-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LGytgOYk42lvV4Lu0q3ykcZcUQS1l2PpSwyyQmYWED7Whc0zEj1zc4mpUQZyLk1y nmfwlk6RR4E3yG4C25mgPQ== 0000950148-98-001407.txt : 19980521 0000950148-98-001407.hdr.sgml : 19980521 ACCESSION NUMBER: 0000950148-98-001407 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980520 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: REAL ESTATE ASSOCIATES LTD III CENTRAL INDEX KEY: 0000318986 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 953547611 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-10673 FILM NUMBER: 98628689 BUSINESS ADDRESS: STREET 1: 9090 WILSHIRE BLVD STREET 2: STE 201 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 BUSINESS PHONE: 3102782192 MAIL ADDRESS: STREET 1: 9090 WILSHIRE BLVD STREET 2: STE 201 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended MARCH 31, 1998 Commission File Number 0-10673 REAL ESTATE ASSOCIATES LIMITED III (A California Limited Partnership) I.R.S. Employer Identification No. 95-3547611 9090 WILSHIRE BLVD., SUITE 201 BEVERLY HILLS, CALIF. 90211 Registrant's Telephone Number, Including Area Code (310) 278-2191 Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve 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 [ ] 2 REAL ESTATE ASSOCIATES LIMITED III (A CALIFORNIA LIMITED PARTNERSHIP) INDEX TO FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets, March 31, 1998 and December 31, 1997 .................. 1 Statements of Operations, Three Months Ended March 31, 1998 and 1997 ...................... 2 Statement of Partners' Equity (Deficiency), Three Months Ended March 31, 1998 ............................... 3 Statements of Cash Flows, Three Months Ended March 31, 1998 and 1997 ...................... 4 Notes to Financial Statements ......................................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ...............................11 PART II. OTHER INFORMATION Item 1. Legal Proceedings ....................................................14 Item 6. Exhibits and Reports on Form 8-K .....................................14 Signatures .....................................................................15
3 REAL ESTATE ASSOCIATES LIMITED III (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS MARCH 31, 1998 AND DECEMBER 31, 1997 ASSETS
1998 1997 (Unaudited) (Audited) ------------ ------------ INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2) $ 1,313,422 $ 1,249,422 CASH AND CASH EQUIVALENTS (Note 1) 10,448,785 10,575,810 OTHER ASSETS 189,561 135,000 ------------ ------------ TOTAL ASSETS $ 11,951,768 $ 11,960,232 ============ ============ LIABILITIES AND PARTNERS' EQUITY LIABILITIES: Notes payable (Notes 3 and 6) $ 1,510,000 $ 1,510,000 Interest payable (Notes 3 and 6) 452,027 414,277 Accounts payable 218,889 110,193 ------------ ------------ 2,180,916 2,034,470 ------------ ------------ COMMITMENTS AND CONTINGENCIES (Notes 4 and 5) PARTNERS' EQUITY (DEFICIENCY): General partners (101,267) (99,718) Limited partners 9,872,119 10,025,480 ------------ ------------ 9,770,852 9,925,762 ------------ ------------ TOTAL LIABILITIES AND PARTNERS' EQUITY $ 11,951,768 $ 11,960,232 ============ ============
The accompanying notes are integral part of these financial statements. 4 REAL ESTATE ASSOCIATES LIMITED III (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (Unaudited)
1998 1997 --------- --------- INTEREST AND OTHER INCOME $ 124,839 $ 109,944 --------- --------- OPERATING EXPENSES: Legal and accounting 61,429 31,095 Management fees - general partner (Note 4) 113,700 113,700 Interest (Note 3) 37,750 37,750 Administrative (Note 4) 171,328 19,799 --------- --------- Total operating expenses 384,207 202,344 --------- --------- LOSS FROM OPERATIONS (259,368) (92,400) DISTRIBUTIONS FROM LIMITED PARTNERSHIPS RECOGNIZED AS INCOME (Note 2) 40,458 81,041 EQUITY IN INCOME OF LIMITED PARTNERSHIPS AND AMORTI- ZATION OF ACQUISITION COSTS (Note 2) 64,000 64,000 --------- --------- NET INCOME $(154,910) $ 52,641 ========= ========= NET INCOME PER LIMITED PARTNERSHIP INTEREST (Note 1) $ (14) $ 5 ========= =========
The accompanying notes are integral part of these financial statements. 5 REAL ESTATE ASSOCIATES LIMITED III (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY) FOR THE THREE MONTHS ENDED MARCH 31, 1998 (Unaudited)
General Limited Partners Partners Total ------------ ------------ ------------ PARTNERSHIP INTERESTS 11,456 ============ EQUITY (DEFICIENCY), January 1, 1998 $ (99,718) $ 10,025,480 $ 9,925,762 Net loss for the three months ended March 31, 1998 (1,549) (153,361) (154,910) ------------ ------------ ------------ EQUITY (DEFICIENCY), March 31, 1998 $ (101,267) $ 9,872,119 $ 9,770,852 ============ ============ ============
The accompanying notes are integral part of these financial statements. 6 REAL ESTATE ASSOCIATES LIMITED III (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (Unaudited)
1998 1997 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ (154,910) $ 52,641 Adjustments to reconcile net income to net cash provided by operating activities: Equity in income of limited partnerships and amortization of acquisition costs (64,000) (64,000) Increase in other assets (54,561) -- Increase in interest and other payable 146,446 36,597 ------------ ------------ Net cash (used in) provided by operating activities (127,025) 25,238 ------------ ------------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (127,025) 25,238 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 10,575,810 9,734,531 ------------ ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD $ 10,448,785 $ 9,759,769 ============ ============
The accompanying notes are integral part of these financial statements. 7 REAL ESTATE ASSOCIATES LIMITED III (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS MARCH 31, 1998 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL The information contained in the following notes to the financial statements is condensed from that which would appear in the annual audited financial statements; accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and related notes thereto contained in the Real Estate Associates Limited III (the "Partnership") annual report for the year ended December 31, 1997. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim period presented are not necessarily indicative of the results for the entire year. In the opinion of the Partnership, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals) necessary to present fairly the financial position as of March 31, 1998 and the results of operations and changes in cash flows for the three months then ended. The general partners have a 1 percent interest in profits and losses of the Partnership. The limited partners have the remaining 99 percent interest which is allocated in proportion to their respective individual investments. National Partnership Investments Corp. (NAPICO) is the corporate general partner of the Partnership. NAPICO is a wholly owned subsidiary of Casden Investment Corporation, which is wholly owned by Alan I. Casden. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. METHOD OF ACCOUNTING FOR INVESTMENT IN LIMITED PARTNERSHIPS The investment in limited partnerships is accounted for on the equity method. Acquisition, selection and other costs related to the acquisition of the projects are capitalized as part of the investment account, and are being amortized on a straight line basis over the estimated lives of the underlying assets, which is generally 30 years. NET INCOME PER LIMITED PARTNERSHIP INTEREST Net income per limited partnership interest was computed by dividing the limited partners' share of net income by the number of limited partnership interests outstanding during the year. The number of limited partnership interests was 11,456 for the periods presented. 5 8 REAL ESTATE ASSOCIATES LIMITED III (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1998 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash and bank certificates of deposit with an original maturity of three months or less. The Partnership has its cash and cash equivalents on deposit primarily with two high credit quality institutions. Such cash and cash equivalents are in excess of the FDIC insurance limit. INCOME TAXES No provision has been made for income taxes in the accompanying financial statements since such taxes, if any, are the liability of the individual partners IMPAIRMENT OF LONG-LIVED ASSETS The Partnership reviews long-lived assets to determine if there has been any permanent impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the sum of the expected future cash flows is less than the carrying amount of the assets, the Partnership recognizes an impairment loss. NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS The Partnership holds limited partnership interests in 26 limited partnerships. In addition, the Partnership holds a general partner interest in REA. NAPICO is also a general partner in REA. REA, in turn, holds limited partner interests in six additional limited partnerships. In total, therefore, the Partnership holds interest, either directly or indirectly including through REA, 32 partnerships which own residential rental projects consisting of 3,062 apartment units. The mortgage loans of these projects are insured by the United States Department of Housing and Urban Development ("HUD") or state governmental agencies. The Partnership, as a limited partner, is entitled to between 75 percent and 99 percent of the profits and losses of the limited partnerships it has invested in directly. The Partnership is also entitled to 99.9 percent of the profits and losses of REA. REA holds a 99 percent interest in each of the limited partnerships in which it has invested. 6 9 REAL ESTATE ASSOCIATES LIMITED III (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1998 NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED) Equity in losses of limited partnerships is recognized in the financial statements until the limited partnership investment account is reduced to a zero balance. Losses incurred after the limited partnership investment account is reduced to zero are not recognized. Distributions from limited partnerships are recognized as a reduction of capital until the investment balance has been reduced to zero. Subsequent distributions received are recognized as income. The following is a summary of the investment in limited partnerships for the three months ended March 31, 1998:
Balance, beginning of period $ 1,249,421 Amortization of acquisitions costs (13,500) Equity in income of limited partnerships 77,500 ----------- Balance, end of period $ 1,313,422 ===========
The following are unaudited combined estimated statements of operations for the three months ended March 31, 1998 and 1997 for the limited partnerships in which the Partnership has investments:
Three months Three months ended ended March 31, 1998 March 31, 1997 ----------- ----------- REVENUES Rental and other $ 5,793,000 $ 5,597,000 ----------- ----------- EXPENSES Depreciation 918,000 939,000 Interest 1,732,000 1,757,000 Operating 3,013,000 3,109,000 ----------- ----------- 5,663,000 5,805,000 ----------- ----------- NET (LOSS) INCOME $ 130,000 $ (208,000) =========== ===========
NAPICO, or one of its affiliates, is the general partner and property management agent for certain of the limited partnerships included above. 7 10 REAL ESTATE ASSOCIATES LIMITED III (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1998 NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED) Under recent adopted law and policy, HUD has determined not to renew housing assistance payments contracts ("HAP Contracts") on a long term basis on the existing terms. In connection with renewals of the HAP Contracts under such new law and policy, the amount of rental assistance payments under renewed HAP Contracts will be based on market rentals instead of above market rentals, which was generally the case under existing HAP Contracts. As a result, existing HAP Contracts that are renewed in the future on projects insured by the Federal Housing Administration of HUD ("FHA") will not provide sufficient cash flow to permit owners of properties to meet the debt service requirements of these existing FHA-insured mortgages. In order to address the reduction in payments under HAP Contracts as a result of this new policy, the Multi-family Assisted Housing Reform and Affordability Act of 1997 ("MAHRAA"), which was adopted in October 1997, provides for the restructuring of mortgage loans insured by the FHA with respect to properties subject to HAP Contracts that have been renewed under the new policy. The restructured loans will be held by the current lender or another lender. Under MAHRAA, an FHA-insured mortgage loan can be restructured to reduce the annual debt service on such loan. There can be no assurance that the Partnership will be permitted to restructure its mortgage indebtedness pursuant to the new HUD rules implementing MAHRAA or that the Partnership would choose to restructure such mortgage indebtedness if it were eligible to participate in the MAHRAA program. It should be noted that there are uncertainties as to the economic impact on the Partnership of the combination of the reduced payments under the HAP Contracts and the restructuring of the existing FHA-insured mortgage loans under MAHRAA. Accordingly, the General Partners are unable to predict with certainty their impact on the Partnership's future cash flow. As a result of the foregoing, the Partnership is undergoing an extensive review of properties for disposition to the REIT as set forth below, refinancing or re-engineering alternatives for the properties in which the limited partnerships have invested and are subject to HUD mortgage and rental subsidy programs. The Partnership has incurred expenses in connection with this review by various third party professionals, including accounting, legal, valuation, structural and engineering costs, which amounted to approximately $337,000 as of March 31, 1998, including approximately $196,000 for the three months ended March 31, 1998. A real estate investment trust ("REIT") organized by an affiliate of NAPICO has advised the Partnership that it intends to make a proposal to purchase from the Partnership certain of the limited partnership interests held for investment by the Partnership. The REIT proposes to purchase such limited partner interests for cash, which it plans to raise in connection with a private placement of its equity securities. The purchase is subject to, among other things, (i) consummation of such private placement by the REIT; (ii) the purchase of the general partner interests in the local limited partnerships by the REIT; (iii) the approval of HUD and certain state housing finance agencies; (iv) the consent of the limited partners to the sale of the local limited partnership interests held for investment by REAL III; and (v) the consummation of a minimum number of purchase transactions with other NAPICO affiliated partnerships. As of March 31, 1998, the REIT had completed buy-out negotiations with a majority of the general partners of the local limited partnerships. 8 11 REAL ESTATE ASSOCIATES LIMITED III (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1998 NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED) A proxy is contemplated to be sent to the limited partners setting forth the terms and conditions of the purchase of the limited partners' interests held for investment by the Partnership, together with certain amendments to the Partnership Agreement and other disclosures of various conflicts of interest in connection with the transaction. NOTE 3 - NOTES PAYABLES Certain of the Partnership's investments involved purchases of partnership interests from partners who subsequently withdrew from the operating partnerships. The Partnership is obligated on non-recourse notes payable of $1,510,000, bearing interest at 10 percent, to the sellers of the partnership interests. These notes are payable by the Partnership through REA, and have principal maturity dates in June 2020 and March 2024 or upon the sale or refinancing of the underlying partnership properties. These notes and the related interest are collaterized by REA's investment in the respective limited partnerships and are payable only out of cash distributions from the investee partnerships, as defined in the notes. Unpaid interest is due at maturity of the notes. NOTE 4 - MANAGEMENT FEE AND EXPENSES DUE TO GENERAL PARTNER Under the terms of the Restated Certificate and Agreement of Limited Partnership, the Partnership is obligated to NAPICO for an annual management fee approximately equal to .4 percent of the invested assets. Invested assets are defined as the costs of acquiring project interests, including the porportionate amount of the mortgage loans related to the Partnership's interests in the capital accounts of the respective partnership. The management fee incurred for the three months ended March 31, 1998 and 1997 was approximately $113,700. The Partnership reimburses NAPICO for certain expenses. The reimbursement paid to NAPICO was approximately $8,800 and $7,800 for the three months ended March 31, 1998 and 1997, respectively, and is included in administrative expenses. NOTE 5 - CONTINGENCIES The corporate general partner of the Partnership is involved in various lawsuits arising from transactions in the ordinary course of business. In the opinion of management and the corporate general partner, the claims will not result in any material liability to the Partnership. The Partnership has assessed the potential impact of the Year 2000 computer systems issue on its operations. The Partnership believes that no significant actions are required to be taken by the Partnership to address the issue and that the impact of the Year 2000 computer systems issue will not materially affect the Partnership's future operating results or financial condition. 9 12 REAL ESTATE ASSOCIATES LIMITED III (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1998 NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosure about Fair Value of Financial Instruments," requires disclosure of fair value information about financial instruments, when it is practicable to estimate that value. The notes payable are collateralized by the Partnership's investments in the investee limited partnerships and are payable only out of cash distributions from the investee partnerships. The operations generated by the investee limited partnerships are subject to various government rules, regulations and restrictions which make it impracticable to estimate the fair value of the notes payable and related accrued interest. The carrying amount of other assets and liabilities reported on the balance sheets that require such disclosure approximates fair value due to their short-term maturity. 10 13 REAL ESTATE ASSOCIATES LIMITED III (A CALIFORNIA LIMITED PARTNERSHIP) MARCH 31, 1998 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES The Partnership's primary sources of funds include interest income earned from investing available cash and distributions from limited partnerships in which the Partnership has invested. It is not expected that any of the local limited partnerships in which the Partnership has invested will generate cash flow sufficient to provide for distributions to the Partnership's limited partners in any material amount. RESULTS OF OPERATIONS Partnership revenues consist primarily of interest income earned on certificates of deposit and other temporary investment of funds not required for investment in local partnerships. Operating expenses consist primarily of recurring general and administrative expenses and professional fees for services rendered to the Partnership. In addition, an annual Partnership management fee in an amount equal to .4 percent of investment assets is payable to the corporate general partner. The Partnership accounts for its investments in the local limited partnerships on the equity method, thereby adjusting its investment balance by its proportionate share of the income or loss of the local limited partnerships. Losses incurred after the limited partnership investment account is reduced to zero are not recognized in accordance with the equity accounting method. Distributions received from limited partnerships are recognized as return of capital until the investment balance has been reduced to zero or to a negative amount equal to future capital contributions required. Subsequent distributions received are recognized as income. Overall distributions from limited partnerships continue to be favorable. This primarily is due, to improved operating results at several of the properties. Except for certificates of deposit and money market funds, the Partnership's investments are entirely interests in other limited partnerships owning government assisted projects. Funds temporarily not required for such investments in projects are invested in certificate of deposit and money market funds which provide substantial amounts of interest as reflected in the statement of operations. These investments are converted to cash to meet obligations as they arise. The Partnership intends to continue investing available funds in this manner. The Partnership is obligated on non-recourse notes payable of $1,510,000 which bear interest at 10 percent per annum and have principal maturities ranging from June 2020 to March 2024. The notes and related interest are payable from cash flow generated from operations of the related rental properties as defined in the notes. These obligations are collateralized by the Partnership's investments in the limited partnerships. Unpaid interest is due at maturity of the notes. Because no payments have been made on these notes, interest expense has remained constant for each of the three years. 11 14 REAL ESTATE ASSOCIATES LIMITED III (A CALIFORNIA LIMITED PARTNERSHIP) MARCH 31, 1998 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS (CONTINUED) Under recent adopted law and policy, HUD has determined not to renew housing assistance payments contracts ("HAP Contracts") on a long term basis on the existing terms. In connection with renewals of the HAP Contracts under such new law and policy, the amount of rental assistance payments under renewed HAP Contracts will be based on market rentals instead of above market rentals, which was generally the case under existing HAP Contracts. As a result, existing HAP Contracts that are renewed in the future on projects insured by the Federal Housing Administration of HUD ("FHA") will not provide sufficient cash flow to permit owners of properties to meet the debt service requirements of these existing FHA-insured mortgages. In order to address the reduction in payments under HAP Contracts as a result of this new policy, the Multi-family Assisted Housing Reform and Affordability Act of 1997 ("MAHRAA"), which was adopted in October 1997, provides for the restructuring of mortgage loans insured by the FHA with respect to properties subject to HAP Contracts that have been renewed under the new policy. The restructured loans will be held by the current lender or another lender. Under MAHRAA, an FHA-insured mortgage loan can be restructured to reduce the annual debt service on such loan. There can be no assurance that the Partnership will be permitted to restructure its mortgage indebtedness pursuant to the new HUD rules implementing MAHRAA or that the Partnership would choose to restructure such mortgage indebtedness if it were eligible to participate in the MAHRAA program. It should be noted that there are uncertainties as to the economic impact on the Partnership of the combination of the reduced payments under the HAP Contracts and the restructuring of the existing FHA-insured mortgage loans under MAHRAA. Accordingly, the General Partners are unable to predict with certainty their impact on the Partnership's future cash flow. As a result of the foregoing, the Partnership is undergoing an extensive review of properties for disposition to the REIT as set forth below, refinancing or re-engineering alternatives for the properties in which the limited partnerships have invested and are subject to HUD mortgage and rental subsidy programs. The Partnership has incurred expenses in connection with this review by various third party professionals, including accounting, legal, valuation, structural and engineering costs, which amounted to approximately $337,000 as of March 31, 1998, including approximately $196,000 in general and administrative expenses for the three months ended March 31, 1998. A real estate investment trust ("REIT") organized by an affiliate of NAPICO has advised the Partnership that it intends to make a proposal to purchase from the Partnership certain of the limited partnership interests held for investment by the Partnership. The REIT proposes to purchase such limited partner interests for cash, which it plans to raise in connection with a private placement of its equity securities. The purchase is subject to, among other things, (i) consummation of such private placement by the REIT; (ii) the purchase of the general partner interests in the local limited partnerships by the REIT; (iii) the approval of HUD and certain state housing finance agencies; (iv) the consent of the limited partners to the sale of the local limited partnership interests held for investment by REAL III; and (v) the consummation of a minimum number of purchase transactions with other NAPICO affiliated partnerships. As of March 31, 1998, the REIT had completed buy-out negotiations with a majority of the general partners of the local limited partnerships. 12 15 REAL ESTATE ASSOCIATES LIMITED III (A CALIFORNIA LIMITED PARTNERSHIP) MARCH 31, 1998 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS (CONTINUED) A proxy is contemplated to be sent to the limited partners setting forth the terms and conditions of the purchase of the limited partners' interests held for investment by the Partnership, together with certain amendments to the Partnership Agreement and other disclosures of various conflicts of interest in connection with the transaction. 13 16 REAL ESTATE ASSOCIATES LIMITED III (A CALIFORNIA LIMITED PARTNERSHIP) MARCH 31, 1998 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The corporate general partner is involved in various lawsuits. None of these are related to REAL III. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) No exhibits are required per the provision of Item 7 of regulation S-K. 14 17 REAL ESTATE ASSOCIATES LIMITED III (A CALIFORNIA LIMITED PARTNERSHIP) MARCH 31, 1998 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. REAL ESTATE ASSOCIATES LIMITED III (a California limited partnership) By: National Partnership Investments Corp. General Partner /s/ BRUCE NELSON ---------------------------------------- Bruce Nelson President Date: May 18, 1998 -------------- /s/ CHARLES H. BOXENBAUM ---------------------------------------- Charles H. Boxenbaum Chief Executive Officer Date: May 18, 1998 -------------- 15 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PARTNERSHIP'S STATEMENTS OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 10,448,785 0 0 0 0 10,448,785 0 0 11,951,768 218,889 0 0 0 0 9,770,852 11,951,768 0 229,297 0 0 346,457 0 37,750 (154,910) 0 (154,190) 0 0 0 (154,190) 0 0
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