FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(d)
(As last amended by 34-31905, eff. 4/26/93)
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [Fee Required]
For the fiscal year ended December 31, 1995
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [No Fee Required]
For the transition period.........to.........
Commission file number 0-10260
SHELTER PROPERTIES III LIMITED PARTNERSHIP
(Name of small business issuer in its charter)
South Carolina 57-0718508
(State or other jurisdiction of (I.R.S. 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
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership Interest
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $5,037,740
State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of a specified date within the past 60 days. $7,656,396
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Prospectus of Registrant dated September 2, 1981 (included
in Registration Statement, No. 2-72567, of Registrant) are incorporated by
reference into Parts I and III.
PART I
Item 1. Description of Business
Shelter Properties III Limited Partnership (the "Registrant" or the
"Partnership") is engaged in the business of acquiring, operating and holding
real properties for investment. The Registrant acquired five existing apartment
properties and subsequently sold one property in June 1986.
Commencing September 2, 1981, the Registrant offered through E. F. Hutton
& Company Inc. ("Hutton") up to 54,800 Units of Limited Partnership Interest
(the "Units") at $500 per Unit with a minimum purchase of 10 Units ($5,000) or 3
Units ($1,500) for an Individual Retirement Account. An additional 200 Units
were purchased by the Corporate General Partner. Limited partners are not
required to make any additional capital contributions.
The Units were registered under the Securities Act of 1933 pursuant to
Registration Statement No. 2-72567 (the "Registration Statement"). Reference is
made to the Prospectus of Registrant dated September 2, 1981, (the "Prospectus")
contained in said Registration Statement, which is incorporated herein by
reference thereto.
The offering terminated on March 22, 1982. Upon termination of the
offering, the Registrant had accepted subscriptions for 55,000 Units, including
200 Units purchased by the Corporate General Partner, for an aggregate of
$27,500,000. The Registrant invested approximately $21,000,000 of such proceeds
in five existing apartment properties and thereby completed its acquisition
program at approximately the expenditure level estimated in the Prospectus.
Funds not expended because they are held as reserves have been invested by the
Registrant, in accordance with the policy described in the Prospectus, in U.S.
Government securities or other highly liquid, short-term investments where there
is appropriate safety of principal.
During June 1986, the Partnership sold River Parkway Apartments in
Atlanta, Georgia. The remaining four properties continue to be held by the
Partnership.
A further description of the Partnership's business is included in
Management's Discussion and Analysis or Plan of Operation included in Item 6 of
this Form 10-KSB.
The Registrant has no employees. Management and administrative services
are performed by Shelter Realty III Corporation, the Corporate General Partner,
and by Insignia Management Group, L.P., an affiliate of Insignia Financial
Group, Inc. ("Insignia"), the ultimate parent company of the Corporate General
Partner. Pursuant to a management agreement between them, Insignia Management
Group, L.P. provides property management services to the Registrant.
The real estate business in which the Partnership is engaged is highly
competitive and the Partnership is not a significant factor in this industry.
The Registrant's properties are subject to competition from similar properties
in the vicinity in which the properties are located. In addition, various
limited partnerships have been formed by the General Partners and/or their
affiliates to engage in business which may be competitive with the Registrant.
Item 2. Description of Properties:
The following table sets forth the Registrant's investments in properties:
<TABLE>
<CAPTION>
Date of
Property Purchase Type of Ownership Use
<S> <C> <C> <C>
Essex Park Apartments 10/29/81 Fee ownership subject Apartment
Columbia, South Carolina to first and second 324 units
mortgages
Colony House Apartments 10/31/81 Fee ownership subject Apartment
Murfreesboro, Tennessee to first and second 194 units
mortgages
North River Village Apartments 04/21/82 Fee ownership subject Apartment
Atlanta, Georgia to first and second 133 units
mortgages
Willowick Apartments 06/30/82 Fee ownership subject Apartment
Greenville, South Carolina to first and second 180 units
mortgages
</TABLE>
Schedule of Properties:
<TABLE>
<CAPTION>
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
<S> <C> <C> <C> <C> <C>
Essex Park Apartments $ 9,474,809 $ 4,714,082 5-36 S/L $1,793,090
Colony House Apartments 5,531,010 2,799,318 5-36 S/L 877,639
North River Village Apartments 5,547,931 2,688,638 5-32 S/L 1,273,887
Willowick Apartments 4,349,031 2,166,014 5-32 S/L 895,807
Totals $24,902,781 $12,368,052 $4,840,423
<FN>
See Note A of the financial statements included in Item 7 for a descrip-
tion of the partnership's depreciation policy.
</TABLE>
Schedule of Mortgages:
<TABLE>
<CAPTION>
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1995 Rate Amortized Date Maturity
<S> <C> <C> <C> <C> <C>
Essex Park Apartments
1st mortgage $3,295,601 7.60 (1) 11/15/02 $2,552,499
2nd mortgage 108,986 7.60 none 11/15/02 108,986
Colony House Apartments
1st mortgage 2,457,057 7.60 (1) 11/15/02 1,902,970
2nd mortgage 81,256 7.60 none 11/15/02 81,256
North River Village
1st mortgage 1,693,154 7.83 (2) 10/15/03 1,488,602
2nd mortgage 53,550 7.83 none 10/15/03 53,550
Willowick Apartments
1st mortgage 1,287,019 7.60 (1) 11/15/02 996,746
2nd mortgage 42,562 7.60 none 11/15/02 42,562
9,019,185
Less unamortized
present value discounts (428,360)
Total $8,590,825
<FN>
(1) The principal balance is being amortized over 257 months with a balloon
payment due November 15, 2002.
(2) The principal balance is being amortized over 344 months with a balloon
payment due October 15, 2003.
</TABLE>
Average annual rental rate per unit and occupancy for 1995 and 1994 for
each property:
Average Annual Average Annual
Rental Rates Occupancy
Property 1995 1994 1995 1994
Essex Park $5,571 $5,299 94% 91%
Colony House 6,535 5,908 96% 96%
North River Village 7,734 7,188 92% 93%
Willowick 5,126 4,845 98% 95%
The Corporate General Partner attributes the increase in occupancy at
Essex Park and Willowick to the improved appearances of the properties resulting
from renovations in 1994 and 1995. The average annual rental rates at Colony
House and North River Village have increased due to periodic rental rate
increases.
As noted under "Item 1. Description of Business," the real estate
industry is highly competitive. All of the properties of the Partnership are
subject to competition from other residential apartment complexes in the area.
The Corporate General Partner believes that all of the properties are adequately
insured. The multi-family residential properties' lease terms are for one year
or less. No residential tenant leases 10% or more of the available rental
space.
Real estate taxes and rates in 1995 for each property were:
1995 1995
Billing Rate
Essex Park $94,423 2.63%
Colony House 93,081 5.43%
North River Village 64,447 4.03%
Willowick 57,445 3.03%
Item 3. Legal Proceedings
The general partner responsible for management of the Partnership's business
is Shelter Realty III Corporation, a South Carolina corporation (the "Corporate
General Partner"). The only other general partner of the Partnership, N. Barton
Tuck, Jr., is effectively prohibited by the Partnership's partnership agreement
(the "Partnership Agreement") from participating in the management of the
Partnership. The Corporate General Partner is an indirect subsidiary of
Insignia Financial Group, Inc. ("Insignia"). The directors and officers of the
Corporate General Partner also serve as executive officers of Insignia.
The Corporate General Partner and the Individual General Partner own 200
Limited Partnership Units ("Units") and four Units, respectively. On May 27,
1995, an affiliate of the Corporate General Partner (the "Affiliated Purchaser")
acquired 12,616 Units at a price of $125.00 per Unit pursuant to a tender offer
(the "Affiliate Offer") described below. The Corporate General Partner, the
Individual General Partner, and the Affiliated Purchaser are, therefore,
entitled to participate in cash distributions made by the Partnership to its
Unit holders. The Partnership made a cash distribution of $5.40 per Unit in
February, 1995. The Corporate General Partner presently expects that the
Partnership will seek to make further cash distributions in the future.
The Corporate General Partner is entitled to certain cash distributions in
respect of its general partner interest, and in February 1995 the Corporate
General Partner received a cash distribution in respect of such interest of
$3,000.
As a result of the Affiliated Purchaser's acquisition of 22.94% of the
outstanding Units, the Affiliated Purchaser, an affiliate of the Corporate
General Partner and Insignia, may be in a position to significantly influence
any vote of the Unit holders. The Partnership has paid Insignia Management
Group, L.P. ("IMG"), an affiliate of the Corporate General Partner, property
management fees equal to 5% of the Partnership's apartment revenues for property
management services in each of the two years in the period ended December 31,
1995, pursuant to property management agreements. Property management fees paid
to IMG amounted to $229,932 and $248,101, respectively, for the years ended
December 31, 1994 and 1995. Insignia and its affiliates do not receive any fees
from the Partnership for the asset management or partnership administration
services they provide, although Insignia and its affiliates are reimbursed by
the Partnership for the expenses they incur in connection with providing those
services. The Partnership Agreement also provides for reimbursement to the
Corporate General Partner and its affiliates for costs incurred in connection
with administration of the Partnership's activities. Pursuant to these provi-
sions and in addition to the property management fees referred to above, the
Partnership paid the Corporate General Partner and its affiliates (including the
reimbursements to Insignia and its affiliates in connection with asset manage-
ment and partnership administration services) an aggregate of $95,568 and
$110,729, respectively, for the years ended December 31, 1994 and 1995. In
addition, at various times during the past two fiscal years an affiliate of
Insignia has held preferred stock issued by an unaffiliated company that
provides insurance brokerage services to the Partnership.
The terms of the Affiliated Purchaser's financing of the Affiliate Offer may
result in future potential conflicts of interest. The Affiliated Purchaser paid
for the Units it purchased pursuant to the Affiliate Offer with funds provided
by Insignia, and Insignia, in turn, obtained these funds from its working
capital. It is possible, however, that in connection with its future financing
activities, Insignia may cause or request the Affiliated Purchaser to pledge its
Units as collateral for loans, or otherwise agree to terms which provide
Insignia and the Affiliated Purchaser with incentives to generate substantial
near-term cash flow from the Affiliated Purchaser's investment in the Units. In
such a situation, the Corporate General Partner may experience a conflict of
interest in seeking to reconcile the best interests of the Partnership with the
need of its affiliates for cash flow from the Partnership's activities.
On April 27, 1995, the Affiliated Purchaser commenced the Affiliate Offer
for up to 30% of the Units at a price of $125.00 per Unit. The Affiliate Offer
expired on May 26, 1995. On May 27, 1995, an affiliate of the Corporate General
Partner, the Affiliated Purchaser, acquired 12,616 Units at a price of $125.00
per Unit pursuant to the Affiliate Offer. During the Affiliate Offer, Carl C.
Icahn and certain of his associates contacted Insignia about pursuing a variety
of possible transactions on a joint venture basis. During those discussions,
representatives of Insignia advised Mr. Icahn and his representatives that
Insignia did not wish to discourage or prevent any transaction which would
produce additional value for Unit holders. During those conversations, Mr.
Icahn and his representatives expressed a desire to make an equity investment in
the Affiliated Purchaser with a view to sharing in the economic benefits, if
any, to be derived by the Affiliated Purchaser from the Affiliate Offer. The
representatives of Insignia declined to agree to such an arrangement.
Following those discussions, at approximately 6:45 p.m. on Monday, May 22,
1995, the Corporate General Partner received a letter from High River Limited
Partnership ("High River") which stated that High River was commencing, by
public announcement, a cash tender offer for up to approximately 30% of the
outstanding Units at a price of $143.75 per Unit (the "High River Offer"). High
River sent similar letters to the Insignia affiliated corporate general partners
of five other limited partnerships. On May 23, 1995, Insignia issued a press
release which announced receipt of the letters.
From 12:00 noon on Tuesday, May 23 through late in the evening of Wednesday,
May 24, the Affiliated Purchaser, Insignia, and High River and their respective
counsel had a series of meetings and telephone conversations to explore a
possible joint venture relationship with respect to various real estate related
investment opportunities, including the Affiliate Offer. Representatives of
High River terminated the discussions. No agreement was reached with respect to
the Affiliated Offer or any other matter.
On the afternoon of Thursday, May 25, 1995, the Corporate General Partner
received a second letter from High River stating that High River had initiated a
tender offer for up to 40% of the outstanding Units at a price of $181.50 per
Unit. High River also issued a press release announcing the High River Offer
and that High River was commencing similar tender offers for units of limited
partnership interest in five other partnerships in which other Insignia affili-
ates are the corporate general partners. Upon receiving the letter from High
River, Insignia issued its own press release announcing the terms of the six
High River offers.
Also on May 25, 1995, the Corporate General Partner received a copy of a
Complaint (the "High River Complaint") seeking, among other things, an order
from the United States District Court for the District of Delaware enjoining the
closing of the Affiliate Offer. The High River Complaint related to the
Affiliate Offer and to five other tender offers made by affiliates of Insignia
for units of limited partnership interests in other limited partnerships in
which other affiliates of Insignia are general partners. The High River
Complaint named as defendants the Affiliated Purchaser and each of the Insignia
affiliates making the five other tender offers; the Corporate General Partner
and the five other Insignia-affiliated general partners; and Insignia. The High
River Complaint contained allegations that, among other things, the Affiliated
Purchaser sought to acquire Units at highly inadequate prices, and that the
Affiliate Offer contained numerous false and misleading statements and omissions
of material facts. The alleged misstatements and omissions concerned, among
other things, the true value of the units; the true financial conditions of the
Partnership; the factors affecting the likelihood that properties owned by the
Partnership will be sold or liquidated in the near future; the liquidity and
value of the Units; the limited secondary market for Units; and the true nature
of the market for underlying assets. The High River Complaint also alleged that
the Affiliated Purchaser failed to comply with the requirements of Rule 13e-4
under the Securities Exchange Act of 1934.
On Friday, May 26, 1995, the United States District Court for the District
of Delaware denied High River's motion for a temporary restraining order to
postpone the closing of the Affiliate Offer. On May 26, 1995, Insignia issued a
press release announcing the Court's decision. High River subsequently volun-
tarily withdrew the High River Complaint without prejudice.
On May 26, 1995, High River filed a Schedule 14D-1 relating to the High
River Offer and containing an Offer to Purchase and a related Assignment of
Partnership Interest. The Affiliate Offer expired as scheduled at midnight on
May 26, 1995. As filed on May 26, 1995, the High River Offer was conditioned
upon the Affiliate Offer being extended by at least 10 business days. High
River issued a press release, dated May 26, 1995, announcing that the extension
of the Affiliate Offer for 10 business days would be eliminated as a condition
to the High River Offer. Also on May 26, the Chairman and Chief Executive
Officer of Insignia received a letter from Mr. Icahn. In the letter, Mr. Icahn
accused Insignia of disregarding its "fiduciary responsibilities."
On Friday June 2, the High River Offer to Purchase and the related Assign-
ment of Partnership Interests were mailed to Unit holders. On Monday, June 5,
the Corporate General Partner delivered a letter to High River which requested
that High River cure certain alleged critical omissions, misstatements, and
deficiencies in the High River Offer by June 7, 1995. On June 7, the Corporate
General Partner received a letter from Mr. Icahn stating that High River does
not agree with the positions taken in the Corporate General Partner's June 5
letter.
On June 8, 1995, the Corporate General Partner commenced an action against
High River and Carl C. Icahn in the United States District Court for the
District of South Carolina. The complaint alleged that the High River Offer
misled Unit holders and violated federal securities laws. The Partnership
sought relief from High River's and Mr. Icahn's actions in the form of an
injunction against the High River Offer, a judgment declaring that the untrue
statements in and omissions from the High River Offer constitute violations of
the federal securities laws, and an order requiring High River to make appropri-
ate disclosures to correct all of the false and misleading statements in and
omissions from the High River Offer.
The Partnership and the Corporate General Partner recommended that the Unit
holders reject the High River Offer and not tender their Units pursuant to the
High River Offer. The Partnership and the Corporate General Partner stated that
they may reconsider their recommendation if High River makes additional disclo-
sures to the Unit holders as the Corporate General Partner requested. For
further information, see the Partnership's Solicitation/Recommendation Statement
on Schedule 14D-9 which was filed with the Securities and Exchange Commission on
June 9, 1995.
On June 12, 1995, High River filed an amendment to its Schedule 14D-1
containing a Supplement to its Offer to Purchase. The Supplement amended the
High River Offer to increase the number of Units being sought to all of the
outstanding Units and amended certain disclosures in the Offer to Purchase.
Persons claiming to own Units filed a purported class action and derivative
suit in the United States District Court for the District of South Carolina
seeking, among other things, an order enjoining the Affiliate Offer. On
Thursday, May 18, 1995, the Court denied plaintiffs' motion for a temporary
restraining order postponing the closing of the Affiliate Offer, which expired
as scheduled on May 26, 1995. Counsel for the parties are engaged in settlement
discussions and may continue such discussions.
The Complaint applies to the Affiliate Offer and to five other tender offers
being made by affiliates of Insignia for units of limited partnership interests
in other limited partnerships in which other affiliates of Insignia serve as
general partners. The Complaint names as defendants the Affiliated Purchaser
and each of the Insignia affiliates, including the five other tender offerors;
the Corporate General Partner and five other Insignia-affiliated general
partners; and four individuals who are officers and/or directors of Insignia,
the Corporate General Partner and/or the Affiliated Purchaser. The Complaint
contains allegations that, among other things, the defendants have intentionally
mismanaged the Partnership and the five other Partnerships (collectively the
"Partnerships") and acted contrary to the limited partners' best interests in
order to prolong the lives of the Partnerships and thus continue the revenues
derived by Insignia from the Partnerships while at the same time reducing the
demand for the Partnerships' units in the limited resale market for the units by
artificially depressing the trading prices for the units, in order to create a
favorable environment for the Affiliate Offer and the five other tender offers.
In the Complaint the plaintiffs also allege that in the Affiliate Offer and the
five other tender offers, the Affiliated Purchaser will acquire effective voting
control over the Partnerships at highly inadequate prices, and that the offers
to purchase and related tender offer documents contain numerous false and
misleading statements and omissions of material facts. The alleged misstate-
ments and omissions concern, among other things, the advantages to Unit holders
of tendering Units pursuant to the Affiliate Offer; the true value of the Units;
the true financial condition of the Partnerships; the factors affecting the
likelihood that properties owned by the Partnerships will be sold or liquidated
in the near future; the liquidity and value of the Units; the limited secondary
market for Units; and the true nature of the market for underlying assets.
On Friday, June 16, plaintiffs filed an amended complaint which contained
allegations that, among other things, the defendants engaged in a plan by which
they misappropriated the Partnerships' assets and fraudulently induced limited
partners to sell units to the defendants at highly inadequate prices by causing
the Partnerships to take actions that artificially depressed the prices avail-
able for units and by knowingly disseminating false and misleading statements
and omissions of material facts. The plaintiffs alleged that the defendants
breached fiduciary duties and violated federal securities law by closing the
Affiliate Offer and the five other tender offers made by affiliates of Insignia
for units in the other Partnerships with the knowledge that the limited partners
were not aware of the High River Offer. The plaintiffs further alleged that the
defendants, since the close of the Affiliate Offer, had caused the Partnerships
to enter into several wasteful transactions that had no business purpose or
benefit to the Partnerships solely in order to entrench themselves in their
positions of control over the Partnerships, with the effect of impeding and
possibly preventing nonaffiliated entities from making tender offers that offer
higher value to unit holders than defendants paid.
Subsequent to the filing of the lawsuit by the Corporate General Partner
against High River and Carl C. Icahn, the Corporate General Partner and High
River began discussions in an attempt to settle the lawsuit. On Friday, June
16, 1995, High River issued a press release announcing that the expiration date
of the High River Offer was extended until 12:00 midnight, New York City time on
Wednesday, June 28, 1995, and that High River and the Corporate General Partner
were engaged in settlement discussions.
On Saturday, June 17, the Affiliated Purchaser and Insignia entered into an
agreement with Carl C. Icahn and High River (the "Agreement") and the Corporate
General Partner, among others, entered into a letter agreement with High River
(together with the Agreement, the "Agreements"). The Agreements provide
generally that Insignia would not, and will not cause or permit its affiliates
to, actively oppose the High River Offer, but rather would take a neutral stance
with respect to the High River Offer, except in the case of a competing third
party bid made prior to the expiration of the High River Offer or the occurrence
of any event materially adversely affecting High River Offer. The High River
Offer would proceed in accordance with its terms, as amended, and the Corporate
General Partner would cooperate to facilitate the admission of High River as a
substitute limited partner with respect to any Units High River purchases
pursuant to the High River Offer in accordance with the terms of the Partnership
Agreement and applicable law. The Agreements limit High River's ability to
amend or extend the High River Offer. Apart from purchases made by High River
pursuant to the High River Offer, neither High River nor Insignia nor any of
their respective affiliates would purchase any additional Units pursuant to a
tender offer and can only purchase additional Units from time to time under
certain conditions specified in the Agreements. High River would vote on
certain matters concerning the Partnership as directed by Insignia. In addi-
tion, High River and its affiliates are prohibited from soliciting proxies with
respect to the Partnership or otherwise making proposals concerning the Partner-
ship directly to other Unit holders. High River and Insignia have certain buy-
sell rights with respect to the other's Units which may be exercised 18 months
after the effective date of the Agreements and annually thereafter and at
earlier or later dates under other circumstances specified in the Agreements,
including the proposal of certain transactions otherwise protected by the
Agreements. The party selling Units pursuant to the buy-sell transaction must
sell or cause to be sold to the other party all Units beneficially owned by the
first party and its affiliates.
Litigation initiated by the Corporate General Partner concerning the High
River Offer and litigation initiated by High River concerning the Affiliate
Offer was dismissed with prejudice and mutual releases were exchanged. On June
20, High River issued a press release announcing that the expiration date of the
High River Offer was extended until 12:00 midnight, New York City time on
Monday, July 3, 1995.
On July 20, 1995, the Partnership mailed a letter to limited partners of the
Partnership who tendered limited partnership units to the Affiliated Purchaser
in the recent tender offer. The letter notifies the limited partners that the
Affiliated Purchaser has offered to increase the amount paid to such limited
partners by an additional 45%.
On September 27, 1995, the parties to the purported class action and deriva-
tive suit described above, filed a stipulation to settle the matter. The
principal terms of the stipulation requires supplemental payments to tendering
limited partners aggregating approximately $6 million; waiver by the Corporate
General Partner and five other Insignia affiliated general partners of any right
to certain proceeds from a sale or refinancing of the Partnership's properties;
some restrictions on Insignia's ability to vote the limited partner interest it
acquired; payment of $1.25 million for plaintiffs' attorney fees and expenses in
the litigation; and general releases of all the defendants. Court approval of
the stipulation is required before it may be distributed to the class members
for review. If a certain number of class members opt out, the settlement may be
cancelled and no assurance can be given that this matter will be settled on the
terms set forth above or otherwise.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of 1995, no matter was submitted to a vote of unit
holders through the solicitation of proxies or otherwise.
PART II
Item 5. Market for the Partnership's Common Equity and Related Partner Matters
As of December 31, 1995, there was minimal trading of the Units in the
secondary market establishing a high and low value of $155.42 and $155.00,
respectively, per unit as quoted in the January 1996 Stanger Report. There are
2,138 holders of record owning an aggregate of 55,000 Units. As disclosed in
"Item 3. Legal Proceedings," an affiliate of the Corporate General Partner
purchased 12,616 Units at $125.00 per Unit. In addition, High River Limited
Partnership purchased 5,398 at $181.50 per Unit. No public trading market has
developed for the Units, and it is not anticipated that such a market will
develop in the future. Cash distributions of $300,000 were declared and paid in
the year ended December 31, 1995. Future cash distributions will depend on the
levels of net cash generated from operations, refinancings, property sales and
the availability of cash reserves. Distributions may also be restricted by the
requirement to deposit net operating income (as defined in the mortgage note)
into the Reserve Account until the Reserve Account is funded an amount equal to
$1,000 per apartment unit for Colony House, Essex Park, and Willowick and
$400.00 per apartment unit for North River Village.
Item 6. Management's Discussion and Analysis or Plan of Operation
This item should be read in conjunction with the consolidated financial
statements and other items contained elsewhere in this report.
Results of Operations
The Partnership's net loss as shown in the financial statements for the year
ended December 31, 1995, was $87,566 versus a net income of $102,738 for 1994
(See Note E of the financial statements for a reconciliation of these amounts to
the Partnership's federal taxable losses). The change from net income to loss
is primarily attributable to increased general and administrative expenses and
increased maintenance expenses. General and administrative expenses increased
as a result of increased legal costs associated with the lawsuits disclosed in
"Item 3. Legal Proceedings," as well as increased administrative expenses in
connection with the tender offers. Maintenance expenses increased due to major
renovations to both North River Village and Colony House properties to maintain
the properties' occupancy levels. Colony House completed siding and exterior
painting projects during 1995 and North River Village completed interior and
exterior painting. Essex Park incurred extensive costs as a result of parking
lot repairs during 1995.
Management relies on the annual appraisals performed by outside appraisers to
assess the impairment of investment properties. There are three recognized
approaches or techniques available to the appraiser. When applicable, these
approaches are used to process the data considered significant to each to arrive
at separate value indications. In all instances the experience of the ap-
praiser, coupled with his objective judgement, plays a major role in arriving at
the conclusions of the indicated value from which the final estimate of value is
made. The three approaches commonly known are the cost approach, the sales
comparison approach, and the income approach. The cost approach is often not
considered to be reliable due to the lack of land sales and the significant
amount of depreciation and, therefore, is often not presented. Upon receipt of
the appraisals, any property which is stated on the books of the partnership
above the estimated value given in the appraisal, is written down to the
estimated value given by the appraiser. The appraiser assumes a stabilized
occupancy at the time of the appraisal and, therefore, any impairment of value
is considered to be permanent by Management. For the year ended December 31,
1995, no adjustments for the impairment of value were recorded.
As part of the ongoing business plan of the Partnership, the Corporate
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 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.
Liquidity and Capital Resources
At December 31, 1995, the Partnership had unrestricted cash of $601,235
compared to $1,246,919 at December 31, 1994. Net cash provided by operating
activities decreased primarily as a result of the increase in net loss as
previously discussed. Increases in escrows for taxes and insurance contributed
to the decrease in net cash provided by operations. Net cash used in investing
activities increased as a result of an increase in cash invested in short-term
investments in 1995 as compared to 1994. Property improvements also increased
during 1995. Net cash used in financing activities increased due to the
distributions paid in 1995 as no distributions were made in 1994.
The Partnership has no material capital programs scheduled to be performed
in 1996, although certain routine capital expenditures and maintenance expenses
have been budgeted. These capital expenditures and maintenance expenses will be
incurred only if cash is available from operations or is received from the
capital reserve account.
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 various properties to adequately maintain the
physical assets and other operating needs of the Partnership. The mortgage
indebtedness of $8,590,825, net of discount, is amortized over varying periods
as previously disclosed in "Item 2. Description of Properties." In addition,
the mortgage notes require balloon payments ranging from November 15, 2002, to
October 15, 2003, at which time the individual properties will either be sold or
refinanced. Such assets are currently thought to be sufficient for any near-
term needs of the Partnership. Cash distributions of $300,000 were paid during
the year ended December 31, 1995. Future cash distributions will depend on the
levels of net cash generated from operations, refinancings, property sales and
the availability of cash reserves.
Item 7. Financial Statements
SHELTER PROPERTIES III LIMITED PARTNERSHIP
LIST OF FINANCIAL STATEMENTS
Report of Independent Auditors
Consolidated Balance Sheet - December 31, 1995
Consolidated Statements of Operations - Years ended December 31, 1995 and
1994
Consolidated Statements of Changes in Partners' Capital (Deficit) - Years
ended December 31, 1995 and 1994
Consolidated Statements of Cash Flows - Years ended December 31, 1995 and
1994
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Shelter Properties III Limited Partnership
We have audited the accompanying consolidated balance sheet of Shelter Proper-
ties III Limited Partnership as of December 31, 1995, and the related consoli-
dated statements of operations, changes in partners' capital (deficit) and cash
flows for each of the two years in the period ended December 31, 1995. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Shelter
Properties III Limited Partnership as of December 31, 1995, and the consolidated
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1995, in conformity with generally accepted account-
ing principles.
/s/ERNST & YOUNG LLP
Greenville, South Carolina
February 12, 1996
SHELTER PROPERTIES III LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
December 31, 1995
Assets
Cash:
Unrestricted $ 601,235
Restricted--tenant security deposits 142,586
Investments (Note B) 692,677
Accounts receivable 30,401
Escrow for taxes 181,828
Restricted escrows 842,625
Other assets 297,539
Investment properties: (Notes C and F)
Land $ 1,281,294
Buildings and related personal property 23,621,487
24,902,781
Less accumulated depreciation (12,368,052) 12,534,729
$15,323,620
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 270,627
Tenant security deposits 141,000
Accrued taxes 53,997
Other liabilities 457,784
Mortgage notes payable (Note C) 8,590,825
Partners' Capital (Deficit)
General partners $ (76,961)
Limited partners (55,000 units
issued and outstanding) 5,886,348 5,809,387
$15,323,620
See Accompanying Notes to Consolidated Financial Statements
SHELTER PROPERTIES III LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31,
1995 1994
Revenues:
Rental income $4,716,828 $4,358,187
Other income 320,912 296,913
Total revenues 5,037,740 4,655,100
Expenses:
Operating 1,474,926 1,489,927
General and administrative 367,679 165,061
Property management fees 248,101 229,932
Maintenance 1,088,534 742,015
Depreciation 858,268 790,125
Interest 788,681 800,420
Property taxes 299,117 313,588
Total expenses 5,125,306 4,531,068
Loss on disposal of property -- (21,294)
Net (loss) income (Note E) $ (87,566) $ 102,738
Net (loss) income allocated to
general partners (1%) $ (876) $ 1,027
Net (loss) income allocated to
limited partners (99%) (86,690) 101,711
$ (87,566) $ 102,738
Net (loss) income per limited
partnership unit $ (1.58) $ 1.85
See Accompanying Notes to Consolidated Financial Statements
SHELTER PROPERTIES III LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 55,000 $ 2,000 $27,500,000 $27,502,000
Partners' (deficit) capital at
December 31, 1993 55,000 $(74,112) $ 6,168,327 $ 6,094,215
Net income for the year ended
December 31, 1994 -- 1,027 101,711 102,738
Partners' (deficit) capital at
December 31, 1994 55,000 (73,085) 6,270,038 6,196,953
Distributions paid
to partners -- (3,000) (297,000) (300,000)
Net loss for the year ended
December 31, 1995 -- (876) (86,690) (87,566)
Partners' (deficit) capital at
December 31, 1995 55,000 $(76,961) $ 5,886,348 $ 5,809,387
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
SHELTER PROPERTIES III LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (87,566) $ 102,738
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation 858,268 790,125
Amortization of discounts and loan costs 91,300 89,189
Loss on disposal of property -- 21,294
Change in accounts:
Restricted cash 2,554 (17,748)
Accounts receivable (5,826) 97,794
Escrows for taxes and insurance (76,658) 212,130
Accounts payable 173,919 11,251
Tenant security deposit liabilities (6,630) 20,238
Accrued taxes (8,701) (146,981)
Other liabilities 110,173 (4,315)
Net cash provided by operating activities 1,050,833 1,175,715
Cash flows from investing activities:
Property improvements and replacements (715,877) (534,797)
Cash invested in short-term investments (2,887,048) --
Cash received from matured investments 2,194,371 --
Deposits to restricted escrows (100,568) (229,686)
Receipts from restricted escrows 301,878 486,674
Net cash used in investing activities (1,207,244) (277,809)
Cash flows from financing activities:
Payments on mortgage notes payable (189,273) (175,422)
Loan costs -- (10,358)
Partners' distributions (300,000) --
Net cash used in financing activities (489,273) (185,780)
Net (decrease) increase in cash (645,684) 712,126
Cash at beginning of year 1,246,919 534,793
Cash at end of year $ 601,235 $ 1,246,919
Supplemental disclosure of cash flow information:
Cash paid for interest $ 697,381 $ 711,230
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
SHELTER PROPERTIES III LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
December 31, 1995
Note A - Organization and Significant Accounting Policies
Organization: Shelter Properties III Limited Partnership (the "Partnership )
was organized as a limited partnership under the laws of the State of South
Carolina pursuant to a Certificate and Agreement of Limited Partnership filed
May 15, 1981. The general partner responsible for management of the Partner-
ship's business is Shelter Realty III Corporation, a South Carolina corporation
(the "Corporate General Partner"). The only other general partner of the
Partnership, N. Barton Tuck, Jr., is effectively prohibited by the Partnership's
partnership agreement (the "Partnership Agreement") from participating in the
management of the Partnership. The Corporate General Partner is an indirect
subsidiary of Insignia Financial Group, Inc. ("Insignia"). The directors and
officers of the Corporate General Partner also serve as executive officers of
Insignia. The partnership agreement terminates December 31, 2021. The
Partnership commenced operations on October 29, 1981, and completed its acquisi-
tion of apartment properties on June 30, 1982. The Partnership operates four
apartment properties located in the South.
Principles of Consolidation: The financial statements include all the accounts
of the Partnership and its one 99.99% owned partnership. All significant
interpartnership balances have been eliminated.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Allocation of Cash Distributions: Cash distributions by the Partnership are
allocated between general and limited partners in accordance with the provisions
of the partnership agreement. The partnership agreement provides that net cash
from operations means revenue received less operating expenses paid, adjusted
for certain specified items which primarily include mortgage payments on debt,
property improvements and replacements not previously reserved, and the effects
of other adjustments to reserves. In the following notes to financial state-
ments, whenever net cash from operations is used, it has the aforementioned
meaning. The following is a reconciliation of the subtotal in the accompanying
statements of cash flows captioned net cash provided by operating activities
to net cash (used by) from operations, as defined in the partnership agreement.
However, "net cash (used by) from operations" should not be considered an
alternative to net income as an indicator of the Partnership's operating
performance or to cash flows as a measure of liquidity.
1995 1994
Net cash provided by operating activities $1,050,833 $1,175,715
Property improvements and replacements (715,877) (534,797)
Payments on mortgage notes payable (189,273) (175,422)
Changes in reserves for net operating
liabilities (188,831) (172,369)
Changes in restricted escrows, net 201,310 256,988
Additional operating reserves (161,000) (255,000)
Net cash (used by) from operations $ (2,838) $ 295,115
Note A - Organization and Significant Accounting Policies (continued)
The Corporate General Partner believes it to be in the best interest of the
Partnership to reserve an additional $161,000 at December 31, 1995, to fund
continuing capital improvements of its investment properties. Distributions
made from reserves no longer considered necessary by the general partners are
considered to be additional net cash from operations for allocation purposes.
During the year ended December 31, 1995, the Corporate General Partner made a
distribution of $300,000 from cash from operations.
The partnership agreement provides that 99% of distributions of net cash from
operations are allocated to the limited partners until they receive net cash
from operations for such fiscal year equal to 7% of their adjusted capital
values (as defined in the partnership agreement), at which point the general
partners will be allocated all net cash from operations until they have received
distributions equal to 10% of the aggregate net cash from operations distributed
to partners for such fiscal year. Thereafter, the general partners will be
allocated 10% of any distributions of remaining net cash from operations for
such fiscal year.
All distributions of distributable net proceeds (as defined in the partnership
agreement) from property dispositions and refinancings will be allocated to the
limited partners until each limited partner has received an amount equal to a
cumulative 7% per annum of the average of the limited partners' adjusted capital
value, less any prior distributions of net cash from operations and distribut-
able net proceeds, and has also received an amount equal to the limited part-
ners' adjusted capital value. Thereafter, the general partners receive 1% of
the selling prices of properties sold where they acted as a broker, and then the
limited partners will be allocated 85% of any remaining distributions of
distributable net proceeds and the general partners will receive 15%.
Distributions may be restricted by the requirement to deposit net operating
income (as defined in the mortgage note) into the Reserve Accounts until the
Reserve Accounts are fully funded.
Undistributed Net Proceeds from Refinancing: At December 31, 1993, the Partner-
ship had $232,000 of undistributed net proceeds from refinancings and sale
proceeds. No proceeds were received during 1995 and 1994. As a result,
$232,000 of net proceeds from refinancings remain undistributed at December 31,
1995. In addition, undistributed net proceeds of $184,500 are payable to the
general partners once certain levels of return are received by the limited
partners. (See Note D).
Allocation of Profits, Gains and Losses: Profits, gains and losses of the
Partnership are allocated between general and limited partners in accordance
with the provisions of the partnership agreement.
For any fiscal year, to the extent that profits, not including gains from
property dispositions, do not exceed distributions of net cash from operations,
such profits are allocated in the same manner as such distributions. In any
fiscal year in which profits, not including gains from property disposition,
exceed distributions of net cash from operations, such excess is treated on a
cumulative basis as if it constituted an equivalent amount of distributable net
proceeds and is allocated together with, and in the same manner as, that portion
of gain described in the second sentence of the following paragraph.
Note A - Organization and Significant Accounting Policies (continued)
Any gain from property dispositions attributable to the excess, if any, of the
indebtedness relating to a property immediately prior to the disposition of such
property over the Partnership's adjusted basis in the property shall be allo-
cated to each partner having a negative capital account balance, to the extent
of such negative balance. The balance of any gain shall be treated on a
cumulative basis as if it constituted an equivalent amount of distributable net
proceeds and shall be allocated to the general partners to the extent that
general partners would have received distributable net proceeds in connection
therewith and the balance shall be allocated to the limited partners. However,
the interest of the general partners will be equal to at least 1% of each gain
at all times during the existence of the Partnership.
All losses, including losses attributable to property dispositions, are allo-
cated 99% to the limited partners and 1% to the general partners. Accordingly,
net (loss) gain as shown in the statements of operations and changes in part-
ners' capital for 1995 and 1994 were allocated 99% to the limited partners and
1% to the general partners. Net (loss) gain per limited partnership unit for
1995 and 1994 was computed as 99% of net (loss) gain divided by 55,000 weighted
average units outstanding.
Other Reserves: The general partners may designate a portion of cash generated
from operations as other reserves in determining net cash from operations.
The general partners designated as other reserves an amount equal to the net
liabilities related to the operations of apartment properties during the current
fiscal year that are expected to require the use of cash during the next fiscal
year. The decrease in other reserves during 1995 was $188,831 and the decrease
in 1994 was $172,369, which amounts were determined by considering changes in
the balances of restricted cash, accounts receivable, escrows for taxes,
accounts payable, tenant security deposit liabilities, and accrued taxes and
other liabilities. At this time, the Corporate General Partner expects to
continue to adjust other reserves based on the net change in the aforementioned
account balances. During 1995 and 1994, the Corporate General Partner reserved
an additional $161,000 and $255,000, respectively, for capital improvements.
Restricted Escrows:
Capital Improvement Account - At the time of the 1992 refinancing of Colony
House Apartments, Essex Park Apartments and Willowick Apartments mortgage notes
payable, $841,515 of the refinancing proceeds were designated for a "capital
improvement escrow" for certain capital improvements. At December 31, 1995,
there was no balance remaining in the account. At the time of the refinancing
of North River Village Apartments in 1993, $545,558 of the refinancing proceeds
were designated for a "capital improvement escrow" for certain capital improve-
ments. At December 31, 1995, the balance remaining in the escrow for this
property was $13,484. Upon completion of the scheduled property improvements,
any excess funds will be returned for property operations.
Reserve Account - In addition to the Capital Improvement Account, a
general Reserve Account was established with the refinancing proceeds for each
mortgaged property. These funds were established to cover necessary repairs and
replacements of existing improvements, debt service, out of pocket expenses
incurred for ordinary and necessary administrative tasks, and payment of real
property taxes and insurance premiums. In connection with the 1992 refinancing,
the Partnership is required to deposit net operating income (as defined in the
mortgage note) from Colony House Apartments, Essex Park Apartments and Willowick
Apartments to the respective reserve account until they equal $1,000 per
apartment unit or $698,000 in total. The balance at December 31, 1995, for
these three properties is $709,707, including interest earned on these funds.
In connection with the 1993 refinancing of North River Village, a reserve
account was established and fully funded at $400 per apartment unit or $53,200
in total. The balance at December 31, 1995, was $55,686, including interest
earned on these funds.
Escrows for Taxes: Currently, these funds are held by the Partnership. All
escrow funds are designated for the payment of real estate taxes.
Depreciation: Depreciation is provided by the straight-line method over the
estimated lives of the apartment properties and related personal property. For
Federal income tax purposes, the accelerated cost recovery method is used (1)
for real property over 15 years for additions prior to March 16, 1984, 18 years
for additions after March 15, 1984, and before May 9, 1985, and 19 years for
additions after May 8, 1985, and before January 1, 1987, and (2) for personal
property over 5 years for additions prior to January 1, 1987. As a result of
the Tax Reform Act of 1986, for additions after December 31, 1986, the modified
accelerated cost recovery method is used for depreciation of (1) real property
additions over 27 1/2 years and (2) personal property additions over 7 years.
Present Value Discounts: Periodically, the Partnership incurs debt at below
market rates for similar debt. Present value discounts are recorded on the
basis of prevailing market rates and are amortized on an interest method over
the life of the related debt.
Loan Costs: Loan costs are included in other assets and are being amortized on
a straight-line basis over the life of the loans.
Cash: The Partnership considers only unrestricted cash to be cash. Certifi-
cates of deposit are considered to be investments. At certain times, the amount
of cash deposited at a bank may exceed the limit on insured deposits.
Investments: Securities held-to-maturity and available-for-sale: The Corporate
General partner determines the appropriate classification of debt securities at
the time of purchase and reevaluates such designation as of each balance sheet
date. Debt securities are classified as held-to-maturity when the Partnership
has the positive intent and ability to hold the securities to maturity. Held-
to-maturity securities are stated at amortized cost, adjusted for amortization
of premiums and accretion of discounts to maturity. Such amortization is
included in investment income. Interest on securities classified as held-to-
maturity is included in investment income.
Marketable equity securities and debt securities not classified as held-to-
maturity are classified as available-for-sale. Presently, all of the Partner-
ship's investments are classified as held-to-maturity. Available-for-sale
securities are carried at fair value, with the unrealized gains and losses, net
of tax, reported in a separate component of shareholders' equity. The amortized
cost of debt securities in this category is adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization is included
in investment income. Realized gains and losses and declines in value judged to
be other-than-temporary on available-for-sale securities are included in
investment income. The cost of securities sold is based on the specific
identification method. Interest and dividends on securities classified as
available-for-sale are included in investment income.
Leases: The Partnership generally leases apartment units for twelve-month terms
or less. The Partnership recognizes income as earned on its leases. In
addition, the Corporate General Partner's policy is to offer rental concessions
during particularly slow months or in response to heavy competition from other
similar complexes in the area. Concessions are charged to expense as incurred.
Restricted Cash -Tenant Security Deposits: The Partnership requires security
deposits from all lessees for the duration of the lease and all such deposits
are considered to be restricted cash. Deposits are refunded when the tenant
vacates the apartment if there has been no damage to the unit.
Investment Properties: Investment properties consist of four apartment com-
plexes and are stated at cost. Costs of apartment properties that have been
permanently impaired have been written down to appraised value. The Corporate
General Partner relies on the annual appraisals performed by the independent
appraisers for the estimated value of the Partnership's properties. There are
three recognized approaches or techniques available to the appraiser. When
applicable, these approaches are used to process the data considered significant
to each to arrive at separate value indications. In all instances the experi-
ence of the appraiser, coupled with his objective judgement, plays a major role
in arriving at the conclusions of the indicated value from which the final
estimate of value is made. The three approaches commonly known are the cost
approach, the sales comparison approach, and the income approach. The cost
approach is often not considered to be reliable due to the lack of land sales
and the significant amount of depreciation and, therefore, is often not
presented. Upon receipt of the appraisals, any property which is stated on the
books of the partnership above the estimated value given in the appraisal, is
written down to the estimated value given by the appraiser. The appraiser
assumes a stabilized occupancy at the time of the appraisal and, therefore, any
impairment of value is considered to be permanent by the Corporate General
Partner. For the year ended December 31, 1995, no adjustments for impairment of
value were recorded.
During the fourth quarter of 1995, the Partnership adopted FASB Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. The impairment loss is measured by
comparing the fair value of the asset to its carrying amount. The effect of
adoption was not material.
Note A - Organization and Significant Accounting Policies (continued)
Fair Value: In 1995, the Partnership implemented Statement of Financial
Accounting Standards No. 107, "Disclosure about Fair Value of Financial Instru-
ments," which requires disclosure of fair value information about financial
instruments for which it is practicable to estimate that value. The carrying
amount of the Partnership's cash and investments approximates fair value due to
short-term maturities. The Partnership estimates the fair value of its fixed
rate mortgages by discounted cash flow analysis, based on estimated borrowing
rates currently available to the Partnership.
Reclassifications: Certain reclassifications have been made to the 1994
information to conform to the 1995 presentation.
Note B - Investments
Investments, stated at cost, consist of the following at December 31, 1995:
Interest Face Maturity
Rate Amount Cost Date
First Union Bank
Certificate of Deposit 5.10% $226,837 $225,877 01/26/96
First Union Bank
Certificate of Deposit 5.25% 100,896 100,456 01/17/96
Ford Motor Credit Corporation
Commercial Paper 5.51% 370,000 365,042 03/14/96
$697,733 691,375
Accrued Interest 1,302
$692,677
The Partnership's investments are classified as held-to-maturity. The Corporate
General Partner believes the market value of the investments is approximately
the same as the cost.
Note C Mortgage Notes Payable
The principal terms of mortgage notes payables are as follows:
<TABLE>
<CAPTION>
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1995 Interest Rate Date Maturity
<S> <C> <C> <C> <C> <C>
Essex Park Apartments
1st mortgage $ 3,295,601 $27,812 7.60% 11/15/02 $2,552,499
2nd mortgage 108,986 690 7.60 11/15/02 108,986
Colony House Apartments
1st mortgage 2,457,057 20,736 7.60 11/15/02 1,902,970
2nd mortgage 81,256 515 7.60 11/15/02 81,256
North River Village
1st mortgage 1,693,154 12,654 7.83 10/15/03 1,488,602
2nd mortgage 53,550 349 7.83 10/15/03 53,550
Willowick Apartments
1st mortgage 1,287,019 10,862 7.60 11/15/02 996,746
2nd mortgage 42,562 270 7.60 11/15/02 42,562
9,019,185 $73,888
Less unamortized
present value discounts (428,360)
Total $ 8,590,825
</TABLE>
The estimated fair values of the Partnership's aggregate debt is approximately
$9,019,000. This estimate is not necessarily indicative of the amounts the
Partnership may pay in actual market transactions.
The Partnership exercised interest rate buy-down options when the debt was
refinanced, reducing the stated rate from 8.76% to 7.60% and 8.13% to 7.83% in
1992 and 1993, respectively. The fee for the interest rate reduction amounted
to $575,120 and is being amortized as a loan discount on the interest method
over the life of the loans. The discount fee is reflected as a reduction of
the mortgage notes payable and increases the effective rates of the debt to
8.76% and 8.13%, respectively.
The mortgage notes payable are non-recourse and are secured by pledge of all of
the Partnership's apartment properties and by pledge of revenues from the
apartment properties. All of the notes require prepayment penalties if repaid
prior to maturity.
Note C - Mortgage Notes Payable (continued)
Scheduled principal payments of mortgage notes payable subsequent to December
31, 1995, are as follows:
1996 $ 204,215
1997 220,337
1998 237,732
1999 256,500
2000 276,750
Thereafter 7,823,651
$9,019,185
Note D - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Corporate 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. Balances and other transactions with
Insignia Financial Group, Inc. and affiliates in 1995 and 1994 are as follows:
1995 1994
Property management fees $248,101 $229,932
Reimbursement for services of affiliates 110,729 95,568
Due to General Partner 184,500 184,500
Due from General Partner 10,000 10,000
The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the Corporate General Partner. An affiliate of
the Corporate 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 Corporate 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 Corporate General Partner by virtue of the agent's obligations is not
significant.
Note E - Income Taxes
The Partnership has received a ruling from the Internal Revenue Service that it
will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership. Taxable income or loss of the Partnership is reported in
the income tax returns of its partners.
Note E - Income Taxes (continued)
The following is a reconciliation of reported net (loss) income and Federal
taxable loss:
1995 1994
Net (loss) income as reported $ (87,566) $ 102,738
Add (deduct):
Amortization of present
value discounts (7,211) (8,465)
Depreciation differences (594,705) (624,785)
Change in prepaid rental 28,073 2,164
Loss on disposal of property -- 23,083
Other 2,803 12
Accrued legal expense 55,553 --
Federal taxable loss $(603,053) $(505,253)
Federal taxable loss per
limited partnership unit $ (10.85) $ (9.09)
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities:
Net assets as reported $ 5,809,387
Land and buildings 3,082,395
Accumulated depreciation (10,776,700)
Syndication fees 3,246,434
Other 315,513
Net assets - tax basis $ 1,677,029
Note F - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Initial Cost
To Partnership
Buildings Cost
and Related Capitalized
Personal Subsequent
Description Encumbrances Land Property Acquisition
<S> <C> <C> <C> <C>
Essex Park Apartments
Columbia, South Carolina $3,404,587 $ 472,741 $ 7,406,270 $1,595,798
Colony House Apartments
Murfreesboro, Tennessee 2,538,313 183,671 4,408,114 939,225
North River Village Apts.
Atlanta, Georgia 1,746,704 335,959 4,084,551 1,127,421
Willowick Apartments
Greenville, South Carolina 1,329,581 288,923 3,563,385 496,723
Totals $9,019,185 $1,281,294 $19,462,320 $4,159,167
</TABLE>
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1995
Buildings
And Related
Personal Accumulated Date of Date Depreciable
Description Land Property Total Depreciation Construction Acquired Life-Years
<S> <C> <C> <C> <C> <C> <C> <C>
Essex Park Apartments
Columbia, South Carolina $ 472,741 $ 9,002,068 $ 9,474,809 $ 4,714,082 1973 10/29/81 5-36
Colony House Apartments
Murfreesboro, Tennessee 183,671 5,347,339 5,531,010 2,799,318 1970-1972 10/30/81 5-36
North River Village
Atlanta, Georgia 335,959 5,211,972 5,547,931 2,688,638 1969 04/21/82 5-32
Willowick Apartments
Greenville, South Carolina 288,923 4,060,108 4,349,031 2,166,014 1974 06/30/82 5-32
Totals $1,281,294 $23,621,487 $24,902,781 $12,368,052
</TABLE>
Note F - Real Estate and Accumulated Depreciation (continued)
Reconciliation of Real Estate and Accumulated Depreciation :
Years Ended December 31,
1995 1994
Investment Properties
Balance at beginning of year $24,257,304 $23,885,172
Property improvements 715,877 534,797
Disposals of property (70,400) (162,665)
Balance at End of Year $24,902,781 $24,257,304
Accumulated Depreciation
Balance at beginning of year $11,577,270 $10,926,728
Additions charged to expense 858,268 790,125
Disposals of property (67,486) (139,583)
Balance at End of Year $12,368,052 $11,577,270
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1995 and 1994 are $27,985,176 and $27,269,303, respectively. The
accumulated depreciation taken for Federal income tax purposes at December 31,
1995 and 1994 are $23,144,753 and $21,691,779, respectively.
Note G - Contingencies
Tender Offer Litigation: The Corporate General Partner owns 200 Limited
Partnership Units ("Units"). In April 1995, six entities ("Affiliated
Purchaser") affiliated with the Partnership commenced tender offers for limited
partner interests in six limited partnerships, including the Partnership
(collectively, the "Shelter Properties Partnerships"). On May 27, 1995, the
Affiliated Purchaser acquired 12,616 units of the Partnership pursuant to the
tender offer. On or about May 12, 1995, in the United States District Court for
the District of South Carolina, certain limited partners of the Shelter
Properties Partnerships commenced a lawsuit, on behalf of themselves, on behalf
of a putative class of plaintiffs, and derivatively on behalf of the
partnerships, challenging the actions taken by defendants (including Insignia,
the acquiring entities and certain officers of Insignia) in the management of
the Shelter Properties Partnerships and in connection with the tender offers and
certain other matters.
The plaintiffs alleged that, among other things: (i) the defendants
intentionally mismanaged the partnerships and acted contrary to the limited
partners' best interests by prolonging the existence of the partnerships in
order to perpetuate the revenues derived by Insignia and its affiliates from the
partnerships, (ii) the defendants' actions reduced the demand for the
partnerships' limited partner interests in the limited resale market by
artificially depressing the trading prices for limited partners interests in
order to create a favorable environment for the tender offers; (iii) through the
tender offers, the acquiring entities sought to acquire effective voting control
over the partnerships while paying highly inadequate prices; and (iv) the
documents disseminated to the class in connection with the tender offers
contained false and misleading statements and omissions of material facts
concerning such issues as the advantages to limited partners of tendering
pursuant to the tender offers, the true value of the interest, the true
financial condition of the partnerships, the factors affecting the likelihood
that properties owned by the partnerships will be sold or liquidated in the
near future, the liquidity and true value of the limited partner interests, the
reasons for the limited secondary market for limited partner interests, and the
true nature of the market for the underlying real estate assets owned by the
partnerships all in violation of the federal securities laws.
On September 27, 1995, the parties entered into a stipulation to settle the
matter. The principal terms of the stipulation require supplemental payments to
tendering limited partners aggregating approximately $6 million to be paid by
the Affiliated Purchaser; waiver by the Shelter Properties Partnership's general
partners of any right to certain proceeds from a sale or refinancing of the
partnerships' properties; some restrictions on Insignia's ability to vote the
limited partner interests it acquired; payment of $1.25 million for plaintiffs'
attorney fees and expenses in the litigation; and general releases of all the
defendants. The Partnership has accrued approximately $56,000 as its allocated
share of the $1.25 million. Provisional Court approval of the stipulation is
required before it will be distributed to the class members for review. If a
certain number of class members opt out, the settlement may be cancelled. No
assurance can be given that this matter will be settled on the terms set forth
above or otherwise.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons,
Compliance with Section 16(a) of the Exchange Act
The Registrant has no officers or directors. The Individual and Corporate
General Partners are as follows:
Individual General Partner - N. Barton Tuck, Jr., age 57, is the Individual
General Partner of the Registrant. Mr. Tuck is Chairman of GolfSouth
Management, Inc. Until August 1990, he served as Chairman and Chief Executive
Officer of U.S. Shelter Corporation ("Shelter"), the former parent of AmReal
Corporation (parent of the Corporate General Partner of the Partnership). For
six years prior to 1966, Mr. Tuck was employed in Greenville, South Carolina by
the certified public accounting firm of S.D. Leidesdorf & Company. From 1966 to
1970, he was a registered representative with the investment banking firm of
Harris Upham & Co., Inc. in Greenville, South Carolina. Since 1970, Mr. Tuck
has been engaged in arranging equity investments for individuals and
partnerships. Mr. Tuck is a graduate of the University of North Carolina. Mr.
Tuck has delegated to the Corporate General Partner all of his authority, as a
general partner of the Partnership, to manage and control the Partnership and
its business and affairs.
Corporate General Partner - The names and ages of, as well as the positions and
offices held by, the executive officers and directors of Shelter Realty III
Corporation are set forth below. There are no family relationships between or
among any officers or directors.
Name Age Position
William H. Jarrard, Jr. 49 President
Ronald Uretta 40 Vice President and Treasurer
John K. Lines 36 Vice President and Secretary
Kelley M. Buechler 38 Assistant Secretary
Mr. Jarrard, who had previously served as Vice President, became President
in August 1994. In June 1994, Mr. Lines became Secretary and Ms. Buechler, who
had previously held the position, became Assistant Secretary.
William H. Jarrard, Jr. has been Managing Director - Partnership
Administration of Insignia since January 1991. Mr. Jarrard was employed by U.S.
Shelter in a similar capacity for eleven years prior to his joining Insignia.
Ronald Uretta has been Insignia's Chief Financial Officer, Secretary, and
Treasurer since January 1992. Since September 1990, Mr. Uretta has also served
as the Chief Financial Officer and Controller of Metropolitan Asset Group. From
May 1988 until September 1990, Mr. Uretta was a self-employed financial
consultant. From January 1978 until January 1988, Mr. Uretta was employed by
Veltri Raynor & Company, independent certified public accountants.
John K. Lines, Esq. has been Insignia's General Counsel since June 1994
and General Counsel and Secretary since July 1994. From May 1993 until June
1994, Mr. Lines was the Assistant General Counsel and Vice President of Ocwen
Financial Corporation, West Palm Beach, Florida. From October 1991 until May
1993, Mr. Lines was a Senior Attorney with BANC ONE CORPORATION, Columbus,
Ohio. From May 1984 until October 1991, Mr. Lines was an attorney with Squire
Sanders & Dempsey, Columbus, Ohio.
Kelley M. Buechler is Assistant Secretary of Insignia. She is Assistant
Secretary of AmReal Corporation. Ms. Buechler served in similar capacities with
U.S. Shelter for seven years prior to her joining Insignia. Ms. Buechler is a
graduate of the University of North Carolina.
Item 10. Executive Compensation
Neither the Individual General Partner nor any of the directors and
officers of the Corporate General Partner received any remuneration from the
Registrant.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Except as noted below, no person or entity was known by the Registrant to
be the beneficial owner of more than 5% of the Limited Partnership Units of the
Registrant as of December 31, 1995.
Number
Entity of Units Percentage
SP III Acquisition, LLC 12,616 22.94%
High River Limited Partnership 5,398 9.81%
No director or officer of the Corporate General Partner owns any Units.
The Corporate General Partner owns 200 Units as required by the terms of the
partnership agreement governing the Partnership. The Individual General Partner
owns 4 limited partnership units.
Item 12. Certain Relationships and Related Transactions
The Individual General Partner and the Corporate General Partner received,
collectively, $3,000 as their prorata share of the distribution made during the
first quarter of 1995. No cash distributions were made during the remainder of
the year ended December 31, 1995. For a description of the share of cash
distributions from operations, if any, to which the general partners are
entitled, reference is made to the material contained in the Prospectus under
the heading PROFITS AND LOSSES AND CASH DISTRIBUTIONS.
The Registrant has a property management agreement with Insignia Management
Group, L.P. pursuant to which Insignia Management Group, L.P. has assumed direct
responsibility for day-to-day management of the Partnership's properties. This
service includes the supervision of leasing, rent collection, maintenance,
budgeting, employment of personnel and payment of operating expenses. Insignia
Management Group, L.P. receives a property management fee equal to 5% of
apartment revenues. During the fiscal year ended December 31, 1995, Insignia
Management Group, L.P. received $248,101 in property management fees.
For a more detailed description of the management fee that Insignia
Management Group, L.P. is entitled to receive, see the material contained in the
Prospectus under the heading CONFLICTS OF INTEREST - Property Management
Services.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as part of this report.
(b) Reports on Form 8-K filed in the fourth quarter of fiscal year 1995:
None.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SHELTER PROPERTIES III LIMITED PARTNERSHIP
By: Shelter Realty III Corporation
Corporate General Partner
By: /s/William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
Date: March 11, 1996
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
date indicated.
/s/William H. Jarrard, Jr. Date: March 11, 1996
William H. Jarrard, Jr.
President and Director
/s/Ronald Uretta Date: March 11, 1996
Ronald Uretta
(Principal Financial Officer
and Principal Accounting Officer
EXHIBIT INDEX
Exhibit
3 See Exhibit 4(a)
4 (a) Amended and Restated Certificate and Agreement of Limited Partnership
[included as Exhibit A to the Prospectus of Registrant dated September
2, 1981 contained in Amendment No. 1 to Registration Statement No. 2-
72567, of Registrant filed September 2, 1981 (the "Prospectus") and
incorporated herein by reference].
(b) Subscription Agreements and Signature Pages [Filed with Amendment No. 1
of Registration Statement No. 2-72567, of Registrant and incorporated
herein by reference].
(c) Real Estate Note and Deed to Secure Debt and Security Agreement between
Pacific Mutual Life Insurance Company and Shelter Properties III to
acquire North River Village Apartments.*
(d) Modification Agreement between Citibank, N.A. and Southern Associates
Limited Partnership and a Title to Real Estate between Southern
Associates Limited Partnership and Shelter Properties III to acquire
Essex Park Apartments.*
*Filed as Exhibit 4(c) and 4(d), respectively, to Form 10-K of
Registrant for year ended December 31, 1987 and incorporated herein by
reference.
10(i) Contract related to acquisition of properties.
(a) Purchase Agreement dated July 1, 1981 and First Addendum to Purchase
Agreement dated August 4, 1981 between Colony House of Murfreesboro and
U. S. Shelter Corporation to purchase Colony House Apartments.**
(b) Purchase Agreement dated July 31, 1981, between Southern Associated
Limited Partnership and U. S. Shelter Corporation to purchase Essex
Park Apartments.**
**Filed as Exhibits 12(a) and 12(b), respectively, to Amendment No. 1
of Registration Statement, No. 2-72567, of Registrant filed September
2, 1981 and incorporated herein by reference.
(c) Purchase Agreement dated December 3, 1981 between Plantation Company of
Georgia and Shelter Properties III to purchase River Parkway
Apartments. [Filed with form 8-K of Registrant dated November 30, 1981
and incorporated herein by reference.]
(d) Purchase Agreement dated April 15, 1982 between North River Village
Joint Venture (a partnership) and U.S. Shelter Corporation to purchase
North River Village Apartments. [Filed with Form 8-K of Registrant
dated April 21, 1982 and incorporated herein by reference.]
(e) Purchase Agreement dated May 14, 1982 between Lincoln Willowick
Greenville Associates and U.S. Shelter Corporation to purchase
Willowick Apartments. [Filed with Form 8-K of Registrant dated May 14,
1982 and incorporated herein by reference.]
(f) Contract dated June 12, 1986, between Shelter Properties III and Thomas
J. Gochberg, William T. Bozarth and Michael J. Weinburger, as Trustees
of Security Capital Real Estate Fund to sell River Parkway Apartments.
[Filed as Exhibit 10(f) to Form 10-K of Registrant for year ended
December 31, 1987 and incorporated herein by reference.]
(ii) Form of Management Agreement with U.S. Shelter Corporation subsequently
assigned to Shelter Management Group, L.P. (now known as Insignia
Management Group, L.P.) [filed with Amendment No. 1 to Registration
Statement, No. 2-72567 of Registrant and incorporated herein by
reference].
(iii) Contracts related to refinancing of debt:
(a) First Deeds of Trust and Security Agreements dated October 28, 1992
between Shelter Properties III Limited Partnership and Wesley D. Turner
(Trustee) and First Commonwealth Realty Credit Corporation, a Virginia
Corporation, securing the following properties: Colony House, Essex
Park and Willowick. ***
(b) Second Deeds of Trust and Security Agreements dated October 28, 1992
between Shelter Properties III Limited Partnership and Wesley D. Turner
(Trustee) and First Commonwealth Realty Credit Corporation, a Virginia
Corporation, securing the following properties: Colony House, Essex
Park and Willowick. ***
(c) First Assignments of Leases and Rents dated October 28, 1992 between
Shelter Properties III Limited Partnership and Wesley D. Turner
(Trustee) and First Commonwealth Realty Credit Corporation, a Virginia
Corporation, securing the following properties: Colony House, Essex
Park and Willowick. ***
(d) Second Assignments of Leases and Rents dated October 28, 1992 between
Shelter Properties III Limited Partnership and Wesley D. Turner
(Trustee) and First Commonwealth Realty Credit Corporation, a Virginia
Corporation, securing the following properties: Colony House, Essex
Park and Willowick. ***
(e) First Deeds of Trust Notes dated October 28, 1992 between Shelter
Properties III Limited Partnership and Wesley D. Turner (Trustee) and
First Commonwealth Realty Credit Corporation, relating to the following
properties: Colony House, Essex Park and Willowick. ***
(f) Second Deeds of Trust Notes dated October 28, 1992 between Shelter
Properties III Limited Partnership and Wesley D. Turner (Trustee) and
First Commonwealth Realty Credit Corporation, relating to the following
properties: Colony House, Essex Park and Willowick. ***
***Filed as Exhibits 10(iii)(a) through (f), respectively, to Form
10KSB of Registrant for year ended December 31, 1992 and incorporated
herein by reference.
(g) First Deed to Secure Debt and Security Agreement dated September 30,
1993 between North River Village III Limited Partnership and Lexington
Mortgage Company, a Virginia corporation receiving North River Village.
****
(h) Second Deed to Secure Debt and Security Agreement dated September 30,
1993 between North River Village III Limited Partnership and Lexington
Mortgage Company, a Virginia corporation receiving North River Village.
****
(i) First Assignment of Leases and Rents dated September 30, 1993 between
North River Village III Limited Partnership and Lexington Mortgage
Company, a Virginia corporation receiving North River Village. ****
(j) Second Assignment of Leases and Rents dated September 30, 1993 between
North River Village III Limited Partnership and Lexington Mortgage
Company, a Virginia corporation receiving North River Village. ****
(k) First Real Estate Note dated September 30, 1993 between North River
Village III Limited Partnership and Lexington Mortgage Company, a
Virginia corporation, relating to North River Village. ****
(l) Second Real Estate Note dated September 30, 1993 between North River
Village III Limited Partnership and Lexington Mortgage Company, a
Virginia corporation, relating to North River Village. ****
****Filed as Exhibit 10 (iii) (a) through (f) of Form 10QSB for quarter
ended September 30, 1993, and incorporated herein by reference.
22 Subsidiaries of the Registrant
27 Financial Data Schedule
99 (a) Prospectus of Registrant dated September 2, 1981 [included in
Registration Statement No. 2-72567, of Registrant] and incorporated
herein by reference.
(b) Agreement of Limited Partnership for North River Village III Limited
Partnership between Shelter III GP Limited Partnership and Shelter
Properties III Limited Partnership entered into April 30, 1992. [Filed
as Exhibit 28(b) to Form 10KSB of Registrant for year ended December
31, 1992 and incorporated herein by reference.]
EXHIBIT 22
SHELTER PROPERTIES III LIMITED PARTNERSHIP
Subsidiary List
Name of Subsidiary State of Incorporation/Formation Date
North River Village III
Limited Partnership Delaware 1992
Shelter III GP Limited
Partnership Delaware 1992
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Shelter
Properties III 1995 Year-End 10-KSB and is qualified in its entirety by
reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000353282
<NAME> SHELTER PROPERTIES III
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 601,235
<SECURITIES> 0
<RECEIVABLES> 30,401
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 24,902,781
<DEPRECIATION> 12,368,052
<TOTAL-ASSETS> 15,323,620
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,590,825
0
0
<COMMON> 0
<OTHER-SE> 5,809,387
<TOTAL-LIABILITY-AND-EQUITY> 15,323,620
<SALES> 0
<TOTAL-REVENUES> 5,037,740
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,125,306
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 788,681
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (87,566)
<EPS-PRIMARY> (1.58)
<EPS-DILUTED> 0
<FN>
<F1>The Partnership has an unclassified balance sheet.
</FN>
</TABLE>
