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, 1999
[ ] 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.)
55 Beattie Place, 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)
(in thousands, except unit data)
March 31, 1999
Assets
Cash and cash equivalents $ 1,077
Receivables and deposits 225
Other assets 86
Investment properties:
Land $ 1,862
Buildings and related personal property 10,708
12,570
Less accumulated depreciation (3,500) 9,070
Investment in joint venture 651
$11,109
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 11
Tenant security deposit liabilities 60
Accrued property taxes 23
Other liabilities 28
Distribution payable 154
Partners' Capital (Deficit)
General partner's $ (23)
Limited partners' (61,063 units
issued and outstanding) 10,856 10,833
$11,109
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,
1999 1998
Revenues:
Rental income $ 459 $ 421
Other income 35 28
Total revenues 494 449
Expenses:
Operating 150 158
General and administrative 38 22
Depreciation 100 99
Property taxes 34 37
Total expenses 322 316
Equity in net income of joint venture 9 2
Net income $ 181 $ 135
Net income allocated to general partner (1%) $ 2 $ 1
Net income allocated to limited partners (99%) 179 134
$ 181 $ 135
Net income per limited partnership unit $ 2.93 $ 2.19
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)
Limited
Partnership General Limited
Units Partner's Partners' Total
Original capital contributions 61,063 $ -- $15,266 $15,266
Partners' (deficit) capital at
December 31, 1998 61,063 $ (24) $10,830 $10,806
Distributions to partners -- (1) (153) (154)
Net income for the three months
ended March 31, 1999 -- 2 179 181
Partners' (deficit) capital at
March 31, 1999 61,063 $ (23) $10,856 $10,833
See Accompanying Notes to Financial Statements
d)
UNITED INVESTORS INCOME PROPERTIES
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1999 1998
Cash flows from operating activities:
Net income $ 181 $ 135
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in net income of joint venture (9) (2)
Depreciation 100 99
Amortization of lease commissions 2 2
Change in accounts:
Receivables and deposits (51) (26)
Other assets 2 18
Accounts payable (14) (3)
Tenant security deposit liabilities 1 2
Accrued property taxes 16 24
Other liabilities (19) (11)
Net cash provided by operating activities 209 238
Cash flows from investing activities:
Property improvements and replacements (57) (40)
Distribution to joint venture (3) --
Net cash used in investing activities (60) (40)
Cash flows used in financing activities:
Distributions to partners -- (154)
Net increase in cash and cash equivalents 149 44
Cash and cash equivalents at beginning of period 928 728
Cash and cash equivalents at end of period $1,077 $ 772
Supplemental disclosure of non-cash financing activity:
Distributions payable to partners of $154,000 were accrued at March 31, 1999 and
paid in April 1999.
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" or "Registrant") 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, 1999, are not necessarily indicative of the results that may be expected
for the fiscal year ending December 31, 1999. For further information, refer to
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, 1998.
NOTE B - TRANSFER OF CONTROL
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO ultimately acquired a 100%
ownership interest in the General Partner. The General Partner does not believe
that this transaction will have a material effect on the affairs and operations
of the Partnership.
NOTE C - 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 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 during the three months ended
March 31, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in
operating expenses) $ 22 $ 21
Reimbursement for services of affiliates
(included in general and administrative
expenses and operating expenses) 10 8
During the three months ended March 31, 1999 and 1998, affiliates of the General
Partner were entitled to receive 5% of the gross receipts from all of the
Partnership's residential properties as compensation for providing property
management services. The Partnership paid to such affiliates $22,000 and $20,000
for the three months ended March 31, 1999 and 1998, respectively. During the
three months ended March 31, 1998, affiliates of the General Partner were
entitled to varying percentages of gross receipts from the Partnership's
commercial property as compensation for providing property management services.
These services were performed by affiliates of the General Partner for the three
months ended March 31, 1998 and were $1,000. Effective October 1, 1998 (the
effective date of the Insignia Merger) these services for the commercial
property were provided by an unrelated party.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $10,000 and $8,000 for the
three months ended March 31, 1999 and 1998, respectively.
NOTE E - 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 C").
The condensed balance sheet of Corinth at March 31, 1999, is summarized as
follows (in thousands):
Assets
Commercial property, net $1,741
Other assets 166
Total $1,907
Liabilities and Partners' Capital
Liabilities $ 48
Partners' capital 1,859
Total $1,907
Condensed statements of operations of Corinth for the three months ended March
31, 1999 and 1998, are as follows (in thousands):
1999 1998
Revenue $ 99 $ 89
Costs and expenses 73 85
Net income $ 26 $ 4
NOTE F - SEGMENT REPORTING
The Partnership has two reportable segments: residential properties and
commercial properties. The Partnership's residential segment consists of three
apartment complexes located in Mountlake Terrace, Washington; Atlanta, Georgia
and Medford, Oregon. The Partnership rents apartment units to tenants for terms
that are typically twelve months or less. The commercial property segment
consists of a medical complex located in Atlanta, Georgia. This property leases
space to various medical practices at terms that range from seven to ten years.
The Partnership evaluates performance based on net income. The accounting
policies of the reportable segments are the same as those of the Partnership as
described in the Partnership's annual report on Form 10-KSB for the year ended
December 31, 1998.
The Partnership's reportable segments are investment properties that offer
different products and services. The reportable segments are each managed
separately because they provide distinct services with different types of
products and customers.
Segment information for the three months ended March 31, 1999 and 1998 is shown
in the tables below (in thousands). The "Other" column includes Partnership
administration related items and income and expense not allocated to the
reportable segments.
1999 Residential Commercial Other Totals
Rental income $ 415 $ 44 $ -- $ 459
Other income 27 -- 8 35
Depreciation 84 16 -- 100
General and administrative expense -- -- 38 38
Equity in income of joint venture -- -- 9 9
Segment profit (loss) 191 11 (21) 181
Total assets 7,963 1,632 1,514 11,109
Capital expenditures for
investment properties 57 -- -- 57
1998 Residential Commercial Other Totals
Rental income $ 382 $ 39 $ -- $ 421
Other income 20 1 7 28
Depreciation 83 16 -- 99
General and administrative expense -- -- 22 22
Equity in income of joint venture -- -- 2 2
Segment profit (loss) 143 5 (13) 135
Total assets 8,027 1,652 1,280 10,959
Capital expenditures for
Investment properties 40 -- -- 40
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-QSB and the other filings with the Securities and
Exchange Commission made by the Partnership from time to time. The discussion
of the Partnership's business and results of operations, including forward-
looking statements pertaining to such matters, does not take into account the
effects of any changes to the Partnership's business and results of operation.
Accordingly, actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
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,
1999 and 1998:
Average Occupancy
Property 1999 1998
Bronson Place Apartments
Mountlake Terrace, Washington 98% 96%
Meadow Wood Apartments
Medford, Oregon 93% 83%
Defoors Crossing Apartments
Atlanta, Georgia 94% 92%
Peachtree Corners Medical Building
Atlanta, Georgia 74% 74%
The General Partner attributes the increased occupancy at Meadow Wood Apartments
to improved market conditions and rental rate adjustments made during 1998.
Results of Operation
The Partnership realized net income of $181,000 for the three month period ended
March 31, 1999, compared to net income of $135,000 for the three month period
ended March 31, 1998. The increase in net income is due primarily to an
increase in total revenues which is partially offset by an increase in total
expenses. The increase in total revenues is primarily attributable to increased
rental income. Rental income increased as a result of increased rental rates at
Bronson Place, DeFoors Crossing and Peachtree Corners and increased occupancy at
Meadow Wood. The increase in total expenses is primarily due to an increase in
general and administrative expenses which was partially offset by a decrease in
operating expense. General and administrative expenses increased due to an
increase in professional fees related to the oversight of the Partnership.
Included in general and administrative expenses at both December 31, 1998 and
1997 are reimbursements to the General Partner allowed under the Partnership
Agreement associated with its management of the Partnership. Costs associated
with the quarterly and annual communications with investors and regulatory
agencies and the annual audit required by the Partnership Agreement are also
included.
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.
Liquidity and Capital Resources
At March 31, 1999, the Partnership had cash and cash equivalents of
approximately $1,077,000 compared to approximately $772,000 at March 31, 1998.
Cash and cash equivalents increased by approximately $149,000 since December 31,
1998, due to approximately $209,000 of cash provided by operating activities,
which was partially offset by approximately $60,000 of cash used in investing
activities. Cash used in investing activities consisted primarily of property
improvements and replacements and to a lesser extent, a distribution to joint
venture. The Partnership invests its working capital reserves in a money market
account.
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 properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
state and local legal and regulatory requirements. Capital improvements planned
for each of the Partnership's properties are detailed below.
Bronson Place
During the three months ended March 31, 1999, the Partnership has spent
approximately $46,000 on capital improvements at Bronson Place Apartments,
primarily consisting of carpet and vinyl replacements, electrical improvements
and structural improvements. These improvements were funded from cash flow from
operations. Based on a report received from an independent third party
consultant analyzing necessary exterior improvements and estimates made by the
General Partner on interior improvements, it is estimated that the property
requires approximately $68,000 of capital improvements over the near term. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $76,000 for 1999 at this property consisting primarily of carpet
and vinyl replacements.
Defoors Crossing
During the three months ended March 31, 1999, the Partnership has spent
approximately $3,000 on capital improvements at Defoors Crossing Apartments,
primarily consisting of carpet and vinyl replacements and appliances. These
improvements were funded from cash flow from operations. Based on a report
received from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the General Partner on interior improvements,
it is estimated that the property requires approximately $78,000 of capital
improvements over the near term. The Partnership has budgeted, but is not
limited to, capital improvements of approximately $94,000 for 1999 at this
property consisting primarily of carpet and vinyl replacements, landscaping,
signage and parking lot repairs.
Meadow Wood
During the three months ended March 31, 1999, the Partnership has spent
approximately $8,000 on capital improvements at Meadow Wood Apartments,
primarily consisting of carpet replacements, appliances and landscaping
improvements. These improvements were funded from cash flow from operations.
Based on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the General Partner on
interior improvements, it is estimated that the property requires approximately
$99,000 of capital improvements over the near term. The Partnership has
budgeted, but is not limited to, capital improvements of approximately $112,000
for 1999 at this property consisting primarily of parking lot improvements,
carpet and vinyl replacements and appliances.
Peachtree Medical Building
The Partnership did not make any capital improvements at Peachtree Medical
Building during the three months ended March 31, 1999. Based on a report
received from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the General Partner on interior improvements,
it is estimated that the property requires approximately $86,000 of capital
improvements over the near term. The Partnership has budgeted, but is not
limited to, approximately $43,000 in tenant improvements for 1999.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital and tenant improvements are completed, the Partnership's distributable
cash flow, if any, may be adversely affected at least in the short term.
The Partnership made a distribution of cash generated from operations of
approximately $154,000 ($2.50 per limited partnership unit) during the three
month period ended March 31, 1998. In March 1999, the Partnership declared and
accrued a distribution of cash generated from operations of approximately
$154,000 ($2.50 per limited partnership unit), which was paid in April 1999. No
other distributions were made during the three month period ended March 31,
1999. The Partnership's distribution policy will be reviewed on a quarterly
basis. Future cash distributions will depend on the levels of net cash
generated from operations, the availability of cash reserves, the timing of debt
maturities, refinancings and/or property sales. There can be no assurance,
however, that the Partnership will generate sufficient funds from operations
after required capital improvements to permit additional distributions to its
partners in 1999 or subsequent periods.
Potential Tender Offer
On October 1, 1998, Insignia Financial Group, Inc. merged into Apartment
Investment and management Company ("AIMCO"), a real estate investment trust,
whose Class A Common Shares are listed on the New York Stock Exchange. As a
result of such merger, AIMCO and AIMCO Properties, L.P., a Delaware limited
partnership and the operating partnership of AIMCO ("AIMCO OP") acquired
indirect control of the General Partner. AIMCO and its affiliates currently own
1.556% of the limited partnership interests in the Partnership. AIMCO is
presently considering whether it will engage in an exchange offer for additional
limited partnership interests in the Partnership. There is a substantial
likelihood that, within a short period of time, AIMCO OP will offer to acquire
limited partnership interests in the Partnership for cash or preferred units or
common units of limited partnership interests in AIMCO OP. While such an
exchange offer is possible, no definite plans exist as to when or whether to
commence such an exchange offer, or as to the terms of any such exchange offer,
and it is possible that none will occur.
A registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective. These
securities may not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This Form 10-QSB shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such state.
Year 2000 Compliance
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership
is dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any of the computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made, or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.
The Managing Agent's plan to resolve Year 2000 issues involves four phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the mainframe system used by the Managing Agent became fully
functional. In addition to the mainframe, PC-based network servers, routers and
desktop PCs were analyzed for compliance. The Managing Agent has begun to
replace each of the non-compliant network connections and desktop PCs and, as of
March 31, 1999, had completed approximately 75% of this effort.
The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date. The remaining network connections and
desktop PCs are expected to be upgraded to Year 2000 compliant systems by July
31, 1999.
Computer Software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
During 1998, the Managing Agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at
all properties, is $200,000, and the implementation and the testing process is
expected to be completed by July 31, 1999.
The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded 80% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
July 31, 1999.
Operating Equipment:
The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).
The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally. The Managing Agent intends to have a third-party conduct an
audit of these systems and report their findings by July 31, 1999.
Any of the above operating equipment that has been found to be non-compliant to
date has been replaced or repaired. To date, these have consisted only of
security systems and phone systems. As of March 31, 1999 the Managing Agent has
evaluated approximately 86% of the operating equipment for the Year 2000
compliance.
The total cost incurred for all properties managed by the Managing Agent as of
March 31, 1999 to replace or repair the operating equipment was approximately
$400,000. The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $325,000, which is expected to be
completed by August 30, 1999.
The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within its enterprise.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent continues to conduct surveys of its banking and other vendor
relationships to assess risks regarding their Year 2000 readiness. The Managing
Agent has banking relationships with three major financial institutions, all of
which have indicated their compliance efforts will be complete before May 1999.
The Managing Agent has updated data transmission standards with two of the three
financial institutions. The Managing Agent's contingency plan in this regard is
to move accounts from any institution that cannot be certified Year 2000
compliant by June 1, 1999.
The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.
The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.8 million ($0.6 million expensed
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.
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 March 31, 1999.
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/ Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/ Timothy R. Garrick
Timothy R. Garrick
Vice President - Accounting
Date: May 4, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from United
Investors Income Properties 1999 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-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,077
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 12,570
<DEPRECIATION> 3,500
<TOTAL-ASSETS> 11,109
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,833
<TOTAL-LIABILITY-AND-EQUITY> 11,109
<SALES> 0
<TOTAL-REVENUES> 494
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 322
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 181
<EPS-PRIMARY> 2.93<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
