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
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 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, 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, 1997
Assets
Restricted cash $ 520
Accounts receivable 102
Escrow for taxes 242
Restricted escrows 263
Other assets 424
Investment properties:
Land $ 6,534
Buildings and related personal property 26,641
33,175
Less accumulated depreciation (9,886) 23,289
$24,840
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 39
Tenant security deposits 118
Accrued taxes 174
Other liabilities 528
Due to Corporate General Partner 530
Mortgage notes payable 21,524
Partners' Capital (Deficit)
General partners $ (443)
Depositary unit certificate holders
(2,444,000 units authorized;
1,222,000 units issued and outstanding) 2,370 1,927
$24,840
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,
1997 1996
Revenues:
Rental income $1,371 $1,285
Interest income 6 5
Other income 36 34
Total revenues 1,413 1,324
Expenses:
Operating 339 308
General and administrative 45 46
Maintenance 68 65
Depreciation 210 208
Amortization 15 14
Interest 561 583
Property taxes 112 113
Total expenses 1,350 1,337
Net income (loss) $ 63 $ (13)
Net income (loss) allocated to general partners (1%) $ 1 $ --
Net income (loss) allocated to depositary unit
certificate holders (99%) 62 (13)
$ 63 $ (13)
Net income (loss) per Depositary Unit Certificate $ .05 $ (.01)
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 Partners 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 three
months ended March 31, 1997 1 62 63
Partners' capital (deficit) at
March 31, 1997 1,222,000 $ (443) $ 2,370 $ 1,927
See Accompanying Notes to Financial Statements
d) U.S. REALTY PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1997 1996
Cash flows from operating activities:
Net income (loss) $ 63 $ (13)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation 210 208
Amortization of leasing commissions, computer
software costs and organizational costs 15 14
Bad debt expense (5) 17
Change in accounts:
Restricted cash (313) 22
Accounts receivable (50) (17)
Escrows for taxes 15 (122)
Other assets (3) --
Accounts payable (16) (36)
Tenant security deposit liabilities (3) --
Accrued taxes 112 113
Due to Corporate General Partner 6 --
Other liabilities 120 18
Net cash provided by operating activities 151 204
Cash flows from investing activities:
Property improvements and replacements (15) (37)
Deposits to restricted escrows (53) (3)
Net cash used in investing activities (68) (40)
Cash flows from financing activities:
Payments on mortgage notes payable (83) (164)
Net cash used in financing activities (83) (164)
Net increase in cash -- --
Cash at beginning of period -- --
Cash at end of period $ -- $ --
Supplemental disclosure of cash flow information:
Cash paid for interest $ 439 $ 562
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 month
period ended March 31, 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 Insignia Financial Group,
Inc. for the quarters ended March 31, 1997 and 1996 were as follows:
Three Months Ended
March 31,
1997 1996
(in thousands)
Property management fees $ 75 $ 75
Reimbursement for services of affiliates 17 30
Interest expense 6 6
Due to Corporate General Partner 530 506
Included in "Reimbursement for services of affiliates" for 1997 are
approximately $1,000 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.
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 three months ended March 31, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Twin Lakes Apartments
Palm Harbor, Florida 96% 96%
Governor's Park Apartments
Little Rock, Arkansas 91% 93%
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 March 31,
1997.
The Partnership's net income for the three months ended March 31, 1997, was
approximately $63,000 versus a net loss of approximately $13,000 for the three
months ended March 31, 1996. The increase in net income is primarily
attributable to an increase in rental income and a decrease in interest expense.
Rental income increased due to increases in rental rates at all four properties
and an increase in tenant reimbursements at the two commercial properties.
Partially offsetting the increase in revenue was an increase in operating
expenses. The increase in operating expense was primarily due to an increase in
resident relations and concessions at Twin Lakes, where reductions in rent and
local gym memberships were offered as leasing incentives. Also, legal fees
increased at The Gallery-Knoxville, due to efforts to collect rent from tenants
which had vacated their spaces prior to their lease expirations in 1996. In
addition, common area expenses, comprised primarily of contract maintenance and
landscaping, increased at the two commercial properties.
Included in maintenance expense in 1997 is approximately $10,000 of major
repairs and maintenance comprised of major landscaping, the purchase of a golf
cart, office computers and window coverings.
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.
Net cash provided by operating activities decreased primarily as a result of the
increase in restricted cash. Net cash used in investing activities increased
due to an increase in deposits to restricted escrows which were partially offset
by a decrease in property improvements and replacements. Net cash used in
financing activities decreased as a result of a decrease in principal payments
on the mortgage note payable.
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 various 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 total mortgage indebtedness of $21,524,000 requires a balloon payment on
August 1, 2001, at which time the properties will be refinanced or sold.
Pursuant to the loan agreement, Net Cash Flow of the Partnership is required to
be paid to the mortgage holder on a monthly basis to reduce accrued interest and
principal. No distributions can be made until all long-term debt is repaid.
The Corporate General Partner is currently in the process of negotiating a
possible refinancing of the mortgage indebtedness which, if successful, would
reduce both the interest rate and restrictions on future distributions.
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, 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: May 15, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from U.S. Realty
Partners Limited Partnership 1997 First 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 102
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 33,175
<DEPRECIATION> (9,886)
<TOTAL-ASSETS> 24,840
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 21,524
0
0
<COMMON> 0
<OTHER-SE> 1,927
<TOTAL-LIABILITY-AND-EQUITY> 24,840
<SALES> 0
<TOTAL-REVENUES> 1,413
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,350
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 561
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63
<EPS-PRIMARY> .05<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
