FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT of 1934
For the transition period.........to.........
Commission file number 0-19242
UNITED INVESTORS GROWTH PROPERTIES II
(Exact name of small business issuer as specified in its charter)
Missouri 43-1542902
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (803) 239-1000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) UNITED INVESTORS GROWTH PROPERTIES II
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
September 30, 1995
<S> <C> <C>
Assets
Cash and cash equivalents:
Unrestricted $ 497,964
Restricted-tenant security deposits 44,611
Accounts receivable 3,169
Escrows for taxes and insurance 71,121
Restricted escrow 66,350
Other assets 123,867
Investment properties:
Land $ 1,071,000
Buildings and related personal property 6,936,783
8,007,783
Less accumulated depreciation ( 903,965) 7,103,818
Investment in joint venture (Note D) 66,438
$7,977,338
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 8,651
Tenant security deposits 44,507
Accrued taxes 84,305
Other liabilities 56,959
Mortgage notes payable 5,048,199
Partners' Capital
General partner $ 541
Limited partners (20,661 units issued
and outstanding) 2,734,176 2,734,717
$7,977,338
</TABLE>
[FN]
See Accompanying Notes to Consolidated Financial Statements
b) UNITED INVESTORS GROWTH PROPERTIES II
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Rental income $365,489 $349,079 $1,081,035 $1,035,177
Other income 19,156 18,966 56,804 49,016
Total revenues 384,645 368,045 1,137,839 1,084,193
Expenses:
Operating 76,102 83,441 247,850 244,270
General and administrative 17,752 12,426 50,309 40,429
Property management fees 18,929 18,144 55,777 54,237
Maintenance 28,755 37,454 93,118 93,253
Depreciation 71,426 69,816 212,673 205,964
Interest 117,594 118,844 353,744 357,413
Property taxes 26,889 24,540 88,258 75,209
Total expenses 357,447 364,665 $1,101,729 1,070,775
Equity in net income (loss)
of joint venture 45,781 (24,899) 18,378 (58,776)
Net income (loss) $ 72,979 $(21,519) $ 54,488 $ (45,358)
Net income (loss) allocated
to general partner $ 12,751 $ (215) $ 12,566 $ (454)
Net income (loss) allocated
to limited partners 60,228 (21,304) 41,922 (44,904)
$ 72,979 $(21,519) $ 54,488 $ (45,358)
Net income (loss) per limited
partnership unit $ 2.92 $ (1.03) $ 2.03 $ (2.17)
</TABLE>
[FN]
See Accompanying Notes to Consolidated Financial Statements
c) UNITED INVESTORS GROWTH PROPERTIES II
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 20,661 $ 100 $5,165,250 $5,165,350
Partners' capital (deficit)
at December 31, 1994 20,661 $(10,310) $2,862,046 $2,851,736
Partners' distributions -- (1,715) (169,792) (171,507)
Net income for the nine months
ended September 30, 1995 -- 12,566 41,922 54,488
Partners' capital at
September 30, 1995 20,661 $ 541 $2,734,176 $2,734,717
</TABLE>
[FN]
See Accompanying Notes to Consolidated Financial Statements
d) UNITED INVESTORS GROWTH PROPERTIES II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 54,488 $ (45,358)
Adjustments to reconcile net income (loss) to
net cash provided by operating
activities:
Equity in net income (loss) of joint venture (18,378) 58,776
Depreciation 212,673 205,964
Amortization of loan costs 17,515 17,515
Change in accounts:
Restricted cash (1,483) 2,070
Accounts receivable (2,009) 1,943
Escrows for taxes and insurance (55,137) (15,116)
Other assets (4,276) (5,132)
Accounts payable (14,895) 3,888
Tenant security deposit liabilities 1,644 (2,070)
Accrued property taxes 57,810 16,256
Other liabilities 26,738 28,642
Net cash provided by operating
activities 274,690 267,378
Cash flows from investing activities:
Property improvements and replacements (44,222) (29,754)
Advances to joint venture (18,000) (25,680)
Deposits to restricted escrow (11,700) (13,000)
Net cash used in
investing activities (73,922) (68,434)
Cash flows from financing activities:
Partners' distributions (171,507) (97,670)
Payments on mortgage notes payable (44,135) (40,466)
Net cash used in financing
activities (215,642) (138,136)
Net (decrease) increase in cash (14,874) 60,808
Cash at beginning of period 512,838 511,312
Cash at end of period $ 497,964 $ 572,120
Supplemental disclosure of cash flow information:
Cash paid for interest $ 336,229 $ 339,898
</TABLE>
[FN]
See Accompanying Notes to Consolidated Financial Statements
e) UNITED INVESTORS GROWTH PROPERTIES II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the General Partner, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine month
periods ended September 30, 1995, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1995. For further
information, refer to the financial statements and footnotes thereto included in
the Partnership's annual report on Form 10-KSB for the fiscal year ended
December 31, 1994.
Certain reclassifications have been made to the 1994 information to conform
to the 1995 presentation.
Note B - Basis of Accounting
The financial statements include the Partnership's only directly-owned
property, Stone Ridge Apartments, as well as a 99.99% interest in Riverwalk
Apartments Limited Partnership ("Riverwalk"). An unaffiliated individual is the
sole limited partner. The Partnership consolidates its interest in Riverwalk
(whereby all accounts are included in the consolidated financial statements of
the Partnership with intercompany accounts being eliminated). The minority
interest of the limited partner is not material to the Partnership. In
addition, the Partnership owns a 40% interest in Renaissance Village Associates
("Renaissance"). The Partnership reflects its interest in Renaissance utilizing
the equity method whereby the original investment is increased by advances to
Renaissance and the Partnership's share of the earnings of Renaissance and
decreased by distributions from Renaissance and the Partnership's share of
losses of Renaissance. During the third quarter of 1995, Renaissance Village
Apartments was sold by Renaissance (see Note D).
Pursuant to the terms in the Partnership Agreement, net income and net loss
for each fiscal year shall be allocated 99% to the limited partners and 1% to
the General Partner.
Gain from a sale shall be allocated as follows: (a) first to each partner who
has a negative capital account, an amount equal to (or in proportion to if less
than) such partner's negative capital account balance and (b) second, 99% to the
limited partners and 1% to the General Partner, until each limited partner has
been allocated an amount equal to (or in proportion to if less than) the
excess, if any, of such limited partner's adjusted capital investment over his
capital account.
Note B - Basis of Accounting (continued)
Loss from a sale shall be allocated as follows: (a) first to each partner who
has a positive capital account, an amount equal to (or in proportion to if less
than) such partner's positive capital account balance and (b) second, 99% to the
limited partners and 1% to the General Partner.
Anything in the Partnership Agreement to the contrary notwithstanding, the
interests of the General Partner, in the aggregate, in each material item of
income, gain, loss deduction and credit of the Partnership will be equal to at
least 1% of each such item at all times during the existence of the Partnership.
Note C - Repurchase of Units
The partnership agreement for the Partnership contains a provision which
states that the General Partner shall purchase up to 10% of the limited
partnership Units outstanding at the fifth anniversary date of the last
Additional Closing Date. Any Limited Partner desiring to sell all or any of its
Units to the General Partner must submit a written request to the General
Partner beginning 30 days prior to the fifth anniversary date.
Note D - Investment in Joint Venture
On August 30, 1995, Renaissance Village Apartments was sold to an
unaffiliated party, Kauri Investments, Ltd. The Partnership's share of the gain
recognized on the sale of the joint venture's property was approximately
$66,000. Currently, the joint venture is in the process of being dissolved.
Once all the remaining liabilities of the joint venture are satisfied, the
remaining cash of the joint venture will be distributed to the joint venturers.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of two apartment complexes.
The following table sets forth the average occupancy of the properties for the
nine months ended September 30, 1995 and 1994:
Average
Occupancy
1995 1994
Riverwalk
Houston, Texas 97% 95%
Stone Ridge
Overland Park, Kansas 97% 98%
The Partnership realized net income of $54,488 for the nine months ended
September 30, 1995, compared to a net loss of $45,358 for the corresponding
period in 1994. The net income for the three months ended September 30, 1995,
was $72,979 compared to a net loss of $21,519 for the three months ended
September 30, 1994. The increase in net income for both periods was primarily
due to the increase in equity in net income of the joint venture as a result of
the sale of the Renaissance Village Apartments (see Note D of the Consolidated
Financial Statements). The Partnership's share of the gain recognized on the
sale was approximately $66,000. Also contributing to the increased net income
is the increase in rental revenues due to increased rental rates at both of the
Partnership's properties. Partially offsetting these increases in revenues were
increases in property taxes and general and administrative expenses. Riverwalk
experienced higher property taxes in 1995 due to a tax value assessment increase
of approximately $413,000 at the end of 1994. General and administrative
expenses increased as a result of an increase in expense reimbursements in 1995.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each 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.
At September 30, 1995, the Partnership had unrestricted cash of $497,964
compared to $512,838 at December 31, 1994. Net cash provided by operating
activities increased as a result of an increase in rental revenues as discussed
above. Net cash used in financing activities increased due to increased
partners' distributions during the nine months ended September 30, 1995,
compared to the corresponding period in 1994.
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 property to adequately maintain the physical assets
and meet other operating needs of the Partnership. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The
mortgage indebtedness of $5,048,199 matures at various times with balloon
payments due at maturity, at which time the properties will either be refinanced
or sold. Future cash distributions will depend on the levels of net cash
generated from operations, property sales and the availability of cash
reserves. Cash distributions of $154,853 were made during fiscal year 1994 and
cash distributions of $171,507 were made during the first nine months of 1995.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K: A Form 8-K dated August 30, 1995 was filed
reporting the sale of the Renaissance Village Apartments.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNITED INVESTORS GROWTH PROPERTIES 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
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Controller and Principal
Accounting Officer
Date: November 13, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from United
Investors Growth Properties II 1995 Third Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB.
</LEGEND>
<CIK> 0000862114
<NAME> UNITED INVESTORS GROWTH PROPERTIES II
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 497,964
<SECURITIES> 0
<RECEIVABLES> 3,169
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 8,007,783
<DEPRECIATION> 903,965
<TOTAL-ASSETS> 7,977,338
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 5,048,199
<COMMON> 0
0
0
<OTHER-SE> 2,734,717
<TOTAL-LIABILITY-AND-EQUITY> 7,977,338
<SALES> 0
<TOTAL-REVENUES> 1,137,839
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,101,729
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 353,744
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,488
<EPS-PRIMARY> 2.03
<EPS-DILUTED> 0
<FN>
<F1>
The Registrant has an unclassified balance sheet.
</FN>
</TABLE>
