<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1996
------------------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------- ----------------------
Commission File Number: 0-18444
--------------------------------------------------------
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-1560476
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12201 Steele Creek Road Charlotte, North Carolina 28273
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip code)
(704) 588-4074
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
This document contains 12 pages. The Exhibit Index is located on page 7.
<PAGE> 2
PART I -- FINANCIAL INFORMATION
2
Item 1. Financial Statements
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
ASSETS (Unaudited) (Note)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 94,522 $ 139,930
Accounts receivable, tenant 38,203 37,565
Prepaid expenses 3,376 1,100
---------- ----------
Total current assets 136,101 178,595
---------- ----------
INVESTMENTS AND NONCURRENT RECEIVABLES
Securities available for sale 172,858 135,050
Properties on operating leases and properties held
for lease, net of accumulated depreciation
1996 $1,182,050; 1995 $1,018,404 7,488,018 6,774,759
Accrued rent receivable 47,909 57,283
OTHER ASSETS
Deferred charges, net of accumulated amortization
1996 $40,377; 1995 $34,434 5,723 10,180
Deferred leasing commissions, net of accumulated
amortization 1996 $28,178; 1995 $15,512 53,734 59,014
---------- ----------
$7,904,343 $7,214,881
========== ==========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Note payable, bank $ 942,483 $ 219,783
Current maturities of long-term debt 2,898,901 2,931,715
Accounts payable 151,615 128,472
Accrued expenses 102,952 127,880
---------- ----------
Total current liabilities 4,095,951 3,407,850
---------- ----------
LONG-TERM DEBT, less current maturities 1,228,306 1,288,753
---------- ----------
COMMITMENT AND CONTINGENCY (Note 4)
PARTNERS' EQUITY
General partners 2,493 1,793
Limited partners 2,574,497 2,505,239
Unrealized gain(loss) on investment securities 3,096 11,246
---------- ----------
2,580,086 2,518,278
---------- ----------
$7,904,343 $7,214,881
========== ==========
</TABLE>
Note: The Condensed Balance Sheet at December 31, 1995 has been taken from the
audited financial statements at that date. See Notes to Condensed
Financial Statements.
<PAGE> 3
3
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Rental income $276,205 $280,397 $874,005 $891,472
Operating expenses:
Wages and contract labor 4,008 11,690 12,881 32,257
Depreciation and amortization 45,851 45,063 136,987 134,718
Repairs and maintenance 35,378 35,286 100,066 99,475
Management fees 12,783 11,073 35,310 34,592
Utilities 43,247 42,297 114,820 116,862
Professional fees 5,675 13,687 28,089 52,107
Property taxes 22,020 22,095 66,060 66,905
Miscellaneous 3,366 8,572 13,205 23,464
-------- -------- -------- --------
172,328 189,763 507,418 560,380
-------- -------- -------- --------
Operating income 103,877 90,634 366,587 331,092
-------- -------- -------- --------
Nonoperating income (expense):
Interest and dividend income 4,396 2,505 11,092 6,233
Interest expense (102,306) (105,236) (309,606) (317,421)
Other 1,885 0 1,885 (5,409)
-------- -------- -------- --------
(96,025) (102,731) (296,629) (316,597)
-------- -------- -------- --------
Net income 7,852 (12,097) 69,958 14,495
======== ======== ======== ========
Net income per limited
partnership unit $ 1.23 $ (1.90) $ 10.98 $ 2.28
======== ======== ======== ========
</TABLE>
See Notes to Condensed Financial Statements.
<PAGE> 4
4
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 69,958 $ 14,495
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 136,987 134,718
(Gain) Loss on sale of securities available for sale (1,884) 5,409
Change in assets and liabilities:
Decrease (Increase) in prepaids, deferrals and 6,460 (27,343)
other receivables
(Decrease) increase in accounts payable and accrued expenses (1,785) 5,470
-------- --------
Net cash provided by operating activities 209,736 132,749
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of securities available for sale 15,685 105,152
Purchase of securities available for sale (59,759) (148,804)
Disbursements for deferred leasing commissions ----- (3,138)
Improvements in investment property (840,509) (59,746)
-------- --------
Net cash (used) in investing activities (884,583) (106,536)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term borrowings (93,261) (86,140)
Proceeds from note payable 722,700 -----
-------- --------
Net cash provided (used) in financing activities 629,439 (86,140)
Net (decrease) in cash and cash equivalents (45,408) (59,927)
Cash and cash equivalents:
Beginning 139,930 107,906
-------- --------
Ending $ 94,522 $ 47,979
======== ========
</TABLE>
See Notes to Condensed Financial Statements.
<PAGE> 5
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Nature of Business:
The Partnership was formed in July 1986 to acquire, operate, hold for
investment and sell real estate. The two properties currently owned are the
UCB Building in Greenville, South Carolina, and the EastPark Executive
Center in Charlotte, North Carolina.
2. Opinion of Management:
In the opinion of management, the accompanying unaudited condensed financial
statements contain all adjustments (all which were normal recurring
accruals) necessary for a fair presentation. The results of operations for
the interim periods are not necessarily indicative of the results which may
be expected for an entire year.
3. Statement of Cash Flows:
For purposes of reporting the statements of cash flows, the Limited
Partnership includes all cash accounts, which are not subject to withdrawal
restrictions or penalties, and all highly liquid debt instruments purchased
with a maturity of three months or less as cash and cash equivalents on the
accompanying condensed balance sheets.
4. Priority Return:
At December 31, 1995, the cumulative unpaid priority return to the unit
holders was $1,681,265 compared to $1,438,481 one year prior. This increase
resulted from no distributions being made to partners during the year and
the pro rata share due partners pursuant to the Limited Partnership
Agreement. Based on the current and projected commercial real estate market
conditions, the General Partners believe that it is reasonably unlikely that
a sale of the Partnership properties would produce net sale proceeds
sufficient to pay the priority return. Furthermore, the General Partners
believe that it is reasonably unlikely that the Partnership's operating
income or any refinancing of Partnership debt would generate sufficient
funds to pay any portion of the priority return.
5
<PAGE> 6
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Changes in financial condition
There have not been any significant changes in financial condition from
December 31, 1995 to September 30, 1996, except for the additional draw on the
increased line of credit of approximately $722,000 (see "Liquidity and Capital
Resources" below). Accrued expenses, as well as cash and cash equivalents, have
decreased from year end due to the payment of the 1995 real property taxes in
January 1996. The Partnership continues to accrue monthly for the 1996 real
property taxes to be paid in January 1997; therefore accrued expenses will
continue to increase each quarter of 1996.
Liquidity and Capital Resources
During the quarter ended September 30, 1996, the Partnership continued to fund
working capital requirements, although the working capital deficit increased
from ($3,229,255) at December 31, 1995 to ($3,959,850) at September 30, 1996.
This significant working capital deficiency is primarily a result of the
reclassification of the UCB building debt from long-term debt to current
liabilities due to the balloon payment of approximately $2,817,000 in December
1996. The General Partners have secured a written commitment from First Union
Bank of North Carolina to refinance this loan. The refinancing will be in the
form of a line of credit for $2,840,000, repayable in monthly payments of
accrued interest only until December 31, 1997 when all remaining principal and
interest shall be due. If the UCB building is not sold by this time (See
"Status of Sales Efforts" below), the loan can be renewed for an additional
year to expire on December 31, 1998. An increase in current liabilities can
also be attributed to an additional line of credit secured by the Partnership
in connection with the upfitting costs of the GSA space at the EastPark
Executive Center, of which $942,483 was outstanding at September 30, 1996. In
April 1996, the General Partners were able to secure an increase in this line
of credit from $750,000 to $1,000,000 to cover substantially all of the GSA
upfit costs. This line of credit matures on April 1997. The upfitting of the
GSA space is scheduled for completion in October 1996. The final estimate of
costs on the upfit are approximately $1,130,000. The additional cost of the
upfit was funded out of current operating funds. No distributions were paid to
the limited partners this quarter, resulting in an increase to their cumulative
unpaid priority return. (See note 4 of the condensed financial statements.)
Results of operations
Net income from operations for the nine months ended September 30, 1996 is up
approximately $35,000 compared to the same period of the prior year. Rental
income decreased by approximately $17,000 primarily due to the decrease in CAM
reimbursements provided to the Metropolitan Life Insurance Company at the UCB
facility. Operating expenses for the first nine months of 1996 are down by
approximately $52,000. This is primarily due to the decrease in expenses
relating to professional fees and contract labor. These same factors can be
attributed to the decrease in expenses for the quarter ended September 30,
1996. Occupancy rates are currently 96% at the UCB building and 95% at the
EastPark building.
Status of Sales Efforts; Future Matters
The General Partners entered into separate listing agreements for both
properties with a Charlotte-based commercial real estate broker at the
beginning of the third quarter. The General Partners believe that the focus of
the Partnership should be towards selling the two Partnership properties
separately now that the GSA upfit at the EastPark Executive Center is almost
complete.
6
<PAGE> 7
PART II. OTHER INFORMATION
<TABLE>
<S> <C>
Item 1. Legal Proceedings
-----------------
The Partnership is not engaged in any legal proceedings of a material
nature at the present time.
Item 6. Exhibit Index
-------------
(a) Exhibits:
</TABLE>
<TABLE>
<CAPTION>
Designation
Number Under
Exhibit Item 601 of Page
Number Regulation S-K Exhibit Description Number
- ------- -------------- ------------------- ------
<S> <C> <C> <C>
1. 4 Instrument defining rights of security holders - set forth in the
Limited Partnership Agreement which is contained in the
Prospectus of the Partnership, dated December 1, 1987,
Registration Number 33-07056-A (hereinafter "Prospectus")
and incorporated herein by reference.
2. 10 Limited Partnership Agreement - contained in the Prospectus
incorporated herein by reference.
3. 10.1 Listing Agreement of Property for Sale-United Carolina Bank Building -
attached on Partnership's 10-Q filed on August 14, 1996.
4. 10.2 Listing Agreement of Property for Sale-EastPark Executive Center -
attached on Partnership's 10-Q filed on August 14, 1996.
5. 10.3 Loan Commitment Agreement with First Union National Bank
of North Carolina for refinancing of the UCB Building. 9
</TABLE>
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the three months ended
September 30, 1996.
7
<PAGE> 8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
(Registrant)
By: DRY Limited Partnership,
General Partner of Registrant
Date 11/13/96 By: /s/ Dexter R. Yager, Sr.
---------------- ------------------------------
Dexter R. Yager, Sr.
General Partner
Date 11/13/96 By: /s/ Alison L. Hawk
---------------- ------------------------------
Alison L. Hawk
Controller
8
<PAGE> 1
EXHIBIT 10.3
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
Private Banking
Two First Union Center
301 South Tyron Street
Charlotte, North Carolina 28288-1220
September 23, 1996
Yager/Kuester Public Fund Limited Partnership
c/o Jerry R. Haynes
Internet Services Corporation
12201 Steele Creek Road
Charlotte, NC 28273-3731
Re: Loan Commitment to Yager/Kuester Public Fund Limited Partnership
Dear Alison:
First Union National Bank of North Carolina ("First Union") is pleased to offer
you a commitment to lend on the following terms and conditions:
BORROWER:
Yager/Kuester Public Fund Limited Partnership
AMOUNT:
The amount of this facility shall be up to $2,840,000.00 in the form of a line
of credit.
PURPOSE:
This facility shall be used to refinance an existing mortgage with United of
Omaha on the UCB building in Greenville, SC.
INTEREST RATE:
3-month LIBOR Rate plus 1.75% (175 basis points). The 3-month LIBOR Rate shall
be determined in accordance with First Union's adjusted LIBOR Rate formula.
REPAYMENT:
This facility shall be repayable in monthly payments of accrued interest only
until December 1, 1997 when all remaining principal and interest shall be due.
If the UCB Building is not sold by 12/1/97, First Union shall renew the loan
for an additional year to expire on December 1, 1998 and take a deed of trust
on the UCB Building.
<PAGE> 2
Yager/Kuester Public Fund Limited Partnership
Commitment Letter - 2
September 23, 1996
COLLATERAL:
This loan shall be on an unsecured basis.
GUARANTORS:
The unconditional guaranty of Dexter R. Yager, Sr. will be required. The
guaranty shall be in form acceptable to First Union.
BORROWER FINANCIAL STATEMENTS:
ANNUAL FINANCIAL STATEMENTS. Borrow shall deliver to First Union, within 60
days after the close of each fiscal year, audited financial statements
reflecting its operations during such fiscal year, including, without
limitation, a balance sheet, profit and loss statement and statement of cash
flow, with supporting schedules: prepared in conformity with generally accepted
accounting principles, applied on a basis consistent with that of the preceding
year. All such statements shall be examined by an independent certified public
accountant acceptable to First Union. The opinion of such independent
certified public accountant shall not be acceptable to First Union if qualified
due to any limitations in scope imposed by Borrower. Any other qualification
of the opinion by the accountant shall render the acceptability of the
financial statements subject to First Union's approval.
GUARANTOR FINANCIAL STATEMENTS:
ANNUAL FINANCIAL STATEMENTS. Guarantor shall deliver to First Union an updated
personal financial statement on an annual basis as well as additional
information that may be necessary to document Guarantor's liquidity and income.
COMMITMENT FEES:
The Borrower shall pay First Union 1/4% of the borrowed amount as a
non-refundable commitment fee at closing.
COSTS:
Borrower shall pay all costs, expenses and fees associated with this
transaction.
The preceding terms and conditions are not exhaustive, and this commitment is
subject to certain other terms and closing conditions customarily required by
First Union for similar transactions. First Union may be referred to as "Bank"
in this commitment letter and other related documents. This commitment will
expire unless it is closed on or before December 20, 1996. This commitment
letter shall not survive closing.
<PAGE> 3
Yager/Kuester Public Fund Limited Partnership
Commitment Letter - 3
September 23, 1996
Borrower represents and agrees that all financial statements and other
information delivered to First Union are correct and complete. No material
adverse change may occur in, nor may any adverse circumstance be discovered as
to, the business or financial condition of the Borrower or any Guarantor prior
to closing. First Union's obligations under this commitment are conditioned on
the fulfillment to First Union's sole satisfaction of each term and condition
referenced by this commitment.
This commitment supersedes all prior commitments and proposals with respect to
this transaction, whether written or oral, including any previous loan
proposals made by First Union or anyone acting with its authorization. No
modification shall be valid unless made in writing and signed by an authorized
officer of First Union. This commitment is not assignable, and no party other
than Borrower shall be entitled to rely on this commitment.
Please indicated your acceptance of this offer and the terms and conditions
contained herein by signing below and returning one executed copy of this
commitment letter to the undersigned. This offer of commitment shall expire
unless the acceptance is received by the undersigned on or before October 15,
1996.
Thank you for allowing First Union to be of service. Please do not hesitate to
give me a call at (704) 374-6313 if I can be of further assistance.
Sincerely,
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By: /s/ William D. Mileham
-------------------------------
William D. Mileham
Vice President
Private Banking
<PAGE> 4
Yager/Kuester Public Fund Limited Partnership
Commitment Letter - 4
September 23, 1996
ACCEPTANCE OF LOAN COMMITMENT:
The above commitment is agreed to and accepted on the terms and conditions
provided by in this letter.
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
By: /s/ Dexter R. Yager, Sr.
------------------------------------------- -----------------------
DRY Limited Partnership, General Partner Date
Dexter R. Yager, Sr. General Partner of
DRY Limited Partnership
GUARANTOR
By: /s/ Dexter R. Yager, Sr.
------------------------------------------- -----------------------
Dexter R. Yager, Sr., Guarantor Date
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 94,522
<SECURITIES> 172,858
<RECEIVABLES> 38,203
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 136,101
<PP&E> 8,670,068
<DEPRECIATION> 1,182,050
<TOTAL-ASSETS> 7,904,343
<CURRENT-LIABILITIES> 4,095,951
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,904,343
<SALES> 0
<TOTAL-REVENUES> 874,005
<CGS> 0
<TOTAL-COSTS> 507,418
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 309,606
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,958
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
