FORM 10-QSB--QUARTERLY OR TRANSITIONAL 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, 1998
[ ] 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 (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29609
(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)
(in thousands, except unit data)
June 30, 1998
Assets
Cash and cash equivalents $ 110
Receivables and deposits 28
Other assets 85
Investment property:
Land $ 227
Building and related personal property 2,951
3,178
Less accumulated depreciation (1,526) 1,652
$ 1,875
Liabilities and Partners' Capital (Deficit)
Liabilities
Tenant security deposit liabilities $ 7
Accrued property taxes 18
Other liabilities 28
Mortgage note payable 1,208
Partners' Capital (Deficit)
General partner's $ (49)
Limited partners' (11,455 units issued and
outstanding) 663 614
$ 1,875
See Accompanying Notes to Financial Statements
b)
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
Revenues:
Rental income $ 93 $ 90 $ 194 $ 175
Interest income 1 1 2 3
Total revenues 94 91 196 178
Expenses:
Operating 30 40 80 60
General and administrative 13 17 26 28
Depreciation 36 32 71 63
Interest 27 27 54 55
Property taxes 9 9 18 18
Total expenses 115 125 249 224
Net loss $ (21) $ (34) $ (53) $ (46)
Net loss allocated to general
partner (1%) $ -- $ -- $ (1) $ --
Net loss allocated to limited
partners (99%) (21) (34) (52) (46)
$ (21) $ (34) $ (53) $ (46)
Net loss per limited
partnership unit $(1.83) $(2.97) $ (4.54) $(4.02)
See Accompanying Notes to Financial Statements
c)
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 11,500 $ 1 $11,500 $ 11,501
Partners' (deficit) capital
at December 31, 1997 11,455 $ (48) $ 715 $ 667
Net loss for the six months
ended June 30, 1998 -- (1) (52) (53)
Partners' (deficit) capital
at June 30, 1998 11,455 $ (49) $ 663 $ 614
See Accompanying Notes to Financial Statements
d)
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (53) $ (46)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation 71 63
Amortization of lease commissions and loan costs 12 11
Rent abatement -- (22)
Changes in accounts:
Receivables and deposits (9) (2)
Other assets (10) (9)
Accounts payable (3) (49)
Tenant security deposit liabilities (1) (4)
Accrued property taxes 18 18
Other liabilities (5) (11)
Net cash provided by (used in) operating
activities 20 (51)
Cash flows used in investing activities:
Property improvements and replacements (20) (46)
Cash flows used in financing activities:
Payments of mortgage note payable (19) (18)
Net decrease in cash and cash equivalents (19) (115)
Cash and cash equivalents at beginning of period 129 255
Cash and cash equivalents at end of period $ 110 $ 140
Supplemental disclosure of cash flow information:
Cash paid for interest $ 49 $ 50
<FN>
See Accompanying Notes to Financial Statements
</FN>
</TABLE>
e)
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - 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, 1998, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1998. 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, 1997.
Certain reclassifications have been made to the 1997 balances to conform to the
1998 presentation.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
The Partnership Agreement provides for certain payments to affiliates for
services and as reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership.
On June 24, 1997, Insignia Financial Group, Inc. ("Insignia"), a Delaware
corporation, and IFGP Corporation, a wholly-owned subsidiary of Insignia and a
Delaware corporation (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. 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.
The following transactions with The Wynnewood Company during the six month
period ended June 30, 1997, and with affiliates of Insignia during the six month
period ended June 30, 1998, were incurred (in thousands):
1998 1997
Property management fees (included in operating
expense) $ 9 $ 3
Reimbursement for services of affiliates (included in
general and administrative expense) 14 --
Prior to Insignia's affiliation on June 24, 1997, affiliates of Insignia
provided property management and partnership administrative services for the
Partnership.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in
Insignia Properties Trust ("IPT"), an affiliate of Insignia, with Apartment
Investment and Management Company ("AIMCO"), a publicly traded real estate
investment trust. The closing, which is anticipated to happen in September or
October of 1998, is subject to customary conditions, including government
approvals and the approval of Insignia's shareholders. If the closing occurs,
AIMCO will then control the General Partner.
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, 1998 and 1997, was 87% and 85%, respectively.
The Partnership realized net losses of approximately $53,000 and $46,000 for the
six month periods ended June 30, 1998 and 1997, respectively. The increase in
net loss is primarily attributable to the increase in operating expenses.
Included in operating expense for the six month period ended June 30, 1998, is
approximately $44,000 of major repairs and maintenance, versus approximately
$23,000 for the corresponding period in 1997. The 1998 costs consist of
exterior painting and parking lot repairs. The 1997 costs consist of roof
repairs. Partially offsetting the increase in operating expense was an increase
in rental income. The increase in rental income is attributable to improved
occupancy at the property, as noted above, and increased rental rates. For the
three months ended June 30, 1998 and 1997, the Partnership realized net losses
of approximately $21,000 and $34,000, respectively. The decrease in net loss is
attributable to the above mentioned improvement in rental income and a decline
in operating expense. The decrease in operating expense is the result of a
decline in repairs and maintenance for the quarter. The decrease is due to the
timing of projects being completed at the property. The parking lot repairs
were completed during the first quarter of 1998 versus roof repairs being
completed during the second quarter of 1997.
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, 1998, the Partnership held cash and cash equivalents of
approximately $110,000 as compared to approximately $140,000 at June 30, 1997.
The decrease in cash and cash equivalents for the six month periods ended June
30, 1998 and 1997, was approximately $19,000 and $115,000, respectively. Net
cash provided by operating activities increased primarily due to the timing of
payments on accounts payable. Also contributing to the increase in operating
cash flow was an increase in rental collections as a result of an increase in
rental income and a decrease in rent abatements. Net cash used in investing
activities declined due to decreased spending on property improvements and
replacements. Net cash used in financing activities remained constant.
During 1997, management commenced with a major repair and maintenance project to
be completed over the next twelve months involving principally roof and parking
lot repairs. Total costs are estimated to be approximately $88,000 of which
$50,000 has been authorized for the current fiscal year. During the six months
ended June 30, 1998, approximately $32,000 was spent on parking lot repairs.
During the six months ended June 30, 1997, approximately $21,000 was spent on
roof repairs and $2,000 was spent on parking lot repairs related to the project.
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 approximately $1,208,000 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. Future cash distributions will
depend on the levels of cash generated from operations, a property sale or
refinancing, and the availability of cash reserves. No cash distributions were
paid during the first six months of 1998 and 1997.
Year 2000
The Partnership is dependent upon the General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The General Partner believes that with modifications to
existing software and conversions to new software, the Year 2000 Issue will not
pose significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the
Partnership.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date
of this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
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: None filed during the quarter ended June 30,
1998.
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant 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 7, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Drexel Burnham Lambert Real Estate Associates 1998 Second Quarter 10-QSB
and is qualified in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000700951
<NAME> DREXEL BURNHAM REAL ESTATE ASSOCIATES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 110
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 3,178
<DEPRECIATION> 1,526
<TOTAL-ASSETS> 1,875
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 1,208
0
0
<COMMON> 0
<OTHER-SE> 614
<TOTAL-LIABILITY-AND-EQUITY> 1,875
<SALES> 0
<TOTAL-REVENUES> 196
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 195
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (53)
<EPS-PRIMARY> (4.54)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
