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 June 30, 2000
[ ] 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 2-95502
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 (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
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 Securities Exchange Act of 1934 during the preceding 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
Consolidated Statement of Net Assets in Liquidation
(Unaudited)
(in thousands)
June 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 2,270
Liabilities:
Accounts payable 55
Other liabilities 199
Estimated costs during the period of liquidation 16
270
Net assets in liquidation $ 2,000
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
b)
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(Unaudited)
Six months Ended June 30, 2000
(in thousands)
Net assets in liquidation at beginning of period $ 5,240
Changes in net assets in liquidation attributed to:
Decrease in cash and cash equivalents (3,566)
Decrease in receivables and deposits (23)
Decrease in investment property (7,650)
Decrease in accounts payable 24
Decrease in tenant security deposit 27
Decrease in other liabilities 141
Decrease in due to affiliate 173
Decrease in mortgage note payable 7,650
Increase in estimated costs during the period
of liquidation (16)
Net assets in liquidation at end of period $ 2,000
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
c)
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1999 June 30, 1999
Revenues: (Restated) (Restated)
<S> <C> <C>
Rental operations $ 444 $ 940
Other income 20 38
Total revenues 464 978
Expenses:
Rental operations 99 202
General and administrative 54 144
Mortgage interest 235 472
Property taxes 35 67
Depreciation 104 208
Total expenses 527 1,093
Loss from continuing operations (63) (115)
(Loss) income from discontinued operations (256) 63
Net loss $ (319) $ (52)
Net loss allocated to general partner (1%) $ (3) $ (1)
Net loss allocated to limited partners (99%) (316) (51)
$ (319) $ (52)
Per limited partnership unit:
Loss from continuing operations (1.04) (1.91)
(Loss) income from discontinued operations (4.24) 1.04
Net loss $ (5.28) $ (0.85)
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
d)
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
consolidated STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30, 1999
(in thousands)
Cash flows from operating activities:
Net loss $ (52)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 590
Amortization of loan costs, lease commissions and
debt discount 52
Change in accounts:
Receivables and deposits (57)
Other assets 125
Accounts payable (123)
Tenant security deposit liabilities (2)
Accrued property taxes 88
Due to affiliate 200
Other liabilities 353
Net cash provided by operating activities 1,174
Cash flows used in investing activities:
Property improvements and replacements (75)
Cash flows used in financing activities:
Payments on mortgage notes payable (157)
Net increase in cash and cash equivalents 942
Cash and cash equivalents at beginning of period 2,904
Cash and cash equivalents at end of period $ 3,846
Supplemental disclosure of cash flow information:
Cash paid for interest $ 757
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
e)
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
As of December 31, 1999, Drexel Burnham Lambert Real Estate Associates III (the
"Partnership" or "Registrant") adopted the liquidation basis of accounting due
to the default of the first mortgage on Shallowford Corners on December 15,
1999, the Partnership's only property at that date. On March 7, 2000, the lender
foreclosed on the property and sold it to an unaffiliated party for $7,650,000.
As a result of the decision to liquidate the Partnership, the Partnership
changed its basis of accounting for its consolidated financial statements at
December 31, 1999, to the liquidation basis of accounting. Consequently, assets
have been valued at their estimated net realizable value and liabilities are
presented at their estimated settlement amounts. The valuation of assets and
liabilities necessarily requires many estimates and assumptions and there are
substantial uncertainties in carrying out the liquidation. The actual
realization of assets and settlement of liabilities could be higher or lower
than amounts indicated and is based upon the estimates of DBL Properties
Corporation (the "General Partner") as of the date of the consolidated financial
statements.
The statement of net assets in liquidation as of June 30, 2000, includes
approximately $16,000 of accrued costs, net of income, that the General Partner
estimates will be incurred during the period of liquidation based on the
assumption that the liquidation process will be completed during the third
quarter of 2000. These costs principally include legal and administrative
expenses. Because the success in realization of assets and the settlement of
liabilities is based on the General Partner's best estimates, the liquidation
period may be shorter than projected or it may be extended beyond the projected
period.
Principles of Consolidation
The consolidated financial statements include the accounts of the Partnership
and its 90% general partnership interest in DBL Airport Valley Limited
Partnership ("DBLAV") which owned and operated two hotels in Tucson and Green
Valley, Arizona, which were sold during 1999, and its 90% general partnership
interest in Shallowford Associates, Ltd. ("Shallowford"), which owned and
operated a shopping center in Roswell, Georgia, which was foreclosed on by the
lender on March 7, 2000. All material inter-entity transactions and balances
have been eliminated in consolidation. In addition, the consolidated financial
statements include the accounts and operations of its wholly-owned property,
Perimeter Square Shopping Center ("Perimeter Square"), which is a shopping
center in Tulsa, Oklahoma, which was sold during 1999.
Note B - Transactions with Affiliated Parties
The Registrant 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 reimbursement of certain expenses incurred by affiliates on behalf
of the Partnership.
<PAGE>
The following payments were made to the General Partner and affiliates during
the six months ended June 30, 2000 and 1999:
2000 1999
(in thousands)
Reimbursement for services of affiliates
(included in general and administrative
expense in 1999) 20 31
An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $20,000 and $31,000 for the
six months ended June 30, 2000 and 1999, respectively.
Included in other liabilities at June 30, 2000, is a $16,000 note payable to the
co-venturer in Shallowford. The note does not have any stipulated terms for
repayment and it accrues interest at 3% above prime.
AIMCO and its affiliates currently own 7,501 limited partnership units in the
Partnership representing approximately 12.52% of the outstanding units. A number
of these units were acquired pursuant to tender offers made by AIMCO or its
affiliates. It is possible that AIMCO or its affiliates will make one or more
additional offers to acquire additional limited partnership interests in the
Partnership for cash or in exchange for units in the operating partnership of
AIMCO. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters. When
voting on matters, AIMCO would in all likelihood vote the Units it acquired in a
manner favorable to the interest of the General Partner because of their
affiliation with the General Partner.
Note C - Distributions to Limited Partners
During the six months ended June 30, 2000, the Partnership distributed
approximately $2,800,000 ($46.74 per limited partnership unit) to the limited
partners consisting of approximately $1,928,000 ($32.18 per limited partnership
unit) from the sale proceeds of Perimeter Square, the Green Valley Hotel, and
the Tucson Airport Hotel and approximately $872,000 ($14.56 per limited
partnership unit) of cash from operations. There were no distributions declared
during the six months ended June 30, 1999.
Note D - Discontinued Operations
Best Western Green Valley Hotel and Tucson Airport Hotel were the only hotels
owned by the Partnership and represented one segment of the Partnership's
operations. Due to the sale of these properties, the results of the hotel
segment have been included in (loss) income from discontinued operations. The
revenues of these properties were approximately $1,715,000 and $4,011,000 for
the three and six months ended June 30, 1999. Loss from discontinued operations
was approximately $256,000 for the three months ended June 30, 2000 compared to
income from discontinued operations of approximately $63,000 for the six months
ended June 30, 1999.
<PAGE>
Note E - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership had two reportable segments: commercial and hotel properties.
The Partnership's commercial property segment consisted of two retail shopping
centers, one in Arizona and one in Georgia. The Partnership leased commercial
space to tenants under various lease terms. The shopping center located in
Arizona was sold to an unrelated party during 1999 and the shopping center
located in Georgia was foreclosed by the lender in March 2000. The Partnership's
hotel property segment consisted of two hotels in Arizona. The two hotel
properties held by the Partnership were sold to unrelated parties during 1999.
Therefore, the hotel segment is reflected as discontinued operations (see "Note
D - "Discontinued Operations" for further discussion). Effective December 31,
1999 the Partnership adopted the liquidation basis of accounting (see "Note A -
Basis of Presentation"). As a result, segment information is only provided for
the three and six month periods ended June 30, 1999.
Measurement of segment profit or loss:
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segments are the same as
those described in the Partnership's Annual Report on Form 10-KSB for the year
ended December 31, 1999.
Factors management used to identify the enterprise's reportable segment:
The Partnership's reportable segments consisted of investment properties that
offered different products and services. The reportable segments were each
managed separately because they provided distinct services with different types
of products and customers.
Segment information for the three and six months ended June 30, 1999, 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.
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999 Hotel Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $ -- $ 444 $ -- $ 444
Other income -- 1 19 20
Interest expense (income) -- 244 (9) 235
Depreciation -- 104 -- 104
General and administrative
expense -- -- 54 54
Loss from discontinued
operations (256) -- -- (256)
Segment loss (256) (37) (26) (319)
Six Months Ended June 30, 1999 Hotel Commercial Other Totals
(discontinued)
Rental income $ -- $ 940 $ -- $ 940
Other income -- 4 34 38
Interest expense (income) -- 490 (18) 472
Depreciation -- 208 -- 208
General and administrative
expense -- -- 144 144
Income from discontinued
operations 63 -- -- 63
Segment profit (loss) 63 (23) (92) (52)
Total assets 8,939 10,566 1,785 21,290
Capital expenditures for
investment properties 72 3 -- 75
</TABLE>
Note F - Legal Proceedings
The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature arising in the ordinary course of business.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 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 Partnership from time to time.
The discussion of the Partnership'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 Partnership'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.
As of December 31, 1999 the Partnership adopted the liquidation basis of
accounting due to the default of the mortgage at Shallowford Corners on December
15, 1999. On March 7, 2000 the lender foreclosed on the property and sold it to
an unrelated party for $7,650,000. Consequently, assets have been valued at
their estimated net realizable value and liabilities are presented at their
estimated settlement amounts, including estimated costs associated with carrying
out the liquidation. The valuation of assets and liabilities necessarily
requires many estimates and assumptions and there are substantial uncertainties
in carrying out the liquidation. The actual realization of assets and settlement
of liabilities could be higher or lower than the amounts indicated and is based
upon the General Partner's estimates as of the date of the financial statements.
The statement of net assets in liquidation as of June 30, 2000, includes
approximately $16,000 of accrued costs, net of income, that the General Partner
estimates will be incurred during the period of liquidation based on the
assumption that the liquidation process will be completed during the third
quarter of 2000. These costs principally include legal and administrative
expenses. Because the success in realization of assets and the settlement of
liabilities is based on the General Partner's best estimates, the liquidation
period may be shorter than projected or it may be extended beyond the projected
period.
During the six months ended June 30, 2000, the Partnership distributed
approximately $2,800,000 ($46.74 per limited partnership unit) to the limited
partners consisting of approximately $1,928,000 ($32.18 per limited partnership
unit) from the sale proceeds of Perimeter Square, the Green Valley Hotel, and
the Tucson Airport Hotel and approximately $872,000 ($14.56 per limited
partnership unit) of cash from operations. There were no distributions declared
during the six months ended June 30, 1999.
<PAGE>
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 quarter ended June 30, 2000.
<PAGE>
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
By: DBL Properties Corporation
Its General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date:
