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 March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT
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 (864) 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)
(in thousands, except unit data)
March 31, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 1,433
Restricted--tenant security deposits 47
Accounts receivable, less allowance
for doubtful accounts of $30 18
Escrows for taxes 154
Other assets 122
Investment properties
Land $ 1,527
Buildings and related personal property 12,490
14,017
Less accumulated depreciation (8,091) 5,926
$ 7,700
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 12
Tenant security deposits 47
Accrued taxes 12
Other liabilities 59
Mortgage notes payable 3,434
Equity interest in net liabilities of joint venture,
net of advances of $1,369 (Note B) 5,642
Partners' Deficit
General partners $ (389)
Limited partners (86,818 units issued
and outstanding) (1,117) (1,506)
$ 7,700
See Accompanying Notes to Financial Statements
b) ANGELES INCOME PROPERTIES, LTD. III
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1996 1995
Revenues:
Rental income $ 400 $ 429
Other income 13 19
Total revenues 413 448
Expenses:
Operating 110 86
General and administrative 56 74
Maintenance 37 35
Depreciation 161 159
Interest 106 99
Property taxes 22 41
Bad debt expense 11 --
Total expenses 503 494
Loss before equity in loss of
joint ventures (90) (46)
Equity in loss of joint ventures (Note B) (241) (272)
Net loss $ (331) $ (318)
Net loss allocated to general
partners (1%) $ (3) $ (3)
Net loss allocated to limited
partners (99%) (328) (315)
Net loss $ (331) $ (318)
Net loss per limited partnership unit $ (3.78) $ (3.63)
<FN>
See Accompanying Notes to Financial Statements
c) ANGELES INCOME PROPERTIES, LTD. III
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(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 at
December 31, 1995 86,818 $ (386) $ (789) $ (1,175)
Net loss for the three months
ended March 31, 1996 -- (3) (328) (331)
Partners' deficit at
March 31, 1996 86,818 $ (389) $ (1,117) $ (1,506)
<FN>
See Accompanying Notes to Financial Statements
d) ANGELES INCOME PROPERTIES, LTD. III
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1996 1995
Cash flows from operating activities:
Net loss $ (331) $ (318)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Equity in loss of joint ventures 241 272
Depreciation 161 159
Amortization of loan costs and leasing commissions 19 10
Bad debt expense 11 --
Change in accounts:
Restricted cash -- 3
Accounts receivable 13 2
Escrows for taxes (36) 44
Other assets 6 (11)
Accounts payable 1 6
Tenant security deposit liabilities -- (2)
Accrued taxes (32) (38)
Other liabilities (34) 15
Net cash provided by operating activities 19 142
Cash flows from investing activities:
Capital improvements (25) (54)
Advances to Joint Venture (436) (195)
Distributions from Joint Venture -- 963
Net cash (used in) provided by
investing activities (461) 714
Cash flows used in financing activities:
Payments on mortgage notes payable (13) (12)
Net (decrease) increase in cash (455) 844
Cash and cash equivalents at beginning of period 1,888 1,221
Cash and cash equivalents at end of period $ 1,433 $ 2,065
Supplemental disclosure of cash flow information:
Cash paid for interest $ 95 $ 96
<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 three month period ended March 31,
1996, are not necessarily indicative of the results that may be expected for the
fiscal year ended December 31, 1996. For further information, refer to the
financial statements and footnotes thereto included in Angeles Income
Properties, Ltd. III's (the "Partnership") annual report on Form 10-KSB for the
fiscal year ended December 31, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
Note B - Investment in Joint Venture
The Partnership has a 33.3% investment in Northtown Mall Partners ("Northtown")
which is shown as "Equity interest in net liabilities of joint venture" on the
balance sheet. The Partnership had a 57% investment in Burlington Outlet Mall
Joint Venture ("Burlington") and a 50% investment in Moraine West Carrollton
Joint Venture ("Moraine"). The Partnership no longer has an investment in these
joint ventures due to the foreclosure of Burlington's investment property and
the dissolution of Moraine during 1995. The condensed balance sheet information
as of March 31, 1996, for Northtown and Burlington is as follows:
Northtown Burlington
(in thousands)
Assets
Cash $ 420 $ 26
Other assets 7,751 2
Investment properties, net 25,833 --
Total $34,004 $ 28
Note B - Investment in Joint Venture (continued)
Liabilities and Partners' (Deficit) Capital
Northtown Burlington
(in thousands)
Other liabilities $ 3,540 $ 17
Mortgage notes payable 51,649 --
Partners' (deficit) capital (21,185) 11
Total $ 34,004 $ 28
The condensed profit and loss statements for the three months ended March 31,
1996 and 1995, for the joint ventures is as follows:
Northtown Burlington
(in thousands)
1996
Revenue $ 2,573 $ 11
Costs and expenses (3,293) --
Net (loss) income $ (720) $ 11
Northtown Burlington Moraine
1995
Revenue $ 2,543 $ 143 $ 13
Costs and expenses (3,147) (273) (1)
Net (loss) income $ (604) $ (130) $ 12
The Partnership's equity in the losses of the joint ventures was $241,000 and
$272,000 for the three months ended March 31, 1996 and 1995, respectively.
The Partnership accounts for its 33.3% investment in Northtown 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 expenses owed to the Managing General Partner and affiliates
during the three months ended March 31, 1996, and March 31, 1995, were paid or
accrued:
1996 1995
(in thousands)
Property management fees $16 $15
Reimbursement for services of
affiliates 37 58
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 three months ended March 31, 1996 and 1995:
Average Occupancy
1996 1995
Lake Forest Apartments (1)
Brandon, Mississippi 87% 95%
Poplar Square Shopping Center
Medford, Oregon 97% 97%
(1) The decrease in occupancy at Lake Forest Apartments is due to competition
from new apartment complexes in the Brandon, Mississippi area.
The Partnership realized a net loss of $331,000 for the three months ended March
31, 1996, as compared to a net loss of $318,000 for the three months ended March
31, 1995. The increase in the net loss for the three months ended March 31,
1996, as compared to the three months ended March 31, 1995, is primarily due to
a decrease in rental income, offset, in part, by a decrease in equity in loss of
joint venture(s).
Rental income decreased during the months ended March 31, 1996, as compared to
the three months ended March 31, 1995, due to the decrease in occupancy at Lake
Forest Apartments and a decrease in average rental rates at Poplar Square
Shopping Center. The decrease in other income during the three months ended
March 31, 1996, as compared to the three months ended March 31, 1995, is a
result of decreased lease cancellation fees, deposits forfeited and other fees
and collections. The increase in operating expenses relates primarily to
increased maintenance payroll associated with improvements being made on vacant
units at Lake Forest Apartments. The decrease in general and administrative
expenses during the three months ended March 31, 1996, as compared to the three
months ended March 31, 1995, is primarily related to decreases in cost
reimbursements for asset management, partnership accounting and investor
services. The decrease in property tax expense relates to a refund for an
overpayment of property taxes on Poplar Square Shopping Center. Bad debt
expenses increased as a result of an increase in the reserve required based on a
review of tenant accounts.
The decrease in the equity loss of joint ventures can be attributed to the loss
recognized on the Partnership's investment in Burlington for the three months
ended March 31, 1995. Due to the foreclosure of the Burlington investment
property in 1995, this loss did not recur in 1996.
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 March 31, 1996, the Partnership had unrestricted cash of $1,433,000 compared
to $2,065,000 at March 31, 1995. Net cash provided by operating activities
decreased as a result of an increase in net loss, an increase in escrows for
taxes and a decrease in other liabilities, offset, in part, by a decrease in
other assets. Net cash used in investing activities increased due to more
advances to Northtown Mall in 1996 and a non-recurring distribution received
from Moraine in 1995. The Northtown Mall property has continued to experience
cash shortfalls and has been dependent upon the Partnership and Angeles Income
Properties, Ltd. IV (the 66.7% owner of Northtown) to cover such shortfalls in
order to meet operating and debt service requirements for this property (see
discussion below for the Managing General Partner's plans regarding this
investment property).
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 $3,434,000, 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 two
six month extensions from the mortgage company to do so. The current extension
expires June 1996. The Managing General Partner does not anticipate that there
will be any excess cash available to the Partnership, if in fact the refinance
is successful. The outcome of the negotiations to refinance cannot presently be
determined. Future cash distributions will depend on the levels of net cash
generated from operations, property sales and the availability of cash reserves.
On March 15, 1991, 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 specified dates.
The Managing General Partner is presently in negotiations to refinance this
indebtedness as well, however, the outcome of such negotiations cannot presently
be determined.
On October 30, 1995, the Partnership lost Burlington Outlet Mall located in
Burlington, NC, through a foreclosure by an unaffiliated mortgage holder. The
property was not generating sufficient cash flow to meet debt service
requirements. The non-payment of principal and interest constituted a default
under the terms of the mortgage agreement and allowed the holder of the mortgage
agreement to foreclose on the property. The Partnership deemed it to be in the
best interest of the Partnership not to contest the foreclosure action.
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. 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 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 - None.
b) Reports on Form 8-K:
None filed during the three months ended March 31, 1996.
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
Vice President/CAO
Date: May 14, 1996