<PAGE>
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 September 30, 1996
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 .
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BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
INDEX
Page
PART I Financial Information
Item 1. Consolidated Financial Statements. . . . . . . . . . . . . 3
Consolidated Balance Sheets at September 30, 1996 and
December 31, 1995. . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations for the nine months
ended September 30, 1996 and 1995. . . . . . . . . . . . . 5
Consolidated Statements of Operations for the three months
ended September 30, 1996 and 1995. . . . . . . . . . . . . 6
Consolidated Statements of Partners' Capital for
the periods January 1, 1995 to September 30, 1996. . . . . 7
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1996 and 1995. . . . . . . . . . . . . 8
Notes to Consolidated Financial Statements . . . . . . . . 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . 19
PART II Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . 26
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . 30
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . 30
Item 4. Submissions of Matters to a Vote of Security Holders . . . 30
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . 30
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 30
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
Except for the December 31, 1995 Consolidated Balance Sheet,
the following Consolidated Balance Sheet as of September 30, 1996,
Consolidated Statements of Operations for the nine months ended
September 30, 1996 and 1995, Consolidated Statements of Operations
for the three months ended September 30, 1996 and 1995,
Consolidated Statements of Partners' Capital for the periods
January 1, 1995 to September 30, 1996 and Consolidated Statements
of Cash Flows for the nine months ended September 30, 1996 and 1995
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 1995 Annual Report on Form
10-K.
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BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1996 1995
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 (2,158,359) (1,869,626)
Net investment in real estate 16,150,433 16,439,166
Investment in Brauvin Gwinnett
County Venture (Note 4) 152,304 153,668
Cash and cash equivalents 1,452,150 1,069,555
Deferred rent receivable 43,044 36,572
Due from affiliates -- 7,301
Prepaid offering costs 70,824 72,270
Other assets 21,868 2,059
Total Assets $17,890,623 $17,780,591
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued expenses $ 404,328 $ 311,553
Rent received in advance 87,562 83,800
Total Liabilities 491,890 395,353
MINORITY INTEREST IN BRAUVIN CHILI'S
LIMITED PARTNERSHIP (501) (514)
PARTNERS' CAPITAL:
General Partners 70,924 70,772
Limited Partners 17,328,310 17,314,980
Total Partners' Capital 17,399,234 17,385,752
Total Liabilities and Partners'
Capital $17,890,623 $17,780,591
See accompanying notes to consolidated financial statements.
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BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30,
1996 1995
INCOME:
Rental $1,672,755 $1,676,721
Interest 30,774 20,232
Other 704 2,979
Total income 1,704,233 1,699,932
EXPENSES:
Management fees 17,234 23,590
General and administrative 120,858 102,310
Transaction costs 187,303 --
Valuation fees 40,129 --
Depreciation 288,733 290,598
Total expenses 654,257 416,498
Income before minority interest and
equity interest in joint ventures 1,049,976 1,283,434
Minority interest's share in Brauvin
Chili's Limited Partnership's net income (423) (482)
Equity interest in Brauvin Gwinnett
County Venture's net income 10,157 9,530
Net income $1,059,710 $1,292,482
Net income allocated to the
General Partners $ 21,194 $ 25,850
Net income allocated to the
Limited Partners $1,038,516 $1,266,632
Net income per Unit outstanding (a) $ 0.47 $ 0.57
(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 distribution
reinvestment plan (the "Plan").
See accompanying notes to consolidated financial statements.
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BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30,
1996 1995
INCOME:
Rental $573,949 $586,910
Interest 12,051 4,558
Other 162 (221)
Total income 586,162 591,247
EXPENSES:
Management fees 5,631 5,637
General and administrative 41,959 36,017
Transaction costs 177,435 --
Valuation fees 1,729 --
Depreciation 96,244 96,245
Total expenses 322,998 137,899
Income before minority interest and
equity interest in joint ventures 263,164 453,348
Minority interest's share in Brauvin
Chili's Limited Partnership's net income (174) (161)
Equity interest in Brauvin Gwinnett
County Venture's net income 3,526 3,074
Net income $266,516 $456,261
Net income allocated to the
General Partners $ 5,330 $ 9,125
Net income allocated to the
Limited Partners $261,186 $447,136
Net income per Unit outstanding (a) $ 0.12 $ 0.20
(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.
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BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
For the period January 1, 1995 to September 30, 1996
General Limited
Partners Partners* Total
Balance, January 1, 1995 $ 79,872 $17,493,547 $17,573,419
Contributions, net -- 193,705 193,705
Selling commissions and other
offering costs (Note 1) -- (33,401) (33,401)
Net income 35,137 1,721,710 1,756,847
Cash distributions (44,237) (2,060,581) (2,104,818)
Balance, December 31, 1995 70,772 17,314,980 17,385,752
Contributions, net -- 32,715 32,715
Selling commissions and other
offering costs (Note 1) -- (8,313) (8,313)
Net income 21,194 1,038,516 1,059,710
Cash distribution (21,042) (1,049,588) (1,070,630)
Balance, September 30, 1996 $ 70,924 $17,328,310 $17,399,234
* Total Units sold at September 30, 1996 and December 31, 1995 were
2,230,375 and 2,227,103, respectively. Cash distributions to Limited
Partners per Unit were $0.47 and $0.93 for the nine months ended
September 30, 1996 and the year ended December 31, 1995 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 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 Nine Months Ended September 30,
1996 1995
Cash flows from operating activities:
Net income $1,059,710 $1,292,482
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 288,733 290,598
Minority interest's share of income from
Brauvin Chili's Limited Partnership 423 482
Equity interest in Brauvin Gwinnett
County Venture's net income (10,157) (9,530)
Decrease in rent receivables -- 13,755
Increase in deferred rent receivable (6,472) (6,472)
Decrease in due from affiliates 7,301 2,352
Increase in other assets (19,809) --
Increase in accounts payable and accrued
expenses 92,775 35
Increase (decrease) in rent received
in advance 3,762 (97,504)
Decrease in due to affiliates -- (6,883)
Net cash provided by operating activities 1,416,266 1,479,315
Cash flows from investing activities:
Cash distribution from Brauvin Gwinnett
County Venture 11,521 12,480
Cash provided by investing activities 11,521 12,480
Cash flows from financing activities:
Sale of Units, net of liquidations
and selling commissions 25,848 101,830
Cash distributions to General Partners (21,042) (33,733)
Cash distributions to Limited Partners (1,049,588) (1,545,411)
Cash distribution to minority interest -
Brauvin Chili's Limited Partnership (410) (425)
Net cash used in financing activities (1,045,192) (1,477,739)
Net increase in cash and cash equivalents 382,595 14,056
Cash and cash equivalents at beginning
of period 1,069,555 925,719
Cash and cash equivalents at end of period $1,452,150 $ 939,775
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. and Jerome J.
Brault. Brauvin Realty Advisors III, Inc. is owned by Mr. Brault
(beneficially) and Mr. Cezar M. Froelich. Mr. Cezar M. Froelich
resigned as an individual General Partner effective as of September
17, 1996. 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 September 30, 1996 and
December 31, 1995, the Partnership has sold $22,766,719 and
$22,693,694 of Units, respectively. These totals include
$1,459,119 and $1,386,094 of Units, respectively, raised by Limited
Partners who utilized their distributions of Operating Cash Flow to
purchase additional Units through the distribution reinvestment
plan (the "Plan"). Units valued at $462,972 and $422,662 have been
purchased by the Partnership from Limited Partners liquidating
their investment in the Partnership and have been retired as of
September 30, 1996 and December 31, 1995, respectively. As of
September 30, 1996, the Plan participants have acquired Units under
the Plan which approximate 6% 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 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
Management's Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
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. Depreciation expense is
computed on a straight-line basis over approximately 35 years.
In 1995, the Partnership adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets" (SFAS 121). In conjunction with the adoption of
SFAS 121, the Partnership performed an analysis of its long-lived
assets, and the Partnership's management determined that there were
no events or changes in circumstances that indicated that the
carrying amount of the assets may not be recoverable. Accordingly,
no impairment loss has been recorded in the accompanying financial
statements.
Organization and Offering Costs
Organization costs represent costs incurred in connection with
the organization and formation of the Partnership. Organization
costs were 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.
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 Plan and the prepaid offering costs will be transferred
to offering costs and treated as a reduction in Partners' Capital.
Cash and Cash Equivalents
Cash equivalents include all highly liquid debt instruments with
an original maturity within three months of purchase.
Estimated Fair Value of Financial Instruments
Disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments." The estimated fair value amounts
have been determined by using available market information and
appropriate valuation methodologies. However, considerable
judgement is necessarily required in interpreting market data to
develop estimates of fair value.
The fair value estimates presented herein are based on
information available to management as of September 30, 1996 and
December 31, 1995, but may not necessarily be indicative of the
amounts that the Partnership could realize in a current market
exchange. The use of different assumptions and/or estimation
methodologies may have a material effect on the estimated fair
value amounts. Although management is not aware of any factors
that would significantly affect the estimated fair value amounts,
such amounts have not been comprehensively revalued for purposes of
these financial statements since that date, and current estimates
of fair value may differ significantly from amounts presented
herein.
The carrying amounts of the following items are a reasonable
estimate of fair value: cash and cash equivalents; due from
affiliates; accounts payable and accrued expenses; and rents
received in advance.
Reclassifications
Certain reclassifications have been made to the 1995 financial
statements to conform to classifications adopted in 1996.
(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; and
. thereafter, 95% to the Limited Partners (apportioned pro rata
based on Units) and 5% to the General Partners.
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 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 shareholders of the Corporate General
Partner provided securities and real estate counsel to the
Partnership.
Fees, commissions and other expenses paid or payable to the
General Partners or its affiliates for the nine months ended
September 30, 1996 and 1995 were as follows:
1996 1995
Selling commissions $ 6,867 $22,743
Management fees 17,234 23,590
Reimbursable operating expenses 83,800 54,000
Legal fees 4,229 4,356
Acquisition fees 19,179 --
<PAGE>
(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
September 30, 1996 December 31, 1995
Land and buildings, net $2,342,196 $2,376,510
Other assets 33,450 41,567
$2,375,646 $2,418,077
Liabilities $ 1,575 $ 22,702
Partners' capital 2,374,071 2,395,375
$2,375,646 $2,418,077
For the Nine months Ended September 30,
1996 1995
Rental income $198,607 $190,751
Expenses:
Depreciation 34,314 34,314
Management fees 1,656 1,870
Operating and
administrative 3,941 5,663
Net income $158,696 $148,904
<PAGE>
(5) SUBSEQUENT EVENTS
Investment in Joint Ventures
On October 31, 1996, the Partnership purchased a 34% interest
in a joint venture with affiliated real estate limited partnerships
(the "Bay County Venture"). The Bay County Venture acquired the
land and building underlying a 6,466 square foot Blockbuster Video
Store located in Callaway, FL from an unaffiliated seller for
approximately $1,015,000 plus closing costs and related fees.
Vote of Limited Partners
On Friday, November 8, 1996 there was a Special Meeting of
Limited Partners of the Partnership. At this Special Meeting, the
Limited Partners holding a majority of the Units approved the
merger of the Partnership with and into Brauvin Real Estate Funds
L.L.C., a Delaware limited liability company (the "Purchaser"),
which approval automatically resulted in the adoption of an
amendment to the Partnership Agreement, to allow the Partnership to
sell or lease property to affiliates. In addition, at the Special
Meeting, Limited Partners holding a majority of the Units approved
the adoption of an amendment to the Partnership Agreement to allow
the majority vote of the Limited Partners to determine the outcome
of the transaction with the Purchaser without the vote of the
General Partners of the Partnership.
<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 distribution reinvestment plan (the "Plan"). The Plan
raised $1,459,119 through February 15, 1996 from Limited Partners
investing their distributions of Operating Cash Flow in additional
Units. As of September 30, 1996, Units valued at $462,972 have
been purchased by the Partnership from Limited Partners liquidating
their original investment in the Partnership and have been retired.
The Partnership purchased the land, buildings and improvements
underlying five Ponderosa restaurants in 1990. In 1991, the
Partnership purchased the land, buildings and improvements
underlying two Chi-Chi's restaurants, an IHOP restaurant an
Applebee's restaurant (which was expanded in 1992), and two Sports
Unlimited sporting goods stores. In 1992, the Partnership
purchased the land, buildings and improvements underlying three
Steak n Shake restaurants.
On February 7, 1992, the Partnership purchased a 99.5% equity
interest in a joint venture with an affiliate, Brauvin Chili's
Limited Partnership, which owns one Chili's restaurant.
On November 9, 1993, the Partnership purchased a 6.4% interest
in a joint venture with affiliated real estate limited partnerships
(the "Venture"). The Venture acquired the land and building
underlying a 25,000 square foot CompUSA computer superstore from an
unaffiliated seller.
On October 31, 1996, the Partnership purchased a 34% interest
in a joint venture with affiliated real estate limited partnerships
(the "Bay County Venture"). The Bay County Venture acquired the
land and building underlying a 6,466 square foot Blockbuster Video
Store located in Callaway, FL from an unaffiliated seller for
approximately $1,015,000 plus closing costs and related fees.
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
distributions per Unit:
Distribution
Date 1996 1995 1994 1993 1992 1991
February 15 $.2313 $.2313 $.2250 $.2250 $.2313 $.2313
May 15 .2313 .2313 .2250 .2250 .2313 .2313
August 15 -- .2313 .2250 .2250 .2250 .2313
November 15 .2313 .2313 .2250 .2250 .2313
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.
In order to enhance the Partnership's diversity and overall
financial performance, the General Partners have recently agreed to
the following change within the Partnership's Ponderosa portfolio.
Unit #856 in Dayton, Ohio was converted into a Bennigan's in
January, 1996. Bennigan's is an affiliate of Ponderosa.
Metromedia Steakhouses Company L.P., the current lease obligor,
will remain liable on the existing lease. However, the General
Partners believe the conversion will ultimately generate additional
percentage rent to the Partnership and enhance the overall security
of the lease. The General Partners believe this change within the
Partnership's Ponderosa portfolio will add to both diversity and
the underlying quality of the Partnership's assets.
The Chi Chi's located in Hickory, North Carolina closed October
2, 1995. However, the property is leased to Foodmaker, Inc. whom
has made complete payments under the lease.
Chi-Chi's has undertaken to re-lease the closed restaurant. In
March 1996, a potential sub-tenant executed a second sub-lease with
Chi-Chi's for the Hickory, North Carolina property. This sub-lease
has been reviewed by both Foodmaker and the Partnership and was
accepted by all three parties before it became effective.
Foodmaker will continue to be the guarantor under terms of the
second sub-lease. The new sub-tenant (Carolina Country BBQ of
Hickory) is scheduled to occupy the facility in November 1996.
During the nine months ended September 30, 1996, the General
Partners and its affiliates collected a management fee of $17,234
and received $21,042 in Operating Cash Flow distributions.
The Partnership has entered into an agreement and plan of merger
dated as of June 14, 1996 (the "Merger Agreement") with Brauvin
Real Estate Funds L.L.C., a Delaware limited liability company (the
"Purchaser"). Pursuant to the terms of the Merger Agreement, the
Partnership proposes to merge with and into the Purchaser through
a merger (the "Merger") of its limited partnership interests. In
connection with the Merger, the beneficial owners (the "Limited
Partners") of the limited partnership interests of the Partnership
(the "Units") will receive approximately $8.85 per Unit in cash.
Promptly upon consummation of the Merger, the Partnership will
cease to exist and the Purchaser, as the surviving entity will
succeed to all of the assets and liabilities of the Partnership.
The affirmative vote of the Limited Partners holding a majority of
the Units is necessary to approve the Merger.
The Partnership drafted a proxy statement, which required prior
review and comment by the Securities and Exchange Commission (the
"Commission"), to solicit proxies for use at a special meeting of
the Limited Partners (the "Special Meeting") originally to be held
at the offices of the Partnership on September 24, 1996. As a
result of various pending legal issues, the Special Meeting was
adjourned to November 8, 1996 at 10:00 a.m. The purpose of the
Special Meeting was to vote upon the Merger and certain other
matters as described herein.
The Special Meeting of Limited Partners of Brauvin Income Plus
L.P. III was held on Friday, November 8, 1996 at 10:00 a.m. At
this Special Meeting, the Limited Partners holding a majority of
the Units approved the merger of the Partnership with and into the
Purchaser. At the Special Meeting, Limited Partners holding a
majority of the Units approved the adoption of an amendment to the
Partnership Agreement to allow the majority vote of the Limited
Partners to determine the outcome of the transaction with the
Purchaser without the vote of the General Partners of the
Partnership.
By approving the Merger, the Limited Partners also approved an
amendment of the Restated Limited Partnership Agreement of the
Partnership, as amended (the "Partnership Agreement") allowing the
Partnership to sell or lease property to affiliates (this
amendment, together with the Merger shall be referred to herein as
the "Transaction"). In addition, the Delaware Revised Uniform
Limited Partnership Act (the "Act") provides that a merger must
also be approved by the general partners of a partnership, unless
the limited partnership agreement provides otherwise. The
Partnership Agreement does not address this matter. Neither the
Act nor the Partnership Agreement provide the Limited Partners not
voting in favor of the Transaction with dissenters' appraisal
rights.
The actual redemption price will be based on the fair market
value of the properties of the Partnership (the "Assets") as
determined by an independent appraiser at such time as is specified
in the certificate of merger (the "Effective Time"), plus all
remaining cash of the Partnership (which will not include earnings
after July 31, 1996, which due to the wind up and litigation costs
of the Partnership are expected to be nominal), less the
Partnership's actual costs incurred and accrued through the
Effective Time, including reasonable reserves in connection with:
(i) the proxy solicitation; (ii) the Transaction (as detailed in
the Merger Agreement); and (iii) the winding up of the Partnership,
including preparation of the final audit, tax return and K-1s
(collectively, the "Transaction Costs") and less all other
Partnership obligations.
Cushman & Wakefield Valuation Advisory Services ("Cushman &
Wakefield"), the largest real estate valuation and consulting
organization in the United States, was engaged by the Partnership
to prepare an appraisal of the Assets. Cushman & Wakefield was
subsequently engaged to provide an opinion as to the fairness of
the Transaction to the Limited Partners from a financial point of
view. Cushman & Wakefield has determined that the fair market
value of the Assets of the Partnership is $19,129,150, which is
approximately $8.58 per Unit. In addition, Cushman & Wakefield
advises that, in its opinion, the price per Unit reflected in the
proposed Transaction is fair, from a financial point of view to the
Limited Partners. Cushman & Wakefield's determination that a price
is "fair" does not mean that the price is the highest price which
might be obtained in the marketplace, but rather that based on the
appraised values of the properties, the price reflected in the
proposed transaction is believed by Cushman & Wakefield to be
reasonable.
The General Partners are Jerome J. Brault, the managing general
partner of the Partnership (the "Managing General Partner") and
Brauvin Realty Advisors III, Inc., the corporate general partner of
the Partnership (the "Corporate General Partner"). Mr. Cezar M.
Froelich gave notice of his intent to resign as a General Partner
of the Partnership on May 23, 1996. Pursuant to the terms of the
Partnership Agreement, Mr. Froelich's resignation became effective
on September 17, 1996. The General Partners will not receive any
payment in exchange for the redemption of their general partnership
interests nor will they receive any fees from the Partnership in
connection with the Transaction.
The Managing General Partner and his son, James L. Brault, an
executive officer of the Corporate General Partner, will have a
minority ownership interest in the Purchaser. Therefore, the
Braults have an indirect economic interest in consummating the
Transaction that is in conflict with the economic interests of the
Limited Partners. Mr. Froelich has no affiliation with the
Purchaser.
The Transaction is one of a series of related transactions
whereby the Purchaser seeks to acquire the Assets of the
Partnership and the assets, through purchase or merger, of Brauvin
High Yield Fund L.P., Brauvin High Yield Fund L.P. II and Brauvin
Corporate Lease Program IV L.P., Delaware limited partnerships
affiliated with the Partnership.
The General Partners have temporarily suspended all
distributions to Limited Partners and liquidations pending
consummation of the Transaction.
Results of Operations - Nine Months ended September 30, 1996 and 1995
Results of operations for the Partnership for the nine months
ended September 30, 1996 reflected net income of $1,059,710
compared to $1,292,482 for the nine months ended September 30,
1995, a decrease of approximately $232,700. The decrease in net
income was due primarily to an increase in total expenses as a
result of the Partnership's Transaction and property valuations.
Total income for the nine months ended September 30, 1996 was
$1,704,233 as compared to $1,699,932 for the nine months ended
September 30, 1995, an increase of approximately $4,300. The
increase in total income is mainly due to an increase in interest
income as a result of more funds invested during the period ended
in 1996.
Total expenses for the nine months ended September 30, 1996 were
$654,257 as compared to $416,498 for the nine months ended
September 30, 1995, an increase of approximately $237,800. The
increase in expense is primarily the result of an increase in
Transaction costs paid or accrued for legal and other professional
fees related to the Transaction. Total expenses also increased in
1996 compared to 1995 as a result of the Partnership hiring an
independent real estate company to conduct property valuations
pursuant to terms of the prospectus.
Results of Operations - Three months ended September 30, 1996 and
1995
Results of operations for the Partnership for the three months
ended September 30, 1996 reflected net income of $266,516 compared
to $456,261 for the three months ended September 30, 1995, a
decrease of approximately $189,700. The decrease in net income was
due primarily to an increase in total expenses as a result of the
Partnership's Transaction and property valuations.
Total income for the three months ended September 30, 1996 was
$586,162 as compared to $591,247 for the three months ended
September 30, 1995, a decrease of approximately $5,100. The
decrease in total income is mainly due to a decrease in rental
income due to a decline in percentage rent at certain properties.
Partially offsetting this decline in percentage rent is an increase
in interest income as a result of increased funds invested in 1996
compared to 1995.
Total expenses for the three months ended September 30, 1996
were $322,998 as compared to $137,899 for the three months ended
September 30, 1995, an increase of approximately $185,100. The
increase in expense is primarily the result of an increase in
Transaction costs paid or accrued for legal and other professional
fees related to the Transaction. Total expenses also increased in
1996 compared to 1995 as a result of the Partnership hiring an
independent real estate company to conduct property valuations.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
Two legal actions, as hereinafter described, were
recently filed against certain of the General Partners of
the Partnership and affiliates of such General Partners,
as well as, in one instance, against the Partnership on
a nominal basis. Each of these actions was brought by
limited partners of the partnership. The Partnership,
and/or these certain General Partners and their
affiliates deny all allegations set forth in the
complaints and are vigorously defending against such
claims.
A. The Florida Lawsuit
On September 17, 1996, a lawsuit was filed in the Circuit
Court of the Seventeenth Judicial Circuit in and for
Broward County, Florida, styled Rebecca Scialpi and Helen
Friedlander v. Jerome J. Brault, Brauvin Realty Advisors,
Inc., Brauvin Realty Advisors II, Inc., Brauvin Realty
Advisors III, Inc., and Brauvin Realty Advisors IV, Inc.,
James L. Brault, and Brauvin Real Estate Funds, L.L.C.
and Brauvin High Yield Fund L.P., High Yield Fund II,
L.P., Brauvin Income Plus L.P. III, and Brauvin Corporate
Lease Program IV, L.P., Docket No. 96012807. The
Partnership, along with the other partnerships proposed
to be party to a merger or sale with Brauvin Real Estate
Funds, L.L.C., a Delaware limited liability company (the
"Purchaser"), is named as a "Nominal Defendant" in a
lawsuit. Jerome J. Brault, the Managing General Partner
of the Partnership, and Brauvin Realty Advisors III,
Inc., the Corporate General Partner of the Partnership,
as well as certain corporate general partners of the
other partnerships affiliated with the Partnership (the
"Affiliated Partnerships"), have been named as
Defendants. James L. Brault, an officer of the Corporate
General Partner and the son of Jerome J. Brault, is also
named as a Defendant.
Plaintiffs filed an amended complaint on October 8, 1996.
The amended complaint alleges a purported class action
consisting of claims for breach of fiduciary duties,
fraud, breach of the Partnership Agreement, and civil
racketeering. The amended complaint seeks injunctive
relief, as well as compensatory and punitive damages,
relating to the proposed transaction with the Purchaser.
The Defendants have answered plaintiffs' amended
complaint, and have denied each of the plaintiffs'
allegations of wrongful conduct.
On October 2, 1996, the plaintiffs in this action
requested that the Circuit Court enjoin the Special
Meetings of the Limited Partners and the proposed
transactions with the Purchaser. This motion was denied
by the Circuit Court on October 8, 1996, and the Florida
appellate court denied plaintiffs' appeal of the Circuit
Court's October 8, 1996 ruling.
B. The Illinois Lawsuit
On September 18, 1996, a class action lawsuit was filed
in the United States District Court for the Northern
District of Illinois, styled M. Barbara Christman, Joseph
Forte, Janet M. Toolson, John Archbold, and Ben O.
Carroll v. Brauvin Realty Advisors, Inc., Brauvin Realty
Advisors II, Inc., Brauvin Realty Advisors III, Inc.,
Brauvin Realty Advisors IV, Inc., Jerome J. Brault;
Brauvin Real Estate Funds, L.L.C., Docket No. 96C6025.
The Partnership is not named as a Defendant in the
lawsuit. Jerome J. Brault and the Corporate General
Partners of the Partnership, as well as the corporate
general partners of the other Affiliated Partnerships,
are named as Defendants.
The plaintiffs filed an amended complaint on October 8,
1996, which alleges claims for breach of fiduciary
duties, breaches of the Partnership Agreement, and
violation of the Illinois Deceptive Trade Practices Act,
815 ILCS 505 et seq. The amended complaint seeks
injunctive relief, as well as compensatory and punitive
damages, relating to the proposed transaction with the
Purchaser.
On September 20, 1996, the District Court entered an
order postponing until October 9, 1996 the Special
Meeting of the Limited Partners of the Partnership and of
the other partnerships to vote on the proposed
transactions with the Purchaser, which meetings had been
scheduled for September 24, 1996.
On October 2, 1996, the District Court certified
plaintiffs' proposed class as all of the Limited Partners
of the Partnership and of the Affiliated Partnerships,
and appointed plaintiffs' counsel, The Mills Firm, as
counsel for the class. On October 2, 1996, the District
Court also conducted a hearing on plaintiffs' motion to
preliminarily enjoin the Special Meetings of the Limited
Partners and the proposed transaction with the Purchaser.
The District Court denied plaintiffs' motion for a
preliminary injunction at the conclusion of the October
2, 1996 hearing.
On September 27, 1996, counsel for plaintiffs, The Mills
Firm, mailed a solicitation to all of the Limited
Partners, requesting that they revoke their previously
mailed proxies in favor of the proposed transaction with
the Purchaser. On September 30, 1996, Jerome J. Brault
and the Corporate General Partner (collectively, the
"Operating General Partners") moved the District Court to
invalidate revocations of proxies procured by The Mills
Firm's September 27, 1996 letter on the basis that The
Mills Firm's September 27, 1996 letter was materially
misleading in violation of the federal securities laws
and SEC proxy rules.
On October 11, 1996, the Operating General Partners of
the Partnership filed a counterclaim against plaintiffs
and their counsel, The Mills Firm, alleging that
plaintiffs and The Mills Firm violated the federal
securities laws and SEC proxy rules by sending their
September 27, 1996 letter to the Limited Partners.
On October 10 and 11, 1996, the District Court conducted
an evidentiary hearing on the motion of the Operating
General Partners to invalidate revocations of proxies
procured as a result of The Mills Firm's September 27,
1996 letter. In that evidentiary hearing, The Mills Firm
admitted that it violated the SEC proxy rules by sending
its September 27, 1996 letter to the Limited Partners
without filing such letter with the SEC in violation of
SEC requirements. At the conclusion of the hearing on
October 10 and 11, the District Court found that the
Operating General Partners have a likelihood of
succeeding on the merits with respect to their claim that
the September 27, 1996 letter sent to the Limited
Partners by plaintiffs and The Mills Firm is false or
misleading in several significant respects.
Notwithstanding this finding, the District Court did not
invalidate the revocations of proxies resulting from The
Mills Firm's September 27, 1996 letter because it did not
believe it possessed the authority to do so under present
law. This ruling has been appealed to the Seventh
Circuit Court of Appeals. The Court of Appeals has
granted the request of the Operating General Partenrs for
an expedited hearing and the Court of Appeals has
scheduled oral arguments for January 1997.
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.
Exhibit 27. Financial Data Schedule
Form 8-K. Item 5. Notification of the partners of the
legal proceedings filied against the
Partnership and certain general partners of
the Partnership regarding the Transaction.
This Form 8-K was dated September 17, 1996
and filed on September 23, 1996.
<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: November 18, 1996
BY: /s/ B. Allen Aynessazian
B. Allen Aynessazian
Chief Financial Officer and Treasurer
DATE: November 18, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,452,150
<SECURITIES> 152,304 <F1>
<RECEIVABLES> 43,044
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 18,308,792 <F2>
<DEPRECIATION> 2,158,359
<TOTAL-ASSETS> 17,890,623
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 17,399,234 <F3>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,890,623
<SALES> 0
<TOTAL-REVENUES> 1,704,233 <F4>
<CGS> 0
<TOTAL-COSTS> 654,257 <F5>
<OTHER-EXPENSES> (9,734) <F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,059,710
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> "SECURITIES" REPRESENTS INVESTMENT IN JOINT VENTURE
<F2> "PP&E" REPRESENTS INVESTMENT IN REAL ESTATE [LAND AND
BUILDING]
<F3> "COMMON" REPRESENTS TOTAL PARTNERS CAPITAL
<F4> "TOTAL REVENUES" REPRESENTS RENTAL, INTEREST, AND OTHER
INCOME
<F5> "TOTAL COSTS" REPRESENTS TOTAL EXPENSES
<F6> "OTHER EXPENSES" REPRESENTS MINORITY INTEREST AND JOINT
VENTURES' NET INCOME/LOSS
</FN>
</TABLE>
