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, 1998
{ } 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, 1998 Commission file number 000-16698
Brown-Benchmark Properties Limited Partnership
(Exact Name of Registrant as Specified in its Charter)
Delaware 31-1209608
(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>
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-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
Assets
<S> <C> <C>
Investment in real estate $ 14,518,315 $ 15,076,301
Cash and cash equivalents 854,286 910,435
Other assets
Accounts receivable, net 83,397 73,196
Prepaid expenses 9,211 29,036
Escrow for real estate taxes 163,578 223,772
Loan fees, less accumulated amortization
of $22,630 and $10,336, respectively 80,732 93,026
Total other assets 336,918 419,030
Total assets $ 15,709,519 $ 16,405,766
Liabilities and Partners' Capital
Liabilities
Accounts payable and accrued expenses $ 638,708 $ 610,557
Tenant security deposits 140,050 139,429
Due to affiliates 6,972 10,892
Mortgage loans payable 14,231,212 14,385,782
Total liabilities 15,016,942 15,146,660
Partners' Capital
General Partners (199,753) (188,422)
Assignor Limited Partner
Assignment of Limited Partnership
Interests - $25 stated value per
unit, 500,000 units outstanding 977,071 1,532,225
Limited Partnership Interests -
$25 stated value per unit,
40 units outstanding (84,841) (84,797)
Subordinated Limited Partners 100 100
Total partners' capital 692,577 1,259,106
Total liabilities and partners' capital $ 15,709,519 $ 16,405,766
</TABLE>
See accompanying notes to financial statements
-1-
<PAGE>
BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
Revenues
<S> <C> <C> <C> <C>
Rental income $ 976,536 $ 969,512 $ 2,904,099 $ 2,882,290
Interest income 5,271 8,158 20,209 19,015
981,807 977,670 2,924,308 2,901,305
Expenses
Compensation and benefits 122,571 95,983 299,157 288,071
Utilities 69,854 76,822 215,877 225,987
Property taxes 92,361 88,311 277,083 264,933
Maintenance and repairs 107,902 79,733 239,533 204,318
Property management fee 43,975 43,662 130,777 129,624
Advertising 15,995 8,606 33,656 23,161
Insurance 8,205 8,001 24,615 24,003
Other 13,691 11,102 36,196 30,328
Administrative & professional fees 11,562 18,831 47,423 69,508
Interest expense 274,626 278,506 826,854 903,617
Depreciation of property and
equipment 257,787 257,787 773,361 773,361
Amortization of loan fees 4,098 4,098 12,294 12,294
1,022,627 971,442 2,916,826 2,949,205
Net income (loss) $ (40,820) $ 6,228 $ 7,482 $ (47,900)
Net income(loss) per unit of assignee
limited partnership interest $ (0.08) $ 0.01 $ 0.01 $ (0.09)
</TABLE>
See accompanying notes to financial statements
-2-
<PAGE>
BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Consolidated Statements of Partners' Capital
For the Nine Months Ended September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Assignor Limited Partner
Assignment
of Limited Limited Subordinated
General Partnership Partnership Limited
Partners Interest Interest Partners Total
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $ (188,422) $ 1,532,225 $ (84,797) $ 100 $1,259,106
Net income 150 7,332 1 - 7,482
Distributions to partners (11,480) (562,486) (45) - (574,011)
Balance at September 30, 1998 $ (199,753) $ 977,071 $ (84,841) $ 100 $ 692,578
Balance at December 31, 1996 $ (175,806) $ 2,150,367 $ (84,748) $ 100 $1,889,913
Net loss (958) (46,938) (4) - (47,900)
Distributions to partners (7,654) (374,998) (30) - (382,682)
Balance at September 30, 1997 $ (184,418) $ 1,728,431 $ (84,782) $ 100 $1,459,331
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30,
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
Cash flows from operating activities
<S> <C> <C>
Net income (loss) $ 7,482 $ (47,900)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities
Depreciation of property and equipment 773,361 773,361
Amortization of loan fees 12,294 12,294
Changes in assets and liabilities
(Increase) decrease in accounts receivable (10,201) 51
Decrease in prepaid expenses 19,825 2,482
Decrease in escrow for real estate taxes 60,194 95,024
Increase (decrease) in accounts payable and accrued expense 28,151 (15,521)
(Decrease) increase in due to affiliates (3,920) 2,501
Increase in tenant security deposits 621 1,483
Net cash provided by operating activities 887,807 823,775
Cash flows from investing activities-
additions to investment in real estate (215,375) (63,344)
Cash flows from financing activities
Financing costs - (23,612)
Distributions to partners (574,011) (382,682)
Mortgage loan principal reduction (154,570) (14,266,911)
Proceeds from issuance of mortgage loans payable - 14,500,000
Net cash used in financing activities (728,581) (173,205)
Net increase in cash and cash equivalents (56,149) 587,226
Cash and cash equivalents
Beginning of period 910,435 402,707
End of period $ 854,286 $ 989,933
</TABLE>
See accompanying notes to financial statements
- -4-
<PAGE>
BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1998
NOTE 1 - THE FUND AND BASIS OF PREPARATION
The accompanying financial statements of Brown-Benchmark Properties Limited
Partnership (the "Partnership") 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
consolidated 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 1997 Annual Report.
NOTE 2 - INVESTMENT IN REAL ESTATE
Investment in real estate is stated at cost, net of accumulated
depreciation, and is summarized as follows:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
<S> <C> <C>
Land $ 1,257,000 $ 1,257,000
Buildings 21,410,475 21,307,273
Furniture, fixtures
and equipment 2,203,149 2,090,976
24,870,624 24,655,249
Less: accumulated depreciation 10,352,309 9,578,948
Total $14,518,315 $15,076,301
</TABLE>
NOTE 3 - CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist solely of cash and money market accounts,
stated at cost, which approximate market value at September 30, 1998 and
December 31, 1997.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Administrative General Partner earned $7,348 and $10,540 during the quarters
ended September 30, 1998 and 1997, respectively, for reimbursement of costs
associated with administering the Partnership, including clerical services,
investor communication services, and reports and filings made to regulatory
authorities.
Benchmark Properties, Inc., an affiliate of the Development General Partner, the
managing agent for the properties, earned a management fee of $43,975 and
$43,662 during the quarters ended September 30, 1998 and 1997, respectively.
NOTE 5 - MORTGAGE LOANS PAYABLE
The Partnership closed its mortgage loan refinancing with The Canada Life
Assurance Company for loans totaling $14,500,000 on February 28, 1997. The
renewal terms became effective on June 1, 1997 and provide for a term of five
years at an interest rate of 7.70%. Monthly payments are based on a 25-year
amortization schedule with a balloon payment due at the end of the 5-year term.
Prior to the effective date of the new loan terms on June 1, 1997, the mortgage
loan terms provide for interest only at 9%.
The Partnership incurred financing fees totaling $103,362. These costs were
capitalized as financing fees and are being amortized over the new term of the
loans.
-5-
<PAGE>
BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1998
NOTE 6 - NET LOSS PER UNIT OF ASSIGNED LIMITED PARTNERSHIP INTEREST
Net loss per Unit of assigned limited partnership interest is disclosed on the
Statement of Operations and is based upon average units outstanding of 500,000
during the quarters ended September 30, 1998 and 1997.
-6-
<PAGE>
BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
The Partnership's liquidity is largely dependent on its ability to maintain
reasonably high occupancy levels, achieve rental rate increases as the
respective markets allow and to control operating expenses. The Partnership
currently has sufficient liquid assets from its rental revenues to satisfy its
anticipated operating expenditures and debt service obligations.
On November 10, 1998, the Partnership made a cash distribution to its partners
totaling $191,342, representing an annualized return of 6% on invested capital.
Based upon the operating results through September and the budget for the
remainder of the year, operating cash flow during 1998 is expected to fully fund
a distribution rate of 6%.
During 1998 the Partnership will utilize the remaining balance of the excess
proceeds ($151,000) generated from refinancing its mortgage loans in 1998 to
fund planned improvements to the three apartment properties. The funds will
primarily be used for roof repairs and brick re-pointing at the Deerfield
property, blacktop sealant and curbing repairs on the parking lots at the
Deerfield and Woodhills properties and refurbishing the clubhouse/office at the
Deerfield property.
The Partnership does not anticipate an outlay for any other significant capital
improvements or repair costs that might adversely impact its liquidity.
Results of Operations
Third quarter revenues and revenues received for the nine months ended September
30, 1998, were essentially flat when compared to those received during the same
periods of 1997, increasing less than 1%. While revenues generated at the
Cincinnati property are above budget, revenues from the Dayton and Columbus
properties remain below budget due to decreased occupancy levels and higher
rental concessions. While the gross rent potential for the three communities
increased $91,348 (or 3%) through the third quarter of 1998 when compared to the
same period in 1997, the average aggregate occupancy level decreased from 94%
through the first nine months of 1997 to 92% through the nine months ended
September 30, 1998. Management has implemented programs to improve occupancy
levels at the Dayton and Columbus properties and we are optimistic fourth
quarter revenues will show a positive trend.
Third quarter operating expenses excluding interest charges, depreciation and
amortization costs, increased $55,065 (or 12.8%) versus similar expenses
incurred during the third quarter of 1997. The primary reason for this increase
was higher compensation and benefit costs at each property as well as increased
maintenance expenses at the Dayton and Columbus properties. The increased
maintenance expenses are associated with apartment interior upgrades designed to
improve leasing efforts and decrease unit turnover. Through the first nine
months of the year, similar expenses increased $44,384 (or 3.5%) versus 1997.
Fourth quarter operating expenses are expected to decrease approximately 5% when
compared to third quarter results and as a result operating expenses for the
year are expected to be within 1% of budget.
The marginal increase in revenues, coupled with higher operating expenses
(excluding interest charges, depreciation and amortization costs) resulted in a
slight decrease (1.3%) in the net operating income of the property through the
first nine months of the 1998 as compared to 1997.
Interest expense on the Partnership's mortgage loans decreased $76,763 (or 8.5%)
through the nine months ended September 30, 1998 when compared to same period in
1997, due to the refinancing of the loans in 1997.
Occupancy levels at Woodhills, in Dayton, Ohio, averaged 88% during the third
quarter, unchanged from the second quarter but down from the 91% level
experienced during the first quarter of the year. As a result of the lower
occupancy levels, rental revenues remain below budget. Revenues received at the
property through the first nine months of 1998 are approximately $60,000 under
budget. The south Dayton apartment rental market remains competitive due to the
-7-
<PAGE>
BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations (continued)
completion of the construction of approximately 1,000 new apartments. In an
effort to improve the occupancy levels at the property, management has
implemented a program to upgrade available units to include: new carpet and
vinyl, lighting fixtures, faucets, mirrors and fresh paint. Occupancy levels
have improved since the end of the third quarter and currently the community is
92% occupied. Management's goal is to achieve a 95% occupancy level by year-end.
The rental market in Cincinnati continues to be strong. The average occupancy
level at the Deerfield property was 97% during the third quarter. Rental
revenues continue to trend positively due to both strong occupancy levels and
increased rental rates. The average rental rate has increased from $590 in the
third quarter of 1997 to $608 in the third quarter of 1998, representing an
increase of 3%. Revenues have increased during each quarter of the year and
through September 1998, revenues are approximately $16,000 higher than budgeted.
Operating expenses remain on budget and as a result the property's net operating
income exceeds budget for the year. The community center has been updated and
new signage is planned for the fourth quarter. There continues to be a strong
traffic flow of prospective residents and management is confident the property
will sustain high occupancy levels for the foreseeable future.
At Oakbrook in Columbus, Ohio, occupancy levels decreased marginally from 95%
during the second quarter of the year to 94% during the third quarter. As a
result of the competitive rental market in Columbus the rental rate increases
projected for the year have not been achieved. As a result, the property's gross
rent potential through the first nine months of the year is $7,500 under budget.
Management's plan at Oakbrook is to upgrade the apartment interiors, improve the
curb appeal of the community and reduce the resident turnover which will allow
for rental rate increases and improve occupancy levels to 95% by year end.
Year 2000
The General Partners are aware of the issues associated with the programming
code in many existing computer systems (the "Year 2000" issue) as the millennium
approaches. The General Partners have conducted a review of computer systems to
identify hardware and software affected by the Year 2000 issue. This issue
affects computer systems having date sensitive programs that may not properly
recognize the Year 2000. Systems that do not properly recognize such information
could generate erroneous data or cause a system to fail resulting in business
interruption.
With respect to existing computer systems, the General Partners are upgrading in
order to meet the demands of the business. In the process, the General Partners
are taking steps to identify, correct and/or reprogram and test its existing
systems for Year 2000 compliance. It is anticipated that all new system upgrades
or reprogramming efforts will be completed by late calendar year 1998, allowing
adequate time for testing. The General Partners presently believe that with
modification to existing software the Year 2000 issue can be mitigated. However,
given the complexity of the Year 2000 issues, there can be no assurances that
the General Partners will be able to address the problem without costs and
uncertainties that might affect future financial results of the Partnership or
cause reported financial information of the Partnership not to be necessarily
indicative of future operating results or future financial condition.
The General Partners have incurred, and expect to incur additional, internal
costs as well as other expenses to address the necessary software upgrades,
training, data conversion, testing and implementation related to the Year 2000
issue. Such costs are being expensed as incurred. The General Partners do not
expect the amounts required to be expensed to have a material effect on the
Partnership's financial position or results of operations. The Year 2000 issue
is expected to affect the systems of various entities with which the Partnership
and the General Partners interact including payors, suppliers and vendors. There
can be no assurance that data produced by systems of other entities on which the
General Partners' systems rely will be converted on a timely basis or that a
failure by another entity's systems to be Year 2000 compliant will not have a
material adverse effect on the Partnership.
-8-
<PAGE>
BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Inapplicable
Item 2. Changes in Securities and Use of Proceeds
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-BENCHMARK PROPERTIES 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-BENCHMARK PROPERTIES
LIMITED PARTNERSHIP
DATE: 11/12/98 By: /s/ John M. Prugh
John M. Prugh
President and Director
Brown-Benchmark AGP, Inc.
Administrative General Partner
DATE: 11/12/98 By: /s/ Timothy M. Gisriel
Timothy M. Gisriel
Treasurer
Brown-Benchmark AGP, 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> 0000818084
<NAME> BROWN-BENCHMARK PROPERTIES
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 854,286
<SECURITIES> 0
<RECEIVABLES> 83,397
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,110,472
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,709,519
<CURRENT-LIABILITIES> 785,730
<BONDS> 14,231,212
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 15,709,519
<SALES> 0
<TOTAL-REVENUES> 2,924,308
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,089,972
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 826,854
<INCOME-PRETAX> 7,482
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,482
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,482
<EPS-BASIC> 0.010
<EPS-DILUTED> 0.000
</TABLE>
