Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 Commission file number 0-8952
SB Partners
--------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-6294787
--------------------------------------------------------------------------
(State of other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
666 Fifth Avenue, N.Y., N.Y. 10103
--------------------------------------------------------------------------
(Address of Principal Executive Offices) Zip Code
(212) 408-2900
--------------------------------------------------------------------------
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
NONE
------------------- -----------------------------------------
------------------- -----------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interests
-------------------------------------------------------------------------
(Title of Class)
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. YES X NO
STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NONAFFILIATES
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.)
Not Applicable
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE (APPLICABLE
ONLY TO CORPORATE REGISTRANTS).
Not Applicable
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K 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).
DOCUMENTS INCORPORATED BY REFERENCE: LIST THE FOLLOWING DOCUMENTS IF
INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-K 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.)
None
Page 1 of 41
2
PART I
ITEM 1. BUSINESS
Description of SB Partners (the "Registrant")
The Registrant is an existing New York limited partnership, which has been
engaged in acquiring, operating and holding for investment a varying
portfolio of real properties since April, 1971. The Registrant's initial
public offering was in 1971. In 1973, 1978, 1980, 1982 and 1985, the
Registrant sold additional limited partnership interests. As of December
31, 1994, the Registrant owned a shopping center in Plantation, Florida,
office buildings in St. Louis, Missouri, Cherry Hill, New Jersey and Los
Angeles, California, and apartment projects in Holiday, Florida, and Las
Vegas and Reno, Nevada. In addition, the Registrant owned an undivided
10% interest in an apartment project in Orlando, Florida, a 60% interest
in an apartment project in Atlanta, Georgia, and 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. In recent years, the ability of the Registrant to meet
these objectives has been impacted negatively by factors discussed
elsewhere in this annual report on Form 10-K, among other things.
The Registrant incurred losses before gain or loss on sale of investments
in real estate during each year of its existence, except for calendar
years 1982, 1987, and 1988. The accumulated tax losses and accumulated
financial statement losses before gain on sale of investments in real
estate as of December 31, 1994 were $143,420,919, and $96,070,606,
respectively. The accumulated tax gains and the accumulated financial
statement gains on sale of investments in real estate as of December 31,
1994, were $97,113,700 and $88,462,425,respectively. Aggregate cash
distributions made to partners as of December 31, 1994 were $ 97,752,882.
Refer to the Registrant's 1994 Annual Audited Financial Statements, which
is contained in this annual report on Form 10-K, Note 9 of Notes to
Financial Statements, for a reconciliation of net loss for financial
reporting purposes to net loss for Federal income tax reporting purposes
for each of the three years in the period ended December 31, 1994.
3
Recent Developments and Real Estate Investment Factors
Numerous events which have affected the real estate industry over the last
several years including significant changes in federal income tax
legislation, stricter government regulations with respect to lending
practices of banking and savings and loan institutions, the Resolution
Trust Corporation's administration and disposition of billions of dollars
of real estate and overbuilding in many markets have had a significant
negative impact on the value and operation of real estate investments.
During such periods of declining real estate values, the use of leverage
causes equity values and property cash flow to decrease more rapidly and
more substantially than instances where leverage is not used. The use of
leverage by the Registrant and other owners of real estate has had a
negative impact on equity values and cash flow during this period of
declining real estate values. Due to the tendency of real estate to be
relatively non-liquid, the ability of the Registrant and other owners of
real estate to vary their portfolios in response to these changing general
and local economic, financial and investment conditions has been limited
in the past and may be limited in the future.
Certain markets and real estate asset classes have stabilized or exhibited
improvement during the last year from improved tenant demand, lower debt
and equity capital costs and more potential buyers of real estate,
including real estate investment trusts, among other factors. Apartment
properties are typical of an improving asset class. Yet, many markets and
asset classes remain unstable or have stabilized at a level where current
rental rates less operating, financing and tenanting costs are
insufficient to support debt and equity structures created in the 1980's
and early 1990's. Central business district office buildings are typical
of these later situations.
In the event that cash flow from the properties is not sufficient to cover
operating, financing and improvement costs, owners of real estate
properties, including the Registrant, may be required to generate funds
from other than internal sources. The sources may include, but are not
limited to, obtaining funds from sales or joint venturing of its real
estate investments, or additional secured or unsecured borrowing (Refer
also to Item 7. - Management's Discussion and Analysis of Financial
Condition and Results of Operations.)
The Registrant has, until recently, owned investments in senior and junior
mortgage notes receivable that resulted from the sales of previously owned
real estate properties. The recent events discussed above have also
contributed to problems experienced by these borrowers, resulting in
filings for protection from creditors under Chapter XI of the United
States Bankruptcy Code, reduced or non-payment of monthly installments of
principal and interest, foreclosure actions and loan restructuring on less
favorable terms to lenders, including the Registrant.
4
Competition
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, among other things. The recent recession and other
factors resulted, and may continue to result, in the inability of existing
tenants to meet their obligations under the terms of their leases, which
may in turn adversely affect the performance and financial condition of
the Registrant.
Tax Matters
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 for nonresidential real estate by 7.5 years (from 31.5 to 39).
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 nonmaterial participating taxpayers, the provisions enacted
as part of the Tax Reform Act of 1986 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 new
provision does not apply to foreclosures or "deeds in lieu" with respect
to nonrecourse debt.
5
Tax Reform Act of 1986 and the Technical
and Miscellaneous Revenue Act of 1988
On October 22, 1986, the Tax Reform Act of 1986 ("the '86 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 their proportionate share
of qualified non-recourse financing, and is also subject to other
limitations.
- The '86 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.
Other Tax Matters
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 tradeable 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.
6
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
Efforts required in complying with Federal, state and local environmental
regulations may 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.
ITEM 2. PROPERTIES
The properties owned by the Registrant as of December 31, 1994 are set
forth on the Summary of Properties Schedule on the page immediately
following.
ITEM 3. LEGAL PROCEEDINGS
Refer to Footnote 11 in the Registrant's 1994 Annual Audited Financial
Statements included elsewhere in this annual report on Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF UNITHOLDERS
NONE.
7
SB PARTNERS
Summary of Properties
As of December 31, 1994
Description Acquisition Percent Mortgage
Property Location Sq. Ft. Units Acres Date Ownership Occupancy Payable
Apartments:
Holiday Park Apts. Holiday, FL 220,000 244 21.5 Jan 1991 100% 92.5% $ 3,624,412
Summerwalk Apts. (1) Orlando, FL 252,000 304 12.8 Mar 1978 10% 93.0% -
Riverbend Apts. (2) Atlanta, GA 557,000 594 49.8 Jan 1989 60% 93.4% -
Meadowwood Apts. Reno, NV 529,000 704 30.0 May 1983 100% 97.8% 18,075,849
Sahara Palms Apts. Las Vegas, NV 253,000 312 19.0 May 1983 100% 97.6% 8,473,981
--------- ----- -----
1,811,000 2,158 133.1
Office: ========= ===== =====
Cherry Hill Office Center Cherry Hill, NJ 138,000 n/a 3.4 Sep 1993 100% 74.6% 436,233
International Jewelry Center(3) Los Angeles, CA 371,000 n/a (2) Nov 1984 100% 70.2% 33,898,519
1010 Market Street St. Louis, MO 343,000 n/a 0.8 Nov 1984 100% 87.0% 41,169,351
------- ---
852,000 4.2
Retail: ======= ===
Plantation Center Plantation, FL 238,000 n/a 18.6 July 1981 100% 79.1% 6,575,433
Land:
Unimproved land (4) Holiday, FL n/a n/a 13.9 July 1978 100% n/a -
(1) Registrant owns a 10% interest in property.
(2) Property contributed to 60% owned joint venture on January 6, 1992. Refer also to the Registrant's 1994
Annual Audited Financial Statements. The property is included in "Investment in Joint Venture" in the 1994
Annual Audited Financial Statements.
(3) Property owned includes a twelve story office building and jewelry mart, and a four story parking garage.
The improvements are owned subject to a participating ground lease. The mortgage note encumbering the property
is in default.
Refer also to Item 7. - Management's Discussion and Analysis of Financial Condition and Results of Operations.
(4) Land is adjacent to Holiday Park Apartments.
/TABLE
8 PART II
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, 1994 was 3,993.
Although at various times the Registrant has generated and distributed
cash to the Unitholders , 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 has not paid
distributions since 1990 and has no current plans to recommence paying
distributions.
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 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.
9
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 Financial Statements and Notes thereto included elsewhere in this
annual report on Form 10-K.
For the Years Ended December 31,
(000's omitted)
1994 1993 1992 1991 1990
Income Statement Data:
Rental, Interest and Other Revenues $25,544 $27,019 $30,221 $34,136 $35,189
Operating Expenses, including
Depreciation and Amortization (35,648) (35,424) (35,659) (39,245) (39,876)
Provision for loan losses, net of recoveries 0 (129) (1,834) (3,250) 0
Writedown and reserves of real estate investments (4,162) 0 (1,295) (459) 0
Interest Expense on Unsecured and
Secured Loans 0 0 (53) (485) (263)
------- ------- ------- ------- -------
Loss from Operations (14,266) (8,534) (8,620) (9,303) (4,950)
Gain (Loss) on Sale of Investments
in Real Estate 6,859 (72) 125 0 0
Equity in Net Loss of Joint Venture (352) (372) (922) 0 0
Extraordinary Item - Interest
Prepayment Charge 0 0 0 0 (662)
------- ------- ------- ------- -------
Net Loss ($7,759) ($8,978) ($9,417) ($9,303) ($5,612)
======= ======= ======= ======= =======
Net Loss per Unit of Partnership Interest:
Loss Before Extraordinary Item ($1,001) ($1,158) ($1,215) ($1,200) ($638)
Net Loss ($1,001) ($1,158) ($1,215) ($1,200) ($724)
Cash Distributions Paid $0 $0 $0 $0 $300
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 $116,253 $136,749 $136,069 $159,310 $156,484
Investment in Joint Venture $11,134 $11,635 $12,122 $0 $0
Mortgage Notes Receivable, net $0 $5,934 $10,006 $24,364 $30,977
Total Assets $135,238 $163,370 $170,311 $192,591 $200,204
Mortgage Notes Payable, net $112,254 $136,004 $136,436 $139,886 $143,280
Other Secured and Unsecured
Loans Payable $0 $0 $0 $6,200 $4,200
/TABLE
10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1994, the Registrant had cash and cash equivalents of
approximately $1,075,000 in addition to $1,303,000 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 $117,000 less than cash, cash equivalents and deposits held
in escrow on December 31, 1993.
During 1994, the Registrant sold Woodlake Apartments for $4,579,000 in
cash over an existing first mortgage of $17,476,000 (which was assumed by
the buyer) and Nob Hill Apartments for $1,500,000 in cash over the
existing senior lien of $5,873,000 (which was assumed by the buyer). Gain
on sale of these real estate investments of $6,859,000 was recognized in
1994.
Outstanding debt at December 31, 1994 consisted of approximately
$112,253,000 of nonrecourse first mortgage notes secured by real estate
owned by the Registrant. The mortgage note secured by Plantation Shopping
Center ($6,793,000) is scheduled to mature in the last quarter of 1995.
Other scheduled maturities through regularly scheduled monthly payments of
principal and interest will be $595,000 in 1995.
As of December 31, 1994, the Registrant has issued irrevocable letters of
credit in the amount of $1,038,000 which primarily serve as additional
collateral securing financing for 1010 Market Street office building.
During 1994, the Registrant obtained releases for approximately $2,100,000
of previously issued letters of credit serving as additional collateral
securing certain financing.
The Registrant has no debt other than normal trade accounts payable and
accrued interest on previously discussed mortgage notes payable.
Cash flow from the Registrant's apartment properties has been stable and
in certain cases increasing moderately, reflecting an improvement in many
apartment submarkets. Cash flow from all sources is projected to be
sufficient to cover operating, financing and improvement costs in the near
future at such properties. Office markets where the Registrant owns
properties have experienced extended periods of high vacancy rates,
significantly lower effective rental rates, reduced demand, and high risks
of tenant failures and overbuilding. Terms of new and renewals of
existing leases are being made that are significantly more in favor of
tenants with reduced rental rates, periods of free or reduced rent and
costs of altering and improving rented
11
premises being borne by the landlord. Consequently, rental revenues have
in recent years, for certain properties, been insufficient to cover
operating costs, tenant improvement costs and other capital expenditures
and scheduled debt service payments. Funds generated from other sources,
including, but not limited to sales or joint venturing of real estate
investments or additional secured or unsecured borrowing, have at times
been utilized to offset cash flow deficits resulting from operating these
properties. The Registrant projects that it will be able to generate
sufficient cash flow from all sources to meet working capital requirements
in 1995.
Due to the impact of the conditions discussed above and the continuing
decline in commercial office rents in the downtown Los Angeles office
market, cash flow generated by International Jewelry Center has not been
sufficient to carry debt service on the mortgage encumbering the property.
The Registrant ceased paying scheduled debt service in May 1993 and since
then has only been paying debt service based on available cash flow from
the building to be applied to debt service and ground rent. The loan was
declared in default by the lender in November 1993. The lender filed a
Notice of Default and Election to Sell on March 3, 1995. Accordingly, it
is uncertain whether the Registrant will be able to successfully continue
to hold the property or obtain some other resolution that would be
beneficial. The Registrant has recorded a reserve for real estate losses
of $4,162,000 for the year ended December 31, 1994 in connection with this
property.
MANAGEMENT'S DISCUSSION OF RESULTS OF OPERATIONS
1994 VS. 1993
Total revenues decreased $1,475,000 to $25,544,000 in 1994 from
$27,019,000 in 1993. Loss from operations increased $5,732,000 to
$14,266,000 from $8,534,000 in 1993. Net loss decreased $1,220,000 to
$7,758,000 in 1994 from $8,978,000 in 1993.
The net loss for 1994 includes a gain on sales of real estate of
$6,859,000 and a reserve for real estate losses of $4,162,000. The net
loss for 1993 included a provision for loan losses of $853,000 after a
partial recovery of previously reserved mortgage note receivable of
$725,000 and a loss on sale of real estate of $72,000.
Meadowwood Apartments (Reno, Nevada)
Total revenues in 1994 increased $221,000 to $4,321,000 from $4,100,000 in
1993. Net loss after depreciation and mortgage interest expense decreased
$163,000 to $100,000 in 1994 from $263,000 in 1993.
12
Revenue increased due to base rent increases of $217,000 charged to
tenants with minimal impact on the property's occupancy. Property
occupancy remained above 95% for most of the year and as of December 31,
1994 was 97.8%. The decrease in net loss was caused by the increase in
revenues discussed above and reduction in real estate taxes ($49,000),
partially offset by an increase in apartment turnover costs ($22,000),
utility costs ($61,000) and professional fees ($24,000).
Sahara Palms Apartments (Las Vegas, Nevada)
Total revenues increased $136,000 to $1,983,000 in 1994 from $1,847,000 in
1993 . Net loss after depreciation and mortgage interest expense
increased $34,000 to $190,000 in 1994 from $156,000 in 1993.
As with Meadowwood, occupancy at Sahara Palms remained above 95% for most
of the year and at December 31, 1994 was 97.6%. The increase in revenues
is indicative of the continuing strength of the Las Vegas apartment market
as base rents rose $42,000 and vacancy and other revenue losses decreased
$86,000.
The increase in net loss was caused by increases in depreciation and
amortization expense ($108,000) payroll ($43,000), contractual services
($24,000), utilities ($14,000) and property administration ($12,000),
partially offset by the previously discussed increase in revenues.
Holiday Park Apartments (Holiday, Florida)
Total revenues increased $37,000 to $1,065,000 in 1994 from $1,028,000 in
1993. Net loss after depreciation and mortgage interest expense increased
$25,000 to $99,000 in 1994 from $74,000 in 1993.
Revenues increased primarily from increases in base rents charged to
tenants ($40,000), partially offset by a small increase in average vacancy
($5,000). The increase in net loss was caused by increases in payroll
related costs ($16,000) and repair and maintenance costs ($47,000),
partially offset by the previously discussed increase in revenues.
Woodlake Village/Redwood Village (Sacramento, California)
Woodlake Apartments was sold in June 1994 for $22,055,000 resulting in a
gain on sale of $6,442,000. Decreases in revenues and net loss before
gain on sale are attributable to a full year of ownership in 1993 as
compared with five months in 1994.
Revenue decreased $2,171,000 to $1,578,000 in 1994 from $3,749,000 in
1993. Net loss before gain on sale decreased $315,000 to $254,000 in 1994
from $569,000 in 1993.
13
Plantation Shopping Center (Plantation, Florida)
Total revenues decreased $159,000 to $1,240,000 in 1994 from $1,399,000 in
1993. Net loss after depreciation and mortgage interest expense increased
$171,000 to $924,000 in 1994 from $753,000 in 1993.
Performance continued to suffer from the effects of the fire which caused
significant damage to the property in late 1992 and the resulting decline
in occupancy. Revenues decreased primarily from a decrease in average
base rent charged to tenants ($282,000) partially offset by increases in
occupancy ($78,000) and tenant pass through income ($53,000). Net loss
increased primarily from the previously discussed revenue decrease and
increases in professional fees ($65,000) and amortization of discount on
mortgage notes payable ($43,000), partially offset by a decrease in real
estate tax expense ($73,000).
1010 Market Street (St. Louis, Missouri)
Total revenues increased $171,000 to $5,576,000 in 1994 from $5,405,000 in
1993. Net loss after depreciation and mortgage interest expense decreased
$59,000 to $1,017,000 in 1994 from $1,076,000 in 1993.
Revenue increased primarily from increases in escalation income ($21,000),
other income ($48,000) and increase in average occupancy from 85% to 87%
($66,000). Net loss decreased due to the revenue increase described
previously, offset by increases in insurance costs ($31,000), repairs and
maintenance ($45,000) and payroll costs ($38,000). A portion of the
increases in property operating expenses have been billed to certain
tenants that have leases with pass through clauses for rent increases due
to increases in building operating expenses.
Cherry Hill Office Center (Cherry Hill, New Jersey)
Cherry Hill Office Center was reacquired by the Registrant in September
1993 by credit bid of its mortgage, such bid being approved by the United
States Bankruptcy Court. Accordingly, increases in total revenue and net
income after depreciation and mortgage interest expense in 1994 are
attributable to a full year of ownership as compared with four months in
1993.
Total revenues increased $957,000 to $1,508,000 in 1994 from $551,000 in
1993. Net income after depreciation and interest expense increased
$136,000 to $248,000 in 1994 from $112,000 in 1993.
14
International Jewelry Center (Los Angeles, California)
Revenues decreased $716,000 to $7,001,000 in 1994 from $7,717,000 in 1993.
Net loss after depreciation and mortgage interest expense increased
$4,933,000 to $7,735,000 in 1994 from $2,802,000 in 1993.
Revenues decreased primarily from a reduction in average occupancy at the
property from 73% to 67% ($525,000), a decrease in average base rents
charged to tenants ($156,000) and a decrease in expense escalation revenue
related to the prior year reduction in occupancy ($102,000). The net loss
increased due to the previously described decrease in revenue, the reserve
for real estate losses ($4,162,000) previously discussed in Liquidity and
Capital Resources, and increases in real estate and other taxes
($181,000), salaries ($151,000), depreciation of improvements ($257,000),
and maintenance and security costs ($260,000), partially offset by a
decrease in bad debt expenses ($1,231,000).
The International Jewelry Center continues to be negatively impacted by
the softening of the jewelry business in general, the Northridge
earthquake in January 1994, and the migration of tenants and potential
tenants to suburban areas perceived to be safer than downtown Los Angeles.
As a result, cash flow generated by the International Jewelry Center has
not been sufficient to carry ground rent and debt service on the mortgage
encumbering the property. Cash flow for 1995 is also projected to be less
than scheduled ground rent and debt service. The positive effects of an
improvement in property occupancy at the end of 1994 have been minimized
by continuing reductions in rental rates paid by new and renewal tenants,
tenant failures and costs of improving such space for the tenants at the
Registrant's cost. Additionally, given the nature of the tenancy at the
building, many of whom manufacture and clean jewelry in the building, The
City of Los Angeles has recently imposed additional requirements in
respect of the waste water treatment plant and indoor air monitoring
systems. Tests results indicate on-going potential environmental risks
arising from the tenants use of hazardous chemicals in the ordinary course
of their business.
Mortgage Notes Receivable Portfolio
Interest income from mortgage notes receivable decreased $558,000 to
$497,000 in 1994 from $1,055,000 in 1993. The decrease was caused by the
reacquisition of Cherry Hill Office Center in September 1993 and Nob Hill
Apartments in July 1994.
In 1993, the Registrant added $854,000 to its provision for possible loan
losses due to the deterioration in the performance of Nob Hill Apartments
and recovered $725,000 from the previously
15
fully reserved third mortgage note secured by an apartment complex located
in Antioch, California.
During 1994, the Registrant reacquired Nob Hill Apartments for $700,000
cash over existing liens (Refer to page 10 - Liquidity and Capital
Resources). As of December 31, 1994, the Registrant does not own
interests in mortgage notes receivable.
Investment in Joint Venture
Equity in net loss of joint venture decreased $21,000 to $351,000 in 1994
from $372,000 in 1993.
The improvement was due to the continuing increase in property occupancy
during the year from 80% at December 31, 1993 to 93% at December 31, 1994
($158,000) and an increase in base rents paid by tenants ($129,000),
partially offset by increases in expenses related to the improvement in
occupancy - apartment turnover costs ($99,000), repairs and maintenance
($20,000) and utility costs ($40,000).
MANAGEMENT'S DISCUSSION OF RESULTS OF OPERATIONS
1993 VS. 1992
Total revenues decreased $3,202,000 in 1993 to $27,019,000 from
$30,221,000 in 1992. Loss from operations decreased to $8,534,000 from
$8,620,000 in 1992. Net loss decreased to $8,978,000 in 1993 from
$9,417,000 in 1992.
The net loss for 1993 included a loan loss provision of $853,000 after a
recovery of a previously reserved mortgage note receivable of $725,000.
The net loss for 1992 included a provision for loan losses of $1,834,000
and a writedown of investments in real estate of $1,295,000.
Holiday Park Apartments
Total revenues in 1993 increased to $1,028,000 from $1,009,000 in 1992.
There was a net loss after depreciation and mortgage interest expense in
1993 of $74,000 compared with net income of $49,000 in 1992.
The increase in revenues was due to increases in apartment rental rates
during 1993 ($27,000), partially offset by a slight increase in the
average vacancy rate ($8,000). Interest expense increased $48,000 from a
full year of interest on a mortgage note payable which was secured in
March 1992. Depreciation and amortization expense also increased
($82,000) from the full year of amortization of loan costs and
depreciation of approximately $460,000 of capital additions to the
property during 1992.
16
Meadowwood Apartments
Total revenues in 1993 increased to $4,100,000 from $4,061,000 in 1992.
Net loss after depreciation and mortgage interest expense increased to
$263,000 from $245,000 in 1992.
The increase in revenues was primarily the result of a stronger apartment
market, as evidenced by implementing increases in rental rates at the
property during the year. Operating expenses were higher primarily from
higher repair and maintenance costs ($30,000) and an increase in the
property's real estate taxes ($38,000).
Sahara Palms Apartments
Total revenues increased $97,000 in 1993 to $1,847,000. Net loss after
depreciation and mortgage interest expense decreased to $156,000 from
$326,000 in 1992.
The increase in revenues was due primarily to an increase in occupancy
from 89% on December 31, 1992 to 98% on December 31, 1993. A reduction in
expenses was the result of the full depreciation of certain short-lived
depreciable property in 1993, partially offset by an increase in
depreciation of property improvement costs incurred in 1992.
Woodlake Village/Redwood Village
Total revenues decreased $48,000 to $3,749,000 in 1993 from $3,797,000 in
1992. Net loss after mortgage interest expense and depreciation expense
increased to $569,000 from $492,000 in 1992.
The decrease in revenues was caused primarily by an increase in rent
concessions. Real estate operating expenses increased from slightly higher
payroll related costs ($33,000) and repair and maintenance costs caused by
tenant turnover ($20,000), which was partially offset by slightly lower
real estate taxes ($11,000).
Plantation Shopping Center
Total revenues decreased $52,000 to $1,399,000 in 1993 from $1,451,000 in
1992. Net loss after mortgage interest expense and depreciation expense
also increased from $533,000 in 1992 to $753,000 in 1993.
The decrease in revenues was the result of a reduction in occupancy
brought about by a fire at the center in late 1992. Real estate operating
expenses increased $147,000 in 1993 due to professional fees incurred in
connection with a tenant collection matter and administering the insurance
claim for the damage caused by the fire referred to above. Depreciation
and amortization expense increased in 1993 from a full year of
17
depreciating and amortizing tenant improvements and leasing commission
costs incurred during 1992.
1010 Market Street
Total revenues decreased $396,000 to $5,405,000 in 1993 from $5,801,000 in
1992. Net loss after mortgage interest expense and depreciation expense
increased to $1,076,000 from $823,000 in 1992.
The decrease in revenues was caused by a reduction in base rents from new
and/or renewing tenants despite an increase in occupancy from 84% at
December 31, 1992 to 86% on December 31, 1993. The decrease in rents is
indicative of the softening of office market conditions in downtown St.
Louis. The increase in net loss is caused by the decrease in revenues
mentioned above, an increase in depreciation and amortization of tenant
improvement costs and refinancing costs incurred in 1992 and 1993,
partially offset by a reduction in mortgage interest expense of $196,000
from the reduced interest rate on the renegotiated mortgage note in
September 1992.
International Jewelry Center
Total revenues decreased $1,715,000 in 1993 to $7,717,000 from $9,432,000
in 1992. Net loss after depreciation and mortgage interest expense
increased to $2,802,000 from a year earlier net income of $250,000.
Despite being the premier jewelry building in Los Angeles, performance has
continued to suffer since the civil disturbances in 1992, the softening of
the jewelry business in general, and since the Northridge earthquake in
January 1994. Since December 31, 1992, nearly 100 of the 300 tenants of
the building on that date have either gone out of business, filed for
bankruptcy court protection, moved to other buildings with lower rental
rates or suburban markets perceived to be safer, or had lease terms
renegotiated with significantly lower effective rental rates. While the
reopening of a renovated Pershing Square Park across the street from the
building has had somewhat of a positive effect, occupancy at December 31,
1993 was approximately 64% versus 74% on December 31, 1992. The increase
in operating expenses were primarily bad debt charge-offs of $1,648,000 in
1993 compared to $76,000 in 1992. The decrease in revenues was caused by
a decrease in rental rates and occupancy for the reasons discussed above.
Mortgage Notes Receivable Portfolio
Interest income from mortgage notes receivable decreased from $2,666,000
in 1992 to $1,055,000 in 1993. The decrease was caused by the 1992
retirements of mortgage notes receivable
18
secured by an apartment property located in Atlanta, Georgia ($726,000)
and a commercial property in St. Louis, Missouri ($110,000). In addition,
the failure of the borrower to perform its obligations under the terms of
a mortgage note secured by Cherry Hill that was restructured as a part of
a bankruptcy court approved reorganization plan resulted in the Registrant
reacquiring the property in September 1993. Interest and real estate
operating income from the property in 1993 was $46,000 versus $699,000 of
interest income in 1992. In 1993, the Registrant sold its interest in a
mortgage note receivable secured by a third lien on an apartment complex
located in Antioch, California for $725,000, which had been fully reserved
for possible loss. Due to the continuing deterioration of the underlying
collateral of its remaining mortgage notes receivable, the Registrant
added $129,000 to its reserve for possible loan losses in 1993, net of
recovery, versus $1,834,000 in 1992.
Investment in Joint Venture
Equity in net loss of joint venture decreased $550,000 to $372,000 in 1993
from $922,000 in 1992. The complete rehabilitation of Riverbend
Apartments, which was performed in phases to minimize rent loss, was
completed during 1993. The property's occupancy rate rose to nearly 80%
by year end from 73% at December 31, 1992 and revenues increased $277,000
from rental rate increases and $50,000 from the reduction in vacancy.
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
24 through 37 of this annual report on Form 10-K. Supplementary financial
information required by this item is contained herein on pages 38 through
41 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
NONE.
19
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 ("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 52 President & Director
Michael J. Weinberger 60 Director
Millie C. Cassidy 49 Director
David Weiner 59 Director
Christine Kurtz 40 Director
Mr. Streicker joined the General Partner in May, 1976. He has been
President 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. He is the residential portfolio manager for the
Western region.
Ms. Cassidy joined the General Partner in August, 1982. She has been a
Director of the General Partner since March, 1988. She is the residential
portfolio manager for the Eastern region.
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. Ms. Kurtz is a Director and
portfolio manager responsible for commercial property transactions and
management.
20
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, 1994, 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, 1994, 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 the Limited Partnership Interest. SRE
Investor Services, Inc., an affiliate of the General Partner, owned
73.5 Units of Limited Partnership Interest representing less than 1%
of the outstanding number of units on December 31, 1994.
(c) During the year ended December 31, 1994, 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.
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, percentage
of revenues or net equity. The cost of such services are believed to be
competitive with charges for similar services provided by unrelated
management companies. Fees charged to these affiliates totalled
$2,073,339, $2,370,964 and $2,755,765 in 1994, 1993, and 1992
respectively.
21
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
which hold title to these properties. A trust company affiliated with the
General Partner holds the general partner interest in each single asset
limited partnership as trustee for the Registrant. For its services, the
affiliate is paid an annual fee, which aggregated $134,086, $138,450 and
$131,390 in 1994, 1993 and 1992, respectively, and is based upon the trust
company's standard rate schedule.
Reference is made to Items 10 and 11, and Notes 2 and 10 in the financial
statements.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial statements - The Registrant's 1994 Annual Audited
Financial Statements are included in this annual report on Form
10-K.
(2) Financial statement schedules - See Index to Financial Statement
Schedules on page 23. All other financial statement schedules are
inapplicable or the required subject matter is contained in the
financial statements or notes thereto.
(b) There were no current reports on Form 8-K filed with the SEC
during the quarter ended December 31, 1994.
(c) Financial data schedule (CE)
(d) Exhibits Incorporated by Reference -
Incorporated by
Description Reference to
Agreement of Exhibit A to Registration Statement
Limited Partnership on Form S-11 as filed with the
Securities and Exchange Commission
on May 16, 1985.
22 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
March 30, 1995 /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 March 30, 1995
John H. Streicker
/s/ Elizabeth B. Longo Chief Financial Officer March 30, 1995
----------------------
Elizabeth B. Longo
/s/ George N. Tietjen III Vice President and
------------------------- Controller March 30, 1995
George N. Tietjen III
23
SB PARTNERS
ITEMS 8 and 14 (a) (1) and (2)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND
SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULES
Report of Independent Public Accountants 24
Balance Sheets as of December 31, 1994 and 1993 26
Statements of Operations for the years ended
December 31, 1994, 1993 and 1992 27
Statements of Changes in Partners' Capital for the
years ended December 31, 1994, 1993 and 1992 28
Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992 29
Notes to Financial Statements 30
Supplemental Financial Statement Schedules:
Schedule III-- Real Estate and Accumulated
Depreciation -- December 31, 1994 38
Schedule IV -- Mortgage Loans on Real Estate --
December 31, 1994 40
24
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of SB Partners:
We have audited the accompanying balance sheets of SB Partners (a New
York limited partnership) as of December 31, 1994 and 1993 and the related
statements of operations, changes in partners' capital and cash flows for
each of the three years in the period ended December 31, 1994. These
financial statements and schedules referred to below are the
responsibility of the general partner. Our responsibility is to express
an opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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.
As discussed more fully in Note 11 to the financial statements, the
Partnership has incurred cash flow deficits at its major commercial
properties in recent years. These cash flow deficits have been generally
offset by cash flow from its residential properties, proceeds from secured
and unsecured financing, sales and joint venturing of its real estate
properties and, to a limited extent, cash flow from certain other
commercial properties. The general partner projects that the
Partnership's cash flow from all sources will be sufficient to allow the
Partnership to meet its obligations as they come due in 1995. The
Partnership's ability to meet obligations as they come due beyond 1995 is
dependent upon, among other things, its ability to generate sufficient
cash flow from the sources discussed above.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of SB Partners as
of December 31, 1994 and 1993, and the results of its operations and its
cash flows for each of the three years in the period ended December 31,
1994 in conformity with generally accepted accounting principles.
25
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules on pages 38 through
41 of this report are not a required part of the basic financial
statements, but are supplementary information required by the Securities
and Exchange Commission. The information has been subjected to the
auditing procedures applied in our audit of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation
to the basic financial statements taken as a whole.
New York, New York ARTHUR ANDERSEN LLP
March 15, 1995
26
SB PARTNERS
BALANCE SHEETS
As of December 31,
1994 1993
ASSETS:
Investments -
Real Estate, at cost
Land $13,697,284 $16,226,405
Buildings, furnishings and improvements 148,151,143 164,919,564
Less - accumulated depreciation and valuation allowance (45,595,714) (44,396,664)
116,252,713 136,749,305
------------ ------------
Mortgage notes receivable, net of allowance for possible
loan losses of $0 and $4,512,780 respectively and
deferred gains of $0 and $5,178,632 respectively 0 5,933,929
Investment in joint venture 11,133,621 11,635,207
------------ ------------
127,386,334 154,318,441
Other Assets -
Cash and cash equivalents 1,074,985 423,262
Other 6,776,434 8,628,406
------------ ------------
Total assets $135,237,753 $163,370,109
============ ============
LIABILITIES:
Mortgage notes payable, net of unamortized discount
of $310,904 and $654,764 respectively $112,253,778 $136,003,934
Accounts payable and accrued expenses 7,179,185 3,826,033
Tenants' security deposits 1,186,880 1,163,546
------------ ------------
Total liabilities 120,619,843 140,993,513
------------ ------------
PARTNERS' CAPITAL:
Units of partnership interest without par value;
Limited partner - 7,753 units 14,634,460 22,392,145
General partner - 1 unit (16,550) (15,549)
------------ ------------
Total partners' capital 14,617,910 22,376,596
------------ ------------
Total liabilities and partners' capital $135,237,753 $163,370,109
============ ============
The accompanying notes are an integral part of these statements.
/TABLE
27
SB PARTNERS
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
1994 1993 1992
REVENUES
Rental income $24,244,843 $25,161,455 $26,847,576
Interest on mortgage notes receivable 496,834 1,055,263 2,666,031
Interest on short-term investments 114,946 148,591 42,586
Other 687,484 653,863 664,771
----------- ----------- -----------
Total revenues 25,544,107 27,019,172 30,220,964
EXPENSES
Interest on mortgage notes payable 13,338,723 12,980,405 14,342,377
Real estate operating expenses 11,369,234 10,559,140 10,470,853
Depreciation and amortization 5,243,818 5,241,810 5,428,678
Real estate taxes 2,376,046 2,217,497 2,039,512
Management fees 2,141,519 1,960,552 2,023,352
Provision for loan losses, net of recoveries 0 128,651 1,833,597
Interest on other secured and unsecured loans 0 0 52,879
Writedown and reserves of investments in real estate 4,161,531 0 1,295,122
Other 1,179,557 2,465,360 1,354,719
----------- ----------- ------------
Total expenses 39,810,428 35,553,415 38,841,089
----------- ----------- ------------
Loss from operations (14,266,321) (8,534,243) (8,620,125)
Equity in net loss of joint venture (351,586) (372,096) (922,299)
Gain (loss) on sale of investments in real 6,859,221 (71,655) 125,263
estate
----------- ----------- ------------
NET LOSS (7,758,686) (8,977,994) (9,417,161)
Loss allocated to general partner (1,001) (1,158) (1,215)
----------- ----------- ------------
Loss allocated to limited partners ($7,757,685) ($8,976,836) ($9,415,946)
============ ============ ============
NET LOSS PER UNIT OF LIMITED PARTNERSHIP
INTEREST
Net Loss ($1,001) ($1,158) ($1,215)
============ ============ ============
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 statements.
/TABLE
28
SB PARTNERS
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Limited Partners:
Units of
Partnership Cumulative Accumulated
Interest Cash Earnings
Number Amount Distributions (Losses) Total
Balance, December 31, 1991 7,753 $119,968,973 ($97,728,323) $18,544,277 $40,784,927
Net loss for the year - - - (9,415,946) (9,415,946)
----- ------------ ------------ ----------- -----------
Balance, December 31, 1992 7,753 119,968,973 (97,728,323) 9,128,331 31,368,981
Net loss for the year - - - (8,976,836) (8,976,836)
----- ------------ ------------ ----------- -----------
Balance, December 31, 1993 7,753 119,968,973 (97,728,323) 151,495 22,392,145
Net loss for the year - - - (7,757,685) (7,757,685)
----- ------------ ------------ ------------ -----------
Balance, December 31, 1994 7,753 $119,968,973 ($97,728,323) ($7,606,190) $14,634,460
===== ============ ============ ============ ===========
General Partner:
Units of
Partnership Cumulative Accumulated
Interest Cash Earnings
Number Amount Distributions (Losses) Total
Balance, December 31, 1991 1 $10,000 ($24,559) $1,383 ($13,176)
Net loss for the year - - - (1,215) (1,215)
--- ------- --------- ------- ---------
Balance, December 31, 1992 1 10,000 (24,559) 168 (14,391)
Net loss for the year - - - (1,158) (1,158)
--- ------- --------- -------- ---------
Balance, December 31, 1993 1 10,000 (24,559) (990) (15,549)
Net loss for the year - - - (1,001) (1,001)
--- ------- --------- -------- ---------
Balance, December 31, 1994 1 $10,000 ($24,559) ($1,991) ($16,550)
=== ======= ========= ======== =========
The accompanying notes are an integral part of these statements.
/TABLE
29
SB PARTNERS
STATEMENTS OF CASH FLOWS
For the years ended December 31,
1994 1993 1992
Cash Flows From Operating Activities:
Net Loss ($7,758,686) ($8,977,994) ($9,417,161)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Provision for loan losses, net of recoveries 0 128,651 1,833,597
Writedown of investment in real estate 0 0 1,295,122
(Gain) loss on sale of investments in real estate (6,859,221) 71,655 (125,263)
Reserve for real estate losses 4,161,531 0 0
Equity in net loss of joint venture 351,586 372,096 922,299
Depreciation and amortization 5,243,818 5,241,810 5,428,678
Amortization of discount on mortgage notes payable 343,860 300,777 303,408
Amortization of discount on mortgage note receivable 0 0 (1,142)
(Increase) decrease in other assets 969,920 1,066,506 (3,164,944)
Increase (decrease) in other liabilities 3,376,486 2,469,392 (3,212,942)
---------- ----------- ----------
Net cash provided by (used in) operating activities (170,706) 672,893 (6,138,348)
---------- ----------- ----------
Cash Flows From Investing Activities:
Net proceeds from sale of real estate 4,877,352 500,000 0
Principal collections on mortgage notes receivable 0 1,028,585 13,290,785
Cash paid on real estate acquisitions (710,384) (9,896) 0
Capital additions to real estate (2,636,254) (2,284,514) (1,650,928)
Additional advances under guarantees (113,651) (803,433) (640,524)
Payments and distributions received from joint 150,000 114,630 5,641,757
venture
---------- ----------- ----------
Net cash provided by (used in) investing activities 1,567,063 (1,454,628) 16,641,090
---------- ----------- ----------
Cash Flows From Financing Activities:
Principal payments on mortgage notes payable (744,634) (732,781) (7,453,843)
Proceeds from issuance of mortgage notes payable 0 0 3,700,000
Principal payments on secured and unsecured loans 0 0 (6,200,000)
---------- ----------- ----------
Net cash used in financing activities (744,634) (732,781) (9,953,843)
---------- ----------- ----------
Net increase (decrease) in cash and cash equivalents 651,723 (1,514,516) 548,899
Cash and cash equivalents at beginning of year 423,262 1,937,778 1,388,879
---------- ----------- -----------
Cash and cash equivalents at end of year $1,074,985 $423,262 $1,937,778
========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $9,410,407 $10,532,172 $14,525,188
========== =========== ===========
Supplemental disclosures of non-cash investing
and financing activities:
See Notes 4 and 6 to Financial Statements
The accompanying notes are an integral part of these statements.
/TABLE
30
SB PARTNERS
Notes to Financial Statements
December 31, 1994, 1993 and 1992
(1) Organization and Significant Accounting Policies
SB Partners (the "Partnership) is a New York limited partnership which has
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:
Basis of presentation -
The accompanying 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.
Income taxes -
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.
Capitalization, depreciation and amortization -
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 50 years
Furnishings 5 to 7 years
Real estate is carried at the lower of cost or net realizable value.
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 over the term of the
related mortgage notes. Amortization of leasing commissions and tenant
improvements is computed by amortizing the cost over the term of the
related lease.
Recognition of gains (losses) on sales of real estate investments -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 that 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.
31
Recognition of interest income and expense -
Discounts on mortgage notes receivable and payable are amortized as
interest income and expense, respectively, using the effective interest
method.
Net loss per unit -
Net 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.
Cash equivalents -
For financial reporting purposes, the Partnership considers all highly
liquid short-term investments purchased with an original maturity of three
months or less to be cash equivalents.
Allowance for possible loan losses -
The Partnership periodically reviews its portfolio of mortgage notes
receivable and related advances for amounts which may not be collectible,
based on, among other things, estimates of the value of underlying
collateral. During the years ended December 31, 1994, 1993 and 1992, the
Partnership provided $ -0-, $128,651,and $1,833,597 for such possible
losses, respectively, net of recoveries.
Reclassifications -
Certain prior year amounts have been reclassified to make them comparable
to the current year presentation.
Joint Venture -
The Partnership accounts for its investment in a joint venture using the
equity method. Pursuant to the special allocations of cash flow which are
contained in the joint venture agreement, it recognizes income or loss to
the extent of its allocable share of the change in the net assets of the
joint venture.
Mortgage financing -
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 and limited liability companies which
hold title to the properties. In these limited partnerships, the
Partnership holds a 99% limited partner interest, and an affiliate of the
General Partner holds a 1% general partner interest as trustee for the
Partnership.
(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.
32
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 payments and 0.5% of capital not invested in real
estate, as defined in the partnership agreement. The management fee
amounted to $2,141,519, $1,960,552, and $2,023,052 for the years ended
December 31, 1994, 1993 and 1992, 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, 1994, 1993, and
1992.
(3) Investments in Real Estate
The following is the cost basis, and accumulated depreciation and
valuation allowance of the real estate investments owned by the
Partnership at December 31, 1994 and 1993.
No.of Year of Carrying Amount
Type Prop. Acquisition Description 1994 1993
Residential properties 4 1978-91 1,564 Apt. units $ 42,780,229 $ 64,242,418
Shopping center 1 1981 240,821 Sq. Ft. 13,169,294 12,860,041
Office buildings 3 1984-93 851,588 Sq. Ft. 105,854,517 103,999,123
Undeveloped land 1 1978 13.9 Acres 44,387 44,387
Developed land 1 1983 18.0 Acres - -
------------ ------------
161,848,427 181,145,969
Less: Accumulated depreciation and valuation allowance 45,595,714 44,396,664
------------ ------------
$116,252,713 $136,749,305
============ ============
(4) Real Estate Transactions
In June 1994, the Partnership sold Woodlake Apartments for $22,055,000.
In connection with the sale, the buyer assumed the existing first mortgage
note in the amount of approximately $17,476,000 and the balance paid in
cash. In July 1994, the Partnership reacquired Nob Hill Apartments for
$700,000 cash, subject to existing liens secured by the property. The
property was recorded at $6,803,000 which in addition to cash paid was the
aggregate carrying amount of the liens, including those owned by the
Partnership on the date of acquisition, net of a deferred gain of
$5,179,000 and allowance for possible loan losses of $5,212,000. The
junior liens owned by the Partnership were effectively extinguished. In
December 1994, Nob Hill was sold for $7,400,000. The buyer assumed an
existing first mortgage note of $5,873,000, and paid the balance in cash.
The Partnership recognized net gains on sale of real estate investments of
$6,859,000 for the year ended December 31, 1994.
33
During 1993, the Partnership sold 400 Office Park for $500,000 all cash
and recognized a loss on the sale of $71,655. Additionally, the
Partnership reacquired Cherry Hill Office Center by credit bid of its
mortgage after the borrower failed to perform under the terms of a
bankruptcy court approved reorganization plan. The property was recorded
at $3,722,248, representing the carrying value of its mortgage note
receivable of $7,050,000, net of deferred gain of $3,327,752, which amount
approximated the estimated market value on that date. Acquisition costs
paid in cash were $9,896. There were no sales of real estate for the year
ended December 31, 1992. Gain on sale of investments in real estate in
1992 relates to recognition of previously deferred gains of $125,263.
The sales of Woodlake Apartments and Nob Hill Apartments, to the extent of
the assumption of mortgage notes payable by the purchasers and the
foreclosure of Cherry Hill, and the portion of the reacquisition of Nob
Hill Apartments in exchange for mortgage notes receivable represent non-
cash investing and financing activities and have been excluded from the
statements of cash flow.
(5) Mortgage and Other Notes Receivable
During 1994, the Partnership reacquired Nob Hill Apartments and all of the
junior liens owned were effectively extinguished (Refer to Note 4).
During 1993, the Partnership sold its interest in a mortgage note for
$725,000 to an affiliate of the borrower which had previously filed for
protection from creditors under Chapter XI of the United States Bankruptcy
Code.
(6) Investment in Joint Venture
During 1992, the Partnership and an institutional investor (the
"Investor") entered into a joint venture agreement where the Partnership
contributed Riverbend Apartments for an agreed equity value of $14,250,000
and the Investor contributed $9,500,000 in cash. The Partnership and the
Investor hold interests in the venture of 60% and 40%, respectively, and
the Investor is entitled to a guaranteed return of 9.5% of its average
investment, as defined in the joint venture agreement. For financial
reporting purposes, the Partnership recorded its investment in the joint
venture at its net carrying amount of the property contributed, and no
gain or loss was recognized. All significant matters affecting the joint
venture require the unanimous consent of the venturers.
34
The following are the condensed financial statements (000's omitted) of
the joint venture as of and for the years ended December 31, 1994 and 1993
(See Note 1):
BALANCE SHEETS
1994 1993 1992
Investment in real estate, net $20,532 $21,071 $20,472
Other assets and liabilities, net (61) 64 1,209
------- ------- -------
Partners capital $20,471 $21,135 $21,681
======= ======= =======
STATEMENTS OF OPERATIONS
Rent and other income $ 3,815 $ 3,357 $ 2,986
Real estate operating expenses (3,264) (2,827) (3,006)
------- ------- -------
Net income (loss) $ 551 $ 530 ($ 20)
======= ======= =======
(7) Mortgage Notes Payable
Mortgage notes payable consist of the following nonrecourse first liens:
Net Carrying Amount
Interest rate Annual December 31,
Original ------------- Installment Amount Due ------------
Property Principal Coupon Effective Maturity date Payments at Maturity 1994 1993
Holiday Park $ 3,700,000 9% 9% March 1, 1999 $ 357,252 $3,494,467 $ 3,624,412 $ 3,654,219
Sahara Palms 8,614,000 10 10 October 1, 1997 888,626 8,413,634 8,473,981 8,513,061
Woodlake Village/
Redwood Village 17,717,000 9.75 9.75 December 1, 1997 1,787,127 --- --- 17,509,857
Meadowwood 18,396,000 9.5 9.5 December 1, 1997 1,813,724 17,893,476 18,075,849 18,167,579
Nob Hill 6,200,000 10.5 10.5 August 1, 1997 680,760 --- --- 5,933,929
International
Jewelry Center (a) 35,000,000 12.4 12.4 August, 2018 4,398,634 --- 33,898,519 33,898,519
Plantation Center
Shopping Plaza 7,725,000 10.25 16.5 November, 1995 813,540 6,792,691 6,575,433 6,333,562
1010 Market Street 42,000,000 8 8 August, 1997 3,698,173 42,000,000 41,169,351 41,556,975
Cherry Hill 2,900,000 9.5 9.5 September, 2000 39,261 436,233 436,233 436,233
------------ ------------
$112,253,778 $136,003,934
============ ============
FN
a) Mortgage is currently in default, refer to Note 11.
/TABLE
35
Principal payments including the accelerated maturity of the note secured
by International Jewelry Center are due as follows: 1995-$41,070,100,
1996-$648,553, 1997-$66,580,909, 1998-$42,331, 1999-$3,475,652 and
thereafter $436,233.
(8) Fair Value of Financial Instruments
The Partnership's financial instruments consist of mortgage notes
receivable, mortgage notes payable and cash equivalents. For cash
equivalents, their carrying amount is a reasonable estimate of fair value.
The fair value of mortgage notes receivable (which are secured by liens on
residential apartments) have been estimated by assessing the underlying
value of the Partnership's investment in the collateral, which was equal
to the mortgage notes receivable net carrying amount at December 31, 1993.
The Partnership did not own any mortgage notes receivable at December 31,
1994. Mortgage
notes payable have been valued by discounting future payments required
under the terms of these obligations at rates currently available to the
Partnership for debt with similar maturities, terms and underlying
collateral, and is estimated at $104,800,000 and $157,000,000 at December
31, 1994 and 1993, respectively.
(9) Federal Income Tax Information
A reconciliation of net loss for financial reporting purposes to net loss
for Federal income tax reporting purposes is as follows:
For the Years Ended December 31,
1994 1993 1992
----------- ----------- -----------
Net loss for financial reporting purposes ($7,758,686) ($8,977,994) ($9,417,161)
Adjustment to net gains on sale of investments in real estate to reflect
gains recognized in different periods under the installment and
cost recovery methods 360,131 13,939 1,812,820
Adjustment for provision for loan and reserves for real estate losses 4,161,531 (624,342) 2,543,597
Difference between tax and financial statement equity in net loss
of joint venture 140,227 (103,555) 177,153
Adjustment for writedown of investments in real estate - - 1,295,122
Adjustment to interest income to reflect amortization of discount
on mortgage notes receivable for financial reporting purposes,
net of imputed interest recognized for tax purposes - (43,864) (43,864)
Adjustment to interest expense to reflect non-deductibility of interest and
amortization of discount on mortgage notes payable recognized for
financial reporting purposes 3,635,561 300,777 265,790
Difference between tax and financial statement depreciation (5,135,849) (5,691,378) (5,408,799)
Net change in accrual entries not recorded on tax basis and
prior tax adjustments 754,969 (319,168) (17,837)
----------- ------------- -------------
Net loss for Federal income tax reporting purposes ($3,842,116) ($15,445,585) ($ 8,793,179)
=========== ============= =============
Net loss per weighted average limited partnership unit for
Federal income tax reporting purposes:
Net ordinary loss per unit of Partnership interest ($ 1,333) ($ 2,078) ($ 1,384)
Average Capital (Sec.1231) gain per unit of
Partnership Interest 838 86 250
----------- ------------- ------------
($ 495) ($ 1,992) ($ 1,134)
=========== ============= ============
Weighted average number of units of limited partnership interest
outstanding 7,753 7,753 7,753
=========== ============= ============
/TABLE
36
As of December 31, 1994 and 1993, the tax bases of the Partnership's
assets and liabilities amounted to $96,877,000 and $130,463,000 of assets,
and $117,639,000 and $147,383,000 of liabilities, respectively.
(10) 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, 1994, 1993 and 1992, billings to the Partnership amounted to
$2,207,425, $2,509,414, and $2,887,155, respectively, and are included in
real estate operating expenses.
(11) Commitments and Contingencies
During 1993, the Partnership stopped making regular monthly payments of
debt service to its lender on the mortgage note secured by the
International Jewelry Center. In the interim, the Partnership has paid
available cash flow from the building to the lender under an informal
agreement. In November 1993, the lender declared the loan in default and
subsequent to December 31, 1994 filed a Notice of Default and Election to
Sell. It is presently uncertain whether the Partnership will be able to
successfully continue to hold the property or obtain some other resolution
that would be beneficial to it. Accordingly, the Partnership has recorded
a reserve for real estate losses of $4,162,000 for the year ended December
31, 1994 which amount reduces the carrying amount of the property and
related assets to the carrying amount of all liabilities associated with
the property.
The Partnership is a party to certain actions directly related to its
normal business operations. While the ultimate outcome is not presently
determinable with certainty, the Partnership believes that the resolution
of these matters will not have a material effect on its financial position
and operations.
The Partnership has secured irrevocable letters of credit in the amount of
approximately $1,000,000 which primarily serve as additional collateral
securing certain financing.
The Partnership has incurred cash flow losses from operations in recent
years. Office markets where the Registrant owns properties have
experienced extended periods of high vacancy rates, significantly lower
effective rental rates, reduced demand, and higher risks of tenant
failure. This has resulted in revenues that have been insufficient to pay
for operating expenses, debt service and required capital expenditures at
those properties. The Partnership has historically covered the cash flow
deficits of these commercial properties with cash flow from its
residential and other commercial properties, proceeds from secured and
unsecured financing, and sales and joint venturing of real estate
properties.
37
The general partner projects that it will be able to generate sufficient
cash flow to cover the deficits at these properties in 1995.
(12) Commercial Operating Leases
Minimum future rentals on noncancelable commercial operating leases in
respect of space leased by the Partnership to occupancy tenants for each
of the five succeeding fiscal years are as follows: 1995 -$13,171,579,
1996 - $11,509,819, 1997 - $8,908,456, 1998 - $7,101,471, 1999 -
$5,511,025 and thereafter $12,711,347. The minimum rentals received on
noncancelable commercial operating leases for the year ended December 31,
1994 was $12,886,929.
38
SB PARTNERS
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1994
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 -
Las Vegas (Sahara Palms) $8,473,981 $1,604,919 $9,010,416 $10,615,335 $1,637,084
Reno (Meadow Wood) 18,075,849 2,466,311 19,057,859 21,524,170 3,613,916
Florida -
Holiday (Holiday Park -
including undeveloped land) 3,624,412 458,344 4,043,352 4,501,696 509,260
Orlando (Villa Cordova) - 30,456 370,284 400,740 22,415
------------ ----------- ------------ ------------ -----------
30,174,242 4,560,030 32,481,911 37,041,941 5,782,675
------------ ----------- ------------ ------------ -----------
SHOPPING CENTER
Plantation (Plantation
Shopping Center) 6,575,433 1,510,714 9,668,665 11,179,379 1,989,915
------------ ----------- ------------ ------------ -----------
OFFICE BUILDINGS
California -
Los Angeles (Int'l Jewelry Center) 33,898,519 - 47,489,120 47,489,120 6,856,240
Missouri -
St Louis (1010 Market Street) 41,169,351 6,978,673 37,251,102 44,229,775 3,217,048
New Jersey -
Cherry Hill (Cherry Hill Office Park) 436,233 647,867 3,163,115 3,810,982 251,352
------------ ----------- ------------ ------------ -----------
75,504,103 7,626,540 87,903,337 95,529,877 10,324,640
------------ ----------- ------------ ------------ -----------
$112,253,778 $13,697,284 $130,053,913 $143,751,197 $18,097,230
============ =========== ============ ============ ===========
/TABLE
SB PARTNERS
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
DECEMBER 31, 1994
Column A Column E Column F
Gross amount at which Carried Accumulated
at End of Year
(Notes a & c) Depreciation
and Valuation
Buildings and Allowance
Description Land Improvements Total (Notes b & d)
MULTI FAMILY RESIDENTIAL
Nevada -
Las Vegas (Sahara Palms) $1,604,919 $10,647,500 $12,252,419 $4,345,003
Reno (Meadow Wood) 2,466,311 22,671,775 25,138,086 9,396,390
Florida -
Holiday (Holiday Park -
including undeveloped land) 458,344 4,552,612 5,010,956 703,236
Orlando (Villa Cordova) 30,456 392,699 423,155 294,059
----------- ------------ ------------ -----------
4,560,030 38,264,586 42,824,616 14,738,688
----------- ------------ ------------ -----------
SHOPPING CENTER
Plantation (Plantation
Shopping Center) 1,510,714 11,658,580 13,169,294 4,568,150
----------- ------------ ------------ -----------
OFFICE BUILDINGS
California -
Los Angeles (Int'l Jewelry Center) - 54,345,360 54,345,360 16,089,016
Missouri -
St Louis (1010 Market Street) 6,978,673 40,468,150 47,446,823 10,079,918
New Jersey -
Cherry Hill (Cherry Hill Office Park) 647,867 3,414,467 4,062,334 119,942
----------- ------------ ------------ -----------
7,626,540 98,227,977 105,854,517 26,288,876
----------- ------------ ------------ -----------
$13,697,284 $148,151,143 $161,848,427 $45,595,714
=========== ============ ============ ===========
/TABLE
SB PARTNERS
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED
DECEMBER 31, 1994
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 -
Las Vegas (Sahara Palms) 1978 May 1983 5 to 30 years
Reno (Meadow Wood) 1974 - 1977 May 1983 5 to 30 years
Florida -
Holiday (Holiday Park -
including undeveloped land) Jan 1991 7 to 27.5 years
Orlando (Villa Cordova) 1974 March 1978 7 to 31 years
SHOPPING CENTER
Plantation (Plantation
Shopping Center) 1980 July 1981 5 to 40 years
OFFICE BUILDINGS
California -
Los Angeles (Int'l Jewelry Center) 1982 Nov 1984 15 to 50 years
Missouri -
St Louis (1010 Market Street) 1982 Nov 1984 5 to 50 years
New Jersey -
Cherry Hill (Cherry Hill Office Park) 1970 Sept 1993 40 years
/TABLE
39
NOTES TO SCHEDULE III:
1994 1993 1992
---- ---- ----
(a)Reconciliation of amounts shown in Column E:
Balance at beginning of year $181,145,969 $175,788,025 $196,219,532
------------ ------------ ------------
Additions -
Acquisitions of real estate 6,803,413 3,810,982 -
Cost of improvements and adjustments 2,636,253 2,177,609 1,650,928
------------ ------------ ------------
Total additions 9,439,666 5,988,591 1,650,928
------------ ------------ ------------
Deductions -
Writedown of investment in real estate - 1,295,122
Contribution of property to
60% owned joint venture - 20,787,313
Sale of property 28,737,208 630,647 -
------------ ------------ ------------
Total deductions 28,737,208 630,647 22,082,435
------------ ------------ ------------
Balance at end of year $161,848,427 $181,145,969 $175,788,025
============ ============ ============
(b)Reconciliation of amounts shown in Column F:
Balance at beginning of year $44,396,664 $39,718,856 $36,909,052
Additions -
Depreciation expense for year 4,819,525 4,758,739 4,911,127
Reserve for real estate loss 4,161,531 - -
Deductions -
Accumulated depreciation on property
contributed to 60% owned joint venture - - 2,101,323
Accumulated depreciation on sold property 7,782,006 80,931 -
------------- ------------ ------------
Balance at end of year $45,595,714 $44,396,664 $39,718,856
============ ============ ============
(c)Aggregate cost basis for Federal
income tax reporting purposes $170,642,020 $192,210,382 $186,020,919
============ ============ ============
(d)Accumulated depreciation for Federal
income tax reporting purposes $93,789,347 $98,904,491 $88,627,587
============ ============ ============
/TABLE
40
SB PARTNERS
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1994
Column A Column B Column C Column D Column E
Periodic
Final Payment Balloon
Description Coupon Effective Maturity Date Terms Payment
NONE NONE NONE NONE NONE NONE
SB PARTNERS
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE - CONTINUED
DECEMBER 31, 1994
Column A Column F Column G Column H Column I
Prior Liens
Underlying Carrying
Mortgages on Face Amount of
Wraparound Amount of Deferred Mortgages
Description Mortgage Notes Mortgages Gain (Notes a & b)
NONE NONE NONE NONE NONE
41
NOTES TO SCHEDULE IV:
1994 1993 1992
(a)Reconciliation of the carrying amount of
mortgages:
Balance at beginning of year $10,446,709 $14,790,514 $27,614,370
----------- ----------- -----------
Advances secured by
junior liens - 803,433 640,524
Recognition of
deferred gains - - 125,263
Amortization of discount - - 1,142
----------- ----------- -----------
Total additions - 803,433 766,929
----------- ----------- -----------
Principal payments received - 725,000 13,290,785
Other decreases in
mortgage notes - - 300,000
Application of loan loss
allowance to note extinguished - 1,503,422 -
Net carrying amount
recorded as the basis
of property on reacquisition 10,446,709 2,918,816 -
----------- ----------- -----------
Total deductions 10,446,709 5,147,238 13,590,785
----------- ----------- -----------
Balance at end of year - $10,446,709 $14,790,514
=========== =========== ===========
(b)Reconciliation of carrying amount shown
in schedule to carrying amounts
reported in financial statements:
1994 1993 1992
As shown in schedule - $10,446,709 $14,790,514
Add: Other note receivable - - 300,000
Less: Allowance for possible
loan losses - (4,512,780) (5,083,597)
----------- ----------- -----------
Net carrying amount in
financial statements - $5,933,929 $10,006,917
=========== =========== ===========
/TABLE