UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR FISCAL YEAR ENDED DECEMBER 31, 1995
Commission File Number:
33-19152
Exact name of Registrant as specified in its charter:
Florida Income Fund III, Limited Partnership
State or other Jurisdiction of incorporation or orgainzation:
Delaware
I.R.S. Employer Identification Number:
65-0016187
Address of Principal Executive Offices:
12800 University Drive, Ste 675
Fort Myers, FL 33907
Registrant's Telephone Number, including Area Code:
(941) 481-2011
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
The registrant 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
has been subject to such filing requirements for the past 90 days.
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
FORM 10-K - 1995
CONTENTS AND CROSS REFERENCE INDEX
PART ITEM FORM 10-K
NO. NO. DESCRIPTION PAGE NO.
- ---- ---- ----------- ---------
I 1 Business 3
2 Properties 4 - 6
3 Legal Proceedings 6
4 Submission of Matters to a Vote of
Security Holders 6
II 5 Market for Registrant's Partnership
Equity and Related Partner Matters 7
6 Selected Financial Data 7
7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 11
8 Financial Statements and Supplementary Data 11 - 29
9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 30
III 10 Directors and Executive Officers of
the Registrant 30 - 32
11 Executive Compensation 32 - 34
12 Security Ownership of Certain Beneficial
Owners and Management 34
13 Certain Relationships and Related Party
Transactions 34
IV 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 35
Signatures 36
2
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS - Florida Income Fund III, Limited Partnership,
(the Partnership) is a Delaware Limited Partnership formed as of December 9,
1987, for the purpose of investing in a diversified portfolio of
income-producing commercial and residential real estate properties primarily
located in Southwest Florida. The Partnership's primary objectives are to
preserve and protect the Partnership's original capital, obtain capital
appreciation through increases in value of Partnership properties, realize
capital gains from the sale of Partnership properties and provide distributable
cash, a portion of which may not constitute taxable income.
There can be no assurance that these objectives will be achieved. The
achievement of these objectives depends on many factors, including principally
the ability of the Managing General Partner to manage it's properties
successfully. The General Partners of the Partnership are Mariner Capital
Management, Inc., a Florida corporation (Managing General Partner or Mariner)
and MCD Real Estate, Inc., an Ohio corporation. For further information see Item
10. The primary market is the west coast of Florida. The intent has been to
invest in more than one property in order to achieve a measure of
diversification. The Partnership's original intent was to hold these properties
as long-term investments. The Managing General Partner has chosen to invest
primarily in the west coast of Florida because of its experience in dealing in
real estate in this area. The west coast of Florida offers, in management's
opinion, a competitive but growing economic base in which to meet its
performance objectives.
The Partnership commenced an offering of $20,000,000 of units of limited
partnership interest (the units) at $1,000 per unit (20,000 total units) on
April 13, 1988, pursuant to a registration statement on Form S-11 under the
Securities Act of 1933 (Reg. No. 33-19152) (Registration Statement). McDonald
and Company Securities, Inc., an affiliate of MCD Real Estate, Inc., Morgan
Keegan & Company, Inc. and J. J. B. Hilliard, W. L. Lyons, Inc., acted as the
managing dealers of the offering. The Prospectus filed pursuant to Rule 424(B)
and 424(C) under the Securities Act of 1933 (the Prospectus) was supplemented on
December 30, 1988, The Prospectus and supplements are incorporated herein by
reference to the extent necessary or appropriate. Pursuant to the terms of the
offering, there was a right to offer for sale an additional 5,000 units. The
Partnership sold an aggregate of $13,098,879 (net of discounts and commissions)
(14,717 units) of Limited Partnership units.
The Partnership itself has no executive officers as employees. The Managing
General Partner, which has responsibility for the management of the Partnership,
has assigned certain individuals to devote as much time to the operations of the
Partnership as deemed necessary. All these individuals serve the Partnership on
a part-time basis. The Managing General Partner is a General Partner in other
publicly and privately offered limited partnerships, including additional public
partnerships with the same or similar investment objectives as the Partnership.
3
<PAGE>
ITEM 2. PROPERTIES
The Partnership has purchased two properties. A brief description of these
properties and the terms of the purchases by the Partnership follows:
PINK SHELL RESORT - On December 30, 1988, the Partnership purchased
from an unaffiliated seller, a 100% ownership interest in the Pink
Shell Family Resort located on Fort Myers Beach, Florida. This property
is located at 275 Estero Boulevard on Estero Island, Lee County,
Florida. At time of purchase, the Pink Shell Resort contained 127
rentable units consisting of apartment units, condominium units and
cottages, comprising a motel/resort operation. The property is situated
on approximately twelve acres of land. At the time of purchase, there
was a Planned Unit Development approved by Lee County which allowed for
expansion of the resort to a maximum of 194 units. During 1990, the
General Partners completed construction on a 60 unit motel building. In
order to do this, 19 existing units were demolished. These additional
41 units brought the property up to 168 units, which were available for
rent in 1991. Additional units were completed in 1995 and discussed
later in this report.
Amenities include three heated swimming pools, a general store, an
outdoor restaurant, a pool bar, two tennis courts, shuffleboard courts,
a 200 foot fishing pier, boat ramp, docks and 1,500 feet of frontage on
both the Gulf of Mexico and on Mantanzas Pass, which is part of Estero
Bay.
The Partnership capitalized the following costs associated with the
acquisition of the Pink Shell Resort:
Original Purchase Price $10,000,000
Acquisition Fee to General Partner 500,000
Survey 9,000
Appraisal 8,000
Intangible Tax 10,000
Other Closing Costs 25,644
-----------
Total $10,552,644
===========
The purchase price of the Property, which included a non-compete
agreement of $371,524; consisted of $5,478,736 cash at closing a
$5,000,000 nonrecourse mortgage note given to the seller and two
assumed mortgages totalling $73,908. The note called for monthly
interest payments at an interest rate of 10% per annum with the
principal due one year following closing. In 1989, the loan was
extended at 11% per annum with the principal due January 31, 1991. On
April 2, 1990, the Partnership borrowed $8,000,000 from a local
financial institution which enabled it to pay off the seller, the two
assumed mortgages as well as finish construction on the sixty-unit
building. Current monthly payments are $78,409.05. In June 1994, the
Partnership extended the loan at an interest rate of 11% until
April 1, 2000, at which time the loan will balloon. The interest rate
was changed to 10.5% on April 1, 1995.
4
<PAGE>
During 1991, the Partnership purchased two bay-front units from
individuals for purchase prices of $300,000 and $200,000, respectively.
The Partnership paid $100,000 cash and gave an interest only (10%)
$200,000 note to the seller of one unit and paid $200,000 cash on the
other. The loan which was to mature January, 1994 has been refinanced
at a rate of 7%. Each March until maturity, a principal payment in the
amount of $10,000 is due. The loan matures, with a balloon payment due,
in January 1998.
During 1995, the Partnership completed construction on a 42 unit
condominium building. All 42 units were sold and closed in early 1995
and the construction loan in the amount of $6,200,000 was paid in full.
The cost of the project was approximately $7,309,000 (which includes
land and building allocations) resulting in a gain of $2,307,000. This
gain has been reported under the full accrual method of accounting.
The Partnership was required to demolish 7 cottages and discontinue
use of 6 units in order to construct the new units. These are reported
as a loss of disposal of fixed assets in 1994.
The Partnership has entered into long term leases with each of the 42
owners. This enables the partnership to include the 42 new two bedroom,
two bath units in its resort rental operation. Terms of these leases
are as follows:
The Partnership pays each owner a minimum annual rental of
$25,000 in 12 equal monthly installments. In addition, the
Partnership pays the owner an amount by which 42.5% of the
annual gross rental income generated by lessee from the unit
exceeds the amount of annual base rent paid. The minimum base
rents increase by $500 per year until the first year for which
percentage rent is payable.
The Partnership has executed 12 leases which expire December 31, 2000,
14 leases which expire December 31, 2002, and 16 leases which expire
December 31, 2005.
The future minimum payments associated with these leases is as follows:
FUTURE
MIN. LEASE TOTAL
EXPIRATION DATE NO. UNITS PAYMENTS PAYMENT
--------------- --------- ---------- -------
December 21, 2000 12 $132,500 $1,590,000
December 31, 2002 14 189,000 2,646,000
December 31, 2005 16 277,500 4,440,000
----------
$8,676,000
==========
Minimum lease payments are projected as follows:
1996 $1,071,000 1998 $1,113,000
1997 1,092,000 1999 1,134,000
2000 1,155,000
Thereafter $3,111,000
----------
$8,676,000
==========
The $8,000,000 first mortgage on the resort was paid down by
$1,637,000, from proceeds from the condo unit sales, in 1995.
5
<PAGE>
WALSINGHAM COMMONS - Walsingham Commons Shopping Center consists of
approximately 42,600 square feet of retail space, constructed in 1986,
situated on 4.6 acres of land within a shopping center, in Largo,
Pinellas County, Florida. Walsingham Commons Shopping Center includes
an additional 120,300 square feet of anchor space owned by individual
retailers, thus, making the total size of the shopping center 162,900
square feet. The retailers include, Albertson's Foods, (63,100),
Scotty's hardware (32,200), Frank's Nursery (15,200), Barnett Bank
(3,800), Long John Silver's (2,400) and Wags Restaurant (3,600).
Although the Partnership did not purchase the above stores, they act as
anchors, generating traffic to the shopping center.
Walsingham Commons is located at the intersection of Ulmerton Road and
Walsingham Road in Largo, Florida.
The Partnership acquired Walsingham Commons on November 30, 1989, for
all cash. The Partnership has capitalized the following costs
associated with the acquisition of Walsingham Commons:
Contract Purchase Price $4,825,000
Acquisition Fee 176,250
Closing Costs 22,528
----------
$5,023,778
==========
On May 16, 1990, the Partnership borrowed $3,200,000 on the Walsingham
Commons Shopping Center with a life insurance company. This loan
carries a fixed interest rate of 9.625%. The payment terms provide for
monthly interest through June 1, 1997, at which time the principal is
due.
The property was 100% occupied at the time of purchase and was 66% and
65% occupied as of December 31, 1995 and 1994. The Partnership is
receiving rent on 81% of the space because Tandy Corporation continues
to pay rent on a vacated space. Tandy's lease is through November 1996.
During 1995, management provided a provision for write down of
Walsingham Commons of $1,236,502 to reflect the current net realizable
value of the property.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not a party to nor is any of the Partnership's property the
subject of any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
6
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANTS'S PARTNERSHIP EQUITY AND RELATED PARTNER MATTERS
The units were not traded on any public market and it is not contemplated for
these units to be traded on any public market in the future. As of December 31,
1995, there were 1,112 Limited Partners.
The Partnership commenced paying quarterly cash distributions in October 1988.
During 1995, 1994 and 1993, the total cash distributions were $680,661, $589,155
and $1,084,503, respectively. The Partnership intends to distribute operating
cash produced by the Partnership on a quarterly basis in 1996 and the upcoming
years.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating revenues (including
interest income of $53,663, $11,697,
$18,081, $25,392, and $29,641 for
1995, 1994, 1993, 1992 and 1991 11,477,902 6,765,804 $7,007,502 $ 6,413,296 $ 5,395,077
Net income (loss) 1,061,549 (755,983) 233,744 237,676 (359,806)
Net income (loss) per weighted
average Limited Partnership unit 71.40 (50.85) 15.72 15.99 (23.23)
Total assets 19,590,595 29,078,498 22,607,756 23,102,524 22,865,266
Mortgages and notes payable 9,315,294 15,603,279 11,586,872 11,364,774 11,091,087
Distributions to Limited Partners 680,661 589,155 1,030,278 625,474 625,445
Distributions per Limited
Partnership unit 46.25 40.03 70.01 42.50 42.50
Partners' equity 8,923,677 8,542,789 9,887,927 10,738,686 11,126,484
Book value per Limited
Partnership unit 608.91 583.74 674.63 728.91 755.42
</TABLE>
Also, refer to Item #8 and the audited Financial Statements referred to herein.
7
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY - The principal sources of the Partnership's liquidity are income from
commercial rental real estate and a hospitality property purchased for the
Partnership's portfolio (as described in Results of Operations), and the cash
reserves held in interest-bearing accounts.
The Partnership has no loans coming due in 1996.
Management hopes to sell both Pink Shell Resort and Walsingham Commons over the
next two or three years. The Pink Shell Resort will be offered for sale after
the Partnership realizes the benefits of the expansion and many improvements
that have been made there.
Management believes that 1996 distribution levels will be similar to 1995. All
of the construction at Pink Shell Resort has been completed and rental property
improvements are anticipated to be similar to 1995 ($134,460).
Other than as discussed above, Management is not aware of any trends or demands,
commitments, events or uncertainties that will result, or are reasonable likely
to result, in the Partnership's liquidity increasing or decreasing in any
material way.
CAPITAL RESOURCES - As of December 31, 1995, the Partnership had $164,966 in
cash and interest bearing deposits.
Rental Properties (net of accumulated depreciation of $3,658,502) were carried
at $18,762,415. Property and equipment purchases of $134,460 were a result of
refurbishing the cottages at the Pink Shell property. Walsingham Commons
Shopping Center was written down by $1,236,502 to reflect market value of
the asset.
The Partnership has entered into long term leases with the owners of the
condominium units. These leases are more fully described in Item 2.
RESULTS OF OPERATIONS
COMPARISON OF THE FISCAL YEARS ENDED DECEMBER 31, 1995 AND 1994
During the years ended December 31, 1995 and 1994, the Partnership's principal
sources of revenue were rental income of $7,618,033 and $5,564,685, interest
income of $53,663 and $11,697, expense reimbursements from tenants of $122,303
and $112,012 and food and beverage revenue of $1,373,246 and $1,072,691,
respectively. In 1995 the Partnership also recognized the gain on sale of the 42
unit building at the Pink Shell in the amount of $2,307,106. The gain was
recognized in accordance with the full accrual method of accounting.
Rental income at the Pink Shell Resort increased $2,005,895 and Walsingham
Commons increased $47,453. The increase at Pink Shell was due to more units
available to rent and a stronger Florida tourism market. The increase at
Walsingham Commons was due to stabilizing the occupancy in 1995.
8
<PAGE>
During 1995 the Pink Shell rented an additional 13,321 rooms at an average daily
rate of $132.24. The resort was able to achieve a 6% increase in average daily
rate as compared to 1994. Construction on the 42 unit building was completed in
early 1995 and the units were all sold and closed in the first quarter of 1995.
The availability of these rooms contributed to the increase in the number of
additional rooms rented in 1995.
Interest income increased due to more funds invested.
Food and beverage income increased at the Pink Shell by $300,555. This is due to
more guests and higher occupancy being achieved by the property.
Property operating expenses increased by $1,948,972. This increase was
attributed to Pink Shell's expenses increasing due to lease payments being made
on the 42 unit condo building. These lease payments totaled $907,719. Marketing
costs increased $183,660, room costs increased $563,145, Administrative and
general expenses increased $228,453 of which $80,000 is due to management's
increase of its insurance reserve. Other expenses increased $65,995. Operating
expenses increased due to occupancy increasing by 32% from 41,395 rooms to
54,716.
Food and beverage expenses increased $59,466 due to more rooms being rented.
Interest expense decreased $186,697 due to the decrease in outstanding
Partnership debt. The Partnership's outstanding debt at December 31, 1995, was
$9,315,294 as compared to $15,603,279 at December 31, 1994. The decrease was
attributable to the construction loan being paid off by $3,707,200, the loan
from an affiliate decreasing $700,000 and principal pay downs of $1,880,785 on
other outstanding debt.
Real Estate Taxes decreased due to the condo building being sold in February
1995.
Loss on disposal is a one time item that related to the demolition of seven
cottage units in order to prepare the site for the 42 unit condominium building.
The demolition occurred in 1994.
The loss on impairment of rental property is Management's provision to write
down the book value of Walsingham Commons. Management believes that this
reduction realistically reflects the net realizable value of the property.
COMPARISON OF THE FISCAL YEARS ENDED DECEMBER 31, 1994 AND 1993
During the years ended December 31, 1994 and 1993, the Partnership's principal
sources of revenue were rental income of $5,564,685 and $5,821,880, interest
income of $11,697 and $18,081, expense reimbursements from tenants of $112,012
and $124,176, food and beverage revenue of $1,072,691 and $1,037,896 and other
income of $4,719 and $5,469, respectively. Rental income at the Pink Shell
Resort decreased $222,588 and Walsingham Commons decreased $34,607. The decrease
at Pink Shell was due to construction activity, less units available to rent and
a softer Florida tourism market. The decrease at Walsingham Commons was due to
vacancies that occurred in 1994.
Interest income decreased due to lower interest rates and lower funds invested.
9
<PAGE>
Tenant reimbursement and other income decreased at Walsingham Commons due to
vacancies that occurred in 1994.
Food and beverage income increased at the Pink Shell by $34,795.
Property operating expenses decreased at Walsingham Commons by $40,773 and
increased at Pink Shell by $501,968. Insurance costs increased by $100,412,
marketing expenses increased $68,533, salaries increased $129,961 due to the
decision to go to daily housekeeping in order to comply with the Best Western
requirements. Health insurance costs rose $51,135. Other increases were due to
general resort operations. Insurance costs increased due to several workman's
compensation claims being filed and also the settlement of general liability
claims against the resort. During 1994, the resort also became affiliated with
the Best Western Motel franchise. In order to bring the resort up to Best
Western standards, the resort had to convert to daily house cleaning of all the
units. Also marketing costs increased due to the Best Western affiliation and
also in anticipation of leasing the 42 unit condominium building for 1995.
Food and beverage expenses increased $48,454 which was partially offset by the
additional revenue gains.
Interest expense increased $45,454 due to an increase in borrowing. The
Partnership's outstanding debt at December 31, 1994, was $15,603,279 as compared
to $11,586,872 at December 31, 1993. The increase was attributable to the
construction loan increasing $3,707,200, the loan from an affiliate increasing
$700,000 and principal pay downs of $390,793.
Real Estate Taxes increased due to increases in millage rates assessed by the
taxing authorities.
Loss on disposal is a one time item that related to the demolition of seven
cottage units in order to prepare the site for the 42 unit condominium building.
The demolition occurred in 1994.
COMPARISON OF THE FISCAL YEARS ENDED DECEMBER 31, 1993 AND 1992
During the years ended December 31, 1993 and 1992, the Partnership's principal
sources of revenue were rental income of $5,821,880 and $5,480,411, interest
income of $18,081 and $25,392, expense reimbursements from tenants of $124,176
and $136,410, food and beverage revenue of $1,037,896 and $767,099 and other
income of $5,469 and $3,984, respectively. Rental income increased in 1993 due
to higher room rates and occupancy at the Pink Shell Resort. Rental income
increased in 1992 due to higher occupancy and average daily rates being achieved
at the Pink Shell Resort.
Interest income decreased because the investors' funds were invested in
properties. The revenue increases were offset, in part, due to increases in
property operating expenses and interest expense. The increase in expenses was
due primarily to the Partnership operating an additional 60 unit building at the
Pink Shell. Interest expense increased due to the Pink Shell loan being fully
drawn during 1992.
10
<PAGE>
INFLATION - At the present time, inflation and changing prices have not had a
significant impact on operations, however the impact on future operations is not
currently determinable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of Independent Accountants dated February 19, 1996, the Balance
Sheets of the Partnership as of December 31, 1995, and 1994 and the Statements
of Operations, Statements of Partner's Capital and Statements of Cash Flows of
the Partnership for each of the three years in the period ended December 31,
1995, as well as the Notes to Financial Statements and Schedule III and the
Report of Independent Accountants there on, dated February 19, 1996, are set
forth herein:
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners
Florida Income Fund III, Limited Partnership
We have audited the accompanying balance sheets of Florida Income Fund III,
Limited Partnership, as of December 31, 1995 and 1994, and the related
statements of operations, partners' capital, and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Partnership's management. Our responsibility is
to express an opinion on these financial statements 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 management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Florida Income Fund III,
Limited Partnership, 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.
COOPERS & LYBRAND LLP
Fort Myers, Florida
February 19, 1996
12
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 164,966 $ 414,944
Restricted cash 0 1,899,357
Accounts receivable, trade 351,231 205,433
Notes receivable 3,038 3,795
Inventory 58,311 67,373
Prepaid expenses and other 169,346 133,428
------------ ------------
Total current assets 746,892 2,724,330
------------ ------------
WORK IN PROGRESS, condominium
units under contracts for sale 0 5,686,698
------------ ------------
RENTAL PROPERTIES, net 18,762,415 20,555,638
------------ ------------
INTANGIBLE ASSETS
Deferred loan and organizational costs, net 81,288 111,832
------------ -------------
Total assets $ 19,590,595 $ 29,078,498
============ =============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Current maturities of mortgages payable-unaffiliated $ 348,033 $ 96,443
Current maturities of mortgages payable-affiliated 0 700,000
Accounts payable, trade 401,490 1,156,198
Accounts payable, construction 0 1,123,685
Accrued expenses 415,822 370,349
Due to general partner 0 25,000
Customer and security deposits, rentals 534,312 357,841
Customer deposits, condominium units 0 1,899,357
------------ ------------
Total current liabilities 1,699,657 5,728,873
------------ ------------
MORTGAGES PAYABLE, less current maturities-unaffiliated 8,967,261 14,806,836
------------ ------- -----
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL
General partners (37,551) (48,166)
Limited partners, 20,000 limited partnership units
authorized; 14,717 issued and outstanding 8,961,228 8,590,955
------------ ------------
Total partners' capital 8,923,677 8,542,789
------------ ------------
Total liabilities and partners' capital $ 19,590,595 $ 29,078,498
============ ============
RM80</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <S> <C> <C>
Revenues
Rental income $ 7,618,033 $ 5,564,685 $ 5,821,880
Food, beverage and retail income 1,373,246 1,072,691 1,037,896
Interest income 53,663 11,697 18,081
Tenant reimbursements 122,303 112,012 124,176
Other income 3,551 4,719 5,469
Gain on sale of condominium units 2,307,106 0 0
---------------- ------------- -----------
11,477,902 6,765,804 7,007,502
---------------- ------------- -----------
Expenses
Property operating expenses 6,313,848 4,364,876 3,903,681
Cost of food, beverage and retail sales 803,585 744,119 695,665
Depreciation and amortization 691,182 639,396 641,968
Interest expense 1,086,357 1,273,862 1,226,555
Interest expense-affiliated 19,044 18,236 20,250
Property taxes 265,835 289,164 285,639
Loss on disposal of fixed assets 0 192,134 0
Loss on impairment of rental property 1,236,502 0 0
---------------- ------------- ------------
10,416,353 7,521,787 6,773,758
---------------- ------------- -------------
Net income (loss) $ 1,061,549 $ (755,983) $ 233,744
================ ============ =============
Net income (loss) allocated to general partner $ 10,615 $ (7,560) $ 2,337
================ ============= =============
Net income (loss) allocated to limited partners $ 1,050,934 $ (748,423) $ 231,407
================ ============= =============
Net income (loss) per limited partner unit $ 71.40 $ (50.85) $ 15.72
================ ============= =============
Distributions per limited partner unit $ 46.25 $ 40.03 $ 70.01
================ ============= =============
Weighted average limited partner units outstanding 14,717 14,717 14,717
================ ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------- -------- -----
<S> <C> <C> <C>
Balances, January 1, 1993 $ 11,282 $ 10,727,404 $ 10,738,686
Distributions (54,225) (1,030,278) (1,084,503)
Net income 2,337 231,407 233,744
----------- ------------- ------------
Balances, December 31, 1993 (40,606) 9,928,533 9,887,927
Distributions 0 (589,155) (589,155)
Net income (7,560) (748,423) (755,983)
------------ -------------- ------------
Balances, December 31, 1994 (48,166) 8,590,955 8,542,789
Distributions 0 (680,661) (680,661)
Net income 10,615 1,050,934 1,061,549
------------ --------------- -----------
Balances, December 31, 1995 $ (37,551) $ 8,961,228 $ 8,923,677
============ =============== ===========
RM80</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,061,549 $ (755,983) $ 233,744
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Gain on sale of condominium units (2,307,106) 0 0
Loss on disposal of fixed assets 0 192,134 0
Loss on impairment of rental property 1,236,502 0 0
Depreciation 691,197 639,396 641,968
Amortization of loan costs 40,343 75,805 28,906
(Increase) decrease in:
Accounts receivable (145,798) (31,907) 46,479
Notes receivable 757 11,440 28,574
Inventory 9,062 (8,392) (2,972)
Prepaid expenses and oher (35,918) 69,424 (86,266)
Restricted cash 1,899,357 (1,899,357) 0
Increase (decrease) in:
Accounts payable-trade and accrued expenses (709,235) 837,795 117,311
Customer and security deposits, rentals 176,471 (52,364) (17,418)
Customer deposits, condominium units (1,899,357) 1,899,357 0
---------------- ---------------- ----------------
Net cash provided by operating activities 17,824 977,348 990,326
---------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of condominium units 7,719,236 0 0
Work in progress, condominium units (849,117) (3,416,427) (371,127)
Rental property improvements and purchases of
equipment (134,476) (668,025) (63,574)
---------------- ---------------- ----------------
Net cash provided by (used in) investing activities 6,735,643 (4,084,452) (434,701)
---------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Repayment) proceeds of cash advanced by general
partner (25,000) 25,000 34,000
Repayment of cash advanced by general partner 0 (34,000) 0
Proceeds of borrowings from unaffiliated companies 6,822 3,707,200 0
Proceeds of borrowing from affiliates 0 700,000 300,000
Repayment of borrowings from unaffiliated companies (5,594,807) (90,793) (77,902)
Repayment of borrowings to affiliates (700,000) (300,000) 0
Loan origination fees paid (9,799) (58,467) 0
Partner distributions paid (680,661) (589,155) (1,084,503)
---------------- ---------------- ----------------
Net cash provided by (used in) financing activities (7,003,445) 3,359,785 (828,405)
---------------- ---------------- ----------------
Net increase (decrease) in cash and cash equivalents (249,978) 252,681 (272,780)
Cash and cash equivalents at beginning of year 414,944 162,263 435,043
---------------- ---------------- ----------------
Cash and cash equivalents at end of year $ 164,966 $ 414,944 $ 162,263
================ ================ ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 1,102,243 $ 1,216,293 $ 1,290,848
================ ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Florida Income Fund III, Limited Partnership (the Partnership) was
formed on December 9, 1987, by the filing of a Certificate and
Agreement of Limited Partnership (Partnership Agreement) under the
laws of the State of Delaware. The general partners, MCD Real
Estate, Inc. (MCD) and Mariner Capital Management, Inc. (MCM), also
the managing general partner, contributed $20,000 and the initial
limited partner contributed $5,000 in the initial capitalization of
the Partnership. The Partnership was formed for the purpose of
investing in a diversified portfolio of income-producing commercial
and residential real estate properties located in Florida. The
Partnership owns the Mariner's Pink Shell Beach and Bay Resort and
Walsingham Commons (a portion of a retail shopping center).
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies of the Partnership
follows:
RENTAL INCOME: The Partnership leases space in its retail centers.
These leases range from one to ten years and include provisions for
minimum rent increases at stated amounts or the Consumer Price
Index. Rental income is recognized by amortizing the total contract
minimum rent on a straight-line basis over the life of the lease.
The difference between rental income recognized and actual rental
receipts is accumulated and included in prepaid expenses and other
in the accompanying balance sheets.
ALLOCATION OF NET INCOME (LOSS): In accordance with the Partnership
Agreement, net income (loss), prior to recoupment is allocated one
percent (1%) to the general partners and ninety-nine percent (99%)
to the limited partners as a class. Upon reaching certain operating
results and prior to recoupment, net income (loss) is allocated five
percent (5%) to the general partners and ninety-five percent (95%)
to the limited partners as a class. Subsequent to recoupment, income
(loss) is allocated twenty percent (20%) to the general partners and
eighty percent (80) to the limited partners as a class.
RENTAL PROPERTIES: Depreciation is computed principally under the
straight-line method over the estimated useful lives of the assets.
Repairs and maintenance are included in operating expenses and
improvements are capitalized.
Upon the sale or retirement of depreciable assets, the cost and
related accumulated depreciation are removed from the accounts and
the difference between the carrying value and any proceeds realized
on sale is included in the determination of net income (loss).
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
RENTAL PROPERTIES, CONTINUED
The Partnership adopted Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" (SFAS 121) on January 1, 1995.
The Statement requires that long-lived assets and certain
identifiable intangibles to be held and used be reviewed for
impairment whenever events or changes in circumstances indicate that
their carrying amount may not be recoverable. In assessing
recoverability, estimates of future cash flows expected to result
from the use of the asset and its eventual disposition should be
used. If the sum of the expected future cash flows (undiscounted and
without interest charges) is less than the carrying amount of the
asset, an impairment loss should be recognized based on the value of
the asset Management has reviewed its property holdings and believes
that an impairment of the Walsingham Commons property exists. A loss
of approximately $1,237,000 on impairment of the Walsingham Commons
property has been recognized in the year ended December 31, 1995.
INTANGIBLE ASSETS: Certain organizational costs, including legal and
professional fees, incurred in organizing the Partnership have been
capitalized and are amortized using the straight-line method over
sixty months. These are fully amortized at December 31, 1993.
DEFERRED LOAN COSTS: Loan costs incurred from financing the various
property acquisitions have been capitalized at cost and are being
amortized over the lives of the related loans. Amortization of loan
costs is included with interest expense in the statement of
operations.
INCOME TAXES: The accompanying financial statements do not show a
provision or liability for Federal or State income taxes because the
partners are taxed individually on their share of Partnership
earnings.
INVENTORIES: Inventories are stated at the lower of cost or market
value, determined using the first-in, first-out (FIFO) method.
PER UNIT INCOME (LOSS): Per unit income (loss) is based on the
weighted average number of units outstanding for the periods ended
December 31, 1995, 1994 and 1993.
CASH EQUIVALENTS: For purposes of the statement of cash flows, the
Partnership considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
PROFIT RECOGNITION ON CONDOMINIUM UNIT SALE: The Partnership
has recognized a gain of approximately $2,300,000 on the sale-
leaseback of the Pink Shell condominiums by the full accrual
method in the year ending December 31, 1995 in accordance with the
provisions of Statement of Financial Accounting Standards
No. 98, "Accounting for Leases", and Statement of Financial
Accounting Standards No. 66, "Accounting for Sales of Real Estate".
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
FAIR VALUE OF FINANCIAL INSTRUMENTS: Statement of Financial
Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments," requires that the Partnership disclose
estimated fair values of financial instruments. The recorded value
for cash and cash equivalents approximates fair value because of the
short maturity of these instruments. The fair value of the
Partnership's short- and long-term notes and mortgages payable at
December 31, 1995, based upon market rates, approximates the amounts
disclosed in Footnote 4.
MANAGEMENT'S USE OF ESTIMATES: The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
RECLASSIFICATIONS: Certain amounts in the 1994 and 1993 financial
statements have been reclassified to conform to the current year
presentation. These reclassifications have no effect on the net
income or partners' capital previously reported.
2. CONDOMINIUM UNITS:
At the Pink Shell Resort site, the Partnership constructed a 42-unit
condominium complex which has been sold and leased back to the
Partnership as of December 31, 1995. The Partnership received a
certificate of occupancy in February 1995 with closing on the
condominium units occurring in February and March 1995.
All 42 owners have entered into 5 to 10 year leases with the
Partnership. The leases state that the lessee shall pay the owner a
base annual rent equal to $25,000 payable in 12 equal monthly
installments. Lessee shall also pay the owner the amount by which 42.5%
of the annual gross rental income generated by the lessee from the unit
exceeds the amount of the annual base rent paid. Base rent under this
agreement shall increase by $500 per year until the first year for
which percentage rent is payable. Thereafter there shall be no further
increases in base rent during the lease term (See also Note 6 - Lease
Commitments).
Deposits made in accordance with the sales contracts on the 42 units of
$1,849,850, together with interest of $49,507, were held in escrow in
accordance with the Partnership's construction loan agreement and are
included in restricted cash at December 31, 1994.
Total closing proceeds from the sale of the 42 unit condominium complex
in the year ended December 31, 1995 was approximately $9,573,000. The
cost of the condominium complex was approximately $7,138,000 (including
capitalized interest of $36,088 and $114,154 in 1995 and 1994,
respectively). Selling expenses totaled $173,555, resulting in a gain
of $2,307,106. Closing proceeds were used to pay down related mortgages
and notes by approximately $6,283,000.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. RENTAL PROPERTIES:
Rental properties consisted of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land $ 6,751,181 $ 6,751,181
Buildings, improvements and equipments 16,906,238 16,771,778
Valuation allowance (1,236,502) 0
---------------- ----------------
22,420,917 23,522,959
Accumulated depreciation (3,658,502) (2,967,321)
---------------- ----------------
$ 18,762,415 $ 20,555,638
================ ================
</TABLE>
Depreciation expense was $691,182, $639,396 and $636,768 for 1995, 1994
and 1993, respectively.
The leases at Walsingham Commons are noncancelable leases. Based on the
terms of the leases in existence at December 31, 1995, future minimum
annual rentals to be received under these leases over the next five
years, and in the aggregate, will be approximately as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 315,639
1997 163,602
1998 80,092
1999 45,491
2000 0
-----------
$ 604,824
===========
</TABLE>
The above schedule includes approximately $90,245 due from McDuff's
Electronics (McDuff's), a division of Tandy Corporation (Tandy).
McDuff's lease is guaranteed by Tandy, although the lease includes a
provision allowing termination if occupancy drops below 60% for a
six-month period. McDuff's has vacated but is continuing its payments
under the lease until November 1996. Management expects to continue to
receive full lease payments until either a negotiated settlement or
sub-lease is agreed to or Walsingham Commons' occupancy drops below 60%
occupancy. Occupancy at December 31, 1995 is 65%. Management believes
it will be successful in keeping occupancy above the 60% level.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. DEFERRED LOAN COSTS:
Deferred loan costs at December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred loan costs $ 267,845 $ 301,578
Accumulated amortization (186,557) (189,746)
---------------- ----------------
$ 81,288 $ 111,832
================ ================
</TABLE>
Additions to deferred loan costs relate to modifications of note terms
and other refinancing transactions during the years ended December 31,
1995 and 1994. Certain loan costs became fully amortized during the
years ended December 31, 1995 and 1994 and, therefore, were written
off. Amortization expense was $38,556, $32,273, and $34,107 for 1995,
1994, and 1993, respectively.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. MORTGAGES AND NOTES PAYABLE:
Mortgages and notes payable consisted of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Unaffiliated debt:
Note and mortgage payable to banks:
Mortgage payable to a bank, monthly payment of $78,409
including interest at 10.5%, final payment due April 2000 $ 5,929,597 $ 7,805,439
Construction loan payable to a bank, interest only payable
monthly at prime plus 1.25%, collateralized by condominium
units under construction, final payment of the unpaid
principal balance made March 1995 0 3,707,200
---------------- ----------------
Total note and mortgage payable to banks 5,929,597 11,512,639
---------------- ----------------
Other mortgages and notes payable:
Mortgage payable to an insurance company, interest only
monthly payments of $25,666 at 9.625%, principal due
June 1997 3,200,000 3,200,000
Mortgage payable to individual, quarterly interest payments at
7%, principal payments of $10,000 every March, final
balloon payment of $160,000 plus interest due January 1998 180,000 190,000
Note payable to finance company, monthly payments of $315
including interest at 6%, final payment due October 1997 5,697 0
Note payable to finance company, monthly payments of $287
including interest at 10%, final payment made February 1995 0 640
---------------- ----------------
Total other mortgages and notes payable 3,385,697 3,390,640
---------------- ----------------
Affiliated debt:
Notes payable to affiliates:
Revolving loan payable to affiliate, quarterly interest payments
14% until January 31, 1995. 13% interest rate thereafter
with final payment of the unpaid principal balance made
March 1995 0 700,000
---------------- ----------------
Total notes and mortgages payable 9,315,294 15,603,279
Less current maturities (348,033) (796,443)
---------------- ----------------
Total long term debt less current maturities $ 8,967,261 $ 14,806,836
================ ================
</TABLE>
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. MORTGAGES AND NOTE PAYABLE, CONTINUED
Long-term debt less current maturities is scheduled to mature
approximately as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 3,583,573
1998 572,316
1999 457,754
2000 4,353,618
----------------
$ 8,967,261
================
</TABLE>
The Mariner's Pink Shell Beach and Bay Resort and Walsingham Commons
properties are pledged as collateral for mortgages. The rents and
receivables related to Walsingham Commons are also pledged as
collateral.
6. LEASE COMMITMENTS:
The Partnership has entered into five to ten year operating leases
with 42 condominium owners at the Pink Shell Resort property. The
estimated future minimum lease payments associated with these
operating leases are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 1,071,000
1997 1,092,000
1998 1,113,000
1999 1,134,000
2000 1,155,000
Thereafter 3,111,000
----------------
$ 8,676,000
================
</TABLE>
Lease expense for the years ending December 31, 1995, 1994 and
1993 was $907,719, $14,325 and $13,725, respectively.
7. RELATED PARTY TRANSACTIONS:
The Partnership participated in the following related party
transactions:
The general partners and their affiliates are also entitled to
receive compensation for leasing and management fees in an amount
not to exceed 5% of gross revenues from residential Partnership
properties or 6% of gross revenues produced by commercial
Partnership properties. Total management fees of $555,259, $405,902
and $421,529 were incurred for the years ending December 31, 1995,
1994 and 1993, respectively.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. RELATED PARTY TRANSACTIONS, CONTINUED
The general partners and their affiliates are also entitled to
reimbursement of costs (including amounts of any salaries paid to
employees and officers of a general partner or its affiliates)
directly attributable to the operation of the Partnership that could
have been provided by independent parties. Expenses amounting to
$2,878,501, $3,332,049 and $1,272,492 were incurred during the years
ending December 31, 1995, 1994 and 1993, respectively. Effective
July 1, 1993, the employees of the Pink Shell Beach and Bay Resort
become employees of Mariner Group, Inc. (parent of MCM), which pays
the payroll and related benefits and charges the cost back to Pink
Shell.
Amounts due from and to the general partner and its affiliates
arising from normal business operations are included in account
balances as follows at December 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Accounts receivable $ 15,819 $ 35,000
Accounts payable, trade 5,352 708,589
Accounts payable, construction 0 570,292
Accrued expenses 96,085 80,855
</TABLE>
24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the financial statements of Florida Income Fund III, Limited
Partnership, is included on page 12 of this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related
financial statement schedule listed in the index on page 35 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND LLP
Fort Myers, Florida
February 19, 1996
25
<PAGE>
<TABLE>
<CAPTION>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER, 31, 1995
COL. A COL. B COL. C COL. D COL. E
COST CAPITALIZED GROSS AMT AT WHICH
INITIAL COST SUBSEQUENT TO CARRIED AT CLOSE
TO PARTNERSHIP ACQUISITION OF PERIOD
BLDGS. & CARRYING BLDGS &
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COSTS LAND IMPROVEMENTS TOTAL
- ----------- ------------ -------- ------------ ------------ ----- ---- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pink Shell Resort
Ft. Myers, FL $ 5,767,261 $4,942,431 $3,933,139 $ 9,698,725 $ -0- $4,942,431 $13,631,864 $18,574,295
Walsingham Commons
Shopping Center (a) (a)
Largo, FL $ 3,200,000 $1,808,750 $3,215,028 $ 59,346 $ -0- $1,808,750 $ 2,037,872 $ 3,846,622
TOTALS $ 8,967,261 $6,751,181 $7,148,167 $ 9,758,071 $ -0- $6,751,181 $15,669,736 $22,420,917
=========== ========== ========== =========== ===== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
COL. F COL. G COL. H COL. I
LIFE IN WHICH
DEPRECIATION IN
DATE OF LATEST INCOME
ACCUMULATED CONSTR DATE STATEMENT IS
DESCRIPTION DEPRECIATION UCTION ACQUIRED COMPUTED
- ----------- ------------ ------- -------- ---------------
<S> <C> <C> <C> <C>
Pink Shell Resort 1954-
Ft. Myers, FL $ 3,004,007 1973 1988 31.5 years
Walsingham Commons
Shopping Center
Largo, FL $ 654,495 1986 1989 31.5 years
TOTALS $ 3,658,502
===========
</TABLE>
SEE ACCOMPANYING NOTES TO SCHEDULE III
(a) This includes a provision for write down of $1,236,502 to reflect the
current net realizable value made by management in 1995.
26
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
NOTES TO SCHEDULE III
DECEMBER 31, 1995
REAL ESTATE AND ACCUMULATED DEPRECIATION
Balance as of 12/31/92 $23,804,160
-----------
Additions During 1993:
Acquisitions through foreclosures $ 0
Other Acquisitions 0
Improvements, Etc. 434,702
Other 0 434,702
----------
Deductions During Period:
Cost of real estate sold $ 0
Reclassify to Condominium Units (371,127) (371,127)
---------- -----------
Balance as of 12/31/93 $23,867,735
-----------
Additions During 1994:
Acquisitions through foreclosures $ 0
Other Acquisitions 1,198,116
Improvements, etc. 0
Other 0 1,198,116
----------
Deductions During Period:
Cost of real estate sold ($ 237,342)
Reclassify to Condominium Units ( 1,305,550) ( 1,542,892)
---------- -----------
Balance as of 12/31/94 $23,522,959
Additions During 1995:
Acquisitions through foreclosures $ 0
Other Acquisitions
Improvements, etc. 134,460
Impairment of Value (1,236,502) ( 1,102,042)
---------- -----------
Balance as of 12/31/95 $22,420,917
===========
27
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
NOTES TO SCHEDULE III
DECEMBER 31, 1995
REAL ESTATE AND ACCUMULATED DEPRECIATION
Balance as of 12/31/92 $1,736,365
Depreciation expense for 1993 $636,768 636,768
-------- ----------
Balance as of 12/31/93 2,373,133
Depreciation expense for 1994 639,396
Less accumulated depreciation
on cottages abandoned (45,208) 594,188
-------- ----------
Balance as of 12/31/94 2,967,321
Depreciation expense for 1995 691,181 691,181
-------- ----------
Balance as of 12/31/95 $3,658,502
==========
28
<PAGE>
FLORIDA INCOME FUND III LIMITED PARTNERSHIP
NOTES TO SCHEDULE III
DECEMBER 31, 1995
REAL ESTATE AND ACCUMULATED DEPRECIATION
(A) The aggregate cost of land and buildings is the same for Federal
Income Tax purposes.
(B) Included in the acquisition of 1989 and 1988 are $176,250 and $500,000
of acquisition fees and expenses payable to the General Partner in
connection with acquiring the property.
(C) See Note 1 to the Financial Statements for depreciation method.
(D) See Note 5 to the Financial Statements for further information on debt
obligations.
29
<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
(A) AND (B) IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
The Partnership, as an entity, does not have any directors or officers. The
Managing General Partner is Mariner Capital Management, Inc. (located at 12800
University Dr., Ste 675, Fort Myers, Florida 33907), a Florida corporation
formed for the purpose of becoming the general partner in limited partnerships
formed principally to invest in real estate. The Managing General Partner is a
wholly owned subsidiary of The Mariner Group, Inc., an Ohio corporation
(referred to herein as "Mariner Group"). The executive officers/directors of the
Managing General Partner as of December 31, 1994, were as follows: Robert M.
Taylor, Timothy R. Bogott, Lawrence A. Raimondi and Michael J. Scullion.
Each of the officers named above, except Michael J. Scullion, has served as an
officer of the Mariner Capital Management, Inc., since its incorporation on July
11, 1983. Michael J. Scullion replaced Richard S. McKinlay as a Secretary/
Treasurer as of September 1, 1987.
MCD Real Estate, Inc. (locate at 2100 Society Building, Cleveland, Ohio 44114)
(referred to herein as "MCD") is a Co-General Partner. MCD is an Ohio
corporation and a wholly owned subsidiary of McDonald & Company Securities,
Inc., the Managing Dealer of the offering. McDonald & Company Securities, an
Ohio corporation, is a wholly owned subsidiary of McDonald & Company
Investments, Inc., a publicly-traded Delaware corporation listed on the New York
Stock Exchange. MCD was formed in February of 1981 for the principal purpose of
becoming the general partner of limited partnerships formed to provide equity
financing for various real estate projects. The directors and officers of MCD as
of December 31, 1994, were as follows: James C. Redinger, Thomas M. O'Donnell,
Richard R. Cundiff III, and Gordon A. Price.
(C) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES
Not applicable
(D) FAMILY RELATIONSHIP
Not applicable
30
<PAGE>
(E) BUSINESS EXPERIENCE
ROBERT M. TAYLOR: Age 54, is Chairman of the Board and a Director of
the Managing General Partner. He founded Mariner Group in 1971 and
served as its President until his election as Chairman and Chief
Executive Officer of Mariner Group in 1979. He also serves as an
officer or director of various other Affiliates of Mariner Group. Mr.
Taylor is a Director of Acme-Cleveland Corporation, Cleveland, Ohio, a
manufacturer of machine tools; Barnett Bank of Fort Myers, Fort Myers,
Florida; MIL- COM Electronics Corporation, San Antonio, Texas; Florida
Council of 100; the Fort Myers Chamber of Commerce, and Chairman of
the Business Development Corporation of Southwest Florida, Fort Myers,
Florida. Since 1971, Mr. Taylor has directed the completion of over 30
real estate developments in Lee County, Florida. Prior to 1971, Mr.
Taylor was a management consultant employed by McKinsey & Company,
Inc., Cleveland, Ohio.
TIMOTHY R. BOGOTT: Age 49, is a Director and the former President of
the Managing General Partner. He was involved in all aspects of the
organization and management of Florida Income Fund, L.P., Florida
Income Fund II and Florida Income Fund III until January 1994 when he
became President of South Seas Resorts Company. He joined Mariner
Group in 1976 and has held the positions of Project Manager and
Director of Administration and Secretary/Treasurer. Prior to 1976, Mr.
Bogott was employed as an Assistant Vice President of Palmetto Federal
Savings and Loan Association, Fort Myers, Florida (1974-1976) and held
various management positions with the First National Bank of Fort
Myers (1970-1974). Mr. Bogott was elected Secretary/Treasurer of
Mariner Group in 1979 and Vice President -Finance in 1983. Mr. Bogott
is also President of Mariner Capital Investment Corporation and is an
officer or director of various other Affiliates of Mariner Group.
LAWRENCE RAIMONDI: Age 48, is President and Director of the Managing
General Partner. He became President in January 1994 after serving as
Executive Vice President in charge of property acquisitions and
financing of partnership debt. He was involved in all property
acquisitions for Florida Income Fund, L.P., Florida Income Fund II and
Florida Income Fund III. He joined Mariner Group in 1981 and served as
Director of Project Finance until joining the general partner. He was
employed in the Real Estate Department of Mellon Bank from 1969 to
1981 in various capacities with his most recent position being a
Commercial Mortgage Officer.
MICHAEL SCULLION: Age 40, is the Secretary/Treasurer of the Managing
General Partner. Mr. Scullion has been a Certified Public Accountant
since 1981. He is a member of the American Institute of Certified
Public Accounts (AICPA), and a member of the Florida Institute of
Certified Public Accountants (FICPA). Mr. Scullion joined Mariner
Group in 1983. Mr. Scullion was employed by Coopers & Lybrand, CPA's
(1980-1983) prior to that time.
31
<PAGE>
JAMES C. REDINGER: Age 59. Mr. Redinger joined McDonald & Company (a
partnership that transferred all of its assets to McDonald & Company
Securities, Inc.) in March 1974, becoming a partner in 1977, working
in the area of corporate underwriting and syndication of real estate
and oil and gas ventures. He has had extensive experience in site
selection, cost projections of both commercial and residential real
estate projects and the syndication of such projects through limited
partnerships. Mr. Redinger has served as Chairman of the District Nine
Committee of the National Association of Securities Dealers, Inc., is
a Vice President and a Director of MCD Oil and Gas Company, Inc., a
Director of McDonald & Company Venture Capital, Inc., a Director of
McDonald & Company Securities, Inc., and a Managing Director of
McDonald & Company Securities, Inc.
THOMAS M. O'DONNELL: Age 60. Mr. O'Donnell joined McDonald & Company
in 1965 in the Corporate Finance Department. Mr. O'Donnell became a
partner of McDonald & Company in 1968 and has been a member of its
Policy Committee since 1971. Mr. O'Donnell is a Chartered Financial
Analyst and a member of the Cleveland Society of Security Analysts.
Mr. O'Donnell is a director of Seaway Food Town, Inc., Maumee, Ohio, a
grocery retailer. Mr. O'Donnell is Chief Executive Officer and
Chairman of the Board of McDonald & Company Investments, Inc., Chief
Executive Officer and Chairman of the Board of McDonald, which
operates an insurance agency; a Director of MCD Oil & Gas Company,
Inc., a Director of McDonald & Company Venture Capital, Inc.; and a
Director of McDonald Financial Services.
RICHARD R. CUNDIFF, III: Age 36. Mr. Cundiff joined McDonald & Company
in December 1982 and has assisted in the development of the Real
Estate and Specialty Finance Department. Specializing in real estate
and oil and gas investment banking, his responsibilities include
structuring, marketing and monitoring investments in these particular
areas. Mr. Cundiff is a First Vice President of McDonald & Company.
GORDON A. PRICE: Age 48. Mr. Price has been a Managing Director and
Chief Financial Officer of McDonald since April 1987. Prior thereto he
was Senior Vice President and Assistant Treasurer of McDonald. Mr.
Price is also an officer and director of various other affiliates of
MCD.
(F) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
No director or officer of the Managing General Partner was involved in
any event during the past five years which would be responsive to this
question.
ITEM 11. EXECUTIVE COMPENSATION
(A) CURRENT REMUNERATION OF GENERAL PARTNERS, THEIR DIRECTORS AND
OFFICERS
No direct remuneration was paid or payable by the Partnership for the
period ended December 31, 1995, to directors or officers of the
General Partners. During the period ended December 31, 1995, no
remuneration, direct or indirect, was paid to affiliates of the
General Partners, except:
32
<PAGE>
The General Partners and their affiliates are also entitled to receive
compensation for leasing and management fees in an amount not to
exceed 5% of gross revenues from residential Partnership properties or
6% of gross revenues produced by commercial Partnership properties.
During 1995, 1994 and 1993, $555,259, $405,902 and $421,529 were
charged to the Partnership.
The General Partners and their affiliates are also entitled to
reimbursement for the actual cost to the General Partners or their
affiliates of goods, materials and services used for or by the
Partnership and obtained from unaffiliated entities and the cost of
services performed by officers and employees of the General Partners
and their affiliates which could be performed directly for the
Partnership by independent parties. During 1995, 1994 and 1993,
$2,878,501, $3,332,049 and $1,272,492 were charged to the Partnership
for these services of which $101,437, $117,256 and $1,359,736 were
included in accounts payable and accrued expenses at December 31,
1995, 1994, and 1993 respectively. A portion of this amount is for the
payment of insurance premiums which are collected by Mariner Group,
Inc. (for all Mariner affiliates) and paid to the carrier on behalf of
Florida Income Fund III. The balance is for reimbursement for on-site
property management personnel and for reimbursement of other costs for
services performed by the General Partner or affiliates which the
Partnership would be required to pay to third parties for comparable
services in the same geographical location. The increase in General
Partner charges for 1994 over prior years is due to management's
decision, effective July 1, 1993, to have the employees of the Pink
Shell Beach and Bay Resort become employees of Mariner Group, Inc.
(parent of Mariner Capital Management, Inc.), which pays the payroll
and related benefits and charges the cost back to Pink Shell and for
related charges on the 42 unit condominium building.
In accordance with the Partnership Agreement, net income or loss,
prior to recoupment, is allocated five percent (5%) to the General
Partners and ninety-five percent (95%) to the Limited Partners as a
class. However, if operating cash flow distributed or distributable
doesn't reach 7%, then net income will be allocated 1% to the General
Partners and 99% to the Limited Partners. Subsequent to recoupment,
income or loss is allocated twenty percent (20%) to the general
partners and eighty percent (80%) to the limited partners as a class.
(B) PROPOSED REMUNERATION
Except for the payment of acquisition fees and the allocation of net
income or loss as described above, the Partnership has no ongoing plan
or arrangement to compensate the persons and entities named above.
However, the Managing General Partner or its affiliates may receive
leasing and management fees in connection with the management of the
Partnership's properties, subject to the limitations described herein
below.
The Managing General Partner or its affiliates are entitled to receive
property management fees not to exceed 6% of the gross revenues from
commercial properties and 5% from residential properties. Other
expenses attributable to the operation of the Partnership may be
reimbursed to the General Partners or affiliates of the Managing
General Partner.
33
<PAGE>
The Managing General Partner or its affiliates are entitled to one
half of the commissions paid as a result of the sale of Partnership
properties based on property sales prices, in an amount not to exceed
2.75% of such prices and subordinated to the right of the Limited
Partners to receive aggregate cash distributions from the Partnership
equal to their adjusted capital contribution plus the 10% preference
amount.
(C) REMUNERATION OF DIRECTORS
None.
(D) OPTIONS, WARRANTS AND RIGHTS
The Registrant has granted no options, warrants or rights.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No person is known to the Partnership to be the beneficial owner of over 5% of
the outstanding Partnership units. For information on net income or loss
allocation see Item 11 (A).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
See Note 7, Related Party Transactions in Notes to the Financial Statements, on
pages 23 and 24 in Item 8.
34
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENT SCHEDULES
The following Financial Statement Schedules of the Partnership are
included in Part II, Item 8:
PAGE
----
Report of Independent Accountants 12
Balance Sheets as of December 31, 1995 and 1994 13
Statements of Operation for the three years ended
1995, 1994 and 1993 14
Statements of Partners' Capital for the three years
ended 1995, 1994 and 1993 15
Statements of Cash Flows for the three years ended
1995, 1994 and 1993 16
Notes to Financial Statements 17 - 24
Report of Independent Accountants on Schedule III 25
Schedule III Real Estate and Accumulated Depreciation 26 - 29
Schedules Omitted:
Other schedules have been omitted because of the absence of
conditions under which they are required or because the
required information is included in the Financial Statements.
(A) 2. EXHIBITS
27 Financial Data Schedule (for SEC use only)
(A) 3. REPORTS ON FORM 8-K
None.
35
<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.
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
(Registrant)
March 20, 1996
By: /s/ LAWRENCE A. RAIMONDI
------------------------------------
LAWRENCE A. RAIMONDI
President, Director and CEO
Mariner Capital Management, Inc.
(Principal Executive Officer)
By: /s/ MICHAEL J. SCULLION
------------------------------------
MICHAEL J. SCULLION
Mariner Capital Management, Inc.
(Principal Financial and Accounting Officer)
36
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 164,966
<SECURITIES> 0
<RECEIVABLES> 354,269
<ALLOWANCES> 0
<INVENTORY> 58,311
<CURRENT-ASSETS> 250,634
<PP&E> 22,420,917
<DEPRECIATION> (3,658,502)
<TOTAL-ASSETS> 19,590,595
<CURRENT-LIABILITIES> 1,699,657
<BONDS> 8,967,261
0
0
<COMMON> 0
<OTHER-SE> 8,961,228
<TOTAL-LIABILITY-AND-EQUITY> 19,590,595
<SALES> 1,373,246
<TOTAL-REVENUES> 11,477,902
<CGS> 803,585
<TOTAL-COSTS> 6,579,683
<OTHER-EXPENSES> 691,182
<LOSS-PROVISION> 1,236,502
<INTEREST-EXPENSE> 1,105,401
<INCOME-PRETAX> 1,061,549
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,061,549
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,061,549
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
