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 March 31, 2005
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
Indicate by check mark whether the registrant is an accelerated
filer (as defined by Exchange Act Rule 12b-2).
YES NO X
U.S. REALTY INCOME PARTNERS L.P.
(A Delaware Limited Partnership)
INDEX
PART I Financial Information
Item 1. Financial Statements 3
Balance Sheets at March 31, 2005 and
December 31, 2004 4
Statements of Operations for the three months
ended March 31, 2005 and 2004 5
Statements of Cash Flows for three months
ended March 31, 2005 and 2004 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 11
Item 4. Controls and Procedures 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 March 31, 2005 (unaudited)
and statements of operations, partnership equity, and cash flows for
the three months ended March 31, 2005(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 2004 Annual Report, as reported on Form 10-K.
U.S Realty Income Partners, L.P.
(A Delaware Limited Partnership)
Consolidated Balance Sheets
Unaudited Audited
?? March 31, December 31,
_2005 2004
Assets
Cash $ 755,555 $ 582,545
Escrow deposits 12,142 12,142
Tenant receivables 20,408 158,258
Property and improvements, net of
accumulated depreciation of
$2,601,169 and $2,558,260
respectively 3,160,312 3,203,222
Other assets 494,794 517,790
Total Assets $ 4,443,211 $ 4,473,957
Liabilities and Partnership Equity
Accounts payable $ 37,631 $ 18,136
Accrued expenses 32,704 28,476
Note payable 3,086,690 3,143,358
Total Liabilities 3,157,025 3,189,970
Minority partner's interest in
Joint venture 259,357 151,997
Partnership equity
General partners, no units
authorized (70,035) (69,778)
Limited partners, 4,858 units
authorized,issued, and outstanding 1,096,864 1,101,768
Net Partnership Equity 1,026,829 1,031,990
Total Liabilities and Partnership
Equity $ 4,443,211 $ 4,473,957
Note: The balance sheet presented above at December 31, 2004 has
been derived from the audited financial statements at that date but
does not include all of the information and disclosures required by
accounting principles generally accepted in the United States of
America for complete financial statements.
See Notes to Consolidated Financial Statements.
U.S. Realty Income Partners L.P.
(A Delaware Limited Partnership)
Consolidated Statements of Operations
For the Three Months Ended
March 31, 2005 and 2004
Unaudited Unaudited
3 Months 3 Months
2005 2004
Revenues
Rental income $ 206,763 $ 269,030
Common area maintenance 21,262 21,998
Interest income 1,548 964
229,573 318,992
Expenses
Interest 56,984 61,215
Professional fees 414 5,003
Depreciation 42,909 41,678
Amortization 22,996 18,049
Property taxes 19,005 19,005
State taxes 200 4,529
Leasing and administrative 18,324 41,234
Management fees 29,125 12,762
Repairs 32,216 5,135
Insurance 2,945 0
Utilities 2,256 2,981
227,374 211,591
Net income before minority
partner's share of income 2,199 107,401
Minority partner's interest
in operating profit ( 7,360) (44,621)
Income from operations ( 5,161) 2,780
Net Income $( 5,161) $ 62,780
Net Income per Unit $ ( 1.01) $ 12.28
Weighted Average Number
of Units 4,858 4,858
See Notes to Consolidated Financial Statements.
U.S. Realty Income Partners L.P.
(A Delaware Limited Partnership)
Statements of Cash Flows
Unaudited Unaudited
3 Months 3 Months
Ending Ending
3/31/05 3/31/04
Cash Flows From Operating Activities
Net income from operations $ (5,161) $ 62,780
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Minority partner's interest in operating
profit of consolidated
partnership 7,360 44,621
Depreciation 42,909 41,679
Amortization 22,996 18,049
(Increase) decrease in:
Escrow deposits 0 (17,421)
Tenant receivables 137,850 836
Prepaid state tax 0 (12,514)
Other assets 0 5,758
Increase (decrease) in:
Tenant deposits 4,228 0
Accounts payable 19,496 802
Accrued expenses 0 3,923
Net cash provided by
operating activities 229,678 148,512
Cash Flows From Investing Activities
Purchase of property and improvements 0 0
Net cash provided by (used in)
investing activities 0 0
Cash Flows From Financing Activities
Payments on mortgage note (56,668) (52,436)
Net cash provided by (used in)
financing activities (56,668) (52,436)
Net increase (decrease) in cash
and cash equivalents 173,010 96,077
Cash and cash equivalents at beginning
of period 582,545 757,636
Cash and cash equivalents at end of period $ 755,555 $ 853,713
Supplemental Disclosures
Interest paid $ 56,984 $ 61,215
See Notes to Consolidated Financial Statements.
U.S. REALTY INCOME PARTNERS L.P.
(A Delaware Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited
March 31, 2005
A. ACCOUNTING POLICIES
Refer to the Partnership's annual financial statements for the
year ended December 31, 2004 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, 2005.
B. TRANSACTIONS WITH AFFILIATES
Fees and other costs and expense paid to the general partner or
its affiliates were as follows:
Three Months
Ended March 31,
2005 2004
Administrative expenses $ 18,000 $ 18,000
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, 2004, the partnership had $582,545 in cash
and cash equivalents. This represents 12% of capital raised. At
March 31, 2005, the Partnership had $755,555 in cash and cash
equivalents. This represents 15.6% 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 2005.
The Partnership distributed $200,000 in December 2004. This
represented operating funds from Bellevue Plaza. The General Partner
is evaluating cash flow to determine whether cash distributions will
be made in 2005.
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 and has approximately 71,000
in total square footage. The Bellevue property is 100% leased. Lease
rent from the tenants amounts to $70,000 per occupancy month. In
addition, the tenants pay common area maintenance charges of
approximately $10,000 per month for a total of approximately $80,000
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.
In 2003 and 2004, $110,560 and $155,948, respectively, was spent on
capitalized roof repairs.
PART I - FINANCIAL INFORMATION
continued
Results of Operations
The Parternship holds a majority joint venture interests
in Bellevue Plaza Partners (66 2/3%). The operational results of the
Partnership for the three months ending March 31, 2005 are summarized
below.
Bellevue Partnership Total
Revenues $228,647 $ 926 $ 229,573
Operating expenses 86,285 18,200 104,485
Interest 56,984 - 56,984
Depreciation and amortization 63,299 2,607 65,906
206,568 20,807 227,375
Net income (loss) 22,079 ( 19,881) 2,198
Partnership share 66 2/3% 100%
Partnership net income (loss) $ 14,720 $( 19,881) $ (5,161)
Partnership operation
cash flow $246,952 $( 17,274) $ 229,678
Operational results for the comparable three month period
ended March 31, 2004 were:
Bellevue Partnership Total
Revenues $318,028 $ 923 $ 318,992
Operating expenses 65,870 24,793 90,663
Interest 61,215 - 61,215
Depreciation and amortization 57,120 2,607 59,727
184,205 27,400 211,605
Net income (loss) 133,823 (26,436) 107,387
Partnership share 66 2/3% 100%
Partnership net income (loss) $ 89,216 $ (26,436) $ 62,780
Partnership operating
cash flow $184,843 $ (36,329) $ 148,514
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.
Financial Position
The primary changes in financial position from December 31, 2004 to
March 31, 2005 are as follows:
.. The increase in cash of $183,010 is due to cash from
operations of $239,678 net of debt repayments of $56,668.
.. The decrease in property and improvements of $42,980 is
attributable to depreciation.
.. The decrease in the note payable of $56,668 is the result of
the debt amortization.
.. Partnership equity decreased by the amount of loss for the
three month period of ($5,161).
.. The increase in the minority partner's interest of $7,360
occurred from the partner's proportionate share of earnings in
the joint venture since December 31, 2004.
Results of Operations
The more significant changes in the results of operations when
comparing the first quarter of 2005 with the corresponding period of
2004 are as follows:
.. The decrease in net income of $67,941 was due to the accrual
of percentage rents at the end of 2004 of $105,425 rather than
recognizing as income in 2005. The rental income in the first
quarter of 2004 includes $110,441 of percentage rents.
Item 3: Quantitative and Qualitative Disclosures about Market Risk
As the partnership's debt has a fixed rate of interest, which
is the Partnership's primary financial instrument, quantitative and
qualitative risks are not deemed significant.
Item 4: Controls and Procedures
The Partnership maintains disclosure controls and procedures,
as defined in Rule 13a-15(e) promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act") that are designed to insure
that information required to be disclosed by it in the reports that
it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified under the
SEC's rules and forms and that such information is accumulated and
communicated to the Partnership's management, including its Chief
Executive Officer and Chief Accounting Officer, as appropriate, to
allow timely decision making regarding required disclosure. The
Partnership, under the supervision and participation of its
management, including the Partnership's Chief Executive Officer and
Chief Accounting Officer, carried out an evaluation of the
effectiveness of the design and operation of the Partnership's
disclosure controls and procedures as of the end of the period
covered by this report pursuant to the Exchange Act. Based upon that
evaluation, the Chief Executive Officer and the Chief Accounting
Officer concluded that the Partnership's disclosure controls and
procedures are effective in ensuring that all material information
required to be disclosed in this annual report has been accumulated
and communicated to them in a manner appropriate to allow timely
decisions regarding required disclosures. During the quarter ended
March 31, 2005, there have been no changes in the Partnership's
internal control over financial reporting that have materially
affected or are reasonably likely to materially affect, the
Partnership's internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None.
ITEM 2. Changes in Securities, Use of Proceeds and Issuer
Purchases of Equity 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
31 CEO and CFO Certification
Pursuant Rule 13a-14(a)/15d-A(a)
32 CEO and CFO Certification
Pursuant 18 USC, Section 1350
Sarbanes - Oxley Act 2002
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
May 12, 2005
EXHIBIT 31
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 controls; 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 ot
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___
May 12, 2005 President, Director, Chief
Executive Officer, Chief
Financial Officer and Chief
Accounting Officer
EXHIBIT 32
Certification Pursuant to
18 USC Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of U.S. Realty Income
Partners, LP, (the "Partnership") on Form 10-Q for the period ending
March 31, 2005, as filed with the Securities and Exchange Commission
on the date hereof (the "Report"), I, Robert B. Miller, President,
Director, Chief Executive Officer, Chief Financial Officer, and Chief
Accounting Officer of the Partnership, certify, pursuant to 18 USC
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that:
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 result of
operations of the Partnership.
Date: May 12, 2005 By: /s/ Robert B. Miller______
President, Director, Chief
Executive Officer, Chief
Financial Officer and Chief
Accounting Officer
1
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