<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 June 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
EXCHANGE ACT
For the transition period from __________________ to _________________
Commission file number 0-26700
UNION PROPERTY INVESTORS, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 65-0558152
(State or Other Jurisdiction (I.R.S. Employer Identification Number)
of Incorporation or Organization)
5200 TOWN CENTER CIRCLE, BOCA RATON FLORIDA 33486
(Address of principal executive offices)
(561) 394-9388
(Issuer'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 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____
As of August 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
<PAGE>
Part I: Financial Information
Item 1. Financial Statements
UNION PROPERTY INVESTORS, INC.
BALANCE SHEET
(Unaudited)
June 30, 1996
June 30, 1996
-------------
Assets
Cash and cash equivalents $ 1,024,538
Accounts receivable 190,268
Due from related party 455,901
Prepaid expenses and other assets 72,648
Property, improvements and equipment, net 49,289,787
Property held for sale, net 711,803
Debt financing costs, net 209,768
-----------
Total assets $51,954,713
===========
Liabilities
Mortgages and notes payable $30,727,179
Accrued interest 182,291
Accounts payable and accrued expenses 197,301
Due to related party 191,130
Dividend payable to related party 90,000
Current taxes payable 179,763
Deferred income taxes 250,045
-----------
Total liabilities 31,817,709
===========
Commitments and contingencies
Redeemable preferred stock 4,500,000
Stockholders' equity
Common stock: ($.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 418,779
-----------
Total stockholders' equity 15,637,004
-----------
Total liabilities and stockholders' equity $51,954,713
===========
See Accompanying Notes to Financial Statements
<PAGE>
UNION PROPERTY INVESTORS, INC.
STATEMENTS OF REVENUES AND EXPENSES
(Unaudited)
For the Three Months Ended June 30, 1996 and 1995
June 30, 1996 June 30, 1995
------------- -------------
Revenues:
Base rents $1,843,898 $1,696,693
Percentage rents 19,910 25,676
Other income 9,750 8,985
Expense reimbursements:
Real estate taxes 94,065 94,133
Common area maintenance 49,139 79,278
Insurance 26,065 27,936
---------- ----------
Total revenues 2,042,827 1,932,701
---------- ----------
Expenses:
Mortgage interest 653,221 630,269
Depreciation and amortization 413,520 405,315
Asset and management fees to related party 347,568 183,635
Real estate taxes 120,763 132,656
Common area maintenance 93,929 84,159
Insurance 38,085 66,774
Professional fees 92,622 28,732
---------- ----------
Total expenses 1,759,708 1,531,540
---------- ----------
Income before income taxes 283,119 401,161
Professional fees 103,106 136,395
----------- ----------
Net income 180,013 264,766
Distributions on preferred stock 90,000 0
---------- ----------
Net income attributable to common
stockholders $ 90,013 $264,766
========== ========
Net income per share of common stock $ 0.02 (1)
==========
Weighted average number of shares of
common stock 3,789,171 (1)
==========
(1) Historical earnings per share for the three months ended June 30, 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 June 30, 1995 reflect historical amounts
relating to the operations of the UPI Properties prior to the Transfer (as
defined in the notes to the financial statements).
See Accompanying Notes to Financial Statements
2
<PAGE>
UNION PROPERTY INVESTORS, INC.
STATEMENTS OF REVENUES AND EXPENSES
(Unaudited)
For the Six Months Ended June 30, 1996 and 1995
June 30, 1996 June 30, 1995
------------- -------------
Revenues:
Base rents $3,643,802 $3,532,408
Percentage rents 48,984 25,676
Other income 46,326 19,695
Expense reimbursements:
Real estate taxes 193,598 269,472
Common area maintenance 119,988 131,356
Insurance 46,664 87,530
----------- ----------
Total revenues 4,099,362 4,066,137
----------- ----------
Expenses:
Mortgage interest 1,268,575 1,262,603
Depreciation and amortization 824,003 807,265
Asset and management fees to related party 611,741 348,515
Real estate taxes 261,470 288,974
Common area maintenance 232,105 187,045
Insurance 74,833 133,603
Professional fees 142,046 63,290
---------- ----------
Total expenses 3,414,773 3,091,295
---------- ----------
Income before income taxes 684,589 974,842
Provision for income taxes 239,606 331,446
---------- ----------
Net income 444,983 643,396
Distributions on preferred stock 220,000 0
---------- ----------
Net income attributable to common
stockholders $ 224,983 $643,396
========== ==========
Net income per share of common stock $ 0.06 (1)
==========
Weighted average number of shares of
common stock 3,789,171 (1)
==========
(1) Historical earnings per share for the six months ended June 30, 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 six months ended June 30, 1995 reflect historical amounts
relating to the operations of the UPI Properties prior to the Transfer (as
defined in the notes to the financial statements).
See Accompanying Notes to Financial Statements
2
<PAGE>
UNION PROPERTY INVESTORS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30, 1996 and 1995
June 30, 1996 June 30, 1995
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 444,983 $ 643,396
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 824,003 807,265
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable (125,419) 146,672
Decrease in prepaid expenses and other
assets 945 29,532
Increase in due from related party (49,065) 0
Increase in accrued interest 182,291 0
Increase in accounts payable and
accrued expenses 5,300 262,076
Increase in due to related party 35,202 0
Increase in current taxes payable 179,763 0
---------- ----------
Net cash provided by operating activities 1,498,003 1,888,941
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITY:
Purchase of property, improvements and
equipment (33,110) 0
---------- ----------
Net cash used in investing activity (33,110) 0
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments on mortgage payable (315,379) (323,875)
Proceeds from notes payable 2,000,000 0
Preferred stock redemption (2,000,000) 0
Payment of dividends (227,793) 0
Distributions to Corporate 0 (1,565,066)
----------- ----------
Net cash used in financing activities (543,172) (1,888,941)
----------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 921,721 0
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 102,817 0
----------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,024,538 $ 0
=========== ==========
CASH PAID FOR:
Interest $ 1,086,284 $1,262,603
=========== ==========
Taxes $ 59,842 $ 0
=========== ==========
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY
Assumption of Cary mortgage $ 0 $1,175,000
=========== ==========
See Accompanying Notes to Financial Statements
3
<PAGE>
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 June 30,
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, 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 June 30, 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 Historical Amounts include giving 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 June 30,
1996 are based on the Company's actual results of operations.
<PAGE>
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 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. As of August 5, 1996,
the LSG Agreement is terminable by either the Company or LSG. 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.
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 can not currently
satisfy all of the requirements for qualification as a REIT.
The Company and LSG have been engaged in discussions with third parties
concerning a possible sale or merger transaction. The Company is also
exploring other opportunities, including financing and refinancing certain of
the UPI Properties.
<PAGE>
Results of Operations
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995
Revenues of the Company increased by $110,126, or 5.39%, to $2,042,827
for the three months ended June 30, 1996 from $1,932,701 for the three months
ended June 30, 1995 primarily due to the net of an increase in occupancy
generating revenue of approximately $147,000 and a decrease in expense
reimbursements of approximately $30,000 as a result of lower real estate tax
expense and insurance expense in 1996.
Operating expenses of the Company increased by $197,011, or 39.72%, to
$692,967 for the three months ended June 30, 1996 from $495,956 for the three
months ended June 30, 1995 primarily due to the net effect of the following:
(1) an increase in asset and management fees to related party of approximately
$164,000 due to the management agreements in connection with the Transfer and
Distribution, and (2) decreases in real estate tax expense and insurance
expense of approximately $39,000 as a result of lower tax assessments and/or
lower tax rates in 1996 and a lower insurance premium in 1996, respectively.
Interest expense increased $22,952, or 3.51%, to $653,221 for the
three months ended June 30, 1996 from $630,269 for the three months ended June
30, 1995 primarily due to borrowings beginning April 1996 drawn against the
line of credit with First Union Bank.
Depreciation and amortization increased $8,205, or 1.98%, to $413,520
for the three months ended June 30, 1996 from $405,315 for the three months
ended June 30, 1995 primarily due to minor property improvements incurred
during 1995.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Revenues of the Company increased by $33,225, or less than 1%, to
$4,099,362 for the six months ended June 30, 1996 from $4,066,137 for the six
months ended June 30, 1995 primarily due to the net of an increase in occupancy
generating revenue of approximately $111,000 and a decrease in expense
reimbursements of approximately $128,000 as a result of lower real estate tax
expense and insurance expense in 1996.
Operating expenses of the Company increased by $300,768, or 29.45%, to
$1,322,195 for the six months ended June 30, 1996 from $1,021,427 for the six
months ended June 30, 1995 primarily due to the net effect of the following:
(1) an increase in asset and management fees to related party of approximately
$263,000 due to the management agreements entered into in connection with the
Transfer and Distribution, (2) an increase in common area maintenance expense
of approximately $45,000 due to increased snow removal costs incurred in 1996,
and (3) decreases in real estate tax expense and insurance expense of
approximately $86,000 due to lower tax assessments and/or lower tax rates in
1996 and a lower insurance premium in 1996, respectively.
Interest expense increased $5,972, or less than 1%, to $1,268,575 for
the six months ended June 30, 1996 from $1,262,603 for the six months ended
June 30, 1995 primarily due to borrowings beginning April 1996 drawn against
the line of credit with First Union Bank.
Depreciation and amortization increased by $16,738, or 2.07%, to
$824,003 for the six months ended June 30, 1996 from $807,265 for the six
months ended June 30, 1995 primarily due to minor property improvements
incurred during 1995.
<PAGE>
Liquidity and Capital Resources
A significant portion of the Company's cash flows from operations 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 seek financing to acquire additional assets. The Company may also seek, from
time to time, to dispose of properties.
As a result of a redemption of $2,000,000 of the UPI Preferred Stock
on March 22, 1996, the dividend rate on the UPI Preferred Stock was decreased
from 9% to 8% effective January 1, 1996. On July 1, 1996, UPI redeemed $270,833
of the UPI Preferred Stock. The 8% dividend rate will be in effect to the
extent that a minimum of $270,833 of the UPI Preferred Stock is redeemed
quarterly.
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 0.25% 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 June 30, 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 $1,498,003 for the six
months ended June 30, 1996 is comprised of (1) net income of $444,983, (2)
adjustments to net income of $824,003 for depreciation and amortization
expense, and (3) a change in operating assets and liabilities of $229,017.
Net cash provided by operating activities of $1,888,941 for the six
months ended June 30, 1995 is comprised of (1) net income of $643,396, (2)
adjustments to net income of $807,265 for depreciation and amortization
expenses, and (3) a change in operating assets and liabilities of $438,280.
<PAGE>
Net cash used in investing activities of $33,110 for the six months
ended June 30,1 996 is comprised of capital expenditures for property
improvements.
Net cash used in financing activities of $543,172 for the six months
ended June 30, 1996 is comprised of (1) principal repayments on mortgage
payable of $315,379, (2) proceeds from notes payable of $2,000,000, (3)
preferred stock redemption of $2,000,000, and (4) payment of dividends of
$227,793.
Net cash used in financing activities of $1,888,941 for the six months
ended June 30, 1995 is comprised of (1) principal repayments on mortgage
payable of $323,875, and (2) distributions to corporate of $1,565,066.
<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 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, rescission of Milestone's transfer
of sixteen of its retail properties to the Company and rescission of
Milestone's distribution of all of the shares of the Common Stock to
Milestone's common stockholders in November 1995. The defendants moved to
dismiss the plaintiff's original complaint, and thereafter, the plaintiff
amended his complaint to allege further causes of action. The defendants have
moved to dismiss the amended complaint.
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.
<PAGE>
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.
(Registrant)
Date: August 9, 1996 /s/ Robert A. Mandor
------------------------------
Robert A. Mandor
President and Chief Financial Officer
Date: August 9, 1996 /s/ Joan LeVine
------------------------------
Joan LeVine
Senior Vice President, Treasurer
and Controller
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,024,538
<SECURITIES> 0
<RECEIVABLES> 646,169
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 59,685,183
<DEPRECIATION> 9,683,593
<TOTAL-ASSETS> 51,954,713
<CURRENT-LIABILITIES> 0
<BONDS> 0
4,500,000
0
<COMMON> 37,892
<OTHER-SE> 15,599,112
<TOTAL-LIABILITY-AND-EQUITY> 51,954,713
<SALES> 0
<TOTAL-REVENUES> 4,099,362
<CGS> 0
<TOTAL-COSTS> 2,146,198
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,268,575
<INCOME-PRETAX> 684,589
<INCOME-TAX> 239,606
<INCOME-CONTINUING> 444,983
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 224,983
<EPS-PRIMARY> .06
<EPS-DILUTED> 0.000
</TABLE>
