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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, 1995, or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number 0-15348
MRI BUSINESS PROPERTIES FUND, LTD. III
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-2969782
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5665 Northside Drive, N.W.
Atlanta, Georgia 30328
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 916-9090
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 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 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. [ ]
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 of Registrant dated December 18, 1985, as thereafter
supplemented incorporated in Parts I, III and IV.
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MRI BUSINESS PROPERTIES FUND, LTD. III
(A limited partnership)
PART I
Item 1. Business.
MRI Business Properties Fund, Ltd. III ("Registrant") was organized in
1984 as a California limited partnership under the California Uniform Limited
Partnership Act. The managing general partner of Registrant 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 Registrant 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.
Registrant'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. Registrant 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 herein by reference.
The principal business of Registrant is to acquire (either primarily or
exclusively through joint ventures), hold for investment, and ultimately sell
hotels. Registrant is a "closed" limited partnership real estate syndicate of
the unspecified asset type. For a further description of Registrant's business,
see the sections entitled "Risk Factors" and "Investment Objectives and
Policies" in the Prospectus.
Beginning in January 1986 through September 5, 1986 Registrant 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. Registrant's original portfolio was geographically diversified with
properties acquired in seven states. The acquisition activities of Registrant
were completed on September 30, 1987, and since that time the principal activity
of Registrant has been managing its portfolio. One of Registrant's properties
was acquired by the lender through foreclosure in fiscal year 1992, Registrant's
joint venture interest in two other properties were sold in March, 1994 and one
of Registrant's properties was sold in the fourth quarter of fiscal 1995. (See
"Sales"). In the first quarter of fiscal 1996, Registrant's Residence-Inn
Orlando property was sold and the joint venture in which Registrant had an
indirect interest sold its only asset, the Holiday Inn-Crowne Plaza, on December
1, 1995. (See "Subsequent Events"). Registrant's remaining asset is under
contract for sale. (See, "Contract for Sale"). Item 2, "Properties" sets forth a
description of Registrant's properties.
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In the event that the sale of Registrant's remaining property is
consummated, Registrant expects to dissolve and, after establishing sufficient
reserves, distribute the net assets of Registrant to its partners in accordance
with the terms of the Partnership Agreement.
Registrant is involved in only one industry segment, as described above.
Registrant does not engage in any foreign operations or derive revenues from
foreign sources.
Both the income and expenses of operating the properties in which
Registrant has an ownership interest are subject to factors outside of
Registrant'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 Registrant.
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 Registrant 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. Registrant 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
Registrant.
Registrant monitors its remaining property for evidence of pollutants,
toxins and any dangerous substances including the presence of asbestos. In
certain cases environmental testing has been performed and, except as noted
below, resulted in no material adverse conditions or liabilities. In no case has
Registrant received notice that it is a potentially responsible party with
respect to an environmental cleanup sight.
Registrant maintains property and liability insurance on the properties
and believes such coverage to be adequate.
Assuming that Registrant's remaining asset is sold at the current contract
price, Registrant's original investment objective of capital growth will not be
attained. Accordingly, a significant portion of invested capital will not be
returned to limited partners.
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Employees/Management
Registrant has no employees. Registrant's properties are managed by
unaffiliated third party management companies pursuant to management agreements
with such third parties.
Registrant's affairs were managed by Metric Management Inc., ("MMI") or a
predecessor from March 1988 to December 1993. On December 16, 1993, the services
agreement with MMI was modified and, as a result thereof, Registrant's general
partner assumed responsibility for cash management of Registrant as of December
23, 1993 and assumed responsibility for day-to-day management of Registrant's
affairs, including portfolio management, accounting and investor relations
services as of April 1, 1994.
On December 6, 1993, NPI Equity Investment II, Inc. ("NPI Equity II" or
the "Managing General Partner") became the managing partner of FRI. As a result,
NPI Equity II became responsible for the operation and management of the
business and affairs of Registrant and the other investment partnerships
sponsored by FRI and its affiliates. The individuals who had served previously
as partners of FRI 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 parties continue to hold indirectly certain economic interests in
Registrant and such other investment limited partnerships, but have ceased to be
responsible for the operation and management of Registrant and such other
partnerships. NPI Equity II is a wholly-owned subsidiary of National Property
Investors, Inc. ("NPI"), a diversified real estate management company with
offices in Jericho, New York and Atlanta, Georgia.
Sales
On July 25, 1995, Registrant's Embassy Suites (Tempe, Arizona) property
was sold to an unaffiliated third party for $19,600,000. At the date of the
sale, the net carrying value of the property was $10,823,000. After deducting
sales expenses of 135,000, the sale resulted in a gain of $8,642,000. The
Partnership received net proceeds of 19,465,000 on the sale.
On March 15, 1994, Registrant sold its 65 percent interest in the
Washington Park Hotel Associates Joint Venture, which owned the Radisson Park
Terrace Hotel, located in Washington, D.C. for $1,455,000 in cash, to its joint
venture partner. The sale, after expenses, resulted in a gain of $924,000.
On March 7, 1994, the partnership sold its 60 percent interest in the Park
Hyatt Water Tower Associates Joint Venture, which owned the Park Hyatt Hotel,
located in Chicago, Illinois to an affiliate of the joint venture partner. The
sales price of $5,831,000 was comprised of the following: (1) the assumption of
the purchase money note payable to an affiliate of the joint venture partner in
the amount of $2,500,000, (2) accrued and unpaid interest to an affiliate of the
joint venture partner of $1,581,000 assumed by the buyer, and (3) cash of
$1,750,000. The sale resulted in a gain of $543,000.
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Subsequent Events
On October 19, 1995, Registrant's Residence Inn - Orlando Property was
sold to an unaffiliated third party for $10,100,000. After satisfaction of the
mortgage loan of $7,985,000 (including accrued interest) and closing costs,
Registrant received approximately $1,981,000. Registrant has recorded a
provision for loss on sale of property of $800,000 for the 1995 fiscal year.
As of July 7, 1995, MRI Business Properties Combined Fund No. 1, a joint
venture with MRI Business Properties Fund, Ltd. II (the "Combined Fund"),
entered into an agreement with its joint venture partner in the Holiday Inn
Crowne Plaza pursuant to which the parties agreed to sell the Holiday Inn Crowne
Plaza. The agreement provided that the net proceeds to the Combined Fund from
any such sale must be at least $5,000,000. On December 1, 1995, the Combined
Fund sold the Holiday Inn Crowne Plaza property to an unaffiliated third party
for $44,000,000. After satisfaction of the mortgage note of $34,000,000, closing
costs and other expenses, the joint venture received approximately $8,900,000.
The Combined Fund received $5,000,000 of net proceeds (of which Registrant's
share is $2,500,000) in accordance with the July 7, 1995 agreement. Registrant
will recognize a gain on disposition of approximately $3,000,000 during the
first quarter of fiscal 1996. The Combined Fund had previously recorded an
approximate $12,000,000 provision for impairment of value in 1991 and 1992. A
former joint venture partner may be required to contribute certain funds to
Registrant in accordance with the joint venture agreement. The amount of
contribution, if any, is not determinable at this time.
Contracts for Sale
On November 15, 1995, the Partnership contracted to sell its remaining
property, the Residence Inn-Sacramento, to an unaffiliated third party for
$14,600,000. After satisfaction of the mortgage loan of approximately $7,500,000
and closing costs, the Partnership expects to receive net proceeds of
approximately $6,800,000. For financial statement purposes the partnership will
recognize a gain on the sale. The sale is subject to due diligence and is
expected to close during the second quarter of fiscal 1996.
Material Events/Change in Control
On October 12, 1994, NPI sold one-third of the stock of NPI to an
affiliate ("Apollo") of Apollo Real Estate Advisors, L.P. Apollo is entitled to
designate three of the seven directors of NPI Equity II. In addition, the
approval of certain major actions on behalf of Registrant requires the
affirmative vote of at least five directors of NPI Equity II.
On October 12, 1994, affiliates of Apollo acquired for aggregate
consideration of approximately $14,800,000 (i) one-third of the stock of the
respective general partners of DeForest Ventures I L.P. ("DeForest I") and
DeForest Ventures II L.P. ("DeForest II") and (ii) an additional equity interest
in NPI-AP Management, L.P. ("NPI-AP"), an affiliate of NPI (bringing its total
equity interest in such entity to one-third). NPI-AP is the sole limited partner
of DeForest II and one of the limited partners of DeForest I.
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DeForest I was formed for the purpose of making tender offers (the "Tender
Offers") for limited partnership interests in Registrant as well as 11
affiliated limited partnerships. DeForest II was formed for the purpose of
making tender offers for limited partnership interest in 7 affiliated limited
partnerships.
Pursuant to DeForest I's Form 13-D filed with the Securities and Exchange
Commission, DeForest I owns 27,527 limited partnership units or 25.25% of the
total limited partnership units of Registrant. (See Item 12, "Security Ownership
of Certain Beneficial Owners and Management.")
On August 17, 1995, the stockholders of NPI, the sole shareholder of NPI
Equity II, entered into an agreement to sell to IFGP Corporation, an affiliate
of Insignia Financial Group, Inc. ("Insignia"), all of the issued and
outstanding stock of NPI. The sale of the stock is subject to the satisfaction
of certain conditions (including, third party consents and other conditions not
within the control of the parties to the agreement) and is scheduled to closed
in January 1996. Upon closing, it is expected that the current officers and
directors of NPI Equity II will resign and Insignia will elect new officers and
directors.
Insignia together with its subsidiaries and affiliates, is a fully
integrated real estate service company specializing in the ownership and
operation of securitized real estate assets. Insignia's principal offices are
located in Greenville, South Carolina and its stock is publicly traded on the
New York Stock Exchange under the symbol IFS. According to Commercial Property
News and the National Multi-Housing Council, Insignia is the largest property
manager in the United States, has been the largest manager of residential
properties since 1992, and is among the largest managers of commercial
properties. As a full service real estate management organization, Insignia
performs property management, asset management, investor services, partnership
administrations, real estate investment banking, mortgage banking, and real
estate brokerage services for various types of property owners.
Competition
Registrant is affected by and subject to the general competitive
conditions of the lodging industry. In addition, each of Registrant's properties
competes in an area which normally contains numerous other properties which may
be considered competitive. In fiscal year 1995 the market for hotel properties
improved significantly due in part to the establishment of new Hotel REITS and
the acquisitions by franchisers (i.e., Marriott, Promus, etc.). As a result,
Registrant was able to sell or contract for the sale of its remaining properties
at competitive prices.
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Item 2. Properties
A description of the hotel properties in which Registrant has or had an
ownership interest is as follows:
Portfolio
Date of Date of Percentage
Name and Location Purchase Sale Rooms (6)
- ----------------- -------- ---- ----- ------
Holiday Inn Crowne Plaza(1)(2) 03/86 12/95 492 21
4355 Ashford-Dunwoody Rd.
Atlanta, Georgia
Embassy Suites - Tempe Hotel(3) 12/86 07/95 224 11
4400 South Rural Road
Tempe, Arizona
Residence Inn - Orlando 09/87 10/95 176 7
7610 Canada Ave.
Orlando, Florida
Residence Inn - Sacramento(3) 09/87 - 176 7
1530 Howe Ave.
Sacramento, California
Radisson Park Terrace Hotel(4) 09/86 03/94 219 16
1515 Rhode Island Avenue NW
Washington, D.C.
Park Hyatt Hotel(4) 12/86 03/94 255 18
800 N. Michigan
Chicago, Illinois
Troy Hilton Inn(4) 11/86 11/91 401 20
1455 Stephenson Highway
Troy, Michigan
(1) Registrant and an affiliated partnership, MRI Business Properties Fund,
Ltd. II, owned a joint venture which had a 50 percent interest in this
property.
(2) 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 5 to the Consolidated Financial Statements).
(3) The property is owned by Registrant in fee.
(4) The property was owned by a joint venture, in which Registrant had a
controlling interest.
(5) Represents the percentage of original cash invested in the individual
property of the total original cash invested in all properties.
See Item 8, "Financial Statements and Supplementary Data", for information
regarding any encumbrances to which the properties of Registrant are subject.
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The following chart sets forth the average occupancy and daily room rate
for each of Registrant's properties for the years ended September 30, 1995, 1994
and 1993.
MRI BUSINESS PROPERTIES FUND, LTD. III
OCCUPANCY AND ROOM RATE SUMMARY
For the Fiscal Years Ended September 30, 1995, 1994 and 1993
Average Average
Occupancy Rate (%) Daily Room Rate ($)
------------------ -------------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
Holiday Inn Crowne Plaza 75 74 68 95.98 88.32 82.55
Embassy Suites - Tempe Hotel(1) - 84 80 - 80.27 75.69
Residence Inn - Orlando 79 72 74 75.98 79.45 76.84
Residence Inn - Sacramento 80 84 80 82.52 79.10 77.47
(1) Property was sold in July 1995.
Item 3. Legal Proceedings.
Lawrence M. Whiteside, on behalf of himself and all others similarly situated,
v. Fox Capital Management Corporation et, al., Superior Court of the State of
California, San Mateo County, Case No. 390018. ("Whiteside")
Bonnie L. Ruben and Sidney Finkel, on behalf of themselves and all others
similarly situated, v. DeForest Ventures I L.P., DeForest Capital I Corporation,
MRI Business Properties Fund, Ltd. II, MRI Business Properties Fund, Ltd. III,
NPI Equity Investments II, Inc., Montgomery Realty Company-84, MRI Associates,
Ltd. II, Montgomery Realty Company-85 and MRI Associates, Ltd. III, United
States District Court, Northern District of Georgia, Atlanta Division("Ruben").
Roger L. Vernon, individually and on behalf of all similarly situated
persons v. DeForest Ventures I L.P. et. al., Circuit Court of Cook County,
County Departments, Chancery Division, Case No. 94CH0100592. ("Vernon")
James Andrews, et al., on behalf of themselves and all others similarly
situated v. Fox Capital Management Corporation, et al., United States District
Court, Northern District of Georgia, Atlanta Division, Case No.
1-94-CV-3351-JEC. ("Andrews")
In the first quarter of fiscal 1995, limited partners in certain limited
partnerships affiliated with Registrant, commenced actions in against, among
others, the Managing General Partner. The actions alleged, among other things,
that the tender offers made by DeForest Ventures I L.P. ("DeForest I") and
DeForest Ventures II L.P. ("DeForest II") in October 1994 constituted (a) breach
of the fiduciary duty owed by the Managing General Partner to the limited
partners of Registrant, and (b) a breach of, and an inducement to breach, the
provisions of the Partnership Agreement of Registrant. The
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actions, which had been brought as class actions on behalf of limited partners
sought monetary damages in an unspecified amount and, in the Whiteside action,
to enjoin the tender offers. The temporary restraining order was sought in the
Whiteside action was denied by the court on November 3, 1994 and on November 18,
1994, the court denied Whiteside a preliminary injunction.
On March 16, 1995 the United States Court for the Northern District of
Georgia, Atlanta, Division, entered an order which granted preliminary approval
to a settlement agreement (the "Settlement Agreement") in the Ruben and Andrews
actions, conditionally certified two classes for purpose of settlement, and
authorized the parties to give notice to the classes of the terms of the
proposed settlement. Plaintiffs counsel in the Vernon and Whiteside action
joined in the Settlement Agreement as well. The Settlement Agreement received
final approval on May 19, 1995 and the actions were dismissed subject to
satisfaction of the terms of the Settlement Agreement. The two certified classes
constituted all limited partners of Registrant and the eighteen other affiliated
partnerships who either tendered their units in connection with the October
tender offers or continued to hold their units in Registrant and the other
affiliated partnerships. Pursuant to the terms of the Settlement Agreement,
which were described in the notice sent to the class members in March 1995, (and
more fully described in the Amended Stipulation of Settlement submitted in the
court on March 14, 1995) all claims which either were made or could have been
asserted in any of the class actions would be dismissed with prejudice and/or
released. In consideration for the dismissal and/or release of such claims,
among other things, DeForest I paid to each unit holder who tendered their units
in Registrant an amount equal to 15% of the original tender offer price less
attorney's fees and expenses. In addition, DeForest I commenced a second tender
offer on June 2, 1995 for an aggregate number of units of Registrant (including
the units purchased in the initial tender) constituting up to 49% of the total
number of units of Registrant at a price equal to the initial tender price plus
15% less attorney's fees and expenses. Furthermore, under the terms of the
Settlement Agreement, the Managing General Partner agreed, among other things,
to provide Registrant a credit line of $150,000 per property which would bear
interest at the lesser of prime rate plus 1% and the rate permitted under the
partnership agreement of Registrant. The second tender offer closed on June 30,
1995.
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.
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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.
No distributions from operations were made during the years ended
September 30, 1995, 1994 and 1993. A distribution from the proceeds of the sale
of Registrant's Embassy Suites Hotel in the amount of $202 per Limited
Partnership Assignee Unit was made during the fourth fiscal quarter of 1995. See
Item 1, "Business" and Item 7, "Management's Discussion and Analysis of
Financial Condition and Result of Operations" for a discussion of Registrant's
expected dissolution and financial ability to make distributions.
As of December 1, 1995, the approximate number of holders of Limited
Partnership Assignee Units was 5,757.
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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, 1995, 1994,
1993, 1992 and 1991. 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.
<TABLE>
<CAPTION>
Year Ended September 30,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(Amounts in thousands except per unit data)
<S> <C> <C> <C> <C> <C>
Total Revenues $23,134 $25,198 $33,900 $33,894 $ 37,356
======= ======= ======= ======= ========
Income (Loss) Before Minority
Interest In Joint Ventures'
Operations $ 9,551 $ 4,440 $ (971) $(17,534) $(10,140)
Minority Interest In Joint
Ventures' Operations - (404) 28 651 (236)
------- -------- ------- -------- -------
Net Income (Loss) $ 9,551 $ 4,036 $ (943) $(16,883) $(10,376)
======= ======= ======= ======== ========
Net Income (Loss) Per Limited
Partnership Assignee Unit(1) $ 68.29 $ 36 $ (8) $ (152) $ (93)
======= ======= ======= ======== ========
Total Assets $24,330 $37,756 $77,611 $ 77,690 $123,151
======= ======= ======= ======== ========
Long Term Obligations:
Notes Payable $15,578 $15,791 $51,799 $ 51,220 $ 67,582
Note Payable To Affiliate Of
Joint Venture Partner $ - - 2,500 2,500 2,500
------- ------- ------- -------- --------
Total $15,578 $15,791 $54,299 $ 53,720 $ 70,082
======= ======= ======= ======== ========
Cash Distributions Per
Limited Partnership Assignee
Unit (Actual Amount Based On
Date Of Admission To
Partnership) $201.67 $ - $ - $ - $ -
======= ======= ======= ======== ========
</TABLE>
(1) $1,000 original contribution per unit, based on weighted average units
outstanding during the year, after giving effect to net loss allocated to
the general partner.
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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.
Liquidity and Capital Resources
Registrant's remaining property is a hotel. On July 25, 1995, Registrant
sold its Embassy Suites-Tempe Hotel to an unaffiliated third party for
$19,600,000. After closing costs and adjustments, Registrant received net
proceeds of $19,465,000 and recognized a gain on sale of $8,642,000. On October
19, 1995 Registrant sold its Residence Inn-Orlando Hotel property to an
unaffiliated third party for $10,100,000. After satisfaction of the mortgage
loan of $7,985,000 (including accrued interest) and closing costs, Registrant
received net proceeds of approximately $1,981,000. For financial statement
purposes Registrant has recorded an $800,000 provision for loss on sale of
property for the year ended September 30,1995. As of July 7, 1995, the joint
venture (the "Combined Fund") which holds an interest in the Holiday Inn Crowne
Plaza entered into an agreement with its joint venture partner in the Holiday
Inn Crowne Plaza pursuant to which the parties agreed to sell the hotel. The
agreement provides that the net proceeds to the Combined Fund from any such sale
must be at least $5,000,000. On December 1, 1995, the Holiday Inn Crowne Plaza
was sold to an unaffiliated third party for $44,000,000. After satisfaction of
the mortgage note of $34,000,000, closing costs and other expenses the joint
venture received approximately $8,900,000. The Combined Fund received $5,000,000
of net proceeds (of which Registrant's share is $2,500,000) in accordance with
the July 7 agreement. Registrant expects to recognize a gain on sale of
approximately $3,000,000 for financial statement purposes during the first
quarter of fiscal 1996. The Combined Fund had previously recorded an approximate
$11,900,000 provision for impairment of value in 1991 and 1992.
On November 15, 1995, the Partnership contracted to sell its, Residence
Inn - Sacramento property, to an unaffiliated third party for $14,600,000. After
satisfaction of the mortgage loan of approximately $7,500,000 and closing costs,
Registrant expects to receive approximately $6,800,000. For financial statement
purposes Registrant will recognize a gain on the sale of approximately
$3,800,000. The sale is subject to due diligence and is expected to close during
the second quarter of fiscal 1996.
Registrant receives hotel operating revenues and is responsible for
operating expenses, administrative expenses, capital improvements and debt
service payments. Registrant uses working capital reserves provided from any
undistributed cash flow from operations and sales proceeds as its primary source
of liquidity. During the year ended September 30, 1995, all of Registrant's
hotels generated positive cash flow.
On July 26, 1995, Registrant distributed $21,988,000 ($202 per unit) and
$449,000 to the limited and general partners, respectively. The funds for
distribution were primarily provided by the proceeds from the sale of
Registrant's Embassy Suites Hotel. Registrant is expected to be terminated in
1996, assuming that Registrant's last remaining property is sold, after
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receipt of outstanding receivables, payment of outstanding liabilities and a
final distribution to the partners.
The level of liquidity based upon cash and cash equivalents experienced a
$1,141,000 decrease at September 30, 1995, as compared to September 30, 1994.
Registrant's $22,650,000 of cash used in financing activities more than offset
$18,471,000 of cash provided by investing activities and $3,038,000 of cash
provided by operating activities. Cash used in financing activities consisted of
$22,437,000 of distributions to partners and $213,000 of notes payable principal
payments. Cash provided by investing activities consisted of $19,465,000 of net
proceeds from the sale of Registrant's Embassy Suites - Tempe Hotel property,
which was partially offset by $994,000 of additions to real estate. All other
increases (decreases) in certain assets and liabilities are the result of the
timing of receipts and payment of various operating activities. Working capital
reserves are usually invested in money market accounts and repurchase agreements
secured by United States Treasury obligations.
The Managing General Partner believes that, if Registrant's remaining
property is not sold and market conditions remain relatively stable, cash flow
from operations, when combined with working capital reserves, will be sufficient
to fund essential capital improvements and debt service payments in 1996 and the
foreseeable future. If Registrant's Residence Inn - Sacramento property is not
sold, a balloon payment of approximately $7,500,000 on the mortgage encumbering
the property is due in October 1997. If the sale is not consummated, the
Managing General Partner believes that the property generates sufficient cash
flow to allow the mortgage to be refinanced.
As required by the terms of the settlement of the actions brought against,
among others, DeForest Ventures I L.P. ("DeForest") relating to the tender offer
made by DeForest in October 1994 (the "First Tender Offer") for units of limited
partnership interest in Registrant and certain affiliated partnerships, DeForest
commenced a second tender offer (the "Second Tender Offer") on June 2, 1995 for
units of limited partnership interest in Registrant. Pursuant to the Second
Tender Offer, DeForest acquired an additional 753 units of Registrant which,
when added to the units acquired during the First Tender Offer, represents
approximately 25.3% of the total number of outstanding units of Registrant (see
Item 3 "Legal Proceedings"). The Managing General Partner believes that the
tender will not have a significant impact on future operations or liquidity of
Registrant. Also in connection with the settlement , an affiliate of the
Managing General Partner has made available to Registrant a credit line of up to
$150,000 per property owned by Registrant. At the present time, Registrant has
no outstanding amounts due under this line of credit. Based on present plans,
management does not anticipate the need to borrow. Other than cash and cash
equivalents, the line of credit is Registrant's only unused source of liquidity.
On August 17, 1995, the stockholders of NPI, Inc., the sole shareholder of
NPI Equity II, agreed to sell to Insignia all of the issued and outstanding
stock of NPI, Inc. The consummation of this transaction is subject to the
satisfaction of certain conditions (including, third party consents and other
conditions not within the control of the parties to the agreement) and is
scheduled to close in January 1996. Upon closing, it is expected that Insignia
will elect new officers and directors of NPI Equity II. The Managing
13
<PAGE>
General Partner does not believe these transactions will have a significant
effect on Registrant's liquidity or results of operation.
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121 "Accounting for the Impairment of Long Lived Assets and for Long Lived
Assets to Be Disposed Of," effective for fiscal years beginning after December
15, 1995. This Statement will not affect the financial position or results of
operations of Registrant.
Assuming that Registrant's remaining asset is sold at the contract price,
Registrant's original investment objective of capital growth will not be
attained. Accordingly, a significant portion of invested capital will not be
returned to limited partners. Upon termination of Registrant, the general
partners will be required to contribute approximately $750,000 to Registrant in
accordance with the partnership agreement.
Real Estate Market
The income and expenses of operating hotels are subject to factors outside
of Registrant's control, such as over-supply of similar properties resulting
from over-building, increases in unemployment, population shifts or changes in
patterns or needs of users. Expenses, such as local real estate taxes and
miscellaneous expenses, are subject to change and cannot always be reflected in
room rate increases due to market conditions. In addition, there are risks
inherent in owning and operating lodging facilities because such properties are
management and labor intensive and especially susceptible to the impact of
economic and other conditions outside the control of Registrant. 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.
Registrant 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 property still owned
by Registrant.
Results of Operations
Fiscal Year 1995 ("1995") Compared to Fiscal Year 1994 ("1994")
Operating results, before the minority interest in joint ventures'
operations, improved by $5,111,000 for the year ended September 30, 1995, as
compared to 1994, due to a decrease in revenues of $2,064,000 and a decrease in
expenses of $7,175,000. Operating results improved due to the $8,642,000 gain on
sale of Registrant's Embassy Suites-Tempe property.
Revenues decreased by $2,064,000 for the year ended September 30, 1995 as
compared to 1994, due to the sale of Registrant's Embassy Suites Hotel in 1995
and joint venture interests in 1994. With respect to the remaining properties,
revenues increased by $403,000 due to increases in room revenue of $357,000 and
interest and other income of $49,000 which was partially offset by a decrease in
operating revenue.
With respect to Registrant's remaining properties, room revenue improved
at Registrant's Orlando property and declined at Registrant's Sacramento
property. Room revenue improved at Registrant's Orlando property due to an
14
<PAGE>
increase in occupancy which was partially offset by a decrease in average daily
room rates. Room revenue declined at Registrant's Sacramento property because of
a decrease in occupancy which was partially offset by an increase in average
daily room rates. Other operating revenue remained relatively constant. In
addition, interest and other income increased by $49,000 due to a $21,000
receipt of a prior year insurance settlement from Registrant's Radisson Park
Terrace joint venture interest and an increase of $28,000 in interest income due
to an increase in average working capital reserves available for investment.
Expenses declined by $7,175,000, for the year ended September 30, 1995, as
compared to 1994, primarily due to the sale of Registrant's Embassy Suites Hotel
in 1995 and joint venture interests in 1994. With respect to the remaining
properties, expenses increased by $912,000 primarily due to a provision for loss
on sale of property of $800,000 provided on Registrant's Orlando property and
increases in room expense of $59,000, other operating expenses of $30,000,
depreciation expense of $44,000 and interest expense of $42,000 which was
partially offset by a decline in equity in unconsolidated joint venture
operation of $63,000. Room and other operating expenses increased at
Registrant's Orlando property due to an increase in occupancy and declined at
Registrant's Sacramento property due to a decrease in occupancy. Depreciation
expense increased due to fixed asset improvements at both the remaining
properties. Interest expense increased due to an increase in the variable
interest rate on the loan encumbering Registrant's Sacramento property. In
addition, the loss from Registrant's unconsolidated joint venture property (The
Holiday Inn Crown Plaza) decreased by $63,000 due to improved hotel operations.
General and administrative expense decreased by $30,000 due to a reduction in
asset management costs.
Fiscal Year 1994 ("1994") Compared to Fiscal Year 1993 ("1993")
Operating results, before the minority interest in joint venture
operations, improved by $5,411,000 for the year ended September 30, 1994, as
compared to 1993, due to a decrease in revenues of $8,702,000 and a decrease in
expenses of $14,113,000. Operating results improved primarily due to the sale of
Registrant's joint venture interests. With respect to the remaining properties,
operating results improved by $2,485,000 for the year ended September 30, 1994,
as compared to 1993, due to an increase in revenues of $922,000 and a decrease
in expenses of $1,563,000.
Revenues decreased by $8,702,000 for the year ended September 30, 1994, as
compared to 1993, due to the sale of Registrant's joint venture interests. With
respect to the remaining properties, revenues increased by $922,000, due to
increases in room revenue of $937,000 and other operating revenue of $77,000,
which was only partially offset by a decrease in interest and other income of
$92,000.
Room revenue increased at all of Registrant's remaining properties, except
for the Residence Inn - Orlando, which declined slightly. The largest increase
was at Registrant's Embassy Suites - Tempe property, due to increases in
occupancy and average daily room rates. Other operating revenues increased due
to an increase in other income at Registrant's Embassy Suites property coupled
with an increase in telephone revenue at Registrant's Residence Inn -
15
<PAGE>
Orlando property. Interest income decreased due to a decline in average working
capital reserves available for investment.
Expenses declined by $14,113,000, for the year ended September 30, 1994,
as compared to 1993, primarily due to the sale of Registrant's joint venture
interests. With respect to the remaining properties, expenses decreased by
$1,563,000. The decreases in depreciation and amortization expense of $480,000,
equity in unconsolidated joint venture's operations of $1,028,000 and interest
expense of $601,000, were only partially offset by increases in room expenses of
$66,000, other operating expenses of $426,000 and general and administrative
expenses of $54,000.
The increase in room expenses is attributable to the increase in occupancy
at Registrant's Embassy Suites Hotel. Other operating expenses increased at all
of Registrant's remaining properties. The largest increase was at Registrant's
Embassy Suites property. General and administrative expenses increased primarily
due to costs associated with the management transition. Depreciation and
amortization expense decreased due to a significant portion of Registrant's
assets becoming fully depreciated in the prior year. The loss from Registrant's
unconsolidated joint venture (Holiday Inn Crowne Plaza) decreased due to
improved operations at the hotel. Interest expense decreased primarily due to
the reduction in the interest rate on the loan encumbering Registrant's
Residence Inn - Orlando property (from 10 percent to 6.50 percent) and
Registrant prepaying on June 2, 1994, in full satisfaction, the note encumbering
Registrant's Embassy Suites property.
Unconsolidated Joint Venture Operations
(MRI BPF Combined Fund No. 1)
During fiscal years 1995, 1994 and 1993, Registrant was allocated losses
from the unconsolidated joint venture which owns the Holiday Inn Crowne Plaza
(formerly the Hyatt Regency Ravinia Hotel). The hotel was sold on December 1,
1995. 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 1995 ("1995") Compared to Fiscal Year 1994 ("1994")
Operating results, prior to minority interest, improved by $257,000, for
the year ended September 30, 1995, as compared to 1994, as revenues increased by
$1,349,000 and expenses increased by $1,092,000. The significant increase in
revenue is attributable to an increase in average room rates and relatively
stable occupancy. The increase in operating expenses is attributable to a slight
increase in occupancy at the hotel. Interest expense increased due to the
increased interest rate on the extension of the mortgage.
Fiscal Year 1994 ("1994") Compared to Fiscal Year 1993 ("1993")
Operating results, prior to minority interest, improved by $1,202,000, for
the year ended September 30, 1994, as compared to 1993, as revenues increased by
$2,045,000 and expenses increased by $843,000. The significant increase in
revenue is attributable to both higher occupancy and average room rates. The
increase in expenses is attributable to the increase in occupancy at the hotel.
16
<PAGE>
In addition, under the terms of the joint venture agreement, the loss from
the Holiday Inn Crowne Plaza was allocated in different proportions during the
year ended September 30, 1994, as compared to 1993. This combined with improved
operations, resulted in a smaller loss being allocated to Registrant.
17
<PAGE>
Item 8. Financial Statements and Supplementary Data.
MRI BUSINESS PROPERTIES FUND, LTD. III
FINANCIAL STATEMENTS
YEAR ENDED SEPTEMBER 30, 1995
INDEX
MRI BUSINESS PROPERTIES FUND, LTD. III
(A LIMITED PARTNERSHIP)
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Reports . . . . . . . . . . . . . . . . . . . . . . F - 2
Financial Statements:
Balance Sheets at September 30, 1995 and 1994 . . . . . . . . . . F - 4
Statements of Operations for the Years Ended September 30, 1995,
1994 and 1993. . . . . . . . . . . . . . . . . . . . . . . . . F - 5
Statements of Partners' Equity for the Years Ended
September 30, 1995, 1994 and 1993. . . . . . . . . . . . . . . F - 6
Statements of Cash Flows for the Years Ended September 30, 1995,
1994 and 1993. . . . . . . . . . . . . . . . . . . . . . . . . F - 7
Notes to Financial Statements. . . . . . . . . . .. . . . . . . . F - 8
Financial Statement Schedules:
Schedule III - Real Estate and Accumulated Depreciation at
September 30, 1995 . . . . . . . . . . . . . . . . . . . . . . F - 21
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
(A GENERAL PARTNERSHIP)
Independent Auditors' Reports . . . . . . . . . . . . . . . . . . . . . . F - 24
Consolidated Financial Statements:
Balance Sheets at September 30, 1995 and 1994 . . . . . . . . . . F - 26
Statements of Operations for the Years Ended September 30, 1995,
1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . F - 27
Statements of Partners' Equity (Deficit) for the Years Ended
September 30, 1995, 1994 and 1993. . . . . . . . . . . . . . . F - 28
Statements of Cash Flows for the Years Ended September 30, 1995,
1994 and 1993. . . . . . . . . . . . . . . . . . . . . . . . . F - 29
Notes to Consolidated Financial Statements. . . . . . . . . . . . F - 30
Financial Statement Schedules:
Schedule III - Real Estate and Accumulated Depreciation at
September 30, 1995 . . . . . . . . . . . . . . . . . . . . . . F - 35
</TABLE>
Financial statements and financial 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.
F - 1
<PAGE>
To the Partners
MRI Business Properties Fund, Ltd. III
Atlanta, Georgia
Independent Auditors' Report
We have audited the accompanying balance sheets of MRI Business Properties Fund,
Ltd. III (a limited partnership) (the "Partnership"), as of September 30, 1995
and 1994, and the related statements of operations, partners' equity and cash
flows for the years then ended. Our audits also included the additional
information supplied pursuant to Item 14(a)(2). These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, the financial statements referred to above present fairly, in
all material respects, the financial position of MRI Business Properties Fund,
Ltd. III as of September 30, 1995 and 1994, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information shown
therein.
As discussed in Notes 1 and 11 to the financial statements, the Partnership has
contracted to sell its last property, subject to the purchaser's due diligence,
during the second quarter of fiscal 1996. If the Partnership's remaining
property is sold, the Partnership is expected to be terminated in 1996 after
receipt of receivables payment of outstanding liabilities and a final
distribution to the partners.
/s/ Imowitz, Koenig & Co., LLP
------------------------------
Certified Public Accountants
New York, N.Y.
December 1, 1995
F - 2
<PAGE>
INDEPENDENT AUDITORS' REPORT
MRI Business Properties Fund, Ltd. III
We have audited the accompanying statements of operations, partners' equity and
cash flows for the year ended September 30, 1993 of MRI Business Properties
Fund, Ltd. III, (a limited partnership) (the "Partnership") and its
subsidiaries, as of September 30, 1993. These consolidated financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit 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 consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall consolidated financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the results of operations and cash flows of the partnership
and its subsidiaries for the year ended September 30, 1993, in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- -------------------------
December 17, 1993
F-3
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 2,904,000 $ 4,045,000
Accounts receivable and other assets 448,000 791,000
Due from affiliate 220,000 --
Real Estate:
Real estate 31,143,000 48,352,000
Accumulated depreciation (9,585,000) (15,432,000)
Allowance for impairment of value (800,000) --
------------ -------------
Real estate, net 20,758,000 32,920,000
------------ -------------
Total assets $ 24,330,000 $ 37,756,000
============ =============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and other liabilities $ 634,000 $ 1,240,000
Due to unconsolidated joint venture 618,000 339,000
Notes payable 15,578,000 15,791,000
------------ -------------
Total liabilities 16,830,000 17,370,000
------------ -------------
Commitments and Contingencies
Partners' Equity:
General partners (deficit) (276,000) (1,933,000)
Limited partners equity (109,027 assignee units
outstanding at September 30, 1995 and 1994) 7,776,000 22,319,000
------------ -------------
Total partners' equity 7,500,000 20,386,000
------------ -------------
Total liabilities and partners' equity $ 24,330,000 $ 37,756,000
============ =============
</TABLE>
See notes to financial statements
F - 4
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Room revenue $ 13,434,000 $ 19,544,000 $ 25,748,000
Food and beverage revenue -- 2,593,000 5,848,000
Other operating revenue 827,000 1,389,000 1,975,000
Interest and other income 231,000 205,000 329,000
Gain on sale of joint venture int -- 1,467,000 --
Gain on sale of property 8,642,000 -- --
------------ ----------- -----------
Total revenues 23,134,000 25,198,000 33,900,000
------------ ----------- -----------
Expenses (including $181,000, $683,000 and
$1,227,000 paid to an affiliate of a joint venture
partner, the general partner and affiliates in
1995, 1994 and 1993)
Room expenses 3,077,000 4,720,000 6,810,000
Food and beverage expenses -- 2,331,000 5,491,000
Other operating expenses 6,373,000 9,690,000 14,624,000
Depreciation 1,533,000 1,679,000 2,663,000
Equity in unconsolidated joint venture's operations 279,000 342,000 1,370,000
Interest 1,082,000 1,527,000 3,498,000
General and administrative 439,000 469,000 415,000
Provision for loss on sale of property 800,000 -- --
------------ ----------- -----------
Total expenses 13,583,000 20,758,000 34,871,000
------------ ----------- -----------
Income (loss) before minority interest in
joint ventures' operations 9,551,000 4,440,000 (971,000)
Minority interest in joint ventures -- (404,000) 28,000
Net income (loss) $ 9,551,000 $4,036,000 $ (943,000)
============ =========== ===========
Net income (loss) per limited partnership
assignee unit $ 68.29 $ 36.28 $ (8.47)
============ =========== ===========
Cash distributions per limited partnership
assignee unit $ 201.67 $ - $ -
============ =========== ===========
</TABLE>
See notes to financial statements
F - 5
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
General Limited Total
Partners' Partners' Partners'
(Deficit) Equity Equity
------------- ------------ ------------
<S> <C> <C> <C>
Balance - October 1, 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
Net income 81,000 3,955,000 4,036,000
------------- ------------ ------------
Balance - September 30, 1994 (1,933,000) 22,319,000 20,386,000
Net income 2,106,000 7,445,000 9,551,000
Distributions (449,000) (21,988,000) (22,437,000)
------------- ------------ ------------
Balance - September 30, 1995 $ (276,000) $ 7,776,000 $ 7,500,000
============= ============ ============
</TABLE>
See notes to financial statements.
F - 6
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------------------------
1995 1994 1993
------------ ------------ --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 9,551,000 $ 4,036,000 $ (943,000)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 1,561,000 1,707,000 2,697,000
Deferred interest added to note payable principal -- -- 292,000
Provision for impairment of value 800,000 -- --
Provision for doubtful receivables 2,000 (5,000) 9,000
Minority interest in joint ventures' operations -- 404,000 (28,000)
Equity in unconsolidated joint venture's operations 279,000 342,000 1,370,000
Gain on sale of joint venture interests -- (1,467,000) --
Gain on sale of property (8,642,000) -- --
Changes in operating assets and liabilities:
Accounts receivable and other assets 313,000 285,000 (237,000)
Accounts payable and other liabilities (606,000) (1,079,000) 605,000
Due from affiliate (220,000) -- --
----------- ----------- -----------
Net cash provided by operating activities 3,038,000 4,223,000 3,765,000
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate (994,000) (1,308,000) (1,767,000)
Unconsolidated joint venture contributions -- (150,000) --
Proceeds from cash investments -- 5,842,000 4,758,000
Purchase of cash investments -- (2,375,000) (6,739,000)
Net proceeds from sale of joint venture interests -- 2,000 --
Net proceeds from sale of property 19,465,000 -- --
----------- ----------- -----------
Net cash provided by (used in) investing activities 18,471,000 2,011,000 (3,748,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (22,437,000) -- --
Notes payable principal payments (213,000) (277,000) (152,000)
Satisfaction of note payable -- (7,000,000) --
----------- ----------- -----------
Cash (used in) financing activities (22,650,000) (7,277,000) (152,000)
----------- ----------- -----------
Net (Decrease) in Cash and Cash Equivalents (1,141,000) (1,043,000) (135,000)
Cash and Cash Equivalents at Beginning of Year 4,045,000 5,088,000 5,223,000
----------- ----------- -----------
Cash and Cash Equivalents at End of Year $ 2,904,000 $ 4,045,000 $ 5,088,000
=========== =========== ===========
Supplemental Disclosure of Cash Flow Information:
Interest paid $ 1,054,000 $ 1,526,000 $ 2,684,000
=========== =========== ===========
Supplemental Disclosure of Non-Cash Investing and
Financing Activities:
Deferred interest added to note payable principal $ -- $ -- $ 439,000
=========== =========== ===========
Gain on sale of joint venture interests in 1994
- See Note 9.
</TABLE>
See notes to financial statements.
F - 7
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
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 Partnership's Embassy
Suites - Tempe Hotel property (Tempe, Arizona) was sold in July
1995, Residence Inn-Orlando (Orlando, Florida) property was sold
in October 1995 and the joint venture which owns the Holiday Inn
Crown Plaza Hotel property (Atlanta, Georgia) sold the hotel on
December 1, 1995. As described in Note 11, the Partnership has a
contract to sell its last property (subject to purchaser's due
diligence), the Residence Inn - Sacramento (Sacramento,
California), in 1996. If the property is sold, the Partnership is
expected to be terminated. The managing general partner of the
Partnership is Montgomery Realty Company-85 ("Montgomery"), a
California general partnership, and the associate general partner
is MRI Associates, Ltd. III, a limited partnership. The general
partners of Montgomery are Fox Realty Investors ("FRI"), a
California general partnership, and Montgomery Realty Corporation
("MRC"), a California Corporation. Effective November 15, 1995,
NPI Realty Management Corp., a wholly owned subsidiary of National
Property Investors Inc. ("NPI, Inc.") succeeded MRC as a general
partner in Montgomery. 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. ("MGP") became
the managing partner of FRI and assumed operational control over
Fox Capital Management Corporation ("FCMC") an affiliate of FRI.
As a result, MGP 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 continue to hold indirectly certain economic interests in
the Partnership and such other investment partnerships, but ceased
to be responsible for the operation and management of the
Partnership and such other partnerships. MGP is a wholly-owned
subsidiary of NPI, Inc, a diversified real estate management
company headquartered in Jericho, New York and Atlanta, Georgia.
On October 12, 1994, NPI, Inc. sold one-third of the stock of NPI,
Inc. to an affiliate of Apollo Real Estate Advisors, L.P.
("Apollo"). In addition, in October 1994 and June 1995, DeForest
Ventures I L.P. ("DeForest"), an entity controlled by Apollo and
affiliates of NPI Inc., commenced tender offers for limited
partnership assignee units of Registrant and 11 other affiliated
limited partnerships. Pursuant to the tender offers DeForest
acquired approximately 25% of total limited partnership units of
the Partnership.
F - 8
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
On August 17, 1995, the stockholders of NPI, Inc., entered into an
agreement to sell to IFGP Corporation, an affiliate of Insignia
Financial Group, Inc. ("Insignia"), all of the issued and
outstanding stock of NPI, Inc. The sale is subject to the
satisfaction of certain conditions and is scheduled to close in
January 1996.
Termination
As discussed in Note 11, the Partnership has a contract to sell its
last property, subject to the purchaser's due diligence during the
second quarter of fiscal 1996. If the property is sold, the
Partnership is expected to be terminated in 1996 after receipt of
receivables, payment of outstanding liabilities and a final
distribution to the partners.
Consolidation
The Partnership sold its remaining joint venture interests in 1994.
The statement of operations for the years ended September 30, 1994
and 1993 have consolidated operations for joint ventures in which
the Partnership had a controlling interest. The statement of cash
flows at September 30, 1993 is consolidated. 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 4).
Distributions
Distributions of $21,988,000 ($201.67 per limited partnership
assignee unit) were made to limited partners and $449,000 to the
general partner during the fiscal year ended September 30, 1995.
These distributions were primarily made from the proceeds received
from the sale of the Partnership's Embassy Suites-Tempe Hotel
property.
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 was amended in October 1994
by FASB Statement No. 119, "Disclosures About Derivative Financial
Instruments and Fair Value of Financial Instruments." These
Statements will not affect the financial position or results of
operation 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
these statements will be required in the financial statements for
fiscal years ending after December 15, 1995.
In March 1995, the FASB issued Statement No. 121 "Accounting for
the Impairment of Long Lived Assets to Be Disposed Of," effective
for fiscal years beginning after December 15, 1995. This Statement
will not affect the financial position or results of operations of
the Partnership.
F - 9
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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.
Concentration of Credit Risk
The Partnership maintains cash balances at institutions insured up
to $100,000 by the Federal Deposit Insurance Corporation ("FDIC").
Balances in excess of $100,000 are usually invested in United
States Treasury bills and repurchase agreements, which are
collateralized by United States Treasury obligations. At times
during the year, cash balances exceeded insured levels. At
September 30, 1995, the Partnership had $1,752,000 invested in
overnight repurchase agreements, secured by United States Treasury
obligations, which are included in cash and cash equivalents.
Inventories and Operating Supplies
Inventories and operating supplies, including linen, china and
glassware, are stated generally at the lower of cost or market.
Inventories are included in accounts receivables and other assets.
Real Estate
Real estate 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. In the absence of the above circumstances,
properties and improvements will continue to be carried in the
financial statements at cost.
F - 10
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Real Estate (Continued)
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 using the straight-line method, based on
the estimated useful lives ranging from 5 years to 39 years.
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 as interest expense over
the lives of the related loans (originally ten years), or expensed
if financing is not obtained. At September 30, 1995 and September
30, 1994, accumulated amortization of deferred financing costs
totaled $221,000 and $194,000 respectively. Net deferred costs of
$55,000 and $83,000 for the years ended September 30, 1995 and
1994, respectively, are included in accounts receivable and other
assets.
Net Income (Loss) Per Limited Partnership Assignee Unit
Net income (loss) per limited partnership assignee unit is computed
by dividing net income (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 1995
presentation.
F - 11
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
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., ("MMI") 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
MMI. On December 16, 1993, the service agreement with MMI was
modified and, as a result thereof, MGP assumed responsibility for
cash management and other partnership services on various dates
commencing December 23, 1993. Related party expenses for the years
ended September 30, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Reimbursement of expenses:
Partnership accounting and investor services $145,000 $102,000 $52,000
Professional services - 12,000 11,000
-------- -------- -------
Total $145,000 $114,000 $63,000
======== ======== =======
</TABLE>
Reimbursed expenses are primarily included in general and
administrative expenses. In addition, an affiliate of MGP was paid
$36,000 relating to successful real estate tax appeals on
Partnership properties during 1995. The tax appeal fees are
included in operating expenses.
In accordance with the Partnership Agreement, the general partner
is entitled to receive cash distributions from operations 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.
The general partner is also entitled to its continuing interest of
two percent of net income and net loss, taxable income and taxable
loss and distribution of cash available for distribution (as
defined the partnership agreement) provided, however, that 20% of
realized gains from the sale or other disposition of properties is
allocated to the general partners until such time as the general
partners do not have a deficit capital account. Upon termination
of the Partnership the general partners will be required to
contribute approximately $750,000 to the Partnership in accordance
with the partnership agreement.
F - 12
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
2. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES (Continued)
On July 26, 1995 the general partner received a distribution of
$449,000, representing the general partners two percent interest in
cash available for distribution which was primarily from the
proceeds received on the sale of the Partnership's Embassy Suites
Hotel property. There were no cash distributions to the general
partner for the years ended September 30, 1994 and 1993.
3. RELATED PARTY TRANSACTIONS
Apart from the reimbursements paid to the general partner and
affiliates as set forth above, the Partnership has or had
agreements with affiliates of its joint venture partners, otherwise
non-affiliated third parties, 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 $569,000 and
$1,164,000 in 1994 and 1993, respectively. No fees were paid in
1995 as the hotels on which these fees were paid were sold in 1994.
4. 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
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
F - 13
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
4. INVESTMENT IN UNCONSOLIDATED JOINT VENTURE (Continued)
to a Holiday Inn Crowne Plaza and the coverage of operational
losses up to $5,000,000 for the first five years of the new joint
venture. As a result of the new joint venture, which included the
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
$7,700,000 which was recognized in 1991. An additional provision
for impairment of value of approximately $4,300,000 was recognized
in 1992. In July 1993, the guarantee was exhausted and the
Combined Fund and its joint venture partner are now jointly
responsible for their share of operational losses. In October 1993
the Combined Fund and Holiday each contributed $300,000 to cover
operational losses. The $34,000,000 mortgage payable encumbering
the hotel which was due to mature in July 1995 was extended to
January 1, 1996 and was satisfied on December 1, 1995 on sale of
the hotel (see Note 13).
5. REAL ESTATE
Hotel properties and improvements at September 30, 1995 and 1994
are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
----------- ------------
<S> <C> <C>
Land $ 5,771,000 $ 8,294,000
Building and improvements 20,552,000 30,227,000
Furnishings 4,820,000 9,831,000
----------- ------------
Total 31,143,000 48,352,000
Accumulated depreciation (9,585,000) (15,432,000)
Allowance for impairment of value (800,000) -
----------- ------------
Net real estate $20,758,000 $ 32,920,000
=========== ============
</TABLE>
For details of the property with an allowance for impairment of
value see Note 10.
6. NOTES PAYABLE
The Partnership's Residence Inn properties (Orlando and Sacramento)
are pledged as collateral for the related notes payable. The notes
currently bear interest at rates from 6.50 percent to 7.38 percent
and are payable monthly. The interest rate on the note encumbering
the Partnership's Residence Inn - Sacramento property fluctuates
monthly.
On June 2, 1994, the Partnership prepaid, in full satisfaction, the
note encumbering its Embassy Suites property in the amount of
$7,000,000. The note had been accruing interest at prime plus 1
percent and was due to mature in December 1996. The property was
sold on July 25, 1995 (see Note 8).
F - 14
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
6. NOTES PAYABLE (Continued)
On October 19, 1995, the Partnership sold its Residence Inn-Orlando
property and satisfied the note, including accrued interest,
encumbering the property in the amount of $7,985,000 (see Note 13).
The final payments due on notes payable:
Date of
Property Final Payment Maturity
--------------------------- ------------- --------
Residence Inn - Sacramento $ 7,621,000 10/97
The following is a summary of the anticipated future principal
payments (including the sold property) at September 30, 1995 on the
notes:
Year Ending
September 30, Amount
------------- ------------
1996 $ 7,921,000
1997 7,657,000
------------
Total $15,578,000
============
7. RENTAL COMMITMENTS
The Partnership satisfied all rental commitments on operating
leases during fiscal year 1995.
Rental expenses for all operating leases were $6,000, $28,000 and
$142,000 in 1995, 1994 and 1993, respectively.
8. GAIN ON SALE OF PROPERTY
On July 25, 1995, the Partnership's Embassy Suites (Tempe, Arizona)
property was sold to an unaffiliated third party for $19,600,000.
At the date of the sale, the net carrying value of the property was
$10,823,000. After deducting sales expenses of 135,000, the sale
resulted in a gain of $8,642,000. The Partnership received net
proceeds of 19,465,000 on the sale. The Partnership had previously
prepaid the note encumbering the Embassy Suites property during
1994 (see Note 6).
F - 15
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
9. GAIN ON SALE OF JOINT VENTURE INTERESTS
On March 7, 1994, the partnership sold its 60 percent interest in
the Park Hyatt Water Tower Associates Joint Venture, which owned
the Park Hyatt Hotel, located in Chicago, Illinois to an affiliate
of the joint venture partner. The sales price of $5,831,000 is
comprised of the following: (1) the assumption of the purchase
money note payable to an affiliate of the joint venture partner in
the amount of $2,500,000, (2) accrued and unpaid interest to an
affiliate of the joint venture partner of $1,581,000 assumed by the
buyer, and (3) cash of $1,750,000. The sale resulted in a gain of
$543,000. The Partnership had recorded a provision for impairment
of value of $6,985,000 during fiscal year 1992.
On March 15, 1994, the Partnership sold its 65 percent interest in
the Washington Park Hotel Associates Joint Venture, which owned the
Radisson Park Terrace Hotel, located in Washington, D.C. for
$1,455,000 in cash, to its joint venture partner. The sale, after
expenses, resulted in a gain of $924,000. The Partnership had
recorded a provision for impairment of value of $7,363,000, of
which $2,755,000 was recognized in fiscal year 1990 and the
remaining $4,608,000 was recognized in fiscal year 1992.
10. PROVISION FOR LOSS ON SALE
On October 19, 1995, the Partnership's Residence Inn - Orlando
property was sold to an unaffiliated third party for $10,100,000
(see Note 13). For financial statement purposes the partnership
has recorded a $800,000 provision for loss on sale of the property
for the 1995 fiscal year.
11. CONTRACT FOR SALE OF PROPERTY
On November 15, 1995, the Partnership contracted to sell its
remaining property, the Residence Inn-Sacramento, to an
unaffiliated third party for $14,600,000. After satisfaction of
the mortgage loan of approximately $7,500,000 and closing costs,
the Partnership expects to receive net proceeds of approximately
$6,800,000. For financial statement purposes the partnership will
recognize a gain on the sale. The sale is subject to due diligence
and is expected to close during the second quarter of fiscal 1996.
12. 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:
F - 16
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
12. RECONCILIATION TO INCOME TAX METHOD OF ACCOUNTING (Continued)
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net income (loss) - financial statements $ 9,551,000 $ 4,036,000 $ (943,000)
Differences resulted from:
Provision for impairment of value 800,000 - -
Depreciation and amortization 57,000 (423,000) (1,150,000)
Minority interest in joint ventures' operations - (1,584,000) (22,000)
Equity in unconsolidated joint venture's
operations (630,000) (612,000) 340,000
Gain (loss) on property disposition 1,516,000 (13,525,000) -
Interest and financing costs 22,000 12,000 (1,133,000)
Other (16,000) (8,000) 610,000
------------ ------------- ------------
Net income (loss) - income tax method $11,300,000 $(12,104,000) $(2,298,000)
============ ============= ============
Taxable income (loss) per limited partnership assignee
unit after giving effect to the allocation to the
general partner $ 83 $ (109) $ (21)
============ ============= ============
Partners' equity - financial statements $7,500,000 $20,386,000 $16,350,000
Differences resulted from:
Deferred sales commissions and
organization costs 11,309,000 11,309,000 11,309,000
Provision for impairment of value 800,000 - 14,348,000
Depreciation and amortization (1,697,000) (1,754,000) (1,331,000)
Minority interest in joint
ventures' operations (1,635,000) (1,635,000) (51,000)
Equity in unconsolidated
joint venture's operations 8,340,000 8,970,000 9,582,000
Sale of joint venture interests 823,000 823,000 -
Interest and financing costs (501,000) (523,000) (535,000)
Gain on property dispositions 1,516,000 - -
Other 1,718,000 1,735,000 1,743,000
------------ ------------- ------------
Partners' equity - income tax method $28,173,000 $39,311,000 $51,415,000
============ ============= ============
</TABLE>
13. SUBSEQUENT EVENTS
On October 19, 1995, the Partnership's Residence Inn - Orlando
Property was sold to an unaffiliated third party for $10,100,000.
After satisfaction of the mortgage loan of $7,985,000 (including
accrued interest) and closing costs, the Partnership received
approximately $1,981,000. The Partnership has recorded a provision
for loss on sale of property of $800,000 for the 1995 fiscal year.
As of July 7, 1995, the Combined Fund entered into an agreement with
its joint venture partner in the Holiday Inn Crowne Plaza pursuant
to which the parties agreed to sell the Holiday Inn Crowne Plaza.
The agreement provides that the net proceeds to the Combined Fund
from any such sale must be at least $5,000,000. On December 1,
1995, the Combined Fund sold the Holiday Inn Crowne Plaza property
to
F - 17
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
13. SUBSEQUENT EVENTS (Continued)
an unaffiliated third party for $44,000,000. After satisfaction of
the mortgage note of $34,000,000, closing costs and other expenses
the joint venture received approximately $8,900,000. The Combined
Fund received $5,000,000 of net proceeds (of which the Partnerships
share is $2,500,000) in accordance with the July 7, 1995 agreement.
The Partnership expects to recognize a gain on sale of approximately
$3,000,000 for financial statement purposes during the first quarter
of fiscal 1996. The Combined Fund had previously recorded an
approximate $11,900,000 provision for impairment of value in 1991
and 1992. A former joint venture partner may be required to
contribute certain funds to the Partnership in accordance with the
joint venture agreement. The amount of contribution, if any, is not
determinable at this time.
14. PRO FORMA FINANCIAL INFORMATION
The following pro forma balance sheet as of September 30, 1995, and
the pro forma statement of operations for the year ended September
30, 1995 give effect to the sale of the Partnership's Embassy
Suites-Tempe property, Residence Inn-Orlando property and the
Partnership's joint venture interest in the Holiday Inn Crowne
Plaza (see Notes 8 and 13). The adjustments related to the pro
forma balance sheet assume the transactions were consummated at
September 30, 1995, while the adjustments to the pro forma
consolidated statement of operations assume the transactions were
consummated at the beginning of the year presented.
The pro forma adjustments required are to eliminate the assets,
liabilities and operating activities of the Embassy Suites - Tempe,
Residence Inn-Orlando properties and Holiday Inn Crowne Plaza joint
venture and to reflect consideration received.
These pro forma adjustments are not necessarily reflective of the
results that actually would have occurred if the sales had been in
effect as of and for the period presented or what may be achieved in
the future.
F - 18
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED 1995, 1994, AND 1993
Pro Forma Consolidated Balance Sheet
September 30, 1995
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
------------- ------------- ------------
<S> <C> <C> <C>
Assets
Cash and cash equivalents $ 2,904,000 $ (668,000) $ 2,236,000
Accounts receivable and other asset 448,000 4,210,000 4,658,000
Due from affiliate 220,000 -- 220,000
Real Estate:
Real estate 31,143,000 (15,750,000) 15,393,000
Accumulated depreciation (9,585,000) 5,008,000 (4,577,000)
Allowance for impairment of value (800,000) 800,000 --
------------- ------------- -------------
Real estate, net 20,758,000 (9,942,000) 10,816,000
------------- ------------- -------------
Total assets $ 24,330,000 $ (6,400,000 $ 17,930,000
============= ============= =============
Liabilities and Partners' Equity
Accounts payable and other liabilities $ 634,000 $ (338,000) $ 296,000
Due to unconsolidated joint venture 618,000 (618,000) --
Notes payable 15,578,000 (7,885,000) 7,693,000
------------- ------------- -------------
Total liabilities 16,830,000 (8,841,000) 7,989,000
------------- ------------- -------------
Commitments and Contingencies
Partners' Equity:
General partners (276,000) 49,000 (227,000)
Limited partners equity (109,027 assignee
units outstanding at September 30, 1995 7,776,000 2,392,000 10,168,000
------------- ------------- -------------
Total partners' equity 7,500,000 2,441,000 9,941,000
------------- ------------- -------------
Total liabilities and partners' $ 24,330,000 $ (6,400,000 $ 17,930,000
============= ============= =============
</TABLE>
F - 19
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED 1995, 1994 AND 1993
Pro Forma Consolidated Statement of Operations
For the Year Ended September 30, 1995
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
----------- ----------- ----------
<S> <C> <C> <C>
Revenues:
Room revenues $13,434,000 $(9,164,000 $ 4,270,000
Other operating revenues 827,000 (657,000) 170,000
Interest and other income 231,000 (29,000) 202,000
Gain on sale of property 8,642,000 (8,642,000) --
----------- ----------- -----------
Total revenues 23,134,000 (18,492,000) 4,642,000
----------- ----------- -----------
Expenses:
Room expenses 3,077,000 (2,099,000) 978,000
Other operating expenses 6,373,000 (4,718,000) 1,655,000
Depreciation 1,533,000 (1,088,000) 445,000
Interest 1,082,000 (535,000) 547,000
Equity in unconsolidated joint venture 279,000 (279,000) --
General and administrative 439,000 -- 439,000
Provision for loss on sale of
property 800,000 (800,000) --
----------- ----------- -----------
Total expenses 13,583,000 (9,519,000) 4,064,000
----------- ----------- -----------
Net income $ 9,551,000 $(8,973,000) $ 578,000
=========== =========== ===========
Net income per limited partnership
unit $ 68.29 $ 5.20
=========== =========== ===========
</TABLE>
F - 20
<PAGE>
SCHEDULE III
MRI BUSINESS PROPERTIES FUND, LTD. III
REAL ESTATE AND ACCUMULATED DEPRECIATION
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
COLUMN COLUMN COLUMN COLUMN
A B C D
Cost Capitalized
Initial Cost Subsequent
to Partnership to Acquisition
----------------------- --------------------------
Buildings
and Carrying
Description Encumbrances Land Improvements Improvements Costs (5)
----------- ------------ ---- ------------ ------------ ---------
(Amounts in thousands)
------------------------
<S> <C> <C> <C> <C> <C>
PARTNERSHIP:
Residence Inn - Orlando
Orlando, Florida (I) 7,885 1,927 12,373 1,750 $(300)
Residence Inn -
Sacramento
Sacramento, California 7,693 3,844 10,615 1,076 (143)
------- ------ ------- ------ ------
Total Partnership $15,578 $5,771 $22,988 $2,826 $(443)
======= ====== ======= ====== ======
<CAPTION>
COLUMN COLUMN COLUMN COLUMN COLUMN
A E F G H
Gross Amount at Which
Carried at Close of Period
------------------------------
Accumulated
Buildings Depreciation & Allowance
and for Impairment of
Improve- value Year of Date of
Description Land ments Total (2) (3)(4) Construction Acquisition
----------- ------ ------ -------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
PARTNERSHIP:
Residence Inn - Orlando
Orlando, Florida (I) 1,927 13,823 15,750 5,808 1984 9/87
Residence Inn -
Sacramento
Sacramento, California 3,845 11,548 15,393 4,577 1986 9/87
------ ------- ------- -------
Total Partnership $5,772 $25,371 $31,143 $10,385
====== ======= ======= =======
</TABLE>
(I) The Residence Inn - Orlando was sold on October 19, 1995
See accompanying notes.
F - 21
<PAGE>
MRI BUSINESS PROPERTIES FUND, LTD. III
REAL ESTATE AND ACCUMULATED DEPRECIATION
SEPTEMBER 30, 1995
NOTES:
(1) The aggregate cost for Federal income tax purposes is $31,180,000.
(2) Balance, October 1, 1992 $109,157,000
Improvements capitalized subsequent to acquisition 1,767,000
------------
Balance, September 30, 1993 110,924,000
Improvements capitalized subsequent to acquisition 1,308,000
Sale of Joint Venture Interest - Park Hyatt Hotel (37,456,000)
Sale of Joint Venture Interest - Radisson Park Terrace (26,424,000)
------------
Balance, September 30, 1994 48,352,000
Improvements capitalized subsequent to acquisition 994,000
Sale of Hotel property - Embassy Suites - Tempe (18,203,000)
------------
Balance, September 30, 1995 $ 31,143,000
============
(3) Balance, October 1, 1992 $ 27,796,000
Additions charged to expense 2,663,000
------------
Balance, September 30, 1993 30,459,000
Additions charged to expense 1,679,000
Sale of Joint Venture Interest - Park Hyatt Hotel (10,738,000)
Sale of Joint Venture Interest - Radisson Park Terrace (5,968,000)
------------
Balance, September 30, 1994 15,432,000
Additions charged to expense 1,533,000
Sale of Hotel property - Embassy Suites - Tempe (7,380,000)
Provision for impairment of value 800,000
------------
Balance, September 30, 1995 $ 10,385,000
============
(4) Depreciation is computed on lives ranging from 5 to 39 years.
(5) 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.
F - 22
<PAGE>
MRI BUSINESS PROPERTIES
COMBINED FUND NO. 1
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
SEPTEMBER 30, 1995, 1994, AND 1993
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
MRI Business Properties Combined Fund No. 1
We have audited the accompanying consolidated balance sheets of MRI Business
Properties Combined Fund No. 1 (a general partnership) and its joint venture as
of September 30, 1995 and 1994, and the related consolidated statements of
operations, partners' equity (deficiency) and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The consolidated statements of operations,
partners' equity (deficiency) and cash flows for the year ended September 30,
1993 of MRI Business Properties Combined Fund No. 1 were audited by other
auditors whose report dated December 17, 1993, expressed an unqualified opinion
on those statements.
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 the disclosures in the financial statements. An audit also
includes assessing the accounting principles used and the 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, the 1995 and 1994 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of MRI
Business Properties Combined Fund No. 1 and its joint venture as of September
30, 1995 and 1994, and the results of their operations and their cash flows for
the years then ended in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule on page 12 is presented for
the purpose of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
As discussed in Note 9 to the financial statements, the Partnership has sold
substantially all of its assets during the first quarter of fiscal 1996. The
Partnership is expected to be terminated in 1996 after receipt of receivables,
payment of outstanding liabilities and a final distribution to the partners.
Tauber & Balser, P.C.
Atlanta, Georgia
November 29, 1995
(except for Notes 9, as to which
the date is December 1, 1995)
<PAGE>
INDEPENDENT AUDITORS' REPORT
MRI Business Properties Combined Fund No. 1.
We have audited the accompanying consolidated statements of operations,
partners' equity (deficiency) and cash flows for the year ended September 30,
1993 of MRI Business Properties Combined Fund No. 1 (a limited partnership) (the
"Partnership") and its joint venture. These consolidated financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit 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 consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall consolidated financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the results of operations and cash flows of the Partnership
and its joint venture for the year ended September 30, 1993, in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
December 17, 1993
<PAGE>
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND 1994
ASSETS
1995 1994
----------- --------
Cash and cash equivalents $ 887,000 $ 561,000
Restricted cash 958,000 564,000
Accounts receivable, less allowance
for uncollectible accounts of
$40,000 and $39,000, respectively 1,155,000 1,132,000
Inventory 96,000 74,000
Prepaid expenses and other 31,000 27,000
Property and improvements 63,148,000 62,898,000
Accumulated depreciation (17,952,000) (16,335,000)
Allowance for impairment of value (11,962,000) (11,962,000)
----------- -----------
Net property and improvements 33,234,000 34,601,000
Organization costs, net of
accumulated amortization of
$207,000 and $157,000, respectively 39,000 90,000
----------- -----------
TOTAL ASSETS $36,400,000 $37,049,000
=========== ===========
LIABILITIES AND PARTNERS' DEFICIENCY
Accounts payable $ 350,000 $ 507,000
Accrued interest - 266,000
Accrued property taxes 121,000 151,000
Other liabilities 1,334,000 1,396,000
Management fees payable to
affiliate 1,578,000 964,000
Due to affiliates 1,491,000 1,131,000
Note payable 34,000,000 34,000,000
----------- -----------
Total liabilities 38,874,000 38,415,000
Joint venturer's interest (1,238,000) (689,000)
Partners' deficiency
MRI BPF, Ltd. II (618,000) (338,000)
MRI BPF, Ltd. III (618,000) (339,000)
----------- -----------
(1,236,000) (677,000)
----------- -----------
TOTAL LIABILITIES AND PARTNERS'
DEFICIENCY $36,400,000 $37,049,000
=========== ===========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -------
<S> <C> <C> <C>
Revenues:
Rooms $12,958,000 $12,037,000 $10,065,000
Food and beverage 6,955,000 6,602,000 6,687,000
Other 810,000 741,000 588,000
Interest 28,000 22,000 17,000
----------- ----------- -----------
Total revenues 20,751,000 19,402,000 17,357,000
Expenses (including $2,475,000,
$2,374,000 and $2,001,000 paid or
payable to an affiliate of the
joint venture partner in 1995,
1994, and 1993):
Rooms 3,397,000 3,158,000 2,705,000
Food and beverage 5,504,000 5,268,000 5,428,000
Other operating 7,659,000 7,445,000 6,882,000
Depreciation and amortization 1,863,000 1,709,000 1,644,000
Interest 3,436,000 3,187,000 3,248,000
General and administrative - 17,000
----------- ----------- -----------
Total expenses 21,859,000 20,767,000 19,924,000
----------- ----------- -----------
LOSS BEFORE JOINT VENTURER'S INTEREST
IN OPERATIONS (1,108,000) (1,365,000) (2,567,000)
JOINT VENTURER'S INTEREST IN
OPERATIONS 549,000 681,000 135,000
----------- ----------- -----------
NET LOSS $ (559,000) $ (684,000) $(2,432,000)
=========== =========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
MRI Business MRI Business
Properties Fund, Properties Fund,
Ltd II Ltd III Total
<S> <C> <C> <C>
Balance, October 1, 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)
Capital contributions 150,000 150,000 300,000
Net loss (342,000) (342,000) (684,000)
------------- ------------ ------------
Balance, September 30, 1994 (338,000) (339,000) (677,000)
Net loss (280,000) (279,000) (559,000)
------------- ------------ ------------
Balance, September 30, 1995 $ (618,000) $ (618,000) $(1,236,000)
============= ============= ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (559,000) $ (684,000) $(2,432,000)
Adjustments to reconcile net loss
to net cash provided (used) by operating
activities:
Depreciation and amortization 1,863,000 1,709,000 1,704,000
Provision for doubtful receivables 1,000 - 2,000
Joint Venturer's interest in operations (549,000) (681,000) (135,000)
Net changes in:
Accounts receivable (23,000) - (118,000)
Inventory (22,000) 18,000 11,000
Prepaid expenses and other (4,000) (1,000) 27,000
Accounts payable, accrued expenses
and other liabilities 99,000 551,000 60,000
----------- ----------- -----------
Net cash provided (used) by
operating activities 806,000 912,000 (881,000)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (446,000) (1,438,000) (2,372,000)
(Deposit to) release from restricted
cash, net (394,000) 175,000 489,000
----------- ----------- -----------
Net cash used by investing activities (840,000) (1,263,000) (1,883,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from Joint Venturer - 300,000 -
Capital contributions - 300,000 -
Increase in due to affiliates 360,000 10,000 1,121,000
Joint venture partner contributions - - 1,700,000
----------- ----------- -----------
Net cash provided by financing
activities 360,000 610,000 2,821,000
----------- ----------- -----------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 326,000 259,000 57,000
CASH AND CASH EQUIVALENTS:
BEGINNING OF YEAR $ 561,000 $ 302,000 $ 245,000
----------- ----------- -----------
END OF YEAR $ 887,000 $ 561,000 $ 302,000
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 3,702,000 $ 3,188,000 $ 3,188,000
=========== =========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
MRI BUSINESS PROPERTIES COMBINED FUND NO.1
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF THE BUSINESS
MRI Business Properties Combined Fund No. 1 ("Partnership") is a general
partnership organized February 18, 1986 under the laws of the State of
California to obtain a 50 percent interest in a Joint Venture which acquired
the Ravinia Hotel. The general partners of the Partnership are MRI Business
Properties Fund, Ltd. II ("MRI BPF, Ltd. II") and MRI Business Properties
Fund, Ltd. III ("MRI BPF, Ltd. III") which are California limited
partnerships affiliated through their managing general partners.
The Partnership is a 50 percent owner in a Joint Venture with Holiday Inn
Ravinia, Inc., a wholly-owned subsidiary of Holiday Inn Worldwide, Inc. This
Joint Venture owns a 495-room hotel operated as the Holiday Inn Crowne Plaza
Ravinia in Atlanta, Georgia (Note 9). Losses of the Joint Venture are allocated
to its owners pursuant to the venture agreement based on ownership.
CONSOLIDATION
The consolidated financial statements include the Partnership and a Joint
Venture in which the Partnership has a 50 percent interest. The Joint Venture's
fiscal year ends on the Thursday prior to September 30 of each year. The year
ended September 29, 1994 contained 53 weeks. All significant intercompany
transactions and balances have been eliminated.
CASH AND CASH EQUIVALENTS
The Partnership considers all highly liquid investments with a maturity of
three months or less when purchased to be "cash equivalents".
INVENTORIES
Inventories consist of food, beverage, and miscellaneous supplies.
Inventories are recorded under the first-in,
<PAGE>
MRI BUSINESS PROPERTIES COMBINED FUND NO.1
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
first-out method and are generally stated at the lower of cost or market.
ORGANIZATION COSTS
Organization costs are deferred and amortized over five years using the
straight-line method.
PROPERTY AND IMPROVEMENTS AND DEPRECIATION
Property and improvements are stated at cost. A provision for impairment of
value was recorded for the property since the property's value had declined
based on management's expectations with respect to projected future operational
cash flows and prevailing economic conditions. In the absence of the above
circumstances, property and improvements are stated at cost. Acquisition fees
are capitalized as a cost of property and improvements.
Depreciation is computed by the straight-line method over estimated useful
lives of 27-40 years for building and improvements and 5-6 years for
furnishings.
INCOME TAXES
MRI Business Properties Combined Fund No. 1 is not subject to income taxes
because it is a Partnership. Instead, each partner is taxed on its share of the
Partnership's taxable income, whether or not distributed, and is entitled to
deduct on its own income tax return its share of the Partnership net losses to
the extent of its tax basis in the Partnership.
RECLASSIFICATION OF FINANCIAL STATEMENT PRESENTATION
Certain reclassifications have been made to the 1993 financial statements
to conform with the 1995 and 1994 financial statement presentation. Such
reclassifications have had no effect on net loss as previously reported.
<PAGE>
MRI BUSINESS PROPERTIES COMBINED FUND NO.1
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
NOTE 2 - RESTRICTED CASH
Restricted cash represents monies maintained in an account in accordance
with the management agreement on the Holiday Inn Crowne Plaza Ravinia in order
to meet future capital requirements. Pursuant to the management agreement,
monthly funding is required by the property in the amount of 5 percent of
monthly Adjusted Gross Revenues.
NOTE 3 - ACCOUNTS RECEIVABLE
Accounts receivable consists of trade receivables due the hotel from
guests, corporations, associations and governments.
NOTE 4 - PROPERTY AND IMPROVEMENTS
Hotel property and improvements are summarized as follows:
1995 1994
---- ----
Land $ 9,108,000 $ 9,108,000
Building and improvements 45,356,000 45,179,000
Furnishings 8,684,000 8,611,000
----------- -----------
63,148,000 62,898,000
Accumulated depreciation (17,952,000) (16,335,000)
Allowance for impairment
of value (see Note 5) (11,962,000) (11,962,000)
----------- -----------
Net property and improvements $33,234,000 $34,601,000
============ ===========
Differences exist between financial statement and federal income tax bases
as a result of accelerated depreciation methods. The depreciable property basis
used for tax purposes as of September 30, 1995 and 1994 is $38,298,000 and
$37,617,000 along with accumulated depreciation of
<PAGE>
MRI BUSINESS PROPERTIES COMBINED FUND NO.1
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
NOTE 4 - PROPERTY AND IMPROVEMENTS (CONTINUED)
$9,910,000 and $7,546,000, respectively. Depreciation expense for tax
purposes as of September 30, 1995, 1994, and 1993 amounts to $3,638,000,
$3,617,000, and $3,317,000, respectively.
NOTE 5 - PROVISION FOR IMPAIRMENT OF VALUE
The impairment of value (Note 4) resulted in the reduction of the book
basis of the hotel in the amounts of $4,311,000 and $7,651,000 in 1992 and 1991,
respectively. For these years, the Joint Venture 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 hotel was other
than temporary and that recovery of its carrying value was not likely.
NOTE 6 - DUE TO AFFILIATES
Of the $1,491,000 due to affiliates, $370,000 is due to an affiliate of the
Partnership while the remainder represents an advance from Holiday Inn
Worldwide, Inc. issued in 1993. These advances are unsecured and non-interest
bearing.
NOTE 7 - NOTE PAYABLE
Property and improvements are pledged as collateral for the note payable of
$34,000,000 which bears interest at 12.29% per annum. The note requires monthly
payments of interest only with a balloon payment in January 1, 1996 of all
outstanding principal and unpaid interest. The note is to be satisfied upon the
sale of the collateralized property (Note 9).
<PAGE>
MRI BUSINESS PROPERTIES COMBINED FUND NO.1
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
NOTE 8 - RELATED PARTY TRANSACTIONS
The Partnership has an agreement with Holiday Inn Worldwide, Inc. to
provide for the management and operation of the Joint Venture property. Fees
paid or payable pursuant to the agreement is based on percentages of gross
revenues or gross operating profits from operations of the property. The
percentages used for these fees, per the related agreement, are 4% of Adjusted
Gross Revenues and 10% of Gross Operating Profit, as defined in the contract.
1995 1994 1993
----------- ----------- --------
Adjusted Gross
Revenues $20,508,000 $19,375,000 $17,258,000
Basic Management
Fee 820,000 775,000 690,000
Gross Operating
Profit $ 5,322,000 $ 4,705,000 $ 3,242,000
Incentive
Management Fee 532,000 471,000 324,000
Pursuant to the management agreement, incentive management fees are accrued
at year-end, if unpaid. Accrued management fees amounted to $1,578,000 and
$964,000 for the fiscal years ended 1995 and 1994, respectively.
In addition, Holiday Inn Worldwide, Inc. provides certain services
to the Partnership. Under the agreement, these services are to be provided at
cost. The services provided and the related expenses to the Partnership were,
exclusive of management fees, for the years ended September 30:
1995 1994 1993
---------- ---------- ---------
Administrative services $ 159,000 $ 149,000 $139,000
Advertising services 371,000 360,000 274,000
Reservation services 130,000 121,000 100,000
Insurance (Property,
Liability, and
Workmen's Compensation) 463,000 498,000 474,000
---------- ---------- --------
$1,123,000 $1,128,000 $987,000
========== ========== ========
<PAGE>
MRI BUSINESS PROPERTIES COMBINED FUND NO.1
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
NOTE 8 - RELATED PARTY TRANSACTIONS (CONTINUED)
In addition, Holiday Inn Worldwide, Inc. provides payroll and asset
acquisition services for the Partnership which are included in the basic
management fee. The expense incurred with Holiday Inn Worldwide, Inc. for
these services for 1995 and 1994 were $390,000 and $492,000, respectively.
NOTE 9 - SUBSEQUENT EVENT
On December 1, 1995 the Partnership sold all of its assets and the
purchaser assumed all operating liabilities in accordance with an agreement
entered into on July 7, 1995, except for $353,000 of cash, $22,000 of other
assets, and $373,000 of other liabilities. Proceeds from the sale were used to
satisfy the outstanding principal and interest on the mortgage and the remainder
is to be distributed to the partners.
<PAGE>
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
REAL ESTATE AND ACCUMULATED DEPRECIATION
SEPTEMBER 30, 1995
SCHEDULE III
<TABLE>
<CAPTION>
COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN COLUMN
A B C D E F G H
Cost Capitalized
Initial Cost Subsequent Gross Amount at Which
to Partnership to Acquisition Carried at Close of Period(1)
-------------- ---------------- -----------------------------
Provision
for Impair-
ment and Year Date
Buildings Buildings Accumulated of Con- of
and Im- Improve- Carrying and Im- Depreciation struc- acqui-
Description Encumbrances Land provements ments Costs Land provements Total(2) (3)(4) tion sition
- ----------- ------------ ---- ---------- ------- --------- ---- ---------- -------- ------------ ------ ------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JOINT VENTURE:
Holiday Inn Crowne
Plaza (5) Atlanta,
Georgia $34,000 $9,108 $47,125 $6,915 - $9,108 $54,040 $63,148 $29,914 1986 3/13/86
====== ====== ======= ====== === ====== ======= ======= =======
</TABLE>
NOTES:
(1) The aggregate cost for Federal income tax purposes is $63,426,000.
(2) Balance, October 1, 1992 $69,840,000
Improvements capitalized subsequent to acquisition 2,372,000
----------
Balance, September 30, 1993 72,212,000
Improvements capitalized subsequent to acquisition 1,437,000
Write off of fully depreciated assets (10,751,000)
----------
Balance, September 30, 1994 $62,898,000
Improvements capitalized subsequent to acquisition 446,000
Write off of fully depreciated assets (196,000)
----------
Balance, September 30, 1995 $63,148,000
==========
(3) Balance, October 1, 1992 $35,840,000
Additions charged to expense 1,594,000
----------
Balance, September 30, 1993 37,434,000
Additions charged to expense 1,614,000
Write off of fully depreciated assets (10,751,000)
----------
Balance, September 30, 1994 28,297,000
Additions charged to expense 1,813,000
Write off of fully depreciated assets (196,000)
----------
Balance, September 30, 1995 $29,914,000
==========
(4) Depreciation is computed on lives ranging from five to forty years.
(5) Formerly Hyatt Regency Ravinia Hotel.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Effective April 22, 1994, Registrant dismissed its prior Independent
Auditors, Deloitte & Touche ("Deloitte") and retained as its new Independent
Auditors, Imowitz Koenig & Co., LLP. Deloitte's Independent Auditors' Report on
Registrant's financial statements for fiscal years ended September 30, 1993 and
1992 did not contain an adverse opinion or a disclaimer of opinion, and were not
qualified or modified as to uncertainty, audit scope or accounting principles.
The decision to change Independent Auditors was approved by the Managing General
Partner's Directors. During fiscal years ended 1992, 1993 and through April 22,
1994 there were no disagreements between Registrant and Deloitte on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope of procedure which disagreements if not resolved to the
satisfaction of Deloitte, would have caused it to make reference to the subject
matter of the disagreements in connection with its reports.
Effective April 22, 1994, Registrant engaged Imowitz Koenig & Co., LLP as
its Independent Auditors. During the last two fiscal years and through April 22,
1994, Registrant did not consult Imowitz Koenig & Co., LLP regarding any of the
matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.
18
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
Neither Registrant, Montgomery Realty Company-85 ("MRC"), the general
partner of Registrant, nor FRI, the general partner of MRC, has any officers or
directors. NPI Equity Investments II, Inc. ("NPI Equity II"), the Managing
General Partner of FRI, manages and controls substantially all of Registrant's
affairs and has general responsibility and ultimate authority in all matters
affecting its business. NPI Equity is a wholly owned subsidiary of National
Property Investors, Inc. ("NPI"). NPI Equity II and its affiliates also control,
or act as, the managing general partner of 28 other public limited partnerships.
All of these partnerships are engaged in the acquisition, leasing and
disposition of real estate. As of December 1, 1995, the names, ages and
positions held by executive officers and directors of NPI Equity II are as
follows:
Has served as a Director
and/or Officer of NPI
Name and Age Positions Held Equity II since
- ------------ -------------- ------------------------
Michael L. Ashner (43) President and Director 12/93
Martin Lifton (63) Chairman and Director 12/93
Arthur N. Queler (49) Secretary/Treasurer 12/93
and Director
Steven Lifton (34) Vice President and 12/93
Director (Director 10/94)
W. Edward Scheetz (30) Director 10/94
Ricardo Koenigsberger (29) Director 10/94
Lee Neibart (45) Director 10/94
Michael L. Ashner has been President and Chairman and Director of NPI and
a Director of NPI Property Management Corporation ("NPI Management") since their
formation in 1984. As the President and a Director of NPI, Mr. Ashner has been
involved with the sponsoring of approximately 35 limited partnerships. Mr.
Ashner is also the President and Director of NPI Equity Investments, Inc. ("NPI
Equity") and NPI Equity II, each a wholly owned subsidiary of NPI. NPI Equity
and NPI Equity II control, or are, the managing general partners of 31 public
partnerships. In addition, since 1981 Mr. Ashner has been President of Exeter
Capital Corporation, a firm which has organized and administered real estate
limited partnerships. Prior to forming NPI in 1984, Mr. Ashner served as a
general partner of seven real estate limited partnerships that were formed by
Exeter Capital Corporation to own and operate income producing real estate,
including apartments, commercial office space and retail space. 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.
19
<PAGE>
Martin Lifton is the Chairman of NPI and a Director of NPI Equity, NPI
Equity II and NPI Management. In addition, Mr. Lifton is Chairman and President
of The Lifton Company, a real estate investment firm. Since entering the real
estate business over 35 years ago, Mr. Lifton has engaged in a wide range of
real estate activities, including the purchase of apartment complexes and other
properties in the New York City metropolitan area and in the southeastern United
States. Mr. Lifton's firm currently owns several apartment buildings in New York
City and Mr. Lifton is a partner in four industrial warehouse buildings in
California and an office building in Baltimore. In partnership with NPI, Mr.
Lifton has purchased interests in five apartment complexes since 1988. Mr.
Lifton was also one of the founders of The Bank of Great Neck located in Great
Neck, New York, of which he currently is Chairman. Mr. Lifton received his B.S.
degree from the New York University.
Arthur N. Queler is a co-founder of NPI of which he has been Executive
Vice President, Treasurer, Secretary and Director since 1984. Mr. Queler
is also the Vice President, Secretary, Treasurer and Director of NPI
Management, NPI Equity and NPI Equity II. 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. Mr. Queler is a certified public
accountant. He received his B.A. and M.B.A. degrees from the City College of
New York.
Steven Lifton is a Vice President of NPI having been appointed to
this position in January 1991 and has been a director since 1992. In
addition, he is a Senior Vice President of The Lifton Company. with The
Lifton Company he has had extensive involvement in the budgeting, refinancing,
rehabilitation and overall operation of several thousand apartment units.
Mr. Lifton has also supervised the operation of other companies affiliated
with The Lifton Company which are engaged in the business of real estate
brokerage, second mortgage financing, land development and other real estate
related activities. Mr. Lifton received his B.B.A. degree from The George
Washington University Business School. He is a Director of The Bank of Great
Neck.
W. Edward Scheetz has been a Director of NPI and NPI Equity since
October 1994. Since May 1993, Mr. Scheetz has been a limited partner of
Apollo Real Estate Advisors, L.P. ("Apollo"), the managing general partner of
Apollo Real Estate Investment Fund, L.P., a private investment fund. Mr.
Scheetz has also served as a Director of Roland International, Inc., a real
estate investment company since January 1994, and as a Director of Capital
Apartment Properties, Inc., a multi-family residential real estate investment
trust, since January 1994. From 1989 to May 1993, Mr. Scheetz was a principal
of Trammel Crow Ventures, a national real estate investment firm. Mr.
Scheetz' received his A.B. in Economics, Magna Cum Laude, from Princeton
University.
Ricardo Koenigsberger has been a Director of NPI and NPI Equity since
October 1994. Since October 1990, Mr. Koenigsberger has been an associate of
Apollo and of Lion Advisors, L.P., which acts as financial advisor to and
representative for certain institutional investors with respect to securities
investments. For more than one year prior thereto, Mr. Koenigsberger was
an associate with Drexel Burnham Lambert Incorporated. Mr.
Koenigsberger received his B.S. degree from The University of
Pennsylvania-Wharton School.
20
<PAGE>
Lee Neibart has been a Director of NPI and NPI Equity since October
1994. Mr. Neibart has also been an associate of Apollo since December 1993.
From 1986 to 1993, Mr. Neibart also served as Executive Vice President of the
Robert Martin Company, a private real estate development and management firm
based in Westchester County, New York, and from 1982 to 1985, Mr. Neibart
served as President of the New York Chapter of the National Association of
Industrial Office Parks, a professional real estate organization. Mr.
Neibart holds a B.A. from the University of Wisconsin and an M.B.A. from New
York University.
There are no family relationships between any of the directors or the
executive officers of NPI Equity II, except that Martin Lifton is the father of
Steven Lifton. Each director and officer of NPI Equity II will hold office until
the next annual meeting of stockholders and directors of NPI Equity II and until
his successor is elected and qualified.
Messrs. Ashner, Lifton and Queler currently are the beneficial owners
of 66 2/3% of the outstanding stock of NPI.
Registrant believes, based on written representations received by it, that
for the fiscal year ended September 30, 1995, all filing requirements under
Section 16(a) of the Securities Exchange Act of 1934 applicable to beneficial
owners of Registrant's Securities, Registrant's general partners and officers
and directors of such general partners, were complied with.
Item 11. Executive Compensation.
The Registrant is not required to and did not pay any compensation to
the officers or directors of NPI Equity II. NPI Equity II does not presently
pay any compensation to any of its officers or directors. (See Item 13,
"Certain Relationships and Related Transactions")
Item 12. Security Ownership of Certain Beneficial Owners and Management.
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 Registrant in accordance with the terms of the
Partnership Agreement.
21
<PAGE>
The following table sets forth certain information regarding limited
partnership units of Registrant owned by each person who is known by Registrant
to own beneficially or exercise voting or dispositive control over more than 5%
of Registrant's limited partnership units, by each of NPI Equity II's directors
and by all directors and executive officers of NPI Equity II as a group as of
December 1, 1995.
Name and address of Amount and nature of
Beneficial Owner Beneficial Owner % of Class
- ------------------- -------------------- ----------
DeForest Ventures I L.P.(1) 27,527(2) 25.25
Michael Ashner (3) 47.33(4) *
Martin Lifton (3) 47.33(4) *
Arthur Queler (1) 47.33(4) *
Steven Lifton (3) 16.67(4) *
Ricardo Koenigsberger (5) - -
Lee Neibart (5) - -
W. Edward Scheetz (5) - -
All directors and executive
officers as a group (eight persons) 158.67(4) *
- ----------------
* less than 1%
(1) Each of such persons may be reached at 5665 Northside Drive, N.W., Atlanta,
Georgia 30328.
(2) Based upon information supplied to Registrant by DeForest Ventures I L.P.
on December 1, 1995.
(3) Each of such persons may be reached at 100 Jericho Quadrangle, Jericho,
New York 11753.
(4) Represents such persons proportionate interest in units held by QAL
Associates II and QALA Associates III, each a general partnership in
which, among others, Messrs. Ashner, Martin Lifton, Queler and Steven
Lifton are partners.
(5) Each of such persons may be reached at 1301 Avenue of the Americas, New
York, New York 10038.
There are no arrangements known to Registrant, the operation of which may,
at a subsequent date, result in a change in control of Registrant, other than as
follows:
(a) In connection with the admission of NPI Equity II as the managing
partner of FRI, PRA reserved the right to remove NPI Equity II from its position
as managing partner of FRI if certain events occur, such as an event of
bankruptcy or the failure to maintain an adequate net worth. In such event, PRA
may, but is not required to, assume the position of managing partner of FRI.
(b) In connection with the loan made by PaineWebber Real Estate
Securities, Inc., formerly known as Kidder Peabody Mortgage Capital Corporation
("PaineWebber"), to DeForest Ventures I L.P. ("DeForest I") and DeForest
Ventures II L.P., ("DeForest II") in connection with the consummation of the
tender offers made for units in Registrant and 18 affiliated limited
partnerships, NPI pledged, as collateral for the loan, all of the issued and
22
<PAGE>
outstanding capital stock of NPI Equity II. Accordingly, if DeForest I or
DeForest II were unable to satisfy its obligations under the loan and
PaineWebber were to foreclose on its collateral, PaineWebber would become the
sole shareholder of NPI Equity II.
(c) See Item 1, "Business - Material Events\Change in Control" for
information relating to the sale by the stockholders of NPI of all of the issued
and outstanding shares of stock of NPI to an affiliate of Insignia.
Item 13. Certain Relationships and Related Transactions.
The Partnership Agreement provides that the general partner will be
reimbursed for actual expenses incurred in providing services required by
Registrant. 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. ("MRS"), which performed partnership management and other
services for Registrant. On January 1, 1993, Metric Management, Inc.,
predecessor to MRS, a company which is not affiliated with the general partner,
commenced providing certain property and portfolio management services to
Registrant 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, Registrant's general partner assumed responsibility for cash management
of Registrant as of December 23, 1993 and for day to day management of
Registrant's affairs, including portfolio management, accounting, and investor
relations services as of April 1, 1994. Related party expenses for the years
ended September 30, 1995, 1994 and 1993 were as follows:
1995 1994 1993
---------- ---------- -------
Reimbursement of expenses:
Partnership accounting and
investor services $ 145,000 $ 102,000 $ 52,000
Professional services - 12,000 11,000
--------- ---------- ---------
Total $ 145,000 $ 114,000 $ 63,000
========= ========== =========
In accordance with the Partnership Agreement, the general partner is
entitled to receive cash distributions from operations 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 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.
The general partner is also entitled to its continuing interest of two
percent of net income and net loss, taxable income and taxable loss and
distribution of cash available for distribution provided, however, that 20% of
23
<PAGE>
realized gains from the sale or other disposition of properties is allocated to
the general partners until such time as the general partners do not have a
deficit capital account.
On July 26, 1995 the general partner received a distribution of $449,000,
representing the general partners two percent interest in cash available for
distribution which was primarily from the proceeds received on the sale of
Registrant's Embassy Suites Hotel property. There were no cash distributions to
the general partner for the years ended September 30, 1994 and 1993.
Apart from the reimbursements paid to the general partner and affiliates
as set forth above, Registrant has or had agreements with affiliates of its
joint venture partners, otherwise non-affiliated third parties, 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 $569,000 and $1,164,000 in
1994 and 1993, respectively. No fees were paid in 1995 as the hotels on which
these fees were paid were sold in 1994.
See Item 1. "Business-Employees/Management" for information relating to
the acquisition by NPI Equity II of management and control of Registrant.
24
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K.
(a)(1)(2) Financial Statements and Financial Statement Schedules:
See Item 8 of this Form 10-K for Consolidated Financial
Statements of Registrant, 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.)
(a) (3) Exhibits:
2. NPI, Inc. Stock Purchase Agreement dated as of August 17, 1995
incorporated by reference to Exhibit 2 to Registrant's Current
Report on Form 8-K dated August 17, 1995.
3,4. Partnership Agreement incorporated by reference to Registrant's
Prospectus filed pursuant to Rule 424 (b) of the Securities Act
of 1933.
16. Letter dated April 27, 1994 from Registrant's Former
Independent Auditors incorporated by reference to Registrant's
Current Report on Form 8-K dated April 22, 1994.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by Registrant during the last
quarter of Registrant's fiscal year except a report dated August 17,
1995 relating to the sale of all of the issued and outstanding shares
of stock of National Property Investors, Inc. (Item 1, Change in
Control).
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized on the 27th day of
December, 1995.
MRI BUSINESS PROPERTIES FUND, LTD. III
By: Montgomery Realty Company-85,
its Managing General Partner
By: Fox Realty Investors,
its Managing General partner
By: NPI Equity Investments II, Inc.,
its Managing Partner
By: Michael L. Ashner
-----------------
Michael L. Ashner
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of Registrant in
their capacities as directors and/or officers of NPI Equity Investments II,
Inc., on the dates indicated below.
Signature/Name Title Date
-------------- ----- -----
/s/Michael L. Ashner
- -----------------------
Michael L. Ashner President and Director
(Principal Executive
Officer) December 27, 1995
/s/Martin Lifton
- -----------------------
Martin Lifton Chairman and Director December 27, 1995
/s/Arthur N. Queler
- -----------------------
Arthur N. Queler Secretary/ Treasurer and
Director (Principal
Financial Officer) December 27, 1995
/s/Steven J. Lifton
- -----------------------
Steven J. Lifton Vice President and Director December 27, 1995
26
<PAGE>
Exhibit Index
Exhibit Page
- ------- ----
2. NPI, Inc. Stock Purchase Agreement dated as of (a)
August 17, 1995
3,4. Partnership Agreement (b)
16. Letter dated April 27, 1994 from Registrant's (c)
Former Independent Auditors
- -----------------------
(a) Incorporated by reference to Exhibit 2 to Registrant's Current Report on
Form 8-K dated August 17, 1995.
(b) Incorporated by referenced to Registrant's Prospectus filed pursuant to
Rule 424 (b) of the Securities Act of 1933.
(c) Incorporated by reference to Registrant's Current Report on Form 8-K
dated April 22, 1994.
27
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from MRI Business
Properties Fund, Ltd. III and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<CASH> 2,904,000
<SECURITIES> 0
<RECEIVABLES> 448,000 <F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 31,143,000
<DEPRECIATION> (10,385,000) <F2>
<TOTAL-ASSETS> 24,330,000
<CURRENT-LIABILITIES> 0
<BONDS> 15,578,000
0
0
<COMMON> 0
<OTHER-SE> 7,500,000
<TOTAL-LIABILITY-AND-EQUITY> 24,330,000
<SALES> 0
<TOTAL-REVENUES> 22,903,000 <F3>
<CGS> 0
<TOTAL-COSTS> 12,062,000 <F4>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,082,000
<INCOME-PRETAX> 9,551,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,551,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,551,000
<EPS-PRIMARY> 68.29
<EPS-DILUTED> 68.29
<FN>
<F1> Receivables include other assets of $148,000.
<F2> Depreciation includes an allowance for impairment of value of $800,000.
<F3> Total revenues include a gain on sale of property of $8,642,000.
<F4> Total costs include a provision for loss on sale of property of $800,000
</FN>
</TABLE>
