FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT of 1934
For the transition period.........to.........
Commission file number 0-18419
BRUNNER COMPANIES INCOME PROPERTIES L.P. III
(Exact name of small business issuer as specified in its charter)
Delaware 31-1266850
(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) (Zip Code)
Issuer's telephone number (803) 239-1000
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. III
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
September 30, 1995
<S>
Assets <C> <C>
Cash:
Unrestricted $ 663,194
Restricted-tenant security deposits 4,993
Accounts receivable 186,808
Escrows for taxes and insurance 128,724
Restricted escrow 87,802
Other assets 196,457
Investment properties:
Land $ 2,336,469
Buildings and related personal property 18,329,225
20,665,694
Less accumulated depreciation (3,701,067) 16,964,627
$18,232,605
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 3,984
Tenant security deposits 4,993
Accrued taxes 120,849
Other liabilities 10,649
Mortgage notes payable (Note C) 17,448,552
Partners' Capital (Deficit)
General partner $ (54,005)
Class A Limited Partners - 850,900 units 674,344
Class B Limited Partners - 8,600 units 23,239 643,578
$18,232,605
</TABLE>
[FN]
See Accompanying Notes to Financial Statements
b) BRUNNER COMPANIES INCOME PROPERTIES L.P. III
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Rental income $533,186 $ 726,589 $1,615,373 $2,111,804
Other income 8,582 7,347 39,123 22,678
Total revenues 541,768 733,936 1,654,496 2,134,482
Expenses:
Operating 48,012 59,272 146,452 250,787
General and administrative 23,848 34,593 85,794 93,506
Property management fees 17,160 32,783 52,696 95,079
Depreciation 149,176 203,057 447,528 606,557
Amortization 3,452 3,888 10,490 11,346
Interest 406,221 579,700 1,223,298 1,724,482
Property taxes 39,880 54,599 121,022 161,187
Write-down of property
(Note D) -- -- 414,859 --
Tenant reimbursements (70,977) (78,733) (204,121) (263,147)
Total expenses 616,772 889,159 2,298,018 2,679,797
Gain on foreclosure (Note D) -- -- 844,287 --
Net (loss) income $(75,004) $(155,223) $ 200,765 $ (545,315)
Net (loss) income allocated
to general partner (1%) $ (750) $ (1,552) $ 2,008 $(5,453)
Net (loss) income allocated
to Class A limited
partners (98.01%) (73,511) (152,134) 196,770 (534,463)
Net (loss) income allocated
to Class B limited
partners (.99%) (743) (1,537) 1,987 (5,399)
$(75,004) $(155,223) $ 200,765 $ (545,315)
Net (loss) income per Class A
limited partnership unit $ (.09) $ (.18) $ .23 $ (.63)
Class A limited partnership
units outstanding 850,900 851,400 850,900 851,400
</TABLE>
[FN]
See Accompanying Notes to Financial Statements
c) BRUNNER COMPANIES INCOME PROPERTIES L.P. III
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
General Limited Partners
Partner Class A Class B Total
<S> <C> <C> <C> <C>
Original capital contributions 1,000 $8,420,170 $86,000 $8,507,170
Partner's capital (deficit) at
December 31, 1994 $(56,013) $ 477,574 $21,252 $ 442,813
Net income for the nine months
ended September 30, 1995 2,008 196,770 1,987 200,765
Partners' capital (deficit)
at September 30, 1995 $(54,005) $ 674,344 $23,239 $ 643,578
</TABLE>
[FN]
See Accompanying Notes to Financial Statements
d) BRUNNER COMPANIES INCOME PROPERTIES L.P. III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 200,765 $ (545,315)
Adjustments to reconcile net income (loss) to
net cash provided by (used in)
operating activities:
Depreciation 447,528 606,557
Gain on foreclosure (844,287) --
Write-down of property 414,859 --
Amortization of organizational costs, loan
costs and leasing commissions 19,390 21,155
Change in accounts:
Restricted cash 3,786 (4,879)
Accounts receivable (18,902) 60,212
Escrows for taxes and insurance 31 (35,856)
Other assets (40,732) (84,294)
Accounts payable (15,100) (5,173)
Tenant security deposit liabilities (3,786) 6,758
Accrued taxes 12,993 (99)
Other liabilities (246) (51,486)
Net cash provided by (used in) operating
activities 176,299 (32,420)
Cash flows from investing activities:
Property improvements and replacements -- (1,266)
Deposits to restricted escrow (87,802) --
Net cash used in investing activities (87,802) (1,266)
Cash flows from financing activities:
Loan extension costs (90,797) (22,072)
Payment on mortgage notes payable (67,448) --
Net cash used in financing activities (158,245) (22,072)
Net decrease in cash (69,748) (55,758)
Cash at beginning of period 732,942 696,137
Cash at end of period $ 663,194 $ 640,379
Supplemental disclosure of cash flow information:
Cash paid for interest $1,214,398 $1,770,173
</TABLE>
[FN]
See Accompanying Notes to Financial Statements
BRUNNER COMPANIES INCOME PROPERTIES L.P. III
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES
Foreclosure
During the nine months ended September 30, 1995, Forest Ridge Shopping Center
was foreclosed upon by the lender. In connection with this foreclosure, the
following balance sheet accounts were adjusted by the non-cash amounts noted
below.
1995
Accounts receivable $ (25,405)
Other assets (31,509)
Investment properties (6,423,410)
Accrued taxes 66,643
Other liabilities 57,968
Mortgage notes payable 7,200,000
[FN]
See Accompanying Notes to Financial Statements
e) BRUNNER COMPANIES INCOME PROPERTIES L.P. III
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Going Concern
The accompanying financial statements have been prepared assuming the
Partnership will continue as a going concern. The Partnership had cash flows
provided by operating activities of $176,299 for the nine months ended September
30, 1995 and $60,143 for the twelve months ended December 31, 1994. At September
30, 1995, the Partnership had unrestricted cash of $663,194. As discussed in
Note C, a mortgage note payable of $5,300,000 that matured January 1, 1994, is
in default. The Partnership's estimated operating cash flows during 1995 are
expected to be inadequate to enable the Partnership to repay this note payable.
Throughout 1994 and the third quarter of 1995 the Partnership has sought
refinancing for the Partnership's debt. The Partnership has been unsuccessful in
refinancing the debt on Bay Village and Forest Ridge. Accordingly, Forest Ridge
was foreclosed on January 5, 1995, (see Note D) and it is expected that Bay
Village will be foreclosed on by the lender before year-end. A long-term
extension related to Highpoint and Gateway Plaza has been obtained to extend the
maturity dates to the year 2008 (see Note C).
Note B - Basis of Presentation
The accompanying unaudited financial statements 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 the Managing General Partner, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and nine
month periods ended September 30, 1995, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1995. 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, 1994.
Reclassifications
Certain reclassifications have been made to the 1994 information to conform
to the 1995 presentation.
Note C - Mortgage Notes Payable
The Partnership's mortgage notes payable for Bay Village ($5,300,000) and
Forest Ridge ($7,200,000) matured on January 1, 1994, and the mortgage notes
payable for Highpoint ($6,600,000) and Gateway ($5,616,000) matured on March 1,
1995. The Partnership has been unsuccessful in refinancing the debt on Bay
Village and Forest Ridge. Accordingly, Forest Ridge was foreclosed on by the
lender on January 5, 1995, (see Note D) and it is expected that Bay Village will
be foreclosed on by the lender before year-end. The Partnership has
successfully obtained a long-term extension related to the Highpoint and Gateway
notes. The Highpoint note matures October 1, 2008, and the Gateway note matures
January 1, 2008. Both notes are cross-collateralized and cross-defaulted and
have an interest rate of 9.25%. Loan costs of $90,797 were paid in conjunction
with the extension of these notes. These loan costs will be amortized over the
term of the loans.
Note D - Foreclosure of Forest Ridge
On January 5, 1995, the lender foreclosed on Forest Ridge Shopping Center.
The $7,200,000 mortgage matured January 1, 1994, and was in default. The lender
granted forebearances through June 30, 1994, while refinancing discussions
continued between the Partnership and the lender. These discussions did not
ultimately produce an agreement to either refinance or sell the property and the
Partnership did not contest the lender's foreclosure. In the Managing General
Partner's opinion, it was not in the Partnership's best interest to contest the
foreclosure action or file for reorganization under the bankruptcy laws. On
January 5, 1995, the Partnership recorded a valuation write-down of $414,859, to
reduce the carrying costs of the Forest Ridge assets to their estimated market
value, and a gain on the foreclosure of $844,287.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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, 1995 and 1994:
Average
Occupancy
1995 1994
Bay Village
Conway, South Carolina 98% 98%
Gateway Plaza
Mt. Sterling, Kentucky 94% 90%
Highpoint Village
Bellefontaine, Ohio 95% 94%
The increase in occupancy at Gateway Plaza is a result of six new tenants
moving in during late 1994 that occupy approximately 9,400 square feet. The
Managing General Partner has been notified by an anchor tenant, Wal-Mart, of its
intent to vacate the Gateway Plaza in 1996. This tenant is liable for, and the
Partnership expects that it will pay, its rental payments through the year 2008
when its lease expires. It is unknown at this time to what extent this vacancy
will negatively impact the performance of the shopping center.
The Partnership realized net income of $200,765 for the nine months ended
September 30, 1995, compared to a net loss of $545,315 for the corresponding
period of 1994. A net loss of $75,004 was realized for the three months ended
September 30, 1995, compared to a net loss of $155,223 for the corresponding
period of 1994. The increase in net income for the nine months ended September
30, 1995, compared to the corresponding period of 1994 was primarily due to an
$844,287 gain on the foreclosure of Forest Ridge Shopping Center. The gain on
the Forest Ridge foreclosure was partially offset by a related $414,859 write-
down to reduce the net book value of the Forest Ridge assets to their estimated
market value. In addition, the decreases for the three and nine month periods
ended September 30, 1995, in rental income, operating expenses, property
management fees, depreciation, interest expense, property taxes, and tenant
reimbursements were primarily a result of the foreclosure of Forest Ridge. Other
income increased for the nine month period ended September 30, 1995, as a result
of an easement fee paid by Wal-Mart at Gateway Plaza.
At September 30, 1995, the Partnership had unrestricted cash of $663,194
compared to $732,942 at December 31, 1994. Net cash provided by operating
activities increased as a result of a decrease in tax and insurance escrow
funding and a decrease in payments of other liabilities. Net cash used in
investing activities increased as a result of a deposit to a restricted escrow
for Bay Village. Net cash used in financing activities increased due to the
payment of loan costs relating to the extension on the Highpoint and Gateway
mortgage notes and increased principal payments.
Due to the uncertainty of the mortgage financing for the Partnership, the
Managing General Partner is attempting to maximize cash reserves. No
distributions were made in 1994 or the first nine months of 1995 and no
distributions are anticipated during the remainder of 1995. Future cash
distributions will depend on the levels of net cash generated from operations,
refinancing, property sales, and the availability of cash reserves.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) 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 September 30, 1995.
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. III,
a Delaware limited partnership
By: Brunner Management Limited
Partnership, an Ohio limited Partnership,
its General Partner
By: 104 Management, Inc., an Ohio corporation,
its Managing General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Controller and Principal
Accounting Officer
Date: November 13, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Brunner
Companies Income Properties III 1995 Third Quarter 10-QSB and is qualified in
its entirety by reference to such 10-QSB.
</LEGEND>
<CIK> 0000847319
<NAME> BRUNNER COMPANIES INCOME PROPERTIES LP III
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 663,194
<SECURITIES> 0
<RECEIVABLES> 186,808
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 20,665,694
<DEPRECIATION> 3,701,067
<TOTAL-ASSETS> 18,232,605
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 17,448,552
<COMMON> 0
0
0
<OTHER-SE> 643,578
<TOTAL-LIABILITY-AND-EQUITY> 18,232,605
<SALES> 0
<TOTAL-REVENUES> 1,654,496
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,298,018
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,223,298
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 200,765
<EPS-PRIMARY> .23
<EPS-DILUTED> 0
<FN>
<F1>
The Registrant has an unclassified balance sheet.
</FN>
</TABLE>
