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 June 30, 1995
[ ] 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 (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)
June 30, 1995
Assets
Cash:
Unrestricted $ 1,983,151
Restricted--tenant security deposits 48,837
Accounts receivable, less allowance for
doubtful accounts of $20,782 35,093
Escrow deposits for taxes 47,622
Other assets 953,338
Investment properties:
Land $ 1,527,024
Buildings and related personal
property 12,413,773
13,940,797
Less accumulated depreciation (7,629,678) 6,311,119
$ 9,379,160
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 11,426
Tenant security deposits 49,761
Property taxes 19,273
Other 76,402
Mortgage note payable, in default 3,472,438
Equity interest in net liabilities
of joint ventures 7,757,726
Partners' Deficit
General partners $ (394,538)
Limited partners capital (86,818
units issued and outstanding) (1,613,328) (2,007,866)
$ 9,379,160
See Accompanying Notes to Financial Statements
1
b) ANGELES INCOME PROPERTIES, LTD. III
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Revenues:
Rental income $ 374,899 $ 408,357 $ 772,513 $ 795,883
Other income 37,910 16,837 57,311 27,966
Total revenues 412,809 425,194 829,824 823,849
Expenses:
Operating 50,014 59,415 113,754 115,906
General and administrative 77,898 176,767 152,215 349,873
Property management fees 16,325 16,408 31,296 35,337
Maintenance 36,776 42,992 71,476 76,458
Depreciation 160,159 159,846 319,380 319,150
Amortization 7,296 4,766 14,130 9,287
Interest 98,445 116,332 197,214 232,998
Property taxes 41,192 35,559 82,407 70,509
Tenant reimbursements (39,348) (23,567) (70,501) (74,624)
Total expenses 448,757 588,518 911,371 1,134,894
Loss before equity in loss
of joint ventures (35,948) (163,324) (81,547) (311,045)
Equity in loss of joint
ventures (Note B) (255,281) (267,437) (527,510) (691,168)
Net loss $(291,229) $ (430,761) $(609,057) $(1,002,213)
Net loss allocated to general
partners (1%) $ (2,912) $ (4,308) $ (6,091) $ (10,022)
Net loss allocated to limited
partners (99%) (288,317) (426,453) (602,966) (992,191)
$(291,229) $ (430,761) $(609,057) $(1,002,213)
Net loss per limited
partnership unit $ (3.32) $ (4.91) $ (6.95) $ (11.41)
See Accompanying Notes to Financial Statements
2
c) ANGELES INCOME PROPERTIES, LTD. III
STATEMENT OF CHANGES IN PARTNERS' DEFICIT - June 30, 1995
(Unaudited)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital
ontributions 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 six months
ended June 30, 1995 -- (6,091) (602,966) (609,057)
Partners' deficit at
June 30, 1995 86,818 $(394,538) $(1,613,328) $(2,007,866)
See Accompanying Notes to Financial Statements
3
d) ANGELES INCOME PROPERTIES, LTD. III
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1995 1994
Cash flows from operating activities:
Net loss $ (609,057) $(1,002,213)
Adjustments to reconcile net loss to net
cash used in operating activities:
Equity in loss of joint ventures 527,510 691,168
Depreciation 319,380 319,150
Amortization of loan costs and
leasing commissions 19,802 14,959
Change in accounts:
Restricted cash 1,613 1,960
Accounts receivable 9,615 (17,258)
Escrows for taxes 50,361 (40,426)
Other assets (396,198) 61,705
Accounts payable 1,205 (19,462)
Tenant security deposit liabilities (1,609) (1,844)
Property taxes (38,401) 3,045
Other liabilities 18,526 (33,385)
Net cash used in operating
activities (97,253) (22,601)
Cash flows from investing activities:
Capital improvements (82,157) (25,349)
Distributions from joint venture 965,731 --
Net cash provided by (used in)
investing activities 883,574 (25,349)
See Accompanying Notes to Financial Statements
4
ANGELES INCOME PROPERTIES, LTD. III
STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Six Months Ended
June 30,
1995 1994
Cash flows used in financing activities:
Payments on mortgage notes payable $ (23,773) $ (24,244)
Net increase (decrease) in cash 762,548 (72,194)
Cash at beginning of period 1,220,603 1,233,009
Cash at end of period $1,983,151 $1,160,815
Supplemental disclosure of cash
flow information:
Cash paid for interest $ 191,542 $ 227,548
See Accompanying Notes to Financial Statements
5
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 six month period ended June
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 six month period ended June 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.
6
Note B - Investment in Joint Ventures (continued)
Condensed balance sheet information as of June 30, 1995 for the joint
ventures is as follows:
Burlington Northtown
Assets
Cash $ 101,440 $ 446,599
Other assets 144,769 6,408,157
Investment properties, net 4,521,516 27,600,306
Total $4,767,725 $34,455,062
Liabilities and Partners' Deficit
Burlington Northtown
Other liabilities $ 330,678 $ 2,158,921
Notes payable 6,700,281 51,893,502
Partners' deficit (2,263,234) (19,597,361)
Total $ 4,767,725 $ 34,455,062
The condensed profit and loss statements for the three and six months
ended June 30, 1995 and 1994 for the joint ventures are as follows:
Three Months Ended
June 30, 1995
Burlington Moraine Northtown
Revenue $ 105,140 $ 3 $ 1,554,709
Costs and expenses (163,594) (2,211,967)
Net (loss) income $ (58,454) $ 3 $ (657,258)
Three Months Ended
June 30, 1994
Burlington Moraine Northtown
Revenue $ 142,862 $ 467,972 $ 1,742,969
Costs and expenses (329,246) (470,429) (2,172,567)
Net loss $ (186,384) $ (2,457) $ (429,598)
7
Note B - Investment in Joint Ventures (continued)
Six Months Ended
June 30, 1995
Burlington Moraine Northtown
Revenue $ 236,959 $12,447 $ 3,087,161
Costs and expenses (425,315) (625) (4,348,010)
Net (loss) income $ (188,356) $11,822 $(1,260,849)
Six Months Ended
June 30, 1994
Burlington Moraine Northtown
Revenue $ 320,050 $ 888,697 $ 3,145,453
Costs and expenses (729,737) (931,651) (4,397,949)
Net loss $ (409,687) $ (42,954) $(1,252,496)
The Partnership's equity in the losses of the joint ventures was
$527,510 and $691,168 for the six months ended June 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 $ 31,296 $ 35,337
Reimbursement for services of
affiliates 120,625 217,974
Marketing services 901 --
8
Note C - Transactions with Affiliated Parties
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.
9
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 six months ended June 30,
1995 and 1994:
Average
Occupancy
Property 1995 1994
Lake Forest Apartments
Brandon, Mississippi 96% 92%
Poplar Square Shopping Center
Medford, Oregon 97% 99%
The Partnership realized a net loss of $609,057 for the six months
ended June 30, 1995, as compared to a net loss of $1,002,213 for the six
months ended June 30, 1994. The Partnership realized a net loss of
$291,229 for the three months ended June 30, 1995, as compared to a net
loss of $430,761 for the three months ended June 30, 1994. The
decrease in the net loss for the three and six months ended June 30,
1995, as compared to the three and six months ended June 30, 1994, is
primarily due to a decrease in general and administrative expenses and a
decrease in the equity in loss of joint ventures (see discussion below).
The Partnership realized a decrease in rental income during the three
and six months ended June 30, 1995, as compared to the three and six
months ended June 30, 1994, as a result of decrease in rental revenue at
Lake Forest Apartments and Poplar Square Shopping Center. The decrease
in revenue at Lake Forest is due to the Partnership's inability to rent
seven units due to foundation problems with those units. In addition,
Poplar Square lost $7,500 per month in rental revenue due to the sale of
a parcel of land in June 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 six months
ended June 30, 1995, as compared to the three and six months ended June
30, 1994, as a result of increased lease cancellation fees, deposits
forfeited and other miscellaneous fees and collections. The decrease in
general and administrative expenses during the three and six months
ended June 30, 1995, as compared to the three and six months ended June
30, 1994, is primarily related to decreases in asset management,
partnership accounting and investor services reimbursements. The
decrease in interest expense for the three and six months ended June 30,
1995, as compared to the three and six months ended June 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.
In addition to a decrease in expenses, the Partnership also
experienced a decrease in overall losses of its joint venture
properties. The decrease in the equity in loss of joint ventures can be
attributed to decreased losses relating to Burlington and a change from
a net loss of $42,954 for Moraine for the first six months of 1994
versus net income of $11,822 for the first six months of 1995. Revenue
decreased at Burlington for the six months ended June 30, 1995, versus
the six months ended June 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).
10
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 June 30, 1995, the Partnership had unrestricted cash of $1,983,151
versus $1,160,815 at June 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
remained stable.
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 $3,472,438, 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. 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 six months ended June 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 has entered into contract negotiations to sell the property.
The outcome of such negotiations can not presently be determined.
11
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.
12
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 anticipates that
it will not pursue its Proof of Claim.
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.
13
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: Carroll D. Vinson
President
By: Robert D. Long, Jr.
Controller and Principal
Accounting Officer
Date: August 10, 1995
14
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: August 10, 1995
14