FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 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)
(864) 239-1000
(Issuer's telephone number)
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)
September 30, 1997
Assets
Restricted cash $ 276
Accounts receivable, net of allowance of $168 136
Escrow for taxes 463
Restricted escrows 263
Other assets 346
Investment properties:
Land $ 6,534
Buildings and related personal property 26,717
33,251
Less accumulated depreciation (10,310) 22,941
$24,425
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 59
Tenant security deposits 122
Accrued property taxes 338
Other liabilities 480
Due to corporate general partner 542
Mortgage notes payable 21,205
Partners' Capital (Deficit)
General partners' $ (446)
Depositary unit certificate holders'
(2,440,000 units authorized;
1,222,000 units issued and outstanding) 2,125 1,679
$24,425
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 Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Revenues:
Rental income $ 1,312 $ 1,284 $ 3,952 $ 3,884
Other income 36 41 121 114
Total revenues 1,348 1,325 4,073 3,998
Expenses:
Operating 420 352 1,098 1,011
General and administrative 58 40 166 143
Maintenance 189 164 333 318
Depreciation 213 211 634 629
Interest 565 576 1,688 1,731
Property taxes 112 108 339 331
Total expenses 1,557 1,451 4,258 4,163
Net loss $ (209) $ (126) $ (185) $ (165)
Net loss allocated
to general partners (1%) $ (2) $ (1) $ (2) $ (2)
Net loss allocated to depositary
unit certificate holders (99%) (207) (125) (183) (163)
$ (209) $ (126) $ (185) $ (165)
Net loss per Depositary
Unit Certificate $ (.17) $ (.10) $ (.15) $ (.13)
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 loss for the nine months
ended September 30, 1997 -- (2) (183) (185)
Partners' capital (deficit) at
September 30, 1997 1,222,000 $ (446) $ 2,125 $ 1,679
See Accompanying Notes to Financial Statements
d) U.S. REALTY PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1997 1996
Cash flows from operating activities:
Net loss $ (185) $ (165)
Adjustments to reconcile net loss to cash
provided by operating activities:
Depreciation 634 629
Amortization 35 43
Bad debt expense 42 (34)
Change in accounts:
Restricted cash (69) 44
Accounts receivable (131) (7)
Escrows for taxes (207) (370)
Other assets 56 24
Accounts payable 4 25
Tenant security deposit liabilities 1 (13)
Accrued property taxes 276 331
Due to Corporate General Partner 18 18
Other liabilities 72 36
Net cash provided by operating activities 546 561
Cash flows from investing activities:
Property improvements and replacements (91) (159)
Deposits to restricted escrows (94) (22)
Receipts from restricted escrows 41 21
Net cash used in investing activities (144) (160)
Cash flows from financing activities:
Payments on mortgage notes payable (402) (401)
Net cash used in financing activities (402) (401)
Net change in cash -- --
Cash at beginning of period -- --
Cash at end of period $ -- $ --
Supplemental disclosure of cash flow information:
Cash paid for interest $1,630 $1,676
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, 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 nine months ended September 30, 1997 and 1996 were as follows:
1997 1996
(in thousands)
Property management fees (included in operating expenses) $220 $221
Reimbursement for services of affiliates, including
approximately $6,000 and $3,000 in 1997 and 1996,
respectively, for construction oversight reimbursements
(included in general and administrative expenses and
maintenance expense) 78 49
Due to Corporate General Partner--
includes principal and accrued interest 542 518
For the period of January 1, 1996 to August 31, 1997, the Partnership insured
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 master policy. The agent assumed the financial obligations to the
affiliate of the Corporate General Partner, who received 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 each of the nine months ended September 30, 1997
and 1996:
Average
Occupancy
1997 1996
Twin Lakes Apartments
Palm Harbor, Florida 94% 95%
Governor's Park Apartments
Little Rock, Arkansas 92% 92%
The Gallery - Huntsville
Huntsville, Alabama 97% 94%
The Gallery - Knoxville
Knoxville, Tennessee 92% 96%
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 September
30, 1997. The Gallery - Knoxville also had Storehouse transfer into the Barnes
and Noble Space which left a 4,000 square foot vacancy as of September 15, 1997.
The vacant Storehouse space comprises approximately 4% of the total square
footage.
The Partnership's net loss for the nine months ended September 30, 1997, was
approximately $185,000 versus a net loss of approximately $165,000 for the nine
months ended September 30, 1996. The Partnership realized net losses for the
three months ended September 30, 1997 and 1996 of approximately $209,000 and
$126,000, respectively. The increase in net loss for the three and nine months
ended September 30, 1997, is primarily attributed to an increase in operating
and general and administrative expenses. Operating expenses increased due to a
major tenant at The Gallery - Knoxville moving out. As a result, the remaining
unamortized lease commission of $60,000 was expensed in the third quarter of
1997. The increase in general and administrative expenses is due to an increase
in expense reimbursements. Partially offsetting these increases in expenses for
nine months ending September 30, 1997, compared to the corresponding period in
1996, was an increase in rental income. Rental income increased primarily due
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 instead of the
Partnership absorbing these costs. Also contributing to the increase in the net
loss for the three months ended September 30, 1997 compared to the corresponding
period in 1996, was an increase in maintenance expense. Maintenance expense
increased as a result of an exterior painting project at Twin Lake that was
started and completed in the third quarter of 1997.
Included in maintenance expense for the nine month period ended September 30,
1997 and 1996 is approximately $141,000 and $125,000, respectively, of major
repairs and maintenance comprised of major landscaping, exterior building
improvements and exterior painting.
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 a decrease in escrows for taxes. 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 remained
relatively stable for the nine months ended September 30, 1997 compared to the
corresponding period in 1996.
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 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 properties 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 $21,205,000 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 September 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: November 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from U.S. Realty
Partners Limited Partnership 1997 Third Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000788955
<NAME> U.S. REALTY LIMITED PARTNERSHIP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 304
<ALLOWANCES> 168
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 33,251
<DEPRECIATION> 10,310
<TOTAL-ASSETS> 24,425
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 21,205
0
0
<COMMON> 0
<OTHER-SE> 1,679
<TOTAL-LIABILITY-AND-EQUITY> 24,425
<SALES> 0
<TOTAL-REVENUES> 4,073
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,258
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,688
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (185)
<EPS-PRIMARY> (.15)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
