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 March 31, 1999
[ ] 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 2-85829
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
(Exact name of small business issuer as specified in its charter)
New York 13-3202289
(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 II
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 1999
Assets
Cash and cash equivalents $ 952
Receivables and deposits 239
Other assets 96
Investment in joint venture 359
Investment properties:
Land $ 1,578
Buildings and related personal property 10,316
11,894
Less accumulated depreciation (8,096) 3,798
$ 5,444
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 19
Tenant security deposit liabilities 95
Accrued property taxes 50
Other liabilities 63
Mortgage notes payable 4,389
Partners' Capital
General partner's $ 7
Limited partners' (37,273 units issued
and outstanding) 821 828
$ 5,444
See Accompanying Notes to Consolidated Financial Statements
b)
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1999 1998
Revenues:
Rental income $ 441 $ 481
Other income 20 16
Total revenues 461 497
Expenses:
Operating 147 180
General and administrative 42 10
Depreciation 114 103
Interest 96 98
Property taxes 50 49
Bad debt expense, net 39 --
Total expenses 488 440
Equity in net income of joint venture 56 85
Net income $ 29 $ 142
Net income allocated to general partner $ -- $ 1
Net income allocated to limited partners 29 141
$ 29 $ 142
Net income per limited partnership unit $ 0.78 $ 3.78
Distributions per limited partnership unit $ -- $ 3.81
See Accompanying Notes to Consolidated Financial Statements
c)
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 37,273 $ 1 $18,637 $18,638
Partners' capital at December 31, 1998 37,273 $ 7 $ 792 $ 799
Net income for the three months
ended March 31, 1999 -- -- 29 29
Partners' capital at March 31, 1999 37,273 $ 7 $ 821 $ 828
See Accompanying Notes to Consolidated Financial Statements
d)
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1999 1998
Cash flows from operating activities:
Net income $ 29 $ 142
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 114 103
Amortization of loan costs and lease
commissions 14 11
Bad debt expense, net 39 --
Equity in net income of joint venture (56) (85)
Change in accounts:
Receivables and deposits 83 (51)
Other assets 3 (1)
Accounts payable 5 (9)
Tenant security deposit liabilities (4) --
Accrued property taxes (92) 51
Other liabilities (6) (26)
Net cash provided by operating activities 129 135
Cash flows from investing activities:
Distribution received from joint venture 275 100
Property improvements and replacements (25) (20)
Net cash provided by investing activities 250 80
Cash flows from financing activities:
Payments on mortgage notes payable (40) (37)
Distributions paid to partners -- (142)
Net cash used in financing activities (40) (179)
Net increase in cash and cash equivalents 339 36
Cash and cash equivalents at beginning of period 613 578
Cash and cash equivalents at end of period $ 952 $ 614
Supplemental disclosure of cash flow information:
Cash paid for interest $ 88 $ 91
See Accompanying Notes to Consolidated Financial Statements
e)
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES II
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Drexel Burnham Lambert Real
Estate Associates II (the "Partnership" or "Registrant") 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 the 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 month period ended March 31, 1999, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1999. 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, 1998.
NOTE B - TRANSFER OF CONTROL
On October 1, 1998, Insignia Financial Group, Inc., the sole shareholder of IFGP
Corporation, completed its merger with and into Apartment Investment and
Management Company ("AIMCO"), a publicly traded real estate investment trust,
with AIMCO being the surviving corporation (the "Insignia Merger"). As a result
of the Insignia Merger, AIMCO acquired control of IFGP Corporation and, as a
result thereof, the General Partner. The General Partner does not believe that
this transaction will have a material effect on the affairs and operations of
the Partnership.
NOTE C - TRANSACTIONS WITH RELATED 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. The following payments were made to the General
Partner and affiliates during the three months ended March 31, 1999 and 1998:
1999 1998
(in thousands)
Property management fees (included in operating
expense) $ 17 $ 25
Reimbursement for services of affiliates (included in
general and administrative expense) 16 14
During the three months ended March 31, 1999 and 1998, affiliates of the General
Partner were entitled to receive 5% of gross receipts from the Partnership's
residential property for providing property management services. The
Partnership paid to such affiliates approximately $17,000 and $18,000 for the
three months ended March 31, 1999 and 1998 respectively. For the three months
ended March 31, 1998 affiliates of the General Partner were entitled to receive
varying percentages of gross receipts from the Partnership's commercial property
for providing property management services. The Partnership paid to such
affiliates approximately $7,000 for the three months ended March 31, 1998.
Effective October 1, 1998 (the effective date of the Insignia Merger) these
services for the commercial property were provided by an unrelated party.
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $16,000 and $14,000 for the
three months ended March 31, 1999 and 1998, respectively.
NOTE D - INVESTMENT IN JOINT VENTURE
Table Mesa
Table Mesa Shopping Center Partnership was formed in 1985, as a joint venture to
own and operate a shopping center in Boulder, Colorado. The Partnership owns a
50% interest in this joint venture. The Partnership's equity in the operations
of Table Mesa, after an adjustment for allocation of depreciation based on its
basis in the property, amounted to net income of approximately $56,000 and
$85,000 for the three months ended March 31, 1999 and 1998, respectively.
The Table Mesa joint venture agreement provides, among other things, that the
Partnership shall be entitled to receive a cash flow preference, as defined, of
$252,000 per year, which is equivalent to a 9% return on the Partnership's
initial cash investment. The annual preference is not cumulative. During the
three months ended March 31, 1999 and 1998, the Partnership received
distributions from the Table Mesa joint venture of approximately $275,000 and
$100,000, respectively.
Summarized financial information for Table Mesa at March 31, 1999, is as follows
(in thousands):
Assets:
Real and personal property net
of accumulated depreciation $5,505
Other assets 1,124
Total assets $6,629
Liabilities:
Mortgage payable $6,545
Other liabilities 580
Total liabilities 7,125
Partners' deficit (496)
Total liabilities and partners'
deficit $6,629
Summarized results of operations for Table Mesa for each of the three month
periods ended March 31, 1999 and 1998, are as follows (in thousands):
1999 1998
Total revenues 627 $600
Total expenses 460 379
Net income $167 $221
NOTE E - DISTRIBUTIONS TO LIMITED PARTNERS
In February 1998, the Partnership declared and paid a cash distribution to the
limited partners in the amount of approximately $142,000 ($3.81 per limited
partnership unit), including approximately $2,000 for withholding taxes on
behalf of the limited partners. No distributions were paid during the three
months ended March 31, 1999.
NOTE F - SEGMENT REPORTING
Description of the types of products and services from which each reportable
segment derives its revenues: The Partnership has two reportable segments:
residential property and commercial property. The Partnership's residential
property segment consists of an apartment complex in North Miami Beach, Florida.
The Partnership rents apartment units to tenants for terms that are typically
twelve months or less. The commercial property segment consists of one office
building and warehouse located in Greensboro, North Carolina. This property
leases space to tenants under various lease terms.
Measurement of segment profit or loss: The Partnership evaluates performance
based on net income. The accounting policies of the reportable segments are the
same as those of the Partnership as described in the Partnership's annual report
on Form 10-KSB for the year ended December 31, 1998.
Factors management used to identify the enterprise's reportable segments: The
Partnership's reportable segments are investment properties that offer different
products and services. The reportable segments are managed separately because
they provide distinct services with different types of products and customers.
Segment information for the three months ended March 31, 1999 and 1998 is shown
in the tables below (in thousands). The "Other" column includes partnership
administration related items and income and expense not allocated to the
reportable segment.
1999
Residential Commercial Other Totals
Rental income $ 314 $ 127 $ -- $ 441
Other income 15 1 4 20
Interest expense 70 26 -- 96
Depreciation 68 46 -- 114
General and administrative expense -- -- 42 42
Equity in net income of joint
venture -- -- 56 56
Segment profit (loss) 26 (15) 18 29
Total assets 2,352 1,950 1,142 5,444
Capital expenditures for investment
properties 19 6 -- 25
1998
Residential Commercial Other Totals
Rental income $ 344 $ 137 $ -- $ 481
Other income 9 2 5 16
Interest expense 72 26 -- 98
Depreciation 68 35 -- 103
General and administrative expense -- -- 10 10
Equity in net income of joint
venture -- -- 85 85
Segment profit 25 37 80 142
Total assets 2,469 2,197 1,068 5,734
Capital expenditures for investment
properties 19 1 -- 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time.
The discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operation. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership owns and operates two investment properties: Wendover Business
Park - Phase II ("Wendover"), a 80,410 square foot office and warehouse complex
located in Greensboro, North Carolina, and Presidential House at Sky Lake
("Presidential"), a residential apartment complex located in North Miami Beach,
Florida. The Partnership also owns a joint venture interest in Table Mesa
Shopping Center ("Table Mesa") located in Boulder, Colorado. The following
table sets forth the average occupancy of the investment properties for the
three months ended March 31, 1999 and 1998:
Average Occupancy
Property 1999 1998
Wendover Business Park Phase II 98% 100%
Presidential House 91% 95%
The General Partner attributes the decrease in occupancy at Presidential House
to the increased competition in the local market.
Results of Operations
The Partnership realized net income of approximately $29,000 compared to
approximately $142,000 for the three months ended March 31, 1999 and 1998,
respectively. The decrease in net income is due to a decrease in total revenues
and in the equity in net income of the Table Mesa joint venture and an increase
in total expenses. The decrease in total revenues is primarily due to a
decrease in rental income. The decrease in rental income resulted from the
decreases in occupancy noted above. The decrease in the equity in net income of
the Table Mesa joint venture is primarily due to an increase in interest expense
paid by the joint venture as a result of the refinancing in the latter part of
1998 which resulted in a decrease in net income of the joint venture. The
refinanced debt now requires a greater portion of the monthly debt service
payment to be allocated to interest expense. The increase in total expenses is
primarily due to an increase in general and administrative expense and bad debt
expense partially offset by a decrease in operating expense. The increase in
general and administrative expense is primarily due to the overaccrual of audit
expense in 1997 that was adjusted in 1998. The 1999 bad debt expense is due to
delinquencies with three of the tenants at Wendover. The Managing General
Partner is currently pursuing collection. The decrease in operating expense is
primarily due to decreases in property and maintenance expenses at Presidential
House. The decrease in property expenses was primarily due to a decrease in
salary expense due to personnel reductions. The decrease in maintenance
expenses is primarily due to fewer repairs required at the property during the
three months ended March 31, 1999, as compared to the same period in 1998.
Included in general and administrative expenses at both March 31, 1999 and 1998
are management reimbursements to the General Partner allowed under the
Partnership Agreement. In addition, costs associated with the quarterly and
annual communications with investors and regulatory agencies and the annual
audit required by the Partnership agreement are also included.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of the investment properties 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 March 31, 1999, the Partnership had cash and cash equivalents of
approximately $952,000 as compared to approximately $614,000 at March 31, 1998.
For the three months ended March 31, 1999, cash and cash equivalents increased
by approximately $339,000 from the Partnership's year ended December 31, 1998.
The increase in cash and cash equivalents is due to approximately $129,000 of
cash provided by operating activities and approximately $250,000 of cash
provided by investing activities which was partially offset by approximately
$40,000 of cash used in financing activities. Cash provided by investing
activities consisted of a distribution from the Table Mesa joint venture,
partially offset by property improvements and replacements. Cash used in
financing activities consisted of principal payments made on the mortgage
encumbering the Partnership's property. The Partnership invests its working
capital reserves in a money market account.
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 properties to adequately maintain the physical
assets and other operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. Capital improvements
planned for each of the Partnership's properties are detailed below.
Wendover II
During the three months ended March 31, 1999, the Partnership completed
approximately $6,000 of capital improvements consisting primarily of HVAC
replacements. These improvements were funded by cash flow from operations. Based
on a report received from an independent third party consultant analyzing
necessary exterior improvements and estimates made by the General Partner on
interior improvements, it is estimated that the property requires approximately
$53,000 of capital improvements over the near term. The Partnership has
budgeted capital improvements of approximately $53,000 for 1999 which includes,
but are not limited to, tenant improvements and HVAC replacements.
Presidential House
During the three months ended March 31, 1999, the Partnership completed
approximately $19,000 of capital improvements consisting primarily of carpet and
vinyl replacement, appliances, and air conditioning. These improvements were
funded by cash flow from operations. Based on a report received from an
independent third party consultant analyzing necessary exterior improvements and
estimates made by the General Partner on interior improvements, it is estimated
that the property requires approximately $420,000 of capital improvements over
the near term. The Partnership has budgeted capital improvements of
approximately $413,000 for 1999 which includes, but is not limited to, HVAC
replacements, carpet and vinyl replacement, landscaping, exterior painting,
parking lot repairs, structural improvements, fencing, roof replacements,
electrical and plumbing upgrades.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
The Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. The remaining
mortgage indebtedness of approximately $4,389,000 requires monthly principal and
interest payments and requires balloon payments in August 2000 and February
2001. If the properties cannot be refinanced or sold for a sufficient amount,
the Partnership will risk losing such properties to foreclosure.
A distribution of approximately $142,000 ($3.81 per limited partnership unit)
was made to the limited partners during the three months ended March 31, 1998.
No distribution was paid to the limited partners during the three months ended
March 31, 1999. The Partnership's distribution policy will be reviewed on a
quarterly basis. Future cash distributions will depend on the levels of net
cash generated from operations, the availability of cash reserves, and the
timing of debt maturities, refinancings and/or property sales. There can be no
assurance, however, that the Partnership will generate sufficient funds from
operations, after planned capital improvement expenditures, to permit any
additional distributions to its limited partners in 1999 or subsequent periods.
Year 2000 Compliance
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership
is dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any of the computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made, or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.
The Managing Agent's plan to resolve Year 2000 issues involves four phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the mainframe system used by the Managing Agent became fully
functional. In addition to the mainframe, PC-based network servers, routers and
desktop PCs were analyzed for compliance. The Managing Agent has begun to
replace each of the non-compliant network connections and desktop PCs and, as of
March 31, 1999, had completed approximately 75% of this effort.
The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date. The remaining network connections and
desktop PCs are expected to be upgraded to Year 2000 compliant systems by July
31, 1999.
Computer Software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
During 1998, the Managing Agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at
all properties, is $200,000, and the implementation and the testing process is
expected to be completed by July 31, 1999.
The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded 80% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
July 31, 1999.
Operating Equipment:
The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).
The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally. The Managing Agent intends to have a third-party conduct an
audit of these systems and report their findings by July 31, 1999.
Any of the above operating equipment that has been found to be non-compliant to
date has been replaced or repaired. To date, these have consisted only of
security systems and phone systems. As of March 31, 1999 the Managing Agent has
evaluated approximately 86% of the operating equipment for the Year 2000
compliance.
The total cost incurred for all properties managed by the Managing Agent as of
March 31, 1999 to replace or repair the operating equipment was approximately
$400,000. The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $325,000, which is expected to be
completed by August 30, 1999.
The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within its enterprise.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent continues to conduct surveys of its banking and other vendor
relationships to assess risks regarding their Year 2000 readiness. The Managing
Agent has banking relationships with three major financial institutions, all of
which have indicated their compliance efforts will be complete before May 1999.
The Managing Agent has updated data transmission standards with two of the three
financial institutions. The Managing Agent's contingency plan in this regard is
to move accounts from any institution that cannot be certified Year 2000
compliant by June 1, 1999.
The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.
The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.8 million ($0.6 million expensed
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K:
None filed during the three months ended March 31, 1999.
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 II
By: DBL Properties Corporation
Its General Partner
By: /s/ Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/ Carla R. Stoner
Carla R. Stoner
Senior Vice President Finance and
Administration
Date: May 14, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Drexel
Burnham Lambert Real Estate Associates II 1999 First Quarter 10-QSB and is
qualified in its entirety by referecent to such 10-QSB filing.
</LEGEND>
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<NAME> DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 952
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 11,894
<DEPRECIATION> 8,096
<TOTAL-ASSETS> 5,444
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 4,389
0
0
<COMMON> 0
<OTHER-SE> 828
<TOTAL-LIABILITY-AND-EQUITY> 5,444
<SALES> 0
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<CGS> 0
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<OTHER-EXPENSES> 488
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