<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 June 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 .
<PAGE>
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 June 30, 1996 and
December 31, 1995. . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations for the six months
ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . 5
Consolidated Statements of Operations for the three months
ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . 6
Consolidated Statements of Partners' Capital for
the periods January 1, 1995 to June 30, 1996 . . . . . . . 7
Consolidated Statements of Cash Flows for the six months
ended June 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. . . . . . . . . . . . 16
PART II Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . 22
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . . . 22
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . 22
Item 4. Submissions of Matters to a Vote of Security Holders . . . 22
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . 22
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 22
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
<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 June 30, 1996, Consolidated
Statements of Operations for the six months ended June 30, 1996 and 1995,
Consolidated Statements of Operations for the three months ended June 30,
1996 and 1995, Consolidated Statements of Partners' Capital for the periods
January 1, 1995 to June 30, 1996 and Consolidated Statements of Cash Flows
for the six months ended June 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.
<PAGE>
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
CONSOLIDATED BALANCE SHEETS
June 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 (2,062,115) (1,869,626)
Net investment in real estate 16,246,677 16,439,166
Investment in Brauvin Gwinnett
County Venture (Note 4) 152,618 153,668
Cash and cash equivalents 985,451 1,069,555
Deferred rent receivable 40,887 36,572
Due from affiliates -- 7,301
Prepaid offering costs 70,824 72,270
Other assets 21,868 2,059
Total Assets $17,518,325 $17,780,591
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued expenses $ 302,921 $ 311,553
Rent received in advance 83,286 83,800
Total Liabilities 386,207 395,353
MINORITY INTEREST IN BRAUVIN CHILI'S
LIMITED PARTNERSHIP (600) (514)
PARTNERS' CAPITAL:
General Partners 65,594 70,772
Limited Partners 17,067,124 17,314,980
Total Partners' Capital 17,132,718 17,385,752
Total Liabilities and Partners'
Capital $17,518,325 $17,780,591
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30,
1996 1995
INCOME:
Rental $1,098,806 $1,089,811
Interest 18,723 15,674
Other 542 3,200
Total income 1,118,071 1,108,685
EXPENSES:
Management fees 11,603 17,953
General and administrative 127,167 66,293
Depreciation 192,489 194,353
Total expenses 331,259 278,599
Income before minority interest and
equity interest in joint ventures 786,812 830,086
Minority interest's share in Brauvin
Chili's Limited Partnership's net income (249) (321)
Equity interest in Brauvin Gwinnett
County Venture's net income 6,631 6,456
Net income $ 793,194 $ 836,221
Net income allocated to the
General Partners $ 15,864 $ 16,724
Net income allocated to the
Limited Partners $ 777,330 $ 819,497
Net income per Unit outstanding (a) $ 0.35 $ 0.37
(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.
<PAGE>
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended June 30,
1996 1995
INCOME:
Rental $552,799 $552,993
Interest 8,909 5,479
Other 163 694
Total income 561,871 559,166
EXPENSES:
Management fees 5,660 11,260
General and administrative 69,888 30,281
Depreciation 96,245 96,245
Total expenses 171,793 137,786
Income before minority interest and
equity interest in joint ventures 390,078 421,380
Minority interest's share in Brauvin
Chili's Limited Partnership's net income (126) (151)
Equity interest in Brauvin Gwinnett
County Venture's net income 3,228 3,302
Net income $393,180 $424,531
Net income allocated to the
General Partners $ 7,864 $ 8,490
Net income allocated to the
Limited Partners $385,316 $416,041
Net income per Unit outstanding (a) $ 0.17 $ 0.19
(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, 1995 to June 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 15,864 777,330 793,194
Cash distribution (21,042) (1,049,588) (1,070,630)
Balance, June 30, 1996 $ 65,594 $17,067,124 $17,132,718
* Total Units sold at June 30, 1996 and December 31, 1995 were 2,230,375 and
2,227,103, respectively. Cash distributions to Limited Partners per Unit
were $0.46 and $0.93 for the six months ended June 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 Six Months Ended June 30,
1996 1995
Cash flows from operating activities:
Net income $ 793,194 $ 836,221
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 192,489 194,353
Minority interest's share of income from
Brauvin Chili's Limited Partnership 249 321
Equity interest in Brauvin Gwinnett
County Venture's net income (6,631) (6,456)
Decrease in rent receivables -- 13,755
Increase in deferred rent receivable (4,315) (4,315)
Decrease (increase) in due from affiliates 7,301 (755)
Increase in other assets (19,809) --
Decrease in accounts payable and accrued
expenses (8,632) (19,217)
Decrease in rent received in advance (514) (62,467)
Decrease in due to affiliates -- (6,902)
Net cash provided by operating activities 953,332 944,538
Cash flows from investing activities:
Cash distribution from Brauvin Gwinnett
County Venture 7,681 8,640
Cash provided by investing activities 7,681 8,640
Cash flows from financing activities:
Sale of Units, net of liquidations
and selling commissions 25,848 35,958
Cash distributions to General Partners (21,042) (23,324)
Cash distributions to Limited Partners (1,049,588) (1,036,066)
Cash distribution to minority interest -
Brauvin Chili's Limited Partnership (335) (300)
Net cash used in financing activities (1,045,117) (1,023,732)
Net decrease in cash and cash equivalents (84,104) (70,554)
Cash and cash equivalents at beginning
of period 1,069,555 925,719
Cash and cash equivalents at end of period $ 985,451 $ 855,165
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 (beneficially)(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 June
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 June 30, 1996 and December
31, 1995, respectively. As of June 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 June 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 General Partners provides 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 six months ended June 30, 1996 and
1995 were as follows:
1996 1995
Selling commissions $ 6,867 $13,641
Management fees 11,603 11,260
Reimbursable operating expenses 44,400 36,000
Legal fees 3,479 --
(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
June 30, 1996 December 31, 1995
Land and buildings, net $2,353,634 $2,376,510
Other assets 26,396 41,567
$2,380,030 $2,418,077
Liabilities $ 1,050 $ 22,702
Partners' capital 2,378,980 2,395,375
$2,380,030 $2,418,077
For the Six Months Ended June 30,
1996 1995
Rental income $130,494 $124,978
Expenses:
Depreciation 22,876 22,876
Management fees 1,242 1,229
Operating and administrative 2,772 --
Net income $103,604 $100,873
<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 June 30, 1996 from Limited Partners investing their
distributions of Operating Cash Flow in additional Units. As of June
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.
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 September 1996.
Since the distribution to Limited Partners had been at least 9.25%
per annum during the six months ended June 30, 1996, the General
Partners and its affiliates collected a management fee of $11,603 and
received $21,042 in Operating Cash Flow distributions. This is
anticipated to continue throughout 1996.
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 is currently in the process of drafting a proxy
statement, which will require 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") to be held at the offices of the Partnership at a
date in the near future. The purpose of the Special Meeting is to vote
upon the Merger and certain other matters as described herein. The
preliminary proxy materials of the Partnership have been filed with the
Commission and are substantially identical to the proxy materials filed
by Brauvin High Yield Fund L.P., a Delaware limited partnership that
is affiliated with the Partnership.
By approving the Merger, the Limited Partners will also be
approving 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. Therefore, the Limited Partners will be
asked to adopt an amendment (the "Amendment") to the Partnership
Agreement which specifically provides that the general partners of the
Partnership (the "General Partners") will not be required to approve
the Transaction. If the Amendment is approved, the vote of the Limited
Partners holding a majority of the Units will be the only vote
necessary to approve the Transaction. 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 include earnings only through July 31,
1996), 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 preliminarily 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 is
finalizing its opinion as to the fairness of the Transaction to the
Limited Partners from a financial point of view.
The General Partners are Jerome J. Brault, the managing general
partner of the Partnership (the "Managing General Partner"), Brauvin
Realty Advisors III, Inc., the corporate general partner of the
Partnership (the "Corporate General Partner") and Cezar M. Froelich.
Mr. 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 will become effective
on the 90th day following notice to the Limited Partners. 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 until there is a vote on the
Transaction.
Results of Operations - Six months ended June 30, 1996 and 1995
Results of operations for the six months ended June 30, 1996
reflected net income of $793,194 compared to $836,221 for the six
months ended June 30, 1995, a decrease of approximately $43,000. The
decrease in net income was due primarily to an increase in total
expenses as a result of the Partnership's property valuations.
Total income for the six months ended June 30, 1996 was $1,118,071
as compared to $1,108,685 for the six months ended June 30, 1995, an
increase of approximately $9,400. The increase in total income is
mainly due to an increase in rental income as a result of increased
percentage rents.
Total expenses for the six months ended June 30, 1996 were
$331,259 as compared to $278,599 for the six months ended June 30,
1995, an increase of approximately $52,700. The increase in expenses
is primarily the result of an increase in general and administrative
expense due to the Partnership hiring an independent real estate
company to conduct property valuations. General and administrative
expense also increased in 1996 compared to 1995 as a result of legal
and other professional fees paid as a result of the Transaction.
Results of Operations - Three months ended June 30, 1996 and 1995
Results of operations for the three months ended June 30, 1996
reflected net income of $393,180 compared to $424,531 for the three
months ended June 30, 1995, a decrease of approximately $31,400. The
decrease in net income was due primarily to an increase in total
expenses as a result of the Partnership's property valuations.
Total income for the three months ended June 30, 1996 was $561,871
as compared to $559,166 for the three months ended June 30, 1995, an
increase of approximately $2,700. The increase in total income is
mainly due to an increase in interest income as a result of increased
funds invested in 1996 compared to 1995.
Total expenses for the three months ended June 30, 1996 were
$171,793 as compared to $137,786 for the three months ended June 30,
1995, an increase of approximately $34,000. The increase in expenses
is primarily the result of an increase in general and administrative
expense due to the Partnership hiring an independent real estate
company to conduct property valuations. General and administrative
expense also increased in 1996 compared to 1995 as a result of legal
and other professional fees paid as a result of the Transaction.
<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.
Exhibit 27. Financial Data Schedule
Form 8-K. Notification to the partners of the resignation
of Mr. Cezar M. Froelich as a General Partner
of the Partnership and the resignation of Mr.
Thomas Coorsh as Treasurer and Cheif Financial
Officer. This Form 8-K was dated May 23, 1996
and filed on June 21, 1996 and amended on
July 24, 1996.
Notification to the partners of the agreement
and plan of merger between the Partnership and
Brauvin Real Estate Funds L.L.C., which would
require an affirmative vote of the Limited
Partners holding a majority of the Units. This
Form 8-K was dated June 14, 1996 and filed on
June 24, 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: August 14, 1996
BY: /s/ B. Allen Aynessazian
B. Allen Aynessazian
Chief Financial Officer and Treasurer
DATE: August 14, 1996
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 985,451
<SECURITIES> 152,618 <F1>
<RECEIVABLES> 40,887
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 18,308,792 <F2>
<DEPRECIATION> 2,062,115
<TOTAL-ASSETS> 17,518,325
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 17,132,718 <F3>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,518,325
<SALES> 0
<TOTAL-REVENUES> 1,118,071 <F4>
<CGS> 0
<TOTAL-COSTS> 331,259 <F5>
<OTHER-EXPENSES> (6,382) <F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 793,194
<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>
