Item 1. Business.
General
Summit Tax Exempt L.P. III (the "Registrant"), a Delaware limited partnership, was formed on February 25, 1987 and will terminate on December 31, 2021 unless terminated sooner under the provisions of the Agreement of Limited Partnership (the "Partnership Agreement"). The Registrant was formed to invest in tax-exempt participating first mortgage revenue bonds ("First Mortgage Bonds" or "FMBs") issued by various state or local governments or their agencies or authorities. The FMBs are secured by participating first mortgage loans ("Mortgage Loans") on multi-family residential apartment properties ("Properties") developed by unaffiliated developers. The Properties are garden apartment projects located in California (2), Florida (1) and Georgia (2). These investments were made with the proceeds from the initial sale of 3,081,625 Beneficial Unit Certificates ("BUC$"). The Registrant's fiscal year for book and tax purposes ends on December 31.
The Registrant is engaged solely in the business of investing in FMBs; therefore, presentation of industry segment information is not applicable.
General Partners
The general partners of the Registrant are Prudential-Bache Properties, Inc. ("PBP") and Related Tax Exempt Associates III, Inc. (the "Related General Partner") (collectively, the "General Partners"). Related BUC$ Associates III, Inc. (the "Assignor Limited Partner"), which acquired and holds limited partnership interests on behalf of those persons who purchase BUC$, has assigned to those persons substantially all of its rights and interest in and under such limited partnership interests. The Related General Partner and the Assignor Limited Partner are under common ownership.
Competition
The General Partners and/or their affiliates have formed, and may continue to form, various entities to engage in businesses which may be competitive with the Registrant.
The Registrant's business is affected by competition to the extent that the underlying Properties from which it derives interest and, ultimately, principal payments, may be subject to competition relating to rental rates and relative level of amenities offered by comparable neighboring properties.
Structure of First Mortgage Bonds
The principal and interest payments on each FMB are payable only from the cash flows, including proceeds in the event of sale, from the Properties underlying the FMBs. None of these FMBs constitute a general obligation of any state or local government, agency or authority. The FMBs are secured by the Mortgage Loans on the underlying Properties and the structure of each Mortgage Loan mirrors the structure of the corresponding FMB.
Unless otherwise modified, the principal of the FMBs will not be amortized during their respective terms (which are generally up to 24 years) and will be required to be repaid in lump sum "balloon" payments at the expiration of the respective terms or at such earlier times as the Registrant may require pursuant to the terms of the bond documents. The Registrant has a right to require redemption of the FMBs approximately twelve years after their issuance. The Registrant anticipates holding the FMBs for approximately 12 to 15 years from the date of issuance; however, it can and may elect to hold them until maturity.
In addition to the stated rates of interest ranging from 8.0% to 9.0% per annum, each of the FMBs provides for "contingent interest" which is equal to: (a) an amount equal to 50% to 100% of net property cash flow
and 75% to 100% of net sale or refinancing proceeds until the borrower has paid, during the post-construction period, annually compounded interest at 9.0% on a cumulative basis, and thereafter (b) an amount equal to 25% of remaining net property cash flow and 25% of remaining net sale or refinancing proceeds until the borrower has paid interest at a simple annual rate of 16% over the term of the FMB. Both the stated and contingent interest are exempt from federal income taxation. The Registrant has not received any contingent interest to date.
In order to protect the tax-exempt status of the FMBs, the owners of the Properties are required to enter into certain agreements to own, manage and operate such Properties in accordance with requirements of the Internal Revenue Code.
The following FMBs' interest income exceeded 15% of the Registrant's total revenue for each of the three years in the period ended December 31, 1996:
1996 1995 1994 ---- ---- ----
Lakepoint 30% 29% 29% Sunset Village 17% 21% 22% Orchard Mill 24% 19% 21% Sunset Creek * 15% 16% Players Club 17% 16% *
* FMB interest income was less than 15% of the Registrant's total revenue for the year.
Bond Modifications/Forbearance Agreements
Forbearance agreements have been executed with the owners of all of the Properties.
Lakepoint
During 1991, the Registrant entered into a forbearance agreement with the owner of the Lakepoint property allowing interest payments at a pay rate of 7.5% per annum in 1991, 8.0% in 1992 and 8.5% in 1993. Due to weakness in the market, in June 1993, the forbearance agreement was further modified to allow for a pay rate of 7.5% from January 1992 through March 1993 and 6.0% from April 1993 through December 1995. In May 1996, the General Partners granted an extension of the forbearance agreement providing for a minimum rate of 6.0% per annum to be paid through December 15, 1997.
Orchard Mill
The Registrant entered into a forbearance agreement with the Orchard Mill property owner in 1991 which permitted interest to be paid only to the extent of the net cash flow from the property. Pursuant to the terms of a forbearance agreement with Orchard Mill effective as of May 1, 1995, the minimum monthly interest pay rate was established at a 5% annual rate with all remaining cash flow generated by the property payable to the Registrant and applied to accrued and unpaid base interest and contingent interest as set forth in the forbearance agreement and loan agreements. For the year ended December 31, 1996, Orchard Mill has paid interest monthly at an annual rate equal to 6.76%, consistent with the terms of the forbearance agreement.
Players Club
In 1992, the Registrant entered into a forbearance agreement with the owner of the Players Club property. This agreement was subsequently modified on January 1, 1994, January 1, 1995, January 1, 1996 and again on January 1, 1997 to require minimum debt service payments of 6.0% per annum through the end of 1994, 7.0% for 1995 and 1996 and 6.25% through the end of 1997.
Sunset Village/Sunset Creek
Forbearance agreements were also entered into with the owner of the Sunset Village and Sunset Creek properties in 1992 allowing debt service payments at a rate of 7.0% per annum through April 1993 at which time the
Bond Modifications/Forbearance Agreements (continued)
pay rate increased to 7.25% and was scheduled to increase in annual increments to the stated rate of 8.5% in May 1996. Effective with the May 1, 1995 payment date, the Sunset Village and Sunset Creek FMBs have made payments based on the monthly net cash flow generated by the operations of the underlying properties in accordance with the terms of the agreement outlined below. Effective as of August 1, 1995, the original owner and obligor of the Sunset Creek and Sunset Village FMBs transferred the deeds to the underlying properties to an affiliate of the Related General Partner for limited consideration. Pursuant to the agreement, the Related General Partner's affiliate, who has not made an equity investment in the underlying property, assumed the day-to-day responsibilities and obligations of operating the properties. The Registrant receives the monthly net cash generated by these properties as payment toward debt service.
General
The determination as to whether it is in the best interest of the Registrant to enter into forbearance agreements on the FMBs, or alternatively, to pursue its remedies under the loan documents, including foreclosure, is based upon several factors. These factors include, but are not limited to, property performance, owner cooperation and projected legal costs. With respect to all five of the Registrant's FMBs, the General Partners have determined that forbearance represented the better of the alternatives. Interest income of approximately $1,400,000, $969,000, and $963,000 was not recognized for the years ended December 31, 1996, 1995, and 1994, respectively.
With respect to all the FMBs, the difference between the pay rate and the original stated rate is deferred and is payable out of available future cash flow or ultimately from sales or refinancing proceeds. See the table below for information regarding the rates paid on the FMBs in 1996. In 1996, all borrowers paid at least the minimum interest rate set forth in their respective forbearance agreement except for those FMBs where interest is paid to the extent of the property's net cash flow.
SUMMIT TAX EXEMPT L.P. III (a limited partnership)
The following table lists the FMBs that the Registrant owns together with the occupancy and current rental rates of the underlying properties:
*The average interest rate paid represents the interest recorded by the Registrant while the stated interest rate represents the coupon rate of the FMB and the minimum pay rate represents the minimum rate required to be paid under the respective forbearance agreements.
(A) Summit Tax Exempt L.P. II, of which the general partners are either the same or affiliates of the General Partners of the Registrant, acquired the other $2,500,000 of the Players Club bond issue.
(B) Interest on this FMB is paid to the extent of the property's net cash flow.
(C) The FMBs are carried at their estimated fair values at December 31, 1996.
(D) Includes receipt of deferred base interest related to prior periods.
Employees
The Registrant has no employees. Management and administrative services for the Registrant are performed by the General Partners and their affiliates pursuant to the Partnership Agreement. See Note 5 to the financial statements in Item 8.
Other Events.
On December 31, 1996, the United States District Court for the Southern District of New York (the "Court") issued a preliminary approval order (the "Order") with respect to settlement (the "Related Settlement") of the class action litigation (the "Class Action") relating to the Registrant (In re Prudential Securities Inc. Limited Partnership Litigation, MDL No. 1005) against the Related General Partner and certain of its affiliates. See Note 6 to the financial statements in Item 8. Pursuant to the stipulation of settlement entered into with counsel for the class on December 24, 1996, the proposed Related Settlement contemplates, among other matters, the reorganization (the "Reorganization") of the Registrant and two other partnerships co-sponsored by affiliates of the Related General Partner and PBP.
The proposed Related settlement and Reorganization are subject to objections by the BUC$holders and limited partners of the Registrant as well as each of the other concerned partnerships and final approval of the Court after review of the proposals at a fairness hearing.
Under the proposed Reorganization plan, the BUC$holders of the Registrant, and Summit Tax Exempt Bond Fund, L.P. and Summit Tax Exempt L.P. II will receive shares in a newly formed business trust. It is anticipated that the shares will be allocated proportionately among the partnerships and their respective investors based upon appraisals and other factors as supported by a third-party fairness opinion. Detailed information about the proposed Related Settlement and Reorganization will be sent to BUC$holders in the near future. The terms of the Reorganization include, among other matters, the acquisition by affiliates of the Related Capital Company ("RCC") of PBP's general partner interest (the "PBP Interest"), transfer to the BUC$holders one-half of the PBP Interest, reduction of fees currently payable to the General Partners by 25%, filing an application to list the new company's shares on an exchange and creating an infinite, as opposed to finite, life-operating business.
In connection with the proposed Related Settlement and Reorganization, on December 19, 1996, PBP and RCC entered into an agreement for the purchase by RCC or its affiliates of the PBP Interest. The agreement is subject to numerous conditions, including the effectiveness of the Related Settlement of the Class Action and the approval of the sale and withdrawal of PBP as a general partner of the Registrant by the Court.
Pending final approval of the Related Settlement, the Court's Order prohibits class members (including the BUC$holders) from, among other matters, (i) transferring their BUC$ unless the transferee agrees to be bound by the Related Settlement; (ii) granting a proxy to object to the Reorganization; or (iii) commencing a tender offer for the BUC$. In addition, the General Partners are enjoined from (i) recording any transfers made in violation of the Order and (ii) providing the list of investors in any of the partnerships which are the subject of the Reorganization to any person conducting a tender offer.
There can be no assurance that the conditions to the closing of the proposed Related Settlement and Reorganization will be satisfied nor that a closing may occur in the projected time frame. In the event a settlement cannot be reached, the Related General Partner believes it has meritorious defenses to the consolidated complaint and intends to vigorously defend this action.
time frame in which a closing may occur.
Item 2.
Item 2. Properties
The Registrant does not own or lease any property.
Item 3.
Item 3. Legal Proceedings
This information is incorporated by reference from Item 1. Business - Other Events and Note 7 to the financial statements in Item 8.
Item 4.
Item 4. Submission of Matters to a Vote of BUC$holders
None.
PART II
Item 5.
Item 5. Market for the Registrant's BUC$ and Related BUC$holder Matters.
As of March 3, 1997 there were 2,992 holders of record owning 3,081,625 BUC$. A significant secondary market for the BUC$ has not developed and it is not expected that one will develop in the future. There are also certain restrictions set forth in Sections 12 and 13 of the Partnership Agreement limiting the ability of a BUC$holder to transfer their BUC$. Furthermore, the Court's Order in connection with the proposed Related Settlement of the Class Action imposes certain restrictions on the transfer of BUC$. See Item 1. Business - Other Events. Consequently, BUC$holders may not be able to liquidate their investments in the event of emergency or for any other reason.
Quarterly cash distributions per BUC paid during 1996 and 1995 were as follows:
Quarter Ended 1996 1995 ------------- ---- ---- March 31 $0.22 $0.22 June 30 $0.22 $0.22 September 30 $0.22 $0.22 December 31 $0.22 $0.22
There are no material legal restrictions upon the Registrant's present or future ability to make distributions in accordance with the provisions of the Partnership Agreement. Cash distributions paid in 1996 and 1995 were funded from current and previously undistributed cash flow from operations. Approximately $367,000 of the $2,712,000 and $213,000 of the $2,712,000 paid to BUC$holders in 1996 and 1995, respectively, represents a return of capital on a generally accepted accounting principles (GAAP) basis. (The return of capital on a GAAP basis is calculated as BUC$holder distributions less net income allocated to BUC$holders.) The Registrant currently expects that cash distributions will continue to be paid, in the foreseeable future, from cash generated from operations. For a discussion of other factors that may affect the amount of future distributions, see Management's Discussion and Analysis of Financial Conditions and Results of Operations in Item 7.
Item 6.
Item 6. Selected Financial Data.
The information set forth below presents selected financial data of the Registrant. Additional financial information is set forth in the financial statements and notes thereto contained in Item 8 hereof.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Liquidity and Capital Resources
Summit Tax Exempt L.P. III ("the Registrant") has invested in five tax-exempt participating First Mortgage Bonds ("FMBs") issued by various state or local governments or their agencies or authorities. The FMBs are secured by participating first mortgage loans on the properties.
At the beginning of the year, the Registrant had cash and temporary investments of approximately $598,000. After the payment of distributions of approximately $3,029,000 and receipt of the net cash flow from operations of approximately $2,791,000, the Registrant ended the year with approximately $360,000 in cash and temporary investments. The fourth quarter distribution of approximately $678,000 ($.22 per BUC) was paid to BUC$holders in February 1997 from cash flow from operations. Interest payments from FMBs are anticipated to provide sufficient liquidity to fund in future years Registrant's operating expenditures, debt service and distributions. The restructuring of the FMBs in 1995 and any future restructurings may result in the General Partners reducing the distributions to BUC$holders in future periods.
Pursuant to the terms of a forbearance agreement with Orchard Mill effective as of May 1, 1995, the minimum monthly interest pay rate was established at a 5% annual rate with all remaining cash flow generated by the property payable to the Registrant and applied to accrued and unpaid base interest and contingent interest pursuant to the forbearance agreement and loan agreements. For the year ended December 31, 1996, Orchard Mill has paid interest monthly at an annual rate equal to 6.76%, consistent with the terms of the forbearance agreement.
For a discussion of the settlement of the proposed Class Action relating to the Registrant see Other Events in Item 1. Business above.
Management is not aware of any trends or events, commitments or uncertainties, which have not otherwise been disclosed that will or are likely to impact liquidity in a material way. The Registrant's investments in FMBs are secured by Registrant's interest in properties which are diversified by location so that if one area of the country is experiencing downturns in the economy, the remaining properties may be experiencing upswings. However, the geographic diversification of the portfolio may not protect against a general downturn in the national economy.
Results of Operations
The Registrant accounts for its investments in the FMBs as debt securities under the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115").
The Registrant has a right to require redemption of the FMBs approximately twelve years after their issuance. The Registrant anticipates holding the FMBs for approximately 12 to 15 years from the date of issuance; however, it can and may elect to hold until maturity. As such, SFAS 115 requires the Registrant to classify these investments as "available for sale." Accordingly, investments in FMBs are carried at their estimated fair values, with unrealized gains and losses reported in a separate component of partners' capital. Unrealized holding gains or losses do not affect the cash flow generated from property operations, distributions to BUC$holders, the characterization of the tax-exempt income stream or the financial obligations under the FMBs.
The Registrant periodically evaluates each FMB to determine whether a decline in fair value below the FMB's cost basis is other than temporary. Such a decline is considered to be other than temporary if, based on current information and events, it is probable that the Registrant will be unable to collect all amounts due according to the existing contractual terms of the bonds. If the decline is judged to be other than temporary, the cost basis of the bond is written down to its then estimated fair value, with the amount of the write-down accounted for as realized loss.
Because the FMBs are not readily marketable, the Registrant estimates fair value for each bond as the present value of its expected cash flows using a discount rate for comparable tax-exempt investments. This process is based upon projections of future economic events affecting the real estate collateralizing the bonds, such as property occupancy rates, rental rates, operating cost inflation and market capitalization rates, and upon determination of an appropriate market rate of interest, all of which are based on good faith estimates and assumptions developed by the Registrant's management. Changes in market conditions and circumstances may occur which would cause these estimates and assumptions to change, therefore, actual results may vary from the estimates and the variance may be material.
1996 vs. 1995
Net income decreased by approximately $157,000 for the year ended December 31, 1996 as compared to the corresponding period in 1995 for the following reasons:
Interest income from Participating FMBs decreased by approximately $111,000 for the year ended December 31, 1996 as compared to the corresponding period in 1995 primarily due to reduced debt service payments received for the Sunset Village and Sunset Creek FMBs, which were restructured in the third quarter 1995, partially offset by an increase in base and deferred base interest received from Orchard Mill.
Interest income from temporary investments decreased approximately $8,000 for the year ended December 31, 1996 as compared to the corresponding period in 1995 primarily due to higher interest rates and invested balances in 1995.
General and administrative expenses increased approximately $38,000 for the year ended December 31, 1996 as compared to the corresponding period in 1995 primarily due to an increase in legal costs relating to the Kinnes litigation described in Note 6 to the Financial Statements.
1995 vs. 1994
Net income decreased by approximately $236,000 for the year ended December 31, 1995 as compared to the corresponding period in 1994 for the following reasons:
Interest income from FMBs decreased by approximately $259,000 for the year ended December 31, 1995 as compared to the corresponding period in 1994 primarily due to reduced interest received from the Sunset Village and Sunset Creek FMBs. This decrease was partially offset by an increase in interest paid on the Player's Club FMB as required by the terms of its forbearance agreement.
Interest income from temporary investments increased approximately $7,000 for the year ended December 31, 1995 as compared to the corresponding period in 1994 primarily due to higher interest rates and invested balances.
General and administrative expenses increased approximately $53,000 for the year ended December 31, 1995 as compared to the corresponding period in 1994 primarily due to increased legal fees in 1995 and increased costs associated with the administration of the Registrant.
General
The determination as to whether it is in the best interest of the Registrant to enter into forbearance agreements on the FMBs, or alternatively, to pursue its remedies under the loan documents, including foreclosure, is based upon several factors including, but not limited to, property performance, owner cooperation and projected legal costs.
The difference between the stated interest rates and the rates paid by FMBs is not accrued as interest income for financial reporting purposes. The accrual of interest at the stated rate will resume once a property's ability to pay the stated interest rate has been adequately demonstrated. Interest income of approximately $1,400,000, $969,000, and $963,000 was not recognized for the years ended December 31, 1996, 1995, and 1994, respectively.
From time to time, certain property owners have elected to supplement the cash flow generated by the properties to meet the required FMB interest payments. No such payments were made in 1994, 1995 or 1996. There can be no assurance that in the future any property owner will elect to supplement property cash flow to satisfy bond interest requirements, if necessary.
SUMMIT TAX EXEMPT L.P. III (a limited partnership)
Property Information
The following table lists the FMBs that the Registrant owns together with occupancy rates of the underlying properties:
*The average interest rate paid represents the interest recorded by the Registrant while the stated interest rate represents the coupon rate of the FMB and the minimum pay rate represents the minimum rate required to be paid under the respective forbearance agreements.
(A) Summit Tax Exempt L.P. II, of which the general partners are either the same or affiliates of the General Partners of the Registrant, acquired the other $2,500,000 of the Players Club bond issue.
(B) Interest on this FMB is paid to the extent of the property's net cash flow.
(C) The FMBs are carried at their estimated fair values at December 31, 1996.
(D) Includes receipt of deferred base interest related to prior periods.
Item 8.
Item 8. Financial Statements and Supplementary Data.
[D+T Letterhead] INDEPENDENT AUDITORS' REPORT
To the Partners of Summit Tax Exempt L.P. III New York, New York
We have audited the accompanying statements of financial condition of Summit Tax Exempt L.P. III (a Delaware Limited Partnership) as of December 31, 1996 and 1995, and the related statements of income, changes in partners' capital (deficit) and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the General Partners. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. 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 the General Partners, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Summit Tax Exempt L.P. III as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles.
/s/DELOITTE & TOUCHE LLP New York, New York March 20, 1997
SUMMIT TAX EXEMPT L.P. III (a limited partnership) STATEMENTS OF FINANCIAL CONDITION
See accompanying notes to financial statements
SUMMIT TAX EXEMPT L.P. III (a limited partnership) STATEMENTS OF INCOME
See accompanying notes to financial statements
SUMMIT TAX EXEMPT L.P. III (a limited partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
See accompanying notes to financial statements
SUMMIT TAX EXEMPT L.P. III (a limited partnership) STATEMENTS OF CASH FLOWS
See accompanying notes to financial statements
SUMMIT TAX EXEMPT L.P. III (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994
NOTE 1 - General
Summit Tax Exempt L.P. III (the "Partnership"), a Delaware limited partnership, was formed February 25, 1987 and will terminate on December 31, 2021 unless terminated sooner under the provisions of the Agreement of Limited Partnership (the "Partnership Agreement"). The Partnership was formed to invest in tax-exempt participating first mortgage revenue bonds ("FMBs") issued by various state or local governments or their agencies or authorities. The FMBs are secured by participating first mortgage loans ("Mortgage Loans") on multi-family residential apartment projects (the "Properties"). The general partners of the Partnership (the "General Partners") are Prudential-Bache Properties, Inc. ("PBP") (a wholly-owned subsidiary of Prudential Securities Group Inc.) and Related Tax Exempt Associates III, Inc. ( the "Related General Partner"). Related BUC$ Associates III, Inc. (the "Assignor Limited Partner"), which acquired and holds limited partnership interests on behalf of those persons who purchase Beneficial Unit Certificates ("BUC$"), has assigned to those persons substantially all of its rights and interest in and under such limited partnership interests. The Related General Partner and the Assignor Limited Partner are under common ownership. As of December 31, 1996, the Partnership has invested in a total of five FMBs.
NOTE 2 - Summary of Significant Accounting Policies
a) Basis of Accounting
The books and records of the Partnership are maintained on the accrual basis of accounting in accordance with generally accepted accounting principles.
The preparation of financial statements in conformity with generally accepted accounting principles requires the General Partners to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
b) Participating first mortgage bonds
Effective January 1, 1994, the Partnership accounts for its investments in the FMBs as debt securities under the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115").
The Partnership has a right to require redemption of the FMBs approximately twelve years after their issuance. The Partnership anticipates holding the FMBs for approximately 12 to 15 years from the date of issuance; however, it can and may elect to hold until maturity. As such, SFAS 115 requires the Partnership to classify these investments as "available for sale." Accordingly, investments in FMBs are carried at their estimated fair values, with unrealized gains and losses reported in a separate component of partners' capital. The cumulative effect of adopting this accounting was a decrease in partners' capital at January 1, 1994 of approximately $476,000 due to unrealized holding losses. Unrealized holding gains or losses do not affect the cash flow generated from property operations, distributions to BUC$holders, the characterization of the tax-exempt income stream or the financial obligations under the FMBs.
The Partnership periodically evaluates each FMB to determine whether a decline in fair value below the FMB's cost basis is other than temporary. Such a decline is considered to be other than temporary if, based on current information and events, it is probable that the Partnership will be unable to collect all amounts due
SUMMIT TAX EXEMPT L.P. III (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994
NOTE 2 - Summary of Significant Accounting Policies (continued)
according to the existing contractual terms of the bonds. If the decline is judged to be other than temporary, the cost basis of the bond is written down to its then estimated fair value, with the amount of the write-down accounted for as realized loss.
Because the FMBs are not readily marketable, the Partnership estimates fair value for each bond as the present value of its expected cash flows using a discount rate for comparable tax-exempt investments. This process is based upon projections of future economic events affecting the real estate collateralizing the bonds, such as property occupancy rates, rental rates, operating cost inflation and market capitalization rates, and upon determination of an appropriate market rate of interest, all of which are based on good faith estimates and assumptions developed by the Partnership's management. Changes in market conditions and circumstances may occur which would cause these estimates and assumptions to change, therefore, actual results may vary from the estimates and the variance may be material.
Interest income from FMBs is recognized at the stated rate when collectibility of future amounts is reasonably assured. Interest income from FMBs with modified terms where the collectibility of future amounts is uncertain is recognized based upon expected cash receipts.
c) Temporary Investments
Temporary investments at December 31, 1996 and 1995 represent tax-exempt municipal preferred stock which is carried at cost which approximates market value.
d) Cash and cash equivalents
Cash and cash equivalents include cash on hand, cash in banks, and investments in short-term instruments with an original maturity of three months or less, for which cost approximates market value.
e) Income taxes
The Partnership is not required to provide, or pay, any Federal income taxes. Income tax attributes that arise from its operations are passed directly to the BUC$holders. The Partnership may be subject to other state and local taxes in jurisdictions in which it operates.
f) Profit and loss allocations and distributions
As more fully described in the Partnership Agreement, the General Partners receive a special distribution equal to a .5% per annum of the total invested assets (which equals the face amount of the FMBs), payable quarterly, for managing the affairs of the Partnership.
Income is allocated first to the General Partners in an amount equal to the special distribution. The net remaining profits or losses and distributions are then allocated 98% to the BUC$holders and 2% to the General Partners, in accordance with the Partnership Agreement.
g) Bond selection fees
The General Partners were paid bond selection fees (equal to 2% of the gross proceeds from the initial offering) for evaluating and selecting FMBs, negotiating the terms of mortgage loans and coordinating the
SUMMIT TAX EXEMPT L.P. III (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994
NOTE 2 - Summary of Significant Accounting Policies (continued)
development effort with property developers and government agencies. These fees have been capitalized and are being amortized over the terms of the FMBs. The accumulated amortization as of December 31, 1996 and 1995, was approximately $565,000 and $503,000, respectively.
h) Fair value of financial instruments
As described in Note 2.b. above, the Partnership's investment in FMBs are carried at estimated fair values. The Partnership has determined that the fair value of its remaining financial instruments, including its temporary investments and cash and cash equivalents approximates their carrying values.
NOTE 3 - Participating First Mortgage Bonds
Overview
The principal and interest payments on each FMB are payable only from the cash flows, including proceeds in the event of sale, from the Properties underlying the FMBs. None of these FMBs constitute a general obligation of any state or local government, agency or authority. The FMBs are secured by the mortgage loans on the underlying Properties and the structure of each mortgage loan mirrors the structure of the corresponding FMB.
Unless otherwise modified, the principal of the FMBs will not be amortized during their respective terms (which are generally up to 24 years) and will be required to be repaid in lump sum "balloon" payments at the expiration of the respective terms or at such earlier times as the Partnership may require pursuant to the terms of the bond documents. The Partnership has a right to require redemption of the FMBs approximately twelve years after their issuance. The Partnership anticipates holding the FMBs for approximately 12 to 15 years from the date of issuance; however, it can and may elect to hold until maturity.
In addition to the stated rates of interest ranging from 8.0% to 9.0% per annum, each of the FMBs provides for "contingent interest" which is equal to: (a) an amount equal to 50% to 100% of net property cash flow and 75% to 100% of net sale or refinancing proceeds until the borrower has paid, during the post-construction period, annually compounded interest at 9% on a cumulative basis, and thereafter (b) an amount equal to 25% of remaining net property cash flow and 25% of remaining net sale or refinancing proceeds until the borrower has paid interest at a simple annual rate of 16% over the term of the FMB. Both the stated and contingent interest are exempt from Federal income taxation. The Partnership has not received any contingent interest to date.
In order to protect the tax-exempt status of the FMBs, the owners of the Properties are required to enter into certain agreements to own, manage and operate such Properties in accordance with requirements of the Internal Revenue Code.
Forbearance agreements have been executed with the owners of all five of the properties.
Lakepoint
During 1991, the Partnership entered into a forbearance agreement with the owner of the Lakepoint property allowing interest payments at a pay rate of 7.5% per annum in 1991, 8.0% in 1992 and 8.5% in 1993. Due to weakness in the market in June 1993, the forbearance agreement was further modified to allow for a pay rate of 7.5% from January 1992 through March 1993 and 6.0% from April 1993 through December 1995. In May 1996, the General Partners granted an extension of the forbearance agreement providing for a minimum rate of 6.0% per annum to be paid through December 15, 1997.
SUMMIT TAX EXEMPT L.P. III (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994
NOTE 3 - Participating First Mortgage Bonds (continued)
Orchard Mill
The 1991 forbearance agreement relating to the Orchard Mill FMB permits interest to be paid only to the extent of the net cash flow from the property. Pursuant to the terms of a forbearance agreement with Orchard Mill effective as of May 1, 1995, the minimum monthly interest pay rate was established at a 5% annual rate with all remaining cash flow generated by the property payable to the Partnership and applied to accrued and unpaid base interest and contingent interest as set forth in the forbearance agreement and loan agreements. For the year ended December 31, 1996, Orchard Mill has paid interest monthly at an annual rate equal to 6.76%, consistent with the terms of the forbearance agreement.
Players Club
In 1992, the Partnership entered into a forbearance agreement with the owner of the Players Club property. This agreement was substantially modified on January 1, 1994 , January 1, 1995, January 1, 1996 and again on January 1, 1997 to require minimum debt service payments of 6.0% per annum through the end of 1994, 7.0% for 1995 and 1996 and 6.25% through the end of 1997.
Sunset Village/Sunset Creek
Forbearance agreements were also entered into with the owner of the Sunset Village and Sunset Creek properties in 1992 allowing debt service payments at a rate of 7.0% per annum through April 1993 at which time the pay rate increased to 7.25% and was scheduled to increase in annual increments to the stated rate of 8.5% in May 1996. Effective with the May 1, 1995 payment date, the Sunset Village and Sunset Creek FMBs have made payments based on the monthly net cash flow generated by the operations of the underlying properties in accordance with the terms of the agreement outlined below. Effective as of August 1, 1995, the original owner and obligor of the Sunset Creek and Sunset Village FMBs transferred the deeds to the underlying properties to an affiliate of the Related General Partner for limited consideration. Pursuant to the agreement, the Related General Partner's affiliate, who has not made an equity investment in the underlying property, assumed the day-to-day responsibilities and obligations of operating the properties. The Partnership receives the monthly net cash generated by these properties as payment toward debt service.
General
The determination as to whether it is in the best interest of the Partnership to enter into forbearance agreements on the FMBs, or alternatively, to pursue its remedies under the loan documents, including foreclosure, is based upon several factors. These factors include, but are not limited to, property performance, owner cooperation and projected legal costs.
The difference between the stated interest rates and the rates paid by FMBs is not accrued as interest income for financial reporting purposes. The accrual of interest at the stated rate will resume once a property's ability to pay the stated interest rate has been adequately demonstrated. Interest income of approximately $1,400,000, $969,000, and $963,000 was not recognized for the years ended December 31, 1996, 1995, and 1994, respectively.
SUMMIT TAX EXEMPT L.P. III (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994
NOTE 3 - Participating First Mortgage Bonds (continued)
The following FMBs' interest income exceeded 15% of the Registrant's total revenue for each of the three years in the period ended December 31, 1996:
1996 1995 1994 ---- ---- ----
Lakepoint 30% 29% 29% Sunset Village 17% 21% 22% Orchard Mill 24% 19% 21% Sunset Creek * 15% 16% Players Club 17% 16% *
* FMB interest income was less than 15% of the Registrant's total revenue for the year.
The cost basis of the FMBs was $47,950,000 at December 31, 1996 and 1995. The net unrealized loss on FMBs consists of gross unrealized gains and losses of $0 and $3,180,208, respectively, at December 31, 1996 and $488,045 and $1,751,460, respectively, at December 31, 1995.
SUMMIT TAX EXEMPT L.P. III (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994
NOTE 3 - Participating First Mortgage Bonds (continued)
Descriptions of the various FMBs owned by the Partnership at December 31, 1996 are as follows:
*The average interest rate paid represents the interest recorded by the Partnership while the stated interest rate represents the coupon rate of the FMB and the minimum pay rate represents the minimum rate required to be paid under the respective forbearance agreements.
(A) Summit Tax Exempt L.P. II, of which the general partners are either the same or affiliates of the General Partners of the Partnership, acquired the other $2,500,000 of the Players Club bond issue.
(B) Interest on this FMB is paid to the extent of the property's net cash flow.
(C) The FMBs are carried at their estimated fair values at December 31, 1996.
(D) Includes receipt of deferred base interest related to prior periods.
SUMMIT TAX EXEMPT L.P. III (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994
NOTE 4 - Income Taxes
Following is a reconciliation of net income for financial statement purposes with net income for Federal income tax reporting purposes:
Net income for tax purposes is generally exempt from Federal income tax. The differences between the tax and book bases of partner's capital are primarily attributable to the cumulative effect of the book to tax income adjustments, the recording of distributions and the Partnership's accounting for the FMBs at fair value for book purposes and cost for tax purposes.
NOTE 5 - Related Parties
The General Partners and their affiliates perform services for the Partnership which include, but are not limited to: accounting and financial management; registrar, transfer and assignment functions; asset management; investor communications; printing and other administrative services. The General Partners and their affiliates receive reimbursements for costs incurred in connection with these services, the amount of which is limited by the Partnership Agreement. The costs and expenses were as follows:
Effective October 1, 1995 the Related General Partner has assumed from PBP, the responsibilities and duties of the Tax Matters Partner as defined in the Partnership Agreement.
SUMMIT TAX EXEMPT L.P. III (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994
NOTE 5 - Related Parties (continued)
An affiliate of the Related General Partner receives the loan servicing fee in the amount of .25% per annum of the principal amount outstanding of mortgage loans serviced by the affiliate.
During 1995 and January 1996, a division of Prudential Securities Incorporated ("PSI"), an affiliate of PBP, was responsible for the purchase, sale and safekeeping of the Partnership's temporary investments. This account was maintained in accordance with the Partnership Agreement.
PSI owns 17,700 BUC$ at December 31, 1996.
The Players Club property (securing a $7,200,000 bond in this Partnership) also secures an FMB for $2,500,000 held by Summit Tax Exempt L.P. II, of which the general partners are either the same or affiliates of the General Partners of this Partnership. The original owner of the FMB is an affiliate of the Related General Partner.
Effective as of August 1, 1995, the original owner and obligor of the Sunset Creek and Sunset Village FMBs transferred the deeds to the underlying properties to an affiliate of the Related General Partner for limited consideration. Pursuant to the agreement, the Related General Partner's affiliate, who has not made an equity investment in the underlying property, assumed the day-to-day responsibilities and obligations of operating the properties.
NOTE 6 - Contingencies
On or about October 18, 1993, a putative class action, captioned Kinnes et al. v. Prudential Securities Group, Inc. et al. (CV-93-654), was filed in the United States District Court for the District of Arizona, purportedly on behalf of investors in the Partnership, against the Partnership, PBP, PSI and a number of other defendants. On November 16, 1993, a putative class action captioned Connelly et al. v. Prudential-Bache Securities Inc. et al. (93 Civ. 713) , was filed in the United States District Court for the District of Arizona , purportedly on behalf of investors in the Partnership against the Partnership, PBP, PSI and a number of other defendants. On January 3, 1992, a putative class action, captioned Levine v. Prudential-Bache Properties Inc. et al.. (92 Civ. 52), was filed in the United States District Court for the Northern District of Illinois purportedly on behalf of investors in the Partnership against the General Partners, PSI and a number of other defendants. Subsequently the Related General Partner was dismissed from the Levine litigation.
By order of the Judicial Panel on Multidistrict Litigation dated April 14, 1994, the Kinnes case, by order dated May 4, 1994, the Connelly case and by order dated July 13, 1994, the Levine case, to a single judge of the United States District Court for the Southern District of New York (the "Court") and consolidated for pretrial proceedings under the caption In re Prudential Securities Incorporated Limited Partnerships Litigation (MDL Docket 1005) (the "Class Action"). On June 8, 1994, plaintiffs in the transferred cases filed a complaint that consolidated the previously filed complaints and named as defendants, among others, PSI, certain of its present and former employees and the General Partners. The Partnership was not named a defendant in the consolidated complaint, but the name of the Partnership was listed as being among the limited partnerships at issue in the case.
On August 9, 1995 PBP, PSI and other Prudential defendants entered into a Stipulation and Agreement of Partial Compromise and Settlement with legal counsel representing plaintiffs in the consolidated actions. The court preliminarily approved the settlement agreement by order dated August 29, 1995 and, following a hearing held November 17, 1995, found that the agreement was fair, reasonable, adequate and in the best interests of the plaintiff class. The Court gave final approval to the settlement, certified a class of purchasers of specific limited partnerships, including the Partnership, released all settled claims by members of the class against the PSI settling defendants and permanently barred and enjoined class members from instituting, commencing or prosecuting any settled claim against the released parties. The full amount due under the settlement agreement has been paid by PSI. The Levine
SUMMIT TAX EXEMPT L.P. III (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994
NOTE 6 - Contingencies (continued)
and Connelly cases were dismissed with prejudice as to the Prudential defendants by court order dated October 25, 1996. The consolidated action remains pending against the Related General Partner and certain of its affiliates.
On December 31, 1996, the Court issued a preliminary approval order (the "Order") with respect to settlement (the "Related Settlement") of the Class Action against the Related General Partner and certain of its affiliates. Pursuant to the stipulation of settlement entered into with counsel for the class on December 24, 1996, the proposed Related Settlement contemplates, among other matters, the reorganization (the "Reorganization") of the Partnership and two other partnerships co-sponsored by affiliates of the Related General Partner and PBP.
The proposed Related Settlement and Reorganization are subject to objections by the BUC$holders and limited partners of the Partnership as well as each of the other concerned partnerships and final approval of the Court after review of the proposals at a fairness hearing.
Under the proposed Reorganization plan, the BUC$holders of the Partnership, and Summit Tax Exempt Bond Fund L.P. and Summit Tax Exempt L.P. II, will receive shares in a newly formed business trust. It is anticipated that the shares will be allocated proportionately among the partnerships and their respective investors based upon appraisals and other factors as supported by a third-party fairness opinion. Detailed information about the proposed Related Settlement and Reorganization will be sent to BUC$holders in the near future. The terms of the Reorganization include, among other matters, affiliates of the Related Capital Company ("RCC") of PBP's general partner interest (the "PBP Interest"), transfer to the BUC$holders of one-half of the PBP Interest, reduction of fees currently payable to the General Partners by 25%, filing an application to list the new company's shares on an exchange and the creation of an infinite, as opposed to finite, life-operating business.
In connection with the proposed Related Settlement and Reorganization, on December 19, 1996, PBP and RCC entered into an agreement for the purchase by RCC or its affiliates of the PBP Interest. The agreement is subject to numerous conditions, including the effectiveness of the Related Settlement of the Class Action and the approval of the sale and withdrawal of PBP as a general partner of the Partnership by the Court.
Pending final approval of the Related Settlement, the Court's Order prohibits class members (including the BUC$holders) from, among other matters, (i) transferring their BUC$ unless the transferee agrees to be bound by the Related Settlement; (ii) granting a proxy to object to the Reorganization; or (iii) commencing a tender offer for the BUC$. In addition, the General Partners are enjoined from (i) recording any transfers made in violation of the Order and (ii) providing the list of investors in any of the partnerships which are the subject of the Reorganization to any person conducting a tender offer.
There can be no assurance that the conditions to the closing of the proposed Related Settlement and Reorganization will be satisfied that a closing may occur in the projected time frame. In the event a settlement cannot be reached, the Related General Partner believes it has meritorious defenses to the consolidated complaint and intends to vigorously defend this action.
NOTE 7 - Subsequent Event
In February 1997, distributions of approximately $678,000 and $14,000 were paid to the BUC$holders and General Partners, respectively, for the quarter ended December 31, 1996.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant.
The Registrant has no directors or executive officers. The Registrant's affairs are managed and controlled by the General Partners. Certain information concerning the directors and officers of the General Partners are set forth below.
The Related General Partner assumed the responsibilities of the Tax Matters Partner as of October 1, 1995.
The Registrant, the Registrant's General Partners and their directors and executive officers, and any persons holding more than ten percent of the Registrant's BUC$ are required to report their initial ownership of such BUC$ and any subsequent changes in that ownership to the Securities and Exchange Commission on Forms 3, 4 and 5. Such executive officers, directors and persons who own greater than ten percent of the Registrant's BUC$ are required by Securities and Exchange Commission regulations to furnish the Registrant with copies of all Forms 3, 4 or 5 they file. All of these filing requirements were satisfied on a timely basis for the current year. In making these disclosures, the Registrant has relied solely on written representations of the General Partners' directors and executive officers and persons who own greater than ten percent of the Registrant's BUC$ or copies of the reports they have filed with the Securities and Exchange Commission during and with respect to its most recent fiscal year.
Prudential-Bache Properties, Inc.
The directors and executive officers of PBP with regard to managing the Registrant are as follows:
THOMAS F. LYNCH, III, age 38, is the President, Chief Executive Officer, Chairman of the Board of Directors, and a Director of PBP. He is a Senior Vice President of Prudential Securities Incorporated ("PSI"), an affiliate of PBP. Mr. Lynch also serves in various capacities for other affiliated companies. Mr. Lynch joined PSI in November 1989.
BARBARA J. BROOKS, age 48, is the Vice President-Finance and Chief Financial Officer of PBP. She is a Senior Vice President of PSI. Ms. Brooks also serves in various capacities for other affiliated companies. She has held several positions within PSI since 1983. Ms. Brooks is a certified public accountant.
EUGENE D. BURAK, age 51, is a Vice President of PBP. He is a First Vice President of PSI. Prior to joining PSI in September 1995, he was a management consultant for three years and was with Equitable Capital Management Corporation from March 1990 to May 1992. Mr. Burak is a certified public accountant.
CHESTER A. PISKOROWSKI, age 53, is a Senior Vice President of PBP. He is a Senior Vice President of PSI and is the Senior Manager of the Specialty Finance Asset Management area. Mr. Piskorowski has held several positions within PSI since April 1972. Mr. Piskorowski is a member of the New York and Federal Bars.
FRANK W. GIORDANO, age 54, is a Director of PBP. He is a Senior Vice President of PSI and an Executive Vice President and General Counsel of Prudential Mutual Fund Management LLC, an affiliate of PSI. Mr. Giordano also serves in various capacities for other affiliated companies. He has been with PSI since July 1967.
NATHALIE P. MAIO, age 46 is a Director of PBP. Ms. Maio is a Senior Vice President and Deputy General Counsel of PSI and supervises non-litigation legal work. She joined the Law Department of PSI in 1983; presently, she also serves in various capacities for other affiliated companies.
There are no family relationships among any of the foregoing directors or executive officers. All of the foregoing directors and executive officers have indefinite terms.
The Related General Partner
The directors and executive officers of the Related General Partner with respect to the Partnership and their positions with the Related General Partner are as follows:
Name Position ---- --------
J. Michael Fried President and Director
Stuart J. Boesky Vice President
Alan P. Hirmes Vice President
Richard A. Palermo Treasurer
Stephen M. Ross Director
Lynn A. McMahon Secretary
J. MICHAEL FRIED, 52, is President and a Director of the Related General Partner. Mr. Fried is President, a Director and a principal shareholder of Related Capital Company ("Capital"), a real estate finance and acquisition affiliate of the Related General Partner. In that capacity, he is the chief executive officer of Capital, and is responsible for initiating and directing all of Capital's syndication, finance, acquisition and investor reporting activities. Mr. Fried practiced corporate law in New York City with the law firm of Proskauer Rose Goetz & Mendelsohn from 1974 until he joined Capital in 1979. Mr. Fried graduated from Brooklyn Law School with a Juris Doctor degree, magna cum laude; from Long Island University Graduate School with a Master of Science degree in Psychology; and from Michigan State University with a Bachelor of Arts degree in History.
STUART J. BOESKY, 40, is a Vice President of the Related General Partner. Mr. Boesky practiced real estate and tax law in New York City with the law firm of Shipley & Rothstein from 1984 until February 1986 when he joined Capital where he presently serves as Managing Director. From 1983 to 1984 Mr. Boesky practiced law with the Boston law firm of Kaye, Fialkow, Richard & Rothstein (which subsequently merged with Strook & Strook & Lavan) and from 1978 to 1980 was a consultant specializing in real estate at the accounting firm of Laventhol & Horwath. Mr. Boesky graduated from Michigan State University with a Bachelor of Arts degree and from Wayne State University School of Law with a Juris Doctor degree. He then received a Master of Law degree in Taxation from Boston University School of Law.
ALAN P. HIRMES, 42, is a Vice President of the Related General Partner. Mr. Hirmes has been a Certified Public Accountant in New York since 1978. Prior to joining Capital in October 1983, Mr. Hirmes was employed by Weiner & Co., certified public accountants. Mr. Hirmes is also a Managing Director of Capital. Mr. Hirmes graduated from Hofstra University with a Bachelor of Arts degree.
RICHARD A. PALERMO, 36, is Treasurer of the Related General Partner. Mr. Palermo has been a Certified Public Accountant in New York since 1985. Prior to joining Related in September 1993, Mr. Palermo was employed by Sterling Grace Capital Management from October 1990 to September 1993, Integrated Resources, Inc. from October 1988 to October 1990 and E.F. Hutton & Company, Inc. from June 1986 to October 1988. From October 1982 to June 1986, Mr. Palermo was employed by Marks Shron & Company and Mann Judd Landau, certified public accountants. Mr. Palermo graduated from Adelphi University with a Bachelor of Business Administration degree.
STEPHEN M. ROSS, 56, is a Director of the Related General Partner. Mr. Ross is President of The Related Companies, L.P. He graduated from The University of Michigan with a Bachelor of Business Administration degree and from Wayne State University School of Law. Mr. Ross then received a Master of Law degree in taxation from New York University School of Law. He joined the accounting firm of Coopers & Lybrand in Detroit as a tax specialist and later moved to New York, where he worked for two large Wall Street investment banking firms in their real estate and corporate finance departments. Mr. Ross formed The Related Companies, Inc. in 1972, to develop, manage, finance and acquire subsidized and conventional apartment developments. To date, The Related Companies, Inc. has developed multi-family properties totaling in excess of 25,000 units, all of which it manages.
LYNN A. McMAHON, 41, is Secretary of the Related General Partner. Since 1983, she has served as Assistant to the President of Capital. From 1978 to 1983 she was employed at Sony Corporation of America in the Government Relations Department.
There are no family relationships among any of the foregoing directors or officers. All of the foregoing officers and/or directors have indefinite terms.
Item 11.
Item 11. Executive Compensation.
The Registrant does not pay or accrue any fees, salaries or any other form of compensation to directors and officers of the General Partners for their services. Certain officers and directors of the General Partners receive compensation from affiliates of the General Partners, not from the Registrant, for services performed for various affiliated entities, which may include services performed for the Registrant; however, the General Partners believe that any compensation attributable to services performed for the Registrant is immaterial. See Item 13 Certain Relationships and Related Transactions for information regarding compensation to the General Partners.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of March 3, 1997, the directors and officers of the Related General Partner directly own 99.97% of the voting securities of the Related General Partner; however, no director or officer of either General Partner owns directly or beneficially any interest in the voting securities of PBP.
As of March 3, 1997, no director or officer of either of the General Partners own directly or beneficially BUC$ issued by the Registrant.
As of March 3, 1997, no BUC$holder beneficially owns more than five percent (5%) of the BUC$ issued by the Registrant.
Item 13.
Item 13. Certain Relationships and Related Transactions.
The Registrant has, and will continue to have, certain relationships with the General Partners and their affiliates. However, there have been no direct financial transactions between the Registrant and the directors or officers of the General Partners.
Reference is made to Notes 1 and 5 to the financial statements in Item 8, which identify the related parties and discuss the services provided by these parties and the amounts paid or payable for their services.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
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.
SUMMIT TAX EXEMPT L.P. III
By: RELATED TAX EXEMPT ASSOCIATES III, INC. a General Partner
Date: March 27, 1997
By: /s/ J. Michael Fried ----------------------------------- J. Michael Fried President and Director
and
By: PRUDENTIAL-BACHE PROPERTIES, INC., a General Partner
Date: March 27, 1997
By: /s/ Thomas F. Lynch, III ----------------------------------- Thomas F. Lynch, III President, Chief Executive Officer, Chairman of the Board of Directors and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, the report has been signed below by the following persons on behalf by the registrant and in the capacities and on the dates indicated: