-----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, QDGmPzNjId7Km6rwzUMWPkx01qFVZ2Uh8Oqj8pfXIkGQolsKXEDp0tckS2I5be0d B5hGJXptIrdszr9uD9+LuA== 0000317900-98-000006.txt : 19980814 0000317900-98-000006.hdr.sgml : 19980814 ACCESSION NUMBER: 0000317900-98-000006 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED INVESTORS INCOME PROPERTIES CENTRAL INDEX KEY: 0000830056 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 431483942 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-17646 FILM NUMBER: 98685713 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLZ STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: P.O. BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10QSB 1 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 June 30, 1998 [ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from________to________ Commission file number 0-17646 UNITED INVESTORS INCOME PROPERTIES (Exact name of small business issuer as specified in its charter) Missouri 43-1483942 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) One Insignia Financial Plaza, 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) UNITED INVESTORS INCOME PROPERTIES BALANCE SHEET (Unaudited) June 30, 1998 (in thousands, except unit data) Assets Cash and cash equivalents $ 739 Receivables and deposits 214 Other assets 62 Investment properties: Land $ 1,862 Buildings and related personal property 10,578 12,440 Less accumulated depreciation (3,196) 9,244 Investment in joint venture 627 $10,886 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 13 Tenant security deposit liabilities 54 Accrued property taxes 27 Other liabilities 38 Partners' Capital (Deficit) General partner's $ (25) Limited partners' (61,063 units 10,779 10,754 issued and outstanding) $10,886 See Accompanying Notes to Financial Statements b) UNITED INVESTORS INCOME PROPERTIES STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 Revenues Rental income $ 455 $ 432 $ 876 $ 840 Other income 32 29 60 51 Total revenues 487 461 936 891 Expenses: Operating 264 172 422 346 General and administrati 23 22 45 41 Depreciation 99 94 198 188 Property taxes 37 42 74 83 Total expenses 423 330 739 658 Equity in income of joint venture 6 9 8 13 Net income $ 70 $ 140 $ 205 $ 246 Net income allocated to general partner (1%) $ 1 $ 1 $ 2 $ 2 Net income allocated to limited partners (99%) 69 139 203 244 $ 70 $ 140 $ 205 $ 246 Net income per partnership unit $1.13 $2.28 $3.32 $4.00 Distributions per limited partnership unit $2.49 $2.49 $4.99 $4.99 See Accompanying Notes to Financial Statements c) UNITED INVESTORS INCOME PROPERTIES STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) (in thousands, except unit data) Limited Partnership General Limited Units Partner's Partners' Total Original capital contributions 61,063 $ -- $15,266 $15,266 Partners' (deficit) capital at December 31, 1997 61,063 $ (24) $10,881 $10,857 Partners' distributions -- (3) (305) (308) Net income for the six months ended June 30, 1998 -- 2 203 205 Partners' (deficit) capital at June 30, 1998 61,063 $ (25) $10,779 $10,754 See Accompanying Notes to Financial Statements d) UNITED INVESTORS INCOME PROPERTIES STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Six Months Ended June 30, 1998 1997 Cash flows from operating activities: Net income $ 205 $ 246 Adjustments to reconcile net income to net cash provided by operating activities: Equity in net income of joint venture (8) (13) Depreciation 198 188 Amortization of lease commissions 3 3 Change in accounts: Receivables and deposits (58) (52) Other assets 30 15 Accounts payable 1 (9) Tenant security deposit liabilities 3 7 Accrued property taxes 27 29 Other liabilities (8) 3 Net cash provided by operating activities 393 417 Cash flows from investing activities: Property improvements and replacements (74) (65) Distributions from joint venture -- 58 Net cash used in investing activities (74) (7) Cash flows from financing activities: Partners' distributions (308) (308) Net cash used in financing activities (308) (308) Net increase in cash and cash equivalents 11 102 Cash and cash equivalents at beginning of period 728 633 Cash and cash equivalents at end of period $ 739 $ 735 See Accompanying Notes to Financial Statements e) UNITED INVESTORS INCOME PROPERTIES NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited financial statements of United Investors Income Properties (the "Partnership") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b)of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of United Investors Real Estate, Inc. (the "General Partner"), a Delaware corporation, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 1998, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1998. 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, 1997. Certain reclassifications have been made to the 1997 information to conform to the 1998 presentation. NOTE B - INVESTMENT IN JOINT VENTURE The Partnership owns a 35% interest in Corinth Square ("Corinth"), a joint venture with United Investors Income Properties II, an affiliated partnership in which the General Partner is also the sole general partner. The joint venture owns a 24,000 square foot medical office building located in Prairie Village, Kansas. The Partnership reflects its interest in its joint venture property utilizing the equity method, whereby the original investment is increased by advances to the joint venture and by the Partnership's share of the earnings of the joint venture. The investment is decreased by distributions from the joint venture and by the Partnership's share of losses of the joint venture (see "Note D"). NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES The Partnership has no employees and is dependent on the General Partner and its affiliates for the management and administration of all partnership activities. Prior to February 25, 1998, the General Partner was a wholly-owned subsidiary of MAE GP Corporation ("MAE GP"), an affiliate of Insignia Financial Group ("Insignia"). Effective February 25, 1998, MAE GP was merged into Insignia Properties Trust ("IPT"), which is an affiliate of Insignia. Thus the General Partner is now a wholly-owned subsidiary of IPT. 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 six months ended June 30, 1998 and 1997 (in thousands): 1998 1997 Property management fees (included in operating expenses) $ 44 $ 42 Reimbursement for services of affiliates (included in general and administrative expenses) 18 16 For the period from January 1, 1997, to August 31, 1997, the Partnership insured its properties under a master policy through an agency affiliated with the General Partner with an insurer unaffiliated with the General Partner. An affiliate of the General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the master policy. The agent assumed the financial obligations to the affiliate of the General Partner which received payments on these obligations from the agent. The amount of the Partnership's insurance premiums that accrued to the benefit of the affiliate of the General Partner by virtue of the agent's obligations was not significant. On March 17, 1998, Insignia entered into an agreement to merge its national residential property management operations, and its controlling interest in IPT, with Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The closing, which is anticipated to happen in September or October of 1998, is subject to customary conditions, including government approvals and the approval of Insignia's shareholders. If the closing occurs, AIMCO will then control the General Partner of the Partnership. NOTE D - INVESTMENT IN CORINTH SQUARE JOINT VENTURE The Partnership owns a 35% interest in Corinth, a joint venture with United Investors Income Properties II, an affiliated partnership, in which the General Partner is also the sole general partner. Corinth is accounted for using the equity method of accounting (see "Note B"). The condensed balance sheet of Corinth at June 30, 1998, is summarized as follows (in thousands): Assets Commercial property, net $1,736 Other assets 117 Total $1,853 Liabilities and Partners' Capital Liabilities $ 62 Partners' capital 1,791 Total $1,853 Condensed statements of operations of Corinth for the six months ended June 30, 1998 and 1997, are as follows (in thousands): 1998 1997 Revenue $ 188 $ 166 Costs and expenses 166 129 Net income $ 22 $ 37 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Partnership's investment properties consist of three apartment complexes and a commercial office building. The following table sets forth the average occupancy of the properties for each of the six month periods ended June 30, 1998 and 1997: Average Occupancy Property 1998 1997 Bronson Place Apartments Mountlake Terrace, Washington 95% 95% Meadow Wood Apartments Medford, Oregon 88% 91% Defoors Crossing Apartments Atlanta, Georgia 92% 92% Peachtree Corners Medical Building Atlanta, Georgia 74% 74% The General Partner attributes the decreased occupancy at Meadow Wood Apartments to softening market conditions. Beginning in the fourth quarter of 1997, rents were reduced on one bedroom units, which suffered the highest vacancy. As a result, physical occupancy had increased to 95% by the end of July. Management continues to monitor and adjust rental rates at all properties to maximize total revenue. The Partnership realized net income of $205,000 for the six month period ended June 30, 1998, compared to net income of $246,000 for the six month period ended June 30, 1997. The Partnership's net income for the three months ended June 30, 1998 was approximately $70,000 compared to net income of approximately $140,000 for the three months ended June 30, 1997. The decrease in net income is primarily attributable to increased operating expense partially offset by increased rental income. The increase in operating expense was primarily due to increased major repairs and maintenance expenses. Included in operating expense are approximately $76,000 and $5,000 of major repairs and maintenance for the six months ending June 30, 1998 and 1997, respectively. The major repairs and maintenance items for 1998 are comprised primarily of deck repairs, landscaping, and repairs at Peachtree Corners caused by storm damage during the second quarter of 1998. The General Partner expects the Partnership to be reimbursed by the insurance company during the third quarter of 1998 for costs paid by the Partnership during the three months ended June 30, 1998, which will reduce the casualty's negative impact on income. The 1997 major repair and maintenance items are comprised primarily of swimming pool repairs. The increase in operating expense was partially offset by rental income, which increased due to rental rate increases, primarily at Bronson Place, which were partially offset by reduced occupancy at Meadow Wood. 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 expenses. 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. 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. At June 30, 1998, the Partnership had cash and cash equivalents of approximately $739,000 compared to approximately $735,000 at June 30, 1997. The net increase in cash and cash equivalents for the six month period ended June 30, 1998 was $11,000 compared to $102,000 for the six month period ended June 30, 1997. Net cash provided by operating activities decreased due to the increased operating expenses partially offset by increased rental income for the six month period ended June 30, 1998, as discussed above. Net cash used in investing activities increased primarily due to a lack of distributions from the joint venture during 1998. Net cash used in financing activities remained constant. 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. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. Distributions to partners of $308,000 were made during the six month periods ended June 30, 1998 and 1997. Future cash distributions will depend on the levels of net cash generated from operations, property sales and the availability of cash reserves. The General Partner anticipates that the Partnership will continue to make cash distributions as property operations permit throughout 1998. Year 2000 The Partnership is dependent upon the General Partner and Insignia for management and administrative services. Insignia has completed an assessment and will have to modify or replace portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and thereafter (the "Year 2000 Issue"). The project is estimated to be completed not later than December 31, 1998, which is prior to any anticipated impact on its operating systems. The General Partner believes that with modifications to existing software and conversions to new software, the Year 2000 Issue will not pose significant operational problems for its computer systems. However, if such modifications and conversions are not made, or are not completed timely, the Year 2000 Issue could have a material impact on the operations of the Partnership. Other Certain items discussed in this quarterly report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act") and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Partnership to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements. Such forward-looking statements speak only as of the date of this quarterly report. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates of revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27 - Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K: None filed during the quarter ended June 30, 1998. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. UNITED INVESTORS INCOME PROPERTIES By: United Investors Real Estate, Inc. Its General Partner By: /s/ Carroll D. Vinson Carroll D. Vinson President and Director By: /s/ Robert D. Long, Jr. Robert D. Long, Jr. Vice President and Chief Accounting Officer Date: August 13, 1998 EX-27 2
5 This schedule contains summary financial information extracted from United Investors Income Properties 1998 Second Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000830056 UNITED INVESTORS INCOME PROPERTIES 1,000 6-MOS DEC-31-1998 JUN-30-1998 739 0 0 0 0 0 12,440 3,196 10,886 0 0 0 0 0 10,754 10,886 0 936 0 0 739 0 0 0 0 0 0 0 0 205 3.32 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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