FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from.........to.........
Commission file number 33-20527
BRUNNER COMPANIES INCOME PROPERTIES L.P. I
(Exact name of small business issuer as specified in its charter)
Delaware 31-1234157
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
BRUNNER COMPANIES INCOME PROPERTIES L.P. I
BALANCE SHEET
(Unaudited)
June 30, 1998
(in thousands, except unit data)
Assets
Cash and cash equivalents $ 383
Receivables and deposits 197
Restricted escrows 30
Other assets 117
Investment properties:
Land $ 4,123
Buildings and related personal property 20,927
25,050
Accumulated depreciation (6,700) 18,350
$19,077
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 2
Tenant security deposit liabilities 17
Accrued property taxes 104
Other liabilities 111
Mortgage notes payable 17,984
Partners' Capital (Deficit)
General partner's $ (28)
Class A limited partners' - (552,000 units) 629
Class B limited partners' - (61,333 units) 258 859
$19,077
See Accompanying Notes to Financial Statements
b)
BRUNNER COMPANIES INCOME PROPERTIES L.P. I
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenues:
Rental income $ 684 $ 696 $ 1,405 $ 1,414
Other income 2 1 5 4
Total revenues 686 697 1,410 1,418
Expenses:
Operating 78 90 157 157
General and administrative 27 19 51 44
Depreciation 167 168 334 335
Interest 412 423 826 848
Property taxes 49 55 92 111
Total expenses 733 755 1,460 1,495
Net loss $ (47) $ (58) $ (50) $ (77)
Net loss allocated to general
partner (1%) $ -- $ (1) $ -- $ (1)
Net loss allocated to Class A
limited partners (89.1%) (42) (51) (45) (68)
Net loss allocated to Class B
limited partners (9.9%) (5) (6) (5) (8)
$ (47) $ (58) $ (50) $ (77)
Net loss per Class A limited
partnership unit $ (.08) $ (.09) $ (.08) $ (.12)
See Accompanying Notes to Financial Statements
c)
BRUNNER COMPANIES INCOME PROPERTIES L.P. I
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
General Limited Partners'
Partner Class A Class B Total
Original capital contributions $ 1 $ 5,520 $ 613 $ 6,134
Partners' (deficit) capital at
December 31, 1997 $ (28) $ 674 $ 263 $ 909
Net loss for the six months
ended June 30, 1998 -- (45) (5) (50)
Partners' (deficit) capital at
June 30, 1998 $ (28) $ 629 $ 258 $ 859
See Accompanying Notes to Financial Statements
d)
BRUNNER COMPANIES INCOME PROPERTIES L.P. I
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
1998 1997
Cash flows from operating activities:
Net loss $ (50) $ (77)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 334 335
Amortization of loan costs and leasing
commissions 24 23
Change in accounts:
Receivables and deposits 176 (16)
Other assets (24) (1)
Accounts payable -- (40)
Tenant security deposit liabilities -- 5
Accrued property taxes (103) 10
Other liabilities (11) (17)
Net cash provided by operating activities 346 222
Cash flows from investing activities:
Property improvements and replacements (6) --
Net deposits to restricted escrows (24) --
Net cash used in investing activities (30) --
Cash flows used in financing activities:
Payments on mortgage notes payable (266) (244)
Net increase (decrease) in cash and cash equivalents 50 (22)
Cash and cash equivalents at beginning of period 333 332
Cash and cash equivalents at end of period $ 383 $ 310
Supplemental disclosure of cash flow information:
Cash paid for interest $ 817 $ 839
See Accompanying Notes to Financial Statements
e)
BRUNNER COMPANIES INCOME PROPERTIES L.P. I
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Brunner Companies Income
Properties L.P. I (the "Partnership") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b)of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of 104 Management, Inc. (the "Managing General Partner"), an Ohio
corporation, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six month periods ended June 30, 1998, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1998. For further information, refer to the financial
statements and footnotes thereto included in the Partnership's annual report on
Form 10-KSB for the fiscal year ended December 31, 1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. A majority of the outstanding stock of the Managing
General Partner is owned by IBGP, Inc., an affiliate of Insignia Financial
Group, Inc. ("Insignia"). The partnership agreement provides for payments to
affiliates for property management services based on a percentage of revenue and
for reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership. The following payments were made to affiliates of the Managing
General Partner during the six months ended June 30, 1998 and 1997 (in
thousands):
1998 1997
Property management fees (included in
operating expenses) $ 45 $ 43
Reimbursement for services of affiliates
(included in general and administrative
expenses) 24 16
Additionally, the Partnership paid approximately $24,000 and $14,000 to an
affiliate of the Managing General Partner for lease commissions related to new
leases at the Partnership's properties during the six months ended June 30, 1998
and 1997, respectively. These lease commissions are included in other assets
and amortized over the terms of the respective leases.
For the period from January 1, 1997 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
Managing General Partner, but with an insurer unaffiliated with the Managing
General Partner. An affiliate of the Managing General Partner acquired, in the
acquisition of a business, certain financial obligations from an insurance
agency which was later acquired by the agent who placed the master policy. The
agent assumed the financial obligations to the affiliate of the Managing General
Partner which received payments on these obligations from the agent. The amount
of the Partnership's insurance premiums accruing to the benefit of the affiliate
of the Managing General Partner by virtue of the agent's obligations is not
significant.
NOTE C - MORTGAGE NOTES PAYABLE
The cross-collateralized and cross-defaulted loans on Hitchcock Plaza, White
Horse Plaza, and Georgetown Landing mature on October 10, 1998. At the present
time the Managing General Partner is considering a potential sale of the
Partnerhip's properties in 1998. If the properties are not sold, the Managing
General Partner expects the lender to grant the Partnership a short term
extension of the maturity date of the mortgage notes payable.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of three retail centers. The
following table sets forth the average occupancy of the properties for the six
months ended June 30, 1998 and 1997:
Average
Occupancy
1998 1997
Hitchcock Plaza
Aiken, South Carolina 92% 99%
Whitehorse Plaza
Greenville, South Carolina 99% 100%
Georgetown Landing
Georgetown, South Carolina 97% 90%
The decrease in occupancy at Hitchcock Plaza resulted primarily from the move-
out of a tenant in January 1998 which had previously leased 20,000 square feet.
The Managing General Partner is aggressively pursuing a new tenant to occupy
this large space. The increase in average occupancy at Georgetown Landing can
be attributed to the move-in of a tenant during March 1998 who leases 3,720
square feet. The move-in of this tenant increased occupancy to 100% at the
property.
The Partnership realized a net loss of approximately $50,000 for the six months
ended June 30, 1998, compared to a net loss of approximately $77,000 for the six
months ended June 30, 1997. The Partnership's net loss, for the three months
ended June 30, 1998, was approximately $47,000 compared to a net loss of
approximately $58,000 for the three months ended June 30, 1997. The decrease in
net loss for the three and six month periods ended June 30, 1998, is primarily
due to decreases in interest expense and property taxes. The decrease in
interest expense is due to a reduction in the mortgage principal balance. The
decrease in tax expense is primarily due to the reassessment of property values
at Hitchcock Plaza. Partially offsetting the decreases in interest expense and
tax expense is a decrease in rental revenue and an increase in general and
administrative expenses. Rental revenue decreased primarily as a result of a
decrease in occupancy at Hitchcock Plaza as discussed above. The decrease in
rental revenue at Hitchcock Plaza was partially offset by an increase in rental
revenue at Whitehorse Plaza, which resulted from an increase in percentage rent
income from the tenants. General and administrative expenses increased
primarily due to an increase in GP reimbursements. No expenditures for major
repairs and maintenance were made during the six months ended June 30, 1998.
During the six months ended June 30, 1997, approximately $12,000 was spent on
exterior painting at White Horse Plaza.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
expense. As part of this plan, the Managing General Partner attempts to protect
the Partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due
to changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the Managing General Partner will be able to sustain such a plan.
As noted above, a large tenant vacated its space at Hitchcock Plaza, and the
Managing General Partner is aggressively pursuing a new tenant to occupy the
vacant space.
At June 30, 1998, the Partnership held unrestricted cash of approximately
$383,000 compared to approximately $310,000 at June 30, 1997. The net increase
in cash for the six months ended June 30, 1998 was approximately $50,000
compared to a net decrease in cash of approximately $22,000 for the six months
ended June 30, 1997. Net cash provided by operating activities increased
primarily due to an increase in cash provided by receivables and deposits due to
the timing of cash receipts. Partially offsetting the increase in cash provided
by receivables and deposits was an increase in cash used for property taxes due
to the timing of payments. Net cash used in investing activities increased as a
result of deposits to restricted escrows and building improvements made at
Hitchcock Plaza. Cash flows used in financing activities increased due to
increased payments on mortgage notes payables.
The cross-collateralized and cross-defaulted loans on Hitchcock Plaza, White
Horse Plaza, and Georgetown Landing mature on October 10, 1998. At the present
time the Managing General Partner is considering a potential sale of the
Partnerhip's properties in 1998. If the properties are not sold, the Managing
General Partner expects the lender to grant the Partnership a short term
extension of the maturity date of the mortgage notes payable.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and meet other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The mortgage indebtedness of approximately $17,984,000 matures October 10, 1998,
as discussed above. Any future cash distributions will depend on the levels of
net cash generated from operations, property sales, refinancings, and the
availability of cash reserves. No cash distributions were made during fiscal
year 1997 or during the first six months of 1998. At this time, unless the
properties are sold, the Managing General Partner does not anticipate making a
cash distribution during 1998.
Year 2000
The Partnership is dependent upon the Managing General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed no
later than December 31, 1998, which is prior to any anticipated impact on its
operating systems. The Managing General Partner believes that with
modifications to existing software and conversions to new software, the Year
2000 Issue will not pose significant operational problems for its computer
systems. However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Partnership.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance, or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates of revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
(b) Reports on Form 8-K:
None filed during the quarter ended June 30, 1998.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
BRUNNER COMPANIES INCOME PROPERTIES L.P. I
By: Brunner Management Limited Partnership
Its General Partner
By: 104 Management, Inc.
Its Managing General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President and Director
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President and Chief Accounting Officer
Date: August 12, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Brunner Companies Income Properties L.P. I 1998 Second Quarter 10-QSB
and is qualified in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000830737
<NAME> BRUNNER COMPANIES INCOME PROPERTIES L.P. I
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 383
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 25,050
<DEPRECIATION> 6,700
<TOTAL-ASSETS> 19,077
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 17,984
0
0
<COMMON> 0
<OTHER-SE> 859
<TOTAL-LIABILITY-AND-EQUITY> 19,077
<SALES> 0
<TOTAL-REVENUES> 1,410
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,460
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 826
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (50)
<EPS-PRIMARY> (.08)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
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