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 June 30, 2002
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended June 30, 2002 Commission file number 000-16698
Brown-Benchmark Properties Limited Partnership
(Exact Name of Registrant as Specified in its Charter)
Delaware 31-1209608
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
225 East Redwood Street, Baltimore, Maryland 21202
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (410) 727-4083
N/A
(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
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
Part II. Other Information
Item 1. through Item 6. 9
Signatures 10
BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Balance Sheets
June 30,
2002 December 31,
(Unaudited) 2001
---------------- ----------------
Assets
Investment in real estate $ 11,522,650 $ 11,950,233
Cash and cash equivalents 501,515 563,187
Other assets
Accounts receivable, net 10,478 19,135
Prepaid expenses 110,347 15,868
Escrow for real estate taxes 99,404 272,753
Loan fees, less accumulated amortization
of $103,362 and $93,022, respectively - 10,340
---------------- ----------------
Total other assets 220,229 318,096
---------------- ----------------
Total assets $ 12,244,394 $ 12,831,516
================ ================
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable and accrued expenses $ 513,550 $ 635,865
Tenant security deposits 137,794 113,348
Due to affiliates 13,881 8,891
Mortgage loans payable 13,338,811 13,448,501
---------------- ----------------
Total liabilities 14,004,036 14,206,605
---------------- ----------------
Partners' Capital (Deficit)
General Partners (248,795) (241,104)
Assignor Limited Partner:
Assignment of Limited Partnership
Interests - $25 stated value per
unit, 500,000 units outstanding (1,425,914) (1,049,082)
Limited Partnership Interests -
$25 stated value per unit,
40 units outstanding (85,033) (85,003)
Subordinated Limited Partners 100 100
---------------- ----------------
Total partners' deficit (1,759,642) (1,375,089)
---------------- ----------------
Total liabilities and partners' deficit $ 12,244,394 $ 12,831,516
================ ================
See accompanying notes to financial statements.
-1-
BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
--------------------------------- ---------------------------------
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
---------------- ---------------- ---------------- ----------------
Revenues
Rental income $ 943,133 $ 1,044,692 $ 1,924,966 $ 2,081,893
Interest income 442 3,820 1,334 8,769
---------------- ---------------- ---------------- ----------------
943,575 1,048,512 1,926,300 2,090,662
---------------- ---------------- ---------------- ----------------
Expenses
Compensation and benefits 92,235 117,282 196,315 230,092
Utilities 62,620 64,085 132,385 158,040
Property taxes 66,731 92,490 163,344 184,980
Maintenance and repairs 128,595 134,554 172,542 204,361
Property management fee 42,441 47,014 86,623 93,456
Advertising 19,376 12,273 29,509 23,562
Insurance 31,452 8,625 51,442 17,250
Other 36,435 13,701 54,552 35,780
Administrative and professional fees 21,739 7,332 48,442 24,710
Interest expense 259,483 262,975 515,445 526,898
Depreciation of property and equipment 233,890 233,340 467,230 466,680
Amortization of loan fees 4,654 5,166 10,340 10,332
---------------- ---------------- ---------------- ----------------
999,651 998,837 1,928,169 1,976,141
---------------- ---------------- ---------------- ----------------
Net income (loss) $ (56,076) $ 49,675 $ (1,869) $ 114,521
================ ================ ================ ================
Net income (loss) per unit of assignee
limited partnership interest - basic $ (0.11) $ 0.10 $ (0.00) $ 0.22
================ ================ ================ ================
See accompanying notes to financial statements.
-2-
BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Statements of Partners' Capital (Deficit)
Six months ended June 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 (37) (1,832) (0) - (1,869)
Distributions to partners (7,654) (375,000) (30) - (382,684)
--------------- --------------- --------------- -------------- ---------------
Balance at June 30, 2002 $ (248,795) $ (1,425,914) $ (85,033) $ 100 $ (1,759,642)
=============== =============== =============== ============== ===============
Balance at December 31, 2000 $ (227,278) $ (371,634) $ (84,949) $ 100 $ (683,761)
Net income 2,290 112,222 9 - 114,521
Distributions to partners (7,654) (375,000) (30) - (382,684)
--------------- --------------- --------------- -------------- ---------------
Balance at June 30, 2000 $ (232,642) $ (634,412) $ (84,970) $ 100 $ (951,924)
=============== =============== =============== ============== ===============
See accompanying notes to financial statements.
-3-
BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30, June 30,
2002 2001
---------------- ----------------
Cash flows from operating activities
Net income (loss) $ (1,869) $ 114,521
Adjustments to reconcile net income (loss)
to net cash provided by operating activities
Depreciation of property and equipment 467,230 466,680
Amortization of loan fees 10,340 10,332
Changes in assets and liabilities
Decrease (increase) in accounts receivable 8,657 (6,617)
Increase in prepaid expenses (94,479) (3,019)
Decrease in escrow for real estate taxes 173,349 2,399
(Decrease) increase in accounts payable and accrued expenses (122,315) 30,080
Increase (decrease) in due to affiliates 4,990 (3,695)
Increase (decrease) in tenant security deposits 24,446 (6,223)
---------------- ----------------
Net cash provided by operating activities 470,349 604,458
---------------- ----------------
Cash flows from investing activities-
additions to investment in real estate (39,647) (51,087)
---------------- ----------------
Cash flows from financing activities
Distributions to partners (382,684) (382,684)
Mortgage loan principal reduction (109,690) (127,385)
---------------- ----------------
Net cash used in financing activities (492,374) (510,069)
---------------- ----------------
Net increase (decrease) in cash and cash equivalents (61,672) 43,302
Cash and cash equivalents
Beginning of period 563,187 638,784
---------------- ----------------
End of period $ 501,515 $ 682,086
================ ================
See accompanying notes to financial statements.
-4-
BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Notes to Financial Statements
June 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:
June 30, 2002 December 31, 2001
Land $ 1,257,000 $ 1,257,000
Buildings 21,423,553 21,416,568
Furniture, fixtures
and equipment 2,710,054 2,677,393
----------- -----------
25,390,607 25,350,961
Less accumulated depreciation 13,867,957 13,400,728
----------- -----------
Total $11,522,650 $11,950,233
=========== ===========
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 June 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, and reports and filings made to regulatory authorities
totaling $13,880 and $13,788 during the three months ended June 30, 2002 and
2001, respectively, and $30,617 and $27,339 for the six months ended June 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 $47,014 and $93,456 for the three and six months ended
June 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 $42,441, and $83,201, for the three and six months ended June
30, 2002, respectively.
5
BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Notes to Financial Statements
June 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
existing lender agreed to extend the loan for one year under terms similar to
the existing loan, except the interest rate was reduced to 7.5%.
The mortgage loan interest paid was $512,320 and $526,622 for the six months
ended June 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 June 30, 2002 and 2001.
6
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 August 12, 2002, the Partnership will make a cash distribution to
its partners totaling $191,342, representing an annualized return of 6% 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 second quarter of the year.
The Partnership's first mortgage loan with Canada Life Assurance
Company matured June 1, 2002. The Partnership extended the loan 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 loan may be paid off
following a sixty-day written notice to the lender.
The Partnership is currently 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
Second quarter 2002 revenues decreased by $104,937 (10%) when compared
to revenues during the second quarter of 2001. Through the first half of 2002,
revenues decreased by $164,362 (8%) when compared to revenues during the first
half of 2001. The decreases in revenues are a result of higher rental
concessions and lower aggregate occupancy levels of the portfolio. The primary
reasons for the decrease in occupancy and revenues are the effects of the
recession, new apartment construction and home buying. A slower economy has led
to slower job growth and an increase in the unemployment rate in Ohio from 3.9%
in March 2001 to 5.6% in June 2002. 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 has contributed to the decrease in occupancy and demand
for apartments.
Second quarter operating expenses, excluding interest charges,
depreciation and amortization costs increased $4,268 (less than 1%) versus
similar expenses incurred during the second quarter of 2001. Through the first
half of the year, similar expenses have decreased $37,077 (4%), versus 2001.
Operating costs are expected to rise modestly during the second half of the year
due primarily to an increase in repairs and maintenance expenses, including
expenses to ready apartments for new tenants.
Due to the decrease in occupancy and revenues through the first half of
2002, the aggregate net operating income of the Partnership (defined as revenues
less operating expenses excluding interest charges, depreciation and
amortization costs) decreased $127,285 (11%) when compared to the first half of
2001.
Occupancy levels at Woodhills, in Dayton, Ohio, decreased from 91%
during the first half of 2001 to 89% during the first half of 2002. Rental
revenues through the first half of 2002 were approximately $46,000 lower than
those received in 2001. The average rental rate at Woodhills increased by $6
from $606 during the second quarter of 2001 to $612 during the second quarter of
2002.
7
BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations (continued)
The average occupancy level at the Deerfield property averaged 95%
through the first half of 2001. Through the same period in 2002 occupancy
averaged 90%. The average rental rate at the community has decreased from
approximately $646 during the second quarter of 2001 to $642 during the second
quarter of 2002. Rental revenues received during the first half of 2002
decreased approximately $71,000 when compared to revenues received during the
first half of 2001. The overall apartment vacancy rate in Greater Cincinnati as
of June 2002 is approximately 9%.
At Oakbrook, in Columbus, Ohio, occupancy averaged 88% through the
first two quarters of 2002 which is a decrease from the 93% averaged during the
same period in 2001. Rental rates have decreased from $616 during the second
quarter of 2001 to $591 during the second quarter of 2002. Rental revenues
through the first half of 2002 decreased by approximately $41,000 when compared
to 2001.
Management has successfully implemented various leasing strategies to
improve the occupancy of all three properties. As of the first week of July
2002, occupancy at Woodhills was 96%, at Deerfield it was 93% and at Oakbrook it
was 98%. We are optimistic that these trends will continue.
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.
Consent to Transfer of General Partner Interest
The Partnership has received the Unitholders approval to the assignment
of the entire General Partnership interest of the Development General Partner to
AIMCO/NHP Properties Inc. or one its affiliates. At the date of this filing the
assignment of the General Partner interest held by the Development General
Partner has not been consummated. It remains uncertain at this time whether or
not the General Partnership interest held by the Development General Partner
will be assigned.
8
BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP
PART I. FINANCIAL INFORMATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Inapplicable
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
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.
b) Reports on Form 8-K: None
9
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: 08/6/02 By: /s/ John M.Prugh
John M. Prugh
President and Director
Brown-Benchmark AGP, Inc.
Administrative General Partner
DATE: 08/6/02 By: /s/ Timothy M.Gisriel
Timothy M. Gisriel
Treasurer
Brown-Benchmark AGP, Inc.
Administrative General Partner
10