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 March 31, 1997 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
March 31, 1997 and December 31, 1996 . . . . . . . . . . 1
Statements of Operations
For the three months ended March 31, 1997
and 1996 . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Changes in Partners' Capital
For the years ended December 31, 1995 and 1996
and the three months ended March 31, 1997 . . . . . . . . 3
Statements of Cash Flows
For the three months ended March 31, 1997
and 1996 . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . . . 5
Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . 6 - 8
Part II Other Information . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>1
<TABLE>
SB PARTNERS
(A New York Limited Partnership)
------------------------------
BALANCE SHEETS
March 31, 1997 (Not Audited) and
December 31, 1996 (Audited, but not covered by the report of independent accountants)
------------------------------------------------------------------------------------
<CAPTION>
March 31, December 31,
1997 1996
---- ----
<S> <C> <C>
Assets:
Investments -
Real Estate, at cost
Land $ 5,083,234 $ 5,113,690
Buildings, furnishings and improvements 45,378,822 45,521,700
Less - accumulated depreciation and valuation allowance (18,390,197) (18,278,229)
----------- -----------
32,071,859 32,357,161
Investment in joint venture 10,733,667 10,742,193
----------- -----------
42,805,526 43,099,354
Other assets-
Cash and cash equivalents 2,016,966 2,019,321
Accounts receivable, accrued interest and other 2,010,799 2,656,255
----------- -----------
Total assets $46,833,291 $47,774,930
=========== ===========
Liabilities:
Mortgage notes payable $30,674,821 $30,752,378
Accounts payable and accrued expenses 757,383 1,113,122
Tenant security deposits 309,589 322,821
----------- -----------
Total liabilities 31,741,793 32,188,321
----------- -----------
Partners' Capital:
Units of partnership interest without par value;
Limited partners - 7,753 units 15,107,987 15,603,034
General partner - 1 unit (16,489) (16,425)
----------- -----------
15,091,498 15,586,609
----------- -----------
Total liabilities & partners' capital $46,833,291 $47,774,930
=========== ===========
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 Ended March 31,
------------------------------------
1997 1996
---- ----
<S> <C> <C>
Revenues:
Rental income 2,017,169 $ 5,288,589
Interest on short-term investments 29,706 20,858
Other 106,189 131,473
----------- -----------
Total revenues 2,153,064 5,440,920
----------- -----------
Expenses:
Interest on mortgage notes payable 601,280 2,379,543
Real estate operating expenses 957,642 2,583,677
Depreciation and amortization 469,638 1,217,969
Real estate taxes 211,088 445,330
Management fees 297,544 484,750
Other 37,293 220,112
----------- -----------
Total expenses 2,574,485 7,331,381
----------- -----------
Loss from operations (421,421) (1,890,461)
Equity in net income (loss) of joint venture (8,527) 185,457
Loss on sale of investment in real estate (65,163) 0
----------- -----------
Net loss
(495,111) (1,705,004)
Loss allocated to general partner (64) (220)
----------- -----------
Loss allocated to limited partners $ (495,047) $(1,704,784)
=========== ===========
Net Loss Per Unit of Limited Partnership Interest $ (63.85) $ (219.89)
=========== ===========
Weighted Average Number of Units of Limited
Partnership Interest Outstanding 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 three months ended March 31, 1997 (Not Audited) and
for the years ended December 31, 1996 and 1995 (Audited, but not covered by the report of independent public accountants)
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Limited Partners:
Units of
Partnership
Interest Cumulative
----------- Cash Accumulated
Number Amount Distributions Earnings Total
------ ------ ------------- ----------- -----
<S> <C> <C> <C> <C> <C>
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 - - - 4,311,423 4,311,423
----- ------------ ------------ ----------- -----------
Balance, December 31, 1996 7,753 119,968,973 (97,728,323) (6,637,616) 15,603,034
Net loss for the period - - - (495,047) (495,047)
----- ------------ ------------ ----------- -----------
Balance, March 31, 1997 7,753 $119,968,973 $(97,728,323) $(7,132,663) $15,107,987
===== ============ ============ =========== ===========
General Partner:
Units of
Partnership
Interest Cumulative
----------- Cash Accumulated
Number Amount Distributions Earnings Total
------ ------ ------------- ----------- -----
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 - - - 556 556
----- ------- -------- ------- --------
Balance, December 31, 1996 1 10,000 (24,559) (1,866) (16,425)
Net loss for the period - - - (64) (64)
----- ------- -------- ------- --------
Balance, March 31, 1997 1 $10,000 $(24,559) $(1,930) $(16,489)
===== ======= ======== ======= ========
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 Three Months Ended
March 31,
--------------------------
1997 1996
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss $ (495,111) $(1,705,004)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Loss on sale of investment in real estate 65,163 0
Equity in net (income) loss of joint venture 8,527 (185,457)
Depreciation and amortization 469,638 1,217,969
Decrease in other assets 600,777 380,063
Increase (decrease) in other liabilities (368,971) 50,994
---------- -----------
Net cash provided by (used in) operating activities 280,023 (241,435)
---------- -----------
Cash Flows From Investing Activities:
Proceeds from sale of investment in real estate 45,000 0
Capital additions to real estate (249,821) (466,642)
Distributions received from joint venture 0 293,100
---------- -----------
Net cash used in investing activities (204,821) (173,542)
---------- -----------
Cash Flows From Financing Activities:
Principal payments on mortgage notes payable (77,557) (1,693,788)
---------- -----------
Net cash used in financing activities (77,557) (1,693,788)
---------- -----------
Net decrease in cash and cash equivalents (2,355) (2,108,765)
Cash and cash equivalents at beginning of period 2,019,321 3,304,968
---------- -----------
Cash and cash equivalents at end of period $2,016,966 $ 1,196,203
========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 460,081 $ 1,668,988
========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>5
SB PARTNERS
(A New York Limited Partnership)
--------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited)
-----------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1997
-----------------------------------------
(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.
The results of operations for the three month periods ended
March 31, 1997 and 1996 are not necessarily indicative of the results to
be expected for a full year.
(2) Loss on Sale of Investment in Real Estate
-----------------------------------------
During the three month period ended March 31, 1997, the Registrant
sold its ten percent interest in an apartment project in Orlando, Florida.
The Registrant had been using the cost method to account for this
investment. The net loss of $65,000 realized in this transaction is
reflected on the statement of operations as a loss on sale of investment
in real estate.
(3) Other Matters
-------------
The Partnership is a party to certain actions directly related to its
normal business operations. While the ultimate outcome is not presently
determinable with certainty, the Partnership believes that the resolution
of these matters will not have a material effect on its financial position
and operations.
<PAGE>6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1997
---------------------------------------------------
General
- -------
The financial statements as of and for the three month period ended March
31, 1997 reflect the operations of one office property, one shopping center,
two residential garden apartment properties and a joint venture. The financial
statements as of and for the three month period ended March 31, 1996 reflect
the operations of three office properties, one shopping center, two residential
garden apartment properties and two joint ventures.
Total income for the three months ended March 31, 1997 decreased
$3,288,000 to approximately $2,153,000 from approximately $5,441,000 for the
three months ended March 31, 1996. The net loss for the three months ended
March 31, 1997 decreased $1,210,000 to approximately $495,000 from
approximately $1,705,000 for the three months ended March 31, 1996.
Changes in total income and net loss are substantially attributable to the
dispositions of International Jewelry Center and 1010 Market Street office
buildings during 1996. Together, these two office buildings accounted for 59%
of total revenues and 70% of the net loss for the three months ended March 31,
1996.
Liquidity and Capital Resources
- -------------------------------
As of March 31, 1997, the Registrant had cash and cash equivalents of
$2,017,000 in addition to $648,000 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 $54,000 more than
cash, cash equivalents, and deposits held in escrow on December 31, 1996.
Debt at March 31, 1997, consisted of approximately $25,325,000 of
nonrecourse first mortgage notes payable secured by real estate owned by the
Registrant, and a recourse note of $5,350,000 secured by Plantation Shopping
Center. Payment terms of the Plantation note are interest only, based upon a
fixed spread over a LIBOR index, until the maturity of the note at December 31,
1997. The Registrant expects to evaluate the potential for a sale of the
shopping center or to refinance this short-term loan with more conventional
long-term financing prior to the maturity of the note. Other scheduled
maturities through regularly scheduled monthly payments of principal and
interest will be approximately $315,000 for the last three fiscal quarters of
1997. 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 mortgage notes payable.
Cash flow from the Registrant's remaining apartment properties has been
increasing moderately, reflecting improving markets. 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 from operations during 1997. The Registrant's remaining properties are
expected to generate sufficient cash flow to cover operating, financing and
capital improvement costs of the Registrant for the foreseeable future.
<PAGE>7
Holiday Park Apartments
- -----------------------
Total revenues for the three months ended March 31, 1997 increased $8,000
to $281,000 from $273,000 for the three months ended March 31, 1996. Net loss
after depreciation and mortgage interest expense for the three months ended
March 31, 1997 decreased $2,000 to $24,000 from $26,000 for the three months
ended March 31, 1996.
The increase in total revenues is primarily due to increases in rental
rates charged at the property which increased revenues $4,000, and a marginal
increase in average occupancy which increased revenues $3,000. The decrease in
net loss is primarily due to the increase in revenue, and a decrease in
professional fees of $3,000, partially offset by increases in payroll and
related costs of $4,000, and repairs and maintenance costs of $4,000.
Meadow Wood Apartments
- ----------------------
Total revenues for the three months ended March 31, 1997 decreased $3,000
to $1,146,000 from $1,149,000 for the three months ended March 31, 1996. Net
income after depreciation and mortgage interest expense for the three months
ended March 31, 1997 increased $22,000 to $43,000 from $21,000 for the three
months ended March 31, 1996.
The decrease in revenues is primarily the result of a decrease in average
occupancy at the property of approximately 3% to 93% for the three months ended
March 31, 1997 from 96% for the comparable period a year earlier. The decrease
in average occupancy decreased income $50,000, but was partially offset by
increases in rental rates implemented at the property during the past year
which increased income $38,000, and increases in miscellaneous income of
$8,000. The increase in net income is primarily due to decreased financing
costs as a result of refinancing the mortgage note encumbering the property at
the end of 1996. Interest expense for the three months ended March 31, 1997
was $15,000 less than the costs for the previous year, and, because of reduced
costs incurred in connection with securing the new loan, amortization of
financing costs was $29,000 less than the previous year. The reduction in
financing costs was partially offset by increased operating expenses, primarily
an increase in repairs and maintenance costs of $21,000.
Plantation Shopping Center
- --------------------------
Total revenues for the three months ended March 31, 1997 decreased $52,000
to $355,000 from $407,000 for the three months ended March 31, 1996. Net loss
after depreciation and mortgage interest expense for the three months ended
March 31, 1997 increased $53,000 to a net loss of $51,000 from net income of
$2,000 for the three months ended March 31, 1996.
<PAGE>8
The decrease in revenues is primarily due to the loss of a large tenant in
the second quarter of 1996, and a second tenant who, during 1996, was relieved
of paying minimum rent and is paying only percentage rent while occupying space
on the premises. The increase in net loss is primarily due to the decrease in
revenues, since decreases in expenses, such as a decrease of $60,000 in
interest expense, were offset by increases in other expenses, such as increases
in real estate taxes of $22,000, depreciation and amortization of $22,000, and
professional fees of $19,000.
Cherry Hill Office Center
- -------------------------
Total revenues for the three months ended March 31, 1997 decreased $25,000
to $342,000 from $367,000 for the three months ended March 31, 1996. Net
income after depreciation and mortgage interest expense for the three months
ended March 31, 1997 increased $30,000 to net income of $20,000 from a net loss
of $10,000 for the three months ended March 31, 1996.
The decrease in revenues is primarily due to a decrease in average base
rental rates charged at the property which decreased income $30,000, and a
decrease in miscellaneous income of $4,000. These decreases were partially
offset by an increase in average occupancy of 1.71% to 77.18% from 75.47% for
the period a year earlier, which increased revenues $7,000, and an increase in
escalation income of $2,000. The decrease in revenues was offset by decreased
expenses, primarily a decrease of $39,000 in repairs and maintenance expense,
and a decrease of $21,000 in utility expense due to the mild winter of 1997 as
compared to the severe winter a year earlier, and a decrease in payroll and
related costs of $5,000. These decreases in expenses were partially offset by
increases in other expenses, primarily an increase of $9,000 in depreciation
expense.
Investment in Joint Venture
- ---------------------------
Equity in net income (loss) of joint venture for the three months ended
March 31, 1997 decreased $194,000 to a net loss of $9,000 from net income of
$185,000 for the three months ended March 31, 1996.
The increase in net loss was primarily due to a decrease in the average
occupancy rate in the first quarter of 1997 of 12% to 80% as compared with 92%
in the first quarter of 1996. This lower occupancy, attributable to decreased
demand for housing in the Atlanta area following the conclusion of the Olympic
games, reduced income $127,000 as compared to a year earlier. In addition,
increases in repairs and maintenance expense of $56,000, and real estate taxes
of $18,000, contributed to the increase in net loss.
<PAGE>9
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
None
All other item numbers are omitted
because they are not applicable.
<PAGE>10
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: May 15, 1997 By: /s/ John H. Streicker
--------------------------
John H. Streicker
President
Dated: May 15, 1997 By: /s/ Elizabeth B. Longo
---------------------------
Elizabeth B. Longo
Chief Financial Officer
Dated: May 15, 1997 By: /s/ George N. Tietjen
---------------------------
George N. Tietjen III
Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,016,966
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,010,799
<PP&E> 61,195,723
<DEPRECIATION> (18,390,197)
<TOTAL-ASSETS> 46,833,291
<CURRENT-LIABILITIES> 1,066,972
<BONDS> 30,674,821
<COMMON> 0
0
0
<OTHER-SE> 15,091,498
<TOTAL-LIABILITY-AND-EQUITY> 46,833,291
<SALES> 0
<TOTAL-REVENUES> 2,079,374
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,973,205
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 601,280
<INCOME-PRETAX> (495,111)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (495,111)
<EPS-PRIMARY> (64)
<EPS-DILUTED> (64)
</TABLE>
