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, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
For the transition period.........to.........
Commission file number 0-10273
CONSOLIDATED CAPITAL PROPERTIES III
(Exact name of small business issuer as specified in its charter)
California 94-2653686
(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 (864) 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) CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 4,066
Restricted-tenant security deposits 119
Accounts receivable 43
Escrows for taxes and insurance 217
Other assets 342
Investment properties:
Land $ 1,828
Buildings and related personal property 16,781
18,609
Less accumulated depreciation (13,228) 5,381
$10,168
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 61
Tenant security deposits 126
Accrued taxes 166
Other liabilities 348
Mortgage notes payable 7,659
Partners' Capital (Deficit)
General partner $(1,957)
Limited partners (158,636 units
issued and outstanding) 3,765 1,808
$10,168
See Accompanying Notes to Consolidated Financial Statements
b) CONSOLIDATED CAPITAL PROPERTIES 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 $1,061 $ 1,027 $ 2,146 $ 2,083
Other income 91 137 196 285
Total revenues 1,152 1,164 2,342 2,368
Expenses:
Operating 467 466 915 896
General and Administrative 114 207 190 395
Maintenance 175 178 319 318
Depreciation 232 277 461 551
Interest 212 212 373 425
Property Taxes 128 73 212 176
Total expenses 1,328 1,413 2,470 2,761
Net loss $ (176) $ (249) $ (128) $ (393)
Net loss allocated
to general partners (4%) $ (7) $ (10) $ (5) $ (16)
Net loss allocated
to limited partners (96%) (169) (239) (123) (377)
Net loss $ (176) $ (249) $ (128) $ (393)
Net loss per weighted average
limited partnership unit $(1.07) $ (1.51) $ (.78) $ (2.38)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c) CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (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 158,945 $ 1 $79,473 $79,474
Partners' capital (deficit) at
December 31, 1995 158,636 $(1,952) $ 3,900 $ 1,948
Distributions Paid -- (--) (12) (12)
Net loss for the six months
ended June 30, 1996 -- (5) (123) (128)
Partners' capital (deficit)
at June 30, 1996 158,636 $(1,957) $ 3,765 $ 1,808
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) CONSOLIDATED CAPITAL PROPERTIES III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (128) $ (393)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 461 551
Amortization of discounts, lease commissions
and loan costs 21 30
Change in accounts:
Restricted cash 4 (1)
Accounts receivable 78 68
Escrows for taxes and insurance (140) (75)
Other assets 11 43
Accounts payable (125) 114
Tenant security deposits liabilities 4 (3)
Accrued taxes 135 77
Other liabilities 123 119
Net cash provided by operating activities 444 530
Cash flows from investing activities:
Property improvements and replacements (85) (128)
Receipts from restricted escrows 7 --
Purchase of investments -- (13,273)
Proceeds from sale of investments -- 12,320
Repayment of notes receivable -- 2,316
Net cash (used in) provided by investing
activities (78) 1,235
Cash flows from financing activities:
Payments on mortgage notes payable (33) (123)
Repayment of mortgage notes payable (3,174) --
Proceeds from mortgage notes payable 4,200 --
Payment of loan costs (135) --
Partners' distributions (12) (1,428)
Net cash provided by (used in) 846 (1,551)
financing activities
Net increase in cash and cash equivalents 1,212 214
Cash and cash equivalents at beginning of period 2,854 2,090
Cash and cash equivalents at end of period $4,066 $ 2,304
Supplemental disclosure of cash flow information:
Cash paid for interest $ 260 $ 342
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
e) CONSOLIDATED CAPITAL PROPERTIES III
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Consolidated
Capital Properties 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 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 three and six month periods 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-KSB for the fiscal year ended December
31, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
Consolidation
The Partnership's financial statements include the accounts of ConCap Mountain
Plaza Associates, Ltd. ("Mountain Plaza Associates), CCP III Associates, Ltd.
("CCP III Associates") and ConCap Village Green Associates, Ltd. ("Village Green
Associates"), three wholly-owned limited partnerships. All intercompany
transactions have been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents for purposes of reporting cash flows include cash on
hand, money market funds and certificates of deposit with original maturities of
three months or less.
Note B - Transactions with Affiliated Parties
The Partnership has paid property management fees based on collected gross
rental revenues for property management services in each of the six months ended
June 30, 1996 and 1995. In late December 1994, an affiliate of the General
Partner assumed day-to-day property management responsibilities for all of the
Partnership's properties. Property management fees of approximately $113,000
and $112,000 were paid to affiliates of the General Partner for the six months
ended June 30, 1996 and 1995, respectively. These fees are included in
operating expenses.
The Limited Partnership Agreement ("Partnership Agreement") provides for a
special management fee equal to 9% of the total distributions made to the
limited partners from cash flow from operations to be paid to the General
Partner for executive and administrative management services. No fees were paid
or accrued under this provision of the Partnership Agreement to affiliates of
the General Partner during the six months ended June 30, 1996, and June 30,
1995.
The Partnership Agreement also provides for reimbursement to the General Partner
and its affiliates for costs incurred in connection with the administration of
Partnership activities. Reimbursements for services of affiliates of
approximately $98,000 and $202,000 were paid to the General Partner and
affiliates for the six months ended June 30, 1996 and 1995, respectively.
Additionally, the Partnership paid $15,000 and $5,000 during the six months
ended June 30, 1996 and 1995, respectively, to an affiliate of the General
Partner for lease commissions at the Partnership's commercial property. These
lease commissions are included in other assets and amortized over the term of
the respective leases.
In July 1995, the Partnership began insuring its properties under a master
policy through an agency and insurer unaffiliated with the General Partner. An
affiliate of the 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 General Partner who
receives payment on these obligations from the agent. The amount of the
Partnership's insurance premiums accruing to the benefit of the affiliate of the
General Partner by virtue of the agent's obligations is not significant.
Note C - Distributions
In April of 1996, the Partnership paid state withholding taxes of $12,000 for
non-resident limited partners. This payment is reflected as a distribution to
the limited partners.
In January of 1995, the General Partner declared and paid distributions
representing a return of capital totalling approximately $1.4 million or $9.00
per Unit to the Limited Partners.
Note D - Repayment of Note Receivable
In October of 1988, the Partnership accepted a $2.1 million note receivable in
connection with the sale of the Columns of Castleton Apartments. The note was
scheduled to mature in June of 1996. In March of 1995, the Partnership received
the outstanding principal balance of approximately $2.3 million, which
represents the original principal balance plus unpaid interest, in settlement of
the borrower's liability under the note agreement.
Note E - Refinance of Mortgage Notes Payable
During the second quarter of 1996, the Partnership entered into an interim
financing arrangement for both Ventura Landing and Village Green for $2.2
million and $2 million, respectively. The previous Ventura Landing note of $3.1
million was repaid at that time. The interest rate is 250 basis points over the
30-day LIBOR, resulting in a total note rate of 7.94%. The loans mature on
August 1, 1996, with a 60-day extension option. The Partnership exercised this
option and extended the maturity of the loans to October 1, 1996. The
Partnership has the option to convert the interim loans to fixed rate
amortizing loans with an interest rate equal to the Treasury Rate, as defined in
the financing agreement, plus 2.15%. Such converted loans would mature in ten
years with monthly payments of principle and interest based on a schedule which
would fully amortize the loans over a thirty year term. The Partnership is
however seeking alternative long-term financing to obtain a lower interest rate.
Note F - Default on Mountain Plaza Apartments Mortgage Note Payable
On May 1, 1996, the Partnership stopped making debt service payments on Mountain
Plaza Apartments. The Partnership attempted to renegotiate the terms of the
note, however, these efforts have proved unsuccessful and the lender has
initiated foreclosure proceedings which the Partnership will not contest. The
partnership has accrued default interest, as defined in the mortgage note, at
the stated note rate of 8.85% plus a 5% default rate. At June 30, 1996,
approximately $121,000 of default interest had been accrued. On August 1, 1996,
a receiver was appointed to assume day-to-day management of the property.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of four apartment complexes and
one commercial property. The following table sets forth the average occupancy
of the properties for each of the six months ended June 30, 1996 and 1995:
Average Occupancy
1996 1995
Mountain Plaza Apartments 86% 80%
El Paso, TX
Professional Plaza Office Building 96% 97%
Salt Lake City, UT
Ventura Landing Apartments 95% 89%
Orlando, FL
Village Green Apartments 95% 91%
Altamante Springs, FL
West Chase Apartments 92% 91%
Lexington, KY
The increase in occupancy at the Mountain Plaza Apartments is due to management
offering concessions to new tenants due to a poorly performing El Paso apartment
market. The increase in occupancy at the Ventura Landing Apartments is the
result of increased traffic at the property and referrals from current tenants.
The increase in occupancy at the Village Green Apartments resulted from lease
concessions being offered to new tenants. Concessions were necessary to remain
competitive in the market.
The Partnership realized a net loss of $128,000 for the six months ended June
30, 1996, of which $176,000 was a net loss for the second quarter. The
corresponding net loss for 1995 was $393,000 and $249,000, respectively.
The decrease in other income is attributable to the absence of interest income
from the Columns of Castleton note receivable which was collected in March of
1995. Depreciation, interest, and general and administrative expenses decreased
for the six months ended June 30, 1996, compared to the six months ended June
30, 1995. The decrease in depreciation expense is attributable to many of the
assets acquired with the purchase of the partnership now being fully
depreciated. Interest expense decreased as a result of the retirement of notes
payable secured by Village Green Apartments and Professional Plaza Office
Building in August 1995. However, this decrease was partially offset by the
refinancing of the Ventura Landing note payable, a new mortgage note payable
secured by Village Green Apartments, and default interest on the mortgage note
payable secured by Mountain Plaza Apartments. General and administrative
expenses decreased for the six months ended June 30, 1996, compared to the six
months ended June 30, 1995, due to decreased legal, printing and postage costs
associated with the Partnership's required responses to various tender offers
made in 1995. The decrease in general and administrative expenses was also
affected by decreased expense reimbursements related to the combined efforts of
the Dallas and Greenville partnership administration staffs during the
transition period in the first quarter of 1995. The increased costs related to
the transition efforts were incurred to minimize any disruption in the year-end
reporting function including the financial reporting and K-1 preparation and
distribution.
The increase in property taxes resulted from the payoff of a 1990 tax liability
of $168,000 of which $68,000, was underaccrued, in order to secure the new note
payable at Village Green Apartments.
As part of the ongoing business plan of the Partnership, the 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 Corporate 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
Corporate General Partner will be able to sustain such a plan.
At June 30, 1996, the Partnership held cash and cash equivalents of $4,066,000
compared to $2,304,000 at June 30, 1995. Net cash provided by operating
activities decreased primarily due to increased funding of tax escrow accounts.
Net cash used in investing activities increased due to the final collection of
the Columns of Castleton note receivable in March of 1995 favorably impacting
1995's cash flows. Net cash provided by financing activities increased due to
cash received from the refinancing of the Village Green Apartments and Ventura
Landing Apartments during the second quarter of 1996.
The partners amended the Partnership Agreement in the fourth quarter of 1995 to
modify the requirement that the Partnership maintain reserves equal to at least
5% of invested capital to instead require reserves in an amount deemed
reasonable and prudent by the General Partner.
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 property 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 $7,659,000 matures at various times with balloon payments due at
maturity, at which time the properties will either be refinanced or sold.
Future cash distributions will depend on the levels of net cash generated from
operations, capital expenditure requirements, property sales and the
availability of cash reserves.
On January 20, 1995, an affiliate of the General Partner, Insignia CCP III
Acquisition, L.L.C., closed an offer to purchase Units (the "Tender Offer") for
a cash price of $50.00 per Unit to Limited Partners of record as of December 15,
1994. Approximately 2,260 Limited Partners holding 36,882 Units (23.24% of
total Units) accepted the Tender Offer and sold their Units to Insignia CCP III
Acquisition, L.L.C. effective January 20, 1995, for an aggregate sales price of
approximately $1.8 million.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On May 1, 1996, the Partnership stopped making debt service payments on
Mountain Plaza Apartments. The Partnership attempted to renegotiate the
terms of the note, however, these efforts have proved unsuccessful and the
lender has initiated foreclosure proceedings which the Partnership will
not contest. The partnership has accrued default interest, as defined in
the mortgage note, at the stated note rate of 8.85% plus a 5% default
rate. At June 30, 1996, approximately $121,000 of default interest had
been accrued. On August 1, 1996, a receiver was appointed to assume day-
to-day management of the property.
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.
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.
CONSOLIDATED CAPITAL PROPERTIES III
By: CONCAP EQUITIES, INC.
General Partner
By: /s/ Carroll D. Vinson
Carroll D. Vinson
President
By: /s/ Robert D. Long, Jr.
Vice President/CAO
Date: August 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Capital Properties III 1996 Second Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000317331
<NAME> CONSOLIDATED CAPITAL PROPERTIES III
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,066
<SECURITIES> 0
<RECEIVABLES> 43
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 18,609
<DEPRECIATION> 13,228
<TOTAL-ASSETS> 10,168
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 7,659
0
0
<COMMON> 0
<OTHER-SE> 1,808
<TOTAL-LIABILITY-AND-EQUITY> 10,168
<SALES> 0
<TOTAL-REVENUES> 2,342
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,470
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 373
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (128)
<EPS-PRIMARY> (.78)<F2>
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
