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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
-------------------------------------------------
[ ] 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
0-20151
PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
and
FFCA/PIP III INVESTOR SERVICES CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Co-Registrants as Specified in Their
Organizational Documents)
Delaware 86-0665681
- --------------------------------------------------------------------------------
(Partnership State of Organization) (Partnership I.R.S. Employer
Identification Number)
Delaware 86-0555605
- --------------------------------------------------------------------------------
(Corporation State of Incorporation) (Corporation I.R.S. Employer
Identification Number)
The Perimeter Center
17207 North Perimeter Drive
Scottsdale, Arizona 85255
- --------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
Co-Registrants' telephone number including area code (602) 585-4500
---------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item l. Financial Statements.
------ --------------------
PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
------
CASH AND CASH EQUIVALENTS $ 638,677 $ 635,446
RECEIVABLES FROM LESSEES 40,000 44,000
MORTGAGE LOAN INTEREST RECEIVABLE 45,208 45,208
MORTGAGE LOAN RECEIVABLE 7,750,000 7,750,000
PROPERTY SUBJECT TO OPERATING LEASES, at cost
Land 2,684,138 2,684,138
Buildings 11,010,862 11,010,862
Equipment 947,838 947,838
------------ ------------
14,642,838 14,642,838
Less - Accumulated depreciation 2,608,510 2,496,576
------------ ------------
12,034,328 12,146,262
------------ ------------
Total assets $ 20,508,213 $ 20,620,916
============ ============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
DISTRIBUTION PAYABLE TO LIMITED PARTNERS $ 579,687 $ 579,590
RENTAL DEPOSITS AND OTHER 252,404 253,269
------------ ------------
Total liabilities 832,091 832,859
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General partner (22,807) (21,687)
Limited partners 19,698,929 19,809,744
------------ ------------
Total partners' capital 19,676,122 19,788,057
------------ ------------
Total liabilities and partners' capital $ 20,508,213 $ 20,620,916
============ ============
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
1998 1997
-------- --------
REVENUES:
Rental $394,870 $394,870
Participating rentals 120,979 111,733
Mortgage loan interest 135,625 135,625
Interest and other 6,461 5,341
-------- --------
657,935 647,569
-------- --------
EXPENSES:
General partner fees 45,426 35,799
Depreciation 111,934 111,934
Operating 27,241 26,490
-------- --------
184,601 174,223
-------- --------
NET INCOME $473,334 $473,346
======== ========
NET INCOME ALLOCATED TO:
General partner $ 4,733 $ 4,733
Limited partners 468,601 468,613
-------- --------
$473,334 $473,346
======== ========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(based on 26,709 units held by limited partners) $ 17.54 $ 17.55
======== ========
<PAGE>
PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners
General ---------------------------
Partner Number Total
Amount of Units Amount Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1997 $ (21,687) 26,709 $ 19,809,744 $ 19,788,057
Net income 4,733 -- 468,601 473,334
Distribution to partners (5,853) -- (579,416) (585,269)
------------ ------------ ------------ ------------
BALANCE, March 31, 1998 $ (22,807) 26,709 $ 19,698,929 $ 19,676,122
============ ============ ============ ============
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 473,334 $ 473,346
Adjustments to net income:
Depreciation 111,934 111,934
Change in assets and liabilities:
Decrease (increase) in receivables from lessees 4,000 (94)
Decrease in payable to general partner -- (708)
Decrease in rental deposits and other (865) (5,848)
--------- ---------
Net cash provided by operating activities 588,403 578,630
--------- ---------
CASH FLOWS FOR FINANCING ACTIVITIES:
Partner distributions declared (585,269) (585,280)
Increase in distribution payable to limited partners 97 109
--------- ---------
Net cash used in financing activities (585,172) (585,171)
--------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 3,231 (6,541)
CASH AND CASH EQUIVALENTS, beginning of period 635,446 651,261
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 638,677 $ 644,720
========= =========
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 2. Management's Discussion and Analysis of
- ------ Financial Condition and Results of Operations
---------------------------------------------
As of March 31, 1998, Participating Income Properties III Limited
Partnership, a Delaware limited partnership, (the Registrant), had
received $26,709,000 in gross proceeds from its offering of Units. Net
funds available for investment, after payment of sales commissions,
organization costs and acquisition fees, amounted to $23,012,902. The
offering of Units is the Registrant's sole source of capital, and since
the final closing of limited partnership units was held on February 28,
1992, the Registrant will not receive additional funds from the offering.
The Registrant was fully invested in travel plaza properties and mortgages
by June 30, 1993 and does not anticipate any further capital expenditures.
On February 2, 1998, the Registrant entered into a letter of intent with
Flying J. Inc. to sell substantially all of the Registrant's assets for
cash of approximately $27 million. The sale is subject to certain
conditions specified in the letter of intent, including the negotiation
and execution of definitive sale and financing agreements with respect to
the assets of the Registrant and the approval, by vote, of a majority of
the limited partner interests. In accordance with the partnership
agreement, sale of substantially all of the assets will result in
dissolution of the partnership and liquidation of remaining Registrant
assets, net of liabilities. There can be no assurance as to the final
terms of the proposed transaction, that the conditions will be satisfied
or that the proposed transaction will be consummated. The limited partners
will receive a proxy statement containing a complete description of the
transaction when the sale and financing agreements are finalized.
The Registrant declared a cash distribution to the limited partners of
$579,416 for the quarter ended March 31, 1998 (the period). During the
period, all net proceeds not invested in travel plaza property and the
mortgage loan were invested in Government Agency discount notes and bank
repurchase agreements (which are secured by United States Treasury and
Government obligations).
During the period, the Registrant received base rental revenue and
mortgage loan interest income pursuant to its travel plaza lease and loan
arrangements in the amount of $530,495, which remains unchanged from the
prior period. In addition, the Registrant received or accrued
participating rentals of $120,979 for the quarter ended March 31, 1998,
representing an increase over participating rentals of $111,733 for the
comparable period in 1997. On June 1, 1996, CFJ Properties (lessee of two
of the Registrant's travel plazas) curtailed its relationship with a large
third party billing company for the trucking industry. The billing company
requested changes to its contract that were unacceptable to CFJ
Properties' management due to the significant long-term ramifications of
the proposed change on CFJ Properties' future business. This resulted in
reduced volume and margins, which contributed to low participating rental
revenues in the quarter ended March 31, 1997 as compared to the quarter
ended March 31, 1998.
Total expenses for the quarter ended March 31, 1998 increased $10,378 over
the comparable period of the prior year primarily due to an increase in
general partner fees. As described more fully in the Registrant's
partnership agreement, the general partner's management fee is
subordinated to a 9% return to the limited partners on their Adjusted
Capital Contribution, as defined. The increase in the general partner's
management fee resulted directly from the increase in the Registrant's
disbursable cash (generally, cash receipts from operations less cash
operating expenses). Net income for the three months ended March 31, 1998
remained relatively unchanged from the comparable period in 1997.
The decrease in total assets reflected in the Registrant's financial
statements filed with this report is mainly attributable to the
depreciation allowance, which is deducted for accounting purposes from the
cost of the assets on the Registrant's books.
In the opinion of management, the financial information included in this
report reflects all adjustments necessary for fair presentation. All such
adjustments are of a normal recurring nature.
<PAGE>
FFCA/PIP III INVESTOR SERVICES CORPORATION
------------------------------------------
BALANCE SHEET - MARCH 31, 1998
------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash $100
Investment in Participating Income Properties III Limited Partnership, at cost 100
----
Total Assets $200
====
LIABILITY
Payable to Parent $100
----
STOCKHOLDER'S EQUITY
Common Stock; $l par value; 100 shares authorized,
issued and outstanding 100
----
Liability and Stockholder's Equity $200
====
</TABLE>
Note: FFCA/PIP III Investor Services Corporation (the Corporation) was
incorporated on December 5, 1988, and amended on July 9, 1990 to act as the
assignor limited partner in Participating Income Properties III Limited
Partnership (PIP III).
The assignor limited partner is the owner of record of the limited
partnership units of PIP III. All rights and powers of the Corporation have been
assigned to the holders, who are the registered and beneficial owners of the
units. Other than to serve as assignor limited partner, the Corporation has no
other business purpose and will not engage in any other activity or incur any
debt.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
PARTICIPATING INCOME PROPERTIES III LIMITED
PARTNERSHIP
By FFCA PARTICIPATING MANAGEMENT COMPANY
LIMITED PARTNERSHIP
Managing General Partner
By FRANCHISE FINANCE CORPORATION OF AMERICA III
Corporate General Partner
Date: May 11, 1998 By /s/ John Barravecchia
----------------------------------------------
John Barravecchia, Chief Financial Officer
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
co-registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FFCA/PIP III INVESTOR SERVICES CORPORATION
Date: May 11, 1998 By /s/ John Barravecchia
---------------------------------------------
John Barravecchia, President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 1998 AND THE STATEMENT OF INCOME FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 865828
<NAME> PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 638,677
<SECURITIES> 0
<RECEIVABLES> 40,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 14,642,838
<DEPRECIATION> 2,608,510
<TOTAL-ASSETS> 20,508,213
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 19,676,122
<TOTAL-LIABILITY-AND-EQUITY> 20,508,213
<SALES> 0
<TOTAL-REVENUES> 657,935
<CGS> 0
<TOTAL-COSTS> 184,601
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 473,334
<INCOME-TAX> 0
<INCOME-CONTINUING> 473,334
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 473,334
<EPS-PRIMARY> 17.54
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AS OF MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
BALANCE SHEET.
</LEGEND>
<CIK> 865829
<NAME> FFCA/PIP III INVESTOR SERVICES CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 100
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 200
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 200
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
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