10-Q 1 benchmarkfiling10q63002.txt BROWN BENCHMARK 10Q FOR QUARTER ENDING 6/30/02 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

See accompanying notes to financial statements. -1- BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP Statements of Operations (Unaudited)

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)

See accompanying notes to financial statements. -3- BROWN-BENCHMARK PROPERTIES LIMITED PARTNERSHIP Statements of Cash Flows (Unaudited)

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

BROWN BENCHMARK PROPERTIES LIMITED PARTNERSHIP 10-Q