-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HytXvW9Qgf+cWaAuH+h0e9M+v6XJ2ykdZowYDLqE9iq03Lcqa3KUJSDjq/pEPYBr InzPaWOf8mKrNc0AV+2/hg== 0000769129-96-000004.txt : 19960517 0000769129-96-000004.hdr.sgml : 19960517 ACCESSION NUMBER: 0000769129-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MRI BUSINESS PROPERTIES FUND LTD III CENTRAL INDEX KEY: 0000769635 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 942969782 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15348 FILM NUMBER: 96567872 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLZ PO BOX 1089 STREET 2: C/O INSIGNIA FINANCIAL GROUP INC CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 4049169090 MAIL ADDRESS: STREET 1: 5665 NORTHSIDE DRIVE NW STREET 2: SUITE 370 CITY: ATLANTA STATE: GA ZIP: 30328 10-Q 1 FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (As last amended in Rel. No. 312905, eff. 4/26/93.) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the quarterly period ended March 31, 1996 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period.........to......... (Amended by Exchange Act Rel. No. 312905, eff. 4/26/93.) Commission file number 0-15348 MRI BUSINESS PROPERTIES FUND, LTD. III (Exact name of registrant as specified in its charter) California 94-2969782 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Insignia Financial Plaza Greenville, South Carolina 29602 (Address of principal executive offices) (Zip Code) Issuer's telephone number (864) 239-1000 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 . PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) MRI BUSINESS PROPERTIES FUND, LTD. III STATEMENT OF NET ASSETS IN LIQUIDATION (in thousands)
March 31, 1996 (Unaudited) Assets Cash and cash equivalents $ 784 Accounts receivable 171 Total assets 955 Liabilities Accrued expenses 18 Estimated costs during the period of 31 49 Net assets in liquidation $ 906 See Accompanying Notes to Financial Statements
a) MRI BUSINESS PROPERTIES FUND, LTD III BALANCE SHEET (in thousands, except unit data) September 30, 1995
Assets Cash and cash equivalents $ 2,904 Accounts receivable and other assets 448 Due from affiliate 220 Investment properties: Land $ 5,771 Buildings and related personal property 24,572 30,343 Less accumulated depreciation (9,585) 20,758 $ 24,330 Liabilities and Partners' Capital Liabilities Accounts payable and other liabilities $ 634 Due to unconsolidated joint ventures 618 Mortgage notes payable 15,578 Partners' Capital: General partners' $ (276) Limited partners' (109,027 assignee units outstanding) 7,776 7,500 $ 24,330 See Accompanying Notes to Financial Statements
b) MRI BUSINESS PROPERTIES FUND, LTD. III STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data)
Three Months Ended Six Months Ended March 31, March 31, 1996 1995 1996 1995 Revenues: Room revenue $ 126 $ 4,234 $ 1,347 $ 7,459 Other operating income 30 242 82 474 Interest income 21 52 59 95 Equity in unconsolidated joint venture interest -- -- 369 -- Gain on sale of unconsolidated joint venture interest -- -- 2,694 -- Gain on sale of property 3,560 -- 3,565 -- Total revenue 3,737 4,528 8,116 8,028 Expenses: Room expenses 30 836 362 1,638 Other operating expenses 58 1,569 558 3,181 Depreciation 18 391 126 782 Interest 19 254 199 509 Equity in unconsolidated joint venture operations -- 24 -- 107 General and administrative 175 111 304 234 Total expenses 300 3,185 1,549 6,451 Income before adjustment to liquidation basis 3,437 -- 6,567 -- Adjustment to liquidation basis (31) -- (31) -- Net income $ 3,406 $ 1,343 $ 6,536 $ 1,577 Net income allocated to general partners $ (3) $ 27 $ 539 $ 32 Net income allocated to limited partners 3,409 1,316 5,997 1,545 $ 3,406 $ 1,343 $ 6,536 $ 1,577 Net income per limited partnership unit $ 31.27 $ 12.07 $ 55.00 $ 14.18 Distribution per limited partnership assignee unit $ 118.02 $ -- $ 118.02 $ -- See Accompanying Notes to Financial Statements
c) MRI BUSINESS PROPERTIES FUND, LTD III STATEMENT OF PARTNERS' EQUITY (DEFICIT) (Unaudited) (in thousands)
Limited General Limited Partnership Partners' Partners' Total Units Deficit Equity Equity Partners' (deficit) equity at September 30, 1995 109,027 $ (276) $ 7,776 $ 7,500 Net income for the six months ended March 31, 1996 -- 539 5,997 6,536 Distributions -- (263) (12,867) (13,130) Partners' equity at March 31, 1996 109,027 $ -- $ 906 $ 906 See Notes to Consolidated Financial Statements
d) MRI BUSINESS PROPERTIES FUND, LTD. III STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended March 31, 1996 1995 Cash flows from operating activities: Net income $ 6,536 $ 1,577 Adjustments to liquidation basis 31 -- Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 130 796 Equity in unconsolidated joint venture operations (369) 107 Gain on sale of unconsolidated joint venture interest (2,694) -- Gain on sale of property (3,565) -- Change in accounts: Accounts receivable and other assets 363 (144) Accounts payable and accrued expenses (625) (224) Due from affiliate 105 -- Net cash (used in) provided by operating activities (88) 2,112 Cash flows from investing activities: Property improvements and replacements (28) (485) Net proceeds from sale of properties 24,259 -- Distribution from unconsolidated joint venture 2,445 -- Net cash provided by (used in) investing activities 26,676 (485) Cash flows from financing activities: Mortgage principal payments (33) (138) Repayment of mortgage notes payable (15,545) -- Distribution paid to partners (13,130) -- Net cash used in financing activities (28,708) (138) Net (decrease) increase in cash and cash equivalents (2,120) 1,489 Cash and cash equivalents at beginning of period 2,904 4,045 Cash and cash equivalents at end of period $ 784 $ 5,534 Supplemental information: Interest paid $ 238 $ 495 See Accompanying Notes to Financial Statements
e) MRI BUSINESS PROPERTIES FUND, LTD. III NOTES TO FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the Managing General Partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six and three month period ended March 31, 1996, are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 1996. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-K for the fiscal year ended September 30, 1995. The balance sheet at September 30, 1995, was derived from audited financial statements at such date. Certain reclassifications have been made to the 1995 information to conform to the 1996 presentation. On January 12, 1996, the Partnership sold its remaining properties. As a result, the Partnership changed its basis of accounting as of March 31, 1996, to a liquidation basis. Consequently, assets have been valued at estimated net realizable value and liabilities are presented at their estimated settlement amounts, including estimated costs associated with carrying out the liquidation. The valuation of assets and liabilities necessarily requires many estimates and assumptions and there are substantial uncertainties in carrying out the liquidation. The actual realization of assets and settlement of liabilities could be higher or lower than amounts indicated and is based on the estimates as of the date of the financial statements. Note B - Transactions with Affiliated Parties MRI Business Properties Fund, Ltd. III (the "Partnership") has no employees and is dependent on its general partners and their affiliates for the management and administration of all partnership activities. The Partnership Agreement provides for payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following transactions with affiliates of Insignia Financial Group, Inc. ("Insignia"), National Property Investors, Inc.("NPI"), and affiliates of NPI were charged to expense in 1996 and 1995:
For the Six Months Ended March 31, 1996 1995 Reimbursement for services of affiliates $ 68,415 $ 80,000 (included in general and administrative expenses)
An affiliate of NPI was paid a fee of $8,000 relating to a successful real estate tax appeal on the Partnership's Embassy Suites-Tempe hotel during the six months ended March 31, 1995. In addition, an affiliate of NPI was paid a fee of $26,000 relating to a successful real estate tax appeal on the Partnership's Embassy Suites-Tempe hotel during the six months ended March 31, 1995. The managing general partner of the Partnership is Montgomery Realty Company-85 ("Montgomery"), a general partnership, and the associate general partner is MRI Associates, Ltd. III ("MRI"), a limited partnership. Fox Realty Investors ("FRI") is the managing general partner of Montgomery and a general partner of MRI. On December 6, 1993, NPI Equity Investments II, Inc. ("Managing General Partner" or "NPI Equity") became the managing general partner of FRI. As a result, the Managing General Partner became responsible for the operation and management of the business and affairs of the Partnership and the other investment partnerships sponsored by FRI. The individuals who had served previously as partners of FRI contributed their general partnership interests in FRI to a newly formed limited partnership, Portfolio Realty Associates, L.P. ("PRA"), in exchange for limited partnership interests in PRA. In the foregoing capacity, such partners continue to hold, indirectly, certain economic interests in the Partnership and such other partnerships, but have ceased to be responsible for the operation and management of the Partnership and such other partnerships. The Managing General Partner is a wholly-owned subsidiary of NPI. On August 17, 1995, the stockholders of NPI entered into an agreement to sell to IFGP Corporation, a Delaware corporation, an affiliate of Insignia, all of the issued and outstanding common stock of NPI for an aggregate purchase price of $1,000,000. The closing of the transactions contemplated by the above mentioned agreement (the "Closing") occurred on January 19, 1996. Upon the closing, the officers and directors of NPI and NPI Equity resigned and IFGP Corporation caused new officers and directors of each of those entities to be elected. Note C - Sale of Property and Unconsolidated Joint Venture Interest On October 19, 1995, the Partnership's Residence Inn - Orlando Property was sold to an unaffiliated third party for $10,100,000. After satisfaction of the mortgage loan of $7,985,000 (including accrued interest) and closing costs, the Partnership received approximately $1,900,000. The Partnership recorded a provision for loss on sale of the property of $800,000 during the 1995 fiscal year. The Partnership has recognized a gain on sale of the property of $5,000. On December 1, 1995, the Combined Fund sold the Holiday Inn Crowne Plaza property to an unaffiliated third party for $44,000,000. After satisfaction of the mortgage note of $34,000,000, closing costs and other expenses, the joint venture received approximately $8,900,000. In accordance with the July 7, 1995, agreement, the Combined Fund received $5,000,000. The Partnership's share of net proceeds, after expenses, was $2,445,000. The Partnership has recognized a gain on sale of $2,694,000. The Combined Fund had previously recorded an approximate $11,900,000 provision for impairment of value in 1991 and 1992. A former joint venture partner may be required to contribute certain funds to the Partnership in accordance with the joint venture agreement. The amount of contribution, if any, is not determinable at this time. On January 12, 1996, the partnership sold its remaining property, Residence Inn - - Sacramento, to an unaffiliated third party for $14,400,000. After satisfaction of the mortgage loan of $7,691,000 (including accrued interest) and closing costs, the Partnership received approximately $6,600,000. For financial statement purposes the Partnership recognized a gain on sale of approximately $3,560,000 during the second quarter of fiscal 1996. Note D - Distributions In January 1996, the Partnership distributed $12,867,000 ($118.02 per limited partnership assignee unit) and $263,000 to the limited partners and the general partners, respectively. The funds were primarily provided by the proceeds from the sale of the Partnership's properties and joint venture interest. Note E - Investment in Unconsolidated Joint Venture The following are the condensed balance sheets as of March 31, 1996, and September 30, 1995, and condensed statements of operations for the three months ended March 31, 1996 and 1995, of the unconsolidated joint venture: MRI BUSINESS PROPERTIES COMBINED FUND NO. 1 CONDENSED BALANCE SHEETS
March 31, September 30, 1996 1995 (Unaudited) (Note) Assets Cash and cash equivalents $ 245 $ 887 Restricted cash -- 958 Accounts receivable and other assets -- 1,321 Real Estate: Real estate -- 63,148 Accumulated depreciation -- (17,952) Allowance for impairment of value -- (11,962) Real estate, net -- 33,234 Total assets $ 245 $ 36,400 Liabilities and Partners' Deficiency Accounts payable and other liabilities $ -- $ 1,805 Due to affiliates 245 3,069 Note payable -- 34,000 Total liabilities 245 38,874 Minority interest in joint venture -- (1,238) Partners' Deficiency: MRI BPF, Ltd. II -- (618) MRI BPF, Ltd. III -- (618) Total partners' deficiency -- (1,236) Total liabilities and partners' deficiency $ 245 $ 36,400
Note: The balance sheet at September 30, 1995, was derived from audited financial statements at such date. Note E - Investment in Unconsolidated Joint Venture (continued) MRI BUSINESS PROPERTIES COMBINED FUND NO. 1 CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
For the Six Months Ended March 31, 1996 March 31, 1995 Revenues $ 4,015 $ 10,122 Gain on sale of hotel 9,755 -- Total revenues 13,770 10,122 Expenses 2,536 10,551 Income (loss) before minority interest in joint venture operations 11,234 (429) Minority interest in joint venture's operations (5,107) 215 Net income (loss) $ 6,127 $ (214) Allocation of net income (loss): MRIBPF, LTD. II $ 3,064 $ (107) MRIBPF, LTD. III 3,063 (107) Net loss $ 6,127 $ (214) For the Three Months Ended March 31, 1996 March 31, 1995 Revenues $ 1 $ 5,251 Expenses 1 5,346 Loss before minority interest in joint venture's operation -- (95) Minority interest in joint venture's operations -- 48 Net loss $ -- $ (47) Allocation of net loss: MRIBPF, LTD. II $ -- $ (23) MRIBPF, LTD. III -- (24) Net loss $ -- $ (47)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As described in "Item 1. Notes to Financial Statements - Note C", the Partnership sold its remaining properties and joint venture interest during the first and second quarter of fiscal 1996. The aggregate sale price for these properties was $68,500,000. After satisfaction of existing mortgages, closing costs and amounts distributed to the Partnership's joint venture partners in the Holiday Inn - Crowne Plaza property, net proceeds received by the Partnership were approximately $10,945,000. As a result of the first quarter sales, the Partnership has recorded a gain on sale of property of $5,000 and gain on sale of unconsolidated joint venture interest of $2,694,000. In addition, the Partnership recognized a gain on sale of approximately $3,560,000 during the second quarter of fiscal 1996. The Partnership reported approximately $6,536,000 of net income for the six months ended March 31, 1996, as compared to approximately $1,577,000 for the comparable period in 1995. Operating results improved primarily due to the $2,694,000 gain on sale of the Partnership's interest in the unconsolidated joint venture and the $3,565,000 gain on sale of Residence Inn - Sacramento and Residence Inn - Orlando. The Partnership's operations for the six month period ended March 31, 1996, are not comparable to the six month period ended March 31, 1995, due to the sales of all of the Partnership's investment properties. In January 1996, the Partnership distributed $12,867,000 ($118.02 per unit) and $263,000 to the limited partners and general partner, respectively. The funds were primarily provided by proceeds from the sale of the Partnership's properties. As a result of the sales, the Managing General Partner is in the process of liquidating and terminating the Partnership. The Partnership's original investment objective of capital growth will not be attained. Accordingly, a significant portion of invested capital will not be returned to limited partners. Upon termination of the Partnership, the general partners will be required to contribute approximately $1,000,000 to the Partnership in accordance with the partnership agreement. The Partnership, due to its fiscal year end of September 30, may be obligated under Section 444 of the Internal Revenue Code to deposit funds with the IRS effectively advancing the liability of its partners. The deposit is due May 15 and the current years required deposit is in excess of the Partnership's available funds. The general partner is currently exploring its alternatives in this matter. No liability for this deposit has been recorded in the accompanying financial statements. The Partnership reported unrestricted cash of approximately $784,000 at March 31, 1996, and approximately $5,534,000 at March 31, 1995. The decrease in cash flow from operating activities for the six month period ended March 31, 1996, as compared to the six month period ended March 31, 1995, is primarily a result of reduced net income from property operations once the effects of the sales are considered. This decrease in net income is due to the Partnership selling all remaining properties in the first two quarters of fiscal 1996. The increase in cash provided by investing activities is primarily a result of the proceeds from the sale of the properties discussed above. Also contributing to this increase is a distribution received from the unconsolidated joint venture. Finally, the Partnership had a reduction in property improvements and replacements due to the sale of the properties. Cash used in financing activities increased due to the repayment of mortgage notes payable in connection with the sale of the properties. Also contributing to this change is a distribution made to the partners from the proceeds of the sales. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K: A Form 8-K dated January 19, 1996, was filed reporting the change in control of the Partnership. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MRI BUSINESS PROPERTIES FUND, LTD. III By: MONTGOMERY REALTY COMPANY 85, A California General Partnership, its managing general partner By: FOX REALTY INVESTORS, A California General Partnership, its managing general partner By: NPI EQUITY INVESTMENTS II, INC., A Florida Corporation, its managing partner /s/ William H. Jarrard, Jr. William H. Jarrard, Jr. President and Director /s/ Ronald Uretta Ronald Uretta Principal Financial Officer and Principal Accounting Officer Date: May 15, 1996 EX-27 2
5 This schedule contains summary financial information extracted from MRI Business Properties Fund III 1996 Second Quarter 10-Q and is qualified in its entirety by reference to such 10-Q filing. 0000769635 MRI BUSINESS PROPERTIES FUND, LTD III 1,000 3-MOS SEP-30-1996 MAR-31-1996 784 0 171 0 0 0 0 0 955 0 0 0 0 0 906 955 0 8,116 0 0 1,549 0 199 6,536 0 6,536 0 0 0 6,536 .12 0 The Registrant has an unclassified balance sheet.
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