<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 June 30, 1997
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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
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YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
North Carolina 56-1560476
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
12201 Steele Creek Road Charlotte, North Carolina 28273
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(Address of principal executive office) (Zip code)
(704) 588-4074
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(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 8 pages. The Exhibit Index is located on page 7.
<PAGE> 2
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ----------
ASSETS (Unaudited) (Note)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 76,336 $ 103,036
Accounts receivable, tenant 26,028 91,224
Prepaid expenses 4,766 2,200
Securities available for sale 189,031 190,380
---------- ----------
Total current assets 296,161 386,840
---------- ----------
INVESTMENTS AND NONCURRENT RECEIVABLES
Properties on operating leases and properties held
for lease, net of accumulated depreciation
1997 $1,363,048; 1996 $1,244,020 7,256,815 7,371,229
Accrued rent receivable 38,536 44,785
OTHER ASSETS
Deferred charges, net of accumulated amortization
1997 $15,582; 1996 $11,282 6,518 10,818
Deferred leasing commissions, net of accumulated
amortization 1997 $38,409; 1996 $31,476 47,509 50,435
---------- ----------
$7,645,539 $7,864,107
========== ==========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Note payable, bank $1,000,000 $ 942,483
Current maturities of long-term debt 58,029 68,868
Accounts payable 4,745 109,107
Accrued expenses 81,982 131,312
---------- ----------
Total current liabilities 1,144,756 1,251,770
---------- ----------
LONG-TERM DEBT, less current maturities 3,978,969 4,059,909
---------- ----------
COMMITMENT AND CONTINGENCY (Note 4)
PARTNERS' EQUITY
General partners 1,918 2,199
Limited partners 2,517,522 2,545,393
Unrealized gain on investment securities 2,374 4,836
---------- ----------
2,521,814 2,552,428
---------- ----------
$7,645,539 $7,864,107
========== ==========
</TABLE>
Note: The Condensed Balance Sheet at December 31, 1996 has been taken from the
audited financial statements at that date. See Notes to Condensed
Financial Statements.
2
<PAGE> 3
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Rental income $ 284,510 $ 280,337 $ 579,582 $ 597,800
Operating expenses:
Wages and contract labor 14,530 4,307 20,653 8,873
Depreciation and amortization 65,223 45,678 130,260 91,136
Repairs and maintenance 44,347 35,204 80,869 64,688
Management fees 11,355 11,143 22,563 22,527
Utilities 35,872 36,137 74,297 71,573
Professional fees 8,756 4,892 19,957 22,414
Property taxes 22,095 22,020 44,190 44,040
Miscellaneous 5,425 4,355 10,564 9,839
--------- --------- --------- ---------
207,603 163,736 403,353 335,090
--------- --------- --------- ---------
Operating income 76,907 116,601 176,229 262,710
--------- --------- --------- ---------
Nonoperating income (expense):
Interest and dividend income 1,865 3,786 7,013 6,696
Interest expense (107,012) (103,073) (212,280) (207,300)
Other 59 -- 885 --
--------- --------- --------- ---------
(105,088) (99,287) (204,382) (200,604)
--------- --------- --------- ---------
Net income ($ 28,181) $ 17,314 ($ 28,153) $ 62,106
========= ========= ========= =========
Net income per limited
partnership unit ($ 4.42) $ 2.72 ($ 4.42) $ 9.75
========= ========= ========= =========
</TABLE>
See Notes to Condensed Financial Statements.
3
<PAGE> 4
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1997 1996
--------- ---------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ($ 28,153) $ 62,106
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 130,260 91,136
Gain on sale of securities available for sale (885) --
Change in assets and liabilities:
Decrease (Increase) in prepaids, deferrals and 68,879 (36,939)
other receivables
(Decrease) in accounts payable and accrued expenses (153,692) (90,596)
--------- ---------
Net cash provided by operating activities 16,409 25,707
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of securities available for sale 116,119 --
Purchase of securities available for sale (116,346) --
Improvements in investment property (4,613) (679,371)
Disbursements for deferred leasing commissions (4,007) --
--------- ---------
Net cash provided (used) in investing activities (8,847) (679,371)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term borrowings (91,779) (67,633)
Proceeds from note payable 57,517 665,200
--------- ---------
Net cash (used) provided in financing activities (34,262) 597,567
Net (decrease) in cash and cash equivalents (26,700) (56,097)
Cash and cash equivalents:
Beginning 103,036 139,930
--------- ---------
Ending $ 76,336 $ 83,833
========= =========
</TABLE>
See Notes to Condensed Financial Statements.
4
<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, 1996, the cumulative unpaid priority return to the unit
holders was $1,924,049 compared to $1,681,265 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, 1996 to June 30, 1997. Accounts receivable has decreased since year end due
to the receipt of payment from the IRS for certain reimburseable items on their
upfit. Accrued expenses, as well as cash and cash equivalents, have decreased
from year end due to the payment of the 1996 real property taxes in January
1997. The Partnership continues to accrue monthly for the 1997 real property
taxes to be paid in January 1998; therefore accrued expenses will continue to
increase each quarter of 1997.
Liquidity and Capital Resources
During the quarter ended June 30, 1997, the Partnership continued to fund
working capital requirements, and the working capital deficit was reduced by
approximately $16,300 from December 31, 1996. The $1,000,000 line of credit with
First Union which was due and payable on April 30, 1997, was renewed on similar
terms for an additional year. 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 consolidated financial statements.)
Results of Operations
Net income is down for the first quarter of 1997 compared to the same period of
the prior year by approximately $90,200. Rental income, as compared to the prior
year, is down by $18,000. This decrease is primarily due to the decrease in
common area maintenance ("CAM") charges as provided in the leases at the UCB
building. Operating expenses for the first six months of 1997 are up by
approximately $68,000. This is primarily due to the increase in depreciation
expense as a result of the completion and capitalization of the IRS upfit at the
EastPark Executive Center. Expenses relating to repairs and maintenance are also
up for the year. These same factors can be attributed to the increase in
expenses for the quarter ended June 30, 1997. Occupancy rate is currently 100%
at the UCB building and 98% at the EastPark building.
Status of Sales Efforts; Future Matters
The General Partners at this time have decided not to renew the listing
agreements with the Charlotte-based real estate broker in order to focus efforts
on lengthening the leases with the current tenants. The General Partners believe
that if longer-term leases are obtained, possibilities would be greater in
obtaining the current asking price of the facilities.
The General Partners agreed to an amendment of the management agreement with FSK
Properties, f/k/a Kuester Properties. (FSK Properties is an affiliate of FSK
Limited, one of the General Partners). Per the agreement, responsibilities of
FSK Properties will be to focus on management of the properties and also
participation in the leasing and selling efforts. FSK Properties would perform
these duties at a reduced management fee of 3%. Financial management and
accounting will be provided by ISC Management, a division of Internet Services
Corporation, at a fee based upon actual time expended. (Interest Services
Corporation is an affiliate of Dry Limited, one of the General Partners).
6
<PAGE> 7
PART II. OTHER INFORMATION
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>
<CAPTION>
Designation
Number Under
Exhibit Item 601 of Page
Number Regulation S-K Exhibit Description Number
------ -------------- ------------------- ------
<C> <C> <S> <C>
1* 4 Instrument defining rights of security holders - set forth in the
Limited Partnership Agreement
2* 10 Limited Partnership Agreement
3** 10.1 Exclusive Leasing and Management Agreement dated October 1, 1994
(EastPark Executive Center)
4** 10.2 Exclusive Leasing and Management Agreement dated October 1, 1994
(United Carolina Bank Building)
5 27 Financial Data Schedule (for SEC use only)
</TABLE>
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the
three months ended June 30, 1997.
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* Incorporated by reference to Exhibit A of the Partnership's
Prospectus dated December 1, 1987, Registration Number
33-07056-A.
** Incorporated by reference to Exhibit 3 and 4 of the
Partnership's Form 10-K for the year ended December 31, 1995.
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 08/14/97 By: /s/ Dexter R. Yager, Sr.
------------------------- ---------------------------------------
Dexter R. Yager, Sr.
General Partner
Date 08/14/97 By: /s/ Jerry R. Haynes
------------------------- ---------------------------------------
Jerry R. Haynes
Chief Financial Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 76,336
<SECURITIES> 189,031
<RECEIVABLES> 26,028
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 296,161
<PP&E> 8,619,863
<DEPRECIATION> 1,363,048
<TOTAL-ASSETS> 7,645,539
<CURRENT-LIABILITIES> 1,444,756
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,645,539
<SALES> 0
<TOTAL-REVENUES> 579,582
<CGS> 0
<TOTAL-COSTS> 403,353
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 212,280
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (28,153)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
