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, 2000
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)
(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, 2000 and
December 31, 1999 5
Statements of Operations for the three months
and nine months ended September 30, 2000 and 1999 6
Statements of Cash Flows for nine months ended
September 30, 2000 and 1999 7
Statements of Partnership Equity for the period
January 1, 1999 through September 30, 2000 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 September 30, 2000 (unaudited)
and statements of operations, partnership equity, and cash flows for
the three months and nine months ended September 30, 2000 (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 1999 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, 2000 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, 1999, were
audited by other accountants, and they expressed an unqualified opinion
on them in their report dated January 25, 2000, but they have not
performed any auditing procedures since that date.
October 17, 2000
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,
2000 1999
Assets
Cash $ 853,295 $ 393,227
Escrow deposits 80,078 18,362
Tenant receivables 6,580 21,127
Property & improvements, net of
accumulated depreciation of
$1,852,293 and $1,735,633 3,464,051 3,580,711
Investment in limited partnership 1,000 1,000
Other assets 865,915 935,038
Total Assets $ 5,270,919 $ 4,949,465
Liabilities & Partnership Equity
Accounts payable $ 143 $ 462
Accrued expenses 72,992 16,032
Notes payable 3,956,362 4,075,341
Total Liabilities 4,029,497 4,091,835
Minority partner's interest in JV (126,937) (136,680)
Partnership equity
Gen. Partners, no units authorized (167,958) (186,661)
Limited Partners, 4,858 units
authorized, issued,
and outstanding 1,536,317 1,180,971
Total Partnership Equity 1,368,359 994,310
Total Liabilities & Partnership
Equity $ 5,270,919 $ 4,949,465
U.S. Realty Income Partners L.P.
(A Limited Partnership)
Statements of Operations
For the Three Months & Nine Months Ended
September 30, 2000 and 1999
Unaudited Unaudited Unaudited Unaudited
3 Months 3 Months 9 Months 9 Months
2000 1999 2000 1999
Revenues
Rental income $ 177,247 $ 166,684 $597,486 $ 529,683
CAM reimbursements 24,963 14,544 72,532 43,378
Interest income 13,035 1,247 22,407 5,523
215,245 182,475 692,425 578,584
Expenses
Interest 73,803 107,584 221,976 253,078
Loan costs 0 40,000 0 40,000
Professional fees 3,620 8,090 15,470 22,266
Depreciation 38,887 38,846 116,660 116,537
Amortization 17,833 4,072 53,710 12,215
Property taxes 18,306 5,352 57,722 44,466
Leasing & admin. 15,219 30,793 87,450 77,750
Management fees 7,736 6,889 25,880 23,557
Repairs 4,745 5,956 120,326 55,661
Utilities 1,492 6,157 5,403 6,157
Insurance 0 127 1,473 6,555
181,641 253,866 706,070 658,242
Net income before minority partner's
share of income 33,604 (71,391) (13,645) (79,658)
Minority partner's interest
in operating profit (9,266) 14,630 (9,743) 5,905
Income (Loss) from
operation 24,338 (56,761) (23,388) (73,753)
Income from investment
in Joint Venture 0 0 0 96,034
Income from
Partnerships 0 0 397,437 0
Net Income (Loss) $ 24,338 $(56,761) $374,049 $ 22,281
Net Income (Loss)
per Unit $ 4.76 $ (11.10) $ 73.15 $ 4.36
Weighted Avg. No.
of Units 4,858 4,858 4,858 4,858
U.S. Realty Income Partners L.P.
(A Limited Partnership)
Statements of Cash Flows
Unaudited Unaudited
9 Months 9 Months
Ending Ending
9/30/00 9/30/99
Cash Flows From Operating Activities
Net income (loss) from operations $ (23,388) $ (73,753)
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 9,743 (6,403)
Depreciation 116,660 116,537
Amortization 53,710 12,215
(Increase) decrease in:
Escrow deposits (61,716) 0
Tenant receivables 14,547 (113,848)
Other assets 15,414 11,626
Increase (decrease) in:
Accounts payable (319) 1,744
Accrued expenses 54,918 (23,311)
Accrued interest payable 0 (29,213)
Tenant deposits 2,041 0
Net cash provided by (used in)
operating activities 181,610 (104,406)
Cash Flows From Investing Activities
Income from partnership 397,437 0
Distribution from joint venture 0 96,034
Net cash provided by (used in)
investing activities 397,437 96,034
Cash Flows From Financing Activities
Proceeds from refinancing 0 4,150,000
Escrow deposits 0 (400,000)
Mortgage loan costs 0 (126,880)
Receivable from joint venture 0 (12,377)
Payments on mortgage note (118,979) (3,542,558)
Net cash provided by (used in)
financing activities (118,979) 68,185
Net increase (decrease) in cash
and cash equivalents 460,068 59,813
Cash & cash equivalents at beginning
of period 393,227 295,485
Cash & cash equivalents at end of period $853,295 $355,298
Supplemental Disclosures
Interest paid $221,976 $253,078
U.S. Realty Income Partners L.P.
(A Limited Partnership)
Statements of Partnership Equity
Period from January 1, 1999 to September 30, 2000
Limited General
Partners Partner Total
Distributive share of net earnings 95% 5% 100%
Balance at January 1, 1999 $1,161,429 $(187,690) $ 973,739
Net earnings of 1999 19,542 1,029 20,571
Balance at December 31, 1999 1,180,971 (186,661) 994,310
Net earnings of 2000 355,346 18,703 374,049
Balance at September 30, 2000 $1,536,317 $(167,958) $1,368,359
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Unaudited
September 30, 2000
A. ACCOUNTING POLICIES
Refer to the Partnership's annual financial statements for the year
ended December 31, 1999 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, 2000.
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.
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.
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Unaudited
September 30, 2000
C. TRANSACTIONS WITH AFFILIATES
Fees and other costs and expense paid to the general partner or its
affiliates were as follows:
Nine Month Year Ended
Ended September 30, December 31,
2000 1999
Administrative expenses $ 36,000 $ 54,000
Guarantee fees, which are related to the note payable, were paid
to affiliates in the amount of $40,000 in 1999.
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, 1999, the partnership had $393,227 in cash and
cash equivalents. This represents 8.08% of capital raised. At
September 30, 2000, the Partnership had $853,295 in cash and cash
equivalents. This represents 17.6% 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 2000.
The General Partner anticipates that a cash distribution will
be made in 2000. The amount of the distribution is anticipated to be
$400,000, which represents proceeds from the sale of the 3310 West End
property.
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
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 resulted in T. J. Maxx beginning monthly
rental payments in November of 1999. T. J. Maxx/Marshalls moved into
the center in November 1999 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.
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 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 leased. The new
parking garage will have 178 spaces.
During early second quarter 1999, the partners of the
Prudential/Daniel Office Venture decided to investigate the potential
for a sale of the entire portfolio. In April 1999 representatives of
the partners toured the properties and each partner submitted an
independent list of potential brokerage firms that could handle the
sale of a $50 million portfolio located in Raleigh and Nashville.
After the review of these lists, the partners reduced the list to three
qualified groups: Trammell Crow Company, Cushman & Wakefield and
Rockwood Realty Associates. All three groups made presentations and
were interviewed in Atlanta on May 12, 1999. All three firms were
asked to make site visits and to value the portfolio. Based on such
indicators as current work load/listings, national focus, regional
market knowledge, past performance and pricing, Rockwood was selected
on June 16, 1999.
During June and throughout July, Rockwood did an exhaustive
review of the properties and of the Raleigh and Nashville markets.
Introductory letters were distributed to a list of 257 national,
regional and local prospective purchasers. Forty-eight responded to
the introductory letter, executed confidentially agreements and then
received the sales package prepared by Rockwood with a portfolio price
of $57,000,000. During the month of September on-site property
inspections were coordinated for all of the interested purchasers. A
call for offers was set for August 31. Rockwood received seven offers,
two of which were for just Nashville or Raleigh. The balance of the
six were for the entire portfolio. The offers ranged from $43,000,000
to $51,500,000 for the portfolio. After analyzing the offers, the Lord
Baltimore Group was selected in late September at a price of
$51,500,000. Lord Baltimore's investment committee rejected the
purchase due to single market exposure in Raleigh of 370,000 square
feet (the Somerset Properties). The next highest offer for the entire
portfolio was $49,400,000. However, the individual offers from two
different prospective purchasers totaled $50,500,000 and accordingly,
the partnership accepted an offer for Raleigh at $38,250,000 from
Drucker and Faulk and for Nashville at $12,250,000 from Highwood
Properties. Both of the purchasers agreed on these prices, but failed
to execute a purchase contract and terminated their respective interest
during the month of November.
During December and January, Rockwood re-contracted the
remaining prospective purchasers who had made offers, as well as other
groups who were initially interested but did not make offers.
However, in July 2000, the 3310 office property was sold. The
partnerships share of the proceeds will be approximately $397,000.
These proceeds will be distributed to the partners before the end of
the year.
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, 2000 are
summarized below.
Bellevue Partnership Total
Revenues $675,331 $414,531 $1,089,862
Operating expenses 261,578 52,146 313,724
Interest 221,976 - 221,976
Depreciation & amortization 162,549 7,821 170,370
646,103 59,967 706,070
Net income (loss) 29,228 354,564 383,792
Partnership share 66 2/3% 100%
Partnership net income $ 19,485 $354,564 $374,049
Partnership operating
cash flow $216,662 $(35,052) $181,610
Operational results for the comparable nine month period
ended September 30, 1999 were:
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)
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, 2000
?
4
1720
8
See Accountants' Compilation Report & Notes to Financial Statements.
10
