UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
Commission file number 33-17577
U.S. Realty Income Partners L.P.
(Exact name of small business issuer as specified in its charter)
DELAWARE 62-1331754
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) (Identification No.)
P.O. Box 58006, Nashville, TN 37205
(Address of principal executive offices) (Zip Code)
(615) 665-5959
(Registrant's telephone number, including area code)
P. O. Box 50507, Nashville, TN 37205
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
YES X NO
U.S. REALTY INCOME PARTNERS L.P.
INDEX
PART I Financial Information
Item l. Financial Statements 3
Compilation Report 4
Balance Sheets at September 30, 1999 and December
31, 1998 5
Statements of Operations for the three months
and nine months ended September 30, 1999 and 1998 6
Statements of Cash Flows for the nine months ended
September 30, 1999 and 1998 7
Statements of Partnership Equity for the period
January 1, 1998 through September 30, 1999 8
Notes to Financial Statements 9 - 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 14
PART II Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Default Upon Senior Securities 15
Item 4. Submissions of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
The following balance sheet at September 30, 1999 (unaudited) and
statements of operations, partnership equity, and cash flows for the three
months and nine months ended September 30, 1999 (unaudited), for U.S. Realty
Income Partners L.P. (a Delaware limited partnership) (the "Partnership"),
have not been examined by independent public accountants but reflect, in the
opinion of management, all adjustments (consisting of normal recurring
accruals) necessary to present fairly the information required.
These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Partnership's 1998
Annual Report, as reported on Form 10-K.
OSBORNE & CO., P.C.
761 OLD HICKORY BLVD., SUITE 201
BRENTWOOD, TN 37027
To the Partners
U.S. Realty Income Partners L.P.
P. O. Box 58006
Nashville, TN 37205
We have compiled the accompanying balance sheet of U.S. Realty Income
Partners L.P. (a limited partnership) as of September 30, 1999 and the
related statements of operations, partnership equity, and cash flows for the
three months and nine months then ended, in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute
of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not
express an opinion or any other form of assurance on them.
We are not considered to be independent with respect to U.S. Realty Income
Partners L.P. according to Securities and Exchange Commission regulations.
The financial statements for the year ended December 31, 1998, were audited
by other accountants, and they expressed an unqualified opinion on them in
their report dated January 26, 1999, but they have not performed any auditing
procedures since that date.
October 28, 1999
Osborne & Co., P.C
Certified Public Accountants
U.S Realty Income Partners, L.P.
(A Limited Partnership)
Balance Sheets
Unaudited Audited
?? September 30, December 31,
1999 1998
Assets
Cash $ 355,299 $ 295,485
Escrow deposits 402,144 0
Tenant receivables 146,749 32,901
Property & improvements, net of
accumulated depreciation of
$1,696,643 and $1,580,106 3,613,284 3,729,821
Investment in limited partnership 1,000 1,000
Other assets 527,198 413,928
Total Assets $ 5,045,674 $ 4,473,135
Liabilities & Partnership Equity
Accounts payable $ 2,618 $ 874
Accrued expenses 70,949 123,474
Notes payable 4,113,019 3,505,577
Total Liabilities 4,186,586 3,629,925
Minority partner's interest in JV (136,932) (130,529)
Partnership equity
Gen. Partners, no units authorized (183,576) (187,690)
Limited Partners, 4,858 units
authorized, issued,
and outstanding 1,182,596 1,161,429
Total Partnership Equity 859,088 843,210
Total Liabilities & Partnership
Equity $ 5,045,674 $ 4,473,135
U.S. Realty Income Partners L.P.
(A Limited Partnership)
Statements of Operations
For the Three Months and Nine Months Ended
September 30, 1999 and 1998
Unaudited Unaudited Unaudited Unaudited
3 Months 3 Months 9 Months 9 Months
1999 1998 1999 1998
Revenues
Rental income $ 166,684 $ 111,288 $ 529,683 $ 394,508
CAM reimbursements 14,603 13,578 43,378 45,974
Miscellaneous (59) 349 0 527
Interest income 1,247 4,514 5,523 14,214
182,475 129,729 578,584 455,223
Expenses
Interest 107,584 88,300 253,078 265,433
Loan costs 40,000 0 40,000 0
Professional fees 8,090 3,554 22,266 17,792
Depreciation 38,846 38,858 116,537 116,573
Amortization 4,072 2,607 12,215 7,821
Property taxes 5,352 18,872 44,466 56,617
Leasing & admin. 30,793 21,871 77,750 63,486
Management fees 6,889 4,797 23,557 16,917
Repairs 12,113 11,239 61,819 29,904
Insurance 127 (19) 6,554 8,715
253,866 190,079 658,242 583,258
Net income before minority partner's
share of income (71,391) (60,350) (79,658) (128,035)
Minority partner's interest in
operating profit 14,630 12,340 5,905 22,648
Inc (Loss) from operation (56,761) (48,010) (73,753) (105,387)
Income from investment in
Joint Venture 0 0 96,034 47,344
Net Income (Loss) $ (56,761) $ (48,010) $ 22,281 $ (58,043)
Net Inc (Loss) per unit$ (11.10) $ (9.39) $ 4.36 $ (11.35)
Weighted Average
Number of Units 4,858 4,858 4,858 4,858
U.S. Realty Income Partners L.P.
(A Limited Partnership)
Statements of Partnership Equity
Period from January 1, 1998 to September 30,1999
Limited General
Partners Partner Total
Distributive share of net earnings 95% 5% 100%
Balance at January 1, 1998 $1,229,647 $(184,100) $1,045,547
Net loss (68,218) (3,590) (71,808)
Balance at December 31, 1998 1,161,429 (187,690) 973,739
Net income (loss) 21,167 1,114 22,281
Balance at September 30, 1999 $1,182,596 $(186,576) $ 996,020
U.S. Realty Income Partners L.P.
(A Limited Partnership)
Statements of Cash Flows
Unaudited Unaudited
9 Months 9 Months
Ending Ending
9/30/99 9/30/98
Cash Flows From Operating Activities
Net income (loss) $ 22,281 $(58,043)
Adjustments to reconcile net income (loss)
to net cash provide by (used in)
operating activities:
Minority partner's interest in operating
profit (loss) of consolidated
partnership (6,403) (22,648)
Depreciation 116,537 116,573
Amortization 12,215 7,821
(Increase) decrease in:
Escrow deposits (2,144) 0
Tenant receivables (113,848) ( 3,427)
Other assets 13,770 (48,703)
Increase (decrease) in:
Accounts payable 1,744 32,673
Accrued expenses (23,311) (48,486)
Accrued interest payable (29,213) 0
Tenant deposits 0 587
Net cash provided by (used in)
operating activities (8,372) (24,053)
Cash Flows From Investing Activities
Purchase of property and improvements 0 (57,304)
Net cash provided by (used in)
investing activities 0 (57,304)
Cash Flows From Financing Activities
Proceeds from refinancing 4,150,000 0
Escrow deposits (400,000) 0
Mortgage loan costs (126,880) 0
Receivable from joint venture (12,377) 0
Payments on mortgage note (3,542,558) (42,353)
Net cash provided by (used in)
financing activities 68,185 (42,353)
Net increase (decrease) in cash
and cash equivalents 59,813 (123,710)
Cash & cash equivalents at beginning
of period 295,485 477,135
Cash & cash equivalents at end of period $355,298 $353,425
Supplemental Disclosures
Interest paid $253,078 $265,433
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Unaudited
September 30, 1999
A. ACCOUNTING POLICIES
Refer to the Partnership's annual financial statements for the year
ended December 31, 1998 for a description of the accounting policies
which have been continued without change. Also, refer to the footnotes
of these annual statements for additional details of the Partnership's
financial condition. The details in those notes have not significantly
changed except as a result of normal transactions in the interim. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary have been included. Operating
results are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999.
B. INVESTMENT IN JOINT VENTURES
The Partnership had a 50% interest in DR/US West End General
Partnership, a joint venture formed to own and operate a commercial
office building in Nashville, Tennessee. The Company's initial
investment of $900,000 in the general partner joint venture was made on
November 1, 1988. Effective December 31, 1991, the Partnership adopted
the liquidation method of accounting for its investment in the joint
venture. Accordingly, the basis has been held at $1,000 since December
31, 1991.
Effective July 28, 1995, the partnership exchanged its interest in the
assets of DR/US West End General Partnership (DR/US) for an indirect
4.17% equity interest (held through a limited partnership interest in
Daniel S. E. Office Limited Partnership) in Prudential/Daniel Office
Venture, LLC (the LLC). The LLC owns six office buildings (including
the DR/US property) located in Nashville, Tennessee and Raleigh, North
Carolina. Management believes the fair value 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.
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Unaudited
September 30, 1999
C. TRANSACTIONS WITH AFFILIATES
Fees and other costs and expense paid to the general partner or its
affiliates were as follows:
Nine Months Year Ended
Ended June 30, December 31,
1999 1998
Administrative expenses $ 36,000 $ 36,000
The Partnership believes the amounts paid to affiliates are
representative of amounts which would have been paid to independent
parties for similar services.
PART I - FINANCIAL INFORMATION
continued
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At December 31, 1998, the partnership had $295,485 in cash and
cash equivalents. This represents 6.08% of capital raised. At
September 30, 1999, the Partnership had $355,299 in cash and cash
equivalents. This represents 7.31% of capital raised. The Partnership
had established a working capital reserve of 5% of the gross proceeds of
the offering. After May 15, 1990, the Partnership's Prospectus provided
that the working capital reserve could be reduced to 3% of capital
raised depending upon the Partnership's experience with its properties.
The working capital was reduced to allow the Partnership to pay costs
associated with the DR/US refinancing. In the event such reserves are
insufficient to satisfy unanticipated costs, the Partnership will be
required to borrow additional funds to meet such costs. The General
Partner does not anticipate having to borrow for working capital
reserves in 1999.
The General Partner has deemed it advisable not to make any
cash distributions since May 1990.
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 is
currently 100% leased. 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 July 1, 1999, the joint venture obtained a $4,150,000 first
mortgage loan on this property from an unaffiliated lender. The
mortgage bears interest at a rate of 7.25% per annum and requires
monthly installments of principal and interest of $37,656. The loan
fully amortizes over 15 years. After paying off Mass Mutual, the
partnership has enough cash to pay for the improvements made to the T.
J. Maxx space. These funds had previously been advanced by T. J. Maxx
to the Partnership. This will result in T. J. Maxx beginning monthly
rental payments in August 1999.
The lender required the Partnership to purchase insurance to cover any
pollution problems. Efforts will be made to recover the premiums from
Ted's Cleaners. Work will continue throughout the fall cleaning up the
site.
T. J. Maxx/Marshalls moved into the center in November 1998 as planned.
They occupy 28,300 square feet. Due to the refinancing, payments from
T. J. Maxx will increase the gross cash flow from the center by
approximately $50,000 a year over the previous tenant.
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,
1997 and 1998.
The partnership contributed 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 square feet out of a total of
107,000 square feet with their lease ending in 1998. They terminated
their lease and moved from the building. However, the total space has
been re-leased.
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 that partnership to have sufficient cash flow to pay
their 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 sq. ft. buildings (Park). These buildings are operating
according to schedule. Prudential Life Insurance Company has funded the
partnership with approximately 7,280,000 to build a garage and a new
55,600 sq. ft. building which was completed at the end of 1998.
Approximately 95% of this space has been already pre-leased. The new
parking garage will have 178 spaces.
A nationally-known brokerage firm (Rockwood) has been retained to
market the office buildings. Plans call for all offers to be reviewed
prior to September. If accepted, some or all of the properties would be
sold before year-end. At this time negotiations are under way with
several buyers. At this time it is not possible to know the final
results.
PART I - FINANCIAL INFORMATION
continued
Results of Operations
The Partnership holds a majority joint venture interests
in Bellevue Plaza Partners (66 2/3%). The operational results of the
Partnership for the nine months ending September 30, 1999 are summarized
below.
Bellevue Partnership Total
Revenues $575,144 $ 99,474 $674,618
Operating expenses 218,852 57,561 276,413
Interest 253,078 - 253,078
Depreciation & amortization 120,931 7,821 128,752
592,861 65,382 658,243
Net income (loss) (17,717) 34,092 16,375
Partnership share 66.67% 100%
Partnership net income $(11,811) $ 34,092 $ 22,281
Partnership operating
cash flow $(50,285) $ 41,913 $ (8,372)
Operational results for the comparable nine month period
ended September 30, 1998 were:
Bellevue Partnership Total
Revenues $453,218 $ 49,349 $502,567
Operating expenses 138,976 54,455 193,431
Interest 265,433 - 265,433
Depreciation & amortization 116,573 7,821 124,394
520,982 62,276 583,258
Net income (loss) (67,764) (12,927) (80,691)
Partnership share 66.67% 100%
Partnership net income $(45,116) $(12,927) $(58,043)
Partnership operating
cash flow $(18,947) $ (5,106) $(24,053)
The Partnership utilized the proceeds of the offering to acquire,
operate and hold for investment existing income producing commercial
real estate properties. Since the proceeds of the offering were less
than the maximum amount, the Partnership was unable to diversify its
investments to the extent initially desired.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None.
ITEM 2. Changes in Securities
None.
ITEM 3. Default Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
1. Exhibits
None.
2. Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
U.S. REALTY INCOME PARTNERS L.P.
By: Vanderbilt Realty Joint Venture,
The General Partner
By: Vanderbilt Realty Associates, Inc.
Its Managing General Partner
By: s/n Robert Bond Miller
Robert Bond Miller
President, Director, Chief
Executive Officer, Chief Financial
Officer and Chief Accounting
Officer
November 8, 1999
?
1
1620
16
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