-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TgLPtv7i4Sy/0OTAu8QFa5FzVkU+UX36pYhWTPRX3d5X1T5qQ6ug7how7JBkOQYl yumqvIwwQBEFJGkaC89zpg== 0000711642-02-000111.txt : 20020513 0000711642-02-000111.hdr.sgml : 20020513 ACCESSION NUMBER: 0000711642-02-000111 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: US REALTY PARTNERS LTD PARTNERSHIP CENTRAL INDEX KEY: 0000788955 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE OPERATORS (NO DEVELOPERS) & LESSORS [6510] IRS NUMBER: 570814502 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-15656 FILM NUMBER: 02644008 BUSINESS ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 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, 2002 [ ] 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 unit data) March 31, 2002
Assets Cash and cash equivalents $ 181 Receivables and deposits 12 Restricted escrows 107 Other assets 391 Investment properties: Land $ 2,123 Buildings and related personal property 16,449 18,572 Less accumulated depreciation (8,010) 10,562 $11,253 Liabilities and Partners' Deficit Liabilities Accounts payable $ 90 Tenant security deposit liabilities 77 Accrued property taxes 136 Other liabilities 225 Due to Corporate General Partner 129 Mortgage notes payable 10,720 Partners' Deficit General partners $ (4) Depositary unit certificate holders (2,440,000 units authorized; 1,222,000 units issued and outstanding) (120) (124) $11,253 See Accompanying Notes to Financial Statements
b) U.S. REALTY PARTNERS LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per unit data) Three Months Ended March 31, 2002 2001 Revenues: Rental income $ 743 $ 746 Other income 43 42 Total revenues 786 788 Expenses: Operating 259 289 General and administrative 45 46 Depreciation 147 143 Interest 220 229 Property taxes 69 67 Total expenses 740 774 Net income $ 46 $ 14 Net income allocated to general partners (1%) $ -- $ -- Net income allocated to depositary unit certificate holders (99%) 46 14 $ 46 $ 14 Net income per depositary unit certificate $ .04 $ .01 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, 2001 1,222,000 $ (4) $ (166) $ (170) Net income for the three months ended March 31, 2002 -- -- 46 46 Partners' deficit at March 31, 2002 1,222,000 $ (4) $ (120) $ (124) 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, 2002 2001 Cash flows from operating activities: Net income $ 46 $ 14 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 147 143 Amortization of loan costs 4 4 Change in accounts: Receivables and deposits 4 3 Other assets (69) (31) Due from Corporate General Partner 23 -- Accounts payable (12) (1) Tenant security deposit liabilities (3) 4 Accrued property taxes 68 68 Due to Corporate General Partner 25 (34) Other liabilities 88 (33) Net cash provided by operating activities 321 137 Cash flows from investing activities: Property improvements and replacements (164) (227) Net deposits to restricted escrows -- (1) Net cash used in investing activities (164) (228) Cash flows from financing activities: Advances from affiliates 42 -- Principal payments on advances from affiliates (89) -- Payments on mortgage notes payable (63) (58) Net cash used in financing activities (110) (58) Net increase (decrease) in cash and cash equivalents 47 (149) Cash and cash equivalents at beginning of period 134 659 Cash and cash equivalents at end of period $ 181 $ 510 Supplemental disclosure of cash flow information: Cash paid for interest $ 216 $ 259 At March 31, 2001, accounts payable and property improvements and replacements were adjusted by approximately $167,000 for non-cash activity. See Accompanying Notes to Financial Statements
e) U.S. REALTY PARTNERS LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (Unaudited) March 31, 2002 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"), a publicly traded real estate investment trust. 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, 2002, are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. 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, 2001. Note B - Reconciliation of Cash Flow As required by the Partnership Agreement, the following is a reconciliation of "net cash provided by operating activities" in the accompanying statements of cash flows to "net cash from operations", as defined in the Partnership Agreement. However, "net cash from 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, 2002 2001 (in thousands) Net cash provided by operating activities $ 321 $ 137 Payments on mortgage notes payable (63) (58) Property improvements and replacements (164) (227) Change in restricted escrows, net -- (1) Principal payments on advances from affiliates (89) -- Advances from affiliates 42 -- Changes in reserves for net operating liabilities (124) 24 Release of reserves 77 125 Net cash from operations $ -- $ --
During the three months ended March 31, 2002 and 2001, the Corporate General Partner released previously reserved funds of approximately $77,000 and $125,000. 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. During the three months ended March 31, 2002 and 2001, 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 $41,000 and $39,000 for the three months ended March 31, 2002 and 2001, respectively, which is included in operating expenses. An affiliate of the Corporate General Partner received reimbursement of accountable administrative expenses amounting to approximately $45,000 and $47,000 for the three months ended March 31, 2002 and 2001, respectively, which is included in general and administrative and operating expenses and investment properties. Included in these amounts are fees related to construction management services provided by an affiliate of the Corporate General Partner of approximately $14,000 and $29,000 for the three months ended March 31, 2002 and 2001, respectively. The construction management services are calculated based on a percentage of current additions to both investment properties. As of March 31, 2002, the Partnership owed approximately $25,000 of accrued accountable administrative expenses to an affiliate of the Corporate General Partner. During the three months ended March 31, 2002, an affiliate of the Corporate General Partner advanced the Partnership approximately $42,000 to pay annual audit bills. The Partnership also made principal payments of approximately $89,000 against prior year advances. As of March 31, 2002, the amount owed to an affiliate of the Corporate General Partner for advances, including accrued interest, was approximately $104,000. In accordance with the Partnership Agreement, interest is to be charged at prime plus 2%. The Partnership made interest payments against the advances of approximately $2,000 and recognized interest expense of approximately $2,000 for the three months ended March 31, 2002. Beginning in 2001, the Partnership began insuring its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Corporate General Partner. During the three months ended March 31, 2002 and 2001, the Partnership was charged by AIMCO and its affiliates approximately $39,000 and $56,000, respectively, for insurance coverage and fees associated with policy claims administration. Note D - Casualty Event On September 22, 2001, Twin Lakes Apartments incurred water and steam damage to two apartment units resulting from a damaged waterbed. The property received insurance proceeds of approximately $14,000 to repair the damage during the three months ended March 31, 2002. Note E - 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 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, 2002 and 2001: Average Occupancy Property 2002 2001 Twin Lakes Apartments Palm Harbor, Florida 97% 96% Governor's Park Apartments Little Rock, Arkansas 94% 93% Results of Operations The Registrant's net income for the three months ended March 31, 2002 was approximately $46,000 as compared to approximately $14,000 for the three months ended March 31, 2001. The increase in net income is primarily attributable to a decrease in total expenses while total revenues remained relatively constant. The decrease in total expenses was attributable to a decrease in operating expense. Operating expense decreased due to insurance proceeds received by Twin Lakes Apartments and a decrease in property expense partially offset by an increase in insurance expense. On September 22, 2001, Twin Lakes Apartments incurred water and steam damage to two apartment units resulting from a damaged waterbed. The property received insurance proceeds of approximately $14,000 to repair the damage during the three months ended March 31, 2002. Property expense decreased due to a decrease in employee salaries and utility costs at both of the Partnership's investment properties. Insurance expense increased due to an increase in insurance premiums at Twin Lakes Apartments. General and administrative expense remained relatively constant. Included in general and administrative expenses for the three months ended March 31, 2002 and 2001 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, 2002, the Partnership had cash and cash equivalents of approximately $181,000 as compared to approximately $510,000 at March 31, 2001. For the three months ended March 31, 2002, cash and cash equivalents increased by approximately $47,000 from the Partnership's year ended December 31, 2001. The increase in cash and cash equivalents is due to approximately $321,000 of cash provided by operating activities partially offset by approximately $164,000 of cash used in investing activities and approximately $110,000 of cash used in financing activities. Cash used in investing activities consisted of property improvements and replacements. Cash used in financing activities consisted of payments on the mortgages encumbering the properties and principal payments on advances from affiliates partially offset by advances from affiliates. The Partnership invests its working capital reserves in interest bearing 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 investment 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 $53,000 in capital expenditures at Governor's Park Apartments during the three months ended March 31, 2002, consisting primarily of a water submetering project, swimming pool improvements, and appliance and floor covering replacements. These improvements were funded with cash flow from operations. The Partnership has budgeted, but is not limited to, approximately $70,000 for capital improvements during 2002 consisting primarily of air conditioning unit replacements, major landscaping, structural improvements, and appliance and floor covering replacements. Additional improvements may be considered and will depend on the physical condition of the property as well as anticipated cash flow generated by the property. Twin Lake Apartments The Partnership completed approximately $111,000 in capital expenditures at Twin Lake Apartments during the three months ended March 31, 2002, consisting primarily of plumbing improvements, building and structural damage repairs and appliance and floor covering replacements. These improvements were funded with cash flow from operations and insurance proceeds. The Partnership has budgeted, but is not limited to, approximately $110,000 for capital improvements, exclusive of casualty repairs, during 2002 consisting primarily of plumbing improvements, air condition unit replacements, door replacements, the installation of a sprinkler system and appliance and floor covering replacements. Additional improvements may be considered and will depend on the physical condition of the property as well as anticipated cash flow generated by the property. 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 $10,720,000 requires monthly payments due on the first day of each month until the loans mature on September 1, 2020 at which time the loans are scheduled to be fully amortized. Pursuant to the Partnership Agreement, the term of the Partnership is scheduled to expire on December 31, 2005. Accordingly, prior to such date the Partnership will need to either sell its investment properties or extend the term of the Partnership. If the Partnership is unable to extend its term, the ultimate sale price of the investment properties may be adversely affected. No distributions were made by the Partnership during the three months ended March 31, 2002 and 2001, respectively. The Partnership's cash available for distribution is reviewed on a monthly basis. Future distributions will depend on the level of net cash generated from operations, the availability of cash reserves and the timing of debt maturities, refinancings, and/or property sales. There can be no assurance that the Partnership will generate sufficient funds from operations after required capital improvements to permit distributions to its partners during the remainder of 2002 or subsequent periods. In addition to its indirect ownership of the Corporate General Partner interest in the Partnership, AIMCO and its affiliates owned 839,077 depositary unit certificates in the Partnership representing 68.66% of the outstanding units at March 31, 2002. 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 voting on certain amendments to the Partnership Agreement and voting to remove the Corporate General Partner. As a result of its ownership of 68.66% of the outstanding units, AIMCO is in a position to influence all such 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 its 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, 2002: 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 13, 2002 -----END PRIVACY-ENHANCED MESSAGE-----