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 June 30, 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)
June 30, 1998
(in thousands, except unit data)
Assets
Cash and cash equivalents $ 739
Receivables and deposits 214
Other assets 62
Investment properties:
Land $ 1,862
Buildings and related personal property 10,578
12,440
Less accumulated depreciation (3,196) 9,244
Investment in joint venture 627
$10,886
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 13
Tenant security deposit liabilities 54
Accrued property taxes 27
Other liabilities 38
Partners' Capital (Deficit)
General partner's $ (25)
Limited partners' (61,063 units 10,779 10,754
issued and outstanding)
$10,886
See Accompanying Notes to Financial Statements
b)
UNITED INVESTORS INCOME PROPERTIES
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenues
Rental income $ 455 $ 432 $ 876 $ 840
Other income 32 29 60 51
Total revenues 487 461 936 891
Expenses:
Operating 264 172 422 346
General and administrati 23 22 45 41
Depreciation 99 94 198 188
Property taxes 37 42 74 83
Total expenses 423 330 739 658
Equity in income of
joint venture 6 9 8 13
Net income $ 70 $ 140 $ 205 $ 246
Net income allocated to
general partner (1%) $ 1 $ 1 $ 2 $ 2
Net income allocated to
limited partners (99%) 69 139 203 244
$ 70 $ 140 $ 205 $ 246
Net income per
partnership unit $1.13 $2.28 $3.32 $4.00
Distributions per limited
partnership unit $2.49 $2.49 $4.99 $4.99
See Accompanying Notes to Financial Statements
c)
UNITED INVESTORS INCOME PROPERTIES
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(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, 1997 61,063 $ (24) $10,881 $10,857
Partners' distributions -- (3) (305) (308)
Net income for the six months
ended June 30, 1998 -- 2 203 205
Partners' (deficit) capital at
June 30, 1998 61,063 $ (25) $10,779 $10,754
See Accompanying Notes to Financial Statements
d)
UNITED INVESTORS INCOME PROPERTIES
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1998 1997
Cash flows from operating activities:
Net income $ 205 $ 246
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in net income of joint venture (8) (13)
Depreciation 198 188
Amortization of lease commissions 3 3
Change in accounts:
Receivables and deposits (58) (52)
Other assets 30 15
Accounts payable 1 (9)
Tenant security deposit liabilities 3 7
Accrued property taxes 27 29
Other liabilities (8) 3
Net cash provided by operating activities 393 417
Cash flows from investing activities:
Property improvements and replacements (74) (65)
Distributions from joint venture -- 58
Net cash used in investing activities (74) (7)
Cash flows from financing activities:
Partners' distributions (308) (308)
Net cash used in financing activities (308) (308)
Net increase in cash and cash equivalents 11 102
Cash and cash equivalents at beginning of period 728 633
Cash and cash equivalents at end of period $ 739 $ 735
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 and six month periods ended June 30, 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 (see "Note
D").
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
six months ended June 30, 1998 and 1997 (in thousands):
1998 1997
Property management fees (included in operating
expenses) $ 44 $ 42
Reimbursement for services of affiliates (included in
general and administrative expenses) 18 16
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
September or October 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 June 30, 1998, is summarized as
follows (in thousands):
Assets
Commercial property, net $1,736
Other assets 117
Total $1,853
Liabilities and Partners' Capital
Liabilities $ 62
Partners' capital 1,791
Total $1,853
Condensed statements of operations of Corinth for the six months ended June 30,
1998 and 1997, are as follows (in thousands):
1998 1997
Revenue $ 188 $ 166
Costs and expenses 166 129
Net income $ 22 $ 37
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 six month periods ended June 30,
1998 and 1997:
Average
Occupancy
Property 1998 1997
Bronson Place Apartments
Mountlake Terrace, Washington 95% 95%
Meadow Wood Apartments
Medford, Oregon 88% 91%
Defoors Crossing Apartments
Atlanta, Georgia 92% 92%
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 reduced on one bedroom units, which suffered the highest vacancy. As a
result, physical occupancy had increased to 95% by the end of July. Management
continues to monitor and adjust rental rates at all properties to maximize total
revenue.
The Partnership realized net income of $205,000 for the six month period ended
June 30, 1998, compared to net income of $246,000 for the six month period ended
June 30, 1997. The Partnership's net income for the three months ended June 30,
1998 was approximately $70,000 compared to net income of approximately $140,000
for the three months ended June 30, 1997. The decrease in net income is
primarily attributable to increased operating expense partially offset by
increased rental income. The increase in operating expense was primarily due to
increased major repairs and maintenance expenses. Included in operating expense
are approximately $76,000 and $5,000 of major repairs and maintenance for the
six months ending June 30, 1998 and 1997, respectively. The major repairs and
maintenance items for 1998 are comprised primarily of deck repairs, landscaping,
and repairs at Peachtree Corners caused by storm damage during the second
quarter of 1998. The General Partner expects the Partnership to be reimbursed
by the insurance company during the third quarter of 1998 for costs paid by the
Partnership during the three months ended June 30, 1998, which will reduce the
casualty's negative impact on income. The 1997 major repair and maintenance
items are comprised primarily of swimming pool repairs. The increase in
operating expense was partially offset by rental income, which increased due to
rental rate increases, primarily at Bronson Place, which were partially offset
by reduced occupancy at Meadow Wood.
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 June 30, 1998, the Partnership had cash and cash equivalents of approximately
$739,000 compared to approximately $735,000 at June 30, 1997. The net increase
in cash and cash equivalents for the six month period ended June 30, 1998 was
$11,000 compared to $102,000 for the six month period ended June 30, 1997. Net
cash provided by operating activities decreased due to the increased operating
expenses partially offset by increased rental income for the six month period
ended June 30, 1998, as discussed above. Net cash used in investing activities
increased primarily due to a lack of distributions from the joint venture during
1998. 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 $308,000 were made during the six month periods
ended June 30, 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) Exhibits:
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 June 30, 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: August 13, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
United Investors Income Properties 1998 Second Quarter 10-QSB and is
qualified in its entirety by reference to such 10-QSB filing.
</LEGEND>
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<NAME> UNITED INVESTORS INCOME PROPERTIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 739
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<ALLOWANCES> 0
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<PP&E> 12,440
<DEPRECIATION> 3,196
<TOTAL-ASSETS> 10,886
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0
0
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