SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(C) or Rule 14a-12
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount previously paid:
Not Applicable
(2) Form, schedule or registration statement no.:
Not Applicable
(3) Filing party:
Not Applicable
(4) Date filed:
Not Applicable <PAGE>
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FLORIDA INCOME FUND III
INVESTOR UPDATE
IMPORTANT
REQUIRES IMMEDIATE ATTENTION
April 7, 1998
Dear Investor:
As explained in our February 6, 1998 investor update, the Partnership
entered into a Letter of Intent to sell the Pink Shell Beach Resort in
January 1998. We are pleased to advise that on February 20, 1998, we
signed a contract with Boykin Hotel Properties, L.P., an affiliate of
Boykin Lodging Company - a Real Estate Investment Trust (R.E.I.T.) -
headquartered in Cleveland, Ohio to acquire the property.
The Florida Income Fund III Partnership Agreement requires the approval
of more than 50% of the outstanding units of Limited Partnership
interest before the Partnership can sell all or substantially all of the
assets of the Partnership in a single sale. Thus, the contract for sale
of the property is contingent on Limited Partner approval.
The enclosed consent form represents a summary of the proposed
transactions and its effects on you as a Partner. It is provided to
assist you in your decision. We believe that the proposed sale is in
the best interest of the Partnership and therefore recommend that you
indicate your approval by signing and returning the enclosed consent
form by no later than April 27, 1998. Failure to vote will be
considered a vote against the sale.
Should you have any questions after reviewing the enclosed document,
please feel free to call Ms. Terry Zagaria at (941) 481-5600 ext. 413.
Sincerely,
/S/ALLEN G. TEN BROEK
- --------------------------------
Allen G. Ten Broek
President
Mariner Capital Management, Inc.
Managing General Partner
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FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
12800 University Drive
Fort Myers, Florida 33907
Dear Limited Partner:
The enclosed materials require your immediate attention and
solicit your vote on the proposed sale of certain real property located
on Estero Island, Florida, and the improvements located on such
property, including the Pink Shell Resort and certain rights relating
thereto and described herein (the "Property") which constitute all of
the remaining assets of Florida Income Fund III, Limited Partnership
(the "Partnership"). Paragraph 11.8(a) of the Partnership's Amended and
Restated Agreement of Limited Partnership requires the approval of more
than 50% of the total outstanding units of limited partnership interest
before the Partnership can sell all or substantially all of the assets
of the Partnership in a single sale. The Partnership previously owned
the Walsingham Commons Shopping Center; however, on January 22, 1997,
the Partnership executed a stipulation agreeing to the appointment of a
receiver and to the entry of a final judgment of foreclosure on the
Walsingham Commons Shopping Center by the first mortgage holder (the
"Foreclosure"). As of this date, the Foreclosure has not been
completed. However, a receiver has been appointed and the Partnership
is no longer involved with and has no further rights to that property.
If approved and closed, the proposed sale will produce net cash
flow to the Partnership, estimated at $979.25 for each $1,000 investment
unit and will result in the dissolution of the Partnership, at which
time the Partnership will make a final distribution to the limited
partners of the Partnership. The terms of the proposed sale are
described in more detail in the Consent Statement accompanying this
letter under the caption "Terms of the Transaction." You are encouraged
to read the entire Consent Statement carefully.
Your consent of the proposed sale is being solicited on behalf of
the Partnership by Mariner Capital Management, Inc. (the "Managing
General Partner"). The Managing General Partner believes that the
proposed sale is in the best interests of the Partnership and therefore
recommends that you indicate your approval by signing and returning the
enclosed consent form.
Failure to vote will be considered a vote against the proposed
sale. We request that your written vote be received by the Managing
General Partner no later than April 27, 1998. Only Limited Partners of
record at close of business on April 3, 1998 will be entitled to vote on
the proposed sale.
You are urged to complete, date and sign the enclosed consent form
and return it in the enclosed envelope. Please contact Ms. Terry
Zagaria at (941) 481-5600, ext. 413 with any questions.
Dated: April 7, 1998
Very truly yours,
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
By: Mariner Capital Management, Inc.
Its: Managing General Partner
By: /S/ ALLEN G. TEN BROEK
Its: President <PAGE>
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
12800 University Drive
Fort Myers, Florida 33907
CONSENT STATEMENT
This Consent Statement is furnished to solicit your consent to the
proposed sale by Florida Income Fund III, Limited Partnership (the
"Partnership") of certain real property located on Estero Island,
Florida (the "Real Property"), and all improvements located on the Real
Property, including the Pink Shell Resort (the "Hotel") and certain
rights relating thereto and described herein (the Real Property, the
Hotel and such rights are collectively referred to herein as the
"Property"). See "Terms of the Transaction--Introduction." This
Consent Statement and the accompanying consent form are first being sent
to holders ("Unitholders" or "Limited Partners") of units of limited
partnership of the Partnership ("Units") on or about April 7, 1998.
If the enclosed consent form is duly executed and returned, the
Units represented thereby will be voted according to the specifications
of the Unitholder. In the absence of any such specification, they will
be voted in favor of the proposal described herein. Adoption of the
proposal requires the approval of Unitholders holding more than 50% of
the Units. Accordingly, approval of the proposal will require that
7,359 Units be voted in favor of the proposal. Mariner Capital
Management, Inc. (the "Managing General Partner") does not own any
Units. A Unitholder who executes the accompanying consent form may
revoke it by filing with the Managing General Partner at 12800
University Drive, Suite 675, Fort Myers, Florida 33907-5343, a written
revocation or a duly executed consent form bearing a later date at any
time prior to April 27, 1998.
The close of business on April 3, 1998, has been fixed as the
record date for the determination of Limited Partners entitled to vote
on the proposed sale. On that date, the Partnership had 14,717 Units
outstanding, each of which is entitled to one vote.
The Proposal
The Managing General Partner requests approval of a proposal (the
"Proposal") to authorize the Partnership to sell the Property to Boykin
Hotel Properties, L.P., an Ohio limited partnership headquartered at
Guildhall Building, 45 West Prospect Avenue, Suite 1500, Cleveland, Ohio
44115 ("Boykin"). The sale of the Property has been authorized by the
Partnership's Property Acquisition Committee (the "Acquisition
Committee") which is comprised of representatives of the Managing
General Partner and a representative of McD Real Estate, Inc., the
Partnership's other general partner.
The Partnership's Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement") provides in Paragraph 11.8(a)
that the general partners of the Partnership (the "General Partners")
are prohibited from selling all or substantially all of the assets of
the Partnership in a single sale without the approval of Limited
Partners holding more than 50% of the Units. As described herein, the
Managing General Partner has entered into a Hotel Purchase Agreement,
dated as of February 20, 1998 (the "Execution Date") on behalf of the
Partnership with Boykin (the "Purchase Agreement") that contemplates the
sale of the Property to Boykin (the "Sale"). Boykin is not affiliated
with the Partnership or the Managing General Partner.
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However, Boykin intends to lease the Hotel and sell certain furniture,
fixtures and equipment in the Hotel (the "FF&E") to South Seas Estero
Island, Ltd., an Ohio limited liability company ("Lessee") and wholly
owned subsidiary of South Seas Properties Company Limited Partnership,
an affiliate of the Managing General Partner ("South Seas"). See
"Interests of Certain Persons in the Sale" contained herein.
Reasons for and Effects of the Proposal
The Real Property and the Hotel were acquired by the Partnership
on December 30, 1988. The Managing General Partner initially intended
to hold the Partnership's properties for a period of between five and
seven years. Because market conditions were not favorable for
hospitality properties until recently, the Managing General Partner
decided to hold the property until market conditions improved. During
the past few years, the market has improved dramatically for hospitality
properties. As a result, on May 26, 1997, the Partnership entered into
an Exclusive Sales Listing Agreement (the "Listing Agreement") with
Hotel Partners, Inc., a brokerage company unaffiliated with the
Partnership or the Managing General Partner that specializes in the sale
of hospitality properties ("Hotel Partners"). Under the terms of the
Listing Agreement, Hotel Partners agreed to attempt to find a buyer for
the Property at the highest possible price in exchange for a brokerage
fee to be paid upon the closing of a sale transaction. Since the
commencement of the Listing Agreement, Hotel Partners has been marketing
the Property for sale both nationally and internationally.
During the period from August 27, 1997 to October 8, 1997, Hotel
Partners generated letters of intent to purchase from seven potential
buyers at purchase prices ranging from $18,000,000 to $21,250,000.
During the final weeks of negotiations, the list was reduced to three
prospective buyers because they were the only buyers that offered
purchase prices that the Managing General Partner believed were
favorable to the Partnership. The Managing General Partner then sought
an offer at $22,000,000. One of the prospective buyers raised its offer
to $21,500,000 and another prospective buyer raised its offer to
$22,000,000; however, when asked by the Managing General Partner to
provide satisfactory evidence that such prospective buyers had the
financial capability to close the transaction, each such prospective
buyer withdrew its bid. The Managing General Partner, therefore,
accepted the offer by Boykin at $21,250,000 because Boykin sufficiently
evidenced its financial capability to close the transaction.
Section 17.1(iv) of the Partnership Agreement provides that the
Partnership will be dissolved upon the sale of all or substantially all
of the assets of the Partnership; therefore, if the Sale is consummated,
the Partnership is required to distribute its assets and dissolve (the
"Dissolution"). Section 7.15 of the Purchase Agreement provides,
however, that for a period of 180 days commencing on the closing date,
the Partnership will not take any action to dissolve, liquidate or
otherwise wind up its affairs and it will maintain a minimum net worth
of $250,000. Therefore, pursuant to the Partnership Agreement and as
permitted by the Purchase Agreement, the Partnership will distribute all
of its assets other than $250,000 plus those reserves deemed necessary
by the Managing General Partner to pay debts of the Partnership,
expenses of liquidation and any contingent or unforeseen liabilities of
the Partnership. See "Terms of the Sale--General Terms of the Purchase
Agreement--Continued Existence."
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<PAGE>
If the Sale is consummated, Boykin intends to lease the Hotel and
sell the FF&E to Lessee. Robert Anderson, Timothy R. Bogott, Curtis
Bostic, Allen G. Ten Broek, Norm Patton and Robert M. Taylor are
affiliates of the Managing General Partner and each has an interest in
Lessee. See "Interests of Certain Persons in the Sale" contained
herein. The General Partners will receive no compensation from the
Sale, other than their pro rata share of the distribution.
The Managing General Partner believes that the terms of the
proposed sale of the Property to Boykin as set forth in the Purchase
Agreement, and as described herein, are favorable to the Partnership.
Vote Required to Approve the Proposal
Approval of the Proposal requires the affirmative vote of the
holders of a majority of the Units.
THE MANAGING GENERAL PARTNER RECOMMENDS A VOTE FOR THE PROPOSAL TO
AUTHORIZE THE PARTNERSHIP TO SELL THE PROPERTY TO BOYKIN.
Terms of the Sale
Introduction. The Partnership and Boykin entered into the
Purchase Agreement pursuant to which the Partnership agreed to sell and
Boykin agreed to purchase all of the Property, which includes the
Partnership's interest in certain real property, improvements, fixtures,
furnishings, furniture, equipment, tenant leases (the "Tenant Leases"),
contracts (the "Contracts"), lease and rental agreements between the
Partnership and individuals for the short-term rental of their
condominium units or residences by the Partnership to third parties on
behalf of such individuals (the "Condominium Lease Agreements"), and
other tangible personal property. Boykin 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 (the "Deposit") which Boykin deposited
with Guardian Title Company of Lee County (the "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 Boykin a portion of the income it earned from
the Property during the period from January 1, 1998 until the closing
date. See "General Terms of the Purchase Agreement--Net Operating
Income Payment." 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 Boykin's 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. See "General Terms
of the Purchase Agreement--Covenants, Representations and Warranties"
and "General Terms of the Purchase Agreement--Conditions Precedent to
the Closing."
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<PAGE>
The material terms of the Purchase Agreement are described below.
The description is only a summary of the Purchase Agreement and is
qualified in its entirety by reference to the Purchase Agreement.
Limited Partners may obtain a copy of the Purchase Agreement by sending
a written request to the office of the Managing General Partner at 12800
University Drive, Suite 675, Fort Myers, Florida 33907-5343.
General Terms of the Purchase Agreement
Description of Property to be Sold. The Property includes 157
rental units owned in fee simple by the Partnership and situated on
approximately 10.4 acres on Estero Island, Florida. It also includes
leasehold interests in 42 condominium units contained in an adjoining
42-unit, mid-rise building with remaining lease terms averaging
approximately five years. The Property has frontage on the Gulf of
Mexico and on Estero Bay. The Property has two swimming pools, a
children's wading pool, two tennis courts, a 200-foot fishing pier with
an 18-slip boat dock, a bait shop, two restaurants, guest laundry and
1,800 square feet of meeting space. The Partnership holds permits to
develop an additional 5,000 square feet of conference space and to
expand the existing bayfront restaurant. The Partnership also holds
permits to develop 42 one-bedroom apartments on a bayside site which
would require the demolition of nine rental units for a net increase of
33 units.
Date of Closing. The closing of the Sale (the "Closing") shall
occur on the fifth business day following satisfaction of all of the
conditions precedent to the parties obligations under the Purchase
Agreement (the "Closing Date").
Covenants, Representations and Agreements.
Access to Information and Records Before Closing. During
the period from the Execution Date until the Closing Date (the
"Interim Period"), the Purchase Agreement requires the Partnership
to provide Boykin with access to its properties, books, contracts,
commitments and records and to furnish to Boykin all information
relating to the Property as Boykin may reasonably request.
Physical Inspections. During the Interim Period, the
Purchase Agreement requires the Partnership to give Boykin and
Boykin's agents and representatives the right to inspect the
Property and to conduct on the Property the tests or
investigations Boykin deems desirable. The Purchase Agreement,
however, does not permit Boykin to contact Hotel employees
("Employees"), to disclose the nature or purpose of its activities
to any person other than its representatives, or to unreasonably
disrupt or interfere with Hotel operations or disrupt guests of
the Hotel.
Exclusivity. During the Interim Period, the Partnership
will not negotiate with any person concerning any merger or sale
of substantial assets or partnership interests, or any similar
transaction involving the Partnership or the Property.
Operations Prior to the Closing. The Partnership has agreed
in the Purchase Agreement that prior to the Closing Date, unless
authorized in writing by Boykin, it will:
(1) Not transfer or otherwise dispose of any of the Property,
except consumables in the ordinary course of business;
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(2) Not make any material change in the Property;
(3) Not enter into any contract, license, franchise or
commitment relating to the Property which is not terminable
by the Partnership upon 30 days' prior written notice;
(4) Not significantly alter or revise the accounting principles,
procedures, methods or practices in place at the Hotel;
(5) Not remove or permit to be removed from the Hotel any
fixtures and tangible personal property, operating equipment
or other similar personal property, except in the ordinary
course of business;
(6) Fully perform all of its obligations under the Contracts;
(7) Pay all business, occupation, hotel, rooms, sales, use and
other similar taxes when such taxes become due;
(8) Continue to meet the Partnership's contractual obligations
incurred in the ordinary course of business;
(9) Maintain the present level of service at the Hotel;
(10) Use its best efforts to preserve good relations with the
suppliers, guests and others related to the Property with
whom the Partnership or the Hotel's manager, South Seas
Resorts Company Limited Partnership (the "Manager"), has
business relations;
(11) Maintain an inventory of consumables, fixtures, tangible
personal property, and operating equipment sufficient for
the operation of the Hotel in the ordinary course of
business consistent with past practices;
(12) Resupply, substitute or replace any consumables, fixtures,
and tangible personal property and operating equipment in
accordance with past practices in order that Boykin may
continue to operate the Hotel without interruption after the
Closing Date;
(13) Accept new bookings only in the ordinary course of business
and only upon terms and conditions usual or customary in
accordance with past business practice of the Partnership;
and
(14) Continue to make scheduled repairs to the Hotel to maintain
the current operating condition of the Hotel.
The Purchase Agreement contains various representations and
warranties of the Partnership that are customary in transactions
such as the Sale, relating to, among other things: (i)
organization and standing of the Partnership; (ii) the
authorization, execution, delivery and performance of the Purchase
Agreement; (iii) the accuracy of the schedules provided by the
Partnership, (iv) the Partnership's good and marketable fee simple
title to the Real Property and good and marketable title to the
other Property, (v) the accuracy of the financial statements
provided by the Partnership and the absence of undisclosed
liabilities,
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(vi) the absence of any material adverse change in the business,
assets, properties, liabilities, revenues or financial condition
of the Hotel or of the Partnership as it relates to the Hotel,
(vii) the payment in full of all taxes imposed with respect to the
Hotel or the operation thereof, and the filing of all federal,
state and local tax returns and tax reports required to be filed
by the Partnership, (viii) the absence of litigation pending or
threatened against the Partnership relating to the Hotel or the
Partnership's interest therein, (ix) compliance with laws, (x)
compliance with environmental laws, including those laws that
require licenses or permits, that apply to the Property or the
operations thereon, (xi) the Partnership's possession of all
permits that are necessary to allow the Partnership to carry on
its business as presently conducted and the status of such
permits, (xii) the absence of employee agreements relating to
Employees and the absence of any liability of Boykin under any
employment agreement relating to Employees, (xiii) the employment
of Employees by the Manager and the compliance with all laws
relating to employment and the payment of wages by the Partnership
and by the Manager, (xiv) the binding nature and enforceability of
certain personal property leases and the Contracts and the absence
of any default under any such personal property lease or under any
Contract, (xv) the binding nature and enforceability of the Tenant
Leases, the payment of rent thereunder and the absence of any
default under any Tenant Lease, (xvi) the accuracy of the list of
Condominium Lease Agreements provided by the Partnership, the
binding nature and enforceability of the Condominium Lease
Agreements and the absence of any notice received by the
Partnership or the Manager claiming any default by the Partnership
or indicating the desire of the other party thereto to amend,
modify, rescind or terminate any Condominium Lease Agreement,
(xvii) the sufficiency of the utilities being supplied to the
Property and the payment in full of the costs of installation
associated therewith, (xviii) the sufficiency of quantities of
fixtures and tangible personal property, consumables and operating
equipment in the Hotel, (xix) the absence of any dispute between
the Partnership and any contractor over payment for services,
material or work supplied to the Hotel and the payment in full
when due of all contractors, subcontractors or materialmen
relating to services, material or work supplied to the Hotel, (xx)
the absence of latent defects in the Property, (xxi) the
Partnership's status for purposes of the withholding provisions of
Section 1445 of the Internal Revenue Code of 1986, as amended, and
(xxii) the absence of any broker, finder or financial adviser,
other than Hotel Partners, acting for the Partnership in
connection with the Purchase Agreement and the Partnership's
responsibility to pay all fees and expenses of Hotel Partners in
connection with the Purchase Agreement. The representations and
warranties described in clauses (vii), (x) and (xii) will survive
the Closing and remain in effect through the date that is 30 days
after the expiration of the statute of limitations applicable to
the subject matter thereof, and the representation and warranty in
clause (iv) will survive indefinitely. All other representations
and warranties of the Partnership will survive the Closing for a
period of 36 months after the Closing Date.
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Title Conveyance; Survey. The Purchase Agreement requires the
Partnership to convey to Boykin on the Closing Date marketable fee
simple absolute title to the Real Property by general warranty deed,
free of all liens and encumbrances other than zoning and building
ordinances, taxes which are a lien but not yet due and payable and those
liens and encumbrances of record as to which Boykin shall not have
objected. On the Closing Date, the Title Company will issue Boykin an
owner's policy of title insurance with respect to the Real Property in
the amount of the purchase price (the "Title Policy").
The Partnership has furnished to Boykin a title commitment
from the Title Company (the "Title Report"). Upon its receipt of
an updated survey, Boykin will have a period of seven days to
raise any objections it may have to the Title Report or the
updated survey. The Partnership will then have seven days to cure
any defects to which Boykin objects. At the end of the cure
period, the Title Company will notify Boykin and the Partnership
whether it will issue the Title Policy without showing as
exceptions the items to which Boykin objected. If the Title
Company will issue the Title Policy, then the Sale will be
consummated pursuant to the terms of the Purchase Agreement. If
the Title Company will not issue the Title Policy, then Boykin
will have the option of terminating the Purchase Agreement.
The Partnership has furnished to Boykin and the Title
Company its current survey and is currently in the process of
having its current survey updated.
Liquor License. The Partnership has agreed in the Purchase
Agreement to cooperate with Boykin to assign and transfer the
existing liquor license used in the operation of the Hotel to
Boykin or its nominee. If necessary, the Partnership will enter
into a management agreement until the liquor license can be
assigned and transferred to Boykin so Boykin can operate the Hotel
under a liquor license without interruption; provided that Boykin
will indemnify the Partnership from any damages or expenses
encountered in connection with these operations during such time
and will maintain insurance to cover all risks associated with
these activities.
Post-Closing Filings. The Partnership has agreed in the
Purchase Agreement to cooperate with Boykin to complete any post-
Closing filings which are required for Boykin. In addition, the
Purchase Agreement requires the Partnership to provide Boykin with
access to the books and records of the Partnership relating to the
Hotel.
Employee Matters. Other than personnel changes in the
ordinary course of business consistent with past practice, the
Manager will continue to employ all Employees after the Closing.
Indemnity. The Partnership has agreed in the Purchase Agreement
to indemnify Boykin from all liabilities or expenses which Boykin may
suffer or incur by reason of (i) any inaccuracy in or breach of any of
the representations, warranties or agreements made by the Partnership in
the Purchase Agreement or the non-performance of any covenant or
obligation to be performed by the Partnership under the Purchase
Agreement, (ii) the Partnership's failure to comply with the bulk
transfer laws of any state or its misapplication of the proceeds of the
purchase price in fraud of its creditors, or
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(iii) any liability imposed upon Boykin as transferee of the business or
operations of the Partnership or the assets being transferred under the
Purchase Agreement, or otherwise relating to the conduct of the business
and operations of the Partnership or the Hotel prior to the Closing,
except as expressly assumed by Boykin. Boykin has agreed in the
Purchase Agreement to indemnify the Partnership from all liabilities or
expenses which the Partnership may suffer or incur by reason of (i)
Boykin's breach of any representations, warranties and covenants of
Boykin contained in the Purchase Agreement; (ii) Boykin's failure to
duly discharge any liabilities of the Partnership assumed by Boykin from
and after the Closing Date; or (iii) any liability imposed upon the
Partnership as a result of Boykin's conduct of the business and
operations of the Hotel after the Closing Date.
Continued Existence. For a period of 180 days commencing on the
Closing Date (the "Existence Period"), the Partnership has agreed in the
Purchase Agreement to maintain its existence as a limited partnership in
good standing under the laws of the State of Delaware and not to take
any action to dissolve, liquidate or otherwise wind up its affairs. At
all times during the Existence Period, the Purchase Agreement requires
the Partnership to maintain a minimum net worth of $250,000. Boykin has
agreed in the Purchase Agreement that the Partnership may make
distributions to its partners during the Existence Period so long as the
distributions do not cause the Partnership's net worth to fall below
$250,000.
Termination. The Purchase Agreement may be terminated (i) at any
time by mutual consent of Boykin and the Partnership; (ii) by Boykin (so
long as Boykin is not then in default of its obligations under the
Purchase Agreement) if the Closing shall not have occurred on or before
May 31, 1998; (iii) by the Partnership if Boykin has materially breached
any of its covenants in the Purchase Agreement or if Boykin has made a
material misrepresentation in the Purchase Agreement or if one or more
of the conditions precedent to the Partnership's obligations have not
been satisfied on or before the date required; (iv) by Boykin if the
Partnership has materially breached any of its covenants in the Purchase
Agreement or if the Partnership has made a material misrepresentation in
the Purchase Agreement or if one or more of the conditions precedent to
Boykin's obligations have not been satisfied on or before the date
required; (v) by Boykin if prior to the Closing Date, the Property is
damaged or destroyed and is not repaired prior to the Closing Date or is
subjected to a taking for public or quasi-public use; or (vi) by either
Boykin or the Partnership if any court of competent jurisdiction or
other governmental agency of competent jurisdiction has issued an order,
or taken action prohibiting the transaction contemplated by the Purchase
Agreement, and such order has become final and nonappealable.
Closing Costs. The Purchase Agreement requires the Partnership to
pay all costs of title insurance, transfer taxes in excess of $50,000,
survey fees, brokerage fees and commissions of agents working on the
Partnership's behalf in connection with the sale of the Property, and
one-half of all escrow fees. The Purchase Agreement requires Boykin to
pay the first $50,000 of transfer taxes, all costs of recording the deed
and any other documents to be recorded and one-half of all escrow fees.
Default and Remedies. If the Sale is not consummated because of a
default on the part of Boykin, then the Deposit will be paid to the
Partnership as the Partnership's sole and exclusive remedy.
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If the Sale is not consummated because of a default on the part of the
Partnership and if the Partnership has executed a definitive agreement
to transfer the Property to a party other than Boykin, Boykin will
receive a return of the Deposit, together with a cash payment from the
Partnership equal to the lesser of (i) $750,000, and (ii) the maximum
amount that Boykin may receive without adversely affecting the status of
Boykin's general partner as a Real Estate Investment Trust under the
Internal Revenue Code of 1986, as amended. Subject to the preceding
sentence, if the Sale is not consummated because of a default by the
Partnership, Boykin may exercise any and all legal and equitable
remedies which Boykin may have against the Partnership, including the
right to require the Partnership to specifically perform its obligations
under the Purchase Agreement.
If the Sale is not consummated because the Partnership is unable
to obtain the approval of the Limited Partners holding more than 50% of
the total outstanding Units, or because of any other condition precedent
to Boykin's responsibilities as described below, Boykin shall (i)
receive a return of the Deposit, and (ii) the Partnership shall pay up
to $75,000 of the actual and documented reasonable out-of-pocket costs
and expenses incurred by Boykin in connection with the negotiation,
execution and delivery of the Purchase Agreement and Boykin's due
diligence related thereto.
Conditions Precedent to the Closing.
Boykin's Responsibilities: The obligation of Boykin to consummate
the Sale is, at Boykin's option, subject to a number of conditions,
including among others:
Covenants, Representations and Warranties. The
Partnership's performance of all covenants, agreements and
obligations applicable to it under the Purchase Agreement and the
truth of the Partnership's representations and warranties as of
the Closing Date.
Partnership Approval. The Managing General Partner shall
have duly approved the Purchase Agreement and the consummation of
the transactions contemplated thereby and the Limited Partners
holding more than 50% of the Units shall have approved the
consummation of the transactions contemplated by the Purchase
Agreement.
Pending Litigation. There shall be no pending litigation
against Boykin or the Partnership for the purpose of enjoining or
preventing the consummation of the Purchase Agreement or otherwise
claiming that the Purchase Agreement or the consummation thereof
is illegal.
Title Policy. The Title Company shall be ready, willing and
able to issue the Title Policy and no liens or encumbrances shall
have been placed on the Property between the date of the Title
Report and the Closing Date, other than those discharged at
Closing.
Delivery of Marketable Title. The Partnership's delivery of
good and marketable title to the Property, free of all liens,
charges or encumbrances except those liens, charges or
encumbrances agreed to by Boykin.
<PAGE>
<PAGE>
Third-Party Consents. Boykin shall have received all
necessary consents and approvals of all applicable governmental
authorities and the Partnership shall have delivered to Boykin the
written consents of all necessary third parties to the transfer of
the Property to Boykin.
Absence of Material Adverse Change. There shall have
occurred no material adverse change in the condition, financial or
otherwise, of the Partnership or the Property.
Liquor License. Boykin shall have obtained the consent of
the applicable governmental authorities to the transfer of all
liquor licenses relating to the Hotel, or Boykin shall have use of
all liquor licenses relating to the Hotel.
Lender Approval. No later than March 20, 1998, Lessee's
lenders shall have consented to the execution, delivery and
performance by Lessee of the Percentage Lease Agreement, dated as
of February 20, 1998, between Boykin and Lessee (the "Lease").
The Partnership's Responsibilities: The obligation of the
Partnership to consummate the Sale is, at the Partnership's option,
subject to a number of conditions, including among others:
Covenants, Representations and Warranties. Boykin's
performance of all covenants, agreements and obligations
applicable to it under the Purchase Agreement and the truth of
Boykin's representations and warranties as of the Closing Date.
Pending Litigation. There shall be no pending litigation
against Boykin or the Partnership for the purpose of enjoining or
preventing the consummation of the Purchase Agreement or otherwise
claiming that the Purchase Agreement or the consummation thereof
is illegal.
Boykin Approval. Boykin shall have duly approved the
Purchase Agreement and the transactions contemplated thereby.
Partnership Approval. The Limited Partners holding more
than 50% of the Units shall have approved the consummation of the
transactions contemplated by the Purchase Agreement.
Adjustments and Prorations. Following are certain items to be
adjusted, prorated or credited between the Partnership and Boykin at the
Closing, as of midnight preceding the Closing Date (the "Cutoff Time").
Net credits to Boykin from the Closing adjustments and prorations
described herein will reduce the cash payable at the Closing, and net
credits to the Partnership from the Closing adjustments and prorations
described herein will increase the cash payable at the Closing.
Revenues. With regard to the booking of guest rooms and the
provision of other services at the Property, the Partnership will
be entitled to all of the revenue generated by these operations
through and including the Cutoff Time.
Prepaid Charges and Fees. All prepaid charges and fees for
permits transferred by the Partnership to Boykin will be prorated
as between the Partnership and Boykin.
<PAGE>
<PAGE>
Contracts and Tenant Leases. All advance payments and other
deposits held by the Partnership with respect to the Contracts and
the Tenant Leases will be credited to Boykin. All charges
relating to the Contracts and the Tenant Leases will be prorated
as of the Cutoff Time between the Partnership and Boykin.
Cash. All cash in-house banks and petty cash funds are not
included in the Purchase Price, but will be purchased by Boykin at
the Closing.
Taxes and Assessments. All nondelinquent ad valorem, real
property taxes, hotel occupancy tax, water and sewer rents, taxes,
special or general assessments, rates or charges, vault charges,
and any municipal permit fees will be prorated as of the Cutoff
Time between the Partnership and Boykin.
Utilities. All expenses pursuant to contracts for the
supply of utility service will be prorated as of the Cutoff Time.
The Partnership will receive a credit for all deposits which
remain for the benefit of Boykin.
Net Operating Income Adjustment. If the Closing Date is any date
after January 15, 1998, the Purchase Agreement requires the Partnership
to pay Boykin the amount by which (1) the Partnership's actual net
operating income for the period commencing on January 1, 1998 and ending
on the Closing Date exceeds (2) the amount of the apportioned net
operating income, which shall be determined by multiplying $2,400,000
(an agreed upon estimate of the net operating income of the Partnership
for the calendar year 1998) by a fraction, the numerator of which is the
number of calendar days elapsed from and including January 1, 1998
through and including the Closing Date and the denominator of which is
365. The net operating income adjustment (the "NOI Adjustment") will
reduce the proceeds from the Sale that the Limited Partners will
receive. If the Closing occurred in May, 1998, the proceeds to Limited
Partners would be decreased by approximately $1,115,000 or $75.76 per
Unit because of the NOI Adjustment.
Accounting Treatment of the Transaction
The Sale will be accounted for as a sale of the assets of the
Partnership.
Financial Information
This proxy statement is accompanied by the Partnership's Form 10-K
for the period ended December 31, 1996 (the "Form 10-K" Exhibit 99.1)
and the Partnership's 10-Q for the quarter ended September 30, 1997 (the
"Form 10-Q" Exhibit 99.2). The information in the Form 10-K and the
Form 10-Q are hereby incorporated by reference into this Consent
Statement.
Interests of Certain Persons in the Sale
In considering the recommendation of the Managing General Partner
with respect to the Proposal, the Limited Partners should be aware that
certain directors of, or affiliated with, the Managing General Partner
have interests in the Proposal that are different from and in addition
to the interests of the Limited Partners generally. The Acquisition
Committee, which includes a representative of MCD Real Estate, Inc., who
does not have such additional interests, was aware of these interests
and took these interests into account in approving the Proposal and the
transactions contemplated thereby.<PAGE>
<PAGE>
If the Sale is consummated, Boykin intends to lease the Hotel and
sell the FF&E to Lessee. Mariner Group, Inc. ("MGI") owns 100% of the
Managing General Partner. MGI also owns more than 10% of South Seas.
South Seas is the holder of 100% of the equity interest of Lessee. As a
result of such common ownership, Lessee is an affiliate of the Managing
General Partner. In addition, certain individuals have interests in
both MGI and in South Seas; a description of these interests follows.
Robert Anderson is a director of and owns 15.7% of MGI. Mr.
Anderson also owns 10.2% of South Seas and serves as a member of the
Advisory Board of South Seas.
Timothy R. Bogott is a director of the Managing General Partner
and is a member of the Acquisition Committee of the Partnership. Mr.
Bogott owns 1.3% of MGI, .027% of the Units and 3.3% of South Seas. Mr.
Bogott is a member of the Advisory Board of South Seas.
Curtis Bostic is a director of and owns 3.3% of MGI. Mr. Bostic
also owns 2.2% of South Seas.
Norm Patton is a director of and owns 1.9% of MGI. Mr. Patton
also owns 2.7% of South Seas.
Robert M. Taylor is a director of the Managing General Partner and
is a member of the Acquisition and Disposition Committee of the
Partnership. Mr. Taylor is a director and officer of and owns 16.6% of
MGI. Mr. Taylor also owns 12.1% of South Seas and 51% of South Seas'
general partner (which owns 1% of South Seas). Mr. Taylor is the
general partner of each of TLT, Ltd., a Florida limited partnership, and
BRT, Ltd., a Florida limited partnership, which collectively own .068%
of the Units.
Allen G. Ten Broek is the president and director of the Managing
General Partner. Mr. Ten Broek is an officer and director of and owns
11.9% of MGI. Mr. Ten Broek also owns .034% of the Units, 9.9% of South
Seas and 49% of South Seas' general partner (which owns 1% of South
Seas).
Boykin and Lessee have executed the Lease, which is conditioned on
the consummation of the Sale. Boykin has agreed to lease the Property
to South Seas for a period of ten years. Lessee has an option to extend
the term of the Lease for two separate, successive periods of three
years each. Lessee will pay rent to Boykin in an amount equal to (i)
the higher of (a) the annual sum of $2,200,000, as adjusted annually
based on the Consumer Price Index, or (b) a percentage of the revenues
generated by the Property, plus (ii) all liabilities, costs and expenses
necessary to perform its obligations under the Lease and under the
franchise agreement for the Hotel.
Lessee will purchase the FF&E from Boykin for an aggregate
purchase price of $2,000,000. Upon a termination of the Lease due to
Lessee's default, Lessee will reconvey to Boykin any remaining FF&E and
will reimburse Boykin for the losses incurred by Boykin by reason of
Lessee's default under the Lease. Upon such reconveyance, Lessee will
be entitled to a credit against such losses in the amount of the
liquidation value of the FF&E reconveyed to Boykin.
<PAGE>
<PAGE>
ESTIMATED ALLOCATIONS AND DISTRIBUTIONS
The following table shows the expected proceeds from the Sale, the
application of certain of the proceeds and the disposition of the
proceeds of the Sale.
CASH DISTRIBUTIONS
Selling Price $21,250,000
Price Reduction
from NOI Adjustment $ 1,115,000
Net Selling Price $20,135,000
Less Estimated Use of Proceeds:
Title insurance premium $ 2,500
State transfer taxes $ 126,945
Survey update $ 8,000
Professional Fees $ 60,000
Miscellaneous closing costs $ 5,000
Brokerage fees to third party $ 304,000
Payoff first mortgage $ 5,077,000
Tax Proration - 5 months $ 90,000
Reserves $ 50,000
-----------
Total Deductions $ 5,723,445
Net Distribution from Sale $ 4,411,555
Estimated Use of Proceeds $ 5,723,445
Estimated Net Distribution from Sale $14,411,555
Estimated Distribution per Unit $ 979.25
See "Federal Income Tax Consequences," contained herein, for a
description of certain federal income tax consequences of the Sale to
the Limited Partners.
Federal Income Tax Consequences
The following summarizes the material income tax consequences of
the Proposal. No opinion is being obtained from legal counsel and no
ruling has been or will be obtained from the Internal Revenue Service
regarding such tax consequences. Accordingly, there can be no assurance
that the treatment described herein will not be challenged by the
Internal Revenue Service or ultimately upheld as proper tax treatment.
THE FOLLOWING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF THE
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE PROPOSAL AND DOES NOT
PURPORT TO BE A COMPLETE ANALYSIS OR LISTING OF ALL POTENTIAL TAX
EFFECTS RELEVANT TO A DECISION ON WHETHER TO VOTE IN FAVOR OF THE
PROPOSAL. THE DISCUSSION DOES NOT ADDRESS THE TAX CONSEQUENCES THAT MAY
BE RELEVANT TO A PARTICULAR LIMITED PARTNER WHO IS SUBJECT TO SPECIAL
TREATMENT UNDER CERTAIN FEDERAL INCOME TAX LAWS OR ANY CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, LOCALITY OR FOREIGN JURISDICTION.
THE DISCUSSION IS BASED UPON THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, TREASURY REGULATIONS THEREUNDER AND ADMINISTRATIVE RULINGS AND
COURT DECISIONS AS OF THE DATE HEREOF. <PAGE>
<PAGE>
ALL OF THE FOREGOING IS SUBJECT TO CHANGE, AND ANY SUCH CHANGE COULD
AFFECT THE CONTINUING VALIDITY OF THIS DISCUSSION. LIMITED PARTNERS ARE
URGED TO CONSULT AND RELY ON THEIR OWN TAX ADVISORS CONCERNING THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PROPOSAL TO
THEM.
Taxation of Partnerships in General
An entity classified as a partnership for federal income tax
purposes is not subject to federal income tax. Instead, income or loss
"flows through" from the partnership to its partners who are taxable in
their individual capacities on their allocable shares of partnership
items of income, gain, loss, deduction and credit. However, the
partnership is a tax-reporting entity that must make an annual return of
partnership taxable income or loss. The tax treatment of partnership
items of taxable income or loss is generally determined at the
partnership level. Each partner is required to treat partnership items
on its return in a manner consistent with the treatment of such items on
the partnership return and may be penalized for intentional disregard of
the consistency requirement. Each partner must account for its
allocable share of partnership taxable income or loss in computing its
income tax, whether or not any actual cash distribution is made to such
partner during its taxable year.
Basis of Partnership Interests
A partner's basis in its interest is generally equal to its cost
for such interest (i.e., the amount of money actually contributed by the
partner to the partnership to purchase the interest), reduced (but not
below zero) by its allocable share of partnership distributions, taxable
losses and expenditures of the partnership not deductible in computing
its taxable income and not properly chargeable to its capital account,
and increased by its allocable share of partnership taxable income,
income of the partnership exempt from tax and additional contributions
to the partnership. For purposes of determining basis, an increase in a
partner's share of partnership liabilities is treated as a contribution
of money by that partner to the partnership. Conversely, a decrease in
its share of partnership liabilities is treated as a distribution of
money to it. Generally, a limited partner may not take partnership
liabilities into account in determining its basis except to the extent
of any additional capital contribution it is required to make under the
partnership agreement. However, if a partnership asset is subject to a
liability for which no partner or a related person has any personal
liability (a "nonrecourse liability"), in general, the limited partner's
allocable share of the nonrecourse liability will be taken into account
to determine basis.
Gain on Sale of Property
The Sale will be a taxable event to the Limited Partners. Gain or
loss on a sale generally will be measured by the difference between the
amount realized and the adjusted basis of the assets that are sold.
Generally the amount realized is the sum of any money received, plus the
fair market value of any property received, plus the amount of
liabilities from which the partnership is discharged as a result of the
sale or disposition. The adjusted basis of property is generally the
initial tax basis less deductions, allowed or allowable, for
depreciation.
<PAGE>
<PAGE>
A substantial portion of the assets to be sold (including
buildings, land, furniture, fixtures and equipment) which were held for
more than one year and are not "dealer property," are expected to be
treated as "section 1231 assets." Section 1231 assets are property used
in the trade or business of a character which is subject to the
allowance for depreciation, held for more than one year, and real
property used in the trade or business held for more than one year.
Gains or losses from the sale of section 1231 assets would be combined
with any other section 1231 gains or losses incurred by the Partnership
in that year, and the section 1231 gains or losses would be allocated to
the Limited Partners as provided in the Partnership Agreement. A
Limited Partner's section 1231 gains or losses from the Partnership
would be combined with any other section 1231 gains and losses incurred
by such Limited Partnership in that year. If a Limited Partner's
section 1231 losses exceed section 1231 gains, such losses would be
treated as ordinary losses and such gains would be treated as ordinary
income. If a Limited Partner's section 1231 gains exceed section 1231
losses, such gains and losses generally would be treated as capital
gains and losses. However, to the extent a Limited Partner has net
section 1231 losses for the five most recent preceding years, such
Limited Partner's net section 1231 gain may be subject to recapture as
ordinary income. If any partnership asset is considered not to be a
capital asset or section 1231 asset, any gain or loss on the sale of
such property would be treated as ordinary income or loss.
A portion of a Limited Partner's gain recognized on disposition of
certain of the Partnership's assets, such as buildings and furniture,
fixtures and equipment, may be subject to recapture as ordinary income
under the provisions of section 1245 or 1250 of the Internal Revenue
Code of 1986, as amended (the "Code"). Any recapture gain will be
recognized in the year of the disposition.
The purchase price for the Property will be allocated among the
various assets that comprise the Property by the Managing General
Partner, and gain or loss calculated therefrom. Such an allocation is
inherently factual and will be based to a significant extent on the
Managing General Partner's experiences. Nevertheless, the Internal
Revenue Service may seek to challenge the Managing General Partner's
allocation of the purchase price and may assert that it should be
allocated in a manner that would yield less favorable tax consequences
to the Limited Partners. Because of the inherently factual nature of
these determinations, there can be no assurance that the Managing
General Partner's allocation of the purchase price will be respected for
tax purposes. The following is a summary of the estimated gain on the
Sale.
Allocation of Taxable Income or Loss
A partner's distributive share of the partnership's taxable income
or loss generally is determined by reference to the allocation of such
items in the partnership agreement. However, if the allocation under
the partnership agreement is determined not to have "substantial
economic effect," then the partnership agreement may not govern, and the
partner's allocable share will be determined according to the partner's
interest in the partnership taking into account all the facts and
circumstances. An allocation is considered to have "substantial
economic effect" if the allocation may actually affect the dollar amount
of the partner's share of the total partnership income or loss
independent of tax consequences. The Managing General Partner believes
that the allocations made under the Partnership Agreement for the
Partnership have substantial economic effect.
<PAGE>
<PAGE>
Accordingly, taxable income or taxable loss of the Partnership on the
Sale should be allocated in accordance with Section 10 of the
Partnership Agreement. The following is a summary of the estimated
allocations of income and loss:
SALE OF PROPERTY
ON OR ABOUT MAY 31, 1998
ESTIMATED TAXABLE INCOME/LOSS
Total
Estimated Gain on the Sale:
Real Estate & Building
Net Sales Proceeds $17,641,658
Basis 13,340,568
Gain 4,301,090 (1)
Furniture, Fixtures & Equipment
Net Sales Proceeds $ 1,945,592
Basis 522,506
Ordinary Income 1,423,086
Estimated Net Gain on Sale of Property $ 5,724,176
Summary:
Gain $ 4,301,090
Ordinary Income $ 1,423,086
- ------------------------------
(1) any section 1231 gain on the Sale may be offset by any section
1231 loss (including section 1231 loss on the Walsingham Commons
Shopping Center) that is allocated to a Limited Partner by the
Partnership or by other sources. See "Federal Income Tax
Consequences -- Gain on Sale of Property" above.
Liquidation of the Partnership
Generally, upon the liquidation of a partnership, gain will be
recognized by and taxable to a partner to the extent the amount of cash
and marketable securities distributed to it exceeds the partner's basis
in its partnership interest at the time of the distribution. Gain or
loss on the liquidation of a partnership interest generally is
considered to be capital gain or loss.
An exception to this treatment is provided in Code section 751,
which states that the proceeds of a sale, exchange or liquidation of a
partnership interest will be considered an amount realized from the sale
or exchange of property other than a capital asset to the extent that
those proceeds are attributable to the partnership's "unrealized
receivables" or to inventory items of the Partnership. The term
"unrealized receivables" includes, to the extent not previously
includable in income under the partnership's method of accounting,
rights to payment for services rendered or to be rendered and for goods
delivered or to be delivered and a partner's pro rata share of any
potential Code section 1245 or 1250 income, short-term obligations,
market discount bonds, franchises, trademarks and trade names and
several other categories of property which would be treated as amounts
received from the sale or exchange of property other than a capital
asset. The Managing General Partner believes there will be no such
unrealized receivables or inventory items.
<PAGE>
<PAGE>
In addition, each Limited Partner may be in receipt of income or
loss from the normal operations of the Partnership during the year of
dissolution. That income may constitute ordinary income or loss.
Alternative Minimum Tax
The discussions heretofore and hereafter do not take into account
the federal alternative minimum tax. This tax is imposed on taxpayers
to the extent that it exceeds a taxpayer's regular tax liability.
Generally, a taxpayer's alternative minimum tax is determined by
adjusting its regular tax liability for alternative minimum tax
preference items. This determination may lead to tax liability even
though the Partnership has a net operating loss for alternative minimum
tax purposes. Each Unitholder should consult its tax advisor with
respect to the possible effects of the alternative minimum tax.
Applicability of Section 291
Pursuant to section 291 of the Code, a corporation that recognizes
gain on the disposition of depreciable realty will recognize ordinary
income in addition to the depreciation recapture amount under section
1250 of the Code. No determination has been made regarding recapture
under section 291 for any Units owned by a corporation. Each corporate
Unitholder should consult its tax advisor with respect to the possible
effects of section 291.
State and Local Income Taxes
Limited Partners should consider the state and local tax
consequences of the Proposal. A Limited Partner's distributive share of
the Partnership's taxable income or loss generally is required to be
included in determining its reportable income for state and local
purposes. Limited Partners may be required to file tax returns in those
state and local taxing jurisdictions in which the Partnership's
properties are located in addition to their state of domicile. The
reporting requirements for federal income tax purposes may not be
consistent with those of such state and local taxing jurisdictions.
Each Limited Partner should consult its own tax advisor with respect to
the state and local tax consequences of the Proposal.
Conclusion
The preceding is intended only as a summary of certain material
federal income tax consequences relating to the Proposal. Limited
Partners should consult their own tax advisors with respect to all
matters discussed herein and their own particular tax circumstances.
General Information
The Partnership is a Delaware limited partnership formed in
December, 1987, for the purpose of investing in a diversified portfolio
of income-producing commercial and residential real estate properties
primarily located in Florida. The Partnership's principal executive
offices are located at 12800 University Drive, Suite 675, Fort Myers,
Florida 33907, and its telephone number is (941) 481-2011.
The Partnership acquired two properties in 1988 and 1989 which
included the Hotel and Walsingham Commons Shopping Center, a shopping
center located in Largo, Florida.
<PAGE>
<PAGE>
On January 22, 1997, the Partnership executed a stipulation
agreeing to the appointment of a receiver and to the entry of a final
judgment of foreclosure on the Walsingham Commons Shopping Center by the
first mortgage holder (the "Foreclosure"). As of this date, the
Foreclosure has not been completed. However, a receiver has been
appointed and the Partnership is no longer involved with that property.
Once the Foreclosure is completed, the Property will represent the
remaining assets of the Partnership.
While the Walsingham Commons Shopping Center was owned by the
Partnership, one of the tenants (the "Tenant") operated a dry cleaning
business and was cited by the State of Florida's State Department of
Environmental Protection for contaminating the site of the dry cleaning
business (the "Site") with drycleaning solvents. The Site is eligible
for Florida state-administered cleanup under the Drycleaning Solvent
Cleanup Program (the "Program"). Under the Program, the expense of the
cleanup is absorbed at the expense of the Hazardous Waste Management
Trust Fund, subject to a $1,000 deductible amount payable by the Tenant.
The Partnership has engaged legal counsel in Florida to advise the
Partnership regarding the potential liability that exists in connection
with the Site if the Tenant were to vacate, declare bankruptcy or fail
to comply with the requirements of the Program. The Partnership has not
yet received a report from such counsel.
Rights of Limited Partners
General Rights. Under the Partnership Agreement, the Limited
Partners may not take part in the control of the business or affairs of
the Partnership and have no voice in the management or operations of the
Partnership. The Limited Partners lack of a voice in management and
control is necessary to limit liability in excess of their investment in
the Partnership and their share of undistributed profits from the
Partnership. The Limited Partners, among other things: (i) share all
profits, losses and distributions of the Partnership in accordance with
the Partnership Agreement; (ii) have their liability for the operations
of the Partnership limited to the amount of their capital contributions
to the Partnership; (iii) have the right to obtain upon request (a) a
copy of the Partnership's certificate or certificates of limited
partnership containing the most recent listing of partners' names,
addresses and capital contributions and (b) copies of all reports filed
with federal and state regulatory and administrative bodies; (iv)
receive annually financial statements, information necessary for the
preparation of their federal income tax forms and certain other
information pertaining to the activities of the Partnership and the
General Partners; (v) receive quarterly a report containing a
description of properties acquired or to be acquired by the Partnership;
(vi) have the right to transfer their Units to the extent and as
provided in Section 15 of the Partnership Agreement; (vii) have the
right to vote on the termination and dissolution of the Partnership
(other than upon expiration of the term of the Partnership); (viii) have
the right to dissolution and liquidation of the Partnership as provided
in Section 17 of the Partnership Agreement; (ix) have the right to vote
to amend certain provisions of the Partnership Agreement upon the
affirmative vote of a majority in interest of the Limited Partners; (x)
have the right to remove a General Partner and elect a substitute
General Partner upon an affirmative vote of a majority in interest of
the Limited Partners; (xi) have the right to elect to continue the
Partnership following certain events described in Section 17.3 of the
Partnership Agreement upon the consent of a majority in interest of the
Limited Partners; and (xii) have the right to approve or disapprove any
sale of all or substantially all of the assets of the Partnership in a
single sale, or in multiple sales in the same three-month period.<PAGE>
<PAGE>
Rights on Sale. If the Proposal is approved and the Sale is
consummated, Limited Partners will have the right to receive
approximately $979.25 per Unit in connection with the Sale. This amount
is subject to reduction under the circumstances described under "Terms
of the Sale--General Terms of the Purchase Agreement--Continued
Existence, Conditions Precedent to the Closing and The Partnership's
Responsibilities" and "Estimated Allocations and Distributions." When
the Partnership is dissolved, the Limited Partners will have the right
to receive distributions arising from operations of the Hotel in 1998
and from amounts retained by the Partnership from the Sale to meet the
minimum net worth requirement set forth in the Purchase Agreement that
were not used to satisfy obligations of the Partnership. After any
final distributions are made at the termination of the Existence Period,
the Partnership will be dissolved.
Federal/State Regulatory Requirements
Other than certain state laws regarding the transfer of liquor
licenses, there are no federal or state regulatory requirements that
apply to the Proposal.
Distribution to Limited Partners: Timetable and Procedures
If the Proposal is approved and the Sale is consummated, a period
of approximately ten days will follow the Closing Date in which various
purchase price adjustments will be made. When this period has expired,
the Managing General Partner will distribute the assets of the
Partnership, other than $250,000, which is required to meet the minimum
net worth requirement described above, plus any reserves that the
Managing General Partner deems reasonably necessary for any contingent
or unforeseen liabilities or obligations of the Partnership, first to
creditors, and then to the Limited Partners and the General Partners.
The holders of certificates representing the Units (the "Certificates")
outstanding on April 3, 1998, will be entitled to receive consideration
as estimated under "Estimate of Allocations and Distributions." Upon
consummation of the Dissolution, such Unitholders will, upon surrender
of the Certificates (duly endorsed) to the Managing General Partner, be
entitled to receive a final distribution from the Partnership. The
Managing General Partner anticipates that it will take ten days after
the Existence Period to make the final distributions to such Unitholders
that have surrendered their Certificates to the Managing General
Partner.
If the Proposal is approved and the Sale is consummated, the
Managing General Partner will mail, by November 15, 1998, a letter of
transmittal with instructions to all owners of record of the Units as of
April 3, 1998 describing in detail the process for surrendering
Certificates in exchange for the anticipated distributions.
Certificates should NOT be surrendered until the letter of transmittal
and instructions are received. NO FINAL DISTRIBUTION WILL BE MADE TO A
UNITHOLDER UNTIL CERTIFICATES REPRESENTING HIS OR HER UNITS, OR A LOST
CERTIFICATE AFFIDAVIT, HAVE BEEN DELIVERED IN ACCORDANCE WITH THE
INSTRUCTIONS IN THE LETTER OF TRANSMITTAL.
Lack of Dissenters' Rights of Appraisal
Unitholders will not be entitled to dissenters' appraisal rights
under Delaware law or under any other statute or under the terms of the
Partnership Agreement in connection with the Proposal.
<PAGE>
<PAGE>
SELECTED FINANCIAL DATA
The following table presents selected financial data of the
Partnership for the five fiscal years ended December 31, 1997. The
following data should be read in conjunction with the financial
statements, schedules and related notes thereto and the information
included in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" appearing in the Form 10-K and the Form 10-Q.
<TABLE>
<CAPTION>
1997
Unaudited 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Operations:
Operating Revenues $10,035,217 $9,811,007 $11,424,239 $6,754,107 $6,989,421
Total Revenues 10,050,298 9,828,999 11,477,902 6,765,804 7,007,502
Net income 564,377 (63,805) 1,061,549 (755,983) 233,744
Net income to 558,733 (63,167) 1,050,934 (748,423)
Limited Partners
Cash distributions to 679,605 680,661 680,661 589,155 1,030,278
Limited Partners
Financial Position:
Property and equipment $17,567,157 $18,155,587 $18,762,415 $26,242,336 $21,865,729
net
Total assets 18,246,457 18,919,818 19,590,595 29,078,498 22,607,756
Current maturities of 572,177 383,573 348,033 796,443 384,022
long-term obligations
Long-term obligations 8,005,333 8,580,758 8,967,261 14,806,836 11,202,850
(excl. current
maturities)
Total Partners' equity 8,063,983 8,179,211 8,923,677 8,542,789 9,887,927
(deficit)
Limited Partners'equity 8,096,528 8,217,400 8,961,228 8,590,955 9,928,533
(deficit)
Per Unit:
Cash distributions to $ 46.18 $ 46.25 $ 46.25 $ 40.03 $ 70.01
Limited Partners
Net income (loss) to 37.97 (4.29) 71.4 (50.85) 15.72
Limited Partners
Limited Partners'equity 550.15 558.36 608.91 583.74 674.63
(deficit)
___________ ________ ________ ________ ________
Total units outstanding 14,717 14,717 14,717 14,717 14,717
</TABLE>
<PAGE>
<PAGE>
PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial information gives effect to the
Sale and the Dissolution. The pro forma financial information is presented for
illustrative purposes only and therefore is not necessarily indicative of the
operating results and financial position that might have been achieved had the
Sale and the Dissolution occurred as of an earlier date.
A pro forma unaudited balance sheet is provided as of September 30, 1997,
giving effect to the Sale and Dissolution as though they had been consummated on
that date.
<TABLE>
<CAPTION>
Pro forma Financial Information
Audited Adjusted Pro Forma
Book Proposed Book Book
Balances Deeding of Balances Partnership Balances
@9/30/97 Center @9/30/97 Liquidation @9/30/97
=========== ============ =========== ============ ========
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 358,772 $14,415,326 $14,774,098 $(14,774,098) $ 0
Other current assets 399,789 (399,789) 0 0 0
---------- ------------ ----------- ------------- --------
Total current assets 758,561 14,015,537 14,774,098 (14,774,098) 0
Property and equipment 22,856,331 (19,009,710) 3,846,621 (3,846,621) 0
Depreciation (5,164,431) 4,399,967 (764,464) 764,464 0
---------- ------------ ------------ ------------ --------
Net property equipment 17,691,900 (14,609,743) 3,082,157 (3,082,157) 0
---------- ------------ ------------ ------------ --------
Other assets 35,479 (35,479) 0 0 0
---------- ------------ ------------ ------------ --------
Total assets $18,485,940 $ (629,685) $17,856,255 $(17,856,255) $ 0
Accounts payable $ 318,089 $ (309,758) $ 8,331 $ (8,331) $ 0
Accrued expenses 449,153 (449,153) 0 0 0
Customer deposits 485,394 (485,394) 0 0 0
Current portion of mortgage 543,573 (543,573) 0 0 0
----------- ------------ ----------- ------------- -------
Total current liabilities 1,796,209 (1,787,878) 8,331 (8,331) 0
Notes payable 8,131,335 (4,931,335) 3,200,000 (3,200,000) 0
----------- ------------ ----------- ------------- -------
Total liabilities 9,927,544 (6,719,213) 3,208,331 (3,208,331) 0
----------- ------------ ----------- ------------- -------
Partners' equity/(deficit) 8,558,396 6,089,528 14,646,924 (14,647,924) 0
----------- ------------ ----------- ------------- -------
Total liabs. and equity $18,485,940 $ (629,685) $17,856,255 $(17,856,255) $ 0
=========== ============ =========== ============= =======
</TABLE>
<PAGE>
<PAGE>
The following unaudited pro forma financial information gives effect to
the Foreclosure of the Walsingham Commons Shopping Center. The pro forma
financial information is presented for illustrative purposes only and
therefore is not necessarily indicative of the operating results and financial
position that might have been achieved had the Foreclosure occurred as of an
earlier date.
A pro forma unaudited balance sheet is provided as of September 30, 1997,
giving effect to the Foreclosure of the Walsingham Commons Shopping Center as
though it had been consummated on that date.
<TABLE>
<CAPTION>
Pro forma Financial Information
Unaudited Adjusted Pro Forma
Book Proposed Book Book
Balances Deeding of Balances Partnership Balances
@9/30/97 Center @9/30/97 Liquidation @9/30/97
=========== ============ =========== ============ ========
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 358,772 $ 0 $ 358,772 $ (358,772) $ 0
Other current assets 399,789 0 399 789 (399,789) 0
---------- ------------ ----------- ------------- --------
Total current assets 758,561 0 758,561 (758,561) 0
Property and equipment 22,856,331 (3,846,621) 19,009,710 (19,009,710) 0
Depreciation (5,164,431) 764,464 (4,399,967) 4,399,967 0
---------- ------------ ------------ ------------ --------
Net property equipment 17,691,900 (3,082,157) 14,609,743 (14,609,743) 0
---------- ------------ ------------ ------------ --------
Other assets 35,479 0 35,479 (35,479) 0
---------- ------------ ------------ ------------ --------
Total assets $18,485,940 $(3,082,157) $15,403,783 $(15,403,783) $ 0
Accounts payable $ 318,089 $ 0 $ 318,089 $ (318,089) $ 0
Accrued expenses 449,153 0 449,153 (449,153) 0
Customer deposits 485,394 0 485,394 (485,394) 0
Current portion of mortgage 543,573 0 543,573 (543,573) 0
----------- ------------ ----------- ------------- -------
Total current liabilities 1,796,209 0 1,796,209 (1,796,209) 0
Notes payable 8,131,335 (3,200,000) 4,931,335 (4,931,335) 0
----------- ------------ ----------- ------------- -------
Total liabilities 9,927,544 (3,200,000) 6,727,544 (6,727,544) 0
----------- ------------ ----------- ------------- -------
Partners' equity/(deficit) 8,558,396 117,843 8,676,239 (8,676,239) 0
----------- ------------ ----------- ------------- -------
Total liabs. and equity $18,485,940 $(3,082,157) $15,403,783 $(15,403,783) $ 0
=========== ============ =========== ============= =======
</TABLE>
<PAGE>
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Units as of April 3, 1998, by: (a) the
Partnership's directors and executive officers, and (b) the
Partnership's executive officers and directors as a group. Unless
otherwise indicated, the following beneficial owners have sole voting
and sole investment power with respect to all Units set forth opposite
their names. No person is known by the Partnership to own beneficially
more than 5% of the outstanding Units (based on filings with the
Securities and Exchange Commission).
Name and Address Units Percent of Class
Timothy R. Bogott 4 .027%
15864 Silverado Ct.
Fort Myers, FL 33908
Robert M. Taylor (1) 10 .068%
15736 Glen Isle Way
Fort Myers, FL 33908
Allen G. Ten Broek 5 .034%
11496 Osprey Landing Way
Fort Myers, FL 33908
Executive Officers and
Directors, collectively 19 .129%
________________________________
(1) Mr. Taylor has the sole voting and investment power with respect
to five Units held of record by BRT, Ltd., a Florida limited
partnership in which Mr. Taylor is the general partner, and with
respect to five units held of record by TLT, Ltd., a Florida
limited partnership in which Mr. Taylor is the general partner.
<PAGE>
<PAGE>
OTHER MATTERS
The solicitation of consents is made by and on behalf of the
Managing General Partner. The cost of the solicitation will be borne by
the Partnership. In addition to solicitation of consent by mail,
regular employees of the Partnership or its affiliates may solicit
consent by telephone or facsimile. The Partnership may also reimburse
employees, banks, brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy
materials to the beneficial owners of the Units.
Under Delaware law and the Partnership Agreement, broker nonvotes
and abstaining votes will not be counted in favor of, or against, the
Proposal. Under Delaware law and the Partnership Agreement, any
Unitholder who abstains from voting on the proposed amendment will in
effect be voting against the Proposal. The Managing General Partner
will count the votes.
The Form 10-K and the Form 10-Q are hereby incorporated by
reference into this Consent Statement.<PAGE>
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
This Limited Partner Consent Form Is Solicited on Behalf of the Managing
General Partner
The undersigned, a Limited Partner of Florida Income Fund III,
Limited Partnership, a Delaware limited partnership (the "Partnership"),
hereby consents to the sale of certain real property located on Estero
Island, Florida, and the improvements located on such property,
including the Pink Shell Resort and all of the Partnership's rights
relating thereto as to all limited partnership units held (unless
otherwise specified below):
__________ APPROVE SALE
__________ DISAPPROVE SALE
__________ ABSTAIN
The failure to sign and return this Consent will be considered a
vote against the proposal. A Consent marked "abstain" will also be
considered a vote against the proposal. A signed Consent on which no
direction is indicated will be voted FOR the proposal.
THE MANAGING GENERAL PARTNER RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL
PLEASE MARK, SIGN, DATE AND RETURN THE CONSENT IN THE RETURN
ENVELOPE PROVIDED ON OR BEFORE APRIL 27, 1998.
Dated: ____________________, 1998.
______________________________
Printed Name of Unitholder
______________________________
Signature
______________________________
Printed Name and Title of Signer
if Different from Line 1 Above
______________________________
Printed Name of Unitholder
______________________________
Signature
______________________________
Printed Name and Title of Signer
if Different from Line 1 Above
IMPORTANT: When Units are in two or more names, all should sign. When
signing as Executor, Trustee, Guardian or Officer of a Corporation, give
full title as such. If a Partnership, please sign in Partnership Name
by Authorized Person.
EXHIBIT 99.1
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, 1996
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>
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
FORM 10-K - 1996
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>
<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 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
<PAGE>
<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>
<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 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:
FUTURE
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, 1996 are projected as
follows:
1997 $1,092,000
1998 1,113,000
1999 1,134,000
2000 902,917
2001 868,000
Thereafter $1,545,750
----------
$6,655,667
==========
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.
5
<PAGE>
<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 68% and
66% occupied as of December 31, 1996 and 1995.
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 $3,200,000 is nonrecourse and will
be satisfied upon the final judgment of foreclosure.
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 has resulted in a high supply of vacant space versus
very low demand which has in turn led to reduced rental rates. The
General Partner was of the opinion that the problem is long term and
felt it was econimically 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
6
<PAGE>
<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,
1996, there were 1,089 Limited Partners.
The Partnership commenced paying quarterly cash distributions in October 1988.
During 1996, 1995 and 1994, the total cash distributions were $680,661,
$680,661 and $589,155, respectively. The Partnership intends to distribute
operating cash produced by the Partnership on a quarterly basis in 1997 and
the upcoming years.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating revenues (including
interest income of $17,992, $53,663,
$11,697 $18,081 and $25,392 for
1996, 1995, 1994, 1993 and 1992 $ 9,828,999 $11,477,902 $ 6,765,804 $ 7,007,502 $ 6,413,296
Net income (loss) $ (63,805) $ 1,061,549 $ (755,983) $ 233,744 $ 237,676
Net income (loss) per weighted
average Limited Partnership unit $ (4.29) $ 71.40 $ (50.85) $ 15.72 $ 15.99
Total assets $18,919,818 $19,590,595 $29,078,498 $22,607,756 $23,102,524
Mortgages and notes payable $ 8,964,331 $ 9,315,294 $15,603,279 $11,586,872 $11,364,774
Distributions to Limited Partners $ 680,661 $ 680,661 $ 589,155 $ 1,030,278 $ 625,474
Distributions per Limited
Partnership unit $ 46.25 $ 46.25 $ 40.03 $ 70.01 $ 42.50
Partners' equity $ 8,179,211 $ 8,923,677 $ 8,542,789 $ 9,887,927 $10,738,686
Book value per Limited
Partnership unit $ 558.36 $ 608.91 $ 583.74 $ 674.63 $ 728.91
</TABLE>
Also, refer to Item #8 and the audited Financial Statements referred to herein.
7
<PAGE>
<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 one loan in the amount of $2,183 maturing in 1997. The
Partnership has no mortgages that mature in 1997.
Management hopes to sell the Pink Shell Resort 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 1997 distribution levels will be similar to 1996. All
of the construction at Pink Shell Resort has been completed and rental property
improvements are anticipated to be lower than those of 1996 ($307,406).
Other than as discussed above and in Item 2 regarding Walsingham Commons,
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, 1996, the Partnership had $101,108 in
cash and interest bearing deposits.
The Pink Shell (net of accumulated depreciation of $3,798,109) was carried
at $15,073,430. Property and equipment purchases of $307,406 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, 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.
8
<PAGE>
<PAGE>
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.
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.
9
<PAGE>
<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.
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.
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.
10
<PAGE>
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Balance Sheets of the Partnership as of December 31, 1996, and 1995 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, 1996, as well as the Notes to Financial Statements and Schedule
III and the Report of Independent Accountants there on, dated March 20, 1997,
are set forth herein:
11
<PAGE>
<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, 1996 and 1995, and the related
statements of operations, partners' capital, and cash flows for each of the
three years in the period ended December 31, 1996. 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, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND LLP
Fort Myers, Florida
March 20, 1997
12
<PAGE>
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
BALANCE SHEETS
December 31, 1996 and 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
------------ -------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 101,108 $ 164,966
Restricted cash 0 0
Accounts receivable, trade 346,767 351,231
Notes receivable 0 3,038
Inventory 68,422 58,311
Prepaid expenses and other 201,608 169,346
------------ ------------
Total current assets 717,905 746,892
------------ ------------
RENTAL PROPERTY IN PROCESS OF ABANDONMENT 3,082,157 0
------------ ------------
RENTAL PROPERTIES, net 15,073,430 18,762,415
------------ ------------
INTANGIBLE ASSETS
Deferred loan and organizational costs, net 46,326 81,288
------------ -------------
Total assets $ 18,919,818 $ 19,590,595
============ =============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Current maturities of mortgages payable-unaffiliated $ 383,573 $ 348,033
Accounts payable, trade 619,317 401,490
Accrued expenses 702,971 415,822
Customer and security deposits, rentals 453,988 534,312
------------ ------------
Total current liabilities 2,159,849 1,699,657
------------ ------------
MORTGAGE PAYABLE RELATED TO RENTAL PROPERTY
IN PROCESS OF ABANDONMENT 3,200,000 0
------------ ------------
MORTGAGES PAYABLE, less current maturities-unaffiliated 5,380,758 8,967,261
------------ ------------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL
General partners (38,189) (37,551)
Limited partners, 20,000 limited partnership units
authorized; 14,717 issued and outstanding 8,217,400 8,961,228
------------ ------------
Total partners' capital 8,179,211 8,923,677
------------ ------------
Total liabilities and partners' capital $ 18,919,818 $ 19,590,595
============ ============
RM80</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <S> <C> <C>
Revenues
Rental income $ 8,300,728 $ 7,618,033 $ 5,564,685
Food, beverage and retail income 1,367,661 1,373,246 1,072,691
Interest income 17,992 53,663 11,697
Tenant reimbursements 142,618 122,303 112,012
Other income 0 3,551 4,719
Gain on sale of condominium units 0 2,307,106 0
---------------- ------------- -----------
9,828,999 11,477,902 6,765,804
---------------- ------------- -----------
Expenses
Property operating expenses 7,035,660 6,313,848 4,364,876
Cost of food, beverage and retail sales 807,610 803,585 744,119
Depreciation 912,448 691,182 639,396
Interest expense 884,599 1,086,357 1,273,862
Interest expense-affiliated 0 19,044 18,236
Property taxes 252,487 265,835 289,164
Loss on disposal of fixed assets 0 0 192,134
Loss on impairment of rental property 0 1,236,502 0
---------------- ------------- ------------
9,892,804 10,416,353 7,521,787
---------------- ------------- -------------
Net income (loss) $ (63,805) $ 1,061,549 $ (755,983)
================ ============ =============
Net income (loss) allocated to general partner $ (638) $ 10,615 $ (7,560)
================ ============= =============
Net income (loss) allocated to limited partners $ (63,167) $ 1,050,934 $ (748,423)
================ ============= =============
Net income (loss) per limited partner unit $ (4.29) $ 71.40 $ (50.85)
================ ============= =============
Distributions per limited partner unit $ 46.25 $ 46.25 $ 40.03
================ ============= =============
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>
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------- ------------ -----------
<S> <C> <C> <C>
Balances, January 1, 1994 $ (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
Distributions 0 (680,661) (680,661)
Net income (638) (63,167) (63,805)
---------- ------------ ----------
Balances, December 31, 1996 $ (38,189) $ 8,217,400 $ 8,179,211
========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (63,805) $ 1,061,549 $ (755,983)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Gain on sale of condominium units 0 (2,307,106) 0
Loss on disposal of fixed assets 0 0 192,134
Loss on impairment of rental property 0 1,236,502 0
Depreciation 912,448 691,197 639,396
Amortization of loan costs 36,748 40,343 75,805
(Increase) decrease in:
Accounts receivable 4,464 (145,798) (31,907)
Notes receivable 3,038 757 11,440
Inventory (10,111) 9,062 (8,392)
Prepaid expenses and oher (32,262) (35,918) 69,424
Restricted cash 0 1,899,357 (1,899,357)
Increase (decrease) in:
Accounts payable-trade and accrued expenses 504,976 (709,235) 837,795
Customer and security deposits, rentals (80,324) 176,471 (52,364)
Customer deposits, condominium units 0 (1,899,357) 1,899,357
---------------- ---------------- ----------------
Net cash provided by operating activities 1,275,172 17,824 977,348
---------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of condominium units 0 7,719,236 0
Work in progress, condominium units 0 (849,117) (3,416,427)
Rental property improvements and purchases of
equipment (307,406) (134,476) (668,025)
---------------- ---------------- ----------------
Net cash provided by (used in) investing activities (307,406) 6,735,643 (4,084,452)
---------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Repayment) proceeds of cash advanced by general
partner 0 (25,000) 25,000
Repayment of cash advanced by general partner 0 0 (34,000)
Proceeds of borrowings from unaffiliated companies 0 6,822 3,707,200
Proceeds of borrowing from affiliates 0 0 700,000
Repayment of borrowings from unaffiliated companies (350,963) (5,594,807) (90,793)
Repayment of borrowings to affiliates 0 (700,000) (300,000)
Loan origination fees paid 0 (9,799) (58,467)
Partner distributions paid (680,661) (680,661) (589,155)
---------------- ---------------- ----------------
Net cash provided by (used in) financing activities (1,031,624) (7,003,445) 3,359,785
---------------- ---------------- ----------------
Net increase (decrease) in cash and cash equivalents (63,858) (249,978) 252,681
Cash and cash equivalents at beginning of year 164,966 414,944 162,263
---------------- ---------------- ----------------
Cash and cash equivalents at end of year $ 101,108 $ 164,966 $ 414,944
================ ================ ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 847,556 $ 1,102,243 $ 1,216,293
================ ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<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:
RENTAL INCOME: The Partnership leases space in its retail center.
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.
Revenues from operation of the resort are recognized when services
are provided to guests.
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>
<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, 1996, 1995 and 1994.
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>
<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, 1996, 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 1995 and 1994 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).
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>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. RENTAL PROPERTIES:
Rental properties consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land $ 4,942,432 $ 6,751,181
Buildings, improvements and equipments 13,929,107 16,906,238
Valuation allowance 0 (1,236,502)
---------------- ----------------
18,871,539 22,420,917
Accumulated depreciation (3,798,109) (3,658,502)
---------------- ----------------
$ 15,073,430 $ 18,762,415
================ ================
</TABLE>
Depreciation expense was $912,448, $691,197 and $639,396 for 1996, 1995
and 1994, respectively.
20
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. DEFERRED LOAN COSTS:
Deferred loan costs at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Deferred loan costs $ 142,262 $ 267,845
Accumulated amortization (95,936) (186,557)
---------------- ----------------
$ 46,326 $ 81,288
================ ================
</TABLE>
Additions to deferred loan costs relate to modifications of note terms
and other refinancing transactions during the years ended December 31,
1996 and 1995. Certain loan costs became fully amortized during the
years ended December 31, 1996 and 1995 and, therefore, were written
off. Amortization expense was $36,748, $38,556 and $32,273 for 1996,
1995, and 1994, respectively.
21
<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>
1996 1995
<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 $ 5,592,148 $ 5,929,597
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 (See Note 8) 0 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 170,000 180,000
Note payable to finance company, monthly payments of $315
including interest at 6%, final payment due October 1997 2,183 5,697
---------------- ----------------
Total other mortgages and notes payable 172,183 3,385,697
---------------- ----------------
Total notes and mortgages payable 5,764,331 9,315,294
Less current maturities (383,573) (348,033)
---------------- ----------------
Total long term debt less current maturities $ 5,380,758 $ 8,967,261
================ ================
</TABLE>
Long-term debt less current maturities is scheduled to mature approximately as
follows:
<TABLE>
<CAPTION>
<S> <C>
1998 572,316
1999 457,754
2000 4,350,688
----------------
$ 5,380,758
================
</TABLE>
The Mariner's Pink Shell Beach and Bay Resort property is pledged as
collateral for a mortgage.
22
<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>
1997 1,092,000
1998 1,113,000
1999 1,134,000
2000 902,917
2001 868,000
Thereafter 1,545,750
----------------
$ 6,655,667
================
</TABLE>
Lease expense for the years ending December 31, 1996 and 1995
was $1,071,000 and $907,719, 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 $562,098, $555,259
and $405,902 were incurred for the years ending December 31, 1996,
1995 and 1994, respectively.
23
<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
$3,238,001, $2,878,501 and $3,332,049 were incurred during the years
ending December 31, 1996, 1995 and 1994, 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>
1996 1995
------------ -------------
<S> <C> <C>
Accounts receivable $ 0 $ 15,819
------------ -------------
Accounts payable, trade $ 123,840 $ 5,352
------------ -------------
Accrued expenses $ 113,000 $ 96,085
------------ -------------
</TABLE>
8. SUBSEQUENT EVENT:
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 $3,200,000 is nonrecourse and will be satisified upon
the final judgment of foreclosure.
24
<PAGE>
<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
March 20, 1997
25
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER, 31, 1996
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 $ 5,764,331 $4,942,432 $3,933,139 $ 9,995,968 $ -0- $4,942,432 $13,929,107 $18,871,539
=========== ========== ========== =========== ===== ========== =========== ===========
</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 $ 3,798,109 1973 1988 31.5 years
===========
</TABLE>
SEE ACCOMPANYING NOTES TO SCHEDULE III
26
<PAGE>
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
NOTES TO SCHEDULE III
DECEMBER 31, 1996
REAL ESTATE AND ACCUMULATED DEPRECIATION
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
Additions During 1996:
Acquisitions through foreclosures 0
Other Acquisitions 0
Improvements, etc. 307,406
Impairment of Value 0 307,406
----------
Deletions During 1996:
Improvements, etc. (10,163)
Rental property in process of abandonment (3,846,621) (3,856,784)
---------- -----------
Balance as of 12/31/96 $18,871,539
===========
27
<PAGE>
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
NOTES TO SCHEDULE III
DECEMBER 31, 1996
REAL ESTATE AND ACCUMULATED DEPRECIATION
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
Depreciation expense for 1996 912,448
Less deletions and rental property
in process of abandonment (772,841) 139,607
-------- ----------
Balance as of 12/31/96 $3,798,109
==========
28
<PAGE>
<PAGE>
FLORIDA INCOME FUND III LIMITED PARTNERSHIP
NOTES TO SCHEDULE III
DECEMBER 31, 1996
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>
<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, 1996, were as follows: Robert
M. Taylor, Timothy R. Bogott, Lawrence A. Raimondi and Joe K. Blacketer.
Each of the officers named above, except Joe K. Blacketer, has served as an
officer of the Mariner Capital Management, Inc., since its incorporation on
July 11, 1983. Joe K. Blacketer replaced Michael J. Scullion as a Secretary/
Treasurer as of May 1, 1996.
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, 1996, 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
30
<PAGE>
<PAGE>
(E) BUSINESS EXPERIENCE
ROBERT M. TAYLOR: Age 55, 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 50, 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 49, 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.
JOE K. BLACKETER: Age 44, is the Secretary/Treasurer of the Managing
General Partner. 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.
31
<PAGE>
<PAGE>
JAMES C. REDINGER: Age 60. 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 61. 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 37. 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, 1996, to directors or officers of the
General Partners. During the period ended December 31, 1996, no
remuneration, direct or indirect, was paid to affiliates of the
General Partners, except:
32
<PAGE>
<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 1996, 1995 and 1994, $562,098, $555,259 and
$405,902 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 1996, 1995 and 1994,
$3,238,001, $2,878,501 and $3,332,049 were charged to the Partnership
for these services of which $126,840, $101,437 and $117,256 were
included in accounts payable and accrued expenses at December 31,
1996, 1995, and 1994 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>
<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>
<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, 1996 and 1995 13
Statements of Operation for the three years ended
1996, 1995 and 1994 14
Statements of Partners' Capital for the three years
ended 1996, 1995 and 1994 15
Statements of Cash Flows for the three years ended
1996, 1995 and 1994 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>
<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 28, 1997
By: /s/ LAWRENCE A. RAIMONDI
------------------------------------
LAWRENCE A. RAIMONDI
President, Director and CEO
Mariner Capital Management, Inc.
(Principal Executive Officer)
By: /s/ JOE K. BLACKETER
------------------------------------
JOE K. BLACKETER
Mariner Capital Management, Inc.
(Principal Financial and Accounting Officer)
36
EXHIBIT 99.2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
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>
<PAGE>
FLORIDA INCOME FUND III, L.P.
INDEX
PART I PAGE NO.
FINANCIAL INFORMATION
Balance Sheets at September 30, 1997
and December 31, 1996. . . . . . . . . . . . . . . . . .3
Statements of Income for the Three and Nine
Months Ended September 30, 1997 and 1996 . . . . . . . .4
Statements of Cash Flows for the Nine
Months Ended September 30, 1997 and 1996 . . . . . . . .5
Notes to Financial Statements. . . . . . . . . . . . . .6
Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . .6-8
PART II
OTHER INFORMATION
Items 1 through 6. . . . . . . . . . . . . . . . . . . .9
PART III
Signatures . . . . . . . . . . . . . . . . . . . . . . 10
COVER PAGE
EXHIBIT 27 - Financial Data Schedule
PAGE 2<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
BALANCE SHEETS (Unaudited)
Sept 30 Dec. 31
1997 1996
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash 358,772 101,108
Accts Recvable Trade, Net of Allowance
for Doubtful Accts of $22,219 for
9/30/97 and $19,457 for 12/31/96 285,684 346,767
Notes Receivable 0 0
Inventory 65,180 68,422
Prepaid Expenses and Other 48,925 201,608
_________ __________
Total Current Assets 758,561 717,905
Rental Properties
Abandonment 3,082,157 3,082,157
Rental Properties, (Net of accumulated
depreciation of $4,399,967 at
9/30/97 $4,562,574 at 12/31/96 14,609,743 15,073,430
Intangible Assets
Deferred Loan and
Organizational Costs Net 35,479 46,326
__________ __________
Total Assets 18,485,940 18,919,818
LIABILITIES & PARTNERS' CAPITAL
CURRENT LIABILITIES
Current Maturities of Notes Mtgs Payable 543,573 383,573
Accounts Payable, Trade 318,089 619,317
Accrued Expenses 449,153 702,971
Customer and Security Deposits 485,394 453,988
__________ __________
Total Current Liabilities 1,796,209 2,159,849
Mtgs Payable related to Rental Prpty Mgmt 3,200,000 3,200,000
Mtgs Payable, Less Current Maturities 4,931,335 5,380,758
PARTNERS' CAPITAL
General Partners Capital (38,189) (38,189)
Limited Partners Capital 7,739,285 8,217,400
Net Income 857,300 0
__________ ___________
Total Partners' Equity 8,558,396 8,179,211
Total Liabilities & Partners' Capitl 18,485,940 18,919,818
</TABLE>
See Accompanying Notes to the Financial Statements
PAGE 3<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
STATEMENTS OF INCOME
(Unaudited)
For Three Months Ended For Nine Months Ended
09/30/97 09/30/96 09/30/97 09/30/96
______________________ ____________________
<S> <C> <C> <C> <C>
REVENUES:
Rental Income 2,000,000 1,831,316 8,170,907 7,972,328
Interest Income 4,986 6,224 12,731 16,577
_________ __________ _________ _________
Total Revenues 2,004,986 1,837,540 8,183,638 7,988,905
COSTS AND EXPENSES:
Property Operating
Expenses 1,901,722 1,857,818 6,123,398 5,950,249
Real Estate Taxes 48,525 70,012 145,575 209,338
Interest Expense 146,501 232,745 444,662 706,259
Depreciation 200,619 215,796 601,857 634,263
Amortization 3,615 4,179 10,846 12,536
__________ _________ _________ _________
Total Expenses 2,300,982 2,380,550 7,326,338 7,512,645
Net Income (Loss) (295,996) (543,010) 857,300 476,260
</TABLE>
See Accompanying Notes to the Financial Statements
PAGE 4<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
For The Nine Months Ended
9/30/97 9/30/96
_________ __________
<S> <C> <C>
Cash flows from operating activities:
Net Income 857,300 476,260
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation & Amortization 612,703 646,799
(Increase) decrease in Accts recvble 61,084 167,696
Prepaid expenses and other 152,683 (26,484)
Inventory 3,242 (4,421)
Increase (decrease) in:
Accounts payable and Accrued expense (555,046) (28,359)
Customer & security deposits 31,406 (170,292)
_________ _________
Net Cash flows provided by operating
activities 1,163,372 1,061,199
Cash flows from investing activities:
Acquisition of and improvements to
rental properties (138,170) (286,303)
__________ __________
Net cash used in investing activities (138,170) (286,303)
Cash flows from financing activities:
Partner distributions paid (478,115) (608,277)
Repayment of long term borrowing (289,423) (262,367)
__________ _________
Net cash flows used by financing
activities (767,538) (870,644)
Net increase (decrease) in cash 257,664 (95,748)
Cash December 31 101,108 164,966
Cash September 30 358,772 69,218
</TABLE>
See Accompanying Notes to the Financial Statements
PAGE 5<PAGE>
<PAGE>
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance
with the instructions to Form 10-Q and therefore, do not include all
disclosures necessary for a fair presentation of the Partnership's
financial position, results of operations and statements of cash flows
in conformity with generally accepted accounting principles as set forth
in the Partnership's form 10-K for the period ended December 31, 1996.
In management's opinion, all adjustments have been made to the financial
statements necessary for a fair presentation of interim periods
presented.
NOTE 2 - RELATED PARTY TRANSACTIONS
The General Partner and their affiliates are entitled to reimbursement
of costs (including amounts of any salaries paid to employees or its
affiliates) directly attributable to the operation of the Partnership
that could have been provided by independent parties. Costs amounting
to $664,829 were incurred during the third quarter of 1997. This
compares to $783,090 of costs that were incurred during the third
quarter of 1996. An affiliate company, South Seas Resorts Company,
Inc., pays the payroll and related benefits and charges them back to the
Pink Shell. South Seas Resorts Company, Inc. also provides room
reservation services for the resort. During the quarter, the
Partnership incurred $120,015 in management fees in accordance with the
Partnership agreement. This compares to $102,336 in management fees
which were incurred during the third quarter of 1996.
NOTE 3 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity
The Partnership's cash position, including interest bearing deposits at
September 30, 1997, was $358,772. This compares to its cash position of
$101,108 at December 31, 1996. The Partnership's cash position at
September 30, 1996, was $69,218.
PAGE 6<PAGE>
<PAGE>
Liquidity - Continued
For the nine months ended September 30, 1997, the Partnership's cash
increased $257,664. The increase in cash was due to cash flow from
operations of $1,163,372; cash outlays for capital improvements of
$138,170; cash outlays for partner distributions of $478,115; and net
repayment of long term debt of $289,423.
The Partnership's total investment in properties for its portfolio at
September 30, 1997, was $22,856,331. This compares to its total
property investment of $22,718,161 at December 31, 1996.
On November 27, 1996, the Partnership defaulted under the terms of a
$3,200,000 mortgage loan on the Walsingham Commons Shopping Center. 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 $3,200,000 is
nonrecourse and will be satisfied upon the final judgment of
foreclosure. Details of this transaction were provided in an 8-K filed
on April 15, 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 has resulted in a high supply of vacant space versus very low
demand which has 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.
Other than as discussed herein, there are no known trends, demands,
commitments, events or uncertainties, that in management's opinion, will
result or are reasonably likely to result in the registrant's liquidity
increasing or decreasing in any material way.
Capital Resources
The Partnership has entered into long term leases with 42 condominium
unit owners. This enables the Partnership to include the 42 units in
its resort rental operation. The Partnership pays a minimum annual
rental of $25,000 in 12 equal monthly installments to each unit owner
for a total minimum annual rental of $1,050,000. In addition, the
Partnership pays the owner an amount by which 42.5% of the annual gross
rental income generated by the lessee from the unit exceeds the amount
of annual base rent paid. These leases expire at various times between
December 31, 2000, and December 31, 2005.
PAGE 7
<PAGE>
Capital Resources - Continued
The Partnership paid down $289,423 of principal on long term borrowings
during the nine month period. Partnership debt as of September 30,
1997, was $8,674,908 as compared to $8,964,331 as of December 31, 1996.
Also during the nine months, the Partnership paid $138,170 for
improvements at the Pink Shell in order to refurbish the units and to
meet Best Western requirements.
Results of Operations
The Partnership had net income of $857,300 for the nine months ended
September 30, 1997. This compares with net income of $476,260 for the
nine month period ended September 30, 1996. The increase in net income
is due to revenues increasing by $194,733, property operating expenses
increasing by $173,149, real estate taxes decreasing by $63,763,
interest expense decreasing by $261,597 and depreciation and
amortization decreasing by $34,096.
Pink Shell's revenues increased $579,912 due to increased room rates and
higher occupancy. Room revenue increased $500,249, store revenue
increased $55,404, and other revenues increased $24,259. Interest
income decreased $3,846 due to a smaller amount of funds being invested
in short term Government Securities.
Property operating expenses have increased for the nine months by
$173,149. The Primary increases are in the operations of the Pink
Shell. Guaranteed payments to owners have increased $37,758 compared to
the first nine months of 1996. This is due to the lease back agreements
signed with the 42 unit condominium owners. Marketing expenses have
increased $33,922 and insurance has decreased $116,394. Other operating
expense increases are in relation to the increased occupancy and room
revenue. The resort has moved to daily housekeeping in order to meet
guest expectations and Best Western affiliation requirements.
Real Estate Taxes have decreased $63,763 which reflects the abandonment
of Walsingham Commons.
Interest expense decreased by $261,597 due to the Partnership having a
lower amount of debt, and due to the abandonment of Walsingham Commons.
Depreciation and amortization have decreased $34,096.
PAGE 8<PAGE>
<PAGE>
PART II
OTHER INFORMATION
FLORIDA INCOME FUND III, LIMITED PARTNERSHIP
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER MATERIALLY IMPORTANT EVENTS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None
(b) REPORTS ON FORM 8-K
None
PAGE 9<PAGE>
<PAGE>
PART III
SIGNATURES
Pursuant to the requirements 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
MARINER CAPITAL MANAGEMENT, INC.
MANAGING GENERAL PARTNER
(Registrant)
11/7/97 By: /s/ LAWRENCE A. RAIMONDI
--------------------------------
Lawrence A. Raimondi
President, Director and CEO
Mariner Capital Management, Inc.
(Principal Executive Officer)
11/7/97 By: /s/ JOE K. BLACKETER
--------------------------------
Joe K. Blacketer
Secretary/Treasurer
Mariner Capital Management, Inc.
(Principal Financial and Accounting
Officer)
PAGE 10
