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 September 30, 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)
September 30, 1996
Assets
Restricted cash $ 312
Accounts receivable 58
Escrow for taxes 508
Restricted escrows 213
Other assets 435
Investment properties:
Land $ 6,534
Buildings and related personal property 26,602
33,136
Less accumulated depreciation ( 9,464) 23,672
$25,198
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 112
Tenant security deposits 125
Accrued taxes 393
Other liabilities 434
Due to corporate general partner 518
Mortgage notes payable 21,659
Partners' Capital (Deficit)
General partners $ (443)
Depositary unit certificate holders
(2,444,000 units authorized;
1,222,000 units issued and outstanding) 2,400 1,957
$25,198
See Accompanying Notes to Financial Statements
b) U.S. REALTY PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 1,284 $ 1,281 $ 3,884 $ 3,695
Other income 41 39 114 125
Total revenues 1,325 1,320 3,998 3,820
Expenses:
Operating 350 313 1,011 925
General and administrative 40 44 143 168
Maintenance 165 73 318 207
Depreciation 211 210 629 625
Interest 576 588 1,731 1,762
Property taxes 109 111 331 319
Total expenses 1,451 1,339 4,163 4,006
Net loss $ (126) $ (19) $ (165) $ (186)
Net loss allocated
to general partners (1%) $ (1) $ -- $ (2) $ (2)
Net loss allocated to depositary
unit certificate holders (99%) (125) (19) (163) (184)
$ (126) $ (19) $ (165) $ (186)
Net loss per Depositary
Unit Certificate $ (.10) $ (.01) $ (.13) $ (.15)
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
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 Holders 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 nine months
ended September 30, 1996 (2) (163) (165)
Partners' capital (deficit) at
September 30, 1996 1,222,000 $ (443) $ 2,400 $ 1,957
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
d) U.S. REALTY PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities:
Net loss $ (165) $ (186)
Adjustments to reconcile net loss to cash
provided by operating activities:
Depreciation 629 625
Amortization 43 43
Bad debt expense (34) 62
Change in accounts:
Restricted cash 44 108
Accounts receivable (7) (45)
Escrows for taxes (370) (300)
Other assets 24 (8)
Accounts payable 25 (13)
Tenant security deposit liabilities (13) 15
Accrued taxes 331 252
Other liabilities 54 26
Net cash provided by operating activities 561 579
Cash flows from investing activities:
Property improvements and replacements (159) (99)
Deposits to restricted escrows (22) (17)
Receipts from restricted escrows 21 27
Net cash used in investing activities (160) (89)
Cash flows from financing activities:
Payments on mortgage notes payable (401) (490)
Net cash used in financing activities (401) (490)
Net change in cash -- --
Cash at beginning of period -- --
Cash at end of period $ -- $ --
Supplemental disclosure of cash flow information:
Cash paid for interest $1,676 $ 1,695
See Accompanying Notes to Financial Statements
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 U.S. Realty I Corporation ("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 and nine
month periods ended September 30, 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. Property management fees paid to
affiliates of Insignia Financial Group, Inc. during each of the nine months
ended September 30, 1996 and 1995, are included in operating expenses on the
Consolidated Statement of Operations and are reflected in the following table.
The Corporate General Partner and its affiliates received reimbursements and
fees as reflected in the following table:
Nine Months Ended
September 30,
1996 1995
(in thousands)
Property management fees $221 $210
Reimbursement for services of affiliates 68 57
Due to Corporate General Partner--
includes principal and accrued interest 518 494
NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES - CONTINUED
Included in "reimbursements of services of affiliates" for 1996 are
approximately $3,000 in reimbursements for construction oversight costs.
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 a
putative class of limited partners of the Partnership. The plaintiffs sought
the certification by the court that the case may proceed 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.
Plaintiffs appealed the dismissal to the United States Court of Appeals for the
Sixth Circuit. During the appeal process, the Partnership was notified that the
parties had reached an agreement to withdraw the appeal. No payment by the
Partnership has been or will be made as part of the discontinuation of the
appeal.
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 nine months ended September 30, 1996 and
1995:
Average
Occupancy
Property 1996 1995
Twin Lakes Apartments
Palm Harbor, Florida 95% 94%
Governor's Park Apartments
Little Rock, Arkansas 92% 96%
The Gallery - Huntsville
Huntsville, Alabama 94% 94%
The Gallery - Knoxville
Knoxville, Tennessee 96% 94%
The Corporate General Partner attributes the decrease in occupancy at Governor's
Park to residents purchasing 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's net loss for the nine months ended September 30, 1996, was
approximately $165,000, with the three months ended September 30, 1996,
recording a net loss of approximately $126,000. The Partnership reported net
losses of approximately $186,000 and $19,000 for the corresponding periods in
1995. The decrease in net loss for the nine month period is primarily due to a
decrease in general and administrative expense and an increase in rental
revenue. General and administrative expense 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. Rental income increased as a result
of rent increases and higher occupancy at Twin Lakes. Rental income also
increased at Gallery Knoxville due to an increase in occupancy. Furthermore,
the percentage rental income, which is rental income based on an agreed
percentage of sales, from certain commercial tenants increased during the nine
months ended September 30, 1996, at both Gallery Huntsville and Gallery
Knoxville due to the increase in such sales.
Increases in maintenance expense and operating expense were largely responsible
for the increase in net loss for the three months ended September 30, 1996,
compared to the corresponding period of 1995. The increase in maintenance
expense was due to the completion of an exterior painting contract at Governor's
Park and the installation and repair of gutters at Twin Lakes. Operating
expense increased due to an increase in management fees due to the increase in
revenues as well as an increase in concessions incurred at Twin Lakes in
response to new competition.
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 remained relatively stable for the
nine months ended September 30, 1996, as compared to the same period in 1995.
Net cash used in investing activities increased as a result of an increase in
property improvements and replacements. Canopies at the Gallery Huntsville are
being replaced, as the existing canopies have deteriorated due to age. Net cash
used in financing activities decreased due to a decrease in principal payments
in 1996 as the debt payments are calculated as a factor of the Partnership's
cash flow which was reduced due to increased capital improvements.
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 approximately $21,659,000 requires a balloon payment on August
1, 2001, at which time the properties are expected to 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 a
putative class of limited partners of the Partnership. The plaintiffs sought
the certification by the court that the case may proceed 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.
Plaintiffs appealed the dismissal to the United States Court of Appeals for the
Sixth Circuit. During the appeal process, the Partnership was notified that the
parties had reached an agreement to discontinue the appeal. No payment by the
Partnership has been or will be made as part of the discontinuation of the
appeal.
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 September 30, 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: November 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from U.S. Realty
Partners Limited Partnership 1996 Third Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000788955
<NAME> U.S. REALTY PARTNERS LIMITED PARTNERSHIP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 58
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 33,136
<DEPRECIATION> 9,464
<TOTAL-ASSETS> 25,198
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 21,659
0
0
<COMMON> 0
<OTHER-SE> 1,957
<TOTAL-LIABILITY-AND-EQUITY> 25,198
<SALES> 0
<TOTAL-REVENUES> 3,998
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,163
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,731
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (165)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
</FN>
</TABLE>
