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, 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 August 12, 1996 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,
1996 1995 1995
ASSETS
Real Estate
Land, buildings and improvements at cost 39,654,127 39,651,566 39,651,566
Less accumulated depreciation (10,911,110) (10,076,111) (10,505,521)
Net book value 28,743,017 29,575,455 29,146,045
Mortgage loans receivable, net of deferred gain 1,274,830 1,300,741 1,288,092
Real estate and mortgage loans receivable 30,017,847 30,876,196 30,434,137
Cash and cash equivalents 1,906,079 1,336,881 1,370,623
Rents and other receivables 364,283 539,984 614,873
Prepaid and deferred expenses 273,391 318,176 290,859
Taxes held in escrow 156,911 280,443 142,778
Total Assets 32,718,511 33,351,680 32,853,270
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgage loans payable 15,048,529 15,510,078 15,271,385
Accounts payable and accrued expenses 836,313 818,848 664,733
Distibution declared 310,400 310,400 310,400
Tenant deposits 85,808 82,952 79,629
Other 35,366 74,602 16,491
Total Liabilities 16,316,416 16,796,880 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 503,205 655,910 611,742
Total Shareholders Equity 16,402,095 16,554,800 16,510,632
Total Liabilities & Shareholders' Equity 32,718,511 33,351,680 32,853,270
</TABLE>
USP REAL ESTATE INVESTMENT TRUST
Statements of Earnings
(unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
Revenue
Rents 1,249,922 1,312,057 2,563,077 2,675,090
Interest 62,108 56,370 120,709 117,114
Total revenue 1,312,030 1,368,427 2,683,786 2,792,204
Expenses
Property expenses:
Real estate taxes 190,808 185,949 385,901 371,898
Repairs and maintenance 72,632 129,250 134,731 217,714
Utilities 28,984 24,206 57,616 48,721
Management fee 57,732 60,258 118,905 124,962
Insurance 11,867 11,670 22,634 23,340
Other 48,402 32,042 81,033 55,470
Property expenses,
excluding depreciation 410,425 443,375 800,820 842,105
Depreciation 202,721 206,242 405,589 412,484
Total property expenses 613,146 649,617 1,206,409 1,254,589
Interest 373,895 394,465 752,103 802,829
Administrative expense 107,365 101,908 213,011 211,269
Total expenses 1,094,406 1,145,990 2,171,523 2,268,687
Net earnings 217,624 222,437 512,263 523,517
Net earnings per share
.06 .06 .13 .13
Distributions to shareholders 310,400 310,400 620,800 582,000
Distributions to shareholders per
share .08 .08 .16 .15
</TABLE>
USP REAL ESTATE INVESTMENT TRUST
Statements of Cash Flows
(unaudited)
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<S> <C> <C>
Six Months Ended
June 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Rents collected 2,807,075 2,665,660
Interest received 123,172 115,325
Payments for operating expenses (840,040) (871,120)
Interest paid (747,175) (777,526)
Net cash provided by operating activities 1,343,032 1,132,339
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collections on mortgage loans receivable 13,262 12,064
Capital expenditures (2,561) (63,140)
Other, net 25,379 69,414
Net cash provided by investing activities 36,080 18,338
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgage loans payable (222,856) (220,943)
Principal repayment on mortgage loan -- (1,136,164)
Distributions paid to shareholders (620,800) (543,200)
Net cash used by financing activities (843,656) (1,900,307)
Net increase (decrease) in cash and cash equivalents 535,456 (749,630)
Cash and cash equivalents at beginning of period 1,370,623 2,086,511
Cash and cash equivalents at end of period 1,906,079 1,336,881
RECONCILIATION OF NET EARNINGS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net earnings 512,263 523,517
Depreciation 405,589 412,484
Amortization 4,928 25,303
Decrease (increase) in rents and other receivables 241,706 (45,141)
Decrease (increase) in prepaid and deferred expenses 16,344 (17,994)
Increase in taxes held in escrow (14,133) (123,678)
Increase in accounts payable
and accrued expenses 171,580 323,926
Increase in advance rents 4,755 33,922
Net cash provided by operating activities 1,343,032 1,132,339
</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.
<TABLE>
<S> <C>
Note 2: Shareholders' equity, December 31, 1995 16,510,632
Net earnings 512,263
Distribution to shareholders (620,800)
Shareholders' equity, June 30, 1996 16,402,095
</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, 1996 were $217,624 ($.06 per share) and $512,263 ($.13 per
share), respectively, compared to $222,437 ($.06 per share) and
$523,517 ($.13 per share) for the same periods in 1995. Funds
from operations (earnings from operations plus depreciation) were
$917,852 for the first six months of 1996 compared to $936,001
for the first six months of 1995.
Net earnings and funds from operations declined slightly from
1995 to 1996 due primarily to lower revenue. Revenue at Geneva
Square in Lake Geneva, Wisconsin decreased by $152,000 from 1995
primarily as a result of P.W. Enterprises filing a Chapter 11
reorganization plan and closing its 63,146 square foot store in
January 1996. This was partially offset by lower repairs and
maintenance at the Trust's properties in 1996.
Total property expenses, excluding depreciation, as a percentage
of rental income, remained steady at 31% for both 1995 and 1996.
Repairs and maintenance decreased by $83,000 in 1996 primarily as
a result of tenant remodeling and exterior improvements such as
groundskeeping and the painting of two shopping centers in 1995.
This decrease was partially offset by an increase of $26,000 in
other property expenses, primarily attributed to legal and
consulting expenditures from the P.W. Enterprise bankruptcy at
Geneva Square and legal fees due to litigation with a former
tenant at North Park Plaza in Phoenix, Arizona.
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 has been 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 will be allowed.
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
($1,906,079 at June 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 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 second quarter distribution of
$.08 per share, payable August 19, 1996 to shareholders of record
August 6, 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
David Blankenship
President
(executive officer)
Roger L. Schulz
Controller
(principal accounting officer)
Dated: August 12, 1996
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<NAME> USP REAL ESTATE INTESTMENT TRUST
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