FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT
UNDER SECTION 13 OR 15(D)
FORM 10-KSB
(Mark One)
[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, 1997
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 [No Fee Required]
For the transition period from.........to.........
Commission file number 0-17645
UNITED INVESTORS GROWTH PROPERTIES
(Name of small business issuer in its charter)
Missouri 43-1483928
(State or other jurisdiction of (I.R.S. 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
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 during the past 12 months (or for such shorter
period that the Partnership 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 Partnership'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: $3,145,000.
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 a specified date within the past 60 days: Market value
information for the Partnership's partnership interests is not available.
Should a trading market develop for these interests, it is the General Partner's
belief that the aggregate market value of the voting partnership's interest
would not exceed $25,000,000.
DOCUMENTS INCORPORATED BY REFERENCE
1.Portions of the Prospectus of Partnership dated June 13, 1988 (included in
Registration Statement, No. 33-21114, of Partnership) are incorporated by
reference into Parts I and III.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
United Investors Growth Properties (the "Registrant" or "Partnership"), a
Missouri Limited Partnership, was organized as a limited partnership under the
laws of the State of Missouri pursuant to a Certificate of Limited Partnership
filed on July 1, 1988, with the Missouri Secretary of State. The Partnership is
governed by an Agreement of Limited Partnership dated October 24, 1988. United
Investors Real Estate, Inc., a Delaware corporation, is the sole general partner
(the "General Partner") of the Partnership. Effective December 31, 1992, 100%
of the General Partner's Common Stock was purchased by MAE GP Corporation ("MAE
GP"), which is wholly owned by Metropolitan Asset Enhancement, L.P. ("MAE"), an
affiliate of Insignia Financial Group, Inc. ("Insignia"). Effective February
25, 1998, MAE GP was merged into Insignia Properties Trust ("IPT"), which is an
affiliate of Insignia. Thus the General Partner is now a wholly-owned
subsidiary of IPT. On March 17, 1998, Insignia entered into an agreement to
merge its national residential property management operations, and its
controlling interest in Insignia Properties Trust, with Apartment Investment and
Management Company ("AIMCO"), a publicly traded real estate investment trust.
The closing, which is anticipated to happen in the third quarter of 1998, is
subject to customary conditions, including government approvals and the approval
of Insignia's shareholders. If the closing occurs, AIMCO will then control the
General Partner of the Partnership.
The Partnership is engaged in the business of acquiring and operating
multifamily residential and commercial properties and other income producing
real estate. The Partnership has acquired three multifamily residential
properties and a retail center which includes medical office space. In
addition, the Partnership owned a 60% interest in a joint venture which owned a
multifamily residential property. During the third quarter of 1995, this
multifamily residential property was sold (see "Note B" of the Notes to
Consolidated Financial Statements, included in "Item 7. Financial Statements").
The remaining properties are further described in "Item 2. Description of
Properties" below.
Commencing on or about June 13, 1988, the Partnership began offering through
Waddell & Reed, Inc., a former affiliate of the Partnership (the "Selling
Agent"), 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). Limited
partners (the "Limited Partners") are not required to make any additional
capital contributions. The Units were registered under the Securities Act of
1933, as amended (the "Act"), under Registration Statement No. 33-21114, which
Registration Statement was declared effective on June 13, 1988.
The offering of Units terminated June 13, 1990. Upon termination of the
offering, the Partnership had accepted subscriptions for 39,297 Units resulting
in Gross Offering Proceeds of $9,824,000.
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.
The real estate business is highly competitive. The Partnership's real property
investments are subject to competition from similar types of properties in the
vicinities in which they are located, and the Partnership is not a significant
factor in its industry. In addition, various limited partnerships have been
formed by related parties to engage in business which may be competitive with
the Partnership.
The Partnership has no employees. Management and administrative services are
performed by affiliates of Insignia. The property manager is responsible for
the day-to-day operations of each property. The General Partner has also
selected affiliates of Insignia to provide real estate advisory and asset
management services to the Partnership. As advisor, these affiliates provide all
partnership accounting and administrative services, investment management, and
supervisory services over property management and leasing. For a further
discussion of property and partnership management, see "Item 12. Certain
Relationship and Related Transactions", which descriptions are herein
incorporated by reference.
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.
ITEM 2. DESCRIPTION OF PROPERTIES:
The following table sets forth the Partnership's investments in properties:
<TABLE>
<CAPTION>
Date of
Property Purchase Type of Ownership Use
<S> <C> <C> <C>
Terrace Royale Apartments 11/01/88 Fee ownership subject Apartment
Bothell, Washington to first mortgage 80 units
Cheyenne Woods Apartments 04/18/89 Fee ownership subject Apartment
North Las Vegas, Nevada to first mortgage 160 units
Greystone South Plaza Center 11/27/89 Fee ownership subject Retail and
Lenexa, Kansas to first mortgage Medical Center
55,000 sq. ft.
Deerfield Apartments 10/24/90 Fee ownership subject Apartment
Memphis, Tennessee to first mortgage 136 units
</TABLE>
SCHEDULE OF PROPERTIES (IN THOUSANDS):
Gross
Carrying Accumulated Useful Federal
Property Value Depreciation Life Method Tax Basis
Terrace Royale $ 4,471 $1,303 5-40 yrs S/L $ 3,144
Cheyenne Woods 6,048 1,680 5-40 yrs S/L 4,409
Greystone South 2,126 623 5-40 yrs S/L 4,290
Deerfield 4,550 1,192 5-40 yrs S/L 3,320
Totals $17,195 $4,798 $ 15,163
See "Note A" of the Notes to Consolidated Financial Statements included in "Item
7. Financial Statements" for a description of the Partnership's depreciation
policy.
SCHEDULE OF MORTGAGES (IN THOUSANDS):
Principal Principal
Balance At Stated Period Balance
December 31, Interest Amortized Maturity Due At
Property 1997 Rate (A) Date Maturity
Terrace Royale $ 2,481 8.50%(1) 20 years 11/98 $ 2,417
Cheyenne Woods 3,842 7.67% 30 years 09/07 3,360
Greystone South 3,605 9.00%(2) (2) 12/99 3,605
Deerfield 3,600 7.34% 30 years 12/04 3,303
Total 13,528 $12,685
Deferred Interest 141
$13,669
(A) The mortgage loans on each of the properties mature at various times with
balloon payments due at maturity.
(1) The interest rate on the mortgage loan collateralized by the Terrace Royale
Apartments was fixed at an annual rate of 10% for the first five years
(through November 1993). The terms of the note were modified to reduce the
interest rate to 8.5% for the remaining five years.
(2) The mortgage loan collateralized by Greystone South requires monthly
payments of interest only to maturity and additional quarterly contingent
interest payments to be made equal to 50% of the net cash flow from
operations of Greystone South. Contingent interest payments of $2,000 were
made in 1996. No contingent interest payments were required in 1997. The
interest rate increased from 8% to 9% in 1997. Interest on the mortgage is
computed using the effective interest method at an imputed rate of 6.8%.
The related deferred interest is included in the mortgage notes payable
balance. For part of 1997, Greystone's mortgage note payable was in
technical default because the mortgage payments were being paid at 8%
rather than the required 9%. At December 31, 1997, the interest payments
on the debt were current, with the monthly payments being made at 9%. At
December 31, 1997 the mortgage was in technical default due to nonpayment
of property taxes due in December 1997.
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. The Partnership recognized
an extraordinary loss in the amount of approximately $22,000 due to the write
off of unamortized loan costs.
On November 20, 1997, the Partnership refinanced the mortgage encumbering
Deerfield Apartments. The refinancing replaced indebtedness of approximately
$2,634,000 with a new mortgage in the amount of $3,600,000 at an interest rate
of 7.34%. Interest on the old mortgage was 9.15%. Payments are due on the
first day of each month until the loan matures on December 1, 2004. Total
capitalized loan costs were approximately $96,000. The Partnership recognized
an extraordinary loss in the amount of approximately $14,000 due to the write
off of unamortized loan costs.
SCHEDULE OF RENTAL RATES AND OCCUPANCY:
Average Annual Average Annual
Rental Rates Occupancy
1997 1996 1997 1996
Terrace Royale Apts. $9,519/unit $8,782/unit 95% 97%
Cheyenne Woods Apts. 6,792/unit 6,427/unit 95% 97%
Deerfield Apts. 6,387/unit 6,174/unit 90% 98%
Greystone South Plaza 8.88/sq.ft. 9.02/sq.ft. 80% 77%
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. As of December 31, 1997,
physical occupancy at Deerfield had improved to 94%.
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 and commercial buildings
in the localities in which they operate. The General Partner believes that all
of the properties are adequately insured. The multi-family residential
properties' lease terms are for one year or less. No residential tenant leases
10% or more of the available rental space.
The following is a schedule of the lease expirations at Greystone South Plaza
for the years 1998-2007:
Number of % of Gross
Expirations Square Feet Annual Rent Annual Rent
(in thousands)
1998 2 3,900 $ 36 9.4%
1999 6 13,367 92 24.0%
2000 5 11,864 95 24.7%
2001 2 4,800 57 15.0%
2002 2 6,540 73 19.0%
2003 0 0 0 0.0%
2004 1 2,100 29 7.5%
2005-2007 0 0 0 0.0%
The following schedule reflects information on the only tenant leasing 10% or
more of the leasable square footage of Greystone South Plaza.
Square Footage Annual rent per Lease
Nature of Business Leased Square Foot Expiration
Home furnishing 5,537 $ 3.41 (1)
(1) The tenant leases 770 square feet on a month-to-month basis and 4,767
square feet with a lease expiration of 4/30/99.
SCHEDULE OF REAL ESTATE TAXES (IN THOUSANDS) AND RATES:
1997 1997
Taxes Rate
Terrace Royale $72 1.56%
Cheyenne Woods 69 1.12%
Greystone South 80 2.90%
Deerfield 88 6.34%
ITEM 3. LEGAL PROCEEDINGS
The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature. The General Partner believes that all such pending or
outstanding litigation will be resolved without a material adverse effect upon
the business, financial condition, or operations of the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fiscal year ended December 31, 1997 no matters were submitted to a
vote of Unit holders through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR PARTNERSHIP EQUITY AND RELATED PARTNER MATTERS
At January 1, 1998, the number of holders of record of Limited Partnership Units
was 1,107. No public trading market has developed for the Units, and it is not
anticipated that such a market will develop in the future.
There were no distributions to the Limited Partners or to the General Partner in
1997 or 1996. A distribution of $400,000 was declared and paid in the first
quarter of 1998. This distribution represented a portion of the net proceeds
from the mortgage refinancing of Deerfield Apartments. Future distributions
will depend on the levels of cash generated from operations, property sales,
refinancings, and the availability of cash reserves.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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 for the year ended December 31, 1997, of
approximately $327,000 compared to a net loss for the year ended December 31,
1996 of approximately $268,000. The increase in net loss is partially
attributable to the extraordinary loss of $36,000 resulting from the refinancing
of debt on two of the Partnership's properties as discussed below in "Liquidity
and Capital Resources". The $36,000 loss represented unamortized loan costs on
the refinanced debt, which were written off at the time of the refinancings.
The loss before extraordinary loss for the year ended December 31, 1997, was
approximately $291,000 compared to a loss for the year ended December 31, 1996
of approximately $268,000.
The increase in the loss before extraordinary loss for the year ended December
31, 1997, is primarily attributable to increased operating expense in 1997.
This increase was largely due to increased advertising costs and concessions, as
well as utility charges for vacant units at Deerfield, which experienced lower
occupancy in the first half of 1997. Also included in operating expense for the
year ended December 31, 1997, was approximately $75,000 of major repairs and
maintenance comprised primarily of exterior painting and parking lot repairs.
Included in operating expense for the year ended December 31, 1996, was
approximately $50,000 of major repairs and maintenance comprised primarily of
exterior building repairs and landscaping. Partially offsetting the increase in
operating expense was decreased interest expense due to a reduction in interest
on the Greystone mortgage note. Included in interest expense for Greystone for
the year ended December 31, 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
refinancing of the Cheyenne Woods mortgage note at a lower interest rate, as
discussed below in "Liquidity and Capital Resources." Also partially offsetting
the increase in operating expense was an increase in other income and a 1997
gain on a casualty event of $22,000. Other income increased primarily due to
increased lease cancellation fees at the residential properties. The casualty
gain relates to the replacement of storm-damaged carports at Terrace Royale.
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.
Liquidity and Capital Resources
At December 31, 1997, the Partnership had cash and cash equivalents of
approximately $1,120,000 compared to approximately $399,000 at December 31,
1996. The net increase in cash and cash equivalents for the year ended December
31, 1997 was $721,000 compared to a net increase of $199,000 for the year ended
December 31, 1996. Net cash provided by operating activities decreased
primarily due to increased operating costs, as discussed above, and increased
other assets. Net cash used in investing activities increased due to increased
property improvements and increased deposits to restricted escrows, as a result
of escrows established with the refinancings of Cheyenne Woods and Deerfield
Apartments. Net cash provided by financing activities increased due to net
proceeds received from refinancing the mortgage notes payable at Cheyenne Woods
and Deerfield Apartments.
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. The Partnership recognized
an extraordinary loss in the amount of approximately $22,000 due to the write
off of unamortized loan costs.
On November 20, 1997, the Partnership refinanced the mortgage encumbering
Deerfield Apartments. The refinancing replaced indebtedness of approximately
$2,634,000 with a new mortgage in the amount of $3,600,000 at an interest rate
of 7.34%. Interest on the old mortgage was 9.15%. Payments are due on the
first day of each month until the loan matures on December 1, 2004. Total
capitalized loan costs were approximately $96,000. The Partnership recognized
an extraordinary loss in the amount of approximately $14,000 due to the write
off of unamortized loan costs.
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 as well as future maturing mortgage obligations and related
refinancing expenses. Such assets are currently thought to be sufficient for
any near-term needs of the Partnership. The mortgage indebtedness of
$13,669,000 matures at various times with balloon payments due at maturity
before which time the properties will either be refinanced or sold. The
mortgage encumbering Terrace Royale matures in November 1998. The General
Partner expects to refinance the debt before the maturity date. Currently the
mortgage note payable for Greystone South Plaza Center of approximately
$3,605,000 net of loan premium is currently in technical default. Due to the
property's limited cash flow, real property taxes on Greystone due in December,
1997 have not been paid. 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. No distributions were made to the
Limited Partners or to the General Partner in 1997 or 1996. A distribution of
$400,000 was declared and paid in the first quarter of 1998. This distribution
represented a portion of the net proceeds from the mortgage refinancing of
Deerfield. Future cash distributions will depend on the levels of net cash
generated from operations, property sales, refinancings, and the availability of
cash reserves. The General Partner does not anticipate making any further
distributions in 1998.
Year 2000
The Partnership is dependent upon the General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The General Partner believes that with modifications to
existing software and conversions to new software, the Year 2000 Issue will not
pose significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the
Partnership.
Other
Certain items discussed in this annual report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such forward-looking statements speak only as of
the date of this annual report. The Partnership expressly disclaims any
obligation or undertaking to release publicly any updates of revisions to any
forward-looking statements contained herein to reflect any change in the
Partnership's expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based.
ITEM 7. FINANCIAL STATEMENTS
UNITED INVESTORS GROWTH PROPERTIES
LIST OF FINANCIAL STATEMENTS
Independent Auditors' Report
Consolidated Balance Sheet - December 31, 1997
Consolidated Statements of Operations - Years ended December 31, 1997 and 1996
Consolidated Statement of Changes in Partners Capital (Deficit) - Years
ended December 31, 1997 and 1996
Consolidated Statements of Cash Flows - Years ended December 31, 1997 and 1996
Notes to Consolidated Financial Statements
INDEPENDENT AUDITORS' REPORT
The Partners
United Investors Growth Properties
(A Missouri Limited Partnership)
We have audited the accompanying consolidated balance sheet of United Investors
Growth Properties (A Missouri Limited Partnership) ("the Partnership") as of
December 31, 1997, and the related consolidated statements of operations,
changes in partners' capital (deficit), and cash flows for each of the two years
in the period ended December 31, 1997. 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 audits 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 audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Partnership as of December 31,
1997, and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
February 17, 1998
except for Note K, as to which the date is
March 17, 1998
UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED BALANCE SHEET
December 31, 1997
(in thousands, except unit data)
Assets
Cash and cash equivalents $ 1,120
Receivables and deposits, net of
allowance of $58 223
Restricted escrows 109
Other assets 298
Investment properties (Notes A and I):
Land $ 1,979
Buildings and related personal property 15,216
17,195
Less accumulated depreciation (4,798) 12,397
$14,147
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 43
Tenant security deposits payable 86
Accrued property taxes 124
Other liabilities 151
Mortgage notes payable, $3,605 in default
(Note C) 13,669
Partners' Capital (Deficit) (Note D)
General partner's $ (5)
Limited partners' (39,297 units issued
and 39,287 outstanding) 79 74
$14,147
See Accompanying Notes to Consolidated Financial Statements
UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Year Ended December 31,
1997 1996
Revenues:
Rental income $2,987 $3,000
Other income 136 100
Gain on casualty event (Note G) 22 --
Total revenues 3,145 3,100
Expenses:
Operating 1,379 1,222
General and administrative 77 73
Depreciation 561 550
Interest 1,107 1,219
Property taxes 312 308
Total expenses 3,436 3,372
Minority interest in net loss of joint
venture (Note B) -- 4
Loss before extraordinary loss (291) (268)
Extraordinary loss on early extinguishment
of debt (Note C) (36) --
Net loss $ (327) $ (268)
Net loss allocated to general partner (1%) $ (3) $ (3)
Net loss allocated to limited partners (99%) (324) (265)
$ (327) $ (268)
Net loss per limited partnership unit:
Loss before extraordinary loss $(7.33) $(6.74)
Extraordinary loss on early extinguishment of debt (.91) --
Net loss per limited partnership unit $(8.24) $(6.74)
See Accompanying Notes to Consolidated Financial Statements
UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 39,297 $ -- $ 9,824 $ 9,824
Partners' capital at
December 31, 1995 39,297 $ 1 $ 668 $ 669
Net loss for the year ended
December 31, 1996 -- (3) (265) (268)
Partners' (deficit) capital at
December 31, 1996 39,297 (2) 403 401
Abandonment of limited
partnership units (Note J) (10) -- -- --
Net loss for the year ended
December 31, 1997 -- (3) (324) (327)
Partners' (deficit) capital at
December 31, 1997 39,287 $ (5) $ 79 $ 74
See Accompanying Notes to Consolidated Financial Statements
UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
1997 1996
Cash flows from operating activities:
Net loss $ (327) $ (268)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Minority interest in net loss
of joint venture -- (4)
Depreciation 561 550
Amortization of loan costs, lease commissions,
loan premium and intangible assets (31) 70
Extraordinary loss on early extinguishment of debt 36 --
Gain on casualty event (22) --
Change in accounts:
Receivables and deposits (8) 26
Other assets (54) 18
Accounts payable (11) 6
Tenant security deposits payable 7 6
Accrued property taxes 82 (3)
Other liabilities 21 29
Net cash provided by operating activities 254 430
Cash flows from investing activities:
Property improvements and replacements (182) (74)
Net (deposits to) receipts from restricted escrows (59) 68
Net insurance proceeds from casualty event 50 --
Net cash used in investing activities (191) (6)
Cash flows from financing activities:
Liquidating distribution to minority interest -- (61)
Payments of mortgage notes payable (175) (164)
Repayment of mortgage debt (6,434) --
Proceeds from debt refinancing 7,450 --
Loan costs paid (183) --
Net cash provided by (used in)
financing activities 658 (225)
Net increase in cash and cash equivalents 721 199
Cash and cash equivalents at beginning of year 399 200
Cash and cash equivalents at end of year $ 1,120 $ 399
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,154 $ 1,120
See Accompanying Notes to Consolidated Financial Statements
UNITED INVESTORS GROWTH PROPERTIES
Notes to Consolidated Financial Statements
December 31, 1997
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization: United Investors Growth Properties (the "Partnership"), a Missouri
Limited Partnership, was organized in July 1988, and the initial group of
limited partners was admitted on October 24, 1988. Additional partners were
admitted through June 1990.
The Partnership was formed to acquire and operate certain types of income-
producing real estate. United Investors Real Estate, Inc. (the "General
Partner") is the general partner. Effective December 31, 1992, 100% of the
General Partner's common stock was purchased by MAE GP Corporation ("MAE GP"),
an affiliate of Insignia Financial Group, Inc. ("Insignia"). Effective February
25, 1998, MAE GP was merged into Insignia Properties Trust ("IPT"), which is an
affiliate of Insignia. Thus the General Partner is now a wholly-owned
subsidiary of IPT.
Basis of accounting: The accompanying financial statements of the Partnership
are prepared on the accrual basis and, therefore, revenue is recorded as earned
and costs and expenses are recorded as incurred.
Cash and Cash Equivalents: The Partnership considers all highly liquid
investments with a maturity, when purchased, of three months or less to be cash
equivalents. At certain times, the amount of cash deposited at a bank may
exceed the limit on insured deposits.
Security Deposits: The Partnership requires security deposits from lessees for
the duration of the lease and such deposits are included in receivables and
deposits. The security deposits are refunded when the tenant vacates, provided
the tenant has not damaged its space and is current on its rental payments.
Income taxes: For income tax purposes, the Partnership reports revenue and
costs and expenses on the accrual method. No income tax provisions have been
shown in the accompanying statements of operations since the partners are taxed
individually.
Investment properties: Investment properties 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.
Depreciation is computed using straight-line methods over estimated useful lives
of fifteen to forty years for buildings and improvements and five to twelve
years for furniture and fixtures. Commercial tenant improvements are
depreciated over the terms of the respective leases.
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 (except for long term
debt) approximates their fair value due to the short term maturity of these
instruments. The fair value of the Partnership's long term debt, after
discounting the scheduled loan payments to maturity, approximates its carrying
balance.
Principles of consolidation: The Partnership reflected its interest in
Renaissance Village utilizing full consolidation whereby all of the accounts of
the joint venture were included in the Partnership's financial statements (with
intercompany accounts being eliminated). The minority partners' share of the
joint ventures' assets and liabilities were reflected as a liability in the
balance sheet of the Partnership. Earnings and losses attributable to the
minority partners' ownership of the joint venture were reflected as a reduction
or addition to income in the statement of operations. 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 venturers and the joint venture
was liquidated.
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 the ability to control the major operating
and financial policies of the property and all economic benefits from the
property. As a result, 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).
During the fourth quarter of 1997 Deerfield Apartments was organized into a
limited liability company known as Deerfield Apartments, L.L.C. ("Deerfield").
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 the ability to control the major operating and financial
policies of the property and all economic benefits from the property. As a
result, the Partnership consolidates its interest in Deerfield (whereby all
accounts of Deerfield are included in the consolidated financial statements of
the Partnership with intercompany accounts being eliminated).
Other assets: Included in other assets are loan costs, deferred rental income
and leasing commissions which are amortized over the terms of the related notes
and leases, respectively.
Loan costs: Loan costs are deferred and are amortized as interest expense over
the terms of the related loans. Unamortized loan costs of approximately
$185,000 are included in other assets at December 31, 1997.
Use 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, included in operating expenses, was $43,000 and $31,000 for
the years ended December 31, 1997 and 1996, respectively.
Reclassifications: Certain reclassifications have been made to the 1996
information to conform to the 1997 presentation.
NOTE B - INVESTMENT IN JOINT VENTURE
The Partnership owned a 60% interest in Renaissance Village Associates
("Renaissance"), a joint venture with United Investors Growth Properties II, an
affiliated partnership, in which the General Partner is also the sole General
Partner.
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 a liquidating
distribution.
NOTE C - MORTGAGE NOTES PAYABLE
The principle terms of mortgage notes payable are as follows (in thousands):
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1997 Interest Rate Date Maturity
Terrace Royale Apts. $ 2,481 $ 24 8.50% 11/98 $ 2,417
Cheyenne Woods Apts. 3,842 27 7.67% 9/07 3,360
Greystone South
Plaza Center 3,605 27 9.00% 12/99 3,605
Deerfield Apartments 3,600 25 7.34% 12/04 3,303
Total 13,528 $ 103
Deferred interest 141
$13,669
The mortgage notes payable are nonrecourse and are secured by a pledge of the
respective properties and by a pledge of revenues from operation of the
respective properties. The mortgage loans collateralized by the Terrace Royale
Apartments, Cheyenne Woods Apartments and Deerfield Apartments each contain
clauses providing for prepayment penalties if the loans are repaid prior to
maturity.
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. The Partnership recognized
an extraordinary loss in the amount of approximately $22,000 due to the write
off of unamortized loan costs.
On November 20, 1997, the Partnership refinanced the mortgage encumbering
Deerfield Apartments. The refinancing replaced indebtedness of approximately
$2,634,000 with a new mortgage in the amount of $3,600,000 at an interest rate
of 7.34%. Interest on the old mortgage was 9.15%. Payments are due on the
first day of each month until the loan matures on December 1, 2004. Total
capitalized loan costs were approximately $96,000. The Partnership recognized
an extraordinary loss in the amount of approximately $14,000 due to the write
off of unamortized loan costs.
The mortgage loan collateralized by Greystone South requires monthly payments of
interest only to maturity and additional quarterly contingent interest payments
to be made equal to 50% of the net cash flow from operations of Greystone South.
Contingent interest payments of $2,000 were made in 1996. No contingent interest
payments were required in 1997. The interest rate increased from 8% to 9% in
1997. Interest on the mortgage is computed using the effective interest method
at an imputed rate of 6.8%. The related deferred interest is included in the
mortgage notes payable balance. For part of 1997, Greystone's mortgage note
payable was in technical default because the mortgage payments were being paid
at 8% rather than the required 9%. At December 31, 1997, the interest payments
on the debt were current, with the monthly payments being made at 9%. At
December 31, 1997 the mortgage was in technical default due to nonpayment of
property taxes due in December 1997.
Scheduled principal payments on the mortgage notes payable subsequent to
December 31, 1997, are as follows (in thousands):
1998 $ 6,155
1999 75
2000 81
2001 87
2002 93
Thereafter 7,037
$13,528
NOTE D - PARTNERS' CAPITAL (DEFICIT)
ALLOCATIONS OF NET INCOME AND LOSS - 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 - The Partnership allocates distributions 1% to the General
Partner and 99% to the limited partners. On February 15, 1998, the Partnership
made a distribution to the partners of approximately $400,000.
GAIN/LOSS FROM A SALE - 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.
NOTE E - TRANSACTIONS WITH AFFILIATED PARTIES (IN THOUSANDS)
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 in 1997 and 1996:
1997 1996
Property management fees (included
in operating expenses) $ 160 $ 162
Reimbursement for services of
affiliates, including $7,000 of
construction services reimburse-
ments in 1997 (included in invest-
ment properties and general and
administrative and operating expenses) 42 32
Additionally, the Partnership paid approximately $21,000 to affiliates of
Insignia for reimbursements of costs, related to the refinancing of Deerfield in
November 1997. These costs were capitalized as loan costs and are being
amortized over the term of the loan.
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 master policy. The
agent assumed the financial obligations to the affiliate of the General Partner
who received 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 F - OPERATING LEASES
Tenants of Greystone South Plaza Center are responsible for their own utilities
and maintenance of their space, and payment of their proportionate share of
common area maintenance, utilities, insurance and real estate taxes. A portion
of the real estate taxes, insurance, and common area maintenance expenses are
paid directly by the Partnership. The Partnership is then reimbursed by the
tenants for their proportionate share.
The future minimum rental payments to be received under operating leases that
have initial or remaining noncancellable lease terms in excess of one year as of
December 31, 1997, are as follows (in thousands):
Years Ending December 31,
1998 $ 365
1999 306
2000 216
2001 148
2002 106
Thereafter 61
$ 1,202
NOTE G - CASUALTY EVENT
In 1997, a major snowstorm destroyed the carports at Terrace Royale. The
carports were rebuilt from proceeds received from the insurance provider, and
the remaining basis of the old carports was written off in 1997. A casualty
gain of $22,000 was recognized as a result of this snowstorm.
NOTE H - PARTNER TAX INFORMATION
The following is a reconciliation between net loss as reported in the
consolidated financial statements and federal taxable loss allocated to the
partners in the Partnership's tax return for the years ended December 31, 1997
and 1996 (in thousands, except per unit data):
1997 1996
Net loss as reported $ (327) $ (268)
Add (deduct):
Deferred revenue and other
liabilities (111) 17
Depreciation differences (81) (84)
Accrued expenses 18 1
Nondeductible reserves and
allowances 3 (10)
Federal taxable loss $ (498) $ (344)
Federal taxable loss per limited
partnership unit $(12.55) $(8.68)
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets at December 31, 1997 (in thousands):
Net assets as reported $ 74
Differences in basis of assets and
liabilities:
Investment properties at cost 3,199
Accumulated depreciation (433)
Other assets and liabilities 308
Syndication costs 1,362
Net assets - tax basis $4,510
NOTE I - INVESTMENT PROPERTIES AND ACCUMULATED DEPRECIATION
(IN THOUSANDS)
Initial cost
To Partnership
Net Cost
Buildings Capitalized
and Related (Written Down)
Personal Subsequent to
Description Encumbrances Land Property Acquisition
Terrace Royale $ 2,481 $ 653 $ 3,496 $ 322
Cheyenne Woods 3,842 587 4,980 481
Greystone South 3,605 1,287 3,449 (2,610)
Deerfield 3,600 240 3,891 419
Totals $13,528 $ 2,767 $15,816 $(1,388)
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1997
Buildings
And
Personal Accumulated Date of Date Depreciable
Description Land Property Total Depreciation Construction Acquired Life-Years
<S> <C> <C> <C> <C> <C> <C> <C>
Terrace Royale $ 653 $ 3,818 $ 4,471 $ 1,303 1987-1988 11/01/88 5-40
Cheyenne Woods 587 5,461 6,048 1,680 1988 04/18/89 5-40
Greystone South 499 1,627 2,126 623 1985 11/27/89 5-40
Deerfield 240 4,310 4,550 1,192 1986 10/24/90 5-40
Totals $1,979 $15,216 $17,195 $ 4,798
</TABLE>
Reconciliation of "Investment Properties and Accumulated Depreciation":
Years Ended December 31,
1997 1996
Investment Properties
Balance at beginning of year $17,060 $16,986
Property improvements 182 74
Disposition of property (47) --
Balance at End of Year $17,195 $17,060
Accumulated Depreciation
Balance at beginning of year $ 4,256 $ 3,706
Additions charged to expense 561 550
Disposition of property (19) --
Balance at End of Year $ 4,798 $ 4,256
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1997, is approximately $20,395,000. The accumulated depreciation
taken for Federal income tax purposes at December 31, 1997 is approximately
$5,232,000.
NOTE J - LIMITED PARTNERSHIP UNITS
In 1997, the number of Limited Partnership Units decreased by 10 units due to a
limited partner abandoning its units. In abandoning his or her Limited
Partnership Units, a limited partner relinquishes all right, title and interest
in the Partnership as of the date of abandonment. However, during the year of
abandonment, the Limited Partner will still be allocated his or her share of the
income or loss for the entire year. The loss per limited partnership units in
the accompanying consolidated statements of operations is calculated based on
the number of units outstanding at the beginning of the year.
NOTE K - SUBSEQUENT EVENT
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in
Insignia Properties Trust, with Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust. The closing,
which is anticipated to happen in the third quarter of 1998, is subject to
customary conditions, including government approvals and the approval of
Insignia's shareholders. If the closing occurs, AIMCO will then control the
General Partner of the Partnership.
ITEM 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There were no disagreements with Deloitte & Touche LLP regarding the 1997 or
1996 audits of the Partnership's financial statements.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
The Partnership has no officers or directors. United Investor Real Estate, Inc.
("UIRE" or the "General Partner") manages and controls the Partnership and has
general responsibility and authority in all matters affecting its business.
Effective December 31, 1992, 100% of the General Partner's Common Stock was
purchased by MAE GP Corporation ("MAE GP"), which is wholly owned by
Metropolitan Asset Enhancement, L.P. ("MAE"), an affiliate of Insignia Financial
Group, Inc. ("Insignia"). Effective February 25, 1998, MAE GP was merged into
Insignia Properties Trust ("IPT"), which is an affiliate of Insignia. Thus the
General Partner is now a wholly owned subsidiary of IPT. On March 17, 1998,
Insignia entered into an agreement to merge its national residential property
management operations, and its controlling interest in Insignia Properties
Trust, with Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust. The closing, which is anticipated to
happen in the third quarter of 1998, is subject to customary conditions,
including government approvals and the approval of Insignia's shareholders. If
the closing occurs, AIMCO will then control the General Partner of the
Partnership.
The names of the directors and executive officers of UIRE, 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
Carroll D. Vinson 57 President and Director
Robert D. Long, Jr. 30 Vice President and
Chief Accounting Officer
William H. Jarrard, Jr. 51 Vice President
Daniel M. LeBey 32 Secretary
Kelley M. Buechler 40 Assistant Secretary
Carroll D. Vinson has been President and Director of the General Partner and
President of MAE, and subsidiaries since August of 1994. He has acted as Chief
Operating Officer of IPT since May 1997. During 1993 to August 1994, Mr. Vinson
was affiliated with Crisp, Hughes & Co. (regional CPA firm) and engaged in
various other investment and consulting activities which included portfolio
acquisitions, asset dispositions, debt restructurings and financial reporting.
Briefly, in early 1993, Mr. Vinson served as President and Chief Executive
Officer of Angeles Corporation, a real estate investment firm. From 1991 to
1993, Mr. Vinson was employed by Insignia in various capacities including
Managing Director - President during 1991.
Robert D. Long, Jr. has been Vice President and Chief Accounting Officer of the
General Partner since August 1994. Mr. Long joined MAE in September 1993.
Since 1994 he has acted as Vice President and Chief Accounting Officer of the
MAE subsidiaries. Mr. Long was an accountant for Insignia until joining MAE in
1993. Prior to joining Insignia, Mr. Long was an auditor for the State of
Tennessee and was associated with the accounting firm of Harsman Lewis and
Associates.
William H. Jarrard, Jr. has been Vice President of the General Partner since
December 1992. He has acted as Senior Vice President of IPT since May 1997.
Mr. Jarrard previously acted as Managing Director - Partnership Administration
of Insignia from January 1991 through September 1997 and served as Managing
Director - Partnership Administration and Asset Management of Insignia from July
1994 until January 1996.
Daniel M. LeBey has been Secretary of the General Partner since January 29, 1998
and Insignia's Assistant Secretary since April 30, 1997. Since July 1996 he has
also served as Insignia's Associate General Counsel. From September 1992 until
June 1996, Mr. LeBey was an attorney with the law firm of Alston & Bird LLP,
Atlanta, Georgia.
Kelley M. Buechler has been Assistant Secretary of the General Partner since
December 1992 and Assistant Secretary of Insignia since 1991.
ITEM 10. EXECUTIVE COMPENSATION
No direct form of compensation or remuneration was paid by the Partnership to
any officer or director of the General Partner. The Partnership has no plan,
nor does the Partnership presently propose a plan, which will result in any
remuneration being paid to any officer or director upon termination of
employment. However, reimbursements and other payments have been made to the
Partnership's General Partner and its affiliates, as described in "Item 12"
below.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as provided below, as of January 1, 1998, no person was known by the
Partnership to be the beneficial owner of more than 5 percent (5%) of the Units
of the Partnership:
NAME AND ADDRESS NUMBER OF UNITS PERCENT OF TOTAL
United Investors Real Estate, Inc. 3,926 10%
One Insignia Financial Plaza
Greenville, SC 29602
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 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 in 1997 and 1996 (in thousands):
1997 1996
Property management fees $ 160 $ 162
Reimbursement for services of
affiliates, including $7,000 of
construction services reimburse-
ments in 1997 42 32
Additionally, the Partnership paid approximately $21,000 to affiliates of
Insignia for reimbursements of costs, related to the refinancing of Deerfield in
November 1997. These costs were capitalized as loan costs and are being
amortized over the term of the loan.
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 master policy. The
agent assumed the financial obligations to the affiliate of the General Partner
who received 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.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: See Exhibit Index contained herein.
(b) Reports on Form 8-K filed in the fourth quarter of fiscal year 1997: None.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Partnership
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 and Director
Date: March 26, 1998
In accordance with the Exchange Act, this report has been signed below by the
following person on behalf of the Partnership and in the capacities and on the
date indicated.
/s/ Carroll D. Vinson President and Director March 26, 1998
Carroll D. Vinson
/s/ Robert D. Long, Jr. Vice President and March 26, 1998
Robert D. Long, Jr. Chief Accounting
Officer
INDEX TO EXHIBITS
EXHIBIT
1.0 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. 33-21114) previously filed on June 9,
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 June 9, 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
June 9, 1988.
4.3 Seventh 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.
4.4 Agreement of Joint Venture of Renaissance Village Associates dated
March 22, 1991 between United Investors Growth Properties (A Missouri
Limited Partnership) and United Investors Growth Properties II (A
Missouri Limited Partnership); incorporated by reference to Exhibit
4.4 to Partnership's Quarterly Report on Form 10-Q previously filed on
April 24, 1991.
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 June 9, 1988.
10.1.1 Amendment to Escrow Agreement; incorporated by reference to Exhibit
10.1.1 to Partnership's Quarterly Report on Form 10-Q previously filed
on November 3, 1989.
10.2 Agreement of Purchase and Sale, dated June 9, 1988, with amendments
dated June 27, 1988 and July 5, 1988, respectively, between United
Investors Real Estate, Inc., as nominee for United Investors Growth
Properties, as purchaser, and Domion-Bothell Associates, as seller,
relating to Terrace Royale 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 Promissory Note, dated October 3, 1988, between United Investors Real
Estate, Inc., as nominee for United Investors Growth Properties, as
borrower, and Confederation Life Insurance Company, as lender;
incorporated by reference to Exhibit 10.1 to Partnership's Quarterly
Report on Form 10-Q previously filed on November 14, 1988.
10.4 Deed of Trust, dated October 3, 1988, between United Investors Real
Estate, Inc., as nominee for United Investors Growth Properties, as
grantor, and Confederation Life Insurance Company, as beneficiary;
incorporated by reference to Exhibit 10.2 to Partnership's Quarterly
Report on Form 10-Q previously filed on November 14, 1988.
10.5 Agreement of Purchase and Sale, dated October 31, 1988, between United
Investors Real Estate, Inc., as purchaser and Cheyenne Woods Limited
Partnership, as seller, relating to Cheyenne Woods Apartments;
incorporated by reference to Exhibit 10.5 to Post-Effective Amendment
No. 1 to Partnership's Registration Statement previously filed on
February 1, 1989.
10.6 Promissory Note and Deed of Trust with respect to the Permanent Loan
on Cheyenne Woods Apartments; incorporated by reference to Exhibit
10.6 to Partnership's Current Report on Form 8-K previously filed on
April 28, 1989.
10.7 Agreement of Purchase and Sale, between United Investors Growth
Properties (A Missouri Limited Partnership), as purchaser, and Central
Life Assurance Company, as seller, executed by the parties on August
11 and August 14, 1989, relating to Greystone South Plaza Center, and
amendments thereto; incorporated by reference to Exhibit 10.7 to
Partnership's Current Report on Form 8-K previously filed on December
12, 1989.
10.8 Promissory Note and First Mortgage and Security Agreement with respect
to the Permanent Loans on Greystone South Plaza Center; incorporated
by reference to Exhibit 10.8 to Partnership's Current Report on Form
8-K previously filed on December 12, 1989.
10.8.1 Modification Agreement between United Investors Growth Properties and
Central Life Assurance Company with respect to the Permanent Loans on
Greystone South Plaza Center; incorporated by reference to Exhibit
10.8.1 to Partnership's Quarterly Report on Form 10-Q previously filed
on August 13, 1991.
10.9 Master Lease dated November 27, 1989 between United Investors Growth
Properties and Central Life Assurance Company; incorporated by
reference to Exhibit 10.9 to Partnership's Current Report on Form 8-K
previously filed on December 12, 1989.
10.9.1 Lease Termination Agreement between United Investors Growth Properties
and Central Life Assurance Company, with respect to the Master Lease
dated November 27, 1989; incorporated by reference to Exhibit 10.9.1
to Partnership's Quarterly Report on Form 10-Q previously filed on
November 12, 1991.
10.10 Agreement of Purchase and Sale, between United Investors Growth
Properties (A Missouri Limited Partnership), as purchaser, and
Deerfield Apartments Limited (A Tennessee Limited Partnership), as
seller, dated July 18, 1990, relating to Deerfield Apartments;
incorporated by reference to Exhibit 10.10 to Partnership's Quarterly
Report on Form 10-Q previously filed on August 15, 1990.
10.11 Promissory Note and Deed of Trust with respect to the Permanent Loan
on Deerfield Apartments; incorporated by reference to Exhibit 10.11 to
Partnership's Quarterly Report on Form 10-Q previously filed on
November 8, 1990.
10.12 Standby Loan Commitment with respect to the financing of Deerfield
Apartments; incorporated by reference to Exhibit 10.12 to
Partnership's Quarterly Report on Form 10-Q previously filed on
November 8, 1990.
10.13 Agreement of Purchase and Sale, dated August 27, 1990, between United
Investors Real Estate, Inc., as purchaser, and Mueller Development
Company, as seller, relating to Renaissance Village Apartments, and
amendments thereto; incorporated by reference to Exhibit 10.2 to
Partnership's Post-Effective Amendment No. 1 Registration Statement
(File No. 33-34111) of United Investors Growth Properties II
previously filed on December 6, 1990.
10.13.1 Seventh and Eighth Amendments to Agreement of Purchase and Sale
between United Investors Real Estate, Inc., as purchaser, and Mueller
Development Company, as seller, relating to Renaissance Village
Apartments; incorporated by reference to Exhibit 10.13.1 to
Partnership's Quarterly Report on Form 10-Q previously filed on April
24, 1991.
10.14 Promissory Note and Deed of Trust with respect to the Permanent Loan
on Renaissance Village Apartments; incorporated by reference to
Exhibit 10.14 to Partnership's Quarterly Report on Form 10-Q
previously filed on April 24, 1991.
10.15 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 10.15 to
Partnership's Current Report on Form 8-K previously filed on January
14, 1993.
10.16 Purchase and Sale Agreement, made as of the 19th of July 1995, by and
between Kauri Investments, Ltd., a Washington corporation, and
Renaissance Village Associates, JV, a Kansas joint venture.
(Incorporated by reference to the Annual Report on Form 10-KSB for the
year ended December 31, 1995)
10.17 Amendment to Purchase and Sale Agreement, made as of the 10th day of
August, 1995, by and between Kauri Investments, Ltd., a Washington
corporation, and Renaissance Village Associates, JV, as Kansas joint
venture. (Incorporated by reference to the Annual Report on Form 10-
KSB for the year ended December 31, 1995)
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. (Incorporated by reference to the Annual Report on
Form 10-KSB for the year ended December 31, 1995)
10.19 Promissory Note dated November 20, 1997, by and between Deerfield
Apartments, L.L.C., a South Carolina limited liability company and
Lehman Brothers Holdings, Inc., a Delaware corporation.
27 Financial Data Schedule
99.1 Portions of Prospectus of Partnership dated June 13, 1988;
incorporated by reference to Exhibit 99.1 to Partnership's Report on
Form 10-K previously filed on March 6, 1991.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from United
Investors Growth Properties 1997 Year-End 10-KSB and is qualified in its
entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000831663
<NAME> UNITED INVESTORS GROWTH PROPERTIES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,120
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 17,195
<DEPRECIATION> 4,798
<TOTAL-ASSETS> 14,147
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 13,669
0
0
<COMMON> 0
<OTHER-SE> 74
<TOTAL-LIABILITY-AND-EQUITY> 14,147
<SALES> 0
<TOTAL-REVENUES> 3,145
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,436
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,107
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (327)
<EPS-PRIMARY> (8.24)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
PROMISSORY NOTE
$3,600,000 New York, New York
As of November 20, 1997
FOR VALUE RECEIVED DEERFIELD APARTMENTS, L.L.C., a South Carolina
limited liability company, having an address at c/o Insignia Financial Group,
One Insignia Financial Plaza, Greenville, South Carolina 29602 (hereinafter
referred to as "Borrower"), promises to pay to the order of LEHMAN BROTHERS
HOLDINGS INC. D/B/A LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS HOLDINGS INC.,
a Delaware corporation, having an address at Three World Financial Center, 200
Vesey Street, New York, New York 10285 (hereinafter referred to as "Lender"), or
at such other place as the holder hereof may from time to time designate in
writing, the principal sum of THREE MILLION, SIX HUNDRED THOUSAND AND 00/100
DOLLARS ($3,600,000.00), in lawful money of the United States of America with
interest thereon to be computed from the date of this Note at the Applicable
Interest Rate (hereinafter defined), and to be paid as hereinafter provided.
A. PAYMENT TERMS
Borrower shall pay to Lender:
(i) a payment of interest only on December 1, 1997;
(ii) a constant payment of $24,778.49 (the "Monthly Payment") on January 1,
1998 and on the first day of each calendar month (the "Monthly Payment
Date") thereafter to and including the first day of November, 2004,
and
(iii) the balance of the principal sum then outstanding and all interest
thereon shall be due and payable on the first day of December, 2004
(the "Maturity Date").
Each of such payments shall be applied as follows:
(i) First to the payment of interest computed at the Applicable Interest
Rate; and
(ii) The balance applied toward the reduction of the principal sum.
B. INTEREST
The term "Applicable Interest Rate" as used in this Note shall mean
7.34% per annum.
Interest on the principal sum of this Note shall be calculated in
arrears on the basis of a three hundred sixty (360) day year consisting of
twelve (12) months of thirty (30) days each.
C. DEFAULT AND ACCELERATION
The whole of the principal sum of this Note, together with all
interest accrued and unpaid thereon and all other sums due under the Security
Instrument (hereinafter defined) and this Note (all such sums hereinafter
collectively referred to as the "Debt") shall without notice become immediately
due and payable at the option of Lender if any payment required in this Note is
not paid within ten (10) days after written notice from the Lender notifying
Borrower that the same is due or on the happening of any other default, after
the expiration of any applicable notice and grace periods, herein or under the
terms of the Security Instrument (hereinafter collectively an "Event of
Default"). All of the terms, covenants and conditions contained in the Security
Instrument and the Other Security Documents (hereinafter defined) are hereby
made part of this Note to the same extent and with the same force as if they
were fully set forth herein. In the event that it should become necessary to
employ counsel to collect the Debt or to protect, sell or foreclose the security
hereof, Borrower also agrees to pay reasonable attorney's fees for the services
of such counsel whether or not suit be brought.
D. PREPAYMENT
Borrower shall not have the right or privilege to prepay all or any
portion of the unpaid principal balance of this Note until November 31, 2000.
Beginning December 1, 2000, provided no Event of Default exists, the principal
balance of this Note may be prepaid, in whole but not in part, upon: (i) not
less than 30 days and not more than 45 days prior written notice (the
"Prepayment Notice") to Lender specifying the scheduled payment date on which
prepayment is to be made (the "Prepayment Date"); (ii) payment of all accrued
and unpaid interest on the outstanding principal balance of this Note to and
including the Prepayment Date together with a payment of all interest which
would have accrued on the principal balance of this Note to and including the
first day of the calendar month immediately following the Prepayment Date, if
such prepayment occurs on a date which is not the first day of a calendar month
(the "Shortfall Interest Payment"); (iii) payment of all other sums then due
under this Note, the Security Instrument and the Other Security Documents and
(iv) if the Prepayment Date occurs prior to the date which is six months prior
to the Maturity Date payment of a prepayment consideration (the "Prepayment
Consideration") in an amount equal to the greater of: (A) one (1%) percent of
the principal amount of this Note being prepaid; and (B) the present value of a
series of payments each equal to the Payment Differential (hereinafter defined)
and payable on each monthly payment date over the remaining original term of
this Note and on the Maturity Date discounted at the Reinvestment Yield
(hereinafter defined) for the number of months remaining from the Prepayment
Date to each such monthly payment date and the Maturity Date. The term
"Reinvestment Yield" as used herein shall be equal to the lesser of (a) the
yield on the U.S. Treasury issue (primary issue) with a maturity date closest to
the Maturity Date, or (b) the yield on the U.S. Treasury issue (primary issue)
with a term equal to the remaining average life of the Debt, with each such
yield being based on the bid price for such issue as published in The Wall
Street Journal on the date that is 14 days prior to the Prepayment Date set
forth in the Prepayment Notice (or, if such bid price is not published on that
date, the next preceding date on which such bid price is so published) and
converted to a monthly compounded nominal yield. The term "Payment
Differential" as used herein shall be equal to (x) the Applicable Interest Rate
minus the Reinvestment Yield, divided by (y) 12 and multiplied by (z) the
principal sum outstanding on such Prepayment Date after application of the
Constant Monthly Payment (if any) due on such Prepayment Date, provided that the
Payment Differential shall in no event be less than zero. In no event, however,
shall Lender be required to reinvest any prepayment proceeds in U.S. Treasury
obligations or otherwise. Lender shall notify Borrower of the amount, and the
basis of determination, of the required Prepayment Consideration. If a
Prepayment Notice is given by Borrower to Lender pursuant to this Article D, the
principal balance of this Note and the other sums required under this Article D
shall be due and payable on the Prepayment Date.
Lender shall not be obligated to accept any prepayment of the
principal balance of this Note unless it is accompanied by all sums due in
connection therewith. Notwithstanding anything contained herein to the
contrary, provided no Event of Default exists, no Prepayment Consideration shall
be due in connection with a complete or partial prepayment resulting from the
application of insurance proceeds or condemnation awards pursuant to paragraphs
3 and 6 of the Security Instrument. In the event of any permitted partial
prepayment of the principal balance of this Note, the amount of principal
prepaid (but not including any Prepayment Consideration or interest) shall be
applied to the principal last due under this Note and shall not release Borrower
from the obligation to pay the Constant Monthly Payments next becoming due under
this Note and the Constant Monthly Payment shall not be adjusted or recalculated
as a result of such partial prepayment.
If a Default Prepayment (defined herein) occurs prior to the date
which is six months prior to the Maturity Date, Borrower shall pay to Lender the
entire Debt, including, without limitation, the Prepayment Consideration.
For purposes of this Note, the term "Default Prepayment" shall mean a
prepayment of the principal amount of this Note made during the continuance of
any Event of Default or after an acceleration of the Maturity Date under any
circumstances, including, without limitation, a prepayment occurring in
connection with reinstatement of the Security Instrument provided by statute
under foreclosure proceedings or exercise of a power of sale, any statutory
right of redemption exercised by Borrower or any other party having a statutory
right to redeem or prevent foreclosure, any sale in foreclosure or under
exercise of a power of sale or otherwise.
Notwithstanding any provision of this Article D to the contrary,
Lender may require Borrower, in lieu of a prepayment as contemplated in the
first paragraph of this Article D, to deliver to Lender the Defeasance
Collateral (hereinafter defined) in the manner contemplated herein. After
Lender's receipt of the Prepayment Notice, Lender shall, if it so elects, advise
Borrower that, in lieu of a prepayment, the Defeasance Collateral shall be
required, in which event Borrower shall be entitled to a release of the Property
(hereinafter defined) from the lien of the Security Instrument and the Other
Security Documents upon satisfaction of the following:
I. Lender shall have received written confirmation from the rating
agencies that have rated the REMIC "real estate mortgage investment conduit"
(defined in Section 860D of the Internal Revenue Code of 1986, as amended from
time to time or any successor statute (the "Code")) ("REMIC") related to the
Securities (as defined in the Security Instrument) that such substitution of
Defeasance Collateral will not result in a downgrade, withdrawal or
qualification of the ratings then assigned to any of the Securities; provided,
however, that in the event that Lender or its agent is unable to obtain such
confirmation, the Lender or its agent shall so advise Borrower and Borrower will
then be subject to the other provisions of this Article D set forth above;
II. all accrued and unpaid interest and all other sums due under this
Note, the Security Instrument and other Security Documents up to the date of the
delivery of the Defeasance Collateral (the "Release Date"), including, without
limitation, all costs and expenses incurred by Lender or its agents in
connection with such release (including, without limitation, the review of the
proposed Defeasance Collateral and the preparation of the Defeasance Security
Agreement (as hereinafter defined) and the related documentation), shall be
fully paid on or before the Release Date; and
III. Borrower shall have delivered to Lender on or before the Release
Date:
(a) a pledge and security agreement, in form and substance
satisfactory to Lender in its sole discretion, creating a first
priority security interest in favor of Lender in the Defeasance
Collateral (the "Defeasance Security Agreement"), which shall provide,
among other things, that any excess received by Lender from the
Defeasance Collateral over the amount payable by Borrower hereunder
shall be refunded to Borrower promptly following each Monthly Payment
Date and the Maturity Date;
(b) direct, non-callable obligations of the United States of
America (the "US Obligations") that provide for payments prior, but as
close as possible, to all successive Monthly Payment Dates occurring
after the Release Date and the Maturity Date, with each such payment
being equal to or greater than the amount of the corresponding
Constant Monthly Payment required to be paid under this Note for the
balance of the term hereof and the amount required to be paid on the
Maturity Date (the "Defeasance Collateral"), each of which shall be
duly endorsed by the holder thereof as directed by Lender or
accompanied by a written instrument of transfer in form and substance
wholly satisfactory to Lender (including, without limitation, such
instrument as may be required by the depository institution holding
such securities or the issuer thereof, as the case may be, to
effectuate book-entry transfers and pledges through the book-entry
facilities of such institution) in order to perfect upon the delivery
of the Defeasance Security Agreement the first priority security
interest therein in favor of the Lender in conformity with all
applicable state and federal laws governing the granting of such
security interests, provided, however, that the price of the
Defeasance Collateral shall not exceed all sums that would otherwise
be due in connection with a prepayment of the principal balance of
this Note under the first paragraph of this Article D; Borrower shall
authorize and direct that the payments received from the U.S.
Obligations shall be made directly to Lender or Lender's designee and
applied to satisfy the Obligations of Borrower under this Note;
(c) evidence reasonably satisfactory to Lender that title to the
Release Property has been transferred to an entity other than
Borrower;
(d) Lender shall have received an opinion of Borrower's counsel,
dated as of the Release Date, in form reasonably satisfactory to
Lender stating, among other things, that (A) the Defeasance Collateral
and the U.S. Obligations have been duly and validly assigned and
delivered to Lender and Lender has a valid, perfected, first priority
lien and security interest in the Defeasance Collateral delivered by
Borrower, (B) the Defeasance Collateral has been validly assigned to
the REMIC, (C) the Defeasance has been effected in accordance with the
requirements of Treasury Regulation 1.860(g)-2(a)(8) (as such
regulation may be amended or substituted from time to time) and will
not be treated as an exchange pursuant to Section 1001 of the Code and
(D) the tax qualification and status of the REMIC will not be
adversely affected or impaired as a result of the Defeasance;
(e) a certificate by Borrower's independent public accountant
certifying that all of the requirements set forth in Clause I and II
above and this Clause III have been fully satisfied;
(f) such other certificates, documents or instruments as Lender
may reasonably require; and
(g) Notwithstanding the foregoing, no such Release shall be
made, given or be deemed effective under this Article D until the
first day after expiration of the period during which the delivery to
Lender of the Defeasance Collateral in connection therewith is subject
to avoidance and recovery as a preferential transfer under 11 U.S.C.
547 in the event of a bankruptcy of the delivering person or entity
without such avoidance and recovery (which day shall be identified in
writing by Borrower at any time that Borrower delivers the Defeasance
Collateral to Lender), unless Lender receives, at the time of such
delivery, an opinion of counsel to the effect that such delivery of
the Defeasance Collateral would not be avoided and recovered as a
preferential transfer under 11 U.S.C. 547 in the event of the filing
of a bankruptcy petition in respect of the conveying or delivering
person or entity.
Upon compliance with the foregoing requirements relating to the
delivery of the Defeasance Collateral, the Property shall be released from the
lien of the Security Instrument and the Other Security Documents and the
Defeasance Collateral shall constitute collateral which shall secure this Note
and the Debt. Lender will, at Borrower's expenses, execute and deliver any
agreements reasonably requested by Borrower to release the lien of the Security
Instrument from the Property. Upon the release by the Lender in accordance with
this Article D, Borrower shall have no further right to prepay this Note
pursuant to the other provisions of this Article D or otherwise.
E. DEFAULT INTEREST
Borrower does hereby agree that upon the occurrence of an Event of
Default or upon the failure of Borrower to pay the Debt in full on the Maturity
Date, Lender shall be entitled to receive and Borrower shall pay interest
("Default Interest") on the entire unpaid principal sum at the rate of (i) the
greater of (a) two percent (2%) over the Prime Rate (hereinafter defined), as
such Prime Rate shall change from time to time or (b) five percent (5%) over the
Applicable Interest Rate then in effect or (ii) the maximum rate of interest
which Borrower may by law pay, whichever is lower, to be computed from the
occurrence of the Event of Default until the actual receipt and collection of
the Debt (the "Default Interest Rate"). This charge shall be added to the Debt,
and shall be deemed secured by the Security Instrument. This clause, however,
shall not be construed as an agreement or privilege to extend the date of the
payment of the Debt, nor as a waiver of any other right or remedy accruing to
Lender by reason of the occurrence of any Event of Default. The term "Prime
Rate" as used in this Note shall mean the daily "prime rate" published in The
Wall Street Journal from the date of the Event of Default, as such "prime rate"
shall change from time to time. In the event The Wall Street Journal ceases to
publish the "prime rate" then Lender shall select an equivalent publication
which publishes such "prime rate"; and in the event such prime rates are no
longer generally published or are limited, regulated or administered by a
governmental or quasi-governmental body, then Lender shall select a comparable
interest rate index.
F. SECURITY
This Note is secured by the Security Instrument and the Other Security
Documents. The term "Security Instrument" as used in this Note shall mean the
Mortgage and Security Agreement dated as of the date hereof in the principal sum
of $3,600,000.00 given by Borrower to Lender encumbering the fee estate of
Borrower in certain premises located in Shelby County, State of Tennessee and
other property, as more particularly described therein and intended to be duly
recorded in said County. The term "Other Security Documents" as used in this
Note shall mean all and any of the documents other than this Note or the
Security Instrument now or hereafter executed by Borrower and/or others and by
or in favor of Lender, which wholly or partially secure or guarantee payment of
this Note. Whenever used, the singular number shall include the plural, the
plural the singular, and the words "Lender" and "Borrower" shall include their
respective successors, assigns, heirs, executors and administrators.
G. SAVINGS CLAUSE
This Note is subject to the express condition that at no time shall
Borrower be obligated or required to pay interest on the principal balance due
hereunder at a rate which could subject Lender to either civil or criminal
liability as a result of being in excess of the maximum interest rate which
Borrower is permitted by applicable law to contract or agree to pay. If by the
terms of this Note, Borrower is at any time required or obligated to pay
interest on the principal balance due hereunder at a rate in excess of such
maximum rate, the Applicable Interest Rate shall be deemed to be immediately
reduced to such maximum rate and all previous payments in excess of the maximum
rate shall be deemed to have been payments in reduction of principal and not on
account of the interest due hereunder.
H. LATE CHARGE
If any sum payable under this Note is not received by Lender within
five (5) days of the date on which it is due, without taking into account or
including within said five (5) day period any applicable notice or grace period,
Borrower shall pay to Lender upon demand an amount equal to the lesser of five
percent (5%) of such unpaid sum or the maximum amount permitted by applicable
law to defray the expenses incurred by Lender in handling and processing such
delinquent payment and to compensate Lender for the loss of the use of such
delinquent payment and such amount shall be secured by the Security Instrument
and the Other Security Documents. Nothing contained herein is intended to
affect the rights of Lender in and to any Default Interest due to Lender
pursuant to the provisions of paragraph E hereof entitled "Default Interest".
I. MISCELLANEOUS
This Note may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Borrower or Lender, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.
If Borrower consists of more than one person or party, the obligations
and liabilities of each such person or party shall be joint and several. The
foregoing sentence, however, is not intended to affect the limited liability of
any limited partner or stockholder of Borrower afforded by applicable
partnership or corporate law.
Borrower and all others who may become liable for the payment of all
or any part of the Debt do hereby severally waive presentment and demand for
payment, notice of dishonor, protest and notice of protest and non-payment. No
release of any security for the Debt or extension of time for payment of this
Note or any installment hereof, and no alteration, amendment or waiver of any
provision of this Note, the Security Instrument or the Other Security Documents
made by agreement between Lender and any other person or party shall release,
modify, amend, waive, extend, change, discharge, terminate or affect the
liability of Borrower, and any other who may become liable for the payment of
all or any part of the Debt, under this Note, the Security Instrument or the
Other Security Documents.
Borrower (and the undersigned representative of Borrower, if any)
represents that Borrower has full power, authority and legal right to execute
and deliver this Note, the Security Instrument and the Other Security Documents
and that this Note, the Security Instrument and the Other Security Documents
constitute valid and binding obligations of Borrower.
This Note shall be governed and construed in accordance with the laws
of the State of New York and the applicable laws of the United States of
America.
J. EXCULPATION
Lender shall not enforce the liability and obligation of Borrower to
perform and observe the obligations contained in this Note or the Security
Instrument by any action or proceeding wherein a money judgment shall be sought
against Borrower or any general or limited partner or member of Borrower
(hereinafter collectively referred to as the "Exculpated Parties"), except that
Lender may bring a foreclosure action, action for specific performance or other
appropriate action or proceeding to enable Lender to enforce and realize upon
this Note, the Security Instrument, the Other Security Documents, and the
interest in the Property, the Rents (as defined in the Security Instrument) and
any other collateral given to Lender created by this Note, the Security
Instrument and the Other Security Documents; provided, however, that any
judgment in any such action or proceeding shall be enforceable against the
Exculpated Parties only to the extent of Borrower's interest in the Property, in
the Rents and in any other collateral given to Lender. Lender, by accepting
this Note and the Security Instrument, agrees that it shall not sue for, seek or
demand any deficiency judgment against the Exculpated Parties in any such action
or proceeding, under or by reason of or under or in connection with the Security
Instrument, the Other Security Documents or this Note. The provisions of this
paragraph shall not, however, (i) constitute a waiver, release or impairment of
any obligation evidenced or secured by the Security Instrument, the Other
Security Documents or this Note; (ii) impair the right of Lender to name
Borrower as a party defendant in any action or suit for judicial foreclosure and
sale under the Security Instrument; (iii) affect the validity or enforceability
of any guaranty made in connection with the Security Instrument, this Note, or
the Other Security Documents; (iv) impair the right of Lender to obtain the
appointment of a receiver upon the occurrence and continuance of an Event of
Default; (v) impair the enforcement of the Assignment of Leases and Rents dated
the date hereof given by Borrower to Lender executed in connection herewith;
(vi) impair the right of Lender to bring suit with respect to fraud or
intentional misrepresentation by Borrower, the Exculpated Parties or any other
person or entity in connection with the Security Instrument, this Note or the
Other Security Documents; (vii) impair the right of Lender to obtain the Rents
received by any of the Exculpated Parties after the occurrence and continuance
of an Event of Default; (viii) impair the right of Lender to bring suit with
respect to the Exculpated Parties' misappropriation of tenant security deposits
or Rents collected in advance; (ix) impair the right of Lender to obtain
insurance proceeds or condemnation awards due to Lender under the Security
Instrument; (x) impair the right of Lender to enforce the provisions of sub-
paragraphs 36(g) through 36(k), inclusive and paragraphs 34 and 35 of the
Security Instrument against the Borrower (excluding the general and limited
partners or members of Borrower); or (xi) impair the right of Lender to recover
any part of the Debt from the Borrower (excluding the general and limited
partners or members of Borrower) following the breach of any covenant contained
in paragraphs 9 or 55 of the Security Instrument.
THIS NOTE, AND THE OTHER SECURITY DOCUMENTS EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN LENDER, BORROWER AND THE OTHER RESPECTIVE
PARTIES HERETO AND THERETO AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS
BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR CONTEMPORANEOUS OR SUBSEQUENT
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
IN WITNESS WHEREOF, Borrower has duly executed this Note under seal as
of the day and year first above written.
[BORROWER]
DEERFIELD APARTMENTS, L.L.C., a South Carolina limited
liability company
By: UNITED INVESTORS GROWTH PROPERTIES, a Missouri
limited partnership, its sole member
By: UNITED INVESTORS REAL ESTATE, INC., a
Delaware corporation, its general partner
By: /s/ Robert D. Long, Jr.
Name: Robert D. Long, Jr.
Title: Vice President
This instrument prepared by:
Carson M. Leonard, Esq.
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
STATE OF South Carolina )
)SS:
COUNTY OF Greenville )
Personally appeared before me, S. Tamara Tucker Burdick, a Notary
Public for the State and County aforesaid, Robert D. Long, Jr. with whom I am
personaly acquainted, and who acknowledged that (s)he executed the within
instrument for the purposes therein contained, and who further acknowledged that
(s)he is the Vice President of United Investors Real Estate, Inc., a Delaware
corporation, the general partner of United Investors Growth Properties, a
Missouri limited partnership, the sole member of Deerfield Apartments, L.L.C.,
the within named bargainor, and (s)he, as such Vice President, is authorized by
said United Investors Real Estate, Inc., to execute said instrument on its
behalf in its capacity as the general partner of United Investors Growth
Properties, said United Investors Growth Properties being authorized by
Deerfield Apartments, L.L.C., to execute this instrument on its behalf.
Witness my hand, at office, this 20th day of November, 1997.
/s/ S. Tamara T. Burdick
Notary Public Notary Public South Carolina
S. Tamara T. Burdick
My Commission Expires:
July 22, 2007
