FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from.........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
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
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)
June 30, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 596
Restricted-tenant security deposits 43
Accounts receivable 1
Escrows for taxes and insurance 40
Restricted escrow 7
Other assets 82
Investment properties
Land $ 1,071
Buildings and related personal property 7,070
8,141
Less accumulated depreciation (1,423) 6,718
$7,487
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 20
Tenant security deposits 43
Accrued taxes 62
Other liabilities 65
Mortgage notes payable 4,939
Partners' Capital (Deficit)
General partner's $ (2)
Limited partners' (20,661
units issued and outstanding) 2,360 2,358
$7,487
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 Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 391 $ 370 $ 777 $ 736
Other income 25 28 51 53
Total revenues 416 398 828 789
Expenses:
Operating 133 118 255 224
General and administrative 20 16 37 36
Maintenance 63 55 100 76
Depreciation 78 75 155 149
Interest 115 116 231 233
Property taxes 29 30 60 59
Total expenses 438 410 838 777
Equity in loss of joint
venture -- (4) -- (4)
Net (loss) income $ (22) $ (16) $ (10) $ 8
Net (loss) income allocated
to general partner (1%) $ -- $ -- $ -- $ --
Net (loss) income allocated
to limited partners (99%) (22) (16) (10) 8
$ (22) $ (16) $ (10) $ 8
Net (loss) income per limited
partnership unit $ (1.06) $ (.77) $ (.48) $ .39
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c) UNITED INVESTORS GROWTH PROPERTIES II
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (Deficit)
(Unaudited)
For the Six Months Ended June 30, 1997
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner's Partners' Total
<S> <C> <C> <C> <C>
Original capital contributions 20,661 $ -- $ 5,165 $ 5,165
Partners' (deficit) capital
at December 31, 1996 20,661 $ (1) $ 2,438 $ 2,437
Distributions to Partners -- (1) (68) (69)
Net loss for the six months
ended June 30, 1997 -- -- (10) (10)
Partners' (deficit) capital
at June 30, 1997 20,661 $ (2) $ 2,360 $ 2,358
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) UNITED INVESTORS GROWTH PROPERTIES II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (10) $ 8
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Equity loss of joint venture -- 4
Depreciation 155 149
Amortization of loan costs 12 12
Change in accounts:
Restricted cash -- 2
Accounts receivable 8 (8)
Escrows for taxes and insurance (31) (24)
Other assets (6) (10)
Accounts payable 12 6
Tenant security deposit liabilities -- (2)
Accrued taxes 21 34
Other liabilities 8 (2)
Net cash provided by operating activities 169 169
Cash flows from investing activities:
Property improvements and replacements (28) (34)
Liquidating distribution from joint venture -- 61
Deposits to restricted escrow (8) (8)
Receipts from restricted escrows 92 --
Net cash provided by investing activities 56 19
Cash flows from financing activities:
Payments on mortgage notes payable (34) (32)
Partners' distributions (69) (69)
Net cash used in financing activities (103) (101)
Net increase in unrestricted cash and cash equivalents 122 87
Unrestricted cash and cash equivalents at beginning
of period 474 482
Unrestricted cash and cash equivalents at end of period $ 596 $ 569
Supplemental disclosure of cash flow information:
Cash paid for interest $ 219 $ 222
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
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 United Investors Real Estate, Inc. (the "General Partner"), a
Delaware corporation, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six month periods ended June 30, 1997, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1997. 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, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 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"). 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.
The General Partner's ability to honor its purchase obligation will depend upon
its ability to raise sufficient funds. As of the date of this Report, the
General Partner does not have sufficient funds to honor its purchase obligation
and it has not received any commitment or other indication that it will obtain
sufficient funds to honor this obligation. Accordingly there can be no
assurance that sufficient funds will be available to enable the General Partner
to honor its purchase obligation.
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. 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. The
following payments were made to affiliates of the General Partner during each of
the six months ended June 30, 1997 and 1996 (in thousands):
1997 1996
Property management fees (included in
operating expenses) $41 $38
Reimbursements for services of affiliates (included
in general and administrative expenses) 16 17
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 six months ended June 30, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Riverwalk
Houston, Texas 96% 96%
Stone Ridge
Overland Park, Kansas 96% 95%
The Partnership realized a net loss of approximately $10,000 for the six months
ended June 30, 1997, compared to net income of approximately $8,000 for the six
months ended June 30, 1996. The net loss for the three months ended June 30,
1997, was approximately $22,000 compared to approximately $16,000 for the three
months ended June 30, 1996. The increase in net loss is primarily due to an
increase in operating and maintenance expenses. Operating expenses increased
due to an increase in utilities and corporate unit expenses. Included in the
maintenance expense for the six months ended June 30, 1997 is approximately
$38,000 of major repairs and maintenance comprised primarily of exterior
building and parking lot repairs. Included in maintenance expenses for the six
months ended June 30, 1996 is approximately $27,000 of major repairs and
maintenance comprised of exterior painting and landscaping. Also contributing
to the increase in maintenance expense was an increase in contract yards and
grounds and swimming pool repairs at both properties in 1997. The increase in
these expenses was partially offset by an increase in rental revenues as a
result of increased rental rates at the Partnership's properties.
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 expense. 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 June 30, 1997, the Partnership held unrestricted cash and cash equivalents of
$596,000 compared to $569,000 at June 30, 1996. Net cash provided by operating
activities and net cash used in financing activities for the six months ended
June 30, 1997 were comparable with the corresponding period in 1996. Net cash
provided by investing activities increased due to receipts from the restricted
escrow for capital improvements made at Riverwalk Apartments.
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 various 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.
The mortgage indebtedness of $4,939,000 matures at various times with balloon
payments due at maturity, at which time the properties will either be refinanced
or sold. The mortgage note payable on Stone Ridge Apartments matures November
1, 1997. Currently the General Partner is investigating alternatives with
regard to the refinancing of the property. However, there can be no assurance
that the Partnership will be successful. If the Partnership is not successful
in obtaining refinancing, the Partnership will have to sell the property or risk
losing the property through foreclosure. 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 $69,000 were made during
the first six months of 1997 and 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 June 30, 1997.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
istrant has duly caused this report to be signed on its behalf by the
undersigned, reunto duly authorized.
UNITED INVESTORS GROWTH PROPERTIES II
By: United Investors Real Estate, Inc.
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: August 7, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from United
Investors Growth Properties II 1997 Second 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 596
<SECURITIES> 0
<RECEIVABLES> 1
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 8,141
<DEPRECIATION> 1,423
<TOTAL-ASSETS> 7,487
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 4,939
0
0
<COMMON> 0
<OTHER-SE> 2,358
<TOTAL-LIABILITY-AND-EQUITY> 7,487
<SALES> 0
<TOTAL-REVENUES> 828
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 838
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 231
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10)
<EPS-PRIMARY> (.48)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
