<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended June 30, 1997
-------------------------
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
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 as specified in its charter)
California 33-0115651
- -------------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
120 W. Grand Avenue, Suite 202, Escondido, California 92025
-----------------------------------------------------------------------
(Address of principal executive offices)
(760) 746-2411
----------------------------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes (x) No (_)
--- ---
1
<PAGE>
TABLE OF CONTENTS
PART I
------
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II
-------
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE
</TABLE>
2
<PAGE>
WINDSOR PARK PROPERTIES 3
-------------------------
(A California Limited Partnership)
BALANCE SHEET
-------------
(unaudited)
<TABLE>
<CAPTION>
June 30, 1997
-------------
<S> <C>
ASSETS
- ------
Property held for investment:
Land $ 1,192,500
Buildings and improvements 5,106,100
Fixtures and equipment 111,100
--------------
6,409,700
Less accumulated depreciation (2,500,200)
--------------
3,909,500
Investments in joint ventures 1,440,900
Cash and cash equivalents 615,800
Deferred financing costs 119,900
Other assets 88,800
--------------
$ 6,174,900
==============
LIABILITIES AND PARTNERS' EQUITY
- --------------------------------
Liabilities:
Mortgage notes payable $ 2,970,400
Accounts payable 29,500
Accrued expenses 82,400
Tenant deposits and other liabilities 64,500
--------------
3,146,800
--------------
Partners' equity:
Limited partners 3,060,100
General partners (32,000)
--------------
3,028,100
--------------
$ 6,174,900
==============
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
WINDSOR PARK PROPERTIES 3
-------------------------
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
------------------------
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1997 1996
----------- -----------
<S> <C> <C>
REVENUES
- --------
Rent and utilities $ 404,200 $ 350,900
Equity in earnings of joint ventures 2,300 11,500
Interest 9,300 12,000
Other 9,900 8,000
----------- -----------
425,700 382,400
----------- -----------
COSTS AND EXPENSES
- ------------------
Property operating 268,600 220,200
Interest 70,000 68,500
Depreciation and amortization 53,400 51,700
General and administrative:
Related parties 19,200 16,300
Other 11,300 12,300
----------- -----------
422,500 369,000
----------- -----------
Net income $ 3,200 $ 13,400
=========== ===========
Net income - general partners $ -- $ 100
=========== ===========
Net income - limited partners $ 3,200 $ 13,300
=========== ===========
Net income per limited partnership unit $ 0.02 $ 0.06
=========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
WINDSOR PARK PROPERTIES 3
-------------------------
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
------------------------
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
REVENUES
- --------
Rent and utilities $ 799,700 $ 676,900
Equity in earnings of joint ventures 19,300 22,100
Interest 20,100 23,500
Other 21,700 18,700
----------- -----------
860,800 741,200
----------- -----------
COSTS AND EXPENSES
- ------------------
Property operating 494,100 423,200
Interest 140,000 121,800
Depreciation and amortization 103,000 99,400
General and administrative:
Related parties 37,900 33,000
Other 22,500 23,000
----------- -----------
797,500 700,400
----------- -----------
Net income $ 63,300 $ 40,800
=========== ===========
Net income - general partners $ 600 $ 400
=========== ===========
Net income - limited partners $ 62,700 $ 40,400
=========== ===========
Net income per limited partnership unit $ 0.32 $ 0.20
=========== ===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
WINDSOR PARK PROPERTIES 3
-------------------------
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
------------------------
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------
1997 1996
------------- -------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 63,300 $ 40,800
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 103,000 99,400
Equity in earnings of joint ventures (19,300) (22,100)
Joint ventures' cash distributions 19,300 22,100
Loss on sale of property held for investment 36,900 600
Amortization of deferred financing costs 9,900 9,100
Changes in operating assets and liabilities:
Other assets 109,700 11,600
Accounts payable (4,300) (19,600)
Accrued expenses (38,500) (700)
Tenant deposits and other liabilities 1,300 6,500
------------- -------------
Net cash provided by operating activities 281,300 147,700
------------- -------------
Cash flows from investing activities:
Investment in joint venture (636,200)
Increase in property held for investment (116,000) (84,000)
Joint ventures' cash distributions 53,300 28,100
Proceeds from sale of property held for investment 3,000 12,300
------------- -------------
Net cash used in investing activities (695,900) (43,600)
------------- -------------
Cash flows from financing activities:
Cash distributions (147,400) (147,400)
Repurchase of limited partnership units (14,000) (34,300)
Proceeds from mortgage note payable 778,500
Payment of deferred financing costs (44,700)
------------- -------------
Net cash (used in) provided by financing activities (161,400) 552,100
------------- -------------
Net (decrease) increase in cash and cash equivalents (576,000) 656,200
Cash and cash equivalents at beginning of period 1,191,800 502,700
------------- -------------
Cash and cash equivalents at end of period $ 615,800 $ 1,158,900
============= =============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
WINDSOR PARK PROPERTIES 3
-------------------------
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE 1. BASIS OF PRESENTATION
---------------------
The balance sheet at June 30, 1997 and the related statements of operations for
the three and six months ended June 30, 1997 and 1996 and the statements of cash
flows for the six months ended June 30, 1997 and 1996 are unaudited. However, in
the opinion of the General Partners, they contain all adjustments, of a normal
recurring nature, necessary for a fair presentation of such financial
statements. Interim results are not necessarily indicative of results for a
full year.
The financial statements and notes are presented as permitted by Form 10-QSB and
do not contain certain information included in the Partnership's annual
financial statements and notes.
NOTE 2. INVESTMENTS IN JOINT VENTURES
-----------------------------
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 $636,200. 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% and the loan is due in March 2006.
The Partnership's investments in joint ventures consist of undivided interests
in four manufactured home communities at June 30, 1997. The combined condensed
results of operations of the joint venture properties (including Apache East
Estates and Denali Park Estates since their purchase) for the six months ended
June 30, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Total revenues $ 747,100 $ 499,700
----------- -----------
Expenses:
Property operating 357,300 254,200
Depreciation 191,400 131,800
Interest 151,800 56,700
----------- -----------
700,500 442,700
----------- -----------
Net income $ 46,600 $ 57,000
=========== ===========
</TABLE>
NOTE 3. 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 period and
the net income allocated to the Limited Partners. The weighted average number
of limited partnership units outstanding during the three and six months ended
June 30, 1997 was 195,996 and 196,153, respectively; and 197,262 and 197,767 for
the three and six months ended June 30, 1996, respectively.
7
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NOTE 4. RELATED PARTY TRANSACTIONS
--------------------------
The General Partners of the Partnership are The Windsor Corporation, a
California corporation, and John A. Coseo, Jr. (Mr. Coseo is also the president,
chief executive officer and the principal stockholder of The Windsor
Corporation.)
The General Partners are entitled to receive from the Partnership various fees
and compensation which are summarized as follows:
Operational Stage
- -----------------
The net 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 The Windsor Corporation for certain direct expenses,
and employee, executive and administrative time incurred on the Partnership's
behalf. The Partnership was charged $22,800 and $19,300 for such costs during
the three months ended June 30, 1997 and 1996, respectively; and $44,900 and
$38,500 during the six months ended June 30, 1997 and 1996, respectively. These
costs are included in property operating and general and administrative expenses
in the accompanying Statements of Operations.
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.
The General Partners received cash distributions of $7,400 during both the six
months ended June 30, 1997 and 1996. The General Partners received no cash
distributions during the three months ended June 30, 1997 and 1996.
NOTE 5. 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 limited partners for the six months ended June 30, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
Per Per
Amount Unit Amount Unit
------ ---- ------ ----
<S> <C> <C> <C> <C>
Net income
- limited partners $ 62,700 $ 0.32 $ 40,400 $ 0.20
Return of capital 77,300 0.39 99,600 0.51
---------- ------- ---------- --------
$ 140,000 $ 0.71 $ 140,000 $ 0.71
========== ======= ========== ========
</TABLE>
8
<PAGE>
NOTE 6. SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest (none capitalized) $ 129,200 $ 91,800
========== =========
</TABLE>
Supplemental schedule of non-cash 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>
<CAPTION>
1996
---------------
<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>
9
<PAGE>
WINDSOR PARK PROPERTIES 3
-------------------------
(A California Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Changes in Financial Condition
- ------------------------------
June 30, 1997 as compared to December 31, 1996
- ----------------------------------------------
The Partnership's primary sources of cash during the six months ended June 30,
1997 were from the operations of its investment properties and cash
distributions from joint ventures. The primary uses of cash during the same
period were for an investment in a joint venture and cash distributions to
partners.
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 Partnership's cost of its equity interest in the
communities was $636,200. 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% and the loan is due in March 2006.
No further investment property acquisitions are planned by the General Partners.
In connection with the purchase of the Apache East Estates and Denali Park
Estates manufactured home communities, the Partnership provided a $244,000
advance to an affiliated entity. The advance bears interest at prime plus 2%
and was fully collected in April 1997.
At June 30, 1997 the Partnership's total mortgage debt, including its
proportionate share of joint venture debt, was $4,152,000, consisting of
$3,270,400 of fixed rate debt and $881,600 of variable rate debt. The average
rate of interest on the fixed and variable rate debt was 8.8% and 8.4%,
respectively, at June 30, 1997.
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.
Results of Operations
- ---------------------
Six months ended June 30, 1997 as compared to six months ended June 30, 1996
- ----------------------------------------------------------------------------
The results of operations for the six months ended June 30, 1997 and 1996 are
not directly comparable due to the purchases of interests in the Trailmont,
Apache East Estates and Denali Park Estates communities in January 1996,
February 1997 and February 1997, respectively. The Partnership realized net
income of $63,300 and $40,800 for the six months ended June 30, 1997 and 1996,
respectively. Net income per limited partnership unit was $0.32 in 1997 and
$0.20 in 1996.
Rent and utilities revenues increased from $676,900 in 1996 to $799,700 in 1997
due mainly to the
10
<PAGE>
acquisition of the Trailmont community in January 1996. In addition, the
overall occupancy of the Partnership's five wholly-owned communities increased
from 83% at June 30, 1996 to 89% at June 30, 1997. Recent rent increases
implemented include $5 per month at both Pondarosa and Little Eagle effective
January 1997; $20 per month at The Pines effective March 1997; and $20 per month
at Shady Hills effective January 1997.
Equity in earnings of joint ventures represents the Partnership's share of the
net income of four manufactured home communities in 1997 and two manufactured
home communities in 1996 (as mentioned previously, two joint venture interests
were acquired in February 1997). Equity in earnings of joint ventures was
$19,300 and $22,100 for the six months ended June 30, 1997 and 1996,
respectively. As projected, the Apache East Estates and Denali Park Estates
communities have incurred book losses since their acquisition, resulting in
lower equity in earnings of joint ventures in 1997. However, after adding back
noncash depreciation expense, these properties are generating cash flow to the
Partnership as expected. The overall occupancy of the Partnership's four joint
venture properties was 85% at June 30, 1997 compared to 94% for two joint
venture properties at June 30, 1996. Recent rent increases include $10 and $12
per month at Big Country effective February 1997 and 1996, respectively; and $10
per month at Harmony Ranch effective October 1996.
Interest income decreased from $23,500 in 1996 to $20,100 in 1997 due mainly to
lower cash balances maintained by the Partnership.
Property operating expenses increased from $423,200 in 1996 to $494,100 in 1997.
The increase is due to the acquisition of the Trailmont community in January
1996 and due to higher wage and utility costs.
Interest expense increased from $121,800 in 1996 to $140,000 in 1997 due mainly
to the loan obtained by the Partnership in connection with the acquisition of
the Trailmont community in January 1996, and due to the additional $120,400 draw
taken on the loan in December 1996.
General and administrative expense increased from $56,000 in 1996 to $60,400 in
1997, due mainly to higher employee time charges from the General Partners,
resulting from the addition of new investment properties to the portfolio.
Three months ended June 30, 1997 as compared to three months ended June 30, 1996
- --------------------------------------------------------------------------------
The results of operations for the three months ended June 30, 1997 and 1996 are
not directly comparable due to the purchase of interests in the Apache East
Estates and Denali Park Estates communities in February 1997. The Partnership
realized net income of $3,200 and $13,400 for the three months ended June 30,
1997 and 1996, respectively. Net income per limited partnership unit was $0.02
in 1997 and $0.06 in 1996.
Rent and utilities revenues increased from $350,900 in 1996 to $404,200 in 1997
for the reasons discussed previously.
Equity in earnings of joint ventures represents the Partnership's share of the
net income of four manufactured home communities in 1997 and two manufactured
home communities in 1996 (as mentioned previously, two joint venture interests
were acquired in February 1997). Equity in earnings of joint ventures decreased
from $11,500 in 1996 to $2,300 in 1997 for the reasons discussed previously.
Interest income decreased from $12,000 in 1996 to $9,300 in 1997 due mainly to
lower cash balances maintained by the Partnership.
11
<PAGE>
Interest expense increased from $68,500 in 1996 to $70,000 in 1997, for the
reasons discussed previously.
General and administrative expense increased from $28,600 in 1996 to $30,500 in
1997 due mainly to higher employee time charges from the General Partners,
resulting from the addition of new investment properties to the portfolio.
12
<PAGE>
PART II
-------
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits and Index of Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
A Form 8-K/A (dated April 28, 1997) was filed with regards to the
Partnership's acquisition of interests in the Apache East Estates and
Denali Park Estates manufactured home communities located in Phoenix,
Arizona.
The items reported in this current report were Item 2 (acquisition or
disposition of assets) and Item 7 (financial statements, proforma
financial information and exhibits).
A summary of the financial information included in the report follows:
a) Financial Statements and Proforma Financial Information of Apache
East Estates and Denali Park Estates Manufactured Home
Communities.
b) Proforma Financial Information of Windsor Park Properties 3.
13
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SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WINDSOR PARK PROPERTIES 3,
A California Limited Partnership
--------------------------------
(Registrant)
By: The Windsor Corporation, General Partner
By /s/ John A. Coseo, Jr.
------------------------------
JOHN A. COSEO, JR.
Chief Financial Officer
(Principal Accounting Officer)
Date: August 11, 1997
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET OF WINDSOR PARK PROPERTIES 3 AS OF JUNE 30, 1997 AND THE RELATED
STATEMENTS OF OPERATIONS AND OF CASH FLOWS FOR THE SIX MONTHS THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 615,800
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,409,700
<DEPRECIATION> 2,500,200
<TOTAL-ASSETS> 6,174,900
<CURRENT-LIABILITIES> 0
<BONDS> 2,970,400
0
0
<COMMON> 0
<OTHER-SE> 3,028,100<F1>
<TOTAL-LIABILITY-AND-EQUITY> 6,174,900
<SALES> 0
<TOTAL-REVENUES> 860,800
<CGS> 0
<TOTAL-COSTS> 494,100
<OTHER-EXPENSES> 163,400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 140,000
<INCOME-PRETAX> 63,300
<INCOME-TAX> 0
<INCOME-CONTINUING> 63,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,300
<EPS-PRIMARY> 0.32<F2>
<EPS-DILUTED> 0
<FN>
<F1>Limited and general partners equity.
<F2>Net income per limited partnership unit.
</FN>
</TABLE>
