FORM 10-QSB--QUARTERLY OR TRANSITIONAL 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 September 30, 2000
[ ] 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 (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the registrant (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___
<PAGE>
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, 2000
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 338
Receivables and deposits 66
Restricted escrows 6
Other assets 62
Investment properties:
Land $ 425
Buildings and related personal property 3,824
4,249
Less accumulated depreciation (1,235) 3,014
$ 3,486
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 23
Tenant security deposit liabilities 22
Accrued property taxes 41
Other liabilities 172
Mortgage notes payable 3,204
Partners' (Deficit) Capital
General partner $ (24)
Limited partners (20,661 units
issued and outstanding) 48 24
$ 3,486
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
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,
2000 1999 2000 1999
(Restated) (Restated)
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 355 $ 423 $ 1,196 $ 1,249
Other income 24 19 73 67
Gain on sale of investment property 907 -- 907 --
Total revenues 1,286 442 2,176 1,316
Expenses:
Operating 200 159 521 458
General and administrative 32 34 90 92
Depreciation 77 84 269 252
Interest 120 123 341 371
Property taxes 33 32 94 89
Total expenses 462 432 1,315 1,262
Income before extraordinary loss on early
extinguishment of debt and cumulative effect
of a change in accounting principle 824 10 861 54
Extraordinary loss on early extinguishment
of debt (76) -- (76) --
Cumulative effect on prior years of a change
in accounting for the cost of exterior
painting and major landscaping -- -- -- 46
Net income $ 748 $ 10 $ 785 $ 100
Net income allocated to general partner (1%) 7 -- 8 1
Net income allocated to limited partners (99%) 741 10 777 99
$ 748 $ 10 $ 785 $ 100
Per limited partnership unit:
Income before extraordinary loss on early
extinguishment of debt and cumulative
effect of a change in accounting principle 39.50 0.48 41.25 2.59
Extraordinary loss on early extinguishment
of debt (3.64) -- (3.64) --
Cumulative effect on prior years of a
change in accounting for the cost of
exterior painting and major landscaping -- -- -- 2.20
Net income $ 35.86 $ 0.48 $ 37.61 $ 4.79
Distributions per limited partnership unit $ 64.13 $ -- $ 83.30 $ --
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
c)
UNITED INVESTORS GROWTH PROPERTIES II
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(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' (deficit) capital at
December 31, 1999 20,661 $ (15) $ 992 $ 977
Partners' distributions -- (17) (1,721) (1,738)
Net income for the nine months
ended September 30, 2000 -- 8 777 785
Partners' (deficit) capital
at September 30, 2000 20,661 $ (24) $ 48 $ 24
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
d)
UNITED INVESTORS GROWTH PROPERTIES II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
Cash flows from operating activities: (Restated)
<S> <C> <C>
Net income $ 785 $ 100
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 269 252
Amortization of loan costs 12 19
Extraordinary loss on early extinguishment of debt 76 --
Cumulative effect on prior years of a change in
accounting principle -- (46)
Gain on sale of investment property (907) --
Change in accounts:
Receivables and deposits 187 26
Other assets 8 (10)
Accounts payable (82) 6
Tenant security deposit liabilities (24) 5
Accrued property taxes 9 (10)
Other liabilities (3) (3)
Net cash provided by operating activities 330 339
Cash flows from investing activities:
Property improvements and replacements (97) (210)
Net receipts from restricted escrows 23 2
Proceeds from sale of investment property 4,231 --
Net cash provided by (used in) investing activities 4,157 (208)
Cash flows from financing activities:
Payments on mortgage notes payable (70) (50)
Repayment of mortgage note payable (2,958) --
Loan costs paid (31) --
Partners' distributions (1,738) --
Net cash used in financing activities (4,797) (50)
Net (decrease) increase in cash and cash equivalents (310) 81
Cash and cash equivalents at beginning of period 648 316
Cash and cash equivalents at end of period $ 338 $ 397
Supplemental disclosure of cash flow information:
Cash paid for interest $ 330 $ 353
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
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" or "Registrant") 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 nine month periods ended
September 30, 2000, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 2000. 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, 1999.
Principles of Consolidation
The consolidated financial statements include all the accounts of the
Partnership and its 100% owned limited liability company, Stone Ridge
Apartments, L.L.C. and its 99.99% owned partnership, Riverwalk Apartments
Limited Partnership ("Riverwalk"). The Partnership is the sole general partner
of Riverwalk and an unaffiliated individual is the sole limited partner. The
Partnership is able to control the major operating and financial policies of
Riverwalk. As a result, the Partnership consolidates its interest in these two
entities, whereby all accounts are included in the consolidated financial
statements of the Partnership with all inter-entity accounts being eliminated.
The minority interest of the limited partner of Riverwalk is not material to the
Partnership.
Change in Accounting Principle
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping. The Partnership
believes that this accounting principle change is preferable because it provides
a better matching of expenses with the related benefit of the expenditures and
it is consistent with industry practice and the policies of the General Partner.
This accounting change was first reported during the fourth quarter of 1999.
Accordingly, net income for the three and nine month periods ended September 30,
1999 has been restated to reflect the accounting change as if it were reported
during the first quarter of 1999. This adjustment decreased income before the
cumulative effect of the accounting change for the nine month period ended
September 30, 1999 by approximately $13,000 ($0.62 per limited partnership
unit). This adjustment decreased income for the three month period ended
September 30, 1999 by approximately $4,000 ($0.19 per limited partnership unit).
The cumulative effect adjustment of approximately $46,000 ($2.20 per limited
partnership unit) is the result of applying retroactively the aforementioned
accounting principle change and is included in income for the nine months ended
September 30, 1999. The accounting change will not have an affect on cash flow,
funds available for distribution or fees payable to the General Partner and
affiliates.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the General Partner. The General Partner does not believe that this transaction
has had or will have a material effect on the affairs and operations of the
Partnership.
Note C - 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 nine month periods ended September 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in operating expenses) $ 64 $ 65
Reimbursement for services of affiliates (included in
investment properties and general and administrative
expenses) 26 21
During the nine months ended September 30, 2000 and 1999, affiliates of the
General Partner were entitled to receive 5% of gross receipts from both of the
Registrant's properties as compensation for providing property management
services. The Registrant paid to such affiliates approximately $64,000 and
$65,000, for management fees for the nine month periods ended September 30, 2000
and 1999, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $26,000 and $21,000, for the
nine month periods ended September 30, 2000 and 1999, respectively.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 2,535 limited partnership
units in the Partnership representing 12.27% of the outstanding units. A number
of these units were acquired pursuant to tender offers made by AIMCO or its
affiliates. It is possible that AIMCO or its affiliates will make one or more
additional offers to acquire additional limited partnership interests in the
Partnership for cash or in exchange for units in the operating partnership of
AIMCO. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters, which
would include without limitation, voting on certain amendments to the
Partnership Agreement and voting to remove the General Partner. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of their affiliation
with the General Partner.
Note D - Distributions
During the nine months ended September 30, 2000, the Partnership paid cash
distributions of approximately $1,738,000 (approximately $1,721,000 to the
limited partners or $83.30 per limited partnership unit) of which approximately
$410,000 (approximately $406,000 to the limited partners or $19.66 per limited
partnership unit) represented cash from operations and approximately $289,000
(approximately $286,000 to the limited partners or $13.84 per limited
partnership unit) represented proceeds from the refinancing of Riverwalk
Apartments in December 1999 and approximately $1,039,000 (approximately
$1,029,000 to the limited partners or $49.80 per limited partnership unit)
represented proceeds from the sale of Riverwalk Apartments. No cash
distributions were made to the partners during the nine months ended September
30, 1999.
Note E - Mortgage Refinancing
On December 29, 1999, the Partnership refinanced the mortgage encumbering
Riverwalk Apartments. The refinancing replaced indebtedness of approximately
$2,551,000 with a new mortgage in the amount of $3,000,000. The new loan
required monthly principal and interest payments and was being amortized over 20
years. Total capitalized loan costs were approximately $47,000 during the year
ended December 31, 1999. The Partnership spent approximately $31,000 on
additional loan costs during the nine months ended September 30, 2000.
Note F - Sale of Investment Property
On August 31, 2000, Riverwalk Apartments, located in Houston, Texas, was sold to
an unaffiliated party for $4,350,000. After payment of closing expenses, the net
sales proceeds received by the Partnership were approximately $4,231,000. The
Partnership used a portion of the proceeds to pay off the mortgage encumbering
the property of $2,958,000. For financial statement purposes, the sale resulted
in a gain of approximately $907,000 and an extraordinary loss on early
extinguishment of debt of approximately $76,000 consisting of the write-off of
unamortized loan costs, which was recognized during the nine months ended
September 30, 2000. The sale transaction is summarized as follows (amounts in
thousands):
Net sales price, net of selling costs $ 4,231
Net real estate (1) (3,221)
Net other liabilities (103)
Gain on sale of real estate $ 907
(1) Real estate at cost, net of accumulated depreciation of approximately
$1,295,000.
The following pro-forma information reflects the operations of the Partnership
for the nine months ended September 30, 2000 and 1999, as if Riverwalk
Apartments had been sold January 1, 1999.
2000 1999
(in thousands, except per unit data)
Revenues $ 694 $ 675
Net income 15 49
Income per limited partnership unit 0.72 2.35
Note G - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues: The Partnership has one reportable segment:
residential property. The Registrant's residential property segment consists of
one apartment complex located in Overland Park, Kansas. The Partnership rents
apartment units to tenants for terms that are typically twelve months or less.
Measurement of segment profit or loss: The Partnership evaluates performance
based on segment profit (loss) before depreciation. The accounting policies of
the reportable segment are the same as those of the Partnership as described in
the Partnership's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999.
Factors management used to identify the enterprise's reportable segment: The
Partnership's reportable segment consists of investment properties that offer
similar products and services. Although each of the investment properties is
managed separately, they have been aggregated into one segment as they provide
services with similar types of products and customers.
Segment information for the three and nine month periods ended September 30,
2000 and 1999 is shown in the tables below (in thousands). The "Other" column
includes Partnership administration related items and income and expense not
allocated to reportable segments.
<TABLE>
<CAPTION>
Three Months Ended September 30, 2000 Residential Other Totals
<S> <C> <C> <C>
Rental income $ 355 $ -- $ 355
Other income 22 2 24
Interest expense 120 -- 120
Depreciation 77 -- 77
General and administrative expense -- 32 32
Gain on sale of investment property 907 -- 907
Extraordinary loss on early extinguishment
of debt (76) -- (76)
Segment profit (loss) 778 (30) 748
Nine Months Ended September 30, 2000 Residential Other Totals
Rental income $ 1,196 $ -- $ 1,196
Other income 64 9 73
Interest expense 341 -- 341
Depreciation 269 -- 269
General and administrative expense -- 90 90
Gain on sale of investment property 907 -- 907
Extraordinary loss on early extinguishment
of debt (76) -- (76)
Segment profit (loss) 866 (81) 785
Total assets 3,313 173 3,486
Capital expenditures for investment
properties 97 -- 97
Three Months Ended September 30, 1999 Residential Other Totals
(Restated)
Rental income $ 423 $ -- $ 423
Other income 17 2 19
Interest expense 123 -- 123
Depreciation 84 -- 84
General and administrative expense -- 34 34
Segment profit (loss) 42 (32) 10
Nine Months Ended September 30, 1999 Residential Other Totals
(Restated)
Rental income $ 1,249 $ -- $ 1,249
Other income 61 6 67
Interest expense 371 -- 371
Depreciation 252 -- 252
General and administrative expense -- 92 92
Cumulative effect of a change in accounting
principle 46 -- 46
Segment profit (loss) 186 (86) 100
Total assets 6,921 201 7,122
Capital expenditures for investment
properties 210 -- 210
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operation. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment property consists of one apartment complex. The
following table sets forth the average occupancy of the property for each of the
nine month periods ended September 30, 2000 and 1999:
Average Occupancy
Property 2000 1999
Stone Ridge Apartments 96% 97%
Overland Park, Kansas
Results of Operations
The Registrant's net income for the nine months ended September 30, 2000 was
approximately $785,000 as compared to net income of approximately $100,000 (as
restated) for the nine months ended September 30, 1999. The Registrant's net
income for the three months ended September 30, 2000 was approximately $748,000
as compared to net income of approximately $10,000 (as restated) for the three
months ended September 30, 1999. The increase in net income for the nine month
period ended September 30, 2000 is primarily attributable to an increase in
total revenues resulting from the gain on sale of Riverwalk Apartments in August
2000, as discussed below, partially offset by the extraordinary loss on the
early extinguishment of debt of Riverwalk Apartments and the cumulative effect
on prior years of a change in accounting principle recognized during the nine
months ended September 30, 1999, as discussed below. The increase in net income
for the three month period ended September 30, 2000 is primarily attributable to
an increase in total revenues resulting from the gain on sale of Riverwalk
Apartments in August 2000, as discussed below, partially offset by the
extraordinary loss on the early extinguishment of debt of Riverwalk Apartments.
Excluding the operations, gain on sale, and extraordinary loss on early
extinguishment of debt of Riverwalk Apartments and the cumulative effect on
prior years of a change in accounting principle, the Partnership had income of
approximately $15,000 for the nine months ended September 30, 2000 and
approximately $3,000 for the nine months ended September 30, 1999. Excluding the
operations, gain on sale, and extraordinary loss on early extinguishment of debt
of Riverwalk Apartments, the Partnership had income of approximately $2,000 for
the three month period ended September 30, 2000 compared to a net loss of
approximately $7,000 for the three month period ended September 30, 1999. Income
increased for the nine month period ended September 30, 2000 compared to the
nine month period ended September 30, 1999 due to an increase in total revenues
partially offset by an increase in total expenses. Income increased for the
three month period ended September 30, 2000 compared to the three month period
ended September 30, 1999 due to an increase in total revenues and a decrease in
total expenses. Total revenues increased for the three and nine month periods
ended September 30, 2000 due to an increase in rental income and other income.
Rental income increased as a result of an average rental rate increase at Stone
Ridge Apartments which more than offset the slight decrease in occupancy. Other
income increased primarily due to an increase in interest income due to
increased cash balances in interest-bearing accounts.
Total expenses increased for the nine months ended September 30, 2000 primarily
due to increased depreciation and property tax expenses which were partially
offset by decreased operating expense and general and administrative expense.
Total expenses decreased for the three month period ended September 30, 2000,
primarily due to decreased operating expense and general and administrative
expense which is partially offset by increased depreciation and property tax
expenses. Depreciation expense increased for the three and nine month periods
ended September 30, 2000 due to property improvements and replacements completed
during the past twelve months. Property tax expense increased for the three and
nine month period ended September 30, 2000 due to an increase in the assessed
value of Stone Ridge Apartments. Operating expenses decreased for the three and
nine month periods ended September 30, 2000 due to a decrease in payroll
expenses. General and administrative expenses decreased for the three and nine
month periods ended September 30, 2000 due to decreased legal expenses due to
the settlement of a legal case during 1999, partially offset by increased
professional expenses associated with the management of the Partnership and an
increase in the cost of services included in the management reimbursements to
the General Partner as allowed under the Partnership Agreement. Included in
general and administrative expenses at both September 30, 2000 and 1999, are
reimbursements to the General Partner allowed under the Partnership Agreement
associated with its management of the Partnership. Costs associated with the
quarterly and annual communications with investors and regulatory agencies and
the annual audit required by the Partnership Agreement are also included.
On August 31, 2000, Riverwalk Apartments, located in Houston, Texas, was sold to
an unaffiliated party for $4,350,000. After payment of closing expenses, the net
sales proceeds received by the Partnership was approximately $4,231,000. The
Partnership used a portion of the proceeds to pay off the mortgage encumbering
the property of $2,958,000. The remaining proceeds were distributed to the
partners in September 2000. For financial statement purposes, the sale resulted
in a gain of approximately $907,000. The Partnership also recorded an
extraordinary loss on early extinguishment of debt of approximately $76,000 as
the result of the write-off of the remaining unamortized loan costs.
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the cost of exterior painting and major landscaping. The Partnership
believes that this accounting principle change is preferable because it provides
a better matching of expenses with the related benefit of the expenditures and
it is consistent with industry practice and the policies of the General Partner.
This accounting change was first reported during the fourth quarter of 1999.
Accordingly, net income for the three and nine month periods ended September 30,
1999 has been restated to reflect the accounting change as if it were reported
during the first quarter of 1999. This adjustment decreased income before the
cumulative effect of the accounting change for the nine month period ended
September 30, 1999 by approximately $13,000 ($0.62 per limited partnership
unit). This adjustment decreased income for the three month period ended
September 30, 1999 by approximately $4,000 ($0.19 per limited partnership unit).
The cumulative effect adjustment of approximately $46,000 ($2.20 per limited
partnership unit) is the result of applying retroactively the aforementioned
accounting principle change and is included in income for the nine months ended
September 30, 1999. The accounting change will not have an affect on cash flow,
funds available for distribution or fees payable to the General Partner and
affiliates.
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.
Liquidity and Capital Resources
At September 30, 2000, the Registrant had cash and cash equivalents of
approximately $338,000 as compared to approximately $397,000 at September 30,
1999. The decrease in cash and cash equivalents of approximately $310,000 since
December 31, 1999, is due to approximately $4,797,000 of cash used in financing
activities, which was partially offset by approximately $4,157,000 of cash
provided by investing activities and approximately $330,000 of cash provided by
operating activities. Cash used in financing activities consisted of
distributions to partners, payments of principal made on the mortgages
encumbering the Registrant's properties, the payoff of the mortgage encumbering
Riverwalk Apartments, and the payment of loan costs. Cash provided by investing
activities consisted of proceeds from the sale of Riverwalk Apartments and net
receipts from escrow accounts maintained by the mortgage lender partially offset
by property improvements and replacements. The Partnership invests its working
capital reserves in money market accounts.
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 properties to adequately maintain the physical
assets and other operating needs of the Registrant and to comply with Federal,
state and local legal and regulatory requirements. Capital improvements planned
for each of the Registrant's properties are detailed below.
Riverwalk Apartments
Riverwalk Apartments spent approximately $53,000 on capital improvements for the
nine months ended September 30, 2000. These improvements consisted primarily of
lighting upgrades, cabinet and countertop replacements, carpet replacement,
structural improvements, and office equipment. These improvements were funded
from operating cash flow. The property was sold on August 31, 2000.
Stone Ridge Apartments
Stone Ridge Apartments spent approximately $44,000 on capital improvements for
the nine months ended September 30, 2000. These improvements consisted primarily
of carpet replacements, submetering improvements, and structural improvements.
These improvements were funded from operating cash flow and Partnership
reserves. The Partnership has evaluated the capital improvement needs of the
property for the year 2000. The amount budgeted is approximately $61,000,
consisting primarily of air conditioning unit replacement, carpet replacements,
and plumbing upgrades. Additional improvements may be considered and will depend
on the physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness for Stone Ridge of approximately $3,204,000 matures on December 1,
2004. The General Partner will attempt to refinance such indebtedness and/or
sell the property prior to its maturity date. If the property cannot be
refinanced or sold for a sufficient amount, the Registrant will risk losing such
property through foreclosure.
During the nine months ended September 30, 2000, the Partnership paid cash
distributions of approximately $1,738,000 (approximately $1,721,000 to the
limited partners or $83.30 per limited partnership unit) of which approximately
$410,000 (approximately $406,000 to the limited partners or $19.66 per limited
partnership unit) represented cash from operations and approximately $289,000
(approximately $286,000 to the limited partners or $13.84 per limited
partnership unit) represented proceeds from the refinancing of Riverwalk
Apartments in December 1999 and approximately $1,039,000 (approximately
$1,029,000 to the limited partners or $49.80 per limited partnership unit)
represented proceeds from the sale of Riverwalk Apartments. No cash
distributions were made to the partners during the nine months ended September
30, 1999. Future cash distributions will depend on the levels of net cash
generated from operations, the availability of cash reserves, and the timing of
debt maturities, refinancings and/or property sales. The Registrant's
distribution policy is reviewed on an annual basis. There can be no assurance,
however, that the Partnership will generate sufficient funds from operations
after required capital improvements to permit additional distributions to its
partners during the remainder of 2000 or subsequent periods.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K filed during the third quarter of 2000:
Current Report on Form 8-K dated August 31, 2000 and filed
September 22, 2000, disclosing the sale of Riverwalk
Apartments to an unrelated party.
<PAGE>
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
By: United Investors Real Estate, Inc.
Its General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date:
