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 ,1997 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 May 13, 1997 was 3,880,000.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements.
USP REAL ESTATE INVESTMENT TRUST
Balance Sheets
(unaudited)
<TABLE>
<S> <C> <C> <C>
March 31, December 31,
1997 1996 1996
ASSETS
Real Estate
Land, buildings and improvements at cost 40,055,926 39,653,566 39,683,279
Less accumulated depreciation (11,519,550) (10,708,389) (11,316,419)
Net book value 28,536,376 28,945,177 28,366,860
Mortgage loans receivable, net of deferred gain 1,253,723 1,281,540 1,260,926
Real estate and mortgage loans receivable 29,790,099 30,226,717 29,627,786
Cash and cash equivalents 1,184,663 1,667,422 1,733,640
Rents and other receivables 487,282 577,501 443,800
Prepaid and deferred expenses 329,386 264,953 255,631
Taxes held in escrow 109,335 93,975 146,871
31,900,765 32,830,568 32,207,728
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgage loans payable 14,700,695 15,158,836 14,819,479
Accounts payable and accrued expenses 675,041 760,195 730,591
Distribution declared 310,400 310,400 310,400
Tenant deposits 76,387 82,237 74,217
Other 70,160 24,029 57,779
15,832,683 16,335,697 15,992,466
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 169,192 595,981 316,372
16,068,082 16,494,871 16,215,262
31,900,765 32,830,568 32,207,728
</TABLE>
USP Real Estate Investment Trust
Statements of Earnings
(unaudited)
<TABLE>
<S> <C> <C>
Three Months Ended
March 31,
1997 1996
REVENUE
Rents 1,219,172 1,313,155
Interest 58,250 58,601
1,277,422 1,371,756
EXPENSES
Property expenses:
Real estate taxes 179,565 195,093
Repairs and maintenance 115,293 62,099
Utilities 35,565 28,632
Management fee 58,294 61,173
Insurance 11,853 10,767
Other 34,971 34,957
Property expenses, excluding depreciation 435,541 392,721
Depreciation 203,131 202,868
Total property expenses 638,672 595,589
Interest 365,278 378,208
Administrative fees 110,252 103,320
1,114,202 1,077,117
Net earnings 163,220 294,639
Net earnings per share .04 .08
Distributions to shareholders 310,400 310,400
Distributions to shareholders per share .08 .08
</TABLE>
USP REAL ESTATE INVESTMENT TRUST
Statements of Cash Flows
(unaudited)
<TABLE>
<S> <C> <C>
Three Months Ended
March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Rents collected 1,193,461 1,350,932
Interest received 65,787 64,962
Payments for operating expenses (641,012) (333,987)
Interest paid (364,436) (374,121)
Net cash provided by operating activities 253,800 707,786
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collections on mortgage loans receivable 7,203 6,552
Capital expenditures (372,647) (2,000)
Other, net (8,149) 7,410
Net cash provided (used) by investing activities (373,593) 11,962
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgage loans payable (118,784) (112,549)
Distributions paid to shareholders (310,400) (310,400)
Net cash used by financing activities (429,184) (422,949)
Net increase (decrease) in cash and cash equivalents (548,977) 296,799
Cash and cash equivalents at beginning of period 1,733,640 1,370,623
Cash and cash equivalents at end of period 1,184,663 1,667,422
RECONCILIATION OF NET EARNINGS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net earnings 163,220 294,639
Depreciation 203,131 202,868
Amortization 842 4,087
Decrease (increase) in rents and other receivables (39,816) 43,614
Decrease (increase) in prepaid and deferred expenses (77,205) 17,789
Decrease in taxes held in escrow 37,536 48,803
Increase (decrease) in accounts payable
and accrued expenses (55,550) 95,462
Increase in advance rents 21,642 524
Net cash provided by operating activities 253,800 707,786
</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 1996 Annual Report.
Note 2: Shareholders' equity, December 31, 1996 16,215,262
Net earnings 163,220
Dividends to shareholders (310,400)
Shareholders' equity, March 31, 1997 16,068,082
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
USP Real Estate Investment Trust had net earnings of
$163,220 ($.04 per share) for the three months ended March
31, 1997 compared to $294,639 ($.08 per share) for the same
period a year ago. Funds from operations (earnings from
operations plus depreciation) were $366,351 for 1997
compared to $497,507 for 1996. The decline in net earnings
and funds from operations from 1996 to 1997 is due primarily
to lower revenue and higher repairs and maintenance.
The Trust's rental income decreased by $94,000 from the
first quarter of 1996. Rents at Geneva Square in Lake
Geneva, Wisconsin decreased by $83,000 due to P.W.
Enterprises vacating their space in January 1996 and MMM
Foods discontinuing their land lease rental payments in
October 1996 as they closed their restaurant operation.
Rents decreased by $61,000 at Kingsley Square in Orange
Park, Florida primarily due to Luria's discontinuing their
rent payments at the end of August 1996. The Trust has
leased the space formerly occupied by Luria's to OfficeMax.
Capital expenditures for the OfficeMax space were $373,000
through March 31, 1997 and the Trust expects to incur an
additional $377,000 to complete the project. Rental income
at North Park increased by $41,000 due to higher percentage
rents received in 1997 and an increase in occupancy.
Total property expenses excluding depreciation, as a
percentage of rental income, increased from 30% in 1996 to
36% in 1997. Repairs and maintenance increased by $53,000
from 1996 due primarily to roof repairs and tenant
remodeling expenses. Utilities have increased by 24% due to
the vacancy created by P.W. Enterprises at Geneva. The
Trust is now responsible for the utilities previously paid
by P.W. Enterprises. The increase in repairs and
maintenance and utilities was partially offset by a decrease
in real estate taxes at Geneva Square and First Tuesday Mall
in Carrollton, Georgia.
Yamaha Motor Corporation, the sole tenant at Yamaha
Warehouse in Cudahy, Wisconsin, has notified the Trust of
their intent to exercise an option to renew their lease for
one year. The one year lease option expires June 1998.
Yamaha has two more one-year lease options.
As reported in the 1996 annual report, Staples closed their
store at North Park in February 1996 and assigned their
lease to the developer of the new center where Staples
relocated. The Trust recently learned that Safeway, the
anchor tenant at North Park, has accepted assignment of the
Staples lease and are studying the feasibility of expanding
into the space which is adjacent to their existing 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 ($1,184,663 at March 31, 1997) 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 has been
exploring various strategic alternatives with the intent to
maximize shareholder value. Raymond James & Associates,
Inc. has been engaged as financial advisor to assist the
Trust with these ongoing efforts.
The Board of Trustees declared a first quarter distribution
of $.08 per share, payable May 19, 1997 to shareholders of
record May 9, 1997. 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 28,
1997, 39% 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:
Trustee Votes For Votes Withheld
Gary A. Downing 1,476,941 41,140
Patrick E. Falconio 1,477,483 40,598
Edwin L. Ingraham 1,478,855 39,226
Samuel L. Kaplan 1,478,915 39,166
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 13, 1997
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<NAME> USP REAL ESTATE INTESTMENT TRUST
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<PERIOD-END> MAR-31-1997
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<RECEIVABLES> 721,046
<ALLOWANCES> 233,764
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