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 September 30, 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)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Real estate investment, at cost:
Land $ 636 $ 636
Buildings 1,642 1,612
------ ------
2,278 2,248
Less: Accumulated depreciation (306) (268)
------ ------
1,972 1,980
Investments in joint ventures 2,109 2,095
Cash and cash equivalents 637 521
Receivables from affiliates 40
Deferred charges (net) and other assets 65 122
------ ------
Total Assets $4,823 $4,718
====== ======
LIABILITIES AND PARTNERS' EQUITY
Payables to affiliates $ 9 $ 23
------ ------
Other liabilities 79
Total Liabilities 88 23
------ ------
Partners' Equity
Limited Partners' - 63,803 units
outstanding in 1995 and 1994 4,725 4,687
General Partner 10 8
------ ------
Total Partner's Equity 4,735 4,695
------ ------
Total Liabilities and Partners'
Equity $4,823 $4,718
====== ======
</TABLE>
See accompanying notes.
<PAGE>
LUTHERAN BROTHERHOOD REALTY FUND I
STATEMENT OF OPERATIONS
(Unaudited)
(thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
------------------ -----------------
<S> <C> <C> <C> <C>
Revenue:
Rental $ 126 $ 125 $ 389 $ 373
Interest 8 5 23 13
----- ----- ----- -----
Total revenue 134 130 412 386
----- ----- ----- -----
Expenses:
Property operations 92 45 186 131
Depreciation and amortization 23 16 68 48
Administrative 15 11 58 55
----- ----- ----- -----
Total expenses 130 72 312 234
----- ----- ----- -----
Net income from operations 4 58 100 152
Income from Joint Ventures 42 38 131 98
----- ----- ----- -----
Net income $ 46 $ 96 $ 231 $ 250
===== ===== ===== =====
Net income per weighted average
number of limited partnership units $ .72 $1.50 $3.62 $3.92
===== ===== ===== =====
Weighted average number of limited
partnership units outstanding 63,803 63,803 63,803 63,803
====== ====== ====== ======
Distributions per weighted average
limited partnership units outstanding $ 1.00 $ 1.00 $ 3.00 $ 3.00
====== ====== ====== ======
</TABLE>
See accompanying notes.
<PAGE>
LUTHERAN BROTHERHOOD REALTY FUND I
STATEMENT OF PARTNERS' EQUITY
FROM DECEMBER 31, 1992 THROUGH SEPTEMBER 30 1995
(in thousands)
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partners Equity
------ -------- --------
<S> <C> <C> <C>
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 2 229 231
------ ------ ------
Distributions to Limited Partners (191) (191)
Balance at September 30, 1995 $ 10 $4,725 $4,735
====== ====== ======
</TABLE>
See accompanying notes.
<PAGE>
LUTHERAN BROTHERHOOD REALTY FUND I
STATEMENT OF CASH FLOW
(Unaudited)
(thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
-----------------
<S> <C> <C>
Net Income $ 231 $ 250
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 68 48
Changes in assets and liabilities:
Due from affiliates (40)
Other assets 6 (2)
Payable to affiliates (14) 16
Property taxes payable 32 19
Other accrued operating expenses 47 (3)
------ ----
Net cash provided by operating activities 330 328
------ -----
Cash flows from investing activities:
Capital improvements (32) (33)
Tenant reimbursements for capital improvements 23
Capital Infusion to Minnetonka 300/400 (80)
Distributions from joint ventures 117 125
Equity in joint venture earnings (131) (98)
------ -----
Net cash provided by (used in) investing
activities (23) (86)
------ -----
Cash flows from financing activities:
Distributions to partners (191) (192)
------ -----
Net cash used in financing activities (191) (192)
------ -----
Net increase (decrease) in cash and cash equivalents 116 50
Cash and cash equivalents at beginning of period 521 562
------ -----
Cash and cash equivalents at end of period $ 637 $ 612
====== ======
Supplemental Schedules:
Interest paid $ 0 $ 0
Income taxes paid $ 0 $ 0
</TABLE>
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 September 30, 1995 and September
30, 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.
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 September 30, 1995 the assets and liabilities of the joint ventures were
as follows (in thousands):
<TABLE>
<CAPTION>
Minnetonka Minnetonka Worthington
225 300 & 400 Green
Associates Associates Associates
---------- ---------- ----------
<S> <C> <C> <C>
Land $ 369 $ 687 $ 837
Property less depreciation 1,174 1,861 4,095
Deferred charges (net)
and other assets 349 468 927
------ ------ ------
1,892 3,016 5,859
Liabilities 36 52 45
------ ------ ------
Net assets $1,856 $2,964 $5,814
====== ====== ======
</TABLE>
Revenues and expenses of the joint ventures for the period from January 1,
1995 through September 30, 1995 were as follows (in thousands):
<TABLE>
<S> <C> <C> <C>
Revenues $ 323 $ 472 $ 859
Property taxes (88) (102) (103)
Management fee (14) (21) (28)
Other operating expenses (51) (92) (277)
Depreciation (59) (125) (196)
------ ------ ------
Net income 111 132 255
Partnership interest 33.3% 33.3% 19.3%
------ ------ ------
Partnership income $ 37 $ 44 $ 50
------ ------ ------
Total income from joint ventures $ 131
======
</TABLE>
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
cash on hand and short term securities, at September 30, 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 September 30, 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 nine months ended September 30, 1995 and 1994, the Partnership was
allocated $24,900 and $26,800, 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
Due to a small increase in rental rates, gross rental revenue for NWDC for
the first nine months of 1995 increased 4% compared to the first nine months
of 1994. There was no significant change in gross rental revenues between
the third quarters of 1995 and 1994 since the property was 100% occupied
during both periods. Interest income has nearly doubled for both
comparative periods due to rising short term interest rates. Depreciation
and amortization expense increased over 40% during both comparative periods
as a result of the capitalization of additional tenant improvements late in
1994. Property operations expense more than doubled for the third quarter
of 1995 compared to the third quarter of 1994 and rose over 40% for the
first nine months of 1995 compared to the first nine months of 1994. This
increase was primarily due to the painting of the exterior of the building
and partial replacement of the retaining wall.
The Partnership's share of Joint Venture income increased over 10% during
the third quarter of 1995 compared to the same period in 1994 and climbed
over 30% for the first nine months of 1995 compared to the first nine months
of 1994.
The Minnetonka 225 property was again largely responsible for this
improvement. Gross rental revenues were up over 50% for the third quarter
of 1995 compared to the third quarter of 1994 and over 85% for the first
nine months of 1995 compared to the same period in 1994. These increases
were due to a contribution of significantly higher rental and occupancy
rates. In addition, there were unusually high operating expense
reimbursements paid to the tenants during the first quarter of 1994. These
1994 reimbursements primarily related to real estate tax refunds received on
the property in 1993. In order to attract new tenants, capital improvements
were made to the property which resulted in significantly higher
depreciation and amortization charges in 1995. Property taxes also rose
over 25% for both the third quarter and first nine months of 1995 compared
to the same periods in 1994. However, despite the depreciation and property
tax increases, the Partnership's share of net income from the Minnetonka 225
joint venture increased to $12,000 for the third quarter of 1995 compared to
$4,000 for the third quarter of 1994 and to $37,000 for the first nine
months of 1995 compared to $3,000 during the same period of 1994.
Gross rental revenues for Minnetonka 300/400 were also up again, rising 24%
in both the third quarter of 1995 and the first nine months of 1995 compared
to the same periods in 1994. However, depreciation expense doubled between
both comparative periods due to capitalized roof replacement costs at
Minnetonka 300 in late 1994. Operating expenses are also up during the
first nine months of 1995 compared to the first nine months of 1994 due to
landscaping and interior repairs during the first half of 1995. As a
result, the Partnership's share of joint venture income from these
properties increased to only $17,000 for the third quarter of 1995 compared
to $14,000 for the third quarter of 1994 and to $44,000 for the first nine
months of 1995 compared to $41,000 for the first nine months of 1994.
Gross rental revenue at Worthington Green rose moderately during both
comparative periods despite a level occupancy rate due to rent increases in
early 1995. However, operating expenses jumped nearly $40,000 during the
third quarter of 1995 and first nine months of 1995 compared to the same
periods in 1994 due to higher charges for noncapitalized property
replacements such as carpeting and appliances. As a result, the
Partnership's share of income from the joint venture slipped to $13,000 for
the third quarter of 1995 compared to $19,000 for the third quarter of 1994
and to $49,000 for the first nine months of 1995 compared to $54,000 for the
first nine months 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.
PROPERTY HIGHLIGHTS
Northwest Distribution Center
NWDC continues to be 100% occupied by two tenants, the larger of whom was
purchased by ExhibitGroup Inc., a wholly-owned subsidiary of The Dial Corp.,
a national service company with over 30 affiliates and subsidiaries in
businesses such as express money orders, travel services, transportation
services, and convention services. ExhibitGroup assumed the obligations of
our current tenant under their lease at NWDC and plans to continue to occupy
the property during the years ahead. Two projects were completed this
quarter: the painting of the exterior of the building and the replacement
of the retaining wall at the entrance. As a result, this property is now in
generally excellent condition.
The Village at Worthington Green
Occupancy at The Village remained consistently above 95% throughout the
third quarter. However, rents have not seen any increase since early in
1995. This is largely a result of increased competition from newly-
constructed apartment communities and lower interest rates resulting in
more affordable single family housing opportunities. Two buildings
(sixteen units) were re-roofed during September with a new 35-year
shingle system. The new roofs also enhance the appearance of the
buildings by adding a textured look to the roofline. In addition to the
roof work, new asphalt was placed at each entry to the project to replace
failed asphalt. A change in on-site managers also occurred during
September.
Minnetonka Industrial Properties
The overall industrial market within the Twin Cities continues to see
demand exceed supply, and as a result, rental rates continue to increase
and occupancies are at their highest point since the mid-1980's. Many
local developers are currently planning and/or building new projects
which are expected to stabilize supply with demand by mid-1996.
Minnetonka 225 is currently 100% occupied, with the next lease expiration
during January of 1996 for approximately 9,000 square feet. We are
presently negotiating to extend that lease for a minimum of two years.
During September, a contract to replace the roof of the building was
awarded and the work commenced. Completion is expected by the end of
1995.
Minnetonka 300 is also currently 100% occupied. However, as of October
31, a tenant representing roughly 8% of the property will vacate due to
their purchase of a building. We are in the final stages of completing a
lease to replace this tenancy by December 1, 1995. No significant
projects were undertaken during the third quarter, and no projects are
planned at this property for the balance of 1995.
Minnetonka 400 is currently 78% occupied by one tenant whose lease will
expire December 31, 1996. We are presently working with this tenant on a
possible lease extension and expansion into the remaining vacant space at
the property. We have also submitted a proposal to a third party who
would require occupancy by January. However, completion of this lease is
on hold until the current tenant's expansion requirements are determined.
Roof replacement will begin in early November and should be completed by
the end of January 1996.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995, the Partnership held cash and cash equivalents of
$637,000. The Partnership improved its cash position by $116,000 during
the first nine months as a result of net cash provided by operating
activities of $330,000 offset by cash used in investing activities of
$23,000 and distributions to Partners of $191,000.
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 nine
months of 1995, the Partnership's share of capital expenditures was
approximately $116,000. An additional $175,000 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 September 30, 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: November 13, 1995 By: /S/ Mitchell F. Felchle
Mitchell F. Felchle
President
Date: November 13, 1995 By: /S/ Anita J. T. Young
Anita J. T. Young
Treasurer
(Chief Financial Officer)
10Q-930.txt
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Lutheran
Brotherhood Realty Fund I for the Quarter ended September 30, 1995 and is
qualified in its entirety by reference to such Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 637
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 637
<PP&E> 2278
<DEPRECIATION> 306
<TOTAL-ASSETS> 4823
<CURRENT-LIABILITIES> 88
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 4735
<TOTAL-LIABILITY-AND-EQUITY> 4823
<SALES> 389
<TOTAL-REVENUES> 543
<CGS> 254
<TOTAL-COSTS> 254
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 231
<INCOME-TAX> 0
<INCOME-CONTINUING> 231
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 231
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
