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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 June 30, 2002
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or
[x] 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
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YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
North Carolina 56-1560476
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
1300 Altura Road Fort Mill, South Carolina 29708
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(Address of principal executive office) (Zip code)
(803) 547-9100
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(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 [x] 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.
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS
June 30, December 31,
2002 2001
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(Unaudited) (Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 112,471 $ 65,583
Accounts receivable, tenant 42,093 42,091
Prepaid expenses 1,084 -
Securities available for sale 60,238 59,223
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Total current assets 215,886 166,897
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INVESTMENTS AND NONCURRENT RECEIVABLES
Properties on operating leases and properties held
for lease, net of accumulated depreciation
2002 $705,480; 2001 $705,480 2,287,569 2,287,569
OTHER ASSETS
Deferred charges, net of accumulated amortization
2002 $12,190; 2001 $12,190 2,810 2,810
Deferred leasing commissions, net of accumulated
amortization 2002 $19,265; 2001 $19,265 33,122 33,122
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$ 2,539,387 $ 2,490,398
=============== ==============
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 70,000 $ 1,452,000
Accounts payable 6,002 11,793
Accrued expenses 35,856 8,769
Deferred revenue 2,179 -
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Total current liabilities 114,037 1,472,562
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LONG-TERM DEBT, less current maturities 1,352,000 -
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COMMITMENT AND CONTINGENCY (Note 4)
PARTNERS' EQUITY
General partners (12,430) (12,993)
Limited partners 1,097,088 1,041,388
Net unrealized gain (loss) on investment securities (11,307) (10,559)
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1,073,350 1,017,836
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$ 2,539,387 $ 2,490,398
=============== ==============
Note: The Condensed Balance Sheet at December 31, 2001 has been taken from
the audited financial statements at that date. See Notes to Condensed
Financial Statements.
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YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- --------------------------------
2002 2001 2002 2001
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(Unaudited) (Unaudited)
Rental income $ 148,330 $ 146,628 $ 295,955 $ 290,299
Operating expenses:
Wages and contract labor 1,500 1,500 3,000 3,000
Depreciation and amortization - - - -
Repairs and maintenance 38,839 51,386 81,148 89,895
Management fees 4,515 4,422 8,944 8,706
Utilities 24,849 21,854 48,070 43,986
Professional fees 24,484 22,633 41,398 42,199
Property taxes 10,665 9,621 21,330 19,242
Miscellaneous 2,466 2,232 3,528 3,154
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107,318 113,648 207,417 210,182
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Operating income 41,012 32,980 88,537 80,117
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Nonoperating income (expense):
Interest and dividend income 1,159 1,647 2,372 3,594
Interest expense (17,512) (27,468) (34,647) (60,165)
Other - (4,974) - -
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(16,353) (25,821) (32,275) (56,571)
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Net income $ 24,659 $ 7,159 $ 56,262 $ 23,546
============= ============= ============= ============
Net income per limited
partnership unit $3.86 $ 1.12 $ 8.80 $ 3.68
============= ============= ============= ============
See Notes to Condensed Financial Statements.
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YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
--------------------------------
2002 2001
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(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 56,262 $ 23,546
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization - -
Loss on sale of securities available for sale - -
Change in assets and liabilities:
(Increase) Decrease in prepaids, deferrals and (1,085) 11,105
other receivables
Increase (Decrease) in accounts payable and accrued expense 23,475 (11,029)
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Net cash provided by (used in) operating activities 78,652 23,622
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CASH FLOWS FROM INVESTING ACTIVITIES
Sale of securities available for sale - -
Purchase of securities available for sale (1,764) (2,396)
Improvements in investment property - (7,538)
Disbursements for deferred charges - -
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Net cash provided by (used in) investing activities (1,764) (9,934)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term borrowings (30,000) (30,000)
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Net cash (used in) financing activities (30,000) (30,000)
Net increase (decrease) in cash and cash equivalents 46,888 (16,312)
Cash and cash equivalents:
Beginning 65,583 72,209
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Ending $ 112,471 $ 55,897
============= ============
See Notes to Condensed Financial Statements.
4
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 its only other real property holding, the BB&T
building facilities (formerly the UCB building) located in Greenville,
South Carolina.
2. Opinion of Management:
In the opinion of management, the accompanying unaudited condensed
financial statements contain all adjustments (all of 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 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, 2001, the cumulative unpaid priority return to the unit
holders was $3,137,969 compared to $2,895,185 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.
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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, 2001 to June 30, 2002. Accrued expenses have increased from year-end due to
the monthly accrual of the 2002 real property taxes. Cash has increased due to
cash being provided by operating activities.
Liquidity and Capital Resources
During the quarter ended June 30, 2002, the Partnership operations continued to
meet working capital requirements and the working capital deficit was deceased
by approximately $1,400,000. The working capital as of June 30, 2002 was
$94,849. The large reduction to working capital deficit is mainly attributable
to the reclassification of the current portion of the long-term debt. On June
4th, the General Partners refinanced the existing loan with Wachovia Bank, NA
(formerly First Union National Bank). The new loan matures on December 31, 2004
with interest at the bank's prime rate (currently 4.75%). Monthly principal
payments of $7,000 will commence on August 31, 2002. The new principal payment
is $2,000 higher than the $5,000 previously required.
Results of Operations
Operations for the six months ended June 30, 2002 are comparable to the same
period of the prior year. Rental income is up approximately 2% due to escalation
increases for the current tenants and increased occupancy. Operating expenses
are down approximately $3,000 as compared to the same period of the prior year.
The favorable operating expense variance is related to the normal fluctuations
of repairs and maintenance. Interest expense is down by approximately $25,500 or
42% due to the decrease in interest rates on the floating rate loan.
Status of EastPark Executive Center
The General Partners remain committed on selling the EastPark facility and
continue to have it listed with a commercial real estate broker. At this time,
the facility is not under contract with any potential buyers. The General
Partners are also working towards extending the leases with the current tenants.
Although the facility is 91% leased, all current tenants have the option to
terminate their leases within the next two years. The tenant, GSA, has the
election to terminate its lease in November 2002. The GSA lease accounts for 86%
of the total rental income at East Park; accordingly, the General Partners will
focus their lease extension efforts towards the GSA lease. However, no
assurances can be given that a replacement tenant could be found if GSA decides
to terminate their lease. In May 2002, the Partnership renewed a 4,046 square
foot lease for an additional year with a 4% rate increase. The renewed lease
expires April 30, 2003 and has a rental rate of $15.23 per square foot. The
General Partners will continue to search for the best offer for the property and
manage it at acceptable standards until such time as it can sell the property to
a qualified buyer.
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.
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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 dated December 22,
1998 (EastPark Executive Center)
9 99.1 Certification pursuant to Section
1350 of Chapter 63 of Title 18 of
the United States Code. (Sarbanes-
Oxley Act of 2002)
10 99.2 Certification pursuant to Section
1350 of Chapter 63 of Title 18 of
the United States Code. (Sarbanes-
Oxley Act of 2002)
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the
three months ended March 31, 2002.
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* 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-K
for the year ended December 31, 1998.
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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 08/14/02 By: /s/ Dexter R. Yager, Sr.
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Dexter R. Yager, Sr.
General Partner
Date 08/14/02 By: /s/ Thomas K.Emery
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Thomas K. Emery
Chief Financial Officer
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