FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT
UNDER SECTION 13 OR 15(D)
FORM 10-KSB
(Mark One)
[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 [No Fee Required]
For the fiscal year ended December 31, 1997
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 [No Fee Required]
For the transition period from.........to.........
Commission file number 0-17646
UNITED INVESTORS INCOME PROPERTIES
(Name of small business issuer in its charter)
Missouri 43-1483942
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip code)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership Interest
(Title of class)
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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $1,822,000
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of a specified date within the past 60 days: Market value
information for the registrant's partnership interests is not available. Should
a trading market develop for these interests, it is the General Partner's belief
that the aggregate market value of the voting partnership interests would not
exceed $25,000,000.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Prospectus of Partnership dated May 4, 1988 (included in
Registration Statement, No. 33-20350, of Registrant) are incorporated by
reference into Parts I and III.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
United Investors Income Properties (the "Registrant" or "Partnership"), a
Missouri Limited Partnership, was organized as a limited partnership under the
laws of the State of Missouri pursuant to a Certificate of Limited Partnership
filed on June 23, 1988, with the Missouri Secretary of State. The Partnership
is governed by an Agreement of Limited Partnership dated July 27, 1988. United
Investors Real Estate, Inc., a Delaware corporation, is the sole general partner
(the "General Partner") of the Partnership. Effective December 31, 1992, 100%
of the General Partner's common stock was purchased by MAE GP Corporation ("MAE
GP"), which is wholly-owned by Metropolitan Asset Enhancement, L.P. ("MAE"), an
affiliate of Insignia Financial Group, Inc. ("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. On March 17, 1998, Insignia entered into an agreement to
merge its national residential property management operations, and its
controlling interest in Insignia Properties Trust, 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.
The Partnership is engaged in the business of acquiring and operating
multifamily residential and commercial properties and other income producing
real estate. The Partnership has acquired three multifamily residential
properties, a medical office building, and an interest in a joint venture which
owns a medical office building. These properties are further described in "Item
2. Description of Properties" below.
Commencing on or about May 4, 1988, the Partnership began offering through
Waddell & Reed, Inc., a former affiliate of the Partnership (the "Selling
Agent"), up to a maximum of 80,000 units of limited partnership interest (the
"Units") at $250 per Unit with a minimum required purchase of eight Units or
$2,000 (four Units or $1,000 for an Individual Retirement Account). Limited
partners (the "Limited Partners") are not required to make any additional
capital contributions. The Units were registered under the Securities Act of
1933, as amended (the "Act"), under Registration Statement No. 33-20350, which
Registration Statement was declared effective on May 4, 1988.
The offering of Units terminated May 4, 1990. Upon termination of the offering,
the Partnership had accepted subscriptions for 61,063 Units resulting in Gross
Offering Proceeds of $15,265,750.
The real estate business is highly competitive. The Partnership's real property
investments are subject to competition from similar types of properties in the
vicinities in which they are located. The Partnership is not a significant
factor in its industry. In addition, various limited partnerships have been
formed by related parties to engage in businesses which may be competitive with
the Partnership.
The Partnership has no employees. Management and administrative services are
performed by affiliates of Insignia. The property manager is responsible for
the day-to-day operations of each property. The General Partner has also
selected affiliates of Insignia to provide real estate advisory and asset
management services to the Partnership. As advisor, these affiliates provide all
partnership accounting and administrative services, investment management, and
supervisory services over property management and leasing. For a further
discussion of the property and partnership management, see "Item 12. Certain
Relationships and Related Transactions" which descriptions are herein
incorporated by reference.
There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.
The Partnership monitors its properties for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain
cases environmental testing has been performed, which resulted in no material
adverse conditions or liabilities. In no case has the Partnership received
notice that it is a potentially responsible party with respect to an
environmental clean up site.
ITEM 2. DESCRIPTION OF PROPERTIES
The following table sets forth the Partnership's investments in properties:
Date of
Property Purchase Type of Ownership(1) Use
Bronson Place Apartments 11/01/88 Fee simple Apartment
Mountlake Terrace, WA 70 units
Defoors Crossing Apartments 05/01/89 Fee simple Apartment
Atlanta, GA 60 units
Meadow Wood Apartments 10/02/89 Fee simple Apartment
Medford, OR 85 units
Peachtree Corners Medical Bldg. 06/01/90 Fee simple Medical Office
Atlanta, GA Building
13,000 sq. ft.
Joint Venture Property
Corinth Square Professional 10/01/90 Joint Venture; Medical Office
Building, Partnership owns a Building-
Prairie Village, Kansas 35% interest 23,000 sq. ft.
(1) None of the Partnership's properties are encumbered by mortgage financing.
SCHEDULE OF PROPERTIES:
(IN THOUSANDS)
Gross
Carrying Accumulated Useful Federal
Property Value Depreciation life Method Tax Basis
Bronson Place $ 3,474 $ 973 5-40 yrs S/L $ 2,510
Defoors Crossing 3,358 800 5-40 yrs S/L 2,557
Meadow Wood 3,644 879 5-40 yrs S/L 2,769
Peachtree Corners 1,890 346 15-40 yrs S/L 1,702
Totals $12,366 $2,998 $ 9,538
See "Note A" of the Notes to Financial Statements in "Item 7. Financial
Statements" for a description of the Partnership's depreciation policy.
SCHEDULE OF RENTAL RATES AND OCCUPANCY:
Average Annual Average Annual
Rental Rates Occupancy
1997 1996 1997 1996
Bronson Place $8,189/per unit $7,742/per unit 95% 94%
Defoors Crossing 8,730/per unit 8,483/per unit 95% 92%
Meadow Wood 7,005/per unit 6,680/per unit 89%(a) 94%
Peachtree Corners 13.71/per sq.ft. 13.46/per sq.ft. 74%(b) 60%
(a) Meadow Wood - The decrease in occupancy is due to increased rental rates
during 1997 and softening market conditions. The General Partner expects
that marketing of the new clubhouse and adjusting rental rates will improve
occupancy in 1998.
(b) Peachtree Corners - The increase in occupancy is due to successful
marketing efforts and property improvements made during 1996 to attract
quality long-term tenants.
As noted under "Item 1. Description of Business," the real estate industry is
highly competitive. All of the properties of the Partnership are subject to
competition from other residential apartment complexes and commercial buildings
in the localities in which they operate. The General Partner believes that all
of the properties are adequately insured. The multi-family residential
properties' lease terms are for one year or less and no residential tenant
leases 10% or more of the available rental space.
The following is a schedule of the lease expirations at Peachtree Corners
Medical Building for the years 1998-2007:
Number of % of Gross
Expirations Square Feet Annual Rent Annual Rent
(in thousands)
1998-2001 0 -- $ -- --
2002 1 1,967 28 21.1%
2003 1 3,738 54 40.5%
2004 0 -- -- --
2005 1 3,521 52 38.4%
2006-2007 0 -- -- --
The following schedule reflects information on tenants leasing 10% or more of
the leasable square footage for Peachtree Corners Medical Building.
Square Footage Annual rent per Lease
Nature of Business Leased Square Foot Expiration
Medical Offices 1,967 $14.40 02/28/02
Medical Offices 3,738 14.50 03/30/03
Medical Offices 3,521 14.61 07/21/05
SCHEDULE OF REAL ESTATE TAXES (IN THOUSANDS) AND RATES:
1997 1997
Taxes Rate
Bronson Place $ 39 1.27%
Defoors Crossing 38 1.97%
Meadow Wood 54 1.39%
Peachtree Corners 13 1.38%
ITEM 3. LEGAL PROCEEDINGS
The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature. The General Partner of the Partnership believes that all
such pending or outstanding litigation will be resolved without a material
adverse effect upon the business, financial condition, or operations of the
Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fiscal year ended December 31, 1997, no matters were submitted to a
vote of Unit holders through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR PARTNERSHIP EQUITY AND RELATED PARTNER MATTERS
At December 31, 1997, the number of holders of record of Limited Partnership
Units was 1,890. No public trading market has developed for the Units and it is
not anticipated that such a market will develop in the future.
The Partnership made distributions of cash generated from operations of
approximately $617,000 during each of the years ended December 31, 1997 and
1996. A distribution of funds from operations of approximately $154,000 was
declared and paid in the first quarter of 1998. Future cash distributions will
depend on the levels of cash generated from operations, property sales, and the
availability of cash reserves.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
The Partnership realized net income of approximately $472,000 for the year ended
December 31, 1997, compared to net income of approximately $475,000 for the year
ended December 31, 1996. During 1997 increased operating and depreciation
expenses were offset by an increase in rental income. The increase in operating
expenses resulted from increased marketing costs at Defoors Crossing, which were
incurred in an effort to increase occupancy at the property, and increased
maintenance expenses at Peachtree Corners during 1997, as a result of increased
occupancy. Major repairs and maintenance were constant in 1997 and 1996.
Included in operating expense for the year ended December 31, 1997 is
approximately $29,000 of major repairs and maintenance comprised primarily of
exterior painting at Peachtree Corners, swimming pool and exterior building
repairs. Included in operating expense for the year ended December 31, 1996 is
approximately $29,000 of major repairs and maintenance comprised primarily of
exterior building and parking lot repairs. Depreciation expense increased
primarily as a result of tenant improvements made at Peachtree Corners in 1996.
The increase in operating and depreciation expenses was offset by increased
rental revenue resulting from increased occupancy at Peachtree Corners, along
with increased rental rates at all of the Partnership's properties.
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 expense. 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. However, 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.
Liquidity and Capital Resources
At December 31, 1997, the Partnership had cash and cash equivalents of
approximately $728,000 compared to approximately $633,000 at December 31, 1996.
The net increase in cash and cash equivalents for the year ended December 31,
1997 was $95,000 compared to a net decrease of $4,000 for the year ended
December 31, 1996. Net cash provided by operating activities increased
primarily due to an increase in other liabilities and a decrease in lease
commissions paid. Net cash used in investing activities decreased in 1997 due
to cash distributions from the joint venture being received during the year
ended December 31, 1997, compared to no distributions in the year ended December
31, 1996. 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 property 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. The Partnership
made distributions of cash generated from operations of approximately $617,000
during each of the years ended December 31, 1997 and 1996. A distribution of
funds from operations of approximately $154,000 was declared and paid in the
first quarter of 1998. Future cash distributions will depend on the levels of
cash generated from operations, property sales, and the availability of cash
reserves.
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 annual 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 annual 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.
ITEM 7. FINANCIAL STATEMENTS
UNITED INVESTORS INCOME PROPERTIES
LIST OF FINANCIAL STATEMENTS
Independent Auditors' Report
Balance Sheet - December 31, 1997
Statements of Operations - Years ended December 31, 1997 and 1996
Statement of Changes in Partners' Capital (Deficit) - Years
ended December 31, 1997 and 1996
Statements of Cash Flows - Years ended December 31, 1997 and 1996
Notes to Financial Statements
INDEPENDENT AUDITORS' REPORT
The Partners
United Investors Income Properties
(A Missouri Limited Partnership)
We have audited the accompanying balance sheet of United Investors Income
Properties (A Missouri Limited Partnership) ("the Partnership") as of December
31, 1997, and the related statements of operations, changes in partners' capital
(deficit), and cash flows for each of the two years in the period ended December
31, 1997. These 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 audit 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, such financial statements present fairly, in all material
respects, the financial position of the Partnership as of December 31, 1997 and
the results of its operations and its cash flows for each of the two years in
the period ended December 31, 1997 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
February 17, 1998
(except for Note H, as to which the date is
March 17, 1998)
UNITED INVESTORS INCOME PROPERTIES
BALANCE SHEET
December 31, 1997
(in thousands, except unit data)
Assets
Cash and cash equivalents $ 728
Receivables and deposits 156
Other assets 95
Investment properties (Notes A and G):
Land $ 1,862
Buildings and related personal 10,504
property 12,366
Less accumulated depreciation (2,998) 9,368
Investment in Joint Venture (Note B) 619
$10,966
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 12
Tenant security deposits payable 51
Other liabilities 46
Partners' Capital (Deficit) (Note C)
General partner's $ (24)
Limited partners' (61,063 units
issued and outstanding) 10,881 10,857
$10,966
See Accompanying Notes to Financial Statements
UNITED INVESTORS INCOME PROPERTIES
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended December 31,
1997 1996
Revenues:
Rental income $ 1,725 $ 1,616
Other income 97 105
Total revenues 1,822 1,721
Expenses:
Operating 754 672
General and administrative 79 76
Depreciation 385 360
Property taxes 152 153
Total expenses 1,370 1,261
Equity in net income of joint venture (Note B) 20 15
Net income (Note F) $ 472 $ 475
Net income allocated to general partner (1%) $ 5 $ 5
Net income allocated to limited partners (99%) 467 470
$ 472 $ 475
Net income per limited partnership unit $ 7.65 $ 7.70
Distributions per limited partner unit $ 10.01 $ 10.01
See Accompanying Notes to Financial Statements
UNITED INVESTORS INCOME PROPERTIES
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner's Partners' Total
Original capital contributions 61,063 $ -- $15,266 $15,266
Partners' (deficit) capital at
December 31, 1995 61,063 $ (22) $11,166 $11,144
Partners' distributions -- (6) (611) (617)
Net income for the year ended
December 31, 1996 -- 5 470 475
Partners' (deficit) capital at
December 31, 1996 61,063 (23) 11,025 11,002
Partners' distributions -- (6) (611) (617)
Net income for the year ended
December 31, 1997 -- 5 467 472
Partners' (deficit) capital at
December 31, 1997 61,063 $ (24) $10,881 $10,857
See Accompanying Notes to Financial Statements
UNITED INVESTORS INCOME PROPERTIES
STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
1997 1996
Cash flows from operating activities:
Net income $ 472 $ 475
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in net income of joint venture (20) (15)
Depreciation 385 360
Amortization of lease commissions 7 6
Change in accounts:
Receivables and deposits (29) (17)
Other assets (17) (41)
Accounts payable (5) 6
Tenant security deposits payable 2 2
Other liabilities 24 (16)
Net cash provided by operating activities 819 760
Cash flows from investing activities:
Property improvements and replacements (179) (147)
Distributions from joint venture 72 --
Net cash used in investing activities (107) (147)
Cash flows from financing activities:
Partners' distributions (617) (617)
Net cash used in financing activities (617) (617)
Net increase (decrease) in cash and cash equivalents 95 (4)
Cash and cash equivalents at beginning of year 633 637
Cash and cash equivalents at end of year $ 728 $ 633
See Accompanying Notes to Financial Statements
UNITED INVESTORS INCOME PROPERTIES
Notes to Financial Statements
December 31, 1997
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization: United Investors Income Properties (the "Partnership"), a Missouri
Limited Partnership, was organized in June 1988, with the initial group of
limited partners being admitted on July 27, 1988. Additional partners were
admitted through May 1990.
The Partnership was formed to acquire and operate certain types of income-
producing real estate. United Investors Real Estate, Inc. (the "General
Partner") is the general partner. Effective December 31, 1992, 100% of the
General Partner's common stock was purchased by MAE GP Corporation ("MAE GP"),
an affiliate of Insignia Financial Group, Inc. ("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.
Basis of accounting: The accompanying financial statements of the Partnership
are prepared on the accrual basis and, therefore, revenue is recorded as earned
and costs and expenses are recorded as incurred.
Cash and cash equivalents: The Partnership considers all highly liquid
investments with a maturity, when purchased, of three months or less to be cash
equivalents. At certain times, the amount of cash deposited at a bank may exceed
the limit on insured deposits.
Security Deposits: The Partnership requires security deposits from lessees for
the duration of the lease, and such deposits are included in receivables and
deposits. The security deposits are refunded when the tenant vacates, provided
the tenant has not damaged its space and is current on its rental payments.
Income taxes: For income tax purposes, the Partnership reports revenue and
costs and expenses on the accrual method. No income tax provision has been
shown in the accompanying statements of operations since the partners are taxed
individually.
Investment Properties: Investment properties are stated at cost. Acquisition
fees are capitalized as a cost of real estate. The Partnership records
impairment losses on long-lived assets used in operations when events and
circumstances indicate that the assets might be impaired and the undiscounted
cash flows estimated to be generated by those assets are less than the carrying
amounts of those assets.
Depreciation: Depreciation is computed using straight-line methods over
estimated useful lives of fifteen to forty years for buildings and improvements
and five to twelve years for furniture and fixtures. Commercial tenant
improvements are depreciated over the terms of the respective leases.
Fair Value of Financial Instruments: "SFAS No. 107, Disclosures about Fair Value
of Financial Instruments," as amended by "SFAS No. 119, Disclosures about
Derivative Financial Instruments and Fair Value of Financial Instruments",
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate fair value. Fair value is defined in the SFAS as the amount at which
the instruments could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. The Partnership believes
that the carrying amount of its financial instruments approximates their fair
value due to the short term maturity of these instruments.
Other Assets: Included in other assets are deferred rental income and leasing
commissions which are amortized over the lives of the related leases.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Advertising: The Partnership expenses the costs of advertising as incurred.
Advertising expense, included in operating expenses, was $35,000 and $31,000 for
the years ended December 31, 1997 and 1996, respectively.
Reclassifications: Certain reclassifications have been made to the 1996
information to conform to the 1997 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.
Condensed balance sheet information for Corinth at December 31, 1997, is as
follows (in thousands):
December 31,
1997
Assets
Commercial properties, net $1,692
Other assets 119
Total $1,811
Liabilities and Partners' Capital
Liabilities $ 42
Partners' capital 1,769
Total $1,811
Condensed statements of operations of Corinth for the years ended December 31,
1997 and 1996, are as follows (in thousands):
Years Ended December 31,
1997 1996
Revenue $ 355 $ 369
Costs and Expenses (297) (325)
Net income $ 58 $ 44
NOTE C - PARTNERS' CAPITAL
ALLOCATIONS OF PROFITS AND LOSSES: In accordance with the partnership agreement,
all profits and losses are to be allocated 1% to the General Partner and 99% to
the limited partners.
DISTRIBUTIONS: The Partnership allocates distributions 1% to the General Partner
and 99% to the limited partners. On February 15, 1998, the Partnership paid a
distribution to the partners of approximately $154,000.
NOTE D - 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.
The partnership agreement provides for payments to affiliates for 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 in 1997 and 1996 (in thousands):
1997 1996
Property management fees (included in
operating expenses) $ 86 $ 82
Reimbursement for services of affiliates
(included in general and administrative
expenses and operating expenses) 36 32
Additionally, the Partnership paid $29,000 during the year ended December 31,
1996, to an affiliate of the General Partner for lease commissions at the
Partnership's commercial property. These lease commissions are included in
other assets and are amortized over the terms of the respective lease.
For the period January 1, 1996 to August 31, 1997, the Partnership insured its
properties under a master policy through an agency and 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
who received payment on these obligations from the agent. The amount of the
Partnership's insurance premiums accruing to the benefit of the affiliate of the
General Partner by virtue of the agent's obligations is not significant.
NOTE E - OPERATING LEASES
Tenants of Peachtree Corners Medical Building are responsible for their own
utilities, maintenance of their space and payment of their proportionate share
of common area maintenance, utilities, insurance and real estate taxes. The
real estate taxes, insurance, and common area maintenance expenses are paid
directly by the Partnership. The Partnership is then reimbursed by the tenants
for their proportionate share.
The future minimum rental payments to be received under operating leases that
have initial or remaining noncancellable lease terms in excess of one year, as
of December 31, 1997, are as follows (in thousands):
Years Ending December 31,
1998 $ 129
1999 132
2000 137
2001 141
2002 120
Thereafter 153
$ 812
NOTE F - PARTNER TAX INFORMATION
The following is a reconciliation between net income as reported in the
financial statements and federal taxable income allocated to the partners in
the Partnership's tax return for the years ended December 31, 1997 and 1996 (in
thousands, except unit data):
1997 1996
Net income as reported $ 472 $ 475
Add (deduct):
Deferred revenue and other
liabilities 4 (6)
Depreciation differences 11 --
Nondeductible reserves and allowances 1 --
Accrued expenses 18 1
Deferred charges and other assets (13) (26)
Federal taxable income $ 493 $ 444
Federal taxable income per limited
partnership unit $8.00 $7.21
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets at December 31, 1997 (in thousands):
Net assets as reported $10,857
Differences in basis of assets and liabilities:
Deferred revenue and other liabilities (25)
Accumulated depreciation 30
Commercial property at cost 139
Deferred charges and other assets (22)
Other 21
Syndication costs 1,902
Net assets - tax basis $12,902
NOTE G - INVESTMENT PROPERTIES AND ACCUMULATED DEPRECIATION
(IN THOUSANDS)
Initial cost
To Partnership
Net Costs
Buildings Capitalized
and Related (Removed)
Personal Subsequent to
Description Land Property Acquisition
Bronson Place Apartments $ 501 $2,568 $ 405
Defoors Crossing Apartments 520 2,480 358
Meadow Wood Apartments 501 2,884 259
Peachtree Corners Medical Bldg. 340 1,396 154
Totals $1,862 $9,328 $1,176
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1997
Buildings
And
Related
Personal Accumulated Date of Date Depreciable
Description Land Property Total Depreciation Construction Acquired Life-Years
<C> <C> <C> <C> <C> <C> <C>
Bronson Place Apartments $ 501 $ 2,973 $ 3,474 $ 973 1988 11/01/88 5-40
Defoors Crossing Apartments 520 2,838 3,358 800 1988 05/01/89 5-40
Meadow Wood Apartments 501 3,143 3,644 879 1988 10/02/89 5-40
Peachtree Corners 340 1,550 1,890 346 1989 06/01/90 15-40
Totals $1,862 $10,504 $12,366 $2,998
</TABLE>
Reconciliation of "Investment Properties and Accumulated Depreciation":
Years Ended December 31,
1997 1996
Investment Properties
Balance at beginning of year $12,187 $12,040
Property improvements 179 147
Balance at end of year $12,366 $12,187
Accumulated Depreciation
Balance at beginning of year $ 2,613 $ 2,253
Amounts charged to expense 385 360
Balance at end of year $ 2,998 $ 2,613
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1997, is approximately $12,506,000. The accumulated depreciation
taken for Federal income tax purposes at December 31, 1997, is approximately
$2,968,000.
NOTE H - SUBSEQUENT EVENT
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in
Insignia Properties Trust, 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.
ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There were no disagreements with Deloitte & Touche LLP regarding the 1997 or
1996 audits of the Partnership's financial statements.
PART III
ITEM 9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
The Partnership has no officers or directors. United Investors Real Estate,
Inc. ("UIRE" or the "General Partner") manages and controls the Partnership and
has general responsibility and authority in all matters affecting its business.
Effective December 31, 1992, 100% of the General Partner's common stock was
purchased by MAE GP Corporation ("MAE GP"), which is wholly owned by
Metropolitan Asset Enhancement, L.P. ("MAE"), an affiliate of Insignia Financial
Group, Inc. ("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. On March 17, 1998,
Insignia entered into an agreement to merge its national residential property
management operations, and its controlling interest in Insignia Properties
Trust, 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.
The names of the directors and executive officers of UIRE, their ages and the
nature of all positions with UIRE presently held by them are set forth below.
There are no family relationships between or among any officers and directors.
Name Age Position
Carroll D. Vinson 57 President and Director
Robert D. Long, Jr. 30 Vice President and
Chief Accounting
Officer
William H. Jarrard, Jr. 51 Vice President
Daniel M. LeBey 32 Secretary
Kelley M. Buechler 40 Assistant Secretary
Carroll D. Vinson has been President and Director of the General Partner and
President of MAE and subsidiaries since August of 1994. He has acted as Chief
Operating Officer of IPT since May 1997. During 1993 to August 1994, Mr. Vinson
was affiliated with Crisp, Hughes & Co. (regional CPA firm) and engaged in
various other investment and consulting activities which included portfolio
acquisitions, asset dispositions, debt restructurings and financial reporting.
Briefly, in early 1993, Mr. Vinson served as President and Chief Executive
Officer of Angeles Corporation, a real estate investment firm. From 1991 to
1993, Mr. Vinson was employed by Insignia in various capacities including
Managing Director - President during 1991.
Robert D. Long, Jr. has been Vice President and Chief Accounting Officer of the
General Partner since August 1994. Mr. Long joined MAE in September 1993.
Since 1994 he has acted as Vice President and Chief Accounting Officer of the
MAE subsidiaries. Mr. Long was an accountant for Insignia until joining MAE in
1993. Prior to joining Insignia, Mr. Long was an auditor for the State of
Tennessee and was associated with the accounting firm of Harsman Lewis and
Associates.
William H. Jarrard, Jr. has been Vice President of the General Partner since
December 1992. He has acted as Senior Vice President of IPT since May 1997.
Mr. Jarrard previously acted as Managing Director - Partnership Administration
of Insignia from January 1991 through September 1997 and served as Managing
Director - Partnership Administration and Asset Management of Insignia from July
1994 until January 1996.
Daniel M. LeBey has been Secretary of the General Partner since January 29, 1998
and Insignia's Assistant Secretary since April 30, 1997. Since July 1996 he has
also served as Insignia's Associate General Counsel. From September 1992 until
June 1996, Mr. LeBey was an attorney with the law firm of Alston & Bird LLP,
Atlanta, Georgia.
Kelley M. Buechler has been Assistant Secretary of the General Partner since
December 1992 and Assistant Secretary of Insignia since 1991.
ITEM 10. EXECUTIVE COMPENSATION
No direct form of compensation or remuneration was paid by the Partnership to
any officer or director of the General Partner. The Partnership has no plan,
nor does the Partnership presently propose a plan, which will result in any
remuneration being paid to any officer or director upon termination of
employment. However, reimbursements and other payments have been made to the
Partnership's General Partner and its affiliates, as described in "Item 12.
Certain Relationships and Related Transactions" below.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of January 1, 1998, no person was known by the Partnership to be the
beneficial owner of more than five percent of the outstanding Units of the
Partnership.
As of January 1, 1998, no Units were owned by the General Partner or any of its
officers and directors.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
The partnership agreement provides for payments to affiliates for 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 in 1997 and 1996 (in thousands):
1997 1996
Property management fees $ 86 $ 82
Reimbursement for services of affiliates 36 32
Additionally, the Partnership paid $29,000 during the year ended December 31,
1996, to an affiliate of the General Partner for lease commissions at the
Partnership's commercial property. These lease commissions are included in
other assets and are amortized over the terms of the respective lease.
For the period January 1, 1996 to August 31, 1997, the Partnership insured its
properties under a master policy through an agency and 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
who received payment on these obligations from the agent. The amount of the
Partnership's insurance premiums accruing to the benefit of the affiliate of the
General Partner by virtue of the agent's obligations is not significant.
During both 1997 and 1996, the General Partner received distributions of
approximately $6,000.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: See Exhibit Index contained herein.
(b) Reports on Form 8-K file in the fourth quarter of fiscal year 1997:
None.
SIGNATURES
In accordance with Section 13 or 15(d) 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
Date: March 26, 1998
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
date indicated.
/s/Carroll D. Vinson President and Date: March 26, 1998
Carroll D. Vinson Director
/s/Robert D. Long, Jr. Vice President and Date: March 26, 1998
Robert D. Long, Jr. Chief Accounting
Officer
INDEX TO EXHIBITS
Exhibit
1 Form of Dealer Manager Agreement between the General Partner and the
Dealer Manager, including Form of Soliciting Broker Agreement;
incorporated by reference to Exhibit 1 to Partnership's Amendment to
Registration Statement (File No. 33-20350) previously filed on May 2,
1988.
1.1 Amendment to Dealer Manager Agreement; incorporated by reference to
Exhibit 1.1 to Post-Effective Amendment No. 2 to Partnership's
Registration Statement previously filed on March 21, 1989.
4.1 Form of Subscription Agreement; incorporated by reference as part of the
Prospectus of Partnership contained in Partnership's Amendment to
Registration Statement previously filed on May 2, 1988.
4.2 Form of Agreement of Limited Partnership of Partnership; incorporated by
reference as part of the Prospectus of Partnership contained in
Partnership's Amendment to Registration Statement previously filed on
May 2, 1988.
4.3 Tenth Amendment to Agreement of Limited Partnership of Partnership;
incorporated by reference to Exhibit 4.3 to Partnership's Quarterly
Report on Form 10-Q previously filed on May 15, 1989.
10.1 Escrow Agreement among the Partnership, the General Partner, the Dealer
Manager, and Boston Safe Deposit & Trust Company; incorporated by
reference to Exhibit 10.1 to Partnership's Amendment to Registration
Statement previously filed on May 2, 1988.
10.1.1 Amendment to Escrow Agreement; incorporated by reference to Exhibit
10.1.1 to Post-Effective Amendment No. 5 to Partnership's Registration
Statement previously filed on October 19, 1989.
10.2 Agreement of Purchase and Sale, dated June 22, 1988, between United
Investors Real Estate, Inc., as nominee for United Investors Income
Properties, as purchaser, and Nilsen/Bay Ridge Development, Inc. and
MBIV Development, as seller, relating to Bronson Place Apartments;
incorporated by reference to Exhibit 10.1 to Partnership's Quarterly
Report on Form 10-Q previously filed on August 11, 1988.
10.3 Agreement of Purchase and Sale, dated October 20, 1988, between United
Investors Real Estate, Inc., as purchaser, and Defoors Crossing
Associates, Ltd., as seller, relating to Defoors Crossing Apartments,
and amendments thereto; incorporated by reference to Exhibit 10.3 to
Post-Effective Amendment No. l to Partnership's Registration Statement
previously filed on February 1, 1989.
10.4 Agreement of Purchase and Sale, dated June 29, 1989, between United
Investors Real Estate, Inc., as purchaser and CMW Properties, as seller,
relating to Meadow Wood Apartments, and amendments thereto; incorporated
by reference to Exhibit 10.4 to Partnership's Current Report on Form 8-K
previously filed on October 17, 1989.
10.5 Agreement of Purchase and Sale, dated December 21, 1989, between United
Investors Real Estate, Inc., as purchaser, and Corners Medical Group,
Inc., as seller, relating to Peachtree Corners Medical Building, and
amendments thereto; incorporated by reference to Exhibit 10.5 to
Partnership's Quarterly Report on Form 10-Q previously filed on May 15,
1990.
10.6 Agreement of Purchase and Sale, dated June 29, 1990, between United
Investors Real Estate, Inc., as purchaser, and American Fire Sprinkler
Corporation, as seller, relating to Corinth Square Professional
Building; incorporated by reference to Exhibit 10.6 to Partnership's
Quarterly Report on Form 10-Q previously filed on August 15, 1990.
10.7 Agreement of Joint Venture of Corinth Square Associates dated October 1,
1990 between the Partnership and United Investors Income Properties II;
incorporated by reference to Exhibit 4.4 to Partnership's Current Report
on Form 8-K previously filed on October 23, 1990.
10.8 Stock Purchase Agreement dated December 4, 1992 showing the purchase of
100% of the outstanding stock of United Investors Real Estate, Inc. by
MAE GP Corporation; incorporated by reference to Exhibit 10.8 to
Partnership's Current Report on Form 8-K previously filed on
December 31, 1992.
27 Financial Data Schedule
99.1 Portions of Prospectus of Partnership dated May 4, 1988; incorporated by
reference to Exhibit 99.1 to Partnership's Report on Form 10-K
previously filed on March 6, 1991.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from United
Investors Income Properties 1997 year-end 10-KSB and is qualified in its
entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000830056
<NAME> United Investors Income Properties
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 728
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 12,366
<DEPRECIATION> 2,998
<TOTAL-ASSETS> 10,966
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,857
<TOTAL-LIABILITY-AND-EQUITY> 10,966
<SALES> 0
<TOTAL-REVENUES> 1,822
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,370
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 472
<EPS-PRIMARY> 7.65<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
