FORM 10-QSB—QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF

10QSB 1 usrp.htm FORM 10-QSB—QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-QSB

(Mark One)

[X]

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2006

[ ]

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

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)

Delaware

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 ___

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes __ No X_

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

U.S. REALTY PARTNERS LIMITED PARTNERSHIP

BALANCE SHEET

(Unaudited)

(in thousands, except unit data)

June 30, 2006


Assets
Cash and cash equivalents		$ 345
Receivables and deposits		91
Other assets		532
Restricted escrow		150
Investment properties:
Land	$ 2,123
Buildings and related personal property	17,769
	19,892
Less accumulated depreciation	(10,576)	9,316
		$10,434

Liabilities and Partners' Deficit
Liabilities
Accounts payable		$ 41
Tenant security deposit liabilities		73
Accrued property taxes		219
Other liabilities		216
Mortgage notes payable		13,104

Partners' Deficit
General partners	$ (11)
Depositary unit certificate holders (2,440,000 units
authorized; 1,222,000 units issued and outstanding)	(3,208)	(3,219)
		$10,434

See Accompanying Notes to Financial Statements

U.S. REALTY PARTNERS LIMITED PARTNERSHIP

STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per unit data)


	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2006	2005	2006	2005
Revenues:
Rental income	$ 847	$ 770	$ 1,688	$ 1,534
Other income	101	82	194	156
Total revenues	948	852	1,882	1,690

Expenses:
Operating	400	308	783	622
General and administrative	33	36	68	69
Depreciation	161	156	318	307
Interest	254	204	508	409
Property taxes	87	75	178	150
Total expenses	935	779	1,855	1,557

Net income	$ 13	$ 73	$ 27	$ 133

Net income allocated to general
partners (1%)	$ --	$ 1	$ --	$ 1
Net income allocated to depositary
unit certificate
holders (99%)	13	72	27	132
	$ 13	$ 73	$ 27	$ 133
Net income per depositary unit
certificate	$ 0.01	$ 0.06	$ 0.02	$ 0.11
Distributions per depository unit
certificate	$ --	$ --	$ 0.23	$ --

See Accompanying Notes to Financial Statements

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	Holders	Total

Original capital contributions	1,222,000	$ 2	$30,550	$30,552

Partners' deficit at
December 31, 2005	1,222,000	$ (11)	$ (2,955)	$(2,966)

Distributions to partners	--	--	(280)	(280)

Net income for the six months
ended June 30, 2006	--	--	27	27

Partners' deficit at
June 30, 2006	1,222,000	$ (11)	$(3,208)	$(3,219)

See Accompanying Notes to Financial Statements

U.S. REALTY PARTNERS LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)


	Six Months Ended
	June 30,
	2006	2005
Cash flows from operating activities:
Net income	$ 27	$ 133
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of loan costs	16	8
Depreciation	318	307
Change in accounts:
Receivables and deposits	3	16
Other assets	(111)	(49)
Accounts payable	(8)	(40)
Tenant security deposit liabilities	5	--
Accrued property taxes	142	112
Due to affiliates	--	9
Other liabilities	30	(39)
Net cash provided by operating activities	422	457

Cash flows used in investing activities:
Property improvements and replacements	(180)	(386)

Cash flows from financing activities:
Advances from affiliates	--	94
Loan costs paid	(8)	--
Payments on mortgage notes payable	(104)	(162)
Distributions to partners	(280)	--
Net cash used in financing activities	(392)	(68)

Net (decrease) increase in cash and cash equivalents	(150)	3

Cash and cash equivalents at beginning of period	495	108

Cash and cash equivalents at end of period	$ 345	$ 111

Supplemental disclosure of cash flow information:
Cash paid for interest	$ 494	$ 393
Supplemental disclosure of non-cash activity:
Property improvements and replacements in accounts
payable	$ 9	$ --

At December 31, 2005, approximately $9,000 of property improvements and replacements were included in accounts payable and are included in property improvements and replacements for the six months ended June 30, 2006.

See Accompanying Notes to Financial Statements

U.S. REALTY PARTNERS LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

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"). 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 and six month periods ended June 30, 2006 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2006. For further information, refer to the financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005. The Corporate General Partner is a wholly-owned subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust.

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 Six Months Ended
	June 30,
	2006	2005
	(in thousands)

Net cash provided by operating activities	$ 422	$ 457
Payments on mortgage notes payable	(104)	(162)
Property improvements and replacements	(180)	(386)
Changes in reserves for net operating
liabilities	(61)	(9)

Net cash provided by (used in) operations	$ 77	$ (100)

Distributions made from reserves no longer considered necessary by the Corporate General Partner are considered to be additional net cash from operations for allocation purposes.

Note C - Transactions with Affiliated Parties

The Partnership has no employees and depends 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.

Affiliates of the Corporate General Partner receive 5% of gross receipts from both of the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $93,000 and $83,000 for the six months ended June 30, 2006 and 2005, respectively, which is included in operating expenses.

An affiliate of the Corporate General Partner received reimbursement of accountable administrative expenses amounting to approximately $49,000 and $70,000 for the six months ended June 30, 2006 and 2005, respectively, which is included in general and administrative expenses and investment properties. The portion of these reimbursements included in investment properties for the six months ended June 30, 2006 and 2005 are fees related to construction management services provided by an affiliate of the Corporate General Partner of approximately $14,000 and $30,000, respectively.

During the six months ended June 30, 2005, the Partnership received advances from an affiliate of the Corporate General Partner of approximately $94,000 to pay for capital improvements at Twin Lakes Apartments. There were no such advances made during the six months ended June 30, 2006. Interest on advances was charged at prime plus 2%. Interest expense was approximately $9,000 for the six months ended June 30, 2005.

The Partnership insures 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, general liability 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 six months ended June 30, 2006, the Partnership was charged by AIMCO and its affiliates approximately $95,000 for hazard insurance coverage and fees associated with policy claims administration. Additional charges will be incurred by the Partnership during 2006 as other insurance policies renew later in the year. The Partnership was charged by AIMCO and its affiliates approximately $47,000 for insurance coverage and fees associated with policy claims administration during the year ended December 31, 2005.

Note D – Contingencies

the complaint alleges AIMCO Properties L.P. and NHP Management Company failed to comply with the FLSA in compensating maintenance workers for time that they worked in excess of 40 hours in a week. In June 2005 the court conditionally certified the collective action on both the on-call and overtime issues. Approximately 1,049 individuals opted in to the class. The defendants are moving to decertify the collective action on both issues in briefs to be filed by August 15, 2006. Because the court denied plaintiffs’ motion to certify state subclasses, on September 26, 2005, the plaintiffs filed a class action with the same allegations in the Superior Court of California (Contra Costa County), and on November 5, 2005 in Montgomery County Maryland Circuit Court. The California case has been stayed, and the defendants have moved to stay the Maryland case as well. Although the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome will have a material adverse effect on its consolidated financial condition or results of operations. Similarly, the Corporate General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership’s financial condition or results of operations.

The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment properties that are not of a routine nature arising in the ordinary course of business.

Environmental

Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain hazardous substances present on a property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of the hazardous substances. The presence of, or the failure to manage or remedy properly, hazardous substances may adversely affect occupancy at affected apartment communities and the ability to sell or finance affected properties. In addition to the costs associated with investigation and remediation actions brought by government agencies, and potential fines or penalties imposed by such agencies in connection therewith, the presence of hazardous substances on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal, remediation or disposal of hazardous substances through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of its properties, the Partnership could potentially be liable for environmental liabilities or costs associated with its properties.

Mold

The Partnership is aware of lawsuits against owners and managers of multifamily properties asserting claims of personal injury and property damage caused by the presence of mold, some of which have resulted in substantial monetary judgments or settlements. The Partnership has only limited insurance coverage for property damage loss claims arising from the presence of mold and for personal injury claims related to mold exposure. Affiliates of the Corporate General Partner have implemented a national policy and procedures to prevent or eliminate mold from its properties and the Corporate General Partner believes that these measures will minimize the effects that mold could have on residents. To date, the Partnership has not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions. Because the law regarding mold is unsettled and subject to change the Corporate General Partner can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on the Partnership’s financial condition or results of operations.

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The matters discussed in this report contain certain forward-looking statements, including, without limitation, statements regarding future financial performance and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors including, without limitation: national and local economic conditions; the terms of governmental regulations that affect the Registrant and interpretations of those regulations; the competitive environment in which the Registrant operates; financing risks, including the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets; litigation, including costs associated with prosecuting and defending claims and any adverse outcomes, and possible environmental liabilities. Readers should carefully review the Registrant's financial statements and the notes thereto, as well as the risk factors described in the documents the Registrant files from time to time with the Securities and Exchange Commission.

The Partnership's investment properties consist of two apartment complexes. The following table sets forth the average occupancy of the properties for the six months ended June 30, 2006 and 2005:


	Average
	Occupancy
Property	2006	2005

Twin Lakes Apartments
Palm Harbor, Florida	97%	95%

Governor's Park Apartments
Little Rock, Arkansas	97%	97%

The Partnership’s financial results depend upon a number of factors including the ability to attract and maintain tenants at the investment properties, interest rates on mortgage loans, costs incurred to operate the investment properties, general economic conditions and weather. As part of the ongoing business plan of the Partnership, the Corporate General Partner monitors the rental market environment of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the 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, the Corporate General Partner may use rental concessions and rental rate reductions to offset softening market conditions, accordingly, there is no guarantee that the Corporate General Partner will be able to sustain such a plan. Further, a number of factors that are outside the control of the Partnership such as the local economic climate and weather can adversely or positively affect the Partnership’s financial results.

Results of Operations

The Partnership’s net income for the three and six months ended June 30, 2006 was approximately $13,000 and $27,000, respectively, compared to net income of approximately $73,000 and $133,000 for the three and six months ended June 30, 2005, respectively. The decrease in net income for the three and six months ended June 30, 2006 is due to an increase in total expenses partially offset by an increase in total revenues.

Total expenses increased for the three and six months ended June 30, 2006 due to increases in operating, depreciation, interest, and property tax expenses. General and administrative expense remained relatively constant for the comparable periods. Operating expense increased due to increases in property, insurance and maintenance expenses. Property expense increased due to increases in salaries and related payroll benefits and utility costs at both investment properties. Insurance expense increased due to an increase in the hazard insurance premium at Twin Lakes Apartments. Maintenance expense increased due to an increase in contract labor at Governor’s Park Apartments. Depreciation expense increased due to property improvements and replacements placed into service over the past twelve months. Interest expense increased primarily due to the second mortgage that was added to Twin Lakes Apartments during December 2005. Property tax expense increased due to an increase in the assessed value of Twin Lakes Apartments.

Included in general and administrative expense for the six months ended June 30, 2006 and 2005 are management reimbursements to the Corporate General Partner as allowed under the Partnership Agreement. Also included in general and administrative expenses are cost associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement.

Total revenues for the three and six months ended June 30, 2006 increased due to an increase in rental and other income. Rental income increased for both periods due to an increase in occupancy at Twin Lakes Apartments, an increase in the average rental rate at both investment properties and a decrease in bad debt expense at Governor’s Park Apartments. Other income increased as a result of an increase in utility reimbursements and pet fees at Twin Lakes Apartments and an increase in interest income.

Liquidity and Capital Resources

At June 30, 2006, the Partnership had cash and cash equivalents of approximately $345,000 compared to approximately $111,000 at June 30, 2005. For the six months ended June 30, 2006, cash and cash equivalents decreased by approximately $150,000 due to approximately $392,000 and $180,000 of cash used in financing activities and investing activities, respectively, partially offset by approximately $422,000 of cash provided by operating activities. Cash used in financing activities consisted of payments on the mortgages encumbering the investment properties, distributions to the limited partners and additional loan costs paid related to the second mortgage obtained on Twin Lakes Apartments in December 2005. Cash used in investing activities consisted of property improvements and replacements. 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 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. The Corporate General Partner monitors developments in the area of legal and regulatory compliance. For example the Sarbanes-Oxley Act of 2002 mandates or suggests additional compliance measures with regard to governance, disclosure, audit and other areas. In light of these changes, the Partnership expects that it will incur higher expenses related to compliance. Capital improvements planned for the Partnership’s properties are detailed below.

Governor's Park Apartments

During the six months ended June 30, 2006, the Partnership completed approximately $86,000 of capital improvements at Governor’s Park Apartments consisting primarily of security equipment, fencing and appliance and floor covering replacements. These improvements were funded from operating cash flow. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2006. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.

Twin Lakes Apartments

During the six months ended June 30, 2006, the Partnership completed approximately $94,000 of capital expenditures at Twin Lakes Apartments, consisting primarily of clubhouse renovations, water heater and air conditioning upgrades and appliance and floor covering replacements. These improvements were funded from operating cash flow. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2006. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.

Additional capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that capital improvements are completed, the Partnership’s distributable cash flow, if any, may be adversely affected at least in the short term.

The Partnership's assets are thought to be sufficient for any near term needs (exclusive of capital improvements) of the Partnership. At June 30, 2006, the mortgage indebtedness encumbering Governor’s Park Apartments of approximately $3,233,000 requires monthly payments of principal and interest until September 1, 2020 at which time the loan is scheduled to be fully amortized. At June 30, 2006 the first and second mortgage indebtedness encumbering Twin Lakes Apartments of approximately $6,293,000 and $3,578,000, respectively, both require monthly payments of principal and interest until December 1, 2015 at which time balloon payments of approximately $5,672,000 and $3,017,000 are due. The Partnership has the option of extending the maturity date on both the first and second mortgage for one additional year, to December 1, 2016.

The Partnership distributed the following amounts during the six months ended June 30, 2006 and 2005 (in thousands, except per unit data):


	Six Months		Six Months
	Ended	Per	Ended	Per
	June 30,	Depositary Unit	June 30,	Depositary Unit
	2006	Certificate	2005	Certificate

Financing (1)	$ 280	$ .23	$ --	$ --

(1)

Distribution consists of financing proceeds from the December 2005 financing of a second mortgage at Twin Lakes Apartments.

Future cash distributions will depend on the levels of net cash generated from operations, the timing of the debt maturities, refinancings, and/or property sales.

The Partnership's cash available for distribution is reviewed on a monthly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations after capital expenditures to permit additional distributions to its partners during 2006 or subsequent periods.

Other

In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 829,427 depository unit certificates (the "Units") in the Partnership representing 67.88% of the outstanding Units at June 30, 2006. 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 acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Corporate General Partner. As a result of its ownership of 67.88% of the outstanding Units, AIMCO and its affiliates are in a position to control all voting decisions with respect to the Partnership. Although the Corporate General Partner owes fiduciary duties to the limited partners of the Partnership, the Corporate General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Corporate General Partner, as corporate general partner, to the Partnership and its limited partners may come into conflict with the duties of the Corporate General Partner to AIMCO as its sole stockholder.

Critical Accounting Policies and Estimates

The financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Partnership to make estimates and assumptions. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity.

Impairment of Long-Lived Assets

Investment properties are recorded at cost, less accumulated depreciation, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of a property may not be recoverable, the Partnership will make an assessment of its recoverability by comparing the carrying amount to the Partnership’s estimate of the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the aggregate undiscounted future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property.

Real property investment is subject to varying degrees of risk. Several factors may adversely affect the economic performance and value of the Partnership’s investment properties. These factors include, but are not limited to, general economic climate; competition from other apartment communities and other housing options; local conditions, such as loss of jobs or an increase in the supply of apartments that might adversely affect apartment occupancy or rental rates; changes in governmental regulations and the related cost of compliance; increases in operating costs (including real estate taxes) due to inflation and other factors, which may not be offset by increased rents; and changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing. Any adverse changes in these factors could cause impairment of the Partnership’s assets.

Revenue Recognition

The Partnership generally leases apartment units for twelve-month terms or less. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Rental income attributable to leases, net of any concessions, is recognized on a straight-line basis over the term of the lease. The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants.

ITEM 3. CONTROLS AND PROCEDURES

(a)

Disclosure Controls and Procedures. The Partnership’s management, with the participation of the principal executive officer and principal financial officer of the Corporate General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the Corporate General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective.

(b)

Internal Control Over Financial Reporting. There have not been any changes in the Partnership’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

AIMCO Properties L.P. and NHP Management Company, both affiliates of the Corporate General Partner, are defendants in a lawsuit alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for all hours worked in excess of forty per week. The complaint, filed in the United States District Court for the District of Columbia, attempts to bring a collective action under the FLSA and seeks to certify state subclasses in California, Maryland, and the District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties L.P. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call." Additionally, the complaint alleges AIMCO Properties L.P. and NHP Management Company failed to comply with the FLSA in compensating maintenance workers for time that they worked in excess of 40 hours in a week. In June 2005 the court conditionally certified the collective action on both the on-call and overtime issues. Approximately 1,049 individuals opted in to the class. The defendants are moving to decertify the collective action on both issues in briefs to be filed by August 15, 2006. Because the court denied plaintiffs’ motion to certify state subclasses, on September 26, 2005, the plaintiffs filed a class action with the same allegations in the Superior Court of California (Contra Costa County), and on November 5, 2005 in Montgomery County Maryland Circuit Court. The California case has been stayed, and the defendants have moved to stay the Maryland case as well. Although the outcome of any litigation is uncertain, AIMCO Properties, L.P. does not believe that the ultimate outcome will have a material adverse effect on its consolidated financial condition or results of operations. Similarly, the Corporate General Partner does not believe that the ultimate outcome will have a material adverse effect on the Partnership’s financial condition or results of operations.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS

See Exhibit Index.

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

Date: August 10, 2006	By: /s/Martha L. Long
	Martha L. Long
	Senior Vice President

Date: August 10, 2006	By: /s/Stephen B. Waters
	Stephen B. Waters
	Vice President

U.S. REALTY PARTNERS LIMITED PARTNERSHIP

EXHIBIT INDEX

Exhibit

See Exhibit 4(a)

4 (a)

Amended and Restated Certificate and Agreement of Limited Partnership (included as Exhibit A to the Prospectus of Registrant dated August 19, 1986 contained in Amendment No. 4 Registration Statement, No. 33-2996, of Registrant filed August 19, 1986 (the "Prospectus") and is incorporated herein by reference).

(b)

Subscription Agreement and Signature Page (included as Exhibit B to the Prospectus and is incorporated herein by reference).

(c)

Instruments governing the Bonds (filed as Exhibit 10C to Amendment No. 4 to Registration Statement, No. 33-2996, of Registrant filed August 19, 1986 and incorporated herein by reference).

(d)

First Amendment to U.S. Realty Partners Limited Partnership Amended and Restated Agreement of Limited Partnership (dated August 15, 1986) dated October 14, 1993. [Filed as Exhibit 4(c) to Form 10QSB for the quarter ended September 30, 1993 and incorporated herein by reference.]

(e)

Amendment to the Amended and Restated Limited Partnership Agreement dated April 12, 2005.

(i)

Contracts related to acquisition of properties:

(l)

Depositary Agreement dated as of October 15, 1993, among U.S. Realty Partners Limited Partnership, First Union National Bank of South Carolina and Continental Casualty Company. *

(m)

Financial Statement - Form UCC-1, State of South Carolina, Office of Secretary of State Jim Miles by US Realty Partners Limited Partnership and Continental Casualty Company. *

(n)

Incumbency Certificate by U.S. Realty I Corporation and U.S. Realty Partners Limited Partnership. *

* Filed as Exhibits 10iii (l) through (n) to Form 10QSB for the quarter ended September 30, 1993 and incorporated herein by reference.

10.23

Multifamily Note dated August 28, 2000 between US Realty Partners Limited Partnership, a South Carolina Limited Partnership, and GMAC Commercial Mortgage Corporation for refinance of Governor’s Park Apartments (Filed on Form 8-K on November 27, 2000 and incorporated herein by reference)

10.25

Multifamily Mortgage, Assignment of Rents and Security Agreement dated December 1, 2005 between U.S. Realty Partners, L.P., a Delaware limited partnership and GMAC Commercial Mortgage Bank. Incorporated by reference to Form 8-K dated December 1, 2005.

10.26

Multifamily Note dated December 1, 2005 between U.S. Realty Partners, L.P., a Delaware limited partnership and GMAC Commercial Mortgage Bank. Incorporated by reference to Form 8-K dated December 1, 2005.

10.27

Replacement Reserve Agreement dated December 1, 2005 between U.S. Realty Partners, L.P., a Delaware limited partnership and GMAC Commercial Mortgage Bank. Incorporated by reference to Form 8-K dated December 1, 2005.

10.28

Guaranty dated December 1, 2005 between AIMCO Properties, L.P., a Delaware limited partnership and GMAC Commercial Mortgage Bank. Incorporated by reference to Form 8-K dated December 1, 2005.

10.29

Amended and Restated Multifamily Mortgage, Assignment of Rents, and Security Agreement dated December 1, 2005 between U.S. Realty Partners, L.P., a Delaware limited partnership and Federal Home Loan Mortgage Corporation. Incorporated by reference to Form 8-K dated December 1, 2005.

10.30

Amended and Restated Multifamily Note dated December 1, 2005 between U.S. Realty Partners, L.P., a Delaware limited partnership and Federal Home Loan Mortgage Corporation. Incorporated by reference to Form 8-K dated December 1, 2005.

10.31

Amended and Restated Guaranty dated December 1, 2005 between AIMCO Properties, L.P., a Delaware limited partnership and Federal Home Loan Mortgage Corporation. Incorporated by reference to Form 8-K dated December 1, 2005.

31.1

Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of the equivalent of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Prospectus of Registrant dated August 19, 1986 (included in Registration Statement, No. 33-2996, of Registrant and incorporated herein by reference).

Exhibit 31.1

CERTIFICATION

I, Martha L. Long, certify that:

I have reviewed this quarterly report on Form 10-QSB of U.S. Realty Partners Limited Partnership;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)

Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date: August 10, 2006

/s/Martha L. Long

Martha L. Long

Senior Vice President of U.S. Realty I Corporation, equivalent of the chief executive officer of the Partnership

Exhibit 31.2

CERTIFICATION

I, Stephen B. Waters, certify that:

I have reviewed this quarterly report on Form 10-QSB of U.S. Realty Partners Limited Partnership;

(a)

(b)

(c)

The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date: August 10, 2006

/s/Stephen B. Waters

Stephen B. Waters

Vice President of U.S. Realty I Corporation, equivalent of the chief financial officer of the Partnership

Exhibit 32.1

Certification of CEO and CFO

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-QSB of U.S. Realty Partners Limited Partnership (the "Partnership"), for the quarterly period ended June 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Martha L. Long, as the equivalent of the chief executive officer of the Partnership, and Stephen B. Waters, as the equivalent of the chief financial officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.


	/s/Martha L. Long
	Name: Martha L. Long
	Date: August 10, 2006

	/s/Stephen B. Waters
	Name: Stephen B. Waters
	Date: August 10, 2006

This certification is furnished with this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.