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, 1998.
[ ] 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)
(414) 792-9200
(Issuer's telephone number)
_________________________________________________________________
Former name, former address and former fiscal year, if changed
since last report)
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 ____.
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 _____.
Decade Companies Income Properties - A Limited Partnership
Form 10-QSB
INDEX
March 31, 1998
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (unaudited as to
March 31, 1998 and the three months
then ended).
Balance Sheet at March 31, 1998. 3
Statements of Operations for the three months
ended March 31, 1998 and 1997. 4
Statements of Partners' Capital
for the three months ended March 31, 1998
and the year ended December 31, 1997. 5
Statements of Cash Flows for the three months
ended March 31, 1998 and 1997. 6
Notes to Financial Statements. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K. 10
SIGNATURES 11
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BALANCE SHEET
March 31, 1998
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 2,140,927
Escrow deposits 247,812
Prepaid expenses and other assets 108,180
Total Current Assets 2,496,919
INVESTMENT PROPERTIES, AT COST: 31,409,094
Less: accumulated depreciation (7,859,850)
Net Investment Property 23,549,244
OTHER ASSETS:
Utility deposits 43,415
Debt issue costs, net of accumulated
amortization 187,518
Total Other Assets 230,933
Total Assets 26,277,096
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and
accrued taxes 390,238
Tenant security deposits 147,359
Distributions payable 168,504
Accrued interest payable 37,174
Payables to affiliates 3,769,964
Mortgage notes payable 22,819,947
Total Liabilities 27,333,186
PARTNERS' CAPITAL:
General Partner Capital (84,650)
Limited Partners
(authorized--18,000 Interests;
outstanding--13,400.27 Interests) (971,440)
Total Partners' Capital (1,056,090)
Total Liabilities and
Partners' Capital 26,277,096
See Notes to Financial Statements.
STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31
1998 1997
Operating revenue:
Rental income 1,642,515 1,535,535
Operating expenses:
Operating 681,558 738,493
Real Estate Taxes 180,324 179,095
Total 861,882 917,588
Net income before
debt service and other
expenses 780,633 617,947
Interest expense (435,534) (439,821)
Depreciation (258,000) (274,900)
Amortization of debt issue costs (7,778) (8,735)
Net (loss) from investment property 79,321 (105,509)
Other income (expenses):
Interest income 21,625 34,176
Partnership management (59,073) (164,432)
(37,448) (130,256)
NET INCOME (LOSS) 41,873 (235,765)
Net income (loss) attributable to
General Partner (1%) 419 (2,358)
Net income (loss) attributable to
Limited Partners (99%) 41,454 (233,407)
41,873 (235,765)
Net income (loss) per Limited
Partner Interest 3.09 (17.42)
See Notes to Financial Statements
STATEMENTS OF PARTNERS' CAPITAL
(Unaudited as to the Three Months Ended March 31, 1998)
General Limited
Partner Partners'
Capital Capital Total
BALANCES AT 12/31/96 (74,801) 472,061 397,260
Tender offer costs (203) (203)
Distributions to Partners (2,730) (670,018) (672,748)
Net (loss) for the year (6,538) (647,230) (653,768)
BALANCES AT 12/31/97 (84,069) (845,390) (929,459)
Distributions to Partners (1,000) (167,504) (168,504)
Net income for the period 419 41,454 41,873
BALANCES AT 3/31/98 (84,650) (971,440) (1,056,090)
() denotes deficit or deduction.
See Notes to Financial Statements.
STATEMENTS OF CASH FLOWS - (UNAUDITED)
For The Three Months Ended March 31,
1998 1997
CASH PROVIDED BY (USED FOR) OPERATIONS 243,554 (8,684)
INVESTING ACTIVITIES:
Additions to investment property (27,685) (29,826)
FINANCING ACTIVITIES:
Principal payments on mortgage notes (78,940) (73,839)
Payment of tender offer costs --- (58)
Distributions paid to limited partners (167,504) (167,504)
NET CASH (USED IN) FINANCING ACTIVITIES (246,444) (241,401)
INCREASE (DECREASE) IN CASH & CASH
EQUIVALENTS (30,575) (279,911)
CASH & CASH EQUIVALENTS AT THE BEGINNING
OF PERIOD 2,171,502 2,620,423
CASH & CASH EQUIVALENTS
AT THE END OF PERIOD 2,140,927 2,340,512
Supplementary disclosure of cash flow information:
Interest paid 428,430 432,724
Income taxes paid 0 0
See Notes to Financial Statements
Note 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, 1998 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1998.
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, 1997.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Operating revenue from rental income was $1,643,000 in the quarter ended
March 31, 1998, compared to $1,536,000 for the same period of 1996, an
increase of 7.0%. Rental income was provided by the three sites for the
comparative three month periods as follows:
Percent
Three Months Ended Increase Increase
3/31/98 3/31/97 (Decrease) (Decrease)
Pelican Sound 690,700 648,300 42,400 6.5%
Meadows II 514,200 483,900 30,300 6.3%
Town Place 437,600 403,300 34,300 8.5%
Total 1,642,500 1,535,500 107,000 7.0%
The average monthly gross potential rent per unit at the Apartments for the
first quarter of 1998, and the comparative period in 1997 is set forth
below:
Number
of Units 1998 1997
Pelican Sound 379 $612 $579
The Meadows II 316 $589 $572
Town Place 240 $599 $581
All Rental Units 935 $601 $577
"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 quarter ended March
31, 1998, and the comparable period in 1997, is set forth below:
Three Months Ended
3/31/98 3/31/97
Pelican Sound 96.1% 96.6%
The Meadows II 91.9% 88.7%
Town Place 97.1% 93.9%
All Rental Units 95.0% 93.2%
The range of occupancy levels at the Apartments for the three month period
ended March 31, 1998, and the comparable period in 1997, is set forth
below:
Three Months Ended
3/31/98 3/31/97
Pelican Sound 95.0-96.8% 96.0-97.8%
The Meadows II 91.4-92.6% 85.8-90.6%
Town Place 96.0-97.9% 92.7-94.7%
All Rental Units 94.8-95.1% 93.0-93.4%
Total rental expenses before depreciation and debt service in the three
month period ended March 31, 1998 decreased by $56,000, from $918,000 to
$862,000. The decrease was comprised of decreases from Town Place
($23,000), Pelican Sound ($20,000), and The Meadows II ($13,000).
A summary of operating expenses before depreciation and debt service by
apartment site follows:
Increase Increase
(Decrease) (Decrease)
1997 1996 Amount Percent
Pelican Sound $379,000 $399,000 $(20,000) (5.0%)
Meadows II 261,000 274,000 (13,000) (4.7%)
Town Place 222,000 245,000 (23,000) (9.4%)
Total $862,000 $918,000 $(56,000) (6.1%)
Net income from rental property operations before debt service and
depreciation was approximately $781,000 for the first three months of 1998,
compared to $618,000 for the comparative period, an increase of
approximately $163,000. The increase was comprised of increases at Pelican
Sound ($62,000), Town Place ($57,000), and at
The Meadows II ($44,000).
A summary of operating income before depreciation and debt service by
apartment site follows:
Increase Increase
(Decrease) (Decrease)
1997 1996 Amount Percent
Pelican Sound 311,000 249,000 62,000 24.9%
Meadows II 254,000 210,000 44,000 21.0%
Town Place 216,000 159,000 57,000 35.8%
Total 781,000 618,000 163,000 26.4%
Interest expense decreased $4,300 from the comparative period primarily as
a result of a lower amount of debt.
The net income before debt service from real estate activities is partially
sheltered by deductions for depreciation and amortization which do not
affect cash flow. Depreciation and amortization decreased $18,000 from
1997 to 1998 for the respective three month periods.
The Partnership's net other expenses decreased in 1998 by approximately
$93,000. Partnership management expenses decreased $105,000, offset by a
decrease in interest income of $12,000. The decrease in partnership
management expenses of $105,000 is primarily attributable to the
nonrecurring litigation expenses incurred in 1997 in the lawsuit against
Arnold K. Leas, Wellington Management Corporation, and WMC Realty, Inc. and
for costs incurred for the proxy solicitation to adopt an amendment to
Section 8 of the Limited Partnership Agreement encaptioned the "Fair Price
Provision". The decrease in interest earned is primarily attributable to
income earned from a smaller investment portfolio.
As a result of the foregoing, the Partnership's net income for the quarter
ended March 31, 1998 was $41,900, compared to a loss of $236,000 in the
same period of 1997. Exclusive of depreciation and amortization, the
Partnership's net income for the quarters ended March 31, 1998 and 1997 was
$308,000 and $48,000.
Liquidity and Financial Condition
At March 31, 1998 there was $2.4 million of cash and cash equivalents and
escrow deposits available to pay liabilities. Current liabilities are
approximately $4.6 million at March 31, 1998, of which approximately $3.8
million is payable to the General Partner. The actual timing of the
payment of deferred fees and related interest will take into account the
amount of cash reserves to be set aside that the General Partner deems
necessary or appropriate for the operation and protection of the
Partnership.
During the first three months of 1998, cash and cash equivalents decreased
by $31,000. During the period $243,000 was provided operating activities,
$28,000 was used in investing activities and approximately $246,000 was
used in financing activities that included payments on the mortgage notes
and distributions to partners as shown herein on the Statements of Cash
Flows.
Day-to-day operating expenses are funded from operations and do not
require the use of cash reserves.
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 a similar amount payable for the first quarter of 1998 to be paid
in April 1998. 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.
The outstanding principal balance on mortgage notes was reduced by $79,000
during the quarter. Scheduled regular monthly mortgage debt principal
reductions are approximately $106,000 over the balance of the year. This
excludes the note on Pelican Sound Apartments which is due in December 1998
with a balloon payment of $9.7 million. The note provides that it may be
extended for another five years if it is not refinanced.
Partners' Capital decreased by $127,000 during the first three months of
1998 due to cash distributions declared payable to the partners of
$169,000, offset by the net income for the quarter of $42,000.
PART II.
OTHER INFORMATION
Item 1. Legal Proceeding.
There is no material pending litigation.
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, 1998.
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 14, 1998 By:/s/ Jeffrey Keierleber
Jeffrey Keierleber
General Partner and Principal
Financial and Accounting Officer
of Registrant