0000950168-95-000661.txt : 19950821 0000950168-95-000661.hdr.sgml : 19950821 ACCESSION NUMBER: 0000950168-95-000661 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANGELES INCOME PROPERTIES LTD III CENTRAL INDEX KEY: 0000720460 STANDARD INDUSTRIAL CLASSIFICATION: 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: 95561200 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 INSIGNIA 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 June 30, 1995 [ ] 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, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (Zip Code) Issuer's telephone number (803) 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) June 30, 1995
Assets Cash: Unrestricted $ 1,983,151 Restricted--tenant security deposits 48,837 Accounts receivable, less allowance for doubtful accounts of $20,782 35,093 Escrow deposits for taxes 47,622 Other assets 953,338 Investment properties: Land $ 1,527,024 Buildings and related personal property 12,413,773 13,940,797 Less accumulated depreciation (7,629,678) 6,311,119 $ 9,379,160 Liabilities and Partners' Deficit Liabilities Accounts payable $ 11,426 Tenant security deposits 49,761 Property taxes 19,273 Other 76,402 Mortgage note payable, in default 3,472,438 Equity interest in net liabilities of joint ventures 7,757,726 Partners' Deficit General partners $ (394,538) Limited partners capital (86,818 units issued and outstanding) (1,613,328) (2,007,866) $ 9,379,160
See Accompanying Notes to Financial Statements 1 b) ANGELES INCOME PROPERTIES, LTD. III STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, 1995 1994 1995 1994 Revenues: Rental income $ 374,899 $ 408,357 $ 772,513 $ 795,883 Other income 37,910 16,837 57,311 27,966 Total revenues 412,809 425,194 829,824 823,849 Expenses: Operating 50,014 59,415 113,754 115,906 General and administrative 77,898 176,767 152,215 349,873 Property management fees 16,325 16,408 31,296 35,337 Maintenance 36,776 42,992 71,476 76,458 Depreciation 160,159 159,846 319,380 319,150 Amortization 7,296 4,766 14,130 9,287 Interest 98,445 116,332 197,214 232,998 Property taxes 41,192 35,559 82,407 70,509 Tenant reimbursements (39,348) (23,567) (70,501) (74,624) Total expenses 448,757 588,518 911,371 1,134,894 Loss before equity in loss of joint ventures (35,948) (163,324) (81,547) (311,045) Equity in loss of joint ventures (Note B) (255,281) (267,437) (527,510) (691,168) Net loss $(291,229) $ (430,761) $(609,057) $(1,002,213) Net loss allocated to general partners (1%) $ (2,912) $ (4,308) $ (6,091) $ (10,022) Net loss allocated to limited partners (99%) (288,317) (426,453) (602,966) (992,191) $(291,229) $ (430,761) $(609,057) $(1,002,213) Net loss per limited partnership unit $ (3.32) $ (4.91) $ (6.95) $ (11.41)
See Accompanying Notes to Financial Statements 2 c) ANGELES INCOME PROPERTIES, LTD. III STATEMENT OF CHANGES IN PARTNERS' DEFICIT - June 30, 1995 (Unaudited)
Limited Partnership General Limited Units Partners Partners Total Original capital ontributions 86,920 $ 1,000 $43,460,000 $43,461,000 Partners' deficit at December 31, 1994 86,818 $(388,447) $(1,010,362) $(1,398,809) Net loss for the six months ended June 30, 1995 -- (6,091) (602,966) (609,057) Partners' deficit at June 30, 1995 86,818 $(394,538) $(1,613,328) $(2,007,866)
See Accompanying Notes to Financial Statements 3 d) ANGELES INCOME PROPERTIES, LTD. III STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, 1995 1994 Cash flows from operating activities: Net loss $ (609,057) $(1,002,213) Adjustments to reconcile net loss to net cash used in operating activities: Equity in loss of joint ventures 527,510 691,168 Depreciation 319,380 319,150 Amortization of loan costs and leasing commissions 19,802 14,959 Change in accounts: Restricted cash 1,613 1,960 Accounts receivable 9,615 (17,258) Escrows for taxes 50,361 (40,426) Other assets (396,198) 61,705 Accounts payable 1,205 (19,462) Tenant security deposit liabilities (1,609) (1,844) Property taxes (38,401) 3,045 Other liabilities 18,526 (33,385) Net cash used in operating activities (97,253) (22,601) Cash flows from investing activities: Capital improvements (82,157) (25,349) Distributions from joint venture 965,731 -- Net cash provided by (used in) investing activities 883,574 (25,349)
See Accompanying Notes to Financial Statements 4 ANGELES INCOME PROPERTIES, LTD. III STATEMENTS OF CASH FLOWS (Continued) (Unaudited)
Six Months Ended June 30, 1995 1994 Cash flows used in financing activities: Payments on mortgage notes payable $ (23,773) $ (24,244) Net increase (decrease) in cash 762,548 (72,194) Cash at beginning of period 1,220,603 1,233,009 Cash at end of period $1,983,151 $1,160,815 Supplemental disclosure of cash flow information: Cash paid for interest $ 191,542 $ 227,548
See Accompanying Notes to Financial Statements 5 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 the Managing General Partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 1995, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1995. 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, 1994. Certain reclassifications have been made to the 1994 information to conform to the 1995 presentation. Note B - Investment in Joint Ventures The Partnership has a 33.3% investment in Northtown Mall Partners ("Northtown"), a 50% investment in Moraine West Carrollton Joint Venture ("Moraine") and a 57% investment in Burlington Outlet Mall Joint Venture ("Burlington"). The investments in Northtown and Burlington are included in the "Equity interest in net liabilities of joint ventures". A purchase agreement was executed on May 8, 1994 for the sale of all of the Moraine properties to an affiliate of the third party managing agent. The sale closed on July 21, 1994. Moraine received a net amount of approximately $2,199,000 in cash after satisfying all indebtedness. Moraine realized a $140,553 gain on the transaction of which the Partnership's pro rata share was $70,277. During the six month period ended June 30, 1995 all of Moraine's remaining cash was distributed. Also during this period, Moraine earned interest income and incurred a minimal amount of expense. 6 Note B - Investment in Joint Ventures (continued) Condensed balance sheet information as of June 30, 1995 for the joint ventures is as follows:
Burlington Northtown Assets Cash $ 101,440 $ 446,599 Other assets 144,769 6,408,157 Investment properties, net 4,521,516 27,600,306 Total $4,767,725 $34,455,062
Liabilities and Partners' Deficit
Burlington Northtown Other liabilities $ 330,678 $ 2,158,921 Notes payable 6,700,281 51,893,502 Partners' deficit (2,263,234) (19,597,361) Total $ 4,767,725 $ 34,455,062
The condensed profit and loss statements for the three and six months ended June 30, 1995 and 1994 for the joint ventures are as follows:
Three Months Ended June 30, 1995 Burlington Moraine Northtown Revenue $ 105,140 $ 3 $ 1,554,709 Costs and expenses (163,594) (2,211,967) Net (loss) income $ (58,454) $ 3 $ (657,258)
Three Months Ended June 30, 1994 Burlington Moraine Northtown Revenue $ 142,862 $ 467,972 $ 1,742,969 Costs and expenses (329,246) (470,429) (2,172,567) Net loss $ (186,384) $ (2,457) $ (429,598)
7 Note B - Investment in Joint Ventures (continued)
Six Months Ended June 30, 1995 Burlington Moraine Northtown Revenue $ 236,959 $12,447 $ 3,087,161 Costs and expenses (425,315) (625) (4,348,010) Net (loss) income $ (188,356) $11,822 $(1,260,849)
Six Months Ended June 30, 1994 Burlington Moraine Northtown Revenue $ 320,050 $ 888,697 $ 3,145,453 Costs and expenses (729,737) (931,651) (4,397,949) Net loss $ (409,687) $ (42,954) $(1,252,496)
The Partnership's equity in the losses of the joint ventures was $527,510 and $691,168 for the six months ended June 30, 1995 and 1994, respectively. The Partnership accounts for its 33.3% investment in Northtown, its 57% investment in Burlington and its 50% investment in Moraine using the equity method of accounting. Under the equity method, the Partnership records its equity interest in earnings or losses of the joint ventures; however, the investment in the joint ventures 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 ventures. 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 payments were made to the Managing General Partner and affiliates in 1995 and in 1994:
1995 1994 Property management fees $ 31,296 $ 35,337 Reimbursement for services of affiliates 120,625 217,974 Marketing services 901 --
8 Note C - Transactions with Affiliated Parties 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. 9 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 six months ended June 30, 1995 and 1994:
Average Occupancy Property 1995 1994 Lake Forest Apartments Brandon, Mississippi 96% 92% Poplar Square Shopping Center Medford, Oregon 97% 99%
The Partnership realized a net loss of $609,057 for the six months ended June 30, 1995, as compared to a net loss of $1,002,213 for the six months ended June 30, 1994. The Partnership realized a net loss of $291,229 for the three months ended June 30, 1995, as compared to a net loss of $430,761 for the three months ended June 30, 1994. The decrease in the net loss for the three and six months ended June 30, 1995, as compared to the three and six months ended June 30, 1994, is primarily due to a decrease in general and administrative expenses and a decrease in the equity in loss of joint ventures (see discussion below). The Partnership realized a decrease in rental income during the three and six months ended June 30, 1995, as compared to the three and six months ended June 30, 1994, as a result of decrease in rental revenue at Lake Forest Apartments and Poplar Square Shopping Center. The decrease in revenue at Lake Forest is due to the Partnership's inability to rent seven units due to foundation problems with those units. In addition, Poplar Square lost $7,500 per month in rental revenue due to the sale of a parcel of land in June 1994. This decrease in revenue is partially offset by an increase in occupancy at Lake Forest. This decrease is offset by the increase in other income during the three and six months ended June 30, 1995, as compared to the three and six months ended June 30, 1994, as a result of increased lease cancellation fees, deposits forfeited and other miscellaneous fees and collections. The decrease in general and administrative expenses during the three and six months ended June 30, 1995, as compared to the three and six months ended June 30, 1994, is primarily related to decreases in asset management, partnership accounting and investor services reimbursements. The decrease in interest expense for the three and six months ended June 30, 1995, as compared to the three and six months ended June 30, 1994, is due to a decrease in the outstanding mortgage note payable. The decrease in the outstanding mortgage balance resulted from the proceeds from the sale of land at Poplar Square Shopping Center being applied against the outstanding mortgage balance. In addition to a decrease in expenses, the Partnership also experienced a decrease in overall losses of its joint venture properties. The decrease in the equity in loss of joint ventures can be attributed to decreased losses relating to Burlington and a change from a net loss of $42,954 for Moraine for the first six months of 1994 versus net income of $11,822 for the first six months of 1995. Revenue decreased at Burlington for the six months ended June 30, 1995, versus the six months ended June 30, 1994, as a result of decreased occupancy. This decrease in revenue was offset by a large decrease in expenses primarily caused by decreased occupancy and a decrease in interest expense as a result of the loan modification agreement (see discussion below). 10 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 June 30, 1995, the Partnership had unrestricted cash of $1,983,151 versus $1,160,815 at June 30, 1994. Net cash used in operating activities increased as a result of an increase in other assets. Net cash provided by investing activities increased as a result of cash distributions received from Moraine. Net cash used in financing activities remained stable. 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 $3,472,438, which is secured by the Poplar Square Shopping Center investment property, matured in June 1995. The Managing General Partner is in negotiations to refinance this indebtedness. Future cash distributions will depend on the levels of net cash generated from operations, property sales and the availability of cash reserves. No cash distributions were recorded in 1994 or during the six months ended June 30, 1995. On March 15, 1991 ("Effective Date"), 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 any time during any of the thirty-day periods occurring immediately prior to the third, fifth, seventh, ninth, eleventh, thirteenth and fifteenth anniversaries of the Effective Date. The first date on which the Option could have been exercised was March 15, 1994. On February 22, 1994, the lender gave notice to the Partnership that it intended to exercise this Option. The lender offered $58,000,000 based on an annual appraisal. Northtown determined that the fair value as determined in accordance with the loan documents is $62,000,000. Northtown is negotiating with the lender to retain ownership of the property in order to protect the Partnership's equity in the property. However, the Managing General Partner cannot presently determine the outcome of such negotiations. The mortgage note payable secured by the Burlington investment property matured on July 1, 1994. Burlington has obtained new financing terms which consolidate all principal, accrued interest and late charges outstanding on July 1, 1994, into a new loan amount which will accrue interest at the greater of 2% or net cash flow as defined in the loan extension agreement. The loan maturity date had been extended until April 1, 1995. The mortgage holder has initiated foreclosure proceedings against this property, however, the mortgage holder has issued a stay of these proceedings in order to give the Managing General Partner an opportunity to sell the property. The Managing General Partner has entered into contract negotiations to sell the property. The outcome of such negotiations can not presently be determined. 11 A purchase agreement was executed on May 8, 1994 for the sale of all of the Moraine properties to an affiliate of the third party managing agent. The sale closed on July 21, 1994. Moraine received a net amount of approximately $2,199,000 in cash after satisfying all indebtedness. Moraine realized a $140,553 gain on the transaction of which the Partnership's pro rata share was $70,277. 12 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 Registrant. Angeles caused the Partnership to make deposits to the account ostensibly to fund the payment of certain obligations of the Partnership. Angeles further caused checks on such account to be written to or on behalf of certain other partnerships. However, of these total deposits, at least $42,213 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 has 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 anticipates that it will not pursue its Proof of Claim. The Registrant is unaware of any other 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 - None. 13 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: Carroll D. Vinson President By: Robert D. Long, Jr. Controller and Principal Accounting Officer Date: August 10, 1995 14 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 Controller and Principal Accounting Officer Date: August 10, 1995 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Angeles Income Properties, Ltd. III's 1995 second quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 1 6-MOS DEC-31-1995 JUN-30-1995 1,983,151 0 55,875 20,782 0 2,114,703 13,940,979 (7,629,678) 9,379,160 80,460 3,472,438 0 0 0 (2,007,866) 9,379,160 0 829,824 0 0 911,371 0 197,214 (609,057) 0 (609,057) 0 0 0 (609,057) (6.95) 0