-----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, FTbaL15qMrz9qpLBHLEMaWoSODsGXFcV1yrG4K0HdsOFpl4FxPdWiWkNhmOGXh7n oGWUUk9u0IQPaMKE8QxyjA== 0000727745-99-000002.txt : 19990331 0000727745-99-000002.hdr.sgml : 19990331 ACCESSION NUMBER: 0000727745-99-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990330 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: 99577233 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, 1998 [ ] 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, 1998 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 Registrant'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 Registrant 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 and Reports Form 8-K Signatures Index to Financial Statements included in the form 10-K. PART I ITEM 1. BUSINESS On December 31, 1998, the registrant sold the last of its real property investments known as Jefferson Place Office Building, located in Boise, Idaho. Jefferson Place was the final operating property owned by LDP-III. The Partnership intends to dissolve its operations by the end of the first Quarter 1999. Immediately subsequent to the sale of this property, the Partnership had no "Ongoing Operations" to report. LDP-III (the "Partnership") was 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 consisted 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 was not 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, which sold in August, 1996. For financial reporting purposes, the Partnership's investment in LDP-III Realty Service Corporation was presented on a consolidated basis. Cash reserves totaled $1,894,000 at December 31, 1998. The General Partner has declared a final cash distribution of $48.25 per unit (one partial distribution of $30 per unit/one final distribution of $18.25) to unit holders of record on December 31, 1998, which was paid in January and March, 1999. These cash distributions represent the final assets of LDP-III which, subsequent to this final distribution, is to be considered a fully liquidated and dissolved Partnership. ITEM 2. PROPERTIES None. 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 1998. 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 December 31, 1998, was 3,837. 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 1998 1997 1996 1995 1994 Rental Revenue $ 672 $ 1,275 $ 1,210 $ 1,339 $ 2,101 Comprehensive Income (Loss) 693 2,838 (193) (334) (259) Comprehensive Income (Loss) Per Unit 19 76 (5) (9) (7) Total Assets 1,905 5,304 6,954 8,636 9,286 Long-term Obligations 0 2,452 6,891 7,871 8,167 Cash Distributions Per Unit 45 0 15 0 14 (1) Financial data of the Partnership for 1998 is not comparable to that of 1997, 1996 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 1998, 1997, 1996, 1995 and 1994. (3) Final distributions of $48.25 per unit ($30 in January 1999 and $18.25 in March 1999) were made during the first quarter of 1999.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION LDP-III was a California limited partnership formed in August 1983. The Partnership's business consisted of a single segment - equity investments in leveraged income-producing real estate. LIQUIDITY AND CAPITAL RESOURCES As of December 31, 1998 the Partnership had cash and cash equivalents totaling approximately $1,894,000. 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. On December 31, 1998, the registrant sold the last of its real property investments known as Jefferson Place Office Building, located in Boise, Idaho. The sale price received by the registrant was $4,405,000 which resulted in a gain of $1,065,055 and cash proceeds of $1,732,642. Jefferson Place was the final operating property owned by LDP-III. The Partnership intends to cease and dissolve its operations by the end of the first quarter 1999. During 1998, the Partnership experienced a net decrease in cash and cash equivalents of $114,000. Sources of cash during the year were from regular Partnership Operations and the sale of Jefferson Place. Cash uses during 1998 were: $109,000 for property capital expenditures and lease commissions, $48,000 for principal payments on notes payable, and cash distribution to Limited Partners of $1,671,000. As of December 31, 1998, cash and cash equivalents totaled $1,894,000 versus a balance of $2,008,000 at December 31, 1997. The Partnership made a cash distribution to its limited partners of $45.00 per unit during 1998. The General Partner has declared a cash distribution of $30 per unit to unit holders of record on December 31, 1998. This distribution was paid in January, 1999. The Partnership made a final distribution of $18.25 per unit on March 8, 1999 to the unit holders of record on December 31, 1998. This distribution represents the last assets of the Partnership. RESULTS OF OPERATIONS Overall, rental income decreased 48% in 1998 versus 1997. 1997's revenue increased 5% from the 1996 level. The 1998 decrease was due to the sale of 1201 Cadillac in December 1997. Interest income in 1998 increased 85% from that in 1997. This was the result of larger cash balances held by the Partnership. Interest expense and depreciation expenses decreased significantly from 1996 to 1997 and 1998 due to the disposition of properties in 1997 and 1998. General and administrative expenses decreased 2% in 1998 versus 1997. 1997's general and administrative expenses increased 5% from 1996. Net loss of the Partnership before gain from sale of real estate increased 51% in 1998 versus 1997. Net loss of the Partnership in 1997 decreased 56% versus 1996. A comparison of the operations of the one property operated continuously through 1998, 1997 and 1996 is provided below:
1998 1997 1996 Rental Revenue $ 672 $ 667 $ 658 Rental Operating Expense 316 321 319 Net Operating Income $ 356 $ 346 $ 339 Interest Expense $ 225 $ 243 $ 232 Rental revenues increased 1.5% from 1996 to 1997 with only a slight increase from 1997 to 1998. Operating expense decreased 2% from 1997 to 1998 after increasing slightly from 1996 to 1997. INFLATION Not applicable. 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, 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, received no compensation from the Partnership. The General Partner had contracted with The Landsing Corporation, an affiliate, for the provision of certain asset and property management and administrative services. The Landsing Corporation had subcontracted these management and administrative services to its affiliate, Pacific Coast Capital. During 1998, Pacific Coast Capital received management fees of $121,000, which were determined based on expenses incurred in order to operate the Partnership. In addition, Pacific Coast Capital was paid $15,000 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 had 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 had entered into a property management agreement with Pacific Coast Capital for the management of the Partnership's properties. During 1998, Pacific Coast Capital received $15,000 for property management. The Partnership had 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 was to perform these services based on reimbursement of costs incurred but in no case were these to exceed those which the Partnership would have had to pay independent parties for comparable services. During 1998, Pacific Coast Capital received expense reimbursements of $121,000. For information concerning the agreements between the Partnership and the affiliates of The Landsing Corporation, see Note 3 of Notes to Financial Statements filed as part of this Annual Report. PART IV ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K (a) 1. Financial Statements See the Index at page F-1. 2. Exhibits See the Exhibit Index which immediately precedes the Exhibits filed with this Report. (b) None. 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 29, 1999 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 29, 1999 /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 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 the Partnership's Annual Report on Form 10-K. LDP-III INDEX TO FINANCIAL STATEMENTS INCLUDED IN THE FORM 10-K Report of Independent Accountants Financial Statements: Balance Sheets, December 31, 1998 and 1997 Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996 Statements of Changes in Partners' Equity for the Years Ended December 31, 1998, 1997 and 1996 Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996 Notes to Financial Statements REPORT OF INDEPENDENT ACCOUNTANTS To the General Partner of LDP-III: We have audited the accompanying consolidated financial statements of LDP-III and subsidiary listed in the index on page F-1 of this Form 10-K as of December 31, 1998 and 1997, and the related statements of operations, partners' equity and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements. 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. As described in Note 2 to the financial statements, the management of LDP-III Adopted a plan of liquidation on December 31, 1998 and the Partnership began Liquidation shortly thereafter. 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, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. DALBY, WENDLAND & CO., P.C. Glenwood Springs, Colorado March 9, 1999 LDP-III BALANCE SHEETS, DECEMBER 31, 1998 and 1997 (In thousands except unit amounts)
1998 1997 ASSETS INVESTMENTS IN REAL ESTATE: Rental properties (including property held for sale) $ 0 $ 5,985 Accumulated depreciation 0 (2,817) 0 3,168 CASH AND CASH EQUIVALENTS (including interest bearing deposits of $1,894 in 1998 and $1,947 in 1997) 1,894 2,008 OTHER ASSETS: Accounts receivable 10 37 Prepaid expenses and deposits 1 1 Loan costs and leasing commissions (net of accumulated amortization of $0 in 1998 and $359 in 1997) 0 90 Total other assets 11 128 TOTAL $ 1,905 $ 5,304 LIABILITIES AND PARTNERS' EQUITY LIABILITIES: Notes payable $ 0 $ 2,452 Accounts payable 0 0 Other liabilities 115 84 Total liabilities 115 2,536 PARTNERS' EQUITY General Partners Equity 0 0 Limited Partners Equity 1,790 2,768 TOTAL $ 1,905 $ 5,304 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, 1998, 1997 AND 1996 (In thousands except unit amounts)
1998 1997 1996 REVENUE: Rental $ 672 $ 1,275 $ 1,210 Interest 37 20 22 Total revenue 709 1,295 1,232 EXPENSE: Interest 225 596 671 Operating 431 372 472 Depreciation and amortization 239 319 325 General and administrative 186 190 180 Total expense 1,081 1,477 1,648 LOSS BEFORE GAIN FROM SALE OF REAL ESTATE (372) (182) (416) GAIN FROM SALE OF REAL ESTATE 1,065 3,020 223 NET INCOME (LOSS) $ 693 $ 2,838 $ (193) NET INCOME (LOSS)-LIMITED PARTNERS $ 693 $ 2,838 $ (193) NET INCOME (LOSS)-GENERAL PARTNERS 0 0 0 TOTAL $ 693 $ 2,838 $ (193) NET INCOME (LOSS) PER PARTNERSHIP UNIT: LIMITED PARTNERS $ 19 $ 76 $ (5) GENERAL PARTNERS 0 0 0 TOTAL $ 19 $ 76 $ (5) 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, 1998, 1997 AND 1996 (In thousands except unit amounts)
LIMITED PARTNERS TOTAL NUMBER OF GENERAL PARTNERS' PARTNERSHIP PARTNER EQUITY UNITS AMOUNT AMOUNT (DEFICIT) 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 Distribution-1998 (1,671) 0 (1,671) Net Income-1998 693 0 693 BALANCE, DECEMBER 31, 1998 37,136 $1,790 $ 0 $1,790 The accompanying notes are an integral part of the financial statements.
LDP-III STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (In thousands except unit amounts)
1998 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 693 $ 2,838 $ (193) Adjustments to reconcile net loss to net cash used in operating activities: Gain from sale of real estate (1,065) (3,020) (223) Depreciation and amortization 239 319 325 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable 27 (20) 7 Decrease in prepaid expenses and deposits 0 3 4 Decrease in accounts payable 0 0 (5) Increase (decrease) in other liabilities 31 (49) 29 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (75) 71 (56) CASH FLOWS FROM INVESTING ACTIVITIES: Short-term investments 0 298 (100) Capital expenditures and construction (109) (247) (51) Deferred expenses 56 36 21 Net proceeds from sale of rental properties 1,733 1,796 660 NET CASH PROVIDED BY INVESTING ACTIVITIES 1,680 1,883 530 CASH FLOWS FROM FINANCING ACTIVITIES: Payments on notes payable (48) (31) (45) Distribution to unit holders (1,671) 0 (556) NET CASH USED IN FINANCING ACTIVITIES (1,719) (31) (601) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (114) 1,923 (127) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,008 85 212 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,894 $ 2,008 $ 85 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 is authorized to continue until December 31, 2033, unless sooner terminated. The Partnership commenced operations on December 9, 1983, with the acquisition of the first property. During 1998, the Partnership owned one commercial office building located in Idaho. (See Note 2 for the Plan of Liquidation.) 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 Income (Loss) Per Partnership Unit - Net income (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 be reviewed 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. Effective January 1998, the Partnership adopted SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 requires that an enterprise (a) classify items of other comprehensive income by their nature in a financial statement, and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial condition. However, the Partnership does not have any items of comprehensive income at December 31, 1998. Effective January 1, 1998, the Partnership adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." However, the Partnership does not have any reportable segments at December 31, 1998. Fair Value of Financial Instruments - 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. The fair value of accrued liabilities is considered to approximate their respective book values due to their short-term nature. Reclassifications - Certain amounts in the 1997 financial statements have been reclassified to conform to the 1998 presentation. 2. PLAN OF LIQUIDATION The Partnership sold its final property on December 31, 1998. As a result, management adopted a plan to liquidate the Partnership. At December 31, 1998, substantially all of the Partnership's assets consisted of cash and cash equivalents. As part of the plan to liquidate, the Partnership made cash distributions to unit holders of $30 and $18.25 per unit on January 26, 1999 and March 8, 1999, respectively. 3. 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:
1998 1997 1996 General and Administrative Support $ 121 $ 143 $ 132 Property Management 15 30 32 Leasing Commissions 0 68 0
4. RENTAL PROPERTIES Rental properties at December 31 consist of the following:
1998 1997 1996 Land $ 0 $ 213 $ 1,384 Building and improvements 0 5,772 9,126 0 5,985 10,510 Accumulated depreciation 0 (2,817) (4,086) 0 $ 3,168 $ 6,424
Depreciation expense for the years ended December 31, 1998 and 1997 was $239 and $319, respectively. 5. 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. On December 31, 1998, the Partnership sold its last property, Jefferson Place Office Building. The sale price received by the registrant was $4,405, which resulted in a gain of $1,065 and cash proceeds of $1,733. 6. NOTES PAYABLE Notes Payable at December 31 consist of:
1998 1997 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. $ 0 $2,452
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 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 During 1995, the Partnership made an additional principal paydown on this loan of $243. The entire outstanding balance on this loan was paid on December 31, 1998 from proceeds from the sale of the property. 7. RECONCILIATION TO INCOME TAX BASIS OF ACCOUNTING The differences at December 31, 1998, 1997 and 1996, 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:
1998 1997 1996 Net income (loss) $ 693 $ 2,838 $ (193) Loss on liquidation eliminated for financial statement purposes - - (147) (Increase) decrease resulted from: Basis difference and accelerated depreciation (61) (233) (182) Capitalize for tax purposes-special tax assessment - - 23 Basis difference and accelerated depreciation on property sold 1,553 252 - Prepayment penalty on property sold - (265) - Investment - LDP-III Realty Service Corporation - - (226) Other 102 (20) 35 Net income (loss) - tax basis $2,287 $ 2,572 $ (690) Taxable income (loss) per Partnership unit $ 62 $ 69 $ (20) Partners' equity $1,790 $ 2,768 $ (70) Increase (decrease) resulted from: Basis of assets - 698 1,504 Accumulated depreciation - (2,182) (2,756) Syndication costs 4,615 4,615 4,615 Other 116 5 39 PARTNER'S EQUITY - TAX BASIS $6,521 $ 5,904 $ 3,332
8. SUPPLEMENTAL DISCLOSURE ABOUT NON-CASH INVESTING AND FINANCING ACTIVITIES In 1998, proceeds from the sale of property were used to retire debt of $2,401. 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 $225 in 1998, $578 in 1997, and $671 in 1996. 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 ART. 5 FDS 1998 10-K
5 1000 12-MOS DEC-31-1998 DEC-31-1998 1,894 0 10 0 0 11 0 0 1,905 115 0 0 0 0 1,790 1,905 0 709 0 0 854 0 225 0 0 0 0 0 0 695 0 0
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