-----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, MRXNiIDTmD5fPsFgLmoF8vAKzCi31a4YSknmkhxlIltip69ZP52JeGTP1Yd/oKbP zXDksdWksCEWfYsD0H+xzA== 0000821365-96-000003.txt : 19960517 0000821365-96-000003.hdr.sgml : 19960517 ACCESSION NUMBER: 0000821365-96-000003 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: LUTHERAN BROTHERHOOD REALTY FUND I CENTRAL INDEX KEY: 0000821365 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 943046442 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17617 FILM NUMBER: 96565238 BUSINESS ADDRESS: STREET 1: 625 FOURTH AVE SOUTH CITY: MINNEAPOLIS STATE: MN ZIP: 55415 BUSINESS PHONE: 6123407215 MAIL ADDRESS: STREET 1: 625 FOURTH AVENUE SOUTH CITY: MINNEAPOLIS STATE: MN ZIP: 55415 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (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, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-17617 LUTHERAN BROTHERHOOD REALTY FUND I, a California limited partnership (Exact name of registrant as specified in its charter) California 94-3046442 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 625 Fourth Avenue South Minneapolis, Minnesota 55415 (Address of principal executive offices) (612) 339-8091 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____ PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS In the opinion of Lutheran Brotherhood Real Estate Products Company (the "General Partner"), the General Partner of Lutheran Brotherhood Realty Fund I, a California limited partnership (the "Partnership"), all adjustments necessary for a fair presentation of the Partnership's results have been made in the following financial statements for the interim periods presented. All such adjustments are of a recurring nature. However, such financial statements are unaudited and subject to any year-end adjustments that may be necessary. LUTHERAN BROTHERHOOD REALTY FUND I BALANCE SHEET (thousands) (Unaudited) March 31, December 31, 1996 1995 ----------- ------------ ASSETS - ------ Real estate investment, at cost: Land $ 636 $ 636 Buildings 1,612 1,612 ------ ------ 2,248 2,248 Less: Accumulated depreciation (332) (319) ------ ------ 1,916 1,929 Investments in joint ventures 2,165 2,105 Cash and cash equivalents 650 610 Receivables from affiliates 6 Deferred charges (net) and other assets 48 56 ------ ------ Total Assets $4,779 $4,706 ====== ====== LIABILITIES AND PARTNERS' EQUITY - -------------------------------- Payables to affiliates $ 44 $ Property taxes payable 32 Other liabilities 7 2 ------ ------ Total Liabilities 83 2 ------ ------ Partners' Equity Limited Partners' - 63,803 units outstanding in 1996 and 1995 4,684 4,693 General Partner 12 11 ------ ------ Total Partner's Equity 4,696 4,704 ------ ------ Total Liabilities and Partners' $4,779 $4,706 Equity ====== ====== See accompanying notes. LUTHERAN BROTHERHOOD REALTY FUND I STATEMENT OF OPERATIONS (Unaudited) (thousands except per share amounts) Three Months Ended March 31, 1996 1995 -------------------- Revenue: Rental $ 132 $ 133 Interest 7 7 Equity in Joint Venture Capital 48 49 ------- ------- Total revenue 187 189 ------- ------- Expenses: Property taxes 32 32 Management fee 5 5 Other property expenses 15 12 Depreciation and amortization 23 22 Administrative 56 40 ------- ------- Total expenses 131 111 ------- ------- Net income $ 56 $ 78 ======== ======== Net income per weighted average number of limited partnership units outstanding $ .88 $ 1.22 ======== ======== Weighted average number of limited partnership units outstanding 63,803 63,803 ======== ======== Distributions per weighted average limited partnership units outstanding $ 1.00 $ 1.00 ======= ======== See accompanying notes. LUTHERAN BROTHERHOOD REALTY FUND I STATEMENT OF PARTNERS' EQUITY FROM DECEMBER 31, 1993 THROUGH MARCH 31, 1996 (in thousands) Total General Limited Partners' Partner Partners Equity ------- -------- -------- Balance at December 31, 1993 5 4,633 4,638 Net income 3 309 312 Distributions to Limited Partners (255) (255) ----- ------ ------ Balance at December 31, 1994 8 4,687 4,695 Net income 3 261 264 Distributions to Limited Partners (255) (255) ----- ------ ------ Balance at December 31, 1995 11 4,693 4,704 Net income 1 55 56 Distributions to Limited Partners (64) (64) ----- ------ ------ Balance at March 31, 1996 $ 12 $ 4,684 $ 4,696 ===== ======= ======= See accompanying notes. LUTHERAN BROTHERHOOD REALTY FUND I STATEMENT OF CASH FLOW (Unaudited) (thousands) Three Months Ended March 31, 1996 1995 ----------------- Net Income $ 56 $ 78 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 23 22 Distributions from joint ventures 38 29 Equity in joint venture earnings (48) (49) Changes in assets and liabilities: Due from affiliates 6 Other assets (2) (9) Payable to affiliates 44 1 Property taxes payable 32 32 Other accrued operating expenses 5 4 ----- ----- Net cash provided by operating activities 154 108 ----- ----- Cash flows from investing activities: Capital improvements (3) Tenant reimbursements - capital improvements 23 Capital Infusion to Minnetonka 225 (30) Capital Infusion to Minnetonka 300/400 (20) 0 ----- ----- Net cash provided by (used in) investing activities (50) 20 ----- ----- Cash flows from financing activities: Distributions to partners (64) (64) ----- ----- Net cash used in financing activities (64) (64) ----- ----- Net increase (decrease) in cash and cash equivalents 40 64 Cash and cash equivalents at beginning of period 610 521 ----- ----- Cash and cash equivalents at end of period $ 650 $ 585 ===== ===== Supplemental Schedules: Interest paid $ 0 $ 0 Income taxes paid $ 0 $ 0 See accompanying notes. Note 1. Organization and Partnership Matters Termination of the Offering The Partnership's offering expired on February 11, 1989, having raised a total of $6,365,000 in contributed capital (including Initial Limited Partner's Contribution) from which the Partnership netted $5,719,000 after underwriting commissions and registration expenses. Note 2. Net Income Per Partnership Unit The Partnership Agreement of the Partnership ("Partnership Agreement") provides for net income and net losses from operations for financial reporting purposes to be allocated 99% to the Limited Partners and 1% to the General Partner. Net income per weighted average number of Limited Partnership Units is computed by dividing net income allocated to the Limited Partners by the weighted average number of Limited Partnership Units outstanding. Per unit information has been computed based on 63,803 weighted average units outstanding at both March 31, 1996 and March 31, 1995. Note 3. Real Estate Investments On September 29, 1989, the Partnership restructured (the "Restructure") its investment portfolio by consummating the following agreements entered into as of June 30, 1989. The Restructure completely eliminated the Partnership's debt. Worthington Green Associates Pursuant to a joint venture agreement, Lutheran Brotherhood ("LB"), the parent of the General Partner contributed $6,161,595 cash for an 84% interest in the joint venture. The Partnership deeded the Village at Worthington Green ("Village") for a 16% interest in the joint venture and $6,161,595 cash. On December 1, 1989, the agreement was revised to increase the Partnership's interest in the joint venture to 19.3% in exchange for an additional $200,000 in cash. Northwest Distribution Center Pursuant to a purchase agreement with LB which was assigned to LB from the General Partner, the Partnership purchased the Northwest Distribution Center ("NWDC"), a bulk warehouse/distribution center located in New Hope, Minnesota, for $2,256,750. Minnetonka 225 Associates Pursuant to a joint venture agreement with LB, the Partnership contributed $606,430 cash for a 33% interest in a joint venture which owns and operates a multi-tenant office/warehouse facility located in Minnetonka, Minnesota. Minnetonka 300 & 400 Associates Pursuant to a joint venture agreement with LB, the Partnership contributed $891,089 cash for a 33% interest in a joint venture which owns and operates two multi-tenant office/warehouse facilities located in Minnetonka, Minnesota. At March 31, 1996 the assets and liabilities of the joint ventures were as follows (in thousands): Minnetonka Minnetonka Worthington 225 300 & 400 Green Associates Associates Associates ---------- ---------- ---------- Land $ 369 $ 687 $ 837 Property less depreciation 1,404 1,818 3,965 Deferred charges (net) and other assets 218 650 1,099 ------- ------ ------ 1,991 3,155 5,901 Liabilities (36) (145) (48) ------- ------ ------ Net assets $1,955 $3,010 $5,853 ====== ====== ====== Revenues and expenses of the joint ventures for the three month periods ending March 31, 1996 and 1995 were as follows (in thousands): Minnetonka Minnetonka Worthington 225 300 & 400 Green Associates Associates Associates ---------- ---------- ---------- March 31, March 31, March 31, 1996 1995 1996 1995 1996 1995 ---- ---- ---- ---- ---- ---- Revenues $ 117 $ 109 $ 152 $ 151 $ 296 $ 282 Property taxes (33) (12) (34) (34) (35) (34) Management fee (5) (5) (6) (7) (10) (7) Other operating expenses (13) (22) (30) (32) (76) (80) Depreciation (21) (18) (44) (39) (70) (65) ----- ---- ---- ---- ---- ---- Net income 45 52 38 39 105 96 Partnership interest 33.3% 33.3% 33.3% 33.3% 19.3% 19.3% ----- ----- ----- ----- ----- ----- Partnership income $ 15 $ 17 $ 13 $ 13 $ 20 $ 19 ===== ===== ===== ===== ===== ===== Note 4. Commitments, Contingencies, and Subsequent Events Commitments Under the Partnership Agreement, the Partnership is required to maintain reasonable reserves for normal repairs, replacements, working capital, and contingencies in an amount equal to at least 3% of Capital Contributions. In the event expenditures are made from these reserves, a portion of the cash generated from operating revenue shall be allocated to such reserves to the extent necessary to maintain the foregoing level. Reserves, including cash on hand and short term securities, at March 31, 1996 and December 31, 1995 were in excess of 3% of Capital Contributions. Pending Litigation The Partnership is not a party to, nor is any of the Partnership's property the subject of, any material legal proceedings. Subsequent Distribution Subsequent to quarter end, but as of March 31, 1996, the Partnership paid distributions totaling $63,803, to the Limited Partners at the rate of 4% per annum on the Limited Partners' invested capital. Note 5. Fees and Reimbursements For the three months ended March 31, 1996 and 1995, the Partnership was allocated $38,499 and $20,002, respectively, in partnership administrative expenses by the General Partner and other affiliated entities. Note 6. Recently Issued Accounting Standards In March, 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for Impairment of Long- Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS 121 establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. The Partnership has adopted SFAS 121 by reviewing long-lived assets to be held and used for impairment as of March 31, 1996. As a result of this review, no material adjustments have been made to the carrying value of the Partnership's real estate investments. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION The Partnership was formed to engage in the business of acquiring and operating income-producing real properties and holding the properties for investment. The Partnership's public offering commenced on December 4, 1987, and expired on February 11, 1989. The offering raised a total of $6,365,000 in contributed capital (including the Initial Partners' contributions) from which the Partnership netted $5,719,000 after underwriting and registration expenses. The General Partner intends to seek limited partner approval of a liquidation proposal to begin the process of selling the Partnership's properties and winding up the Partnership. The General Partner has listed the Partnership's properties with real estate agencies to test the feasibility of such sales. There can be no assurance, however, that following limited partner approval of the liquidation proposal, the General Partner will be able to accomplish such sales during 1996 or thereafter. Currently, the Partnership owns a warehouse/distribution center in New Hope, Minnesota and is a co-venturer in three joint ventures holding four residential and commercial properties. See Part I, Item 1, Note 3, Real Estate Investments, for a description of the September, 1989 restructure of the Partnership's investment portfolio pursuant to which the Partnership acquired its interest in these properties. RESULTS OF OPERATIONS Gross rental revenues for NWDC were relatively flat because occupancy levels were at 100% during the first quarters of both 1996 and 1995. Administrative expenses increased 40% to $56,000 during the first quarter of 1996 compared to $40,000 during the first quarter of 1995 due to the General Partner's efforts to determine the feasibility of liquidation of the Partnership. The Partnership's share of Joint Venture income decreased slightly to $48,000 during the first quarter of 1996 from $49,000 during the first quarter of 1995. The Partnership's share of income from the Minnetonka 225 Joint Venture was $15,000 during the first quarter of 1996 compared to $17,000 during the same period in 1995. Rental revenues rose from $109,000 to $117,000 because of slight increases in occupancy levels and rental rates during the first quarter of 1996 compared to the first quarter of 1995. This improvement was offset by an increase in property tax expense to $33,000 during the first quarter of 1996 from $12,000 during the first quarter of 1995. The tax accrual was underestimated in 1995 and a prior year adjustment was taken in 1995 for disputed taxes. Other operating expenses decreased 41% primarily due to roof repair expenses incurred during the first quarter of 1995. Gross rental revenue for Minnetonka 300/400 remained flat during the first quarter of 1996 compared to the same period in 1995. Depreciation and amortization expense rose 13% during the same period due to the amortization of tenant improvements for Minnetonka 300 that were completed in June of 1995. Other operating expenses declined slightly so that overall the Partnership's share of net income was $13,000 for both the first quarter of 1996 and 1995. Occupancy levels at Worthington Green remained at 96% during both periods. Gross rental revenues increased 5% due to slight increases in rental rates. Depreciation expense increased 8% as a result of a $30,000 roof replacement completed in November of 1995. Overall, the Partnership's share of net income increased to $20,000 during the first quarter of 1996 compared to $19,000 during the first quarter of 1995. INFLATION The moderate inflation experienced in 1995 had little effect on the Partnership's operations. It is anticipated that during 1996, inflation will continue at a moderate level and that the Partnership's operations will not be significantly influenced by inflation. PROPERTY HIGHLIGHTS Northwest Distribution Center In general, the industrial-bulk warehouse market continues to show strength, with occupancies exceeding 95% in the Twin Cities market area. Rental rates have been strong and this is prompting the return of semi-speculative real estate development, a situation that supports the General Partner's consideration of liquidating the Partnership. The property continues to be 100% occupied by two tenants, with the next lease expiration during June of 1997 for 20,000 square feet. The Village at Worthington Green Occupancy for the first three months of 1996 averaged approximately 96%, which is slightly lower than during first quarter 1995. We believe this downward movement is only temporary and the property should continue to lease well. Minnetonka Industrial Properties The market for industrial-office/warehouse buildings such as the Minnetonka properties remained fairly healthy through March of 1996. Much development is occurring in the marketplace because existing occupancy for office/warehouse buildings is at an all-time high, exceeding 95%. We can expect to see the effects of the new competition on the Minnetonka Properties as we negotiate lease renewals during late 1996 and early 1997. Minnetonka 225 is currently 100% occupied, with the next lease renewal in December of 1997 for 8% of the property. Minnetonka 300 is also currently 100% occupied, with the most recent lease renewal as of February 1996 for 2% of the property. Management has not renewed this lease yet due to the probability of an adjacent tenant wanting to expand into this smaller area in connection with a separate lease renewal. Minnetonka 400 was 100% occupied as of March 31, 1996, after having been 78% occupied during the last half of 1995. Management negotiated a short-term lease for the balance of space in this building during the quarter as part of an overall long-term lease we are negotiating for the entire facility. The next lease expiration is December of 1996 for 76% of the property and as noted above, we are actively seeking a lease renewal and/or new tenants for the property at this time. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1996, the Partnership held cash and cash equivalents of $650,000. The Partnership improved its cash position by $40,000 during the quarter as a result of net cash provided from operating activities of $154,000 offset by cash used for investing activities of $50,000 and distributions to Partners of $64,000. The Partnership has sufficient cash and cash equivalents to meet its 3% required reserve. Cash provided from operations in 1996 is expected to be sufficient to satisfy substantially all of the Partnership's working capital and normal capital expenditure needs. During the first quarter, the Partnership's share of capital expenditures for the Joint Venture properties was approximately $12,000. Additional capital expenditures are anticipated during the remainder of 1996 which are expected to total $139,000. However, cash provided from operations in 1996 may not be sufficient to provide anticipated distributions to the Limited Partners for the entire year. The Partnership may borrow funds from the General Partner to provide cash for distributions to Limited Partners but it is not anticipated that such borrowing will occur. The Partnership will not acquire additional properties or additional interests in joint ventures which own properties. During the holding period of the Partnership's properties, cash flow from operations is expected to contribute to the liquidity of the Partnership and to generate current income. The General Partner, however, intends to seek limited partner approval of a liquidation proposal to begin the process of selling the Partnership's properties and winding up the Partnership. The General Partner has listed the Partnership's properties with real estate agencies to test the feasibility of such sales. There can be no assurance, however, that following limited partner approval of the liquidation proposal, the General Partner will be able to accomplish such sales during 1996 or thereafter. PART II. Other Information ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) No exhibits are filed as part of this report. (b) There were no reports on Form 8-K filed during the quarter ended March 31, 1996. 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. LUTHERAN BROTHERHOOD REALTY FUND I, a California limited partnership By: Lutheran Brotherhood Real Estate Products Company, Its General Partner Date: May 15, 1996 By: /S/ Mitchell F. Felchle ------------------------------- Mitchell F. Felchle President Date: May 15, 1996 By: /S/ Anita J. T. Young ------------------------------- Anita J. T. Young Treasurer (Chief Financial Officer) INDEX TO EXHIBIT EXHIBIT NUMBER PAGE IN REGISTRATION STATEMENT 27 Financial Data Schedule 10 EX-27 2
5 This schedule contains summary financial information extracted from Lutheran Brotherhood Realty Fund I Form 10-Q for the Quarter ended March 31, 1996 and is qualified in its entirety by reference to such Form 10-Q. 1,000 3-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 650 0 0 0 0 650 2248 332 4779 83 0 0 0 0 4696 4779 132 187 75 75 0 0 0 56 0 56 0 0 0 56 0 0
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