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 March 31, 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 March 31, 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>
March 31, December 31,
1995 1994
<S> <C> <C>
Assets
Investment in real estate $ 15,624,679 $ 15,867,064
Cash and cash equivalents 1,715,320 1,738,073
Other assets
Accounts receivable, including $15,000 and $23,533
due from affiliates, respectively 34,678 46,958
Prepaid expenses 48,335 66,482
Loan fees, less accumulated amortization
of $414,215 and $395,668, respectively 105,100 123,647
Total other assets 188,113 237,087
Total assets $ 17,528,112 $ 17,842,224
Liabilities and Partners' Capital
Accounts payable and accrued expenses including
$33,030 and $26,602 due to affiliates, respectively$ 389,518 $ 447,430
Tenant security deposits 125,290 123,616
Mortgage loans payable 20,296,504 20,326,886
Total liabilities 20,811,312 20,897,932
Partners' Capital
General Partners (220,207) (215,657)
Limited Partners
Class A - $1,000 stated value per unit;
27,000 units outstanding (3,063,093) (2,840,151)
Class B 100 100
Total partners' capital (3,283,200) (3,055,708)
Total liabilities and partners' capital $ 17,528,112 $ 17,842,224
</TABLE>
See accompanying notes to financial statements
-1-
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND LIMITED PARTNERSHIP
Statements of Operations
For the three months ended March 31,
(Unaudited)
1995 1994
Revenues
Rental income $ 1,132,960 $ 1,093,688
Interest income 16,763 13,045
1,149,723 1,106,733
Expenses
Compensation and related benefits 109,919 96,042
Utilities 59,083 69,628
Property taxes 89,913 92,518
Insurance 18,147 13,150
Advertising 15,555 14,654
Maintenance and repairs 99,076 77,630
Property management fee 56,648 54,684
Other 8,428 5,016
Administrative and professional fees 21,135 27,619
Interest expense 487,343 488,557
Depreciation of property and equipment 255,666 255,255
Amortization of loan fees 18,547 18,547
1,239,460 1,213,300
Net loss $ (89,737) $ (106,567)
Net loss per Unit of Class A
limited partnership interest $ (3.26) $ (3.87)
See accompanying notes to financial statements
-2-
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND LIMITED PARTNERSHIP
Statements of Partners' Capital
For the three months ended March 31,
(Unaudited)
Class A Class B
General Limited Limited
Partners Partner Partners Total
Balance at December 31, 1994$ (215,657)$ (2,840,151)$ 100 $ (3,055,708)
Net loss (1,795) (87,942) - (89,737)
Distributions to partners (2,755) (135,000) - (137,755)
Balance at March 31, 1995 $ (220,207)$ (3,063,093)$ 100 $ (3,283,200)
Balance at December 31, 1993$ (196,405)$ (1,096,782)$ 100 $ (1,293,087)
Net loss (2,131) (104,436) - (106,567)
Distributions to partners (2,755) (135,000) - (137,755)
Balance at March 31, 1994 $ (201,291)$ (1,336,218)$ 100 $ (1,537,409)
See accompanying notes to financial statements
-3-
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND LIMITED PARTNERSHIP
Statements of Cash Flows
For the three months ended March 31,
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Cash flow from operating activities
Net loss $ (89,737) $ (106,567)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation of property and equipment 255,666 255,255
Amortization of organization and start-up costs
and loan fees 18,547 18,547
Changes in assets and liabilities:
Decrease in accounts receivable 12,280 3,934
Decrease in prepaid expenses 18,147 13,150
Decrease in accounts payable and accrued expenses (57,912) (96,878)
Increase (decrease) in tenant security deposits 1,674 (920)
Net cash provided by operating activities 158,665 86,521
Cash flows from investing activities-
additions to investment in real estate (13,281) -
Cash flows from financing activities
Decrease in mortgage loans payable (30,382) -
Distributions to investors (137,755) (137,755)
Net cash used in financing activities (168,137) (137,755)
Net decrease in cash and cash equivalents (22,753) (51,234)
Cash and cash equivalents:
Beginning of period 1,738,073 2,265,838
End of period $1,715,320 $ 2,214,604
</TABLE>
See accompanying notes to financial statements
-4-
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 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:
<TABLE>
<CAPTION>
March 31, 1995 Dec. 31, 1994
-------------- -------------
<S> <C> <C>
Land $ 1,205,950 $ 1,205,950
Buildings 20,134,515 20,134,515
Furniture, fixtures and equipment 2,126,853 2,113,572
-------------- --------------
23,467,318 23,454,037
Less: accumulated depreciation 7,842,639 7,586,973
-------------- --------------
Total $15,624,679 $15,867,064
======== ========
</TABLE>
(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.
<TABLE>
<CAPTION>
March 31, 1995 Dec. 31, 1994
-------------- -------------
<S> <C> <C>
Cash and money market $ 738,496 $ 772,440
Certificates of deposit with interest rates
ranging from 4.25% to 5.75% in 1995
and 3.05% to 4.25% in 1994 976,824 965,633
-------------- --------------
$1,715,320 $1,738,073
======== ========
</TABLE>
-5-
<PAGE>
BROWN-FLOURNOY EQUITY INCOME FUND LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 1995
(Unaudited)
(4) Related Party Transactions
Brown Equity Income Properties, Inc., the Administrative General
Partner, billed the Fund $13,846 and $9,503 in the quarters ended March
31, 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 $56,648 and $54,684 representing 5% of gross monthly
operating revenues from the properties during the quarters ended March
31, 1995 and 1994, respectively.
(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 $487,576 and $488,557
was paid during the quarters ended March 31, 1995 and 1994,
respectively.
(6) Net Loss per Class A Limited Partnership Interest
Net loss per Class A Limited Partnership interest as disclosed on the
statements of operations is based upon 27,000 weighted average units
outstanding during the quarters ended March 31, 1995 and 1994.
(7) Subsequent Event
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.
-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 March 31, 1995, the Fund had a working capital position of
unrestricted cash and cash equivalents of $1,590,030 and accounts payable and
accrued expenses of $389,518. Restricted cash represents amounts retained from
tenants for security deposits and totaled $125,290 at March 31, 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 $22,753 during the first quarter of
1995. This decrease represents the net effect of $158,665 in cash provided by
operating activities, $13,281 utilized for capital expenditures, paydown of
first mortgage balances of $30,382 and distributions to investors of $137,755.
In May, 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 first quarter. On April 21, 1995 the Fund made an additional
distribution to investors of approximately $275,000, representing proceeds
received during 1994 from the settlement of a lawsuit regarding polybutylene
piping utilized in the construction of one of the properties.
The provisions of the mortgages for each of the Fund's four properties
required principal amortization of the loans, beginning in October, 1994. As a
result, debt service payments increased approximately $10,000 per month, in
aggregate. Current operating results indicate that this increased debt service
will be adequately funded from cash provided by operations.
The Fund's management anticipates incurring certain capital expenditures
during the second, third and fourth quarters of 1995, primarily to paint two of
the Fund's properties. The cost of these expenditures is estimated at
approximately $110,000 and will be adequately funded from cash provided by
operations and available cash reserves.
Currently, there are no material commitments for capital expenditures or
other uses of cash, other than ongoing debt service.
Results of Operations
Rental revenues for the first quarter of 1995 were approximately 3.6%
higher than the same period in 1994. This increase is primarily the result of
rental rate increases implemented at the Fund's properties throughout 1994 and
early 1995. Interest income for the quarter was higher than the same period in
1994, primarily due to higher available interest rates in 1995.
Total expenses during the first quarter of 1995 were consistent with
same period in 1994. The only notable change was represented by an increase in
maintenance and repairs of approximately $22,000. This increase is primarily
associated with certain non-recurring repairs made to parking lots and access
roads during the first quarter.
Overall occupancy for the Fund's properties averaged 92% during the
first quarter of 1995, a slight decrease from the first quarter of 1994's
average of 94%. This decrease is primarily the result of aggressive rental rate
increases implemented during the first quarter. Rents were increased 6%, on
average, in January, resulting in a temporary increase in turnover. While
occupancy increased slightly, the magnitude of the rent increases caused an
overall rise in total income.
-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)
Occupancy averaged 95% during the first quarter at the Hidden Lake
property in Union City, Georgia. Rents were increased $20 to $60 per unit in
January. While occupancy initially declined in response to the higher rent
levels, total income remained at historical levels, due in part to higher income
from corporate rental units. Leasing efforts have been improved due, in part, to
the property's painting during 1994 and occupancy by the middle of April was
above 96%.
The High Ridge property, located in Athens, Georgia, achieved an average
occupancy during the quarter of 96%, 1% lower than same period in 1994. Rents
were increased $35 to $50 per unit during the quarter, contributing to a 6%
increase in total income as compared to the same period in 1994. The increase in
rents brought the property to levels consistent with amounts being charged by a
newly constructed property nearby. While the addition of new units to the market
has heightened competition for the property, it has also provided an opportunity
to set a new, and higher, level for Class A property rents.
Occupancy at the Park Place property in Spartanburg, South Carolina,
averaged 85% during first quarter, a decrease from the 1994 first quarter
average of 87%. In spite of the lower occupancy, management believed there
remained an opportunity to achieve higher rent levels from current tenants. A
rental rate increase averaging $35 per unit was implemented in January,
contributing to an $11,000 increase in total income as compared to the same
period in 1994. Management continues to examine the leasing challenges of the
market, in an effort to best position the property to compete. In order to
improve the overall aesthetic appeal of the community, management plans to paint
the property and reseal the parking lot during 1995.
The Southland Station property, located in Warner Robins, Georgia,
achieved an average occupancy during the quarter of 93%, as compared to 97%
during the first quarter of 1994. Rents, which were increased an average of $50
per unit during 1994, were raised again during the first quarter an average of
$40 per unit. These increases contributed to a $10,000 increase in total income,
as compared to the same period in 1994. Management intends to paint the property
during 1995, which should enhance leasing efforts.
All four properties remain in excellent 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: 5/9/95 By: /s/ John M. Prugh
John M. Prugh
President and Director
Brown Equity Income Properties, Inc.
Administrative General Partner
DATE: 5/9/95 By: /s/ Timothy M. Gisriel
Timothy M. Gisriel
Treasurer
Brown Equity Income Properties, Inc.
Administrative General Partner
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000796333
<NAME> Brown Flournoy Equity Income Fund
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 1,715,320
<SECURITIES> 0
<RECEIVABLES> 34,678
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,798,333
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,528,112
<CURRENT-LIABILITIES> 389,518
<BONDS> 20,296,504
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,528,112
<SALES> 0
<TOTAL-REVENUES> 1,149,723
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 752,117
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 487,343
<INCOME-PRETAX> (89,737)
<INCOME-TAX> 0
<INCOME-CONTINUING> (89,767)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (89,737)
<EPS-PRIMARY> 0.000
<EPS-DILUTED> 0.000
</TABLE>
