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 June 30, 1994
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 0-15348
MRI Business Properties Fund, Ltd. III
(Exact name of Registrant as specified in its charter)
California 94-2969782
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5665 Northside Drive N.W., Ste. 370, Atlanta, Georgia 30328
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (404) 916-9090
N/A
Former name, former address and fiscal year, if changed since last report.
Indicate by check mark whether 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 PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant (1) has filed all 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 _____ 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 __________________.
1 of 16
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1994
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
Consolidated Balance Sheets
June 30, September 30,
1994 1993
(Unaudited) (Audited)
Assets
<S> <C> <C>
Cash and cash equivalents $ 3,471,000 $ 5,088,000
Cash investments - 3,467,000
Accounts and interest receivable, net 568,000 1,814,000
Inventories and operating supplies 36,000 533,000
Prepaid expenses and other assets 158,000 434,000
Real Estate:
Real estate 48,099,000 110,924,000
Accumulated depreciation (15,006,000) (30,459,000)
Allowance for impairment of value - (14,348,000)
------------- -------------
Real estate, net 33,093,000 66,117,000
Deferred financing costs, net 90,000 158,000
------------- -------------
Total assets $ 37,416,000 $ 77,611,000
============= =============
Liabilities and Partners' Equity
Accounts payable $ 194,000 $ 1,466,000
Accrued interest 123,000 966,000
Accrued property taxes 339,000 1,779,000
Payable to affiliate of joint
venture partner - 1,581,000
Due to unconsolidated joint venture 259,000 147,000
Other liabilities 541,000 1,467,000
Note payable to affiliate of joint
venture partner - 2,500,000
Notes payable 15,881,000 51,799,000
------------- -------------
Total liabilities 17,337,000 61,705,000
------------- -------------
Minority interest in joint ventures - (444,000)
------------- -------------
Partners' equity (deficit):
General partners (1,939,000) (2,014,000)
Limited partners (109,027 units outstanding at
June 30, 1994 and September 30, 1993) 22,018,000 18,364,000
------------- -------------
Total partners' equity 20,079,000 16,350,000
------------- -------------
Total liabilities and partners' equity $ 37,416,000 $ 77,611,000
============= =============
</TABLE>
See notes to consolidated financial statements.
2 of 16
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1994
Consolidated Statements of Operations (Unaudited)
For the Nine Months Ended
June 30, 1994 June 30, 1993
<TABLE>
<CAPTION>
Revenues:
<S> <C> <C>
Room revenue $ 16,350,000 $ 19,475,000
Food and beverage revenue 2,593,000 4,586,000
Other operating revenue 1,174,000 1,479,000
Interest 197,000 280,000
Gain on sale of joint venture interests 1,467,000 -
------------- -------------
Total revenues 21,781,000 25,820,000
------------- -------------
Expenses:
Room expenses 3,926,000 5,098,000
Food and beverage expenses 2,331,000 4,291,000
Other operating expenses 8,212,000 11,320,000
Depreciation and amortization 1,254,000 2,442,000
Interest 1,299,000 3,089,000
Equity in unconsolidated joint
venture's operation 262,000 898,000
General and administrative 364,000 304,000
------------- -------------
Total expenses 17,648,000 27,442,000
------------- -------------
Income (loss) before minority interest in joint
ventures' operations 4,133,000 (1,622,000)
Minority interest in joint ventures' operations (404,000) 187,000
------------- -------------
Net income (loss) $ 3,729,000 $ (1,435,000)
============= =============
Net income (loss) per limited partnership
assignee unit $ 34 $ (13)
============= =============
</TABLE>
See notes to consolidated financial statements.
3 of 16
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1994
Consolidated Statements of Operations (Unaudited)
For the Three Months Ended
June 30, 1994 June 30, 1993
<TABLE>
<CAPTION>
Revenues:
<S> <C> <C>
Room revenue $ 3,405,000 $ 6,965,000
Food and beverage revenue - 1,588,000
Other operating revenue 219,000 522,000
Interest 67,000 194,000
------------- -------------
Total revenues 3,691,000 9,269,000
------------- -------------
Expenses:
Room expenses 828,000 1,766,000
Food and beverage expenses - 1,415,000
Other operating expenses 1,559,000 3,677,000
Depreciation and amortization 376,000 746,000
Interest 357,000 550,000
Equity in unconsolidated joint
venture's operation 110,000 276,000
General and administrative 107,000 106,000
------------- -------------
Total expenses 3,337,000 8,536,000
------------- -------------
Income before minority interest in joint
ventures' operations 354,000 733,000
Minority interest in joint ventures'
operations - (214,000)
------------- -------------
Net income $ 354,000 $ 519,000
============= =============
Net income per limited partnership
assignee unit $ 3 $ 5
============= =============
</TABLE>
See notes to consolidated financial statements.
4 of 16
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1994
Consolidated Statement of Partners' Equity (Deficit) (Unaudited)
For the Nine Months Ended June 30, 1994
<TABLE>
<CAPTION>
General Limited Total
Partners' Partners' Partners'
(Deficit) Equity Equity
<S> <C> <C> <C>
Balance - October 1, 1993 $ (2,014,000) $ 18,364,000 $ 16,350,000
Net income 75,000 3,654,000 3,729,000
------------- ------------- -------------
Balance - June 30, 1994 $ (1,939,000) $ 22,018,000 $ 20,079,000
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
5 of 16
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1994
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended
June 30, 1994 June 30, 1993
Operating Activities:
<S> <C> <C>
Net income (loss) $ 3,729,000 $ (1,435,000)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 1,322,000 2,472,000
Deferred interest added to note
payable principal - 292,000
Minority interest in joint ventures'
operations 404,000 (187,000)
Gain on sale of joint venture interests (1,467,000) -
Equity in unconsolidated joint
venture's operation 262,000 898,000
Changes in operating assets and liabilities:
Accounts and interest receivable 1,246,000 (104,000)
Inventories and operating supplies 497,000 7,000
Prepaid expenses and other assets 276,000 (55,000)
Accounts payable, accrued expenses and
other liabilities (4,481,000) 733,000
------------- -------------
Net cash provided by operating activities 1,788,000 2,621,000
------------- -------------
Investing Activities:
Net proceeds from sale of joint
venture interests 34,332,000 -
Properties and improvements additions (1,055,000) (1,132,000)
Unconsolidated joint venture contributions (150,000) -
Proceeds from cash investments 5,842,000 3,964,000
Purchase of cash investments (2,375,000) (3,271,000)
------------- -------------
Net cash provided by (used in)
investing activities 36,594,000 (439,000)
------------- -------------
Financing Activities:
Satisfaction of payables to affiliates of
joint venture partner (4,081,000) -
Satisfaction of notes payables (35,731,000) -
Notes payable principal payments (187,000) (13,000)
------------- -------------
Cash (used in) financing activities (39,999,000) (13,000)
------------- -------------
(Decrease) Increase in Cash and Cash
Equivalents (1,617,000) 2,169,000
Cash and Cash Equivalents at Beginning
of Period 5,088,000 5,223,000
------------- -------------
Cash and Cash Equivalents at End of Period $ 3,471,000 $ 7,392,000
============= =============
Supplemental Disclosure of Cash Flow
Information:
Interest paid in cash during the period $ 1,224,000 $ 2,287,000
============= =============
Supplemental Disclosure of Non-Cash Investing
and Financing Activities:
Deferred interest added to note payable
principal $ - $ 439,000
============= =============
Gain on sale of joint venture
interests - Note 4
</TABLE>
See notes to consolidated financial statements.
6 of 16
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1994
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying consolidated financial statements, footnotes and
discussions should be read in conjunction with the consolidated
financial statements, related footnotes and discussions contained in
the Partnership's Annual Report for the year ended September 30, 1993.
The financial information contained herein is unaudited. In the
opinion of management, all adjustments necessary for a fair
presentation of such financial information have been included. All
adjustments are of a normal recurring nature, except for the gain on
sale of joint venture interests, as described in Note 4.
The results of operations for the nine and three months ended June 30,
1994 and 1993 are not necessarily indicative of the results to be
expected for the full year.
2. Transactions with Related Parties
Affiliates of the Managing General Partner received reimbursements of
administrative expenses amounting to $58,000 during the nine months
ended June 30, 1994. These reimbursements are primarily included in
general and administrative expenses.
3. Notes Payable
On June 2, 1994, the Partnership prepaid, in full satisfaction, the
note encumbering its Embassy Suites property in the amount of
$7,000,000. The note had been accruing interest at prime plus 1% and
was due to mature in December 1996.
4. Gain on Sale of Joint Venture Interests
On March 7, 1994, the Partnership sold its 60 percent interest in the
Park Hyatt Water Tower Associates Joint Venture, which owned the Park
Hyatt Hotel, located in Chicago, Illinois. The sales price of
$5,831,000 is comprised of the following: (1) the assumption of the
purchase money note payable in the amount of $2,500,000, (2) accrued
and unpaid interest of $1,581,000 assumed by the buyer, and (3) cash of
$1,750,000. The sale resulted in a gain of approximately $543,000.
The Partnership had recorded a provision for impairment of value of
$6,985,000 during fiscal year 1992.
On March 15, 1994, the Partnership sold its 65 percent interest in the
Washington Park Hotel Associates Joint Venture, which owned the
Radisson Park Terrace Hotel, located in Washington, D.C. for $1,455,000
in cash. The sale resulted in a gain of approximately $924,000. The
Partnership had recorded a provision for impairment of value of
$7,363,000, of which $2,755,000 was recognized in fiscal year 1990 and
the remaining $4,608,000 was recognized in fiscal year 1992.
7 of 16
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1994
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Investment in Unconsolidated Joint Venture
The following are the condensed balance sheets as of June 30, 1994 and
September 30, 1993 and condensed statements of operations for the nine and the
three months ended June 30, 1994 and 1993 of the unconsolidated joint venture:
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
1994 1993
(Unaudited) (Audited)
Assets
<S> <C> <C>
Cash and cash equivalents $ 959,000 $ 302,000
Restricted cash 1,179,000 739,000
Accounts receivable 1,153,000 1,132,000
Net property and improvements 33,894,000 34,778,000
Deferred financing costs - 45,000
Other assets 213,000 257,000
------------- -------------
Total assets $ 37,398,000 $ 37,253,000
============= =============
Liabilities and Partners' (Deficit)
Accounts payable and accrued liabilities $ 4,447,000 $ 3,854,000
Note payable 34,000,000 34,000,000
------------- -------------
Total liabilities 38,447,000 37,854,000
------------- -------------
Minority interest in joint venture (532,000) (308,000)
------------- -------------
Partners' (deficit):
MRI BPF, Ltd. II (258,000) (146,000)
MRI BPF, Ltd. III (259,000) (147,000)
------------- -------------
Total partners' (deficit) (517,000) (293,000)
------------- -------------
Total liabilities and partners' (deficit) $ 37,398,000 $ 37,253,000
============= =============
</TABLE>
8 of 16
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1994
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Investment in Unconsolidated Joint Venture (Continued)
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended
June 30, 1994 June 30, 1993
<S> <C> <C>
Revenues $ 15,096,000 $ 13,395,000
Expenses 16,144,000 15,190,000
------------- -------------
Loss before minority interest in joint
venture operations (1,048,000) (1,795,000)
Minority interest in joint venture
operations 524,000 -
------------- -------------
Net loss $ (524,000) $ (1,795,000)
============= =============
Allocation of net loss:
MRI BPF, Ltd. II $ (262,000) $ (897,000)
MRI BPF, Ltd. III (262,000) (898,000)
------------- -------------
Net loss $ (524,000) $ (1,795,000)
============= =============
</TABLE>
For the Three Months Ended
June 30, 1994 June 30, 1993
<TABLE>
<CAPTION>
<S> <C> <C>
Revenues $ 4,944,000 $ 4,421,000
Expenses 5,385,000 4,972,000
------------- -------------
Loss before minority interest in joint
venture operations (441,000) (551,000)
Minority interest in joint venture
operations 221,000 -
------------- -------------
Net loss $ (220,000) $ (551,000)
============= =============
Allocation of net loss:
MRI BPF, Ltd. II $ (110,000) $ (275,000)
MRI BPF, Ltd. III (110,000) (276,000)
------------- -------------
Net loss $ (220,000) $ (551,000)
============= =============
</TABLE>
9 of 16
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1994
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
This item should be read in conjunction with the Consolidated Financial
Statements and other Items contained elsewhere in this Report.
Fund Liquidity and Capital Resources
All of the Fund's properties are hotels. The Fund receives hotel operating
revenues and is responsible for operating expenses, administrative
expenses, capital improvements and debt service payments. The Fund uses
working capital reserves provided from any undistributed cash flow from
operations and sales proceeds as its primary source of liquidity. During
the nine months ended June 30, 1994, all of the Fund's hotels generated
positive cash flow, except for the Holiday Inn Crowne Plaza, the
unconsolidated joint venture. The Holiday Inn Crowne Plaza spent $380,000,
during the nine months ended June 30, 1994 for guest room renovations.
Management anticipates spending an additional $765,000 to complete the
renovations. On June 2, 1994, the Fund prepaid, in full satisfaction, the
note encumbering its Embassy Suites property in the amount of $7,000,000.
The note had been accruing interest at prime plus 1% and was due to mature
in December 1996. To preserve working capital reserves required for
necessary capital improvements to properties and provide resources for debt
restructuring, cash distributions remained suspended during the nine months
ended June 30, 1994. The Managing General Partner will evaluate future
cash distributions based on the capital needs of the Fund.
The level of liquidity based upon cash and cash equivalents experienced a
$1,617,000 decrease at June 30, 1994, as compared to September 30, 1993.
The Fund's $39,999,000 used in financing activities was partially offset by
$36,594,000 from investing activities and $1,788,000 from operating
activities. Net cash provided by operating activities declined at June 30,
1994, as compared to 1993, primarily due to the decrease in accounts
payable, accrued expenses and other liabilities resulting from the
disposition of the Fund's joint venture interests, which was only partially
offset by improved operations at the Fund's remaining properties. Cash
provided by investing activities consisted of $34,332,000 of net proceeds
from the sale of the Fund's joint venture interests and $3,467,000 of net
cash from the liquidation of the Fund's investments, which were only
partially offset by $1,055,000 of fixed asset purchases and $150,000 to
fund operating deficits at the Holiday Inn Crowne Plaza. Financing
activities consisted of $187,000 of note principal payments, $4,081,000 in
satisfaction of payables to an affiliate of the joint venture partner and
$35,731,000 in satisfaction of notes payables. Satisfaction of notes
payable consisted of the Fund prepaying the note encumbering the Fund's
Embassy Suites property in the amount of $7,000,000 and the satisfaction of
notes payable in the amount of $28,731,000 relating to the sale of the
Fund's joint venture interests. Mortgage principal payments increased
primarily due to the Fund's Residence Inn, Orlando property loan, which
started principal amortization during November 1993. All other increases
(decreases) in certain assets and liabilities are the result of the timing
of receipts and payments of various operating activities.
Working capital reserves are invested in money market accounts and
repurchase agreements secured by United States Treasury obligations. The
Managing General Partner believes that, if market conditions remain
relatively stable, cash flow from operations, when combined with working
capital reserves, will be sufficient to fund essential capital improvements
and debt service payments in 1994 and the foreseeable future. Balloon
payments on mortgages encumbering the Fund's properties are due from
10 of 16
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1994
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Fund Liquidity and Capital Resources (Continued)
September 1997 to October 1997. Management is confident that there will be
sufficient cash flow generated by the remaining properties to continue
operations, in the event that any of the properties are lost through
foreclosure. The Managing General Partner believes, however, that each
property generates sufficient cash flow to allow all mortgages to be
refinanced in an orderly fashion.
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 Fund's
remaining properties and the markets in which such properties are located
and on the sales price of the remaining properties. In this regard, it is
anticipated at this time that some of the remaining properties will be held
longer than originally expected. The ability to hold and operate these
properties is dependent on the Fund's ability to obtain refinancing or debt
modification as required.
Real Estate Market
The income and expenses of operating the properties owned by the Fund are
subject to factors outside of the Fund's control, such as over-supply of
similar properties resulting from over-building, increases in unemployment,
population shifts or changes in patterns or needs of users. Expenses, such
as local real estate taxes and miscellaneous expenses, are subject to
change and cannot always be reflected in room rate increases due to market
conditions. In addition, there are risks inherent in owning and operating
lodging facilities because such properties are management and labor
intensive and especially susceptible to the impact of economic and other
conditions outside the control of the Fund.
There have been, and it is possible there may be other Federal, state and
local legislation and regulations enacted relating to the protection of the
environment. The Fund is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which
such existing or new legislation or regulations might adversely affect the
properties still owned by the Fund.
Results of Operations
Nine Months Ended June 30, 1994 vs. June 30, 1993
Operating results, before the minority interest in joint venture
operations, improved by $5,755,000 for the nine months ended June 30, 1994,
as compared to 1993, due to a decrease in expenses of $9,794,000, which was
only partially offset by a decrease in revenues of $4,039,000. Operating
results improved primarily due to the sale of the Fund's joint venture
interests. With respect to the remaining properties, operating results
improved by $1,742,000 for the nine months ended June 30, 1994, as compared
to 1993, due to an increase in revenues of $708,000 and a decrease in
expenses of $1,034,000.
11 of 16
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1994
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Nine Months Ended June 30, 1994 vs. June 30, 1993 (Continued)
Revenues decreased by $4,039,000 for the nine months ended June 30, 1994,
as compared to 1993, primarily due to the sale of the Fund's joint venture
interests. With respect to the remaining properties, revenues increased by
$708,000, due to increases in room revenue of $715,000 and other operating
revenue of $58,000, which was only partially offset by a decrease in
interest and other income of $65,000.
Room revenue increased at all of the Fund's remaining properties, except
for the Residence Inn - Orlando, which remained relatively constant. The
largest increase was at the Fund's Embassy Suites - Tempe property, due to
increases in occupancy and average daily room rates. Other operating
revenues increased due to an increase in telephone revenue at the Fund's
Residence Inn - Orlando property, coupled with an increase in other income
at the Fund's Embassy Suites property. Interest income decreased due to a
decline in average working capital reserves available for investment.
Expenses declined by $9,794,000 for the nine months ended June 30, 1994, as
compared to 1993, primarily due to the sale of the Fund's joint venture
interests. With respect to the remaining properties, expenses decreased by
$1,034,000. The decreases in depreciation and amortization expense of
$446,000, interest expense of $425,000 and equity in unconsolidated joint
venture operations of $636,000, were only partially offset by increases in
room expenses of $98,000, other operating expenses of $315,000 and general
and administrative expenses of $60,000.
The increase in room expenses is attributable to the increase in occupancy
at the Fund's Embassy Suites and Residence Inn - Sacramento hotels. Other
operating expenses increased primarily at the Fund's Embassy Suites and
Residence Inn - Sacramento properties. General and administrative expenses
increased primarily due to costs associated with the management transition.
Depreciation and amortization expense decreased due to a portion of the
Fund's assets becoming fully depreciated in the prior year, coupled with an
over estimate of expense for the nine months ended June 30, 1993. Interest
expense decreased primarily due to the reduction in the interest rate on
the loan encumbering the Fund's Residence Inn - Orlando property (from 10%
to 6.5%) and the Fund prepaying on June 2, 1994, in full satisfaction, the
note encumbering the Fund's Embassy Suites property. The loss from the
Fund's unconsolidated joint venture (Holiday Inn Crowne Plaza) decreased
due to improved operations at the hotel.
Three Months Ended June 30, 1994 vs. June 30, 1993
Operating results, before the minority interest in joint venture
operations, declined by $379,000 for the three months ended June 30, 1994,
as compared to 1993, due to decreases in revenues of $5,578,000 and
expenses of $5,199,000. Operating results declined due to the disposition
of the Fund's joint venture interests. With respect to the remaining
properties, operating results improved by $445,000 for the three months
ended June 30, 1994, as compared to 1993, due to an increase in revenues of
$133,000 and a decrease in expenses of $312,000.
12 of 16
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1994
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Three Months Ended June 30, 1994 vs. June 30, 1993 (Continued)
Revenues decreased by $5,578,000 for the three months ended June 30, 1994,
as compared to 1993, due to the sale of the Fund's joint venture interests.
With respect to the remaining properties, revenues increased by $133,000
due to increases in room revenue of $220,000, and other operating revenue
of $27,000, which was only partially offset by a decrease in interest and
other income of $114,000.
Room revenue increased at all of the Fund's remaining properties, except
for the Residence Inn - Orlando property, which declined slightly due to
decreases in occupancy and average room rates. The largest increase was at
the Fund's Embassy Suites - Tempe property, which experienced increases in
occupancy and average daily room rates. Other operating revenues increased
slightly, primarily due to an increase in other income at the Fund's
Embassy Suites property. Interest income decreased due to a significant
decline in average working capital reserves available for investment.
Expenses declined by $5,199,000 for the three months ended June 30, 1994,
as compared to 1993, primarily due to the sale of the Fund's joint venture
interests. With respect to the remaining properties, expenses declined by
$312,000. The decreases in depreciation and amortization expense of
$132,000, interest expense of $179,000 and equity in unconsolidated joint
venture's operations of $166,000, were only partially offset by increases
in room expenses of $16,000, general and administrative expenses of $1,000
and other operating expenses of $148,000.
Room expenses and general and administrative expenses remained relatively
constant. Other operating expenses increased primarily at the Fund's
Embassy Suites and Residence Inn - Sacramento properties. Depreciation and
amortization expense decreased due to a portion of the Fund's assets
becoming fully depreciated in the prior year. Interest expense decreased
primarily due to the reduction in the interest rate on the loan encumbering
the Fund's Residence Inn - Orlando property (from 10% to 6.5%) and the Fund
prepaying on June 2, 1994, in full satisfaction, the note encumbering the
Fund's Embassy Suites property. The loss from the Fund's unconsolidated
joint venture (Holiday Inn Crowne Plaza) decreased due to improved
operations at the hotel.
Unconsolidated Joint Venture Operations
(MRI BPF Combined Fund No. 1)
Nine Months Ended June 30, 1994 vs. June 30, 1993
Operating results, prior to minority interests, improved by $747,000 for
the nine months ended June 30, 1994, as revenues increased by $1,701,000
and expenses increased by $954,000. The large increase in revenue is
attributable to both higher occupancy and average room rates.
In addition, under the terms of the joint venture agreement, the loss from
the Holiday Inn Crowne Plaza was allocated in different proportions during
the nine months ended June 30, 1994, as compared to 1993. This, combined
with improved operations, resulted in a smaller loss being allocated to the
Fund.
13 of 16
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1994
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Three Months Ended June 30, 1994 vs. June 30, 1993
Operating results, prior to minority interests, improved by $110,000 for
the three months ended June 30, 1994, as revenues increased by $523,000 and
expenses increased by $413,000. The large increase in revenue is
attributable to both higher occupancy and average room rates.
Properties
A description of the hotel properties in which the Fund has an ownership
interest during the period covered by this Report, together with occupancy
and room rate data, follows:
<TABLE>
<CAPTION>
MRI BUSINESS PROPERTIES FUND, LTD. III
OCCUPANCY AND ROOM RATE SUMMARY
Average Average
Occupancy Rate (%) Daily Room Rate ($)
Nine months Three Months Nine months Three Months
Date Ended Ended Ended Ended
of June 30, June 30, June 30, June 30,
Name and Location Rooms Purchase 1994 1993 1994 1993 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Holiday Inn Crowne
Plaza (1)
Atlanta, Georgia 492 03/86 75 66 80 73 89.05 83.51 87.60 84.91
Embassy Suites - Tempe
Tempe, Arizona 224 12/86 85 76 86 80 84.53 77.40 77.49 70.44
Residence Inn - Orlando
Orlando, Florida 176 09/87 72 74 75 78 81.47 77.39 76.09 77.71
Residence Inn -
Sacramento,
California 176 09/87 84 79 86 85 79.09 77.27 82.21 78.57
Radisson Park Terrace
Hotel (2)
Washington, D.C. 219 09/86 - 75 - 93 - 86.39 - 84.65
Park Hyatt Hotel (3)
Chicago, Illinois 255 12/86 - 58 - 62 - 149.57 - 153.36
</TABLE>
(1) The Fund and an affiliated partnership, MRI Business Properties
Fund, Ltd. II, own the hotel through a joint venture which has a
50 percent interest in this property.
(2) The Fund sold its 65% interest in this property on March 15, 1994.
(3) The Fund sold its 60% interest in this property on March 7, 1994.
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MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1994
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
On April 29, 1994, a Current Report on Form 8-K was filed
with the Securities and Exchange Commission to provide for
the change in the Fund's accountants from Deloitte & Touche
to Imowitz Koenig & Company. No other Reports on Form 8-K
were filed during the period covered by this Report.
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MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1994
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. III
By: MONTGOMERY REALTY COMPANY 85,
A California General Partnership,
its managing general partner
By: FOX REALTY INVESTORS,
A California General Partnership,
its managing general partner
By: NPI Equity Investments II, Inc.,
A Florida Corporation,
its managing partner
/S/ARTHUR N. QUELER
ARTHUR N. QUELER
Executive Vice President (Principal
Financial and Accounting Officer)
and Director NPI
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