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 September 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
1
<PAGE>
PART I
Item 1. Financial Statements
<TABLE>
USAA Real Estate Income Investments I Limited Partnership
Condensed Balance Sheets
<CAPTION>
September 30,
1995 December 31,
(Unaudited) 1994
<S> <C> <C>
Assets
Rental properties, net $ 10,578,905 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 403,999 780,568
403,999 789,883
Cash 49,890 5,793
Cash and cash equivalents 453,889 795,676
Accounts receivable 37,725 35,904
Deferred charges and other assets, at
amortized cost 395,783 276,781
$ 16,906,302 16,968,881
Liabilities and Partners' Equity
Accounts payable, including amounts due
to affiliates of $42,455 and $35,140 $ 54,192 72,614
Accrued expenses 181,263 20,668
Security deposits 63,787 68,808
Total liabilities 299,242 162,090
Partners' equity
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 84,407 79,785
Cumulative distributions (175,014) (168,394)
(89,607) (87,609)
Limited Partners (54,610 units):
Capital contributions, net of offering costs 25,666,700 25,666,700
Cumulative net income 8,356,316 7,898,729
Cumulative distributions (17,326,349) (16,671,029)
16,696,667 16,894,400
Total Partners' equity 16,607,060 16,806,791
$ 16,906,302 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
September 30, September 30
1995 1994
<S> <C> <C>
Income
Rental income $ 297,617 219,924
Interest from mortgage loan (note 1) 154,285 152,227
Less direct expenses, including depre-
ciation of $140,890 and $106,472 (220,079) (176,482)
Net operating income 231,823 195,669
Interest income (note 1) 5,279 13,019
Total income 237,102 208,688
Expenses
General and administrative (note 1) 50,875 42,704
Management fee (note 1) 21,250 13,673
Total expenses 72,125 56,377
Net income $ 164,977 152,311
Net income per limited partnership unit $ 2.99 2.76
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30
1995 1994
<S> <C> <C>
Income
Rental income $ 895,226 596,432
Interest from mortgage loan (note 1) 457,768 454,358
Less direct expenses, including depre-
ciation of $402,321 and $316,983 (651,639) (588,587)
Net operating income 701,355 462,203
Interest income (note 1) 20,448 36,649
Total income 721,803 498,852
Expenses
General and administrative (note 1) 198,015 197,017
Management fee (note 1) 61,579 30,998
Total expenses 259,594 228,015
Net income $ 462,209 270,837
Net income per limited partnership unit $ 8.38 4.91
See accompanying notes to condensed financial statements.
</TABLE>
3
<PAGE>
<TABLE>
USAA Real Estate Income Investments I Limited Partnership
Condensed Statements of Cash Flows
Nine months ended September 30, 1995 and 1994
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 462,209 270,837
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 402,321 316,983
Amortization 23,237 4,325
Decrease (increase) in accounts receivable (1,821) 42,808
Increase in deferred charges and other assets (142,239) (183,370)
Increase in accounts payable, accrued expenses
and other liabilities 137,152 76,614
Loss on early retirement of assets -- 2,465
Cash provided by operating activities 880,859 530,662
Cash flows used in investing activities-
Additions to rental properties (560,706) (319,415)
Cash flows used in financing activities-
Distributions to partners (661,940) (661,939)
Net decrease in cash and cash equivalents (341,787) (450,692)
Cash and cash equivalents at beginning of period 795,676 1,577,808
Cash and cash equivalents at end of period $ 453,889 1,127,116
See accompanying notes to condensed financial statements.
</TABLE>
4
<PAGE>
Notes to Condensed Financial Statements
September 30, 1995
(Unaudited)
1. Transactions with Affiliates
A summary of transactions with affiliates follows for the
nine months ended September 30, 1995:
Quorum
USAA USAA Real Estate
Mutual Real Estate Services
Fund, Inc. Company Corporation
Reimbursement
of expenses (a) $ -- 77,788 10,776
Management fees -- 61,579 32,502
Lease commissions -- -- 12,757
Mortgage servicing fees -- 10,200 --
Interest income (18) (457,768) --
Total $ (18) (308,201) 56,035
(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 three months of 1995 or any other future period.
The financial information included in this interim report as of
September 30, 1995 and for the three-month and nine-month periods
ended September 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 September 30, 1995, the Partnership had cash of $49,890 and
temporary investments of $403,999. Accounts receivable consisted
primarily of amounts due from tenants at Volusia Point and the
Systech building. 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 September 30, 1995, the Partnership
distributed $218,440 to Limited Partners and $2,207 to the
General Partner for a total of $220,647. 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 were paid in the first half of 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.
It is anticipated that the Partnership will receive the principal
balance of the mortgage loan receivable from USAA Real Estate
Company, the borrower, in January 1996 in accordance with the
terms of the mortgage loan agreement. Distribution of the
proceeds from the loan repayment, net of reserves determined to
be needed for future operations, would then be made to the
Partners during the first quarter of 1996, in addition to the
regular quarterly distribution. Due to the reduced cash flow
that will occur subsequent to the repayment of the mortgage loan,
quarterly distributions to Partners are expected to be decreased
beginning in the first quarter of 1996.
6
<PAGE>
Future liquidity is expected to result from cash generated from
operations of the properties, interest on temporary investments
and ultimately through the sale of the properties.
Results of Operations
For the periods ended September 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
September 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 revenue at
the Systech building and property tax accruals for both
Partnership properties accounted for the increase in accrued
expenses from December 31, 1994 to September 30, 1995.
Net income for the three-month and nine-month periods ended
September 30, 1995 was higher than the comparable periods in 1994
due to increases in property revenues, offset to a lesser degree
by increases in property operating expenses. The increase in
rental income for the three-month period ended September 30, 1995
over the same three-month period in 1994 was attributable to the
March 1, 1995 commencement of the single tenant lease at the
Systech building, and was offset by the decrease in revenue at
Volusia Point that resulted from the decrease in occupancy from
95% at September 30, 1994 to 88% one year later.
For the nine-month periods ended September 30, 1994 and 1995, the
majority of the increase in rental income was attributable to the
increase at the Systech building. The increase in percentage
rent and tenant reimbursable operating expenses at Volusia Point
was offset for the most part by the decrease in rental income
related to the decrease in occupancy at that property.
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 increased from the three months
ended September 30, 1994 to the same period in 1995. Most of the
increase at Volusia Point was due to an increase in property
taxes coupled with a decrease in tenant reimbursement of
operating expenses. There was a decrease in direct expenses at
Volusia Point for the nine months ended September 30, 1995 from
the same period of the prior year, due to lower repair and
maintenance expenditures and expenses related to collection of
tenant receivables in 1995.
General and administrative expenses increased from the three-
month period ended September 30, 1994 to the three-month period
ended September 30, 1995 due to internal audit fees and the
amortization of lease commissions, both of which were related to
the Systech building. Legal expenses decreased from the three
months and nine months ended September 30, 1994 to the same
periods in 1995, offsetting increases in other general and
administrative expenses of the same period. 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), Registration No.2-92845
and incorporated herein by this reference. __
27 Financial Data Schedule 11
(b) During the quarter ended September 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
November 9, 1995 BY: /s/Edward B. Kelley
Edward B. Kelley
Chairman, President and
Chief Executive Officer
November 9, 1995 BY: /s/Martha J. Barrow
Martha J. Barrow
Vice President -
Administration and
Finance/Treasurer<PAGE>
10
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 453,889
<SECURITIES> 0
<RECEIVABLES> 37,725
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 10,578,905
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,906,302
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 16,607,060
<TOTAL-LIABILITY-AND-EQUITY> 16,906,302
<SALES> 0
<TOTAL-REVENUES> 1,352,994
<CGS> 0
<TOTAL-COSTS> 651,639
<OTHER-EXPENSES> 259,594
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 462,209
<INCOME-TAX> 0
<INCOME-CONTINUING> 462,209
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 462,209
<EPS-PRIMARY> 8.38
<EPS-DILUTED> 0
</TABLE>
