FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
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, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________to _________
Commission file number 0-13192
ANGELES INCOME PROPERTIES, LTD. III
(Exact name of small business issuer as specified in its charter)
California 95-3903984
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (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)
ANGELES INCOME PROPERTIES, LTD. III
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2001
Assets
Cash and cash equivalents $ 102
Receivables and deposits 26
Other assets 15
Investment property
Land $ 657
Buildings and related personal property 4,349
5,006
Less accumulated depreciation (3,454) 1,552
$ 1,695
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 17
Tenant security deposit liabilities 22
Accrued property taxes 13
Other liabilities 90
Partners' (Deficit) Capital
General partners $ (17)
Limited partners (86,738 units issued and
outstanding) 1,570 1,553
$ 1,695
See Accompanying Notes to Consolidated Financial Statements
b)
ANGELES INCOME PROPERTIES, LTD. III
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
2001 2000
Revenues:
Rental income $ 210 $ 205
Other income 12 16
Total revenues 222 221
Expenses:
Operating 81 89
General and administrative 37 29
Depreciation 66 68
Property taxes 15 11
Total expenses 199 197
Net income $ 23 $ 24
Net income allocated to general partners (1%) $ -- $ --
Net income allocated to limited partners (99%) 23 24
Net income $ 23 $ 24
Net income per limited partnership unit $ 0.27 $ 0.28
Distributions per limited partnership unit $ 1.71 $14.55
See Accompanying Notes to Consolidated Financial Statements
c)
ANGELES INCOME PROPERTIES, LTD. III
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 86,920 $ 1 $43,460 $43,461
Partners' (deficit) capital
at December 31, 2000 86,738 $ (15) $ 1,695 $ 1,680
Distributions to partners -- (2) (148) (150)
Net income for the three months
ended March 31, 2001 -- -- 23 23
Partners' (deficit) capital
at March 31, 2001 86,738 $ (17) $ 1,570 $ 1,553
See Accompanying Notes to Consolidated Financial Statements
d)
ANGELES INCOME PROPERTIES, LTD. III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2001 2000
Cash flows from operating activities:
Net income $ 23 $ 24
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 66 68
Change in accounts:
Receivables and deposits 3 71
Other assets (7) (7)
Accounts payable (6) (28)
Tenant security deposit liabilities (1) --
Accrued property taxes (25) (27)
Other liabilities 7 (76)
Net cash provided by operating activities 60 25
Cash flows from investing activities:
Property improvements and replacements (14) (16)
Cash flows used in financing activities:
Distributions to partners (150) (1,275)
Net decrease in cash and cash equivalents (104) (1,266)
Cash and cash equivalents at beginning of period 206 2,253
Cash and cash equivalents at end of period $ 102 $ 987
See Accompanying Notes to Consolidated Financial Statements
e)
ANGELES INCOME PROPERTIES, LTD. III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Angeles Income
Properties, Ltd. III (the "Partnership" or "Registrant") 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
financial statements. In the opinion of Angeles Realty Corporation II (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, 2001, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2001. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Partnership's Annual
Report on Form 10-KSB for the year ended December 31, 2000. The Managing General
Partner is a wholly owned subsidiary of Apartment Investment and Management
Company ("AIMCO").
Principles of Consolidation: The consolidated financial statements of the
Partnership include its 99% limited partnership interests in Poplar Square AIP
III, L.P. and Poplar Square GP LP. Poplar Square GP LP is the general partner of
Poplar Square AIP III and ARC II is the general partner of Poplar Square GP LP.
Both general partners of the consolidated partnerships may be removed by the
Registrant; therefore, the partnerships are controlled and consolidated by the
Partnership. All significant interpartnership balances have been eliminated.
Segment Reporting: Statement of Financial Accounting Standards ("SFAS") No. 131,
"Disclosure about Segments of an Enterprise and Related Information" established
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. As defined in SFAS
No. 131, the Partnership has only one reportable segment. The Managing General
Partner believes that segment-based disclosures will not result in a more
meaningful presentation than the financial statements as currently presented.
Note B - Transactions with Affiliated Parties
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 (i) for certain
payments to affiliates for services and (ii) reimbursement of certain expenses
incurred by affiliates on behalf of the Partnership.
The following payments were made to the Managing General Partner and affiliates
during the three months ended March 31, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in operating
operating expenses) $ 11 $ 10
Reimbursement for services of affiliates
(included in general and administrative expenses) 22 13
Affiliates of the Managing General Partner are entitled to receive 5% of gross
receipts from the Registrant's residential property as compensation for
providing property management services. The Registrant paid to such affiliates
approximately $11,000 and $10,000 for the three months ended March 31, 2001 and
2000, respectively.
The Partnership Agreement provides for a fee equal to 10% of "net cash flow from
operations", as defined in the Partnership Agreement to be paid to the Managing
General Partner for executive and administrative management services. This fee
is calculated and accrued annually. A fee of approximately $33,000 was earned
for the twelve months ended December 31, 2000 and is included in other
liabilities at March 31, 2001.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $22,000 and
$13,000 for the three months ended March 31, 2001 and 2000, respectively.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 39,976 limited partnership units
(the "Units") in the Partnership representing 46.09% of the outstanding Units at
March 31, 2001. A number of these Units were acquired pursuant to tender offers
made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates
will make one or more additional offers to acquire additional limited
partnership interests in the Partnership for cash or in exchange for Units in
the operating partnership of AIMCO. Under the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with respect to a
variety of matters, which would include without limitation, voting on certain
amendments to the Partnership Agreement and voting to remove the Managing
General Partner. When voting on matters, AIMCO would in all likelihood vote the
Units it acquired in a manner favorable to the interest of the Managing General
Partner because of its affiliation with the Managing General Partner.
Note C - Distributions
The Partnership paid a cash distribution from operations of approximately
$150,000 (approximately $148,000 to the limited partners, or $1.71 per limited
partnership unit) during the three months ended March 31, 2001. During the three
months ended March 31, 2000, the Partnership paid a cash distribution from sale
proceeds of approximately $1,205,000 (approximately $1,193,000 to the limited
partners, or $13.75 per limited partnership unit) and from operations of
approximately $70,000 (approximately $69,000 to the limited partners or $0.80
per limited partnership unit).
Note D - Legal Proceedings
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its Managing General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging, among other things, the acquisition of interests in
certain general partner entities by Insignia Financial Group, Inc. ("Insignia")
and entities which were, at one time, affiliates of Insignia; past tender offers
by the Insignia affiliates to acquire limited partnership units; management of
the partnerships by the Insignia affiliates; and the Insignia Merger. The
plaintiffs seek monetary damages and equitable relief, including judicial
dissolution of the Partnership. On June 25, 1998, the Managing General Partner
filed a motion seeking dismissal of the action. In lieu of responding to the
motion, the plaintiffs filed an amended complaint. The Managing General Partner
filed demurrers to the amended complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Court, at which time
the Court set a final approval hearing for December 10, 1999. Prior to the
December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the Managing General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case and an appeal was taken from the order on
October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff
Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the
putative class. Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001, the Managing General Partner and its affiliates filed a
demurrer to the third amended complaint. The demurrer is scheduled to be heard
on May 14, 2001. The Court has also scheduled a hearing on a motion for class
certification for August 27, 2001. Plaintiffs must file their motion for class
certification no later than June 15, 2001. The Managing General Partner does not
anticipate that costs associated with this case will be material to the
Partnership's overall operations.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operation. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Partnership's investment property consists of one apartment complex. The
following table sets forth the average occupancy of the property for the three
months ended March 31, 2001 and 2000:
Average Occupancy
Property 2001 2000
Lake Forest Apartments 93% 93%
Brandon, Mississippi
Results from Operations
The Registrant's net income for the three months ended March 31, 2001 was
approximately $23,000 as compared to approximately $24,000 for the corresponding
period in 2000. The decrease in net income is primarily attributable to an
increase in total expenses offset by a slight increase in total revenues. Total
revenues increased due to an increase in rental income. Rental income increased
due to increased rental rates at Lake Forest Apartments.
Total expenses increased due to an increase in property tax and general and
administrative expenses offset by a decrease in operating expense. Property tax
expense increased due to a property value reassessment by the local taxing
authority at Lake Forest Apartments. Operating expense decreased due to a
decrease in maintenance expense at the property.
General and administrative expense increased primarily due to an increase in the
costs of services included in the management reimbursements to the General
Partner as allowed under the Partnership Agreement. In addition to these
reimbursements, costs associated with the quarterly and annual communications
with investors and regulatory agencies and the annual audit required by the
Partnership Agreement are also included in general and administrative expenses.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment property 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 market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At March 31, 2001, the Registrant had cash and cash equivalents of approximately
$102,000 as compared to approximately $987,000 at March 31, 2000. The net
decrease in cash and cash equivalents was approximately $104,000 from December
31, 2000. The decrease in cash and cash equivalents was due to approximately
$150,000 and $14,000 of cash used in financing and investing activities,
respectively, which was partially offset by approximately $60,000 of cash
provided by operating activities. Cash used in financing activities consisted of
distributions to partners. Cash used in investing activities consisted of
property improvements and replacements. The Registrant invests its working
capital reserves in interest bearing accounts.
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 Partnership's property to adequately maintain the
physical assets and other operating needs of the Registrant and to comply with
Federal, state, and local legal and regulatory requirements. Capital
improvements planned for the Registrant's property are detailed below.
Lake Forest Apartments: The Partnership budgeted approximately $37,400 for
capital improvements at Lake Forest Apartments for 2001 consisting primarily of
floor coverings, heating and air conditioning upgrades and appliances. During
the three months ended March 31, 2001, the property has spent approximately
$14,000 on capital expenditures, consisting primarily of exterior painting,
floor coverings, heating and air conditioning upgrades and office equipment.
These improvements were funded from operating cash flow. Additional improvements
may be considered and will depend on the physical condition of the property as
well as replacement reserves and anticipated cash flow generated by the
property.
The additional capital expenditures will be incurred only if cash is available
from operations or Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.
The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant.
The Partnership paid a cash distribution from operations of approximately
$150,000 (approximately $148,000 to the limited partners, or $1.71 per limited
partnership unit) during the three months ended March 31, 2001. During the three
months ended March 31, 2000, the Partnership paid a cash distribution from sale
proceeds of approximately $1,205,000 (approximately $1,193,000 to the limited
partners, or $13.75 per limited partnership unit) and from operations of
approximately $70,000 (approximately $69,000 to the limited partners or $0.80
per limited partnership unit). Future cash distributions will depend on the
levels of net cash generated from operations, the availability of cash reserves,
mortgage financing, and/or the sale of the property. The Partnership's
distribution policy is reviewed on a quarterly basis. There can be no assurance
that the Partnership will generate sufficient funds from operations, after
required capital expenditures, to permit additional distributions to its
partners during the remainder of 2001 or subsequent periods.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 39,976 limited partnership units
(the "Units") in the Partnership representing 46.09% of the outstanding Units at
March 31, 2001. A number of these Units were acquired pursuant to tender offers
made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates
will make one or more additional offers to acquire additional limited
partnership interests in the Partnership for cash or in exchange for Units in
the operating partnership of AIMCO. Under the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with respect to a
variety of matters, which would include without limitation, voting on certain
amendments to the Partnership Agreement and voting to remove the Managing
General Partner. When voting on matters, AIMCO would in all likelihood vote the
Units it acquired in a manner favorable to the interest of the Managing General
Partner because of its affiliation with the Managing General Partner.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia
Financial Group, Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, its Managing General Partner and several of their affiliated
partnerships and corporate entities. The action purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging, among other things, the acquisition of interests in
certain general partner entities by Insignia Financial Group, Inc. ("Insignia")
and entities which were, at one time, affiliates of Insignia; past tender offers
by the Insignia affiliates to acquire limited partnership units; management of
the partnerships by the Insignia affiliates; and the Insignia Merger. The
plaintiffs seek monetary damages and equitable relief, including judicial
dissolution of the Partnership. On June 25, 1998, the Managing General Partner
filed a motion seeking dismissal of the action. In lieu of responding to the
motion, the plaintiffs filed an amended complaint. The Managing General Partner
filed demurrers to the amended complaint which were heard February 1999.
Pending the ruling on such demurrers, settlement negotiations commenced. On
November 2, 1999, the parties executed and filed a Stipulation of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the settlement was obtained on November 3, 1999 from the Court, at which time
the Court set a final approval hearing for December 10, 1999. Prior to the
December 10, 1999 hearing, the Court received various objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement. On
December 14, 1999, the Managing General Partner and its affiliates terminated
the proposed settlement. In February 2000, counsel for some of the named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated the settlement. On June 27, 2000, the Court entered an order
disqualifying them from the case and an appeal was taken from the order on
October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff
Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the
putative class. Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001, the Managing General Partner and its affiliates filed a
demurrer to the third amended complaint. The demurrer is scheduled to be heard
on May 14, 2001. The Court has also scheduled a hearing on a motion for class
certification for August 27, 2001. Plaintiffs must file their motion for class
certification no later than June 15, 2001. The Managing General Partner does not
anticipate that costs associated with this case will be material to the
Partnership's overall operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
None.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 2001.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES INCOME PROPERTIES, LTD. III
By: Angeles Realty Corporation II
Managing General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President and
Controller
Date: