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 March 31, 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 March 31, 1999 and December
31, 1998 5
Statements of Operations for the three months
ended March 31, 1999 and 1998 6
Statements of Cash Flows for three months ended
March 31, 1999 and 1998 7
Statements of Partnership Equity for the period
January 1, 1998 through March 31, 1999 8
Notes to Financial Statements 9 - 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 15
PART II Other Information
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Default Upon Senior Securities 16
Item 4. Submissions of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
The following balance sheet at March 31, 1999 (unaudited) and
statements of operations, partnership equity, and cash flows for the
three months ended March 31, 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, 1998 and the
related statements of operations, partnership equity, and cash flows
for the three 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, 1997, 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.
May 6, 1999
Osborne & Co., P.C
Certified Public Accountants
U.S Realty Income Partners, L.P.
(A Limited Partnership)
Balance Sheets
Unaudited Audited
?? March 31, December 31,
1999 1998
Assets
Cash $ 280,237 $ 295,485
Tenant receivables 75,971 32,901
Property & improvements, net of
accumulated depreciation of
$1,618,952 & $1,580,106 3,690,975 3,729,821
Investment in limited partnership 1,000 1,000
Other assets 417,766 413,928
Total Assets $ 4,465,949 $ 4,473,135
Liabilities & Partnership Equity
Accounts payable $ 1,555 $ 874
Accrued expenses 35,587 123,474
Notes payable 3,487,268 3,505,577
Total Liabilities 3,524,410 3,629,925
Minority partner's interest in JV (123,191) (130,529)
Partnership equity
Gen. Partners, no units authorized (183,140) (187,690)
Limited Partners, 4,858 units
authorized, issued,
and outstanding 1,247,870 1,161,429
Total Partnership Equity 941,539 843,210
Total Liabilities & Partnership
Equity $ 4,465,949 $ 4,473,135
U.S. Realty Income Partners L.P.
(A Limited Partnership)
Statements of Operations
For the Three Months Ended
March 31, 1999 and 1998
Unaudited Unaudited
3 Months 3 Months
1999 1998
Revenues
Rental income $ 207,047 $ 167,650
CAM reimbursements 13,329 16,516
Interest income 2,556 4,426
222,932 188,592
Expenses
Interest 87,450 88,721
Professional fees 600 1,942
Depreciation 38,846 38,858
Amortization 4,072 2,607
Property taxes 19,557 18,872
Leasing & admin. 38,994 8,917
Management fees 7,089 7,339
Repairs 19,747 9,731
Insurance 4,283 5,793
220,637 182,780
Net income before minority partner's
share of income 2,295 5,812
Minority partner's interest
in operating profit (7,338) (2,644)
Inc (Loss) from operation (5,043) 3,168
Income from investment
in Joint Venture 96,034 47,344
Net Income (Loss) $ 90,991 $ 50,512
Net Inc (Loss) per Unit $ 17.79 $ 9.88
Weighted Average
Number of Units 4,858 4,858
U.S. Realty Income Partners L.P.
(A Limited Partnership)
Statements of Cash Flows
Unaudited Unaudited
3 Months 3 Months
Ending Ending
3/31/99 3/31/98
Cash Flows From Operating Activities
Net income (loss) $ 90,991 $ 50,512
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 7,338 2,644
Depreciation 38,846 38,858
Amortization 4,072 2,607
(Increase) decrease in:
Tenant receivables (43,071) (26)
Other assets 4,590 2,166
Increase (decrease) in:
Accounts payable 681 103
Accrued expenses (58,672) (86,231)
Accrued interest payable (29,213) 0
Tenant deposits 0 587
Net cash provided by (used in)
operating activities 15,562 11,220
Cash Flows From Financing Activities
Receivable from joint venture (12,500) 0
Payments on mortgage note (18,310) (16,608)
Net cash provided by (used in)
financing activities (30,810) (16,608)
Net increase (decrease) in cash
and cash equivalents (15,248) (5,388)
Cash & cash equivalents at beginning
of period 295,485 477,135
Cash & cash equivalents at end of period $280,237 $471,747
Supplemental Disclosures
Interest paid $ 87,450 $ 88,721
U.S. Realty Income Partners L.P.
(A Limited Partnership)
Statements of Partnership Equity
Period from January 1, 1998 to March 31, 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) 86,441 4,550 90,991
Balance at September 30, 1999 $1,247,870 $(183,140) $1,064,730
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Unaudited
March 31, 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
March 31, 1999
C. TRANSACTIONS WITH AFFILIATES
Fees and other costs and expense paid to the general partner or its
affiliates were as follows:
Three Months Year Ended
Ended March 31, December 31,
1999 1998
Administrative expenses $ 18,000 $ 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 March
31, 1999, the Partnership had $280,237 in cash and cash equivalents.
This represents 5.77% 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. The General Partner cannot
determine whether any cash will be available for distribution until the
Bellevue mortgage is refinanced.
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 - 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. The mortgage holder,Mass Mutual, has continued to
extend the mortgage. A refinancing will occur when the vacant space
is released and the pollution problem with Ted's Cleaners is resolved.
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 money to clean up
the pollution. The problem should be addressed this spring.
Hopefully, there will be a final resolution this year.
Haverty's moved from the center at the end of October, 1997. We
have reached an agreement with T. J. Maxx/Marshalls for 28,300 sq. ft..
Plans call for the store to open November 8, 1998. Our Partnership has
completed work on the space which includes tear out, removal of
existing fixtures, providing a separate meter, upgrading the electrical
supply, and putting the HVAC in good working order. The tenant was
responsible for the completion of any work to make the space suitable
for the tenant. As our Partnership does not have extensive reserves,
the tenant has fronted 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 yield approximately $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 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, 1994, 1995 and 1996.
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
accounting 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.
In the next couple of months a nationally known brokerage firm
will be retained to determine the market value of the office buildings
and secure any interest in the purchase of them.
With the circumstances regarding the shopping center and the
$1,000,000 payment due on the 3310 Office Building, it does not appear
there will be any cash distribution in 1999 from operations. However,
if the study and interest regarding the office buildings prove
positive, there is a possibility of one or more sales of the office
buildings. The Partnership would make distributions to the partners if
this occurs.
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 three months ending March 31, 1999 are summarized
below.
Bellevue Partnership Total
Revenues $222,044 $ 96,922 $318,966
Operating expenses 72,270 18,000 90,270
Interest 87,450 - 87,450
Depreciation & amortization 40,310 2,607 42,917
200,030 20,607 220,637
Net income (loss) 22,014 76,315 98,329
Partnership share 66.67% 100%
Partnership net income $ 14,676 $ 76,315 $ 90,991
Partnership operating
cash flow $(63,360) $ 78,922 $ 15,562
Operational results for the comparable three month period
ended March 31, 1998 were:
Bellevue Partnership Total
Revenues $188,105 $ 47,831 $235,936
Operating expenses 52,594 - 52,594
Interest 88,721 - 88,721
Depreciation & amortization 38,858 2,607 41,465
180,173 2,607 182,780
Net income (loss) 7,932 45,224 53,156
Partnership share 66.23% 100%
Partnership net income (loss) $ 5,288 $ 45,224 $ 50,512
Partnership operating
cash flow $(36,611) $ 47,831 $ 11,220
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
May 7, 1999
?
1
120
8
See Accountants' Compilation Report & Notes to Financial Statements.
17
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 280,237
<SECURITIES> 0
<RECEIVABLES> 75,971
<ALLOWANCES> 0
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<PP&E> 5,309,927
<DEPRECIATION> 1,618,952
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