<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [Fee Required]
For the fiscal year ended December 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [No Fee Required]
For the transition period from ................to...............
Commission file number 0-15699
WINDSOR PARK PROPERTIES 3, A CALIFORNIA LIMITED PARTNERSHIP
-----------------------------------------------------------
(Exact name of small business issuer in its charter)
California 33-0115651
- ------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
120 W. Grand Avenue, Suite 202, Escondido, California 92025
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (619) 746-2411
Securities registered under Section
12(b) of the Exchange Act: None
Securities registered under Section
12(g)] of the Exchange Act: Units of Limited Partnership Interest
-------------------------------------
(Title of Class)
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 [ ]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $1,557,800
DOCUMENTS INCORPORATED BY REFERENCE: None
1
<PAGE>
TABLE OF CONTENTS
PART I
------
Page
----
Item 1. Description of Business 3
Item 2. Description of Properties 5
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
-------
Item 5. Market for the Partnership's Units and Related Security
Holder Matters 7
Item 6. Management's Discussion and Analysis 7
Item 7. Financial Statements 10
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 23
PART III
--------
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a) of
The Exchange Act 23
Item 10. Executive Compensation 24
Item 11. Security Ownership of Certain Beneficial Owners
and Management 24
Item 12. Certain Relationships and Related Transactions 24
Item 13. Exhibits and Reports on Form 8-K 25
SIGNATURES 26
2
<PAGE>
PART I
------
Item 1. DESCRIPTION OF BUSINESS
-----------------------
Business Development
- --------------------
Windsor Park Properties 3, a California Limited Partnership (the Partnership),
was formed in August 1985 pursuant to the provisions of the California Uniform
Limited Partnership Act. The General Partners of the Partnership are The Windsor
Corporation, a California corporation, and John A. Coseo, Jr., chief executive
officer, president and principal stockholder of The Windsor Corporation. The
Partnership term is set to expire in December 1999; however, the Partnership may
either be dissolved earlier or extended under certain circumstances. The
Partnership may be extended at the recommendation of the General Partners with
approval of a majority of the Limited Partners.
The Partnership was organized to acquire and hold existing manufactured home
communities for investment. Its principal investment objectives are to provide
to its Limited Partners: (i) distributions of cash from operations, (ii)
preservation, protection and eventual return of the Limited Partners'
investment, and (iii) realization of appreciation in the value of the properties
acquired.
The Partnership was funded through a public offering of 200,000 limited
partnership units (Units). All Units were sold for gross proceeds aggregating
$20,000,000. In addition, the General Partners initially purchased 1,000 Units
for $100,000. The offering commenced in October 1985 and terminated in September
1986. The net proceeds from the offering were originally expended for the
acquisition of undivided interests in 10 fully-developed properties located in
Oregon, Florida, Indiana, Idaho, South Carolina, Iowa, Tennessee, and Wyoming.
The Partnership paid all cash for these properties.
In August 1993, the Partnership sold its interests in four manufactured home
communities for net proceeds of $11,806,300.
In May 1995, through a proxy vote of the limited partners, an amendment to the
Agreement of Limited Partnership was approved permitting the financing of
currently owned manufactured home communities and the reinvestment of financing
proceeds into newly acquired manufactured home communities to be purchased with
permanent mortgage financing. Overall Partnership mortgage financing will not
exceed 55% of the value of existing and newly acquired properties.
Subsequent to the approval of the financing and reinvestment proposal discussed
above, the Partnership obtained two loans collateralized by interests in
currently owned manufactured home communities. The proceeds from these loans
were used as partial consideration to purchase three additional manufactured
home communities. The remaining consideration was obtained from permanent
mortgage financing.
In September 1995, the Partnership and an affiliated limited partnership jointly
obtained a $1,200,000 loan collateralized by the Harmony Ranch manufactured home
community, a jointly owned property. The Partnership's share of this loan is
$300,000. In January 1996, the Partnership obtained a $1,800,000 loan
collateralized by the Pondarosa, Little Eagle and Shady Hills manufactured home
communities.
In January 1996, the Partnership purchased the Trailmont manufactured home
community located in Nashville, Tennessee. The Partnership's total cost of the
property was $2,114,500. The Partnership obtained a $1,050,000 loan,
collateralized by the community, in connection with the purchase. In December
1996, after achieving certain net operating income levels, the Partnership
received
3
<PAGE>
$120,400 of additional loan proceeds.
In February 1997, the Partnership purchased a 29% interest in the Apache East
Estates and Denali Park Estates manufactured home communities located in
Phoenix, Arizona. The remaining interests in the communities were purchased by
affiliated entities. The Partnership's cost of its equity interest in the
communities was $667,000. In connection with the purchase, the joint venture
obtained a loan for $3,040,000, collateralized by the communities. The
Partnership's share of this loan is $881,600.
The Partnership owns interests in the following manufactured home communities at
February 28, 1997:
<TABLE>
<CAPTION>
Date
Name of Property Ownership % Acquired Location
- ---------------- ----------- -------- --------
<S> <C> <C> <C>
Pondarosa 100% March 1986 Indianapolis, Indiana
Little Eagle 100% March 1986 Indianapolis, Indiana
The Pines 100% August 1986 Charleston, South Carolina
Shady Hills 100% September 1986 Nashville, Tennessee
Harmony Ranch 25% December 1986 Thonotosassa, Florida
Big Country Estates 40% December 1986 Cheyenne, Wyoming
Trailmont 100% January 1996 Nashville, Tennessee
Apache East 29% February 1997 Phoenix, Arizona
Denali Park 29% February 1997 Phoenix, Arizona
</TABLE>
No further investment property acquisitions are planned by the General Partners.
The overall occupancy of the seven properties owned by the Partnership at
December 31, 1996 was approximately 90%. The General Partners continue to
maintain the properties in good condition and promote them to improve occupancy.
There are no current plans to dispose of any of the properties.
Business of Issuer
- ------------------
The Partnership is currently in the business of managing, holding for
investment, and eventually selling the existing manufactured home communities.
Competitors of the Partnership include other public and private limited
partnerships, individuals, corporations, and other entities engaged in real
estate investment activities. Competition for such properties varies with
changes in the supply or demand for similar or competing properties in a given
area, changes in interest rates and the availability of mortgage funds, and
changes in tax, real estate, environmental, and zoning laws.
Partnership profitability depends in part on maximizing occupancy and rental
rates in its manufactured home communities. Rents and occupancy rates are
affected by both changes in general economic conditions and changes in local
conditions such as levels of employment, supply of other comparable units or
competitive housing alternatives, zoning laws, and the availability and cost of
energy and transportation.
All of the Partnership's properties are located in or near urban areas.
Accordingly, they compete for rentals not only with other manufactured home
communities, but with apartments and any other form of low cost housing that
might exist.
The Partnership's profitability also depends on the minimization of both
property and partnership administration expenses. Expenses are affected by
changes in general economic trends and changes in local conditions, such as
prevailing wages, utility rates, insurance costs, and real estate taxation
4
<PAGE>
practices.
The Partnership has no employees. Partnership administrative services are
provided by The Windsor Corporation, which is reimbursed for costs incurred on
behalf of the Partnership. An independent property management company employs
all of the properties' on-site personnel and is reimbursed by the Partnership
for all such costs.
Item 2. DESCRIPTION OF PROPERTIES
-------------------------
The Partnership owns interests in nine properties at February 28, 1997. The
Partnership operates the properties as manufactured home communities, renting
space to manufactured home tenants on a month-to-month basis. The properties
compete for rentals with other manufactured home communities and apartments in
their local markets. All properties are encumbered, except for The Pines and
Big Country. It is the General Partners' opinion that the properties are in
good condition and are adequately insured.
<TABLE>
<CAPTION>
Little The Pines
Pondarosa Eagle --------- Shady Hills
--------- ----- Charleston, -----------
Indianapolis, Indianapolis, South Nashville,
Location Indiana Indiana Carolina Tennessee
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Percentage of Ownership 100% 100% 100% 100%
Date Acquired 3/86 3/86 8/86 9/86
Acreage 18 14 24 25
Number of
Spaces 148 96 204 249
Monthly Rents (1) $ 202 $ 183 $ 124 $ 142
Occupancy Level:
December 31,
1996 96% 96% 76% 86%
Real Estate Taxes $ 13,500 $ 7,700 $ 6,800 $ 30,500
Federal Tax
Basis (4) $ 834,900 $536,100 $1,152,300 $2,024,200
Mortgage
Information:
Balance payable $1,800,000 (2) - (2)
Interest rate 8.97% (2) - (2)
Amortization
period - (2) - (2)
Maturity date 1/03 (2) - (2)
Balance due at
maturity $1,800,000 (2) - (2)
</TABLE>
5
<PAGE>
Item 2. DESCRIPTION OF PROPERTIES (continued)
-------------------------
<TABLE>
<CAPTION>
Big
Harmony Country Apache Denali
Ranch Estates Trailmont East Park
----- ------- --------- ---- ----
Thonotosassas, Cheyenne, Nashville, Phoenix, Phoenix,
Location Florida Wyoming Tennessee Arizona Arizona
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Percentage of
Ownership 25% 40% 100% 29% 29%
Date Acquired 12/86 12/86 1/96 2/97 2/97
Acreage 29 28 30 16 33
Number of
Spaces 193 255 131 123 162
Monthly Rents (1) $ 217 $ 179 $ 195 $ 220 $ 202
Occupancy Level:
December 31,
1996 91% 92% 99% 77% 68%
Real Estate Taxes $ 38,000 $ 11,400 $ 9,800 $ 16,300 $ 23,200
Federal Tax
Basis (4) $ 471,300 $853,000 $2,026,800 $ 645,300 $848,300
Mortgage
Information:
Balance payable $1,200,000 - $1,170,400 $3,040,000 (3)
Interest rate 8.87% - 8.41% 8.38% (3)
Amortization - - - 24 years (3)
period
Maturity date 9/02 - 1/03 3/06 (3)
Balance due at
maturity $1,200,000 - $1,170,400 $2,583,200 (3)
</TABLE>
(1) Average rental rates in effect on December 31, 1996.
(2) Same mortgage note payable as Pondarosa.
(3) Same mortgage note payable as Apache East
(4) For income tax purposes, the properties and their components are
depreciated using both straight-line and accelerated methods over useful
lives ranging from 3 to 40 years.
Item 3. LEGAL PROCEEDINGS
-----------------
There are no pending legal proceedings, other than ordinary routine litigati
incidental to the business, to which the Partnership is a party or of which any
of its properties is the subject.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
There were no matters submitted to security holders for a vote
during the fourth quarter of the fiscal year covered by this
report.
6
<PAGE>
PART II
-------
Item 5. MARKET FOR THE PARTNERSHIP'S UNITS AND RELATED SECURITY HOLDER MATTERS
----------------------------------------------------------------------
A public market for the Partnership's units does not exist and is not likely to
develop. As of December 31, 1996, there were approximately 3,100 persons
holding an aggregate of 196,425 Units.
Cash distributions paid to the limited partners since December 31, 1994 are as
follows:
<TABLE>
<CAPTION>
Per $1,000
Originally
Date Paid Amount (1) Invested (2)
- --------- ---------- ------------
<S> <C> <C>
February 1997 $140,000 $6.96
August 1996 $140,000 $6.96
February 1996 $140,000 $6.96
August 1995 $ 70,000 $3.48
May 1995 $ 70,000 $3.48
February 1995 $ 70,000 $3.48
</TABLE>
(1) Amounts exclude General Partner participation.
(2) Computed based on $20,100,000 original investment.
Cash distributions paid to the General Partners since December 31, 1994 were
$25,700. The General Partners expect that the Partnership will make cash
distributions on a semi-annual basis in the future.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
a) Liquidity and Capital Resources
-------------------------------
The Partnership's primary sources of cash during the years ended December 31,
1996 and 1995 were from the operations of its investment properties, cash
distributions from joint ventures and proceeds from mortgage notes payable. The
primary uses of cash during the same period were for the purchase of an
investment property and cash distributions to partners.
In May 1995, through a proxy vote of the limited partners, an amendment to the
Agreement of Limited Partnership was approved permitting the financing of
currently owned manufactured home communities and the reinvestment of financing
proceeds into newly acquired manufactured home communities to be purchased with
permanent mortgage financing. Overall Partnership mortgage financing will not
exceed 55% of the value of existing and newly acquired properties.
Subsequent to the approval of the financing and reinvestment proposal discussed
above, the Partnership obtained two loans collateralized by interests in
currently owned manufactured home communities. The proceeds from these loans
were used as partial consideration to purchase three additional manufactured
home communities. The remaining consideration was obtained from permanent
mortgage financing.
In September 1995, the Partnership and an affiliated limited partnership jointly
obtained a $1,200,000 loan collateralized by the Harmony Ranch manufactured home
community, a jointly owned property.
7
<PAGE>
The Partnership's share of this loan is $300,000. The loan, which was originally
payable in monthly interest only installments bearing interest at 90 day LIBOR
plus 2.95%, is due in September 2002. In March 1996, the loan was converted to a
fixed rate loan bearing interest at 8.87%. All other terms remained the same.
The Partnership and the affiliated limited partnership are both contingently
liable for the full amount of the loan.
In January 1996, the Partnership obtained a $1,800,000 loan collateralized by
the Pondarosa, Little Eagle and Shady Hills manufactured home communities. The
loan, which was originally payable in monthly interest only installments bearing
interest at 90 day LIBOR plus 2.95%, is due in January 2003. In March 1996,
the loan was converted to a fixed rate loan bearing interest at 8.97%. All
other terms remained the same.
In January 1996, the Partnership purchased the Trailmont manufactured home
community located in Nashville, Tennessee. The Partnership's total cost of the
property was $2,114,500. In connection with the purchase, the Partnership
obtained a $1,050,000 loan, collateralized by the community. The loan, which is
due in January 2003, bears interest at a fixed rate of 8.41% and is payable in
monthly interest only installments. In December 1996, after achieving certain
net operating income levels, the Partnership received $120,400 of additional
loan proceeds, at the same terms.
At December 31, 1996, the Partnership's total mortgage debt, including its
proportionate share of joint venture debt, was $3,270,400, consisting entirely
of fixed rate debt. The average rate of interest on the fixed rate debt was
8.8% at December 31, 1996.
In February 1997, the Partnership purchased a 29% interest in the Apache East
and Denali Park manufactured home communities located in Phoenix, Arizona. The
remaining interests in the communities were purchased by affiliated entities.
The Partnership's cost of its equity interest in the properties was $667,000. In
connection with the purchase, the joint venture obtained a mortgage loan of
$3,040,000, collateralized by the communities. The Partnership's share of the
loan is $881,600. The loan initially bears interest at $8.375%. In March 2000
and March 2003, the interest rate adjusts to the yield on the 3 year Treasury
Note plus 2.2%. The loan is due in March 2006. In connection with the purchase,
the Partnership provided a $253,000 loan to an affiliated entity. The loan bears
interest at prime plus 2% and is due no later than July 1997.
The Partnership owns interests in the following manufactured home communities at
February 28, 1997:
<TABLE>
<CAPTION>
Date
Name of Property Ownership % Acquired Location
- ---------------- ----------- -------- --------
<S> <C> <C> <C>
Pondarosa 100% March 1986 Indianapolis, Indiana
Little Eagle 100% March 1986 Indianapolis, Indiana
The Pines 100% August 1986 Charleston, South Carolina
Shady Hills 100% September 1986 Nashville, Tennessee
Harmony Ranch 25% December 1986 Thonotosassa, Florida
Big Country Estates 40% December 1986 Cheyenne, Wyoming
Trailmont 100% January 1996 Nashville, Tennessee
Apache East 29% February 1997 Phoenix, Arizona
Denali Park 29% February 1997 Phoenix, Arizona
</TABLE>
No further investment property acquisitions are planned by the General Partners.
8
<PAGE>
As discussed in Note 11 to the financial statements, pursuant to the Partnership
Agreement, net profits from the sale of Partnership properties should be
allocated first to each partner with a negative capital account balance in an
amount equal to the amount of the negative capital account of each partner.
Subsequent to the issuance of the 1995 financial statements, the general
partners determined that the financial statements did not properly reflect the
income allocation provisions of the Partnership Agreement. Accordingly,
partners' equity at December 31, 1994, has been restated from the amounts
previously reported to properly allocate net profits from the sale of
Partnership properties among the partners in accordance with the provisions of
the Partnership Agreement.
The future sources of cash for the Partnership will be provided from property
operations, cash reserves and ultimately from the sale of property. The future
uses of cash will be for Partnership administration, capital expenditures and
distributions to partners. The General Partners believe that the future sources
of cash are sufficient to meet the working capital requirements of the
Partnership for the foreseeable future.
b) Results of Operations
---------------------
The results of operations for the years ended December 31, 1996 and 1995 are not
directly comparable due to the purchase of the Trailmont community in January
1996. The Partnership realized net income of $59,100 and $176,100 for the years
ended December 31, 1996 and 1995, respectively. Net income per limited
partnership unit was $0.30 in 1996 and $0.87 in 1995.
As a result of the investment property purchase described above, all major
revenue and expense categories increased in 1996, specifically rent and
utilities revenues, property operating costs, and depreciation and amortization.
The overall occupancy of the Partnership's five wholly-owned communities was 89%
at December 31, 1996, compared to 76% for four wholly-owned properties at
December 31,1995. The Partnership implemented $5 per month rent increases at
both the Pondarosa and Little Eagle communities effective January 1996.
Equity in earnings of joint ventures, which reflects the Partnership's share of
the net income of the Big Country Estates and Harmony Ranch manufactured home
communities, was $49,700 and $29,900 for the years ended December 31, 1996 and
1995, respectively. The overall occupancy of the two joint venture properties
increased from 89% at December 31, 1995 to 92% at December 31, 1996. In
addition, recent rent increases include $12 per month at Big Country effective
February 1996, and $10 per month at Harmony Ranch in both October 1996 and 1995.
Offsetting the occupancy gains and rent increases was increased interest expense
at Harmony Ranch as a result of the $1.2 million loan obtained in September
1995, as discussed previously.
Interest income increased from $15,300 in 1995 to $50,400 in 1996 due mainly to
higher cash balances maintained by the Partnership.
Interest expense of $256,600 in 1996 was incurred on the two loans obtained by
the Partnership in January 1996, as discussed previously. No interest expense
was incurred in 1995.
General and administrative expense decreased from $119,000 in 1995 to $108,300
in 1996, due mainly to proxy solicitation costs incurred in 1995, but not in
1996.
9
<PAGE>
Item 7. FINANCIAL STATEMENTS
--------------------
The following financial statements are filed as a part of this report:
Page
----
Independent Auditors' Report 11
Balance Sheet at December 31, 1996 12
Statements of Operations for the years ended
December 31, 1996 and 1995 13
Statements of Partners' Equity for the years ended
December 31, 1996 and 1995 14
Statements of Cash Flows for the years ended
December 31, 1996 and 1995 15
Notes to Financial Statements 16
10
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Windsor Park Properties 3
(A California Limited Partnership)
Escondido, California
We have audited the accompanying balance sheet of Windsor Park Properties 3 (the
Partnership) as of December 31, 1996 and the related statements of operations,
partners' equity and cash flows for each of the two years in the period ended
December 31, 1996. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Windsor Park Properties 3 as of December 31,
1996 and the results of its operations and its cash flows for each of the two
years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
As discussed in Note 11, partners' equity at December 31, 1994 has been
restated.
Deloitte & Touche LLP
Costa Mesa, California
February 28, 1997
11
<PAGE>
WINDSOR PARK PROPERTIES 3
-------------------------
(A California Limited Partnership)
BALANCE SHEET
-------------
<TABLE>
<CAPTION>
December 31, 1996
-----------------
ASSETS
- ------
<S> <C>
Property held for investment, net $3,940,700
Investments in joint ventures 858,000
Cash and cash equivalents 1,191,800
Deferred financing costs 129,800
Other assets 183,500
----------
$6,303,800
==========
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Liabilities:
Mortgage notes payable $2,970,400
Accounts payable 33,800
Accrued expenses 110,200
Tenant deposits and other liabilities 63,200
----------
3,177,600
----------
Partners' equity:
Limited partners 3,151,400
General partners (25,200)
----------
3,126,200
----------
$6,303,800
==========
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
WINDSOR PARK PROPERTIES 3
-------------------------
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------
1996 1995
------------ ---------------
<S> <C> <C>
REVENUES
- --------
Rent and utilities $1,421,700 $1,007,300
Equity in earnings of joint ventures 49,700 29,900
Interest 50,400 15,300
Other 36,000 38,400
---------- ----------
1,557,800 1,090,900
---------- ----------
COSTS AND EXPENSES
- ------------------
Property operating 929,400 684,200
Interest 256,600
Depreciation and amortization 204,400 111,600
General and administrative:
Related parties 69,700 70,200
Other 38,600 48,800
---------- ----------
1,498,700 914,800
---------- ----------
Net income $ 59,100 $ 176,100
========== ==========
Net income - general partners $ 600 $ 1,800
========== ==========
Net income - limited partners $ 58,500 $ 174,300
========== ==========
Net income per limited partnership unit $ 0.30 $ 0.87
========== ==========
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
WINDSOR PARK PROPERTIES 3
-------------------------
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
----------------------------------------------
<TABLE>
<CAPTION>
General Partners Limited Partners Total
---------------- ---------------- -----------
<S> <C> <C> <C>
Balance at December 31, 1994
- as previously reported $ (536,200) $4,009,300 $3,473,100
Reallocation of partners' equity
(Note 11) 534,300 (534,300)
---------- ---------- ----------
Balance at December 31, 1994,
- as restated (1,900) 3,475,000 3,473,100
Cash distributions (11,000) (210,000) (221,000)
Net income 1,800 174,300 176,100
Repurchase of limited
partnership units (19,400) (19,400)
---------- ---------- ----------
Balance at December 31, 1995 (11,100) 3,419,900 3,408,800
Cash distributions (14,700) (280,000) (294,700)
Net income 600 58,500 59,100
Repurchase of limited
partnership units (47,000) (47,000)
---------- ---------- ----------
Balance at December 31, 1996 $ (25,200) $3,151,400 $3,126,200
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
WINDSOR PARK PROPERTIES 3
-------------------------
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
For The Year Ended December 31,
-------------------------------
1996 1995
------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 59,100 $ 176,100
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 204,400 111,600
Equity in earnings of joint ventures (49,700) (29,900)
Joint ventures' cash distributions 49,700 29,900
Loss (gain) on sale of property held for
investment 3,400 (400)
Amortization of deferred financing costs 19,000
Changes in operating assets and liabilities:
Other assets (86,500) (72,700)
Accounts payable (14,500) 9,700
Accrued expenses 21,200 29,900
Tenant deposits and other liabilities 17,700 (11,600)
---------- ---------
Net cash provided by operating activities 223,800 242,600
---------- ---------
Cash flows from investing activities:
Increase in property held for investment (135,100) (98,300)
Joint ventures' cash distributions 79,500 334,900
Proceeds from sale of property held for
investment 11,800 3,900
---------- ---------
Net cash (used in) provided by investing activities (43,800) 240,500
---------- ---------
Cash flows from financing activities:
Proceeds from mortgage notes payable 898,900
Cash distributions (294,700) (221,000)
Repurchase of limited partnership units (47,000) (19,400)
Payment of deferred financing costs (48,100)
---------- ---------
Net provided by (used in) financing activities 509,100 (240,400)
---------- ---------
Net increase in cash and cash equivalents 689,100 242,700
Cash and cash equivalents at beginning of year 502,700 260,000
---------- ---------
Cash and cash equivalents at end of year $1,191,800 $ 502,700
========== =========
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
WINDSOR PARK PROPERTIES 3
-------------------------
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE 1. THE PARTNERSHIP AND A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------------------------------
The Partnership
- ---------------
Windsor Park Properties 3, A California Limited Partnership (the Partnership),
was formed in August 1985 for the purpose of acquiring and holding existing
manufactured home communities for investment. The General Partners of the
Partnership are The Windsor Corporation, a California corporation, and John A.
Coseo, Jr., chief executive officer, president and principal stockholder of The
Windsor Corporation (TWC).
The Partnership was funded through a public offering of 200,000 limited
partnership units at $100 per unit which commenced in October 1985 and
terminated in September 1986. The Partnership term is set to expire in December
1999; however, the Partnership may either be dissolved earlier or extended under
certain circumstances. The Partnership may be extended at the recommendation of
the General Partners with approval of a majority of the Limited Partners.
The following is a summary of the Partnership's significant accounting policies:
Property Held For Investment
- ----------------------------
Property held for investment is recorded at the lower of cost or estimated net
realizable value after disposition costs and depreciated over various estimated
useful lives (buildings and improvements - 5 to 19 years; fixtures and
equipment - 3 to 5 years) using the straight-line method. When assets are sold
or otherwise disposed of, the cost and related accumulated depreciation are
removed from the accounts, and any gain or loss is included in net income.
Repairs and maintenance are charged to operations as incurred.
In 1996, the Partnership adopted Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of". Accordingly, property held for investment is
reviewed for impairment annually or whenever events or changes in circumstances
indicate that the carrying values of the properties may not be recoverable.
Impairment is measured as the difference between the carrying value of the
property and its fair value. The adoption of SFAS No. 121 did not have an effect
on the 1996 financial statements of the Partnership.
Investments in Joint Ventures
- -----------------------------
The investments in joint ventures are accounted for by the equity method of
accounting as the Partnership does not exercise control over these ventures.
Financing Costs
- ---------------
Financing costs are amortized to interest expense over the life of the note
using the level yield method.
Income Taxes
- ------------
Under provisions of the Internal Revenue Code and the California Revenue and
Taxation Code, partnerships are generally not subject to income taxes. The tax
effect of any income or loss accrues
16
<PAGE>
to the individual partners.
Net Income per Limited Partnership Unit
- ---------------------------------------
Net income per limited partnership unit is calculated based on the weighted
average number of limited partnership units outstanding during the year and the
net income allocated to the Limited Partners. The weighted average number of
limited partnership units outstanding during the years ended December 31, 1996
and 1995 was 197,276 and 200,069, respectively.
Statements of Cash Flows
- ------------------------
For purposes of the statements of cash flows, the Partnership considers all
highly-liquid investments purchased with an original maturity of three months
or less to be cash equivalents.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2. PARTNERSHIP AGREEMENT
---------------------
In accordance with the Partnership Agreement, the maximum liability of the
Limited Partners is the amount of their capital contributions. The number of
limited partnership units outstanding at December 31, 1996 and 1995 was 196,425
and 199,224, respectively, which represented capital contributions of
$19,642,500 and $19,922,400, respectively. During the years ended December
31, 1996 and 1995, the Partnership repurchased 2,799 units and 1,046 units,
respectively, for $47,000 and $19,400, respectively. The General Partners owned
1,010 units at both December 31, 1996 and 1995.
The General Partners are entitled to receive from the Partnership various fees
and compensation which are summarized as follows:
Operational Stage
- -----------------
The profits and losses of the Partnership during the operational stage are
allocated 99% to the Limited Partners and 1% to the General Partners. Cash
distributions from operations are allocated 95% to the Limited Partners and 5%
to the General Partners.
The Partnership reimburses TWC for certain direct expenses, and employee,
executive and administrative time incurred on the Partnership's behalf. The
Partnership was charged $81,500 and $80,100 for such costs during the years
ended December 31, 1996 and 1995, respectively. These costs are included in
property operating and general and administrative expenses in the accompanying
statements of operations.
17
<PAGE>
Liquidation Stage
- -----------------
The General Partners receive 1% of cash distributions from the sale or financing
of Partnership properties. This participation increases to 15% after the
Limited Partners have received their original invested capital plus a 9%
cumulative, non-compounded, annual return.
The General Partners generally receive 1% of profits and losses from the sale of
Partnership properties. However, if applicable, profits on sale will first be
allocated 100% to the General Partners to the extent of their negative capital
account.
During the years ended December 31, 1996 and 1995, the General Partners received
cash distributions of $14,700 and $11,000, respectively.
NOTE 3. PROPERTY HELD FOR INVESTMENT
----------------------------
In January 1996, the Partnership purchased the Trailmont manufactured home
community located in Nashville, Tennessee. The community is situated on 30
acres of land and contains 131 manufactured home sites. The Partnership's cost
of the property was $2,114,500.
Property held for investment consists of five manufactured home communities
summarized as follows:
<TABLE>
<CAPTION>
Name of Property Date Acquired Location
- ---------------- ------------- --------
<S> <C> <C>
Pondarosa March 31, 1986 Indianapolis, Indiana
Little Eagle March 31, 1986 Indianapolis, Indiana
The Pines August 1, 1986 Charleston, South Carolina
Shady Hills September 30, 1986 Nashville, Tennessee
Trailmont January 17, 1996 Nashville, Tennessee
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
Land $ 1,192,600
Buildings and improvements 5,047,000
Fixtures and equipment 106,200
-----------
6,345,800
Less accumulated depreciation (2,405,100)
-----------
$ 3,940,700
===========
</TABLE>
NOTE 4. INVESTMENTS IN JOINT VENTURES
-----------------------------
The Partnership's investments in joint ventures consist of undivided interests
in two manufactured home communities summarized as follows:
<TABLE>
<CAPTION>
Ownership
Name of Property Percentage Date Acquired Location
- ---------------- ---------- ------------- --------
<S> <C> <C> <C>
Big Country Estates 40% December 1, 1986 Cheyenne, Wyoming
Harmony Ranch 25% December 15, 1986 Thonotosassa, Florida
</TABLE>
18
<PAGE>
The remaining interests in the communities are owned by Windsor Park Properties
4, a California Limited Partnership, which has the same General Partners as the
Partnership.
In September 1995, the Partnership and Windsor Park Properties 4 jointly
obtained a $1,200,000 loan collateralized by the Harmony Ranch community. The
Partnership's share of this loan is $300,000. The loan, which was originally
payable in monthly interest only installments bearing interest at 90-day LIBOR
plus 2.95%, is due in September 2002. In March 1996, the loan was converted to
a fixed rate loan bearing interest at 8.87%. All other terms remain the same.
The Partnership and Windsor Park Properties 4 are contingently liable for the
full amount of the loan.
The combined condensed financial position and results of operations of the joint
ventures follow:
<TABLE>
<CAPTION>
Financial Position December 31, 1996
- ------------------ -----------------
<S> <C>
Property held for investment, net $3,432,100
Cash 43,700
Other assets 100,200
----------
Total assets
$3,576,000
==========
Mortgage note payable $1,200,000
Accounts payable 14,000
Other liabilities 55,400
----------
Total liabilities 1,269,400
Partners' equity 2,306,600
----------
$3,576,000
==========
</TABLE>
<TABLE>
<CAPTION>
For The Year Ended December 31,
-------------------------------
Results of Operations 1996 1995
- --------------------- ----------- ---------
<S> <C> <C>
Property revenues $1,050,700 $932,500
---------- --------
Expenses:
Property operating 541,400 525,000
Depreciation 264,400 266,600
Interest 114,300 43,600
---------- --------
920,100 835,200
---------- --------
Net income $ 130,600 $ 97,300
========== ========
</TABLE>
NOTE 5. MORTGAGE NOTES PAYABLE
----------------------
In January 1996, the Partnership obtained a $1,800,000 loan collateralized by
the Pondarosa, Little Eagle and Shady Hills manufactured home communities. The
loan, which was originally payable in monthly interest only installments bearing
interest at 90-day LIBOR plus 2.95%, is due in January 2003. In March 1996, the
loan was converted to a fixed rate loan bearing interest at 8.97%. All
19
<PAGE>
other terms remain the same.
In January 1996, in connection with the purchase of the Trailmont manufactured
home community, the Partnership obtained a $1,050,000 loan collateralized by the
property. The loan is payable in monthly interest only installments bearing
interest at a fixed rate of 8.41% and is due in January 2003. In December 1996,
after achieving certain net operating income levels, the Partnership obtained
$120,400 of additional loan proceeds at the same terms.
NOTE 6. DISTRIBUTIONS TO LIMITED PARTNERS
---------------------------------
Distributions to limited partners in excess of net income allocated to limited
partners are considered a return of capital. A breakdown of cash distributions
to the Limited Partners for the years ended December 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------
Per Per
Amount Unit Amount Unit
------ ---- ------ ----
<S> <C> <C> <C> <C>
Net income
- Limited Partners $ 58,500 $ 0.30 $174,300 $ 0.87
Return of capital 221,500 1.12 35,700 0.18
-------- ------ -------- ------
$280,000 $ 1.42 $210,000 $ 1.05
======== ====== ======== ======
</TABLE>
NOTE 7. INCOME TAXES
------------
Certain transactions of the Partnership are reported in different periods for
financial and tax reporting purposes. A reconciliation between amounts reported
for financial statement and federal tax return purposes as of December 31, 1996
and 1995 and for the years then ended follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------- ---------------------------
Net
Income Partners' Net Partners'
(Loss) Equity Income Equity
------ -------- ------ ---------
<S> <C> <C> <C> <C>
Per financial statements $ 59,100 $3,126,200 $ 176,100 $3,408,800
Syndication costs 2,203,400 2,203,400
Gain on sale of property
held for investment (21,900) (731,900) (710,000)
Provision for estimated
loss in value of
property held for
investment 2,525,000 2,525,000
Depreciation (59,400) 997,800 (57,200) 1,057,200
Other 8,600 108,100 (6,800) 99,500
-------- ---------- --------- ----------
Per Partnership tax
return $(13,600) $8,228,600 $ 112,100 $8,583,900
======== ========== ========= ==========
</TABLE>
20
<PAGE>
NOTE 8. FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
The carrying amounts of cash and cash equivalents, accounts payable, accrued
expenses and other liabilities approximate fair value because of the short
maturity of the financial instruments. The General Partners believe the
carrying value of the mortgage notes payable approximates fair value based upon
interest rates available for the issuance of debt with similar terms and
maturities.
NOTE 9. SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest (none capitalized) $216,700 $ --
======== =======
</TABLE>
Supplemental schedule of noncash investing and financing activities:
- --------------------------------------------------------------------
In 1996, the Partnership acquired the Trailmont
community. A new note payable was obtained and a
portion of the proceeds from the refinancing of
existing Partnership properties was remitted
directly to the seller, as follows:
<TABLE>
<S> <C>
Total property cost $ 2,114,500
Note payable proceeds, net (1,005,000)
Existing property financing proceeds to seller (1,021,500)
-----------
Cash paid $ 88,000
===========
</TABLE>
NOTE 10. SUBSEQUENT EVENT
----------------
In February 1997, the Partnership purchased a 29% interest in the Apache East
Estates and Denali Park Estates manufactured home communities located in
Phoenix, Arizona. The remaining interests in the communities were purchased by
affiliated entities. The Partnership's cost of its equity interest in the
communities was $667,000. In connection with the purchase, the joint venture
obtained a $3,040,000 loan, collateralized by the communities. The
Partnership's share of this loan is $881,600. The loan initially bears interest
at 8.375%. In March 2000 and March 2003, the interest rate adjusts to the yield
on the 3-year Treasury Note plus 2.2%. The loan is due in March 2006. In
connection with the purchase, the Partnership provided a $253,000 loan to an
affiliated entity. The loan bears interest at prime plus 2% and is due no later
than July 1997.
21
<PAGE>
NOTE 11. RESTATEMENT OF PARTNERS' EQUITY
-------------------------------
Pursuant to the Partnership Agreement, net profits from the sale of Partnership
properties should be allocated first to each partner with a negative capital
account balance in an amount equal to the amount of the negative capital account
of each partner. Subsequent to the issuance of the 1995 financial statements,
the General Partners determined that the financial statements did not properly
reflect the income allocation provisions of the Partnership Agreement.
Accordingly, partners' equity at December 31, 1994 has been restated from the
amounts previously reported to properly allocate net profits from the sale of
Partnership properties among the partners in accordance with the provisions of
the Partnership Agreement. The effect of this restatement on the Partnership's
financial statements is summarized below:
<TABLE>
<CAPTION>
As Previously
Equity Balance Report As Restated
- -------------- ------------- -----------
<S> <C> <C>
General Partners $ (536,200) $ (1,900)
Limited Partners $4,009,300 $3,475,000
</TABLE>
22
<PAGE>
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
There were no disagreements over accounting or financial disclosure with the
independent accountants for the Partnership.
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
--------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
-------------------------------------------------
The original general partners of the Partnership were The Windsor Corporation
(Windsor), and John A. Coseo, Jr. Mr. Coseo, his wife Patricia Ann Coseo and
their children owned a majority of the stock of Windsor.
In July 1994, Windsor merged into Windsor Group, Inc., a majority-owned
subsidiary. In conjunction with the merger, Windsor Group, Inc. changed its
name to The Windsor Corporation (Wincorp). Subsequent to the merger, Mr. Coseo,
his wife Patricia Ann Coseo and their children own a majority of the stock of
Wincorp.
Windsor and Wincorp were incorporated in 1977 and 1992, respectively, to engage
in the real estate syndication business. Since 1979 they have concentrated
solely on the acquisition, management, and sale of fully-developed manufactured
home communities through the investment programs which they sponsor.
The executive officers of Windsor and Wincorp do not receive direct compensation
from the Partnership in these capacities and are only required to spend such
time on the Partnership's affairs as is deemed necessary. Substantial amounts
of these officers' time is expected to be spent on matters unrelated to the
Partnership, particularly after the completion of its offering and acquisition
stages.
The names, ages, and nature of the positions held by the directors and executive
officers of Wincorp follow:
<TABLE>
<CAPTION>
Name Age Office
- ----------------- ----- ------------------------------------------
<S> <C> <C>
John A. Coseo, Jr. 58 Chairman of the Board and Chief Executive
Officer
Patricia A. Coseo 55 Secretary and Director
</TABLE>
A brief background of the directors and executive officers follows.
John A. Coseo, Jr. (58) was the founder of Windsor in 1974 and has been actively
involved in all facets of the manufactured housing business since that time.
From 1979 to the present, Mr. Coseo has acted as general partner or advisor in
the acquisition and management of 56 manufactured home communities throughout
the United States. Mr. Coseo is the Chairman and chief executive officer of
Wincorp. Mr. Coseo is a general partner of seven limited partnerships which
have registered their securities under the Securities and Exchange Act of 1934.
Mr. Coseo is also Chairman, chief executive officer, and a trustee of Wincorp's
first sponsored real estate investment trust, Windsor Real Estate Investment
Trust 8. Mr. Coseo is the husband of Patricia A. Coseo.
23
<PAGE>
Patricia A. Coseo (55) is and has been the Secretary and a Director of Windsor
and Wincorp for the past ten years. She is involved in corporate planning and
development, and is the spouse of John A. Coseo, Jr.
Item 10. EXECUTIVE COMPENSATION
----------------------
The Partnership has not paid and does not propose to pay any remuneration or
retirement benefits to the directors or executive officers of The Windsor
Corporation. Refer to Item 12 (Certain Relationships and Related Transactions)
for cash distributions and expense reimbursements paid to The Windsor
Corporation by the Partnership.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
No person is known by the Partnership to be the beneficial owner of more
than 5% of the limited partnership units.
(b) Security Ownership of Management
The following table presents certain information regarding the number of
units owned, directly or indirectly, by (i) each General Partner and
(ii) all General Partners as a group as of December 31, 1996.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Title of Class Beneficial Owner Beneficial Ownership Class
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Units of Limited
Partnership Interest John A. Coseo, Jr.
A General Partner 10 .005%
Units of Limited The Windsor Corporation
Partnership Interest A General Partner 1,000 .509%
-------------------- ----------
Units of Limited All General Partners
Partnership Interest As a group 1,010 .514%
==================== ==========
</TABLE>
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The following table reflects all compensation accrued or paid to the General
Partners during the years ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
Form of Compensation and Entity Receiving 1996 1995
- ----------------------------------------- ---- ----
<S> <C> <C>
Expense reimbursement - The Windsor Corporation $81,500 $80,100
Cash distributions - The Windsor Corporation $14,700 $11,000
</TABLE>
24
<PAGE>
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits and Index of Exhibits
(3) - Certificate and Agreement of Limited Partnership filed as
Exhibit A to Registration Statement No. 2-99697 and incorporated
herein by reference.
(27) - Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the last quarter
of the period covered by this Form 10-KSB.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on this 26th day of March,
1997
WINDSOR PARK PROPERTIES 3
A California Limited Partnership
By: /s/ John A. Coseo, Jr.
----------------------
John A. Coseo, Jr.
Individual General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John A. Coseo, Jr. General Partner and Chairman of the March 26, 1997
- ---------------------- Board of The Windsor Corporation
JOHN A. COSEO, JR. (Principal Executive Officer of The
Windsor Corporation)
/s/ Patricia A. Coseo Director of The Windsor Corporation March 26, 1997
- ---------------------
PATRICIA A. COSEO
</TABLE>
26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF WINDSOR PARK PROPERTIES 3 AS OF DECEMBER 31, 1996 AND THE RELATED
STATEMENTS OF OPERATIONS, PARTNER'S EQUITY AND CASH FLOWS FOR THE YEAR THEN
ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,191,800
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,345,800
<DEPRECIATION> 2,405,100
<TOTAL-ASSETS> 6,303,800
<CURRENT-LIABILITIES> 0
<BONDS> 2,970,400
0
0
<COMMON> 0
<OTHER-SE> 3,126,200<F1>
<TOTAL-LIABILITY-AND-EQUITY> 6,303,800
<SALES> 0
<TOTAL-REVENUES> 1,557,800
<CGS> 0
<TOTAL-COSTS> 929,400
<OTHER-EXPENSES> 312,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 256,600
<INCOME-PRETAX> 59,100
<INCOME-TAX> 0
<INCOME-CONTINUING> 59,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,100
<EPS-PRIMARY> 0.30<F2>
<EPS-DILUTED> 0
<FN>
<F1>LIMITED AND GENERAL PARTNERS EQUITY
<F2>NET INCOME PER LIMITED PARTNERSHIP UNIT
</FN>
</TABLE>
