UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
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) 665-5959
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 March 31, 1998. There is no public
market for these interests.
U.S. REALTY INCOME PARTNERS L.P.
1997 FORM 10-K ANNUAL REPORT
INDEX
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . 4
Item 4. Submission of Matters to a Vote of Limited Partners. . . . . . 4
PART II
Item 5. Market for the Registrant's Limited Partnership
Interests and Related Limited Partner Matters. . . . . . . . . 5
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . 5
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . 6
Item 8. Financial Statements and Supplementary Data. . . . . . . . . . 12
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . . . . . 12
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . 13
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . 14
Item 12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 13. Certain Relationships and Related Transactions . . . . . . . . 15
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . 17
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Prospectus of the Registrant dated November 30, 1987, as
supplemented through December 1997 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 residentialandcommercial real
estate properties. The Partnership sold $4,858,000 limitedpartnershipinterests
(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 operationswhich 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
GeneralPartner has the responsibility for the initial selection, evaluation and
negotiation ofthe 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) fora 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 servicesfor 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 concerningthis property which supplement is
incorporated herein by reference. 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, 1997.
PART II
Item 5. Market for the Registrant's Limited Partnership Interests and Related
Limited Partner Matters.
At December 31, 1997, 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 ofthe General Partner, repurchase Units under certain circumstances,
as set forth in the Partnership's prospectus. At the request of a limited
partner, otherthana 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 inlocating 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,
1997 1996 1995
Selected Income Statement Data:
Rental Income $732,267 $ 743,689 $ 692,478
Interest Income 6,236 3,212 6,088
Interest Expense 357,889 362,845 366,378
Operating Expense 210,126 230,326 210,251
Net Effect of Change in
Basis of Accounting for
Investment in Joint
Venture - - ( 118)
Net Income (Loss) ($ 4,065) ($ 52,640) ($ 68,378)
Net Income (Loss) Per
Limited Partnership Interest $ .79 ($ 10.29) ($ 13.37)
U.S. Realty Income Partners L.P.
(a Delaware limited partnership)
Year Ended December 31,
1997 1996 1995
Selected Balance Sheet Data:
Property and Improvements-Net $3,885,252 $4,040,633 $4,196,063
Investments in Joint Venture 1,000 1,000 1,000
Notes Payable 3,557,105 3,600,032 3,642,603
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, 1996, 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
shoppingcenter located in Nashville, Tennessee ("Bellevue") which was renovated
in 1988.The Bellevue property was 100% leased at the end of 1993 - 1996. 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
loan became due on February 1, 1997. However, the lender has extended the
maturity to August 1997. The mortgage holder, Mass Mutual, has continued to
extend the mortgage.A refinancing will occur when the vacant space is re-leased
and the pollution problem with Ted's Cleaners is financed. The State of
Tennessee has promulgated rules and regulations pertaining to state wide
pollution problems. Ted's Cleaners has made application to the Industry "Super
Fund" to obtain moneytoclean up the pollution. The problem should be addressed
this spring. Hopefully, there will be a final resolution this year.
Haverty's movedfromthe center at the end of Occtober, 1997. We have reached an
agreement with T J Maxx/Marshalls for 28,300 sq. ft. with the lease still to be
negotiated. Our Partnership will complete work on the space which includes tear
out, removal of existing fixtures, providing a separate meter, upgrading the
elctrical supplyand putting the HVAC in good working order. The tenant will be
responsible for the completion of any work to make the space suitable to the
tenant. As our Partnership does not have extensive reserves, the tenant will
front the cost of this and the Partnership will repay the amount from the first
two years lease payments. The term of the lease is 10 years. Lease payments
will yieldapproximately $50,000 more revenue to the Partnership each year after
the first two years than received from the lease with Haverty's. However, for
the next two years, this center will only break even on a cash flow basis. 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 anofficebuilding located in Nashville, Tennessee. The Partnership's
JointVenturepartner is Daniel West End Limited Partnership, the general partner
of which isthe Daniel Corporation ("Daniel"). The property was 95% occupied at
December 31, 1994, 1995 and 1996. When Gresham and Smith moved last March the
Partnership begana program to re-lease the 65,000 sq. ft. of space. As of this
date, all but 1,400 sq. ft. has been re-leased. In 1998 the Partnership will
have to fund tenant build out and brokerage commissions in an amount of
$1,300,000. This will have to come from operational cash flow. Lastly, a new
roof and decking for the building were completed in 1997.
Thepartnershipcontributed 3310 West End office building to a new partnership in
July 1995. A major reason for this was we had one tenant, Gresham and Smith,
leasing 65,000 squarefeet outof a total of 107,000 square feet with their lease
ending in 1998. They have terminated their lease and moved from the building.
Our contribution of 3310 in 1995 to the new partnership with Prudential Life
Insurance paying off the mortgage was a wise decision. It now enables the
partnership to have sufficient cash flow to pay for these costs. If we had not
made that change, our partnership would not have the cash flow to pay these
expenses and the partnership would stand a good chance of losing the building.
Properties in Raleigh, NC
These properties consist of one 110,000 sq. ft. building (Center 98) and four
50,000 sq. ft. buildings (Park). These buildings are operating according to
schedule. Prudential Life Insurance Company has funded the Partnership with
approximately 7,280,000 tobuild agarage and a new 55,600 sq. ft. building which
should be completed by the end of 1998.Approximately 25% of this space has been
already pre-leased. The new parking garage will have 178 spaces.
Inthe next couple of months a natiuonally known brokerage firm will be retained
todetermine the market value of the office buildings and secure any interest in
the purchase of them. I'll report to you when there is any significant news.
With the circumstances regarding the shopping center and the $1,300,000 payment
due onthe 3310 Office Building, it does not appear there will be any cash
distribution in 1998 from operations. However, if the study and interest
regardingthe office buildings prove positive, threre is a possibility of one or
more sales of hte office buildings. Our Partnership will make distributions to
the partners when this occurs.
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").
In view of the 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 Venturebeganto consider future plans for the 3310 Office Building as well
as a sale oftheproperty 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 thencontributed itsassets 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 BusinessCenter, 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 DevelopmentCorporation(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 ofitsinterest 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 onthe 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. This lease has been terminated.
(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
alternativesto theformation 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 themost 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 operational results of the Partnership for the years ended December 31,
1997, 1996 and 1995 are summarized below:
Year Ended December 31, 1997:
JOINT VENTURE
BELLEVUE PARTNERSHIP TOTAL
Revenues $ 736,661 $ 32,551 $ 769,212
Operating Expenses 155,771 54,355 210,126
Interest 357,889 - 357,889
Depreciation & Amort. 166,056 10,428 176,484
Refinancing Costs 2,500 - 2,500
682,216 64,783 746,999
Net Operating Income (Loss) 54,445 ( 32,232) 22,213
Partnership Share 66 2/3% 100%
Partnership Net Income (Loss) $ 36,297 ($ 32,232) $ 4,065
Partnership Cash Flow $ 207,110 ($ 21,804) $ 185,306
Year Ended December 31, 1996:
JOINT VENTURE
BELLEVUE PARTNERSHIP TOTAL
Revenues $ 745,340 $ 22,406 $ 767,746
Operating Expenses 151,322 79,004 230,326
Interest 362,845 - 362,845
Depreciation & Amort. 165,680 20,675 186,355
Refinancing Costs 28,543 - 28,543
708,390 99,679 808,069
Net Operating Income (Loss) 36,950 ( 77,273) ( 40,323)
Partnership Share 66 2/3% 100%
Partnership Net Loss $ 24,633 ($ 77,273) ($ 52,654)
Partnership Cash Flow $ 193,244 ($ 56,598) $ 136,646
Year Ended December 31, 1995:
JOINT VENTURE
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) ($ 68,259)
Partnership Cash Flow $ 53,750 ($ 63,849) ($ 10,099)
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, 1997, the
Partnership had $477,135 in cash and cash equivalents. This represents 9.8% 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
GeneralPartner has deemed it advisable not to make any cash distributions since
May 1990. The General Partner does not expect to make cash distributions in
1998.
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.
None.
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
partnersofthe General Partner and are responsible for the day-to-day operations
of the Partnership:
Name Age
Robert Bond Miller 62
Donald R. Zoch 41
Lee Rosenberg 44
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
acquiredover 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. hasbeen 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 16 years experience in financial planning
Mr. Rosenberg hasbeen a partner in ARS Financial Services, Inc., Valley Stream,
New York, a firm specializing in personal financing planning for more than five
years. He isaCertified 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 wellasbeing 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
ofJacques-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
Partnershipfor itsoverhead 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 November1989,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 aright 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
itsrelationship withthe 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 allocatingmanagementtime, 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
GeneralPartner 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 orRefinancing 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 timingof a sale of any of the Partnership properties, the establishment and
maintenance of reasonable reserves, the timing of expenditures, the level of
mortgage amortization andother 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 favorableto 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
servicesto, 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.
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 indexof financialstatements 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
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Actof 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
13
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
FINANCIAL STATEMENTS AND SCHEDULES
December 31, 1997, 1996 and 1995
(With Independent Auditors' Report Thereon)
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
Independent Auditors' Report
Members of the Partnership
U.S. Realty Income Partners, L.P.
Nashville, Tennessee
We have audited the balance sheets of U.S. Realty Income Partners, L.P.
(a limited partnership) (the Partnership) as of December 31, 1997 and
1996 and the related statements of operations, partnership equity, and
cash flows for the years ended December 31, 1997, 1996 and 1995. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
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 audits provide 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 U.S. Realty
Income Partners, L.P. as of December 31, 1997 and 1996 and the results
of its operations and its cash flows for the years ended December 31,
1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
S/N Dempsey Wilson & Co., P.C.
Certified Public Accountants
January 27, 1998
Murfreesboro, Tennessee
S. Realty Income Partners, L.P.
(A Limited Partnership)
BALANCE SHEETS
December 31, 1997 and 1996
Assets
1997 1996
Cash $ 477,135 $ 291,829
Tenant receivables 1,996 6,035
Property, plant and equipment, net of
accumulated depreciation of
$1,424,675 in 1997 and $1,269,294
in 1996 3,885,252 4,040,633
Investment in joint venture 1,000 1,000
Other assets 256,079 266,984
Total assets $ 4,621,462 $4,606,481
Liabilities and Partnership Equity
Notes payable $ 3,557,105 $3,600,032
Accounts payable 1,187 2,548
Accrued expenses 120,548 83,492
Total liabilities 3,678,840 3,686,072
Commitments and contingent liabilities
Minority partners' interest in joint
venture (102,925) (121,073)
Partnership equity:
General Partners, no units authorized (184,100) (184,303)
Limited Partners, 4,858 units
authorized, issued, and
outstanding 1,229,647 1,225,785
Net partnership equity 1,045,547 1,041,482
$ 4,621,462 $4,606,481
See accompanying notes to financial statements.
2
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
Revenues:
Rental income $ 626,672 $629,035 $ 609,362
Common area maintenance 105,595 114,654 83,116
Interest 6,236 3,212 6,088
Total revenues 738,503 746,901 698,566
Expenses:
Interest 357,889 362,845 366,378
Legal and professional 18,268 24,510 28,269
Depreciation 155,381 155,430 155,430
Amortization 21,103 30,925 31,758
Property taxes 75,460 68,047 68,047
Leasing and administrative 44,323 75,068 47,025
Management fees 27,650 27,121 26,305
Repairs and maintenance 24,889 23,583 23,134
Refinancing costs 2,500 28,543 -
Utilities 11,998 8,814 10,419
Insurance 7,538 3,183 7,052
Total expenses 746,999 808,069 763,817
Net loss before minority
interest and loss from joint
venture (8,496) (61,168) (65,251)
Minority partner's interest in
operating profit (18,148) (12,317) (3,009)
Loss from operations (26,644) (73,485) (68,260)
Income (loss) from joint venture 30,709 20,845 (118)
Net earnings (loss) $ 4,065 $(52,640) $ (68,378)
Net earnings (loss) per unit $ .79 $ (10.29) $ (13.37)
Weighted average number of units 4,858 4,858 4,858
See accompanying notes to financial statements.
3
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
STATEMENTS OF PARTNERSHIP EQUITY
Years Ended December 31, 1997, 1996 and 1995
Limited General
Partners Partners Total
Distributive share of net earnings 95% 5% 100%
Balance at December 31, 1994 1,340,752 (178,252) 1,162,500
Net loss of 1995 (64,959) (3,419) (68,378)
Balance at December 31, 1995 1,275,793 (181,671) 1,094,122
Net loss of 1996 (50,008) (2,632) (52,640)
Balance at December 31, 1996 1,225,785 (184,303) 1,041,482
Net earnings of 1997 3,862 203 4,065
Balance at December 31, 1997 $1,229,647 $(184,100) $1,045,547
See accompanying notes to financial statements.
4
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
Cash Flows from Operating Activities
Net loss from operations $(26,644) $(73,485) $ (68,260)
Adjustments to reconcile net
income to cash provided by
operating activities:
Minority partner's
interest in net profit
(loss) of consolidated
partnership 18,148 12,317 3,009
Depreciation 155,381 155,430 155,430
Amortization 21,103 30,925 31,758
(Increase) decrease in:
Tenant receivable 4,039 (3,283) 3,127
Other assets (10,198) 35,000 (65,080)
Increase (decrease) in:
Accounts payable (1,361) (157) 1,145
Accrued expenses 37,056 1,625 (32,572)
Net cash provided by operating
activities 197,524 158,372 28,557
Cash Flows from Investing Activities
Distribution from (investment in)
joint venture 30,709 20,845 (118)
Net cash used in investing
activities 30,709 20,845 (118)
Cash Flows from Financing Activities
Repayments on mortgage note (42,927) (42,571) (38,538)
Net cash used in financing
activities (42,927) (42,571) (38,538)
Net (decrease) increase in
cash and cash equivalents 185,306 136,646 (10,099)
Cash and cash equivalents
at beginning of year 291,829 155,183 165,282
Cash and cash equivalents
at end of year $477,135 $291,829 $155,183
See accompanying notes to financial statements.
5
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1997, 1996 and 1995
1. Summary of Significant Accounting Policies
Organization
U.S. Realty Income Partners, L.P. (the Partnership) was formed as
a limited partnership under the laws of the state of Delaware on
September 23, 1987. The Partnership was formed to acquire,
operate, hold for investment and dispose of residential and
commercial property. The general partner is Vanderbilt Realty
Joint Venture, a Tennessee partnership. Limited partners were
admitted beginning on May 15, 1988. The partnership controls
certain shopping center property, located in Nashville, Tennessee,
through its 66-2/3% interest in Bellevue Plaza Partners, a
Tennessee joint venture. This joint venture's assets, liabilities
and operations are included in these financial statements and
represent the partnership's primary business. Minority interests
represent the 33-1/3% interest held in such joint venture by an
unaffiliated party.
The Partnership files its tax return and prepares its financial
statements under the accrual method of accounting.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Partnership
considers cash on hand, demand deposits with financial
institutions, and highly liquid financial instruments with a
maturity of three months or less to be cash and cash equivalents.
Property and Improvements
Property and improvements are recorded at the acquisition cost.
Depreciation is provided for in amounts sufficient to relate the
cost of depreciable assets to operations over their estimated
service lives, using straight-line and accelerated methods.
Investment in Joint Venture
Investment in joint venture currently represents the partnership's
indirect 4.17% interest in Prudential/Daniel Office Venture, LLC,
which is stated at cost (note 3).
6
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
For the Years Ended December 31, 1997, 1996 and 1995
1. Summary of Significant Accounting Policies, (Continued)
Earnings per Unit
Earnings per unit are based on the weighted average of limited
partner units outstanding.
Income Taxes
The financial statements include only the assets and liabilities
and results of operations which relate to the business of the
Partnership. No provisions have been made for federal and state
income taxes as such taxes are the personal responsibility of the
partners.
Partnership Allocations
Partnership allocations are made in accordance with the limited
partnership agreement. Cash distributions, net earnings or loss
and taxable income or loss are generally allocated 95% to the
limited partners and 5% to the general partner. Liquidation
proceeds are generally allocated 85% to the limited partners and
15% to general partners, after replenishment of negative capital
accounts and return of limited partners' capital and preferred
returns.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ
from those estimates.
7
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
For the Years Ended December 31, 1997, 1996 and 1995
2. Property and Improvements
Property and improvements located at Bellevue Plaza consist of the
following:
1997 1996
Buildings and improvements $ 4,895,626 $4,895,626
Less accumulated depreciation (1,424,675) (1,269,294)
3,470,951 3,626,332
Land 414,301 414,301
$ 3,885,252 $4,040,633
During the years ended December 31, 1997, 1996 and 1995, the
Partnership recognized depreciation of $155,381, $155,430,
and $155,430, respectively.
3. Investment in Joint Venture
The Partnership held a 50% interest in DR/US West End General
Partnership, a general partnership joint venture formed to own and
operate a commercial office building in Nashville, Tennessee.
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, which
is controlled by Prudential Life Insurance Company of America,
owns six office buildings (including the DR/US property) located
in Nashville, Tennessee and Raleigh, North Carolina. Management
believes the fair value of the
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.
8
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
For the Years Ended December 31, 1997, 1996 and 1995
3. Investment in Joint Venture, (Continued)
Revenues of the Joint Venture for the seven months ended July 28,
1995 are summarized as follows:
Revenues $1,133,452
Expenses
Interest 408,573
Depreciation and
amortization 285,598
Other operating expenses 493,962
1,188,133
Net Loss $ (54,681)
Cash flow information is summarized as follows:
Operating activities $ 148,286
Investing activities (39,659)
Financing activities (156,610)
Net decrease in cash (47,983)
Cash, beginning of year 47,642
Cash, end of year $ (341)
The partnership's income (loss) from its joint venture investments
is determined as follows:
1997 1996 1995
Distributions from Prudential/Daniel
Office Venture, LLC $30,709 $ 20,845 $ 10,000
Provisions for loss on investment in
DR/US West End General Partnership - - (10,118)
$30,709 $ 20,845 $ (118)
9
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
For the Years Ended December 31, 1997, 1996 and 1995
4. Related Party Transactions
Administration expenses (fees and other costs and expenses) paid
to the general partner or its affiliates amounted to $36,000 in
1997, $65,000 in 1996 and $36,000 in 1995.
5. Note Payable
The Partnership has a note payable to a financial institution
amounting to $3,557,105 and $3,600,032 as of December 31, 1997 and
1996. The note bears an interest rate of 10% per annum with
monthly installments of principal and interest of $33,743 payable
until March 31, 1998, when the remaining balance will be due. The
note is collateralized by a deed of trust on the Bellevue Plaza
property.
6. Reconciliation of Financial Statements and Tax Returns
1997 1996 1995
Net income (loss), per
financial statements $ 4,065 $ (52,640) $ (68,378)
Items treated differently
on the tax return:
Net operating loss 1,038 (4,003) (16,080)
Write-down in value of
investment - - 118
Amortization (14,140) (14,149) (14,151)
Net loss, per tax returns $ (9,037) $ (70,792) $ (98,491)
The Partnership's federal income tax return is subject to audit
and possible adjustment by the Internal Revenue Service.
10
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
For the Years Ended December 31, 1997, 1996 and 1995
7. Other Assets
Other assets consist of:
1997 1996
Acquisition fees $ 328,447 $ 328,447
Mortgage financing costs - 101,089
Deferred commissions 41,021 41,968
369,468 471,504
Less accumulated amortization (115,039) (206,170)
254,429 265,334
Accounts receivable from affiliate 1,650 1,650
$ 256,079 $ 266,984
Acquisition fees are amortized over the life of the acquired
property, which is 31.5 years. Deferred commissions are amortized
over the terms of the related leases.
8. Leases of Lessor
Bellevue Plaza leases property to others under noncancellable
operating leases requiring fixed monthly payments over various
terms. At December 31, 1997, future minimum lease receipts were as
follows:
Year Ending December 31:
1998 $ 418,600
1999 285,395
2000 196,516
2001 146,525
2002 39,594
2003 7,124
$1,093,754
9. Supplemental Cash Flow Information
Interest paid totaled $328,247 in 1997, $362,845 in 1996 and
$366,378 in 1995.
11
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
For the Years Ended December 31, 1997, 1996 and 1995
10. Financial Instruments
The estimated fair values of the partnership's financial
instruments, as of December 31, 1997 and 1996, were as follows (in
thousands):
1997 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial assets:
Cash and cash equivalents $477 $ 477 $292 $ 292
Receivables 2 2 6 6
Investment in joint
venture 1 1,361 1 1,361
$480 $1,840 $299 $1,659
Financial liabilities:
Notes payable $3,557 $3,557 $3,600 $3,600
Accounts payable 1 1 3 3
Accrued expenses 121 121 83 83
$3,679 $3,679 $3,686 $3,686
Methods and assumptions used in estimating fair values are
summarized as follows:
Cash and cash equivalents - Carrying amounts represent a
reasonable estimate of fair values.
Trade accounts receivable and payable, and accrued expenses -
Carrying values of these accounts approximate fair value due to
their short maturities.
Investment in joint venture - Management's estimate of fair value,
as of December 31, 1997, is based on unaudited estimated values of
the underlying real estate. Management believes the fair value of
the 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
12
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
For the Years Ended December 31, 1997, 1996 and 1995
10. Financial Instruments (Continued)
properties. The LLC interest has been valued in these financial
statements at $1,000, the partnership's carrying value in the
DR/US investment. (note 3)
Note Payable - Carrying value of the note payable approximates
market value since the terms of the note are similar to those
available in the current market.
11. Environmental Contingency
The shopping center property the partnership controls (described
in note 1) has environmental problems due to a current tenant.
The tenant operates in an industry that has a superfund
established by the State of Tennessee. This superfund is
available to the businesses in this industry, however, the state
has yet to promulgate rules and regulations for use of these
funds. Management anticipates no related liability to the
partnership since management believes that the current tenant is
responsible for the cost of the cleanup.
1
INDEPENDENT AUDITORS' REPORT
ON ACCOMPANYING SCHEDULES
Members of the Partnership
U.S. Realty Income Partners, L.P.
Our audit was conducted for the purpose of forming an opinion on the
basic financial statements of taken as a whole. Schedule V - Property
and Improvements and Schedule VI - Accumulated Depreciation of
Property and Improvements are presented for purposes of additional
analysis and are not a required part of the basic financial
statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation
to the basic financial statements taken as a whole.
January 27, 1998
Murfreesboro, Tennessee
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
SCHEDULE V - PROPERTY AND IMPROVEMENTS
Balance at Balance,
Beginning Additions at end
Classification of Period At Cost Retirements of Period
1992 5,301,022 5,570 - 5,306,592
1993 5,306,592 2,400 - 5,308,992
1994 5,308,992 935 - 5,309,927
1995 5,309,927 - - 5,309,927
1996 5,309,927 - - 5,309,927
1997 5,309,927 - - 5,309,927
15
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY AND IMPROVEMENTS
Additions
Balance at Charged to Balance,
Beginning Costs and at end
Classification of Period Expenses Retirements of Period
1992 492,359 155,308 - 647,667
1993 647,667 155,340 - 803,007
1994 803,007 155,427 - 958,434
1995 958,434 155,430 - 1,113,864
1996 1,113,864 155,430 - 1,269,294
1997 1,269,294 155,381 - 1,424,675
Depreciation is provided for by the required tax method of
depreciating commercial real estate; i.e. MACRS. The Partnership
believes this provides for a depreciation provision similar to
standard book depreciation methods.
16
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 477,135
<SECURITIES> 0
<RECEIVABLES> 1,996
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 479,131
<PP&E> 5,309,927
<DEPRECIATION> 1,424,675
<TOTAL-ASSETS> 4,621,462
<CURRENT-LIABILITIES> 121,735
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,045,547
<TOTAL-LIABILITY-AND-EQUITY> 4,621,462
<SALES> 738,503
<TOTAL-REVENUES> 738,503
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 389,110
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 357,889
<INCOME-PRETAX> 4,065
<INCOME-TAX> 4,065
<INCOME-CONTINUING> 4,065
<DISCONTINUED> 0
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