1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1999
--------------------------------------------------------------
or
[ ] 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: 0-18444
---------------------------------------------------------
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-1560476
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1300 Altura Road Fort Mill, South Carolina 29715-9201
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip code)
(803) 547-9100
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
September 30, December 31,
1999 1998
----------- -----------
ASSETS (Unaudited) (Note)
CURRENT ASSETS
Cash and cash equivalents $ 43,266 $ 45,738
Accounts receivable, tenant 39,901 39,695
Prepaid expenses 2,240 --
Securities available for sale 117,465 118,779
----------- -----------
Total current assets 202,872 204,212
----------- -----------
INVESTMENTS AND NONCURRENT RECEIVABLES
Properties on operating leases and properties held
for lease, net of accumulated depreciation
1999 $705,480; 1998 $705,480 2,368,831 2,333,320
OTHER ASSETS
Deferred charges, net of accumulated amortization
1999 $12,190; 1998 $12,190 2,810 2,810
Deferred leasing commissions, net of accumulated
amortization 1999 $19,265; 1998 $19,265 33,122 29,670
----------- -----------
$ 2,607,635 $ 2,570,012
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Note payable, bank $ -- $ 500,000
Current maturities of long-term debt 1,609,000 1,145,441
Accounts payable 1,488 5,997
Accrued expenses 49,984 18,296
Deferred revenue 2,179 --
----------- -----------
Total current liabilities 1,662,651 1,669,734
----------- -----------
LONG-TERM DEBT, less current maturities -- --
----------- -----------
COMMITMENT AND CONTINGENCY (Note 4)
PARTNERS' EQUITY
General partners (13,747) (14,202)
Limited partners 966,730 921,681
Unrealized gain on investment securities (7,999) (7,201)
----------- -----------
Total partner's equity 944,984 900,278
----------- -----------
$ 2,607,635 $ 2,570,012
=========== ===========
Note: The Condensed Balance Sheet at December 31, 1998 has been taken from
the audited financial statements at that date. See Notes to Condensed
Financial Statements.
2
3
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
(Unaudited) (Unaudited)
Rental income $ 140,199 $ 125,755 $ 415,331 $ 559,530
Operating expenses:
Wages and contract labor 1,500 1,575 5,004 6,975
Depreciation and amortization -- 39,416 -- 180,559
Repairs and maintenance 28,656 27,733 84,508 107,519
Management fees 4,177 3,769 12,454 17,571
Utilities 25,732 25,030 69,291 91,099
Professional fees 17,566 10,363 60,911 59,541
Property taxes 8,995 9,318 26,984 44,425
Miscellaneous 1,126 969 4,354 10,607
--------- --------- --------- ---------
87,752 118,173 263,506 518,296
--------- --------- --------- ---------
Operating income 52,447 7,582 151,825 41,234
--------- --------- --------- ---------
Nonoperating income (expense):
Interest and dividend income 2,453 2,985 7,376 13,818
Interest expense (33,508) (41,555) (112,203) (207,879)
Other 1,494 (1,012) (1,494) 198
Loss on Sale of properties held for lease -- (268) -- (175,980)
--------- --------- --------- ---------
(29,561) (39,850) (106,321) (369,843)
--------- --------- --------- ---------
Net income $ 22,886 $ (32,268) $ 45,504 $(328,609)
========= ========= ========= =========
Net income per limited
partnership unit $ 3.59 $ (5.07) $ 7.14 $ (51.59)
========= ========= ========= =========
See Notes to Condensed Financial Statements.
3
4
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
-------------------------------
1999 1998
----------- -----------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 45,504 $ (296,341)
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization -- 141,143
Loss(Gain) on sale of securities available for sale 1,494 (1,210)
Loss on sale of properties held for lease -- 175,712
Change in assets and liabilities:
(Increase) Decrease in prepaids, deferrals and (2,446) 31,356
other receivables
Increase (Decrease) in accounts payable and accrued expenses 29,358 (107,319)
----------- -----------
Net cash provided (used) by operating activities 73,910 (56,659)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of securities available for sale 20,138 404,092
Purchase of securities available for sale (21,116) (317,906)
Proceeds from sale of properties held for lease -- 3,241,214
Improvements in investment property (35,511) --
Disbursements for deferred leasing commissions (3,452) (19,777)
----------- -----------
Net cash (used) provided in investing activities (39,941) 3,307,623
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term borrowings (36,441) (3,306,161)
----------- -----------
Net cash (used) in financing activities (36,441) (3,306,161)
Net (decrease) in cash and cash equivalents (2,472) (55,197)
Cash and cash equivalents:
Beginning 45,738 92,544
----------- -----------
Ending $ 43,266 $ 37,347
=========== ===========
See Notes to Condensed Financial Statements.
4
5
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Nature of Business:
The Partnership was formed in July 1986 to acquire, operate, hold for
investment and sell real estate. The Partnership currently owns the
EastPark Executive Center in Charlotte, North Carolina. On April 24, 1998,
the Partnership sold the BB&T building facilities (formerly the UCB
building) in Greenville, South Carolina.
2. Opinion of Management:
In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments (all which were normal
recurring accruals) necessary for a fair presentation. The results of
operations for the interim periods are not necessarily indicative of the
results which may be expected for an entire year.
3. Statement of Cash Flows:
For purposes of reporting the statements of cash flows, the Limited
Partnership includes all cash accounts, which are not subject to
withdrawal restrictions or penalties, and all highly liquid debt
instruments purchased with a maturity of three months or less as cash and
cash equivalents on the accompanying condensed balance sheets.
4. Priority Return:
At December 31, 1998, the cumulative unpaid priority return to the unit
holders was $2,409,617 compared to $2,166,833 one year prior. This
increase resulted from no distributions being made to partners during the
year. Based on the current and projected commercial real estate market
conditions, the General Partners believe that it is reasonably unlikely
that a sale of the remaining Partnership property would produce net sale
proceeds sufficient to pay any of such priority return. Furthermore, the
General Partners believe that it is reasonably unlikely that the
Partnership's operating income or any refinancing of Partnership debt
would generate sufficient funds to pay any portion of the priority return.
5
6
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Changes in Financial Condition
There have not been any significant changes in financial condition from December
31, 1998 to September 30, 1999. The Partnership had approximately $35,000 in
additional upfit costs during the first quarter of 1999. These upfit costs were
for a new tenant that moved in February 1, 1999. The Partnership also paid
approximately $3,500 in commissions relating to this new lease). Accrued
expenses have increased since year end, due to the monthly accrual of 1999 real
property taxes. These taxes will be paid in January 2000 or at the time of sale
of the EastPark facility, whichever occurs first.
Liquidity and Capital Resources
During the quarter ended September 30, 1999, the Partnership operations
continued to meet working capital requirements, and the working capital deficit
was decreased by approximately $6,000 from December 31, 1998. The working
capital deficit at September 30, 1999 was $1,459,779. The loans on the EastPark
facility with First Union and United of Omaha matured on June 30, 1999 and July
1, 1999, respectively. These two loans were refinanced with one loan of
$1,625,000 with First Union. Although the new loan terms require interest only
payments, the Partnership will continue to pay essentially the same level of
debt service as before the refinance. The interest rate on the new loan is the
prime rate of First Union, which is currently 8%. The loan will mature on
December 30, 1999. The General Partners intend to renew the loan if the EastPark
Property is not sold before this date. (See "Status of EastPark Executive
Center" below).
Results of Operations
Rental income for the three months ended September 30, 1999 has increased by
approximately $14,000 as compared to the same period of the prior year. Rental
income was down approximately $144,000 for the nine months ended September 30,
1999 as compared to the same period of the prior year. The main cause for this
decrease is related to the sale of the BB&T building in April of the prior year.
Operating expenses are down approximately $254,000 for the nine months ended
September 30, 1999. The main factors for the decrease in operating expenses were
due to the sale of the BB&T Building and the absence of charges during this
period for depreciation expense. Generally accepted accounting principles
("GAAP") do not allow for depreciation to be taken after the building was
written down to current market value in the prior year.
Status of EastPark Executive Center
As previously reported, the EastPark Executive Center is under contract to be
sold to Four Dan, LLC, a North Carolina Limited Liability Company, for a sales
price of $2,525,000. On September 2, 1999, the General Partners signed an
Amendment to the contract to extend the due diligence period until October 2,
1999 with a 30-day close. On October 1, 1999 a Second Amendment to the contract
was signed. Under the terms of this Second Amendment, the closing on the
EastPark Sale shall be not later than thirty days after the Partnership gives
Four Dan, LLC notice that the Partnership has (i) obtained the approval of the
Limited Partners to the sale of the EastPark Executive Center, and (ii) obtained
an amendment to the Partnership's current lease with the General Services
Administration that renews the lease term and increases the square footage of
the leased space (but such notice shall not be given later than March 1, 2000).
Risks Associated with Year 2000
The Partnership, in its day to day operations, relies upon various computer
software and hardware that may be adversely affected by the change in the
millennium, from 1999 to 2000. In general, information system experts have
predicted that a wide variety of problems, from systems failures to data entry
and transfer errors, will result from the turn of the century. Repeated systems
failures, data entry and transfer errors and similar computer problems would
result in a material adverse effect on the Partnership and its operations.
However, the Partnership has examined its commuter software and hardware
6
7
and, based on such examination, does not reasonably anticipate any significant
internal problems as a result of the change in the millennium. The Partnership
may, however, be materially and adversely affected by external systems problems,
problems over which the Partnership has minimal control. The costs associated
with bringing the Partnership's computer systems in compliance will be minimal,
as the management company of the Partnership will be responsible for the
majority of these costs. In the worst case scenario, this single-property
company would be able to operate on a manual accounting system which would not
have an adverse affect on the day to day operations of the Partnership.
Forward-Looking Statements
This report contains certain forward-looking statements with respect to the
financial condition, results of operations, plans, objectives, future
performance and business of the Partnership. These forward-looking statements
involve certain risks and uncertainties. Actual results may differ materially
from those contemplated by such forward-looking statements.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership is not engaged in any legal
proceedings of a material nature at the present time.
Item 6. Exhibit Index
(a) Exhibits:
Designation
Number Under
Exhibit Item 601 of
Number Regulation S-K Exhibit Description
------- -------------- -------------------
1* 4 Instrument defining rights of
security holders - set forth in the
Limited Partnership Agreement
2* 10 Limited Partnership Agreement
3** 10.1 Exclusive Leasing and Management
Agreement dated October 1, 1994
(EastPark Executive Center)
4*** 10.2 Listing Agreement of Property For
Lease and/or Sale (EastPark
Executive Center)
5**** 10.3 Offer to Purchase Contract by and
between the Partnership and Four
Dan, LLC dated July 19, 1999.
6 10.4 Amendment to Offer to Purchase and
Contract by and between the
Partnership and Four Dan, LLC dated
September 2, 1999.
7 10.5 Second Amendment to Offer to
Purchase and Contract by and between
the Partnership and Four Dan, LLC
dated October 1, 1999.
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the
three months ended September 30, 1999.
7
8
* Incorporated by reference to Exhibit A of the Partnership's
Prospectus dated December 1, 1987, Registration Number
33-07056-A.
** Incorporated by reference to Exhibit 3 of the Partnership's
Form 10-K for the year ended December 31,1995.
*** Incorporated by reference to Exhibit 4 of the Partnership's
Form 10-Q for the quarter ended September 30,1997.
**** Incorporated by reference to Exhibit 5 of the Partnership's
Form 10-Q for the quarter ended June 30,1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
(Registrant)
By: DRY Limited Partnership,
General Partner of Registrant
Date 11/11/99 By: /s/ Dexter R. Yager, Sr.
----------------- -----------------------------
Dexter R. Yager, Sr.
General Partner
Date 11/11/99 By: /s/ Jerry R. Haynes
----------------- -----------------------------
Jerry R. Haynes
Chief Financial Officer
8