<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1996
--------------
Commission file number 0-11962
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CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
--------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-1311532
- ----------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11200 Rockville Pike, Rockville, Maryland 20852
- ----------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(301) 468-9200
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at March 31, 1996
- ------------------------- ----------------------------------
(Not applicable) (Not applicable)
<PAGE>
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
Page
----
PART I. Financial Information (Unaudited)
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1996
and December 31, 1995 . . . . . . . . . . . . . 1
Consolidated Statements of Operations - for
the three months ended March 31, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows - for
the three months ended March 31, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . 3
Notes to Consolidated Financial Statements . . . . 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . 12
PART II. Other Information
Item 3. Defaults Upon Senior Securities . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 19
Signature . . . . . . . . . . . . . . . . . . . . . . . . 20
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------- ------------
(Unaudited)
<S> <C> <C>
Investments in partnerships $ 24,757,152 $ 28,502,606
Investment in partnership held for sale -- 1,249,305
Cash and cash equivalents 3,413,837 2,897,013
Acquisition fees, principally paid to related parties, net of accumulated amortization of
$424,448 and $415,716, respectively 623,391 632,123
Property purchase costs, net of accumulated amortization of $384,244 and $376,110, respectively 591,892 600,026
Other assets 293,305 80,183
------------- ------------
Total assets $ 29,679,577 $ 33,961,256
============= ============
LIABILITIES AND PARTNERS' DEFICIT
Due on investments in partnerships, net of unamortized discount on purchase money notes
of $10,950,164 and $11,879,234, respectively $ 16,997,276 $ 24,303,206
Accrued interest payable 40,853,189 45,542,056
Distributions payable 579,000 --
Consulting fees payable to related parties 117,028 --
Accounts payable and accrued expenses 84,925 114,599
------------- ------------
Total liabilities 58,631,418 69,959,861
------------- ------------
Commitments and contingencies
Partners' capital (deficit):
Capital paid-in:
General Partners 2,000 2,000
Limited Partners 60,001,500 60,001,500
------------- ------------
60,003,500 60,003,500
Less:
Accumulated distributions to partners (2,288,681) (1,709,681)
Offering costs (6,156,933) (6,156,933)
Accumulated losses (80,509,727) (88,135,491)
------------- ------------
Total partners' deficit (28,951,841) (35,998,605)
------------- ------------
Total liabilities and partners' deficit $ 29,679,577 $ 33,961,256
============= ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Share of income from partnerships $ 4,791,987 $ 531,150
------------ ------------
Other revenue and expenses:
Revenue:
Interest and other income 45,990 39,510
------------ ------------
Expenses:
Interest 2,108,633 2,265,456
Management fee 75,000 75,000
General and administrative 43,199 40,312
Professional fees 26,892 25,657
Amortization 16,866 17,528
------------ ------------
2,270,590 2,423,953
------------ ------------
Total other revenue and expenses (2,224,600) (2,384,443)
------------ ------------
Income (loss) before gain on disposition of investment in partnership 2,567,387 (1,853,293)
Gain on disposition of investment in partnership 5,058,377 --
------------ ------------
Net income (loss) 7,625,764 (1,853,293)
Accumulated losses, beginning of period (88,135,491) (79,986,144)
------------ ------------
Accumulated losses, end of period $(80,509,727) $(81,839,437)
============ ============
Income (loss) allocated to General Partners (1.51%) $ 115,149 $ (27,985)
============ ============
Income (loss) allocated to Initial and Special Limited Partners (1.49%) $ 113,624 $ (27,614)
============ ============
Income (loss) allocated to Additional Limited Partners (97%) $ 7,396,991 $ (1,797,694)
============ ============
Income (loss) per unit of Additional Limited Partnership Interest based on
60,000 units outstanding $ 123.28 $ (29.96)
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 7,625,764 $ (1,853,293)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Share of income from partnerships (4,791,987) (531,150)
Amortization of deferred costs 16,866 17,528
Amortization of discount on purchase money notes 929,070 932,556
Gain on disposition of investment in partnership (5,058,377) --
Payment of purchase money note interest (2,853,221) (274,316)
Changes in assets and liabilities:
Increase in other assets (213,122) (13,868)
Increase in accrued interest payable 1,179,564 1,332,900
Increase (decrease) in accounts payable and accrued expenses 87,354 (9,020)
------------ ------------
Net cash used in operating activities (3,078,089) (398,663)
------------ ------------
Cash flows from investing activities:
Receipt of distributions from partnerships 8,537,442 343,422
Proceeds from disposition of investment in partnership 3,292,471 --
------------ ------------
Net cash provided by investing activities 11,829,913 343,422
------------ ------------
Cash flows from financing activities:
Pay-off of purchase money notes (8,235,000) --
------------ ------------
Net increase (decrease) in cash and cash equivalents 516,824 (55,241)
Cash and cash equivalents, beginning of period 2,897,013 2,681,974
------------ ------------
Cash and cash equivalents, end of period $ 3,413,837 $ 2,626,733
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-3-
<PAGE>
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of C.R.I., Inc. (CRI), the Managing General Partner, the
accompanying unaudited consolidated financial statements contain all adjustments
of a normal recurring nature necessary to present fairly the consolidated
financial position of Capital Realty Investors-III Limited Partnership (the
Partnership) as of March 31, 1996 and December 31, 1995, and its consolidated
results of operations for the three months ended March 31, 1996 and 1995 and its
consolidated cash flows for the three months ended March 31, 1996 and 1995.
These unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in consolidated financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. While the Managing General Partner believes that
the disclosures presented are adequate to make the information not misleading,
it is suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes included in
the Partnership's Annual Report filed on Form 10-K for the year ended
December 31, 1995.
2. INVESTMENTS IN PARTNERSHIPS
As of March 31, 1996, the Partnership's obligations with respect to its
investments in Local Partnerships, in the form of purchase money notes of
$27,827,896 (exclusive of unamortized discount on purchase money notes of
$10,950,164) plus accrued interest of $40,819,213, are payable upon the earliest
of: (i) sale or refinancing of the respective Local Partnership's rental
property; (ii) payment in full of the respective Local Partnership's permanent
loan; or (iii) maturity. Purchase money notes in an aggregate principal amount
of $3,861,070 matured on January 1, 1996, but not have been paid, as discussed
below. Purchase money notes in an aggregate principal amount of $2,100,000
mature on May 1, 1996, as discussed below. The remaining purchase money notes
mature from 1997 to 2015. The purchase money notes are generally secured by the
Partnership's interest in the respective Local Partnership. There is no
assurance that the underlying properties will have sufficient appreciation and
equity to enable the Partnership to pay the purchase money notes' principal and
accrued interest when due. If a purchase money note is not paid in accordance
with its terms, the Partnership will either have to renegotiate the terms of
repayment or risk losing its partnership interest in the Local Partnership. The
Managing General Partner is continuing to investigate possible alternatives to
reduce the Partnership's long-term debt obligations. These alternatives
include, among others, retaining the cash available for distribution to meet the
purchase money note requirements, buying out certain purchase money notes at a
discounted price, extending the due dates of certain purchase money notes, or
refinancing the respective properties' underlying debt and using the
Partnership's share of the proceeds to pay off or buy down certain purchase
money note obligations.
Interest expense on the Partnership's purchase money notes for the three
months ended March 31, 1996 and 1995 was $2,108,633 and $2,265,456,
respectively. Amortization of the imputed interest on purchase money notes
increased interest expense during the three months ended March 31, 1996 and 1995
by $929,070 and $932,556, respectively.
As of March 31, 1996 and December 31, 1995, the Partnership's obligations
-4-
<PAGE>
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. INVESTMENTS IN PARTNERSHIPS - Continued
with respect to its investment in Local Partnerships included $119,544 due to
local general partners, plus accrued interest on these obligations of $33,976.
Purchase money notes, plus accrued interest, relating to the following
properties have matured or will mature in 1996:
<TABLE>
<CAPTION>
Property Principal Amount Maturity Date
-------- ---------------- -------------
<S> <C> <C>
Briar Crest I $ 525,050 January 1, 1996(A,E)
Briar Crest II 415,920 January 1, 1996(A,E)
Briar Hills 458,100 January 1, 1996(A,E)
Indian Hills 327,000 January 1, 1996(A,E)
Park Heights Tower 2,135,000 January 1, 1996(B)
Village Squire I & II 3,660,000 March 1, 1996(C)
Village Squire III 2,440,000 March 1, 1996(C)
Cedar Valley 2,100,000 May 1, 1996(D,E)
</TABLE>
(A) On June 15, 1994, the Local Managing General Partner of Briar Crest I,
Briar Crest II, Briar Hills and Indian Hills filed a notice of intent
to participate under the Low Income Housing Preservation and Resident
Homeownership Act of 1990 (LIHPRHA) in hopes of refinancing the
existing first mortgages of each property. As a result of the recent
changes in the LIHPRHA program, as discussed below, the Managing
General Partner asked the Local Managing General Partner to pursue a
sale of the properties under the LIHPRHA program. On February 20,
1996, the Local Managing General Partner filed a notice with HUD to
amend the plan of action under the LIHPRHA program requesting a sale
of the properties. The Local Managing General Partner is also the
noteholder of the related purchase money notes. The Partnership
defaulted on its purchase money notes relating to Briar Crest I, Briar
Crest II, Briar Hills and Indian Hills on January 1, 1996 when the
notes matured and were not paid. The default amounts included
principal and accrued interest as follows:
-5-
<PAGE>
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. INVESTMENTS IN PARTNERSHIPS - Continued
<TABLE>
<CAPTION>
Accrued Interest Accrued Interest
Property Principal January 1, 1996 April 23, 1996
-------- --------- ---------------- ----------------
<S> <C> <C> <C>
Briar Crest I $ 525,050 $ 746,672 $ 768,508
Briar Crest II 415,920 574,963 591,957
Briar Hills 458,100 683,564 703,046
Indian Hills 327,000 477,973 491,707
---------- ---------- ----------
$1,726,070 $2,483,172 $2,555,218
========== ========== ==========
</TABLE>
The Managing General Partner has offered to extend the maturity dates
to coincide with the possible future sale of the properties under the
LIHPRHA program. No agreement has been reached as of April 17, 1996.
There can be no assurance that an agreement will be reached, or that
the eventual sale of the properties will occur. As such, there is no
assurance that the Partnership will be able to retain its interests in
the Local Partnerships.
(B) On January 5, 1994 the local general partners of Park Heights Towers
Limited Partnership (Park Heights) filed a notice of intent to
participate under the LIHPRHA program. On February 2, 1996, the local
general partners of Park Heights sold the property to a non-profit
entity. The sale of the property generated net proceeds to the
Partnership of approximately $1.27 million. The proceeds were net of
$2.135 million used to retire, at a discount, the Partnership's
purchase money note obligation with respect to the property. The sale
provided proceeds to the Partnership in excess of its investment in
the Local Partnership, and resulted in a net financial statement gain
and a net tax gain in 1996 of approximately $5.1 million and $7.0
million, respectively. The Partnership intends to distribute $579,000
(or approximately $9.65 per Additional Limited Partner unit) to the
Additional Limited Partners as return of capital on a generally
accepted accounting principles basis by April 30, 1996. The Managing
General Partner intends to retain all of the Partnership's remaining
undistributed net sale proceeds for the possible repayment, prepayment
or purchase of the outstanding purchase money notes of other Local
Partnerships. The General Partner and/or its affiliates earned net
fees of $117,028 for its services relating to the sale of the
property. As of April 17, 1996, these fees have not been paid.
(C) On March 1, 1996, the local general partner of Village Squire I & II
and Village Squire III refinanced the respective properties' existing
first mortgages. On March 1, 1996, proceeds provided to the
Partnership from the properties' mortgage refinancings, along with
approximately $560,000 of existing Partnership cash resources, were
used to pay off the related purchase money note obligations.
Approximately $4.1 million in refinancing proceeds provided to the
Partnership were in excess of the Partnership's investment in the
-6-
<PAGE>
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. INVESTMENTS IN PARTNERSHIPS - Continued
respective Local Partnerships and are included in share of income from
Local Partnerships in the consolidated statement of operations.
(D) The Managing General Partner is currently negotiating with the
noteholders to extend the Cedar Valley purchase money note due dates
to coincide with a potential future LIHPHRA sale. There is no
assurance that any agreement will be reached with the noteholders or
that a sale of the property will eventually occur.
(E) The uncertainty about the continued ownership of the Partnership's
interest in the Briar Crest I, Briar Crest II, Briar Hills, Indian
Hills and Cedar Valley Local Partnerships does not impact the
Partnership's financial condition because the related purchase money
notes are nonrecourse and secured solely by the Partnership's interest
in the respective Local Partnerships. Should the investment in any or
all of the above listed Local Partnership's, excluding Indian Hills,
not produce sufficient value to satisfy the related purchase money
notes, the Partnership's exposure to loss is limited since the amount
of the nonrecourse indebtedness exceeds the carrying amount of the
investment in and advances to the Local Partnerships. Thus, even a
complete loss of these investments would not have a material impact on
the operations of the Partnership. However, should the Partnership be
unable to retain its interest in these Local Partnerships, the
investments in Local Partnerships would be reduced by the
Partnership's basis in these Local Partnerships, which at March 31,
1996, was approximately 5% of the total investment in Local
Partnerships. In the case of Indian Hills, the carrying amount of the
investment exceeds the amount of nonrecourse indebtedness, however,
the Partnership's exposure to loss is limited to this excess, which at
March 31, 1996 was approximately $840,000.
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments" (SFAS 107), requires the disclosure of fair
value information about financial instruments for which it is practicable to
estimate that value. The Partnership implemented SFAS 107 in 1995. The
Partnership has determined that the carrying amount of its cash and cash
equivalents approximates fair value due to the short-term nature of the related
financial instruments. The Partnership has determined that it is not
practicable to estimate the fair value of its purchase money notes, either
individually or in the aggregate, due to: (i) the lack of an active market for
this type of financial instrument, (ii) the variable nature of purchase money
note interest payments as a result of fluctuating cash flow distributions
received from the related Local Partnerships, and (iii) the excessive costs
associated with an independent appraisal of the purchase money notes.
Some of the rental properties owned by the Local Partnerships have
mortgages which are federally insured under Section 236 or Section 221(d)(3) of
the National Housing Act, as amended. These properties may be eligible for
sale, subject to numerous requirements, under the LIHPRHA program. This program
may provide incentives to owners of qualifying multifamily housing who commit to
permanently maintain their properties as low to moderate income housing.
Incentives originally available under LIHPRHA included selling the property to
qualified buyers or obtaining supplemental financing for the property. On March
28, 1996, Congress enacted the Housing Opportunity Program Extension Act of 1996
which includes revisions to the LIHPRHA program. These revisions include: (i)
-7-
<PAGE>
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. INVESTMENTS IN PARTNERSHIPS - Continued
severely limiting the availability of the supplemental financing option for
owners of qualifying multifamily housing, (ii) allowing owners who no longer
qualify for supplemental financing under the revised guidelines to elect to
pursue a sale of the property under the LIHPRHA program, provided that the
election to sell was made by April 15, 1996, and (iii) continuing the funding of
sale transactions under the LIHPRHA program through October 1, 1996, but only
for transactions in which the owner's plan of action is approved by HUD by
August 15, 1996. As of April 17, 1996, there can be no assurance that Congress
will extend the LIHPRHA program beyond the October 1 deadline, or that a
modified program will be developed in place of the existing program. Also,
there is no assurance that the sale of any of the properties owned by the Local
Partnerships will occur.
Some of the rental properties owned by the Local Partnerships are financed
by state housing agencies. The Managing General Partner has been working to
develop a strategy to sell or refinance certain properties pursuant to programs
developed by these agencies. These programs may include opportunities to sell
the property to a qualifying purchaser who would agree to maintain the property
as low to moderate income housing in perpetuity, or may include opportunities to
refinance the property or obtain supplemental financing. The Managing General
Partner continues to monitor these programs to ascertain whether the properties
would qualify within the parameters of the programs and whether the programs
would provide an appropriate economic benefit to the limited partners of the
Partnership.
Some of the rental properties owned by the Local Partnerships are dependent
on the receipt of housing assistance payments guaranteed by contract under the
HUD Section 8 program. The level of funding for the Section 8 program, and HUD-
insured multifamily housing in general, is dependent upon the continuation of
appropriations approved by Congress for subsidy payments. In the event that the
rental subsidy programs are reduced or phased out, there is no assurance that
the rental properties will be able to maintain the occupancy levels necessary to
pay debt service and operating costs or that the rents necessary to pay debt
service and operating costs will be competitive with rents for comparable units
in the rental properties' respective market areas. While the Managing General
Partner has no reason to believe that HUD will not honor its obligations under
the contracts, some uncertainty exists in light of the recent Congressional
scrutiny of appropriations for HUD programs.
The following are combined statements of operations for the Local
Partnerships in which the Partnership has invested. These statements are
compiled from information supplied by the management agents of the projects and
are unaudited.
-8-
<PAGE>
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. INVESTMENTS IN PARTNERSHIPS - Continued
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
----------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Revenue:
Rental revenue $ 8,168,032 $ 7,978,801
Other 420,034 349,882
------------ ------------
8,588,066 8,328,683
------------ ------------
Expenses:
Operating 5,071,675 4,837,251
Interest 1,768,021 1,761,705
Depreciation and amortization 1,410,313 1,427,601
------------ ------------
8,250,009 8,026,557
------------ ------------
Net income $ 338,057 $ 302,126
============ ============
</TABLE>
As of March 31, 1996 and December 31, 1995, the Partnership's share of
cumulative losses to date for eleven of the thirty-five Local Partnerships
exceeds the amount of the Partnership's investments in these Local Partnerships
by $11,577,722 and $11,371,859, respectively. As the Partnership has no further
obligation to advance funds or provide financing to these Local Partnerships,
the excess losses have not been reflected in the accompanying consolidated
financial statements.
3. RELATED-PARTY TRANSACTIONS
In accordance with the terms of the Partnership Agreement, the Partnership
is obligated to reimburse the Managing General Partner for its direct expenses
in managing the Partnership and to pay an annual incentive management fee (the
Management Fee) after all other expenses of the Partnership are paid. The
Partnership paid $35,054 and $21,037 for the three months ended March 31, 1996
and 1995, respectively, as direct reimbursement of expenses incurred on behalf
of the Partnership. Such expenses are included in the statement of operations
as general and administrative expenses. Additionally, the Partnership paid the
Managing General Partner a Management Fee of $75,000 for each of the three-month
periods ended March 31, 1996 and 1995.
The Managing General Partner and/or its affiliates may receive a fee of not
more than 2% of the sales price of an investment in a Local Partnership or the
property it owns, payable under certain conditions upon the sale of an
investment in a Local Partnership or the property it owns. The payment of the
fee is subject to certain restrictions, including the achievement of a certain
level of sales proceeds and making certain minimum distributions to limited
-9-
<PAGE>
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. RELATED-PARTY TRANSACTIONS - Continued
partners. The Managing General Partner and/or its affiliates earned net fees
for services relating to the sale of the Partnership's interest in Park Heights
of $117,028 on February 2, 1996. These fees have not been paid as of April 17,
1996.
4. CONTINGENCIES
In 1990, CRI, as managing general partner of the Partnership and various
other entities, subcontracted certain property-level asset management functions
for certain properties to Capital Management Strategies, Inc. (CMS). Among
these properties were properties owned by some of the Local Partnerships in
which the Partnership invested. CMS was formed by Martin C. Schwartzberg, a
nominal general partner of the Partnership and a former stockholder of CRI, when
he retired from and cashed out of CRI and its related businesses as of January
1, 1990. Mr. Schwartzberg agreed not to act as a general partner with respect
to any of the CRI-sponsored partnerships, including this Partnership, and has
not done so since that time. In late 1995, a dispute arose between CRI and CMS
over the funding level of the 1996 contract for CMS. On November 9, 1995, CRI
filed a complaint against CMS to determine the proper amount of fees to be paid
in 1996 under the asset management agreement. CMS answered on January 10, 1996,
but asserted no counterclaims.
Thereafter, Mr. Schwartzberg launched a hostile consent solicitation to be
designated as managing general partner of approximately 125 private partnerships
sponsored by CRI. On January 18, 1996, Mr. Schwartzberg and CMS filed a
complaint in the Circuit Court of Montgomery County, Maryland (the Circuit
Court), against CRI and Messrs. Dockser and Willoughby (who are general partners
of the Partnership) alleging, among other things, that CRI and Messrs. Dockser
and Willoughby have breached the asset management agreement pursuant to which
Mr. Schwartzberg's company, CMS, agreed to perform limited functions related to
property-level issues for a portion of CRI's subsidized housing portfolio
(including some of the properties in which the Partnership invested), by
reducing the proposed budget for 1996. The Partnership is not named as a
defendant in this action. Messrs. Dockser and Willoughby have entered an answer
denying all of Mr. Schwartzberg's claims. Messrs. Dockser and Willoughby have
publicly responded that Mr. Schwartzberg's suit is motivated by his budget
dispute with CRI and personal animosity. On February 6, 1996, CRI terminated
the CMS contract for cause. Mr. Schwartzberg and CMS responded by filing a
motion for injunctive relief in the Circuit Court, asking the court to enjoin
CRI from terminating the contract. In a ruling issued on February 12, 1996, the
Circuit Court, among other things, refused to grant the injunction requested by
CMS. A hearing in this case is scheduled for April 29, 1996. On February 12,
1996, the Circuit Court also issued a memorandum opinion and order enjoining CMS
and Mr. Schwartzberg from disclosing information made confidential under the
asset management agreement.
On February 1, 1996 and February 16, 1996, Mr. Schwartzberg sent letters to
the Partnership requesting investor lists and other forms of investor
information. On February 5, 1996, the Partnership, acting through its managing
general partner, CRI, denied Mr. Schwartzberg's request. On February 20, 1996,
counsel for the Partnership responded to Mr. Schwartzberg's second request,
denying that Mr. Schwartzberg had standing or a proper purpose for requesting
the investor lists. In view of Mr. Schwartzberg's solicitation efforts against
other CRI-sponsored partnerships, CRI anticipates that litigation may arise from
this request.
-10-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Financial Condition/Liquidity
-----------------------------
Capital Realty Investors-III Limited Partnership's (the Partnership)
liquidity, with cash resources of $3,413,837 and $2,897,013 as of March 31, 1996
and December 31, 1995, respectively, along with anticipated future cash
distributions from the Local Partnerships, is expected to meet its current and
anticipated operating cash needs. As of April 17, 1996, there are no material
commitments for capital expenditures.
As of March 31, 1996, the Partnership's obligations with respect to its
investments in Local Partnerships, in the form of purchase money notes of
$27,827,896 (exclusive of unamortized discount on purchase money notes of
$10,950,164) plus accrued interest of $40,819,213, are payable upon the earliest
of: (i) sale or refinancing of the respective Local Partnership's rental
property; (ii) payment in full of the respective Local Partnership's permanent
loan; or (iii) maturity. Purchase money notes in an aggregate principal amount
of $3,861,070 matured on January 1, 1996, but not have been paid, as discussed
below. Purchase money notes in an aggregate principal amount of $2,100,000
mature on May 1, 1996, as discussed below. The remaining purchase money notes
mature from 1997 to 2015. The purchase money notes are generally secured by the
Partnership's interest in the respective Local Partnership. There is no
assurance that the underlying properties will have sufficient appreciation and
equity to enable the Partnership to pay the purchase money notes' principal and
accrued interest when due. If a purchase money note is not paid in accordance
with its terms, the Partnership will either have to renegotiate the terms of
repayment or risk losing its partnership interest in the Local Partnership. The
Managing General Partner is continuing to investigate possible alternatives to
reduce the Partnership's long-term debt obligations. These alternatives
include, among others, retaining the cash available for distribution to meet the
purchase money note requirements, buying out certain purchase money notes at a
discounted price, extending the due dates of certain purchase money notes, or
refinancing the respective properties' underlying debt and using the
Partnership's share of the proceeds to pay off or buy down certain purchase
money note obligations.
As of March 31, 1996 and December 31, 1995, the Partnership's obligations
with respect to its investment in Local Partnerships included $119,544 due to
local general partners, plus accrued interest on these obligations of $33,976.
Purchase money notes, plus accrued interest, relating to the following
properties have matured or will mature in 1996:
-11-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
<TABLE>
<CAPTION>
Property Principal Amount Maturity Date
-------- ---------------- -------------
<S> <C> <C>
Briar Crest I $ 525,050 January 1, 1996(A,E)
Briar Crest II 415,920 January 1, 1996(A,E)
Briar Hills 458,100 January 1, 1996(A,E)
Indian Hills 327,000 January 1, 1996(A,E)
Park Heights Tower 2,135,000 January 1, 1996(B)
Village Squire I & II 3,660,000 March 1, 1996(C)
Village Squire III 2,440,000 March 1, 1996(C)
Cedar Valley 2,100,000 May 1, 1996(D,E)
</TABLE>
(A) On June 15, 1994, the Local Managing General Partner of Briar Crest I,
Briar Crest II, Briar Hills and Indian Hills filed a notice of intent
to participate under the Low Income Housing Preservation and Resident
Homeownership Act of 1990 (LIHPRHA) in hopes of refinancing the
existing first mortgages of each property. As a result of the recent
changes in the LIHPRHA program, as discussed below, the Managing
General Partner asked the Local Managing General Partner to pursue a
sale of the properties under the LIHPRHA program. On February 20,
1996, the Local Managing General Partner filed a notice with HUD to
amend the plan of action under the LIHPRHA program requesting a sale
of the properties. The Local Managing General Partner is also the
noteholder of the related purchase money notes. The Partnership
defaulted on its purchase money notes relating to Briar Crest I, Briar
Crest II, Briar Hills and Indian Hills on January 1, 1996 when the
notes matured and were not paid. The default amounts included
principal and accrued interest as follows:
<TABLE>
<CAPTION>
Accrued Interest Accrued Interest
Property Principal January 1, 1996 April 23, 1996
-------- --------- ---------------- ----------------
<S> <C> <C> <C>
Briar Crest I $ 525,050 $ 746,672 $ 768,508
Briar Crest II 415,920 574,963 591,957
Briar Hills 458,100 683,564 703,046
Indian Hills 327,000 477,973 491,707
---------- ---------- ----------
$1,726,070 $2,483,172 $2,555,218
========== ========== ==========
</TABLE>
The Managing General Partner has offered to extend the maturity dates
to coincide with the possible future sale of the properties under the
LIHPRHA program. No agreement has been reached as of April 17, 1996.
There can be no assurance that an agreement will be reached, or that
the eventual sale of the properties will occur. As such, there is no
-12-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
assurance that the Partnership will be able to retain its interests in
the Local Partnerships.
(B) On January 5, 1994 the local general partners of Park Heights Towers
Limited Partnership (Park Heights) filed a notice of intent to
participate under the LIHPRHA program. On February 2, 1996, the local
general partners of Park Heights sold the property to a non-profit
entity. The sale of the property generated net proceeds to the
Partnership of approximately $1.27 million. The proceeds were net of
$2.135 million used to retire, at a discount, the Partnership's
purchase money note obligation with respect to the property. The sale
provided proceeds to the Partnership in excess of its investment in
the Local Partnership, and resulted in a net financial statement gain
and a net tax gain in 1996 of approximately $5.1 million and $7.0
million, respectively. The Partnership intends to distribute $579,000
(or approximately $9.65 per Additional Limited Partner unit) to the
Additional Limited Partners as return of capital on a generally
accepted accounting principles basis by April 30, 1996. The Managing
General Partner intends to retain all of the Partnership's remaining
undistributed net sale proceeds for the possible repayment, prepayment
or purchase of the outstanding purchase money notes of other Local
Partnerships. The General Partner and/or its affiliates earned net
fees of $117,028 for its services relating to the sale of the
property. As of April 17, 1996, these fees have not been paid.
(C) On March 1, 1996, the local general partner of Village Squire I & II
and Village Squire III refinanced the respective properties' existing
first mortgages. On March 1, 1996, proceeds provided to the
Partnership from the properties' mortgage refinancings, along with
approximately $560,000 of existing Partnership cash resources, were
used to pay off the related purchase money note obligations.
Approximately $4.1 million in refinancing proceeds provided to the
Partnership were in excess of the Partnership's investment in the
respective Local Partnerships and are included in share of income from
Local Partnerships in the consolidated statement of operations.
(D) The Managing General Partner is currently negotiating with the
noteholders to extend the Cedar Valley purchase money note due dates
to coincide with a potential future LIHPHRA sale. There is no
assurance that any agreement will be reached with the noteholders or
that a sale of the property will eventually occur.
(E) The uncertainty about the continued ownership of the Partnership's
interest in the Briar Crest I, Briar Crest II, Briar Hills, Indian
Hills and Cedar Valley Local Partnerships does not impact the
Partnership's financial condition because the related purchase money
notes are nonrecourse and secured solely by the Partnership's interest
in the respective Local Partnerships. Should the investment in any or
all of the above listed Local Partnership's, excluding Indian Hills,
not produce sufficient value to satisfy the related purchase money
notes, the Partnership's exposure to loss is limited since the amount
of the nonrecourse indebtedness exceeds the carrying amount of the
investment in and advances to the Local Partnerships. Thus, even a
complete loss of these investments would not have a material impact on
the operations of the Partnership. However, should the Partnership be
unable to retain its interest in these Local Partnerships, the
-13-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
investments in Local Partnerships would be reduced by the
Partnership's basis in these Local Partnerships, which at March 31,
1996 was approximately 5% of the total investment in Local
Partnerships. In the case of Indian Hills, the carrying amount of the
investment exceeds the amount of nonrecourse indebtedness, however,
the Partnership's exposure to loss is limited to this excess, which at
March 31, 1996 was approximately $840,000.
The Partnership closely monitors its cash flow and liquidity position in an
effort to ensure that sufficient cash is available for operating requirements.
For the three months ended March 31, 1996, the receipt of distributions from
Local Partnerships, which included proceeds from the refinancing of the Village
Squire I & II and Village Squire III first mortgages, along with proceeds from
the sale of Park Heights was adequate to support operating cash requirements and
the pay-off of the related purchase money notes.
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments" (SFAS 107), requires the disclosure of fair
value information about financial instruments for which it is practicable to
estimate that value. The Partnership implemented SFAS 107 in 1995. The
Partnership has determined that the carrying amount of its cash and cash
equivalents approximates fair value due to the short-term nature of the related
financial instruments. The Partnership has determined that it is not
practicable to estimate the fair value of its purchase money notes, either
individually or in the aggregate, due to: (i) the lack of an active market for
this type of financial instrument, (ii) the variable nature of purchase money
note interest payments as a result of fluctuating cash flow distributions
received from the related Local Partnerships, and (iii) the excessive costs
associated with an independent appraisal of the purchase money notes.
Results of Operations
---------------------
The Partnership's net income for the three months ended March 31, 1996
increased from the comparable period in 1995 primarily as a result of the gain
on disposition of Park Heights, as discussed above. Contributing to the
increase in net income was an increase in share of income from Local
Partnerships principally due to the receipt of refinancing proceeds from Village
Squire I & II and Village Squire III which were in excess of the Partnership's
investments in the respective Local Partnerships, as discussed above. Also
contributing to the increase in the Partnership's net income was a decrease in
interest expense resulting from the retirement of the Park Heights, Village
Squire I & II and Village Squire III purchase money notes, as discussed above.
For financial reporting purposes, the Partnership, as a limited partner in
the Local Partnerships, does not record losses from the Local Partnerships in
excess of its investment. As a result, the Partnership's recognized income for
the three months ended March 31, 1996 did not include losses of $205,863
compared to excluded losses of $234,553 for the three months ended March 31,
1995, respectively.
Some of the rental properties owned by the Local Partnerships have
mortgages which are federally insured under Section 236 or Section 221(d)(3) of
the National Housing Act, as amended. These properties may be eligible for
sale, subject to numerous requirements, under the LIHPRHA program. This program
may provide incentives to owners of qualifying multifamily housing who commit to
-14-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
permanently maintain their properties as low to moderate income housing.
Incentives originally available under LIHPRHA included selling the property to
qualified buyers or obtaining supplemental financing for the property. On March
28, 1996, Congress enacted the Housing Opportunity Program Extension Act of 1996
which includes revisions to the LIHPRHA program. These revisions include: (i)
severely limiting the availability of the supplemental financing option for
owners of qualifying multifamily housing, (ii) allowing owners who no longer
qualify for supplemental financing under the revised guidelines to elect to
pursue a sale of the property under the LIHPRHA program, provided that the
election to sell was made by April 15, 1996, and (iii) continuing the funding of
sale transactions under the LIHPRHA program through October 1, 1996, but only
for transactions in which the owner's plan of action is approved by HUD by
August 15, 1996. As of April 17, 1996, there can be no assurance that Congress
will extend the LIHPRHA program beyond the October 1 deadline, or that a
modified program will be developed in place of the existing program. Also,
there is no assurance that the sale of any of the properties owned by the Local
Partnerships will occur.
Some of the rental properties owned by the Local Partnerships are financed
by state housing agencies. The Managing General Partner has been working to
develop a strategy to sell or refinance certain properties pursuant to programs
developed by these agencies. These programs may include opportunities to sell
the property to a qualifying purchaser who would agree to maintain the property
as low to moderate income housing in perpetuity, or may include opportunities to
refinance the property or obtain supplemental financing. The Managing General
Partner continues to monitor these programs to ascertain whether the properties
would qualify within the parameters of the programs and whether the programs
would provide an appropriate economic benefit to the limited partners of the
Partnership.
Some of the rental properties owned by the Local Partnerships are dependent
on the receipt of housing assistance payments guaranteed by contract under the
HUD Section 8 program. The level of funding for the Section 8 program, and HUD-
insured multifamily housing in general, is dependent upon the continuation of
appropriations approved by Congress for subsidy payments. In the event that the
rental subsidy programs are reduced or phased out, there is no assurance that
the rental properties will be able to maintain the occupancy levels necessary to
pay debt service and operating costs or that the rents necessary to pay debt
service and operating costs will be competitive with rents for comparable units
in the rental properties' respective market areas. While the Managing General
Partner has no reason to believe that HUD will not honor its obligations under
the contracts, some uncertainty exists in light of the recent Congressional
scrutiny of appropriations for HUD programs.
No other significant changes in the Partnership's operations have taken
place during this period.
General
-------
In 1990, CRI, as managing general partner of the Partnership and various
other entities, subcontracted certain property-level asset management functions
for certain properties to Capital Management Strategies, Inc. (CMS). Among
these properties were properties owned by some of the Local Partnerships in
which the Partnership invested. CMS was formed by Martin C. Schwartzberg, a
nominal general partner of the Partnership and a former stockholder of CRI, when
-15-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
he retired from and cashed out of CRI and its related businesses as of January
1, 1990. Mr. Schwartzberg agreed not to act as a general partner with respect
to any of the CRI-sponsored partnerships, including this Partnership, and has
not done so since that time. In late 1995, a dispute arose between CRI and CMS
over the funding level of the 1996 contract for CMS. On November 9, 1995, CRI
filed a complaint against CMS to determine the proper amount of fees to be paid
in 1996 under the asset management agreement. CMS answered on January 10, 1996,
but asserted no counterclaims.
Thereafter, Mr. Schwartzberg launched a hostile consent solicitation to be
designated as managing general partner of approximately 125 private partnerships
sponsored by CRI. On January 18, 1996, Mr. Schwartzberg and CMS filed a
complaint in the Circuit Court of Montgomery County, Maryland (the Circuit
Court), against CRI and Messrs. Dockser and Willoughby (who are general partners
of the Partnership) alleging, among other things, that CRI and Messrs. Dockser
and Willoughby have breached the asset management agreement pursuant to which
Mr. Schwartzberg's company, CMS, agreed to perform limited functions related to
property-level issues for a portion of CRI's subsidized housing portfolio
(including some of the properties in which the Partnership invested), by
reducing the proposed budget for 1996. The Partnership is not named as a
defendant in this action. Messrs. Dockser and Willoughby have entered an answer
denying all of Mr. Schwartzberg's claims. Messrs. Dockser and Willoughby have
publicly responded that Mr. Schwartzberg's suit is motivated by his budget
dispute with CRI and personal animosity. On February 6, 1996, CRI terminated
the CMS contract for cause. Mr. Schwartzberg and CMS responded by filing a
motion for injunctive relief in the Circuit Court, asking the court to enjoin
CRI from terminating the contract. In a ruling issued on February 12, 1996, the
Circuit Court, among other things, refused to grant the injunction requested by
CMS. A hearing in this case is scheduled for April 29, 1996. On February 12,
1996, the Circuit Court also issued a memorandum opinion and order enjoining CMS
and Mr. Schwartzberg from disclosing information made confidential under the
asset management agreement.
On February 1, 1996 and February 16, 1996, Mr. Schwartzberg sent letters to
the Partnership requesting investor lists and other forms of investor
information. On February 5, 1996, the Partnership, acting through its managing
general partner, CRI, denied Mr. Schwartzberg's request. On February 20, 1996,
counsel for the Partnership responded to Mr. Schwartzberg's second request,
denying that Mr. Schwartzberg had standing or a proper purpose for requesting
the investor lists. In view of Mr. Schwartzberg's solicitation efforts against
other CRI-sponsored partnerships, CRI anticipates that litigation may arise from
this request.
PART II. OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
On June 15, 1994, the Local Managing General Partner of Briar Crest I,
Briar Crest II, Briar Hills and Indian Hills filed a notice of intent to
participate under the Low Income Housing Preservation and Resident Homeownership
Act of 1990 (LIHPRHA) in hopes of refinancing the existing first mortgages of
each property. As a result of the recent changes in the LIHPRHA program, as
discussed below, the Managing General Partner asked the Local Managing General
Partner to pursue a sale of the properties under the LIHPRHA program. On
February 20, 1996, the Local Managing General Partner filed a notice with HUD to
-16-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
amend the plan of action under the LIHPRHA program requesting a sale of the
properties. The Local Managing General Partner is also the noteholder of the
related purchase money notes. The Partnership defaulted on its purchase money
notes relating to Briar Crest I, Briar Crest II, Briar Hills and Indian Hills on
January 1, 1996 when the notes matured and were not paid. The default amounts
included principal and accrued interest as follows:
<TABLE>
<CAPTION>
Accrued Interest Accrued Interest
Property Principal January 1, 1996 April 23, 1996
-------- --------- ---------------- ----------------
<S> <C> <C> <C>
Briar Crest I $ 525,050 $ 746,672 $ 768,508
Briar Crest II 415,920 574,963 591,957
Briar Hills 458,100 683,564 703,046
Indian Hills 327,000 477,973 491,707
---------- ---------- ----------
$1,726,070 $2,483,172 $2,555,218
========== ========== ==========
</TABLE>
The Managing General Partner has offered to extend the maturity dates to
coincide with the possible future sale of the properties under the LIHPRHA
program. No agreement has been reached as of April 17, 1996. There can be no
assurance that an agreement will be reached, or that the eventual sale of the
properties will occur. As such, there is no assurance that the Partnership
will be able to retain its interests in the Local Partnerships.
The uncertainty about the continued ownership of the Partnership's interest
in the Briar Crest I, Briar Crest II, Briar Hills, Indian Hills and Cedar Valley
Local Partnerships does not impact the Partnership's financial condition because
the related purchase money notes are nonrecourse and secured solely by the
Partnership's interest in the respective Local Partnerships. Should the
investment in any or all of the above listed Local Partnership's, excluding
Indian Hills, not produce sufficient value to satisfy the related purchase money
notes, the Partnership's exposure to loss is limited since the amount of the
nonrecourse indebtedness exceeds the carrying amount of the investment in and
advances to the Local Partnerships. Thus, even a complete loss of these
investments would not have a material impact on the operations of the
Partnership. However, should the Partnership be unable to retain its interest
in these Local Partnerships, the investments in Local Partnerships would be
reduced by the Partnership's basis in these Local Partnerships, which at March
31, 1996, was approximately 5% of the total investment in Local Partnerships.
In the case of Indian Hills, the carrying amount of the investment exceeds the
amount of nonrecourse indebtedness, however, the Partnership's exposure to loss
is limited to this excess, which at March 31, 1996 was approximately $840,000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
A report on Form 8-K was filed with the Commission on February 20, 1996
regarding the sale of the property relating to the Partnership's investment in
Park Heights Limited Partnership.
-17-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
All other items are not applicable.
-18-
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CAPITAL REALTY INVESTORS-III
LIMITED PARTNERSHIP
(Registrant)
By: C.R.I., Inc.
Managing General Partner
April 23, 1996 By: /s/ Richard J. Palmer
- ----------------------- ------------------------------
Date Richard J. Palmer
Senior Vice President/Finance
Signing on behalf of the
Registrant and as Principal
Accounting Officer
-19-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Method of Filing
- ------- -----------------------------
27 Financial Data Schedule Filed herewith electronically
-20-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FIRST QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,413,837
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 29,679,577
<CURRENT-LIABILITIES> 0
<BONDS> 57,850,465
0
0
<COMMON> 0
<OTHER-SE> (28,951,577)
<TOTAL-LIABILITY-AND-EQUITY> 29,679,577
<SALES> 0
<TOTAL-REVENUES> 4,837,977
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 161,957
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,108,633
<INCOME-PRETAX> 2,567,387
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,567,387
<DISCONTINUED> 0
<EXTRAORDINARY> 5,058,377
<CHANGES> 0
<NET-INCOME> 7,625,764
<EPS-PRIMARY> 123.28
<EPS-DILUTED> 123.28
</TABLE>
