-----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, Hc3EUut8kwXT6EOnAlW558bcYQ6P2X+vBo+hkUwOlnrQ+MoC4LmmuDFO8Gb7/qyV Yyzu/65bCbiGjl7Pkq0rOw== 0000720460-98-000001.txt : 19980513 0000720460-98-000001.hdr.sgml : 19980513 ACCESSION NUMBER: 0000720460-98-000001 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980512 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: 98616220 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 (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, 1998 [ ] 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 (IRS Employer incorporation or organization) Identification No.) One Insignia Financial Plaza Greenville, South Carolina 29602 (Address of principal executive offices) (Zip Code) (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, 1998 Assets Cash and cash equivalents $ 1,198 Receivables and deposits (net of allowance for 192 doubtful accounts of $27) Other assets 280 Restricted escrows 240 Investment properties: Land $ 1,527 Buildings and related personal property 12,971 14,498 Less accumulated depreciation (9,425) 5,073 $ 6,983 Liabilities and Partners' Capital Liabilities Accounts payable $ 14 Tenant security deposit liabilities 45 Accrued property taxes 10 Other liabilities 290 Mortgage note payable 3,744 Partners' (Deficit) Capital General partners $ (347) Limited partners (86,778 units issued and outstanding) 3,227 2,880 $ 6,983 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, 1998 1997 Revenues: Rental income $ 438 $ 509 Other income 17 14 Total revenues 455 523 Expenses: Operating 123 136 General and administrative 41 61 Depreciation 170 163 Interest 90 91 Property taxes 39 41 Total expenses 463 492 (Loss) income before equity in loss of joint venture (8) 31 Equity in loss of joint venture (Note B) -- (235) Net loss $ (8) $ (204) Net loss allocated to general partners (1%) $ -- $ (2) Net loss allocated to limited partners (99%) (8) (202) Net loss $ (8) $ (204) Net loss per limited partnership unit $ (.09) $ (2.33) See Accompanying Notes to Consolidated Financial Statements c) ANGELES INCOME PROPERTIES, LTD. III CONSOLIDATED STATEMENTS 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) capital at December 31, 1997 86,778 $ (347) $ 3,235 $ 2,888 Net loss for the three months ended March 31, 1998 -- -- (8) (8) Partners' (deficit) capital at March 31, 1998 86,778 $ (347) $ 3,227 $ 2,880 See Accompanying Notes to Consolidated Financial Statements
d) ANGELES INCOME PROPERTIES, LTD. III CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Three Months Ended March 31, 1998 1997 Cash flows from operating activities: Net loss $ (8) $ (204) Adjustments to reconcile net loss to net cash provided by operating activities Equity in loss of joint venture -- 235 Depreciation 170 163 Amortization of loan costs and leasing commissions 10 11 Change in accounts: Receivables and deposits (3) (24) Other assets 29 11 Accounts payable (9) (13) Tenant security deposit liabilities (3) -- Property taxes (28) (30) Other liabilities (16) (42) Net cash provided by operating activities 142 107 Cash flows from investing activities: Property improvements and replacements (8) (18) Net deposits to restricted escrows (6) (5) Net cash used in investing activities (14) (23) Cash flows used in financing activities: Payments on mortgage note payable (11) (10) Net increase in cash and cash equivalents 117 74 Cash and cash equivalents at beginning of period 1,081 1,371 Cash and cash equivalents at end of period $ 1,198 $ 1,445 Supplemental disclosure of cash flow information: Cash paid for interest $ 86 $ 87 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 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, 1998, are not necessarily indicative of the results that may be expected for the fiscal year ended December 31, 1998. 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, 1997. Certain reclassifications have been made to the 1997 information to conform to the 1998 presentation. NOTE B - INVESTMENT IN JOINT VENTURE The Partnership had a 33.3% investment in Northtown Mall Partners ("Joint Venture"). On May 12, 1997, the Joint Venture sold its only investment property, 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 $16,243,000. As a result of the sale, mortgage debt in the amount of approximately $8,711,000 was forgiven and unamortized loan costs in the amount of approximately $1,327,000 were written off. This resulted in an extraordinary gain on extinguishment of debt of approximately $7,384,000. 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 of approximately $51,326,000. The Joint Venture was liquidated in December 1997. The condensed profit and loss statement for the three months ended March 31, 1997, for the Joint Venture is as follows: 1997 (in thousands) Revenue $ 2,696 Costs and expenses (3,399) Net loss $ (703) The Partnership's equity in the loss of the joint venture was approximately $235,000 for the three months ended March 31, 1997. 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 Managing General Partner is a wholly-owned subsidiary of Insignia Properties Trust ("IPT"), an affiliate of Insignia Financial Group, Inc. ("Insignia). The Partnership Agreement provides for certain payments to affiliates for services and as 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, 1998 and 1997: 1998 1997 (in thousands) Property management fees (included in operating expenses) $18 $19 Reimbursement for services of affiliates (included in general and administrative expenses and other assets) 26 44 Included in "Reimbursement for Services of Affiliates" for the period ended March 31, 1998, is approximately $2,000 in leasing commissions paid to an affiliate of the Managing General Partner. On March 17, 1998, Insignia entered into an agreement to merge its national residential property management operations, and its controlling interest in IPT with Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The closing, which is anticipated to happen in the third quarter of 1998, is subject to customary conditions, including government approvals and the approval of Insignia's shareholders. If the closing occurs, AIMCO will then control the Managing General Partner of the Partnership. For the period January 1, 1997 to August 31, 1997, the Partnership insured its properties under a master policy through an agency affiliated with the Managing General Partner with an 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 which receives payments on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the Managing General Partner by virtue of the agent's obligations was not significant. 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 three months ended March 31, 1998 and 1997: Average Occupancy 1998 1997 Lake Forest Apartments Brandon, Mississippi (1) 89% 93% Poplar Square Shopping Center Medford, Oregon 93% 94% 1)Average occupancy at Lake Forest Apartments was down as of March 31, 1998, due to new apartment complexes in the Brandon, Mississippi area. The Partnership realized a net loss of approximately $8,000 for the three months ended March 31, 1998, as compared to a net loss of approximately $204,000 for the three months ended March 31, 1997. The decrease in the net loss is primarily due to the equity in loss of joint venture for the three months ended March 31, 1997. The Joint Venture sold its only investment property, Northtown Mall, during the second quarter of 1997 (see "Note B" of the financial statements included in Item 1). For the three months ended March 31, 1998, versus the three months ended March 31, 1997, loss before equity in loss of joint venture increased due to a decrease in rental income, partially offset by a decrease in total expenses. Rental income decreased during the three months ended March 31, 1998, as compared to the three months ended March 31, 1997, due to the decreases in occupancy at both Lake Forest Apartments and at Poplar Square Shopping Center. The decrease in total expenses is a result of decreases in both operating and general and administrative expenses. The decrease in operating expenses is due primarily to a decrease in administrative units expense at Lake Forest Apartments. The complex had ten administrative units during 1997 and are currently renting them to tenants in 1998. General and administrative expense decreased due to a decrease in expense reimbursements due to the sale of Northtown Mall. On May 12, 1997, the Joint Venture in which the Partnership owned a 33.3% interest sold Northtown Mall, its only investment property, to an affiliate of the lender (see Note B). The economic closing of the sale of Northtown Mall was as of April 1, 1997, at which time the joint venture was released from the mortgage note of approximately $51,326,000. For the three months ended March 31, 1997, the Partnership realized equity in loss of the joint venture of approximately $235,000. Included in operating expenses for the three months ended March 31, 1997, is approximately $15,000 of major repairs and maintenance, comprised of parking lot seal-coating and repairs. 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 March 31, 1998, the Partnership had cash and cash equivalents of approximately $1,198,000 compared to approximately $1,445,000 at March 31, 1997. Cash and cash equivalents increased approximately $117,000 and $74,000 for the periods ended March 31, 1998 and 1997, respectively. Net cash provided by operating activities increased as a result of the decrease in net loss, as discussed above. Net cash used in investing activities decreased due to a decrease in property improvements and replacements at Lake Forest Apartments. Net cash used in financing activities resulted from the payments on the mortgage note encumbering the Poplar Square Shopping Center. 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 approximately $3,744,000, which is secured by the Poplar Square Shopping Center investment property matures in November 2006, at which time the property will either be refinanced or sold. No cash distributions were made during the first quarter of 1998 or 1997. A cash distribution of approximately $250,000 was made during May 1998. Year 2000 The Partnership is dependent upon the Managing General Partner and Insignia for management and administrative services. Insignia has completed an assessment and will have to modify or replace portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and thereafter (the "Year 2000 Issue"). The project is estimated to be completed not later than December 31, 1998, which is prior to any anticipated impact on its operating systems. The Managing General Partner believes that with modifications to existing software and conversions to new software, the Year 2000 Issue will not pose significant operational problems for its computer systems. However, if such modifications and conversions are not made, or are not completed timely, the Year 2000 Issue could have a material impact on the operations of the Partnership. Other Certain items discussed in this quarterly report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act") and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Partnership to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements. Such forward-looking statements speak only as of the date of this quarterly report. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDING 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 complaint 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 its 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 as well as a recently announced agreement between Insignia and Apartment Investment and Management Company. The complaint seeks monetary damages and equitable relief, including judicial dissolution of the Partnership. The Managing General Partner was only recently served with the complaint which it believes to be without merit, and intends to vigorously defend the action. In May 1998, the Partnership and its Managing General Partner were named as respondents in a Petition in Los Angeles Superior Court. The Petition, brought by a limited partner of the Partnership, seeks performance by the Managing General Partner of certain alleged contractual obligations under the Partnership Agreement and compliance with certain alleged statutory requirements. Service on the Partnership was only recently accomplished, and the Managing General Partner has not yet replied to the Petition. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature. The Managing General Partner believes that all such pending or outstanding litigation will be resolved without a material adverse effect upon the business, financial condition or operations of the Partnership. 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 March 31, 1998. 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/Director By: /s/Robert D. Long Robert D. Long Vice President/CAO Date: May 12, 1998 EX-27 2
5 This schedule contains summary financial information extracted from Angeles Income Properties, Ltd. III 1998 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-31-1998 MAR-31-1998 1,198 0 192 0 0 0 14,498 (9,425) 6,983 0 3,744 0 0 0 2,880 6,983 0 455 0 0 463 0 90 0 0 0 0 0 0 (8) (.09) 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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