<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 September 30, 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)
1300 Altura Road Fort Mill, South Carolina 29715-9201
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(Address of principal executive office) (Zip code)
(803) 547-9100
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(Registrant's telephone number, including area code)
(Former Address: 12201 Steele Creek Road, Charlotte, NC 28273)
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>
September 30, December 31,
1998 1997
----------- ----------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 74,817 $ 92,544
Accounts receivable, tenant 38,325 38,196
Prepaid expenses 4,483 7,053
Securities available for sale 130,500 267,629
----------- ----------
Total current assets 248,125 405,422
----------- ----------
INVESTMENTS AND NONCURRENT RECEIVABLES
Properties on operating leases and properties held
for lease, net of accumulated depreciation
1998 $815,582; 1997 $1,482,902 3,600,686 7,155,595
Accrued rent receivable -- 29,683
OTHER ASSETS
Deferred charges, net of accumulated amortization
1998 $13,315; 1997 $12,190 1,685 2,810
Deferred leasing commissions, net of accumulated
amortization 1998 $23,749; 1997 $45,826 21,734 40,092
----------- ----------
$ 3,872,230 $7,633,602
=========== ==========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Note payable, bank $ 500,000 $1,000,000
Current maturities of long-term debt 1,160,043 2,834,990
Accounts payable 3,144 14,423
Accrued expenses 47,777 137,552
----------- ----------
Total current liabilities 1,710,964 3,986,965
----------- ----------
LONG-TERM DEBT, less current maturities 0 1,145,441
----------- ----------
COMMITMENT AND CONTINGENCY (Note 4)
PARTNERS' EQUITY
General partners (1,602) 1,684
Limited partners 2,169,088 2,494,411
Unrealized gain on investment securities (6,220) 5,101
----------- ----------
Total partner's equity 2,161,266 2,501,196
----------- ----------
$ 3,872,230 $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 Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
--------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Rental income $ 125,755 $ 288,726 $ 559,530 $ 868,308
Operating expenses:
Wages and contract labor 1,575 3,300 6,975 23,953
Depreciation and amortization 39,416 65,145 180,559 195,405
Repairs and maintenance 27,733 44,069 107,519 124,938
Management fees 3,769 8,760 17,571 31,323
Utilities 25,030 46,433 91,099 120,730
Professional fees 10,363 11,990 59,541 31,947
Property taxes 9,318 22,095 44,425 66,285
Miscellaneous 969 3,648 10,607 14,212
--------- --------- --------- ---------
118,173 205,440 518,296 608,793
--------- --------- --------- ---------
Operating income 7,582 83,286 41,234 259,515
--------- --------- --------- ---------
Nonoperating income (expense):
Interest and dividend income 2,985 5,439 13,818 12,452
Interest expense (41,555) (107,477) (207,879) (319,757)
Other (1,012) 502 198 1,387
Loss on sale of properties held for lease (268) -- (175,980) --
--------- --------- --------- ---------
(39,850) (101,536) (369,843) (305,918)
--------- --------- --------- ---------
Net income $ (32,268) $ (18,250) $(328,609) $ (46,403)
========= ========= ========= =========
Net income per limited
partnership unit $ (5.07) $ (2.87) $ (51.59) $ (7.28)
========= ========= ========= =========
</TABLE>
See Notes to Condensed Financial Statements.
3
<PAGE> 4
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------
1998 1997
----------- ---------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ (328,609) $ (46,403)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 180,559 195,405
(Gain) on sale of securities available for sale (198) (1,387)
Loss on sale of properties held for lease 175,980 --
Change in assets and liabilities:
Decrease in prepaids, deferrals and 32,124 55,166
other receivables
(Decrease) in accounts payable and accrued expenses (101,054) (94,224)
----------- ---------
Net cash (used) provided by operating activities (41,198) 108,557
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of securities available for sale 461,782 170,881
Purchase of securities available for sale (335,776) (209,408)
Proceeds from sale of properties held for lease 3,240,946 --
Improvements in investment property (2,659) (21,497)
Disbursements for deferred leasing commissions (20,434) (4,007)
----------- ---------
Net cash provided (used) in investing activities 3,343,859 (64,031)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term borrowings (3,320,388) (119,893)
Proceeds from note payable -- 57,517
----------- ---------
Net cash (used) in financing activities (3,320,388) (62,376)
Net (decrease) in cash and cash equivalents (17,727) (17,850)
Cash and cash equivalents:
Beginning 92,544 103,036
----------- ---------
Ending $ 74,817 $ 85,186
=========== =========
</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 remaining Partnership property 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
As a result of the sale of the BB&T building (See "Results of Operations"
below), properties held for lease as well as total long-term debt has decreased
since year end. The long-term portion of the debt has been reclassified to
current maturities, as this loan on the EastPark facility matures on June 30,
1999 (See "Liquidity and Capital Resources" 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 September 30,1998, the Partnership continued to fund
working capital requirements, and the working capital deficit was reduced by
$2,118,704 from December 31,1997. This reduction in the working capital deficit
is mainly attributable to the use of the proceeds from the sale of the BB&T
Building to payoff the First Union note on this property as well as to pay down
$500,000 on the First Union line of credit for the upfit of the EastPark
facility. The two loans on the EastPark facility mature on June 30, 1999. The
General Partners are not considering refinance options at this time, in the
anticipation of a sale before the maturity date. The General Partners believe
that refinancing on acceptable terms could be obtained if the EastPark Facility
was not sold before the maturity dates. 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 nine months ended September 30, 1998 is down
approximately $282,000 compared to the same period of the prior year. The main
factor for this decrease is the $175,000 loss on the sale of the BB&T building
in April. Net income form operations for the third quarter is down as compared
to the same period of the prior year by approximately $14,000. Rental revenue is
down $163,000 for the third quarter and operating expenses for the third quarter
of 1998 are down by approximately $88,000, all of which relate to the
disposition of the BB&T building. The occupancy rate at the EastPark facility is
currently 80.2%. A lease signed in the third quarter for approximately 3,800
square feet will bring the occupancy to 90%. This three-year lease will commence
in January 1999, with an initial rental per square foot of $13.80 escalating to
$14.64 in year three. As a condition of the lease, approximately $40,000 in
upfit costs will be incurred.
Status of East Park Facility
The General Partners are continuing to focus on selling the EastPark facility
and continue to have it listed with a Charlotte-based real estate broker. The
General Partners are also working on increasing the occupancy at EastPark (See
"Results of Operations" above). The General Partners believe that the higher
occupancy would support a higher asking price for the EastPark facility.
6
<PAGE> 7
Risks Associated with Year 2000
The Partnership, in its day to day operations, relies upon various computer
software and hardware that may be adversely affected by the change in the
millennium, from 1999 to 2000. In general, information systems experts have
predicted that a wide variety of problems, from systems failures to data entry
and transfer errors, will result from the turn of the century. Repeated systems
failures, data entry and transfer errors and similar computer problems would
result in a material adverse effect on the Partnership and its operations.
However, the Partnership has examined its computer hardware and software and,
based on such examination, does not reasonably anticipate any significant
internal problems as a result of the change in millennium. The Partnership may,
however, be materially and adversely affected by external systems problems,
problems over which the Partnership has minimal control.
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:
Designation
Number Under
Exhibit Item 601 of Page
Number Regulation S-K Exhibit Description Number
------ -------------- ------------------- ------
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 Listing Agreement of Property For
Lease and/or Sale (EastPark
Executive Center)
5 27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the three
months ended September 30, 1998.
- ----------
* 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 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
<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 11/13/98 By: /s/ Dexter R. Yager, Sr.
---------------------------------
Dexter R. Yager, Sr.
General Partner
Date 11/13/98 By: /s/ Jerry R. Haynes
---------------------------------
Jerry R. Haynes
Chief Financial Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 74,817
<SECURITIES> 130,500
<RECEIVABLES> 38,325
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 248,125
<PP&E> 4,416,268
<DEPRECIATION> 815,582
<TOTAL-ASSETS> 3,872,230
<CURRENT-LIABILITIES> 1,710,964
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,872,230
<SALES> 0
<TOTAL-REVENUES> 573,546
<CGS> 0
<TOTAL-COSTS> 518,296
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 207,879
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (175,980)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (328,609)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
