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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FORM 10-K.-ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required]
For the fiscal year ended December 31, 2000
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or
[ ]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required}
For the transition period from to
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Commission file Number 0-8952
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SB Partners
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(Exact name of registrant as specified in its charter)
New York 13-6294787
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(State of other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1251 Avenue of the Americas, N.Y., N.Y. 10020
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 408-2900
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Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
NONE
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Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interests
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(Title of Class)
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(Title of Class)
2
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (sec.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X] (Amended by Exch Act Rel No.
28869, eff. 5/1/91.)
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
(See definition of affiliate in Rule 405, 17 CFR 230.405).
NOTE: If a determination as to whether a particular person or entity is an
affiliate cannot be made without involving unreasonable effort and expense, the
aggregate market value of the common stock held by non-affiliates may be
calculated on the basis of assumptions reasonable under the circumstances,
provided that the assumptions are set forth in this Form.
Not Applicable
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APPLICABLE ONLY TO REGISTRANTS 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 Section 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
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(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Not Applicable
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DOCUMENTS INCORPORATED BY REFERENCE.
List hereunder the following documents if incorporated by reference and the
Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g. annual report to security holders
for fiscal year ended December 24, 1980).
None
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3
PART I
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ITEM 1. BUSINESS
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Description of SB Partners (the "Registrant")
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The Registrant is a New York limited partnership engaged in acquiring, operating
and holding for investment a varying portfolio of real properties. The
Registrant's initial public offering was in 1971, the year it began operations.
As of December 31, 2000, the Registrant owned apartment projects in St. Louis,
Missouri; Greenville, South Carolina; Reno, Nevada; and Holiday and Orlando,
Florida; as well as 13.9 acres of land in Holiday, Florida.
The principal objectives of the Registrant are, first, to obtain capital
appreciation through equity investments in real estate; second, to generate cash
available for distribution, a portion of which may not be currently taxable; and
third, to the extent still permitted under the Internal Revenue Code of 1986, as
amended, to generate tax losses which may offset the limited partners' income
from the Registrant and certain other sources.
Recent Developments and Real Estate Investment Factors
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The United States economy continued to expand appreciably during the first half
of 2000. Constraints on the availability of labor created upward pressure on
wages and the threat of inflation as consumer price indexes showed indications
of accelerating increases. In the real estate sector, occupancy rates were
steady, and construction activity remained strong. As the economy continued to
expand, the threat of inflationary pressures and an overheated economy prompted
the United States Federal Reserve Board to raise interest rates three times
during the year. Despite rising interest rates, sales of new and existing homes
were strong in many areas of the country.
During the latter half of 2000, the economy showed signs of becoming sluggish.
Inflation rates were generally higher than in the previous three to five years
and stock markets underwent dramatic reversals of gains amassed over the prior
two years. Continued labor shortages and higher energy prices added to the cost
of operating rental properties. Real estate construction activity slowed in some
areas. Many banking institutions reported a general tightening of credit policy,
although interest rates were declining from levels seen earlier in 2000 in
anticipation of a decision by the Federal Reserve Board to reduce interest
rates.
Despite the tightening of credit standards towards the end of the year, debt and
equity capital was generally more available to real estate companies and at
lower costs. In particular, many apartment owners and investors benefited from a
lower interest rate environment with decreased mortgage borrowing rates of
approximately 100 basis points in the last six months of the year. Lower
interest rates provided strong demand for apartment properties and the
Registrant believes that values in many, but not all, areas remained stable
during the year.
4
General Real Estate Risks
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This report on Form 10-K 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 for a number of reasons, including, but not limited to, those risks
described below:
General
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The Registrant's investments generally consist of investments in real property
and as such will be subject to varying degrees of risk generally incident to the
ownership of real estate assets. The underlying value of the Registrant's real
estate investments and the Registrant's financial condition will be dependent
upon its ability to operate its properties in a manner sufficient to maintain or
increase revenues and to generate sufficient income in excess of operating
expenses. Income from the properties may be adversely affected by changes in
national and local economic conditions such as oversupply of apartment units or
a reduction in demand for apartment units in the Registrant's markets, the
attractiveness of the properties to tenants, changes in interest rates and in
the availability, cost and terms of mortgage financing, the ongoing need for
capital improvements, particularly in older structures, changes in real estate
tax rates, adverse changes in governmental rules and fiscal policies, adverse
changes in zoning laws, civil unrest, acts of God, including natural disasters
(which may result in uninsured losses), and other factors which are beyond the
control of the Registrant. If the Registrant were unable to promptly renew or
relet the leases of a significant number of tenants, or, if the rental rates
upon such renewal or reletting were significantly lower than expected rates, the
Registrant's results of operations, financial condition and ability to make
distributions to Unitholders may be adversely affected.
5
Risks of Liability and Loss
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The development and ownership of real estate may result in liability to third
parties, due to conditions existing on a property which may result in injury. In
addition, real estate may suffer a loss in value due to casualties such as fire
or hurricane. Such liability or loss may be uninsurable in some circumstances or
may exceed the limits of insurance maintained at typical amounts for the type
and condition of the property. Real estate may also be taken, in whole or in
part, by public authorities for public purposes in eminent domain proceedings.
Awards resulting from such proceedings may not adequately compensate the
Registrant for the value lost.
Value and Non-liquidity of Real Estate
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Real estate investments are relatively non-liquid. The Registrant's ability to
vary its portfolio in response to changes in economic and other conditions will
therefore be limited. If the Registrant must sell an investment, there can be no
assurance that it will be able to dispose of the investment in the time period
it desires or that the sales price of the investment will recoup or exceed the
amount of the Registrant's cost of the investment.
Potential Adverse Effect on Results of Operations Due to Operating Risks
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The Registrant's properties are subject to operating risks common to real estate
in general, any and all of which may adversely affect occupancy or rental rates.
The Registrant's properties are subject to increases in operating expenses such
as cleaning, electricity, heating, ventilation and air conditioning, and
maintenance; insurance and administrative costs; marketing and payroll costs;
and other general costs associated with security, landscaping, repairs and
maintenance. Tenants in commercial properties generally are obligated to pay
these escalating costs, although there can be no assurance that tenants will
agree to pay such costs upon renewal or that new tenants will agree to pay such
costs. The cost of these expenses must be borne by the Registrant for any
portion of a commercial property which is not leased. In the case of apartment
communities, the Registrant must bear all such increased expenses, except in
those markets where passing the cost of certain utilities to tenants is
customary. If operating expenses increase, the local rental market may limit the
extent to which rents may be increased to meet such additional expenses without
lowering occupancy rates. While the Registrant implements cost-saving incentive
measures at each of its properties, should any of the foregoing occur, the
Registrant's results of operations, financial condition and its ability to pay
distributions to Unitholders could be adversely affected. Furthermore, the
inability of existing tenants to meet their obligations under the terms of their
leases, may in turn adversely affect the performance and financial condition of
the Registrant.
6
Debt Servicing and Financing
- ----------------------------
If the Registrant does not have funds sufficient to repay its indebtedness at
maturity, the Registrant may need to refinance indebtedness through additional
debt financing or equity offerings. If the Registrant is unable to refinance
this indebtedness on acceptable terms, the Registrant may be forced to dispose
of properties upon disadvantageous terms, which could result in losses to the
Registrant and adversely affect the amount of cash available for distribution to
Unitholders. If prevailing interest rates or general economic conditions result
in higher interest rates at a time when the Registrant must refinance its
indebtedness, the Registrant's interest expense would increase, which would
adversely affect the Registrant's results of operations, financial condition and
its ability to pay expected distributions to Unitholders, or it may be
restricted from obtaining a loan which will be sufficient to retire the existing
loan based on lower debt service coverage. Further, if any of the Registrant's
properties are mortgaged to secure payment of indebtedness and the Registrant is
unable to meet mortgage payments, the mortgagee could foreclose or otherwise
transfer the property, with a consequent loss of income and asset value to the
Registrant.
Environmental Issues
- --------------------
Under various Federal, state and local environmental laws, ordinances and
regulations, an owner or operator of real estate may be liable for the costs of
removal or remediation of certain hazardous or toxic substances on such
property. These laws often impose environmental liability without regard to
whether the owner or operator knew of, or was responsible for, the presence of
such hazardous or toxic substances. The presence of such substances, or the
failure to properly remediate such substances, may adversely affect the owner's
or operator's ability to sell or rent the property or to borrow using the
property as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances may also be liable for the costs of removal or
remediation of such substances at a disposal or treatment facility, whether or
not such facility is owned or operated by such person. Certain third parties may
seek recovery from owners or operators of such properties or persons who
arranged for the disposal or treatment of hazardous or toxic substances and,
therefore, are potentially liable for removal or remediation costs, as well as
certain other related costs, including governmental fines and injuries to
persons and property.
Competition
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The Registrant competes for tenants with many other real estate owners. The
success of the Registrant in attracting tenants for its properties will depend
upon its ability to maintain its properties and their attractiveness to tenants,
neighborhood conditions, and changing demographic trends, et cetera. All of the
Registrant's properties are located in developed areas that include other,
similar properties. The number of competitive properties in a particular area
could have a material effect on the Registrant's ability to lease apartment
units at its properties and on the rents charged at such properties. In
addition, other forms of housing, including manufactured housing community
properties and single-family housing, provide alternatives to potential
residents of multi-family residential properties.
7
Tax Matters
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In August 1993, Congress passed and President Clinton signed into law the
Omnibus Budget Reconciliation Act of 1993 (the "Act"). The Act includes several
provisions designed to help revive the real estate industry, including relaxed
rules for pension fund investments in real estate, passive-loss relief for
developers, extension of the low-income housing credit, and an easing of the
rules on recognizing cancellation of certain real estate debt. On the negative
side, the Act extended the recovery period by 7.5 years (from 31.5 to 39) for
nonresidential real estate purchased subsequent to the effective date of the
Act.
The Act relaxes the "per se" passive characterization of certain rental real
estate operations. For tax years beginning after 1993, eligible taxpayers, who
materially participate in rental real estate activities, are able to deduct
losses from rental activities against other income. For all other nonmaterially
participating taxpayers, the provisions enacted as part of the Tax Reform Act of
1986 and the Technical and Miscellaneous Revenue Act of 1988 (as discussed
below) continue to apply. The Act also provides some relief by allowing
taxpayers, other than corporations, to elect to exclude from income some
cancellation of "qualified real property business indebtedness", effective for
certain discharges after December 31, 1992. The amount of the exclusion is
limited to the basis of the taxpayer's business real property or the excess of
the principal amount of the debt over the fair market value of business real
property that secures the debt, whichever is less. The basis of the taxpayer's
business real property must be reduced by the amount of excluded income. The
provision does not apply to foreclosures or "deeds in lieu" with respect to
nonrecourse debt.
8
Tax Reform Act of 1986 and the Technical
and Miscellaneous Revenue Act of 1988
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On October 22, 1986, the Tax Reform Act of 1986 (the "1986 Act") was signed into
law. The Technical and Miscellaneous Revenue Act of 1988 ("TAMRA 88") was
enacted on November 10, 1988. Generally the principal provisions of the 1986 Act
and TAMRA 88 impacting the Registrant and its Limited Partners are:
-Passive activity loss limitations have limited the ability of the
partners to offset their allocated share of taxable passive losses
(essentially losses from rental real estate operations) of the Registrant
against other earned or portfolio income.
-The limitation of losses to amounts that partners have "at risk" was
extended to passive real estate investments. The amount a partner has "at
risk" generally includes its proportionate share of qualified non-recourse
financing, and is also subject to other limitations.
-The 1986 Act limits the deduction of investment interest expense, as
defined, to the amount of net investment income generated for the year, as
defined, with an unlimited carryover for excess expense.
The effect of these and other changes in income tax laws will vary depending
upon each partner's individual tax situation. The Registrant believes that its
characterization of, and allocation of, passive and portfolio income and losses
from its operations are in compliance with existing regulations, but it can
provide no assurances that the Internal Revenue Service ("IRS") will not
challenge such treatment and allocations in the event of an audit.
9
Other Tax Matters
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The Taxpayer Relief Act of 1997 contains significant changes to the taxation of
capital gains of individuals, trusts and estates. For gains realized after July
28, 1997, and subject to certain exceptions, the maximum rate of tax on net
capital gains of individuals, trusts and estates from the sale or exchange of
capital assets held for more than 18 months has been reduced to 20%, and the
maximum rate is reduced to 18% for assets acquired after December 31, 2000 and
held for more than five years. However, the maximum rate for long-term capital
gains attributable to the sale of depreciable real property held for more than
18 months is 25% to the extent of the deductions for depreciation with respect
to such property. Therefore, that portion of capital gain that is attributable
to depreciation previously allocated to the Unitholders will be subject to the
25% rate. The maximum rate of capital gains tax for capital assets held for more
than one year (but not more than 18 months) remains at 28%. The taxation of
capital gains of corporations was not changed by the Taxpayer Relief Act.
The IRS Restructuring and Reform ACT of 1998 (the "1998 ACT") eliminated the
18-month holding period that was required in order to take advantage of the
lowest capital gain tax rates. This holding period change is generally effective
for tax years ending after December 31, 1997. Thus, in tax years ending after
1997, capital gains on most property held more than 12 months will be eligible
for the 10, 20, or 25 percent capital gains rates introduced in the 1997 ACT.
The 1998 ACT also made the following changes to the maximum capital gains rate
provisions, and is generally effective for tax years ending after May 6, 1997:
1) The regular tax and minimum tax "minimum capital gains rate" rules were
reorganized for the sake of clarity, while retaining the substance of the rules.
In particular, the definition of "adjusted net capital gain" was clarified. 2)
Several conforming amendments were in the 1998 Act to coordinate the multiple
holding periods introduced under the Taxpayer Relief Act of 1997 with other tax
law provisions. For example, inherited property and certain patents are now
deemed to have a holding period of more than 18 months, allowing the 10 and 20
percent rates to apply.
2000 Legislation:
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On December 21, 2000, the President signed into law an end-of-session budget
bill (H.R. 4577) containing a 10-year, $32 billion tax relief package. The
Community Renewal Tax Relief Act of 2000 primarily contains incentives for
economically distressed urban and rural areas. For example, the bill extends and
expands empowerment zones and creates "renewal communities" eligible for
empowerment zone-type tax benefits. Other provisions extend and expand the
low-income housing credit, enhance the deduction for corporate donations of
computer equipment and permit expensing of "brownfield" cleanup costs.
Repealing legislation enacted in 1999, the President also signed the Installment
Tax Correction Act of 2000 into law. This bill retroactively reinstates the
installment method for accrual basis taxpayers, effective for sales or other
dispositions occurring on or after December 17, 1999.
Unitholders are urged to consult their own tax advisors with respect to the tax
consequences arising under the federal law and the laws of any state,
municipality or other taxing jurisdiction, including tax consequences arising
from such Unitholder's own tax characteristics.
10
The Revenue Act of 1987 retroactively changed the treatment of income and loss
of publicly-traded partnerships ("PTP") to characterize a partner's share of
income as portfolio instead of passive, and limits the current deductibility of
losses.
The term PTP refers to any partnership whose interests are traded on an
established securities market or are readily tradable on a secondary market (or
the substantial equivalent thereof). The Registrant believes that it is not a
PTP pursuant to such definition and therefore its holders will not be subject to
the Revenue Act of 1987 provisions. However, due to the complexities of the
regulations, no assurance can be provided that the IRS may not challenge the
treatment of income and losses in the event of an audit.
In 1989, the Registrant made an election under IRC Section 754 which provides
for an adjustment of the adjusted tax basis of depreciable property which may
result in additional depreciation deductions to purchasing partners and those
partners who inherit their interests in the Registrant. These adjustments,
however, are subject to the passive loss rules discussed above and may or may
not provide current benefit to a particular partner. The Registrant will be
bound by the Section 754 election for all subsequent years.
General
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Efforts required in complying with Federal, state and local environmental
regulations may have and may continue to have an adverse effect on the
Registrant's operations in the future, although such costs have not historically
been significant in amount.
There are approximately 45 full and part-time on-site project personnel employed
at the Registrant's properties.
The Registrant's real estate investments are not generally subject to seasonal
fluctuations, although net income (loss) may vary somewhat from quarter to
quarter based upon changes in utility consumption and seasonal maintenance
expenditures at each property.
The Registrant considers itself to be engaged in only one industry segment, real
estate investment, and therefore information regarding industry segments is not
applicable and has not been provided.
The Registrant reports to its Unitholders on a quarterly and annual basis. The
annual report is audited by an independent public accountant who expresses an
opinion on the Registrant's financial statements. Refer to the Consolidated
Financial Statements and Notes included elsewhere in this annual report on Form
10-K.
11
ITEM 2.PROPERTIES
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The properties owned by the Registrant as of December 31, 2000 are set forth on
the Summary of Properties schedule on the page immediately following.
ITEM 3.LEGAL PROCEEDINGS
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The Registrant is a party to certain actions directly arising from its normal
business operations. While the ultimate outcome is not presently determinable
with certainty, the Registrant believes that the resolution of these matters
will not have a material effect on its financial position or results of
operations.
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF UNITHOLDERS
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NONE.
12
SB PARTNERS
Summary of Properties
As of December 31, 2000
Occupancy
Description Acquisition Percent at Mortgage
Property Location Sq. Ft. Units Acres Date Ownership 12/31/00 Payable
Apartments:
Meadowwood Apts. Reno, NV 529,000 704 30.0 May 1983 100% 95.9% $20,175,226
Holiday Park Apts. Holiday, FL 220,000 244 21.5 Jan 1991 100% 91.4% $ 3,680,975
Cypress Key Apts. Orlando, FL 323,000 360 22.7 Aug 1998 100% 98.1% $16,859,135
Halton Place Apts. Greenville, SC 233,000 246 20.6 Dec 1998 100% 89.4% $ 0
Le Coeur du Monde Apts. St. Louis, MO 177,000 192 12.3 Sep 1999 100% 85.9% $10,197,950
--------- ----- -----
1,482,000 1,746 107.1
========= ===== =====
Land:
Unimproved land (a) Holiday, FL n/a n/a 13.9 Jul 1978 100% n/a $ 0
Additional information regarding properties owned by the Registrant:
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Average Occupancy (b)
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Meadowwood Apts. 93.5% 91.5% 85.5% 88.8% 94.9%
Holiday Park Apts. 91.5% 91.0% 94.0% 93.2% 91.0%
Cypress Key Apts. 94.0% 91.0% 88.0% n/a n/a
Halton Place Apts. 91.6% 91.0% 95.0% n/a n/a
Le Coeur du Monde Apts. 89.0% 96.0% n/a n/a n/a
Effective Annual Rent (c)
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Meadowwood Apts. $6,454 $6,143 $5,717 $5,987 $6,372
Holiday Park Apts. $4,861 $4,772 $4,800 $4,604 $4,335
Cypress Key Apts. $7,866 $7,661 $7,475 n/a n/a
Halton Place Apts. $6,610 $6,333 $5,495 n/a n/a
Le Coeur du Monde Apts. $8,513 $9,383 n/a n/a n/a
(a) Land is adjacent to Holiday Park Apartments.
(b) For period of ownership.
(c) Per apartment unit. Gross potential rent, less concessions and vacancies,
divided by the total number of units at the property. Annualized for periods
of ownership of less than one year.
13 PART II
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ITEM 5.MARKET FOR REGISTRANT'S UNITS OF PARTNERSHIP
INTEREST AND RELATED UNITHOLDER MATTERS
--------------------------------------------
The transfer of Units or Participations (equivalent to one-half Unit) is subject
to certain limitations, including the consent of the General Partner. There is
no public market for the Units and it is not anticipated that any such public
market will develop. The number of Unitholders as of December 31, 2000 was
3,526.
At various times, the Registrant has generated and distributed cash to the
Unitholders. With the repositioning of the portfolio, the Registrant was able to
resume distributions to the limited partners in 1999. A distribution of $100 per
unit totaling $775,350 was paid in March 2001 to Unitholders of record on
December 31, 2000. Including the current amount, distributions to date have
totaled $100,195,235, however, there is no requirement to make such
distributions nor can there be any assurance that future operations will
generate cash available for distribution.
ITEM 6.SELECTED FINANCIAL DATA
-----------------------
Selected Financial Data is set forth on the table on the following page. This
information should be read in conjunction with the Consolidated Financial
Statements and Notes thereto, and Management's Discussion and Analysis of
Financial Condition and Results of Operations, included elsewhere in this annual
report on Form 10-K.
14
SELECTED FINANCIAL DATA
The following table sets forth selected financial data regarding the
Registrant's financial condition and results of operations determined in
accordance with generally accepted accounting principles. This data should be
read in conjunction with the Audited Consolidated Financial Statements and Notes
thereto included elsewhere in this annual report on Form 10-K.
For the Years Ended December 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(In Thousands, Except Unit Data)
Income Statement Data:
Rental, Interest and Other Revenues $ 12,501 $11,063 $ 9,512 $ 9,066 $ 15,430
Operating Expenses, less
Depreciation and Amortization (11,052) (9,854) (8,545) (8,663) (20,029)
Depreciation and Amortization (2,415) (2,123) (1,426) (1,723) (3,466)
-------- ------- ------- -------- --------
Loss from Operations (966) (914) (459) (1,320) (8,065)
Gain on Sale of Investments in Real Estate 0 0 3,873 1,404 0
Equity in Net Income of Joint Venture 0 0 0 316 426
-------- ------- ------- -------- --------
Net Income (Loss) before Extraordinary Gain (966) (914) 3,414 400 (7,639)
Gain on Dispositions of Investments in Real Estate
through Discharge of Indebtedness 0 0 0 0 11,951
-------- ------- ------- -------- --------
Net Income (Loss) $ (966) $ (914) $ 3,414 $ 400 $ 4,312
======== ======= ======= ======== ========
Net Income (Loss) per Unit of Partnership Interest:
Net Income (Loss) before Extraordinary Gain $ (125) $ (118) $ 440 $ 52 $ (985)
Extraordinary Gain 0 $ 0 $ 0 $ 0 $ 1,541
Net Income (Loss) $ (125) $ (118) $ 440 $ 52 $ 556
Distributions per Unit of Partnership Interest $ 100 $ 115 $ 100 $ 0 $ 0
Weighted Average Number of
Partnership Units Outstanding 7,754 7,754 7,754 7,754 7,754
Balance Sheet Data at Year End:
Real Estate, net $ 65,345 $66,687 $53,570 $ 18,502 $ 32,357
Real Estate Assets Held for Sale $ 0 $ 0 $ 0 $ 24,926 $ 0
Investment in Joint Venture $ 0 $ 0 $ 0 $ 0 $ 10,742
Total Assets $ 67,791 $70,301 $62,089 $ 45,667 $ 47,775
Mortgage Notes Payable, net $ 50,913 $51,627 $41,918 $ 28,742 $ 30,752
15
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of December 31, 2000, the Registrant had cash and cash equivalents of
approximately $475,000 in addition to $1,138,000 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 $1,095,000 less
than cash, cash equivalents and deposits held in escrow on December 31, 1999.
After decreasing deposits held in escrow by $225,000, operating activities for
the year ended December 31, 2000 generated approximately $1,721,000 of cash
flow; of which, $986,000 was invested in capital additions to the properties and
$713,000 of principal payments were made on mortgage notes payable during the
year. In addition, cash distributions amounting to approximately $892,000 were
paid in March 2000 to Unitholders of record on December 31, 1999.
Total outstanding debt at December 31, 2000 consisted of approximately
$50,900,000 of nonrecourse first mortgage notes secured by real estate owned by
the Registrant. Scheduled maturities through regularly scheduled monthly
payments will be approximately $766,000 in 2001. The terms of certain 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 payment of principal and interest. The Registrant has no other
debt except normal trade accounts payable and accrued interest on mortgage notes
payable.
As of December 31, 2000, Halton Place Apartments was unencumbered. However, on
March 1, 2001, the Registrant entered into a revolving credit facility agreement
with a bank in the amount of $7,500,000 which is secured by the apartment
community. The credit facility is for a term of two years. In March 2001, the
Registrant borrowed $700,000 under the credit facility. Borrowings, which bear
interest at LIBOR plus 1.95%, may be used for working capital and/or
acquisitions. Investigations of appropriate new acquisitions are ongoing.
Inflation and changing prices during the current period did not significantly
affect the markets in which the Registrant conducts its business, or the
Registrant's business overall.
For the third consecutive year since the repositioning of the portfolio, the
Registrant made a distribution to the Unitholders. In March 2001, a distribution
of $100 per Unit was made to Unitholders of record as of December 31, 2000.
However, there is no requirement to make such distributions, nor can there be
any assurance that future operations will generate cash available for
distribution.
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.
16
MANAGEMENT'S DISCUSSION OF RESULTS OF OPERATIONS
- ------------------------------------------------
2000 VS. 1999
- -------------
Total revenues increased $1,438,000 to $12,501,000 in 2000 from $11,063,000
in 1999. Net loss increased $52,000 to $966,000 in 2000 from $914,000 in 1999.
The changes in total revenues and net loss reflect the changes in the
composition of the portfolio from year to year. The most recent addition to the
portfolio, Le Coeur du Monde Apartments, added nearly $1,200,000 to total
revenues in the current year. Efforts to regain market share in the Reno
submarket continued to yield results in 2000 as improved occupancy and higher
rental rates at Meadowwood Apartments added $193,000 to total revenues in 2000.
Operating expenses were higher in 2000 principally because Le Coeur du Monde
Apartments was operated for a full year and incurred a full year's expenses in
2000, whereas expenses for 1999 reflect only three months of operation for this
apartment community. Furthermore, to remain competitive and increase occupancy
rates, repairs and maintenance efforts were intensified at all the properties
and additional costs were incurred.
In September of 1999, the Registrant obtained a mortgage loan on Le Coeur du
Monde Apartments in connection with the acquisition of the property. The
increase in interest expense from 1999 to 2000 is primarily due to the interest
incurred for this loan which was outstanding for the entire year of 2000 but
only for the period of ownership during 1999.
The changes in depreciation expense and real estate taxes also reflect the
different periods of ownership of Le Coeur du Monde Apartments. In 2000, a full
year of depreciation and real estate taxes were recorded.
For additional analysis, please refer to the discussions of the individual
properties below.
17
Meadowwood Apartments (Reno, Nevada)
- ---------------------
Total revenues increased $193,000 to $4,715,000 in 2000 from $4,522,000 in 1999.
Net income after depreciation and mortgage interest expense increased $102,000
to net income of $45,000 in 2000 from a net loss of $57,000 in 1999.
The increase in total revenues was primarily the result of higher rental rates
implemented at the property on new and renewing leases, which added $99,000 to
revenue. An increase in average occupancy of 2.0%, to 93.5% in 2000 from 91.5%
in 1999, added approximately $89,000 to total revenues, and lower rent
concessions also added $16,000 to revenues. Partially offsetting the higher
revenues was a decrease in miscellaneous income which reduced revenue by
$26,000. Occupancy has improved as a result of regaining market share previously
lost to newly constructed multifamily apartment communities as the capital
improvement program implemented in 1998 continued to attract new tenants to the
property. The increase in net income after depreciation and mortgage interest
expense is due primarily to the increase in revenues, partially offset by an
increase of $91,000 in total expenses. Additional costs of operating the
property at higher occupancy levels included increases in advertising and
promotion costs of $13,000, general and administrative costs of $17,000, and
other fees of $27,000. Utility costs were also $38,000 higher in 2000, due, in
part, to higher rates charged by providers. The registrant is working with a
utility provider and may possibly recover a portion of 2000 expenses.
Depreciation of the upgrades completed in the capital improvement program added
$27,000 to depreciation expense in 2000. A reduction of $27,000 in interest
expense served to offset the additional depreciation expense, as cumulative
payments on the principal outstanding reduced the interest due on the loan
during the year.
Holiday Park Apartments (Holiday, Florida)
- -----------------------
Total revenues increased $49,000 to $1,262,000 in 2000 from $1,213,000 in 1999.
Net income after depreciation and mortgage interest expense decreased $25,000 to
$72,000 in 2000 from $97,000 in 1999.
The increase in revenues was primarily a result of higher miscellaneous income,
primarily from the utility billback program, which increased revenues $27,000.
In addition, an increase in rental rates implemented at the property increased
revenues $24,000. The decrease in net income after depreciation and mortgage
interest expense is due primarily to an increase of $74,000 in total expenses,
more than offsetting the increase in total revenues. Increased costs of
operating the property included an increase in repair and maintenance of $16,000
and payroll costs of $5,000. Utility expenses increased $12,000 primarily due to
a retroactive adjustment charged by a utility provider. Advertising and
promotion increased $5,000 as the property maintained efforts to retain market
share. In addition, real estate taxes increased $17,000, other fees increased
$13,000, and depreciation expense was $3,000 higher as assets recently placed in
service were depreciated.
18
Cypress Key Apartments (Orlando, Florida)
- ----------------------
Total revenues increased $120,000 to $3,049,000 in 2000 from $2,929,000 in 1999.
Net loss after depreciation and mortgage interest expense increased $57,000 to
$310,000 in 2000 from $253,000 in 1999.
The increase in total revenues was due primarily to an increase in average
occupancy of 3.0%, to 94.0% in 2000 from 91.0% in 1999, which added
approximately $86,000 to total revenues. Miscellaneous income was also higher,
by $61,000, in large part due to income from the utility billback program. An
increase in tenant concessions reduced income by $34,000, partially offsetting
the other increases in revenues. The increase in net loss after depreciation and
mortgage interest expense was due primarily to an increase of $178,000 in
expenses, more than offsetting the higher revenues from the property. As the
occupancy rate rose, turnover costs followed, including increases in repairs and
maintenance costs of $128,000, payroll of $26,000, and administrative costs of
$20,000. Utility costs decreased $18,000, in large part as a result of lower
utility costs incurred to maintain the lower number of vacant units.
Depreciation expense increased $19,000 as new assets were placed in service and
depreciated. A reduction of $13,000 in interest expense served to offset some of
the operating expenses, as cumulative payments on the principal outstanding
reduced the interest due on the loan.
Halton Place Apartments (Greenville, South Carolina)
- -----------------------
Total revenues increased $75,000 to $1,711,000 in 2000 from $1,636,000 in 1999.
Net income after depreciation expense increased $26,000 to $539,000 in 2000 from
$513,000 in 1999.
The increase in total revenues is due primarily to lower tenant concessions of
$44,000. In addition, occupancy rose 0.6% to 91.6% in 2000 from 91.0% in 1999,
adding $12,000 to income. Miscellaneous income was also higher, by $13,000. The
increase in net income is due to the increase in total revenues, partially
offset by a $49,000 increase in total expenses. Repairs and maintenance costs
were $17,000 higher in the current year as more apartments were prepared for new
tenants. Utilities expense was $18,000 higher, primarily due to the severe
weather experienced in the region during the early part of 2000, and higher
costs for water and sewer charges in the current year. Depreciation expense
increased $20,000 as new assets were placed in service and depreciated.
Le Coeur du Monde Apartments (St. Louis, Missouri)
- ----------------------------
Total revenues increased $1,231,000 to $1,697,000 in 2000 from $466,000 in 1999.
Net loss after interest and depreciation expense increased $197,000 to $99,000
in 2000 from net income of $98,000 in 1999.
As the property was purchased on September 29, 1999, the reporting period for
that year was approximately three months long, whereas the reporting period for
2000 reflects a full year of ownership. In 2000, the Registrant has maintained
occupancy levels at the property of approximately eighty-nine percent, while the
resident profile has been improved to conform to higher leasing standards.
During 2000, projects to improve curb appeal and maintain increased market share
included the exterior walls, trim, railings and balconies.
19
MANAGEMENT'S DISCUSSION OF RESULTS OF OPERATIONS
- ------------------------------------------------
1999 VS. 1998
- -------------
Total revenues increased $1,551,000 to $11,063,000 in 1999 from $9,512,000 in
1998. Loss from operations increased $455,000 to $914,000 in 1999 from $459,000
in 1998. Net loss increased $4,328,000 to $914,000 in 1999 from net income of
$3,414,000 in 1998. Net income for 1998 included gains on sales of investments
in real estate of approximately $3,368,000 and $506,000 from the sales of
Riverbend Apartments and Cherry Hill Office Center, respectively.
The changes in total revenues and operating income/loss reflect the changes in
the composition of the portfolio from year to year. The new additions to the
portfolio, Cypress Key, Halton Place and Le Coeur du Monde, added nearly
$4,000,000 to total revenues in the current year. Efforts to retain market share
in the Reno submarket began to yield results in 1999 as improved occupancy at
Meadowwood Apartments boosted total revenues at that property $316,000. This
growth in revenues was partially offset by the absence of revenues from the two
properties sold in the prior year, Riverbend Apartments and Cherry Hill Office
Center, which accounted for approximately $2,300,000 and $400,000 of total
revenues in 1998, respectively.
In December of 1998, the Registrant placed a mortgage loan on Cypress Key
Apartments to continue the expansion and rebuilding of the portfolio. The
increase in interest expense from 1998 to 1999 is primarily due to the interest
incurred for this new loan.
The changes in depreciation expense and real estate taxes reflect the different
periods of ownership of the properties in the portfolio. In 1999, a full year of
depreciation and real estate taxes was recorded for the 1998 acquisitions,
Cypress Key and Halton Place, whereas the expense relating to these properties
in the year of acquisition corresponded to the periods of ownership. Similarly,
the real estate taxes for the properties sold, Riverbend Apartments and Cherry
Hill Office Center, corresponded to the periods of ownership which were also for
less than a full year. However, since the properties had been classified as
"held for sale", in accordance with generally accepted accounting principles, no
depreciation was recorded for those properties during 1998.
For additional analysis, please refer to the discussions of the individual
properties below.
20
Meadowwood Apartments (Reno, Nevada)
- ---------------------
Total revenues increased $317,000 to $4,522,000 in 1999 from $4,205,000 in 1998.
Net loss after depreciation and mortgage interest expense decreased $220,000 to
$57,000 in 1999 from $277,000 in 1998.
The increase in total revenues was due primarily to an increase in average
occupancy of 6.0%, to 91.5% in 1999 from 85.5% in 1998. The greater average
occupancy added approximately $300,000 to total revenues, and a corresponding
increase in miscellaneous income added $16,000. Occupancy has improved as a
result of regaining market share previously lost to newly constructed
multifamily apartment communities. As the rate of new construction in the area
slowed, the capital improvement program implemented in 1998 proved effective in
attracting new tenants to the property. The decrease in net loss after
depreciation and mortgage interest expense is due primarily to the increase in
revenues, partially offset by an increase of $97,000 in total expenses.
Additional costs of operating the property at higher occupancy levels included
increases in repairs and maintenance costs of $35,000, payroll and related costs
of $19,000, and professional fees of $20,000. Depreciation of the upgrades
completed in the capital improvement program added $40,000 to depreciation
expense in 1999. Real estate tax expense was slightly higher in 1999, increasing
$6,000. A reduction of $25,000 in interest expense served to offset some of the
operating expenses, as cumulative payments on the principal outstanding reduced
the interest due on the loan.
Holiday Park Apartments (Holiday, Florida)
- -----------------------
Total revenues decreased $4,000 to $1,213,000 in 1999 from $1,217,000 in 1998.
Net income after depreciation and mortgage interest expense increased $39,000 to
$97,000 in 1999 from $58,000 in 1998.
The decrease in revenues was primarily a result of lower occupancy, which
reduced revenues by $37,000. Average occupancy decreased 3.0% to 91.0% in 1999
from 94.0% in 1998. Lower occupancy reflected the low interest rates available
to consumers which made homebuying a viable alternative to apartment living. The
majority of move-out notices that Holiday Park received in 1999 were due to home
purchases by former residents. Nevertheless, an increase in rental rates
implemented at the property increased revenues $40,000, while tenant concessions
increased $10,000. There was also a small rise in miscellaneous income of $3,000
during the current year. Holiday Park had an increase in marketing and
advertising expense of $5,000 in an effort to reverse the downward trend in
occupancy, although the property reduced repairs and maintenance costs by
$15,000 during the year. Since some assets have been fully depreciated,
depreciation expense decreased approximately $4,000. However, net income
improved primarily as a result of reduced debt service costs. Interest expense
for the period decreased $6,000 from the prior period as a result of refinancing
the mortgage loan at a lower interest rate during 1998. Furthermore,
amortization of costs associated with the financing of the loan encumbering the
property decreased $46,000. 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 refinanced.
21
Cypress Key Apartments (Orlando, Florida)
- ----------------------
Total revenues increased $1,895,000 to $2,929,000 in 1999 from $1,034,000 in
1998. Net loss after depreciation and mortgage interest expense increased
$545,000 to $253,000 in 1999 from net income of $292,000 in 1998.
As the property was purchased at the end of August 1998, the reporting period
for that year was approximately four months long, whereas the income and
expenses for 1999 reflect a full year of ownership. Revenues were nearly
$1,895,000 higher in the current year, while operating expenses increased only
$776,000. Real estate taxes and depreciation expense increased $265,000 and
$320,000, respectively, principally because of the longer ownership period in
the current year. Interest expense increased $1,042,000, as the expense for the
prior year was only for the short period at the end of December during which the
loan was outstanding.
Average occupancy for 1999 was 91.0%, while average occupancy from the date of
purchase through December 31, 1998 was 88.0%. Certain leases entered into by the
former owners were not up to the standards employed by the Registrant and were
not renewed. This caused a temporary decline in occupancy, however, occupancy
rates have risen steadily throughout 1999.
Halton Place Apartments (Greenville, South Carolina)
- -----------------------
Total revenues increased $1,603,000 to $1,636,000 in 1999 from $33,000 in 1998.
Net income after depreciation expense increased $511,000 to $513,000 in 1999
from net income of $2,000 in 1998.
As the property was purchased on December 23, 1998, the reporting period for
that year was less than one month, whereas the reporting period for 1999
reflects a full year of ownership. Since acquisition, the Registrant has
maintained occupancy levels at the property above ninety percent, while the
resident profile has been improved to conform to higher leasing standards.
During 1999, projects to improve curb appeal and maintain market share included
lighting conversions throughout the property, improved landscaping, work to
improve the tennis courts, and painting the trim and doors throughout the
community.
Le Coeur du Monde Apartments (St. Louis, Missouri)
- ----------------------------
On September 29, 1999, the Registrant purchased Le Coeur du Monde Apartments for
$13,325,000. In connection with the purchase, the Registrant obtained a first
mortgage loan of $10,303,000 with a FNMA DUS program lender. The mortgage loan
is secured by the property, bears interest at 7.805% per annum and matures on
October 1, 2009. (Refer also to the Liquidity and Capital Resources Section and
Footnotes 4 and 6 of the Consolidated Financial Statements.)
Total revenues for the period of ownership were $466,000. Net income after
depreciation and mortgage interest expense was $98,000. Average occupancy for
the period of ownership was 96.0%. Major components of expense included real
estate operating costs of $93,000, interest expense at $138,000, depreciation
expense of $101,000 and real estate taxes of $32,000.
22
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
On March 1, 2001, the Registrant entered into a revolving credit facility
agreement with a bank under which interest incurred is determined based on
current market rates. As such, the Registrant has market risk to the extent
interest rates fluctuate during the two year term and funds are advanced by the
bank under the agreement. The Registrant does not believe this limited exposure
to market risk will have a material adverse effect on its financial position or
results of its operations.
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The Financial Statements required by this item, together with the Report of
Independent Public Accountants thereon, are contained herein on pages 28 through
38 of this annual report on Form 10-K. Supplementary financial information
required by this item is contained herein on pages 39 through 42 of this report.
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
NONE.
23
PART III
--------
ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The Registrant has no executive officers or directors. All of its business
affairs are handled by its General Partner, SB Partners Real Estate Corporation
(the "General Partner").
The directors and executive officers of the General Partner are elected by
Sentinel Holdings Corporation ("SHC") as its sole shareholder to serve until
their successors are duly elected and qualified. The limited partners of the
Registrant are not entitled to vote in their election.
The directors and executive officers of the General Partner who are active in
the Registrant's operations are:
Name Age Position
---- --- --------
John H. Streicker 58 President & Director
Michael J. Weinberger 65 Director
Millie C. Cassidy 55 Director
David Weiner 65 Director
Christine Kurtz 46 Director
Elizabeth B. Longo 49 Treasurer
Anita Breslin 44 First Vice President
Jacques Lewis 51 Vice President
Mr. Streicker joined the General Partner in May 1976. He has been President
and a Director since April 1984. He is President of SHC and its parent company,
J.H. Streicker & Co., Inc.
Mr. Weinberger, a Certified Property Manager, joined the General Partner in
February 1973, and has been a Director since April 1984. He is the residential
portfolio manager for the Southeastern region.
Ms. Cassidy joined the General Partner in August 1982. She has been a Director
of the General Partner since March 1988.
Mr. Weiner joined the General Partner in April 1984. He is a portfolio
manager and manager of investor relations. He has been a Director of the General
Partner since March 1988.
Ms. Kurtz joined the General Partner in 1980 and has been a Director since
1991. She is the portfolio manager responsible for commercial property
transactions and management.
Ms. Longo joined the General Partner in 1988 and serves as its chief financial
officer. She is a certified public accountant with over twenty-six years of real
estate related financial experience.
Ms. Breslin joined the General Partner in 1978. She is the portfolio
manager responsible for residential property transactions and management for the
Northeastern region.
Mr. Lewis joined the General Partner in 1994. He is the portfolio manager
responsible for residential property transactions and management for the
Northwestern region.
24
ITEM 11.EXECUTIVE COMPENSATION
----------------------
The Registrant has no executive officers or directors.
ITEM 12.SECURITY OWNERSHIP OF CERTAIN
-----------------------------
BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------
(a) At December 31, 2000, an institutional investor of record owned 7.13% of
the outstanding Units of Limited Partnership Interests. On January 13,
1993, a group of Unitholders of record, including the institutional
investor referred to above, entered into a collective agreement with
respect to their ownership interest in the Registrant. The aggregate number
of Units beneficially owned by the group is 676 Units, representing 8.7% of
the total number of outstanding Units of Limited Partnership Interest on
that date. Each Unitholder has disclaimed beneficial ownership of all Units
owned by the other Unitholders in this group. The foregoing information is
based upon a 13-D filing made by the respective Unitholders.
(b) As of December 31, 2000, none of the Directors of the General Partner owned
any outstanding Units of Limited Partnership Interest, however, an
Assistant Secretary of the General Partner owned four Units of Limited
Partnership Interest. No Officers or Directors of SHC owned any outstanding
Units of Limited Partnership Interest. SRE Clearing Services, Inc.
(formerly known as SRE Investor Services, Inc.), an affiliate of the
General Partner, owned 955.8 Units of Limited Partnership Interest
representing 12.3% of the outstanding number of Units on December 31, 2000.
In accordance with SEC regulations, SRE Clearing Services filed Form 13-D/A
on December 22, 2000, when the total number of Units held surpassed 12% of
the outstanding number of Units.
(c) During the year ended December 31, 2000, there have been no changes in
control of the Registrant or the General Partner.
ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The General Partner, among other things, furnishes services and advice to the
Registrant and is paid a variable annual fee for such services based on
calculations prescribed in the Registrant's Partnership Agreement. For these
services, the General Partner receives a management fee equal to 2% of the
average amount of capital invested in real estate plus cumulative mortgage
amortization payments and 0.5% of capital not invested in real estate, as
defined in the partnership agreement. The management fee amounted to $806,818,
$734,050, and $835,502 for the years ended December 31, 2000, 1999, and 1998,
respectively. In addition, the General Partner is entitled to 25% of cash
distributions in excess of the annual distribution preferences, as defined in
the partnership agreement. No such amounts were due for the years ended December
31, 2000, 1999 or 1998.
25
Certain affiliates of the General Partner oversee the management and operations
of various real estate properties, including those owned by the Registrant.
Services performed by these affiliates applicable to the Registrant's properties
are billed at actual or allocated cost, or percentage of revenues. The costs of
such services are believed to be competitive with charges for similar services
provided by unrelated management companies. Fees charged by these affiliates
totaled $767,467, $705,772, and $582,791 in 2000, 1999, and 1998, respectively.
In connection with the mortgage financing of certain properties, the respective
lenders required the Registrant to place the assets and liabilities of these
properties into single asset limited partnerships or land trusts which hold, or
held, title to these properties. A trust company affiliated with the General
Partner holds, or held, the general partner interest in each single asset
limited partnership as trustee for the Registrant. An affiliate of the General
Partner is also the trustee of the land trust. For its services, the affiliate
is paid an annual fee, which aggregated $86,561, $46,914, and $27,545 in 2000,
1999, 1998, respectively, and is based upon the trust company's standard rate
schedule.
Reference is made to Items 10 and 11, and Notes 2 and 8 in the consolidated
financial statements.
PART IV
-------
ITEM 14.EXHIBITS, FINANCIAL STATEMENT
-----------------------------
SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------
(a) (1) Financial statements - The Registrant's 2000 Annual Audited Consolidated
Financial Statements are included in this annual report on Form 10-K.
(2) Financial statement schedules - See Index to Consolidated Financial
Statement Schedules on page 27. All other financial statement schedules
are inapplicable or the required subject matter is contained in the
consolidated financial statements or notes thereto.
(b) Exhibits Incorporated by Reference -
Incorporated by
Description Reference to
- ----------- ---------------
Agreement of Limited Partnership Exhibit A to Registration Statement
on Form S-11 as filed with the Securities
and Exchange Commission on May 16, 1985.
26
SIGNATURES
- ----------
Pursuant to the requirements of Section 13 or 15 (d) 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.
SB PARTNERS
-----------
By: SB PARTNERS REAL ESTATE CORPORATION
-----------------------------------
GENERAL PARTNER
April 2, 2001 /s/ John H. Streicker
-----------------------------------
By: John H. Streicker
President, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Position Date
- --------- -------- ----
/s/ John H. Streicker Chief Executive Officer
- --------------------- and Director April 2, 2001
John H. Streicker
/s/ Elizabeth B. Longo Chief Financial Officer
- ---------------------- (Principal Financial Officer) April 2, 2001
Elizabeth B. Longo
/s/ George N. Tietjen III Vice President
- ------------------------- (Principal Accounting Officer) April 2, 2001
George N. Tietjen III
27
SB PARTNERS
ITEMS 8 and 14 (a) (1) and (2)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
----------------------------------------------
SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULE
-----------------------------------------
Report of Independent Public Accountants.............................28
Consolidated Balance Sheets as of December 31, 2000 and 1999.........29
Consolidated Statements of Operations
for the years ended December 31, 2000, 1999 and 1998..........30
Consolidated Statements of Changes in Partners' Capital
for the years ended December 31, 2000, 1999 and 1998..........31
Consolidated Statements of Cash Flows
for the years ended December 31, 2000, 1999 and 1998..........32
Notes to Consolidated Financial Statements......................33 - 38
Supplemental Financial Statement Schedule:
Schedule III -- Real Estate and Accumulated Depreciation
December 31, 2000........................................39 - 42
28
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of SB Partners:
We have audited the accompanying consolidated balance sheets of SB
Partners (a New York limited partnership) and subsidiaries as of December 31,
2000 and 1999, and the related consolidated statements of operations, changes in
partners' capital and cash flows for each of the three years in the period ended
December 31, 2000. These financial statements and the schedule referred to below
are the responsibility of the general partner. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by the general partner, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of SB Partners and
subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000 in conformity with accounting principles generally accepted in
the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commissions rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
New York, New York
January 30, 2001
29
SB PARTNERS
CONSOLIDATED BALANCE SHEETS
As of December 31,
2000 1999
----------------------------
ASSETS:
Investments -
Real Estate, at cost
Land $ 7,777,153 $ 7,777,153
Buildings, furnishings and improvements 76,551,411 75,564,949
Less - accumulated depreciation (18,983,204) (16,654,948)
------------ ------------
65,345,360 66,687,154
Other Assets -
Cash and cash equivalents 474,689 1,344,906
Cash held by lenders in escrow 1,138,085 1,362,890
Other 832,888 905,734
------------ ------------
Total assets $ 67,791,022 $ 70,300,684
============ ============
LIABILITIES:
Mortgage notes payable $ 50,913,286 $ 51,626,658
Accounts payable and accrued expenses 781,855 670,253
Tenant security deposits 242,778 292,723
------------ ------------
Total liabilities 51,937,919 52,589,634
------------ ------------
PARTNERS' CAPITAL:
Units of partnership interest without par value;
Limited partners - 7,753 units 15,869,494 17,727,201
General partner - 1 unit (16,391) (16,151)
------------ ------------
Total partners' capital 15,853,103 17,711,050
------------ ------------
Total liabilities and partners' capital $ 67,791,022 $ 70,300,684
============ ============
The accompanying notes are an integral part of these consolidated balance sheets.
30
SB PARTNERS
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31,
2000 1999 1998
-------------------------------------------
REVENUES
Rental income $11,826,046 $10,261,144 $8,541,709
Interest on short-term investments 61,985 291,645 331,210
Other 612,653 510,021 638,662
----------- ----------- ----------
Total revenues 12,500,684 11,062,810 9,511,581
----------- ----------- ----------
EXPENSES
Real estate operating expenses 5,158,938 4,498,597 4,578,613
Interest on mortgage notes and other loans payable 3,712,580 3,094,484 2,041,952
Depreciation and amortization 2,414,690 2,123,464 1,425,744
Management fees 806,818 734,050 835,502
Real estate taxes 1,061,443 958,002 698,144
Other 312,509 568,450 391,101
----------- ----------- ----------
Total expenses 13,466,978 11,977,047 9,971,056
----------- ----------- ----------
Loss from operations (966,294) (914,237) (459,475)
Gain on sale of investments in real estate 0 0 3,873,733
----------- ----------- ----------
NET INCOME (LOSS) (966,294) (914,237) 3,414,258
Net income (loss) allocated to general partner (125) (118) 440
----------- ----------- ----------
Net income (loss) allocated to limited partners $ (966,169) $ (914,119) $3,413,818
=========== =========== ==========
NET INCOME (LOSS) PER UNIT OF LIMITED PARTNERSHIP INTEREST $ (125) $ (118) $ 440
=========== =========== ==========
WEIGHTED AVERAGE NUMBER OF UNITS OF LIMITED
PARTNERSHIP INTEREST OUTSTANDING 7,753 7,753 7,753
=========== =========== ==========
The accompanying notes are an integral part of these consolidated statements.
31
SB PARTNERS
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, 1998
Limited Partners:
Units of
Partnership
Interest Cumulative Accumulated
-------------------- Cash Earnings
Number Amount Distributions (Losses) Total
----------------------------------------------------------------------------
Balance, December 31, 1997 7,753 $119,968,973 $(97,728,323) $(6,237,898) $16,002,752
Net income for the year 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
Cash distributions 0 0 (775,250) 0 (775,250)
Net loss for the year 0 0 0 (914,119) (914,119)
----- ------------ ------------ ----------- -----------
Balance, December 31, 1999 7,753 119,968,973 (98,503,573) (3,738,199) 17,727,201
Cash distributions 0 0 (891,538) 0 (891,538)
Net loss for the year 0 0 0 (966,169) (966,169)
----- ------------ ------------ ----------- -----------
Balance, December 31, 2000 7,753 $119,968,973 $(99,395,111) $(4,704,368) $15,869,494
===== ============ ============ =========== ===========
General Partner:
Units of
Partnership
Interest Cumulative Accumulated
-------------------- Cash Earnings
Number Amount Distributions (Losses) Total
----------------------------------------------------------------------------
Balance, December 31, 1997 1 $10,000 $(24,559) $(1,814) $(16,373)
Net income for the year 0 0 0 440 440
--- ------- -------- ------- --------
Balance, December 31, 1998 1 10,000 (24,559) (1,374) (15,933)
Cash distributions 0 0 (100) 0 (100)
Net loss for the year 0 0 0 (118) (118)
--- ------- -------- ------- --------
Balance, December 31, 1999 1 10,000 (24,659) (1,492) (16,151)
Cash distributions 0 0 (115) 0 (115)
Net loss for the year 0 0 0 (125) (125)
--- ------- -------- ------- --------
Balance, December 31, 2000 1 $10,000 $(24,774) $(1,617) $(16,391)
=== ======= ======== ======= ========
The accompanying notes are an integral part of these consolidated statements.
32
SB PARTNERS
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
2000 1999 1998
-------------------------------------------
Cash Flows From Operating Activities:
Net income (loss) $ (966,294) $ (914,237) $ 3,414,258
Adjustments to reconcile net income (loss)
to net cash providedby operating activities:
Gain on sale of investments in real estate 0 0 (3,873,733)
Depreciation and amortization 2,414,690 2,123,464 1,425,744
(Increase) decrease in other operating assets 211,217 (263,263) (218,936)
Increase (decrease) in other operating liabilities 61,657 192,681 (168,479)
----------- ------------ ------------
Net cash provided by operating activities 1,721,270 1,138,645 578,854
----------- ------------ ------------
Cash Flows From Investing Activities:
Net proceeds from sales/dispositions of investments in real estate 0 0 29,210,371
Acquisition of real estate investments 0 (13,372,135) (35,305,088)
Capital additions to real estate owned (986,462) (1,791,677) (1,305,719)
----------- ------------ ------------
Net cash used in investing activities (986,462) (15,163,812) (7,400,436)
----------- ------------ ------------
Cash Flows From Financing Activities:
Proceeds from mortgage notes and other loans payable 0 10,303,000 21,050,000
Retirement of mortgage notes and other loans payable 0 0 (7,514,832)
Principal payments on mortgage notes and other loans payable (713,372) (594,068) (359,417)
Increase in deferred financing costs 0 (148,761) (318,677)
Distributions paid to partners (891,653) (775,350) 0
----------- ------------ ------------
Net cash provided by (used in) financing activities (1,605,025) 8,784,821 12,857,074
----------- ------------ ------------
Net increase (decrease) in cash and cash equivalents (870,217) (5,240,346) 6,035,492
Cash and cash equivalents at beginning of year 1,344,906 6,585,252 549,760
----------- ------------ ------------
Cash and cash equivalents at end of year $ 474,689 $ 1,344,906 $ 6,585,252
=========== ============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 3,714,949 $ 3,096,680 $ 2,067,061
=========== ============ ============
The accompanying notes are an integral part of these consolidated statements.
33
SB PARTNERS
Notes to Consolidated Financial Statements
(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 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 year amounts have
been reclassified to make them comparable to the current year
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.
(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 5 to 40 years
Furnishings 5 to 7 years
Investments in real estate are carried at historical cost and
reviewed periodically for impairment. 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.
34
(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) Leases generally have terms of one year or less. Rental income
is recognized when earned pursuant to the terms of the leases
with tenants.
(f) 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 year. There were no
potentially dilutive securities outstanding during each year.
(g) For financial reporting purposes, the Partnership considers all
highly liquid, short-term investments with maturities of three
months or less when purchased to be cash equivalents.
(h) In connection with the mortgage financing on certain of its
properties, the Partnership placed the assets and liabilities of
these properties into single asset limited partnerships, limited
liability companies or land trusts which hold, or held, title to
the properties. The Partnership has effective control over such
entities and holds 100% of the beneficial interest. Accordingly,
the financial statements of these subsidiaries are consolidated
with those of the Partnership.
(i) Real estate properties are regularly evaluated on a property by
property basis to determine if it is appropriate to write down
carrying values to recognize an impairment of value. Impairment
is determined by calculating the sum of the estimated
undiscounted future cash flows including the projected
undiscounted future net proceeds from the sale of the property.
In the event such sum is less than the net carrying value of the
property, the property will be written down to estimated fair
market value.
(j) The Partnership is engaged in only one industry segment, real
estate investment, and therefore information regarding industry
segments is not applicable and is not included in these
consolidated financial statements.
(2) INVESTMENT MANAGEMENT AGREEMENT
The Partnership has entered into a management agreement with the
General Partner. Under the terms of this agreement, the General Partner
is responsible for the acquisition, management and disposition of all
investments, as well as performance of the day-to-day administrative
operations and provision of office space for the Partnership.
For these services, the General Partner receives a management fee equal
to 2% of the average amount of capital invested in real estate plus
cumulative mortgage amortization payments, and 0.5% of capital not
invested in real estate, as defined in the partnership agreement. The
management fee amounted to $806,818, $734,050, and $835,502 for the
years ended December 31, 2000, 1999, and 1998 respectively. In
addition, the General Partner is entitled to 25% of cash distributions
in excess of the annual distribution preferences, as defined in the
partnership agreement. No such amounts were due for the years ended
December 31, 2000, 1999 or 1998.
35
(3) INVESTMENTS IN REAL ESTATE
As of December 31, 2000 and 1999, the Partnership owned apartment
projects in St. Louis, Missouri; Greenville, South Carolina; Reno,
Nevada; and Holiday and Orlando, Florida; as well as 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 at
December 31, 2000 and 1999:
Real Estate at Cost
No.of Year of ------------------------
Type Prop. Acquisition Description 2000 1999
- ---- ----- ----------- ----------- ---- ----
Residential properties 5 1983-99 1,746 Apts. $ 84,284,177 $ 83,297,715
Undeveloped land 1 1978 13.9 Acres 44,387 44,387
------------ ------------
Total cost 84,328,564 83,342,102
Less: accumulated depreciation (18,983,204) (16,654,948)
------------ ------------
Net book value $ 65,345,360 $ 66,687,154
============ ============
(4) REAL ESTATE TRANSACTIONS
On September 29, 1999, the Partnership purchased Le Coeur du Monde
Apartments, a 192-unit apartment community located in St. Louis,
Missouri, for $13,325,000. In connection with the purchase, the
partnership obtained a first mortgage loan of $10,303,000 from a FNMA
DUS program lender. The mortgage loan is secured by the property, bears
interest at 7.805% per annum and matures on October 1, 2009.
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.
36
(6) MORTGAGE NOTES PAYABLE
Mortgage notes payable consist of the following first liens:
Net Carrying Amount
Annual December 31,
Original Interest Maturity Installment Amount Due ------------
Property Principal(a) Rate Date Payments(b) at Maturity 2000 1999
- -------------------------------------------------------------------------------------------------------------------------------
Holiday Park $ 3,800,000 6.895% February 2008 $ 300,169 $ 3,277,785 $ 3,680,975 $ 3,725,654
Meadowwood 21,500,000 7.550% January 2004 1,914,996 18,979,461 20,175,226 20,551,431
Cypress Key 17,250,000 6.605% January 2009 1,322,707 14,772,418 16,859,135 17,061,002
Le Coeur du Monde 10,303,000 7.805% October 2009 890,447 9,075,763 10,197,950 10,288,571
----------- -----------
$50,913,286 $51,626,658
=========== ===========
(a) The mortgages are nonrecourse to the Partnership.
(b) Annual installment payments include principal and interest. Scheduled
principal payments on mortgage notes payable are $765,854 for 2001;
$823,492 for 2002; $885,484 for 2003; $19,304,578 for 2004; $475,788 for
2005 and $28,658,090 thereafter.
37
(7) FEDERAL INCOME TAX INFORMATION
A reconciliation of net income (loss) for financial reporting purposes
to net income (loss) for Federal income tax reporting purposes is
as follows:
For the Years Ended December 31,
2000 1999 1998
--------- --------- ----------
Net income (loss) for financial reporting purposes $(966,294) $(914,237) $3,414,258
Adjustment to net gain on sales/dispositions of investments in real estate to
reflect differences between tax and financial reporting bases
of assets and liabilities disposed 0 0 (1,285,190)
Difference between tax and financial statement equity in net income
or loss of joint venture 0 0 (228,596)
Difference between tax and financial statement depreciation 678,395 678,001 927,462
--------- --------- ----------
Net income (loss) for Federal income tax reporting purposes $(287,899) $(236,236) $2,827,934
========= ========= ==========
Net income (loss) per weighted average limited partnership unit for Federal
income tax reporting purposes:
Net ordinary income (loss) per unit of partnership interest $ (37) $ (30) $ 12
Average Capital (Sec. 1231) gain per unit of partnership interest 0 0 353
--------- --------- ----------
$ (37) $ (30) $ 365
========= ========= ==========
Weighted average number of units of limited partnership
interest outstanding 7,753 7,753 7,753
========= ========= ==========
As of December 31, 2000 and 1999, the tax bases of the Partnership's
assets and liabilities were approximately $62,698,000 and $64,529,000
of assets, and $51,938,000 and $52,590,000 of liabilities,
respectively.
38
(8) PROPERTY MANAGEMENT SERVICES
Certain affiliates of the General Partner oversee the management and
operations of various real estate properties, including those owned by
the Partnership. Services performed by affiliates are billed at actual
or allocated cost, percentage of revenues or net equity. For the years
ended December 31, 2000, 1999 and 1998 such billings to the partnership
amounted to $854,028, $752,686, and $610,336, respectively, and are
included in real estate operating expenses.
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS
The Partnership's financial instruments consist of cash and cash
equivalents and mortgage notes payable. The carrying amount of the cash
and cash equivalents are reasonable estimates of fair value. Mortgage
notes payable have been valued by discounting future payments required
under the terms of the obligations at rates currently available to the
Partnership for debt with similar maturities, terms and underlying
collateral. The fair value of the mortgage notes payable is estimated
to be $51,319,831 and $50,149,130 at December 31, 2000 and 1999,
respectively.
(10) 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 adverse effect on
its financial position or results of operations.
39
SB PARTNERS
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2000
Column A Column B Column C Column D
Initial Cost to the Registrant Costs
-------------------------------------- Capitalized
Buildings and Subsequent to
Description Encumbrances Land Improvements Total Acquisition
MULTI FAMILY RESIDENTIAL
Nevada -
Reno (Meadowwood) $20,175,226 $2,466,311 $19,057,859 $21,524,170 $7,295,389
Florida -
Holiday (Holiday Park -
including undeveloped land) 3,680,975 458,342 4,043,354 4,501,696 957,581
Orlando (Cypress Key) 16,859,135 2,260,000 20,404,725 22,664,725 694.069
South Carolina -
Greenville (Halton Place) 0 1,260,000 11,364,343 12,624,343 476,786
Missouri -
St. Louis (Le Coeur du Monde) 10,197,950 1,332,500 12,039,635 13,372,135 217,670
----------- ---------- ----------- ----------- ----------
$50,913,286 $7,777,153 $66,909,916 $74,687,069 $9,641,495
=========== ========== =========== =========== ==========
40
SB PARTNERS
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
DECEMBER 31, 2000
Column A Column E Column F
Gross amount at which
Carried at End of Year
(Notes a & c)
Accumulated
Buildings and Depreciation
Description Land Improvements Total (Notes b & d)
MULTI FAMILY RESIDENTIAL
Nevada -
Reno (Meadowwood) $2,466,311 $26,353,248 $28,819,559 $14,755,779
Florida -
Holiday (Holiday Park -
including undeveloped land) 458,342 5,000,935 5,459,277 1,879,601
Orlando (Cypress Key) 2,260,000 21,098,794 23,358,794 1,302,606
South Carolina -
Greenville (Halton Place) 1,260,000 11,841,129 13,101,129 632,265
Missouri -
St. Louis (Le Coeur du Monde) 1,332,500 12,257,305 13,589,805 412,953
---------- ----------- ----------- -----------
$7,777,153 $76,551,411 $84,328,564 $18,983,204
========== =========== =========== ===========
41
SB PARTNERS
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
DECEMBER 31, 2000
Column A Column G Column H Column I
Life on which
Depreciation
in
Latest
Statement
Date of Date of Operations
Description Construction Acquired is Computed
MULTI FAMILY RESIDENTIAL
Nevada -
Reno (Meadowwood) 1974 - 1977 May 1983 5 to 30 years
Florida -
Holiday (Holiday Park -
including undeveloped land) 1972 - 1975 Jan 1991 7 to 30 years
Orlando (Cypress Key) 1988 Aug 1998 7 to 40 years
South Carolina -
Greenville (Halton Place) 1986 Dec 1998 7 to 40 years
Missouri -
St. Louis (Le Coeur du Monde) 1988 - 1989 Sept 1999 7 to 40 years
42
NOTES TO SCHEDULE III:
2000 1999 1998
---- ---- ----
(a) Reconciliation of amounts shown in Column E:
Balance at beginning of year $83,342,102 $68,178,290 $ 56,718,106
Additions -
Acquisitions 0 13,372,135 35,305,088
Cost of improvements 986,462 1,791,677 1,305,719
Deductions -
Dispositions of property 0 0 (25,150,623)
----------- ----------- ------------
Balance at end of year $84,328,564 $83,342,102 $ 68,178,290
=========== =========== ============
(b) Reconciliation of amounts shown in Column F:
Balance at beginning of year $16,654,948 $14,608,682 $ 13,290,104
Additions -
Depreciation expense for year 2,328,256 2,046,266 1,318,578
----------- ----------- ------------
Balance at end of year $18,983,204 $16,654,948 $ 14,608,682
=========== =========== ============
(c) Aggregate cost basis for Federal
income tax reporting purposes $86,933,055 $85,946,598 $ 70,781,471
=========== =========== ============
(d) Accumulated depreciation for Federal
income tax reporting purposes $28,382,243 $26,732,385 $ 25,364,120
=========== =========== ============