10-Q 1 sli.txt SLI UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2004 or [ ] 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 0-14569 SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) Maryland 04-2848939 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 (Registrant's telephone number) Check 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___ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ___ No X_ PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEETS (in thousands, except unit data)

SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per unit data)

SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands, except unit data)

SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)

SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements of Springhill Lake Investors Limited Partnership (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of AIMCO/Springhill Lake Investors GP, LLC ("AIMCO LLC"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2003. The Managing General Partner is a wholly owned subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. On December 11, 2003, AIMCO Properties, L.P., a Delaware limited partnership, entered into a Redemption and Contribution Agreement (the "Redemption and Contribution Agreement") with First Winthrop Corporation, a Delaware corporation ("FWC") and the sole shareholder of Three Winthrop Properties, Inc. ("Winthrop"), the former managing general partner of the Partnership, with respect to the acquisition of its general partner interest in the Partnership (the "MGP Interest") by an affiliate of AIMCO Properties, L.P., the operating partnership of AIMCO. As of the time of the execution of the Redemption and Contribution Agreement and until such time as the transfer of the MGP Interest from Winthrop to AIMCO LLC was effective, NHP Management Company ("NHP"), an affiliate of AIMCO Properties, L.P., was vested with the authority to, subject to certain limitations, cause Winthrop to take such actions as it deems necessary and advisable in connection with the activities of the Partnership. The transfer of the MGP Interest from Winthrop to AIMCO LLC became effective on March 31, 2004. As used herein, the term "Managing General Partner" shall mean Winthrop, with respect to matters occurring prior to March 31, 2004 and AIMCO LLC for matters occurring from and after March 31, 2004. The accompanying consolidated financial statements include the accounts of the Partnership and the operating partnerships. Theodore N. Lerner's ownership in the operating partnerships has been reflected as a minority interest in the accompanying consolidated financial statements. All significant interpartnership accounts and transactions have been eliminated in consolidation. Reclassifications: Certain reclassifications have been made to the 2003 balances to conform to the 2004 presentation. Note B - Transactions with Affiliated Parties The Partnership has no employees and is dependent on the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Limited Partnership Agreement provides for (i) certain payments to affiliates for services, (ii) reimbursements of certain expenses incurred by affiliates on behalf of the Partnership, (iii) an annual asset management fee of $100,000 and (iv) an annual administration fee of $10,000. Affiliates of the Managing General Partner are entitled to receive 3% of residential rent collections and 5% of commercial income from the Partnership's property as compensation for providing property management services. The Partnership paid to such affiliates approximately $479,000 and $469,000 for the six months ended June 30, 2004 and 2003, respectively, which is included in operating expenses. An affiliate of the Managing General Partner charged the Partnership reimbursement of accountable administrative expenses amounting to approximately $210,000 and $219,000 for the six months ended June 30, 2004 and 2003, respectively, which is included in general and administrative expenses. In accordance with the Partnership Agreement, the Managing General Partner earned approximately $50,000 in asset management fees and approximately $5,000 in administrative fees for both the six month periods ended June 30, 2004 and 2003. These fees are included in general and administrative expenses. At December 31, 2002, the Partnership owed advances of approximately $156,000 to an affiliate of the Managing General Partner. The advance was repaid in January 2003 with interest charged at prime plus 2% which amounted to less than $1,000 for the six months ended June 30, 2003. There were no advances owed at June 30, 2004. The Partnership insures its property up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers' compensation, property casualty and vehicle liability. The Partnership insures its property above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the six months ended June 30, 2004 and 2003, the Partnership was charged by AIMCO and its affiliates approximately $180,000 and $273,000, respectively, for insurance coverage and fees associated with policy claims administration. Note C - Casualty Gain During September 2003, Hurricane Isabel caused damages to some of the apartment buildings at the property. During the six months ended June 30, 2004, all work was completed to repair the damage and the property recorded a casualty gain of approximately $31,000. The gain was the result of the receipt of insurance proceeds of approximately $38,000 offset by approximately $7,000 of undepreciated damaged assets being written off. During March 2002, a fire occurred at Springhill Lake Apartments which resulted in damage to eleven units at the property. During the six months ended June 30, 2003, all work was completed to repair the damage and the property recorded a casualty gain of approximately $83,000. The gain was the result of the receipt of insurance proceeds of approximately $104,000 offset by approximately $21,000 of undepreciated damaged assets being written off. Note D - Minority Interest The limited partnership interest of Theodore N. Lerner in the operating partnerships is reflected as a minority interest in the accompanying consolidated financial statements. Minority interest in net earnings of the operating partnerships recorded by the Partnership totaled approximately zero for the six months ended June 30, 2004 and 2003. During the six months ended June 30, 2004 and 2003, the Partnership did not recognize any minority interest in net earnings of the operating partnerships as previous distributions to the minority partner during 2002 reduced the minority interest partner's interest balance to zero. For the six months ended June 30, 2003, distributions to the minority interest partner of approximately $985,000 were made in excess of the minority partner's investment in the operating partnerships. When the operating partnerships make distributions in excess of the minority partner's investment balance, the Partnership, as the majority partner, records a charge equal to the minority partner's excess distribution over the investment balance. The charge is classified as distributions to the minority interest partner in excess of investment on the accompanying consolidated statements of operations. Cumulative distributions to the minority partner in excess of investment totaled approximately $2,083,000 at June 30, 2004. No income is allocated to the minority partner until all previous losses recognized by the majority partner are recovered. For the six months ended June 30, 2004 and 2003, approximately $578,000 and $527,000, respectively, in earnings were allocated to the majority partner to recover previous losses recognized. Earnings will continue to be allocated to the majority partner to recover previous losses recognized until such time as the net amount of approximately $438,000 at June 30, 2004 is recovered. Note E - Subsequent Event On July 22, 2004, the Partnership refinanced the mortgage encumbering Springhill Lake Apartments. The new mortgage of $113,500,000 replaced existing mortgage indebtedness of approximately $109,007,000. The new mortgage bears interest at a variable rate and has a balloon payment of $113,500,000 due on August 1, 2011. The interest rate on the variable rate loan is the Fannie Mae discounted mortgage-backed security index plus 65 basis points. The rate was 1.25% at July 22, 2004. After repayment of the existing mortgage, payment of closing costs, and funding of a $675,000 repair escrow account and operating reserves, the Partnership received net proceeds of approximately $3,969,000. The Partnership also received a refund of approximately $7,085,000 relating to the repair escrow required by the previous lender. Total capitalized loan costs associated with this refinancing were approximately $85,000 during the six months ended June 30, 2004 with approximately $437,000 of additional loan costs incurred at closing. The Partnership expects to recognize a loss on the early extinguishment of debt of approximately $1,377,000 due to the write off of unamortized loan costs during the period ending September 30, 2004. Note F - Contingencies On August 8, 2003 AIMCO Properties L.P., an affiliate of the Managing General Partner, was served with a complaint in the United States District Court, District of Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. On March 5, 2004 Plaintiffs filed an amended complaint also naming NHP Management Company, which is also an affiliate of the Managing General Partner. The complaint is styled as a Collective Action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, the complaint alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call". The defendants have filed an answer to the amended complaint denying the substantive allegations. Some discovery has taken place and settlement negotiations continue. Although the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome will have a material adverse effect on its financial condition or results of operations taken as a whole. Similarly, the Managing General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership's financial condition or results of operations taken as a whole. The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment property that are not of a routine nature arising in the ordinary course of business. As previously disclosed, the Central Regional Office of the United States Securities and Exchange Commission is conducting an investigation relating to certain matters. AIMCO believes the areas of investigation include AIMCO's miscalculated monthly net rental income figures in third quarter 2003, forecasted guidance, accounts payable, rent concessions, vendor rebates, and capitalization of expenses and payroll. AIMCO is cooperating fully. AIMCO does not believe that the ultimate outcome will have a material adverse effect on its consolidated financial condition or results of operations taken as a whole. Similarly, the Managing General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership's consolidated financial condition or results of operations taken as a whole. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The matters discussed in this report contain certain forward-looking statements, including, without limitation, statements regarding future financial performance and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors including, without limitation: national and local economic conditions; the terms of governmental regulations that affect the Registrant and interpretations of those regulations; the competitive environment in which the Registrant operates; financing risks, including the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets; litigation, including costs associated with prosecuting and defending claims and any adverse outcomes, and possible environmental liabilities. Readers should carefully review the Registrant's financial statements and the notes thereto, as well as the risk factors described in the documents the Registrant files from time to time with the Securities and Exchange Commission. The Partnership's sole asset is a 2,899 unit apartment complex, which consists of apartment and townhouse units and a four-store shopping center, known as Springhill Lake Apartments located in Greenbelt, Maryland. Average occupancy for each of the six months ended June 30, 2004 and 2003 was 95%. The Partnership's financial results are dependent upon a number of factors including the ability to attract and maintain tenants at the investment property, interest rates on mortgage loans, costs incurred to operate the investment property, general economic conditions and weather. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of its investment property to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the Managing General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, the Managing General Partner may use rental concessions and rental rate reductions to offset softening market conditions, accordingly, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Further, a number of factors which are outside the control of the Partnership such as the local economic climate and weather can adversely or positively impact the Partnership's financial results. Results of Operations The Partnership's net income for the six months ended June 30, 2004 was approximately $3,051,000 compared to approximately $1,668,000 for the corresponding period in 2003. Income before minority interest for the six months ended June 30, 2004 was approximately $3,051,000 compared to approximately $2,653,000 for the corresponding period in 2003. The increase in income before minority interest for the six months ended June 30, 2004 is primarily due to a decrease in total expenses and an increase in total revenues. The increase in total revenues is due to an increase in rental and other income partially offset by a decrease in casualty gain. Rental income increased due to a slight increase in the average rental rate at the Partnership's investment property. Other income increased due to an increase in reimbursements for legal costs charged to tenants and lease cancellation fees at Springhill Lake Apartments. During September 2003, Hurricane Isabel caused damages to some of the apartment buildings at the property. During the six months ended June 30, 2004, all work was completed to repair the damage and the property recorded a casualty gain of approximately $31,000. The gain was the result of the receipt of insurance proceeds of approximately $38,000 offset by approximately $7,000 of undepreciated damaged assets being written off. During March 2002, a fire occurred at Springhill Lake Apartments which resulted in damage to eleven units at the property. During the six months ended June 30, 2003, all work was completed to repair the damage and the property recorded a casualty gain of approximately $83,000. The gain was the result of the receipt of insurance proceeds of approximately $104,000 offset by approximately $21,000 of undepreciated damaged assets being written off. Total expenses for the six months ended June 30, 2004 decreased due to decreases in general and administrative, depreciation, bad debt and interest expenses offset slightly by an increase in property tax expense. Operating expense remained relatively constant between the comparable periods. General and administrative expenses decreased due to a decrease in accountable reimbursements charged to the Partnership by an affiliate of the Managing General Partner in accordance with the Partnership Agreement. Depreciation expense decreased due to certain property improvements and replacements becoming fully depreciated during the past twelve months which more than offset depreciation on new improvements and replacements. Bad debt expense decreased due to increased collections from evicted tenants. Interest expense decreased due to the payment of scheduled principal payments on the mortgage encumbering the Partnership's investment property, which has reduced the average outstanding balance over the past twelve months. Property tax expense increased due to an increased tax rate by the local taxing authority. The Partnership's net income for the three months ended June 30, 2004 was approximately $1,629,000 compared to approximately $1,422,000 for the corresponding period in 2003. Income before minority interest for the three months ended June 30, 2004 was approximately $1,629,000 compared to approximately $1,725,000 for the corresponding period in 2003. The decrease in income before minority interest for the three months ended June 30, 2004 is primarily due to an increase in total expenses partially offset by an increase in total revenues. The increase in total revenues for the three months ended June 30, 2004 is due to an increase in rental and other income and a casualty gain, all as discussed above, for the six months ended June 30, 2004. Total expenses for the three months ended June 30, 2004 increased due to an increase in operating, general and administrative and property tax expenses partially offset by decreases in depreciation, interest and bad debt expenses. Operating expense increased due to an increase in utilities, especially natural gas, and salaries and related employee benefits. General and administrative expense increased due to an increase in accountable reimbursements charged to the Partnership by an affiliate of the Managing General Partner in accordance with the Partnership Agreement. The increase in property tax expense and the decrease in depreciation, interest and bad debt expenses are the same, as discussed above, for the six months ended June 30, 2004. Included in general and administrative expenses are reimbursements to the Managing General Partner as allowed under the Partnership Agreement associated with its management of the Partnership. Costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement are also included in general and administrative expenses. The limited partnership interest of Theodore N. Lerner in the operating partnerships is reflected as a minority interest in the accompanying consolidated financial statements. Minority interest in net earnings of the operating partnerships recorded by the Partnership totaled approximately zero for the six months ended June 30, 2004 and 2003. During the six months ended June 30, 2004 and 2003, the Partnership did not recognize any minority interest in net earnings of the operating partnerships as previous distributions to the minority partner during 2002 reduced the minority interest partner's interest balance to zero. For the six months ended June 30, 2003, distributions to the minority interest partner of approximately $985,000 were made in excess of the minority partner's investment in the operating partnerships. When the operating partnerships make distributions in excess of the minority partner's investment balance, the Partnership, as the majority partner, records a charge equal to the minority partner's excess distribution over the investment balance. The charge is classified as distributions to the minority interest partner in excess of investment on the accompanying consolidated statements of operations. Cumulative distributions to the minority partner in excess of investment totaled approximately $2,083,000 at June 30, 2004. No income is allocated to the minority partner until all previous losses recognized by the majority partner are recovered. For the six months ended June 30, 2004 and 2003, approximately $578,000 and $527,000, respectively, in earnings were allocated to the majority partner to recover previous losses recognized. Earnings will continue to be allocated to the majority partner to recover previous losses recognized until such time as the net amount of approximately $438,000 at June 30, 2004 is recovered. Liquidity and Capital Resources At June 30, 2004, the Partnership had cash and cash equivalents of approximately $8,065,000 as compared to approximately $710,000 at June 30, 2003. Cash and cash equivalents increased approximately $2,871,000 from December 31, 2003 due to approximately $5,840,000 of cash provided by operating activities partially offset by approximately $1,505,000 and $1,464,000 of cash used in investing and financing activities, respectively. Cash used in investing activities consisted of property improvements and replacements and, to a lesser extent, net deposits to restricted escrows partially offset by the receipt of insurance proceeds. Cash used in financing activities consisted of principal payments made on the mortgage encumbering the property and loan costs paid for the July refinancing of the mortgage. The Partnership invests its working capital reserves in interest bearing accounts. The Partnership has invested as a general partner in the operating partnerships, and as such, receives distributions of cash flow from the operating partnerships and is responsible for expenditures consisting of (i) interest payable on the mortgage loan and (ii) fees payable to affiliates of the Managing General Partner. The Managing General Partner believes that funds distributed by the operating partnerships to the Partnership will be sufficient to pay such expenditures. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the property to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, and local legal and regulatory requirements. The Managing General Partner monitors developments in the area of legal and regulatory compliance. For example, the Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance measures with regard to governance, disclosure, audit and other areas. In light of these changes, the Partnership expects that it will incur higher expenses related to compliance, including increased legal and audit fees. Capital improvements planned for the Partnership's property are detailed below. During the six months ended June 30, 2004, the Partnership completed approximately $1,694,000 of capital improvements at Springhill Lake Apartments consisting primarily of structural improvements, appliances, water and sewer upgrades, roof and floor covering replacements and air conditioning upgrades. Approximately $28,000 of these additions were related to a September 2003 casualty mentioned above. These improvements were funded from operations and insurance proceeds. The Partnership evaluates the capital improvement needs of the property during the year and currently expects to complete an additional $1,131,000 in capital improvements during the remainder of 2004. In connection with the November 2002 refinancing of the mortgage encumbering the property an escrow account was created to fund required repairs and improvements. At June 30, 2004, there was approximately $7,085,000 in the escrow account. This escrow account was returned to the Partnership subsequent to June 30, 2004 in connection with the July 2004 refinancing of the Partnership's existing mortgage, see discussion below. Additional improvements may be considered and will depend on the physical condition of the property as well as anticipated cash flow generated by the property. The additional capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that such budgeted capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. The Partnership's assets are thought to be sufficient for any near term needs (exclusive of capital improvements) of the Partnership. The mortgage indebtedness existing at June 30, 2004 of approximately $109,007,000, which had a maturity date of September 2007, was refinanced on July 22, 2004. The new mortgage of $113,500,000 replaced existing mortgage indebtedness of approximately $109,007,000. The new mortgage bears interest at a variable rate and has a balloon payment of $113,500,000 due on August 1, 2011. The interest rate on the variable rate loan is the Fannie Mae discounted mortgage-backed security index plus 65 basis points. The rate was 1.25% at July 22, 2004. After repayment of the existing mortgage, payment of closing costs, and funding of a $675,000 repair escrow account and operating reserves, the Partnership received net proceeds of approximately $3,969,000. The Partnership also received a refund of approximately $7,085,000 relating to the repair escrow required by the previous lender. Total capitalized loan costs associated with this refinancing were approximately $85,000 during the six months ended June 30, 2004 with approximately $437,000 of additional loan costs incurred at closing. The Partnership expects to recognize a loss on the early extinguishment of debt of approximately $1,377,000 due to the write off of unamortized loan costs during the period ending September 30, 2004. The Partnership distributed the following amounts during the six months ended June 30, 2004 and 2003 (in thousands, except per unit data):

Subsequent to June 30, 2004, the Partnership distributed from operations approximately $5,100,000 or $7,465.00 per limited partnership unit. In addition, a distribution of approximately $9,599,000 or $14,647.00 per limited partnership unit from refinancing proceeds was paid subsequent to June 30, 2004. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves, and the timing of the debt maturity, refinancing, and/or property sale. The Partnership's cash available for distribution is reviewed on a monthly basis. There can be no assurance that the Partnership will generate sufficient funds from operations after required capital improvement expenditures to permit any additional distributions to its partners during 2004 or subsequent periods. Other AIMCO and its affiliates owned 521.65 limited partnership units (the "Units") in the Partnership representing 80.38% of the outstanding Units at June 30, 2004. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 80.38% of the outstanding Units, AIMCO and its affiliates are in a position to control all voting decisions with respect to the Partnership. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO, as its sole stockholder. Critical Accounting Policies and Estimates The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States which require the Partnership to make estimates and assumptions. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity. Impairment of Long-Lived Assets The Partnership's investment property is recorded at cost, less accumulated depreciation, unless considered impaired. If events or circumstances indicate that the carrying amount of the property may be impaired, the Partnership will make an assessment of its recoverability by estimating the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the aggregate future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the fair value of the property. Real property investments are subject to varying degrees of risk. Several factors may adversely affect the economic performance and value of the Partnership's investment property. These factors include, but are not limited to, changes in the national, regional and local economic climate; local conditions, such as an oversupply of multifamily properties; competition from other available multifamily property owners and changes in market rental rates. Any adverse changes in these factors could cause impairment of the Partnership's asset. Revenue Recognition The Partnership generally leases apartment units for twelve-month terms or less. Commercial building lease terms are generally for terms of 3 to 10 years or month to month. The Partnership recognizes income attributable to leases monthly as it is earned. The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Any concessions given at the inception of the lease are amortized over the life of the lease. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Partnership is exposed to market risks from adverse changes in interest rates. In this regard, changes in U.S. interest rates affect the interest earned on the Partnership's cash and cash equivalents as well as interest paid on its indebtedness. As a policy, the Partnership does not engage in speculative or leveraged transactions, nor does it hold or issue financial instruments for trading purposes. The Partnership is exposed to changes in interest rates primarily as a result of its borrowing activities used to maintain liquidity and fund business operations. The debt encumbering the property bears interest at a variable rate. Based on interest rates at June 30, 2004, a 100 basis point increase or decrease in market interest rates would affect net income by approximately $1.1 million. The following table summarizes the Partnership's debt obligations at June 30, 2004. Management believes that the fair value of the Partnership's debt approximates its carrying value as of June 30, 2004. Principal amount by expected maturity: Long Term Debt Variable Rate Debt Average Interest Rate (in thousands) 2004 $ 1,385 (1) 2005 2,829 (1) 2006 2,891 (1) 2007 101,902 (1) Total $109,007 (1) Adjustable rate based on Fannie Mae discounted mortgage-backed security index ("DMBS") plus 85 basis points. The rate was 2.11% at June 30, 2004 and resets monthly. The loan was refinanced in July 2004 with the new loan maturity in August 2011. ITEM 4. CONTROLS AND PROCEDURES (a) Disclosure Controls and Procedures. The Partnership's management, with the participation of the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership's principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership's disclosure controls and procedures are effective. (b) Internal Control Over Financial Reporting. There have not been any changes in the Partnership's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On August 8, 2003 AIMCO Properties L.P., an affiliate of the Managing General Partner, was served with a complaint in the United States District Court, District of Columbia alleging that AIMCO Properties L.P. willfully violated the Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. On March 5, 2004 Plaintiffs filed an amended complaint also naming NHP Management Company, which is also an affiliate of the Managing General Partner. The complaint is styled as a Collective Action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. failed to compensate maintenance workers for time that they were required to be "on-call". Additionally, the complaint alleges AIMCO Properties L.P. failed to comply with the FLSA in compensating maintenance workers for time that they worked in responding to a call while "on-call". The defendants have filed an answer to the amended complaint denying the substantive allegations. Some discovery has taken place and settlement negotiations continue. Although the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome will have a material adverse effect on its financial condition or results of operations taken as a whole. Similarly, the Managing General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership's financial condition or results of operations taken as a whole. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On February 3, 2004, the Partnership advised and sought the consent of its limited partners to the replacement of Three Winthrop Properties, Inc., as the general partner of the Partnership with AIMCO/Springhill Lake Investors GP, LLC, a Delaware limited liability company ("AIMCO GP"). In order to effect such substitution, the consent of limited partners holding a majority of the Units was required. Due to the fact that affiliates of AIMCO GP held more than a majority of the Units, AIMCO GP agreed not the consummate the replacement if Limited Partners holding a majority of the Units held by Limited Partners who are not affiliates of the AIMCO GP objected in writing to the replacement. At the close of business on February 23, 2004, the requisite percentage of limited partners had not objected to the proposed transaction. Accordingly, the replacement of Three Winthrop Properties, Inc., by AIMCO GP as the managing general partner of the Partnership, was effected on June 30, 2004. As indicated above, an affiliate of the AIMCO GP has effectively had the right to control the day to day operations of the Partnership since October 1998. Accordingly, the replacement is not expected to have a material effect on the operations of the Partnership. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: See Exhibit Index attached. b) Reports on Form 8-K filed during the quarter ended June 30, 2004: Current Report on Form 8-K dated March 29, 2004 and filed on May 21, 2004 disclosing an agreement in principle with Linnaeus-Lexington Associates Limited Partnership ("Linnaeus") for the transfer of the general partnership interest owned by Linnaeus by AIMCO Properties, L.P. 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. SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP By: AIMCO/Springhill Lake Investors GP,LLC Managing General Partner By: /s/Martha L. Long Martha L. Long Senior Vice President By: /s/Stephen B. Waters Stephen B. Waters Vice President Date: August 13, 2004 Index to Exhibits Exhibit No. Document 3.4 Amended and Restated Limited Partnership Agreement and Certificate of Amendment of Springhill Lake Investors Limited Partnership(1) 3.4 (a) Amendment to Amended and Restated Limited Partnership Agreement of Springhill Lake Investors Limited Partnership dated August 23, 1995 (3) 10 (a) Amended and Restated Limited Partnership Agreement and Certificate of Amendment of First Springhill Lake Limited Partnership (Partnership Agreements of Second - Ninth Springhill Lake Limited Partnerships are substantially identical)(1) (j) Consolidated, Amended and Restated Multifamily Note dated November 1, 2002 between Springhill Lake Investors Limited Partnership and GMAC Commercial Mortgage Corporation (2) (k) Guaranty dated November 1, 2002 by AIMCO Properties, L.P., for the benefit of GMAC Commercial Mortgage Corporation (2) (l) Consolidated, Amended and Restated Payment Guaranty dated November 1, 2002 by the Operating Partnerships (2) (m) Completion/Repair and Security Agreement dated November 1, 2002 between the Operating Partnerships and GMAC Commercial Mortgage Corporation (2) (n) Replacement Reserve and Security Agreement dated November 1, 2002 between the Operating Partnerships and GMAC Commercial Mortgage Corporation (2) (o) Promissory Note dated November 1, 2002 between Springhill Lake Investors Limited Partnership and the Operating Partnerships (2) (p) Maryland Amended and Restated Multifamily Note dated July 22, 2004 between Springhill Lake Investors Limited Partnership and GMAC Commercial Mortgage Corporation (4) (q) Amended and Restated Limited Guaranty dated July 22, 2004 by AIMCO Properties, L.P., for the benefit of GMAC Commercial Mortgage Corporation (4) (r) Amended and Restated Payment Guaranty dated July 22, 2004 by the Operating Partnerships (4) (s) Repair Escrow Agreement dated July 22, 2004 between the Springhill Lake Investors Limited Partnership and the Operating Partnerships and GMAC Commercial Mortgage Corporation (4) (t) Replacement Reserve Agreement dated July 22, 2004 between the Springhill Lake Investors Limited Partnership and the Operating Partnerships and GMAC Commercial Mortgage Corporation (4) (u) Maryland Amended and Restated Promissory Note dated July 22, 2004 between Springhill Lake Investors Limited Partnership and the Operating Partnerships (4) 31.1 Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1) Incorporated herein by reference to the Registrant's Registration Statement on Form 10 dated April 30, 1986, as thereafter amended. (2) Incorporated herein by reference to the Registrant's Current Report on Form 8-K dated November 14, 2002, as filed November 29, 2002. (3) Incorporated herein by reference to the Registrant's Current Report on Form 8-K dated August 23, 1995, as filed September 5, 1995. (4) Incorporated herein by reference to the Registrant's Current Report on Form 8-K dated July 22, 2004, as filed August 04, 2004. Exhibit 31.1 CERTIFICATION I, Martha L. Long, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Springhill Lake Investors Limited Partnership; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 13, 2004 /s/Martha L. Long Martha L. Long Senior Vice President of AIMCO/Springhill Lake Investors GP, LLC, equivalent of the chief executive officer of the Partnership Exhibit 31.2 CERTIFICATION I, Stephen B. Waters, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Springhill Lake Investors Limited Partnership; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 13, 2004 /s/Stephen B. Waters Stephen B. Waters Vice President of AIMCO/Springhill Lake Investors GP, LLC, equivalent of the chief financial officer of the Partnership Exhibit 32.1 Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report on Form 10-Q of Springhill Lake Investors Limited Partnership (the "Partnership"), for the quarterly period ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Martha L. Long, as the equivalent of the Chief Executive Officer of the Partnership, and Stephen B. Waters, as the equivalent of the Chief Financial Officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. /s/Martha L. Long Name: Martha L. Long Date: August 13, 2004 /s/Stephen B. Waters Name: Stephen B. Waters Date: August 13, 2004 This certification is furnished with this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

SPRINGHILL LAKE INVESTORS LTD PARTNERSHIP 10-Q