Item 1. BUSINESS
RAL YIELD + EQUITIES III LIMITED PARTNERSHIP (the "registrant" or "Partnership") is a Wisconsin Limited Partnership formed on April 29, 1985, under the Wisconsin Revised Uniform Limited Partnership Act. The Registrant was organized to acquire, for cash (no debt), real estate projects, including real estate for restaurants, mobile home communities and other commercial properties. The Partnership sold $13,725,000 in Limited Partnership Interests (13,725 Interests at $1,000 per unit) from August 27, 1985, through December 12, 1986, pursuant to a registration statement on Form S-11 under the Securities Act of 1933. The Partnership registered with the Securities and Exchange Commission a total of 15,000 units of Limited Partnership Interests ("Interests") for sale to the public.
The Partnership utilized the net offering proceeds to acquire the real property investments as described under "Properties" (Item 2).
The Registrant originally acquired fifteen real property investments, utilizing the net offering proceeds available for investment. The Registrant sold five of the original properties during 1993, one commercial property during 1994, and two commercial properties in 1996.
The officers and employees of RAL Asset Management Group, a Wisconsin general partnership, and its affiliates, performed services for the Registrant through June 1, 1993. RAL Asset Management Group is controlled by the General Partners of the Partnership. Effective June 1, 1993 the Partnership made separate property and partnership management agreements.
The partnership management agreement is with an unrelated management company. The property management agreement is with a related entity with the same general partners as the Partnership. The related property management firm simultaneously subcontracted with the same unrelated management company handling the partnership
management. The terms and conditions of these agreements are similar to the above related party agreements, which they replace.
The Partnership itself employs individual on-site managers and maintenance personnel in the three mobile home parks it owns, as well as personnel to run the partnership-operated restaurant. As of March 28, 1997 the Partnership employed 25, twenty of which are employed by the restaurant. These individuals are directed and managed by personnel of First Financial Realty Management (FFRM).
Item 2.
Item 2. PROPERTIES
As of March 28, 1997, the Registrant owned the following properties:
Property Name Approximate Size - ----------------------------- ------------------------------ Pizza Hut Restaurant A 2,870 square foot building Land and Building on approximately 46,200 square Minnetonka, MN feet of land
Rocky Rococo Restaurant A 3,470 square foot building Land and Building on approximately 21,000 square Milwaukee, WI feet of land
Forest Junction Mobile 82 mobile home sites on 35 Home Park acres of land Brillion, WI*
Pizza Hut Restaurant A 3,467 square foot building Land and Building on 37,400 square feet of land Normal, IL
Wendy's Restaurant A 3,700 square foot building Land and Building on 48,500 square feet of land Waukesha, WI
Shamrock 31 mobile home sites on 4 Mobile Home Park acres of land Albany, MN
Cloverleaf 172 mobile home sites on 25 Mobile Home Park acres of land St. Cloud, MN*
*Denotes a material property, having gross revenues greater than 10% of total revenues.
All of the properties were unencumbered as of March 28, 1997.
Leases on Investment Properties:
At December 31, 1996, the Partnership had three (3) restaurant properties available for lease, all of which are occupied. The restaurant properties are generally leased under 10-20 year lease terms with two five-year options to renew the leases at the end of the original term. Rent, which is payable monthly, is equal to the greater of a percentage of gross sales or a minimum base rental stated in the lease.
All of the restaurant leases described above are "triple net" to the partnership. Thus, the lessees are responsible for all occupancy costs such as maintenance, insurance, taxes and utilities. The warehouse property lease provides for the tenant to pay real estate taxes, utilities, and maintenance.
The restaurant property located in Milwaukee, Wisconsin is being operated by the Partnership. It opened for business in September, 1994. Any excess cash flow from this restaurant is contributed to the Partnership.
The partnership also operates three (3) mobile home parks. As of December 31, 1996 approximately 89% of the spaces were leased. The mobile home parks receive income on a monthly basis from tenant leases which normally have lease terms of one year or less.
The real estate business is highly competitive and the Partnership competes with many other real estate investment entities many of which have greater financial resources. No one firm or group of firms, in the opinion of the General Partners, is dominant in the industry. The Partnership, therefore, faces substantial competition from a variety of sources for attracting and retaining tenants.
Any commercial, residential or mobile home property acquired by the Partnership has competition for tenants from similar properties in the vicinity. To the extent that the Partnership owns commercial properties, such as restaurants, which have leases entitling the Partnership to participate in gross receipts of tenants above fixed minimum amounts, the success of the Partnership will depend in part on the success of its tenants in competing with similar businesses in the vicinity.
In the opinion of management of the Partnership, all properties are adequately covered by insurance.
MATERIAL PROPERTIES - ------------------- Following is information with respect to each property whose revenues are greater than 10% of total revenues as denoted above.
The Federal tax basis for each of the material properties is identical to the book basis as listed in Schedule III on page of this report. Depreciation information on all properties is as follows:
Type of Asset Rate Method Depreciable Life ------------- ---- ------ ----------------
Land Improvements SL ACRS 15/19/20 Year Building SL ACRS 19/31.5/39/40 Year Equipment DDB ACRS/MACRS 5/7/12 Year
Item 3.
Item 3. LEGAL PROCEEDINGS
The Partnership is not subject to any material pending legal action.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during 1996.
PART II
Item 5.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) & (b) As of December 31, 1996, there were approximately 2,000 record holders of Interests of the Partnership. There is no public market for Interests and it is not anticipated that a public market for Interests will develop. The General Partners will not redeem or repurchase Interests.
(c) All cash available for distribution other than sale or refinancing proceeds is distributed to the Limited Partners. The Partnership makes distributions, to Limited Partners, of cash available for distribution within 45 days after the end of each quarter in which such cash is available. See attached financial statements and footnotes for a detailed discussion of amounts and timing of distributions to Limited Partners.
Item 6.
Item 6. SELECTED FINANCIAL DATA FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, 1994, 1993 AND 1992
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RAL YIELD + EQUITIES III LIMITED PARTNERSHIP (the "Partnership") is a Wisconsin Limited Partnership formed on April 29, 1985, under the Wisconsin Revised Uniform Limited Partnership Act. The Partnership was organized to acquire new and existing income producing properties for cash. These properties consist primarily of restaurants (including land and building) to be leased on a "triple net" lease basis (i.e. for the tenant to pay for maintenance, repairs, real estate taxes and insurance) to chain restaurants, including Wendy's and Pizza Hut. Beginning in 1994 the Partnership began operating a Rocky Rococo restaurant at a previously vacant commercial site in Milwaukee, Wisconsin. The Partnership also owns and operates three mobile home communities located in Wisconsin and Minnesota. The Partnership's offering of limited partnership interests to the public pursuant to the Securities Act of 1933 raised $13,725,000, in which the above-described properties were purchased for cash.
Liquidity and Capital Resources:
Properties acquired by the Partnership are generally intended to be held from seven to ten years. Since the Partnership has purchased the Properties for cash, liquidity is not reduced by debt service payments. During the Properties' holding periods, the investment strategy is to maintain (on the "triple net lease" restaurant properties) and improve (on the mobile home parks) occupancy rates through the application of professional property management (including selective capital improvements). The Partnership also accumulates working capital reserves for normal repairs, replacements, working capital, and contingencies.
Net cash flow provided by operating activities was $503,000 in 1996, $738,000 in 1995, and $525,000 in 1994, primarily from earnings and depreciation (amortization), net of increases in receivables. In addition, the Partnership generated $1,685,000 of cash flow in 1996 due to the sale of a commercial warehouse and a mobile home park.
As of December 31, 1996, the Partnership had cash of approximately $383,000 representing undistributed cash flow, working capital and tenants' security deposits. Current liabilities amounted to approximately $138,000.
The Partnership has not experienced, and is not currently experiencing any liquidity problems. It is not expected that the Partnership will experience liquidity problems due to the nature of the current liabilities. Approximately $56,000 of the current liabilities represent tenant security deposits. The majority of the remaining current liabilities are accrued and escrowed real estate taxes payable in installments, in 1997. The Partnership expects to meet all of its obligations as they come due.
Results of Operations:
Gross rental revenues varied from $862,000 in 1996 versus $968,000 in 1995 and $952,000 in 1994. The decrease in 1996 was due to the sale of one of the commercial properties and one of the mobile home parks in 1996.
Total operating expenses, exclusive of restaurant operations and loss on sales of property, were $628,000 in 1996, $724,000 in 1995, and $823,000 in 1994. The decrease between 1996 and 1995 was primarily a result of the sale of the warehouse property and one of the mobile home parks during 1996 and a decrease in administrative costs.
In September, 1994 the Partnership opened a previously vacant restaurant as a Rocky Rococo. During 1996, 1995 and 1994, the restaurant had revenue of $587,000, $578,000 and $163,000 respectively and expenses of $466,000, $447,000 and $180,000, respectively. Due to start up costs, the restaurant had unusually high expenses in 1994. The restaurant had approximately $121,000 and $137,000 of annual cash flow in 1996 and 1995 respectively, and that is expected to improve in the future.
Interest and other income was $62,000 in 1996, $41,000 in 1995, and $40,000 in 1994.
Net income (loss) was $786,000 in 1996, $417,000 in 1995, and ($120,000) in 1994. The large amount of net income in 1996 is a result of the gains on the sales of the commercial property and mobile home park. The loss incurred in 1994 is a result of the large loss on the sale of the commercial property and from start up costs incurred due to the opening of the restaurant which is operated by the Partnership. The decrease is also a result of loss of income from properties sold in 1993 and 1994.
Inflation:
Due to the comparatively low level of inflation since the Partnership commenced operations, the effect of inflation on the Partnership has not been material to date. Should the rate of inflation increase substantially over the life of the Partnership, it is likely to influence ongoing operations, in particular, the operating expenses of the Partnership. Most of the commercial leases contain clauses permitting pass-through of certain increased operating costs. Residential leases are typically of one year or less in duration; this allows the Partnership to react quickly (through rental increases) to changes in the level of inflation. These factors should serve to reduce, to a certain degree, any impact of rising costs on the Partnership.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Financial Statement Schedule on page, incorporated herein by reference.
The supplemental financial information specified by Item 302 of Regulation S-K is not applicable.
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
a. None.
b. None.
PART III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The General Partners of RAL YIELD + EQUITIES III LIMITED PARTNERSHIP (the "Partnership") are Robert A. Long, John A. Hanson, Thomas R. Brophy, and Bart Starr. The General Partners manage and control the Partnership's affairs and have the general responsibility and the ultimate authority in all matters affecting the Partnership's business. The Partnership has available to it the services, personnel, and experience of certain other organizations affiliated with the General Partners, including RAL Asset Management Group. The General Partners are also General Partners of an affiliate, RAL Asset Management Group. The relationship of the General Partners to their affiliates is described under the caption "Conflicts of Interest" on pages 9 through 12 of the Prospectus, a copy of which is filed with Form S-11 for this Partnership and is hereby incorporated herein by reference.
The names, ages and business experience of the executive officers and the significant employee of First Financial Realty Management are as follows:
Position with RAL Asset ----------------------- Name Management Group - ---- -----------------
Robert A. Long General Partner John A. Hanson General Partner Thomas R. Brophy General Partner Bart Starr General Partner Douglas C. Heston President (FFRM)
There is no family relationship among any of the foregoing officers. The business experience of the General Partners and significant employees includes the following:
Robert A. Long, age 55, has, since January 1982, been a partner in RAL Asset Management Group. He is co-founder of RAL Asset Management Group. Since 1966 Mr. Long has been involved in real estate consulting, development and syndication. Mr. Long is a licensed securities agent. Since 1981 Mr. Long has been involved as an individual, general partner, or affiliate in ownership and management of twenty-six (26) mobile home parks totaling over 2,600 pads in the states of Wisconsin and Minnesota. Prior to 1981, Mr. Long developed or purchased over 200 commercial properties in six states and currently owns individually or through partnerships over 50 restaurants (land and building) leased to restaurant operators, including Pizza Hut, Hardee's, Taco Bell, and Rocky Rococo (or their franchisees). Mr. Long also played professional football for the Green Bay Packers, Atlanta Falcons, and Washington Redskins. Mr. Long received a Bachelor of Science Degree in Business from Wichita State University in 1965 and is currently Executive Director of the Vince Lombardi Scholarship Fund for Wichita State University. Mr. Long is also on the Board of Directors of Roundy's Inc., a major Midwest food distributor and originator of the Pick 'N Save stores.
John A. Hanson, age 55, has, since March 1982, been a partner in RAL Asset Management Group. Mr. Hanson is involved individually, as a general partner, or as an affiliate, in the ownership and management of twenty-six (26) mobile home parks in the states of Wisconsin and Minnesota. Mr. Hanson has been involved in pension and profit-sharing and tax consulting for 25 years. In 1975 he founded, and since that time has been president of Pension Designers, Inc., of Appleton, Wisconsin, a firm that specializes in structuring and consulting with respect to qualified retirement plans, estate planning, investment sales and sales of life, health and disability insurance products to individuals, groups or corporations. From 1966 to 1971 Mr. Hanson was engaged in tax consulting, having management and tax accounting responsibilities for a farm management firm with approximately 200 clients. Mr. Hanson is past president of the Fox River Valley Association of Life Underwriters, and the General Agents and Managers Association, an associate member of the American Society of Pension Actuaries, a member of the International Association of Financial Planners, a qualifying and life member of the Million Dollar Round Table, and a registered principal with the National Association of Securities Dealers. Mr. Hanson received his Bachelor of Science Degree in Agri-Business from the University of Wisconsin - River Falls in 1966. Mr. Hanson is a licensed securities agent.
Thomas R. Brophy, CLU, ChFC., age 51, has, since March 1982, been a partner of RAL Asset Management Group. Mr. Brophy is involved individually, as a general partner, or as an affiliate in the ownership and management of twenty-six (26) mobile home parks in the states of Wisconsin and Minnesota which total approximately 2,600 pads. Mr. Brophy has been a NASD registered securities representative since 1969, active in the marketing and sales of mutual funds, unit investment trusts, stocks, bonds, limited partnerships and private ventures. Since 1967 Mr. Brophy has also been active in the marketing, selling, training, supervising and managing of personnel, with respect to qualified retirement plans and personal or business life, health and disability insurance plans. He is active in the financial planning field, having been conferred the degree of Chartered Financial Consultant, by the American College, Bryn Mawr, PA, in 1984. He is also associated with the Principal Financial Group. Mr. Brophy is an active member of the National and Wisconsin Association of Life Underwriters, Million Dollar Round Table, Fox Valley Estate Planning Council and International Association of Financial Planners. He is recipient of the Fox River Valley Association of Life Underwriters' 1983 "Agent of the Year" award. A 1967 Bachelor of Science graduate from Marquette University, Mr. Brophy went on for advanced studies in insurance, receiving his Chartered Life Underwriter (CLU) degree from the American College, Bryn Mawr, PA, in 1975. Mr. Brophy is a licensed securities agent.
Bart Starr, age 64, has, since January 1984, been a partner in RAL Asset Management Group. He is a University of Alabama graduate with a B.S. Degree in Education. Since 1970, he has been a partner in the Bart Starr Motor Company, Birmingham, Alabama. Since 1979 he has been a member of the Board of Directors of the Sentry Insurance Company, Stevens Point, Wisconsin. He was a Green Bay Packer football player from 1956-1972, the Green Bay Packer Head Coach from 1975-1983, the NFL Most Valuable Player in 1966, and the Most Valuable Player in Super Bowls I and II. Mr. Starr was a CBS Game Analyst in 1973 and 1974 and the first winner of the Byron White Award in 1967. Mr. Starr has been the recipient of numerous civic and sports awards and is actively engaged in many charitable and public service organizations.
The following individual is an employee of the unaffiliated property management firm who make significant contributions to the business of the Partnership:
Douglas C. Heston, age 43, is President of First Financial Realty Management (FFRM). FFRM and affiliates own and/or manage over 50 investment properties. Mr. Heston received a B.A. degree from Duke University (North Carolina) with a double major in Economics and Public Policy Analysis (Statistics) in 1975. He received an M.S. degree in Real Estate Investment Analysis from the University of Wisconsin in 1979. Previously he worked for real estate appraisal firms in Atlanta and Milwaukee. He co-founded RAL Asset Management Group in 1982 and left at the end of 1984 to found his current firm.
Item 11.
Item 11. EXECUTIVE COMPENSATION
(a,b,c, and d) The Registrant has not paid and does not propose to pay any executive compensation to the General Partners or any of their affiliates (other than described in Item 13 below).
(e) There are no compensatory plans or arrangements regarding termination of employment or change of control.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person owns of record or is known by the Registrant to own beneficially more than 5% of the outstanding Interests of the Registrant as of December 31, 1996.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a and b) The Partnership sold Village Terrace Mobile Home Park to Wisconsin Homesites III Limited Partnership. Doug Heston is the President of the Corporate General Partner of Wisconsin Homesites III. Mr. Heston is also the President of First Financial Realty Management, the company which now manages RAL Yield & Equities III.
Certain General Partners own or control businesses which have agreed to perform a variety of services for the Partnership. In addition, certain General Partners are securities agents for the managing dealer for the offering of Limited Partnership Interests.
In consideration for these services, the General Partners and related parties receive certain compensation at amounts which are provided by the Partnership agreement. The following table sets forth the types, amounts and recipients of compensation paid annually to related parties.
Real estate commissions payable to The total compensation RAL Asset Management Group or other paid all persons for the related party on sale of Partnership sale of properties is properties. limited to 6% of the contract price. An affiliate may receive up to one-half of such compensation, where it provides brokerage services, subject to certain limitations based on a minimum return to limited partners. During 1996, a commission of $9,600 was paid to First Financial Realty Manage- ment on the sale of the mobile home park.
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1 and 2) See Index to Financial Statements and Financial Statement Schedule on Page.
(b) Reports on Form 8-K None.
(c) Exhibits See Exhibit 27
(d) Financial Statement Schedule See Index to Financial Statements and Financial Statement Schedule on Page.
RAL YIELD + EQUITIES III LIMITED PARTNERSHIP (A Wisconsin Limited Partnership)
AND FINANCIAL STATEMENT SCHEDULE
COVERED BY REPORTS OF INDEPENDENT ACCOUNTANTS Item 14(a)
Reference
- --------- Report of Independent Accountants
Balance Sheets at December 31, 1996 and 1995
Statements of Income for the years ended December 31, 1996, 1995 and 1994
Statements of Partners' Equity for the years ended December 31, 1996, 1995 and 1994
Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994
Notes to Financial Statements to
Financial Statement Schedule: III - Real Estate and Accumulated Depreciation to
Schedules, other than those listed, are omitted for the reason that they are inapplicable or equivalent information has been included elsewhere herein.
INDEPENDENT AUDITOR'S REPORT ----------------------------
January 14, 1997
To the Partners of RAL Yield + Equities III Limited Partnership
We have audited the accompanying Balance Sheets of RAL Yield + Equities III Limited Partnership (a Wisconsin Limited partnership) as of December 31, 1996 and 1995, and the related Statements of Income, Partners' Equity and Cash Flows for each of the three years in the period ended December 31, 1996. Our audit also included the financial statement schedule listed in the Index at Item 14. 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 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 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 RAL Yield + Equities III Limited Partnership as of December 31, 1996 and 1995, and the results of its operations and cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
Kolb Lauwasser & Co., S.C.
Milwaukee, Wisconsin
RAL YIELD + EQUITIES III LIMITED PARTNERSHIP Notes to Financial Statements ----------------------------- For the years ended December 31, 1996, 1995 and 1994
Note #1 Nature of Business and Summary of Significant Accounting - ------- -------------------------------------------------------- Policies -------- A. Nature of Business ------------------ RAL Yield + Equities III Limited Partnership (the Partnership) is a Wisconsin limited partnership formed on March 5, 1984 under the provisions of the Wisconsin Uniform Limited Partnership Act, to acquire for cash, operate, lease, develop and eventually sell income-producing real estate properties. Currently, the Partnership owns seven properties. It operates three mobile home parks and one restaurant. It also leases three commercial properties to restaurant franchisors. These properties are located primarily in southeastern Wisconsin. The Partnership will terminate December 31, 2014, except in the event of prior sale of the Partnership's properties, action by a majority interest of the Limited Partners or certain other events.
Effective December 12, 1986, the Partnership completed its offering of limited partnership interests. A total of 13,725 interests were sold for an aggregate contribution of $13,725,000. In connection with the sale of limited partnership interests, the Partnership incurred approximately $1,233,000 of costs to raise capital, including sales commissions of $1,098,000 and other offering costs of $135,000, which were charged against partners' equity.
B. Method of Accounting -------------------- Assets, liabilities, revenue and expenses are recognized on the accrual basis method of accounting.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure 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 these estimates.
C. Income-Producing Properties --------------------------- Income-producing properties are carried at the lower of cost less accumulated depreciation or fair value. Cost includes acquisition fees paid to RAL Asset Management Group. Management periodically evaluates a property's fair value based upon occupancy rate and comparison to similar properties in the same geographic area.
D. Allowance for Doubtful Accounts ------------------------------- Receivables are reviewed periodically by management to determine the adequacy of the allowance for doubtful accounts. Based upon management's evaluation, an allowance for doubtful accounts of $60,427 and $60,790 was necessary as of December 31, 1996 and 1995, respectively.
E. Deferred Charges ---------------- Costs incurred with respect to organizing the Partnership were deferred and have been fully amortized. Prepaid management fees incurred in the initial public offering were amortized to expense on the straight-line method over the term (ten years) of the management agreement and have been fully amortized. Commission fees incurred to lease the properties have been deferred and amortized over the respective lease term.
F. Leases ------ The Partnership has determined that all leases relating to the income-producing properties are properly classified as operating leases; therefore, rental income is reported when earned and the cost of each of the properties, excluding cost of land, is depreciated over its estimated useful life.
G. Income Taxes ------------ No income taxes will be payable or provided for by the Partnership since net income or loss is includable in the respective tax returns of the partners. In the initial year of ownership of partnership interests, an individual partner's share of taxable income or loss, tax credits and distributions is allocated to them on a pro rata basis which considers the number of days in the year during which their respective interests were held.
H. Cash and Cash Equivalents ------------------------- For purposes of the Statements of Cash Flows, the Partnership considers all short-term investments in interest-bearing bank accounts and certificates of deposits with a maturity of three months or less, to be equivalent to cash. Several demand deposit accounts are at one financial institution. Such funds on deposit exceeded the federally insured limit by $273,082 and $359,307 for the years ended December 31, 1996 and 1995, respectively.
Note #2 General Provision of the Limited Partnership Agreement - ------- ------------------------------------------------------ Pursuant to the terms of the partnership agreement, net income or losses of the Partnership from operations and losses on sale of income-producing properties are allocated 99% to the limited partners and 1% to the general partners.
In general, profits from the sale of income-producing properties will be allocated first to limited partners to the extent necessary to eliminate any deficit in their capital accounts, and then to general partners to the extent necessary to eliminate any deficit in their capital accounts, and finally, to each limited partner until they have received distributions equal to their original capital contribution less previous distributions. The remainder of the profits will be allocated 75% to the limited partners and 25% to the general partners provided that general partners will be allocated at least 1% of the total profits from the sale of income-producing properties. The general partners' share of sale or refinancing proceeds is subject to the limited partners earning specified noncompounded rates of return on their original investment. The priority rates of return for limited partners are dependent upon when they acquired their interest in the Partnership.
The partnership agreement requires that distributions to limited partners of Cash Available for Distribution (as defined in the Prospectus dated August 27, 1985) shall be made in such amounts and at such times as the general partners may determine, but not less frequently than semi-annually.
Note #3 Income-Producing Properties - ------- ---------------------------
During 1994, the Partnership recorded a loss on the sale of one restaurant in the amount of $272,360.
During 1996, the Partnership recorded a gain on the sale of one mobile home park and the warehouse building in the amount of $368,751.
Note #4 Leases of Income-Producing Properties - ------- ------------------------------------- At December 31, 1996, the Partnership owned three restaurant properties, all of which are currently leased. The fourth restaurant property is operated by the Partnership. The restaurant properties are generally leased under fourteen to twenty year lease terms with two five-year options to renew the leases at the end of the original term. Rent, which is payable monthly, is equal to the greater of a percentage of gross sales or a minimum base rental stated in the lease.
All of the restaurant leases described above are "triple net" to the Partnership. Thus, the lessees are responsible for all occupancy costs such as maintenance, insurance, taxes and utilities. The Partnership, however, is contingently liable for real estate taxes that are owed by its tenants. All rents received to date are based on the minimum rentals as none of the properties have exceeded the gross sales levels as defined in the leases.
The approximate minimum annual rental commitments under long-term lease agreements in effect at December 31, 1996 are as follows:
1997 165,000 1998 174,000 1999 177,000 2000 166,000 2001 154,000 After 2001 195,000 --------- 1,031,000 =========
The Partnership also operates three mobile home parks which have a total of 284 rental spaces. As of December 31, 1996 and 1995, a total of 253 and 286 spaces, respectively, were leased. The mobile home parks receive income on a monthly basis from tenant leases which normally have lease terms of one year or less. Rental revenue for the parks was approximately $585,000, $597,000 and $586,000 in 1996, 1995 and 1994, respectively.
Note #5 Notes Receivable - ------- ----------------
Des Moines, Iowa Property - -------------------------
In 1989, the Partnership received a $53,439 promissory note from the Dannig Corporation, an unrelated entity, for past due rent of a restaurant property. The terms of the note required monthly interest payments at 10%, with the unpaid principal and interest due July 31, 1992. An official of the Dannig Corporation personally guaranteed the note with his 38 shares in Pizza Slices, Inc., the officers of which are general partners in the Partnership. Subsequently, the Dannig Corporation filed bankruptcy. Independent of the bankruptcy, the officer sold his shares to the officers of Pizza Slices, Inc., who had tendered an offer to purchase all outstanding corporate shares. Upon notification by the Partnership of its rights in those shares purchased, subsequent payments for the shares were sent directly to the Partnership by the officers. Payments received in 1996 on this note of $4,807 were for interest only. As of December 31, 1996, the outstanding principal of $44,439 and interest of $15,988 had been fully reserved for, due to the uncertainty of collection.
RAL-YIELD EQUITIES III LIMITED PARTNERSHIP (A Wisconsin Limited Partnership)
NOTES TO SCHEDULE III
(a) All properties are unencumbered at December 31, 1996.
(b) Includes personal property.
(c) The aggregate cost of land, buildings and improvements for Federal Income Tax purposes is the same as for book purposes.
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.
RAL YIELD + EQUITIES III LIMITED PARTNERSHIP
BY: Robert A. Long ------------------------------- Robert A. Long, General Partner
DATE: March 28, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date - ------------------------------------------------------------------
Robert A. Long General Partner of RAL 03/28/97 - -------------------- Yield + Equities III ------- Robert A. Long Limited Partnership
John A. Hanson General Partner of RAL 03/28/97 - ------------------ Yield + Equities III ------- John A. Hanson Limited Partnership
Douglas C. Heston President, First Financial 03/28/97 - -------------------- Realty Management ------- Douglas C. Heston