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
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] 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, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 576
Restricted-tenant security deposits 43
Accounts receivable 2
Escrows for taxes and insurance 44
Restricted escrow 23
Other assets 77
Investment properties
Land $ 1,071
Buildings and related personal property 7,050
8,121
Less accumulated depreciation (1,345) 6,776
$7,541
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 14
Tenant security deposits 43
Accrued taxes 57
Other liabilities 57
Mortgage notes payable 4,956
Partners' Capital (Deficit)
General partner $ (1)
Limited partners
20,661 units issued and outstanding) 2,415 2,414
$7,541
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
March 31,
1997 1996
<S> <C> <C>
Revenues:
Rental income $ 386 $ 366
Other income 26 25
Total revenues 412 391
Expenses:
Operating 122 106
General and administrative 17 20
Maintenance 37 21
Depreciation 77 74
Interest 116 117
Property taxes 31 29
Total expenses 400 367
Net income $ 12 $ 24
Net income allocated to general partner (1%) $ -- $ --
Net income allocated to limited partners (99%) 12 24
$ 12 $ 24
Net income per limited partnership unit $ .58 $ 1.16
<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 Three Months Ended March 31, 1997
(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 (deficit)
at December 31, 1996 20,661 $ (1) $ 2,438 $ 2,437
Distributions to Partners -- -- (35) (35)
Net income for the three months
ended March 31, 1997 -- -- 12 12
Partners' capital (deficit) at
March 31, 1997 20,661 $ (1) $ 2,415 $ 2,414
<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>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 12 $ 24
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 77 74
Amortization of loan costs 6 6
Change in accounts:
Restricted cash -- (2)
Accounts receivable 7 (1)
Escrows for taxes and insurance (35) (34)
Other assets 5 4
Accounts payable 6 --
Tenant security deposit liabilities -- 2
Accrued taxes 16 30
Other liabilities -- 8
Net cash provided by operating activities 94 111
Cash flows from investing activities:
Property improvements and replacements (8) (12)
Receipts from restricted escrows 72 --
Deposits to restricted escrow (4) (4)
Net cash provided by (used in)
investing activities 60 (16)
Cash flows from financing activities:
Payments on mortgage notes payable (17) (16)
Partners' distributions (35) (35)
Net cash used in financing activities (52) (51)
Net increase in cash and cash equivalents 102 44
Cash and cash equivalents at beginning of period 474 482
Cash and cash equivalents at end of period $ 576 $ 526
Supplemental disclosure of cash flow information:
Cash paid for interest $ 110 $ 111
<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 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 month
period ended March 31, 1997, are not necessarily indicative of the results that
may be expected for the fiscal year ended 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 by Renaissance and the joint
venture was liquidated during the second quarter of 1996 (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. 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 the
second quarter of 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 (included in operating expenses)
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 for the three months ended March 31, 1997 and 1996 (in thousands):
1997 1996
Property management fees $20 $19
Reimbursements for services of affiliates 9 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 each of
the three months ended March 31, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Riverwalk
Houston, Texas 97% 96%
Stone Ridge
Overland Park, Kansas 95% 96%
The Partnership realized net income of $12,000 for the three months ended March
31, 1997 compared to net income of $24,000 for the three months ended March 31,
1996. The decrease in net income was attributable to higher operating and
maintenance expenses for the three months ended March 31, 1997, compared to the
corresponding period of 1996. Operating expenses increased due to an increase
in corporate unit expense, legal fees and travel and training. Maintenance
expense increased primarily due to foundation repairs at Riverwalk Apartments.
Included in maintenance expense is $11,000 of major repairs and maintenance
related to this project. The increase in expenses was mitigated 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 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, 1997, the Partnership held unrestricted cash of $576,000 compared
to $526,000 at March 31, 1996. Net cash provided by operating activities
decreased due to increases in operating and maintenance expenses discussed
above. 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 $4,956,000 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 $35,000 were made during the first three months ended
March 31, 1997 and 1996. The distributions were made from cash generated by
property operations. The General Partner of the Partnership anticipates that
the Partnership will continue to make cash distributions as property operations
permit throughout 1997.
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, 1997.
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 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contain summary financial information extracted from United
Investors Growth Properties II 1997 First 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 576
<SECURITIES> 0
<RECEIVABLES> 2
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 8,121
<DEPRECIATION> 1,345
<TOTAL-ASSETS> 7,541
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 4,956
0
0
<COMMON> 0
<OTHER-SE> 2,414
<TOTAL-LIABILITY-AND-EQUITY> 7,541
<SALES> 0
<TOTAL-REVENUES> 412
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 116
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12
<EPS-PRIMARY> .58<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
