March 27, 2000
United States
Securities and Exchange Commission
Washington, D.C. 20549
RE: United Investors Income Properties
Form 10-KSB
File No. 0-17646
To Whom it May Concern:
The accompanying Form 10-KSB for the year ended December 31, 1999 describes a
change in the method of accounting to capitalize exterior painting and major
landscaping, which would have been expensed under the old policy. The
Partnership believes that this accounting principle change is preferable because
it provides a better matching of expenses with the related benefit of the
expenditures and it is consistent with industry practice and the policies of the
General Partner.
Please do not hesitate to contact the undersigned with any questions or comments
that you might have.
Very truly yours,
Stephen Waters
Real Estate Controller
<PAGE>
FORM 10-KSB--Annual or Transitional Report Under
Section 13 or 15(d)
Form 10-KSB
[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, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
[No Fee Required]
For the transition period _________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.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
Issuer's telephone number
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 of 1934 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. $1,814,000
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 December 31, 1999. No market exists for the limited partnership
interests of the Registrant, and, therefore, no aggregate market value can be
determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
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 on June 23, 1988. 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 ("UIRE" or the
"General Partner") of the Partnership. UIRE was wholly-owned by MAE GP
Corporation ("MAE GP"). Effective February 25, 1998, MAE GP was merged into
Insignia Properties Trust ("IPT"), a subsidiary of Apartment Investment and
Management Company ("AIMCO"). Thus the General Partner is now wholly-owned by
AIMCO. The Partnership Agreement provides that the Partnership is to terminate
on December 31, 2018 unless terminated prior to such date.
Commencing on or about May 4, 1988, the Partnership offered pursuant to a
Registration Statement filed with the Securities and Exchange Commission ("SEC")
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). 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
approximately $15,266,000. Since its initial offering, the Registrant has not
received, nor are limited partners required to make, additional capital
contributions.
The Partnership was engaged in the business of acquiring and operating
multifamily residential and commercial real estate properties and other income
producing real estate. The Partnership had acquired three multifamily
residential properties, a medical office building, and an interest in a joint
venture which owns a medical office building. The medical office building and
the joint venture were sold December 30, 1999. The only remaining properties are
residential properties. These remaining properties are further described in
"Item 2. Description of Properties" below.
The Registrant has no employees. Management and administrative services are
provided by the General Partner and by agents retained by the General Partner.
An affiliate of the General Partner has been providing such property management
services.
The real estate business in which the Partnership is engaged is highly
competitive. There are other residential properties within the market area of
the Partnership's properties. The number and quality of competitive properties,
including those which may be managed by an affiliate of the General Partner in
such market area, could have a material effect on the rental market for the
apartments and the rents that may be charged for such apartments. While the
General Partner and its affiliates own and/or control a significant number of
apartment units in the United States, such units represent an insignificant
percentage of total apartment units in the United States and competition for the
apartments is local.
Both the income and expenses of operating the properties owned by the
Partnership are subject to factors outside of the Partnership's control, such as
changes in the supply and demand for similar properties resulting from various
market conditions, increases/decreases in unemployment or population shifts,
changes in the availability of permanent mortgage financing, changes in zoning
laws, or changes in patterns or needs of users. In addition, there are risks
inherent in owning and operating residential properties because such properties
are susceptible to the impact of economic and other conditions outside of the
control of the Partnership.
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.
A further description of the Partnership's business is included in Management's
Discussion and Analysis or Plan of Operation" included in "Item 6" of this Form
10-KSB.
Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. ("Insignia") and IPT merged
into AIMCO, a publicly traded real estate investment trust, with AIMCO being the
surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100%
ownership interest in the General Partner. The General Partner does not believe
that this transaction has had or will have a material effect on the affairs and
operations of the Partnership.
Item 2. Description of Properties
The following table sets forth the Partnership's investment in properties:
<TABLE>
<CAPTION>
Date of
Property Purchase Type of Ownership Use
<S> <C> <C> <C>
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
</TABLE>
<PAGE>
Schedule of Properties:
Set forth below for each of the Registrant's properties is the gross carrying
value, accumulated depreciation, depreciable life, method of depreciation and
Federal tax basis.
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Useful Federal
Property Value Depreciation Life Method Tax Basis
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Bronson Place $ 3,632 $ 1,222 5-40 yrs S/L $ 2,335
Defoors Crossing 3,452 1,010 5-40 yrs S/L 2,371
Meadow Wood 3,751 1,119 5-40 yrs S/L 2,599
Totals $10,835 $ 3,351 $ 7,305
</TABLE>
See "Note A" of the financial statements in "Item 7. Financial Statements" for a
description of the Partnership's depreciation policy and "Note K - Change in
Accounting Principle".
Schedule of Rental Rates and Occupancy:
Average annual rental rates and occupancy for 1999 and 1998 for each property:
Average Annual Average Annual
Rental Rate Occupancy
(per unit)
Property 1999 1998 1999 1998
Bronson Place $9,405 $8,911 93% 95%
Defoors Crossing 9,335 9,158 95% 92%
Meadow Wood 7,189 7,132 94% 89%
The General Partner attributes the increased occupancy at Meadow Wood and
Defoors Crossing Apartments to improved market conditions and increased
marketing efforts. The Atlanta, Georgia area in which Defoors Crossing
Apartments is located has had one of the best job formation rates in the country
which has helped to increase occupancy.
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 in the localities in
which they operate. The General Partner believes that all of the properties are
adequately insured. Each residential property is an apartment complex which
leases units for lease terms of one year or less. No residential tenant leases
10% or more of the available rental space. All of the properties are in good
physical condition, subject to normal depreciation and deterioration as is
typical for assets of this type and age.
<PAGE>
Schedule of Real Estate Taxes and Rates:
Real estate taxes and effective rates in 1999 for each property were:
1999 1999
Billing Rate
(in thousands)
Bronson Place $ 44 1.42%
Defoors Crossing 48 1.97%
Meadow Wood 55 1.41%
Capital Improvements:
Bronson Place
During the year ended December 31, 1999, the Partnership spent approximately
$88,000 on capital improvements at Bronson Place Apartments, consisting
primarily of structural improvements, electrical improvements, and carpet and
vinyl replacements. These improvements were funded from cash flow from
operations. The Partnership is currently evaluating the capital improvement
needs of the property for the upcoming year. The minimum amount to be budgeted
is expected to be $300 per unit or $21,000. Additional improvements may be
considered and will depend on the physical condition of the property as well as
anticipated cash flow generated by the property.
Defoors Crossing
During the year ended December 31, 1999, the Partnership spent approximately
$80,000 on capital improvements at Defoors Crossing Apartments, consisting
primarily of carpet and vinyl replacements and exterior painting. These
improvements were funded from cash flow from operations. The Partnership is
currently evaluating the capital improvement needs of the property for the
upcoming year. The minimum amount to be budgeted is expected to be $300 per unit
or $18,000. Additional improvements may be considered and will depend on the
physical condition of the property as well as anticipated cash flow generated by
the property.
Meadow Wood
During the year ended December 31, 1999, the Partnership spent approximately
$63,000 on capital improvements at Meadow Wood Apartments, consisting primarily
of carpet and vinyl replacements, appliances, and air conditioning units. These
improvements were funded from cash flow from operations. The Partnership is
currently evaluating the capital improvement needs of the property for the
upcoming year. The minimum amount to be budgeted is expected to be $300 per unit
or $25,500. Additional improvements may be considered and will depend on the
physical condition of the property as well as anticipated cash flow generated by
the property.
Item 3. Legal Proceedings
The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature arising in the ordinary course of business.
Item 4. Submission of Matters to a Vote of Security Holders
During the quarter ended December 31, 1999, no matters were submitted to a vote
of Unit holders through the solicitation of proxies or otherwise.
<PAGE>
PART II
Item 5. Market for Partnership Equity and Related Partner Matters
The Partnership, a publicly-held limited partnership, offered 80,000 and sold
61,063 Limited Partnership Units during its offering period through May 4, 1990,
aggregating approximately $15,266,000. The Partnership currently has 61,063
Limited Partnership Units outstanding and 1,542 holders of record. Affiliates of
the General Partner owned 11,695 Units or 19.152% at December 31, 1999. No
public trading market has developed for the Units, and it is not anticipated
that such a market will develop in the future.
The following table sets forth the distributions made by the Partnership for the
years ended December 31, 1998 and 1999, as well as for the subsequent period
from January 1, 2000 to February 29, 2000:
Distributions
Per Limited
Aggregate Partnership Unit
(in thousands)
01/01/98 - 12/31/98 $ 617 (1) $10.01
01/01/99 - 12/31/99 $ 1,238 (1) $20.08
01/01/00 - 02/29/00 $ 1,209 (2) $19.60
(1) Distribution was made from cash from operations (see "Item 6" for further
details).
(2) Consists of $206,000 of cash from operations and $1,003,000 of cash from
the sales of Peachtree Corners Medical Building and Corinth Square Joint
Venture (see "Item 6" for further details).
Future cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of financings
and/or property sales. The Partnership's distribution policy is reviewed on a
quarterly basis. There can be no assurance, however that the Partnership will
generate sufficient funds from operations after required capital improvements to
permit any additional distributions to its partners in the year 2000 or
subsequent periods. See "Item 2. Description of Properties, Capital
Improvements" for information relating to anticipated capital expenditures at
the properties.
Several tender offers were made by various parties, including affiliates of the
General Partner, during the years ended December 31, 1999 and 1998. As a result
of these tender offers, AIMCO and its affiliates currently own 11,695 limited
partnership units in the Partnership representing 19.152% of the outstanding
units. It is possible that AIMCO or its affiliates will make one or more
additional offers to acquire additional limited partnership interests in the
Partnership for cash or in exchange for units in the operating partnership of
AIMCO. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters. When
voting on matters, AIMCO would in all likelihood vote the Units it acquired in a
manner favorable to the interest of the General Partner because of their
affiliation with the General Partner.
Item 6. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-KSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-KSB 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 operations. 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.
This item should be read in conjunction with the financial statements and other
items contained elsewhere in this report.
Results of Operations
The Partnership realized a net loss of approximately $540,000 for the year ended
December 31, 1999, compared to net income of approximately $566,000 for the year
ended December 31, 1998. (See "Note H" for a reconciliation of these amounts to
the Registrant's Federal taxable (loss) income.) The increase in net loss is
primarily due to the impairment loss on and sale of the discontinued operation
of Peachtree Corners Medical Building in December 1999 as discussed below, and
the equity in the loss of the joint venture due to the sale of Corinth Square
Joint Venture, as discussed below.
Excluding the discontinued operations and the equity in loss of the joint
venture as discussed above, the Partnership had net income from continuing
operations of approximately $489,000 for both of the years ended December 31,
1999 and 1998. Net income remained comparable due to an increase in total
revenues which was offset by an increase in total expenses.
The increase in total revenues was due to increased rental income and increased
other income. Rental income increased primarily due to increased average rental
rates at all of the Partnership's properties and improved occupancy at Meadow
Wood and Defoors Crossing Apartments which more than offset the decrease in
occupancy at Bronson Place Apartments. The increase in other income is primarily
due to increased tenant charges at Bronson Place and Meadow Wood Apartments.
Total expenses increased for the year ended December 31, 1999 primarily due to
increased general and administrative expenses and depreciation expense. General
and administrative expense increased due to an increase in professional fees
related to the oversight of the Partnership. Included in general and
administrative expenses 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. Depreciation expense increased due to capital improvements
completed during the past twelve months that are now being depreciated.
As a result of the sale of Peachtree Corners Medical Building in December 1999,
as discussed below, the results of operations of Peachtree were classified as
"Income from discontinued operations" on the income statement. The decrease in
net income from discontinued operations is due primarily to an increase in
administrative expenses due to an appraisal performed at the property and
increased legal fees due to the sale of the property and reduced operating
expense recoveries from the tenants at Peachtree Corners Medical Building.
During the third quarter of 1999, the Partnership determined that Peachtree
Corners Medical Building located in Atlanta, Georgia, with a carrying value of
approximately $1,451,000, was impaired and its value was written down by
approximately $600,000. The fair value was based upon current economic
conditions and projected future operational cash flows. In December 1999,
Peachtree Corners Medical Building was sold to an unaffiliated party for
$700,000. After payment of closing expenses, the net sales proceeds received by
the Partnership were approximately $615,000. For financial statement purposes,
the sale resulted in a loss of approximately $246,000.
Peachtree Corners Medical Building was the last commercial property owned by the
Partnership and represented one segment of the Partnership's operations. Due to
the sale of this property, the results of the commercial segment have been shown
as income from discontinued operations and loss on sale of discontinued
operations. Revenues of this property were approximately $151,000 and $187,000
for 1999 and 1998, respectively. Income from discontinued operations were
approximately $7,000 and $57,000 for 1999 and 1998, respectively.
The Partnership had a 35% investment in Corinth Square Joint Venture ("Joint
Venture"). For the year ended December 31, 1999, the Partnership realized equity
in the loss on the sale of the joint venture property of approximately $209,000,
and equity in the income of the joint venture of approximately $19,000
(excluding the loss on sale) and $20,000 for the years ended December 31, 1999
and 1998 (see "Note C - Investment in Corinth Square Joint Venture"). On
December 30, 1999, the Joint Venture sold its only investment property, Corinth
Square, to an unaffiliated third party. The sale resulted in net proceeds of
approximately $1,143,000 after payment of closing costs, resulting in a loss on
sale of approximately $598,000. The Partnership's 1999 pro-rata share of this
loss is approximately $209,000.
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping on a prospective
basis. The Partnership believes that this accounting principle change is
preferable because it provides a better matching of expenses with the related
benefit of the expenditures, and it is consistent with industry practice and the
policies of the General Partner. The effect of the change in 1999 was to
decrease the loss by approximately $60,000 ($.97 per limited partnership unit).
The cumulative effect, had this been applied to prior periods, is not material.
The accounting principle change will not have an effect on cash flow, funds
available for distribution or fees payable to the General Partner and
affiliates.
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. 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, 1999, the Partnership had cash and cash equivalents of
approximately $1,167,000 compared to approximately $928,000 at December 31,
1998. Cash and cash equivalents increased by approximately $239,000 since the
Partnership's year ended December 31, 1998, due to approximately $1,053,000 of
cash provided by operating activities, and approximately $424,000 of cash
provided by investing activities which was partially offset by approximately
$1,238,000 of cash used in financing activities. Cash provided by investing
activities consisted of proceeds from the sale of Peachtree Corners Medical
Building and distributions received from the joint venture which were partially
offset by property improvements and replacements. Cash used in financing
activities consisted of distributions paid to the partners. The Partnership
invests its working capital reserves in money market accounts.
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 and to comply with
Federal, state, and local legal and regulatory requirements. The Partnership is
currently evaluating the capital improvement needs of the properties for the
upcoming year. The minimum amount to be budgeted is expected to be $300 per unit
or $64,500. Additional improvements may be considered and will depend on the
physical condition of the properties as well as anticipated cash flow generated
by the properties. The Partnership's current assets are thought to be sufficient
for any near-term needs (exclusive of capital improvements) of the Partnership.
The Partnership made distributions of cash generated from operations of
approximately $1,238,000 (approximately $1,226,000 to the limited partners or
$20.08 per limited partnership unit) during the year ended December 31, 1999.
Subsequent to December 31, 1999, the Partnership paid a distribution of cash
generated from the sale of Peachtree Corners Medical Building and Corinth Square
Joint Venture of approximately $1,003,000 (approximately $993,000 to the limited
partners or $16.26 per limited partnership unit) and approximately $206,000 of
cash generated from operations (approximately $204,000 to the limited partners
or $3.34 per limited partnership unit). During the year ended December 31, 1998,
the Partnership paid distributions of cash generated from operations of
approximately $617,000 (approximately $611,000 to the limited partners or $10.01
per limited partnership unit). The Partnership's distribution policy is reviewed
on a quarterly basis. Future cash distributions will depend on the levels of net
cash generated from operations, the availability of cash reserves, and the
timing of financings 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 any additional distributions to its
partners during the year 2000 or subsequent periods.
Tender Offer
Several tender offers were made by various parties, including affiliates of the
General Partner, during the years ended December 31, 1999 and 1998. As a result
of these tender offers, AIMCO and its affiliates currently own 11,695 limited
partnership units in the Partnership representing 19.152% of the outstanding
units. It is possible that AIMCO or its affiliates will make one or more
additional offers to acquire additional limited partnership interests in the
Partnership for cash or in exchange for units in the operating partnership of
AIMCO. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters. When
voting on matters, AIMCO would in all likelihood vote the Units it acquired in a
manner favorable to the interest of the General Partner because of their
affiliation with the General Partner.
Year 2000 Compliance
General Description
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 Managing Agent's computer
programs or hardware that had date-sensitive software or embedded chips might
have recognized a date using "00" as the year 1900 rather than the year 2000.
This could have resulted 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.
Computer Hardware, Software and Operating Equipment
In 1999, the Managing Agent completed all phases of its Year 2000 program by
completing the replacement and repair of any hardware or software system or
operating equipment that was not yet Year 2000 compliant. The Managing Agent's
hardware and software systems and its operating equipment are now Year 2000
compliant. No material failure or erroneous results have occurred in the
Managing Agent's computer applications related to the failure to reference the
Year 2000 to date.
Third Parties
To date, the Managing Agent is not aware of any significant supplier or
subcontractor (external agent) or financial institution of the Partnership that
has a Year 2000 issue that would have a material impact on the Partnership's
results of operations, liquidity or capital resources. However, the Managing
Agent has no means of ensuring or determining the Year 2000 compliance of
external agents. At this time, the Managing Agent does not believe that a Year
2000 issue of any non-compliant external agent will have a material impact on
the Partnership's financial position or results of operations.
Costs
The total cost of the Managing Agent's Year 2000 project was approximately $3.2
million and was funded from operating cash flows.
Risks Associated with the Year 2000
The Managing Agent completed all necessary phases of its Year 2000 program in
1999, and did not experience system or equipment malfunctions related to a
failure to reference the Year 2000. The Managing Agent or Partnership have not
been materially adversely effected by disruptions in the economy generally
resulting from the Year 2000 issue.
At this time, the Managing Agent does not believe that the Partnership's
businesses, results of operations or financial condition will be materially
adversely effected by the Year 2000 issue.
Contingency Plans Associated with the Year 2000
The Managing Agent has not had to implement contingency plans such as manual
workarounds or selecting new relationships for its banking or elevator operation
activities in order to avoid the Year 2000 issue.
<PAGE>
Item 7. Financial Statements
UNITED INVESTORS INCOME PROPERTIES
LIST OF FINANCIAL STATEMENTS
Independent Auditors' Report
Balance Sheet - December 31, 1999
Statements of Operations - Years ended December 31, 1999 and 1998
Statements of Changes in Partners' (Deficit) Capital - Years ended December 31,
1999 and 1998
Statements of Cash Flows - Years ended December 31, 1999 and 1998
Notes to Financial Statements
<PAGE>
Independent Auditors' Report
The Partners
United Investors Income Properties
We have audited the accompanying balance sheet of United Investors Income
Properties (the "Partnership") as of December 31, 1999, and the related
statements of operations, changes in partners' (deficit) capital and cash flows
for each of the years in the two year period then ended. 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 audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Partnership as of December
31, 1999, and the results of its operations and its cash flows for each of the
years in the two year period then ended, in conformity with generally accepted
accounting principles.
As discussed in Note K to the financial statements, the Partnership changed its
method of accounting to capitalize the cost of exterior painting and major
landscaping effective January 1, 1999.
/s/KPMG LLP
Greenville, South Carolina
February 25, 2000
<PAGE>
UNITED INVESTORS INCOME PROPERTIES
BALANCE SHEET
(in thousands, except unit data)
December 31, 1999
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 1,167
Receivables and deposits 154
Due from affiliated partnership 400
Other assets 38
Investment properties (Note F):
Land $ 1,522
Buildings and related personal property 9,313
10,835
Less accumulated depreciation (3,351) 7,484
Investment in joint venture (Note C) 9
$ 9,252
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 78
Tenant security deposit liabilities 43
Other liabilities 103
Partners' (Deficit) Capital
General partner $ (41)
Limited partners (61,063 units issued and
outstanding) 9,069 9,028
$ 9,252
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
UNITED INVESTORS INCOME PROPERTIES
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
Revenues: (restated)
<S> <C> <C>
Rental income $ 1,675 $ 1,588
Other income 139 111
Total revenues 1,814 1,699
Expenses:
Operating 663 652
General and administrative 168 85
Depreciation 361 338
Property taxes 133 135
Total expenses 1,325 1,210
Income before equity in (loss) income of joint venture
and before discontinued operation 489 489
Equity in (loss) income of joint venture (190) 20
Income before discontinued operation 299 509
Income from discontinued operation 7 57
Impairment loss on discontinued operation (600) --
Loss on sale of discontinued operation (246) --
Net (loss) income $ (540) $ 566
Net (loss) income allocated to general partner (1%) (5) 6
Net (loss) income allocated to limited partners (99%) (535) 560
$ (540) 566
Per limited partnership unit:
Income before discontinued operation $ 4.85 $ 8.25
Income from discontinued operation 0.11 0.92
Impairment loss on discontinued operation (9.73) --
Loss on sale of discontinued operation (3.99) --
Net (loss) income $ (8.76) $ 9.17
Distributions per limited partnership unit $ 20.08 $ 10.01
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
UNITED INVESTORS INCOME PROPERTIES
STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 61,063 $ -- $15,266 $15,266
Partners' (deficit) capital
at December 31, 1997 61,063 $ (24) $10,881 $10,857
Distributions to partners -- (6) (611) (617)
Net income for the year ended
December 31, 1998 -- 6 560 566
Partners' (deficit) capital at
December 31, 1998 61,063 (24) 10,830 10,806
Distributions to partners -- (12) (1,226) (1,238)
Net loss for the year
ended December 31, 1999 -- (5) (535) (540)
Partners' (deficit) capital
at December 31, 1999 61,063 $ (41) $ 9,069 $ 9,028
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
UNITED INVESTORS INCOME PROPERTIES
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
Cash flows from operating activities:
<S> <C> <C>
Net (loss) income $ (540) $ 566
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Equity in net loss (income) of joint venture 190 (20)
Depreciation 425 402
Impairment loss on discontinued operation 600 --
Loss on sale of discontinued operation 246 --
Amortization of lease commissions 7 7
Change in accounts:
Receivables and deposits 20 (18)
Other assets 19 (2)
Accounts payable 53 13
Tenant security deposit liabilities (16) 8
Accrued property taxes (7) 7
Other liabilities 56 1
Net cash provided by operating activities 1,053 964
Cash flows used in investing activities:
Property improvements and replacements (231) (147)
Distributions from joint venture 40 --
Proceeds from sale of discontinued operation 615 --
Net cash provided by (used in) investing
activities 424 (147)
Cash flows used in financing activities:
Distributions to partners (1,238) (617)
Net increase in cash and cash equivalents 239 200
Cash and cash equivalents at beginning of year 928 728
Cash and cash equivalents at end of year $ 1,167 $ 928
Supplemental disclosure of non-cash activity:
Sale of joint venture in exchange for receivable
from affiliate $ 400 $ --
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
UNITED INVESTORS INCOME PROPERTIES
Notes to Financial Statements
December 31, 1999
Note A - Organization and Significant Accounting Policies
Organization: United Investors Income Properties (the "Partnership" or
"Registrant"), 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. United Investors Real
Estate, Inc., a Delaware Corporation, is the sole general partner ("UIRE" or the
"General Partner") of the Partnership. UIRE was wholly-owned by MAE GP
Corporation ("MAE GP"). Effective February 25, 1998, MAE GP was merged into
Insignia Properties Trust ("IPT"), a subsidiary of Apartment Investment and
Management Company ("AIMCO"). Thus, the General Partner is a subsidiary of AIMCO
(see "Note B - Transfer of Control"). The Partnership Agreement states that the
Partnership is to terminate on December 31, 2018, unless terminated prior to
such date. As of December 31, 1999, the Partnership operates two residential
properties in the northwest and one residential property in the south.
Cash and cash equivalents: Includes cash on hand, in banks and money market
accounts. At certain times, the amount of cash deposited at a bank may exceed
the limit on insured deposits.
Allocations of profits, losses and distributions: In accordance with the
partnership agreement, all profits, losses and distributions are to be allocated
1% to the General Partner and 99% to the limited partners.
Tenant Security Deposits: The Partnership requires security deposits from
lessees for the duration of the lease and such deposits are included in
receivables and deposits. Deposits are refunded when the tenant vacates,
provided the tenant has not damaged its space and is current on its rental
payments.
Investment Properties: Investment properties consist of three apartment
complexes and are stated at cost. Acquisition fees are capitalized as a cost of
real estate. In accordance with Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", 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.
Costs of investment properties that have been permanently impaired have been
written down to appraisal or estimated fair market value. No adjustment for
impairment of value was recorded in the year ended December 31, 1998. During the
year ended December 31, 1999, the Partnership determined that Peachtree Corners
Medical Building located in Atlanta, Georgia, with a carrying value of
approximately $1,451,000, was impaired and its value was written down by
approximately $600,000. The fair value was based upon current economic
conditions and projected future operational cash flows. The property was sold on
December 30, 1999 (see "Note E - Impairment Loss and Sale of Discontinued
Operation").
Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the apartment properties and related personal property. For
Federal income tax purposes, the accelerated cost recovery method is used (1)
for real property over 15 years for additions prior to March 16, 1984, 18 years
for additions after March 15, 1984, and before May 9, 1985, and 19 years for
additions after May 8, 1985, and before January 1, 1987, and (2) for personal
property over 5 years for additions prior to January 1, 1987. As a result of the
Tax Reform Act of 1986, for additions after December 31, 1986, the modified
accelerated cost recovery method is used for depreciation of (1) real property
additions over 27 1/2 years and (2) personal property additions over 5 years.
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the costs of exterior painting and major landscaping (see Note K).
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.
Leases: The Partnership leases its residential properties under short-term
operating leases. Lease terms are generally one year or less in duration. The
Partnership recognizes income as earned on its leases. In addition, the General
Partner's policy is to offer rental concessions during periods of declining
occupancy or in response to heavy competition from other similar complexes in
the area. Concessions are charged against rental income as incurred.
Uses 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 for its residential properties, included in operating
expense, was approximately $37,000 and $38,000 for the years ended December 31,
1999 and 1998, respectively.
Segment Reporting: SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information" established standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers (see "Note I" for detailed disclosure of the Partnership's segments).
Reclassifications: Certain reclassifications have been made to the 1998
information to conform to the 1999 presentation.
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 IPT merged into AIMCO, a
publicly traded real estate investment trust, with AIMCO being the surviving
corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership
interest in the General Partner. The General Partner does not believe that this
transaction has had or will have a material effect on the affairs and operations
of the Partnership.
Note C - Investment in Corinth Square Joint Venture
The Partnership had a 35% investment in Corinth Square Joint Venture ("Joint
Venture") with United Investors Income Properties II, an affiliated partnership
in which the General Partner is also the sole general partner. The Partnership
reflects its interest in the Joint Venture 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.
On December 30, 1999, the Joint Venture sold its only investment property,
Corinth Square, to an unaffiliated third party. The sale resulted in net
proceeds of approximately $1,143,000 after payment of closing costs, resulting
in a loss on sale of approximately $598,000. The Partnership's 1999 pro-rata
share of this loss is approximately $209,000. The net proceeds were received by
United Investors Income Properties II, of which approximately $400,000 is the
Partnership's pro-rata share. This amount has been recorded as "Due from
affiliated partnership" in the accompanying balance sheet as of December 31,
1999 and was received by the Partnership in January 2000.
Condensed balance sheet information of the Joint Venture at December 31, 1999,
is as follows (in thousands):
Assets
Cash $ 91
Other assets 9
Total $100
Liabilities and Partners' Capital
Other Liabilities $ 75
Partners' capital 25
Total $100
The condensed profit and loss statement of the Joint Venture for the years ended
December 31, 1999 and 1998 is summarized as follows (in thousands):
1999 1998
Revenue $ 378 $ 375
Costs and expenses (323) (317)
Income before loss on sale of
property 55 58
Loss on sale of property (598) --
Net (loss) income $ (543) $ 58
The Partnership's 35% equity interest in the loss on the sale of the Joint
Venture property for the year ended December 31, 1999, was approximately
$209,000. The equity interest in the income of the Joint Venture for the years
ended December 31, 1999 and 1998 was approximately $19,000 and $20,000,
respectively.
Note D - Distributions
During the year ended December 31, 1999, the Partnership distributed cash
generated from operations of approximately $1,238,000 (approximately $1,226,000
to the limited partners or $20.08 per limited partnership unit). Subsequent to
December 31, 1999, the Partnership paid a distribution of cash generated from
the sale of Peachtree Corners Medical Building and Corinth Square Joint Venture
of approximately $1,003,000 (approximately $993,000 to the limited partners or
$16.26 per limited partnership unit) and approximately $206,000 of cash
generated from operations (approximately $204,000 to the limited partners or
$3.34 per limited partnership unit). During the year ended December 31, 1998,
the Partnership made distributions of cash generated from operations of
approximately $617,000 (approximately $611,000 to the limited partners or $10.01
per limited partnership unit).
Note E - Impairment Loss and Sale of Discontinued Operation
During the year ended December 31, 1999, the Partnership determined that the
Peachtree Corners Medical Building located in Atlanta, Georgia, with a carrying
value of approximately, $1,451,000 was impaired and its value was written down
by approximately $600,000. The fair value was based upon current economic
conditions and projected future operational cash flows.
In December 1999, Peachtree Corners Medical Building was sold to an unaffiliated
party for $700,000. After payment of closing expenses, the net sales proceeds
received by the Partnership were approximately $615,000. For financial statement
purposes, the sale resulted in a loss of approximately $246,000.
The following unaudited pro-forma information reflects the operations of the
Partnership for the years ended December 31, 1999 and 1998, as if Peachtree
Corners Medical Building and Corinth Square Joint Venture had been sold January
1, 1998.
1999 1998
(in thousands, except per unit data)
Revenues $1,814 $1,699
Net income 489 489
Income per limited partnership unit 7.93 7.93
Peachtree Corners Medical Building was the last commercial property owned by the
Partnership and represented one segment of the Partnership's operations. Due to
the sale of this property, the results of the commercial segment have been shown
as income from discontinued operations and loss on sale of discontinued
operations. Revenues of this property were approximately $151,000 and $187,000
for 1999 and 1998, respectively. Income from operations were approximately
$7,000 and $57,000 for 1999 and 1998, respectively.
<PAGE>
Note F - Real Estate and Accumulated Depreciation
Initial Cost
To Partnership
Buildings Net Costs
and Related Capitalized
Personal Subsequent to
Description Land Property Acquisition
(in thousands) (in thousands)
Bronson Place Apartments $ 501 $ 2,568 $ 563
Defoors Crossing Apartments 520 2,480 452
Meadow Wood Apartments 501 2,884 366
Totals $ 1,522 $ 7,932 $ 1,381
<TABLE>
<CAPTION>
Gross Amount At Which
Carried
At December 31, 1999
(in thousands)
Buildings
And Related
Personal Accumulated Date of Date Depreciable
Description Land Property Total Depreciation Construction Acquired Life-Years
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Bronson Place $ 501 $ 3,131 $ 3,632 $ 1,222 1988 11/01/88 5-40
Defoors Crossing 520 2,932 3,452 1,010 1988 05/01/89 5-40
Meadow Wood 501 3,250 3,751 1,119 1988 10/02/89 5-40
Totals $ 1,522 $ 9,313 $10,835 $ 3,351
</TABLE>
<PAGE>
Reconciliation of "Real Estate and Accumulated Depreciation":
Years Ended December 31,
1999 1998
(in thousands)
Investment Properties
Balance at beginning of year $12,513 $12,366
Property improvements 231 147
Impairment loss on discontinued
operation (600) --
Sale of discontinued operation (1,309) --
Balance at end of year $10,835 $12,513
Accumulated Depreciation
Balance at beginning of year $ 3,400 $ 2,998
Amounts charged to expense 361 402
Sale of discontinued operation (410) --
Balance at end of year $ 3,351 $ 3,400
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1999 and 1998, is approximately $10,952,000 and $12,652,000,
respectively. The accumulated depreciation taken for Federal income tax purposes
at December 31, 1999 and 1998, is approximately $3,323,000 and $3,337,000,
respectively.
Note G - 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 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 years ended December 31, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in
operating expenses) $ 90 $ 88
Reimbursement for services of affiliates (included
in general and administrative expenses) 38 38
During the years ended December 31, 1999 and 1998, affiliates of the General
Partner were entitled to receive 5% of gross receipts from all of the
Partnership's residential properties as compensation for providing property
management services. The Partnership paid to such affiliates approximately
$90,000 and $84,000 for the years ended December 31, 1999 and 1998,
respectively. During the nine months ended September 30, 1998, affiliates of the
General Partner were entitled to varying percentages of gross receipts from the
Partnership's commercial property as compensation for providing management
services. These services were performed by affiliates of the General Partner for
the nine months ended September 30, 1998, and were approximately $4,000.
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 $38,000 for both of the years
ended December 31, 1999 and 1998.
For acting as real estate broker in connection with the sale of Peachtree
Corners Medical Building, the General Partner earned a real estate commission of
approximately $21,000. The commission was accrued at December 31, 1999. However,
this amount is not payable until the limited partners receive an amount equal to
their adjusted capital investment and cumulative distribution equal to an 8%
annual return from the last additional closing date or, if greater, a 6%
cumulative annual return from his date of admission to the Partnership.
The net proceeds from the sale of Corinth Square (see "Note C") were received by
United Investors Income Properties II, an affiliated partnership in which the
General Partner is also the sole General Partner. The Partnership's pro-rata
share of the net proceeds is approximately $400,000. This amount has been
recorded as "Due from affiliated partnership" in the accompanying balance sheet
as of December 31, 1999 and was received in January 2000.
Several tender offers were made by various parties, including affiliates of the
General Partner, during the years ended December 31, 1999 and 1998. As a result
of these tender offers, AIMCO and its affiliates currently own 11,695 limited
partnership units in the Partnership representing 19.152% of the outstanding
units. It is possible that AIMCO or its affiliates will make one or more
additional offers to acquire additional limited partnership interests in the
Partnership for cash or in exchange for units in the operating partnership of
AIMCO. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters. When
voting on matters, AIMCO would in all likelihood vote the Units it acquired in a
manner favorable to the interest of the General Partner because of their
affiliation with the General Partner.
Note H - Income Taxes
The Partnership received a ruling from the Internal Revenue Service that it is
to be classified as a partnership for Federal income tax purposes. Accordingly,
no provision for income taxes is made in the financial statements of the
Partnership. Taxable income or loss of the Partnership is reported in the income
tax returns of its partners.
The following is a reconciliation between net (loss) income as reported in the
financial statements and Federal taxable (loss) income allocated to the partners
in the Partnership's tax return for the years ended December 31, 1999 and 1998
(in thousands, except unit data):
1999 1998
Net (loss) income as reported $ (540) $ 566
Add (deduct):
Deferred revenue and other liabilities 6 (2)
Depreciation differences (29) 15
Accrued expenses -- (21)
Federal taxable (loss) income $ (563) $ 558
Federal taxable (loss) income per limited
partnership unit $(9.13) $9.05
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets at December 31, 1999 (in thousands):
Net assets as reported $ 9,028
Differences in basis of assets and liabilities
Deferred revenue and other liabilities 10
Accumulated depreciation 27
Commercial property at cost 117
Deferred charges and other assets --
Other (46)
Syndication costs 1,902
Net assets - tax basis $11,038
Note I - Segment Reporting
At December 31, 1999, the Partnership had one reportable segment: residential
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 consisted
of a medical building located in Atlanta, Georgia. On December 30, 1999, the
commercial property held by the Partnership was sold to an unrelated party.
Therefore, the commercial segment is reflected as discontinued operations (see
"Note E - Impairment Loss and Sale of Discontinued Operation" for further
discussion regarding the commercial sale).
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segment are the same as
those described in the summary of significant accounting policies.
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.
<PAGE>
Segment information for the years ended December 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.
<TABLE>
<CAPTION>
1999 Residential Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $1,675 $ -- $ -- $1,675
Other income 116 -- 23 139
Depreciation 361 -- -- 361
General and administrative expense -- -- 168 168
Income from discontinued
operation -- 7 -- 7
Impairment loss on discontinued
operation -- (600) -- (600)
Loss on sale of discontinued
operation -- (246) -- (246)
Equity in loss of joint venture -- -- (190) (190)
Segment profit (loss) 634 (839) (335) (540)
Total assets 8,041 -- 1,211 9,252
Capital expenditures for
investment properties 231 -- -- 231
</TABLE>
<TABLE>
<CAPTION>
1998 Residential Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $ 1,588 $ -- $ -- $ 1,588
Other income 84 -- 27 111
Depreciation 338 -- -- 338
General and administrative expense -- -- 85 85
Income from discontinued
operation -- 57 -- 57
Equity in income of joint venture -- -- 20 20
Segment profit (loss) 547 57 (38) 566
Total assets 7,920 1,625 1,399 10,944
Capital expenditures for
investment properties 128 19 -- 147
</TABLE>
Note J - Legal Proceedings
The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature arising in the ordinary course of business.
Note K - Change in Accounting Principle
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping on a prospective
basis. The Partnership believes that this accounting principle change is
preferable because it provides a better matching of expenses with the related
benefit of the expenditures and it is consistent with industry practice and the
policies of the General Partner. The effect of the change in 1999 was to
decrease the loss by approximately $60,000 ($.97 per limited partnership unit).
The cumulative effect, had this been applied to prior periods, is not material.
The accounting principle change will not have an effect on cash flow, funds
available for distribution or fees payable to the General Partner and
affiliates.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Effective September 23, 1998, the Registrant dismissed its prior Independent
Auditors, Deloitte & Touche LLP ("Deloitte") and retained as its new Independent
Auditors, KPMG LLP. Deloitte's Independent Auditor's Report on the Registrant's
financial statements for the calendar year ended December 31, 1997 did not
contain an adverse opinion or a disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope or accounting principles. The decision
to change Independent Auditors was approved by the General Partner's Directors.
During the calendar year ended 1997 and through September 23, 1998, there were
no disagreements between the Registrant and Deloitte on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope of
procedure which disagreements if not resolved to the satisfaction of Deloitte,
would have caused it to make references to the subject matter of the
disagreements in connection with its reports.
Effective September 23, 1998, the Registrant engaged KPMG LLP as its Independent
Auditors. During the last two calendar years and through September 23, 1998, the
Registrant did not consult KPMG LLP regarding any of the matters or events set
forth in Item 304 (a) (2) (i) and (ii) of Regulation S-B.
During the calendar year ended December 31, 1999, there were no disagreements
between the Registrant and KPMG LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons, Compliance
with Section 16(a) of the Exchange Act
United Investors Income Properties (the "Registrant" or the "Partnership") has
no officers or directors. The names of the directors and executive officers of
United Investors Real Estate, Inc. ("UIRE" or the "General Partner"), 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
Patrick J. Foye 42 Executive Vice President and Director
Martha L. Long 40 Senior Vice President and Controller
Patrick J. Foye has been Executive Vice President and Director of the General
Partner since October 1, 1998. Mr. Foye has served as Executive Vice President
of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a partner in the
law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was
Managing Partner of the firm's Brussels, Budapest and Moscow offices from 1992
through 1994. Mr. Foye is also Deputy Chairman of the Long Island Power
Authority and serves as a member of the New York State Privatization Council. He
received a B.A. from Fordham College and a J.D. from Fordham University Law
School.
Martha L. Long has been Senior Vice President and Controller of the General
Partner and AIMCO since October 1998, as a result of the acquisition of Insignia
Financial Group, Inc. From June 1994 until January 1997, she was the Controller
for Insignia, and was promoted to Senior Vice President - Finance and Controller
in January 1997, retaining that title until October 1998. From 1988 to June
1994, Ms. Long was Senior Vice President and Controller for The First Savings
Bank, FSB in Greenville, South Carolina.
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Registrant under Rule 16a-3(e) during the Registrant's most recent fiscal
year and Form 5 and amendments thereto furnished to the Registrant with respect
to its most recent fiscal year, the Registrant is not aware of any director,
officer, beneficial owner of more than ten percent of the units of limited
partnership interest in the Registrant that failed to file on a timely basis, as
disclosed in the above Forms, reports required by Section 16(a) of the Exchange
Act during the most recent fiscal year or prior fiscal years.
Item 10. Executive Compensation
No remuneration was paid by the Partnership to any officer or director of the
General Partner during the year ended December 31, 1999.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Except as noted below, no person or entity was known by the Registrant to be the
beneficial owner of more than 5% of the Limited Partnership Units of the
Registrant as of December 31, 1999.
Entity Number of Units Percentage
United Investors Real Estate Inc. 950 1.556%
(an affiliate of AIMCO)
Insignia Properties LP 88 0.144%
(an affiliate of AIMCO)
AIMCO Properties LP 10,657 17.452%
(an affiliate of AIMCO)
United Investors Real Estate Inc. and Insignia Properties LP are both indirectly
ultimately owned by AIMCO. Their business address is 55 Beattie Place,
Greenville, South Carolina 29602.
AIMCO Properties LP is indirectly ultimately controlled by AIMCO. Its business
address is 2000 South Colorado Boulevard, Denver, Colorado 80222.
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 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 years ended December 31, 1999 and 1998:
1999 1998
(in thousands)
Property management fees $ 90 $ 88
Reimbursement for services of affiliates 38 38
During the years ended December 31, 1999 and 1998, affiliates of the General
partner were entitled to receive 5% of gross receipts from all of the
Partnership's residential properties as compensation for providing property
management services. The Partnership paid to such affiliates approximately
$90,000 and $84,000 for the years ended December 31, 1999 and 1998,
respectively. During the nine months ended September 30, 1998, affiliates of the
General Partner were entitled to varying percentages of gross receipts from the
Partnership's commercial property as compensation for providing management
services. These services were performed by affiliates of the General Partner for
the nine months ended September 30, 1998, and were approximately $4,000.
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 $38,000 for both of the years
ended December 31, 1999 and 1998.
For acting as real estate broker in connection with the sale of Peachtree
Corners Medical Building, the General Partner earned a real estate commission of
approximately $21,000. The commission was accrued at December 31, 1999. However,
this amount is not payable until the limited partners receive an amount equal to
their adjusted capital investment and cumulative distribution equal to an 8%
annual return from the last additional closing date or, if greater, a 6%
cumulative annual return from his date of admission to the Partnership.
The net proceeds from the sale of Corinth Square were received by United
Investors Income Properties II, an affiliated Partnership in which the General
Partner is also the sole General Partner. The Partnership's pro-rata share of
the net proceeds is approximately $400,000. This amount has been recorded as
"Due from affiliated partnership" as of December 31, 1999 and was received in
January 2000.
Several tender offers were made by various parties, including affiliates of the
General Partner, during the years ended December 31, 1999 and 1998. As a result
of these tender offers, AIMCO and its affiliates currently own 11,695 limited
partnership units in the Partnership representing 19.152% of the outstanding
units. It is possible that AIMCO or its affiliates will make one or more
additional offers to acquire additional limited partnership interests in the
Partnership for cash or in exchange for units in the operating partnership of
AIMCO. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters. When
voting on matters, AIMCO would in all likelihood vote the Units it acquired in a
manner favorable to the interest of the General Partner because of their
affiliation with the General Partner.
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 18, Independent Accountants' Preferability Letter for Change
in Accounting Principle, is filed as an exhibit to this report.
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
(b) Reports on Form 8-K filed during the fourth quarter of calendar year
1999:
None.
<PAGE>
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/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date:
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 on the date
indicated.
/s/Patrick J. Foye Executive Vice President Date:
Patrick J. Foye and Director
/s/Martha L. Long Senior Vice President Date:
Martha L. Long and Controller
<PAGE>
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.1 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.
10.9 Purchase and Sale Contract between Registrant and Cadle's Peachtree Medical
Building, an Ohio Limited Liability Company, dated December 30, 1999.
10.10Addendum to Purchase and Sale Contract between Registrant and Cadle's
Peachtree Medical Building, an Ohio Limited Liability Company, dated
December 30, 1999.
10.11Purchase and Sale Contract between Corinth Square Associates and The Cadle
Company, an Ohio Corporation, dated December 30, 1999 relating to Corinth
Square Professional Building.
10.12Addendum to Purchase and Sale Contract between Corinth Square Associates
and The Cadle Company, an Ohio Corporation, dated December 30, 1999
relating to Corinth Square Professional Building.
16 Letter dated October 1, 1998 from the Registrant's former accountant
incorporated by reference to Exhibit (c) filed with Registrant's Current
Report on Form 8-K/A dated September 23, 1998.
18 Independent Accountants' Preferability Letter for Change in Accounting
Principle.
27 Financial Data Schedule
<PAGE>
Exhibit 18
February 25, 2000
Mr. Patrick J. Foye
Executive Vice President
United Investors Real Estate, Inc.
General Partner of United Investors Income Properties
55 Beattie Place
P.O. Box 1089
Greenville, South Carolina 29602
Dear Mr. Foye:
Note K of Notes to the Financial Statements of United Investors Income
Properties included in its Form 10-KSB for the year ended December 31, 1999
describes a change in the method of accounting to capitalize exterior painting
and major landscaping, which would have been expensed under the old policy. You
have advised us that you believe that the change is to a preferable method in
your circumstances because it provides a better matching of expenses with the
related benefit of the expenditures and is consistent with policies currently
being used by your industry and conforms to the policies of the General Partner.
There are no authoritative criteria for determining a preferable method based on
the particular circumstances; however, we conclude that the change in the method
of accounting for exterior painting and major landscaping is to an acceptable
alternative method which, based on your business judgment to make this change
for the reasons cited above, is preferable in your circumstances.
Very truly yours,
/s/KPMG LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from UNITED
INVESTORS INCOME PROPERTIES 1999 Fourth Quarter 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,167
<SECURITIES> 0
<RECEIVABLES> 154
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 10,835
<DEPRECIATION> (3,351)
<TOTAL-ASSETS> 9,252
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,028
<TOTAL-LIABILITY-AND-EQUITY> 9,252
<SALES> 0
<TOTAL-REVENUES> 1,814
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,325
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (540)
<EPS-BASIC> (8.76)<F2>
<EPS-DILUTED> 0
<FN>
<F1> Registrant has an unclassified balance sheet. <F2> Multiplier is 1.
</FN>
</TABLE>
