FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(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 June 30, 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
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
(Unaudited)
(in thousands)
June 30, 1996
<TABLE>
<CAPTION>
<S> <C>
Assets
Cash and cash equivalents $ 428
Other assets 540
Accounts receivable 171
Total assets 1,139
Liabilities
Accrued expenses 188
Estimated costs during the period of liquidation 15
203
Net assets in liquidation $ 936
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
a) MRI BUSINESS PROPERTIES FUND, LTD. III
CONSOLIDATED 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
Real Estate:
Real estate 30,343
Accumulated depreciation (9,585)
Real estate, net 20,758
Total assets $ 24,330
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and other liabilities $ 634
Due to unconsolidated joint venture 618
Notes payable 15,578
Commitments and Contingencies
Partners' Equity:
General partners (276)
Limited partners (109,027 assignee units
outstanding at September 30, 1995) 7,776
Total partners' equity 7,500
Total liabilities and partners' equity $ 24,330
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
b) MRI BUSINESS PROPERTIES FUND, LTD. III
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(Unaudited)
(in thousands)
June 30, 1996
<TABLE>
<CAPTION>
<S> <C>
Net assets in liquidation $ 906
at March 31, 1996
Changes in net assets in liquidation
attributed to:
Decrease in cash (356)
Increase in other assets 540
Increase in accrued expenses (170)
Decrease in estimated costs during the
period of liquidation 16
Net assets in liquidation at
June 30, 1996 $ 936
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
c) MRI BUSINESS PROPERTIES FUND, LTD. III
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
June 30, June 30,
1995 1995
<S> <C> <C>
Revenues:
Room revenue $ 3,601 $ 11,060
Other operating revenues 229 703
Interest 70 165
Equity in unconsolidated joint venture's operations 14 --
Total revenues 3,914 11,928
Expenses:
Room expenses 865 2,503
Other operating expenses 1,491 4,672
Interest 253 762
Depreciation 391 1,173
Equity in unconsolidated joint venture's operations -- 93
General and administrative 115 349
Total expenses 3,115 9,552
Net income $ 799 $ 2,376
Net income allocated to general partners $ 16 $ 48
Net income allocated to limited partners 783 2,328
$ 799 $ 2,376
Net income per limited partnership unit $ 7.18 $ 21.35
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
d) MRI BUSINESS PROPERTIES FUND, LTD. III
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
1995
<S> <C>
Cash flows from operating activities:
Net income $ 2,376
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 1,194
Equity in unconsolidated joint venture's operations 93
Change in accounts:
Accounts receivable and other assets 42
Accounts payable, other liabilities and due to an
affiliate of the joint venture partner (111)
Net cash provided by operating activities 3,594
Cash flows from investing activities:
Property improvements and replacements (794)
Unconsolidated joint venture distributions (170)
Cash used in investing activities (964)
Cash flows from financing activities:
Mortgage principal payments (210)
Cash used in financing activities (210)
Net increase in cash and cash equivalents 2,420
Cash and cash equivalents at beginning of period 4,045
Cash and cash equivalents at end of period $ 6,465
Supplemental information:
Interest paid $ 741
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
e) MRI BUSINESS PROPERTIES FUND, LTD. III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information under the liquidation basis of accounting 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 NPI Equity
Investments II, Inc. ("NPI Equity" or the "Managing General Partner"), all
adjustments considered necessary for a fair presentation on the liquidation
basis have been included. 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.
During the first two quarters of fiscal 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 their 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.
The consolidated statement of net assets in liquidation as of June 30, 1996,
includes approximately $15,000 of costs, net of income, that the Managing
General Partner estimates will be incurred during the period of liquidation,
based on the assumption that the liquidation process will be completed by
September 30, 1996. These costs include anticipated legal fees, administrative
expenses, and mailing costs. Because the success in realization of assets and
the settlement of liabilities is based on the Managing General Partner's best
estimates, the liquidation period may be shorter than projected or it may be
extended beyond the projected period.
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 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 Nine Months Ended
June 30,
1996 1995
<S> <C> <C>
Reimbursement for services of affiliates $ 75,000 $140,000
(included in general and administrative expenses)
</TABLE>
An affiliate of the Managing General Partner was paid a fee of $10,000
relating to a successful real estate tax appeal on the Partnership's Residence
Inn-Sacramento Hotel during the nine months ended June 30, 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 nine months ended June 30, 1995.
The 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.
Pursuant to a series of transations which closed during the first half of
1996, affiliates of Insignia acquired control of NPI Equity, the managing
general partner of FRI. In connection with these transactions, affiliates of
Insignia appointed new officers and directors of NPI Equity.
Note C - Investment in Unconsolidated Joint Venture
The following are the condensed balance sheets as of June 30, 1996, and
September 30, 1995, and condensed statements of operations for each of the nine
months ended June 30, 1996 and 1995, of the unconsolidated joint venture:
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
CONDENSED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
(Unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents $ 231 $ 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 $ 231 $ 36,400
Liabilities and Partners' Deficiency
Accounts payable and other liabilities $ -- $ 1,805
Due to affiliates 231 3,069
Note payable -- 34,000
Total liabilities 231 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 $ 231 $ 36,400
<FN>
Note: The balance sheet at September 30, 1995, was derived from audited
financial statements at such date.
</TABLE>
Note C - Investment in Unconsolidated Joint Venture (continued)
MRI BUSINESS PROPERTIES COMBINED FUND NO. 1
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
For the Nine Months Ended
June 30, June 30,
1996 1995
<S> <C> <C>
Revenues $ 4,017 $ 15,730
Gain on sale of hotel 9,755 --
Total revenues 13,772 15,730
Expenses 2,553 16,102
Income (loss) before minority interest in
joint venture operations 11,219 (372)
Minority interest in joint venture
operations (5,107) 186
Net income (loss) $ 6,112 $ (186)
Allocation of net income (loss):
MRI BPF, Ltd. II $ 3,056 $ (93)
MRI BPF, Ltd. III 3,056 (93)
Net income (loss) $ 6,112 $ (186)
For the Three Months Ended
June 30, June 30,
1996 1995
Revenues $ 2 $ 5,608
Expenses 17 5,551
(Loss) income before minority interest in
joint venture's operations (15) 57
Minority interest in joint venture's
operations -- (29)
Net (loss) income $ (15) $ 28
Allocation of net (loss) income:
MRI BPF, Ltd. II $ (8) $ 14
MRI BPF, Ltd. III (7) 14
Net (loss) income $ (15) $ 28
</TABLE>
Note D - Sale of Investment Properties
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 E - 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
As of March 31, 1996, the Partnership adopted the liquidation basis of
accounting. As described in "Item 1, Notes to Financial Statements, Note D",
the Partnership sold its remaining properties during the first two quarters of
fiscal year 1996. The aggregate sales price for its properties was $68,500,000.
After satisfaction of existing mortgages, closing costs and amounts distributed
to the Partnership's joint venture partners, net proceeds received by the
Partnership were approximately $10,945,000. The Partnership recorded a gain of
$5,000 on the sale of the Residence Inn - Orlando Hotel, a gain of $3,560,000 on
the sale of the Residence Inn - Sacramento Hotel and a gain of $2,694,000 on the
sale of its unconsolidated joint venture property, the Holiday Inn Crowne Plaza.
The Partnership distributed $12,867,000 to the limited partners ($118.02 per
limited partnership assignee unit) and $263,000 to the general partners in
January 1996. The funds were primarily provided by proceeds from the sale of
the Parntership's properties. Since these were the Partnership's last remaining
properties, the Partnership expects to be terminated in 1996 after collection of
receivables, payment of outstanding liabilities and a final distribution to the
partners.
For the three months ended June 30, 1996, the Partnership recorded a net
increase in net assets in liquidation of approximately $30,000. The Partnership
recorded an increase in other assets related to the requirement under Section
444 of the Internal Revenue Code to deposit funds with the Internal Revenue
Service due to its fiscal year end of September 30. This deposit of $540,000
with the Internal Revenue Service will be refunded upon termination of the
Partnership. The Partnership also recognized an increase in accrued expenses
during the three months ended June 30, 1996, related to state withholding taxes
due to Illinois and the District of Columbia of approximately $171,000.
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 the limited partners. Upon termination of the Partnership, the
general partners may be required to contribute approximately $1,000,000 to the
Partnership in accordance with the partnership agreement.
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: None filed during the quarter ended June 30, 1996.
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
Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
Date: August 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from MRI Business
Properties Fund Ltd. III 1996 Third 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> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 428
<SECURITIES> 0
<RECEIVABLES> 171
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,139
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 936
<TOTAL-LIABILITY-AND-EQUITY> 1,139
<SALES> 0
<TOTAL-REVENUES> 0<F2>
<CGS> 0
<TOTAL-COSTS> 0<F2>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0<F2>
<EPS-PRIMARY> 0<F3>
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified statement of net assets in liquidation.
<F2>The Registrant has changed to the liquidation basis of accounting.
<F3>Multiplier is 1.
</FN>
</TABLE>
