FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(As last amended in Rel. No. 312905, eff. 4/26/93.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period.........to.........
(Amended by Exchange Act Rel. No. 312905, eff. 4/26/93.)
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
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports ), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) MRI BUSINESS PROPERTIES FUND, LTD. III
STATEMENT OF NET ASSETS IN LIQUIDATION
(in thousands)
<TABLE>
<CAPTION>
March 31,
1996
(Unaudited)
<S> <C>
Assets
Cash and cash equivalents $ 784
Accounts receivable 171
Total assets 955
Liabilities
Accrued expenses 18
Estimated costs during the period of 31
49
Net assets in liquidation $ 906
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
a) MRI BUSINESS PROPERTIES FUND, LTD III
BALANCE SHEET
(in thousands, except unit data)
September 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Assets
Cash and cash equivalents $ 2,904
Accounts receivable and other assets 448
Due from affiliate 220
Investment properties:
Land $ 5,771
Buildings and related personal property 24,572
30,343
Less accumulated depreciation (9,585) 20,758
$ 24,330
Liabilities and Partners' Capital
Liabilities
Accounts payable and other liabilities $ 634
Due to unconsolidated joint ventures 618
Mortgage notes payable 15,578
Partners' Capital:
General partners' $ (276)
Limited partners' (109,027 assignee units
outstanding) 7,776 7,500
$ 24,330
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
b) MRI BUSINESS PROPERTIES FUND, LTD. III
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Room revenue $ 126 $ 4,234 $ 1,347 $ 7,459
Other operating income 30 242 82 474
Interest income 21 52 59 95
Equity in unconsolidated
joint venture interest -- -- 369 --
Gain on sale of
unconsolidated joint
venture interest -- -- 2,694 --
Gain on sale of property 3,560 -- 3,565 --
Total revenue 3,737 4,528 8,116 8,028
Expenses:
Room expenses 30 836 362 1,638
Other operating expenses 58 1,569 558 3,181
Depreciation 18 391 126 782
Interest 19 254 199 509
Equity in unconsolidated
joint venture operations -- 24 -- 107
General and administrative 175 111 304 234
Total expenses 300 3,185 1,549 6,451
Income before adjustment to
liquidation basis 3,437 -- 6,567 --
Adjustment to liquidation
basis (31) -- (31) --
Net income $ 3,406 $ 1,343 $ 6,536 $ 1,577
Net income allocated to
general partners $ (3) $ 27 $ 539 $ 32
Net income allocated to
limited partners 3,409 1,316 5,997 1,545
$ 3,406 $ 1,343 $ 6,536 $ 1,577
Net income per limited
partnership unit $ 31.27 $ 12.07 $ 55.00 $ 14.18
Distribution per limited
partnership assignee unit $ 118.02 $ -- $ 118.02 $ --
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
c) MRI BUSINESS PROPERTIES FUND, LTD III
STATEMENT OF PARTNERS' EQUITY (DEFICIT)
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Limited General Limited
Partnership Partners' Partners' Total
Units Deficit Equity Equity
<S> <C> <C> <C> <C>
Partners' (deficit) equity at
September 30, 1995 109,027 $ (276) $ 7,776 $ 7,500
Net income for the six
months ended March 31, 1996 -- 539 5,997 6,536
Distributions -- (263) (12,867) (13,130)
Partners' equity at
March 31, 1996 109,027 $ -- $ 906 $ 906
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
d) MRI BUSINESS PROPERTIES FUND, LTD. III
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,536 $ 1,577
Adjustments to liquidation basis 31 --
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 130 796
Equity in unconsolidated joint venture operations (369) 107
Gain on sale of unconsolidated joint venture
interest (2,694) --
Gain on sale of property (3,565) --
Change in accounts:
Accounts receivable and other assets 363 (144)
Accounts payable and accrued expenses (625) (224)
Due from affiliate 105 --
Net cash (used in) provided by operating
activities (88) 2,112
Cash flows from investing activities:
Property improvements and replacements (28) (485)
Net proceeds from sale of properties 24,259 --
Distribution from unconsolidated joint venture 2,445 --
Net cash provided by (used in) investing
activities 26,676 (485)
Cash flows from financing activities:
Mortgage principal payments (33) (138)
Repayment of mortgage notes payable (15,545) --
Distribution paid to partners (13,130) --
Net cash used in financing activities (28,708) (138)
Net (decrease) increase in cash and cash
equivalents (2,120) 1,489
Cash and cash equivalents at beginning of period 2,904 4,045
Cash and cash equivalents at end of period $ 784 $ 5,534
Supplemental information:
Interest paid $ 238 $ 495
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
e) MRI BUSINESS PROPERTIES FUND, LTD. III
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of the Managing General Partner, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six and three month period ended March
31, 1996, are not necessarily indicative of the results that may be expected for
the fiscal year ending September 30, 1996. For further information, refer to
the financial statements and footnotes thereto included in the Partnership's
annual report on Form 10-K for the fiscal year ended September 30, 1995.
The balance sheet at September 30, 1995, was derived from audited financial
statements at such date.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
On January 12, 1996, the Partnership sold its remaining properties. As a
result, the Partnership changed its basis of accounting as of March 31, 1996, to
a liquidation basis. Consequently, assets have been valued at estimated net
realizable value and liabilities are presented at their estimated settlement
amounts, including estimated costs associated with carrying out the liquidation.
The valuation of assets and liabilities necessarily requires many estimates and
assumptions and there are substantial uncertainties in carrying out the
liquidation. The actual realization of assets and settlement of liabilities
could be higher or lower than amounts indicated and is based on the estimates as
of the date of the financial statements.
Note B - Transactions with Affiliated Parties
MRI Business Properties Fund, Ltd. III (the "Partnership") has no employees and
is dependent on its general partners and their affiliates for the management and
administration of all partnership activities. The Partnership Agreement
provides for payments to affiliates for services and as reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership.
The following transactions with affiliates of Insignia Financial Group, Inc.
("Insignia"), National Property Investors, Inc.("NPI"), and affiliates of NPI
were charged to expense in 1996 and 1995:
<TABLE>
<CAPTION>
For the Six Months Ended
March 31,
1996 1995
<S> <C> <C>
Reimbursement for services of affiliates $ 68,415 $ 80,000
(included in general and administrative expenses)
</TABLE>
An affiliate of NPI was paid a fee of $8,000 relating to a successful real
estate tax appeal on the Partnership's Embassy Suites-Tempe hotel during the six
months ended March 31, 1995.
In addition, an affiliate of NPI was paid a fee of $26,000 relating to a
successful real estate tax appeal on the Partnership's Embassy Suites-Tempe
hotel during the six months ended March 31, 1995.
The managing general partner of the Partnership is Montgomery Realty Company-85
("Montgomery"), a general partnership, and the associate general partner is MRI
Associates, Ltd. III ("MRI"), a limited partnership. Fox Realty Investors
("FRI") is the managing general partner of Montgomery and a general partner of
MRI.
On December 6, 1993, NPI Equity Investments II, Inc. ("Managing General Partner"
or "NPI Equity") became the managing general partner of FRI. As a result, the
Managing General Partner became responsible for the operation and management of
the business and affairs of the Partnership and the other investment
partnerships sponsored by FRI. 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 partners continue to hold, indirectly, certain economic interests in the
Partnership and such other partnerships, but have ceased to be responsible for
the operation and management of the Partnership and such other partnerships.
The Managing General Partner is a wholly-owned subsidiary of NPI.
On August 17, 1995, the stockholders of NPI entered into an agreement to sell to
IFGP Corporation, a Delaware corporation, an affiliate of Insignia, all of the
issued and outstanding common stock of NPI for an aggregate purchase price of
$1,000,000. The closing of the transactions contemplated by the above
mentioned agreement (the "Closing") occurred on January 19, 1996.
Upon the closing, the officers and directors of NPI and NPI Equity resigned and
IFGP Corporation caused new officers and directors of each of those entities to
be elected.
Note C - Sale of Property and Unconsolidated Joint Venture Interest
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 $1,900,000. The Partnership recorded a
provision for loss on sale of the property of $800,000 during the 1995 fiscal
year. The Partnership has recognized a gain on sale of the property of $5,000.
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. In accordance with the July 7, 1995,
agreement, the Combined Fund received $5,000,000. The Partnership's share of
net proceeds, after expenses, was $2,445,000. The Partnership has recognized a
gain on sale of $2,694,000. 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.
On January 12, 1996, the partnership sold its remaining property, Residence Inn
- - Sacramento, to an unaffiliated third party for $14,400,000. After
satisfaction of the mortgage loan of $7,691,000 (including accrued interest) and
closing costs, the Partnership received approximately $6,600,000. For financial
statement purposes the Partnership recognized a gain on sale of approximately
$3,560,000 during the second quarter of fiscal 1996.
Note D - Distributions
In January 1996, the Partnership distributed $12,867,000 ($118.02 per limited
partnership assignee unit) and $263,000 to the limited partners and the general
partners, respectively. The funds were primarily provided by the proceeds from
the sale of the Partnership's properties and joint venture interest.
Note E - Investment in Unconsolidated Joint Venture
The following are the condensed balance sheets as of March 31, 1996, and
September 30, 1995, and condensed statements of operations for the three months
ended March 31, 1996 and 1995, of the unconsolidated joint venture:
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
(Unaudited) (Note)
<S> <C> <C>
Assets
Cash and cash equivalents $ 245 $ 887
Restricted cash -- 958
Accounts receivable and other assets -- 1,321
Real Estate:
Real estate -- 63,148
Accumulated depreciation -- (17,952)
Allowance for impairment of value -- (11,962)
Real estate, net -- 33,234
Total assets $ 245 $ 36,400
Liabilities and Partners' Deficiency
Accounts payable and other liabilities $ -- $ 1,805
Due to affiliates 245 3,069
Note payable -- 34,000
Total liabilities 245 38,874
Minority interest in joint venture -- (1,238)
Partners' Deficiency:
MRI BPF, Ltd. II -- (618)
MRI BPF, Ltd. III -- (618)
Total partners' deficiency -- (1,236)
Total liabilities and partners' deficiency $ 245 $ 36,400
</TABLE>
Note: The balance sheet at September 30, 1995, was derived from
audited financial statements at such date.
Note E - Investment in Unconsolidated Joint Venture (continued)
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
March 31, 1996 March 31, 1995
<S> <C> <C>
Revenues $ 4,015 $ 10,122
Gain on sale of hotel 9,755 --
Total revenues 13,770 10,122
Expenses 2,536 10,551
Income (loss) before minority interest in
joint venture operations 11,234 (429)
Minority interest in joint venture's
operations (5,107) 215
Net income (loss) $ 6,127 $ (214)
Allocation of net income (loss):
MRIBPF, LTD. II $ 3,064 $ (107)
MRIBPF, LTD. III 3,063 (107)
Net loss $ 6,127 $ (214)
For the Three Months Ended
March 31, 1996 March 31, 1995
Revenues $ 1 $ 5,251
Expenses 1 5,346
Loss before minority interest in joint
venture's operation -- (95)
Minority interest in joint venture's
operations -- 48
Net loss $ -- $ (47)
Allocation of net loss:
MRIBPF, LTD. II $ -- $ (23)
MRIBPF, LTD. III -- (24)
Net loss $ -- $ (47)
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
As described in "Item 1. Notes to Financial Statements - Note C", the
Partnership sold its remaining properties and joint venture interest during the
first and second quarter of fiscal 1996. The aggregate sale price for these
properties was $68,500,000. After satisfaction of existing mortgages, closing
costs and amounts distributed to the Partnership's joint venture partners in the
Holiday Inn - Crowne Plaza property, net proceeds received by the Partnership
were approximately $10,945,000. As a result of the first quarter sales, the
Partnership has recorded a gain on sale of property of $5,000 and gain on sale
of unconsolidated joint venture interest of $2,694,000. In addition, the
Partnership recognized a gain on sale of approximately $3,560,000 during the
second quarter of fiscal 1996.
The Partnership reported approximately $6,536,000 of net income for the six
months ended March 31, 1996, as compared to approximately $1,577,000 for the
comparable period in 1995. Operating results improved primarily due to the
$2,694,000 gain on sale of the Partnership's interest in the unconsolidated
joint venture and the $3,565,000 gain on sale of Residence Inn - Sacramento and
Residence Inn - Orlando. The Partnership's operations for the six month period
ended March 31, 1996, are not comparable to the six month period ended March 31,
1995, due to the sales of all of the Partnership's investment properties.
In January 1996, the Partnership distributed $12,867,000 ($118.02 per unit) and
$263,000 to the limited partners and general partner, respectively. The funds
were primarily provided by proceeds from the sale of the Partnership's
properties. As a result of the sales, the Managing General Partner is in the
process of liquidating and terminating the Partnership.
The Partnership'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 the Partnership, the general
partners will be required to contribute approximately $1,000,000 to the
Partnership in accordance with the partnership agreement.
The Partnership, due to its fiscal year end of September 30, may be obligated
under Section 444 of the Internal Revenue Code to deposit funds with the IRS
effectively advancing the liability of its partners. The deposit is due May 15
and the current years required deposit is in excess of the Partnership's
available funds. The general partner is currently exploring its alternatives in
this matter. No liability for this deposit has been recorded in the
accompanying financial statements.
The Partnership reported unrestricted cash of approximately $784,000 at March
31, 1996, and approximately $5,534,000 at March 31, 1995. The decrease in cash
flow from operating activities for the six month period ended March 31, 1996, as
compared to the six month period ended March 31, 1995, is primarily a result of
reduced net income from property operations once the effects of the sales are
considered. This decrease in net income is due to the Partnership selling all
remaining properties in the first two quarters of fiscal 1996. The increase in
cash provided by investing activities is primarily a result of the proceeds from
the sale of the properties discussed above. Also contributing to this increase
is a distribution received from the unconsolidated joint venture. Finally, the
Partnership had a reduction in property improvements and replacements due to the
sale of the properties. Cash used in financing activities increased due to the
repayment of mortgage notes payable in connection with the sale of the
properties. Also contributing to this change is a distribution made to the
partners from the proceeds of the sales.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K: A Form 8-K dated January 19, 1996, was filed
reporting the change in control of the Partnership.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MRI BUSINESS PROPERTIES FUND, LTD. III
By: MONTGOMERY REALTY COMPANY 85,
A California General Partnership,
its managing general partner
By: FOX REALTY INVESTORS,
A California General Partnership,
its managing general partner
By: NPI EQUITY INVESTMENTS II, INC.,
A Florida Corporation,
its managing partner
/s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
/s/ Ronald Uretta
Ronald Uretta
Principal Financial Officer
and Principal Accounting Officer
Date: May 15, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from MRI Business
Properties Fund III 1996 Second Quarter 10-Q and is qualified in its entirety
by reference to such 10-Q filing.
</LEGEND>
<CIK> 0000769635
<NAME> MRI BUSINESS PROPERTIES FUND, LTD III
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 784
<SECURITIES> 0
<RECEIVABLES> 171
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 955
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 906
<TOTAL-LIABILITY-AND-EQUITY> 955
<SALES> 0
<TOTAL-REVENUES> 8,116
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,549
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 199
<INCOME-PRETAX> 6,536
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,536
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,536
<EPS-PRIMARY> .12
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
</FN>
</TABLE>
