FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or 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
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period.........to.........
Commission file number 0-13192
ANGELES INCOME PROPERTIES LTD. III
(Exact name of small business issuer as specified in its charter)
California 95-3903984
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (803) 239-1000
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
BALANCE SHEET
(Unaudited)
September 30, 1995
Assets
Cash:
Unrestricted $ 2,017,381
Restricted--tenant security deposits 47,987
Accounts receivable, less allowance for
doubtful accounts of $21,514 74,329
Escrow deposits for taxes 82,898
Other assets 972,084
Investment properties:
Land $ 1,527,024
Buildings and related personal
property 12,443,022
13,970,046
Less accumulated depreciation (7,793,182) 6,176,864
$ 9,371,543
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 35,589
Tenant security deposits 47,837
Property taxes 61,736
Other 91,554
Mortgage note payable 3,460,054
Equity interest in net liabilities
joint ventures 8,201,271
Partners' Deficit
General partners $ (399,724)
Limited partners capital (86,818
units issued and outstanding) (2,126,774) (2,526,498)
$ 9,371,543
[FN]
See Accompanying Notes to Financial Statements
b) ANGELES INCOME PROPERTIES, LTD. III
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Revenues:
Rental income $ 398,107 $ 381,815 $ 1,170,620 $ 1,177,698
Other income 28,437 11,729 85,748 39,695
Total revenues 426,544 393,544 1,256,368 1,217,393
Expenses:
Operating 93,239 64,473 206,993 180,379
General and administrative 71,744 117,937 223,959 467,810
Property management fees 19,787 15,477 51,083 50,814
Maintenance 64,056 43,830 135,532 120,288
Depreciation 163,504 160,306 482,884 479,456
Amortization 8,186 6,272 22,316 15,559
Interest 108,804 105,526 306,018 338,524
Property taxes 42,463 36,289 124,870 106,798
Tenant reimbursements (70,152) (35,597) (140,653) (110,221)
Total expenses 501,631 514,513 1,413,002 1,649,407
Loss before equity in loss
of joint ventures (75,087) (120,969) (156,634) (432,014)
Equity in loss of joint
ventures (Note B) (443,545) (289,919) (971,055) (981,087)
Gain on sale of property -- 513,910 -- 513,910
Net (loss) income $(518,632) $ 103,022 $(1,127,689) $ (899,191)
Net (loss) income allocated
to general partners (1%) $ (5,186) $ 1,030 $ (11,277) $ (8,992)
Net (loss) income allocated
to limited partners (99%) (513,446) 101,992 (1,116,412) (890,199)
$(518,632) $ 103,022 $(1,127,689) $ (899,191)
Net (loss) income per limited
partnership unit $ (5.91) $ 1.17 $ (12.86) $ (10.24)
[FN]
See Accompanying Notes to Financial Statements
c) ANGELES INCOME PROPERTIES, LTD. III
STATEMENT OF CHANGES IN PARTNERS' DEFICIT - September 30, 1995
(Unaudited)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 86,920 $ 1,000 $43,460,000 $43,461,000
Partners' deficit at
December 31, 1994 86,818 $(388,447) $(1,010,362) $(1,398,809)
Net loss for the nine months
ended September 30, 1995 -- (11,277) (1,116,412) (1,127,689)
Partners' deficit at
September 30, 1995 86,818 $(399,724) $(2,126,774) $(2,526,498)
[FN]
See Accompanying Notes to Financial Statements
d) ANGELES INCOME PROPERTIES, LTD. III
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1995 1994
Cash flows from operating activities:
Net loss $(1,127,689) $ (899,191)
Adjustments to reconcile net loss to net
cash used in operating activities:
Equity in loss of joint ventures 971,055 981,087
Depreciation 482,884 479,456
Amortization of loan costs and
leasing commissions 41,518 24,067
Gain on sale of property -- (513,910)
Change in accounts:
Restricted cash 2,463 (2,211)
Accounts receivable (29,621) (18,614)
Escrows for taxes 15,085 (75,644)
Other assets (436,660) 87,990
Accounts payable 25,368 (11,808)
Tenant security deposit liabilities (3,533) (909)
Property taxes 4,062 39,335
Other liabilities 33,678 (21,008)
Net cash (used in) provided by
operating activities (21,390) 68,640
Cash flows from investing activities:
Capital improvements (111,406) (45,442)
Proceeds from sale of asset -- 600,000
Distributions from joint venture 965,731 --
Net cash provided by investing
activities 854,325 554,558
Cash flows used in financing activities
Payments on mortgage notes payable (36,157) (639,713)
Net increase (decrease) in cash 796,778 (16,515)
Cash at beginning of period 1,220,603 1,233,009
Cash at end of period $ 2,017,381 $1,216,494
Supplemental disclosure of cash flow information
Cash paid for interest $ 286,815 $ 335,880
[FN]
See Accompanying Notes to Financial Statements
e) ANGELES INCOME PROPERTIES, LTD. III
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited 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
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 nine month
period ended September 30, 1995, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1995. For further
information, refer to the financial statements and footnotes thereto included in
the Partnership's annual report on Form 10-KSB for the fiscal year ended
December 31, 1994.
Certain reclassifications have been made to the 1994 information to conform to
the 1995 presentation.
Note B - Investment in Joint Ventures
The Partnership has a 33.3% investment in Northtown Mall Partners
("Northtown"), a 50% investment in Moraine West Carrollton Joint Venture
("Moraine") and a 57% investment in Burlington Outlet Mall Joint Venture
("Burlington").
The investments in Northtown and Burlington are included in the "Equity
interest in net liabilities of joint ventures".
A purchase agreement was executed on May 8, 1994 for the sale of all of the
Moraine properties to an affiliate of the third party managing agent. The sale
closed on July 21, 1994. Moraine received a net amount of approximately
$2,199,000 in cash after satisfying all indebtedness. Moraine realized a
$140,553 gain on the transaction of which the Partnership's pro rata share was
$70,277.
During the nine month period ended September 30, 1995, all of Moraine's
remaining cash was distributed. Also during this period, Moraine earned
interest income and incurred a minimal amount of expense.
Note B - Investment in Joint Ventures (continued)
Condensed balance sheet information as of September 30, 1995, for the joint
ventures is as follows:
Burlington Northtown
Assets
Cash $ 67,889 $ 290,827
Other assets 18,611 6,354,276
Investment properties, net 4,384,299 26,963,125
Total $ 4,470,799 $33,608,228
Liabilities and Partners' Deficit
Burlington Northtown
Other liabilities $ 323,808 $ 2,217,985
Notes payable 6,700,281 51,813,776
Partners' deficit (2,553,290) (20,423,533)
Total $ 4,470,799 $ 33,608,228
The condensed profit and loss statements for the three and nine months ended
September 30, 1995 and 1994 for the joint ventures are as follows:
Three Months Ended
September 30, 1995
Burlington Moraine Northtown
Revenue $ 3,369 $ -- $ 1,207,032
Costs and expenses (293,425) -- (2,033,205)
Net loss $ (290,056) $ -- $ (826,173)
Three Months Ended
September 30, 1994
Burlington Moraine Northtown
Revenue $ 155,772 $ 130,952 $ 1,190,193
Costs and expenses (295,596) (279,153) (2,026,260)
Gain on disposal of
property -- 323,153 --
Net (loss) income $ (139,824) $ 174,952 $ (836,067)
Nine Months Ended
September 30, 1995
Burlington Moraine Northtown
Revenue $ 223,145 $12,447 $ 4,294,193
Costs and expenses (701,557) (625) (6,381,215)
Net (loss) income $ (478,412) $11,822 $(2,087,022)
Nine Months Ended
September 30, 1994
Burlington Moraine Northtown
Revenue $ 475,822 $ 1,019,649 $ 4,335,646
Costs and expenses (1,025,333) (1,210,804) (6,424,209)
Gain on disposal of
property -- 323,153 --
Net (loss) income $ (549,511) $ 131,998 $(2,088,563)
The Partnership's equity in the losses of the joint ventures was $971,055 and
$981,087 for the nine months ended September 30, 1995 and 1994, respectively.
The Partnership accounts for its 33.3% investment in Northtown, its 57%
investment in Burlington and its 50% investment in Moraine using the equity
method of accounting. Under the equity method, the Partnership records its
equity interest in earnings or losses of the joint ventures; however, the
investment in the joint ventures will be recorded at an amount less than zero (a
liability) to the extent of the Partnership's share of net liabilities of the
joint ventures.
Note C - 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 for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
The following payments were made to the Managing General Partner and
affiliates in 1995 and in 1994:
1995 1994
Property management fees $ 51,083 $ 50,814
Reimbursement for services of
affiliates 171,467 274,741
Marketing services 901 --
The Partnership insures its properties 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 receives 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of one apartment complex
and one commercial property. The following table sets forth the average
occupancy of the properties for the nine months ended September 30, 1995 and
1994:
Average
Occupancy
Property 1995 1994
Lake Forest Apartments
Brandon, Mississippi 95% 94%
Poplar Square Shopping Center
Medford, Oregon 97% 99%
The Partnership realized a net loss of $1,127,689 for the nine months ended
September 30, 1995, as compared to a net loss of $899,191 for the nine months
ended September 30, 1994. The Partnership realized a net loss of $518,632 for
the three months ended September 30, 1995, as compared to net income of $103,022
for the three months ended September 30, 1994. The increase in the net loss for
the three and nine months ended September 30, 1995, as compared to the three and
nine months ended September 30, 1994, is primarily due to the gain on the sale
of land at Poplar Square on July 7, 1994, offset partially by a decrease in
general and administrative expenses during 1995 (see discussion below).
The Partnership realized a decrease in rental income during the nine months
ended September 30, 1995, as compared to the nine months ended September 30,
1994, as a result of a decrease in rental revenue at Poplar Square Shopping
Center. Poplar Square lost $7,500 per month in rental revenue due to the sale
of a parcel of land in September 1994. This decrease in revenue is partially
offset by an increase in occupancy at Lake Forest. This decrease is offset by
the increase in other income during the three and nine months ended September
30, 1995, as compared to the three and nine months ended September 30, 1994.
This increase in other income is a result of increased interest income, as a
result of investments in short term commercial paper, increased lease
cancellation fees, deposits forfeited and other miscellaneous fees and
collections. The decrease in general and administrative expenses during the
three and nine months ended September 30, 1995, as compared to the three and
nine months ended September 30, 1994, is primarily related to decreases in asset
management, partnership accounting and investor services reimbursements. The
decrease in interest expense for the nine months ended September 30, 1995, as
compared to the nine months ended September 30, 1994, is due to a decrease in
the outstanding mortgage note payable. The decrease in the outstanding mortgage
balance resulted from the proceeds from the sale of land at Poplar Square
Shopping Center being applied against the outstanding mortgage balance. The
decrease in expenses are complimented by an increase in tenant reimbursements
for the three and nine months ended September 30, 1995. This increase is due to
the tenant reimbursements in 1994 being based on information provided to the
Partnership by the previous management company. Such estimates were not an
accurate reflection of actual reimbursements.
In addition to a decrease in expenses, the Partnership also experienced a
decrease in overall losses from its joint venture properties for the nine months
ended September 30, 1995, versus the nine months ended September 30, 1994.
However, for the three months ended September 30, 1995, the Partnership's equity
in the losses of the joint ventures increased significantly over the three
months ended September 30, 1994. This increase in the equity in loss of joint
ventures can be attributed to increased losses relating to Burlington and a
change from net income of $174,952 for Moraine for the three months ended
September 30, 1994, versus no income for the three months ended September 30,
1995, due to the sale of this investment property on July 21, 1994. Revenue
decreased at Burlington for the three and nine months ended September 30, 1995,
versus the three and nine months ended September 30, 1994, as a result of
decreased occupancy. This decrease in revenue was offset by a large decrease in
expenses primarily caused by decreased occupancy and a decrease in interest
expense as a result of the loan modification agreement (see discussion below).
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of each 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 market conditions,
there is no guarantee that the Managing General Partner will be able to sustain
such a plan.
At September 30, 1995, the Partnership had unrestricted cash of $2,017,381
versus $1,216,494 at September 30, 1994. Net cash used in operating activities
increased as a result of an increase in other assets. Net cash provided by
investing activities increased as a result of cash distributions received from
Moraine. Net cash used in financing activities decreased as a result of a
prepayment of a portion of the mortgage note payable secured by the Poplar
Square investment property from the proceeds of the sale of land during 1994.
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 $3,460,054, which is secured by the Poplar Square
Shopping Center investment property, matured in June 1995. The Managing
General Partner is in negotiations to refinance this indebtedness and has
received a six month extension from the mortgage company to do so. Future cash
distributions will depend on the levels of net cash generated from operations,
property sales and the availability of cash reserves. No cash distributions
were recorded in 1994 or during the nine months ended September 30, 1995.
On March 15, 1991 ("Effective Date"), Northtown and the holder of the
Northtown Mall mortgage note payable entered into an Option Agreement ("Option")
whereby such lender has the right and an option to purchase the Northtown Mall
property on the terms and conditions as set forth in the Option. The purchase
price of the property, as set forth in the Option, is defined as the fair market
value of the property. Such Option can be exercised by written notice by the
lender at any time during any of the thirty-day periods occurring immediately
prior to the third, fifth, seventh, ninth, eleventh, thirteenth and fifteenth
anniversaries of the Effective Date. The first date on which the Option could
have been exercised was March 15, 1994. On February 22, 1994, the lender gave
notice to the Partnership that it intended to exercise this Option. The lender
offered $58,000,000 based on an annual appraisal. Northtown determined that the
fair value as determined in accordance with the loan documents is $62,000,000.
Northtown is negotiating with the lender to retain ownership of the property in
order to protect the Partnership's equity in the property. However, the
Managing General Partner cannot presently determine the outcome of such
negotiations.
The mortgage note payable secured by the Burlington investment property
matured on July 1, 1994. Burlington has obtained new financing terms which
consolidate all principal, accrued interest and late charges outstanding on July
1, 1994, into a new loan amount which will accrue interest at the greater of 2%
or net cash flow as defined in the loan extension agreement. The loan maturity
date had been extended until April 1, 1995. The mortgage holder has initiated
foreclosure proceedings against this property, however, the mortgage holder has
issued a stay of these proceedings in order to give the Managing General Partner
an opportunity to sell the property. The Managing General Partner is not
optimistic that a sale will be consummated within an amount of time satisfactory
to the mortgage holder and therefore anticipates that the mortgage holder will
proceed with the foreclosure.
A purchase agreement was executed on May 8, 1994 for the sale of all of the
Moraine properties to an affiliate of the third party managing agent. The sale
closed on July 21, 1994. Moraine received a net amount of approximately
$2,199,000 in cash after satisfying all indebtedness. Moraine realized a
$140,553 gain on the transaction of which the Partnership's pro rata share was
$70,277.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Angeles Corporation ("Angeles"), either directly or through an affiliate,
maintained a central disbursement account (the "account") for the properties and
partnerships managed by Angeles and its affiliates, including the Registrant.
Angeles caused the Partnership to make deposits to the account ostensibly to
fund the payment of certain obligations of the Partnership. Angeles further
caused checks on such account to be written to or on behalf of certain other
partnerships. However, of these total deposits, at least $42,213 deposited by
or on behalf of the Partnership was used for purposes other than satisfying the
liabilities of the Partnership. Accordingly, the Partnership filed a Proof of
Claim in the Angeles bankruptcy proceedings for such amount. However,
subsequently the Managing General Partner of the Partnership has determined that
the cost involved to pursue such claim would likely exceed any amount received,
if in fact such claim were to be resolved in favor of the Partnership.
Therefore, the Partnership withdrew this claim on August 9, 1995.
The Registrant is unaware of any other pending or outstanding litigation that
is not of a routine nature. The Managing General Partner of the Registrant
believes that all such pending or outstanding litigation will be resolved
without a material adverse effect upon the business, financial condition, or
operations of the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits -
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K - None.
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/Carroll D. Vinson
Carroll D. Vinson
President
By: /s/Robert D. Long
Robert D. Long
Controller and Principal
Accounting Officer
Date: November 9, 1995