-----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, LL+sN33qhTxDc1P93wlK/RuI+BC52JskyXKCKh7wMSFNHorYd2TbTPaSm0vHG8wv 7iRGL1ModTtF7Y0/DoJVxQ== 0000720460-97-000015.txt : 19971110 0000720460-97-000015.hdr.sgml : 19971110 ACCESSION NUMBER: 0000720460-97-000015 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971107 SROS: NONE 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: 97709773 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLZ STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: P.O. BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10QSB 1 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 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 or [ ] TRANSITION REPORT PURSUANT TO 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT For the transition period.........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 (IRS Employer incorporation or organization) Identification No.) One Insignia Financial Plaza, 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) September 30, 1997 Assets Cash and cash equivalents: Unrestricted $ 2,389 Restricted--tenant security deposits 49 Accounts receivable, less allowance for doubtful accounts of $12 28 Escrow for taxes 179 Other assets 244 Restricted escrows 224 Investment properties: Land $ 1,527 Buildings and related personal property 12,882 14,409 Less accumulated depreciation (9,084) 5,325 $ 8,438 Liabilities and Partners' Capital Liabilities Accounts payable $ 10 Tenant security deposits 49 Accrued taxes 62 Other liabilities 65 Mortgage note payable 3,766 Equity interest in net liabilities of joint venture 5 Partners' (Deficit) Capital General partners $ (331) Limited partners capital (86,920 units issued and 86,778 units outstanding) 4,812 4,481 $ 8,438 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 Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Revenues: Rental income $ 437 $ 411 $ 1,332 $ 1,262 Other income 27 33 58 79 Total revenues 464 444 1,390 1,341 Expenses: Operating 110 100 317 313 General and administrative 75 60 166 183 Maintenance 109 46 268 126 Depreciation 169 165 500 488 Interest 91 111 273 326 Bad debt expense -- 7 -- 30 Property taxes 25 42 105 105 Total expenses 579 531 1,629 1,571 Loss before equity in income (loss) of joint venture (115) (87) (239) (230) Equity in income (loss) of joint venture (Note B) 2 (238) 6,970 (764) Net (loss) income $ (113) $ (325) $ 6,731 $ (994) Net (loss) income allocated to general partners (1%) $ (1) $ (3) $ 67 $ (10) Net (loss) income allocated to limited partners (99%) (112) (322) 6,664 (984) Net (loss) income $ (113) $ (325) $ 6,731 $ (994) Net (loss) income per limited partnership unit $ (1.29) $ (3.71) $ 76.79 $ (11.33) 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' deficit at December 31, 1996 86,778 $ (398) $ (1,852) $ (2,250) Net income for the nine months ended September 30, 1997 -- 67 6,664 6,731 Partners' (deficit) capital at September 30, 1997 86,778 $ (331) $ 4,812 $ 4,481 See Accompanying Notes to Consolidated Financial Statements d) ANGELES INCOME PROPERTIES, LTD. III CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 1997 1996 Cash flows from operating activities: Net income (loss) $ 6,731 $ (994) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Equity in (income) loss of joint venture (6,970) 764 Depreciation 500 488 Amortization of loan costs and leasing commissions 30 68 Bad debt expense -- 30 Change in accounts: Restricted cash (1) (2) Accounts receivable (17) (12) Escrows for taxes (65) (107) Other assets 29 3 Accounts payable (17) -- Tenant security deposit liabilities 1 2 Property taxes 21 16 Other liabilities 5 (8) Net cash provided by operating activities 247 248 Cash flows from investing activities: Property improvements and replacements (247) (140) Advances to joint venture -- (721) Collection on advances from joint venture 1,066 -- Deposits to restricted escrows (17) -- Net cash provided by (used in) investing activities 802 (861) Cash flows from financing activities: Payments on mortgage notes payable (31) (40) Loan costs paid -- (94) Net cash used in financing activities (31) (134) Net increase (decrease) in unrestricted cash and cash equivalents 1,018 (747) Unrestricted cash and cash equivalents at beginning of period 1,371 1,888 Unrestricted cash and cash equivalents at end of period $ 2,389 $ 1,141 Supplemental disclosure of cash flow information: Cash paid for interest $ 261 $ 283 See Accompanying Notes to Consolidated Financial Statements e) ANGELES INCOME PROPERTIES, LTD. III CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited 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 and nine month periods ended September 30, 1997, are not necessarily indicative of the results that may be expected for the fiscal year ended December 31, 1997. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-KSB for the fiscal year ended December 31, 1996. Certain reclassifications have been made to the 1996 information to conform to the 1997 presentation. NOTE B - INVESTMENT IN JOINT VENTURE The Partnership has a 33.3% investment in Northtown Mall Partners ("Northtown") which is shown as "Equity interest in net liabilities of joint venture" on the balance sheet. The investment property, Northtown Mall, was sold in May 1997, but effective April 1, 1997. The condensed balance sheet information for Northtown is as follows: September 30, 1997 (in thousands) Assets Cash $ 7 Total Assets $ 7 Liabilities Liabilities $ 7 Total Liabilities $ 7 The condensed profit and loss statements for the three and nine months ended September 30, 1997 and 1996, for Northtown are as follows: Three Months Ended September 30, (in thousands) 1997 1996 Revenues $ 12 $ 2,564 Costs and expenses (6) (3,277) Loss on sale of investment property (5) -- Net income (loss) $ 1 $ (713) Nine Months Ended September 30, (in thousands) 1997 1996 Revenues $ 2,739 $ 7,554 Costs and expenses (3,527) (9,841) Gain on sale of investment property 23,627 -- Net income (loss) $ 22,839 $ (2,287) The Partnership realized equity income from Northtown of approximately $6,970,000 for the nine months ended September 30, 1997, and realized equity loss of approximately $764,000 for the nine months ended September 30, 1996. During the fourth quarter of 1997, all remaining liabilities of this joint venture will be paid and the joint venture will be terminated. The Partnership accounts for its 33.3% investment in Northtown using the equity method of accounting. Under the equity method, the Partnership records its equity interest in income and losses of the joint venture; however, the investment in the joint venture will be recorded at an amount less than zero (a liability) to the extent of the Partnership's share of net liabilities of the joint venture (See "Note D" for information regarding the sale of this investment property). NOTE C - 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 for payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following expenses owed to the Managing General Partner and affiliates during the nine months ended September 30, 1997, and September 30, 1996, were paid or accrued: 1997 1996 (in thousands) Property management fees $ 52 $ 47 Reimbursement for services of affiliates 124 137 Lease commissions 24 -- Included in reimbursements for services of affiliates at September 30, 1997, is approximately $27,000 in construction oversight costs. For the period from January 1, 1996, to August 31, 1997, the Partnership insured its properties under a master policy through an agency and insurer unaffiliated with the Managing General Partner. An affiliate of the Managing General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the master policy. The agent assumed the financial obligations to the affiliate of the Managing General Partner who receives payment on these obligations from the agent. The amount of the Partnership's insurance premiums that accrued to the benefit of the affiliate of the Managing General Partner by virtue of the agent's obligations was not significant. NOTE D - SALE OF NORTHTOWN MALL On May 12, 1997, the Partnership sold Northtown Mall to an affiliate of the lender. The sale resulted in net proceeds of approximately $1,200,000, after payment of closing costs, and the gain on the sale amounted to approximately $23,627,000. The economic closing of the sale of Northtown Mall was as of April 1, 1997, at which time the Partnership was released from the mortgage note secured by this property in the amount of approximately $51,326,000. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS The Partnership's investment properties consist of one apartment complex and one commercial property. The following table sets forth the average occupancy of the properties for the nine months ended September 30, 1997 and 1996: Average Occupancy 1997 1996 Lake Forest Apartments (1) Brandon, Mississippi 92% 92% Poplar Square Shopping Center Medford, Oregon 93% 94% (1) The Managing General Partner expects occupancy to improve at this property during the remainder of 1997 and into 1998. The property has undergone various exterior building improvements in an effort to improve the curb appeal. The Partnership realized a net loss of approximately $113,000 and net income of approximately $6,731,000 for the three and nine months ended September 30, 1997, respectively, as compared to net losses of approximately $325,000 and approximately $994,000 for the three and nine months ended September 30, 1996, respectively. The increase in net income for the three and nine months ended September 30, 1997, over the same period in 1996, is due to the equity in income of the joint venture, as a result of the gain realized on the sale of Northtown Mall in the second quarter of 1997 (see "Note D"). For the three and nine months ended September 30, 1997, versus 1996, loss before equity in income (loss) of the joint venture increased slightly due to an increase in total expenses, which was only partially offset by an increase in total revenues. Despite a slight drop in occupancy for the Partnership, rental income increased during the nine months ended September 30, 1997, as compared to the nine months ended September 30, 1996, due to an increase in average annual rental rates at Lake Forest Apartments. Other income decreased during the three and nine months ended September 30, 1997, as compared to the three and nine months ended September 30, 1996, due to a decrease in interest income as a result of a decrease in cash investments. The Partnership began the 1996 year with over $1,800,000 in cash and was able to invest a significant portion of this cash until it was advanced to Northtown (See discussion below). In September 1997, $1,066,000 of these advances were recovered. Contributing to the overall increase in expenses was an increase in maintenance expense. Maintenance expense increased at Lake Forest Apartments due to an exterior painting project and other various exterior building improvements undertaken in an effort to improve the appearance of the property. Partially offsetting this increase in overall expenses was a decrease in general and administrative expenses due to a decrease in reimbursements for services of affiliates, excluding construction oversight costs. Also, interest expense decreased due to the refinancing of the mortgage debt secured by Poplar Square Shopping Center in November 1996. This debt was refinanced at a lower interest rate. Bad debt expense for the three and nine months ended September 30, 1996, was a result of an increase in the reserve required based on a review of tenants' accounts at the Poplar Square Shopping Center. No such reserve was required during the nine months ended September 30, 1997. On May 12, 1997, the Partnership sold Northtown Mall to an affiliate of the lender. The sale resulted in net proceeds of approximately $1,200,000, after payment of closing costs, and the gain on the sale amounted to approximately $23,627,000. The Partnership's pro-rata share of this gain is included in "Equity in income of joint venture" in the accompanying statement of operations. The economic closing of the sale of Northtown Mall is as of April 1, 1997, at which time the Partnership was released from the mortgage note of approximately $51,326,000. During the fourth quarter of 1997, all remaining liabilities of this joint venture will be paid and the joint venture will be terminated. Included in maintenance expense for the nine months ended September 30, 1997, is $165,000 of major repairs and maintenance comprised of parking lot seal-coating and repairs, exterior building improvements, and exterior painting. For the nine months ended September 30, 1996, $10,000 of major repairs and maintenance, comprised of exterior building improvements, is included in maintenance expense. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of each of its investment properties 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. At September 30, 1997, the Partnership held unrestricted cash and cash equivalents of $2,389,000 compared to $1,141,000 at September 30, 1996. Net cash provided by operating activities remained relatively constant. Net cash provided by investing activities increased due to collection on advances from the joint venture as a result of the distribution of the remaining cash after the sale of Northtown Mall, along with a decrease in advances to the joint venture. Prior to the sale of the property, the Northtown Mall property had continued to experience cash shortfalls and had been dependent upon the Partnership and Angeles Income Properties, Ltd. IV (the 66.7% owner of Northtown) to cover such shortfalls in order to meet operating and debt service requirements for this property (see discussion at "Note D" regarding this investment property). During the nine months ended September 30, 1996, the Partnership advanced $721,000 to Northtown. There were no advances to Northtown during the nine months ended September 30, 1997. Partially offsetting the decrease in advances to joint venture was an increase in cash used for property improvements and replacements at Lake Forest Apartments. Net cash used in financing activities decreased due to the loan costs incurred in 1996 in an effort to refinance the mortgage indebtedness secured by the Poplar Square Shopping Center. This mortgage indebtedness was refinanced in November 1996. As a result of the refinance, the monthly payments to service this debt decreased causing a decrease in payments on the mortgage note payable. 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 properties to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The mortgage indebtedness of $3,766,000, which is secured by the Poplar Square Shopping Center investment property, carries a stated interest rate of 9.2% and matures in November 2006. Future cash distributions will depend on the levels of net cash generated from operations, property sales and the availability of cash reserves. The Managing General Partner is currently evaluating the economic position of the Partnership and the Partnership's ability to make a distribution in 1997. During the nine months ended September 30, 1997 and 1996, there were no distributions paid. PART II - OTHER INFORMATION 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: No reports on form 8-K were filed during the three months ended September 30, 1997. 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/ Carroll D. Vinson Carroll D. Vinson President By: /s/ Robert D. Long Robert D. Long Vice President/CAO Date: November 7, 1997 EX-27 2
5 This schedule contains summary financial information extracted from Angeles Income Properties Ltd. III 1997 Third Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000720460 ANGELES INCOME PROPERTIES LTD. III 1,000 9-MOS DEC-31-1997 SEP-30-1997 2,389 0 28 12 0 0 14,409 9,084 8,438 0 3,766 0 0 0 4,481 8,438 0 1,390 0 0 1,629 0 273 6,731 0 6,731 0 0 0 6,731 76.79 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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