UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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 33-17577
U.S. Realty Income Partners L.P.
(Exact name of small business issuer as specified in its charter)
DELAWARE 62-1331754
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 50507, Nashville, TN 37205
(Address of principal executive offices) (Zip Code)
(615) 298-5700
(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
U.S. REALTY INCOME PARTNERS L.P.
INDEX
PART I Financial Information
Item l. Financial Statements 3
Compilation Report 4
Balance Sheets at September 30, 1995 & December
31, 1994 5
Statements of Partnership Equity for the period
January 1, 1994 through September 30, 1995 6
Statements of Operations for the three months
& nine months ended September 30, 1995 & 1994 7
Statements of Cash Flows for the nine months ended
September 30, 1995 & 1994 8
Notes to Financial Statements 9 - 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13 - 15
PART II Other Information
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Default Upon Senior Securities 16
Item 4. Submissions of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
The following balance sheet at September 30, 1995 (unaudited)
and statements of operations, partnership equity, and cash flows for the
three and nine months ended September 30, 1995 (unaudited), for U.S.
Realty Income Partners L.P. (a Delaware limited partnership) (the
"Partnership"), have not been examined by independent public accountants
but reflect, in the opinion of management, all adjustments (consisting of
normal recurring accruals) necessary to present fairly the information
required.
These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Partnership's 1994
Annual Report, as reported on Form 10-K.
<PAGE>
OSBORNE & CO., P.C.
761 OLD HICKORY BLVD., SUITE 201
BRENTWOOD, TN 37027
To the Partners
U.S. Realty Income Partners L.P.
102 Woodmont Blvd., Suite 410
Nashville, TN 37205
We have compiled the accompanying balance sheet of U.S. Realty Income
Partners L.P. (a limited partnership) as of September 30, 1995 and the
related statements of operations, partnership equity, and cash flows for
the three months and nine months then ended, in accordance with Statements
on Standards for Accounting and Review Services issued by the American
Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited
or reviewed the accompanying financial statements and, accordingly, do not
express an opinion or any other form of assurance on them.
We are not considered to be independent with respect to U.S. Realty Income
Partnerships L.P. according to Securities and Exchange Commission
regulations.
The financial statements for the year ended December 31, 1994, were
audited by other accountants, and they expressed an unqualified opinion on
them in their report dated March 15, 1995, but they have not performed any
auditing procedures since that date.
October 30, 1995
Certified Public Accountants
<PAGE>
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
Unaudited Audited
September 30, December 31,
1995 1994
ASSETS
CASH $ 166,472 $ 165,281
TENANT RECEIVABLES 3,848 5,879
PROPERTY AND IMPROVEMENTS, net of
accumulated depreciation of
$1,075,005 and $958,434 4,234,922 4,351,493
INVESTMENT IN JOINT VENTURE 1,000 1,000
OTHER ASSETS 280,076 299,587
TOTAL ASSETS $4,686,318 $4,823,240
LIABILITIES AND PARTNERSHIP EQUITY
ACCOUNTS PAYABLE $ 7,843 $ 1,560
ACCRUED EXPENSES 66,504 114,438
NOTES PAYABLE 3,652,600 3,681,141
TOTAL LIABILITIES 3,726,947 3,797,139
MINORITY PARTNER'S INTEREST IN JOINT
VENTURE ( 133,228) ( 136,399)
PARTNERSHIP EQUITY 1,092,599 1,162,500
TOTAL PARTNERSHIP EQUITY 959,371 1,026,101
TOTAL LIABILITIES & PARTNERSHIP EQUITY $4,686,318 $4,823,240<PAGE>
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERSHIP EQUITY
Period from January 1, 1994 to September 30, 1995
Limited General
Partners Partner Total
Distributive share of
net earnings 95% 5% 100%
Balance at January 1, 1994 $1,421,694 ($173,992) $1,247,702
Net loss ( 80,942) ( 4,260) ( 85,202)
Balance at December 31, 1994 1,340,752 ( 178,252) 1,162,500
Net loss ( 66,406) ( 3,495) ( 69,901)
Balance at September 30, 1995 $1,274,346 ($181,747) ($1,092,599
<PAGE>
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
For the Three Months and Six Months Ended
September 30, 1995 and 1994
Unaudited Unaudited Unaudited Unaudited
3 Months 3 Months 9 Months 9 Months
1995 1994 1995 1994
Revenues
Rental income $ 140,465 $ 144,999 $ 468,268 $ 448,975
CAM reimbursements 19,910 23,083 62,391 75,036
Miscellaneous 63 198 254 427
Interest income 1,838 526 4,518 1,244
162,276 168,806 535,431 525,682
Expenses
Interest 91,477 92,403 275,146 277,854
Professional fees 6,053 5,950 23,769 20,798
Depreciation 38,857 38,852 116,571 116,555
Amortization 6,113 6,759 19,238 20,277
Property taxes 17,012 17,012 51,035 51,035
Leasing & admin. 22,563 12,855 53,194 44,789
Management fees 7,824 6,840 22,239 19,816
Repairs 10,019 7,327 26,153 22,358
Insurance 4,700 4,569 4,700 4,569
204,618 192,567 592,045 578,051
Net Loss Before Minority
Partner's Share of Loss( 42,342) ( 23,761) ( 56,614) ( 52,369)
Minority Partner's Interest
in Share of Loss 5,168 1,668 ( 3,171) ( 715)
Loss From Operations ( 37,174) ( 22,093) ( 59,785) ( 53,084)
Provision for Loss in
Investment in JV ( 1,225) ( 6,063) ( 10,116) ( 19,810)
Net Loss ($ 38,399) ($ 28,156) ($ 69,901) ($ 72,894)
Net Loss per Unit ($ 7.51) ($ 5.51) ($ 13.67) ($ 14.25)
Weighted Average
Number of Units 4,858 4,858 4,858 4,858
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
Unaudited Nine Months Ending
September 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 69,901) ($ 72,894)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Minority partner's interest in net loss
of consolidated partnership 3,171 715
Depreciation 116,571 116,555
Amortization 19,238 20,277
Decrease (increase) in:
Tenant receivables 2,031 ( 2,271)
Other assets 272 0
Increase (decrease) in:
Accounts payable 6,283 1,853
Professional Fees Payable ( 30,921) ( 8,419)
Tenant Deposits 0 ( 1,117)
Accrued expenses ( 17,012) ( 17,012)
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 29,732 37,687
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and improvements 0 ( 935)
NET CASH PROVIDED BY INVESTING ACTIVITIES 0 ( 935)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgage note ( 28,541) ( 25,833)
NET CASH PROVIDED BY FINANCING ACTIVITIES ( 28,541) ( 25,833)
NET INCREASE (DECREASE) IN CASH 1,191 ( 10,919)
CASH AT BEGINNING OF YEAR 165,281 118,781
CASH AT END OF PERIOD $ 166,472 $ 129,700
SUPPLEMENTAL DISCLOSURES:
INTEREST PAID $ 275,146 $ 277,854
<PAGE>
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Unaudited
September 30, 1995
A. ACCOUNTING POLICIES
Refer to the Partnership's annual financial statements for the year
ended December 31, 1994 for a description of the accounting policies which
have been continued without change. Also, refer to the footnotes of these
annual statements for additional details of the Partnership's financial
condition. The details in those notes have not significantly changed
except as a result of normal transactions in the interim. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary have been included. Operating results are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1995.
B. INVESTMENT IN JOINT VENTURES
The Partnership had a 50% interest in DR/US West End General
Partnership, a joint venture formed to own and operate a commercial office
building in Nashville, Tennessee. The Company's initial investment of
$900,000 in the general partner joint venture was made on November 1,
1988. Effective December 31, 1991, the Partnership adopted the
liquidation method of accounting for its investment in the joint venture.
Accordingly, the basis has been held at $1,000 since December 31, 1991.
Effective August 1995, the joint venture contributed all assets and
liabilities to a new limited liability company, Prudential/Daniel Office
Venture, LLC in return for a 3.9% equity interest. See "Management
Discussion" for a more comprehensive description of this transaction.
<PAGE>
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Unaudited
September 30, 1995
continued
B. TRANSACTIONS WITH AFFILIATES
Fees and other costs and expense paid to the general partner or its
affiliates were as follows:
Nine Months Ended Year Ended
September 30, December 31,
1995 1994
Administrative expenses $ 67,000 $ 36,000
In 1995, the Partnership paid $40,000 in deferred payments in
addition to normal recurring charges.
The Partnership believes the amounts paid to affiliates are
representative of amounts which would have been paid to independent
parties for similar services.
<PAGE>
PART I - FINANCIAL INFORMATION
continued
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
At December 31, 1994, the partnership had $165,281 in cash and
cash equivalents. This represents 3.40% of capital raised. At September
30, 1995, the Partnership had $166,472 in cash and cash equivalents. This
represents 3.43% of capital raised. The Partnership had established a
working capital reserve of 5% of the gross proceeds of the offering.
After May 15, 1990, the Partnership's Prospectus provided that the working
capital reserve could be reduced to 3% of capital raised depending upon
the Partnership's experience with its properties. The working capital was
reduced to allow the Partnership to pay costs associated with the DR/US
refinancing. In the event such reserves are insufficient to satisfy
unanticipated costs, the Partnership will be required to borrow additional
funds to meet such costs. The General Partner does not anticipate having
to borrow for working capital reserves in 1995.
The General Partner has deemed it advisable not to make any cash
distributions since May 1990. The General Partner does not expect to make
any cash distributions in 1995.
Bellevue
The Bellevue property was 100% leased at December 31, 1994 and
September 30, 1995. Lease rents from the tenants amounts to $46,822 per
occupancy month. In addition, the tenants pay common area maintenance
charges of $6,636 per month for a total of $53,458 per month.
On February 1, 1989, the Joint Venture obtained a $3,800,000 first
mortgage loan on this property from an unaffiliated lender. The mortgage
bears interest at a rate of 10% per annum and required monthly
installments of interest only through February 1, 1991. Monthly debt
service was $31,667 until March 1991 at which time monthly installments of
principal and interest rose to $33,743. The Joint Venture has paid debt
service on a current basis.
In the first quarter of 1996, the first mortgage will become due.
Negotiations have begun to refinance this indebtedness. The results of
our efforts will be communicated on a timely basis.
<PAGE>
DR/US WEST END
After many months of negotiations with Prudential Life Insurance
Company, an agreement was reached in early August to form a limited
liability company known as Prudential/Daniel Office Venture, LLC.
Assets of the new company are: 1) The 107,000 square feet 3310
Office Building located in Nashville, Tennessee, 2) The 108,113 square
feet Somerset Park Business Center, a six story office building located in
Raleigh, North Carolina and, 3) Somerset Park, four two story office
buildings totaling 207,326 square feet, also located in Raleigh, North
Carolina.
The total value of the properties is $34,925,000 with a value of
$9,531,000 for the 3310 Office Building, $8,458,000 for the Somerset
Business Center and $16,936,000 for Somerset Park.
The capital positions for each venture is $31,432,500 for
Prudential, $1,361,445 for U.S. Realty Income Partners for their interest
in the 3310 Office Building, $355,600 for Daniel's position in the 3310
Office Building and $1,775,455 for Daniel's interest in the Somerset
Buildings.
Prudential's capital contribution of $31,432,000 included the payoff
of $7,537,955 of debt on the 3310 Office Building, plus $120,000 repair
escrow for a new roof. The remainder of the money purchased Metropolitan
Life Insurance's interest in the Raleigh properties, payoff of debt on the
properties, and transaction costs including due diligence, closing costs,
and fees for professional services (legal and accounting) totaling 1.5% of
the transaction.
By Prudential paying off all debt on the properties, cash flow will
be available to the investors in 1996. In addition, monies previously
used to pay PNC bank from Bellevue Plaza will now become available for
distribution. Plans call for a distribution one time a year to keep the
administrative and postage costs to a minimum.
The decision to join Prudential and contribute the 3310 Office
Building property to the venture was made taking into consideration the
following:
A. The South Trust Bank first mortgage on 3310 Office Building
matures in April, 1997.
B. Gresham and Smith's lease expires eighteen months after the
loan is due. They lease approximately 47% of the building.
C. All existing cash flow between now and the year 2,000 would
have to be used to pay debt and set up reserves either to
replace Gresham and Smith and/or make tenant improvements. Up
to $1,200,000 is projected to be required when new tenants are
found.
The alternatives considered were:
A. Refinance: With Gresham and Smith's lease ending in 1998, no
lender wanted to make a new loan with this uncertainty.
Gresham and Smith would not commit to extend their lease at
this time. Also, if a loan could be procured, it would not be
of sufficient amount to pay off all existing debt.
B. Sell the property: The mortgage problem prevented a sale to
potential buyers. Once a cash buyer (Prudential) was located,
the problem of the mortgages went away leaving only the
Gresham and Smith lease problem that does not have to be
solved until 1998.
First and foremost, conservation of the investors capital has been
the goal of your General Partners. You will remember that in 1992, we
were able to save the 3310 Office Building when the building was put into
bankruptcy. By doing this we were able to reduce the outstanding first
mortgage from $12 million to $7.5 million including a second mortgage with
PNC Bank. That transaction enabled us to bring stability to the
partnership and preserve our asset while reducing the indebtedness.
By making our new agreement with Prudential, we have accomplished
the following:
A. Eliminated the mortgage problem by paying off all debt.
B. Eliminated most of the risk involving the Gresham and Smith
lease.
C. Strengthen our position by having a new partner, Prudential,
who has deep pockets.
D. Free up money now being used for debt service from Bellevue
Plaza that can be used for distribution to partners.
E. Spread the risk to three buildings and two cities from one
building in one city.
F. Accomplished the above with no new tax to be paid by the
partners of U.S. Realty Income Partners.
<PAGE>
PART I - FINANCIAL INFORMATION
continued
Results of Operations
The Partnership holds joint venture interests in two joint
ventures, Bellevue Plaza Partners (66 2/3%) and DR/US West End General
Partnership (50%). The operational results of the Partnership for the
nine months ending September 30, 1995 are summarized below.
Bellevue Partnership Total
Revenues $533,695 $ 1,736 $535,431
Operating expenses 124,645 66,561 191,206
Interest 275,146 - 275,146
Depreciation & amort. 124,392 11,417 135,809
524,183 77,978 602,161
Net income (loss) 9,512 ( 76,242) ( 66,730)
Partnership share 66 2/3% 50% 100%
Partnership net income
(loss) $ 6,341 ($ 76,242) ($ 69,901)
Partnership Oper. cash
flow $ 94,557 ($ 64,825) ($ 29,732)
Operational results for the comparable nine month period ended
September 30, 1994 were:
Bellevue Partnership Total
Revenues $525,482 $ 200 $525,682
Operating expenses 116,471 66,704 183,175
Interest 277,854 - 277,854
Depreciation & amort. 129,011 7,821 136,832
523,336 74,525 597,861
Net loss 2,146 ( 74,325) ( 72,179)
Partnership share 66 2/3% 50% 100%
Partnership net inc.
(loss) from oper. $ 1,431 ($ 74,325) ($ 72,894)
Partnership oper-
ating cash flow $104,191 ($ 66,504) $ 37,687
The Partnership utilized the proceeds of the offering to acquire,
operate and hold for investment existing income producing commercial real
estate properties. Since the proceeds of the offering were less than the
maximum amount the Partnership was unable to diversify its investments to
the extent initially desired.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None.
ITEM 2. Changes in Securities
None.
ITEM 3. Default Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
1. Exhibits
None.
2. Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
U.S. REALTY INCOME PARTNERS L.P.
By: Vanderbilt Realty Joint Venture,
the General Partner
By: Vanderbilt Realty Associates, Inc.
its Managing General Partner
By: Robert Bond Miller
Robert Bond Miller
President, Director, Chief Executive
Officer, Chief Financial Officer and
Chief Accounting Officer
November 8, 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 166,472
<SECURITIES> 0
<RECEIVABLES> 3,848
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,309,927
<DEPRECIATION> 1,075,005
<TOTAL-ASSETS> 4,686,318
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 959,371
<TOTAL-LIABILITY-AND-EQUITY> 4,686,318
<SALES> 535,431
<TOTAL-REVENUES> 535,431
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 320,070
<LOSS-PROVISION> 10,116
<INTEREST-EXPENSE> 275,146
<INCOME-PRETAX> (69,901)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (69,901)
<EPS-PRIMARY> (13.67)
<EPS-DILUTED> 0
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