-----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, AfrekDBk3IgLiBoqUOiHVMpfU85Ylq3UDxJKcEL5PdmB98u0EAadVM7zGCJNUIJG k1gwJ98nJ6mk2WI/HVDkgQ== 0000711642-00-000157.txt : 20000516 0000711642-00-000157.hdr.sgml : 20000516 ACCESSION NUMBER: 0000711642-00-000157 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANGELES INCOME PROPERTIES LTD III CENTRAL INDEX KEY: 0000720460 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 953903984 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-13192 FILM NUMBER: 631505 BUSINESS ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: P.O. BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10QSB 1 FIRST QUARTER OF 2000 FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarterly or Transitional Report U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________to _________ Commission file number 0-13192 ANGELES INCOME PROPERTIES, LTD. III (Exact name of small business issuer as specified in its charter) California 95-3903984 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) ANGELES INCOME PROPERTIES, LTD. III CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) March 31, 2000 Assets Cash and cash equivalents $ 987 Receivables and deposits 89 Other assets 14 Investment property Land $ 657 Buildings and related personal property 4,279 4,936 Less accumulated depreciation (3,190) 1,746 $ 2,836 Liabilities and Partners' (Deficit) Capital Liabilities Accounts payable $ 5 Tenant security deposit liabilities 20 Accrued property taxes 12 Other liabilities 104 Partners' (Deficit) Capital General partners $ (6) Limited partners (86,738 units issued and outstanding) 2,701 2,695 $ 2,836 See Accompanying Notes to Consolidated Financial Statements b) ANGELES INCOME PROPERTIES, LTD. III CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended March 31, 2000 1999 (restated) Revenues: Rental income $ 205 $ 202 Other income 16 17 Total revenues 221 219 Expenses: Operating 89 91 General and administrative 29 43 Depreciation 68 64 Property taxes 11 9 Total expenses 197 207 Income from continuing operations 24 12 Loss from discontinued operations -- (47) Net income (loss) $ 24 $ (35) Net income (loss) allocated to general partners (1%) $ -- $ (1) Net income (loss) allocated to limited partners (99%) 24 (34) $ 24 $ (35) Net income (loss) per limited partnership unit: Income from continuing operations $ .28 $ .14 Income (loss) from discontinued operations -- (.53) Net income (loss) per limited partnership unit $ .28 $ (.39) Distributions per limited partnership unit $ 14.55 $ -- See Accompanying Notes to Consolidated Financial Statements c) ANGELES INCOME PROPERTIES, LTD. III CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partners Partners Total Original capital contributions 86,920 $ 1 $43,460 $43,461 Partners' capital at December 31, 1999 86,738 $ 7 $ 3,939 $ 3,946 Distributions to partners -- (13) (1,262) (1,275) Net income for the three months ended March 31, 2000 -- -- 24 24 Partners' (deficit) capital at March 31, 2000 86,738 $ (6) $ 2,701 $ 2,695 See Accompanying Notes to Consolidated Financial Statements
ANGELES INCOME PROPERTIES, LTD. III CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Three Months Ended March 31, 2000 1999 Cash flows from operating activities: Net income (loss) $ 24 $ (35) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Bad debt expense -- 50 Depreciation 68 170 Amortization of loan costs and leasing commissions -- 9 Change in accounts: Receivables and deposits 71 (95) Other assets (7) 31 Accounts payable (28) 18 Tenant security deposit liabilities -- (1) Accrued property taxes (27) 9 Other liabilities (76) (29) Net cash provided by operating activities 25 127 Cash flows from investing activities: Property improvements and replacements (16) (24) Net deposits to restricted escrows -- (5) Net cash used in investing activities (16) (29) Cash flows from financing activities: Payments on mortgage note payable -- (12) Distributions to partners (1,275) -- Net cash used in financing activities (1,275) (12) Net (decrease) increase in cash and cash equivalents (1,266) 86 Cash and cash equivalents at beginning of period 2,253 1,347 Cash and cash equivalents at end of period $ 987 $ 1,433 Supplemental disclosure of cash flow information: Cash paid for interest $ -- $ 85 See Accompanying Notes to Consolidated Financial Statements
e) ANGELES INCOME PROPERTIES, LTD. III NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements of Angeles Income Properties, Ltd. III (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Angeles Realty Corporation II (the "Managing General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2000, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB for the year ended December 31, 1999. Principles of Consolidation: The consolidated financial statements of the Partnership include its 99% limited partnership interests in Poplar Square AIP III, L.P. and Poplar Square GP LP. Poplar Square GP LP is the general partner of Poplar Square AIP III and ARC II is the general partner of Poplar Square GP LP. Both general partners of the consolidated partnerships may be removed by the Registrant; therefore, the partnerships are controlled and consolidated by the Partnership. All significant interpartnership balances have been eliminated. Note B - Transfer of Control Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust merged into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the Managing General Partner. The Managing General Partner does not believe that this transaction has had or will have a material effect on the affairs and operations of the Partnership. Note C - Discontinued Operations Poplar Square Shopping Center was the only commercial property of the Partnership and was one segment of the Partnership's operations. Due to the sale of this property in December 1999, the operating results of this property have been shown as loss from discontinued operations for the three months ended March 31, 2000 and 1999 and, accordingly, the 1999 statement of operations has been restated to reflect this presentation. Revenues of this property were approximately $216,000 for the three months ended March 31, 1999 and the Partnership realized a loss from discontinued operations of approximately $47,000 for the same period. Note D - Transactions with Affiliated Parties The Partnership has no employees and is dependent on the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides (i) for certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following payments were made to the Managing General Partner and affiliates during the three months ended March 31, 2000 and 1999: 2000 1999 (in thousands) Property management fees (included in operating expenses) $ 10 $ 11 Partnership management fee (included in other liabilities) 47 -- Reimbursement for services of affiliates (included in general and administrative expenses) 13 21 During the three months ended March 31, 2000 and 1999 affiliates of the Managing General Partner were entitled to receive 5% of gross receipts from the Registrant's residential property as compensation for providing property management services. The Registrant paid to such affiliates approximately $10,000 and $11,000 for the three months ended March 31, 2000 and 1999, respectively. The Partnership Agreement provides for a fee equal to 10% of "net cash flow from operations", as defined in the Partnership Agreement to be paid to the Managing General Partner for executive and administrative management services. This fee is calculated and accrued annually. A fee of approximately $47,000 was earned for the twelve months ended December 31, 1999 and is included in other liabilities at March 31, 2000. An affiliate of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $13,000 and $21,000 for the three months ended March 31, 2000 and 1999, respectively. AIMCO and its affiliates currently own 33,632 limited partnership units in the Partnership representing 38.774% of the outstanding units. A number of these units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Managing General Partner because of their affiliation with the Managing General Partner. Note E - Distributions The Partnership paid a cash distribution from sale proceeds of approximately $1,205,000 (approximately $1,193,000 to the limited partners, or $13.75 per limited partnership unit) and from operations of approximately $70,000 (approximately $69,000 to the limited partners, or $.80 per limited partnership unit), during the three months ended March 31, 2000. No distributions were paid during the three months ended March 31, 1999. Note F - Segment Reporting Description of the types of products and services from which reportable segment derives its revenues: The Partnership had two reportable segments: residential properties and commercial properties. The Partnership's residential property segment consists of one apartment complex located in Mississippi. The Partnership rents apartment units to tenants for terms that are typically twelve months or less. The commercial property segment consisted of a shopping center located in Oregon, which was sold on December 30, 1999. As a result of the sale of the commercial property during 1999, the commercial segment is shown as discontinued operations. Measurement of segment profit or loss: The Partnership evaluates performance based on segment profit (loss) before depreciation. The accounting policies of the reportable segment are the same as those of the Partnership as described in the Partnership's Annual Report on Form 10-KSB for the year ended December 31, 1999. Factors management used to identify the enterprise's reportable segment: The Partnership's reportable segments are investment properties that offer different products and services. The reportable segments are each managed separately because they provide distinct services with different types of products and customers. Segment information for the three months ended March 31, 2000 and 1999 is shown in the tables below. The "Other" column includes Partnership administration related items and income and expense not allocated to the reportable segments (in thousands).
2000 Residential Commercial Other Totals (discontinued) Rental income $ 205 $ - $ - $ 205 Other income 7 - 9 16 Depreciation 68 - - 68 General and administrative expense - - 29 29 Segment profit (loss) 44 - (20) 24 Total assets 2,319 - 517 2,836 Capital expenditures for investment property 16 - - 16
1999 Residential Commercial Other Totals (discontinued) Rental income $ 202 $ - $ - $ 202 Other income 5 - 12 17 Depreciation 64 - - 64 General and administrative expense - - 43 43 Loss from discontinued operations - (47) - (47) Segment profit (loss) 43 (47) (31) (35) Total assets 2,111 3,429 1,165 6,705 Capital expenditures for investment properties 24 - - 24
Note G - Legal Proceedings In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the Managing General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates to acquire limited partnership units, the management of partnerships by Insignia Affiliates and the Insignia Merger (see "Note B - Transfer of Control"). The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Managing General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs have filed an amended complaint. The Managing General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to final court approval, on behalf of the Partnership and all limited partners who own units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Superior Court of the State of California, County of San Mateo, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of class plaintiffs' counsel to enter the settlement. On December 14, 1999, the Managing General Partner and its affiliates terminated the proposed settlement. Certain plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in the action. The Managing General Partner does not anticipate that costs associated with this case will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS The matters discussed in this Form 10-QSB contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosures contained in this Form 10-QSB and the other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussion of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, does not take into account the effects of any changes to the Registrant's business and results of operation. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. The Partnership's investment property consists of one apartment complex. The following table sets forth the average occupancy of the property for the three months ended March 31, 2000 and 1999: Average Occupancy Property 2000 1999 Lake Forest Apartments 93% 91% Brandon, Mississippi Results from Operations The Registrant's net income for the three month period ended March 31, 2000 was approximately $24,000 as compared to a net loss of approximately $35,000 for the three months ended March 31, 1999. The increase in net income is primarily attributable to the loss from discontinued operations of approximately $47,000 for the three months ended March 31, 1999. The decrease in the loss from discontinued operations is due to the sale of the property in December of 1999. Poplar Square was the only commercial property owned by the Partnership and represented one segment of the Partnership's operations. Due to the sale of this property, the results of the commercial segment have been shown as loss from discontinued operations for the three months ended March 31, 1999 and, accordingly, the 1999 statement of operations has been restated to reflect this presentation. The Registrant's income from continuing operations for the three months ended March 31, 2000 was approximately $24,000 as compared to approximately $12,000 for the three months ended March 31, 1999. The increase in income from continuing operations is primarily attributable to a decrease in total expenses. The decrease in total expenses is primarily attributable to a decrease in general and administrative expense. General and administrative expenses decreased primarily due to a decrease in legal expenses due to the settlement of lawsuits in 1999 as disclosed in the Partnership's March 31, 1999 Form 10-QSB and reduced reimbursements to the Managing General Partner. Included in general and administrative expenses for the three months ended March 31, 2000 and 1999 are reimbursements to the Managing General Partner allowed under the Partnership Agreement. In addition, costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement are also included. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of its investment property to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the Managing General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Liquidity and Capital Resources At March 31, 2000, the Registrant had cash and cash equivalents of approximately $987,000 as compared to approximately $1,433,000 at March 31, 1999. The net decrease in cash and cash equivalents was approximately $1,266,000 from the Registrant's year ended December 31, 1999. The decrease in cash and cash equivalents was due to approximately $1,275,000 of cash used in financing activities and approximately $16,000 of cash used in investing activities, which was partially offset by approximately $25,000 of cash provided by operating activities. Cash used in financing activities consisted of distributions to partners. Cash used in investing activities consisted of property improvements and replacements. The Registrant invests its working capital reserves in a money market account. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the Partnership's property to adequately maintain the physical assets and other operating needs of the Registrant and to comply with Federal, state, and local legal and regulatory requirements. Capital improvements planned for the Registrant's property are detailed below. Lake Forest Apartments: The Partnership budgeted approximately $59,000 for capital improvements at Lake Forest Apartments for the year 2000 consisting primarily of appliance replacements, air conditioning unit replacements, floor covering replacements and structural improvements. As of March 31, 2000 the property has spent approximately $16,000 on capital expenditures, consisting primarily of appliance replacements, major landscaping and roof improvements. These improvements were funded from operating cash flow. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. The additional capital expenditures will be incurred only if cash is available from operations or Partnership reserves. To the extent that such budgeted capital improvements are completed, the Registrant's distributable cash flow, if any, may be adversely affected at least in the short term. The Registrant's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Registrant. The Partnership paid a cash distribution from sale proceeds of approximately $1,205,000 (approximately $1,193,000 to the limited partners, or $13.75 per limited partnership unit) and from operations of approximately $70,000 (approximately $69,000 to the limited partners, or $.80 per limited partnership unit), during the three months ended March 31, 2000. No distributions were paid during the three months ended March 31, 1999. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves, mortgage financing, and/or the sale of the property. The Partnership's distribution policy is reviewed on a semi-annual basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations, after required capital expenditures, to permit additional distributions to its partners during the remainder of 2000 or subsequent periods. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the Managing General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates to acquire limited partnership units, the management of partnerships by Insignia Affiliates and the Insignia Merger (see "Part 1 - Financial Information, Item 1. Financial Statements, Note B - Transfer of Control"). The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Managing General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs have filed an amended complaint. The Managing General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to final court approval, on behalf of the Partnership and all limited partners who own units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Superior Court of the State of California, County of San Mateo, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of class plaintiffs' counsel to enter the settlement. On December 14, 1999, the Managing General Partner and its affiliates terminated the proposed settlement. Certain plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in the action. The Managing General Partner does not anticipate that costs associated with this case will be material to the Partnership's overall operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K: A Form 8-K dated December 30, 1999 was filed with the Securities and Exchange Commission on January 13, 2000 disclosing the sale of Poplar Square Shopping Center. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ANGELES INCOME PROPERTIES, LTD. III By: Angeles Realty Corporation II Managing General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Martha L. Long Martha L. Long Senior Vice President and Controller Date: May 15, 2000 EX-27 2 FIRST QUARTER 10-QSB
5 This schedule contains summary financial information extracted from Angeles Income Properties, Ltd. III 2000 First Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000720460 Angeles Income Properties, Ltd. III 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 987 0 0 0 0 0 4,936 3,190 2,836 0 0 0 0 0 2,695 2,836 0 221 0 0 197 0 0 0 0 0 0 0 0 24 128 0 Registrant has an unclassified balance sheet. Multiplier is 1.
-----END PRIVACY-ENHANCED MESSAGE-----