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
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] 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.)
55 Beattie Place, 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 per unit data)
June 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Restricted cash $ 684
Receivables and deposits 328
Other assets 46
Investment properties:
Land $ 2,123
Buildings and related personal property 15,717
17,840
Less accumulated depreciation (7,020) 10,820
$11,878
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 14
Tenant security deposit liabilities 54
Accrued property taxes 199
Other liabilities 526
Due to Corporate General Partner 598
Mortgage note payable 3,673
Partners' Capital
General partners $ 7
Depositary unit certificate holders (2,440,000 units
authorized; 1,222,000 units issued and outstanding) 6,807 6,814
$11,878
See Accompanying Notes to Financial Statements
</TABLE>
b)
U.S. REALTY PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 735 $ 730 $ 1,494 $ 1,444
Other income 32 42 69 79
Total revenues 767 772 1,563 1,523
Expenses:
Operating 279 250 575 534
General and administrative 50 44 94 94
Depreciation 138 115 269 230
Interest 113 309 232 707
Property taxes 67 51 129 59
Total expenses 647 769 1,299 1,624
Income (loss) from continuing
operations 120 3 264 (101)
Income from discontinued operations -- 170 -- 363
(Loss) gain on sale of discontinued
operations -- (93) -- 2,701
Net income $ 120 $ 80 $ 264 $ 2,963
Net income (loss) allocated to general
partners (1%) $ 1 $ 1 $ 3 $ 30
Net income allocated to depositary
unit certificate holders (99%) 119 79 261 2,933
$ 120 $ 80 $ 264 $ 2,963
Net income per depositary unit certificate:
Income (loss) from continuing operations $ .10 $ -- $ .21 $ (.08)
Income from discontinued operations -- .14 -- .29
(Loss) gain on sale of discontinued
operations -- (.08) -- 2.19
$ .10 $ .06 $ .21 $ 2.40
See Accompanying Notes to Financial Statements
</TABLE>
c)
U.S. REALTY PARTNERS LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(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' capital at
December 31, 1999 1,222,000 $ 4 $ 6,546 $ 6,550
Net income for the six months
ended June 30, 2000 -- 3 261 264
Partners' capital at
June 30, 2000 1,222,000 $ 7 $ 6,807 $ 6,814
See Accompanying Notes to Financial Statements
</TABLE>
d)
U.S. REALTY PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 264 $ 2,963
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 269 230
Investment in discontinued operations -- 130
Gain on sale of discontinued operations -- (2,701)
Change in accounts:
Restricted cash (172) 120
Receivables and deposits (172) (346)
Other assets (5) (14)
Accounts payable (139) (6)
Tenant security deposit liabilities (4) (8)
Accrued property taxes 129 58
Due to Corporate General Partner 2 24
Other liabilities 5 (46)
Net cash provided by operating activities 177 404
Cash flows from investing activities:
Net proceeds from sale of investment property -- 8,909
Property improvements and replacements (323) (71)
Net withdrawals from (deposits to) restricted escrows 283 (6)
Net cash (used in) provided by investing
activities (40) 8,832
Cash flows from financing activities:
Payments on mortgage note payable (137) (331)
Repayment of mortgage note payable -- (8,905)
Net cash used in financing activities (137) (9,236)
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 $ 189 $ 704
See Accompanying Notes to Financial Statements
</TABLE>
e)
U.S. REALTY PARTNERS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
June 30, 2000
Note A - Basis of Presentation
The accompanying unaudited financial statements of U.S. Realty Partners Limited
Partnership (the "Partnership" or "Registrant") 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, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000. 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,
1999.
Certain reclassifications have been made to the 1999 financial statements to
conform with the 2000 presentation.
Note B - 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 ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the Corporate General Partner. The Corporate General Partner does not believe
that this transaction has had or will have a material effect on the affairs and
operations of the Partnership.
Note C - 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
restructuring in October of 1993.
Note D - Discontinued Operations
The Gallery - Knoxville and The Gallery - Huntsville were the only two
commercial properties owned by the Partnership and represented one segment of
the Partnership's operations. Both of these properties were sold during 1999 and
accordingly the results of the commercial segment have been shown as income from
discontinued operations and gain (loss) on sale of discontinued operations as of
June 30, 2000 and 1999. Revenues of these properties were approximately $240,000
and $659,000 for the three and six months ended June 30, 1999, respectively. No
revenues from the properties were recorded during the three and six months ended
June 30, 2000. Income from discontinued operations was approximately $170,000
and $363,000 for the three and six months ended June 30, 1999, respectively.
On February 1, 1999, The Gallery - Knoxville, located in Knoxville, Tennessee,
was sold to an unaffiliated third party for $9,300,000. After closing expenses
of approximately $391,000, the net proceeds received by the Partnership were
approximately $8,909,000. The Partnership was required to use the net proceeds
from the sale of the property to pay down the mortgage encumbering the
Partnership's properties. The sale of the property resulted in a gain on sale of
investment property of approximately $2,701,000. In connection with the sale, a
commission of approximately $93,000 was paid to the Corporate General Partner in
accordance with the terms of the Partnership Agreement.
On July 2, 1999, The Gallery - Huntsville, located in Huntsville, Alabama, was
sold to an unaffiliated third party for $7,310,000. After closing expenses of
approximately $215,000, the net proceeds received by the Partnership were
approximately $7,095,000. The Partnership was required to use the net proceeds
from the sale of the property to pay down the mortgage encumbering the
Partnership's properties. The sale of the property resulted in a gain on sale of
investment property of approximately $1,968,000. In connection with the sale, a
commission of approximately $73,100 was paid to the Corporate General Partner in
accordance with the Partnership Agreement.
Note E - 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 (i) certain
payments to affiliates for services and (ii) reimbursement of certain expenses
incurred by affiliates on behalf of the Partnership. The following amounts were
paid or accrued to the Corporate General Partner and its affiliates during the
six months ended June 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in
operating expenses) $ 77 $ 78
Reimbursement for services of affiliates
(included in general and administrative,
operating expenses and investment properties) 42 38
Due to Corporate General Partner 598 584
During the six months ended June 30, 2000 and 1999, affiliates of the Corporate
General Partner were entitled to receive 5% of gross receipts from both of the
Registrant's residential properties for providing property management services.
The Registrant paid to such affiliates approximately $77,000 and $78,000 for the
six months ended June 30, 2000 and 1999, respectively.
An affiliate of the Corporate General Partner received reimbursement of
accountable administrative expenses amounting to approximately $42,000 and
$38,000 for the six months ended June 30, 2000 and 1999, respectively.
AIMCO and its affiliates currently own 475,380 limited partnership units in the
Partnership representing 38.90% of the outstanding units. A number of these
units were acquired pursuant to tender offers made by AIMCO or its affiliates.
It is possible that AIMCO or its affiliates will make one or more additional
offers to acquire additional limited partnership interests in the Partnership
for cash or in exchange for units in the operating partnership of AIMCO. Under
the Partnership Agreement, unitholders holding a majority of the Units are
entitled to take action with respect to a variety of matters. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the Corporate General Partner because of their
affiliation with the Corporate General Partner.
Note F - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership had 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 tenants for terms that are typically twelve months or
less. The commercial property segment consisted of a shopping center located in
Alabama, which was sold on July 2, 1999 and a shopping center in Tennessee which
was sold on February 1, 1999. As a result of the sale of both commercial
properties during 1999, the commercial segment is shown as discontinued
operations.
Measurement of segment profit or loss:
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segment are the same as
those of the Partnership as described in the Partnership's Annual Report on Form
10-KSB for the year ended December 31, 1999.
Factors management used to identify the enterprise's reportable segment:
The Partnership's reportable segment consists 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 three and six month periods ended June 30, 2000 and
1999 is shown in the tables below. The "Other" column includes partnership
administration related items and income and expense not allocated to the
reportable segment (in thousands).
Three Months Ended June 30, 2000 Residential Other Totals
Rental income $ 735 $ -- $ 735
Other income 26 6 32
Interest expense -- 113 113
Depreciation 138 -- 138
General and administrative expense -- 50 50
Segment profit (loss) 277 (157) 120
Six Months Ended June 30, 2000 Residential Other Totals
Rental income $ 1,494 $ -- $ 1,494
Other income 55 14 69
Interest expense -- 232 232
Depreciation 269 -- 269
General and administrative expense -- 94 94
Segment profit (loss) 566 (302) 264
Total assets 11,367 511 11,878
Capital expenditures for investment
properties 323 -- 323
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999 Residential Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $ 730 $ -- $ -- $ 730
Other income 35 -- 7 42
Interest expense -- -- 309 309
Depreciation 115 -- -- 115
General and administrative expense -- -- 44 44
Income from discontinued operations -- 170 -- 170
(Loss) on sale of discontinued
operations -- (93) -- (93)
Segment profit (loss) 349 77 (346) 80
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999 Residential Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $ 1,444 $ -- $ -- $ 1,444
Other income 65 -- 14 79
Interest expense -- -- 707 707
Depreciation 230 -- -- 230
General and administrative expense -- -- 94 94
Income from discontinued operations -- 363 -- 363
Gain on sale of discontinued
operations -- 2,701 -- 2,701
Segment profit (loss) 686 3,064 (787) 2,963
Total assets 10,865 5,326 963 17,154
Capital expenditures for investment
properties 71 -- -- 71
</TABLE>
Item 2. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussions 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.
The Partnership's investment properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for the six
months ended June 30, 2000 and 1999:
Average
Occupancy
Property 2000 1999
Twin Lakes Apartments
Palm Harbor, Florida 96% 96%
Governor's Park Apartments
Little Rock, Arkansas 96% 94%
Results of Operations
The Registrant's net income for the three and six months ended June 30, 2000 was
approximately $120,000 and $264,000, respectively, as compared to approximately
$80,000 and $2,963,000 for the three and six months ended June 30, 1999. The
decrease in net income for the six months ended June 30, 2000 is primarily
attributable to the gain on sale of discontinued operations of approximately
$2,701,000 realized on the sale of The Gallery - Knoxville. The Gallery -
Knoxville was sold to an unaffiliated third party on February 1, 1999 for
$9,300,000. After closing expenses of approximately $391,000 the net proceeds
received by the Partnership were approximately $8,909,000. The Partnership was
required to use the proceeds from the sale of the property to pay down the
mortgage encumbering the Partnership's properties. The decrease in net income is
also attributable to a decrease in income from discontinued operations as a
result of the above mentioned sale in addition to the sale of the Partnership's
remaining commercial property, The Gallery - Huntsville, on July 2, 1999.
Excluding the impact of the operations and sale of both commercial properties,
the Registrant's income from continuing operations for the three and six months
ended June 30, 2000 was approximately $120,000 and $264,000 as compared to a net
income (loss) from continuing operations of approximately $3,000 and $(101,000)
for the three and six months ended June 30, 1999. The increase in net income is
due primarily to a decrease in total expenses for the three and six months ended
June 30, 2000 and, to a lesser extent, an increase in total revenue for the six
months ended June 30, 2000. Total expenses decreased primarily due to a decrease
in interest expense. Interest expense decreased as a result of the reduction of
the mortgage encumbering the Partnership's investment properties, with the net
proceeds from the sale of The Gallery - Knoxville and The Gallery - Huntsville
as noted above.
The decrease in total expenses was partially offset by increases in operating,
depreciation, and property tax expenses. The increase in operating expense is
due primarily to increases in salaries and related employee benefits and to an
increase in repairs and maintenance at the Partnership's residential properties.
Depreciation expense increased as a result of recent capital improvements
performed at both of the Partnership's investment properties. Property tax
expense increased as a result of an adjustment to the accrual for property tax
expense during 1999 as a result of prior overaccruals.
Total revenues increased for the six months ended June 30, 2000 as a result of
an increase in rental income. The increase in rental income is due primarily to
an increase in the average rental rates at both of the Partnership's residential
properties and to an increase in occupancy at Governor's Park Apartments. The
increase in total revenue for the six months ended June 30, 2000, was partially
offset by a decrease in other income. The decrease in other income is due
primarily to decreases in lease cancellation fees and deposit forfeitures at
Twin Lakes Apartments. Total revenue remained relatively constant for the three
months ended June 30, 2000.
General and administrative expenses remained relatively constant for the three
and six month periods ended June 30, 2000. Included in general and
administrative expenses are management reimbursements to the Corporate General
Partner allowed under the Partnership Agreement. 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 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
All of the Partnership's cash is restricted pursuant to the terms of the
mortgage loan encumbering the Partnership's properties. At June 30, 2000, the
Partnership had approximately $684,000 of restricted cash from continuing
operations as compared to approximately $512,000 of restricted cash from both
continuing and discontinued operations at December 31, 1999. The Partnership had
approximately $137,000 of cash used in financing activities and approximately
$40,000 of cash used in investing activities, which was offset by approximately
$177,000 of cash provided by operating activities. Cash used in financing
activities consisted of payments on the mortgage encumbering the Registrant's
properties. Cash used in investing activities consisted of property improvements
and replacements, which was partially offset by withdrawals from restricted
escrow accounts.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the various properties to adequately maintain the
physical assets and other operating needs of the Partnership and to comply with
Federal, State, and local, legal and regulatory requirements. Capital
improvements planned for each of the Registrant's properties are detailed below.
Governor's Park Apartments
The Partnership has budgeted, but is not limited to, approximately $113,700 for
capital improvements during the current year consisting primarily of floor
covering, appliance and major landscaping. The Partnership completed
approximately $27,000 in capital expenditures at Governor's Park Apartments
during the six months ended June 30, 2000, consisting primarily of major
landscaping, floor covering and appliance replacements. These improvements were
funded with cash from operations.
Twin Lakes Apartments
The Partnership has budgeted, but is not limited to, approximately $455,000 for
capital improvements during the current year consisting primarily of roof and
structural improvements, floor and appliance replacement and major landscaping.
The Partnership completed approximately $296,000 in capital expenditures at Twin
Lake Apartments during the six months ended June 30, 2000, consisting primarily
of roof replacements, floor covering replacement, drapery/blind replacements and
other building improvements. These improvements were funded with cash from
operations.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves.
The total mortgage indebtedness of $3,673,000 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.
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 filed during the quarter ended June 30, 2000:
None.
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/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: August 11, 2000
