-----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, JcAJMTK728lRExh0ShOpEppBp9qvrz3J/Z7/Xe4D5VrvCjkdCPE9UiKSOUHPJ8ls zrralw+y4mQDoWEYuucsfQ== 0000830056-98-000004.txt : 19980327 0000830056-98-000004.hdr.sgml : 19980327 ACCESSION NUMBER: 0000830056-98-000004 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980326 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: 10KSB SEC ACT: SEC FILE NUMBER: 000-17646 FILM NUMBER: 98574524 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 10KSB 1 FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) FORM 10-KSB (Mark One) [X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the fiscal year ended December 31, 1997 [ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the transition period from.........to......... Commission file number 0-17646 UNITED INVESTORS INCOME PROPERTIES (Name of small business issuer in its charter) Missouri 43-1483942 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Insignia Financial Plaza, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (Zip code) Issuer's telephone number (864) 239-1000 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Units of Limited Partnership Interest (Title of class) 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 Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] State issuer's revenues for its most recent fiscal year: $1,822,000 State the aggregate market value of the voting partnership interests held by non-affiliates computed by reference to the price at which the partnership interests were sold, or the average bid and asked prices of such partnership interests, as of a specified date within the past 60 days: Market value information for the registrant's partnership interests is not available. Should a trading market develop for these interests, it is the General Partner's belief that the aggregate market value of the voting partnership interests would not exceed $25,000,000. DOCUMENTS INCORPORATED BY REFERENCE 1. Portions of the Prospectus of Partnership dated May 4, 1988 (included in Registration Statement, No. 33-20350, of Registrant) are incorporated by reference into Parts I and III. PART I ITEM 1. DESCRIPTION OF BUSINESS United Investors Income Properties (the "Registrant" or "Partnership"), a Missouri Limited Partnership, was organized as a limited partnership under the laws of the State of Missouri pursuant to a Certificate of Limited Partnership filed on June 23, 1988, with the Missouri Secretary of State. The Partnership is governed by an Agreement of Limited Partnership dated July 27, 1988. United Investors Real Estate, Inc., a Delaware corporation, is the sole general partner (the "General Partner") of the Partnership. Effective December 31, 1992, 100% of the General Partner's common stock was purchased by MAE GP Corporation ("MAE GP"), which is wholly-owned by Metropolitan Asset Enhancement, L.P. ("MAE"), an affiliate of Insignia Financial Group, Inc. ("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. On March 17, 1998, Insignia entered into an agreement to merge its national residential property management operations, and its controlling interest in Insignia Properties Trust, with Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The closing, which is anticipated to happen in the third quarter 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. The Partnership is engaged in the business of acquiring and operating multifamily residential and commercial properties and other income producing real estate. The Partnership has acquired three multifamily residential properties, a medical office building, and an interest in a joint venture which owns a medical office building. These properties are further described in "Item 2. Description of Properties" below. Commencing on or about May 4, 1988, the Partnership began offering through Waddell & Reed, Inc., a former affiliate of the Partnership (the "Selling Agent"), up to a maximum of 80,000 units of limited partnership interest (the "Units") at $250 per Unit with a minimum required purchase of eight Units or $2,000 (four Units or $1,000 for an Individual Retirement Account). Limited partners (the "Limited Partners") are not required to make any additional capital contributions. The Units were registered under the Securities Act of 1933, as amended (the "Act"), under Registration Statement No. 33-20350, which Registration Statement was declared effective on May 4, 1988. The offering of Units terminated May 4, 1990. Upon termination of the offering, the Partnership had accepted subscriptions for 61,063 Units resulting in Gross Offering Proceeds of $15,265,750. The real estate business is highly competitive. The Partnership's real property investments are subject to competition from similar types of properties in the vicinities in which they are located. The Partnership is not a significant factor in its industry. In addition, various limited partnerships have been formed by related parties to engage in businesses which may be competitive with the Partnership. The Partnership has no employees. Management and administrative services are performed by affiliates of Insignia. The property manager is responsible for the day-to-day operations of each property. The General Partner has also selected affiliates of Insignia to provide real estate advisory and asset management services to the Partnership. As advisor, these affiliates provide all partnership accounting and administrative services, investment management, and supervisory services over property management and leasing. For a further discussion of the property and partnership management, see "Item 12. Certain Relationships and Related Transactions" which descriptions are herein incorporated by reference. There have been, and it is possible there may be other, Federal, state and local legislation and regulations enacted relating to the protection of the environment. The Partnership is unable to predict the extent, if any, to which such new legislation or regulations might occur and the degree to which such existing or new legislation or regulations might adversely affect the properties owned by the Partnership. The Partnership monitors its properties for evidence of pollutants, toxins and other dangerous substances, including the presence of asbestos. In certain cases environmental testing has been performed, which resulted in no material adverse conditions or liabilities. In no case has the Partnership received notice that it is a potentially responsible party with respect to an environmental clean up site. ITEM 2. DESCRIPTION OF PROPERTIES The following table sets forth the Partnership's investments in properties: Date of Property Purchase Type of Ownership(1) Use Bronson Place Apartments 11/01/88 Fee simple Apartment Mountlake Terrace, WA 70 units Defoors Crossing Apartments 05/01/89 Fee simple Apartment Atlanta, GA 60 units Meadow Wood Apartments 10/02/89 Fee simple Apartment Medford, OR 85 units Peachtree Corners Medical Bldg. 06/01/90 Fee simple Medical Office Atlanta, GA Building 13,000 sq. ft. Joint Venture Property Corinth Square Professional 10/01/90 Joint Venture; Medical Office Building, Partnership owns a Building- Prairie Village, Kansas 35% interest 23,000 sq. ft. (1) None of the Partnership's properties are encumbered by mortgage financing. SCHEDULE OF PROPERTIES: (IN THOUSANDS) Gross Carrying Accumulated Useful Federal Property Value Depreciation life Method Tax Basis Bronson Place $ 3,474 $ 973 5-40 yrs S/L $ 2,510 Defoors Crossing 3,358 800 5-40 yrs S/L 2,557 Meadow Wood 3,644 879 5-40 yrs S/L 2,769 Peachtree Corners 1,890 346 15-40 yrs S/L 1,702 Totals $12,366 $2,998 $ 9,538 See "Note A" of the Notes to Financial Statements in "Item 7. Financial Statements" for a description of the Partnership's depreciation policy. SCHEDULE OF RENTAL RATES AND OCCUPANCY: Average Annual Average Annual Rental Rates Occupancy 1997 1996 1997 1996 Bronson Place $8,189/per unit $7,742/per unit 95% 94% Defoors Crossing 8,730/per unit 8,483/per unit 95% 92% Meadow Wood 7,005/per unit 6,680/per unit 89%(a) 94% Peachtree Corners 13.71/per sq.ft. 13.46/per sq.ft. 74%(b) 60% (a) Meadow Wood - The decrease in occupancy is due to increased rental rates during 1997 and softening market conditions. The General Partner expects that marketing of the new clubhouse and adjusting rental rates will improve occupancy in 1998. (b) Peachtree Corners - The increase in occupancy is due to successful marketing efforts and property improvements made during 1996 to attract quality long-term tenants. As noted under "Item 1. Description of Business," the real estate industry is highly competitive. All of the properties of the Partnership are subject to competition from other residential apartment complexes and commercial buildings in the localities in which they operate. The General Partner believes that all of the properties are adequately insured. The multi-family residential properties' lease terms are for one year or less and no residential tenant leases 10% or more of the available rental space. The following is a schedule of the lease expirations at Peachtree Corners Medical Building for the years 1998-2007: Number of % of Gross Expirations Square Feet Annual Rent Annual Rent (in thousands) 1998-2001 0 -- $ -- -- 2002 1 1,967 28 21.1% 2003 1 3,738 54 40.5% 2004 0 -- -- -- 2005 1 3,521 52 38.4% 2006-2007 0 -- -- -- The following schedule reflects information on tenants leasing 10% or more of the leasable square footage for Peachtree Corners Medical Building. Square Footage Annual rent per Lease Nature of Business Leased Square Foot Expiration Medical Offices 1,967 $14.40 02/28/02 Medical Offices 3,738 14.50 03/30/03 Medical Offices 3,521 14.61 07/21/05 SCHEDULE OF REAL ESTATE TAXES (IN THOUSANDS) AND RATES: 1997 1997 Taxes Rate Bronson Place $ 39 1.27% Defoors Crossing 38 1.97% Meadow Wood 54 1.39% Peachtree Corners 13 1.38% ITEM 3. LEGAL PROCEEDINGS The Partnership is unaware of any pending or outstanding litigation that is not of a routine nature. The General Partner of the Partnership believes that all such pending or outstanding litigation will be resolved without a material adverse effect upon the business, financial condition, or operations of the Partnership. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fiscal year ended December 31, 1997, no matters were submitted to a vote of Unit holders through the solicitation of proxies or otherwise. PART II ITEM 5. MARKET FOR PARTNERSHIP EQUITY AND RELATED PARTNER MATTERS At December 31, 1997, the number of holders of record of Limited Partnership Units was 1,890. No public trading market has developed for the Units and it is not anticipated that such a market will develop in the future. The Partnership made distributions of cash generated from operations of approximately $617,000 during each of the years ended December 31, 1997 and 1996. A distribution of funds from operations of approximately $154,000 was declared and paid in the first quarter of 1998. Future cash distributions will depend on the levels of cash generated from operations, property sales, and the availability of cash reserves. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION RESULTS OF OPERATIONS The Partnership realized net income of approximately $472,000 for the year ended December 31, 1997, compared to net income of approximately $475,000 for the year ended December 31, 1996. During 1997 increased operating and depreciation expenses were offset by an increase in rental income. The increase in operating expenses resulted from increased marketing costs at Defoors Crossing, which were incurred in an effort to increase occupancy at the property, and increased maintenance expenses at Peachtree Corners during 1997, as a result of increased occupancy. Major repairs and maintenance were constant in 1997 and 1996. Included in operating expense for the year ended December 31, 1997 is approximately $29,000 of major repairs and maintenance comprised primarily of exterior painting at Peachtree Corners, swimming pool and exterior building repairs. Included in operating expense for the year ended December 31, 1996 is approximately $29,000 of major repairs and maintenance comprised primarily of exterior building and parking lot repairs. Depreciation expense increased primarily as a result of tenant improvements made at Peachtree Corners in 1996. The increase in operating and depreciation expenses was offset by increased rental revenue resulting from increased occupancy at Peachtree Corners, along with increased rental rates at all of the Partnership's properties. 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 expense. 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. 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 General Partner will be able to sustain such a plan. Liquidity and Capital Resources At December 31, 1997, the Partnership had cash and cash equivalents of approximately $728,000 compared to approximately $633,000 at December 31, 1996. The net increase in cash and cash equivalents for the year ended December 31, 1997 was $95,000 compared to a net decrease of $4,000 for the year ended December 31, 1996. Net cash provided by operating activities increased primarily due to an increase in other liabilities and a decrease in lease commissions paid. Net cash used in investing activities decreased in 1997 due to cash distributions from the joint venture being received during the year ended December 31, 1997, compared to no distributions in the year ended December 31, 1996. 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 property 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. The Partnership made distributions of cash generated from operations of approximately $617,000 during each of the years ended December 31, 1997 and 1996. A distribution of funds from operations of approximately $154,000 was declared and paid in the first quarter of 1998. Future cash distributions will depend on the levels of cash generated from operations, property sales, and the availability of cash reserves. 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 annual 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 annual 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. ITEM 7. FINANCIAL STATEMENTS UNITED INVESTORS INCOME PROPERTIES LIST OF FINANCIAL STATEMENTS Independent Auditors' Report Balance Sheet - December 31, 1997 Statements of Operations - Years ended December 31, 1997 and 1996 Statement of Changes in Partners' Capital (Deficit) - Years ended December 31, 1997 and 1996 Statements of Cash Flows - Years ended December 31, 1997 and 1996 Notes to Financial Statements INDEPENDENT AUDITORS' REPORT The Partners United Investors Income Properties (A Missouri Limited Partnership) We have audited the accompanying balance sheet of United Investors Income Properties (A Missouri Limited Partnership) ("the Partnership") as of December 31, 1997, and the related statements of operations, changes in partners' capital (deficit), and cash flows for each of the two years in the period ended December 31, 1997. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 1997 and the results of its operations and its cash flows for each of the two years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Greenville, South Carolina February 17, 1998 (except for Note H, as to which the date is March 17, 1998) UNITED INVESTORS INCOME PROPERTIES BALANCE SHEET December 31, 1997 (in thousands, except unit data) Assets Cash and cash equivalents $ 728 Receivables and deposits 156 Other assets 95 Investment properties (Notes A and G): Land $ 1,862 Buildings and related personal 10,504 property 12,366 Less accumulated depreciation (2,998) 9,368 Investment in Joint Venture (Note B) 619 $10,966 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 12 Tenant security deposits payable 51 Other liabilities 46 Partners' Capital (Deficit) (Note C) General partner's $ (24) Limited partners' (61,063 units issued and outstanding) 10,881 10,857 $10,966 See Accompanying Notes to Financial Statements UNITED INVESTORS INCOME PROPERTIES STATEMENTS OF OPERATIONS (in thousands, except unit data) Years Ended December 31, 1997 1996 Revenues: Rental income $ 1,725 $ 1,616 Other income 97 105 Total revenues 1,822 1,721 Expenses: Operating 754 672 General and administrative 79 76 Depreciation 385 360 Property taxes 152 153 Total expenses 1,370 1,261 Equity in net income of joint venture (Note B) 20 15 Net income (Note F) $ 472 $ 475 Net income allocated to general partner (1%) $ 5 $ 5 Net income allocated to limited partners (99%) 467 470 $ 472 $ 475 Net income per limited partnership unit $ 7.65 $ 7.70 Distributions per limited partner unit $ 10.01 $ 10.01 See Accompanying Notes to Financial Statements UNITED INVESTORS INCOME PROPERTIES STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (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, 1995 61,063 $ (22) $11,166 $11,144 Partners' distributions -- (6) (611) (617) Net income for the year ended December 31, 1996 -- 5 470 475 Partners' (deficit) capital at December 31, 1996 61,063 (23) 11,025 11,002 Partners' distributions -- (6) (611) (617) Net income for the year ended December 31, 1997 -- 5 467 472 Partners' (deficit) capital at December 31, 1997 61,063 $ (24) $10,881 $10,857 See Accompanying Notes to Financial Statements UNITED INVESTORS INCOME PROPERTIES STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 1997 1996 Cash flows from operating activities: Net income $ 472 $ 475 Adjustments to reconcile net income to net cash provided by operating activities: Equity in net income of joint venture (20) (15) Depreciation 385 360 Amortization of lease commissions 7 6 Change in accounts: Receivables and deposits (29) (17) Other assets (17) (41) Accounts payable (5) 6 Tenant security deposits payable 2 2 Other liabilities 24 (16) Net cash provided by operating activities 819 760 Cash flows from investing activities: Property improvements and replacements (179) (147) Distributions from joint venture 72 -- Net cash used in investing activities (107) (147) Cash flows from financing activities: Partners' distributions (617) (617) Net cash used in financing activities (617) (617) Net increase (decrease) in cash and cash equivalents 95 (4) Cash and cash equivalents at beginning of year 633 637 Cash and cash equivalents at end of year $ 728 $ 633 See Accompanying Notes to Financial Statements UNITED INVESTORS INCOME PROPERTIES Notes to Financial Statements December 31, 1997 NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization: United Investors Income Properties (the "Partnership"), a Missouri Limited Partnership, was organized in June 1988, with the initial group of limited partners being admitted on July 27, 1988. Additional partners were admitted through May 1990. The Partnership was formed to acquire and operate certain types of income- producing real estate. United Investors Real Estate, Inc. (the "General Partner") is the general partner. Effective December 31, 1992, 100% of the General Partner's common stock was purchased by MAE GP Corporation ("MAE GP"), an affiliate of Insignia Financial Group, Inc. ("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. Basis of accounting: The accompanying financial statements of the Partnership are prepared on the accrual basis and, therefore, revenue is recorded as earned and costs and expenses are recorded as incurred. Cash and cash equivalents: The Partnership considers all highly liquid investments with a maturity, when purchased, of three months or less to be cash equivalents. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Security Deposits: The Partnership requires security deposits from lessees for the duration of the lease, and such deposits are included in receivables and deposits. The security deposits are refunded when the tenant vacates, provided the tenant has not damaged its space and is current on its rental payments. Income taxes: For income tax purposes, the Partnership reports revenue and costs and expenses on the accrual method. No income tax provision has been shown in the accompanying statements of operations since the partners are taxed individually. Investment Properties: Investment properties are stated at cost. Acquisition fees are capitalized as a cost of real estate. The Partnership records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. Depreciation: Depreciation is computed using straight-line methods over estimated useful lives of fifteen to forty years for buildings and improvements and five to twelve years for furniture and fixtures. Commercial tenant improvements are depreciated over the terms of the respective leases. Fair Value of Financial Instruments: "SFAS No. 107, Disclosures about Fair Value of Financial Instruments," as amended by "SFAS No. 119, Disclosures about Derivative Financial Instruments and Fair Value of Financial Instruments", requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined in the SFAS as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amount of its financial instruments approximates their fair value due to the short term maturity of these instruments. Other Assets: Included in other assets are deferred rental income and leasing commissions which are amortized over the lives of the related leases. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Advertising: The Partnership expenses the costs of advertising as incurred. Advertising expense, included in operating expenses, was $35,000 and $31,000 for the years ended December 31, 1997 and 1996, respectively. Reclassifications: Certain reclassifications have been made to the 1996 information to conform to the 1997 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. Condensed balance sheet information for Corinth at December 31, 1997, is as follows (in thousands): December 31, 1997 Assets Commercial properties, net $1,692 Other assets 119 Total $1,811 Liabilities and Partners' Capital Liabilities $ 42 Partners' capital 1,769 Total $1,811 Condensed statements of operations of Corinth for the years ended December 31, 1997 and 1996, are as follows (in thousands): Years Ended December 31, 1997 1996 Revenue $ 355 $ 369 Costs and Expenses (297) (325) Net income $ 58 $ 44 NOTE C - PARTNERS' CAPITAL ALLOCATIONS OF PROFITS AND LOSSES: In accordance with the partnership agreement, all profits and losses are to be allocated 1% to the General Partner and 99% to the limited partners. DISTRIBUTIONS: The Partnership allocates distributions 1% to the General Partner and 99% to the limited partners. On February 15, 1998, the Partnership paid a distribution to the partners of approximately $154,000. NOTE D - 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. The partnership agreement provides for payments to affiliates for 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 in 1997 and 1996 (in thousands): 1997 1996 Property management fees (included in operating expenses) $ 86 $ 82 Reimbursement for services of affiliates (included in general and administrative expenses and operating expenses) 36 32 Additionally, the Partnership paid $29,000 during the year ended December 31, 1996, to an affiliate of the General Partner for lease commissions at the Partnership's commercial property. These lease commissions are included in other assets and are amortized over the terms of the respective lease. For the period January 1, 1996 to August 31, 1997, the Partnership insured its properties under a master policy through an agency and 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 who received payment on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the General Partner by virtue of the agent's obligations is not significant. NOTE E - OPERATING LEASES Tenants of Peachtree Corners Medical Building are responsible for their own utilities, maintenance of their space and payment of their proportionate share of common area maintenance, utilities, insurance and real estate taxes. The real estate taxes, insurance, and common area maintenance expenses are paid directly by the Partnership. The Partnership is then reimbursed by the tenants for their proportionate share. The future minimum rental payments to be received under operating leases that have initial or remaining noncancellable lease terms in excess of one year, as of December 31, 1997, are as follows (in thousands): Years Ending December 31, 1998 $ 129 1999 132 2000 137 2001 141 2002 120 Thereafter 153 $ 812 NOTE F - PARTNER TAX INFORMATION The following is a reconciliation between net income as reported in the financial statements and federal taxable income allocated to the partners in the Partnership's tax return for the years ended December 31, 1997 and 1996 (in thousands, except unit data): 1997 1996 Net income as reported $ 472 $ 475 Add (deduct): Deferred revenue and other liabilities 4 (6) Depreciation differences 11 -- Nondeductible reserves and allowances 1 -- Accrued expenses 18 1 Deferred charges and other assets (13) (26) Federal taxable income $ 493 $ 444 Federal taxable income per limited partnership unit $8.00 $7.21 The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net assets at December 31, 1997 (in thousands): Net assets as reported $10,857 Differences in basis of assets and liabilities: Deferred revenue and other liabilities (25) Accumulated depreciation 30 Commercial property at cost 139 Deferred charges and other assets (22) Other 21 Syndication costs 1,902 Net assets - tax basis $12,902 NOTE G - INVESTMENT PROPERTIES AND ACCUMULATED DEPRECIATION (IN THOUSANDS) Initial cost To Partnership Net Costs Buildings Capitalized and Related (Removed) Personal Subsequent to Description Land Property Acquisition Bronson Place Apartments $ 501 $2,568 $ 405 Defoors Crossing Apartments 520 2,480 358 Meadow Wood Apartments 501 2,884 259 Peachtree Corners Medical Bldg. 340 1,396 154 Totals $1,862 $9,328 $1,176
Gross Amount At Which Carried At December 31, 1997 Buildings And Related Personal Accumulated Date of Date Depreciable Description Land Property Total Depreciation Construction Acquired Life-Years Bronson Place Apartments $ 501 $ 2,973 $ 3,474 $ 973 1988 11/01/88 5-40 Defoors Crossing Apartments 520 2,838 3,358 800 1988 05/01/89 5-40 Meadow Wood Apartments 501 3,143 3,644 879 1988 10/02/89 5-40 Peachtree Corners 340 1,550 1,890 346 1989 06/01/90 15-40 Totals $1,862 $10,504 $12,366 $2,998
Reconciliation of "Investment Properties and Accumulated Depreciation": Years Ended December 31, 1997 1996 Investment Properties Balance at beginning of year $12,187 $12,040 Property improvements 179 147 Balance at end of year $12,366 $12,187 Accumulated Depreciation Balance at beginning of year $ 2,613 $ 2,253 Amounts charged to expense 385 360 Balance at end of year $ 2,998 $ 2,613 The aggregate cost of the real estate for Federal income tax purposes at December 31, 1997, is approximately $12,506,000. The accumulated depreciation taken for Federal income tax purposes at December 31, 1997, is approximately $2,968,000. NOTE H - SUBSEQUENT EVENT On March 17, 1998, Insignia entered into an agreement to merge its national residential property management operations, and its controlling interest in Insignia Properties Trust, with Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The closing, which is anticipated to happen in the third quarter 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. ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There were no disagreements with Deloitte & Touche LLP regarding the 1997 or 1996 audits of the Partnership's financial statements. PART III ITEM 9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT The Partnership has no officers or directors. United Investors Real Estate, Inc. ("UIRE" or the "General Partner") manages and controls the Partnership and has general responsibility and authority in all matters affecting its business. Effective December 31, 1992, 100% of the General Partner's common stock was purchased by MAE GP Corporation ("MAE GP"), which is wholly owned by Metropolitan Asset Enhancement, L.P. ("MAE"), an affiliate of Insignia Financial Group, Inc. ("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. On March 17, 1998, Insignia entered into an agreement to merge its national residential property management operations, and its controlling interest in Insignia Properties Trust, with Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The closing, which is anticipated to happen in the third quarter 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. The names of the directors and executive officers of UIRE, their ages and the nature of all positions with UIRE presently held by them are set forth below. There are no family relationships between or among any officers and directors. Name Age Position Carroll D. Vinson 57 President and Director Robert D. Long, Jr. 30 Vice President and Chief Accounting Officer William H. Jarrard, Jr. 51 Vice President Daniel M. LeBey 32 Secretary Kelley M. Buechler 40 Assistant Secretary Carroll D. Vinson has been President and Director of the General Partner and President of MAE and subsidiaries since August of 1994. He has acted as Chief Operating Officer of IPT since May 1997. During 1993 to August 1994, Mr. Vinson was affiliated with Crisp, Hughes & Co. (regional CPA firm) and engaged in various other investment and consulting activities which included portfolio acquisitions, asset dispositions, debt restructurings and financial reporting. Briefly, in early 1993, Mr. Vinson served as President and Chief Executive Officer of Angeles Corporation, a real estate investment firm. From 1991 to 1993, Mr. Vinson was employed by Insignia in various capacities including Managing Director - President during 1991. Robert D. Long, Jr. has been Vice President and Chief Accounting Officer of the General Partner since August 1994. Mr. Long joined MAE in September 1993. Since 1994 he has acted as Vice President and Chief Accounting Officer of the MAE subsidiaries. Mr. Long was an accountant for Insignia until joining MAE in 1993. Prior to joining Insignia, Mr. Long was an auditor for the State of Tennessee and was associated with the accounting firm of Harsman Lewis and Associates. William H. Jarrard, Jr. has been Vice President of the General Partner since December 1992. He has acted as Senior Vice President of IPT since May 1997. Mr. Jarrard previously acted as Managing Director - Partnership Administration of Insignia from January 1991 through September 1997 and served as Managing Director - Partnership Administration and Asset Management of Insignia from July 1994 until January 1996. Daniel M. LeBey has been Secretary of the General Partner since January 29, 1998 and Insignia's Assistant Secretary since April 30, 1997. Since July 1996 he has also served as Insignia's Associate General Counsel. From September 1992 until June 1996, Mr. LeBey was an attorney with the law firm of Alston & Bird LLP, Atlanta, Georgia. Kelley M. Buechler has been Assistant Secretary of the General Partner since December 1992 and Assistant Secretary of Insignia since 1991. ITEM 10. EXECUTIVE COMPENSATION No direct form of compensation or remuneration was paid by the Partnership to any officer or director of the General Partner. The Partnership has no plan, nor does the Partnership presently propose a plan, which will result in any remuneration being paid to any officer or director upon termination of employment. However, reimbursements and other payments have been made to the Partnership's General Partner and its affiliates, as described in "Item 12. Certain Relationships and Related Transactions" below. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of January 1, 1998, no person was known by the Partnership to be the beneficial owner of more than five percent of the outstanding Units of the Partnership. As of January 1, 1998, no Units were owned by the General Partner or any of its officers and directors. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Partnership has no employees and is dependent on the General Partner and its affiliates for the management and administration of all partnership activities. The partnership agreement provides for payments to affiliates for 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 in 1997 and 1996 (in thousands): 1997 1996 Property management fees $ 86 $ 82 Reimbursement for services of affiliates 36 32 Additionally, the Partnership paid $29,000 during the year ended December 31, 1996, to an affiliate of the General Partner for lease commissions at the Partnership's commercial property. These lease commissions are included in other assets and are amortized over the terms of the respective lease. For the period January 1, 1996 to August 31, 1997, the Partnership insured its properties under a master policy through an agency and 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 who received payment on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the General Partner by virtue of the agent's obligations is not significant. During both 1997 and 1996, the General Partner received distributions of approximately $6,000. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: See Exhibit Index contained herein. (b) Reports on Form 8-K file in the fourth quarter of fiscal year 1997: None. SIGNATURES In accordance with Section 13 or 15(d) 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 Date: March 26, 1998 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. /s/Carroll D. Vinson President and Date: March 26, 1998 Carroll D. Vinson Director /s/Robert D. Long, Jr. Vice President and Date: March 26, 1998 Robert D. Long, Jr. Chief Accounting Officer INDEX TO EXHIBITS Exhibit 1 Form of Dealer Manager Agreement between the General Partner and the Dealer Manager, including Form of Soliciting Broker Agreement; incorporated by reference to Exhibit 1 to Partnership's Amendment to Registration Statement (File No. 33-20350) previously filed on May 2, 1988. 1.1 Amendment to Dealer Manager Agreement; incorporated by reference to Exhibit 1.1 to Post-Effective Amendment No. 2 to Partnership's Registration Statement previously filed on March 21, 1989. 4.1 Form of Subscription Agreement; incorporated by reference as part of the Prospectus of Partnership contained in Partnership's Amendment to Registration Statement previously filed on May 2, 1988. 4.2 Form of Agreement of Limited Partnership of Partnership; incorporated by reference as part of the Prospectus of Partnership contained in Partnership's Amendment to Registration Statement previously filed on May 2, 1988. 4.3 Tenth Amendment to Agreement of Limited Partnership of Partnership; incorporated by reference to Exhibit 4.3 to Partnership's Quarterly Report on Form 10-Q previously filed on May 15, 1989. 10.1 Escrow Agreement among the Partnership, the General Partner, the Dealer Manager, and Boston Safe Deposit & Trust Company; incorporated by reference to Exhibit 10.1 to Partnership's Amendment to Registration Statement previously filed on May 2, 1988. 10.1.1 Amendment to Escrow Agreement; incorporated by reference to Exhibit 10.1.1 to Post-Effective Amendment No. 5 to Partnership's Registration Statement previously filed on October 19, 1989. 10.2 Agreement of Purchase and Sale, dated June 22, 1988, between United Investors Real Estate, Inc., as nominee for United Investors Income Properties, as purchaser, and Nilsen/Bay Ridge Development, Inc. and MBIV Development, as seller, relating to Bronson Place Apartments; incorporated by reference to Exhibit 10.1 to Partnership's Quarterly Report on Form 10-Q previously filed on August 11, 1988. 10.3 Agreement of Purchase and Sale, dated October 20, 1988, between United Investors Real Estate, Inc., as purchaser, and Defoors Crossing Associates, Ltd., as seller, relating to Defoors Crossing Apartments, and amendments thereto; incorporated by reference to Exhibit 10.3 to Post-Effective Amendment No. l to Partnership's Registration Statement previously filed on February 1, 1989. 10.4 Agreement of Purchase and Sale, dated June 29, 1989, between United Investors Real Estate, Inc., as purchaser and CMW Properties, as seller, relating to Meadow Wood Apartments, and amendments thereto; incorporated by reference to Exhibit 10.4 to Partnership's Current Report on Form 8-K previously filed on October 17, 1989. 10.5 Agreement of Purchase and Sale, dated December 21, 1989, between United Investors Real Estate, Inc., as purchaser, and Corners Medical Group, Inc., as seller, relating to Peachtree Corners Medical Building, and amendments thereto; incorporated by reference to Exhibit 10.5 to Partnership's Quarterly Report on Form 10-Q previously filed on May 15, 1990. 10.6 Agreement of Purchase and Sale, dated June 29, 1990, between United Investors Real Estate, Inc., as purchaser, and American Fire Sprinkler Corporation, as seller, relating to Corinth Square Professional Building; incorporated by reference to Exhibit 10.6 to Partnership's Quarterly Report on Form 10-Q previously filed on August 15, 1990. 10.7 Agreement of Joint Venture of Corinth Square Associates dated October 1, 1990 between the Partnership and United Investors Income Properties II; incorporated by reference to Exhibit 4.4 to Partnership's Current Report on Form 8-K previously filed on October 23, 1990. 10.8 Stock Purchase Agreement dated December 4, 1992 showing the purchase of 100% of the outstanding stock of United Investors Real Estate, Inc. by MAE GP Corporation; incorporated by reference to Exhibit 10.8 to Partnership's Current Report on Form 8-K previously filed on December 31, 1992. 27 Financial Data Schedule 99.1 Portions of Prospectus of Partnership dated May 4, 1988; incorporated by reference to Exhibit 99.1 to Partnership's Report on Form 10-K previously filed on March 6, 1991. EX-27 2
5 This schedule contains summary financial information extracted from United Investors Income Properties 1997 year-end 10-KSB and is qualified in its entirety by reference to such 10-KSB filing. 0000830056 United Investors Income Properties 1,000 12-MOS DEC-31-1997 DEC-31-1997 728 0 0 0 0 0 12,366 2,998 10,966 0 0 0 0 0 10,857 10,966 0 1,822 0 0 1,370 0 0 0 0 0 0 0 0 472 7.65 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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