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 March 31, 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)
March 31, 2000
Assets
Restricted cash $ 677
Receivables and deposits 248
Other assets 61
Investment properties:
Land $ 2,123
Buildings and related personal property 15,534
17,657
Less accumulated depreciation (6,882) 10,775
$11,761
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 81
Tenant security deposit liabilities 55
Accrued property taxes 132
Other liabilities 490
Due to Corporate General Partner 602
Mortgage note payable 3,707
Partners' Capital
General partners $ 5
Depositary unit certificate holders (2,440,000 units
authorized; 1,222,000 units issued and outstanding) 6,689 6,694
$11,761
See Accompanying Notes to Financial Statements
<PAGE>
b)
U.S. REALTY PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
Revenues: (restated)
<S> <C> <C>
Rental income $ 759 $ 715
Other income 37 36
Total revenues 796 751
Expenses:
Operating 275 284
General and administrative 44 50
Depreciation 131 115
Interest 119 398
Property taxes 62 6
Total expenses 631 853
Income (loss) from continuing operations 165 (102)
(Loss) income from discontinued operations (21) 191
Gain on sale of discontinued operations -- 2,794
Net income $ 144 $2,883
Net income allocated to general partners (1%) $ 1 $ 29
Net income allocated to depositary unit certificate
holders (99%) 143 2,854
$ 144 $2,883
Net income per depositary unit certificate:
Income (loss) from continuing operations $ .13 $ (.08)
Income from discontinued operations (.01) .15
Gain on sale of discontinued operations -- 2.27
$ .12 $ 2.34
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
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 three months
ended March 31, 2000 -- 1 143 144
Partners' capital at
March 31, 2000 1,222,000 $ 5 $ 6,689 $ 6,694
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
d)
U.S. REALTY PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 144 $ 2,883
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation 131 178
Amortization of lease commissions and software -- 2
Gain on sale of discontinued operations (2,794)
Change in accounts:
Restricted cash (165) 187
Receivables and deposits (92) (216)
Other assets (20) 101
Accounts payable (140) (6)
Tenant security deposit liabilities (3) (41)
Accrued property taxes 62 (112)
Due to Corporate General Partner 6 18
Other liabilities (31) (19)
Net cash (used in) provided by operating
activities (108) 181
Cash flows from investing activities:
Net proceeds from sale of investment property -- 9,002
Property improvements and replacements (72) (29)
Net withdrawals from (deposits to) restricted escrows 283 (3)
Net cash provided by investing activities 211 8,970
Cash flows from financing activities:
Payments on mortgage note payable (103) (246)
Repayment of mortgage note payable -- (8,905)
Net cash used in financing activities (103) (9,151)
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 $ 97 $ 402
At March 31, 2000 property improvements and replacements and accounts payable
were adjusted by approximately $68,000 for non-cash activity.
See Accompanying Notes to Financial Statements
</TABLE>
e)
U.S. REALTY PARTNERS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
March 31, 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
month period ended March 31, 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 (loss)
income from discontinued operations and gain on sale of discontinued operations
as of March 31, 2000 and 1999. Revenues of these properties were approximately
$419,000 for the three months ended March 31, 1999. No revenues from the
properties were recorded during the three months ended March 31, 2000. (Loss)
income from discontinued operations was approximately $(21,000) and $191,000 for
the three months ended March 31, 2000 and 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 $298,000, the net proceeds received by the Partnership were
approximately $9,002,000. 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 $2,794,000.
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 certain payments
to affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following were paid or accrued to
the Corporate General Partner and its affiliates during the three months ended
March 31, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in
operating expenses) $ 39 $ 37
Reimbursement for services of affiliates
(included in general and administrative,
operating expenses and investment properties) 24 29
Due to Corporate General Partner 602 578
During the three months ended March 31, 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
$39,000 and $37,000 for the three months ended March 31, 2000 and 1999,
respectively.
An affiliate of the Corporate General Partner received reimbursement of
accountable administrative expenses amounting to approximately $24,000 and
$29,000 for the three months ended March 31, 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. As a result of its
ownership of 38.90% of the outstanding units, AIMCO is in a position to
significantly influence all voting decisions with respect to the Registrant.
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 and 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 months ended March 31, 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.
<TABLE>
<CAPTION>
2000
Residential Commercial Other Totals
(discontinued)
(in thousands)
<S> <C> <C> <C> <C>
Rental income $ 759 $ -- $ -- $ 759
Other income 29 -- 8 37
Interest expense -- -- 119 119
Depreciation 131 -- -- 131
General and administrative expense -- -- 44 44
Loss from discontinued operations -- (21) -- (21)
Segment profit (loss) 320 (21) (155) 144
Total assets 10,999 -- 762 11,761
Capital expenditures for investment
properties 140 -- -- 140
</TABLE>
<TABLE>
<CAPTION>
1999
Residential Commercial Other Totals
(discontinued)
(in thousands)
<S> <C> <C> <C> <C>
Rental income $ 715 $ -- $ -- $ 715
Other income 29 -- 7 36
Interest expense -- -- 398 398
Depreciation 115 -- -- 115
General and administrative expense -- -- 50 50
Income from discontinued operations -- 191 -- 191
Gain on sale of discontinued
operations -- 2,794 -- 2,794
Segment profit (loss) 339 2,985 (441) 2,883
Total assets 10,920 5,398 844 17,162
Capital expenditures for investment
properties 29 -- -- 29
</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
operations. 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 three
months ended March 31, 2000 and 1999:
Average
Occupancy
Property 2000 1999
Twin Lakes Apartments
Palm Harbor, Florida 97% 96%
Governor's Park Apartments
Little Rock, Arkasas 98% 94%
The Corporate General Partner attributes the increase in occupancy at Governor's
Park Apartments to improved conditions in the apartment industry in the Little
Rock area.
Results of Operations
The Registrant's net income for the three months ended March 31, 2000 was
approximately $144,000 as compared to approximately $2,883,000 for the three
months ended March 31, 1999. The decrease in net income is primarily
attributable to the gain on sale of discontinued operations of approximately
$2,794,000 realized during the three months ended March 31, 1999 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 $298,000 the net proceeds received by the Partnership were
approximately $9,002,000. 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 1, 1999.
Excluding the impact of the operations and sale of both commercial properties,
the Registrant's net income for the three months ended March 31, 2000 was
approximately $165,000 as compared to a net loss of approximately $102,000 for
the three months ended March 31, 1999. The increase in net income was
attributable to an increase in total revenues and a decrease in total expenses.
Total revenues increased due to an increase in rental income at the
Partnership's investment properties. The increase in rental income was
attributable to an increase in average rental rates combined with an increase in
occupancy at both Twin Lakes Apartments and Governor's Park Apartments.
The decrease in total expenses was primarily attributable to a decrease in
interest expense. Interest expense decreased as a result of the pay down 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 interest expense was partially offset by an
increase in depreciation and property tax expense. Depreciation expense
increased as a result of capital improvements performed at both residential
properties in 1999. 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. Operating and general and administrative expense remained
relatively constant. Included in general and administrative expenses for the
three months ended March 31, 2000 and 1999 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 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 March 31, 2000 the
Partnership had approximately $677,000 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 $108,000 of cash used in operating activities and approximately
$103,000 of cash used in financing activities which was offset by approximately
$211,000, of cash provided by investing activities. Cash used in financing
activities consisted of payments on the mortgage encumbering the properties.
Cash provided by investing activities consisted primarily of cash received from
restricted escrows partially offset by property improvements and replacements.
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, $300 per unit or $46,200
for capital improvements during the current year consisting primarily of floor
covering, appliance and major landscaping. The Partnership completed
approximately $16,000 in capital expenditures at Governor's Park Apartments
during the three months ended March 31, 2000, consisting primarily of major
landscaping, and floor covering and appliance replacements. These improvements
were funded with cash from operations. Also included in capital expenditures for
the three month period ended March 31, 2000, was an adjustment for $68,000 for
fencing.
Twin Lake 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 $124,000 in capital expenditures at Twin
Lake Apartments during the three months ended March 31, 2000, consisting
primarily of roof replacements, floor covering replacement and drapery/blind
replacements. 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 $3,707,000 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 March 31,
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: May 8, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
US Realty Partners Limited PartnershipPARTNERSHIP NAME
2000 First Quarter 10-QSB and is qualified in its entirety by reference to such
10-QSB filing.
</LEGEND>
<CIK> 0000788955
<NAME> US Realty Partners Limited Partnership
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 677
<SECURITIES> 0
<RECEIVABLES> 248
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 17,657
<DEPRECIATION> (6,882)
<TOTAL-ASSETS> 11,761
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 3,707
0
0
<COMMON> 0
<OTHER-SE> 6,694
<TOTAL-LIABILITY-AND-EQUITY> 11,761
<SALES> 0
<TOTAL-REVENUES> 796
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 631
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 119
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 144
<EPS-BASIC> 0.12 <F2>
<EPS-DILUTED> 0
<FN>
<F1> Registrant has an unclassified balance sheet. <F2> Multiplier is 1.
</FN>
</TABLE>
