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 March 31, 1996
[ ] 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 (864) 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)
(in thousands, except unit data)
March 31, 1996
Assets
Cash:
Unrestricted $ 791
Restricted-tenant security deposits 4
Accounts receivable 141
Escrows for taxes and insurance 68
Other assets 102
Investment properties:
Land $ 1,525
Buildings and related personal property 12,901
14,426
Less accumulated depreciation (2,846) 11,580
$12,686
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 19
Tenant security deposits 6
Accrued taxes 53
Other liabilities 22
Mortgage notes payable 12,043
Partners' Capital (Deficit)
General partner $ (55)
Class A Limited Partners - (850,900 units) 576
Class B Limited Partners - (8,600 units) 22 543
$12,686
See Accompanying Notes to Financial Statements
b) BRUNNER COMPANIES INCOME PROPERTIES L.P. III
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1996 1995
Revenues:
Rental income $ 429 $ 606
Other income 9 10
Total revenues 438 616
Expenses:
Operating 80 86
General and administrative 26 24
Depreciation 106 149
Interest 280 410
Property taxes 22 41
Write-down of property (Note C) -- 415
Total expenses 514 1,125
Gain on foreclosure (Note C) -- 844
Net income (loss) $ (76) $ 335
Net income (loss) allocated to general
partner (1%) $ (1) $ 3
Net income (loss) allocated to Class A
limited partners (98.01%) (74) 329
Net income (loss) allocated to Class B
limited partners (.99%) (1) 3
$ (76) $ 335
Net income (loss) per Class A limited
partnership unit $ (.09) $ .39
See Accompanying Notes to Financial Statements
c) BRUNNER COMPANIES INCOME PROPERTIES L.P. III
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
General Limited Partners
Partner Class A Class B Total
<S> <C> <C> <C> <C>
Original capital contributions 1 $ 8,420 $ 86 $ 8,507
Partner's capital (deficit) at
December 31, 1995 $ (54) $ 650 $ 23 $ 619
Net income for the three
months ended March 31, 1996 (1) (74) (1) (76)
Partners' capital (deficit)
at March 31, 1996 $ (55) $ 576 $ 22 $ 543
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
d) BRUNNER COMPANIES INCOME PROPERTIES L.P. III
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (76) $ 335
Adjustments to reconcile net income (loss) to
net cash provided by
operating activities:
Depreciation 106 149
Gain on foreclosure -- (844)
Write-down of property -- 415
Amortization of organizational costs, loan
costs and leasing commissions 4 8
Change in accounts:
Restricted cash -- 5
Accounts receivable 107 44
Escrows for taxes and insurance 2 89
Other assets 2 (32)
Accounts payable (3) (12)
Tenant security deposit liabilities 3 (5)
Accrued taxes (5) (40)
Other liabilities 4 73
Net cash provided by operating
activities 144 185
Cash flows from investing activities:
Property improvements and replacements -- --
Net cash used in investing activities -- --
Cash flows from financing activities:
Loan extension costs -- (61)
Mortgage principal payments (53) --
Net cash used in financing activities (53) (61)
Net increase in cash 91 124
Cash at beginning of period 700 733
Cash at end of period $ 791 $ 857
Supplemental disclosure of cash flow information:
Cash paid for interest $ 279 $ 405
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
BRUNNER COMPANIES INCOME PROPERTIES L.P. III
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES
Foreclosure
During the first quarter of 1995, Forest Ridge Shopping Center foreclosed upon
by the mortgage holders. In connection with this foreclosure, the following
balance sheet accounts were adjusted by the non-cash amounts noted below.
Forest Ridge
Accounts receivable $ (25)
Other assets (32)
Investment properties (7,587)
Accumulated depreciation 1,163
Accrued taxes 67
Accounts payable --
Other liabilities 58
Mortgage notes payable 7,200
Gain on disposal of property $ 844
See Accompanying Notes to Financial Statements
e) BRUNNER COMPANIES INCOME PROPERTIES L.P. III
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements for Brunner Companies Income
Properties LP. III, 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 month period ended March 31, 1996,
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1996. 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, 1995.
Reclassifications
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
Note B - Mortgage Notes Payable
The mortgage notes payable for Highpoint ($6,600,000) and Gateway ($5,616,000)
matured on March 1, 1995. The Partnership successfully obtained a long-term
extension related to the Highpoint and Gateway notes in May of 1995. The
Highpoint note matures October 1, 2008, and the Gateway note matures January 1,
2008. Both notes are cross-collateralized, cross-defaulted and have an interest
rate of 9.25%.
Note C - 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 $415,000, to
reduce the carrying costs of the Forest Ridge assets to their estimated market
value, and a gain on the foreclosure of $844,000.
Note D - Foreclosure of Bay Village
On December 4, 1995, the lender foreclosed on the Bay Village Shopping Center.
The $5,300,000 mortgage matured January 1, 1994, and had been in default since
that date. 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 lender foreclosed on the property. In the Managing General
Partner's opinion, it was not in the Partnership's best interest to contest the
foreclosure action or file bankruptcy. The estimated fair value of Bay Village
approximated the amount payable to the mortgage holder; therefore, a gain on the
disposal of the property in foreclosure of $16,000, the difference between the
carrying value of the property and the debt to the mortgage holder, was
recorded.
Note E - 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. The partnership agreement provides for payments to
affiliates for services 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 in 1996 and 1995:
Three Months Ended
1996 1995
Property management fees $14 $18
Reimbursement for services of affiliates 8 9
Leasing commissions 5 3
The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the General Partner. An affiliate of the General
Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the General Partner who receives
payments on these obligations from the agent. The amount of the Partnership's
insurance premiums accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligations is not significant.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of two retail centers. The
following table sets forth the average occupancy of the properties for the three
months ended March 31, 1996 and 1995:
Average
Occupancy
1996 1995
Gateway Plaza
Mt. Sterling, Kentucky 95% 94%
Highpoint Village
Bellefontaine, Ohio 95% 95%
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 a net loss of $76,000 for the three months ended March
31, 1996, compared to net income of $335,000 for the corresponding period of
1995. The decrease in net income between 1996 and 1995 was primarily due to the
foreclosure of Bay Village Shopping Center. In addition, the decreases for the
three months ended March 31, 1996, in rental income, operating expenses,
depreciation, interest expense, and property taxes were primarily a result of
the foreclosure of Bay Village in December of 1995.
At March 31, 1996, the Partnership held unrestricted cash of $791,000 versus
$852,000 at March 31, 1995. Net cash provided by operating activities decreased
primarily because of significant prepaid rent collections in the first quarter
of 1995 that did not occur in the corresponding period in 1996. Net cash used
in financing activities decreased due to the non-recurring loan costs relating
to the extension of the Highpoint and Gateway mortgage notes that were paid in
1995.
The mortgage notes payable for Highpoint ($6,600,000) and Gateway ($5,616,000)
matured on March 1, 1995. The Partnership successfully obtained a long-term
extension related to the Highpoint and Gateway notes in May of 1995. 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%.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and meet other operating needs of the Partnership. Due to the successful
closing of the long-term financing on Highpoint and Gateway, the level of
existing liquid assets is believed to be sufficient to meet any near term needs
of the Partnership. No distributions were made in 1995 or during the first
quarter of 1996. Future cash distributions will depend on the levels of net
cash generated from operations, refinancings, property sales, and the
availability of cash reserves. At this time, the Managing General Partner does
not anticipate making a cash distribution during 1996.
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 March 31, 1996.
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.
Vice President/CAO
Date: May 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Brunner
Companies Income Properties L.P. III and is qualified in its entirety by
reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000847319
<NAME> BRUNNER COMPANIES INCOME PROPERTIES LP III
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 791
<SECURITIES> 0
<RECEIVABLES> 141
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 14,426
<DEPRECIATION> 2,846
<TOTAL-ASSETS> 12,686
<CURRENT-LIABILITIES> 0
<BONDS> 12,043
0
0
<COMMON> 0
<OTHER-SE> 543
<TOTAL-LIABILITY-AND-EQUITY> 12,686
<SALES> 0
<TOTAL-REVENUES> 438
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 514
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 280
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (76)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> 0
<FN>
<F1>The Partnership has an unclassified balance sheet.
</FN>
</TABLE>
