FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended June 30, 1998
Commission File Number: 0-13559
LDP-III
(Exact name of registrant as specified in its governing instruments)
California 94-2911983
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P. O. Box 130, Carbondale, Colorado 81623
(Address of principal executive offices)
(970) 963-8007
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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 [ ]
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<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LDP-III
CONSOLIDATED BALANCE SHEET, JUNE 30, 1998 AND DECEMBER 31, 1997
(Unaudited) (Dollars in thousands except Units)
<CAPTION>
June 30, December 31,
1998 1997
<S> <C> <C>
INVESTMENTS IN REAL ESTATE:
Rental properties (including property
for sale) $ 6,022 $ 5,985
Accumulated depreciation (2,917) (2,817)
Rental properties - net 3,105 3,168
CASH AND CASH EQUIVALENTS
(including interest bearing deposits
of $254 in 1998 and $1,947 in 1997) 255 2,008
OTHER ASSETS:
Accounts receivable 5 37
Prepaid expenses and deposits 3 1
Deferred organization costs, loan costs
and leasing commissions (net of accumulated
amortization of $370 in 1998 and $359 in 1997) 80 90
Total other assets 88 128
TOTAL $ 3,448 $ 5,304
LIABILITIES AND PARTNERS' EQUITY LIABILITIES:
Notes payable $ 2,421 $ 2,452
Accounts payable 0 0
Other liabilities 68 133
Total liabilities 2,489 2,536
PARTNERS' EQUITY (Deficit)
General Partners 0 0
Limited Partners 959 2,768
TOTAL $ 3,448 $ 5,304
Equity Units Authorized - Limited Partners 37,156 37,156
- General Partners 0 0
Equity Units Outstanding - Limited Partners 37,136 37,136
- General Partners 0 0
The accompanying notes are an integral part of the financial statements.
</TABLE>
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<TABLE>
DP-III
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited) (In thousands except per share amounts)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUE:
Rental $ 151 $ 288 $ 321 $ 557
Interest 4 3 33 9
Total revenue 155 291 354 566
EXPENSE:
Interest 56 151 112 302
Operating 82 82 151 175
Depreciation and amortization 59 79 117 157
General and administrative 58 62 111 107
Total expense 255 374 490 741
NET INCOME (LOSS) - Limited Partners $(100) $ (83) (136) (175)
- General Partners 0 0 0 0
NET INCOME (LOSS) PER PARTNERSHIP UNIT
- Limited Partners (3) (2) (4) (5)
- General Partners 0 0 0 0
The accompanying notes are an integral part of the financial statements.
</TABLE>
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<TABLE>
LDP-III
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND
THE YEAR ENDED DECEMBER 31, 1997
(Unaudited) (Dollars in thousands)
<CAPTION>
..LIMITED PARTNERS..
NUMBER OF GENERAL TOTAL
PARTNERSHIP PARTNER PARTNERS'
UNITS AMOUNT AMOUNT EQUITY
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 37,136 $ (70) $ 0 $ (70)
Income - 1997 2,838 2,838
BALANCE, DECEMBER 31, 1997 37,136 2,768 0 2,768
Net loss (136) (136)
Distribution (1,671) (1,671)
BALANCE, JUNE 30, 1998 37,136 $ (959) $ 0 $ (959)
The accompanying notes are an integral part of the financial statements.
</TABLE>
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<TABLE>
LDP-III
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited) (In thousands)
<CAPTION>
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (136) $ (175)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation 117 135
Change in operating assets and liabilities:
Decrease in accounts receivable 32 7
Increase in prepaid expenses and deposits (2) (2)
Increase in accounts payable 0 20
Decrease in other liabilities (18) (69)
Net cash used in operating activities (7) (84)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in short term investments 0 99
Capital expenditures and construction (37) (22)
(Increase )decrease in deferred expenses (6) (51)
Net cash provided by (used in) investing activities (43) 26
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (31) (23)
Net (distributions) contributions (1,672) 0
Net cash used in financing activities (1,703) (23)
Decrease in cash and cash equivalents (1,747) (81)
Cash and cash equivalents at beginning
of period 2,008 85
Cash and cash equivalents at end of period $ 255 $ 4
The accompanying notes are an integral part of the financial
statements.
</TABLE>
<PAGE>
LDP-III
FINANCIAL NOTES
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements should be
read in conjunction with the Partnership's 1997 Annual Report. These
consolidated statements have been prepared in accordance with the
instructions to the Securities and Exchange Commission Form 10-Q and do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of the general partner, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation
have been included. The consolidated results of operations for the
six months ended June 30, 1998 and 1997, are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1998.
Organization - LDP-III (the "Partnership") is a limited partnership
organized under the laws of the state of California for the purpose of
acquiring, operating, holding for investment, and ultimately selling
income producing real estate. Landsing Partners-III (the "General
Partner") is a California General Partnership whose partners are
Landsing Equities Corporation and Partners '84. LDP-III was formed
on August 30, 1983, and shall continue until December 31, 2033,
unless sooner terminated. The Partnership commenced operations on
December 9, 1983, with the acquisition of the first property.
The Partnership owns one building located in Idaho, which is a
commercial office building with numerous tenants.
Investment in Subsidiary - On December 3, 1992 the Partnership
transferred two of its properties, the 533 Cabot Building and the
391 Forbes Building to its wholly owned subsidiary, LDP-III Realty
Service Corporation, which filed bankruptcy under Chapter 11 of the
Federal Bankruptcy Code. During 1993, the U.S. Bankruptcy case was
dismissed and the 533 Cabot Building was disposed of. In 1996,
391 Forbes Building was sold and the subsidiary dissolved. For
financial reporting purposes the Partnership consolidated the
operation of the subsidiary with that of the Partnership. All
significant intercompany transactions and balances have been
eliminated.
Rental Properties - Rental properties are stated at the lower of
cost or recoverable value. Depreciation is computed by the straight-
line method over estimated useful lives ranging from five to forty
years. Tenant improvements are amortized over the lives of the
related tenant leases which range from one to ten years. Major
additions are capitalized at cost, while maintenance and repairs
which do not improve or extend the life of the respective assets
are expensed currently. When assets are retired or otherwise
disposed of, the costs and related accumulated depreciation are
removed from the accounts, and any gain or loss on disposal is
included in the results of operations.
Loan Costs and Leasing Commissions - Amounts paid to obtain loans are
deferred and amortized over the lives of the related notes payable,
which range from four to ten years. Leasing commissions are amortized
over the lives of the tenant leases which range from one to ten years.
<PAGE>
Cash and Cash Equivalents - The Partnership considers all highly
liquid investments with a maturity of three months or less from the
date of purchase to be cash equivalents.
Short-Term Investments - The Partnership invests in short-term
federally insured certificates of deposits which mature on a date in
excess of three months from the date of purchase. The cost of these
investments approximates market value.
Income Taxes - No provision for Federal or state income taxes has
been made in the financial statements because these taxes are the
obligation of the partners.
Net Loss Per Partnership Unit - Net loss per Partnership unit is
based on weighted average units outstanding after giving effect to
net income (loss) allocated to the General Partner.
Concentrations of Credit Risk - The Partnership's financial
instruments that are exposed to concentrations of credit risk
consist primarily of its cash and cash equivalents. The
Partnership's cash and cash equivalents are maintained in various
accounts in FDIC insured institutions. This investment policy limits
the Partnership's exposure to concentrations of credit risks.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Impairment of Long-Lived Assets - The Partnership adopted Statement
of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be
Disposed Of" during 1996. SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles to be held and used or
disposed of by an entity and be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. During 1997 and 1996, the
Partnership determined that no impairment loss need be recognized
for applicable assets of continuing operations.
Accounting Pronouncements - In June 1996, the Financial Accounting
Standards Board issued Statement No. 125 Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities.
This Statement is effective for transactions occurring after
December 31, 1996. However, transactions such as securities
lending, repurchase agreements, dollar rolls, and similar secured
financing arrangements are not subject to the provisions of SFAS No.
125 until January 1, 1998. The standard provides that, following a
transfer of financial assets, an entity is to recognize the financial
and servicing assets it controls and the liabilities it has incurred,
derecognize financial assets when control has been surrendered and
derecognize liabilities when extinguished. The adoption of SFAS No.
125 had no impact on the Partnership's financial statements. The
impact of the delayed provisions is also not expected to be material.
<PAGE>
In June 1997, the FASB issued Statement No. 130 Reporting
Comprehensive Income (SFAS No. 130) and Statement No. 131,
Disclosures about Segments of an Enterprise and Related Information
(SFAS No. 131) Each of the new statements is effective for periods
beginning after December 15, 1997, and requires that certain
additional information be reported in the financial statements and
related notes. The Partnership will adopt these SFAS in 1998 but
does not expect an impact on its 1998 financial statements.
Year 2000 - The Partnership is aware of the Year 2000 conversion
issue. It is Management's assertion that the current accounting
system utilized by the Partnership has the capability to accommodate
the Year 2000 issue.
Adequate Capital Resources - The General Partner believes that
despite the fact the Partnership has continued to operate at a net
loss before gain from the sale of properties, the Partnership has
adequate capital resources to continue operations. Operating results
at Jefferson Place in Idaho, the only remaining property, indicate
the property is operating at a positive cash flow position. The
California property, 1201 Cadillac, was sold for profit in December
1997. Proceeds of the sale increased cash reserves and allowed the
Partnership to make a cash distribution to limited partners in March
1998.
The General Partner believes that due to the disposition of certain
properties and the stability of the remaining property in the
portfolio, that operations will generate positive cash flow.
In the event the Partnership must liquidate its assets, management
believes the costs of the assets will be recovered and excess funds
would be available after satisfaction of all liabilities.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
LDP-III is a California limited partnership formed in August 1983.
The Partnership's business consists of a single segment -- equity
investments in leveraged income-producing real estate.
The Partnership's current portfolio consists of fee title ownership
of one property. The Partnership's property investment is:
Jefferson Place Office Building, Boise. Jefferson Place has been
placed on the market for sale.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998, the Partnership's consolidated cash and cash
equivalents balance totaled $255,000. Cash not required for current
operations is placed in federally insured financial instruments and
money market funds which can be liquidated as needed.
The Partnership has invested $99,000 in short-term federally insured
certificates of deposit which mature on a date less than 90 days or
3 months from the date of purchase. Due to this characteristic,
these deposits are classified as "cash equivalents."
During the first half of 1998, the Partnership experienced a net
decrease in cash and cash equivalents of $1,747,000. As of June
30, 1998, cash and cash equivalents totaled $255,000 versus a
balance of $2,008,000 December 31, 1997.
Management believes the cash flow from operations of the remaining
property, Jefferson Place, will be sufficient to cover the
operating costs of the Partnership.
In March, 1998, the Partnership paid a distribution of $45 per unit
to unit holders of record on February 28, 1998.
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RESULTS OF OPERATIONS
The following represents the operations of the property held
continuously during the first six months of 1998 and 1997:
<CAPTION>
1998 1997 % Change
<S> <C> <C> <C>
Rental Revenue $ 322 $ 316 + 2%
Operating Expense 151 166 - 9%
Net Operating Income 171 150 +14%
Interest Expense 112 114 - 2%
</TABLE>
Overall, revenues increased for the six months ended June 30, 1998
relative to the same period in 1997. The increase in commercial
properties was due to higher occupancy and normal increases in
current lease amounts due.
The Jefferson Place Office Building is currently 96% occupied.
Property operating expenses decreased 9% for the six months ended
June 30, 1998 relative to the same period in 1997.
The Partnership general and administrative expense increased $4,000
in 1998 relative to the same period in 1997.
INFLATION
The Partnership's rental revenues in certain overbuilt real estate
markets, including Boise and the San Francisco Bay Area, have not
followed the overall inflationary trends of the economy. In the
future, the General Partner believes market rate rents in those areas
will more closely follow or exceed inflation. Operating costs for
properties in most of the Partnership's markets have continued to
follow inflationary trends. It is not expected that the Partnership
will be materially impacted by inflationary forces in the near term.
<PAGE>
PART II. OTHER INFORMATION
All items in Part II have been omitted since they are inapplicable
or the answer is negative.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
LDP-III
Date: August 15, 1998 /s/ Gary K. Barr
Gary K. Barr, President
Landsing Equities Corporation
Managing Partner of the General Partner
Landsing Partners-III
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 255
<SECURITIES> 0
<RECEIVABLES> 5
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 83
<PP&E> 6,022
<DEPRECIATION> (2,917)
<TOTAL-ASSETS> 3,448
<CURRENT-LIABILITIES> 68
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 959
<TOTAL-LIABILITY-AND-EQUITY> 3,448
<SALES> 0
<TOTAL-REVENUES> 354
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 378
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 112
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (136)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
