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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 June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-24683
Brunner Companies Income Properties L.P. I
(Exact name of small business issuer 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) 863-2222
(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.
<TABLE>
<S> <C>
Title
Class A Units 552,000 Outstanding as of
Class B Units 61,333 July 31, 2000
</TABLE>
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PART I - FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
BRUNNER COMPANIES INCOME PROPERTIES L.P. I
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
--------- ------------
2000 1999
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Unaudited Audited
--------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 459 $ 426
Accounts receivable - net and deposits 78 92
Restricted cash in escrow 681 561
Other assets 224 124
Investment properties - net 17,186 17,454
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Total Assets $18,628 $18,657
======= =======
LIABILITIES
Accounts payable and accrued expenses 184 127
Accrued property taxes 112 --
Tenant security deposit liabilities 19 19
Mortgage notes payable 17,693 17,747
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Total Liabilities 18,008 17,893
PARTNERS' CAPITAL
General partner's $ (31) $ (30)
Class A limited partners' - (552,000 units) 417 545
Class B limited partners' - (61,333 units) 234 249
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Total Partners' Capital 620 764
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Total Liabilities and Partners' Capital $18,628 $18,657
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</TABLE>
See Accompanying Notes to Financial Statements
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BRUNNER COMPANIES INCOME PROPERTIES L.P. I
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ -----------------
June 30, June 30,
------------------ -----------------
2000 1999 2000 1999
------ ------ ------- ------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 585 $ 736 $ 1,115 $1,502
Other income 33 6 36 13
------ ------ ------- ------
Total revenues 618 742 1,151 1,515
------ ------ ------- ------
Expenses:
Operating 74 63 132 133
General and administrative 37 56 79 83
Depreciation 176 167 352 334
Interest 309 312 620 623
Property taxes 59 44 112 88
------ ------ ------- ------
Total expenses 655 642 1,295 1,261
------ ------ ------- ------
Net (loss) income $ (37) $ 100 $ (144) $ 254
====== ====== ======= ======
Net (loss) income allocated to general
partner (1.0%) -- 1 (1) 3
Net (loss) income allocated to Class A
limited partners (89.1%) (33) 89 (128) 226
Net (loss) income allocated to Class B
limited partners (9.9%) (4) 10 (15) 25
------ ------ ------- ------
$ (37) $ 100 $ (144) $ 254
====== ====== ======= ======
Net (loss) income per Class A limited
partnership units $ (.07) $ .18 $ (.26) $ .46
====== ====== ======= ======
</TABLE>
See Accompanying Notes to Financial Statements
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BRUNNER COMPANIES INCOME PROPERTIES L.P. I
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands)
<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, 1999 $ (30) $ 545 $ 249 $ 764
Net loss for the six months ended
June 30, 2000 (1) (128) (15) (144)
------ -------- ------ --------
Partners' capital (deficit) at
June 30, 2000 $ (31) $ 417 $ 234 $ 620
====== ======== ====== ========
</TABLE>
See Accompanying Notes to Financial Statements
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<PAGE> 5
BRUNNER COMPANIES INCOME PROPERTIES L.P. I
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------
2000 1999
------ ------
<S> <C> <C>
Cash flows from operating activities
Net (loss) income $ (144) $ 254
Adjustments to reconcile net (loss) income to net cash
provided by operating activities
Depreciation 352 334
Amortization of loan costs and leasing commissions 15 14
Change in deferred and accrued amounts
Accounts receivables and deposits 14 (4)
Other assets (115) 17
Accounts payable and accrued expenses 57 33
Tenant security deposit liabilities -- (2)
Accrued property taxes 112 (88)
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Net cash provided by operating activities 291 558
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Cash flows used in investing activities
Property improvements and replacements (84) --
Net deposits to restricted escrows (120) (32)
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Net cash used in investing activities (204) (32)
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Cash flows used in financing activities
Payments on mortgage notes payable (54) (8)
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Net increase in cash and cash equivalents 33 518
Cash and cash equivalents at beginning of period 426 480
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Cash and cash equivalents at end of period $ 459 $ 998
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Supplemental disclosure of cash flow information:
Cash paid for interest $ 620 $ 623
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</TABLE>
See Accompanying Notes to Financial Statements
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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 six-month period ended June 30, 2000, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 2000. 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, 1999.
Certain reclassifications have been made to the 1999 information to conform to
the 2000 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 six months ended June 30, 2000 and 1999 (in
thousands):
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Property management fees (included in
operating expenses) $33 $39
Reimbursement for services of affiliates
(included in general and administrative
expenses) $16 $24
</TABLE>
Additionally, the Partnership paid approximately $2,760 and $20,557 to an
affiliate of the Managing General Partner for lease commissions related to new
and renewal leases at the Partnership's properties during the six months ended
June 30, 2000 and 1999, respectively. These lease commissions are included in
other assets and amortized over the terms of the respective leases.
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Note C - Mortgage Notes Payable
In July of 2000, the Partnership and New York Life Insurance Company (the
"Lender") entered into a Loan Modification Agreement, effective May 10, 2000, to
extend the maturity dates of the mortgage notes to November 10, 2000. During the
extension period, the mortgage notes bear interest at the rate of 7% per annum
and the Partnership is required to make monthly payments of principal, interest
and escrow of $131,261. The mortgages require a balloon payment at maturity for
the remaining principal balance. These notes are cross-collateralized and
cross-defaulted and are secured by the properties and by a pledge of revenues
from the respective properties.
Under the Loan Modification Agreement, the Partnership is required to make
quarterly payments of net cash flow, as defined, into a separate escrow account
controlled jointly by the Lender and the Partnership. These escrow funds are to
be only used for tenant improvements, leasing commissions, capital improvements
and/or debt service shortfall as approved by the lender.
The Partnership's continued ability to operate is dependent on its ability to
either restructure the terms of its existing debt or raise additional capital.
To that end the Managing General Partner is presently attempting to extend or
modify the mortgage notes. However, there can be no assurance that a debt
restructuring or a renegotiation of terms will occur or that additional capital
will be raised in a manner that will allow the Partnership to continue its
operations in its present form.
Note D - Tender Offer to Purchase Units
On March 1, 2000 MP FALCON FUND, LLC; MP VALUE FUND 6, LLC; PREVIOUSLY OWNED
MORTGAGE PARTNERSHIP INCOME FUND, L.P.; ACCELERATED HIGH YIELD INSTITUTIONAL
INVESTORS, LTD.; and MORAGA FUND 1, LLC (the "Purchasers") collectively offered
to purchase up to 220,800 Class A units of the Partnership upon the terms and
subject to the conditions set forth in their offer filed with the Securities and
Exchange Commission.
On April 10, 2000 the bidders reported on Schedule 14(d)(1) that the offer had
terminated on March 31, 2000 and that a total of 166,773 Units were tendered.
Upon such acquisition the Purchasers held an aggregate of approximately 194,323
Units, or approximately 35.2% of the total outstanding Units.
The Partnership's Managing General Partner does not expect the purchaser's
acquisition to have a material effect on the Partnership.
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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, 2000 and 1999 based on actual physical square footage
occupancy of the properties during the quarter:
<TABLE>
<CAPTION>
Average
-------------
Occupancy
-------------
2000 1999
---- ----
<S> <C> <C>
Hitchcock Plaza, 94% 91%
Aiken, South Carolina
Whitehorse Plaza, 16% 17%
Greenville, South Carolina
Georgetown Landing, 100% 100%
Georgetown, South Carolina
</TABLE>
The Partnership's net loss for the six months ended June 30, 2000, was $144,000
compared to net income of $254,000 for the corresponding period of 1999. The net
loss is primarily due to a decrease in rental income due primarily to tenant
vacancies at Whitehorse Plaza and an increase in the allowance for uncollectable
rents. The Partnership's accounting policy is to record as an allowance for
doubtful accounts 100% of receivables over ninety days old, 50% of receivables
over sixty but less than ninety-on days old and 100% of receivables from former
tenants.
Whitehorse Plaza - Tenant Activity
Two major tenants, Wal-Mart Stores and Winn-Dixie Stores, vacated their space at
Whitehorse Plaza during 1999. Wal-Mart Stores continues to pay its lease
obligations for 81,922 Square feet, although the space is vacant. The
Partnership is presently in litigation with Winn-Dixie Stores to collect rent on
its 35,922 square feet, which remains vacant. Winn-Dixie has not paid rent or
common area maintenance fees since June 1999. Both the Wal-Mart and Winn-Dixie
leases extend into 2006. The balance due from Winn-Dixie Stores at June 30, 2000
was $300,000, which, under the Partnership's accounting policy as discussed
above, has been fully reserved. The Winn-Dixie Stores account receivable has
been pledged as collateral for the Partnership's mortgage notes payable.
First Family Financial Associates vacated 1,500 square feet at Whitehorse Plaza
as of April 30, 2000 and paid a termination fee of $27,000, which was recorded
as other income.
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<PAGE> 9
Hitchcock Plaza - Tenant Activity
During the first quarter of 2000 two new tenants, Burke's Outlet and CiCi's
Pizza were added at Hitchcock Plaza. The Partnership paid $84,000 for tenant
upfits for these two tenants, which is being amortized over the terms of the
respective leases. In May of 2000, Pic-N-Pay shoe store vacated its 1,500 square
feet at Hitchcock Plaza. In July of 2000 Goody's Family Clothing store gave
notice that it would be vacating its 35,000 square feet at Hitchcock Plaza
during the fourth quarter of 2000.
Georgetown Landing - Tenant Activity
Georgetown Landing remained 100% occupied during the second quarter of 2000. In
June of 2000, The Medicine Shoppe, a drug store in Georgetown Landing, exercised
a five-year renewal option to begin on November 1, 2000.
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.
Total expenses increased $34,000, primarily due to increases in depreciation and
property tax expense.
At June 30, 2000, the Partnership held unrestricted cash of approximately
$498,000. No distributions were made in 2000 or 1999. Any 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 or renegotiating its terms. Presently no
cash distributions are planned.
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.
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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:
No reports on Form 8-K were filed during the quarter ended June 30,
2000.
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: August 14, 2000
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