-----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, igcLr3VFewVPjWSeQDWBge3iEO0907Ig2iMl1+9Babx15iG/rKnkBKZOsbYt+Qzg Shc0tG2JgcNAhK3gnml4Ew== 0000889812-95-000419.txt : 19950814 0000889812-95-000419.hdr.sgml : 19950814 ACCESSION NUMBER: 0000889812-95-000419 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 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: 95562000 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 June 30, 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 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. Consolidated Balance Sheets June 30, September 30, 1995 1994 (Unaudited) (Audited) Assets Cash and cash equivalents $ 6,465,000 $ 4,045,000 Accounts receivable and other assets 728,000 791,000 Real Estate: Real estate 49,146,000 48,352,000 Accumulated depreciation (16,605,000) (15,432,000) -------------- -------------- Real estate, net 32,541,000 32,920,000 -------------- -------------- Total assets $ 39,734,000 $ 37,756,000 ============== ============== Liabilities and Partners' Equity Accounts payable and other liabilities $ 1,129,000 $ 1,240,000 Due to unconsolidated joint venture 262,000 339,000 Notes payable 15,581,000 15,791,000 -------------- -------------- Total liabilities 16,972,000 17,370,000 -------------- -------------- Commitments and Contingencies Partners' Equity: General partners (deficit) (1,885,000) (1,933,000) Limited partners equity (109,027 assignee units outstanding at June 30, 1995 and September 30, 1994) 24,647,000 22,319,000 -------------- -------------- Total partners' equity 22,762,000 20,386,000 -------------- -------------- Total liabilities and partners' equity $ 39,734,000 $ 37,756,000 ============== ============== See notes to consolidated financial statements. 2 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 Consolidated Statements of Operations (Unaudited) For the Nine Months Ended June 30, 1995 June 30, 1994 Revenues: Room revenue $ 11,060,000 $ 16,350,000 Food and beverage revenue -- 2,593,000 Other operating revenues 703,000 1,174,000 Interest income 165,000 197,000 Gain on sale of joint venture interests -- 1,467,000 ------------- ------------- Total revenues 11,928,000 21,781,000 ------------- ------------- Expenses: Room expenses 2,503,000 3,926,000 Food and beverage expenses -- 2,331,000 Other operating expenses 4,672,000 8,212,000 Depreciation 1,173,000 1,254,000 Interest 762,000 1,299,000 Loss from unconsolidated joint venture's operations 93,000 262,000 General and administrative 349,000 364,000 ------------- ------------- Total expenses 9,552,000 17,648,000 ------------- ------------- Income before minority interest in joint ventures' operations 2,376,000 4,133,000 Minority interest in joint ventures' operations -- (404,000) ------------- ------------- Net income $ 2,376,000 $ 3,729,000 ============= ============= Net income per limited partnership assignee unit $ 21 $ 34 ============= ============= See notes to consolidated financial statements. 3 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 Consolidated Statements of Operations (Unaudited) For the Three Months Ended June 30, 1995 June 30, 1994 Revenues: Room revenue $3,601,000 $3,405,000 Other operating revenues 229,000 219,000 Interest income 70,000 67,000 Equity in unconsolidated joint venture's operations 14,000 -- ----------- ----------- Total revenues 3,914,000 3,691,000 ----------- ----------- Expenses: Room expenses 865,000 828,000 Other operating expenses 1,491,000 1,559,000 Depreciation and amortization 391,000 376,000 Interest 253,000 357,000 Loss from unconsolidated joint venture's operations -- 110,000 General and administrative 115,000 107,000 ----------- ----------- Total expenses 3,115,000 3,337,000 ----------- ----------- Net income $ 799,000 $ 354,000 =========== =========== Net income per limited partnership assignee unit $ 7 $ 3 =========== =========== See notes to consolidated financial statements. 4 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 Consolidated Statement of Partners' Equity (Deficit) (Unaudited) For the Nine Months Ended June 30, 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 48,000 2,328,000 2,376,000 ------------ ------------ ------------ Balance - June 30, 1995 $(1,885,000) $24,647,000 $22,762,000 ============ ============ ============ See notes to consolidated financial statements. 5 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended June 30, 1995 June 30, 1994 Operating Activities: Net income $ 2,376,000 $ 3,729,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,194,000 1,322,000 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 93,000 262,000 Changes in operating assets and liabilities: Accounts receivable and other assets 42,000 156,000 Accounts payable, and other liabilities (111,000) (1,100,000) ------------ ------------ Net cash provided by operating activities 3,594,000 3,306,000 ------------ ------------ Investing Activities: Net proceeds from sale of joint venture interests -- 2,000 Properties and improvements additions (794,000) (1,055,000) Unconsolidated joint venture contributions (170,000) (150,000) Proceeds from cash investments -- 5,842,000 Purchase of cash investments -- (2,375,000) ------------ ------------ Net cash (used in) provided by investing activities (964,000) 2,264,000 ------------ ------------ Financing Activities: Satisfaction of note payable -- (7,000,000) Notes payable principal payments (210,000) (187,000) ------------ ------------ Cash (used in) financing activities (210,000) (7,187,000) ------------ ------------ Increase (Decrease) in Cash and Cash Equivalents 2,420,000 (1,617,000) Cash and Cash Equivalents at Beginning of Period 4,045,000 5,088,000 ------------ ------------ Cash and Cash Equivalents at End of Period $ 6,465,000 $ 3,471,000 ============ ============ Supplemental Disclosure of Cash Flow Information: Interest paid in cash during the period $ 741,000 $ 1,224,000 ============ ============ Supplemental Disclosure of Non-Cash Investing and Financing Activities: Gain on sale of joint venture interests in 1994 - Note 4 See notes to consolidated financial statements. 6 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 NOTES TO CONSOLIDATED 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 nine months ended June 30, 1994 has 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 4. At June 30, 1995, the Partnership had approximately $4,818,000 invested in overnight repurchase agreements earning approximately 6% per annum. The results of operations for the nine and three months ended June 30, 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 $120,000 and $58,000 during the nine months ended June 30, 1995 and 1994, respectively. These reimbursements are primarily included in general and administrative expenses. An affiliate of NPI, Inc. was paid fees of $26,000 and $10,000 relating to successful real estate tax appeals on the Partnership's Embassy Suites - Tempe and Residence Inn - Sacramento Hotels, respectively, during the nine months ended June 30, 1995. The tax appeal fees are included in operating expenses. 3. Notes Payable On June 2, 1994, the Partnership prepaid, in full satisfaction, the note encumbering its Embassy Suites property in the amount of $7,000,000. The note had been accruing interest at prime plus 1% and was due to mature in December 1996. The Partnership's unconsolidated joint venture's (the Holiday Inn Crowne Plaza) mortgage payable in the amount of $34,000,000, was due to mature in July 1995. On June 28, 1995, the Partnership obtained a six month extension of the due date to December 29, 1995. The loan requires monthly payments of interest only at 12.29% commencing August 1, 1995. 7 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. 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. 5. Subsequent Events As of July 7, 1995, the Combined Fund, a joint venture in which the Partnership has a 50% interest, entered into an agreement with its joint venture partner in the Holiday Inn Crowne Plaza pursuant to which the parties agreed to sell the Holiday Inn Crowne Plaza. The agreement provides that the net proceeds to the Combined Fund from any such sale must be at least $5,000,000. If the property is not sold by January 31, 1996, the joint venture partner is obligated to purchase the joint venture interest of the Combined Fund for $5,000,000. The Partnership anticipates that it will recognize net proceeds of approximately $2,500,000 and a gain on disposition of approximately $2,700,000 for financial statement purposes on the transaction. On July 25, 1995, the Partnership sold its Embassy Suites Hotel to an unaffiliated third party for $19,600,000. After closing costs and adjustments, the Partnership received net proceeds of approximately $19,000,000 and will recognize a gain on sale of approximately $8,700,000. On July 26, 1995, the Partnership distributed $21,989,000 ($202 per unit) and $449,000 to the limited and general partners, respectively. The funds were primarily provided by the sale proceeds of the Partnership's Embassy Suites Hotel. 6. Legal Proceedings On May 19, 1995 final approval was given by the Court to a settlement agreement relating to the tender offer litigation. As required by the terms of the settlement agreement, DeForest Ventures I L.P. ("DeForest") commenced a second tender offer (the "Second Tender Offer") on June 2, 1995 for units of limited partnership in the Partnership. Pursuant to the Second Tender Offer, DeForest acquired an additional 753 limited partnership units of the Partnership. 8 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. Investment in Unconsolidated Joint Venture The following are the condensed balance sheets as of June 30, 1995 and September 30, 1994 and condensed statements of operations for the nine and the three months ended June 30, 1995 and 1994 of the unconsolidated joint venture: MRI BUSINESS PROPERTIES COMBINED FUND NO. 1 CONDENSED BALANCE SHEETS June 30, September 30, 1995 1994 (Unaudited) (Audited) Assets Cash and cash equivalents $ 1,010,000 $ 561,000 Restricted cash 790,000 564,000 Accounts receivable and other assets 2,230,000 1,323,000 Real Estate: Real estate 63,293,000 62,898,000 Accumulated depreciation (17,535,000) (16,335,000) Allowance for impairment of value (11,962,000) (11,962,000) ------------- ------------- Real estate, net 33,796,000 34,601,000 ------------- ------------- Total assets $ 37,826,000 $ 37,049,000 ============= ============= Liabilities and Partners' Deficiency Accounts payable and other liabilities $ 3,000,000 $ 2,320,000 Due to affiliates 1,884,000 2,095,000 Note payable 34,000,000 34,000,000 ------------- ------------- Total liabilities 38,884,000 38,415,000 ------------- ------------- Minority interest in joint venture (535,000) (689,000) ------------- ------------- Commitments and Contingencies Partners' Deficiency: MRI BPF, LTD. II (261,000) (338,000) MRI BPF, LTD. III (262,000) (339,000) ------------- ------------- Total partners' deficiency (523,000) (677,000) ------------- ------------- Total liabilities and partners' deficiency $ 37,826,000 $ 37,049,000 ============= ============= 9 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. Investment in Unconsolidated Joint Venture (Continued) MRI BUSINESS PROPERTIES COMBINED FUND NO. 1 CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) For the Nine Months Ended June 30, 1995 June 30, 1994 Revenues $ 15,730,000 $ 15,096,000 Expenses 16,102,000 16,144,000 ------------- ------------- Loss before minority interest in joint venture operations (372,000) (1,048,000) Minority interest in joint venture operations 186,000 524,000 ------------- ------------- Net loss $ (186,000) $ (524,000) ============= ============= Allocation of net loss: MRI BPF, Ltd. II $ (93,000) $ (262,000) MRI BPF, Ltd. III (93,000) (262,000) ------------- ------------- Net loss $ (186,000) $ (524,000) ============= ============= For the Three Months Ended June 30, 1995 June 30, 1995 Revenues $ 5,608,000 $ 4,944,000 Expenses 5,551,000 5,385,000 ------------- ------------ Income (loss) before minority interest in joint venture operations 57,000 (441,000) Minority interest in joint venture operations (29,000) 221,000 ------------- ------------ Net income (loss) $ 28,000 $ (220,000) ============= ============ Allocation of net income (loss): MRI BPF, Ltd. II $ 14,000 $ (110,000) MRI BPF, Ltd. III 14,000 (110,000) ------------- ------------ Net income (loss) $ 28,000 $ (220,000) ============= ============ 10 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This item should be read in conjunction with the Consolidated 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 nine months ended June 30, 1995, all of Registrant's remaining hotels generated positive cash flow. On July 25, 1995, Registrant sold its Embassy Suites Hotel to an unaffiliated third party for $19,600,000. After closing costs and adjustments, Registrant received net proceeds of approximately $19,000,000 and will recognize a gain on sale of approximately $8,700,000. On July 26, 1995, Registrant distributed $21,989,000 and $449,000 to the limited and general partners, respectively. The funds were primarily provided by the sale proceeds of Registrant's Embassy Suites Hotel. The level of liquidity based upon cash and cash equivalents experienced a $2,420,000 increase at June 30, 1995, as compared to September 30, 1994. Registrant's $3,594,000 of cash from operating activities was only partially offset by $964,000 of cash used in investing activities and $210,000 of notes payable payments (financing activities). Net cash used in investing activities consisted of $794,000 of fixed asset purchases and $170,000 of contributions to Registrant's unconsolidated joint venture. 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 and October 1997. The Managing General Partner believes that each property generates sufficient cash flow to allow all mortgages to be refinanced in an orderly fashion. The mortgage encumbering the Holiday Inn Crowne Plaza, was due to mature in July 1995. Registrant obtained a six month extension of the due date to December 29, 1995. The Managing General Partner anticipates selling the hotel on or before the maturity date. As described in Item 1, Note 5, pursuant to an agreement, Registrant's interest in the Holiday Inn Crowne Plaza will be sold or otherwise disposed of by January 31, 1996. Registrant anticipates that it will receive net proceeds of approximately $2,500,000 on the transaction. In addition, Registrant is currently marketing for sale its two remaining properties. As required by the terms of the settlement of the actions brought against, among others, DeForest Ventures I L.P. ("DeForest") relating to the tender offer made by DeForest in October 1994 (the "First Tender Offer") for units of limited partnership interest in Registrant and certain affiliated partnerships, DeForest commenced a second tender offer (the "Second Tender Offer") on June 2, 1995 for units of limited partnership interest in Registrant. Pursuant to the Second Tender Offer, DeForest acquired an additional 753 units of Registrant which, when added to the units acquired during the First Tender 11 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources (Continued) Offer, represents approximately 25.3% of the total number of outstanding units of Registrant. The Managing General Partner believes that the tender will not have a significant impact on future operations or liquidity of Registrant (see Part II, Item 1, Litigation). Also in connection with the settlement, an affiliate of the Managing General Partner has made available to Registrant a credit line of up to $150,000 per property owned by Registrant. Based on present plans, management does not anticipate the need to borrow in the near future. 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 Nine Months Ended June 30, 1995 vs. June 30, 1994 Operating results, before minority interest in joint venture's operations, declined by $1,757,000 for the nine months ended June 30, 1995, as compared to 1994. Operating results declined primarily due to the $1,467,000 gain on sale of Registrant's joint venture interests in 1994. Revenues declined by $9,853,000 for the nine months ended June 30, 1995, as compared to 1994, due to the sale of Registrant's joint venture interests. With respect to the remaining properties, revenues increased by $808,000 due to increases in room revenues of $741,000 and other operating revenue of $72,000 which were slightly offset by a decrease in interest income of $5,000. 12 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Nine Months Ended June 30, 1995 vs. June 30, 1994 (Continued) Room revenue increased at Registrant's remaining properties, with the exception of the Residence Inn - Sacramento, where a decline in occupancy more than 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 $8,096,000 for the nine months ended June 30, 1995, as compared to 1994, due to the sale of Registrant's joint venture interests. With respect to the remaining properties, expenses declined due to decreases in interest expense of $421,000 and loss from unconsolidated joint venture operations of $169,000 which were partially offset by increases in other operating expenses of $190,000, room expenses of $84,000 and depreciation of $34,000. In addition, general and administrative expenses decreased by $15,000. 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 rate 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 June 30, 1995 vs. June 30, 1994 Operating results improved by $445,000 for the three months ended June 30, 1995, as compared to 1994, due to an increase in revenues of $223,000 and a decrease in expenses of $222,000. Revenues increased due to increases in room revenues of $196,000, other operating income of $10,000, equity in unconsolidated joint venture operations of $14,000 and interest income of $3,000. Room revenues increased at all of Registrant's properties. 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 increased due to an increase in average working capital reserves available for investment. Expenses decreased due to decreases in interest expense of $104,000, other operating expenses of $68,000, and loss from unconsolidated joint venture operations of $110,000, which were partially offset by increases in rooms expense of $37,000, depreciation and amortization of $15,000, and general and administrative expense of $8,000. Interest expense decreased primarily due to Registrant prepaying on 13 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Three Months Ended June 30, 1995 vs. June 30, 1994 (Continued) June 2, 1994, in full satisfaction, the note encumbering Registrant's Embassy Suites property, coupled with the reduction in the interest rate on the loan encumbering Registrant's Residence Inn - Orlando property. Other operating expenses decreased primarily at Registrant's Residence Inn - Orlando property. Room expense remained relatively constant. Depreciation and amortization increased due to an under accrual in the prior year comparative period. General and administrative expenses increased due to increased reimbursed expenses for the period. Unconsolidated Joint Venture Operations (MRI BPF Combined Fund No. 1) Nine Months Ended June 30, 1995 vs. June 30, 1994 Operating results, prior to the minority interest, improved by $676,000 for the nine months ended June 30, 1995, as compared to 1994, due to increases in revenues and decreases in expenses. The increase in revenue is attributable to higher average room rates. Three Months Ended June 30, 1995 vs. June 30, 1994 Operating results, prior to minority interest, improved by $498,000 for the three months ended June 30, 1995, due to an increase in revenues which was partially offset by an increase in expenses. The increase in revenue is attributable to higher average room rates, which was partially offset by a decline in occupancy. 14 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Properties A description of the hotel properties in which Registrant had an ownership interest during the period covered by this Report, together with occupancy and room rate data, follows:
MRI BUSINESS PROPERTIES FUND, LTD. III OCCUPANCY AND ROOM RATE SUMMARY Average Average Occupancy Rate (%) Daily Room Rate ($) ---------------------------- ------------------------------- Nine months Three Months Nine months Three Months Date Ended Ended Ended Ended of June 30, June 30, June 30, June 30, Name and Location Rooms Purchase 1995 1994 1995 1994 1995 1994 1995 1994 - ----------------- ----- ------- ---- ---- ---- ---- ---- ---- ---- ---- Holiday Inn Crowne Plaza (1) Atlanta, Georgia 492 03/86 75 75 78 80 96.78 89.05 98.65 87.60 Embassy Suites - Tempe Tempe, Arizona 224 12/86 80 85 81 86 100.52 84.53 89.98 77.49 Residence Inn - Orlando Orlando, Florida 176 09/87 79 72 77 75 76.05 81.47 75.48 76.09 Residence Inn - Sacramento, California 176 09/87 79 84 86 86 82.20 79.09 85.00 82.21 (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.
15 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 PART II - OTHER INFORMATION Item 1. Litigation Lawrence M. Whiteside, on behalf of himself and all others similarly situated, v. Fox Capital Management Corporation et al., Superior Court of the State of California, San Mateo County, Case No. 390018. 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. 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. James Andrews, et al., on behalf of themselves and all others 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. On May 19, 1995, the Court gave final approval to the settlement agreement entered into, in March 1995, by the plaintiffs and the defendants in the above actions. Pursuant to the Court's order, all claims made by the plaintiffs were dismissed with prejudice subject to the defendants compliance with the settlement agreement. As required by the settlement agreement, DeForest Ventures I L.P. ("DeForest") and DeForest Ventures II L.P. commenced a tender offer for units of limited partnership interest in Registrant as well as 18 other affiliated partnerships on June 2, 1995 and implemented the other provisions of the settlement agreement. See Part I, Item 2, "Management's Discussion and Analysis of Financial Condition." Item 5. Pro Forma Financial Information The following pro forma consolidated balance sheet as of June 30, 1995, and the pro forma consolidated statement of operations for the nine months ended June 30, 1995 and the year ended September 30, 1994 give effect to the sale of Registrant's Embassy Suites property interest. Registrant sold its Embassy Suites Hotel on July 25, 1995 to an unaffiliated third party for $19,600,000. Registrant received net proceeds of approximately $19,000,000 and will recognize a gain on sale of approximately $8,700,000. The adjustments related to the pro forma consolidated balance sheet assume the transaction was consummated at June 30, 1995, while the adjustments to the pro forma consolidated statements of operations assume the transaction was consummated at the beginning of the year presented. The pro forma adjustments required are to eliminate the assets, liabilities and operating activity of the Embassy Suites property and to reflect consideration received for the property. These pro forma adjustments are not necessarily reflective of the results that actually would have occurred if the sale had been in effect as of and for the period presented or what may be achieved in the future. 16 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 Pro Forma Consolidated Balance Sheet (Unaudited) June 30, 1995
Pro Forma Historical Adjustments Pro Forma ------------ ------------ ------------ Assets Cash and cash equivalents $ 6,465,000 $ (317,000) $ 6,148,000 Accounts receivable and other assets 728,000 18,604,000 19,332,000 Real Estate: Real estate 49,146,000 (18,174,000) 30,972,000 Accumulated depreciation (16,605,000) 7,298,000 (9,307,000) ------------- ------------- ------------- Real estate, net 32,541,000 (10,876,000) 21,665,000 ------------- ------------- ------------- Total assets $ 39,734,000 $ 7,411,000 $ 47,145,000 ============= ============= ============= Liabilities and Partners' Equity Accounts payable and other liabilities $ 1,129,000 $ (500,000) $ 629,000 Due to unconsolidated joint venture 262,000 -- 262,000 Notes payable 15,581,000 -- 15,581,000 ------------- ------------- ------------- Total liabilities 16,972,000 (500,000) 16,472,000 ------------- ------------- ------------- Commitments and Contingencies Partners' Equity: General partners (1,885,000) 158,000 (1,727,000) Limited partners equity (109,027 assignee units outstanding at June 30, 1995 and September 30, 1994) 24,647,000 7,753,000 32,400,000 ------------- ------------- ------------- Total partners' equity 22,762,000 7,911,000 30,673,000 ------------- ------------- ------------- Total liabilities and partners' equity $ 39,734,000 $ 7,411,000 $ 47,145,000 ============= ============= =============
17 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 Pro Forma Consolidated Statement of Operations (Unaudited) For the Nine Months Ended June 30, 1995 Pro Forma Historical Adjustments Pro Forma ----------- ------------ ------------ Revenues: Room revenue $11,060,000 $(4,980,000) $ 6,080,000 Other operating revenues 703,000 (406,000) 297,000 Interest income 165,000 (20,000) 145,000 ------------ ------------ ------------ Total revenues 11,928,000 (5,406,000) 6,522,000 ------------ ------------ ------------ Expenses: Room expense 2,503,000 (1,091,000) 1,412,000 Other operating expenses 4,672,000 (2,003,000) 2,669,000 Depreciation 1,173,000 (469,000) 704,000 Interest 762,000 -- 762,000 Loss from unconsolidated joint venture's operations 93,000 -- 93,000 General and administrative 349,000 -- 349,000 ------------ ------------ ------------ Total expenses 9,552,000 (3,563,000) 5,989,000 ------------ ------------ ------------ Net income $ 2,376,000 $(1,843,000) $ 533,000 ============ ============ ============ Net income per limited partnership unit $ 21 $ 5 ============ ============ 18 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 Pro Forma Consolidated Statement of Operations For the Year Ended September 30, 1994
Historical Pro Forma Pro Forma (Audited) Adjustments (Unaudited) ------------ ------------- ------------- Revenues Room revenues $ 19,544,000 $ (5,661,000) $ 13,883,000 Food and beverage revenue 2,593,000 0 2,593,000 Other operating revenues 1,389,000 (457,000) 932,000 Interest and other income 205,000 (17,000) 188,000 Gain on sale of joint ventures 1,467,000 0 1,467,000 ------------- ------------- ------------- Total revenues 25,198,000 (6,135,000) 19,063,000 ------------- ------------- ------------- Expenses Room expenses 4,720,000 (1,392,000) 3,328,000 Food and beverage revenue 2,331,000 0 2,331,000 Other operating expenses 9,690,000 (2,424,000) 7,266,000 Depreciation 1,679,000 (626,000) 1,053,000 Interest 1,527,000 (373,000) 1,154,000 Equity in unconsolidated joint venture 342,000 0 342,000 General and administrative 469,000 0 469,000 ------------- ------------- ------------- Total expenses 20,758,000 (4,815,000) 15,943,000 ------------- ------------- ------------- Income 4,440,000 (1,320,000) 3,120,000 Minority interest (404,000) 0 (404,000) ------------- ------------- ------------- Net income $ 4,036,000 $ (1,320,000) $ 2,716,000 ============= ============= ============= Net income per limited partnership $ 36 $ 24 unit ============= =============
19 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 1995 PART II - OTHER INFORMATION 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 June 30, 1995. 20 of 21 MRI BUSINESS PROPERTIES FUND, LTD. III - FORM 10-Q - JUNE 30, 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 /S/ ARTHUR N. QUELER ------------------------------------- Secretary/Treasurer and Director (Principal Financial Officer) 21 of 21 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 9-MOS SEP-30-1995 OCT-01-1994 JUN-30-1995 6,465,000 0 728,000 0 0 0 49,146,000 (16,605,000) 39,734,000 0 15,581,000 0 0 0 22,762,000 39,734,000 0 11,763,000 0 8,441,000 0 0 762,000 2,376,000 0 2,376,000 0 0 0 2,376,000 21 21 Receivable includes other assets of $165,000.
-----END PRIVACY-ENHANCED MESSAGE-----