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 March 31, 2001
[ ] 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 0-17645
UNITED INVESTORS GROWTH PROPERTIES
(Exact name of small business issuer as specified in its charter)
Missouri 43-1483928
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2001
Assets
Cash and cash equivalents $ 238
Receivables and deposits 59
Restricted escrows 67
Other assets 196
Investment properties:
Land $ 893
Buildings and related personal property 8,755
9,648
Less accumulated depreciation (3,713) 5,935
$ 6,495
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 11
Tenant security deposit liabilities 47
Accrued property taxes 50
Other liabilities 83
Mortgage notes payable 6,789
Partners' Deficit
General partner $ (10)
Limited partners (39,287 units
issued and outstanding) (475) (485)
$ 6,495
See Accompanying Notes to Consolidated Financial Statements
b)
UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
2001 2000
Revenues:
Rental income $ 394 $ 647
Other income 33 46
Total revenues 427 693
Expenses:
Operating 167 287
General and administrative 34 35
Depreciation 107 167
Interest 131 197
Property taxes 50 52
Total expenses 489 738
Loss before extraordinary item (62) (45)
Extraordinary loss on early extinguishment of debt (57) --
Net loss $ (119) $ (45)
Net loss allocated to general partner (1%) $ (1) $ --
Net loss allocated to limited partners (99%) (118) (45)
$ (119) $ (45)
Per limited partnership unit:
Loss before extraordinary item $(1.56) $(1.15)
Extraordinary loss on early extinguishment of debt (1.44) --
Net loss $(3.00) $(1.15)
Distributions per limited partnership unit $12.47 $ --
See Accompanying Notes to Consolidated Financial Statements
c)
UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 39,297 $ -- $ 9,824 $ 9,824
Partners' (deficit) capital at
December 31, 2000 39,287 $ (4) $ 133 $ 129
Distributions to partners -- (5) (490) (495)
Net loss for the three months
ended March 31, 2001 -- (1) (118) (119)
Partners' deficit at
March 31, 2001 39,287 $ (10) $ (475) $ (485)
See Accompanying Notes to Consolidated Financial Statements
d)
UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2001 2000
(Restated)
Cash flows from operating activities:
Net loss $ (119) $ (45)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Extraordinary loss on early extinguishment of debt 57 --
Depreciation 107 167
Amortization of loan costs 6 6
Change in accounts:
Receivables and deposits 24 157
Other assets (13) (31)
Accounts payable (28) (19)
Tenant security deposit liabilities (30) 3
Accrued property taxes 8 (25)
Other liabilities (67) (52)
Net cash (used in) provided by operating
activities (55) 161
Cash flows from investing activities:
Proceeds from sale of investment property 352 --
Property improvements and replacements (25) (68)
Net withdrawals from restricted escrows 7 28
Net cash provided by (used in) investing
activities 334 (40)
Cash flows from financing activities:
Payments on mortgage note payable (34) (43)
Distributions to partners (495) --
Net cash used in financing activities (529) (43)
Net (decrease) increase in cash and cash equivalents (250) 78
Cash and cash equivalents at beginning of period 488 774
Cash and cash equivalents at end of period $ 238 $ 852
Supplemental disclosure of cash flow information:
Cash paid for interest $ 142 $ 192
Supplemental disclosure of non-cash activity:
Mortgage assumed by Purchaser of Cheyenne Woods Apartments $3,728 $ --
See Accompanying Notes to Consolidated Financial Statements
e)
UNITED INVESTORS GROWTH PROPERTIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of United Investors
Growth 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-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The Partnership's General Partner is United Investors Real
Estate, Inc. (the "General Partner"), an affiliate of Apartment Investment and
Management Company ("AIMCO"), a publicly traded real estate investment trust. In
the opinion of the General Partner all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 2001, are
not necessarily indicative of the results that may be expected for the fiscal
year ending December 31, 2001. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Partnership's Annual Report on Form 10-KSB for the fiscal year ended December
31, 2000.
Principles of Consolidation
The consolidated financial statements include all the accounts of the
Partnership and its three 100% owned limited liability companies, Terrace
Royale, L.L.C., Cheyenne Woods United Investors, L.L.C. and Deerfield
Apartments, L.L.C. Although legal ownership of the respective assets remains
with these entities, the Partnership retains all economic benefits from the
properties. As a result, the Partnership consolidates its interest in these
three entities, whereby all accounts are included in the consolidated financial
statements of the Partnership with all inter-entity accounts being eliminated.
Note B - 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 (i) certain payments to affiliates for
services and (ii) reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership. The following payments were made to the General
Partner and affiliates during the three month periods ended March 31, 2001 and
2000:
2001 2000
(in thousands)
Property management fees (included in operating expenses) $ 26 $ 36
Reimbursement for services of affiliates (included in
general and administrative expenses) 13 13
During the three months ended March 31, 2001 and 2000, affiliates of the General
Partner were entitled to receive 5% of gross receipts from all of the
Registrant's residential properties as compensation for providing property
management services. The Registrant paid to such affiliates approximately
$26,000 and $36,000 for the three months ended March 31, 2001 and 2000,
respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $13,000 for both of the three
month periods ended March 31, 2001 and 2000.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 11,937 limited partnership
units in the Partnership representing 30.38% of the outstanding units. A number
of these units were acquired pursuant to tender offers made by AIMCO or its
affiliates. It is possible that AIMCO or its affiliates will make one or more
additional offers to acquire additional limited partnership interests in the
Partnership for cash or in exchange for units in the operating partnership of
AIMCO. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters, which
would include without limitation, voting on certain amendments to the
Partnership Agreement and voting to remove the General Partner. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of their affiliation
with the General Partner.
Note C - Sale of Investment Property
On January 3, 2001, Cheyenne Woods, located in Las Vegas, Nevada, was sold to an
unaffiliated third party for $4,200,000. After closing expenses and other
payments of approximately $120,000 and the assumption of $3,728,000 in debt by
the purchaser, the net proceeds received by the Partnership were approximately
$352,000. For financial statement purposes the sale resulted in a loss of
$56,000 which had been recorded as an impairment loss during the year ended
December 31, 2000. As a result, the only financial statement impact recorded
during the three months ended March 31, 2000 was the recognition of loss on
early extinguishment of debt of approximately $57,000 due to the write off of
unamortized loan costs. Revenues from Cheyenne Woods Apartments included in the
accompanying consolidated statements of operations was approximately $239,000
for the three months ended March 31, 2000.
Note D - Distributions
The Partnership paid distributions of approximately $197,000 (approximately
$195,000 to the limited partners or $4.96 per limited partnership unit) from
operations and approximately $298,000 (approximately $295,000 to the limited
partners or $7.51 per limited partnership unit) from the sale proceeds of
Cheyenne Woods Apartments during the three months ended March 31, 2001. No
distributions were made during the three months ended March 31, 2000.
Note E - Legal Proceedings
The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature arising in the ordinary course of business.
Note F - Segment Reporting
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about
Segments of an Enterprise and Related Information" established standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports. It
also establishes standards for related disclosures about products and services,
geographic areas, and major customers. As defined in SFAS No. 131, the
Partnership has only one reportable segment. The General Partner believes that
segment-based disclosures will not result in a more meaningful presentation than
the consolidated financial statements as currently presented.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operation. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
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 three month periods ended March 31, 2001 and 2000:
Average Occupancy
Property 2001 2000
Terrace Royale Apartments 89% 93%
Bothell, Washington
Deerfield Apartments 92% 96%
Memphis, Tennessee
The General Partner attributes the decrease in occupancy at Terrace Royale
Apartments to construction of new apartment complexes in the Bothell, Washington
area which are offering concessions and significant move in incentives to
attract tenants. Property management is evaluating its options to improve the
property's occupancy. The General Partner attributes the decrease in occupancy
at Deerfield Apartments to tenants purchasing new homes in the area as a result
of a decrease in interest rates. The average occupancy for Cheyenne Woods
Apartments was 93% for the three months ended March 31, 2000. This property was
sold on January 3, 2001.
Results of Operations
The Registrant's net loss for the three months ended March 31, 2001 was
approximately $119,000 compared to approximately $45,000 for the three months
ended March 31, 2000. The increase in net loss is due primarily to the loss on
early extinguishment of debt of approximately $57,000 and a decrease in total
revenues which was partially offset by a decrease in total expenses as a result
of the sale of Cheyenne Woods Apartments.
On January 3, 2001, Cheyenne Woods, located in Las Vegas, Nevada, was sold to an
unaffiliated third party for $4,200,000. After closing expenses and other
payments of approximately $120,000 and the assumption of $3,728,000 in debt by
the purchaser, the net proceeds received by the Partnership were approximately
$352,000. For financial statement purposes the sale resulted in a loss of
$56,000 which had been recorded as an impairment loss during the year ended
December 31, 2000. As a result, the only financial statement impact recorded
during the three months ended March 31, 2000 was the recognition of loss on
early extinguishment of debt of approximately $57,000 due to the write off of
unamortized loan costs. Revenues from Cheyenne Woods Apartments included in the
accompanying consolidated statements of operations was approximately $239,000
for the three months ended March 31, 2000.
Excluding the impact of the operations and sale of Cheyenne Woods, the
Partnership had a net loss of approximately $38,000 for the three months ended
March 31, 2001, compared to a loss of approximately $37,000 for the three months
ended March 31, 2000. Total revenues and total expenses remained relatively
stable for the comparable period.
General and administrative expense remained stable over the comparable periods.
Included in general and administrative expenses at both March 31, 2001 and 2000,
are management reimbursements to the General Partner 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 are also included.
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, 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 March 31, 2001, the Registrant had cash and cash equivalents of approximately
$238,000 as compared to approximately $852,000 at March 31, 2000. The decrease
in cash and cash equivalents of approximately $250,000 from the Registrant's
year ended December 31, 2000, is due to approximately $529,000 of cash used in
financing activities and approximately $55,000 of cash used in operating
activities which was partially offset by $334,000 of cash provided by investing
activities. Cash provided by investing activities consisted of property
improvements and replacements which were partially offset by net proceeds from
the sale of Cheyenne Woods Apartments and net withdrawals from escrow accounts
maintained by the mortgage lender. Cash used in financing activities consisted
of payments of principal made on the mortgages encumbering the Registrant's
properties and distributions paid 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 Registrant and to comply with Federal,
state and local legal and regulatory requirements. Capital improvements planned
for each of the Registrant's properties are detailed below.
Terrace Royale Apartments
During the three months ended March 31, 2001, the Partnership completed
approximately $9,000 of capital improvements at Terrace Royale Apartments
consisting primarily of floor covering and appliance replacements and electrical
improvements. These improvements were funded from cash flow from operations. The
Partnership has evaluated the capital improvement needs of the property for the
year. The amount budgeted is approximately $22,000, consisting primarily of
floor covering and appliance replacements and electrical improvements.
Additional improvements may be considered and will depend on the physical
condition of the property as well as replacement reserves and anticipated cash
flow generated by the property.
Cheyenne Woods Apartments
During the three months ended March 31, 2001, the Partnership completed
approximately $2,000 of capital improvements at Cheyenne Woods Apartments,
consisting primarily of floor covering and appliance replacements. These
improvements were funded from cash flow from operations. This property was sold
on January 3, 2001.
Deerfield Apartments
During the three months ended March 31, 2001, the Partnership completed
approximately $14,000 of capital improvements at Deerfield Apartments consisting
primarily of parking area and roof improvements, floor covering and appliance
replacements, other building improvements, and water heater replacements. These
improvements were funded from the property's replacement reserves. The
Partnership has evaluated the capital improvement needs of the property for the
year. The amount budgeted is approximately $266,000, consisting primarily of
roof replacements, water heater replacements, appliances and floor covering
replacements. Additional improvements may be considered and will depend on the
physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
The Partnership's current assets are thought to be sufficient for any near term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $6,789,000 has maturity dates ranging from
December 2004 to February 2019 with a balloon payment due at maturity for the
mortgage encumbering Deerfield Apartments. The General Partner will attempt to
refinance such indebtedness and/or sell the properties prior to such maturity
dates. If the properties cannot be refinanced and/or sold for a sufficient
amount, the Partnership may risk losing such properties through foreclosure.
The Partnership paid distributions of approximately $197,000 (approximately
$195,000 to the limited partners or $4.96 per limited partnership unit) from
operations and approximately $298,000 (approximately $295,000 to the limited
partners or $7.51 per limited partnership unit) from the sale proceeds of
Cheyenne Woods Apartments during the three months ended March 31, 2001. No
distributions were made during the three months ended March 31, 2000. Future
cash distributions will depend on the levels of net cash generated from
operations, the availability of cash reserves, and the timing of debt
maturities, refinancings, and/or property sales. The Registrant's distribution
policy is reviewed on a monthly basis. There can be no assurance, however, that
the Registrant will generate sufficient funds from operations after required
capital expenditures to permit any further distributions to its partners in 2001
or subsequent periods.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 11,937 limited partnership
units in the Partnership representing 30.38% of the outstanding units. A number
of these units were acquired pursuant to tender offers made by AIMCO or its
affiliates. It is possible that AIMCO or its affiliates will make one or more
additional offers to acquire additional limited partnership interests in the
Partnership for cash or in exchange for units in the operating partnership of
AIMCO. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters, which
would include without limitation, voting on certain amendments to the
Partnership Agreement and voting to remove the General Partner. When voting on
matters, AIMCO would in all likelihood vote the Units it acquired in a manner
favorable to the interest of the General Partner because of their affiliation
with the General Partner.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
None.
b) Reports on Form 8-K:
Current Report on Form 8-K dated January 3, 2001 and filed on
January 12, 2001 in connection with the sale of Cheyenne Woods
Apartments.
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 GROWTH PROPERTIES
By: United Investors Real Estate, Inc.
Its General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date: May 14, 2001