Income Growth Partners, LTD. X

10QSB 1 a94174e10qsb.htm FORM 10-QSB PERIOD ENDED 9-30-03 Income Growth Partners, LTD. X

FORM 10-QSB

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2003

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number 0-18528

INCOME GROWTH PARTNERS, LTD. X

(Exact name of registrant as specified in its charter)


CALIFORNIA		33-0294177
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

11230 Sorrento Valley Road, Suite 220, San Diego, California 92121
(Address of principal executive offices) (Zip Code)

(858) 457-2750

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registration (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 filing requirements for the past 90 days. Yes [X] No [ ]

The number of the registrant’s Original Limited Partnership Units outstanding as of November 5, 2003 was 18,826.5. The number of the registrant’s Class A Units outstanding as of November 5, 2003 was 8,100.

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II — OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS:
	ITEM 2. CHANGES IN SECURITIES:
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
	ITEM 5. OTHER INFORMATION:
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
SIGNATURES
EXHIBIT INDEX
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARIES
(A California Limited Partnership)
CONSOLIDATED BALANCE SHEETS

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


		September 30			December 31,
		2003			2002
		unaudited

	ASSETS
Rental properties
	Land	$	7,078,365		$	7,078,365
	Buildings and improvements		23,205,083			22,907,239

			30,283,448			29,985,604
	Less accumulated depreciation		(13,591,958	)		(12,909,758	)

			16,691,490			17,075,846

Cash and cash equivalents			782,374			604,969
Deferred loan fees, net of accumulated amortization of $483,763 and $415,758, respectively			293,421			361,425
Prepaids and other assets			345,417			182,775

		$	18,112,702		$	18,225,015

	LIABILITIES AND PARTNERS’ DEFICIT
Mortgage loans payable		$	18,490,268		$	18,689,960
Other liabilities
Accounts payable and accrued liabilities			349,739			144,320
	Accrued interest payable		122,317			122,317
	Security deposits		236,866			233,005

			19,199,190			19,189,602
Commitments and contingencies

Partners’ deficit			(1,076,488	)		(954,587	)
Note receivable from general partner			(10,000	)		(10,000	)

		$	18,112,702		$	18,225,015

The accompanying notes are an integral part of these consolidated financial statements.

-2-

INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARIES
(A California Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS — - UNAUDITED


			FOR THE THREE MONTHS				FOR THE NINE MONTHS
			ENDED SEPTEMBER 30,				ENDED SEPTEMBER 30,

			2003		2002		2003		2002

REVENUES
	Rents		$	1,479,720	$	1,431,588	$	4,212,938	$	4,083,208
	Other			60,305		23,737		232,333		114,658

		Total revenues		1,540,025		1,455,325		4,445,271		4,197,866

EXPENSES
		Operating expenses		682,543		656,795		2,016,399		1,876,998
		Depreciation and amortization		250,068		235,668		750,204		705,613
		Interest		357,176		362,210		1,071,569		1,086,341

Total expenses				1,289,787		1,254,673		3,838,172		3,668,952

Net income			$	250,238	$	200,652	$	607,099	$	528,914

BASIC AND DILUTED PER LIMITED PARTNERSHIP UNIT DATA
		Net income per limited partnership unit	$	7.90	$	6.33	$	19.16	$	16.70

		Distributions per Class A limited unit holder	$	30.00	$	25.06	$	90.00	$	73.71

Weighted average limited partnership units				26,926		26,926		26,926		26,926

The accompanying notes are an integral part of these consolidated financial statements.

-3-

INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARIES
(A California Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS — — UNAUDITED


					FOR THE NINE MONTHS
					ENDED SEPTEMBER 30,

					2003			2002

CASH FLOWS FROM OPERATING ACTIVITIES
	Net income				$	607,099		$	528,914
	Adjustments to reconcile net income to net cash provided by operating activities
		Depreciation and amortization				750,204			705,613
				(Increase) in
			Prepaid expenses and other assets			(162,642	)		(79,509	)
				Increase/(Decrease) in
			Accounts payable, accrued liabilities and accrued interest payable			205,419			(23,561	)
				Increase/(Decrease) in
			Security deposits			3,861			254

				Net cash provided by operating activities		1,403,941			1,131,711

CASH FLOWS FROM INVESTING ACTIVITIES
	Capital expenditures					(297,844	)		(416,842	)

				Net cash used in investing activities		(297,844	)		(416,842	)

CASH FLOWS FROM FINANCING ACTIVITIES
	Principal payments under mortgage debt					(199,692	)		(184,920	)
	Principal payments to affiliate					—			(8,000	)
	Distributions to Investors					(729,000	)		(597,015	)

				Net cash used in financing activities		(928,692	)		(789,935	)

				Net Increase in cash and cash equivalents		177,405			(75,066	)
				Cash and cash equivalents at beginning of period		604,969			429,729

				Cash and cash equivalents at end of period	$	782,374		$	354,663

The accompanying notes are an integral part of these consolidated financial statements

-4-

INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARIES
(A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 2003 AND 2002

1. BASIS OF FINANCIAL STATEMENT PRESENTATION:

The accompanying unaudited consolidated financial statements of Income Growth Partners, Ltd. X, a California limited partnership, and subsidiaries (the “Partnership”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to those rules and regulations, although the Partnership believes that the disclosures made are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Partnership’s latest audited financial statements for the year ended December 31, 2002 filed on Form 10-KSB.

The accompanying unaudited consolidated financial statements have not been audited by independent public accountants, but include all adjustments (consisting of normal recurring adjustments) which are, in the opinion of the general partners, necessary for a fair presentation of the financial condition, results of operations and cash flows for the periods presented. However, these results are not necessarily indicative of results for a full year.

-5-

INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARIES
(A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 2003 AND 2002

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto filed herewith.

a. Critical Accounting Standards

Rental revenues are recognized at the beginning of each month based on the current occupancy of the apartments. Tenant leases are generally for a minimum term of six months with an option to rent on a month-to-month basis.

Land, buildings, and improvements are recorded at cost. Buildings and improvements are depreciated using the straight-line method over the estimated useful lives of 27.5 and 5 to 15 years, respectively. Expenditures for maintenance and repairs are charged to expense as incurred. Significant renovations are capitalized and depreciated over the remaining life of the property. The Partnership assesses its property for impairment whenever events or changes in circumstances indicate that the carrying amount of the property may not be recoverable. Recoverability of property to be held and used is measured by a comparison of the carrying amount of the property to future undiscounted net cash flows expected to be generated by the property. If the property is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property exceeds the fair value of the property. The cost and related accumulated depreciation of real estate are removed from the accounts upon disposition. Gains and losses arising from the dispositions are reported as income or expense.

b. Liquidity and Capital Resources:

Since inception, the Partnership’s operating and debt service obligations have been financed through the sale of Partnership Units, cash provided by operating activities, and 1995 debt restructuring activities. During the nine months ended September 30, 2003, all of the Partnership’s operating and debt service cash requirements have been met through cash generated from operations.

The Mission Park mortgage was refinanced in December 1995 at a fixed interest rate of 7.76%. The Shadowridge Meadows mortgage was refinanced in October 1997 at a fixed interest rate of 7.49%.

In the event that one or more of the properties is unable to support its debt service and the Partnership is unable to cover operational shortfalls from cash reserves, the Partnership may have to take one or more alternative courses of action. The general partners would then determine, based on their analysis of relevant economic conditions and the status of the properties, a course of action intended to be consistent with the best interests of the Partnership. Possible courses of action might include the sacrifice, sale or refinancing of one or more of the properties, the entry into one or more joint venture partnerships with other entities, or the filing of another bankruptcy petition.

Net cash provided by operating activities for the nine months ended September 30, 2003 was approximately $1,404,000 compared to approximately $1,132,000 for the same period in 2002. The principal reason for this increase can be attributed to an increase in accounts payable and net income for the period.

Net cash used in investing activities for the nine months ended September 30, 2003 was approximately $298,000 compared to approximately $417,000 for the same period in 2002. The principal reason for this decrease was a decrease in capital expenditures.

Net cash used in financing activities for the nine months ended September 30, 2003 was approximately $929,000 compared to approximately $790,000 for the same period in 2002. The principal reason for this increase was an increase in principal payments under Mortgage Debt and an increase in distributions to investors.

-6-

INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARIES
(A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 2003 AND 2002

b. Liquidity and Capital Resources – (Continued):

In October, 2001 the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 establishes a single accounting model, based on the framework established in SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of ”, for long-lived assets to be disposed of by sale, and resolves significant implementation issues related to SFAS No. 121. The adoption of this statement had no material impact on the Company’s financial statements.

In April 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 rescinds SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt,” and an amendment of that SFAS, SFAS No. 64, “Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements.” SFAS No. 145 also rescinds SFAS No. 44, “Accounting for Intangible Assets of Motor Carriers.” Further, SFAS No. 145 amends SFAS No. 13, “Accounting for Leases,” to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS No. 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or described their applicability under changed conditions. This pronouncement requires gains and losses from extinguishment of debt to be classified as an extraordinary item only if the criteria in Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” have been met. Further, lease modifications with economic effects similar to sale-leaseback transactions must be accounted for in the same manner as sale-leaseback transactions. The provisions of SFAS No. 145 related to the rescission of SFAS No. 4 shall be applied in fiscal years beginning after May 15, 2002. The provisions of SFAS No. 145 related to Statement 13 shall be effective for transactions occurring after May 15, 2002, with early application encouraged. The adoption of SFAS No. 145 did not have a material impact on the Company’s consolidated financial position or results of operations for the nine months ended September 30, 2003.

In May 2003, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of this Statement is not expected to have a material effect on the consolidated financial statements.

-7-

INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARIES
(A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 2003 AND 2002

c. Results of Operations:

COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2003 TO THE THREE MONTHS ENDED SEPTEMBER 30, 2002.

Rental revenue for the three months ended September 30, 2003 was approximately $1,480,000, an increase of 3.35% over rents of approximately $1,432,000 for the comparable period in 2002. The increase is primarily attributable to an increase in monthly tenant rental rates and steady average occupancy rates.

Operating expenses for the three months ended September 30, 2003 were approximately $683,000, an increase of 3.96 % over operating expenses of approximately $657,000 for the comparable period in 2002. The increase is primarily attributable to an increase in property maintenance costs and in partnership expenses.

COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2003 TO THE NINE MONTHS ENDED SEPTEMBER 30, 2002.

Rental revenue for the nine months ended September 30, 2003 was approximately $4,213,000, an increase of 3.18% over rents of approximately $4,083,000 for the comparable period in 2002. The increase is primarily attributable to an increase in monthly tenant rental rates and steady average occupancy rates.

Operating expenses for the nine months ended September 30, 2003 were approximately $2,016,000, an increase of 7.41% over operating expenses of approximately $1,877,000 for the comparable period in 2002. The increase is primarily attributable to an increase in property maintenance and partnership expenses.

-8-

INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARIES
(A California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 2003 AND 2002

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS:

There are no pending legal proceedings, which may have a material adverse effect on the Partnership. However, the Partnership is involved in small claims court proceedings against certain present or former tenants of its apartment complexes with regard to landlord-tenant matters, all of which are considered to be in the ordinary course of its business.

ITEM 2. CHANGES IN SECURITIES:

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES:

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:

None

ITEM 5. OTHER INFORMATION:

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:

31.1, 31.2, 32.1, 32.2

-9-

INCOME GROWTH PARTNERS, LTD. X AND SUBSIDIARIES
(A California Limited Partnership)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Date: November 05, 2003
	INCOME GROWTH PARTNERS, LTD. X, a California Limited Partnership
	By:	Income Growth Management, Inc. General Partner
		By:	/s/ Timothy C. Maurer

		Timothy C. Maurer Principal Financial Officer AND Duly Authorized Officer of the Registrant

-10-

EXHIBIT INDEX


EXHIBIT NUMBER		DESCRIPTION

31.1		CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 — CEO
31.2		CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 — CFO
32.1		Section 302 Certification – CEO
32.2		Section 302 Certification — CFO

-11-

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1.		BASIS OF FINANCIAL STATEMENT PRESENTATION:

		The accompanying unaudited consolidated financial statements of Income Growth Partners, Ltd. X, a California limited partnership, and subsidiaries (the “Partnership”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to those rules and regulations, although the Partnership believes that the disclosures made are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Partnership’s latest audited financial statements for the year ended December 31, 2002 filed on Form 10-KSB.

		The accompanying unaudited consolidated financial statements have not been audited by independent public accountants, but include all adjustments (consisting of normal recurring adjustments) which are, in the opinion of the general partners, necessary for a fair presentation of the financial condition, results of operations and cash flows for the periods presented. However, these results are not necessarily indicative of results for a full year.

	a.		Critical Accounting Standards

			Rental revenues are recognized at the beginning of each month based on the current occupancy of the apartments. Tenant leases are generally for a minimum term of six months with an option to rent on a month-to-month basis.

			Land, buildings, and improvements are recorded at cost. Buildings and improvements are depreciated using the straight-line method over the estimated useful lives of 27.5 and 5 to 15 years, respectively. Expenditures for maintenance and repairs are charged to expense as incurred. Significant renovations are capitalized and depreciated over the remaining life of the property. The Partnership assesses its property for impairment whenever events or changes in circumstances indicate that the carrying amount of the property may not be recoverable. Recoverability of property to be held and used is measured by a comparison of the carrying amount of the property to future undiscounted net cash flows expected to be generated by the property. If the property is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property exceeds the fair value of the property. The cost and related accumulated depreciation of real estate are removed from the accounts upon disposition. Gains and losses arising from the dispositions are reported as income or expense.

	b.		Liquidity and Capital Resources:

			Since inception, the Partnership’s operating and debt service obligations have been financed through the sale of Partnership Units, cash provided by operating activities, and 1995 debt restructuring activities. During the nine months ended September 30, 2003, all of the Partnership’s operating and debt service cash requirements have been met through cash generated from operations.

			The Mission Park mortgage was refinanced in December 1995 at a fixed interest rate of 7.76%. The Shadowridge Meadows mortgage was refinanced in October 1997 at a fixed interest rate of 7.49%.

			In the event that one or more of the properties is unable to support its debt service and the Partnership is unable to cover operational shortfalls from cash reserves, the Partnership may have to take one or more alternative courses of action. The general partners would then determine, based on their analysis of relevant economic conditions and the status of the properties, a course of action intended to be consistent with the best interests of the Partnership. Possible courses of action might include the sacrifice, sale or refinancing of one or more of the properties, the entry into one or more joint venture partnerships with other entities, or the filing of another bankruptcy petition.

			Net cash provided by operating activities for the nine months ended September 30, 2003 was approximately $1,404,000 compared to approximately $1,132,000 for the same period in 2002. The principal reason for this increase can be attributed to an increase in accounts payable and net income for the period.

			Net cash used in investing activities for the nine months ended September 30, 2003 was approximately $298,000 compared to approximately $417,000 for the same period in 2002. The principal reason for this decrease was a decrease in capital expenditures.

			Net cash used in financing activities for the nine months ended September 30, 2003 was approximately $929,000 compared to approximately $790,000 for the same period in 2002. The principal reason for this increase was an increase in principal payments under Mortgage Debt and an increase in distributions to investors.

	b.		Liquidity and Capital Resources – (Continued):

			In October, 2001 the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 establishes a single accounting model, based on the framework established in SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of ”, for long-lived assets to be disposed of by sale, and resolves significant implementation issues related to SFAS No. 121. The adoption of this statement had no material impact on the Company’s financial statements.

			In April 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 rescinds SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt,” and an amendment of that SFAS, SFAS No. 64, “Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements.” SFAS No. 145 also rescinds SFAS No. 44, “Accounting for Intangible Assets of Motor Carriers.” Further, SFAS No. 145 amends SFAS No. 13, “Accounting for Leases,” to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS No. 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or described their applicability under changed conditions. This pronouncement requires gains and losses from extinguishment of debt to be classified as an extraordinary item only if the criteria in Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” have been met. Further, lease modifications with economic effects similar to sale-leaseback transactions must be accounted for in the same manner as sale-leaseback transactions. The provisions of SFAS No. 145 related to the rescission of SFAS No. 4 shall be applied in fiscal years beginning after May 15, 2002. The provisions of SFAS No. 145 related to Statement 13 shall be effective for transactions occurring after May 15, 2002, with early application encouraged. The adoption of SFAS No. 145 did not have a material impact on the Company’s consolidated financial position or results of operations for the nine months ended September 30, 2003.

			In May 2003, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of this Statement is not expected to have a material effect on the consolidated financial statements.

	c.		Results of Operations:

			COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2003 TO THE THREE MONTHS ENDED SEPTEMBER 30, 2002.

			Rental revenue for the three months ended September 30, 2003 was approximately $1,480,000, an increase of 3.35% over rents of approximately $1,432,000 for the comparable period in 2002. The increase is primarily attributable to an increase in monthly tenant rental rates and steady average occupancy rates.

			Operating expenses for the three months ended September 30, 2003 were approximately $683,000, an increase of 3.96 % over operating expenses of approximately $657,000 for the comparable period in 2002. The increase is primarily attributable to an increase in property maintenance costs and in partnership expenses.

			COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2003 TO THE NINE MONTHS ENDED SEPTEMBER 30, 2002.

			Rental revenue for the nine months ended September 30, 2003 was approximately $4,213,000, an increase of 3.18% over rents of approximately $4,083,000 for the comparable period in 2002. The increase is primarily attributable to an increase in monthly tenant rental rates and steady average occupancy rates.

			Operating expenses for the nine months ended September 30, 2003 were approximately $2,016,000, an increase of 7.41% over operating expenses of approximately $1,877,000 for the comparable period in 2002. The increase is primarily attributable to an increase in property maintenance and partnership expenses.