FORM 10-QSB--Quarterly Report Under Section 13 or 15(d)
Of the Securities Exchange Act of 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 0-15656
U.S. REALTY PARTNERS LIMITED PARTNERSHIP
(Exact name of small business issuer as specified in its charter)
South Carolina 57-0814502
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Check whether the issuer (1) 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 .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) U.S. REALTY PARTNERS LIMITED PARTNERSHIP
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 1996
Assets
Restricted cash $ 334
Accounts receivable 318
Escrow for taxes 259
Restricted escrows 215
Other assets 187
Investment properties:
Land $ 6,534
Buildings and related personal property 26,479
33,013
Less accumulated depreciation (9,043) 23,970
$25,283
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 51
Tenant security deposits 138
Accrued taxes 174
Other liabilities 408
Due to corporate general partner 506
Mortgage notes payable 21,897
Partners' Capital (Deficit)
General partners $ (441)
Depositary unit certificate holders
(2,444,000 units authorized;
1,222,000 units issued and outstanding) 2,550 2,109
$25,283
See Accompanying Notes to Financial Statements
b) U.S. REALTY PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1996 1995
Revenues:
Rental income $1,285 $1,190
Other income 39 42
Total revenues 1,324 1,232
Expenses:
Operating 233 203
General and administrative 46 67
Property management fees 75 72
Maintenance 65 60
Depreciation 208 207
Amortization 14 15
Interest 583 589
Property taxes 113 106
Total expenses 1,337 1,319
Net loss $ (13) $ (87)
Net loss allocated to general partners (1%) $ -- $ (1)
Net loss allocated to depositary unit
certificate holders (99%) (13) (86)
$ (13) $ (87)
Net loss per Depositary Unit Certificate $ (.01) $ (.07)
See Accompanying Notes to Financial Statements
c) U.S. REALTY PARTNERS LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Depositary
Depositary Unit
Unit General Certificate
Certificates Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 1,222,000 $ 2 $ 30,550 $ 30,552
Partners' capital (deficit) at
December 31, 1995 1,222,000 $ (441) $ 2,563 $ 2,122
Net loss for the three months
ended March 31, 1996 -- -- (13) (13)
Partners' capital (deficit) at
March 31, 1996 1,222,000 $ (441) $ 2,550 $ 2,109
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
d) U.S. REALTY PARTNERS LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (13) $ (87)
Adjustments to reconcile net loss to cash
provided by operating activities:
Depreciation 208 207
Amortization of leasing commissions, computer
software costs and organizational costs 15 14
Bad debt expense 17 34
Change in accounts:
Restricted cash 22 135
Accounts receivable (17) (57)
Escrows for taxes (122) (54)
Other assets -- (5)
Accounts payable (36) (38)
Tenant security deposit liabilities -- 3
Accrued taxes 113 39
Other liabilities 17 10
Net cash provided by operating activities 204 201
Cash flows from investing activities:
Property improvements and replacements (37) (38)
Deposits to restricted escrows (3) (14)
Receipts from restricted escrows -- 27
Net cash used in investing activities (40) (25)
Cash flows from financing activities:
Payments on mortgage notes payable (164) (176)
Net cash used in financing activities (164) (176)
Net increase in cash -- --
Cash at beginning of period -- --
Cash at end of period $ -- $ --
Supplemental disclosure of cash flow information:
Cash paid for interest $ 562 $ 569
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
e) U.S. REALTY PARTNERS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of U.S. Realty Partners
Limited Partnership (the "Partnership") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of the Corporate General Partner, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31,
1996, are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1996. For further information, refer to the
financial statements and footnotes thereto included in the Partnership's annual
report on Form 10-KSB for the year ended December 31, 1995.
Certain reclassifications have been made to the 1995 information to conform
to the 1996 presentation.
Note B - Reconciliation of Cash Flows
The Partnership considers all cash to be restricted for tenant security
deposits and for the purpose of the deposit of Net Cash Flow, as defined by the
debt restructure in October of 1993.
Note C - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Corporate General
Partner and its affiliates for the management and administration of all
Partnership activities. The Partnership Agreement provides for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
Transactions between the partnership and affiliates of Insignia Financial
Group, Inc. for the quarters ended March 31, 1996 and 1995 were as follows:
Three Months Ended
March 31,
1996 1995
(in thousands)
Property management fees $ 75 $ 72
Reimbursement for services of affiliates 30 19
Interest expense 6 6
Due to Corporate General Partner 506 482
The Partnership insures its properties under a master policy through an
agency and insurer unaffiliated with the Corporate General Partner. An
affiliate of the Corporate General Partner acquired, in the acquisition of a
business, certain financial obligations from an insurance agency which was later
acquired by the agent who placed the current year's master policy. The current
agent assumed the financial obligations to the affiliate of the Corporate
General Partner, who receives payments on these obligations from the agent. The
amount of the partnership's insurance premiums accruing to the benefit of the
affiliate of the Corporate General Partner by virtue of the agent's obligations
is not significant.
Note D - Contingency
On March 29, 1994, Insignia Financial Group, Inc., an affiliate of the
Corporate General Partner, was served with a complaint filed in the United
States District Court, Eastern District of Kentucky and styled Kenneth Ogle, et.
al., v. U.S. Shelter Corporation, et. al. The Corporate General Partner was a
named defendant in such suit and was served with such complaint. Such complaint
alleged, inter alia, that the Corporate General Partner engaged in a conspiracy
to defraud limited partners in the Partnership, made certain material
misstatements and omissions in the prospectus relating to the sale of limited
partnership interests in the Partnership, and breached its fiduciary duties to
the limited partners of the Partnership, and sought the certification of such
suit as a class action. The case was dismissed with prejudice by the United
States District Court for the Eastern District of Kentucky on April 25, 1996.
The Corporate General Partner is currently evaluating the possibility of any
allowed indemnification for its costs associated with this case.
Except for the issue stated, the Registrant is unaware of any pending or
outstanding litigation that is not of a routine nature. The Corporate General
Partner of the Registrant believes that all such pending or outstanding
litigation will be resolved without a material adverse effect upon the business,
financial condition, or operations of the Partnership.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
On April 1, 1993, the Partnership filed for protection under Chapter 11 of
the Federal Bankruptcy Code. The filing was made due to the Partnership's
inability to repay its secured debt as a result of a deficiency of funds
necessary to retire debt to an insurance company. On April 23, 1993, the
Partnership filed the Reorganization Plan (the "Plan") with the United States
Bankruptcy Court for the District of South Carolina (the "Court"). The
significant provision of the Plan was the refinancing of the secured debt which
occurred on October 15, 1993. On July 23, 1993, the Court entered an order
confirming the Partnership's Plan. On January 27, 1994, the Court closed the
case.
The Partnership's investment properties consist of two apartment complexes
and two commercial shopping centers. The following table sets forth the average
occupancy of the properties for the three months ended March 31, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Twin Lakes Apartments
Palm Harbor, Florida 96% 93%
Governor's Park Apartments
Little Rock, Arkansas 93% 97%
The Gallery - Huntsville
Huntsville, Alabama 94% 93%
The Gallery - Knoxville
Knoxville, Tennessee 98% 97%
The Corporate General Partner attributes the increase in occupancy at Twin
Lakes to a decrease in the number of home purchases by existing tenants and an
increase in renewals at the property. The Corporate General Partner attributes
the decrease in occupancy at Governor's Park to residents taking advantage of
the lower interest rates to purchase homes. Additionally, Pulaski County is
experiencing a decline in population growth as people are moving to surrounding
counties because of cheaper housing and better school districts.
The Partnership reported a net loss of $13,000 for the three months ended
March 31, 1996, versus a net loss of $87,000 for the corresponding period ended
March 31, 1995. The decrease in net loss is primarily attributable to increased
rental income as Twin Lakes had a rent increase effective in February 1996 and
Governor's Park had a rent increase effective in December 1995. Also, the
Partnership received increased percentage rental income, which is rental income
based on an agreed percentage of sales, from certain commercial tenants during
the first quarter of 1996. General and administrative costs decreased due to a
decrease in professional fees as the Partnership paid the final invoice related
to the debt restructuring in the first quarter of 1995.
Offsetting the items noted above was a decrease in other income and an
increase in operating expenses. The decrease in other income was due to a
decrease in cancellation and cleaning fees at Twin Lakes. Operating expenses
increased primarily as a result of increased utility expenses at Twin Lakes and
Governor's Park. Leasing commissions increased at Twin Lakes due to increased
leasing activity which resulted in an increase in occupancy.
As part of the ongoing business plan of the Partnership, the Corporate
General Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
expenses. As part of this plan, the Corporate General Partner attempts to
protect the Partnership from the burden of inflation-related increases in
expenses by increasing rents and maintaining a high overall occupancy level.
However, due to changing market conditions, which can result in the use of
rental concessions and rental reductions to offset softening market conditions,
there is no guarantee that the Corporate General Partner will be able to sustain
such a plan.
Based on the terms of the debt structure, all cash is considered restricted.
Cash flows provided by operating activities increased as a result of the
decrease in net loss for the three months ended March 31, 1996, as compared to
the same period in 1995 as discussed above. Net cash used in investing
activities increased as a result of a decrease in receipts from restricted
escrows. Net cash used in financing activities decreased due to the decrease in
principal payments in 1996.
The Partnership has no material capital programs scheduled to be performed
in 1996, although certain routine capital expenditures and maintenance expenses
have been budgeted. These capital expenditures and maintenance expenses will be
incurred only if cash is available from operations or is received from the
capital reserve account.
The sufficiency of existing liquid assets to meet future liquidity and
capital expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Partnership. Such assets are currently thought
to be sufficient for any near-term needs of the Partnership. The mortgage
indebtedness of $21,897,000, requires a balloon payment on August 1, 2001, at
which time the properties will either be refinanced or sold. The Corporate
General Partner is currently assessing the feasibility of refinancing the
mortgage encumbering the Partnership's investment properties. Pursuant to the
loan agreement, no distributions can be made until all long-term debt is repaid.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 29, 1994, Insignia Financial Group, Inc., an affiliate of the
Corporate General Partner, was served with a complaint filed in the United
States District Court, Eastern District of Kentucky and styled Kenneth Ogle, et.
al., v. U.S. Shelter Corporation, et. al. The Corporate General Partner was a
named defendant in such suit and was served with such complaint. Such complaint
alleged, inter alia, that the Corporate General Partner engaged in a conspiracy
to defraud limited partners in the Partnership, made certain material
misstatements and omissions in the prospectus relating to the sale of limited
partnership interests in the Partnership, and breached its fiduciary duties to
the limited partners of the Partnership, and sought the certification of such
suit as a class action. The case was dismissed with prejudice by the United
States District Court for the Eastern District of Kentucky on April 25, 1996.
The Corporate General Partner is currently evaluating the possibility of any
allowed indemnification for its costs associated with this case.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
U.S. REALTY PARTNERS LIMITED PARTNERSHIP
By: U. S. Realty I Corporation
Corporate General Partner
By: /s/William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By: /s/Ronald Uretta
Ronald Uretta
Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
Date: May 8, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from U.S. Realty
Partners Ltd Partnership 1996 First Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000788955
<NAME> US REALTY PARTNERS LTD PARTNERSHIP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 318
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 33,013
<DEPRECIATION> 9,043
<TOTAL-ASSETS> 25,283
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 21,897
0
0
<COMMON> 0
<OTHER-SE> 2,109
<TOTAL-LIABILITY-AND-EQUITY> 25,283
<SALES> 0
<TOTAL-REVENUES> 1,324
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,337
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 583
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
<FN>
<F1>The Partnership has an unclassified balance sheet.
</FN>
</TABLE>
