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 September 30, 1995
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 0-11975
BRAUVIN REAL ESTATE FUND L.P. 3
(Exact name of registrant as specified in its charter)
Delaware 36-3290420
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
150 South Wacker Drive, Suite 1020, Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
(312) 443-0922
(Registrant's telephone number, including area code)
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
<PAGE>
BRAUVIN REAL ESTATE FUND L.P. 3
INDEX
Page
PART I Financial Information
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . 3
Statements of Net Liabilities in Liquidation at
September 30, 1995 (unaudited) and December 31, 1994
(audited) - (Liquidation Basis). . . . . . . . . . . . . 4
Statement of Changes in Net Liabilities in
Liquidation for the nine months ended
September 30, 1995 (unaudited) - (Liquidation Basis) 5
Statement of Changes in Net Liabilities in Liquidation
for the three months ended September 30, 1995
(unaudited) - (Liquidation Basis). . . . . . . . . . . . 6
Notes to Financial Statements. . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . 10
PART II Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . 12
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . 12
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . 12
Item 4. Submission 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
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Except for the December 31, 1994 audited Statement of Net Liabilities
in Liquidation, the following Statement of Net Liabilities in Liquidation
as of September 30, 1995, the Statements of Changes in Net Liabilities in
Liquidation for the nine and three months ended September 30, 1995, for
Brauvin Real Estate Fund L.P. 3 (the "Partnership") are unaudited and
have not been examined by independent public accountants but reflect in
the opinion of management, all adjustments 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 1994
Annual Report on Form 10-K.
<PAGE>
BRAUVIN REAL ESTATE FUND L.P. 3
(a Delaware limited partnership)
STATEMENTS OF NET LIABILITIES IN LIQUIDATION
(Liquidation Basis)
September 30, December 31,
1995 1994
(Unaudited) (Audited)
ASSETS
Cash $ 22,716 $ 65,468
Tenant receivables 15,807 17,475
Other assets 33,702 16,454
Real estate held for sale 1,876,655 4,974,040
Total Assets $1,948,880 $5,073,437
LIABILITIES
Accounts payable and other accrued
expenses $ 37,970 $ 42,213
Due to affiliates 215,486 574,171
Security deposits 29,267 40,152
Note payable -- 125,000
Mortgages payable 1,774,391 4,608,211
Estimated losses through date
of liquidation 60,000 164,000
Total Liabilities 2,117,114 5,553,747
Net liabilities in liquidation $ 168,234 $ 480,310
See accompanying notes.
<PAGE>
BRAUVIN REAL ESTATE L.P. 3
(a Delaware limited partnership)
STATEMENT OF CHANGES IN NET LIABILITIES IN LIQUIDATION-(UNAUDITED)
For the nine months ended September 30, 1995
(Liquidation Basis)
Net liabilities in liquidation at
December 31, 1994 $ (480,310)
Adjustment to provision of estimated
losses through date of liquidation 312,076
Net liabilities in liquidation at
September 30, 1995 $ (168,234)
See accompanying notes.
<PAGE>
BRAUVIN REAL ESTATE L.P. 3
(a Delaware limited partnership)
STATEMENT OF CHANGES IN NET LIABILITIES IN LIQUIDATION-(UNAUDITED)
For the three months ended September 30, 1995
(Liquidation Basis)
Net liabilities in liquidation at
June 30, 1995 $(192,632)
Adjustment to provision of estimated
losses through date of liquidation 24,398
Net liabilities in liquidation at
September 30, 1995 $(168,234)
See accompanying notes.
<PAGE>
BRAUVIN REAL ESTATE FUND L.P. 3
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. For
further information, refer to the financial statements and footnotes
thereto included in the Partnership's annual report on Form 10-K for the
year ended December 31, 1994.
As a result of the General Partners' decision to cease operations,
and in accordance with generally accepted accounting principles, the
Partnership's financial statements as of September 30, 1995 have been
prepared on a liquidation basis. Accordingly, the carrying values of the
assets are presented at estimated realizable amounts and all liabilities
are presented at estimated settlement amounts, including estimated costs
associated with carrying out the liquidation. Preparation of the
financial statements on a liquidation basis required significant
assumptions by management, including assumptions regarding the amounts
that creditors would agree to accept in settlement of obligations due
them, the estimate of liquidation costs to be incurred and the resolution
of contingent liabilities, including tax liabilities, resulting from the
liquidation. There may be differences between the assumptions and the
actual results because events and circumstances frequently do not occur as
expected. Those differences, if any, could result in a change in the net
liabilities recorded in the statement of net liabilities in liquidation as
of September 30, 1995.
(2) MORTGAGES AND NOTE PAYABLE
On April 20, 1995, the Partnership received a modification from the
Bear Canyon I first mortgage lender extending the maturity date from May
1, 1995 to May 1, 1996. The modification increased the interest rate from
8.87% to 10.00%.
On May 26, 1995, the Partnership paid off the Bear Canyon II first
mortgage as the result of the sale of Bear Canyon II to an unaffiliated
third party for $920,000. (See Note 5)
On May 31, 1995, a Certificate of Sale for Country Club was executed
and filed by the Brevard County, Florida Circuit Court as a result of the
uncontested final Judgment of Foreclosure, dated April 25, 1995. On June
13, 1995, the Certificate of Title was issued to the new unaffiliated
owner of Country Club. (See Note 6)
(3) PROVISION OF ESTIMATED LOSSES THROUGH DATE OF LIQUIDATION
At July 1, 1994, in accordance with the liquidation basis of
accounting, assets were adjusted to estimated net realizable value and
liabilities were adjusted to estimated settlement amounts, including
estimated costs associated with carrying out the liquidation. At
September 30, 1995, the provision for estimated losses through date of
liquidation was decreased by $104,000. The net decrease was due to the
gain on sale of Bear Canyon I of $24,319, the gain on foreclosure of
Country Club of $125,000, the nine months ended September 30, 1995 net
income of $58,757 and an adjustment to the provision of $312,076. The
provision was decreased based on the Partnership's reassessment of the
estimate of costs to complete the liquidation.
(4) TRANSACTIONS WITH AFFILIATES
The General Partners and other affiliates provide various services to
support operating activities of the Partnership. Fees, commissions and
other expenses incurred by the Partnership with respect to such services
for the nine months ended September 30, 1995 and 1994 are as follows:
1995 1994
Legal fees $ 382 $ 557
Management fees and reimbursable
administrative service 66,395 83,336
The Partnership believes the amounts paid to affiliates are
representative of amounts which would have been paid to independent
parties for similar services. Management fees cannot exceed 6% of gross
operating revenues generated by the Partnership properties. The
Partnership had payables to affiliates for management fees and
reimbursable administrative services of $215,486 and $433,015 at September
30, 1995 and December 31, 1994, respectively. The Partnership had
payables to affiliates for legal fees of $0 and $141,156 at September 30,
1995 and December 31, 1994, respectively.
(5) SALE OF BEAR CANYON II BUILDING
On May 26, 1995, the Partnership sold the Bear Canyon II building to
an unaffiliated third party for $920,000. The net sales proceeds to the
Partnership were approximately $377,000. Pursuant to the liquidation
basis of accounting, the gain of $24,319 related to the sale served to
increase the provision of estimated losses through date of liquidation.
(6) FORECLOSURE SALE OF COUNTRY CLUB
On August 19, 1994, the Partnership received a notice of default
from the Country Club first mortgage lender. The notice stated that the
default was a result of the Partnership's failure to make the interest
payments of $18,065 due July 8, 1994 and August 8, 1994. The notice also
stated that the Partnership had five business days from receipt of the
notice to cure the default or the lender would exercise its rights granted
under the security documents by and between the Partnership and the
lender. The Partnership decided not to cure the default and on October
19, 1994, agreed to a joint stipulation for entry of final judgement of
foreclosure and for appointment of a receiver. The Partnership and lender
further agreed that if the receiver is unsuccessful in liquidating the
property by May 31, 1995, the lender would immediately thereafter obtain
a sale date for the property to be sold at a foreclosure sale which would
take place no later than September 30, 1995.
On May 31, 1995, a Certificate of Sale for Country Club was executed
and filed by the Brevard County Florida Circuit Court as a result of the
uncontested final judgement of Foreclosure, dated April 25, 1995. On June
13, 1995, the Certificate of Title was issued to the new unaffiliated
owner of Country Club.
Pursuant to the liquidation basis of accounting, the gain of
$125,000 related to the foreclosure sale served to increase the provision
of estimated losses through date of liquidation.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
The General Partners of the Partnership have decided to conclude the
Partnership operations. During the third quarter of 1995, the Partnership
continued to work toward the disposition of its properties and the winding
up of its affairs. The Partnership continues to be unable to pay its
operating expenses and several expense items are being accrued for payment
out of property sales proceeds.
On May 26, 1995, the Partnership sold the Bear Canyon II building to
an unaffiliated third party for approximately $920,000. Sales proceeds
were used to repay the property's mortgage and satisfy a portion of the
Partnership's outstanding payables.
The Partnership continues to actively market Bear Canyon I and Bear
Canyon III. A new local broker has been engaged to assist in the sales.
Some minor cosmetic improvements have been made to facilitate the sale.
The properties have been reviewed by several prospective purchasers.
On May 31, 1995, a Certificate of Sale for Country Club was executed
and filed by the Brevard County, Florida Circuit Court as a result of the
uncontested Final Judgment of Foreclosure, dated April 25, 1995. On June
13, 1995, the Certificate of Title was issued to the new unaffiliated
owner of Country Club.
It is the intention of the General Partners to conclude the
Partnership's operations during the first quarter of 1996. There can be
no assurance that this timing will be met due to circumstances beyond the
control of the General Partners. In light of the Partnership's current
operating condition and expenses which have been accrued, the proceeds
from the sale of the Partnership's properties will, in all likelihood, not
be sufficient to return investors' initial capital.
Results of Operations - For the nine and three months ended September 30,
1995 compared to September 30, 1994
Pursuant to its liquidation basis of accounting, results of
operations have been charged to the provision of estimated losses through
date of liquidation. The results of operations, excluding the gain on the
sale of Bear Canyon I of $24,319 and the gain on the foreclosure of
Country Club of $125,000, for the nine months ended September 30, 1995
reflect net income of $58,757 compared to a net loss of $214,938 for the
nine months ended September 30, 1994, an increase of approximately
$273,700. The results of operations for the three months ended September
30, 1995 reflect net income of $15,210 compared to a net loss of $59,261
for the three months ended September 30, 1994, an increase of
approximately $74,500. The increase in net income was due to the decrease
in total expenses as a result of the decrease in properties owned and
operated during 1995.
Total income generated for the nine months ended September 30, 1995
was $608,988 compared to $787,043 for the nine months ended September 30,
1994, a decrease of approximately $178,000. Total income generated for
the three months ended September 30, 1995 was $133,589 compared to
$263,839 for the three months ended September 30, 1994, a decrease of
approximately $130,200. The decrease in total income is due to a decrease
in properties owned and operated as a result of the sale of Bear Canyon I
in May 1995 and the foreclosure of Country Club in June 1995.
Total expenses for the nine months ended September 30, 1995 were
$550,231 compared to $1,001,981 for the nine months ended September 30,
1994, a decrease of approximately $451,800. Total expenses for the three
months ended September 30, 1995 were $118,379 compared to $323,100 for the
three months ended September 30, 1994, a decrease of approximately
$204,700. The decrease in expenses is mainly due to a decrease in
depreciation expense as a result of the liquidation basis of accounting
which reduced the properties to their net realizable value and the
decrease of property operating expenses as the result of the decrease in
properties owned and operated.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On July 22, 1994 a complaint was filed with the second Judicial
District Court, in the County of Bernalillo, in the State of New Mexico,
against the Partnership and Brauvin Real Estate Fund L.P. 4 (BREF 4), (the
"Defendants"). United of Omaha Life Insurance Company (the "Plaintiff")
alleges that the Defendants failed and refused to make payments when due
and are in default under the Modification Agreements, secured by the Bear
Canyon III building and a property in BREF 4, dated November 13, 1991.
The Plaintiff declared due and owing, from the Partnership only, the
principal sum of $1,510,300, together with accrued interest of $594,954,
and non-payment of cash flow payments in the amount of $25,930, totaling
$2,131,184. On September 6, 1994, the Partnership filed an answer and
counterclaim. The counterclaim alleges breach of contract and breach of
the duty of good faith and dealing. During the second quarter of 1995,
the complaint was settled.
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.
Exhibit 27. Financial Data Schedule
<PAGE>
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.
BY: Brauvin Realty Partners, Inc.
Corporate General Partner of
Brauvin Real Estate Fund L.P. 3
BY: /s/ Jerome J. Brault
Jerome J. Brault
President and
Chief Executive Officer
DATE: November 14, 1995
BY: /s/ Thomas J. Coorsh
Thomas J. Coorsh
Chief Financial Officer
DATE: November 14, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 22,716
<SECURITIES> 0
<RECEIVABLES> 15,807
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,876,655 <F1>
<DEPRECIATION> 0 <F2>
<TOTAL-ASSETS> 1,948,880
<CURRENT-LIABILITIES> 0
<BONDS> 1,774,391 <F3>
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,117,114
<SALES> 0
<TOTAL-REVENUES> 608,988 <F4>
<CGS> 0
<TOTAL-COSTS> 550,231 <F5>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,757
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> "PP&E" REPRESENTS REAL ESTATE HELD FOR SALE
<F2> "DEPRECIATION" IS INCLUDED IN "PP&E"
<F3> "BONDS" REPRESENTS MORTGAGE PAYABLE
<F4> "TOTAL REVENUES" REPRESENTS RENTAL, INTEREST, AND OTHER
INCOME
<F5> "TOTAL COSTS" REPRESENTS TOTAL EXPENSES
</FN>
</TABLE>
