FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
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, 1997
or
[ ] TRANSITION REPORT PURSUANT TO 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)
(864) 239-1000
(Issuer's telephone number)
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
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 2,389
Restricted--tenant security deposits 49
Accounts receivable, less allowance for
doubtful accounts of $12 28
Escrow for taxes 179
Other assets 244
Restricted escrows 224
Investment properties:
Land $ 1,527
Buildings and related personal property 12,882
14,409
Less accumulated depreciation (9,084)
5,325
$ 8,438
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 10
Tenant security deposits 49
Accrued taxes 62
Other liabilities 65
Mortgage note payable 3,766
Equity interest in net liabilities of joint venture 5
Partners' (Deficit) Capital
General partners $ (331)
Limited partners capital (86,920 units issued
and 86,778 units outstanding) 4,812 4,481
$ 8,438
See Accompanying Notes to Consolidated Financial Statements
b) ANGELES INCOME PROPERTIES, LTD. III
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Revenues:
Rental income $ 437 $ 411 $ 1,332 $ 1,262
Other income 27 33 58 79
Total revenues 464 444 1,390 1,341
Expenses:
Operating 110 100 317 313
General and administrative 75 60 166 183
Maintenance 109 46 268 126
Depreciation 169 165 500 488
Interest 91 111 273 326
Bad debt expense -- 7 -- 30
Property taxes 25 42 105 105
Total expenses 579 531 1,629 1,571
Loss before equity in income
(loss) of joint venture (115) (87) (239) (230)
Equity in income (loss) of
joint venture (Note B) 2 (238) 6,970 (764)
Net (loss) income $ (113) $ (325) $ 6,731 $ (994)
Net (loss) income allocated
to general partners (1%) $ (1) $ (3) $ 67 $ (10)
Net (loss) income allocated
to limited partners (99%) (112) (322) 6,664 (984)
Net (loss) income $ (113) $ (325) $ 6,731 $ (994)
Net (loss) income per
limited partnership unit $ (1.29) $ (3.71) $ 76.79 $ (11.33)
See Accompanying Notes to Consolidated Financial Statements
c) ANGELES INCOME PROPERTIES, LTD. III
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 86,920 $ 1 $ 43,460 $ 43,461
Partners' deficit at
December 31, 1996 86,778 $ (398) $ (1,852) $ (2,250)
Net income for the nine months
ended September 30, 1997 -- 67 6,664 6,731
Partners' (deficit) capital
at September 30, 1997 86,778 $ (331) $ 4,812 $ 4,481
See Accompanying Notes to Consolidated Financial Statements
d) ANGELES INCOME PROPERTIES, LTD. III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1997 1996
Cash flows from operating activities:
Net income (loss) $ 6,731 $ (994)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Equity in (income) loss of joint venture (6,970) 764
Depreciation 500 488
Amortization of loan costs and
leasing commissions 30 68
Bad debt expense -- 30
Change in accounts:
Restricted cash (1) (2)
Accounts receivable (17) (12)
Escrows for taxes (65) (107)
Other assets 29 3
Accounts payable (17) --
Tenant security deposit liabilities 1 2
Property taxes 21 16
Other liabilities 5 (8)
Net cash provided by operating
activities 247 248
Cash flows from investing activities:
Property improvements and replacements (247) (140)
Advances to joint venture -- (721)
Collection on advances from joint venture 1,066 --
Deposits to restricted escrows (17) --
Net cash provided by (used in)
investing activities 802 (861)
Cash flows from financing activities:
Payments on mortgage notes payable (31) (40)
Loan costs paid -- (94)
Net cash used in financing activities (31) (134)
Net increase (decrease) in unrestricted cash
and cash equivalents 1,018 (747)
Unrestricted cash and cash equivalents at
beginning of period 1,371 1,888
Unrestricted cash and cash equivalents at
end of period $ 2,389 $ 1,141
Supplemental disclosure of cash flow information:
Cash paid for interest $ 261 $ 283
See Accompanying Notes to Consolidated Financial Statements
e) ANGELES INCOME PROPERTIES, LTD. III
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Angeles Income Properties,
Ltd. III (the "Partnership" or "Registrant") 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 month periods ended September 30, 1997, are not necessarily
indicative of the results that may be expected for the fiscal year ended
December 31, 1997. For further information, refer to the financial statements
and footnotes thereto included in the Partnership's annual report on Form 10-KSB
for the fiscal year ended December 31, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 presentation.
NOTE B - INVESTMENT IN JOINT VENTURE
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 investment property, Northtown Mall, was sold in May 1997,
but effective April 1, 1997. The condensed balance sheet information for
Northtown is as follows:
September 30, 1997
(in thousands)
Assets
Cash $ 7
Total Assets $ 7
Liabilities
Liabilities $ 7
Total Liabilities $ 7
The condensed profit and loss statements for the three and nine months ended
September 30, 1997 and 1996, for Northtown are as follows:
Three Months Ended
September 30,
(in thousands)
1997 1996
Revenues $ 12 $ 2,564
Costs and expenses (6) (3,277)
Loss on sale of investment
property (5) --
Net income (loss) $ 1 $ (713)
Nine Months Ended
September 30,
(in thousands)
1997 1996
Revenues $ 2,739 $ 7,554
Costs and expenses (3,527) (9,841)
Gain on sale of investment property 23,627 --
Net income (loss) $ 22,839 $ (2,287)
The Partnership realized equity income from Northtown of approximately
$6,970,000 for the nine months ended September 30, 1997, and realized equity
loss of approximately $764,000 for the nine months ended September 30, 1996.
During the fourth quarter of 1997, all remaining liabilities of this joint
venture will be paid and the joint venture will be terminated.
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 income and 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 (See "Note D" for information regarding the sale of this
investment property).
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 expenses owed to the Managing General Partner and affiliates
during the nine months ended September 30, 1997, and September 30, 1996, were
paid or accrued:
1997 1996
(in thousands)
Property management fees $ 52 $ 47
Reimbursement for services of affiliates 124 137
Lease commissions 24 --
Included in reimbursements for services of affiliates at September 30, 1997, is
approximately $27,000 in construction oversight costs.
For the period from January 1, 1996, to August 31, 1997, the Partnership insured
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 master
policy. The agent assumed the financial obligations to the affiliate of the
Managing General Partner who receives payment on these obligations from the
agent. The amount of the Partnership's insurance premiums that accrued to the
benefit of the affiliate of the Managing General Partner by virtue of the
agent's obligations was not significant.
NOTE D - SALE OF NORTHTOWN MALL
On May 12, 1997, the Partnership sold Northtown Mall to an affiliate of the
lender. The sale resulted in net proceeds of approximately $1,200,000, after
payment of closing costs, and the gain on the sale amounted to approximately
$23,627,000. The economic closing of the sale of Northtown Mall was as of April
1, 1997, at which time the Partnership was released from the mortgage note
secured by this property in the amount of approximately $51,326,000.
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, 1997 and 1996:
Average Occupancy
1997 1996
Lake Forest Apartments (1)
Brandon, Mississippi 92% 92%
Poplar Square Shopping Center
Medford, Oregon 93% 94%
(1) The Managing General Partner expects occupancy to improve at this property
during the remainder of 1997 and into 1998. The property has undergone
various exterior building improvements in an effort to improve the curb
appeal.
The Partnership realized a net loss of approximately $113,000 and net income of
approximately $6,731,000 for the three and nine months ended September 30, 1997,
respectively, as compared to net losses of approximately $325,000 and
approximately $994,000 for the three and nine months ended September 30, 1996,
respectively. The increase in net income for the three and nine months ended
September 30, 1997, over the same period in 1996, is due to the equity in income
of the joint venture, as a result of the gain realized on the sale of Northtown
Mall in the second quarter of 1997 (see "Note D"). For the three and nine
months ended September 30, 1997, versus 1996, loss before equity in income
(loss) of the joint venture increased slightly due to an increase in total
expenses, which was only partially offset by an increase in total revenues.
Despite a slight drop in occupancy for the Partnership, rental income increased
during the nine months ended September 30, 1997, as compared to the nine months
ended September 30, 1996, due to an increase in average annual rental rates at
Lake Forest Apartments. Other income decreased during the three and nine months
ended September 30, 1997, as compared to the three and nine months ended
September 30, 1996, due to a decrease in interest income as a result of a
decrease in cash investments. The Partnership began the 1996 year with over
$1,800,000 in cash and was able to invest a significant portion of this cash
until it was advanced to Northtown (See discussion below). In September 1997,
$1,066,000 of these advances were recovered. Contributing to the overall
increase in expenses was an increase in maintenance expense. Maintenance expense
increased at Lake Forest Apartments due to an exterior painting project and
other various exterior building improvements undertaken in an effort to improve
the appearance of the property. Partially offsetting this increase in overall
expenses was a decrease in general and administrative expenses due to a decrease
in reimbursements for services of affiliates, excluding construction oversight
costs. Also, interest expense decreased due to the refinancing of the mortgage
debt secured by Poplar Square Shopping Center in November 1996. This debt was
refinanced at a lower interest rate.
Bad debt expense for the three and nine months ended September 30, 1996, was a
result of an increase in the reserve required based on a review of tenants'
accounts at the Poplar Square Shopping Center. No such reserve was required
during the nine months ended September 30, 1997.
On May 12, 1997, the Partnership sold Northtown Mall to an affiliate of the
lender. The sale resulted in net proceeds of approximately $1,200,000, after
payment of closing costs, and the gain on the sale amounted to approximately
$23,627,000. The Partnership's pro-rata share of this gain is included in
"Equity in income of joint venture" in the accompanying statement of operations.
The economic closing of the sale of Northtown Mall is as of April 1, 1997, at
which time the Partnership was released from the mortgage note of approximately
$51,326,000. During the fourth quarter of 1997, all remaining liabilities of
this joint venture will be paid and the joint venture will be terminated.
Included in maintenance expense for the nine months ended September 30, 1997, is
$165,000 of major repairs and maintenance comprised of parking lot seal-coating
and repairs, exterior building improvements, and exterior painting. For the
nine months ended September 30, 1996, $10,000 of major repairs and maintenance,
comprised of exterior building improvements, is included in maintenance expense.
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, 1997, the Partnership held unrestricted cash and cash
equivalents of $2,389,000 compared to $1,141,000 at September 30, 1996. Net
cash provided by operating activities remained relatively constant. Net cash
provided by investing activities increased due to collection on advances from
the joint venture as a result of the distribution of the remaining cash after
the sale of Northtown Mall, along with a decrease in advances to the joint
venture. Prior to the sale of the property, the Northtown Mall property had
continued to experience cash shortfalls and had 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 at "Note D" regarding this
investment property). During the nine months ended September 30, 1996, the
Partnership advanced $721,000 to Northtown. There were no advances to Northtown
during the nine months ended September 30, 1997. Partially offsetting the
decrease in advances to joint venture was an increase in cash used for property
improvements and replacements at Lake Forest Apartments. Net cash used in
financing activities decreased due to the loan costs incurred in 1996 in an
effort to refinance the mortgage indebtedness secured by the Poplar Square
Shopping Center. This mortgage indebtedness was refinanced in November 1996.
As a result of the refinance, the monthly payments to service this debt
decreased causing a decrease in payments on the mortgage note payable.
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 $3,766,000, which is secured by the Poplar Square
Shopping Center investment property, carries a stated interest rate of 9.2% and
matures in November 2006. Future cash distributions will depend on the levels of
net cash generated from operations, property sales and the availability of cash
reserves. The Managing General Partner is currently evaluating the economic
position of the Partnership and the Partnership's ability to make a distribution
in 1997. During the nine months ended September 30, 1997 and 1996, there were
no distributions paid.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K:
No reports on form 8-K were filed during the three months ended
September 30, 1997.
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 7, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Angeles
Income Properties Ltd. III 1997 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-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,389
<SECURITIES> 0
<RECEIVABLES> 28
<ALLOWANCES> 12
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 14,409
<DEPRECIATION> 9,084
<TOTAL-ASSETS> 8,438
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 3,766
0
0
<COMMON> 0
<OTHER-SE> 4,481
<TOTAL-LIABILITY-AND-EQUITY> 8,438
<SALES> 0
<TOTAL-REVENUES> 1,390
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,629
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 273
<INCOME-PRETAX> 6,731
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,731
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,731
<EPS-PRIMARY> 76.79<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
