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 June 30, 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)
June 30, 1998
Assets
Restricted cash $ 436
Receivables and deposits, net of $130 for
doubtful accounts 601
Restricted escrows 267
Other assets 307
Investment properties:
Land $ 6,534
Buildings and related personal property 26,857
33,391
Less accumulated depreciation (10,948) 22,443
$24,054
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 28
Tenant security deposit liabilities 120
Accrued property taxes 299
Other liabilities 476
Due to corporate general partner 554
Mortgage notes payable 20,857
Partners' Capital (Deficit)
General partners $ (445)
Depositary unit certificate holders
(1,222,000 units issued and outstanding) 2,165 1,720
$24,054
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,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 1,320 $ 1,259 $ 2,648 $ 2,625
Other income 50 43 98 85
Total revenues 1,370 1,302 2,746 2,710
Expenses:
Operating 406 390 779 807
General and administrative 54 63 119 108
Depreciation 213 211 425 421
Interest 536 562 1,085 1,123
Property taxes 118 115 234 227
Total expenses 1,327 1,341 2,642 2,686
Net income (loss) $ 43 $ (39) $ 104 $ 24
Net income (loss) allocated
to general partners (1%) $ -- $ -- $ 1 $ --
Net income (loss) allocated to depositary
unit certificate holders (99%) 43 (39) 103 24
$ 43 $ (39) $ 104 $ 24
Net income (loss) per depositary
unit certificate $ .03 $ (.03) $ .08 $ .02
<FN>
See Accompanying Notes to Financial Statements
</FN>
</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 Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 1,222,000 $ 2 $ 30,550 $ 30,552
Partners' (deficit) capital at
December 31, 1997 1,222,000 $ (446) $ 2,062 $ 1,616
Net income for the six months
ended June 30, 1998 -- 1 103 104
Partners' (deficit) capital at
June 30, 1998 1,222,000 $ (445) $ 2,165 $ 1,720
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
d)
U.S. REALTY PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1998 1997
Cash flows from operating activities:
Net income $ 104 $ 24
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 425 421
Amortization of lease commissions and software 7 28
Change in accounts:
Restricted cash (104) (65)
Receivables and deposits (170) (280)
Other assets (1) (44)
Accounts payable -- (34)
Tenant security deposit liabilities (1) (2)
Accrued property taxes 165 226
Due to Corporate General Partner 6 12
Other liabilities (45) 23
Net cash provided by operating activities 386 309
Cash flows from investing activities:
Property improvements and replacements (85) (42)
Deposits to restricted escrows -- (27)
Net cash used in investing activities (85) (69)
Cash flows from financing activities:
Payments on mortgage notes payable (301) (240)
Net cash used in financing activities (301) (240)
Net change 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 $1,065 $1,092
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 consolidated 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, 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 six months ended June 30, 1998 and 1997 were as follows:
1998 1997
(in thousands)
Property management fees (included in operating expense) $147 $143
Reimbursement for services of affiliates, including
approximately $1,000 and $3,000 of construction oversight
reimbursements in 1998 and 1997, respectively (included in
general and administrative and operating expenses) 58 50
Due to Corporate General Partner--
includes principal and accrued interest 554 536
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 September or October 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 six months ended June 30, 1998 and 1997:
Average
Occupancy
1998 1997
Twin Lakes Apartments
Palm Harbor, Florida 92% 93%
Governor's Park Apartments
Little Rock, Arkansas 93% 90%
The Gallery - Huntsville
Huntsville, Alabama 93% 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 directed specifically to the
medical professionals in the area. The Corporate General Partner attributes the
decrease in occupancy at both The Gallery - Knoxville and The Gallery -
Huntsville to the continuing vacancy of approximately 9,000 and 4,500 square
feet of space respectively that was occupied during the six months ended June
30, 1997.
Results of Operations
The Partnership's net income for the three and six months ended June 30, 1998,
was approximately $43,000 and $104,000, respectively as compared to
approximately ($39,000) and $24,000, respectively for the three and six months
ended June 30, 1997. The increase in net income is primarily attributable to an
increase in rental and other income, and decreases in operating and interest
expenses. Rental income increased due to the increase in occupancy at
Governor's Park as discussed above and rental rate increases at Twin Lakes.
Other income increased primarily due to increases in lease cancellation fees and
corporate unit income at both Twin Lakes and Governor's Park Apartments.
Operating expense decreased due to a decrease in amortization 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 for the three and
six month periods due to a decrease in the principal balance of the mortgage
note payable.
Included in operating expense for the six months ended June 30, 1998 is
approximately $12,000 of major repairs and maintenance comprised of construction
services, major landscaping and window coverings. Included in operating expense
for the six months ended June 30, 1997 is approximately $21,000 of major repairs
and maintenance comprised primarily of golf carts, construction services, major
landscaping 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.
Liquidity and Capital Resources
Based on the terms of the debt restructure, all cash is considered restricted.
Net cash provided by operating activities increased primarily as a result of an
increase in net income as discussed above and a smaller increase in receivables
and deposits as compared to June 30, 1997. These increases were offset by a
decrease in other liabilities and a smaller increase in accrued property taxes
as compared to June 30, 1997. 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
and 1998. Net cash used in investing activities increased due to an increase in
property improvements and replacements, which was partially offset by a decrease
in deposits to restricted escrows. 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 six
months ended June 30, 1998 and 1997, the increase in 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 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 $20,857,000 requires a balloon payment on August
1, 2001, at which time the properties will either 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
marketing the Partnership's two commercial properties or 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 June 30, 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: August 11, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
U.S. Realty Partners Limited Partnership 1998 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-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 601
<ALLOWANCES> 130
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 33,391
<DEPRECIATION> (10,948)
<TOTAL-ASSETS> 24,054
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 20,857
0
0
<COMMON> 0
<OTHER-SE> 1,720
<TOTAL-LIABILITY-AND-EQUITY> 24,054
<SALES> 0
<TOTAL-REVENUES> 2,746
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,642
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,085
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 104
<EPS-PRIMARY> .08<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
