-----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, CJwSdVshylFhsIgIaeiIm2i4KyGLOCYp8KkUHlhQZ0Qg6XkkC4hH3kZc4Dvv4FHG E/SrMWu5U/F/FkKo9AiFjg== 0000727745-98-000001.txt : 19980401 0000727745-98-000001.hdr.sgml : 19980401 ACCESSION NUMBER: 0000727745-98-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 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 SEC ACT: SEC FILE NUMBER: 000-13559 FILM NUMBER: 98580273 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 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, 1997 [ ] 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 LDP-III FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 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 Schedule 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 $2,008,000 at December 31, 1997. Funds not invested in real property are placed in temporary high-grade investments which can be readily liquidated. The General Partner has declared a cash distribution of $45 per unit to unit holders of record on February 28, 1998, to be paid in March, 1998. 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 1997, the 1201 Cadillac property. The remaining property, Jefferson Place 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, 1997 is as follows: Financial Occupancy Physical Average Net For the Occupancy Effective Rentable Year Ended At Rental Name/Location Type Sq. Feet 12/31/97 12/31/97 Rate (1) (2) (3) Jefferson Place Office Building 54,344 95% 93% $12.22 (1) 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. (2) Physical occupancy denotes the percentage of net rentable square footage leased as of a certain date. (3) Represents the average effective rental rates, per square foot, for the year ended December 31, 1997. The remaining Partnership property is subject to an encumbrance. 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 1997. 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, 1998, is 4,057. 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 1997 1996 1995 1994 1993 Rental Revenue $ 1,275 $ 1,210 $ 1,339 $ 2,101 $ 2,934 Agricultural Revenue 0 0 0 0 369 Net Income (Loss) 2,838 (193) (334) (259) (173) Net Income (Loss) Per Unit 76 (5) (9) (7) (5) Total Assets 5,304 6,954 8,636 9,286 17,451 Long-term Obligations 2,452 6,891 7,871 8,167 15,218 Cash Distributions Per Unit 0 15 0 14 0 (1) Financial data of the Partnership for 1997 is not comparable to that of 1996, 1995 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. (2) Based on a weighted average of outstanding Units in 1997, 1996, 1995, 1994 and 1993.
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 one property. The Partnership's property investment is: Jefferson Place Office Building, Boise, Idaho. LIQUIDITY AND CAPITAL RESOURCES As of December 31, 1997 the Partnership had cash and cash equivalents totaling approximately $2,008,000. Cash reserves not needed for current operations are placed in temporary, high-grade investments which can be readily liquidated. 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. On December 9, 1997, the Partnership sold one of its real property investments known as 1201 Cadillac Court, located in Milpitas, California. The property consisted of a 51,450 square feet commercial building. The sale price received by the registrant was $6,800,000 which resulted in a gain of $3,020,000 and cash proceeds of $1,796,000. The Partnership has invested $1,882,000 in short-term federally insured certificates of deposit which mature on a date less than 90 days or 3 months from the date of purchase. Due to this characteristic, these deposits are classified as "cash and cash equivalents." During 1997, the Partnership experienced a net increase in cash and cash equivalents of $1,923,000. Sources of cash during the year were from regular Partnership Operations and the sale of 1201 Cadillac. Cash uses during 1997 were: $262,000 for property capital expenditures and lease commissions, and $31,000 for principal payments on notes payable. As of December 31, 1997, cash and cash equivalents totaled $2,008,000 versus a balance of $383,000 at December 31, 1996. 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 1997, and are expected to continue to improve in 1998. The Partnership made a cash distribution to its limited partners of $15.00 per unit during 1996. There were no distributions in 1997. All future sale proceeds will be used to increase reserves, reduce indebtedness and/or make distributions to investors. Because of the sale of the 1201 Cadillac property in December 1997, the Partnership had significant cash reserves as of December 31, 1997. The General Partner has declared a cash distribution of $45 per unit to unit holders of record on February 28, 1998. This distribution will be paid in March, 1998. The Partnership is currently in the process of selling its properties. One property was sold in 1997, the 1201 Cadillac property. 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 increased 5% in 1997 versus 1996. 1996's revenue decreased 9% from the 1995 level. The 1996 decrease was due to the sale of 391 Forbes in August 1996. The 1997 increase was due to the increase in lease amounts from the sole tenant of the 1201 Cadillac property during the 5 months prior to the sale of the property in December, 1997. Interest income in 1997 decreased 10% from that in 1996. 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 18% from 1996 to 1997, and decreased 1% from 1995 to 1996. Overall, operating expenses on rental properties decreased 21% in 1997 versus 1996, or $100,000. In 1996, operating expenses increased 19% versus 1995. The 1997 decrease was a result of lower property tax expense and management fees. Interest expense decreased 11% in 1997 versus 1996. The decrease was caused by the reduced amount of property indebtedness due to the disposition of properties in 1997. Interest expense in 1996 decreased 6% versus 1995. 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 2% and 17% from 1996 to 1997, and 1995 to 1996 respectively. The decrease in depreciation expense was due to the disposition of properties during these periods. General and administrative expenses increased 5% in 1997 versus 1996. 1996's general and administrative expenses decreased 7% from 1995. The increase from 1996 was a result of increased costs of outside professional and transfer agent fees. Net loss of the Partnership before gain from sale of real estate decreased 56% in 1997 versus 1996. This decrease is primarily the result of decreased operating expenses, and higher rents. Net loss of the Partnership in 1996 increased 24% versus 1995. This increase resulted from higher operating costs in 1996 versus 1995. A comparison of the operations of the two properties operated continuously through 1997, 1996 and 1995 is provided below:
1997 1996 1995 Rental Revenue $ 1,275 $ 1,076 $ 1,095 Rental Operating Expense 372 436 344 Net Operating Income $ 903 $ 640 $ 751 Interest Expense $ 596 $ 608 $ 611 Rental revenues decreased 1% for 1996 compared to 1995. Rental revenues increased 18% from 1996 to 1997 due to the lease renewal with the sole tenant of the 1201 Cadillac property. Operating expense decreased 17% from 1996 to 1997. This decrease is the result of a decrease in general and administrative expenses on continuously owned properties. 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. 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 (LP-III), which has sole responsibility for all aspects of the Partnership's operations. LP-III 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 thebook 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 1997, Pacific Coast Capital received management fees of $143,000, which were determined based on expenses incurred in order to operate the Partnership. In addition, Pacific Coast Capital was paid $30,000 for property management services and $68,000 for leasing commissions. These property management fees were based on monthly property revenues received and leasing commissions were based on % of the base rent. 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 1997, Pacific Coast Capital received $30,000 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 1997, Pacific Coast Capital received expense reimbursements of $143,000. For information concerning the agreements between the Partnership and the affiliates of The Landsing Corporation, see Note 2 of Notes to 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 December 31, 1997, 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 28, 1998 By: /s/ Gary K. Barr 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 28, 1998 /s/ Gary K. Barr 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 Pursuantto 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 FINANCIAL STATEMENTS AND SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULES INCLUDED IN THE FORM 10-K Report of Independent Accountants Financial Statements: Balance Sheets, December 31, 1997 and 1996 Statements of Operations for the Years Ended December 31, 1997, 1996 and 1995 Statements of Changes in Partners' Equity (Deficit) for the Years Ended December 31, 1997, 1996 and 1995 Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 Notes to Financial Statements Supplemental Financial Statement Schedule: Schedule III - Real Estate and Accumulated Depreciation at December 31, 1997 REPORT OF INDEPENDENT ACCOUNTANTS To the General Partner of LDP-III: We have audited the accompanying consolidated financial statements and financial statement schedule of LDP-III and subsidiary listed in the index on page F-1 of this Form 10-K as of December 31, 1997 and 1996, and the related statements of operations, partners' equity and cash flows for each of the three years in the period ended December 31, 1997. 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 financial statements referred to above present fairly, in all material respects, the financial position of LDP-III as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule 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. DALBY, WENDLAND & CO., P.C. Glenwood Springs, Colorado March 9, 1998 LDP-III BALANCE SHEETS, DECEMBER 31, 1997 and 1996 (In thousands except unit amounts)
1997 1996 ASSETS INVESTMENTS IN REAL ESTATE: Rental properties (including property held for sale) $ 5,985 $ 10,510 Accumulated depreciation (2,817) (4,086) 3,168 6,424 CASH AND CASH EQUIVALENTS (including interest bearing deposits of $1,947 in 1997 and $85 in 1996) 2,008 85 OTHER ASSETS: Short-term investments 0 298 Accounts receivable 37 17 Prepaid expenses and deposits 1 4 Loan costs and leasing commissions (net of accumulated amortization of $359 in 1997 and $474 in 1996) 90 126 Total other assets 128 445 TOTAL $ 5,304 $ 6,954 LIABILITIES AND PARTNERS' EQUITY (DEFICIT) LIABILITIES: Notes payable $ 2,452 $ 6,891 Accounts payable 0 0 Other liabilities 84 133 Total liabilities 2,536 7,024 PARTNERS' EQUITY (DEFICIT) General Partners Equity 0 0 Limited Partners Equity (Deficit) 2,768 (70) TOTAL $ 5,304 $ 6,954 Equity Units Authorized - Limited Partners 37,156 37,156 - General Partners 0 0 Equity Units Outstanding - Limited Partners 37,136 37,136 - General Partners 0 0 The accompanying notes are an integral part of the financial statements.
LDP-III STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (In thousands except unit amounts)
1997 1996 1995 REVENUE: Rental $ 1,275 $ 1,210 $ 1,339 Interest 20 22 28 Total revenue 1,295 1,232 1,367 EXPENSE: Interest 596 67 717 Operating 372 472 394 Depreciation and amortization 319 325 396 General and administrative 190 180 194 Total expense 1,477 1,648 1,701 LOSS BEFORE GAIN FROM SALE OF REAL ESTATE (182) (416) (334) GAIN FROM SALE OF REAL ESTATE 3,020 223 0 NET INCOME (LOSS) $ 2,838 $ (193) $ (334) NET INCOME (LOSS)-LIMITED PARTNERS $ 2,838 $ (193) $ (334) NET INCOME (LOSS)-GENERAL PARTNERS 0 0 0 TOTAL $ 2,838 $ (193) $ (334) NET INCOME (LOSS) PER PARTNERSHIP UNIT: LIMITED PARTNERS $ 76 $ (5) $ (9) GENERAL PARTNERS 0 0 0 TOTAL $ 76 $ (5) $ (9) The accompanying notes are an integral part of the financial statements.
LDP-III STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (In thousands except unit amounts)
LIMITED PARTNERS TOTAL NUMBER OF GENERAL PARTNERS' PARTNERSHIP PARTNER EQUITY UNITS AMOUNT AMOUNT (DEFICIT) BALANCE, JANUARY 1, 1995 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) Net Income - 1997 2,838 0 2,838 BALANCE, DECEMBER 31, 1997 37,136 $ 2,768 $ 0 $ 2,768 The accompanying notes are an integral part of the financial statements.
LDP-III STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (In thousands except unit amounts)
1997 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 2,838 $ (193) $ (334) Adjustments to reconcile net loss to net cash used in operating activities: Gain from sale of real estate (3,020) (223) 0 Depreciation 319 325 342 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable (20) 7 13 Decrease in prepaid expenses and deposits 3 4 1 Decrease in accounts payable 0 (5) (27) Increase in accrued interest payable 19 0 0 Increase (decrease) in other liabilities (68) 29 6 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 71 (56) 1 CASH FLOWS FROM INVESTING ACTIVITIES: Short-term investments 298 (100) 397 Capital expenditures and construction (247) (51) (134) Deferred expenses 36 21 (21) Net proceeds from sale of rental properties 1,796 660 0 NET CASH PROVIDED BY INVESTING ACTIVITIES 1,883 530 242 CASH FLOWS FROM FINANCING ACTIVITIES: Payments on notes payable (31) (45) (295) Distribution to unit holders 0 (556) 0 NET CASH USED IN FINANCING ACTIVITIES (31) (601) (295) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,923 (127) (52) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 85 212 264 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 2,008 $ 85 $ 212 The accompanying notes are an integral part of the financial statements.
LDP-III NOTES TO FINANCIAL STATEMENTS (In thousands except 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 one building located in Idaho, which is a commercial office building with numerous tenants. 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. 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. 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 maintained in various accounts in FDIC insured institutions. 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. Impairment of Long-Lived Assets - The Partnership adopted Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of" during 1996. SFAS No. 121 requires that long-lived assets and certain identifiable intangibles to be held and used or disposed of by an entity and bereviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During 1997 and 1996, the Partnership determined that no impairment loss need be recognized for applicable assets of continuing operations. Accounting Pronouncements - In June 1996, the Financial Accounting Standards Board issued Statement No. 125 Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities. This Statement is effective for transactions occurring after December 31, 1996. However, transactions such as securities lending, repurchase agreements, dollar rolls, and similar secured financing arrangements are not subject to the provisions of SFAS No. 125 until January 1, 1998. The standard provides that, following a transfer of financial assets, an entity is to recognize the financial and servicing assets it controls and the liabilities it has incurred, derecognize financial assets when control has been surrendered and derecognize liabilities when extinguished. The adoption of SFAS No. 125 had no impact on the Partnership's financial statements. The impact of the delayed provisions is also not expected to be material. In June 1997, the FASB issued Statement No. 130 Reporting Comprehensive Income (SFAS No. 130) and Statement No. 131, Disclosures about Segments of an Enterprise and Related Information (SFAS No. 131) Each of the new statements is effective for periods beginning after December 15, 1997, and requires that certain additional information be reported in the financial statements and related notes. The Partnership will adopt these SFAS in 1998 but does not expect an impact on its 1998 financial statements. Year 2000 - The Partnership is aware of the Year 2000 conversion issue. It is Management's assertion that the current accounting system utilized by the Partnership has the capability to accommodate the Year 2000 issue. 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, the Partnership has adequate capital resources to continue operations. Operating results at Jefferson Place in Idaho, the only remaining property, indicate the property is operating at a positive cash flow position. The California property, 1201 Cadillac, was sold for profit in December 1997.Proceeds of the sale increased cash reserves and will allow the Partnership to make a cash distribution to limited partners in 1998. The General Partner believes that due to the disposition of certain properties and the stability of the remaining property in the portfolio, that operations will generate positive cash flow. Net loss before gains from sales of real estate decreased to $182 in 1997, compared with $416 in 1996 and $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 after satisfaction of all liabilities. Restricted Cash - At December 31, 1997 and 1996, there was restricted cash of $0 and $37, respectively. The cash balance was related 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:
1997 1996 1995 General and Administrative Support $ 143 $ 132 $ 194 Property Management 30 32 38 Leasing Commissions 68 0 0
3. RENTAL PROPERTIES Rental properties at December 31 consist of the following:
1997 1996 Land $ 213 $ 1,384 Building and improvements 5,772 9,126 5,985 10,510 Accumulated depreciation (2,817) (4,086) 3,168 6,424
Depreciation expense for the years ended December 31, 1997 and 1996 was $319 and $325, respectively. 4. REAL ESTATE 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. On December 9, 1997, the Partnership sold the 1201 Cadillac property. The sale resulted in a gain for financial reporting purposes of $3,020 and cash proceeds of $1,796. 5. NOTES PAYABLE Notes Payable at December 31 consist of:
1997 1996 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. $ 2,452 $ 2,483 First note payable collateralized by the 1201 Cadillac Building 0 4,408 Total $ 2,452 $ 6,891
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. The 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 had a principal balance of $4,408, accrued interest at the rate of 8.5% per annum, and required interest only payments. The entire outstanding balance of the loan was paid on December 9, 1997 from proceeds from the sale of the property. 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: 1998 $ 55 1999 60 2000 66 2001 2,271 Total $ 2,452 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, 1997, are as follows: 1998 $ 566 1999 476 2000 343 2001 245 2002 191 Total $ 1,821 7. RECONCILIATION TO INCOME TAX BASIS OF ACCOUNTING The differences at December 31, 1997, 1996 and 1995, 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 for per unit amounts):
1997 1996 1995 Net income (loss) $ 2,838 $ (193) $ (334) Loss on liquidation eliminated for financial statement purposes - (147) - (Increase) decrease resulted from: Basis difference and accelerated depreciation (233) (233) (182) Capitalize for tax purposes-special tax assessment - 23 23 Basis difference and accelerated depreciation on property sold 252 - - Prepayment penalty on property sold (265) - - Investment - LDP-III Realty Service Corporation - (226) 12 Other (20) 35 - Net income (loss) - tax basis $ 2,572 $ (741) $ (481) Taxable income (loss) per Partnership unit $ 69 $ (20) $ (13) Partners' equity $ 2,768 $ (70) $ 679 Increase (decrease) resulted from: Basis of assets 698 1,504 1,481 Accumulated depreciation (2,182) (2,756) (2,523) Syndication costs 4,615 4,615 4,615 Other 5 39 4 Remove consolidated equity in LDP-III Realty Service Corp. - - (344) Tax investment in LDP-III Realty Service Corp. - - 717 PARTNER'S EQUITY - TAX BASIS $ 5,904 $ 3,332 $4,629
8. SUPPLEMENTAL DISCLOSURE ABOUT NON-CASH INVESTING AND FINANCING ACTIVITIES In 1997, proceeds from the sale of property were used to retire debt of $4,408. In 1996, proceeds from the sale of building were used to retire debt 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. 9. SUPPLEMENTAL CASH FLOW INFORMATION The Partnership paid interest of $578 in 1997, $671 in 1996, and $717 in 1995. 10. FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price, if one exists. Fair value estimates are made as of a specific point in time based on the characteristics of the financial instruments and relevant market information. Where available, quoted market prices are used. In other cases, fair values are based on estimates using present value or other valuation techniques. These techniques involve uncertainties and are significantly affected by the assumptions used and judgments made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors. Changes in assumptions could significantly affect these estimates and the resulting fair values. Derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in an immediate sale of the instrument. Also, because of differences in methodologies and assumptions used to estimate fair values, the Partnership's fair values should not be compared to those of other partnerships. Fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Accordingly, the aggregate fair value amounts presented do not purport to represent the underlying market of the Partnership. Assets for Which Fair Value Approximates Carrying Value - The fair value of certain financial assets carried at cost, including cash and cash equivalents and accounts receivable are considered to approximate their respective carrying values due to their short-term nature and negligible credit losses. Liabilities for Which Fair Value Approximates Carrying Value - The fair value of accounts payable, accrued liabilities and accrued interest payable is considered to approximate their respective book values due to their short term nature. Notes Payable - The valuation of notes payable with floating rates is estimated to be the same as carrying value. Fair value of notes payable with fixed rates is estimated based on quoted market prices for similar issues. At December 31, 1997 and 1996, fair value of notes payable approximates carrying value. 11. SUBSEQUENT EVENTS The Partnership has declared a cash dividend of $45 per unit to unit holders as of February 28, 1998 for distribution in March, 1998. SCHEDULE XI LDP-III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1997 (In thousands)
LIFE ON RESERVE WHICH COST OF FOR DATE OF DEPRECIA- DESCRIP- ENCUM- INITIAL IMPROVE- DEPRECIA- CONSTRUCT- DATE TION IS TION BRANCES COST MENTS TOTAL TION TION ACQUIRED COMPUTED Jefferson Place $2,452 $5,393 $ 592 $5,985 $2,817 N/A 12/09/83 40 years Boise, Idaho
RECONCILIATION Balance at beginning of period $ 10,510 Additions during period: Improvements 247 Deductions during period: Cost of real estate sold (4,772) Balance at close of period $ 5,985
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. E X H I B I T I N D E X 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
5 1000 12-MOS DEC-31-1997 DEC-31-1997 2008 0 37 0 0 38 5985 2817 5304 84 0 0 0 0 2768 5304 0 1295 0 0 881 0 596 0 0 0 0 0 0 2838 0 0
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