FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
(As last amended by 34-32231, eff. 6/3/93)
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(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, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period.........to.........
Commission file number 0-13104
MRI BUSINESS PROPERTIES FUND LTD.
(Exact name of small business issuer 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) (Zip Code)
(864) 239-1000
Issuer's telephone 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.
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Cash and cash equivalents $ 4,173
Receivables and deposits 2,066
Other assets 17
Investment property
Land $ 440
Building and related personal property 4,035
Property valuation reserve (300)
4,175
Accumulated depreciation (1,793) 2,382
$ 8,638
Liabilities and Partners' Deficit
Accounts payable $ 7
Tenants' security deposits payable 4
Accrued property taxes 31
Other liabilities 11
Partners' Deficit:
Limited partners' (82,158 units outstanding) $ 9,605
General Partner's (1,020) 8,585
$ 8,638
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
b) MRI BUSINESS PROPERTIES FUND LTD.
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Commercial operations $ 85 $ 813 $ 253 $ 1,635
Interest and other income 40 44 95 111
Gain on sale of property -- -- 858 --
Total revenues 125 857 1,206 1,746
Expenses:
Operating 44 460 148 911
Interest -- 25 6 50
Depreciation 30 226 69 330
General and administrative 238 133 320 246
Total expenses 312 844 543 1,537
(Loss) income before property valuation
reserve and extraordinary item (187) 13 663 209
Property valuation reserve 300 -- 300 --
(Loss) income before extraordinary item (487) 13 363 209
Extraordinary item:
Loss on extinguishment of debt -- -- 94 --
Net (loss) income $ (487) $ 13 $ 269 $ 209
Net (loss) income allocated to general
partners $ (10) $ -- $ 143 $ 4
Net (loss) income allocated to limited
partners (477) 13 126 205
Net (loss) income $ (487) $ 13 $ 269 $ 209
Net (loss) income per limited partnership
unit:
(Loss) income before
extraordinary item $ (5.81) $ .16 $ 2.44 $ 2.49
Extraordinary loss on
extinguishment of debt -- -- (.91) --
Net (loss) income per limited partnership
unit $ (5.81) $ .16 $ 1.53 $ 2.49
Distribution per limited
partnership unit $ -- $ 40.35 $ 83.50 $ 40.35
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
c) MRI BUSINESS PROPERTIES FUND LTD.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited General Limited
Partnership Partners' Partners' Total
Units Deficit Equity Equity
<S> <C> <C> <C> <C>
Original capital contributions 82,158 $ 100 $ 82,158 $ 82,258
Partners' (deficit) capital at
September 30, 1996 82,158 $ (1,023) $ 16,339 $ 15,316
Distributions paid to partners (140) (6,860) (7,000)
Net income for the six
months ended March 31, 1997 -- 143 126 269
Partners' (deficit) capital at
March 31, 1997 82,158 $ (1,020) $ 9,605 $ 8,585
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
d) MRI BUSINESS PROPERTIES FUND LTD.
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 269 $ 209
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation 69 330
Amortization 7 69
Gain on disposal of property (858) --
Property valuation reserve 300 --
Extraordinary loss on early extinguishment of debt 94 --
Change in accounts:
Receivables and deposits 189 103
Other assets 6 10
Accounts payable 7 (5)
Tenant security deposits payable (34) --
Accrued property taxes (85) (159)
Other liabilities (23) (8)
Net cash (used in) provided by
operating activities (59) 549
Cash flows from investing activities:
Property improvements and replacements -- (27)
Proceeds from sale of property 3,889 --
Net cash provided by (used in) investing activities 3,889 (27)
Cash flows from financing activities:
Satisfaction of notes payable (1,063) --
Costs paid to extinguish debt (32) (23)
Distribution to partners (7,000) (3,383)
Net cash used in financing activities (8,095) (3,406)
Net decrease in cash and cash equivalents (4,265) (2,884)
Cash and cash equivalents at beginning of period 8,438 3,795
Cash and cash equivalents at end of period $ 4,173 $ 911
Supplemental information:
Cash paid for interest $ 13 $ 47
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
e)
MRI BUSINESS PROPERTIES FUND LTD.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of MRI Business Properties Fund
Ltd. (the "Partnership") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B. 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 NPI Equity Investments II, Inc. ("NPI Equity" or the "Managing
General Partner"), all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six month periods ended March 31, 1997, are not
necessarily indicative of the results that may be expected for the fiscal year
ending September 30, 1997. For further information, refer to the financial
statements and footnotes thereto included in the Partnership's annual report on
Form 10-K for the fiscal year ended September 30, 1996.
Certain reclassifications have been made to the fiscal year 1996 information to
conform to the fiscal year 1997 presentation.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the Managing 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 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. 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.
Pursuant to a series of transactions which closed during 1996, affiliates of
Insignia Financial Group, Inc. ("Insignia") acquired all of the issued and
outstanding shares of stock of NPI Equity and National Property Investors, Inc.
("NPI"). In connection with these transactions, affiliates of Insignia
appointed new officers and directors of NPI Equity and NPI.
The following transactions with affiliates of Insignia, NPI, and affiliates of
NPI were charged to expense during the six month periods ended March 31, 1997
and 1996 (dollar amounts in thousands):
For the Six Months Ended
March 31,
1997 1996
Reimbursement for services of affiliates (included
in general and administrative expenses) $ 8 $ 77
For the period from January 19, 1996, to March 31, 1997, the Partnership insured
its properties 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 C - GAIN ON SALE OF PROPERTY AND EXTRAORDINARY LOSS ON EXTINGUISHMENT OF
DEBT
On October 22, 1996, the Partnership sold Resource Park West Office Building to
an unrelated third party for a contract amount of $4,025,000. After the payment
of the note payable, closing costs and related expenses of approximately
$136,000, the Partnership received proceeds of approximately $3,889,000. The
sale resulted in a gain of approximately $858,000 in fiscal year 1997. The
early extinguishment of debt resulted in an extraordinary loss of approximately
$94,000, arising from prepayment penalties and the write off of unamortized loan
costs.
NOTE D - PROPERTY VALUATION RESERVE
The occupancy rate at the Parkway Village Shopping Center decreased during the
first fiscal quarter of 1997 as the result of the relocation of an anchor tenant
who occupied 41% of the total space. An additional 12% of the property's space,
consisting of five tenants, was vacated since the loss of the anchor tenant. At
March 31, 1997, occupancy for the property had declined to 11% as a result of
the aforementioned tenant losses. With these tenant losses, the Managing General
Partner believed it was prudent to continue marketing the property for sale as
opposed to expending significant amounts of cash flow in an effort to fully
lease the property. Near the end of the second fiscal quarter of 1997, the
Managing General Partner signed a contract for sale for the investment property
at a contract price of $2,400,000. The sale, which is subject to the
purchaser's due diligence and other customary conditions, is expected to close
during the third fiscal quarter of 1997. During the six month period ended
March 31, 1997, the Partnership determined that the low occupancy rate was other
than temporary. A property valuation reserve of $300,000, based on the current
contract price in relation to the net book value of the investment property, has
been recognized to reduce the carrying value of the property to its estimated
fair value.
NOTE E - DISTRIBUTIONS
In October 1996, the Partnership distributed approximately $6,860,000 ($83.50
per limited partnership unit) to the limited partners and approximately $140,000
to the general partners from proceeds from the disposition of the Norwood Tower
Office Building and Mardot II Building which occurred during fiscal year 1996.
During the six month period ended March 31, 1996, the Partnership distributed
approximately $3,315,000 ($40.35 per limited partnership unit) to the limited
partners and approximately $68,000 to the general partners from proceeds from
the disposition of the Dallas Marriott Quorum Hotel, which occurred during
fiscal year 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment property consists of Parkway Village Shopping
Center, located in Atlanta Georgia. The average occupancy for the six month
periods ended March 31, 1997 and 1996, was 39% and 77%, respectively.
The decrease in occupancy at the Parkway Village Shopping Center is the result
of the relocation of an anchor tenant who occupied 41% of the total space,
during the first fiscal quarter of 1997. An additional 12% of the property's
space, consisting of five tenants, was vacated since the loss of the anchor
tenant. At March 31, 1997, occupancy for the property had declined to 11% as a
result of the above mentioned tenant losses. With these tenant losses, the
Managing General Partner believed it was prudent to continue marketing the
property for sale as opposed to expending significant amounts of cash flow in an
effort to fully lease the property. Near the end of the second fiscal quarter of
1997, the Managing General Partner signed a contract for sale for the investment
property at a contract price of $2,400,000. The sale, which is subject to the
purchaser's due diligence and other customary conditions, is expected to close
during the third fiscal quarter of 1997. During the six month period ended March
31, 1997, the Partnership determined that the low occupancy rate was other than
temporary. A property valuation reserve of $300,000, based on the current
contract price in relation to the net book value of the investment property, has
been recognized to reduce the carrying value of the property to its estimated
fair value.
The Partnership realized net income of approximately $269,000 and $209,000 for
the six months ended March 31, 1997, and 1996, respectively. The Partnership
realized a net loss of approximately $487,000 for the three month period ended
March 31, 1997, versus net income of approximately $13,000 for the same
corresponding period in fiscal year 1996. The increase in net income for the
six month period is the result of the gain on sale of the Resource Park West
Building, during the first fiscal quarter of 1997, which was partially offset by
the extraordinary loss on early extinguishment of debt, also related to the sale
of the property and the property valuation reserve related to Parkway Village
(see discussion above). Additionally, during fiscal 1996, the Partnership sold
three properties, the Norwood Tower Office Building, in June of 1996; the Mardot
II Building, in July of 1996; and the Priest Office Building in September of
1996. Due to the above mentioned property sales, in fiscal 1996 and 1997, the
Partnership has seen a significant reduction in interest, operating, and
depreciation expenses. General and administrative expenses increased during the
six month period ended March 31, 1997, due to interest and penalties paid to the
Internal Revenue Service related to the deposit required under Section 444 of
the Internal Revenue Code. At the time the deposit was due to the Internal
Revenue Service, the Partnership did not have sufficient funds to make the
deposit. As funds became available, the deposit was made. The amount expensed
for major repairs and renovations for the six month periods ended March 31, 1997
and 1996, is not significant.
Revenues and expenses at the remaining property, Parkway Village Shopping
Center, decreased during the three and six month period ended March 31, 1997 as
compared to March 31, 1996. This decrease was the result of tenant losses
discussed above. This decrease was partially offset by an increase in tenant
reimbursements.
At March 31, 1997, the Partnership had unrestricted cash of approximately
$4,173,000 as compared to approximately $911,000 at March 31, 1996. Net cash
used in operations decreased due to the decrease in net operating income from
the Partnership's remaining property and the sale of the Partnership's four
properties during fiscal 1996 and the first quarter of fiscal 1997. Net cash
provided by investing activities increased as the result of the proceeds from
the sale of the Resource Park West Building. Net cash used in financing
activities increased as the result of the satisfaction of approximately
$1,063,000 in mortgage indebtedness secured by the Resource Park West Building,
and a distribution of approximately $7,000,000 to the partners.
An affiliate of the Managing General Partner has made available to the
Partnership a line of credit of $150,000, per property owned by the Partnership.
As of March 31, 1997, there are no outstanding amounts due under this line of
credit. Based on present plans, the Managing General Partner 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.
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 property 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. Future cash
distributions will depend on the levels of cash generated from operations, a
property sale, and the availability of cash reserves. In October 1996, the
Partnership distributed $6,860,000 ($83.50 per limited partnership unit) to the
limited partners and $140,000 to the general partners from proceeds from the
disposition of the Norwood Tower Office Building and Mardot II Building. The
Partnership anticipates making a distribution during 1997.
PART II - OTHER INFORMATION
ITEMS 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: None filed during the quarter ended March 31, 1997.
SIGNATURE
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
Vice President and Treasurer
Date: May 15, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from MRI Business
Properties Fund Ltd. 1997 Second Quarter 10-QSB and is qualified in its entirety
by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000722886
<NAME> MRI BUSINESS PROPERTIES FUND LTD.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,173
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 4,175
<DEPRECIATION> (1,793)
<TOTAL-ASSETS> 8,638
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,585
<TOTAL-LIABILITY-AND-EQUITY> 8,638
<SALES> 0
<TOTAL-REVENUES> 1,206
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 543
<LOSS-PROVISION> 300
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 663
<DISCONTINUED> 0
<EXTRAORDINARY> (94)
<CHANGES> 0
<NET-INCOME> 269
<EPS-PRIMARY> 1.53<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
