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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 September 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 ______
Commission File Number 0-24683
Brunner Companies Income Properties L.P. I
(Exact name of small business issuer as specified in its charter)
Delaware 31-1234157
(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
Class A Units 552,000 Outstanding as of
Class B Units 61,333 October 31, 2000
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PART I - FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
BRUNNER COMPANIES INCOME PROPERTIES L.P. I
BALANCE SHEETS
(in thousands, except unit data)
<TABLE>
<CAPTION>
September 30, December 31,
------------- ------------
2000 1999
------------- ------------
Unaudited Audited
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 466 $ 426
Accounts receivable - net 81 92
Restricted cash in escrow 719 561
Other assets 282 124
Investment properties - net 17,006 17,454
--------- ---------
Total Assets $ 18,554 $ 18,657
========= =========
LIABILITIES
Accounts payable and accrued expenses 188 127
Accrued property taxes 171 --
Tenant security deposits payable 17 19
Mortgage notes payable 17,649 17,747
--------- ---------
Total Liabilities 18,025 17,893
PARTNERS' CAPITAL
General partner's $ (32) $ (30)
Class A limited partners' - (552,000 units) 335 545
Class B limited partners' - (61,333 units) 226 249
--------- ---------
Total Partners' Capital 529 764
--------- ---------
Total Liabilities and Partners' Capital $ 18,554 $ 18,657
========= =========
</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 Nine Months Ended
September 30, September 30,
------------------- ----------------------
2000 1999 2000 1999
----- ----- ------- ------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 525 $ 655 $ 1,640 $2,157
Other income 19 -- 54 13
----- ----- ------- ------
Total revenues 544 655 1,694 2,170
----- ----- ------- ------
Expenses:
Operating 75 140 206 325
General and administrative 11 20 91 51
Depreciation 179 167 532 501
Interest 309 311 929 934
Property taxes 59 44 171 132
----- ----- ------- ------
Total expenses 633 682 1,929 1,943
----- ----- ------- ------
Net (loss) income $ (89) $ (27) $ (235) $ 227
===== ===== ======= ======
Net (loss) income allocated to general
Partner (1.0%) (1) (1) (2) 2
Net (loss) income allocated to Class A
limited partners (89.1%) (79) (24) (210) 202
Net (loss) income allocated to Class B
limited partners (9.9%) (9) (2) (23) 23
----- ----- ------- ------
$ (89) $ (27) $ (235) $ 227
===== ===== ======= ======
Net (loss) income per Class A limited
partnership units $(.16) $(.05) $ (.43) $ .41
===== ===== ======= ======
</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 nine months ended September 30, 2000 (2) (210) (23) (235)
------ --------- ------- ---------
Partners' capital (deficit) at September 30, 2000 $ (32) $ 335 $ 226 $ 529
====== ========= ======= =========
</TABLE>
See Accompanying Notes to Financial Statements
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BRUNNER COMPANIES INCOME PROPERTIES L.P. I
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
2000 1999
------- ---------
<S> <C> <C>
Cash flows provided by operating activities:
Net income (loss) $ (235) $ 227
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation 532 501
Amortization of loan costs and leasing commissions 21 26
Change in deferred and accrued amounts:
Accounts receivable and deposits 11 (96)
Other assets (179) (19)
Accounts payable and accrued expenses 61 53
Accrued property taxes 171 (44)
Tenant security deposits payable (2) (2)
------- ---------
Net cash provided by operating activities 380 646
------- ---------
Cash flows used in investing activities:
Purchase of property improvements and replacements (84) --
Net deposits to restricted escrows (158) (78)
------- ---------
Net cash used in investing activities (242) (78)
------- ---------
Cash flows used in financing activities:
Principal payments on mortgage notes payable (98) (30)
------- ---------
Net increase in cash and cash equivalents 40 538
Cash and cash equivalents at the beginning of the period 426 480
------- ---------
Cash and cash equivalents at the end of the period $ 466 $ 1,018
======= =========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 929 $ 934
======= =========
</TABLE>
See Accompanying Notes to Financial Statements
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BRUNNER COMPANIES INCOME PROPERTIES, L.P. I
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
(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, 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 nine months ended September 30, 2000 and 1999 (in
thousands):
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Property management fees (included in
operating expenses) $53 $59
Reimbursement for services of affiliates
(included in general and administrative
expenses) $23 $31
</TABLE>
Additionally, the Partnership paid approximately $11,135 and $39,812 to an
affiliate of the Managing General Partner for lease commissions related to new
and renewal leases at the Partnership's properties during the nine months ended
September 30, 2000 and 1999, respectively. These lease commissions are included
in other assets and amortized over the terms of the respective
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leases. Should a tenant terminate its lease early, any remaining unamortized
lease commission is fully expensed.
Note C - Mortgage Notes Payable
On June 29, 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 bore interest at the rate of 7% per
annum and the Partnership was required to make monthly payments of principal,
interest and escrow (for insurance and taxes) of $131,261. The mortgages
required a balloon payment at maturity for the remaining principal balance.
This required balloon payment was not made, and management is presently in
negotiations with the Lender to extend or renegotiate the notes. Existing
terms, conditions and monthly payments as required under the expired agreements
are expected to continue to be made and adhered to until new loan agreements
are in place. Under the most recent 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. 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 and expects 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.
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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 nine
months ended September 30, 2000 and 1999 based on actual physical square
footage occupancy of the properties:
<TABLE>
<CAPTION>
Average
Occupancy
-------------
2000 1999
---- ----
<S> <C> <C>
Hitchcock Plaza, 95% 99%
Aiken, South Carolina
Whitehorse Plaza, 15% 17%
Greenville, South Carolina
Georgetown Landing, 100% 100%
Georgetown, South Carolina
</TABLE>
The Partnership's net loss for the nine months ended September 30, 2000, was
$235,000 compared to net income of $227,000 for the corresponding period of
1999. The 2000 net loss is primarily due to a decrease in rental income of
$517,000 due primarily to tenant vacancies at Whitehorse Plaza and an increase
in the provision 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-one days
old and 100% of receivables from former tenants.
For the nine months ended September 30, 2000, total expenses decreased $14,000
compared to 1999, primarily due to a decrease in operating expenses offset by
increases in general and administrative expense, depreciation and property tax
expense. Operating expenses have declined from 1999 to 2000 primarily due to
significant roof repair charges incurred in 1999 that have not reoccurred in
2000 and reduced property maintenance and other operating expenses. General and
administrative expenses have increased due to additional professional fees
necessary to meet regulatory filing requirements, to negotiate with the
Partnership's Lenders and to process contractual arrangements with former and
existing tenants. Property tax expense has increased due to an increased
accrual based on estimated expected property tax increases.
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.
At September 30, 2000, the Partnership held unrestricted cash of approximately
$466,000. No
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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.
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
past-due rent on its 35,922 square feet, which remains vacant. Winn-Dixie has
not paid rent since June 1999. Both the Wal-Mart and Winn-Dixie leases extend
into 2006. The balance due from Winn-Dixie Stores at September 30, 2000 was
$385,000, which, under the Partnership's accounting policy as discussed above,
has been fully reserved. Management ultimately expects to recover the entire
Winn-Dixie Stores balance once the litigation has concluded. The Winn-Dixie
Stores account receivable has been pledged as collateral for the Partnership's
mortgage notes payable.
During the second quarter of 2000, 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.
During the third quarter of 2000, rental payments of $8,500 were refunded to
Rent-A-Center due to a provision in its lease allowing for a reduction in rent
due to the leaving of the anchor tenant. This rental refund was recorded as a
reduction of rental income.
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.
During the second quarter of 2000, in May, Pic-N-Pay shoe store vacated its
1,500 square feet at Hitchcock Plaza.
During the third quarter of 2000, Michael's Liquor Store was unable to obtain a
liquor license resulting in a rental refund of $8,000, which was recorded as a
reduction of rental income. Nations Credit vacated its 1,500 square feet in
August 2000 and paid a termination fee of $13,476, which was recorded as other
income. Alltel Mobile Telephone exercised a renewal option for 3,000 square
feet for five years, China 8 Restaurant, a new tenant, leased 3,000 square feet
for five years, which was previously occupied by Pic-N-Pay and Dollar General,
a new tenant, signed a five-year lease for 5,000 square feet to begin November
1, 2000. In July of 2000 Goody's Family Clothing Store agreed to continue
renting its 35,000 square feet on a month-to-month basis after the expiration
of its lease on August 31, 2000. It is expected that Goody's will continue
renting through December 31, 2000.
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Georgetown Landing - Tenant Activity
Georgetown Landing remained 100% occupied during the third 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.
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 10.56 - Loan Modification Agreement, dated June 29, 2000,
relating to Georgetown Square, with New York Life Insurance Company as
Secured Party
Exhibit 10.57 - Loan Modification Agreement, dated June 29, 2000,
relating to Whitehorse Plaza, with New York Life Insurance Company as
Secured Party
Exhibit 10.58 - Loan Modification Agreement, dated June 29, 2000,
relating to Hitchcock Plaza, with New York Life Insurance Company as
Secured Party
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 September
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: November 14, 2000
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