U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from to
Commission file number 0-21455.
DECADE COMPANIES INCOME PROPERTIES - A LIMITED PARTNERSHIP
(Exact name of small business issuer as specified in its charter)
State of Wisconsin 39-1518732
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
250 Patrick Blvd., Suite 140 Brookfield, Wisconsin 53045-5864
(Address of principal executive offices)
(262) 792-9200
(Issuer's telephone number)
Not Applicable
Former name, former address and former fiscal year, if changed
since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by
court. Yes No .
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: .
Transitional Small Business Disclosure Format (check one): Yes
No X .
Decade Companies Income Properties - A Limited Partnership
Form 10-QSB
INDEX
March 31, 2001
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (unaudited)
Balance Sheet - March 31, 2001. 3
Statements of Operations for the three
months ended March 31, 2001 and 2000 4
Statements of Partners' Capital
for the three months ended March 31, 2001
and the year ended December 31, 2000. 5
Statements of Cash Flows for the three months
ended March 31, 2001 and 2000. 6
Notes to Financial Statements. 7
Item 2. Management's Discussion and Analysis or Plan
of Operations 7 - 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 15
SIGNATURES 16
Decade Companies Income Properties - A Limited Partnership
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEET
March 31, 2001
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,311,139
Escrow deposits 23,958
Prepaid expenses and other assets 104,119
Total Current Assets 4,439,216
INVESTMENT PROPERTIES, AT COST: 32,855,043
Less: accumulated depreciation (10,948,148)
Net Investment Property 21,906,895
OTHER ASSETS:
Utility deposits 40,903
Debt issue costs, net of accumulated
amortization 496,625
Total Other Assets 537,528
Total Assets $26,883,639
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and
accrued taxes $ 426,371
Unearned rent collections 56,001
Tenant security deposits 108,243
Distributions payable 172,051
Accrued interest payable 20,225
Payable to affiliates 3,973,724
Mortgage notes payable 25,376,800
Total Liabilities 30,133,415
PARTNERS' CAPITAL:
General Partner Capital (97,103)
Limited Partners
(authorized--18,000 Interests;
outstanding--13,400.27 Interests) (3,152,673)
Total Partners' Capital (3,249,776)
Total Liabilities and
Partners' Capital $26,883,639
See Notes to Unaudited Financial Statements.
STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31
2001 2000
Operating revenue:
Rental income $1,721,560 $ 1,655,566
Operating expenses:
Operating 755,325 673,472
Real Estate Taxes 190,497 183,900
Total 945,822 857,372
Net income before
debt service and other
expenses 775,738 798,194
Interest expense (492,402) (504,916)
Depreciation (255,000) (250,480)
Amortization of debt issue costs (28,326) (28,327)
Net (loss) from investment property 10 14,471
Other income (expenses):
Interest income 41,487 41,849
Partnership management (69,057) (65,684)
(27,570) (23,835)
NET INCOME (LOSS) $ (27,560) $ (9,364)
Net income (loss) attributable to
General Partner (1%) $ (276) (94)
Net income (loss) attributable to
Limited Partners (99%) (27,284) (9,270)
$ (27,560) $ (9,364)
Net income (loss) per Limited
Partner Interest $ (2.04) $ (0.69)
See Notes to Financial Statements
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited as to the Three Months Ended March 31, 2001)
General Limited
Partner Partners'
Capital Capital Total
Balances at 12/31/99 $(91,792) $(2,239,604) $(2,331,396)
Distributions to Partners (3,547) (670,016) (673,563)
Net income for the period (488) (48,265) (48,753)
Balances at 12/31/00 $(95,827) (2,957,885) $(3,053,712)
Distributions to Partners (1,000) (167,504) (168,504)
Net (loss) for the period (276) (27,284) (27,560)
Balance at 3/31/01 $(97,103) $(3,152,673) $(3,249,776)
See Notes to Unaudited Financial Statements.
STATEMENTS OF CASH FLOWS - (UNAUDITED)
For The Three Months Ended March 31,
2001 2000
CASH PROVIDED BY OPERATIONS $ 405,095 $ 420,677
INVESTING ACTIVITIES:
Additions to investment property (72,229) (78,984)
FINANCING ACTIVITIES:
Principal payments on mortgage notes (105,607) (90,284)
Distributions paid to limited partners (167,504) (167,504)
NET CASH (USED IN) FINANCING ACTIVITIES (273,111) (257,788)
INCREASE (DECREASE) IN CASH & CASH
EQUIVALENTS 59,755 83,905
CASH & CASH EQUIVALENTS AT THE BEGINNING
OF PERIOD 4,251,384 4,570,655
CASH & CASH EQUIVALENTS
AT THE END OF PERIOD $4,311,139 $4,654,560
Supplementary disclosure of cash flow information:
Interest paid $ 484,987 $ 500,311
Income taxes paid 0 0
See Notes to Unaudited Financial Statements
Decade Companies Income Properties - A Limited Partnership
September 30, 1998Decade Companies Income Properties
- - A Limited Partnership
Form 10-QSB
March 31, 2001NOTE A--BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form
10-QSB 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 management, 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, 2001 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2001. For
further information, refer to the financial statements and
footnotes thereto included in the Partnership's annual report on
Form 10-KSB for the year ended December 31, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FORWARD-LOOKING INFORMATION
Forward-looking statements in this report, including without
limitation, statements relating to Decade Companies Income
Properties (the "Partnership") plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Investors are cautioned that such
forwarded-looking statements involve risks and uncertainties
including without limitation the following: (i) the Partnership's
plans, strategies, objectives, expectations and intentions are
subject to change at any time at the discretion of the General
Partner; (ii) the Partnership's plans and results of operations
will be affected by the Partnership's ability to manage its growth
(iii) other risks and uncertainties indicated from time to time in
the Partnership's filings with the Securities and Exchange
Commission.
Information contained in this Quarterly Report on Form 10-QSB
contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, which can be
identified by the use of forward-looking terminology such as "may,"
"will," "believe," "expect, "anticipate," "estimate" or "continue"
or the negative thereof or other variations thereon or comparable
terminology. There are number of important factors with respect to
such forward looking statements, including certain risks and
uncertainties, that could cause actual results, performance, or
achievements of the Partnership to differ materially from
anticipated future results, performance or achievements expressed
or implied by such forward-looking statements. Such factors, which
could adversely effect the Partnership's ability to obtain these
results, include, but are not limited to, the following: (i)
occupancy levels and market rents may be adversely affected by
local economic and market conditions, which are beyond the
Partnership's control; (ii) debt financing could adversely affect
the Partnership's performance, (iii) scheduled debt payments could
adversely affect the Partnership's financial condition, (iv)
financial covenants could adversely affect the Partnership's
financial condition, (v) the Partnership's degree of leverage could
limit its ability to obtain additional financing, (vi) control and
influence by significant limited partners could be exercised in a
manner adverse to other limited partners, (vii) environmental
problems are possible and can be costly, (viii) the Partnership's
performance and Limited Partnership Interest value are subject to
risks associated with the real estate industry, (ix) the
Partnership may be unable to renew leases or relet space as leases
expire, (x) new real estate acquisitions may fail to perform as
expected, (xi) competition for real estate acquisitions may result
in increased prices for properties, (xii) because real estate
investments are illiquid, the Partnership may not be able to sell
properties when appropriate, (xiii) changing laws could affect the
Partnership's business, (xiv) provisions in the Limited Partnership
Agreement could inhibit changes in control, (xv) the Partnership
depends on key personnel; and (xvi) other factors described
elsewhere in this Quarterly Report on Form 10-QSB.
Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date hereof. The
Partnership undertakes no obligation to publicly release any
revisions to these forward-looking statements, which may be made to
reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events.
The Partnership Agreement provides for termination at December 31,
2005. The three properties owned by the Partnership were acquired
between January 1989 and November 1993.
The General Partner recognizes that each Limited Partner might have
different and, at times, conflicting economic interests with
respect to the Partnership's continuing ownership of the
properties, particular to their individual economic situations.
Some Limited Partners might favor a complete liquidation of the
Limited Partnership and the distribution of all of its assets,
regardless of tax consequences. Other Limited Partners might
prefer continuing their investment in the Limited Partnership,
without change in its holding or investment strategy for the short
term. Other Limited Partners might desire to continue their
investment in the Limited Partnership, but only if it were to
diversify its investment strategies rather than hold the existing
properties.
In view of these conflicting goals of individual Limited Partners,
the General Partner has concluded that it will consider different
approaches to the Limited Partnership's future in order to provide
as much flexibility as possible to Limited Partners to exercise
whatever economic decisions they would deem necessary for their
particular economic situation.
As the Partnership enters the liquidation stage, the General
Partner will consider the benefits of exchanging the real estate
for replacement properties for those Limited Partners who my wish
to extend the life of the Partnership, while accommodating those
Limited Partners who prefer to terminate their investment upon the
sale of the properties.
RESULTS OF OPERATIONS
Operating revenue from rental income was $1,721,000 in the quarter
ended March 31, 2001, compared to $1,655,000 for the same period in
2000, an increase of 4.0%. Rental income was provided by the
three sites for the comparative three month period as set forth
below:
Percent
Three Months Ended Increase Increase
3/31/01 3/31/00 (Decrease) (Decrease)
Pelican Sound $ 725,000 $ 679,000 $ 46,000 6.8%
Meadows II 564,000 546,000 18,000 3.3%
Town Place 432,000 430,000 2,000 0.5%
Total $1,721,000 $1,655,000 $ 66,000 4.0%
The $66,000 increase in operating revenue consisted of increases at
all three properties. The $66,000 increase was attributed
primarily to a 4% increase in gross potential rent, with average
occupancy holding steady at 92% for both quarters. The $46,000
increase at Pelican Sound was attributed to a 5% increase in gross
potential rent, plus a 1% increase in occupancy (from 91% to 92%).
The $18,000 increase at The Meadows II was attributed to a 3%
increase in gross potential rent plus a 1% increase in average
occupancy (from 92% to 93%). The $2,000 increase at Town Place was
attributed a 4% increase in gross potential rent, offset by a 4%
decrease in average occupancy (from 93% to 89%).
The average monthly gross potential rent per unit at the Apartments
for the first quarter of 2001, and the comparative period in 2000,
is set forth below:
Number Three Months Ended
of Units 3/31/01 3/31/00
Pelican Sound 379 $677 $644
The Meadows II 316 $636 $621
Town Place 240 $660 $634
All Rental Units 935 $659 $633
"Gross potential rent" represents the asking rent established by
the Partnership for a vacant apartment plus the rent in effect for
occupied apartments.
The average occupancy level at the Apartments for the first quarter
ended March 31, 2001 and the comparable period in 2000, is set
forth below:
Three Months Ended
3/31/01 3/31/00
Pelican Sound 91.8% 91.1%
The Meadows II 93.5% 91.7%
Town Place 88.9% 93.4%
All Rental Units 91.6% 91.9%
The range of occupancy levels at the Apartments for the first
quarter period ended March 31, 2001 and the comparable period in
2000, is set forth below:
Three Months Ended
3/31/01 3/31/00
Pelican Sound 91.7-92.1% 87.8-94.1%
The Meadows II 92.6-94.6% 91.0-92.4%
Town Place 87.3-89.7% 93.0-93.8%
All Rental Units 90.8-92.1% 90.4-93.4%
Total rental expenses before depreciation and debt service in the
three month period ended March 31, 2001 increased by $89,000, from
$857,000 to $946,000, compared to the same period of 2000. The
increase was comprised of increases at The Meadows II of $55,000,
at Town Place of $21,000, and at Pelican Sound of $13,000.
A summary of operating expenses before depreciation and debt
service by apartment site follows:
For the Three Months Ended
Increase Increase
(Decrease) (Decrease)
3/31/01 3/31/00 Amount Percent
Pelican Sound $377,000 $364,000 $ 13,000 3.6%
Meadows II 334,000 279,000 55,000 19.7%
Town Place 235,000 214,000 21,000 9.8%
Total $946,000 $857,000 $ 89,000 10.4%
The $55,000 increase in operating expenses at The Meadows II was
primarily attributable to an increase in utilities expense of
$27,000, an increase in insurance expense of $8,000, an increase in
the cost of snow removal of $7,000, an increase in maintenance
personnel of $4,000, an increase in grounds expenses of $4,000, and
an increase in property management fees (attributable to higher
rent collections) of $4,000.
The $21,000 increase in operating expenses at Town Place was
primarily attributable to an increase in advertising expenses of
$6,000, an increase in apartment cleaning of $4,000, an increase in
property taxes of $3,000, an increase in lawn mowing and grounds
expense of $3,000, an increase in supplies of $2,000, and an
increase in property management expenses (attributable to higher
rent collections) of $2,000.
The $13,000 increase in operating expenses at Pelican Sound was
primarily attributable to an increase in property taxes of $4,000,
an increase in pest control of $3,000, an increase in wallpaper
replacement of $3,000, and an increase in on-site personnel of
$3,000.
As a result of the foregoing, net income from rental property
operations before debt service, depreciation and amortization, was
approximately $776,000 for the first quarter of 2001, compared to
$798,000 for the comparative period, a decrease of approximately
$22,000. The net decrease was comprised of decreases at The
Meadows II of $37,000 and at Town Place of $19,000, offset by an
increase at Pelican Sound of $34,000.
A summary of net operating income before depreciation,
amortization, and debt service, by site including the percent of
total for each site for three month periods ended follows:
Increase Increase
3/31/01 3/31/00 (Decrease)(Decrease)
Amount Percent Amount Percent Amount Percent
Pelican Sound $349,000 45% $315,000 40% $ 34,000 10.8%
Meadows II 230,000 30% 267,000 33% (37,000) (13.9%)
Town Place 197,000 25% 216,000 27% (19,000) (8.8%)
Total $776,000 100% $798,000 100% $(22,000) (2.8%)
Interest expense for the first quarter of 2001 decreased $12,500
from the comparative period primarily as a result of a lower amount
of outstanding debt between the two comparative periods.
The net income before debt service from real estate activities is
reduced by deductions for depreciation and amortization which do
not affect cash flow. Depreciation and amortization increased
$4,500 for the first quarter of 2001 compared to 2000.
The Partnership's net other expenses increased during the three
month period in 2001 by approximately $3,800. The $3,800 increase
consisted of a decrease in interest income of $400 and an increase
in partnership management expenses of $3,400.
As a result of the foregoing, the Partnership's net loss for the
quarter ended March 31, 2001 was $27,600, compared to a net loss of
$9,400 in the same period of 2000.
Exclusive of depreciation and amortization, the Partnership's net
income for the quarters ended March 31, 2001 and 2000 was $256,000
and $269,000, respectively.
LIQUIDITY AND SOURCES OF CAPITAL
At March 31, 2001 there was $4.34 million of cash and cash
equivalents and escrow deposits available to pay liabilities. The
Partnership has a credit line established of approximately $2.56
million from the undisbursed funds from The Meadows II refinancing
to provide additional liquidity. The undisbursed funds do not bear
interest until they are released by the mortgage lender. The cash
balance averaged approximately $4.28 million during the three month
period.
During the first three months of 2001, cash and cash equivalents
increased by $60,000 as shown herein on the Statements of Cash
Flows. Operating activities provided $405,000 during the quarter.
The cash flow was used to make cash distributions to the limited
partners of $168,000, of which $41,000 (24%) was considered to be
portfolio income subject to income taxes. The balance of the cash
flow provided by operations was used to make principal payments on
the outstanding mortgage notes of $106,000, and to purchase
capitalized additions to the investment properties of $72,000.
The General Partner believes that the Partnership has the ability
to generate adequate amounts of cash to meet the Partnership's
current needs for the foreseeable future.
Short-term obligations total $4.3 million, consisting of $778,000
of current liabilities, $422,000 of mortgage principal liabilities,
and $3,097,000 payable to the General Partner and affiliates.
On a short-term basis, rental operations are expected to provide a
stream of cash flow to pay day-to-day operating expenses and to
fund quarterly cash distributions to partners. Investment property
operations generated a profit in the first quarter of 2001 of
$283,000 (before depreciation and amortization of $283,000)
compared to $293,000 for the same period in 2000.
The Agreement of Limited Partnership provides that the Partnership
will make distributions for each calendar quarter of cash flow less
amounts set aside for reserves. In January the Partnership paid to
the Limited Partners the December declaration of $167,500 ($12.50
per Interest) and declared for the eighteenth consecutive quarter
a similar amount payable for the first quarter of 2001 which was
paid in April 2001. The distribution payable to the General
Partner of $1,000 was accrued and payment will be made
subsequently. The Partnership intends, but is not required, to
continue to make cash distributions to the Limited Partners each
quarter in the same amount of 5.0% per annum on the original
capital investment of $1,000 per Interest. This intention will
require cash distributions to the limited partners of approximately
$670,000 in the next 12 months, which should be met from operations
and cash reserves. Through March 31, 2001 the Partnership declared
cash distributions of approximately $14.0 million (78% of original
capital) to the Limited Partners since inception. Cumulative cash
distributions range from $783 (78%) to $930 (93%) per $1,000
Interest purchased in the initial public offering by an original
holder, depending upon the date of purchasing the Interest.
The long-term mortgage obligations of the Partnership require
principal reductions (excluding balloon payments) of approximately
$2.0 million over the next five years. These obligations will most
likely be satisfied by cash generated from operations. The Town
Place loan is due in 2003 and will require a balloon payment of
approximately $6.1 million. The Meadows II loan is due in 2005 and
will require a balloon payment of approximately $5.7 million. The
Pelican Sound note is due in 2006 and will require a balloon
payment of approximately $6.0 million. It is anticipated that all
three properties will be sold or refinanced prior to the maturity
dates.
The mortgage notes on Pelican Sound, Town Place and Meadows II bear
interest at 7.50%, 8.25%, and 7.25% respectively. The Partnership
is exploring the possibility of refinancing the mortgage loans
during 2001 if lower interest rates are available. Additional
proceeds from the refinancing in excess of the existing mortgage
debt would provide additional liquidity.
Approximately $3.9 million of deferred fees and deferred interest
related thereto has been earned by the General Partner and
affiliates, of which approximately $3.0 million is a short-term
obligation of the Partnership currently due and payable. It is
anticipated that the current liability of approximately $3.0
million will be paid during the next quarter.
Other than the payments described above, there are no long-term
material capital expenditures, obligations, or other demands or
commitments that might impair the liquidity of the Partnership.
Partners' Capital decreased by $196,000 during the first three
months of 2001 due to cash distributions declared payable to the
partners of $169,000, less the net loss for the first quarter of
$27,000.
PART II.
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
The Partnership did not file any reports on Form 8-K during the
three months ended March 31, 2001.
Decade Companies Income Properties - A Limited Partnership
Form 10-QSB
March 31, 2001
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
DECADE COMPANIES INCOME PROPERTIES -
A LIMITED PARTNERSHIP
(Registrant)
By: DECADE COMPANIES
(General Partner)
Date: May 15, 2001 By: /s/ Jeffrey Keierleber
Jeffrey Keierleber
General Partner and Principal
Financial and Accounting Officer
of Registrant