10QSB 1 usrp.txt USRP FORM 10-QSB QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarterly or Transitional Report U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________to _________ Commission file number 0-15656 U.S. REALTY PARTNERS LIMITED PARTNERSHIP (Exact name of small business issuer as specified in its charter) South Carolina 57-0814502 (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) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) U.S. REALTY PARTNERS LIMITED PARTNERSHIP BALANCE SHEET (Unaudited) (in thousands, except per unit data) March 31, 2001
Assets Cash and cash equivalents $ 510 Receivables and deposits 26 Restricted escrows 138 Other assets 361 Investment properties: Land $ 2,123 Buildings and related personal property 16,131 18,254 Less accumulated depreciation (7,435) 10,819 $11,854 Liabilities and Partners' Deficit Liabilities Accounts payable $ 50 Tenant security deposit liabilities 72 Accrued property taxes 131 Other liabilities 156 Due to Corporate General Partner 586 Mortgage note payable 10,965 Partners' Deficit General partners $ (4) Depositary unit certificate holders (2,440,000 units authorized; 1,222,000 units issued and outstanding) (102) (106) $11,854 See Accompanying Notes to Financial Statements
b) U.S. REALTY PARTNERS LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended March 31, 2001 2000 Revenues: Rental income $ 746 $ 759 Other income 42 37 Total revenues 788 796 Expenses: Operating 289 296 General and administrative 46 44 Depreciation 143 131 Interest 229 119 Property taxes 67 62 Total expenses 774 652 Net income $ 14 $ 144 Net income allocated to general partners (1%) $ -- $ 1 Net income allocated to depositary unit certificate holders (99%) 14 143 $ 14 $ 144 Net income per depositary unit certificate $ .01 $ .12 See Accompanying Notes to Financial Statements c) U.S. REALTY PARTNERS LIMITED PARTNERSHIP STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands, except unit data)
Depositary Depositary Unit Unit General Certificate Certificates Partners Partners Total Original capital contributions 1,222,000 $ 2 $30,550 $30,552 Partners' deficit at December 31, 2000 1,222,000 $ (4) $ (116) $ (120) Net income for the three months ended March 31, 2001 -- -- 14 14 Partners' deficit at March 31, 2001 1,222,000 $ (4) $ (102) $ (106) See Accompanying Notes to Financial Statements
d) U.S. REALTY PARTNERS LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Three Months Ended March 31, 2001 2000 Cash flows from operating activities: Net income $ 14 $ 144 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 143 131 Amortization of loan costs 4 -- Change in accounts: Restricted cash -- (165) Receivables and deposits 3 (92) Other assets (31) (20) Accounts payable (1) (140) Tenant security deposit liabilities 4 (3) Accrued property taxes 68 62 Due to Corporate General Partner (34) 6 Other liabilities (33) (31) Net cash provided by (used in) operating activities 137 (108) Cash flows from investing activities: Property improvements and replacements (227) (72) Net (deposits to) withdrawals from restricted escrows (1) 283 Net cash (used in) provided by investing activities (228) 211 Cash flows from financing activities: Payments on mortgage note payable (58) (103) Net cash used in financing activities (58) (103) Net change in cash and cash equivalents (149) -- Cash and cash equivalents at beginning of period 659 -- Cash and cash equivalents at end of period $ 510 $ -- Supplemental disclosure of cash flow information: Cash paid for interest $ 259 $ 97 At December 31, 2000 and March 31, 2001, accounts payable and property improvements and replacements were adjusted by approximately $167,000 for non-cash activity. At March 31, 2000 property improvements and replacements and accounts payable were adjusted by approximately $68,000 for non-cash activity. See Accompanying Notes to Financial Statements
e) U.S. REALTY PARTNERS LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Unaudited) March 31, 2001 Note A - Basis of Presentation The accompanying unaudited financial statements of U.S. Realty Partners Limited Partnership (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310 (b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The general partner responsible for management of the Partnership's business is U.S. Realty I Corporation, a South Carolina Corporation (the "Corporate General Partner"). The Corporate General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"). In the opinion of the Corporate General Partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2001, are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. For further information, refer to the financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB for the year ended December 31, 2000. Segment Reporting: Statement of Financial Accounting Standards ("SFAS") No. 131, Disclosure about Segments of an Enterprise and Related Information ("Statement 131"), 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. As defined in SFAS No. 131, the Partnership has only one reportable segment. Moreover, due to the very nature of the Partnership's operations, the Corporate General Partner believes that segment-based disclosures will not result in a more meaningful presentation than the consolidated financial statements as presently presented. Note B - Reconciliation of Cash Flow The following is a reconciliation of the subtotal on the accompanying consolidated statements of cash flows captioned "net cash provided by (used in) operating activities" to "net cash provided by operations", as defined in the Partnership Agreement. However, "net cash provided by operations" should not be considered an alternative to net income as an indicator of the Partnership's operating performance or to cash flows as a measure of liquidity.
For the Three Months Ended March 31, 2001 2000 (in thousands) Net cash provided by (used in) operating activities $ 137 $ (108) Payments on mortgage notes payable (58) (103) Property improvements and replacements (227) (72) Change in restricted escrows, net (1) 283 Changes in reserves for net operating liabilities 24 383 Additional reserves 125 (383) Net cash provided by operations $ -- $ --
During the three months ended March 31, 2001, the Corporate General Partner released previously reserved funds of approximately $125,000. During the three months ended March 31, 2000, the Partnership considered all cash to be restricted for tenant security deposits and for the purpose of the deposit of Net Cash Flow, as defined by the debt restructuring in October of 1993. The debt encumbering the investment properties was refinanced during August 2000. Note C - Transactions with Affiliated Parties The Partnership has no employees and is dependent on the Corporate General Partner and its affiliates for the management and administration of all partnership activities. The Partnership Agreement provides for (i) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following were paid or accrued to the Corporate General Partner and its affiliates during the three months ended March 31, 2001 and 2000: 2001 2000 (in thousands) Property management fees (included in operating expenses) $ 39 $ 39 Reimbursement for services of affiliates (included in general and administrative, operating expenses and investment properties) 47 24 Due to Corporate General Partner 586 602 During the three months ended March 31, 2001 and 2000, affiliates of the Corporate General Partner were entitled to receive 5% of gross receipts from both of the Registrant's residential properties for providing property management services. The Registrant paid to such affiliates approximately $39,000 for both the three months ended March 31, 2001 and 2000. An affiliate of the Corporate General Partner received reimbursement of accountable administrative expenses amounting to approximately $47,000 and $24,000 for the three months ended March 31, 2001 and 2000, respectively. In addition to its indirect ownership of the Corporate General Partner interest in the Partnership, AIMCO and its affiliates currently own 735,185 depositary unit certificates in the Partnership representing 60.16% of the outstanding units. A number of these units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters which would include without limitation, voting on certain amendments to the Partnership Agreement and voting to remove the Corporate General Partner. As a result of its ownership of 60.16% of the outstanding units, AIMCO is in a position to influence all voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Corporate General Partner because of their affiliation with the Corporate General Partner. Item 2. Management's Discussion and Analysis or Plan of Operation The matters discussed in this Form 10-QSB contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosures contained in this Form 10-QSB and the other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussions 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 operations. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. The Partnership's investment properties consist of two apartment complexes. The following table sets forth the average occupancy of the properties for the three months ended March 31, 2001 and 2000: Average Occupancy Property 2001 2000 Twin Lakes Apartments Palm Harbor, Florida 96% 97% Governor's Park Apartments Little Rock, Arkansas 93% 98% The decrease in average occupancy at Governor's Park Apartments is due to a change in demographics of the market areas in which the investment property competes and lower interest rates for home buyers. Results of Operations The Registrant's net income for the three months ended March 31, 2001 was approximately $14,000 as compared to approximately $144,000 for the three months ended March 31, 2000. The decrease in net income is primarily attributable to an increase in total expenses and a decrease in total revenues. The increase in total expenses was attributable to an increase in interest expense and depreciation expense. Interest expense increased due to the refinancing of the consolidated mortgage encumbering the investment properties during the third quarter of 2000 and obtaining separate mortgages for each property. Depreciation expense increased due to property improvements and replacements placed in service during the past twelve months at the investment properties which are now being depreciated. Total revenue decreased due to a decrease in rental income which was partially offset by an increase in other income. Rental income decreased due to a decrease in occupancy at Governor's Park Apartments as discussed above. Other income increased as a result of higher average cash balances being maintained in interest bearing accounts. General and administrative expense remained relatively constant. Included in general and administrative expenses for the three months ended March 31, 2001 and 2000 are management reimbursements to the Corporate General Partner allowed under the Partnership Agreement. In addition, 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. As part of the ongoing business plan of the Partnership, the Corporate General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the Corporate 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 Corporate General Partner will be able to sustain such a plan. Liquidity and Capital Resources At March 31, 2001, the Partnership had approximately $510,000 of cash and cash equivalents. At March 31, 2000, all of the Partnership's cash was restricted pursuant to the terms of the previous mortgage loan which encumbered the Partnership's properties. This mortgage was refinanced during August 2000. Cash and cash equivalents decreased approximately $149,000 for the three months ended March 31, 2001 from the Registrant's year end, primarily due to approximately $228,000 of cash used in investing activities and approximately $58,000 of cash used in financing activities which was partially offset by approximately $137,000 of cash provided by operating activities. Cash used in financing activities consisted of payments on the mortgages encumbering the properties. Cash used in investing activities consisted primarily of property improvements and replacements and net deposits to escrow accounts. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the various properties to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, State, and local, legal and regulatory requirements. Capital improvements planned for each of the Registrant's properties are detailed below. Governor's Park Apartments The Partnership completed approximately $7,000 in capital expenditures at Governor's Park Apartments during the three months ended March 31, 2001, consisting primarily of floor covering and appliance replacements. These improvements were funded with cash flow from operations. The Partnership has budgeted, but is not limited to, approximately $42,000 for capital improvements during 2001 consisting primarily of floor covering and appliance replacement and air conditioning improvements. Twin Lake Apartments The Partnership completed approximately $53,000 in capital expenditures at Twin Lake Apartments during the three months ended March 31, 2001, consisting primarily of office computers and floor covering and appliance replacements. These improvements were funded with cash flow from operations. The Partnership has budgeted, but is not limited to, approximately $137,000 for capital improvements during 2001 consisting primarily of roof replacements, water heater replacements, floor covering and appliance replacement and interior decoration. The additional capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. The Registrant's current assets are thought to be sufficient for any near term needs (exclusive of capital improvements) of the Registrant. The total mortgage indebtedness of $10,965,000 requires monthly payments due on the first day of each month until the loan matures on September 1, 2020 at which time the loans are scheduled to be fully amortized. The Corporate General Partner will attempt to refinance such indebtedness and/or sell the properties prior to such maturity date. In addition to its indirect ownership of the Corporate General Partner interest in the Partnership, AIMCO and its affiliates currently own 735,185 depositary unit certificates in the Partnership representing 60.16% of the outstanding units. A number of these units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters which would include without limitation, voting on certain amendments to the Partnership Agreement and voting to remove the Corporate General Partner. As a result of its ownership of 60.16% of the outstanding units, AIMCO is in a position to influence all voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Corporate General Partner because of their affiliation with the Corporate General Partner. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: None. b) Reports on Form 8-K filed during the quarter ended March 31, 2001: None. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. U.S. REALTY PARTNERS LIMITED PARTNERSHIP By: U.S. Realty I Corporation Corporate 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: May 14, 2001