-----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, Kvoljr7c7KdnVcBABxXUL35WyuM2vSvBxtBoBU/Ywd2+3LWlL4HUXa1xJN+selP3 1pg/q0OiUt0kPbKopgdTHw== 0000720460-97-000007.txt : 19970514 0000720460-97-000007.hdr.sgml : 19970514 ACCESSION NUMBER: 0000720460-97-000007 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 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: 97602855 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 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 March 31, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 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 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, 1997 Assets Cash and cash equivalents: Unrestricted $ 1,445 Restricted--tenant security deposits 48 Accounts receivable, less allowance for doubtful accounts of $26 71 Escrows for taxes 113 Other assets 281 Restricted escrows 212 Investment properties Land $ 1,527 Buildings and related personal property 12,653 14,180 Less accumulated depreciation (8,747) 5,433 Total assets $ 7,603 Liabilities and Partners' Deficit Liabilities Accounts payable $ 14 Tenant security deposits 48 Accrued taxes 11 Other liabilities 53 Mortgage notes payable 3,787 Equity interest in net liabilities of joint venture, net of advances of $1,653 (Note B) 6,144 Partners' Deficit General partners $ (400) Limited partners (86,778 units issued and outstanding) (2,054) (2,454) Total liabilities and partners' deficit $ 7,603 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, 1997 1996 Revenues: Rental income $ 509 $ 400 Other income 14 13 Total revenues 523 413 Expenses: Operating 104 110 General and administrative 61 56 Maintenance 32 37 Depreciation 163 161 Interest 91 106 Property taxes 41 22 Bad debt expense -- 11 Total expenses 492 503 Income (loss) before equity in loss of joint venture 31 (90) Equity in loss of joint venture (Note B) (235) (241) Net loss $ (204) $ (331) Loss allocated to general partners (1%) $ (2) $ (3) Loss allocated to limited partners (99%) (202) (328) Net loss $ (204) $ (331) Net loss per limited partnership unit $ (2.33) $ (3.78) See Accompanying Notes to Consolidated Financial Statements c) ANGELES INCOME PROPERTIES, LTD. III CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT (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 loss for the three months ended March 31, 1997 -- (2) (202) (204) Partners' deficit at March 31, 1997 86,778 $ (400) $ (2,054) $ (2,454) 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, 1997 1996 Cash flows from operating activities: Net loss $ (204) $ (331) Adjustments to reconcile net loss to net cash provided by operating activities: Equity in loss of joint venture 235 241 Depreciation 163 161 Amortization of loan costs and leasing commissions 11 19 Bad debt expense -- 11 Change in accounts: Accounts receivable (60) 13 Escrows for taxes 1 (36) Other assets 11 6 Accounts payable (13) 1 Accrued taxes (30) (32) Other liabilities (7) (34) Net cash provided by operating activities 107 19 Cash flows from investing activities: Capital improvements (18) (25) Advances to Joint Venture -- (436) Deposits to restricted escrows (5) -- Net cash used in investing activities (23) (461) Cash flows used in financing activities: Payments on mortgage notes payable (10) (13) Net increase (decrease) in unrestricted cash and cash equivalents 74 (455) Unrestricted cash and cash equivalents at beginning of period 1,371 1,888 Unrestricted cash and cash equivalents at end of period $ 1,445 $ 1,433 Supplemental disclosure of cash flow information: Cash paid for interest $ 87 $ 95 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 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, 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 Angeles Income Properties, Ltd. III's (the "Partnership" or "Registrant") 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 condensed balance sheet information as of March 31, 1997, for Northtown is as follows: Northtown (in thousands) Assets Cash $ 973 Other assets 6,425 Investment property, net 26,187 Total Assets $ 33,585 Liabilities and Partners' Deficit Northtown (in thousands) Other liabilities $ 5,798 Mortgage note payable, in default 51,326 Partners' deficit (23,539) Total Liabilities and Partners' Deficit $ 33,585 The condensed profit and loss statements for the three months ended March 31, 1997 and 1996, for Northtown is as follows: Northtown (in thousands) 1997 1996 Revenue $ 2,696 $ 2,573 Costs and expenses (3,399) (3,293) Net loss $ (703) $ (720) The Partnership's equity in the losses of the joint venture was $235,000 and $241,000 for the three months ended March 31, 1997 and 1996, respectively. 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 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"). 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 three months ended March 31, 1997, and March 31, 1996, were paid or accrued: 1997 1996 (in thousands) Property management fees $19 $16 Reimbursement for services of affiliates 44 37 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 Effective April 1, 1997, the Northtown Mall property was sold to an affiliate of the lender for $43,000,000. Northtown received approximately $1,600,000 in proceeds as a result of the sale. The Partnership will recognize a gain on the sale of this investment property in the second quarter of 1997. 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, 1997 and 1996: Average Occupancy 1997 1996 Lake Forest Apartments Brandon, Mississippi (1) 93% 87% Poplar Square Shopping Center Medford, Oregon (2) 94% 97% 1) Average occupancy at Lake Forest Apartments was down as of March 31, 1996, due to new apartment complexes in the Brandon, Mississippi area. 2) Average occupancy at Poplar Square Shopping Center decreased due to two tenants that went out of business. However, leases with new tenants have been signed and both vacancies filled subsequent to March 31, 1997. The Partnership realized a net loss of $204,000 for the three months ended March 31, 1997, as compared to a net loss of $331,000 for the three months ended March 31, 1996. The decrease in the net loss for the three months ended March 31, 1997, as compared to the three months ended March 31, 1996, is primarily due to an increase in rental income. Rental income increased during the three months ended March 31, 1997, as compared to the three months ended March 31, 1996, due to the increase in occupancy at Lake Forest Apartments and an increase in average rental rates at Poplar Square Shopping Center. Partially offsetting the increase in revenue was an increase in property tax expense. Property tax expense increased due to a refund in January 1996 for an overpayment of 1995 property taxes relating to Poplar Square Shopping Center. At the same time, interest expense decreased due to refinancing of the mortgage debt secured by Poplar Square Shopping Center in November 1996. Other expense items remained stable for the comparative periods. Included in maintenance expense for the three months ended March 31, 1997, is $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, 1997, the Partnership had unrestricted cash and cash equivalents of $1,445,000 compared to $1,433,000 at March 31, 1996. Net cash provided by operating activities increased as a result of the decreased net loss. The Northtown Mall property has continued to experience cash shortfalls and has 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 below and at "Note D" regarding this investment property). During the three months ended March 31, 1996, the Partnership advanced $436,000 to Northtown. There were no advances to Northtown during the three months ended March 31, 1997. Other uses of cash for investing and financing purposes remained stable for the comparable periods. 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 $3,787,000, 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. At March 31, 1997, Northtown is in default on its non-recourse mortgage note payable due to allowing a mechanics lien to remain on its mortgaged property, which is in violation of its mortgage agreement. The Partnership incurred significant costs for tenant improvements and other expenditures for a new tenant during 1996. In November 1996, the lender and the Partnership disagreed on the funding for these costs, resulting in the Partnership refusing to authorize any further disbursements from its "Improvements and Leasing Commissions Reserve Escrow" to pay the remaining balance of approximately $1 million due to the contractors and other vendors. In January 1997, the contractors filed a mechanics lien against the property. In addition, the Partnership ceased servicing the mortgage debt secured by this property in March 1997. 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. In accordance with the Option, the lender gave notice to Northtown in November 1996, that it intended to exercise this Option. The lender and Northtown began the determination of the property's fair value as defined in the Option and in the loan agreement. The Managing General Partner believed that the appraisals would produce an option price that would be substantially less than the current outstanding debt. The Managing General Partner made a proposal to allow the lender to consummate its option to purchase the property. Subsequent to March 31, 1997, the Northtown Mall investment property was sold to an affiliate of the lender for $43,000,000. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Registrant is unaware of any pending or outstanding litigation that is not of a routine nature. The Managing General Partner of the Registrant 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, 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:May 13, 1997 EX-27 2
5 This schedule contains summary financial information extracted from Angeles Income Properties Ltd. III 1997 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-31-1997 MAR-31-1997 1,445 0 71 26 0 0 14,180 8,747 7,603 0 3,787 0 0 0 (2,454) 7,603 0 523 0 0 492 0 91 (204) 0 (204) 0 0 0 (204) (2.33) 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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