UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1995
or
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 0-13227
USAA Real Estate Income Investments I Limited Partnership
(Exact name of registrant as specified in its charter)
California 74-2325025
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8000 Robert F. McDermott Fwy., IH 10 West, Suite 600,
San Antonio, Texas 78230-3884
(Address of principal executive offices) (Zip Code)
(210) 498-7391
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former 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.
[X] Yes [ ] No
<PAGE>
PART I
Item 1. Financial Statements
<TABLE>
USAA Real Estate Income Investments I Limited Partnership
Condensed Balance Sheets
<CAPTION>
June 30,
1995 December 31,
(Unaudited) 1994
<S> <C> <C>
Assets
Rental properties, net $ 10,738,180 10,420,520
Mortgage loan receivable from affiliate 5,440,000 5,440,000
Temporary investments, at cost which
approximates market value:
USAA Mutual Fund, Inc. 9,315
Money market fund 302,719 780,568
302,719 789,883
Cash 25,077 5,793
Cash and cash equivalents 327,796 795,676
Accounts receivable 31,406 35,904
Deferred charges and other assets, at
amortized cost 379,768 276,781
$ 16,917,150 16,968,881
Liabilities and Partners' Equity
Accounts payable, including amounts due
to affiliates of $34,994 and $35,140 $ 95,304 72,614
Accrued expenses 98,346 20,668
Security deposits 60,770 68,808
Total liabilities 254,420 162,090
Partners' equity
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 82,757 79,785
Cumulative distributions (172,807) (168,394)
(89,050) (87,609)
Limited Partners (54,610 units):
Capital contributions, net of
offering costs 25,666,700 25,666,700
Cumulative net income 8,192,989 7,898,729
Cumulative distributions (17,107,909) (16,671,029)
16,751,780 16,894,400
Total Partners' equity 16,662,730 16,806,791
$ 16,917,150 16,968,881
See accompanying notes to condensed financial statements.
</TABLE>
2
<PAGE>
<TABLE>
USAA Real Estate Income Investments I Limited Partnership
Condensed Statements of Income
(Unaudited)
<CAPTION>
Three Months Three Months
Ended Ended
June 30, 1995 June 30, 1994
<S> <C> <C>
Income
Rental income $ 282,468 181,452
Interest from mortgage loan (note 1) 152,759 152,320
Less direct expenses, including depre-
ciation of $144,898 and $104,906 (236,873) (201,659)
Net operating income 198,354 132,113
Interest income (note 1) 6,334 12,225
Total income 204,688 144,338
Expenses
General and administrative (note 1) 68,818 85,597
Management fee (note 1) 18,585 14,195
Total expenses 87,403 99,792
Net income $ 117,285 44,546
Net income per limited partnership unit $ 2.13 0.81
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1995 June 30, 1994
<S> <C> <C>
Income
Rental income $ 597,609 376,508
Interest from mortgage loan (note 1) 303,482 302,131
Less direct expenses, including depre-
ciation of $261,431 and $210,512 (431,560) (412,104)
Net operating income 469,531 266,535
Interest income (note 1) 15,169 23,629
Total income 484,700 290,164
Expenses
General and administrative (note 1) 147,139 154,313
Management fee (note 1) 40,329 17,325
Total expenses 187,468 171,638
Net income $ 297,232 118,526
Net income per limited partnership unit $ 5.39 2.15
See accompanying notes to condensed financial statements.
</TABLE>
3
<PAGE>
<TABLE>
USAA Real Estate Income Investments I Limited Partnership
Condensed Statements of Cash Flows
Six months ended June 30, 1995 and 1994
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 297,232 118,526
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 261,430 210,512
Amortization 12,249 2,403
Decrease in accounts receivable 4,498 69,629
Increase in deferred charges and (115,236) (154,121)
other assets
Increase in accounts payable, accrued
expenses and other liabilities 92,330 67,841
Loss on early retirement of assets 2,465
Cash provided by operating activities 552,503 317,255
Cash flows used in investing activities-
Additions to rental properties (579,090) (237,016)
Cash flows used in financing activities-
Distributions to partners (441,293) (441,293)
Net decrease in cash and cash equivalents (467,880) (361,054)
Cash and cash equivalents at beginning of period 795,676 1,577,808
Cash and cash equivalents at end of period $ 327,796 1,216,754
See accompanying notes to condensed financial statements.
</TABLE>
4
<PAGE>
Notes to Condensed Financial Statements
June 30, 1995
(Unaudited)
1. Transactions with Affiliates
A summary of transactions with affiliates follows for the six
months ended June 30, 1995:
Quorum
USAA USAA Real Estate
Mutual Real Estate Services
Fund, Inc. Company Corporation
Reimbursement
of expenses (a) $ 53,068 8,381
Management fees 40,329 21,263
Lease commissions 9,388
Mortgage servicing fees 6,800
Interest income (18) (303,482)
Total $ (18) (203,285) 39,032
(a) Reimbursement of expenses represents amounts paid or
accrued as reimbursement of expenses incurred on behalf
of the Partnership at actual cost and does not include
any mark-up or items normally considered as overhead.
2. Other
Reference is made to the financial statements in the Annual
Report filed with the Form 10-K for the year ended December
31, 1994 with respect to significant accounting and financial
reporting policies as well as to other pertinent information
concerning the Partnership. Information furnished in this
report reflects all normal recurring adjustments which are, in
the opinion of management, necessary for a fair presentation
of the results for the interim periods presented. Further,
the operating results presented for these interim periods are
not necessarily indicative of the results which may occur for
the remaining six months of 1995 or any other future period.
The financial information included in this interim report as
of June 30, 1995 and for the three-month and six-month periods
ended June 30, 1995 and 1994 has been prepared by management
without audit by independent certified public accountants who
do not express an opinion thereon. The Partnership's annual
report includes audited financial statements.
5
<PAGE>
PART I
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At June 30, 1995, the Partnership had cash of $25,077 and
temporary investments of $302,719. Accounts receivable consisted
primarily of amounts due from tenants at Volusia Point. Deferred
charges and other assets consisted of deferred rent that resulted
from recognition of income as required by generally accepted
accounting principles, and lease commissions. Accounts payable
included amounts due to affiliates for management fees and
reimbursable expenses.
During the quarter ended June 30, 1995, the Partnership
distributed $218,440 to Limited Partners and $2,206 to the
General Partner for a total of $220,646. Distributions were
decreased in 1994 from amounts paid in prior years in order to
maintain a reserve for capital expenditures for leasing and
property maintenance. In addition to those expenditure needs,
cash flow at the Systech building decreased when the previous
single tenant lease expired in August 1993.
The new single tenant lease between the Partnership and Systech
Corporation commenced March 1, 1995. The initial lease term is
five years with a three year renewal option at prevailing market
rental rates. Systech Corporation moved into almost 43,000
square feet of the building in mid February 1995 and is scheduled
to move into the remaining 10,200 square feet of the building by
March 1996. The rental rate per square foot is lower than the
rental rate for the previous tenant and reflects current rental
market conditions in the area surrounding the property.
Beginning in 1996, in addition to rent, the tenant will pay
property operating expenses that exceed those of 1995, the base
year. The majority of the tenant improvements for the Systech
Corporation has been paid as of June 30, 1995. The Partnership's
commitment of $84,400 for the final tenant improvements on the
remaining 10,200 square feet of the building is expected to be
paid during the first quarter of 1996 and will be funded from
working capital reserves.
6
<PAGE>
Future liquidity is expected to result from cash generated from
operations of the properties and ultimately through the sale of
such properties. In addition, repayment of the mortgage loan
receivable, including participation income based on gross
revenues of Plaza on the Lake, the property underlying the
mortgage, is expected in accordance with the terms of the loan
agreement. Continuing losses incurred at Plaza on the Lake are
not expected to have a material effect on the financial condition
of USAA Real Estate Company, the borrower. The loan agreement
also provides for participation in profits from the sale of the
underlying assets securing the mortgage loan receivable; however,
it is not determinable at this time whether any profits will
result from the sale of the underlying assets or whether such a
sale will occur.
Results of Operations
For the six-month periods ended June 30, 1995 and 1994, income
was generated from rental income from the income producing
properties, interest income and participation income earned on
the mortgage loan and interest income earned on the funds
invested in temporary investments. As there was no lease in
force at the Systech building from August 1993 through February
1995, no income was generated by that property during that
period.
Expenses incurred during the same periods were associated with
operations of the Partnership's properties and various other
costs required for administration of the Partnership.
The increase in rental properties from December 31, 1994 to June
30, 1995 was attributable to the addition of building and tenant
improvements at the Systech building. Cash and cash equivalents
decreased during the same period due to payment of distributions
to Partners and expenditures for improvements and lease
commissions at the Systech building. The increase in deferred
charges during this period resulted from the payment of lease
commissions at the Systech building and additions of deferred
rent at both Partnership properties. Prepaid rent at the Systech
building and property tax accruals for both Partnership
properties accounted for the increase in accrued expenses from
December 31, 1994 to June 30, 1995.
Net income for the three-month and six-month periods ended June
30, 1995 was higher than the comparable periods in 1994 due to
increases in revenues, offset to a lesser degree by increases in
property operating expenses. The majority of the increase in
revenues was attributable to the March 1, 1995 lease commencement
of the single tenant lease at the Systech building. Also
contributing to the increase in revenue was the receipt of
percentage rent at Volusia Point, which was higher in the first
half of 1995 than in 1994.
7
<PAGE>
There were several factors that contributed to the overall
increase in direct operating expenses of the Partnership. The
largest item was the increase in depreciation expense that
resulted from the addition of building and tenant improvements at
the Systech building. Expenses for building services and
utilities also increased as expected upon the commencement of the
Systech lease.
Direct expenses at Volusia Point decreased from the three months
and six months ended June 30, 1994 to the same periods in 1995,
offsetting the increases that resulted from operations at the
Systech building. Most of the decreases at Volusia Point were
due to lower repairs and maintenance expenditures and expenses
related to collection of tenant receivables in 1995.
Legal expenses decreased from the three months and six months
ended June 30, 1994 to the same periods in 1995, accounting for
most of the decrease in general and administrative expenses. The
portfolio management fee is based on cash flow from operations of
the Partnership, adjusted for cash reserves, and fluctuated
accordingly.
8
<PAGE>
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit.
Sequentially
Exhibit Numbered
No. Description Page
4 Restated Certificate and Agreement of Limited
Partnership dated as of October 18, 1984,
incorporated as Exhibit A to the Partnership's
Prospectus dated November 16, 1984, filed
pursuant to Rule 424(b), and incorporated
herein by this reference. __
27 Financial Data Schedule 11
(b) During the quarter ended June 30, 1995, there were no
Current Reports on Form 8-K filed.
9
<PAGE>
FORM 10-Q
SIGNATURES
USAA REAL ESTATE INCOME INVESTMENTS I LIMITED PARTNERSHIP
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.
USAA REAL ESTATE INCOME INVESTMENTS I
LIMITED PARTNERSHIP (Registrant)
BY: USAA INVESTORS I, INC.,
General Partner
August 11, 1995 BY: /s/Edward B. Kelley
Edward B. Kelley
Chairman, President and
Chief Executive Officer
August 11, 1995 BY: /s/Martha J. Barrow
Martha J. Barrow
Vice President -
Administration and
Finance
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 327,796
<SECURITIES> 0
<RECEIVABLES> 31,406
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 10,738,180
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,917,150
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 16,662,730
<TOTAL-LIABILITY-AND-EQUITY> 16,917,150
<SALES> 0
<TOTAL-REVENUES> 901,091
<CGS> 0
<TOTAL-COSTS> 431,560
<OTHER-EXPENSES> 187,468
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 297,232
<INCOME-TAX> 0
<INCOME-CONTINUING> 297,232
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 297,232
<EPS-PRIMARY> 5.39
<EPS-DILUTED> 0
</TABLE>
