FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT
UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
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, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from.........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, 1998
Assets
Cash and cash equivalents $ 2,137
Receivables and deposits 662
Restricted escrows 843
Other assets 598
Investment properties:
Land $ 3,023
Buildings and related personal property 32,552
35,575
Accumulated depreciation (23,842) 11,733
$ 15,973
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 68
Tenant security deposit liabilities 160
Accrued property taxes 733
Other liabilities 295
Mortgage notes payable 24,398
Partners' Deficit
General partner's $ (277)
Limited partners' (48,049 units issued
and outstanding) (9,404) (9,681)
$ 15,973
See Accompanying 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,
1998 1997
Revenues:
Rental income $ 2,022 $ 2,001
Other income 131 79
Total revenues 2,153 2,080
Expenses:
Operating 772 826
General and administrative 76 38
Depreciation 333 315
Interest 468 500
Property taxes 181 186
Total expenses 1,830 1,865
Net income $ 323 $ 215
Net income allocated to general partner (1%) $ 3 $ 2
Net income allocated to limited partners (99%) 320 213
$ 323 $ 215
Net income per limited partnership unit $ 6.66 $ 4.43
See Accompanying Notes to Consolidated Financial Statements
c)
NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 48,049 $ 1 $ 24,025 $ 24,026
Partners' deficit at
December 31, 1997 48,049 $ (280) $ (9,724) $ (10,004)
Net income for the three months
ended March 31, 1998 -- 3 320 323
Partners' deficit at
March 31, 1998 48,049 $ (277) $ (9,404) $ (9,681)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
d)
NATIONAL PROPERTY INVESTORS III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1998 1997
Cash flows from operating activities:
Net income $ 323 $ 215
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 333 315
Amortization of loan costs 17 17
Change in accounts:
Receivables and deposits (38) (134)
Other assets 21 (32)
Account payable 34 (231)
Tenant security deposit liabilities 2 (1)
Accrued property taxes 127 186
Other liabilities -- (39)
Net cash provided by operating activities 819 296
Cash flows from investing activities:
Property improvements and replacements (91) (88)
Net deposits to restricted escrows (83) (49)
Net cash used in investing activities (174) (137)
Cash flows from financing activities:
Payments on mortgage notes payable (16) (34)
Loan costs paid -- (15)
Net cash used in financing activities (16) (49)
Net increase in cash and cash equivalents 629 110
Cash and cash equivalents at beginning of period 1,508 964
Cash and cash equivalents at end of period $ 2,137 $ 1,074
Supplemental information:
Cash paid for interest $ 421 $ 481
See Accompanying Notes to Consolidated Financial Statements
e)
NATIONAL PROPERTY INVESTORS III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of National
Property Investors III (the "Partnership") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete 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, 1998, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in the annual report of the
Partnership on Form 10-KSB for the year ended December 31, 1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 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 Managing General Partner is wholly-owned by
Insignia Properties Trust ("IPT"), an affiliate of Insignia Financial Group,
Inc. ("Insignia"). The Partnership Agreement provides for certain 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 were incurred during the
three month periods ended March 31, 1998 and 1997 (in thousands):
1998 1997
Property management fees (included in operating
expenses) $108 $103
Reimbursement for services of affiliates, including
approximately $17,000 and $10,000 of construction
services reimbursements in 1998 and 1997,
respectively (included in investment properties, and
operating and general and administrative expenses) 59 41
For the period from January 1, 1997 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
Managing General Partner with an 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 master policy. The
agent assumed the financial obligations to the affiliate of the Managing General
Partner which received payments on these obligations from the agent. The amount
of the Partnership's insurance premiums that accrued to the benefit of the
affiliate of the Managing General Partner by virtue of the agent's obligations
was not significant.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in IPT,
with Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust. The closing, which is anticipated to happen in
the third quarter of 1998, is subject to customary conditions, including
government approvals and the approval of Insignia's shareholders. If the
closing occurs, AIMCO will then control the Managing General Partner of the
Partnership.
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, 1998 and 1997:
Average Occupancy
Property 1998 1997
Lakeside Apartments 95% 96%
Lisle, Illinois
Pinetree Apartments 89% 90%
Charlotte, North Carolina
Summerwalk Apartments 98% 99%
Winter Park, Florida
The Partnership's net income for the three month period ended March 31, 1998,
was approximately $323,000, versus net income of approximately $215,000 for the
corresponding period of 1997. The increase in net income is primarily due to an
increase in total revenues and a decrease in operating and interest expenses.
Rental revenue increased for the three months ended March 31, 1998, versus the
same period in 1997, as a result of an increase in rental rates at all of the
Partnership's investment properties. Other income increased primarily due to
higher amounts of cash being held in interest-bearing accounts. Also
contributing to the increase in other income was an increase in lease
cancellations fees at Lakeside. Operating expenses decreased for the three month
period primarily as a result of a decrease in maintenance expense.
Maintenance expense decreased primarily as a result of a decrease at Lakeside in
contract interior painting, contract yard and grounds, heating and air
conditioning maintenance and other maintenance materials. The decrease in
interest expense is primarily a result of the refinancing of the first mortgage
note encumbering Summerwalk on December 23, 1997. The new note carries a stated
interest rate of 7.13% replacing the previous note that carried an interest rate
of 9.75%. Partially offsetting the decrease in operating and interest expenses
was an increase in general and administrative expenses for the three month
period ended March 31, 1998, due to an increase in reimbursements for services
of affiliates as well as an increase in taxes and licenses.
Included in operating expenses for the three month period ended March 31, 1998,
was approximately $19,000 of major repairs and maintenance comprised primarily
of exterior painting at Summerwalk Apartments. Included in operating expenses
for the three month period ended March 31, 1997, was approximately $9,000 of
major repairs and maintenance comprised primarily of parking lot repairs at
Lakeside Apartments.
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, 1998, the Partnership held cash and cash equivalents of
approximately $2,137,000, compared to approximately $1,074,000 for the
corresponding period in 1997. The net increase in cash and cash equivalents was
approximately $629,000 for the three month period ended March 31, 1998. Cash
and cash equivalents had a net increase of approximately $110,000 for the three
month period ended March 31, 1997. Net cash provided by operating activities
increased primarily as a result of an increase in net income, as discussed
above, and a decrease in receivables and deposits and an increase in accounts
payable due to the timing of receipts and payments. Net cash used in investing
activities increased as a result of an increase in net deposits made to
restricted escrows. Net cash used in financing activities decreased as a result
of a decrease in mortgage principal payments and loan costs paid in association
with the refinancing of Summerwalk Apartments in 1997.
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.
The mortgage indebtedness of approximately $24,398,000 is being amortized over
varying periods with balloon payments due over periods ranging from July 2001 to
January 2008, at which time the properties will either be refinanced or sold.
Future cash distributions will depend on the levels of cash generated from
operations, property sales, property refinancings and the availability of cash
reserves.
Year 2000
The Partnership is dependent upon the Managing General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The Managing General Partner believes that with
modifications to existing software and conversions to new software, the Year
2000 Issue will not pose significant operational problems for its computer
systems. However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Partnership.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date of
this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled ROSALIE NUANES, ET AL. V. INSIGNIA
FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia and its affiliates of
interests in certain general partner entities, past tender offers by Insignia
affiliates to acquire limited partnership units, the management of partnerships
by Insignia affiliates as well as a recently announced agreement between
Insignia and Apartment Investment and Management Company. The complaint seeks
monetary damages and equitable relief, including judicial dissolution of the
Partnership. The Managing General Partner was only recently served with the
complaint which it believes to be without merit, and intends to vigorously
defend the action.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature. The Managing General Partner 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) 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, 1998.
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.
NATIONAL PROPERTY INVESTORS III
By: NPI EQUITY INVESTMENTS, INC.
Its 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, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
National Property Investors III 1998 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-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,137
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 35,575
<DEPRECIATION> 23,842
<TOTAL-ASSETS> 15,973
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 24,398
0
0
<COMMON> 0
<OTHER-SE> (9,681)
<TOTAL-LIABILITY-AND-EQUITY> 15,973
<SALES> 0
<TOTAL-REVENUES> 2,153
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,362
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 468
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 323
<EPS-PRIMARY> 6.66<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
