FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period.........to.........
Commission file number 0-9567
NATIONAL PROPERTY INVESTORS III
(Exact name of small business issuer as specified in its charter)
California 13-2974428
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
Issuer's phone number
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports ), and (2)
has been subject to such filing requirements for the past 90 days. Yes X .
No .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) NATIONAL PROPERTY INVESTORS III
CONSOLIDATED BALANCE SHEET
(in thousands, except for unit data)
March 31,
1996
(Unaudited)
Assets
Cash and cash equivalents $ 1,016
Escrow deposits 494
Other assets 786
Investment properties:
Land $ 3,023
Buildings and related personal 30,479
33,502
Less accumulated depreciation (21,245) 12,257
$ 14,553
Liabilities and Partners' Deficit
Liabilities
Accounts payable and accrued expenses $ 1,131
Tenants' security deposits payable 213
Mortgage payable 24,000
Partners' Deficit:
Limited partners' (48,049 units outstanding) $ (10,504)
General partners' (287) (10,791)
$ 14,553
<FN>
See Notes to Consolidated Financial Statements
b) NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except for unit data)
Three Months Ended
March 31,
1996 1995
Revenues:
Rental income $ 1,837 $ 1,822
Other income 69 69
Total revenues 1,906 1,891
Expenses:
Operating 916 945
Interest 537 547
Depreciation 309 338
General and administrative expenses 72 66
Total expenses 1,834 1,896
Net income (loss) $ 72 $ (5)
Net income (loss) allocated to general
partners (1%) $ 1 $ --
Net income (loss) allocated to limited
partners (99%) 71 (5)
Net income (loss) $ 72 $ (5)
Net income (loss) per limited partnership unit $ 1.49 $ .10
<FN>
See Notes to Consolidated Financial Statements
c) NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
(Unaudited)
(in thousands, except for unit data)
Limited General Limited
Partnership Partners' Partners' Total
Units Deficit Deficit Deficit
Original capital contributions 48,049 $ 1 $ 24,025 $ 24,026
Partners' deficit at
December 31, 1995 48,049 $ (288) $ (10,575) $ (10,863)
Net income for the three
months ended March 31, 1996 -- 1 71 72
Partners' deficit at
March 31, 1996 48,049 $ (287) $ (10,504) $ (10,791)
<FN>
See Notes to Consolidated Financial Statements
d) NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands, except for unit data)
Three Months Ended
March 31,
1996 1995
Cash flows from operating activities:
Net income (loss) $ 72 $ (5)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation 309 338
Amortization of mortgage costs 13 12
Change in accounts:
Escrow deposits (203) (154)
Other assets (295) (140)
Accounts payable and accrued expenses 413 131
Tenant security deposit liabilities -- 9
Net cash provided by operating
activities 309 191
Cash flows from investing activities:
Property improvements and replacements (53) (79)
Cash used in investing activities (53) (79)
Cash flows from financing activities:
Mortgage principal repayments (161) (118)
Cash used in financing activities (161) (118)
Net increase (decrease) in cash and cash
equivalents 95 (6)
Cash and cash equivalents at beginning of period 921 205
Cash and cash equivalents at end of period $ 1,016 $ 199
Supplemental information:
Interest paid $ 663 $ 535
<FN>
See Notes to Consolidated Financial Statements
e)
NATIONAL PROPERTY INVESTORS III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
consolidated financial statements. In the opinion of the Managing General
Partner, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three month period ended March 31, 1996, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1996. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Partnership's annual report on Form 10-K for
the year ended December 31, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
Note B - Transactions with Affiliated Parties
National Property Investors III (the "Partnership") has no employees and is
dependent on the Managing General Partner and its affiliates for the management
and administration of all partnership activities. The Partnership Agreement
provides for payments to affiliates for services and as reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership.
The following transactions with affiliates of Insignia Financial Group, Inc.,
National Property Investors, Inc. ("NPI"), and affiliates of NPI were charged
to expense in 1996 and 1995:
For the Three Months Ended
March 31,
1996 1995
Property management fees (included in operating
expenses) $ 95,000 $ 91,000
Reimbursement for services of affiliates (included
in general and administrative expenses) 63,000 33,000
For the period from January 19, 1996, to March 31, 1996, the Partnership insured
its property under a master policy through an agency and insurer unaffiliated
with the Managing General Partner. An affiliate of the Managing General Partner
acquired, in the acquisition of a business, certain financial obligations from
an insurance agency which was later acquired by the agent who placed the current
year's master policy. The current agent assumed the financial obligations to
the affiliate of the Managing General Partner who received payments on these
obligations from the agent. The amount of the Partnership's insurance premiums
accruing to the benefit of the affiliate of the Managing General Partner by
virtue of the agent's obligations is not significant.
Note B - Transactions with Affiliated Parties (continued)
Included in operating expenses for the three months ended March 31, 1995, are
insurance premiums of approximately $48,000 which were paid to the Managing
General Partner under a master insurance policy arranged for by the Managing
General Partner.
NPI Equity Investments, Inc. ("NPI Equity" or the "Managing General Partner"),
is the general partner of the Partnership. NPI Equity is a wholly-owned
subsidiary of NPI.
On August 17, 1995, the stockholders of NPI entered into an agreement to sell to
IFGP Corporation, a Delaware corporation, an affiliate of Insignia Financial
Group, Inc., a Delaware corporation ("Insignia"), all of the issued and
outstanding common stock of NPI for an aggregate purchase price of $1,000,000.
The closing of the transactions contemplated by the above mentioned agreement
(the "Closing") occurred on January 19, 1996.
Upon the Closing, the officers and directors of NPI and the Managing General
Partner resigned and IFGP Corporation caused new officers and directors of each
of those entities to be elected.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of three apartment complexes.
The following table sets forth the average occupancy for the three months ended
March 31, 1995 and 1996:
Average
Occupancy
Property 1996 1995
Lakeside Apartments 91% 94%
Lisle, Illinois
Pinetree Apartments 92% 91%
Charlotte, North Carolina
Summerwalk Apartments
Winter Park, Florida 91% 94%
The Managing General Partner attributes the decline in occupancy for Lakeside
and Summerwalk to new construction in the area and leasing specials offered by
competitors. In addition, the properties have experienced a decrease in
qualified traffic.
The Partnership's net income for the three months ended March 31, 1996, was
$72,000 versus net loss of $5,000 for the same period in 1995. This change from
a net loss to a net income is primarily attributable to the increased rental
revenue resulting from increased rental rates, and the decrease in operating,
interest and depreciation expenses. The decreases in these expenses was
partially offset by an increase in general and administrative expenses.
Overall, the operations of the Partnership's investment properties were stable
in comparison to the three months ended March 31, 1995.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the Managing General Partner attempts to protect the Partnership from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
At March 31, 1996 the Partnership had unrestricted cash of $1,016,000 as
compared to $199,000 at March 31, 1995. Net cash provided by operating
activities increased primarily as a result of an increase in accounts payable
and accrued expenses including the prepayment of rent. The decrease in the cash
used in investing activities is attributed to a decrease in property
improvements and replacements. The increase in cash used in financing
activities is due to additional mortgage payments being made in the first
quarter of the 1996 versus the same period in 1995.
The Managing General Partner has extended to the Partnership a $500,000 line of
credit. At the present time, the Partnership has no outstanding amounts due
under this line of credit. Based on present plans, the Managing General Partner
does not anticipate the need to borrow in the near future. Other than cash and
cash equivalents, the line of credit is the Partnership's only unused source of
liquidity.
The Registrant has a balloon payment of approximately $4,582,000 on Summerwalk
Apartments due in September 1996. The Registrant will attempt to extend the due
date of this loan or find replacement financing. If the loan is not refinanced
or extended, or the property is not sold, the Registrant could lose this
property through foreclosure. If the property is lost through foreclosure the
Registrant would not recognize a loss for financial statement purposes.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The
mortgage indebtedness of $24,000,000 is amortized over varying periods with
balloon payments due at maturity at which time the properties will either be
refinanced or sold. Future cash distributions will depend on the levels of cash
generated from operations, property sales, and the availability of cash
reserves. No cash distributions were made during 1995 or the first quarter of
1996. The Partnership is prohibited from making any distributions from
operations until the mortgage encumbering the Lakeside Apartments property is
satisfied. At this time, it appears that the original investment objective of
capital growth from the inception of the Partnership will not be obtained.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report.
b) Reports on Form 8-K: a Form 8-K dated January 19, 1996 was filed reporting
the change in control of the Registrant.
SIGNATURE
In connection with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NATIONAL PROPERTY INVESTORS III
By: NPI EQUITY INVESTMENTS, INC.
MANAGING GENERAL PARTNER
By: /s/William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By: /s/Ronald Uretta
Ronald Uretta
Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
Date: May 13, 1996