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 March 31, 1997
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>
March 31,
1997 December 31,
(Unaudited) 1996
<S> <C> <C>
Assets
Rental properties, net $ 9,822,011 9,964,683
Temporary investments, at cost which
approximates market value-
Money market fund 1,004,834 926,892
Cash 41,435 46,204
Cash and cash equivalents 1,046,269 973,096
Accounts receivable 51,317 72,175
Deferred charges, at amortized cost, and other
assets 376,197 386,325
$ 11,295,794 11,396,279
Liabilities and Partners' Equity
Accounts payable, including amounts due to
affiliates of $36,517 and $27,907 $ 67,244 83,582
Accrued expenses and other liabilities 70,323 35,634
Security deposits 66,616 66,616
Total liabilities 204,183 185,832
Partners' equity:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 90,836 89,818
Cumulative distributions (186,597) (184,391)
(94,761) (93,573)
Limited Partners (54,610 units):
Capital contributions, net of offering costs 25,666,700 25,666,700
Cumulative net income 8,992,817 8,892,025
Cumulative distributions (23,473,145) (23,254,705)
11,186,372 11,304,020
Total Partners' equity 11,091,611 11,210,447
$ 11,295,794 11,396,279
See accompanying notes to condensed financial statements.
</TABLE>
2
<PAGE>
<TABLE>
USAA REAL ESTATE INCOME INVESTMENTS I LIMITED PARTNERSHIP
Condensed Statements of Income
Three months ended March 31, 1997 and 1996
(Unaudited)
<CAPTION>
1997 1996
<S> <C> <C>
Income
Rental income $ 470,977 392,081
Interest from mortgage loan from affiliate -- 52,124
Interest income 12,942 48,046
Total income 483,919 492,251
Expenses
Direct expenses, $33,783 and $31,086 to
affiliates (note 1) 138,877 130,312
Depreciation 146,243 141,364
General and administrative, $42,153 and
$36,401 to affiliates (note 1) 76,866 86,148
Management fee to affiliate (note 1) 20,123 21,787
Total expenses 382,109 379,611
Net income $ 101,810 112,640
Net income per limited partnership unit $ 1.85 2.04
See accompanying notes to condensed financial statements.
</TABLE>
3
<PAGE>
<TABLE>
USAA REAL ESTATE INCOME INVESTMENTS I LIMITED PARTNERSHIP
Condensed Statements of Cash Flows
Three months ended March 31, 1997 and 1996
(Unaudited)
<CAPTION>
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 101,810 112,640
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 146,243 141,364
Amortization 11,364 11,053
Decrease in accounts receivable 20,858 30,502
Increase in deferred charges and other assets (1,236) (9,586)
Increase in accounts payable, accrued expenses
and other liabilities 18,351 114,928
Cash provided by operating activities 297,390 400,901
Cash flows from investing activities:
Additions to rental properties (3,571) --
Proceeds from mortgage loan receivable -- 5,440,000
Cash provided by (used in) investing activities (3,571) 5,440,000
Cash flows used in financing activities-
Distributions to Partners (220,646) (5,165,470)
Net increase in cash and cash equivalents 73,173 675,431
Cash and cash equivalents at beginning of period 973,096 366,837
Cash and cash equivalents at end of period $ 1,046,269 1,042,268
See accompanying notes to condensed financial statements.
</TABLE>
4
<PAGE>
Notes to Condensed Financial Statements
March 31, 1997
(Unaudited)
1. Transactions with Affiliates
A summary of transactions with affiliates follows for the
three-month period ended March 31, 1997:
Quorum
USAA Real Estate
Real Estate Services
Company Corporation
Reimbursement
of expenses (a)$ 36,996 18,552
Management fees 20,123 15,231
Lease commissions -- 5,157
Total $ 57,119 38,940
(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 as part of the Form 10-K for the year ended
December 31, 1996 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 nine months of 1997 or any other future
period.
The financial information included in this interim report as of
March 31, 1997 and for the three-month period ended March 31,
1997 and 1996 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.
Certain 1996 balances have been reclassified to conform to the
1997 presentation.
5
<PAGE>
PART I
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At March 31, 1997, the Partnership had cash of $41,435 and
temporary investments of $1,004,834. These funds were held in the
working capital reserve for the payment of obligations of the
Partnership. Accounts receivable consisted of amounts due from
tenants at both of the Partnership properties. 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 and to third parties for expenses incurred for operations.
Accrued expenses and other liabilities consisted of property tax
accruals, security deposits and prepaid revenue from tenants.
During the quarter ended March 31, 1997, the Partnership
distributed $218,440 to Limited Partners and $2,206 to the General
Partner for a total of $220,646. Management evaluates reserves and
the availability of funds for distribution to the Partners on a
continuing basis based on anticipated leasing activity and cash
flows available from the Partnership investments. As a result of
this analysis, quarterly distributions were increased from $3.00 to
$4.00 per limited partnership unit in the fourth quarter of 1996.
Due to strengthening market conditions surrounding the Partnership
properties and occupancy levels achieved at the properties,
management believes the portfolio is well positioned to sell. The
Partnership will continue to explore options for possible sale of
both properties. To date, no formal plan for final disposition of
the properties has been made.
Due to the recent change in tenancy, the name of the Systech
building has been changed to 10505 Sorrento Valley Road. The
balance of approximately $22,000 of the Partnership's commitment
for the final phase of tenant improvements at this property was
expended in January 1997. The funding of these improvements was
from the working capital reserve of the Partnership.
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.
6
<PAGE>
Results of Operations
For the three-month periods ended March 31, 1997 and 1996, income
was generated from rental income from the income producing
properties and interest earned on the funds invested in temporary
investments. Interest income and participation income earned on
the mortgage loan prior to the January 31, 1996 payoff of the
mortgage loan receivable is also included in income for the three-
month period ended March 31, 1996. 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 decrease in rental properties from December 31, 1996 to March
31, 1997 was primarily attributable to depreciation on the
Partnership properties. The decrease in accounts receivable during
the same time period reflects the collection of rents and
reimbursable operating expenses from tenants at both of the
Partnership properties. Amortization of lease commissions for
10505 Sorrento Valley Road caused the decrease in deferred charges.
The decrease in accounts payable reflected timing in payment of
tenant improvements at 10505 Sorrento Valley Road. Accrued
property taxes for both of the Partnership properties accounted for
the increase in accrued expenses and other liabilities.
Rental income increased at both of the Partnership properties from
the three-month period ended March 31, 1996 to the same three-month
period in 1997. Approximately $26,000 of the increase was
attributable to the increase in occupancy and percentage rent at
Volusia Point Shopping Center. The balance of the increase of
approximately $53,000 was realized as a result of the increase in
physical occupancy at 10505 Sorrento Valley Road and the receipt
from tenants of reimbursable operating expenses subsequent to their
base year. The decrease in interest income from the mortgage loan
for the three-month period ended March 31, 1997 was the result of
the January 31, 1996 payoff of the receivable. Interest income was
higher for the three-month period in 1996 as a result of the
increase in cash and cash equivalents temporarily held by the
Partnership after the payoff of the mortgage loan receivable and
prior to distribution of those proceeds to Limited Partners.
The increase in direct expenses from the three-month period ended
March 31, 1996 to the three-month period ended March 31, 1997
reflected increases in utility and cleaning charges at 10505
Sorrento Valley Road which resulted from the increase in physical
occupancy at the property. The increase in depreciation during the
same period was due to the addition of tenant improvements at 10505
Sorrento Valley Road, and was partially offset by a decrease in
depreciation at Volusia Point as some tenant improvements were
fully depreciated in 1996.
7
<PAGE>
General and administrative expenses decreased from the three-month
period in 1996 to the three-month period in 1997 primarily as a
result of lower postage and audit fees. Legal expenses were also
higher during the three-month period ended March 31, 1996 due to
the lease restructing that occurred at 10505 Sorrento Valley Road
during that 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), Regis. No. 2-92845
and incorporated herein by this reference. __
27 Financial Data Schedule 11
(b) During the quarter ended March 31, 1997, 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
May 12, 1997 BY: /s/Edward B. Kelley
Edward B. Kelley
Chairman, President and
Chief Executive Officer
May 12, 1997 BY: /s/Martha J. Barrow
Martha J. Barrow
Vice President -
Administration and
Finance/Treasurer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,046,269
<SECURITIES> 0
<RECEIVABLES> 51,317
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 9,822,011
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,295,794
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 11,091,611
<TOTAL-LIABILITY-AND-EQUITY> 11,295,794
<SALES> 0
<TOTAL-REVENUES> 470,977
<CGS> 0
<TOTAL-COSTS> 285,120
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 101,810
<INCOME-TAX> 0
<INCOME-CONTINUING> 101,810
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101,810
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 0
</TABLE>
