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, 2002
[ ] 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, 2002
Assets
Cash and cash equivalents $ 95
Receivables and deposits 69
Restricted escrows 63
Other assets 180
Investment properties:
Land $ 893
Buildings and related personal property 9,063
9,956
Less accumulated depreciation (4,101) 5,855
$ 6,262
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 137
Tenant security deposit liabilities 45
Accrued property taxes 45
Due to General Partner 88
Other liabilities 85
Mortgage notes payable 6,644
Partners' Deficit
General partner $ (13)
Limited partners (39,287 units
issued and outstanding) (769) (782)
$ 6,262
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,
2002 2001
Revenues:
Rental income $ 389 $ 399
Other income 32 29
Total revenues 421 428
Expenses:
Operating 156 153
General and administrative 33 34
Depreciation 105 107
Interest 122 123
Property taxes 54 49
Total expenses 470 466
Loss from continuing operations (49) (38)
Loss from discontinued operations -- (24)
Extraordinary loss on early extinguishment of debt
from discontinued operations -- (57)
Net loss $ (49) $ (119)
Net loss allocated to general partner (1%) $ -- $ (1)
Net loss allocated to limited partners (99%) (49) (118)
$ (49) $ (119)
Per limited partnership unit:
Loss from continuing operations $(1.25) $ (.96)
Loss from discontinued operations -- (.60)
Extraordinary loss on early extinguishment of debt
from discontinued operations -- (1.44)
Net loss $(1.25) $(3.00)
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
(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 at
December 31, 2001 39,287 $ (13) $ (720) $ (733)
Net loss for the three months
ended March 31, 2002 -- -- (49) (49)
Partners' deficit at
March 31, 2002 39,287 $ (13) $ (769) $ (782)
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,
2002 2001
Cash flows from operating activities:
Net loss $ (49) $ (119)
Adjustments to reconcile net loss to net cash used in
operating activities:
Extraordinary loss on early extinguishment of debt -- 57
Depreciation 105 107
Amortization of loan costs 6 6
Change in accounts:
Receivables and deposits 9 24
Other assets (33) (13)
Accounts payable 56 (28)
Tenant security deposit liabilities (2) (30)
Accrued property taxes (23) 8
Due to General Partner 23 --
Other liabilities (107) (67)
Net cash used in operating activities (15) (55)
Cash flows from investing activities:
Proceeds from sale of investment property -- 352
Property improvements and replacements (130) (25)
Net withdrawals from restricted escrows 26 7
Net cash (used in) provided by investing
activities (104) 334
Cash flows from financing activities:
Proceeds from General Partner advances 70 --
Payments on advances from affiliate of General Partner (5) --
Payments on mortgage notes payable (37) (34)
Distributions to partners -- (495)
Net cash provided by (used in) financing
activities 28 (529)
Net decrease in cash and cash equivalents (91) (250)
Cash and cash equivalents at beginning of period 186 488
Cash and cash equivalents at end of period $ 95 $ 238
Supplemental disclosure of cash flow information:
Cash paid for interest $ 116 $ 142
Supplemental disclosure of non-cash activity:
Mortgage assumed by Purchaser of Cheyenne Woods Apartments $ -- $ 3,728
Fixed assets in accounts payable $ 47 $ --
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 "Registrant" or "Partnership") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. 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, 2002, are
not necessarily indicative of the results that may be expected for the fiscal
year ending December 31, 2002. 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, 2001.
Effective January 1, 2002, the Partnership adopted Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", which established standards for the way that public business
enterprises report information about long-lived assets that are either being
held for sale or have already been disposed of by sale or other means. The
standard requires that results of operations for a long-lived asset that is
being held for sale or has already been disposed of be reported as a
discontinued operation on the statement of operations. As a result, the
accompanying consolidated statements of operations have been reclassified as of
March 31, 2001 to reflect the operations of Cheyenne Woods Apartments as loss
from discontinued operations due to its sale in January 2001.
Reclassifications
Certain reclassifications have been made to the 2001 balances to conform to the
2002 presentation.
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.
During the three months ended March 31, 2002 and 2001, 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
$21,000 and $26,000 for the three months ended March 31, 2002 and 2001,
respectively, which is included in operating expenses and loss from discontinued
operations.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $24,000 and $13,000 for the
three month periods ended March 31, 2002 and 2001, respectively, which is
included in general and administrative expenses and investment properties.
Included in these amounts are fees related to construction management services
provided by an affiliate of the General Partner of approximately $6,000 for the
three months ended March 31, 2002. No such fees were charged during the three
months ended March 31, 2001. The construction management service fees are
calculated based on a percentage of current year additions to investment
properties. As of March 31, 2002, the Partnership owed approximately $13,000 to
an affiliate of the General Partner for reimbursement of accountable
administrative expenses accrued during the three months ended March 31, 2002.
During the three months ended March 31, 2002, an affiliate of the General
Partner advanced the Partnership approximately $70,000 to cover operating
obligations at Deerfield Apartments. The Partnership was able to repay
approximately $5,000 of such advances during the same period. At March 31, 2002,
the Partnership owed an affiliate of the General Partner approximately $75,000
which includes advances from 2001. Interest is being charged at prime rate plus
2% in accordance with the Partnership Agreement. During the three months ended
March 31, 2002, the Partnership made interest payments of approximately $1,000
and recognized interest expense of approximately $1,000.
Beginning in 2001, the Partnership began insuring 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 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 three months ended March 31,
2002 and 2001, the Partnership paid AIMCO and its affiliates approximately
$20,000 and $18,000, respectively, for insurance coverage and fees associated
with policy claims administration.
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 financial statement impact recorded during
the three months ended March 31, 2001 was the recognition of loss on early
extinguishment of debt of approximately $57,000 due to the write off of
unamortized loan costs and loss from discontinued operations of approximately
$24,000.
Note D - 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 three month periods ended March 31, 2002 and 2001:
Average Occupancy
Property 2002 2001
Terrace Royale Apartments 93% 89%
Bothell, Washington
Deerfield Apartments 86% 92%
Memphis, Tennessee
The General Partner attributes the increase in occupancy at Terrace Royale
Apartments to an aggressive marketing campaign and an increase in local traffic
patterns in the Boethell, Washington area. The General Partner attributes the
decrease in occupancy at Deerfield Apartments to increased competition in the
local market in the Memphis area.
Results of Operations
The Registrant's net loss for the three months ended March 31, 2002 was
approximately $49,000 compared to approximately $119,000 for the three months
ended March 31, 2001. The decrease in net loss is due primarily to the loss on
early extinguishment of debt related to discontinued operations of approximately
$57,000 and loss from discontinued operations of approximately $24,000 resulting
from the sale of Cheyenne Woods Apartments during the three months ended March
31, 2001.
Effective January 1, 2002, the Partnership adopted Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", which established standards for the way that public business
enterprises report information about long-lived assets that are either being
held for sale or have already been disposed of by sale or other means. The
standard requires that results of operations for a long-lived asset that is
being held for sale or has already been disposed of be reported as a
discontinued operation on the statement of operations. As a result, the
accompanying consolidated statements of operations have been reclassified as of
March 31, 2001 to reflect the operations of Cheyenne Woods Apartments as loss
from discontinued operations.
On January 3, 2001, Cheyenne Woods Apartments, 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, 2001 was the recognition of
loss on early extinguishment of debt of approximately $57,000 due to the write
off of unamortized loan costs and loss from discontinued operations of
approximately $24,000.
Excluding the impact of discontinued operations, the Partnership had a loss from
continuing operations of approximately $49,000 for the three months ended March
31, 2002, compared to a loss from continuing operations of approximately $38,000
for the three months ended March 31, 2001. The increase in loss from continuing
operations is due to a decrease in total revenues while total expenses remained
relatively constant for the three months ended March 31, 2002 and 2001,
respectively. Total revenues decreased due to a decrease in rental income.
Rental income decreased due to a decrease in occupancy at Deerfield Apartments
which was partially offset by an increase in occupancy at Terrace Royale
Apartments.
General and administrative expense remained relatively constant for the three
months ended March 31, 2002 and 2001, respectively. Included in general and
administrative expenses at both March 31, 2002 and 2001, 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, 2002, the Registrant had cash and cash equivalents of approximately
$95,000 as compared to approximately $238,000 at March 31, 2001. The decrease in
cash and cash equivalents of approximately $91,000 from the Registrant's year
ended December 31, 2001, is due to approximately $104,000 of cash used in
investing activities and approximately $15,000 of cash used in operating
activities which was partially offset by approximately $28,000 of cash provided
by financing activities. Cash used in investing activities consisted of property
improvements and replacements partially offset by net withdrawals from escrow
accounts maintained by the mortgage lender. Cash provided by financing
activities consisted of advances from an affiliate of the General Partner
partially offset by payments of principal made on the mortgages encumbering the
Registrant's properties and on advances from an affiliate of the General
Partner. 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 Terrace
During the three months ended March 31, 2002, the Partnership completed
approximately $16,000 of capital improvements at Terrace Royale Apartments
consisting primarily of parking lot upgrades, mini blinds, and appliance and
floor covering replacements. These improvements were funded from operating cash
flow. The Partnership has budgeted, but is not limited to, capital improvements
of approximately $30,000 for the year 2002 at this property which consist
primarily of signage, water heater replacements, parking lot upgrades and
appliance 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.
Deerfield Apartments
During the three months ended March 31, 2002, the Partnership completed
approximately $161,000 of capital improvements at Deerfield Apartments
consisting primarily of exterior building painting and structural upgrades.
These improvements were funded from operating cash flow and replacement
reserves. The Partnership has budgeted for, but is not limited to, capital
improvements of approximately $308,000 for the year 2002 at this property which
consist of signage, major landscaping, parking lot upgrades, recreational
facility upgrades, exterior building painting, water heater replacements,
appliance and floor covering replacements and structural upgrades. 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 $6,644,000 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 distributed the following amounts during the three months ended
March 31, 2002 and 2001 (in thousands except per unit data):
Three Months Per Limited Three Months Per Limited
Ended Partnership Ended Partnership
March 31, 2002 Unit March 31, 2001 Unit
Operations $ -- $ -- $ 197 $ 4.96
Sale (1) -- -- 298 7.51
$ -- $ -- $ 495 $12.47
(1) Distribution made from sales proceeds of Cheyenne Woods.
The Registrant's cash available for distribution is reviewed on a monthly basis.
Future 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. There can be no assurance,
however, that the Registrant will generate sufficient funds from operations
after required capital expenditures to permit distributions to its partners in
2002 or subsequent periods.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 13,554 limited partnership units in
the Partnership representing 34.50% of the outstanding units at March 31, 2002.
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. In this regard, on February 25, 2002, AIMCO Properties, LP commenced a
tender offer to acquire any and all of the units not owned by affiliates of
AIMCO for a purchase price of $4 per unit. Pursuant to this offer, AIMCO
Properties, LP acquired 594 units during the quarter ended March 31, 2002. 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 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 filed during the quarter ended March 31,2002:
None.
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 15, 2002