ITEM 1. BUSINESS
Background
Southeast Acquisitions III, L.P. (the "Partnership") was formed on November 4, 1988, as a Delaware limited partnership. The Partnership's public offering of 12,400 units of limited partnership interest ("Units") commenced on May 2, 1989 and terminated on August 29, 1989 when all 12,400 Units were sold. The Partnership has since been scheduled to terminate on December 31, 2001. There are currently no plans to extend the Partnership agreement. Since there is land remaining at December 31, 2001, the current General Partner will continue to run operations through the liquidation mode.
The Partnership purchased the following five parcels of unimproved land in 1989: 208 acres in Fulton County, Georgia; 265 acres in Henry County, Georgia; 24 Acres in Nashville, Tennessee; 47 acres in Fort Myers, Florida; and 51 acres in Columbia, South Carolina. The Partnership's primary business objective is to realize appreciation in the value of the five parcels of unimproved land (each a "Property", collectively the "Properties"), by holding the Properties for investment and eventual sale, although there is no assurance that this will be attained.
Since acquisition, through January 2002, the Partnership has sold approximately 50% of its Fulton County, Georgia Property, all of its Henry County, Georgia Property, all of its Nashville, Tennessee Property, all of its Fort Myers, Florida Property and all of its Columbia, South Carolina Property. All of the remaining Property in Fulton County, Georgia is currently under contract, but there can be no assurance that this transaction will close.
The timing and manner of sale will be determined by Southern Management Group, LLC, the General Partner of the Partnership. The General Partner generally has the right to sell Property, or portions thereof, without the consent of the Limited Partners. The Partnership Agreement provides, however, that a majority in interest of the Limited Partners must consent to the sale or disposition at one time of 60% or more of the real estate acreage held by the Partnership as of September 22, 1997 unless the sale or disposition is being made in connection with the liquidation of the Partnership pursuant to the Partnership Agreement or in the event that the net proceeds of the sale, when distributed in accordance with the Partnership Agreement, will be sufficient to provide the Limited Partners with distributions equal to the acquisition cost of the assets sold.
The General Partner believes that the Partnership's cash reserves will be sufficient to last for at least one more year assuming no significant increases in expenses. However, if the reserves are exhausted and the Partnership is unable to borrow funds, the Partnership may have to sell the Property on unfavorable terms.
The General Partner has no plans to develop the Properties, except for activities necessary to prepare the Properties for sale. There can be no assurance that necessary funds would be available should it be desirable for the Partnership to improve the Properties to facilitate their sale.
At a special meeting of Limited Partners held on November 5, 1997, the Partnership Agreement was amended to (i) extend the term of the Partnership from its original expiration date of December 31, 1999 to December 31, 2001; (ii) substitute Southern Management Group, LLC for Southeast Acquisitions, Inc. as the General Partner of the Partnership; (iii) authorize new commissions and new management fees for the new General Partner; (iv) give the new General Partner the exclusive right to sell Partnership property; and (v) modify the Partnership Agreement to require that a majority in interest of the Limited Partners must consent to the sale or disposition at one time of 60% or more of the real estate acreage held by the Partnership as of September 22, 1997 unless the sale or disposition is being made in connection with the liquidation of the Partnership pursuant to the Partnership Agreement or the net proceeds of the sale, when distributed in accordance with the Partnership Agreement, will be sufficient to provide the Limited Partners with distributions equal to the acquisition cost of the assets sold.
Material Recent Developments
During 2001, the Partnership sold 100.01 acres of the Fulton County, Georgia land for a sales price of $2,000,000 and recognized a gain of $1,147,677. During 1999, 2000 and 2001 the Partnership also received extension fees and interest income totaling $372,781 related to the extension of the closing of this sale, which originally closed in escrow in November 1999. In September 2001, the Partnership entered into a sales contract to sell all of the remaining Fulton County, Georgia Property for a sales price of $32,100 per acre. The contract allows for several extension periods, which could extend the closing to as late as July 2002. There are contract contingencies that could allow the purchaser to terminate the agreement. There can be no assurance that this transaction will close. The Partnership also sold 1.59 acres of the Columbia, South Carolina Property for a sales price of $25,000 and recognized a loss of $5,992. In January 2002, all of the remaining Columbia, South Carolina Property was sold for a sales price of $500,000.
Employees
The Partnership presently has no employees. The General Partner manages and controls the affairs of the Partnership. (See Part III, Item 10, Directors and Executive Officers of the Partnership).
Competition
The General Partner believes that there is significant direct competition within a five-mile radius of the remaining Property. The remaining Property is located in central Georgia.
Trademarks and Patents
The Partnership has no trademarks or patents.
ITEM 2.
ITEM 2. PROPERTIES
The Partnership owns one tract of undeveloped land consisting of approximately 105 acres in Fulton County, Georgia.
Fulton County, Georgia Property
The Fulton County, Georgia Property consists of approximately 105 acres of undeveloped land located in the southern portion of Fulton County approximately 16 miles southwest of the central business district, approximately 10 miles west of the Hartsfield-Atlanta International Airport. The Property is located at the northeast quadrant of the intersection of State route 92 (Campbelltown-Fairburn Road) and the South Fulton Parkway. The Property has approximately 2,750 feet of frontage along State Route 92 on its east side and 3,345 feet of frontage on Thompson Road. Thompson Road is paved and intersects with State Route 92 north of the South Fulton Parkway. South Fulton Parkway provides the site with direct access to both I-85 and I-285, major north-south arteries. The Property is currently the only non-residentially zoned land in the immediate surrounding area. The Property is located in the northeast quadrant of the State Route 92 and South Fulton Parkway intersection and is currently zoned for agriculture use.
All utilities are available to the Property except sewer facilities. The Partnership has no other plans for development of this Property. The General Partner has the sole discretion to decide whether the Partnership should develop the Property to facilitate sales.
The former general partner had the Fulton County Property appraised in 1996 by Urban Realty Advisors, Inc. The 1996 appraiser has no relationship with the former general partner or the current General Partner. The Property was appraised in 1996 for $1,350,000 or approximately $6,490 per acre. The appraiser used the sales comparison (market) approach to value the Property. The appraiser concluded that the Property's only
immediate use was residential due to the low traffic counts and low population density in the area. The appraiser also determined that the Property was not imminently ready for development and therefore did not conduct a development analysis for comparison to the market approach.
The appraised value does not reflect costs, expenses and commissions, which would be incurred in connection with a sale of the property. Moreover, appraisals are only an approximation of current market value, which can only be established by an actual sale. The Partnership currently has a contract to sell all of the remaining Fulton County, Georgia Property for a sales price of $32,100 per acre. There can be no reasonable assurance that this transaction will close.
Fort Myers, Florida Property
All of the Fort Myers, Florida Property has been sold. The Property consisted of approximately 47 acres and was sold at a sales price of $1,300,000, less commissions and expenses.
Columbia, South Carolina Property
All of the Columbia, South Carolina Property has been sold. During 2001, the Partnership sold approximately 1.59 acres at a sales price of $25,000, less commissions and expenses. The remaining 33 acres were sold in January 2002 at a sales price of $500,000, less commissions and expenses.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not directly a party to, nor is the Partnership's Property directly the subject of, any material legal proceedings.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders in 2001.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE PARTNERSHIP'S UNITS OF LIMITED PARTNERSHIP INTEREST AND RELATED SECURITY HOLDER MATTERS
There is no established public trading market for the Units and it is not anticipated that any will develop in the future. The Partnership commenced an offering to the public on May 2, 1989 of 12,400 Units of limited partnership interests. The offering of $12,400,000 was fully subscribed and terminated on August 29, 1989. As of December 31, 2001, there were 703 limited partners in the Partnership.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
* Includes a provision for loss on land of $141,147.
** Includes a provision for lose on land of $140,844.
SELECTED QUARTERLY FINANCIAL DATA
* In the real estate industry, costs of sales are netted in the gain on sale of land and are included in operating revenues; therefore, there is no breakdown for gross profit.
** Includes a provision for loss on land of $140,844.
*** Negative revenues resulted from the General Partner's fourth quarter decision to apply $50,000 of extension fees to the sales price of a pending land sale at closing. The previous agreement between the Partnership and the potential purchaser was that the $50,000 was a non-refundable extension fee and would not apply to the purchase price.
**** Net income (loss) per unit of limited partnership interest for the first three quarters of 2000 have been restated to conform to the year-end presentation.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Background
The Partnership was formed to acquire and realize appreciation in the Property by holding it for investment and eventual sale. However, there can be no assurance that the Partnership's objectives will be realized.
The Partnership originally purchased 595 acres of unimproved land at five locations. The status of these Properties at December 31, 2001 is as follows:
Results of Operations
The Partnership had no operations from the date of its formation on November 4, 1988 until June 1, 1989 when it acquired the initial Property and sold 6,215 Units of Limited Partnership interest. During 1989 the Partnership acquired four additional Properties and sold 6,185 additional Units of Limited Partnership interests.
2001 Compared to 2000
During 2001, the Partnership had one sale of the Fulton County, Georgia Property, recognized non-refundable extension fees and interest income related to the Fulton County, Georgia sale and had one sale of the Columbia, South Carolina Property. The revenues recognized from these transactions totaled $1,311,829 as compared to gains from Property sales, extension fees and interest income related to Property sales of $377,229 in 2000. During 2001 the Partnership also recognized other income of $6,411, $6,319 of which was for payment of prior year real estate taxes related to the Fulton County, Georgia sale. There was no such income in 2000. Other revenue in 2001 consisted of $10,218 in interest income compared to $16,206 in 2000. During 2001, a distribution of $160 per Unit was made to the Limited Partners compared to a distribution per Unit of $140 in 2000.
Expenses for 2001 were $301,276 consisting of general and administrative expenses of $35,403, management fees of $26,500, franchise and excise taxes of $14,562, real estate taxes of $83,745, insurance of $222 and a provision for loss on land of $140,844 based on the amount the Partnership had committed to sell the
Columbia, South Carolina Property for during January 2002, net of estimated selling costs. The general and administrative fees included $23,004 in accounting and legal fees, which represents a decrease of $7,145 from 2000. In 2001 the Partnership did not require the additional legal assistance that had been needed for the Fort Myers, Florida Property sale in 2000. The general and administrative expenses also included $7,002 for professional fees related to the wetlands delineation and flood plains study on the Columbia, South Carolina Property. There were no such fees in 2000. The franchise and excise tax liability to Tennessee was primarily related to the interest income from the Fulton County, Georgia Property sale. There were no such taxes paid in 2000. The real estate taxes in 2001 included $80,146 in Greenbelt rollback taxes. These taxes, along with the provision for loss on land, are both related to the sale of the remaining Columbia, South Carolina Property, which occurred in January 2002. There were no rollback taxes or provision for loss on land in 2000.
2000 Compared to 1999
During 2000, the Partnership had two sales of the Columbia, South Carolina Property, sold all of the Fort Myers, Florida Property and recognized interest income on a pending sale of the South Fulton County Property. The gain recognized from these transactions totaled $377,229 as compared to gains from Property sales, extension fees and related interest income of $1,321,313 in 1999. Other revenue in 2000 consisted of $16,206 in interest income compared to $22,547 in 1999.
Expenses for 2000 were $104,072, consisting of general and administrative expenses of $38,217, management fees of $26,500, real estate taxes of $39,182 and insurance of $173. The general and administrative expenses included legal and accounting fees of $30,149, which represents an increase of $7,972 compared to 1999. This increase was primarily due to additional legal assistance needed for the Fort Myers, Florida Property sale. The general and administrative expenses also includes professional fees of $1,987, which represents a decrease from 1999 of $5,258. The 1999 fees included $1,100 for an appraisal on the Fort Myers, Florida Property and $3,498 for engineering fees in relation to a sale of the Columbia, South Carolina Property. There were no such fees in 2000. The Partnership also had to pay $2,000 for debris removal on the South Fulton County Property. The $19,972 increase in real estate taxes is primarily due to greenbelt rollback taxes of $12,727, which resulted from the Columbia, South Carolina sales.
Inflation did not have a material impact on operations during 2001, 2000 or 1999.
Liquidity And Capital Resources
Cash generated by operating activities varies from year to year based on the level of land sale activity. The Partnership had cash reserves of $83,860 at December 31, 2001. The General Partner believes that the Partnership has sufficient cash reserves to cover normal partnership expenses for an additional year. However, if additional expenses are incurred or if the Partnership goes forward with the construction to bring sewer to the Fulton County Property, the reserves may be inadequate to cover the Partnership's operating expenses. If the reserves are exhausted, the Partnership may have to dispose of some of the Property or incur indebtedness on unfavorable terms.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Partnership's financial statements for the years ended December 31, 2001, 2000 and 1999, together with the report of the Partnership's independent auditors, Williams Benator & Libby, LLP, are included in this Form 10-K
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Partnership does not have any directors or officers. The General Partner manages and controls the affairs of the Partnership and has responsibility for all aspects of the Partnership's operations. The current members and executive officers and directors of the General Partner are identified and described below.
The General Partner is a Tennessee limited liability company whose members are Richard W. Sorenson, who owns a 50% interest in the General Partner and has a 51% voting right, and Southeast Venture LLC, a Tennessee limited liability company which owns 50% and has a 49% voting right.
Mr. Sorenson, age 76, has over 40 years experience in several real estate disciplines, including land acquisition and development, development of office buildings, shopping centers, warehouses and medical facilities. All of these activities occurred in the southeastern United States.
Mr. Sorenson was President of Phoenix Investment Company ("Phoenix"), a publicly owned, Atlanta based real estate development and investment firm from 1965 to 1970. Concurrent with his employment at Phoenix, he was President of First Atlanta Realty Fund, a publicly owned real estate investment trust. During his tenure with the trust, he served as a Trustee of the National Association of Real Estate Investment Trusts.
Following his departure from Phoenix in 1970, Mr. Sorenson became Vice President of Cousins Properties in Atlanta, where he was responsible for development of office buildings, shopping centers and apartments until 1971. Until forming Southeast Venture Companies ("SV") in 1979, Mr. Sorenson was an independent real estate developer.
Mr. Sorenson was co-founder of SV in 1979. In 1992, substantially all of the assets of SV were sold to Southeast Venture Corporation.
Mr. Sorenson is a graduate of the Northwestern University Business School with a major in real estate.
The other member of the General Partner is Southeast Venture LLC ("SVLLC"). The officers and key employees of SVLLC include the following:
Paul J. Plummer, age 52. Mr. Plummer is a registered architect and serves as director of architecture services for SVLLC. Mr. Plummer is responsible for facility programming, planning, master planning, facility assessment and design. Before joining SV in 1986, Mr. Plummer served as a partner and director of design for the Nashville-based architecture and engineering firm of Gresham, Smith and Partners. In that capacity he was responsible for the design and planning of over 15 major projects throughout the United States and Saudi Arabia. Mr. Plummer earned his bachelor of architecture degree from the University of Kentucky and is a member of the American Institute of Architects.
Wood S. Caldwell, age 48. Mr. Caldwell is responsible for all site development activities on behalf of commercial and health care clients of SVLLC, including managing all design consultants, permitting, scheduling, budgeting and construction management. He contributes to SVLLC's development team in the areas of land planning, zoning, permitting, engineering and construction. Before joining SV in 1985, Mr. Caldwell served as a professional engineer for Gresham, Smith and Partners. As the prime site design engineer for Gresham, Smith and Partners, Mr. Caldwell produced and coordinated site development plans for over 50 separate medical facilities in over 40 different communities throughout the southeast. Mr. Caldwell earned his bachelor of engineering degree from the Vanderbilt University School of Engineering.
Axson E. West, age 47. Mr. West serves as vice president of brokerage services for SVLLC, specializing in office and industrial leasing, improved property sales and land disposition for several commercial and residential projects.
Mr. West has sold real estate and real estate securities since 1980 and, since joining SV in 1988, he has been responsible for the disposition of land encompassing industrial, office and retail developments. Mr. West is past director of the Nashville Board of Realtors and past president of the board's commercial investment division. He received his bachelor of arts degree from Vanderbilt University and is a Certified Commercial Investment Member, a designation of the Commercial Investment Real Estate Institute.
Cameron W. Sorenson, age 40. Mr. Sorenson serves as director of vertical development for SVLLC. He is primarily responsible for providing development and project management for the clients of SVLLC. Prior to assuming these responsibilities, Mr. Sorenson was project director for two large scale land development ventures for SVLLC. Prior to joining SV in 1987, Mr. Sorenson was with Trust Company Bank in Atlanta, as an officer in the National Division, managing a credit portfolio in excess of $150 million. He received his bachelor of science degree in finance from the MacIntyre School of Business at the University of Virginia. Cameron Sorenson is the son of Richard W. Sorenson, the individual majority member of the General Partner.
Randall W. Parham, age 46. Mr. Parham is the President of SVLLC. He is primarily responsible for property management, park and association management and also specializes in real estate development and brokerage. Mr. Parham is a licensed real estate broker and architect. Prior to joining SVLLC in 1998, Mr. Parham was a project manager with Gresham, Smith and Partners from 1978 to 1983 and was responsible for overall project management of project team and project financial management. Following his departure from Gresham, Smith and Partners, Mr. Parham joined MetroCenter Properties, Inc., an 850 acre mixed-use development in Nashville, Tennessee. He was Vice President and was responsible for initiation and development of new projects, land sales and lease negotiations. In 1991 he purchased the assets of MetroCenter Properties and formed MetroCenter Management, Inc. where he served as President through 1997.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
During the fiscal year ended December 31, 2001, the Partnership did not pay compensation to any officers of the General Partner. The Partnership paid the General Partner a management fee of $26,500 in the fiscal years ended December 31, 2001, 2000 and 1999, respectively. See Item 13 of this report, "Certain Relationships and Related Transactions."
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 2001, no person or "group" (as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934) was known by the Partnership to beneficially own more than five percent of the Units of the Partnership.
Security Ownership of Management
No individual member, or director or officer of a member, of the General Partner nor such directors or officers as a group, owns any of the Partnership's outstanding securities. The General Partner owns a general partnership interest which entitles it to receive 30% of cash distributions after the Limited Partners have received a return of their capital contributions plus cumulative distributions equal to a 10% non-compounded Cumulative Annual Return of their Adjusted Capital Contributions as those terms are defined in the Partnership Agreement. The General Partner will share in taxable income to reflect cash distributions or, to the extent there are losses, 1% of such losses.
Changes in Control
There are no arrangements known to the Partnership that would at any subsequent date result in a change in control of the Partnership.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From 1988 to November 5, 1997, the Partnership paid $24,886 annually as an administration fee to the former general partner. This fee was computed as one quarter of one percent of the base cost of the land. The cumulative amount of such fee could not exceed $207,244,which limit was reached and paid during 1997 as provided in the Partnership Agreement. As of November 5, 1997, the Limited Partners voted and agreed to pay the new General Partner, Southern Management Group, LLC, a fee of $4,066 for the period November 5, 1997 through December 31, 1997 and annual fees of $26,500 from January 1, 1998 through December 31, 2001. No management fees will be paid in the year 2002 since the Partnership will be operating in liquidation mode.
The General Partner will also receive 30% of cash distributions after the Limited Partners have received (i) a return of their Capital Contributions plus (ii) cumulative distributions equal to a 10% Cumulative Annual Return on their Adjusted Capital Contributions (as those terms are defined in the Partnership Agreement). During 2001, 2000, and 1999 the General Partner received no cash distributions.
At the special meeting of Limited Partners held on November 5, 1997, the Partnership Agreement was amended to provide that total compensation paid to all persons, including the General Partner, for the sale of the Partnership's Property is limited to a competitive real estate commission or disposition fee not to exceed 10% of the contract price of the property. Any such real estate commission or disposition fee that is paid to the General Partner will reduce any distributions to which it would otherwise be entitled under the amended Partnership Agreement. In addition, the Partnership Agreement was amended to provide that the General Partner may act as the exclusive agent for the sale of the Property. During 2001, 2000 and 1999, the Partnership paid real estate commissions of $41,250, $72,477 and $57,069, respectively, to the General Partner.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Index to Financial Statements
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership during the fourth quarter of 2001.
(c) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
* Incorporated by reference to Exhibit 3.1 filed as part of the Exhibits to the Partnership's Registration Statement on Form S-18, Registration No. 33-26759.
** Incorporated by reference to Exhibit 3.2 filed as part of the Partnership's Registration Statement on Form S-18, Registration No. 33-26759.
SOUTHEAST ACQUISITIONS III, L.P. (A Limited Partnership Operating in Liquidation Mode)
AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 2001
with
INDEPENDENT AUDITORS' REPORT
Audited Financial Statements (A Limited Partnership Operating in Liquidation Mode)
SOUTHEAST ACQUISITIONS III, L.P.
December 31, 2001
[WILLIAMS BENATOR & LIBBY, LLP LOGO]
INDEPENDENT AUDITORS' REPORT
Partners Southeast Acquisitions III, L.P. Nashville, Tennessee
We have audited the accompanying balance sheets of Southeast Acquisitions III, L.P. (a Delaware limited partnership operating in liquidation mode) as of December 31, 2001 and 2000, and the related statements of income, partners' equity (deficit), and cash flows for the years ended December 31, 2001, 2000, and 1999. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Southeast Acquisitions III, L.P. (a limited partnership operating in liquidation mode) as of December 31, 2001 and 2000, and the results of its operations and its cash flows for the years ended December 31, 2001, 2000, and 1999, in conformity with accounting principles generally accepted in the United States of America.
As more fully described in Note A, according to the terms of the partnership agreement, the Partnership was scheduled to terminate on December 31, 2001 and is continuing to operate in liquidation mode.
WILLIAMS BENATOR & LIBBY, LLP
Atlanta, Georgia January 16, 2002
BALANCE SHEETS
SOUTHEAST ACQUISITIONS III, L.P. (A Limited Partnership Operating in Liquidation Mode)
See notes to financial statements.
STATEMENTS OF INCOME
SOUTHEAST ACQUISITIONS III, L.P. (A Limited Partnership Operating in Liquidation Mode)
See notes to financial statements.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
SOUTHEAST ACQUISITIONS III, L.P. (A Limited Partnership Operating in Liquidation Mode)
See notes to financial statements.
STATEMENTS OF CASH FLOWS
SOUTHEAST ACQUISITIONS III, L.P. (A Limited Partnership Operating in Liquidation Mode)
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
SOUTHEAST ACQUISITIONS III, L.P. (A Limited Partnership Operating in Liquidation Mode)
December 31, 2001
NOTE A--DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Southeast Acquisitions III, L.P. (a limited Partnership operating in liquidation mode) ("the Partnership") is a Delaware limited partnership that was formed to acquire undeveloped land. The Partnership was formed during November 1988 and received equity contributions totaling $12,373,480 through the sale of 12,400 limited partnership units during 1989. The Partnership was originally scheduled to terminate on December 31, 1999. However, during November 1997, concurrent with the replacement of the previous general partner, the term of the Partnership was extended to December 31, 2001. It is the intention of the general partner to operate in liquidation mode until all of the Partnership's land is sold. At December 31, 2001, there were no adjustments necessary to present the financial statements on a liquidation basis.
During 1989, the Partnership purchased undeveloped land as follows: approximately 211 acres in Fulton County, Georgia, approximately 265 acres in Henry County, Georgia, approximately 24 acres in Nashville, Tennessee, approximately 48 acres in Fort Myers, Florida, and approximately 51 acres in Columbia, South Carolina. This land was purchased from an affiliate of the previous general partner. The land in Nashville, Tennessee was sold during 1995. The land in Henry County, Georgia was sold during 1999. The land in Fort Meyers, Florida, was sold during 2000. At December 31, 2001, the Partnership's property consisted of approximately 104.8 acres in Fulton County, Georgia and approximately 33 acres in Columbia, South Carolina.
The following accounting policies are presented to assist the reader in understanding the Partnership's financial statements:
Basis of Accounting: The Partnership maintains its accounting records on the accrual basis of accounting. Sales of land are recognized upon the closing of an enforceable sales contract and the Partnership's execution of its obligations under the contract.
Land: Land held for sale is carried at the lower of cost or fair value less estimated cost to sell. The Partnership's land is carried net of write-downs to fair value, as determined by independent appraisals. Cumulative original write-downs to fair value through December 31, 2001 totaled $3,622,126 on the Fulton County, Georgia land and $766,705 on the Columbia, South Carolina land.
NOTES TO FINANCIAL STATEMENTS--Continued
SOUTHEAST ACQUISITIONS III, L.P. (A Limited Partnership Operating in Liquidation Mode)
NOTE A--DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES-- Continued
Income Taxes: Federal and state income taxes have not been provided for in the financial statements. Under existing law, the Partnership is not treated as a taxable entity. Rather, each partner must include his allocated share of Partnership income, loss, gain, deduction, and credit in his individual income tax return. Write-downs of the land's carrying value that have been recorded for financial statement purposes will not be recognized for income tax purposes until the land is sold. At December 31, 2001 and 2000, remaining write-downs that had not been recognized for income tax purposes totaled $2,379,967 and $4,052,554, respectively.
Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents: For purposes of reporting cash flows, the Partnership considers all demand deposits and highly liquid investments purchased with an original maturity of three months or less which can be readily converted to cash on demand, without penalty, to be cash equivalents. At December 31, 2001, cash on deposit included approximately $165,000 in excess of federally insured limits.
NOTE B--RELATED PARTY TRANSACTIONS
During each of the years ended December 31, 2001, 2000 and 1999, the Partnership paid management fees of $26,500 to the general partner, as provided for in the amendment to the partnership agreement that was adopted during November 1997. No management fees will be paid during 2002 since the Partnership will be operating in liquidation mode.
At December 31, 2001 and 2000, the Partnership had commissions payable to its previous general partner of $3,584. During the years ended December 31, 2001, 2000, and 1999, the Partnership paid commissions to the current general partner related to the sale of land of $41,250, $72,477, and $57,069, respectively.
NOTES TO FINANCIAL STATEMENTS--Continued
SOUTHEAST ACQUISITIONS III, L.P. (A Limited Partnership Operating in Liquidation Mode)
NOTE B--RELATED PARTY TRANSACTIONS--Continued
The Partnership agreement provides for reimbursement of expenses incurred by the general partner related to the administration and operation of the Partnership. During the years ended December 31, 2001, 2000, and 1999, reimbursements to the general partner's members and related companies totaled $2,455, $2,148, and $7,016, respectively.
NOTE C--PARTNERS' EQUITY
In accordance with the partnership agreement (as amended in November 1997), cash distributions and Partnership profits and losses are to be allocated as follows:
(a) Cash Distributions--Except for distributions in connection with the liquidation of the Partnership, cash distributions, if any, will be made 100% to the limited partners until the limited partners have received (i) a return of their capital contributions ($4,437,337 at December 31, 2001) plus (ii) cumulative distributions equal to their 10% noncompounded cumulative annual return on their adjusted capital contributions, as defined ($13,089,295 at December 31, 2001); thereafter distributions will be made 70% to the limited partners and 30% to the general partner. Distributions in connection with the Partnership's liquidation will be made in accordance with the partners' capital accounts as maintained for federal income tax purposes.
(b) Profits and losses are to be allocated as provided in the partnership agreement. Generally, profits will be allocated to reflect cash distributions, or to offset negative balances in the partners' capital accounts, but at least 1% of profits will be allocated to the general partner. Losses will generally be allocated 99% to the limited partners, in proportion to their units, and 1% to the general partner, or to reduce any positive account balances in the partners' capital accounts. In no event will the general partner be allocated less than 1% of profits or losses for any year.
Upon Partnership dissolution and termination, the general partner is required to contribute to the capital of the Partnership the lesser of any negative amount of its capital account as defined, or 1.01% of the capital contributions made by the limited partners. Any amount so contributed shall be distributed to the limited partners in proportion to their positive capital account balances.
During the years ended December 31, 2001, 2000, and 1999, the Partnership made distributions to the limited partners of $1,984,000, $1,736,000, and $2,046,000, respectively, or $160, $140, and $165 per unit, respectively, representing a return of their capital contributions.
NOTES TO FINANCIAL STATEMENTS--Continued
SOUTHEAST ACQUISITIONS III, L.P. (A Limited Partnership Operating in Liquidation Mode)
NOTE C--PARTNERS' EQUITY--Continued
Total compensation paid to all persons, including the general partner, upon the sale of the Partnership's property is limited to a competitive real estate commission or disposition fee not to exceed 10% of the contract price. Any such commission or disposition fee paid to the general partner would reduce any distribution which it would otherwise be entitled to pursuant to the partnership agreement. The general partner or an affiliate may be given an exclusive right to sell property for the partnership.
NOTE D--EXTENSION FEE AND INTEREST INCOME ON PREVIOUS PENDING SALE OF LAND
During the year ended December 31, 1999, the Partnership received a non-refundable extension fee of $50,000 and interest income of $11,188 related to the extension of the closing date of a pending sales contract. During the year ended December 31, 1999, the Partnership also received a deposit of $40,000 to be applied to the sales price at closing.
During the year ended December 31, 2000, the general partner agreed to apply the non-refundable extension fee of $50,000, that had been received during 1999, to the sales price at closing. Therefore, the extension fee of $50,000 was reclassified from revenues to the escrow liability account during the year ended December 31, 2000. In addition, during the year ended December 31, 2000, the Partnership recognized interest income of $191,449 related to the extension of the closing date of this pending sales contract. The Partnership also received additional escrow deposits of $322,164 to be applied to the sales price at closing.
During the year ended December 31, 2001, the Partnership recognized received non-refundable extension fees of $132,534 and interest income of $37,610 related to this sales contract. The contract closed during May 2001. Total escrow deposits of $412,164 were applied to the sales price.
During the year ended December 31, 2000, the Partnership received extension fees of $10,000 and interest income of $1,182 on another sale of land that closed in October 2000.
NOTES TO FINANCIAL STATEMENTS--Continued
SOUTHEAST ACQUISITIONS III, L.P. (A Limited Partnership Operating in Liquidation Mode)
NOTE E--SUMMARY OF PROPERTY AND ACTIVITY
At December 31, 2001, land consisted of the following:
There were no liens on the land as of December 31, 2001. At December 31, 2001, the aggregate carrying value of this land for income tax purposes was $3,529,644. The difference between the carrying value for financial statement purposes and income tax purposes resulted from write-downs on the land that were recorded for financial statement purposes as more fully described in Note A.
Land activity during the years ended December 31, 1999, 2000 and 2001 consisted of the following:
NOTES TO FINANCIAL STATEMENTS--Continued
SOUTHEAST ACQUISITIONS III, L.P. (A Limited Partnership Operating in Liquidation Mode)
NOTE E--SUMMARY OF PROPERTY AND ACTIVITY--Continued
During January 2002, the Partnership sold the remaining 33 acres of the Columbia, South Carolina land for $500,000 and recognized a loss of $1,850.
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.
SOUTHEAST ACQUISITIONS III, L.P. a Delaware limited partnership
By: SOUTHERN MANAGEMENT GROUP, LLC General Partner
By: /s/ RICHARD W. SORENSON ------------------------------------- RICHARD W. SORENSON President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities and on the date indicated.