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 March 31, 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 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 May 10, 1996 was 3,880,000.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements.
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USP REAL ESTATE INVESTMENT TRUST
Balance Sheets
(unaudited)
<S> <C> <C> <C>
March 31, December 31,
1996 1995 1995
ASSETS
Real Estate
Land, buildings and improvements at cost 39,653,566 39,651,566 39,651,566
Less accumulated depreciation (10,708,389) (9,930,926) (10,505,521)
Net book value 28,945,177 29,720,640 29,146,045
Mortgage loans receivable, net of deferred gain 1,281,540 1,306,844 1,288,092
Real estate and mortgage loans receivable 30,226,717 31,027,484 30,434,137
Cash and cash equivalents 1,667,422 1,055,430 1,370,623
Rents and other receivables 577,501 743,518 614,873
Prepaid and deferred expenses 264,953 306,149 290,859
Taxes held in escrow 93,975 218,604 142,778
32,830,568 33,351,185 32,853,270
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgage loans payable 15,158,836 15,614,927 15,271,385
Accounts payable and accrued expenses 760,195 720,264 664,733
Distribution declared 310,400 271,600 310,400
Tenant deposits 82,237 75,960 79,629
Other 24,029 25,671 16,491
16,335,697 16,708,422 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 595,981 743,873 611,742
16,494,871 16,642,763 16,510,632
32,830,568 33,351,185 32,853,270
</TABLE>
<TABLE>
USP Real Estate Investment Trust
Statements of Earnings
(unaudited) Three Months Ended
March 31,
<S> <C> <C>
1996 1995
REVENUE
Rents 1,313,155 1,363,033
Interest 58,601 60,744
Total revenue 1,371,756 1,423,777
EXPENSES
Property expenses:
Real estate taxes 195,093 185,949
Repairs and maintenance 62,099 88,464
Utilities 28,632 24,515
Management fee 61,173 64,704
Insurance 10,767 11,670
Other 34,957 23,428
Property expenses, excluding depreciation 392,721 398,730
Depreciation 202,868 206,242
Total property expenses 595,589 604,972
Interest 378,208 408,364
Administrative fees 103,320 109,361
1,077,117 1,122,697
Net earnings 294,639 301,080
Net earnings per share .08 .08
Distributions to shareholders 310,400 271,600
Distributions to shareholders per share .08 .07
</TABLE>
<TABLE>
USP REAL ESTATE INVESTMENT TRUST
Statements of Cash Flows
(unaudited)
<S> <C> <C>
Three Months Ended
March 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Rents collected 1,350,932 1,257,527
Interest received 64,962 58,831
Payments for operating expenses (333,987) (342,135)
Interest paid (374,121) (395,713)
Net cash provided by operating activities 707,786 578,510
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collections on mortgage loans receivable 6,552 5,961
Capital expenditures (2,000) (2,083)
Other, net 7,410 (96,552)
Net cash provided (used) by investing activities 11,962 (92,674)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgage loans payable (112,549) (109,153)
Principal repayment on mortgage loan - - (1,136,164)
Distributions paid to shareholders (310,400) (271,600)
Net cash used by financing activities (422,949) (1,516,917)
Net increase (decrease) in cash and cash equivalents 296,799 (1,031,081)
Cash and cash equivalents at beginning of period 1,370,623 2,086,511
Cash and cash equivalents at end of period 1,667,422 1,055,430
RECONCILIATION OF NET EARNINGS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net earnings 294,639 301,080
Depreciation 202,868 206,242
Amortization 4,087 12,651
Decrease (increase) in rents and other receivables 43,614 (99,552)
Decrease in prepaid and deferred expenses 17,789 2,453
Decrease (increase) in taxes held in escrow 48,803 (61,839)
Increase in accounts payable
and accrued expenses 95,462 225,342
Increase (decrease) in advance rents 524 (7,867)
Net cash provided by operating activities 707,786 578,510
</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 1995 Annual Report.
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<S> <C>
Note 2: Shareholders' equity, December 31, 1995 16,510,632
Net earnings 294,639
Dividends to shareholders (310,400)
Shareholders' equity, March 31, 1996 16,494,871
</TABLE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
We are pleased to present the Trust's 1996 first quarter
report. Net earnings were $294,639 ($.08 per share) for the
three months ended March 31, 1996 compared to $301,080 ($.08
per share) for the same period a year ago. Funds from
operations (earnings from operations plus depreciation) were
$497,507 for 1996 compared to $507,322 for 1995.
The slight decline in net earnings and funds from operations
from 1995 to 1996 is due primarily to lower revenue which
was partially offset by lower interest expense. Rents at
Geneva Square in Lake Geneva, Wisconsin decreased by
approximately $53,000 from 1995 as P.W. Enterprises filed a
Chapter 11 reorganization plan and closed its 63,146 square
foot store in January 1996. Rent from P.W. Enterprises was
approximately $87,000 in the first quarter of 1995, compared
to $37,000 in 1996. Interest expense declined $30,000 due
to the January 1995 prepayment of a mortgage loan on First
Tuesday Mall in Carrollton, Georgia, and the normal
amortization of monthly payments on the remaining mortgage
loans.
Total property expenses, excluding depreciation, as a
percentage of rental income, increased from 29% in 1995 to
30% in 1996. Repairs and maintenance decreased by $26,000
from 1995 due primarily to improvements to the exterior of
two properties. This was partially offset by an increase in
other property expenses primarily attributed to legal and
consulting expenditures from the P.W. Enterprises bankruptcy
at Geneva Square.
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. As of this report, the Trust is awaiting a court
hearing to determine what amount, if any, will be paid.
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 ($1,667,422 at March 31, 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. On March 1, 1996,
the Trust exercised an option to extend the mortgage loan on
Geneva Square for eight years at 8.30%. The loan may be
prepaid without penalty any time during the first two years
of the extended loan term.
As reported previously, the Trust is exploring various
strategic alternatives with the intent to maximize
shareholder value, including a possible sale of the Trust's
assets. While the Trust continues to consider potential
transactions, there is no assurance any transaction will be
consummated.
The Board of Trustees declared a first quarter distribution
of $.08 per share, payable May 20, 1996 to shareholders of
record May 10, 1996. Distributions to shareholders continue
to be dependent upon earnings, cash flow, financial
condition and other factors reviewed by the Board of
Trustees.
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders.
At the Trust's annual meeting of shareholders on April 29,
1996, 67% of the Trust's outstanding shares were represented
(in person or by proxy). All four incumbent Trustees were
re-elected to the Board of Trustees, with each receiving at
least 97% of the vote for the shares represented. The vote
tabulation for each Trustee was as follows:
<TABLE>
<S> <C> <C>
Trustee Votes For Votes Withheld
Gary A. Downing 2,560,186 52,545
Patrick E. Falconio 2,565,324 47,407
Edwin L. Ingraham 2,567,054 45,677
Samuel L. Kaplan 2,565,748 46,983
</TABLE>
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/ Roger L. Schulz
Roger L Schulz
Controller
(principal accounting officer)
Dated: May 10, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000102438
<NAME> USP REAL ESTATE INTESTMENT TRUST
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 1,667,422
<SECURITIES> 0
<RECEIVABLES> 765,650
<ALLOWANCES> 188,149
<INVENTORY> 0
<CURRENT-ASSETS> 2,603,851
<PP&E> 39,653,566
<DEPRECIATION> 10,708,389
<TOTAL-ASSETS> 32,830,568
<CURRENT-LIABILITIES> 1,176,861
<BONDS> 15,158,836
0
0
<COMMON> 3,880,000
<OTHER-SE> 12,614,871
<TOTAL-LIABILITY-AND-EQUITY> 32,830,568
<SALES> 0
<TOTAL-REVENUES> 1,371,756
<CGS> 0
<TOTAL-COSTS> 595,589
<OTHER-EXPENSES> 103,320
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 378,208
<INCOME-PRETAX> 294,639
<INCOME-TAX> 0
<INCOME-CONTINUING> 294,639
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 294,639
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
