<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 March 31, 1998
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
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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.
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---------- ----------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 107,518 $ 92,544
Accounts receivable, tenant 43,825 38,196
Prepaid expenses 37,458 7,053
Securities available for sale 186,788 267,629
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Total current assets 375,589 405,422
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INVESTMENTS AND NONCURRENT RECEIVABLES
Properties on operating leases and properties held
for lease, net of accumulated depreciation
1998 $1,542,263; 1997 $1,482,902 7,096,234 7,155,595
Accrued rent receivable 24,996 29,683
OTHER ASSETS
Deferred charges, net of accumulated amortization
1998 $14,340; 1997 $12,190 660 2,810
Deferred leasing commissions, net of accumulated
amortization 1998 $49,460; 1997 $45,826 56,234 40,092
---------- ----------
$7,553,713 $7,633,602
========== ==========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Note payable, bank $1,000,000 $1,000,000
Current maturities of long-term debt 2,821,178 2,834,990
Accounts payable 41,022 14,423
Accrued expenses 69,838 137,552
Deferred revenue 11,929 --
---------- ----------
Total current liabilities 3,943,967 3,986,965
---------- ----------
LONG-TERM DEBT, less current maturities 1,130,451 1,145,441
---------- ----------
COMMITMENT AND CONTINGENCY (Note 4)
PARTNERS' EQUITY
General partners 1,508 1,684
Limited partners 2,476,939 2,494,411
Unrealized gain on investment securities 848 5,101
---------- ----------
2,479,295 2,501,196
---------- ----------
$7,553,713 $7,633,602
========== ==========
</TABLE>
Note: The Condensed Balance Sheet at December 31, 1997 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
March 31,
----------------------------
1998 1997
--------- ---------
(Unaudited)
<S> <C> <C>
Rental income $ 296,660 $ 295,072
Operating expenses:
Wages and contract labor 3,300 6,123
Depreciation and amortization 65,144 65,037
Repairs and maintenance 47,890 36,522
Management fees 8,634 11,208
Utilities 35,901 38,425
Professional fees 26,776 11,201
Property taxes 22,881 22,095
Miscellaneous 6,181 5,139
--------- ---------
216,707 195,750
--------- ---------
Operating income 79,953 99,322
--------- ---------
Nonoperating income (expense):
Interest and dividend income 5,083 5,148
Interest expense (104,039) (105,268)
Other 1,355 826
--------- ---------
(97,601) (99,294)
--------- ---------
Net income $ (17,648) $ 28
========= =========
Net income per limited
partnership unit $ (2.77) $ 0.00
========= =========
</TABLE>
See Notes to Condensed Financial Statements.
3
<PAGE> 4
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1998 1997
--------- ---------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ (17,648) $ 28
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 65,144 65,037
Gain on sale of securities available for sale (1,355) (826)
Change in assets and liabilities:
(Increase) Decrease in prepaids, deferrals and
other receivables (31,347) 50,984
(Decrease) in accounts payable and accrued expenses (29,186) (169,393)
--------- ---------
Net cash provided by operating activities (14,392) (54,170)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of securities available for sale 148,866 91,057
Purchase of securities available for sale (70,921) (25,000)
Improvements in investment property -- --
Disbursements for deferred leasing commissions (19,777) --
--------- ---------
Net cash provided (used) in investing activities 58,168 66,057
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term borrowings (28,802) (63,995)
Proceeds from note payable -- 57,517
--------- ---------
Net cash (used) provided in financing activities (28,802) (6,478)
Net (decrease) in cash and cash equivalents 14,974 5,409
Cash and cash equivalents:
Beginning 92,544 103,036
--------- ---------
Ending $ 107,518 $ 108,445
========= =========
</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 Partnership currently owns the
EastPark Executive Center in Charlotte, North Carolina. On April 24,
1998, the Partnership sold the BB&T building facilities (formerly the
UCB building) in Greenville, South 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, 1997, the cumulative unpaid priority return to the
unit holders was $2,166,833 compared to $1,924,049 one year prior.
This increase resulted from no distributions being made to partners
during the year. 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 any of such 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, 1997 to March 31, 1998. Accounts receivable has increased since year end due
to a total of $5,629 of uncollected common area maintenance ("CAM") charges.
Prepaid expenses increased $30,405 from December 31,1997 to March 31, 1998. A
total of $30,273 in prepaid expenses relates to costs associated with selling
the BB&T Building. (See "Status of Sales Efforts" below.) The Partnership
continues to accrue monthly for the 1998 real property taxes to be paid in
January 1999; therefore accrued expenses will continue to increase each quarter
of 1998.
Liquidity and Capital Resources
During the quarter ended March 31,1998, the Partnership continued to fund
working capital requirements, and the working capital deficit was reduced by
approximately $13,165 from December 31,1997. The $1,000,000 line of credit with
First Union, which was due and payable on April 30,1998, has been renewed on
similar terms for an additional fourteen months. The line of credit will be due
and payable on June 30, 1999. 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 from operations for the three months ended March 31,1998 is down
approximately $17,700 compared to the same period of the prior year. While
common area maintenance ("CAM") charges increased this year by approximately
$7,500 at the BB&T facility, a decrease in occupancy at the EastPark facility
offset this increase. This resulted in rental income increasing only by
approximately $1,500 for the first quarter as compared to the same period of the
prior year. Operating expenses for the first quarter of 1998 are up by
approximately $19,300. The largest increase in operating expense is professional
fees totaling $15,574. Expenses relating to repairs and maintenance are also up
$11,368 for the first quarter of 1998. Occupancy rate at the EastPark building
is currently 81%.
Status of BB&T Building
On April 24,1998, the Partnership sold the BB&T Bank Building to
Highwoods/Forsyth Limited Partnership for $3,471,000. This sale resulted in net
proceeds of approximately $450,000, which the General Partners have invested in
securities at the current time. The General Partners do not anticipate
distributing any proceeds until after the sale of the EastPark facility. The
General Partners are continuing their efforts to find a qualified buyer for the
EastPark facility.
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
------ -------------- ------------------- ------
<S> <C> <C> <C> <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
(Branch, Banking & Trust Building)
5*** 10.3 Listing Agreement of Property For Lease and/or Sale
(EastPark Executive Center)
</TABLE>
(b) Reports on Form 8-K:
1. Sale of BB&T Building facility on April 24,
1998 (Incorporated by reference to report
Form 8-K dated May 5, 1998).
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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.
*** Incorporated by reference to Exhibit 4 of the Partnership's
Form 10-Q for the quarter ended September 30, 1997.
7
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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 5/14/98 By: /s/ Dexter R. Yager, Sr.
--------------- ---------------------------------
Dexter R. Yager, Sr.
General Partner
Date 5/14/98 By: /s/ Jerry R. Haynes
--------------- ---------------------------------
Jerry R. Haynes
Chief Financial Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 107,518
<SECURITIES> 186,788
<RECEIVABLES> 43,825
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 375,589
<PP&E> 8,638,497
<DEPRECIATION> 1,542,263
<TOTAL-ASSETS> 7,553,713
<CURRENT-LIABILITIES> 3,943,967
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,553,713
<SALES> 0
<TOTAL-REVENUES> 303,098
<CGS> 0
<TOTAL-COSTS> 216,707
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104,039
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,648)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
