FORM 10-Q--Quarterly or Transitional Report Under Section 13 or 15 (d) OF
The Securities Exchange Act of 1934
Quarterly or Transitional Report
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(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, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number 0-14569
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Maryland 04-2848939
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except unit data)
March 31, December 31,
2002 2001
(unaudited) (Note)
Assets
Cash and cash equivalents $ 1,051 $ 2,277
Receivables and deposits 2,361 2,118
Restricted escrows 2,358 2,332
Other assets 1,104 1,256
Investment property:
Land 5,833 5,833
Buildings and related personal property 119,850 119,300
125,683 125,133
Less accumulated depreciation (67,564) (65,806)
58,119 59,327
$ 64,993 $ 67,310
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 976 $ 2,222
Tenant security deposit liabilities 786 775
Other liabilities 933 1,096
Due to affiliate 498 1,952
Mortgage note payable 51,312 51,788
54,505 57,833
Minority interest 5,716 5,470
Partners' (Deficit) Capital
General partners (2,622) (2,660)
Investor limited partners (649 units issued and
outstanding) 7,394 6,667
4,772 4,007
$ 64,993 $ 67,310
Note: The balance sheet at December 31, 2001, has been derived from the audited
financial statements at that date but does not include all the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
See Accompanying Notes to Consolidated Financial Statements
b)
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended
March 31,
2002 2001
Revenues:
Rental income $7,452 $7,219
Other income 321 329
Total revenues 7,773 7,548
Expenses:
Operating 3,073 2,906
General and administrative 184 167
Depreciation 1,758 1,562
Interest 1,286 1,336
Property taxes 461 450
Total expenses 6,762 6,421
Income before minority interest 1,011 1,127
Minority interest in net earnings of operating
partnerships (246) (300)
Net income $ 765 $ 827
Net income allocated to general partners (5%) $ 38 $ 41
Net income allocated to investor limited
partners (95%) 727 786
$ 765 $ 827
Net income per limited partnership unit $1,120 $1,211
See Accompanying Notes to Consolidated Financial Statements
c)
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited Investor
Partnership General Limited
Units Partners Partners Total
Original capital contributions 649 $ -- $40,563 $40,563
Partners' (deficit) capital at
December 31, 2001 649 $(2,660) $ 6,667 $ 4,007
Net income for the three months
ended March 31, 2002 -- 38 727 765
Partners' (deficit) capital at
March 31, 2002 649 $(2,622) $ 7,394 $ 4,772
See Accompanying Notes to Consolidated Financial Statements
d)
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2002 2001
Cash flows from operating activities:
Net income $ 765 $ 827
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interest in net earnings of operating
partnerships 246 300
Depreciation 1,758 1,562
Amortization of loan costs 34 35
Change in accounts:
Receivables and deposits (243) (430)
Other assets 118 306
Accounts payable (795) (91)
Tenant security deposit liabilities 11 54
Other liabilities (120) 382
Due to affiliate (93) (29)
Net cash provided by operating activities 1,681 2,916
Cash flows from investing activities:
Property improvements and replacements (1,044) (2,612)
Net deposits to restricted escrows (26) (279)
Net cash used in investing activities (1,070) (2,891)
Cash flows from financing activities:
Payments on advances from affiliate (1,361) (208)
Payments on mortgage note payable (476) (302)
Net cash used in financing activities (1,837) (510)
Net decrease in cash and cash equivalents (1,226) (485)
Cash and cash equivalents at beginning of period 2,277 2,447
Cash and cash equivalents at end of period $ 1,051 $ 1,962
Supplemental disclosure of cash flow information:
Cash paid for interest, including approximately $31
and $32, respectively, paid to an affiliate $ 1,254 $ 863
Supplemental disclosure of non-cash information:
Property improvements and replacements included in
accounts payable $ 179 $ --
At December 31, 2001 and 2000, approximately $673,000 and $908,000 of property
improvements and replacements were included in accounts payable, respectively,
which are included in property improvements and replacements during the three
months ended March 31, 2002 and 2001, respectively.
See Accompanying Notes to Consolidated Financial Statements
e)
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Springhill Lake
Investors Limited Partnership (the "Partnership" or "Registrant") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of Three Winthrop Properties, Inc. (the
"Managing General Partner" or "Three Winthrop"), all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 2002
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2002. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Partnership's Annual
Report on Form 10-K for the year ended December 31, 2001. The Managing General
Partner is ultimately controlled by Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust.
Certain reclassifications have been made to the 2001 information to conform to
the 2002 presentation.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
Partnership activities. The Limited Partnership Agreement provides for (i)
certain payments to affiliates for services (ii) reimbursements of certain
expenses incurred by affiliates on behalf of the Partnership (iii) an annual
asset management fee of $100,000 and (iv) an annual administration fee of
$10,000.
Affiliates of the Managing General Partner are entitled to receive 3% of tenant
rent collections and 5% of store commercial income from the Registrant's
property for providing property management services. The Registrant paid to such
affiliates approximately $208,000 and $222,000 for the three months ended March
31, 2002 and 2001, respectively, which is included in operating expenses.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $223,000 and
$128,000 for the three months ended March 31, 2002 and 2001, respectively, which
is included in general and administrative expenses and investment property.
Included in these amounts are fees related to construction management services
provided by an affiliate of the Managing General Partner of approximately
$88,000 for the three months ended March 31, 2002. No construction management
fees were paid during the three months ended March 31, 2001. The construction
management service fees are calculated based on a percentage of certain
additions to investment property. At December 31, 2001, approximately $88,000 of
the reimbursements for accountable expenses were accrued and included in due to
affiliate in the accompanying consolidated balance sheets. No amounts were
accrued at March 31, 2002.
In accordance with the Partnership Agreement, the Managing General Partner
earned approximately $25,000 in asset management fees and approximately $3,000
in administrative fees for each of the three months ended March 31, 2002 and
2001, which are included in general and administrative expenses.
At March 31, 2002 and December 31, 2001, the Partnership owed advances of
approximately $492,000 and $1,853,000, respectively, to an affiliate of the
Managing General Partner plus accrued interest thereon of approximately $6,000
and $11,000, respectively, which are included in due to affiliate. These
advances bear interest at the prime rate plus 2%, and the Partnership recognized
approximately $26,000 and $59,000 in interest expense during the three months
ended March 31, 2002 and 2001, respectively. Additionally, during the three
months ended March 31, 2002 and 2001, the Partnership made principal payments of
approximately $1,361,000 and $208,000, respectively.
Beginning in 2001, the Partnership began insuring its property up to certain
limits through coverage provided by AIMCO which is generally self-insured for a
portion of losses and liabilities related to workers compensation, property
casualty and vehicle liability. The Partnership insures its property above the
AIMCO limits through insurance policies obtained by AIMCO from insurers
unaffiliated with the Managing General Partner. During the three months ended
March 31, 2002 and 2001, the Partnership was charged by AIMCO and its affiliates
approximately $225,000 and $393,000, respectively, for insurance coverage and
fees associated with policy claims administration.
Note C - Legal Proceedings
The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature arising in the ordinary course of business.
Item 2. Management's Discussion and Analysis or Plan of Operations
The matters discussed in this Form 10-Q contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-Q and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operations. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The investment property is a complex which consists of apartment and townhouse
units and an eight store shopping center. The following table sets forth the
average occupancy of the property for the three months ended March 31, 2002 and
2001:
Average
Occupancy
2002 2001
Springhill Lake Apartments
Greenbelt, Maryland 96% 97%
Results of Operations
The Registrant's net income for the three months ended March 31, 2002 was
approximately $765,000 compared to approximately $827,000 for the corresponding
period in 2001. Income before minority interest in net earnings for the three
months ended March 31, 2002 was approximately $1,011,000 compared to
approximately $1,127,000 for the corresponding period in 2001. The decrease in
income before minority interest is primarily the result of an increase in total
expenses partially offset by an increase in total revenues. The increase in
total revenues is attributable to an increase in rental income. Rental income
increased due to an increase in average rental rates at the property and a
decrease in bad debt expense partially offset by a slight decrease in occupancy.
Total expenses increased primarily due to an increase in operating, depreciation
and general and administrative expenses partially offset by a decrease in
interest expense. Operating expenses increased primarily due to an increase in
utility and salaries and related employee expenses. Depreciation expense
increased due to the completion of property improvements and replacements at the
property during the past twelve months which are now being depreciated. Interest
expense decreased due to payments on advances from affiliates and scheduled
principal payments on the mortgage encumbering the property.
General and administrative expenses increased due to an increase in audit fees
and taxes, fees and licenses. Also included in general and administrative
expenses are reimbursements to the Managing General Partner as allowed under the
Partnership Agreement associated with its management of the Partnership. Costs
associated with the quarterly and annual communications with investors and
regulatory agencies and the annual audit required by the Partnership Agreement
are also included in general and administrative expenses.
As part of the ongoing business plan of the Registrant, the Managing General
Partner monitors the rental market environment of its investment property to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels, and protecting the Registrant from increases in expenses. As part of
this plan, the Managing General Partner attempts to protect the Registrant from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At March 31, 2002, the Registrant had cash and cash equivalents of approximately
$1,051,000 compared to approximately $1,962,000 at March 31, 2001. Cash and cash
equivalents decreased approximately $1,226,000 from December 31, 2001 due to
approximately $1,070,000 and $1,837,000 of cash used in investing and financing
activities, respectively, which was partially offset by approximately $1,681,000
of cash provided by operating activities. Cash used in investing activities
consisted of property improvements and replacements and net deposits to escrow
accounts maintained by the mortgage lender. Cash used in financing activities
consisted of principal payments made on the mortgage encumbering the
Registrant's property and payments on the advances from affiliate. The
Registrant invests its working capital reserves in interest bearing accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Registrant and to comply with Federal, state,
and local legal and regulatory requirements. Capital improvements planned for
the Registrant's property is detailed below.
During the three months ended March 31, 2002, the property completed
approximately $550,000 of capital improvements, consisting primarily of plumbing
upgrades, flooring and appliance replacements, heating and cooling upgrades and
structural improvements. These improvements were funded from operating cash flow
and replacement reserves. The Partnership has budgeted approximately $1,136,000
for capital improvements at Springhill Lake consisting primarily of floor
covering and appliance replacements and structural improvements. Additional
improvements may be considered and will depend on the physical condition of the
property as well as replacement reserves and anticipated cash flow generated by
the property.
The Registrant's current assets are thought to be sufficient for any near term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of approximately $51,312,000 is being amortized over 120 months
with a balloon payment of approximately $49,017,000 due May 2003. The Managing
General Partner will attempt to refinance such indebtedness and/or sell the
property prior to such maturity date. If the property cannot be refinanced or
sold for a sufficient amount, the Registrant will risk losing the property
through foreclosure.
The Partnership made no distributions during the three months ended March 31,
2002 or 2001. Future cash distributions will depend on the levels of net cash
generated from operations, the availability of cash reserves, and the timing of
the debt maturity, refinancing and/or sale of the property. The Partnership's
cash available for distribution is reviewed on a monthly basis. There can be no
assurance that the Partnership will generate sufficient funds from operations,
after planned capital expenditures, to permit distributions to its partners in
2002 or subsequent periods.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 519.9 limited partnership units (the
"Units") in the Partnership representing 80.11% of the outstanding Units at
March 31, 2002. A number of these Units were acquired pursuant to tender offers
made by AIMCO or its affiliates or Three Winthrop's affiliates. It is possible
that AIMCO or its affiliates will make one or more additional offers to acquire
additional limited partnership interests in the Partnership for cash or in
exchange for units in the operating partnership of AIMCO. Under the Partnership
Agreement, unitholders holding a majority of the Units are entitled to take
action with respect to a variety of matters. As a result of its ownership of
80.11% of the outstanding Units, AIMCO is in a position to control all voting
decisions with respect to the Registrant. When voting on matters, AIMCO would in
all likelihood vote the Units it acquired in a manner favorable to the interest
of the Managing General Partner because of its affiliation with the Managing
General Partner.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership is exposed to market risks from adverse changes in interest
rates. In this regard, changes in U.S. interest rates affect the interest earned
on the Partnership's cash and cash equivalents as well as interest paid on its
indebtedness. As a policy, the Partnership does not engage in speculative or
leveraged transactions, nor does it hold or issue financial instruments for
trading purposes. The Partnership is exposed to changes in interest rates
primarily as a result of its borrowing activities used to maintain liquidity and
fund business operations. To mitigate the impact of fluctuations in U.S.
interest rates, the Partnership maintains its debt as fixed rate in nature by
borrowing on a long-term basis. However, the advances made from its affiliate to
the Partnership bear interest at a variable rate. As of March 31, 2002, the
Partnership owes approximately $492,000 in such advances which are repaid as the
property's cash flow allows. Based on interest rates at March 31, 2002, a 100
basis point increase or decrease in market interest rates would not have a
material impact on the Partnership.
The following table summarizes the Partnership's debt obligations at March 31,
2002. The interest rates represent the weighted-average rates. The fair value of
the Partnership's debt is approximately $52,409,000 as of March 31, 2002.
Principal amount by expected maturity:
Long Term Debt
Fixed Rate Debt Average Interest Rate
(in thousands)
2002 $ 1,564 9.30%
2003 49,748 9.30%
Total $51,312
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
None.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 2002.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
By: THREE WINTHROP PROPERTIES, INC.
Managing General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Vice President - Residential
By: /s/Martha L. Long
Martha L. Long
Vice President - Residential
Accounting
Date: