UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended June 30, 1995 Commission file number 0-7589
USP REAL ESTATE INVESTMENT TRUST
(Exact name of registrant as specified in its charter)
Iowa 42-6149662
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4333 Edgewood Road N.E., Cedar 52499
Rapids, IA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (319) 398-8975
N/A
(Former name, address and 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 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
The number of shares of beneficial interest of the
registrant outstanding at August 3, 1995 was 3,880,000.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
USP REAL ESTATE INVESTMENT TRUST
Balance Sheets
(unaudited)
<TABLE>
<S> <C> <C> <C>
June 30, December 31,
1995 1994 1994
ASSETS
Real Estate
Land, buildings and improvements at cost 39,651,566 44,293,328 39,651,566
Less accumulated depreciation (10,076,111) (10,082,551) (9,726,767)
Net book value 29,575,455 34,210,777 29,924,799
Mortgage loans receivable, net of deferred gain 1,300,741 1,324,316 1,312,805
Real estate and mortgage loans receivable 30,876,196 35,535,093 31,237,604
Cash and cash equivalents 1,336,881 1,431,751 2,086,511
Rents and other receivables 539,984 303,123 535,792
Prepaid and deferred expenses 318,176 307,778 316,921
Taxes held in escrow 280,443 282,641 156,765
Total Assets 33,351,680 37,860,386 34,333,593
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgage loans payable 15,510,078 20,274,774 16,853,303
Accounts payable and accrued expenses 818,848 1,332,320 494,922
Distibution declared 310,400 232,800 271,600
Tenant deposits 82,952 110,040 73,989
Other 74,602 33,649 26,496
Total Liabilities 16,796,880 21,983,583 17,720,310
Shareholders' Equity
Shares of beneficial interest,
$1 par value, 20,000,000
shares authorized, 3,880,000
shares issued and outstanding 3,880,000 3,880,000 3,880,000
Additional paid-in capital 12,018,890 11,996,803 12,018,890
Undistributed net earnings 655,910 -- -- 714,393
Total Shareholders Equity 16,554,800 15,876,803 16,613,283
Total Liabilities & Shareholders' Equity 33,351,680 37,860,386 34,333,593
</TABLE>
USP REAL ESTATE INVESTMENT TRUST
Statements of Operations
(unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
REVENUE
Rents 1,312,057 1,530,040 2,675,090 3,135,773
Interest 56,370 52,641 117,114 98,582
Total Revenue 1,368,427 1,582,681 2,792,204 3,234,355
EXPENSES
Property expenses:
Real estate taxes 185,949 200,937 371,898 429,283
Wages and salaries --- 5,215 --- 12,342
Repairs and maintenance 129,250 143,140 217,714 259,746
Utilities 24,206 30,545 48,721 66,030
Management fee 60,258 72,059 124,962 145,901
Insurance 11,670 16,620 23,340 33,240
Other 32,042 22,759 55,470 53,621
Property expenses, excluding
depreciation 443,375 491,275 842,105 1,000,163
Depreciation 206,242 257,188 412,484 514,228
Total property expenses 649,617 748,463 1,254,589 1,514,391
Interest 394,465 505,300 802,829 1,033,461
Administrative expense 101,908 132,733 211,269 242,990
Total Expenses 1,145,990 1,386,496 2,268,687 2,790,842
Net earnings 222,437 196,185 523,517 443,513
Net earnings per share .06 .05 .13 .11
Distributions to shareholders 310,400 232,800 582,000 465,600
Distributions to shareholders per share .08 .06 .15 .12
</TABLE>
USP REAL ESTATE INVESTMENT TRUST
Statements of Cash Flows
(unaudited)
<TABLE>
<S> <C> <C>
Six Months Ended
June 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Rents collected 2,665,660 3,358,449
Interest received 115,325 97,252
Payments for operating expenses (871,120) (1,299,529)
Interest paid (777,526) (1,019,715)
Net cash provided by operating activities 1,132,339 1,136,457
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collections on mortgage loans receivable 12,064 10,971
Capital expenditures (63,140) (292,197)
Other, net 69,414 538,163
Net cash provided by investing activities 18,338 256,937
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgage loans payable (220,943) (291,689)
Principal repayment on mortgage loan (1,136,164) ---
Net proceeds from refinancing -- 114,369
Distributions paid to shareholders (543,200) (465,600)
Net cash used by financing activities (1,900,307) (642,920)
Net increase (decrease) in cash and cash (749,630) 750,474
equivalents
Cash and cash equivalents at beginning of period 2,086,511 681,277
Cash and cash equivalents at end of period 1,336,881 1,431,751
RECONCILIATION OF NET EARNINGS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net earnings 523,517 443,513
Depreciation 412,484 514,228
Amortization 25,303 26,896
Decrease (increase) in rents and other receivables (45,141) 226,419
Decrease (increase) in prepaid and deferred expenses (17,994) 15,637
Increase in taxes held in escrow (123,678) (231,589)
Increase in accounts payable
and accrued expenses 323,926 146,426
Increase (decrease) in advance rents 33,922 (5,073)
Net cash provided by operating activities 1,132,339 1,136,457
</TABLE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1: The unaudited interim financial statements are
prepared in accordance with generally accepted accounting
principles and include all adjustments of a normal recurring
nature necessary for a fair presentation of the financial
position and quarterly results. Interim reports should be
read in conjunction with the audited financial statements
and related notes included in the 1994 Annual Report.
<TABLE>
<S> <C>
NOTE 2: Shareholders' equity, December 31,1994 16,613,283
Net earnings 523,517
Distributions to shareholders (582,000)
Shareholders' equity, June 30, 1995 16,554,800
</TABLE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
We are pleased to report the Trust's second quarter results
of operations. Net earnings for the three and six months
ended June 30, 1995 were $222,437 ($.06 per share) and
$523,517 ($.13 per share), respectively, compared to
$196,185 ($.05 per share) and $443,513 ($.11 per share) for
the same periods in 1994. Funds from operations (earnings
from operations plus depreciation) were $936,001 for the
first six months of 1995 compared to $957,741 for the first
six months of 1994. Contributing to the increase in net
earnings in 1995 were increased interest income of $19,000
due to higher interest rates on investable funds and
decreased interest expense of $231,000 due to the prepayment
of mortgage loans. Administrative expenses were lower due
to decreased legal expenses and a reduction in the
administrative fee due to the sale of Midway Business Park,
Tucson, Arizona.
Rents and property expenses declined from 1994 to 1995 due
to the sale of Midway. Midway contributed rental income of
$514,000 and incurred property expenses exclusive of
depreciation of $231,000 in 1994. Rents and property
expenses before depreciation for properties owned in both
years increased $54,000 and $73,000, respectively, from 1994
to 1995. Included in the $73,000 increase in operating
expenses was a $29,000 increase in real estate taxes because
First Tuesday Mall, Carrollton, Georgia received property
tax refunds in the second quarter of 1994. Also included
was a $22,000 increase in repairs and maintenance expense
due primarily to parking lot repairs and other repair items
completed at Presidential Drive Business Park , Atlanta,
Georgia. Overall occupancy of the Trust's real estate
portfolio remained strong at 96% as of June 30, 1995.
The Trust previously reported that Publix Supermarkets at
Kingsley Square in Orange Park, Florida had exercised an
option to extend its lease for five years. The lease
extension, effective February 11, 1995, requires the Trust
to contribute up to $250,000 toward remodeling costs at the
Publix store. The Trust had expected to incur this cost in
1995, but it is now anticipated that this will not be
incurred until 1996. Luria's, a 23,587 square foot tenant
at Kingsley Square, discontinued operations there in March
1995. Luria's has continued to pay rent and has notified
the Trust that it will honor its lease which runs through
March 2010. The Trust is cooperating with Luria's in
securing a new tenant to sublease this space.
Capital resources of the Trust consist of equity in real
estate investments and mortgage loans receivable.
Properties are maintained in good condition and adequate
insurance coverage is provided. Liquidity is represented by
cash and cash equivalents ($1,336,881 at June 30, 1995) as
well as cash flow from the continued operation of the
Trust's real estate portfolio, which is considered
sufficient to meet current obligations. The mortgage on
Geneva Square in Lake Geneva, Wisconsin matures in March
1996, requiring a payoff of $2,873,831. The Trust expects
to refinance this loan with the current lender.
Earlier this year, the Trust announced that it had begun
exploring strategic alternatives to maximize shareholder
value, including a possible business combination or sale of
assets. After an extensive process of study and discussions
with various parties, the Trust has received an offer to
acquire all its assets for a price equivalent to $5.75 per
share, less costs required to complete the transaction which
have not yet been determined. The offer is subject to
financing and further due diligence as well as additional
negotiation. Completion of any such transaction will
require the execution of a definitive agreement and approval
of the Trustees and shareholders. There is no assurance
that this or any other transaction will be consummated.
The Board of Trustees declared a distribution of $.08 per
share, payable August 21, 1995 to shareholders of record
August 8, 1995. Distributions to shareholders continue to
be dependent upon earnings, cash flow, financial condition
and other factors reviewed by the Board of Trustees.
SIGNATURE
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.
USP REAL ESTATE INVESTMENT TRUST
/s/ Alan F. Fletcher
Alan F. Fletcher
Vice President and Treasurer
(principal financial officer)
/s/ Edward J. Kittleson
Edward J. Kittleson
Controller
(principal accounting officer)
Dated: August 3, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0000102438
<NAME> USP REAL ESTATE INVESTMENT TRUST
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 1,336,881
<SECURITIES> 0
<RECEIVABLES> 655,271
<ALLOWANCES> 115,287
<INVENTORY> 0
<CURRENT-ASSETS> 2,475,484
<PP&E> 39,651,566
<DEPRECIATION> 10,076,11
<TOTAL-ASSETS> 33,351,680
<CURRENT-LIABILITIES> 1,286,802
<BONDS> 15,510,078
<COMMON> 3,880,000
0
0
<OTHER-SE> 12,674,800
<TOTAL-LIABILITY-AND-EQUITY> 33,351,680
<SALES> 0
<TOTAL-REVENUES> 2,792,204
<CGS> 0
<TOTAL-COSTS> 1,254,589
<OTHER-EXPENSES> 211,269
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 802,829
<INCOME-PRETAX> 523,517
<INCOME-TAX> 0
<INCOME-CONTINUING> 523,517
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 523,517
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
