UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly year ended March 31, 1995
or
[ ] 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 0-19219
Brauvin Income Plus L.P. III
(Exact name of registrant as specified in its charter)
Delaware 36-3639043
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 South Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
(312) 443-0922
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 .
<PAGE>
BRAUVIN INCOME PLUS L.P. III
Index
Page
PART I Financial Information
Item 1. Consolidated Financial Statements. . . . . . . . . 3
Consolidated Balance Sheets at March 31, 1995
and December 31, 1994. . 4
Consolidated Statements of Operations for the period
January 1, 1995 to March 31, 1995 and January 1,
1994 to March 31, 1994 5
Consolidated Statements of Partners' Capital for
the period January 1, 1992 to March 31, 1995 . 6
Consolidated Statements of Cash Flows for the period
January 1, 1995 to March 31, 1995 and January 1, 1994
to March 31, 1994 7
Notes to Consolidated Financial Statements . . . . 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . 13
PART II
PART II Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . 15
Item 2. Changes in Securities. . . . . . . . . . . . . . . 15
Item 3. Defaults Upon Senior Securities. . . . . . . . . . 15
Item 4. Submissions of Matters to a Vote of Security Holders. . 15
Item 5. Other Information. . . . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 15
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Except for the December 31, 1994 Consolidated Balance Sheet, the following
Consolidated Balance Sheet as of March 31, 1995, Consolidated Statements of
Operations for the three months ended March 31, 1995 and 1994, Consolidated
Statements of Partners' Capital for the period January 1, 1992 to March 31,
1995 and Consolidated Statements of Cash Flows for the three
months ended March 31, 1995 and 1994 for Brauvin Income Plus L.P. III (the
"Partnership") are unaudited and have not been examined by independent public
accountants but reflect, in the opinion of the management, all adjustments
necessary to present fairly the information required. All such adjustments
are of a normal recurring nature.
These consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Partnership's 1994 Annual Report on Form 10-K.
<PAGE>
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1995 1994
ASSETS
Investment in real estate, at cost:
Land $ 7,845,528 $ 7,845,528
Buildings and improvements 10,463,264 10,463,264
18,308,792 18,308,792
Less: accumulated depreciation (1,584,621) (1,486,513)
Net investment in real estate 16,724,171 16,822,279
Investment in Brauvin Gwinnett
County Venture (Note 4) 155,048 157,014
Cash and cash equivalents 820,853 925,719
Rent receivable 1,226 13,755
Deferred rent receivable 30,100 27,943
Due from affiliates 2,726 2,352
Prepaid offering costs 76,630 78,078
Total Assets $17,810,754 $18,027,140
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued expenses $ 308,581 $ 298,738
Rent received in advance 61,754 144,944
Due to affiliates 11,128 10,421
Total Liabilities 381,463 454,103
MINORITY INTEREST IN BRAUVIN CHILI'S
LIMITED PARTNERSHIP (287) (382)
PARTNERS' CAPITAL:
General Partners 75,106 79,872
Limited Partners 17,354,472 17,493,547
Total Partners' Capital 17,429,578 17,573,419
Total Liabilities and Partners'
Capital $17,810,754 $18,027,140
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31,
1995 1994
INCOME:
Rental $536,818 $535,650
Interest 10,195 3,199
Other 2,506 5,060
Total Income 549,519 543,909
EXPENSES:
Management fees 6,693 --
General and administrative 36,012 35,951
Amortization of organization costs -- 1,500
Depreciation 98,108 96,243
Total expenses 140,813 133,694
Income before minority interest and
equity interest in joint ventures 408,706 410,215
Minority interest share in Brauvin Chili's
Limited Partnership's net income (170) (136)
Equity interest in Brauvin Gwinnett
County Venture's net income 3,154 2,537
Net income $411,690 $412,616
Net income allocated to the General
Partners $ 8,234 $ 8,252
Net income allocated to the Limited Partners $403,456 $404,364
Net income per Unit outstanding (a) $ 0.18 $ 0.18
(a) Net income per Unit was based on the average Units outstanding during the
period since they were of varying dollar amounts and percentages based upon
the dates Limited Partners were admitted to the Partnership and additional
Units were purchased through the Plan.
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
For the period January 1, 1992 to March 31, 1995
General Interest
Partners Holders* Total
Balance, January 1, 1992 $24,300 $18,320,204 $18,344,504
Contributions, net -- 150,611 150,611
Selling commissions and other
offering costs -- (30,542) (30,542)
Net income 28,783 1,410,366 1,439,149
Cash distributions -- (1,958,231) (1,958,231)
Balance, December 31, 1992 53,083 17,892,408 17,945,491
Contributions, net -- 249,281 249,281
Selling commissions and other
offering costs -- (30,564) (30,564)
Net income 32,289 1,582,139 1,614,428
Cash distributions -- (1,973,921) (1,973,921)
Balance, December 31, 1993 85,372 17,719,343 17,804,715
Contributions, net -- 145,507 145,507
Selling commissions and
other offering costs (Note 1) -- (31,848) (31,848)
Net income -- 1,668,247 1,668,247
Cash distributions (5,500) (2,007,702) (2,013,202)
Balance, December 31, 1994 79,872 17,493,547 17,573,419
Contributions, net -- (21,589) (21,589)
Selling commissions and
other offering costs (Note 1) -- (8,325) (8,325)
Net income 8,234 403,456 411,690
Cash distribution (13,000) (512,617) (525,617)
Balance, March 31, 1995 $ 75,106 $17,354,472 $17,429,578
* Total Units sold at March 31, 1995, December 31, 1994, 1993 and 1992 were
2,205,574, 2,208,472, 2,193,182 and 2,168,254, respectively. Cash
distributions to Limited Partners per Unit were $0.23, $0.91, $0.91 and $0.91
for the three months ended March 31, 1995 and the years ended December 31,
1994, 1993 and 1992, respectively.
Cash distributions to Limited Partners per Unit are based
on the average Units outstanding during the period since they were of varying
dollar amounts and percentages based upon the dates Limited Partners were
admitted to the Partnership and additional Units were purchased through the
distribution reinvestment plan.
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31,
1995 1994
Cash flows from operating activities:
Net income $411,690 $412,616
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity interest in Brauvin Gwinnett
County Venture (3,154) (2,537)
Minority interest's share of income
from Brauvin Chili's Limited Partnership 170 136
Depreciation and amortization 98,108 97,743
Decrease in rent receivables 12,529 6,923
Increase in deferred rent receivable (2,157) (2,532)
Increase in due from affiliates (374) (142)
Decrease in rent received in advance (83,190) (13,379)
Increase in due to affiliates 707 615
Increase (decrease) in accounts payable
and accrued expenses 9,843 (23,738)
Decrease in prepaid offering costs 1,448 --
Total adjustments 33,931 63,089
Net cash provided by operating activities 445,620 475,705
Cash flows from investing activities:
Cash distribution to minority interest
- Brauvin Chili's Limited Partnership (75) (150)
Cash distribution from Brauvin Gwinnett
County Venture 5,120 2,241
Net cash provided by investing activities 5,045 2,091
Cash flows from financing activities:
Sale of Units, net of liquidations and
selling commissions (29,914) (2,160)
Cash distributions to General Partners (13,000) --
Cash distributions to Limited Partners (512,617) (495,431)
Net cash used in financing activities (555,531) (497,591)
Net decrease in cash and cash equivalents (104,866) (19,795)
Cash and cash equivalents at beginning of
period 925,719 579,340
Cash and cash equivalents at end of period $820,853 $559,545
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
BRAUVIN INCOME PLUS L.P. III (the "Partnership") is a Delaware limited
partnership organized for the purpose of acquiring debt-free ownership of
existing, free-standing, income-producing retail, office or industrial
real estate properties predominantly subject to "triple-net" leases. The
General Partners of the Partnership are Brauvin Realty Advisors III, Inc.,
Jerome J. Brault and Cezar M. Froelich. Brauvin Realty Advisors III, Inc. is
owned by Messrs. Brault (50%) and Froelich (50%). Brauvin Securities, Inc.,
an affiliate of the General Partners, was the selling agent for the
Partnership. The Partnership is managed by an affiliate of the General
Partners.
The Partnership was formed on July 31, 1989 and filed a Registration
Statement on Form S-11 with the Securities and Exchange Commission which was
declared effective on October 30, 1989. The sale of the minimum of
$1,200,000 of limited partnership interests of the Partnership (the "Units")
necessary for the Partnership to commence operations was achieved on
January 15, 1990.
The Partnership's offering was originally expected to close on October 29,
1990 but the Partnership, with the receipt of the necessary regulatory
approval, extended the offering until it closed on October 29, 1991. Through
March 31, 1995, the Partnership has sold $22,055,738 of Units. This total
includes $990,017 of Units purchased by Limited Partners who utilized their
distributions of Operating Cash Flow to purchase additional Units through the
distribution reinvestment plan (the "Plan") and are net of Units purchased by
the Partnership from Limited Partners liquidating their investments in the
Partnership which Units were retired. As of March 31, 1994, the Plan
participants have acquired Units under the Plan which approximate 4% of the
total Units outstanding.
The Partnership has acquired the land and buildings underlying five Ponderosa
restaurants, two Chi-Chi's restaurants, one International House of Pancakes
restaurant, one Applebee's restaurant, two Sports Unlimited stores, and three
Steak n Shake restaurants. The Partnership also acquired a 99.5% and 6.4%
equity interests in two joint ventures with entities affiliated with the
Partnership. These ventures own the land underlying a Chili's restaurant and
a CompUSA store, respectively.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
The accompanying financial statements have been prepared using the accrual
method of accounting.
Rental Income
Rental income is recognized on a straight-line basis over the life of the
related leases. Differences between rental income earned and amounts due per
the respective lease agreements are credited or charged as applicable to
deferred rent receivable.
Federal Income Taxes
Under the provisions of the Internal Revenue Code, the Partnership's income
and losses are reportable by the partners on their respective income tax
returns. Accordingly, no provision is made for Federal income taxes in the
Consolidated Financial Statements. However, in certain instances, the
Partnership has been required under applicable state law to remit directly
to the tax authorities amounts representing withholding from distributions paid
to partners.
Consolidation of Joint Venture
The Partnership owns a 99.5% equity interest in a joint venture, Brauvin
Chili's Limited Partnership, which owns one Chili's restaurant. The
accompanying financial statements have consolidated 100% of the assets,
liabilities, operations and partners' capital of Brauvin Chili's Limited
Partnership. All significant intercompany accounts have been eliminated.
Investment in Joint Venture
The Partnership owns a 6.4% equity interest in a joint venture, Brauvin
Gwinnett County Venture, which owns one CompUSA store. The accompanying
financial statements include the investment in Brauvin Gwinnett County Venture
using the equity method of accounting.
Investment in Real Estate
The operating properties acquired by the Partnership are stated at cost
including acquisition costs, net of accumulated depreciation. Depreciation
expense is computed on a straight-line basis over approximately 35 years.
Organization and Offering Costs
Organization costs represent costs incurred in connection with the
organization and formation of the Partnership. Organization costs are
amortized over a period of five years using the straight-line method. Offering
costs represent costs incurred in selling Units, such as the printing of the
Prospectus and marketing materials. Offering costs have been recorded as a
reduction of Limited Partners' Capital.
The General Partners have guaranteed payment of any organization and offering
costs that exceed defined percentages of the gross proceeds of the offering.
Prepaid offering costs represent amounts in excess of the defined percentages
of the gross proceeds. Subsequently, gross proceeds are expected to increase
due to the purchase of additional Units through the distribution reinvestment
plan (the "Plan") and the prepaid offering costs will be transferred to
offering costs and treated as a reduction in Partners' Capital.
<PAGE>
Cash and Cash Equivalents
Cash equivalents include all highly liquid debt instruments with an original
maturity within three months of purchase.
(2) PARTNERSHIP AGREEMENT
Distributions
All Operating Cash Flow, as defined in the Partnership Agreement (the
"Agreement") shall be distributed:
(a) first, to the Limited Partners until the Limited Partners receive an amount
equal to a 9-1/4% non-cumulative, non-compounded, annual return on Adjusted
Investment, as such term is defined in the Agreement, commencing on the last
day of the calendar quarter in which the Unit was purchased (the "Current
Preferred Return"); and (b) thereafter, any remaining amounts will be
distributed 98% to the Limited Partners (on a pro rata basis) and 2% to the
General Partners.
The net proceeds of a sale or refinancing of a Partnership property shall be
distributed as follows:
. first, pro rata to the Limited Partners until each Limited Partner has
received an amount equal to a 10.5% cumulative, non-compounded, annual
return of Adjusted Investment (the "Cumulative Preferred Return");
. second, to the Limited Partners until each Limited Partner has been paid
an amount equal to his Adjusted Investment, as defined in the Agreement,
apportioned pro rata among the Limited Partners based on the amount of the
Adjusted Investment;
. thereafter, 95% to the Limited Partners (apportioned pro rata based on
Units) and 5% to the General Partners.
Distributions to Limited Partners for the first quarter of 1995 will be made
to investors receiving quarterly distributions on May 15, 1995 and to investors
receiving monthly distributions on approximately April, May and June 15, 1995,
in the aggregate amount of $504,470.
Profits and Losses
Net profits and losses from operations of the Partnership [computed without
regard to any allowance for depreciation or cost recovery deductions under the
Internal Revenue Code of 1986, as amended (the "Code")] for each taxable year
of the Partnership shall be allocated to each Partner in the same ratio as the
cash distributions received by such Partner attributable to that period bears
to the total cash distributed by the Partnership. In the event that there are
no cash distributions, net profits and losses from operations of the
Partnership (computed without regard to any allowance for depreciation or cost
recovery deductions under the Code) shall be allocated 99% to the Limited
Partners and 1% to the General Partners. Notwithstanding the foregoing, all
depreciation and cost recovery deductions allowed under the Code shall be
allocated 2% to the General Partners and 98% to the Taxable Class Limited
Partners, as defined in the Agreement.
The net profit of the Partnership from any sale or other disposition of a
Partnership property shall be allocated (with ordinary income being allocated
first) as follows: (a) first, an amount equal to the aggregate deficit
balances of the Partners' Capital Accounts, as such term is defined in the
Agreement, shall be allocated to each Partner who or which has a deficit
Capital Account balance in the same ratio as the deficit balance of such
Partner's Capital Account bears to the aggregate of the deficit balances
of all Partners' Capital Accounts; (b) second, to the Limited Partners until
the Capital Account balances of the Limited Partners are equal to any
unpaid Cumulative Preferred Return, as of such date; (c) third, to the Limited
Partners until the Capital Account balances of the Limited Partners are equal
to the sum of the amount of their Adjusted Investment plus any unpaid
Cumulative Preferred Return; (d) fourth, to the General Partners until their
Capital Account balances are equal to any previously subordinated fees; and
(e) thereafter, 95% to the Limited Partners and 5% to the General Partners.
The net loss of the Partnership from any sale or other disposition of a
Partnership property shall be allocated as follows: (a) first, an amount
equal to the aggregate positive balances in the Partners' Capital Accounts,
to each Partner in the same ratio as the positive balance in such Partner's
Capital Account bears to the aggregate of all Partners' positive Capital
Accounts balances; and (b) thereafter, 95% to the Limited Partners
and 5% to the General Partners.
(3) TRANSACTIONS WITH RELATED PARTIES
The Partnership paid an affiliate of the General Partners an acquisition
fee of 5% of the gross proceeds of the Partnership's offering for their
services in connection with the acquisition of properties. An allocation of
acquisition fees related to the properties not ultimately purchased by the
Partnership were expensed as incurred.
The Partnership paid the selling agent a non-accountable expense allowance
in an amount equal to 2% of the gross proceeds of the Partnership's offering,
a portion of which was reallowed to Participating Dealers.
The Partnership pays an affiliate of the General Partners an annual property
management fee equal to up to 1% of gross revenues derived from Partnership
properties managed by such affiliate. The property management fee is
subordinated to receipt by the Limited Partners of distributions of Operating
Cash Flow in an amount equal to the Current Preferred Return.
An affiliate of one of the General Partners provides securities and real
estate counsel to the Partnership.
<PAGE>
Fees, commissions and other expenses paid or payable to the General Partners
or its affiliates for the three months ended March 31, 1995 and 1994 were as
follows:
1995 1994
Selling commissions $ 6,878 $ 6,528
Management fees 6,693 --
Reimbursable operating expenses 18,000 18,900
Legal fees 861 900
(4) EQUITY INVESTMENT
The Partnership owns an equity interest in the Brauvin Gwinnett County
Venture and reports its investment on the equity method. The following are
condensed financial statements for the Brauvin Gwinnett County Venture:
BRAUVIN GWINNETT COUNTY VENTURE
March 31, 1995 December 31, 1994
Land and buildings, net $2,410,824 $ 2,422,262
Other assets 9,640 45,198
$2,420,464 $ 2,467,460
Liabilities $ -- $ 19,792
Partners' capital 2,420,464 2,447,668
$2,420,464 $2,467,460
For the three months ended March 31,
1995 1994
Rental income $ 61,327 $58,465
Expenses:
Depreciation 11,438 11,438
Management fees 602 594
Operating and administrative -- 6,799
12,040 18,831
Net income $49,287 $39,634
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
The Partnership commenced an offering to the public on October 30, 1989 of
2,500,000 Units. The offering was anticipated to close on October 29, 1990 but
was extended by the General Partners with the necessary regulatory approval to
October 29, 1991. The Offering was conditioned upon the sale of $1,200,000,
which was achieved on January 15, 1990. The Offering closed on October 29,
1991 with the Partnership raising a cumulative total of $21,307,600. The
Partnership continues to raise additional funds through the Plan. The Plan
raised $917,622 through December 31, 1994 from Limited Partners investing
their distributions of Operating Cash Flow in additional Units. As of
December 31, 1994, Units valued at $137,290 have been purchased by the
Partnership from Limited Partners liquidating their investment in the
Partnership and have been retired.
The General Partners will be adopting an enhancement to the Partnership's
Distribution Reinvestment Plan effective August, 1995. This enhancement will
permit unit holders to reinvest at a unit price that will be
adjusted to reflect any return of investor capital generated through property
sales. In addition, any unit liquidations will also occur at the adjusted
unit price.
The Partnership purchased the land, buildings and improvements underlying
five Ponderosa restaurants on January 19, 1990, February 16, 1990, March 19,
1990, April 24, 1990 and June 4, 1990, respectively. In addition, the
Partnership closed on the land, buildings and improvements underlying two
Chi-Chi's restaurants; the first closed on March 12, 1991 and the second
closed on March 27, 1991. The land, buildings and improvements underlying an
IHOP restaurant were purchased on April 26, 1991, an Applebee's restaurant on
June 5, 1991 (which was expanded in 1992), two Sports Unlimited sporting goods
stores on September 17, 1991, a Chili's restaurant on February 7, 1992 and
three Steak n Shake restaurants on April 16, 1992.
The Partnership is fully invested in properties with the exception of
funds raised through the Plan. These operating properties are expected to
generate cash flow for the Partnership after deducting certain operating and
general and administrative expenses from their rental income. The Partnership
has no funds available to purchase additional property, excluding those raised
through the Plan.
Below is a table summarizing the historical data for distribution rates per
annum:
Distribution
Date 1995 1994 1993 1992 1991
February 15 9.25% 9.00% 9.00% 9.25% 9.25%
May 15 9.25 9.00 9.00 9.25 9.25
August 15 9.00 9.00 9.00 9.25
November 15 9.25 9.00 9.00 9.25
Future increases in the Partnership's distribution will largely depend on
increased sales at the Partnership's properties resulting in additional
percentage rent and, to a lesser extent rental increases, which will occur due
to increases in receipts from certain leases based upon increases in the
Consumer Price Index or scheduled increases of base rent.
Results of Operations - Three Months ended March 31, 1995 and 1994
Results of operations for the three months ended March 31, 1995 reflected
net income of $411,690 compared to $412,616 for the three months ended March
31, 1994, a decrease of approximately $900. The decrease in net income was
mainly due to an increase in management fee expense which was mostly offset
by an increase in interest income. Total income for the three months ended
March 31, 1995 was $549,519 as compared to $543,909 for the three months
ended March 31, 1994, an increase of approximately $6,000. The increase in
total income is mainly due to an increase in interest income as a result of
higher interests on funds invested. Total expenses for the three months
ended March 31, 1995 were $140,813 as compared to $133,694 for the three
months ended March 31, 1994, an increase of approximately $7,000. The
increase in expenses was due to the Partnership incurring management fees
during the first quarter of 1995 as a result of the limited partners
receiving a 9.25% distribution on their invested capital.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
None.
ITEM 2. Changes in Securities.
None.
ITEM 3. Defaults Upon Senior Securities.
None.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports On Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BY: Brauvin Realty Advisors III, Inc.
Corporate General Partner of
Brauvin Income Plus L.P. III
BY: /s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of Directors,
President and Chief Executive Officer
DATE: May 12, 1995
BY: /s/ Thomas J. Coorsh
Thomas J. Coorsh
Chief Financial Officer and Treasurer
DATE: May 12, 1995
