US REALTY PARTNERS LTD PARTNERSHIP, 10KSB/A, 1999-06-30

US REALTY PARTNERS LTD PARTNERSHIP
10KSB/A, 1999-06-30
REAL ESTATE OPERATORS (NO DEVELOPERS) & LESSORS

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FORM 10-KSB - ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(D)
(As last amended by 34-31905, eff. 4/26/93)

FORM 10-KSB/A
-------------
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [No Fee Required]

For the fiscal year ended December 31, 1998
or

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [No Fee Required]

For the transition period from.........to.........

Commission file number 0-15656

U.S. REALTY PARTNERS LIMITED PARTNERSHIP
(Name of small business issuer in its charter)

South Carolina 57-0814502
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) (Identification No.)

55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)

Issuer's telephone number (864) 239-1000

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Depositary Unit Certificates
----------------------------

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 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
---

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year. $5,293,000

State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of December 31, 1998. No market exists for the limited
partnership interests of the Registrant, and, therefore, no aggregate market
value can be determined.

DOCUMENTS INCORPORATED BY REFERENCE
None
PART I

ITEM 1. DESCRIPTION OF BUSINESS
-----------------------

U.S. Realty Partners Limited Partnership (the "Partnership" or "Registrant") was
organized as a limited partnership under the laws of South Carolina on January
23, 1986.
The general partner responsible for management of the Partnership's business is
U.S. Realty I Corporation, a South Carolina corporation (the "Corporate General
Partner"). The only other general partner of the Partnership is N. Barton Tuck,
Jr. Mr. Tuck is not an affiliate of the Corporate General Partner and is
effectively prohibited by the Partnership's partnership agreement (the
"Partnership Agreement") from participating in the management of the
Partnership. The Corporate General Partner is a subsidiary of Apartment
Investment and Management Company ("AIMCO"). The Partnership Agreement provides
that the Partnership is to terminate on December 31, 2005 unless terminated
prior to such date.

The Registrant is engaged in the business of operating and holding real
properties for investment. The Registrant commenced operations on August 26,
1986, and acquired its first property, a newly constructed apartment property,
on August 28, 1986. Prior to September 5, 1986, it acquired an existing
apartment property, a newly constructed shopping center and an existing shopping
center. The Registrant continues to own and operate three of these properties.
One of the shopping centers was sold on February 1, 1999. See "Item 2.
Description of Properties."

Commencing on August 26, 1986, the Registrant delivered 1,222,000 Depositary
Unit Certificates, representing assignments of limited partnership interests
("DUCs"), to Wheat First Securities, Inc. and received $30,550,000 ($25.00 per
DUC) in proceeds. The DUCs were offered by several underwriters in minimum
investment amounts of 100 DUCs ($25.00 per DUC). The Registrant also received
$16,369,000 as proceeds from a contemporaneous private bond offering. The
Registrant used substantially all of the proceeds from these offerings to
acquire its initial four operating properties.

On April 1, 1993, the Partnership filed for protection under Chapter 11 of the
Federal Bankruptcy Code. The filing was made due to the Partnership's inability
to repay its secured debt due to an insurance company (see "Note E" of
financial statements). On April 23, 1993, the Partnership filed a
Reorganization Plan ("the Plan") with the United States Bankruptcy Court for the
District of South Carolina. The significant provision of the Plan was the
refinancing of the secured debt. On July 23, 1993, the Court entered an order
confirming the Partnership's Plan. On January 27, 1994, the Court closed the
case.

A further description of the Partnership's business is included in Management's
Discussion and Analysis or Plan of Operation included in "Item 6" of this Form
10-KSB.

The Registrant has no employees. Management and administrative services are
provided by the Corporate General Partner and by agents retained by the
Corporate General Partner. With respect to the Partnership's residential
properties these services were provided by affiliates of the Corporate General
Partner for the years ended December 31, 1998 and 1997. With respect to the
Partnership's commercial properties these services were provided by affiliates
of the Corporate General Partner for the nine months ended September 30, 1998
and the year ended December 31, 1997. As of October 1, 1998 the management
services were provided by an unaffiliated party for the commercial properties.
Both the income and expenses of operating the remaining properties owned by the
Partnership are subject to factors outside of the Partnership's control, such as
an oversupply of similar properties resulting from overbuilding, increases in
unemployment or population shifts, reduced availability of permanent mortgage
financing, changes in zoning laws, or changes in patterns or needs of users. In
addition, there are risks inherent in owning and operating residential and
commercial properties because such properties are susceptible to the impact of
economic and other conditions outside of the control of the Partnership.

There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.

The Partnership monitors its properties for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain
cases environmental testing has been performed, which resulted in no material
adverse conditions or liabilities. In no case has the Partnership received
notice that it is a potentially responsible party with respect to an
environmental clean up site.

The business in which the Partnership is engaged is highly competitive. There
are other residential and commercial properties within the market area of the
registrant's properties. The number and quality of competitive properties,
including those which may be managed by an affiliate of the Corporate General
Partner in such market area, could have a material effect on the rental market
for the apartments or commercial space at the Registrant's properties and the
rents that may charged for such apartments and commercial space. While the
Corporate General Partner and its affiliates are a significant factor in the
United States in the apartment industry, competition for apartments and
commercial property is local. In addition, various limited partnerships have
been formed by the Corporate General Partner and/or affiliates to engage in
business which may be competitive with the Registrant.

Transfer of Control

Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company, a publicly traded real
estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result, AIMCO ultimately acquired a 100% ownership
interest in Insignia Properties Trust ("IPT"), the entity which controls the
Corporate General Partner. The Corporate General Partner does not believe that
this transaction will have a material effect on the affairs and operations of
the Partnership.

ITEM 2. DESCRIPTION OF PROPERTIES

The following table sets forth the Registrant's investments in properties:

Date of
Property Purchase Type of Ownership Use

The Gallery - Huntsville 08/29/86 Fee ownership subject to Retail
Huntsville, Alabama first mortgage Approximately
101,000 s.f.

The Gallery - Knoxville (1) 09/04/86 Fee ownership subject to Retail
Knoxville, Tennessee first mortgage Approximately
100,000 s.f.

Governor's Park Apartments 08/29/86 Fee ownership subject to Apartment
Little Rock, Arkansas first mortgage 154 units

Twin Lakes Apartments 08/28/86 Fee ownership subject to Apartment
Palm Harbor, Florida first mortgage 262 units

(1) Subsequent to December 31, 1998 this property was sold to an unaffiliated
party. See "Subsequent Event" below for more details.

SCHEDULE OF PROPERTIES:

Set forth below for each of the Registrant's properties is the gross carrying
value, accumulated depreciation, depreciable life, method of depreciation and
federal tax basis.

Gross

Carrying Accumulated Federal

Property Value Depreciation Rate Method Tax Basis

(in thousands) (in thousands)

The Gallery -

Huntsville $ 7,404 $ 2,329 5-35 S/L $ 7,353

The Gallery -

Knoxville 9,025 2,789 5-35 S/L 7,327

Governor's Park 6,074 2,579 5-35 S/L 1,963

Twin Lakes 10,957 3,683 5-35 S/L 4,697

$33,460 $11,380 21,340

See "Note A" of the financial statements included in "Item 7" for a description
of the Partnership's depreciation policy.

SCHEDULE OF PROPERTY INDEBTEDNESS:

The following table sets forth certain information relating to the loan
encumbering the Registrant's properties.

Principal Principal

Balance At Stated Balance

December 31, Interest Period Maturity Due At

1998 Rate Amortized Date Maturity (2)

(in thousands)

U.S. Realty

Partnership $20,582 10.00% 95 months 08/01/01 (1)

(1) The balance at maturity is directly related to the ability of the
Partnership to make cash flow payments per the mortgage agreement.

(2) See Item 7, Financial Statements _ Note E for information with respect to
the Registrant's ability to prepay these loans.

RENTAL RATES AND OCCUPANCY:

Average annual rental rates and occupancy for 1998 and 1997 for each property:

Average Annual Average Annual

Rental Rates Occupancy

Property 1998 1997 1998 1997

The Gallery _ Huntsville $ 9.65/s.f. $ 8.99/s.f. 92% 98%

The Gallery _ Knoxville 12.54/s.f. 13.24/s.f. 89% 91%

Governor's Park 6,696/unit 6,609/unit 91% 92%

Twin Lakes 7,475/unit 7,227/unit 93% 93%

The Corporate General Partner attributes the decrease in occupancy at The
Gallery-Huntsville to the continuing vacancy of space that was occupied during
the year ended December 31, 1997. Brochures have been mailed to prospective
tenants for The Gallery-Huntsville, which has started to generate renewed
interest in the available space. As disclosed during the quarter ended
September 30, 1998, The Gallery - Knoxville was under contract for sale. This
sale took place on February 1, 1999.

As noted under "Item 1. Description of Business," the real estate industry is
highly competitive. All of the properties of the Partnership are subject to
competition from other residential apartment complexes and commercial buildings
in the area. The Corporate General Partner believes that all of the properties
are adequately insured. The residential properties are apartment complexes which
lease units of one year or less. No residential tenant leases 10% or more of
the available rental space. The commercial buildings are retail sales outlets
which lease available space from one to ten years. See Notes A and I to the
Financial Statements for information as to the principle terms of the leases at
The Gallery - Huntsville. All properties are in good condition subject to
normal depreciation and deterioration as is typical for assets of this type and
age.

The following is a schedule of the lease expirations for the years 1999-2008 for
The Gallery - Huntsville:

The Gallery Number of % of Gross

Huntsville Expirations Square Feet Annual Rent Annual Rent

(in thousands)

1999 7 23,203 $212 25.04%

2000 1 3,755 26 3.02%

2001 4 18,000 205 24.23%

2002 2 13,500 103 12.16%

2003 0 -- -- --

2004 3 18,400 229 27.11%

2005 0 -- -- --

2006 1 3,600 31 3.71%

2007 0 -- -- --

2008 1 6,500 40 4.73%

The following schedule reflects information on commercial tenants occupying 10%
or more of the leasable square feet for The Gallery - Huntsville.

Nature of Square Footage Annual Rent Lease
Business Leased Per Square Foot Expiration

The Gallery - Huntsville Book Store 12,000 $ 7.25 02/28/02
Shoe Store 13,800 13.13 09/14/04

SCHEDULE OF REAL ESTATE TAXES AND RATES:

1998 1998

Billing Rate

(in thousands)

The Gallery - Huntsville $ 67 5.80%

The Gallery - Knoxville 139 5.56%

Governor's Park 63 6.39%

Twin Lakes 174 2.08%

CAPITAL IMPROVEMENTS:

THE GALLERY - HUNTSVILLE

During 1998, the Partnership completed $7,500 of capital improvements at the
property, consisting primarily of tenant improvements. These improvements were
funded primarily from cash flow. Based on a report received from an independent
third party consultant analyzing necessary exterior improvements and estimates
made by the Corporate General Partner on interior improvements, it is estimated
that the property requires approximately $144,000 of capital improvements over
the near term. The Partnership has budgeted, but is not limited to, capital
improvements of approximately $11,000 for 1999 which includes tenant
improvements.

THE GALLERY - KNOXVILLE

During 1998, the Partnership completed $4,500 of capital improvements at the
property, consisting primarily of tenant improvements. These improvements were
funded primarily from cash flow. This property was sold February 1, 1999.

GOVERNOR'S PARK APARTMENTS

During 1998, the Partnership completed $42,000 of capital improvements at the
property, consisting primarily of roof and floor covering replacements. These
improvements were funded primarily from cash flow. Based on a report received
from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the Corporate General Partner on interior
improvements, it is estimated that the property requires approximately $231,000
of capital improvements over the near term. The Partnership has budgeted, but
is not limited to, capital improvements of approximately $257,000, for 1999
which includes roofing, stairwells, and balcony repairs.

TWIN LAKES APARTMENTS

During 1998, the Partnership completed $100,000 of capital improvements at the
property, consisting primarily of building improvements, appliance and floor
covering replacement. These improvements were funded primarily from cash flow
and Partnership reserves. Based on a report received from an independent third
party consultant analyzing necessary exterior improvements and estimates made by
the Corporate General Partner on interior improvements, it is estimated that the
property requires approximately $436,000 of capital improvements over the near
term. The Partnership has budgeted, but is not limited to, capital improvements
of approximately $454,000 for 1999 which includes roofing, gutter repairs, and
exterior lighting.

The capital improvements planned for 1999 at the Partnership's properties will
be made only to the extent of cash available from operations and Partnership
reserves.

ITEM 3. LEGAL PROCEEDINGS

On July 30, 1998, certain entities claiming to own limited partnership interests
in certain limited partnerships whose general partners were, at the time,
affiliates of Insignia filed a complaint entitled EVEREST PROPERTIES, LLC. V.
INSIGNIA FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of
California, county of Los Angeles. The action involves 44 real estate limited
partnerships (including the Partnership) in which the plaintiffs allegedly own
interests and which Insignia Affiliates allegedly manage or control (the
"Subject Partnerships"). This case was settled on March 3, 1999. The
Partnership is responsible for a portion of the settlement costs. The expense
will not have a material effect on the Partnership's net income.

The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the quarter ended December 31, 1998, no matter was submitted to a vote of
security holders through the solicitation of proxies or otherwise.

PART II

ITEM 5. MARKET FOR PARTNERSHIP EQUITY AND RELATED PARTNERSHIP MATTERS

As of December 31, 1998, the number of DUC holders of record was 2,033. Transfer
of DUCs is subject to certain suitability and other requirements. Due to the
security being delisted during 1990, no public trading market has developed and
it is not anticipated that such a market will develop in the future. No
distributions were made in 1998 or 1997. Pursuant to the loan agreement, no
distributions can be made until all long-term debt is repaid. An affiliate of
the Corporate General Partner acquired 243,831 DUCs during the first quarter of
1999 representing 19.95% of the total DUCs.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The matters discussed in this Form 10-KSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-KSB and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects of
any changes to the Registrant's business and results of operation. Accordingly,
actual results could differ materially from those projected in the forward-
looking statements as a result of a number of factors, including those
identified herein.

This item should be read in conjunction with the financial statements and other
items contained elsewhere in this report.

Results of Operations

The Registrant's net loss for the year ended December 31, 1998 was $76,000 as
compared to $248,000 for the year ended December 31, 1997. (See "Note F" of the
financial statements for a reconciliation of these amounts to the Registrant's
federal taxable losses). The decrease in net loss is primarily attributable to
a decrease in total expenses, offset by a decrease in total revenue. The
decrease in total revenue is due to a decrease in rental income which was
partially offset by an increase in other income. Rental income decreased as a
result of the decrease in occupancy at The Gallery _ Huntsville and a decrease
in the average annual rental rates at The Gallery- Knoxville as noted in "Item
2. Description of Properties." Other income increased as a result of an
increase in interest income due to increased balances in interest-bearing
accounts.

Expenses decreased due to a reduction in operating expense. Operating expense
decreased due to decreases in other leasing expense, amortization of lease
commissions and maintenance expense. Other leasing expense decreased due to a
major tenant at The Gallery _ Knoxville moving out during 1997. As a result,
the remaining unamortized lease commission of $60,000 was expensed in the third
quarter of 1997. Amortization expense decreased due to software becoming fully
amortized in 1997 and a decrease of lease commissions as discussed above.
Maintenance expense decreased as a result of an exterior painting project at
Twin Lakes Apartments that was started and completed in the third quarter of
1997. Maintenance expense also decreased due to a decrease in 1998 of major
landscaping and exterior building renovations at the residential properties to
improve the appearance of the properties.

General and administrative, interest, property tax and depreciation expense
remained relatively constant for the comparable periods. Included in general
and administrative expenses at both December 31, 1998 and 1997 are management
reimbursements to the Corporate General Partner allowed under the Partnership
Agreement. In addition, costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement are also included.

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 high overall occupancy levels.
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 upon the terms of the debt structure, all cash and cash equivalents are
considered restricted. At both December 31, 1998 and 1997, the Partnership had a
balance of zero on its statements of cash flow for cash and cash equivalents. In
fact at December 31, 1998, cash provided by operating activities of
approximately $735,000 was totally offset by approximately $159,000 of cash used
in investing activities and approximately $576,000 of cash used in financing
activities. Net cash used in investing activities consisted of capital
improvements and net deposits to restricted escrow accounts. Net cash used in
financing activities consisted of payments of principal made on the mortgage
encumbering the Registrant's properties.

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 Registrant and to comply with federal,
state, and local legal and regulatory requirements. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The
Registrant has budgeted approximately $722,000 in capital improvements for all
the Registrant's remaining properties in 1999. Budgeted capital improvements at
The Gallery-Huntsville include tenant improvements. Budgeted capital
improvements at Governor's Park Apartments include roofing, stairwells, and
balcony repairs. Budgeted capital improvements at the Twin Lakes Apartments
include roofing, gutter repairs, and exterior lighting. Capital improvements at
the Gallery-Knoxville were not budgeted due to the sale of the property on
February 1, 1999. The total mortgage indebtedness of $20,582,000 requires a
balloon payment on August 1, 2001. The Corporate General Partner will attempt to
refinance such indebtedness and/or sell the properties prior to such maturity
date. If the properties cannot be refinanced or sold for a sufficient amount,
the Partnership will risk losing such properties through foreclosure. 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.

Subsequent Event

Subsequent to December 31, 1998, the Partnership sold The Gallery - Knoxville,
to an unaffiliated third party. The sale was completed on February 1, 1999 for
$9,300,000. The net proceeds from the sale were used to pay down the mortgage
encumbering the Partnership's remaining investment properties.

The following unaudited pro-forma information reflects the operations of the
Partnership for the year ended December 31, 1998 and 1997, as if The Gallery -
Knoxville had been sold December 31, 1996.

1998 1997

(in thousands, except unit data)

Revenues $3,851 $3,894
Net loss (886) (987)
Loss per limited partnership unit (.72) (.80)

Year 2000 Compliance

General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems

The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership
is dependent upon the Corporate General Partner and its affiliates for
management and administrative services ("Managing Agent"). Any of the computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.

Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.

The Managing Agent's plan to resolve Year 2000 issues involves four Phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.

Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:

During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the mainframe system used by the Managing Agent became fully
functional. In addition to the mainframe, PC-based network servers and routers
and desktop PCs were analyzed for compliance. The Managing Agent has begun to
replace each of the non-compliant network connections and desktop PCs and, as of
December 31, 1998, had completed approximately 75% of this effort.

The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date. The remaining network connections and
desktop PCs are expected to be upgraded to Year 2000 compliant systems by March
31, 1999.

Computer software:

The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.

During 1998, the Managing Agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at
all properties, is $200,000, and the implementation and the testing process is
expected to be completed by March 31, 1999.

The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded 80% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
March 31, 1999.

Operating Equipment:

The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).

The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally. The Managing Agent intends to have a third-party conduct an
audit of these systems and report their findings by March 31, 1999.

Any of the above operating equipment that has been found to be non-compliant to
date has been replaced or repaired. To date, these have consisted only of
security systems and phone systems. As of December 31, 1998 the Managing Agent
has evaluated approximately 86% of the operating equipment for the Year 2000
compliance.

The total cost incurred for all properties managed by the Managing Agent as of
December 31, 1998 to replace or repair the operating equipment was approximately
$400,000. The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $325,000, which is expected to be
completed by April 30, 1999.

The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within our enterprise.

Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000

The Managing Agent continues to conduct surveys of its banking and other vendor
relationships to assess risks regarding their Year 2000 readiness. The Managing
Agent has banking relationships with three major financial institutions, all of
which have indicated their compliance efforts will be complete before May 1999.
The Managing Agent has updated data transmission standards with two of the three
financial institutions. The Managing Agent's contingency plan in this regard is
to move accounts from any institution that cannot be certified Year 2000
compliant by June 1, 1999.

The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.

The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.

Costs to Address Year 2000

The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.8 million ($0.6 million expensed
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.

Risks Associated with the Year 2000

The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.

In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.

Contingency Plans Associated with the Year 2000

The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.

ITEM 7. FINANCIAL STATEMENTS

U.S. REALTY PARTNERS LIMITED PARTNERSHIP

LIST OF FINANCIAL STATEMENTS

Report of Ernst & Young LLP, Independent Auditors

Balance Sheet - December 31, 1998

Statements of Operations - Years ended December 31, 1998 and 1997

Statements of Changes in Partners' Capital (Deficit) - Years ended
December 31, 1998 and 1997

Statements of Cash Flows - Years ended December 31, 1998 and 1997

Notes to Financial Statements

Report of Ernst & Young LLP, Independent Auditors

The Partners
U. S. Realty Partners Limited Partnership:

We have audited the accompanying balance sheet of U. S. Realty Partners Limited
Partnership as of December 31, 1998, and the related statements of operations,
changes in partners' capital (deficit) and cash flows for each of the two years
in the period ended December 31, 1998. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of U. S. Realty Partners Limited
Partnership at December 31, 1998, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.

/s/ERNST & YOUNG LLP

Greenville, South Carolina
March 3,1999

U.S. REALTY PARTNERS LIMITED PARTNERSHIP

BALANCE SHEET
(in thousands, except unit data)

December 31, 1998

Assets

Restricted cash $ 557

Receivables and deposits, net of

$291 for doubtful accounts 420

Restricted escrows 272

Other assets 261

Investment properties (Notes E & H):

Land $ 6,534

Buildings and related personal property 26,926

33,460

Less accumulated depreciation (11,380) 22,080

$23,590

Liabilities and Partners' Capital (Deficit)

Liabilities

Accounts payable $ 15

Tenant security deposit liabilities 120

Accrued property taxes 203

Other liabilities 570

Due to Corporate General Partner 560

Mortgage note payable (Note E) 20,582

Partners' Capital (Deficit)

General partners $ (447)

Depository unit certificate holders

(2,440,000 units authorized, 1,222,000

units issued and outstanding) 1,987 1,540

$23,590

See Accompanying Notes to Financial Statements
U.S. REALTY PARTNERS LIMITED PARTNERSHIP

STATEMENTS OF OPERATIONS
(in thousands, except unit data)

Years Ended December 31,

1998 1997

Revenues:

Rental income $5,111 $5,174

Other income 182 169

Total revenues 5,293 5,343

Expenses:

Operating 1,607 1,829

General and administrative 227 222

Depreciation 857 847

Interest 2,225 2,250

Property taxes 453 443

Total expenses 5,369 5,591

Net loss (Note F) $ (7) $ (248)

Net loss allocated to general partner (1%) $ (1) $ (2)

Net loss allocated to depository unit

certificate holders (99%) (75) (246)

$ (76) $ (248)

Net loss per depository unit certificate $ (.06) $ (.20)

See Accompanying Notes to Financial Statements

U.S. REALTY PARTNERS LIMITED PARTNERSHIP

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(in thousands, except unit data)

Depository

Limited Unit

Partnership General Certificate

Units 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 year

ended December 31, 1997 -- (2) (246) (248)

Partners' capital (deficit)

at December 31, 1997 1,222,000 (446) 2,062 1,616

Net loss for the year

ended December 31, 1998 -- (1) (75) (76)

Partners' capital (deficit)

at December 31, 1998 1,222,000 $(447) $ 1,987 $ 1,540

See Accompanying Notes to Financial Statements

U.S. REALTY PARTNERS LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS
(in thousands)

Years Ended December 31,

1998 1997

Cash flows from operating activities:

Net loss $ (76) $ (248)

Adjustments to reconcile net loss to

net cash provided by operating activities:

Depreciation 857 847

Amortization 13 39

Bad debt expense 42 55

Change in accounts:

Restricted cash (225) (68)

Receivables and deposits (31) (240)

Other assets 39 85

Accounts payable (13) (27)
Tenant security deposit liabilities (1) --

Accrued property taxes 69 72

Due to Corporate General Partner 12 24

Other liabilities 49 113

Net cash provided by operating activities 735 652

Cash flows from investing activities:

Property improvements and replacements (154) (146)

Net deposits to restricted escrows (5) (57)

Net cash used in investing activities (159) (203)

Cash flows from financing activities:

Payments on mortgage note payable (576) (449)

Net cash used in financing activities (576) (449)

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 $2,145 $2,172

See Accompanying Notes to Financial Statements

U. S. REALTY PARTNERS LIMITED PARTNERSHIP

Notes to Financial Statements

December 31, 1998

NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization: U.S. Realty Partners Limited Partnership (the "Partnership" or
"Registrant") was organized as a limited partnership under the laws of the State
of South Carolina on January 23, 1986. The general partner responsible for
management of the Partnership's business is U.S. Realty I Corporation, a South
Carolina Corporation (the "Corporate General Partner"). The only other general
partner of the Partnership is N. Barton Tuck, Jr. Mr. Tuck is not an affiliate
of the Corporate General Partner and is effectively prohibited by the
Partnership's partnership agreement (the "Partnership Agreement") from
participating in the management of the Partnership. The Corporate General
Partner is a subsidiary of Apartment Investment and Management Company
("AIMCO"). See "Note B _ Transfer of Control." The directors and officers of
the Corporate General Partner also serve as executive officers of AIMCO. The
Partnership Agreement provides that the Partnership is to terminate on December
31, 2005, unless terminated prior to such date. The Partnership commenced
operations on August 26, 1986, and completed its acquisition of two apartment
complexes and two commercial properties on September 4, 1986, all of which are
located in the South. The Partnership sold one of the commercial properties on
February 1, 1999.

The Depositary Unit Certificate ("DUC") holders are assignees of USS Assignor,
Inc. (the Limited Partner), an affiliate of the Corporate General Partner, and
as such will be entitled to receive the economic rights attributable to the
Limited Partnership Interests represented by their DUCs. DUC holders will for
all practical purposes be treated as limited partners of the Partnership.

Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Allocation of Cash Distributions: Cash distributions by the Partnership are
allocated 98% to the DUC holders and 2% to the general partners until the DUC
holders have received annual noncumulative distributions equal to 10% of their
Adjusted Capital Values. Net cash from operations then will be distributed to
the general partners until the general partners collectively have received 7% of
net cash from operations distributed in that fiscal year. Thereafter, (after
repayment of any loans by the general partners to the Partnership), net cash
from operations will be distributed 93% to the DUC holders and 7% to the general
partners. According to the terms of the Partnership's loan agreements, no
distributions may be made until the long term debt is repaid.

During the first eight quarters following the issuance of the DUCs, the
Corporate General Partner was obligated to loan to the Partnership up to
approximately $811,000 to cover any deficiency in the quarterly cash
distributions. The Corporate General Partner loaned the Partnership $300,000
under this guarantee, which expired August 26, 1988. A deficiency arose when
the DUC holders did not receive annualized cash distributions equal to 10% of
the average of their Adjusted Capital Values. The loan bears interest at the
lesser of the rates being paid by the parent company of the Corporate General
Partner or two percentage points over the CitiBank, N.A. prime interest rate.
The repayment of the loan would reduce the amount subsequently available for
distribution to the DUC holders. This loan may not be repaid until the
Partnership's long term debt is repaid. The balance at December 31, 1998,
including accrued interest is $560,000.

Allocation of Profits, Gains and Losses: Profits, gains and losses of the
Partnership are allocated between the Corporate General Partner and DUC holders
in accordance with the provisions of the Partnership Agreement.

Profits and losses generally will be allocated 99% to the DUC holders and 1% to
the Corporate General Partner. Net loss per DUC for the years ended December
31, 1998 and 1997, was computed as 99% of the net loss divided by 1,222,000
depositary units outstanding.

Investment Properties: Investment properties consist of two apartment complexes
and two commercial properties, and are stated at cost. Acquisition fees are
capitalized as a cost of real estate. In accordance with Financial Accounting
Standards Board Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," the Partnership records
impairment losses on long-lived assets used in operations when events and
circumstances indicate that the assets might be impaired and the undiscounted
cash flows estimated to be generated by those assets are less than the carrying
amounts of those assets. Costs of apartment properties and commercial
properties that have been permanently impaired have been written down to
appraised value. No adjustment for impairment of value was recorded for the
years ended December 31, 1998 and 1997. The Gallery _ Knoxville was sold on
February 1, 1999.

Fair Value of Financial Instruments: Statement of Financial Accounting Standards
("SFAS") No. 107, "Disclosures about Fair Value of Financial Instruments", as
amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and
Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments, whether or not recognized in the
balance sheet, for which it is practicable to estimate fair value. Fair value is
defined in the SFAS as the amount at which the instruments could be exchanged in
a current transaction between willing parties, other than in a forced or
liquidation sale. The Partnership believes that the carrying amount of its
financial instruments (except for long term debt) approximates their fair value
due to the short term maturity of these instruments. The fair value of the
Partnership's long term debt, after discounting the scheduled loan payments at
an estimated borrowing rate currently available to the Partnership approximates
its carrying value.

Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the rental properties and related personal property. For
Federal income tax purposes, the accelerated cost recovery method is used: 1)
for real property over periods of 19 years for additions after May 8, 1985, and
before January 1, 1987, and 2) for personal property over 5 years for additions
after December 31, 1986, the modified accelerated cost recovery method is used
for depreciation of 1) real property additions over 27-1/2 years, and 2)
personal property additions over 7 years.

Amortization: Computer software costs were amortized over six years and are
fully amortized as of December 31, 1998. Lease commissions are being amortized
over a period of one to ten years using the straight-line method over the term
of the respective leases and are included in other assets.

Leases: The Partnership generally leases apartment units for twelve-month terms
or less. The Partnership recognizes income as earned on its leases. In
addition, the Corporate General Partner's policy is to offer rental concessions
during particularly slow months or in response to heavy competition from other
similar complexes in the area. Concessions are charged against rental income as
incurred. Commercial property leases vary from one to ten years. For leases
with scheduled rental increases, rental income is recognized on a straight-line
basis over the life of the applicable leases. Certain tenants have percentage
rent claims which provide for additional rent upon the tenant achieving certain
rental objectives. Percentage rent totaled approximately $141,000 and $68,000
for 1998 and 1997, respectively.

Restricted Cash

Tenant Security Deposits - The Partnership requires security deposits from all
apartment lessees for the duration of the lease. Deposits are refunded when the
tenant vacates the apartment if there has been no damage. The Partnership held
$123,000 of such funds at December 31, 1998.

Net Cash Flow Fund - The Partnership maintains a restricted cash account
for the purpose of repayment of the Partnership's debt. The Partnership
held approximately $433,000 of such funds at December 31, 1998. The
Partnership deposits Net Cash Flow, as defined in the loan agreement, into
this account to facilitate "Cash Sweeps" as defined in the loan agreement.
On a monthly basis, the Net Cash Flow Fund is disbursed or retained as
follows:

(a) first, at any time as there shall be a balance of less than $150,000 in
the Working Capital Account, an amount equal to the difference between the
actual balance and $150,000 but not in excess of twenty percent (20%) of
such Net Cash Flow shall be paid to the Partnership for deposit into the
Working Capital Account;

(b) second, to the payment of, or the reimbursement to the Partnership for
certain repairs and expenses and Capital Expenditures;

(d) fourth, to the payment of that portion of the Principal Balance equal to
accrued and unpaid interest therefore added to the Principal Balance
pursuant to the loan agreement;

(e) fifth, to the payment of the remaining Principal Balance and to any and all
other amounts payable to the Surety thereunder, including, but not limited
to, the additional interest.

Restricted Escrows

Capital Improvement Account - The Partnership established an interest bearing
bank account (see "Note E"), for the purpose of deposit and expenditure of cash
flow for Capital Expenditures. The Partnership shall deposit from time to time
from revenues a reasonable allowance for Capital Expenditures, provided the
amount of such deposit shall have been approved in advance by the Surety. The
Partnership may withdraw any amounts on deposit in the Capital Expenditures
Account to pay for Capital Expenditures as they are made, provided the amount of
such withdrawals shall have been approved in advance by the Surety. At December
31, 1998, the balance was approximately $118,000.

Working Capital Account - The Partnership established the "Working Capital
Account" for the purpose of providing a cash reserve available to the
Partnership (see "Note E"). On September 16, 1993, prior to making the first
deposit into the Net Cash Flow Fund, the Partnership deposited $150,000 into the
Working Capital Account. The bank holds the funds in the Working Capital
Account for the benefit of the Surety. The Partnership has the right to access
these funds without the consent of the Surety under specific guidelines mutually
agreed to by the Partnership and the Surety. Specifically, the Working Capital
Account may be used to fund negative cash flow, or emergency or immediate
funding needs of a property. At December 31, 1998, the balance was
approximately $154,000.

Escrow for Taxes: All escrow funds are designated for the payment of real
estate taxes and are held by the Partnership. These funds totaled approximately
$277,000 at December 31, 1998 and are included in receivables and deposits.

Segment Reporting: In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Standards No. 131, Disclosure about Segments of an
Enterprise and Related Information ("Statement 131"), which is effective for
years beginning after December 15, 1997. Statement 131 established standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports. It also establishes standards for related disclosures about products
and services, geographic areas, and major customers. See "Note J" for detailed
disclosures.

Advertising: The Partnership expenses the costs of advertising as incurred.
Advertising expense, included in operating expense, was approximately $48,000
for the year ended December 31, 1998 and $35,000 for the year ended December 31,
1997.

Reclassifications: Certain reclassifications have been made to the 1997
financial statements to conform with the 1998 presentation.

NOTE B - TRANSFER OF CONTROL

NOTE C - SUBSEQUENT EVENT

On February 1, 1999, the Partnership sold The Gallery - Knoxville to an
unaffiliated third party, for $9,300,000. The Partnership anticipates realizing
a gain of approximately $2,795,000 on the sale during the first quarter of 1999.
The proceeds from the sale were used for the payment of closing costs and to
paydown the mortgage encumbering the Partnership's properties.

The sales transaction is summarized as follows (amounts in thousands):

Sale price, net of selling costs $9,110
Net real estate (1) (6,315)
------
Gain on sale of real estate $2,795
=====

(1) Accumulated depreciation was approximately $2,789,000.

NOTE D - ACCOUNTS RECEIVABLE

Accounts receivable included in receivables and deposits at December 31, 1998,
consisted of the following (in thousands):

Tenant rentals $ 330

Common area maintenance, insurance and taxes 53
----

383

Less allowance for doubtful accounts (291)

$ 92

An analysis of the allowance for doubtful accounts is set forth below (in
thousands):
Years Ended December 31,

1998 1997

Balance at beginning of period $156 $126

Charged to expenses 42 55

Uncollectible amounts written

off against related assets -- (25)

Amounts collected 93 --

Balance at end of period $291 $156

NOTE E - MORTGAGE NOTE PAYABLE

On October 15, 1993, the Partnership finalized the refinancing of all debt
encumbering its real estate assets. The debt has a stated interest rate of
10%, which shall accrue and, to the extent such interest is not paid currently
out of Net Cash Flow, as defined in the loan agreement, shall be added to the
principal balance on August 16 of each year prior to the maturity date of August
1, 2001; provided, however, that the amount of accrued and unpaid interest,
shall at no time exceed the sum of $1,740,733 and the balances in the Capital
Expenditures Account, the Working Capital Account, and the Tax Escrow Account
established under provisions of the loan agreement. Amounts in excess of this
total must be immediately paid by the Partnership. The loan agreement also
calls for additional interest of approximately $59,000, which accrues annually
on August 1, and is payable on the earlier of the maturity date or the date on
which the principal balance and all accrued interest is paid. The Corporate
General Partner is currently assessing the feasibility of refinancing the
mortgage encumbering the Partnership's investment properties.

The obligations of the Partnership to the Surety in connection with the issuance
of the debt are secured by a first mortgage or deed of trust on each of the
Partnership's properties and are cross-defaulted so that a default with respect
to one property is a default under each mortgage or deed of trust. The mortgage
note payable is non-recourse. The note does not require prepayment penalties if
repaid prior to maturity.

The principle terms of the note payable are as follows:

Principal Principal

Balance At Stated Balance

December 31, Interest Period Maturity Due At

1998 Rate Amortized Date Maturity

(in thousands)

U.S. Realty

Partnership $20,582 10.00% 95 months 08/01/01 (1)

(1) The balance at maturity is directly related to the ability of the
Partnership to make cash flow payments per the mortgage agreement.

At December 31, 1998 and 1997, approximately $97,000 and $88,000, respectively,
of accrued interest was included in other liabilities.

NOTE F - INCOME TAXES

The Partnership has received a ruling from the Internal Revenue Service that it
will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership. Taxable income or loss of the Partnership is reported in
the income tax returns of its partners.

The following is a reconciliation of reported net loss and Federal taxable loss
(in thousands except per unit data):

Years Ended December 31,

1998 1997

Net loss as reported $ (76) $(248)

Add (deduct):

Depreciation differences (685) (689)

Difference in bad debt expense 135 38

Difference in rents recognized 25 61

Change in prepaid rentals (60) 70

Other (79) (8)

Federal taxable loss $ (74) $(776)

Federal taxable loss per DUC $ (.60) $(.63)

The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands):

Net assets as reported $ 1,540
Land and buildings 10,746
Accumulated depreciation (11,487)
Syndication 2,774
Other 167

Net assets - tax basis $ 3,740

NOTE G - 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 certain payments
to affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following payments were made to the
Corporate General Partner and its affiliates during the year ended December 31,
1998 and 1997:

1998 1997

(in thousands)

Property management fees (included in operating expenses) $255 $292

Reimbursement for services of affiliates (included in

operating, general and administrative expenses, and

investment properties) (1) 117 159

Lease commissions -- 57

Due to General Partner 560 548

(1) Included in "reimbursements for services of affiliates" for 1998 and 1997
are approximately $3,000 and $7,000, respectively, in reimbursements for
construction oversight costs.

During the years ended December 31, 1998 and 1997, affiliates of the Corporate
General Partner were entitled to receive 5% of gross receipts from all of the
Registrant's residential properties for providing property management services.
The Registrant paid to such affiliates $142,000 and $140,000 for the years ended
December 31, 1998 and 1997, respectively. For the nine months ending September
30, 1998 and the year ended December 31, 1997, affiliates of the Corporate
General Partner were entitled to receive varying percentages of gross receipts
from all of the Registrant's commercial properties for providing property
management services. The Registrant paid to such affiliates $113,000 and
$152,000 for the nine months ending September 30, 1998 and the year ended
December 31, 1997, respectively. Effective October 1, 1998 (the effective date
of the Insignia Merger) these services for the commercial properties were
provided by an unrelated party.

An affiliate of the Corporate General Partner received reimbursement of
accountable administrative expenses amounting to approximately $117,000 and
$159,000 for the nine months ended September 30, 1998 and the year ended
December 31, 1998 and 1997, respectively.

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 who 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.

During the first quarter of 1999, an affiliate of the Corporate General Partner
acquired 243,831 DUC's representing 19.95% of the total outstanding DUC's.

NOTE H - REAL ESTATE AND ACCUMULATED DEPRECIATION

Investment Properties

Initial Cost

To Partnership

(in thousands)

Cost

Buildings Capitalized

and Related (Removed)

Personal Subsequent to

Description Land Property Acquisition

(in thousands)

The Gallery - Huntsville

Huntsville, Alabama $4,070 $ 8,377 $(5,043)

The Gallery - Knoxville

Knoxville, Tennessee 3,376 9,037 (3,388)

Governor's Park Apartments

Little Rock, Arkansas 423 5,701 (50)

Twin Lakes Apartments

Palm Harbor, Florida 1,928 9,283 (254)

Totals $9,797 $32,398 $(8,735)

The cost removed, net of additions, subsequent to the acquisition is primarily
due to write-downs and removals in the prior years.

Gross Amount At Which Carried

At December 31, 1998

(in thousands)

Buildings

and

Personal Accumulated Date of Date Depreciable

Description Land Property Total Depreciation Construction Acquired Life-Years

(in thousands)

The Gallery -

Huntsville $2,341 $ 5,063 $ 7,404 $ 2,329 1986 08/29/86 5-35

The Gallery-

Knoxville 2,070 6,955 9,025 2,789 1984 09/04/86 5-35

Governor's Park 423 5,651 6,074 2,579 1985 08/29/86 5-35

Twin Lakes 1,700 9,257 10,957 3,683 1986 08/28/86 5-35

Totals $6,534 $26,926 $33,460 $11,380

</TABLE>

Each of the Partnership's properties is secured by a first mortgage or deed of
trust in connection with the issuance of an Amended and Restated Surety Note,
Bond Notes and Suretyship Agreement.

Reconciliation of "Real Estate and Accumulated Depreciation":

Years Ended December 31,

1998 1997

(in thousands)

Real Estate

Balance at beginning of year $33,306 $33,160

Property improvements 154 146

Disposals of property -- --

Balance at end of year $33,460 $33,306

Accumulated Depreciation

Balance at beginning of year $10,523 $ 9,676

Additions charged to expense 857 847

Disposals of property -- --

Balance at end of year $11,380 $10,523

The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1998 and 1997, is approximately $44,206,000 and $44,052,000,
respectively. The accumulated depreciation taken for Federal income tax
purposes at December 31, 1998 and 1997, is approximately $22,867,000 and
$21,325,000, respectively.

NOTE I - REVENUES

The Partnership leases The Gallery _ Huntsville under non-cancellable operating
lease agreements. Future minimum rental payments to be received under operating
leases that have initial or remaining non-cancellable lease terms in excess of
one year as of December 31, 1998, are as follows (in thousands):

1999 $ 627

2000 633

2001 533

2002 345

2003 315

Thereafter 463

$2,916

Rents from tenants of The Gallery - Huntsville exceeding 10% of rental income
during 1998 and 1997 were as follows:

1998 1997

Amount Percentage Amount Percentage

(in thousands) (in thousands)

Eye care center 93 11% 93 11%
Bookstore 87 10% 87 10%
Shore store 181 21% 181 21%

NOTE J - SEGMENT REPORTING

Description of the types of products and services from which the reportable
segment derives its revenues

As defined by SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information", the Partnership has two reportable segments: residential
properties and commercial properties. The Partnership's residential property
segment consists of two apartment complexes located in Arkansas and Florida.
The Partnership rents apartment units to people for terms that are typically
twelve months or less. The commercial property segment consists of two shopping
centers located in Alabama and Tennessee. These properties lease space to
various retail businesses terms ranging from 12 months to 10 years.

Measurement of segment profit or loss

The Partnership evaluates performance based on net income. The accounting
policies of the reportable segments are the same as those described in the
summary of significant accounting policies.

Factors management used to identify the enterprise's reportable segment

The Partnership's reportable segments consist of investment properties that
offer different products and services. The reportable segments are each managed
separately because they provide distinct services with different types of
products and customers.

Segment information for the years 1998 and 1997 is shown in the tables below.
The "Other" Column includes partnership administration related items and income
and expense not allocated to the reportable segments (in thousands).

1998 RESIDENTIAL COMMERCIAL OTHER TOTALS

Rental income $ 2,655 $ 2,456 $ -- $ 5,111
Other income 128 23 31 182
Interest expense -- -- 2,225 2,225
Depreciation 459 398 -- 857
General and administrative expense -- -- 227 227
Segment profit (loss) 944 1,400 (2,420) (76)
Total assets 10,920 11,849 821 23,590
Capital expenditures for
investment properties 142 12 -- 154

1997

Rental income $ 2,641 $ 2,533 $ -- $ 5,174
Other income 102 42 25 169
Interest expense -- -- 2,250 2,250
Depreciation 452 395 -- 847
General and administrative expense -- -- 222 222
Segment profit (loss) 806 1,403 (2,457) (248)
Total assets 11,246 12,305 575 24,126
Capital expenditures for
investment properties 128 18 -- 146

NOTE K - LEGAL PROCEEDINGS

The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND

FINANCIAL DISCLOSURE

None.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The Registrant has no officers or directors. The Individual and Corporate
General Partners of the Registrant are as follows:

Individual General Partner - N. Barton Tuck, Jr., age 59, is the Individual

General Partner of the Registrant. Mr. Tuck is Chairman of GolfSouth
Management, Inc. Until August 1990, he served as Chairman and Chief Executive
Officer of U.S. Shelter Corporation ("Shelter"), the former parent of AmReal
Corporation (parent of the Corporate General Partner of the Partnership). For
six years prior to 1966, Mr. Tuck was employed in Greenville, South Carolina by
the certified public accounting firm of S.D. Leidesdorf & Company. From 1966 to
1970, he was a registered representative with the investment banking firm of
Harris Upham & Co., Inc. in Greenville, South Carolina. Since 1970, Mr. Tuck has
been engaged in arranging equity investments for individuals and partnerships.
Mr. Tuck is a graduate of the University of North Carolina. Mr. Tuck has
delegated to the Corporate General Partner all of his authority, as a general
partner of the Partnership, to manage and control the Partnership and its
business and affairs.

Corporate General Partner: The names of the directors and executive officers of

U.S. Realty I Corporation, their ages and the nature of all positions with U.S.
Realty I Corporation presently held by them are set forth below. There are no
family relationships between or among any officers and directors.

Name Age Position

Patrick J. Foye 41 Executive Vice President and Director

Timothy R. Garrick 42 Vice President _ Accounting and Director

Patrick J. Foye has been Executive Vice President and Director of the Corporate
General Partner since October 1, 1998. Mr. Foye has served as Executive Vice
President of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a
partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to
1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow
offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long
Island Power Authority and serves as a member of the New York State
Privatization Council. He received a B.A. from Fordham College and a J.D. from
Fordham University Law School.

Timothy R. Garrick has served as Vice President-Accounting of AIMCO and Vice
President-Accounting and Director of the Corporate General Partner since October
1, 1998. Prior to that date, Mr. Garrick served as Vice President-Accounting
Services of Insignia Financial Group since June of 1997. From 1992 until June
of 1997, Mr. Garrick served as Vice President of Partnership Accounting and from
1990 to 1992 as an Asset Manager for Insignia Financial Group. From 1984 to
1990, Mr. Garrick served in various capacities with U.S. Shelter Corporation.
From 1979 to 1984, Mr. Garrick worked on the audit staff of Ernst & Whinney. Mr.
Garrick received his B.S. Degree from the University of South Carolina and is a
Certified Public Accountant.

ITEM 10. EXECUTIVE COMPENSATION

Neither the Individual General Partner nor any of the directors and officers of
the Corporate General Partner received any remuneration from the Registrant.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of December 31, 1998, no person or entity was known by the Registrant to be
the beneficial owner of more than 5% of the Limited Partnership Units of the
Registrant. However during the first quarter of 1999, an affiliate of the
Corporate General Partner with an address at 1873 South Bellaire Street, Denver,
Colorado acquired in private transactions a total of 243,831 DUCs representing
19.95% of the total outstanding DUCs.

No director or officer of the Corporate General Partner owns any Units.

On October 1, 1998, Insignia Financial Group, Inc. merged into AIMCO, a real
estate investment trust, whose Class A Common Shares are listed on the New York
Stock Exchange. As a result of such merger, AIMCO and AIMCO Properties, L.P., a
Delaware limited partnership and the operating partnership of AIMCO ("AIMCO OP")
acquired indirect control of the Corporate General Partner. AIMCO and its
affiliates do not currently own any of the limited partnership interests in the
Partnership. AIMCO is presently considering whether it will engage in an
exchange offer for limited partnership interests in the Partnership. There is a
substantial likelihood that, within a short period of time, AIMCO OP will offer
to acquire limited partnership interests in the Partnership for cash or
preferred units or common units of limited partnerships interests in AIMCO OP.
While such an exchange offer is possible, no definite plans exist as to when or
whether to commence such an exchange offer, or as to the terms of any such
exchange offer, and it is possible that none will occur.

A registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective. These
securities may not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This Form 10-KSB shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such state.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

(in thousands)

Property management fees (included in operating expenses) $255 $292

Reimbursement for services of affiliates (included in

operating, general and administrative expenses, and

investment properties) (1) 117 159

Lease commissions -- 57

Due to General Partner 560 548

(1) Included in "reimbursements for services of affiliates" for 1998 and 1997
are approximately $3,000 and $7,000, respectively, in reimbursements for
construction oversight costs.

During the first quarter of 1999, an affiliate of the Corporate General Partner
acquired 243,831 DUCs representing 19.95% of total outstanding DUCs.

ITEM 13. 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 filed in the fourth quarter of fiscal year
1998:

Current Report on Form 8-K dated October 1, 1998 and filed on October 16, 1998
disclosing change in control of Registrant from Insignia Financial Group, Inc.
to AIMCO.

SIGNATURES

In accordance with Section 13 or 15(d) 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/Patrick J. Foye
Patrick J. Foye
Executive Vice President

By: /s/Carla R. Stoner
Carla R. Stoner
Senior Vice President
Finance and Administration

Date: June 30, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

By: /s/Patrick J. Foye Date: June 30, 1999
Patrick J. Foye
Executive Vice President and Director

By: /s/Carla R. Stoner Date: June 30, 1999
Carla R. Stoner
Senior Vice President
Finance and Administration
EXHIBIT INDEX

Exhibit

3 See Exhibit 4(a)

2.1 Agreement and Plan of Merger, dated as of October 1, 1998, by and
between AIMCO and IPT (Incorporated by reference to Exhibit 2.1 of
IPT's Current Report on Form 8-K, File No. 1-14179, dated October 1,
1998).

4 (a) Amended and Restated Certificate and Agreement of Limited Partnership
(included as Exhibit A to the Prospectus of Registrant dated August
19, 1986 contained in Amendment No. 4 Registration Statement, No. 33-
2996, of Registrant filed August 19, 1986 (the "Prospectus") and is
incorporated herein by reference).

(b) Subscription Agreement and Signature Page (included as Exhibit B to
the Prospectus and is incorporated herein by reference).

(c) Instruments governing the Bonds (filed as Exhibit 10C to Amendment No.
4 to Registration Statement, No. 33-2996, of Registrant filed August
19, 1986 and incorporated herein by reference).

(d) First Amendment to U.S. Realty Partners Limited Partnership Amended
and Restated Agreement of Limited of Partnership (dated August 15,
1986) dated October 14, 1993. [Filed as Exhibit 4(c) to Form 10QSB
for the quarter ended September 30, 1993 and incorporated herein by
reference.]

10(i) Contracts related to acquisition of properties:

(a) Purchase Agreement dated January 31, 1986 between The Gallery,
Ltd./LNDC Venture and U.S. Realty Partners Limited Partnership to
acquire The Gallery Shopping Plaza, Knoxville, Tennessee (filed as
Exhibit 10D to Amendment No. 1 to Registration Statement, No. 33-2996,
of the Registrant filed August 19, 1986 incorporated herein by
reference).

(b) Form of Purchase Agreement by which U.S. Realty Partners Limited
Partnership expects to acquire The Gallery Shopping Plaza, Huntsville,
Alabama (filed as Exhibit 10E to Amendment No. 2 to Registration
Statement, No. 33-2996, of the Registrant filed August 19, 1986 and
incorporated herein by reference).

(ii) Form of Management Agreement with U.S. Shelter Corporation (filed with
Amendment No. 4 to Registration Statement No. 33-2996, of Registrant
filed August 19, 1986 and is incorporated herein by reference).

(iii) (a) Form of Master Lease and Management and Leasing Sub-Agreement related
to Purchase Agreement (see 10(b) between Cazana/Huntsville Shopping
Center, Ltd. and U.S. Shelter Corporation) to acquire The Gallery
Shopping Plaza, Huntsville, Alabama (filed as Exhibit 10E to Amendment
No. 4 to Registration Statement, No. 33-2996, of the Registrant filed
August 19, 1986 and incorporated herein by reference).

(b) Amended and Restated Surety Note, Bond Notes and Suretyship Agreement
by and between U.S. Realty Partners Limited Partnership and
Continental Casualty Company, dated October 15, 1993. *

(c) First Amended and Restated Mortgage, Assignment of Rents and Security
Agreement dated as of October 15, 1993 from U.S. Realty Partners
Limited Partnership, a Delaware limited partnership, to Continental
Casualty Company, an Illinois insurance company, securing Twin Lakes
Apartments, Palm Harbor, Florida. *

(d) State of Florida Uniform Commercial Code - Statement of Change - Form
UCC - 3 Rev. 11-88 by U.S. Realty Partners Limited Partnership and
Continental Casualty Company. *

(e) First Amended and Restated Mortgage, Assignment of Rents and Security
Agreement dated as of October 15, 1993 from U.S. Realty Partners
Limited Partnership, a Delaware limited partnership, to Continental
Casualty Company, an Illinois insurance company, securing Governor's
Park (formerly St. Croix) Apartments, Little Rock, Arkansas. *

(f) Uniform Commercial Code - Standard Form Pulaski County, Arkansas,
Statements of Continuation, Partial Release, Assignment, etc. - Form
UCC-3 by U.S. Realty Partners Limited Partnership and Continental
Casualty Company. *

(g) First Amended and Restated Mortgage, Assignment of Rents and Security
Agreement dated as of October 15, 1993 from U.S. Realty Partners
Limited Partnership, a Delaware limited partnership, to Continental
Casualty Company, an Illinois insurance company, securing Gallery
Shopping Plaza, Huntsville, Alabama.*

(h) State of Alabama - Uniform Commercial Code, Statements of
Continuation, Partial Release Assignments, etc. - Form UCC-3 by U.S.
Realty Partners Limited Partnership and Continental Casualty Company.
*

(i) First Amended and Restated Mortgage, Assignment of Rents and Security
Agreement dated as of October 15, 1993 from U.S. Realty Partners
Limited Partnership, a Delaware limited partnership, to Continental
Casualty Company, an Illinois insurance company, securing Gallery
Shopping Plaza, Knoxville, Tennessee.*

(j) State of Tennessee Uniform Commercial Code Statements of Continuation
Partial Release, Assignment, etc. - Form UCC-3 by U.S. Realty Partners
Limited Partnership and Continental Casualty Company. *

(k) First Amended and Restated Assignment of Rents and Leases dated
October 15, 1993 from U.S. Realty Partners Limited Partnership to
Continental Casualty Company, securing Gallery Shopping Plaza,
Huntsville, Alabama and Gallery Shopping Plaza, Knoxville, Tennessee.
*

(l) Depositary Agreement dated as of October 15, 1993, among U.S. Realty
Partners Limited Partnership, First Union National Bank of South
Carolina and Continental Casualty Company. *

(m) Financial Statement - Form UCC-1, State of South Carolina, Office of
Secretary of State Jim Miles by US Realty Partners Limited Partnership
and Continental Casualty Company. *

(n) Incumbency Certificate by U.S. Realty I Corporation and U.S. Realty
Partners Limited Partnership. *

10.21 Contract of Sale between Registrant and The Gallery of Knoxville,
L.P., effective February 1, 1999 (Filed February , 1999.)

* Filed as Exhibits 10iii (a) through (m) to Form 10QSB for the quarter ended
September 30, 1993 and incorporated herein by reference.

99 Prospectus of Registrant dated August 19, 1986 (included in
Registration Statement, No. 33-2996, of Registrant and incorporated
herein by reference).

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from U.S. Realty
Partners Limited PArtnerhsip 1998 Year-End 10-KSB and is qualified in its
entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000788955
<NAME> U.S. REALTY PARTNERS LIMITED PARTNERSHIP
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 420
<ALLOWANCES> 291
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 33,460
<DEPRECIATION> (11,380)
<TOTAL-ASSETS> 23,590
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 20,582
0
0
<COMMON> 0
<OTHER-SE> 1,540
<TOTAL-LIABILITY-AND-EQUITY> 23,590
<SALES> 0
<TOTAL-REVENUES> 5,293
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,369
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,225
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (76)
<EPS-BASIC> (.06)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>

</TABLE>