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 June 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)
June 30, 1996
Assets
Restricted cash $ 340
Accounts receivable 387
Escrow for taxes 383
Restricted escrows 213
Other assets 172
Investment properties:
Land $ 6,534
Buildings and related personal property 26,538
33,072
Less accumulated depreciation (9,252) 23,820
$25,315
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 51
Tenant security deposits 128
Accrued taxes 284
Other liabilities 471
Due to corporate general partner 512
Mortgage notes payable 21,786
Partners' Capital (Deficit)
General partners $ (441)
Depositary unit certificate holders
(2,444,000 units authorized;
1,222,000 units issued and outstanding) 2,524 2,083
$25,315
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 Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 1,315 $ 1,223 $ 2,600 $ 2,413
Other income 34 45 73 87
Total revenues 1,349 1,268 2,673 2,500
Expenses:
Operating 337 321 659 611
General and administrative 57 57 103 124
Maintenance 89 75 154 135
Depreciation 210 208 418 415
Interest 572 585 1,155 1,174
Property taxes 110 103 223 209
Total expenses 1,375 1,349 2,712 2,668
Net loss $ (26) $ (81) $ (39) $ (168)
Net loss allocated
to general partners (1%) $ -- $ (1) $ -- $ (2)
Net loss allocated to depositary
unit certificate holders (99%) (26) (80) (39) (166)
$ (26) $ (81) $ (39) $ (168)
Net loss per Depositary
Unit Certificate $ (.02) $ (.07) $ (.03) $ (.14)
<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 six months
ended June 30, 1996 -- -- (39) (39)
Partners' capital (deficit) at
June 30, 1996 1,222,000 $ (441) $ 2,524 $ 2,083
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
d) U.S. REALTY PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (39) $ (168)
Adjustments to reconcile net loss to cash
provided by operating activities:
Depreciation 418 415
Amortization 29 29
Bad debt expense 10 47
Change in accounts:
Restricted cash 17 120
Accounts receivable (79) (30)
Escrows for taxes (245) (177)
Other assets -- (5)
Accounts payable (36) (22)
Tenant security deposit liabilities (10) 10
Accrued taxes 223 141
Other liabilities 84 (14)
Net cash provided by operating activities 372 346
Cash flows from investing activities:
Property improvements and replacements (96) (68)
Deposits to restricted escrows (20) (15)
Receipts from restricted escrows 19 27
Net cash used in investing activities (97) (56)
Cash flows from financing activities:
Payments on mortgage notes payable (275) (290)
Net cash used in financing activities (275) (290)
Net change in cash -- --
Cash at beginning of period -- --
Cash at end of period $ -- $ --
Supplemental disclosure of cash flow information:
Cash paid for interest $1,115 $1,134
<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 six month period ended June 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.
Transactions between the partnership and affiliates of Insignia Financial Group,
Inc. for the six months ended June 30, 1996 and 1995 were as follows:
Six Months Ended
June 30,
1996 1995
(in thousands)
Property management fees $146 $140
Reimbursement for services of affiliates 50 37
Due to Corporate General Partner--
includes principal and accrued interest 512 488
Note C - Transactions with Affiliated Parties - continued
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 have appealed the
dismissal to the United States Court of Appeals for the Sixth Circuit. The
Partnership anticipates that a decision on the appeal will be rendered.
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 six months ended June 30, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Twin Lakes Apartments
Palm Harbor, Florida 95% 92%
Governor's Park Apartments
Little Rock, Arkansas 92% 96%
The Gallery - Huntsville
Huntsville, Alabama 94% 94%
The Gallery - Knoxville
Knoxville, Tennessee 98% 96%
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 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 six months ended June 30, 1996, was $39,000,
with the second quarter recording a net loss of $26,000. The Partnership
reported net losses of $168,000 and $81,000 for the corresponding periods in
1995. The decrease in net loss 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 at
the residential properties. Also, the percentage rental income, which is rental
income based on an agreed percentage of sales, from certain commercial tenants
increased during the six months ended June 30, 1996.
Offsetting the decrease in net loss was a decrease in other income and an
increase in maintenance expense. Other income decreased due to a reduction in
cleaning and damage fees, lease cancellation fees, and application fees at Twin
Lakes as turnover is down in comparison to the prior year. Maintenance expense
increased due to an increase in repair work which is necessary to maintain the
appearance of the properties. Parking lot repairs, interior painting,
landscaping, and building improvements increased during 1996 as compared to
1995.
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 six months ended June 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 $21,786,000 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 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 have appealed the
dismissal to the United States Court of Appeals for the Sixth Circuit. The
Partnership anticipates that a decision on the appeal will be rendered.
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 June 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: August 9, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from US Realty
Partners Ltd. Partnership 1996 Second 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 387
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 33,072
<DEPRECIATION> 9,252
<TOTAL-ASSETS> 25,315
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 21,786
0
0
<COMMON> 0
<OTHER-SE> 2,083
<TOTAL-LIABILITY-AND-EQUITY> 25,315
<SALES> 0
<TOTAL-REVENUES> 2,673
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,712
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,155
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet
</FN>
</TABLE>
