FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-17617
LUTHERAN BROTHERHOOD REALTY FUND I,
a California limited partnership
(Exact name of registrant as specified in its charter)
California 94-3046442
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
625 Fourth Avenue South
Minneapolis, Minnesota 55415
(Address of principal executive offices)
(612) 339-8091
(Registrant's telephone number, including area code)
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>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
In the opinion of Lutheran Brotherhood Real Estate Products Company (the
"General Partner"), the General Partner of Lutheran Brotherhood Realty Fund
I, a California limited partnership (the "Partnership"), all adjustments
necessary for a fair presentation of the Partnership's results have been
made in the following financial statements for the interim periods
presented. All such adjustments are of a recurring nature. However, such
financial statements are unaudited and subject to any year-end adjustments
that may be necessary.
LUTHERAN BROTHERHOOD REALTY FUND I
BALANCE SHEET
(thousands)
(Unaudited)
March 31, December 31,
1995 1994
---------- ------------
ASSETS
Real estate investment, at cost:
Land $ 636 $ 636
Buildings 1,612 1,612
------ -----
2,248 2,248
Less: Accumulated depreciation (281) (268)
------ -----
1,967 1,980
Investments in Joint Ventures 2,116 2,095
Cash and cash equivalents 585 521
Deferred charges (net) and other assets 101 122
------ -----
Total Assets $4,769 $4,718
====== ======
LIABILITIES AND PARTNERS' EQUITY
Payables to affiliates $ 24 $ 23
Property taxes payable 32
Other liabilities 4
------ -----
Total Liabilities 60 23
------ -----
Partners' Equity
Limited Partners' - 63,803 units
outstanding in 1994 and 1993 4,700 4,687
General Partner 9 8
------ -----
Total Partner's Equity 4,709 4,695
------ -----
Total Liabilities and Partners' $4,769 $4,718
Equity ====== ======
See accompanying notes
<PAGE>
LUTHERAN BROTHERHOOD REALTY FUND I
STATEMENT OF OPERATIONS
(Unaudited)
(thousands except per share amounts)
Three Months Ended
March 31,
1995 1994
---- ----
Revenue:
Rental $ 133 $ 127
Interest 7 3
------ -----
Total revenue 140 130
------ -----
Expenses:
Property operations 49 42
Depreciation and amortization 22 16
Administrative 40 33
------ -----
Total expenses 111 91
------ -----
Net income from operations 29 39
Income from Joint Ventures 49 27
------ -----
Net income $ 78 $ 66
====== ======
Net income per weighted average
number of limited partnership units $ 1.22 $ 1.04
====== ======
Weighted average number of
limited partnership units outstanding 63,803 63,803
====== ======
Distributions per weighted average
limited partnership units outstanding $ 1.00 $ 1.00
====== ======
See accompanying notes.
<PAGE>
LUTHERAN BROTHERHOOD REALTY FUND I
STATEMENT OF PARTNERS' EQUITY
FROM DECEMBER 31, 1992 THROUGH MARCH 31, 1995
(in thousands)
Total
General Limited Partners'
Partner Partners Equity
Balance at December 31, 1992 2 4,593 4,595
Net income 3 295 298
Distributions to Limited Partners (255) (255)
----- ----- -----
Balance at December 31, 1993 5 4,633 4,638
Net income 3 309 312
Distributions to Limited Partners (255) (255)
----- ----- -----
Balance at December 31, 1994 8 4,687 4,695
Net income 1 77 78
Distributions to Limited Partners (64) (64)
----- ----- -----
Balance at March 31, 1995 $ 9 $4,700 $4,709
===== ====== ======
See accompanying notes.
<PAGE>
LUTHERAN BROTHERHOOD REALTY FUND I
STATEMENT OF CASH FLOW
(Unaudited)
(thousands)
Three Months Ended
March 31,
1995 1994
---- ----
Net Income $ 78 $ 66
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 22 16
Changes in assets and liabilities:
Other assets (9) (12)
Payable to affiliates 1 17
Property taxes payable 32 32
Other accrued operating expenses 4 (2)
----- -----
Net cash provided by operating activities 128 117
----- -----
Cash flows from investing activities:
Capital improvements (3)
Tenant Reimbursements - capital improvements 23
Capital Infusion to Minnetonka 300/400 (80)
Distributions from joint ventures 29 64
Equity in joint venture earnings (49) (27)
----- -----
Net cash provided by (used in) investing
activities 0 (43)
----- -----
Cash flows from financing activities:
Distributions to partners (64) (64)
----- -----
Net cash used in financing activities (64) (64)
----- -----
Net increase (decrease) in cash and cash
equivalents 64 10
Cash and cash equivalents at beginning of period 521 562
----- -----
Cash and cash equivalents at end of period $ 585 $ 572
===== =====
Supplemental Schedules:
Interest paid $ 0 $ 0
Income taxes paid $ 0 $ 0
See accompanying notes.
<PAGE>
Note 1. Organization and Partnership Matters
Termination of the Offering
The Partnership's offering expired on February 11, 1989, having raised a
total of $6,365,000 in contributed capital (including Initial Limited
Partner's Contribution) from which the Partnership netted $5,719,000
after underwriting commissions and registration expenses.
Note 2. Net Income Per Partnership Unit
The Partnership Agreement of the Partnership ("Partnership Agreement")
provides for net income and net losses from operations for financial
reporting purposes to be allocated 99% to the Limited Partners and 1% to
the General Partner. Net income per weighted average number of Limited
Partnership Units is computed by dividing net income allocated to the
Limited Partners by the weighted average number of Limited Partnership
Units outstanding. Per unit information has been computed based on
63,803 weighted average units outstanding at both March 31, 1995 and
March 31, 1994.
Note 3. Real Estate Investments
On September 29, 1989, the Partnership restructured (the "Restructure") its
investment portfolio by consummating the following agreements entered into
as of June 30, 1989. The Restructure completely eliminated the Partnership's
debt.
Worthington Green Associates
Pursuant to a joint venture agreement, Lutheran Brotherhood ("LB"), the
parent of the General Partner contributed $6,161,595 cash for an 84%
interest in the joint venture. The Partnership deeded the Village at
Worthington Green ("Village") for a 16% interest in the joint venture and
$6,161,595 cash. On December 1, 1989, the agreement was revised to increase
the Partnership's interest in the joint venture to 19.3% in exchange for an
additional $200,000 in cash.
Northwest Distribution Center
Pursuant to a purchase agreement with LB which was assigned to LB from the
General Partner, the Partnership purchased the Northwest Distribution Center
("NWDC"), a bulk warehouse/distribution center located in New Hope,
Minnesota, for $2,256,750.
Minnetonka 225 Associates
Pursuant to a joint venture agreement with LB, the Partnership contributed
$606,430 cash for a 33% interest in a joint venture which owns and operates
a multi-tenant office/warehouse facility located in Minnetonka, Minnesota.
<PAGE>
Minnetonka 300 & 400 Associates
Pursuant to a joint venture agreement with LB, the Partnership contributed
$891,089 cash for a 33% interest in a joint venture which owns and operates
two multi-tenant office/warehouse facilities located in Minnetonka,
Minnesota.
At March 31, 1995 the assets and liabilities of the joint ventures were as
follows (in thousands):
Minnetonka Minnetonka Worthington
225 300 & 400 Green
Associates Associates Associates
Land $ 369 $ 687 $ 837
Property less depreciation 1,197 1,924 4,195
Deferred charges (net)
and other assets 332 454 852
------ ------ ------
1,898 3,065 5,884
Liabilities 26 111 41
------ ------ ------
Net assets $1,872 $2,954 $5,843
====== ====== ======
Revenues and expenses of the joint ventures for the period from January 1,
1995 through March 31, 1995 were as follows (in thousands):
Revenues $ 109 $ 151 $ 282
Property taxes (12) (34) (34)
Management fee (5) (7) (7)
Other operating expenses (22) (32) (80)
Depreciation (18) (39) (65)
------ ------ ------
Net income 52 39 96
Partnership interest 33.3% 33.3% 19.3%
Partnership income $ 17 $ 13 $ 19
------ ------ ------
Total income from joint ventures $ 49
======
<PAGE>
Note 4. Commitments, Contingencies, and Subsequent Events
Commitments
Under the Partnership Agreement, the Partnership is required to maintain
reasonable reserves for normal repairs, replacements, working capital, and
contingencies in an amount equal to at least 3% of Capital Contributions.
In the event expenditures are made from these reserves, a portion of the
cash generated from operating revenue shall be allocated to such reserves to
the extent necessary to maintain the foregoing level. Reserves, including
demand deposits and Treasury securities, at March 31, 1995 and December 31,
1994 were in excess of 3% of Capital Contributions.
Pending Litigation
The Partnership is not a party to, nor is any of the Partnership's property
the subject of, any material legal proceedings.
Subsequent Distribution
Subsequent to quarter end, but as of March 31, 1995, the Partnership paid
distributions totaling $63,803, to the Limited Partners at the rate of 4%
per annum on the Limited Partners' invested capital.
Note 5. Fees and Reimbursements
For the three months ended March 31, 1995 and 1994, the Partnership was
allocated $20,002 and $16,800, respectively, in partnership administrative
expenses by the General Partner and other affiliated entities.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Partnership was formed to engage in the business of acquiring and
operating income-producing real properties and holding the properties for
investment. The Partnership's public offering commenced on December 4, 1987,
and expired on February 11, 1989. The offering raised a total of $6,365,000
in contributed capital (including the Initial Partners' contributions) from
which the Partnership netted $5,719,000 after underwriting and registration
expenses.
The Partnership completed its start-up and investment-in-properties phases
in 1989 and is currently in an operational phase in which the Partnership's
activities will be focused on efforts to increase income and distributions
to Limited Partners through active management of the Partnership's
properties.
Currently, the Partnership owns a warehouse/distribution center in New Hope,
Minnesota and is a co-venturer in three joint ventures holding four
residential and commercial properties. See Part I, Item 1, Note 3, Real
Estate Investments, for a description of the September, 1989 restructure of
the Partnership's investment portfolio pursuant to which the Partnership
acquired its interest in these properties.
RESULTS OF OPERATIONS
Gross rental revenues for NWDC were relatively flat because occupancy levels
were at 100% during the first quarters of 1995 and 1994. Depreciation and
amortization expense increased 38% from $16,000 to $22,000, primarily as a
result of the capitalization of additional tenant improvements late in 1994.
Other operating expenses increased 16% from $42,000 to $49,000, due to a new
tenant security system and sprinkler repairs in 1995 and tenant
reimbursements received in the first quarter of 1994 from prior year
repairs.
The Partnership's share of Joint Venture income nearly doubled to $49,000
during the first quarter of 1995 from $27,000 in the first quarter of 1994,
primarily due to significantly improved operating results at the Minnetonka
225 property. The Partnership's share of income from the Minnetonka 225
Joint Venture was $17,000 during the first quarter of 1995 compared to a
loss of $5,000 during the first quarter of 1994. The occupancy level at
Minnetonka 225 increased 37% in the first quarter of 1995 compared to the
first quarter of 1994. In addition, there were unusually high operating
expense reimbursements paid to tenants during the first quarter of 1994.
These reimbursements primarily related to prior year property tax refunds
received on the property in 1993. Overall expenses for the property
increased slightly in 1995.
Gross rental revenue at Minnetonka 300/400 rose 12% during the first quarter
of 1995 compared to the first quarter in 1994, primarily due to an increase
of 18% in the occupancy rate at Minnetonka 300. However, this increase was
offset by an increase in depreciation expense of 86% between the same
periods. This increase resulted from capitalized roof replacement costs at
Minnetonka 300 that were completed in December, 1994. Minnetonka 400's
occupancy rate was 100% during both periods. As a result of all of these
actions, the Partnership's share of income from this joint venture decreased
to $13,000 during the first quarter of 1995 compared to $15,000 during the
first quarter in 1994.
Occupancy levels at Worthington Green remained at 97% during both periods.
Gross rental revenues increased only 4% due to slight increases in rental
rates. There was little change in total operating expenses between periods.
As a result, the Partnership's share of income from this joint venture
increased slightly to $19,000 during the first quarter of 1995 from $17,000
during the first quarter of 1994.
INFLATION
The moderate inflation experienced in 1994 had little effect on the
Partnership's operations. It is anticipated that during 1995, inflation will
continue at a moderate level and that the Partnership's operations will not
be significantly influenced by inflation.
LIQUIDITY AND CAPITAL RESOURCES
Northwest Distribution Center
NWDC is 100% occupied and the next lease expiration is not until April of
1997 when 17% of the property comes up for renewal. The market for bulk
warehouse buildings continues to be strong. The relatively high demand for
additional space together with low supply have allowed property owners to
increase rental rates and maintain strong occupancies in late 1994 and early
1995. These conditions are not expected to change through at least late 1995
since new development is not keeping pace with demand for functional bulk-
type space.
The Village at Worthington Green
Occupancy at The Village averaged 94% during the first quarter of 1995. The
property's market area, Worthington, continues to see employment and housing
growth, including single and multi-family developments. Due to continued new
development competition, monthly rents at The Village saw little positive
change during the quarter. However, management is reducing the concessions
necessary to attract new tenants to The Village.
Management visited The Village during March of 1995. Several potential
developments relating to road improvements within the Worthington/Dublin
areas may impact The Village, with the potential for either increasing or
reducing the property's value. These developments will be watched closely.
Consideration is also being given to enhancing the marketability of the
property by the addition of car ports and other amenities, provided that
they are economically feasible. During 1995, several roofs will be replaced,
the parking areas overlayed and other interior upgrades performed in order
for the property to maintain peak desirability.
Minnetonka Industrial Properties
Minnetonka 225's occupancy level at the end of the first quarter of 1995 was
100%, Minnetonka 300's was approximately 73% and Minnetonka 400's was 100%.
Minnetonka 300's occupancy is expected to rise to 100% as of May 1, 1995.
However, Minnetonka 400's occupancy will be reduced to 78% effective July 1,
1995 due to a tenant exercising its option to terminate its lease on that
date. Management believes that this termination is actually favorable to the
Minnetonka 300/400 properties due to that tenant's significant parking
requirement, which has negatively impacted tenant retention in Minnetonka
300. Roof replacements are scheduled for both Minnetonka 225 and Minnetonka
400 in July of 1995 at a total cost of approximately $425,000.
The Office/warehouse market for the Southwest Twin Cities geographic area is
the strongest such market in the Twin Cities with vacancy less than 9%
currently. Rents are increasing as demand for this type of property exceeds
supply. New development comprising approximately 6% of this market's supply
is currently planned and under pre-leasing; it is expected that ground on
these projects will be broken during the summer of 1995. Much of this new
development is expected to be filled by growth as opposed to relocations in
the market area.
_____________________________________________
At March 31, 1995, the Partnership held cash and cash equivalents of
$585,000. The Partnership improved its cash position by $64,000 during the
quarter as a result of net cash provided from operating activities of
$128,000 offset by distributions to Partners of $64,000.
The Partnership has sufficient cash and cash equivalents to meet its 3%
required reserve.
Cash provided from operations in 1995 is expected to be sufficient to
satisfy substantially all of the Partnership's working capital and normal
capital expenditure needs. During the first quarter, the Partnership's share
of capital expenditures was approximately $24,000. An additional $261,000 in
capital expenditures is anticipated during the remainder of 1995. However,
cash provided from operations in 1995 may not be sufficient to provide
anticipated distributions to the Limited Partners for the entire year. The
Partnership may borrow funds from the General Partner to provide cash for
distributions to Limited Partners but it is not anticipated that such
borrowing will occur.
It is not anticipated that the Partnership will acquire additional
properties or additional interests in joint ventures which own properties.
During the holding period of the properties, cash flow from operations is
expected to contribute to the liquidity of the Partnership as the
Partnership's primary objective is to generate current income. Secondarily,
the General Partner's intent is to realize an increased value for the
properties at sale, thus enhancing the Partnership's ability to make surplus
funds distributions to the Limited Partners upon such property sales.
<PAGE>
PART II. Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) No exhibits are filed as part of this report.
(b) There were no reports on Form 8-K filed during the quarter
ended March 31, 1995.
<PAGE>
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.
LUTHERAN BROTHERHOOD REALTY FUND I,
a California limited partnership
By: Lutheran Brotherhood Real
Estate Products Company,
Its General Partner
Date: May 12, 1995 By: /s/ Mitchell F. Felchle
Mitchell F. Felchle
President
Date: May 12, 1995 By: /s/ Anita J. T. Young
Anita J. T. Young
Treasurer
(Chief Financial Officer)
