FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the transition period.........to.........
Commission file number 2-95502
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
(Exact name of small business issuer as specified in its charter)
New York 13-3251176
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
230 Park Avenue, Suite 2400
New York, New York 10169
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (212) 697-2330
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
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
(A Limited Partnership)
BALANCE SHEET
(Unaudited)
June 30, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Cash and cash equivalents:
Unrestricted $ 2,425,271
Restricted-tenant security deposits 19,982
Certificate of deposit due November 6,
1995, plus accrued interest 1,058,293
Accounts receivable 281,536
Escrows for taxes and insurance 92,492
Deferred charges 303,448
Other assets 124,668
Investment properties:
Land $ 8,503,676
Buildings and related personal
property 19,742,048
Furniture, fixtures and equipment 3,929,058
Less accumulated depreciation (12,445,729) 19,729,053
$24,034,743
Liabilities and Partners' Equity (Deficit)
Liabilities
Accounts payable $ 266,061
Accrued liabilities:
Property taxes $ 166,828
Interest 98,352
Other 203,812 468,992
Deposits and other tenant liabilities 56,333
Mortgages payable 15,391,024
Demand note payable - related party 25,000
Partners' equity (deficit)
General partner (112,556)
Limited partners 7,939,889 7,827,333
$24,034,743
</TABLE>
See Notes to Financial Statements
1
<PAGE>
b) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
(A Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
<S> <C> <C> <C> <C>
1995 1994 1995 1994
Revenues:
Hotel operations $1,822,982 $1,634,921 $4,251,648 $3,719,862
Rental operations 380,216 351,813 754,299 800,781
Other income 327 19,806 327 24,977
Interest income 35,591 24,421 72,016 42,641
Total revenues 2,239,116 2,030,961 5,078,290 4,588,261
Expenses:
Hotel operations 1,427,565 1,361,045 2,922,603 2,678,984
Rental operations 97,974 108,162 204,900 253,684
Depreciation and
amortization 307,699 294,041 615,398 587,586
Mortgage interest 357,632 360,204 714,938 715,486
Management fees to related
parties (Note 3) 69,707 62,933 157,553 139,030
General and administrative 36,467 38,627 66,466 68,180
Total expenses 2,297,044 2,225,012 4,681,858 4,442,950
Net (loss) income $ (57,928) $ (194,051) $ 396,432 $ 145,311
Net (loss) income per limited
partnership unit $ (.96) $ (3.20) $ 6.55 $ 2.39
Partnership units outstanding 59,905 60,095 59,905 60,095
</TABLE>
See Notes to Financial Statements
2
<PAGE>
c) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
<S> <C> <C> <C>
Partners' (deficit) equity at
December 31, 1994 $(116,520) $7,547,421 $7,430,901
Net income for the six months ended
June 30, 1995 3,964 392,468 396,432
Partners' (deficit) equity at
June 30, 1995 $(112,556) $7,939,889 $7,827,333
</TABLE>
See Notes to Financial Statements
3
<PAGE>
d) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 396,432 $ 145,311
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 615,398 587,586
Change in accounts:
Restricted cash 1,452 20,158
Accrued interest receivable (728) (5,989)
Accounts receivable 16,729 (99,106)
Escrows for taxes and insurance (37,640) (66,550)
Deferred charges (20,552) (95,784)
Other assets 22,856 79,063
Accounts payable (171,215) 200,615
Accrued liabilities 42,481 55,579
Deposits and other tenant liabilities (18,139) (24,198)
Net cash provided by
operating activities 847,074 796,685
Cash flows from investing activities:
Property improvements and replacements (129,293) (247,619)
Purchase of certificate of deposits (27,594) (1,000,000)
Net cash used by
investing activities (156,887) (1,247,619)
</TABLE>
See Notes to Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
<S> <C> <C>
Cash flows from financing activities:
Principal payments on mortgages payable $ (40,942) $ (241,230)
Partners' distributions paid (599,050) --
Net cash used by financing
activities (639,992) (241,230)
Net increase (decrease) in cash 50,195 (692,164)
Cash at beginning of period 2,375,076 3,264,216
Cash at end of period $2,425,271 $ 2,572,052
Supplemental disclosure of cash
flow information:
Cash paid for interest $ 715,222 $ 724,629
</TABLE>
See Notes to Financial Statements
5
<PAGE>
e) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited financial statements 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
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, 1995, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1995. 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, 1994.
Note 2 - Basis of Accounting
The financial statements include the Partnership's operating
division, Perimeter Square Shopping Center ("Perimeter Square"), and the
assets, liabilities, equity, income and expenses of its joint ventures
in DBL Airport Valley Limited Partnership ("DBLAV") and Shallowford
Corners Shopping Center ("Shallowford").
The Partnership had a 77.53% interest in the 123 Office Building
(Tyson's Corner) joint venture. On March 14, 1994, the building was
lost in a foreclosure proceeding, and on November 15, 1994, the joint
venture was liquidated. (See Note 4 for 123 Office Building Foreclosure
Proceedings.)
Certain reclassifications have been made to the 1994 information to
conform to the 1995 presentation.
6
<PAGE>
Note 3 - Related Party Transactions
For the six month period ended June 30, 1995, management fees paid to
related parties are as follows:
<TABLE>
<CAPTION>
<S> <C>
The Wynnewood Company, Inc. $ 52,279
Paragon Group 19,653
Capstar Hotels 85,621
$157,553
</TABLE>
Note 4 - 123 Office Building Foreclosure Proceedings
Tyson's Corner was formed on August 22, 1985, pursuant to the Uniform
Partnership Act of the Commonwealth of Virginia for the purpose of
acquiring, operating and leasing a 40,727 square foot office building
known as the 123 Office Building located in Fairfax County, Virginia.
The Partnership had a 77.53% interest in Tyson's Corner, while Drexel
Burnham Lambert Real Estate Associates II, an affiliated entity, held
the remaining 22.47% interest.
In October 1993, the lease for the principal tenant of the 123 Office
Building expired and the tenant, who was occupying approximately 85% of
the building, vacated the premises. In November 1993, debt service
payments to the 123 Office Building mortgagee were discontinued. The
decision to discontinue making such payments was due to the anticipated
vacancy of the principal tenant and the General Partner's expectation
that it would not be able to lease the premises within a reasonable
period of time without having to make substantial renovations. The
mortgagee exercised its option to call the loan in 1994, and on March
14, 1994, concluded its foreclosure proceedings on the property. On
November 15, 1994, the Tyson's Corner joint venture was liquidated with
the remaining assets distributed to the joint venturers.
At December 31, 1993, the Partnership had provided for a potential
real estate valuation loss in the amount of $1,689,361 in relation to
the foreclosure.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
For the six months ended June 30, 1995, the Partnership recognized
net income of $396,432 compared to net income of $145,311 for the six
months ended June 30, 1994. A net loss of $57,928 was recognized for
the three months ended June 30, 1995, compared to a net loss of $194,051
for the comparable period in 1994. This fluctuation in quarterly net
income is due to the seasonal variation in occupancy at the Green Valley
and Tucson Airport Hotels during the second quarter of 1995 and 1994.
During the three months ended March 31, 1995, the hotels had net
operating income of $933,628 compared to $767,002 for the corresponding
period in 1994. For the three months ended June 30, 1995, the hotels
had net operating income of $395,417 compared to the net income of
$273,876 for the three months ended June 30, 1994.
The increase in net income for the six months ended June 30, 1995,
was due primarily to the increase in hotel revenue resulting from
increased room, food, and beverage revenues at the Tucson Airport Hotel.
This increase is due to higher occupancy, average rates and the
improvements made to the Tucson restaurant in 1994. Partially
offsetting the increase in hotel revenues was an increase in variable
hotel operating expenses. Also contributing to the increase in net
income was an increase in interest income due to investments in higher
yielding short-term certificates of deposit in 1995. The decrease in
rental revenue and rental operating expenses was primarily due to the
foreclosure of the 123 Office Building in March of 1994. Other income
was lower for the six months ended June 30, 1995, compared to the
corresponding period in 1994 as a result of $23,900 in collections from
a lawsuit in 1994.
Liquidity and Capital Resources
At June 30, 1995, the Partnership held unrestricted cash and
certificates of deposit totalling $3,483,564. The present cash reserves
of the Partnership are believed to be sufficient to meet the foreseeable
needs of the Partnership.
The Partnership has executed a new franchise agreement at its Green
Valley hotel which would replace the existing franchise. Upon approval,
the changeover costs and fees related to the new franchise are estimated
to be $65,000 which equals the estimated annual savings from this
change. The initial costs will be funded from existing cash reserves.
Occupancy at Shallowford Corners shopping center was approximately
89% at the end of the quarter and management has begun to market this
center for sale. The Perimeter Square shopping center was 94% occupied
at June 30, 1995. Both the Tucson Hotel and Green Valley Hotel are
performing in line with expectations.
On July 20, 1995, the Partnership executed a purchase agreement
whereby it would acquire approximately three acres of vacant land
immediately to the north of, and adjacent to, its hotel in Tucson.
Earlier in the year, an agreement to acquire vacant land to the South of
the hotel expired according to its terms. The price for the proposed
acquisition approximates $550,000 and would be funded from existing cash
reserves with closing planned after satisfactory completion
8
<PAGE>
of normal due diligence. The acquisition is believed to provide
additional flexibility to the existing hotel and there are no immediate
plans for its development.
Other than the items referred to above, the Partnership has not
entered into any material commitments for capital expenditures at any of
its properties as of June 30, 1995. In December 1994, the Partnership
approved a distribution of $10 per partnership interest, totalling
$599,050, which was paid from existing cash reserves in February 1995.
9
<PAGE>
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, 1995.
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DREXEL BURNHAM LAMBERT REAL ESTATE
ASSOCIATES III
(Registrant)
By: DBL Properties Corporation
(General Partner)
By: /s/William D. Clements
William D. Clements
President
Date: August 10, 1995
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Drexel Burnham Lambert Real Estate Associates III's 1995 Second Quarter
10-QSB and is qualified in its entirety by reference to such 10-QSB
filing.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,425,271
<SECURITIES> 0
<RECEIVABLES> 281,536
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,002,242
<PP&E> 32,174,782
<DEPRECIATION> 12,445,729
<TOTAL-ASSETS> 24,034,743
<CURRENT-LIABILITIES> 816,386
<BONDS> 15,391,024
<COMMON> 0
0
0
<OTHER-SE> 7,827,333
<TOTAL-LIABILITY-AND-EQUITY> 24,034,743
<SALES> 0
<TOTAL-REVENUES> 5,078,290
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,681,858
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 714,938
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 396,432
<EPS-PRIMARY> 6.55
<EPS-DILUTED> 0
<PAGE>
</TABLE>
