UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1996
or
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: 33-1624
CERTIFICATES OF PARTICIPATION
BK I REALTY INC.
(formerly Shearson\BK Realty, Inc.)
BK III RESTAURANTS INC.
(formerly Shearson\BK Restaurants, Inc.)
Exact name of registrant as specified in its charter
13-3100473
New York 13-3178423
State or other jurisdiction I.R.S. Employer
of incorporation or organization Identification No.
Attn: Andre Anderson
3 World Financial Center, 29th Floor, New York, NY 10285-2900
Address of principal executive offices zip code
Registrant's telephone number, including area code: (212) 526-3237
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited
Partnership Units
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 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
No market for the limited partnership units exists and therefore a market value
for the units cannot be determined.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to COP holders for the year ended December 31, 1996 (Portions of
parts I, II, III and IV)
PART I
Item 1. Business.
(a) General Development of Business
Certificates of Participation ("COPs") represent an assignment from the issuing
general partners of some, but not all, of their rights to participate in the
profits, losses and gains of, and to receive distributions from Burger King
Limited Partnership I, Burger King Limited Partnership II, and Burger King
Limited Partnership III. On May 10, 1996, Burger King Limited Partnership II
("BK-II") completed the sale of its 29 remaining restaurant properties and was
subsequently dissolved in December 1996. Accordingly, COPs' investment in
BK-II Properties Inc. ("GP-II"), the general partner of BK-II, was also
dissolved in December 1996.
The remaining issuing general partners and their respective partnerships are BK
I Realty Inc. (formerly Shearson/BK Realty, Inc.) ("GP-I"), a New York
corporation and the general partner of Burger King Limited Partnership I
("BK-I"), a New York limited partnership; and BK III Restaurants Inc. (formerly
Shearson/BK Restaurants, Inc.) ("GP-III"), a New York corporation and general
partner of Burger King Limited Partnership III ("BK-III"), a New York limited
partnership. (GP-I and GP-III are collectively referred to herein as the
"General Partners". BK-I and BK-III are collectively referred to herein as the
"Partnerships".) Each of the General Partners are affiliates of Lehman
Brothers Inc. ("Lehman") (formerly Shearson Lehman Brothers, Inc. ("Shearson"),
see Item 10).
COPs includes an assignment from GP-I of some, but not all, of GP- I's rights
to participate in the profits, losses and gains of, and to receive
distributions from BK-I (the "BK-I COPs"). More specifically, BK-I COPs
represent, in the aggregate, an assignment to the holders of the BK-I COPs
("BK-I COPs Holders") as defined under the terms of the partnership agreement
of BK-I (the "BK-I Partnership Agreement"), the rights of GP-I to receive (i)
as distributions from BK-I, up to an additional 4% of BK-I's net cash flow from
operations for each year that the BK-I limited partners have received cash
distributions equal to 12 1/2% per annum of their BK-I remaining invested
capital, and, after BK-I Payout, as defined in the BK-I Partnership Agreement,
(BK-I "Payout"), 8.89% of BK-I's net property disposition proceeds; and (ii) as
allocations by BK-I, 4% of any excess of net taxable income over BK-I's net
cash flow from operations; after BK-I Payout, 10.11% of losses; and after BK-I
Payout, 10.11% of gain on disposition of BK- I's properties (collectively, the
"BK-I Assigned Interest"). The BK-I Assigned Interest has been assigned in
equal parts to the BK-I COPs Holders. The unassigned portion of the rights of
GP-I to receive distributions and allocations from BK-I represents GP-I's
retained interest.
COPs also includes an assignment from GP-III of some, but not all, of GP-III's
rights to participate in the profits, losses and gains of, and to receive
distributions from BK-III (the "BK-III COPs"). More specifically, BK-III COPs
represent, in the aggregate, an assignment to the holders of the BK-III COPs
("BK-III COPs Holders") as defined under the terms of the partnership agreement
of BK-III (the "BK-III Partnership Agreement")(collectively, the BK- I
Partnership Agreement and the BK-III Partnership Agreement are defined as the
"Partnership Agreements"), the rights of GP-III to receive (i) as distributions
from BK-III, 4% of BK-III's net cash flow from operations for each year and,
after BK-III Payout, as defined in the BK-III Partnership Agreement, (BK-III
"Payout"), 4.7% of BK-III's net property disposition proceeds; and (ii) as
allocations by BK-III, 4% of net taxable income; after BK-III Payout, 4.88% of
losses; and, after BK-III Payout, 4.88% of gain on disposition of BK-III's
properties (collectively, the "BK-III Assigned Interest"). The BK-III Assigned
Interest has been assigned in equal parts to the BK-III COPs Holders. The
unassigned portion of the rights of BK-III represents GP-III's retained
interest.
BK-I COPs Holders and BK-III COPs Holders are collectively referred to as "COPs
Holders".
BK-I and BK-III originally acquired or ground leased, the sites for, and
constructed, 32 and 27, respectively, free-standing Burger Kingr fast-food
restaurants (each referred to as the "Property", collectively, the
"Properties") which are leased on a net basis to franchisees of Burger King
Corporation ("BKC"). Prior to the Partnerships' acquisition of each Property,
BKC proposed the site for approval by each respective General Partner. The
sites are geographically diversified throughout the United States. No further
site acquisitions are anticipated. The General Partners do not manage or
operate any Property nor do they acquire or finance the acquisition of the
equipment necessary to operate the Properties. BK-I currently owns nine
Properties and BK-III currently owns 23 Properties. Reference is made to Item
2 captioned "Properties" for information concerning the Properties.
The Partnerships' principal investment objectives are to:
(1) provide regular cash distributions, a portion of which will be "tax
sheltered"; and
(2) provide realization of the long-term appreciation in the value of the
Properties, consistent in all cases with the preservation of Partners'
capital.
BKC had the option to purchase any or all of the Properties at fair market
value, determined by an independent appraisal at any time during the eighth
through tenth years following the date of completion of the offering of limited
partnership units in each Partnership (the "Units"). The offering of the Units
in BK-I and BK-III occurred in 1982 and 1984, respectively. BKC did not
exercise its option for any of the Properties and the option has since expired.
During late 1991 and early 1992, GP-I performed an analysis of the various
options available to BK-I regarding its Properties which included marketing the
Properties for sale, the continued ownership of the Properties, or financing
the portfolio and distributing the loan proceeds to the partners. After a
detailed analysis of each option, GP-I determined that it would be in the best
interest of the partners to market BK-I Properties for sale. GP-I began the
sale of BK-I's Properties in June 1992. Through December 31, 1996, BK-I had
sold 23 of the original 32 Properties. GP-I has had discussions with a number
of institutions and other third parties interested in purchasing BK-I's nine
remaining Properties. However, an environmental issue at one of BK- I's
Properties located in Greenfield, Wisconsin (the "Greenfield Property") has
delayed BK-I's efforts to complete a sale of the remaining Properties. BK-I
had previously proposed site-specific clean-up standards for the Greenfield
Property to the Wisconsin Department of Natural Resources ("WDNR"), whose
response has taken significantly longer than originally anticipated. In light
of the unanticipated lengthy delay, GP-I has decided to move forward with its
efforts to market the Properties for sale during 1997.
After a careful evaluation of market conditions, GP-III has decided to commence
efforts to market BK-III's remaining 23 Properties during 1997 in a bulk sale
transaction. Prior to December 31, 1996, BK-III sold four Properties, one of
which was sold in the fourth quarter of 1996. Reference is made to Item 2
captioned "Properties" for information concerning Property sales since each
Partnership's inception.
There can be no assurance that GP-I or GP-III will be successful in completing
their respective Partnerships' marketing plans during 1997. As long as
Properties remain unsold, the Partnerships will continue to operate the
Properties and intends to make distributions to the partners in accordance with
the terms of the respective Partnership Agreements. Reference is made to Item
7 captioned "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the "Message to Investors" of the 1996 Annual Report
to COPs Holders, which is filed as an exhibit under Item 14 and incorporated
herein by reference, regarding efforts to sell each Partnership's Properties.
Employees
COPs has no employees.
Competition
Percentage rents received by the Partnership from leases with the franchisees
at the Properties are based on the food and beverage sales generated by the
Properties. Competition in the fast food industry has generally become more
intense as the number of chains competing for the consumer's business has
increased. For most chains, in 1997, the primary source of revenue growth will
continue to be the development of new restaurants or the acquisition of
existing restaurants. As a result, intense price competition and aggressive
marketing promotions have become essential ingredients in the effort to
increase sales from existing restaurants. Other factors which influence sales
include, but are not limited to, product quality, customer service, and the
diversity of menu offerings.
(b) Financial Information About Industry Segments
The Partnerships' businesses consist of only one segment, the investment in the
Properties. The General Partners do not engage in sales of goods or services.
(c) Narrative Description of Business
(1) See Paragraphs (a) and (b) above.
(i) through (xii) - Not Applicable.
(xi) through (xii) - Not Applicable.
(xiii) See Paragraph (a) above.
Item 2. Properties.
The following tables set forth the location of sites which the Partnerships
have acquired or ground leased as of December 31, 1996. The Partnerships own
the completed improvements in fee ownership and either have a fee ownership in
the land or a ground leasehold interest in the land as indicated. Also
included is the location of sites which the Partnerships have sold as of
December 31, 1996, the acquisition date, and the date of sale. Financial
information regarding sales includes book value, selling price and gain on the
sale.
In the event one of the Properties defaults on its rent obligations, BKC is
required to pay to the respective Partnership the minimum rent due under the
Property's lease. If a Property remains in default for 12 months, BKC can
either declare economic abandonment of the Property and supervise its sale to a
third party or purchase the Property from the Partnership at a purchase price
which is equal to the greater of the fair market value of the Property or the
minimum guaranteed price as set forth in the management agreements between BKC
and the Partnerships.
BK-I Properties owned as of December 31, 1996
Atlanta, Georgia* Klamath Falls, Oregon*
Decatur, Alabama Springdale, Arkansas
Fairfield, Ohio Springfield, Massachusetts*
Greenfield, Wisconsin Statesville, North Carolina
Greenville, South Carolina
* Subject to a ground lease.
For the year ended December 31, 1996, the Properties located in Statesville
(NC), Decatur (AL), Springdale (AR), Atlanta (GA) and Klamath Falls (OR)
generated 11%, 14%, 10%, 13% and 13%, respectively, of BK-I's total rental
revenues. No individual Property represented 10% or more of BK-I's total
assets for the year ended December 31, 1996.
BK-I Properties Sold as of December 31, 1996
Site Acquisition Sale Net Adjusted Gain
Location Date Date Book Value Selling Price on Sale
1. Altus, Oklahoma 11/10/82 12/30/91 $ 259,954 $ 290,164 $ 30,210
2. Grand Island,
Nebraska 05/07/82 10/01/92 218,064 686,000 467,936
3. Marion, Virginia 11/24/82 10/01/92 119,207 229,900 110,693
4. Sunnyvale,
California 02/03/83 10/01/92 151,063 348,000 196,937
5. Greenbelt,
Maryland 10/12/82 11/23/92 127,217 478,500 351,283
6. Guilderland,
New York 05/20/82 12/23/92 440,742 853,000 412,258
7. Atlantic
Highlands, NJ 04/08/83 03/04/93 129,381 158,002 28,621
8. Rohnert Park,
California 10/11/82 03/23/93 111,445 206,500 95,055
9. Dothan, Alabama 11/11/82 03/26/93 298,067 725,000 426,933
10. Madison Heights,
Virginia 02/23/83 07/01/94 274,271 369,218 94,947
11. Pearl,
Mississippi 06/29/82 08/01/94 257,672 427,108 169,436
12. Falmouth,
Massachusetts 09/24/82 08/01/94 289,187 568,353 279,166
13. Tucson, Arizona 10/07/82 08/01/94 74,146 161,163 87,017
14. W. Springfield,
Massachusetts 10/18/82 08/01/94 104,977 151,391 46,414
15. Jackson,
Mississippi 02/06/85 08/01/94 332,299 503,149 170,850
16. Kansas City,
Missouri 01/10/83 12/02/94 290,626 536,691 246,065
17. Salem,
Massachusetts 09/23/82 12/09/94 335,664 590,264 254,600
18. Pasco,
Washington 06/01/82 12/15/94 271,444 618,487 347,043
19. West Allis,
Wisconsin 10/07/82 12/15/94 366,838 711,987 345,149
20. Washington,
North Carolina 08/20/82 03/08/95 180,837 619,944 439,107
21. Big Spring,
Texas 07/01/84 03/31/95 130,499 455,898 325,399
22. Carlsbad,
New Mexico 05/12/84 03/31/95 240,175 728,684 488,509
23. Wichita, Kansas 09/08/82 10/01/96 241,905 580,500 338,595
BK-III Properties owned as of December 31, 1996
Albuquerque, New Mexico* Gary, Indiana
Atlanta, Georgia Gallatin, Tennessee
Brooklyn Park, Maryland* Largo, Florida
Chattanooga, Tennessee Memphis, Tennessee
Cleburne, Texas Montgomery, Alabama*
Columbus, Indiana Mounds View, Minnesota
Covina, California Nashville, Tennessee
Edison, New Jersey North Augusta, South Carolina
Fayetteville, North Carolina* San Bernadino, California*
Federal Heights, Colorado* Shelbyville, Tennessee
Frankfort, Kentucky Sulphur Springs, Texas
Wilson, North Carolina
* Subject to a ground lease.
For the year ended December 31, 1996, no individual Property generated rental
revenues of 10% or more of BK-III's total rental revenues. Additionally, no
individual Property represented 10% or more of BK-III's total assets for the
year ended December 31, 1996.
BK-III Properties Sold as of December 31, 1996
Site Acquisition Sale Net Adjusted Gain
Location Date Date Book Value Selling Price on Sale
1. Woodstock,
Georgia 07/19/84 04/12/91 $304,047 $380,059 $ 76,012
2. Kansas City,
Missouri 05/05/86 02/10/93 336,807 398,189 61,382
3. Waterford
Township, MI 03/21/86 03/08/93 430,678 531,809 101,131
4. Delhi Township,
Ohio 06/16/86 11/15/96 123,807 507,000 383,193
Item 3. Legal Proceedings.
There are no pending legal proceedings to which the Partnerships' are a party
or to which any of their assets are subject.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for the Registrant's Units and Related Security Holder Matters.
(a) Market Information
No public market for the COPs units (the "Units") presently exists. Each
Unit currently consists of one BK-I COPs and one BK-III COPs.
(b) Holders
The number of COPs Holders as of December 31, 1996 was 608.
(c) Distributions
The following table illustrates the per Unit quarterly cash distributions
paid to COPs Holders during the past two years:
Quarter Declared 1996 1995
First Quarter $ 5.77 $ 11.70 (3)
Second Quarter 5.33 5.31 (4)
Third Quarter 5.59 5.46
Fourth Quarter 18.83 (1) 37.92
Special Distributions 184.47 (2) --
Total Cash Distributions $219.99 $ 60.39
(1) Includes a $2.83 per Unit distribution of net proceeds received from
Property sales paid on January 30, 1997.
(2) This amount includes (i) a $171.35 per Unit distribution of net proceeds
received from the sale of BK-II's remaining Properties paid on August 30,
1996, and (ii) a liquidating distribution of $13.12 per Unit paid on
December 30, 1996 representing COPs' share of BK-II's cash flow from
operations for the first and second quarters of 1996 after the payment of
BK-II's final expenses and liabilities.
(3) Includes a $5.05 per Unit distribution of net proceeds received from
Property sales paid on April 28, 1995.
(4) Includes a $0.39 per Unit distribution of net proceeds received from a
Property sale paid on August 1, 1995.
Reference is also made to the "Message to Investors" of the 1996 Annual
Report to COPs Holders, which is filed as an exhibit under Item 14, for
additional information concerning distributions paid by the Partnership.
Item 6. Selected Financial Data.
The information set forth below should be read in conjunction with the
Partnership's Financial Statements and notes thereto and Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of Operations, also
included elsewhere herein.
GP-I
1996 1995 1994 1993 1992
Equity in earnings of BK-I $ 43,180 $ 49,322 $ 89,234 $ 78,707 $ 105,527
BK-I's net income 23,000 34,190 59,579 53,140 68,549
Earnings per COPs' Unit(1) 8.61 12.79 23.15 20.42 27.37
Total Assets at year-end (48,060) (62,210) (15,052) (11,408) 37,777
GP-III
1996 1995 1994 1993 1992
Equity in earnings of BK-III $ 87,852 $ 80,307 $ 84,786 $ 83,386 $ 88,879
BK-III's net income 52,617 54,119 56,858 56,002 59,362
Earnings per Cops' Unit(1) 20.20 20.83 21.99 21.63 23.06
Total Assets at year end 878 (2,424) 2,945 211 14,915
(1) Earnings per COPs Unit represents 80% of GP-I's and GP-III's earnings in
BK-I and BK-III, respectively, less general and administrative expenses,
divided by 3,084 COPs' Units outstanding.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
The General Partners do not engage in the sale of goods or services. Their
only assets are the investments in the Partnerships.
The prospectuses of BK-I and BK-III specify that BKC had the option to purchase
any or all of the Properties at fair market value, determined by an independent
appraisal, at any time during the eighth through tenth years following the date
of completion of the offering of the Units in each Partnership. The offering
of the Units in BK-I and BK-III occurred in 1982 and 1984, respectively, and,
therefore, BKC's options to purchase the Properties has expired.
GP-I has had discussions with a number of institutions and other third parties
interested in purchasing BK-I's nine remaining Properties. However, an
environmental issue at the Greenfield Property has delayed BK-I's efforts to
complete a sale of the remaining Properties. BK-I had previously proposed
site-specific clean-up standards for the Greenfield Property to the WDNR, whose
response has taken significantly longer than originally anticipated. In light
of the unanticipated lengthy delay, GP-I has decided to move forward with its
efforts to market the Properties for sale during 1997. Upon the sale of the
Properties, GP-I intends to distribute the net sales proceeds in accordance
with the terms of BK-I's Partnership Agreement. While GP-I is hopeful that a
sale of the Properties can be completed during 1997, there can be no assurance
that such efforts will be successful.
GP-I believes that the potential environmental remediation costs associated
with the Greenfield Property should not exceed approximately $300,000 and,
therefore, in accordance with BK-I's Partnership Agreement, such amount has
been set aside from BK-I's net cash flow from operations to fund these costs.
If the proposed site-specific standards are approved by the WDNR prior to any
sale of the Properties, it is expected that any of such reserves spent on the
environmental remediation should be recovered from the proceeds of the eventual
sale of the Greenfield Property. Therefore, any remediation costs incurred
prior to a sale of the Greenfield Property will be capitalized and included in
the carrying value of BK-I's Properties. Alternatively, if the sale occurs
prior to the receipt of such approval, it is likely that any buyer will
attribute a discount to the value of the Greenfield Property in determining an
acceptable purchase price.
GP-I believes that BK-I should have sufficient assets with which to pay any
potential remediation costs on the Greenfield Property. In the unlikely event
that BK-I does not have sufficient assets with which to pay such costs, GP-I is
unaware of any Federal or State of Wisconsin environmental law potentially
imposing any personal liability on the unitholders of BK-I for their pro-rata
share of BK- I's remediation costs. Therefore, except as otherwise provided
for in BK-I's Partnership Agreement, unitholders of BK-I may be liable for
BK-I's obligations only to the extent of their respective capital
contributions.
After a careful evaluation of market conditions, GP-III has decided to commence
efforts to market BK-III's remaining 23 Properties during 1997 in a bulk sale
transaction. While GP-III is hopeful that a sale of the Properties can be
completed during 1997, there can be no assurance that such efforts will be
successful. Until all of BK-III's remaining Properties are sold, BK-III
intends to continue operating the Properties and will distribute cash flow from
operations to the partners in accordance with the terms of the BK-III's
Partnership Agreement.
As a result of BK-I's and BK-III's intention to pursue a sale of their
respective Properties, the Properties have been reclassified on the
Partnership's respective balance sheets as real estate held for sale and are
carried at the lower of cost or fair value less any estimated costs to sell the
Properties, including any estimated environmental remediation costs.
At December 31, 1996, GP-I's investment in BK-I was $(48,060), reflecting
distributions in excess of equity in earnings plus the initial investments.
GP-III's investment in BK-III was $878 at December 31, 1996, compared to
$(2,424) at December 31, 1995.
COPs Holders receive their pro rata share of the cash distributions assigned by
GP-III on a quarterly basis and their pro rata share of the cash distributions
assigned by GP-I on an annual basis in accordance with the respective
Partnership Agreements.
For 1996, COPs Holders received total distributions of $219.99 per Unit. This
included: (i) a cash distribution made as a result of the sale of BK-II's
remaining Properties in the amounts of $171.35 per Unit, (ii) the related
liquidating distribution in the amount of $13.12 per Unit, (iii) a distribution
of BK-I's annual cash flow from operations of $10.66 per Unit, (iv) quarterly
distributions of BK-III's cash flow from operations during 1996 totalling
$22.03 per Unit, (v) a distribution of net proceeds from the sale of one of BK-
I's Properties in the fourth quarter of 1996 in the amount of $1.51 per Unit,
and (vi) a distribution of net proceeds from the sale of one of BK-III's
Properties in the last quarter of 1996 in the amount of $1.32 per Unit.
Since the inception of COPs, cumulative cash distributions have totaled $972.19
per original $1,000 Unit, including distributions of cash flow from operations
in the amount of $764.11 per Unit and distributions of net proceeds from the
sales of Properties in the amount of $208.08 per Unit. Distributions of net
sales proceeds represent returns of capital which have reduced COPs' Unit size
from $1,000 to $791.92.
Results of Operations
The results of operations for the 1996, 1995, and 1994 fiscal years are
primarily attributable to the investments in BK-I and BK-III.
For the years ended December 31, 1996, 1995 and 1994, GP-I's net income was
$23,000, $34,190 and $59,579, respectively. For the years ended December 31,
1996, 1995 and 1994, GP-III's net income was $52,617, $54,119 and $56,858,
respectively. The net income fluctuated each year primarily as a result of
gains from the sales of Properties, reduced levels of depreciation expense,
reduced rental income as a result of the sale of Properties, and increases and
decreases in percentage rents received from the franchisees operating each of
the Properties. During 1996, BK-I sold a Property, realizing a total gain of
$338,595. BK-III also sold a Property during 1996, realizing a gain on the
sale of $383,193. During 1995, BK-I sold three Properties, realizing a total
gain of $1,253,015. BK-III did not sell any Properties during 1995. During
1994, BK-I sold 10 Properties, realizing a total gain of $2,040,687. BK-III
did not sell any Properties during 1994.
Same-store sales for BK-I's remaining Properties during 1996 were $11,654,459
compared to $11,138,721 for 1995, representing an increase of approximately
4.5%. Same-store sales at BK-III's Properties during 1996 were $24,212,417
compared to $23,384,120 for 1995, representing an increase of approximately
3.5%. The increase in same-store sales for both Partnerships' Properties is
primarily attributable to BKC's aggressive marketing efforts. Rental income
received by the Partnerships from the franchisees at the Properties is equal to
the greater of a minimum annual base rent or 8.5% of the Properties' annual
food and beverage sales. Therefore, increases in sales at the Properties will
often result in an increase in the Partnerships' rental income.
Item 8. Financial Statements and Supplementary Data.
Incorporated by reference to the 1996 Annual Report to COPs Holders, included
as an exhibit under Item 14.
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.
On July 31, 1993, Shearson sold certain of its domestic retail brokerage and
asset management businesses to Smith Barney, Harris Upham & Co. Incorporated
("Smith Barney"). Subsequent to this sale, Shearson changed its name to Lehman
Brothers Inc. The transaction did not affect the ownership of the Partnerships
or the General Partners. However, the assets acquired by Smith Barney included
the name "Shearson." Consequently, effective January 24, 1994, Shearson/BK
Realty, Inc. and Shearson/BK Restaurants, Inc. changed their names to delete
any reference to "Shearson."
COPs has no officers or directors. The General Partners of the Partnerships
manage and control the affairs of the Partnerships and have general
responsibility and authority in all matters affecting its business. Certain
officers and the director of the General Partners are now serving (or in the
past have served) as officers or directors of entities which act as general
partners of a number of real estate limited partnerships which have sought
protection under the provisions of the Federal Bankruptcy Code. The
partnerships which have filed bankruptcy petitions own real estate which has
been adversely affected by the economic conditions in the market in which that
real estate is located and, consequently, the partnerships sought the
protection of the bankruptcy laws to protect the partnerships' assets from loss
through foreclosure.
The director and executive officers of the General Partners as of December 31,
1996, are set forth below. There are no family relationships between or among
any officer and any other officer or director.
Name Age Office
Rocco F. Andriola 38 Director, President and Chief Financial Officer
Kenneth F. Boyle 33 Vice President
Timothy E. Needham 28 Vice President
The foregoing director has been elected to serve as director until the next
annual meeting of the General Partners.
Rocco F. Andriola is a Managing Director of Lehman Brothers in its Diversified
Asset Group and has held such position since October 1996. Since joining
Lehman Brothers in 1986, Mr. Andriola has been involved in a wide range of
restructuring and asset management activities involving real estate and other
direct investment transactions. From June 1991 through September 1996, Mr.
Andriola held the position of Senior Vice President in Lehman's Diversified
Asset Group. From June 1989 through May 1991, Mr. Andriola held the position
of First Vice President in Lehman's Capital Preservation and Restructuring
Group. From 1986-89, Mr. Andriola served as a Vice President in the Corporate
Transactions Group of Shearson Lehman Brothers' office of the general counsel.
Prior to joining Lehman Brothers, Mr. Andriola practiced corporate and
securities law at Donovan Leisure Newton & Irvine in New York. Mr. Andriola
received a B.A. from Fordham University, a J.D. from New York University School
of Law, and an LL.M in Corporate Law from New York University's Graduate School
of Law.
Kenneth F. Boyle is a Vice President of Lehman Brothers in its Diversified
Asset Group. Mr. Boyle joined Lehman in January 1991. Mr. Boyle is a Certified
Public Accountant and was employed by the accounting firm of KPMG Peat Marwick
LLP from 1985 to 1990. Mr. Boyle graduated from the State University of New
York at Binghamton with a B.S. degree in Accounting.
Timothy E. Needham is an Associate of Lehman Brothers and assists in the
management of commercial real estate in the Diversified Asset Group. Mr.
Needham joined Lehman in September 1995. Prior to joining Lehman, Mr. Needham
was a consultant with KPMG Peat Marwick LLP in the Banking and Investment
Services Group from 1994- 1995. Mr. Needham received his master's degree in
international management from the American Graduate School of International
Management in December 1993. Previous to entering graduate school, Mr. Needham
worked in Tokyo during 1991, for approximately one year, doing market research
for a Japanese firm. In addition, Mr. Needham is currently a candidate for the
designation of Chartered Financial Analyst, Level III.
Item 11. Executive Compensation.
Officers and the director of the General Partners are employees of Lehman and
are not compensated by the Partnerships or the General Partners for services
rendered in connection with the Partnerships.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) Security ownership of certain beneficial owners
The Registrant knows of no person who beneficially owns more than 5% of
the Units.
(b) Security ownership of management
GP-I and GP-III, under the terms of the Partnership Agreements of BK-I and
BK-III, respectively, manage the affairs of BK-I and BK-III, respectively.
GP-I and GP-III retained a share of the cash distribution and the
allocable profit or loss of BK-I and BK-III in accordance with COPs'
prospectus. Neither the director nor the officers of the General Partners
own any Units.
(c) Changes in control
None.
Item 13. Certain Relationships and Related Transactions.
(a) Transactions with Management and Others
There have been no material transactions since the beginning of the
registrants' last fiscal year between the Partnerships, their management
and others, as defined in Regulation S-K 229.404.
(b) Certain Business Relationships
There have been no business transactions between the director and officers
of the General Partners and the Partnerships.
(c) Indebtedness of Management
No management person is indebted in any amount to the Partnerships.
(d) Transactions with Promoters
There have been no transactions with promoters.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)(1) Financial Statements and Supplementary Data:
GP-I:
Independent Auditors' Report
Financial Statements:
Balance Sheets at December 31, 1996 and 1995
Statements of Operations for the years ended December 31, 1996, 1995 and 1994
Statements of Changes in Stockholder's Deficit for the years ended
December 31, 1996, 1995 and 1994
Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994
Notes to the Financial Statements
GP-III:
Independent Auditors' Report
Financial Statements:
Balance Sheets at December 31, 1996 and 1995
Statements of Operations for the years ended December 31, 1996, 1995 and 1994
Statements of Changes in Stockholder's Deficit for the years ended
December 31, 1996, 1995 and 1994
Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994
Notes to the Financial Statements
The financial statements for GP-I and GP-III are incorporated by reference to
COPs' Annual Report to COPs Holders for the year ended December 31, 1996.
(2) Financial Statement Schedules:
No other schedules are presented because the information is not
applicable or is included in the financial statements or notes thereto.
(3) Exhibits:
99.1 BK-I:
Independent Auditors' Report
Financial Statements:
Balance Sheets at December 31, 1996 and 1995
Statements of Operations for the years ended December 31, 1996,
1995 and 1994
Statements of Partners' Capital (Deficit) for the years ended
December 31, 1996, 1995 and 1994
Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994
Notes to the Financial Statements
99.2 BK-III:
Independent Auditors' Report
Financial Statements:
Balance Sheets at December 31, 1996 and 1995
Statements of Operations for the years ended December 31,
1996, 1995 and 1994
Statements of Partners' Capital (Deficit) for the years ended
December 31, 1996, 1995 and 1994
Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994
Notes to the Financial Statements
13.1 Annual Report to COPs Holders for the year ended
December 31, 1996.
13.2 Annual Report to COPs Holders for the years ended December 31,
1995, 1994 and 1993, incorporated by reference to exhibit 13 to
COPs' Form 10-K for those respective years.
27.1 Financial Data Schedule for BK I Realty Inc.
27.2 Financial Data Schedule for BK III Restaurants Inc.
(b) Reports on Form 8-K:
(1) There have been no reports filed on Form 8-K during the last quarter
of the period covered by this report.
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.
Dated: April 15, 1997
CERTIFICATES OF PARTICIPATION
BK I REALTY INC.
BK III RESTAURANTS INC.
BY: BK I Realty Inc.
BK III Restaurants Inc.
Registrant
BY: /s/ Rocco F. Andriola
Name: Rocco F. Andriola
Title: Director, President and
Chief Financial Officer
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 in the capacities and on the dates indicated.
BK I REALTY INC.
BK III RESTAURANTS INC.
Registrant
Date: April 15, 1997
BY: /s/ Rocco F. Andriola
Rocco F. Andriola
Director, President and
Chief Financial Officer
Date: April 15, 1997
BY: /s/ Kenneth F. Boyle
Kenneth F. Boyle
Vice President
Date: April 15, 1997
BY: /s/ Timothy E. Needham
Timothy E. Needham
Vice President