FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
(Mark One)
{ X } QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
----------------------------
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended September 30, 1995 Commission file number 0-15747
Brown-Flournoy Equity Income Fund Limited Partnership
(Exact Name of Registrant as Specified in its Charter)
Delaware 58-1688140
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
225 East Redwood Street, Baltimore, Maryland 21202
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (410) 727-4083
N/A
(Former Name, Former Address, and Former Fiscal Year,
if Changed Since Last Report.)
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
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND LIMITED PARTNERSHIP
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets 1
Statements of Operations 2
Statements of Partners' Capital 3
Statements of Cash Flows 4
Notes to Financial Statements 5-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
Part II.Other Information
Item 1. through Item 6. 9
Signatures 10
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND LIMITED PARTNERSHIP
Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
<S> <C> <C>
Assets
Investment in real estate $ 15,165,005 $ 15,867,064
Cash and cash equivalents 1,456,776 1,738,073
Other assets
Accounts receivable, including $157,896 and
$23,533 due from affiliates, respectively 174,957 46,958
Prepaid expenses 12,351 66,482
Loan fees, less accumulated amortization
of $451,309 and $395,668, respectively 68,006 123,647
Total other assets 255,314 237,087
Total assets $ 16,877,095 $ 17,842,224
Liabilities and Partners' Capital
Accounts payable and accrued expenses including
$25,564 and $26,602 due to affiliates, respectively$ 618,180 $ 447,430
Tenant security deposits 138,252 123,616
Mortgage loans payable 20,233,573 20,326,886
Total liabilities 20,990,005 20,897,932
Partners' Capital
General Partners (236,801) (215,657)
Limited Partners
Class A - $1,000 stated value per unit;
27,000 units outstanding (3,876,209) (2,840,151)
Class B 100 100
Total partners' capital (4,112,910) (3,055,708)
Total liabilities and partners' capital $ 16,877,095 $ 17,842,224
See accompanying notes to financial statements
-1-
</TABLE>
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND LIMITED PARTNERSHIP
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues
Rental income $ 1,180,371 $ 1,116,492 $ 3,447,855 $ 3,306,136
Interest income 18,101 11,699 51,631 34,161
1,198,472 1,128,191 3,499,486 3,340,297
Expenses
Compensation and related benefits 115,906 108,560 332,764 315,492
Utilities 69,969 71,244 191,671 202,046
Property taxes 87,007 71,110 266,833 256,146
Insurance 18,329 13,111 54,623 39,412
Advertising 25,934 16,194 59,979 48,296
Maintenance and repairs 210,704 121,138 417,810 280,677
Property management fee 59,019 55,675 172,393 165,157
Other 9,113 9,263 25,661 20,519
Administrative and professional fees 22,490 25,761 64,957 77,022
Interest expense 484,182 488,556 1,459,844 1,465,670
Depreciation of property and equipment 254,405 258,425 765,737 768,935
Amortization of loan fees 18,547 18,547 55,641 55,641
1,375,605 1,257,584 3,867,913 3,695,013
Net loss $ (177,133) $ (129,393) $ (368,427) $ (354,716)
Net loss per Unit of Class A limited
partnership interest $ (6.43) $ (4.70) $ (13.37) $ (12.87)
See accompanying notes to financial statements
-2-
</TABLE>
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND LIMITED PARTNERSHIP
Statements of Partners' Capital
For the nine months ended September 30,
(Unaudited)
<TABLE>
<CAPTION>
Class A Class B
General Limited Limited
Partners Partner Partners Total
<S> <C> <C> <C> <C>
Balance at December 31, 1994 $ (215,657)$ (2,840,151)$ 100 $ (3,055,708)
Net loss (7,369) (361,058) - (368,427)
Distributions to partners (13,776) (675,000) - (688,775)
Balance at September 30, 1995$ (236,801)$ (3,876,209)$ 100 $ (4,112,910)
Balance at December 31, 1993 $ (196,405)$ (1,096,782)$ 100 $ (1,293,087)
Net loss (7,094) (347,622) - (354,716)
Distributions to partners:
Operations (8,265) (405,000) - (413,265)
Financing proceeds - (800,000) - (800,000)
Balance at September 30, 1994$ (211,765)$ (2,649,403)$ 100 $ (2,861,068)
See accompanying notes to financial statements
-3-
</TABLE>
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND LIMITED PARTNERSHIP
Statements of Cash Flows
For the nine months ended September 30,
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Cash flow from operating activities
Net loss $ (368,427) $ (354,716)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation of property and equipment 765,737 768,935
Amortization of loan fees 55,641 55,641
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (127,999) 2,923
Decrease in prepaid expenses 54,131 37,812
Increase in accounts payable and accrued expenses 170,750 106,988
Increase in tenant security deposits 14,636 1,091
Net cash provided by operating activities 564,469 618,674
Cash flows from investing activities-
additions to investment in real estate (63,678) (38,849)
Cash flows from financing activities
Decrease in mortgage loans payable (93,313) -
Distributions to investors (688,775) (1,213,265)
Net cash used in financing activities (782,088) (1,213,265)
Net decrease in cash and cash equivalents (281,297) (633,440)
Cash and cash equivalents
Beginning of period 1,738,073 2,265,838
End of period $1,456,776 $ 1,632,398
See accompanying notes to financial statements
-4-
</TABLE>
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND LIMITED PARTNERSHIP
Notes to Financial Statements
September 30, 1995
(Unaudited)
(1) The Fund and Basis of Preparation
The accompanying financial statements of Brown-Flournoy Equity Income
Fund Limited Partnership (the "Fund") do not include all of the
information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles. The unaudited interim financial statements reflect all
adjustments which are, in the opinion of management, necessary to a
fair statement of the results for the interim periods presented. All
such adjustments are of a normal recurring nature. The unaudited
interim financial information should be read in conjunction with the
financial statements contained in the 1994 Annual Report.
(2) Investment in Real Estate
Investment in real estate is stated at the lower of net realizable
value or cost, net of accumulated depreciation, and is summarized as
follows:
September 30, 1995 December 31, 1994
Land $ 1,205,950 $ 1,205,950
Buildings 20,134,515 20,134,515
Furniture, fixtures and equipment 2,177,250 2,113,572
-------------- --------------
23,517,715 23,454,037
Less: accumulated depreciation 8,352,710 7,586,973
-------------- --------------
Total $15,165,005 $15,867,064
========== ==========
(3) Cash and Cash Equivalents
The Fund considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. Cash and cash
equivalents consist of the following, stated at cost, which approximates
market value.
September 30, 1995 December 31, 1994
Cash and money market $ 451,691 $ 772,440
Certificates of deposit with interest rates
ranging from 4.25% to 5.9% in 1995
and 3.05% to 4.25% in 1994 1,005,085 965,633
-------------- --------------
$1,456,776 $1,738,073
======== ========
4) Related Party Transactions
Brown Equity Income Properties, Inc., the Administrative General
Partner, billed the Fund $6,490 and $10,137 in the quarters ended
September 30, 1995 and 1994, respectively, for reimbursement of the cost
of administrative services and expenses made on behalf of the Fund.
Flournoy Properties, Inc., an affiliate of the Development General
Partner, is the managing agent for the properties and earned a
management fee of $59,019 and $55,675 representing 5% of gross monthly
operating revenues from the properties during the quarters ended
September 30, 1995 and 1994, respectively.
-5-
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND LIMITED PARTNERSHIP
Notes to Financial Statements
September 30, 1995
(Unaudited)
(5) Mortgage Loans Payable
The first mortgage loans are secured by the land, apartment units and
all other improvements on the four apartment properties. These loans are
for an original term of 7 years with interest only payments at 9.6%.
Beginning in October, 1994 and thereafter, monthly payments will be
based on a 30-year amortization schedule with a balloon payment due at
the end of the 7 year term. Interest expense of $484,685 and $488,556
was paid during the quarters ended September 30, 1995 and 1994,
respectively.
(6) Special Distribution
On April 21, 1995, the Fund made a special distribution totalling
$275,510 from settlement proceeds resulting from the lawsuit the Fund
settled during the fourth quarter of 1995, with the manufacturer of
defective polybutylene piping which was utilized at one of the
properties. Each Class A Limited Partner received $10 per unit.
(7) Net Loss per Unit of Class A Limited Partnership Interest
Net loss per Class A Limited Partnership interest is disclosed on the
Statements of Operations and is based upon 27,000 units outstanding.
-6-
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND LIMITED PARTNERSHIP
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At September 30, 1995, the Fund had a working capital position of
unrestricted cash and cash equivalents of $1,318,524 and accounts payable and
accrued expenses of $618,180. Restricted cash represents amounts retained from
tenants for security deposits and totaled $138,252 at September 30, 1995. The
working capital balance represents reserves for future contingencies that were
established from mortgage loan proceeds and are deemed sufficient to meet the
Fund's liquidity requirements even under very pessimistic operating scenarios.
Reserves may be distributed as the General Partners deem appropriate.
Cash and cash equivalents decreased $192,303 during the third quarter
of 1995. This decrease represents the net effect of $6,839 in cash provided by
operating activities, $28,104 of capital expenditures, $33,283 in mortgage
principal payments, and an August 1995 distribution to investors of $137,755.
Cash provided by operating activities reflects an increase in amounts due from
affiliates of $142,896. This increase was associated with the payment of common
property related expenses on behalf of certain properties that are owned by
affiliates of one of the Partnership's General Partners. Subsequent to the end
of the third quarter, this balance was reduced to more normal levels via a
reimbursement from the affiliate entities.
In mid November, 1995 the Fund made a cash distribution to its
investors of $137,755. This distribution was derived from unrestricted cash
available at the end of the third quarter.
Currently, there are no material commitments for capital expenditures
or other uses of cash, except for ongoing debt service which is anticipated to
be adequately funded from cash provided by operations.
Results of Operations
Rental revenues for the third quarter and first nine months of 1995
were approximately 6% and 4% higher, respectively, than the same periods in
1994. This increase is primarily attributable to rental rate increases
implemented at the Fund's properties over the past several quarters. The most
significant improvement in rental revenues for the quarter was experienced at
the Park Place property, which experienced average occupancy during the quarter
of 96%, 6% greater than the same period in 1994.
Interest income increased during the third quarter and first nine
months of 1995 as compared to the same periods in 1994 due to higher interest
rates.
Total expenses during the quarter and nine months ended September 30,
1995 were approximately 9% and 5% higher than the same periods in 1994. This
increase was primarily attributable to the costs of painting the Park Place and
Southland Station properties during the third quarter at a total cost of
approximately $103,000. This compares to painting costs incurred during the
third quarter of 1994 of approximately $60,000, representing nearly two thirds
of the total costs for painting the High Ridge and Hidden Lake properties last
year. Additional repairs and maintenance charges during the third quarter of
1995 included concrete repairs at Park Place and approximately $10,000 in
roofing repairs at Southland Station, representing the deductible from an
insurance claim associated with hurricane damage incurred in August.
Overall occupancy for the Fund's four properties averaged 94% during
the third quarter, consistent with the third quarter of 1994 and down slightly
from the average 95% experienced during the first two quarters of 1995.
Occupancy remained generally stable at the Hidden Lake and High Ridge
properties, averaging 96% at both during the quarter. An intensive marketing
effort at Park Place has improved occupancy at the property from 90% during the
third quarter of 1994, to its current level of 96%. However, the Southland
Station property has experienced a decline in occupancy in recent months due to
continued home purchasing in the area.
-7-
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND LIMITED PARTNERSHIP
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations (continued)
Rental revenues during the third quarter at the Hidden Lake property,
located in Union City, Georgia, were 6% higher than the same period in 1994. The
property appears to have benefitted from its improved curb appeal resulting from
1994's painting efforts, as well as recent road repairs. The stable occupancy
levels at or above 95% have allowed management to completely eliminate
concessions and further tighten their tenant credit requirements.
The High Ridge property, located in Athens, Georgia, appears to have
been little impacted from additional competition from a nearby newly constructed
community. Occupancy has been maintained above 95% for most of 1995, while
management continues to increase rents on the most popular unit types. In
August, a rental rate increase of $20 to $50 per unit was implemented on several
unit types. Total revenues during the quarter were 8% higher than the third
quarter of 1994. This pace should continue as leasing efforts are further
bolstered by improved curb appeal from the recent painting of the property.
During the second and third quarters of 1995, management at the Park
Place property, located in Spartanburg, South Carolina, undertook an intensive
study of the market and the property's competitive position. As a result of this
study, certain marketing strategies were implemented, including revised
advertising materials and direct marketing to local businesses. These efforts,
combined with the property's recent painting and other aesthetic improvements,
have contributed to a significant improvement in operations. Occupancy during
the quarter, which averaged 96%, was 6% higher than the same period in 1994 and
8% higher than the second quarter of 1995. Rental revenues were 10% higher than
the third quarter of 1994. While leasing efforts will continue to be challenged
by the strong propensity toward home buying and continued new construction in
the area, management believes that the recent marketing and aesthetic changes
will allow the property to continue to compete well in this marketplace.
The Southland Station property, located in Warner Robbins, Georgia,
experienced a sharp decline in occupancy during the third quarter due to several
residents moving out to purchase new homes. While the news that the nearby
Warner Robbins Air Force Base would not be included in the latest round of
military base closures should provide ongoing stability to the market, many
residents reacted by solidifying their commitment to the area via a new home
purchase. While occupancy declined to an average of 88% during the quarter,
total revenues were actually 1% greater than the same period in 1994. The
ability to keep pace with prior periods' performance was due to the high level
of corporate units which provide a $900 per unit rental premium, as well as
rental rate increases implemented during the first quarter.
All four properties remain in excellent physical condition.
-8-
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND LIMITED PARTNERSHIP
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Inapplicable
Item 2. Changes in Securities
Inapplicable
Item 3. Defaults upon Senior Securities
Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders
Inapplicable
Item 5. Other Information
Inapplicable
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits: None.
b) Reports on Form 8-K: None.
-9-
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND LIMITED PARTNERSHIP
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BROWN-FLOURNOY EQUITY INCOME FUND
LIMITED PARTNERSHIP
DATE: 11/9/95 By: /s/ John M. Prugh
John M. Prugh
President and Director
Brown Equity Income Properties, Inc.
Administrative General Partner
DATE: 11/9/95 By: /s/ Timothy M. Gisriel
Timothy M. Gisriel
Treasurer
Brown Equity Income Properties, Inc.
Administrative General Partner
-10-
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with legend, if applicable)
</LEGEND>
<CIK> 796333
<NAME> Brown Flournoy Equity Income Fund
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> SEPT-30-1995
<EXCHANGE-RATE> 1
<CASH> 1,456,776
<SECURITIES> 0
<RECEIVABLES> 174,957
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,644,084
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,877,095
<CURRENT-LIABILITIES> 618,180
<BONDS> 20,233,573
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 16,877,095
<SALES> 0
<TOTAL-REVENUES> 3,499,486
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,408,069
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,459,844
<INCOME-PRETAX> (368,427)
<INCOME-TAX> 0
<INCOME-CONTINUING> (368,427)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (368,427)
<EPS-PRIMARY> 0.000
<EPS-DILUTED> 0.000
</TABLE>
