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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
--------------
Commission file number 0-16343
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SHELBOURNE PROPERTIES III, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3502381
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 9507, 7 Bulfinch Place, Suite 500, Boston, Massachusetts 02114
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(Address of principal executive offices)
(617) 570-4600
--------------
(Registrant's telephone number, including area code)
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicated by check whether registrant is an accelerated filer (as identified in
Rule 12b-2 of the Exchange Act). Yes No X
--- ---
As of May 12, 2003, there were 788,772 shares of common stock outstanding.
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SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
INDEX
Part I. Financial Information Page
----
Item 1. Consolidated Financial Statements:
Consolidated Statements of Net Assets (Liquidation Basis) for
March 31, 2003 and December 31, 2002............................................... 3
Consolidated Statement of Operations and Changes in Net Assets
(Liquidation Basis) for the Three Months Ended March 31, 2003 and
Consolidated Statement Operations (Going Concern) for the
Three Months Ended March 31, 2002 (Restated)....................................... 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2003 (Liquidation Basis) and
the Three Months Ended March 31, 2002 (Going Concern) (Restated)................... 5
Notes to Consolidated Financial Statements......................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................................ 16
Item 3. Quantitative and Qualitative Disclosure about Market Risk.......................... 22
Item 4. Controls and Procedures............................................................ 22
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K................................................... 23
Signatures ................................................................................... 24
2
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
CONSOLIDATED STATEMENTS OF NET ASSETS (LIQUIDATION BASIS)
AS OF MARCH 31, 2003 AND DECEMBER 31, 2002
March 31, 2003 December 31, 2002
----------------------- ----------------------
(Unaudited)
ASSETS
Real estate held for sale $ 16,388,074 $ 31,146,000
Investments in joint ventures 14,987,513 37,202,673
Cash and cash equivalents, of which $1,001,370 is restricted
cash at March 31, 2003 2,271,423 260,370
Other assets 153,971 273,333
Receivables, net 224,781 123,997
----------------------- ----------------------
Total Assets 34,025,762 69,006,3733
----------------------- ----------------------
LIABILITIES
Accounts payable and accrued expenses 884,554 640,412
Note payable 15,423,374 19,718,457
Reserve for estimated costs during the period of liquidation 1,111,169 1,500,000
Deferral of gains on real estate assets and joint ventures 9,058,716 28,173,687
COMMITMENTS AND CONTIGENCIES (Notes 8, 10)
CLASS B Partnership Interests - -
CLASS A 5% Preferred Partnership Interests, at liquidation value - 672,178
----------------------- ----------------------
Total Liabilities 26,477,813 50,704,734
----------------------- ----------------------
NET ASSETS IN LIQUIDATION $ 7,547,949 $ 18,301,639
======================= ======================
See notes to consolidated financial statements.
3
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
CONSOLIDATED STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 (LIQUIDATION BASIS) AND
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 (GOING CONCERN BASIS)
(UNAUDITED)
For the Three Months Ended
March 31,
-----------------------------------------------------
2003 2002
------------------------ ----------------------------
(Restated - See note 2)
Rental Revenues $ 798,551 $ 835,649
Costs and Expenses
Operating expenses 439,978 346,416
Depreciation and amortization - 172,774
Asset management fee 50,000 105,863
Transition management fees - 41,650
Purchase of advisory agreements - 15,262,114
Administrative expenses 252,671 629,534
Property management fee 16,731 24,292
------------------------ ----------------------------
759,380 16,582,643
------------------------ ----------------------------
Income (loss) before equity income from joint ventures, gain
on sales of real estate and interest 39,171 (15,746,994)
Equity income from joint ventures 15,102,299 1,096,278
Gain on sales of real estate 4,618,972 -
Interest expense (157,785) (84,594)
Interest income 19,777 11,675
------------------------ ----------------------------
Net income (loss) 19,622,434 (14,723,635)
Preferred dividends (8,402) (4,201)
------------------------ ----------------------------
Net income (loss) available for common shares 19,614,032 $ (14,727,836)
============================
Net assets at January 1, 2003 18,301,639
Liquidating dividends - common (30,367,722)
------------------------
Net assets at March 31, 2003 $ 7,547,949
========================
Earnings (loss) per share - basic and diluted $ 24.87 $ (15.01)
======================== ============================
Weighted average common shares 788,772 981,385
======================== ============================
See notes to consolidated financial statements.
4
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 (LIQUIDATION BASIS)
AND MARCH 31, 2002 (GOING CONCERN BASIS)
(UNAUDITED
For the Three Months Ended
March 31,
--------------------------------------------------
2003 2002
---------------------- --------------------------
(Restated - See Note 2)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $19,622,434 $ (14,723,635)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization - 172,774
Straight-line adjustment for stepped lease rentals - 10,938
Change in bad debt reserve 17,099 61,250
Purchase of advisory agreement - 15,262,114
Distributions in excess of earnings from joint ventures 8,395,184 10,521,993
Gain on sales of real estate (4,618,972) -
Change in assets and liabilities:
Receivables (117,883) (36,191)
Other assets 119,362 (96,630)
Accounts payable and accrued expenses (886,951) (144,514)
Accrued interest 70,084 84,594
---------------------- --------------------------
Net cash provided by operating activities 22,600,357 11,112,693
---------------------- --------------------------
Cash FlowS from Investing Activities:
Improvements to real estate (18,074) (3,581)
Investment in Accotel (720,791) -
Proceeds from sales of real estate, net 14,820,768 -
---------------------- --------------------------
Net cash provided by (used in) investing activities 14,081,903 (3,581)
---------------------- --------------------------
Cash FlowS from Financing Activities:
Purchase of treasury stock - (11,830,337)
Proceeds from Fleet Loan 15,423,374 -
Paydown of Credit Facility from sales proceeds (6,524,820) -
Payoff of Credit Facility (13,193,637) -
Dividends paid-preferred and common (30,376,124) -
---------------------- --------------------------
Net cash used in financing activities (34,671,207) (11,830,337)
---------------------- --------------------------
Increase (decrease) in cash and cash equivalents 2,011,053 (721,225)
Cash and cash equivalents, beginning of period 260,370 2,839,489
---------------------- --------------------------
Cash and cash equivalents, end of period $ 2,271,423 $ 2,118,264
====================== ==========================
Supplemental disclosure of cash flow information-
Cash paid for interest $ 87,701 $ -
====================== ==========================
See notes to consolidated financial statements
5
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
------------
Shelbourne Properties III, Inc., a Delaware corporation (the
"Corporation"), was formed on April 17, 2001. The Corporation's
wholly-owned operating partnership, Shelbourne Properties III L.P., a
Delaware limited partnership (the "Operating Partnership," and
together with the Corporation, the "Company"), holds directly and
indirectly all of the Company's properties. Pursuant to a merger that
was consummated on April 17, 2001, the Operating Partnership became
the successor by merger to High Equity Partners L.P. - Series 88 (the
"Predecessor Partnership").
In August 2002, the Board of Directors adopted a Plan of Liquidation
(the "Plan of Liquidation") and directed that the Plan of Liquidation
be submitted to the Corporation's stockholders for approval. The
stockholders of the Corporation approved the Plan of Liquidation at a
Special Meeting of Stockholders held on October 29, 2002. The Plan of
Liquidation contemplates the orderly sale of all of the Corporation's
assets for cash or such other form of consideration as may be
conveniently distributed to the Corporation's stockholders and the
payment of (or provision for) the Corporation's liabilities and
expenses, as well as the establishment of a reserve to fund the
Corporation's contingent liabilities. The Plan of Liquidation gives
the Corporation's Board of Directors the power to sell any and all of
the assets of the Corporation without further approval by the
stockholders.
The Corporation currently expects that the liquidation will be
substantially completed not later than October 29, 2004, although
there can be no assurance in this regard. As a result, it is currently
anticipated that not later than October 29, 2004, any then remaining
assets and liabilities will be transferred to a liquidating trust.
With the transfer to a liquidating trust, the liquidation will be
completed for federal and state income tax purposes, although one or
more distributions of the remaining cash and net proceeds from future
asset sales may occur subsequent to the establishment of a liquidating
trust.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
BASIS OF PRESENTATION
---------------------
As a result of the adoption of the Plan of Liquidation and its
approval by the Corporation's stockholders, the Corporation adopted
the liquidation basis of accounting for the period subsequent to
October 29, 2002. Under the liquidation basis of accounting, assets
are stated at their estimated net realizable value. Liabilities
including the reserves for estimated costs during the period of
liquidation are stated at their anticipated settlement amounts. The
valuation of investments in joint ventures and real estate held for
sale is based upon current contracts, estimates as determined by
independent appraisals or other indications of sales values. The
valuations for other assets and liabilities under the liquidation
basis of accounting are based on management's estimates as of March
31, 2003. The actual values realized for assets and settlement of
liabilities may differ materially from the amounts estimated.
The accompanying consolidated financial statements include the
accounts of the Corporation and its wholly owned subsidiaries, the
Operating Partnership and Shelbourne Properties III GP Inc., the
general partner of the Operating Partnership and a wholly-owned
subsidiary of the Corporation. Intercompany accounts and transactions
have been eliminated in consolidation.
The consolidated statements of operations and cash flows for the three
months ended March 31, 2002 have been restated from the pro-rata
method of accounting to reflect the equity method of accounting.
6
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------------------
The following table summarizes the statement of operations line items
impacted by the restatement:
For the Three Months Ended
March 31,
Previously
Reported Restated
2002 2002
------------------ ------------------
Rental revenues $ 1,958,960 $ 835,649
Costs and expenses (17,091,935) (16,582,643)
Equity income from joint ventures - 1,096,278
Interest expense (84,594) (84,594)
Interest income 31,222 11,675
Net gain on sales of real estate 462,712 -
------------------ -----------------
Net Loss $ (14,723,635) $ 14,723,635)
================== =================
ADJUSTMENTS TO LIQUIDATION BASIS OF ACCOUNTING
- ----------------------------------------------
On October 30, 2002, in accordance with the liquidation basis of
accounting, assets were adjusted to estimated net realizable value and
liabilities were adjusted to estimated settlement amounts, including
estimated costs associated with carrying out the liquidation. Since
the sale of Livonia Shopping Plaza (note 4), Melrose Crossing II (note
4), Hilliard, Ohio (note 5) and 568 Broadway (note 5), the valuation
of investments in joint ventures and real estate held for sale have
been updated to reflect the remaining estimated costs of carrying out
the liquidation as of March 31, 2003 without any additional adjustment
required. The valuation of investments in joint ventures and real
estate held for sale is based on current contracts, estimates as
determined by independent appraisals or other indications of sales
value, net of estimated selling costs and capital expenditures
anticipated during the liquidation period. The valuations of other
assets and liabilities are based on management's estimates as of March
31, 2003. The actual values realized for assets and settlement of
liabilities may differ materially from amounts estimated. Significant
increases (decreases) in the carrying value of net assets are
summarized as follows:
Decrease to reflect estimated net realizable values of
certain real estate properties $ (4,574,204)
Recognition of deferred gain and incentive fees on real
estate properties 4,574,204
Decrease to reflect net realizable value of investments
in joint ventures (14,540,767)
Recognition of deferred gain and incentive fees on
investments in joint ventures 14,540,767
------------
Adjustment to reflect changes since December 31, 2002
to net carrying value $ -
=============
Adjusting assets to estimated net realizable value resulted in the
write-up in the value of certain real estate properties. The
anticipated gains, net of any incentive fees associated with the
adjustment in value of these real estate properties, have been
deferred until such time as a sale occurs. During the quarter ended
March 31, 2003, the Corporation recognized actual gains of $4,618,972
on the sale of real estate and $14,565,894 included in equity income
from joint ventures attributable to real estate sales.
7
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
-----------------------------------------------------
RESERVE FOR ESTIMATED COSTS DURING THE PERIOD OF LIQUIDATION
------------------------------------------------------------
Under liquidation accounting, the Corporation is required to estimate and
accrue the costs associated with executing the Plan of Liquidation. These
amounts can vary significantly due to, among other things, the timing and
realized proceeds from property sales, the costs of retaining agents and
trustees to oversee the liquidation, the costs of insurance, the timing and
amounts associated with discharging known and contingent liabilities and
the costs associated with cessation of the Company's operations. These
costs are estimates and are expected to be paid out over the liquidation
period. Such costs do not include costs incurred in connection with
ordinary operations.
The reserve for additional costs associated with liquidation was reduced
from $1,500,000 at December 31, 2002 to $1,111,169 at March 31, 2003 due to
professional costs associated with obtaining the Fleet Loan of $372,165 and
tax planning costs of $16,666 paid to an affiliate of Presidio Capital
Investment Company, LLC in connection with the Accor transaction (see note
10).
USE OF ESTIMATES
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and 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 materially from those estimates.
CASH EQUIVALENTS
----------------
The Corporation considers all short-term investments that have original
maturities of three months or less from the date of acquisition to be cash
equivalents.
ACCOUNTS RECEIVABLE
-------------------
Accounts receivable are stated net of an allowance for doubtful accounts of
$36,269 and $19,170 as of March 31, 2003 and December 31, 2002,
respectively.
REVENUE RECOGNITION
-------------------
Prior to the adoption of the liquidation basis of accounting, base rents
were recognized on a straight-line basis over the terms of the related
leases. Subsequent to the adoption of the liquidation basis of accounting,
the amount of the previously deferred straight-line rent was grouped with
real estate for purposes of comparing such balances to their net realizable
value and, if such amounts when aggregated with real estate exceeded the
net realizable value, the amount of the excess was included in the
write-off of other assets as part of the adjustment to the liquidation
basis of accounting. At October 29, 2002, the date prior to the adoption of
liquidation accounting, approximately $356,513 of deferred straight-line
rent was included in other assets that was subsequently grouped with real
estate with no write-off required.
Percentage rents charged to retail tenants based on sales volume are
recognized when earned. Pursuant to Staff Accounting Bulletin No 101,
"Revenue Recognition in Financial Statements," and the Emerging Issues Task
Force's Consensus on Issue 98-9, "Accounting for Contingent Rent in Interim
Financial Periods," the Corporation defers recognition of contingent rental
income (i.e., percentage/excess rent) in interim periods until the
specified target (i.e., breakpoint) that triggers the contingent rental
income is achieved. Recoveries from tenants for taxes, insurance and other
operating expenses are recognized as revenue in the period the applicable
costs are incurred.
8
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
-----------------------------------------------------
INVESTMENTS IN JOINT VENTURES
-----------------------------
Certain properties are owned in joint ventures with Shelbourne Properties I
L.P. and/or Shelbourne Properties II L.P. Accordingly, the Corporation's
consolidated balance sheet at December 31, 2002 and the Corporation's
consolidated statements of operations commencing January 1, 2002, as
restated, reflect the equity method of accounting.
REAL ESTATE
-----------
Subsequent to the adoption of the liquidation basis of accounting, real
estate assets were adjusted to their net realizable value and classified as
real estate held for sale. Additionally, the Corporation suspended
recording any further depreciation expense.
DEPRECIATION AND AMORTIZATION
-----------------------------
Upon the adoption of the liquidation basis of accounting, deferred loan
fees of $614,178 were written off to reflect the balances at their net
realizable value. Direct lease costs associated with the real estate were
grouped with real estate for purposes of comparing carrying amounts to
their net realizable value, and if such amounts, when aggregated with real
estate exceeded the net realizable value, these costs were written off.
Prior to the Corporation adopting the liquidation basis of accounting,
depreciation was computed using the straight-line method over the useful
life of the property, which was estimated to be 40 years. The cost of
properties represented the initial cost of the properties to the Company
plus acquisition and closing costs less impairment adjustments. Tenant
improvements, leasing costs and deferred loan fees were amortized over the
applicable lease term.
FINANCIAL INSTRUMENTS
---------------------
The carrying values reflected in the consolidated statements of net assets
at March 31, 2003 and December 31, 2002 reasonably approximate the fair
values for cash and cash equivalents, other assets, receivables, accounts
payable, accrued expenses and note payable. Additionally, as the
Corporation currently expects that the liquidation will be substantially
completed not later than October 2004, the net realizable value of notes
payable approximates the fair value. In making such assessment, the
Corporation has utilized discounted cash flow analyses, estimates, and
quoted market prices as deemed appropriate.
INCOME TAXES
------------
The Corporation is operating with the intention of qualifying as a real
estate investment trust ("REIT") under Sections 856-860 of the Internal
Revenue Code of 1986 as amended. Under those sections, a REIT which pays at
least 90% of its ordinary taxable income as a dividend to its stockholders
each year and which meets certain other conditions will not be taxed on
that portion of its taxable income which is distributed to its
stockholders.
For federal income tax purposes, the cash dividends distributed to
stockholders after October 29, 2002 have been and will be characterized as
liquidating distributions.
AMOUNTS PER SHARE
-----------------
Basic earnings (loss) per share is computed based on weighted average
common shares outstanding during the period.
9
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
-----------------------------------------------------
DIVIDENDS PER SHARE
-------------------
On January 13, 2003, the Board of Directors declared a dividend of $2.50
per share. The dividend was paid on January 31, 2003 to stockholders of
record at the close of business on January 23, 2003.
On February 28, 2003, the Board of Directors declared a dividend of $36.00
per share. The dividend was paid on March 18, 2003 to stockholders of
record at the close of business on March 10, 2003. The dividend was funded
from proceeds of the Fleet Loan (see note 7) and from proceeds generated by
the sales of the New York, New York property and the Melrose Park, Illinois
property, as well as cash reserves.
RECENTLY ISSUED ACCOUNTING STANDARDS
------------------------------------
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical
Corrections," which updates, clarifies and simplifies existing accounting
pronouncements which are effective for fiscal years beginning after May 15,
2002. This statement had no effect on the Corporation's consolidated
financial statements.
In November 2002, the FASB issued Interpretation No. 45, Guarantors'
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. The Interpretation elaborates on the
disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. It also clarifies
that a guarantor is required to recognize, at the inception of a guarantee,
a liability for the fair value of the obligation undertaken in issuing the
guarantee. This Interpretation does not prescribe a specific approach for
subsequently measuring the guarantor's recognized liability over the term
of the related guarantee. The disclosure provisions of this Interpretation
are effective for the Corporation's December 31, 2002 financial statements.
The initial recognition and initial measurement provisions of this
Interpretation are applicable on a prospective basis to guarantees issued
or modified after December 31, 2002. This Interpretation had no effect on
the Corporation's consolidated financial statements.
In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities. This Interpretation clarifies the application
of existing accounting pronouncements to certain entities in which equity
investors do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to finance
its activities without additional subordinated financial support from other
parties. The provisions of the Interpretation will be immediately effective
for all variable interest in variable interest entities created after
January 31, 2003, and the Corporation will need to apply its provisions to
any existing variable interest in variable interest entities by no later
than December 21, 2004. The Corporation does not expect that this will have
an impact on the Corporation's consolidated financial statements.
3. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
-----------------------------------------------------------
During the three months ended March 31, 2003 and 2002, property management
services (the "Property Management Services") and asset management
services, investor relation services and accounting services (the "Asset
Management Services") have been provided to the Company by affiliates of
the Company.
ASSET MANAGEMENT SERVICES
-------------------------
For the period from January 1, 2002 through February 14, 2002, Shelbourne
Management LLC ("Shelbourne Management"), a wholly-owned subsidiary of
Presidio Capital Investment Company, LLC ("PCIC"), provided Asset
Management Services to the Company pursuant to the terms of an Advisory
Agreement (the "Advisory Agreement") between the Corporation, the Operating
Partnership and Shelbourne Management. Pursuant to the
10
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
----------------------------------------------------------------------
terms of the Advisory Agreement, the Corporation was obligated to pay for
Asset Management Services an annual asset management fee, payable
quarterly, equal to 1.25% of the gross asset value of the Corporation as of
the last day of each year. In addition, the Corporation was obligated to
(i) pay $200,000 for non-accountable expenses and (ii) reimburse Shelbourne
Management for expenses incurred in connection with the performance of its
services. Effective February 14, 2002, in connection with the Transaction
(as described below), PCIC began providing such services for a reduced fee
of $333,333 per annum. Both Shelbourne Management and PCIC were affiliates
of the then management of the Corporation.
Effective October 1, 2002, as contemplated by in the Plan of Liquidation,
the agreement with PCIC was terminated and Kestrel Management, L.P.
("Kestrel") began providing the Asset Management Services for a fee of
$200,000 per annum. Kestrel is an affiliate of the Corporation's current
Chief Executive Officer.
Asset Management Services were provided to the Corporation during the three
months ended March 31, 2003 and 2002 as follows:
o Effective January 1, 2002 through February 13, 2002, pursuant to
the terms of the Advisory Agreement, by Shelbourne Management.
o Effective February 14, 2002 through the end of the fiscal quarter
and thereafter through September 30, 2002, by PCIC.
o Effective October 1, 2002 and thereafter including for the fiscal
quarter ended March 31, 2003, as contemplated by the Plan of
Liquidation, by Kestrel.
PROPERTY MANAGEMENT SERVICES
----------------------------
The Operating Partnership has contracted with affiliates to provide
Property Management Services pursuant to agreements that provide for a fee
of up to 6% of property revenue. Kestrel provided Property Management
Services during the fiscal quarters ended March 31, 2003 and 2002.
The following table summarizes the amounts paid to affiliates for Expense
Reimbursements, Asset Management Fee, Transition Management Fee and
Property Management Fees for the three-month periods ended March 31, 2003
and 2002.
THREE MONTHS ENDED MARCH 31, 2003
Shelbourne
Management Kestrel
---------- -------
Asset Management Fee $ - $ 50,000
Property Management Fees $ - $ 52,626
11
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
----------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 2002
Shelbourne
Management Kestrel
---------- -------
Expense Reimbursement (1) $ 25,000 $ -
Asset Management Fee 105,863 -
Transition Management Fee 41,650 -
Property Management Fees $ - $ 57,639
(1) The asset management fees were modified in connection with the
Transaction to eliminate expense reimbursement.
ALLOCATION OF DIVIDENDS BY THE CORPORATION
------------------------------------------
Dividends payable to HX Investors, L.P. ("HX Investors"), an affiliate of
the current Chief Executive Officer of the Corporation, for the three
months ended March 31, 2003 and 2002 on account of shares of common stock
owned by HX Investors were $12,646,634 and $0, respectively.
In addition, in connection with the settlement of the lawsuit brought by HX
Investors, Shelbourne Management agreed to pay to HX Investors 42% of the
amounts paid to Shelbourne Management with respect to the Class A units.
THE TRANSACTION
---------------
On February 14, 2002, the Corporation, Shelbourne Properties I, Inc. and
Shelbourne Properties II, Inc. (the "Companies") consummated a transaction
(the "Transaction") whereby the Corporation purchased the 385,226 shares of
the Corporation's common stock held by subsidiaries of PCIC and the
Advisory Agreement was contributed to the Operating Partnership. Pursuant
to the Transaction, the Corporation paid PCIC $11,830,337 in cash and the
Operating Partnership issued preferred partnership interests with an
aggregate liquidation preference of $672,178 and a note in the amount of
$14,589,936. This note was satisfied in April 2002 from the proceeds of the
Credit Facility (See note 6).
4. REAL ESTATE
-----------
The following table is a summary of the Corporation's real estate as of:
MARCH 31, 2003 DECEMBER 31, 2002
LIQUIDATION BASIS LIQUIDATION BASIS
(UNAUDITED)
-------------------- --------------------
Real estate held for sale $ 16,388,074 $ 31,146,000
==================== ====================
On January 29, 2003, Livonia Shopping Plaza located in Livonia, Michigan
was sold for a gross sales price of $12,969,000. The Corporation received
proceeds of $12,737,322 after closing costs. The Corporation received net
proceeds in the amount of approximately $7,865,000 after mortgage repayment
and closing adjustments. The Corporation realized an accounting gain of
$4,481,423.
12
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. REAL ESTATE (CONTINUED)
----------------------
On February 28, 2003, the Corporation sold its property located in Melrose
Park, Illinois for a gross purchase price of $2,164,800. The Corporation
received proceeds of $2,083,446 after closing costs. After closing
adjustments, net proceeds were approximately $1,970,000. The Corporation
realized an accounting gain of $137,549.
5. INVESTMENT IN JOINT VENTURES
----------------------------
On October 30, 2002, the Corporation adopted the liquidation basis of
accounting. Subsequent to the adoption of the liquidation basis of
accounting, the investments in joint ventures were adjusted to their net
realizable value based on current contracts, estimates as determined by
independent appraisals or other indications of sales value.
At January 1, 2003 the Corporation was invested in three joint ventures,
(568 Broadway, Supervalu, and Tri-Columbus). As of March 31, 2003 the
Corporation was invested in two operating joint ventures (SuperValu and
Tri- Columbus). The joint ventures are accounted for utilizing the equity
method of accounting.
On January 14, 2002, one of the Corporation's joint ventures sold a
supermarket in Edina, Minnesota for $3,500,000 that resulted in a gain on
sale to the Corporation of $649,092. On January 30, 2002, the same joint
venture sold a supermarket in Toledo, OH for $3,600,000 that resulted in a
net loss to the Corporation of $186,380. These amounts are included in the
Corporation's equity earnings from joint ventures.
On January 31, 2003, the Hilliard, Ohio property, which was owned by
Tri-Columbus Associates, in which the Corporation holds a 79.34% interest,
was sold for a gross sales price of $4,600,000. After satisfying the debt
encumbering the property, closing adjustments and other closing costs, net
proceeds were approximately $2,063,000, $1,636,784 of which is attributable
to the Corporation's interest. The joint venture recognized no gain or loss
on the sale as the joint venture's property was previously written down to
its net realizable value.
On February 24, 2003, Indiana Market Ltd, A Limited Liability Co., in which
the Corporation indirectly holds a 50% interest, entered into a contract to
sell its property located in Indianapolis, Indiana for a gross sales price
of $750,000. On April 28, 2003 an amendment to the original contract was
signed, reducing the gross sales price to $700,000. The sale closed on May
8, 2003.
On February 28, 2003, 568 Broadway Joint Venture, a joint venture in which
the Corporation indirectly holds a 22.15% interest, sold its property
located at 568 Broadway, New York, New York for a gross sale price of
$87,500,000. After assumption of the debt encumbering the property
($10,000,000), closing adjustments and other closing costs, net proceeds
were approximately $73,000,000, approximately $16,169,500 of which was
allocated to the Operating Partnership. The joint venture recognized an
accounting gain of $67,746,480 of which $14,565,894 was attributable to the
Corporation and is reported as equity income from joint ventures.
6. CREDIT FACILITY
---------------
On May 1, 2002, the Operating Partnership and certain of its subsidiaries,
as well as the operating partnership of Shelbourne Properties I, Inc. and
the operating partnership of Shelbourne Properties II, Inc., and certain of
their subsidiaries entered into a $75,000,000 revolving credit facility
with Bayerische Hypo-Und Vereinsbank AG, New York Branch, as agent for
itself and other lenders (the "Credit Facility"). The Credit Facility was
subsequently satisfied on February 20, 2003. (See note 7 below).
7. FLEET LOAN
On February 20, 2003, in a transaction designed to provide flexibility to
the Corporation, Shelbourne Properties I, Inc. and Shelbourne Properties
II, Inc., (collectively, the "Companies") and their respective operating
partnerships (the "Shelbourne OPs")in implementing their respective plans
of liquidation and enable them to distribute 100% of
13
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. FLEET LOAN (CONTINUED)
---------------------
the net proceeds from the sale of the New York, New York property, direct
and indirect subsidiaries (the "Borrowers") of each of the Companies
entered into a Loan Agreement with Fleet National Bank, as agent for itself
and other lenders ("Fleet") pursuant to which the Borrowers obtained a
$55,000,000 loan (the "Loan"). The Companies believed that by entering into
a single loan transaction instead of three separate loan transactions they
were able to obtain a larger loan at a more favorable interest rate. The
Loan bears interest at the election of the Borrowers at a rate of either
LIBOR plus 2.75% (4.09% at March 31, 2003) or Fleet's prime rate (but not
less than 5%) plus 100 basis points. At present the Borrowers have elected
that the Loan bear interest at LIBOR plus 2.75%. The Loan matures on
February 19, 2006, subject to two one year extensions. The Loan is
prepayable in whole or in part at anytime without penalty or premium.
At March 31, 2003, the Loan was secured by mortgages on the Company's Las
Vegas, Nevada property and the properties held by Tri-Columbus Associates,
as well as certain other real properties owned indirectly by Shelbourne
Properties I, Inc. and Shelbourne Properties II, Inc. The Borrowers are
jointly and severally liable for the repayment of the amounts due under the
Loan and the Operating Partnership and the Corporation (as well as the
other operating partnerships and Companies) have guaranteed the repayment
of the Loan. A portion of the Loan proceeds, as well as the balance of a
note in the amount of $10,000,000 secured by the 568 Broadway property,
were used to satisfy the Credit Facility that had a balance due of
$37,417,249 as of February 20, 2003.
At March 31, 2003, the outstanding balance due on the Loan was $55,000,000,
of which $15,423,374 was allocable to the Company and the interest rate, at
March 31, 2003, on the Loan was 4.09%. The outstanding principal balance
was subsequently reduced by $20,000,000 on April 29, 2003 in connection
with the sale of property jointly owned by Shelbourne Properties I, Inc.
and Shelbourne Properties II, Inc.
Since the Borrowers are jointly and severally liable for the repayment of
the entire principal, interest and other amounts due under the Loan, the
Borrowers, the Companies and the operating partnerships have entered into
Indemnity, Contribution and Subrogation Agreements, the purpose and intent
of which was to place the operating partnerships in the same position (as
among each other) as each would have been had the lender made three
separate loans, one to each of the operating partnerships; each of which
loans would have been in a smaller amount than the Loan, would have been
the obligation/liability only of the operating partnership to which it was
made and would have been secured only by certain of such operating
partnership's assets.
8. CLASS B PARTNERSHIP INTERESTS
-----------------------------
Under the Plan of Liquidation which has been approved by the Corporation's
Board of Directors and stockholders, the Class B Unitholders are entitled
to receive an incentive payment of 15% of (i) the cash and other proceeds
generated from operating the assets and properties of the Company, plus the
aggregate fair value of all consideration received from the disposal of the
assets and properties of the Company less (ii) the sum of all direct costs
incurred in connection with such disposal (the "Incentive Fee"), after the
payment of a priority return of approximately $52.25 per share to
stockholders of the Corporation plus interest thereon compounded quarterly
at 6% (from August 19, 2002) per annum (the "Priority Return"). On August
19, 2002, the Board of Directors of the Corporation authorized the issuance
by the Operating Partnership of, and the Operating Partnership issued,
Class B Units to HX Investors L.P. ("HX Investors") which Class B Units
provide distribution rights to HX Investors consistent with the intent and
financial terms of the Incentive Fee. The Class B Units entitle the holder
thereof to receive distributions equal to 15% of gross proceeds after the
Priority Return. After giving effect to dividends paid from August 19, 2002
to May 12, 2003, the remaining unpaid per share Priority Return at May 12,
2003 is $7.18.
14
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. CLASS A 5% PREFERRED PARTNERSHIP INTERESTS
------------------------------------------
In connection with the Transaction, the Operating Partnership issued to
Shelbourne Management 672.178 Class A 5% Preferred Partnership Units (the
"Class A Units"). The Class A Units entitled the holder to a quarterly
distribution equal to 1.25% of the aggregate liquidation preference of the
Class A Units ($672,178). In addition, upon the liquidation of the
Operating Partnership, each Class A Unit was entitled to a liquidation
preference of $1,000 per unit. The Class A Units are not convertible into
common units of the Operating Partnership or shares in the Corporation and
the holders of the Class A Units do not have voting rights except in
limited circumstances. Although the holders of the Class A Units do not
have redemption rights, pursuant to the terms of the Purchase and
Contribution Agreement entered into in connection with the Transaction,
Shelbourne Management had the right to cause the Operating Partnership to
reacquire the Class A Units upon the occurrence of certain events
including, without limitation, if the aggregate assets of the Companies is
below approximately $75 million or the outstanding debt under which the
Companies are obligated is less than $55 million, for a purchase price
equal to the liquidation preference plus an amount (the "Put Premium")
which was equal to approximately $4,374,000 at December 31, 2002 and
declined each February 13, May 13, August 13 and November 13 until it
reached zero on May 13, 2007.
The terms of the Class A Units were subsequently modified to eliminate the
liquidation preference and limit the circumstances under which the holders
of the Class A Units can cause the Operating Partnership to purchase the
Class A Units at a premium. These circumstances include the occurrence of
the following while any of the Class A Units are outstanding; (i) the
filing of bankruptcy by a Shelbourne OP; (ii) the failure of a Shelbourne
OP to be taxed as a partnership; (iii) the termination of the Advisory
Agreement; (iv) the issuing of a guaranty by any of the Companies on the
debt securing the Accor S.A. properties; or (v) the taking of any action
with respect to the Accor S.A. properties (see below) without the consent
of the Class A Unitholder.
In connection with the settlement of the lawsuit brought by HX Investors,
Shelbourne Management agreed to pay to HX Investors 42% of the amounts paid
to Shelbourne Management with respect to the Class A units.
10. ACCOR S.A. PROPERTIES TRANSACTION
---------------------------------
On January 15, 2003, a joint venture owned by the Operating Partnership and
the operating partnerships of Shelbourne Properties I, Inc. and Shelbourne
Properties II, Inc. acquired from Realty Holdings of America, LLC, an
unaffiliated third party, a 100% interest in an entity that owns 20 motel
properties triple net leased to an affiliate of Accor S.A. The cash
purchase price, which was provided from working capital, was approximately
$2,668,272, of which $867,806, $1,079,675 and $720,791 was paid by
Shelbourne Properties I, Inc., Shelbourne Properties II, Inc., and the
Corporation respectively. The properties are also subject to existing
mortgage indebtedness in the current principal amount of approximately
$74,220,000.
The Companies formed the joint venture and acquired the interest in the new
properties in order to facilitate the disposition of the other properties
of the Companies and the distribution to stockholders of the sales proceeds
in accordance with the Plan of Liquidation. Prior to the acquisition of the
Accor S.A. properties, the holder of the Class A Units had the right to
cause the Operating Partnerships to purchase the Class A Units at a
substantial premium to their liquidation value (at the time of the
acquisition, a premium of approximately $4,374,000 in the case of the
Operating Partnership and approximately $16,265,000 for all three operating
partnerships) unless the operating partnerships maintained at least
approximately $54,200,000 of aggregate indebtedness ($14,574,000 in the
case of the Operating Partnership) guaranteed by the holder of the Class A
Units and secured by assets having an aggregate market value of at least
approximately $74,800,000 ($20,100,000 in the case of the Operating
Partnership). These requirements significantly impaired the ability of the
Corporation to sell its properties and make distributions in accordance
with the Plan of Liquidation. In lieu of these requirements, the operating
partnerships acquired the Accor S.A. properties for the benefit of the
holder of the Class A Units. The holder of the Class A Units does, however,
continue to have the right, under certain limited circumstances which the
Companies do not anticipate will occur, to cause the operating partnerships
to purchase the Class A Units at the premium as described above. The terms
of the Class A Units were also modified to eliminate the $2,500,000
aggregate liquidation
15
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
10. ACCOR S.A. PROPERTIES TRANSACTION (CONTINUED)
--------------------------------------------
preferences to which the holder of the Class A Units was previously
entitled ($672,178 in the case of the Operating Partnership).
The holder of the Class A Units has the right to require the operating
partnerships to acquire other properties for its benefit at an aggregate
cash cost to the operating partnerships of $2,500,000 (approximately
$670,000 of which would be paid by the Operating Partnership). In that
event the Accor S.A. properties would not be held for the benefit of the
holder of the Class A Units and would be disposed of as part of the
liquidation of the Companies.
11. SUBSEQUENT EVENTS
-----------------
On April 16, 2003, Tri-Columbus Associates, a joint venture in which the
Corporation indirectly owns a 79.34% interest, entered into a contract to
sell its building in Grove City, Ohio for a gross sales price of
$4,090,000. The closing of the sale, if at all, is tentatively expected to
occur in early June 2003.
On May 8, 2003, Indiana Market Ltd., a joint venture in which the
Corporation holds a 50% interest, consummated the sale of its shopping
center property located in Indianapolis, Indiana commonly referred to as
Indiana Market Place for a purchase price of $700,000. After closing costs
and adjustments, net proceeds were approximately $600,000, approximately
$300,000 of which is allocable to the Corporation. The Corporation
anticipates an accounting gain of approximately $30,000.
As a result of the sale, the remaining properties owned by the Corporation
are a shopping center located in Las Vegas, Nevada, and a 79.34% interest
in two industrial buildings in the Columbus, Ohio area.
16
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995.
Statements contained herein may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Any statements contained herein which are not
statements of historical facts and that address activities, events or
developments that Shelbourne Properties III, Inc. expects, believes or
anticipates will or may occur in the future shall be deemed to be
forward-looking statements. Forward-looking statements are inherently
subject to risks and uncertainties, many of which cannot be predicted
with accuracy and some of which might not even be anticipated. Future
events, actual results and performance financial and otherwise, could
differ materially from those set forth in or contemplated by the
forward-looking statements herein. Factors that could cause actual
results to differ materially from those in forward-looking statements
include the terms of future property sales, investments and
financings, general economic and business conditions and various other
risk factors listed in the registration statement of Shelbourne
Properties III, Inc. filed with the Securities and Exchange
Commission.
This item should be read in conjunction with the financial statements
and other items contained elsewhere in the report.
ORGANIZATION
Shelbourne Properties III, Inc., a Delaware corporation (the
"Corporation"), was formed on April 17, 2001. The Corporation's
wholly-owned operating partnership, Shelbourne Properties III L.P., a
Delaware limited partnership (the "Operating Partnership," and
together with the Corporation, the "Company"), holds directly and
indirectly all of the Company's properties. Pursuant to a merger that
was consummated on April 17, 2001, the Operating Partnership became
the successor by merger to High Equity Partners L.P. - Series 88 (the
"Predecessor Partnership").
In August 2002, the Board of Directors adopted a Plan of Liquidation
(the "Plan of Liquidation") and directed that the Plan of Liquidation
be submitted to the Corporation's stockholders for approval. The
stockholders of the Corporation approved the Plan of Liquidation at a
Special Meeting of Stockholders held on October 29, 2002. The Plan of
Liquidation contemplates the orderly sale of all of the Corporation's
assets for cash or such other form of consideration as may be
conveniently distributed to the Corporation's stockholders and the
payment of (or provision for) the Corporation's liabilities and
expenses, as well as the establishment of a reserve to fund the
Corporation's contingent liabilities. The Plan of Liquidation gives
the Corporation's Board of Directors the power to sell any and all of
the assets of the Corporation without further approval by the
stockholders.
Since the adoption of the Plan of Liquidation, the Company has sold
its properties located in Livonia, Michigan and Melrose Park, Illinois
and its joint venture properties located in Hilliard, Ohio, New York,
New York. As a result, the remaining assets of the Company are a
shopping center located in Las Vegas, Nevada, a 50% interest in a
retail property in Indianapolis, Indiana, and a 79.34% interest in two
industrial buildings in the Columbus, Ohio area. In addition, the
Company holds a 27% interest in a joint venture that holds 20 motel
properties for the benefit of the Class A Unitholder. See "The Accotel
Transaction" below.
The Corporation currently expects that the liquidation will be
substantially completed not later than October 29, 2004, although
there can be no assurance in this regard. As a result, it is currently
anticipated that not later than October 29, 2004, any then remaining
assets and liabilities will be transferred to a liquidating trust.
With the transfer to a liquidating trust, the liquidation will be
completed for federal and state income tax purposes, although one or
more distributions of the remaining cash and net proceeds from future
asset sales may occur subsequent to the establishment of a liquidating
trust.
17
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
THE TRANSACTION
- ---------------
On February 14, 2002, the Corporation, Shelbourne Properties I, Inc. and
Shelbourne Properties II, Inc. (the "Companies") consummated a transaction (the
"Transaction") whereby the Corporation purchased the 385,226 shares of the
Corporation's common stock held by subsidiaries of Presidio Capital Investment
Company ("PCIC") and the Advisory Agreement was contributed to the Operating
Partnership. Pursuant to the Transaction, the Corporation paid PCIC $11,830,337
in cash and the Operating Partnership issued preferred partnership interests
with an aggregate liquidation preference of $672,178 and a note in the amount of
$14,589,936.
THE ACCOTEL TRANSACTION
- -----------------------
In connection with the Transaction, the Operating Partnership issued the Class A
Units to Shelbourne Management. Pursuant to the terms of the Purchase and
Contribution Agreement in which the Class A Units were issued, the holder of the
Class A Units had the right to cause the Operating Partnership to purchase the
Class A Units at a substantial premium to their liquidation value ($4,374,000 at
the January 15, 2003) unless the Operating Partnership, together with the
operating partnerships of Shelbourne Properties I, Inc. and Shelbourne
Properties II, Inc. (collectively, the "Shelbourne OPs") maintained at least
approximately $54,200,000 of aggregate indebtedness ($14,574,000 in the case of
the Operating Partnership) guaranteed by the holder of the Class A Units and
secured by assets having an aggregate market value of at least approximately
$74,800,000 ($20,100,000 in the case of the Operating Partnership) (the "Debt
and Asset Covenant"). These requirements significantly impaired the ability of
the Corporation to sell its properties and pay dividends in accordance with the
Plan of Liquidation.
Accordingly, in a transaction (the "Accotel Transaction") designed to facilitate
the liquidation of the Corporation and provide dividends to stockholders, on
January 15, 2003, a joint venture owned by the Shelbourne OPs acquired from
Realty Holdings of America, LLC, an unaffiliated third party, a 100% interest in
an entity that owns 20 motel properties triple net leased to an affiliate of
Accor S.A. The cash purchase price, which was provided from working capital, was
$2,668,272, of which $867,806, $1,079,675 and $720,791 was paid by Shelbourne
Properties I L.P., Shelbourne Properties II L.P. and the Operating Partnership,
respectively. The properties were also subject to existing mortgage indebtedness
in the principal amount of approximately $74,220,000.
The Accor S.A. properties were acquired for the benefit of the holder of the
Class A Units as they provide sufficient debt to be guaranteed by the holder of
the Class A Units. Except as indicated below, the Class A Unitholder will
ultimately be the sole owner of the joint venture. In connection with the
Accotel Transaction, the terms of the Class A Units were amended to (i)
eliminate the liquidation preferences (as the cost of the interest in the Accor
S.A. properties which was borne by the Shelbourne OPs satisfied the liquidation
preference) and (ii) eliminate the Debt and Asset Covenant. The holder of the
Class A Units does, however, continue to have the right, under certain limited
circumstances which the Companies do not anticipate will occur, to cause the
Shelbourne OPs to purchase their respective Class A Units at the premium
described above. These circumstances include the occurrence of the following
while any of the Class A Units are outstanding; (i) the filing of bankruptcy by
a Shelbourne OP; (ii) the failure of a Shelbourne OP to be taxed as a
partnership; (iii) the termination of the Advisory Agreement; (iv) the issuing
of a guaranty by any of the Companies on the debt securing the Accor S.A.
properties; or (v) the taking of any action with respect to the Accor S.A.
properties without the consent of the Class A Unitholder.
The holder of the Class A Units has the right, which right must be exercised by
no later than July 28, 2004, to require that the Shelbourne OPs acquire other
properties for the Class A Unitholder's benefit at an aggregate cash cost to the
Shelbourne OPs of not more than $2,500,000 (approximately $670,000 of which
would be paid by the Operating Partnership). In that event, the Accor S.A.
properties would not be held for the benefit of the holder of the Class A Units
and the Companies would seek to dispose of these properties as part of the
liquidation of the Companies. Accordingly, if the Class A Unitholder were to
exercise this option, there is a risk that the Companies interest in the Accor
S.A. properties could not be sold for their original purchase price.
The foregoing description of the transaction does not purport to be complete,
and is qualified in its entirety by reference to the Purchase Agreement (and all
exhibits thereto) dated as of January 15, 2003, the Modification Agreement,
dated as of January 15, 2003 and the Amended and Restated Partnership Unit
Designation, copies of
18
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
which are attached as exhibits to the Corporation's Current Report on Form 8-K
filed on January 16, 2003, which are incorporated herein by reference.
THE PLAN OF LIQUIDATION - PROPERTY SALES
- ----------------------------------------
On October 29, 2002, the Corporation's stockholders approved the Plan of
Liquidation. Accordingly the Corporation began selling its properties. Since the
adoption of the Plan of Liquidation, the Company has sold the following
properties.
Livonia Shopping Plaza. On January 29, 2003 Livonia Shopping Plaza was sold for
$12,969,000. The Corporation received proceeds of $12,737,322 after closing
costs. After satisfying the debt encumbering the property of $4,700,000, all
expenses, prorations, adjustments and settlement charges, the Company received
net proceeds in the amount of approximately $7,865,000. The Company realized an
accounting gain of $4,481,423.
TMR Warehouse, Hilliard, Ohio. On January 31, 2003, the Hilliard, Ohio,
property, which was owned by Tri-Columbus Associates, a joint venture in which
the Corporation held a 79.34% interest, was sold for a gross sales price of
$4,600,000. After satisfying the debt encumbering the property of $2,300,000 (of
which the Corporation was responsible for $1,824,820), closing adjustments and
other closing costs, net proceeds were $2,063,553, $1,637,223 of which is
attributable to the Corporation's interest. The joint venture recognized no gain
or loss on the sale as the joint venture's property was previously written down
to its net realizable value.
568 Broadway. On February 28, 2003, 568 Broadway Joint Venture, a joint venture
in which the Corporation indirectly held a 22.15% interest, sold its property
located at 568 Broadway, New York, New York for a gross sales price of
$87,500,000. After assumptions of the debt encumbering the property (see above),
closing adjustments and other closing costs, net proceeds were approximately
$73,000,000 of which approximately $16,169,500 was allocated to the Operating
Partnership. The joint venture recognized an accounting gain of $67,746,480 of
which $14,565,894 was attributable to the Corporation.
Melrose Crossing Shopping Center. Also on February 28, 2003, the Corporation
sold its property located in Melrose Park, Illinois for a gross purchase price
of $2,164,800. The Corporation received proceeds of $2,083,446 after closing
costs. After closing adjustments, net proceeds were approximately $1,970,000.
The Company realized an accounting gain of $137,549.
RECENT DEVELOPMENTS
- -------------------
On April 16, 2003, Tri-Columbus Associates, a joint venture in which the
Corporation indirectly owns a 79.34% interest, entered into a contract to sell
its building in Grove City, Ohio for a gross sales price of $4,090,000. The
closing of the sale, if at all, is tentatively expected to occur in early June
2003.
On May 8, 2003, Indiana Market Ltd., a joint venture in which the Corporation
holds a 50% interest, consummated the sale of its shopping center property
located in Indianapolis, Indiana commonly referred to as Indiana Market Place
for a purchase price of $700,000. After closing costs and adjustments, net
proceeds were approximately $600,000, approximately $300,000 of which is
allocable to the Corporation. The Corporation anticipates an accounting gain of
approximately $30,000.
As a result of the sale, the remaining properties owned by the Corporation are a
shopping center located in Las Vegas, Nevada, and a 79.34% interest in two
industrial buildings in the Columbus, Ohio area.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company uses its working capital reserves and any cash from operations as
its primary source of liquidity. In addition, on February 20, 2003, in a
transaction designed to provide flexibility to the Corporation, Shelbourne
Properties I, Inc. and Shelbourne Properties II, Inc. (collectively, the
"Companies") in implementing their respective plans of liquidation and enable
them to distribute 100% of the net proceeds from the sale of the New York, New
York property, direct and indirect subsidiaries (the "Borrowers") of each of the
Companies entered into a Loan Agreement with Fleet National Bank, as agent for
itself and other lenders ("Fleet") pursuant to which the Borrowers
19
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
obtained a $55,000,000 loan (the "Loan"). The Companies believed that by
entering into a single loan transaction instead of three separate loan
transactions they were able to obtain a larger loan at a more favorable interest
rate. The Loan bears interest at the election of the Borrowers at a rate of
either LIBOR plus 2.75% or Fleet's prime rate (but not less than 5%) plus 1%. At
present the Borrowers have elected that the Loan bear interest at LIBOR plus
2.75%. The Loan matures on February 19, 2006, subject to two one year
extensions. The Loan is prepayable in whole or in part at anytime without
penalty or premium.
At March 31, 2003, the outstanding balance due on the Loan was $55,000,000, of
which $15,423,374 was allocable to the Company and the interest rate on the Loan
was 4.09%. The outstanding principal balance was subsequently reduced by
$20,000,000 on April 29, 2003 in connection with the sale of property jointly
owned by Shelbourne Properties I, Inc. and Shelbourne Properties II, Inc.
The Loan is secured by mortgages on the Company's Las Vegas, Nevada property and
the properties held by Tri-Columbus Associates, as well as certain other real
properties owned indirectly by Shelbourne Properties I, Inc. and Shelbourne
Properties II, Inc. The Borrowers are jointly and severally liable for the
repayment of the amounts due under the Loan and the Operating Partnership and
the Corporation (as well as the other operating partnerships and Companies) have
guaranteed the repayment of the Loan. A portion of the Loan proceeds, as well as
the balance of a note in the amount of $10,000,000 secured by the 568 Broadway
property, were used to satisfy the Credit Facility that had a balance due of
$37,417,249 of which the Corporation was responsible for $13,193,637.
Since the Borrowers are jointly and severally liable for the repayment of the
entire principal, interest and other amounts due under the Loan, the Borrowers,
the Companies and the operating partnerships have entered into Indemnity,
Contribution and Subrogation Agreements, the purpose and intent of which was to
place the operating partnerships in the same position (as among each other) as
each would have been had the lender made three separate loans, one to each of
the operating partnerships; each of which loans would have been in a smaller
amount than the Loan, would have been the obligation/liability only of the
operating partnership to which it was made and would have been secured only by
certain of such operating partnership's assets.
The Company had $2,271,423 in cash and cash equivalents at March 31, 2003 of
which $1,001,370 was classified as restricted cash. Cash and cash equivalents
are temporarily invested in short-term instruments. The Company's level of
liquidity based upon cash and cash equivalents increased by $2,011,053 for the
three months ended March 31, 2003 as compared to December 31, 2002. As discussed
further below, the increase resulted from $22,600,357 of net cash provided by
operating activities and $14,081,903 of net cash provided by investing
activities which was offset by $34,671,207 of net cash used in financing
activities.
In addition to the cash and cash equivalents reported at March 31, 2003, the
Corporation's joint ventures held cash at March 31, 2003 of which the
Corporation's allocable share was $769,366.
Currently, the Corporation's primary sources of funds are rents collected from
tenants, distributions from its joint venture investments and proceeds from
property sales. Rents collected from tenants for the three months ended March
31, 2003 amounted to $758,885 as compared to $831,580 for the three months ended
March 31, 2002. The decrease is due to the sale of Livonia Shopping Plaza on
January 29, 2003.
Cash provided from investing activities were a result of the proceeds from the
sales of Livonia Shopping Plaza and Melrose Crossing II of $14,820,768 that were
offset by the investment in Accotel of $720,791 and improvements to real estate
of $18,074 at Sunrise Marketplace.
Cash used in financing activities consisted of the dividends paid to
stockholders of $30,367,722, preferred dividends in the amount of $8,402 and the
payoff of the Credit Facility which was funded by the proceeds generated by the
sales of Livonia Shopping Plaza and the Hilliard, Ohio property and Fleet Loan
proceeds of $15,423,374.
20
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
RESULTS OF OPERATIONS
- ---------------------
Three months ended March 31, 2003 vs. March 31, 2002
- ----------------------------------------------------
Net income
The Corporation's net income increased by $34,341,868 to a net income of
$19,614,032 for the three month's ended March 31, 2003 from a net loss of
$14,727,836 for the three months ended March 31, 2002. The increase was due to
an increase in gains on sale, increased equity income from joint ventures and a
decrease in costs and expenses partially offset by a decrease in rental revenue
and an increase in interest expense. The Corporation's income before interest
and other income and net gain on sale of real estate was $39,171 for the three
months ended March 31, 2003, as compared to a loss of $15,746,994 for the three
months ended March 31, 2002.
Gain on Sale
The gain on sale of $4,618,972 for the three months ended March 31, 2003 was due
to the sale of Livonia Shopping Plaza and Melrose Crossing II during the three
months ended March 31, 2003.
Rental Revenue
Rental revenues decreased $37,098 or approximately 4%, to $798,551 for the
three-months ended March 31, 2003 from $835,649 for the three months ended March
31, 2002 due to the sale of Livonia Shopping Plaza. The decrease in rental
revenues of $81,493 due to the sale of Livonia Shopping Plaza was substantially
offset by Sunrise Marketplace's rental revenues increasing by approximately
$45,000.
Costs and Expenses
Costs and expenses for the three months ended March 31, 2003 amounted to
$759,380, representing a decrease of $15,823,263 from the same period in 2002.
The decrease is due principally to expenses incurred in 2002 of $15,262,114
associated with the purchase of the Advisory Agreement that was consummated on
February 14, 2002. The remaining expenses from 2002 amounted to $1,320,529.
Therefore, without giving effect to the costs incurred in 2002 for the purchase
of the Advisory Agreements, expenses decreased by $561,149 for three months
ended March 31, 2003 compared with the same period in 2002. The decrease is
primarily due to reduced administrative expenses, the cessation of depreciation
and amortization and the reduction of the asset management fees to $200,000 per
year.
Operating expenses increased by $93,562 for the three months ended March 31 2003
as compared to the three months ended March 31, 2002. The increase was the
result of an obligation under the terms of the sale of Livonia Shopping Plaza to
pay the real estate taxes through November 30, 2003. This was partially offset
by billings to tenants to recover the additional expense. This additional income
and expense was recognized during the period ended March 31, 2003. The increase
in expense was partially offset by the reduction in insurance costs due to the
sales of Livonia and Melrose Crossing II.
Pursuant to the Plan of Liquidation which was adopted October 29, 2002,
depreciation and amortization expenses ceased as of that date. Therefore the
Corporation incurred no depreciation and amortization for the three months ended
March 31, 2003 as compared to $172,774 for the same period in 2002. Partnership
asset management fees decreased to $50,000 for the three months ended March 31,
2003 from $147,513 for the same period in 2002. In 2002, prior to the
Transaction, the fees were based on 1.25% of gross asset value of the
Corporation, which amounted to $105,863 during 2002, and after the Transaction,
there was a flat fee of $27,778 per month which amounted to $41,650 for the
balance of the first quarter of 2002. As a result the total asset management fee
and transition management fees paid for the three months ended March 31, 2002
were 147,513. Effective October 1, 2002, the asset management fee payable by the
Corporation was reduced to $50,000 per quarter.
Administrative costs decreased to $252,671 for the three months ended March 31,
2003 from $629,534 for the same period in 2002. This reduction is due to the
costs not incurred in 2003 that were incurred in 2002 in connection with
21
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
the Transaction. Property Management fees decreased to $16,731 from
$24,292 for the periods ending March 31, 2003 and 2002 respectively.
The decrease is due to the sale of Livonia Shopping Plaza in January
2003.
Non-Operating Income and Expenses
Income from investments in joint ventures increased by $14,006,021 to
$15,102,299 for the three months ended March 31, 2003 as compared to
$1,096,278 for the three months ended March 31, 2002. This is
primarily due to 568 Broadway Joint Venture, in which the Corporation
indirectly held a 22.15% interest, selling its property on February
28, 2003. The joint venture recognized a gain on sale of $67,746,480
of which $14,565,894 was allocated to the Corporation. Excluding the
gain on sale, the Corporation experienced a decrease in equity income
from 568 Broadway Joint Venture for the three months ended March 31,
2003 as compared to the three months ended March 31, 2002 of $270,758
due to the sale of the property on February 28, 2003.
The Corporation's other two other investments in joint ventures,
SuperValu and Tri-Columbus Associates, experienced a combined increase
in equity income, excluding the sale of the Hilliard, Ohio property,
of $173,598 for the three months ended March 31, 2003 as compared to
the same period in 2002. This increase is primarily due to the
cessation of depreciation and amortization expenses in accordance with
liquidation accounting.
During the first quarter of 2003, interest expense amounted to
$157,785, which consisted of $87,701 paid in connection with the
Credit Facility and $70,084 incurred in connection with the Loan, as
compared to $84,594 for the first quarter 2002. The interest in 2002
was incurred on the notes issued to Shelbourne Management in
connection with the purchase of the Advisory Agreements on February
14, 2002.
Interest income increased to $19,777 during the three months ended
March 31, 2003 from $11,675 during the three months ended March 31,
2002 due to slightly higher cash balances invested.
Inflation
Inflation is not expected to have a material impact on the operations
or financial position of Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary market risk we face is interest rate sensitivity. Our
long-term debt bears interest at a floating rate, and therefore we are
exposed to the risk of interest rate changes. At May 12, 2003,
borrowings under our secured loan totaled $15,423,374 and initially
bore an interest rate of LIBOR plus 2.75%. Based on the balance
outstanding on our credit facility at May 12, 2003 and the interest
rate at that date, a 10% increase in LIBOR would increase our interest
expense in 2003 by approximately $20,667. Conversely, a 10% decrease
in LIBOR would decrease our interest expense in 2003 by the same
amount. The gain or loss we ultimately realize with respect to
interest rate fluctuations will depend on the actual interest rates
during that period. We do not believe that we have any risk related to
derivative financial instruments.
ITEM 4. CONTROLS AND PROCEDURES
Our principal executive officer and principal financial officer have,
within 90 days of the filing date of this quarterly report, evaluated
the effectiveness of the Corporation's disclosure controls and
procedures (as defined in Exchange Act Rules 13a - 14(c)) and have
determined that such disclosure controls and procedures are adequate.
There have been no significant changes in the Corporation's internal
controls or in other factors that could significantly affect such
internal controls since the date of evaluation. Accordingly, no
corrective actions have been taken with regard to significant
deficiencies or material weaknesses.
22
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibits required by Item 601 of Regulation S-K are filed herewith or
incorporated herein by reference and are listed in the attached
Exhibit Index.
(B) REPORTS ON FORM 8-K
The following reports on Form 8-K were filed on behalf of the
Registrant during the quarter ended March 31, 2003:
(i) Acquisition of Accotel Properties.
Item reported: 2
Dated filed: January 16, 2003
(ii) Sale of Livonia Property.
Item reported: 2
Dated filed: January 30, 2003
(iii) Sale of Hilliard, Ohio Property.
Item reported: 2
Dated filed: February 4, 2003
(iv) Fleet Loan.
Item reported: 5
Dated filed: February 24, 2003
(v) Sale of New York, New York and Melrose, Illinois Properties.
Issuance of Dividend.
Item reported: 5
Dated filed: March 3, 2003
23
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Shelbourne Properties III, Inc.
(Registrant)
Dated: May 14, 2003 By: /S/ Michael L. Ashner
---------------------
Michael L. Ashner
Chief Executive Officer
24
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
CERTIFICATIONS
I, Michael L. Ashner, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Shelbourne
Properties III, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant is made known to
us, particularly during the period in which this quarterly report
is being prepared:
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: May 14, 2003 /s/ Michael L. Ashner
----------------------------
Michael L. Ashner
Chief Executive Officer
25
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
CERTIFICATIONS
I, Carolyn B. Tiffany, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Shelbourne
Properties, III Inc;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant is made known to
us, particularly during the period in which this quarterly report
is being prepared:
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: May 14, 2003 /s/ Carolyn B. Tiffany
----------------------------
Carolyn B. Tiffany
Chief Financial Officer
26
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
EXHIBIT INDEX
Exhibit
Number Description Page
- ------ ----------- ----
2.1 Stock Purchase Agreement among HX Investors,
Exeter Capital Corporation and the Company (4)
2.2 Amendment No. 1 to Stock Purchase Agreement (6)
2.3 Plan of Liquidation (7)
3.1 Amended and Restated Certificate of Incorporation of the Company (1)
3.2 Amended and Restated Bylaws of the Corporation (1)
4.1 Limited Partnership of the operating partnership (1)
4.2 Stockholder Rights Agreement (1)
4.3 Amendment to Stockholder Rights Agreement (2)
4.4 Restated Partnership Unit Designation for 5% Class A Preferred (9)
Partnership Units (incorporated by reference to Exhibit E-1 of Exhibit 10.4)
4.5 Stockholder Agreement, among the Companies and (3)
HX Investors, LP and Exeter Capital Corporation, dated as of April 30, 2002
4.6 Amendment No. 2 to Stockholder Rights Agreement (5)
4.7 Partnership Unit Designation of the Class B Partnership Units of the Operating Partnership (8)
10.1 Settlement Agreement and Mutual Release between
HX Investors, the Companies and Shelbourne Management (4)
10.2 Amendment No. 1 to Settlement Agreement (6)
10.3 Purchase Agreement, dated as of January 15, 2003, (9)
between the Shelbourne JV LLC and Realty Holdings of America, LLC
10.4 Agreement, dated as of January 15, 2003, among . (9)
Presidio Capital Investment Company, LLC (and certain of its subsidiaries),
Shelbourne Management, NorthStar Capital Investment Corp., each of the
Shelbourne REITs and its operating partnership and HX Investors, L.P
10.5 Loan Agreement, dated as of February 19, 2003, among Shelbourne Properties I L.P., (10)
Shelbourne Properties II L.P., Shelbourne Properties III L.P., Shelbourne Richmond
Company LLC, Shelbourne Matthews Company LLC, Shelbourne
Las Vegas Company LLC, Century Park I Joint Venture, Seattle Landmark
Joint Venture, Tri-Columbus Associates and Fleet National Bank and the other
lending institutions which may become party thereto and Fleet National Bank, as agent
10.6 Form of Guaranty, dated as of February 19, 2003, from Shelbourne Properties III, Inc. and (10)
Shelbourne Properties III L.P.
10.7 Form of Indemnity, Contribution and Subrogation Agreement, dated as of February (10)
19, 2003, among the REITs and the operating partnerships
10.8 Form of Deed of Trust, Assignment of Leases and Rents, Security Agreement (10)
and Fixture Filing with respect to the Collateral Properties dated as of February 19, 2003
in favor of Fleet National Bank
10.9 Cash Management Agreement, dated February 19, 2003, among Shelbourne Properties (10)
I L.P., Shelbourne Properties II L.P., Shelbourne Properties III L.P., Fleet National Bank,
as agent for itself and the Lenders, and various subsidiaries of the Shelbourne OP's listed
on Exhibit A thereto
99.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 29
- ------------------
(1) incorporated by reference to the Registration Statement of the Company on
Form S-4 filed on February 11, 2000, as amended
(2) incorporated by reference to the Current Report of the Company on Form 8-K
filed on February 14, 2002
(3) incorporated by reference to the Current Report of the Company on Form 8-K
filed on May 14, 2002.
(4) incorporated by reference to the Current Report of the Company on Form 8-K
filed on July 2, 2002.
27
SHELBOURNE PROPERTIES III, INC.
FORM 10Q- MARCH 31, 2003
(5) incorporated by reference to the Current Report of the Company on Form 8-K
filed on July 8, 2002
(6) incorporated by reference to the Current Report of the Company on Form 8-K
filed on August 5, 2002
(7) incorporated by reference to Appendix A to the Company's Definitive Proxy
Statement on Schedule 14A filed on September 27, 2002
(8) incorporated by reference to the Quarterly Report on Form 10-Q of the
Company filed on November 14, 2002.
(9) incorporated by reference to the Current Report of the Company on Form 8-K
filed on January 15, 2003.
(10) incorporated by reference to the Current Report of the Company on Form 8-K
filed on February 24, 2003.
28