FORM 10-QSB.--QUARTERLY OR TRANSITIONAL REPORT
UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from.........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)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 369
Restricted-tenant security deposits 87
Accounts receivable, net of allowance of $58 20
Escrows for taxes and insurance 118
Restricted escrow 50
Other assets 218
Investment properties:
Land $ 1,979
Buildings and related personal property 15,150
17,129
Less accumulated depreciation (4,673) 12,456
$13,318
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 28
Tenant security deposits 87
Accrued taxes 108
Other liabilities 137
Mortgage notes payable, $3,764 in
default (Note E) 12,763
Partners' Capital (Deficit)
General partner's $ (4)
Limited partners' (39,297 units issued
and outstanding) 199 195
$13,318
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,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 767 $ 762 $2,238 $2,253
Other income 32 25 107 74
Total revenues 799 787 2,345 2,327
Expenses:
Operating 280 243 763 700
General and administrative 22 17 63 56
Maintenance 59 75 201 224
Depreciation 141 139 417 412
Interest 270 304 844 914
Property taxes 80 74 241 237
Total expenses 852 852 2,529 2,543
Minority interest in net
loss of joint venture -- -- -- 4
Net loss before
extraordinary loss $ (53) $ (65) $ (184) $ (212)
Extraordinary loss on debt
refinancing (22) -- (22) --
Net loss $ (75) $ (65) $ (206) $ (212)
Net loss allocated to
general partner (1%) $ (1) $ (1) $ (2) $ (2)
Net loss allocated to
limited partners (99%) (74) (64) (204) (210)
$ (75) $ (65) $ (206) $ (212)
Net loss before extraordinary
loss per limited partnership
unit $(1.33) $(1.63) $(4.64) $(5.34)
Extraordinary loss per limited
partnership unit (.55) -- (.55) --
Net loss per limited partnership
unit $(1.88) $(1.63) $(5.19) $(5.34)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</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's Partners' Total
<S> <C> <C> <C> <C>
Original capital contributions 39,297 $ -- $ 9,824 $ 9,824
Partners' (deficit) capital at
December 31, 1996 39,297 $ (2) $ 403 $ 401
Net loss for the nine months
ended September 30, 1997 -- (2) (204) (206)
Partners' (deficit) capital at
September 30, 1997 39,297 $ (4) $ 199 $ 195
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
d) UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (206) $ (212)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Minority interest in net loss of
joint venture -- (4)
Depreciation 417 412
Amortization of loan costs, lease commissions
and loan premium (22) 52
Extraordinary loss on debt refinancing 22 --
Change in accounts:
Restricted cash (9) (7)
Accounts receivable 2 17
Escrows for taxes and insurance (3) 6
Other assets (47) (16)
Accounts payable (26) (5)
Tenant security deposit liabilities 8 9
Accrued property taxes 66 43
Other liabilities 7 13
Net cash provided by operating activities 209 308
Cash flows from investing activities:
Property improvements and replacements (69) (59)
Receipts from restricted escrows -- 68
Net cash (used in) provided by
investing activities (69) 9
Cash flows from financing activities:
Liquidating distribution to minority interest -- (61)
Repayment of mortgage notes payable (133) (125)
Payoff of mortgage note principal (3,800) --
Proceeds from debt refinancing 3,850 --
Loan costs (87) --
Net cash used in financing activities (170) (186)
Net (decrease) increase in unrestricted cash and cash
equivalents (30) 131
Unrestricted cash and cash equivalents at beginning
of period 399 200
Unrestricted cash and cash equivalents at end of period $ 369 $ 331
Supplemental disclosure of cash flow information:
Cash paid for interest $ 883 $ 873
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
e) UNITED INVESTORS GROWTH PROPERTIES
NOTES TO CONSOLIDATED 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 United Investors Real Estate, Inc. (the "General Partner"), a
Delaware corporation, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and nine month periods ended September 30, 1997, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1997. 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, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 presentation.
NOTE B - BASIS OF ACCOUNTING
During 1994, Cheyenne Woods Apartments was restructured into a lower tier
partnership, known as Cheyenne Woods United Investors, L.P. During the third
quarter of 1997 Cheyenne Woods United Investors, L.P. was restructured into a
limited liability company known as Cheyenne Woods United Investors, L.L.C.
("Cheyenne"). United Investors Growth Properties owns 100% of the new entity.
Although legal ownership of the asset was transferred to a new entity, United
Investors Growth Properties retained 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"). During the third quarter of 1995, Renaissance Village
Apartments was sold. During the second quarter of 1996, a final distribution
was made to the joint ventures and the joint venture was liquidated. (see "Note
D" of the Notes to Consolidated Financial Statements).
NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
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. The following payments were made to
affiliates of the General Partner for the nine months ended September 30, 1997
and 1996 (in thousands):
1997 1996
Property management fees (included in
operating expenses) $119 $123
Reimbursement for services of affiliates
(included in general and administrative expenses) 34 24
For the period of January 1, 1996 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency and insurer unaffiliated
with the General Partner. An affiliate of the General Partner acquired, in the
acquisition of a business, certain financial obligations from an insurance
agency which was later acquired by the agent who placed the 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 D - 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
distributions.
NOTE E - MORTGAGE NOTE PAYABLE, IN DEFAULT
The Partnership's mortgage note payable for Greystone South Plaza Center of
approximately $3,764,000, net of loan premium, is currently in technical
default. The note calls for interest only payments each month with the interest
rate increasing from 8% to 9% on January 1, 1997. Due to the property's limited
cash flow, the mortgage payment has been paid at 8% rather than 9% during the
first nine months of 1997. The unpaid interest has been accrued for financial
reporting purposes. The lender has not notified the Partnership of any intent
to foreclose on the property.
NOTE F - REFINANCING AND EXTRAORDINARY LOSS
On August 8, 1997, the Partnership refinanced the mortgage encumbering Cheyenne
Woods Apartments. The refinancing replaced indebtedness of approximately
$3,800,000 with a new mortgage in the amount of $3,850,000 at an interest rate
of 7.67%. Interest on the old mortgage was 10.5%. Payments are due on the
first day of each month until the loan matures on September 1, 2007. Total
capitalized loan costs were approximately $87,000 at September 30, 1997. The
Partnership recognized an extraordinary loss in the amount of approximately
$22,000 due to the write off of unamortized loan costs.
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, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Terrace Royale Apartments
Bothell, Washington 94% 97%
Cheyenne Woods Apartments
North Las Vegas, Nevada 95% 98%
Greystone South Plaza Center
Lenexa, Kansas 80% 77%
Deerfield Apartments
Memphis, Tennessee 88% 98%
The General Partner attributes the occupancy decrease at Deerfield to recently
built new units in the market and road construction in front of the apartment
complex. The road construction was completed in 1997 and the General Partner
anticipates occupancy will increase as a result. Physical occupancy had improved
to 95% at September 30, 1997. The occupancy decrease at Terrace Royale relates
to rental increases during the past 12 months. The decreased occupancy at
Cheyenne Woods is due to increased competition due to the recent completion of
new apartment units in the local market.
The Partnership realized a net loss of approximately $206,000 for the nine
months ended September 30, 1997, compared to a net loss of approximately
$212,000 for the corresponding period of 1996. The net loss for the three
months ended September 30, 1997, was approximately $75,000 compared to a net
loss of approximately $65,000 for the three months ended September 30, 1996.
Included in net loss for the three and nine months ended September 30, 1997, is
an extraordinary loss of $22,000. The extraordinary loss is a result of the
refinancing as discussed in "Item 1 - Note F - Refinancing and Extraordinary
Loss."
The decrease in the loss before extraordinary loss for the three and nine months
ended September 30, 1997 is primarily attributable to increased other income and
decreased interest expense in 1997. Other income increased primarily due to
increased lease cancellation fees at the residential properties. Interest
expense decreased due to a reduction in interest on the Greystone mortgage note.
Included in interest expense for Greystone for the nine months ended September
30, 1996, was a catch up of deferred interest on the Greystone mortgage related
to the increasing interest rate, as required by the mortgage note. Also
contributing to the decrease in interest expense was the Cheyenne Woods mortgage
note being refinanced with an interest rate equal to 7.67% compared to the
previous rate of 10.5% during the third quarter of 1997. These changes were
partially offset by increased operating expenses at Cheyenne Woods and
Deerfield.
Included in maintenance expense for the nine months ended September 30, 1997, is
approximately $15,000 of major repairs and maintenance comprised primarily of
exterior building repairs and landscaping. Included in maintenance expense for
the nine months ended September 30, 1996 is approximately $45,000 of major
repairs and maintenance comprised primarily of exterior building repairs and
landscaping.
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, 1997, the Partnership had unrestricted cash and cash
equivalents of $369,000 compared to $331,000 at September 30, 1996. Net cash
provided by operating activities decreased primarily due to increased lease
commissions paid during 1997 and a decrease in accounts payable related to the
timing of payments. Net cash used in investing activities increased primarily
due to a decrease in receipts from restricted escrows. Net cash used in
financing activities decreased primarily due to proceeds received from
refinancing the mortgage note payable for Cheyenne Woods.
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 $12,763,000 matures at various times with balloon
payments due at maturity before which time the properties will either be
refinanced or sold. Currently the mortgage note payable for Greystone South
Plaza Center of approximately $3,674,000 net of loan premium, is currently in
technical default. The note calls for interest only payments each month with
the interest rate increasing from 8% to 9% on January 1, 1997. Due to the
property's limited cash flow, the mortgage payment has been paid at 8% rather
than 9% during the first nine months of 1997. As a result, this property could
be lost through foreclosure. However, the lender has not notified the
Partnership of its intent to foreclose on the property. If the lender did
foreclose on Greystone, the General Partner anticipates that the Partnership's
liquidity would not be significantly impacted, as the property has operated at
approximately break even on a cash flow basis during 1996 and 1997. Future cash
distributions will depend on the levels of net cash generated from operations,
property sales and the availability of cash reserves. No cash distributions
were made in 1996 or during the first nine months of 1997.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: See Exhibit Index contained herein.
b) Reports on Form 8-K:
None filed during the quarter ended September 30, 1997.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNITED INVESTORS GROWTH PROPERTIES
By: United Investors Real Estate, Inc.
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 7, 1997
UNITED INVESTORS GROWTH PROPERTIES
EXHIBIT INDEX
Exhibit Number Description of Exhibit
10.18 Multifamily Note dated August 7, 1997, by and
between Cheyenne Woods, L.L.C., a South
Carolina limited liability company, and Green
Park Financial Limited Partnership, a District
of Columbia Limited Partnership.
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from United
Investors Growth Properties 1997 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-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 369
<SECURITIES> 0
<RECEIVABLES> 78
<ALLOWANCES> 58
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 17,129
<DEPRECIATION> 4,673
<TOTAL-ASSETS> 13,318
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 12,763
0
0
<COMMON> 0
<OTHER-SE> 195
<TOTAL-LIABILITY-AND-EQUITY> 13,318
<SALES> 0
<TOTAL-REVENUES> 2,345
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,529
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 844
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (22)
<CHANGES> 0
<NET-INCOME> (206)
<EPS-PRIMARY> (5.19)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
Exhibit 10.18
MULTIFAMILY NOTE
US $3,850,000.00
Las Vegas, Nevada
August 7, 1997
FOR VALUE RECEIVED, the undersigned promise to pay GREEN PARK FINANCIAL
LIMITED PARTNERSHIP, a District of Columbia limited partnership or order, the
principal sum of Three Million Eight Hundred and Fifty Thousand and 00/100
Dollars, with interest on the unpaid principal balance from the date of this
Note, until paid, at the rate of 7.67 percent per annum. The principal and
interest shall be payable at 7500 Old Georgetown Road, Suite 800, Bethesda,
Maryland 20814-6133, or such other place as the holder hereof may designate in
writing, in consecutive monthly installments of Twenty-seven Thousand Three
Hundred Sixty Nine and 34/100 Dollars (US $27,369.34) on the first day of each
month beginning October 1, 1997, (herein "amortization commencement date") until
the entire indebtedness evidenced hereby is fully paid, except that any
remaining indebtedness, if not sooner paid, shall be due and payable on
September 1, 2007.
If any installment under this Note is not paid when due, the entire
principal amount outstanding hereunder and accrued interest thereon shall at
once become due and payable, at the option of the holder hereof. The holder
hereof may exercise this option to accelerate during any default by the
undersigned regardless of any prior forbearance. In the event of any default in
the payment of this Note, and if the same is referred to an attorney at law for
collection or any action at law or in equity is brought with respect hereto, the
undersigned shall pay the holder hereof all expenses and costs, including, but
not limited to, attorney's fees.
If any installment under this Note is not received by the holder hereof
within five (5) calendar days after the installment is due, the undersigned
shall pay to the holder hereof a late charge of five (5) percent of such
installment, such late charge to be immediately due and payable without demand
by the holder hereof. If any installment under this Note remains past due for
thirty (30) calendar days or more, the outstanding principal balance of this
Note shall bear interest during the period in which the undersigned is in
default at a rate of 11.67 percent per annum, or, if such increased rate of
interest may not be collected from the undersigned under applicable law, then at
the maximum increased rate of interest, if any, which may be collected from the
undersigned under applicable law.
From time to time, without affecting the obligation of the undersigned or
the successors or assigns of the undersigned to pay the outstanding principal
balance of this Note and observe the covenants of the undersigned contained
herein, without affecting the guaranty of any person, corporation, partnership
or other entity for payment of the outstanding principal balance of this Note,
without giving notice to or obtaining the consent of the undersigned, the
successors or assigns of the undersigned or guarantors, and without liability on
the part of the holder hereof, the holder hereof may, at the option of the
holder hereof, extend the time for payment of said outstanding principal balance
or any part thereof, reduce the payments thereon, release anyone liable on any
of said outstanding principal balance, accept a renewal of this Note, modify the
terms and time of payment of said outstanding principal balance, join in any
extension or subordination agreement, release any security given herefor, take
or release other or additional security, and agree in writing with the
undersigned to modify the rate of interest or period of amortization of this
Note or change the amount of the monthly installments payable hereunder.
Presentment, notice of dishonor, and protest are hereby waived by all
makers, sureties, guarantors and endorsers hereof. This Note shall be the joint
and several obligation of all makers, sureties, guarantors and endorsers, and
shall be binding upon them and their successors and assigns.
The indebtedness evidenced by this Note is secured by a Mortgage or Deed of
Trust dated as of August 7, 1997 hereof, and reference is made thereto for
rights as to acceleration of the indebtedness evidenced by this Note. This Note
shall be governed by the law of the jurisdiction in which the Property subject
to the Mortgage or Deed of Trust is located.
The Addendum to Multifamily Note, of even date herewith, attached hereto,
is incorporated herein by this reference.
In the event of any inconsistency between the terms of this Note and the
Addendum to Multifamily Note, the term of the Addendum to Multifamily Note shall
govern.
CHEYENNE WOODS, L.L.C., a South Carolina
limited liability company
By: United Investors Growth Properties
(A Missouri Limited Partnership)
its Managing Member
By: United Investors Real Estate, Inc.,
a Delaware corporation, its General
Partner
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President
PAY TO THE ORDER OF
__________________________________
WITHOUT RECOURSE
GREEN PARK FINANCIAL LIMITED PARTNERSHIP
a District of Columbis limited partnership
By: WALKER & DUNLOP GP, LLC
a Delaware limited liability company,
Managing General Partner
By: /s/Mary Ellen Slavinskas
Name:Mary Ellen Slavinskas
Title:Vice President
