FORM 10-QSB.--QUARTERLY OR TRANSITIONAL REPORT
UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[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 2-76434
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
(Exact name of small business issuer as specified in its charter)
New York 13-3153572
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29609
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
BALANCE SHEET
(Unaudited)
September 30, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 112,550
Restricted-tenant security deposits 8,137
Accounts receivable 9,550
Deposits with mortgagee 34,022
Deferred charges 73,130
Deferred rental income 12,784
Real and personal property:
Land $ 227,104
Building and improvements 2,930,891
3,157,995
Less accumulated depreciation (1,423,473) 1,734,522
$1,984,695
Liabilities and Partners' Equity (Deficit)
Liabilities
Accounts payable $ 2,856
Accrued liabilities:
Interest $ 8,638
Real estate taxes 26,478
Professional fees 18,263 53,379
Deposits payable 8,052
Mortgage note payable 1,236,304
Total liabilities 1,300,591
Partners' Equity (Deficit)
General partner's $ (47,356)
Limited partners' (11,500 units issued
and 11,455 units outstanding) 731,460 684,104
$1,984,695
See Notes to Financial Statements
b) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Revenues:
Rental operations $ 95,401 $101,045 $270,603 $259,230
Interest income 1,354 2,766 4,236 8,832
Total revenues 96,755 103,811 274,839 268,062
Expenses:
Rental operations 31,683 26,597 103,182 79,701
General and administrative 9,271 10,869 37,598 40,458
Mortgage interest 24,846 25,539 75,071 77,107
Depreciation and amortization 39,255 28,238 113,305 82,199
Total expenses 105,055 91,243 329,156 279,465
Net (loss) income $ (8,300) $ 12,568 $(54,317) $(11,403)
Net (loss) income allocated to
general partner $ (83) $ 126 $ (543) $ (114)
Net (loss) income allocated to
limited partners (8,217) 12,442 (53,774) (11,289)
$ (8,300) $ 12,568 $(54,317) $(11,403)
Net (loss) income per limited
partner interest (based on
11,455 units outstanding) $ (.72) $ 1.09 $ (4.69) $ (.99)
<FN>
See Notes to Financial Statements
</FN>
c) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
(Unaudited)
Limited
Partnership General Limited
Units Partner's Partners' Total
Original capital contributions 11,500 $ 1,000 $11,500,000 $11,501,000
Partners' (deficit) equity
at December 31, 1996 11,455 $ (46,813) $ 785,234 $ 738,421
Net loss for the nine months
ended September 30, 1997 -- (543) (53,774) (54,317)
Partners' (deficit) equity
at September 30, 1997 11,455 $ (47,356) $ 731,460 $ 684,104
<FN>
See Notes to Financial Statements
</FN>
d) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1997 1996
Cash flows from operating activities:
Net loss $ (54,317) $ (11,403)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 113,305 82,199
Deferred rental income (25,784) (9,567)
Change in accounts:
Restricted cash 3,537 --
Accounts receivable (1,834) 11,244
Deposits with mortgagee (23,497) 68,611
Deferred charges (9,320) (30,229)
Accounts payable (50,646) (4,995)
Accrued real estate taxes 26,478 29,662
Accrued professional fees (5,237) (5,237)
Deposits payable (3,622) --
Other liabilities -- 2,231
Net cash (used in) provided by operating
activities (30,937) 132,516
Cash flows from investing activities:
Additions to real and personal property (85,477) (38,501)
Net cash used in investing activities (85,477) (38,501)
Cash flows from financing activities:
Payments of mortgage note payable (26,556) (24,521)
Partners' distributions paid -- (114,550)
Net cash used in financing activities (26,556) (139,071)
Net decrease in unrestricted cash and cash equivalents (142,970) (45,056)
Unrestricted cash and cash equivalents at beginning
of period 255,520 302,236
Unrestricted cash and cash equivalents at end of period $ 112,550 $ 257,180
Supplemental disclosure of cash flow information:
Cash paid for interest $ 75,071 $ 77,107
Non-cash investing activities:
Tenant improvements included in accounts
payable and deferred rental income $ -- $ 130,200
<FN>
See Notes to Financial Statements
</FN>
e) DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Drexel Burnham Lambert Real
Estate Associates (the "Partnership") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulations S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of DBL Properties Corporation ("DBL" or the "General Partner"),
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three and
nine month periods ended September 30, 1997, are not necessarily indicative of
the results that may be expected for the fiscal year ending December 31, 1997.
For further information, refer to the financial statements and footnotes thereto
included in the Partnership's annual report on Form 10-KSB for the fiscal year
ended December 31, 1996.
NOTE 2 - GENERAL
The financial statements of the Partnership include the operations of Wendover
Business Park Phase I ("Wendover") which is the only property the Partnership
owns and operates.
Certain reclassifications have been made to the 1996 balances to conform to the
1997 presentation.
NOTE 3 - TRANSACTIONS WITH RELATED PARTIES
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
The Partnership Agreement provides for payments to affiliates for services and
as reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership.
On June 24, 1997, Insignia Financial Group, Inc., a Delaware corporation
("Insignia"), and IFGP Corporation, a Delaware corporation ("IFGP")
(collectively, the "Buyer"), entered into a Stock Purchase Agreement (the
"Agreement") with The Wynnewood Company, Inc., a New York corporation
("Seller"), DBL, a New York corporation, and William Clements, an individual and
the owner of 100% of the capital stock of Seller ("Clements"). The closing of
the transactions contemplated by the Agreement occurred on June 24, 1997 (the
"Closing"). At the Closing, pursuant to the terms and conditions of the
Agreement, the Buyer acquired all of the issued and outstanding stock of DBL.
Upon the Closing, the officers and directors of DBL resigned and Insignia caused
new officers and directors of this entity to be elected.
The following transactions with The Wynnewood Company prior to June 24, 1997,
and with affiliates of Insignia subsequent to June 24, 1997, were incurred
during the nine month periods ended September 30, 1997 and 1996.
For the Nine Months Ended
September 30,
1997 1996
Property management fees (included in operating
expense) $7,521 $ 4,670
Reimbursement for services of affiliates (included in
general and administrative expense) 3,750 --
Prior to Insignia's affiliation on June 24, 1997, affiliates of Insignia
provided property management and partnership administrative services for the
Partnership.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment property, Wendover Business Park Phase I,
("Wendover"), is a commercial business park of approximately 68,000 square feet
located in Greensboro, North Carolina. The average occupancy for the nine
months ended September 30, 1997 and 1996, was 87% and 89%, respectively.
For the nine months ended September 30, 1997, the Partnership realized a
net loss of $54,317 compared to a net loss of $11,403 for the corresponding
period of 1996. The Partnership realized a net loss of $8,300 for the three
months ended September 30, 1997, compared to net income of $12,568 for the
corresponding period of 1996. The increase in net loss for the three and nine
month periods ended September 30, 1997, is primarily attributable to an increase
in depreciation and operating expenses. The increase in depreciation expense is
the result of an increase in tenant improvements during 1996 and 1997. Tenant
improvements are depreciated over the life of the respective tenants' lease. The
increase in operating expense is the result of an increase in maintenance
expense attributable to roof and parking lot repairs in 1997. The increases in
expenses for the nine month period ended September 30, 1997, is partially offset
by an increase in rental revenue due to the execution of two new leases since
September 1996. The new leases, which affect approximately 18% or 10,440 square
feet, were executed at rental rates which exceeded the expired leases on the
same space.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of the investment property to assess the
feasibility of increasing rents, maintaining or increasing occupancy levels and
protecting the Partnership from increases in expense. As part of this plan, the
General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, due to changing market conditions, which
can result in the use of rental concessions and rental reductions to offset
softening market conditions, there is no guarantee that the General Partner will
be able to sustain such a plan.
At September 30, 1997, the Partnership had unrestricted cash and cash
equivalents of $112,550 versus $257,180 at September 30, 1996. Net cash used in
operating activities increased primarily due to no refunds being received from
mortgagee deposit accounts in 1997. Approximately $95,000 was refunded in 1996.
Also contributing to the increase in cash used in operating activities was the
timing of payments of accounts payable. Cash used in investing activities
increased due to an increase in tenant improvements during the nine months ended
September 30, 1997. Net cash used in financing activities decreased due to no
distributions being made to the partners during the nine months ended September
30, 1997.
Management has received bids for major repairs and maintenance to be performed
over the next twelve to eighteen months involving principally roof and parking
lot repairs. Total costs are estimated to be approximately $66,000 of which
$36,000 has been authorized for the current fiscal year. During the nine months
ended September 30, 1997, approximately $33,000 was spent on roofing and parking
lot repairs. During the nine months ended September 30, 1996, approximately
$6,000 was spent on roofing and parking lot repairs.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Partnership. Such assets are currently thought
to be sufficient for any near-term needs of the Partnership. The mortgage
indebtedness of $1,236,304 requires monthly principal and interest payments and
requires a balloon payment on February 1, 2001, at which time the property will
either be refinanced or sold. Future cash distributions will depend on the
levels of cash generated from operations, a property sale and the availability
of cash reserves. Distributions of $114,550 or $10.00 per limited partner unit
were made to the limited partners during the nine months ended September 30,
1996. No distributions have been made and none are anticipated in 1997.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K: None filed during the quarter ended September
30, 1997.
SIGNATURE
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.
DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES
By: DBL Properties Corporation
Its General Partner
By: /s/William H. Jarrard, Jr.
William H. Jarrard
President and Director
Date: November 6, 1997