FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly 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
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period.........to.........
Commission file number 0-9567
NATIONAL PROPERTY INVESTORS III
(Exact name of small business issuer as specified in its charter)
California 13-2974428
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
Issuer's phone number
Check whether the registrant (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) NATIONAL PROPERTY INVESTORS III
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
June 30,
1996
<S> <C> <C>
Assets
Cash and cash equivalents $ 695
Escrow deposits 340
Other assets 900
Investment properties:
Land $ 3,023
Buildings and related personal 30,631
33,654
Less accumulated depreciation (21,566) 12,088
$ 14,023
Liabilities and Partners' Deficit
Liabilities
Accounts payable and accrued expenses $ 874
Tenants' security deposits payable 190
Mortgage payable 23,871
Partners' Deficit:
Limited partners' (48,049 units $ (10,624)
General partners' (288) (10,912)
$ 14,023
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
b) NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 1,842 $ 1,879 $ 3,679 $ 3,701
Other income 89 191 158 260
Total revenues 1,931 2,070 3,837 3,961
Expenses:
Operating 1,114 1,054 2,030 1,999
Interest 536 547 1,073 1,094
Depreciation 322 338 631 676
General and administrative 80 53 152 119
Total expenses 2,052 1,992 3,886 3,888
Net (loss) income $ (121) $ 78 $ (49) $ 73
Net (loss) income allocated
to general partner (1%) $ (1) $ 1 $ -- $ 1
Net (loss) income allocated
to limited partners (99%) (120) 77 (49) 72
Net (loss) income $ (121) $ 78 $ (49) $ 73
Net (loss) income per
limited partnership unit $ (2.50) $ 1.61 $ (1.01) $ 1.50
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
c) NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited General Limited
Partnership Partners' Partners' Total
Units Deficit Deficit Deficit
<S> <C> <C> <C> <C>
Original capital contributions 48,049 $ 1 $ 24,025 $ 24,026
Partners' deficit at
December 31, 1995 48,049 $ (288) $ (10,575) $ (10,863)
Net loss for the six
months ended June 30, 1996 -- -- (49) (49)
Partners' deficit at
June 30, 1996 48,049 $ (288) $ (10,624) $ (10,912)
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
d) NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (49) $ 73
Adjustments to reconcile net (loss) income to
cash provided by operating activities:
Depreciation 631 676
Amortization of mortgage costs 27 27
Change in accounts:
Escrow deposits (50) (137)
Other assets (424) (176)
Accounts payable and accrued expenses 157 63
Tenant security deposit liabilities (23) 16
Net cash provided by operating activities 269 542
Cash flows from investing activities:
Property improvements and replacements (205) (247)
Cash used in investing activities (205) (247)
Cash flows from financing activities:
Mortgage principal payments (290) (239)
Cash used in financing activities (290) (239)
Net (decrease) increase in cash and cash
equivalents (226) 56
Cash and cash equivalents at beginning of period 921 205
Cash and cash equivalents at end of period $ 695 $ 261
Supplemental information:
Interest paid $ 1,181 $ 1,067
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
e)
NATIONAL PROPERTY INVESTORS III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
The accompanying unaudited consolidated 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
consolidated financial statements. In the opinion of NPI Equity Investments,
Inc. ("NPI Equity" or 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, 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-K for the year ended December 31,
1995.
Certain reclassifications have been made to the 1995 information to conform
to the 1996 presentation.
Note B - Transactions with Affiliated Parties
National Property Investors III (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 transactions with affiliates of Insignia Financial Group, Inc.
("Insignia"), National Property Investors, Inc. ("NPI"), and affiliates of NPI
were charged to expense in 1996 and 1995:
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Property management fees (included in operating
expenses) $190,000 $191,000
Reimbursement for services of affiliates (included
in general and administrative and
operating expenses) 121,000 103,000
</TABLE>
For the period from January 19, 1996, to June 30, 1996, the Partnership
insured 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
received 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.
Included in operating expenses for the six months ended June 30, 1995, are
insurance premiums of approximately $91,000 which were paid to the Managing
General Partner under a master insurance policy arranged for by the Managing
General Partner.
NPI Equity is the general partner of the Partnership. NPI Equity is a
wholly-owned subsidiary of NPI.
On August 17, 1995, the stockholders of NPI entered into an agreement to sell
to IFGP Corporation, a Delaware corporation and an affiliate of Insignia, a
Delaware corporation, all of the issued and outstanding common stock of NPI for
an aggregate purchase price of $1,000,000. The closing of the transactions
contemplated by the above mentioned agreement (the "Closing") occurred on
January 19, 1996.
Upon the Closing, the officers and directors of NPI and the Managing General
Partner resigned and IFGP Corporation caused new officers and directors of each
of those entities to be elected.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of three apartment complexes.
The following table sets forth the average occupancy for each of the six month
periods ended June 30, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Lakeside Apartments 90% 94%
Lisle, Illinois
Pinetree Apartments 92% 94%
Charlotte, North Carolina
Summerwalk Apartments
Winter Park, Florida 86% 94%
The Managing General Partner attributes the decline in occupancy at Lakeside
to new construction in the area and leasing specials offered by competitors.
The decrease in occupancy at Summerwalk Apartments is attributable to the
managing general partner's eviction of tenants who were not paying their rents.
Subsequent to June 30, 1996, occupancy has increased.
The Partnership's net loss for the six months ended June 30, 1996, was
$49,000, of which $121,000 was recorded in the second quarter. For the six
months ended June 30, 1995, the Partnership recorded $73,000 net income, of
which $78,000 was recorded in the second quarter. This change from net income to
net loss is primarily attributable to the decrease in other income in 1996 as
compared to 1995 due to the Partnership receiving $110,000 for a laundry
contract renewal at Lakeside Apartments in 1995. The increase in general and
administrative expenses is due to costs related to the transition of the
Partnership administration offices in 1996. These expenses are expected to
decrease during the remaining six months of 1996.
As part of the ongoing business plan of the Partnership, the Managing 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 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 conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
At June 30, 1996, the Partnership had unrestricted cash of $695,000 as
compared to $261,000 at June 30, 1995. Net cash provided by operating
activities decreased primarily as a result of an increase in other assets due to
the funding of tenant security deposit accounts, as well as the decrease in
other income associated with the 1995 laundry contract renewal. The decrease in
cash used in investing activities is attributed to a decrease in property
improvements and replacements. The increase in cash used in financing
activities is due to additional mortgage payments being made in the first six
months of 1996 versus the same period in 1995.
The Managing General Partner has extended to the Partnership a $500,000 line
of credit. At the present time, the Partnership has no outstanding amounts due
under this line of credit. Based on present plans, the Managing General Partner
does not anticipate the need to borrow in the near future. Other than cash and
cash equivalents, the line of credit is the Partnership's only unused source of
liquidity.
The Partnership has a balloon payment of approximately $4,582,000 on
Summerwalk Apartments due in September 1996. The Partnership will attempt to
extend the due date of this loan or find replacement financing. The Managing
General Partner feels confident that this can be done; however, if the loan is
not refinanced or extended, or the property is not sold, the Partnership could
lose this property through foreclosure. If the property is lost through
foreclosure the Partnership would not recognize a loss for financial statement
purposes.
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 $23,871,000 is amortized over varying periods with
balloon payments due at maturity at which time the properties will either be
refinanced or sold. The Partnership is currently trying to refinance the
existing indebtedness on Lakeside and Summerwalk. Future cash distributions
will depend on the levels of cash generated from operations, property sales, and
the availability of cash reserves. No cash distributions were made during 1995
or the first six months of 1996. The Partnership is prohibited from making any
distributions from operations until the mortgage encumbering the Lakeside
Apartments property is satisfied. At this time, it appears that the original
investment objective of capital growth from the inception of the Partnership
will not be obtained.
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 were filed during the quarter ended June 30, 1996.
SIGNATURE
In connection with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NATIONAL PROPERTY INVESTORS III
By: NPI EQUITY INVESTMENTS, INC.
MANAGING GENERAL PARTNER
By: /s/William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By: /s/Ronald Uretta
Ronald Uretta
Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
Date: August 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from National
Property Investors III 1996 Second Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000310485
<NAME> NATIONAL PROPERTY INVESTORS III
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 695
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 33,654
<DEPRECIATION> 21,566
<TOTAL-ASSETS> 14,023
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 23,871
0
0
<COMMON> 0
<OTHER-SE> (10,912)
<TOTAL-LIABILITY-AND-EQUITY> 14,023
<SALES> 0
<TOTAL-REVENUES> 3,837
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,886
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,073
<INCOME-PRETAX> (49)
<INCOME-TAX> 0
<INCOME-CONTINUING> (49)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49)
<EPS-PRIMARY> (1.01)<F2>
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
<F2> Multiplier is 1.
</FN>
</TABLE>
