Total # of Pages: 18
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 June 30, 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 of (I.R.S. Employer Identification No.)
incorporation or organization)
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
------- -------
INDEX
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Page
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PART I. Financial Information
Item 1. Financial Statements (unaudited)
Balance Sheets - June 30, 1997
and September 30, 1996 3
Statements of Operations - Three and nine months
ended June 30, 1997 and 1996 4
Statement of Partners' Capital - Nine
months ended June 30, 1997 5
Statements of Cash Flows - Nine months
ended June 30, 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 II. 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)
June 30, 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 789,484 1,240,077
Accounts receivable and other assets 137,835 90,146
Debt issuance costs, net of accumulated
amortization of $43,673 and $33,446,
respectively 3,409 13,637
Deferred leasing costs, net of accumulated
amortization of $464,022 - 174,013
---------- -----------
$6,500,316 $ 6,910,619
========== ===========
Liabilities and Partners' Capital
---------------------------------
Mortgages payable, net of unamortized debt
discount of $2,509 and $4,525,
respectively $3,204,118 $ 3,303,685
Payable to managing general partner 126,030 602,323
Accounts payable and accrued expenses 293,812 296,557
Property taxes payable - 21,238
Tenants' deposits 38,458 39,339
Unearned rental income 7,041 5,556
Accrued interest payable - 490
---------- -----------
Total liabilities 3,669,459 4,269,188
---------- -----------
Partners' capital
General partners (111,975) (113,869)
Limited partners 2,942,832 2,755,300
---------- -----------
Total partners' capital 2,830,856 2,641,431
---------- -----------
$6,500,317 $ 6,910,619
========== ===========
See accompanying notes to financial statements.
3
BOETTCHER WESTERN PROPERTIES III LTD.
(A Limited Partnership)
Statements of Operations
Three and nine months ended June 30, 1997 and 1996
(unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
Revenue:
Rental income $196,164 $198,148 $593,969 $1,123,126
Tenant reimbursements for
common area charges,
insurance and taxes 66,528 42,904 203,583 184,258
Other income 7,606 14,551 48,169 53,098
-------- -------- -------- ----------
270,298 255,603 845,721 1,360,482
-------- -------- -------- ----------
Expenses:
Interest, including
amortization of debt
discount and debt
issuance costs 91,995 91,873 274,831 435,794
Depreciation - 52,681 - 264,078
Property taxes 21,238 22,712 64,624 125,550
Fees and reimbursements to
managing general partner 24,686 24,951 76,395 109,313
Other management fees 12,095 11,219 35,160 60,807
Salaries of on-site property
managers - - - 62,888
Repairs and maintenance 23,254 25,122 102,207 126,097
Utilities 8,502 8,882 26,433 61,838
Other administrative 23,161 34,038 68,820 158,513
Environmental costs 1,850 3,224 7,825 10,130
-------- -------- -------- ----------
206,781 274,702 656,295 1,415,008
-------- -------- -------- ----------
Operating income (loss) 63,517 (19,099) 189,426 (54,526)
Gain on sale of real estate
investment - - - 1,329,705
-------- -------- -------- ----------
Net earnings (loss) $ 63,517 $(19,099) $189,426 $1,275,179
======== ======== ======== ==========
Net earnings (loss) per limited
partnership unit $ 2.89 $ (.86) $ 8.61 $ 57.38
======== ======== ======== ==========
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
Nine months ended June 30, 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 nine months 1,894 187,532 189,426
ended June 30, 1997 --------- ---------- ----------
Balances at June 30, 1997 $(111,975) $2,942,832 $2,830,857
========= ========== ==========
See accompanying notes to financial statements.
5
BOETTCHER WESTERN PROPERTIES III LTD.
(A Limited Partnership)
Statements of Cash Flows
Nine Months Ended June 30, 1997 and 1996
(unaudited)
Nine Months Ended
June 30,
----------------------
1997 1996
---- ----
Cash flows from operating activities:
Net earnings (loss) $ 189,426 $ 1,275,179
Adjustments to reconcile net loss to
net cash provided by operating activities
Depreciation and amortization 12,307 331,588
Gain on sale of property - (1,329,705)
Change in assets and liabilities:
(Increase) decrease in accounts receivable and other assets (47,689) 41,060
Decrease in property tax and other escrow deposits - 111,511
Increase (decrease) in payable to managing general
partner relating to operations 123,707 (956,681)
Decrease in accounts payable and accrued expenses (2,745) 2,794
Decrease in property taxes payable (21,238) (140,902)
Decrease in tenants' deposits (881) (26,687)
Increase (decrease) in unearned rental income 1,485 (17,227)
Decrease in accrued interest payable (490) (33,491)
---------- -----------
Net cash flows from operating activities 253,882 (742,561)
---------- -----------
Cash flows used by investing activities:
Additions to real estate held for sale (2,829) (64,149)
Deferred leasing costs - (53,629)
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) 5,918,962
---------- -----------
Cash flows used in financing activities:
Advances from (payments to) managing general partner (600,000) -
Reductions in mortgage principal (101,646) (3,832,332)
Distributions to limited partners - (999,900)
---------- -----------
Net cash flows from financing activities (701,646) (4,832,232)
---------- -----------
Net increase (decrease) in cash and cash equivalents (450,593) 344,169
Cash and cash equivalents at September 30 1,240,077 836,140
---------- -----------
Cash and cash equivalents at June 30 $ 789,484 $ 1,180,309
========== ===========
Supplemental disclosure of cash flow information:
Interest paid in cash during the nine month period $ 275,321 $ 451,438
========== ===========
See accompanying notes to financial statements.
6
BOETTCHER WESTERN PROPERTIES III LTD.
(A Limited Partnership)
Notes to Financial Statements
June 30, 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
reasonably 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
June 30, 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
June 30, 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 June 30:
1997 1996
-------- ----------
Money Market $631,359 $1,094,504
Operating Cash 158,125 85,805
-------- ----------
Cash and Cash Equivalents $789,484 $1,180,309
======== ==========
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 June
30, 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 June 30, 1997 the
amount earned by the Managing General Partner was $716.
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 June 30, 1997 such
reimbursements totaled $4,320.
9
BOETTCHER WESTERN PROPERTIES III LTD.
(A Limited Partnership)
Notes to Financial Statements
June 30, 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 June 30, 1997, the Partnership had cash reserves of $789,484, while the
required minimum amount was $660,000. For the nine months ended June 30,
1997, the payable to Managing General Partner decreased by $476,293 to a
total of $126,030 as of June 30, 1997. This decrease is the net result of
advances from the Managing General Partner totaling $123,707, 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 $126,030 as of June 30, 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 June 30,
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 ("Venetian").
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 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 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. If Venetian is not sold prior to October 1,
10
BOETTCHER WESTERN PROPERTIES III LTD.
(A Limited Partnership)
Notes to Financial Statements
June 30, 1997
(unaudited)
1997, the Managing General Partner intends to secure an additional
extension on its first mortgage payable to Great West.
(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
This report contains forward-looking statements (within the meaning of Section
21E. of the Securities Exchange Act of 1934, as amended) representing the
Managing General Partner's current expectations and beliefs concerning future
events. When used in this report, the words "believes," "estimates," "plans,"
"expects," "intends," anticipates," and similar expressions as they relate to
the Partnership or its management are intended to identify forward-looking
statements. The actual results of the Partnership could differ materially from
those indicated by the forward-looking statements because of various risks and
uncertainties related to and including, without limitation, the Partnership's
ability to sell its remaining real estate investment, the levels of income and
expenses relating to its real estate investment, and the extent of additional
costs to complete environmental remediation at its remaining property. These
risks and uncertainties are beyond the ability of the Managing General Partner
to control; in many cases, the Managing General Partner cannot predict the risks
and uncertainties that could cause actual results to differ from those indicated
by the forward-looking statements.
Results of Operations
For the three and nine months ended June 30, 1997, the Partnership
generated total revenue of $270,298 and $845,721 and incurred total expenses of
$206,781 and $656,295, resulting in income from operations of $63,517 and
$189,426, respectively. This represents improvements in the Partnership's income
from operations when compared to the three and nine months ended June 30, 1996
of $82,616 and $243,952, 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 nine months ended June 30, 1996 of $1,275,179.
The Partnership generated decreased total revenue, primarily rental and other
income, and decreased total expenses in all categories for the nine months ended
June 30, 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 June 30 Nine Months Ended June 30
(in thousands) (in thousands)
----------------------------------- -------------------------
Amount Amount
of % of %
1997 1996 Change Change 1997 1996 Change Change
----- ----- ------- ------- ----- ------ ------- ------
Total revenue $ 270 $ 256 $ 14 5% $ 846 $1,360 $ (514) (38%)
Total expenses 207 275 ( 68) 25% 656 1,415 ( 759) 54%
----- ----- ----- ----- ------ -------
Net operating
income (loss) $ 63 $ (19) $ 82 $ 190 $ (55) $ 245
===== ===== ===== ===== ====== =======
When making period-to-period comparisons, the exclusion of the operations
of LaRisa from the prior fiscal year-to-date results allows for a more
meaningful analysis of the operations of the
12
Partnership's remaining investment. For comparison purposes only, the results of
operations of LaRisa have been excluded from the nine months ended June 30, 1996
in the table below.
Three Months Ended June 30 Nine Months Ended June 30
(in thousands) (in thousands)
-------------------------- ---------------------------
Amount Pro Amount
of % Forma of %
1997 1996 Change Change 1997 1996 Change Change
----- ----- -------- ------- ----- ----- -------- ------
Total revenue $ 270 $ 256 $ 14 5% $ 846 $ 839 $ 7 1%
Total expenses 207 275 (68) 25% 656 877 (221) 25%
----- ----- ---- ----- ----- --------
Net operating
income (loss) $ 63 $ (19) $ 82 $ 190 $ (38) $ 228
===== ===== ==== ===== ===== ========
Based upon the actual and proforma amounts presented above, the Partnership
generated total revenue of $270,298 and $845,721, for the three and nine months
ended June 30, 1997 which represent increases of $14,695 (5%) and $6,829 (1%),
respectively, when compared with the corresponding periods of fiscal 1996.
Rental income generated by the Partnership's remaining property for the three
and nine month periods in fiscal 1997 decreased $1,984 (1%) and $29,673 (5%),
when compared with the corresponding periods in fiscal 1996, primarily the
result of decreased average occupancy at the property in fiscal 1997. Venetian
achieved average occupancy of 79% and an average effective rental rate of $8.48
for the third quarter of fiscal 1997, representing a decrease of 8% and an
increase of $.72, respectively, when compared to the same period in fiscal 1996.
Tenant reimbursement income increased $19,325 (10%) for the nine months ended
June 30, 1997 when compared to the corresponding period in fiscal 1996, as a
result of increased tenant assessments for common area maintenance based upon
the costs of operations. Other income remained constant for the three months
ended June 30, 1997 compared to the same period in 1996, while it increased
$17,177 for the nine months ended June 30, 1997, when compared to the same
period in 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 former real estate investments. A summary of the Partnership's
remaining property's average occupancy and average effective rental rates is
presented below.
Third Quarter
Fiscal 1997 Fiscal 1996
-------------- ------------
Commercial
- ----------
Venetian Square Shopping Center
Average occupancy 79% 87%
Average effective rental rate (1) (2) $8.48 $7.76
(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.
13
Based on the actual and proforma amounts presented previously, the
Partnership incurred total expenses of $206,781 and $656,295 for the three and
nine months ended June 30, 1997, representing decreases of $67,921 (25%) and
$220,611 (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. For the nine months ended June 30, 1997, this
amounted to an approximate $136,000 decrease in total expenses.
For the three and nine months ended June 30, 1997, as 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 $265 and
$32,918 for the three and nine months ended June 30, 1997 as compared to the
corresponding period 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 $2,455 for the nine months ended June 30,
1997 as compared to the corresponding period 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 $23,464 for the nine months ended
June 30, 1997 as compared to the corresponding period 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 $40,995 and $53,002 for the three and
nine months ended June 30, 1997 compared to the corresponding periods in 1996.
The 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 $789,484 at June 30, 1997 which represents a decrease of $450,593
when compared with the fiscal 1996 year-end balance. Net cash flows from
operating activities for the nine months ended June 30, 1997 amounted to
$253,882 and included an increase in payable to Managing General Partner
relating to operations of $123,707. At June 30, 1997 the payable to Managing
General Partner totaled $126,030. Other significant changes in assets and
liabilities include an increase in accounts receivable and other assets of
$47,689, primarily as the result of the prepayment of property taxes in the
third quarter of fiscal 1997. Similarly, this resulted in a decrease in property
taxes payable of $21,238.
14
Net cash flows used in investing activities amounted to $2,829 for the nine
months ended June 30, 1997, comprised solely of expenditures made for additions
to real estate held for sale. 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 $701,646 for the
nine months ended June 30, 1997 and is comprised of a payment to the Managing
General Partner of $600,000 representing deferred acquisition fees, general
reimbursements and repayment of prior cash advances; and reductions in mortgage
principal in the amount of $101,646.
The Partnership is required under its Partnership Agreement to maintain
cash reserves of 3% of aggregate capital contributions ($660,000). As of June
30, 1997, the Partnership had $789,484 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 $126,030 as of June 30, 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 June 30,
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
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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. If Venetian is not
sold prior to October 1, 1997, the Managing General Partner intends to secure an
additional extension on its first mortgage payable to Great West.
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 II. 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: August 14, 1997 By: /s/ Thomas M. Mansheim
----------------------
Thomas M. Mansheim
Treasurer; Principal
Financial and Accounting
Officer of the Partnership
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