FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(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, 1997
[ ] 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 0-18419
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)
(864) 239-1000
(Issuer's telephone number)
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)
June 30, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 959
Restricted-tenant security deposits 8
Accounts receivable 102
Escrows for taxes and insurance 57
Other assets 93
Investment properties:
Land $ 1,525
Buildings and related personal property 12,908
14,433
Less accumulated depreciation (3,378) 11,055
$12,274
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 1
Tenant security deposits 8
Accrued taxes 51
Other liabilities 160
Mortgage notes payable 11,778
Partners' Capital (Deficit)
General Partner's $ (57)
Class A Limited Partners' - (850,900 units) 313
Class B Limited Partners' - (8,600 units) 20 276
$12,274
See Accompanying Notes to Financial Statements
b) BRUNNER COMPANIES INCOME PROPERTIES L.P. III
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 476 $ 461 $ 911 $ 890
Other income 10 7 20 16
Total revenues 486 468 931 906
Expenses:
Operating 143 69 221 143
General and administrative 15 18 34 50
Depreciation 107 107 212 213
Interest 273 279 549 559
Property taxes 26 26 49 48
Total expenses 564 499 1,065 1,013
Net loss $ (78) $ (31) $ (134) $ (107)
Net loss allocated
to general partner (1%) $ (1) $ -- $ (1) $ (1)
Net loss allocated to Class A
limited partners (98.01%) (76) (31) (132) (105)
Net loss allocated to Class B
limited partners (.99%) (1) -- (1) (1)
$ (78) $ (31) $ (134) $ (107)
Net loss per Class A limited
partnership unit $ (.09) $ (.04) $ (.16) $ (.12)
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
c) BRUNNER COMPANIES INCOME PROPERTIES L.P. III
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
General Limited Partners'
Partner's Class A Class B Total
<S> <C> <C> <C> <C>
Original capital contributions $ 1 $ 8,420 $ 86 $ 8,507
Partners' (deficit) capital at
December 31, 1996 $ (56) $ 445 $ 21 $ 410
Net loss for the six months
ended June 30, 1997 (1) (132) (1) (134)
Partners' (deficit) capital
at June 30, 1997 $ (57) $ 313 $ 20 $ 276
<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>
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (134) $ (107)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 212 213
Amortization of loan costs and leasing commissions 6 8
Change in accounts:
Restricted cash (2) --
Accounts receivable 31 108
Escrows for taxes and insurance -- (25)
Other assets (4) 1
Accounts payable (19) (1)
Tenant security deposit liabilities 2 2
Accrued taxes (5) 22
Other liabilities 25 6
Net cash provided by operating activities 112 227
Cash flows from investing activities: -- --
Cash flows from financing activities:
Payments on mortgage notes payable (117) (108)
Net cash used in financing activities (117) (108)
Net (decrease) increase in unrestricted cash and
cash equivalents (5) 119
Unrestricted cash and cash equivalents at beginning
of period 964 700
Unrestricted cash and cash equivalents at end of period $ 959 $ 819
Supplemental disclosure of cash flow information:
Cash paid for interest $ 548 $ 557
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
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 (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 and six month periods ended June 30, 1997, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1997. 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, 1996.
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. 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 for the six month periods ended June
30, 1997 and 1996 (in thousands):
1997 1996
Property management fees (included in operating
expenses) $29 $27
Reimbursement for services of affiliates (included
in general and administrative expenses) 10 13
The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the Managing General Partner. An affiliate of the
Managing 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 Managing 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
Managing 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 six
months ended June 30, 1997 and 1996:
Average
Occupancy
1997 1996
Gateway Plaza
Mt. Sterling, Kentucky 54% 85%
Highpoint Village
Bellefontaine, Ohio 95% 94%
Wal-Mart, an anchor tenant, vacated the Gateway Plaza in May of 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. Certain tenants in the
shopping center have the option to pay a reduced rental rate based on tenant
sales due to the vacancy of this anchor tenant. To date, two tenants have
exercised this option; however, rental revenues have not been materially
impacted. It is unknown to what extent this vacancy will negatively impact the
performance of the shopping center in the future.
The Partnership realized a net loss of approximately $134,000 for the six
months ended June 30, 1997 compared to a net loss of approximately $107,000 for
the six months ended June 30, 1996. The Partnership's net loss for the three
months ended June 30, 1997 was approximately $78,000 compared to a net loss of
approximately $31,000 for the three months ended June 30, 1996. The increase
in net loss for the three and six month periods ended June 30, 1997 is
primarily due to increased operating expenses due to $100,000 in extensive
parking lot repairs at Highpoint Village. During the six month periods ended
June 30, 1997 and 1996, there were no other significant expenditures for major
repairs and maintenance. Partially offsetting this increase was a decrease in
general and administrative expenses. General and administrative expenses
decreased primarily due to decreased professional fees for the six months ended
June 30, 1997 compared to the corresponding period of 1996.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment 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 General Partner will be able to sustain such a plan.
At June 30, 1997, the Partnership held unrestricted cash and cash equivalents
of $959,000 compared to $819,000 at June 30, 1996. Net cash provided by
operating activities decreased due to the increased operating expenses
discussed above and the change in accounts receivable related to timing of
collections. Net cash used in financing activities increased due to the
increased principal portion of the monthly mortgage payments on the investment
properties.
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. Such assets are
currently thought to be sufficient to meet any near-term needs of the
Partnership. The mortgage indebtedness of $11,778,000 matures in 2008 with
balloon payments due at maturity at which time the properties will either
be refinanced or sold. No distributions were made in 1996 or during the first
six months of 1997. 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 1997.
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 June 30, 1997.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BRUNNER COMPANIES INCOME PROPERTIES L.P. III,
By: Brunner Management Limited Partnership
Its General Partner
By: 104 Management, Inc.
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: August 8, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Brunner
Companies Income Properties L.P. III 1997 Second Quarter 10-QSB and is
qualified in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000847319
<NAME> BRUNNER COMPANIES INCOME PROPERTIES L.P. III
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 959
<SECURITIES> 0
<RECEIVABLES> 102
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 14,433
<DEPRECIATION> 3,378
<TOTAL-ASSETS> 12,274
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 11,778
0
0
<COMMON> 0
<OTHER-SE> 276
<TOTAL-LIABILITY-AND-EQUITY> 12,274
<SALES> 0
<TOTAL-REVENUES> 931
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,065
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 549
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (134)
<EPS-PRIMARY> (.16)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
