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, 1999
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 58006, 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, 2000. There is no
public
market for these interests.
U.S. REALTY INCOME PARTNERS L.P.
1999 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 1998 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 residential and
commercial real
estate properties. The Partnership sold $4,858,000 limited partnership
interests
(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 operations which
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
General Partner has the responsibility for the initial selection,
evaluation and
negotiation of the 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) for a 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 services for 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 concerning this 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, 1999.
PART II
Item 5. Market for the Registrant's Limited Partnership Interests and
Related
Limited Partner Matters.
At December 31, 1999, 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 of the General Partner, repurchase Units under certain
circumstances,
as set forth in the Partnership's prospectus. At the request of a limited
partner, other than a 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 in locating 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,
1999 1998 1997
Selected Income Statement Data:
Rental Income $749,095 $ 593,069 $ 732,267
Interest Income 8,882 16,883 6,236
Interest Expense 329,425 352.958 357,889
Operating Expense 291,593 226,415 210,126
Income from Joint Venture 96,034 47,344 30,709
Net Income (Loss) $ 20,571 ($ 71,808) $ 4,065
Net Income (Loss) Per
Limited Partnership Interest $ 4.02 ($ 14.04) $ .79
U.S. Realty Income Partners L.P.
(a Delaware limited partnership)
Year Ended December 31,
1999 1998 1997
Selected Balance Sheet Data:
Property and Improvements-Net $3,580,711 $3,729,821
$3,885,252
Investments in Joint Venture 1,000 1,000
1,000
Notes Payable 4,075,341 3,505,577
3,557,105
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, 1999, 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
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 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 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
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 t a list of 257 national, regional and local prospective
purchasers.
Forty-eight groups 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 Highwoods 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 make offers, as well as other groups who were initially
interested but did not make offers. Those efforts, in light of the
current
condition of the capital markets (fewer buyers, rising cap rates and
rising
interest rates), have proved fruitless. The partnership is currently
evaluating
whether to remarket the portfolio during 2000 or to hold the properties
until a
more attractive time to sell.
Liquidity and Capital Resources
At December 31, 1999, the partnership had $393,227 in cash and cash
equivalents. This represents 8.09% 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 has deemed it advisable not to make any cash
distributions since May 1990.
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 Venture began to consider future plans for the 3310 Office Building
as well
as a sale of the property 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 then contributed its assets 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 Business Center, 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 Development Corporation
(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 of its interest 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 on the 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
alternatives to the formation 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 the most 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,
1999, 1998 and 1997 are summarized below:
Year Ended December 31, 1999:
JOINT VENTURE
BELLEVUE PARTNERSHIP TOTAL
Revenues $ 753,150 $ 100,861 $
851,011
Operating Expenses 234,035 57,558
291,593
Interest 329,425 - 329,425
Depreciation & Amort. 208,145 10,428
218,573
771,605 67,986
839,591
Net Operating Income (Loss) ( 18,455) 32,875 14,420
Partnership Share 66 2/3% 100%
Partnership Net Income (Loss) ($ 12,304) $ 32,875 $
20,571
Partnership Cash Flow $ 54,439 $ 43,303 $
97,742
Year Ended December 31, 1998:
JOINT VENTURE
BELLEVUE PARTNERSHIP TOTAL
Revenues $ 607,244 $ 50,052 $
657,296
Operating Expenses 170,199 56,216
226,415
Interest 352,958 -
352,958
Depreciation & Amort. __166,907 ___10,428
__177,335
690,064 66,644
756,708
Net Operating Income (Loss) ( 82,820) ( 16,592) (
99,412)
Partnership Share 66 2/3% 100%
Partnership Net Loss ($ 55,216) ($ 16,592) ($
71,808)
Partnership Cash Flow ($ 175,486) ($ 6,164) ($
181,650)
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 Loss 54,445 ( 32,232)
22,213
Partnership Share 66 2/3% 100%
Partnership Net Loss $ 36,297 ($ 32,232) $
4,605
Partnership Cash Flow $ 207,110 ($ 21,804) $
185,306
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, 1999,
the
Partnership had $393,227 in cash and cash equivalents. This represents
8.1% 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
General Partner has deemed it advisable not to make any cash distributions
since
May 1990. The General Partner does not expect to make cash distributions
in
2000.
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
partners of the General Partner and are responsible for the day-to-day
operations
of the Partnership:
Name Age
Robert Bond Miller 64
Donald R. Zoch 43
Lee Rosenberg 46
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
acquired over 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. has been 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 has been a partner in ARS Financial Services, Inc., Valley
Stream,
New York, a firm specializing in personal financing planning for more than
five
years. He is a Certified 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 well as being 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
of Jacques-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
Partnership for its overhead 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 November 1989, 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 a right 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
its relationship with the 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 allocating management time, 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
General Partner 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 or Refinancing 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 timing of a sale of any of the Partnership properties, the
establishment and
maintenance of reasonable reserves, the timing of expenditures, the level
of
mortgage amortization and other 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 favorable to 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
services to, 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 index of financial statements 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 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: Robert Bond Miller
Robert Bond Miller
President, Director, Chief
Executive Officer, Chief
Financial
Officer and Chief Accounting
Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 393,227
<SECURITIES> 0
<RECEIVABLES> 21,127
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 423,716
<PP&E> 5,316,344
<DEPRECIATION> (1,735,633)
<TOTAL-ASSETS> 4,949,465
<CURRENT-LIABILITIES> 16,494
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 994,310
<TOTAL-LIABILITY-AND-EQUITY> 4,949,465
<SALES> 749,095
<TOTAL-REVENUES> 757,977
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 510,166
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 329,425
<INCOME-PRETAX> 20,571
<INCOME-TAX> 20,571
<INCOME-CONTINUING> 20,571
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,571
<EPS-BASIC> 4.02
<EPS-DILUTED> 4.02
</TABLE>
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
FINANCIAL STATEMENTS AND SCHEDULES
December 31, 1999, 1998 and 1997
(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 6-12
Independent Auditors' Report on Accompanying Schedules 13
Schedules:
Schedule V - Property and Improvements 14
Schedule VI - Accumulated Depreciation of
Property and Improvements 15
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, 1999 and 1998 and the related statements of
operations, partnership equity, and cash flows for the years
ended December 31, 1999, 1998 and 1997. 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, 1999 and
1998 and the results of its operations and its cash flows for the
years ended December 31, 1999, 1998 and 1997, in conformity with
generally accepted accounting principles.
January 25, 2000 s/n Dempsey Vantrease & Follis PLLC
Murfreesboro, Tennessee
U. S. Realty Income Partners, L.P.
(A Limited Partnership)
BALANCE SHEETS
December 31, 1999 and 1998
Assets
1999 1998
Cash $ 393,227 $ 295,485
Escrow deposits 18,362 -
Tenant receivables 21,127 32,901
Property, plant and equipment, net of
accumulated depreciation of
$1,735,633 in 1999 and $1,580,106
in 1998 3,580,711 3,729,821
Investment in joint venture 1,000 1,000
Other assets 935,038 413,928
Total assets $4,949,465 $4,473,135
Liabilities and Partnership Equity
Notes payable $4,075,341 $3,505,577
Accounts payable 462 874
Accrued expenses 16,032 123,474
Total liabilities 4,091,835 3,629,925
Commitments and contingent liabilities
Minority partners' interest in joint
venture (136,680) (130,529)
Partnership equity:
General Partners, no units authorized (186,661) (187,690)
Limited Partners, 4,858 units
authorized, issued, and
outstanding 1,180,971 1,161,429
Net partnership equity 994,310 973,739
$4,949,465 $4,473,135
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, 1999, 1998 and 1997
1999 1998 1997
Revenues:
Rental income $691,435 $533,070 $ 626,672
Common area maintenance 57,660 59,999 105,595
Interest 8,882 16,883 6,236
Total revenues 757,977 609,952 738,503
Expenses:
Interest 329,425 352,958 357,889
Legal and professional 25,594 20,818 18,268
Guarantee fees 40,000 - -
Depreciation 155,527 155,431 155,381
Amortization 63,046 21,904 21,103
Property taxes 62,772 78,229 75,460
Leasing and administrative 60,717 48,436 44,323
Management fees 31,330 21,783 27,650
Repairs and maintenance 55,904 31,889 24,889
Refinancing costs - - 2,500
Utilities 8,050 16,545 11,998
Insurance 7,226 8,715 7,538
Total expenses 839,591 756,708 746,999
Net loss before minority
interest and loss from joint
venture (81,614) (146,756) (8,496)
Minority partner's interest in
operating (profit) loss 6,151 27,604 (18,148)
Loss from operations (75,463) (119,152) (26,644)
Income from joint venture 96,034 47,344 30,709
Net earnings (loss) $ 20,571 $(71,808) $ 4,065
Net earnings (loss) per unit $ 4.02 $ (14.04) $ .79
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, 1999, 1998 and 1997
Limited General
Partners Partners Total
Distributive share of net earnings 95% 5% 100%
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
Net loss of 1998 (68,218) (3,590) (71,808)
Balance at December 31, 1998 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
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, 1999, 1998 and 1997
1999 1998 1997
Cash Flows from Operating Activities
Net loss from operations $ (75,463) $(119,152) $(26,644)
Adjustments to reconcile net
income to cash provided by
operating activities:
Minority partner's
interest in net profit
(loss) of consolidated
partnership (6,151) (27,604) 18,148
Depreciation 155,527 155,431 155,381
Amortization 63,046 21,904 21,103
(Increase) decrease in:
Tenant receivable 11,774 (30,905) 4,039
Escrow deposits (18,362) - -
Other assets (16,254) (121,170) (10,198)
Increase (decrease) in:
Accounts payable (412) (313) (1,361)
Accrued expenses (107,442) 2,926 37,056
Net cash provided by operating
activities 6,263 (118,883) 197,524
Cash Flows from Investing Activities
Purchase of property, plant, and
equipment (6,417) - -
Payment of lease acquisition costs (441,022) (58,583) -
Distribution from joint venture 96,034 47,344 30,709
Net cash used in investing
activities (351,405) (11,239) 30,709
Cash Flows from Financing Activities
Proceeds received from refinancing 672,175 - -
Payment of loan closing costs (126,880) - -
Repayments on mortgage note (102,411) (51,528) (42,927)
Net cash used in financing
activities 442,884 (51,528) (42,927)
Net (decrease) increase in
cash and cash equivalents 97,742 (181,650) 185,306
Cash and cash equivalents
at beginning of year 295,485 477,135 291,829
Cash and cash equivalents
at end of year $393,227 $295,485 $477,135
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, 1999, 1998 and 1997
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, 1999, 1998 and 1997
1. Summary of Significant Accounting Policies, (Continued)
Revenue Recognition
Rent is recorded as income over the lease terms as rents become
receivable according to provisions of the leases. Rent from leases
containing rent-free periods is recognized on a straight-line basis,
with the related straight-line rent included in tenant receivables
until payments of rent begin. The receivables are reduced in each
subsequent month by the excess of the monthly payments over the
income. During the current year, a lease containing the rent free
period was amended, whereby rent payments by the tenant began
immediately. At this time, rent receivable was reclassified as lease
acquisition cost and is being amortized as described in Note 7.
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, 1999, 1998 and 1997
2. Property and Improvements
Property and improvements located at Bellevue Plaza consist of the
following:
1999 1998
Buildings and improvements $4,902,043 $4,895,626
Less accumulated depreciation (1,735,633) (1,580,106)
3,166,410 3,315,520
Land 414,301 414,301
$3,580,711 $3,729,821
During the years ended December 31, 1999, 1998 and 1997, the
Partnership recognized depreciation of $155,527, $155,431,
and $155,381, 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, 1999, 1998 and 1997
3. Investment in Joint Venture, (Continued)
The partnership's income from its joint venture investments is
determined as follows:
1999 1998 1997
Distributions from Prudential/
Daniel Office Venture, LLC $ 96,034 $ 47,344 $ 30,709
4. Related Party Transactions
Administration expenses (fees and other costs and expenses) paid
to the general partner or its affiliates amounted to $54,000 in
1999, $46,500 in 1998 and $42,000 in 1997.
Guarantee fees, which related to the note payable, were paid to
affiliates in the amount of $40,000 in 1999.
5. Note Payable
The Partnership refinanced the mortgage on the Bellevue Plaza
property. Under the terms of the new mortgage, additional funds
were provided for establishment of property tax escrow and
repayment to a tenant for various improvements made by the tenant.
These improvements have been classified in the financial
statements as lease acquisition costs, since at the time of
refinancing, the terms of the original lease with the certain
tenant were amended to provide for this repayment.
The mortgage is payable at 7.25% in monthly installments of
principal and interest of $37,884. The mortgage matures in July,
2014, and is secured by a deed of trust on the Bellevue Plaza
property. At December 31, 1999 the balance was $4,075,341.
Principal maturities of the mortgage are as follows:
December 31,
2000 $ 159,577
2001 172,581
2002 185,702
2003 199,823
2004 214,300
Thereafter 3,143,358
$4,075,341
9
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
For the Years Ended December 31, 1999, 1998, and 1997
6. Reconciliation of Financial Statements and Tax Returns
1999 1998 1997
Net income (loss), per
financial statements $ 20,571 $ (71,808) $ 4,065
Items treated differently
on the tax return:
Net operating loss - 33,855 1,038
Income from joint venture (95,558) - -
Amortization (14,140) (14,148) (14,140)
Net loss, per tax returns $ (89,127) $ (52,101) $ (9,037)
The Partnership's federal income tax return is subject to audit
and possible adjustment by the Internal Revenue Service.
7. Other Assets
Other assets consist of:
1999 1998
Acquisition fees $ 328,447 $ 328,447
Lease acquisition costs 499,605 58,583
Loan costs 126,880 -
Deferred commissions 159,295 148,656
1,114,227 535,686
Less accumulated amortization (180,839) (123,408)
933,388 412,278
Accounts receivable from affiliate 1,650 1,650
$ 935,038 $ 413,928
Acquisition fees are amortized over the life of the acquired
property, which is 31.5 years. Deferred commissions and lease
acquisition costs are amortized over the terms of the related
leases. Loan costs are amortized over the terms of the related
mortgage.
10
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
For the Years Ended December 31, 1999, 1998, and 1997
8. Leases of Lessor
Bellevue Plaza leases property to others under noncancellable
operating leases requiring fixed monthly payments over various
terms. At December 31, 1999, future minimum lease receipts were as
follows:
Year Ending December 31:
2000 $ 673,502
2001 628,216
2002 512,365
2003 422,449
2004 306,151
2005 and after 812,475
$3,355,158
9. Supplemental Cash Flow Information
Interest paid totaled $358,264 in 1999, $353,387 in 1998 and
$328,247 in 1997.
10. Financial Instruments
The estimated fair values of the partnership's financial
instruments, as of December 31, 1999 and 1998, were as follows (in
thousands):
1999 1998
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial assets:
Cash and cash
equivalents $ 393 $ 393 $295 $ 295
Escrow deposits 18 18 - -
Receivables 21 21 33 33
Investment in joint
venture 1 1,361 1 1,361
$ 433 $1,793 $329 $1,689
Financial liabilities:
Notes payable $4,075 $4,075 $3,506 $3,506
Accounts payable - - 1 1
Accrued expenses 16 16 123 123
$4,091 $4,091 $3,630 $3,630
11
U.S. Realty Income Partners, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
For the Years Ended December 31, 1999, 1998, and 1997
10. Financial Instruments (Continued)
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, 1999, 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 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. Credit Concentration
The Partnership maintains cash balances at various financial
institutions. Deposits at banks are insured by the Federal
Deposit Insurance Corporation up to $100,000 at each bank. At
December 31, 1999, the Partnership had deposits at one bank which
exceeded insured limited by $72,134. Deposits with brokerages are
insured by the Securities Investor Protection Corporation (SIPC)
up to $100,000 for claims for cash and $400,000 for coverage on
securities. The Partnership's deposits at brokerages are also
within these limits at December 31, 1999.
12
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 25, 2000
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
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
1998 5,309,927 - - 5,309,927
1999 5,309,927 6,417 - 5,316,344
14
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
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
1998 1,424,675 155,431 - 1,580,106
1999 1,580,106 155,527 - 1,735,633
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.
15
