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 March 31, 1998
[ ] 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)
March 31, 1998
(in thousands, except unit data)
Assets
Cash and cash equivalents $ 717
Receivables and deposits 237
Other assets 94
Investment properties:
Land $ 1,525
Buildings and related personal property 12,912
14,437
Less accumulated depreciation (3,697) 10,740
$11,788
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 10
Tenant security deposit payable 8
Accrued property taxes 26
Other liabilities 98
Mortgage notes payable 11,593
Partners' Capital (Deficit)
General Partner's $ (60)
Class A limited partners' (850,900 units
issued and outstanding) 96
Class B limited partners' (8,600 units
issued and outstanding) 17 53
$11,788
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,
1998 1997
Revenues:
Rental income $ 407 $ 435
Other income 9 10
Total revenues 416 445
Expenses:
Operating 73 78
General and administrative 24 19
Depreciation 105 105
Interest 268 276
Property taxes 24 23
Total expenses 494 501
Net loss $ (78) $ (56)
Net loss allocated to general
partner (1%) $ (1) $ (1)
Net loss allocated to Class A
limited partners (98.01%) (76) (54)
Net loss allocated to Class B
limited partners (.99%) (1) (1)
$ (78) $ (56)
Net loss per Class A limited
partnership unit $ (.09) $ (.06)
See Accompanying Notes to Financial Statements
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
Partner's (deficit) capital at
December 31, 1997 $ (59) $ 172 $ 18 $ 131
Net loss for the three
months ended March 31, 1998 (1) (76) (1) (78)
Partners' (deficit) capital at
March 31, 1998 $ (60) $ 96 $ 17 $ 53
<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>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (78) $ (56)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 105 105
Amortization of loan costs and leasing
commissions 4 3
Change in accounts:
Receivables and deposits 12 (15)
Other assets 3 2
Accounts payable (7) (10)
Tenant security deposit liabilities 1 2
Accrued property taxes (30) (30)
Other liabilities (67) (127)
Net cash used in operating activities (57) (126)
Cash flows from investing activities -- --
Cash flows from financing activities:
Mortgage principal payments (63) (77)
Net cash used in financing activities (63) (77)
Net decrease in cash and cash equivalents (120) (203)
Cash and cash equivalents at beginning of period 837 964
Cash and cash equivalents at end of period $ 717 $ 761
Supplemental disclosure of cash flow information:
Cash paid for interest $ 269 $ 367
<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 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 month period ended March 31, 1998, are not necessarily
indicative of the results that may be expected for the fiscal year ending
December 31, 1998. 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, 1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 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. A majority of the outstanding stock of the Managing
General Partner is owned by IBGP, Inc., an affiliate of Insignia Financial
Group, Inc. ("Insignia"). 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 during the three months ended March
31, 1998 and 1997 (in thousands):
1998 1997
Property management fees (included in operating
expense) $11 $13
Reimbursement for services of affiliates (included
in general and administrative expense) 14 5
Additionally, the Partnership paid approximately $1,000 and $5,000 during the
three months ended March 31, 1998 and 1997, respectively, to an affiliate of the
Managing General Partner for lease commissions at the Partnership's commercial
property. These lease commissions are included in other assets and are
amortized over the terms of the respective leases.
For the period from January 1, 1997 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
Managing General Partner with an 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 master policy. The
agent assumed the financial obligations to the affiliate of the Managing General
Partner which received payments on these obligations from the agent. The amount
of the Partnership's insurance premiums that accrued to the benefit of the
affiliate of the Managing General Partner by virtue of the agent's obligations
was not significant.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in
Insignia Properties Trust, with Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust. The closing, which
is anticipated to happen in the third quarter of 1998, is subject to customary
conditions, including government approvals and the approval of Insignia's
shareholders. If the closing occurs, AIMCO will then control the Managing
General Partner of the Partnership.
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 physical occupancy of the properties for
each of the three months ended March 31, 1998 and 1997:
Average
Occupancy
1998 1997
Gateway Plaza
Mt. Sterling, Kentucky 56% 55%
Highpoint Village
Bellefontaine, Ohio 93% 96%
Wal-Mart, an anchor tenant, vacated 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 is
97% and 96% for the three months ended March 31, 1998 and 1997, respectively.
The Partnership realized a net loss of approximately $78,000 for the three
months ended March 31, 1998, compared to approximately $56,000 for the three
months ended March 31, 1997. The increase in net loss is primarily due to a
decrease in rental revenues. The decrease in rental revenues is attributable to
a decrease in occupancy due to the departure of two tenants from Highpoint
Village during 1997. During the three months ended March 31, 1998, all other
revenues and 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 March 31, 1998, the Partnership held cash and cash equivalents of
approximately $717,000 compared to approximately $761,000 at March 31, 1997.
The net decrease in cash and cash equivalents for the three months ended March
31, 1998 was approximately $120,000 compared to a net decrease of approximately
$203,000 for the three months ended March 31, 1997. Net cash used in operations
decreased primarily due to a decrease in cash used in other liabilities relating
to the timing of prepaid rent collections. Net cash used in financing
activities decreased due to a decrease in principal payments made on the
mortgage notes.
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 other operating needs of the Partnership. Such assets are currently
thought to be sufficient for any near term needs of the Partnership. The
mortgage indebtedness of approximately $11,593,000 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 1997 or during the first three months of
1998. 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 1998.
Year 2000
The Partnership is dependent upon the Managing General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed no
later than December 31, 1998, which is prior to any anticipated impact on its
operating systems. The Managing General Partner believes that with
modifications to existing software and conversions to new software, the Year
2000 Issue will not pose significant operational problems for its computer
systems. However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Partnership.
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.
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, 1998.
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,
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 and Director
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President and Chief Accounting
Officer
Date: May 11, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Brunner Companies Incomes Properties L.P. III 1998 First 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 717
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 14,337
<DEPRECIATION> 3,697
<TOTAL-ASSETS> 11,788
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 11,593
0
0
<COMMON> 0
<OTHER-SE> 53
<TOTAL-LIABILITY-AND-EQUITY> 11,788
<SALES> 0
<TOTAL-REVENUES> 416
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 494
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 268
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (78)
<EPS-PRIMARY> (.09)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
