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 March 31, 1997
or
[ ] 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)
CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 3,393,337
Restricted--tenant security deposits 18,546
Accounts receivable 542,988
Prepaid expenses 124,273
Real and personal property:
Land and improvements $ 9,102,865
Buildings and improvements 19,909,287
Furniture, fixtures and equipment 4,116,504
33,128,656
Less accumulated depreciation (14,375,066) 18,753,590
Deferred charges 196,897
Deferred rent receivable 81,962
Deposits and other assets 195,780
$ 23,307,373
Liabilities and Partners' Equity (Deficit)
Liabilities
Accounts payable $ 451,664
Accrued liabilities:
Interest $ 71,749
Property and other taxes 216,406
Professional fees 53,168
Other 214,689 556,012
Demand note payable - related party 25,000
Deposits and other liabilities 67,701
Mortgages payable 15,660,595
Total liabilities 16,760,972
Partners' equity (deficit)
General partner $ (113,384)
Limited partners (60,095 units issued and
59,905 units outstanding) 6,659,785 6,546,401
$ 23,307,373
See Notes to Consolidated Financial Statements
b) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
1997 1996
Revenues:
Hotel operations $ 2,382,932 $ 2,404,448
Rental operations 465,473 445,463
Other income 37,024 36,614
Interest income 37,696 21,511
Total revenue 2,923,125 2,908,036
Expenses:
Hotel operations 1,487,855 1,525,067
Rental operations 121,639 118,564
Depreciation and amortization 311,722 296,476
Mortgage interest 371,974 360,674
General and administrative 30,177 29,297
Total expenses 2,323,367 2,330,078
Net income $ 599,758 $ 577,958
Net income per limited partnership unit $ 9.91 $ 9.55
Average limited partner units outstanding 59,905 59,905
See Notes to Consolidated Financial Statements
c) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
(A Limited Partnership)
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
(Unaudited)
For the three months ended March 31, 1997
General Limited
Partner Partners Total
Partners' equity (deficit) at
December 31, 1996 $ (119,382) $6,066,025 $5,946,643
Net income for the three months
ended March 31, 1997 5,998 593,760 599,758
Partners' equity (deficit) at
March 31, 1997 $ (113,384) $6,659,785 $6,546,401
See Notes to Consolidated Financial Statements
d) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 599,758 $ 577,958
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 311,722 296,476
Change in accounts:
Restricted cash 1,436 (2,904)
Accrued interest receivable -- (5,563)
Accounts receivable (251,550) (255,666)
Prepaid expenses (40,486) 9,815
Escrows and other assets (34,009) (99,460)
Deferred charges (20,581) (8,432)
Deferred rent receivable 2,918 (3,653)
Accounts payable 52,035 49,887
Accrued liabilities 62,076 (23,800)
Deposits and other liabilities (8,096) 2,252
Net cash provided by operating activities 675,223 536,910
Cash flows from investing activities:
Property improvements and replacements (65,157) (35,204)
Net cash used in investing activities (65,157) (35,204)
Cash flows from financing activities:
Principal payments on mortgages payable (64,427) (24,535)
Distributions to partners (599,050) (599,050)
Net cash used in financing activities (663,477) (623,585)
Net decrease in cash and cash equivalents (53,411) (121,879)
Cash and cash equivalents at beginning of period 3,446,748 1,829,631
Cash and cash equivalents at end of period $ 3,393,337 $ 1,707,752
Supplemental disclosure of cash flow information:
Cash paid for interest $ 371,983 $ 360,674
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
e) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
(A Limited Partnership)
Notes to Consolidated Financial Statements
March 31, 1997
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated 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 month period
ended March 31, 1997, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1997. 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, 1996.
NOTE 2 - BASIS OF ACCOUNTING
The consolidated financial statements include the accounts of the Partnership
and its 90% general partnership interest in DBL Airport Valley Limited
Partnership ("DBLAV") which owns and operates two hotels in Tucson and Green
Valley, Arizona, and its 90% general partnership interest in Shallowford
Associates, Ltd. ("Shallowford"), which owns and operates a shopping center in
Roswell, Georgia. All material intercompany transactions and balances have been
eliminated in consolidation.
In addition, the consolidated financial statements include the accounts and
operations of the Partnership's operating division, Perimeter Square Shopping
Center ("Perimeter Square"), which operates a shopping center complex located in
Tulsa, Oklahoma.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 presentation.
NOTE 3 - RELATED PARTY TRANSACTIONS
For the three month periods ended March 31, 1997 and 1996, management fees paid
to related parties are as follows:
1997 1996
The Wynnewood Company, Inc. $ 38,728 $ 36,406
Paragon Group 10,912 9,924
Capstar Hotels 66,979 62,895
$ 116,619 $ 109,225
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
For the three months ended March 31, 1997, the Partnership realized net income
of $599,758 compared to net income of $577,958 for the three months ended March
31, 1996. The increase in net income is attributable primarily to increased
interest income. The increase in interest income is directly related to an
increase in the average balance of cash and cash equivalents outstanding for the
period ended March 31, 1997, compared to the corresponding period of 1996.
Expenses for the three month periods ended March 31, 1997 and 1996 were
comparable.
Liquidity and Capital Resources
At March 31, 1997, the Partnership held cash on hand (including shares of money
market funds) of $3,393,337. The present cash reserves of the Partnership are
believed to be sufficient to meet the foreseeable needs of the Partnership.
During 1996, management negotiated and executed a sale contract for the
Shallowford Corners Shopping Center. The main tenant in that center, occupying
45,528 sq. ft., approximately 39% of the leaseable space, was approached by a
competing center to vacate its space and occupy space in the competing center.
Management has had a number of discussions with that tenant regarding expanding
and improving the space it occupies as well as adding additional parking spaces
to the center. The tenant is presently studying it's alternatives and the buyer
has expressed its unwillingness to proceed with the acquisition until the
tenant's plan is known. The first mortgage of $7,750,000 on the property, which
matured on April 15, 1997, was anticipated to be repaid from the proceeds of the
sale. Management has commenced discussions with the holder of the mortgage
regarding an extension of the maturity pending the resolution of this situation.
There can be no certainty that this situation will be satisfactorily resolved or
that a satisfactory agreement will be reached with the lender. If not
satisfactorily resolved, the property could be lost in a foreclosure sale.
The Perimeter Square shopping center is currently 92% occupied and management
has executed new leases with two existing tenants, occupying 28,716 sq. ft. or
almost half of the center, whose leases were scheduled to expire during 1997.
Both the Tucson Hotel and Green Valley Hotel are performing in line with
expectations.
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
March 31, 1997. On March 14, 1997, the Partnership paid a distribution to it's
limited partners of $10 per unit.
PART II - OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Partnership has defaulted upon the $7,750,000 first mortgage on Shallowford
Corners as discussed in Item 2. "Liquidity and Capital Resources," which
discussion is hereby incorporated into this Item by reference.
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 quarter ended March 31, 1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
such 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:May 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Drexel
Burnham Lambert Real Estate Associates III 1997 First 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,393,337
<SECURITIES> 0
<RECEIVABLES> 542,988
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 33,128,656
<DEPRECIATION> 14,375,066
<TOTAL-ASSETS> 23,307,373
<CURRENT-LIABILITIES> 0
<BONDS> 15,660,595
0
0
<COMMON> 0
<OTHER-SE> 6,546,401
<TOTAL-LIABILITY-AND-EQUITY> 23,307,373
<SALES> 0
<TOTAL-REVENUES> 2,923,125
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,323,367
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 371,974
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 599,758
<EPS-PRIMARY> 9.91
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
</FN>
</TABLE>
