FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT of 1934
For the quarterly period ended June 30, 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)
June 30, 2001
Assets
Cash and cash equivalents $ 250
Receivables and deposits 63
Restricted escrows 69
Other assets 173
Investment properties:
Land $ 893
Buildings and related personal property 8,812
9,705
Less accumulated depreciation (3,793) 5,912
$ 6,467
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 84
Tenant security deposit liabilities 48
Accrued property taxes 55
Other liabilities 98
Mortgage notes payable 6,753
Partners' Deficit
General partner $ (11)
Limited partners (39,287 units
issued and outstanding) (560) (571)
$ 6,467
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 Six Months Ended
June 30, June 30,
2001 2000 2001 2000
Revenues:
Rental income $ 406 $ 664 $ 800 $1,311
Other income 23 53 56 99
Casualty gain 36 -- 36 --
Total revenues 465 717 892 1,410
Expenses:
Operating 219 281 386 568
General and administrative 62 48 96 83
Depreciation 102 171 209 338
Interest 122 200 253 397
Property taxes 46 69 96 121
Total expenses 551 769 1,040 1,507
Loss before extraordinary item (86) (52) (97)
(148)
Loss on early extinguishment of debt -- -- (57) --
Net loss $ (86) $ (52) $ (205) $ (97)
Net loss allocated to
general partner (1%) $ (1) $ (1) $ (2) $ (1)
Net loss allocated to
limited partners (99%) (85) (51) (203) (96)
$ (86) $ (52) $ (205) $ (97)
Per limited partnership unit:
Loss before extraordinary item $(2.16) $(1.30) $(3.73) $(2.44)
Loss on early extinguishment
of debt -- -- (1.44) --
Net loss $(2.16) $(1.30) $(5.17) $(2.44)
Distributions per limited
partnership unit $ -- $10.07 $12.47 $10.07
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
Distribution to partners -- (5) (490) (495)
Net loss for the six months
ended June 30, 2001 -- (2) (203) (205)
Partners' deficit at
June 30, 2001 39,287 $ (11) $ (560) $ (571)
See Accompanying Notes to Consolidated Financial Statements
d)
UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2001 2000
Cash flows from operating activities:
Net loss $ (205) $ (97)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Extraordinary loss on early extinguishment of debt 57 --
Casualty gain (36) --
Depreciation 209 338
Amortization of loan costs 11 15
Change in accounts:
Receivables and deposits 28 129
Other assets 5 (2)
Accounts payable 45 (100)
Tenant security deposit liabilities (29) 3
Accrued property taxes 13 (12)
Other liabilities (52) (54)
Net cash provided by operating activities 46 220
Cash flows from investing activities:
Proceeds from sale of investment property 352 --
Net insurance proceeds received 61 --
Property improvements and replacements (137) (154)
Net withdrawals from restricted escrows 5 10
Net cash provided by (used in) investing
activities 281 (144)
Cash flows from financing activities:
Payments on mortgage notes payable (70) (86)
Distributions to partners (495) (400)
Net cash used in financing activities (565) (486)
Net decrease in cash and cash equivalents (238) (410)
Cash and cash equivalents at beginning of period 488 774
Cash and cash equivalents at end of period $ 250 $ 364
Supplemental disclosure of cash flow information:
Cash paid for interest $ 262 $ 384
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 and six month periods ended June 30,
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.
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 required that those enterprises report
selected information about operating segments in interim financial reports. It
also established 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.
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 its affiliates during the six month periods ended June 30, 2001 and
2000:
2001 2000
(in thousands)
Property management fees (included in operating expenses) $ 48 $ 72
Reimbursement for services of affiliates (included in
general and administrative expense, operating expense and
investment properties) 33 31
During the six months ended June 30, 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
$48,000 and $72,000 for the six months ended June 30, 2001 and 2000,
respectively.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $33,000 and $31,000 for the
six month periods ended June 30, 2001 and 2000.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 11,937 limited partnership units in
the Partnership representing 30.38% of the outstanding units at June 30, 2001. 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 its 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 approximately
$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 approximately $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 six months ended June 30, 2001
was the recognition of a loss on the 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 were approximately $517,000 for the six months ended
June 30, 2000.
Note D - Casualty Gain
During the six months ended June 30, 2001, a net casualty gain of approximately
$36,000 was recorded at Deerfield Apartments. The casualty gain related to fire
damage to the apartment complex. The gain was a result of the receipt of
insurance proceeds of approximately $61,000 and a receivable for additional
proceeds of approximately $8,000 offset by approximately $33,000 of
undepreciated fixed assets being written off.
Note E - 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 six months ended June 30, 2001. During the
six months ended June 30, 2000 the Partnership paid a distribution of
approximately $400,000 (approximately $396,000 to the limited partners or $10.07
per limited partnership unit) from refinancing proceeds at Terrace Royale
Apartments.
Note F - 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.
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 six month periods ended June 30, 2001 and 2000:
Average Occupancy
Property 2001 2000
Terrace Royale Apartments 92% 94%
Bothell, Washington
Deerfield Apartments 92% 96%
Memphis, Tennessee
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 six months ended June 30, 2000. This property was sold on January 3, 2001.
Results of Operations
The Registrant's net loss for the three and six months ended June 30, 2001 was
approximately $86,000 and $205,000 compared to net loss of approximately $52,000
and $97,000 for the three and six months ended June 30, 2000. The increase in
net loss for the three and six month periods ended June 30, 2001, is due
primarily to the loss on early extinguishment of debt of approximately $57,000,
and a decrease in total revenues which were partially offset by a decrease in
total expenses as a result of the sale of Cheyenne Woods Apartments. The
increase in net loss was also partially offset by a casualty gain recognized
during the three and six months ended June 30, 2001 as a result of a fire at
Deerfield Apartments as discussed below.
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 approximately
$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 approximately $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 six months ended June 30, 2001
was the recognition of a loss on the 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 were approximately $517,000 for the six months ended
June 30, 2000.
During the six months ended June 30, 2001, a net casualty gain of approximately
$36,000 was recorded at Deerfield Apartments. The casualty gain related to fire
damage to the apartment complex. The gain was a result of the receipt of
insurance proceeds of approximately $61,000 and a receivable for additional
proceeds of approximately $8,000 offset by approximately $33,000 of
undepreciated fixed assets being written off.
Excluding the impact of the sale and operations of Cheyenne Woods Apartments and
the casualty gain at Deerfield Apartments, the Partnership had a net loss of
approximately $121,000 and $159,000 for the three and six months ended June 30,
2001 as compared to net loss of approximately $28,000 and $66,000 for the three
and six months ended June 30, 2000, respectively. The increase in net loss for
both periods is primarily attributable to an increase in total expenses and a
decrease in total revenues. Total revenues decreased for the three and six
months ended June 30, 2001 due to a decrease in rental income and other income.
Rental income decreased due to a decrease in occupancy at both of the
Partnership's properties and an increase in concessions at Terrace Royal
Apartments. Other income decreased due to a decrease in utility and cable TV
charges at Terrace Royal Apartments which was partially offset by an increase in
lease cancellation fees at both investment properties. Other income also
decreased due to a decrease in interest income as a result of lower average cash
balances being maintained in interest bearing accounts.
Total expenses increased as a result of an increase in general and
administrative and operating expenses for the three and six months ended June
30, 2001. General and administrative expense increased due to an increase in tax
and license fees, and professional services. This increase was partially offset
by a decrease in legal fees and management reimbursements to the General Partner
allowed under the Partnership Agreement. Operating expense increased as a result
of an increase in maintenance expense and property expense. Maintenance expense
increased due to an increase in contract labor at Terrace Royale Apartments.
Property expense increased due to an increase in utilities as a result of vacant
apartments at both investment properties and the addition of maintenance
personnel at Deerfield Apartments.
Also included in general and administrative expenses for the three and six
months ended June 30, 2001 and 2000, are costs associated with the quarterly and
annual communications with investors and regulatory agencies and the annual
audit required by the Partnership Agreement.
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 June 30, 2001, the Registrant had cash and cash equivalents of approximately
$250,000 as compared to approximately $364,000 at June 30, 2000. The decrease in
cash and cash equivalents of approximately $238,000 from the Registrant's year
ended December 31, 2000, is due to approximately $565,000 of cash used in
financing activities which was partially offset by approximately $281,000 of
cash provided by investing activities and approximately $46,000 of cash provided
by operating activities. Cash provided by investing activities consisted of
proceeds from the sale of Cheyenne Woods Apartments and net insurance proceeds
received as a result of the casualty at Deerfield Apartments and, to a lesser
extent, net withdrawals from escrow accounts maintained by the mortgage lender
which were partially offset by property improvements and replacements. Cash used
in financing activities consisted of distributions to the partners and, to a
lesser extent, payments of principal made on the mortgages encumbering the
Registrant's properties. 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 six months ended June 30, 2001, the Partnership completed
approximately $24,000 of capital improvements at Terrace Royale Apartments
consisting primarily of floor covering and appliance replacements, structural
improvements and other building improvements. These improvements were funded
from cash flow from Partnership reserves and operating cash flow. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $22,000, consisting primarily of floor covering replacements and
appliance improvements and other building 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 six months ended June 30, 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 six months ended June 30, 2001, the Partnership completed
approximately $111,000 of capital improvements at Deerfield Apartments
consisting primarily of floor covering and appliance replacements and structural
improvements due to casualty at the property as discussed above. These
improvements were funded from the Partnership's operating cash flow. The
Partnership has budgeted, but is not limited to, capital improvements of
approximately $266,000, consisting primarily of roof replacements, water heater
replacements, and 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 $6,753,000 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 six months ended June 30, 2001. During the
six months ended June 30, 2000 the Partnership paid a distribution of
approximately $400,000 (approximately $396,000 to the limited partners or $10.07
per limited partnership unit) from refinancing proceeds at Terrace Royale
Apartments. 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 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 owned 11,937 limited partnership units in
the Partnership representing 30.38% of the outstanding units at June 30, 2001. 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 its 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:
None filed during the quarter ended June 30, 2001.
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: August 9, 2001