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
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1999
-----------------------------------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from --------------------- to ----------------------
(Amended by Exch Act Rel No. 312905. eff 4/26/93.)
Commission File Number: 0-8952
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SB PARTNERS
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-6294787
- --------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
666 Fifth Avenue N.Y., N.Y 10103
- ---------------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
(212) 408-2900
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- ------------------------------------------------------------------------------
(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. [X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ] Yes [ ] No
Not Applicable
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Not Applicable
<PAGE>
SB PARTNERS
INDEX
Part I Financial Information
Consolidated Balance Sheets
March 31, 1999 and December 31, 1998 . . . . . . . . . . 1
Consolidated Statements of Operations
For the three months ended March 31, 1999
and 1998 . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Changes in Partners' Capital
For the three months ended March 31, 1999
and the years ended December 31, 1997 and 1998 . . . . . 3
Consolidated Statements of Cash Flows
For the three months ended March 31, 1999
and 1998 . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements . . . . . . . 5 - 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . 9 - 12
Quantitative and Qualitative Disclosures About
Market Risk . . . . . . . . . . . . . . . . . . . . . . 13
Part II Other Information . . . . . . . . . . . . . . . . . . . . 13
<PAGE>1
<TABLE>
SB PARTNERS
(A New York Limited Partnership)
------------------------------
CONSOLIDATED BALANCE SHEETS
March 31, 1999 (Not Audited) and
December 31, 1998 (Audited, but not covered by the report of independent public accountants)
-------------------------------------------------------------------------------------------
<CAPTION>
March 31, December 31,
1999 1998
---- ----
<S> <C> <C>
Assets:
Investments:
Real estate, at cost
Land $ 6,444,653 $ 6,444,653
Buildings, furnishings and improvements 61,992,006 61,733,637
Less - accumulated depreciation (15,075,224) (14,608,682)
------------ ------------
53,361,435 53,569,608
Other assets:
Cash and cash equivalents 5,789,282 6,585,252
Other 1,828,797 1,933,798
------------ ------------
Total assets $ 60,979,514 $ 62,088,658
============ ============
Liabilities:
Mortgage notes payable $ 41,776,691 $ 41,917,726
Accounts payable and accrued expenses 480,888 527,122
Tenant security deposits 250,970 243,173
------------ ------------
Total liabilities 42,508,549 42,688,021
------------ ------------
Partners' Capital:
Units of partnership interest without par value;
Limited partners - 7,753 units 18,487,018 19,416,570
General partner - 1 unit (16,053) (15,933)
------------ ------------
Total partners' capital 18,470,965 19,400,637
------------ ------------
Total liabilities & partners' capital $ 60,979,514 $ 62,088,658
============ ============
The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>
<PAGE>2
<TABLE>
SB PARTNERS
(A New York Limited Partnership)
------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS (Not Audited)
---------------------------------------------------
<CAPTION>
For the Three Months Ended March 31,
------------------------------------
1999 1998
---- ----
<S> <C> <C>
Revenues:
Rental income $2,395,849 $2,610,548
Interest on short-term investments 74,163 18,624
Other 97,625 239,882
---------- ----------
Total revenues 2,567,637 2,869,054
---------- ----------
Expenses:
Real estate operating expenses 1,020,515 1,453,002
Interest on mortgage notes payable 742,899 550,503
Depreciation and amortization 484,618 327,270
Management fees 177,705 270,963
Real estate taxes 235,437 209,364
Other 60,785 97,755
---------- ----------
Total expenses 2,721,959 2,908,857
---------- ----------
Net loss (154,322) (39,803)
Loss allocated to general partner (20) (5)
---------- ----------
Loss allocated to limited partners $ (154,302) $ (39,798)
========== ==========
Net Loss Per Unit of Limited Partnership Interest $ (19.90) $ (5.13)
========== ==========
Weighted Average Number of Units of Limited
Partnership Interest Outstanding 7,753 7,753
========== ==========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>3
<TABLE>
SB PARTNERS
(A New York Limited Partnership)
------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the three months ended March 31, 1999 (Not Audited)
and for the years ended December 31, 1998 and 1997
(Audited, but not covered by the report of independent public accountants)
------------------------------------------------------------------------
<CAPTION>
Limited Partners:
Units of
Partnership
Interest Cumulative Accumulated
----------- Cash Earnings
Number Amount Distributions (Losses) Total
------ ------ ------------- ------------ -----
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 7,753 $119,968,973 $(97,728,323) $(6,637,616) $15,603,034
Net income for the period 0 0 0 399,718 399,718
----- ------------ ------------ ----------- -----------
Balance, December 31, 1997 7,753 119,968,973 (97,728,323) (6,237,898) 16,002,752
Net income for the period 0 0 0 3,413,818 3,413,818
----- ------------ ------------ ----------- -----------
Balance, December 31, 1998 7,753 119,968,973 (97,728,323) (2,824,080) 19,416,570
Net loss for the period 0 0 0 (154,302) (154,302)
Cash distributions 0 0 (775,250) 0 (775,250)
----- ------------ ------------ ----------- -----------
Balance, March 31, 1999 7,753 $119,968,973 $(98,503,573) $(2,978,382) $18,487,018
===== ============ ============ =========== ===========
General Partner:
Units of
Partnership
Interest Cumulative Accumulated
----------- Cash Earnings
Number Amount Distributions (Losses) Total
------ ------ ------------- ----------- -----
Balance, December 31, 1996 1 $10,000 $(24,559) $(1,866) $(16,425)
Net income for the period 0 0 0 52 52
---- ------- -------- ------- --------
Balance, December 31, 1997 1 10,000 (24,559) (1,814) (16,373)
Net income for the period 0 0 0 440 440
---- ------- -------- ------- --------
Balance, December 31, 1998 1 10,000 (24,559) (1,374) (15,933)
Net loss for the period 0 0 0 (20) (20)
Cash distributions 0 0 (100) 0 (100)
---- ------- -------- ------- --------
Balance, March 31, 1999 1 $10,000 $(24,659) $(1,394) $(16,053)
==== ======= ======== ======= ========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>4
<TABLE>
SB PARTNERS
(A New York Limited Partnership)
------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (Not Audited)
---------------------------------------------------
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
1999 1998
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss $ (154,322) $ (39,803)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 484,618 327,270
Decrease in other assets 118,034 280,882
Decrease in other liabilities (38,437) (129,033)
----------- -----------
Net cash provided by operating activities 409,893 439,316
----------- -----------
Cash Flows Used In Investing Activities:
Capital additions to real estate owned (258,369) (189,233)
----------- -----------
Cash Flows From Financing Activities:
Proceeds from mortgage note payable 0 3,800,000
Retirement of mortgage note payable 0 (3,514,832)
Principal payments on mortgage notes payable (141,035) (84,970)
Cash distributions paid to partners (775,350) 0
(Increase) decrease in deferred financing costs (31,109) 1,866
----------- -----------
Net cash provided by (used in) financing activities (947,494) 202,064
----------- -----------
Net increase (decrease) in cash and cash equivalents (795,970) 452,147
Cash and cash equivalents at beginning of period 6,585,252 549,760
----------- -----------
Cash and cash equivalents at end of period $ 5,789,282 $ 1,001,907
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 743,433 $ 542,380
=========== ===========
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>5
SB PARTNERS
(A New York Limited Partnership)
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
------------------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1999
-----------------------------------------
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
SB Partners, a New York limited partnership, and its subsidiaries
(collectively, the "Partnership") have been engaged since April 1971 in
acquiring, operating and holding for investment a varying portfolio of
real properties. SB Partners Real Estate Corporation (the "General
Partner") serves as the general partner of the Partnership.
The consolidated financial statements as of and for the three month
periods ended March 31, 1999 and 1998 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,
1999 and 1998 are not necessarily indicative of the results to be
expected for a full year.
The significant accounting and financial reporting policies of the
Partnership are as follows:
(a) The accompanying consolidated financial statements include the
accounts of SB Partners and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
The consolidated financial statements are prepared using the
accrual basis of accounting under generally accepted accounting
principles. Revenues are recognized as earned and expenses are
recognized as incurred. The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates. Certain prior period amounts have
been reclassified to make them comparable to the current period
presentation.
(b) Each partner is individually responsible for reporting his share
of the Partnership's taxable income or loss. Accordingly, no
provision has been made in the accompanying financial statements
for Federal, state or local income taxes.
<PAGE>6
(c) Depreciation of buildings, furnishings and improvements is
computed using the straight-line method of depreciation, based
upon the estimated useful lives of the related properties, as
follows:
Buildings and improvements 30 to 40 years
Furnishings 5 to 7 years
Expenditures for maintenance and repairs are expensed as
incurred. Expenditures for improvements, renewals and
betterments, which increase the useful life of the real estate,
are capitalized. Upon retirement or sale of property, the
related cost and accumulated depreciation are removed from the
accounts. Amortization of deferred financing and refinancing
costs is computed by amortizing the cost on a straight-line
basis over the term of the related mortgage notes. Amortization
of leasing commissions and tenant improvements is computed by
amortizing the cost on a straight-line basis over the term of
the related lease.
(d) Gains on sales of investments in real estate are recognized in
accordance with generally accepted accounting principles
applicable to sales of real estate, which require minimum levels
of initial and continuing investment by the purchaser, and
certain other tests be met, prior to the full recognition of
profit at the time of the sale. When the tests are not met,
gains on sales are recognized on either the installment or cost
recovery methods.
(e) Net income (loss) per unit of partnership interest has been
computed based on the weighted average number of units of
partnership interest outstanding during each period. There were
no potentially dilutive securities outstanding during each
period.
(f) For financial reporting purposes, the Partnership considers all
highly liquid, short-term investments with maturities of three
months or less to be cash equivalents.
(2) INVESTMENTS IN REAL ESTATE
As of March 31, 1999 and December 31, 1998, the Partnership owned
apartment projects in Greenville, South Carolina; Reno, Nevada; and
Holiday and Orlando, Florida; and 13.9 acres of land in Holiday,
Florida. The following is the cost basis and accumulated depreciation
of the real estate investments owned by the Partnership as of March
31, 1999 and December 31, 1998:
<TABLE>
<CAPTION>
Real Estate at Cost
No.of Year of -------------------
Type Prop. Acquisition Description 3/31/99 12/31/98
- ---- ----- ----------- ----------- ------- --------
<S> <C> <C> <C> <C> <C>
Residential properties 4 1983-98 1,544 Apt. Units $68,392,272 $68,133,903
Undeveloped land 1 1978 13.9 Acres 44,387 44,387
----------- -----------
68,436,659 68,178,290
Less: Accumulated depreciation (15,075,224) (14,608,682)
----------- -----------
$53,361,435 $53,569,608
=========== ===========
<FN>
Note: Information is provided for all properties owned as of the end of the periods presented.
</TABLE>
<PAGE>7
(3) REAL ESTATE TRANSACTIONS
On December 23, 1998, the Partnership acquired Halton Place
Apartments, a 246 unit apartment community located in Greenville,
South Carolina, for $12,600,000 in an all cash transaction. On August
20, 1998, the Partnership purchased Cypress Key Apartments, a 360 unit
apartment community located in Orlando, Florida, for $22,600,000, also
in an all cash transaction.
On April 16, 1998, the Partnership sold Cherry Hill Office Center for
a contract price of $4,825,000, and on June 30, 1998, sold Riverbend
Apartments for a contract price of $24,500,000. Both of these sales
were all cash transactions. As a result of these sales, the
Partnership recognized gains for financial reporting purposes of
approximately $506,000 and $3,368,000, respectively, for the year
ended December 31, 1998.
(4) MORTGAGE NOTES PAYABLE
Mortgage notes payable consist of the following first liens:
<TABLE>
<CAPTION>
Net Carrying Amount
Annual March 31, December 31,
Interest Maturity Installment Amount Due --------- ------------
Property Rate Date Payments(b) at Maturity 1999 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Holiday Park 6.895% 2/08 $ 300,169 $ 3,277,785 $ 3,757,205 $ 3,767,366
Meadow Wood 7.55% 1/04 1,914,996 18,979,461 20,815,575 20,900,360
Cypress Key (a) 6.605% 1/09 1,322,707 14,772,418 17,203,911 17,250,000
----------- -----------
$41,776,691 $41,917,726
=========== ===========
<FN>
(a) Mortgage note was financed in December 1998, and payments began in February 1999.
(b) Annual installment payments include principal and interest.
</TABLE>
<PAGE>8
(5) DISTRIBUTIONS
In March 1999, the Partnership paid a cash distribution of $100 per
weighted average unit outstanding, which totalled $775,350 based on 7,753.5
weighted average number of units outstanding.
(6) COMMITMENTS AND CONTINGENCIES
The Partnership is a party to certain actions directly arising from
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 or results of operations.
On November 6, 1997, Hugh Spencer, a limited partner who holds two
units in the Partnership, filed a purported class action (the
"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 moved to stay the
class action and compel arbitration of any individual claim of the
plaintiff. On September 27, 1998 the Supreme Court of the State of New
York granted the Partnership's motion. In December 1998, Spencer and
Norma Schulze, another limited partner who holds 2 1/2 units in the
Partnership, filed a Demand for Arbitration (the "Demand") with the
American Arbitration Association. Other than omitting the class
action allegations, the Demand contains substantially the same
allegations as those contained in the Complaint. The Partnership, as
well as the other respondents, have moved to stay the arbitration to
the extent it seeks to recover attorneys' fees. Those motions are sub
judice. The arbitration panel of three arbitrators was chosen and a
preliminary hearing was held on May 6, 1999. The Partnership believes
that the final outcome of this matter will not have a material adverse
effect on its financial position or results of operations.
<PAGE>9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1999
---------------------------------------------------
General
- -------
The consolidated financial statements as of and for the three month period
ended March 31, 1999 reflect the operations of four residential garden
apartment properties. The financial statements as of and for the three month
period ended March 31, 1998 reflect the operations of one office property and
three residential garden apartment properties.
Total revenues for the three months ended March 31, 1999 decreased
$301,000 to approximately $2,568,000 from approximately $2,869,000 for the
three months ended March 31, 1998. Net loss for the three months ended March
31, 1999 increased $114,000 to approximately $154,000 from approximately
$40,000 for the three months ended March 31, 1998.
The decrease in total revenues and increase in net loss are attributable
mainly to the change in composition of the portfolio from 1998 to 1999. In
April 1998, the Registrant sold Cherry Hill Office Center. Several weeks
later, the sale of Riverbend Apartments was completed. The Registrant then
began to rebuild the portfolio by purchasing Cypress Key Apartments in August.
By placing a mortgage note on this new acquisition, the Registrant was able use
the proceeds of the mortgage to add Halton Place Apartments to the portfolio in
December, 1998. Please see Forms 8-K, as amended, filed in connection with
these transactions.
The consolidated statement of operations for the three month period ended
March 31, 1998 includes $382,000 of revenues and $198,000 of operating expenses
from Cherry Hill Office Center. Revenues from Riverbend Apartments totalled
$1,131,000, while expenses incurred during the period totalled $635,000. Since
the office center and apartments were both classified as real estate assets
held for sale, no depreciation was recorded for these properties in 1998. As
both Cypress Key Apartments and Halton Place Apartments were purchased later in
the year, the financial statements as of and for the three months ended March
31, 1998 do not reflect any activity for these two investments.
For the three months ended March 31, 1999, there are no revenues or
related expenses from the assets which were sold, Cherry Hill Office Center and
Riverbend Apartments. However, the statement of operations for the current
year includes $686,000 of revenues from Cypress Key Apartments, and $417,000 of
revenues from Halton Place Apartments. Operating expenses for Cypress Key
Apartments and Halton Place Apartments totalled $277,000 and $136,000,
respectively. In addition, $131,000 and $71,000 of depreciation expense was
recorded for these properties. For additional analyses, please refer to the
discussions of the individual properties below.
This report on Form 10-Q includes statements that constitute "forward
looking statements" within the meaning of Section 27(A) of the Securities Act
of 1933 and Section 21(E) of the Securities Exchange Act of 1934 and that are
intended to come within the safe harbor protection provided by those sections.
By their nature, all forward looking statements involve risks and
uncertainties. Actual results may differ materially from those contemplated by
the forward looking statements.
<PAGE>10
Year 2000 Compliance
- --------------------
The Registrant has examined the problem presented by the inability of many
computer programs to distinguish the year 2000 from the year 1900 (referred to
as the "Year 2000 Problem"). The primary software packages used by the
Registrant are designed by outside vendors who have represented that the
software is generally Year 2000 compliant (that is, not to be negatively
affected by the occurrence or use of a date in the year 2000 or beyond). The
Registrant expects to have any required software modifications implemented by
the end of the third quarter of 1999. Furthermore, the Registrant expects that
the cost to remediate Year 2000 technology issues will be minimal. Although
there can be no assurances, at the present time the Registrant does not believe
problems likely to be faced by its vendors, lenders or customers because of the
Year 2000 Problem would be likely to have a material adverse impact on the
Registrant or the results of its operations. The Registrant could be affected
by systemic problems in the economy resulting from the Year 2000 Problem, such
as disruptions of communication systems or overall economic dislocation. For
example, the Registrant's activities could be disrupted if banks, as a result
of the Year 2000 Problem, are unable to effect transactions in the normal
course of business. At the present time, the Registrant does not believe it is
possible to measure the effect of potential complications. The Registrant will
continually monitor and evaluate these areas and develop contingency plans on
an as needed basis.
Liquidity and Capital Resources
- -------------------------------
As of March 31, 1999, the Registrant had cash and cash equivalents of
$5,789,000 in addition to $1,091,000 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 $566,000 less than
cash, cash equivalents, and deposits held in escrow on December 31, 1998. Total
cash and cash equivalents decreased primarily as a result of cash distributions
amounting to $775,350, paid in March 1999 to Unitholders of record on December
31, 1998. The decrease in cash, cash equivalents, and deposits held in escrow
was offset partially by the collection in full of a miscellaneous receivable of
$254,000.
Debt at March 31, 1999, consisted of approximately $41,777,000 of
nonrecourse first mortgage notes payable secured by three apartment properties
owned by the Registrant (see Note 4 to the Financial Statements). Scheduled
maturities through monthly payments of principal and interest will be
approximately $422,000 for the remainder of 1999. Terms of the 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.
<PAGE>11
Halton Place is currently unencumbered, however, a mortgage note may be
placed on the property with the proceeds used to continue the expansion of the
portfolio through the acquisition of additional investments in real estate
properties. Investigations of appropriate new acquisitions are underway.
Inflation and changing prices during the current period did not
significantly affect the markets in which the Registrant conducts its business.
In view of the low rate of inflation, its impact on the Registrant's business
has not been significant.
The Registrant's properties are expected to generate sufficient cash flow
to cover operating, financing, capital improvement costs, and other working
capital requirements of the Registrant for the foreseeable future.
Holiday Park Apartments
- -----------------------
Total revenues for the three months ended March 31, 1999 decreased $8,000
to $303,000 from $311,000 for the three months ended March 31, 1998. Net
income after depreciation and mortgage interest expense for the three months
ended March 31, 1999, increased $66,000 to net income of $30,000 from a net
loss of $36,000 for the three months ended March 31, 1998.
The decrease in total revenues is due primarily to a decrease in average
occupancy of 3.8%, to 93.5% from 97.3% for the period a year earlier. This
reduced revenues $17,000, and an increase in tenant concessions lowered
revenues $2,000. These decreases were partially offset by increases in rental
rates charged at the property which added $12,000 to the revenues for the
period. The increase in net income is primarily a result of lower operating
costs and reduced debt service costs. Operating expenses decreased $13,000, due
primarily to decreased repairs and maintenance costs of $10,000 and lower
payroll costs of $4,000. Certain nonrecurring costs for repairs made during the
first quarter of 1998, such as the installation of new signs and repairs to the
elevators, did not need to be made in the current year. In addition, a
nonrecurring adjustment for workers compensation insurance recorded in the
first quarter of 1998 was not repeated in the current year. Interest expense
for the first three months of 1999 was $9,000 less than the expense recorded
for the same period in the prior year as a result of refinancing the mortgage
note at a lower interest rate. Amortization of costs associated with the
financing of the loan encumbering the property decreased $45,000. In 1998, a
one-time charge against earnings of $43,000 was recorded to write-off the
unamortized costs associated with the loan that was retired.
<PAGE>12
Meadow Wood Apartments
- ----------------------
Total revenues for the three months ended March 31, 1999 increased $60,000
to $1,086,000 from $1,026,000 for the three months ended March 31, 1998. Net
loss after depreciation and mortgage interest expense for the three months
ended March 31, 1999 decreased $85,000 to $22,000 from $107,000 for the three
months ended March 31, 1998.
The increase in revenues is primarily the result of an increase in average
occupancy at the property of approximately 4.7%, to 88.7% for the three months
ended March 31, 1999 from 84% in the comparable period a year earlier. The
higher average occupancy increased revenues $59,000, while fewer tenant
concessions increased revenues $20,000. These increases in revenues were offset
partially by reduced miscellaneous income which decreased revenues $6,000,
coupled with a modest decrease in rental rates charged at the property which
lowered revenues $13,000. The decrease in net loss is due primarily to the
increase in revenues, and decreases in property operating costs, primarily a
decrease in repairs and maintenance costs of $26,000. For the three-month
period ended March 31, 1998, repairs and maintenance costs were impacted by the
increased costs associated with higher turnover of tenants at the property. As
occupancy at the property begins to stabilize, there has been a corresponding
decrease in costs associated with the turnover of tenants.
Cypress Key Apartments
- -----------------------
On August 20, 1998, the Registrant purchased Cypress Key Apartments, a 360
unit apartment community located in Orlando, Florida, for $22,600,000 in an all
cash transaction. (Refer also to Footnote 3 of the Financial Statements).
Total revenues for the three month period ended March 31, 1999 were
$686,000. Net loss after depreciation and mortgage interest expense was
$118,000. Average occupancy for the period was 85.6%. Certain leases entered
into by the former owner were not up to the standards employed by the
Registrant and were not renewed. This caused a temporary increase in the
vacancy rate at the property, however, future occupancy rates are expected to
exceed 90%.
Halton Place Apartments
- -----------------------
On December 23, 1998, the Registrant purchased Halton Place Apartments, a
246 unit apartment community located in Greenville, South Carolina, for
$12,600,000 in an all cash transaction. (Refer also to Footnote 3 of the
Financial Statements). At the present time, there is no mortgage note on this
property.
Total revenues for the three month period ended March 31, 1999 were $417,000.
Net income after depreciation expense was $172,000. Average occupancy for the
period was 93.3%. Since acquisition, occupancy has been steady; however,
changes in the resident profile are being made as new applicants are screened.
In the first quarter of the year, lighting conversions were made throughout the
property and landscaping was improved by clearing out some trees. During the
rest of the year, other projects are planned to improve curb appeal in order to
maintain market share.
<PAGE>13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1999
---------------------------------------------------
Not Applicable
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
On January 7, 1999, the Registrant
filed Form 8-K to report the purchase
on December 23, 1998, of Halton Place
Apartments. On March 8, 1999, the
Registrant filed form 8-K/A to amend
this filing to include the requisite
financial statements.
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: May 17, 1999 By: /s/ John H. Streicker
--------------------------
John H. Streicker
President
Dated: May 17, 1999 By: /s/ Elizabeth B. Longo
---------------------------
Elizabeth B. Longo
Chief Financial Officer
(Principal Financial Officer)
Dated: May 17, 1999 By: /s/ George N. Tietjen
---------------------------
George N. Tietjen III
Vice President
(Principal Accounting Officer)
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 5,789,282
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,828,797
<PP&E> 68,436,659
<DEPRECIATION> (15,075,224)
<TOTAL-ASSETS> 60,979,514
<CURRENT-LIABILITIES> 731,858
<BONDS> 41,776,691
0
0
<COMMON> 0
<OTHER-SE> 18,470,965
<TOTAL-LIABILITY-AND-EQUITY> 60,979,514
<SALES> 0
<TOTAL-REVENUES> 2,567,637
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,979,060
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 742,899
<INCOME-PRETAX> (154,322)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (154,322)
<EPS-PRIMARY> (20)
<EPS-DILUTED> (20)
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