FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
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, 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 0-15656
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
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 Exchange Act during the past 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, 1997
Assets
Restricted cash $ 329
Accounts receivable 121
Escrow for taxes 405
Restricted escrows 237
Other assets 453
Investment properties:
Land $ 6,534
Buildings and related personal property 26,668
33,802
Less accumulated depreciation (10,097) 23,105
$24,650
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 21
Tenant security deposits 119
Accrued taxes 288
Other liabilities 431
Due to corporate general partner 536
Mortgage notes payable 21,367
Partners' Capital (Deficit)
General partners $ (444)
Depositary unit certificate holders
(2,440,000 units authorized;
1,222,000 units issued and outstanding) 2,332 1,888
$24,650
See Accompanying Notes to Financial Statements
b) U.S. REALTY PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Revenues:
Rental income $ 1,269 $ 1,315 $ 2,640 $ 2,600
Interest income 6 7 12 12
Other income 37 27 73 61
Total revenues 1,312 1,349 2,725 2,673
Expenses:
Operating 324 337 678 659
General and administrative 63 57 108 103
Maintenance 76 89 144 154
Depreciation 211 210 421 418
Interest 562 572 1,123 1,155
Property taxes 115 110 227 223
Total expenses 1,351 1,375 2,701 2,712
Net (loss) income $ (39) $ (26) $ 24 $ (39)
Net (loss) income allocated
to general partners (1%) $ -- $ -- $ -- $ --
Net (loss) income allocated to depositary
unit certificate holders (99%) (39) (26) 24 (39)
$ (39) $ (26) $ 24 $ (39)
Net (loss) income per Depositary
Unit Certificate $ (.04) $ (.02) $ .01 $ (.03)
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)
Depositary
Depositary Unit
Unit General Certificate
Certificates Partners Holders Total
Original capital contributions 1,222,000 $ 2 $ 30,550 $ 30,552
Partners' capital (deficit) at
December 31, 1996 1,222,000 $ (444) $ 2,308 $ 1,864
Net income for the six months
ended June 30, 1997 -- -- 24 24
Partners' capital (deficit) at
June 30, 1997 1,222,000 $ (444) $ 2,332 $ 1,888
See Accompanying Notes to Financial Statements
d) U.S. REALTY PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1997 1996
Cash flows from operating activities:
Net income (loss) $ 24 $ (39)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation 421 418
Amortization 28 29
Bad debt expense 37 10
Change in accounts:
Restricted cash (122) 17
Accounts receivable (111) (79)
Escrows for taxes (149) (245)
Other assets (44) --
Accounts payable (34) (36)
Tenant security deposit liabilities (2) (10)
Accrued taxes 226 223
Due to Corporate General Partner 12 --
Other liabilities 23 84
Net cash provided by operating activities 309 372
Cash flows from investing activities:
Property improvements and replacements (42) (96)
Deposits to restricted escrows (56) (20)
Receipts from restricted escrows 29 19
Net cash used in investing activities (69) (97)
Cash flows from financing activities:
Payments on mortgage notes payable (240) (275)
Net cash used in financing activities (240) (275)
Net change in cash -- --
Cash at beginning of period -- --
Cash at end of period $ -- $ --
Supplemental disclosure of cash flow information:
Cash paid for interest $1,092 $1,115
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 six
month periods ended June 30, 1997, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1997. 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,
1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 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 the Corporate General
Partner for the six months ended June 30, 1997 and 1996 were as follows:
1997 1996
(in thousands)
Property management fees (included in operating expenses) $143 $146
Reimbursement for services of affiliates (included in
general and administrative expenses) 48 50
Due to Corporate General Partner--
includes principal and accrued interest 536 512
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.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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, 1997 and 1996:
Average
Occupancy
1997 1996
Twin Lakes Apartments
Palm Harbor, Florida 93% 95%
Governor's Park Apartments
Little Rock, Arkansas 90% 92%
The Gallery - Huntsville
Huntsville, Alabama 96% 94%
The Gallery - Knoxville
Knoxville, Tennessee 93% 98%
The Corporate General Partner attributes the decrease in occupancy at The
Gallery - Knoxville to the expiration of the Rack Room Shoes lease during the
fourth quarter of 1996. This space comprises approximately 5% of the total
square footage of the shopping center and had not been leased as of June 30,
1997.
The Partnership's net income for the six months ended June 30, 1997, was
approximately $24,000 versus a net loss of approximately $39,000 for the six
months ended June 30, 1996. The Partnership realized net losses for the three
months ended June 30, 1997 and 1996 of approximately $39,000 and $26,000,
respectively. The increase in net income for the six months ended June 30,
1997, is primarily attributed to an increase in revenues and an overall decrease
in expenses. The increase in revenues is due to an increase in rental income
and other income. Rental income increased for the six month period ended June
30, 1997 due primarily to increases in rents and tenant reimbursements at The
Gallery - Huntsville. These increases were attributable to the increase in
occupancy and passing management fees on to the tenants through tenant
reimbursements rather than having the Partnership absorb the costs. Other
income increased for both the three and six month periods ended June 30, 1997
due to leases being broken and termination fees being collected at Twin Lakes
Apartments. Maintenance expense for both the three and six month periods ended
June 30, 1997 decreased due to a major landscaping project at Governor's Park
Apartments in 1996 to enhance the appearance and appeal of the property. The net
loss for the three months ended June 30, 1997, in comparison to the same period
in 1996, increased due to a decrease in rental income caused by the decrease in
occupancy at The Gallery - Knoxville as discussed above. The decrease in rental
income was offset by the decrease in maintenance expense as previously
discussed.
Based on the terms of the debt restructure, all cash is considered restricted.
Net cash provided by operating activities decreased as a result of an increase
in restricted cash partially offset by an increase in net income. Net cash used
in investing activities decreased due to a decrease in property replacements and
improvements which was partially offset by an increase in deposits to restricted
escrows. Net cash used in financing activities decreased due to a decrease in
payments on the mortgage notes payable.
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.
The Partnership has no material capital programs scheduled to be performed in
1997, 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 $21,367,000 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 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, 1997.
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 6, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from U.S. Realty Partners
Limited Partnership 1997 Second 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 329
<SECURITIES> 0
<RECEIVABLES> 121
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 33,802
<DEPRECIATION> 10,097
<TOTAL-ASSETS> 24,650
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 21,367
0
0
<COMMON> 0
<OTHER-SE> 1,888
<TOTAL-LIABILITY-AND-EQUITY> 24,650
<SALES> 0
<TOTAL-REVENUES> 2,725
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,701
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,123
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 24
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24
<EPS-PRIMARY> .02<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
