SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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., Ste. 370, Atlanta, Georgia 30328
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (404) 916-9090
N/A
Former name, former address and fiscal year, if changed since last report.
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No_____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.
Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date __________________.
1 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets
June 30, September 30,
1995 1994
(Unaudited) (Audited)
Assets
Cash and cash equivalents $ 6,465,000 $ 4,045,000
Accounts receivable and other assets 728,000 791,000
Real Estate:
Real estate 49,146,000 48,352,000
Accumulated depreciation (16,605,000) (15,432,000)
-------------- --------------
Real estate, net 32,541,000 32,920,000
-------------- --------------
Total assets $ 39,734,000 $ 37,756,000
============== ==============
Liabilities and Partners' Equity
Accounts payable and other liabilities $ 1,129,000 $ 1,240,000
Due to unconsolidated joint venture 262,000 339,000
Notes payable 15,581,000 15,791,000
-------------- --------------
Total liabilities 16,972,000 17,370,000
-------------- --------------
Commitments and Contingencies
Partners' Equity:
General partners (deficit) (1,885,000) (1,933,000)
Limited partners equity (109,027 assignee
units outstanding at June 30, 1995 and
September 30, 1994) 24,647,000 22,319,000
-------------- --------------
Total partners' equity 22,762,000 20,386,000
-------------- --------------
Total liabilities and partners' equity $ 39,734,000 $ 37,756,000
============== ==============
See notes to consolidated financial statements.
2 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
Consolidated Statements of Operations (Unaudited)
For the Nine Months Ended
June 30, 1995 June 30, 1994
Revenues:
Room revenue $ 11,060,000 $ 16,350,000
Food and beverage revenue -- 2,593,000
Other operating revenues 703,000 1,174,000
Interest income 165,000 197,000
Gain on sale of joint venture interests -- 1,467,000
------------- -------------
Total revenues 11,928,000 21,781,000
------------- -------------
Expenses:
Room expenses 2,503,000 3,926,000
Food and beverage expenses -- 2,331,000
Other operating expenses 4,672,000 8,212,000
Depreciation 1,173,000 1,254,000
Interest 762,000 1,299,000
Loss from unconsolidated joint venture's
operations 93,000 262,000
General and administrative 349,000 364,000
------------- -------------
Total expenses 9,552,000 17,648,000
------------- -------------
Income before minority interest in joint
ventures' operations 2,376,000 4,133,000
Minority interest in joint ventures' operations -- (404,000)
------------- -------------
Net income $ 2,376,000 $ 3,729,000
============= =============
Net income per limited partnership assignee unit $ 21 $ 34
============= =============
See notes to consolidated financial statements.
3 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
Consolidated Statements of Operations (Unaudited)
For the Three Months Ended
June 30, 1995 June 30, 1994
Revenues:
Room revenue $3,601,000 $3,405,000
Other operating revenues 229,000 219,000
Interest income 70,000 67,000
Equity in unconsolidated joint venture's
operations 14,000 --
----------- -----------
Total revenues 3,914,000 3,691,000
----------- -----------
Expenses:
Room expenses 865,000 828,000
Other operating expenses 1,491,000 1,559,000
Depreciation and amortization 391,000 376,000
Interest 253,000 357,000
Loss from unconsolidated joint venture's
operations -- 110,000
General and administrative 115,000 107,000
----------- -----------
Total expenses 3,115,000 3,337,000
----------- -----------
Net income $ 799,000 $ 354,000
=========== ===========
Net income per limited partnership assignee unit $ 7 $ 3
=========== ===========
See notes to consolidated financial statements.
4 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
Consolidated Statement of Partners' Equity (Deficit) (Unaudited)
For the Nine Months Ended June 30, 1995
General Limited Total
Partners' Partners' Partners'
(Deficit) Equity Equity
Balance - October 1, 1994 $(1,933,000) $22,319,000 $20,386,000
Net income 48,000 2,328,000 2,376,000
------------ ------------ ------------
Balance - June 30, 1995 $(1,885,000) $24,647,000 $22,762,000
============ ============ ============
See notes to consolidated financial statements.
5 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended
June 30, 1995 June 30, 1994
Operating Activities:
Net income $ 2,376,000 $ 3,729,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,194,000 1,322,000
Minority interest in joint ventures'
operations -- 404,000
Gain on sale of joint venture interests -- (1,467,000)
Equity in unconsolidated joint venture's
operations 93,000 262,000
Changes in operating assets and liabilities:
Accounts receivable and other assets 42,000 156,000
Accounts payable, and other liabilities (111,000) (1,100,000)
------------ ------------
Net cash provided by operating activities 3,594,000 3,306,000
------------ ------------
Investing Activities:
Net proceeds from sale of joint venture
interests -- 2,000
Properties and improvements additions (794,000) (1,055,000)
Unconsolidated joint venture contributions (170,000) (150,000)
Proceeds from cash investments -- 5,842,000
Purchase of cash investments -- (2,375,000)
------------ ------------
Net cash (used in) provided by investing
activities (964,000) 2,264,000
------------ ------------
Financing Activities:
Satisfaction of note payable -- (7,000,000)
Notes payable principal payments (210,000) (187,000)
------------ ------------
Cash (used in) financing activities (210,000) (7,187,000)
------------ ------------
Increase (Decrease) in Cash and Cash
Equivalents 2,420,000 (1,617,000)
Cash and Cash Equivalents at Beginning
of Period 4,045,000 5,088,000
------------ ------------
Cash and Cash Equivalents at End of Period $ 6,465,000 $ 3,471,000
============ ============
Supplemental Disclosure of Cash Flow
Information:
Interest paid in cash during the period $ 741,000 $ 1,224,000
============ ============
Supplemental Disclosure of Non-Cash Investing
and Financing Activities:
Gain on sale of joint venture interests in
1994 - Note 4
See notes to consolidated financial statements.
6 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying financial statements, footnotes and discussions should be
read in conjunction with the financial statements, related footnotes and
discussions contained in the Partnership's Annual Report for the year ended
September 30, 1994. The Partnership sold its remaining joint venture
interests in March 1994. The statement of operations for the nine months
ended June 30, 1994 has consolidated joint ventures in which the Partnership
had a controlling interest. Certain accounts have been reclassified in
order to conform to the current period.
The financial information contained herein is unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such
financial information have been included. All adjustments are of a normal
recurring nature, except as discussed in Note 4.
At June 30, 1995, the Partnership had approximately $4,818,000 invested in
overnight repurchase agreements earning approximately 6% per annum.
The results of operations for the nine and three months ended June 30, 1995
and 1994 are not necessarily indicative of the results to be expected for
the full year.
2. Transactions with Related Parties
An affiliate of NPI, Inc. received reimbursements of administrative expenses
amounting to $120,000 and $58,000 during the nine months ended June 30, 1995
and 1994, respectively. These reimbursements are primarily included in
general and administrative expenses.
An affiliate of NPI, Inc. was paid fees of $26,000 and $10,000 relating to
successful real estate tax appeals on the Partnership's Embassy Suites -
Tempe and Residence Inn - Sacramento Hotels, respectively, during the nine
months ended June 30, 1995. The tax appeal fees are included in operating
expenses.
3. Notes Payable
On June 2, 1994, the Partnership prepaid, in full satisfaction, the note
encumbering its Embassy Suites property in the amount of $7,000,000. The
note had been accruing interest at prime plus 1% and was due to mature in
December 1996.
The Partnership's unconsolidated joint venture's (the Holiday Inn Crowne
Plaza) mortgage payable in the amount of $34,000,000, was due to mature in
July 1995. On June 28, 1995, the Partnership obtained a six month extension
of the due date to December 29, 1995. The loan requires monthly payments of
interest only at 12.29% commencing August 1, 1995.
7 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Gain on Sale of Joint Venture Interests
On March 7, 1994, the Partnership sold its 60 percent interest in the Park
Hyatt Water Tower Associates Joint Venture, which owned the Park Hyatt
Hotel, located in Chicago, Illinois 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
approximately $543,000. The Partnership had recorded a provision for
impairment of value of $6,985,000 during fiscal year 1992.
On March 15, 1994, the Partnership sold its 65 percent interest in the
Washington Park Hotel Associates Joint Venture, which owned the Radisson
Park Terrace Hotel, located in Washington, D.C. for $1,455,000 in cash, 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.
5. Subsequent Events
As of July 7, 1995, the Combined Fund, a joint venture in which the
Partnership has a 50% interest, 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. If the property is not sold by January 31, 1996, the
joint venture partner is obligated to purchase the joint venture interest of
the Combined Fund for $5,000,000. The Partnership anticipates that it will
recognize net proceeds of approximately $2,500,000 and a gain on disposition
of approximately $2,700,000 for financial statement purposes on the
transaction.
On July 25, 1995, the Partnership sold its Embassy Suites Hotel to an
unaffiliated third party for $19,600,000. After closing costs and
adjustments, the Partnership received net proceeds of approximately
$19,000,000 and will recognize a gain on sale of approximately $8,700,000.
On July 26, 1995, the Partnership distributed $21,989,000 ($202 per unit)
and $449,000 to the limited and general partners, respectively. The funds
were primarily provided by the sale proceeds of the Partnership's Embassy
Suites Hotel.
6. Legal Proceedings
On May 19, 1995 final approval was given by the Court to a settlement
agreement relating to the tender offer litigation. As required by the terms
of the settlement agreement, DeForest Ventures I L.P. ("DeForest") commenced
a second tender offer (the "Second Tender Offer") on June 2, 1995 for units
of limited partnership in the Partnership. Pursuant to the Second Tender
Offer, DeForest acquired an additional 753 limited partnership units of the
Partnership.
8 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Investment in Unconsolidated Joint Venture
The following are the condensed balance sheets as of June 30, 1995 and
September 30, 1994 and condensed statements of operations for the nine and
the three months ended June 30, 1995 and 1994 of the unconsolidated joint
venture:
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
CONDENSED BALANCE SHEETS
June 30, September 30,
1995 1994
(Unaudited) (Audited)
Assets
Cash and cash equivalents $ 1,010,000 $ 561,000
Restricted cash 790,000 564,000
Accounts receivable and other assets 2,230,000 1,323,000
Real Estate:
Real estate 63,293,000 62,898,000
Accumulated depreciation (17,535,000) (16,335,000)
Allowance for impairment of value (11,962,000) (11,962,000)
------------- -------------
Real estate, net 33,796,000 34,601,000
------------- -------------
Total assets $ 37,826,000 $ 37,049,000
============= =============
Liabilities and Partners' Deficiency
Accounts payable and other liabilities $ 3,000,000 $ 2,320,000
Due to affiliates 1,884,000 2,095,000
Note payable 34,000,000 34,000,000
------------- -------------
Total liabilities 38,884,000 38,415,000
------------- -------------
Minority interest in joint venture (535,000) (689,000)
------------- -------------
Commitments and Contingencies
Partners' Deficiency:
MRI BPF, LTD. II (261,000) (338,000)
MRI BPF, LTD. III (262,000) (339,000)
------------- -------------
Total partners' deficiency (523,000) (677,000)
------------- -------------
Total liabilities and partners' deficiency $ 37,826,000 $ 37,049,000
============= =============
9 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Investment in Unconsolidated Joint Venture (Continued)
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Nine Months Ended
June 30, 1995 June 30, 1994
Revenues $ 15,730,000 $ 15,096,000
Expenses 16,102,000 16,144,000
------------- -------------
Loss before minority interest in joint
venture operations (372,000) (1,048,000)
Minority interest in joint venture
operations 186,000 524,000
------------- -------------
Net loss $ (186,000) $ (524,000)
============= =============
Allocation of net loss:
MRI BPF, Ltd. II $ (93,000) $ (262,000)
MRI BPF, Ltd. III (93,000) (262,000)
------------- -------------
Net loss $ (186,000) $ (524,000)
============= =============
For the Three Months Ended
June 30, 1995 June 30, 1995
Revenues $ 5,608,000 $ 4,944,000
Expenses 5,551,000 5,385,000
------------- ------------
Income (loss) before minority interest in joint
venture operations 57,000 (441,000)
Minority interest in joint venture
operations (29,000) 221,000
------------- ------------
Net income (loss) $ 28,000 $ (220,000)
============= ============
Allocation of net income (loss):
MRI BPF, Ltd. II $ 14,000 $ (110,000)
MRI BPF, Ltd. III 14,000 (110,000)
------------- ------------
Net income (loss) $ 28,000 $ (220,000)
============= ============
10 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
This item should be read in conjunction with the Consolidated Financial
Statements and other Items contained elsewhere in this Report.
Liquidity and Capital Resources
All of Registrant's properties are hotels. 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 nine months ended June
30, 1995, all of Registrant's remaining hotels generated positive cash flow. On
July 25, 1995, Registrant sold its Embassy Suites Hotel to an unaffiliated third
party for $19,600,000. After closing costs and adjustments, Registrant received
net proceeds of approximately $19,000,000 and will recognize a gain on sale of
approximately $8,700,000. On July 26, 1995, Registrant distributed $21,989,000
and $449,000 to the limited and general partners, respectively. The funds were
primarily provided by the sale proceeds of Registrant's Embassy Suites Hotel.
The level of liquidity based upon cash and cash equivalents experienced a
$2,420,000 increase at June 30, 1995, as compared to September 30, 1994.
Registrant's $3,594,000 of cash from operating activities was only partially
offset by $964,000 of cash used in investing activities and $210,000 of notes
payable payments (financing activities). Net cash used in investing activities
consisted of $794,000 of fixed asset purchases and $170,000 of contributions to
Registrant's unconsolidated joint venture. All other increases (decreases) in
certain assets and liabilities are the result of the timing of receipt and
payment of various operating activities.
Working capital reserves are invested in money market accounts and repurchase
agreements secured by United States Treasury obligations. The Managing General
Partner believes that, if market conditions remain relatively stable, cash flow
from operations, when combined with working capital reserves, will be sufficient
to fund essential capital improvements and debt service payments in the
remainder of 1995 and the foreseeable future. Balloon payments on mortgages
encumbering Registrant's properties are due in September and October 1997. The
Managing General Partner believes that each property generates sufficient cash
flow to allow all mortgages to be refinanced in an orderly fashion. The
mortgage encumbering the Holiday Inn Crowne Plaza, was due to mature in July
1995. Registrant obtained a six month extension of the due date to December 29,
1995. The Managing General Partner anticipates selling the hotel on or before
the maturity date. As described in Item 1, Note 5, pursuant to an agreement,
Registrant's interest in the Holiday Inn Crowne Plaza will be sold or otherwise
disposed of by January 31, 1996. Registrant anticipates that it will receive
net proceeds of approximately $2,500,000 on the transaction. In addition,
Registrant is currently marketing for sale its two remaining properties.
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
11 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Liquidity and Capital Resources (Continued)
Offer, represents approximately 25.3% of the total number of outstanding units
of Registrant. The Managing General Partner believes that the tender will not
have a significant impact on future operations or liquidity of Registrant (see
Part II, Item 1, Litigation). 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. Based on
present plans, management does not anticipate the need to borrow in the near
future.
At this time, it appears that the investment objective of capital growth will
not be attained and that a significant portion of invested capital will not be
returned to investors. The extent to which invested capital is returned to
investors is dependent upon the performance of Registrant's remaining properties
and the markets in which such properties are located and on the sales price of
the remaining properties.
Real Estate Market
The income and expenses of operating the properties owned by Registrant 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 properties still
owned by Registrant.
Results of Operations
Nine Months Ended June 30, 1995 vs. June 30, 1994
Operating results, before minority interest in joint venture's operations,
declined by $1,757,000 for the nine months ended June 30, 1995, as compared to
1994. Operating results declined primarily due to the $1,467,000 gain on sale
of Registrant's joint venture interests in 1994.
Revenues declined by $9,853,000 for the nine months ended June 30, 1995, as
compared to 1994, due to the sale of Registrant's joint venture interests. With
respect to the remaining properties, revenues increased by $808,000 due to
increases in room revenues of $741,000 and other operating revenue of $72,000
which were slightly offset by a decrease in interest income of $5,000.
12 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Nine Months Ended June 30, 1995 vs. June 30, 1994 (Continued)
Room revenue increased at Registrant's remaining properties, with the exception
of the Residence Inn - Sacramento, where a decline in occupancy more than offset
an increase in average daily room rates. The largest increase was at
Registrant's Embassy Suites - Tempe property, due to a significant increase in
average daily room rates, which was only partially offset by a decline in
occupancy. Other operating revenues increased due to increases in other income
and telephone revenue at Registrant's Embassy Suites - Tempe property. Interest
income decreased due to the decline in average working capital reserves
available for investment.
Expenses decreased by $8,096,000 for the nine months ended June 30, 1995, as
compared to 1994, due to the sale of Registrant's joint venture interests. With
respect to the remaining properties, expenses declined due to decreases in
interest expense of $421,000 and loss from unconsolidated joint venture
operations of $169,000 which were partially offset by increases in other
operating expenses of $190,000, room expenses of $84,000 and depreciation of
$34,000. In addition, general and administrative expenses decreased by $15,000.
Interest expense decreased primarily due to Registrant prepaying on June 2,
1994, in full satisfaction, the note encumbering Registrant's Embassy Suites
property, coupled with the reduction in the interest rate on the loan
encumbering Registrant's Residence Inn - Orlando property. The loss from
Registrant's unconsolidated joint venture property (the Holiday Inn Crowne
Plaza) decreased due to improved operations at the hotel. Room expenses
remained relatively constant. Other operating expenses increased primarily at
Registrant's Embassy Suites property. Depreciation expense increased due to an
under accrual in the prior year comparative period. General and administrative
expenses decreased due to a reduction in asset management costs.
Three Months Ended June 30, 1995 vs. June 30, 1994
Operating results improved by $445,000 for the three months ended June 30, 1995,
as compared to 1994, due to an increase in revenues of $223,000 and a decrease
in expenses of $222,000.
Revenues increased due to increases in room revenues of $196,000, other
operating income of $10,000, equity in unconsolidated joint venture operations
of $14,000 and interest income of $3,000. Room revenues increased at all of
Registrant's properties. The largest increase was at Registrant's Embassy
Suites - Tempe property, due to a significant increase in average daily room
rates, which was only partially offset by a decline in occupancy. Other
operating revenues increased due to increases in other income and telephone
revenue at Registrant's Embassy Suites - Tempe property. Interest income
increased due to an increase in average working capital reserves available for
investment.
Expenses decreased due to decreases in interest expense of $104,000, other
operating expenses of $68,000, and loss from unconsolidated joint venture
operations of $110,000, which were partially offset by increases in rooms
expense of $37,000, depreciation and amortization of $15,000, and general and
administrative expense of $8,000. Interest expense decreased primarily due to
Registrant prepaying on
13 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Three Months Ended June 30, 1995 vs. June 30, 1994 (Continued)
June 2, 1994, in full satisfaction, the note encumbering Registrant's Embassy
Suites property, coupled with the reduction in the interest rate on the loan
encumbering Registrant's Residence Inn - Orlando property. Other operating
expenses decreased primarily at Registrant's Residence Inn - Orlando property.
Room expense remained relatively constant. Depreciation and amortization
increased due to an under accrual in the prior year comparative period. General
and administrative expenses increased due to increased reimbursed expenses for
the period.
Unconsolidated Joint Venture Operations
(MRI BPF Combined Fund No. 1)
Nine Months Ended June 30, 1995 vs. June 30, 1994
Operating results, prior to the minority interest, improved by $676,000 for the
nine months ended June 30, 1995, as compared to 1994, due to increases in
revenues and decreases in expenses. The increase in revenue is attributable to
higher average room rates.
Three Months Ended June 30, 1995 vs. June 30, 1994
Operating results, prior to minority interest, improved by $498,000 for the
three months ended June 30, 1995, due to an increase in revenues which was
partially offset by an increase in expenses. The increase in revenue is
attributable to higher average room rates, which was partially offset by a
decline in occupancy.
14 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Properties
A description of the hotel properties in which Registrant had an ownership
interest during the period covered by this Report, together with occupancy and
room rate data, follows:
<TABLE>
<CAPTION>
MRI BUSINESS PROPERTIES FUND, LTD. III
OCCUPANCY AND ROOM RATE SUMMARY
Average Average
Occupancy Rate (%) Daily Room Rate ($)
---------------------------- -------------------------------
Nine months Three Months Nine months Three Months
Date Ended Ended Ended Ended
of June 30, June 30, June 30, June 30,
Name and Location Rooms Purchase 1995 1994 1995 1994 1995 1994 1995 1994
- ----------------- ----- ------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Holiday Inn Crowne
Plaza (1)
Atlanta, Georgia 492 03/86 75 75 78 80 96.78 89.05 98.65 87.60
Embassy Suites - Tempe
Tempe, Arizona 224 12/86 80 85 81 86 100.52 84.53 89.98 77.49
Residence Inn - Orlando
Orlando, Florida 176 09/87 79 72 77 75 76.05 81.47 75.48 76.09
Residence Inn - Sacramento,
California 176 09/87 79 84 86 86 82.20 79.09 85.00 82.21
<FN>
(1) Registrant and an affiliated partnership, MRI Business Properties Fund, Ltd. II, own the hotel through a joint venture
which has a 50 percent interest in this property.
</FN>
</TABLE>
15 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
PART II - OTHER INFORMATION
Item 1. Litigation
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.
Bonnie L. Ruben and Sidney Finkel, on behalf of themselves and all others
similarly situated, v. DeForest Ventures I L.P., et. al., United States
District Court, Northern District of Georgia, Atlanta Division, Case No.
1-94-CV-2983-JEC.
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, State of Illinois, Case
No. 94CH0100592.
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.
On May 19, 1995, the Court gave final approval to the settlement
agreement entered into, in March 1995, by the plaintiffs and the
defendants in the above actions. Pursuant to the Court's order, all
claims made by the plaintiffs were dismissed with prejudice subject to
the defendants compliance with the settlement agreement. As required by
the settlement agreement, DeForest Ventures I L.P. ("DeForest") and
DeForest Ventures II L.P. commenced a tender offer for units of limited
partnership interest in Registrant as well as 18 other affiliated
partnerships on June 2, 1995 and implemented the other provisions of the
settlement agreement. See Part I, Item 2, "Management's Discussion and
Analysis of Financial Condition."
Item 5. Pro Forma Financial Information
The following pro forma consolidated balance sheet as of June 30, 1995,
and the pro forma consolidated statement of operations for the nine
months ended June 30, 1995 and the year ended September 30, 1994 give
effect to the sale of Registrant's Embassy Suites property interest.
Registrant sold its Embassy Suites Hotel on July 25, 1995 to an
unaffiliated third party for $19,600,000. Registrant received net
proceeds of approximately $19,000,000 and will recognize a gain on sale
of approximately $8,700,000. The adjustments related to the pro forma
consolidated balance sheet assume the transaction was consummated at June
30, 1995, while the adjustments to the pro forma consolidated statements
of operations assume the transaction was consummated at the beginning of
the year presented.
The pro forma adjustments required are to eliminate the assets,
liabilities and operating activity of the Embassy Suites property and to
reflect consideration received for the property.
These pro forma adjustments are not necessarily reflective of the results
that actually would have occurred if the sale had been in effect as of
and for the period presented or what may be achieved in the future.
16 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
Pro Forma Consolidated Balance Sheet (Unaudited)
June 30, 1995
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
------------ ------------ ------------
Assets
<S> <C> <C> <C>
Cash and cash equivalents $ 6,465,000 $ (317,000) $ 6,148,000
Accounts receivable and other assets 728,000 18,604,000 19,332,000
Real Estate:
Real estate 49,146,000 (18,174,000) 30,972,000
Accumulated depreciation (16,605,000) 7,298,000 (9,307,000)
------------- ------------- -------------
Real estate, net 32,541,000 (10,876,000) 21,665,000
------------- ------------- -------------
Total assets $ 39,734,000 $ 7,411,000 $ 47,145,000
============= ============= =============
Liabilities and Partners' Equity
Accounts payable and other liabilities $ 1,129,000 $ (500,000) $ 629,000
Due to unconsolidated joint venture 262,000 -- 262,000
Notes payable 15,581,000 -- 15,581,000
------------- ------------- -------------
Total liabilities 16,972,000 (500,000) 16,472,000
------------- ------------- -------------
Commitments and Contingencies
Partners' Equity:
General partners (1,885,000) 158,000 (1,727,000)
Limited partners equity (109,027 assignee
units outstanding at June 30, 1995 and
September 30, 1994) 24,647,000 7,753,000 32,400,000
------------- ------------- -------------
Total partners' equity 22,762,000 7,911,000 30,673,000
------------- ------------- -------------
Total liabilities and partners' equity $ 39,734,000 $ 7,411,000 $ 47,145,000
============= ============= =============
</TABLE>
17 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
Pro Forma Consolidated Statement of Operations (Unaudited)
For the Nine Months Ended June 30, 1995
Pro Forma
Historical Adjustments Pro Forma
----------- ------------ ------------
Revenues:
Room revenue $11,060,000 $(4,980,000) $ 6,080,000
Other operating revenues 703,000 (406,000) 297,000
Interest income 165,000 (20,000) 145,000
------------ ------------ ------------
Total revenues 11,928,000 (5,406,000) 6,522,000
------------ ------------ ------------
Expenses:
Room expense 2,503,000 (1,091,000) 1,412,000
Other operating expenses 4,672,000 (2,003,000) 2,669,000
Depreciation 1,173,000 (469,000) 704,000
Interest 762,000 -- 762,000
Loss from unconsolidated joint
venture's operations 93,000 -- 93,000
General and administrative 349,000 -- 349,000
------------ ------------ ------------
Total expenses 9,552,000 (3,563,000) 5,989,000
------------ ------------ ------------
Net income $ 2,376,000 $(1,843,000) $ 533,000
============ ============ ============
Net income per limited partnership
unit $ 21 $ 5
============ ============
18 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
Pro Forma Consolidated Statement of Operations
For the Year Ended September 30, 1994
<TABLE>
<CAPTION>
Historical Pro Forma Pro Forma
(Audited) Adjustments (Unaudited)
------------ ------------- -------------
<S> <C> <C> <C>
Revenues
Room revenues $ 19,544,000 $ (5,661,000) $ 13,883,000
Food and beverage revenue 2,593,000 0 2,593,000
Other operating revenues 1,389,000 (457,000) 932,000
Interest and other income 205,000 (17,000) 188,000
Gain on sale of joint ventures 1,467,000 0 1,467,000
------------- ------------- -------------
Total revenues 25,198,000 (6,135,000) 19,063,000
------------- ------------- -------------
Expenses
Room expenses 4,720,000 (1,392,000) 3,328,000
Food and beverage revenue 2,331,000 0 2,331,000
Other operating expenses 9,690,000 (2,424,000) 7,266,000
Depreciation 1,679,000 (626,000) 1,053,000
Interest 1,527,000 (373,000) 1,154,000
Equity in unconsolidated joint
venture 342,000 0 342,000
General and administrative 469,000 0 469,000
------------- ------------- -------------
Total expenses 20,758,000 (4,815,000) 15,943,000
------------- ------------- -------------
Income 4,440,000 (1,320,000) 3,120,000
Minority interest (404,000) 0 (404,000)
------------- ------------- -------------
Net income $ 4,036,000 $ (1,320,000) $ 2,716,000
============= ============= =============
Net income per limited partnership $ 36 $ 24
unit ============= =============
</TABLE>
19 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
No report on Form 8-K was required to be filed for the three months ended
June 30, 1995.
20 of 21
MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MRI BUSINESS PROPERTIES FUND, LTD. III
By: MONTGOMERY REALTY COMPANY - 85,
its Managing General Partner
By: FOX REALTY INVESTORS,
the managing general partner of
the Managing General Partner
By: NPI Equity Investments II, Inc. ("NPI")
managing partner
/S/ ARTHUR N. QUELER
-------------------------------------
Secretary/Treasurer and Director
(Principal Financial Officer)
21 of 21
<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> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 6,465,000
<SECURITIES> 0
<RECEIVABLES> 728,000 <F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 49,146,000
<DEPRECIATION> (16,605,000)
<TOTAL-ASSETS> 39,734,000
<CURRENT-LIABILITIES> 0
<BONDS> 15,581,000
<COMMON> 0
0
0
<OTHER-SE> 22,762,000
<TOTAL-LIABILITY-AND-EQUITY> 39,734,000
<SALES> 0
<TOTAL-REVENUES> 11,763,000
<CGS> 0
<TOTAL-COSTS> 8,441,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 762,000
<INCOME-PRETAX> 2,376,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,376,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,376,000
<EPS-PRIMARY> 21
<EPS-DILUTED> 21
<FN>
<F1> Receivable includes other assets of $165,000.
</FN>
</TABLE>
