FORM 10-QSB--QUARTERLY OR TRANSITIONAL 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, 1998
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)
(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)
March 31, 1998
Assets
Restricted cash $ 382
Receivables and deposits, net of $151 for
doubtful accounts 515
Restricted escrows 264
Other assets 289
Investment properties:
Land $ 6,534
Buildings and related personal property 26,812
33,346
Less accumulated depreciation (10,735) 22,611
$24,061
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 29
Tenant security deposit liabilities 130
Accrued property taxes 181
Other liabilities 470
Due to Corporate General Partner 554
Mortgage note payable 21,020
Partners' Capital (Deficit)
General partners $ (445)
Depositary unit certificate holders
(2,440,000 units authorized;
1,222,000 units issued and outstanding) 2,122 1,677
$24,061
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,
1998 1997
Revenues:
Rental income $1,328 $1,366
Other income 48 42
Total revenues 1,376 1,408
Expenses:
Operating 373 417
General and administrative 65 45
Depreciation 212 210
Interest 549 561
Property taxes 116 112
Total expenses 1,315 1,345
Net income $ 61 $ 63
Net income allocated to general partners (1%) $ 1 $ 1
Net income allocated to depositary unit
certificate holders (99%) 60 62
$ 61 $ 63
Net income per depositary unit certificate $ .05 $ .05
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, 1997 1,222,000 $ (446) $ 2,062 $ 1,616
Net income for the three months
ended March 31, 1998 -- 1 60 61
Partners' capital (deficit) at
March 31, 1998 1,222,000 $ (445) $ 2,122 $ 1,677
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,
1998 1997
Cash flows from operating activities:
Net income $ 61 $ 63
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 212 210
Amortization 4 15
Change in accounts:
Restricted cash (50) (256)
Receivables and deposits (84) (97)
Other assets 20 (3)
Accounts payable 1 (16)
Tenant security deposit liabilities 9 (3)
Accrued property taxes 47 112
Due to Corporate General Partner 6 6
Other liabilities (51) 120
Net cash provided by operating activities 175 151
Cash flows from investing activities:
Property improvements and replacements (40) (15)
Withdrawals from (deposits to) restricted escrows 3 (53)
Net cash used in investing activities (37) (68)
Cash flows from financing activities:
Payments on mortgage notes payable (138) (83)
Net cash used in financing activities (138) (83)
Net increase in cash and cash equivalents -- --
Cash and cash equivalents at beginning of period -- --
Cash and cash equivalents at end of period $ -- $ --
Supplemental disclosure of cash flow information:
Cash paid for interest $ 528 $ 439
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, 1998, are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 1998. 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,
1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 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 Corporate General Partner's ultimate parent company
is Insignia Financial Group, Inc. ("Insignia"). 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 three months ended March 31, 1998 and 1997 were as follows:
1998 1997
(in thousands)
Property management fees (included in operating expenses) $ 72 $ 75
Reimbursement for services of affiliates, including
approximately $1,000 of construction oversight
reimbursements in 1997 (included in general and
administrative and operating expenses) 28 17
Due to Corporate General Partner--
includes principal and accrued interest 554 530
For the period of January 1, 1997 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
Corporate General Partner with an 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 which placed the master policy.
The agent assumed the financial obligations to the affiliate of the Corporate
General Partner, which receives payment 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.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in
Insignia Properties Trust, with Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust. The closing, which
is anticipated to happen in the third quarter of 1998, is subject to customary
conditions, including government approvals and the approval of Insignia's
shareholders. If the closing occurs, AIMCO will then control the Corporate
General Partner of the Partnership.
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, 1998 and 1997:
Average
Occupancy
Property 1998 1997
Twin Lakes Apartments
Palm Harbor, Florida 93% 96%
Governor's Park Apartments
Little Rock, Arkansas 94% 91%
The Gallery - Huntsville
Huntsville, Alabama 95% 96%
The Gallery - Knoxville
Knoxville, Tennessee 88% 93%
The Corporate General Partner attributes the increase in occupancy at Governor's
Park to aggressive marketing and concession plans during the fall of 1997 to
improve resident retention in winter months. The Corporate General Partner
attributes the decrease in occupancy at The Gallery - Knoxville to the continued
vacancy of approximately 4,000 square feet of space since the third quarter of
1997.
Results of Operations
The Partnership's net income for the three months ended March 31, 1998, was
approximately $61,000 as compared to approximately $63,000 for the three months
ended March 31, 1997. Although net income remained stable, rental income
decreased which was offset by a corresponding decrease in total expenses.
Rental income decreased as a result of decreases in occupancy at three of the
Partnership's properties. General and administrative expenses increased due to
increases in expense reimbursements. Offsetting the increase in general and
administrative expenses was decreases in both operating expenses and interest
expense. Operating expenses decreased due to decreases in maintenance and
amortization expenses. Decreases in major landscaping, floor covering and other
maintenance were primarily responsible for the decrease in maintenance expense.
Amortization expense decreased due to software becoming fully amortized in 1997
and a decrease in lease commissions as a result of a major tenant at The Gallery
- - Knoxville moving out during 1997 at which time the remaining unamortized lease
commission was expensed in 1997. Interest expense decreased due to a decrease
in the principal balance of the mortgage note payable.
Included in operating expenses for the three months ended March 31, 1998 is
approximately $2,000 of major repairs and maintenance comprised primarily of
window covering replacements. Included in operating expenses for the three
months ended March 31, 1997 is approximately $10,000 of major repairs and
maintenance comprised primarily of window coverings, golf carts, and major
landscaping.
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.
Liquidity and Capital Resources
Based on the terms of the 1993 debt restructure, all cash is considered
restricted. Net cash provided by operating activities increased primarily as a
result of the decrease in restricted cash, accrued property taxes and other
liabilities. These changes are due to the timing of payments to vendors, the
timing of rental collections and a decrease in accrued interest as a result of
increased payments on the mortgage note payable throughout 1997. Net cash used
in investing activities decreased due to a decrease in deposits to restricted
escrows which was partially offset by an increase in property improvements and
replacements. Net cash used in financing activities increased as a result of an
increase in principal payments on the mortgage note payable. Total principal
and interest payments are based upon excess cash flows at the properties and are
allocated first to accrued interest and the remainder to principal. Although
excess cash flows were relatively consistent for the three months ended March
31, 1998 and 1997, the increase in the principal payments is attributed to lower
accrued interest therefore, a larger portion of the payments are applied to
principal.
The Partnership has no material capital programs scheduled to be performed in
1998, 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 $21,020,000 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 assessing the feasibility of
refinancing the mortgage encumbering the Partnership's investment properties.
Year 2000
The Partnership is dependent upon the Corporate General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The Corporate General Partner believes that with
modifications to existing software and conversions to new software, the Year
2000 Issue will not pose significant operational problems for its computer
systems. However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Partnership.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates of revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
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 March 31, 1998.
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
Vice President and Treasurer
Date: May 14, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
U.S. Realty Partners Limited Partnership 1998 First Quarter 10-QSB
and is qualified in its entirety by reference to such 10-QSB filing.
</LEGEND>
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<NAME> U.S. REALTY PARTNERS LIMITED PARTNERSHIP
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
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<RECEIVABLES> 515
<ALLOWANCES> 151
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 33,346
<DEPRECIATION> (10,735)
<TOTAL-ASSETS> 24,061
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 21,020
0
0
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