UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 90549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-17577
U.S. Realty Income Partners L.P.
(Exact name of registrant as specified in its charter)
Delaware 62-1331754
(State or other jurisdiction of (I.R.S. Employer
Identification
incorporation or organization) Number)
P. O. Box 50507, Nashville, Tennessee 37205
(Address of principal executive offices) (Zip Code)
Registrant's telephone, including area code (615) 298-5700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
NOT APPLICABLE NOT APPLICABLE
Securities registered pursuant to section 12(g) of the Act:
NOT APPLICABLE
(Title of class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part II of this Form 10-
K or any amendment to this Form 10-K. Yes X No
The aggregate sales price of the limited partnership interests
subscribed for by non-affiliates was $4,858,000 at April 15, 1996. There
is no public market for these interests.
U.S. REALTY INCOME PARTNERS L.P.
1995 FORM 10-K ANNUAL REPORT
INDEX
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 2
Item 4. Submission of Matters to a Vote of Limited Partners. . . . . . 2
PART II
Item 5. Market for the Registrant's Limited Partnership
Interests and Related Limited Partner Matters. . . . . . . . . 3
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . 3
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . 4
Item 8. Financial Statements and Supplementary Data. . . . . . . . . . 9
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . . . . . 9
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . 10
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . 11
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 13. Certain Relationships and Related Transactions . . . . . . . . 12
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . .14
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Prospectus of the Registrant dated November 30, 1987,
as supplemented through December 1995 and filed pursuant to Rule 424(b), are
hereby incorporated by reference.
PART 1
Item 1. Business
U.S. Realty Income Partners L.P. (the "Partnership") is a Delaware
limited partnership formed in 1987 for the purpose of acquiring, operating,
holding and ultimately disposing of existing income producing residential
and commercial real estate properties. The Partnership sold $4,858,000
limited partnership interests (the "Units") through November 30, 1989, when
it terminated its public offering (the "Offering") pursuant to a
Registration Statement on Form S-11 under the Securities Act of 1933, as
amended, which Offering registered 20,000 Units. The Partnership began
admitting limited partners on May 15, 1988.
The principal investment objectives of the Partnership are: (i)
preservation and protection of capital; (ii) long-term capital appreciation;
(iii) distribution of current cash flow, some of which may not be subject
to federal income taxes in the early years of the Partnership's operations;
(iv) build-up of equity through reduction of mortgage indebtedness on
Partnership properties; (v) a diversified real estate portfolio; and (vi)
federal income tax deductions during the initial years of the Partnership's
operations which may be used to offset income from the Partnership and
possibly other passive sources.
The Partnership is managed by the general partner of the Partnership
Vanderbilt Realty Joint Venture (the "General Partner"). Vanderbilt Realty
Associates, Inc., acts as the managing partner of the General Partner. The
General Partner has the responsibility for the initial selection, evaluation
and negotiation of the investments for the Partnership. In making the
Partnership's investments, the General Partner considered various real
property and financial factors, including the condition and use of the
property, the prospects for long-range liquidity, income-producing capacity,
long-term appreciation and income tax considerations. In addition, the
General Partner considers the possible effect of shortages of materials,
supplies and energy sources. As of December 31, 1992, the Partnership had
fully invested the proceeds raised in its offering through the purchase of
two properties through joint venture arrangements.
The Partnership invested in property only if one or more of the
following conditions were met: (1) during the period of at least one year
preceding the purchase, the property generated (or would have generated if
leases currently in existence had been in effect) cash flow in an amount
estimated to be
consistent with the Partnership's objectives; or (2) for a period of at
least two years, the projection of income from the property based on
executed leases or other appropriate guarantees indicates the Partnership
should obtain from the property cash flow consistent with its investment
objectives.
The Partnership has no employees. The General Partner and its
affiliates are permitted to perform services for the Partnership for a
competitive fee and have done so.
The business of the Partnership is not seasonal and the Partnership
does no foreign or export business.
A presentation of information about industry segments is not applicable
because the Partnership operates solely in the real estate industry.
Item 2. Properties.
In October 1988, the Partnership acquired a 66.67% interest in a
Tennessee joint venture known as Bellevue Plaza Partners owning as its
primary asset an improved shopping center located in Nashville, Tennessee.
The joint venture interest was acquired for a purchase price of $1,500,000.
Please refer to Supplement No. 2 dated October 26, 1988 for additional
information concerning the acquisition of this joint-venture interest which
supplement is incorporated herein by reference.
In November 1988, the Partnership acquired a 50% ownership interest in
a joint venture known as DR/US West End General Partnership, a Virginia
general partnership (the "DR/US Joint Venture"). The DR/US Joint Venture
owned an office building located in Nashville, Tennessee. See Supplement
No. 3 dated November 29, 1988 for additional information concerning this
property which supplement is incorporated herein by referenced. The
Partnership purchased its interest for an initial contribution of $900,000.
In order to retain its 50% interest, the Partnership contributed an
additional $1,035,000 to the DR/US Joint Venture by August 1989. In 1991,
an additional $150,000 was contributed as part of a Chapter 11
reorganization. In 1995, the DR/US Joint Venture contributed its equity
position in the office building to Daniels Southeast Venture. See
"Liquidity and Capital Resources".
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to the Limited Partners during the fourth
quarter ended December 31, 1995.
<PAGE>
PART II
Item 5. Market for the Registrant's Limited Partnership Interests and
Related Limited Partner Matters.
At December 31, 1995, the Partnership had admitted Limited Partners
holding 4,858 Units.
The Partnership does not currently intend to list the Units on a
national securities exchange, and there is no public market for the Units.
If a public market for the Units does not develop, the Partnership may, in
the sole discretion of the General Partner, repurchase Units under certain
circumstances, as set forth in the Partnership's prospectus. At the request
of a limited partner, other than a resident of the State of California, who
wishes to sell all or a part of the Limited Partner's Units, the General
Partner may assist such Limited Partner in locating a purchaser, within the
limit of applicable laws and regulations. Neither the General Partner nor
the Partnership is obligated to redeem or repurchase Units.
Item 6. Selected Financial Data.
U.S. Realty Income Partners L.P.
(a Delaware limited partnership)
Year Ended December 31,
1995 1994 1993
Selected Income Statement Data:
Rental Income $692,478 $ 690,424 $ 655,911
Interest Income 6,088 1,971 2,148
Interest Expense 366,378 370,034 373,339
Operating Expense 210,251 195,893 199,456
Net Effect of Change in
Basis of Accounting for
Investment in Joint
Venture ( 118) ( 25,174) ( 31,787)
Net Loss ($ 68,378) ($ 85,202) ($ 163,621)
Net Loss Per Limited
Partnership Interest ($ 14.07) ($ 16.66) ($ 32.00)
<PAGE>
U.S. Realty Income Partners L.P.
(a Delaware limited partnership)
Year Ended December 31,
1995 1994 1993
Selected Balance Sheet Data:
Property and Improvements-Net $4,196,063 $4,351,493 $4,505,985
Investments in Joint Venture 1,000 1,000 1,000
Notes Payable 3,642,603 3,681,141 3,716,023
Cash Distributions to Limited
Partners 0 0
0
Cash Distributions per Limited
Partnership Interest 0 0
0
The above selected financial data should be read in conjunction with
the financial statements and the related notes appearing elsewhere in this
annual report.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
As of December 31, 1995, the Partnership had raised $4,858,000 in funds
from Limited Partners. The Partnership's offering terminated in November
1989.
During 1988 the Partnership purchased interests in two joint ventures
located in Nashville, Tennessee.
Bellevue
In October 1988, the Partnership acquired a 66.67% interest in a
Tennessee joint venture known as Bellevue Plaza Partners holding as its
primary asset a shopping center located in Nashville, Tennessee ("Bellevue")
which was renovated in 1988. The Bellevue property was 100% leased at the
end of 1993 - 1995. Lease rent from the tenants amounts to $48,367 per
occupancy month. In addition, the tenants pay common area maintenance
charges of $5,881 per month for a total of $54,248 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 requires 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 Partnership has paid debt service on a
current basis.
DR/US West End
In November 1988, the Partnership acquired a 50% ownership interest
in a joint venture known as DR/US West End General Partnership (the "Joint
Venture") which owns an office building located in Nashville, Tennessee.
The Partnership's Joint Venture partner is Daniel West End Limited
Partnership, the general partner of which is the Daniel Corporation
("Daniel"). The property was 95% occupied at December 31, 1993, 1994 and
1995. There are no tenant leases currently under negotiation. One tenant
occupies 45.9% of the space with payments providing annual lease income of
$932,000. The lease runs through October 31, 1998, with three additional
three-year options to renew at market rates. This tenant may cancel its
lease with six months' notice after 1998 with a termination payment equal
to the present value of future rents due using a discount rate of prime plus
two percent. Also, the tenant had the option to reduce its total square
footage, but extending its lease term. The lease was extended for two more
years, through October 31, 1998 at $19.35 per square foot for the first year
and at a market rate in the second year.
Liquidity and Capital Resources
On November 1, 1988, for an initial investment of $900,000, the
Partnership acquired a 50% interest in the DR/US West End General
Partnership (the "DR/US Joint Venture"), a Tennessee general partnership
formed to own and operate a commercial office building in Nashville,
Tennessee (the "3310 Office Building"). The 3310 Office Building was 95%
leased at December 31, 1995. One tenant occupies 45.9% of the space with
payments providing base annual lease income of $932,000. The lease for this
tenant runs through November 31, 1998, with two additional three-year
options to renew at market rates. This tenant may cancel its lease with six
months' notice after 1998 with a termination payment equal to the present
value of true rents due using a discount rate of prime plus two percent.
Also, the tenant has the option to reduce its total square footage, but
extending its lease term. The first mortgage principal debt balance at June
30, 1995 was $[6,673,138] and bore interest at 9%. This debt was scheduled
to mature in April, 1997. In addition, the other joint venture partner
loaned $673,512 to the DR/US Joint Venture at prime plus 1% which was
scheduled to mature March 1, 2028, in order to meet the venture to meet its
obligations. Also, there was a $220,696 nonrecourse promissory note paying
interest only at 8% which matures February 1, 1997.
In view of the possible expiration of the lease for the largest tenant
of the 3310 Office Building and the maturity of the senior debt on the
property, the DR/US Joint Venture began to consider future plans for the
3310 Office Building as well as a sale of the property and discussed
possible alternatives with third parties, including the Prudential Life
Insurance Company of America ("Prudential").
Effective August 1995, the DR/US Joint Venture contributed all of its
assets to a newly formed limited partnership, the Daniel S.E. Limited
Partnership, a Virginia limited partnership (the US/Daniel Venture"). The
US/Daniel Venture then contributed its assets to a newly-formed limited
liability company known as Prudential/Daniel Office Venture, LLC, (the
"PruDan L.L.C"). The members of PruDan LLC are the US/Daniel Venture and
Prudential.
The assets of PruDan LLC consist of: (1) the 3310 Office Building,
a 107,000 square foot office building in Nashville, Tennessee; (2) the
Somerset Park Business Center, a 108,113 square foot six-story office
building located in Raleigh, North Carolina; and (3) Somerset Park, 207,326
square feet in four two-story office building located in Raleigh, North
Carolina (items 2 and 3 are collectively referred to as the "somerset
Buildings"). The assets of PruDan LLC reflect indirect capital
contributions from the Partnership, Daniel Realty Company ("DRC") and First
Daniel Realty Development Corporation (collective, with DRC, "Daniel") and
Prudential valued at $1,361,445, $2,131,055 and $31,432,500, respectively,
or equity interests of 3.9%, 6.1% and 90.0%, respectively. The
Partnership's capital contribution consisted of its interest in the assets
of the DR/US Joint Venture, principally the 3310 Office Building. Daniel's
capital contribution consisted of its interest in the assets of the DR/US
Joint Venture (valued at $355,600) and is interest in the Somerset Buildings
(valued at $1,775,455). Prudential's capital contribution consisted of
payoff of $7,537,955 of debt on the 3310 Office Building, plus $120,000 for
a new roof repair escrow, purchasing Metropolitan Life Insurance's interest
in the Somerset Buildings, payoff of debt on the Somerset Buildings, and
transactions costs including due diligence, closing costs, and fees for
professional services (legal and accounting) totalling 1.5% of the
transaction.
In reaching the decision to contribute the Partnership's interest in
the DR/US Joint Venture to the PruDan LLC, the General Partners considered
a number of factors:
(1) The 3310 Office Building was subject to a first mortgage loan
with a principal debt balance at June 30, 1995 of $6,634,502,
bearing interest at 9%, and scheduled to mature in April 1997.
(2) A single tenant, Gresham & Smith ("G&S"), occupied 45.9% of the
space in the 3310 Office Building providing base annual lease
income of $932,000 pursuant to a lease scheduled to terminate
in October, 1998, less than nineteen months after maturity of
the debt on the property.
(3) Based on its present projections, the DR/US Joint Venture
estimated that all of the existing cash flow between now and the
year 2000 would be required to pay the debt expense and
establish a reserve necessary to find a replacement tenant for
G&S or to make necessary tenant improvements. The General
Partners estimate that approximately $1,200,000 could be
required to make necessary improvements to secure new tenants.
In making these considerations, the General Partners considered two
alternatives to the formation of the PruDan LLC; refinancing and sale of the
3310 Office Building. With the uncertainty surrounding the G&S lease, it
was unlikely that another lender would be willing to make a loan. G&S would
not commit to extend their lease at this time and even if a new loan could
be procured, it is unlikely that there would be sufficient proceeds to pay
off the existing debt. The mortgage problem created by the timing of the
G&S lease expiration also served to increase the difficulty in a sale of the
property. For these reasons, the General Partners believe the PruDan LLC
presented the most viable option for the Partnership.
The General Partners believe the Partnership's investment in the
PruDan LLC accomplished the following objectives:
(1) Eliminated the mortgage problem created by the expiration of the
G&S lease by retiring all debt on the 3310 Office Building;
(2) Reduced the direct risk to the Partnership involving the
potential expiration of the G&S lease and the potential loss of
cash flow.
(3) Establishment of a strong working relationship with Prudential,
an entity with significant capital resources.
(4) Diversification of risk from single asset, single location to
multiple assets in different locations; and
(5) Access to cash flow from Bellevue Plaza formerly used for debt
service on the 3310 Office Building and now available for
distribution to the Partnership's limited partners.
These objectives were accomplished without requiring any additional debt or
the need for capital contributions from the Partnership's limited partners.
The General Partners are currently considering the possibility of annual
distributions to the limited partners from the cash flow from Bellevue
Plaza.
The operational results of the Partnership for the years ended December
31, 1995, 1994 and 1993 are summarized below:
Year Ended December 31, 1995:
BELLEVUE PARTNERSHIP TOTAL
Revenues $ 695,821 $ 2,745 $ 698,566
Operating Expenses 143,657 66,594 210,251
Interest 366,378 - 366,378
Depreciation & Amort. 176,761 10,427 187,188
686,796 77,021 763,817
Net Operating Loss ( 9,025) ( 74,276) ( 65,251)
Partnership Share 66 2/3% 100%
Partnership Net Loss $ 6,017 ($ 74,276) ($ 332,549)
Partnership Cash Flow $ 53,750 ($ 63,849) $ 48,592
Year Ended December 31, 1994:
BELLEVUE DR/US PARTNERSHIP TOTAL
Revenues $ 691,875 $1,840,514 $ 520
$2,532,909
Operating Expenses 140,832 734,155 55,061
930,048
Interest 370,034 694,176 -
1,064,210
Depreciation & Amort. 173,598 510,169 10,428
694,195
684,464 1,938,500 65,489
2,688,453
Net Oper. Income (Loss) 7,411 ( 97,986) ( 64,969) (
155,544)
Partnership Share 66 2/3% 50% 100%
Prtrshp Net Inc. (Loss) $ 4,941 ($ 48,993) ($ 64,969) ($
109,021)
Partnership Cash Flow $ 101,042 ($ 3,780) ($ 54,541) $
42,721
Year Ended December 31, 1993:
BELLEVUE DR/US PARTNERSHIP TOTAL
Revenues $ 657,681 $1,795,659 $ 378
$2,453,718
Operating Expenses 152,390 674,008 46,526
872,924
Interest 373,339 718,567 -
1,091,906
Depreciation & Amort. 169,633 510,659 60,596
740,888
695,902 1,903,234 107,122
2,705,718
Net Operating Loss ( 38,221) ( 107,575) ( 106,744) (
252,000)
Partnership Share 66 2/3% 50% 100%
Partnership Net Loss ($ 25,481) ($ 53,788) ($ 106,744) ($
186,013)
Partnership Cash Flow 54,612 ($ 388) ($ 46,148) $ 8,076
The Partnership has utilized the proceeds of the offering as set forth
under "Estimated Use of Proceeds of the Offering," in the Partnership's
Prospectus to acquire, operate and hold for investment existing income
producing residential and commercial real estate properties. Since the
proceeds of the offering are less than the maximum amount the Partnership
was unable to diversify its investments to the extent initially desired.
The Partnership has 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%
depending upon the Partnership's experience with its properties. At
December 31, 1995, the Partnership had $155,183 in cash and cash
equivalents. This represents 3.19% of capital raised. In the event such
reserves are insufficient to satisfy unanticipated costs, the Partnership
will be required to borrow additional funds to meet such costs.
Due to the ongoing commitments with the lenders on the Joint Venture,
the General Partner has deemed it advisable not to make any cash
distributions since May 1990. The General Partner does expect to make cash
distributions in 1995. However, the amount is not known at this time.
Item 8. Financial Statements and Supplementary Data.
See Index to Financial Statements on Page F-l of Form 10-K for
Financial Statements and Financial Statement schedules, where applicable.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
The Partnership changed accountants from Hill, Neal, and Allen, P.C.
to Dempsey, Wilson & Co., P.C. There were no disagreements regarding
accounting and financial disclosures. The prior accountants firm has
undergone several personnel changes and the Partnership felt it would be
better served by the new accountants.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Partnership.
The General Partner of the Partnership is Vanderbilt Realty Joint
Venture, a Tennessee general partnership. The constituent partners of
Vanderbilt Realty Joint Venture are Vanderbilt Realty Associates, Inc., a
Tennessee corporation wholly owned by Mr. Robert Bond Miller, and American
Financial Planners Group, Inc., a New York corporation. The Partnership is
managed by the General Partner through Miller & Associates, Inc., an
Affiliate of the General Partner.
The following persons are the principal representatives of the
constituent partners of the General Partner and are responsible for the day-
to-day operations of the Partnership:
Name Age
Robert Bond Miller 60
Donald R. Zoch 39
Lee Rosenberg 42
Robert Bond Miller. Mr. Miller serves as President of Vanderbilt
Realty Associates, Inc., and Miller & Associates, Inc. Prior to
establishing Miller & Associates, Inc., he served as President of Jacques-
Miller, Inc., which he co-founded in 1969. During this tenure, Jacques-
Miller, Inc., and its affiliates acquired over 165 properties valued in
excess of $600 million and raised a total of $350 million in capital from
15,500 investors.
From 1965 to 1968, Mr. Miller was in charge of the Nashville office of
Blair, Follin, Allen & Walker, where he was responsible for sales and
installation of fringe benefit programs, including life, disability and
health insurance plans. Previously he was associated with Massachusetts
Mutual Life Insurance Co., from 1960 to 1965, during which time he became
a Life Member of the Million Dollar Roundtable and earned the Chartered Life
Underwriter designation. A founding member of the International Association
of Financial Planners (IAFP), he established the organization's Nashville
Chapter and served as its first President.
Mr. Miller received a Bachelor of Science degree in Aeronautics from
St. Louis University. Following graduation, he served three years in the
U.S. Air Force, receiving his honorable discharge as a first lieutenant.
Donald R. Zoch. Mr. Zoch is an executive officer of American Financial
Planners Group, Inc. Mr. Zoch has lectured extensively in this field and
is a Certified Financial Planner, Registered Investment Advisor and is
licensed with the National Association of Security Dealers, Inc. ("NASD").
Zoch & Zoch Financial Group, Inc. has been active in the financial planning
field since 1975; Mr. Zoch was an Adjunct Professor at the College of
Financial Planning in New Jersey and received a Bachelor of Arts degree in
Business from Catholic University of America, Washington, D.C.
Lee Rosenberg. Mr. Rosenberg is an executive officer of American
Financial Planners Group, Inc. and has more than 14 years experience in
financial planning Mr. Rosenberg has been a partner in ARS Financial
Services, Inc., Valley Stream, New York, a firm specializing in personal
financing planning for more than five years. He is a Certified Financial
Planner, Registered Investment Advisor and is licensed with the NASD, and
is currently a member and serves on the Board of Directors of the Long
Island Society of the Institute of Certified Financial Planners as well as
being a Director of the New York Chapter of National Speakers Association.
Mr. Rosenberg received a Bachelor of Arts degree in Business from
Brooklyn University, Brooklyn, New York.
There are no family relationships among executive officers and
directors.
Miller & Associates, Inc.
Miller & Associates, Inc. was formed in 1986 by four individuals who
were officers of Jacques-Miller, Inc., a Tennessee corporation, which acts
as a general partner in real estate limited partnerships. Three of these
four individuals are no longer affiliated with Miller & Associates, Inc.
Mr. Robert Bond Miller is the sole shareholder of Miller & Associates, Inc.
Mr. Miller, the president of Miller & Associates, Inc. served as
president of Jacques-Miller,Inc., a company he co-founded in 1969. In
addition, Mr. Miller served as a general partner of Jacques-Miller
Associates, an affiliate of Jacques-Miller, Inc., which entity served as a
general partner of various investment partnerships sponsored by Jacques-
Miller, Inc.
Item 11. Executive Compensation.
The Partnership is required to pay certain fees, make distributions and
allocate a share of the profits and losses of the Partnership to the General
Partner. See pages 11 to 13 of the Prospectus of the Partnership, which
pages are incorporated herein by reference, for a discussion of the
compensation payable to the General Partner and its Affiliates, as well as
Note G to the Financial Statements included herein.
The General Partner and its Affiliates may not be reimbursed by the
Partnership for its overhead costs or expenses, and no overhead costs or
expenses of the General Partner or its Affiliates can be allocated to or
paid by the Partnership. However, direct costs may be reimbursed, including
employee time spent on Partnership matters. The foregoing reimbursements
of expenses will be made regardless of whether any distributions of
Operating Cash Flow are made to the Limited Partners.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) Limited Partners were admitted beginning May 15, 1988 and
admissions ceased in November 1989, at which time the Partnership's offering
terminated. As of this date, the Partnership is not aware of any person or
group who has subscribed for more than 5% of the outstanding Units.
(b) The officers and directors of the general partners of the General
Partner of the Partnership as a group have subscribed for the following
Units:
Amount of Class Beneficial Ownership Percent of Class
Units of Limited
Partnership Interest None 0%
No officer or director of the general partners of the General Partner
possesses a right to acquire beneficial ownership of additional Units other
than those noted above.
Item 13. Certain Relationships and Related Transactions.
The Partnership is subject to various conflicts of interest arising out
of its relationship with the General Partner and its Affiliates. All
agreements and arrangements, including those relating to compensation,
between the Partnership and the General Partner and its Affiliates are not
the result of arm's-length negotiations.
Affiliates of the General Partner have been general partners or
managers of other limited partnerships or groups of investors, which have
invested in real properties. In addition, the General Partner and its
Affiliates have and continue to form and manage or advise additional public
and private real estate investment entities. The General Partner and its
Affiliates will have conflicts of interest in allocating management time,
services and functions between various existing partnerships and any future
partnerships which they may organize or serve, as well as other business
ventures in which they are involved. Miller & Associates, Inc., which, for
a property management fee, may perform property management services for
Partnership properties, and may also, in the future, solicit outside
property management accounts.
Many of the officers and directors of the constituent partners of the
General Partner are also officers and directors of one or more entities
(many of which are affiliated with the General Partner) which engage in the
development, brokerage, sale, operation or management of real estate.
The General Partner and its Affiliates do intend to sponsor privately
offered real estate partnerships although it is not anticipated that the
investment objectives of such partnerships will be the same as those of the
Partnership.
The General Partner has certain interests in the Operating Cash Flow,
Net Sale or Refinancing Proceeds and profits and losses of the Partnership.
Because the timing and amount of Operating Cash Flow, Net Sale or
Refinancing Proceeds and profits and losses of the Partnership received by,
or allocated to, the Limited Partners may be affected by decisions of the
General Partner, including the timing of a sale of any of the Partnership
properties, the establishment and maintenance of reasonable reserves, the
timing of expenditures, the level of mortgage amortization and other
matters, the General Partner may have a conflict of interest with respect
to such determinations.
Where conflicts arise from anticipated transactions with Affiliates of
the General Partner, the limitations described below have been adopted.
While the Partnership will make no loans to the General Partner or its
Affiliates, the Partnership may borrow money from the General Partner or its
Affiliates but only on terms as to interest rate, security, fees and other
charges at least as favorable to the Partnership as that changed by
unaffiliated lending institutions in the same locality on comparable loans
for the same purpose.
The General Partners and its Affiliates are not prohibited from
providing services to, and otherwise dealing or doing business with, persons
who deal with the Partnership, although there are no present arrangements
with respect to any such services. However, no rebates or "give-ups" may
be received by the General Partner or any of its Affiliates, nor may the
General Partner or any such Affiliates participate in any reciprocal
business arrangement which would have the effect of circumventing any of the
provisions of the Agreement.
Zoch & Zoch Financial Group, Inc., a broker-dealer affiliated with the
General Partner, acted as Selling Agent in the offering but did not receive
selling commissions.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
(1) (2) Financial Statements and Schedules
(See index of financial statements filed with this annual report included
in Item 8.)
(3) Exhibits
(a) Restated Limited Partnership Agreement of the
Partnership
is hereby incorporated by reference to the Prospectus
of
the Partnership dated November 30, 1987, as filed with
the Securities and Exchange Commission, File No. 33-
17577,
as supplemented December 28, 1987, October 26, 1988, and
November 29, 1988.
(b) Annual Report
(b) The following reports on Form 8-K were filed since the beginning
of the last quarter of the period covered by this report:
DATE
None
<PAGE>
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
January 2, 1996
Members of the Partnership
U.S. Realty Income Partners, L.P.
Nashville, Tennessee
We are pleased to confirm our understanding of the services we
are to provide for U.S. Realty Income Partners, L.P. for the year
ended December 31, 1995.
We will audit the balance sheet of U.S. Realty Income Partners,
L.P., and the related statements of income, retained earnings,
and cash flows for the year then ended.
Our audit will be conducted in accordance with generally accepted
auditing standards and will include tests of your accounting
records and other procedures we consider necessary to enable us
to express an unqualified opinion that your financial statements
are fairly presented, in all material respects, in conformity
with generally accepted accounting principles. If our opinion is
other than unqualified, we will fully discuss the reasons with
you in advance. If, for any reason, we are unable to complete
the audit, we will not issue a report as a result of this
engagement.
Our procedures will include tests of documentary evidence
supporting the transactions recorded in the accounts, tests of
the physical existence of inventories, and direct confirmation of
receivables and certain other assets and liabilities by
correspondence with selected customers, creditors, and banks. We
will request written representations from your attorneys as part
of the engagement, and they may bill you for responding to this
inquiry. At the conclusion of our audit, we will also request
certain written representations from you about the financial
statements and related matters.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements;
therefore, our audit will involve judgment about the number of
transactions to be examined and the areas to be tested. Also, we
will plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. However, because of the concept of reasonable
assurance and because we will not perform a detailed examination
of all transactions, there is a risk that material errors,
irregularities, or illegal acts, including fraud or defalcations,
may exist and not be detected by us. We will inform you,
however, of any matters of that nature that come to our attention
unless they are clearly inconsequential. Our responsibility as
auditors is limited to the period covered by our audit and does
not extend to any later periods for which we are not engaged as
auditors.
We understand that you will provide us with the basic information
required for our audit and that you are responsible for the
accuracy and completeness of that information. We will advise
you about appropriate accounting principles and their application
and will assist in the preparation of your financial statements,
but the responsibility for the financial statements remains with
you. This responsibility includes the maintenance of adequate
records and related internal control structure, the selection and
application of accounting principles, and the safeguarding of
assets.
We understand that your employees will type all cash, accounts
receivable, accounts payable, and other confirmations we request
and will locate any documents selected by us for testing.
Our audit is not specifically designed and cannot be relied on to
disclose reportable conditions, that is, significant deficiencies
in the design or operation of the internal control structure.
However, during the audit, if we become aware of such reportable
conditions or ways that we believe management practices can be
improved, we will communicate them to you in a separate letter.
We expect to begin our audit on approximately February 5, 1996
and to issue our report no later than March 31, 1996.
Our fees for these services will be $6,500 for the audit. The
fee is based on anticipated cooperation from your personnel and
the assumption that unexpected circumstances will not be
encountered during the audit. If significant additional time is
necessary, we will discuss it with you and arrive at a new fee
estimate before we incur the additional costs. Our invoices for
these fees will be rendered each month as work progresses and are
payable on presentation.
We appreciate the opportunity to be of service to you and believe
this letter accurately summarizes the significant terms of our
engagement. If you have any questions, please let us know. If
you agree with the terms of our engagement as described in this
letter, please sign the enclosed copy and return it to us.
Very truly yours,
Dempsey, Wilson & Co., P.C.
RESPONSE:
This letter correctly sets forth the understanding of U.S. Realty
Income Partners, L.P.
Officer signature:
Title:
Date:
<PAGE>
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
FINANCIAL STATEMENTS AND SCHEDULES
December 31, 1995, 1994 and 1993
(With Independent Auditors' Report Thereon)
<PAGE>
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
Table of Contents
Page
Number
Independent Auditors' Report 1
Financial Statements:
Balance Sheets 2
Statements of Operations 3
Statements of Partnership Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6-13
Independent Auditors' Report on Accompanying Schedules 14
Schedules:
Schedule V - Property and Improvements 15
Schedule VI - Accumulated Depreciation of
Property and Improvements 16
<PAGE>
Independent Auditors' Report
Members of the Partnership
U.S. Realty Income Partners, L.P.
Nashville, Tennessee
We have audited the balance sheet of U.S. Realty Income Partners,
L.P. (a limited partnership) (the Partnership) as of December 31,
1995 and the related statements of operations, partnership
equity, and cash flows for the year then ended. The financial
statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these
financial statements based on our audit. The financial
statements of U.S. Realty Income Partners, L.P. as of December
31, 1994 and for the years ended December 31, 1994 and 1993, were
audited by other auditors whose report dated March 15, 1995,
expressed an unqualified report thereon.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of the U.S. Realty Income Partners, L.P. as of December 31, 1995
and the results of its operations and its cash flows for the year
then ended in conformity with generally accepted accounting
principles.
February 6, 1996
Murfreesboro, Tennessee
<PAGE>
U. S. Realty Income Partners, L.P.
(A Limited Partnership)
BALANCE SHEETS
December 31, 1995 and 1994
Assets
1995 1994
Cash $ 155,183 $ 165,282
Tenant receivable 2,752 5,879
Property, plant and equipment, net of
accumulated depreciation of $1,113,864
in 1995 and $958,434 in 1994 4,196,063 4,351,493
Investment in joint venture 1,000 1,000
Other assets 332,909 299,587
Total assets $4,687,907 $4,823,241
Liabilities and Partnership Equity
Notes payable $3,642,603 $3,681,141
Accounts payable 2,705 1,560
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 155183
<SECURITIES> 0
<RECEIVABLES> 2752
<ALLOWANCES> 0
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<CURRENT-ASSETS> 0
<PP&E> 5309927
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 4687907
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<CGS> 0
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<OTHER-EXPENSES> 397439
<LOSS-PROVISION> 118
<INTEREST-EXPENSE> 366378
<INCOME-PRETAX> (68378)
<INCOME-TAX> 0
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<EPS-PRIMARY> (14.07)
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