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 September 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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
(A Limited Partnership)
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
September 30, 1995
<S> <C> <C>
Assets
Cash and cash equivalents:
Unrestricted $ 2,222,851
Restricted-tenant security deposits 19,982
Certificate of deposit, plus accrued
interest 1,074,496
Accounts receivable 286,484
Prepaid expenses 108,977
Escrows for taxes and insurance 179,843
Deferred charges 291,782
Other assets 37,327
Investment properties:
Land $ 8,503,676
Buildings and related personal property 19,746,656
Furniture, fixtures and equipment 4,000,756
Less accumulated depreciation (12,737,845) 19,513,243
$23,734,985
Liabilities and Partners' Equity (Deficit)
Liabilities
Accounts payable $ 196,345
Accrued liabilities:
Property taxes $ 243,457
Interest 98,317
Professional fees 55,031
Other 195,788 592,593
Deposits and other tenant liabilities 60,970
Mortgages payable 15,367,098
Demand note payable - related party 25,000
Partners' equity (deficit)
General partner (115,899)
Limited partners 7,608,878 7,492,979
$23,734,985
</TABLE>
[FN]
See Notes to Financial Statements
b) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
(A Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Hotel operations $1,389,948 $1,318,908 $5,641,596 $5,038,770
Rental operations 381,177 399,488 1,135,476 1,200,269
Other income -- 157,700 327 182,677
Interest income 38,501 30,433 110,517 73,074
Total revenues 1,809,626 1,906,529 6,887,916 6,494,790
Expenses:
Hotel operations 1,289,668 1,286,275 4,212,271 3,965,259
Rental operations 98,450 117,738 303,350 371,422
Depreciation and amortization 307,712 296,434 923,110 884,020
Mortgage interest 364,576 359,273 1,079,514 1,074,759
Management fees to related
parties (Note 3) 55,931 53,443 213,484 192,473
General and administrative 27,643 33,116 94,109 101,296
Total expenses 2,143,980 2,146,279 6,825,838 6,589,229
Net (loss) income $ (334,354) $ (239,750) $ 62,078 $ (94,439)
Net (loss) income per limited
limited partnership unit $ (5.52) $ (3.95) $ 1.03 $ (1.56)
Partnership units outstanding 59,905 60,095 59,905 60,095
</TABLE>
[FN]
See Notes to Financial Statements
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' equity (deficit) at
December 31, 1994 $(116,520) $7,547,421 $7,430,901
Net income for the nine months
ended September 30, 1995 621 61,457 62,078
Partners' equity (deficit) at
September 30, 1995 $(115,899) $7,608,878 $7,492,979
</TABLE>
[FN]
See Notes to Financial Statements
d) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 62,078 $ (94,439)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 923,110 884,020
Change in accounts:
Restricted cash 1,452 16,690
Accrued interest receivable (16,931) (17,233)
Accounts receivable 11,781 (188,589)
Prepaid expense (5,786) 64,189
Escrows for taxes and insurance (124,991) (65,311)
Deferred charges (24,479) (107,630)
Other assets 7,003 (18,208)
Accounts payable (240,931) 220,992
Accrued liabilities 166,082 111,621
Deposits and other tenant liabilities (13,502) (8,569)
Net cash provided by operating activities 744,886 797,533
Cash flows from investing activities:
Property improvements and replacements (205,599) (508,929)
Purchase of certificate of deposits (27,594) (1,000,000)
Net cash used by investing activities (233,193) (1,508,929)
Cash flows from financing activities:
Principal payments on mortgages payable (64,868) (261,806)
Partners' distributions paid (599,050) --
Net cash used by financing activities (663,918) (261,806)
Net decrease in cash (152,225) (973,202)
Cash at beginning of period 2,375,076 3,264,216
Cash at end of period $2,222,851 $ 2,291,014
Supplemental disclosure of cash flow information:
Cash paid for interest $1,079,833 $ 1,084,484
</TABLE>
[FN]
See Notes to Financial Statements
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 nine month
periods ended September 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 - 123 Office Building Foreclosure Proceedings.)
Certain reclassifications have been made to the 1994 information to conform
to the 1995 presentation.
Note 3 - Related Party Transactions
For the nine month period ended September 30, 1995, management fees paid to
related parties are as follows:
The Wynnewood Company, Inc. $ 70,637
Paragon Group 29,355
Capstar Hotels 113,492
$213,484
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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
For the nine months ended September 30, 1995, the Partnership recognized net
income of $62,078 compared to a net loss of $94,439 for the nine months ended
September 30, 1994. A net loss of $334,354 was recognized for the three months
ended September 30, 1995, compared to a net loss of $239,750 for the comparable
period of 1994. The net losses realized for the three months ended September
30, 1995 and 1994 are due to the seasonal variation in occupancy at the Green
Valley and Tucson Airport Hotels.
The increase in net income for the nine months ended September 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 room rates and the improvements made to the Tucson restaurant in
1994. Partially offsetting the increase in hotel revenues was an increase in
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 three and nine month
periods ended September 30, 1995, compared to the corresponding periods of 1994,
as a result of collections from the Laventhol and Horwath lawsuit in 1994. It
is unknown whether additional collections will be made from this lawsuit.
Liquidity and Capital Resources
At September 30, 1995, the Partnership held unrestricted cash and
certificates of deposit totalling $3,297,347. The present cash reserves of the
Partnership are believed to be sufficient to meet the foreseeable needs of the
Partnership.
The Partnership has entered into a new franchise agreement at its Green
Valley hotel which will replace the existing franchise. The changeover costs
and fees related to the new franchise are estimated at approximately $65,000
which approximates the estimated annual savings from this change. The initial
costs are being funded from existing cash reserves.
Occupancy at Shallowford Corners shopping center was approximately 88% 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 September 30. Both the
Tucson Hotel and Green Valley Hotel are performing in line with expectations.
Liquidity and Capital Resources (continued)
On July 20, 1995, the Partnership executed a purchase agreement to 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 land
purchase was consummated on October 12, 1995 for a price of $535,661 which was
funded from existing cash reserves. This acquisition is believed to provide
additional flexibility to the existing hotel. 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
September 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.
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 September 30, 1995.
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: November 9, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Drexel
Burnham Lambert Real Estate Associates III 1995 Third Quarter 10-QSB and
is qualified in its entirety by reference to such 10-QSB.
</LEGEND>
<CIK> 0000761657
<NAME> DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,222,851
<SECURITIES> 0
<RECEIVABLES> 286,484
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 32,251,088
<DEPRECIATION> 12,737,845
<TOTAL-ASSETS> 23,734,985
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 15,367,098
<COMMON> 0
0
0
<OTHER-SE> 7,492,979
<TOTAL-LIABILITY-AND-EQUITY> 23,734,985
<SALES> 0
<TOTAL-REVENUES> 6,887,916
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,825,838
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,079,514
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62,078
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 0
<FN>
<F1>
The Registrant has an unclassified balance sheet.
</FN>
</TABLE>
