FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT
UNDER SECTION 13 OR 15(D)
[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, 1996
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: $1,166,000
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of December 31, 1996: 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. 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 affiliates of Insignia Financial
Group Inc., "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:
Date of
Property Purchase Type of Ownership(1) Use
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.
Covington Pike 01/01/93 Joint Venture Interest Mini-storage
Memphis, Tennessee facility -
452 units
(1) None of the Registrant's properties are encumbered by mortgage financing.
SCHEDULE OF PROPERTIES:
(dollar amounts in thousands)
Gross
Carrying Accumulated Useful Federal
Property Value Depreciation Life Method Tax Basis
Keebler Distribution Center-VA $2,014 $ 269 31.5-40 S/L $1,722
Keebler Distribution Center-SC 2,103 259 31.5-40 S/L 1,819
Corinth Square Professional
Building 1,992 265 7-40 S/L 1,741
Covington Pike 1,031 134 25 S/L 926
Total $7,140 $ 927 $6,208
See "Note A" of the Notes to Consolidated Financial Statements included in "Item
7" for a description of the Partnership's depreciation policy.
SCHEDULE OF RENTAL RATES AND OCCUPANCY:
Average Annual Average Annual
Rental Rates Occupancy
1996 1995 1996 1995
Keebler - Virginia $ 6.78/sq.ft. $ 6.76/sq.ft. 100% 100%
Keebler - South Carolina $ 6.00/sq.ft. $ 5.77/sq.ft. 100% 100%
Corinth Square $13.86/sq.ft. $14.30/sq.ft. 80% 83%
Covington Pike $ 665/unit $ 645/unit 99% 99%
The Keebler Company vacated the Columbia, South Carolina, facility in January of
1996 and vacated the Chesapeake, Virginia, facility in August 1996. 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. The tenant has thus far paid the scheduled rental payments
on the vacated facilities. In addition, Keebler, with approval from the
Partnership, entered into a sub-lease agreement for the Columbia, South Carolina
facility. The tenant is obligated to pay rent to Keebler through December 31,
2000.
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 localities in which they operate. 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 1997-2006:
Number of % of Gross
Expirations Square Feet Annual Rent Annual Rent
(in thousands)
1997 1 1,595 $ 22 8.1%
1998 3 4,605 60 21.8%
1999 3 5,641 79 28.7%
2000 1 1,396 18 6.7%
2001 2 2,022 30 11.1%
2002-2006 0 0 0 0
The following schedule reflects information on tenants occupying 10% or more
of the leasable square footage for each property:
<TABLE>
<CAPTION>
Nature of Square Footage Annual Rent Per Lease
Business Leased Square Foot Expiration
<S> <C> <C> <C> <C>
Keebler - Virginia
Distribution 32,344 $ 6.78 10/31/02
Facility
Keebler - South
Carolina
Distribution 38,761 $ 6.00 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
</TABLE>
SCHEDULE OF REAL ESTATE TAXES AND RATES:
1996 1996
Taxes Rate
(in thousands)
Corinth Square Professional Building $ 43 3.64%
Covington Pike 25 6.27%
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, 1996, 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, 1996, the number of holders of record of Limited
Partnership Units was 786. 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
approximately $567,000 and $551,000 during the years ended December 31, 1996 and
1995, respectively. 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 1996, the Partnership realized net income of $436,000 compared to
$428,000 for the year ended December 31, 1995. The increased net income is due
to increased rental revenues which resulted from scheduled increases in rental
rates in the Keebler, SC lease and rate increases at Covington Pike. A decrease
in rental revenue at Corinth Square resulting from the decrease in occupancy was
offset by an increase in tenant common area expense reimbursements. The
increase in rental revenue was partially offset by a loss resulting from a roof
replacement at Corinth Square. The decrease in maintenance expense was a result
of a decrease in maintenance contracts at Corinth Square and a decrease in roof
repairs at Keebler, SC.
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 expenses. 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, 1996, the Partnership held unrestricted cash of $914,000
compared to $889,000 at December 31, 1995. Net cash provided by operating
activities increased primarily due to the increase in rental revenues discussed
above. Net cash used in investing activities increased due to a roof
replacement project at Corinth Square in the fourth quarter of 1996. Net cash
used in financing activities increased as a result of greater distributions to
the partners during the year ended December 31, 1996, compared to the
corresponding period of 1995.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the investment properties to adequately maintain the
physical assets and other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
Cash distributions of $567,000 and $551,000 were made during the years ended
December 31, 1996 and 1995, respectively.
The Keebler Company vacated the Columbia, South Carolina, facility in January
of 1996 and vacated the Chesapeake, Virginia facility in August, 1996. 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. The tenant has thus far paid the scheduled rental
payments on the vacated facilities. In addition, Keebler, with approval from
the Partnership, entered into a sub-lease agreement for the Columbia, South
Carolina, facility. The sub-lease tenant is obligated to pay rent to Keebler
through December 31, 2000.
ITEM 7. FINANCIAL STATEMENTS
UNITED INVESTORS INCOME PROPERTIES II
LIST OF FINANCIAL STATEMENTS
Independent Auditors' Report
Consolidated Balance Sheet -- December 31, 1996
Consolidated Statements of Operations -- Years ended December 31,
1996 and 1995
Consolidated Statements of Changes in Partners' Capital (Deficit) --
Years ended December 31, 1996 and 1995
Consolidated Statements of Cash Flows -- Years ended December 31,
1996 and 1995
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, 1996, 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, 1996. 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,
1996, and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
February 21, 1997
UNITED INVESTORS INCOME PROPERTIES II
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
December 31, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 914
Restricted-tenant security deposits 5
Accounts receivable, net of allowance of $10 25
Escrows for taxes 22
Other assets 46
Investment properties (Notes A and H):
Land $1,026
Buildings and related personal property 6,114
7,140
Less accumulated depreciation (927) 6,213
$7,225
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 14
Tenant security deposits 11
Accrued taxes 22
Other liabilities 15
Minority interest (Notes B and C) 631
Partners' Capital (Deficit)
General partner $ (3)
Limited partners (32,601 units
issued and outstanding) 6,535 6,532
$7,225
See Accompanying Notes to Consolidated Financial Statements
UNITED INVESTORS INCOME PROPERTIES II
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended December 31,
1996 1995
Revenues:
Rental income $ 1,100 $ 1,033
Other income 66 67
Total revenues 1,166 1,100
Expenses:
Operating 202 197
General and administrative 66 62
Maintenance 53 67
Depreciation 186 185
Property taxes 69 61
Loss on disposal of investment property 50 --
Total expenses 626 572
Minority interest in net income of joint
ventures (Notes B and C) (104) (100)
Net income (Note G) $ 436 $ 428
Net income allocated to general partner (1%) $ 4 $ 4
Net income allocated to limited partners (99%) 432 424
$ 436 $ 428
Net income per limited partnership unit $ 13.25 $ 12.98
See Accompanying Notes to Consolidated Financial Statements
UNITED INVESTORS INCOME PROPERTIES II
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 32,601 $ -- $ 8,150 $ 8,150
Partners' capital at
December 31, 1994 32,601 $ -- $ 6,786 $ 6,786
Partners' distributions -- (5) (546) (551)
Net income for the year ended
December 31, 1995 -- 4 424 428
Partners' capital (deficit) at
December 31, 1995 32,601 (1) 6,664 6,663
Partners' distributions -- (6) (561) (567)
Net income for the year
ended December 31, 1996 -- 4 432 436
Partners' capital (deficit) at
December 31, 1996 32,601 $ (3) $ 6,535 $ 6,532
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
UNITED INVESTORS INCOME PROPERTIES II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 436 $ 428
Adjustments to reconcile net income to
net cash provided by operating activities:
Minority interest in net income of joint ventures 104 100
Depreciation 186 185
Amortization of lease commissions 3 3
Loss on disposal of investment property 50 --
Change in accounts:
Accounts receivable (8) 38
Escrows for taxes (16) (3)
Other assets 2 (4)
Accounts payable 8 --
Accrued taxes 4 (1)
Other liabilities 1 (1)
Net cash provided by operating activities 770 745
Cash flows from investing activities:
Property improvements and replacements (74) (34)
Net cash used in investing activities (74) (34)
Cash flows from financing activities:
Net distributions to minority interest (104) (102)
Partners' distributions (567) (551)
Net cash used in financing activities (671) (653)
Net increase in cash and cash equivalents 25 58
Cash and cash equivalents at beginning of year 889 831
Cash and cash equivalents at end of year $ 914 $ 889
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
UNITED INVESTORS INCOME PROPERTIES II
NOTES TO CONSOLDIATED FINANCIAL STATEMENTS
(December 31, 1996)
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 individually.
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 term 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 (with
intercompany accounts being 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 income 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 $3,000 and $5,000 for
the years ended December 31, 1996 and 1995, respectively.
RECLASSIFICATIONS: Certain reclassifications have been made to the 1995
information to conform to the 1996 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 by 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
by 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 number 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.
Net income for Covington was $197,000 for the year ended December 31, 1996.
Of this amount, $89,000 was allocated to the minority interests. Distributions
of 1996 cash flow from Covington totaled $230,000. Of this amount, $104,000 was
distributed to minority interests.
NOTE D - PARTNERS' CAPITAL (DEFICIT)
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. On February 14, 1997, the Partnership
paid a distribution to the partners of $141,000.
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. Property management fees are included
in operating expenses. The following payments were made to affiliates of the
General Partner in 1996 and 1995:
1996 1995
(in thousands)
Property management fees $ 31 $ 30
Reimbursement for services of affiliates 32 30
In addition, affiliates of the General Partner were paid approximately $4,000
during 1996 for construction oversight costs incurred in conjunction with the
roof replacement project at Corinth Square.
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.
Two of the Partnership's properties, Keebler Distribution Center - South
Carolina and Keebler Distribution Center - Virginia, are leased by a single
tenant. This tenant
represents $452,000 of total rental revenues reported in 1996. The tenant
vacated the South Carolina property in January 1996 and vacated the Virginia
property in August 1996. 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.
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, 1996, 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.
Years Ending December 31,
(in thousands)
1997 $ 658
1998 635
1999 561
2000 515
2001 475
Thereafter 192
Total $ 3,036
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 tax return for the years ended December 31,
1996 and 1995 (in thousands, except unit data):
1996 1995
Net income as reported $ 436 $ 428
Add (deduct) differences related to:
Accumulated depreciation (12) (12)
Deferred revenue (6) 12
Accrued expenses 1 --
Deferred charges and other assets 6 5
Federal taxable income $ 425 $ 433
Federal taxable income
per limited partnership unit $12.91 $13.14
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets at December 31, 1996 (in thousands):
Net assets as reported $6,532
Differences in basis of assets
and liabilities:
Accumulated depreciation (4)
Deferred revenue and other
liabilities (17)
Accrued expenses 6
Deferred charges and other assets (15)
Syndication costs 1,194
Net assets - tax basis $7,696
NOTE H - INVESTMENT PROPERTIES AND ACCUMULATED DEPRECIATION
(dollar amounts in thousands)
Initial Cost
To Partnership
Buildings Cost
and Related Capitalized
Personal Subsequent to
Description Land Property Acquisition
Keebler Distribution Center-VA $ 260 $1,625 $ 129
Keebler Distribution Center-SC 172 1,794 137
Corinth Square 400 1,410 241
(59)
Covington Pike 194 837 --
Totals $1,026 $5,666 $ 448
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1996
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, Va $ 260 $ 1,754 $ 2,014 $ 269 1987 08/01/91 31.5-40
Keebler Distribution
Center, SC 172 1,931 2,103 259 1986 04/01/92 31.5-40
Corinth Square 400 1,592 1,992 265 1970 10/01/90 7-40
Covington Pike 194 837 1,031 134 1992 01/01/93 25
Totals $1,026 $ 6,114 $ 7,140 $ 927
</TABLE>
Reconciliation of "Investment Properties and Accumulated Depreciation"
Years Ended December 31,
1996 1995
Investment Properties
Balance at beginning of year $7,125 $7,091
Property improvements 74 34
Disposal of property (59) --
Balance at end of Year $7,140 $7,125
Accumulated Depreciation
Balance at beginning of year $ 750 $ 565
Depreciation expense 186 185
Disposal of property (9) --
Balance at end of year $ 927 $ 750
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1996, is $7,140,000. The accumulated depreciation taken for
Federal income tax purposes at December 31, 1996, is $932,000.
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,
1996, 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 56 President, Director
William H. Jarrard, Jr. 50 Vice President
Robert D. Long, Jr. 29 Controller, Principal
Accounting Officer
John K. Lines 37 Secretary
Kelley M. Buechler 39 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.
William H. Jarrard, Jr. has been Vice President of UIRE since December 1992
and Managing Director - Partnership Administration of Insignia since 1991. Mr.
Jarrard served as Managing Director - Partnership Administration and Asset
Management for Insignia from July 1994 until January 1996.
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.
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.
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 March 1997, 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 March 1997, 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 approximately $4,000 of the Registrant's 1996
income and $4,000 of the Registrant's 1995 income. During 1996 and 1995, the
General Partner received distributions of approximately $6,000 and $5,000,
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 Notes to Consolidated 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 receive property management fees
equal to 6% of commercial revenues. During the years ended December 31, 1996
and 1995, affiliates of Insignia received approximately $31,000 and $30,000 of
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. During the years ended December 31, 1996 and 1995,
affiliates of Insignia received $32,000 and $30,000, respectively, of such
reimbursements.
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 Notes to Consolidated 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 1996:
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 II
(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 27, 1997
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/ Carroll D. Vinson President March 27, 1997
Carroll D. Vinson
/s/ Robert D. Long, Jr. Controller and Principal March 27, 1997
Robert D. Long, Jr. Accounting Officer
INDEX TO EXHIBITS
Exhibit
1. Form of Dealer Manager Agreement between the General Partner and the
Dealer Manager, including Form of Soliciting Broker Agreement;
incorporated by reference to Exhibit 1 to 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.
10.1.1Form 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> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from United
Investors Income Properties II 1996 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> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 914
<SECURITIES> 0
<RECEIVABLES> 35
<ALLOWANCES> 10
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 7,140
<DEPRECIATION> 927
<TOTAL-ASSETS> 7,225
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,532
<TOTAL-LIABILITY-AND-EQUITY> 7,225
<SALES> 0
<TOTAL-REVENUES> 1,166
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 626
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 436
<EPS-PRIMARY> 13.25<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
