FORM 10-QSB.--QUARTERLY OR TRANSITIONAL 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 September 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)
September 30, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 830
Restricted-tenant security deposits 8
Accounts receivable 113
Escrows for taxes and insurance 71
Other assets 103
Investment properties:
Land $ 1,525
Buildings and related personal property 12,908
14,433
Less accumulated depreciation (3,485) 10,948
$12,073
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 4
Tenant security deposits 8
Accrued taxes 77
Other liabilities 105
Mortgage notes payable 11,718
Partners' Capital (Deficit)
General Partner's $ (58)
Class A Limited Partners' - (850,900 units) 200
Class B Limited Partners' - (8,600 units) 19 161
$12,073
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 Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 416 $ 432 $ 1,327 $ 1,322
Other income 9 12 29 28
Total revenues 425 444 1,356 1,350
Expenses:
Operating 117 56 338 199
General and administrative 18 4 52 54
Depreciation 107 106 319 319
Interest 272 277 821 836
Property taxes 26 25 75 73
Total expenses 540 468 1,605 1,481
Net loss $ (115) $ (24) $ (249) $ (131)
Net loss allocated
to general partner (1%) $ (1) $ -- $ (2) $ (1)
Net loss allocated
to Class A limited partners (98.01%) (113) (24) (245) (129)
Net loss allocated
to Class B limited partners (.99%) (1) -- (2) (1)
$ (115) $ (24) $ (249) $ (131)
Net loss per Class A limited
partnership unit $ (.13) $ (.03) $ (.29) $ (.15)
<FN>
See Accompanying Notes to Financial Statements
</FN>
</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 nine months
ended September 30, 1997 (2) (245) (2) (249)
Partners' (deficit) capital
at September 30, 1997 $ (58) $ 200 $ 19 $ 161
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
d) BRUNNER COMPANIES INCOME PROPERTIES L.P. III
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (249) $ (131)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 319 319
Amortization of loan costs and leasing commissions 10 16
Change in accounts:
Restricted cash (2) (2)
Accounts receivable 20 159
Escrows for taxes and insurance (14) (5)
Other assets (18) (10)
Accounts payable (16) (16)
Tenant security deposit liabilities 2 2
Accrued taxes 21 20
Other liabilities (30) 7
Net cash provided by operating activities 43 359
Cash flows from investing activities: -- --
Cash flows from financing activities:
Payment on mortgage notes payable (177) (163)
Net cash used in financing activities (177) (163)
Net (decrease) increase in unrestricted cash and
cash equivalents (134) 196
Unrestricted cash and cash equivalents at beginning
of period 964 700
Unrestricted cash and cash equivalents at end of period $ 830 $ 896
Supplemental disclosure of cash flow information:
Cash paid for interest $ 820 $ 834
<FN>
See Accompanying Notes to Financial Statements
</FN>
</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 L.P. 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 nine month periods ended September 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 nine month periods ended
September 30, 1997 and 1996 (in thousands):
1997 1996
Property management fees (included in operating
expenses) $42 $42
Reimbursement for services of affiliates (included in
general and administrative expenses) 19 20
For the period January 1, 1996 to August 31, 1997 the Partnership insured 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 nine
months ended September 30, 1997 and 1996:
Average
Occupancy
1997 1996
Gateway Plaza
Mt. Sterling, Kentucky 56% 75%
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. Gateway Plaza's average
occupancy shown above represents the shopping center's physical occupancy.
Because Wal-Mart has continued making its rental payments, the center's economic
average occupancy for the nine months ended September 30, 1997 is 97%.
The Partnership realized a net loss of approximately $249,000 for the nine
months ended September 30, 1997, compared to a net loss of approximately
$131,000 for the nine months ended September 30, 1996. The Partnership's net
loss was approximately $115,000 for the three months ended September 30, 1997,
compared to a net loss of approximately $24,000 for the corresponding period of
1996. The increase in net loss for the three and nine month periods ended
September 30, 1997 is primarily due to increased operating expenses due to
extensive parking lot repairs at Highpoint Village. During the nine month
periods ended September 30, 1997 and 1996, there were no other significant
expenditures for major repairs and maintenance. During the nine month periods
ended September 30, 1997 and 1996, revenues and all other expenses remained
relatively consistent.
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 September 30, 1997, the Partnership held unrestricted cash and cash
equivalents of $830,000 compared to $896,000 at September 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 $11,718,000 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 nine
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 September 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: November 4, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Brunner
Companies Income Properties L.P. III 1997 Third 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 830
<SECURITIES> 0
<RECEIVABLES> 113
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 14,433
<DEPRECIATION> 3,485
<TOTAL-ASSETS> 12,073
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 11,718
0
0
<COMMON> 0
<OTHER-SE> 161
<TOTAL-LIABILITY-AND-EQUITY> 12,073
<SALES> 0
<TOTAL-REVENUES> 1,356
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,605
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 821
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (249)
<EPS-PRIMARY> (.29)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
