FORM 10-KSB--Annual or Transitional Report
Under Section 13 or 15(d)
(As last amended by 34-31905, eff. 4/26/93)
[X] Annual Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1995
or
[ ] Transition Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the transition period.........to.........
Commission file number 0-19243
UNITED INVESTORS INCOME PROPERTIES II
(Name of small business issuer in its charter)
Missouri 43-1542903
(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 of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $1,037,252
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of December 31, 1995. Market value information for the
Registrant's partnership interests is not available. Should a trading market
develop for these interests, it is management's belief that such trading would
not exceed $25,000,000.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Prospectus of Registrant dated May 17, 1990 (included in
Registration Statement, No. 33-33965 of Registrant) are incorporated by
reference into Parts I and III.
PART I
Item 1. Description of Business
United Investors Income Properties II (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 March 20, 1990, with the Missouri Secretary of State. The Registrant
is governed by an Agreement of Limited Partnership dated September 24, 1990.
United Investors Real Estate, Inc., a Delaware corporation, is the sole general
partner (the "General Partner") of the Registrant. Effective December 31, 1992,
100% of the General Partner's common stock was purchased by MAE GP Corporation,
an affiliate of Insignia Financial Group, Inc. ("Insignia"). The Registrant is
engaged in the business of acquiring and operating multifamily residential and
commercial properties and other income producing real estate. The Registrant
has acquired a 65% interest in a joint venture which owns a professional office
building, a fee simple interest in two commercial distribution facilities, and a
55% interest in a joint venture which owns a mini-warehouse. These properties
are further described in "Item 2" below.
Commencing on or about May 17, 1990, the Registrant began offering through
United Investors Equity Services, Inc., a former affiliate of the Registrant
(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.
33-33965, which Registration Statement was declared effective on May 17, 1990.
The offering was extended beyond the initial termination date of May 17, 1992.
On October 26, 1992, the General Partner terminated the extended offering
period. Upon termination of the offering, the Registrant had accepted
subscriptions for 32,601 Units resulting in Gross Offering Proceeds of
$8,150,250.
The real estate business is highly competitive. The Registrant'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 businesses which may be
competitive with the Registrant.
The Registrant has no employees. Management and administrative services for
the commercial properties are performed by an affiliate of Insignia. An
unaffiliated entity, U-Store Management Corporation, performs management and
administrative services for Covington Pike. 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", which
descriptions are herein incorporated by reference.
Item 2. Description of Properties:
The following table sets forth the Registrant's investments in properties:
<TABLE>
<CAPTION>
Date of
Property Purchase Type of Ownership(1) Use
<S> <C> <C> <C>
Keebler Distribution Center 08/01/91 Fee simple Distribution
Chesapeake, Virginia facility -
32,344 sq.ft.
Keebler Distribution Center 04/01/92 Fee simple Distribution
Columbia, South Carolina facility -
38,761 sq.ft.
Corinth Square Professional 10/01/90 Joint Venture Interest Medical office
Building building -
Prairie Village, Kansas 23,149 sq.ft.
U-Stor Covington Pike 01/01/93 Joint Venture Interest Mini-storage
Memphis, Tennessee facility -
452 units
<FN>
(1) None of the Registrant's properties are encumbered by mortgage financing.
</TABLE>
Schedule of Properties:
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Useful Federal
Property Value Depreciation Life Method Tax Basis
<S> <C> <C> <C> <C> <C>
Keebler Distribution Center-VA $2,013,753 $ 218,884 31.5-40 S/L $1,778,167
Keebler Distribution Center-SC 2,103,249 204,474 31.5-40 S/L 1,880,383
Corinth Square Professional
Building 1,977,189 226,750 7-40 S/L 1,761,282
U-Store Covington Pike 1,031,358 100,456 25 S/L 952,734
Total $7,125,549 $ 750,564 $6,372,566
</TABLE>
See "Note A" of the consolidated financial statements included in "Item 7" for
a description of the Partnership's depreciation policy.
Schedule of Rental Rates and Occupancy:
<TABLE>
<CAPTION>
Average Annual Average Annual
Rental Rates Occupancy
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Keebler - Virginia $ 6.76/sq.ft. $ 6.48/sq.ft. 100% 100%
Keebler - South Carolina $ 5.77/sq.ft. $ 5.77/sq.ft. 100% 100%
Corinth Square $14.30/sq.ft. $13.90/sq.ft. 83% 84%
U-Stor Covington Pike $ 645/unit $ 585/unit 99% 99%
</TABLE>
The Keebler Company vacated the Columbia, South Carolina facility in January of
1996 and intends to vacate the Chesapeake, Virginia facility in 1997. The
Keebler Company has indicated its intentions to honor its financial obligations.
Keebler is obligated to continue paying rent on the vacated space through the
years 2001 (Columbia, South Carolina) and 2002 (Chesapeake, Virginia), should
the tenant fail to honor its lease obligations, operating results would be
adversely affected.
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 properties in the area. The General Partner believes that
all of the properties are adequately insured.
The following is a schedule of the lease expirations at Corinth Square for
the years 1996-2005:
Number of % of Gross
Expirations Square Feet Annual Rent Annual Rent
1996 1 1,685 $28,777 11.7%
1997 1 1,595 22,330 9.1%
1998 3 4,605 59,951 24.4%
1999 3 5,641 78,849 32.0%
2000 1 1,396 18,363 7.5%
2001 1 1,108 16,321 6.7%
2002-2005 0 0 0 0
The following schedule reflects information on tenants occupying 10% or more
of the leasable square footage for each property:
Nature of Square Footage Annual Rent Per Lease
Business Leased Square Foot Expiration
Keebler - Virginia
Distribution 32,344 $6.76 10/31/02
Facility
Keebler - South
Carolina
Distribution 38,761 $5.77 12/31/01
Facility
Corinth Square
Doctor's Office 3,007 $12.35 4/30/98
Doctor's Office 2,318 $10.00 5/31/99
Schedule of Real Estate Taxes and Rates:
1995 1995
Taxes Rate
Corinth Square Professional Building $36,020 3.19%
U-Store Covington Pike 24,981 6.25%
The tenants of the Keebler Distribution Centers are responsible for paying the
real estate taxes on their respective properties.
Item 3. Legal Proceedings
The Registrant is unaware of any pending or outstanding litigation that is not
of a routine nature. The General Partner of the Registrant believes that all
such pending and 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 fourth quarter of the fiscal year ended December 31, 1995, 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
As of December 31, 1995, the number of holders of record of Limited Partnership
Units was 785. No public trading market has developed for the Units, and it is
not anticipated that such a market will develop in the future.
The Partnership made distributions of cash generated from operations of
$551,111 and $470,674 for the twelve months ended December 31, 1995 and 1994,
respectively. The Partnership also made a distribution of $141,271 on February
20, 1996. Future distributions will depend on the levels of cash generated from
operations and the availability of cash reserves.
Item 6. Management's Discussion and Analysis or Plan of Operation
Results of Operations
During 1995, the Partnership realized net income of $427,590 compared to
$439,448 for the year ended December 31, 1994. The decrease in net income is
primarilyattributable to an increase in operating and general and administrative
expenses. Operating expenses increased as a result of higher utility costs and
increased administrative and maintenance salary expenses at Corinth Square.
General and administrative expenses increased in 1995 due to an increase in
general partner expense reimbursements. Partially offsetting these expense
increases were decreases in management fees at the Keebler Distribution Centers
in 1995.
The General Partner continues to monitor the rental market environment in each
location of its investment properties to assess the feasibility of increasing
rents and maintaining or increasing occupancy levels to protect the Partnership
from increases in expenses. The General Partner expects to be able, at a
minimum, to continue protecting the Partnership from the burden of inflation
related increases in expenses by increasing rents and maintaining a high overall
occupancy level. However, rental concessions and rental reductions needed to
offset softening market conditions could affect the ability to sustain this
plan.
Liquidity and Capital Resources
At December 31, 1995, the Partnership held unrestricted cash of $889,300
compared to $831,033 at December 31, 1994. Net cash provided by operating
activities increased as a result of higher collections of accounts receivable.
Net cash used in investing activities increased primarily due to greater
property improvements at Corinth Square in 1995. Net cash used in financing
activities increased due to increased partners' distributions in 1995, partially
offset by a decrease in net distributions to the minority interests in the joint
venture.
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 various properties to adequately maintain the physical
assets. Such assets are currently thought to be sufficient for any near term
needs of the Partnership. Future cash distributions will depend on the levels
of net cash generated from operations, property sales, and the availability of
cash reserves. Distributions of $551,111 were made during the fiscal year ended
December 31, 1995, compared to distributions of $470,674 for the year ended
December 31, 1994. On February 20, 1996, the Partnership made a distribution of
$141,271. The distributions were made from cash generated by property
operations. The General Partner of the Partnership anticipates that the
Partnership will continue to make cash distributions as property operations
permit throughout 1996.
The Keebler Company vacated the Columbia, South Carolina facility in January of
1996 and intends to vacate the Chesapeake, Virginia facility in 1997. The
Keebler Company has indicated its intentions to honor its financial obligations.
Keebler is obligated to continue paying rent on the vacated space through the
years 2001 (Columbia, South Carolina) and 2002 (Chesapeake, Virginia), should
the tenant fail to honor its lease obligations, operating results would be
adversely affected.
Item 7. Financial Statements
UNITED INVESTORS INCOME PROPERTIES II
LIST OF FINANCIAL STATEMENTS
Independent Auditors' Report
Consolidated Balance Sheet - December 31, 1995
Consolidated Statements of Operations - Years ended December 31, 1995
and 1994
Consolidated Statements of Changes in Partners Capital (Deficit) -
Years ended December 31, 1995 and 1994
Consolidated Statements of Cash Flows - Years ended December 31, 1995
and 1994
Notes to Consolidated Financial Statements
INDEPENDENT AUDITORS' REPORT
The Partners
United Investors Income Properties II
(A Missouri Limited Partnership)
We have audited the accompanying consolidated balance sheet of United Investors
Income Properties II (A Missouri Limited Partnership) ("the Partnership") as of
December 31,1995, and the related consolidated statements of operations, changes
in partners' capital (deficit) and cash flows for the each of the two years in
the period ended December 31, 1995. 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,
1995, and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
February 21, 1996
UNITED INVESTORS INCOME PROPERTIES II
CONSOLIDATED BALANCE SHEET
December 31, 1995
Assets
Cash:
Unrestricted $ 889,300
Restricted-tenant security deposits 4,830
Accounts receivable 17,391
Escrow for taxes 6,042
Other assets 50,479
Investment properties (Notes A and H):
Land $1,026,222
Buildings and related personal property 6,099,327
7,125,549
Less accumulated depreciation (750,564) 6,374,985
$7,343,027
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 6,394
Tenant security deposits 10,856
Accrued taxes 18,010
Other liabilities 13,831
Minority interest (Notes B and C) 630,677
Partners' Capital (Deficit) (Note D)
General partner $ (1,172)
Limited partners (32,601 units
issued and outstanding) 6,664,431 6,663,259
$7,343,027
See Accompanying Notes to Consolidated Financial Statements
UNITED INVESTORS INCOME PROPERTIES II
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994
<S> <C> <C>
Revenues:
Rental income $ 970,314 $ 948,614
Other income 66,938 73,040
Total revenues 1,037,252 1,021,654
Expenses:
Operating 145,903 123,579
General and administrative 61,940 50,209
Property management fees 47,979 62,462
Maintenance 67,416 64,552
Depreciation 184,834 183,139
Amortization 3,277 2,896
Property taxes 60,992 63,636
Tenant reimbursements (Note F) (62,608) (82,878)
Total expenses 509,733 467,595
Minority interest in net income of joint
ventures (Notes B and C) (99,929) (114,611)
Net income (Note G) $ 427,590 $ 439,448
Net income allocated to general partner (1%) $ 4,276 $ 4,394
Net income allocated to limited partners (99%) 423,314 435,054
$ 427,590 $ 439,448
Net income per limited partnership unit $ 12.98 $ 13.34
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
UNITED INVESTORS INCOME PROPERTIES II
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 32,601 $ 100 $8,150,250 $8,150,350
Partners' capital at
December 31, 1993 32,601 $ 376 $6,817,630 $6,818,006
Partners' distributions -- (4,707) (465,967) (470,674)
Net income for the year ended
December 31, 1994 -- 4,394 435,054 439,448
Partners' capital at
December 31, 1994 32,601 63 6,786,717 6,786,780
Partners' distributions -- (5,511) (545,600) (551,111)
Net income for the year ended
December 31, 1995 -- 4,276 423,314 427,590
Partners' capital (deficit) at
December 31, 1995 32,601 $(1,172) $6,664,431 $6,663,259
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
UNITED INVESTORS INCOME PROPERTIES II
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 427,590 $ 439,448
Adjustments to reconcile net income to
net cash provided by operating activities:
Minority interest in net income of joint
ventures 99,929 114,611
Depreciation 184,834 183,139
Amortization of lease commissions 3,277 2,896
Change in accounts:
Restricted cash (54) --
Accounts receivable 37,969 (3,351)
Escrows for taxes (3,060) 3,942
Other assets (3,743) (24,720)
Accounts payable 864 (4,783)
Accrued taxes (1,005) 1,123
Other liabilities (1,435) (19,299)
Net cash provided by operating activities 745,166 693,006
Cash flows from investing activities:
Property improvements (33,645) (8,078)
Net cash used in investing activities (33,645) (8,078)
Cash flows from financing activities:
Net distributions to minority interest (102,143) (136,089)
Partners' distributions (551,111) (470,674)
Net cash used in financing activities (653,254) (606,763)
Net increase in cash 58,267 78,165
Cash at beginning of year 831,033 752,868
Cash at end of year $ 889,300 $ 831,033
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
UNITED INVESTORS INCOME PROPERTIES II
Notes to Consolidated Financial Statements
December 31, 1995
<TABLE>
<S> <C>
Note A - Organization and Summary of Significant Accounting Policies
Organization: United Investors Income Properties II (the "Partnership"), a
Missouri Limited Partnership, was organized in March 1990 with the initial group
of limited partners being admitted on September 24, 1990. Additional partners
were admitted each month thereafter through October 1992.
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, an affiliate
of Insignia Financial Group, Inc.
Basis of accounting: The accompanying financial statements of the Partnership are
prepared on the accrual basis whereby revenue is recorded as earned and costs and
expenses are recorded as incurred.
Cash
Unrestricted: Unrestricted cash includes cash on hand and in banks and money
market funds and certificates of deposit with original maturities of three months
or less.
Restricted cash-tenant security deposits: The Partnership requires security
deposits from lessees for the duration of the lease with such deposits being
considered restricted cash. 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 in their
individual capacities.
Investment Properties: During 1995, the Partnership adopted FASB Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", which requires impairment losses to be recognized for
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows are not sufficient to recover the assets'
carrying amount. The impairment loss is measured by comparing the fair value of
the asset to its carrying amount. The adoption of FASB No. 121 had no effect on
the Partnership's financial statements.
Depreciation is computed using straight-line methods over estimated useful lives
of twenty-five to forty years for buildings and improvements and over the term of
a lease for leasehold improvements.
Fair Value: In 1995, the Partnership implemented Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of Financial
Instruments," which requires disclosure of fair value information about financial
instruments for which it is practicable to estimate the value. The carrying
amounts of all financial instruments approximate fair value due to short
maturities.
Principles of consolidation: The Partnership reflects its interest in the joint
ventures utilizing full consolidation whereby all of the accounts of the joint
ventures are included in the Partnership's financial statements (intercompany
accounts are eliminated). The minority partners' share of the joint ventures'
assets and liabilities are reflected as a liability in the balance sheet of the
Partnership. Earnings and losses attributable to the minority partners'
ownership of the joint ventures are reflected as a reduction or addition to
income in the statements of operations.
Other assets: Included in other assets are leasing commissions and deferred
rental collections which are amortized over the life of the related lease.
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 $5,159 and $6,702 for
the years ended December 31, 1995 and 1994, respectively.
Reclassifications: Certain reclassifications have been made to the 1994
information to conform to the 1995 presentation.
Note B - Investment in Corinth Square
The Partnership owns a 65% interest in Corinth Square ("Corinth"), a joint
venture with United Investors Income Properties, an affiliated partnership in
which the General Partner is also the sole general partner. All of the accounts
of Corinth are consolidated with the Partnership.
Note C - Investment in Covington Pike
As of December 31, 1992, the Partnership had advanced $1,057,698 to the General
Partner for the benefit of Covington Pike ("Covington"), which was a joint
venture between the General Partner and an unaffiliated party. On January 1,
1993, the General Partner assigned its interest in the joint venture to the
Partnership with no additional consideration beyond the funds advanced as of
December 31, 1992. The $1,057,698 consisted of land and building costs of
approximately $1,031,000 and cash of $26,155. Capital contributed by the
unaffiliated partner was $82. All of the accounts of Covington are consolidated
with the Partnership.
Any cash distributions of Covington are allocated annually as follows:
1. To the Partnership in the amount of 11% of its capital investment during
the year.
2. To the Partnership in the amount of 11% of its capital investment,
cumulative, reduced by the cumulative distributions paid in number 1
above.
3. To the other venturers in an amount of 9/11ths of the amount paid in
number 1 above.
4. The balance, 55% to the Partnership and 45% to the other venturers.
Net income is allocated as follows:
1. To each venturer in an amount equal to (or in proportion to if less than)
cash distributions for the year.
2. To the Partnership in an amount equal to the excess of cumulative cash
distributions over cumulative net income allocated in number 1 above and
under this provision.
3. To the other venturers in the same manner as 2 above.
4. The balance, 55% to the Partnership and 45% to the other venturers.
Net losses are allocated first to each venturer in proportion or equal to their
positive capital account, and then 55% to the Partnership and 45% to the other
venturers.
All distributions and net income of Covington were allocated to the Partnership
in 1995. Net income for Covington was $178,491 for the year ended December 31,
1995. Of this amount, $80,321 was allocated to the minority interests.
Distributions of 1995 cash flow from Covington totaled $218,961. Of this amount,
$98,533 was distributed to minority interests.
Note D - Partners' Capital
Allocations of profits and losses - In accordance with the partnership agreement,
all profits and losses are to 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. Subsequent to December 31, 1995, the
Partnership paid a distribution to the partners of $141,271 on February 20, 1996.
Repurchase of Units - The partnership agreement for the Partnership contains a
provision which states that the General Partner shall purchase up to 10% of the
limited partnership Units outstanding at the fifth anniversary date of the last
Additional Closing Date and become a limited partner with respect to such units.
Any Limited Partner desiring to sell all or any of his Units to the General
Partner must submit a written request to the General Partner beginning 30 days
prior to the fifth anniversary date.
Note E - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
The partnership agreement provides for payments to affiliates for services (based
on a percentage of revenue) and for reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. Effective December 31, 1992, 100% of
the General Partner's common stock was purchased by MAE GP Corporation, an
affiliate of Insignia.
</TABLE>
The following payments were made to affiliates of Insignia Financial Group,
Inc. in 1995 and 1994:
1995 1994
Property management fees $29,782 $45,986
Reimbursement for services of affiliates 30,000 20,000
<TABLE>
The Partnership insures Corinth Square under a master policy through an agency
and insurer unaffiliated with the General Partner. An affiliate of the General
Partner acquired, in the acquisition of a business, certain financial obligations
from an insurance agency which was later acquired by the agent who placed the
current year's master policy. The current agent assumed the financial
obligations to the affiliate of the General Partner, who receives payments on
these obligations from the agent. The amount of the Partnership's insurance
premiums accruing to the benefit of the affiliate of the General Partner by
virtue of the agent's obligations is not significant.
Note F - Operating Leases
Tenants of Corinth Square Professional Building 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 expenses paid by the Partnership are
included in the accompanying Statements of Operations as property taxes,
insurance, and operating expenses. The portion which is reimbursable from the
tenants has been included in tenant reimbursements in the accompanying Statements
of Operations.
Two of the Partnership's properties, Keebler Distribution Center - South Carolina
and Keebler Distribution Center - Virginia, are occupied by a single tenant.
This tenant represents $442,196 of total rental revenues reported in 1995. The
tenant vacated the South Carolina property in January 1996 and has notified the
Partnership of its intention to vacate the Virginia property in 1997. The tenant
is obligated under its leases through the years 2001 and 2002 on the South
Carolina and Virginia properties, respectively. Should the tenant fail to honor
its lease obligations, operating results would be adversely affected.
Note F - Operating Leases (continued)
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, 1995, are set forth below. Certain leases have provisions which
will adjust the future minimum rental payments for changes in the Consumer Price
Index ("CPI"). For these leases the Partnership has included the base rent,
before any CPI changes, as the future minimum rental payment.
<S> <C>
Years Ending December 31,
1996 $ 643,105
1997 646,369
1998 612,038
1999 537,785
2000 491,940
Thereafter 649,768
Total $ 3,581,005
Note G - Partner Tax Information
The following is a reconciliation between net income as reported in the
consolidated financial statements and federal taxable income allocated to the
partners in the Partnership's information returns for the years ended December
31, 1995 and 1994:
1995 1994
Net income as reported $427,590 $439,448
Add (deduct) differences related to:
Accumulated depreciation (11,699) (11,697)
Deferred revenue 12,268 (2,296)
Accrued expenses (500) (3,000)
Deferred charges and other assets 4,892 (8,857)
Federal taxable income $432,551 $413,598
Federal taxable income
per limited partnership unit $ 13.14 $ 12.56
Note G - Partner Tax Information (continued)
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets at December 31, 1995:
Net assets as reported $6,663,259
Differences in basis of assets
and liabilities:
Accumulated depreciation (2,419)
Deferred revenue and other
liabilities (723)
Accrued expenses 4,500
Deferred charges and other (20,670)
Syndication costs 1,194,238
Net assets - tax basis $7,838,185
</TABLE>
Note H - Investment Properties and Accumulated Depreciation
<TABLE>
<CAPTION>
Initial Cost
To Partnership
Buildings Cost
and Related Capitalized
Personal Subsequent to
Description Land Property Acquisition
<S> <C> <C> <C>
Keebler Distribution Center
Chesapeake, Virginia $ 260,000 $1,625,031 $128,722
Keebler Distribution Center
Columbia, South Carolina 172,000 1,794,355 136,894
Corinth Square
Prairie Village, Kansas
(See Note B) 400,000 1,410,085 167,104
U-Store Covington Pike
Memphis, Tennessee
(See Note C) 194,222 837,136 --
Totals $1,026,222 $5,666,607 $432,720
</TABLE>
Note H - Investment Properties and Accumulated Depreciation (continued)
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1995
Buildings
And Related
Personal Accumulated Date of Date Depreciable
Description Land Property Total Depreciation Construction Acquired Life-Years
<S> <C> <C> <C> <C> <C> <C> <C>
Keebler Distribution Center
Chesapeake, Virginia $ 260,000 $ 1,753,753 $ 2,013,753 $ 218,884 1987 08/01/91 31.5-40
Keebler Distribution Center
Columbia, South Carolina 172,000 1,931,249 2,103,249 204,474 1986 04/01/92 31.5-40
Corinth Square
Prairie Village, Kansas 400,000 1,577,189 1,977,189 226,750 1970 10/01/90 7-40
Covington Pike
Memphis, Tennessee 194,222 837,136 1,031,358 100,456 1992 01/01/93 25
Totals $1,026,222 $ 6,099,327 $ 7,125,549 $ 750,564
</TABLE>
<TABLE>
Reconciliation of Investment Properties and Accumulated Depreciation :
Years Ended December 31,
1995 1994
Investment Properties
Balance at beginning of year $7,091,904 $7,083,826
Property improvements 33,645 8,078
Balance at end of Year $7,125,549 $7,091,904
Accumulated Depreciation
Balance at beginning of year $ 565,730 $ 382,591
Depreciation expense 184,834 183,139
Balance at end of year $ 750,564 $ 565,730
The aggregate cost of the real estate for Federal income tax purposes at December
31, 1995 is $7,125,549. The accumulated depreciation taken for Federal income
tax purposes at December 31, 1995 is $752,983.
Note I - Contingencies
The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature. The General Partner of the Partnership 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 8. Changes and Disagreements with Accountants on Accounting and Financial
Disclosure
None.
PART III
Item 9. Directors and Executive Officers, Promoters and Control Persons,
Compliance with Section 16(a) of the Exchange Act
The Registrant has no officers or directors. The General Partner manages and
controls the Registrant and has general responsibility and authority in all
matters affecting its business.
The names of the directors and executive officers of United Investors Real
Estate, Inc. ("UIRE"), the Partnership's General Partner, as of December 31,
1995, 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 or directors.
Name Age Position
Carroll D. Vinson 55 President, Director
Robert D. Long, Jr. 28 Controller, Principal
Accounting Officer
William H. Jarrard, Jr. 49 Vice President
John K. Lines 36 Secretary
Kelley M. Buechler 38 Assistant Secretary
Carroll D. Vinson has been President of the General Partner and Metropolitan
Asset Enhancement, L.P. ("MAE") subsidiaries since August 1994. Prior to that,
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. 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. From 1986 to 1990, Mr. Vinson was
President and Director of U.S. Shelter Corporation, a real estate services
company, which sold substantially all of its assets to Insignia in December
1990.
Robert D. Long, Jr. is Controller and Principal Accounting Officer of the
General Partner and MAE subsidiaries. Prior to joining MAE in February 1994, he
was an auditor for the State of Tennessee and was associated with the accounting
firm of Harshman Lewis and Associates. He is a graduate of the University of
Memphis.
William H. Jarrard, Jr. is Vice President of the General Partner and MAE
subsidiaries and Managing Director - Partnership Administration of Insignia.
During the five years prior to joining Insignia in 1991, he served in a similar
capacity for U.S. Shelter. He was previously associated with the accounting
firm, Ernst and Whinney, for eleven years. Mr. Jarrard is a graduate of the
University of South Carolina and a certified public accountant.
John K. Lines has been Secretary of the General Partner and MAE subsidiaries
since August 1994 and General Counsel and Secretary of Insignia since July 1994.
From May 1993 until June 1994, Mr. Lines was the Assistant General Counsel and
Vice President of Ocwen Financial Corporation in West Palm Beach, Florida. From
October 1991 until April 1993, Mr. Lines was a Senior Attorney with Banc One
Corporation in Columbus, Ohio. From May 1984 until October 1991, Mr. Lines was
employed as an associate with Squire Sanders & Dempsey in Columbus, Ohio.
Kelley M. Buechler is Assistant Secretary of the General Partner and MAE
subsidiaries and Assistant Secretary of Insignia. During the five years prior
to joining Insignia in 1991, she served in a similar capacity for U.S. Shelter.
Ms. Buechler is a graduate of the University of North Carolina.
Item 10. Executive Compensation
None of the directors and officers of the General Partner received any
remuneration from the Registrant.
Item 11. Security Ownership of Certain Beneficial Owners and Management
As of February 1996, no person was known by the Registrant to be the
beneficial owner of more than five percent of the outstanding Units of the
Registrant.
As of February 1996, no Units were owned by the General Partner or any of its
officers and directors.
Item 12. Certain Relationships and Related Transactions
Pursuant to the Agreement of Limited Partnership of the Registrant, the
General Partner was allocated $4,276 of the Registrant's 1995 income and $4,394
of the Registrant's 1994 income. During 1995 and 1994, the General Partner
received distributions of $5,511 and $4,707, respectively. For a description of
the distributions and the allocation of income and loss to which the General
Partner is entitled, reference is made to "Note D" of the financial statements
included in "Item 7" of this report.
The Registrant has property management agreements with affiliates of Insignia
pursuant to which such affiliates have assumed direct responsibility for day-to-
day management of three of the four properties owned by the Registrant. This
service includes the supervision of leasing, rent collection, maintenance,
budgeting, employment of personnel, and payment of operating expenses, etc.
Insignia affiliates received property management fees equal to 6% of commercial
revenues. During the twelve months ended December 31, 1995 and 1994, affiliates
of Insignia received $47,979 and $45,986 in fees for property management,
respectively.
Pursuant to Section 9(e) of the Registrant's Agreement of Limited
Partnership, the General Partner may be reimbursed by the Registrant for certain
of its administrative costs. The Partnership shall reimburse the General
Partner or its affiliates the actual cost of goods, materials, and services
obtained from unaffiliated parties. Administrative services performed by the
General Partner or its affiliates shall be reimbursed at cost; provided,
however, that the amounts charged do not exceed the lesser of (1) the actual
cost of such services, or (2) 90% of the amount which the Partnership would be
required to pay to an independent party for comparable services in the same
geographic location.
For a further description of payments made by the Registrant to affiliates
for services and as reimbursement of certain expenses incurred by affiliates on
behalf of the Registrant, see "Note E" of the financial statements included as
part of this report.
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
1995:
None.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNITED INVESTORS INCOME PROPERTIES
(A Missouri Limited Partnership)
By: United Investors Real Estate, Inc., a
Delaware Corporation, its General
Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
Date: March 20, 1996
In accordance with the Exchange Act, this report has been signed below by
the following person on behalf of the Registrant and in the capacities and on
the date indicated.
<S> <C> <C>
/s/Carroll D. Vinson President March 20,1996
Carroll D. Vinson
/s/Robert D. Long, Jr. Controller and Principal March 20,1996
Robert D. Long, Jr. Accounting Officer
</TABLE>
INDEX TO EXHIBITS
<TABLE>
<S> <C>
Exhibit
1. Form of Dealer Manager Agreement between the General Partner and the
Dealer Manager, including Form of Soliciting Broker Agreement;
incorporated by reference to Exhibit 1 to Amendment No. 1 to
Registrant's Registration Statement (File No. 33-33965) previously
filed on May 7, 1990.
1.1 Form of Amendment to Dealer Manager Agreement; incorporated by
reference to Exhibit 1.1 to Amendment No. 6 to Registrant's
Registration Statement previously filed on February 14, 1992.
1.2 Form of Amendment to Soliciting Broker Agreement; incorporated by
reference to Exhibit 1.2 to Amendment No. 6 to Registrant's
Registration Statement previously filed on February 14, 1992.
3 Certificate of Limited Partnership and Amendment thereto; incorporated
by reference to Exhibit 3 to Amendment No. 1 to Registrant's
Registration Statement previously filed on May 7, 1990.
4.1 Form of Subscription Agreement; incorporated by reference to Exhibit
3.1 to Amendment No. 1 to Registrant's Registration Statement
previously filed on May 7, 1990.
4.2 Agreement of Limited Partnership of Registrant dated September 24,
1990; incorporated by reference to Exhibit 4.2 to Registrant's Report
on Form 10-K previously filed on March 6, 1991.
4.2.1 Amended and Restated Agreement of Limited Partnership of Registrant
dated May 1, 1992; incorporated by reference to Exhibit 4.2 to
Amendment No. 9 to Registrant's Registration Statement previously filed
on April 29, 1992.
10.1 Escrow Agreement among the Registrant, the Dealer Manager and United
Missouri Bank of Kansas City, N.A.; incorporated by reference to
Exhibit 10.1 to Amendment No. 1 to Registrant's Registration Statement
previously filed on May 7, 1990.
10.1.1 Form of Amendment to Escrow Agreement; incorporated by reference to
Exhibit 10.1.1 to Amendment No. 6 to Registrant's Registration
Statement previously filed on February 14, 1992.
10.2 Agreement of Purchase and Sale, dated June 29, 1990, between United
Investors Real Estate, Inc., as purchaser, and American Fire Sprinkler,
Corporation, as seller, relating to Corinth Square Professional
Building; incorporated by reference to Exhibit 10.1 to Registrant's
Quarterly Report on Form 10-Q previously filed on August 15, 1990.
10.3 Agreement of Joint Venture of Corinth Square Associates dated October
1, 1990 between the Registrant and United Investors Income Properties
(A Missouri Limited Partnership); incorporated by reference to Exhibit
4.3 to Registrant's Current Report on Form 8-K previously filed on
October 23, 1990.
10.4 Agreement of Purchase and Sale, dated December 6, 1990, between United
Investors Real Estate, Inc., as purchaser, and Keeva Properties, L.P.,
as seller, relating to the Keebler Distribution Center located in
Chesapeake, Virginia (the "Virginia Center") and the First Amendment
thereto; incorporated by reference to Exhibit 10.4 to Amendment No. 2
to Registrant's Registration Statement previously filed on February 27,
1991.
10.5 Lease, dated June 26, 1986, between Keeva Properties, a Missouri
Limited Partnership, as lessor, and Keebler Company, as lessee,
relating to the Virginia Center and amendments thereto; incorporated by
reference to Exhibit 10.5 to Amendment No. 2 to Registrant's
Registration Statement previously filed on February 27, 1991.
10.6 Agreement for Purchase and Sale, dated December 6, 1990, between United
Investors Real Estate, Inc., as purchaser, and Keecar Properties, L.P.,
as seller, relating to the Keebler Distribution Center located in
Columbia, South Carolina (the "South Carolina Center"), and First
Amendment thereto; incorporated by reference to Exhibit 10.6 to
Amendment No. 2 to Registrant's Registration Statement previously filed
on February 27, 1991.
10.7 Lease, dated June 6, 1986, between Keecar Properties, a Missouri
Limited Partnership, as lessor, and Keebler Company, as lessee,
relating to the South Carolina Center, and amendment thereto;
incorporated by reference to Exhibit 10.7 to Amendment No. 2 to
Registrant's Registration Statement previously filed on February 27,
1991.
10.8 Form of Agreement between the Registrant and Colby Sandlian regarding
the Covington U-Stor Mini-Warehouse; incorporated by reference to
Exhibit 10.8 to Amendment No. 9 to Registrant's Registration Statement
previously filed on April 29, 1992.
10.9 Form of Agreement between the Registrant and Colby Sandlian regarding
the Harry Hines U-Stor Mini-Warehouse; incorporated by reference to
Exhibit 10.9 to Amendment No. 9 to Registrant's Registration Statement
previously filed on April 29, 1992.
10.10 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 10.10 to
Registrant's Current Report on Form 8-K previously filed on December
31, 1992.
16.1 Letter of KPMG Peat Marwick to the Securities and Exchange Commission
included herein pursuant to the requirements of Item 304 (a) (3) of
Regulation S-K; incorporated by reference to Exhibit 16.1 to
Registrant's Current Report on Form 8-K previously filed on October 22,
1990.
16.2 Letter of Mayer Hoffman McCann, the Registrant's former independent
accountant, regarding its concurrence with the statements made by the
registrant is incorporated by reference to the exhibit filed with form
8-K dated August 30, 1993.
27 Financial Data Schedule
99.1 Portions of Registrant's Prospectus dated May 17, 1990; incorporated by
reference to Exhibit 99.1 to Registrant's Report on Form 10-K
previously filed on March 6, 1991.
99.2 Portions of Registrant's Prospectus dated May 14, 1992.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from United
Investors Income Properties II 1995 Year-End 10-KSB and is qualified in its
entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000862028
<NAME> UNITED INVESTORS INCOME PROPERTIES II
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 889,300
<SECURITIES> 0
<RECEIVABLES> 17,391
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 7,125,549
<DEPRECIATION> 750,564
<TOTAL-ASSETS> 7,343,027
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,663,259
<TOTAL-LIABILITY-AND-EQUITY> 7,343,027
<SALES> 0
<TOTAL-REVENUES> 1,037,252
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 509,733
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 427,590
<EPS-PRIMARY> 12.98
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
</FN>
</TABLE>
