-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, fcn4Yu6byOpfnzc8dJRWPyVVEvxlRGMKne+cHvAFeaTEQJZR3dAEqrfC5FtIeLOD scakJDZ9+mjzMXXvsK9LxQ== 0000889812-95-000220.txt : 19950518 0000889812-95-000220.hdr.sgml : 19950518 ACCESSION NUMBER: 0000889812-95-000220 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MRI BUSINESS PROPERTIES FUND LTD III CENTRAL INDEX KEY: 0000769635 STANDARD INDUSTRIAL CLASSIFICATION: 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: 95539079 BUSINESS ADDRESS: STREET 1: 5665 NORTHSIDE DRIVE NW STREET 2: SUITE 370 CITY: ATLANTA STATE: GA ZIP: 30328 BUSINESS PHONE: 4049169090 MAIL ADDRESS: STREET 1: 5665 NORTHSIDE DRIVE NW STREET 2: SUITE 370 CITY: ATLANTA STATE: GA ZIP: 30328 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------- ----------- Commission file number 0-15348 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 Identification No.) incorporation or organization) 5665 Northside Drive N.W., Ste. 370, Atlanta, Georgia 30328 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code (404) 916-9090 N/A Former name, former address and fiscal year, if changed since last report. Indicate by check mark whether 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 ------ APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No ------ ------ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date . ------------------ 1 of 17 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - MARCH 31, 1995 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. Balance Sheets March 31, September 30, 1995 1994 (Unaudited) (Audited) Assets Cash and cash equivalents $ 5,534,000 $ 4,045,000 Accounts receivable and other assets 921,000 791,000 Real Estate: Real estate 48,837,000 48,352,000 Accumulated depreciation (16,214,000) (15,432,000) ------------- ------------- Real estate, net 32,623,000 32,920,000 ------------- ------------- Total assets $ 39,078,000 $ 37,756,000 ============= ============= Liabilities and Partners' Equity Accounts payable and other liabilities $ 1,016,000 $ 1,240,000 Due to unconsolidated joint venture 446,000 339,000 Notes payable 15,653,000 15,791,000 ------------- ------------- Total liabilities 17,115,000 17,370,000 ------------- ------------- Partners' Equity: General partners (deficit) (1,901,000) (1,933,000) Limited partners equity (109,027 assignee units outstanding at March 31, 1995 and September 1994) 23,864,000 22,319,000 ------------- ------------- Total partners' equity 21,963,000 20,386,000 ------------- ------------- Total liabilities and partners' equity $ 39,078,000 $ 37,756,000 ============= ============= See notes to financial statements. 2 of 17 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - MARCH 31, 1995 Statements of Operations (Unaudited) For the Six Months Ended March 31, 1995 March 31, 1994 Revenues: Room revenue $ 7,459,000 $ 12,945,000 Food and beverage revenue - 2,593,000 Other operating revenues 474,000 955,000 Interest income 95,000 130,000 Gain on sale of joint venture interests - 1,467,000 ------------- ------------- Total revenues 8,028,000 18,090,000 ------------- ------------- Expenses: Room expenses 1,638,000 3,098,000 Food and beverage expenses - 2,331,000 Other operating expenses 3,181,000 6,653,000 Depreciation 782,000 878,000 Interest 509,000 942,000 Equity in unconsolidated joint venture's operations 107,000 152,000 General and administrative 234,000 257,000 ------------- ------------- Total expenses 6,451,000 14,311,000 ------------- ------------- Income before minority interest in joint ventures' operations 1,577,000 3,779,000 Minority interest in joint ventures' operation - (404,000) ------------- ------------- Net income $ 1,577,000 $ 3,375,000 ============= ============= Net income per limited partnership assignee unit $ 14 $ 30 ============= ============= See notes to financial statements. 3 of 17 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - MARCH 31, 1995 Statements of Operations (Unaudited) For the Three Months Ended March 31, 1995 March 31, 1994 Revenues: Room revenue $ 4,234,000 $ 6,016,000 Food and beverage revenue - 816,000 Other operating revenue 242,000 418,000 Interest income 52,000 76,000 Gain on sale of joint venture interests - 1,467,000 ------------- ------------- Total revenues 4,528,000 8,793,000 ------------- ------------- Expenses: Room expenses 836,000 1,406,000 Food and beverage expenses - 832,000 Other operating expenses 1,569,000 3,189,000 Depreciation 391,000 492,000 Interest 254,000 435,000 Equity in unconsolidated joint venture's operations 24,000 46,000 General and administrative 111,000 132,000 ------------- ------------- Total expenses 3,185,000 6,532,000 ------------- ------------- Income before minority interest in joint ventures' operations 1,343,000 2,261,000 Minority interest in joint ventures' operations - 41,000 ------------- ------------- Net income $ 1,343,000 $ 2,302,000 ============= ============= Net income per limited partnership assignee unit $ 12 $ 21 ============= ============= See notes to financial statements. 4 of 17 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - MARCH 31, 1995 Statements of Partners' Equity (Unaudited) For the Six Months Ended March 31, 1995 General Limited Total partners' partners' partners' (deficit) equity equity Balance - October 1, 1994 $ (1,933,000) $ 22,319,000 $ 20,386,000 Net income 32,000 1,545,000 1,577,000 ------------- ------------- ------------- Balance - March 31, 1995 $ (1,901,000) $ 23,864,000 $ 21,963,000 ============= ============= ============= See notes to financial statements. 5 of 17 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - MARCH 31, 1995 Statements of Cash Flows (Unaudited) For the Six Months Ended March 31, 1995 March 31, 1994 Operating Activities: Net income $ 1,577,000 $ 3,375,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 796,000 939,000 Minority interest in joint ventures' operations - 404,000 Gain on sale of joint venture interests - (1,467,000) Equity in unconsolidated joint venture's operations 107,000 152,000 Changes in operating assets and liabilities: Accounts receivable and other assets (144,000) (65,000) Accounts payable and other liabilities (224,000) (413,000) ------------- ------------- Net cash provided by operating activities 2,112,000 2,925,000 ------------- ------------- Investing Activities: Net proceeds from sale of joint venture interests - 2,000 Properties and improvements additions (485,000) (912,000) Unconsolidated joint venture contributions - (150,000) Proceeds from cash investments - 5,842,000 Purchase of cash investments - (2,375,000) ------------- ------------- Net cash (used in) provided by investing activities (485,000) 2,407,000 ------------- ------------- Financing Activities: Notes payable principal payments (138,000) (122,000) ------------- ------------- Cash (used in) financing activities (138,000) (122,000) ------------- ------------- Increase in Cash and Cash Equivalents 1,489,000 5,210,000 Cash and Cash Equivalents at Beginning of Period 4,045,000 5,088,000 ------------- ------------- Cash and Cash Equivalents at End of Period $ 5,534,000 $ 10,298,000 ============= ============= Supplemental Disclosure of Cash Flow Information: Interest paid in cash during the period $ 495,000 $ 875,000 ============= ============= Supplemental Disclosure of Non-Cash Investing and Financing Activities: Gain on sale of joint venture interests in 1994 - See Note 3. See notes to financial statements. 6 of 17 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - MARCH 31, 1995 NOTES TO FINANCIAL STATEMENTS 1. General The accompanying financial statements, footnotes and discussions should be read in conjunction with the financial statements, related footnotes and discussions contained in the Partnership's Annual Report for the year ended September 30, 1994. The Partnership sold its remaining joint venture interests in March 1994. The statement of operations for the six months and three months ended March 31, 1994 have consolidated joint ventures in which the Partnership had a controlling interest. Certain accounts have been reclassified in order to conform to the current period. The financial information contained herein is unaudited. In the opinion of management, all adjustments necessary for a fair presentation of such financial information have been included. All adjustments are of a normal recurring nature, except as discussed in Note 3. At March 31, 1995, the Partnership had approximately $3,459,000 invested in overnight repurchase agreements earning approximately 6% per annum. The results of operations for the six and three months ended March 31, 1995 and 1994 are not necessarily indicative of the results to be expected for the full year. 2. Transactions with Related Parties An affiliate of NPI, Inc. received reimbursements of administrative expenses amounting to $80,000 and $21,000 during the six months ended March 31, 1995 and 1994, respectively. These reimbursements are primarily included in general and administrative expenses. An affiliate of NPI, Inc. 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 tax appeal fee is included in operating expenses. 3. Gain on Sale of Joint Venture Interests On March 7, 1994, the Partnership sold its 60 percent interest in the Park Hyatt Water Tower Associates Joint Venture, which owned the Park Hyatt Hotel, located in Chicago, Illinois to an affiliate of the joint venture partner. The sales price of $5,831,000 is comprised of the following: (1) the assumption of the purchase money note payable to an affiliate of the joint venture partner in the amount of $2,500,000, (2) accrued and unpaid interest to an affiliate of the joint venture partner of $1,581,000 assumed by the buyer, and (3) cash of $1,750,000. The sale resulted in a gain of approximately $543,000. The Partnership had recorded a provision for impairment of value of $6,985,000 during fiscal year 1992. On March 15, 1994, the Partnership sold its 65 percent interest in the Washington Park Hotel Associates Joint Venture, which owned the Radisson Park Terrace Hotel, located in Washington, D.C. for $1,455,000 in cash, to its joint venture partner. The sale, after expenses, resulted in a gain of $924,000. The Partnership had recorded a provision for impairment of value of $7,363,000, of which $2,755,000 was recognized in fiscal year 1990 and the remaining $4,608,000 was recognized in fiscal year 1992. 7 of 17 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - MARCH 31, 1995 NOTES TO FINANCIAL STATEMENTS 4. Subsequent Event On April 28, 1995, the Partnership entered into an agreement to sell the Embassy Suites - Tempe property for approximately $19,600,000. The sale is subject to the purchaser completing its due diligence review. If the sale is consummated, the Partnership would receive net proceeds of approximately $19,500,000 and recognize a substantial gain on the sale. 8 of 17 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - MARCH 31, 1995 NOTES TO FINANCIAL STATEMENTS 5. Investment in Unconsolidated Joint Venture The following are the condensed balance sheets as of March 31, 1995 and September 30, 1994 and condensed statements of operations for the six and the three months ended March 31, 1995 and 1994 of the unconsolidated joint venture: MRI BUSINESS PROPERTIES COMBINED FUND NO. 1 CONDENSED BALANCE SHEETS March 31, September 30, 1995 1994 (Unaudited) (Audited) Assets Cash and cash equivalents $ 938,000 $ 561,000 Restricted cash 278,000 564,000 Accounts receivable and other assets 1,634,000 1,323,000 Real Estate: Real estate 63,116,000 62,898,000 Accumulated depreciation (17,135,000) (16,335,000) Allowance for impairment of value (11,962,000) (11,962,000) ------------- ------------- Real estate, net 34,019,000 34,601,000 ------------- ------------- Total assets $ 36,869,000 $ 37,049,000 ============= ============= Liabilities and Partners' Deficiency Accounts payable and other liabilities $ 2,786,000 $ 2,320,000 Due to affiliates 1,878,000 2,095,000 Note payable 34,000,000 34,000,000 ------------- ------------- Total liabilities 38,664,000 38,415,000 ------------- ------------- Minority interest in joint venture (904,000) (689,000) ------------- ------------- Partners' Deficiency: MRI BPF, LTD. II (445,000) (338,000) MRI BPF, LTD. III (446,000) (339,000) ------------- ------------- Total partners' deficiency (891,000) (677,000) ------------- ------------- Total liabilities and partners' deficiency $ 36,869,000 $ 37,049,000 ============= ============= 9 of 17 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - MARCH 31, 1995 NOTES TO FINANCIAL STATEMENTS 5. 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, 1995 March 31, 1994 Revenues $ 10,122,000 $ 10,152,000 Expenses 10,551,000 10,759,000 ------------- ------------- Loss before minority interest in joint venture's operations (429,000) (607,000) Minority interest in joint venture's operations 215,000 303,000 ------------- ------------- Net loss $ (214,000) $ (304,000) ============= ============= Allocation of net loss: MRI BPF, Ltd. II $ (107,000) $ (152,000) MRI BPF, Ltd. III (107,000) (152,000) ------------- ------------- Net loss $ (214,000) $ (304,000) ============= ============= The six months ended March 31, 1994 contained twenty-seven weeks. For the Three Months Ended March 31, 1995 March 31, 1994 Revenues $ 5,251,000 $ 5,024,000 Expense 5,346,000 5,210,000 ------------- ------------- Loss before minority interest in joint venture's operations (95,000) (186,000) Minority interest in joint venture's operations 48,000 95,000 ------------- ------------- Net loss $ (47,000) $ (91,000) ============= ============= Allocation of net loss: MRI BPF, Ltd. II $ (23,000) $ (45,000) MRI BPF, Ltd. III (24,000) (46,000) ------------- ------------- Net loss $ (47,000) $ (91,000) ============= ============= 10 of 17 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - MARCH 31, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This item should be read in conjunction with the Financial Statements and other Items contained elsewhere in this Report. Liquidity and Capital Resources All of Registrant's properties are hotels. Registrant receives hotel operating revenues and is responsible for operating expenses, administrative expenses, capital improvements and debt service payments. Registrant uses working capital reserves provided from any undistributed cash flow from operations and sales proceeds as its primary source of liquidity. During the six months ended March 31, 1995, all of Registrant's hotels generated positive cash flow. Guest room renovations continue at Registrant's 25% owned unconsolidated joint venture, the Holiday Inn Crowne Plaza. During the six months ended March 31, 1995, $218,000 was spent on room renovations. Management anticipates spending approximately $750,000 to complete the renovations. The renovations will be funded by working capital and replacement reserves (restricted cash). To preserve working capital reserves required for necessary capital improvements to properties and provide resources for debt restructuring, cash distributions from operations remained suspended during the six months ended March 31, 1995. On April 28, 1995, Registrant entered into an agreement to sell the Embassy Suites - Tempe property for approximately $19,600,000. The sale is subject to the purchaser completing its due diligence review. If the sale is consummated, Registrant would receive net proceeds of approximately $19,500,000 and recognize a substantial gain on the sale. Registrant intends to distribute the net proceeds from the sale, if consummated. The level of liquidity based upon cash and cash equivalents experienced a $1,489,000 increase at March 31, 1995, as compared to September 30, 1994. Registrant's $2,112,000 from operating activities was only partially offset by $485,000 of fixed asset purchases (investing activities) and $138,000 of notes payable principal payments (financing activities). Net cash provided by operating activities declined at March 31, 1995, as compared to 1994, primarily due to the disposition of Registrant's joint venture interests during the second quarter of fiscal year ended September 30, 1994. All other increases (decreases) in certain assets and liabilities are the result of the timing of receipt and payment of various operating activities. Working capital reserves are invested in money market accounts and repurchase agreements secured by United States Treasury obligations. The Managing General Partner believes that, if market conditions remain relatively stable, cash flow from operations, when combined with working capital reserves, will be sufficient to fund essential capital improvements and debt service payments in the remainder of 1995 and the foreseeable future. Balloon payments on mortgages encumbering Registrant's properties are due in September 1997 and October 1997. The mortgage encumbering Registrant's unconsolidated joint venture, the Holiday Inn Crowne Plaza, matures in July 1995. The mortgage agreement provides an option to extend the maturity date to June 1999. The new interest rate on the loan, if extended, would be approximately 12%. The Managing General Partner believes that each property generates sufficient cash flow to allow all mortgages to be refinanced in an orderly fashion. Pursuant to the terms of a Settlement Agreement entered into in connection with the Ruben and Andrews actions, DeForest Ventures I L.P. will make a tender offer for an aggregate number of units of Registrant (including the units purchased in the initial tender) constituting up to 49% of the total 11 of 17 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - MARCH 31, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources (Continued) number of units of Registrant at a price equal to the initial tender price plus 15% less attorney's fees and expenses. In addition, pursuant to the terms of the proposed settlement, the Managing General Partner will agree to provide Registrant a credit line of $150,000 per property, borrowings under which would bear interest at the lesser of prime plus 1% or the rate permitted by the Partnership Agreement of Registrant. A hearing for final approval of the settlement is scheduled for May 19, 1995. See Part II - Other Information, "Item 1 - Legal Proceedings". If the settlement receives final Court approval, it is expected that the tender offer will commence on or about June 19, 1995. The Managing General Partner believes that the settlement will not have an adverse effect on Registrant. At this time, it appears that the investment objective of capital growth will not be attained and that a significant portion of invested capital will not be returned to investors. The extent to which invested capital is returned to investors is dependent upon the performance of Registrant's remaining properties and the markets in which such properties are located and on the sales price of the remaining properties. Real Estate Market The income and expenses of operating the properties owned by Registrant are subject to factors outside of Registrant's control, such as over-supply of similar properties resulting from over-building, increases in unemployment, population shifts or changes in patterns or needs of users. Expenses, such as local real estate taxes and miscellaneous expenses, are subject to change and cannot always be reflected in room rate increases due to market conditions. In addition, there are risks inherent in owning and operating lodging facilities because such properties are management and labor intensive and especially susceptible to the impact of economic and other conditions outside the control of Registrant. There have been, and it is possible there may be other Federal, state and local legislation and regulations enacted relating to the protection of the environment. Registrant is unable to predict the extent, if any, to which such new legislation or regulations might occur and the degree to which such existing or new legislation or regulations might adversely affect the properties still owned by Registrant. Results of Operations Six Months Ended March 31, 1995 vs. March 31, 1994 Operating results, before minority interest in joint venture's operations, declined by $2,202,000 for the six months ended March 31, 1995, as compared to 1994. Operating results declined primarily due to the gain on sale of Registrant's joint venture interests in 1994. Revenues declined by $10,062,000 for the six months ended March 31, 1995, as compared to 1994, due to the sale of Registrant's joint venture interests. With respect to the remaining properties, revenues increased by $597,000 due to increases in room revenues of $545,000 and other operating revenue of $62,000, which were slightly offset by a decrease in interest income of $10,000. 12 of 17 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - MARCH 31, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Six Months Ended March 31, 1995 vs. March 31, 1994 (Continued) Room revenue increased at Registrant's remaining properties, except for the Residence Inn - Sacramento, where a decline in occupancy offset an increase in average daily room rates. The largest increase was at Registrant's Embassy Suites - Tempe property, due to a significant increase in average daily room rates, which was only partially offset by a decline in occupancy. Other operating revenues increased due to increases in other income and telephone revenue at Registrant's Embassy Suites - Tempe property. Interest income decreased due to the decline in average working capital reserves available for investment. Expenses decreased by $7,860,000 for the six months ended March 31, 1995, as compared to 1994, due to the sale of Registrant's joint venture interests. With respect to the remaining properties, expenses declined by $38,000 due to decreases in interest expense of $317,000 and equity in unconsolidated joint venture operations of $45,000, which were partially offset by increases in other operating expenses of $258,000, room expenses of $47,000 and depreciation of $19,000. General and administrative expenses decreased by $23,000. Interest expense decreased primarily due to Registrant prepaying on June 2, 1994, in full satisfaction, the note encumbering Registrant's Embassy Suites property, coupled with the reduction in the interest on the loan encumbering Registrant's Residence Inn - Orlando property. The loss from Registrant's unconsolidated joint venture property (the Holiday Inn Crowne Plaza) decreased due to improved operations at the hotel. Room expenses remained relatively constant. Other operating expenses increased primarily at Registrant's Embassy Suites property. Depreciation expense increased due to an under accrual in the prior year comparative period. General and administrative expenses decreased due to a reduction in asset management costs. Three Months Ended March 31, 1995 vs. March 31, 1994 Operating results, before the minority interest in joint venture operations, declined by $918,000 for the three months ended March 31, 1995, as compared to 1994. Operating results declined due to the gain on sale of Registrant's joint venture interests in 1994. Revenues declined by $4,265,000 for the three months ended March 31, 1995, as compared to 1994, due to the sale of Registrant's joint venture interests. With respect to the remaining properties, revenues increased by $339,000 due to increases in room revenue of $313,000 and other operating revenue of $41,000, which were only slightly offset by a decrease in interest income of $15,000. Room revenue increased at Registrant's remaining properties, except for the Residence Inn - Sacramento, where a decline in occupancy offset an increase in average daily room rates. The largest increase was at Registrant's Embassy Suites - Tempe property, due to a significant increase in average daily room rates, which was only partially offset by a decline in occupancy. Other operating revenues increased due to increases in other income and telephone revenue at Registrant's Embassy Suites - Tempe property. Interest income decreased due to the decline in average working capital reserves available for investment. 13 of 17 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - MARCH 31, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Three Months Ended March 31, 1995 vs. March 31, 1994 (Continued) Expenses decreased by $3,347,000 for the three months ended March 31, 1995, as compared to 1994, due to the sale of Registrant's joint venture interest. With respect to the remaining properties, expenses declined by $71,000 due to decreases in interest expense of $77,000, equity in unconsolidated joint venture operations of $22,000 and other operating expenses of $21,000, which were partially offset by increases in room expenses of $35,000 and depreciation expense of $14,000. General and administrative expenses decreased by $21,000. Interest expense decreased primarily due to Registrant prepaying on June 2, 1994, in full satisfaction, the note encumbering Registrant's Embassy Suites property, coupled with the reduction in the interest on the loan encumbering Registrant's Residence Inn - Orlando property. The loss from Registrant's unconsolidated joint venture property (the Holiday Inn Crowne Plaza) decreased due to improved operations at the hotel. Other operating expenses and room expenses remained relatively constant. Depreciation expense increased due to an under accrual in the prior year comparative period. General and administrative expenses decreased due to a reduction in asset management costs. Unconsolidated Joint Venture Operations (MRI BPF Combined Fund No. 1) Six Months Ended March 31, 1995 vs. March 31, 1994 Operating results, prior to the minority interest, improved by $178,000 for the six months ended March 31, 1995, as compared to 1994, due to a decrease in expenses which was partially offset by a decrease in revenues. Three Months Ended March 31, 1995 vs. March 31, 1994 Operating results, prior to minority interest, improved by $91,000 for the three months ended March 31, 1995, due to the increase in revenues which was partially offset by an increase in expenses. The increase in revenue is attributable to higher average room rates. 14 of 17 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - MARCH 31, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Properties A description of the hotel properties in which Registrant has an ownership interest, together with occupancy and room rate data, follows: MRI BUSINESS PROPERTIES FUND, LTD. III OCCUPANCY AND ROOM RATE SUMMARY
Average Average Occupancy Rate (%) Daily Room Rate ($) Six Months Three Months Six Months Three Months Date Ended Ended Ended Ended of March 31, March 31, March 31, March 31, Name and Location Rooms Purchase 1995 1994 1995 1994 1995 1994 1995 1994 - - ---------------- ----- -------- ---- ---- ---- ---- ---- ---- ---- ---- Holiday Inn Crowne Plaza (1) Atlanta, Georgia 492 03/86 73 72 75 76 95.85 89.78 102.50 92.03 Embassy Suites - Tempe Tempe, Arizona 224 12/86 80 85 85 90 105.79 88.06 119.81 96.77 Residence Inn - Orlando Orlando, Florida 176 09/87 81 71 90 84 76.33 84.16 76.25 89.41 Residence Inn - Sacramento, California 176 09/87 75 83 77 87 80.80 77.53 83.23 77.59 Radisson Park Terrace Hotel (2) Washington, D.C. 219 09/86 - 72 - 69 - 87.52 - 88.53 Park Hyatt Hotel (3) Chicago, Illinois 255 12/86 - 63 - 53 - 149.37 - 141.24
(1) Registrant and an affiliated partnership, MRI Business Properties Fund, Ltd. II, own the hotel through a joint venture which has a 50 percent interest in this property. (2) Registrant sold its 65% interest in this property on March 15, 1994. (3) Registrant sold its 60% interest in this property on March 7, 1994. 15 of 17 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - MARCH 31, 1995 PART II - OTHER INFORMATION Item 1. Legal Proceedings Lawrence M. Whiteside, on behalf of himself and all other similarly situated, v. Fox Capital Management Corporation, et al., Superior Court of the State of California, San Mateo County, Case No. 390018 ("Whiteside"). Bonnie L. Ruben and Sidney Finkel, on behalf of themselves and all others similarly situated, v. DeForest Ventures I L.P., et al., United States District Court, Northern District of Georgia, Atlanta Division, Case No. 1-94-CV-2983-JEC ("Ruben"). Roger L. Vernon, individually and on behalf of all similarly situated persons v. DeForest Ventures I L.P., et al., Circuit Court of Cook County, County Departments, Chancery Division, State of Illinois, Case No. 94CH0100592 ("Vernon"). James Andrews, et al., on behalf of themselves and all other similarly situated v. Fox Capital Management Corporation, et al., United States District Court, Northern District of Georgia, Atlanta Division, Case No. 1-94-CV-3351-JEC ("Andrews"). On March 16, 1995 the United States District Court for the Northern District of Georgia, Atlanta Division, entered an order which granted preliminary approval to a settlement agreement in the Ruben and Andrews actions, conditionally certified two classes for purpose of settlement, and authorized the parties to give notice to the classes of the terms of the proposed settlement. Plaintiffs counsel in the Vernon and Whiteside action have joined in the Settlement Agreement as well. The two certified classes constitute all limited partners of Registrant and the eighteen other affiliated partnerships who either tendered their units in connection with the October tender offers or continue to hold their units in Registrant and the other affiliated partnerships. Pursuant to the terms of the proposed settlement, which are described in the notice sent to the class members in March 1995, (and more fully described in the Amended Stipulation of Settlement submitted to the court on March 14, 1995) all claims which either were made or could have been asserted in any of the class actions would be dismissed with prejudice and/or released. In consideration for the dismissal and/or release of such claims, among other things, DeForest I would pay to each unit holder who tendered their units in Registrant an amount equal to 15% of the original tender offer price less attorney's fees and expenses. In addition, DeForest I will commence a second tender offer for an aggregate number of units of Registrant (including the units purchased in the initial tender) constituting up to 49% of the total number of units of Registrant at a price equal to the initial tender price plus 15% less attorney's fees and expenses. Furthermore, under the terms of the proposed settlement, the Managing General Partner would agree, among other things, to provide Registrant a credit line of $150,000 per property which would bear interest at the lesser of prime rate plus 1% and the rate permitted under the partnership agreement of Registrant. A hearing on the final approval of the settlement is scheduled for May 19, 1995. Item 6. Exhibits and Reports on Form 8-K. No report on Form 8-K was required to be filed for the three months ended March 31, 1995. 16 of 17 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - MARCH 31, 1995 SIGNATURE 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, its Managing General Partner By: FOX REALTY INVESTORS, the managing general partner of the Managing General Partner By: NPI Equity Investments II, Inc. ("NPI") managing partner ---------------------------------- ARTHUR N. QUELER Secretary/Treasurer and Director (Principal Financial Officer) 17 of 17 EX-27 2 FINANCIAL DATA SCHEDULE
5 The schedule contains summary financial information extracted from MRI Business Properties Fund, Ltd. III and is qualified in its entirety by reference to such financial statements. 1 6-MOS SEP-30-1995 OCT-01-1994 MAR-31-1995 5,534,000 0 921,000 0 0 0 48,837,000 (16,214,000) 39,078,000 0 15,653,000 0 0 0 21,963,000 39,078,000 0 7,933,000 0 5,601,000 0 0 509,000 1,577,000 0 1,577,000 0 0 0 1,577,000 14 14 Receivables include $248,000 of other assets.
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