-----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, KYR4fjsyrQtLPgB+eqxNWbOcKpn9KcaKmLVdj9pQP4h5CkVe+2U6MMnexvi/LJRI K8Vdfx+GiuGMXnMo9WvaqA== 0000720460-96-000014.txt : 19961113 0000720460-96-000014.hdr.sgml : 19961113 ACCESSION NUMBER: 0000720460-96-000014 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 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: 1934 Act SEC FILE NUMBER: 000-13192 FILM NUMBER: 96659625 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 REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 QUARTERLY OR TRANSITIONAL REPORT (As last amended by 34-32231, eff. 6/3/93.) 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, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 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) (Zip Code) Issuer's telephone number (864) 239-1000 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 BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 1996 Assets Cash and cash equivalents: Unrestricted $ 1,141 Restricted--tenant security deposits 49 Accounts receivable, net of allowance of $49 25 Escrow for taxes 225 Other assets 170 Investment properties: Land $ 1,527 Buildings and related personal property 12,605 14,132 Less accumulated depreciation (8,418) 5,714 $ 7,324 Liabilities and Partners' Deficit Liabilities Accounts payable $ 11 Tenant security deposits 49 Property taxes 60 Other 85 Mortgage note payable 3,407 Equity interest in net liabilities of joint ventures, net of advances of $1,653 (Note B) 5,881 Partners' Deficit General partners $ (396) Limited partners (86,818 units issued and outstanding) (1,773) (2,169) $ 7,324 See Accompanying Notes to Financial Statements b) ANGELES INCOME PROPERTIES LTD. III STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data)
Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 Revenues: Rental income $ 411 $ 468 $ 1,262 $ 1,311 Other income 33 29 79 86 Total revenues 444 497 1,341 1,397 Expenses: Operating 100 121 313 280 General and administrative 60 71 183 224 Maintenance 46 65 126 136 Depreciation 165 164 488 483 Interest 111 109 326 306 Bad debt expense 7 -- 30 -- Property taxes 42 43 105 125 Total expenses 531 573 1,571 1,554 Equity in loss of joint ventures (238) (443) (764) (971) Net loss $ (325) $ (519) $ (994) $ (1,128) Net loss allocated to general partners (1%) $ (3) $ (5) $ (10) $ (11) Net loss allocated to limited partners (99%) (322) (514) (984) (1,117) Net loss $ (325) $ (519) $ (994) $ (1,128) Net loss per limited partnership unit $ (3.71) $ (5.91) $(11.33) $ (12.86) See Accompanying Notes to Financial Statements
c) ANGELES INCOME PROPERTIES LTD. III STATEMENT OF CHANGES IN PARTNERS' DEFICIT (in thousands, except unit data) (Unaudited)
Limited Partnership General Limited Units Partners Partners Total Original capital contributions 86,920 $ 1 $ 43,460 $ 43,461 Partners' deficit at December 31, 1995 86,818 $ (386) $ (789) $ (1,175) Net loss for the nine months ended September 30, 1996 (10) (984) (994) Partners' deficit at September 30, 1996 86,818 $ (396) $ (1,773) $ (2,169) See Accompanying Notes to Financial Statements
d) ANGELES INCOME PROPERTIES LTD. III STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) Nine Months Ended September 30 1996 1995 Cash flows from operating activities: Net loss $ (994) $ (1,128) Adjustments to reconcile net loss to net cash provided by operating activities: Equity in loss of joint ventures 764 971 Depreciation 488 483 Amortization of loan costs and leasing commissions 68 42 Bad debt expense 30 -- Change in accounts: Restricted cash (2) 3 Accounts receivable (12) (30) Escrows for taxes (107) 15 Other assets 3 (59) Accounts payable -- 25 Tenant security deposit liabilities 2 (4) Property taxes 16 4 Other liabilities (8) 34 Net cash provided by operating activities 248 356 Cash flows from investing activities: Property improvements and replacements (140) (111) Advances to joint venture (721) (378) Distributions from joint venture -- 965 Net cash (used in) provided by investing activities (861) 476 Cash flows used in financing activities Payments on mortgage notes payable (40) (36) Loan costs (94) -- Net cash used in financing activities (134) (36) Net (decrease) increase in cash (747) 796 Cash and cash equivalents at beginning of period 1,888 1,221 Cash and cash equivalents at end of period $ 1,141 $ 2,017 Supplemental disclosure of cash flow information Cash paid for interest $ 283 $ 287 See Accompanying Notes to Financial Statements e) ANGELES INCOME PROPERTIES LTD. III NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited financial statements 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 months ended September 30, 1996, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1996. For further information, refer to the financial statements and footnotes thereto included in Angeles Income Properties, Ltd. III's (the "Partnership") annual report on Form 10-KSB for the fiscal year ended December 31, 1995. Certain reclassifications have been made to the 1995 information to conform to the 1996 presentation. NOTE B - INVESTMENT IN JOINT VENTURES 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 Partnership had a 57% investment in Burlington Outlet Mall Joint Venture ("Burlington") and a 50% investment in Moraine West Carrollton Joint Venture ("Moraine"). The Partnership no longer has an investment in these joint ventures due to the foreclosure of Burlington's investment property in 1995 and the sale of Moraine's investment property in 1994. Condensed balance sheet information as of September 30, 1996, for Northtown is as follows: Northtown (in thousands) Assets Cash $ 662 Other assets 6,586 Investment properties, net 25,815 Total $33,063 Liabilities and Partners' Deficit Northtown (in thousands) Other liabilities $ 4,339 Note payable 51,476 Partners' deficit (22,752) Total $ 33,063 The condensed profit and loss statements for the three and nine months ended September 30, 1996 and 1995, for the joint ventures are as follows: Three Months Ended September 30, 1996 Northtown Burlington (in thousands) (in thousands) Revenues $ 2,564 $ -- Costs and expenses (3,277) (11) Net loss $ (713) $ (11) Three Months Ended September 30, 1995 Northtown Burlington (in thousands) (in thousands) Revenues $ 2,547 $ 38 Costs and expenses (3,373) (328) Net loss $ (826) $ (290) Nine Months Ended September 30, 1996 Northtown Burlington (in thousands) (in thousands) Revenues $ 7,554 $ 11 Costs and expenses (9,841) (11) Net loss $(2,287) $ -- NOTE B - INVESTMENT IN JOINT VENTURES (CONTINUED) Nine Months Ended September 30, 1995 Northtown Moraine Burlington Revenues $ 7,744 $ 13 $ 275 Costs and expenses (9,831) (1) (753) Net (loss) income $(2,087) $ 12 $ (478) 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 earnings or 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. The increased loss at Northtown is attributable to a decrease in rental income and an increase in insurance and real estate taxes. 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 amounts owed to the Managing General Partner and affiliates during the nine months ended September 30, 1996 and 1995 were paid or accrued: 1996 1995 (in thousands) Property management fees $ 47 $ 51 Reimbursement for services of affiliates 139 172 The Partnership insures 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 current year's master policy. The current agent assumed the financial obligations to the affiliate of the Managing General Partner who 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 is not significant. NOTE D - SUBSEQUENT EVENT - MORTGAGE NOTE REFINANCING On October 31, 1996, the Managing General Partner refinanced the mortgage debt secured by Poplar Square Shopping Center. The Partnership paid off debt and accrued interest of approximately $3,435,000 at closing and paid closing costs and funded tax and insurance escrows and repair and replacement reserves with $3,800,000 of proceeds from the new debt which matures on November 1, 2006. The new debt payments are based on a 25 year amortization. The loan carries an interest rate of 9.2%. Title to Poplar Square Shopping Center was transferred from the Partnership to Poplar Square AIP III, L.P. as a result of the refinancing. The Partnership is the 99% limited partner and Poplar Square GP Limited Partnership is the 1% general partner in Poplar Square AIP III, L.P. 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, 1996 and 1995: Average Occupancy Property 1996 1995 Lake Forest Apartments Brandon, Mississippi 92% 95% Poplar Square Shopping Center Medford, Oregon 97% 97% The decrease in occupancy at Lake Forest Apartments is due to competition from new apartment complexes in the Brandon, Mississippi area. This property has some physical needs (wood replacement and painting) and the Managing General Partner anticipates that occupancy will improve once the physical deficiencies are addressed. The Partnership recorded a net loss of approximately $994,000 for the nine months ended September 30, 1996, as compared to a net loss of approximately $1,128,000 for the nine months ended September 30, 1995. The Partnership recorded a net loss of approximately $325,000 for the three months ended September 30, 1996, as compared to a net loss of approximately $519,000 for the three months ended September 30, 1995. The decrease in the net loss for the three and nine months ended September 30, 1996, as compared to the three and nine months ended September 30, 1995, is primarily due to a decrease in equity in loss of joint ventures. The decrease in equity in loss of joint venture is primarily attributable to the Partnership's share of Burlington's loss in 1995. Operating expenses increased primarily due to the hiring of two additional maintenance staff to make improvements to vacant units at Lake Forest Apartments. The decrease in general and administrative expenses is primarily related to decreases in cost reimbursements for asset management, partnership accounting and investor services. Bad debt expenses increased as a result of an increase in the reserve required based on a review of the tenant's accounts receivable at the Poplar Square Shopping Center. The decrease in property tax expense relates to a refund for an overpayment of property taxes on Poplar Square Shopping Center in the prior year. 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, 1996, the Partnership had unrestricted cash of approximately $1,141,000 versus approximately $2,017,000 at September 30, 1995. Net cash provided by operating activities decreased primarily as a result of an increase in escrows for taxes. Net cash used in investing activities increased due to an increase in advances to Northtown in 1996 and a non-recurring distribution received from Moraine in 1995. The Partnership advanced money to Northtown during the nine months ended September 30, 1996, to pay for tenant improvements, supervisory fees and debt service. The increase in net cash used in financing activities is due to the loan costs incurred in 1996 in an effort to refinance the mortgage indebtedness secured by the Poplar Square Shopping Center. On October 31, 1996, the Managing General Partner refinanced the mortgage debt secured by Poplar Square Shopping Center. The Partnership paid off debt, and accrued interest, of approximately $3,435,000 at closing and paid closing costs and funded tax and insurance escrows and repair and replacement reserves with the proceeds from the $3,800,000 new debt which matures on November 1, 2006. The new debt payments are based on a 25 year amortization. The loan carries an interest rate of 9.2%. Title to Poplar Square Shopping Center was transferred from the Partnership to Poplar Square AIP III, L.P. as a result of the refinancing. The Partnership is the 99% limited partner and Angeles Income Properties Ltd. III is the 1% general partner in Poplar Square AIP III, L.P. 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 new mortgage indebtedness, which resulted from the October 31, 1996 refinance, carries a 10 year term. Future cash distributions will depend on the levels of net cash generated from operations, property sales and the availability of cash reserves. On March 15, 1991, Northtown and the holder of the Northtown Mall mortgage note payable entered into an Option Agreement (-Option-) whereby such lender has the right and an option to purchase the Northtown Mall property on the terms and conditions as set forth in the Option. The purchase price of the property, as set forth in the Option, is defined as the fair market value of the property. Such Option can be exercised by written notice by the lender at specified dates. The lender has indicated that it may exercise the Option. If the lender does exercise the Option, the Managing General partner does not believe the sale of the property will occur until 1997. Currently, it is believed that the fair market value of the property will be less than the underlying debt that secures the property. If the Option is exercised, the Partnership will write-off its equity interest in net liabilities of joint venture which would result in the recording of a significant gain to the Partnership. Also, the Managing General Partner is currently negotiating with a third party as a possible source of an equity infusion, if the current lender does not exercise their option to acquire Northtown. The Partnership does not anticipate making significant advances to Northtown in the future. On October 30, 1995, the Partnership lost Burlington Outlet Mall located in Burlington, NC, through a foreclosure by an unaffiliated mortgage holder. The property was not generating sufficient cash flow to meet debt service requirements. The non-payment of principal and interest constituted a default under the terms of the mortgage agreement and allowed the holder of the mortgage agreement to foreclose on the property. The Partnership deemed it to be in the best interest of the Partnership not to contest the foreclosure action. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Angeles Corporation ("Angeles"), either directly or through an affiliate, maintained a central disbursement account (the "account") for the properties and partnerships managed by Angeles and its affiliates, including the Partnership. Angeles caused the Partnership to make deposits to the account ostensibly to fund the payment of certain obligations of the Partnership. However, of these total deposits, at least $42,000 deposited by or on behalf of the Partnership was used for purposes other than satisfying the liabilities of the Partnership. Accordingly, the Partnership filed a Proof of Claim in the Angeles bankruptcy proceedings for such amount. However, subsequently the Managing General Partner of the Partnership determined that the cost involved to pursue such claim would likely exceed any amount received if in fact such claim were to be resolved in favor of the Partnership. Therefore, the Partnership withdrew this claim on August 9, 1995. The Managing General Partner 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. b) Reports on Form 8-K None filed during the quarter ended September 30, 1996. 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 12, 1996 EX-27 2
5 This schedule contains summary financial information extracted from Angeles Income Properties Ltd. III 1996 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-31-1996 SEP-30-1996 1,141 0 25 0 0 0 14,132 (8,418) 7,324 0 3,407 0 0 0 2,169 7,324 0 1,341 0 0 1,571 0 326 (994) 0 (994) 0 0 0 (994) (11.33) 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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