<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
EXCHANGE ACT
For the transition period from __________________ to ________________
Commission file number 0-26700
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UNION PROPERTY INVESTORS, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 65-0558152
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(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
5200 TOWN CENTER CIRCLE, BOCA RATON FLORIDA 33486
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(Address of principal executive offices)
(407) 394-9388
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(Issuer's Telephone Number, Including Area Code)
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(Former name, former address and former fiscal year,
if changed since last report)
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 past 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
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As of May 9, 1996, 3,789,171 shares of the registrant's common stock, par value
$.01 per share, and 450,000 shares of the registrant's $10.00 redeemable
preferred stock, par value $.01 per share, were outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
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Part I: Financial Information
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Item 1 Financial Statements
UNION PROPERTY INVESTORS, INC
BALANCE SHEET
(UNAUDITED)
MARCH 31, 1996
March 31, 1996
ASSETS --------------
Cash and cash equivalents $ 1,092,716
Accounts receivable 161,128
Due from related party 434,929
Prepaid expenses and other assets 68,736
Property, improvements and equipment, net 49,657,724
Property held for sale, net 718,181
Debt financing costs, net 215,860
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Total assets $ 52,349,274
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LIABILITIES
Mortgages and notes payable $ 30,908,034
Accrued interest 185,456
Accounts payable and accrued expenses 166,426
Due to related party 615,326
Dividend payable to related party 90,000
Current taxes payable 87,000
Deferred income taxes 250,045
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Total liabilities 32,302,287
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COMMITMENTS AND CONTINGENCIES
Redeemable preferred stock $ 4,500,000
STOCKHOLDERS' EQUITY
Common stock: ($.01 par value, 20,000,000 shares
authorized, 3,789,171 issued and outstanding) 37,892
Additional paid-in surplus 15,180,333
Accumulated earnings 328,762
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Total stockholders' equity 15,546,987
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Total liabilities and stockholders' equity $ 52,349,274
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See Accompanying Notes To Financial Statements
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UNION PROPERTY INVESTORS, INC
STATEMENTS OF REVENUES AND EXPENSES
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
March 31, 1996 March 31, 1995
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REVENUES:
Base rents $ 1,799,904 $ 1,835,715
Percentage rents 29,074 0
Other income 36,576 10,710
Expense reimbursements
Real estate taxes 99,533 175,339
Common area maintenance 70,849 52,O78
Insurance 20,599 59,594
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Total revenues 2,056,535 2,133,436
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EXPENSES:
Mortgage interest 615,354 632,334
Depreciation and amortization 410,483 401,950
Asset and management fees to related party 264,173 164,880
Real estate taxes 140,707 156,318
Common area maintenance 138,176 102,886
Insurance 36,748 66,829
General and administrative 49,424 29,376
Other property expense 0 5,182
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Total expenses 1,655,065 1,559,755
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Income before income taxes 401,470 573,681
Provision for income taxes 136,500 195,052
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Net income 264,970 378,629
Distributions on preferred stock 130,000 0
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Net income attributable to common
stockholders $ 134,970 $ 378,629
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Net income per share of common stock $ 0.04 (1)
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Weighted average number of shares of
common stock 3,789,171 (1)
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(1) Historical earnings per share for the three months ended March 31,
1995 has not been included because the Company did not begin operations
until August 4, 1995, and management has determined that historical
earnings per share data for such period would not provide meaningful
information. The other amounts set forth for the three months ended
March 31, 1995 reflect historical amounts relating to the operation of
the UPI Properties prior to the Transfer (as defined in the notes to
the financial statements).
See Accompanying Notes to Financial Statements
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UNION PROPERTY INVESTORS, INC
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
March 31, 1996 March 31, 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net revenues less expenses $ 264,970 $ 378,629
Adjustments to reconcile net revenues
less expenses to net cash provided
by operating activities:
Depreciation and amortization 410,483 401,950
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable (96,279) 53,238
Decrease in prepaid expenses and
other assets 4,857 66,827
Increase in due from related party (28,093) 0
Increase in accrued interest 185,456 0
(Decrease) increase in accounts
payable and accrued expenses (25,575) 135,663
Increase in due to related party 459,398 0
Increase in current taxes payable 87,000 0
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Net cash provided by operating activities 1,262,217 1,036,307
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments on mortgage payable (134,521) (113,021)
Proceeds from notes payable 2,000,000 0
Preferred stock redemption (2,000,000) 0
Payment of dividends (137,797) 0
Distributions to Corporate 0 (923,286)
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Net cash used in financing activities (272,318) (1,036,307)
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NET INCREASE IN CASH 969,899 0
CASH, BEGINNING OF YEAR 102,817 0
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CASH, END OF YEAR $ 1,092,716 $ 0
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CASH PAID FOR
Interest 429,898 632,334
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Taxes 49,500 0
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SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY
Assumption of Cary mortgage $ 0 $ 1,175,000
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See Accompanying Notes To Financial Statements
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UNION PROPERTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying financial statements of Union Property Investors, Inc.
(the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and in accordance with
the instructions to Form 10-QSB and Rule 310(b) of Regulation S-B. 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 management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of the financial statements have
been included herein. The financial statements as of March 31, 1996 and 1995
are unaudited. The financial statements reflecting results of operations for
the interim periods are not necessarily indicative of the results of operations
for the fiscal year. For further information, refer to the financial statements
and footnotes included thereto in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1995.
ORGANIZATION AND BASIS OF PRESENTATION
The Company's common stock, par value $.01 per share (the "Common Stock")
began trading on December 11, 1995 in the "pink sheets" in the over-the-counter
market and on the OTC Bulletin Board. The Common Stock has traded under the
symbol "UPIC" since such date. Prior to such date, there was no public market
for the Common Stock.
On August 4, 1995 and October 30, 1995, Milestone Properties, Inc.
("Milestone") transferred to the Company five and eleven retail properties (the
"Transfer"), respectively (collectively, the "UPI Properties"). On November 20,
1995, the Company was spun-off from Milestone upon the distribution by Milestone
(the "Distribution") of all the outstanding shares of the Common Stock, par
value $.01 per share to Milestone's common stockholders of record as of October
31, 1995, on a share-for-share basis and for no consideration. The Transfer has
been accounted for in a manner similar to that in a pooling of interest
accounting. Therefore, the UPI Properties were reflected at the historical cost
basis of Milestone.
Prior to August 4, 1995, the Company had no operations and, as such, the
Statement of Revenues and Expenses for the period ended March 31, 1995 (the
"Statement") consists of historical revenue and expense amounts relating to the
operation of the UPI Properties prior to the Transfer ("Historical Amounts").
The Statement gives effect to (1) an allocation to the Company of a portion of
the salaries of Milestone's officers and general and administrative expenses
related to Milestone's corporate office, and (2) an allocation of Milestone's
income taxes associated with the Historical Amounts that the Company would have
incurred on a stand-alone basis.
The Statement of Revenues and Expenses for the period ended March 31, 1996
are based on the Company's actual results of operations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION.
GENERAL
Union Property Investors, Inc. (the "Company") is in the business of
acquiring, owning and developing real estate. Currently, the Company's
operations consist of the ownership of sixteen retail properties (the "UPI
Properties").
The Company is exploring alternatives to enable it to qualify for treatment
as a Real Estate Investment Trust ("REIT") or to sell the Company's common
stock, par value $.01 per share (the "Common Stock"), or assets to, or merge
with, a REIT, to enhance Common Stockholder value and, to the extent it would be
beneficial to the Company's strategy to attain REIT qualification, to explore
opportunities for the acquisition of additional REIT qualified assets,
particularly income-producing properties. The Company can not currently satisfy
all of the requirements for qualification as a REIT.
Information regarding the requirements the Company would need to satisfy to
qualify as a REIT and, if qualified and elected, to maintain REIT status, is set
forth in the Company's Registration Statement on Form 10-SB, filed with the
Securities and Exchange Commission on August 31, 1995, as amended, to which
reference is hereby made.
The Company entered into an agreement with LSG Advisors, a division of
Societe Generale Securities Corporation ("LSG"), on February 5, 1996 (the "LSG
Agreement"), under which it has retained LSG to act as the Company's exclusive
financial advisor in connection with the Company's qualification as a REIT or
possible sale or merger transaction with or to a REIT. The LSG Agreement is
terminable by either the Company or LSG after August 5, 1996. If, during the
period LSG is retained by the Company or within six months thereafter, (i) the
Company consummates a sale or merger transaction or enters into a definitive
agreement with any third party which subsequently results in a sale or merger
transaction and (ii) LSG identified, advised the Company with respect to, or had
discussions regarding such sale or merger transaction, LSG will be entitled to a
transaction fee equal to 1.75% of the aggregate purchase consideration of such
sale or merger.
Substantially all of the Company's income is currently being used to pay
principal and interest expenses on the mortgages underlying the UPI Properties
and to pay to Milestone Properties, Inc. ("Milestone"), which spun-off the
Company in November 1995, (a) certain fees for administrative and property
management services and (b) dividends and the redemption price relating to the
Company's preferred stock, par value $.01 per share and $10 per share redemption
value and liquidation preference (the "Preferred Stock"). Therefore, while the
Company will have enough cash to operate and own the UPI Properties in 1996, the
Company will likely be required to borrow to acquire additional assets. The
Company may also seek, from time to time, to dispose of properties.
The Company is also exploring other financing opportunities, including
financing and refinancing certain of the UPI Properties.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995
Revenues of the Company decreased by $76,901, or 3.60%, to $2,056,535 for
the three months ended March 31, 1996, from $2,133,436 for the three months
ended March 31, 1995, primarily due to a decrease in expense reimbursements of
approximately $96,000 due to lower real estate tax expense and insurance
expense.
Operating expenses of the Company increased by $103,757, or 19.75%, to
$629,228 for the three months ended March 31, 1996, from $525,471 for the three
months ended March 31, 1995, primarily due to the net effect of (1) an increase
in common area maintenance expenses of approximately $35,000 due to increased
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snow removal costs incurred in 1996, (2) an increase in related party management
fees of approximately $99,000 due to a change in the calculation of such fees in
1996, and (3) decreases in real estate tax expense and insurance expense of
approximately $46,000 due to lower tax assessments and/or lower tax rates and a
lower insurance premium in 1996, respectively.
Interest expense decreased $16,980, or 2.69%, to $615,354 for the three
months ended March 31, 1996, from $632,334 for the three months ended March 31,
1995 primarily due to principal reductions on the property mortgages.
Depreciation and amortization increased $8,533, or 2.12%, to $410,483 for
the three months ended March 31, 1996, from $401,950 for the three months ended
March 31, 1995, primarily due to minor property improvements incurred during
1995.
LIQUIDITY AND CAPITAL RESOURCES
The primary source of capital to fund the Company's real estate acquisition
and development activities is expected to be obtained from the financing and
refinancing of the UPI Properties, commercial credit lines, and from third-party
institutional mortgages and purchase money mortgages provided by sellers
obtained in connection with specific acquisitions. The Company is actively
seeking commitments for such funding.
The Company has a $3,000,000 line of credit with First Union National Bank
of Florida with borrowing to bear interest, at the option of the Company, at
either prime plus .25% or LIBOR plus 2.2%. The line of credit, which was
obtained by Milestone in February 1995 and assigned to the Company in November
1995, has an 18-month term which may be extended and is secured by a first
mortgage encumbering one of the UPI Properties located in Morganton, North
Carolina. As of March 31, 1996, the Company had borrowed $2,000,000 which was
then outstanding under such line of credit.
The Company's existing borrowings and the encumbrances on the UPI
Properties securing those borrowings may inhibit the Company or result in
increased costs in connection with the Company's ability to incur future
indebtedness and/or raise substantial equity capital in the marketplace.
The Company expects to meet its short term financing needs with cash
generated from the operation of the UPI Properties and funds available under its
$3,000,000 line of credit with First Union National Bank. Management is not
aware of any trends or events, commitments or uncertainties that will impact
liquidity in a material way.
CASH FLOW
Net cash provided by operating activities of $1,262,217 for the three
months ended March 31, 1996 is comprised of (1) net income of $264,970, (2)
adjustments to net income of $410,483 for depreciation and amortization expense,
and (3) a change in operating assets and liabilities of $586,764. Net cash
provided by operating activities of $1,036,307 for the three months ended March
31, 1995 was comprised of (1) net income of $378,629, (2) adjustments to net
income of $401,950 for depreciation and amortization expense, and (3) a change
of $255,728 in operating assets and liabilities.
<PAGE>
Net cash used in financing activities of $272,318 for the three months
ended March 31, 1996 is comprised of (1) principle repayments on mortgage
payable of $134,521, (2) proceeds from notes payable of $2,000,000, (3)
Preferred Stock redemption payment of $2,000,000, and (4) payment of Preferred
Stock dividends of $137,797. Net cash used in financing activities of
$1,036,307 for the three months ended March 31, 1995 was comprised of (1)
principle repayments of $113,021 on mortgage payable and (2) net distributions
of $923,286 to various corporate accounts of Milestone.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any legal proceedings. An action was
commenced on January 30, 1996 in the Court of Chancery in the State of Delaware
against Milestone, its Board of Directors and Concord Assets Group, Inc.
("Concord"). The Company was a wholly-owned subsidiary of Milestone until
November 1995, and Milestone currently owns all of the Company's outstanding
Preferred Stock. Concord, together with its affiliates, owns approximately 75%
of the Common Stock, and its executive officers and directors are also executive
officers and directors of the Company and Milestone. In the action, the
plaintiff, a preferred stockholder of Milestone purporting to bring the action
on behalf of himself and other preferred stockholders of Milestone, is seeking,
among other things, damages from Milestone and rescission of (1) Milestone's
transfer of sixteen of its retail properties to the Company in October 1995 and
(2) Milestone's distribution on a share-for-share basis and for no consideration
of all of the shares of the Common Stock to Milestone's common stockholders in
November 1995. Milestone has moved to dismiss the complaint.
ITEM 5. OTHER INFORMATION.
On March 21, 1996, the Company borrowed $2,000,000 under its line of credit
with First Union National Bank of Florida to pay for the redemption on March 22,
1996 of 200,000 shares of the Preferred Stock owned by Milestone at $10.00 per
share plus an amount equal to the accrued and unpaid dividends thereon for a
total redemption price of approximately $2,040,000. As a result of such
redemption, the dividend rate on the Preferred Stock as of January 1, 1996 is
currently 8% per annum.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the quarter for which this report
is being filed.
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SIGNATURES
In accordance with 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.
UNION PROPERTY INVESTORS, INC.
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(Registrant)
Date: May 13, 1996 /s/ Robert A. Mandor
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Robert A. Mandor
President and Chief Financial Officer
Date: May 13, 1996 /s/ Joan LeVine
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Joan LeVine
Senior Vice President, Treasurer
and Controller
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,092,716
<SECURITIES> 0
<RECEIVABLES> 596,057
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 59,652,073
<DEPRECIATION> 9,276,168
<TOTAL-ASSETS> 52,349,274
<CURRENT-LIABILITIES> 0
<BONDS> 0
4,500,000
0
<COMMON> 37,892
<OTHER-SE> 15,509,095
<TOTAL-LIABILITY-AND-EQUITY> 52,349,224
<SALES> 0
<TOTAL-REVENUES> 2,050,535
<CGS> 0
<TOTAL-COSTS> 1,039,711
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 615,354
<INCOME-PRETAX> 401,470
<INCOME-TAX> 136,500
<INCOME-CONTINUING> 264,970
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 134,920
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0
</TABLE>
