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, 2003
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, 2003 and
December 31, 2002 4
Statements of Operations for the three months
and six months ended June 30, 2003 and 2002 5
Statements of Cash Flows for six months
ended June 30, 2003 and 2002 6
Statements of Partnership Equity for the
period January 1, 2002 through June 30, 2003 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
PART II Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Default Upon Senior Securities 12
Item 4. Submissions of Matters to a Vote of
Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
Certification of Principal Executive Officer
and Chief Financial Officer under Securities
Exchange Act Rules 13a-14 and 15d-14 14
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
The following balance sheet at June 30, 2003 (unaudited) and
statements of operations, partnership equity, and cash flows for the
three months and six months ended June 30, 2003 (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 2002 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,
_2003 2002
Assets
Cash $ 851,074 $ 814,043
Escrow deposits 54,375 12,922
Tenant receivables 64,339 8,329
Property & improvements, net of
accumulated depreciation of
$2,301,244 and $2,217,887 3,304,740 3,227,537
Other assets 632,736 680,353
Total Assets $ 4,907,264 $ 4,793,184
Liabilities & Partnership Equity
Accounts payable $ 8,869 $ 2,529
Accrued expenses 54,333 21,024
Notes payable 3,458,346 3,557,481
Total Liabilities 3,521,548 3,581,034
Minority partner's interest in JV 107,236 37,150
Partnership equity
Gen. Partners, no units authorized (77,453) (82,627)
Limited Partners, 4,858 units
authorized, issued,
and outstanding 1,355,933 1,257,627
Net Partnership Equity 1,278,480 1,175,000
Total Liabilities & Partnership
Equity $ 4,907,264 $ 4,793,184
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, 2003 and 2002
Unaudited Unaudited Unaudited Unaudited
3 Months 3 Months 6 Months 6 Months
2003 2002 2003 2002
Revenues
Rental income $ 186,549 $ 183,059 $ 475,992 $ 451,302
CAM reimbursements 61,738 63,833 83,336 86,558
Interest income 1,754 2,973 3,369 5,936
250,041 249,865 562,697 543,795
Expenses
Interest 63,987 67,473 128,168 135,041
Professional fees 0 10,520 16,078 14,170
Depreciation 41,678 41,458 83,357 82,916
Amortization 18,049 18,049 36,098 36,098
Property taxes 19,005 19,005 38,010 38,010
State taxes 100 100 916 200
Leasing & admin. 13,432 12,947 47,069 50,804
Management fees 7,706 8,068 20,074 19,566
Repairs 5,970 5,233 14,541 12,536
Utilities 2,249 2,527 4,819 5,131
Insurance 0 679 0 1,358
172,176 186,059 389,130 395,830
Net income before minority partner's
share of income 77,865 63,806 173,567 147,966
Minority partner's interest
in operating profit (26,307) (24,778) (70,087) (59,832)
Income (Loss) from
operation 51,558 39,027 103,480 88,132
Income from investment
in partnership 0 21,746 0 21,746
Net Income (Loss) $ 51,559 $ 60,775 $ 103,481 $ 109,880
Net Income (Loss)
per Unit $ 10.15 $ 11.88 $ 20.24 $ 21.49
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
6/30/03 6/30/02
Cash Flows From Operating Activities
Net income (loss) from operations $ 103,480 $ 88,132
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 70,086 59,832
Depreciation 83,357 82,916
Amortization 36,098 36,098
(Increase) decrease in:
Escrow deposits (41,453) (39,524)
Tenant receivables (56,010) (42,602)
Other assets 11,519 10,529
Increase (decrease) in:
Accounts payable 6,340 792
Accrued expenses 33,309 38,010
Tenant deposits (0) (1,750)
Net cash provided by (used in)
operating activities 246,726 232,433
Cash Flows From Investing Activities
Income from partnership 0 21,746
Purchase of property & improvements (110,560) 0
Net cash provided by (used in)
investing activities (110,560) 21,746
Cash Flows From Financing Activities
Payments on mortgage note (99,135) (92,261)
Net cash provided by (used in)
financing activities (99,135) (92,261)
Net increase (decrease) in cash
and cash equivalents 37,031 161,918
Cash & cash equivalents at beginning
of period 814,043 847,086
Cash & cash equivalents at end of period $ 851,074 $1,009,004
Supplemental Disclosures
Interest paid $ 128,168 $ 135,041
See Notes to Financial Statements.
U.S. Realty Income Partners L.P.
(A Limited Partnership)
Statements of Partnership Equity
Period from January 1, 2002 to June 30, 2003
Limited General
Partners Partner Total
Distributive share of net earnings 95% 5% 100%
Balance at January 1, 2002 $1,351,166 $ (88,230) $1,262,936
Cash distributions (200,000) (200,000)
Net earnings of 2002 106,461 5,603 112,064
Balance at December 31, 2002 1,257,627 (82,627) 1,175,000
Net earnings of 2003 98,306 5,174 103,480
Balance at June 30, 2003 $1,355,933 $(77,453) $1,278,480
See Notes To Financial Statements.
U.S. REALTY INCOME PARTNERS L.P.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Unaudited
June 30, 2003
A. ACCOUNTING POLICIES
Refer to the Partnership's annual financial statements for the year
ended December 31, 2002 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, 2003.
B. 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,
2003 2002
Administrative expenses $ 18,300 $ 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, 2002, the partnership had $814,043 in cash and
cash equivalents. This represents 16.8% of capital raised. At June
30, 2003, the Partnership had $851,074 in cash and cash equivalents.
This represents 17.5% 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 2003.
The Partnership distributed $200,000 in December 2002. This
represented operating funds from Bellevue Plaza. The General Partner is
evaluating cash flow to determine whether cash distributions will be
made in 2003.
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 had 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.
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, 2003 are summarized
below.
Bellevue Partnership Total
Revenues $559,553 $ 3,144 $ 562,697
Operating expenses 106,885 41,622 148,507
Interest 128,168 - 128,168
Depreciation & amortization 114,240 5,215 119,455
349,293 46,837 396,130
Net income (loss) 210,260 ( 43,693) 173,567
Partnership share 66 2/3% 100%
Partnership net income $140,173 $( 43,693) $ 103,480
Partnership operating
cash flow $285,204 $( 38,478) $ 246,726
Operational results for the comparable six month period
ended June 30, 2002 were:
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
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 12, 2003
Certification of Principal Executive Officer and Chief Financial
Officer Under Securities Exchange Act Rules 13a-14 and 15d-14
I, Robert Bond Miller, certify that:
1) I have reviewed this Quarterly Report on Form 10-Q of U.S.
Realty Income Partners, LP;
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
annual 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, and for, the periods presented in this
quarterly report;
4) I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the Registrant and I have:
1. Designed such disclosure controls and procedures to
ensure that material information relating to the
Registrant is made known to us by others, particularly
during the period in which this quarterly report is
being prepared;
2. Evaluated the effectiveness of the Registrant's
disclosure controls and procedures as of a date within
45 days prior to the filing date of this quarterly
report ("Evaluation Date"); and
3. Presented in this quarterly report my conclusions about
the effectiveness of the disclosure controls and
procedures based on my evaluation as of the Evaluation
Date;
5) I have disclosed, based on my most recent evaluation, to the
Registrant's auditors:
1. All significant deficiencies in the design and
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 contols; and
2. 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) 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 the most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
By: /s/Robert Bond Miller___
August 12, 2003 President, Director, Chief
Executive Officer, Chief
Financial Officer and Chief
Accounting Officer
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