March 30, 2000
United States
Securities and Exchange Commission
Washington, D.C. 20549
RE: United Investors Growth Properties II
Form 10-KSB
File No. 0-19242
To Whom it May Concern:
The accompanying Form 10-KSB for the year ended December 31, 1999 describes a
change in the method of accounting to capitalize exterior painting and major
landscaping, which would have been expensed under the old policy. 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.
Please do not hesitate to contact the undersigned with any questions or comments
that you might have.
Very truly yours,
Stephen Waters
Real Estate Controller
<PAGE>
FORM 10-KSB--Annual or Transitional Report
Under Section 13 or 15(d)
FORM 10-KSB
[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 [No Fee Required]
For the fiscal year ended December 31, 1999
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the transition period from to
Commission file number 0-19242
UNITED INVESTORS GROWTH PROPERTIES II
(Name of small business issuer in its charter)
Missouri 43-1542902
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
Issuer's telephone number
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership Interest
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 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 ___
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $1,762,000
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of December 31, 1999. No market exists for the limited partnership
interests of the Registrant, and, therefore, no aggregate market value can be
determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
Item 1. Description of Business
United Investors Growth Properties II (the "Registrant" or "Partnership"), a
Missouri Limited Partnership, was organized as a limited partnership under the
laws of the State of Missouri on March 23, 1990. The Partnership is governed by
an Agreement of Limited Partnership dated February 22, 1991. United Investors
Real Estate, Inc. ("UIRE"), a Delaware corporation, is the sole general partner
(the "General Partner") of the Partnership. UIRE was wholly-owned by MAE GP
Corporation ("MAE GP"). Effective February 25, 1998, MAE GP was merged into
Insignia Properties Trust ("IPT"), which is a subsidiary of Apartment Investment
and Management Company ("AIMCO"). Thus, the General Partner is now a wholly
owned subsidiary of AIMCO (see "Transfer of Control" below). The Partnership
Agreement provides that the Partnership is to terminate on December 31, 2020
unless terminated prior to such date.
The Registrant is engaged in the business of operating and holding existing real
estate properties for investment. The Registrant owns a 99.99% interest in a
limited partnership which owns an apartment complex and a 100% interest in a
limited liability corporation (a "LLC") which owns a second apartment complex
(See "Item 2. Description of Properties").
Commencing on or about June 18, 1990, the Partnership offered, pursuant to a
Registration Statement filed with the Securities and Exchange Commission, up to
a maximum of 80,000 Units of limited partnership interest (the "Units") at $250
per Unit with a minimum required purchase of eight Units or $2,000 (four Units
or $1,000 for an Individual Retirement Account). The offering was extended
beyond the initial termination date of June 18, 1992. On October 26, 1992, the
General Partner terminated the extended offering period. Upon termination of the
offering, the Partnership had accepted subscriptions for 20,661 Units resulting
in gross offering proceeds of approximately $5,165,000. Since its initial
offering, the Partnership has not received, nor are the limited partners
required to make, any additional capital contributions.
The Registrant has no employees. Management and administrative services are
provided by the General Partner and by agents retained by the General Partner.
An affiliate of the General Partner has been providing property management
services.
The business in which the Partnership is engaged is highly competitive. There
are other residential properties within the market area of the Registrant's
properties. The number and quality of competitive properties, including those
which may be managed by an affiliate of the General Partner in such market area,
could have a material effect on the rental market for the apartments at the
Registrant's properties and the rents that may be charged for such apartments.
While the General Partner and its affiliates own and/or control a significant
number of apartment units in the United States, such units represent an
insignificant percentage of total apartment units in the United States, and
competition for the apartments is local.
Both the income and expenses of operating the properties owned by the
Partnership are subject to factors outside of the Partnership's control, such as
changes in the supply and demand for similar properties resulting from various
market conditions, increases/decreases in unemployment or population shifts,
changes in the availability of permanent mortgage financing, changes in zoning
laws, or changes in patterns or needs of users. In addition, there are risks
inherent in owning and operating residential properties because such properties
are susceptible to the impact of economic and other conditions outside of the
control of the Partnership.
<PAGE>
There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.
The Partnership monitors its properties for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain
cases, environmental testing has been performed which resulted in no material
adverse conditions or liabilities. In no case has the Partnership received
notice that it is a potentially responsible party with respect to an
environmental clean up site.
A further description of the Partnership's business is included in "Management's
Discussion and Analysis or Plan of Operation" included in "Item 6" of this Form
10-KSB.
Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and IPT merged into 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.
Item 2. Description of Properties:
The following table sets forth the Partnership's investment in properties:
Date of
Purchase Type of Ownership Use
Riverwalk Apartments 03/31/92 Fee ownership subject Apartment
Houston, TX to first mortgage (1) 104 units
Stone Ridge Apartments 07/01/92 Fee ownership subject Apartment
Overland Park, KS to first mortgage (2) 106 units
(1) Property is held by a limited partnership in which the Registrant owns a
99.99% interest.
(2) Property is held by a limited liability corporation in which the
Registrant owns a 100% interest.
Schedule of Properties:
Set forth below for each of the Registrant's properties is the gross carrying
value, accumulated depreciation, depreciable life, method of depreciation and
Federal tax basis.
Gross
Carrying Accumulated Useful Federal
Property Value Depreciation Life Method Tax Basis
(in thousands) (in thousands)
Riverwalk $4,509 $1,183 5-27.5 S/L $3,263
Stone Ridge 4,159 1,078 5-27.5 S/L 3,091
Totals $8,668 $2,261 $6,354
See "Note A" of the consolidated financial
statements included in "Item 7. Financial Statements" for a description of the
Partnership's depreciation policy and "Note I - Change in Accounting Principle.
Schedule of Property Indebtedness:
The following table sets forth certain information relating to the loans
encumbering the Registrant's properties.
<TABLE>
<CAPTION>
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1999 Rate Amortized Date Maturity (1)
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Riverwalk $3,000 7.92% 20 years 01/01/20 $ --
Stone Ridge 3,232 7.13% 30 years 12/01/04 3,018
Total $6,232 $3,018
</TABLE>
(1) See "Item 7. Financial Statements - Note C" for information with respect
to the Registrant's ability to prepay these loans and other specific
details about the loans.
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
requires monthly principal and interest payments of approximately $25,000, bears
interest at 7.92% per annum, is being amortized over 20 years and matures on
January 1, 2020. Total capitalized loan costs were approximately $47,000 during
the year ended December 31, 1999.
Schedule of Rental Rates and Occupancy:
Average annual rental rate and occupancy for 1999 and 1998 for each property:
Average Annual Average Annual
Rental Rate Occupancy
(per unit)
Property 1999 1998 1999 1998
Riverwalk $8,142 $7,880 96% 96%
Stone Ridge 8,532 8,185 96% 97%
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. Both of the properties of the Partnership are subject to
competition from other residential apartment complexes in the localities in
which they operate. The General Partner believes that both of the properties are
adequately insured. Each property is an apartment complex which leases its units
for lease terms of one year or less. No residential tenant leases 10% or more of
the available rental space. All of the properties are in good physical
condition, subject to normal depreciation and deterioration as is typical for
assets of this type and age.
<PAGE>
Schedule of Real Estate Taxes and Rates:
Real estate taxes and effective rates in 1999 for each property were:
1999 1999
Taxes Rate
(in thousands)
Riverwalk $69 2.48%
Stone Ridge 56 1.05%
Capital Improvements:
Riverwalk Apartments
Riverwalk Apartments spent approximately $250,000 on capital improvements for
the year ended December 31, 1999. These improvements consisted primarily of air
conditioning unit replacements, carpet and vinyl replacements, major
landscaping, cabinets, and other structural improvements. These improvements
were funded from operating cash flow and Partnership reserves. The Partnership
is currently evaluating the capital improvement needs of the property for the
upcoming year. The minimum amount to be budgeted is expected to be $300 per unit
or $31,200. 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.
Stone Ridge Apartments
Stone Ridge Apartments spent approximately $87,000 on capital improvements for
the year ended December 31, 1999. These improvements consisted primarily of
exterior painting, furniture and fixtures, major landscaping, parking lot
improvements, and carpet and vinyl replacements. These improvements were funded
from operating cash flow and Partnership reserves. The Partnership is currently
evaluating the capital improvement needs of the property for the upcoming year.
The minimum amount to be budgeted is expected to be $300 per unit or $31,800.
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.
Item 3. Legal Proceedings
The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature arising in the ordinary course of business.
Item 4. Submission of Matters to a Vote of Security Holders
During the quarter ended December 31, 1999, no matters were submitted to a vote
of Unit holders through the solicitation of proxies or otherwise.
<PAGE>
PART II
Item 5. Market for Partnership Equity and Related Partner Matters
The Partnership, a publicly held limited partnership, offered and sold 20,661
limited partnership units aggregating approximately $5,165,000. The Partnership
currently has 504 holders of record owning an aggregate of 20,661 units.
Affiliates of the General Partner owned 1,950 limited partnership units
representing 9.438% of the outstanding units as of December 31, 1999. No public
trading market has developed for the Units, and it is not anticipated that such
a market will develop in the future.
The following table sets forth the distributions made by the Partnership for the
years ended December 31, 1998 and 1999, as well as for the subsequent period
from January 1, 2000 to March 8, 2000 (see "Item 6. Management's Discussion and
Analysis or Plan of Operation" for further details).
Distributions
Per Limited
Aggregate Partnership Unit
(in thousands)
01/01/98 - 12/31/98 $1,319 (1) $63.21
01/01/99 - 12/31/99 -- --
01/01/00 - 03/08/00 400 (2) 19.17
(1) Consists of approximately $399,000 of cash from operations and
approximately $920,000 of cash from the refinance of Stone Ridge
Apartments.
(2) Distribution was declared subsequent to December 31, 1999 and consist of
approximately $111,000 of cash from operations and approximately $289,000
of cash from the refinance of Riverwalk Apartments.
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 Partnership'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 expenditures to permit further distributions to its partners in 2000 or
subsequent periods.
Several tender offers were made by various parties, including affiliates of the
General Partner, during the years ended December 31, 1999 and 1998. As a result
of these tender offers, AIMCO and its affiliates currently own 1,950 limited
partnership units in the Partnership representing 9.438% of the outstanding
units. 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. 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.
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation
The matters discussed in this Form 10-KSB 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-KSB 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.
This item should be read in conjunction with the consolidated financial
statements and other items contained elsewhere in this report.
Results of Operations
The Registrant's net income for the year ended December 31, 1999 was
approximately $2,000 as compared to net income of approximately $25,000 for the
year ended December 31, 1998. The decrease in net income is due primarily to the
extraordinary loss on the extinguishment of debt due to the refinance of
Riverwalk Apartments in December 1999, as discussed below, which was partially
offset by a cumulative effect on prior years of a change in accounting principle
(see discussion below).
Excluding the extraordinary loss on the extinguishment of debt and the
cumulative effect on prior years of a change in accounting principle, the
Partnership had income of approximately $9,000 for the year ended December 31,
1999 and approximately $25,000 for the year ended December 31, 1998. Income
decreased over the two year periods due to an increase in total expenses which
was partially offset by an increase in total revenues. Total revenues increased
due to an increase in rental income, which was partially offset by a decrease in
other income. Rental income increased primarily as a result of average annual
rental rate increases at both properties which was partially offset by a slight
occupancy decrease at Stone Ridge Apartments. Other income decreased primarily
due to a decrease in interest income due to decreased cash balances in
interest-bearing accounts.
Total expenses increased primarily due to increased general and administrative
expenses and, to a lesser extent, increased interest expense which is partially
offset by decreased operating expenses. General and administrative expenses
increased due to increased legal expenses due to the settlement of a legal case
as previously disclosed in the Partnership's Form 10-QSB for the quarterly
period ended June 30, 1999 and increased professional fees. Included in general
and administrative expenses at both December 31, 1999 and 1998, 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.
Interest expense increased due to the payoff of the mortgage and refinance of
Riverwalk Apartments, as discussed below. Operating expenses decreased due to
decreased insurance premiums at both properties due to lower rates provided by a
new insurance carrier late in 1998 and the completion of a major landscaping
project at Stone Ridge Apartments during 1998.
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.
The effect of the change in 1999 was to increase income by approximately $28,000
($1.36 per limited partnership unit). The cumulative effect adjustment of
approximately $46,000 is the result of applying the aforementioned change in
accounting principle retroactively and is included in income for 1999. The
proforma amounts shown on the statements of operations have been adjusted for
the effect of retroactive application of this change. The accounting principle
change will not have an effect 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 December 31, 1999, the Registrant had cash and cash equivalents of
approximately $648,000 as compared to approximately $316,000 at December 31,
1998. The increase in cash and cash equivalents of approximately $332,000 since
December 31, 1998, is due to approximately $338,000 of cash provided by
operating activities and approximately $309,000 of cash provided by financing
activities, which was partially offset by approximately $315,000 of cash used in
investing activities. Cash provided by financing activities consisted primarily
of proceeds from debt refinancing which was partially offset by payments of
principal made on the mortgages encumbering the Registrant's properties, payment
of loan costs, and payment of a prepayment penalty. Cash used in investing
activities consisted primarily of property improvements and replacements which
was slightly offset by net receipts from escrow accounts maintained by the
mortgage lender. The Partnership invests its working capital reserves in money
market accounts.
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
requires monthly principal and interest payments of approximately $25,000, bears
interest at 7.92% per annum, is being amortized over 20 years and matures on
January 1, 2020. Total capitalized loan costs were approximately $47,000 during
the year ended December 31, 1999. For financial statement purposes, the
Partnership recognized a loss on the early extinguishment of the debt of
approximately $53,000 consisting of a prepayment penalty and the write-off of
unamortized loan costs.
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. The Partnership is currently
evaluating the capital improvement needs of the properties for the upcoming
year. The minimum amount to be budgeted is expected to be $300 per unit or
$63,000. Additional improvements may be considered and will depend on the
physical condition of the properties as well as replacement reserves and
anticipated cash flow generated by the properties. The 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 Riverwalk of approximately $3,000,000 requires monthly
principal and interest payments and matures on January 1, 2020. The mortgage
indebtedness for Stone Ridge of approximately $3,232,000 has a balloon payment
of approximately $3,018,000 due on December 1, 2004. The General Partner will
attempt to refinance such indebtedness and/or sell the properties prior to their
respective maturity dates. If the properties cannot be refinanced or sold for a
sufficient amount, the Registrant will risk losing such properties through
foreclosure.
No cash distributions were made to partners during the year ended December 31,
1999. During the year ended December 31, 1998, cash distributions were
approximately $1,319,000 (approximately $1,306,000 to the limited partners or
$63.21 per limited partnership unit). These distributions consisted of
approximately $920,000 (approximately $911,000 to the limited partners or $44.09
per limited partnership unit) of proceeds from the refinancing of Stone Ridge
Apartments in November 1997 and approximately $399,000 (approximately $395,000
to the limited partners or $19.12 per limited partnership unit) from operations.
Subsequent to December 31, 1999, a cash distribution of approximately $400,000
was declared (approximately $396,000 to the limited partners or $19.17 per
limited partnership unit) of which approximately $111,000 represented cash from
operations and approximately $289,000 represented proceeds from the refinance of
Riverwalk Apartments. 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 in 2000 or subsequent periods. See "Item 2. Description of Properties -
Capital Improvements" for information relating to anticipated capital
expenditures at the properties.
Tender Offer
Several tender offers were made by various parties, including affiliates of the
General Partner, during the years ended December 31, 1999 and 1998. As a result
of these tender offers, AIMCO and its affiliates currently own 1,950 limited
partnership units in the Partnership representing 9.438% of the outstanding
units. 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. 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.
Year 2000 Compliance
General Description
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership is
dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any of the Managing Agent's computer
programs or hardware that had date-sensitive software or embedded chips might
have recognized a date using "00" as the year 1900 rather than the year 2000.
This could have resulted in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
Computer Hardware, Software and Operating Equipment
In 1999, the Managing Agent completed all phases of its Year 2000 program by
completing the replacement and repair of any hardware or software system or
operating equipment that was not yet Year 2000 compliant. The Managing Agent's
hardware and software systems and its operating equipment are now Year 2000
compliant. No material failure or erroneous results have occurred in the
Managing Agent's computer applications related to the failure to reference the
Year 2000 to date.
Third Parties
To date, the Managing Agent is not aware of any significant supplier or
subcontractor (external agent) or financial institution of the Partnership that
has a Year 2000 issue that would have a material impact on the Partnership's
results of operations, liquidity or capital resources. However, the Managing
Agent has no means of ensuring or determining the Year 2000 compliance of
external agents. At this time, the Managing Agent does not believe that a Year
2000 issue of any non-compliant external agent will have a material impact on
the Partnership's financial position or results of operations.
Costs
The total cost of the Managing Agent's Year 2000 project was approximately $3.2
million and was funded from operating cash flows.
Risks Associated with the Year 2000
The Managing Agent completed all necessary phases of its Year 2000 program in
1999, and did not experience system or equipment malfunctions related to a
failure to reference the Year 2000. The Managing Agent or Partnership have not
been materially adversely effected by disruptions in the economy generally
resulting from the Year 2000 issue.
At this time, the Managing Agent does not believe that the Partnership's
businesses, results of operations or financial condition will be materially
adversely effected by the Year 2000 issue.
Contingency Plans Associated with the Year 2000
The Managing Agent has not had to implement contingency plans such as manual
workarounds or selecting new relationships for its banking or elevator operation
activities in order to avoid the Year 2000 issue.
<PAGE>
Item 7. Financial Statements
UNITED INVESTORS GROWTH PROPERTIES II
LIST OF FINANCIAL STATEMENTS
Independent Auditors' Report
Consolidated Balance Sheet - December 31, 1999
Consolidated Statements of Operations - Years ended December 31, 1999 and 1998
Consolidated Statements of Changes in Partners (Deficit) Capital - Years ended
December 31, 1999 and 1998
Consolidated Statements of Cash Flows - Years ended December 31, 1999 and 1998
Notes to Consolidated Financial Statements
<PAGE>
Independent Auditors' Report
The Partners
United Investors Growth Properties II
We have audited the accompanying consolidated balance sheet of United Investors
Growth Properties II (the "Partnership") as of December 31, 1999, and the
related consolidated statements of operations, changes in partners' (deficit)
capital and cash flows for each of the years in the two-year period then ended.
These consolidated financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Partnership as
of December 31, 1999, and the results of its operations and its cash flows for
each of the years in the two-year period then ended, in conformity with
generally accepted accounting principles.
As discussed in Note I to the consolidated financial statements, the Partnership
changed its method of accounting to capitalize the cost of exterior painting and
major landscaping effective January 1, 1999.
KPMG LLP
Greenville, South Carolina
February 25, 2000
<PAGE>
UNITED INVESTORS GROWTH PROPERTIES II
CONSOLIDATED BALANCE SHEET
December 31, 1999
(in thousands, except unit data)
Assets
Cash and cash equivalents $ 648
Receivables and deposits 253
Restricted escrows 29
Other assets 127
Investment properties (Notes C and F):
Land $ 1,071
Buildings and related personal property 7,597
8,668
Less accumulated depreciation (2,261) 6,407
$ 7,464
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 105
Tenant security deposit liabilities 46
Accrued property taxes 32
Other liabilities 72
Mortgage notes payable (Note C) 6,232
Partners' (Deficit) Capital:
General partner $ (15)
Limited partners (20,661 units issued
and outstanding) 992 977
$ 7,464
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
UNITED INVESTORS GROWTH PROPERTIES II
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
Revenues:
<S> <C> <C>
Rental income $ 1,669 $ 1,632
Other income 93 110
Total revenues 1,762 1,742
Expenses:
Operating 648 673
General and administrative 119 89
Depreciation 352 326
Interest 516 499
Property taxes 118 130
Total expenses 1,753 1,717
Income before extraordinary item and cumulative effect of
a change in accounting principle 9 25
Extraordinary loss on the early extinguishment of debt (53) --
Cumulative effect on prior years of a change in accounting
for the cost of exterior painting and major
landscaping (Note I) 46 --
Net income $ 2 $ 25
Net income allocated to general partner (1%) $ -- $ --
Net income allocated to limited partners (99%) 2 25
$ 2 $ 25
Per limited partnership unit:
Income before extraordinary item $ .44 $ 1.21
Extraordinary loss on the early extinguishment of debt (2.54) --
Cumulative effect on prior years of a change in
accounting for the cost of exterior painting and
major landscaping 2.20 --
Net income $ .10 $ 1.21
Distributions per limited partnership unit $ -- $ 63.21
Proforma amounts assuming the new accounting principle
was applied retroactively:
Net (loss) income $ (44) $ 4
Net (loss) income per limited partnership unit $ (2.10) $ 0.19
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
UNITED INVESTORS GROWTH PROPERTIES II
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(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, 1997 20,661 $ (2) $ 2,271 $ 2,269
Partners' distributions -- (13) (1,306) (1,319)
Net income for the year ended
December 31, 1998 -- -- 25 25
Partners' (deficit) capital at
December 31, 1998 20,661 (15) 990 975
Net loss for the year ended
December 31, 1999 -- -- 2 2
Partners' (deficit) capital at
December 31, 1999 20,661 $ (15) $ 992 $ 977
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
UNITED INVESTORS GROWTH PROPERTIES II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
Cash flows from operating activities:
<S> <C> <C>
Net income $ 2 $ 25
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 352 326
Amortization of loan costs 25 25
Extraordinary loss on the early extinguishment
of debt 53 --
Cumulative effect on prior years of change in
accounting principle (46) --
Change in accounts:
Receivables and deposits (42) (140)
Other assets (13) 12
Accounts payable 92 (2)
Tenant security deposit liabilities 4 (1)
Accrued property taxes (74) 106
Other liabilities (15) (12)
Net cash provided by operating activities 338 339
Cash flows from investing activities:
Property improvements and replacements (337) (108)
Net receipts from (deposits to) restricted escrows 22 (36)
Net cash used in investing activities (315) (144)
Cash flows from financing activities:
Payments on mortgage notes payable (68) (63)
Payoff of mortgage note payable (2,551) --
Proceeds from debt refinancing 3,000 --
Loan costs paid (47) (5)
Prepayment penalty (25) --
Partners' distributions -- (1,319)
Net cash provided by (used in) financing
activities 309 (1,387)
Net increase (decrease) in cash and cash equivalents 332 (1,192)
Cash and cash equivalents at beginning of year 316 1,508
Cash and cash equivalents at end of year $ 648 $ 316
Supplemental disclosure of cash flow information:
Cash paid for interest $ 512 $ 493
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
UNITED INVESTORS GROWTH PROPERTIES II
Notes to Consolidated Financial Statements
December 31, 1999
Note A - Organization and Significant Accounting Policies
Organization: United Investors Growth Properties II (the "Partnership" or
"Registrant"), a Missouri Limited Partnership, was organized in March 1990, with
the initial group of limited partners being admitted on February 22, 1991.
Additional partners were admitted each month thereafter through October 1992.
The Partnership was formed to acquire and operate certain types of
income-producing real estate. United Investors Real Estate, Inc. (the "General
Partner"), is the general partner. The General Partner is a wholly-owned
subsidiary of Apartment Investment and Management Company ("AIMCO"). See "Note B
- - Transfer of Control". The directors and officers of the General Partner also
serve as executive officers of AIMCO. The Partnership Agreement provides that
the Partnership is to terminate on December 31, 2020 unless terminated prior to
such date. The Partnership commenced operations on March 23, 1990, and completed
its acquisition of apartment properties on July 1, 1992. The Partnership
operates two apartment properties in the South.
Principles of consolidation: The Partnership owns a 99.99% interest and is the
sole general partner in Riverwalk Apartments Limited Partnership (a Missouri
Limited Partnership) ("Riverwalk"), a 104 unit apartment complex located in
Houston, Texas. An unaffiliated individual is the sole limited partner. The
Partnership reflects its interest in Riverwalk utilizing full consolidation
whereby all of the accounts of Riverwalk are included in the consolidated
financial statements of the Partnership (with intercompany accounts being
eliminated). The Partnership has the ability to control the major operating and
financial policies of this Partnership. The minority interest of the limited
partner is not material to the Partnership.
In November 1997, the Partnership transferred ownership of the Stone Ridge
Apartments to Stone Ridge Apartments, LLC ("Stone Ridge"), a wholly-owned
subsidiary of the Partnership, which is consolidated with the Partnership's
consolidated financial statements.
Cash and cash equivalents: Includes cash on hand, in banks and money market
accounts. At certain times, the amount of cash deposited at a bank may exceed
the limit on insured deposits.
Tenant Security deposits: The Partnership requires security deposits from
lessees for the duration of the lease, and such deposits are included in
receivables and deposits. Deposits are refunded when the tenant vacates,
provided the tenant has not damaged the apartment and is current on its rental
payments.
Investment properties: Investment properties consist of two apartment complexes
and are stated at cost. Acquisition fees are capitalized as a cost of real
estate. In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", the Partnership records impairment losses on
long-lived assets used in operations when events and circumstances indicate that
the assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets. No
adjustments for impairment of value were necessary for the years ended December
31, 1999 or 1998.
<PAGE>
Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the apartment properties and related personal property. For
Federal income tax purposes, the accelerated cost recovery method is used (1)
for real property over 15 years for additions prior to March 16, 1984, 18 years
for additions after March 15, 1984 and before May 9, 1985, and 19 years for
additions after May 8, 1985, and before January 1, 1987, and (2) for personal
property over 5 years for additions after December 31, 1986, the modified
accelerated cost recovery method is used for depreciation of (1) real property
over 27 1/2 years and (2) personal additions over 5 years.
Effective January 1, 1999, the Partnership changed its method of accounting to
capitalize the costs of exterior painting and major landscaping (see "Note I").
Restricted Escrow: A replacement reserve account was established at Stone Ridge
Apartments when it was refinanced. The property makes monthly deposits to
maintain a Replacement Reserve designated for repairs and replacements at the
properties. At December 31, 1999, this reserve totaled approximately $29,000.
Loan Costs: Loan costs are deferred and are amortized as interest expense over
the terms of the related loans. Unamortized loan costs of approximately $107,000
are included in other assets at December 31, 1999.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Fair Value of Financial Instruments: SFAS No. 107, "Disclosures about Fair Value
of Financial Instruments", as amended by SFAS No. 119, "Disclosures about
Derivative Financial Instruments and Fair Value of Financial Instruments",
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate fair value. Fair value is defined in the SFAS as the amount at which
the instruments could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. The Partnership believes
that the carrying amount of its financial instruments (except for long term
debt) approximates their fair value due to the short term maturity of these
instruments. The fair value of the Partnership's long term debt, after
discounting the scheduled loan payments to maturity, approximates its carrying
balance.
Allocation of Net Income and Loss: In accordance with the Partnership Agreement,
net income and net loss (as defined in the Partnership Agreement, income or loss
of the Partnership determined without regard to gain or loss from sale) shall be
allocated 1% to the General Partner and 99% to the limited partners.
Gain/Loss from a Sale: Gain from a sale shall be allocated as follows: (a) first
to each partner who has a negative capital account, an amount equal to (or in
proportion to if less than) such partner's negative capital account balance and
(b) second, 99% to the limited partners and 1% to the General Partner, until
each limited partner has been allocated an amount equal to (or in proportion to
if less than) the excess, if any, of such limited partner's adjusted capital
investment over his capital account.
<PAGE>
Loss from a sale shall be allocated as follows: (a) first to each partner who
has a positive capital account, an amount equal to (or in proportion to if less
than) such partner's positive capital account balance and (b) second, 99% to the
limited partners and 1% to the General Partner.
Anything in the Partnership Agreement to the contrary notwithstanding, the
interests of the General Partner, in the aggregate, in each material item of
income, gain, loss, deduction and credit of the Partnership will be equal to at
least 1% of each item at all times during the existence of the Partnership.
Advertising: The Partnership expenses the costs of advertising as incurred.
Advertising costs of approximately $37,000 and $38,000 for the years ended
December 31, 1999 and 1998, respectively, were charged to operating expense as
incurred.
Leases: The Partnership generally leases apartment units for twelve-month terms
or less. The Partnership recognizes income as earned on its leases. In addition,
the General Partner's policy is to offer rental concessions during periods of
declining occupancy or in response to heavy competition from other similar
complexes in the area. Concessions are charged against rental income as
incurred.
Segment Reporting: SFAS No. 131, Disclosure about Segments of an Enterprise and
Related Information established standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. See "Note H" for required disclosure.
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 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 - Mortgage Notes Payable
The principle terms of mortgage notes payable are as follows:
<TABLE>
<CAPTION>
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1999 Interest Rate Date Maturity
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C>
Riverwalk Apartments $3,000 $ 25 7.92% 01/01/20 $ --
Stone Ridge Apartments 3,232 22 7.13% 12/01/04 3,018
Total $6,232 $ 47 $3,018
</TABLE>
<PAGE>
The mortgage notes payable are nonrecourse and are secured by pledge of the
respective Partnership's properties and by pledge of revenue from operations of
the respective rental properties. Both mortgage notes payable include prepayment
penalties if repaid prior to maturity. Further, the properties may not be sold
subject to existing indebtedness.
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
requires monthly principal and interest payments and is being amortized over 20
years. Total capitalized loan costs were approximately $47,000 during the year
ended December 31, 1999. For financial statement purposes, the Partnership
recognized a loss on the early extinguishment of the debt of approximately
$53,000 consisting of a prepayment penalty and the write-off of unamortized loan
costs.
Scheduled principal payments on the mortgage notes payable subsequent to
December 31, 1999, are as follows (in thousands):
2000 $ 96
2001 109
2002 118
2003 127
2004 3,151
Thereafter 2,631
$6,232
Note D - 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 years ended December 31, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in
operating expenses) $ 87 $ 86
Reimbursement for services of affiliates
(included in investment properties and
general and administrative and operating
expenses) 27 27
During the years ended December 31, 1999 and 1998, 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 $87,000 and
$86,000, respectively, for management fees for the years ended December 31, 1999
and 1998, respectively.
<PAGE>
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $27,000 for both of the years
ended December 31, 1999 and 1998.
Several tender offers were made by various parties, including affiliates of the
General Partner, during the years ended December 31, 1999 and 1998. As a result
of these tender offers, AIMCO and its affiliates currently own 1,950 limited
partnership units in the Partnership representing 9.438% of the outstanding
units. 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. 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 E - Income Tax
The Partnership has received a ruling from the Internal Revenue Service that it
will be classified as a partnership for Federal income tax purposes.
Accordingly, taxable income or loss of the Partnership is reported in the income
tax returns of its partners. Accordingly, no provision for income taxes is made
in the consolidated financial statements of the Partnership.
The following is a reconciliation of reported net (loss) income and Federal
taxable (loss) income (in thousands, except for unit data):
1999 1998
Net income as reported $ 2 $ 25
Add (deduct):
Deferred revenue and other liabilities 17 (24)
Depreciation differences 7 17
Cumulative effect on prior year of change
in accounting principle (46) --
Federal taxable income (loss) $ (20) $ 18
Federal taxable income (loss) per limited
partnership unit $(0.96) $0.87
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets at December 31, 1999 (in thousands):
Net assets as reported $ 977
Differences in basis of assets and liabilities:
Investment properties at cost 9
Accumulated depreciation 22
Cumulative effect on prior year of change
in accounting principle (46)
Deferred Revenue and other 8
Syndication costs 681
Net assets - tax basis $1,651
<PAGE>
Note F- Real Estate and Accumulated Depreciation
Initial Cost
To Partnership
(in thousands)
Buildings Net Costs
and Related Capitalized
Personal Subsequent to
Description Encumbrances Land Property Acquisition
(in thousands) (in thousands)
Riverwalk $3,000 $ 646 $3,062 $ 801
Stone Ridge 3,232 425 3,265 469
Totals $6,232 $1,071 $6,327 $1,270
<TABLE>
<CAPTION>
Gross Amount At Which
Carried
At December 31, 1999
(in thousands)
Buildings
And
Personal Accumulated Date of Date Depreciable
Description Land Property Total Depreciation Construction Acquired Life-Years
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Riverwalk $ 646 $3,863 $4,509 $1,183 1985 03/31/92 5-27.5
Stone Ridge 425 3,734 4,159 1,078 1987 07/01/92 5-27.5
Totals $1,071 $7,597 $8,668 $2,261
</TABLE>
<PAGE>
Reconciliation of "Real Estate and Accumulated Depreciation":
Years Ended December 31,
1999 1998
(in thousands)
Investment Properties
Balance at beginning of year $8,285 $8,177
Property improvements 337 108
Cumulative effect on prior
years of change in accounting
principle 46 --
Balance at end of year $8,668 $8,285
Accumulated Depreciation
Balance at beginning of year $1,909 $1,583
Depreciation expense 331 326
Cumulative effect on prior
years of change in accounting
principle 21 --
Balance at end of year $2,261 $1,909
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1999 and 1998, is approximately $8,610,000 and $8,273,000,
respectively. The accumulated depreciation taken for Federal income tax purposes
at December 31, 1999 and 1998, is approximately $2,256,000 and $1,911,000,
respectively.
Note G - Distributions
No cash distributions were made to the partners during the year ended December
31, 1999. During the year ended December 31, 1998, cash distributions were
approximately $1,319,000 (approximately $1,306,000 to the limited partners or
$63.21 per limited partnership unit). These distributions consisted of
approximately $920,000 (approximately $911,000 to the limited partners or $44.09
per limited partnership unit) of proceeds from the refinancing of Stone Ridge
Apartments in November 1997 and approximately $399,000 (approximately $395,000
to the limited partners or $19.12 per limited partnership unit) from operations.
Subsequent to December 31, 1999, a cash distribution of approximately $400,000
was declared (approximately $396,000 to the limited partners or $19.17 per
limited partnership unit) of which approximately $111,000 represented cash from
operations and approximately $289,000 represented proceeds from the refinance of
Riverwalk Apartments.
Note H - Segment Reporting
The Partnership has one reportable segment: residential properties. The
Registrant's residential property segment consists of two apartment complexes,
one located in Houston, Texas and another located in Overland Park, Kansas. The
Partnership rents apartment units to people for terms that are typically twelve
months or less.
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segment are the same as
those described in the summary of significant accounting policies.
<PAGE>
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 years ended December 31, 1999 and 1998 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.
1999 Residential Other Totals
Rental income $ 1,669 $ -- $ 1,669
Other income 85 8 93
Interest expense 516 -- 516
Depreciation 352 -- 352
General and administrative expense -- 119 119
Extraordinary loss on early
extinguishment of debt (53) -- (53)
Cumulative effect of a change in
accounting principle 46 -- 46
Segment profit (loss) 113 (111) 2
Total assets 6,989 475 7,464
Capital expenditures for investment
properties 337 -- 337
1998 Residential Other Totals
Rental income $ 1,632 $ -- $ 1,632
Other income 85 25 110
Interest expense 499 -- 499
Depreciation 326 -- 326
General and administrative expense -- 89 89
Segment profit (loss) 89 (64) 25
Total assets 6,840 234 7,074
Capital expenditures for investment
properties 108 -- 108
<PAGE>
Note I - 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.
The effect of the change in 1999 was to increase income by approximately $28,000
($1.36 per limited partnership unit). The cumulative effect adjustment of
approximately $46,000 is the result of applying the aforementioned change in
accounting principle retroactively and is included in income for 1999. The
proforma amounts shown on the statements of operations have been adjusted for
the effect of retroactive application of this change. The accounting principle
change will not have an effect on cash flow, funds available for distribution or
fees payable to the General Partner and affiliates.
The effect of the new method for each quarter of 1999 on net income and net
income per limited partnership unit before the cumulative effect is as follows:
Increase/(Decrease) in Per limited
Net income partnership unit
First Quarter $(4,000) $(.19)
Second Quarter 7,000 .34
Third Quarter 6,000 .29
Fourth Quarter 19,000 .92
<PAGE>
Item 8. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
Effective September 28, 1998, the Registrant dismissed its prior Independent
Auditors, Deloitte & Touche LLP ("Deloitte") and retained as its new Independent
Auditors, KPMG LLP. Deloitte's Independent Auditor's Report on the Registrant's
consolidated financial statements for the calendar year ended December 31, 1997
did not contain an adverse opinion or a disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting principles.
The decision to change Independent Auditors was approved by the General
Partner's Directors. During the calendar year ended 1997 and through September
28, 1998, there were no disagreements between the Registrant and Deloitte on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope of procedure which disagreements if not resolved to the
satisfaction of Deloitte, would have caused Deloitte to make references to the
subject matter of the disagreements in connection with its reports.
Effective September 28, 1998, the Registrant engaged KPMG LLP as its Independent
Auditors. During the last two calendar years and through September 28, 1998, the
Registrant did not consult KPMG LLP regarding any of the matters or events set
forth in Item 304 (a) (2) (i) and (ii) of Regulation S-B.
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons, Compliance
with Section 16(a) of the Exchange Act
United Investors Growth Properties II (the "Registrant" or the "Partnership")
has no officers or directors. United Investors Real Estate, Inc. ("UIRE" or the
"General Partner") manages and controls the Partnership and has general
responsibility and authority in all matters affecting its business.
The names of the directors and executive officers of UIRE, their ages and the
nature of all positions with UIRE presently held are as follows:
Name Age Position
Patrick J. Foye 42 Executive Vice President and Director
Martha L. Long 40 Senior Vice President and Controller
Patrick J. Foye has been Executive Vice President and Director of the General
Partner since October 1, 1998. Mr. Foye has served as Executive Vice President
of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a partner in the
law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was
Managing Partner of the firm's Brussels, Budapest and Moscow offices from 1992
through 1994. Mr. Foye is also Deputy Chairman of the Long Island Power
Authority and serves as a member of the New York State Privatization Council. He
received a B.A. from Fordham College and a J.D. from Fordham University Law
School.
Martha L. Long has been Senior Vice President and Controller of the General
Partner and AIMCO since October 1998, as a result of the acquisition of Insignia
Financial Group, Inc. From June 1994 until January 1997, she was the Controller
for Insignia, and was promoted to Senior Vice President - Finance and Controller
in January 1997, retaining that title until October 1998. From 1988 to June
1994, Ms. Long was Senior Vice President and Controller for The First Savings
Bank, FSB in Greenville, South Carolina.
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to
the Registrant under Rule 16a-3(e) during the Registrant's most recent fiscal
year and Form 5 and amendments thereto furnished to the Registrant with respect
to its most recent fiscal year, the Registrant is not aware of any director,
officer, beneficial owner of more than ten percent of the units of limited
partnership interest in the Registrant that failed to file on a timely basis, as
disclosed in the above Forms, reports required by Section 16(a) of the Exchange
Act during the most recent fiscal year or prior fiscal years.
Item 10. Executive Compensation
Neither the director nor any of the officers of the General Partner received
remuneration from the Partnership.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Except as noted below, no person or entity was known by the Registrant to be the
beneficial owner of more than 5% of the Limited Partnership Units of the
Registrant as of December 31, 1999.
Entity Number of Units Percentage
AIMCO Properties LP
(an affiliate of AIMCO) 1,950 9.438%
AIMCO Properties LP is indirectly ultimately controlled by AIMCO. Its business
address is 2000 South Colorado Boulevard, Denver, Colorado 80222.
Item 12. Certain Relationships and Related Transactions
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 for the years
ended December 31, 1999 and 1998:
1999 1998
(in thousands)
Property management fees $ 87 $ 86
Reimbursement for services of affiliates 27 27
During the years ended December 31, 1999 and 1998, 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 $87,000 and
approximately $86,000, respectively for management fees for the years ended
December 31, 1999 and 1998, respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $27,000 for both of the years
ended December 31, 1999 and 1998.
Several tender offers were made by various parties, including affiliates of the
General Partner, during the years ended December 31, 1999 and 1998. As a result
of these tender offers, AIMCO and its affiliates currently own 1,950 limited
partnership units in the Partnership representing 9.438% of the outstanding
units. 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. 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.
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 18, Independent Accountants' Preferability Letter for Change
in Accounting Principle, is filed as an exhibit to this report.
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
(b) Reports on Form 8-K filed in the fourth quarter of calendar year 1999:
None.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Partnership
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:
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
date indicated.
/s/Patrick J. Foye Executive Vice President Date:
Patrick J. Foye and Director
/s/Martha L. Long Senior Vice President Date:
Martha L. Long and Controller
<PAGE>
INDEX TO EXHIBITS
Exhibit
1 Form of Dealer Manager Agreement between the General Partner and the Dealer
Manager, including Form of Soliciting Broker Agreement; incorporated by
reference to Exhibit 1 to Amendment No. 1 to Partnership's Registration
Statement (File No. 33-34111) previously filed on June 8, 1990.
2.1 Agreement and Plan of Merger, dated October 1, 1998 and filed October 16,
1998, by and between AIMCO and IPT (incorporated by reference to Exhibit
2.1 filed with Registrant's Current Report on Form 8-K, dated, October 1,
1998).
3 Certificate of Limited Partnership and Amendment thereto; incorporated by
reference to Exhibit 3 to Amendment No. 1 to Partnership's Registration
Statement previously filed on June 8, 1990.
4.1 Form of Subscription Agreement; incorporated by reference to Exhibit 4.1 to
Amendment No. 1 to Partnership's Registration Statement previously filed on
June 8, 1990.
4.2 Agreement of Limited Partnership of Partnership dated February 22, 1991;
incorporated by reference to Exhibit 4.2 to Partnership's Report on Form
10-K previously filed on March 7, 1991.
4.2.1Amended and Restated Agreement of Limited Partnership of Partnership dated
June 1, 1992; incorporated by reference to Exhibit 4.2.1 to Partnership's
Form 8-K, amending Partnership's Form 10-Q filed with the Commission on May
15, 1992 previously filed on June 22, 1992.
4.3 Agreement of Joint Venture of Renaissance Village Associates dated March
22, 1991 between United Investors Growth Properties (A Missouri Limited
Partnership) and United Investors Growth Properties II (A Missouri Limited
Partnership); incorporated by reference to Exhibit 4.3 to Partnership's
Quarterly Report on Form 10-Q previously filed on April 24, 1991.
10.1 Escrow Agreement among the Partnership, the Dealer Manager, and United
Missouri Bank of Kansas City, N.A.; incorporated by reference to Exhibit
10.1 to Amendment No. 1 to Partnership's Registration Statement previously
filed on June 8, 1990.
10.1.1 Form of Amendment to Escrow Agreement; incorporated by reference to
Exhibit 10.1.1 to Amendment No. 5 to Partnership's Registration Statement
previously filed on February 24, 1992.
10.2 Agreement of Purchase and Sale, dated August 27, 1990, between United
Investors Real Estate, Inc., as purchaser, and Mueller Development Company,
as seller, relating to Renaissance Village Apartments, and amendments
thereto; incorporated by reference to Exhibit 10.2 to Amendment No. 1 to
Partnership's Registration Statement previously filed on December 6, 1990.
10.2.1 Seventh and Eighth Amendments to Agreement of Purchase and Sale between
United Investors Real Estate, Inc., as purchaser, and Mueller Development
Company, as seller, relating to Renaissance Village Apartments;
incorporated by reference to Exhibit 10.2.1 to Partnership's Quarterly
Report on Form 10-Q previously filed on April 24, 1991.
<PAGE>
10.3 Agreement of Joint Venture of Renaissance Village Associates dated March
22, 1991; incorporated by reference to Exhibit 10.3 to Amendment No. 3 to
Partnership's Registration Statement previously filed on April 10, 1991.
10.4 Promissory Note and Deed of Trust with respect to the Permanent Loan on
Renaissance Village Apartments; incorporated by reference to Exhibit 10.3
to Partnership's Quarterly Report on Form 10-Q previously filed on April
24, 1991.
10.5 Agreement of Purchase and Sale, dated January 9, 1992, between United
Investors Real Estate, Inc., as purchaser, and Normandy 104 Associates,
Ltd., as seller, relating to Riverwalk Apartments, and first and second
amendments thereto; incorporated by reference to Exhibit 10.5 to Amendment
No. 5 to Partnership's Registration Statement previously filed on February
24, 1992.
10.5.1 Third Amendment to the Agreement of Purchase and Sale, dated January 9,
1992 between United Investors Real Estate, Inc., as purchaser, and Normandy
104 Associates, Ltd., as seller, relating to Riverwalk Apartments;
incorporated by reference to Exhibit 10.5.1 to Partnership's Current Report
on Form 8-K previously filed on April 13, 1992.
10.6 Promissory Note and Deed of Trust with respect to the Permanent Loan on
Riverwalk Apartments; incorporated by reference to Exhibit 10.6 to
Partnership's Current Report on Form 8-K previously filed on April 13,
1992.
10.7 Agreement of Limited Partnership of Riverwalk Associates, L.P., (a Missouri
Limited Partnership), dated March 23, 1992, between United Investors Growth
Properties II and Scott Wise; incorporated by reference to Exhibit 10.7 to
Partnership's Current Report on Form 8-K previously filed on April 13,
1992.
10.8 Real Estate Sale Agreement between United Investors Real Estate, Inc., as
purchaser, and The Travelers Insurance Company, as seller, relating to
Stone Ridge Apartments; incorporated by reference to Exhibit 10.8 to
Amendment No. 9 to Partnership's Registration Statement previously filed on
June 1, 1992.
10.10Promissory Note with respect to the General Partner loan on Stone Ridge
Apartments; incorporated by reference to Exhibit 10.10 to Partnership's
Quarterly Report on Form 10-Q previously filed on August 12, 1992.
10.11Permanent Loan Commitment with respect to Stone Ridge Apartments;
incorporated by reference to Exhibit 10.11 to Partnership's Quarterly
Report on Form 10-Q previously filed on August 12, 1992.
10.12Mortgage, Security Agreement and Fixture Filing with respect to the
Permanent Loan on Stone Ridge Apartments; incorporated by reference to
Exhibit 10.12 to Partnership's Quarterly Report on Form 10-Q previously
filed on November 12, 1992.
10.13Mortgage Note with respect to the Permanent Loan on Stone Ridge
Apartments.
10.14Stock Purchase Agreement dated December 4, 1992 showing the purchase of
100% of the outstanding stock of United Investors Real Estate, Inc. by MAE
GP Corporation; incorporated by reference to Exhibit 10.14 to Partnership's
Current Report on Form 8-K previously filed on December 31, 1992.
<PAGE>
10.15Purchase and Sale Agreement, made as of the 19th of July, 1995, by and
between Kauri Investments, Ltd., a Washington corporation, and Renaissance
Village Associates, JV, a Kansas joint venture. (Incorporated by reference
to the Annual Report on Form 10-KSB for the year ended December 31, 1995)
10.16Amendment to Purchase and Sale Agreement, made as of the 10th day of
August, 1995, by and between Kauri Investments, Ltd., a Washington
corporation, and Renaissance Village Associates, JV, a Kansas joint
venture. (Incorporated by reference to the Annual Report on Form 10-KSB for
the year ended December 31, 1995)
10.17Multifamily Note dated November 3, 1997, by and between Stone Ridge
Apartments, L.L.C., a South Carolina limited liability company and Lehman
Brothers Holdings, Inc., a Delaware corporation (Incorporated by reference
to the Quarterly Report on Form 10-QSB for the quarter ended September 30,
1997)
10.18Multifamily Note dated December 17, 1999, by and between Riverwalk
Associates, L.P., a Missouri limited partnership and GMAC Commercial
Mortgage Corporation, a California corporation.
16 Letter dated October 1, 1998 from the Registrant's former independent
accountant regarding its concurrence with the statements made by the
Registrant in this current report (incorporated by reference to the
Registrant's Current Report on Form 8-K/A filed October 27, 1998.)
18 Independent Accountants' Preferability Letter for Change in Accounting
Principle.
27 Financial Data Schedule
99.1 Portions of Partnership's Prospectus dated June 18, 1990; incorporated by
reference to Exhibit 99.1 to Partnership's Report on Form 10-K previously
filed on March 6, 1991.
<PAGE>
Exhibit 18
February 25, 2000
Mr. Patrick J. Foye
Executive Vice President
United Investors Real Estate, Inc.
General Partner of United Investors Growth Properties II
55 Beattie Place
P.O. Box 1089
Greenville, South Carolina 29602
Dear Mr. Foye:
Note I of Notes to the consolidated Financial Statements of United Investors
Growth Properties II included in its Form 10-KSB for the year ended December 31,
1999 describes a change in the method of accounting to capitalize exterior
painting and major landscaping, which would have been expensed under the old
policy. You have advised us that you believe that the change is to a preferable
method in your circumstances because it provides a better matching of expenses
with the related benefit of the expenditures and is consistent with policies
currently being used by your industry and conforms to the policies of the
General Partner.
There are no authoritative criteria for determining a preferable method based on
the particular circumstances; however, we conclude that the change in the method
of accounting for exterior painting and major landscaping is to an acceptable
alternative method which, based on your business judgment to make this change
for the reasons cited above, is preferable in your circumstances.
Very truly yours,
/s/KPMG LLP
<PAGE>
Exhibit 10.18
FHLMC Loan No. 002642719
MULTIFAMILY NOTE
(TEXAS)
US $3,000,000.00 As of December 17, 1999
FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally (if
more than one) promises to pay to the order of GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation, the principal sum of Three Million and
00/100 Dollars (US $3,000,000.00), with interest on the unpaid principal balance
at the annual rate of seven and ninety two hundredths percent (7.92%).
1. Defined Terms. As used in this Note, (i) the term "Lender" means the holder
of this Note, and (ii) the term "Indebtedness" means the principal of, interest
on, or any other amounts due at any time under, this Note, the Security
Instrument or any other Loan Document, including prepayment premiums, late
charges, default interest, and advances to protect the security of the Security
Instrument under Section 12 of the Security Instrument. "Event of Default" and
other capitalized terms used but not defined in this Note shall have the
meanings given to such terms in the Security Instrument.
2. Address for Payment. All payments due under this Note shall be payable at 650
Dresher Road, P.O. Box 1015, Horsham, Pennsylvania 19044-8015, Attn: Servicing -
Account Manager, or such other place as may be designated by written notice to
Borrower from or on behalf of Lender.
3. Payment of Principal and Interest. Principal and interest shall be paid as
follows:
(a) Unless disbursement of principal is made by Lender to Borrower on the first
day of the month, interest for the period beginning on the date of disbursement
and ending on and including the last day of the month in which such disbursement
is made shall be payable simultaneously with the execution of this Note.
Interest under this Note shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
(b) Consecutive monthly installments of principal and interest, each in the
amount of Twenty Four Thousand Nine Hundred Forty Four and 04/100 (US
$24,944.04), shall be payable on the first day of each month beginning on
February 1, 2000, until the entire unpaid principal balance evidenced by this
Note is fully paid. Any accrued interest remaining past due for 30 days or more
shall be added to and become part of the unpaid principal balance and shall bear
interest at the rate or rates specified in this Note, and any reference below to
"accrued interest" shall refer to accrued interest which has not become part of
the unpaid principal balance. Any remaining principal and interest shall be due
and payable on January 1, 2020 or on any earlier date on which the unpaid
principal balance of this Note becomes due and payable, by acceleration or
otherwise (the "Maturity Date"). The unpaid principal balance shall continue to
bear interest after the Maturity Date at the Default Rate set forth in this Note
until and including the date on which it is paid in full.
(c) Any regularly scheduled monthly installment of principal and interest that
is received by Lender before the date it is due shall be deemed to have been
received on the due date solely for the purpose of calculating interest due.
4. Application of Payments. If at any time Lender receives, from Borrower or
otherwise, any amount applicable to the Indebtedness which is less than all
amounts due and payable at such time, Lender may apply that payment to amounts
then due and payable in any manner and in any order determined by Lender, in
Lender's discretion. Borrower agrees that neither Lender's acceptance of a
payment from Borrower in an amount that is less than all amounts then due and
payable nor Lender's application of such payment shall constitute or be deemed
to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.
5. Security. The Indebtedness is secured, among other things, by a multifamily
mortgage, deed to secure debt or deed of trust dated as of the date of this Note
(the "Security Instrument"), and reference is made to the Security Instrument
for other rights of Lender as to collateral for the Indebtedness.
6. Acceleration. If an Event of Default has occurred and is continuing, the
entire unpaid principal balance, any accrued interest, the prepayment premium
payable under Paragraph 10, if any, and all other amounts payable under this
Note and any other Loan Document shall at once become due and payable, at the
option of Lender, without any prior notice to Borrower. Lender may exercise this
option to accelerate regardless of any prior forbearance.
7. Default Rate. So long as (a) any monthly installment under this Note remains
past due for 30 days or more, or (b) any other Event of Default has occurred and
is continuing, interest under this Note shall accrue on the unpaid principal
balance from the earlier of the due date of the first unpaid monthly installment
or the occurrence of such other Event of Default, as applicable, at a rate (the
"Default Rate") equal to the lesser of 4 percentage points above the rate stated
in the first paragraph of this Note or the maximum interest rate which may be
collected from Borrower under applicable law. If the unpaid principal balance
and all accrued interest are not paid in full on the Maturity Date, the unpaid
principal balance and all accrued interest shall bear interest from the Maturity
Date at the Default Rate. Borrower also acknowledges that its failure to make
timely payments will cause Lender to incur additional expenses in servicing and
processing the loan evidenced by this Note (the "Loan"), that, during the time
that any monthly installment under this Note is delinquent for more than 30
days, Lender will incur additional costs and expenses arising from its loss of
the use of the money due and from the adverse impact on Lender's ability to meet
its other obligations and to take advantage of other investment opportunities,
and that it is extremely difficult and impractical to determine those additional
costs and expenses. Borrower also acknowledges that, during the time that any
monthly installment under this Note is delinquent for more than 30 days or any
other Event of Default has occurred and is continuing, Lender's risk of
nonpayment of this Note will be materially increased and Lender is entitled to
be compensated for such increased risk. Borrower agrees that the increase in the
rate of interest payable under this Note to the Default Rate represents a fair
and reasonable estimate, taking into account all circumstances existing on the
date of this Note, of the additional costs and expenses Lender will incur by
reason of the Borrower's delinquent payment and the additional compensation
Lender is entitled to receive for the increased risks of nonpayment associated
with a delinquent loan.
8. Loan Charges. Borrower and Lender intend at all times to comply with the law
of the State of Texas governing the maximum rate or amount of interest payable
on or in connection with this Note and the Indebtedness (or applicable United
States federal law to the extent that it permits Lender to contract for, charge,
take, reserve or receive a greater amount of interest than under Texas law). If
the applicable law is ever judicially interpreted so as to render usurious any
amount payable under this Note or under any other Loan Document, or contracted
for, charged, taken, reserved or received with respect to the Indebtedness, or
if acceleration of the maturity of this Note, or if any prepayment by Borrower
results in Borrower having paid any interest in excess of that permitted by any
applicable law, then Borrower and Lender expressly intend that all excess
amounts collected by Lender shall be applied to reduce the unpaid principal
balance of this Note (or, if this Note has been or would thereby be paid in
full, shall be refunded to Borrower), and the provisions of this Note, the
Security Instrument and any other Loan Documents immediately shall be deemed
reformed and the amounts thereafter collectible under this Note or any other
Loan Document reduced, without the necessity of the execution of any new
documents, so as to comply with any applicable law, but so as to permit the
recovery of the fullest amount otherwise payable under this Note or any other
Loan Document. The right to accelerate the maturity of this Note does not
include the right to accelerate any interest which has not otherwise accrued on
the date of such acceleration, and Lender does not intend to collect any
unearned interest in the event of acceleration. All sums paid or agreed to be
paid to Lender for the use, forbearance or detention of the Indebtedness shall,
to the extent permitted by any applicable law, be amortized, prorated, allocated
and spread throughout the full term of the Indebtedness until payment in full so
that the rate or amount of interest on account of the Indebtedness does not
exceed the applicable usury ceiling. Notwithstanding any provision contained in
this Note, the Security Instrument or any other Loan Document that permits the
compounding of interest, including any provision by which any accrued interest
is added to the principal amount of this Note, the total amount of interest that
Borrower is obligated to pay and Lender is entitled to receive with respect to
the Indebtedness shall not exceed the amount calculated on a simple (i.e.,
noncompounded) interest basis at the maximum rate on principal amounts actually
advanced to or for the account of Borrower, including all current and prior
advances and any advances made pursuant to the Security Instrument or other Loan
Documents (such as for the payment of taxes, insurance premiums and similar
expenses or costs).
9. Limits on Personal Liability.
(a) Except as otherwise provided in this Paragraph 9, Borrower shall have no
personal liability under this Note, the Security Instrument or any other Loan
Document for the repayment of the Indebtedness or for the performance of any
other obligations of Borrower under the Loan Documents, and Lender's only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender's exercise of its rights and remedies with respect
to the Mortgaged Property and any other collateral held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit or
impair Lender's enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any obligations of Borrower.
(b) Borrower shall be personally liable to Lender for the repayment of a portion
of the Indebtedness equal to zero percent (0%) of the original principal balance
of this Note, plus any other amounts for which Borrower has personal liability
under this Paragraph 9.
(c) In addition to Borrower's personal liability under Paragraph 9(b), Borrower
shall be personally liable to Lender for the repayment of a further portion of
the Indebtedness equal to any loss or damage suffered by Lender as a result of
(1) failure of Borrower to pay to Lender upon demand after an Event of Default
all Rents to which Lender is entitled under Section 3(a) of the Security
Instrument and the amount of all security deposits collected by Borrower from
tenants then in residence; (2) failure of Borrower to apply all insurance
proceeds and condemnation proceeds as required by the Security Instrument; or
(3) failure of Borrower to comply with Section 14(d) or (e) of the Security
Instrument relating to the delivery of books and records, statements, schedules
and reports.
(d) For purposes of determining Borrower's personal liability under Paragraph
9(b) and Paragraph 9(c), all payments made by Borrower or any guarantor of this
Note with respect to the Indebtedness and all amounts received by Lender from
the enforcement of its rights under the Security Instrument shall be applied
first to the portion of the Indebtedness for which Borrower has no personal
liability.
(e) Borrower shall become personally liable to Lender for the repayment of all
of the Indebtedness upon the occurrence of any of the following Events of
Default: (1) Borrower's acquisition of any property or operation of any business
not permitted by Section 33 of the Security Instrument; (2) a Transfer
(including, but not limited to, a lien or encumbrance) that is an Event of
Default under Section 21 of the Security Instrument, other than a Transfer
consisting solely of the involuntary removal or involuntary withdrawal of a
general partner in a limited partnership or a manager in a limited liability
company; or (3) fraud or written material misrepresentation by Borrower or any
officer, director, partner, member or employee of Borrower in connection with
the application for or creation of the Indebtedness or any request for any
action or consent by Lender.
(f) In addition to any personal liability for the Indebtedness, Borrower shall
be personally liable to Lender for (1) the performance of all of Borrower's
obligations under Section 18 of the Security Instrument (relating to
environmental matters); (2) the costs of any audit under Section 14(d) of the
Security Instrument; and (3) any costs and expenses incurred by Lender in
connection with the collection of any amount for which Borrower is personally
liable under this Paragraph 9, including fees and out of pocket expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of Borrower's books and records to determine the amount for which Borrower has
personal liability.
(g) To the extent that Borrower has personal liability under this Paragraph 9,
Lender may exercise its rights against Borrower personally without regard to
whether Lender has exercised any rights against the Mortgaged Property or any
other security, or pursued any rights against any guarantor, or pursued any
other rights available to Lender under this Note, the Security Instrument, any
other Loan Document or applicable law. For purposes of this Paragraph 9, the
term "Mortgaged Property" shall not include any funds that (1) have been applied
by Borrower as required or permitted by the Security Instrument prior to the
occurrence of an Event of Default or (2) Borrower was unable to apply as
required or permitted by the Security Instrument because of a bankruptcy,
receivership, or similar judicial proceeding.
10. Voluntary and Involuntary Prepayments.
(a) A prepayment premium shall be payable in connection with any prepayment made
under this Note as provided below:
(1) Borrower may voluntarily prepay all of the unpaid principal balance of this
Note on the last Business Day of a calendar month if Borrower has given Lender
at least 30 days prior notice of its intention to make such prepayment. Such
prepayment shall be made by paying (A) the amount of principal being prepaid,
(B) all accrued interest, (C) all other sums due Lender at the time of such
prepayment, and (D) the prepayment premium calculated pursuant to Schedule A.
For all purposes including the accrual of interest, any prepayment received by
Lender on any day other than the last calendar day of the month shall be deemed
to have been received on the last calendar day of such month. For purposes of
this Note, a "Business Day" means any day other than a Saturday, Sunday or any
other day on which Lender is not open for business. Borrower shall not have the
option to voluntarily prepay less than all of the unpaid principal balance.
(2) Upon Lender's exercise of any right of acceleration under this Note,
Borrower shall pay to Lender, in addition to the entire unpaid principal balance
of this Note outstanding at the time of the acceleration, (A) all accrued
interest and all other sums due Lender, and (B) the prepayment premium
calculated pursuant to Schedule A.
(3) Any application by Lender of any collateral or other security to the
repayment of any portion of the unpaid principal balance of this Note prior to
the Maturity Date and in the absence of acceleration shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium. The amount of any such partial prepayment shall be computed
so as to provide to Lender a prepayment premium computed pursuant to Schedule A
without Borrower having to pay out-of-pocket any additional amounts.
(b) Notwithstanding the provisions of Paragraph 10(a), no prepayment premium
shall be payable with respect to (A) any prepayment made no more than 180 days
before the Maturity Date, or (B) any prepayment occurring as a result of the
application of any insurance proceeds or condemnation award under the Security
Instrument.
(c) Schedule A is hereby incorporated by reference into this Note.
(d) Any permitted or required prepayment of less than the unpaid principal
balance of this Note shall not extend or postpone the due date of any subsequent
monthly installments or change the amount of such installments, unless Lender
agrees otherwise in writing.
(e) Borrower recognizes that any prepayment of the unpaid principal balance of
this Note, whether voluntary or involuntary or resulting from a default by
Borrower, will result in Lender's incurring loss, including reinvestment loss,
additional expense and frustration or impairment of Lender's ability to meet its
commitments to third parties. Borrower agrees to pay to Lender upon demand
damages for the detriment caused by any prepayment, and agrees that it is
extremely difficult and impractical to ascertain the extent of such damages.
Borrower therefore acknowledges and agrees that the formula for calculating
prepayment premiums set forth on Schedule A represents a reasonable estimate of
the damages Lender will incur because of a prepayment.
(f) Borrower further acknowledges that the prepayment premium provisions of this
Note are a material part of the consideration for the Loan, and acknowledges
that the terms of this Note are in other respects more favorable to Borrower as
a result of the Borrower's voluntary agreement to the prepayment premium
provisions.
11. Costs and Expenses. Borrower shall pay all expenses and costs, including
fees and out-of-pocket expenses of attorneys and expert witnesses and costs of
investigation, incurred by Lender as a result of any default under this Note or
in connection with efforts to collect any amount due under this Note, or to
enforce the provisions of any of the other Loan Documents, including those
incurred in post-judgment collection efforts and in any bankruptcy proceeding
(including any action for relief from the automatic stay of any bankruptcy
proceeding) or judicial or non-judicial foreclosure proceeding.
12. Forbearance. Any forbearance by Lender in exercising any right or remedy
under this Note, the Security Instrument, or any other Loan Document or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy. The acceptance by Lender of any
payment after the due date of such payment, or in an amount which is less than
the required payment, shall not be a waiver of Lender's right to require prompt
payment when due of all other payments or to exercise any right or remedy with
respect to any failure to make prompt payment. Enforcement by Lender of any
security for Borrower's obligations under this Note shall not constitute an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.
13. Waivers. Presentment, demand, notice of dishonor, protest, notice of
acceleration, notice of intent to demand or accelerate payment or maturity,
presentment for payment, notice of nonpayment, grace, and diligence in
collecting the Indebtedness are waived by Borrower and all endorsers and
guarantors of this Note and all other third party obligors.
14. Commercial Purpose. Borrower represents that the Indebtedness is being
incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family or household purposes.
15. Counting of Days. Except where otherwise specifically provided, any
reference in this Note to a period of "days" means calendar days, not Business
Days.
16. Governing Law. This Note shall be governed by the law of the jurisdiction in
which the Land is located.
17. Captions. The captions of the paragraphs of this Note are for convenience
only and shall be disregarded in construing this Note.
18. Notices. All notices, demands and other communications required or permitted
to be given by Lender to Borrower pursuant to this Note shall be given in
accordance with Section 31 of the Security Instrument.
19. Consent to Jurisdiction and Venue. Borrower agrees that any controversy
arising under or in relation to this Note shall be litigated exclusively in the
jurisdiction in which the Land is located (the "Property Jurisdiction"). The
state and federal courts and authorities with jurisdiction in the Property
Jurisdiction shall have exclusive jurisdiction over all controversies which
shall arise under or in relation to this Note. Borrower irrevocably consents to
service, jurisdiction, and venue of such courts for any such litigation and
waives any other venue to which it might be entitled by virtue of domicile,
habitual residence or otherwise.
20. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO ELECT A
TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE
RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT
BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE
TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
ATTACHED SCHEDULES. The following Schedules are attached to this Note:
X Schedule A Prepayment Premium (required)
X Schedule B Modifications to Multifamily Note
IN WITNESS WHEREOF, Borrower has signed and delivered this Instrument or
has caused this Instrument to be signed and delivered by its duly authorized
representative.
RIVERWALK ASSOCIATES, L.P., a Missouri
limited partnership
By: UNITED INVESTORS GROWTH PROPERTIES II (A
Missouri Limited Partnership), a Missouri
limited partnership, its general partner
By: UNITED INVESTORS REAL ESTATE, INC., a
Delaware corporation, its general partner
By:
Patti K. Fielding
Vice President
45-1542903
Borrower's Social Security/Employer ID Number
<PAGE>
PAY TO THE ORDER OF FEDERAL HOME LOAN MORTGAGE CORPORATION, WITHOUT RECOURSE,
THIS 17TH DAY OF DECEMBER, 1999.
GMAC COMMERCIAL MORTGAGE CORPORATION, a
California corporation
By:
Donald W. Marshall
Vice President
<PAGE>
SCHEDULE A
PREPAYMENT PREMIUM
Any prepayment premium payable under Paragraph 10 of this Note shall be computed
as follows:
(a) If the prepayment is made between the date of this Note and the date that is
180 months after the first day of the first calendar month following the date of
this Note (the "Yield Maintenance Period"), the prepayment premium shall be the
greater of:
(i) of the unpaid principal balance of this Note; or
(ii) the product obtained by multiplying:
(A) the amount of principal being prepaid,
by
(B) the excess (if any) of the Monthly Note Rate over the Assumed Reinvestment
Rate,
by
(C) the Present Value Factor.
For purposes of subparagraph (ii), the following definitions shall apply:
Monthly Note Rate: one-twelfth (1/12) of the annual interest rate of the Note,
expressed as a decimal calculated to five digits.
Prepayment Date: in the case of a voluntary prepayment, the date on which the
prepayment is made; in any other case, the date on which Lender accelerates the
unpaid principal balance of the Note.
Assumed Reinvestment Rate: one-twelfth (1/12) of the yield rate as of the date 5
Business Days before the Prepayment Date, on the 9.250% U.S. Treasury Security
due February 1, 2016, as reported in The Wall Street Journal, expressed as a
decimal calculated to five digits. In the event that no yield is published on
the applicable date for the Treasury Security used to determine the Assumed
Reinvestment Rate, Lender, in its discretion, shall select the non-callable
Treasury Security maturing in the same year as the Treasury Security specified
above with the lowest yield published in The Wall Street Journal as of the
applicable date. If the publication of such yield rates in The Wall Street
Journal is discontinued for any reason, Lender shall select a security with a
comparable rate and term to the Treasury Security used to determine the Assumed
Reinvestment Rate. The selection of an alternate security pursuant to this
Paragraph shall be made in Lender's discretion.
<PAGE>
Present Value Factor: the factor that discounts to present value the costs
resulting to Lender from the difference in interest rates during the months
remaining in the Yield Maintenance Period, using the Assumed Reinvestment Rate
as the discount rate, with monthly compounding, expressed numerically as
follows:
[OBJECT OMITTED]
n = number of months remaining in Yield Maintenance Period
ARR = Assumed Reinvestment Rate
(b) If the prepayment is made after the expiration of the Yield Maintenance
Period but more than 180 days before the Maturity Date, the prepayment premium
shall be 1.0% of the unpaid principal balance of this Note.
<PAGE>
SCHEDULE B
MODIFICATIONS TO MULTIFAMILY NOTE
1. The first sentence of 7 of the Note ("Default Rate") is hereby deleted and
replaced with the following:
So long as (a) any monthly installment under this Note remains past
due for more than thirty (30) days or (b) any other event of Default
has occurred and is continuing, interest under this Note shall
accrue on the unpaid principal balance from the earlier of the due
date of the first unpaid monthly installment or the occurrence of
such other Event of Default, as applicable, at a rate (the "Default
Rate") equal to the lesser of (1) the maximum interest rate which
may be collected from Borrower under applicable law or (2) the
greater of (i) three percent (3%) above the Interest Rate or (ii)
four percent (4.0%) above the then-prevailing Prime Rate. As used
herein, the term "Prime Rate" shall mean the rate of interest
announced by The Wall Street Journal from time to time as the "Prime
Rate".
2. Paragraph 9(c) of the Note is amended to add the following subparagraph (4):
(4) failure by Borrower to pay the amount of the water and sewer
charges, taxes, fire, hazard or other insurance premiums, ground
rents in accordance with the terms of the Security Instrument.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from UNITED
INVESTORS GROWTH PROPERTIES II 1999 Fourth Quarter 10-KSB and is qualified in
its entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000862114
<NAME> UNITED INVESTORS GROWTH PROPERTIES II
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> DEC-31-1999
<CASH> 648
<SECURITIES> 0
<RECEIVABLES> 253
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 8,668
<DEPRECIATION> (2,261)
<TOTAL-ASSETS> 7,464
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 6,232
0
0
<COMMON> 0
<OTHER-SE> 977
<TOTAL-LIABILITY-AND-EQUITY> 7,464
<SALES> 0
<TOTAL-REVENUES> 1,762
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,753
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 516
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 53
<CHANGES> 0
<NET-INCOME> 2
<EPS-BASIC> (0.10)<F2>
<EPS-DILUTED> 0
<FN>
<F1> Registrant has an unclassified balance sheet. <F2> Multiplier is 1.
</FN>
</TABLE>
