United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2002
[ ] TRANSITION REPORT UNDER 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)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2002
Assets
Cash and cash equivalents $ 182
Receivables and deposits 61
Restricted escrows 82
Other assets 148
Investment properties:
Land $ 893
Buildings and related personal property 9,161
10,054
Less accumulated depreciation (4,313) 5,741
$ 6,214
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 16
Tenant security deposit liabilities 40
Accrued property taxes 53
Due to General Partner 389
Other liabilities 161
Mortgage notes payable 6,568
Partners' Deficit
General partner $ (16)
Limited partners (39,287 units
issued and outstanding) (997) (1,013)
$ 6,214
See Accompanying Notes to Consolidated Financial Statements
UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
(Restated)
Revenues:
Rental income $ 368 $ 429 $1,107 $1,234
Other income 35 26 107 78
Casualty gain 9 -- 9 36
Total revenues 412 455 1,223 1,348
Expenses:
Operating 206 163 547 534
General and administrative 31 32 95 128
Depreciation 111 101 328 310
Interest 126 122 371 368
Property taxes 55 43 162 138
Total expenses 529 461 1,503 1,478
Loss from continuing operations (117) (6) (130)
(280)
Loss from discontinued operations -- -- -- (81)
Net loss $ (117) $ (6) $ (280) $ (211)
Net loss allocated to
general partner (1%) $ (1) $ -- $ (3) $ (2)
Net loss allocated to
limited partners (99%) (116) (6) (277) (209)
$ (117) $ (6) $ (280) $ (211)
Per limited partnership unit:
Loss from continuing operations $(2.95) $ (.15) $(7.05) $(3.28)
Loss from discontinued operations -- -- -- (2.04)
Net loss $(2.95) $ (.15) $(7.05) $(5.32)
Distributions per limited
partnership unit $ -- $ 1.89 $ -- $14.36
See Accompanying Notes to Consolidated Financial Statements
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 nine months
ended September 30, 2002 -- (3) (277) (280)
Partners' deficit at
September 30, 2002 39,287 $ (16) $ (997) $(1,013)
See Accompanying Notes to Consolidated Financial Statements
UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
2002 2001
Cash flows from operating activities:
Net loss $ (280) $ (211)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Loss on early extinguishment of debt -- 57
Casualty gain (9) (36)
Depreciation 328 310
Amortization of loan costs 17 17
Change in accounts:
Receivables and deposits 17 22
Other assets (12) 6
Accounts payable (18) (14)
Tenant security deposit liabilities (7) (33)
Accrued property taxes (15) (5)
Due to General Partner 43 --
Other liabilities (21) (41)
Net cash provided by operating activities 43 72
Cash flows from investing activities:
Proceeds from sale of investment property -- 352
Net insurance proceeds received 37 69
Property improvements and replacements (314) (173)
Net withdrawals from restricted escrows 7 (5)
Net cash (used in) provided by investing
activities (270) 243
Cash flows from financing activities:
Proceeds from General Partner advances 414 --
Payments on advances from General Partner (78) --
Payments on mortgage notes payable (113) (105)
Distributions to partners -- (570)
Net cash provided by (used in) financing
activities 223 (675)
Net decrease in cash and cash equivalents (4) (360)
Cash and cash equivalents at beginning of period 186 488
Cash and cash equivalents at end of period $ 182 $ 128
Supplemental disclosure of cash flow information:
Cash paid for interest $ 369 $ 379
Supplemental disclosure of non-cash activity:
Mortgage assumed by Purchaser of Cheyenne Woods
Apartments $ -- $ 3,728
See Accompanying Notes to Consolidated Financial Statements
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 nine month periods ended September
30, 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 ("SFAS") 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 restated as of
September 30, 2001 to reflect the operations of Cheyenne Woods Apartments as
loss from discontinued operations due to its sale in January 2001.
Effective April 1, 2002, the Partnership adopted SFAS No. 145, "Rescission of
FASB Statements No. 4, 44 and 64". SFAS No. 4 "Reporting Gains and Losses from
Extinguishment of Debt," required that all gains and losses from extinguishment
of debt be aggregated and, if material, classified as an extraordinary item.
SFAS No. 145 rescinds SFAS No. 4, and accordingly, gains and losses from
extinguishment of debt should only be classified as extraordinary if they are
unusual in nature and occur infrequently. Neither of these criteria applies to
the Partnership. As a result, the accompanying consolidated statements of
operations have been restated as of September 30, 2001 to reflect the loss on
early extinguishment of debt of approximately $57,000 at Cheyenne Woods
Apartments in discontinued operations rather than as an extraordinary item.
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 nine months ended September 30, 2002 and 2001, affiliates of the
General Partner were entitled to receive 5% of gross receipts from both of the
Registrant's residential properties as compensation for providing property
management services. The Registrant paid to such affiliates approximately
$59,000 and $71,000 for the nine months ended September 30, 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 $68,000 and $48,000 for the
nine month periods ended September 30, 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 $25,000 and
$10,000 for the nine months ended September 30, 2002 and 2001, respectively. The
construction management service fees are calculated based on a percentage of
current year additions to investment properties. As of September 30, 2002, the
Partnership owed approximately $37,000 to an affiliate of the General Partner
for reimbursement of accountable administrative expenses.
During the nine months ended September 30, 2002, an affiliate of the General
Partner advanced the Partnership approximately $414,000 to cover operating
obligations at Deerfield Apartments and the Partnership. There were no such
advances during the nine months ended September 30, 2001. The Partnership was
able to repay approximately $78,000 of such advances during the nine months
ended September 30, 2002. At September 30, 2002, the Partnership owed an
affiliate of the General Partner approximately $352,000 which includes advances
and accrued interest from 2001. Interest is being charged at prime rate plus 2%,
or 6.75%, at September 30, 2002, in accordance with the Partnership Agreement.
During the nine months ended September 30, 2002, the Partnership recognized
interest expense of approximately $9,000 relative to obligations to affiliates.
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 nine months ended September
30, 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 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 $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 nine months ended September 30, 2001 was the
recognition of loss from discontinued operations of approximately $81,000, which
includes a loss on the early extinguishment of debt of approximately $57,000.
Note D - Casualty Gain
During the three and nine months ended September 30, 2002 a net casualty gain of
approximately $9,000 was recorded at Deerfield Apartments. The casualty gain
related to fire damage to the apartment complex that occurred on October 26,
2001. The gain was a result of the receipt of insurance proceeds of
approximately $37,000 offset by approximately $28,000 of undepreciated fixed
assets being written off.
During the nine months ended September 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 $69,000 offset by approximately
$33,000 of undepreciated fixed assets being written off.
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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements in certain circumstances. The matters discussed
in this report contain certain forward-looking statements, including, without
limitation, statements regarding future financial performance and the effect of
government regulations. The discussions of the Registrant's business and results
of operations, including forward-looking statements pertaining to such matters,
do not take into account the effects of any changes to the Registrant's business
and results of operations. Actual results may differ materially from those
described in the forward-looking statements and will be affected by a variety of
risks and factors including, without limitation: national and local economic
conditions; the terms of governmental regulations that affect the Registrant and
interpretations of those regulations; the competitive environment in which the
Registrant operates; financing risks, including the risk that cash flows from
operations may be insufficient to meet required payments of principal and
interest; real estate risks, including variations of real estate values and the
general economic climate in local markets and competition for tenants in such
markets; and possible environmental liabilities. Readers should carefully review
the Registrant's financial statements and the notes thereto, as well as the risk
factors described in the documents the Registrant 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 nine month periods ended September 30, 2002 and 2001:
Average Occupancy
Property 2002 2001
Terrace Royale Apartments 89% 94%
Bothell, Washington
Deerfield Apartments 90% 92%
Memphis, Tennessee
The General Partner attributes the decrease in occupancy at Terrace Royale
Apartments to increased competition in the local market of the Seattle area.
Results of Operations
The Registrant's net loss for the three and nine months ended September 30, 2002
was approximately $117,000 and $280,000 compared to a net loss, as restated, of
approximately $6,000 and $211,000 for the three and nine months ended September
30, 2001.
Effective January 1, 2002, the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") 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 restated as of
September 30, 2001 to reflect the operations of Cheyenne Woods Apartments as
loss from discontinued operations due to its sale in January 2001.
Effective April 1, 2002, the Partnership adopted SFAS No. 145, "Rescission of
FASB Statements No. 4, 44 and 64". SFAS No. 4 "Reporting Gains and Losses from
Extinguishment of Debt," required that all gains and losses from extinguishment
of debt be aggregated and, if material, classified as an extraordinary item.
SFAS No. 145 rescinds SFAS No. 4, and accordingly, gains and losses from
extinguishment of debt should only be classified as extraordinary if they are
unusual in nature and occur infrequently. Neither of these criteria applies to
the Partnership. As a result, the accompanying consolidated statements of
operations have been restated as of September 30, 2001 to reflect the loss on
early extinguishment of debt of approximately $57,000 at Cheyenne Woods
Apartments in discontinued operations rather than as an extraordinary item.
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 the 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
financial statement impact recorded during the nine months ended September 30,
2001 was a loss from discontinued operations of approximately $81,000, which
includes a loss on the early extinguishment of debt of approximately $57,000.
Excluding the impact of discontinued operations, the Partnership had a loss of
approximately $117,000 and $280,000 for the three and nine months ended
September 30, 2002 as compared to a loss of approximately $6,000 and $130,000
for the three and nine months ended September 30, 2001. The increase in loss for
the three and nine months ended September 30, 2002 is due to a decrease in total
revenues and an increase in total expenses. Total revenues for the nine months
ended September 30, 2002 decreased due to a decrease in rental income and
casualty gain partially offset by an increase in other income. Total revenues
for the three months ended September 30, 2002 decreased due to a decrease in
rental income partially offset by an increase in other income and casualty gain.
Rental income for the three and nine months ended September 30, 2002 decreased
due to a decrease in occupancy at both investment properties and an increase in
bad debt expense at Deerfield Apartments. Other income for the three and nine
month periods increased due to an increase in late charges and lease
cancellation fees at Deerfield Apartments and utility reimbursements at Terrace
Royale Apartments partially offset by a decrease in interest income due to lower
cash balances maintained in interest bearing accounts at the Partnership and its
investment properties. During the three and nine months ended September 30, 2002
a net casualty gain of approximately $9,000 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
$37,000 offset by approximately $28,000 of undepreciated fixed assets being
written off. During the nine months ended September 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 $69,000 offset by
approximately $33,000 of undepreciated fixed assets being written off.
Total expenses increased for the nine months ended September 30, 2002 due to an
increase in operating, depreciation and property tax expenses partially offset
by a decrease in general and administrative expense. Total expenses for the
three months ended September 30, 2002 increased due to an increase in operating,
depreciation and property tax expenses. Operating expenses for the nine months
ended September 30, 2002 increased due to an increase in property expenses
partially offset by a decrease in maintenance expenses. Operating expenses for
the three months ended September 30, 2002, increased due to an increase in
property expense. Property expense for the three and nine months ended September
30, 2002 increased due to an increase in employee salaries and apartments and
sewer expense at Terrace Royal Apartments partially offset by a decrease in
employee salaries at Deerfield Apartments. Maintenance expenses for the nine
months ended September 30, 2002 decreased due to a decrease in contract work at
Terrace Royale Apartments. Depreciation for the three and nine month periods
increased due to property improvements and replacements placed into service
during the last twelve months at Deerfield Apartments. Property tax expenses for
the three and nine month periods increased as a result of the increase in
assessed value at Deerfield Apartments by the City of Memphis. General and
administrative expenses for the nine months ended September 30, 2002 decreased
due to a decrease in taxes and license fees and professional services partially
offset by an increase in management reimbursements allowed to the General
Partner under the Partnership Agreement.
Included in general and administrative expenses for the three and nine months
ended September 30, 2002 and 2001, 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 September 30, 2002, the Registrant had cash and cash equivalents of
approximately $182,000 as compared to approximately $128,000 at September 30,
2001. The decrease in cash and cash equivalents of approximately $4,000 from the
Registrant's fiscal year ended December 31, 2001, is due to approximately
$270,000 of cash used in investing activities partially offset by approximately
$223,000 of cash provided by financing activities and approximately $43,000 of
cash provided by operating activities. Cash used in investing activities
consisted of property improvements and replacements partially offset by proceeds
received from the casualty at Deerfield Apartments and 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 payments against 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. The General Partner monitors
developments in the area of legal and regulatory compliance and is studying new
federal laws, including the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act
of 2002 mandates or suggests additional compliance measures with regard to
governance, disclosure, audit and other areas. In light of these changes, the
Partnership expects that it will incur higher expenses related to compliance,
including increased legal and audit fees. Capital improvements planned for each
of the Registrant's properties are detailed below.
Terrace Royale Apartments
During the nine months ended September 30, 2002, the Partnership completed
approximately $33,000 of capital improvements at Terrace Royale Apartments
consisting primarily of appliance and floor covering replacements, interior
decoration and window treatments. These improvements were funded from operating
cash flows. The Partnership has evaluated the capital improvement needs of the
property for the year. The amount budgeted is approximately $33,000, consisting
primarily of floor covering and appliance 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 nine months ended September 30, 2002, the Partnership completed
approximately $281,000 of capital improvements at Deerfield Apartments
consisting primarily of exterior building painting, parking lot resurfacing,
appliance and floor covering replacements, major landscaping, water submetering
and structural upgrades. These improvements were funded from operating cash
flows and replacement reserves. The Partnership has evaluated the capital
improvement needs of the property for the year. The amount budgeted is
approximately $309,000, consisting primarily of structural upgrades, water
heater replacements, recreational facilities, exterior building painting, major
landscaping and parking lot resurfacing. 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 $6,568,000 has maturity dates ranging from
December 2004 to February 2019 with a balloon payment of approximately
$3,303,000 due at maturity in December 2004 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 nine months ended
September 30, 2002 and 2001 (in thousands except per unit data):
Nine Months Per Nine Months Per
Ended Limited Ended Limited
September 30, Partnership September 30, Partnership
2002 Unit 2001 Unit
Operations $ -- $ -- $ 272 $ 6.85
Sale (1) -- -- 298 7.51
$ -- $ -- $ 570 $14.36
(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
during the remainder of 2002 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 14,328 limited partnership units
(the "Units") in the Partnership representing 36.47% of the outstanding Units at
September 30, 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 acquire additional units of limited partnership interest in the
Partnership in exchange for cash or a combination of cash and units in 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 which
would include voting on certain amendments to the Partnership Agreement and
voting to remove the General Partner. 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 it sole stockholder.
Critical Accounting Policies and Estimates
The consolidated 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 considered impaired. If events or circumstances indicate that the
carrying amount of a property may be impaired, the Partnership will make an
assessment of its recoverability by estimating the undiscounted future cash
flows, excluding interest charges, of the property. If the carrying amount
exceeds the aggregate future cash flows, the Partnership would recognize an
impairment loss to the extent the carrying amount exceeds the 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 changes in the
national, regional and local economic climate; local conditions, such as an
oversupply of multifamily properties; competition from other available
multifamily property owners and changes in market rental rates. Any adverse
changes in these factors could cause an impairment in the Partnership's assets.
Revenue Recognition
The Partnership generally leases apartment units for twelve-month terms or less.
Rental income attributable to leases is recognized monthly as it is earned. The
Partnership will offer rental concessions during particularly slow months or in
response to heavy competition from other similar complexes in the area.
Concessions are charged to income as incurred.
ITEM 3. CONTROLS AND PROCEDURES
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, within 90 days of the
filing date of this quarterly report, evaluated the effectiveness of the
Partnership's disclosure controls and procedures (as defined in Exchange Act
Rules (13a-14(c) and (15d-14(c)) and have determined that such disclosure
controls and procedures are adequate. There have been no significant changes in
the Partnership's internal controls or in other factors that could significantly
affect the Partnership's internal controls since the date of evaluation. The
Partnership does not believe any significant deficiencies or material weaknesses
exist in the Partnership's internal controls. Accordingly, no corrective actions
have been taken.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
3.1 Form of Agreement of Limited Partnership (part of the
Prospectus of Partnership contained in the Partnership's
Amendment to Registration Statement filed on June 9,
1988, is incorporated herein by reference).
3.2 Seventh Amendment to Agreement of Limited Partnership
(Exhibit 4.3 to the Partnership's Quarterly Report on
Form 10-Q filed on May 15, 1989, is incorporated herein
by reference).
99 Certification of Chief Executive Officer and Chief
Financial Officer
b) Reports on Form 8-K:
Current Report on Form 8-K/A dated June 27, 2002 and filed on
July 16, 2002, disclosing the dismissal of KPMG LLP as the
Registrant's certifying auditor and the appointment of Ernst &
Young LLP, as the certifying auditor for the year ending
December 31, 2002.
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/ Thomas C. Novosel
Thomas C. Novosel
Senior Vice President
and Chief Accounting Officer
Date: November 13, 2002
CERTIFICATION
I, Patrick J. Foye, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of United Investors
Growth Properties;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002
Patrick J. Foye
Executive Vice President of United Investors
Real Estate, Inc., equivalent of the chief
executive officer of the Partnership
CERTIFICATION
I, Paul J. McAuliffe, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of United Investors
Growth Properties;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002
Paul J. McAuliffe
Executive Vice President and Chief Financial
Officer of United Investors Real Estates, Inc.,
equivalent of the chief financial officer of
the Partnership
Exhibit 99
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-QSB of United Income Growth
Partnership (the "Partnership"), for the quarterly period ended September 30,
2002 as filed with the Securities and Exchange Commission on the date hereof
(the "Report"), Patrick J. Foye, as the equivalent of the chief executive
officer of the Partnership, and Paul J. McAuliffe, as the equivalent of the
chief financial officer of the Partnership, each hereby certifies, pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/Patrick J. Foye
Name: Patrick J. Foye
Date: November 13, 2002
/s/Paul J. McAuliffe
Name: Paul J. McAuliffe
Date: November 13, 2002
This certification accompanies the Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Partnership for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.