30, 1995. Net income
after gain on disposition of investments in real estate for the nine
months ended September 30, 1996 increased $10,913,000 to approximately
$5,434,000 from a net loss of approximately $5,479,000 for the nine
months ended September 30, 1995.
Changes in total revenues and net income/loss are
substantially attributable to the sale of Sahara Palms Apartments in
December, 1995, the disposition of the International Jewelry Center in
May, 1996, and the disposition of 1010 Market Street in August, 1996.
<PAGE>8
Liquidity and Capital Resources
-------------------------------
As of September 30, 1996, the Registrant had cash and cash
equivalents of $162,000 in addition to $669,000 of deposits held in
escrow by certain lenders for the payment of insurance, real estate
taxes, and certain capital and maintenance costs. These balances are
approximately $3,619,000 less than cash, cash equivalents, and
deposits held in escrow on December 31, 1995. The decrease is
primarily due to the payment of a required principal reduction of
$1,500,000 paid to the former lender of the mortgage note secured by
Plantation Shopping Center, payment of $1,038,370 to reimburse the
letter of credit securing the financing for 1010 Market Street office
building, and approximately $410,000 of mortgage principal paid
through regularly scheduled payments. In addition, the Registrant
made expenditures of approximately $1,335,000 for capital additions to
existing properties during the period.
Debt at September 30, 1996 consisted of approximately $22
million of nonrecourse first mortgage notes payable secured by real
estate owned by the Registrant, and a note of $5,350,000 secured by
Plantation Shopping Center. The Registrant will evaluate the
possibility of a sale of Plantation or more conventional long term
financing before the term of the note expires at the end of 1997. The
Registrant is negotiating with the current lender for the mortgage
loan secured by Meadowwood Apartments to extend the maturity of the
loan, increase the loan amount, and reduce the interest rate. Other
scheduled maturities through regularly scheduled monthly payments of
principal and interest will be approximately $56,000 for the last
quarter of 1996. The terms of certain mortgage notes require monthly
escrow of estimated annual real estate tax, insurance and reserves for
repairs, maintenance and improvements to the secured property, in
addition to the payments of principal and interest. The Registrant
has no other debt except normal trade accounts payable and expenses,
and accrued interest on previously discussed mortgage notes payable.
Cash flow from the Registrant's apartment properties has been
increasing moderately, reflecting the strong Atlanta and Reno
apartment submarkets. Based upon the refinancing of the loan with a
significantly lower interest rate and debt service requirement,
Plantation Center is expected to generate positive cash flow for the
balance of 1996. The disposition of International Jewelry Center from
the Registrant's portfolio of investments will not have a significant
impact on cash flows since, during recent years, the Registrant paid
debt service to the lender equal to the cash flow from the operations
of the property. Likewise,
<PAGE>9
the elimination of 1010 Market Street office building is not expected
to have a significant impact on the future cash flows of the
Registrant. The Registrant's remaining properties are expected to
generate sufficient cash flow to cover operating, financing and
capital improvement costs for the foreseeable future.
Holiday Park Apartments
-----------------------
Total revenues for the three months ended September 30, 1996
increased $5,000 to approximately $270,000 from $265,000 for the three
months ended September 30, 1995. Net loss after depreciation and
mortgage interest expense for the three months ended September 30,
1996 decreased $6,000 to $29,000 from $35,000 for the three months
ended September 30, 1995. The increase in revenues is primarily a
result of a stronger apartment market as evidenced by rental increases
implemented at the property during the year which increased revenues
$5,000, while average occupancy remained unchanged from the prior
year. The decrease in net loss was primarily due to the increased
revenues and a decrease in mortgage interest expense of $1,000.
Total revenues for the nine months ended September 30, 1996
increased $23,000 to $819,000 from $796,000 for the nine months ended
September 30, 1995. Net loss after depreciation and mortgage interest
expense for the nine months ended September 30, 1996 decreased $34,000
to $71,000 from $105,000 for the nine months ended September 30, 1995.
The increase in revenues is primarily a result of a stronger apartment
market as discussed above, as rental increases implemented at the
property increased revenues $14,000, increased occupancy during the
nine month period increased revenues $6,000, and increases in
miscellaneous income increased revenues $3,000. The decrease in net
loss was primarily due to the increased revenue and decreases in
repairs and maintenance costs of $9,000, and interest expense of
$2,000.
<PAGE>10
Meadow Wood Apartments
----------------------
Total revenues for the three months ended September 30, 1996
increased $86,000 to $1,190,000 from $1,104,000 for the three months
ended September 30, 1995. Net income after depreciation and mortgage
interest expense for the nine months ended September 30, 1996
increased $57,000 to $36,000 from a net loss of $21,000 for the three
months ended September 30, 1995. The increase in revenues is
primarily due to the implementation of increased rental rates at the
property which increased revenues $72,000, and increases in
miscellaneous income which increased revenues $14,000. The increase
in net income is primarily due to the increased revenues which were
partially offset by increases in repairs and maintenance costs of
$26,000, and increases in payroll expense of $6,000, partially offset
by decreased interest expense of $3,000.
Total revenues for the nine months ended September 30, 1996
increased $131,000 to $3,461,000 from $3,330,000 for the nine months
ended September 30, 1995. Net income after depreciation and mortgage
interest expense for the nine months ended September 30, 1996
increased $44,000 to net income of $9,000 from a net loss of $35,000
for the nine months ended September 30, 1995. The increase in
revenues is primarily the result of a strong apartment market as
evidenced by increases in rental rates implemented at the property
during the last year which increased revenues by $205,000, and
increases in miscellaneous income which increased income $17,000.
These increases were partially offset by decreased occupancy during
the year which decreased revenues $91,000. The increase in net income
is primarily due to the increased revenues and decreases in mortgage
interest expense of $7,000, partially offset by increases in repairs
and maintenance costs of $95,000.
International Jewelry Center
----------------------------
The Registrant transferred title to the International Jewelry
Center on May 22, 1996 through negotiations with the former lender
which resulted in a net gain on disposition of $7,536,000. (Please
refer to Footnote 3 of the Financial Statements.)
Total revenues for the three months ended September 30, 1996
decreased to $-0- from $1,702,000 for the three months ended September
30, 1995. Net loss for the three months ended September 30, 1996
decreased to $-0- from $840,000 for the three months ended September
30, 1995. There was no reportable activity for the quarter for the
International Jewelry Center due to the disposition earlier in the
year.
<PAGE>11
Total revenues for the nine months ended September 30, 1996
decreased $2,302,000 to $2,853,000 from $5,155,000 for the nine months
ended September 30, 1995. Net loss before the gain on disposition and
after depreciation and mortgage interest expense for the nine months
ended September 30, 1996 increased $1,141,000 to $3,482,000 from
$2,341,000 for the nine months ended September 30, 1995.
Due to the disposition of the property by the Registrant, the
reporting period for the International Jewelry Center ended on May 22,
1996. The changes in revenues and net loss are substantially due to
the shortened reporting periods. Also included in the activity for
the reporting period is a write-off of bad debt expense of $1,931,000
which increased the net loss reported for the nine months ended
September 30, 1996.
Plantation Shopping Center
--------------------------
Total revenues for the three months ended September 30, 1996
decreased $101,000 to $233,000 from $334,000 for the three months
ended September 30, 1995. Net loss after depreciation and mortgage
interest expense for the three months ended September 30, 1996
decreased $98,000 to $78,000 from $176,000 for the three months ended
September 30, 1995. The decrease in total revenues was primarily due
to decreases in rental rates for new and renewal leases at the
property which decreased revenues $64,000, a decrease in average
occupancy of approximately 10.4% to 70.5% from 80.9% for the period a
year earlier which decreased revenues $28,000, and decreases in
escalation income which decreased revenues $9,000. The decrease in
net loss is primarily due decreases in interest expense of $214,000
and professional fees of $9,000, partially offset by the decrease in
revenue and an increase in depreciation expense of $26,000.
Total revenue for the nine months ended September 30, 1996
decreased $16,000 to $1,082,000 from $1,098,000 for the nine months
ended September 30, 1995. Net loss after depreciation and mortgage
interest expense for the nine months ended September 30, 1996
decreased $335,000 to $68,000 from $403,000 for the nine months ended
September 30, 1995. The decrease in total revenues was primarily due
to a decrease in average occupancy of 4% to 76% for the nine months
ended September 30, 1996 from 80% for the period a year earlier, which
decreased income $40,000. In addition, lower escalation income
decreased revenues $40,000. These decreases in revenue were partially
offset by increases in participation rents of $15,000, and increases
in rental rates charged at the property for new and renewal leases
which increased revenues $47,000. The decrease in net loss is
primarily due to decreases in mortgage interest expense of $418,000,
partially offset by increases in depreciation expense of $67,000, and
the decrease in revenues.
<PAGE>12
1010 Market Street
------------------
The Registrant returned title to the property to the lender on
August 28, 1996 in a foreclosure sale which resulted in a net gain of
approximately $4,415,000. (Please refer to Footnote 3 of the
Financial Statements.)
Total revenues for the three months ended September 30, 1996
decreased $505,000 to $942,000 from $1,447,000 for the three months
ended September 30, 1995. Net loss before gain on disposition and
after depreciation and mortgage interest expense for the three months
ended September 30, 1996 increased $1,764,000 to $1,963,000 from
$199,000 for the three months ended September 30, 1995.
Total revenue for the nine months ended September 30, 1996
decreased $556,000 to $3,816,000 from $4,372,000 for the nine months
ended September 30, 1995. Net loss before gain on disposition and
after depreciation and mortgage interest expense for the nine months
ended September 30, 1996 increased $1,154,000 to $1,682,000 from
$528,000 for the nine months ended September 30, 1995.
Due to the disposition of the property by the Registrant, the
reporting period for 1010 Market Street office building ended on
August 28, 1996. The changes in revenues and net loss are
substantially due to the shortened reporting periods. Also included
in the activity for the reporting period is a write-off of bad debt
expense of approximately $600,000 which increased the net loss
reported for the periods.
Cherry Hill Office Center
-------------------------
Total revenues for the three months ended September 30, 1996
increased $50,000 to $392,000 from $342,000 for the three months ended
September 30, 1995. Net income after depreciation and mortgage
interest expense increased $18,000 to $30,000 from $12,000 for the
three months ended September 30, 1995. The increase in revenues was
primarily due to an increase in average occupancy of 6% to 79% for the
quarter ended September 30, 1996 from 73% for the comparable period in
1995, which increased revenues $31,000, and increases in rental rates
charged on new and renewal leases which increased revenues $18,000.
The increase in net income was primarily due to the increased
revenues, partially offset by increases in repairs and maintenance
costs of $18,000, depreciation expense of $7,000, and professional
fees of $7,000.
<PAGE>13
Total revenues for the nine months ended September 30, 1996
increased $115,000 to $1,124,000 from $1,009,000 for the nine months
ended September 30, 1995. Net income after depreciation and mortgage
interest expense decreased $30,000 to $53,000 from $83,000 for the
nine months ended September 30, 1995. The increase in total revenues
was primarily due to increases in base rent charged to tenants on new
and renewal leases which increased revenues by $51,000, an increase in
average occupancy of 4% to 79% for the nine months ended September 30,
1996 from 75% for the period a year earlier which increased revenues
$46,000. Additionally, there were increases in escalation income of
$13,000 and miscellaneous income of $4,000. The decrease in net
income is primarily due to increased operating expenses, including
increases in repairs and maintenance costs of $49,000, utilities
expense of $36,000, depreciation and amortization expense of $25,000,
payroll and related costs of $15,000, professional fees of $8,000,
administrative expenses of $5,000, insurance expense of $5,000, and
real estate taxes of $2,000. The increased expenses were partially
offset by the increased revenues.
Investment in Joint Venture
---------------------------
Equity in net income of joint venture for the three months
ended September 30, 1996 decreased $168,000 to $113,000 from $281,000
for the three months ended September 30, 1995. The decrease is
primarily due to a decrease in occupancy of 9% to 87% at September 30,
1996 as compared to 96% for the previous year. Lower occupancy is
attributable decreased demand for housing in the Atlanta area due to
the conclusion of the Olympic Games, and reduced income $65,000 as
compared to the period a year earlier. In addition, net income was
lower due to increases in operating expenses, primarily increases in
utilities expense of $44,000, repairs and maintenance costs of
$27,000, and depreciation expense of $4,000.
Equity in net income of joint venture for the nine months
ended September 30, 1996 decreased $27,000 to $504,000 from $531,000
for the three months ended September 30, 1995. The decrease is
attributable to an increase in depreciation expense of $15,000 and a
decrease of $11,000 in interest income earned by the venture.
<PAGE>14
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
---------------------------------
(a) Exhibits
None
(b) Reports on Form 8-K
Financial
Date Event Reported Statements
---- -------------- ----------
May 22, 1996 Property Disposition Yes
August 29, 1996 Property Disposition Yes
All other item numbers are not submitted
because they are not applicable.
<PAGE>15
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SB PARTNERS
-------------------------------
(Registrant)
By:SB PARTNERS REAL ESTATE CORPORATION
-----------------------------------
General Partner
Dated: November 14, 1996 By:/s/ John H. Streicker
-------------------------------
John H. Streicker
President
Dated: November 14, 1996 By:/s/ Elizabeth B. Longo
-------------------------------
Elizabeth B. Longo
Chief Financial Officer
Dated: November 14, 1996 By:/s/ George N. Tietjen
-------------------------------
George N. Tietjen III
Vice President and Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 162,110
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,766,120
<PP&E> 60,440,572
<DEPRECIATION> (17,868,194)
<TOTAL-ASSETS> 45,500,608
<CURRENT-LIABILITIES> 1,618,972
<BONDS> 27,173,372
<COMMON> 0
0
0
<OTHER-SE> 16,708,264
<TOTAL-LIABILITY-AND-EQUITY> 45,500,608
<SALES> 0
<TOTAL-REVENUES> 13,719,845
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 13,783,081
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,454,228
<INCOME-PRETAX> (6,517,464)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 11,951,098
<CHANGES> 0
<NET-INCOME> 5,433,634
<EPS-PRIMARY> 701
<EPS-DILUTED> 701
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