As of December 31, 2003, the Partnership's liquid assets consisting of cash and cash equivalents were $18.9 million, an increase of $0.3 million from $18.6 million at December 31, 2002. The change in the Partnership's cash position was primarily due to an increase in net cash flows from operating and financing activities, property acquisitions and dispositions, and distributions to the Partners.
The Partnership's net investment income for the twelve months ended December 31, 2003 was $10.6 million, a decrease of $0.3 million from $10.9 million when compared to the corresponding period in 2002. The decrease is primarily due to increased vacancy within the office portfolio and the loss of income resulting from the sales of the industrial properties in Bolingbrook, Illinois in September 2002 and Salt Lake City, Utah in January 2003. Offsetting these decreases is the $1.9 million lease termination fee received at the retail center located in Roswell, Georgia.
Equity in income of real estate partnership was $0.6 million for 2003, an increase of $0.3 million from $0.3 million in 2002. This increase is due to an increase in revenue associated with expansion of the existing grocery store anchor that was completed during the second quarter.
Interest on short-term investments decreased approximately $0.2 million or 38.1% for the twelve months ended December 31, 2003 due primarily to lower interest rates.
Interest expense increased $0.6 million, or 28.5%, in 2003 compared to 2002. This increase was primarily due to the Partnership's assumption of a $7.4 million mortgage loan in conjunction with the acquisition of a controlling interest in a retail center located in Ocean City, Maryland in late 2002 and the financing of an $8.8 million note placed on the apartment investment located in Raleigh, North Carolina on June 27, 2003.
Minority interest expense decreased $0.1 million, or 37.0%, in 2003 compared to 2002. This decrease was primarily due to the Partnership's buyout of its minority partner's interest in the retail center located in Hampton, Virginia on April 15, 2003.
Net investment income from property operations for the office sector decreased approximately $2.8 million, or 57.8%, for the twelve months ended December 31, 2003 when compared to the corresponding period in 2002 primarily due to increased vacancy and weak market fundamentals.
As of December 31, 2003 all vacant spaces were being marketed.
The apartment complexes owned by the Partnership experienced a net unrealized loss of $0.1 million for the twelve months ended December 31, 2003 compared to a net unrealized loss of $0.9 million for the twelve months ended December 31, 2002. The unrealized loss for 2003 was mainly attributable to the apartment complex located in Gresham/Salem, Oregon and the apartment complex located in Atlanta, Georgia due to an increase in projected operating expenses and capital expenditures, respectively. Offsetting this loss is the unrealized gain at the apartment complex located in Jacksonville, Florida due to market rent increases.
The apartment complexes owned by the Partnership experienced a net unrealized loss of $0.9 million for the twelve months ended December 31, 2002. These unrealized losses were due to softening market conditions, which have resulted in lower short-term occupancy and income projections, increased rental concessions, and increases in operating expense levels.
The retail properties experienced a net unrealized loss of $0.5 million for the twelve months ended December 31, 2003. The Roswell, Georgia retail center had a decrease in value resulting from the lease termination as previously discussed. The Kansas City, Kansas and Missouri retail center experienced a net unrealized loss primarily due to capital expenditures, which were not reflected as an increase in market value. Offsetting these losses was the gain in value due to strengthening market fundamentals, renovation and re-leasing efforts, and the authorization of the pre-leased expansion at the center located in Ocean City, Maryland.
The Aurora, Colorado industrial property owned by the Partnership experienced a net unrealized loss of approximately $0.6 million for the twelve months ended December 31, 2003 compared to a net unrealized gain of approximately $0.5 million for the twelve months ended December 31, 2002. The unrealized loss experienced in 2003 is due to soft market conditions and capital expenditures at the property that were not reflected as an increase in market value.
As of December 31, 2003, all vacant spaces were being marketed.
Other net investment income decreased $0.04 million during the twelve months ended December 31, 2003 compared to the corresponding period in 2002. Other net investment income includes interest income from short-term investments, investment management fees, and portfolio level expenses.
The Partnership's net investment income for the year ended December 31, 2002 was $10.9 million, a decrease of $1.5 million from $12.4 million when compared to the corresponding period in 2001. The Partnership's liquidation of its investment in REIT stocks during the fourth quarter of 2001 resulted in no dividend income being received in 2002. Additionally, the occupancy at one of the Brentwood, TN properties had decreased to 0% in 2002 from 100% in 2001 due to the move-out of the single tenant.
Interest on short-term investments increased approximately $0.2 million or 53.6% for the year ended December 31, 2002 due primarily to higher average cash balance when compared to the corresponding period in 2001.
The five office properties owned by the Partnership experienced a net unrealized loss of approximately $0.8 million during the twelve months of 2001. One of the Brentwood, Tennessee properties experienced a net unrealized loss of approximately $0.7 million primarily due to the near-term expiration and expected move-out of the single tenant at the property in July 2002. The Beaverton, Oregon and the Lisle, Illinois office properties experienced a net unrealized loss of approximately $0.4 million and $0.2 million, respectively, primarily due to softening market conditions. Offsetting these unrealized losses was an unrealized gain of approximately $0.6 million at the office property located in Oakbrook Terrace, Illinois. This unrealized gain was attributable to the signing of two new leases, which brought the leased area from 55% to 79%.
Occupancy at one of the Brentwood, Tennessee office properties increased from 74% at December 31, 2001 to 78% at December 31, 2002. The other Brentwood, Tennessee office property decreased from 100% at December 31, 2001 to 0% at December 31, 2002. Occupancy at the Lisle, Illinois and Beaverton, Oregon office properties remained unchanged at 100% at December 31, 2001 and 2002. Occupancy at the Oakbrook Terrace, Illinois office decreased from 79% at December 31, 2001 to 27% at December 31, 2002. As of December 31, 2002 all vacant spaces were being marketed.
Net investment income from property operations for the apartment sector was $3.1 million for the year ended December 31, 2002, a decrease of $0.6 million, or 17.3%, when compared to the corresponding period in 2001. These decreases were primarily due to a decrease in average occupancy at the Atlanta, Georgia apartment complex. Average occupancy for the Atlanta, Georgia apartment complex was 90% and 83% for the years ended December 31, 2001 and 2002, respectively. Additionally, rental concessions were made with a goal attracting and retaining occupants, thus resulting in lower revenue at all the apartment complexes.
The apartment complexes owned by the Partnership experienced a net unrealized loss of $0.9 million for the year ended December 31, 2002 compared to a net unrealized gain of $0.4 million for the year ended December 31, 2001. Of the unrealized loss experienced in the twelve months of 2002, $1.3 million was experienced at the apartment complex located in Atlanta, Georgia. This unrealized loss was due to softening market conditions. The apartment complex located in Jacksonville, Florida experienced an unrealized loss of $0.2 million due to slightly higher expense estimates and softening market conditions. The apartment portfolio
located in Gresham/Salem, Oregon, also experienced a net unrealized loss of $0.1 million primarily due to increases in operating expense levels and softening market conditions. Offsetting these losses, the apartment complex located in Raleigh, North Carolina experienced an unrealized gain of $0.7 million due to a reduced estimate of rent concessions and a reduction in certain operating expenses.
Occupancy at the Atlanta, Georgia complex increased from 83% at December 31, 2001 to 90% at December 31, 2002. Occupancy at the Raleigh, North Carolina complex increased from 82% at December 31, 2001 to 88% at December 31, 2002. Occupancy at the apartment complex in Jacksonville, Florida increased from 88% at December 31, 2001 to 90% at December 31, 2002. Occupancy at the Gresham and Salem, Oregon apartment complexes decreased from 93% at December 31, 2001 to 92% at December 31, 2002. As of December 31, 2002, all available vacant units were being marketed.
The equity investment experienced a net unrealized loss of $0.6 million and a net unrealized gain of $0.2 million for the years ended December 31, 2002 and 2001, respectively. The unrealized loss of $0.6 million for the year ended December 31, 2002 was primarily due to renovations from the expansion of the existing grocery store anchor that have not been reflected yet in the market value of the property. The unrealized gain of $0.2 million for the twelve months ended December 31, 2001 was primarily due to the addition of a tenant that will provide a substantial amount of income to the center in rent and the addition of new space to house this tenant.
As described above, the estimated market value of real estate and real estate related assets is determined through an appraisal process. These estimated market values may vary significantly from the prices at which the real estate investments would sell since market prices of real estate investments can only be determined by negotiation between a willing buyer and seller. Although the estimated market values represent subjective estimates, management believes these estimated market values are reasonable approximations of market prices and the aggregate value of investments in real estate is fairly presented as of December 31, 2003 and December 31, 2002.