UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-1
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- - --- ACT OF 1934
For the fiscal year ended December 31, 1995
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-16816
SUMMIT TAX EXEMPT L.P. III
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3442249
- - --------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
625 Madison Avenue, New York, New York 10022
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 421-5333
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Beneficial Unit Certificates
Indicate by check mark whether the registrant: (1) has 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
Agreement of Limited Partnership, dated as of February 25, 1987, included
as part of the Registration Statement filed with the Securities and Exchange
Commission on April 6, 1987 pursuant to Rule 424(b) under the Securities Act of
1933 is incorporated by reference into Part IV of this Annual Report on Form
10-K.
Index to exhibits may be found on pages 31
Page 1 of 39
<PAGE>
PART I
Item 1. Business.
General
- - -------
Summit Tax Exempt L.P. III (the "Registrant"), a Delaware limited
partnership, was formed on February 25, 1987 and will terminate on December 31,
2021 unless terminated sooner under the provisions of the Agreement of Limited
Partnership (the "Partnership Agreement"). The Registrant was formed to invest
in tax-exempt participating first mortgage revenue bonds ("First Mortgage Bonds"
or "FMBs") issued by various state or local governments or their agencies or
authorities. The FMBs are secured by participating first mortgage loans
("Mortgage Loans") on multi-family residential apartment properties
("Properties") developed by unaffiliated developers. The Properties are garden
apartment projects located in California (2), Florida (1) and Georgia (2). These
investments were made with the proceeds from the initial sale of 3,081,625
Beneficial Unit Certificates ("BUC$"). The Registrant's fiscal year for book and
tax purposes ends on December 31.
The Registrant is engaged solely in the business of investing in
FMBs; therefore, presentation of industry segment information is not applicable.
General Partners
- - ----------------
The general partners of the Registrant are Prudential-Bache
Properties, Inc. ("PBP") and Related Tax Exempt Associates III, Inc. (the
"Related General Partner") (collectively, the "General Partners"). Related BUC$
Associates III, Inc. (the "Assignor Limited Partner"), which acquired and holds
limited partnership interests on behalf of those persons who purchase BUC$, has
assigned to those persons substantially all of its rights and interest in and
under such limited partnership interests. The Related General Partner and the
Assignor Limited Partner are under common ownership.
Competition
- - -----------
The General Partners and/or their affiliates have formed, and may
continue to form, various entities to engage in businesses which may be
competitive with the Registrant.
The Registrant's business is affected by competition to the extent
that the underlying Properties from which it derives interest and, ultimately,
principal payments, may be subject to competition relating to rental rates and
amenities from comparable neighboring properties.
Structure of First Mortgage Bonds
- - ---------------------------------
The principal and interest payments on each FMB are payable only from
the cash flows, including proceeds in the event of sale, from the Properties
underlying the FMBs. None of these FMBs constitute a general obligation of any
state or local government, agency or authority. The FMBs are secured by the
Mortgage Loans on the underlying Properties and the structure of each Mortgage
Loan mirrors the structure of the corresponding FMB.
Unless otherwise modified, the principal of the FMBs will not be
amortized during their respective terms (which are generally up to 24 years) and
will be required to be repaid in lump sum "balloon" payments at the expiration
of the respective terms or at such earlier times as the Registrant may require
pursuant to the terms of the bond documents. The Registrant has a right to
require redemption of the FMBs approximately twelve years after their issuance.
The Registrant anticipates holding the FMBs for approximately 12 to 15 years
from the date of issuance; however, it can and may elect to hold until maturity.
In addition to the stated rates of interest ranging from 8.0% to 9.0%
per annum, each of the FMBs provides for "contingent interest" which is equal
to: (a) an amount equal to 50% to 100% of net property cash flow
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<PAGE>
and 75% to 100% of net sale or refinancing proceeds until the borrower has paid,
during the post-construction period, annually compounded interest at 9.0% on a
cumulative basis, and thereafter (b) an amount equal to 25% of remaining net
property cash flow and 25% of remaining net sale or refinancing proceeds until
the borrower has paid interest at a simple annual rate of 16% over the term of
the FMB. Both the stated and contingent rate interest are exempt from federal
income taxation. The Registrant has not received any contingent interest to
date.
In order to protect the tax-exempt status of the FMBs, the owners of
the Properties are required to enter into certain agreements to own, manage and
operate such Properties in accordance with requirements of the Internal Revenue
Code.
The following FMBs' interest income exceeded 15% of the Registrant's
total revenue for each of the three years in the period ended December 31, 1995:
1995 1994 1993
---- ---- ----
Lakepoint 29% 29% 29%
Sunset Village 21% 22% 22%
Orchard Mill 19% 21% 21%
Sunset Creek 15% 16% 16%
Players Club 16% * *
* FMB interest income was less than 15% of the Registrant's total revenue for
the year.
Bond Modifications/Forbearance Agreements
- - -----------------------------------------
Forbearance agreements have been executed with respect to all of the
Properties. During 1991, the Registrant entered into a forbearance agreement
with the owner of the Lakepoint property allowing interest payments at a pay
rate of 7.5% in 1991, 8.0% in 1992 and 8.5% in 1993. Due to weakness in the
market, in June 1993, the forbearance agreement was further modified to allow
for a pay rate of 7.5% from January 1992 through March 1993 and 6.0% from April
1993 through December 1995. In May 1996, the General Partners granted an
extension of the forbearance agreement at 6.0% through December 15, 1997. The
Registrant entered into a forbearance agreement with the Orchard Mill property
owner in 1991 which permitted interest to be paid only to the extent of the net
cash flow from the property.
In 1992, the Registrant entered into a forbearance agreement with the
owner of the Players Club property. This agreement was subsequently modified on
January 1, 1994, January 1, 1995, and again on January 1, 1996 to require
minimum debt service payments of 6.0% through the end of 1994 and 7.0% for 1995
and 1996.
Forbearance agreements were also entered into with the owner of the
Sunset Village and Sunset Creek properties in 1992 allowing debt service
payments at a rate of 7.0% per annum through April 1993 at which time the pay
rate increased to 7.25% and was scheduled to increase in annual increments to
the stated rate of 8.5% in May 1996. Effective with the May 1, 1995 payment
date, the Sunset Village and Sunset Creek FMBs have made payments based on the
monthly net cash flow generated by the operations of the underlying properties
in accordance with the terms of the agreement outlined below. Effective as of
August 1, 1995, the original owner and obligor of the Sunset Creek and Sunset
Village FMBs transferred the deeds to the underlying properties to an affiliate
of the Related General Partner for limited consideration. Pursuant to the
agreement, the Related General Partner's affiliate, who has not made an equity
investment in the underlying property, assumed the day-to-day responsibilities
and obligations of operating the properties. The Registrant receives the monthly
net cash generated by these properties as payment toward debt service.
The determination as to whether it is in the best interest of the
Registrant to enter into forbearance agreements on the FMBs, or alternatively,
to pursue its remedies under the loan documents, including foreclosure, is based
upon several factors. These factors include, but are not limited to, property
performance, owner cooperation and projected legal costs. With respect to all
five of the Registrant's FMBs, the General Partners have determined that
forbearance represented the better of the alternatives.
-3-
<PAGE>
Bond Modifications/Forbearance Agreements (continued)
- - -----------------------------------------
With respect to all the FMBs, the difference between the pay rate and
the original stated rate is deferred and is payable out of available future cash
flow or ultimately from sales or refinancing proceeds. See the table below for
information regarding the rates paid on the FMBs in 1995. In 1995, all borrowers
paid at least the minimum interest rate set forth in their respective
forbearance agreement except for those FMBs where interest is paid to the extent
of the property's net cash flow.
-4-
<PAGE>
SUMMIT TAX EXEMPT L.P. III
(a limited partnership)
The following table lists the FMBs that the Registrant owns together with the
occupancy and current rental rates of the underlying properties:
<TABLE>
<CAPTION>
Carrying Average Minimum
Face Amount Final Interest Stated Pay Rate at
Closing Amount at December Completion Rate Paid Interest December 31,
Property Date of Bond 31, 1995 (C) Date in 1995* Rate* 1995*
- - -------- ------- ------- ------------ ---------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Player's Club,
Fort Myers, FL (A) 8/14/87 $ 7,200,000 $ 7,383,769 12/85 7.00% 8.00% 7.00%
Lakepoint,
Dekalb City, GA 11/18/87 15,100,000 14,886,559 3/89 6.10 8.50 6.00
Sunset Village,
Lancaster, CA 3/25/88 11,375,000 9,178,214 10/89 6.40 8.50 (B)
Sunset Creek,
Lancaster, CA 3/25/88 8,275,000 5,933,767 10/89 6.50 8.50 (B)
Orchard Mill,
Atlanta, GA 5/1/89 10,500,000 9,304,276 9/90 5.70 9.00 (B)
----------- -----------
$52,450,000 $46,686,585
=========== ===========
</TABLE>
Occupancy Rental Rates No. of
February 11, at December Rental
Property 1996 31, 1995 Units
- - -------- ----------- -------- -----
Player's Club,
Fort Myers, FL (A) 87.6% $450-645 288
Lakepoint,
Dekalb City, GA 96.1 485-705 360
Sunset Village,
Lancaster, CA 86.1 460-680 204
Sunset Creek,
Lancaster, CA 84.1 460-680 148
Orchard Mill,
Atlanta, GA 96.2 439-665 238
*The rate paid represents the interest recorded by the Registrant while the
stated rate represents the coupon rate of the FMB and the minimum pay rate
represents the minimum rate required to be paid under the respective forbearance
agreements.
(A) Summit Tax Exempt LP II, of which the general partners are either the same
or affiliates of the General Partners of the Registrant, acquired the other
$2,500,000 of the Players Club bond issue.
(B) Interest on this FMB is paid to the extent of the property's net cash flow.
(C) The FMBs are carried at their estimated fair values at December 31, 1995.
-5-
<PAGE>
Employees
- - ---------
The Registrant has no employees. Management and administrative
services for the Registrant are performed by the General Partners and their
affiliates pursuant to the Partnership Agreement. See Note 5 to the financial
statements in Item 8.
Item 2. Properties
The Registrant does not own or lease any property.
Item 3. Legal Proceedings
This information is incorporated by reference to Note 6 to the
financial statements in Item 8.
Item 4. Submission of Matters to a Vote of BUC$holders
None
PART II
Item 5. Market for the Registrant's BUC$ and Related BUC$holder Matters.
As of March 1, 1996 there were 3,011 holders of record owning
3,081,625 BUC$. A significant secondary market for the BUC$ has not developed
and it is not expected that one will develop in the future. There are also
certain restrictions set forth in Sections 12 and 13 of the Partnership
Agreement limiting the ability of a BUC$holder to transfer their BUC$.
Consequently, BUC$holders may not be able to liquidate their investments in the
event of emergency or for any other reason.
Quarterly cash distributions per BUC paid during 1995 and 1994 were
as follows:
Quarter Ended 1995 1994
------------- ------ ------
March 31 $0.22 $0.22
June 30 $0.22 0.22
September 30 $0.22 0.22
December 31 $0.22 0.22
There are no material legal restrictions upon the Registrant's present
or future ability to make distributions in accordance with the provisions of the
Partnership Agreement. Cash distributions paid in 1995 and 1994 were funded from
current and previously undistributed cash flow from operations. No portion of
the distributions paid to the BUC$holders in 1994 represents a return of capital
on a generally accepted accounting principles (GAAP) basis; however,
approximately $213,000 of the $2,712,000 paid to BUC$holders in 1995 represents
a return of capital on a GAAP basis. (The return of capital on a GAAP basis is
calculated as BUC$holder distributions less net income allocated to
BUC$holders.) The Registrant currently expects that cash distributions will
continue to be paid, in the foreseeable future, from cash generated from
operations. For a discussion of other factors that may affect the amount of
future distributions, see Management's Discussion and Analysis of Financial
Conditions and Results of Operations in Item 7.
-6-
<PAGE>
Item 6. Selected Financial Data.
The information set forth below presents selected financial data of
the Registrant. Additional financial information is set forth in the financial
statements and notes thereto contained in Item 8 hereof.
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Interest income from
participating first
mortgage bonds $ 3,185,563 $ 3,444,722 $ 3,460,427 $ 3,510,977 $ 3,688,527
=========== =========== =========== =========== ===========
Provision for loss on
impairment of assets $ 0 $ 0 $ 0 $ 4,500,000 $ 0
=========== =========== =========== =========== ===========
Net income (loss) $ 2,812,119 $ 3,048,116 $ 2,544,011 $(1,503,436) $ 3,266,373
=========== =========== =========== =========== ===========
Net income (loss) per BUC $ .81 $ .89 $ .73 $ (.56) $ .96
=========== =========== =========== =========== ===========
Total assets $48,150,516 $48,178,868 $49,675,109 $50,864,951 $56,380,022
=========== =========== =========== =========== ===========
Distributions to BUC$holders $ 2,711,830 $ 2,711,830 $ 3,451,420 $ 3,705,346 $ 3,697,033
=========== =========== =========== =========== ===========
Distributions per BUC $ .88 $ .88 $ 1.12 $ 1.2024 $ 1.1997
=========== =========== =========== =========== ===========
</TABLE>
-7-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
- - -------------------------------
Summit Tax Exempt L.P. III ("the Registrant") has invested in five
tax-exempt participating First Mortgage Bonds ("FMBs") issued by various state
or local governments or their agencies or authorities. The FMBs are secured by
participating first mortgage loans on the properties.
At the beginning of the year, the Registrant had cash and temporary
investments of approximately $642,000. After the payment of distributions and
receipt of the net cash flow from operations, the Registrant ended the year with
approximately $598,000 in cash and temporary investments. The fourth quarter
distribution of approximately $678,000 ($.22 per BUC) from cash flow from
operations was paid to BUC$holders in February 1996. Interest payments from FMBs
are anticipated to provide sufficient liquidity to meet the operating
expenditures of the Registrant in future years and to fund distributions.
Management is not aware of any trends or events, commitments or
uncertainties that will impact liquidity in a material way. The Registrant's
investments in mortgage loans are secured by a Registrant interest in properties
which are diversified by location so that if one area of the country is
experiencing downturns in the economy, the remaining properties may be
experiencing upswings.
Results of Operations
- - ---------------------
Pursuant to a review of the Registrant's financial statements by
the SEC staff in 1996 and in accordance with others in the industry, the
Registrant agreed that it will account for its investments in the FMBs as debt
securities under the provisions of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
("SFAS 115") effective January 1, 1994, and has restated its 1995 and 1994
financial statements to reflect this change in accounting treatment.
The change in accounting treatment does not affect cash flow or
payments received by the Registrant from the properties, level of distribution
to BUC$Holders, the tax-exempt nature of the Partnership's net income or the
obligation under the FMBs.
The Registrant has a right to require redemption of the FMBs
approximately twelve years after their issuance. The Registrant anticipates
holding the FMBs for approximately 12 to 15 years from the date of issuance;
however, it can elect to hold until maturity. As such, SFAS 115 requires the
Registrant to classify these investments as "available for sale." Accordingly,
effective January 1, 1994, investments in FMBs are carried at their estimated
fair values, with unrealized gains and losses reported in a separate component
of partners' capital. The cumulative effect of adopting this accounting was a
decrease in partners' capital at January 1, 1994 of approximately $476,000 due
to unrealized holding losses. This accounting also resulted in cumulative net
unrealized losses of approximately $1,263,000 and $1,437,000 at December 31,
1995 and 1994, respectively. Again, unrealized holding gains or losses do not
affect the cash flow generated from property operations, distributions to
BUC$holders, the characterization of the tax-exempt income stream or the
financial obligations under the FMBs.
The Registrant periodically evaluates each FMB to determine
whether a decline in fair value below the FMB's cost basis is other than
temporary. Such a decline is considered to be other than temporary if, based on
current information and events, it is probable that the Registrant will be
unable to collect all amounts due according to the existing contractual terms of
the bonds. If the decline is judged to be other than temporary, the cost basis
of the bond is written down to its then estimated fair value, with the amount of
the write-down accounted for as realized loss.
Because the FMBs are not readily marketable, the Registrant
estimates fair value for each bond as the present value of its expected cash
flows using an interest rate for comparable tax-exempt investments. This process
is based upon projections of future economic events affecting the real estate
collateralizing the bonds, such
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<PAGE>
as property occupancy rates,
rental rates, operating cost inflation and market capitalization rates, and upon
determination of an appropriate market rate of interest, all of which are based
on good faith estimates and assumptions developed by the Registrant's
management. Changes in market conditions and circumstances may occur which would
cause these estimates and assumptions to change, therefore, actual results may
vary from the estimates and the variance may be material.
1995 vs. 1994
- - -------------
Net income decreased by approximately $236,000 for the year ended
December 31, 1995 as compared to the corresponding period in 1994 for the
following reasons.
Total interest income from debt service for the FMBs decreased by
approximately $259,000 for the year ended December 31, 1995 as compared to the
corresponding period in 1994 primarily due to reduced interest received from the
Sunset Village and Sunset Creek FMBs. This decrease was partially offset by an
increase in interest paid on the Player's Club FMB as required by the terms of
its forbearance agreement.
Interest income from temporary investments increased approximately
$7,000 for the year ended December 31, 1995 as compared to the corresponding
period in 1994 primarily due to higher interest rates and invested balances.
General and administrative expenses increased approximately $53,000
for the year ended December 31, 1995 as compared to the corresponding period in
1994 primarily due to increased legal fees in 1995 and increased costs
associated with the administration of the Registrant.
1994 vs. 1993
- - -------------
Net income increased by approximately $504,000 for the year ended
December 31, 1994 as compared to the corresponding period in 1993 for the
reasons discussed below.
Total interest income from debt service for the FMBs decreased by
approximately $16,000 for the year ended December 31, 1994 as compared to the
corresponding period in 1993. This decrease results from reduced interest
received from the Players Club reflecting the terms of a modification to the
forbearance agreement with the property owner during 1994. This decrease was
partially offset by an increase in interest received from all of the
Registrant's other FMBs.
During 1994, a provision for uncollectible interest was recorded in
the amount of approximately $69,000 relating to the Orchard Mill property in
order to reserve the outstanding interest receivable balance. In 1993, a
provision of $458,000 was recorded to reserve the outstanding interest
receivable balance for the Lakepoint FMB.
General and administrative expenses decreased by approximately
$125,000 for the year ended December 31, 1994 as compared to the corresponding
period in 1993. The decrease is due primarily to a decrease in legal fees
relating to the Registrant and a reduction in the costs associated with the
administration for the Registrant.
General
- - -------
The determination as to whether it is in the best interest of the
Registrant to enter into forbearance agreements on the FMBs, or alternatively,
to pursue its remedies under the loan documents, including foreclosure, is based
upon several factors including, but not limited to, property performance, owner
cooperation and projected legal costs.
The difference between the stated interest rates and the rates paid
by FMBs is not accrued as interest income for financial reporting purposes. The
accrual of interest at the stated rate will resume once a property's ability to
pay the stated interest rate has been adequately demonstrated. Interest income
of approximately $969,000, $963,000 and $1,020,000 was not recognized for the
years ended December 31, 1995, 1994, and 1993, respectively.
-9-
<PAGE>
From time to time, certain property owners have elected to supplement
the cash flow generated by the properties to meet the required FMB interest
payments. There can be no assurance that in the future any property owner will
elect to supplement property cash flow to satisfy bond interest requirements if
necessary.
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<PAGE>
SUMMIT TAX EXEMPT L.P. III
(a limited partnership)
Property Information
- - --------------------
The following table lists the FMBs that the Registrant owns together
with occupancy rates of the underlying properties:
<TABLE>
<CAPTION>
Carrying
Amount February 11, Average Stated Minimum Pay
Face Amount at December 1996 Interest Rate Interest Rate at December
Property Location of FMB 31,1995 (D) Occupancy Paid in 1995* Rate* 31,1995*
- - -------- -------- ----------- ----------- ------------ ------------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Players Club (A) Fort Myers, FL $ 7,200,000 $ 7,383,769 87.6% 7.00% 8.00% 7.00%
Lakepoint Dekalb County, GA 15,100,000 14,886,559 96.1 6.10 8.50 6.00
Sunset Village Lancaster, CA 11,375,000 9,178,214 86.1 6.40 8.50 (C)
Sunset Creek Lancaster, CA 8,275,000 5,933,767 84.1 6.50 8.50 (C)
Orchard Mill Atlanta, GA 10,500,000 9,304,276 96.2 5.70 9.00 (C)
---------- ----------
$52,450,000 $46,686,585
=========== ===========
</TABLE>
*The rate paid represents the interest recorded by the Registrant while the
stated rate represents the interest rate of the FMB and the minimum pay rate
represents the minimum rate required to be paid under the respective forbearance
agreements.
(A) Summit Tax Exempt L.P. II, of which the general partners are either the
same or affiliates of the General Partners of the Registrant, acquired the
other $2,500,000 of the Players Club bond issue.
(B) Forbearance agreements have been executed with the owners of all of the
properties collateralizing the Registrant's FMBs. See Note 3 to the
financial statements in Item 8 for a description of each agreement.
(C) Interest on this FMB is paid to the extent of the property's net cash flow.
(D) The FMBs are carried at their estimated fair values at December 31, 1995.
-11-
<PAGE>
Item 8. Financial Statements and Supplementary Data.
(a) 1. Financial Statements Page
-------------------- ----
Independent Auditors' Report 13
Statements of Financial Condition as of December
31, 1995 and 1994 14
Statements of Income for the years ended December
31, 1995, 1994 and 1993 15
Statements of Changes in Partners' Capital
(Deficit) for the years ended December 31, 1995,
1994 and 1993 16
Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 17
Notes to Financial Statements 18
-12-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Summit Tax Exempt L.P. III
New York, New York
We have audited the accompanying statements of financial condition
of Summit Tax Exempt L.P. III (a Delaware Limited Partnership) as of December
31, 1995 and 1994, and the related statements of income, changes in partners'
capital (deficit) and cash flows for each of the three years in the period ended
December 31, 1995. Our audits also included the financial statement schedule
listed in the Index at Item 14. These financial statements and financial
statement schedule are the responsibility of the General Partners. Our
responsibility is to express an opinion on the financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by the General Partners, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Summit Tax Exempt L.P. III as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note 2, the accompanying financial statements and
the financial statement schedule have been restated to account for the
Partnership's investments in tax-exempt participating first mortgage revenue
bonds as debt securities.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
New York, New York
March 20, 1996 (August 12, 1996 as to Notes 2 and 3 and the financial statement
schedule)
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<PAGE>
SUMMIT TAX EXEMPT L.P. III
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
ASSETS
December 31,
--------------------------
1995 1994
----------- -----------
Participating first mortgage bonds-at fair value $46,686,585 $46,512,514
Temporary investments 250,000 566,327
Cash and cash equivalents 347,908 75,950
Interest receivable, net 132,128 227,736
Deferred bond selection fees, net 729,686 791,018
Other assets 4,209 5,323
----------- -----------
Total assets $48,150,516 $48,178,868
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 77,880 $ 82,065
Due to affiliates 43,427 24,361
----------- -----------
Total liabilities 121,307 106,426
----------- -----------
Contingencies
Partners' capital (deficit):
BUC$holders (3,081,625 BUC$
issued and outstanding) 49,456,927 49,669,885
General Partners (164,303) (159,957)
Net unrealized loss on
participating first mortgage bonds (1,263,415) (1,437,486)
----------- -----------
Total partners' capital 48,029,209 48,072,442
----------- -----------
Total liabilities and partners' capital $48,150,516 $48,178,868
=========== ===========
See accompanying notes to financial statements
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<PAGE>
SUMMIT TAX EXEMPT L.P. III
(a limited partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Interest income:
Participating first mortgage bonds $3,185,563 $3,444,722 $3,460,427
Temporary investments 20,752 13,908 16,770
---------- ---------- ----------
Total revenues 3,206,315 3,458,630 3,477,197
---------- ---------- ----------
Expenses:
Provision for uncollectible interest 0 69,405 458,430
General and administrative 201,739 148,351 273,033
Loan servicing fees 131,125 131,125 131,125
Amortization of deferred bond selection fees 61,332 61,633 61,633
Amortization of organizational costs 0 0 8,965
---------- ---------- ----------
Total expenses 394,196 410,514 933,186
---------- ---------- ----------
Net income $2,812,119 $3,048,116 $2,544,011
========== ========== ==========
Allocation of Net Income:
BUC$holders $2,498,872 $2,730,149 $2,236,126
========== ========== ==========
General Partners:
Special distribution $ 262,250 $ 262,250 $ 262,250
Other 50,997 55,717 45,635
---------- ---------- ----------
$ 313,247 $ 317,967 $ 307,885
========== ========== ==========
Net income per BUC $ .81 $ .89 $ .73
========== ========== ==========
</TABLE>
See accompanying notes to financial statements
-15-
<PAGE>
SUMMIT TAX EXEMPT L.P. III
(a limited partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Net Unrealized
Gain (Loss) on
Participating First
Total BUC$holders General Partners Mortgage Bonds
----------- ----------- ---------------- -------------------
<S> <C> <C> <C> <C>
Partners' capital (deficit) -
December 31, 1992 $50,731,331 $50,866,860 $(135,529)
Net income 2,544,011 2,236,126 307,885
Distributions (3,784,107) (3,451,420) (332,687)
----------- ----------- ---------
Partners' capital (deficit) -
December 31, 1993 49,491,235 49,651,566 (160,331)
Cumulative effect through
January 1, 1994 of
accounting change (Note 2) (475,556) 0 0 $ (475,556)
Net income 3,048,116 2,730,149 317,967 0
Distributions (3,029,423) (2,711,830) (317,593) 0
Net change in fair value of-
participating first mortgage
bonds (961,930) 0 0 (961,930)
----------- ----------- --------- ------------
Partners' capital (deficit) -
December 31, 1994 48,072,442 49,669,885 (159,957) (1,437,486)
Net income 2,812,119 2,498,872 313,247 0
Distributions (3,029,423) (2,711,830) (317,593) 0
Net change in fair value of-
participating first mortgage
bonds 174,071 0 0 174,071
----------- ----------- --------- ------------
Partners' capital (deficit) -
December 31, 1995 $48,029,209 $49,456,927 $(164,303) $ (1,263,415)
=========== =========== ========= ============
</TABLE>
See accompanying notes to financial statements
-16-
<PAGE>
SUMMIT TAX EXEMPT L.P. III
(a limited partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Interest received $3,301,923 $3,448,922 $ 3,217,064
Fees and expenses paid (316,869) (280,770) (354,117)
---------- ---------- ----------
Net cash provided by operating activities 2,985,054 3,168,152 2,862,947
---------- ---------- ----------
Cash flows from investing activities:
Net sale (purchase) of temporary investments 316,327 (166,287) 825,368
Cash flows from financing activities:
Distributions paid (3,029,423) (3,029,423) (3,784,107)
---------- ---------- ----------
Net increase (decrease) in cash
and cash equivalents 271,958 (27,558) (95,792)
Cash and cash equivalents at beginning of year 75,950 103,508 199,300
---------- ---------- ----------
Cash and cash equivalents at end of year $ 347,908 $ 75,950 $ 103,508
========== ========== ==========
Schedule reconciling net income to net
cash flow provided by operating activities:
Net income $2,812,119 $3,048,116 $2,544,011
---------- ---------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for uncollectible interest 0 69,405 458,430
Amortization of deferred bond selection fees 61,332 61,633 61,633
Amortization of organizational costs 0 0 8,965
Changes in:
Interest receivable 95,608 (9,708) (184,633)
Other assets 1,114 76,154 (75,713)
Accounts payable and accrued expenses (4,185) (57,304) 76,049
Due to affiliates 19,066 (20,144) (25,795)
---------- ---------- ----------
Total adjustments 172,935 120,036 318,936
---------- ---------- ----------
Net cash provided by operating activities $2,985,054 $3,168,152 $2,862,947
========== ========== ==========
</TABLE>
See accompanying notes to financial statements
-17-
<PAGE>
SUMMIT TAX EXEMPT L.P. III
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - General
Summit Tax Exempt L.P. III (the "Partnership"), a Delaware limited
partnership, was formed February 25, 1987 and will terminate on December 31,
2021 unless terminated sooner under the provisions of the Agreement of Limited
Partnership (the "Partnership Agreement"). The Partnership was formed to invest
in tax-exempt participating first mortgage revenue bonds ("FMBs") issued by
various state or local governments or their agencies or authorities. The FMBs
are secured by participating first mortgage loans ("Mortgage Loans") on
multi-family residential apartment projects (the "Properties"). The general
partners of the Partnership (the "General Partners") are Prudential-Bache
Properties, Inc. ("PBP") (a wholly-owned subsidiary of Prudential Securities
Group Inc.) and Related Tax Exempt Associates III, Inc. ( the "Related General
Partner"). Related BUC$ Associates III, Inc. (the "Assignor Limited Partner"),
which acquired and holds limited partnership interests on behalf of those
persons who purchase Beneficial Unit Certificates ("BUC$"), has assigned to
those persons substantially all of its rights and interest in and under such
limited partnership interests. The Related General Partner and the Assignor
Limited Partner are under common ownership. As of December 31, 1995, the
Partnership has invested in a total of five FMBs.
NOTE 2 - Summary of Significant Accounting Policies
a) Basis of Accounting
The books and records of the Partnership are maintained on the
accrual basis of accounting in accordance with generally accepted accounting
principles.
The preparation of financial statements in conformity with
generally accepted accounting principles requires the General Partners to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
b) Participating first mortgage bonds
Pursuant to a review of the Partnership's financial statements by
the SEC staff in 1996 and in accordance with others in the industry, the
Partnership agreed that it will account for its investments in the FMBs as debt
securities under the provisions of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
("SFAS 115") effective January 1, 1994, and has restated its 1995 and 1994
financial statements to reflect this change in accounting treatment.
The change in accounting treatment does not affect cash flow or
payments received by the Partnership from the properties, level of distribution
to BUC$Holders, the tax-exempt nature of the Partnership's net income or the
obligation under the FMBs.
The Partnership has a right to require redemption of the FMBs
approximately twelve years after their issuance. The Partnership anticipates
holding the FMBs for approximately 12 to 15 years from the date of issuance;
however, it can elect to hold until maturity. As such, SFAS 115 requires the
Partnership to classify these investments as "available for sale." Accordingly,
effective January 1, 1994, investments in FMBs are carried at their estimated
fair values, with unrealized gains and losses reported in a separate component
of partners' capital. The cumulative effect of adopting this accounting was a
decrease in partners' capital at January 1, 1994 of approximately $476,000 due
to unrealized holding losses. This accounting also resulted in cumulative net
unrealized losses of
-18-
<PAGE>
SUMMIT TAX EXEMPT L.P. III
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 2 - Summary of Significant Accounting Policies (continued)
approximately $1,263,000 and $1,437,000 at December 31, 1995 and 1994,
respectively. Again, unrealized holding gains or losses do not affect the cash
flow generated from property operations, distributions to BUC$holders, the
characterization of the tax-exempt income stream or the financial obligations
under the FMBs.
The Partnership periodically evaluates each FMB to determine
whether a decline in fair value below the FMB's cost basis is other than
temporary. Such a decline is considered to be other than temporary if, based on
current information and events, it is probable that the Partnership will be
unable to collect all amounts due according to the existing contractual terms of
the bonds. If the decline is judged to be other than temporary, the cost basis
of the bond is written down to its then estimated fair value, with the amount of
the write-down accounted for as realized loss.
Because the FMBs are not readily marketable, the Partnership
estimates fair value for each bond as the present value of its expected cash
flows using an interest rate for comparable tax-exempt investments. This process
is based upon projections of future economic events affecting the real estate
collateralizing the bonds, such as property occupancy rates, rental rates,
operating cost inflation and market capitalization rates, and upon determination
of an appropriate market rate of interest, all of which are based on good faith
estimates and assumptions developed by the Partnership's management. Changes in
market conditions and circumstances may occur which would cause these estimates
and assumptions to change, therefore, actual results may vary from the estimates
and the variance may be material.
Interest income is recognized at the stated rate when
collectibility of future amounts is reasonably assured. Interest income from
FMBs with modified terms where the collectibility of future amounts is uncertain
is recognized based upon expected cash receipts.
c) Temporary Investments
Temporary investments at December 31, 1995 represent tax-exempt
Municipal Preferred Stock which are carried at cost which approximates market
value. Temporary investments at December 31, 1994 represent tax-exempt floating
rate municipal bonds which are carried at cost plus accrued interest which
approximates market value.
d) Cash and cash equivalents
Cash and cash equivalents include cash on hand, cash in banks,
and investments in short-term instruments with an original maturity of three
months or less, for which cost approximates market value.
e) Income taxes
The Partnership is not required to provide, or pay, any federal
income taxes. Income tax attributes that arise from its operations are passed
directly to the BUC$holders. The Partnership may be subject to other state and
local taxes in jurisdictions in which it operates.
f) Profit and loss allocations and distributions
As more fully described in the Partnership Agreement, the General
Partners receive a special distribution equal to a .5% per annum of the total
invested assets (which equals the face amount of the FMBs), payable quarterly,
for managing the affairs of the Partnership.
-19-
<PAGE>
SUMMIT TAX EXEMPT L.P. III
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 2 - Summary of Significant Accounting Policies (continued)
Income is allocated first to the General Partners in an amount
equal to the special distribution. The net remaining profits or losses and
distributions are then allocated 98% to the BUC$holders and 2% to the General
Partners, in accordance with the Partnership Agreement.
g) Organizational Costs
Costs incurred to organize the Partnership, including but not
limited to legal, accounting, registration fees and certain printing costs, were
considered deferred organizational costs. These costs were capitalized and
subsequently amortized over a 60-month period which ended in 1993.
h) Bond selection fees
The General Partners were paid bond selection fees (equal to 2%
of the gross proceeds from the initial offering) for evaluating and selecting
FMBs, negotiating the terms of mortgage loans and coordinating the development
effort with property developers and government agencies. These fees have been
capitalized and are being amortized over the terms of the FMBs. The accumulated
amortization as of December 31, 1995 and 1994, was approximately $503,000 and
$441,000, respectively.
i) Fair value of financial instruments
As described in Note 2.b. above, the Partnership's investment in
FMBs are carried at estimated fair values. The Partnership has determined that
the fair value of its remaining financial instruments, including its temporary
investments and cash and cash equivalents approximates their carrying values.
NOTE 3 - Participating First Mortgage Bonds
The principal and interest payments on each FMB are payable only from
the cash flows, including proceeds in the event of sale, from the Properties
underlying the FMBs. None of these FMBs constitute a general obligation of any
state or local government, agency or authority. The FMBs are secured by the
Mortgage Loans on the underlying Properties and the structure of each Mortgage
Loan mirrors the structure of the corresponding FMB.
Unless otherwise modified, the principal of the FMBs will not be
amortized during their respective terms (which are generally up to 24 years) and
will be required to be repaid in lump sum "balloon" payments at the expiration
of the respective terms or at such earlier times as the Partnership may require
pursuant to the terms of the bond documents. The Partnership has a right to
require redemption of the FMBs approximately twelve years after their issuance.
The Partnership anticipates holding the FMBs for approximately 12 to 15 years
from the date of issuance; however, it can and may elect to hold until maturity.
In addition to the stated rates of interest ranging from 8.0% to 9.0%
per annum, each of the FMBs provides for "contingent interest" which is equal
to: (a) an amount equal to 50% to 100% of net property cash flow and 75% to 100%
of net sale or refinancing proceeds until the borrower has paid, during the
post-construction period, annually compounded interest at 9% on a cumulative
basis, and thereafter (b) an amount equal to 25% of remaining net property cash
flow and 25% of remaining net sale or refinancing proceeds until the borrower
has paid interest at a simple annual rate of 16% over the term of the FMB. Both
the stated and contingent interest are exempt from federal income taxation. The
Partnership has not received any contingent interest to date.
-20-
<PAGE>
SUMMIT TAX EXEMPT L.P. III
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 3 - Participating First Mortgage Bonds (continued)
In order to protect the tax-exempt status of the FMBs, the owners of
the Properties are required to enter into certain agreements to own, manage and
operate such Properties in accordance with requirements of the Internal Revenue
Code.
Forbearance agreements have been executed with all five of the
properties. During 1991, the Partnership entered into a forbearance agreement
with the owner of the Lakepoint property allowing interest payments at a pay
rate of 7.5% in 1991, 8.0% in 1992 and 8.5% in 1993. Due to weakness in the
market in June 1993, the forbearance agreement was further modified to allow for
a pay rate of 7.5% from January 1992 through March 1993 and 6.0% from April 1993
through December 1995. In May 1996, the General Partners granted an extension of
the forbearance agreement at 6.0% through December 15, 1997. The 1991
forbearance agreement relating to the Orchard Mill FMB permits interest to be
paid only to the extent of the net cash flow from the property.
In 1992, the Partnership entered into a forbearance agreement with
the owner of the Players Club property. This agreement was substantially
modified on January 1, 1994 , January 1, 1995 and as of January 1, 1996 to
require minimum debt service payments of 6.0% through the end of 1994 and 7.0%
for 1995 and 1996.
Forbearance agreements were also entered into with the owner of the
Sunset Village and Sunset Creek properties in 1992 allowing debt service
payments at a rate of 7.0% per annum through April 1993 at which time the pay
rate increased to 7.25% and was scheduled to increase in annual increments to
the stated rate of 8.5% in May 1996. Effective with the May 1, 1995 payment
date, the Sunset Village and Sunset Creek FMBs have made payments based on the
monthly net cash flow generated by the operations of the underlying properties
in accordance with the terms of the agreement outlined below. Effective as of
August 1, 1995, the original owner and obligor of the Sunset Creek and Sunset
Village FMBs transferred the deeds to the underlying properties to an affiliate
of the Related General Partner for limited consideration. Pursuant to the
agreement, the Related General Partner's affiliate, who has not made an equity
investment in the underlying property, assumed the day-to-day responsibilities
and obligations of operating the properties. The Partnership receives the
monthly net cash generated by these properties as payment toward debt service.
The determination as to whether it is in the best interest of the
Partnership to enter into forbearance agreements on the FMBs, or alternatively,
to pursue its remedies under the loan documents, including foreclosure, is based
upon several factors. These factors include, but are not limited to, property
performance, owner cooperation and projected legal costs.
With respect to all the FMBs, the difference between the pay rate and
the original stated rate is deferred and is payable out of available future cash
flow or ultimately from sales or refinancing proceeds. See the table on page 22
for information regarding the rates paid on the FMBs in 1995. In 1995, all
borrowers paid at least the minimum interest rate set forth in their respective
forbearance agreement except for those FMBs where interest is paid to the extent
of the property's net cash flow.
-21-
<PAGE>
SUMMIT TAX EXEMPT L.P. III
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 3 - Participating First Mortgage Bonds (continued)
The following FMBs' interest income exceeded 15% of the Registrant's
total revenue for each of the three years in the period ended December 31, 1995:
1995 1994 1993
------ ------ ------
Lakepoint 29% 29% 29%
Sunset Village 21% 22% 22%
Orchard Mill 19% 21% 21%
Sunset Creek 15% 16% 16%
Players Club 16% * *
* FMB interest income was less than 15% of the Registrant's total revenue for
the year.
The cost basis of the FMBs was $47,950,000 at December 31, 1995 and
1994. The net unrealized loss on FMB's consists of gross unrealized gains and
losses of $488,045 and $1,751,460, respectively, at December 31, 1995 and
$874,670 and $2,312,156, respectively, at December 31, 1994.
-22-
<PAGE>
SUMMIT TAX EXEMPT L.P. III
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 3 - Participating First Mortgage Bonds
Descriptions of the various FMBs owned by the Partnership at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Minimum Carrying
Average Pay Rate Stated Amount
Interest Rate at December Interest at December
Property Location Paid in 1995* 31,1995* Rate* Call Date Maturity Date Face Amount 31, 1995 (C)
- - -------- -------- ------------- ----------- ----- --------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Players Club (A) Ft. Myers, FL 7.00% 7.00% 8.00% Aug. 1999 Aug. 2007 $ 7,200,000 $ 7,383,769
Lakepoint Dekalb City, GA 6.10% 6.00 8.50 Jan. 2000 Oct. 2007 15,100,000 14,886,559
Sunset Village Lancaster, CA 6.40% (B) 8.50 Mar. 2000 Mar. 2008 11,375,000 9,178,214
Sunset Creek Lancaster, CA 6.50% (B) 8.50 Mar. 2000 Mar. 2008 8,275,000 5,933,767
Orchard Mill Atlanta, GA 5.70% (B) 9.00 Apr. 2001 May. 2009 10,500,000 9,304,276
----------- -----------
$52,450,000 $46,686,585
=========== ===========
</TABLE>
*The rate paid represents the interest recorded by the Partnership while the
stated rate represents the coupon rate of the FMB and the minimum pay rate
represents the minimum rate required to be paid under the respective forbearance
agreements.
(A) Summit Tax Exempt L.P. II, of which the general partners are either the
same or affiliates of the General Partners of the Partnership, acquired
the other $2,500,000 of the Players Club bond issue.
(B) Interest on this FMB is paid to the extent of the property's net cash
flow.
(C) The FMBs are carried at their estimated fair values at December 31, 1995.
The difference between the stated interest rates and the actual rates paid
has not been accrued for financial statement purposes and was approximately
$969,000, $963,000 and $1,020,000 for the years ended December 31, 1995, 1994
and 1993, respectively.
-23-
<PAGE>
SUMMIT TAX EXEMPT L.P. III
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 4 - Income Taxes
Following is a reconciliation of net income for financial statement
purposes with net income for Federal income tax reporting purposes:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net income per financial statements $ 2,812,119 $ 3,048,116 $ 2,544,011
Uncollected interest from FMBs 969,000 1,031,827 1,019,833
Provision for uncollectible interest 0 69,405 458,430
Property tax loan deferred
for tax reporting purposes, net (82,204) 0 0
Amortization of deferred bond
selection fees 61,332 61,633 61,633
------------ ------------ ------------
Net income for tax purposes $ 3,760,247 $ 4,210,981 $ 4,083,907
============ ============ ============
</TABLE>
Net income for tax purposes is generally exempt from Federal income
tax. The differences between the tax and book bases of partner's capital are
primarily attributable to the cumulative effect of the book to tax income
adjustments, the recording of distributions and the Partnership's accounting for
the FMBs at fair value for book purposes and cost for tax purposes.
Effective October 1, 1995 the Related General Partner has assumed
from PBP, the responsibilities and duties of the Tax Matters Partner as defined
in the Partnership Agreement.
NOTE 5 - Related Parties
The General Partners and their affiliates perform services for the
Partnership which include, but are not limited to: accounting and financial
management; registrar, transfer and assignment functions; asset management;
investor communications; printing and other administrative services. The General
Partners and their affiliates receive reimbursements for costs incurred in
connection with these services, the amount of which is limited by the provisions
of the Partnership Agreement. The costs and expenses were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Prudential-Bache Properties, Inc.
and affiliates
General and administrative $ 71,153 $ 61,866 $ 60,120
Related Tax Exempt Associates III, Inc.
and affiliates
General and administrative 21,853 8,521 23,382
Loan servicing fee 131,125 131,125 131,125
-------- -------- --------
152,978 139,646 154,507
-------- -------- --------
$224,131 $201,512 $214,627
======== ======== ========
</TABLE>
-24-
<PAGE>
SUMMIT TAX EXEMPT L.P. III
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 5 - Related Parties (continued)
An affiliate of the Related General Partner receives the loan
servicing fee in the amount of .25% per annum of the principal amount
outstanding of mortgage loans serviced by the affiliate.
A division of Prudential Securities Incorporated ("PSI"), an
affiliate of PBP, received a fee for the purchase, sale and safekeeping of the
Partnership's temporary investments. This account is maintained in accordance
with the Partnership Agreement.
PSI owns 17,700 BUC$ at December 31, 1995.
The Players Club property (securing a $7,200,000 bond in this
Partnership) also secures an FMB for $2,500,000 held by Summit Tax Exempt L.P.
II, of which the general partners are either the same or affiliates of the
General Partners of this Partnership. The original owner of the FMB is an
affiliate of the Related General Partner.
NOTE 6 - Contingencies
On or about October 18, 1993, a putative class action, captioned
Kinnes et al v. Prudential Securities Group, Inc. et al. (93 Civ. 654), was
filed in the United States District Court for the District of Arizona,
purportedly on behalf of investors in the Partnership against the Partnership,
PBP, PSI and a number of other defendants. On November 16, 1993, a putative
class action captioned Connelly et al v. Prudential-Bache Securities Inc. et al.
(93 Civ. 713) , was filed in the United States District Court for the District
of Arizona , purportedly on behalf of investors in the Partnership against the
Partnership, PBP, PSI and a number of other defendants. On January 3, 1992, a
putative class action, captioned Levine v. Prudential-Bache Properties Inc. et
al. (92 Civ. 52), was filed in the United States District Court for the Northern
District of Illinois purportedly on behalf of investors in the Partnership
against the General Partners, PSI and a number of other defendants. Subsequently
the Related General Partner exited the Levine litigation by way of settlement.
By its April 14, 1994 order, the Judicial Panel on Multidistrict
Litigation transferred the Levine case, the Kinnes case, and by order dated May
4, 1994, the Connelly case, together with a number of other actions, on each
occasion, not involving the Partnership, to a single judge of the United States
District Court for the Southern District of New York and consolidated them for
pretrial proceedings under the caption In re Prudential Securities Incorporated
Limited Partnerships Litigation (MDL Docket No. 1005). On June 8, 1994
plaintiffs in the transferred cases filed a complaint that consolidated the
previously filed complaints and named as defendants, among others, PSI, certain
of its present and former employees and the General Partners. The Partnership
was not named a defendant in the consolidated complaint, but the name of the
Partnership was listed as being among the limited partnerships at issue in the
case.
On August 9, 1995 PBP, PSI and other Prudential defendants entered
into a Stipulation and Agreement of Partial Compromise and Settlement with legal
counsel representing plaintiffs in the consolidated actions. The court
preliminarily approved the settlement agreement by order dated August 29, 1995
and, following a hearing held November 17, 1995, found that the agreement was
fair, reasonable, adequate and in the best interests of the plaintiff class. The
court gave final approval to the settlement, certified a class of purchasers of
specific limited partnerships, including the Partnership, released all settled
claims by members of the class against the PSI settling defendants and
permanently barred and enjoined class members from instituting, commencing or
prosecuting any settled claim against the released parties. The full amount due
under the settlement agreement has been paid by PSI. The consolidated action
remains pending against the Related General Partner and certain of its
affiliates.
-25-
<PAGE>
SUMMIT TAX EXEMPT L.P. III
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 6 - Contingencies (continued)
The Related General Partner has been engaged in settlement
negotiations with counsel for the plaintiffs. In the event a settlement can not
be reached, the Related General Partner believes it has meritorious defenses to
the consolidated complaint and intends to vigorously defend this action.
NOTE 7 - Subsequent Event
In February 1996, distributions of approximately $678,000 and $14,000
were paid to the BUC$holders and General Partners, respectively, for the quarter
ended December 31, 1995.
-26-
<PAGE>
Item 9.
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Registrant has no directors or executive officers. The
Registrant's affairs are managed and controlled by the General Partners. Certain
information concerning the directors and officers of the General Partners are
set forth below.
The Related General Partner assumed the responsibilities of the Tax
Matters Partner as of October 1, 1995.
PBP and its directors and executive officers, and any persons holding
more than ten percent of the Registrant's BUC$ are required to report their
initial ownership of such BUC$ and any subsequent changes in that ownership to
the Securities and Exchange Commission on Forms 3, 4 and 5. Such executive
officers, directors and persons who own greater than ten percent of the
Registrant's BUC$ are required by Securities and Exchange Commission regulations
to furnish the Registrant with copies of all Forms 3, 4 or 5 they file. All of
these filing requirements were satisfied on a timely basis for the current year.
In making these disclosures, the Registrant has relied solely on written
representations of PBP's directors and executive officers and persons who own
greater than ten percent of the Registrant's BUC$ or copies of the reports they
have filed with the Securities and Exchange Commission during and with respect
to its most recent fiscal year.
Prudential-Bache Properties, Inc.
The directors and executive officers of PBP with regard to managing
the Registrant are as follows:
Name Position
---- --------
Thomas F. Lynch, III President, Chief Executive Officer,
Chairman of the Board of Directors
and Director
Barbara J. Brooks Vice President-Finance and Chief
Financial Officer
Eugene D. Burak Vice President
Chester A. Piskorowski Vice President
Frank W. Giordano Director
Nathalie P. Maio Director
THOMAS F. LYNCH, III, age 37, is the President, Chief Executive
Officer, Chairman of the Board of Director, and a Director of PBP. He is a
Senior Vice President of Prudential Securities Incorporated ("PSI"), an
affiliate of PBP. Mr. Lynch also serves in various capacities for other
affiliated companies. Mr. Lynch joined PSI in November 1989.
BARBARA J. BROOKS, age 47, is the Vice President-Finance and Chief
Financial Officer of PBP. She is a Senior Vice President of PSI. Ms. Brooks also
serves in various capacities for other affiliated companies. She has held
several positions within PSI since 1983. Ms. Brooks is a certified public
accountant.
-27-
<PAGE>
EUGENE D. BURAK, age 50, is a Vice President of PBP. He is a First
Vice President of PSI. Prior to joining PSI in September 1995, he was a
management consultant for three years and was with Equitable Capital Management
Corporation from March 1990 to May 1992. Mr. Burak is a certified public
accountant.
CHESTER A. PISKOROWSKI, age 52, is a Vice President of PBP. He is a
Senior Vice President of PSI and is the Senior Manager of the Specialty Finance
Asset Management area. Mr. Piskorowski has held several positions within PSI
since April 1972. Mr. Piskorowski is a member of the New York and Federal Bars.
FRANK W. GIORDANO, age 53, is a Director of PBP. He is a Senior Vice
President of PSI and an Executive Vice President and General Counsel of
Prudential Mutual Fund Management, Inc., an affiliate of PSI. Mr. Giordano also
serves in various capacities for other affiliated companies. He has been with
PSI since July 1967.
NATHALIE P. MAIO, age 45, is a Director of PBP. Ms. Maio is a Senior
Vice President and Deputy General Counsel of PSI and supervises non-litigation
legal work. She joined the Law Department of PSI in 1983; presently, she also
serves in various capacities for other affiliated companies.
James M. Kelso ceased to serve as President, Chief Executive Officer,
Chairman of the Board of Directors and Director effective June 30, 1995.
Effective June 30, 1995, Thomas F. Lynch, III was elected President, Chief
Executive Officer, Chairman of the Board of Directors and Director. Robert J.
Alexander ceased to serve as Vice President effective August 25, 1995. Eugene D.
Burak was elected Vice President effective October 9, 1995.
There are no family relationships among any of the foregoing
directors or executive officers. All of the foregoing directors and executive
officers have indefinite terms.
The Related General Partner
Based on a review of Forms 3 and 4 and amendments thereto furnished
to the Registrant pursuant to Rule 16a-3(e) during its most recent fiscal year
and Form 5 and amendments thereto furnished to the Registrant with respect to
its most recent fiscal year and written representations pursuant to Item
405(b)(2)(i) of Regulation S-K, neither the Related General Partner nor its
directors or officers or beneficial owners of more than 10% of the Units, failed
to file, on a timely basis, reports required by Section 16(a) of the Exchange
Act during the most recent fiscal year.
The directors and executive officers of the Related General Partner
with respect to the Partnership and their positions with the Related General
Partner are as follows:
Name Position
---- --------
J. Michael Fried President and Director
Stuart J. Boesky Vice President
Alan P. Hirmes Vice President
Lawrence J. Lipton Treasurer
Stephen M. Ross Director
Lynn A. McMahon Secretary
-28-
<PAGE>
J. MICHAEL FRIED, 51, is President and a Director of the Related
General Partner. Mr. Fried is President, a Director and a principal shareholder
of Related Capital Company ("Capital"), a real estate finance and acquisition
affiliate of the Related General Partner. In that capacity, he is the chief
executive officer of Capital, and is responsible for initiating and directing
all of Capital's syndication, finance, acquisition and investor reporting
activities. Mr. Fried practiced corporate law in New York City with the law firm
of Proskauer Rose Goetz & Mendelsohn from 1974 until he joined Capital in 1979.
Mr. Fried graduated from Brooklyn Law School with a Juris Doctor degree, magna
cum laude; from Long Island University Graduate School with a Master of Science
degree in Psychology; and from Michigan State University with a Bachelor of Arts
degree in History.
STUART J. BOESKY, 39, is a Vice President of the Related General
Partner. Mr. Boesky practiced real estate and tax law in New York City with the
law firm of Shipley & Rothstein from 1984 until February 1986 when he joined
Capital where he presently serves as Managing Director. From 1983 to 1984 Mr.
Boesky practiced law with the Boston law firm of Kaye, Fialkow, Richard &
Rothstein and from 1978 to 1980 was a consultant specializing in real estate at
the accounting firm of Laventhol & Horwath. Mr. Boesky graduated from Michigan
State University with a Bachelor of Arts degree and from Wayne State University
School of Law with a Juris Doctor degree. He then received a Master of Law
degree in Taxation from Boston University School of Law.
ALAN P. HIRMES, 41, is a Vice President of the Related General
Partner. Mr. Hirmes has been a Certified Public Accountant in New York since
1978. Prior to joining Capital in October 1983, Mr. Hirmes was employed by
Weiner & Co., certified public accountants. Mr. Hirmes is also a Managing
Director of Capital. Mr. Hirmes graduated from Hofstra University with a
Bachelor of Arts degree.
LAWRENCE J. LIPTON, 39, is Treasurer of the Related General Partner.
Mr. Lipton has been a Certified Public Accountant in New York since 1989. Mr.
Lipton is also Controller of The Related Companies, L.P. ("Related"), an
affiliate of Capital. Prior to joining Related in 1991, Mr. Lipton was employed
by Deloitte & Touche LLP from 1987-1991. Mr.. Lipton graduated from Rutgers
College with a Bachelor of Arts degree and from Baruch College with a Masters of
Business Administration degree.
STEPHEN M. ROSS, 55, is a Director of the Related General Partner.
Mr. Ross is President of The Related Companies, L.P. He graduated from The
University of Michigan with a Bachelor of Business Administration degree and
from Wayne State University School of Law. Mr. Ross then received a Master of
Law degree in taxation from New York University School of Law. He joined the
accounting firm of Coopers & Lybrand in Detroit as a tax specialist and later
moved to New York, where he worked for two large Wall Street investment banking
firms in their real estate and corporate finance departments. Mr. Ross formed
The Related Companies, Inc. in 1972, to develop, manage, finance and acquire
subsidized and conventional apartment developments. To date, The Related
Companies, Inc. has developed multi-family properties totaling in excess of
25,000 units, all of which it manages.
LYNN A. McMAHON, 40, is Secretary of the Related General Partner.
Since 1983, she has served as Assistant to the President of Capital. From 1978
to 1983 she was employed at Sony Corporation of America in the Government
Relations Department.
There are no family relationships among any of the foregoing
directors or officers. All of the foregoing officers and/or directors have
indefinite terms.
-29-
<PAGE>
Item 11. Executive Compensation.
The Registrant does not pay or accrue any fees, salaries or any other
form of compensation to directors and officers of the General Partners for their
services. Certain officers and directors of the General Partners receive
compensation from affiliates of the General Partners, not from the Registrant,
for services performed for various affiliated entities, which may include
services performed for the Registrant; however, the General Partners believe
that any compensation attributable to services performed for the Registrant is
immaterial. See Item 13 Certain Relationships and Related Transactions for
information regarding compensation to the General Partners.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of March 1, 1996, the directors and officers of the Related
General Partner directly own 99.97% of the voting securities of the Related
General Partner; however, no director or officer of either General Partner owns
directly or beneficially any interest in the voting securities of PBP.
As of March 1, 1996, no director or officer of either of the General
Partners own directly or beneficially BUC$ issued by the Registrant.
As of March 1, 1996, no BUC$holder beneficially owns more than five
percent (5%) of the BUC$ issued by the Registrant.
Item 13. Certain Relationships and Related Transactions.
The Registrant has, and will continue to have, certain relationships
with the General Partners and their affiliates. However, there have been no
direct financial transactions between the Registrant and the directors or
officers of the General Partners.
Reference is made to Notes 1 and 5 to the financial statements in
Item 8, which identify the related parties and discuss the services provided by
these parties and the amounts paid or payable for their services.
-30-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
Sequential
Page
----------
(a) 1. Financial Statements 13
Independent Auditors' Report 14
Statements of Financial Condition as of
December 31, 1995 and 1994 15
Statements of Income for the years ended
December 31, 1995, 1994 and 1993 16
Statements of Changes in Partners' Capital
(Deficit) for the years ended December 31,
1995, 1994 and 1993 17
Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 18
Notes to Financial Statements 35
(a) 2. Financial Statement Schedules
Schedule II-Valuation and Qualifying Accounts
and Reserves for the three years ended
December 31, 1995
All other schedules have been omitted because
they are not applicable or the required
information is included in the financial
statements or notes hereto.
(a) 3. Exhibits
3(a) and 4(a) Partnership Agreement, incorporated by
reference to Exhibit A to the Prospectus of
Registrant, dated June 10, 1987, filed
pursuant to Rule 424(b) under the Securities
Act of 1933, File No. 33-13184
3(b) and 4(b) Certificate of Limited Partnership
(incorporated by reference to Exhibit 4 to
the Registration Statement of Form S-11, File
No. 33-13184)
3(c) and 4(c) Amendment No. 1 to the Partnership Agreement,
dated October 1, 1995 (incorporated by
reference to Exhibit 3(c) and 4(c) in the
Registrant's Annual Report on Form 10-K dated
December 31, 1995)
10(a) First Mortgage Bond, dated as of August 14,
1987, with respect to the Players Club
project at Fort Myers in the principal amount
of $7,200,000 (incorporated by reference to
Exhibit 10(a) in the Registrant's Current
Report on Form 8-K dated August 14, 1987)
10(b) First Mortgage Bond, dated as of November 18,
1987, with respect to the Lakepoint project,
in the principal amount of $15,100,000
(incorporated by reference to Exhibit 10(a)
in the Registrant's Current Report on Form
8-K dated November 18, 1987)
-31-
<PAGE>
10(c) First Mortgage Bonds, dated March 25, 1988,
with respect to the Sunset Village and Sunset
Creek projects in the principal amounts of
$11,375,000 and $8,275,000, respectively
(incorporated by reference to Exhibits 10(a)
and 10(b) in the Registrant's Current Report
on Form 8-K dated March 25, 1988)
10(d) First Mortgage Bond, dated as of May 1, 1989,
with respect to the Ashley Knoll project (now
named Orchard Mill) in the principal amount
of $10,500,000 (incorporated by reference to
Exhibits 10(a), 10(b) and 10(c) in the
Registrant's Current Report on Form 8-K dated
May 1, 1989)
10(e) Settlement Agreement for the Lakepoint First
Mortgage Bond dated June 28, 1991
(incorporated by reference to Exhibit 10(e)
in the Registrant's 1991 Annual Report on
Form 10-K)
10(f) Settlement Agreement for the Players Club
First Mortgage Bond dated February 1, 1992
(incorporated by reference to exhibit 10(f)
in the Registrant's 1992 Annual Report on
Form 10-K)
10(g) Settlement Agreement for the Sunset Village
First Mortgage Bond dated July 10, 1992
(incorporated by reference to Exhibit 10(g)
in the Registrant's 1992 Annual Report in
Form 10-K)
10(h) Settlement Agreement for the Sunset Creek
First Mortgage Bond dated July 10,1992
(incorporated by reference to exhibit 10(h)
in the Registrant's 1992 Annual Report on
Form 10-K)
10(i) Amended Settlement Agreement for the
Lakepoint First Mortgage Bond dated June 1,
1993 (incorporated by reference to Exhibit
10(i) in the Registrant's 1993 Annual Report
on Form 10-K)
10(j) Amended Settlement Agreement for the Players
Club First Mortgage Bond dated December 1,
1993 (incorporated by reference to Exhibit
10(j) in the Registrant's 1993 Annual Report
on Form 10-K)
10(k) Amended Settlement Agreement for the Players
Club First Mortgage Bond dated December 1,
1994 (incorporated by reference to Exhibit
10(k) in the Registrant's 1994 Annual Report
on Form 10-K)
10(l) Amended Settlement Agreement for the
Lakepoint First Mortgage Bond dated May 1,
1996 (filed herewith) 36
27 Financial Data Schedule (filed herewith) 39
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the
last quarter of the period covered by this
report.
-32-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Summit Tax Exempt L.P. III
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: Alan P. Hirmes Date: August 13, 1996
--------------
Alan P. Hirmes
Vice President
By: Related Tax Exempt Associates III, Inc.
A Delaware corporation, General Partner
By: Eugene D. Burak Date: August 13, 1996
---------------
Eugene D. Burak
Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities (with respect to the General Partners) and on
the dates indicated.
By: Related Tax Exempt Associates III, Inc.
A Delaware corporation, General Partner
By: J. Michael Fried Date: August 13, 1996
----------------
J. Michael Fried
President and Director
By: Alan P. Hirmes Date: August 13, 1996
--------------
Alan P. Hirmes
Vice President
By: Lawrence J. Lipton Date: August 13, 1996
------------------
Lawrence J. Lipton
Treasurer
By: Stephen M. Ross Date: August 13, 1996
---------------
Stephen M. Ross
Director
-35-
<PAGE>
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: Thomas F. Lynch, III Date: August 13, 1996
--------------------
Thomas F. Lynch, III
President, Chief Executive Officer,
Chairman of the Board of Directors and Director
By: Barbara J. Brooks Date: August 13, 1996
-----------------
Barbara J. Brooks
Vice President-Finance and Chief Financial Officer
By: Eugene D. Burak Date: August 13, 1996
---------------
Eugene D. Burak
Vice President
By: ________________ Date: August 13, 1996
Frank W. Giordano
Director
By: Nathalie P. Maio Date: August 13, 1996
----------------
Nathalie P. Maio
Director
-36-
<PAGE>
SUMMIT TAX EXEMPT L.P. III
(a limited partnership)
Schedule II - Valuation and Qualifying Accounts and Reserves
Valuation allowance for loss on impairment of assets
<TABLE>
<CAPTION>
Additions
Additions Deductions (Deductions)
--------- ---------- ------------
Balance at Amounts Amounts Amounts
Year ended beginning reserved written-off reclassified Balance at
December 31, of year during year during year during year end of year
- - ------------ ------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1995 $ 0 $ 0 $ 0 $ 0 $ 0
1994 4,500,000 0 0 (4,500,000) 0
1993 4,500,000 0 0 0 4,500,000
</TABLE>
Valuation allowance for uncollectible interest
Additions
---------
Balance at Amounts
Year ended beginning reserved Balance at
December 31, of year during year end of year
- - ------------ --------- ----------- -----------
1995 $ 527,835 $ 0 $ 527,835
1994 458,430 69,405 527,835
1993 0 458,430 458,430
-37-
[Letterhead]
May 1, 1996
HRA, Ltd.
Attn: Mr. Elliott Lewis
Group Three North - Suite 400
3190 North East Expressway Access Road
Atlanta, Georgia 30341
Dear Mr. Lewis:
HRA, Ltd., a Georgia limited partnership organized and existing in the State of
Georgia (the "Developer"), is the Developer and Owner of a 360-unit multifamily
residential rental housing development known as Lakepoint Apartments, located in
DeKalb County, Georgia (the "Project"). The cost of acquiring, constructing,
improving and equipping the Project was financed by the Housing Authority of the
County of DeKalb, Georgia (the "Issuer"), by the issuance of its Multifamily
Housing Revenue Bonds (Lakepoint Project) Series 1987, in the principal amount
of $15,100,000 (the "Bonds"), pursuant to its Resolution adopted as of October
26, 1987, (the "Resolution").
The terms of the Bonds, the security therefor, the rights and remedies of the
holders thereof, and various other matters in connection therewith were
prescribed pursuant to a Trust Indenture between the Issuer and Citizens and
Southern Trust Company (Georgia), National Association (the "Trustee"), dated as
of November 1, 1987 (the "Trust Indenture").
Proceeds of the Bonds were loaned to the Developer pursuant to a Loan Agreement
between the Issuer and the Developer dated as of November 1, 1987 (the "Loan
Agreement"), evidenced by the Developer's promissory note (the "Note") in the
amount of $15,100,000. The obligations of the Developer under the Loan Agreement
and the Note are secured by a Building Loan Deed to Secure Debt and Security
Agreement, dated as of November 1, 1987 (the "Building Loan Mortgage"), and
various other loan documents defined in the Loan Agreement (collectively, the
"Loan Documents").
All of the Bonds issued pursuant to the Trust Indenture were purchased and are
owned as of this date by Summit Tax Exempt, L.P. III ("Summit"), a limited
partnership organized and existing under the laws of the State of Delaware.
[Address]
<PAGE>
Mr. Elliott Lewis
May 1, 1996
Page Two
As of June, 1991, the Developer had failed to pay certain amounts of Base
Interest on the Note ("Base Interest") when due, which constituted an Event of
Default pursuant to various provisions of the Trust Indenture, Bonds and Loan
Documents. Pursuant to Section 7.02(a) of the Trust Indenture, Summit, as the
single owner of the Bonds, is the designated "Acting Party" with the sole
authority to take actions in respect of any Event of Default. The Developer
requested that Summit, in its capacity as Acting Party, agree to forbear from
enforcing its remedies under the various remedies provisions of the Trust
Indenture, Bonds and Loan Documents (collectively, the "Remedies Provisions") in
connection with such defaults resulting from the non-payment of Base Interest
when due, conditioned on the payment of such interest pursuant to a schedule
proposed by the Developer. The Developer also requested that Summit agree to
forbear from enforcing its remedies under the Remedies Provisions upon the
future occurrence of defaults for the non-payment of Base Interest when due,
conditioned on the payment of certain portions of such interest when due.
Accordingly, the Developer and Summit entered into a letter agreement dated as
of June 28, 1991 (the "1991 Letter Agreement"), whereby Summit agreed to forbear
from enforcing its remedies under the Remedies Provisions based upon the partial
payment of Base Interest, and on various other terms and conditions, all as set
forth therein. Pursuant to the 1991 Letter Agreement, certain portions of the
Base Interest which would have been due and payable between December 16, 1990
and December 15, 1992, were deferred in accordance with the terms and conditions
thereof.
As of December, 1992, the Developer requested that Summit agree to forbear from
enforcing its remedies under the Remedies Provisions upon the occurrence of
further defaults for the non-payment of Base Interest when due, from and after
December 15, 1992, again conditioned on the payment of certain portions of such
interest when due. As consideration for such forbearance, the Developer agreed
to the payment of a concession fee to Summit, to the establishment of a monthly
escrow payment to provide for the future payment of real estate taxes,
assessments and insurance premiums when due, and to certain other matters.
Accordingly, Summit and the Developer entered into a second letter agreement
dated as of June 1, 1993 (the "1993 Letter Agreement"), whereby certain portions
of the Base Interest which would have been due and payable between December 16,
1992 and December 15, 1995, were deferred in accordance with the terms and
conditions thereof. The 1993 Letter Agreement also provided for the payment of a
concession fee to Summit, to the establishment of a monthly tax and insurance
escrow payment, and for certain other matters all as set forth therein.
As of this date, the Developer has requested that Summit extend its agreement to
forbear from enforcing its remedies under the Remedies Provisions upon the
occurrence of further defaults for the non-payment of Base Interest when due,
from and
<PAGE>
Mr. Elliott Lewis
May 1, 1996
Page Three
after December 15, 1995, again conditioned on the payment of certain portions of
such interest when due. Accordingly, the Developer and Summit hereby agree to
extend all the provisions, terms and conditions of the 1993 Letter Agreement
with respect to the payment of Base Interest due and payable from December 16,
1995 through December 15, 1997, by deleting "3/16/93 - 12/15/95" under the "Time
Period" heading in paragraph 2(d), and by inserting in lieu thereof "3/16/93 -
12/15/97." Except for this extension of the "Time Period" as set forth in
paragraph 2(d), the Developer and Summit hereby agree that all the other
provisions, terms and conditions of the 1993 Letter Agreement are hereby
ratified and reaffirmed, and shall remain in full force and effect.
If the above accurately sets forth the extension of time on which we have
agreed, please return to us five (5) copies of this letter executed by you in
the space provided below, at which time this letter shall constitute a binding
first amendment to the 1993 Letter Agreement.
Very truly yours,
SUMMIT TAX EXEMPT L.P. III
By: Related Tax Exempt Associates III, Inc.,
a general partner
By: /s/ Alan Hirmes
--------------------------------
(Title)
Accepted and Agreed to this
31st day of May, 1996:
HRA, Ltd., a Georgia Limited Partnership
By: EALCO, Inc., general partner
By: /s/ Elliott Lewis
---------------------
Elliott Lewis,
President
MS69/db
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Summit Tax Exempt L.P. III
</LEGEND>
<CIK> 0000812220
<NAME> Summit Tax Exempt L.P. III
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 347,908
<SECURITIES> 46,936,585
<RECEIVABLES> 866,023
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 48,150,516
<CURRENT-LIABILITIES> 121,307
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 48,029,209
<TOTAL-LIABILITY-AND-EQUITY> 48,150,516
<SALES> 0
<TOTAL-REVENUES> 3,206,315
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 394,196
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,812,119
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,812,119
<EPS-PRIMARY> .81
<EPS-DILUTED> 0
</TABLE>
