-----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, WeURYW82h/6gxE233Dk7CXI1ZZlgTC6QeY4v8YAbhYFtLYVvSRV3BfKyoVGEv7C4 lcHvU2x6PeMA+59YG7VQGw== 0000727745-97-000004.txt : 19970423 0000727745-97-000004.hdr.sgml : 19970423 ACCESSION NUMBER: 0000727745-97-000004 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970422 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LDP III CENTRAL INDEX KEY: 0000727745 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 942911983 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-13559 FILM NUMBER: 97584847 BUSINESS ADDRESS: STREET 1: P O BOX 130 CITY: CARBONDALE STATE: CO ZIP: 81623 BUSINESS PHONE: 3039638007 MAIL ADDRESS: STREET 1: PO BOX 130 CITY: CARBONDALE STATE: CO ZIP: 81623 FORMER COMPANY: FORMER CONFORMED NAME: LANDSING DIVERSIFIED PROPERTIES III DATE OF NAME CHANGE: 19910331 10-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 1996 [ ] Transition Report Pursuant to Section 13 or 15(a) of the Securities Exchange Act of 1934 Commission File Number 0-13559 LDP-III (Exact name of registrant as specified in its charter) California 94-2911983 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) P. O. Box 130, Carbondale, CO 81623 (Address of principal executive offices) (970) 963-8007 (Partnership's telephone number, including area Code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interest (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10- K or any amendment to this Form 10-K [ ]. State the aggregate market value of the voting stock held by non-affiliates of the registrant. Inapplicable DOCUMENTS INCORPORATED BY REFERENCE. None 1. LDP-III FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 TABLE OF CONTENTS Form 10-K Item No. Name of Item Part I Item 1. Business Item 2. Properties Item 3. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders Part II Item 5. Market for Partnership's Common Equity and Related Partnership Matters Item 6. Selected Financial Data Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Part III Item 10. Directors and Executive Officers of the Partnership Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management Item 13. Certain Relationships and Related Transactions Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K Signatures Index to Financial Statements and Supplemental Financial Statement Schedules PART I ITEM 1. BUSINESS LDP-III (the "Partnership") is a limited partnership which was organized under the Uniform Limited Partnership Act of the State of California on August 30, 1983. The Partnership was organized as a non-specified property limited partnership to acquire a diversified portfolio of real properties, including commercial, residential and agricultural properties, located primarily within the western portion of the United States. The General Partner of the Partnership is Landsing Partners-III (the "General Partner") , a partnership having two General Partners, Landsing Equities Corporation, a California corporation which is the managing partner of the General Partner, and Partners '84, a California limited partnership. The Partnership's business consists of a single segment - equity investments in leveraged income-producing real property. For a schedule of the Partnership's revenue, net loss and total assets for its last fiscal year, see Item 6, Selected Financial Data, below. The Partnership will not be engaged in the production of goods or the rendering of services. The Partnership had an investment in a wholly-owned subsidiary, LDP-III Realty Service Corporation, which owned one property, the 391 Forbes Building in South San Francisco, California, until it was sold in August, 1996. For financial reporting purposes, the Partnership's investment in LDP-III Realty Service Corporation was presented on a consolidated basis. The Partnership requires cash reserves to finance property operations. Cash reserves totaled $383,000 at December 31, 1996. Funds not invested in real property are placed in temporary high-grade investments which can be readily liquidated. Results of the Partnership's operations depend primarily upon the successful operation of its existing investments. The yields (return on capital) available on equity ownership of investments in income-producing and other types of real estate investments depend to a large extent upon the ability to lease or rent the property, the geographic location of the property, competition and other factors, none of which can be predicted with any certainty. See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, for a more specific discussion of the impact of the foregoing factors on the Partnership's financial condition, operations and liquidity. The Partnership has not engaged in research activities relating to the development or improvement of products or services. The Partnership has not made, nor does it anticipate making, during the remainder of its current fiscal year or during its succeeding fiscal year, any capital expenditures for environmental control facilities, nor does it expect any material effects upon capital expenditures, earnings or competitive position resulting from compliance with present Federal, state or local environmental control provisions. The Partnership has no employees. All of the Partnership's operations are located in the United States. The Partnership is currently in the process of selling its properties. One property was sold in 1996. One property, the 1201 Cadillac property, has been listed for sale. The other property, Jefferson Office Building, will be placed on the market in 1998. ITEM 2. PROPERTIES A description of the income-producing properties which the Partnership owned at December 31, 1996 is as follows:
Financial Occupancy Physical Average Net For The Occupancy Effective Rentable Year Ended At Rental Name & Location Type Sq. Ft. 12/31/96 12/31/96 Rate Jefferson Place Office Building 54,344 94% 89% $11.35 Boise, Idaho 1201 Cadillac Court Industrial 51,450 100% 100% $ 8.92 Milpitas, California Expressed as a percentage, it compares the actual dollar amount of rent received with the dollar amount of rent which would be received if the property were fully leased. Physical occupancy denotes the percentage of net rentable square footage leased as of a certain date. Represents the average effective rental rates, per square foot, for the year ended December 31, 1996.
Each of the Partnership's properties is subject to substantial encumbrances. Reference is made to Schedule XI to the Financial Statements filed as part of this annual report for information regarding such encumbrances. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter has been submitted to a vote of security holders, through solicitation of proxies or otherwise, during fourth quarter 1996. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED PARTNERSHIP MATTERS There is no established public trading market for the Units of Limited Partnership interest of the Partnership and there are substantial restrictions on the transferability of such Units imposed by Federal and state securities laws and by the Limited Partnership Agreement, as amended. The approximate number of record holders of Units of the Partnership as of January 1, 1997, is 4,070. The limited partners of the Partnership (the "Limited Partners") are entitled to certain distributions under the Amended and Restated Certificate and Agreement of Limited Partnership of the Partnership. ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per Unit amounts) .............For the years ended December 31........... 1996 1995 1994 1993 1992 Rental Revenue $ 1,210 $ 1,339 $ 2,101 $ 2,934 $ 2,907 Agricultural Revenue 0 0 0 369 1,599 Net Loss (193) (334) (259) (173) (1,108) Net Loss Per Unit (5) (9) (7) (5) (30) Total Assets 6,954 8,636 9,286 17,451 23,280 Long-term Obligations 6,891 7,871 8,167 15,218 20,201 Cash Distributions Per Unit 15 0 14 0 0 __________ Financial data of the Partnership for 1996 is not comparable to that of 1995, 1994 or prior periods because the Partnership did not own the same number of properties throughout these periods. For a more specific discussion of the impact of the foregoing factor on the comparability of the Partnership's financial information, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. Based on a weighted average of outstanding Units in 1996, 1995, 1994, 1993 and 1992.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION LDP-III is a California limited partnership formed in August 1983. The Partnership's business consists of a single segment - equity investments in leveraged income-producing real estate. The Partnership's current portfolio consists of fee title ownership of two properties located in two geographic areas. The Partnership's property investments are: Jefferson Place Office Building, Boise, Idaho, and 1201 Cadillac Court Building, Milpitas, California. LIQUIDITY AND CAPITAL RESOURCES As of December 31, 1996 the Partnership had cash and short-term investments totaling approximately $383,000. Cash reserves not needed for current operations are placed in temporary, high-grade investments which can be readily liquidated. During 1994, the Partnership sold the Silverado Apartments and the Montbello Green Business Park. Gross proceeds were $8,500,000 for Silverado Apartments and $260,000 for Montbello Green Business Park, resulting in a gain of $364,000 and $37,000, respectively. Cash proceeds from these two sales totaled $1,463,000 which was used to fund a Partner Distribution, Capital Expenditures and Partnership Operations. In August 1996, the Partnership sold its interest in the 391 Forbes Building in South San Francisco, California. Gross proceeds were $1,730,000, which resulted in a gain of $223,000 and cash proceeds of $660,000. Proceeds were used to fund a Partnership distribution. The Partnership has invested $298,000 in short-term federally insured certificates of deposit which mature on a date in excess of 90 days or 3 months from the date of purchase. Due to this characteristic, these deposits are classified as "short-term investments" rather than as "cash and cash equivalents." During 1996, the Partnership experienced a net decrease in cash and short- term investments of $27,000. Sources of cash during the year were from regular Partnership Operations and the sale of 391 Forbes. Cash uses during 1996 were: $51,000 for property capital expenditures and construction, $45,000 for principal payments on notes payable, and $556,000 for Partnership distribution. As of December 31, 1996, cash plus short-term investments totaled $383,000 versus a balance of $410,000 at December 31, 1995. The Partnership's most significant current uses of cash reserves are for principal payments on outstanding debt balance and capital expenditures needed to maintain properties and current occupancy rates. In prior years, the Boise and San Francisco Bay Area marketplaces, where certain of the Partnership's real estate assets are located experienced a significant imbalance between supply and demand. Historic high building activity and declining economic conditions in these markets produced high vacancies in industrial and commercial properties. As a result, market rate rents declined. Due to these conditions the Partnership suffered recurring losses and negative cash flows from operations. Market conditions have improved in 1996 and are expected to continue to improve in 1997. The Partnership made a cash distribution to its limited partners of $15.00 per unit during 1996. All future sale proceeds will be used to increase reserves, reduce indebtedness and/or make distributions to investors. The Partnership is currently in the process of selling its properties. One property was sold in 1996. One property, the 1201 Cadillac property, has been listed for sale. The other property, the Jefferson Place Office Building, will be placed on the market in 1998. Management believes that the cash reserves plus proceeds from operations and property sales will be sufficient to meet the viable operating costs of the partnership as it continues through this liquidation phase. RESULTS OF OPERATIONS Overall, rental income decreased 9% in 1996 versus 1995. 1995's revenue decreased 41% from the 1994 level. The 1996 decrease was due to the sale of 391 Forbes in August 1996. The 1995 decrease was primarily due to selling the Silverado Apartment complex, in July 1994. Interest income in 1996 decreased 22% from that in 1995. This was the result of lower average cash balances held by the Partnership. Revenues for the two properties owned continuously for the three year period increased 3% from 1995 to 1996, and 8% from 1994 to 1995. Overall, operating expenses on rental properties increased 19% in 1996 versus 1995, or $78,000. In 1995, operating expenses decreased 61% versus 1994. The 1996 increase was caused by an increase in maintenance expenses, property taxes and other miscellaneous expenses. Interest expense decreased 76% in 1996 versus 1995. The decrease was caused by the reduced amount of property indebtedness due to the disposition of properties in 1996. Interest expense in 1995 decreased 45% versus 1994. This decrease was also the result of disposition of properties. The partnership indebtedness is currently all at fixed rates. Thus, the partnership will not be impacted by the current changes in the interest rate environment. Depreciation and amortization expense decreased 17% and 33% from 1995 to 1996, and 1994 to 1995 respectively. The decrease in depreciation expense was due to the disposition of properties during this period of time. General and administrative expenses decreased 7% in 1996 versus 1995. 1995's general and administrative expenses decreased 17% from 1994. The decrease in 1996 was due to management's continuing efforts to keep general and administrative expense under control. The General Partner expects costs to stabilize during 1997 relative to 1996. Net loss of the Partnership before gain from sale of real estate or ordinary expenses increased 24% in 1996 versus 1995. This increase is primarily the result of increased operating expenses. Loss of the Partnership in 1995 decreased 67% versus 1994. This decrease was primarily the result of disposition of properties which were operating at a net loss, and improvement in property operations of the properties which continue to be held by the Partnership. The result of operations for 1996 are not comparable to 1995 or 1994. Variables between the years due to the number of properties operated and the number of properties sold, can make comparison of operating results misleading. Comparison of the operations of the two properties operated continuously through 1996, 1995 and 1994 is provided below:
1996 1995 1994 Rental Revenue $ 1,076 $ 1,095 $ 1,100 Rental Operating Expense 436 344 436 Net Operating Income $ 640 $ 751 $ 664 Interest Expense $ 608 $ 611 $ 917
Rental revenues from 1994 to 1995 decreased by less than 1%. Rental Revenues decreased 1% for 1996 compared to 1995. Rental operating expense on continuously owned properties increased 26% from 1995 to 1996 due to higher maintenance and upkeep at Jefferson Place and higher property taxes at 1201 Cadillac Court. Operating expense decreased 9% from 1994 to 1995. This decrease was the result Of decreases in insurance costs and general and administrative expenses. INFLATION The Partnership's rental revenues in the overbuilt real estate markets of Boise and San Francisco, have not followed the overall inflationary trends of the economy. In the future, the General Partner believes market rate rents in those areas will more closely follow or exceed inflation. Operating costs for properties in most of the Partnership's markets have continued to follow inflationary trends. It is not expected that the Partnership will be materially impacted by inflationary forces in the near term. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is contained at Page F-1 following in this Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The General Partner of the Partnership is Landsing Partners-III, which has sole responsibility for all aspects of the Partnership's operations. It is a General Partnership having two General Partners, Landsing Equities Corporation, a California corporation, which is the managing General Partner of the General Partner, and Partners '84, a California limited partnership. The organizers or promoters of the Partnership are Landsing Equities Corporation and Gary K. Barr. Landsing Equities Corporation and Mr. Barr are the General Partners of Partners '84. Mr. Barr holds the position with Landsing Equities Corporation indicated below. Gary K. Barr is the Director and President of Landsing Equities Corporation. His principal occupation during the last five years or more, and certain other affiliations are set forth below: Gary K. Barr. Mr. Barr serves as Chairman and Chief Executive Officer of Pacific Coast Capital and has served as President and Director of Landsing Pacific Fund from its inception in November, 1988 to July, 1992. Mr. Barr received a Bachelor of Science degree in Mechanical Engineering from Oklahoma State University in 1967 and a Master of Business Administration degree from the Stanford University Graduate School of Business in 1972. Mr. Barr serves on the Board of Governors of the National Association of Real Estate Investment Trusts and on its Editorial Board. Mr. Barr has served as President of the California Chapter of the Real Estate Securities and Syndication Institute of the National Association of Realtors ("RESSI"), which has awarded him the designation of Specialist in Real Estate Securities. Since 1983, he has served on the Board of Directors of Silicon Valley Bancshares. In 1989 he authored the book J.K. Lasser's "Real Estate Investment Guide" published by Prentice Hall. ITEM 11. EXECUTIVE COMPENSATION The General Partner, Landsing Partners-III, and its General Partners, receive no compensation from the Partnership. The General Partner has contracted with The Landsing Corporation, an affiliate, for the provision of certain asset and property management and administrative services. The Landsing Corporation has subcontracted these management and administrative services to its affiliate, Pacific Coast Capital. During 1996, Pacific Coast Capital received management fees of $132,000, which were determined based on expenses incurred in order to operate the Partnership. In addition, Pacific Coast Capital was paid $32,000 for property management services. These property management fees were based on monthly property revenues received. See Item 13, "Certain Relationships and Related Transactions" for further information. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT No person or group is known by the Partnership to hold more than 5% of the Units of Limited Partnership. The General Partner is not a direct or beneficial owner of any Units of the limited partnership. The General Partner knows of no arrangements, including any pledge by any person of securities of the Partnership, the operation of which may at a subsequent date result in a change in control of the Partnership. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Partnership has agreements with The Landsing Corporation and one of its affiliates, Pacific Coast Capital, pursuant to which the Partnership has paid various fees and compensation to these companies. The Landsing Corporation is a closely-held corporation. The Partnership has entered into a property management agreement with Pacific Coast Capital for the management of the Partnership's properties. During 1996, Pacific Coast Capital received $32,000 for property management. The Partnership has retained The Landsing Corporation to serve as advisor and to manage the day-to-day operations of the Partnership. These services are provided under a subcontract with Pacific Coast Capital, an affiliate of The Landsing Corporation. Pacific Coast Capital is to perform these services based on reimbursement of costs incurred but in no case are these to exceed those which the Partnership would have to pay independent parties for comparable services. During 1996, Pacific Coast Capital received expense reimbursements of $132,000. For information concerning the agreements between the Partnership and the affiliates of The Landsing Corporation, see Note 2 of Notes to Consolidated Financial Statements filed as part of this Annual Report. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements See the Index at page F-1. 2. Financial Statements Schedules See the Index at page F-1. 3. Exhibits See the Exhibit Index which immediately precedes the Exhibits filed with this Report. (b) The Partnership filed one report on Form 8-K during the quarter ended September 30, 1996, to report the "Disposition of an Asset". SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. LDP-III By: Landsing Partners-III, General Partner By: Landsing Equities Corporation, General Partner March 31, 1997 By: /s/ Gary K. Barr President and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Partnership and in the capacities and on the dates indicated. March 31, 1997 /s/ Gary K. Barr President and Director, Landsing Equities Corporation (Principal Executive Officer) Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act. No Annual Report or Proxy material has been sent to Partnership's security holders. An Annual Report will be furnished to such security holders subsequent to the filing of Partnership's Annual Report on Form 10-K, and, when sent, Partnership shall furnish copies of such material to the Commission. LDP-III INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT SCHEDULES INCLUDED IN THE FORM 10-K DESCRIPTION Report of Independent Accountants Financial Statements: Consolidated Balance Sheets, December 31, 1996 and 1995 Consolidated Statements of Operations for the Years Ended December 31, 1996, 1995 and 1994 Consolidated Statements of Changes in Partners' Equity (Deficit) for the Years Ended December 31, 1996, 1995 and 1994 Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994 Notes to Consolidated Financial Statements Supplemental Consolidated Financial Statement Schedules: Schedule X - Supplementary Consolidated Income Statement Information for the Years Ended December 31, 1996, 1995 and 1994 Schedule XI - Real Estate and Accumulated Depreciation at December 31, 1996 REPORT OF INDEPENDENT ACCOUNTANTS To the General Partner of LDP-III: We have audited the accompanying consolidated financial statements and consolidated financial statement schedules of LDP-III and subsidiary listed in the index on page F-1 of this Form 10-K as of December 31, 1996 and 1995, and the related consolidated statements of operations, partners' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of LDP-III and subsidiary as of December 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. In addition, in our opinion, the consolidated financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects, the information required to be included therein. The accompanying consolidated financial statements and consolidated financial statement schedules have been prepared assuming that the Partnership will continue as a going concern. As discussed in Note 1 to the financial statements, the Partnership has suffered negative cash flows and recurring losses from operations which raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to this matter are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. DALBY, WENDLAND & CO., P.C. Glenwood Springs, Colorado March 13, 1997 LDP-III CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1996 and 1995 (In thousands)
1996 1995 ASSETS INVESTMENTS IN REAL ESTATE: Rental properties (including property held for sale) $ 10,510 $ 12,306 Accumulated depreciation (4,086) (4,264) 6,424 8,042 CASH AND CASH EQUIVALENTS (including interest bearing deposits of $85 in 1996 and $104 in 1995, and including restricted cash of $37 in 1996 and $14 in 1995) 85 212 OTHER ASSETS: Short-term investments 298 198 Accounts receivable 17 24 Prepaid expenses and deposits 4 8 Loan costs and leasing commissions (net of accumulated amortization of $474 in 1996 and $536 in 1995) 126 152 Total other assets 445 382 TOTAL $ 6,954 $ 8,636 LIABILITIES AND PARTNERS' EQUITY (DEFICIT) LIABILITIES: Notes payable $ 6,891 $ 7,871 Accounts payable 0 5 Other liabilities 133 81 Total liabilities 7,024 7,957 PARTNERS' EQUITY (DEFICIT) (70) 679 TOTAL $ 6,954 $ 8,636 The accompanying notes are an integral part of the consolidated financial statements.
LDP-III CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (In thousands except per unit amounts)
1996 1995 1994 REVENUE: Rental $ 1,210 $ 1,339 $ 2,101 Interest 22 28 30 Total revenue 1,232 1,367 2,131 EXPENSE: Interest 671 717 1,302 Operating 472 394 1,002 Depreciation and amortization 325 396 588 General and administrative 180 194 233 Total expense 1,648 1,701 3,125 LOSS BEFORE GAIN FROM SALE OF REAL ESTATE AND EXTRAORDINARY ITEM (416) (334) (994) GAIN FROM SALE OF REAL ESTATE 223 0 401 LOSS BEFORE EXTRAORDINARY ITEM (193) (334) (593) EXTRAORDINARY ITEM - GAIN FROM EXTINGUISHMENT OF DEBT 0 0 334 NET LOSS $ (193) $ (334) $ (259) NET LOSS BEFORE EXTRAORDINARY ITEM PER PARTNERSHIP UNIT: LIMITED PARTNERS (5) (9) (16) GENERAL PARTNERS 0 0 0 EXTRAORDINARY ITEM: GAIN FROM EXTINGUISHMENT OF DEBT PER PARTNERSHIP UNIT: LIMITED PARTNERS 0 0 9 GENERAL PARTNERS 0 0 0 NET LOSS PER PARTNERSHIP UNIT: LIMITED PARTNERS (5) (9) (7) GENERAL PARTNERS 0 0 0 TOTAL (5) (9) (7) The accompanying notes are an integral part of the consolidated financial statements.
LDP-III CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (Dollars in thousands except per unit amounts)
LIMITED PARTNERS NUMBER OF GENERAL TOTAL PARTNERSHIP PARTNER PARTNERS' UNITS AMOUNT AMOUNT EQUITY (DEFICIT) BALANCE, JANUARY 1, 1994 37,156 1,792 0 1,792 Abandonments (15) Distribution - 1994 (520) (520) Net loss - 1994 (259) (259) BALANCE, DECEMBER 31, 1994 37,141 1,013 0 1,013 Abandonments (5) Net loss - 1995 (334) (334) BALANCE, DECEMBER 31, 1995 37,136 679 0 679 Distribution-1996 (556) 0 (556) Net loss - 1996 (193) 0 (193) BALANCE, DECEMBER 31, 1996 37,136 $ (70) $ 0 $ (70) The accompanying notes are an integral part of the consolidated financial statements.
LDP-III CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (In thousands)
1996 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (193) $ (334) $ (259) Adjustments to reconcile net loss to net cash used in operating activities: Provision for loss in value of investment in real estate, gain from sale of real estate and extra- ordinary item (223) 0 (699) Depreciation 325 342 588 Changes in operating assets and liabilities: Decrease in accounts receivable 7 13 60 Decrease (increase) in prepaid expenses and deposits 4 1 43 Decrease in accounts payable (5) (27) (61) Increase (decrease) in accrued interest payable 0 0 (45) Increase (decrease) in other liabilities 29 6 (124) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (56) 1 (497) CASH FLOWS FROM INVESTING ACTIVITIES: Short-term investments (100) 397 0 Capital expenditures and construction (51) (134) (537) Deferred expenses 21 (21) 43 Net proceeds from sale of rental properties 660 0 1,415 NET CASH PROVIDED BY INVESTING ACTIVITIES 530 242 921 CASH FLOWS FROM FINANCING ACTIVITIES: Payments on notes payable (45) (295) (92) Net proceeds from refinancing 0 0 173 Distribution to unit holders (556) 0 (520) NET CASH USED IN FINANCING ACTIVITIES (601) (295) (439) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (127) (52) (15) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 212 264 279 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 85 $ 212 $ 264 The accompanying notes are an integral part of the consolidated financial statements.
LDP-III NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands except per unit amounts) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization - LDP-III (the "Partnership") is a limited partnership organized under the laws of the state of California for the purpose of acquiring, operating, holding for investment, and ultimately selling income producing real estate. Landsing Partners-III (the "General Partner") is a California General Partnership whose partners are Landsing Equities Corporation and Partners '84. LDP-III was formed on August 30, 1983, and shall continue until December 31, 2033, unless sooner terminated. The Partnership commenced operations on December 9, 1983, with the acquisition of the first property. The Partnership owns two buildings. One is an office building Located in northern California which is leased solely to one Corporate tenant. The other is located in Idaho and is a commercial Office building. Investment in Subsidiary - On December 3, 1992 the Partnership transferred two of its properties, the 533 Cabot Building and the 391 Forbes Building to its wholly owned subsidiary, LDP-III Realty Service Corporation, which filed bankruptcy under Chapter 11 of the Federal Bankruptcy Code. During 1993, the U.S. Bankruptcy case was dismissed and the 533 Cabot Building was disposed of. In 1996, 391 Forbes Building was sold and the subsidiary dissolved. For financial reporting purposes the Partnership consolidated the operation of the subsidiary with that of the Partnership. All significant intercompany transactions and balances have been eliminated. Rental Properties - Rental properties are stated at the lower of cost or recoverable value. Depreciation is computed by the straight- line method over estimated useful lives ranging from five to forty years. Certain acquisition fees and expenses for real estate brokerage services paid to Landsing Property Corporation, an affiliate of the General Partner, are capitalized as a cost of rental properties. Tenant improvements are amortized over the lives of the related tenant leases which range from one to ten years. Major additions are capitalized at cost, while maintenance and repairs which do not improve or extend the life of the respective assets are expensed currently. When assets are retired or otherwise disposed of, the costs and related accumulated depreciation are removed from the accounts, and any gain or loss on disposal is included in the results of operations. Loan Costs and Leasing Commissions - Amounts paid to obtain loans are deferred and amortized over the lives of the related notes payable, which range from four to ten years. Leasing commissions are amortized over the lives of the tenant leases which range from one to ten years. Cash and Cash Equivalents - The Partnership considers all highly liquid investments with a maturity of three months or less from the date of purchase to be cash equivalents. Short-Term Investments - The Partnership invests in short-term federally insured certificates of deposits which mature on a date in excess of three months from the date of purchase. The cost of these investments approximates market value. Income Taxes - No provision for Federal or state income taxes has been made in the financial statements because these taxes are the obligation of the partners. Net Loss Per Partnership Unit - Net loss per Partnership unit is based on weighted average units outstanding after giving effect to net income (loss) allocated to the General Partner of $0 in 1996, $0 in 1995 and $0 in 1994. Concentrations of Credit Risk - The Partnership's financial instruments that are exposed to concentrations of credit risk consist primarily of its cash and cash equivalents. The Partnership's cash and cash equivalents are in high-quality institutions with high credit ratings. This investment policy limits the Partnership's exposure to concentrations of credit risks. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Adequate Capital Resources - The General Partner believes that despite the fact the Partnership has continued to operate at a net loss before gain from the sale of properties and extraordinary items, the Partnership has adequate capital resources to continue operations. Improvements in the operation at Jefferson Place in Idaho, one of the remaining properties, has the property operating at a positive cash flow position. The California property, 1201 Cadillac, also operates in a positive cash flow position, and a recent re-negotiation of the lease at that complex will significantly increase operating cash flow. The Partnership has continued to incur substantial operating losses. A combination of historic high building activity and recessionary Economic activity caused severe market pressures on rental rates, Occupancy levels and agricultural prices. As a result of these conditions, the Partnership has been unable to generate sufficient cash from operations to fully fund its operating, necessary capital improvements and debt service requirements, resulting in depletion of the Partnership's cash reserves. These conditions may indicate that the Partnership will be unable to continue as a going concern and realize its property values in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Partnership be unable to continue as a going concern. The General Partner believes that due to the disposition of certain properties and improvement in the remaining properties in the portfolio, that operations will stabilize. Net loss before gains from sales and extraordinary items decreased to $193 in 1996 compared to $334 in 1995. The Partnership expects this positive trend to continue. In the event the Partnership must liquidate its assets, management believes the costs of the assets will be recovered and excess funds would be available then for satisfaction of all liabilities. Limited Partner Units Outstanding - Limited Partner Units outstanding as of December 31, 1996, 1995 and 1994 were: 37,136, 37,136 and 37,141 respectively. Restricted Cash - At December 31, 1996 and 1995, there was restricted cash of $37 and $14, respectively. The cash relates to an escrow agreement for tenant security deposits. 2. RELATED PARTY TRANSACTIONS The Partnership has entered into agreements with The Landsing Corporation and one of its affiliates, Pacific Coast Capital. Advisory services for investment management, general and administrative and property management are provided by Pacific Coast Capital under subcontract with The Landsing Corporation. The General Partner is an affiliate of The Landsing Corporation. The related party transactions delineated in the Partnership Agreement with affiliates of the General Partner are as follows:
1996 1995 1994 General and Administrative Support $ 132 $ 194 $ 233 Property Management and Lease Commissions 32 38 58 3. RENTAL PROPERTIES 1996 1995 Rental properties consist of the following: Land $ 1,384 $ 2,205 Building and improvements 9,126 10,101 Total $10,510 $12,306 4. REAL ESTATE During 1994, a first note payable of $2,395, a second note payable of $419 and a third note payable of $304, all due to the same lender and collateralized by the Jefferson Place Office Building, were consolidated into a single note. This consolidation resulted in a gain on debt forgiven of $334. On July 7, 1994, the Partnership sold the Silverado Apartments located in Houston, Texas. Total consideration received by the Partnership was $8,500, which resulted in a gain of $364 and cash proceeds of $1,234. On October 14, 1994, the Partnership sold the Montbello Green Commercial Building located in Denver, Colorado. Total consideration received by the Partnership was $260, which resulted in a gain of $37 and cash proceeds of $229. On August 16, 1996, the Partnership's wholly owned subsidiary, LDP-III Realty Services Corporation, sold its remaining property 391 Forbes. The sale resulted in a gain for financial reporting purposes of $223, and cash proceeds of $660.
5. NOTES PAYABLE Notes Payable at December 31, 1996 and 1995, consisted of (thousands of dollars):
1996 1995 First note payable collateralized by the Jefferson Place Building bears interest at a rate of 9.25% and requires payments of$23 per month. This note matures August 8, 2001. $ 2,483 $ 2,529 Note payable collateralized by the 391 Forbes Building bears interest at a rate of 11.25% and requires principal and interest payments of$10 per month. This note matured on March 1, 1996. 0 934 (See Note 10) First note payable collateralized by the 1201 Cadillac Building bears interest at a rate of 8.5% and requires interest payments of $31 per month. This note matures on September 1, 1999. 4,408 4,408 Total $ 6,891 $ 7,871
During 1994, the General Partner re-negotiated the terms and conditions of the first mortgage loan on the Jefferson Place Office Building. In return for a principal paydown of $50 the existing loan was reduced by $334 to an outstanding balance of $2,814. This new loan accrues interest at the rate of 9.25% per annum, and requires monthly principal and interest payments of $23. Loan is all due and payable on August 8, 2001. This reduction in the outstanding principal balance in excess of the principal payments made resulted in income to the partnership from forgiveness of debt of $334 in 1994. During 1995, the Partnership made an additional principal paydown on this loan of $243. The loans on the 1201 Cadillac building have a principal balance of $4,408, accrue interest at the rate of 8.5% per annum, and require interest only payments. The entire outstanding balance of the loan is all due and payable on September 1, 2001. Rental properties are pledged as collateral for notes payable which mature over periods ending through 2001. Principal payments required in future years are as follows: 1997 $ 50 1998 55 1999 4,468 2000 66 2001 2,252 Total $6,891 6. RENTAL PROPERTIES UNDER OPERATING LEASES Minimum future rents from rental properties under operating leases having initial or remaining noncancelable lease terms in excess of one year at December 31, 1996, are as follows: 1997 $ 996 1998 1,166 1999 1,127 2000 1,038 2001 984 Total $5,311 During February 1997, the Partnership extended the lease of the sole tenant at 1201 Cadillac for 5 years at an increased rental rate. The increase is included in the schedule above. 7. RECONCILIATION TO INCOME TAX BASIS OF ACCOUNTING The differences at December 31, 1996, 1995 and 1994, between the basis of accounting used in the accompanying financial statements and the income tax basis used to file the Partnership's Federal income tax return are as follows (in thousands except per unit amounts):
1996 1995 1994 Net loss $ (193) $ (334) $ (259) Loss on liquidation eliminated for financial statement purposes (147) (Increase) decrease resulted from: Basis difference and accelerated depreciation (233) (182) (300) Capitalize for tax purposes-special tax assessment 23 23 Basis difference and accelerated depreciation on property sold 2,242 Investment - LDP-III Realty Service Corporation (226) 12 35 Other 35 36 Net income(loss) - tax basis $ (741) $ (481) $ 1,754 Taxable income (loss) per Partnership unit $ (20) $ (13) $ 47 Partners' equity $ (70) $ 679 $ 1,013 Increase (decrease) resulted from: Basis of assets 1,504 1,481 1,457 Accumulated depreciation (2,756) (2,523) (2,336) Syndication costs 4,615 4,615 4,615 Other 35 4 Remove consolidated equity in LDP-III Realty Services Corp. (344) (390) Tax investment in LDP-III Realty Service Corp. 717 750 PARTNERS' EQUITY - TAX BASIS $3,332 $ 4,629 $5,109
8. SUPPLEMENTAL DISCLOSURE ABOUT NON-CASH INVESTING AND FINANCING ACTIVITIES In 1996, proceeds from the sale of building were used to retire debt in the amount of $935. A note payable to a bank with a principal balance of $932 was refinanced. The new loan balance was initially $950; the increase in principal of $18 was used for deferred loan fees and other closing costs. During 1994, notes payable of $334 were forgiven. 9. SUPPLEMENTAL CASH FLOW INFORMATION The Partnership paid interest of $671 in 1996, $717 in 1995, and $1,302 in 1994. SCHEDULE X LDP-III SUPPLEMENTARY CONSOLIDATED INCOME STATEMENT INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (In thousands)
COLUMN A COLUMN B ITEM CHARGED TO COSTS AND EXPENSES 1996 1995 1994 1. Maintenance and repairs $ 122 $ 109 $ 218 2a. Depreciation 286 342 510 2b. Amortization of deferred loan costs and leasing commissions 39 54 78 3. Property taxes 163 130 254 4. Utilities 72 63 5. Insurance 34 29 As to items omitted, amounts did not exceed one percent of total revenue.
SCHEDULE XI LDP-III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996 (In thousands)
COST CAPITALIZED INITIAL COST SUBSE- PROVISION BLDG. & QUENT TO FOR ACCUMULATED ENCUM- IMPROVE- ACQUI- LOSS IN DEPRECI- BRANCES LAND MENTS TOTAL SITION VALUE TOTAL ATION Jefferson Place $2,483 $ 243 $5,150 $ 5,393 $1,126 $ (640) $ 5,879 $2,633 Boise, Idaho Date Acquired 12/09/83 1201 Cadillac Court 4,408 1,450 3,773 5,223 408 (1,000) 4,631 1,453 Milpitas, California Date Acquired 10/32/85 TOTAL $6,891 $1,693 $8,923 $10,616 $1,534 $(1,640) $10,510 $4,086
NOTES: (1) The Partnership's policy is to purchase development and completed projects. Costs incurred before completion of the development are included in building basis. Costs incurred after completion of the development projects and costs incurred subsequent to the purchase of completed projects are included as improvements. (2) Depreciation is computed by the straight-line method on lives ranging from five to forty years. EXHIBIT INDEX Exhibit Number in Accordance with 601 of Regulation S-K Exhibit Description 3 & 4 The Partnership Agreement included as Exhibit B to the Prospectus dated March 1, 1984 (Incorporated by reference to Exhibit 3.4 of Form 10-K for the year ended December 31, 1985) 10.1 Commercial Contract to Buy and Sell Real Estate dated December 11, 1989 between Highland Hall and Landsing Diversified Properties-III 10.2 Bill of Sale and General Warranty Deed related to the sale of Silverado Apartments. (Incorporated by reference to Exhibit 10.1 and 10.2 of Form 8-K dated July 7, 1994) 99 ADDITIONAL EXHIBITS 99.1 The Prospectus dated March 1, 1984 (Incorporated by reference to Exhibit 28.1 of Form 10-K for the year ended December 31, 1985) 99.2 Supplement No. 12 to Prospectus (Incorporated by reference to Exhibit 28.2 of Form 10-K for the year ended December 31, 1985) EX-27 2 ART. 5 FDS 1996 10-K
5 1000 12-MOS DEC-31-1996 DEC-31-1996 383 0 17 0 0 130 10,510 4,086 6,954 133 0 0 0 0 (70) 6,954 0 1,232 0 0 977 0 671 0 0 0 0 0 0 (193) 0 0
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