UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-K

 

(Mark

One)

 

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended December 31, 2011

OR

 

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from             to             

Commission file no. 0-16851

 

 

DEL TACO RESTAURANT PROPERTIES III

(A California limited partnership)

(Exact name of registrant as specified in its charter)

California		33-0139247
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
25521 Commercentre Drive Lake Forest, California		92630
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (949) 462-9300

Securities registered pursuant to section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act: None

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨     No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes   ¨    No  x

Indicate by check mark 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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  x     No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		¨		Accelerated filer		¨
Non-accelerated filer		x		Smaller reporting company		¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Form S-11 Registration Statement filed December 17, 1982 are incorporated by reference into Part IV of this report.

 

 

 

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PART I

 

Item 1.

Business

Del Taco Restaurant Properties III (the Partnership, us, we or our) is a publicly-held limited Partnership organized under the California Uniform Limited Partnership Act. The Partnership’s General Partner is Del Taco LLC, a California limited liability company (Del Taco or the General Partner). The Partnership sold 48,000 units totaling $12 million through an offering of limited partnership units from February 1986 through June 1987. The term of the partnership agreement is until December 31, 2025, unless terminated earlier by means provided in the partnership agreement.

The business of the Partnership is ownership and leasing of restaurants in California to Del Taco. The Partnership acquired land and constructed ten Mexican-American restaurants for long-term lease to Del Taco. Each property is leased for 35 years on a triple net basis. Rent is equal to twelve percent of gross sales of the restaurants. The restaurant originally built in Twentynine Palms was sold in November 1997 and net proceeds from the sale were distributed to the partners. The restaurant originally built in the city of Industry was sold in December 2011 and net proceeds from the sale were distributed to the partners. As of December 31, 2011, the Partnership had a total of eight properties leased to Del Taco.

The Partnership has no full time employees. The Partnership agreement assigns full authority for general management and supervision of the business affairs of the Partnership to the General Partner. The General Partner has a one percent interest in the profits or losses and distributions of the Partnership. Limited partners have no right to participate in the day to day management or conduct of the Partnership’s business affairs.

 

Item 1A.

Risk Factors

None.

 

2

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Item 2.

Properties

The Partnership acquired ten properties with proceeds obtained from the sale of limited partnership units:

 

Address		City, State		Date of Acquisition		Restaurant Constructed		Date of Commencement of Operation (1)
Rancho California Plaza		Rancho California, CA		December 23, 1986		60 seat with drive through service window		July 14, 1987
East Vista Way		Vista, CA		February 24, 1987		60 seat with drive through service window		September 10, 1987
4th Street		Perris, CA		June 24, 1987		60 seat with drive through service window		December 16, 1987
Foothill Boulevard		Upland, CA		August 3, 1987		60 seat with drive through service window		January 12, 1988
Plaza at Puente Hills		Industry, CA		May 12, 1987		60 seat with drive through service window		February 24, 1988 (2)
Twentynine Palms Highway		Twentynine Palms, CA		December 14, 1987		60 seat with drive through service window		May 17, 1988 (3)
East Valley Boulevard		Walnut, CA		April 29, 1988		60 seat with drive through service window		August 31, 1988
West Sepulveda Boulevard		Los Angeles, CA		July 8, 1988		60 seat with drive through service window		January 12, 1989 (4)
Lassen Street		Chatsworth, CA		January 27, 1989		60 seat with drive through service window		August 21, 1989
Hesperia Road		Victorville, CA		December 29, 1989		100 seat with drive through service window		July 5, 1990

See also Schedule III – Real Estate and Accumulated Depreciation included in Item 8.

 

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Item 2.

Properties – (Continued)

 

(1)

Commencement of operation is the first date Del Taco, as lessee, operated the facility on the site as a Del Taco restaurant.

 

(2)

In May 2011, the City of Industry property was destroyed by fire, an insurance claim was received, and the property was sold in December 2011 yielding net proceeds to the Partnership of $1,231,720.

 

(3)

In November 1997, the Twentynine Palms property was sold yielding net proceeds to the Partnership of $278,612.

 

(4)

The restaurant was subleased to a franchisee of Del Taco and the restaurant operated as a Del Taco restaurant. On December 29, 1999 the franchise agreement for this restaurant expired. Del Taco began operation of this restaurant as a company-managed facility on December 29, 1999.

 

Item 3.

Legal Proceedings

The Partnership is not a party to any material pending legal proceedings.

 

Item 4.

Mine Safety Disclosures

Not applicable.

PART II

 

Item 5.

Market for the Partnership’s Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities

The Partnership sold 48,000 ($12,000,000) limited partnership units during the public offering period ended June 1, 1987 and currently has 1,086 limited partners of record. There is no public market for the trading of the units. Distributions made by the Partnership to the limited partners during the past three fiscal years are described in Notes 6 and 8 to the Notes to the Financial Statements contained under Item 8.

Communication from Certain Limited Partners

During the third quarter of 2011, several limited partners communicated to the General Partner their desire to sell all of the properties and then dissolve the Partnership. Pursuant to the Partnership agreement, any decision to sell all of the properties and to dissolve the Partnership would require approval from a majority in interest of limited partners. During the fourth quarter, the aforementioned limited partners withdrew their desire to sell all of the properties and dissolve the Partnership. The General Partner is not aware of any plans or activity with respect to any potential sale of properties or dissolution of the Partnership.

 

Item 6.

Selected Financial Data

The selected financial data presented as of and for the years ended December 31, 2011, 2010, 2009, 2008, and 2007, has been derived from the audited financial statements and should be read in conjunction with the financial statements and related notes and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

4

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Item 6.

Selected Financial Data – (Continued)

 

		Years Ended December 31,
		2011				2010				2009				2008				2007
Rental revenues		$	1,005,655			$	1,036,594			$	1,053,770			$	1,050,381			$	1,044,591
General and administrative expense			145,625				76,117				79,945				79,794				79,273
Depreciation expense			76,406				112,737				113,240				113,240				113,240
Interest and other income			4,411				4,289				3,082				9,770				10,367
Gain on disposal of property			545,973				—				—				—				—
Net income			1,334,008				852,029				863,667				867,117				862,445
Net income per limited partnership unit			27.94				17.85				18.09				18.16				18.07
Cash distributions per limited partnership unit			45.55				20.25				20.48				20.58				20.48
Total assets			4,531,154				5,331,937				5,456,531				5,565,286				5,679,975
Long-term obligations			577,510				577,510				577,510				577,510				577,510

 

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of financial condition, results of operations, liquidity and capital resources, and off balance sheet arrangements and contractual obligations contained within this report on Form 10-K is more clearly understood when read in conjunction with the notes to the financial statements. The notes to the financial statements elaborate on certain terms that are used throughout this discussion and provide information about the Partnership and the basis of presentation used in this report on Form 10-K.

The eight restaurants currently leased to Del Taco make up all of the income producing assets of the Partnership. Therefore, the business of the Partnership is entirely dependent on the success of the Del Taco as the operator of the restaurants located at our properties. The success of the restaurants is dependent on a large variety of factors, including, but not limited to, consumer demand and preference for fast food, in general, and for Mexican-American food in particular.

Liquidity and Capital Resources

The Partnership offered limited partnership units for sale between February 1986 and June 1987. In total, $12 million was raised through the sale of limited partnership units and used to acquire sites, build ten restaurants, pay commissions to brokers and to reimburse Del Taco LLC (the General Partner or Del Taco) for offering costs incurred. In February of 1992, approximately $281,000 raised during the offering but not required to acquire sites and build restaurants was distributed to the limited partners. One restaurant was sold in November 1997.

 

5

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Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – (Continued)

Liquidity and Capital Resources – (Continued)

As described in note 6 to the Notes to the Financial Statements contained under Item 8, the Partnership has a death and disability redemption fund totaling $86,017 at December 31, 2011. Investors should contact the General Partner with all questions regarding the eligibility of a limited partner or the estate of a deceased limited partner to participate in the redemption fund. A limited partner has the right, under certain circumstances involving such limited partner’s death or disability, to tender to the Partnership for redemption all of the units owned of record by such limited partner. The redemption price will be equal to the partners’ capital account balance as of the redemption date. The death and disability fund was established in 1987. The fund was limited to two percent of the gross proceeds from sale of the limited partnership units. Requests for redemption made after the funds in the death and disability fund are depleted will not be accepted.

On May 3, 2011, an automobile accident and ensuing fire resulted in a total casualty loss of the restaurant in Industry, California (Unit 218); the restaurant has not conducted any operations since that date (see Note 11). Unit 218 was operated by Del Taco on real property and improvements owned by the Partnership and leased to Del Taco. The property was sold on December 2, 2011 for net sale proceeds of $926,393. In addition to the net sale proceeds, net insurance recovery proceeds for the property and equipment destroyed by the fire totaling $305,327 were received. The Partnership recorded a net gain of $545,973. Pursuant to the Partnership Agreement, the limited partners received a special distribution on December 12, 2011 totaling 100% of the total net proceeds of $1,231,720 and the General Partner did not receive any distribution.

The Partnership’s only source of cash flow is rental income from the properties from the triple net leases. Such operating income has historically been and is expected to continue to be sufficient to fund the Partnership’s operating expenses. Net cash provided by operating activities in excess of the Partnership’s ongoing needs is distributed to the partners.

Off Balance Sheet Arrangements and Contractual Obligations

None.

Results of Operations

The Partnership owns eight properties, as of December 31, 2011, that are under long-term lease to Del Taco for restaurant operations. The restaurant in Industry, California was sold in December 2011.

 

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Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – (Continued)

Results of Operations – (Continued)

The following table sets forth rental revenues earned by restaurant by year:

 

		Years Ended December 31,
		2011				2010				2009
Rancho California Plaza, Rancho California, CA		$	172,253			$	174,756			$	176,565
East Vista Way, Vista, CA			106,084				102,004				101,276
Plaza at Puente Hills, Industry, CA (i)			45,627				74,052				78,647
4th Street, Perris, CA			113,384				119,456				123,968
Foothill Blvd., Upland, CA			118,857				121,698				128,435
East Valley Blvd., Walnut, CA			74,034				74,553				73,549
Lassen Street, Chatsworth, CA			146,493				146,181				151,600
Hesperia Road, Victorville, CA			142,447				139,331				137,635
W. Sepulveda Blvd., Los Angeles, CA			86,476				84,563				82,095
Total		$	1,005,655			$	1,036,594			$	1,053,770

 

(i)

This restaurant was destroyed by fire in May 2011 and then sold in December 2011, as more fully described in Note 11.

The Partnership earns rental revenues equal to 12 percent of gross sales from the restaurants. The Partnership earned rental revenues of $1,005,655 during the year ended December 31, 2011, which represents a decrease of $30,939 from 2010. The changes in rental revenues between 2010 and 2011 are directly attributable to changes in sales levels at the restaurants under lease due to local competitive and industry factors and due to the closure of the restaurant in the City of Industry during May 2011.

The Partnership earned rental revenues of $1,036,594 during the year ended December 31, 2010, which represents a decrease of $17,176 from 2009. The changes in rental revenues between 2009 and 2010 are directly attributable to changes in sales levels at the restaurants under lease due to local competitive and industry factors.

 

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Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – (Continued)

Results of Operations – (Continued)

The following table breaks down general and administrative expenses by type of expense:

Percentage of Total General and Administrative Expense

 

		Years Ended December 31,
		2011				2010				2009
Accounting fees			31.62	%			57.26	%			54.93	%
Distribution of information to limited partners			27.47				39.64				41.16
Other			40.91				3.10				3.91
			100.00	%			100.00	%			100.00	%

General and administrative costs increased by $69,508 from 2010 to 2011. The increase was caused primarily by the direct costs related to the fire at the restaurant in the City of Industry and the resulting appraisal and definitive proxy statement (see Note 11), as well as legal fees related to the communication from certain limited partners in regards to their desire to see all of the properties and then dissolve the partnership (see Note 12), printing and distribution costs and additional costs related to a new mandatory filing process known as XBRL.

General and administrative costs decreased by $3,828 from 2009 to 2010. The decrease was caused primarily by decreased printing costs.

Depreciation expense decreased by $36,331 in 2011 because certain assets were disposed in relation to the loss at the restaurant in the City of Industry.

Depreciation expense decreased by $503 in 2010 because certain assets became fully depreciated. Depreciation expense was $113,240 in 2009.

Gain on disposal of property was $545,973 in 2011 and was related to the sale and insurance proceeds from the restaurant in the City of Industry that was destroyed and sold during 2011 (see Note 11). There was no similar gain in 2010 or 2009.

Net income increased by $481,979 from 2010 to 2011 primarily due to the gain related to the sale of the restaurant in The City of Industry of $545,973, the decrease in depreciation expense of $36,331 and the increase in interest and other income of $122, partially offset by the decrease in revenues of $30,939 and the increase in general and administrative expenses of $69,508.

Net income decreased by $11,638 from 2009 to 2010 primarily due to the decrease in revenues of $17,176, partially offset by the decrease in general and administrative expenses of $3,828, the increase in interest and other income of $1,207 and the decrease in depreciation expense of $503.

Recent Accounting Pronouncements

None that applies to the Partnership.

 

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Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – (Continued)

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations, as well as disclosures included elsewhere in this report on Form 10-K are based upon the Partnership’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Partnership believes the critical accounting policies that most impact the financial statements are described below. A summary of the significant accounting policies of the Partnership can be found in Note 1 to the Financial Statements which is included in Item 8 of this Form 10-K.

Revenue Recognition: Rental revenue is recognized based on 12 percent of gross sales of the restaurants for the corresponding period, and is earned at the point of sale.

Property and Equipment: Property and equipment is stated at cost. Depreciation is computed using the straight-line method over estimated useful lives which are 20 years for land improvements, 35 years for buildings and improvements, and 10 years for machinery and equipment.

The Partnership accounts for property and equipment in accordance with authoritative guidance issued by the Financial Accounting Standards Board that requires long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In evaluating long-lived assets held for use, an impairment loss is recognized if the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying value of the asset. Once a determination has been made that an impairment loss should be recognized for long-lived assets, various assumptions and estimates are used to determine fair value including, among others, estimated costs of construction and development, recent sales of comparable properties and the opinions of fair value prepared by independent real estate appraisers. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

 

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

None.

 

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Item 8.

Financial Statements and Supplementary Data

PART I. INFORMATION

 

INDEX		PAGE NUMBER
Report of Independent Registered Public Accounting Firm – Squar, Milner, Peterson, Miranda & Williamson, LLP		11
Balance Sheets at December 31, 2011 and 2010		12
Statements of Income for the years ended December 31, 2011, 2010 and 2009		13
Statements of Partners’ Equity for the years ended December 31, 2011, 2010 and 2009		14
Statements of Cash Flows for the years ended December 31, 2011, 2010 and 2009		15
Notes to Financial Statements		16-22
Schedule III – Real Estate and Accumulated Depreciation		29

 

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Report of Independent Registered Public Accounting Firm

To the Partners

Del Taco Restaurant Properties III:

We have audited the accompanying balance sheets of Del Taco Restaurant Properties III (a California Limited Partnership) as of December 31, 2011 and 2010 and the related statements of income, partners’ equity, and cash flows for each of the three years in the period ended December 31, 2011. Our audits also included the financial statement schedule of the Partnership listed in Item 15. These financial statements and financial statement schedule are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 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 Del Taco Restaurant Properties III as of December 31, 2011 and 2010 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related 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.

 

/s/ Squar, Milner, Peterson, Miranda & Williamson, LLP

Newport Beach, California

March 23, 2012

 

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DEL TACO RESTAURANT PROPERTIES III

BALANCE SHEETS

 

		December 31,
		2011				2010
ASSETS
CURRENT ASSETS:
Cash		$	277,636			$	309,131
Receivable from Del Taco LLC			81,786				88,135
Deposits			1,654				2,440
Total current assets			361,076				399,706
RESTRICTED CASH			86,017				86,017
PROPERTY AND EQUIPMENT:
Land			3,284,629				3,829,693
Land improvements			494,254				576,273
Buildings and improvements			2,534,393				2,954,959
Machinery and equipment			1,306,171				1,522,922
			7,619,447				8,883,847
Less-accumulated depreciation			3,535,386				4,037,633
			4,084,061				4,846,214
		$	4,531,154			$	5,331,937
LIABILITIES AND PARTNERS’ EQUITY
CURRENT LIABILITIES:
Payable to limited partners		$	69,529			$	62,605
Accounts payable			37,878				14,543
Total current liabilities			107,407				77,148
OBLIGATION TO GENERAL PARTNER			577,510				577,510
PARTNERS’ EQUITY:
Limited partners; 47,261 units outstanding at December 31, 2011 and 2010			3,890,871				4,725,920
General partner-Del Taco LLC			(44,634	)			(48,641	)
			3,846,237				4,677,279
		$	4,531,154			$	5,331,937

See accompanying notes to financial statements.

 

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DEL TACO RESTAURANT PROPERTIES III

STATEMENTS OF INCOME

 

		Years Ended December 31,
		2011				2010				2009
RENTAL REVENUES		$	1,005,655			$	1,036,594			$	1,053,770
EXPENSES:
General and administrative			145,625				76,117				79,945
Depreciation			76,406				112,737				113,240
			222,031				188,854				193,185
Operating income			783,624				847,740				860,585
OTHER INCOME:
Interest			486				1,114				607
Other			3,925				3,175				2,475
Gain on disposal of property			545,973				—				—
Net income		$	1,334,008			$	852,029			$	863,667
Net income per limited partnership unit (Note 2)		$	27.94			$	17.85			$	18.09
Number of limited partnership units used in computing per unit amounts			47,261				47,261				47,261

See accompanying notes to financial statements.

 

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DEL TACO RESTAURANT PROPERTIES III

STATEMENTS OF PARTNERS’ EQUITY

Years Ended December 31, 2011, 2010, and 2009

 

		Limited Partners								General
		Units				Amount				Partner				Total
Balance, December 31, 2008			47,261			$	4,954,303			$	(46,333	)		$	4,907,970
Net Income			—				855,031				8,636				863,667
Cash Distributions			—				(968,749	)			(9,785	)			(978,534	)
Balance, December 31, 2009			47,261				4,840,585				(47,482	)			4,793,103
Net Income			—				843,509				8,520				852,029
Cash Distributions			—				(958,174	)			(9,679	)			(967,853	)
Balance, December 31, 2010			47,261				4,725,920				(48,641	)			4,677,279
Net Income			—				1,320,667				13,341				1,334,008
Cash Distributions			—				(2,155,716	)			(9,334	)			(2,165,050	)
Balance, December 31, 2011			47,261			$	3,890,871			$	(44,634	)		$	3,846,237

See accompanying notes to financial statements.

 

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DEL TACO RESTAURANT PROPERTIES III

STATEMENTS OF CASH FLOWS

 

		Years Ended December 31,
		2011				2010				2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	1,334,008			$	852,029			$	863,667
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			76,406				112,737				113,240
Gain on disposal of property			(545,973	)			—				—
Changes in operating assets and liabilities:
Receivable from Del Taco LLC			6,349				(474	)			(793	)
Deposits			786				(343	)			(209	)
Payable to limited partners			6,924				(7,599	)			5,689
Accounts payable			23,335				(1,171	)			423
Net cash provided by operating activities			901,835				955,179				982,017
CASH FLOWS FROM INVESTING ACTIVITIES -
Proceeds from disposal of property			1,231,720				—				—
CASH FLOWS FROM FINANCING ACTIVITIES -
Cash distributions to partners			(2,165,050	)			(967,853	)			(978,534	)
Net change in cash			(31,495	)			(12,674	)			3,483
Beginning cash balance			309,131				321,805				318,322
Ending cash balance		$	277,636			$	309,131			$	321,805

See accompanying notes to financial statements.

 

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DEL TACO RESTAURANT PROPERTIES III

NOTES TO FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Partnership: Del Taco Restaurant Properties III, a California limited partnership, (the Partnership) was formed on December 19, 1985, for the purpose of acquiring real property in California for construction of ten Mexican-American restaurants to be leased under long-term agreements to Del Taco LLC (General Partner or Del Taco) for operation under the Del Taco trade name. As of July 5, 1990, all ten restaurants had commenced operation on acquired properties. In November 1997, the Twentynine Palms property was sold yielding net proceeds of $278,612. In May 2011, the City of Industry property was destroyed by fire and then sold in December 2011 yielding net proceeds of $1,231,720. As of December 31, 2011, Del Taco Restaurant Properties III had eight properties in operation. The term of the partnership agreement is until December 31, 2025 unless terminated earlier by means provided in the partnership agreement.

The Partnership has no full time employees (see Note 4). The Partnership agreement assigns full authority for general management and supervision of the business affairs of the Partnership to the General Partner. The General Partner has a one percent interest in the profits or losses and distributions of the Partnership. Limited partners have no right to participate in the day to day management or conduct of the Partnership’s business affairs.

Distributions are made to the general and limited partners in accordance with the provisions of the partnership agreement (see Note 2).

Basis of Accounting: The Partnership utilizes the accrual method of accounting for transactions relating to the business of the Partnership. The summary of significant accounting policies presented below is designed to assist in understanding the Partnership’s financial statements. Such financial statements and accompanying notes are the representations of the Partnership’s management, who is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) in all material respects, and have been consistently applied in preparing the accompanying financial statements.

Property and Equipment: Property and equipment is stated at cost. Depreciation is computed using the straight-line method over estimated useful lives which are 20 years for land improvements, 35 years for buildings and improvements, and 10 years for machinery and equipment.

The Partnership accounts for property and equipment in accordance with authoritative guidance issued by the Financial Accounting Standards Board that requires long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In evaluating long-lived assets held for use, an impairment loss is recognized if the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying value of the asset. Once a determination has been made that an impairment loss should be recognized for long-lived assets, various assumptions and estimates are used to determine fair value including, among others, estimated costs of construction and development, recent sales of comparable properties and the opinions of fair value prepared by independent real estate appraisers. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

 

16

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DEL TACO RESTAURANT PROPERTIES III

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Income Taxes: No provision has been made for federal or state income taxes on partnership net income, since the Partnership is not subject to income tax. Partnership income is includable in the taxable income of the individual partners as required under applicable income tax laws. Certain items, primarily related to depreciation methods, are accounted for differently for income tax reporting purposes (see Note 7).

Net Income Per Limited Partnership Unit: The net income per limited partnership unit is based on net income attributable to the limited partners (after 1% allocation to the general partner) using the weighted average units outstanding during the periods presented which amounted to 47,261 in 2011, 2010 and 2009, respectively.

Use of Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Revenue Recognition: Rental revenue is recognized based on 12 percent of gross sales of the restaurants for the corresponding period, and is earned at the point of sale.

Concentration of Risk: The eight restaurants leased to Del Taco make up all of the income producing assets of the Partnership and contributed all of the Partnership’s rental revenues for the three years ended December 31, 2011. Therefore, the business of the Partnership is entirely dependent on the success of the Del Taco trade name restaurants that lease the properties.

The Partnership maintains substantially all of its cash and cash equivalents at one major commercial bank. Although the Partnership at times maintains balances that exceed the federally insured limit, it has not experienced any losses related to these balances and management believes the credit risk to be minimal.

Fair Value of Financial Instruments: The fair values of cash, accounts receivables, deposits, accounts payable and payables to limited partners approximate the carrying amounts due to their short maturities.

Subsequent Events: Management has evaluated events subsequent to December 31, 2011 through the date of the accompanying financial statements were filed with the Securities and Exchange Commission for transactions and other events that may require adjustment of and/or disclosure in such financial statements.

NOTE 2 – PARTNERS’ EQUITY

Pursuant to the partnership agreement, annual partnership net income or loss is allocated one percent to the General Partner and 99 percent to the limited partners. Partnership gains from any sale or refinancing are to be allocated one percent to the General Partner and 99 percent to the limited partners until allocated gains and profits equal losses, distributions and syndication costs, and until each class of limited partners receive their priority return (10 percent) as defined in the partnership agreement. Additional gains are to be allocated 15 percent to the General Partner and 85 percent to the limited partners.

 

17

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DEL TACO RESTAURANT PROPERTIES III

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

NOTE 3 – OBLIGATION TO GENERAL PARTNER

Under terms of the partnership agreement, the General Partner is entitled to receive a fee in an amount equal to five percent of aggregate capital contributions. The fee shall be for services rendered in connection with site selection and the design and supervision of construction and improvements to acquired properties. This fee shall be earned at the time the services are rendered, but shall not be paid and shall be subordinated to the limited partners’ interests until all restaurants have opened and the limited partners have received certain minimum returns on their investment, as required by the partnership agreement. It is the policy of the Partnership to accrue the site acquisition and development fee as an obligation to the General Partner. No fees were earned for such services during 2011, 2010, and 2009.

NOTE 4 – LEASING ACTIVITIES

The Partnership leases certain properties for operation of restaurants to Del Taco on a triple net basis. The leases are for terms of 35 years commencing with the completion of the restaurant facility located on each property and require monthly rentals equal to 12 percent of the gross sales of the restaurants. The leases terminate in the years 2022 to 2024. Pursuant to the lease agreements, minimum rentals of $3,500 per month are due to the Partnership during the first six months of any non-operating period caused by an insured casualty loss. The Partnership had a total of eight properties leased to Del Taco as of December 31, 2011.

The restaurants operated by Del Taco, for which the Partnership is the lessor, had combined, unaudited sales of $8,207,338, $8,638,283, and $8,781,419 and unaudited net losses of $55,685, $65,785 and $89,807 during the years ended December 31, 2011, 2010 and 2009, respectively. In addition, the restaurant in Industry, CA generated minimum rental income totaling $20,774 subsequent to being destroyed by fire in May 2011 and prior to its sale in December 2011. Net income by restaurant includes charges for general and administrative expenses incurred in connection with supervision of restaurant operations and interest expense. The decrease in net loss from the corresponding period of the prior year primarily relates to decreased interest expense.

NOTE 5 – RELATED PARTIES

The receivable from Del Taco consists of rent accrued for the months of December 2011 and 2010. The rent receivable was collected in January 2012 and 2011, respectively.

The General Partner received $9,334, $9,679 and $9,785 in distributions relating to its one percent interest in the Partnership for the years ended December 31, 2011, 2010 and 2009, respectively.

Del Taco serves in the capacity of General Partner in other partnerships which are engaged in the business of operating restaurants, and three other partnerships which were formed for the purpose of acquiring real property in California for construction of Mexican-American restaurants for lease under long-term agreements to Del Taco.

The General Partner provides certain minimal managerial and accounting services to the Partnership at no cost.

 

18

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DEL TACO RESTAURANT PROPERTIES III

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

NOTE 6 – RESTRICTED CASH

At December 31, 2011 and 2010 the Partnership had a restricted cash balance of $86,017. The restricted cash is a death and disability redemption fund. Such fund is maintained in an interest bearing account at a major commercial bank. A limited partner has the right, under certain circumstances involving such limited partner’s death or disability, to tender to the Partnership for redemption all of the units owned of record by such limited partner. The redemption price will be equal to the partners’ capital account balance as of the redemption date. The death and disability fund was established in 1987. The fund was limited to two percent of the gross proceeds from sale of the limited partnership units. Requests for redemption made after the funds in the death and disability fund are depleted will not be accepted.

NOTE 7 – INCOME TAXES (UNAUDITED)

The Partnership is not subject to income taxes because its income is taxed directly to the General Partner and limited partners. The reconciling items presented in the table below are the only items that create a difference between the tax basis and reported amounts of the Partnerships assets and liabilities.

A reconciliation of financial statement net income to taxable income for each of the periods is as follows:

 

		2011				2010				2009
Net income per financial statements		$	1,334,008			$	852,029			$	863,667
Excess (tax) book depreciation			(289	)			28,170				28,170
Excess book gain			(76,061	)			—				—
Taxable income		$	1,257,658			$	880,199			$	891,837

A reconciliation of partnership equity per the financial statements to partners’ equity for tax purposes as of December 31, 2011, is as follows (unaudited):

 

Partners’ equity per financial statements		$	3,846,237
Issue costs of limited partnership units capitalized for tax purposes			1,741,677
Difference in book vs. tax depreciation			506,213
Other			84
Partners’ equity for tax purposes		$	6,094,211

 

19

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DEL TACO RESTAURANT PROPERTIES III

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

NOTE 8 – CASH DISTRIBUTIONS TO LIMITED PARTNERS

Cash distributions paid to limited partners for the three years ended December 31, 2011 were as follows:

 

Quarter Ended		Cash Distribution per Limited Partnership Unit				Weighted Average Number of Units Outstanding				Number of Units Outstanding at the End of Quarter
December 31, 2008		$	5.22				47,261				47,261
March 31, 2009			4.78				47,261				47,261
June 30, 2009			4.90				47,261				47,261
September 30, 2009			5.58				47,261				47,261
Total paid in 2009		$	20.48
December 31, 2009		$	5.17				47,261				47,261
March 31, 2010			4.46				47,261				47,261
June 30, 2010			5.12				47,261				47,261
September 30, 2010			5.50				47,261				47,261
Total paid in 2010		$	20.25
December 31, 2010		$	5.06				47,261				47,261
March 31, 2011			4.66				47,261				47,261
June 30, 2011			4.77				47,261				47,261
September 30, 2011			5.03				47,261				47,261
Special distribution: December 12, 2011			26.03				47,261				47,261
Total paid in 2011		$	45.55

Cash distributions per limited partnership unit were calculated based upon the weighted average and cash flow statement units outstanding for each quarter and were paid from operations. Distributions declared in January 2012 for the quarter ended December 31, 2011 amounted to $3.63 per limited partnership unit and were paid in February 2012.

NOTE 9 – RESULTS BY QUARTER (UNAUDITED)

 

		First Quarter				Second Quarter				Third Quarter				Fourth Quarter
Year ended December 31, 2011
Rental revenues		$	250,437			$	254,923			$	254,668			$	245,627
Net income			190,699				222,043				185,561				735,705
Net income per limited partnership unit			3.99				4.65				3.89				15.41
Year ended December 31, 2010
Rental revenues		$	249,723			$	260,039			$	267,525			$	259,307
Net income			183,761				220,643				226,097				221,528
Net income per limited partnership unit			3.85				4.62				4.74				4.64

 

20

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DEL TACO RESTAURANT PROPERTIES III

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

NOTE 10 – PAYABLE TO LIMITED PARTNERS

Payable to limited partners represents a reclassification from cash for distribution checks made to limited partners that have remained outstanding for six months or longer. The increase in payable to limited partners from December 31, 2010 to December 31, 2011 is primarily due to the increase in distribution checks that were not deposited by limited partners.

NOTE 11 – GAIN ON DISPOSAL OF PROPERTY

On May 3, 2011, an automobile accident and ensuing fire resulted in a total casualty loss of the Plaza at Puente Hills restaurant in Industry, California (Unit 218). The restaurant has not conducted any operations since that date. Unit 218 was operated by Del Taco on real property and improvements owned by the Partnership and leased to Del Taco under a standard lease dated February 24, 1988 between Del Taco and the Partnership, as amended (the Lease). The Lease provided for rental payments equal to 12% of the gross sales (as defined in the Lease) at Unit 218. During the years ended December 31, 2011, 2010 and 2009, the annual 12% rental paid to the Partnership was $45,627, $74,052, and $78,647, or $0.965, $1.551, and $1.647 per Partnership unit (unaudited), respectively. The Lease did not provide for any minimum rent, except for rental value insurance of $3,500 per month for six months in the event of casualty loss and loss of rental income. The Lease was to expire on February 28, 2023.

As required by the Lease, Del Taco maintained fire and casualty insurance covering Unit 218 with Commonwealth Insurance. The carrier confirmed coverage. In the case of total destruction of the improvements from any cause covered by the insurance (as occurred here), the Lease provided that Del Taco would be obligated to repair the improvements upon receipt of the net insurance proceeds. Del Taco’s obligation to repair was not limited to the net insurance proceeds.

Del Taco, as the General Partner, with certain exceptions, had the sole and exclusive right to manage the business of the Partnership. This right included, specifically, the right to operate, construct or sell any personal and real property owned by the Partnership. Due to Unit 218’s historical financial underperformance relative to an average Del Taco unit and Del Taco’s obligation to repair the improvements above and beyond the net insurance proceeds, Del Taco, as the lessee under the Lease and as the operator of Unit 218, had a material financial interest in the disposition of that restaurant. Due to the presence of such material financial interest, it appeared that Del Taco had a conflict of interest in the determination of the ultimate course of action.

Section 5.8.3 of the Partnership Agreement provides that, if the General Partner believes it is unable to resolve a conflict of interest, it is authorized to describe the relevant facts and submit alternatives to the Limited Partners for their vote, who may then vote on the alternatives or choose another alternative.

As such, the General Partner requested a vote on a proposal to sell the land, retain the net insurance proceeds and distribute all such proceeds in a special distribution to the limited partners. If the proposal was not adopted, the General Partner would be required to rebuild and continue operating the unit. Based on an analysis performed by management, the General Partner recommended that the financial interests of the Partnership and the Limited Partners would be best served to sell the land, retain the net insurance proceeds and distribute all such proceeds in a special distribution to the limited partners.

 

21

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DEL TACO RESTAURANT PROPERTIES III

NOTES TO FINANCIAL STATEMENTS – CONTINUED

 

NOTE 11 – GAIN ON DISPOSAL OF PROPERTY (Continued)

 

As such, Del Taco filed a definitive proxy statement with the Securities and Exchange Commission on August 29, 2011. The result of such vote was determined in September 2011 and authorized the General Partner to sell the land, retain the net insurance proceeds and distribute all such proceeds in a special distribution to the limited Partners. The property was sold on December 2, 2011 for net sale proceeds of $926,393. In addition to the net sale proceeds, net insurance recovery proceeds for the property and equipment destroyed by the fire totaling $305,327 were received. The Partnership recorded net gain of $545,973. As of December 2, 2011, there were 47,323 limited partner units outstanding in the Partnership. Pursuant to the Partnership Agreement, these limited partners received a special distribution of $26.03 per unit on December 12, 2011 totaling 100% of the total net proceeds of $1,231,720 and the General Partner did not receive any distribution.

The operating results of Unit 218 were not deemed significant to the overall financials to qualify for discontinued operations reporting.

NOTE 12 – COMMUNICATION FROM CERTAIN LIMITED PARTNERS

During the third quarter of 2011, several limited partners communicated to the General Partner their desire to sell all of the properties and then dissolve the Partnership. Pursuant to the Partnership agreement, any decision to sell all of the properties and to dissolve the Partnership would require approval from a majority in interest of limited partners. During the fourth quarter, the aforementioned limited partners withdrew their desire to sell all of the properties and dissolve the Partnership. The General Partner is not aware of any plans or activity with respect to any potential sale of properties or dissolution of the Partnership.

 

22

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Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

None

 

Item 9A.

Controls and Procedures

Disclosure controls and procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognized that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost–benefit relationship of possible controls and procedures.

In connection with the preparation of this Annual Report on Form 10-K, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Internal control over financial reporting

 

(a)

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control system is designed to provide reasonable assurance to our management regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2011. In making its assessment of internal control over financial reporting, management used the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

23

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Item 9A.

Controls and Procedures – (Continued)

Management has concluded that, as of December 31, 2011, our internal control over financial reporting was effective based on these criteria.

This annual report does not include an attestation report of the Partnership’s registered public accounting firm regarding the effectiveness of internal control over financial reporting. Pursuant to temporary rules of the Securities and Exchange Commission, such attestation report is not required to be included in this filing; the Partnership is only required to provide management’s report in this annual report.

 

(b)

Changes in internal controls:

There were no significant changes in the Partnership’s internal controls over financial reporting that occurred during our most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 9B.

Other Information

None.

PART III

 

Item 10.

Directors, Executive Officers, and Corporate Governance

(a) & (b) Del Taco serves as the Partnership’s sole General Partner. Individuals who perform the functions of directors and officers of the Partnership consist of the following officers of Del Taco:

 

Name		Title		Age
Paul J.B. Murphy, III		Chief Executive Officer		57
Janet D. Erickson		Executive Vice President, Purchasing		55
Steven L. Brake		Chief Financial Officer		39
John Cappasola		Chief Brand Officer		38
David Pear		Senior Vice President, Operations		48

Del Taco’s term as General Partner will continue indefinitely, subject to the right of a majority in interest of the limited partners to remove and replace it. The above referenced officers of the General Partner will hold office until their resignation or the election or appointment of their successor.

 

(c)

None

(d)	No family relationship exists between any such officer of the General Partner.

(e)	The following is an account of the business experience during the past five years of each such officer:

 

24

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Item 10.

Directors, Executive Officers, and Corporate Governance – (Continued)

Paul J.B. Murphy, III, Chief Executive Officer of Del Taco LLC. Mr. Murphy has served as Chief Executive Officer since February of 2009. He previously served as President and Chief Executive Officer of Einstein Noah Restaurant Group, Inc. (formerly, New World Restaurant Group, Inc.) from October of 2003 to December of 2007.

Janet D. Erickson, Executive Vice President, Purchasing of Del Taco LLC. From 1979 to 1986, Ms. Erickson was with Denny’s Incorporated. She served in the Research and Development department in a variety of positions until 1982 when she was promoted to the position of Purchasing Agent. Ms. Erickson was hired in 1986 as Manager of Contract Purchasing with Carl Karcher Enterprises, a post she held until March 1990 when she became Vice President, Purchasing for Del Taco LLC. Ms. Erickson has a Bachelor of Science degree in Foods and Nutrition from Cal State Polytechnic University in Pomona, California.

Steven L. Brake, Senior Vice President, Chief Financial Officer of Del Taco LLC. Mr. Brake has served as Chief Financial Officer since April of 2010 and previously served as Treasurer from March 2006 to April 2010 and as the Corporate Controller of Del Taco LLC from September 2003 to March of 2006. From December 1995 until September 2003 Mr. Brake spent seven years with Arthur Andersen and one year with KPMG LLP in their respective audit departments. Mr. Brake was a licensed certified public accountant and holds a Bachelor of Arts degree in Economics from the University of California, Irvine and an MBA from the Paul Merage School of Business at the University of California, Irvine.

John Cappasola, Chief Brand Officer of Del Taco LLC. Mr. Cappasola has served as our Chief Brand Officer since February 2011. He previously served as our Vice President of Marketing from March 2009 to February 2011. From September 2008 to March 2009, he served as our Vice President of Marketing Development. From August 2002 to September 2008, he held various positions in marketing, strategic development and operations at Blockbuster, Inc. of Dallas, Texas.

David Pear, Senior Vice President, Operations of Del Taco LLC. Mr. Pear has served as Senior Vice President of Operations since January 2012. From January 2009 to January of 2012 Mr. Pear served as a Director of DMA Operations for Taco Bell (Yum Brands). From 1985 to 2009, Mr. Pear served in a wide variety of operation positions with increasing level of responsibility for Domino’s Pizza, Inc.

Code of Ethics

The Partnership has no executive officers or any fulltime employees and, accordingly, has not adopted a code of ethics.

 

25

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Item 11.

Executive Compensation

The Partnership has no executive officers or directors and pays no direct remuneration to any executive officer or director of its General Partner. The Partnership has not issued any options or stock appreciation rights to any executive officer or director of its General Partner, nor does the Partnership propose to pay any annuity, pension or retirement benefits to any executive officer or director of its General Partner. The Partnership has no plan, nor does the Partnership presently propose a plan, which will result in any remuneration being paid to any executive officer or director of the General Partner upon termination of employment.

 

Item 12.

Security Ownership of Certain Beneficial Owners and Management

 

(a)	No person of record currently owns more than five percent of limited partnership units of the Partnership, nor was any person known of by the Partnership to own of record and beneficially, or beneficially only, more than five percent of such securities.

 

(b)	Neither Del Taco LLC, nor any executive officer or director of Del Taco LLC, owns any limited partnership units of the Partnership.

 

(c)

The Partnership knows of no contractual arrangements, the operation or the terms of which may at a subsequent date result in a change in control of the Partnership, except for provisions in the partnership agreement providing for removal of the General Partner by holders of a majority of the limited partnership units and if a material event of default occurs under the financing agreements of the General Partner.

 

Item 13.

Certain Relationships, Related Transactions, and Director Independence

 

(a)	Other than listed below, no transactions have occurred between the Partnership and any executive officer or director of its General Partner.

During 2011, the following transactions occurred between the Partnership and the General Partner pursuant to the terms of the partnership agreement.

 

(1)

The General Partner earned $13,341 as its one percent share of the net income of the Partnership.

 

(2)

The General Partner received $9,334 in distributions relating to its one percent interest in the Partnership.

 

(b)	During 2011, the Partnership had no business relationships with any entity of a type required to be reported under this item.

 

(c)	Neither the General Partner, any director or officer of the General Partner, or any associate of any such person, was indebted to the Partnership at any time during 2011 for any amount.

 

(d)	Not applicable.

 

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Item 14.

Principal Accountant Fees and Services

The following table presents fees for professional services rendered by Squar, Milner, Peterson, Miranda & Williamson, LLP (Squar Milner).

 

		2011				2010
Audit Fees		$	17,055			$	16,563
Audit-Related Fees			—				—
Tax Fees			—				—
All Other Fees			—				—
Total		$	17,055			$	16,563

The General Partner approves all the audit and non-audit services, and related fees, provided to the Partnership by the independent auditors prior to the services being rendered.

 

27

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PART IV

 

Item 15.

Exhibits and Financial Statement Schedules

(a)(1) Financial Statements

 

Included

in Part II of this report:

 

Report

of Independent Registered Public Accounting Firm –

Squar, Milner, Peterson, Miranda & Williamson, LLP

Balance

Sheets

Statements

of Income

Statements

of Partners’ Equity

Statements

of Cash Flows

Notes

to Financial Statements

(a)(2) Financial Statement Schedule

 

Schedule

III – Real Estate and Accumulated Depreciation

Financial statement schedules other than those referred to above have been omitted because they are not applicable or not required.

 

(b)	Reports on Form 8-K

None

 

(c)	Exhibits required by Item 601 of Regulation S-K:

 

1.

Incorporated herein by reference, Restated Agreement of Limited Partnership of Del Taco Restaurant Properties III filed as Exhibit 3.01 to Partnership’s Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on December 30, 1985.

 

2.

Incorporated herein by reference, Amendment to Restated Agreement of Limited Partnership of Del Taco Restaurant Properties III.

 

3.

Incorporated herein by reference, Form of Standard Lease to be entered into by partnership and Del Taco LLC, as lessee, filed as Exhibit 10.02 to Partnership’s Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on December 30, 1985.

 

31.1

Paul J.B. Murphy, III’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

31.2

Steven L. Brake’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

101.INS		XBRL Instance Document*
101.SCH		XBRL Taxonomy Extension Schema Document*
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB		XBRL Taxonomy Extension Label Linkbase Document*
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document*

* Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under these sections.

 

28

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SCHEDULE REAL ESTATE AND ACCUMULATED DEPRECIATION

DEL TACO RESTAURANT PROPERTIES III

SCHEDULE III—REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2011

 

 

Description (All Restaurants)		Encumbrances				Initial cost to company								Cost capitalized subsequent to acquisition				Gross amount at which carried at close of period				Accumulated depreciation				Date of construction				Date acquired				Life on which depreciation in latest income statement is computed
						Land & land improvements				Buildings & Improve- ments				Carrying costs				Land, buildings & improvements Total
Rancho California, CA		$	—			$	384,400			$	257,807			$	—			$	642,207				226,768				1986				1986			20 (LI), 35 (BI)
Vista, CA			—				512,130				343,471				—				855,601				302,110				1987				1987			20 (LI), 35 (BI)
Perris, CA			—				437,522				293,434				—				730,956				258,100				1987				1987			20 (LI), 35 (BI)
Upland, CA			—				281,827				189,014				—				470,841				166,248				1987				1987			20 (LI), 35 (BI)
Walnut, CA			—				340,848				228,597				—				569,445				201,066				1988				1988			20 (LI), 35 (BI)
Los Angeles, CA			—				674,283				452,223				—				1,126,506				397,767				1988				1988			20 (LI), 35 (BI)
Chatsworth, CA			—				642,475				430,890				—				1,073,365				379,010				1989				1989			20 (LI), 35 (BI)
Victorville, CA			—				505,398				338,957				—				844,355				298,146				1989				1989			20 (LI), 35 (BI)
		$	—			$	3,778,883			$	2,534,393			$	—			$	6,313,276			$	2,229,215

 

		Restaurants				Accumulated Depreciation
Balances at December 31, 2008:		$	7,360,925			$	2,288,737
Additions			—				113,240
Retirements			—				—
Balances at December 31, 2009:			7,360,925				2,401,977
Additions			—				112,737
Retirements			—				—
Balances at December 31, 2010:			7,360,925				2,514,714
Additions			—				76,406
Retirements			(1,047,649	)			(361,905	)
Balances at December 31, 2011:		$	6,313,276			$	2,229,215

The aggregate cost basis of Del Taco Restaurant Properties III real estate assets for Federal income tax purposes was $6,313,276 at December 31, 2011.

See accompanying report of independent registered public accounting firm.

 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

		DEL TACO RESTAURANT PROPERTIES III
		a California limited partnership
		Del Taco LLC
		General Partner
Date March 23, 2012		Paul J. B. Murphy, III
		Paul J.B. Murphy, III
		Chief Executive Officer
Date March 23, 2012		Steven L. Brake
		Steven L. Brake
		Chief Financial Officer
Date March 23, 2012		John Cappasola
		John Cappasola
		Chief Brand Officer

 

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