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, 1997 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 0-11502
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BOETTCHER WESTERN PROPERTIES III LTD.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
COLORADO 84-0911344
- ---------------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
77 West Wacker Drive
Chicago, Illinois 60601
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 574-6000
-----------------------------
Indicate by checkmark 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 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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INDEX
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Page
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PART I. Financial Information
Item 1. Financial Statements (unaudited)
Balance Sheets - March 31, 1997
and September 30, 1996 3
Statements of Operations - Three and six months
ended March 31, 1997 and 1996 4
Statement of Partners' Capital - Six
months ended March 31, 1997 5
Statements of Cash Flows - Six months
ended March 31, 1997 and 1996 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
PART III. Other Information
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURE 18
2
PART I. Financial Information
Item 1. Financial Statements
BOETTCHER WESTERN PROPERTIES III LTD.
(A Limited Partnership)
Balance Sheets
(unaudited)
March 31, September 30,
1997 1996
----------- --------------
Assets
------
Real estate investments, at gross cost
Properties held for sale $ - $ 8,771,101
Less discount on related debt - (778,407)
-----------
- 7,992,694
Less accumulated depreciation - (2,599,948)
---------- -----------
- 5,392,746
Real estate held for sale 5,569,588 -
Cash and cash equivalents at cost, which
approximates market value 701,818 1,240,077
Accounts receivable and other assets 140,708 90,146
Debt issuance costs, net of accumulated
amortization of $40,264 and $33,446,
respectively 6,819 13,637
Deferred leasing costs, net of accumulated
amortization of $464,022 - 174,013
---------- -----------
$6,418,933 $ 6,910,619
========== ===========
Liabilities and Partners' Capital
---------------------------------
Mortgages payable, net of unamortized debt
discount of $3,185 and $4,525,
respectively $3,232,826 $ 3,303,685
Payable to managing general partner 92,020 602,323
Accounts payable and accrued expenses 285,037 296,557
Property taxes payable - 21,238
Tenants' deposits 35,731 39,339
Unearned rental income 5,979 5,556
Accrued interest payable - 490
---------- -----------
Total liabilities 3,651,593 4,269,188
---------- -----------
Partners' capital
General partners (113,743) (113,869)
Limited partners 2,881,083 2,755,300
---------- -----------
Total partners' capital (deficit) 2,767,340 2,641,431
---------- -----------
$6,418,933 $ 6,910,619
========== ===========
See accompanying notes to financial statements.
3
BOETTCHER WESTERN PROPERTIES III LTD.
(A Limited Partnership)
Statements of Operations
Three and six months ended March 31, 1997 and 1996
(unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
--------------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
Revenue:
Rental income $190,885 $407,763 $397,805 $ 924,978
Tenant reimbursements for
common area charges,
insurance and taxes 61,726 58,534 137,055 141,354
Other income 10,608 20,223 40,563 38,547
-------- ---------- -------- ----------
263,219 486,520 575,423 1,104,879
-------- ---------- -------- ----------
Expenses:
Interest, including
amortization of debt
discount and debt
issuance costs 86,108 154,154 182,836 343,921
Depreciation - 95,262 - 211,397
Property taxes 21,542 40,380 43,386 102,838
Fees and reimbursements to
managing general partner 25,965 39,726 51,709 84,362
Other management fees 10,674 20,738 23,065 49,588
Salaries of on-site property
managers - 31,413 - 62,888
Repairs and maintenance 40,726 49,620 78,953 100,975
Utilities 7,522 18,104 17,931 52,956
Other administrative 14,215 61,390 45,659 124,475
Environmental costs 2,101 3,005 5,975 6,906
-------- ---------- -------- ----------
208,853 513,792 449,514 1,140,306
-------- ---------- -------- ----------
Operating income (loss) 54,366 (27,272) 125,909 (35,427)
Gain on sale of real estate
investment - 1,329,705 - 1,329,705
-------- ---------- -------- ----------
Net earnings $ 54,366 $1,302,433 $125,909 $1,294,278
======== ========== ======== ==========
Net earnings per limited
partnership unit $ 2.45 $ 58.61 $ 5.67 $ 58.24
======== ========== ======== ==========
Weighted average number of
limited partnership units
outstanding 22,000 22,000 22,000 22,000
======== ========== ======== ==========
See accompanying notes to financial statements.
4
BOETTCHER WESTERN PROPERTIES III LTD.
(A Limited Partnership)
Statement of Partners' Capital
Six months ended March 31, 1997
(unaudited)
Total
General Limited partners'
partners partners capital
----------- ----------- -----------
Balances at October 1, 1996 $(113,869) $2,755,300 $2,641,431
Net income for the six months
ended March 31, 1997 126 125,783 125,909
--------- ---------- ----------
Balances at March 31, 1997 $(113,743) $2,881,083 $2,767,340
========= ========== ==========
See accompanying notes to financial statements.
5
BOETTCHER WESTERN PROPERTIES III LTD.
(A Limited Partnership)
Statements of Cash Flows
Six Months Ended March 31, 1997 and 1996
(unaudited)
Six Months Ended
March 31,
-------------------------
1997 1996
---- ----
Cash flows from operating activities:
Net earnings (loss) $ 125,909 $ 1,294,278
Adjustments to reconcile net loss to
net cash provided by operating activities
Depreciation and amortization 8,162 264,078
Gain on sale of property - (1,329,705)
Change in assets and liabilities:
(Increase) decrease in accounts receivable and other assets (50,562) 20,638
Decrease in property tax and other escrow deposits - 111,511
Increase (decrease) in payable to managing general
partner relating to operations 89,697 (997,197)
Decrease in accounts payable and accrued expenses (11,524) (31,361)
Decrease in property taxes payable (21,238) (119,664)
Decrease in tenants' deposits (3,608) (26,687)
Increase (decrease) in unearned rental income 423 (16,734)
Decrease in accrued interest payable (490) (32,831)
---------- -----------
Net cash flows from operating activities 136,769 (863,674)
---------- -----------
Cash flows used by investing activities:
Additions to real estate held for sale (2,829) (6,415)
Deferred leasing costs - (37,614)
Proceeds from sale of property
net of closing costs and other costs of sale - 6,036,740
---------- -----------
Net cash flows from investing activities (2,829) 5,992,711
---------- -----------
Cash flows used in financing activities:
Advances from (payments to) managing general partner (600,000) -
Reductions in mortgage principal (72,199) (3,796,981)
Distributions to limited partners - (999,900)
---------- -----------
Net cash flows from financing activities (672,199) (4,796,881)
---------- -----------
Net increase (decrease) in cash and cash equivalents (538,259) 332,156
Cash and cash equivalents at September 30 1,240,077 836,140
---------- -----------
Cash and cash equivalents at March 31 $ 701,818 $ 1,168,296
========== ===========
Supplemental disclosure of cash flow information:
Interest paid in cash during the six month period $ 182,346 $ 376,752
========== ===========
See accompanying notes to financial statements.
6
BOETTCHER WESTERN PROPERTIES III LTD.
(A Limited Partnership)
Notes to Financial Statements
March 31, 1997
(unaudited)
(1) Financial Statement Adjustments and Footnote Disclosure
The accompanying financial statements are unaudited. However, Boettcher
Properties, Ltd. the Managing General Partner of Boettcher Western
Properties III Ltd. (the "Partnership"), believes all material adjustments
necessary for a fair presentation of the interim financial statements have
been made. Certain information and footnotes normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to Securities and Exchange Commission
rules and regulations. The Managing General Partner believes the
disclosures made are adequate to make the information not misleading and
suggests that the condensed financial statements be read in conjunction
with the financial statements and notes thereto included in the Boettcher
Western Properties III Ltd. September 30, 1996 Annual Report.
(2) Significant Accounting Principles
Deferred Leasing Costs
Costs associated with the leasing of the Partnership's shopping center are
deferred and amortized over the life of the related leases and are recorded
at cost. These costs are comprised of lease commissions and construction
costs related to the buildout of tenant space. In fiscal 1997 upon adoption
of SFAS 121, described below, these costs are included in real estate held
for sale.
Environmental Remediation Liabilities
Liabilities for loss contingencies, including environmental remediation
costs, arising from claims, assessments, litigation, fines and penalties,
and other sources are recorded when it is probable that a liability has
been incurred and the amount of the assessment and/or remediation can be
reasonable estimated. The costs of site clean-up are recorded in the amount
of the cash payments made or for future estimated costs for that site when
fixed or reliably determinable based upon information derived from the
remediation plan for that site. Recoveries from third parties which are
probable of realization are separately recorded, and are not offset against
the related environmental liability.
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 96-1, Environmental Remediation
Liabilities. SOP 96-1 will be adopted by the Partnership during fiscal 1997
and will require, among other things, environmental remediation liabilities
to be accrued when the criteria of SFAS No. 5, Accounting for
Contingencies, have been met. The SOP also provides guidance with respect
to the measurement of the remediation liabilities. Such accounting is
consistent with the Partnership's current method of accounting for
environmental remediation costs and therefore, adoption of this new
Statement will not have a material impact on the Partnership's financial
position, results of operations, or liquidity.
7
BOETTCHER WESTERN PROPERTIES III LTD.
(A Limited Partnership)
Notes to Financial Statements
March 31, 1997
(unaudited)
Financial Instruments
The fair value of the Partnership's financial instruments approximate their
carrying values due to the short maturities of those instruments or due to
the interest rates of those instruments approximating interest rates for
similar issues.
Income Taxes
No provision has been made for federal income taxes, as the liability for
such taxes is that of the partners rather than the Partnership. The
Partnership reports certain transactions differently for tax and financial
statement purposes, primarily depreciation and debt discount.
Real Estate Investments
Properties held for sale are recorded at the lower of cost or fair value
based upon independent appraised values less estimated selling costs.
Impairment of Long-Lived Assets
In March of 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 121, effective for fiscal years beginning after December 15,
1995. Statement No. 121 requires impairment losses to be recorded on long-
lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying amount. Statement No. 121 also addresses
the accounting for long-lived assets that are expected to be disposed of.
The Partnership adopted Statement No. 121 effective with its fiscal year
beginning October 1, 1996.
Debt Discount and Debt Issuance Costs
Costs incurred in arranging financing, such as loan origination fees,
commitment fees and extension fees, are deferred and amortized using the
level-interest-yield method over the term of the related debt or the
extension period.
Debt discount is amortized to interest expense using the level-interest-
yield method over the term of the related debt.
8
BOETTCHER WESTERN PROPERTIES III LTD.
(A Limited Partnership)
Notes to Financial Statements
March 31, 1997
(unaudited)
Statements of Cash Flows
For purposes of the Statements of Cash Flows, cash and cash equivalents
include highly liquid debt instruments purchased with an original maturity
of three months or less. Cash and cash equivalents are comprised of the
following at March 31:
1997 1996
-------- ----------
Money Market $631,136 $1,103,642
Operating Cash 70,682 64,654
-------- ----------
Cash and Cash Equivalents $701,818 $1,168,296
======== ==========
Use of Estimates
Management of the Partnership has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
(3) Transactions with Related Parties
Deferred Acquisition Fee: Pursuant to the Management Agreement, the
Managing General Partner receives an annual fee for acquisition services
provided to the Partnership for each fiscal year equal to (a) 2% of the
average daily Aggregate Capital Investment Account plus (b) 1/2 of 1% of
the average daily Capital Cash Account, as those terms are defined in the
Limited Partnership Agreement. Payments may be made for the lesser of 15
years or until the limit on payments is reached. For the quarter ended
March 31, 1997 the amount earned by the Managing General Partner was
$19,650.
Property Management Fee: In accordance with the provisions of the
Management Agreement, property management fees are payable to the Managing
General Partner, regardless of the profitability of the Partnership, equal
to 5% of the actual gross receipts from the properties reduced by
management fees paid to others. For the quarter ended March 31, 1997 the
amount earned by the Managing General Partner was $1,995.
Direct Services: The Managing General Partner and its affiliates provide
various services directly related to the operations of the Partnership and
its properties. The Partnership reimburses the Managing General Partner and
its affiliates for its allocable share of salaries of nonmanagement and
nonsupervisory personnel providing accounting, investor reporting and
communications, and legal services to the Partnership; as well as allowable
expenses related to the maintenance and repair of data processing equipment
used for or by the Partnership. For the quarter ended March 31, 1997 such
reimbursements totaled $4,320.
9
BOETTCHER WESTERN PROPERTIES III LTD.
(A Limited Partnership)
Notes to Financial Statements
March 31, 1997
(unaudited)
(4) Liquidity and Debt Maturities
The Partnership is required under its Partnership Agreement to maintain
cash reserves of not less than 3% of aggregate capital contributions for
normal repairs, replacements, working capital and other contingencies. As
of March 31, 1997, the Partnership had cash reserves of $701,818, while the
required minimum amount was $660,000. For the six months ended March 31,
1997, the payable to Managing General Partner decreased by $510,303 to a
total of $92,020 as of March 31, 1997. This decrease is the net result of
advances from the Managing General Partner totaling $89,697, including the
accrual of fees and reimbursements earned by the Managing General Partner,
and a payment of $600,000 to the Managing General Partner in the second
quarter of fiscal 1997. The Managing General Partner intends to apply cash
flow generated from Partnership operations in fiscal 1997, if any, to
maintain the minimum required cash reserves, as necessary, including any
additional reserves to cover remediation costs at Venetian Square Shopping
Center. Thereafter, the Partnership intends to pay the Managing General
Partner all unpaid cash advances made to the Partnership, all unpaid
administrative reimbursements and all deferred fees earned by the Managing
General Partner which total $92,020, as of March 31, 1997.
The Managing General Partner is attempting to sell the Partnership's
remaining property in fiscal 1997. However, there can be no assurances that
the Partnership will sell such property in fiscal 1997. As of March 31,
1997, the Partnership has recorded its remaining real estate investment as
property held for sale. The Partnership has entered into a listing
agreement with an unrelated real estate brokerage firm to act as the
exclusive selling agent for Venetian Square Shopping Center. The Managing
General Partner believes that this sale will provide net proceeds to the
Partnership after the payment of sales costs, closing costs and mortgages
payable; however, this sale transaction may include both cash at closing
and deferred payments to the Partnership. The ability of the Partnership to
sell Venetian Square Shopping Center may be adversely affected by the
potential remediation costs of the petroleum contamination on a parcel of
land adjacent to and part of the property. The Partnership intends to apply
net sales proceeds to maintain the Partnership's minimum required cash
reserves, as necessary, including any additional reserves to cover
potential remediation costs. Thereafter, the Partnership intends to pay
amounts owed to the Managing General Partner and to make a final
distribution to limited partners.
On October 24, 1995, the Partnership entered into a letter agreement with
Great West Life Assurance Company ("Great West") to extend the maturity
date of the first mortgage payable secured by Venetian Square Shopping
Center to October 1, 1997. Under the agreement, the Partnership was
obligated to pay a $20,000 fee, the interest rate was increased to 10.5%
and the monthly payment was increased to $39,098.
10
BOETTCHER WESTERN PROPERTIES III LTD.
(A Limited Partnership)
Notes to Financial Statements
March 31, 1997
(unaudited)
(5) Environmental Contingency
From approximately 1979 through 1990, a card-lock fueling station had been
operated on a parcel of land adjacent to and part of Venetian Square
Shopping Center. In fiscal 1992, upon removal of the three underground fuel
storage tanks, leakage of petroleum contaminants was discovered through
performance of soil and groundwater tests. The Partnership is in the
process of determining the method, cost and timing of required soil and
groundwater remediation measures. The Partnership has spent approximately
$307,000 to date in connection with the remediation program and since
fiscal 1993 has maintained an accrual of $250,000 as a provision for
possible additional remediation expenses. Management is unable at this time
to estimate the full extent of additional expenses that may be incurred.
Due to groundwater contamination, the Partnership may incur significant
additional remediation costs. The estimate of costs and their timing of
payment could change as a result of (1) changes to a remediation plan
required by the State Environmental Agency, (2) changes in technology
available to treat the site, (3) unforeseen circumstances existing at the
site and (4) differences between actual inflation rates and rates assumed
in preparing the estimate. As a result of these factors, it is not possible
for the Partnership to reasonably estimate the amount by which remediation
costs may exceed amounts that the Partnership has accrued. The ultimate
resolution of this matter and its impact on the Partnership's financial
statements is uncertain.
11
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
For the three and six months ended March 31, 1997, the Partnership
generated total revenue of $263,219 and $575,423 and incurred total expenses of
$208,853 and $449,514, resulting in income from operations of $54,366 and
$125,909, respectively. This represents improvements in the Partnership's
results of operations when compared to the three and six months ended March 31,
1996 of $81,638 and $161,336, respectively. A gain on the sale of real estate
investment, LaRisa Apartments ("LaRisa"), in the amount of $1,329,705 was
recorded in the second quarter of fiscal 1996, which resulted in the Partnership
reporting net earnings for the three and six months ended March 31, 1996 of
$1,302,433 and $1,294,278, respectively. The Partnership generated decreased
total revenue, primarily rental and other income, and decreased total expenses
in all categories for the six months ended March 31, 1997, primarily due to the
sale of LaRisa. The Partnership also reported decreased expenses due to the
adoption of Statement of Financial Accounting Standards No. 121. ("SFAS 121") in
fiscal 1997. SFAS 121 addresses the accounting for long-lived assets that are
expected to be disposed of and has accordingly eliminated depreciation and
amortization related to the Partnership's long-lived assets held for sale. A
summary of the Partnership's operations and period-to-period comparisons before
gain on sale of LaRisa is presented below.
Three Months Ended March 31 Six Months Ended March 31
(in thousands) (in thousands)
------------------------------------ ----------------------------------
Amount Amount
of % of %
1997 1996 Change Change 1997 1996 Change Change
----- ----- -------- -------- ----- ------ ------- ------
Total revenue $ 263 $ 487 $(224) (46%) $ 575 $1,105 $(530) (48%)
Total expenses 209 514 305 59% 450 1,140 690 61%
----- ----- ----- ----- ------ -------
Net operating
income (loss) $ 54 $ (27) $ 81 $ 125 $ (35) $ 160
===== ===== ===== ===== ====== =======
When making period-to-period comparisons, the exclusion of the operations
of LaRisa from the prior fiscal quarters' results allows for a more meaningful
analysis of the operations of the Partnership's remaining investment. For
comparison purposes only, the results of operations of LaRisa have been excluded
from the three and six months ended March 31, 1996 in the table below.
Three Months Ended March 31 Six Months Ended March 31
(in thousands) (in thousands)
------------------------------------ ---------------------------------
Amount Amount
of % of %
1997 1996 Change Change 1997 1996 Change Change
----- ----- -------- -------- ----- ----- -------- ------
Total revenue $ 263 $ 278 $(15) (5%) $ 575 $ 583 $ (8) (1%)
Total expenses 209 306 97 32% 450 602 152 25%
----- ----- ---- ----- ----- ----
Net operating
income (loss) $ 54 $ (28) $ 82 $ 125 $ (19) $144
===== ===== ==== ===== ===== ====
12
Based upon the proforma amounts presented above, the Partnership generated
total revenue of $263,219 and $575,423, for the three and six months ended March
31, 1997 which represent decreases of $14,962 (5%) and $7,866 (1%),
respectively, when compared with the corresponding periods of fiscal 1996.
Rental income generated by the Partnership's remaining property for the three
and six month periods in fiscal 1997 decreased $18,514 (9%) and $27,689 (6%),
when compared with fiscal 1996, primarily the result decreased average occupancy
at the property in fiscal 1997. Venetian achieved average occupancy of 80% and
an average effective rental rate of $8.16 for the second quarter of fiscal 1997,
representing a decrease of 10% and an increase of $.20, respectively, when
compared to the same period in fiscal 1996. Tenant reimbursement income
decreased $4,299 (3%) for the six months ended March 31, 1997 when compared to
the corresponding period in fiscal 1996, also the result of increased vacancies
at the property. Other income remained constant for the three months ended March
31, 1997 compared to the same period in 1996, while it increased $24,122 for the
six months ended March 31, 1997, when compared to fiscal 1996. This increase is
the combined result of higher interest income in the current year due to the
maintenance of higher cash reserves and the receipt of a refund from a prior
insurance carrier of one of the Partnership's sold properties. A summary of the
Partnership's properties' average occupancy and average effective rental rates
is presented below.
Second Quarter
Fiscal 1997 Fiscal 1996
----------- -----------
Multi Family
- ------------
LaRisa Apartments
Average Occupancy/(3)/ N/A 92%
Average effective rental rate
per unit per month /(3)(1)/ N/A $ 424
Commercial
- ----------
Venetian Square Shopping Center
Average occupancy 80% 90%
Average effective rental rate /(1)(2)/ $8.16 $7.96
/(1)/ Average effective rental rates for apartments are stated in terms of an
average effective rental rate per unit per month and for commercial
properties they are stated in terms of an average annual effective rental
rate per square foot. Effective rental rates take into account the effect
of leasing concessions and bad debts.
/(2)/ These rates are "triple net". In addition to this base rent, tenants pay
their pro rata share of taxes, insurance and common area maintenance
expenses at the project.
/(3)/ The computations give effect to the sale of LaRisa Apartments on February
29, 1996.
Based on the proforma amounts presented previously, the Partnership
incurred total expenses of $208,853 and $449,514 for the three and six months
ended March 31, 1997, representing decreases of $97,047 (32%) and $152,690
(25%), respectively, when compared with the corresponding periods of fiscal
1996. A significant factor contributing to the reduced expense in the current
fiscal periods is the adoption of SFAS 121. As indicated earlier, SFAS 121
requires the elimination of depreciation and amortization expense on long-lived
assets to be disposed of.
13
For the six months ended March 31, 1997, this amounted to an approximate
$136,000 decrease in total expenses.
For the three and six months ended March 31, 1997 compared to the
corresponding periods in fiscal 1996, interest, property taxes, utilities and
environmental expenses remained constant.
Fees and reimbursements to the Managing General Partner decreased $13,761
and $32,653 for the three and six months ended March 31, 1997 compared to the
corresponding periods in 1996 due to the sale of LaRisa in the second quarter of
1996 which had the effect of reducing all fees paid by the Partnership to the
Managing General Partner.
Other management fees decreased $657 and $3,331 for the three and six
months ended March 31, 1997 when compared to the corresponding periods in 1996
due to the increased number of vacancies and resultant lower rental income, at
the Partnership's remaining property in the current fiscal year.
Repairs and maintenance expense increased $9,538 and $25,333 for the three
and six months ended March 31, 1997 compared to the corresponding periods in
1996. A portion of the increase is due to ongoing roof repairs and plumbing work
at Venetian Square Shopping Center ("Venetian"). In addition, approximately
$8,700 of the increased costs are being completed on behalf of a tenant at
Venetian. Upon completion of this general repair work, the Partnership intends
to bill the tenant and obtain a reimbursement.
Other administrative costs decreased $32,877 and $42,123 for the three
months ended March 31, 1997 compared to the corresponding period in 1996. This
decrease is primarily the result of the elimination of amortization of deferred
leasing costs in the current year, a result of adoption of SFAS 121 as discussed
previously.
Liquidity and Capital Resources
Cash and cash equivalent balances which represent Partnership reserves
amounted to $701,818 at March 31, 1997 which represents a decrease of $538,259
when compared with the fiscal 1996 year-end balance. Net cash flows from
operating activities for the six months ended March 31, 1997 amounted to
$136,769 and included an increase in payable to Managing General Partner
relating to operations of $89,697. At March 31, 1997 the payable to Managing
General Partner totaled $92,020. Other significant changes in assets and
liabilities include an increase in accounts receivable and other assets of
$50,562, primarily the result of the prepayment of property taxes in the second
quarter of fiscal 1997. Similarly, this resulted in a decrease in property taxes
payable of $21,238.
Net cash flows used in investing activities amounted to $2,829 for the six
months ended March 31, 1997, comprised solely of expenditures made for additions
to real estate held for sale.
14
These costs include costs related to tenant finish and lease commissions
associated with new tenants and the renewal of existing tenants at Venetian
Square Shopping Center.
Net cash flows used in financing activities amounted to $672,199 for the
six months ended March 31, 1997 and is comprised of a payment to the Managing
General Partner of $600,000 representing deferred acquisition fees, general
reimbursements and prior cash advances; and reductions in mortgage principal in
the amount of $72,199.
The Partnership is required under its Partnership Agreement to maintain
cash reserves of 3% of aggregate capital contributions ($660,000). As of March
31, 1997, the Partnership had $701,818 in cash reserves. The Partnership intends
to apply any cash flow generated from Partnership operations in fiscal 1997 to
maintain minimum required cash reserves, including any additional reserves
deemed necessary by the Managing General Partner to cover potential remediation
costs of the petroleum contamination at Venetian Square Shopping Center as
discussed below. Thereafter, the Partnership intends to pay the Managing General
Partner all unpaid deferred fees earned by the Managing General Partner, which
totaled $92,020 as of March 31, 1997.
To the knowledge of the Managing General Partner, its remaining property is
in good physical condition. In fiscal 1997, other than tenant finish and lease
commissions associated with the ongoing leasing efforts at Venetian Square
Shopping Center there are no other budgeted capital improvements.
The Managing General Partner is attempting to sell the Partnership's
remaining real estate investment in fiscal 1997. However, there can be no
assurances that the Partnership will sell this property in 1997. As of March 31,
1997, the Partnership has recorded its remaining real estate investment as real
estate held for sale. The Partnership has entered into a listing agreement with
an unrelated real estate brokerage firm to act as the exclusive selling agent
for the remaining property. The Managing General Partner believes that a sale
would provide net proceeds to the Partnership after the payment of sales costs,
closing costs and mortgage payable; however, this sales transaction may include
both cash at closing and deferred payments to the Partnership. The ability of
the Partnership to sell Venetian Square Shopping Center may be adversely
affected by the potential remediation costs of the petroleum contamination on a
parcel of land adjacent to and part of the property. The Partnership intends to
apply net sales proceeds to pay all remaining liabilities identified by the
Managing General Partner arising out of or in connection with the operations of
the Partnership and the sale of Venetian, including amounts owed to the Managing
General Partner. Thereafter, all remaining cash reserves of the Partnership will
be utilized to first pay the costs of liquidation and dissolution of the
Partnership, and then to make a final distribution to limited partners.
On October 24, 1996, the Partnership entered into a letter agreement with
Great West Life Assurance Company ("Great West") to extend the maturity date of
the first mortgage payable secured by Venetian Square Shopping Center to October
1, 1997. Under the agreement, the Partnership was obligated to pay a $20,000
fee, the interest rate was increased to 10.5% and the monthly payment was
increased to $39,098.
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From approximately 1979 through 1990, a card-lock fueling station had been
operated on a parcel of land adjacent to and part of Venetian Square Shopping
Center. In fiscal 1992, upon removal of the three underground fuel storage
tanks, leakage of petroleum contaminants was discovered through performance of
soil and groundwater tests. The Partnership is in the process of determining the
method, cost and timing of required soil and groundwater remediation measures.
The Partnership has spent approximately $307,000 to date in connection with the
remediation program and since fiscal 1993 has maintained an accrual of $250,000
as a provision for possible additional remediation expenses. Management is
unable at this time to estimate the full extent of additional expenses that may
be incurred. Due to groundwater contamination, the Partnership may incur
significant additional remediation costs. The estimate of costs and their timing
of payment could change as a result of (1) changes to a remediation plan
required by the State Environmental Agency, (2) changes in technology available
to treat the site, (3) unforeseen circumstances existing at the site and (4)
differences between actual inflation rates and rates assumed in preparing the
estimate. As a result of these factors, it is not possible for the Partnership
to reasonably estimate the amount by which remediation costs may exceed amounts
that the Partnership has accrued. The ultimate resolution of this matter and its
impact on the Partnership's financial statements is uncertain.
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PART III. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the period
covered by this report.
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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.
BOETTCHER WESTERN PROPERTIES III LTD.
-------------------------------------
(Registrant)
By: Boettcher Properties, Ltd., as
Managing General Partner
By: BPL Holdings, Inc., as
Managing General Partner
Dated: May 22, 1997 By: /s/ Thomas M. Mansheim
----------------------
Thomas M. Mansheim
Treasurer; Principal
Financial and Accounting
Officer of the Partnership
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