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 0-10273 CONSOLIDATED CAPITAL PROPERTIES III (Exact name of small business issuer as specified in its charter) California 94-2653686 (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) CONSOLIDATED CAPITAL PROPERTIES III CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) March 31, 1996 Assets Cash and cash equivalents: Unrestricted $ 3,022 Restricted-tenant security deposits 135 Prepaid and other assets 517 Investment properties: Land $ 1,828 Buildings and related personal property 16,739 18,567 Less accumulated depreciation (12,996) 5,571 $ 9,245 Liabilities and Partners' Capital (Deficit) Accounts payable and accrued expenses $ 556 Notes and interest payable 6,693 Partners' Capital (Deficit) General partner $ (1,950) Limited partners (158,636 units issued and outstanding) 3,946 1,996 $ 9,245 See Accompanying Notes to Consolidated Financial Statements b) CONSOLIDATED CAPITAL PROPERTIES III CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended March 31, 1996 1995 Revenues: Rental income $ 1,085 $ 1,056 Other income 105 148 Total revenues 1,190 1,204 Expenses: Property operations 671 673 Depreciation 229 274 Interest 161 213 Administrative 81 188 Total expenses 1,142 1,348 Net income (loss) $ 48 $ (144) Net income (loss) allocated to general partner (4%) $ 2 $ (6) Net income (loss) allocated to limited partners (96%) 46 (138) $ 48 $ (144) Net income (loss) per weighted limited partnership unit $ .29 $ (.87) <FN> See Accompanying Notes to Consolidated Financial Statements c) CONSOLIDATED CAPITAL PROPERTIES III CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) (in thousands, except unit data) Limited Partnership General Limited Units Partner Partners Total Original capital contributions 158,945 $ 1 $79,473 $79,474 Partners' capital (deficit) at December 31, 1995 158,636 $(1,952) $ 3,900 $ 1,948 Net income for the three months ended March 31, 1996 2 46 48 Partners' capital (deficit) at March 31, 1996 158,636 $(1,950) $ 3,946 $ 1,996 <FN> See Accompanying Notes to Consolidated Financial Statements d) CONSOLIDATED CAPITAL PROPERTIES III CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Three Months Ended March 31, 1996 1995 Cash flows from operating activities: Net income (loss) $ 48 $ (144) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization of discounts and loan costs 238 289 Change in accounts: Tenant security deposits (12) -- Interest on note receivable -- 15 Prepaids and other assets (83) (5) Accounts payable and accrued expenses 44 137 Note interest payable -- 55 Net cash provided by operating activities 235 347 Cash flows from investing activities: Property improvements and replacements (53) (53) Disposition of property 11 -- Purchase of investments -- (3,087) Proceeds from sale of investments -- 3,019 Repayment of notes receivable -- 2,316 Net cash (used in) provided by investing activities (42) 2,195 Cash flows from financing activities: Payments on notes payable (25) (55) Partners' distributions -- (1,428) Net cash used in financing activities (25) (1,483) Net increase in cash and cash equivalents 168 1,059 Cash and cash equivalents at beginning of period 2,854 2,154 Cash and cash equivalents at end of period $3,022 $ 3,213 Supplemental disclosure of cash flow information: Cash paid for interest $ 154 $ 145 <FN> See Accompanying Notes to Consolidated Financial Statements e) CONSOLIDATED CAPITAL PROPERTIES III NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements of Consolidated Capital Properties III ("The Partnership") 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 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-KSB for the fiscal year ended December 31, 1995. Certain reclassifications have been made to the 1995 information to conform to the 1996 presentation. Consolidation The Partnership's financial statements include the accounts of ConCap Mountain Plaza Associates, Ltd. ("Mountain Plaza Associates), CCP III Associates, Ltd. ("CCP III Associates") and ConCap Village Green Associates, Ltd. ("Village Green Associates"), three wholly-owned limited partnerships. All intercompany transactions have been eliminated. Cash and Cash Equivalents Cash and cash equivalents for purposes of reporting cash flows include cash on hand, demand deposits and money market funds. Note B - Transactions with Affiliated Partners The Partnership has paid property management fees equal to 5% of collected gross rental revenues ("Rental Revenues") for property management services in each of the three months ended March 31, 1996 and 1995. In late December 1994, an affiliate of Insignia Financial Group, Inc. ("Insignia") assumed day-to-day property management responsibilities for all of the Partnerships' properties. Fees paid to Insignia and affiliates for the three months ended March 31, 1996, and March 31, 1995, which are included in operating expenses, have been reflected in the following table as compensation to related parties in the applicable periods: For the Three Months Ended March 31, 1996 1995 (in thousands) Property management fees $55 $56 The Partnership Agreement also provides for reimbursement to the General Partner and its affiliates for costs incurred in connection with the administration of Partnership activities. The General Partner and its affiliates received reimbursements during the first quarter of 1996 and 1995 as reflected in the following table: For the Three Months Ended March 31, 1996 1995 (in thousands) Reimbursement for services of affiliates $42 $92 Note C - Distributions In January of 1995, the General Partner declared and paid distributions representing a return of capital totalling approximately $1.4 million or $9.00 per Unit to the Limited Partners. Note D - Repayment of Note Receivable In October of 1988, the Partnership accepted a $2.1 million note receivable in connection with the sale of the Columns of Castleton Apartments. The note was scheduled to mature in June of 1996. In March of 1995, the Partnership received the outstanding principal balance of approximately $2.3 million, which represents the original principal balance plus unpaid interest, in settlement of the borrower's liability under the note agreement. Note E - Subsequent Events On May 3, 1996, the Partnership entered into an interim financing arrangement for both Ventura Landing and Village Green for $2.2 million and $2 million, respectively. The then existing Ventura Landing note of $3.2 million was repaid at that time. The interest rate is 250 basis points over the 30-day LIBOR, resulting in a total note rate of 7.94% on May 3. The loans mature on August 1, 1996 with a 60-day extension option. The Partnership hopes to obtain long-term financing prior to the expiration of the interim financing arrangement. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS The Partnership's investment properties consist of four apartment complexes 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 Mountain Plaza Apartments 83% 82% El Paso, TX Professional Plaza Office Building 96% 98% Salt Lake City, UT Ventura Landing Apartments 93% 90% Orlando, FL Village Green Apartments 95% 90% Altamante Springs, FL West Chase Apartments 93% 92% Lexington, KY The Partnership realized net income from operations of approximately $48,000 for the three months ended March 31, 1996, compared to a net loss from operations of approximately $144,000 for the three months ended March 31, 1995. Depreciation, interest and administrative expenses decreased for the three months ended March 31, 1996, compared to the three months ended March 31, 1995. Administrative expenses decreased for the three months ended March 31, 1996, compared to the three months ended March 31, 1995, due to decreased legal, printing and postage costs associated with the Partnership's required responses to various tender offers made in 1995. The decrease in administrative expenses was also affected by decreased expense reimbursements related to the combined efforts of the Dallas and Greenville partnership administration staffs during the transition period in the first quarter of 1995. The increased costs related to the transition efforts were incurred to minimize any disruption in the year-end reporting function including the financial reporting and K-1 preparation and distribution. Interest expense decreased as a result of the retirement of notes payable secured by the Professional Plaza Office Building and the Village Green Apartments in August 1995. As part of the ongoing business plan of the Partnership, the 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 Corporate 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 Corporate General Partner will be able to sustain such a plan. At March 31, 1996, the Partnership held cash and cash equivalents of approximately $3,157,000 including restricted cash, compared to approximately $3,213,000 at March 31, 1995. Net cash provided by operating activities decreased primarily due to increased funding of the tax escrow accounts. Also contributing to the decrease was lower interest income from the Columns of Castleton note receivable, which was collected in March of 1995 (See "Note D" for further discussion). Net cash used in investing activities decreased due to the final collection of the Columns of Castleton note receivable in March of 1995 favorably impacting 1995's cash flows. Net cash used in financing activities decreased due to the Partners' distributions in January of 1995. The Partnership modified its Partnership Agreement in the fourth quarter of 1995 to eliminate the requirement that the Partnership maintain reserves equal to at least 5% of invested capital and instead require reserves in an amount deemed reasonable and prudent by the General Partner. 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 property 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 approximately $6,693,000 matures at various times 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 net cash generated from operations, capital expenditure requirements, property sales and the availability of cash reserves. On January 20, 1995, an affiliate of the General Partner, Insignia CCP III Acquisition, L.L.C., closed an offer to purchase Units (the "Tender Offer") for a cash price of $50.00 per Unit to Limited Partners of record as of December 15, 1994. Approximately 2,260 Limited Partners holding 36,882 Units (23.24% of total Units) accepted the Tender Offer and sold their Units to Insignia CCP III Acquisition, L.L.C. effective January 20, 1995, for an aggregate sales price of approximately $1.8 million. 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 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. CONSOLIDATED CAPITAL PROPERTIES III By: CONCAP EQUITIES, INC. General Partner By: /s/ Carroll D. Vinson Carroll D. Vinson President By: /s/ Robert D. Long, Jr. Vice President/CAO Date: May 14, 1996