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 March 31, 1996
[ ] 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 (864) 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)
(in thousands, except unit data)
March 31, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 526
Restricted-tenant security deposits 47
Accounts receivable 14
Escrows for taxes and insurance 53
Restricted escrow 74
Other assets 104
Investment properties
Land $ 1,071
Buildings and related personal property 6,978
8,049
Less accumulated depreciation (1,040) 7,009
Investment in joint venture 65
$7,892
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 8
Tenant security deposits 47
Accrued taxes 55
Other liabilities 58
Mortgage notes payable 5,017
Partners' Capital
General partner $ 1
Limited partners (20,661 units issued
units issued and outstanding) 2,706 2,707
$7,892
See Accompanying Notes to Consolidated Financial Statements
b) UNITED INVESTORS GROWTH PROPERTIES II
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1996 1995
Revenues:
Rental income $ 366 $ 359
Other income 25 17
Total revenues 391 376
Expenses:
Operating 109 98
General and administrative 17 15
Maintenance 21 16
Depreciation 74 70
Interest 117 118
Property taxes 29 27
Total expenses 367 344
Equity in loss of joint venture -- (14)
Net income $ 24 $ 18
Net income allocated
to general partner (1%) $ -- $ --
Net income allocated
to limited partners (99%) 24 18
$ 24 $ 18
Net income per limited
partnership unit $ 1.16 $ .87
See Accompanying Notes to Consolidated Financial Statements
c) UNITED INVESTORS GROWTH PROPERTIES II
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
For the Three Months Ended March 31, 1996
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 20,661 $ -- $ 5,165 $ 5,165
Partners' capital
at December 31, 1995 20,661 $ 1 $ 2,717 $ 2,718
Distributions to Partners -- -- (35) (35)
Net income for the three months
ended March 31, 1996 -- -- 24 24
Partners' capital at
March 31, 1996 20,661 $ 1 $ 2,706 $ 2,707
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) UNITED INVESTORS GROWTH PROPERTIES II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Month Ended
March 31,
1996 1995
Cash flows from operating activities:
Net income $ 24 $ 18
Adjustments to reconcile net income to
net cash provided by operating
activities:
Equity loss of joint venture -- 14
Depreciation 74 70
Amortization of loan costs 6 6
Change in accounts:
Restricted cash (2) (2)
Accounts receivable (1) (1)
Escrows for taxes and insurance (34) (29)
Other assets 4 5
Accounts payable -- (19)
Tenant security deposit liabilities 2 2
Accrued taxes 30 24
Other liabilities 8 9
Net cash provided by operating
activities 111 97
Cash flows from investing activities:
Property improvements and replacements (12) (7)
Advances to joint venture -- (8)
Deposits to restricted escrow (4) (4)
Net cash used in investing activities (16) (19)
Cash flows from financing activities:
Payments on mortgage notes payable (16) (15)
Partners' distributions (35) (57)
Net cash used in financing
activities (51) (72)
Net increase in cash 44 6
Cash at beginning of period 482 513
Cash at end of period $ 526 $ 519
Supplemental disclosure of cash flow information:
Cash paid for interest $ 111 $ 112
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 consolidated financial statements of United Investors
Growth Properties II ("The Partnership") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of the General Partner, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 1996,
are not necessarily indicative of the results that may be expected for the
fiscal year ended December 31, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Partnership's annual report on Form 10-KSB for the fiscal year ended December
31, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
Note B - Basis of Accounting
The financial statements include the Partnership's only directly-owned property,
Stone Ridge Apartments. The Partnership also owns a 99.99% interest and is the
sole general partner in Riverwalk Apartments Limited Partnership ("Riverwalk").
An unaffiliated party 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".)
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 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 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 liquidated. Once all
the remaining liabilities of the joint venture are satisfied, any remaining
assets of the joint venture will be distributed to the joint venturers.
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 (included in operating expenses)
to affiliates for services (based on a percentage of revenue) and for
reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership. Expense reimbursements are included in general and administrative
expenses. The following payments were made to affiliates of Insignia for the
three months ended March 31, 1996 and 1995:
1996 1995
Property management fees $19 $19
Reimbursements for services of affiliates 8 8
The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the General Partner. An affiliate of the General
Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the General Partner, who receives
payment on these obligations from the agent. The amount of the Partnership's
insurance premiums accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligations is not significant.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for the
quarters ended March 31, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Riverwalk
Houston, Texas 96% 99%
Stone Ridge
Overland Park, Kansas 96% 96%
The General Partner attributes the decrease in occupancy at Riverwalk to an
increase in the number of tenants purchasing homes due to favorable interest
rates.
The Partnership's net income for the three months ended March 31, 1996, was
$24,000 compared to net income of $18,000 for the three months ended March 31,
1995. The increase in net income was primarily due to the sale of Renaissance.
The Partnership's investment in the joint venture resulted in a $14,000 loss for
the three months ended March 31, 1995, and no loss for the corresponding period
of 1996. Also, contributing to the increase in net income was an increase in
other income resulting from increased corporate unit income and lease
cancellation fees. The increase in operating expenses is due to an increase in
concessions offered at Stone Ridge Apartments.
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.
At March 31, 1996, the Partnership held unrestricted cash and cash equivalents
of $526,000 compared to $519,000 at March 31, 1995. Net cash provided by
operating activities increased due to increases in rental and other income. Net
cash used in financing activities decreased due to a decrease in distributions
made in the three months ended March 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 property to adequately maintain the physical assets
and other operating needs of the Partnership. Such assets are currently thought
to be sufficient for any near-term needs of the Partnership. The mortgage
indebtedness of $5,017,000 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 $206,000 were made during 1995 and a cash distribution of
$35,000 was made during the first three months of 1996.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 1996.
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.
Vice President/CAO
Date: May 15, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from United
Investors Grwoth Properties II 1996 First Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000862114
<NAME> UNITED INVESTORS GROWTH PROEPRTIES II
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 526
<SECURITIES> 0
<RECEIVABLES> 14
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 8,049
<DEPRECIATION> 1,040
<TOTAL-ASSETS> 7,892
<CURRENT-LIABILITIES> 0
<BONDS> 5,017
0
0
<COMMON> 0
<OTHER-SE> 2,707
<TOTAL-LIABILITY-AND-EQUITY> 7,892
<SALES> 0
<TOTAL-REVENUES> 391
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 367
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 117
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 0
<FN>
<F1>The Partnership has an unclassified balance sheet.
</FN>
</TABLE>
