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 [No Fee Required]
For the fiscal year ended December 31, 1996
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. $5,377,000
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. Market Value
information for the Registrant's partnership interests is not available. Should
a trading market develop for these interests, it is the Corporate General
partners' belief that such trading would not exceed $25,000,000.
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 Residential 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 Residential 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:
Date of
Property Purchase Type of Ownership Use
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
Schedule of Properties:
(in thousands)
Gross
Carrying Accumulated Federal
Property Value Depreciation Rate Method Tax Basis
Essex Park Apartments $ 9,699 $ 5,074 5-36 S/L $1,524
Colony House Apartments 5,660 2,989 5-36 S/L 725
North River Village Apartments 5,608 2,909 5-32 S/L 1,010
Willowick Apartments 4,439 2,316 5-32 S/L 714
Totals $25,406 $13,288 $3,973
See "Note A" of the financial statements included in "Item 7" for a description
of the partnership's depreciation policy.
Schedule of Mortgages:
Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1996 Rate Amortized Date Maturity
Essex Park Apartments
1st mortgage $3,209 7.60% (1) 11/15/02 $2,552
2nd mortgage 109 7.60% none 11/15/02 109
Colony House Apartments
1st mortgage 2,393 7.60% (1) 11/15/02 1,903
2nd mortgage 81 7.60% none 11/15/02 81
North River Village
1st mortgage 1,673 7.83% (2) 10/15/03 1,489
2nd mortgage 54 7.83% none 10/15/03 54
Willowick Apartments
1st mortgage 1,253 7.60% (1) 11/15/02 997
2nd mortgage 43 7.60% none 11/15/02 43
8,815
Less unamortized
present value discounts (375)
Total $ 8,440
(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.
Average annual rental rate per unit and occupancy for 1996 and 1995 for each
property:
Average Annual Average Annual
Rental Rates Occupancy
Property 1996 1995 1996 1995
Essex Park $5,874 $5,571 94% 94%
Colony House 7,285 6,535 92% 96%
North River Village 8,385 7,734 96% 92%
Willowick 5,560 5,126 93% 98%
The Corporate General Partner attributes the decreases in occupancy at Colony
House Apartments and Willowick Apartments to an increase in rental rates and
tenants purchasing homes. The Corporate General Partner attributes the increase
in occupancy at North River Village Apartments to economic growth in the Atlanta
area.
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 1996 for each property were (in thousands):
1996 1996
Billing Rate
Essex Park $90 1.55%
Colony House 95 5.56%
North River Village 90 4.03%
Willowick 58 1.83%
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 owns 200 Limited Partnership Units ("Units"). On
or about April 26 and 27, 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 (an affiliate of the
Corporate General Partner) 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 Shelter Properties
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, of which approximately $713,000 is Shelter Properties
III's portion; waiver by the Shelter Properties Partnerships' 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 (which amount is divided among
the various partnerships and acquiring entities) for plaintiffs' attorney fees
and expenses in the litigation; and general releases of all the defendants.
On June 24, 1996, after notice to the class and a hearing on the fairness and
adequacy of the notice and the terms of settlement, the court orally approved
the settlement. The court signed the formal order on July 30, 1996. No appeal
was filed within thirty days after the court entered the formal order, and the
settlement became effective on August 30, 1996. The Affiliated Purchaser made
the payments to investors in accordance with the settlement in early September
1996.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of 1996, no matter was submitted to a vote of unit
holders through the solicitation of proxies or otherwise.
PART II
Item 5. Market for the Registrant's Units of Limited Partnership and Related
Partner Matters
There is no established market for the Units and it is not anticipated that any
will occur in the foreseeable future. As of December 31, 1996, there were 2,135
holders of record owning an aggregate of 55,000 Units.
Cash distributions of approximately $250,000 were declared and paid in the year
ended December 31, 1996, and $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 income as shown in the financial statements for the year
ended December 31, 1996, was approximately $413,000 versus a net loss of
approximately $88,000 for 1995, (see "Note D" of the financial statements for a
reconciliation of these amounts to the Partnership's federal taxable losses).
The change from net loss to net income is primarily attributable to an increase
in rental income due to rental rate increases; a decrease in general and
administrative expenses as the result of decreased legal costs associated with
the lawsuits disclosed in "Item 3, Legal Proceedings;" and decreases in
administrative expenses in connection with the tender offers. A decrease in
maintenance expenses also contributed to the increase in net income. Colony
House had major exterior painting and gutter replacement in 1995, for which
similar expenses were not incurred in 1996. Partially offsetting the increase in
net income was an increase in property taxes at North River Village due to an
increase in the assessment value of the property by the county taxing authority.
Included in maintenance expense in 1996 is approximately $209,000 of major
repairs and maintenance comprised of interior and exterior building expenses,
landscaping, and tennis court expenses.
Management relies on the annual appraisals performed by outside appraisers to
assess whether or not indicators of impairment exist with regard to the
Partnership's 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 appraiser, coupled
with his objective judgment, 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 compared to the undiscounted
future cash flows attributable to that property. If such undiscounted future
cash flows are not sufficient to recover the related property's carrying amount,
such property 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, 1996, 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, 1996, the Partnership had unrestricted cash of approximately
$1,509,000 compared to approximately $1,294,000 at December 31, 1995. Net cash
provided by operating activities increased primarily as a result of the increase
in net income as discussed above, and the increase in accrued taxes in 1996.
These increases were partially offset by a decrease in accounts payable due to
the timing of payments to vendors as well as a decrease in other liabilities.
Net cash used in investing activities increased primarily as a result of a
decrease in receipts from restricted escrows, partially offset by a decrease in
property improvements and replacements in 1996. Net cash used in financing
activities decreased due to a decrease in distributions in 1996 as compared to
1995.
The Partnership has no material capital programs scheduled to be performed in
1997, 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 approximately $8,440,000, net of discount, is amortized over
varying periods with required 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 approximately $250,000 and
$300,000 were paid during the years ended December 31, 1996 and 1995,
respectively. 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, 1996
Consolidated Statements of Operations - Years ended December 31, 1996 and
1995
Consolidated Statements of Changes in Partners' Capital (Deficit) - Years
ended December 31, 1996 and 1995
Consolidated Statements of Cash Flows - Years ended December 31, 1996 and
1995
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
Properties III Limited Partnership as of December 31, 1996, and the related
consolidated statements of operations, changes in partners' capital (deficit)
and cash flows for each of the two years in the period ended December 31, 1996.
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
standards. 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, 1996, and the consolidated
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ERNST & YOUNG LLP
Greenville, South Carolina
February 5, 1997
SHELTER PROPERTIES III LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
December 31, 1996
Assets
Cash:
Unrestricted $ 1,509
Restricted--tenant security deposits 137
Accounts receivable 25
Escrow for taxes 269
Restricted escrows 869
Other assets 264
Investment properties: (Notes B and E)
Land $ 1,281
Buildings and related personal property 24,125
25,406
Less accumulated depreciation (13,288) 12,118
$15,191
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 50
Tenant security deposits 137
Accrued taxes 204
Other liabilities 388
Mortgage notes payable (Note B) 8,440
Partners' Capital (Deficit)
General partners $ (73)
Limited partners (55,000 units
issued and outstanding) 6,045 5,972
$15,191
See Accompanying Notes to Consolidated Financial Statements
SHELTER PROPERTIES III LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit data)
Years Ended December 31,
1996 1995
Revenues:
Rental income $5,036 $4,717
Other income 341 321
Total revenues 5,377 5,038
Expenses:
Operating 1,844 1,723
General and administrative 205 368
Maintenance 883 1,089
Depreciation 923 858
Interest 776 789
Property taxes 333 299
Total expenses 4,964 5,126
Net income (loss) (Note D) $ 413 $ (88)
Net income (loss) allocated to
general partners (1%) $ 4 $ (1)
Net income (loss) allocated to
limited partners (99%) 409 (87)
$ 413 $ (88)
Net income (loss) per limited
partnership unit $ 7.43 $(1.58)
See Accompanying Notes to Consolidated Financial Statements
SHELTER PROPERTIES III LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 55,000 $ 2 $27,500 $27,502
Partners' (deficit) capital at
December 31, 1994 55,000 $(73) $ 6,270 $ 6,197
Distributions paid
to partners -- (3) (297) (300)
Net loss for the year ended
December 31, 1995 -- (1) (87) (88)
Partners' (deficit) capital at
December 31, 1995 55,000 (77) 5,886 5,809
Distributions paid
to partners -- -- (250) (250)
Net income for the year ended
December 31, 1996 -- 4 409 413
Partners' (deficit) capital at
December 31, 1996 55,000 $ (73) $ 6,045 $ 5,972
See Accompanying Notes to Consolidated Financial Statements
SHELTER PROPERTIES III LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years ended December 31,
1996 1995
Cash flows from operating activities:
Net income (loss) $ 413 $ (88)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 923 858
Amortization of discounts and loan costs 94 91
Change in accounts:
Restricted cash 5 3
Accounts receivable 6 (6)
Escrows for taxes and insurance (87) (76)
Other assets (7) --
Accounts payable (221) 174
Tenant security deposit liabilities (4) (6)
Accrued taxes 149 (9)
Other liabilities (69) 110
Net cash provided by operating activities 1,202 1,051
Cash flows from investing activities:
Property improvements and replacements (507) (716)
Deposits to restricted escrows (36) (101)
Receipts from restricted escrows 10 302
Net cash used in investing activities (533) (515)
Cash flows from financing activities:
Payments on mortgage notes payable (204) (189)
Partners' distributions (250) (300)
Net cash used in financing activities (454) (489)
Net increase in cash 215 47
Cash at beginning of year 1,294 1,247
Cash at end of year $ 1,509 $ 1,294
Supplemental disclosure of cash flow information:
Cash paid for interest $ 681 $ 697
See Accompanying Notes to Consolidated Financial Statements
SHELTER PROPERTIES III LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
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
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 partnership agreement terminates
December 31, 2021. The Partnership commenced operations on October 29, 1981,
and completed its acquisition of apartment properties on June 30, 1982. The
Partnership operates four apartment properties located in the South. Affiliates
of Insignia own 13,106 units of the Partnership at December 31, 1996.
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
statements, 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 operations, as defined in the
partnership agreement (in thousands). However, "net cash used by 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.
1996 1995
Net cash provided by operating activities $1,202 $1,051
Property improvements and replacements (507) (716)
Payments on mortgage notes payable (204) (189)
Changes in reserves for net operating
liabilities 228 (190)
Changes in restricted escrows, net (26) 201
Additional operating reserves (700) (161)
Net cash used by operations $ (7) $ (4)
The Corporate General Partner believes it to be in the best interest of the
Partnership to reserve an additional $700,000 at December 31, 1996, 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 years ended December 31, 1996 and 1995, the Corporate General Partner
made distributions of approximately $250,000 and $300,000 respectively.
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
distributable net proceeds, and has also received an amount equal to the limited
partners' 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: Undistributed net proceeds of
approximately $185,000 are payable to the general partners once certain levels
of return are received by the limited partners. (See "Note C").
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.
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
allocated 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
allocated 99% to the limited partners and 1% to the general partners.
Accordingly, net income (loss) as shown in the statements of operations and
changes in partners' capital for 1996 and 1995 were allocated 99% to the limited
partners and 1% to the general partners. Net income (loss) per limited
partnership unit for 1996 and 1995 was computed as 99% of net income (loss)
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 increase in other reserves during 1996 was approximately $228,000 and
the decrease in 1995 was approximately $190,000, 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 1996 and 1995, the Corporate
General Partner reserved an additional $700,000 and $161,000, respectively, for
capital improvements.
Restricted Escrows:
Capital Improvement Account - At the time of the refinancing of North River
Village Apartments in 1993, approximately $546,000 of the refinancing proceeds
were designated for a "capital improvement escrow" for certain capital
improvements. At December 31, 1996, the balance remaining in the escrow for
this property was approximately $15,000. 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, 1996, for these
three properties is approximately $730,000, 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
approximately $53,000 in total. The balance at December 31, 1996, was
approximately $58,000, 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.
Advertising: The Partnership expenses the costs of advertising as incurred.
Advertising expense, which is included in operating expenses, was approximately
$83,000 and $65,000 for the years ended December 31, 1996 and 1995,
respectively.
Loan Costs: Loan costs of approximately $408,000 less accumulated amortization
of approximately $156,000 are included in other assets and are being amortized
on a straight-line basis over the life of the loans.
Unrestricted Cash: Unrestricted cash includes cash on hand and in banks,
Certificates of Deposit with original maturities less than 90 days, or other
money market investments offering appropriate levels of liquidity. At certain
times, the amount of cash deposited at a bank may exceed the limit on insured
deposits.
Restricted cash - tenant security deposits: The Partnership requires security
deposits from lessees for the duration of the lease and such deposits are
considered restricted cash. Deposits are refunded when the tenant vacates,
provided the tenant has not damaged its space and is current on its rental
payments.
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.
Investment Properties: The Partnership's investment properties consist of four
apartment complexes stated at cost. Prior to the fourth quarter of 1995, costs
of apartment properties that were permanently impaired were written down to
appraised value. The Corporate General Partner relied on the annual appraisals
performed by outside 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 experience of the appraiser, coupled with his objective judgment,
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 used
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 was stated on the
books of the Partnership above the estimated value given in the appraisal was
written down to the estimated value given by the appraiser. The appraiser
assumed a stabilized occupancy at the time of the appraisal and, therefore, any
impairment of value was considered to be permanent by the Corporate General
Partner.
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 recognized for
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows are not sufficient to recover the related
asset's carrying amount. The impairment loss is measured by comparing the fair
value of the asset to its carrying amount. The adoption of "FASB No. 121" did
not have a material effect on the Partnership's financial statements. For the
years ended December 31, 1996 and 1995, no adjustments for impairment of value
were recorded.
Fair Value: In 1995, the Partnership implemented "FASB Statement No. 107,
Disclosure about Fair Value of Financial Instruments," 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 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 1995
information to conform to the 1996 presentation.
Note B - Mortgage Notes Payable
The principal terms of mortgage notes payable are as follows (in thousands,
except monthly payment):
Principal Monthly Principal
Balance At Payment Stated Balance
December 31, Including Interest Maturity Due At
Property 1996 Interest Rate Date Maturity
Essex Park Apartments
1st mortgage $ 3,209 $27,812 7.60% 11/15/02 $2,552
2nd mortgage 109 690 7.60% 11/15/02 109
Colony House Apartments
1st mortgage 2,393 20,736 7.60% 11/15/02 1,903
2nd mortgage 81 515 7.60% 11/15/02 81
North River Village
1st mortgage 1,673 12,654 7.83% 10/15/03 1,489
2nd mortgage 54 349 7.83% 10/15/03 54
Willowick Apartments
1st mortgage 1,253 10,862 7.60% 11/15/02 997
2nd mortgage 43 270 7.60% 11/15/02 43
8,815 $73,888
Less unamortized
present value discounts (375)
Total $ 8,440
The estimated fair values of the Partnership's aggregate debt approximates its
carrying value. 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 rates 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 approximately $575,000 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.
Scheduled principal payments of mortgage notes payable subsequent to December
31, 1996, are as follows (in thousands):
1997 $ 220
1998 238
1999 256
2000 277
2001 299
Thereafter 7,525
$8,815
Note C - 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. Property management fees paid to
affiliates of Insignia Financial Group, Inc., during 1996 and 1995, are included
in operating expenses on the consolidated statement of operations and are
reflected in the following table. The Corporate General Partner and its
affiliates received reimbursements and fees as reflected in the following table
(in thousands):
1996 1995
Property management fees $265 $248
Reimbursement for services of affiliates 131 111
Due to General Partner 185 185
Due from General Partner 10 10
Included in "reimbursements for services of affiliates" for 1996 is
approximately $5,000 in reimbursements for construction oversight costs.
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 D - 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.
The following is a reconciliation of reported net income (loss) and Federal
taxable loss (in thousands, except per unit data):
1996 1995
Net income (loss) as reported $ 413 $ (88)
Add (deduct):
Amortization of present
value discounts (4) (7)
Depreciation differences (452) (595)
Change in prepaid rental (52) 28
Other (37) 3
Accrued legal expense -- 56
Federal taxable loss $ (132) $ (603)
Federal taxable loss per
limited partnership unit $(2.37) $(10.85)
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands):
Net assets as reported $ 5,972
Land and buildings 3,086
Accumulated depreciation (11,231)
Syndication fees 3,234
Other 234
Net assets - tax basis $ 1,295
Note E - Real Estate and Accumulated Depreciation
Initial Cost
To Partnership
(in thousands)
Buildings Cost
and Related Capitalized
Personal Subsequent to
Description Encumbrances Land Property Acquisition
Essex Park Apartments
Columbia, South Carolina $3,318 $ 473 $ 7,406 $1,820
Colony House Apartments
Murfreesboro, Tennessee 2,474 183 4,408 1,069
North River Village Apts.
Atlanta, Georgia 1,727 336 4,085 1,187
Willowick Apartments
Greenville, South Carolina 1,296 289 3,563 587
Totals $8,815 $1,281 $19,462 $4,663
<TABLE>
<CAPTION>
Gross Amount At Which Carried
At December 31, 1996
(in thousands)
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 $ 473 $ 9,226 $ 9,699 $ 5,074 1973 10/29/81 5-36
Colony House Apartments
Murfreesboro, Tennessee 183 5,477 5,660 2,989 1970-1972 10/30/81 5-36
North River Village Apartments
Atlanta, Georgia 336 5,272 5,608 2,909 1969 04/21/82 5-32
Willowick Apartments
Greenville, South Carolina 289 4,150 4,439 2,316 1974 06/30/82 5-32
Totals $1,281 $24,125 $25,406 $13,288
</TABLE>
Reconciliation of "Real Estate and Accumulated Depreciation:"
Years Ended December 31,
1996 1995
Investment Properties
Balance at beginning of year $24,903 $24,257
Property improvements 507 716
Disposals of property (4) (70)
Balance at End of Year $25,406 $24,903
Accumulated Depreciation
Balance at beginning of year $12,368 $11,577
Additions charged to expense 923 858
Disposals of property (3) (67)
Balance at End of Year $13,288 $12,368
The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1996 and 1995, are $28,492,000 and $27,985,000, respectively. The
accumulated depreciation taken for Federal income tax purposes at December 31,
1996 and 1995, are $24,519,000 and $23,145,000, respectively.
Note F - Contingencies
The Corporate General Partner owns 200 Limited Partnership Units ("Units"). On
or about April 26 and 27, 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 (an affiliate of the
Corporate General Partner) 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 Shelter Properties
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, of which approximately $713,000 is Shelter Properties
III's portion; waiver by the Shelter Properties Partnerships' 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 (which amount is divided among
the various partnerships and acquiring entities) for plaintiffs' attorney fees
and expenses in the litigation; and general releases of all the defendants.
On June 24, 1996, after notice to the class and a hearing on the fairness and
adequacy of the notice and the terms of settlement, the court orally approved
the settlement. The court signed the formal order on July 30, 1996. No appeal
was filed within thirty days after the court entered the formal order, and the
settlement became effective on August 30, 1996. The Affiliated Purchaser made
the payments to investors in accordance with the settlement in early September
1996.
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 58, 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). 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. 50 President and Director
Ronald Uretta 41 Vice President and Treasurer
John K. Lines, Esq. 37 Vice President and Secretary
Kelley M. Buechler 39 Assistant Secretary
Mr. Jarrard, who had previously served as Vice President, became President in
August 1994. In June 1994, Mr. Lines became Vice President and Secretary and
Ms. Buechler, who had previously held the position of Secretary, became
Assistant Secretary.
William H. Jarrard, Jr. has been Managing Director - Partnership Administration
of Insignia since January 1991. Mr. Jarrard served as Managing Director -
Partnership Administration and Asset Management from July 1994 until January
1996.
Ronald Uretta has been Insignia's Treasurer since January 1992. Since August
1996, he has also served as Chief Operating Officer. He has also served as
Secretary from January 1992 to June 1994 and as Chief Financial Officer from
January 1992 to August 1996. Since September 1990, Mr. Uretta has also served
as the Chief Financial Officer and Controller of Metropolitan Asset Group.
John K. Lines, Esq. has been Vice President and Secretary of the Corporate
General Partner since August 1994, 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 has been Assistant Secretary of the Corporate General Partner
and Assistant Secretary of Insignia since 1991. During the five years prior to
joining Insignia in 1991, she served in similar capacities with U. S. Shelter.
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, 1996.
Number
Entity of Units Percentage
Insignia and affiliates 13,106 23.83%
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. For the years ended December 31, 1996 and 1995, the
Corporate General Partner also received distributions related to the 200 units
which it owns. 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 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. Property management fees paid to
affiliates of Insignia Financial Group, Inc., during 1996 and 1995, are included
in operating expenses on the consolidated statement of operations and are
reflected in the following table. The Corporate General Partner and its
affiliates received reimbursements and fees as reflected in the following table
(in thousands):
1996 1995
Property management fees $265 $248
Reimbursement for services of affiliates 131 111
Included in "reimbursements for services of affiliates" for 1996 is
approximately $5,000 in reimbursements for construction oversight costs.
For a more detailed description of the management fee that Insignia Residential
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 1996:
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 24, 1997
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 24, 1997
William H. Jarrard, Jr.
President and Director
/s/Ronald Uretta Date: March 24, 1997
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.]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Shelter
Properties III Limited Partnership 1996 Year-End 10-KSB and is qualified in its
entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000353282
<NAME> SHELTER PROPERTIES III LIMITED PARTNERSHIP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,509
<SECURITIES> 0
<RECEIVABLES> 25
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 25,406
<DEPRECIATION> (13,288)
<TOTAL-ASSETS> 15,191
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,440
0
0
<COMMON> 0
<OTHER-SE> 5,972
<TOTAL-LIABILITY-AND-EQUITY> 15,191
<SALES> 0
<TOTAL-REVENUES> 5,377
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,964
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 776
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 413
<EPS-PRIMARY> 7.43<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
