UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(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, 2008
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________to _________
Commission file number 0-17646
UNITED INVESTORS INCOME PROPERTIES
(Exact name of registrant as specified in its charter)
Missouri 43-1483942
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.
[X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
PART I – FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
UNITED INVESTORS INCOME PROPERTIES
BALANCE SHEETS
(in thousands, except unit data)
June 30, | December 31, | ||
2008 | 2007 | ||
(Unaudited) | (Note) | ||
Assets | |||
Cash and cash equivalents | $ 137 | $ 152 | |
Receivables and deposits | 86 | 74 | |
Other assets | 73 | 84 | |
Investment properties: | |||
Land | 1,021 | 1,021 | |
Buildings and related personal property | 7,630 | 7,500 | |
8,651 | 8,521 | ||
Less accumulated depreciation | (4,567) | (4,381) | |
4,084 | 4,140 | ||
$ 4,380 | $ 4,450 | ||
Liabilities and Partners' (Deficiency) Capital | |||
Liabilities | |||
Accounts payable | $ 28 | $ 66 | |
Tenant security deposit liabilities | 46 | 40 | |
Accrued property taxes | 37 | -- | |
Other liabilities | 43 | 47 | |
Mortgage note payable | 3,451 | 3,451 | |
3,605 | 3,604 | ||
Partners' (Deficiency) Capital | |||
General partner | (55) | (54) | |
Limited partners (61,063 units issued and | |||
outstanding) | 830 | 900 | |
775 | 846 | ||
$ 4,380 | $ 4,450 | ||
Note:
The balance sheet at December 31, 2007 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.
See Accompanying Notes to Financial Statements
UNITED INVESTORS INCOME PROPERTIES
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended | Six Months Ended | |||
June 30, | June 30, | |||
2008 | 2007 | 2008 | 2007 | |
Revenues: | ||||
Rental income | $ 326 | $ 305 | $ 660 | $ 606 |
Other income | 38 | 39 | 72 | 69 |
Total revenues | 364 | 344 | 732 | 675 |
Expenses: | ||||
Operating | 178 | 190 | 339 | 353 |
General and administrative | 31 | 31 | 58 | 57 |
Depreciation | 93 | 78 | 186 | 155 |
Interest | 38 | 45 | 82 | 88 |
Property taxes | 32 | 23 | 63 | 47 |
Total expenses | 372 | 367 | 728 | 700 |
Net (loss) income | $ (8) | $ (23) | $ 4 | $ (25) |
Net (loss) income allocated to | ||||
general partner (1%) | $ -- | $ -- | $ -- | $ -- |
Net (loss) income allocated to | ||||
limited partners (99%) | (8) | (23) | 4 | (25) |
$ (8) | $ (23) | $ 4 | $ (25) | |
Net (loss) income per limited | ||||
partnership unit | $ (0.13) | $ (0.38) | $ 0.07 | $ (0.41) |
Distribution per limited | ||||
partnership unit | $ 1.21 | $ -- | $ 1.21 | $ -- |
See Accompanying Notes to Financial Statements
UNITED INVESTORS INCOME PROPERTIES
STATEMENT OF CHANGES IN PARTNERS' (DEFICIENCY) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited | ||||
Partnership | General | Limited | ||
Units | Partner | Partners | Total | |
Original capital contributions | 61,063 | $ -- | $15,266 | $15,266 |
Partners' (deficiency) capital | ||||
at December 31, 2007 | 61,063 | $ (54) | $ 900 | $ 846 |
Distribution to partners | -- | (1) | (74) | (75) |
Net income for the six months | ||||
ended June 30, 2008 | -- | -- | 4 | 4 |
Partners' (deficiency) capital | ||||
at June 30, 2008 | 61,063 | $ (55) | $ 830 | $ 775 |
See Accompanying Notes to Financial Statements
UNITED INVESTORS INCOME PROPERTIES
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended | ||
June 30, | ||
2008 | 2007 | |
Cash flows from operating activities: | ||
Net income (loss) | $ 4 | $ (25) |
Adjustments to reconcile net income (loss) to net cash | ||
provided by operating activities: | ||
Depreciation | 186 | 155 |
Amortization of loan costs | 11 | 22 |
Change in accounts: | ||
Receivables and deposits | (12) | (7) |
Other assets | -- | (16) |
Accounts payable | (10) | 10 |
Tenant security deposit liabilities | 6 | 5 |
Accrued property taxes | 37 | 20 |
Other liabilities | (4) | 9 |
Due to affiliates | -- | (17) |
Net cash provided by operating activities | 218 | 156 |
Cash flows used in investing activities: | ||
Property improvements and replacements | (158) | (66) |
Cash flows from financing activities: | ||
Payments on mortgage note payable | -- | (14) |
Distribution to partners | (75) | -- |
Net cash used in financing activities | (75) | (14) |
Net (decrease) increase in cash and cash equivalents | (15) | 76 |
Cash and cash equivalents at beginning of period | 152 | 73 |
Cash and cash equivalents at end of period | $ 137 | $ 149 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | $ 78 | $ 60 |
Supplemental disclosure of non-cash activity: | ||
Property improvements and replacements included in | ||
accounts payable | $ 7 | $ 5 |
At December 31, 2007, approximately $35,000 of property improvements and replacements were included in accounts payable, which are included in property improvements and replacements for the six months ended June 30, 2008.
See Accompanying Notes to Financial Statements
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" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. 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 the Partnership’s general partner, United Investors Real Estate, Inc. (the “General Partner” or “UIRE”), a Delaware corporation and a subsidiary of Apartment Investment and Management Company (“AIMCO”), a publicly traded real estate investment trust, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six m onth periods ended June 30, 2008 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2008. 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, 2007.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and depends 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 and for reimbursement of certain expenses incurred by affiliates on behalf of the Partnership.
Affiliates of the 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 $36,000 and $33,000 for the six months ended June 30, 2008 and 2007, respectively, which are included in operating expenses.
An affiliate of the General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $25,000 for each of the six months ended June 30, 2008 and 2007, which is included in general and administrative expenses.
In accordance with the Partnership Agreement, prior to 2007, AIMCO Properties, L.P., an affiliate of the General Partner, advanced funds to the Partnership. During the six months ended June 30, 2007, interest on advances, at the rate of prime plus 2%, was approximately $6,000. The entire advance balance was repaid during the third quarter of 2007 with proceeds from the refinancing of the mortgage encumbering Bronson Place Apartments. At June 30, 2008 and December 31, 2007, there were no advances or associated accrued interest due to AIMCO Properties, L.P. The Partnership may receive additional advances of funds from AIMCO Properties, L.P. although AIMCO Properties, L.P. is not obligated to provide such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission.
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 General Partner. During the six months ended June 30, 2008, the Partnership was charged by AIMCO and its affiliates approximately $15,000 for hazard insurance coverage and fees associated with policy claims administration. Additional charges will be incurred by the Partnership during 2008 as other insurance policies renew later in the year. The Partnership was charged by AIMCO and its affiliates approximately $27,000 for insurance coverage and fees associated with policy claims administration during the year ended December 31, 2007.
Note C - Contingencies
As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call" (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter 2008, AIMCO Properties, L.P. settled the overt ime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts will be dismissed. At this time, affiliates of the General Partner are attempting to obtain additional information to determine the most equitable allocation of settlement amounts and attorneys’ fees. The General Partner is uncertain as to the amount of loss, if any, allocable to the Partnership. Therefore, the Partnership cannot estimate whether a loss will occur or a potential range of loss.
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 General Partner have implemented policies, procedures, third-party audits and training and the General Partner believes that these measures will prevent or eliminate mold exposure and will minimize the effects that mold may 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 General Partner can make no assura nce 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 OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Report contains or may contain information that is forward-looking, including, without limitation, statements regarding the effect of redevelopments, the Partnership’s future financial performance, including the Partnership’s ability to maintain current or meet projected occupancy and rent levels, and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and, in addition, will be affected by a variety of risks and factors that are beyond the Partnership’s control including, without limitation: natural disasters such as hurricanes; national and local economic conditions; the general level of interest rates; energy costs; the terms of governmental regulations that affect the Partner ship’s properties and interpretations of those regulations; the competitive environment in which the Partnership operates; financing risks, including the risk that the Partnership’s cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for tenants in such markets; insurance risks; development risks; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the Partnership. Readers should carefully review the Partnership’s financial statements and the notes thereto and the other documents the Partnership 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 each of the six months ended June 30, 2008 and 2007:
Average Occupancy | ||
Property | 2008 | 2007 |
Bronson Place Apartments | 98% | 97% |
Mountlake Terrace, Washington | ||
Defoors Crossing Apartments (1) | 99% | 96% |
Atlanta, Georgia | ||
(1)
The General Partner attributes the increase in occupancy at Defoors Crossing Apartments to increased resident retention efforts.
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 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. However, the General Partner may use rental concessions and rental rate reductions to offset softening market conditions; accordingly, there is no guarantee that the General Part ner will be able to sustain such a plan. Further, a number of factors which 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 recognized a net loss of approximately $8,000 for the three months ended June 30, 2008, compared to a net loss of approximately $23,000 for the three months ended June 30, 2007. The Partnership recognized net income of approximately $4,000 for the six months ended June 30, 2008, compared to a net loss of approximately $25,000 for the six months ended June 30, 2007. The decrease in net loss for the three months ended June 30, 2008 is due to an increase in total revenues. The increase in net income for the six months ended June 30, 2008 is due to an increase in total revenues, partially offset by an increase in total expenses. The increase in total revenues for both the three and six months ended June 30, 2008 is due to an increase in rental income. Other income remained relatively constant for the comparable periods. Rental income increased for both periods due to increases in occupancy and the average rental rate at both of th e Partnership’s investment properties.
Total expenses remained relatively constant for the three months ended June 30, 2008 as increases in depreciation and property tax expenses were substantially offset by decreases in operating and interest expenses. Total expenses increased for the six months ended June 30, 2008 due to increases in depreciation and property tax expenses, partially offset by decreases in operating and interest expenses. General and administrative expense remained relatively constant for the comparable periods. Depreciation expense increased for both periods due to property improvements and replacements placed into service during the past twelve months at both of the Partnership’s investment properties. Property tax expense increased for both periods primarily due to an increase in the assessed value of Defoors Crossing Apartments. Operating expense decreased for both periods primarily due to a decrease in contract services at both of the Partnership’s inves tment properties. The decrease in operating expenses for the six months ended June 30, 2008 was partially offset by an increase in utility expenses at Defoors Crossing Apartments. Interest expense decreased for both periods primarily due to a lower variable rate charged on the mortgage encumbering Bronson Place Apartments and a decrease in interest on advances from AIMCO Properties, L.P. due to a lower average advance balance, partially offset by an increase in interest expense due to a higher carrying balance of the mortgage encumbering Bronson Place Apartments due to its refinancing in September 2007.
Included in general and administrative expenses for the three and six months ended June 30, 2008 and 2007 are management reimbursements to the General Partner as allowed under the Partnership Agreement, costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement.
Liquidity and Capital Resources
At June 30, 2008, the Partnership had cash and cash equivalents of approximately $137,000, compared to approximately $149,000 at June 30, 2007. Cash and cash equivalents decreased approximately $15,000, from December 31, 2007, due to approximately $158,000 and $75,000 of cash used in investing and financing activities, respectively, partially offset by approximately $218,000 of cash provided by operating activities. Cash used in investing activities consisted of property improvements and replacements. Cash used in financing activities consisted of a distribution to partners. 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 General Partner monitors developments in the area of legal and regulatory compliance. Capital improvements planned for the Partnership's properties are detailed below.
Bronson Place Apartments
During the six months ended June 30, 2008, the Partnership completed approximately $64,000 of capital improvements at Bronson Place Apartments, consisting primarily of structural improvements and floor covering replacement. 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 expenditures are anticipated during the remainder of 2008. Such capital expenditures will depend on the physical condition of the property as well as the anticipated cash flow generated by the property.
DeFoors Crossing Apartments
During the six months ended June 30, 2008, the Partnership completed approximately $66,000 of capital improvements at DeFoors Crossing Apartments, consisting primarily of water and sewer upgrades. 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 expenditures are anticipated during the remainder of 2008. Such capital expenditures will depend on the physical condition of the property as well as the anticipated cash flow generated by the property.
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. On September 21, 2007, the Partnership refinanced the mortgage encumbering Bronson Place Apartments. The refinancing replaced the existing mortgage, which at the time of refinancing had a principal balance of approximately $1,858,000, with a new mortgage loan in the principal amount of approximately $3,451,000. The new loan was refinanced under a secured real estate credit facility (“Secured Credit Facility”) with AEGON USA Realty Advisors, Inc., as agent for Transamerica Occidental Life Insurance Company, which has a maturity of October 1, 2010, with two one-year extension options. The new mortgage requires monthly payments of interest only beginning on November 1, 2007, through the October 1, 2010 maturity date, at which date the entire principal balance of approximately $3,451,000 is due. &nbs p;The new loan has a variable interest rate of the one-month LIBOR rate plus 0.78% (3.24% per annum at June 30, 2008) and resets monthly. The variable interest rate may increase to the one-month LIBOR rate plus 0.98% if the debt service coverage ratio of the investment property decreases below a prescribed threshold. The Secured Credit Facility provides mortgage loans on properties owned by other partnerships that are affiliated with the General Partner. The Secured Credit Facility creates separate loans for each property that are not cross-collateralized or cross-defaulted with the other property loans. The loans are prepayable without penalty. As a condition of the Secured Credit Facility, the lender required AIMCO Properties, L.P., an affiliate of the General Partner, to guarantee certain obligations and liabilities of the Partnership with respect to the new mortgage financing. The General Partner will attempt to refinance such indebtedness and/or sell the property prior to such maturity date. If the property cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing such property through foreclosure.
The Partnership distributed the following amounts during the six months ended June 30, 2008 and 2007 (in thousands, except per unit data):
Six Months | Per Limited | Six Months | Per Limited | |
Ended | Partnership | Ended | Partnership | |
June 30, 2008 | Unit | June 30, 2007 | Unit | |
Refinancing (1) | $ 75 | $1.21 | $ -- | $ -- |
(1)
Proceeds from the September 2007 refinancing of the mortgage encumbering Bronson Place Apartments.
Future cash distributions will depend on the levels of cash generated from operations, the timing of the debt maturity, property sales and/or financings. 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 improvements to permit additional distributions to its partners during 2008 or subsequent periods.
Other
In addition to its indirect ownership of the sole general partner of the Partnership, AIMCO and its affiliates owned 24,498 limited partnership units (the "Units") in the Partnership representing 40.12% of the outstanding Units at June 30, 2008. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. AIMCO or its affiliates may 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. Under 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 General Partner. As a result of its ownership of 40.12% of the outstanding Units at June 30, 2008, AIMCO and its affiliates are in a position to influence all such voting decisions with respect to the Partnership. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the 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 investments are 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 4T.
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 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 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)
Changes in Internal Control Over Financial Reporting.
There have been no significant 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
As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call" (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter 2008, AIMCO Properties, L.P. settled the overt ime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts will be dismissed. At this time, affiliates of the General Partner are attempting to obtain additional information to determine the most equitable allocation of settlement amounts and attorneys’ fees. The General Partner is uncertain as to the amount of loss, if any, allocable to the Partnership. Therefore, the Partnership cannot estimate whether a loss will occur or a potential range of loss.
ITEM 6.
EXHIBITS
See Exhibit Index.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly 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. | |
General Partner | |
Date: August 13, 2008 | By: /s/Martha L. Long |
Martha L. Long | |
Senior Vice President | |
Date: August 13, 2008 | By: /s/Stephen B. Waters |
Stephen B. Waters | |
Vice President |
UNITED INVESTORS INCOME PROPERTIES |
INDEX TO EXHIBITS |
Exhibit
Description
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.
4.4
Certificate of Limited Partnership (Exhibit 3 to Partnership's Current Report on Form 8-K filed on April 29, 1991, is incorporated herein by reference).
4.5
Amendment to Agreement of Limited Partnership effective March 28, 2005; incorporated by reference to Exhibit 4.5 to Partnership’s Quarterly Report on Form 10-QSB filed on May 13, 2005.
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 the 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 the Post-Effective Amendment No.1 to Partnership's Registration Statement previously filed on February 1, 1989.
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 the Partnership's Current Report on Form 8-K previously filed on December 31, 1992.
10.18
Deed of Trust, Security Agreement and Fixture Filing dated September 21, 2007 between United Investors Income Properties, a Missouri limited partnership, and Transamerica Occidental Life Insurance Company, an Iowa corporation. (Incorporated by reference to the Registrant’s Current Report on Form 8-K dated September 21, 2007).
10.19
Secured Promissory Note dated September 21, 2007 between United Investors Income Properties, a Missouri limited partnership, and Transamerica Occidental Life Insurance Company, an Iowa corporation. (Incorporated by reference to the Registrant’s Current Report on Form 8-K dated September 21, 2007).
10.20
Carveout Guarantee and Indemnity Agreement dated September 21, 2007 between AIMCO Properties, L.P., a Delaware limited partnership, and Transamerica Occidental Life Insurance Company, an Iowa corporation. (Incorporated by reference to the Registrant’s Current Report on Form 8-K dated September 21, 2007).
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 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.
