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, 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)
September 30, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 541
Restricted-tenant security deposits 43
Accounts receivable 15
Escrows for taxes and insurance 77
Restricted escrow 82
Other assets 97
Investment properties
Land $ 1,071
Buildings and related personal property 7,014
8,085
Less accumulated depreciation (1,190) 6,895
$7,750
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 14
Tenant security deposits 43
Accrued taxes 88
Other liabilities 51
Mortgage notes payable 4,985
Partners' Capital
General partner $ --
Limited partners (20,661 units issued
and outstanding) 2,569 2,569
$7,750
See Accompanying Notes to Consolidated Financial Statements
b) UNITED INVESTORS GROWTH PROPERTIES II
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 378 $ 366 $ 1,114 $ 1,081
Other income 30 19 83 57
Total revenues 408 385 1,197 1,138
Expenses:
Operating 127 95 351 304
General and administrative 16 17 52 50
Maintenance 97 29 173 93
Depreciation 75 71 224 213
Interest 117 118 350 354
Property taxes 29 27 88 88
Total expenses 461 357 1,238 1,102
Equity in income (loss ) of
joint venture -- 45 (4) 18
Net income (loss) $ (53) $ 73 $ (45) $ 54
Net income (loss) allocated
to general partner (1%) $ -- $ 13 $ -- $ 12
Net income (loss) allocated
to limited partners (99%) (53) 60 (45) 42
$ (53) $ 73 $ (45) $ 54
Net income (loss) per limited
partnership unit $(2.57) $ 2.92 $ (2.18) $ 2.03
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c) UNITED INVESTORS GROWTH PROPERTIES II
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
For the Nine Months Ended September 30, 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 -- (1) (103) (104)
Net income for the nine months
ended September 30, 1996 -- -- (45) (45)
Partners' capital at
September 30, 1996 20,661 $ -- $ 2,569 $ 2,569
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) UNITED INVESTORS GROWTH PROPERTIES II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities:
Net income (loss) $ (45) $ 54
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Equity in (income) loss of joint venture 4 (18)
Depreciation 224 213
Amortization of loan costs 18 18
Change in accounts:
Restricted cash 2 (2)
Accounts receivable (2) (2)
Escrows for taxes and insurance (58) (55)
Other assets (1) (4)
Accounts payable 6 (15)
Tenant security deposit liabilities (2) 2
Accrued taxes 63 58
Other liabilities 1 26
Net cash provided by operating
activities 210 275
Cash flows from investing activities:
Property improvements and replacements (48) (44)
Advances to joint venture -- (18)
Liquidating distribution from joint venture 61 --
Deposits to restricted escrow (12) (12)
Net cash provided by (used in)
investing activities 1 (74)
Cash flows from financing activities:
Payments on mortgage notes payable (48) (44)
Partners' distributions (104) (172)
Net cash used in financing activities (152) (216)
Net increase (decrease) in cash 59 (15)
Cash and cash equivalents at beginning of period 482 513
Cash and cash equivalents at end of period $ 541 $ 498
Supplemental disclosure of cash flow information:
Cash paid for interest $ 332 $ 336
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 (United Investors Real Estate, Inc.), 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, 1996, are not necessarily indicative of the
results that may be expected for the fiscal year ending 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 owned 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 Renaissance earnings and decreased by distributions from Renaissance and the
Partnership's share of Renaissance losses. During the third quarter of 1995,
Renaissance Village Apartments was sold and the joint venture was liquidated
during the second quarter of 1996 (see "Note D").
NOTE C - REPURCHASE OF UNITS
The Partnership's partnership agreement 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. The
joint venture was liquidated during the second quarter of 1996. All the
remaining liabilities of the joint venture have been satisfied, and the
remaining assets of the joint venture were distributed to the joint venturers
with the Partnership receiving a liquidating distribution of $61,000 during
1996.
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 property
management 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 during each of the nine months ended
September 30, 1996 and 1995:
1996 1995
Property management fees $58 $56
Reimbursements for services of affiliates 30 23
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 each of
the nine months ended September 30, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Riverwalk
Houston, Texas 96% 97%
Stone Ridge
Overland Park, Kansas 96% 97%
The Partnership realized a net loss of $45,000 for the nine months ended
September 30, 1996, compared to net income of $54,000 for the nine months ended
September 30, 1995. The net loss for the three months ended September 30, 1996,
was $53,000 compared to net income of $73,000 for the three months ended
September 30, 1995. The decrease in net income was due to the liquidation of the
Renaissance Village joint venture and increased maintenance and operating
expenses mitigated by increased revenues. The Partnership's investment in the
joint venture resulted in an $18,000 gain for the nine months ended September
30, 1995, compared to a $4,000 loss for the corresponding period of 1996. The
increase in rental revenues was due to rental rate increases at the
Partnership's properties. The increase in other income was due to increased
corporate rentals at Riverwalk and increased lease cancellation fees at Stone
Ridge. The increase in maintenance expenses is due to an exterior painting and
siding project at Riverwalk Apartments. Operating expenses increased due to
additional costs incurred for concessions and advertising.
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 September 30, 1996, the Partnership held unrestricted cash and cash
equivalents of $541,000 compared to $498,000 at September 30, 1995. Net cash
provided by operating activities decreased primarily due to the increased
operating and maintenance expenses discussed above. Net cash provided by
investing activities increased due to the $61,000 liquidating distribution from
the Renaissance joint venture. Net cash used in financing activities decreased
due to a decrease in distributions to partners during the nine months ended
September 30, 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 $4,985,000 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 $172,000 were made during the first nine months of 1995 and
cash distributions of $104,000 were made during the first nine months of 1996.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits 27, Financial Data Schedule.
b) Reports on Form 8-K:
None filed during the quarter ended September 30, 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: November 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from United
Investors Growth Properties II 1996 Third Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000862114
<NAME> UNITED INVESTORS GROWTH PROPERTIES II
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 541
<SECURITIES> 0
<RECEIVABLES> 15
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 8,085
<DEPRECIATION> 1,190
<TOTAL-ASSETS> 7,750
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 4,985
0
0
<COMMON> 0
<OTHER-SE> 2,569
<TOTAL-LIABILITY-AND-EQUITY> 7,750
<SALES> 0
<TOTAL-REVENUES> 1,197
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,238
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 350
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45)
<EPS-PRIMARY> (2.18)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
