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, 1997
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 organization:
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>
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FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
FORM 10-K - 1997
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 12 - 30
9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 31
III 10 Directors and Executive Officers of
the Registrant 31 - 33
11 Executive Compensation 33 - 35
12 Security Ownership of Certain Beneficial
Owners and Management 35
13 Certain Relationships and Related Party
Transactions 35
IV 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 36
Signatures 37
2
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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 its 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
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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
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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 11 leases which expire December 31, 2000,
15 leases which expire December 31, 2002, and 16 leases which expire
December 31, 2005.
Total initial minimum payments associated with these leases are as
follows:
INITIAL
MIN. LEASE TOTAL
EXPIRATION DATE NO. UNITS PAYMENTS PAYMENT
--------------- --------- ---------- -------
December 21, 2000 11 130,833 $1,439,163
December 31, 2002 15 186,500 2,797,500
December 31, 2005 16 273,750 4,380,000
----------
$8,616,663
==========
Future minimum lease payments at December 31, 1997 are projected as
follows:
1998 $1,113,000
1999 1,134,000
2000 902,917
2001 868,000
2002 527,250
Thereafter 1,018,500
----------
$5,563,667
==========
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.
Subsequent to December 31, 1997, the Partnership entered into a
Purchase Agreement with a hotel company to sell the Pink Shell.
Limited Partners approval of this proposed transaction is expected to
be solicited in March or April of 1998. If approved, the sale could
close in the second quarter of 1998. The general partners would then
adopt a formal plan of liquidation, in accordance with the Partnership
agreement, which would be implemented as soon as all the terms and
conditions of the sale are satisfied.
5
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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 was
due.
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.
As a result of the Partnership's November 27, 1996 default under the
terms of the above mentioned mortgage loan, the Partnership agreed to
the appointment of a receiver on the Walsingham Commons on February 3,
1997. All rights, powers, interests and obligations in Walsingham
Commons have been transferred to the receiver as of November 27, 1996.
The outstanding mortgage balance of $3,200,000 is nonrecourse and will
be satisfied upon the final judgment of foreclosure. The foreclosure
proceedings had not been finalized at December 31, 1997.
This action was taken in response to a declining rental market in the
area of Largo, FL where this property is located. The subject
neighborhood has been declining and losing many of the long term
tenants to newer buildings located in more desirable areas of Pinellas
County. This resulted in a high supply of vacant space versus
very low demand which in turn led to reduced rental rates. The
General Partner was of the opinion that the problem is long term and
felt it was economically prudent to default on the mortgage loan to
eliminate the negative cash flow being generated by 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
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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,
1997, there were 1132 Limited Partners.
The Partnership commenced paying quarterly cash distributions in October 1988.
During 1997, 1996 and 1995, the total cash distributions were $679,605,
$680,661 and $680,661, respectively. The Partnership intends to distribute
operating cash produced by the Partnership on a quarterly basis in 1998 or
until the potential sale discussed in Item 2 above takes place.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating revenues (including
interest income of $15,081, $17,992,
$53,663, $11,697 and $18,081 for
1997, 1996, 1995, 1994 and 1993 $10,050,298 $ 9,828,999 $11,477,902 $ 6,765,804 $ 7,007,502
Net income (loss) $ 673,929 $ (63,805) $ 1,061,549 $ (755,983) $ 233,744
Net income (loss) per weighted
average Limited Partnership unit $ 45.33 $ (4.29) $ 71.40 $ (50.85) $ 15.72
Total assets $18,293,585 $18,919,818 $19,590,595 $29,078,498 $22,607,756
Mortgages and notes payable $ 8,577,510 $ 8,964,331 $ 9,315,294 $15,603,279 $11,586,872
Distributions to Limited Partners $ 679,605 $ 680,661 $ 680,661 $ 589,155 $ 1,030,278
Distributions per Limited
Partnership unit $ 46.18 $ 46.25 $ 46.25 $ 40.03 $ 70.01
Partners' equity $ 8,173,535 $ 8,179,211 $ 8,923,677 $ 8,542,789 $ 9,887,927
Book value per Limited
Partnership unit $ 557.52 $ 558.36 $ 608.91 $ 583.74 $ 674.63
</TABLE>
Also, refer to Item #8 and the audited Financial Statements referred to herein.
7
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY - The principal source of the Partnership's liquidity is income
from 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 had one loan in the amount of $2,183 which matured in 1997.
The Partnership has one mortgage that matures in 1998 in the amount of
$160,000.
Management believes that 1998 distribution levels from operations will be
similar to 1997 until the potential sale discussed in Item 2 above takes
place.
As discussed above and in Item 2 regarding Pink Shell Resort, Management
anticipates the potential liquidation of this Partnership during 1998.
CAPITAL RESOURCES - As of December 31, 1997, the Partnership had $156,000 in
cash and interest bearing deposits.
The Pink Shell (net of accumulated depreciation of $4,536,637 was carried
at $14,485,000. Property and equipment purchases of $150,098 were a result of
refurbishing the cottages at the Pink Shell property. Walsingham Commons
Shopping Center was written down in 1995 by $1,236,502 to reflect market value
of the asset. It is carried at $3,082,157 (net of accumulated depreciation of
$764,464).
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, 1997 AND 1996
During the years ended December 31, 1997 and 1996, the Partnership's principal
sources of revenue were rental income of $8,486,992 and $8,300,728, interest
income of $15,081 and $17,992, expense reimbursements from tenants of $0 and
$142,618 and food, beverage and retail revenue of $1,548,225 and $1,367,661,
respectively.
Rental income at the Pink Shell Resort increased $621,323. The increase at
Pink Shell was due to achieving a higher average daily rate and higher
occupancy.
During 1997 the Pink Shell rented 3,492 more rooms at an average daily
rate of $147.59.
Interest income decreased due to fewer funds invested.
Food, beverage and retail income increased at the Pink Shell by $180,564. This
is due to much higher occupancy at the property. Food, beverage and retail
expenses increased $148,283.
8
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Property operating expenses decreased by $159,390 mostly due to the pending
foreclosure of Walsingham Commons. Pink Shell lease payments increased
$21,002. Marketing costs increased $40,895, room costs increased $62,699.
Administrative and general expenses increased $22,304. Other expenses
increased $15,560.
Interest expense decreased $294,987 due to the decrease in outstanding
Partnership debt and the pending foreclosure of Walsingham Commons. The
Partnership's outstanding debt at December 31, 1997, was $8,577,510 as compared
to $8,964,331 at December 31, 1996.
Real Estate Taxes decreased $36,417.
COMPARISON OF THE FISCAL YEARS ENDED DECEMBER 31, 1996 AND 1995
During the years ended December 31, 1996 and 1995, the Partnership's principal
sources of revenue were rental income of $8,300,728 and $7,618,033, interest
income of $17,992 and $53,663, expense reimbursements from tenants of $142,618
and $122,303 and food, beverage and retail revenue of $1,367,661 and
$1,373,246, respectively. In 1995 the Partnership recognized a gain on the sale
of the 42 unit building at the Pink Shell in the amount of $2,307,106.
Rental income at the Pink Shell Resort increased $630,085 and Walsingham
Commons increased $52,610. The increase at Pink Shell was due to achieving
a higher average daily rate. The increase at Walsingham Commons was due to
stabilizing the occupancy in 1996.
During 1996 the Pink Shell rented 704 fewer rooms at an average daily
rate of $145.63. The resort was able to achieve a 10% increase in average daily
rate as compared to 1995.
Interest income decreased due to fewer funds invested.
Food, beverage and retail income decreased at the Pink Shell by $5,585. This is
due to slightly lower occupancy at the property. Food, beverage and retail
expenses increased $4,025.
Property operating expenses increased by $721,812. 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 $1,071,000.
Marketing costs decreased $13,007, room costs increased $208,095 Administrative
and general expenses increased $309,727 of which $92,000 is due to management's
increase of its insurance reserve. Other expenses increased $41,693.
9
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Interest expense decreased $257,550 due to the decrease in outstanding
Partnership debt. The Partnership's outstanding debt at December 31, 1996, was
$8,964,331 as compared to $9,315,294 at December 31, 1995.
Real Estate Taxes decreased $13,348.
No impairment loss was recognized in December 31, 1996. An impairment loss of
$1,236,502 was recognized in December 31, 1995.
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.
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, beverage and retail 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.
10
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<PAGE>
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.
11
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Balance Sheets of the Partnership as of December 31, 1997 and 1996 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, 1997, as well as the Notes to Financial Statements and Schedule
III and the Report of Independent Accountants there on, dated March 10, 1998,
are set forth herein:
12
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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, 1997 and 1996, and the related
statements of operations, partners' capital, and cash flows for each of the
three years in the period ended December 31, 1997. 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, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Tampa, Florida
March 10, 1998
13
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FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
BALANCE SHEETS
December 31, 1997 and 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
------------ -------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 156,000 $ 101,108
Accounts receivable, trade 377,930 346,767
Inventory 69,837 68,422
Prepaid expenses and other 90,797 201,608
------------ ------------
Total current assets 694,564 717,905
------------ ------------
RENTAL PROPERTY UNDER FORECLOSURE 3,082,157 3,082,157
------------ ------------
RENTAL PROPERTIES, net 14,485,000 15,073,430
------------ ------------
INTANGIBLE ASSETS
Deferred loan and organizational costs, net 31,864 46,326
------------ -------------
Total assets $18,293,585 $ 18,919,818
============ =============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Current maturities of mortgages and notes payable $ 722,549 $ 383,573
Accounts payable, trade 405,986 619,317
Accrued expenses 265,608 508,872
Customer and security deposits, rentals 504,885 453,988
Property taxes payable 216,061 194,099
------------ ------------
Total current liabilities 2,115,089 2,159,849
------------ ------------
MORTGAGE PAYABLE RELATED TO RENTAL PROPERTY
UNDER FORECLOSURE 3,200,000 3,200,000
------------ ------------
MORTGAGES AND NOTES PAYABLE, less current maturities 4,804,961 5,380,758
------------ ------------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL
General partners deficiency (31,450) (38,189)
Limited partners, 20,000 limited partnership units
authorized; 14,717 issued and outstanding 8,204,985 8,217,400
------------ ------------
Total partners' capital 8,173,535 8,179,211
------------ ------------
Total liabilities and partners' capital $18,293,585 $ 18,919,818
============ ============
RM80</TABLE>
The accompanying notes are an integral part of these financial statements.
14
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FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <S> <C> <C>
Revenues
Rental income $ 8,486,992 $ 8,300,728 $ 7,618,033
Food, beverage and retail income 1,548,225 1,367,661 1,373,246
Interest income 15,081 17,992 53,663
Tenant reimbursements 0 142,618 122,303
Other income 0 0 3,551
Gain on sale of condominium units 0 0 2,307,106
---------------- ------------- -----------
10,050,298 9,828,999 11,477,902
---------------- ------------- -----------
Expenses
Property operating expenses 6,876,266 7,035,660 6,313,848
Cost of food, beverage and retail sales 955,893 807,610 803,585
Depreciation 738,528 912,448 691,182
Interest expense 589,612 884,599 1,086,357
Interest expense-affiliated 0 0 19,044
Property taxes 216,070 252,487 265,835
Loss on impairment of rental property 0 0 1,236,502
---------------- ------------- ------------
9,376,369 9,892,804 10,416,353
---------------- ------------- -------------
Net income (loss) $ 673,929 $ (63,805) $ 1,061,549
================ ============ =============
Net income (loss) allocated to general partner $ 6,739 $ (638) $ 10,615
================ ============= =============
Net income (loss) allocated to limited partners $ 667,190 $ (63,167) $ 1,050,934
================ ============= =============
Net income (loss) per limited partner unit $ 45.33 $ (4.29) $ 71.40
================ ============= =============
Distributions per limited partner unit $ 46.18 $ 46.25 $ 46.25
================ ============= =============
Weighted average limited partner units outstanding 14,717 14,717 14,717
================ ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
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FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
years ended December 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------- ------------ -----------
<S> <C> <C> <C>
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
Distributions 0 (680,661) (680,661)
Net income (loss) (638) (63,167) (63,805)
---------- ------------ ----------
Balances, December 31, 1996 (38,189) 8,217,400 8,179,211
Distributions 0 (679,605) (679,605)
Net income 6,739 667,190 673,929
---------- ------------ -----------
Balances, December 31, 1997 $ (31,450) $ 8,204,985 $ 8,173,535
========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 673,929 $ (63,805) $ 1,061,549
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Gain on sale of condominium units 0 0 (2,307,106)
Loss on impairment of rental property 0 0 1,236,502
Depreciation 738,528 912,448 691,197
Amortization of loan costs 14,462 36,748 40,343
(Increase) decrease in:
Accounts receivable (31,163) 4,464 (145,798)
Notes receivable 0 3,038 757
Inventory (1,415) (10,111) 9,062
Prepaid expenses and other 110,811 (32,262) (35,918)
Restricted cash 0 0 1,899,357
Increase (decrease) in:
Accounts payable, trade and accrued expenses (434,633) 504,976 (709,235)
Customer and security deposits, rentals 50,897 (80,324) 176,471
Customer deposits, condominium units 0 0 (1,899,357)
---------------- ---------------- ----------------
Net cash provided by operating activities 1,121,416 1,275,172 17,824
---------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of condominium units 0 0 7,719,236
Work in progress, condominium units 0 0 (849,117)
Additions to rental property (150,098) (307,406) (134,476)
---------------- ---------------- ----------------
Net cash (used in) provided by investing activities (150,098) (307,406) 6,735,643
---------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of cash advanced by general partner 0 0 (25,000)
Proceeds from borrowings from affiliated companies 150,000 0 0
Proceeds of borrowings from unaffiliated companies 0 0 6,822
Repayment of borrowings from unaffiliated companies (386,821) (350,963) (5,594,807)
Repayment of borrowings to affiliates 0 0 (700,000)
Loan origination fees paid 0 0 (9,799)
Partner distributions paid (679,605) (680,661) (680,661)
---------------- ---------------- ----------------
Net cash used in financing activities (916,426) (1,031,624) (7,003,445)
---------------- ---------------- ----------------
Net increase (decrease) in cash and cash equivalents 54,892 (63,858) (249,978)
Cash and cash equivalents at beginning of year 101,108 164,966 414,944
---------------- ---------------- ----------------
Cash and cash equivalents at end of year $ 156,000 $ 101,108 $ 164,966
================ ================ ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 589,612 $ 847,556 $ 1,102,243
================ ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
<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. As a
result of Management's decision to abandon the Walsingham property
(See Note 8), the Partnership's sole property is the Pink Shell Beach
and Bay Resort (Pink Shell). The business of Pink Shell is
substantially dependent on tourism and leisure and business travel,
which is dependent on general economic conditions in the U.S. and
Europe.
Pink Shell leases and rents condominium units owned by individuals as
part of its resort rental operations. A decline in the number of
property owners that participate in the guaranteed lease and rental
programs may have a material adverse affect on Pink Shell's results
of operations and financial condition.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies of the Partnership
follows:
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 INCOME: Revenues from operation of the resort are recognized
when services are provided to guests.
WEIGHTED AVERAGE NUMBER OF LIMITED PARTNER UNITS OUTSTANDING: Net
income (loss) and distributions per limited partner unit are
calculated based upon the weighted average number of units of limited
partnership interest outstanding for the years ended December 31,
1997, 1996 and 1995.
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.
RENTAL PROPERTIES: Rental properties are carried at cost less
accumulated depreciation. Depreciation is computed principally under
the straight-line method over the estimated useful lives (31.5 years)
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).
18
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
RENTAL PROPERTIES, CONTINUED
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets to be Disposed Of" (SFAS 121)
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 reviews on a periodic
basis 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 was
recognized in the year ended December 31, 1995.
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.
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".
19
<PAGE>
<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, 1997, based upon market rates, approximates the amounts
disclosed in Note 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 1996 and 1995 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 was 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).
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 approximately $173,600,
resulting in a gain of $2,307,106. Closing proceeds were used to pay
down related mortgages and notes by approximately $6,283,000.
20
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. RENTAL PROPERTIES:
Rental properties consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Land $ 4,942,432 $ 4,942,432
Buildings, improvements and equipments 14,079,205 13,929,107
---------------- ----------------
19,021,637 18,871,539
Accumulated depreciation (4,536,637) (3,798,109)
---------------- ----------------
$ 14,485,000 $ 15,073,430
================ ================
</TABLE>
Depreciation expense was approximately $738,500, $912,400 and $691,200
for 1997, 1996 and 1995, respectively.
Additionally, the Partnership has entered into Furniture and
Furnishings lease agreements with all 42 condoninium owners. The
lease states that the owner shall pay the Partnership base rent of
$9,900 payable in 60 equal installments of $165 over the five year
lease term.
Future minimum annual rentals from lease leases will be approximately
as follows:
1998 $ 83,160
1999 83,160
2000 83,160
2001 13,860
-------
$263,340
21
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. DEFERRED LOAN COSTS:
Deferred loan costs at December 31 are as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Deferred loan costs $ 142,262 $ 142,262
Accumulated amortization (110,398) (95,936)
---------------- ----------------
$ 31,864 $ 46,326
================ ================
</TABLE>
Additions to deferred loan costs relate to modifications of note terms
and other refinancing transactions during the years ended December 31,
1997 and 1996. Certain loan costs became fully amortized during the
years ended December 31, 1997 and 1996 and, therefore, were written
off. Amortization expense was approximately $14,500, $36,700 and $38,600
for 1997, 1996, and 1995, respectively.
22
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. MORTGAGES AND NOTES PAYABLE:
Mortgages and notes payable consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Affiliated debt:
Note payable to management company, balloon payment of
$150,000 plus interest at 11% due February 1998 $ 150,000 $ 0
Unaffiliated debt:
Mortgage payable to a bank, monthly payment of $78,409
including interest at 10.5%, final payment due April 2000 5,217,510 5,592,148
Other mortgages and notes payable:
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 160,000 170,000
Other 0 2,183
---------------- ----------------
Total other mortgages and notes payable 160,000 172,183
---------------- ----------------
Total mortgages and notes payable 5,527,510 5,764,331
Less current maturities (722,549) (383,573)
---------------- ----------------
Total long term debt less current maturities $ 4,804,961 $ 5,380,758
================ ================
The mortgage payable to bank includes certain covenants primarily
related to administrative matters and the availability of certain
financial data.
</TABLE>
Long-term debt less current maturities is scheduled to mature approximately as
follows:
<TABLE>
<CAPTION>
<S> <C>
1999 $ 458,013
2000 4,346,948
----------------
$ 4,804,961
================
</TABLE>
The Pink Shell Beach and Bay Resort property is pledged as
collateral for the mortgage payable to a bank.
23
<PAGE>
<PAGE>
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>
1998 1,113,000
1999 1,134,000
2000 902,917
2001 868,000
2002 527,250
Thereafter 1,018,500
----------------
$ 5,563,667
================
</TABLE>
Lease expense for the years ending December 31, 1997, 1996 and 1995
was approximately $1,092,000, $1,071,000 and $907,800, respectively.
7. RELATED PARTY TRANSACTIONS:
The Partnership participated in the following related party
transactions:
The general partners and their affiliates are 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 approximately
$602,800, $562,000 and $555,300 were incurred for the years ending
December 31, 1997, 1996 and 1995, respectively.
24
<PAGE>
<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
approximately $2,836,000, $3,238,000 and $2,878,500 were incurred
during the years ending December 31, 1997, 1996 and 1995,
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>
1997 1996
------------ -------------
<S> <C> <C>
Accounts payable, trade $ 161,614 $ 123,840
------------ -------------
Accrued expenses $ 144,362 $ 113,000
------------ -------------
</TABLE>
8. RENTAL PROPERTY UNDER FORECLOSURE:
As a result of the Partnership's November 27, 1996 default under the
terms of the mortgage loan, the Partnership agreed to the appointment
of a receiver on the Walsingham Commons on February 3, 1997. All
rights, powers, interests and obligations in Walsingham Commons have
been transferred to the receiver as of November 27, 1996. The
outstanding mortgage balance of $3,200,000 is non-recourse and will be
satisfied upon the final judgment of foreclosure. The foreclosure
proceedings had not been finalized at December 31, 1997.
9. SUBSEQUENT EVENT:
During February, 1998 the Partnership and a hotel company entered
into a Purchase Agreement pursuant to which the Partnership agreed to
sell all of the Pink Shell Property, which includes the Partnership's
interest in certain real property, improvements, fixtures, furnishings,
furniture, equipment, tenant leases and other tangible personal
property. The hotel company will pay to the Partnership a purchase
price of $21,250,000 and will assume certain liabilities and obligations
of the Partnership to the extent such liabilities and obligations arise
or are incurred and are first required to be performed after the closing
date. The purchase price includes an earnest money deposit in the
amount of $500,000 which the Purchaser deposited with a title company.
The balance of the purchase price will be paid in cash to the
Partnership at the time of closing. The purchase price is subject to
certain customary adjustments and prorations.
Because the hotel earns a disproportionate amount of its earnings
in the first quarter, the Purchase Agreement provides that the
Partnership will pay to the purchaser a portion of the income
it earned from the Pink Shell Property during the period from January
1, 1998 until the closing date. The Partnership's obligations to
complete the Sale under the Purchase Agreement are conditioned on the
Partnership obtaining the necessary Limited Partner approval of the
Proposal. In addition, the Partnership's obligations and the
Purchasers obligations under the Purchase Agreement are conditioned
upon the satisfaction of several conditions precedent to closing. If
those conditions are not satisfied or waived on or before the closing
date, the Purchase Agreement will be terminated and canceled and the
Sale will not occur. If the sale does occur, Management will implement
a formal plan of liquidation for the Partnership, in accordance with the
Partnership agreement.
25
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Our report on the financial statements of Florida Income Fund III, Limited
Partnership, is included on page 13 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 36 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 L.L.P.
Tampa, Florida
March 10, 1998
26
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER, 31, 1997
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 IMPRVMENTS IMPROVEMENTS COSTS LAND IMPROVEMENTS TOTAL
- ----------- ------------ -------- ---------- ------------ ----- ---- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pink Shell Resort
Ft. Myers, FL $ 5,377,510 $4,942,432 $3,933,139 $10,146,066 $ -0- $4,942,432 $14,079,205 $19,021,637
=========== ========== ========== =========== ===== ========== =========== ===========
</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 $ 4,536,637 1973 1988 31.5 years
===========
</TABLE>
SEE ACCOMPANYING NOTES TO SCHEDULE III
27
<PAGE>
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
NOTES TO SCHEDULE III
DECEMBER 31, 1997
REAL ESTATE AND ACCUMULATED DEPRECIATION
Balance as of 12/31/94 $23,522,959
Additions During 1995:
Improvements, etc. 134,460
Impairment of Value (1,236,502) ( 1,102,042)
---------- -----------
Balance as of 12/31/95 $22,420,917
Additions During 1996:
Improvements, etc. 307,406 307,406
---------- -----------
Deletions During 1996:
Improvements, etc. (10,163)
Rental property under foreclosure (3,846,621) (3,856,784)
---------- -----------
Balance as of 12/31/96 18,871,539
Additions during 1997:
Improvements, etc. 150,098 150,098
--------- -----------
Balance as of 12/31/97 $19,021,637
===========
28
<PAGE>
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
NOTES TO SCHEDULE III
DECEMBER 31, 1997
REAL ESTATE AND ACCUMULATED DEPRECIATION
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
Depreciation expense for 1996 912,448
Less deletions and rental property
under foreclosure (772,841) 139,607
-------- ----------
Balance as of 12/31/96 3,798,109
Depreciation expense for 1997 738,528 738,528
-------- ----------
Balance as of 12/31/97 $4,536,637
==========
29
<PAGE>
<PAGE>
FLORIDA INCOME FUND III LIMITED PARTNERSHIP
NOTES TO SCHEDULE III
DECEMBER 31, 1997
REAL ESTATE AND ACCUMULATED DEPRECIATION
(A) The aggregate cost of land and buildings is the same for Federal
Income Tax purposes.
(B) See Note 1 to the Financial Statements for depreciation method.
(C) See Note 5 to the Financial Statements for further information on
debt obligations.
30
<PAGE>
<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, 1997, were as follows: Robert
M. Taylor, Timothy R. Bogott, Allen G. Ten Broek and Joe K. Blacketer.
Mr. Taylor and Mr. Bogott have served as officers of the Mariner Capital
Management, Inc., since its incorporation on July 11, 1983. Allen G. Ten Broek
replaced Lawrence A. Raimondi as President as of December 31, 1997. Subsequent
to December 31, 1997, Mr. Blacketer resigned as Secretary/Treasurer. He was
replaced in the capacity by Elaine Hawkins.
MCD Real Estate, Inc. (located at 800 Superior Avenue, Suite 2100, 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, 1997, were as follows: James
C. Redinger, Thomas M. O'Donnell and Richard R. Cundiff III.
(C) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES
Not applicable
(D) FAMILY RELATIONSHIP
Not applicable
31
<PAGE>
<PAGE>
(E) BUSINESS EXPERIENCE
ROBERT M. TAYLOR: Age 56, 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 51, 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.
ALLEN G. TEN BROEK: Age 57, Mr. Ten Broek became President of Mariner
Capital Management, Inc. on December 31, 1997. Mr. Ten Broek is also
President and CEO of The Mariner Group, Inc., a position in which he
served from 1979 to 1992, and again since October 1995. The Mariner
Group is an asset management, business development and real estate
development company. From 1992 to 1995 Mr. Ten Broek was the Vice
Chairman and Managing Executive of Hilton Grand Vacations Company, a
timeshare development and operations company affiliated with Hilton
Hotels. Mr. Ten Broek is an original shareholder of The Mariner
Group, Inc. and has been a director of The Mariner Group, Inc.
since 1973. Mr. Ten Broek is the Chairman Emeritus of the Florida
Shore and Beach Preservation Association and Chairman of the
American Coastal Coalition. He is a former director of two local
banks and a founding director of Community Bank of the Islands.
Mr. Ten Broek is an officer and director of various other Mariner
affiliates. Mr. Ten Broek is a graduate of the University of
Wisconsin. He worked for ten years in various executive positions
with AT&T prior to joining Mariner.
JOE K. BLACKETER: Age 45, was the Secretary/Treasurer of the Managing
General Partner at December 31, 1997. Mr. Blacketer has been a
Certified Public Accountant since 1983. 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.
Blacketer joined Mariner Group in 1983. Mr. Blacketer was employed
by Coopers & Lybrand, CPA's (1979-1983) prior to that time.
ELAINE HAWKINS: Age 45, is the Vice President/Treasurer of the
Managing General Partner. She joined the Mariner Group in 1980 as
the Director of Risk Management for all of the affiliated entities.
In 1988 she became the President of South Seas and Captiva Properties,
Inc., an affiliated real estate firm. She holds licenses as a real
estate broker, and in property, casualty, life and health
insurance. Prior to joining the company she was employed by
Liberty Mutual Insurance Company in commercial sales.
32
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JAMES C. REDINGER: Age 61. 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 62. 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 38. 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.
(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, 1997, to directors or officers of the
General Partners. During the period ended December 31, 1997, no
remuneration, direct or indirect, was paid to affiliates of the
General Partners, except:
33
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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 1997, 1996 and 1995, $602,806, $562,098 and
$555,259 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 1997, 1996 and 1995,
$2,946,169, $3,238,001 and $2,878,501 were charged to the Partnership
for these services of which $482,576, $126,840 and $101,437 were
included in accounts payable and accrued expenses at December 31,
1997, 1996, and 1995 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.
34
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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.
35
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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 13
Balance Sheets as of December 31, 1997 and 1996 14
Statements of Operation for the three years ended
1997, 1996 and 1995 15
Statements of Partners' Capital for the three years
ended 1997, 1996 and 1995 16
Statements of Cash Flows for the three years ended
1997, 1996 and 1995 17
Notes to Financial Statements 18 - 25
Report of Independent Accountants on Schedule III 26
Schedule III Real Estate and Accumulated Depreciation 27 - 30
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.
36
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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 29, 1998
By: /s/ ALLEN G. TEN BROEK
------------------------------------
ALLEN G. TEN BROEK
President, Director and CEO
Mariner Capital Management, Inc.
(Principal Executive Officer)
By: /s/ ELAINE HAWKINS
------------------------------------
ELAINE HAWKINS
Mariner Capital Management, Inc.
(Principal Financial and Accounting Officer)
37
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 156,000
<SECURITIES> 0
<RECEIVABLES> 396,509
<ALLOWANCES> 18,579
<INVENTORY> 69,837
<CURRENT-ASSETS> 694,564
<PP&E> 19,021,637
<DEPRECIATION> 4,536,637
<TOTAL-ASSETS> 18,293,585
<CURRENT-LIABILITIES> 2,115,089
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 18,293,585
<SALES> 10,035,217
<TOTAL-REVENUES> 10,050,298
<CGS> 955,893
<TOTAL-COSTS> 955,893
<OTHER-EXPENSES> 7,830,864
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 589,612
<INCOME-PRETAX> 673,929
<INCOME-TAX> 0
<INCOME-CONTINUING> 673,929
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 673,929
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
