FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(D)
FORM 10-KSB
(Mark One)
[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 [No Fee Required]
For the fiscal year ended December 31, 1997
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 [No Fee Required]
For the transition period from.........to.........
Commission file number 2-76434
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
(Name of small business issuer 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 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership Interest
(Title of class)
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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $351,000.
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of a specified date within the past 60 days. Market value
information for Registrant's partnership interests is not available. Should a
trading market develop for these interests, it is the General Partner's belief
that the aggregate market value of the voting partnership interests would not
exceed $25,000,000.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Prospectus of Registrant dated November 2, 1982 (included in
Registration Statement, No. 2-76434 of Registrant) are incorporated by
reference into Parts I and III.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Drexel Burnham Lambert Real Estate Associates (the "Partnership" or
"Registrant") is a limited partnership which was formed on December 14, 1982,
pursuant to the Partnership Law of the State of New York. The general partner
of the Partnership is DBL Properties Corporation ("DBL" or "General Partner"),
an affiliate of Insignia Financial Group, Inc. ("Insignia") (see "Change in
Control" below). The Partnership is engaged in the business of acquiring,
operating and holding real properties for investment. The Partnership acquired
four properties during 1983 and it continues to own and operate one of those,
Wendover Business Park-Phase I.
Commencing in January 1983 pursuant to the Prospectus, the Partnership offered
$11,500,000 in Limited Partnership Interests (the "Interests"). A total of
11,500 Interests were sold to the public at $1,000 per Interest. The offering
closed on February 10, 1983. No Limited Partner has made any additional capital
contribution after that date. The Limited Partners of the Partnership share in
the benefits of ownership of the Partnership's real property investments
according to the number of Interests held. Partners holding 45 units abandoned
their Interests in 1994.
The Interests were registered under the Securities Act of 1933 via Registration
Statement No. 2-76434 (the "Registration Statement"). Reference is made to the
Prospectus of the Registrant dated November 2, 1982 (the "Prospectus") contained
in said Registration Statement, which is incorporated herein by reference
thereto.
A further description of the Partnership's business is included in "Item 6.
Management's Discussion and Analysis or Plan of Operation".
The General Partner of the Partnership intends to maximize the operating results
and, ultimately, the net realizable value of the Partnership's remaining
property in order to achieve the best possible return for the investors. Such
results may best be achieved through a property sale, refinancing, debt
restructuring or relinquishment of the asset. The Partnership intends to
evaluate its holding periodically to determine the most appropriate strategy for
the asset.
The Partnership has no full time employees. The General Partner is vested with
full authority as to the general management and supervision of the business and
affairs of the Partnership. Limited partners have no right to participate in
the management or conduct of such business and affairs. Insignia/ESG, an
affiliate of the General Partner, provides day-to-day management services for
the Partnership's investment property.
The business in which the Partnership is engaged is highly competitive, and the
Partnership is not a significant factor in its industry. The remaining property
is located in a major urban area and, accordingly, competes for rentals not only
with similar commercial properties in its immediate area but with several
similar commercial properties throughout the urban area, including properties
owned and/or managed by affiliates of the Partnership. Such competition is
primarily on the basis of location, rents, services and amenities. In addition,
the Partnership competes with significant numbers of individuals and
organizations (including similar partnerships, real estate investment trusts and
financial institutions) with respect to the sale of improved real properties,
primarily on the basis of the prices and terms of such transactions.
There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.
The Partnership monitors its property for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain
cases environmental testing has been performed, which resulted in no material
adverse conditions or liabilities. In no case has the Partnership received
notice that it is a potentially responsible party with respect to an
environmental clean up site.
Changes in Control
On June 24, 1997, Insignia, a Delaware corporation, and IFGP Corporation, 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.
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, with Apartment Investment and Management Company
("AIMCO"), a publically traded real estate investment trust. The closing, which
is anticipated to happen in the third quarter 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. DESCRIPTION OF PROPERTY
On June 29, 1983, the Partnership acquired, Wendover Business Park-Phase I
("Wendover") (approximately 68,000 square feet) located in Greensboro, North
Carolina. Wendover was acquired for $2,820,000 of which $1,410,000 was paid in
cash and $1,410,000 was paid in the form of a $1,110,000 senior purchase money
note and a $300,000 junior purchase money note. In July of 1993, the junior
note was paid in full. A new mortgage in the amount of $1,350,000 was executed
in January of 1994. The proceeds from the new mortgage were used to pay off the
original senior note. The principal balance of the current mortgage at December
31, 1997, is approximately $1,227,000. The mortgage matures February 1, 2001,
and is being amortized over twenty years with an interest rate of 8%. The
balloon payment due at maturity is approximately $1,097,000.
Depreciation of building and improvements is computed on the straight-line
method over estimated service lives ranging from three to thirty years. Wendover
had a gross carrying value of approximately $3,158,000 at December 31, 1997,
with accumulated depreciation of approximately $1,455,000 for a net book value
of approximately $1,703,000. The federal tax basis at December 31, 1997, of the
property was approximately $663,000.
Average annual rental rates and average annual occupancy for 1997 and 1996 for
Wendover were as follows:
Average Annual Average Annual
Rental Rate Occupancy
1997 $5.73/sq.ft. 86%
1996 $5.23/sq.ft. 88%
As noted under "Item 1. Description of Business", the real estate industry is
highly competitive and Wendover is subject to competition from other commercial
buildings in the area. Management believes the property is adequately insured.
The following is a schedule of the lease expirations for the years 1998 - 2007:
Number of % of Gross
Expirations Square Feet Annual Rent Annual Rent
(in thousands)
1998 2 6,060 $ 35 10.2%
1999 4 24,437 115 33.9%
2000 2 10,470 73 21.4%
2001 1 13,903 95 28.0%
2002 1 2,610 22 6.5%
2003-2007 -- -- -- --
The following schedule reflects information on tenants occupying 10% or more of
the leasable square feet at Wendover:
Square Footage Annual Rent
Nature of Business Leased Per Square Foot Lease Expiration
Communication equipment 13,903 $6.83 06/14/01
Wholesale auto supplies 7,037 4.82 01/31/99
Textile equipment sales 6,960 4.24 06/30/99
Electrical contractor 6,960 4.74 05/31/99
Office furniture and
equipment supplies 6,960 3.86 07/31/00
Real estate taxes in 1997 for Wendover were $33,881. The 1997 tax rate is
approximately 1.26%.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is unaware of any pending or outstanding litigation that is not
routine in nature. The General Partner of the Partnership believes that all
such pending or outstanding litigation will be resolved without a material
adverse effect upon the business, financial condition, or operations of the
Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of unit holders during 1997.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP EQUITY AND RELATED PARTNER MATTERS
As of December 31, 1997, the Partnership included approximately 996 limited
partners, holding a total of 11,455 Interests. During 1994, the number of
Partnership Interests decreased by 45 Interests due to limited partners
abandoning their Interests. In abandoning his or her Partnership Interests, a
limited partner relinquishes all rights, title and interest in the Partnership
as of the date of abandonment. No public trading market has developed for the
Interests and it is not anticipated that such a market will develop in the
future.
Cash distributions were made quarterly from July 1983, until October 1987, after
which they were suspended. In December 1995, the General Partner approved a
cash distribution to the Limited Partners in the amount of $114,550 ($10 per
Interest) which was paid in February 1996. No distributions were declared for
1997 or 1996. As of December 31, 1997, the remaining unpaid preferred return
arrearage totaled approximately $8,941,000 or approximately $781 per Interest.
Reference is made to "Item 6. Management's Discussion and Analysis or Plan of
Operation" for a description of liquidity and capital resources.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
For the year ended December 31, 1997, the Partnership realized a net loss of
approximately $71,000 compared to a net loss of approximately $11,000 for the
year ended December 31, 1996. The increase in net loss for the year ended
December 31, 1997, is primarily attributable to an increase in depreciation and
operating expenses. The increase in depreciation expense is the result of an
increase in tenant improvements during 1996 and 1997. Tenant improvements are
depreciated over the life of the respective tenants' lease. The increase in
operating expenses is the result of an increase in major repairs and maintenance
attributable to increased roof and parking lot repairs in 1997. Included in
operating expenses for 1997 is approximately $33,000 in expenditures for parking
lot and roof repairs. Included in operating expenses for 1996 is approximately
$7,000 for parking lot and roof repairs. An additional $50,000 of parking lot
repairs are budgeted for 1998.
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.
Liquidity and Capital Resources
At December 31, 1997, the Partnership had cash and cash equivalents of
approximately $129,000 compared to approximately $255,000 at December 31, 1996.
Net cash used in operating activities increased primarily due to increased
operating expenses, as discussed above, and the change in accounts payable
related to the timing of payments. Net cash used in investing activities
increased due to an increase in tenant improvements in 1997 along with a
withdrawal from a restricted escrow being received in 1996. In January 1994, the
Wendover property was refinanced. Under the terms of the new mortgage, Wendover
was required to maintain an escrow account for tenant improvements and leasing
commissions for two years. In January 1996, approximately $95,000 was returned
to the property from the mortgage company as the terms of the agreement expired.
Net cash used in financing activities decreased due to no distributions being
paid to the partners during 1997.
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 $1,227,000 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. Distributions of $114,550 or
$10.00 per limited partner unit were made to the limited partners during 1996.
No distributions were paid in 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 annual 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 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 annual report. The
Partnership expressly disclaims any obligation or undertaking to release
publicly any updates of 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.
ITEM 7. FINANCIAL STATEMENTS
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
LIST OF FINANCIAL STATEMENTS
Independent Auditor's Report
Balance Sheet - December 31, 1997
Statements of Operations - Years ended December 31, 1997 and 1996
Statements of Changes in Partners' Capital (Deficit) - Years ended
December 31, 1997 and 1996
Statements of Cash Flows - Years ended December 31, 1997 and 1996
Notes to Financial Statements
Independent Auditor's Report
To the Partners
Drexel Burnham Lambert Real Estate Associates
We have audited the accompanying balance sheet of Drexel Burnham Lambert Real
Estate Associates (a limited partnership) as of December 31, 1997, and the
related statements of operations, changes in partners' capital (deficit) and
cash flows for each of the two years in the period ended December 31, 1997.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Drexel Burnham Lambert Real
Estate Associates (a limited partnership) at December 31, 1997, and the results
of its operations and its cash flows for each of the two years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
Pannell Kerr Forster PC
February 6, 1998
New York, NY
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
BALANCE SHEET
December 31, 1997
(in thousands, except unit data)
Assets
Cash and cash equivalents $ 129
Receivables and deposits 19
Other assets 87
Investment property (Notes A and F):
Land $ 227
Building and related personal property 2,931
3,158
Less accumulated depreciation (1,455) 1,703
$ 1,938
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 3
Tenant security deposits payable 8
Other liabilities 33
Mortgage note payable (Note C) 1,227
Partners' Capital (Deficit) (Note D)
General partner's $ (48)
Limited partners' (11,455 units issued and
outstanding) 715 667
$ 1,938
See Accompanying Notes to Financial Statements
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended
December 31,
1997 1996
Revenues
Rental operations $ 346 $ 350
Interest income 5 11
Total revenues 351 361
Expenses
Operating 104 75
General and administrative 47 53
Depreciation 128 98
Interest 109 112
Property taxes 34 34
Total expenses 422 372
Net loss $ (71) $ (11)
Net loss allocated to general partner (1%) $ (1) $ --
Net loss allocated to limited partners (99%) (70) (11)
$ (71) $ (11)
Net loss per limited partner interest $ (6.11) $ (.92)
See Accompanying Notes to Financial Statements
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner's Partners' Total
Original capital contributions 11,500 $ 1 $ 11,500 $ 11,501
Partners' (deficit) equity
at December 31, 1995 11,455 $ (47) $ 796 $ 749
Net loss for the year ended
December 31, 1996 -- -- (11) (11)
Partners' (deficit) capital
at December 31, 1996 11,455 (47) 785 738
Net loss for the year ended
December 31, 1997 -- (1) (70) (71)
Partners' (deficit) capital
at December 31, 1997 11,455 $ (48) $ 715 $ 667
See Accompanying Notes to Financial Statements
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended
December 31,
1997 1996
Cash flows from operating activities:
Net loss $ (71) $ (11)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation 128 98
Amortization of lease commissions and loan costs 23 20
Rent abatement (22) (30)
Changes in accounts:
Receivables and deposits 11 5
Other assets (21) (33)
Accounts payable (51) (4)
Tenant security deposits payable (4) --
Other liabilities 2 --
Net cash (used in) provided by operating
activities (5) 45
Cash flows from investing activities:
Property improvements and replacements (85) (39)
Withdrawal from restricted escrow -- 95
Net cash (used in) provided by investing
activities (85) 56
Cash flows from financing activities:
Payments of mortgage note payable (36) (33)
Partners' distributions paid -- (115)
Net cash used in financing activities (36) (148)
Net decrease in cash and cash equivalents (126) (47)
Cash and cash equivalents at beginning of year 255 302
Cash and cash equivalents at end of year $ 129 $ 255
Supplemental disclosure of cash flow information:
Cash paid for interest $ 100 $ 102
See Accompanying Notes to Financial Statements
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
Notes to Financial Statements
December 31, 1997
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization:
Drexel Burnham Lambert Real Estate Associates ("Partnership") was organized as a
limited partnership under the laws of the State of New York pursuant to a
Certificate of Limited Partnership dated December 14, 1982. The general partner
of the Partnership is DBL Properties Corporation ("DBL" or the "General
Partner"). Effective June 24, 1997, IFGP Corporation, an affiliate of Insignia
Financial Group, Inc. ("Insignia"), purchased all of the issued and outstanding
stock of DBL.
The Partnership owns and operates the Wendover Business Park - Phase I
("Wendover"), an office/warehouse complex, containing approximately 68,000
square feet of office/warehouse space on 3.776 acres in Greensboro, North
Carolina.
Basis of Accounting:
The financial statements of the Partnership are prepared on an accrual basis,
and therefore, revenue is recorded as earned and costs and expenses are recorded
as incurred. The financial statements include the accounts of the Partnership
and its investment property, Wendover.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Fair Value of Financial Instruments:
Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures about
Fair Value of Financial Instruments", as amended by SFAS No. 119, "Disclosures
about Derivative Financial Instruments and Fair Value of Financial Instruments",
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is practicable to
estimate fair value. Fair value is defined in the SFAS as the amount at which
the instruments could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. The Partnership believes
that the carrying amount of its financial instruments (except for long term
debt) approximates their fair value due to the short term maturity of these
instruments. The fair value of the Partnership's long term debt, after
discounting the scheduled loan payments to maturity, approximates its carrying
balance.
Cash and Cash Equivalents:
The Partnership considers all highly liquid investments with a maturity, when
purchased, of three months or less to be cash equivalents. At certain times,
the amount of cash deposited at a bank may exceed the limit on insured deposits.
Security Deposits:
The Partnership requires security deposits from lessees for the duration of the
lease and such deposits are included in receivables and deposits. The security
deposits are refunded when the tenant vacates, provided the tenant has not
damaged its space, and is current on its rental payments.
Investment Property:
Investment property is stated at cost. Acquisition fees are capitalized as a
cost of real estate. In accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
the Partnership records impairment losses on long-lived assets used in
operations when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets.
Depreciation:
Depreciation of the Wendover building and improvements is computed on the
straight-line method over estimated service lives ranging from three to thirty
years.
Other assets:
Included in other assets are loan costs and lease commissions. Loan costs are
capitalized and are amortized on a straight-line basis as interest expense over
the life of the loan. At December 31, 1997, unamortized loan costs of
approximately $30,000 are included in other assets. Lease commissions are
deferred and amortized over the lives of the related leases. Such amortization
is charged to operating expense. At December 31, 1997, unamortized leasing
commissions totaled approximately $44,000 and are included in other assets.
Leases:
The straight-line basis is used to recognize minimum rental income under
leases which provide for varying rents over their terms. For all other leases,
rents are recognized over the terms of the leases as earned.
Advertising:
The Partnership expenses the costs of advertising as incurred.
Income taxes:
Taxable income or loss of the Partnership is reported in the income tax returns
of its partners. Accordingly, no provision for income taxes is made in the
financial statements of the Partnership.
Reclassifications:
Certain reclassifications have been made to the 1996 balances to conform to the
1997 presentation.
Noncash investing and financing activities:
During 1996, the Partnership agreed to reimburse approximately $105,000 to one
of the Wendover commercial tenants for improvements made to commercial space and
paid for by the tenant. The agreement provided that one-half would be paid in
January 1997 and the balance in the form of rental abatements commencing
September 1996. As a result of this agreement, approximately $33,000 and
$22,000 of rent was abated in 1996 and 1997, respectively.
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 payments to affiliates for services and
as reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership.
On June 24, 1997, Insignia, a Delaware corporation, and IFGP Corporation, 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 former 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 prior to June 24, 1997,
and with affiliates of Insignia subsequent to June 24, 1997, were incurred
during the twelve month periods ended December 31, 1997 and 1996 (in thousands):
1997 1996
Property management fees (included in operating
expenses) $12 $ 7
Reimbursement for services of affiliates (included in
general and administrative expense) 8 --
Prior to Insignia's affiliation on June 24, 1997, affiliates of Insignia
provided property management and partnership administrative services for the
Partnership.
In accordance with the partnership agreement, the General Partner was allocated
its one percent continuing interest in the Partnership's net loss.
NOTE C - MORTGAGE NOTE PAYABLE
The Wendover mortgage note payable matures on February 1, 2001, and requires
monthly payments of approximately $11,000 to be applied first to interest at the
rate of 8% per annum and the balance to reduction of principal. The principal
balance due at maturity is approximately $1,097,000. In addition, the mortgage
note payable provides that monthly escrow deposits be made for payments of real
estate taxes and insurance. At December 31, 1997, the balance in the escrow
account was approximately $10,000.
Scheduled principal payments of the mortgage note payable subsequent to December
31, 1997, are as follows (in thousands):
1998 $ 39
1999 42
2000 45
2001 1,101
Total $1,227
NOTE D - PARTNERS' CAPITAL
Pursuant to a public offering, 11,500 limited partnership units were sold at
$1,000 per interest. Partners holding 45 units abandoned their Partnership
interests in 1994, accordingly, calculations of net loss per limited partner
interest in 1997 and 1996 are based on 11,455 interests outstanding.
For income tax purposes, the limited partners share 99% and the General Partner
1% (subordinated as defined in the partnership agreement) in all profits or
losses from operations until the limited partners have received an 8% cumulative
preferred return on their invested capital. Thereafter, the limited partners
share 90% and the General Partner shares 10% in the profits or losses from
operations.
Cash distributions from sales or refinancings, if any, shall be made to the
partners to the extent available and, as more fully described in the partnership
agreement, as follows: first, to each partner in an amount equivalent to the
positive amount of such partner's capital account on the date of distribution
after adjustment; second, to the limited partners, until the limited partners
have received an amount equal to their original invested capital; third, 99% to
the limited partners equal to any unpaid preferred return arrearage; and fourth,
as to any excess, 85% to the limited partners and 15% to the General Partner.
Distributions in liquidation to the partners shall be made in accordance with
the terms of the preceding two paragraphs, as appropriate.
In December 1995, the Partnership approved a cash distribution to Limited
Partners in the amount of $114,550 ($10 per unit) which was paid in February
1996. No distributions were made or accrued to the General Partner, since the
Limited Partners must receive their original invested capital plus any preferred
return arrearage before payment to the General Partner. As of December 31,
1997, the unpaid preferred return arrearage totaled approximately $8,941,000.
NOTE E - SIGNIFICANT TENANTS AND MINIMUM FUTURE RENTAL PAYMENTS
The Partnership leases office and warehouse space in the Wendover property to
tenants under lease agreements which expire on various dates through 2002. The
following is a schedule by year of the minimum future rentals, excluding
escalations, required under these leases as of December 31, 1997 (in thousands):
1998 $ 325
1999 251
2000 182
2001 88
Thereafter 17
Total $ 863
One tenant of Wendover individually accounted for approximately $95,000, or
27.5%, of total rental revenue for the year ended December 31, 1997. Two
tenants of Wendover individually accounted of 12% and 13% of the total rental
revenue for the year ended December 31, 1996.
NOTE F - INVESTMENT PROPERTY AND ACCUMULATED DEPRECIATION (IN THOUSANDS)
Initial Cost
To Partnership
Buildings Net Costs
and Related Capitalized
Personal Subsequent to
Description Encumbrances Land Property Acquisition
Wendover Business Park I
Greensboro,
North Carolina $ 1,227 $ 234 $ 2,727 $ 197
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1997
Buildings
And Accumu- Date Deprec-
Related lated of Date iable
Personal Deprec- Construc- Acq- Life-
Description Land Property Total iation tion quired Years
<C> <C> <C> <C> <C> <C> <C>
Wendover Business $ 227 $2,931 $3,158 $1,455 1981 6/83 3-30
Park I
</TABLE>
Reconciliation of Investment Property and Accumulated Depreciation:
Years Ended December 31,
1997 1996
Investment Property
Balance at beginning of year $ 3,073 $ 2,929
Property improvements 85 144
Balance at end of year $ 3,158 $ 3,073
Accumulated Depreciation
Balance at beginning of year $ 1,327 $ 1,229
Additions charged to expense 128 98
Balance at end of year $ 1,455 $ 1,327
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1997 and 1996, respectively, is approximately $3,063,000 and
$2,977,000. The accumulated depreciation taken for Federal income tax purposes
at December 31, 1997 and 1996, respectively, is approximately $2,400,000 and
$2,275,000.
NOTE G - INCOME TAXES
The following is a reconciliation of the Partnership's net loss for financial
and tax reporting purposes (in thousands):
1997 1996
Net loss as reported $ (71) $ (11)
Excess (deficiency) of book over tax depreciation 3 (23)
Deferred rent income (27) 20
Federal taxable net loss $ (95) $ (14)
Federal taxable loss per limited
partnership unit $(8.28) $(1.21)
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands):
1997
Net assets as reported $ 667
Investment property at cost, net (1,039)
Other assets and liabilities (14)
Net liabilities - tax basis $ (386)
ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements with Pannell Kerr Forster PC regarding the 1997
or 1996 audits of the Partnership's financial statements.
PART III
ITEM 9.DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS,COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Partnership does not have any officers or directors. Management and
administrative services are performed by DBL Properties Corporation ("DBL" or
the "General Partner") and its affiliates. The General Partner has general
responsibility and authority in all matters affecting the business of the
Partnership.
On June 24, 1997, Insignia Financial Group, Inc., a Delaware corporation
("Insignia"), and IFGP Corporation, 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 former officers and
directors of DBL resigned and Insignia caused new officers to be elected.
The names of the directors and executive officers of DBL as of January 29, 1998,
their ages and nature of all positions presently held by them are set forth
below. There are no family relationships between or among any officers and
directors:
Name Age Position
William H. Jarrard, Jr. 51 President and Director
Ronald Uretta 41 Vice President and
Treasurer
Martha L. Long 38 Controller
Daniel M. LeBey 32 Vice President and
Secretary
Kelley M. Buechler 40 Assistant Secretary
William H. Jarrard, Jr. has been President and Director of the General Partner
since June 24, 1997. He has acted as Senior Vice President of Insignia
Properties Trust ("IPT"), an affiliate of the General Partner, since May 1997.
Mr. Jarrard previously acted as Managing Director - Partnership Administration
of Insignia from January 1991 through September 1997 and served as Managing
Director - Partnership Administration and Asset Management of Insignia from July
1994 until January 1996.
Ronald Uretta has been Vice President and Treasurer of the General Partner since
June 24, 1997, and Insignia's Treasurer since January 1992. Since August 1996,
he has also served as Insignia's Chief Operating Officer. He has also served as
Insignia's Secretary from January 1992 to June 1996 and as Insignia's Chief
Financial Officer from January 1992 to August 1996.
Martha L. Long has been Controller of the General Partner since June 24, 1997,
and Senior Vice President - Finance and Controller of Insignia since January
1997. In June 1994, Ms. Long joined Insignia as its Controller, and was
promoted to Senior Vice President - Finance in January 1997. Prior to that
time, she was Senior Vice President and Controller of the First Savings Bank, in
Greenville, SC.
Daniel M. LeBey has been Vice President and Secretary of the General Partner
since January 29, 1998, and Insignia's Assistant Secretary since April 30, 1997.
Since July 1996 he has also served as Insignia's Associate General Counsel. From
September 1992 until June 1996, Mr. LeBey was an attorney with the law firm of
Alston & Bird LLP, Atlanta, Georgia.
Kelley M. Buechler has been Assistant Secretary of the General Partner since
June 24, 1997, and Assistant Secretary of Insignia since 1991.
ITEM 10. EXECUTIVE COMPENSATION
No direct form of compensation or remuneration was paid by the Partnership to
any officer or director of the General Partner. The Partnership has no plan,
nor does the Partnership presently propose a plan, which will result in any
remuneration being paid to any officer or director upon termination of
employment. However, reimbursements and other payments have been made to the
Partnership's General Partner and its affiliates, as described in "Item 12.
Certain Relationships and Related Transactions" below.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Partnership is a limited partnership and has no officers or directors. The
General Partner has discretionary control over most of the decisions made by or
for the Partnership in accordance with the terms of the Partnership Agreement.
The directors and officers of the General Partner, as a group, do not own any of
the Partnership's units.
As of January 1, 1998, there is no person known to the Partnership who owns
beneficially or of record more than five percent of the limited partnership
units of 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, with Apartment Investment and Management Company
("AIMCO"), a publically traded real estate investment trust. The closing, which
is anticipated to happen in the third quarter 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 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 payments to affiliates for services and
as reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership.
On June 24, 1997, Insignia, a Delaware corporation, and IFGP Corporation, 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.
The following transactions with The Wynnewood Company prior to June 24, 1997,
and with affiliates of Insignia subsequent to June 24, 1997, were incurred
during the twelve month periods ended December 31, 1997 and 1996 (in thousands):
1997 1996
Property management fees $ 12 $ 7
Reimbursement for services of affiliates 8 --
Prior to Insignia's affiliation on June 24, 1997, affiliates of Insignia
provided property management and partnership administrative services for the
Partnership.
In accordance with the partnership agreement, the general partner was allocated
its one percent continuing interest in the Partnership's net loss.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K:
(a) See Exhibit Index contained herein.
(b) Reports on Form 8-K filed during the fourth quarter of 1997: None.
SIGNATURES
In accordance with Section 13 or 15(d) 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: March 25, 1998
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
/s/William H. Jarrard, Jr. President and Date: March 25, 1998
William H. Jarrard, Jr. Director
/s/Ronald Uretta Vice President Date: March 25, 1998
Ronald Uretta and Treasurer
EXHIBIT INDEX
Exhibit
3.1 Prospectus of the Partnership filed pursuant to rule 424(b), dated
November 2, 1982 is hereby incorporated herein by reference.
3.2 Form of Agreement of Limited Partnership of the Partnership -
reference is made to Exhibit A to the Prospectus.
3.3 Certificate of Limited Partnership of the Partnership, which appears
as Exhibit 3.2 to the Registration Statement is hereby incorporated
herein by reference.
10.1 Agreement relating to purchase by the Partnership of the Wendover
Business Park Phase I in Greensboro, North Carolina, for which a
Report on Form 8-K was filed with the Commission on July 14, 1983 and
was amended on November 18, 1983, which report is hereby incorporated
herein by reference.
10.2 Contracts related to refinancing of the debt of Wendover Business Park
Phase I were filed as Exhibit 10.6 to the Report on Form 10-KSB for
the fiscal year ended December 31, 1993, and are hereby incorporated
herein by reference:
(a) Mortgage note dated January 13, 1994 between Drexel Burnham
Lambert Real Estate Associates, a New York limited partnership,
and United Family Life Insurance Company, a Georgia corporation.
(b) Deed of Trust and Security Agreement dated January 13, 1994
between Drexel Burnham Lambert Real Estate Associates, a New
York limited partnership, and Stewart Title Guaranty Company for
the benefit of United Family Life Insurance Company, a
Georgia corporation.
(c) Assignment of Leases, Rents, Contracts, and Agreements dated
January 13, 1994 from Drexel Burnham Lambert Real Estate
Associates, a New York limited partnership, to United Family Life
Insurance Company, a Georgia corporation.
(d) Hazardous Material Indemnification Agreement dated January 13,
1994 between Drexel Burnham Lambert Real Estate Associates, a New
York limited partnership, and United Family Life Insurance
Company, a Georgia corporation.
(e) Escrow Agreement dated January 13, 1994 by and between United
Family Life Insurance Company, a Georgia corporation, Drexel
Burnham Lambert Real Estate Associates, a New York limited
partnership, and Dickinson, Logan, Todd and Barber, Inc. (the
"Escrow Agent").
10.3 Exchange Agreement effective January 13, 1994 between Drexel Burnham
Lambert Real Estate Associates, a New York limited partnership, and
the DBL Liquidating Trust, a trust established under the laws of New
York was filed as Exhibit 10.7 to Report 10-KSB for fiscal year ended
December 31, 1993, and is hereby incorporated herein by reference.
27 Financial Data Schedule
99.1 Special Report/Acquisition Bulletin dated July 1, 1983 is hereby
incorporated herein by reference.
99.2 Report on Form 8-K filed July 14, 1983 and amended November 18, 1983
regarding the purchase of Wendover Business Park Phase I in
Greensboro, North Carolina is hereby incorporated herein by reference.
99.3 Report on Form 8-K filed May 5, 1988 regarding the suspension of cash
distributions to Limited Partners is hereby incorporated herein by
reference.
99.4 Report on Form 8-K filed October 11, 1989 regarding the change in
control of the parent company of the General Partner is hereby
incorporated herein by reference.
99.5 Report on Form 8-K filed February 3, 1993 regarding the sale of
outstanding stock of the General Partner is hereby incorporated herein
by reference.
99.6 Report on Form 8-K filed July 9, 1997, regarding the change in control
of the Partnership.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial informaton extracted from Drexel
Burnham Lambert Real Estate Associates 1997 year-end 10-KSB and is qualified in
its entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000700951
<NAME>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 129
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 3,158
<DEPRECIATION> (1,455)
<TOTAL-ASSETS> 1,938
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 1,227
0
0
<COMMON> 0
<OTHER-SE> 667
<TOTAL-LIABILITY-AND-EQUITY> 1,938
<SALES> 0
<TOTAL-REVENUES> 351
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 313
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 109
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (71)
<EPS-PRIMARY> (6.11)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet
<F2>Multiplier is 1
</FN>
</TABLE>
