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, 1996
[ ] 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.)
850 Third Avenue, Nineteenth Floor
New York, New York 10022
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (212) 822-2246
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)
September 30, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 1,834,257
Restricted--tenant security deposits 19,982
Certificate of deposit at cost
plus accrued interest 1,133,729
Accounts receivable 372,307
Prepaid expenses 40,801
Real and personal property:
Land and improvements $ 9,102,865
Buildings and improvements 19,790,842
Furniture, fixtures and equipment 4,070,113
32,963,820
Less accumulated depreciation (13,754,531) 19,209,289
Deferred charges 125,181
Deferred rent receivable 98,021
Escrows and other assets 355,842
$ 23,189,409
Liabilities and Partners' Equity (Deficit)
Liabilities
Accounts payable $ 383,040
Accrued liabilities:
Interest $ 102,417
Property and other taxes 381,309
Professional fees 108,809
Other 193,776 786,311
Demand note payable - related party 25,000
Deposits and other liabilities 65,367
Mortgages payable 15,263,681
Total liabilities 16,523,399
Partners' equity (deficit)
General partner (118,178)
Limited partners 6,784,188 6,666,010
$ 23,189,409
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,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Hotel operations $1,395,109 $1,389,948 $5,654,675 $5,641,596
Rental operations 398,985 381,177 1,230,618 1,135,476
Other income 1,259 -- 11,693 327
Interest income 31,751 38,501 91,853 110,517
Total revenues 1,827,104 1,809,626 6,988,839 6,887,916
Expenses:
Hotel operations 1,334,262 1,289,668 4,275,422 4,212,271
Rental operations 92,217 98,450 317,309 303,350
Depreciation and amortization 316,696 307,712 949,242 923,110
Mortgage interest 364,253 364,576 1,088,205 1,079,514
Management fees to related
parties (Note 3) 56,115 55,931 211,199 213,484
General and administrative 26,222 27,643 88,712 94,109
Total expenses 2,189,765 2,143,980 6,930,089 6,825,838
Net (loss) income $ (362,661) $ (334,354) $ 58,750 $ 62,078
Net (loss) income per limited
partnership unit (based
on 59,905 limited partnership
units outstanding) $ (5.99) $ (5.52) $ .97 $ 1.03
<FN>
See Notes to Financial Statements
</TABLE>
c) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
(Unaudited)
General Limited
Partner Partners Total
Partners' equity (deficit) at
December 31, 1995 $(118,766) $6,726,026 $6,607,260
Net income for the nine months
ended September 30, 1996 588 58,162 58,750
Partners' equity (deficit) at
September 30, 1996 $(118,178) $6,784,188 $6,666,010
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,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 58,750 $ 62,078
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 949,242 923,110
Change in accounts:
Restricted cash -- 1,452
Accrued interest receivable (23,318) (16,931)
Accounts receivable (132,411) 11,781
Prepaid expense 101,296 4,320
Escrows and other assets (263,664) (128,092)
Deferred charges (9,043) (21,590)
Deferred rent receivable 682 (2,890)
Accounts payable 140,501 (225,440)
Accrued liabilities 186,664 150,590
Deposits and other tenant liabilities 1,350 (13,502)
Net cash provided by operating activities 1,010,049 744,886
Cash flows from investing activities:
Property improvements and replacements (310,269) (205,599)
Purchase of certificates of deposit (20,614) (27,594)
Net cash used in investing activities (330,883) (233,193)
Cash flows from financing activities:
Principal payments on mortgages payable (75,490) (64,868)
Partners' distributions paid (599,050) (599,050)
Net cash used in financing activities (674,540) (663,918)
Net increase (decrease) in cash and cash equivalents 4,626 (152,225)
Cash and cash equivalents at beginning of period 1,829,631 2,375,076
Cash and cash equivalents at end of period $1,834,257 $2,222,851
Supplemental disclosure of cash flow information:
Cash paid for interest $1,088,386 $1,079,833
<FN>
See Notes to Financial Statements
</TABLE>
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, 1996, are
not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1996. 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, 1995.
NOTE 2 - BASIS OF ACCOUNTING
The financial statements include the accounts of the Partnership, 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") and, its operating division, Perimeter
Square Shopping Center ("Perimeter Square").
Certain reclassifications have been made to the 1995 information to conform
to the 1996 presentation.
NOTE 3 - RELATED PARTY TRANSACTIONS
For the nine months ended September 30, 1996 and 1995, management fees paid
to related parties are as follows:
1996 1995
The Wynnewood Company, Inc. $ 70,121 $ 70,637
Paragon Group 28,707 29,355
Capstar Hotels 112,371 113,493
$ 211,199 $ 213,484
NOTE 4 - SUBSEQUENT EVENT
On October 7, 1996, the Partnership entered into a $1.5 million first
mortgage, bearing interest of 9.25% and secured by Perimeter Square. The
mortgage is collateralized by a first lien on the property. The mortgage
requires monthly principal and interest payments of $15,438. It is
anticipated that approximately $1.0 million in proceeds will be used to pay
down the principal on the mortgage on Tuscon with the remainder to be used
as working capital.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
For the nine months ended September 30, 1996, the Partnership realized net
income of $58,750 compared to net income of $62,078 for the nine months
ended September 30, 1995. A net loss of $362,661 was realized for the
three months ended September 30, 1996, compared to a net loss of $334,354
for the three months ended September 30, 1995. The increase in net loss
and decrease in net income for the three and nine month periods ended
September 30, 1996, compared to the corresponding periods of 1995 were the
result of increases in total expenses partially offset by increases in
total revenues. The increase in other income was primarily due to
approximately $6,000 of settlement proceeds received from a lawsuit
initiated in previous years. The increase in other income was partially
offset by a decrease in interest income for the three and nine months ended
September 30, 1996. The decrease was due to a decline in the average
balance of short-term investments outstanding for the three and nine months
ended September 30, 1996, compared to the corresponding periods of 1995.
Liquidity and Capital Resources
At September 30, 1996, the Partnership held cash on hand (including
shares of money market funds and exclusive of certificates of deposit) of
$1,834,257. The present cash reserves of the Partnership are believed to
be sufficient to meet the foreseeable needs of the Partnership.
Occupancy at Shallowford Corners Shopping Center was approximately 88%
at the end of the third quarter. Management has made a number of physical
improvements to this property from operating cash in connection with the
marketing of the property. While the Partnership has executed an agreement
to sell Shallowford, because of certain conditions that must be met,
management is unable to predict if the sale will be consummated. If it is
not, management will attempt to find another purchaser. The Perimeter
Square shopping center is currently 94% occupied and management has
recently executed a first mortgage on the property. The mortgage is in the
amount of $1.5 million, bears interest at the rate of 9.25% and matures in
three years. Proceeds from the loan are anticipated to be used to reduce
the principal amount of the 10% first mortgage on Tucson Hotel by
approximately $1 million with the remainder to be used as working capital.
Both Tucson Hotel and Green Valley Hotel are performing in line with
expectations.
Management is in the process of installing a sprinkler system at the
hotel in Green Valley, Arizona at an estimated cost of approximately
$132,000. The installation costs are being funded from existing cash
reserves.
Other than the items referred to above, the Partnership has not entered
into any material commitments for capital expenditures at any of the
properties as of September 30, 1996.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits 10.6, Perimeter Square financing documents.
The Partnership will file an amended 10-QSB to include the closing
documents for the financing of the Perimeter Square property as
an Exhibit when they are received.
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, 1996.
SIGNATURES
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 III
(Registrant)
By: DBL Properties Corporation
(General Partner)
By: /s/William D. Clements
William D. Clements
President
Date: November 6, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Drexel
Burnham Lambert Real Estate Associates III 1996 Third Quarter 10-QSB and is
qualified in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000761657
<NAME> DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,834,257
<SECURITIES> 0
<RECEIVABLES> 372,307
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 32,963,820
<DEPRECIATION> (13,754,531)
<TOTAL-ASSETS> 23,189,409
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 15,263,681
0
0
<COMMON> 0
<OTHER-SE> 6,666,010
<TOTAL-LIABILITY-AND-EQUITY> 23,189,409
<SALES> 0
<TOTAL-REVENUES> 6,988,839
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,930,089
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,088,205
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,750
<EPS-PRIMARY> .97
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
</FN>
</TABLE>
