<PAGE>
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, 1996
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, 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
June 30, 1996 (unaudited) and December 31, 1995
(audited) - (Liquidation Basis). . . . . . . . . . . . . . . 4
Statement of Changes in Net Liabilities in
Liquidation for the six months ended
June 30, 1996 and 1995(unaudited) -
Liquidation Basis) . . . . . . . . . . . . . . . . . . . . . 5
Statement of Changes in Net Liabilities in
Liquidation for the three months ended
June 30, 1996 and 1995(unaudited) -
(Liquidation Basis). . . . . . . . . . . . . . . . . . . . . 6
Notes to Financial Statements. . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . 11
PART II Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . 13
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . . 13
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . 13
Item 4. Submission of Matters to a Vote of Security Holders . . . . 13
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Except for the December 31, 1995 audited Statement of Net Liabilities
in Liquidation (Liquidation Basis), the following Statement of Net
Liabilities in Liquidation (Liquidation Basis) as of June 30, 1996, the
Statement of Changes in Net Liabilities in Liquidation (Liquidation Basis)
for the six months ended June 30, 1996 and 1995, the Statement of Changes
in Net Liabilities in Liquidation (Liquidation Basis) for the three months
ended June 30, 1996 and 1995, for Brauvin Real Estate Fund L.P. 3 (the
"Partnership") are unaudited but reflect, in the opinion of management,
all adjustments necessary to present fairly the information required. All
such adjustments are of a normal recurring nature.
These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Partnership's 1995
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)
June 30, December 31,
1996 1995
(Unaudited) (Audited)
ASSETS
Cash $ 67,118 $ 28,032
Tenant receivables 15,908 13,395
Other assets 22,471 16,033
Real estate held for sale 1,461,925 1,876,655
Total Assets $1,567,422 $1,934,115
LIABILITIES
Accounts payable and other accrued
expenses $ 26,984 $ 29,901
Due to affiliates:
Management fees and reimburseables 152,138 230,662
Security deposits 18,589 22,937
Mortgages payable 1,298,815 1,749,375
Estimated losses through date of
liquidation 70,896 --
Total Liabilities 1,567,422 2,032,875
Net liabilities in liquidation $ 0 $ 98,760
See accompanying notes.
<PAGE>
BRAUVIN REAL ESTATE L.P. 3
(a Delaware limited partnership)
STATEMENT OF CHANGES IN NET LIABILITIES IN LIQUIDATION-(UNAUDITED)
(Liquidation Basis)
For the six months ended
June 30, June 30,
1996 1995
Net liabilities in liquidation at
beginning of period $(98,760) $(480,310)
Net income 169,656 323,678
Adjustment to provision of estimated
losses through date of liquidation (70,896) (36,000)
Net liabilities in liquidation at
end of period $ 0 $(192,632)
See accompanying notes.
BRAUVIN REAL ESTATE L.P. 3
(a Delaware limited partnership)
STATEMENT OF CHANGES IN NET LIABILITIES IN LIQUIDATION-(UNAUDITED)
(Liquidation Basis)
For the three months ended
June 30, June 30,
1996 1995
Net liabilities in liquidation at
beginning of period $(75,067) $(480,310)
Net income 145,963 167,860
Adjustment to provision of estimated
losses through date of liquidation (70,896) 119,818
Net liabilities in liquidation at
end of period $ 0 $(192,632)
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 Presentation:
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, 1995.
Effective July 1, 1994, the General Partners decided to cease
operations and liquidate all of the Partnership's assets in an
orderly manner. It is the Partnership's intention to sell all of its
real estate holdings or negotiate an uncontested foreclosure of the
properties to the lenders.
As a result of the General Partners' decision to cease operations,
and in accordance with generally accepted accounting principles, the
Partnership's financial statements for periods subsequent to June 30,
1994 have been prepared on a liquidation basis. Accordingly, at June
30, 1996 and December 31, 1995, the carrying value of the assets were
presented at estimated realizable amounts and all liabilities were
presented at estimated settlement amounts, including estimated costs
associated with carrying out the liquidation. Preparation of the
financial statements on a liquidation basis requires 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.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(2) MORTGAGES PAYABLE:
Mortgages payable at June 30, 1996 and December 31, 1995 consist
of the following:
First Mortgages
June 30, December 31, Interest Date
1996 1995 Rate Due
Bear Canyon Office
Buildings
I(b) $ -- $ 399,960 10.00% 5/96
III(a) 1,298,815 1,349,415 3.00% 7/97
$1,298,815 $1,749,375
(a) The terms of the mortgage loan on Bear Canyon Office Building III
were modified for the first time in the third quarter of 1990 and for
the second time in the third quarter of 1991. The second loan
modification requires that the Partnership make monthly payments of
principal and interest based upon a (i) 25-year amortization schedule
plus 100% of net cash flow from July 1, 1992 through June 1, 1993 and
(ii) a 15-year amortization schedule plus 50% of net cash flow from
July 1, 1993 through July 1, 1997, the extended maturity date. The
Lender has the option to accelerate the loan maturity on July 1 of
each year if the property is not: (i) in good condition and repair;
(ii) occupied at a rate that is equal to the prevailing occupancy
rate for similar properties in the same locale; and (iii) leased at
rental rates which are at least 90% of the prevailing rate for
similar properties in the same locale.
The potential buyer of the Bear Canyon III building whose
contract was disclosed in the December 31, 1995 financial statements
canceled the contract for sale upon completion of its due diligence
review. Subsequent to this action the Partnership received a contract
for sale to another third party purchaser, the purchaser has requested
an extension of time in order to complete its financing. The
Partnership is now considering extending the contract for a limited
time; and in the event the potential purchaser is unable to secure
financing shortly, the Partnership will resume actively marketing the
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
property to potential third party purchasers. As of June 30, 1996 and
December 31, 1995, the carrying amount of the affected real estate
pledged as collateral is $1,461,925.
(b)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 8.875% to 10%. Interest is payable monthly and
additional payments of 50% of annual cash flow, if any, calculated
quarterly as of December 31, March 31, June 30 and September 30 shall
be applied to the principal of the note.
On April 3, 1996 the Bear Canyon I building was sold to an
unaffiliated third party for approximately $625,000. The Partnership
paid off the mortgage payable from the proceeds of the sale.
The Partnership paid interest on all of its mortgages of $33,744
for the six months ended June 30, 1996.
(3) ADJUSTMENT TO LIQUIDATION BASIS:
Effective 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 June 30, 1996, the provision for estimated losses
through date of liquidation was decreased by the Partnership net
income of $169,656 and increased by estimated losses through date of
liquidation of $70,896.
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(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 six months ended June 30, 1996 and 1995 are as
follows:
1996 1995
Management fees and reimbursable
administrative services $26,856 $45,189
Legal fees -- --
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 the
gross operating revenues generated by the Partnership's properties.
The Partnership had payables to affiliates for management fees and
reimbursable administrative services of $152,138 and $230,662 at June
30, 1996 and December 31, 1995, respectively.
(5) SALE OF BEAR CANYON I OFFICE BUILDING:
On April 3, 1996, the Partnership sold the Bear Canyon I office
building to an unaffiliated third party for approximately $625,000.
The net sales proceeds to the Partnership was approximately $171,000.
The proceeds from this sale was used to pay outstanding obligations
of the Partnership.
<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 second quarter of 1996, 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.
It is the intention of the General Partners to conclude the
Partnership's operations during the fourth 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 six months ended June 30, 1996
compared to June 30, 1995
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 for the six
months ended June 30, 1996 reflect net income of $9,293 compared to
net income of $43,547 for the six months ended June 30, 1995, a
decrease of approximately $34,300. The primary reason for the
decline in net income was the decrease in rental revenues as a
result of the decrease in properties owned and operated during
1996. Partially offsetting this decline in rental revenue was a
decrease in expenses due to fewer properties owned and operated
during the period ended in 1996.
Total income generated for the six months ended June 30, 1996
was $217,219 compared to $476,607 for the six months ended June 30,
1995, a decrease of approximately $259,400. The decrease in total
income is due to a decrease in properties owned and operated as a
result of the sale of Bear Canyon II in May 1995 and the
foreclosure of Country Club in June 1995 and the sale of Bear
Canyon I in April 1996.
Total expenses for the six months ended June 30, 1996 were
$207,926 compared to $433,060 for the six months ended June 30,
1995, a decrease of approximately $225,100. The decrease in
expenses is mainly due to a decrease in property operating expenses
as the result of the decrease in properties owned and operated.
Results of Operations - For the three months ended June 30, 1996
compared to June 30, 1995
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 for the
three months ended June 30, 1996 reflect net loss of $14,400
compared to net loss of $112,271 for the three months ended June
30, 1995, a decrease of approximately $97,900. The primary reason
for the decrease in net loss was the decrease in expenses due to
fewer properties owned and operated during the period ended in
1996. Partially offsetting this decline in expenses was a decrease
in rental revenues as a result of the decrease in properties owned
and operated during 1996.
Total income generated for the three months ended June 30, 1996
was $96,173 compared to $99,677 for the three months ended June 30,
1995, a decrease of approximately $3,500. The decrease in total
income is due to a decrease in properties owned and operated as a
result of the sale of Bear Canyon II in May 1995 and the
foreclosure of Country Club in June 1995 and the sale of Bear
Canyon in April 1996.
Total expenses for the three months ended June 30, 1996 were
$110,573 compared to $211,948 for the three months ended June 30,
1995, a decrease of approximately $101,400. The decrease in
expenses is mainly due to a decrease in property operating expenses
as the result of the decrease in properties owned and operated.
<PAGE>
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.
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: August 14, 1996
BY: /s/ B. Allen Aynessazian
B. Allen Aynessazian
Chief Financial Officer
DATE: August 14, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 67,118
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,461,925 <F1>
<DEPRECIATION> 0 <F2>
<TOTAL-ASSETS> 1,567,442
<CURRENT-LIABILITIES> 0
<BONDS> 1,298,815 <F3>
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,567,442
<SALES> 0
<TOTAL-REVENUES> 217,219 <F4>
<CGS> 0
<TOTAL-COSTS> 207,926 <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> 9,293
<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 MORTGAGES PAYABLE
<F4> "TOTAL REVENUES" REPRESENTS RENTAL, INTEREST,
AND OTHER INCOME
<F5> "TOTAL COSTS" REPRESENTS TOTAL EXPENSES
</FN>
</TABLE>
