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 June 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 June 30, 1996 & December
31, 1995 5
Statements of Partnership Equity for the period
January 1, 1995 through June 30, 1996 6
Statements of Operations for the three months
and six months ended June 30, 1996 & 1995 7
Statements of Cash Flows for the six months ended
June 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 June 30, 1996 (unaudited) and
statements of operations, partnership equity, and cash flows for the three
months and six months ended June 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 June 30, 1996, and the related statements of
operations, partnership equity, and cash flows for the three months and six
months then ended, in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified PublicAccountants.
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, 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.
July 29, 1996
Certified Public Accountants
<PAGE>
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
Unaudited Audited
June 30, December 31,
1996 1995
ASSETS
CASH $ 159,891 $ 155,184
TENANT RECEIVABLES 3,893 2,752
PROPERTY AND IMPROVEMENTS, net of
accumulated depreciation of
$1,191,578 and $1,113,864 4,118,348 4,196,062
INVESTMENT IN JOINT VENTURE 1,000 1,000
OTHER ASSETS 337,843 332,909
TOTAL ASSETS $4,620,975 $4,687,907
LIABILITIES AND PARTNERSHIP EQUITY
ACCOUNTS PAYABLE $ 3,804 $ 2,705
ACCRUED EXPENSES 49,468 81,867
NOTES PAYABLE 3,621,847 3,642,603
TOTAL LIABILITIES 3,675,119 3,727,175
MINORITY PARTNER'S INTEREST IN JOINT
VENTURE ( 117,329) ( 133,390)
PARTNERSHIP EQUITY 1,063,185 1,094,122
TOTAL PARTNERSHIP EQUITY 945,856 960,732
TOTAL LIABILITIES & PARTNERSHIP EQUITY $4,620,975 $4,687,907<PAGE>
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERSHIP EQUITY
Period from January 1, 1995 to June 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 ( 29,390) ( 1,547) ( 30,937)
Balance at June 30, 1996 $1,246,403 ($183,218) ($1,063,185)
<PAGE>
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
For the Three Months and Six Months Ended
June 30, 1996 and 1995
Unaudited Unaudited Unaudited Unaudited
3 Months 3 Months 6 Months 6 Months
1996 1995 1996 1995
Revenues
Rental income $ 147,470 $ 140,237 $ 329,647 $ 327,804
CAM reimbursements 24,062 20,325 66,296 42,482
Miscellaneous 97 68 97 191
Interest income 357 1,189 1,774 2,680
171,986 161,819 397,814 373,157
Expenses
Interest 91,222 91,718 182,202 183,669
Professional fees 11,348 1,366 11,348 17,716
Depreciation 38,857 38,862 77,715 77,714
Amortization 5,214 5,467 10,428 13,125
Property taxes 17,012 17,012 34,023 34,023
Leasing & admin. 16,642 17,849 62,721 30,631
Management fees 6,300 5,488 14,181 14,416
Repairs 6,015 7,250 14,537 16,134
Insurance 2,352 0 5,535 0
194,963 185,012 412,690 387,428
Net Loss Before
Minority Partner's
Share of Loss ( 22,977) ( 23,193) ( 14,876) ( 14,271)
Minority Partner's
Interest in Share
of Loss ( 35) 3,298 ( 16,061) ( 8,339)
Loss From Operations ( 23,012) ( 19,895) ( 30,937) ( 22,610)
Provision for Loss in
Investment in JV 0 ( 4,181) 0 ( 8,893)
Net Loss ($ 23,012) ($ 24,076) ($ 30,937) ($ 31,503)
Net Loss per Unit ($ 4.50) ($ 4.71) ($ 6.05) ($ 6.16)
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
Six Months Six Months
Ending Ending
June 30, 1996 June 30, 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 30,937) ($ 31,503)
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 16,061 8,339
Depreciation 77,715 77,714
Amortization 10,428 13,125
Decrease (increase) in:
Tenant receivables ( 1,141) 3,939
Other assets ( 15,361) ( 118)
Increase (decrease) in:
Accounts payable 1,099 15,074
Professional Fees Payable 0 ( 25,871)
Tenant Deposits 1,625 0
Accrued expenses ( 34,024) ( 34,024)
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 25,465 26,675
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgage note ( 20,756) ( 18,789)
NET CASH PROVIDED BY FINANCING ACTIVITIES ( 20,756) ( 18,789)
NET INCREASE (DECREASE) IN CASH/EQUIVALENTS 4,709 7,886
CASH & CASH EQUIVALENTS AT BEGINNING PERIOD 155,183 165,281
CASH & CASH EQUIVALENTS AT END OF PERIOD $ 159,892 $ 173,167
SUPPLEMENTAL DISCLOSURES:
INTEREST PAID $ 182,202 $ 183,669
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Unaudited
June 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, 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.
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Unaudited
June 30, 1996
C. TRANSACTIONS WITH AFFILIATES
Fees and other costs and expense paid to the general partner or its
affiliates were as follows:
Six Months Year Ended
Ended June 30, December 31,
1996 1995
Administrative expenses $ 47,000 $ 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 June 30,
1996, the Partnership had $159,891 in cash and cash equivalents. This
represents 3.29% 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 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
June 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.
In the first quarter of 1996, the first mortgage became due. The lender granted
an extension of time based upon the submission of an application for a loan from
another lender. Negotiations continue to refinance this indebtedness. The
results of our efforts will be communicated on a timely basis.
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 six months ending June 30, 1996 are summarized below.
Bellevue Partnership Total
Revenues $397,080 $ 734 $397,814
Operating expenses 83,767 58,578 142,345
Interest 182,202 - 182,202
Depreciation & amort. 82,929 5,214 88,143
348,898 63,792 412,690
Net income (loss) 48,182 ( 63,058) ( 14,876)
Partnership share 66 2/3% 100%
Partnership net income
(loss) $ 32,121 ($ 63,058) ($ 30,937)
Partnership Oper. cash
flow $ 83,309 ($ 57,844) $ 25,465
Operational results for the comparable six month period ended
June 30, 1995 were:
Bellevue Partnership Total
Revenues $372,400 $ 757 $373,157
Operating expenses 80,786 41,026 121,812
Interest 182,669 - 182,669
Depreciation & amort. 83,928 7,911 91,839
347,383 48,937 396,320
Net income (loss) 25,017 ( 48,180) ( 23,163)
Partnership share 66 2/3% 100%
Partnership net income
(loss) $ 16,678 ($ 48,180) ($ 31,502)
Partnership Operating
cash flow $ 96,835 ($ 70,157) $ 26,678
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
August 10, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 159,891
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,309,926
<DEPRECIATION> 1,191,578
<TOTAL-ASSETS> 4,620,975
<CURRENT-LIABILITIES> 53,272
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,063,185
<TOTAL-LIABILITY-AND-EQUITY> 4,620,975
<SALES> 397,814
<TOTAL-REVENUES> 397,814
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 230,408
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 182,202
<INCOME-PRETAX> (30,937)
<INCOME-TAX> (30,937)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (30,937)
<EPS-PRIMARY> (6.05)
<EPS-DILUTED> (6.05)
</TABLE>
