FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period.........to.........
Commission file number 0-13192
ANGELES INCOME PROPERTIES LTD. III
(Exact name of small business issuer as specified in its charter)
California 95-3903984
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) ANGELES INCOME PROPERTIES LTD. III
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 1,141
Restricted--tenant security deposits 49
Accounts receivable, net of allowance of $49 25
Escrow for taxes 225
Other assets 170
Investment properties:
Land $ 1,527
Buildings and related personal property 12,605
14,132
Less accumulated depreciation (8,418) 5,714
$ 7,324
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 11
Tenant security deposits 49
Property taxes 60
Other 85
Mortgage note payable 3,407
Equity interest in net liabilities of
joint ventures, net of advances of $1,653 (Note B) 5,881
Partners' Deficit
General partners $ (396)
Limited partners (86,818
units issued and outstanding) (1,773) (2,169)
$ 7,324
See Accompanying Notes to Financial Statements
b) ANGELES INCOME PROPERTIES LTD. III
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 411 $ 468 $ 1,262 $ 1,311
Other income 33 29 79 86
Total revenues 444 497 1,341 1,397
Expenses:
Operating 100 121 313 280
General and administrative 60 71 183 224
Maintenance 46 65 126 136
Depreciation 165 164 488 483
Interest 111 109 326 306
Bad debt expense 7 -- 30 --
Property taxes 42 43 105 125
Total expenses 531 573 1,571 1,554
Equity in loss of joint
ventures (238) (443) (764) (971)
Net loss $ (325) $ (519) $ (994) $ (1,128)
Net loss allocated
to general partners (1%) $ (3) $ (5) $ (10) $ (11)
Net loss allocated
to limited partners (99%) (322) (514) (984) (1,117)
Net loss $ (325) $ (519) $ (994) $ (1,128)
Net loss per limited
partnership unit $ (3.71) $ (5.91) $(11.33) $ (12.86)
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
c) ANGELES INCOME PROPERTIES LTD. III
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(in thousands, except unit data)
(Unaudited)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 86,920 $ 1 $ 43,460 $ 43,461
Partners' deficit at
December 31, 1995 86,818 $ (386) $ (789) $ (1,175)
Net loss for the nine months
ended September 30, 1996 (10) (984) (994)
Partners' deficit at
September 30, 1996 86,818 $ (396) $ (1,773) $ (2,169)
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
d) ANGELES INCOME PROPERTIES LTD. III
STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Nine Months Ended
September 30
1996 1995
Cash flows from operating activities:
Net loss $ (994) $ (1,128)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Equity in loss of joint ventures 764 971
Depreciation 488 483
Amortization of loan costs and
leasing commissions 68 42
Bad debt expense 30 --
Change in accounts:
Restricted cash (2) 3
Accounts receivable (12) (30)
Escrows for taxes (107) 15
Other assets 3 (59)
Accounts payable -- 25
Tenant security deposit liabilities 2 (4)
Property taxes 16 4
Other liabilities (8) 34
Net cash provided by
operating activities 248 356
Cash flows from investing activities:
Property improvements and replacements (140) (111)
Advances to joint venture (721) (378)
Distributions from joint venture -- 965
Net cash (used in) provided by
investing activities (861) 476
Cash flows used in financing activities
Payments on mortgage notes payable (40) (36)
Loan costs (94) --
Net cash used in financing activities (134) (36)
Net (decrease) increase in cash (747) 796
Cash and cash equivalents at beginning of period 1,888 1,221
Cash and cash equivalents at end of period $ 1,141 $ 2,017
Supplemental disclosure of cash flow information
Cash paid for interest $ 283 $ 287
See Accompanying Notes to Financial Statements
e) ANGELES INCOME PROPERTIES LTD. III
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of Angeles Realty Corporation II (the "Managing General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine months ended September 30, 1996, are not necessarily indicative
of the results that may be expected for the fiscal year ending December 31,
1996. For further information, refer to the financial statements and footnotes
thereto included in Angeles Income Properties, Ltd. III's (the "Partnership")
annual report on Form 10-KSB for the fiscal year ended December 31, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
NOTE B - INVESTMENT IN JOINT VENTURES
The Partnership has a 33.3% investment in Northtown Mall Partners ("Northtown")
which is shown as "Equity interest in net liabilities of joint venture" on the
balance sheet. The Partnership had a 57% investment in Burlington Outlet Mall
Joint Venture ("Burlington") and a 50% investment in Moraine West Carrollton
Joint Venture ("Moraine"). The Partnership no longer has an investment in these
joint ventures due to the foreclosure of Burlington's investment property in
1995 and the sale of Moraine's investment property in 1994.
Condensed balance sheet information as of September 30, 1996, for Northtown is
as follows:
Northtown
(in thousands)
Assets
Cash $ 662
Other assets 6,586
Investment properties, net 25,815
Total $33,063
Liabilities and Partners' Deficit
Northtown
(in thousands)
Other liabilities $ 4,339
Note payable 51,476
Partners' deficit (22,752)
Total $ 33,063
The condensed profit and loss statements for the three and nine months ended
September 30, 1996 and 1995, for the joint ventures are as follows:
Three Months Ended
September 30, 1996
Northtown Burlington
(in thousands) (in thousands)
Revenues $ 2,564 $ --
Costs and expenses (3,277) (11)
Net loss $ (713) $ (11)
Three Months Ended
September 30, 1995
Northtown Burlington
(in thousands) (in thousands)
Revenues $ 2,547 $ 38
Costs and expenses (3,373) (328)
Net loss $ (826) $ (290)
Nine Months Ended
September 30, 1996
Northtown Burlington
(in thousands) (in thousands)
Revenues $ 7,554 $ 11
Costs and expenses (9,841) (11)
Net loss $(2,287) $ --
NOTE B - INVESTMENT IN JOINT VENTURES (CONTINUED)
Nine Months Ended
September 30, 1995
Northtown Moraine Burlington
Revenues $ 7,744 $ 13 $ 275
Costs and expenses (9,831) (1) (753)
Net (loss) income $(2,087) $ 12 $ (478)
The Partnership accounts for its 33.3% investment in Northtown using the equity
method of accounting. Under the equity method, the Partnership records its
equity interest in earnings or losses of the joint venture; however, the
investment in the joint venture will be recorded at an amount less than zero (a
liability) to the extent of the Partnership's share of net liabilities of the
joint venture. The increased loss at Northtown is attributable to a decrease in
rental income and an increase in insurance and real estate taxes.
NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership Agreement provides for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
The following amounts owed to the Managing General Partner and affiliates during
the nine months ended September 30, 1996 and 1995 were paid or accrued:
1996 1995
(in thousands)
Property management fees $ 47 $ 51
Reimbursement for services of
affiliates 139 172
The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the Managing General Partner. An affiliate of the
Managing General Partner acquired, in the acquisition of a business, certain
financial obligations from an insurance agency which was later acquired by the
agent who placed the current year's master policy. The current agent assumed
the financial obligations to the affiliate of the Managing General Partner who
receives payments on these obligations from the agent. The amount of the
Partnership's insurance premiums accruing to the benefit of the affiliate of the
Managing General Partner by virtue of the agent's obligations is not
significant.
NOTE D - SUBSEQUENT EVENT - MORTGAGE NOTE REFINANCING
On October 31, 1996, the Managing General Partner refinanced the mortgage debt
secured by Poplar Square Shopping Center. The Partnership paid off debt and
accrued interest of approximately $3,435,000 at closing and paid closing costs
and funded tax and insurance escrows and repair and replacement reserves with
$3,800,000 of proceeds from the new debt which matures on November 1, 2006. The
new debt payments are based on a 25 year amortization. The loan carries an
interest rate of 9.2%. Title to Poplar Square Shopping Center was transferred
from the Partnership to Poplar Square AIP III, L.P. as a result of the
refinancing. The Partnership is the 99% limited partner and Poplar Square GP
Limited Partnership is the 1% general partner in Poplar Square AIP III, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of one apartment complex and one
commercial property. The following table sets forth the average occupancy of
the properties for the nine months ended September 30, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Lake Forest Apartments
Brandon, Mississippi 92% 95%
Poplar Square Shopping Center
Medford, Oregon 97% 97%
The decrease in occupancy at Lake Forest Apartments is due to competition from
new apartment complexes in the Brandon, Mississippi area. This property has
some physical needs (wood replacement and painting) and the Managing General
Partner anticipates that occupancy will improve once the physical deficiencies
are addressed.
The Partnership recorded a net loss of approximately $994,000 for the nine
months ended September 30, 1996, as compared to a net loss of approximately
$1,128,000 for the nine months ended September 30, 1995. The Partnership
recorded a net loss of approximately $325,000 for the three months ended
September 30, 1996, as compared to a net loss of approximately $519,000 for the
three months ended September 30, 1995. The decrease in the net loss for the
three and nine months ended September 30, 1996, as compared to the three and
nine months ended September 30, 1995, is primarily due to a decrease in equity
in loss of joint ventures. The decrease in equity in loss of joint venture is
primarily attributable to the Partnership's share of Burlington's loss in 1995.
Operating expenses increased primarily due to the hiring of two additional
maintenance staff to make improvements to vacant units at Lake Forest
Apartments. The decrease in general and administrative expenses is primarily
related to decreases in cost reimbursements for asset management, partnership
accounting and investor services. Bad debt expenses increased as a result of an
increase in the reserve required based on a review of the tenant's accounts
receivable at the Poplar Square Shopping Center. The decrease in property tax
expense relates to a refund for an overpayment of property taxes on Poplar
Square Shopping Center in the prior year.
As part of the ongoing business plan of the Partnership, the Managing 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 Managing General Partner attempts to
protect the Partnership from the burden of inflation-related increases in
expenses by increasing rents and maintaining a high overall occupancy level.
However, due to changing market conditions, which can result in the use of
rental concessions and rental reductions to offset softening market conditions,
there is no guarantee that the Managing General Partner will be able to sustain
such a plan.
At September 30, 1996, the Partnership had unrestricted cash of approximately
$1,141,000 versus approximately $2,017,000 at September 30, 1995. Net cash
provided by operating activities decreased primarily as a result of an increase
in escrows for taxes. Net cash used in investing activities increased due to an
increase in advances to Northtown in 1996 and a non-recurring distribution
received from Moraine in 1995. The Partnership advanced money to Northtown
during the nine months ended September 30, 1996, to pay for tenant improvements,
supervisory fees and debt service. The increase in net cash used in financing
activities is due to the loan costs incurred in 1996 in an effort to refinance
the mortgage indebtedness secured by the Poplar Square Shopping Center.
On October 31, 1996, the Managing General Partner refinanced the mortgage debt
secured by Poplar Square Shopping Center. The Partnership paid off debt, and
accrued interest, of approximately $3,435,000 at closing and paid closing costs
and funded tax and insurance escrows and repair and replacement reserves with
the proceeds from the $3,800,000 new debt which matures on November 1, 2006.
The new debt payments are based on a 25 year amortization. The loan carries an
interest rate of 9.2%. Title to Poplar Square Shopping Center was transferred
from the Partnership to Poplar Square AIP III, L.P. as a result of the
refinancing. The Partnership is the 99% limited partner and Angeles Income
Properties Ltd. III is the 1% general partner in Poplar Square AIP III, L.P.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The new
mortgage indebtedness, which resulted from the October 31, 1996 refinance,
carries a 10 year term. Future cash distributions will depend on the levels of
net cash generated from operations, property sales and the availability of cash
reserves.
On March 15, 1991, Northtown and the holder of the Northtown Mall mortgage note
payable entered into an Option Agreement (-Option-) whereby such lender has the
right and an option to purchase the Northtown Mall property on the terms and
conditions as set forth in the Option. The purchase price of the property, as
set forth in the Option, is defined as the fair market value of the property.
Such Option can be exercised by written notice by the lender at specified dates.
The lender has indicated that it may exercise the Option. If the lender does
exercise the Option, the Managing General partner does not believe the sale of
the property will occur until 1997. Currently, it is believed that the fair
market value of the property will be less than the underlying debt that secures
the property. If the Option is exercised, the Partnership will write-off its
equity interest in net liabilities of joint venture which would result in the
recording of a significant gain to the Partnership. Also, the Managing General
Partner is currently negotiating with a third party as a possible source of an
equity infusion, if the current lender does not exercise their option to acquire
Northtown. The Partnership does not anticipate making significant advances to
Northtown in the future.
On October 30, 1995, the Partnership lost Burlington Outlet Mall located in
Burlington, NC, through a foreclosure by an unaffiliated mortgage holder. The
property was not generating sufficient cash flow to meet debt service
requirements. The non-payment of principal and interest constituted a default
under the terms of the mortgage agreement and allowed the holder of the mortgage
agreement to foreclose on the property. The Partnership deemed it to be in the
best interest of the Partnership not to contest the foreclosure action.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Angeles Corporation ("Angeles"), either directly or through an affiliate,
maintained a central disbursement account (the "account") for the properties and
partnerships managed by Angeles and its affiliates, including the Partnership.
Angeles caused the Partnership to make deposits to the account ostensibly to
fund the payment of certain obligations of the Partnership. However, of these
total deposits, at least $42,000 deposited by or on behalf of the Partnership
was used for purposes other than satisfying the liabilities of the Partnership.
Accordingly, the Partnership filed a Proof of Claim in the Angeles bankruptcy
proceedings for such amount. However, subsequently the Managing General Partner
of the Partnership determined that the cost involved to pursue such claim would
likely exceed any amount received if in fact such claim were to be resolved in
favor of the Partnership. Therefore, the Partnership withdrew this claim on
August 9, 1995.
The Managing General Partner is unaware of any other pending or outstanding
litigation that is not of a routine nature. The Managing General Partner
believes that all such pending or outstanding litigation will be resolved
without a material adverse effect upon the business, financial condition, or
operations of the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits -
Exhibit 27, Financial Data Schedule.
b) Reports on Form 8-K
None filed during the quarter ended September 30, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ANGELES INCOME PROPERTIES LTD. III
By: Angeles Realty Corporation II
Managing General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
By: /s/Robert D. Long
Robert D. Long
Vice President/CAO
Date: November 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Income Properties Ltd. III 1996 Third Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000720460
<NAME> ANGELES INCOME PROPERTIES LTD. III
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,141
<SECURITIES> 0
<RECEIVABLES> 25
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 14,132
<DEPRECIATION> (8,418)
<TOTAL-ASSETS> 7,324
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 3,407
0
0
<COMMON> 0
<OTHER-SE> 2,169
<TOTAL-LIABILITY-AND-EQUITY> 7,324
<SALES> 0
<TOTAL-REVENUES> 1,341
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,571
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 326
<INCOME-PRETAX> (994)
<INCOME-TAX> 0
<INCOME-CONTINUING> (994)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (994)
<EPS-PRIMARY> (11.33)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
