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
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1997
[ ] 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 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) NATIONAL PROPERTY INVESTORS III
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 1997
Assets
Cash and cash equivalents $ 1,074
Receivable and deposits 1,035
Other assets 598
Investment properties:
Land $ 3,023
Buildings and related personal property 31,320
34,343
Accumulated depreciation (22,539) 11,804
$ 14,511
Liabilities and Partners' Deficit
Accounts payable $ 66
Tenants' security deposits payable 170
Accrued property taxes 740
Other liabilities 207
Notes payable 23,964
Partners' Deficit:
Limited partners' (48,049 units issued
and outstanding $ (10,350)
General partners' (286) (10,636)
$ 14,511
See Notes to Consolidated Financial Statements
b) NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1997 1996
Revenues:
Rental income $ 2,012 $ 1,837
Other income 76 69
Total revenues 2,088 1,906
Expenses:
Operating 1,023 916
Interest 500 537
Depreciation 315 309
General and administrative 38 72
Total expenses 1,876 1,834
Net income $ 212 $ 72
Net income allocated to general partners (1%) $ 2 $ 1
Net income allocated to limited partners (99%) 210 71
Net income $ 212 $ 72
Net income per limited partnership unit $ 4.37 $ 1.49
See Notes to Consolidated Financial Statements
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, 1996 48,049 $ (288) $ (10,560) $ (10,848)
Net income for the three months
ended March 31, 1997 -- 2 210 212
Partners' deficit at
March 31, 1997 48,049 $ (286) $ (10,350) $ (10,636)
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
d) NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 212 $ 72
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 315 309
Amortization of loan costs 17 13
Change in accounts:
Receivables and deposits (134) (412)
Other assets (34) 1
Accounts payable (231) (185)
Tenants' security deposits payable 1 --
Accrued property taxes 186 165
Other liabilities (36) 434
Net cash provided by operating activities 296 397
Cash flows from investing activities:
Deposits to restricted escrows (49) (88)
Property improvements and replacements (88) (53)
Net cash used in investing activities (137) (141)
Cash flows from financing activities:
Payments on mortgage notes payable (34) (161)
Loan costs (15) --
Net cash used in financing activities (49) (161)
Net increase in cash and cash equivalents 110 95
Cash and cash equivalents at beginning of period 964 921
Cash and cash equivalents at end of period $ 1,074 $ 1,016
Supplemental information:
Cash paid for interest $ 481 $ 663
<FN>
See Notes to Consolidated Financial Statements
</TABLE>
e)
NATIONAL PROPERTY INVESTORS III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 three month period
ended March 31, 1997, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1997. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the annual report of National Property Investors III (the "Partnership") on Form
10-KSB for the year ended December 31, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 presentation.
NOTE B - 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.
Pursuant to a series of transactions which closed during 1996, affiliates of
Insignia Financial Group, Inc. ("Insignia") acquired all of the issued and
outstanding shares of stock of NPI Equity and National Property Investors, Inc.
("NPI"). In connection with these transactions, affiliates of Insignia
appointed new officers and directors of NPI Equity and NPI.
The following transactions with affiliates of Insignia, NPI, and affiliates of
NPI were charged to expense during the three month periods ended March 31, 1997
and 1996 (dollar amounts in thousands):
For the Three Months Ended
March 31,
1997 1996
Property management fees (included in operating
expenses) $103 $95
Reimbursement for services of affiliates, including
approximately $10,000 of construction service
reimbursements in 1997 (included in investment
properties, operating expenses and general and
administrative expenses) 41 63
For the period from January 19, 1996 to March 31, 1997, 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.
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 three month
periods ended March 31, 1997 and 1996:
Average Occupancy
Property 1997 1996
Lakeside Apartments 96% 91%
Lisle, Illinois
Pinetree Apartments 90% 92%
Charlotte, North Carolina
Summerwalk Apartments 99% 91%
Winter Park, Florida
The Managing General Partner attributes the increase in occupancy at Lakeside
and Summerwalk to rent concessions and aggressive marketing efforts.
The Partnership's net income for the three month period ended March 31, 1997,
was approximately $212,000 versus net income of $72,000 for the corresponding
period of 1996. This increase in net income for the three month period ended
March 31, 1997, is primarily attributable to an increase in rental income and a
decrease in general and administrative expenses. These changes are partially
offset by an increase in operating expenses. The increase in rental income is
due to the increase in occupancy at Lakeside and Summerwalk as discussed above.
As noted in "Item 1. Note B - Transactions with Affiliated Parties," the
Partnership reimburses the Managing General Partner and its affiliates for its
costs involved in the management and administration of all partnership
activities. The decrease in general and administrative expenses during the
three month period ended March 31, 1997, is directly attributable to the
transition and relocation of the administrative offices during the first quarter
of 1996. The increase in operating expense is due to increased utility and
maintenance expenses. The increase in utility expense is primarily due to
increased water billings at Lakeside Apartments. The increase in maintenance
expense is primarily due to plumbing fixtures purchased by Summerwalk
Apartments. The amount incurred for major repairs and renovation expense during
the three month periods ended March 31, 1997 and 1996, is not significant.
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 market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
At March 31, 1997, the Partnership had unrestricted cash of approximately
$1,074,000 as compared to approximately $1,016,000 at March 31, 1996. Net cash
provided by operations decreased primarily due to the change in timing for
collections of receivables and for payments of other liabilities. Net cash used
in investing activities remained stable in comparison to the prior year. Net
cash used in financing activities decreased primarily due to the refinancing of
the mortgage encumbering Lakeside Apartments in the fourth quarter of 1996,
which requires interest only payments.
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 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 the other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership
(see discussion of the Summerwalk Apartments mortgage indebtedness below). The
mortgage indebtedness of $23,964,000 is being amortized over varying periods
with balloon payments due at maturity at which time the properties will either
be refinanced or sold. The Partnership had a balloon payment of approximately
$4,582,000 on Summerwalk Apartments due in December 1996. While the loan has
not been formally extended, the Partnership continues to pay debt service to the
lender while an extension of the loan or alternative financing is arranged.
However, if replacement financing is not found or if the current financing is
not extended, it is possible that the Partnership could sell the property or
lose the property through foreclosure. If the property is lost through
foreclosure, the Partnership would not recognize a loss for financial statement
purposes. In connection with the efforts to obtain replacement financing, the
Partnership acquired the 10% interest in the property previously held by an
unaffiliated third party for $50,000 in January, 1997. Future cash
distributions will depend on the levels of cash generated from operations,
property sales, property refinancings and the availability of cash reserves. No
cash distributions were paid during the first three months of 1997 and 1996.
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 March 31, 1997.
SIGNATURE
Pursuant to the requirements 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.
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
Vice President and Treasurer
Date: May 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from National
Property Investors III 1997 First 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,074
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 34,343
<DEPRECIATION> (22,539)
<TOTAL-ASSETS> 14,511
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 23,964
0
0
<COMMON> 0
<OTHER-SE> (10,636)
<TOTAL-LIABILITY-AND-EQUITY> 14,511
<SALES> 0
<TOTAL-REVENUES> 2,088
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,876
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 500
<INCOME-PRETAX> 212
<INCOME-TAX> 0
<INCOME-CONTINUING> 212
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 212
<EPS-PRIMARY> 4.37<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
