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 September 30, 1996 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 Rapids, IA 52499
(Address of principal executive offices) (Zip Code)
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 November 13, 1996 was 3,880,000.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
USP Real Estate Investment Trust
Balance Sheets
(unaudited)
<TABLE>
September 30, December 31,
1996 1995 1995
<S> <C> <C> <C>
Assets
Real Estate
Land, buildings and
improvements at cost $ 39,654,127 39,651,566 39,651,566
Less accumulated
depreciation (11,113,764) (10,273,234) (10,505,521)
28,540,363 29,378,332 29,146,045
Mortgage loans receivable,
net of deferred gain 1,267,960 1,294,491 1,288,092
Real estate and mortgage
loans receivable 29,808,323 30,672,823 30,434,137
Cash and cash equivalents 1,837,689 1,459,938 1,370,623
Rents and other receivables 497,077 465,303 614,873
Prepaid and deferred expenses 245,416 291,422 290,859
Taxes held in escrow 95,134 91,729 142,778
$ 32,483,639 32,981,215 32,853,270
Liabilities and Shareholders' Equity
Liabilities
Mortgage loans payable $ 14,935,400 15,388,645 15,271,385
Accounts payable and
accrued expenses 826,438 616,915 664,733
Distribution declared 310,400 310,400 310,400
Tenant deposits 77,232 82,952 79,629
Other 36,422 40,025 16,491
16,185,892 16,438,937 16,342,638
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 12,018,890 12,018,890
Undistributed net earnings 398,857 643,388 611,742
16,297,747 16,542,278 16,510,632
$ 32,483,639 32,981,215 32,853,270
</TABLE>
USP Real Estate Investment Trust
Statements of Earnings
(unaudited)
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
<S> <C> <C> <C> <C>
1996 1995 1996 1995
Revenue
Rents $ 1,302,684 1,323,794 3,865,761 3,998,884
Interest 68,285 63,183 188,994 180,297
1,370,969 1,386,977 4,054,755 4,179,181
Expenses
Property expenses:
Real estate taxes 168,775 180,877 554,676 552,775
Repairs and maintenance 128,782 102,701 263,513 320,415
Utilities 32,145 29,673 89,761 78,394
Management fee 60,633 61,735 179,538 186,697
Insurance 11,922 9,870 34,556 33,210
Other 88,557 20,916 169,590 76,386
Property expenses,
excluding depreciation 490,814 405,772 1,291,634 1,247,877
Depreciation 202,654 204,722 608,243 617,206
Total property expenses 693,468 610,494 1,899,877 1,865,083
Interest 371,173 377,974 1,123,276 1,180,803
Administrative expense 100,276 100,631 313,287 311,900
1,164,917 1,089,099 3,336,440 3,357,786
Net earnings $ 206,052 297,878 718,315 821,395
Net earnings per share $ .05 .08 .19 .21
Distributions to shareholders $ 310,400 310,400 931,200 892,400
Distributions to shareholders per share $ .08 .08 .24 .23
</TABLE>
USP Real Estate Investment Trust
Statements of Cash Flows
(unaudited)
<TABLE>
Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Rents collected $ 3,976,232 4,022,976
Interest received 192,370 178,508
Payments for operating expenses (1,365,146) (1,372,307)
Interest paid (1,117,506) (1,156,731)
Net cash provided by operating activities 1,685,950 1,672,446
Cash flows from investing activities:
Principal collections on mortgage
loans receivable 20,132 18,314
Capital expenditures (2,561) (70,739)
Other, net 30,730 78,605
Net cash provided by investing activities 48,301 26,180
Cash flows from financing activities:
Principal payments on mortgage
loans payable (335,985) (335,435)
Principal repayment on mortgage loan --- (1,136,164)
Distributions paid to shareholders (931,200) (853,600)
Net cash used by financing activities (1,267,185) (2,325,199)
Net increase (decrease) in cash and
cash equivalents 467,066 (626,573)
Cash and cash equivalents
at beginning of period 1,370,623 2,086,511
Cash and cash equivalents
at end of period $ 1,837,689 1,459,938
Reconcilition of net earnings to net cash
provided by operating activities:
Net earnings $ 718,315 821,395
Depreciation 608,243 617,206
Amortization 5,770 24,072
Decrease in rents and other receivables 115,244 30,194
Decrease in prepaid and deferred expenses 30,426 441
Decrease in taxes held in escrow 47,644 65,036
Increase in accounts payable
and accrued expenses 161,705 121,993
Decrease in advance rents (1,397) (7,891)
Net cash provided by operating activities $ 1,685,950 1,672,446
</TABLE>
[FN]
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 1995 Annual Report.
Note 2: Shareholders' equity, December 31, 1995 $16,510,632
Net earnings 718,315
Distribution to shareholders (931,200)
Shareholder's equity, September 30, 1996 $16,297,747
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
We are pleased to report the Trust's third
quarter results of operations. Net earnings
were $206,052 ($.05 per share) for the three
months ended September 30, 1996 bringing year-
to-date net earnings to $718,315 ($.19 per
share). Net earnings in 1995 were $297,878
($.08 per share) and $821,395 ($.21 per
share) for the three and nine months,
respectively. Funds from operations
(earnings from operations plus depreciation)
were $1,326,558 for the first nine months of
1996 compared to $1,438,601 for the first
nine months of 1995.
Net earnings and funds from operations
declined from 1995 to 1996 primarily due to
lower revenue. Rents at Geneva Square in
Lake Geneva, Wisconsin decreased by $226,000
from 1995, primarily the result of P.W.
Enterprises filing a Chapter 11
reorganization plan and closing it 63,146
square foot store in January, 1996. This was
partially offset by an increase in rental
income at Presidential Drive Business Park in
Atlanta, Georgia and at North Park Plaza in
Phoenix, Arizona. Rental income increased at
Presidential Drive due to higher base rents,
higher expense recoveries and a rent
settlement from a former tenant. The Trust
also received a $60,000 rent settlement from
Eaglesons, a former tenant at North Park Plaza.
Total property expenses, excluding
depreciation, as a percentage of rental
income, increased slightly from 31% in 1995
to 33% in 1996. Repairs and maintenance
decreased by $57,000 in 1996 primarily as a
result of tenant remodeling at Presidential
Drive and the painting of two shopping
centers in 1995. The 1995 expenditures were
partially offset by $23,000 in resealing the
parking lot at Mendenhall Commons Shopping
Center in Memphis, Tennessee in 1996. The
increase in other property expenses is
primarily due to legal fees and expenses
related to the bankruptcy of P.W. Enterprises
(former tenant at Geneva Square) and the
litigation settlement with Eaglesons (former
tenant at North Park Plaza).
The Trust previously reported that it had
filed a claim as an unsecured creditor in
connection with the P.W. Enterprises Chapter
11 reorganization plan, and that
approximately $360,000 was expected from the
bankruptcy trustee. That claim was contested
and a court hearing was held, but as of the
date of this report, a decision has not yet
been rendered as to the amount of the claim,
if any, that may be allowed.
L. Luria and Sons (Lurias) is a 23,587 square
foot tenant at Kingsley Square in Orange
Park, Florida. Lurias discontinued its
operations at Kingsley Square in March 1995
and vacated the premises, but continued to
honor its lease obligations (which expire in
March 2010). Recently, however, Lurias has
become delinquent in paying their rent.
Efforts to collect the rent or negotiate a
buy-out of their remaining lease obligations
have been unsuccessful. The Trust is,
accordingly, taking legal steps to terminate
Luria's right to possession of the premises.
The Trust has also been negotiating with a
prospective replacement tenant for the Lurias
space. There is no assurance, however, that
the prospective tenant will occupy the Lurias
space even if that space becomes available.
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
($1,837,689 at September 30, 1996) as well as
cash flow from the continued operation of the
Trust's real estate portfolio, which is
considered sufficient to meet current obligations.
As previously reported, the Board of Trustees
is exploring various strategic alternatives
with the intent to maximize shareholder
value. While a number of possibilities are
being considered, there is no assurance any
transaction will be consummated.
The Board of Trustees declared a third
quarter distribution of $.08 per share,
payable November 18, 1996 to shareholders of
record November 5, 1996. 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
Alan F. Fletcher
Vice President and Treasurer
(principal financial officer)
Roger L. Schulz
Controller
(principal accounting officer)
Dated: November 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000102438
<NAME> USP REAL ESTATE INTESTMENT TRUST
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 1,837,689
<SECURITIES> 0
<RECEIVABLES> 628,678
<ALLOWANCES> 131,601
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<CURRENT-ASSETS> 2,675,316
<PP&E> 39,654,127
<DEPRECIATION> 11,113,764
<TOTAL-ASSETS> 32,483,639
<CURRENT-LIABILITIES> 1,250,492
<BONDS> 14,935,400
0
0
<COMMON> 3,880,000
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<TOTAL-REVENUES> 4,054,7556
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<TOTAL-COSTS> 1,291,634
<OTHER-EXPENSES> 313,287
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<INCOME-PRETAX> 718,315
<INCOME-TAX> 0
<INCOME-CONTINUING> 718,315
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<EXTRAORDINARY> 0
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<NET-INCOME> 718,315
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
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