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, 1997 Commission File Number 0-8952
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SB PARTNERS
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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
--------------------
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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, 1997 and December 31, 1996 . . . . . . . . . . 1
Statements of Operations
For the three and nine months ended September 30, 1997
and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Changes in Partners' Capital
For the nine months ended September 30, 1997
and the years ended December 31, 1996 and 1995 . . . . . . . 3
Statements of Cash Flows
For the nine months ended September 30, 1997
and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . . . 5 - 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . 7 - 12
Part II Other Information . . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>1
<TABLE>
SB PARTNERS
(a New York limited partnership)
------------------------------
BALANCE SHEETS
September 30, 1997 (Not Audited) and
December 31, 1996 (Audited, but not covered by the report of independent accountants)
------------------------------------------------------------------------------------
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Assets:
Investments -
Real Estate, at cost
Land $ 2,924,653 $ 5,113,690
Buildings, furnishings and improvements 28,726,406 45,521,700
Less - accumulated depreciation and valuation allowance (13,016,464) (18,278,229)
------------ ------------
18,634,595 32,357,161
Investment in joint venture 10,961,882 10,742,193
------------ ------------
29,596,477 43,099,354
Other assets-
Real estate assets held for sale 13,021,025 0
Cash and cash equivalents 1,764,304 2,019,321
Accounts receivable and other assets 2,031,557 2,656,255
------------ ------------
Total assets $ 46,413,363 $ 47,774,930
============ ============
Liabilities:
Mortgage notes payable $ 30,179,151 $ 30,752,378
Accounts payable and accrued expenses 934,879 1,113,122
Tenants security deposits 311,464 322,821
------------ ------------
Total liabilities 31,425,494 32,188,321
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Partners' Capital:
Units of partnership interest without par value;
Limited partners - 7,753 units 15,004,371 15,603,034
General partner - 1 unit (16,502) (16,425)
------------ ------------
14,987,869 15,586,609
------------ ------------
Total liabilities & partners' capital $ 46,413,363 $ 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 For The Nine Months
Ended June 30, Ended June 30,
----------------------- -----------------------
1997 1996 1997 1996
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues:
Rental income $2,131,312 $ 2,909,240 $6,487,702 $12,785,586
Interest on short-term investments 24,931 8,588 84,674 42,785
Other 21,084 123,155 254,050 387,221
---------- ----------- ---------- -----------
Total revenues 2,177,327 3,040,983 6,826,426 13,215,592
---------- ----------- ---------- -----------
Expenses:
Interest on mortgage notes payable 581,246 1,476,089 1,779,090 6,454,228
Real estate operating expenses 931,809 1,308,206 2,747,661 5,958,439
Write-off of uncollectable accounts 0 600,211 0 2,531,516
Depreciation and amortization 476,396 632,705 1,425,114 2,847,831
Real estate taxes 215,891 154,803 660,493 825,686
Management fees 300,094 378,347 897,651 1,225,083
Other 3,973 23,216 69,683 394,526
---------- ----------- ---------- -----------
Total expenses 2,509,409 4,573,577 7,579,692 20,237,309
---------- ----------- ---------- -----------
Loss from operations (332,082) (1,532,594) (753,266) (7,021,717)
Equity in net income of joint venture 172,876 112,972 219,689 504,253
Loss on sale of investment in real estate 0 0 (65,163) 0
---------- ----------- ---------- -----------
Net loss before extraordinary items (159,206) (1,419,622) (598,740) (6,517,464)
Gain on disposition of investment in real estate
through discharge of indebtedness 0 4,415,446 0 11,951,098
---------- ----------- ---------- -----------
Net income (loss) (159,206) 2,995,824 (598,740) 5,433,634
Income (loss) allocated to general partner (21) 386 (77) 701
---------- ----------- ---------- -----------
Income (loss) allocated to limited partners $ (159,185) $ 2,995,438 $ (598,663) $ 5,432,933
========== =========== ========== ===========
Net Income (Loss) Per Unit of Limited Partnership Interest:
Loss before extraordinary items $ (20.53) $ (183.08) $ 77.22) $ (840.53)
Extraordinary income $ 0.00 $ 569.44 $ 0.00 $ 1,541.28
Net income (loss) $ (20.53) $ 386.36 $ (77.22) $ 700.75
========== =========== ========== ===========
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, 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 Cumulative
Interest 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 - - - (598,663) (598,663)
----- ------------ ------------ ------------ -----------
Balance, September 30, 1997 7,753 $119,968,973 $(97,728,323) $ (7,236,279) $15,004,371
===== ============ ============ ============ ===========
General Partner:
Units of
Partnership Cumulative
Interest 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 - - - (77) (77)
----- ------- -------- ------- --------
Balance, September 30, 1997 1 $10,000 $(24,559) $(1,943) $(16,502)
===== ======= ======== ======= ========
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,
------------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss) $ (598,740) $ 5,433,634
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Loss on sale of investment in real estate 65,163 0
Extraordinary gain on disposition of investment in real estate 0 (11,951,098)
Equity in net income of joint venture (219,689) (504,253)
Distributions received from joint venture 0 504,253
Depreciation and amortization 1,425,114 2,847,831
Write-off of uncollectable accounts 0 2,351,516
Decrease in other assets 492,006 822,294
Increase (decrease) in other liabilities (189,600) 1,168,407
----------- ------------
Net cash provided operating activities 974,254 672,584
----------- ------------
Cash Flows From Investing Activities:
Proceeds from sale of investment in real estate 45,000 92,327
Capital additions to real estate (701,044) (1,335,369)
Distributions received from joint venture in excess of
net income 0 199,604
----------- ------------
Net cash used in investing activities (656,044) (1,043,438)
----------- ------------
Cash Flows From Financing Activities:
Proceeds from mortgage notes payable 0 5,350,000
Proceeds from short-term loan 0 1,038,370
Retirement of mortgage note payable (326,267) (5,173,235)
Principal payments on mortgage notes payable (246,960) (2,948,769)
Repayment of short-term loan 0 (1,038,370)
----------- ------------
Net cash used in financing activities (573,227) (2,772,004)
----------- ------------
Net increase (decrease) in cash and cash equivalents (255,017) (3,142,858)
Cash and cash equivalents at beginning of period 2,019,321 3,304,968
----------- ------------
Cash and cash equivalents at end of period $ 1,764,304 $ 162,110
=========== ============
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 1,647,802 $ 4,656,760
=========== ============
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)
-----------------------------------------
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 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 and nine month periods ended
September 30, 1997 and 1996 are not necessarily indicative of the results
to be expected for the full year.
(2) Mortgage Notes Payable
----------------------
In June 1997, the Partnership retired the mortgage note of $326,000
secured by Cherry Hill Office Center. The note had a 9.50% interest rate
and was scheduled to mature on September 1, 2000.
In October 1997, the existing lender issued an application to
refinance the mortgage loan encumbering Holiday Park Apartments.
The partnership has accepted the application and the refinancing is
expected to occur in December 1997, with a significantly lower interest
rate and approximately $300,000 of additional loan proceeds.
The Partnership expects to retire the $5,350,000 note secured by the
Plantation Shopping Center in December 1997 in connection with the sale of
this asset (see Note 4).
(3) Gain/Loss on Sale of Investment in Real Estate
----------------------------------------------
In January 1997, the Partnership sold its ten percent interest in an
apartment project in Orlando, Florida. The Partnership 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.
<PAGE>6
(4) Real Estate Transactions
------------------------
In October 1997, the Partnership entered into a contract to sell the
Plantation Shopping Center for $11,000,000. The Buyer has completed its
due diligence inspections and closing is scheduled for December 1997.
In September 1997, the joint venture which owns Riverbend Apartments
signed a contract to sell the asset for a price of $24,500,000, and, in
connection therewith, the Partnership will buy its venture partner s
interest for $9,800,000. Since the acquisition of the venture interest is
expected to close in November, and the buyer has the ability to set a
closing date as late as December 30, 1997, the Partnership has negotiated a
bridge loan with its lead bank. The buyer has the option of terminating its
contract at the conclusion of its due diligence investigations on December
15, 1997. Should this occur, the Partnership would put the property back
on the market.
In October 1997, the Partnership entered into a contract to sell
Cherry Hill Office Center. A closing is scheduled for January 1998. The
buyer retains the option to terminate the contract at the conclusion of its
due diligence negations on November 24, 1997. Should that occur, the
Partnership would put the property back on the market.
In light of the above transactions, both the Plantation Shopping
Center and the Cherry Hill Office Center are included in real estate
assets held for sale on the accompanying balance sheet.
There can be no assurance that these sales will occur. Sales prices
shown are gross prices to the Partnership and do not reflect the payment of
underlying debt, if any, brokerage fees, or closing costs and adjustments.
(5) 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 results of operations.
On November 6, 1997, Hugh Spencer, a limited partner who holds two
units in the Partnership, filed a purported class action complaint, on
behalf of himself and other persons similarly situated, against the
Partnership and its general partner and other affiliates in the Supreme
Court of the State of New York, County of New York, entitled
Spencer v. SB Partners et. al., Index No. 120673/97. The complaint alleges,
inter alia, that the business of the Partnership can only be carried on at
a loss, and that the general partner breached the partnership agreement and
its fiduciary duties, and seeks a court decree of dissolution of the
Partnership pursuant to Sections 63 and 99 of the New York Partnership Law,
an accounting from the general partner, the appointment of a receiver
to wind up the Partnership's affairs and an award of costs and attorneys'
fees to the plaintiff and the putative class. The Partnership believes
that it has meritorious defenses to the action and that it will not have a
material adverse affect on its financial position.
<PAGE>7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997
----------------------------------------------
General
-------
The financial statements as of and for the three and nine months
ended September 30, 1997 reflect the operations of one office property, one
shopping center, two residential garden apartment properties and one joint
venture owning an apartment property. The financial statements as of and
for the three and nine months ended September 30, 1996 reflect the
operations of two office properties, one shopping center, two residential
garden apartment properties and two joint ventures owning apartments. The
nine month period ended September 30, 1996, also includes a third office
property.
The Partnership has entered into contracts to sell three properties:
Plantation Shopping Center, Cherry Hill Office Center, and Riverbend
Apartments (see Footnote 4 of the accompanying financial statements). The
Partnership has also made application to the existing lender to refinance
the mortgage loan encumbering Holiday Park Apartments.
As a result of these transactions, the Partnership estimates the net
proceeds received after the payment of related debt, payment of related
transaction closing costs and expenses will be approximately $23,000,000.
There can be no assurance that these transactions will close. If, however,
they do occur the Partnership will have completed the disposition of the
last of the troubled assets in its portfolio allowing it to recommence cash
distributions to its limited partners in 1998 and to resume acquisition
activities to rebuild its portfolio. Investigations of appropriate new
acquisitions are underway.
Operations
----------
Total revenues for the three months ended September 30, 1997
decreased $864,000 to approximately $2,177,000 from approximately
$3,041,000 for the three months ended September 30, 1996. Net loss
increased $3,174,000 to approximately $178,000 from net income after gain
on disposition of $2,996,000 for the three months ended September 30, 1996.
Total revenues for the nine months ended September 30, 1997 decreased
$6,389,000 to approximately $6,826,000 from approximately $13,216,000 for
the nine months ended September 30, 1996. Net income decreased $6,052,000
to a net loss of approximately $618,000 from net income after gain on
disposition of approximately $5,434,000 for the nine months ended September
30, 1996.
<PAGE>8
Changes in total revenues and net income/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 30.98% of total revenues and 132.61% of the net
loss before the gain on disposition for the three months ended September
30, 1996, and 50.47% of total revenues and 79.22% of the net loss before
the gain on disposition for the nine months ended September 30, 1996. Net
income for the three and nine month periods ended September 30, 1996
include extraordinary gains on disposition of real estate through discharge
of indebtedness of approximately $4,415,000 and $11,951,000, respectively.
Please refer to forms 8-K filed in May and September, 1996, in connection
with these dispositions, and note that all line items of revenue and
expense were similarly affected, as total revenue and expenses, due to
discontinuance of operation of these two large office buildings.
Liquidity and Capital Resources
-------------------------------
As of September 30, 1997, the Registrant had cash and cash
equivalents of $1,764,000 in addition to $870,000 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 $23,000 more than cash, cash equivalents, and deposits held
in escrow on December 31, 1996.
Debt at September 30, 1997 consisted of approximately $24,829,000 of
non-recourse first mortgage notes payable secured by two apartment
properties owned by the Registrant, and a note of $5,350,000 secured by
Plantation Shopping Center. This property is under contract to be sold
with a closing scheduled for December 1997, at which time the note would be
retired. As previously reported, the Registrant retired the mortgage note
secured by Cherry Hill Office Center during the quarter ended June 30,
1997. The balance of the note at the time it was retired was $326,000.
Other scheduled maturities through regularly scheduled monthly payments of
principal and interest will be approximately $88,000 for the last fiscal
quarter of 1997. The terms of the other 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 properties has been increasing
moderately. Each of the properties, including those properties included in
sale discussions, are expected to generate cash flow which is sufficient to
cover operating, financing, and capital improvement costs for the
foreseeable future.
<PAGE>9
Holiday Park Apartments
-----------------------
Total revenues for the three months ended September 30, 1997
increased $24,000 to $294,000 from $270,000 for the three months ended
September 30, 1996. Net loss after depreciation and mortgage interest
expense for the three months ended September 30, 1997 decreased $16,000 to
$13,000 from $29,000 for the three months ended September 30, 1996. The
increase in revenues was primarily due to an increase in average occupancy
at the property from 88.8% to 93.7% which increased income $14,000, while
rental rate increases implemented at the property increased revenues
$9,000, and miscellaneous income increased revenues by $1,000. The decrease
in net loss was primarily due to the increase in revenues, partially offset
by increases in operating expenses including repairs and maintenance of
$5,000 and payroll and related costs of $3,000.
Total revenues for the nine months ended September 30, 1997 increased
$40,000 to $859,000 from $819,000 for the nine months ended September 30,
1996. Net loss after depreciation and mortgage interest expense for the
nine months ended September 30, 1997 decreased $4,000 to $67,000 from
$71,000 for the nine months ended September 30, 1996. The increase in
revenues was primarily the result of increased rental rates implemented at
the property which increased income $19,000, and an increase in average
occupancy of 1.5% to 91.9% from 90.4% for the period a year earlier, which
increased revenues $21,000. The decrease in net loss was primarily due to
the increase in revenues, partially offset by increases in operating
expenses including repairs and maintenance of $18,000, payroll and related
costs of $12,000, and utilities of $7,000. Repairs and maintenance
increased in connection with the higher rate of turnover at the property.
The increase in payroll and related costs was the result of the hiring of
two maintenance staff at the property. For a portion of 1996, the property
was not fully staffed and the hiring of these two new employees during 1997
fully staffed the property.
Meadow Wood Apartments
----------------------
Total revenues for the three months ended September 30, 1997
decreased $86,000 to $1,104,000 from $1,190,000 for the three months ended
September 30, 1996. Net loss after depreciation and mortgage interest
expense for the three months ended September 30, 1997 increased $72,000 to
a net loss of $36,000 from net income of $36,000 for the three months ended
September 30, 1996. The decrease in revenues was primarily a result of
decreases in average occupancy of 6.8% to 88.5% from 95.3% for the period a
year earlier, which decreased revenues $88,000, and decreases in
miscellaneous income which decreased revenues $7,000. These decreases were
partially offset by an increase in rental rates implemented at the property
which increased revenues $10,000. The increase in net loss was primarily
due to the decrease in revenues and an increase in operating expenses,
including increases in repairs and maintenance of $29,000 and utilities of
$21,000, partially offset by 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 September 30, 1997 was $30,000
less than the previous year, and, because of reduced costs incurred in
connection with securing the new loan, amortization of financing costs were
$29,000 less than the previous year.
<PAGE>10
Total revenues for the nine months ended September 30, 1997 decreased
$79,000 to $3,382,000 from $3,461,000 for the nine months ended September
30, 1996. Net income after depreciation and mortgage interest expense for
the nine months ended September 30, 1997 increased $30,000 to $39,000 from
$9,000 for the nine months ended September 30, 1996. The decrease in
revenues was primarily the result of a decrease in average occupancy of
4.7% to 89.5% from 94.2% for the period a year earlier, which decreased
revenues $154,000. This decrease in revenues was partially offset by
increased rental rates implemented at the property, which increased
revenues by $68,000, and an increase in miscellaneous income, which
increased revenue by $6,000. The increase in net income was primarily due
to decreased financing costs. Interest expense for the nine months ended
September 30, 1997 was $66,000, and amortization of financing costs
$84,000, less than the previous year. The rate on the new loan was 7.55%,
versus 9.50% on the old loan, although the loan amount was increased from
$18,396,000 to $21,500,000. In addition, net income increased due to
decreases in certain operating expenses, including payroll and related
costs of $19,000 and insurance costs of $6,000. These changes were
partially offset by an increase in repairs and maintenance of $69,000.
Reno is currently experiencing an oversupply in housing as new construction
is completed and apartments become available. This is especially true in
the northwest and southeast sections of the area. Meadow Wood is located
in the southeast section and is working to maintain its market share,
although it has experienced a decrease in occupancy and increased turnover
of renters. This caused the decrease in revenues due to the decrease in
occupancy, and the increase in repairs and maintenance as a greater number
of apartments needed to be made market ready for new residents.
Plantation Shopping Center
--------------------------
Total revenues for the three months ended September 30, 1997
increased $183,000 to $416,000 from $233,000 for the three months ended
September 30, 1996. Net income after depreciation and mortgage interest
expense for the three months ended September 30, 1997 increased $105,000 to
net income of $27,000 from a net loss of $78,000 for the three months ended
September 30, 1996. The increase in revenues was primarily due to
increases in rental rates on new and renewal leases at the property, which
increased revenue $88,000, an increase in average occupancy of 23.7% to
94.2% from 70.5% for the period a year earlier, which increased revenue
$64,000, an increase in escalation income of $26,000, and an increase in
percentage rents of $5,000. The increase in net income was primarily due to
the increase in revenues, partially offset by increases in operating
expenses, primarily real estate taxes of $21,000 and depreciation expense
of $12,000.
<PAGE>11
Total revenues for the nine months ended September 30, 1997 increased
$294,000 to $1,376,000 from $1,082,000 for the nine months ended September
30, 1996. Net income for the nine months ended September 30, 1997
increased $266,000 to net income of $198,000 from a net loss of $68,000 for
the nine months ended September 30, 1996. The increase in revenues was
primarily due to an increase in escalation income, which increased revenue
$135,000, while increases in rental rates negotiated on new and renewal
leases increased income $82,000. In addition, average occupancy increased
4.4% to 80.6% from 76.2%, which increased income $51,000, while
miscellaneous revenues increased $27,000. The increase in net income was
primarily due to the increases in revenue and decreases in operating
expenses, primarily decreases in interest expense of $83,000, repairs and
maintenance expense of $10,000, and insurance costs of $9,000, partially
offset by increases in real estate taxes of $64,000 and depreciation
expense of $28,000. With the full restoration of the shopping center now
complete after the fire loss suffered in an earlier year, the county has
increased the assessment of the taxable value of the property, increasing
real estate tax expense accordingly. Depreciation expense has likewise
increased now that the restoration is fully operational. Interest expense
decreased from the refinancing of the existing mortgage loan in June 1996
with a short term borrowing at the significantly lower interest rate of
LIBOR plus 2.0% and a lower loan amount. This lowered the effective
borrowing rate 10.25% to 7.625%.
Cherry Hill Office Center
-------------------------
Total revenues for the three months ended September 30, 1997
decreased $54,000 to $338,000 from $392,000 for the three months ended
September 30, 1996. Net loss after depreciation and mortgage interest
expense increased $68,000 to a net loss of $38,000 from net income of
$30,000 for the three months ended September 30, 1996. The decrease in
revenues was primarily the result of decreased rental rates charged on new
and renewal leases which decreased revenues $73,000. This decrease was
partially offset by an increase in escalation income, which increased
income $13,000, while average occupancy increased 1.2% to 80.4% from 79.2%
for the period a year earlier, which increased revenues $5,000. The
decrease in net income was due to the net decrease in revenues and
increases in utilities expense of $28,000, depreciation expense of $7,000,
partially offset by decreases in professional fees of $9,000, interest
expense of $9,000, and insurance costs of $4,000.
<PAGE>12
Total revenues for the nine months ended September 30, 1997 remained
unchanged from September 30, 1996 at approximately $1,124,000. Net income
for the nine months ended September 30, 1997 increased $85,000 to $138,000
from $53,000 for the nine months ended September 30, 1996. The increase in
net income was due to decreases in operating expenses, primarily decreases
in repairs and maintenance of $42,000, utilities expense of $28,000,
payroll and related costs of $17,000, interest expense of $12,000,
insurance costs of $12,000, and professional fees of $10,000, partially
offset by an increase in depreciation expense of $26,000 and financing
costs of $11,000. The decrease in repairs and maintenance is primarily
attributable to the mild winter of early 1997 as compared to the record
snowfalls of early 1996, as snow removal costs were significantly lower in
the current year. Utilities expense also decreased for the nine month
period as a result of the milder weather.
Investment in Joint Venture
---------------------------
Equity in net income of joint venture for the three months ended
September 30, 1997 increased $99,000 to $212,000 from $113,000 for the
three months ended September 30, 1996. The increase in net income was
primarily due to a decrease in property operating expenses as compared to a
year earlier, as average occupancy and rental rates for the three months
ended September 30, 1997 were approximately equal to the three month period
a year earlier, leaving total revenues virtually unchanged between the two
periods. Decreased operating expenses included a decrease in utilities
expense of $104,000, as a result of the repair of a water leak which
contributed to the increased utilities expense in the prior year. Other
changes in operating expenses include a decrease in repairs and maintenance
of $48,000, partially offset by increases in payroll and related costs of
$25,000.
Equity in net income of joint venture for the nine months ended
September 30, 1997 decreased $245,000 to $259,000 from $504,000 for the
nine months ended September 30, 1996. The decrease in income for the nine-
month period was primarily due to a decrease in the average occupancy rate
for the nine months ended September 30, 1997. This decrease in occupancy,
attributable to decreased demand for housing in the Atlanta area following
the conclusion of the Olympic Games, reduced income $165,000 as compared to
a year earlier. In addition, net income decreased due to decreases in
miscellaneous income of $46,000 and increases in property operating
expenses including payroll and related costs of $41,000, repairs and
maintenance of $17,000, depreciation of $17,000, and advertising and
promotion of $14,000. Payroll and related costs increased due to the
additional employment of maintenance staff during the summer months to
clean and repair the air conditioning system at the property.
<PAGE>13
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>14
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 19, 1997 By:/s/ John H. Streicker
-----------------------------
John H. Streicker
President
Dated: November 19, 1997 By:/s/ Elizabeth B. Longo
-----------------------------
Elizabeth B. Longo
Chief Financial Officer
Dated: November 19, 1997 By:/s/ George N. Tietjen
-----------------------------
George N. Tietjen III
Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,764,304
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
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<PP&E> 42,612,941
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<TOTAL-ASSETS> 46,413,363
<CURRENT-LIABILITIES> 1,246,343
<BONDS> 30,179,151
<COMMON> 0
0
0
<OTHER-SE> 14,987,869
<TOTAL-LIABILITY-AND-EQUITY> 46,413,363
<SALES> 0
<TOTAL-REVENUES> 6,980,952
<CGS> 0
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<OTHER-EXPENSES> 5,800,602
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<INTEREST-EXPENSE> 1,779,090
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