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 June 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 June 30, 2000 and December 31, 1999 5
Statements of Operations for the three months
and six months ended June 30, 2000 and 1999 6
Statements of Cash Flows for six months ended June 30,
2000 and 1999 7
Statements of Partnership Equity for the period
January 1, 1999 through June 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 June 30, 2000 (unaudited) and
statements of operations, partnership equity, and cash flows for the three
months and six months ended June 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 March 31, 2000 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, 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.
July 27, 2000
Osborne & Co., P.C
Certified Public Accountants
U.S Realty Income Partners, L.P.
(A Limited Partnership)
Balance Sheets
Unaudited Audited
?? June 30, December 31,
2000 1999
Assets
Cash $ 798,120 $ 393,227
Escrow deposits 66,206 18,362
Tenant receivables 1,954 21,127
Property & improvements, net of
accumulated depreciation of
$1,813,406 and $1,735,633 3,502,938 3,580,711
Investment in limited partnership 1,000 1,000
Other assets 888,885 935,038
Total Assets $ 5,259,103 $ 4,949,465
Liabilities & Partnership Equity
Accounts payable $ 390 $ 462
Accrued expenses 54,686 16,032
Notes payable 3,996,210 4,075,341
Total Liabilities 4,051,286 4,091,835
Minority partner's interest in JV (136,203) (136,680)
Partnership equity
Gen. Partners, no units authorized (169,175) (186,661)
Limited Partners, 4,858 units
authorized, issued,
and outstanding 1,513,195 1,180,971
Total Partnership Equity 1,344,020 994,310
Total Liabilities & Partnership
Equity $ 5,259,103 $ 4,949,465
U.S. Realty Income Partners L.P.
(A Limited Partnership)
Statements of Operations
For the Three Months & Six Months Ended
June 30, 2000 and 1999
Unaudited Unaudited Unaudited Unaudited
3 Months 3 Months 6 Months 6 Months
2000 1999 2000 1999
Revenues
Rental income $ 176,614 $ 155,953 $420,239 $ 362,999
CAM reimbursements 32,811 15,505 47,570 28,834
Interest income 4,860 1,719 9,372 4,276
214,285 173,177 477,181 396,109
Expenses
Interest 73,725 58,043 148,172 145,493
Professional fees 9,000 13,576 11,850 14,176
Depreciation 38,887 38,846 77,774 77,691
Amortization 17,829 4,072 35,878 8,143
Property taxes 18,306 19,557 39,416 39,114
Leasing & admin. 31,502 7,962 72,230 46,957
Management fees 7,643 9,579 18,145 16,668
Repairs 104,148 29,959 115,581 49,706
Utilities 1,554 0 3,911 0
Insurance 737 2,143 1,474 6,426
303,331 183,737 524,431 404,374
Net income before minority partner's
share of income (89,046) (10,560) (47,250) (8,265)
Minority partner's interest
in operating profit 20,896 (1,387) (477) (8,725)
Income (Loss) from
operation (68,150) (11,947) (47,727) (16,990)
Income from investment
in Joint Venture 0 0 0 96,034
Income from
Partnerships 397,437 0 397,437 0
Net Income (Loss) $329,287 $(11,947) $349,710 $ 79,044
Net Income (Loss)
per Unit $ 64.39 $ (2.34) $ 68.39 $ 15.46
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
6 Months 6 Months
Ending Ending
6/30/00 6/30/99
Cash Flows From Operating Activities
Net income (loss) from operations $ (47,728) $ (16,990)
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 477 8,228
Depreciation 77,774 77,691
Amortization 35,878 8,143
(Increase) decrease in:
Escrow deposits (47,844) 0
Tenant receivables 19,173 (91,263)
Other assets 10,276 9,180
Increase (decrease) in:
Accounts payable (72) 60,799
Accrued expenses 36,612 (39,115)
Accrued interest payable 0 (29,213)
Tenant deposits 2,041 0
Net cash provided by (used in)
operating activities 86,587 (12,540)
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
Mortgage loan costs 0 (125,700)
Receivable from joint venture 0 (15,000)
Payments on mortgage note (79,131) (27,751)
Net cash provided by (used in)
financing activities (79,131) (168,451)
Net increase (decrease) in cash
and cash equivalents 404,893 (84,957)
Cash & cash equivalents at beginning
of period 393,227 295,485
Cash & cash equivalents at end of period $798,120 $210,528
Supplemental Disclosures
Interest paid $148,172 $145,493
U.S. Realty Income Partners L.P.
(A Limited Partnership)
Statements of Partnership Equity
Period from January 1, 1999 to June 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 332,224 17,486 349,710
Balance at June 30, 2000 $1,513,195 $(169,175) $1,344,020
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Unaudited
June 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
June 30, 2000
C. TRANSACTIONS WITH AFFILIATES
Fees and other costs and expense paid to the general partner or its
affiliates were as follows:
Six Months Year Ended
Ended March 31, 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 June 30, 2000, the
Partnership had $798,120 in cash and cash equivalents. This represents 16.4%
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 six months ending June 30, 2000 are summarized below.
Bellevue Partnership Total
Revenues $472,016 $402,602 $874,618
Operating expenses 213,976 48,631 262,607
Interest 148,172 - 148,172
Depreciation & amortization 108,437 5,215 113,652
470,585 53,846 524,431
Net income (loss) 1,431 348,756 350,187
Partnership share 66 2/3% 100%
Partnership net income $ 954 $348,756 $349,710
Partnership operating
cash flow $130,053 $ (43,466) $ 86,587
Operational results for the comparable six month period ended
June 30, 1999 were:
Bellevue Partnership Total
Revenues $393,867 $ 98,276 $492,143
Operating expenses 141,579 31,468 173,047
Interest 145,493 - 145,493
Depreciation & amortization 80,620 5,214 85,834
367,692 36,682 404,374
Net income 26,175 61,594 87,769
Partnership share 66.67% 100%
Partnership net income $ 17,450 $ 61,594 $ 79,044
Partnership operating
cash flow $ 16,686 $ 66,808 $ 83,494
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
August 10, 2000
?
1
1720
8
See Accountants' Compilation Report & Notes to Financial Statements.
17
