UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
Commission file number 33-17577
U.S. Realty Income Partners L.P.
(Exact name of small business issuer as specified in its charter)
DELAWARE 62-1331754
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) (Identification No.)
P.O. Box 58006, Nashville, TN 37205
(Address of principal executive offices) (Zip Code)
(615) 665-5959
(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
U.S. REALTY INCOME PARTNERS L.P.
INDEX
PART I Financial Information
Item 1. Financial Statements 3
Balance Sheets at June 30, 2002 and
December 31, 2001 4
Statements of Operations for the three months
and six months ended June 30, 2002 and 2001 5
Statements of Cash Flows for the six months
ended June 30, 2002 and 2001 6
Statements of Partnership Equity for the
period January 1, 2001 through June 30, 2002 7
Notes to Financial Statements 8-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-13
PART II Other Information
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Default Upon Senior Securities 14
Item 4. Submissions of Matters to a Vote of
Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
The following balance sheet at June 30, 2002 (unaudited) and
statements of operations, partnership equity, and cash flows for the
three and six months ended June 30, 2002 (unaudited), for U.S. Realty
Income Partners L.P. (a Delaware limited partnership) (the
"Partnership"), have not been examined by independent public
accountants but reflect, in the opinion of management, all adjustments
(consisting of normal recurring accruals) necessary to present fairly
the information required.
These financial statements should be read in conjunction with
the financial statements and notes thereto included in the
Partnership's 2001 Annual Report, as reported on Form 10-K.
U.S Realty Income Partners, L.P.
(A Limited Partnership)
Balance Sheets
Unaudited Audited
?? June 30, December 31,
2002 2001
Assets
Cash $ 1,008,975 $ 847,086
Escrow deposits 49,418 9,894
Tenant receivables 43,588 986
Property & improvements, net of
accumulated depreciation of
$2,092,919 & $2,051,462 3,281,856 3,364,773
Other assets 717,365 763,992
Total Assets $ 5,101,202 $ 4,986,731
Liabilities & Partnership Equity
Accounts payable $ 808 $ 16
Accrued expenses 59,034 22,774
Notes payable 3,650,921 3,743,183
Total Liabilities 3,710,763 3,765,973
Minority partner's interest in JV 17,654 (42,178)
Partnership equity
Gen. Partners, no units authorized (82,738) (88,230)
Limited Partners, 4,858 units
authorized, issued,
and outstanding 1,455,523 1,351,166
Net Partnership Equity 1,372,785 1,262,936
Total Liabilities & Partnership
Equity $ 5,101,202 $ 4,986,731
See Notes to Financial Statements.
U.S. Realty Income Partners L.P.
(A Limited Partnership)
Statements of Operations
For the Three Months and Six Months Ended
June 30, 2002 and 2001
Unaudited Unaudited Unaudited Unaudited
3 Months 3 Months 6 Months 6 Months
2002 2001 2002 2001
Revenues
Rental income $ 183,059 $ 179,613 $ 451,302 $ 434,632
CAM reimbursements 63,833 20,545 86,558 43,628
Interest income 2,944 14,241 5,907 20,454
249,836 214,399 543,767 498,714
Expenses
Interest 67,473 70,714 135,041 141,428
Professional fees 10,520 11,132 14,170 11,732
Depreciation 41,458 41,136 82,916 82,271
Amortization 18,049 18,049 36,098 36,098
Property taxes 19,005 18,306 38,010 36,612
State taxes 100 0 200 0
Leasing & admin. 12,947 13,393 50,804 49,135
Management fees 8,068 7,760 19,566 18,784
Repairs 5,233 8,143 12,536 17,823
Utilities 2,527 1,988 5,131 4,806
Insurance 678 1,129 1,360 2,266
186,058 191,750 395,832 400,953
Net income before minority partner's
share of income 63,778 22,649 147,935 97,761
Minority partner's interest
in operating profit (24,778) (7,793) (59,832) (37,327)
Income (Loss) from
operation 39,000 14,856 88,103 60,434
Income from investment
in partnership 21,746 1,307,970 21,746 1,374,853
Net Income (Loss) $ 60,746 $1,322,826 $ 109,849 $1,435,287
Net Income (Loss)
per Unit $ 11.88 $ 258.68 $ 21.48 $ 280.68
Weighted Avg. No.
of Units 4,858 4,858 4,858 4,858
See Notes to Financial Statements.
U.S. Realty Income Partners L.P.
(A Limited Partnership)
Statements of Cash Flows
Unaudited Unaudited
6 Months 6 Months
Ending Ending
6/30/02 6/30/01
Cash Flows From Operating Activities
Net income (loss) from operations $ 88,103 $ 60,434
Adjustments to reconcile net income (loss)
to net cash provide by (used in)
operating activities:
Minority partner's interest in operating
profit (loss) of consolidated
partnership 59,832 37,327
Depreciation 82,916 82,271
Amortization 36,098 36,098
(Increase) decrease in:
Escrow deposits (39,524) (30,612)
Tenant receivables (42,602) (153)
Other assets 10,529 10,845
Increase (decrease) in:
Accounts payable 792 543
Accrued expenses 38,010 36,612
Tenant deposits (1,750) 0
Net cash provided by (used in)
operating activities 232,404 233,365
Cash Flows From Investing Activities
Income from partnership 21,746 1,374,853
Net cash provided by (used in)
investing activities 21,746 1,374,853
Cash Flows From Financing Activities
Payments on mortgage note (92,261) (85,874)
Net cash provided by (used in)
financing activities (92,261) (85,874)
Net increase (decrease) in cash
and cash equivalents 161,889 1,522,344
Cash & cash equivalents at beginning
of period 847,086 495,790
Cash & cash equivalents at end of period $1,008,975 $2,018,134
Supplemental Disclosures
Interest paid $ 135,041 $ 141,428
See Notes to Financial Statements.
U.S. Realty Income Partners L.P.
(A Limited Partnership)
Statements of Partnership Equity
Period from January 1, 2001 to June 30, 2002
Limited General
Partners Partner Total
Distributive share of net earnings 95% 5% 100%
Balance at January 1, 2001 $1,203,192 $(164,439) $1,038,753
Cash distributions (1,300,000) (1,300,000)
Net earnings of 2001 1,447,974 76,209 1,524,183
Balance at December 31, 2001 1,351,166 (88,230) 1,262,936
Net earnings of 2002 104,357 5,492 109,849
Balance at June 30, 2002 $1,455,523 $(82,738) $1,372,785
See Notes To Financial Statements.
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Unaudited
June 30, 2002
A. ACCOUNTING POLICIES
Refer to the Partnership's annual financial statements for the year
ended December 31, 2001 for a description of the accounting policies
which have been continued without change. Also, refer to the footnotes
of these annual statements for additional details of the Partnership's
financial condition. The details in those notes have not significantly
changed except as a result of normal transactions in the interim. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary have been included. Operating
results are not necessarily indicative of the results that may be
expected for the year ending December 31, 2002.
B. INVESTMENT IN JOINT VENTURE
The Partnership had a 50% interest in DR/US West End General
Partnership, a joint venture formed to own and operate a commercial
office building in Nashville, Tennessee. The Company's initial
investment of $900,000 in the general partner joint venture was made on
November 1, 1988. Effective December 31, 1991, the Partnership adopted
the liquidation method of accounting for its investment in the joint
venture.
Effective July 28, 1995, the partnership exchanged its interest in the
assets of DR/US West End General Partnership (DR/US) for an indirect
3.745% equity interest (held through a limited partnership interest in
Daniel S. E. Office Limited Partnership) in Prudential/Daniel Office
Venture, LLC (the LLC). The LLC, which is controlled by Prudential
Life Insurance Company of America, owned six office buildings located
in Nashville, Tennessee and Raleigh, North Carolina. The LLC interest
was disposed of in 2001.
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Unaudited
June 30, 2002
C. TRANSACTIONS WITH AFFILIATES
Fees and other costs and expense paid to the general partner or its
affiliates were as follows:
Six Months Year Ended
Ended March 31, December 31,
2002 2001
Administrative expenses $ 18,000 $ 66,000
The Partnership believes the amounts paid to affiliates are
representative of amounts which would have been paid to independent
parties for similar services.
PART I - FINANCIAL INFORMATION
continued
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At December 31, 2001, the partnership had $847,088 in cash and
cash equivalents. This represents 17.4% of capital raised. At June
30, 2002, the Partnership had $1,008,975 in cash and cash equivalents.
This represents 20.8% of capital raised. The Partnership had
established a working capital reserve of 5% of the gross proceeds of
the offering. After May 15, 1990, the Partnership's Prospectus provided
that the working capital reserve could be reduced to 3% of capital
raised depending upon the Partnership's experience with its properties.
The General Partner does not anticipate having to borrow for working
capital reserves in 2002.
The Partnership distributed $1,300,000 in September 2001.
This represented the funds received from Daniel S. E. Office Limited
Partnership. The General Partner is evaluating cash flow to determine
whether cash distributions will be made in 2002.
Bellevue
In October 1988, the Partnership acquired a 66.67% interest in a
Tennessee joint venture known as Bellevue Plaza Partners holding as its
primary asset a shopping center located in Nashville, Tennessee
("Bellevue") which was renovated in 1988. The Bellevue property is
100% leased. Lease rent from the tenants amounts to $48,367 per
occupancy month. In addition, the tenants pay common area maintenance
charges of $5,881 per month for a total of $54,248 per month.
On July 1, 1999, the joint venture obtained a $4,150,000 first
mortgage loan on this property from an unaffiliated lender. The
mortgage bears interest at a rate of 7.25% per annum and requires
monthly installments of principal and interest of $37,656. The loan
fully amortizes over 15 years. After paying off Mass Mutual, the
partnership has enough cash to pay for the improvements made to the T.
J. Maxx space. These funds had previously been advanced by T. J. Maxx
to the Partnership. This resulted in T. J. Maxx beginning monthly
rental payments in November of 1999. T. J. Maxx/Marshalls moved into
the center in November 1999 as planned. They occupy 28,300 square
feet. Due to the refinancing, payments from T. J. Maxx have increased
the gross cash flow from the center by approximately $50,000 a year
over the previous tenant.
Properties in Raleigh, NC
These properties consist of one 110,000 sq. ft. building (Center
98) and four 50,000 sq. ft. buildings (Park). These buildings are
operating accounting to schedule. Prudential Life Insurance Company
has funded the partnership with approximately $7,280,000 to build a
garage and a new 55,600 sq. ft. building which was completed at the end
of 1998. Approximately 95% of this space has been leased. The new
parking garage has 178 spaces.
The remaining buildings in Raleigh, North Carolina have been
sold. The accounting has not been finalized yet. Our Partnership
received $1,381,000 from the sale. $1,300,000 was distributed to the
partners with the remainder held by the partnership.
In July 2000, the 3310 office property was sold. The
partnerships share of the proceeds was $397,000. These proceeds were
distributed to the partners in December 2000.
In July 2001, the remaining properties were sold. The
Partnerships share of the proceeds was $1,456,737. $1,300,000 was
distributed to the partners in September 2001.
PART I - FINANCIAL INFORMATION
continued
Results of Operations
The Partnership holds a majority joint venture interests
in Bellevue Plaza Partners (66 2/3%). The operational results of the
Partnership for the six months ending June 30, 2002 are summarized
below.
Bellevue Partnership Total
Revenues $538,363 $ 27,150 $ 565,513
Operating expenses 109,082 32,380 141,462
Interest 135,041 - 135,041
Depreciation & amortization 113,800 5,214 119,014
357,923 37,594 395,517
Net income (loss) 180,440 ( 10,444) 169,996
Partnership share 66 2/3% 100%
Partnership net income $120,293 $( 10,444) $ 109,849
Partnership operating
cash flow $237,634 $( 5,230) $ 232,404
Operational results for the comparable six month period
ended June 30, 2001 were:
Bellevue Partnership Total
Revenues $478,063 $1,395,504 $1,873,567
Operating expenses 111,498 29,658 141,156
Interest 141,428 - 141,428
Depreciation & amortization 113,155 5,214 118,369
366,081 34,872 400,953
Net income (loss) 111,982 1,360,632 1,472,614
Partnership share 66 2/3% 100%
Partnership net income $ 74,655 $1,360,632 $1,435,287
Partnership operating
cash flow $242,372 $( 9,007) $ 233,365
The Partnership utilized the proceeds of the offering to
acquire, operate and hold for investment existing income producing
commercial real estate properties. Since the proceeds of the offering
were less than the maximum amount, the Partnership was unable to
diversify its investments to the extent initially desired.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None.
ITEM 2. Changes in Securities
None.
ITEM 3. Default Upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
1. Exhibits
None.
2. Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
U.S. REALTY INCOME PARTNERS L.P.
By: Vanderbilt Realty Joint Venture,
The General Partner
By: Vanderbilt Realty Associates, Inc.
Its Managing General Partner
By: s/n Robert Bond Miller
Robert Bond Miller
President, Director, Chief
Executive Officer, Chief Financial
Officer and Chief Accounting
Officer
August 14, 2002
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