FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
For the transition period.........to.........
Commission file number 0-17645
UNITED INVESTORS GROWTH PROPERTIES
(Exact name of small business issuer as specified in its charter)
Missouri 43-1483928
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
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 GROWTH PROPERTIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1996
Assets
Cash:
Unrestricted $ 331
Restricted-tenant security deposits 82
Accounts receivable, net of allowance
of $52 21
Escrows for taxes and insurance 122
Restricted escrow 50
Other assets 180
Investment properties:
Land $ 1,979
Buildings and related personal property 15,066
17,045
Less accumulated depreciation (4,117) 12,928
$13,714
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 43
Tenant security deposits 82
Accrued taxes 88
Other liabilities 114
Mortgage notes payable 12,930
Partners' Capital (Deficit)
General partner $ (1)
Limited partners (39,297 units issued
and outstanding) 458 457
$13,714
See Accompanying Notes to Consolidated Financial Statements
b) UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 762 $ 823 $2,253 $2,664
Other income 25 50 74 124
Total revenues 787 873 2,327 2,788
Expenses:
Operating 244 287 703 888
General and administrative 17 24 56 59
Maintenance 74 104 221 253
Depreciation 139 163 412 512
Interest 304 375 914 1,193
Property taxes 74 89 237 292
Total expenses 852 1,042 2,543 3,197
Minority interest in net
(income)loss of joint venture -- (45) 4 (18)
Gain on disposition of
investment property -- 165 -- 165
Net loss $ (65) $ (49) $ (212) $ (262)
Net (loss) income allocated to
general partner $ (1) $ 77 $ (2) $ 74
Net loss allocated to
limited partners (64) (126) (210) (336)
$ (65) $ (49) $ (212) $ (262)
Net loss per limited
partnership unit $(1.63) $(3.19) $(5.34) $(8.56)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c) UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 39,297 $ -- $ 9,824 $ 9,824
Partners' capital at
December 31, 1995 39,297 $ 1 $ 668 $ 669
Net loss for the nine months
ended September 30, 1996 -- (2) (210) (212)
Partners' capital (deficit) at
September 30, 1996 39,297 $ (1) $ 458 $ 457
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities:
Net loss $ (212) $ (262)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Minority interest in net (income) loss of
joint venture (4) 18
Depreciation 412 512
Amortization of intangible assets 52 94
Gain on sale of property -- (165)
Change in accounts:
Restricted cash (7) 13
Accounts receivable 17 (28)
Escrows for taxes and insurance 6 16
Other assets (16) (33)
Accounts payable (5) (11)
Tenant security deposit liabilities 9 (15)
Accrued property taxes 43 --
Other liabilities 13 (38)
Net cash provided by operating activities 308 101
Cash flows from investing activities:
Property improvements and replacements (59) (74)
Proceeds from sale of property -- 3,990
Receipts from restricted escrows 68 --
Deposits to restricted escrows -- (15)
Net cash provided by
investing activities 9 3,901
Cash flows from financing activities:
Distributions from minority interest -- 18
Liquidating distribution to minority interest (61) --
Repayment of mortgage notes payable -- (3,874)
Payments of mortgage notes payable (125) (135)
Net cash used in financing activities (186) (3,991)
Net increase in cash 131 11
Cash at beginning of period 200 247
Cash at end of period $ 331 $ 258
Supplemental disclosure of cash flow information:
Cash paid for interest $ 873 $ 1,157
See Accompanying Notes to Consolidated Financial Statements
e) UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of United Investors
Growth Properties ("the Partnership"), have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of the General Partner (United Investors Real Estate, Inc.), all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and nine
month periods ended September 30, 1996, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1996. For
further information, refer to the financial statements and footnotes thereto
included in the Partnership's annual report on Form 10-KSB for the fiscal year
ended December 31, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
NOTE B - BASIS OF ACCOUNTING
The financial statements include the Partnership's operating divisions, Terrace
Royale Apartments, Deerfield Apartments, and Greystone South Plaza Center.
During the second quarter of 1994, Cheyenne Woods Apartments was restructured
into a lower-tier partnership, known as Cheyenne Woods United Investors, L.P.
("Cheyenne"), in which United Investors Growth Properties is the 99.99% limited
partner. Although legal ownership of the asset was transferred to a new entity,
United Investors Growth Properties retained substantially all economic benefits
from the property. The Partnership consolidates its interest in Cheyenne
(whereby all accounts of Cheyenne are included in the consolidated financial
statements of the Partnership with intercompany accounts being eliminated). In
addition, the Partnership owned a 60% interest in Renaissance Village Associates
("Renaissance"). The Partnership consolidated its interest in Renaissance
(whereby all accounts of the joint venture are included in the Partnership's
financial statements with intercompany accounts being eliminated). The minority
partner's share of the joint venture's net assets were reflected as minority
interest in the balance sheet of the Partnership. Earnings and losses
attributable to the minority partner's ownership of the joint venture were
reflected as a reduction or addition to net income of the Partnership. In the
third quarter of 1995, Renaissance Village Apartments was sold by Renaissance.
In accordance with the partnership agreement, net income and net loss (as
defined in the Partnership agreement, income or loss of the Partnership
determined without regard to gain or loss from sale) shall be allocated 1% to
the General Partner and 99% to the limited partners. Distributions are
allocated 1% to the General Partner and 99% to the limited partners.
NOTE B - BASIS OF ACCOUNTING (CONTINUED)
Gain from a sale shall be allocated as follows: (a) first to each partner who
has a negative capital account, an amount equal to (or in proportion to if less
than) such partner's negative capital account balance and (b) second, 99% to the
limited partners and 1% to the General Partner, until each limited partner has
been allocated an amount equal to (or in proportion to if less than) the excess,
if any, of such limited partner's adjusted capital investment over his capital
account.
Loss from a sale shall be allocated as follows: (a) first to each partner who
has a positive capital account, an amount equal to (or in proportion to if less
than) such partner's positive capital account balance and (b) second, 99% to the
limited partners and 1% to the General Partner.
Anything in the Partnership Agreement to the contrary notwithstanding, the
interests of the General Partner, in the aggregate, in each material item of
income, gain, loss deduction and credit of the Partnership will be equal to at
least 1% of each item at all times during the existence of the Partnership.
During the second quarter of 1996, a final distribution was made to the joint
venturers and the joint venture was liquidated.
NOTE C - REPURCHASE OF UNITS
The partnership agreement for the Partnership contains a provision which states
that the General Partner shall purchase up to 10% of the limited partnership
units outstanding at the fifth anniversary date of the last Additional Closing
Date and become a limited partner with respect to such units. Pursuant to this
provision, the General Partner accepted repurchase notices representing 10% of
the limited partnership units and, during the fourth quarter of 1995, the
transfer of 3,926 units was effected.
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 property
management services and for reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. Property management fees are included
in operating expenses. The following payments were made to affiliates of the
General Partner for the nine months ended September 30, 1996 and 1995:
1996 1995
(in thousands)
Property management fees $123 $143
Reimbursement for services of affiliates 24 $23
NOTE D - TRANSACTIONS WITH AFFILIATED PARTIES (CONTINUED)
The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the General Partner. An affiliate of the General
Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the General Partner who receives
payments on these obligations from the agent. The amount of the Partnership's
insurance premiums accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligations is not significant.
NOTE E - SALE OF INVESTMENT PROPERTY
On August 30, 1995, Renaissance Village Apartments was sold to an unaffiliated
party, Kauri Investments, Ltd. The Partnership recognized a gain on the sale of
approximately $165,000. The minority interest share of this gain was
approximately $66,000. The joint venture was liquidated during the second
quarter of 1996 with the Partnership retaining approximately $92,000 and the
minority interest holder receiving approximately $61,000 as liquidating
dividends.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of three apartment complexes and
a retail center. The following table sets forth the average occupancy of the
properties for the nine month periods ended September 30, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Terrace Royale Apartments
Bothell, Washington 97% 93%
Cheyenne Woods Apartments
North Las Vegas, Nevada 98% 97%
Greystone South Plaza Center
Lenexa, Kansas 77% 81%
Deerfield Apartments
Memphis, Tennessee 98% 98%
The decrease in occupancy at Greystone South was due to tenants vacating the
property resulting in a net decrease of 2,700 square feet occupied at September
30, 1996.
The Partnership realized a net loss of $212,000 for the nine months ended
September 30, 1996, of which $65,000 was realized during the third quarter. The
corresponding net loss for 1995 was $262,000 and $49,000, respectively. The
decrease in the net loss was primarily due to the sale of Renaissance Village in
August of 1995. Renaissance generated $525,000 in revenues and $645,000 in
expenses during the nine months ending September 30, 1995. The absence of this
property explains the overall decreases in rental revenues and total expenses.
Also contributing to the decreased net loss was an increase in rental revenues
at the remaining properties resulting from increased occupancy and rental rate
increases.
The operating results, excluding the impact of the Renaissance Village sale,
generated a decrease in net loss of $82,000. This is primarily due to the
increase in rental revenues discussed above partially offset by an increase in
maintenance expense of $9,000. The maintenance expense increase is attributable
to landscaping and exterior improvements at Deerfield and Cheyenne Woods,
respectively.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of its investment properties to assess
the feasibility of increasing rents, maintaining or increasing occupancy levels
and protecting the Partnership from increases in expense. As part of this plan,
the General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, due to changing market conditions, which
can result in the use of rental concessions and rental reductions to offset
softening market conditions, there is no guarantee that the General Partner will
be able to sustain such a plan.
At September 30, 1996, the Partnership held unrestricted cash of $331,000
compared to $258,000 at September 30, 1995. Net cash provided by operating
activities increased due to decreased expenses and interest payments (which
offset the decreased revenues) resulting from the sale of Renaissance Village.
Net cash provided by investing activities decreased as a result of the benefit
of the proceeds from the sale of Renaissance Village in 1995. Net cash used in
financing activities decreased due to the repayment of the Renaissance Village
mortgage caused by the sale of the property in 1995.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the various properties to adequately maintain the
physical assets and other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The mortgage indebtedness of $12,930,000 matures at various times with balloon
payments due at maturity, at which time the properties will either be refinanced
or sold. Future cash distributions will depend on the levels of net cash
generated from operations, property sales and the availability of cash reserves.
Other than the liquidating distribution related to Renaissance Village, no cash
distributions were made in 1995 or during the first nine months of 1996.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K:
None filed during the quarter ended September 30, 1996.
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 GROWTH PROPERTIES
(A Missouri Limited Partnership)
By: United Investors Real Estate, Inc., a
Delaware corporation, its General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President/CAO
Date: November 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from United
Investors Growth Properties 1996 Third Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000831663
<NAME> UNITED INVESTORS GROWTH PROPERTIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 331
<SECURITIES> 0
<RECEIVABLES> 73
<ALLOWANCES> 52
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 17,045
<DEPRECIATION> 4,117
<TOTAL-ASSETS> 13,714
<CURRENT-LIABILITIES> 0
<BONDS> 12,930
0
0
<COMMON> 0
<OTHER-SE> 457
<TOTAL-LIABILITY-AND-EQUITY> 13,714
<SALES> 0
<TOTAL-REVENUES> 2,327
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,543
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 914
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (212)
<EPS-PRIMARY> (5.34)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
