FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
(Mark One)
{ X } QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
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{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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For Quarter Ended September 30, 2002 Commission file number 000-16698
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Brown-Benchmark Properties Limited Partnership
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(Exact Name of Registrant as Specified in its Charter)
Delaware 31-1209608
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
225 East Redwood Street, Baltimore, Maryland 21202
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (410) 727-4083
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N/A
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(Former Name, Former Address, and Former Fiscal Year,
if Changed Since Last Report.)
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
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BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets 1
Statements of Operations 2
Statements of Partners' Capital (Deficit) 3
Statements of Cash Flows 4
Notes to Financial Statements 5-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 9
Item 4. Controls and Procedures 9
Part II. Other Information
Item 1. through Item 6. 9-10
Signatures 11
BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Balance Sheets
September 30,
2002 December 31,
(Unaudited) 2001
---------------- ----------------
Assets
Investment in real estate $ 11,348,954 $ 11,950,233
Cash and cash equivalents 305,106 563,187
Other assets
Accounts receivable, net 19,903 19,135
Prepaid expenses 126,063 15,868
Escrow for real estate taxes 100,822 272,753
Loan fees, less accumulated amortization
of $103,362 and $93,022, respectively - 10,340
---------------- ----------------
Total other assets 246,788 318,096
---------------- ----------------
Total assets $ 11,900,848 $ 12,831,516
================ ================
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable and accrued expenses $ 463,320 $ 635,865
Tenant security deposits 142,259 113,348
Due to affiliates 33,016 8,891
Mortgage loans payable 13,274,225 13,448,501
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Total liabilities 13,912,820 14,206,605
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Partners' Capital (Deficit)
General Partners (253,842) (241,104)
Assignor Limited Partner:
Assignment of Limited Partnership
Interests - $25 stated value per
unit, 500,000 units outstanding (1,673,177) (1,049,082)
Limited Partnership Interests -
$25 stated value per unit,
40 units outstanding (85,053) (85,003)
Subordinated Limited Partners 100 100
---------------- ----------------
Total partners' deficit (2,011,972) (1,375,089)
---------------- ----------------
Total liabilities and partners' deficit $ 11,900,848 $ 12,831,516
================ ================
See accompanying notes to financial statements.
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BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
--------------------------------- ---------------------------------
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
---------------- ---------------- ---------------- ----------------
Revenues
Rental income $ 1,057,489 $ 1,025,232 $ 2,982,455 $ 3,107,126
Interest income 200 3,158 1,534 11,926
---------------- ---------------- ---------------- ----------------
1,057,689 1,028,390 2,983,989 3,119,052
---------------- ---------------- ---------------- ----------------
Expenses
Compensation and benefits 114,210 113,104 310,525 343,197
Utilities 104,870 75,774 237,255 233,814
Property taxes 81,451 92,490 244,795 277,470
Maintenance and repairs 157,094 155,684 329,636 360,045
Property management fee 46,353 46,124 132,976 139,581
Advertising 19,207 9,434 48,716 32,996
Insurance 31,147 8,625 82,589 25,875
Other 20,357 15,614 74,910 51,392
Administrative and professional fees 38,398 12,471 86,839 37,181
Interest expense 268,808 262,034 784,253 788,932
Depreciation of property and equipment 236,782 233,340 704,012 700,020
Amortization of loan fees 0 5,166 10,340 15,498
---------------- ---------------- ---------------- ----------------
1,118,677 1,029,860 3,046,846 3,006,001
---------------- ---------------- ---------------- ----------------
Net income (loss) $ (60,988) $ (1,470) $ (62,857) $ 113,051
================ ================ ================ ================
Net income (loss) per unit of assignee
limited partnership interest - basic $ (0.12) $ (0.00) $ (0.12) $ 0.22
================ ================ ================ ================
See accompanying notes to financial statements.
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BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Statements of Partners' Capital (Deficit)
Nine months ended September 30, 2002 and 2001
(Unaudited)
Assignor Limited Partner
--------------------------------
Assignment
of Limited Limited Subordinated
General Partnership Partnership Limited
Partners Interests Interests Partners Total
--------------- --------------- --------------- -------------- ---------------
Balance at December 31, 2001 $ (241,104) $ (1,049,082) $ (85,003) $ 100 $ (1,375,089)
Net loss (1,257) (61,595) (5) - (62,856)
Distributions to partners (11,481) (562,500) (45) - (574,026)
--------------- --------------- --------------- -------------- ---------------
Balance at September 30, 2002 $ (253,842) $ (1,673,177) $ (85,053) $ 100 $ (2,011,971)
=============== =============== =============== ============== ===============
Balance at December 31, 2000 $ (227,278) $ (371,634) $ (84,949) $ 100 $ (683,761)
Net income 2,261 110,781 9 - 113,051
Distributions to partners (11,481) (562,500) (45) - (574,026)
--------------- --------------- --------------- -------------- ---------------
Balance at September 30, 2001 $ (236,498) $ (823,353) $ (84,985) $ 100 $ (1,144,736)
=============== =============== =============== ============== ===============
See accompanying notes to financial statements.
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BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30, September 30,
2002 2001
---------------- ----------------
Cash flows from operating activities
Net income (loss) $ (62,857) $ 113,051
Adjustments to reconcile net income (loss)
to net cash provided by operating activities
Depreciation of property and equipment 704,012 700,020
Amortization of loan fees 10,340 15,498
Changes in assets and liabilities
(Increase) decrease in accounts receivable (768) 1,929
(Increase) decrease in prepaid expenses (110,195) 4,770
Decrease in escrow for real estate taxes 171,931 41,848
Decrease in accounts payable and accrued expenses (172,545) (13,402)
Increase (decrease) in due to affiliates 24,125 (1,219)
Increase (decrease) in tenant security deposits 28,911 (10,164)
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Net cash provided by operating activities 592,954 852,331
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Cash flows from investing activities-
additions to investment in real estate (102,733) (77,726)
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Cash flows from financing activities
Distributions to partners (574,026) (574,026)
Mortgage loan principal reduction (174,276) (192,492)
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Net cash used in financing activities (748,302) (766,518)
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Net increase (decrease) in cash and cash equivalents (258,081) 8,087
Cash and cash equivalents
Beginning of period 563,187 638,784
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End of period $ 305,106 $ 646,871
================ ================
See accompanying notes to financial statements.
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BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Notes to Financial Statements
September 30, 2002 and 2001
(Unaudited)
NOTE 1 - THE PARTNERSHIP AND BASIS OF PREPARATION
The accompanying financial statements of Brown-Benchmark Properties Limited
Partnership (the "Partnership") do not include all of the information and note
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America.
The unaudited interim financial statements reflect all adjustments which are, in
the opinion of management, necessary for a fair statement of financial position,
operating results and cash flows for the interim periods presented. All such
adjustments are of a normal recurring nature. The unaudited interim financial
information should be read in conjunction with the financial statements
contained in the 2001 Annual Report.
NOTE 2 - INVESTMENT IN REAL ESTATE
Investment in real estate is summarized as follows:
September 30, 2002 December 31, 2001
Land $ 1,257,000 $ 1,257,000
Buildings 21,416,568 21,416,568
Furniture, fixtures
and equipment 2,780,126 2,677,393
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25,453,694 25,350,961
Less accumulated depreciation 14,104,740 13,400,728
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Total $11,348,954 $11,950,233
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NOTE 3 - CASH AND CASH EQUIVALENTS
The Partnership considers all short-term investments with maturities of three
months or less at dates of purchase as cash equivalents. Cash and cash
equivalents consist of cash and money market accounts and are stated at cost,
which approximated market value at September 30, 2002 and December 31, 2001.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Administrative General Partner was reimbursed for certain costs associated
with administering the Partnership, including clerical services, investor
communication services, legal services, and reports and filings made to
regulatory authorities totaling $33,016 and $7,107 during the three months ended
September 30, 2002 and 2001, respectively, and $63,633 and $23,193 for the nine
months ended September 30, 2002 and 2001 respectively.
Benchmark Properties, Inc., an affiliate of the Development General Partner, the
managing agent for the properties through January 7, 2002, earned a management
fee of $3,422 in 2002 and $46,124 and $139,581 for the three and nine months
ended September 30, 2001, respectively. Effective January 7, 2002, the
management agreement was assigned to NHP Management Company in anticipation of
the assignment of the General Partner interest of the Development General
Partner to AIMCO/NHP Properties, Inc. or one of its affiliates. NHP Management
Company earned a management fee of $46,353, and $129,554, for the three and nine
months ended September 30, 2002, respectively.
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BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Notes to Financial Statements
September 30, 2002 and 2001
(Unaudited)
NOTE 5 - MORTGAGE LOANS PAYABLE
The mortgage loans had a stated rate of interest of 7.7% through June 1, 2002
(original maturity). Monthly payments were based on a 25-year amortization
schedule with a balloon payment due at maturity. Effective June 1, 2002 the
lender agreed to extend the loans for one year under terms similar to the
existing loans, except the interest rate was reduced to 7.5%.
The mortgage loan interest paid was $784,253 and $788,932 for the nine months
ended September 30, 2002 and 2001, respectively.
NOTE 6 - NET INCOME PER UNIT OF ASSIGNEE LIMITED PARTNERSHIP INTEREST
Net income per Unit of assignee limited partnership interest is disclosed on the
Statement of Operations and is based upon average units outstanding of 500,000
during the periods ended September 30, 2002 and 2001.
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BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
The Partnership's liquidity is largely dependent on its ability to
maintain reasonably high occupancy levels, achieve rental rate increases as the
markets allow and to control operating expenses. The Partnership has sufficient
liquid assets from its rental revenues to satisfy its anticipated operating
expenditures and debt service obligations in 2002.
On November 13, 2002, the Partnership will make a cash distribution to
its partners totaling $95,671, representing an annualized return of 3% on
invested capital. This distribution will be funded from the operations of the
three apartment properties and working capital reserves available at the end of
the third quarter of the year. The distribution is a decrease from the first two
quarters which represented an annualized return of 6% on invested capital. The
Partnership has decreased the distribution pending the final outcome of a number
of engineering studies of the three properties as a result of the positioning of
the properties for sale. We anticipate that various capital improvements may be
needed but are currently unsure of the extent and costs. Consequently, the
Partnership is taking a prudent and conservative approach to its cash flow
distribution policy.
The Partnership's first mortgage loans with Canada Life Assurance
Company matured June 1, 2002. The Partnership extended the loans for one year.
All terms are essentially the same, except the interest rate decreased from 7.7%
to 7.5%. There will be no prepayment penalty and the loans may be paid off
following a sixty-day written notice to the lender.
The Partnership has been negotiating to sell the portfolio of apartment
properties. Although these negotiations are serious, there are no assurances
that an acceptable contract of sale will be finalized and the properties will be
sold. If an acceptable sale is not achievable, new financing will be secured.
The Partnership does not anticipate an outlay for any significant
capital improvements or repair costs that might adversely impact its liquidity
in 2002.
Results of Operations
Third quarter 2002 revenues increased by $29,299 (3%) when compared to
revenues during the third quarter of 2001. Through the first three quarters of
2002, revenues decreased by $135,063 (4%) when compared to revenues during the
same period in 2001. The decrease in revenues is a result of higher rental
concessions and lower aggregate occupancy levels of the portfolio experienced
mainly in the first half of the year. Management has successfully implemented
various leasing strategies to improve the occupancy of all three properties.
Consequently, revenues have increased in the third quarter of 2002 and we are
optimistic this trend will continue. The primary reasons for the decrease in
occupancy and revenues in the first half of the year were the effects of the
recession, new apartment construction and home buying. A slower economy led to
slower job growth and an increase in the unemployment rate in Ohio. New
apartment construction, primarily in Cincinnati, has caused the apartment rental
market to be very competitive. Low mortgage interest rates have caused
significant home buying by prospective and existing tenants which contributed to
the decrease in occupancy and demand for apartments.
Third quarter operating expenses, excluding interest charges,
depreciation and amortization costs increased $83,767 (16%) versus similar
expenses incurred during the third quarter of 2001. Through the third quarter of
the year, similar expenses have increased $46,690 (3%), versus 2001. As
anticipated, operating costs have increased during the third quarter of 2002 due
primarily to expenses to ready apartments for new tenants and, advertising and
administrative and professional fees related to partnership reporting and sale
activity.
The aggregate net operating income of the Partnership (defined as
revenues less operating expenses excluding interest charges, depreciation and
amortization costs) decreased $181,753 (11%) when compared to the first three
quarters of 2001.
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BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations (continued)
Occupancy levels at Woodhills, in Dayton, Ohio, increased from 90%
through the third quarter of 2001 to 92% for the same period in 2002. The
average rental rate at Woodhills increased from $605 during the third quarter of
2001 to $626 during the third quarter of 2002. However, due to leasing
incentives, rental revenues through the third quarter of 2002 were approximately
$35,000 lower than in 2001.
The average occupancy level at the Deerfield property was 92% through
the first three quarters of 2002. Through the same period in 2001 occupancy
averaged 94%. The average rental rate of approximately $650 at the community in
the third quarter of 2002 remains unchanged from the same period in 2001. Rental
revenues during the first three quarters of 2002 decreased approximately $78,000
when compared to revenues for the first three quarters of 2001.
At Oakbrook, in Columbus, Ohio, occupancy averaged 91% through the
third quarter of 2002 which is a slight decrease from the 92% averaged during
the same period in 2001. Rental rates have increased slightly from $622 during
the third quarter of 2001 to $624 during the third quarter of 2002. Rental
revenues through the third quarter of 2002 decreased by approximately $12,000
when compared to 2001.
As of the end of October 2002, occupancy was 97% at Woodhills and
Deerfield and 96% at Oakbrook. We are optimistic that these trends will continue
along with reduced concession costs and professional fees for the balance of the
year.
Critical Accounting Policies
Critical accounting policies are those that are both important to the
presentation of financial condition and results of operations and require
management's most difficult, complex or subjective judgments. The Partnership's
critical accounting policy relates to the evaluation of impairment of long-lived
assets.
If events or changes in circumstances indicate that the carrying value
of a property to be held and used may be impaired, a recoverability analysis is
performed based on estimated undiscounted cash flows to be generated from the
property in the future. If the analysis indicates that the carrying value is not
recoverable from future cash flows, the property is written down to estimated
fair value and an impairment loss is recognized. If the Partnership decides to
sell a property, it evaluates the recoverability of the carrying amount of the
assets. If the evaluation indicates that the carrying value is not recoverable
from estimated net sales proceeds, the property is written down to estimated
fair value less costs to sell and an impairment loss is recognized. The
estimates of cash flows and fair values of the properties are based on current
market conditions and consider matters such as rental rates and occupancies for
the property and comparable properties, recent sales data for comparable
properties and, where applicable, contracts or the results of negotiations with
purchasers or prospective purchasers. These estimates are subject to revision as
market conditions and the Partnership's assessment of them change.
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BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
PART I. FINANCIAL INFORMATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Partnership has exposure to changing interest rates and is
currently not engaged in hedging activities. Interest on the Partnership's
$13,274,225 mortgage is at a fixed rate of 7.5% and the loans mature on June 1,
2003.
Item 4. Controls and Procedures
Within the 90-day period prior to the filing of this quarterly report,
an evaluation was performed under the supervision and with the participation of
the Partnership's management, including the Chief Executive Officer and Chief
Financial Officer of the general partner, of the effectiveness of the design and
operation of disclosure controls and procedures as defined in Rule 13a-14 of the
rules promulgated under the Securities and Exchange Act of 1934, as amended.
Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the design and operation of these disclosure controls and
procedures were effective. There have been no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Inapplicable
Item 2. Changes in Securities and Use of Proceeds
Inapplicable
Item 3. Defaults upon Senior Securities
Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders
Inapplicable
Item 5. Other Information
Inapplicable
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BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.3 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.4 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
Exhibit 99.5 Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.6 Certification of Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.7 Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.8 Certification of Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
b) Reports on Form 8-K: None
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BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BROWN-BENCHMARK PROPERTIES
LIMITED PARTNERSHIP
DATE: 11/13/02 By: /s/ John M.Prugh
John M. Prugh
President and Director
Brown-Benchmark AGP, Inc.
Administrative General Partner
DATE: 11/12/02 By: /s/ Timothy M.Gisriel
Timothy M. Gisriel
Treasurer
Brown-Benchmark AGP, Inc.
Administrative General Partner
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