UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Year Ended December 31, 2000 Commission file number: 33-2121
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
ARIZONA 86-0540409
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2944 N. 44th Street, Suite 200, Phoenix, Arizona 85018
(Address of principal executive offices) (Zip Code)
(602) 955-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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. [X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [X] Yes [ ] No
Registrant's revenues for its most recent fiscal year were $1,000,000.
No market exists for the limited partnership interests of the Registrant, and,
therefore, no aggregate market value can be determined.
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
December 31, 2000
PART I
1. BUSINESS
TPI Land Development III Limited Partnership (the Partnership) is a limited
partnership formed during 1986 under the laws of the State of Arizona for a
term of fifteen (15) years, expiring on December 31, 2001. The Partnership
reached impound on May 27, 1986. The offering period for TPI Land
Development III Limited Partnership ended December 31, 1987, after receiving
and accepting $9,939,500 or 19,879 units at $500 each from limited partners.
The Partnership was formed to acquire property for investment and
appreciation purposes. The Partnership is actively and aggressively
attempting to sell all of its remaining properties and liquidate the
Partnership. The General Partner is currently working to identify and
negotiate with potential buyers. If all of the Partnership properties are
not sold prior to the dissolution date of December 31, 2001, then the
General Partner shall immediately commence to wind up the Partnership
affairs and liquidate the assets of the Partnership as promptly as possible.
The Partnership filed petitions for relief under Chapter 11 of the federal
bankruptcy laws in the United States Bankruptcy Court for the District of
Arizona on July 6, 1995. Under Chapter 11, certain claims against the Debtor
in existence prior to the filing of petitions for relief under the federal
bankruptcy laws are stayed while the Debtor continues business operations as
Debtor-in-Possession. At the time of the filing, the Partnership owned real
property in Maricopa County and Pinal County, Arizona, comprised of
commercial, industrial, mid-rise office, and multi-family acreage. After the
purchase of said real property, both counties suffered significant declines
in values of real property for a number of years.
On May 20, 1997, the Partnership executed Amendment No. 1 to its partnership
agreement for the purpose of listing a new general partner, Investors
Recovery Group LLC, which was filed with the State of Arizona on June 18,
1997.
On July 29, 1997, the Partnership filed Chapter 11 Plan of Reorganization
for the purpose of classification of creditors and provisions for treatment
of claims of creditors. The funds necessary to execute and implement this
Plan of Reorganization were derived from the sale of real property owned by
the Partnership, and cash in bank. The assets could not be sold without
court approval and notice.
On August 31, 1999, the Partnership filed a First Amended Plan of
Reorganization for the purpose of distributing cash held by the Partnership
based on each partner's respective ownership interests. The distribution
took place immediately upon approval by the court, which was on October 21,
1999. The Partnership deemed abandoned any units of partners that did not
negotiate the distribution check by December 31, 1999, which totaled
$13,181, or 262 units. Subsequent to December 31, 1999, the Partnership
found $4,226, or 84 units, which were reinstated during 2000. The funds
necessary to execute and implement the Plan of Reorganization were derived
from the sale of real property owned by the Partnership, and an interest
bearing cash trust account.
2
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
December 31, 2000
1. BUSINESS (CONTINUED)
On March 30, 2000, a Notice of Consummation of Plan of Reorganization and
Application for Final Decree was made. On April 5, 2000, the Partnership
emerged from bankruptcy pursuant to a confirmed plan of reorganization. In
accordance with Statement of Position (SOP) 90-7, "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code," once the Partnership
emerges from reorganization, the Partnership qualifies for "fresh start"
accounting and reporting. All assets and liabilities are restated to reflect
their reorganization values, which approximate fair values at the
reorganization date. In addition, the amount of prior partners' capital or
deficit is eliminated as a charge to partners' capital.
The reorganization values of the Partnership's properties were determined in
consideration of several factors, such as population and demographic data
derived from the 1990 U.S. Census data bank, and by reliance on available
market information and appropriate valuation methodologies. Considerable
judgment is necessarily required in interpreting market data to develop the
estimates of fair value, and, accordingly, the estimates are not necessarily
indicative of the amounts that the Partnership could realize in current
market exchange.
As a result, on March 31, 2000, the Partnership charged partners' capital
with $2,452,556, representing accumulated partners' deficit through March
31, 2000, and charged partners' capital with $555,345 representing the
restatement of assets at fair market value. See Note 3.
In 2000, the main sources of revenue for the Partnership were transfer of
ownership fees of $2,238.21, and interest of $42,572 earned on money market
accounts, and land sales as described in Note 2.
On December 31, 2000, the Partnership had $229,301 in cash and money market
accounts. This cash is to be retained as operating reserves and will be
distributed to the partners with the final distribution of the Partnership.
COMPETITION
The real estate business is highly competitive and the property has active
competition from similar properties in the vicinity. The Registrant is also
competing for potential buyers with respect to the ultimate sale of the
Property. See "Item 6, Management's Discussion and Analysis or Plan of
Operation."
EMPLOYEES
The Registrant has no employees. Services are performed for the Registrant
by the general partner and the management group retained by them.
3
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
December 31, 2000
1. BUSINESS (CONTINUED)
ASSET MANAGEMENT
The Partnership has retained as its asset managers Horizon Real Estate
Group, Inc. and its affiliate National Portfolio, Inc., in an agreement
dated September 1996, to provide broker/manager and accounting services for
the Partnership.
The broker/manager receives the following fees and commissions:
(1) a monthly asset management fee equal to one twelfth of .75% times the
total values of the real property on hand,
(2) a brokerage services fee equal to five percent (5%) of (a) the selling
price of each parcel of the property sold; (b) of the amount of damages
actually collected by suit or otherwise if completion of a sale is
prevented by the default of the buyer under a purchase and sale
agreement; and (c) of the list price of any parcel of property for which
the broker/manager has procured a buyer who is ready, willing and able
to purchase such parcel at the listed price and upon the listed terms
upon Partnership's refusal to sell such parcel,
(3) a disposition fee of one percent (1%) of the selling price upon the
closing of each sale of a portion of the property which occurs while
this agreement remains in effect,
(4) an accounting fee equal to the reasonable hourly charges for the time of
its employees spent in performing the accounting services required, not
to exceed $10,000 per year. In addition, a tax return preparation fee
equal to the reasonable hourly charges for the time of its employees
spent in the preparation of the annual income tax returns, not to exceed
$7,000 per year, and
(5) if the broker/manager is required to administer more than one
distribution to the partners during a single calendar year, compensation
shall be at $35 per hour for its clerical employees. In addition, if any
extraordinary professional services are required from the broker/manager
beyond the services required by this agreement, compensation shall be at
$150 per hour, provided that the broker/manager obtains the
Partnership's approval in writing.
The agreement is dated September 1996 and continues until terminated at any
time by written consent of either party.
4
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
December 31, 2000
2. PROPERTIES
No properties were purchased during 2000.
On May 30, 2000, the Partnership sold the 10.22 acres of property located at
Baseline Road and 32nd Street, Phoenix, Arizona, AZ (the Southwest quarter
of Section 36, Township 1 North, Range 3 East of the Gila and Salt River
Base and Meridian, Maricopa County, Arizona) for $1,000,000. Under the
"fresh start" accounting rules, the property was written down in
reorganization by $307,902 to its fair market value of $1,000,000, known
expenses of $56,303 were accrued at reorganization, and no loss was
recognized on the sale of the property for book purposes. Two other
properties were written down in reorganization to their fair market values.
Property (4) was written down $69,059 to a fair market value of $75,000, and
property (5) was written down $124,306 to a fair market value of $1,372,140.
Total reorganization restatement of assets was $555,345.
During 1999, the Partnership sold three parcels of land as follows: (i)
easement located at the Northeast corner of Baseline Road and 32nd Street,
Phoenix, Arizona, for $35,000, on February 1, 1999, for a net gain of
$35,000; (ii) 13 acres located at Pecos Road and Arizona Avenue, Chandler
Arizona, on February 3, 1999, for $588,587. Costs of sales were $1,477,603,
for a net loss of $889,017; and (iii) 90,000 square feet located at 79th
Avenue and Peoria Avenue, Peoria, Arizona, on August 11, 1999, for $180,000.
Costs of sales were $184,102, for a net loss of $4,102.
The remaining parcels of vacant land currently held by the Partnership are
22.1 acres of commercial real property at Baseline and 24th Street, Phoenix,
AZ; 11.3 acres of commercial real property at Peoria and 79th Avenue,
Phoenix, AZ; 1.03 acres of commercial real property at Central Avenue and
Ludlow, Avondale, AZ; 8.5 acres of commercial real property at Van Buren and
Central Avenue, Goodyear, AZ. The properties continue to be actively
marketed.
3. LEGAL PROCEEDINGS
None.
4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS
None.
5
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
December 31, 2000
PART II
5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
a. Market Information - There is no established public trading market for
the limited partnership units.
b. Holders - Upon close of the offering on December 31, 1987, the
Partnership had received and accepted 19,879 limited partner units.
c. The Partnership made the following cash distributions to limited
partners during 2000 and 1999: $900,120 and $986,931.
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The matters discussed in this Form 10-K 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-K and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time.
The discussion of the Registrant's liquidity, capital resources 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 operations. 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.
RESULTS OF OPERATIONS
The Partnership continues to operate in a loss situation with the net loss
for the years ending December 31, 2000 and December 31, 1999 being $99,183
and $991,114. Property sales for the same periods resulted in net losses of
($361, 979) and ($893,119) respectively. The major expenses of the
Partnership were management fees of $51,017 in the year 2000 and $48,405 in
the year 1999, property taxes of $43,899 in 2000 and $42,211 in 1999, legal
and accounting fees of $36,104 in 2000 and $76,801 in 1999. Professional
(legal and accounting) fees dropped due to the Partnership's emergence from
bankruptcy and the elimination of trustee and attorney fees required to
continue operations under Chapter 11.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2000 the Partnership had $229,301 in cash and money
market instruments. The sources of revenue during the operating period were
revenue proceeds from property sales, transfer fees, and interest on the
money market account.
7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Registrant's financial statements contained at the end of this Form
10-K.
8. CHANGES IN OR DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
6
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
December 31, 2000
PART III
9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
THE INFORMATION INCLUDED UNDER THE HEADING "MANAGEMENT" CONTAINED ON PAGES
20 - 21 OF THE PROSPECTUS, AND AMENDMENT NO. 1 TO CERTIFICATE OF TPI LAND
DEVELOPMENT III LIMITED PARTNERSHIP AS FILED WITH THE ARIZONA SECRETARY OF
STATE ON JUNE 18, 1997 IS INCORPORATED HEREIN BY REFERENCE.
The Registrant has no officers or directors. The general partner manages and
controls substantially all of Registrant's affairs and has general
responsibility and ultimate authority in all matters affecting its business.
Horizon Real Estate Group, Inc. and its affiliates manage the partnership
under the terms of an agreement dated September 1996.
10. EXECUTIVE COMPENSATION
None.
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERES AND MAANAGEMENT
None.
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements.
See the Registrant's financial statements contained at the end of this
Form 10-K.
(b) Reports on Form 8-K
Form 8-K/A filed November 14, 2000 to announce the emergence from
bankruptcy and filed an audited balance sheet as of March 31, 2000.
7
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
December 31, 2000
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
Date: April 17, 2001 By: /s/ Lawrie Porter
-----------------------------------------
Lawrie Porter, Managing Member
Investors Recovery Group, LLC
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature/Name Title Date
- -------------- ----- ----
/s/ Lawrie Porter Managing Member, April 17, 2001
- ------------------------- Investors Recovery Group, LLC
Lawrie Porter
8
TPI LAND DEVELOPMENT III
LIMITED PARTNERSHIP
PHOENIX, ARIZONA
AUDIT REPORT
DECEMBER 31, 2000 AND 1999
F-1
INDEPENDENT AUDITORS' REPORT
To the Partners of
TPI Land Development III Limited Partnership
An Arizona Limited Partnership
Phoenix, Arizona 85018
We have audited the balance sheet of TPI Land Development III Limited
Partnership (the Partnership), as of December 31, 2000 and 1999, and the related
statement of operations, changes in partners' capital and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1 to the financial statements, the Partnership emerged from
bankruptcy on April 5, 2000, (effective March 31, 2000), and the Partnership
accounted for the reorganization using fresh-start reporting. Thus, the
post-reorganization financial statements are not comparable to the
pre-reorganization financial statements. The Partnership is actively and
aggressively attempting to sell all of its remaining properties and liquidate
the Partnership. The General Partner is currently working to identify and
negotiate with potential buyers.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Partnership at December 31,
2000 and 1999, the results of its operations and its cash flows for the years
then ended, in conformity with generally accepted accounting principles.
/s/ Clancy and Co., P.L.L.C.
Phoenix, Arizona
April 3, 2001
F-2
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
2000 1999
---------- ----------
ASSETS
Current Assets
Cash $ 229,301 $ 323,275
Land Held for Investment Purposes (Note 3) 4,734,276 6,235,543
---------- ----------
Total Assets $4,963,577 $6,558,818
========== ==========
PARTNERS' CAPITAL
Current Liabilities
Accounts Payable $ 27,250 $ 67,843
Commitments and Contingencies (Note 4)
Partners' Capital
General Partner, Units Outstanding (2000:203, 1999:200) 50,504 68,769
Limited Partners, Units Outstanding (2000:19,676, 1999:19,679) 4,885,823 6,422,206
---------- ----------
Partners' Capital 4,936,327 6,490,975
---------- ----------
Total Liabilities and Partners' Capital $4,963,577 $6,558,818
========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
Year Ended December 31
2000 1999
--------- ---------
POST-REORGANIZATION ITEMS (APRIL 1 TO DECEMBER 31):
Revenues
Interest and Dividend Income $ 38,759 $ --
Other Income 1,563 --
--------- ---------
Total Revenues 40,322 --
Expenses
Legal and Accounting 29,084 --
Management Fees (Note 5) 44,494 --
Property Taxes 33,459 --
General and Administrative 10,091 --
--------- ---------
Total Expenses 117,128 --
--------- ---------
Post-reorganization Net Loss (76,806) --
PRE-REORGANIZATION ITEMS (JANUARY 1 TO MARCH 31):
Revenues
Interest and Dividend Income 3,813 46,101
Miscellaneous Income 675 14,937
--------- ---------
Total Revenues 4,488 61,038
Expenses
Legal and Accounting 7,020 76,802
Management Fees (Note 5) 6,523 48,405
Property Taxes 10,440 42,211
General and Administrative 2,882 26,615
--------- ---------
Total Expenses 26,865 194,033
Other Expenses
Loss on Sales of Properties (Note 3) -- (858,119)
--------- ---------
Pre-reorganization Net Loss (22,377) (991,114)
--------- ---------
Net Loss $ (99,183) $(991,114)
========= =========
Net Loss Per Limited Partnership Unit $ (5.04) $ (50.36)
========= =========
Weighted Average Number of Limited Partnership Units Outstanding 19,679 19,679
========= =========
The accompanying notes are an integral part of these financial statements.
F-4
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
Partners' Accumulated Total Partners'
Capital Deficit Capital
----------- ----------- -----------
Balance, December 31, 1997 $ 9,908,085 $(1,095,586) $ 8,812,499
Net Loss (343,479) (343,479)
----------- ----------- -----------
Balance, December 31, 1998 9,908,085 (1,439,065) 8,469,020
Partner Distributions (986,931) (986,931)
Net Loss (991,114) (991,114)
----------- ----------- -----------
Balance, December 31, 1999 8,921,154 (2,430,179) 6,490,975
Pre-reorganization Net Loss, January 1 to March 31, 2000 (22,377) (22,377)
Fresh-start Accounting - Restatement of Assets (555,345) (555,345)
Fresh-start Accounting - Elimination of Partners' Deficit (2,452,556) 2,452,556 0
----------- ----------- -----------
Reorganization Values, March 31, 2000 (Note 1) 5,913,253 0 5,913,253
Partner Distributions (900,120) (900,120)
Post-reorganization Net Loss, April 1 to December 31,2000 (76,806) (76,806)
----------- ----------- -----------
Balance, December 31, 2000 $ 5,013,133 $ (76,806) $ 4,936,327
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-5
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
Year Ended December 31
2000 1999
----------- -----------
Cash Flows From Operating Activities
Post-reorganization Net Loss, April 1 to December 31, 2000 $ (76,806) $ 0
(Increase) Decrease in Land Held For Investment Purposes 1,000,000 0
Increase (Decrease) in Accounts Payable (78,596) 0
----------- -----------
Cash Flows Provided By Operating Activities Before Reorganization Items 844,598 0
Pre-reorganization Net Loss, January 1 to March 31, 2000 (22,377) (991,114)
Adjustments to Reconcile Net Loss to Net Cash Provided By
Operating Activities:
(Increase) Decrease in Refundable Property Taxes 0 2,528
(Increase) Decrease in Land Held For Investment Purposes 0 1,619,809
Increase (Decrease) in Accounts Payable Not Subject to Compromise (16,075) 514
Increase (Decrease) in Accounts Payable Subject to Compromise 0 (1,036)
----------- -----------
Cash Flows Provided By Reorganization Items 0 1,621,815
----------- -----------
Net Cash Flows Provided By Operating Activities 806,146 630,701
Cash Flows From Investing Activities -- --
Cash Flows From Financing Activities
Distributions to Partners (900,120) (986,931)
----------- -----------
Net Cash Used In Financing Activities (900,120) (986,931)
----------- -----------
Decrease in Cash and Cash Equivalents (93,974) (356,230)
Cash and Cash Equivalents, Beginning of Year 323,275 679,505
----------- -----------
Cash and Cash Equivalents, End of Year $ 229,301 $ 323,275
=========== ===========
Supplemental Information:
Cash paid for:
Interest $ 0 $ 0
=========== ===========
Income taxes $ 0 0
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-6
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
NOTE 1 - ORGANIZATION
TPI Land Development III Limited Partnership (the Partnership) is a
limited partnership formed during 1986 under the laws of the State of
Arizona for a term of fifteen (15) years, expiring on December 31,
2001. The offering period for the Partnership ended December 31, 1987,
after receiving and accepting $9,939,500, or 19,879 units at $500 each.
The Partnership was formed to acquire property for investment and
appreciation purposes. The Partnership is actively and aggressively
attempting to sell all of its remaining properties and liquidate the
Partnership. The General Partner is currently working to identify and
negotiate with potential buyers. If all of the Partnership properties
are not sold prior the dissolution date of December 31, 2001, then the
General Partner shall immediately commence to wind up the Partnership
Affairs and liquidate the assets of the Partnership as promptly as
possible.
The Partnership filed petitions for relief under Chapter 11 of the
federal bankruptcy laws in the United States Bankruptcy Court for the
District of Arizona on July 6, 1995. Under Chapter 11, certain claims
against the Debtor in existence prior to the filing of petitions for
relief under the federal bankruptcy laws are stayed while the Debtor
continues business operations as Debtor-in-Possession. At the time of
the filing, the Partnership owned real property in Maricopa County and
Pinal County, Arizona, comprised of commercial, industrial, mid-rise
office, and multi-family acreage. After the purchase of said real
property, both counties suffered significant declines in values of real
property for a number of years.
On July 29, 1997, the Partnership filed Chapter 11 Plan of
Reorganization for the purpose of classification of creditors and
provisions for treatment of claims of creditors. The funds necessary to
execute and implement this Plan of Reorganization were derived from the
sale of real property owned by the Partnership, and cash in bank. The
assets could not be sold without court approval and notice.
On August 31, 1999, the Partnership filed a First Amended Plan of
Reorganization for the purpose of distributing cash held by the
Partnership based on each partner's respective ownership interests. The
distribution took place immediately upon approval by the court, which
was on October 21, 1999. The Partnership deemed abandoned any units of
partners that did not negotiate the distribution check by December 31,
1999, which totaled $13,181, or 262 units. Subsequent to December 31,
1999, the Partnership found $4,226, or 84 units, which were reinstated
during 2000. The funds necessary to execute and implement the Plan of
Reorganization were derived from the sale of real property owned by the
Partnership, and an interest bearing cash trust account.
F-7
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 (CONTINUED)
NOTE 1 - ORGANIZATION (CONTINUED)
On March 30, 2000, a Notice of Consummation of Plan of Reorganization
and Application for Final Decree was made. On April 5, 2000, the
Partnership emerged from bankruptcy pursuant to a confirmed plan of
reorganization. In accordance with Statement of Position (SOP) 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code," once the Partnership emerges from reorganization, the
Partnership qualifies for "fresh start" accounting and reporting. All
assets and liabilities are restated to reflect their reorganization
values, which approximates fair values at the reorganization date. In
addition, the amount of prior partners' capital or deficit is
eliminated as a charge to partners' capital.
The reorganization values of the Partnership's properties were
determined in consideration of several factors, such as population and
demographic data derived from the 1990 U.S. Census data bank, and by
reliance on available market information and appropriate valuation
methodologies. Considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair value, and,
accordingly, the estimates are not necessarily indicative of the
amounts that the Partnership could realize in current market exchange.
As a result, on March 31, 2000, the Partnership charged partners'
capital with $2,452,556, representing accumulated partners deficit
through March 31, 2000, and charged partners' capital with $555,345
representing the restatement of assets at fair market value. See
Note 3.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
METHOD OF ACCOUNTING
The Partnership's financial statements are prepared using the accrual
method of accounting. The Partnership's intent to sell all of the
remaining properties and liquidate the Partnership will not impact the
accounting treatment applied by the Partnership in its financial
statements prepared in accordance with generally accepted accounting
principles as the liquidation proceeds and the timing thereof are not
currently estimable. When the timing of the last cash receipt from the
sale of the last property is reasonably determinable, the Partnership
will adopt liquidation basis accounting in that quarter, or on December
31, 2001, the dissolution date of the Partnership, whichever comes
earlier. At that time, all assets and liabilities will be adjusted to
their settlement amounts and an amount to be distributed to the
remaining limited partners upon liquidation will be estimated.
F-8
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 (CONTINUED)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
The Partnership considers all highly liquid debt instruments with a
maturity of three months or less when acquired to be cash and cash
equivalents.
CONCENTRATION OF CREDIT RISK
The Partnership maintains cash balances in excess of $100,000 at a
local bank. The balance is insured by the Federal Deposit Insurance
Corporation up to $100,000.
RISKS AND UNCERTAINTIES
The Partnership's ability to (i) achieve positive cash flow from
operations, (ii) meet its debt obligations, (iii) provide distributions
either from operations or the ultimate disposition of the Partnership's
properties or (iv) continue as a going concern, may be impacted by
changes in interest rates, property values, geographic economic
conditions, or the entry of other competitors into the market. The
accompanying financial statements do not provide for adjustments with
regard to these uncertainties.
REVENUE RECOGNITION
The Partnership accounts for sales of land held for investment purposes
under the accrual method when certain criteria are met, and profit is
recorded when a sale has been consummated.
SYNDICATION COSTS
Syndication costs totaling $31,415 represent commissions incurred on
the sale of the limited partnership interest and the costs of preparing
the prospectuses, and have been charged against partners' capital.
These costs are not deductible for income tax purposes, and upon
partnership dissolution, will be allocated proportionately against the
remaining partnership interests.
LAND HELD FOR INVESTMENT PURPOSES AND RELATED COSTS
Real estate is stated at the lower of cost or estimated fair value less
costs to sell and is adjusted for impairment of value. Estimated fair
value is based upon independent appraisals or prevailing market rates
for comparable properties. Appraisals are estimates of fair value based
upon assumptions about the property and the market in which it is
located. Land-related costs are capitalized as a cost of real estate.
F-9
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 (CONTINUED)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Land-related costs not previously allocated to specifically
identifiable properties represent commissions, legal expenses, and
other expenses incurred during the acquisition of the land. These costs
are allocated when a parcel is sold based on the parcel's original
contract price as a percentage of total contract prices of all
remaining parcels and are included in cost of sales.
In accordance with the Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed of," the Partnership records
impairment losses for long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows
are not sufficient to recover the asset's carrying amount. The
impairment loss is measured by comparing the fair value of the asset to
its carrying amount.
USE OF ESTIMATES
Estimates, primarily of the amounts that will be realized from selling
existing real estate, are required in preparing financial statements in
accordance with generally accepted accounting principles because of
normal business uncertainties. Because of the uncertainties inherent in
those estimates, it is at least reasonably possible that the estimate
will change in the near term. No estimate can be made of the range of
additional loss that is reasonably possible. Actual results may differ
from these estimates.
INCOME TAXES
The Partnership is a limited partnership. As such, all taxable income
or losses and available income tax credits are passed from the
partnership to the individual partners. It is the responsibility of the
individual partners to report the taxable income or losses and tax
credits, and to pay any resulting income taxes. Consequently, there is
no provision for income taxes included in these financial statements.
Net income (loss) and partners' equity (deficit) for financial
reporting purposes will differ from the Partnership income tax return
because of different accounting methods used for certain items,
including syndication cost and provisions for impairment of investments
in real estate.
F-10
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 (CONTINUED)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Partnership is required to file Internal Revenue Service Form 1065,
U.S. PARTNERSHIP RETURN OF Income, and to provide its partners with
Schedule K-1, PARTNERS' SHARE OF INCOME, CREDITS, DEDUCTIONS, ETC.
Partners' share of income and loss is allocated to those partners' in
proportion to each partner's share of the basis in the Partnership,
calculated after special allocations of expenses have been made. If any
partner is not a partner for an entire fiscal year or if his capital
percentage changed during the year, the share of net profits, net
losses, distributions, credits and deductions of the Partnership
allocable to such partner is determined consistent with the portion of
the year during which he was a partner and by taking into account his
varying capital percentages. Any assignment or sale of units is
recognized by the Partnership not later than the last day of the
calendar quarter following receipt of written notice of such assignment
or sale accompanied by copies of all operative documents effecting such
assignment or sale.
All distributions of cash available for distribution, until dissolution
of the Partnership, shall be allocated to the limited partners on a pro
rata basis in accordance with their respective ownership interests.
PRESENTATION
Certain items appearing in the financial statements have been
reclassified to conform to the current year presentation.
PENDING ACCOUNTING PRONOUNCEMENTS
It is anticipated that current pending accounting pronouncements will
not have an adverse impact on the financial statements of the
Partnership.
NOTE 3 - LAND HELD FOR INVESTMENT PURPOSES
Land Held For Investment Purposes represents costs incurred by the
Partnership for the acquisition and holding of land. The following is a
summary of real properties:
(1) 22.1 acres of commercial real property at Baseline and 24th
Street, Phoenix, AZ
(2) 11.3 acres of commercial real property at Peoria and 79th Avenue,
Peoria, AZ
(3) 10.22 acres of commercial real property at Baseline Road and 32nd
Street, Phoenix, AZ
(4) 1.03 acres of commercial real property at Central Avenue and
Ludlow, Avondale, AZ
(5) 8.5 acres of commercial real property at Van Buren and Central
Avenue, Goodyear, AZ
F-11
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 (CONTINUED)
NOTE 3 - LAND HELD FOR INVESTMENT PURPOSES (CONTINUED)
December 31, 2000 December 31, 1999
-------------------------------------- --------------------------------------
Cost or Land- Cost or Land-
Basis Related Total Basis Related Total
---------- -------- ---------- ---------- -------- ----------
(1) $2,030,417 $300,787 $2,331,204 $2,030,417 $300,787 $2,331,204
(2) 832,592 123,340 955,932 832,592 123,340 955,932
(3) 0 0 0 1,139,148 168,754 1,307,902
(4) 65,323 9,677 75,000 125,472 18,587 144,059
(5) 1,194,140 178,000 1,372,140 1,302,320 194,126 1,496,446
---------- -------- ---------- ---------- -------- ----------
$4,122,472 $611,804 $4,734,276 $5,429,949 $805,594 $6,235,543
========== ======== ========== ========== ======== ==========
On May 30, 2000, the Partnership sold the 10.22 acres of property
located at Baseline Road and 32nd Street, Phoenix, Arizona, for
$1,000,000. Under the "fresh start" accounting rules, the property was
written down in reorganization by $307,902 to its fair market value of
$1,000,000, known expenses of $56,303 were accrued at reorganization,
and no loss was recognized on the sale of the property for book
purposes. Two other properties were written down in reorganization to
their fair market values. Property (4) was written down $69,059 to a
fair market value of $75,000, and property (5) was written down
$124,306 to a fair market value of $1,372,140. Total reorganization
restatement of assets was $555,345.
During 1999, the Partnership sold three parcels of land as follows: (i)
easement located at the Northeast corner of Baseline Road and 32nd
Street, Phoenix, Arizona, for $35,000, on February 1, 1999, for a net
gain of $35,000; (ii) 13 acres located at Pecos Road and Arizona
Avenue, Chandler Arizona, on February 3, 1999, for $588,587. Costs of
sales were $1,477,603, for a net loss of $889,017; and (iii) 90,000
square feet located at 79th Avenue and Peoria Avenue, Peoria, Arizona,
on August 11, 1999, for $180,000. Costs of sales were $184,102, for a
net loss of $4,102.
NOTE 4 - COMMITMENTS
MANAGEMENT FEES. The general partner, Investors Recovery Group L.L.C.,
has entered into an agreement with Horizon Real Estate Group, dated
September 1996, to provide broker/manager and accounting services for
the Partnership. The broker/manager receives the following fees and
commissions:
(1) a monthly asset management fee equal to one twelfth of .75% times
the total values of the real property on hand,
F-12
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 (CONTINUED)
NOTE 4 - COMMITMENTS (CONTINUED)
(2) a brokerage services fee equal to five percent (5%) of (a) the
selling price of each parcel of the property sold; (b) of the
amount of damages actually collected by suit or otherwise if
completion of a sale is prevented by the default of the buyer
under a purchase and sale agreement; and (c) of the list price of
any parcel of property for which the broker/manager has procured
a buyer who is ready, willing and able to purchase such parcel at
the listed price and upon the listed terms upon Partnership's
refusal to sell such parcel,
(3) a disposition fee of one percent (1%) of the selling price upon
the closing of each sale of a portion of the property which
occurs while this agreement remains in effect,
(4) an accounting fee equal to the reasonable hourly charges for the
time of its employees spent in performing the accounting services
required, not to exceed $10,000 per year. In addition, a tax
return preparation fee equal to the reasonable hourly charges for
the time of its employees spent in the preparation of the annual
income tax returns, not to exceed $7,000 per year, and
(5) if the broker/manager is required to administer more than one
distribution to the partners during a single calendar year,
compensation shall be at $35 per hour for its clerical employees.
In addition, if any extraordinary professional services are
required from the broker/manager beyond the services required by
this agreement, compensation shall be at $150 per hour, provided
that the broker/manager obtains the Partnership's approval in
writing.
The agreement is dated September 1996 and continues until terminated at
any time by written consent of either party.
NOTE 5 - RECONCILIATION TO INCOME TAX METHOD OF ACCOUNTING
The differences between the accrual method of accounting for income tax
reporting and the accrual method of accounting used in the financial
statements are as follows:
2000 1999
-------- --------
Net Loss - Financial Statement Purposes $ 99,183 $991,114
Restated Property Sold - Loss Charged to
Partners' Capital 361,980 --
-------- --------
Net Loss - Income Tax Purposes $461,163 $991,114
======== ========
F-13
TPI LAND DEVELOPMENT III LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 (CONTINUED)
NOTE 5 - RECONCILIATION TO INCOME TAX METHOD OF ACCOUNTING (CONTINUED)
Future differences in accounting for income taxes and financial
statement purposes will result from the reorganization write down of
$193,365 charged to partners' capital at the reorganization date for
financial statement purposes, which will be realized for tax purposes
upon the sales of the respective properties, and syndication costs of
$31,415 which will be allocated proportionately against the remaining
partnership interests upon partnership dissolution.
The following is a reconciliation of partners' capital for financial
reporting purposes to partners' capital for federal income tax purposes
as of December 31:
2000 1999
---------- ----------
Partners' Capital - Financial Statement Purposes $4,936,327 $6,490,975
Reorganization Restatement of Assets 193,365 --
Syndication Costs 31,415 31,415
---------- ----------
Partners' Capital - Income Tax Purposes $5,161,107 $6,522,390
========== ==========
NOTE 6 - SUBSEQUENT EVENT
On March 6, 2001, the Partnership filed a "Second Amended and
Completely Restated Certificate of Limited Partnership" to extend the
Partnership period past the dissolution date of December 31, 2001 if
all of the properties are not sold. Thereupon, the General Partner
will immediately commence to wind up the Partnership affairs and
liquidate the assets of the Partnership as promptly as possible.
F-14