Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2014 | Nov. 12, 2014 | |
Document and Entity Information: | ' | ' |
Entity Registrant Name | 'REAL ESTATE ASSOCIATES LTD III | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-14 | ' |
Amendment Flag | 'false | ' |
Entity Central Index Key | '0000318986 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Common Stock, Shares Outstanding | ' | 11,294 |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Voluntary Filers | 'No | ' |
Entity Well-known Seasoned Issuer | 'No | ' |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
Balance_Sheets_September_30_20
Balance Sheets (September 30, 2014 Unaudited) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
ASSETS | ' | ' |
Cash and cash equivalents | $339 | $522 |
Receivable from Limited Partners | 67 | ' |
Total assets | 406 | 522 |
Liabilities: | ' | ' |
Accounts payable and accrued expenses | 43 | 25 |
Total liabilities | 43 | 25 |
Partners' (deficiency) capital: | ' | ' |
General partners | -117 | -116 |
Limited partners | 480 | 613 |
Total partners' (deficiency) capital | 363 | 497 |
Total liabilities and partners' (deficiency) capital | $406 | $522 |
Statements_of_Operations_Unaud
Statements of Operations (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Thousands, except Per Share data, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | ||||
Operating expenses: | ' | ' | ' | ' | ||||
Management fees - General Partner | $3 | $9 | $9 | $27 | ||||
General and administrative | 10 | 5 | 30 | 13 | ||||
Legal and accounting | 34 | 13 | 80 | 66 | ||||
Total operating expenses | 47 | 27 | 119 | 106 | ||||
Income (Loss) from partnership operations | -47 | -27 | -119 | -106 | ||||
Forfeited Earnest Money | 60 | [1] | ' | [1] | 60 | [1] | ' | [1] |
Gain from sale of local partners interest | ' | 407 | ' | 407 | ||||
Advances made to Local Partnerships recognized as expense | -75 | ' | -75 | -67 | ||||
Net Income (Loss) | -62 | 380 | -134 | 234 | ||||
Net Income (Loss) allocated to general partners (1%) | -1 | 4 | -1 | 2 | ||||
Net Income (Loss) allocated to limited partners (99%) | ($61) | $376 | ($133) | $232 | ||||
Net Income (Loss) per limited partnership interest | ($5.49) | $33.22 | ($11.86) | $20.49 | ||||
[1] | See Note 2 |
Statement_of_Changes_in_Partne
Statement of Changes in Partners' (Deficiency) Capital (Unaudited) (USD $) | General Partners | Limited Partners | Total |
In Thousands | |||
Partners' (deficiency) capital, beginning balance at Dec. 31, 2013 | ($116) | $613 | $497 |
Net Income (Loss) | -1 | -133 | -134 |
Partners' (deficiency) capital, ending balance at Sep. 30, 2014 | ($117) | $480 | $363 |
Statements_of_Cash_Flows_Unaud
Statements of Cash Flows (Unaudited) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 |
Cash flows from operating activities: | ' | ' |
Net loss | ($134) | $234 |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Advances made to Local Partnerships recognized as expense | 75 | 67 |
Sale of Local Limited Partnership interest | ' | -407 |
Change in accounts: | ' | ' |
Receivables from Limited Partners | -67 | ' |
Accounts payable and accrued expenses | 18 | -30 |
Net cash used in operating activities | -108 | -136 |
Cash flows used in investing activities: | ' | ' |
Sale of Local Limited Partnership interest | ' | 407 |
Advances to Local Partnerships | -75 | -67 |
Accrued fees due to General Partner | ' | 17 |
Net cash used in investing activities | -75 | 357 |
Net decrease in cash and cash equivalents | -183 | 221 |
Cash and cash equivalents, beginning of period | 522 | 138 |
Cash and cash equivalents, end of period | $339 | $359 |
Note_1_Organization_and_Summar
Note 1 - Organization and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 1 - Organization and Summary of Significant Accounting Policies | ' |
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
General | |
The information contained in the following notes to the unaudited financial statements is condensed from that which would appear in the annual audited financial statements; accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and related notes thereto contained in the annual report for the fiscal year ended December 31, 2013 prepared by Real Estate Associates Limited III (the "Partnership" or "Registrant"). Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim periods presented are not necessarily indicative of the results expected for the entire year. | |
In the opinion of the Partnership’s management, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring items) considered necessary for a fair presentation. The balance sheet at December 31, 2013 has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. | |
The general partners share a one percent interest in profits and losses of the Partnership. The limited partners share the remaining 99 percent interest in proportion to their respective investments. The general partners are National Partnership Investments, LLC (“NAPICO” or the “General Partner”), a California limited liability company, and National Partnership Investment Associates, a limited partnership. The General Partner is a subsidiary of Bethesda Holdings II, LLC, a privately held real estate asset management company (“Bethesda”). The business of the Partnership is conducted primarily by NAPICO. | |
At September 30, 2014 and December 31, 2013, the Partnership had outstanding 11,294 limited partnership interests. | |
Basis of Presentation | |
The accompanying unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States. | |
Method of Accounting for Investments in Local Partnerships | |
The investments in local limited partnerships (the “Local Partnerships”) are accounted for on the equity method. | |
Net Loss Per Limited Partnership Interest | |
Net loss per limited partnership interest was computed by dividing the limited partners’ share of net loss by the number of limited partnership interests outstanding at the beginning of the year. The number of limited partnership interests used was 11,294 and 11,320 for the three and nine months ended September 30, 2014 and September 30, 2013, respectively. | |
Variable Interest Entities | |
The Partnership consolidates any variable interest entities in which the Partnership holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. | |
In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Partnership’s investment; the obligation or likelihood for the Partnership or other investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions. | |
At September 30, 2014 and December 31, 2013, the Partnership held variable interests in one VIE for which the Partnership was not the primary beneficiary. The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in the Local Partnership, that the general partner of each of the Local Partnership is the primary beneficiary of the respective Local Partnership. In making this determination, the Partnership considered the following factors: | |
· the general partner conducts and manage the business of the Local Partnership; | |
· the general partner has the responsibility for and sole discretion over selecting a property management agent for the Local Partnership's underlying real estate properties; | |
· the general partner is responsible for approving operating and capital budgets for the properties owned by the Local Partnerships; | |
· the general partner is obligated to fund any recourse obligations of the Local Partnership; | |
· the general partner is authorized to borrow funds on behalf of the Local Partnership; and | |
· the Partnership, as a limited partner in the Local Partnership, does not have the ability to direct or otherwise significantly influence the activities of the Local Partnership that most significantly impact such entity's economic performance. | |
The VIE at September 30, 2014 consisted of one Local Partnership that is directly engaged in the ownership and management of one apartment property with a total of 80 units. The Partnership is involved with the VIE as a non-controlling limited partner equity holder. The Partnership’s maximum exposure to loss as a result of its involvement with the unconsolidated VIE is limited to the Partnership’s recorded investments in and receivables from the VIE, which was zero at September 30, 2014 and December 31, 2013. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future. |
Note_2_Investments_in_and_Adva
Note 2 - Investments in and Advances To Local Partnerships | 9 Months Ended | ||||
Sep. 30, 2014 | |||||
Notes | ' | ||||
Note 2 - Investments in and Advances To Local Partnerships | ' | ||||
Note 2 – Investments in and Advances to Local Partnerships | |||||
As of September 30, 2014 and December 31, 2013, the Partnership held limited partnership interests in one Local Partnership that owned a residential low income rental project consisting of 80 apartment units. The rental project is located in Puerto Rico. The mortgage loans of this project are payable to or insured by various governmental agencies. | |||||
The Partnership, as a limited partner, does not have a contractual relationship with the Local Partnership or exercise control over the activities and operations, including refinancing or selling decisions, of the Local Partnership that would require or allow for consolidation. Accordingly, the Partnership accounts for its investment in the Local Partnership using the equity method. The Partnership is allocated profits and losses of the Local Partnership based upon its ownership percentage (95%). Distributions of surplus cash from operations from the Local Partnership are restricted by the Local Partnership's Regulatory Agreements with the Rural Development ("RD"). These restrictions limit the distribution to a portion, generally less than 10%, of the initial invested capital. The excess surplus cash is deposited into a residual receipts reserve, of which the ultimate realization by the Partnership is uncertain as RD frequently retains it upon sale or dissolution of the Local Partnership. The Partnership is allocated profits and losses and receives distributions from refinancings and sales in accordance with the Local Partnership's partnership agreement. This agreement limits the Partnership’s distributions to an amount substantially less than its ownership percentage in the Local Partnership. | |||||
The investment is carried at cost plus the Partnership’s share of the Local Partnership’s profits less the Partnership’s share of the Local Partnership’s losses, distributions and impairment charges. The Partnership is not legally liable for the obligations of the Local Partnership and is not otherwise committed to provide additional support to it. Therefore, it does not recognize losses once its investment in the Local Partnership reaches zero. Distributions from the Local Partnership are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. When the investment balance has been reduced to zero, subsequent distributions received are recognized as income in the accompanying statements of operations. | |||||
For those investments where the Partnership has determined that the carrying value of its investments approximates the estimated fair value of those investments, the Partnership’s policy is to recognize equity in income of the Local Partnerships only to the extent of distributions received and amortization of acquisition costs from those Local Partnerships. Therefore, the Partnership limits its recognition of equity earnings to the amount it expects to ultimately realize. | |||||
On October 26, 2011 Marina Del Rey entered into a purchase and sale contract to sell its investment property to a third party for a gross sales price of $2,500,000. As of December 31, 2013, earnest money of $100,000 had been received by the local limited partnership and placed into escrow. In January 2014, the buyer failed to close and the agreement was terminated. As a result, in July 2014, the Partnership received $60,000 of the $100,000 deposit as a settlement of the terminated agreement. | |||||
At September 30, 2014 and December 31, 2013, the investment balance in the Local Partnership had been reduced to zero. | |||||
In July 2013, the Partnership sold its limited partnership interest in Lakeside Apartments, Ltd. to an affiliate of the operating General Partner for no consideration. The Partnership's investment balance in this local partnership was zero at the time of sale. | |||||
In August 2013, the Partnership sold the real estate of Santa Maria Limited Dividend Partnership Assoc. and received approximately $407,000 in proceeds from the sale. Subsequent to the closing, the Partnership received an additional amount of $404,000 from release of reserves. The Partnership's investment balance in this local partnership was zero at the time of sale. | |||||
In October 2013, the Partnership assigned its limited partnership interest in Alabama Properties, Ltd., V (Ramblewood I) to an affiliate of the operating general partner for a total of $17,600. The Partnership had no investment balance remaining at the date of the assignment. | |||||
At times, advances are made to the Local Partnerships. Advances made by the Partnership to the individual Local Partnerships are considered part of the Partnership’s investment in the Local Partnerships. Advances to Local Partnerships for which the investment has been reduced to zero are charged to expense. During the nine months ended September 30, 2014, the Partnership advanced approximately $75,000 to Local Partnerships for capital improvements. During the nine months ended September 30, 2013 the partnership advanced $67,000 to Local Partnerships for taxes. The advances were recognized as expense. While not obligated to make advances to any of the Local Partnerships, the Partnership may make future advances in order to protect its economic investment in the Local Partnerships. | |||||
The following are unaudited condensed combined estimated statements of operations for the nine months ended September 30, 2014 and 2013 for the Local Partnerships in which the Partnership has invested. The 2014 and 2013 amount exclude Santa Maria Ltd., Lakeside and Alabama Properties, Ltd. V (in thousands): | |||||
Three Months Ended September 30, 2014 | Three Months Ended September 30, 2013 | Nine Months Ended September 30, 2014 | Nine Months Ended September 30, 2013 | ||
Revenues | |||||
Rental and other | $ 148 | $ 157 | $ 439 | $ 469 | |
Expenses | |||||
Operating expenses | 76 | 71 | 229 | 213 | |
Financial expenses | 61 | 63 | 183 | 188 | |
Depreciation and amortization | 12 | 12 | 38 | 37 | |
Total expenses | 149 | 146 | 450 | 438 | |
Income (loss) from continuing operations | $ (1) | $ 11 | $ (11) | $ 31 | |
In addition to being the General Partner of the Partnership, NAPICO or one of its affiliates is the local operating general partner of the Local Partnership included above. |
Note_3_Transactions_With_Affil
Note 3 - Transactions With Affiliated Parties | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 3 - Transactions With Affiliated Parties | ' |
Note 3 – Transactions with Affiliated Parties | |
Under the terms of the Restated Certificate and Agreement of Limited Partnership, the Partnership is obligated to NAPICO for an annual management fee equal to 0.4 percent of the Partnership’s original remaining invested assets of the Local Partnerships and is calculated at the beginning of each year. Invested assets are defined as the costs of acquiring project interests, including the proportionate amount of the mortgage loans related to the Partnership's interest in the capital accounts of the respective Local Partnerships. The management fee incurred for the three months ended September 30, 2014 and 2013 was approximately $3,000 and $9,000, respectively, and for the nine months ended September 30, 2014 and 2013 was approximately $9,000 and $27,000, respectively. | |
At September 30, 2014, advances from affiliates for certain expenses were approximately $27,000. |
Note_4_Fair_Value_of_Financial
Note 4 - Fair Value of Financial Instruments | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 4 - Fair Value of Financial Instruments | ' |
Note 4 – Fair Value of Financial Instruments | |
Financial Accounting Standards Board Accounting Standards Codification Topic 825, “Financial Instruments”, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. At September 30, 2014, the Partnership believes that the carrying amount of liabilities reported on the balance sheet that require such disclosure approximated their fair value due to the short-term maturity of these instruments. |
Note_5_Contingencies
Note 5 - Contingencies | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 5 - Contingencies | ' |
Note 5 - Contingencies | |
The General Partner is involved in various lawsuits arising from transactions in the ordinary course of business. In the opinion of management and the General Partner, the claims will not result in any material liability to the Partnership. |
Note_6_Subsequent_Event
Note 6 - Subsequent Event | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 6 - Subsequent Event | ' |
Note 6 - Subsequent Event | |
The Partnership’s management evaluated subsequent events through the time this Quarterly Report on Form 10-Q was filed. |
Note_1_Organization_and_Summar1
Note 1 - Organization and Summary of Significant Accounting Policies: Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Basis of Presentation | ' |
Basis of Presentation | |
The accompanying unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States. |
Note_1_Organization_and_Summar2
Note 1 - Organization and Summary of Significant Accounting Policies: Method of Accounting For Investment in Local Partnerships (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Method of Accounting For Investment in Local Partnerships | ' |
Method of Accounting for Investments in Local Partnerships | |
The investments in local limited partnerships (the “Local Partnerships”) are accounted for on the equity method. |
Note_1_Organization_and_Summar3
Note 1 - Organization and Summary of Significant Accounting Policies: Net Loss Per Limited Partnership Interest (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Net Loss Per Limited Partnership Interest | ' |
Net Loss Per Limited Partnership Interest | |
Net loss per limited partnership interest was computed by dividing the limited partners’ share of net loss by the number of limited partnership interests outstanding at the beginning of the year. The number of limited partnership interests used was 11,294 and 11,320 for the three and nine months ended September 30, 2014 and September 30, 2013, respectively. |
Note_1_Organization_and_Summar4
Note 1 - Organization and Summary of Significant Accounting Policies: Variable Interest Entities (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Variable Interest Entities | ' |
Variable Interest Entities | |
The Partnership consolidates any variable interest entities in which the Partnership holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. | |
In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Partnership’s investment; the obligation or likelihood for the Partnership or other investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions. | |
At September 30, 2014 and December 31, 2013, the Partnership held variable interests in one VIE for which the Partnership was not the primary beneficiary. The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in the Local Partnership, that the general partner of each of the Local Partnership is the primary beneficiary of the respective Local Partnership. In making this determination, the Partnership considered the following factors: | |
· the general partner conducts and manage the business of the Local Partnership; | |
· the general partner has the responsibility for and sole discretion over selecting a property management agent for the Local Partnership's underlying real estate properties; | |
· the general partner is responsible for approving operating and capital budgets for the properties owned by the Local Partnerships; | |
· the general partner is obligated to fund any recourse obligations of the Local Partnership; | |
· the general partner is authorized to borrow funds on behalf of the Local Partnership; and | |
· the Partnership, as a limited partner in the Local Partnership, does not have the ability to direct or otherwise significantly influence the activities of the Local Partnership that most significantly impact such entity's economic performance. | |
The VIE at September 30, 2014 consisted of one Local Partnership that is directly engaged in the ownership and management of one apartment property with a total of 80 units. The Partnership is involved with the VIE as a non-controlling limited partner equity holder. The Partnership’s maximum exposure to loss as a result of its involvement with the unconsolidated VIE is limited to the Partnership’s recorded investments in and receivables from the VIE, which was zero at September 30, 2014 and December 31, 2013. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future. |
Note_2_Investments_in_and_Adva1
Note 2 - Investments in and Advances To Local Partnerships: Estimated condensed combined statements of operations for Local Partnerships (Tables) | 9 Months Ended | ||||
Sep. 30, 2014 | |||||
Tables/Schedules | ' | ||||
Estimated condensed combined statements of operations for Local Partnerships | ' | ||||
Three Months Ended September 30, 2014 | Three Months Ended September 30, 2013 | Nine Months Ended September 30, 2014 | Nine Months Ended September 30, 2013 | ||
Revenues | |||||
Rental and other | $ 148 | $ 157 | $ 439 | $ 469 | |
Expenses | |||||
Operating expenses | 76 | 71 | 229 | 213 | |
Financial expenses | 61 | 63 | 183 | 188 | |
Depreciation and amortization | 12 | 12 | 38 | 37 | |
Total expenses | 149 | 146 | 450 | 438 | |
Income (loss) from continuing operations | $ (1) | $ 11 | $ (11) | $ 31 |
Note_1_Organization_and_Summar5
Note 1 - Organization and Summary of Significant Accounting Policies (Details) | Sep. 30, 2014 | Dec. 31, 2013 |
Details | ' | ' |
OutstandingLimitedPartnershipInterests | 11,294 | 11,294 |
Note_1_Organization_and_Summar6
Note 1 - Organization and Summary of Significant Accounting Policies: Net Loss Per Limited Partnership Interest (Details) | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
Details | ' | ' |
Number of limited partnership interests in EPS calculation | 11,294 | 11,320 |
Note_2_Investments_in_and_Adva2
Note 2 - Investments in and Advances To Local Partnerships: Estimated condensed combined statements of operations for Local Partnerships (Details) (Partnership Interest, USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Partnership Interest | ' | ' | ' | ' |
Rental Income, Nonoperating | $148 | $157 | $439 | $469 |
Expenses | ' | ' | ' | ' |
Operating Costs and Expenses | 76 | 71 | 229 | 213 |
Financial Expense | 61 | 63 | 183 | 188 |
Depreciation, Depletion and Amortization, Nonproduction | 12 | 12 | 38 | 37 |
Total Expenses | 149 | 146 | 450 | 438 |
Income (Loss) from Continuing Operations, Including Portion Attributable to Noncontrolling Interest | ($1) | $11 | ($11) | $31 |