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, 1999
------------------------------------------------
[ ] 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
Commission file number 33-35868-01
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 (480) 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 1. FINANCIAL STATEMENTS.
------- ---------------------
PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
BALANCE SHEETS (Note 1)
MARCH 31, 1999 AND DECEMBER 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS $ 27,524,358 $ 2,243,462
RECEIVABLES FROM LESSEES 29,803 45,242
DEFERRED COSTS -- 169,547
MORTGAGE LOAN INTEREST RECEIVABLE -- 45,208
MORTGAGE LOAN RECEIVABLE -- 6,012,518
PROPERTY SUBJECT TO OPERATING LEASES, at cost
Land -- 2,684,138
Buildings -- 11,010,862
Equipment -- 947,838
------------ ------------
-- 14,642,838
Less - Accumulated depreciation -- 2,944,311
------------ ------------
-- 11,698,527
------------ ------------
Total assets $ 27,554,161 $ 20,214,504
============ ============
LIABILITIES AND PARTNERS' CAPITAL
DISTRIBUTION PAYABLE TO LIMITED PARTNERS $ 579,586 $ 579,451
PAYABLE TO GENERAL PARTNER 3,579 46,750
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 84,413 15,839
RENTAL DEPOSITS AND OTHER -- 232,142
------------ ------------
Total liabilities 667,578 874,182
------------ ------------
PARTNERS' CAPITAL (DEFICIT) (Note 1):
General partner -- (26,165)
Limited partners 26,886,583 19,366,487
------------ ------------
Total partners' capital 26,886,583 19,340,322
------------ ------------
Total liabilities and partners' capital $ 27,554,161 $ 20,214,504
============ ============
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
STATEMENTS OF INCOME (Note 1)
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(The Final Period of Operations) AND MARCH 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- --------
<S> <C> <C>
REVENUES:
Rental $ 352,411 $394,870
Participating rentals 120,632 120,979
Mortgage loan interest 94,359 135,625
Interest and other 52,297 6,461
Gain on sale of property (Note 1) 7,786,586 -
----------- --------
8,406,285 657,935
----------- --------
OPERATING EXPENSES:
General partner fees (Note 2) - 45,426
Depreciation 74,623 111,934
Operating 37,971 27,241
----------- --------
112,594 184,601
----------- --------
OPERATING INCOME 8,293,691 473,334
LIQUIDATION COSTS (Note 1) 162,123 -
----------- --------
NET INCOME $8,131,568 $473,334
========== ========
NET INCOME ALLOCATED TO (Note 1):
General partner $ 32,019 $ 4,733
Limited partners 8,099,549 468,601
----------- --------
$8,131,568 $473,334
========== ========
NET INCOME PER LIMITED PARTNERSHIP UNIT
(based on 26,709 units held by limited partners) (Note 1) $303.25 $17.54
======= ======
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (Note 1)
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(The Final Period of Operations)
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners
General -------------------------
Partner Number Total
Amount of Units Amount Amount
------------ ------ ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1998 $(26,165) 26,709 $19,366,487 $19,340,322
Net income 32,019 - 8,099,549 8,131,568
Distribution to partners,
cash from operations (5,854) - (579,453) (585,307)
------------ ------ ----------- -----------
BALANCE, March 31, 1999 $ - 26,709 $26,886,583 $26,886,583
============ ====== =========== ===========
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (Note 1)
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(The Final Period of Operations) AND MARCH 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,131,568 $ 473,334
Adjustments to net income:
Depreciation 74,623 111,934
Gain on sale of property (7,786,586) --
Change in assets and liabilities:
Decrease in receivables from lessees 15,439 4,000
Decrease in deferred cost 169,547 --
Decrease in mortgage loan interest receivable 45,208 --
Decrease in payable to general partner (43,171) --
Increase in accounts payable and accrued liabilities 68,574 --
Decrease in rental deposits and other (232,142) (865)
------------ ------------
Net cash provided by operating activities 443,060 588,403
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipt of mortgage loan payoff 6,012,518 --
Proceeds from sale of property 19,410,490 --
------------ ------------
Net cash provided by investing activities 25,423,008 --
------------ ------------
CASH FLOWS FOR FINANCING ACTIVITIES:
Partner distributions declared (585,307) (585,269)
Increase in distribution payable to limited partners 135 97
------------ ------------
Net cash used in financing activities (585,172) (585,172)
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 25,280,896 3,231
CASH AND CASH EQUIVALENTS, beginning of period 2,243,462 635,446
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 27,524,358 $ 638,677
============ ============
</TABLE>
<PAGE>
PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
-------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
MARCH 31, 1999
--------------
1) PARTNERSHIP LIQUIDATION:
On March 22, 1999, Participating Income Properties III Limited Partnership (the
Partnership) sold substantially all of the Partnership's assets (those assets
comprising the travel plazas) and recognized a gain of approximately $7.8
million on the sale. The sale of the travel plazas represents the disposition of
substantially all of the Partnership's assets and the Partnership has no further
liability in connection with any of the travel plazas. In accordance with the
partnership agreement, sale proceeds have been allocated to the General Partner
in an amount equal to its deficit capital account balance, with the remaining
sale proceeds allocated to the limited partners.
In April 1999, the General Partner began the Partnership liquidation process,
which includes the distribution of assets to the limited partners in accordance
with the partnership agreement. The liquidation of the Partnership is expected
to be completed in June 1999 and an estimate of the cost of the liquidation has
been included in the Partnership's statement of operations. The net amount
ultimately available for distribution to the limited partners depends on various
factors, such as the actual cost of the liquidation and the amount of interest
income from temporary investments received by the Partnership until completely
liquidated. The General Partner estimates that the liquidating distribution will
approximate $1,015 per limited partnership unit, of which approximately $6 per
unit will be deposited in a trust (the Trust Fund) with a bank. The Trust Fund,
including interest income, would be available to satisfy claims made directly or
indirectly with respect to the liquidation of the Partnership for a period of up
to 24 months following the effective date of the trust agreement, at which time,
as long as there are no unresolved claims, the remaining balance of the Trust
Fund will be disbursed to the limited partners.
2) GENERAL PARTNER FEES:
As described in the 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 disbursable cash generated during the quarter
ended March 31, 1999 did not exceed the 9% return to the limited partners as a
result of the sale of the travel plaza property; therefore, the General Partner
did not receive a management fee for the quarter ended March 31, 1999.
<PAGE>
PART I - FINANCIAL INFORMATION
- --------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- ------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Participating Income Properties III Limited Partnership, a Delaware limited
partnership, (the Registrant) entered into purchase agreements with Flying J
Inc. on September 4, 1998 to sell substantially all of the Registrant's assets
(those assets comprising the travel plazas) for cash of $25,482,518 (the
original sales price of $27,220,000 less the partial pay down of the mortgage
loan received by the Registrant in December 1998). The limited partners received
a consent solicitation statement describing the proposed transaction and an
affirmative vote of the limited partners holding a majority of the partnership
units was achieved on October 26, 1998. The sale transaction was completed on
March 22, 1999 and the Registrant recognized a gain of approximately $7.8
million on the sale. The net cash proceeds from this sale are being held in U.S.
government securities pending distribution to the limited partners. The sale of
the travel plazas represents the disposition of substantially all of the
Registrant's assets and the Registrant has no further liability in connection
with any of the travel plazas. In April 1999, the General Partner began the
Registrant liquidation process that includes the distribution of assets to the
limited partners in accordance with the partnership agreement. The liquidation
of the Registrant is expected to be completed in June 1999 and an estimate of
the cost of the liquidation has been included in the Registrant's statement of
operations.
The net amount ultimately available for distribution to the limited partners
depends on various factors, such as the actual cost of the liquidation and the
amount of interest income from temporary investments received by the Registrant
until completely liquidated. The General Partner estimates that the liquidating
distribution will approximate $1,015 per limited partnership unit, of which
approximately $6 per unit will be deposited in a trust (the Trust Fund) with a
bank. The Trust Fund, including interest income, would be available to satisfy
claims made directly or indirectly with respect to the liquidation of the
Registrant for a period of up to 24 months following the effective date of the
trust agreement, at which time, as long as there are no unresolved claims, the
remaining balance of the Trust Fund will be disbursed to the limited partners.
The Registrant declared a cash distribution to the limited partners of $579,453
for the quarter ended March 31, 1999 (the period) representing travel plaza
operations through the date of the sale of the travel plazas on March 22, 1999.
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 $446,770. Rental revenue and mortgage loan interest income were lower
in 1999 because the travel plazas were sold prior to the end of the quarter. In
addition, the Registrant received or accrued participating rentals of $120,632
for the quarter ended March 31, 1999, which was relatively unchanged from
participating rentals for the comparable period in 1998.
Operating expenses for the quarter ended March 31, 1999 decreased $72,007 from
the comparable period of the prior year primarily due to a decrease in general
partner fees and depreciation expense. As described in the 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
disbursable cash generated during the quarter ended March 31, 1999 did not
exceed the 9% return to the limited partners as a result of the sale of the
travel plaza property; therefore, the General Partner did not receive a
management fee for the quarter ended March 31, 1999. Depreciation expense was
also lower this period due to the sale of the travel plaza property.
The increase in total assets reflected in the Registrant's financial statements
filed with this report is attributable to the cash proceeds received from the
sale of travel plaza property (prior to distribution of the proceeds to the
limited partners).
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, except those adjustments related to the
liquidation and dissolution of the Registrant.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
- ------- -----------------------------------------------------------
The financial instruments held by the Registrant at March 31, 1999 consist of
cash equivalents (primarily investments in U.S. Treasury securities or
repurchase agreements that are collateralized by U.S. Treasury and government
obligations) and receivables from lessees that are short- term in nature and do
not subject the Registrant to a material exposure to changes in interest rates.
<PAGE>
FFCA/PIP III INVESTOR SERVICES CORPORATION
------------------------------------------
BALANCE SHEET - MARCH 31, 1999
------------------------------
ASSETS
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
====
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 5, 1999 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 5, 1999 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, 1999 AND
THE STATEMENT OF INCOME FOR THE THREE MONTHS ENDED
MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000865828
<NAME> PARTICIPATING INCOME PROPERTIES III LIMITED PARTNERSHIP
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 27,524,358
<SECURITIES> 0
<RECEIVABLES> 29,803
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 27,554,161
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 26,886,583
<TOTAL-LIABILITY-AND-EQUITY> 27,554,161
<SALES> 0
<TOTAL-REVENUES> 8,406,285
<CGS> 0
<TOTAL-COSTS> 112,594
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,131,568
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,131,568
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,131,568
<EPS-PRIMARY> 303.25
<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, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
BALANCE SHEET.
</LEGEND>
<CIK> 0000865829
<NAME> FFCA/PIP III INVESTOR SERVICES CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<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>
