FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from________to________
Commission file number 0-17646
UNITED INVESTORS INCOME PROPERTIES
(Exact name of small business issuer as specified in its charter)
Missouri 43-1483942
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
UNITED INVESTORS INCOME PROPERTIES
BALANCE SHEET
(Unaudited)
March 31, 1998
(in thousands, except unit data)
Assets
Cash and cash equivalents $ 772
Receivables and deposits 182
Other assets 75
Investment properties:
Land $ 1,862
Buildings and related personal property 10,544
12,406
Less accumulated depreciation (3,097) 9,309
Investment in joint venture 621
$10,959
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 9
Tenant security deposit liabilities 53
Accrued property taxes 24
Other liabilities 35
Partners' Capital (Deficit)
General partner's $ (24)
Limited partners' (61,063 units
issued and outstanding) 10,862 10,838
$10,959
See Accompanying Notes to Financial Statements
b)
UNITED INVESTORS INCOME PROPERTIES
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1998 1997
Revenues:
Rental income $ 421 $ 408
Other income 28 22
Total revenues 449 430
Expenses:
Operating 158 174
General and administrative 22 19
Depreciation 99 94
Property taxes 37 41
Total expenses 316 328
Equity in net income of joint venture 2 4
Net income $ 135 $ 106
Net income allocated to general partner (1%) $ 1 $ 1
Net income allocated to limited partners (99%) 134 105
$ 135 $ 106
Net income per limited partnership unit $ 2.19 $ 1.72
Distributions per limited partnership unit $ 2.50 $ 2.50
See Accompanying Notes to Financial Statements
c)
UNITED INVESTORS INCOME PROPERTIES
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner's Partners' Total
<S> <C> <C> <C> <C>
Original capital contributions 61,063 $ -- $15,266 $15,266
Partners' (deficit) capital at
December 31, 1997 61,063 $ (24) $10,881 $10,857
Partners' distributions -- (1) (153) (154)
Net income for the three months
ended March 31, 1998 -- 1 134 135
Partners' (deficit) capital at
March 31, 1998 61,063 $ (24) $10,862 $10,838
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
d)
UNITED INVESTORS INCOME PROPERTIES
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1998 1997
Cash flows from operating activities:
Net income $ 135 $ 106
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in net income of joint venture (2) (4)
Depreciation 99 94
Amortization of lease commissions 2 2
Change in accounts:
Receivables and deposits (26) (36)
Other assets 18 14
Accounts payable (3) 7
Tenant security deposit liabilities 2 2
Accrued property taxes 24 24
Other liabilities (11) (1)
Net cash provided by operating activities 238 208
Cash flows from investing activities:
Property improvements and replacements (40) (23)
Distributions from joint venture -- 47
Net cash (used in) provided by
investing activities (40) 24
Cash flows from financing activities:
Partners' distributions (154) (154)
Net cash used in financing activities (154) (154)
Net increase in cash and cash equivalents 44 78
Cash and cash equivalents at beginning of period 728 633
Cash and cash equivalents at end of period $ 772 $ 711
See Accompanying Notes to Financial Statements
e)
UNITED INVESTORS INCOME PROPERTIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of United Investors Income
Properties (the "Partnership") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b)of Regulation S-B. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of United Investors Real Estate, Inc. (the "General Partner"), a
Delaware corporation, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 1998, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 1998. For further information, refer to the financial statements
and footnotes thereto included in the Partnership's annual report on Form 10-KSB
for the fiscal year ended December 31, 1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation.
NOTE B - INVESTMENT IN JOINT VENTURE
The Partnership owns a 35% interest in Corinth Square ("Corinth"), a joint
venture with United Investors Income Properties II, an affiliated partnership in
which the General Partner is also the sole general partner. The joint venture
owns a 24,000 square foot medical office building located in Prairie Village,
Kansas. The Partnership reflects its interest in its joint venture property
utilizing the equity method, whereby the original investment is increased by
advances to the joint venture and by the Partnership's share of the earnings of
the joint venture. The investment is decreased by distributions from the joint
venture and by the Partnership's share of losses of the joint venture.
NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
Prior to February 25, 1998, the General Partner was a wholly-owned subsidiary of
MAE GP Corporation ("MAE GP"), an affiliate of Insignia Financial Group
("Insignia"). Effective February 25, 1998, MAE GP was merged into Insignia
Properties Trust ("IPT"), which is an affiliate of Insignia. Thus the General
Partner is now a wholly-owned subsidiary of IPT. The partnership agreement
provides for payments to affiliates for property management services based on a
percentage of revenue and for reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
The following payments were made to affiliates of the General Partner for the
three months ended March 31, 1998 and 1997 (in thousands):
1998 1997
Property management fees (included in operating
expenses) $ 21 $ 20
Reimbursement for services of affiliates (included in
general and administrative and operating expenses) 8 9
For the period from January 1, 1997, to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
General Partner with an insurer unaffiliated with the General Partner. An
affiliate of the General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the master policy. The agent assumed the financial
obligations to the affiliate of the General Partner which received payments on
these obligations from the agent. The amount of the Partnership's insurance
premiums that accrued to the benefit of the affiliate of the General Partner by
virtue of the agent's obligations was not significant.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in IPT,
with Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust. The closing, which is anticipated to happen in
the third quarter of 1998, is subject to customary conditions, including
government approvals and the approval of Insignia's shareholders. If the
closing occurs, AIMCO will then control the General Partner of the Partnership.
NOTE D - INVESTMENT IN CORINTH SQUARE JOINT VENTURE
The Partnership owns a 35% interest in Corinth, a joint venture with United
Investors Income Properties II, an affiliated partnership, in which the General
Partner is also the sole general partner. Corinth is accounted for using the
equity method of accounting (see Note B).
The condensed balance sheet of Corinth at March 31, 1998, is summarized as
follows (in thousands):
Assets
Commercial property, net $1,701
Other assets 126
Total $1,827
Liabilities and Partners' Capital
Liabilities $ 54
Partners' capital 1,773
Total $1,827
Condensed statements of operations of Corinth for the three months ended March
31, 1998 and 1997, are as follows (in thousands):
1998 1997
Revenue $ 89 $ 82
Costs and expenses 85 68
Net income $ 4 $ 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of three apartment complexes and
a commercial office building. The following table sets forth the average
occupancy of the properties for each of the three month periods ended March 31,
1998 and 1997:
Average
Occupancy
Property 1998 1997
Bronson Place Apartments
Mountlake Terrace, Washington 96% 95%
Meadow Wood Apartments
Medford, Oregon 83% 90%
Defoors Crossing Apartments
Atlanta, Georgia 92% 87%
Peachtree Corners Medical Building
Atlanta, Georgia 74% 74%
The General Partner attributes the decreased occupancy at Meadow Wood Apartments
to softening market conditions. Beginning in the fourth quarter of 1997, rents
were decreased on one bedroom units, which suffered the highest vacancy. As a
result, physical occupancy had increased to 92% by the end of April. The
increase in occupancy at DeFoors Crossing is a result of favorable local market
conditions and the use of concessions. Management continues to monitor and
adjust rental rates at all properties to maximize total revenue.
The Partnership realized net income of $135,000 for the three month period ended
March 31, 1998, compared to net income of $106,000 for the three month period
ended March 31, 1997. The increase in net income is primarily attributable to
increased rental income and decreased operating expenses. Rental income
increased as a result of increased rental rates at Bronson Place and increased
occupancy at DeFoors Crossing. The decreased operating expense was primarily
due to reduced normal maintenance expenses at Bronson Place. Also contributing
to the decrease in operating expense was a decrease in major repairs and
maintenance. Included in operating expense for the three month period ended
March 31, 1997 is approximately $4,000 of major repairs and maintenance
comprised primarily of swimming pool repairs. No major repairs and maintenance
expenses were incurred during the three month period ended March 31, 1998.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of its investment properties to assess
the feasibility of increasing rents, maintaining or increasing occupancy levels
and protecting the Partnership from increases in expenses. As part of this plan,
the General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. Due to changing market conditions, which can
result in the use of rental concessions and rental reductions to offset
softening market conditions, there is no guarantee that the General Partner will
be able to sustain such a plan.
At March 31, 1998, the Partnership had cash and cash equivalents of
approximately $772,000 compared to approximately $711,000 at March 31, 1997.
The net increase in cash and cash equivalents for the three month period ended
March 31, 1998 was $44,000 compared to $78,000 for the three month period ended
March 31, 1997. Net cash provided by operating activities increased due to the
increased revenues and decreased operating expenses for the three month period
ended March 31, 1998, as discussed above. Net cash used in investing activities
increased primarily due to distributions being received from the joint venture
during 1997. Net cash used in financing activities remained constant.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the various properties to adequately maintain the
physical assets and other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
Distributions to partners of $154,000 were made during the three month periods
ended March 31, 1998 and 1997. Future cash distributions will depend on the
levels of net cash generated from operations, property sales and the
availability of cash reserves. The General Partner anticipates that the
Partnership will continue to make cash distributions as property operations
permit throughout 1998.
Year 2000
The Partnership is dependent upon the General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The General Partner believes that with modifications to
existing software and conversions to new software, the Year 2000 Issue will not
pose significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the
Partnership.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date of
this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates of revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27 - Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 1998.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNITED INVESTORS INCOME PROPERTIES
By: United Investors Real Estate, Inc.
Its General Partner
By: /s/ Carroll D. Vinson
Carroll D. Vinson
President and Director
By: /s/ Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President and Chief Accounting
Officer
Date: May 14, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
United Investors Income Properties 1998 First Quarter 10-QSB and is
qualified in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000830056
<NAME> UNITED INVESTORS INCOME PROPERTIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 772
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 12,406
<DEPRECIATION> 3,097
<TOTAL-ASSETS> 10,959
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,838
<TOTAL-LIABILITY-AND-EQUITY> 10,959
<SALES> 0
<TOTAL-REVENUES> 449
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 316
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 135
<EPS-PRIMARY> 2.19<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
