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
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT of 1934
For the transition period from.........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
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
(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)
March 31, 1998
Assets
Cash and cash equivalents $ 1,198
Receivables and deposits (net of allowance for 192
doubtful accounts of $27)
Other assets 280
Restricted escrows 240
Investment properties:
Land $ 1,527
Buildings and related personal property 12,971
14,498
Less accumulated depreciation (9,425) 5,073
$ 6,983
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 14
Tenant security deposit liabilities 45
Accrued property taxes 10
Other liabilities 290
Mortgage note payable 3,744
Partners' (Deficit) Capital
General partners $ (347)
Limited partners (86,778 units issued
and outstanding) 3,227 2,880
$ 6,983
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
March 31,
1998 1997
Revenues:
Rental income $ 438 $ 509
Other income 17 14
Total revenues 455 523
Expenses:
Operating 123 136
General and administrative 41 61
Depreciation 170 163
Interest 90 91
Property taxes 39 41
Total expenses 463 492
(Loss) income before equity in loss of
joint venture (8) 31
Equity in loss of joint venture (Note B) -- (235)
Net loss $ (8) $ (204)
Net loss allocated to general partners (1%) $ -- $ (2)
Net loss allocated to limited partners (99%) (8) (202)
Net loss $ (8) $ (204)
Net loss per limited partnership unit $ (.09) $ (2.33)
See Accompanying Notes to Consolidated Financial Statements
c)
ANGELES INCOME PROPERTIES, LTD. III
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(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) capital
at December 31, 1997 86,778 $ (347) $ 3,235 $ 2,888
Net loss for the three months
ended March 31, 1998 -- -- (8) (8)
Partners' (deficit) capital
at March 31, 1998 86,778 $ (347) $ 3,227 $ 2,880
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
d)
ANGELES INCOME PROPERTIES, LTD. III
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (8) $ (204)
Adjustments to reconcile net loss to net cash
provided by operating activities
Equity in loss of joint venture -- 235
Depreciation 170 163
Amortization of loan costs and leasing commissions 10 11
Change in accounts:
Receivables and deposits (3) (24)
Other assets 29 11
Accounts payable (9) (13)
Tenant security deposit liabilities (3) --
Property taxes (28) (30)
Other liabilities (16) (42)
Net cash provided by operating activities 142 107
Cash flows from investing activities:
Property improvements and replacements (8) (18)
Net deposits to restricted escrows (6) (5)
Net cash used in investing activities (14) (23)
Cash flows used in financing activities:
Payments on mortgage note payable (11) (10)
Net increase in cash and cash equivalents 117 74
Cash and cash equivalents at beginning of period 1,081 1,371
Cash and cash equivalents at end of period $ 1,198 $ 1,445
Supplemental disclosure of cash flow information:
Cash paid for interest $ 86 $ 87
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
e) ANGELES INCOME PROPERTIES, LTD. III
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated 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 month period ended March 31, 1998, are not
necessarily indicative of the results that may be expected for the fiscal year
ended December 31, 1998. 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, 1997.
Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation.
NOTE B - INVESTMENT IN JOINT VENTURE
The Partnership had a 33.3% investment in Northtown Mall Partners ("Joint
Venture"). On May 12, 1997, the Joint Venture sold its only investment property,
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 $16,243,000. As a result of the
sale, mortgage debt in the amount of approximately $8,711,000 was forgiven and
unamortized loan costs in the amount of approximately $1,327,000 were written
off. This resulted in an extraordinary gain on extinguishment of debt of
approximately $7,384,000. 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 of approximately $51,326,000. The Joint Venture was liquidated in
December 1997.
The condensed profit and loss statement for the three months ended March 31,
1997, for the Joint Venture is as follows:
1997
(in thousands)
Revenue $ 2,696
Costs and expenses (3,399)
Net loss $ (703)
The Partnership's equity in the loss of the joint venture was approximately
$235,000 for the three months ended March 31, 1997.
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 Managing General Partner is a wholly-owned
subsidiary of Insignia Properties Trust ("IPT"), an affiliate of Insignia
Financial Group, Inc. ("Insignia). The Partnership Agreement provides for
certain payments to affiliates for services and as reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership.
The following payments were made to the Managing General Partner and affiliates
during the three months ended March 31, 1998 and 1997:
1998 1997
(in thousands)
Property management fees (included in
operating expenses) $18 $19
Reimbursement for services of affiliates
(included in general and administrative
expenses and other assets) 26 44
Included in "Reimbursement for Services of Affiliates" for the period ended
March 31, 1998, is approximately $2,000 in leasing commissions paid to an
affiliate of the Managing General Partner.
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in IPT
with Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust. The closing, which is anticipated to happen in
the third quarter of 1998, is subject to customary conditions, including
government approvals and the approval of Insignia's shareholders. If the
closing occurs, AIMCO will then control the Managing General Partner of the
Partnership.
For the period January 1, 1997 to August 31, 1997, the Partnership insured its
properties under a master policy through an agency affiliated with the Managing
General Partner with an 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 which
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 was 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 three months ended March 31, 1998 and 1997:
Average Occupancy
1998 1997
Lake Forest Apartments
Brandon, Mississippi (1) 89% 93%
Poplar Square Shopping Center
Medford, Oregon 93% 94%
1)Average occupancy at Lake Forest Apartments was down as of March 31, 1998,
due to new apartment complexes in the Brandon, Mississippi area.
The Partnership realized a net loss of approximately $8,000 for the three months
ended March 31, 1998, as compared to a net loss of approximately $204,000 for
the three months ended March 31, 1997. The decrease in the net loss is primarily
due to the equity in loss of joint venture for the three months ended March 31,
1997. The Joint Venture sold its only investment property, Northtown Mall,
during the second quarter of 1997 (see "Note B" of the financial statements
included in Item 1). For the three months ended March 31, 1998, versus the
three months ended March 31, 1997, loss before equity in loss of joint venture
increased due to a decrease in rental income, partially offset by a decrease in
total expenses.
Rental income decreased during the three months ended March 31, 1998, as
compared to the three months ended March 31, 1997, due to the decreases in
occupancy at both Lake Forest Apartments and at Poplar Square Shopping Center.
The decrease in total expenses is a result of decreases in both operating and
general and administrative expenses. The decrease in operating expenses is due
primarily to a decrease in administrative units expense at Lake Forest
Apartments. The complex had ten administrative units during 1997 and are
currently renting them to tenants in 1998. General and administrative expense
decreased due to a decrease in expense reimbursements due to the sale of
Northtown Mall.
On May 12, 1997, the Joint Venture in which the Partnership owned a 33.3%
interest sold Northtown Mall, its only investment property, to an affiliate of
the lender (see Note B). The economic closing of the sale of Northtown Mall was
as of April 1, 1997, at which time the joint venture was released from the
mortgage note of approximately $51,326,000. For the three months ended March
31, 1997, the Partnership realized equity in loss of the joint venture of
approximately $235,000.
Included in operating expenses for the three months ended March 31, 1997, is
approximately $15,000 of major repairs and maintenance, comprised of parking lot
seal-coating and repairs.
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 March 31, 1998, the Partnership had cash and cash equivalents of
approximately $1,198,000 compared to approximately $1,445,000 at March 31, 1997.
Cash and cash equivalents increased approximately $117,000 and $74,000 for the
periods ended March 31, 1998 and 1997, respectively. Net cash provided by
operating activities increased as a result of the decrease in net loss, as
discussed above. Net cash used in investing activities decreased due to a
decrease in property improvements and replacements at Lake Forest Apartments.
Net cash used in financing activities resulted from the payments on the mortgage
note encumbering 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 approximately $3,744,000, which is secured by the
Poplar Square Shopping Center investment property matures in November 2006, at
which time the property will either be refinanced or sold. No cash distributions
were made during the first quarter of 1998 or 1997. A cash distribution of
approximately $250,000 was made during May 1998.
Year 2000
The Partnership is dependent upon the Managing General Partner and Insignia for
management and administrative services. Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems. The Managing General Partner believes that with
modifications to existing software and conversions to new software, the Year
2000 Issue will not pose significant operational problems for its computer
systems. However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Partnership.
Other
Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such forward-looking statements speak only as of the date of
this quarterly report. The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING
In March 1998, several putative unit holders of limited partnership units of the
Partnership commenced an action entitled ROSALIE NUANES, ET AL. V. INSIGNIA
FINANCIAL GROUP, INC., ET AL. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities. The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia Financial Group, Inc.
("Insignia") and its affiliates of interests in certain general partner
entities, past tender offers by Insignia affiliates to acquire limited
partnership units, the management of partnerships by Insignia affiliates as well
as a recently announced agreement between Insignia and Apartment Investment and
Management Company. The complaint seeks monetary damages and equitable relief,
including judicial dissolution of the Partnership. The Managing General Partner
was only recently served with the complaint which it believes to be without
merit, and intends to vigorously defend the action.
In May 1998, the Partnership and its Managing General Partner were named as
respondents in a Petition in Los Angeles Superior Court. The Petition, brought
by a limited partner of the Partnership, seeks performance by the Managing
General Partner of certain alleged contractual obligations under the Partnership
Agreement and compliance with certain alleged statutory requirements. Service
on the Partnership was only recently accomplished, and the Managing General
Partner has not yet replied to the Petition.
The Partnership 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, 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 March
31, 1998.
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/Director
By: /s/Robert D. Long
Robert D. Long
Vice President/CAO
Date: May 12, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Angeles Income Properties, Ltd. III 1998 First 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,198
<SECURITIES> 0
<RECEIVABLES> 192
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 14,498
<DEPRECIATION> (9,425)
<TOTAL-ASSETS> 6,983
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 3,744
0
0
<COMMON> 0
<OTHER-SE> 2,880
<TOTAL-LIABILITY-AND-EQUITY> 6,983
<SALES> 0
<TOTAL-REVENUES> 455
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 463
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 90
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8)
<EPS-PRIMARY> (.09)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
