<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 1997.
-------------------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________TO________.
Commission File number: 0-18454 (formerly 33-26759)
---------------------------
SOUTHEAST ACQUISITIONS III, L.P.
--------------------------------
(Exact name of registrant)
Delaware 23-2532708
- -------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 King of Prussia Road, Radnor, PA 19087
- -------------------------------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (610 964-7234)
--------------
Indicate by check mark whether the registrant (a) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
--- ---
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
The unaudited financial statements of Southeast Acquisitions III, L.P.
(the "Partnership") at September 30, 1997 are attached hereto as Exhibit A.
In the opinion of management, the accompanying unaudited condensed
financial statements include all adjustments, which are of a normal recurring
nature, necessary to present fairly the Partnership's financial position as of
September 30, 1997, and the results of its operations and cash flows for the
nine months ended September 30, 1997.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Background
The Partnership was formed to acquire, own and realize appreciation in
the following properties by holding them for investment and eventual sale (each
a "Property," collectively the "Properties"): 211 acres of undeveloped land in
Fulton County Georgia; 265 acres of undeveloped land in Henry County, Georgia;
24 acres of undeveloped land near Nashville, Tennessee; 48 acres of undeveloped
land near Fort Myers, Florida; and 51 acres of undeveloped land near Columbia,
South Carolina. There can be no assurance that the Partnership's objectives will
be realized.
Results of Operations
The Partnership had no operations from the date of its formation on
November 4, 1988 until June 1, 1989 when it acquired the first property and sold
6,215 Units of limited partnership interest. During 1989, the Partnership
acquired four additional Properties and sold 6,185 additional units of limited
partnership interest.
The Partnership's activities for the third quarter of 1997 were
primarily focused on attempting to sell certain of the properties. Revenues for
the third quarter of 1997 consisted of interest income of $7,225 and partnership
transfer fees of $500. Expenses for the third quarter of 1997 consisted of
general and administrative costs of $41,925, management fees of $3,751, real
estate taxes of $7,895 and insurance costs of $126. General and administrative
costs include a $40,000 accrual for legal and printing costs related to the
proxy statement discussed in Part II, Item 4 and 5.
The Partnership's activities for the third quarter of 1996 were
primarily focused on attempting to sell the properties. Revenues for the third
quarter of 1996 consisted of interest
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income of $3,196 and partnership transfer fees of $425. Expenses for the third
quarter of 1996 consisted of general and administrative costs of $9,725,
management fees of $6,222, real estate taxes of $8,892 and insurance costs of
$127.
The Partnership activities for the third quarter of 1995 were primarily
focused on attempting to sell the Properties. During the third quarter of 1995,
the Partnership sold all 24 acres of the Nashville, Tennessee property for a net
profit of $410,858. Revenues for the third quarter of 1995 consisted of interest
income of $9,938 and partnership transfer fees of $300. Expenses for the third
quarter of 1995 consisted of general and administrative costs of $2,952,
management fees of $6,222, real estate taxes of $4,301 and insurance costs of
$150.
The Partnership's activities for the second quarter of 1997 were
primarily focused on attempting to sell certain of the Properties. During the
second quarter of 1997, the Partnership sold 7.16 acres of the Columbia, South
Carolina property for a gain of $91,709. Revenues for the second quarter of 1997
consisted of interest income of $5,421 and partnership transfer fees of $175.
Expenses for the second quarter of 1997 consisted of general and administrative
costs of $2,602, management fees of $6,221, real estate taxes of $8,822 and
insurance costs of $127.
The Partnership's activities for the second quarter of 1996 were
primarily focused on attempting to sell certain of the Properties. Revenues for
the second quarter of 1996 consisted of interest income of $3,337, timber sales
of $14,199 and partnership transfer fees of $150. Expenses for the second
quarter of 1996 consisted of general and administrative costs of $2,948,
management fees of $6,221, real estate taxes of $8,910 and insurance costs of
$127.
The Partnership's activities for the second quarter of 1995 were
primarily focused on attempting to sell certain of the Properties. Revenues for
the second quarter of 1995 consisted of interest income of $6,970 and
partnership transfer fees of $200. Expenses for the second quarter of 1995
consisted of general and administrative costs of $3,173, management fees of
$6,221, real estate taxes of $11,873 and insurance of $151.
The Partnership's activities for the first quarter of 1997 were
primarily focused on attempting to sell certain of the Properties. Revenues for
the first quarter of 1997 consisted of interest income of $3,613 and partnership
transfer fees of $150. Expenses for the first quarter of 1997 consisted of
general and administrative costs of $1,940, management fees of $6,222, real
estate taxes of $8,913 and insurance costs of $127.
The Partnership's activities for the first quarter of 1996 were
primarily focused on attempting to sell certain of the Properties. During the
first quarter of 1996, the Partnership sold 5 acres of the Henry County, Georgia
property for a gain of $33,572. Revenues for the first quarter of 1996 consisted
of interest income of $2,973 and partnership transfer fees of $175. Expenses for
the first quarter of 1996 consisted of general and administrative costs of
$2,153, management fees of $6,222, real estate taxes of $9,931 and insurance
costs of $127.
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The Partnership's activities for the first quarter of 1995 were
primarily focused on attempting to sell certain of the Properties. Revenues for
the first quarter of 1995 consisted of interest income of $6,500 and partnership
transfer fees of $200. Expenses for the first quarter of 1995 consisted of
general and administrative costs of $5,667, management fees of $6,222, real
estate taxes of $11,873 and insurance of $150.
Inflation did not have any material impact on operations during 1997
and it is not expected to materially impact future operations.
The new General Partner has the right to sell the Properties without
the consent of the Limited Partners unless the sale involves more than 60 % of
the acreage held as of September 22, 1997 in a single transaction and the
consideration is less than the Acquisition Cost of the assets sold. (See Part
II, Items 4 and 5).
The new General Partner has no plans to develop the Properties, except
for activities including rezoning, land planning, market surveys and other
activities necessary to prepare the Properties for sale. There can be no
assurance that necessary funds would be available should it be desirable for the
Partnership to improve the Properties to facilitate their sale.
Liquidity and Capital Resources
At September 30, 1997, the Partnership had available cash in the amount
of $566,471. A cash reserve in the amount of $175,000 has been set aside and
used to cover the following estimated annual costs: $16,194 annual
administration fee to the General Partner (1997) only, $10,000 per year for
auditing, accounting, tax, legal and other administrative services, $525 per
year for insurance and $36,000 per year for real estate taxes. At September 30,
1997, the Partnership accrued an additional $40,000 (1997 only) expense for
legal and printing fees related to the proxy discussed in Part II, Item 4 and 5.
The new General Partner is currently reserving $200,000 to bring sewer to the
Fulton County, Georgia site if additional funding from third parties can be
found. The additional funds currently on hand will most likely be distributed
after additional sales occur. In the General Partner's opinion, the
Partnership's reserves will be sufficient for an additional three years.
However, if unforeseen expenses are incurred or if the Partnership goes forward
with the construction to bring sewer to the Fulton County Property at a cost
greater than the funds already set aside therefor, the reserves may be
inadequate to cover the Partnership's operating expenses. If the reserves are
exhausted, the Partnership may have to dispose of some or all of the Properties
or incur indebtedness on unfavorable terms.
During 1996, appraisals were performed on the Partnership's properties
causing the Partnership to write-down the Columbia, South Carolina property by
$50,560, the Fulton County, Georgia property by $3,622,126 and the Fort Myers,
Florida property by $676,200.
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The General Partner has reviewed the assumptions and conclusions of the
appraisals, had discussions with real estate professionals and developers, and
believes that the appraisals are a reasonable approximation of the current value
of the properties.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
The Partnership is not a direct party to, nor is the Partnership's
property directly the subject of, any material legal proceeding. However, on
November 6, 1992, the Commonwealth Court of Pennsylvania issued an order placing
The Fidelity Mutual Life Insurance Company ("Fidelity Mutual"), the indirect
parent of Southeast Acquisitions, Inc., the old General Partner of the
Partnership, into rehabilitation under the control and authority of the
Pennsylvania Insurance Commissioner pursuant to the provisions of the
Pennsylvania Insurance Department Act, 40 P.S. Section 221.1 et seq. The
Partnership is not a direct party to the order, but ownership of the stock of
(and consequently control of) the General Partner is vested in the Insurance
Commissioner pursuant to the Order. Effective November 5, 1997, the old General
Partner was replaced by the new General Partner (see Part II, Items 4 and 5).
The new General Partner is not a party to or otherwise involved in the old
General Partner's rehabilitation proceedings.
Item 2 - Changes in Securities
There was no change in the partnership's securities during the third
quarter of 1997.
Item 3 - Defaults Upon Senior Securities
There was no default in the payment of principal, interest, a sinking
or purchase fund installment or any other default with respect to any
indebtedness of the Partnership. The Partnership has issued no preferred stock;
accordingly, there has been no arrearages or delinquencies with respect to any
such preferred stock.
Item 4 - Submission of Matters to a Vote of Security Holders
Matters were submitted to the Partners for a vote during the third
quarter of 1997.
On September 22, 1997, the old General Partner mailed to the
Limited Partners of the Partnership the following:
1) a letter soliciting their votes on two sets of alternative
amendments;
2) a notice of Special Meeting of the Limited Partners on
November 5, 1997;
3) a Proxy Statement detailing the two sets of alternative
amendments to be voted on at the Special Meeting; and
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4) a Proxy Card
The first alternative amendments proposed the following
modifications to the Partnership Agreement:
1) extend the Partnership until December 31, 2001
2) substitute a new general partner
3) authorize new fees, commissions and rights to sell
Partnership properties for the new general partner
4) give the new general partner the exclusive right to sell
Partnership properties
5) modify the Limited Partners' rights to consent to certain
sales of Partnership properties
The second alternative amendments proposed the following
modifications to the Partnership Agreement:
1) extend the Partnership until December 31, 2001
2) retain the General Partner
3) authorize new fees, commissions and rights to sell
Partnership properties for the General Partner
4) give the General Partner the exclusive right to sell
partnership properties
4) eliminate the Limited Partners' rights to consent to
certain sales of Partnership properties
Item 5 - Other Information
At the Special Meeting on November 5, 1997, the first set of
alternative amendments received the requisite vote to be adopted and as
a result of their adoption the following modifications to the
Partnership Agreement were effective as of November 5, 1997:
- The termination date for the Partnership was extended until
December 31, 2001;
- Southern Management Group, LLC, a Tennessee Limited
Liability Company was substituted for Southeast
Acquisitions, Inc. as the General Partner. Southern
Management Group, LLC is located in Nashville, Tennessee
at the following address:
Southern Management Group, LLC
c/o Southeast Venture Corporation, Inc.
301 South Perimeter Park Drive
Suite 115
Nashville, TN 37211
- SMG can act as broker for the Partnership and earn
commissions on sales of the Properties up to a maximum of
10% which is the maximum commission which can be paid in
total on any sale;
- SMG is to be paid management fees of $26,500 per year;
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- SMG has now been given the exclusive right to sell the
properties; and SMG can only sell 60% or more of the
acreage held by the Partnership as of September 22, 1997
in a single transaction if it receives consideration equal
to or greater than the Acquisition Cost of the assets sold.
Otherwise it must obtain the consent of the majority in
interest of the Limited Partners.
Item 6 - Exhibits and Reports on Form 8-K
Reports on Form 8-K
None
Exhibits (numbered in accordance with Item 601 of Regulation S-K)
<TABLE>
<CAPTION>
Exhibit Numbers Description Page Number
- --------------- ----------- -----------
<S> <C> <C>
3.1(a) Certificate of Limited *
Partnership
3.1(b) & (4) Restated Limited Partnership **
Agreement
9 not applicable
11 not applicable
12 not applicable
13 not applicable
16 not applicable
18 not applicable
19 not applicable
22 not applicable
23 not applicable
24 not applicable
</TABLE>
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25 not applicable
27 Financial Data Schedule
28 not applicable
29 not applicable
- -------------------------------------------------------
* Incorporated by reference to Exhibit 3.1 filed as part of the Exhibits
to the Partnership's Registration Statement on Form S-18, Registration No.
33-26759.
** Incorporated by reference to Exhibit 3.2 filed as part of the
Partnership's Registration Statement on Form S-18, Registration No. 33-26759.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ RICHARD W. SORENSON Member of
- ----------------------- Southern 11/11 1997
Richard W. Sorenson Management -------
Group, LLC
</TABLE>
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EXHIBIT A
SOUTHEAST ACQUISITIONS III, L.P.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30,
1997 December 31,
(Unaudited) 1996
------------ ------------
<S> <C> <C>
Land held for sale, net $ 1,255,500 $ 1,255,500
Land held for investment 3,154,324 3,261,558
Cash and cash equivalents 566,471 359,293
------------ ------------
$ 4,976,295 $ 4,876,351
============ ============
</TABLE>
LIABILITIES AND PARTNERS' EQUITY
<TABLE>
<S> <C> <C>
Accrued expenses $ 75,149 $ 9,105
Accounts payable 20,000 -
Due to affiliates 3,584 9,806
Partners' Equity 4,877,562 4,857,440
------------ ------------
$ 4,976,295 $ 4,876,351
============ ============
</TABLE>
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SOUTHEAST ACQUISITIONS III, L.P.
STATEMENTS OF OPERATIONS AND PARTNERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Interest income $ 7,225 $ 3,196 $ 16,259 $ 9,396
Gain on sale of land - - 91,709 33,572
Timber revenue - - - 14,199
Other income 500 425 825 750
------------- ------------- ------------- -------------
7,725 3,621 108,793 57,917
------------- ------------- ------------- -------------
EXPENSES:
General and administrative 41,925 9,725 46,467 14,826
Management fee 3,751 6,222 16,194 18,665
Real estate taxes 7,895 8,892 25,630 26,833
Insurance 126 127 380 381
------------- ------------- ------------- -------------
53,697 24,966 88,671 60,705
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ (45,972) $ (21,345) $ 20,122 (2,788)
Partners' equity,
Beginning of period 4,923,534 9,182,095 4,857,440 9,163,538
------------- ------------- ------------- -------------
Partners' equity,
End of period $ 4,877,562 $ 9,160,750 $ 4,877,562 $ 9,160,750
============= ============= ============= =============
Weighted Average Number
of Limited Partnership
Units Outstanding 12,400 12,400 12,400 12,400
============= ============= ============= =============
Income (Loss) from Operations
per Limited Partnership
Interest $ (3.67) $ (1.70) $ 1.60 $ (.22)
============= ============= ============= =============
</TABLE>
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SOUTHEAST ACQUISITIONS III, L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30
----------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Interest income $ 16,259 $ 9,396 $ 23,408
Gain on sale of land 91,709 33,572 410,858
Timber revenue - 14,199 -
Other income 825 750 700
------------ ------------ ------------
108,793 57,917 434,966
------------ ------------ ------------
EXPENSES:
General and administrative 46,467 14,826 8,292
Management fee 16,194 18,665 18,665
Real estate taxes 25,630 26,833 28,047
Insurance 380 381 451
------------ ------------ ------------
88,671 60,705 55,455
------------ ------------ ------------
NET INCOME (LOSS) $ 20,122 $ (2,788) $ 379,511
============ ============ ============
</TABLE>
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SOUTHEAST ACQUISITIONS III, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30
--------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Proceeds from sale of land $ 198,943 $ 60,683 $ 1,338,166
Interest income received 16,259 9,396 23,408
Other income received 825 750 700
Timber revenue received - 14,199 -
Deposit on land sale 20,000 - -
Cash paid for operating expenses (28,849) (36,901) (45,647)
------------ ------------ ------------
Net cash flows (used) in
operating activities 207,178 48,127 1,316,627
Distribution to Limited Partners - - (1,550,003)
------------ ------------ ------------
Increase (Decrease) in cash 207,178 48,127 (233,376)
Cash, beginning of period 359,293 258,680 556,074
------------ ------------ ------------
Cash, end of period $ 566,471 $ 306,807 $ 322,698
============ ============ ============
</TABLE>
RECONCILIATION OF NET INCOME(LOSS) TO NET CASH FLOWS FROM OPERATING ACTIVITIES:
<TABLE>
<S> <C> <C> <C>
Net income (loss) $ 20,122 $ (2,788) $ 379,511
Adjustments to reconcile net income(loss)
to net cash provided by
operating activities:
Decrease in due from General Partner - - 3,584
Increase in accounts payable 20,000 - -
Increase in accrued expenses 66,044 30,889 21,568
Decrease in due to affiliates (6,222) (6,222) (6,222)
Decrease in assets 107,234 26,248 918,186
Distribution to Limited Partners - - (1,550,003)
------------ ------------ ------------
Net cash provided by (used in)
operating activities $ 207,178 $ 48,127 $ (233,376)
============ ============ ============
</TABLE>
4
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000846014
<NAME> SOUTHEAST ACQUISITIONS III, L.P.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 566,471
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 566,471
<PP&E> 4,409,824
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,976,295
<CURRENT-LIABILITIES> 98,733
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,877,562
<TOTAL-LIABILITY-AND-EQUITY> 4,976,295
<SALES> 7,725
<TOTAL-REVENUES> 7,725
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 53,697
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (45,972)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45,972)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
