<PAGE> 1
FORM 10-QSB
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, 1999
OR
[ ] 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 0-24683
BRUNNER COMPANIES INCOME PROPERTIES L.P. I
(Exact name of registrant as specified in its charter)
Delaware 31-1266850
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3632 Wheeler Road
P.O. Box 204227
Augusta, Georgia 30917-204227
(Address of principal executive offices)
(706) 863-0823
(Registrant's telephone number, including area code)
(Former address 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 [ ]
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Title Outstanding
Class A Units 552,000 September 30, 1999
Class B Units 61,333
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
BRUNNER COMPANIES INCOME PROPERTIES L.P. I
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Sept. 30, 1999 Dec. 31, 1998
(unaudited) (audited)
-------------- ------------
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 1,018 $ 480
Accounts receivable - net, and escrow deposits 516 342
Other assets 81 88
Investment properties - net 17,532 18,033
--------- ----------
$ 19,147 $ 18,943
========= ==========
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable and accrued expenses $ 171 $ 118
Accrued property taxes 132 176
Tenant security deposits 18 20
Mortgage notes payable 17,770 17,800
Partners' Capital (Deficit)
General partner's (27) (29)
Class A limited partners' - (552,000 units) 805 603
Class B limited partners' - (61,333 units) 278 1,056 255 829
--- --------- --- ----------
$ 19,147 $ 18,943
========= ==========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE> 3
BRUNNER COMPANIES INCOME PROPERTIES L.P. I
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
------------------------ ------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 655 $ 681 $ 2,157 $ 2,086
Other income -- 3 13 8
---------- ---------- ---------- ----------
Total revenues 655 684 2,170 2,094
---------- ---------- ---------- ----------
Expenses:
Operating 83 83 216 240
General and administrative 77 46 160 97
Depreciation 167 166 501 500
Interest 311 409 934 1,235
Property taxes 44 52 132 144
---------- ---------- ---------- ----------
Total expenses 682 756 1,943 2,216
---------- ---------- ---------- ----------
Net income (loss) $ (27) $ (72) $ 227 $ (122)
========== ========== ========== ==========
Net income (loss) allocated to general partner (1%) $ (1) $ (1) $ 2 $ (1)
Net income (loss) allocated to Class A limited
partners (89.1%) (24) (64) 202 (109)
Net income (loss) allocated to Class B limited (2) (7) 23 (12)
partners (9.9%) ---------- ---------- ---------- ----------
$ (27) $ (72) $ 227 $ (122)
========== ---------- ========== ----------
Net income (loss) per Class A limited
partnership unit $ (.05) $ (.12) $ .41 $ (.22)
========== ========== ========== ==========
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE> 4
BRUNNER COMPANIES INCOME PROPERTIES L.P. I
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited Partners'
-------------------------------
General
Partner Class A Class B Total
<S> <C> <C> <C> <C>
Original capital contributions $ 1 $ 5,520 $ 613 $6,134
========== ======= ======= ======
Partners' capital (deficit) at
December 31, 1998 $ (29) $ 603 $ 255 $ 829
Net income for the nine months ended
Sept 30, 1999 2 202 23 227
---------- ------- ------- ------
Partners' capital (deficit) at
Sept 30, 1999 $ (27) $ 805 $ 278 $1,056
========== ======= ======= ======
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE> 5
BRUNNER COMPANIES INCOME PROPERTIES L.P. I
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months
Ended
Sept 30,
----------------------
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 227 $ (122)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation 501 500
Amortization of loan costs and leasing commissions 26 35
Change in accounts:
Receivables and deposits (96) 97
Other assets (19) (19)
Accounts payable and accrued expenses 53 11
Tenant security deposits (2) 1
Accrued property taxes (44) (51)
------- -------
Net cash provided by operating activities: 646 452
------- -------
Cash flows from investing activities:
Property improvements and replacements -- (23)
Net deposits to restricted escrows (78) (23)
------- -------
Net cash used in investing activities (78) (46)
------- -------
Cash flows used in financing activities:
Principal payments on mortgage notes payable (30) (403)
------- -------
Net increase in cash and cash equivalents 538 3
Cash and cash equivalents at beginning of period 480 333
------- -------
Cash and cash equivalents at end of period $ 1,018 $ 336
======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 934 $ 1,222
======= =======
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE> 6
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 nine month period ended September 30, 1999, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 1999. 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, 1998.
Certain reclassifications have been made to the 1998 information to conform to
the 1999 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. All of the outstanding stock of the Managing General
Partner is owned by BCIP I & III, LLC, an affiliate of Hull/Storey Development,
LLC ("Hull/Storey"). 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 nine months ended September 30, 1999 and 1998 (in
thousands):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Property management fees
(included in operating expenses) $59 $66
Reimbursement for services of affiliates
(included in general and administrative expenses) $31 $37
</TABLE>
Additionally, the Partnership paid approximately $39,812 and $32,000 to an
affiliate of the Managing General Partner for lease commissions related to new
leases at the Partnership's properties during the nine months ended September
30, 1999 and 1998, respectively. These lease commissions are included in other
assets and amortized over the terms of the respective leases.
Note C - Mortgage Notes Payable
Pursuant to lender agreements the maturity dates of the mortgage notes were
extended until May 10, 2000. The agreements further provide that, from and after
October 10, 1998 through May 10, 2000, the mortgage notes accrue interest at a
fixed rate per annum of seven (7%) percent. Prior to the agreements, the stated
interest rate of the mortgage notes was nine (9%) percent. The agreement further
provides that, commencing with the June 1999 payment and continuing monthly
through the May 2000 payment, the Partnership is allowed to pay fixed monthly
payments based upon 7 1/2% per annum of the principal debt. The principal
balance bears interest at the rate of 7% per annum, and the excess payment is a
principal reduction. The agreements further provide that the lender, upon
fifteen (15) days prior written notice to the Managing General Partner, shall
have the right to accelerate repayment of the mortgage notes in full and demand
the Partnership repay the mortgage notes in full, with or without cause and
regardless of whether an event of default should exist or not. The mortgages
require a balloon payment at maturity for the remaining principal balance. These
notes are all cross-collateralized and cross-defaulted. The mortgage notes
payable are nonrecourse and are secured by the properties and by a pledge of
revenues from the respective properties. Under an agreement with the Lender,
after payment of a management fee and operating expenses, the net operating
income is deposited into joint account with the Lender and the Partnership. As
of September 30, 1999 approximately $523,000 was held in the joint account
pursuant to the agreement.
<PAGE> 7
The Partnership's continued ability to operate is dependent on its ability to
either restructure its existing debt or raise additional capital. To that end
the Managing General Partner is attempting to extend or modify the mortgage
notes, negotiating alternative financing sources requiring additional capital
infusions and evaluating the Partnership's alternatives. However, there can be
no assurance that debt restructuring will occur or additional capital will be
raised in a manner that allows the Partnership to continue its operations in its
present form.
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 nine
months ended September 30, 1999, and September 30, 1998:
<TABLE>
<CAPTION>
Average
Occupancy
1999 1998
---- ----
<S> <C> <C>
Hitchcock Plaza, 99% 91%
Aiken, South Carolina
Whitehorse Plaza, 17% 99%
Greenville, South Carolina
Georgetown Landing, 100% 98%
Georgetown, South Carolina
</TABLE>
All but approximately 1,200 square feet of Hitchcock Plaza has been leased and
the Managing General Partner is currently negotiating on this space. One of the
anchor tenants, Kroger Company, has performed a major upfit of its space, and
likewise, K-Mart modified its store to a Big-K and reconfigured its current
space.
Whitehorse Plaza's anchor tenants have both vacated their respective spaces. One
tenant continues to pay rent pursuant to its lease obligation. The other tenant
maintains that it is entitled to terminate its lease because the other anchor
tenant has vacated the center. The Managing General Partner has instituted a
lawsuit to enforce the lease obligations of the tenant who has ceased paying
rent, and there are currently two separate lawsuits pending regarding this
matter. The Managing General Partner intends to pursue this matter to a
conclusion.
As noted in the Partnership's Form 10-QSB for the period ended June 30, 1999,
the Managing General Partner and the lender holding the debt on the Partnership
properties had entered into an agreement whereby the Partnership was not
obligated to pay the full monthly payment obligation for each property, but
interest only at the rate of 7% annum and certain escrow deposits. The lender
and the Managing General Partner have agreed to a similar arrangement through
and including May 10, 2000. Basically, the Partnership is making fixed monthly
payments which represent interest on the principal debt at the rate of 7% annum,
a moderate principal reduction and an escrow deposit for taxes and insurance.
After payment of a management fee and operating expenses, the net operating
income is deposited into a joint account with the lender and the Partnership. As
of September 30, 1999, $521,658 was held in the joint account pursuant to the
agreement.
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 access 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
against increased 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.
At September 30, 1999, the Partnership held unrestricted cash of approximately
$1,018,000 compared to approximately $480,000 at September 30, 1998. The net
increase in cash for the nine months ended September 30, 1999, was approximately
$538,000 compared to a net increase of approximately $3,000 for the nine months
ended September 30, 1998. The net increase in cash is primarily due to the
decrease in interest expense and operating expenses and to the increase in
rental income discussed above as well as to the reduced principal payments.
<PAGE> 8
No cash distributions were made during fiscal year 1998 or during the first nine
months of 1999, and future cash distributions will depend on the levels of net
cash generated from operations, refinancing, property sales, and the
availability of cash reserves after restructuring the existing indebtedness.
Year 2000
The "Year 2000 Issue" has arisen because many existing computer programs and
chip-based embedded technology systems use only the last two digits to refer to
a year, and therefore do not properly recognize a year that begins with "20"
instead of the familiar "19". If not corrected, many computer applications could
fail or create erroneous results. The following disclosure provides information
regarding the current status of the Partnership's Year 2000 compliance program.
The Partnership processes its records on computer hardware and software systems
maintained by Hull/Storey Development, LLC ("Hull/Storey"), the management
company retained by the General Partner of the Partnership. Hull/Storey has
adopted a compliance program because it recognizes the importance of minimizing
the number and seriousness of any disruptions that may occur as a result of the
Year 2000 issue. Hull/Storey's compliance program includes an assessment of its
hardware and software computer systems and embedded systems.
Hull/Storey has invested in the implementation and maintenance of accounting and
reporting systems and equipment that are intended to enable the Partnership to
provide adequately for its information and reporting needs and which are also
Year 2000 compliant. Substantially all of Hull/Storey's in-house systems have
already been certified as Year 2000 compliant through testing and other
mechanisms and Hull/Storey has not delayed any systems projects due to the Year
2000 Issue. Hull/Storey is in the process of engaging a third party to review
its Year 2000 in-house compliance. The Managing General Partner believes that
future costs associated with Year 2000 issues for Hull/Storey's in-house systems
will be insignificant and will therefore not impact the Partnership's business,
financial condition and results of operations.
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.
<PAGE> 9
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27, Financial Data Schedule, (for SEC purposes only), is filed
as an exhibit to this report.
(b) Reports on Form 8-K:
None
<PAGE> 10
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/ James M. Hull
-----------------------------
James M. Hull
President and Director
By: /s/ Deborah Mosley
-----------------------------
Deborah Mosley
Chief Accounting Officer
Date: November 11, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 1,018
<SECURITIES> 0
<RECEIVABLES> 516
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 17,532
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,147
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,056
<TOTAL-LIABILITY-AND-EQUITY> 19,147
<SALES> 2,170
<TOTAL-REVENUES> 2,170
<CGS> 0
<TOTAL-COSTS> 1,943
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 227
<INCOME-TAX> 0
<INCOME-CONTINUING> 227
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 227
<EPS-BASIC> 0.0
<EPS-DILUTED> 0.0
</TABLE>
