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, 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 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, 1996 & December
31, 1995 5
Statements of Partnership Equity for the period
January 1, 1995 through September 30, 1996 6
Statements of Operations for the three months
and nine months ended September 30, 1996 & 1995 7
Statements of Cash Flows for the nine months ended
September 30, 1996 & 1995 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, 1996 (unaudited) and
statements of operations, partnership equity, and cash flows for the three
months and nine months ended September 30, 1996 (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 1995
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.
P. O. Box 50507
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, 1996, 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
Partners L.P. according to Securities and Exchange Commission regulations.
The financial statements for the year ended December 31, 1995, were audited by
other accountants, and they expressed an unqualified opinion on them in their
report dated February 6, 1996, but they have not performed any auditing
procedures since that date.
October 28, 1996
Osborne & Co., P.C
Certified Public Accountants
<PAGE>
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
Unaudited Audited
September 30, December 31,
1996 1995
ASSETS
CASH $ 243,042 $ 155,184
TENANT RECEIVABLES 1,506 2,752
PROPERTY AND IMPROVEMENTS, net of
accumulated depreciation of
$1,230,437 and $1,113,864 4,079,490 4,196,062
INVESTMENT IN LIMITED PARTNERSHIP ( 19,845) 1,000
OTHER ASSETS 291,477 332,909
TOTAL ASSETS $4,595,670 $4,687,907
LIABILITIES AND PARTNERSHIP EQUITY
ACCOUNTS PAYABLE $ 3,874 $ 2,705
ACCRUED EXPENSES 66,482 81,867
NOTES PAYABLE 3,611,135 3,642,603
TOTAL LIABILITIES 3,681,491 3,727,175
MINORITY PARTNER'S INTEREST IN JOINT
VENTURE ( 116,671) ( 133,390)
PARTNERSHIP EQUITY 1,030,850 1,094,122
TOTAL PARTNERSHIP EQUITY 914,179 960,732
TOTAL LIABILITIES & PARTNERSHIP EQUITY $4,595,670 $4,687,907<PAGE>
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERSHIP EQUITY
Period from January 1, 1995 to September 30, 1996
Limited General
Partners Partner Total
Distributive share of
net earnings 95% 5% 100%
Balance at January 1, 1995 $1,340,752 ($178,252) $1,162,500
Net loss ( 64,959) ( 3,419) ( 68,378)
Balance at December 31, 1995 1,275,793 ( 181,671) 1,094,122
Net loss ( 60,108) ( 3,164) ( 63,272)
Balance at September 30, 1996 $1,215,685 ($184,835) ($1,030,850)
<PAGE>
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended
September 30, 1996 and 1995
Unaudited Unaudited Unaudited Unaudited
3 Months 3 Months 9 Months 9 Months
1996 1995 1996 1995
Revenues
Rental income $ 149,350 $ 140,465 $ 478,997 $ 468,268
CAM reimbursements 22,574 19,910 88,870 62,391
Miscellaneous 276 63 373 254
Interest income 959 1,838 2,733 4,518
173,159 162,276 570,973 535,431
Expenses
Interest 90,518 91,477 272,720 275,146
Professional fees 9,220 6,053 20,568 23,769
Depreciation 38,857 38,857 116,572 116,571
Amortization 5,214 6,113 15,642 19,238
Property taxes 17,012 17,012 51,035 51,035
Leasing & admin. 28,365 22,563 91,086 53,194
Management fees 6,446 7,824 20,628 22,239
Repairs 9,203 10,019 23,740 26,153
Insurance 0 4,700 5,535 4,700
204,835 204,618 617,526 592,045
Net Loss Before
Minority Partner's
Share of Loss ( 31,676) ( 42,342) ( 46,553) ( 56,614)
Minority Partner's
Interest in Share
of Loss ( 658) 5,168 ( 16,719) ( 3,171)
Loss From Operations ( 32,334) ( 37,174) ( 63,272) ( 59,785)
Provision for Loss in
Investment in JV 0 ( 1,224) 0 ( 10,116)
Net Loss ($ 32,334) ($ 38,398) ($ 63,272) ($ 69,901)
Net Loss per Unit ($ 6.32) ($ 7.51) ($ 12.37) ($ 13.67)
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 Unaudited
Nine Months Nine Months
Ending Ending
Sept. 30, 1996 Sept. 30,. 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 63,272) ($ 69,901)
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 16,719 3,171
Depreciation 116,572 116,571
Amortization 15,642 19,238
Decrease (increase) in:
Tenant receivables 1,246 2,031
Other assets 25,792 272
Increase (decrease) in:
Accounts payable 1,169 6,283
Professional Fees Payable 0 ( 30,921)
Tenant Deposits 1,625 0
Accrued expenses ( 17,012) ( 17,012)
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 98,481 29,732
CASH FLOWS FROM INVESTING ACTIVITIES:
Distribution from limited partnership 20,845 0
NET CASH PROVIDED BY INVESTING ACTIVITIES 20,845 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgage note ( 31,468) ( 28,541)
NET CASH PROVIDED BY FINANCING ACTIVITIES ( 31,468) ( 28,541)
NET INCREASE (DECREASE) IN CASH/EQUIVALENTS 87,858 1,191
CASH & CASH EQUIVALENTS AT BEGINNING PERIOD 155,184 165,281
CASH & CASH EQUIVALENTS AT END OF PERIOD $ 243,042 $ 166,472
SUPPLEMENTAL DISCLOSURES:
INTEREST PAID $ 272,720 $ 275,146
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Unaudited
September 30, 1996
A. ACCOUNTING POLICIES
Refer to the Partnership's annual financial statements for the year
ended December 31, 1995 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, 1996.
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 July 28, 1995, the partnership exchanged its interest in the assets of
DR/US West End General Partnership (DR/US) for an indirect 4.17% equity interest
(held through a limited partnership interest in Daniel S. E. Office Limited
Partnership) in Prudential/Daniel Office Venture, LLC (the LLC). The LLC owns
six office buildings (including the DR/US property) located in Nashville,
Tennessee and Raleigh, North Carolina. Management believes the fair value ofthe
partnership's interest in the LLC approximates capital contributions recognized
by the LLC (for the 4.17% interest) amounting to $1,361,445. Such capital
contributions were valued based on management's (unaudited) estimated values of
the contributed properties. The LLC interest has been valued in these financial
statements as shown below:
Basis at January 1, 1996 $ 1,000
Less: Distributions ( 20,845)
Basis at September 30, 1996 ($19,845)
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Unaudited
September 30, 1996
C. TRANSACTIONS WITH AFFILIATES
Fees and other costs and expense paid to the general partner or its
affiliates were as follows:
Nine Months Year Ended
Ended September 30, December 31,
1996 1995
Administrative expenses $ 65,000 $ 36,000
In 1996, the Partnership paid $29,000, 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, 1995, the partnership had $155,194 in cash and
cash equivalents. This represents 3.19% of capital raised. At September 30,
1996, the Partnership had $243,042 in cash and cash equivalents. This
represents 5.00% 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 1996.
The General Partner has deemed it advisable not to make any cash
distributions since May 1990. The General Partner cannot determine whether any
cash will be available for distribution until the Bellevue mortgage is
refinanced.
Bellevue
The Bellevue property was 100% leased at December 31, 1995 and
September 30, 1996. Lease rents from the tenants amounts to $46,950 per
occupancy month. In addition, the tenants pay common area maintenance
charges of $8,616 per month for a total of $55,566 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.
Mass Mutual's mortgage matured in February of this year. They did not wish to
renew because the amount of $3,700,000 is smaller than the loans they are
currently making. They have granted various extensions and as of August 1,
1996, again extended for six months.
Your partnership applied for a mortgage with two lenders and have been turned
down by both. The first lender did not feel comfortablethat Haverty's Furniture
Company's lease had only two more years before their renewal date. They have a
large space in the center and the lender felt this was possibly a risk they did
not want to take. By January 20, 1997, Haverty's has to tell us their intention
of either staying or leaving so that the unknown will become a known by then. If
they renew, the term would be for five years beginning October 31, 1997,
extending the lease to October 31, 2002.
The second lender, in their inspection, uncovered pollutants in the ground below
the dry cleaning tenant. This is caused by chemicals used in cleaning solvents.
Law Engineering found traces of Dichlorocthene, Telrechloroethene "Perc" and
Trichloroethene. Our next step is to determine the extent of these chemicalsand
secondly, whether or not it is possible to remove them. The big question is can
the chemical residue be removed and if so, can we have someone tell us the
problem has been solved. TVG Environmental has been hired to make additional
tests and to determine the extent of the pollution.
Due to all the above, it appears prudent to postpone any decision regarding cash
distributions to the partners. If Haverty's does leave, it is important to have
cash available for tenant refinish and leasing commissions. Secondly, we have
the unknown as to what has to be done regarding the chemical spill and how much
money it will take to fix the problem.
DR/US WEST END
Effective July 28, the partnership exchanged its interest in the assets of DR/US
West End General Partnership (DR/US) for an indirect 4.17% equity interest (held
through a limited partnership interest in Daniel S. E. Office Limited
Partnership) in Prudential/Daniel Office Venture, LLC (the LLC). The LLC owns
six office buildings (including the DR/US property) located in Nashville,
Tennessee and Raleigh, North Carolina. Management believes the fair value ofthe
partnership's interest in the LLC approximates capital contributions recognized
by the LLC (for the 4.17% interest) amounting to $1,361,445. Such capital
contributions were valued based on management's (unaudited) estimated values of
the contributed properties. The LLC interest has been valued in these financial
statements at $1,000, the partnership's carrying value in the DR/US investment.
<PAGE>
PART I - FINANCIAL INFORMATION
continued
Results of Operations
The Partnership holds a majority joint venture interests in
Bellevue Plaza Partners (66 2/3%). The operational results of the Partnership
for the nine months ending September 30, 1996 are summarized below.
Bellevue Partnership Total
Revenues $569,639 $ 1,334 $570,973
Operating expenses 126,319 87,590 213,909
Interest 272,720 - 272,720
Depreciation & amort. 124,393 7,821 132,214
523,432 95,411 618,843
Net income (loss) 46,207 ( 94,077) ( 47,870)
Partnership share 66 2/3% 100%
Partnership net income
(loss) $ 30,805 ($ 94,077) ($ 63,272)
Partnership Oper. cash
flow $190,070 ($ 91,589) $ 98,481
Operational results for the comparable nine month period ended
September 30, 1995 were:
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 Operating
cash flow $ 94,557 ($ 64,825) $ 29,732
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.
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 10, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 243,042
<SECURITIES> 0
<RECEIVABLES> 1,506
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 244,548
<PP&E> 5,309,927
<DEPRECIATION> 1,230,437
<TOTAL-ASSETS> 4,595,670
<CURRENT-LIABILITIES> 70,356
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 914,179
<TOTAL-LIABILITY-AND-EQUITY> 4,595,670
<SALES> 570,973
<TOTAL-REVENUES> 570,973
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 344,806
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 272,720
<INCOME-PRETAX> (63,272)
<INCOME-TAX> (63,272)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (63,272)
<EPS-PRIMARY> (12.37)
<EPS-DILUTED> (12.37)
</TABLE>
