FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT
For the transition period.........to.........
Commission file number 0-13192
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)
June 30, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Cash and cash equivalents:
Unrestricted $ 1,266
Restricted--tenant security deposits 48
Accounts receivable, net of allowance of $41 48
Escrow deposits for taxes 189
Other assets 138
Investment properties:
Land $ 1,527
Buildings and related personal property 12,516
14,043
Less accumulated depreciation (8,253) 5,790
$ 7,479
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 10
Tenant security deposits 48
Property taxes 19
Other 73
Mortgage note payable 3,421
Equity interest in net liabilities of
joint venture, net of advances of $1,544 (Note B) 5,752
Partners' Deficit
General partners $ (393)
Limited partners capital (86,818
units and outstanding) (1,451) (1,844)
<FN> $ 7,479
See Accompanying Notes to Financial Statements
</TABLE>
b) ANGELES INCOME PROPERTIES, LTD. III
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 451 $ 414 $ 851 $ 843
Other income 33 38 46 57
Total revenues 484 452 897 900
Expenses:
Operating 103 73 213 159
General and administrative 67 79 123 153
Maintenance 43 36 80 71
Depreciation 162 160 323 319
Interest 109 98 215 197
Bad debt expense 12 -- 23 --
Property taxes 41 41 63 82
Total expenses 537 487 1,040 981
Loss before equity in loss
of joint ventures (53) (35) (143) (81)
Equity in loss of joint
ventures (Note B) (285) (256) (526) (528)
Net loss $ (338) $ (291) $ (669) $ (609)
Net loss allocated to general
partners (1%) $ (3) $ (3) $ (7) $ (6)
Net loss allocated to limited
partners (99%) (335) (288) (662) (603)
Net loss $ (338) $ (291) $ (669) $ (609)
Net loss per limited
partnership unit $(3.86) $(3.32) $(7.63) $(6.95)
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
c) ANGELES INCOME PROPERTIES, LTD. III
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
<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 six months
ended June 30, 1996 -- (7) (662) (669)
Partners' deficit at
June 30, 1996 86,818 $ (393) $(1,451) $(1,844)
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
d) ANGELES INCOME PROPERTIES, LTD. III
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (669) $ (609)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Equity in loss of joint ventures 526 528
Depreciation 323 319
Amortization of loan costs and
leasing commissions 42 20
Bad debt expense 23 --
Change in accounts:
Restricted cash (1) 2
Accounts receivable (28) 10
Escrows for taxes (71) 50
Other assets 4 (18)
Accounts payable (1) 1
Tenant security deposit liabilities 1 (2)
Property taxes (25) (39)
Other liabilities (20) 19
Net cash provided by operating
activities 104 281
Cash flows from investing activities:
Property improvements and replacements (50) (83)
Advances to joint ventures (612) (378)
Distributions from joint ventures -- 966
Net cash (used in) provided by
investing activities (662) 505
Cash flows from financing activities:
Payments on mortgage notes payable (27) (24)
Payments of loan costs (37) --
Net cash used in financing activities (64) (24)
Net (decrease) increase in cash (622) 762
Cash and cash equivalents at beginning of period 1,888 1,221
Cash and cash equivalents at end of period $ 1,266 $ 1,983
Supplemental disclosure of cash flow information:
Cash paid for interest $ 189 $ 192
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
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
six months ended June 30, 1996, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1996. For further
information, refer to the 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 June 30, 1996, for the joint ventures
is as follows:
Northtown Burlington
Assets
Cash $ 152 $ 26
Other assets 7,338 2
Investment properties, net 25,276 --
Total $32,766 $ 28
Liabilities and Partners' (Deficit) Capital
Northtown Burlington
Other liabilities $ 3,241 $ 17
Note payable 51,564 --
Partners' (deficit) capital (22,039) 11
Total $ 32,766 $ 28
The condensed profit and loss statements for the three and six months ended June
30, 1996 and 1995, for the joint ventures are as follows:
Three Months Ended
June 30, 1996
Northtown Burlington
Revenues $ 2,417 $ --
Costs and expenses (3,271) --
Net loss $ (854) $ --
Three Months Ended
June 30, 1995
Northtown Moraine Burlington
Revenues $ 2,654 $ -- $ 105
Costs and expenses (3,311) -- (164)
Net loss $ (657) $ -- $ (59)
Six Months Ended
June 30, 1996
Northtown Burlington
Revenues $ 4,990 $ 11
Costs and expenses (6,564) --
Net (loss) income $(1,574) $ 11
Note B - Investment in Joint Ventures (continued)
Six Months Ended
June 30, 1995
Northtown Moraine Burlington
Revenues $ 5,197 $ 13 $ 237
Costs and expenses (6,458) (1) (425)
Net (loss) income $(1,261) $ 12 $ (188)
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.
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 six months ended June 30, 1996 and 1995 were paid or accrued:
1996 1995
(in thousands)
Property management fees $ 32 $ 31
Reimbursement for services of
affiliates 88 122
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.
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 six months ended June 30, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Lake Forest Apartments (1)
Brandon, Mississippi 89% 96%
Poplar Square Shopping Center
Medford, Oregon 97% 97%
(1) 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 realized a net loss of $669,000 for the six months ended June
30, 1996, as compared to a net loss of $609,000 for the six months ended June
30, 1995. The Partnership realized a net loss of $338,000 for the three months
ended June 30, 1996, as compared to a net loss of $291,000 for the three months
ended June 30, 1995. The increase in the net loss for the three and six months
ended June 30, 1996, as compared to the three and six months ended June 30,
1995, is primarily due to an increase in operating and bad debt expenses offset,
in part, by a decrease in general and administrative expenses.
The decrease in other income is a result of decreased lease cancellation fees,
deposits forfeited and other fees and collections. The increase in operating
expenses relates primarily to increased maintenance payroll associated with
improvements being made on vacant units at Lake Forest Apartments. The decrease
in general and administrative expenses during the three and six months ended
June 30, 1996, as compared to the three and six months ended June 30, 1995, is
primarily related to decreases in cost reimbursements for asset management,
partnership accounting and investor services. 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. Bad debt expenses increased as a
result of an increase in the reserve required based on a review of tenants
accounts at the Poplar Square Shopping Center.
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 June 30, 1996, the Partnership had unrestricted cash of $1,266,000 versus
$1,983,000 at June 30, 1995. Net cash provided by operating activities
decreased as a result of an increase in escrows for taxes and a decrease in
other liabilities. Net cash used in investing activities increased due to more
advances to Northtown in 1996 and a non-recurring distribution received from
Moraine in 1995. The Northtown Mall property has continued to experience cash
shortfalls and has been dependent upon the Partnership and Angeles Income
Properties, Ltd. IV (the 66.7% owner of Northtown) to cover such shortfalls in
order to meet operating and debt service requirements for this property (see
discussion below for the Managing General Partner's plans regarding this
investment property). 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.
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
mortgage indebtedness of $3,421,000, which is secured by the Poplar Square
Shopping Center investment property, matured in June 1995. The Managing General
Partner is in negotiations to refinance this indebtedness and has received two
six month extensions and one four month extension from the mortgage company to
do so. The current extension expires in October 1996. The Managing General
Partner does not anticipate that there will be any excess cash available to the
Partnership if in fact the refinance is successful. The outcome of the
negotiations to refinance this indebtedness cannot presently be determined.
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 Managing General Partner is presently in negotiations to refinance this
indebtedness, however, the outcome of such negotiations cannot presently be
determined.
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 June 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: August 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Income Properties Ltd, III 1996 Second 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,266
<SECURITIES> 0
<RECEIVABLES> 48
<ALLOWANCES> 41
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 14,043
<DEPRECIATION> 8,253
<TOTAL-ASSETS> 7,479
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 3,421
0
0
<COMMON> 0
<OTHER-SE> (1,844)
<TOTAL-LIABILITY-AND-EQUITY> 7,479
<SALES> 0
<TOTAL-REVENUES> 897
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,040
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 215
<INCOME-PRETAX> (669)
<INCOME-TAX> 0
<INCOME-CONTINUING> (669)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (669)
<EPS-PRIMARY> (7.63)<F2>
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
