UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1993
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 incorporation or
organization) (I.R.S. Employer Identification No.)
950 Tower Lane
Foster City, California 94404
----------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(415) 378-7000
(800) 366-6707 IN ALL STATES
Securities registered pursuant to Section 12(b) of the Act:None
Securities registered pursuant to Section 12(g) of the Act:Limited
Partnership Units
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
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ X ]
No market for the Limited Partnership Units exists and therefore a
market value for such Units cannot be determined.
DOCUMENTS INCORPORATED HEREIN BY REFERENCE:
(1) Prospectus and all Supplements thereto filed pursuant to Rule
424(b) under the Securities Act of 1933 and reports on Form 8-K under the
Securities Exchange Act of 1934 incorporated in Parts I, III and IV.
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
(A LIMITED PARTNERSHIP)
PART I
ITEM 1. BUSINESS.
MRI Business Properties Fund, Ltd. III (the "Partnership") was
organized in 1984 as a California limited partnership under the California
Uniform Limited Partnership Act. The managing general partner of the
Partnership is Montgomery Realty Company-85, a California general
partnership of which Fox Realty Investors ("FRI"), a California general
partnership, is the general partner and Montgomery Realty Corporation (the
"General Partner"), a California corporation, is the co-general partner.
The associate general partner of the Partnership is MRI Associates, Ltd.
III, a California limited partnership, of which FRI is the general partner,
and Two Broadway Associates IV, an affiliate of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, is the limited partner.
The Partnership's Registration Statement filed, pursuant to the
Securities Act of 1933 (No. 2-98110), was declared effective by the
Securities and Exchange Commission on December 18, 1985. The Partnership
marketed its securities pursuant to its Prospectus dated December 18, 1985
which was thereafter supplemented (hereinafter the "Prospectus"). This
Prospectus was filed with the Securities and Exchange Commission pursuant
to Rule 424(b) of the Securities Act of 1933 and such Prospectus as
supplemented is incorporated by reference herein.
The principal business of the Partnership is to acquire (either
primarily or exclusively through joint ventures), hold for investment, and
ultimately sell hotels. The Partnership is a "closed" limited partnership
real estate syndicate of the unspecified asset type. For a further
description of the Partnership's business, see the sections entitled "Risk
Factors" and "Investment Objectives and Policies" in the Prospectus.
Beginning in January 1986 through September 5, 1986 the Partnership
offered and sold $109,027,000 in Limited Partnership Assignee Units. The
net proceeds of this offering were used to purchase interests in seven
income-producing real properties, which are described in Item 2. The
Partnership's original portfolio is geographically diversified with
properties acquired in seven states. The acquisition activities of the
Partnership were completed on September 30, 1987, and since that time the
principal activity of the Partnership has been managing its portfolio. One
of the Partnership's properties was acquired by the lender through
foreclosure in fiscal year 1992, as discussed in Item 7.
The Partnership is involved in only one industry segment, as
described above. The Partnership does not engage in any foreign operations
or derive revenues from foreign sources. The Partnership's affairs were
managed by Metric Realty Services, L.P. ("MRS") from March 1988 to December
1992 and are now being managed by its successor through merger, Metric
Management, Inc. ("MMI"). See Item 8, Note 2 to the consolidated financial
statements and Item 13. MMI and its affiliates employed or managed
approximately 896 full-time employees, as of September 30, 1993. On
December 16, 1993, the services agreement with MMI was motified and, as a
result thereof, the Partnership's general partner will assume
responsibility for cash management of the Partnership as of December 23,
1993 and for investor relations services as of April 1, 1994.
On December 6, 1993, NPI Equity Investments II, Inc. ("NPI Equity
II") became the managing partner of FRI and assumed operational control
over Fox Capital Management Corporation ("FCMC"). 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 partnerships sponsored
by FRI and/or FCMC. The individuals who had served previously as partners
of FRI and as officers and directors of FCMC contributed their general
partnership interests in FRI to a newly formed limited partnership,
Portfolio Realty Associates, L.P. ("PRA"), in exchange for limited
partnership interests in PRA. In the foregoing capacity, such partners
will continue to hold indirectly certain economic interests in the
Partnership and such other investment partnerships, but will cease to be
responsible for the operation and management of the Partnership and such
other partnerships.
In connection with the acquisition by NPI Equity II of management
and control of the Partnership and such other partnerships, NPI Realty
Advisors, Inc. ("NPI Realty"), an affiliate of NPI Equity II, acquired an
aggregate of approximately $10,800,000 of loans made by FRI and FCMC to
certain of such other partnerships (the "Fox Advances"). The aggregate
purchase price for such loans was equal to the sum of the outstanding
principal amount of, and all accrued and unpaid interest on, such loans.
The purchase price was paid by a $3,000,000 cash down payment and delivery
to FRI and FCMC of two promissory notes due December 16, 1999 in the
aggregate principal amount of $7,796,761.41. The promissory notes are
secured by the Fox Advances and general partner interest of NPI Equity II
in FRI. Interest on the promissory notes accrues at a rate equal to the
lower of 9% per annum or the prime rate of interest as announced from time
to time by Bank of America, N.T. & S.A. NPI Equity and NPI Realty are
wholly-owned subsidiaries of National Property Investors, Inc. ("NPI"), a
diversified real estate management company headquartered in Jericho, New
York.
Both the income and expenses of operating the properties in which
the Partnership has an ownership interest are subject to factors outside of
the Partnership'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. In addition, there are risks
inherent in owning and operating hotels and other 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 Partnership.
Expenses, such as local real estate taxes and miscellaneous
management expenses, are subject to change and cannot always be reflected
in room rate increases due to market conditions. The profitability and
marketability of developed real property may be adversely affected by
changes in general and local economic conditions and in prevailing interest
rates, and favorable changes in such factors will not necessarily enhance
the profitability or marketability of such property. Even under the most
favorable market conditions there is no guarantee that any property owned
by the Partnership can be sold by it or, if sold, that such sale can be
made upon favorable terms.
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 managing general partner 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 owned by the Partnership.
The Partnership is affected by and subject to the general
competitive conditions of the lodging industry. In addition, each of the
Partnership's properties competes in an area which normally contains
numerous other properties which may be considered competitive. In fiscal
year 1993 markets in many areas remained depressed due in part to
overbuilding which continues to depress lodging rental rates. An over-
supply of properties, including those held by banks, savings institutions
and the Resolution Trust Corporation, affects the ability of the
Partnership to sell such properties and their sales prices. The level of
sales of existing properties and development of new properties have been
affected by the limited availability of financing in real estate markets.
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 success of the
managing general partner's strategy as set forth in Item 7, as well as upon
significant improvement in 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. In this regard, it is anticipated
at this time that some of the remaining properties will be held longer than
originally expected.
<PAGE>
ITEM 2.PROPERTIES.
A description of the hotel properties in which the Partnership has
or has had an ownership interest is as follows:
<TABLE>
<CAPTION> PORTFOLIO
DATE OF DATE OF PERCENTAGE
NAME AND LOCATION PURCHASE SALE ROOMS <F5>
- ----------------- -------- ---- ----- -----
<S> <C> <C> <C>
Holiday Inn Crowne Plaza<F1><F4> 03/86 - 492 21
4355 Ashford-Dunwoody Rd.
Atlanta, Georgia
Radisson Park Terrace Hotel<F2> 09/86 - 219 16
1515 Rhode Island Avenue NW
Washington, D.C.
Embassy Suites - Tempe Hotel<F3> 12/86 - 224 11
4400 South Rural Road
Tempe, Arizona
Park Hyatt Hotel<F2> 12/86 - 255 18
800 N. Michigan
Chicago, Illinois
Residence Inn - Orlando<F3> 09/87 - 176 7
7610 Canada Ave.
Orlando, Florida
Residence Inn - Sacramento<F3> 09/87 - 176 7
1530 Howe Ave.
Sacramento, California
Troy Hilton Inn<F2> 11/86 11/91 401 20
1455 Stephenson Highway
Troy, Michigan
<FN>
<F1> The Partnership and an affiliated partnership, MRI Business
Properties Fund, Ltd. II, own a joint venture which has a 50 percent
interest in this property.
<F2> The property is or was owned by a joint venture, in which the
Partnership has a controlling interest.
<F3> The property is owned by the Partnership in fee.
<F4> Formerly the Hyatt Regency Ravinia Hotel. The name was changed as a
result of a change in ownership of the hotel which occurred in fiscal year
1991 (see Note 6 to the Consolidated Financial Statements).
<F5> Represents the percentage of original cash invested in the individual
property of the total original cash invested in all properties.
</TABLE>
See Selected Financial Data in Item 6 for net project operations
for the properties in which the Partnership has a controlling interest.
See the Consolidated Financial Statements in Item 8 for information
regarding any encumbrances to which the properties of the Partnership are
subject. An occupancy summary is set forth on the chart following:
<PAGE>
<TABLE>
MRI BUSINESS PROPERTIES FUND, LTD. III
OCCUPANCY AND ROOM RATE SUMMARY<F1>
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1993, 1992 AND 1991
<CAPTION>
AVERAGE AVERAGE
Occupancy Rate (%) Daily Room Rate ($)
----------------- -------------------
1993 1992 1991 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
HOTELS:
Holiday Inn Crowne Plaza <F1> 68 64 63 82.55 78.79 79.73
Radisson Park Terrace Hotel 76 69 61 85.37 83.58 83.22
Embassy Suites - Tempe Hotel 80 75 77 75.69 72.93 69.38
Park Hyatt Hotel 57 60 63 149.25 149.18 153.35
Residence Inn - Orlando 74 72 70 76.84 77.04 82.41
Residence Inn - Sacramento 80 79 77 77.47 77.61 78.09
<FN>
<F1> Formerly the Hyatt Regency Ravinia.
</TABLE>
<PAGE>
ITEM 3.LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the
Partnership is a party or to which any of its assets are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the
period covered by this Report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Limited Partnership Assignee Unit holders are entitled to
certain distributions as provided in the Partnership Agreement. No market
for Limited Partnership Assignee Units exists, nor is expected to develop.
As of September 30, 1993, the approximate number of holders of
Limited Partnership Assignee Units was as follows:
NUMBER OF
RECORD
TITLE OF CLASS HOLDERS*
Limited Partnership Assignee Units 8,271
* Number of Investments.<PAGE>
ITEM 6.SELECTED FINANCIAL DATA.
The following represents selected financial data for MRI Business
Properties Fund, Ltd. III for the fiscal years
ended September 30, 1993, 1992, 1991, 1990 and 1989. The data should be
read in conjunction with the consolidated financial
statements included elsewhere herein. This data is not covered by the
independent auditors' report.
<PAGE>
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(AMOUNTS IN THOUSANDS EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C>
TOTAL REVENUES $33,900 $33,894 $37,356 $45,196 $49,023
======= ======= ======= ======= =======
LOSS BEFORE MINORITY
INTEREST IN JOINT VENTURES'
OPERATIONS $ (971) $(17,534) $(10,140) $(24,614) $(5,595)
MINORITY INTEREST IN JOINT
VENTURES' OPERATIONS 28 651 (236) 626 (959)
--------- -------- -------- ------- -------
NET LOSS $ (943) $(16,883) $(10,376) $(23,988) $(6,554)
========= ======== ======== ======= =======
NET LOSS PER LIMITED
PARTNERSHIP ASSIGNEE UNIT<F1> $(8) $(152) $(93) $(216) $(59)
====== ==== ===== ==== ====
TOTAL ASSETS $77,611 $77,690 $123,151 $135,769 $162,879
======= ======== ======== ======== ========
LONG TERM OBLIGATIONS:
Notes payable $51,799 $51,220 $67,582 $67,712 $67,998
Note payable to affiliate of
joint venture partner 2,500 2,500 2,500 2,500 2,500
------- ------- ------- ------- -------
TOTAL $54,299 $53,720 $70,082 $70,212 $70,498
======= ======= ======= ======= =======
CASH DISTRIBUTIONS PER LIMITED
PARTNERSHIP ASSIGNEE UNIT (actual
amount based on date of admission to
partnership) $- $- $- $15 $30
== == === === ===
FN
<PAGE>
<F1>$1,000 original contribution per unit, based on weighted average
limited partnership assignee units outstanding during the period
after giving effect to the net loss allocated to the general partner.
</TABLE>
NET PROJECT OPERATIONS OF CONSOLIDATED PROPERTIES INTRODUCTION
The Net Project Operations tables reflect the components of net
project operations for the properties in which the Partnership has a
controlling ownership interest and that were consolidated into the
Partnership's Consolidated Financial Statements for the fiscal years then
ended. Through the use of net project operations, it is possible to
determine which properties are generating the cash to support fund
liquidity. The tables present:
Net operating income (loss) is operating revenues less operating
expenses (exclusive of noncash items such as depreciation, amortization and
long term deferred operating expenses) for the consolidated properties.
Project operations are the net operating income (loss) less the
related debt service (principal and interest on an accrual basis, excluding
deferred interest).
Net project operations are the amounts that were included in the
Partnership's Consolidated Statements of Operations in Item 8 except that
net project operations are net of principal reductions (exclusive of
balloon and refinancing payments and before elimination of intercompany
transactions).
To determine net project operations, project operations may have
been adjusted for the following items:
Decreased for amortization of deferred financing costs.
Decreased for deferred interest and deferred operating expenses
recognized as an expense in the Consolidated Statements of Operations.
Increased for guarantee revenue.
A reconciliation of Net Project Operations to Loss Before Minority
Interest as shown in the Consolidated Statements of Operations is included.
Funds from net project operations should not be considered by the reader as
an alternative to net loss or as an indicator of the Partnership's
operating performance or to cash flows as a measure of liquidity.
<PAGE>
<TABLE>
MRI BUSINESS PROPERTIES FUND, LTD. III
<CAPTION>
NET PROJECT OPERATIONS<F1>
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1993
-----------------------------------------------------------------------
LESS:
HOTEL NET LESS: NET
OPERATING OPERATING OPERATING DEBT PROJECT ADJUST- PROJECT
REVENUES EXPENSES INCOME SERVICEOPERATIONS MENTS OPERATIONS
-------- -------- ------ ----------------- ----- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Radisson Park
Terrace Hotel $ 7,071 $ 5,695 $1,376 $ 456 $ 920 $(292) $ 628
Embassy Suites -
Tempe Hotel 5,350 3,491 1,859 640 1,219 - 1,219
Park Hyatt Hotel 13,155 12,550 605 693 (88) (44) (132)
Residence Inn -
Orlando 3,848 2,656 1,192 826 366 (16) 350
Residence Inn -
Sacramento 4,147 2,533 1,614 671 943 (12) 931
------- ------- ------ ------ ----- ----- -----
Total $33,571 $26,925 $6,646 $3,286 $3,360 $(364) $2,996
======= ======= ====== ====== ===== ===== =====
<FN>
<F1> See preceding Net Project Operations Introduction.
</TABLE>
<PAGE>
<TABLE>
MRI BUSINESS PROPERTIES FUND, LTD. III
NET PROJECT OPERATIONS<F1>
<CAPTION>
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1992
-----------------------------------------------------------------------
LESS:
HOTEL NET LESS: NET
OPERATING OPERATING OPERATING DEBT PROJECT ADJUST- PROJECT
REVENUES EXPENSES INCOME SERVICEOPERATIONS MENTS OPERATIONS
-------- -------- ------ ----------------- ----- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Radisson Park Terrace
Hotel $ 6,384 $ 5,900 $ 484 $1,003 $ (519) $(439) $ (958)
Troy Hilton Inn<F2> - - - - - - -
Embassy Suites -
Tempe Hotel 4,865 3,429 1,436 641 795 795
Park Hyatt Hotel 13,820 13,209 611 1,386 (775) (185) (960)
Residence Inn -
Orlando 3,761 2,593 1,168 820 348 (16) 332
Residence Inn -
Sacramento 4,132 2,446 1,686 827 859 (11) 848
-------- -------- ------- ------ ------ ---- ------
Total $32,962 $27,577 $5,385 $4,677 $ 708 $(651) $ 57
======= ======= ====== ====== ====== ==== ======
<FN>
<F1> See preceding Net Project Operations Introduction.
<F2> The property was acquired by the lender through foreclosure in November 1991.
/TABLE
<PAGE>
<TABLE>
MRI BUSINESS PROPERTIES FUND, LTD. III
<CAPTION>
NET PROJECT OPERATIONS<F1>
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1991
-----------------------------------------------------------------------
LESS:
HOTEL NET LESS: NET
OPERATING OPERATING OPERATING DEBT PROJECT ADJUST- PROJECT
REVENUES EXPENSES INCOME SERVICEOPERATIONS MENTS OPERATIONS
-------- -------- ------ ----------------- ----- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Radisson Park Terrace
Hotel $ 5,850 $ 5,666 $ 184 $1,284 $(1,100) $(1,100)
Troy Hilton Inn<F2> 2,514 3,315 (801) 101 (902) (902)
Embassy Suites - Tempe
Hotel 4,782 3,338 1,444 617 827 827
Park Hyatt Hotel 14,530 13,451 1,079 1,386 (307) $(146) (453)
Residence Inn -
Orlando 3,834 2,760 1,074 815 259 (16) 243
Residence Inn -
Sacramento 3,985 2,238 1,747 894 853 (11) 842
------- ------- ------ ------ ------ ----- ------
Total $35,495 $30,768 $4,727 $5,097 $ (370) $(173) $ (543)
======= ======= ====== ====== ====== ==== ======
<FN>
<F1> See preceding Net Project Operations Introduction.
<F2> The property was placed in receivership in February 1991 and ceased operations in August 1991.
/TABLE
<PAGE>
<TABLE>
MRI BUSINESS PROPERTIES FUND, LTD. III
RECONCILIATION OF NET PROJECT OPERATIONS
TO LOSS BEFORE MINORITY INTEREST
<CAPTION>
FOR THE FISCAL YEAR
ENDED SEPTEMBER 30,
----------------------------
1993 1992 1991
---- ---- ----
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Net Project Operations $ 2,996 $ 57 $ (543)
Less:
Depreciation and amortization 2,663 4,316 4,248
Equity in unconsolidated joint
venture's operations 1,370 2,266 6,411
General and administrative expenses 415 483 681
Provision for impairment of value - 11,353 -
Interest expense on note payable to
affiliate of joint venture partner - 275 275
Plus:
Interest and other income 329 932 1,861
Principal payments in debt service 152 170 157
--------- --------- ---------
Loss Before Minority Interest $ (971) $(17,534) $(10,140)
======== ======== ========
The operations of the joint venture, in which the Partnership with an affiliated partnership
own a 50 percent interest in the Holiday Inn Crowne Plaza, are presented below as supplemental
information.
</TABLE>
<TABLE>
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
NET PROJECT OPERATIONS <F1>
<CAPTION>
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1993
---------------------------------------------------------
LESS:
HOTEL NET LESS: NET
OPERATING OPERATING OPERATING DEBT PROJECT ADJUST- PROJECT
REVENUES EXPENSES INCOME SERVICEOPERATIONS MENTS OPERATIONS
-------- -------- ------ ------- --------- ----- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Holiday Inn Crowne
Plaza <F2> $17,340 $14,691 $2,649 $3,188 $(539) $(384) $ (923)
======= ======= ==== ====== ======= ====
Plus: Interest income 17
Minority interest in joint venture's operations 135
Less: Depreciation and amortization 1,644
General and administrative expenses 17
--------
MRI Business Properties Combined Fund No. 1 Net Loss $(2,432)
========
Allocation of Net Loss:
MRI BPF, Ltd. II $(1,062)
MRI BPF, Ltd. III (1,370)
-------
$(2,432)
=======
<FN>
<F1> See preceding Net Project Operations Introduction.
<F2> Performance guarantee in the amount of $5,000,000 was exhausted in July 1993.
</TABLE>
<TABLE>
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
NET PROJECT OPERATIONS <F1>
<CAPTION>
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1992
--------------------------------------------------------------------
LESS:
HOTEL NET LESS: NET
OPERATING OPERATING OPERATING DEBT PROJECT ADJUST- PROJECT
REVENUES EXPENSES INCOME SERVICEOPERATIONS MENTS OPERATIONS
-------- -------- ------ ----------------- ----- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Holiday Inn Crowne
Plaza <F2> $16,451 $15,473 $978 $3,187 $(2,209) $(230) $ (2,439)
. ======= ======= ====== ====== ======= ====
Plus: Interest income 68
Minority interest in joint venture's operations 4,627
Less: Depreciation and amortization 2,440
Provision for impairment of value 4,311
General and administrative expenses 38
---------
MRI Business Properties Combined Fund No. 1 Net Loss $ (4,533)
========
Allocation of Net Loss:
MRI BPF, Ltd. II $ (2,267)
MRI BPF, Ltd. III (2,266)
--------
$ (4,533)
========
<FN>
<F1> See preceding Net Project Operations Introduction.
<F2> Guarantee amount was contributed by an affiliate of the joint venture partnership for up to
$5,000,000 or until the maximum expiration date of 9/30/96.
</TABLE>
<TABLE>
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
NET PROJECT OPERATIONS <F1>
<CAPTION>
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1991
--------------------------------------------------------------------
LESS:
HOTEL NET LESS: NET
OPERATING OPERATING OPERATING DEBT PROJECT ADJUST- PROJECT
REVENUES EXPENSES INCOME SERVICEOPERATIONS MENTS OPERATIONS
-------- -------- ------ ----------------- ----- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Holiday Inn Crowne
Plaza<F2><F3>H $17,220 $15,740 $1,480 $3,187 $(1,707) $(58) $(1,765)
======= ======= ==== ====== ======= ====
Plus: Interest income 79
Minority interest in joint venture's operations 595
Less: Depreciation and amortization 3,939
Provision for impairment of value 7,651
General and administrative expenses 120
--------
MRI Business Properties Combined Fund No. 1 Net Loss $(12,801)
=======
Allocation of Net Loss:
MRI BPF, Ltd. II $(6,390)
MRI BPF, Ltd. III (6,411)
-------
$(12,801)
=======
<FN>
<F1> See preceding Net Project Operations Introduction.
<F2> Guarantee amount was contributed by an affiliate of the joint venture partnership for up to
$5,000,000 or until the maximum expiration date of 9/30/96.
<F3> Formerly the Hyatt Regency Ravinia Hotel.
</TABLE>
<PAGE>
<PAGE>
ITEM 7. 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.
PARTNERSHIP LIQUIDITY AND CAPITAL RESOURCES
The results of project operations are determined by hotel operating
revenues less hotel operating expenses (exclusive of capital improvements
and noncash items such as depreciation and amortization and deferred
operating expenses) and debt service (see Item 6, Selected Financial Data).
During fiscal year 1993, four of the hotels in which the Partnership has a
controlling interest generated positive project operations. However,
positive project operations at the Radisson Park Terrace resulted from the
cessation of making monthly debt service payments in November 1992. The
Park Hyatt Hotel incurred negative project operations despite the cessation
of debt service and property tax payments as discussed below. The Holiday
Inn Crowne Plaza owned by the unconsolidated joint venture experienced
negative project operations; however the joint venture partner was
responsible for funding negative operations until the performance guarantee
was exhausted which occurred in July 1993 when the Partnership and the
joint venture partner became responsible for funding negative operations.
The Partnership, after taking into account results of project operations,
guaranteed payments, interest income and general and administrative
expenses on an accrual basis, experienced positive results of operations
for the fiscal year, as defined herein. However, since the cash flow
generated at the Radisson Park Terrace is not available for distribution to
the Partnership and in order to preserve working capital reserves required
for necessary capital improvements to properties, cash distributions from
operations remained suspended in fiscal year 1993.
In addition, as presented in the Consolidated Statement of Cash
Flows, cash was provided by operating activities. Cash was used by
investing activities for the net purchase of cash investments as well as
additions and improvements to the properties. Cash was used by financing
activities for note payable principal payments.
As discussed in Note 11 to the consolidated financial statements,
in February 1992 the Partnership was informed by the court that the Troy
Hilton Inn was transferred through foreclosure to the holder of the first
note in November 1991. The Partnership acquired an interest in the joint
venture partnership which acquired the property in November 1986 for total
consideration of $34,978,000, including original mortgage financing of
$16,400,000 at date of acquisition. A payment of $82,000 was received in
fiscal year 1992 from the former operator of the Troy Hilton Inn in
settlement of the Partnership's claim for funds owed under the terms of the
management agreement. In fiscal year 1993, the Partnership received a
refund of $150,000 resulted from a tax appeal at Troy Hilton Inn initiated
in prior years. In the Partnership's opinion, any return which the
Partnership might have realized through a reasonable period of continued
ownership would not have been adequate to offset its anticipated deficits.
Full Service Hotels:
Radisson Park Terrace Hotel
The Radisson Park Terrace Hotel experienced an average occupancy of
76 percent in fiscal year 1993, an increase from 69 percent in fiscal year
1992, and an average daily room rate of $85.37 compared to $83.58 for
fiscal year 1992, which was due to an improvement in the local hotel
market.
The Partnership finalized an amendment to the joint venture
agreement on the Radisson Park Terrace Hotel which included an option
allowing the joint venture partner to purchase the Partnership's interest
in the joint venture. This option expired on June 30, 1992; however, an
agreement has been reached between the parties for the sale of the
Partnership's interest in the hotel. As part of the agreement, the joint
venture reached an agreement with the lender for a discounted pay off of
the $13,000,000 loan. The discounted payment would be made simultaneously
with the sale of the Partnership's interest in the property. The sale is
anticipated to close in fiscal year 1994. The Partnership ceased making
debt service payments to the lender in November 1992, and in April 1993 as
a result of the potential discounted payoff, the Partnership ceased
accruing interest since it appears unlikely that these expenses will be
paid. If the Partnership is unsuccessful in completing the sale of its
interest, the Partnership may allow the property to be acquired by the
lender through foreclosure. Accordingly, an additional provision for
impairment of value of $4,608,000 was recognized in 1992 to reduce the
carrying value of the property based on the estimated potential economic
loss to the Partnership.
In fiscal year 1993, the Partnership spent $92,000 on additions and
improvements to Radisson Park Terrace Hotel.
Park Hyatt Hotel
A weak economy and an oversupply of hotel rooms in the Chicago
hotel market have caused operations to remain competitive at the Park Hyatt
Hotel. As a result, average occupancy decreased to 57 percent while
average daily room rates remained stable in fiscal year 1993. In April
1993, the Partnership ceased making quarterly debt service payments on the
$15,000,000 note payable and has received a notice of default from the
lender. As a result, the Partnership ceased accruing both property taxes
and interest expense at the Park Hyatt Hotel beginning in April 1993 since
it appears unlikely that these expenses will be paid. In addition, the
Partnership stopped recording depreciation expense in April 1993 due to the
potential disposition of the Partnership's interest in the hotel. The
Partnership is currently negotiating with the lender to structure a
modification of the debt in order to protect the Partnership's interest in
the hotel. If the Partnership is unable to obtain such a restructure, the
Partnership may allow the property to be acquired by the lender through
foreclosure or attempt to sell its interest to the joint venture partner.
Accordingly, as discussed in Note 10 to the consolidated financial
statements, a provision for impairment of value of $6,985,000 was
recognized in fiscal year 1992 to reduce the carrying value of the property
based on the estimated economic loss to the Partnership. The Partnership
acquired an interest in the joint venture partnership which acquired the
property, for total consideration of $36,213,000, including cash, mortgage
financing and other cash expenditures capitalized in December 1986.
In fiscal year 1993, the Partnership, as required by the city of
Chicago, began installation of a building sprinkler system at the Park
Hyatt Hotel at an estimated cost of $1,200,000. The project will be
completed in the first quarter of fiscal year 1994.
In fiscal year 1993, the Partnership spent $803,000 on additions
and improvements to Park Hyatt Hotel. In fiscal year 1994 the Partnership
anticipates spending approximately $873,000 on additions and improvements
to the property. These improvements are required to keep the property
competitive in its market.
Unconsolidated Joint Venture
(MRI BPF Combined Fund No.1)
Holiday Inn Crowne Plaza
Average occupancy at the Holiday Inn Crowne Plaza was 68 percent in
fiscal year 1993, an increase from 64 percent in fiscal year 1992, and the
average daily room rate was $82.55 in fiscal year 1993 compared to $78.79
in fiscal year 1992, due to a gradual improvement in the Atlanta hotel
market.
In fiscal year 1991, the Partnership and MRI Business Properties
Fund, Ltd II (jointly the "Combined Fund") effected a change in the joint
venture ownership of the Hyatt Regency Ravinia Hotel and formed a new joint
venture with an entity affiliated with Holiday Inns, Inc. ("Holiday"). In
connection with this change in ownership, the new joint venture entered
into a new management agreement with Holiday whereby Holiday agreed to
cover operational losses up to $5,000,000 for up to the first 5 years of
the joint venture. As a result of the formation of the new joint venture,
which included Combined Fund's surrender of certain priority returns, there
was a reduction, through provision for impairment of value, to the book
basis of the property of the Combined Fund of approximately $7.7 million of
which $3.85 million relates to the Partnership. In July 1993 the guarantee
was exhausted and the Combined Fund and the joint venture partner became
jointly responsible for the operational losses. In October 1993, the
Combined Fund and Holiday each contributed $300,000 to cover operational
losses. The Partnership intends to continue funding operational losses.
During fiscal year 1993, $2,372,000 was spent on capital
improvements at Holiday Inn Crowne Plaza. In fiscal year 1994 it is
anticipated approximately $800,000 will be spent on property additions and
improvements at this property. These improvements are required to keep the
property competitive in its market.
Embassy Suites - Tempe Hotel
The Embassy Suites in Tempe, Arizona, continues to maintain a
leading position in the market due to the strength of the Embassy Suites
brand name and additional group business. As a result, average occupancy
increased to 80 percent in fiscal year 1993 from 75 percent in fiscal year
1992 and the average daily room rate increased to $75.69 in fiscal year
1993 from $72.93 in fiscal year 1992.
In fiscal year 1993, the Partnership spent $593,000 on additions
and improvements to Embassy Suites - Tempe Hotel. In fiscal year 1994 the
Partnership anticipates spending approximately $273,000 on additions and
improvements to the property. These improvements are required to keep the
property competitive in its market.
Limited Service Hotels:
Residence Inn - Orlando
Although market conditions remain competitive in Orlando, Florida,
average occupancy has increased at the Residence Inn - Orlando to 74
percent in fiscal year 1993 from 72 percent in fiscal year 1992 due, in
part, to an increase in corporate business.
In fiscal year 1993, the Partnership spent $128,000 on additions
and improvements to Residence Inn - Orlando. In fiscal year 1994 the
Partnership anticipates spending approximately $200,000 on additions and
improvements to the property. These improvements are required to keep the
property competitive in its market.
Residence Inn - Sacramento
The Residence Inn in Sacramento, California, continues to
outperform the market due to increased corporate business. As a result,
average occupancy increased slightly and rental rates remained stable in
fiscal year 1993.
In fiscal year 1993, the Partnership spent $151,000 on additions
and improvements to Residence Inn - Sacramento. In fiscal year 1994 the
Partnership anticipates spending approximately $213,000 on additions and
improvements to the property. These improvements are required to keep the
property competitive in its market.
Conclusion
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 success of the
managing general partner's strategy as set forth herein, as well as upon
significant improvement in 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. In this regard, it is anticipated
at this time that some of the remaining properties will be held longer than
originally expected.
The Partnership anticipates that it will have sufficient resources
to meet capital and operating requirements into the foreseeable future.
RESULTS OF OPERATIONS
The competitive market conditions in which the Partnership's
properties operate have suppressed significant rate growth which negated
the increase in occupancy for the majority of the properties. As a result,
the operations of the Partnership remain stable.
Fiscal Year 1993 ("1993") Compared to Fiscal Year 1992 ("1992")
Room revenue increased $611,000 and other operating revenues
increased $136,000 in 1993 compared to 1992 due to increased occupancy and
room rates, primarily at the Radisson Park Terrace and Embassy Suites -
Tempe Hotels which more than offset the decrease in room revenue at the
Park Hyatt Hotel due to a decrease in occupancy.
Interest and other income decreased $603,000 in 1993 compared to
1992, primarily as a result of the collection of the Park Hyatt Hotel's
note receivable from an affiliate of the joint venture partner in 1992.
Room, food and beverage expenses decreased $399,000 in 1993
compared to 1992 due to certain properties operating more efficiently
combined with a decrease in occupancy at the Park Hyatt Hotel.
Other operating expenses decreased $226,000 in 1993 compared to
1992 as a result of the cessation of accruing property taxes at the Park
Hyatt Hotel and the overall decrease in property tax expenses at certain
properties due to lower tax assessments which more than offset costs
incurred for a national advertising assessment relating to the Park Hyatt
Hotel.
Depreciation and amortization expenses decreased $1,653,000 in 1993
compared to 1992 due to the suspension of depreciation and the allowance
for impairment of value relating to the Park Hyatt Hotel recognized in
1992.
Interest expense decreased $1,813,000 in 1993 compared to 1992 due
to the cessation of accruing interest expense in April 1993 at the Radisson
Park Terrace and Park Hyatt Hotels.
Fiscal Year 1992 ("1992") Compared to Fiscal Year 1991 ("1991")
Room, food and beverage and other operating revenues decreased
$2,533,000 and room, food and beverage and other operating expenses
decreased $3,208,000 in 1992 compared to 1991 primarily due to the
discontinuance of the recognition of operations at the Troy Hilton Inn in
February 1991 when a receiver was appointed and the property was
subsequently foreclosed on in November 1991. These decreases were also
related to significant deficit operations at the Park Hyatt Hotel, as well
as decreases in room rates at the Park Hyatt Hotel and the two Residence
Inns which was offset, in part, by an increase in rates at the Embassy
Suites - Tempe.
Interest and other income decreased $929,000 in 1992 compared to
1991 due to the payoff of the note receivable from the affiliate of the
joint venture partner of the Park Hyatt Hotel in January 1992 and a
decrease in cash available for investments and lower interest rates.
The provision for impairment of value of $11,353,000 recognized in
1992 related to the Park Hyatt and the Radisson Park Terrace Hotels, as
discussed in Note 10 to the consolidated financial statements and was
offset by the $240,000 adjustment recognized relating to the Troy Hilton
Inn, as discussed in Note 11.
_____________________
Unconsolidated Joint Venture Operations
(MRI BPF Combined Fund No. 1)
During fiscal years 1993, 1992 and 1991, the Partnership was
allocated losses from the unconsolidated joint venture which owns the
Holiday Inn Crowne Plaza (formerly the Hyatt Regency Ravinia Hotel). The
Consolidated Financial Statements for the unconsolidated joint venture are
presented in Item 8, Financial Statements and Financial Statement
Schedules. A discussion of its Results of Operations follows:
Fiscal Year 1993 ("1993") Compared to Fiscal Year 1992 ("1992")
Room revenue increased $1,021,000 in 1993 compared to 1992 due to
an increase in average occupancy and daily room rates while room and other
operating expenses decreased $192,000 in 1993 compared to 1992 due to cost
control measures at the hotel.
Food and beverage expenses decreased $435,000 in fiscal year 1993
compared to fiscal year 1992 primarily due to cost control measures
implemented at the hotel and to the closure of the hotel's restaurant.
Depreciation and amortization expenses decreased $796,000 in 1993
compared to 1992 as a result of the provision for impairment of value
recognized in 1992.
Fiscal Year 1992 ("1992") Compared to Fiscal Year 1991 ("1991")
Room revenue increased $129,000 in 1992 compared to 1991 due to an
increase in average occupancy at the Holiday Inn Crowne Plaza.
Depreciation and amortization expenses decreased $1,499,000 in 1992
compared to 1991 as a result of the provision for impairment of value
recognized in 1991.
An additional provision for impairment of value of $4,311,000 was
recognized in 1992 on the Holiday Inn Crowne Plaza. See Note 6 to the
consolidated financial statements of the Combined Fund.
Minority interest in joint venture's operations increased
$4,032,000 in 1992 compared to 1991 due to the change in joint venture
ownership.
Although inflation impacts the Partnership's expenses, the
Partnership has the ability to attempt to offset expense increases through
increases in room rates. Certain expenses may not be impacted by
inflation, such as debt service related to the mortgage financing
encumbering the Partnership's properties which was generally obtained at
fixed interest rates. It is impossible to accurately predict the future
impact of inflation on the operations of the Partnership, the ability to
successfully pass all increased costs through in the form of increases in
room rates or the impact of inflation on the ultimate sales price of the
properties.<PAGE>
Item 8.Financial Statements and Financial Statement Schedules.
MRI BUSINESS PROPERTIES FUND, LTD. III
(A limited partnership)
TABLE OF CONTENTS
Page
Independent Auditors' Report
Consolidated Financial Statements:
Balance Sheets at September 30, 1993 and 1992
Statements of Operations for the Years Ended
September 30, 1993, 1992 and 1991
Statements of Partners' Equity (Deficiency) for the
Years Ended September 30, 1993, 1992 and 1991
Statements of Cash Flows for the Years Ended
September 30, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
Financial Statement Schedules:
Schedule X -Consolidated Statements of Operations
Information for the Years Ended
September 30, 1993, 1992 and 1991
Schedule XI-Real Estate and Accumulated Depreciation
at September 30, 1993
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
(A general partnership)
Independent Auditors' Report
Consolidated Financial Statements:
Balance Sheets at September 30, 1993 and 1992
Statements of Operations for the Years Ended
September 30, 1993, 1992 and 1991
Statements of Partners' Equity (Deficiency) for
the Years Ended September 30, 1993, 1992 and 1991
Statements of Cash Flows for the Years Ended
September 30, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
Financial Statement Schedules:
Schedule X -Consolidated Statements of Operations
Information for the Years Ended
September 30, 1993, 1992 and 1991
Schedule XI -Real Estate and Accumulated
Depreciation at September 30, 1993
Financial statements and financial statement schedules not included
have been omitted because of the absence of conditions under which they are
required or because the information is included elsewhere in this Report.
<PAGE>
INDEPENDENT AUDITORS' REPORT
MRI Business Properties Fund, Ltd. III:
We have audited the accompanying consolidated financial statements
of MRI Business Properties Fund, Ltd. III (a limited partnership) (the
"Partnership") and its consolidated joint ventures, listed in the
accompanying table of contents. Our audits also included the financial
statement schedules of the Partnership and its joint ventures listed in the
accompanying table of contents. These financial statements and financial
statement schedules are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements
and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the Partnership
and its consolidated joint ventures at September 30, 1993 and 1992, and the
results of their operations and their cash flows for each of the three
years in the period ended September 30, 1993 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material
respects the information shown therein.
DELOITTE & TOUCHE
San Francisco, California
December 17, 1993<PAGE>
<TABLE>
MRI BUSINESS PROPERTIES FUND, LTD. III
(A LIMITED PARTNERSHIP)
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1993 AND 1992
<CAPTION>
1993 1992
---- ----
ASSETS
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 5,088,000 $ 5,223,000
CASH INVESTMENTS 3,467,000 1,486,000
ACCOUNTS AND INTEREST RECEIVABLE - NET 1,814,000 1,565,000
INVENTORIES AND OPERATING SUPPLIES 533,000 582,000
PREPAID EXPENSES AND OTHER ASSETS 434,000 406,000
INVESTMENT IN UNCONSOLIDATED JOINT VENTURE - 1,223,000
PROPERTIES AND IMPROVEMENTS 110,924,000 109,157,000
ACCUMULATED DEPRECIATION (30,459,000) (27,796,000)
ALLOWANCE FOR IMPAIRMENT OF VALUE (14,348,000) (14,348,000)
------------ ------------
NET PROPERTIES AND IMPROVEMENTS 66,117,000 67,013,000
DEFERRED FINANCING COSTS - NET 158,000 192,000
------------- -------------
TOTAL ASSETS $ 77,611,000 $ 77,690,000
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIENCY)
ACCOUNTS PAYABLE $ 1,466,000 $ 1,873,000
ACCRUED INTEREST 966,000 917,000
ACCRUED PROPERTY TAXES 1,779,000 1,303,000
PAYABLE TO AFFILIATE OF JOINT VENTURE PARTNER 1,581,000 1,581,000
DUE TO UNCONSOLIDATED JOINT VENTURE 147,000 -
OTHER LIABILITIES 1,467,000 1,419,000
NOTE PAYABLE TO AFFILIATE OF JOINT
VENTURE PARTNER 2,500,000 2,500,000
NOTES PAYABLE 51,799,000 51,220,000
------------ ------------
TOTAL LIABILITIES 61,705,000 60,813,000
------------ ------------
MINORITY INTEREST IN JOINT VENTURES (444,000) (416,000)
------------ ------------
PARTNERS' EQUITY (DEFICIENCY):
GENERAL PARTNERS (2,014,000) (1,995,000)
LIMITED PARTNERS (109,027 assignee units
outstanding at September 30, 1993 and 1992) 18,364,000 19,288,000
------------ ------------
TOTAL PARTNERS' EQUITY 16,350,000 17,293,000
------------ ------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 77,611,000 $ 77,690,000
============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
MRI BUSINESS PROPERTIES FUND, LTD. III
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1992 AND 1991
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Room revenue $25,748,000 $ 25,137,000 $ 26,252,000
Food and beverage revenue 5,848,000 5,986,000 7,345,000
Other operating revenue 1,975,000 1,839,000 1,898,000
Interest and other income 329,000 932,000 1,861,000
------------ ------------ ------------
Total revenues 33,900,000 33,894,000 37,356,000
------------ ------------ ------------
EXPENSES (including $1,227,000, $1,625,000 and $1,696,000
paid to an affiliate of a joint venture partner, general
partner and affiliates in 1993, 1992, and 1991):
Room expenses 6,810,000 6,953,000 7,809,000
Food and beverage expenses 5,491,000 5,890,000 7,046,000
Other operating expenses 14,624,000 14,850,000 16,046,000
Depreciation and amortization 2,663,000 4,316,000 4,248,000
Equity in unconsolidated joint
venture's operations 1,370,000 2,266,000 6,411,000
Interest 3,498,000 5,317,000 5,255,000
General and administrative 415,000 483,000 681,000
Provision for impairment of value - 11,353,000 -
------------ -------------- ------------
Total expenses 34,871,000 51,428,000 47,496,000
------------ ------------ ------------
LOSS BEFORE MINORITY INTEREST IN JOINT
VENTURES' OPERATIONS (971,000) (17,534,000) (10,140,000)
MINORITY INTEREST IN JOINT VENTURES'
OPERATIONS 28,000 651,000 (236,000)
------------- ------------ ------------
NET LOSS $ (943,000) $(16,883,000)$(10,376,000)
============ ============ ============
NET LOSS PER LIMITED PARTNERSHIP
ASSIGNEE UNIT $(8) $(152) $(93)
===== ==== =====
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
MRI BUSINESS PROPERTIES FUND, LTD. III
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1992 AND 1991
<CAPTION>
GENERAL LIMITED TOTAL
PARTNERS PARTNERS AMOUNT
-------- -------- ------
<S> <C> <C> <C>
BALANCE, OCTOBER 1, 1990 $(1,449,000) $ 46,001,000 $ 44,552,000
NET LOSS (208,000) (10,168,000) (10,376,000)
----------- ------------ ------------
BALANCE, SEPTEMBER 30, 1991 (1,657,000) 35,833,000 34,176,000
NET LOSS (338,000) (16,545,000) (16,883,000)
----------- ------------ ------------
BALANCE, SEPTEMBER 30, 1992 (1,995,000) 19,288,000 17,293,000
NET LOSS (19,000) (924,000) (943,000)
----------- ------------ ------------
BALANCE, SEPTEMBER 30, 1993 $(2,014,000) $ 18,364,000 $ 16,350,000
=========== ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
MRI BUSINESS PROPERTIES FUND, LTD. III
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1992 AND 1991
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss. $ (943,000) $(16,883,000) $(10,376,000)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 2,697,000 4,356,000 4,288,000
Deferred interest added to note payable principal 292,000 - -
Provision for impairment of value - 11,353,000 -
Provision for doubtful receivables 9,000 (14,000) (35,000)
Minority interest in joint ventures' operations (28,000) (651,000) 236,000
Equity in unconsolidated joint venture's operations 1,370,000 2,266,000 6,411,000
Interest on note receivable from affiliate of
joint venture partner - (478,000) (1,430,000)
Changes in operating assets and liabilities:
Accounts and interest receivable (258,000) 124,000 767,000
Prepaid expenses and other assets (28,000) (117,000) 331,000
Receivable from an affiliate of joint
venture partner - 59,000 -
Inventories and operating supplies 49,000 16,000 33,000
Accounts payable, accrued expenses and
other liabilities 605,000 1,173,000 (1,229,000)
Payable to affiliate of joint venture partner - 275,000 275,000
----------- ----------- ------------
Net cash provided (used) by operating activities 3,765,000 1,479,000 (729,000)
----------- ----------- ------------
<PAGE>
INVESTING ACTIVITIES
Properties and improvements additions (1,767,000) (1,466,000) (1,060,000)
Unconsolidated joint venture contributions - (35,000) (1,110,000)
Unconsolidated joint venture distributions - 75,000 -
Guarantee payments credited to
properties and improvements - - (8,000)
Proceeds from cash investments 4,758,000 4,718,000 2,690,000
Purchase of cash investments (6,739,000) (4,249,000) (1,955,000)
------------ ----------- ------------
Net cash used by investing activities (3,748,000) (957,000) (1,443,000)
------------ ----------- ------------
FINANCING ACTIVITIES
Joint venture partner contributions - 596,000 397,000
Interest on note receivable from affiliate
of joint venture partner - 478,000 1,430,000
Joint venture partner distributions - (13,478,000) (1,791,000)
Note receivable from affiliate of joint
venture partner - 13,000,000 -
Note payable proceeds - 23,000 27,000
Notes payable principal payments (152,000) (170,000) (157,000)
----------- ----------- ------------
Net cash provided (used) by financing activities (152,000) 449,000 (94,000)
----------- ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (135,000) 971,000 (2,266,000)
Cash and cash equivalents at beginning of year 5,223,000 4,252,000 6,518,000
----------- ----------- ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,088,000 $ 5,223,000 $ 4,252,000
=========== =========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash during the year $2,684,000 $4,593,000 $4,943,000
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Deferred interest added to note payable principal $439,000 $- $-
========== ========== ==========
Foreclosure of hotel property in fiscal year 1992 - See Note 11.
See notes to consolidated financial statements.
/TABLE
<PAGE>
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
(A LIMITED PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - MRI Business Properties Fund, Ltd. III ("the
Partnership") is a limited partnership organized under the laws of the
State of California to acquire, hold for investment, and ultimately sell
income-producing hotel properties. The managing general partner is
Montgomery Realty Company-85, a California general partnership, and the
associate general partner is MRI Associates, Ltd. III, a limited
partnership. The general partners of Montgomery Realty Company-85 are Fox
Realty Investors, a California general partnership, and Montgomery Realty
Corporation, a California Corporation. Fox Realty Investors, using the
business name of Fox Hotel Investors, is conducting the business formerly
conducted by its predecessor Montgomery Realty Investors. Fox Realty
Investors is also the general partner of MRI Associates, Ltd. III. The
Partnership was organized on June 28, 1984, but did not commence operations
until December 1985. The capital contributions of $109,027,000 ($1,000 per
unit) were made by the limited partners.
On December 6, 1993, NPI Equity Investments II, Inc. ("NPI Equity")
became the managing partner of Fox Realty Investors ("FRI") and assumed
operational control over Fox Capital Management Corporation ("FCMC"). As a
result, NPI Equity became responsible for the operation and management of
the business and affairs of the Partnership and the other investment
partnerships sponsored by FRI and/or FCMC. The individuals who had served
previously as partners of FRI and as officers and directors of FCMC
contributed their general partnership interests in FRI to a newly formed
limited partnership, Portfolio Realty Associates, L.P. ("PRA"), in exchange
for limited partnership interests in PRA. In the foregoing capacity, such
partners will continue to hold indirectly certain economic interests in the
Partnership and such other investment partnerships, but will cease to be
responsible for the operation and management of the Partnership and such
other partnerships.
Consolidation - The consolidated financial statements include the
Partnership and joint ventures in which the Partnership has a controlling
interest. All significant intercompany transactions and balances have been
eliminated. The investment in the unconsolidated joint venture is
accounted for under the equity method of accounting, see Note 6.
New Accounting Pronouncements - In December 1991, the Financial
Accounting Standards Board (FASB) issued Statement No. 107, "Disclosures
About Fair Value of Financial Instruments". This Statement will not affect
the financial position or results of operations of the Partnership but will
require additional disclosure on the fair value of certain financial
instruments for which it is practicable to estimate fair value.
Disclosures under this statement will be required in the fiscal year 1996
financial statements.
Cash and Cash Equivalents - The Partnership considers cash investments
with a maturity of three months or less at the time of purchase to be cash
equivalents.
Inventories and Operating Supplies - Inventories and operating
supplies, including linen, china and glassware, are stated generally at the
lower of first-in, first-out cost or market.
Properties and Improvements - Properties and improvements are stated at
cost. A provision for impairment of value is recorded when a decline in
the value of a property is determined to be other than temporary as a
result of one or more of the following: (1) a property is offered for sale
at a price below its current carrying value, (2) a property has significant
balloon payments due within the foreseeable future for which the
Partnership does not have the resources to meet, and anticipates it will be
unable to obtain replacement financing or debt modification sufficient to
allow a continued hold of the property over a reasonable period of time,
(3) a property has been, and is expected to continue, generating
significant operating deficits and the Partnership is unable or unwilling
to sustain such deficit results of operations, and has been unable to, or
anticipates it will be unable to, obtain debt modification, financing or
refinancing sufficient to allow a continued hold of the property for a
reasonable period of time or, (4) a property's value has declined based on
management's expectations with respect to projected future operational cash
flows and prevailing economic conditions. An impairment loss is indicated
when the undiscounted sum of estimated future cash flows from an asset,
including estimated sales proceeds, and assuming a reasonable period of
ownership up to five years, is less than the carrying amount of the asset.
The impairment loss is measured as the difference between the estimated
fair value and the carrying amount of the asset. Impairment losses are
limited to the maximum potential economic loss to the Fund. In the absence
of the above circumstances, properties and improvements will continue to be
carried in the financial statements at cost. Acquisition fees are
capitalized as a cost of properties and improvements. Properties which
were contributed to the joint ventures by the minority joint venture
partners are stated at amounts agreed upon among the partners at the date
of acquisition or contribution which approximated fair market value. Upon
acquisition of the properties, the Partnership contributed cash to the
joint ventures equal to its proportionate ownership interest in the joint
ventures. Certain payments received from the sellers pursuant to
performance guarantee agreements in excess of the hotels' operating income
are applied as a reduction of the cost of the related hotel.
Depreciation - Depreciation is computed by the straight-line method
over estimated useful lives of 30 years for the building and improvements
and six years for furnishings. Properties for which a provision for
impairment of value has been recorded and are expected to be disposed of
within the next year are not depreciated.
Deferred Financing Costs - Financing costs are deferred and amortized
over the lives of the related loans, which range from seven to ten years,
or expensed, if financing is not obtained.
Net Loss Per Limited Partnership Assignee Unit - Net loss per limited
partnership assignee unit is computed by dividing net loss allocated to the
limited partners by 109,027 assignee units outstanding.
Income Taxes - No provision for Federal and state income taxes has
been made in the financial statements because income taxes are the
obligation of the partners.
Reclassification - Certain amounts have been reclassified to conform
to the 1993 presentation.
2. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
In accordance with the Partnership Agreement, the Partnership may be
charged by the general partner and affiliates for services provided to the
Partnership. From March 1988 to December 1992 such amounts were assigned
pursuant to a services agreement by the general partner and affiliates to
Metric Realty Services, L.P., which performed partnership management and
other services for the Partnership. On January 1, 1993, Metric Management,
Inc., a company which is not affiliated with the general partner, commenced
providing certain property and portfolio management services to the
Partnership under a new services agreement. As provided in the new
services agreement effective January 1, 1993, no reimbursements were made
to the general partner and affiliates after December 31, 1992. Subsequent
to December 31, 1992, reimbursements were made to Metric Management, Inc.
On December 16, 1993, the services agreement with Metric Management, Inc.
was modified and, as a result thereof, the Partnership's general partner
will assume responsibility for cash management of the Partnership as of
December 23, 1993 and for investor relations services as of April 1, 1994.
Related party expenses for the years ended September 30, 1993, 1992 and
1991 are as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Reimbursement of expenses:
Partnership accounting $44,000 $184,000 $229,000
Professional services 11,000 44,000 36,000
Investor services 8,000 34,000 34,000
--------- --------- ---------
Total $63,000 $262,000 $299,000
======== ======== ========
</TABLE>
In accordance with the Partnership Agreement, the general partner
received cash distributions as follows: (1) a Partnership management
incentive equal to an allocation of ten percent determined on a cumulative,
noncompounded basis, of cash available for distribution (as defined in the
Partnership Agreement) which is distributed to partners, and (2) a
continuing interest representing two percent of cash available for
distribution distributed to partners remaining after the allocation of the
Partnership management incentive. Subsequent to December 31, 1986, the
Partnership management incentive is subordinated to certain cash
distributions to the unit holders. There were no cash distributions to the
general partner for the years ended September 30, 1993, 1992 and 1991.
In accordance with the Partnership Agreement, the general partner
is entitled to receive an allocation of net loss and taxable loss of two
percent.
3. RELATED PARTY TRANSACTIONS
In addition to the fees paid to the general partner and affiliates
as set forth above, the Partnership has an agreement with affiliates of its
joint venture partners, which provide for the management and operation of
the joint venture properties. Fees paid pursuant to these agreements are
generally based on a percentage of gross revenues from operations of the
properties and were $1,164,000, $1,088,000 and $1,122,000 in 1993, 1992 and
1991.
4. CASH INVESTMENTS
Cash investments include all cash not considered cash or cash
equivalents, as defined in Note 1. Cash investments at September 30, 1993
mature in October 1993 and January 1994 at effective interest rates of 3.24
percent and 3.21 percent per annum, respectively.
5. PAYMENT OF NOTE RECEIVABLE FROM AFFILIATE OF JOINT VENTURE PARTNER
In January 1992 the joint venture owning the Park Hyatt Hotel
received $13,000,000 from an affiliate of the joint venture partner in
satisfaction of its note receivable from the joint venture affiliate.
According to the joint venture agreement, the joint venture is required to
distribute these funds to the joint venture partner. In this respect, the
joint venture distributed the proceeds to the joint venture partner in
January 1992.
6. INVESTMENT IN UNCONSOLIDATED JOINT VENTURE
In February 1986, the Partnership acquired a 50 percent ownership
interest in MRI Business Properties Combined Fund No. 1 ("Combined Fund"),
a joint venture with MRI Business Properties Fund, Ltd. II, a California
limited partnership affiliated with the Partnership's managing general
partner. The Combined Fund acquired a majority interest in a joint
venture, MRI Ravinia Associates, which on March 13, 1986, acquired the
Hyatt Regency Ravinia Hotel. In fiscal year 1991 the Combined Fund
effected a change in the joint venture ownership (see discussion below).
The Partnership's interest in the Combined Fund is reported using the
equity method of accounting.
In fiscal year 1990, the joint venture partner at the Hyatt Regency
Ravinia Hotel indicated it would not contribute its 50 percent share to
fund deficit operations at the hotel. Consequently, in fiscal year 1991,
the Partnership and MRI Business Properties Fund Ltd. II, each funded
$1,060,000 to the hotel, of which $530,000 from each was funded on behalf
of the joint venture partner. Accordingly, the joint venture partner was
not allocated loss in fiscal year 1991.
Formal notice of deficiency was sent placing the joint venture
partner in default. As a result of such default, in fiscal year 1991 the
Combined Fund effected a change in the joint venture ownership by amending
their agreement with the joint venture partner and forming a new joint
venture with an affiliate of Holiday Inns, Inc. ("Holiday"). The new
joint venture entered into a new management agreement with Holiday. As
consideration for a 50 percent interest in the new joint venture Holiday
has agreed to pay for the costs to terminate the Hyatt Management
Agreement, the conversion costs associated with the change to a Holiday Inn
Crowne Plaza and the coverage of operational losses up to $5,000,000 for up
to the first 5 years of the new joint venture. As a result of the new
joint venture, which included Combined Fund's surrender of certain priority
returns, there was a reduction, through provision for impairment of value,
to the book basis of the property of the Combined Fund of approximately
$7.7 million which was recognized in the June 1991. In July 1993, the
guarantee was exhausted and the Combined Fund and its joint venture partner
are now jointly responsible for their share of the operational losses. In
October 1993 the Combined Fund and Holiday each contributed $300,000 to
cover operational losses. The Partnership intends to continue funding
operational losses, if necessary.
In connection with the above transaction the Partnership finalized
an agreement with the lender on the $34,000,000 note payable to extend the
current provision for interest only mortgage payments (which had been
scheduled to begin amortizing at higher monthly debt service payments in
August 1991) through June 1995. In addition the Partnership has the option
to extend the modification agreement and the maturity date of the note an
additional four year period through June 1999.
During fiscal year 1992, the Combined Fund determined that based
upon the continuing deterioration of the economic market in Atlanta,
Georgia and projected operational cash flows, the decline in value of the
Holiday Inn Crowne Plaza is other than temporary and the recovery of its
carrying value is not likely. Accordingly, an additional provision for
impairment of value of $4,311,000 was recognized in fiscal year 1992 to
reduce the carrying value of the property based on the estimated economic
loss to the Partnership. Carrying value includes the cost of the property
less accumulated depreciation.
7. PROPERTIES AND IMPROVEMENTS
Hotel properties and improvements at September 30, 1993 and 1992
are summarized as follows:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Land $ 21,743,000 $ 21,743,000
Building and improvements 65,631,000 64,912,000
Furnishings 23,550,000 22,502,000
------------ ------------
Total 110,924,000 109,157,000
Accumulated depreciation (30,459,000) (27,796,000)
Allowance for impairment of value (14,348,000) (14,348,000)
------------ ------------
Net property and improvements $ 66,117,000 $ 67,013,000
============ ============
</TABLE>
For details of the property with an allowance for impairment of
value see Note 10.
8. NOTE PAYABLE TO AFFILIATE OF JOINT VENTURE PARTNER
This note is secured by a collateral assignment of certain cash
distributions from the joint venture which owns the Park Hyatt Hotel. The
note requires annual interest only payments at 11 percent payable only to
the extent the Partnership receives certain distributions. The Partnership
has stopped accruing interest on the note payable in fiscal year 1993 since
it appears unlikely the Partnership will receive any distributions due to
the continuing deficit operations at the Park Hyatt Hotel. The note is due
the earlier of December 2020, date of joint venture dissolution or upon
sale of the property. Interest accrued on note payable to affiliate of the
joint venture partner but unpaid during 1992 and 1991 totaled $275,000 in
each year. Interest accrued but unpaid to an affiliate of the joint
venture partner was $1,581,000 at September 30, 1993 and 1992.
9. NOTES PAYABLE
Individual properties and improvements are pledged as collateral
for the related notes payable. Certain of the Partnership's properties are
located in areas affected by highly competitive market conditions.
Markets, although improving, remain depressed due to overbuilding which may
already impact occupancy of the properties, such as the Park Hyatt Hotel,
and the ability of the properties to generate cash flow sufficient to fund
debt service payments. The notes currently bear interest at rates from
6.21 percent to 10.45 percent. The interest rates on four of the five
notes will vary at future dates as defined in the note agreements. The
notes are generally payable monthly and mature beginning in October 1996
through October 1997. Certain notes require balloon payments beginning in
October 1996. Principal payments are required as follows:
1994 $28,994,000
1995 285,000
1996 7,295,000
1997 15,225,000
-----------
Total $51,799,000
===========
As discussed in Note 10, the Partnership has been informed that the
$13,000,000 and $15,000,000 loans on the Radisson Park Terrace Hotel and
the Park Hyatt Hotel are in default. Accordingly, the loans have been
classified as due in fiscal year 1994 in the above repayment schedule.
10. PROVISION FOR IMPAIRMENT OF VALUE
In 1990, the managing general partner had not expected to hold the
Radisson Park Terrace Hotel, located in Washington, D.C., until operations
improved and had been unable to sell its share in the joint venture
partnership or obtain debt modification from the lender. Accordingly, the
carrying value of the property was reduced to its estimated realizable
value and a provision for impairment of value totaling $2,755,000 was
recognized in fiscal year 1990. Carrying value includes the cost of the
property less accumulated depreciation. However, in fiscal year 1991 the
Partnership finalized an amendment to the joint venture agreement which
establishes the Partnership as the sole managing partner and includes an
option which allows the joint venture partner to purchase the Partnership's
interest in the joint venture at a specified price. This option expired
June 30, 1992; however, a preliminary agreement was reached between the
parties for the sale of the hotel or the Partnership's interest in the
hotel. The amendment provides for amounts previously contributed by the
Partnership on behalf of the joint venture partner as discussed above, to
be treated as capital contributions by the Partnership.
As part of the preliminary agreement, the joint venture partner
reached an agreement with the lender for a discounted pay off of the
$13,000,000 loan. The discounted payment would be made simultaneously with
the sale of the Partnership's interest in the property. The sale is
anticipated to close in fiscal year 1994. The Partnership ceased debt
service payments to the lender in November 1992 and in April 1993, as a
result of the potential discounted payoff, the Partnership ceased accruing
interest totalling $645,000, since it appears unlikely that these expenses
will be paid. In addition, the Partnership stopped recording depreciation
on the property in October 1991 due to the potential disposition of the
Partnership's interest in the hotel. If the Partnership is unsuccessful in
completing the sale of its interest, the Partnership may allow the property
to be acquired by the lender through foreclosure. Accordingly, an
additional provision for impairment of value of $4,608,000 was recognized
in 1992 to reduce the carrying value of the property based on the estimated
potential economic loss to the Partnership.
During fiscal year 1992 the Partnership determined that based upon
current economic conditions and projected future operational cash flows,
the decline in value of Park Hyatt Hotel, located in Chicago, Illinois, is
other than temporary and that recovery of its carrying value is not likely.
Accordingly, a provision for impairment of value of $6,985,000 was
recognized to reduce the carrying value of the property based on the
estimated economic loss to the Partnership.
The Partnership has withheld property taxes at the Park Hyatt Hotel
totalling $1,139,000 relating to calendar year 1992, which were due in
March 1993 and September 1993. It also suspended quarterly debt service
payments on the hotel's $15,000,000 note payable to the lender in April
1993. As a result, beginning in April 1993 the Partnership ceased accruing
property taxes totalling $570,000 and interest expense of $693,000 since it
appeared unlikely that these expenses will be paid. The Partnership is
currently negotiating with the lender to obtain a debt modification. If
the Partnership is unable to obtain debt modification, the Partnership may
allow the property to be acquired by the lender through foreclosure. As a
result, in April 1993, the Partnership stopped recording depreciation on
the property.
11. FORECLOSURE OF HOTEL PROPERTY
On February 6, 1992 the Partnership was informed that the Troy
Hilton Inn, located in Troy, Michigan, was acquired through foreclosure on
November 26, 1991 by the holder of the first note. Accordingly, the
Partnership was relieved of its liability for the first note payable of
$16,010,000 (which had been due in 1990) and accrued and deferred interest
payable of $132,000. The loss on disposition was $11,715,000 which had
been recognized in prior years. The consolidated financial statements for
fiscal year 1992 do not include operating results of the Troy Hilton Inn as
the Partnership relinquished control of the property upon appointment of a
receiver to operate the property in February 1991.
12. RENTAL COMMITMENTS
Minimum future rental commitments on operating leases at September
30, 1993 are payable
as follows:
1994 $109,000
1995 29,000
1996 6,000
1997 2,000
--------
Total $146,000
========
Rental expenses for all operating leases were $142,000, $193,000
and $239,000 in 1993, 1992 and 1991, respectively.
<PAGE>
13. RECONCILIATION TO INCOME TAX METHOD OF ACCOUNTING
The differences between the method of accounting for income tax
reporting and the accrual method of accounting used in the financial
statements are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Net loss - financial statements $ (943,000) $(16,883,000) $(10,376,000)
Differences resulted from:
Provision for impairment of value - 11,593,000 -
Depreciation and amortization (1,150,000) 454,000) (2,869,000)
Minority interest in joint ventures' operations (22,000) (2,875,000) (23,000)
Equity in unconsolidated joint venture's operations 340,000 1,684,000 4,271,000
Loss on property disposition - (8,164,000) -
Interest and financing costs (1,133,000) 340,000 (306,000)
Other 610,000 119,000 397,000
------------ ------------ ------------
Net loss - income tax method $ (2,298,000) $(13,732,000) $ (8,906,000)
============ ============ ============
Taxable loss per limited partnership assignee
unit after giving effect to the allocation to the
general partner $(21) $(123) $(80)
===== ==== ====
Partners' equity - financial statements $16,350,000 $17,293,000 $34,176,000
Differences resulted from:
Deferred sales commissions and organization costs 11,309,000 11,309,000 11,309,000
Provision for impairment of value 14,348,000 14,348,000 14,710,000
Depreciation and amortization (1,331,000) (181,000) (4,565,000)
Minority interest in joint ventures' operations (51,000) (29,000) 2,846,000
Equity in unconsolidated joint venture's operations 9,582,000 9,242,000 7,558,000
Interest and financing costs (535,000) 598,000 267,000
Other 1,743,000 1,133,000 1,144,000
------------ ------------ ------------
Partners' equity - income tax method $51,415,000 $53,713,000 $67,445,000
=========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
SCHEDULE X
MRI BUSINESS PROPERTIES FUND, LTD. III
(A LIMITED PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS INFORMATION
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1992 AND 1991
<CAPTION>
COLUMN A COLUMN B
CHARGED TO EXPENSES
--------------------------------------
ITEM 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C>
1.Depreciation<F1> $2,663,000 $4,315,000 $4,237,000
2.Maintenance and repairs $1,945,000 $2,064,000 $2,131,000
3.Advertising $3,950,000 $3,556,000 $3,283,000
4.Property taxes<F2> $1,438,000 $2,099,000 $2,530,000
As to items omitted, amounts did not exceed one percent of total
revenues.
<FN>
<F1> The Partnership stopped recording depreciation on Radisson Park
Terrace Hotel and Park Hyatt Hotel since October 1991 and April 1993,
respectively (see Note 10).
<F2> The Partnership ceased accruing property taxes on the Park Hyatt
Hotel totalling $570,000 beginning in April 1993 (see Note 10).
</TABLE> <PAGE>
<PAGE>
<TABLE> SCHEDULE XI
MRI BUSINESS PROPERTIES FUND, LTD. III
(A LIMITED PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
SEPTEMBER 30, 1993
<CAPTION>
1 2 3 4 5 6 7 8 9 10 11 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PARTNERSHIP:
Embassy Suites - Tempe Hotel Tempe, Arizona
$ 7,005 $ 2,522 $12,440 $2,540 $2,522 $14,980 $ 17,502 $ 6,203 1984 12/86
Residence Inn - Orlando Orlando, Florida
8,150 1,927 12,373 1,023 $(300) 1,927 13,096 15,023 3,970 1984 9/87
Residence Inn - Sacramento Sacramento, California
7,913 3,844 10,615 839 (143) 3,844 11,311 15,155 3,695 1986 9/87
------- ------- ------- ------ ----- ------- ------- -------- -------
Total Partnership
23,068 8,293 35,428 4,402 (443) 8,293 39,387 47,680 13,868
------- ------- ------- ------ ----- ------- ------- -------- -------
JOINT VENTURES:
Radisson Park Terrace Hotel Washington, D.C. <F6>
13,731 3,239 22,326 859 - 3,239 23,185 26,424 5,968 1986 9/86
Park Hyatt Hotel Chicago, Illinois <F6>
15,000 10,211 21,439 5,170 - 10,211 26,609 36,820 10,623 1962 12/86
------- ------- ------- ------ ------ ------- ------- -------- -------
Total Joint Ventures
28,731 13,450 43,765 6,029 - 13,450 49,794 63,244 16,591
------- ------- ------- ------ ------ ------- ------- -------- -------
TOTAL $51,799 $21,743 $79,193 $10,431 $(443)$21,743 $89,181 $110,924 $30,459
======= ======= ======= ====== ===== ======= ======= ======== =======
</TABLE>
See accompanying notes.
<PAGE>
1. COLUMN A - Description
2. COLUMN B - Encumbrances<F5>
3. COLUMN C - Initial cost to Partnership - Land
4. COLUMN C - Initial cost to Partnership - Buildings and
Improvements
5. COLUMN D - Cost Capitalized Subsequent to Acquisition -
Improvements
6. COLUMN D - Cost Capitalized Subsequent to Acquisition - Carrying
Costs <F7>
7. COLUMN E - Gross Amount at Which Carried at Close of Period<F1> -
Land
8. COLUMN E - Gross Amount at Which Carried at Close of Period<F1> -
Buildings and Improvements
9. COLUMN E - Gross Amount at Which Carried at Close of Period<F1> -
Total<F2>
10. COLUMN F - Accumulated Depreciation <F3><F4>
11. COLUMN G - Year of Construction
12. COLUMN H - Date of Acquisition
<PAGE>
SCHEDULE XI
MRI BUSINESS PROPERTIES FUND, LTD. III
(A LIMITED PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
SEPTEMBER 30, 1993
NOTES:
<F1>The aggregate cost for Federal income
tax purposes is $103,403,000.
<F2>Balance, October 1, 1990 $142,889,000
Guarantee payments debited to properties
and improvements 8,000
Improvements capitalized
subsequent to acquisition 1,060,000
------------
Balance, September 30, 1991 143,957,000
Improvements capitalized subsequent
to acquisition 1,466,000
Cost of property disposition (36,266,000)
------------
Balance, September 30, 1992 109,157,000
Improvements capitalized subsequent
to acquisition 1,767,000
------------
Balance, September 30, 1993 $110,924,000
============
<F3>Balance, October 1, 1990 $27,520,000
Additions charged to expense 4,237,000
-----------
Balance, September 30, 1991 31,757,000
Additions charged to expense 4,315,000
Accumulated depreciation of property disposition (8,276,000)
-----------
Balance, September 30, 1992 27,796,000
Additions charged to expense 2,663,000
-----------
Balance, September 30, 1993 $30,459,000
===========
<F4>Depreciation is computed on lives ranging from six to 30 years.
<F5>Encumbrances include capital lease obligations.
<F6>Amounts exclude the effect of provisions for impairment of value. See
Note 10 to the consolidated financial statements.
<F7>Certain revenues received from the original sellers in excess of the
properties net operating income for a specified period of time after
acquisition have been applied as a reduction of the cost of the related
property.
INDEPENDENT AUDITORS' REPORT
MRI Business Properties Combined Fund No. 1:
We have audited the accompanying consolidated financial statements
of MRI Business Properties Combined Fund No. 1 (a general partnership) (the
"Partnership") and its joint venture, listed in the accompanying table of
contents. Our audits also included the financial statement schedules of
the Partnership and its joint venture listed in the accompanying table of
contents. These financial statements and financial statement schedules are
the responsibility of the Partnership's management. Our responsibility is
to express an opinion on these financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the Partnership
and its joint venture at September 30, 1993 and 1992, and the results of
their operations and their cash flows for each of the three years in the
period ended September 30, 1993, in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information shown therein.
DELOITTE & TOUCHE
San Francisco, California
December 17, 1993<PAGE>
<PAGE>
<TABLE>
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
(A GENERAL PARTNERSHIP)
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1993 AND 1992
<CAPTION>
1993 1992
---- ----
ASSETS
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 302,000 $ 245,000
RESTRICTED CASH 739,000 1,228,000
ACCOUNTS RECEIVABLE - NET 1,132,000 1,016,000
INVENTORIES AND OPERATING SUPPLIES 92,000 103,000
PREPAID EXPENSES 26,000 53,000
PROPERTY AND IMPROVEMENTS 72,212,000 69,840,000
ACCUMULATED DEPRECIATION (25,472,000) (23,878,000)
ALLOWANCE FOR IMPAIRMENT OF VALUE (11,962,000) (11,962,000)
------------ ------------
NET PROPERTY AND IMPROVEMENTS 34,778,000 34,000,000
DEFERRED FINANCING COSTS - NET 45,000 105,000
ORGANIZATION COSTS - NET 139,000 189,000
------------ ------------
TOTAL ASSETS $37,253,000 $36,939,000
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIENCY)
ACCOUNTS PAYABLE $ 796,000 $ 1,368,000
ACCRUED INTEREST 266,000 266,000
ACCRUED PROPERTY TAXES 45,000 151,000
OTHER LIABILITIES 1,626,000 888,000
DUE TO AFFILIATE OF JOINT VENTURE PARTNER 1,121,000 -
NOTE PAYABLE 34,000,000 34,000,000
----------- -----------
TOTAL LIABILITIES 37,854,000 36,673,000
----------- -----------
MINORITY INTEREST IN JOINT VENTURE (308,000) (1,873,000)
----------- -----------
PARTNERS' EQUITY (DEFICIENCY):
MRI BPF, LTD. II (146,000) 916,000
MRI BPF, LTD. III (147,000) 1,223,000
----------- -----------
TOTAL PARTNERS' EQUITY (DEFICIENCY) (293,000) 2,139,000
----------- -----------
TOTAL LIABILITIES AND
PARTNERS' EQUITY (DEFICIENCY) $37,253,000 $36,939,000
=========== ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
(A GENERAL PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1992 AND 1991
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Room revenue $10,065,000 $ 9,044,000 $ 8,915,000
Food and beverage revenue 6,687,000 6,730,000 6,855,000
Other operating revenue 588,000 677,000 1,450,000
Interest 17,000 68,000 79,000
------------ ----------- -----------
Total revenues 17,357,000 16,519,000 17,299,000
----------- ----------- -----------
EXPENSES (including $1,014,000, $822,000 and $647,000
paid or payable to an affiliate of the joint venture partner
in 1993, 1992, and 1991):
Room expenses 2,705,000 2,843,000 2,868,000
Food and beverage expenses 5,428,000 5,863,000 5,907,000
Other operating expenses 6,882,000 6,936,000 6,965,000
Depreciation and amortization 1,644,000 2,440,000 3,939,000
Interest 3,248,000 3,248,000 3,245,000
General and administrative 17,000 38,000 120,000
Provision for impairment of value - 4,311,000 7,651,000
----------- ----------- -----------
Total expenses 19,924,000 25,679,000 30,695,000
----------- ----------- -----------
LOSS BEFORE MINORITY INTEREST IN JOINT
VENTURE'S OPERATIONS (2,567,000) (9,160,000) (13,396,000)
MINORITY INTEREST IN JOINT VENTURE'S
OPERATIONS 135,000 4,627,000 595,000
------------ ------------ -----------
NET LOSS $(2,432,000) $ (4,533,000) $(12,801,000)
=========== ============ ===========
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1992 AND 1991
<CAPTION>
MRI BUSINESS MRI BUSINESS
PROPERTIES FUND,PROPERTIES FUND,
LTD. II LTD. III TOTAL
------- -------- -----
<S> <C> <C> <C>
BALANCE, OCTOBER 1, 1990 $ 8,503,000 $ 8,830,000 $17,333,000
CAPITAL CONTRIBUTIONS 1,110,000 1,110,000 2,220,000
NET LOSS (6,390,000) (6,411,000) (12,801,000)
------------ ----------- -----------
BALANCE, SEPTEMBER 30, 1991 3,223,000 3,529,000 6,752,000
CAPITAL CONTRIBUTIONS 35,000 35,000 70,000
DISTRIBUTIONS (75,000) (75,000) (150,000)
NET LOSS (2,267,000) (2,266,000) (4,533,000)
----------- ----------- -----------
BALANCE, SEPTEMBER 30, 1992 916,000 1,223,000 2,139,000
NET LOSS (1,062,000) (1,370,000) (2,432,000)
----------- ----------- -----------
BALANCE, SEPTEMBER 30, 1993 $ (146,000) $ (147,000) $ (293,000)
=========== =========== ===========
See notes to consolidated financial statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
(A GENERAL PARTNERSHIP)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1992 AND 1991
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $(2,432,000) $ (4,533,000) $(12,801,000)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization 1,704,000 2,501,000 3,997,000
Provision for impairment of value - 4,311,000 7,651,000
Provision for doubtful receivables 2,000 50,000 1,000
Minority interest in joint venture's operations (135,000) (4,627,000) (595,000)
Changes in operating assets and liabilities:
Accounts receivable (118,000) 128,000 (199,000)
Inventories and operating supplies 11,000 6,000 15,000
Prepaid expenses 27,000 14,000 35,000
Accounts payable, accrued expenses and
other liabilities 60,000 184,000 324,000
----------- ----------- -----------
Net cash used by operating activities (881,000) (1,966,000) (1,572,000)
----------- ----------- -----------
INVESTING ACTIVITIES
Property and improvements additions (2,372,000) (1,043,000) (422,000)
Restricted cash 489,000 63,000 (260,000)
Organization costs paid - (50,000) (197,000)
----------- ----------- -----------
Net cash used by investing activities (1,883,000) (1,030,000) (879,000)
----------- ----------- -----------
FINANCING ACTIVITIES
Capital contributions - 70,000 2,220,000
Liability to affiliate of joint venture partner 1,121,000 - -
Joint venture partner contributions 1,700,000 2,600,000 821,000
Distributions - (150,000) -
Financing costs paid - - (10,000)
----------- ---------- -----------
Net cash provided by financing activities 2,821,000 2,520,000 3,031,000
----------- ---------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 57,000 (476,000) 580,000
Cash and cash equivalents at beginning of year 245,000 721,000 141,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 302,000 $ 245,000 $ 721,000
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash during the year $3,188,000 $3,187,000 $2,921,000
========== ========== ==========
Organization costs accrued $- $- $47,000
== == =======
</TABLE>
<PAGE>
<PAGE>
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
(A GENERAL PARTNERSHIP)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - MRI Business Properties Combined Fund No. 1
("Partnership") is a general partnership organized under the laws of the
State of California to acquire a majority interest in a joint venture which
acquired the Hyatt Regency Ravinia Hotel. In fiscal year 1991 the
Partnership effected a change in the joint venture ownership by amending
their agreement with the joint venture partner and forming a new joint
venture with an entity affiliated with Holiday Inns, Inc. ("Holiday") which
effectively has resulted in the Partnership and Holiday each owning an
equal 50 percent interest in the new joint venture. In conjunction with
the formation of the new joint venture with Holiday, the management
agreement with Hyatt Corporation was terminated and a new management
contract was signed with Holiday. The hotel is, therefore, now operated as
a Holiday Inn Crowne Plaza. The general partners are MRI Business
Properties Fund, Ltd. II ("MRI BPF, Ltd. II") and MRI Business Properties
Fund, Ltd. III ("MRI BPF, Ltd. III"), both are California limited
partnerships which are affiliated through their managing general partners.
The Partnership was organized on February 18, 1986 and commenced operations
on March 13, 1986.
Consolidation - The consolidated financial statements include the
Partnership and its joint venture in which the Partnership has a 50 percent
interest. All significant intercompany transactions and balances have been
eliminated.
New Accounting Pronouncements - In December 1991, the Financial
Accounting Standards Board (FASB) issued Statement No. 107, "Disclosure
about Fair Value of Financial Instruments". This Statement will not affect
the financial position or result of operations of the Partnership but will
require additional disclosure on the fair value of certain financial
instruments for which it is practicable to estimate fair value.
Disclosures under this statement will be required in the fiscal year 1996
financial statements.
Cash and Cash Equivalents - The Partnership considers cash
investments with a maturity of three months or less at the time of purchase
to be cash equivalents.
Inventories and Operating Supplies - Inventories and operating
supplies, including linen, china and glassware, are stated generally at the
lower of first-in, first-out cost or market.
Property and Improvements - Property and improvements are stated at
cost. A provision for impairment of value is recorded when a decline in
the value of a property is determined to be other than temporary as a
result of one or more of the following: (1) a property is offered for sale
at a price below its current carrying value, (2) a property has significant
balloon payments due within the foreseeable future for which the
Partnership does not have the resources to meet, and anticipates it will be
unable to obtain replacement financing or debt modification sufficient to
allow a continued hold of the property over a reasonable period of time,
(3) a property has been, and is expected to continue, generating
significant operating deficits and the Partnership is unable or unwilling
to sustain such deficit results of operations, and has been unable to, or
anticipates it will be unable to, obtain debt modification, financing or
refinancing sufficient to allow a continued hold of the property for a
reasonable period of time or, (4) a property's value has declined based on
management's expectations with respect to projected future operational cash
flows and prevailing economic conditions. An impairment loss is indicated
when the undiscounted sum of estimated future cash flows from an asset,
including estimated sales proceeds, and assuming a reasonable period of
ownership up to 5 years, is less than the carrying amount of the asset.
The impairment loss is measured as the difference between the estimated
fair value and the carrying amount of the asset. Impairment losses are
limited to the maximum potential economic loss to the Fund. In the absence
of the above circumstances, properties and improvements are stated at cost.
Acquisition fees are capitalized as a cost of property and improvements.
Depreciation - Depreciation is computed by the straight-line method
over estimated useful lives of 30 years for building and improvements and
six years for furnishings. Properties for which a provision for impairment
of value has been recorded and are expected to be disposed of within the
next year are not depreciated.
Deferred Financing Costs - Financing costs are deferred and
amortized over five to seven years.
Organization Costs - Organization costs are deferred and amortized
over five years.
Net Loss Allocation - The net loss of the joint venture, in which
the Partnership has a 50 percent interest, for the period in fiscal year
1991 prior to the change in joint venture ownership, as described above,
were allocated 100 percent to the general partners because the joint
venture partner did not contribute its 50 percent share of the required
contributions to fund deficit operations at the hotel. With the formation
of the joint venture with Holiday, net loss was allocated in accordance
with the new venture agreement, approximately 50 percent to each partner,
in fiscal year 1991 and 1992. As discussed in Note 7, the performance
guarantee was exhausted in July 1993 and accordingly, the 1993 net loss was
allocated to reflect each partners' equal share of the year-end deficiency.
Income Taxes - No provision for Federal and state income taxes
has been made in the financial statements because income taxes are the
obligation of the partners.
Reclassification - Certain amounts have been reclassified to
conform to the 1993 presentation.
2. RESTRICTED CASH
Restricted cash represents monies maintained in an account in
accordance with the management and loan agreement on the Holiday Inn Crowne
Plaza in order to meet future capital requirements.
3. RELATED PARTY TRANSACTIONS
The Partnership has agreements with affiliates of its joint venture
partners, which provide for the management and operation of the joint
venture property. Fees paid or payable pursuant to these agreements are
generally based on a percentage of gross revenues from operations of the
property and were $1,014,000, $822,000 and $647,000 in 1993, 1992 and 1991.
As a result of negotiations in forming the new joint venture and
changing management companies, $185,000 of incentive management fees
recorded in 1990, will not be paid. The reversal of such fees was
recognized in 1991 as revenue. No incentive management fees were recorded
in 1991.
4. PROPERTY AND IMPROVEMENTS
Hotel property and improvements at September 30, 1993 and 1992 are
summarized as follows:
1993 1992
---- ----
Land $ 9,108,000 $ 9,108,000
Building and improvements 45,267,000 44,974,000
Furnishings 17,837,000 15,758,000
----------- -----------
Total 72,212,000 69,840,000
Accumulated depreciation (25,472,000) (23,878,000)
Allowance for impairment of value (11,962,000) (11,962,000)
----------- -----------
Net property and improvements $34,778,000 $34,000,000
=========== ===========
5. NOTE PAYABLE
Property and improvements are pledged as collateral for the note
payable. The note bears interest at 9.375 percent. The note requires
monthly interest only payments and in fiscal year 1991 the Partnership
finalized a debt modification agreement with the lender to extend the due
date of the balloon payment from August 1991 through June 1995. The
modification agreement also provides an option for the extension of the
note due date for an additional four year period through June 1999.
6. PROVISION FOR IMPAIRMENT OF VALUE
The Provision for Impairment of Value of $7,651,000 recorded in
1991 represents the reduction in the book basis of the Hyatt Regency
Ravinia resulting from a change in the joint venture ownership, as
discussed in Note 7.
During fiscal year 1992 the Partnership determined that based upon
the continuing deterioration of the economic market in Atlanta, Georgia and
projected operational cash flows, the decline in value of the Holiday Inn
Crowne Plaza is other than temporary and that recovery of its carrying
value is not likely. Accordingly, an additional provision for impairment
of value of $4,311,000 was recognized in fiscal year 1992 to reduce the
carrying value of the property. Carrying value includes the cost of the
property less accumulated depreciation.
7. CHANGE IN JOINT VENTURE OWNERSHIP
In August 1991 the Partnership amended their agreement with the
existing joint venture partner and formed a new joint venture with an
entity affiliated with Holiday Inn, Inc. ("Holiday"). The new joint
venture entered into a new management agreement with Holiday. The
agreement is for a term of 15 years and provides more stringent management
performance standards on Holiday than the agreement with the previous
manager. As consideration for a 50 percent interest in the new joint
venture, Holiday has agreed to pay for the costs to terminate the Hyatt
Management Agreement, the conversion costs associated with the change to a
Holiday Inn Crowne Plaza and the coverage of operational losses up to
$5,000,000 for up to the first 5 years of the joint venture. As a result
of the formation of the new joint venture, which included Combined Fund's
surrender of certain priority returns, there has been a reduction, through
provision for impairment of value, to the book basis of the property of the
Partnership of approximately $7.7 million which was recognized in fiscal
year 1991.
In July 1993, the guarantee was exhausted and the Partnership and
Holiday are now jointly responsible for the operational losses. In October
1993 the Partnership and Holiday each contributed $300,000 to fund the
operations of the Holiday Inn Crowne Plaza. The Partnership expects to
continue to receive funding from its joint venture partners, if necessary.
In connection with the above transaction, as discussed in Note 5
above, the Partnership has finalized a debt modification agreement with the
lender on the $34,000,000 first note.
8. LIABILITY TO AFFILIATE OF JOINT VENTURE PARTNER
In fiscal year 1993 a non-interest bearing advance of $1,121,000
was made by Holiday.
<PAGE>
<TABLE>
SCHEDULE X
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
(A GENERAL PARTNERSHIP)
CONSOLIDATED STATEMENTS OF OPERATIONS INFORMATION
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1992 AND 1991
<CAPTION>
COLUMN A COLUMN B
CHARGED TO EXPENSES
----------------------------------
ITEM 1993 1992 1991
---- ----- ---- ----
<S> <C> <C> <C>
1. Depreciation $1,594,000 $2,390,000 $3,930,000
2. Maintenance and repairs $947,000 $1,025,000 $1,361,000
3. Advertising $1,284,000 $1,495,000 $1,137,000
4. Property taxes $421,000 $639,000 $776,000
As to items omitted, amounts did not exceed one percent of total
revenues.
</TABLE> <PAGE>
<PAGE>
<TABLE> SCHEDULE XI
MRI BUSINESS PROPERTIES FUND, LTD. III
(A LIMITED PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
SEPTEMBER 30, 1993
<CAPTION>
1 2 3 4 5 6 7 8 9 10 11 12
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JOINT VENTURE:
Holiday Inn Crowne Plaza<F5><F6> Atlanta, Georgia
$34,000 $9,108 $58,073 $5,031 $- $9,108 $63,104 $72,212 $25,472 1986 3/13/86
======= ====== ======= ====== == ====== ======= ======= =======
/TABLE
<PAGE>
1. COLUMN A - Description
2. COLUMN B - Encumbrances<F5>
3. COLUMN C - Initial cost to Partnership - Land
4. COLUMN C - Initial cost to Partnership - Buildings and
Improvements
5. COLUMN D - Cost Capitalized Subsequent to Acquisition -
Improvements
6. COLUMN D - Cost Capitalized Subsequent to Acquisition - Carrying
Costs
7. COLUMN E - Gross Amount at Which Carried at Close of Period<F1> -
Land
8. COLUMN E - Gross Amount at Which Carried at Close of Period<F1> -
Buildings and Improvements
9. COLUMN E - Gross Amount at Which Carried at Close of Period<F1> -
Total<F2>
10. COLUMN F - Accumulated Depreciation <F3><F4>
11. COLUMN G - Year of Construction
12. COLUMN H - Date of Acquisition
<PAGE>
NOTES:
<F1>The aggregate cost for Federal income tax purposes is $36,398,000.
<F2>Balance, October 1, 1990 $68,375,000
Improvements capitalized subsequent
to acquisition 422,000
-----------
Balance, September 30, 1991 68,797,000
Improvements capitalized subsequent
to acquisition 1,043,000
-----------
Balance, September 30, 1992 69,840,000
Improvements capitalized subsequent
to acquisition 2,372,000
-----------
Balance, September 30, 1993 $72,212,000
===========
<F3>Balance, October 1, 1990 $17,558,000
Additions charged to expense 3,930,000
-----------
Balance, September 30, 1991 21,488,000
Additions charged to expense 2,390,000
-----------
Balance, September 30, 1992 23,878,000
Additions charged to expense 1,594,000
-----------
Balance, September 30, 1993 $25,472,000
===========
<F4>Depreciation is computed on lives ranging from six to 30 years.
<F5>Formerly Hyatt Regency Ravinia Hotel.
<F6>Excludes the effect of the provisions for impairment of value of
$4,311,000 and $7,651,000 recognized in fiscal years 1992 and 1991,
respectively (See Notes 6 and 7 to the consolidated financial statements).
<PAGE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Partnership has no directors or executive officers. The
following are the names and additional information relating to the
directors and executive officers of NPI Equity II, Inc. On December 6,
1993, NPI Equity II became managing partner of FRI, thereby obtaining
management and control of the General Partner. By virtue of their
positions with NPI Equity II, the listed individuals control the business
affairs of the Partnership. FRI and its affiliates serve directly or
indirectly as general partner of 24 publicly-held partnerships.
MICHAEL L. ASHNER (41) has been President and a Director of NPI
since 1984, President and a Director of NPI Equity II since 1993 and
President and a Director of FCMC since December 6, 1993. Since 1991, Mr.
Ashner has also served as a Director and President of NPI Equity Investors,
Inc. ("NPI Equity I"), an affiliate of NPI Equity II, which serves as the
general partner of the seven publicly-held NPI real estate limited
partnerships. In addition, since 1981 Mr. Ashner has been President and
sole shareholder of Exeter Capital Corporation, a firm which has organized
and administered real estate limited partnerships. He received his A.B.
degree cum laude from Cornell University and received a J.D. degree magna
cum laude from the University of Miami School of Law, where he was an
editor of the law review. Mr. Ashner is a member of the New Jersey, New
York and Florida bar associations and is a member of the Executive Council
of the Board of Directors of the Multi Housing Council.
MARTIN LIFTON (61) has been the Chairman and a Director of NPI
since 1991 and NPI Equity II since 1993 and the Chairman and a Director of
FCMC since December 6, 1993. In addition, since 1991, Mr. Lifton has
served as the Chairman and a Director of NPI Equity I. Mr. Lifton is also
Chairman and President of Lifton Company, a real estate investment firm.
Since entering the real estate business 35 years ago, Mr. Lifton has
engaged in a wide range of real estate activities, including the purchase
and construction of apartment complexes in the New York metropolitan area
and in the southeastern and midwestern United States. Mr. Lifton was also
one of the founders of the Bank of Great Neck of which he is Chairman and a
major stockholder. Mr. Lifton received his B.S. degree from the New York
University School of Commerce where he majored in real estate.
ARTHUR N. QUELER (47) was a co-founder of NPI, of which he has been
Executive Vice President and a Director since 1984. Mr. Queler has also
been Executive Vice President and a Director of NPI Equity II since 1993
and of FCMC since December 6, 1993. Since 1991, Mr. Queler has been
Executive Vice President and a Director of NPI Equity I. In addition,
since 1983 Mr. Queler has been President of ANQ Securities, Inc., a NASD
registered broker-dealer firm which has been responsible for supervision of
licensed brokers and coordination with a nationwide broker-dealer network
for the marketing of NPI investment programs. Prior to 1983, Mr. Queler
was a managing general partner of Berg Harquel Associates, a real estate
syndication firm, in which capacity he was involved in the acquisition,
syndication and management of 23 properties. Mr. Queler is a certified
public accountant. He received B.B.A. and M.B.A. degrees from the City
College of New York.
Messrs. Ashner, Lifton and Queler currently are the beneficial
owners of all of the outstanding stock of NPI.
ITEM 11. EXECUTIVE COMPENSATION.
The Partnership does not pay or employ any directors or officers.
Compensation to the general partners of FRI, the general partner of the
Partnership's managing general partner, is not related to the results of
the Partnership.
The Partnership has not established any plans pursuant to which
plan or non-plan compensation has been paid or distributed during the last
fiscal year or is proposed to be paid or distributed in the future, nor has
the Partnership issued or established any options or rights relating to the
acquisition of its securities or any plans relating to such options or
rights. However, the Partnership's general partner has received and is
expected to receive certain allocations, distributions and other amounts
pursuant to the Partnership's limited partnership agreement. In addition,
included in the amounts paid by the Partnership to MRS for the quarter
ended December 31, 1992 for certain asset management services provided to
the Partnership was an allocation for a portion of the compensation
(including employee benefit plan contributions) of personnel rendering
services required under the services agreement with MRS. (See Item 13
below).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
There is no person known to the Partnership who owns beneficially
or of record more than five percent of the voting securities of the
Partnership. Other than the purchase of 100 Limited Partnership Units for
$100,000 by FRI, neither the Partnership's general partners nor affiliates
of the Partnership's general partners have contributed capital to the
Partnership. With respect to the ownership of 100 Limited Partnership
Units, FRI has the same rights and entitlements as all
other limited partners.
The Registrant is a limited partnership and has no officers or
directors. The managing general partner has discretionary control over
most of the decisions made by or for the Partnership in accordance with the
terms of the Partnership Agreement. The partners and officers of the
Partnership's general partners and its affiliates, as a group, own less
than one percent of the Partnership's voting securities.
There are no arrangements known to the Partnership, the operation
of which may, at a subsequent date, result in a change in control of the
Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None; except that for the quarter ended December 31, 1992, the
Partnership paid fees to MRS for services provided as a result of an
assignment of such fees by the Partnership's general partner. See the
Prospectus filed pursuant to Rule 424(b) under the Securities Act of 1933
which is incorporated by reference herein and Note 2 to the Financial
Statements in Item 8. Similar fees were received in 1992 by MRS from other
real estate syndications sponsored directly or indirectly by FCMC or FRI.
Such fees were assigned pursuant to a services agreement among MRS, the
Partnership's general partner, FCMC or FRI and the general partners of such
other syndications whereby certain asset and property management and other
services were provided by MRS to the Partnership and such other
syndications. W. Patrick McDowell, a former officer and former director of
FCMC and a former partner (and since December 1993, a limited partner of a
partner) of FRI, and Robert A. Fiddaman, a former partner (and since
December 1993, a limited partner of a partner) of FRI, were directors and
officers of the corporate general partner of MRS from March 1988 to
December 1992 and from March 1988 to June 1990 held an indirect ownership
interest in MRS.
In December 1992, the services agreement with MRS was terminated by
the parties and as of January 1993 the Partnership, FCMC, FRI and other
real estate funds sponsored by FCMC and FRI entered into a new services
agreement with MMI, a successor through merger of MRS. Under this new
services agreement, MMI provides certain asset
management services directly to the Partnership. No directors or officers
of FCMC or partners of FRI are directors or officers of MMI, which is a
wholly owned subsidiary of Metropolitan Life Insurance Company. No out-
of-pocket expense reimbursements for portfolio management services or fees
for property management services to the Partnership were made in fiscal
year 1993 after December 31, 1992 by the Partnership to the general partner
or its affiliates. On December 16, 1993, the services agreement with MMI
was modified and, as a result thereof, the Partnership's general partner
will assume responsibility for cash management of the Partnership as of
December 23, 1993 and for investor relations services as of April 1, 1994.
See "Item 1. Business." for information relating to the acquisition
by NPI Equity II of management and control of the Partnership.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM
8-K.
(a) 1. and 2. See Item 8 of this Form 10-K for Consolidated Financial
Statements of the Partnership, Notes thereto, and Financial Statement
Schedules. (A table of contents to Consolidated Financial Statements and
Financial Statement Schedules is included in Item 8 and incorporated herein
by reference.)
See Item 8 of this Form 10-K for MRI Business Properties Combined
Fund No. 1, Notes thereto, and Financial Statement Schedules. (A table of
contents to Consolidated Financial Statements and F
Financial Statement Schedules is included in Item 8 and
incorporated herein by reference.)
(b) No Reports on Form 8-K were required to be filed during the last
quarter of the period covered by this Report.
(c) List of Exhibits (numbered in accordance with Item 601 of
Regulation S-K):
3. Partnership Agreement included in Prospectus filed pursuant to
Rule 424(b) of the Securities Act of 1933 and incorporated herein by
reference.<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
REGISTRANT
MRI BUSINESS PROPERTIES FUND, LTD. III
By: Montgomery Realty Company-85,
its Managing General Partner
By:Fox Realty Investors,*
the managing general partner of
the Managing General Partner
By:NPI Equity Investments II, Inc.
("NPI")
managing partner
By:/s/ Michael L. Ashner
-----------------------
Michael L. Ashner
President
Date: December 17, 1993
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the date indicated.
By: /s/ Michael L. Ashner By:/s/ Arthur N. Queler
------------------------- -------------------------
Michael L. Ashner Arthur N. Queler
President and Director Executive Vice President
NPI (Principal Financial and
Accounting Officer)
and Director
NPI
By: /s/ Martin Lifton
-------------------------
Martin Lifton
Chairman and Director
NPI
Date: December 17, 1993 * d/b/a Fox Hotel Investors<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
REGISTRANT
MRI BUSINESS PROPERTIES FUND, LTD. III
By: Montgomery Realty Company-85,
its Managing General Partner
By:Fox Realty Investors,*
the managing general partner of
the Managing General Partner
By:NPI Equity Investments II, Inc.
("NPI")
managing partner
By:
-----------------------
Michael L. Ashner
President
Date: December 17, 1993
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the date indicated.
By: By:
------------------------- -------------------------
Michael L. Ashner Arthur N. Queler
President and Director Executive Vice President
NPI (Principal Financial and
Accounting Officer)
and Director
NPI
By:
-------------------------
Martin Lifton
Chairman and Director
NPI
Date: December 17, 1993 * d/b/a Fox Hotel Investors<PAGE>
