FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended in Rel. No. 312905, eff. 4/26/93.)
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period.........to.........
(Amended by Exchange Act Rel. No. 312905, eff. 4/26/93)
Commission file number 0-13104
MRI BUSINESS PROPERTIES FUND, LTD.
(Exact name of registrant as specified in its charter)
California 94-2919856
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
Issuer's phone number
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 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 .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) MRI BUSINESS PROPERTIES FUND, LTD.
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
(Unaudited) (Note)
<S> <C> <C>
Assets
Cash and cash equivalents $ 911 $ 3,795
Receivables and other assets 340 474
Deferred costs, net 366 414
Investment Properties
Real estate 25,265 25,239
Accumulated depreciation (10,555) (10,225)
Investment Properties 14,710 15,014
$ 16,327 $ 19,697
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable and accrued liabilities $ 405 $ 528
Due to affiliate -- 50
Mortgage note payable 1,087 1,110
Partners' Capital (Deficit):
General partners (1,113) (1,049)
Limited partners (82,158 units issued
and outstanding at March 31, 1996 and
September 30, 1995) 15,948 19,058
$ 16,327 $ 19,697
</TABLE>
Note: The balance sheet at September 30, 1995, has been derived
from the audited financial statements at that date but
does not include all of the information and footnotes
required by generally accepted accounting principles for
complete financial statements.
See Accompanying Notes to Consolidated Financial Statements
b) MRI BUSINESS PROPERTIES FUND, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
For the Six Months Ended
March 31, March 31,
1996 1995
<S> <C> <C>
Revenues:
Commercial operations $ 1,683 $ 1,651
Hotel lease -- 85
Interest income 63 63
Gain on sale of property -- 2,097
Total revenues 1,746 3,896
Expenses:
Hotel operations -- 59
Commercial operations 911 961
Depreciation 330 471
Interest 50 283
General and administrative 246 250
Total expenses 1,537 2,024
Income before extraordinary item 209 1,872
Extraordinary item:
Gain on extinguishment of debt -- 4,596
Net income $ 209 $ 6,468
Net income allocated to general partners $ 4 $ 1,334
Net income allocated to limited partners 205 5,134
Net income $ 209 $ 6,468
Net income per limited partnership unit:
Income before extraordinary item $ 2.49 $ 17.73
Extraordinary item -- 44.76
Net income $ 2.49 $ 62.49
Distribution per limited partnership unit $ 40.35 $ --
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
b) MRI BUSINESS PROPERTIES FUND, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, March 31,
1996 1995
<S> <C> <C>
Revenues:
Commercial operations $ 835 $ 835
Hotel lease -- --
Interest income 22 22
Total revenues 857 857
Expenses:
Hotel operations -- --
Commercial operations 460 496
Depreciation 226 171
Interest 25 25
General and administrative 133 125
Total expenses 844 817
Income before extraordinary item 13 40
Extraordinary item:
Gain on extinguishment of debt -- --
Net income $ 13 $ 40
Net income allocated to general partners $ -- $ 1
Net income allocated to limited partners 13 39
Net income $ 13 $ 40
Net income per limited partnership unit: $ .16 $ .47
Distribution per limited partnership unit $ 40.35 $ --
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c) MRI BUSINESS PROPERTIES FUND, LTD.
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners' Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 82,158 $ -- $ 82,158 $ 82,158
Partners' capital (deficit) at
September 30, 1995 82,158 $(1,049) $ 19,058 $ 18,009
Distributions paid to partners -- (68) (3,315) (3,383)
Net income for the six
months ended March 31, 1996 -- 4 205 209
Partners' capital (deficit) at
March 31, 1996 82,158 $(1,113) $ 15,948 $ 14,835
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) MRI BUSINESS PROPERTIES FUND, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
For the Six Months ended
March 31, March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 209 $ 6,468
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Gain on sale of property -- (2,097)
Extraordinary gain on extinguishment of debt -- (4,596)
Depreciation 330 471
Amortization 69 67
Provision for doubtful receivables -- 1
Changes in accounts:
Receivables and other assets 133 (39)
Deferred costs (20) (26)
Accounts payable and accrued liabilities (122) (1,360)
Due to affiliate (50) --
Net cash provided by (used in) operating
actitivies 549 (1,111)
Cash flows from investing activities
Net proceeds from sale of property -- 27,681
Property improvements and replacements (27) (898)
Net cash (used in) provided by investing
activities (27) 26,783
Cash flows from financing activities:
Repayment of notes payable -- (27,051)
Mortgage notes payable payments (23) (28)
Distribution to partners (3,383) --
Net cash used in financing (3,406) (27,079)
Decrease in Cash and Cash Equivalents (2,884) (1,407)
Cash and Cash Equivalents at Beginning of Period 3,795 5,031
Cash and Cash Equivalents at End of Period $ 911 $ 3,624
Supplemental Disclosure of Cash Flow Information
Interest paid in cash during the period $ 47 $ 1,185
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
e) MRI BUSINESS PROPERTIES FUND, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - 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 the Managing General Partner, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six and three month period ended March
31, 1996, are not necessarily indicative of the results that may be expected for
the fiscal year ending September 30, 1996. 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 September 30, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
Note B - Transactions with Affiliated Parties
MRI Business Properties Fund, Ltd. (the "Partnership") has no employees and is
dependent on its general partner and its affiliates for the management and
administration of all partnership activities. The Partnership Agreement
provides for payments to affiliates for services and as reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership.
The following transactions with affiliates of Insignia Financial Group, Inc.
("Insignia"), National Property Investors, Inc. ("NPI"), and affiliates of NPI
were charged to expense in 1996 and 1995:
<TABLE>
<CAPTION>
For the Six Months Ended
March 31,
1996 1995
<S> <C> <C>
Reimbursement for services of affiliates (included
in general and administrative expenses) $77,000 $54,000
</TABLE>
For the period from January 19, 1996, to March 31, 1996, the Partnership insured
its property under a master policy through an agency and insurer unaffiliated
with the Managing General Partner. An affiliate of the Managing General Partner
acquired, in the acquisition of a business, certain financial obligations from
an insurance agency which was later acquired by the agent who placed the current
year's master policy. The current agent assumed the financial obligations to
the affiliate of the Managing General Partner who received payments on these
obligations from the agent. The amount of the Partnership's insurance premiums
accruing to the benefit of the affiliate of the Managing General Partner by
virtue of the agent's obligations is not significant.
Note B - Transactions with Affiliated Parties (continued)
The managing general partner of the Partnership is Montgomery Realty Company-83
("Montgomery"), a California limited partnership of which Fox Realty Investors
("FRI"), a California general partnership, is the managing general partner.
Effective March 31, 1996, Montgomery Realty Corporation, a California
corporation, withdrew as the co-general partner in Montgomery. The associate
general partner of the Partnership is MRI Associates, Ltd., a California limited
partnership, of which FRI is the general partner, and Two Broadway Associates
II, an affiliate of Merrill lynch, Pierce, Fenner & Smith, Incorporated, is the
limited partner.
On December 6, 1993, NPI Equity Investment II, Inc. ("NPI Equity II" or the
"Managing General Partner") became the managing partner of FRI. As a result,
NPI Equity II became responsible for the operation and management of the
business and affairs of the Partnership and the other investment partnership
sponsored by FRI and/or its affiliates. The Managing General Partner is a
wholly owned subsidiary of NPI.
On August 17, 1995, the stockholders of NPI entered into an agreement to sell to
IFGP Corporation, a Delaware corporation, an affiliate of Insignia Financial
Group, Inc., a Delaware corporation ("Insignia"), all of the issued and
outstanding common stock of NPI, for an aggregate purchase price of $1,000,000.
The closing of the transactions contemplated by the above mentioned agreement
(the "Closing") occurred on January 19, 1996.
Upon the Closing, the officers and directors of NPI and NPI Equity resigned and
IFGP Corporation caused new officers and directors of each of those entities to
be elected.
Note C - Gain on Sale of Property and Extraordinary Gain on Extinguishment of
Debt
On October 24, 1994, the Partnership sold its Dallas Marriott Quorum Hotel for
$29,815,000. After repayment of the first and second mortgage loan balances of
$22,221,000 (including $170,000 of accrued interest) and $5,000,000,
respectively, deferred interest of $750,000 and closing costs and adjustments of
$515,000, the cash received by the Partnership was $1,329,000. Under the terms
of the agreement, cash in the hotel's bank account of approximately $1,980,000
was retained by the purchaser to be used as a partial repayment of the second
loan. Accrued but unpaid interest of approximately $4,596,000 on the second
loan was forgiven by the lender. The sale resulted in a gain of $2,097,000 and
an extraordinary gain on extinguishment of debt of $4,596,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Partnership's investment properties consist of three office buildings, one
office/warehouse complex and one shopping center located in Colorado, Arizona,
Texas, and Georgia. The following table sets forth the average occupancy of the
properties for the six months ended March 31, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Resource Park West Office Building
Lakewood, Colorado 100% 99%
Priest Office Building
Tempe, Arizona 100% 100%
Mardot II Building
Tempe, Arizona 100% 100%
Parkway Village Shopping Center
Atlanta, Georgia 77% 67%
Norwood Tower Office Building
Austin, Texas 96% 97%
During fiscal 1994, one of Parkway Village Shopping Centers tenants moved out.
Although this space was temporarily filled by a month-to-month tenant in early
fiscal 1995, this tenant also vacated in April 1995. A portion of this space
has been leased in the 1996 fiscal year.
The Partnership reported net income of approximately $209,000 for the six months
ended March 31, 1996, versus net income of approximately $6,468,000 for the
comparable period in 1995. This decrease in net income is primarily due to the
gain on sale of Dallas Marriott Quorum Hotel and gain on extinguishment of debt
in connection with this sale in fiscal 1995. Offsetting this decrease in net
income is a decrease in depreciation and interest expenses. These decreases are
also due to the sale of the Marriott discussed above. Also contributing to the
decrease in deprecation is the provision of impairment of value of $2,400,000
which was recognized on Norwood Tower Office Building in fiscal 1995.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rent, maintain or increasing occupancy
levels and protecting the Partnership from increases in expense. As part of this
plan, the Managing General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
At March 31, 1996, the Partnership had unrestricted cash of approximately
$911,000 as compared to approximately $3,624,000 at March 31, 1995. Net cash
provided by operating activities increased for the six month period ended March
31, 1996 as compared to the six month period ended March 31, 1995 due to the
change in accounts payable and other liabilities primarily due to the payment of
deferred interest in connection with the sale of the Dallas Marriott Quorum
Hotel in 1995. Net cash provided by investing activities decreased due to the
proceeds received in 1995 for the sale of the Marriott hotel. This change was
offset by a decrease in property improvements and replacements resulting from
substantial improvements at Norwood Tower in 1995 with no such project in 1996.
Net cash used in financing activities decreased for the six month period ended
March 31, 1996, as compared to the six month period ended March 31, 1995, due to
payments of approximately $27,051,000 to satisfy the debt on the Marriott Quorum
Hotel in connection with the sale. Offsetting this change is the distribution
made to the partners in the second quarter of fiscal 1996.
An affiliate of the Managing General Partner has made available to the
Partnership a credit line of up to $150,000 per property owned by the
Partnership. The Partnership has no outstanding amounts due under this line of
credit. Based on present plans, management does not anticipate the need to
borrow in the near future. Other than cash and cash equivalents, the line of
credit is the Partnership's only unused source of liquidity.
Management is currently negotiating a lease extension with a tenant that
occupies 75% of the Partnership's Mardot II office/warehouse complex which is
expected to be finalized in the third quarter of fiscal 1996. A significant
portion of the unoccupied space at Parkway Village Shopping Center is currently
being marketed to potential long term tenants. In addition, a tenant occupying
approximately 41% of Parkway Village Shopping Center may not renew its lease,
which expires on October 31, 1996. The re-leasing of these spaces might require
significant expenditures for tenant installations and leasing commissions. If
the spaces are not re-leased, it will have a significant negative impact on the
Partnership's operations.
All of the Partnership's remaining properties other than Resource Park are
currently under contract for sale. It is expected that the sale of Norwood
Tower Office Building will be consummated in the third fiscal quarter for a
contract sales price of approximately $5,700,000, subject to adjustments. The
Partnership anticipates that it will receive net proceeds of approximately
$5,400,000 from this sale. The sales of Mardot II, Priest and Parkway Village,
which are subject to the purchaser's due diligence review and other customary
conditions, are expected to close during the fourth fiscal quarter of 1996. The
contract purchase price for Mardot II, Priest and Parkway Village is
approximately $2,600,000, $1,675,000 and $3,100,000 respectively.
The Partnership, due to its fiscal year end of September 30, may be obligated
under Section 444 of the Internal Revenue Code to deposit funds with the IRS
effectively advancing the liability of its partners. The deposit is due May 15
and the current year's required deposit is in excess of the Partnership's
available funds. The general partner is currently exploring its alternatives in
this matter. No liability for this deposit has been recorded in the
accompanying financial statements.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the various properties to adequately maintain the
physical assets and other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The mortgage indebtedness of $1,087,000 is collateralized by Resource Park West
and has a balloon payment due in January 1999, at which time the property will
either be refinanced or sold. At this time, it appears that the investment
objective of capital growth will not be attained and that a significant portion
of invested capital will not be returned to investors. The extent to which
invested capital is returned to investors is dependent upon the performance of
the Partnership's remaining properties and the markets in which such properties
are located and on the sales price of the remaining properties. Upon sale of
all properties and termination of the Partnership, the general partners may be
required to contribute certain funds to the Partnership in accordance with the
partnership agreement. The Partnership paid approximately $3,383,000 in
distributions to the partners in the first six months of fiscal year 1996.
Future cash distributions will depend on the levels of net cash generated from
operations, property sales, and the availability of cash reserves. No cash
distributions were made in 1995.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K: A Form 8-K dated January 19, 1996, was filed
reporting the
change in control of the Partnership.
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.
MRI BUSINESS PROPERTIES FUND, LTD.
By: MONTGOMERY REALTY COMPANY 83,
its Managing General Partner
By: FOX REALTY INVESTORS,
its Managing General Partner
By: NPI EQUITY INVESTMENTS, II INC.
its managing general partner
By: /s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By: /s/ Ronald Uretta
Ronald Uretta
Principal Financial Officer
and Principal Accounting Officer
Date: May 15, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from MRI Business
Properties Fund, Ltd. 1996 Second Quarter 10-Q and is qualified in its
entirety by reference to such 10-Q filing.
</LEGEND>
<CIK> 0000722886
<NAME> MRI BUSINESS PROPERTIES FUND, LTD.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 911
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 25,265
<DEPRECIATION> 10,555
<TOTAL-ASSETS> 16,327
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 1,087
0
0
<COMMON> 0
<OTHER-SE> 14,835
<TOTAL-LIABILITY-AND-EQUITY> 16,327
<SALES> 0
<TOTAL-REVENUES> 1,746
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,537
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50
<INCOME-PRETAX> 209
<INCOME-TAX> 0
<INCOME-CONTINUING> 209
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 209
<EPS-PRIMARY> 2.49<F2>
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
<F2> Amount not in thousands
</FN>
</TABLE>
