-----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, ICsT9YPOlB7FJ9CJvQm8c4KbXa7DjRZvfxS1+pFP3u++NFyECbO6Yjy8lM63DU1o FPD/vwIS3Kasp3fmHQUV7g== 0000763049-98-000035.txt : 19981113 0000763049-98-000035.hdr.sgml : 19981113 ACCESSION NUMBER: 0000763049-98-000035 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED INVESTORS INCOME PROPERTIES CENTRAL INDEX KEY: 0000830056 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 431542903 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-17646 FILM NUMBER: 98745587 BUSINESS ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 BUSINESS PHONE: 8642391000 MAIL ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET STREET 2: 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 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 September 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.) 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) UNITED INVESTORS INCOME PROPERTIES BALANCE SHEET (Unaudited) September 30, 1998 (in thousands, except unit data) Assets Cash and cash equivalents $ 883 Receivables and deposits 193 Other assets 71 Investment properties: Land $ 1,862 Buildings and related personal property 10,622 12,484 Less accumulated depreciation (3,298) 9,186 Investment in joint venture 634 $10,967 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 15 Tenant security deposit liabilities 58 Accrued property taxes 28 Other liabilities 39 Partners' Capital (Deficit) General partner's $ (25) Limited partners' (61,063 units 10,852 10,827 issued and outstanding) $10,967 See Accompanying Notes to Financial Statements b) UNITED INVESTORS INCOME PROPERTIES STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended Nine Months Ended September 30, September 30, 1998 1997 1998 1997 Revenues Rental income $ 445 $ 444 $1,321 $1,284 Other income 29 25 89 76 Total revenues 474 469 1,410 1,360 Expenses: Operating 94 190 516 536 General and administrative 20 23 65 64 Depreciation 102 98 300 286 Property taxes 38 35 112 118 Total expenses 254 346 993 1,004 Equity in income of joint venture 7 4 15 17 Net income $ 227 $ 127 $ 432 $ 373 Net income allocated to general partner (1%) $ 2 $ 1 $ 4 $ 4 Net income allocated to limited partners (99%) 225 126 428 369 $ 227 $ 127 $ 432 $ 373 Net income per partnership unit $ 3.68 $ 2.06 $ 7.01 $ 6.04 Distributions per limited partnership unit $ 2.50 $ 2.50 $ 7.50 $ 7.50 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 -- (5) (457) (462) Net income for the nine months ended September 30, 1998 -- 4 428 432 Partners' (deficit) capital at September 30, 1998 61,063 $ (25) $10,852 $10,827 See Accompanying Notes to Financial Statements d) UNITED INVESTORS INCOME PROPERTIES STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 1998 1997 Cash flows from operating activities: Net income $ 432 $ 373 Adjustments to reconcile net income to net cash provided by operating activities: Equity in net income of joint venture (15) (17) Depreciation 300 286 Amortization of lease commissions 5 5 Change in accounts: Receivables and deposits (37) (87) Other assets 19 15 Accounts payable 3 3 Tenant security deposit liabilities 7 4 Accrued property taxes 28 32 Other liabilities (7) 13 Net cash provided by operating activities 735 627 Cash flows from investing activities: Property improvements and replacements (118) (139) Distributions from joint venture -- 65 Net cash used in investing activities (118) (74) Cash flows from financing activities: Partners' distributions (462) (462) Net cash used in financing activities (462) (462) Net increase in cash and cash equivalents 155 91 Cash and cash equivalents at beginning of period 728 633 Cash and cash equivalents at end of period $ 883 $ 724 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, a wholly-owned subsidiary of Insignia Properties Trust ("IPT") (see "Note E") all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 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 (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. Affiliates of the General Partner provide property management and asset management services to the Partnership. 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 nine months ended September 30, 1998 and 1997: 1998 1997 (in thousands) Property management fees (included in operating expenses) $ 67 $ 64 Reimbursement for services of affiliates (included in general and administrative and operating expenses) 28 30 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. 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 September 30, 1998, is summarized as follows (in thousands): Assets Commercial property, net $1,722 Other assets 142 Total $1,864 Liabilities and Partners' Capital Liabilities $ 53 Partners' capital 1,811 Total $1,864 Condensed statements of operations of Corinth for the nine months ended September 30, 1998 and 1997, are as follows (in thousands): 1998 1997 Revenue $ 283 $ 256 Costs and expenses 241 207 Net income $ 42 $ 49 NOTE E - TRANSFER OF CONTROL; SUBSEQUENT EVENT On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control of the General Partner. In addition, AIMCO also acquired approximately 51% of the outstanding common shares of beneficial interest of Insignia Properties Trust ("IPT"), the sole shareholder of the General Partner of the Partnership. Also, effective October 1, 1998, IPT and AIMCO entered into an Agreement and plan of Merger pursuant to which IPT is to be merged with and into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger requires the approval of the holders of a majority of the outstanding IPT Shares. AIMCO has agreed to vote all of the IPT Shares owned by it in favor of the IPT Merger and has granted an irrevocable limited proxy to unaffiliated representatives of IPT to vote the IPT Shares acquired by AIMCO and its subsidiaries in favor of the IPT Merger. As a result of AIMCO's ownership and its agreement, the vote of no other holder of IPT is required to approve the merger. The General Partner does not believe that this transaction will have a material effect on the affairs and operations of the Partnership. 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 nine month periods ended September 30, 1998 and 1997: Average Occupancy Property 1998 1997 Bronson Place Apartments Mountlake Terrace, Washington 95% 96% Meadow Wood Apartments Medford, Oregon 90% 92% Defoors Crossing Apartments Atlanta, Georgia 92% 94% Peachtree Corners Medical Building Atlanta, Georgia 74% 74% The Partnership realized net income of $432,000 for the nine month period ended September 30, 1998, compared to net income of $373,000 for the nine month period ended September 30, 1997. The Partnership's net income for the three months ended September 30, 1998 was approximately $227,000 compared to net income of approximately $127,000 for the three months ended September 30, 1997. The increase in net income for the comparable nine month periods is primarily attributable to increased rental income and decreased operating expenses. Rental income increased primarily due to rental rate increases at Bronson Place, which were partially offset by reduced rental revenue at DeFoors Crossing and Peachtree Corners. The decrease in operating expenses is primarily due to approximately $119,000 of insurance proceeds received as a result of storm damage during the second quarter at Peachtree Corners. This was partially offset by approximately $92,000 of related insurance damage expenses incurred during the first nine months of 1998. All storm damages had been repaired and all insurance proceeds received as of September 30, 1998. Included in operating expenses are approximately $28,000 and $10,000 of major repairs and maintenance for the nine months ending September 30, 1998 and 1997, respectively. The major repairs and maintenance items for 1998 are comprised primarily of deck repairs and landscaping. The 1997 major repairs and maintenance items are comprised primarily of exterior building repairs and swimming pool repairs. 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 September 30, 1998, the Partnership had cash and cash equivalents of approximately $883,000 compared to approximately $724,000 at September 30, 1997. The net increase in cash and cash equivalents for the nine month period ended September 30, 1998 was $155,000 compared to $91,000 for the nine month period ended September 30, 1997. Net cash provided by operating activities increased primarily due to the increased net income for the nine month period ended September 30, 1998, as discussed above. In addition, cash used for receivables and deposits decreased for the nine months ended September 30, 1998. 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 and to comply with federal, state and local legal and regulatory requirements. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The General Partner is currently assessing the need for capital improvements at each of the Partnership's properties. To the extent that additional capital improvements are required, the Partnership's distributable cash flow, if any, may be adversely affected, at least in the short term. Distributions to partners of $462,000 were made during the nine month periods ended September 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 Partnership's future distribution policy will be reviewed on a quarterly basis. There can be no assurance that the Partnership will make further cash distributions in 1998 or any future years. Transfer of Control; Subsequent Event On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control of the General Partner. In addition, AIMCO also acquired approximately 51% of the outstanding common shares of beneficial interest of Insignia Properties Trust ("IPT"), the sole shareholder of the General Partner. Also, effective October 1, 1998, IPT and AIMCO entered into an Agreement and plan of Merger pursuant to which IPT is to be merged with and into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger requires the approval of the holders of a majority of the outstanding IPT Shares. AIMCO has agreed to vote all of the IPT Shares owned by it in favor of the IPT Merger and has granted an irrevocable limited proxy to unaffiliated representatives of IPT to vote the IPT Shares acquired by AIMCO and its subsidiaries in favor of the IPT Merger. As a result of AIMCO's ownership and its agreement, the vote of no other holder of IPT is required to approve the merger. The General Partner does not believe that this transaction will have a material effect on the affairs and operations of the Partnership. Year 2000 General Description of the Year 2000 Issue and the Nature and Effects of the Year 2000 on Information Technology (IT) and Non-IT Systems The Year 2000 Issue is the result of computer programs being written using two digits rather than four to define the applicable year. The Partnership is dependent upon the General Partner and its affiliates for management and administrative services ("Managing Agent"). Any computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. The Managing Agent has determined that it will be required to modify or replace significant portions of its software and certain hardware so that those systems will properly utilize dates beyond December 31, 1999. The Managing Agent presently believes that with modifications or replacements of existing software and certain hardware, the Year 2000 Issue can be mitigated. However, if such modifications and replacements are not made, or are not completed timely, the Year 2000 Issue could have a material impact on the operations of the Managing Agent and the Partnership. Status of Progress in Becoming Year 2000 Compliant The Managing Agent's plan to resolve the Year 2000 Issue involves the following four phases: assessment, remediation, testing and implementation. To date, the Managing Agent has fully completed its assessment of all information systems that could be significantly affected by the Year 2000, and has begun the remediation, testing and implementation phase on both hardware and software systems. Assessments are continuing in regards to embedded systems in operating equipment. The Managing Agent anticipates having all phases complete by June 1, 1999. In addition to the areas the Partnership is relying on the Managing Agent to verify compliance with, the Partnership has certain operating equipment, primarily at the property sites, which needed to be evaluated for Year 2000 compliance. The focus of the General Partner was to the security systems, elevators, heating-ventilation-air-conditioning systems, telephone systems and switches, and sprinkler systems. The General Partner is currently engaged in the identification of all non-compliant operational systems, and is in the process of estimating the costs associated with any potential modifications or replacements needed to such systems in order for them to be Year 2000 compliant. It is not expected that such costs would have a material adverse effect upon the operations of the Partnership. Risk Associated with the Year 2000 The General Partner believes that the Managing Agent has an effective program in place to resolve the Year 2000 issue in a timely manner and has appropriate contingency plans in place for critical applications that could affect the Partnership's operations. To date, the General Partner is not aware of any external agent with a Year 2000 issue that would materially impact the Partnership's results of operations, liquidity or capital resources. However, the General Partner has no means of ensuring that external agents will be Year 2000 compliant. The General Partner does not believe that the inability of external agents to complete their Year 2000 resolution process in a timely manner will have a material impact on the financial position or results of operations of the Partnership. However, the effect of non-compliance by external agents is not readily determinable. 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: A Form 8-K dated September 23, 1998 (amended October 27, 1998) was filed reporting the change in the Partnership's accounatants. 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/Patrick Foye Patrick Foye Executive Vice President By: /s/Timothy R. Garrick Timothy R. Garrick Vice President - Accounting (Duly Authorized Officer) Date: November 12, 1998 EX-27 2
5 This schedule contains summary financial information extracted from United Investors Income Properties 1998 Third Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000830056 UNITED INVESTORS INCOME PROPERTIES 1,000 9-MOS DEC-31-1998 SEP-30-1998 883 0 0 0 0 0 12,484 3,284 10,967 0 0 0 0 0 10,827 10,967 0 1,410 0 0 993 0 0 0 0 0 0 0 0 432 7.01 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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