FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(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, 1997
[ ] 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 2-76434
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
(Exact name of small business issuer as specified in its charter)
New York 13-3153572
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
a) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
BALANCE SHEET
(Unaudited)
June 30, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 139,847
Restricted--tenant security deposits 8,052
Deposits with mortgagee 23,843
Deferred charges 77,152
Deferred rental income 11,232
Real and personal property:
Land $ 227,104
Buildings and improvements 2,891,614
3,118,718
Less accumulated depreciation (1,389,695) 1,729,023
$1,989,149
Liabilities and Partners' Equity (Deficit)
Liabilities
Accounts payable $ 4,894
Accrued liabilities:
Interest $ 8,638
Real estate taxes 17,652
Professional fees 12,175 38,465
Deposits payable 8,052
Mortgage payable 1,245,334
Total liabilities 1,296,745
Partners' Equity (Deficit)
General partner's $ (47,273)
Limited partners' (11,500 units issued
and 11,455 units outstanding) 739,677 692,404
$1,989,149
See Notes to Financial Statements
b) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Rental operations $ 89,770 $ 75,058 $175,202 $158,185
Interest income 1,081 2,741 2,882 6,066
Total revenues 90,851 77,799 178,084 164,251
Expenses:
Rental operations 45,975 27,771 71,499 53,104
General and administrative 17,065 17,588 28,327 29,589
Mortgage interest 24,968 25,704 50,225 51,568
Depreciation and amortization 36,542 27,000 74,050 53,961
Total expenses 124,550 98,063 224,101 188,222
Net loss $(33,699) $(20,264) $(46,017) $(23,971)
Net loss allocated to
general partner $ (337) $ (203) $ (460) $ (240)
Net loss allocated to
limited partners (33,362) (20,061) (45,557) (23,731)
$(33,699) $(20,264) $(46,017) $(23,971)
Net loss per limited
partner interest (based on
11,455 units outstanding) $ (2.92) $ (1.75) $ (3.98) $ (2.07)
<FN>
See Notes to Financial Statements
</TABLE>
c) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
(Unaudited)
General Limited
Partner's Partners' Total
Partners' (deficit) equity at
December 31, 1996 $(46,813) $785,234 $738,421
Net loss for the six months
ended June 30, 1997 (460) (45,557) (46,017)
Partners' (deficit) equity at
June 30, 1997 $(47,273) $739,677 $692,404
See Notes to Financial Statements
d) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1997 1996
Cash flows from operating activities:
Net loss $ (46,017) $ (23,971)
Adjustments to reconcile net loss to net
cash (used in) provided by operating
activities:
Depreciation and amortization 74,050 53,961
Deferred rental income (24,232) (2,913)
Change in accounts:
Tenant security deposits 3,622 --
Accounts receivable 7,716 10,250
Deferred charges (7,865) (8,186)
Deposits with mortgagee (13,318) 79,759
Accounts payable (48,608) (3,220)
Accrued real estate taxes 17,652 18,833
Accrued professional fees (11,325) (11,325)
Deposits payable (3,622) --
Other liabilities -- 1,108
Net cash (used in) provided by
operating activities (51,947) 114,296
Cash flows from investing activities:
Additions to real and personal property (46,200) (31,916)
Net cash used in investing activities (46,200) (31,916)
Cash flows from financing activities:
Payments of mortgage note payable (17,526) (16,184)
Distribution to partners -- (114,550)
Net cash used in financing activities (17,526) (130,734)
Net decrease in unrestricted cash and
cash equivalents (115,673) (48,354)
Unrestricted cash and cash equivalents at
beginning of period 255,520 302,236
Unrestricted cash and cash equivalents at end
of period $ 139,847 $ 253,882
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 50,225 $ 51,568
See Notes to Financial Statements
e) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
Notes to Financial Statements
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Drexel Burnham Lambert Real
Estate Associates (the "Partnership") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of DBL Properties Corporation ("DBL" or the "General Partner"),
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three and
six month periods ended June 30, 1997, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1997. For
further information, refer to the financial statements and footnotes thereto
included in the Partnership's annual report on Form 10-KSB for the fiscal year
ended December 31, 1996.
NOTE 2 - GENERAL
The financial statements of the Partnership include the operations of Wendover
Business Park Phase I ("Wendover") which is the only property the Partnership
owns and operates.
Certain reclassifications have been made to the 1996 balances to conform to the
1997 presentation.
NOTE 3 - RELATED PARTY TRANSACTIONS
On June 24, 1997, Insignia Financial Group, Inc., a Delaware corporation
("Insignia"), and IFGP Corporation, a Delaware corporation ("IFGP")
(collectively, the "Buyer"), entered into a Stock Purchase Agreement (the
"Agreement") with The Wynnewood Company, Inc., a New York corporation
("Seller"), DBL, a New York corporation, and William Clements, an individual
and the owner of 100% of the capital stock of Seller ("Clements"). The closing
of the transactions contemplated by the Agreement occurred on June 24, 1997
(the "Closing"). At the Closing, pursuant to the terms and conditions of the
Agreement, the Buyer acquired all of the issued and outstanding stock of DBL.
Upon the Closing, the officers and directors of DBL resigned and Insignia
caused new officers and directors of this entity to be elected.
For the six months ended June 30, 1997 and 1996, the Partnership paid management
fees of $3,147 and $3,091, respectively, to The Wynnewood Company, an affiliate
of the Partnership's General Partner until June 24, 1997 (see discussion above).
The following transactions with affiliates of Insignia were incurred during the
six months ended June 30, 1997 and 1996: property management fees (included in
operating expenses) of $5,581 and $5,151, respectively; partnership
administration fees (included in general and administrative expenses) of $7,500
in both periods; and registrar and transfer services fees (included in general
and administrative expenses) of $2,436 in both periods. Insignia became an
affiliate as of June 24, 1997 (see discussion above).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment property, Wendover Business Park Phase I,
("Wendover"), is a commercial business park of approximately 68,000 square feet
located in Greensboro, North Carolina. The average occupancy for the six months
ended June 30, 1997 and 1996, was 85% and 90%, respectively. The General
Partner attributes the decrease in occupancy to a tenant occupying 3,510 sq. ft.
vacating its space prior to the end of its lease in 1996. It is anticipated
that the space will be leased to a new tenant.
For the six month period ending June 30, 1997, the Partnership realized a net
loss of $46,017 compared to a net loss of $23,971 for the corresponding period
of 1996. The Partnership realized a net loss of $33,699 for the three months
ended June 30, 1997, compared to a net loss of $20,264 for the corresponding
period of 1996. The increase in net loss is attributable to an increase in
depreciation and operating expenses. The increase in depreciation expense is the
result of tenant improvements during the second half of 1996 and first half of
1997. Tenant improvements are depreciated over the life of the respective
tenants' lease. The increase in operating expense is the result of an increase
in maintenance expense attributable to approximately $21,000 of roof repairs in
1997. The increases in expenses is partially offset by an increase in rental
revenue due to the execution of three new leases since June 1996. The new
leases, which affect approximately 36% or 24,343 square feet, were executed at
rental rates which exceeded the expired leases on the same space.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of the investment property to assess the
feasibility of increasing rents, maintaining or increasing occupancy levels and
protecting the Partnership from increases in expense. As part of this plan, the
General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, due to changing market conditions, which
can result in the use of rental concessions and rental reductions to offset
softening market conditions, there is no guarantee that the General Partner will
be able to sustain such a plan.
At June 30, 1997, the Partnership had unrestricted cash and cash equivalents of
$139,847 versus $253,882 at June 30, 1996. Net cash used in operating
activities increased primarily due to no refunds being received from mortgagee
deposit accounts in 1997. Approximately $95,000 was refunded in 1996. Also
contributing to the increase in cash used in operating activities was the timing
of payments of accounts payable. Cash used in investing activities increased
due to an increase in tenant improvements during the six months ended June 30,
1997. Net cash used in financing activities decreased due to no distributions
being made to the partners during the six months ended June 30, 1997.
Management has received bids for major repairs and maintenance to be performed
over the next twelve to eighteen months involving principally roof and parking
lot repairs. Total costs are estimated to be approximately $66,000 of which
$36,000 has been authorized for the current fiscal year. During the six months
ended June 30, 1997, approximately $24,000 was spent on roofing and parking lot
repairs. During the six months ended June 30, 1996, there were no expenditures
for major repairs and maintenance.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Partnership. Such assets are currently thought
to be sufficient for any near-term needs of the Partnership. The mortgage
indebtedness of $1,245,334 requires monthly principal and interest payments and
requires a balloon payment on February 1, 2001, at which time the property will
either be refinanced or sold. Distributions of $114,550 or $10.00 per limited
partner unit were made to the limited partners during the six months ended June
30, 1996. There have been no distributions made in 1997.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K: A Form 8-K dated June 24, 1997, was filed
reporting the change in control of the Registrant.
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.
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
By: DBL Properties Corporation
Its General Partner
By: /s/ William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
Date: August 5, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Drexel
Burnham Lambert Real Estate Associates 1997 Second Quarter 10-QSB and is
qualified in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000700951
<NAME> DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 139,847
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 3,118,718
<DEPRECIATION> 1,389,695
<TOTAL-ASSETS> 1,989,149
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 1,245,334
0
0
<COMMON> 0
<OTHER-SE> 692,404
<TOTAL-LIABILITY-AND-EQUITY> 1,989,149
<SALES> 0
<TOTAL-REVENUES> 178,084
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 224,101
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,225
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (46,017)
<EPS-PRIMARY> (3.98)
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
</FN>
</TABLE>
