FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
For the transition period.........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 (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
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, 1996
Assets
Cash:
Unrestricted $ 285
Restricted-tenant security deposits 80
Accounts receivable, net of allowance
of $49 21
Escrows for taxes and insurance 160
Restricted escrow 50
Other assets 166
Investment properties:
Land $ 1,979
Buildings and related personal property 15,045
17,024
Less accumulated depreciation (3,979) 13,045
$13,807
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 46
Tenant security deposits 80
Accrued taxes 94
Other liabilities 98
Mortgage notes payable 12,967
Partners' Capital
General partner $ --
Limited partners (39,297 units issued
and outstanding) 522 522
$13,807
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,
1996 1995 1996 1995
Revenues:
Rental income $ 739 $ 920 $1,491 $1,841
Other income 29 37 49 74
Total revenues 768 957 1,540 1,915
Expenses:
Operating 249 317 459 601
General and administrative 16 19 39 35
Maintenance 89 87 147 149
Depreciation 137 175 273 349
Interest 330 417 610 818
Property taxes 83 102 163 203
Total expenses 904 1,117 1,691 2,155
Minority interest in net
loss of joint venture 4 13 4 27
Net loss $ (132) $ (147) $ (147) $ (213)
Net loss allocated to
general partner (1%) $ (1) $ (2) $ (1) $ (2)
Net loss allocated to
limited partners (99%) (131) (145) (146) (211)
$ (132) $ (147) $ (147) $ (213)
Net loss per limited
partnership unit $(3.33) $(3.69) $(3.72) $(5.36)
<FN>
See Accompanying Notes to Consolidated Financial Statements
c) UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' 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' capital at
December 31, 1995 39,297 $ 1 $ 668 $ 669
Net loss for the six months
ended June 30, 1996 -- (1) (146) (147)
Partners' capital at
June 30, 1996 39,297 $ -- $ 522 $ 522
<FN>
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,
1996 1995
Cash flows from operating activities:
Net loss $ (147) $ (213)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Minority interest in net loss of
joint venture (4) (27)
Depreciation 273 349
Amortization of intangible assets 36 61
Change in accounts:
Restricted cash (5) (8)
Accounts receivable 17 (38)
Escrows for taxes and insurance (32) --
Other assets 9 (15)
Accounts payable (2) 13
Tenant security deposit liabilities 7 8
Accrued property taxes 49 4
Other liabilities (3) 2
Net cash provided by operating activities 198 136
Cash flows from investing activities:
Property improvements and replacements (38) (40)
Receipts from restricted escrows 68 --
Deposits to restricted escrows -- (11)
Net cash provided by (used in)
investing activities 30 (51)
Cash flows from financing activities:
Distributions from minority interest -- 8
Liquidating distribution to minority interest (61) --
Payments of mortgage notes payable (82) (91)
Net cash used in financing activities (143) (83)
Net increase in cash 85 2
Cash at beginning of period 200 247
Cash at end of period $ 285 $ 249
Supplemental disclosure of cash flow information:
Cash paid for interest $ 584 $ 767
<FN>
See Accompanying Notes to Consolidated Financial Statements
e) UNITED INVESTORS GROWTH PROPERTIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of United
Investors Growth Properties ("the 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. In the opinion of the General Partner (United Investors
Real Estate, Inc.), 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, 1996, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1996. For further information, refer to the financial
statements and footnotes thereto included in the Partnership's annual report on
Form 10-KSB for the fiscal year ended December 31, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
Note B - Basis of Accounting
The financial statements include the Partnership's operating divisions, Terrace
Royale Apartments, Deerfield Apartments, and Greystone South Plaza Center.
During the second quarter of 1994, Cheyenne Woods Apartments was restructured
into a lower tier partnership, known as Cheyenne Woods United Investors, L.P.
("Cheyenne"), in which United Investors Growth Properties is the 99.99% limited
partner. Although legal ownership of the asset was transferred to a new
entity, United Investors Growth Properties retained substantially all economic
benefits from the property. The Partnership consolidates its interest in
Cheyenne (whereby all accounts of Cheyenne are included in the consolidated
financial statements of the Partnership with intercompany accounts being
eliminated). In addition, the Partnership owned a 60% interest in Renaissance
Village Associates ("Renaissance"). The Partnership consolidated its interest
in Renaissance (whereby all accounts of the joint venture are included in the
Partnership's financial statements with intercompany accounts being
eliminated). The minority partners's share of the joint venture's net assets
were reflected as minority interest in the balance sheet of the Partnership.
Earnings and losses attributable to the minority partner's ownership of the
joint venture were reflected as a reduction or addition to net income of the
Partnership. In the third quarter of 1995, Renaissance Village Apartments was
sold by Renaissance. During the second quarter of 1996, a final distribution
was made to the joint venturers and the joint venture was liquidated.
Note C - Repurchase of Units
The partnership agreement for the Partnership contains a provision which states
that the General Partner shall purchase up to 10% of the limited partnership
units outstanding at the fifth anniversary date of the last Additional Closing
Date and become a limited partner with respect to such units. Pursuant to this
provision, the General Partner accepted repurchase notices representing 10% of
the limited partnership units and, during the fourth quarter of 1995, the
transfer of 3,926 units was effected.
Note D - 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 payments to affiliates for
property management services and for reimbursement of certain expenses incurred
by affiliates on behalf of the Partnership. Property management fees are
included in operating expenses. The following payments were made to affiliates
of the General Partner for the six months ended June 30, 1996 and 1995:
1996 1995
(in thousands)
Property management fees $82 $97
Reimbursement for services of affiliates 16 15
Additionally, the Partnership paid $9,000 to an affiliate of the General
Partner for lease commissions related to new leases at the Partnership's
commercial property during the six months ended June 30, 1995. These lease
commissions are included in other assets and amortized over the term of the
respective leases.
The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the General Partner. An affiliate of the General
Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the General Partner who receives
payments on these obligations from the agent. The amount of the Partnership's
insurance premiums accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligations is not significant.
Note E - Sale of Investment Property
On August 30, 1995, Renaissance Village Apartments was sold to an unaffiliated
party, Kauri Investments, Ltd. The Partnership recognized a gain on the sale
of approximately $166,000. The minority interest share of this gain was
approximately $66,000. The joint venture was liquidated during the second
quarter of 1996 with the Partnership retaining approximately $92,000 and the
minority interest holder receiving approximately $61,000 as liquidating
dividends.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of three apartment complexes
and a retail center. The following table sets forth the average occupancy of
the properties for the six month periods ended June 30, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Terrace Royale Apartments
Bothell, Washington 96% 93%
Cheyenne Woods Apartments
North Las Vegas, Nevada 98% 97%
Greystone South Plaza Center
Lenexa, Kansas 77% 82%
Deerfield Apartments
Memphis, Tennessee 98% 98%
The decrease in occupancy at Greystone South was due to tenants vacating the
property resulting in a net decrease of 2,700 square feet at June 30, 1996.
The Partnership realized a net loss of $147,000 for the six months ended June
30, 1996, of which $132,000 was incurred during the second quarter. The
corresponding net loss for 1995 was $213,000 and $147,000, respectively. The
decrease in the net loss was primarily due to the sale of Renaissance Village
in August of 1995. Renaissance generated $412,000 in revenues and $480,000 in
expenses during the six months ending June 30, 1995. The absence of this
property explains the overall decreases in rental revenues and total expenses.
Also contributing to the decreased net loss was an increase in rental revenues
at the remaining properties resulting from increased occupancy and rental rate
increases.
The operating results, excluding the impact of the Renaissance Village sale,
generated a decrease in net loss of $30,000. This is primarily due to the
increase in rental revenues discussed above partially offset by an increase in
maintenance expense of $29,000. The maintenance expense increase is
attributable to landscaping and exterior improvements at Deerfield and Cheyenne
Woods, respectively.
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 expense. 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.
At June 30, 1996, the Partnership held unrestricted cash of $285,000 compared
to $249,000 at June 30, 1995. Net cash provided by operating activities
increased due to decreased expenses and interest payments (which offset the
decreased revenues) resulting from the sale of Renaissance Village. Net cash
provided by investing activities increased as a result of the receipts of
restricted escrows from the liquidation of Renaissance Village during the
second quarter of 1996. Net cash used in financing activities increased due to
the liquidating distribution to the minority interest of Renaissance Village in
the second quarter of 1996.
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 various properties to adequately maintain the
physical assets and other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The mortgage indebtedness of $12,967,000 matures at various times with balloon
payments due at maturity before which time the properties will either be
refinanced or sold. Future cash distributions will depend on the levels of net
cash generated from operations, property sales and the availability of cash
reserves. Other than the liquidating distribution related to Renaissance
Village, no cash distributions were made in 1995 or during the first six months
of 1996.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 1996.
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
(A Missouri Limited Partnership)
By: United Investors Real Estate, Inc., a
Delaware corporation, its General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President/CAO
Date: August 12, 1996