<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 March 31, 2000
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) 863-2222
(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.
Title Outstanding as of
Class A Units 552,000 April 30, 2000
Class B Units 61,333
<PAGE> 2
PART I - FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
BRUNNER COMPANIES INCOME PROPERTIES L.P. I
BALANCE SHEETS
(in thousands, except unit data)
<TABLE>
<CAPTION>
March 31, December 31,
------------- ------------
2000 1999
---- ----
Unaudited Audited
------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 435 $ 426
Accounts receivable - net 45 92
Restricted cash in escrow 642 561
Other assets 173 124
Investment properties - net 17,362 17,454
------------- -----------
Total Assets $ 18,657 $ 18,657
============= ===========
LIABILITIES
Accounts payable and accrued expenses 205 127
Accrued property taxes 53 --
Tenant security deposit liabilities 18 19
Mortgage notes payable 17,724 17,747
------------ -----------
Total Liabilities 18,000 17,893
PARTNERS CAPITAL
General partner's $ (31) $ (30)
Class A limited partners' - (552,000 units) 450 545
Class B limited partners' - (61,333 units) 238 249
--------- -------
Total Partners' Capital 657 764
------------- -----------
Total Liabilities and Partners' Capital $ 18,657 $ 18,657
============= ===========
</TABLE>
See Accompanying Notes to Financial Statements
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<PAGE> 3
BRUNNER COMPANIES INCOME PROPERTIES L.P. I
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended
---------------------
March 31,
---------
2000 1999
------ ------
<S> <C> <C>
Revenues:
Rental income $ 530 $ 766
Other income 3 7
------ ------
Total revenues 533 773
------ ------
Expenses:
Operating 58 70
General and administrative 42 27
Depreciation 176 167
Interest 311 311
Property taxes 53 44
------ ------
Total expenses 640 619
------ ------
Net (loss) income $ (107) $ 154
====== ======
Net (loss) income allocated to general partner (1%)
$ (1) $ 2
Net (loss) income allocated to Class A limited
partners (89.1%) (95) 137
Net (loss) income allocated to Class B limited
partners (9.9%) (11) 15
------ ------
$ (107) $ 154
====== ======
Net (loss) income per Class A limited
partnership unit $ (.17) $ .25
====== ======
</TABLE>
See Accompanying Notes to Financial Statements
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<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, 1999 $(30) $ 545 $ 249 $ 764
Net loss for the three months ended
March 31, 2000 (1) (95) (11) (107)
---- ------- ----- -------
Partners' capital (deficit) at
March 31, 2000 $(31) $ 450 $ 238 $ 657
==== ======= ===== =======
</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>
Three Months
------------
Ended
-----
March 31,
---------
2000 1999
----- -----
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $(107) $ 154
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Depreciation 176 167
Amortization of loan costs and leasing commissions 8 13
Change in accounts:
Receivables and deposits 105 59
Other assets (115) 22
Accounts payable and accrued expenses 78 2
Tenant security deposit liabilities (1) --
Accrued property taxes 53 (132)
----- -----
Net cash provided by operating activities: 197 285
----- -----
Cash flows used in investing activities:
Property improvements and replacements (84) --
Net deposits to restricted escrows (81) (16)
----- -----
Net cash used in investing activities (165) (16)
----- -----
Cash flows used in financing activities:
Payments on mortgage notes payable (23) --
----- -----
Net increase in cash and cash equivalents 9 269
Cash and cash equivalents at beginning of period 426 480
----- -----
Cash and cash equivalents at end of period $ 435 $ 749
===== =====
Supplemental disclosure of cash flow information:
Cash paid for interest $ 310 $ 311
===== =====
</TABLE>
See Accompanying Notes to Financial Statements
-5-
<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 three-month period ended March 31, 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 three months ended March 31, 2000 and 1999 (in
thousands):
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Property management fees (included in
operating expenses) $13 $22
Reimbursement for services of affiliates
(included in general and administrative
expenses) $ 8 $11
</TABLE>
Additionally, the Partnership paid approximately $1,560 and $7,445 to an
affiliate of the Managing General Partner for lease commissions related to new
leases at the Partnership's properties during the three months ended March 31,
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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<PAGE> 7
Note C - Mortgage Notes Payable
On December 29, 1999, the Partnership and New York Life Insurance Company (the
"Lender") entered into a Loan Modification Agreement, effective May 10, 1999, to
extend the maturity dates of the mortgage notes to May 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. Additionally, 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. As of May 10, 2000 the
Partnership has requested and expects to receive an additional one or two year
extension of the maturity dates of the mortgage notes under the same terms and
conditions as the previous extension and is continuing to make monthly payments
of principal, interest and escrow of $131,261. However, the mortgages required 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.
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.
The Partnership's Managing General Partner does not expect the offer to have a
material effect on the Partnership.
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.
-7-
<PAGE> 8
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 three
months ended March 31, 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% 93%
Aiken, South Carolina
Whitehorse Plaza, 12% 98%
Greenville, South Carolina
Georgetown Landing, 100% 94%
Georgetown, South Carolina
</TABLE>
The Partnership's net loss for the three months ended March 31, 2000, was
$107,000 compared to net income of $154,000 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 by $126,000. 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.
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. Winn-Dixie has not paid since June 1999. Both the
Wal-Mart and Winn-Dixie leases extend into 2006. The balance due from Winn-Dixie
Stores at March 31, 2000 was $321,000, which, under the Partnership's policy as
discussed above, has been reserved for at 100%. The Winn-Dixie Stores account
receivable has been pledged as collateral for the Partnership's mortgage notes
payable.
During the first quarter 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.
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.
-8-
<PAGE> 9
General and administrative fees increased by $15,000, which was primarily due
to increased professsional fees for assistance in preparing the Partnership's
required regulatory filings.
At March 31, 2000, the Partnership held unrestricted cash of approximately
$435,000. 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.
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 March 31,
2000.
-9-
<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: May 15, 2000
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 435
<SECURITIES> 0
<RECEIVABLES> 45
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,295
<PP&E> 25,243
<DEPRECIATION> 7,881
<TOTAL-ASSETS> 18,657
<CURRENT-LIABILITIES> 276
<BONDS> 17,724
0
0
<COMMON> 0
<OTHER-SE> 654
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 533
<TOTAL-REVENUES> 533
<CGS> 0
<TOTAL-COSTS> 640
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (107)
<EPS-BASIC> (.17)
<EPS-DILUTED> (.17)
</TABLE>
