THIS DOCUMENT IS A COPY OF THE ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1995 FILED ON APRIL 1, 1996 PURSUANT TO A RULE 201 TEMPORARY
HARDSHIP EXEMPTION.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- - ----- ACT OF 1934
For the fiscal year ended December 31, 1995
or
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 0-19246
CLOVER INCOME PROPERTIES III, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2935727
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
23 W. Park Avenue, Merchantville, NJ 08109
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (609) 662-1116
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The registrant has no voting stock. The registrant's outstanding voting
securities consist of units of limited partnership interest which have no
readily ascertainable market value since there is no public trading market for
these securities on which to base a calculation of aggregate market value.
Documents incorporated by reference: The Prospectus of the registrant dated
September 18, 1987 filed with the Commission pursuant to Rule 424(b) under the
Securities Act of 1933 on September 30, 1987 is incorporated herein by reference
in Parts I, II and III of this Annual Report on Form 10-K, and Supplement No. 3
to the Prospectus dated September 12, 1988 and filed with the Commission as part
of Post-Effective Amendment No. 4 to the Registrant's Registration Statement on
September 13, 1988 is incorporated by reference in Part I of this Annual Report
on Form 10-K. Registrant's Current Report on Form 8-K filed with the
Securities and Exchange Commission on March 4, 1996 is incorporated by reference
in Part I of this Annual Report on Form 10-K.
PART I
Item 1. Business
The Registrant, Clover Income Properties III, L.P. (the "Partnership"),
is a limited partnership formed in May 1988 under the Revised Uniform
Limited Partnership Act of the State of Delaware to invest in existing
income-producing residential real estate properties. Crown Management
Corporation, a New Jersey corporation which is a wholly-owned subsidiary of
Clover Financial Corporation ("Clover"), a New Jersey corporation, is the
General Partner (the "General Partner") of the Partnership. The
Partnership made a public offering (the "Offering") of units (the
"Units") of limited partnership interest pursuant to a Prospectus (the
"Prospectus") contained in Pre-Effective Amendment No. 1 to the
Partnership's Form S-11 Registration Statement (the "Registration
Statement") filed with the Commission under the Securities Act of 1933 (No.
33-26129) on March 30, 1989. The Partnership supplemented the Prospectus by
Supplement No. 1 dated August 25, 1989 ("Supplement No. 1"), Supplement
No. 2 dated December 11, 1989 ("Supplement No. 2"), Supplement No. 3
dated February 14, 1990 ("Supplement No. 3"), and Supplement No. 4 dated
March 27, 1990 ("Supplement No. 4") which incorporated and superseded
Supplement No. 3, Supplement No. 5 dated April 25, 1990 (the
"Cumulative Supplement") which incorporated and superseded Supplement No.
1, 2 and 4, and Supplement No. 6 dated March 27, 1991 (the "Supplement No.
6").
On March 16, 1992, the Partnership terminated the Offering upon the sale of
7,300 Units to 743 limited partners. The gross proceeds to the Partnership from
the sale of such Units was $7,295,440, which amount reflects purchases net of
selling commissions by officers, directors, and employees of the Partnership and
its affiliates and purchases subject to reduced commissions by certain other
subscribers.
On July 1, 1994, the Partnership sold the Mallard Green Apartments
("Mallard Green"), a 76-unit garden-style residential apartment complex located
outside the city limits of Charlotte, North Carolina, together with all related
improvements and intangible and tangible property, to United Dominion Realty
Trust, Inc. ("United Dominion") for a cash purchase price of $2,700,000. The
Purchaser is not affiliated with the Partnership, and the sale was negotiated on
an arms-length basis. The Partnership incurred expenses of $28,813 in connection
with the sale, which were paid from the proceeds of the sale. The Partnership
also set aside additional working capital reserves of $58,487 at the time of the
sale. No expenses or commissions were paid to the General Partner or its
affiliates in connection with the sale.
The Partnership had acquired Mallard Green in April 1990 from an
affiliate at a purchase price of $3,307,721 (the price paid by the affiliate
plus its net acquisition and carrying costs), plus acquisition expenses of
$14,933 and an acquisition fee of $151,456 paid to the General Partner. A more
complete description of the Mallard Green Apartments and the terms of its
acquisition by the Partnership is contained in the section of the Cumulative
Supplement titled "Real Property Investments", and such description is
incorporated herein by reference.
The Partnership continues to own a 14.18% interest in The Willowbrook Joint
Venture, a joint venture among the Partnership, Clover Income Properties, L.P.
("CIP") and Clover Income Properties II, L.P. ("CIP II"), both of which are
affiliates of the Partnership. The Partnership acquired its interest in The
Willowbrook Joint Venture effective April 1, 1992. The Willowbrook Joint Venture
owns The Willowbrook Apartments, a 299-unit mid-rise residential apartment
complex located in Baltimore, Maryland, which it acquired on December 17, 1987,
at a purchase price of $12,500,000. The Partnership acquired its interest in The
Willowbrook Joint Venture for a cash purchase price of $2,200,000, and the
Partnership paid an acquisition fee to the General Partner in the amount of
$212,030 as well as $17,609 in expenses, including legal, appraisal, accounting,
title insurance and miscellaneous expenses.
The Willowbrook Apartments are subject to risks, including competition
from other rental apartment and townhouse developments in the Baltimore area,
adverse local market conditions due to changes in economic conditions in the
Baltimore market, the Mid-Atlantic region or nationally, area characteristics,
interest rates, availability and cost of insurance coverage, changes in real
estate tax rates or laws, rising utilities costs and operating expenses, rent
control, governmental regulations, acts of God and other factors which are
beyond the control of the Partnership.
Services at Willowbrook Apartments are performed by on-site personnel
all of whom are employees of NPI-CL Management L.P. ("NPI"), an unaffiliated
third party. Such services are provided pursuant to a written agreement
providing for fees equal to 5% of the gross revenues from the Willowbrook
Apartments. NPI replaced Allstate Management Corp., an affiliate of the General
Partner, as the property manager effective February 21, 1995. At the same time,
other partnerships affiliated with the General Partner also engaged NPI as a
property manager at rates equivalent to the rates previously paid to the prior
property manager of each partnership.
In January 1996, NPI was acquired by an affiliate of Insignia Financial
Group, Inc. According to Commercial Property News and the National Multi-Housing
Council, Insignia, together with its affiliates, is the largest property manager
in the United States. The General Partner does not believe this transaction will
have a significant impact on the Partnership.
On February 7, 1996, the Willowbrook Joint Venture, Berwind Property
Group, Inc. ("Berwind") and First Montgomery Properties, Ltd. ("First
Montgomery", and with Berwind, the "Buyers") executed an Agreement of Sale (as
amended, the "Sale Agreement") concerning the sale of Willowbrook Apartments
(the "Sale").
Pursuant to the terms of the Sale Agreement, the Buyers have agreed to
purchase The Willowbrook Apartments for a purchase price of $10,500,000 (less a
$315,000 credit for capital improvements). The completion of the Sale is
contingent upon the approval of the holders of more than 50% of the outstanding
Units and the holders of more than 50% of the outstanding units of limited
partnership interest in each of CIP and CIP II. In addition, for a period of 90
days from the date of the execution of the Sale Agreement, the Buyers have the
right to cancel and terminate the Sale Agreement for any reason whatsoever. The
Sale is described in a Form 8-K filed with the Commission pursuant to the
Securities Exchange Act of 1934 on March 4, 1996 and such description is
incorporated herein by reference.
Reference is made to Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations for a further discussion of the
operations of the Partnership's business.
Item 2. Properties
The Partnership owns a 14.18% in The Willowbrook Joint Venture which owns
The Willowbrook Apartments. Reference is made to Item 1. Business, for a
description of The Willowbrook Apartments and The Willowbrook Joint Venture.
The Willowbrook Joint Venture continued with its operational program put in
place in 1993 which was established to maintain and enhance the overall
appearance and physical condition of The Willowbrook Apartments. As part of this
program, in 1995 one elevator was replaced at a cost of $22,857; air
conditioning equipment was purchased at a cost of $18,422 and other capital
improvements were made at a cost of $11,833. In addition, common area hallways
were recarpeted in 1995. In 1994 one roof was replaced, large areas of sidewalks
were also replaced, apartment interiors were fully repainted as needed as well
as updated with appliances and carpeting as needed and tiles were repaired and
replaced in the pool area for a combined cost of $133,141. Major projects
planned for 1996 at The Willowbrook Apartments at an estimated total cost of
$188,000 include the replacement of carpets and tiles, the resurfacing of the
parking lot and the painting of certain hallways. See Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations.
Funding for these projects is anticipated to be fully provided by the
Willowbrook Apartments' operating cash flow. It is not anticipated that the
completion of these projects will cause any increase in the realty taxes at The
Willowbrook Apartments.
The average occupancy rates at The Willowbrook Apartments for the five
years ended December 31, 1991, 1992, 1993, 1994 and 1995 were 94.1%, 90.1%,
88.7%, 93.3% and 93.9%, respectively, and the average effective annual rentals
per unit for those five years were $7,128, $7,350, $7,270, $7,218 and $7,180,
respectively. The realty tax rates for the Willowbrook Apartments for the
periods ended June 30, 1994, June 30, 1995 and June 30, 1996 were $61.60, $60.60
and $60.60, respectively, per $1,000 of assessed value, resulting in annual
realty taxes of $298,778, $267,996 and $267,996, respectively.
The General Partner believes that The Willowbrook Apartments are adequately
covered by insurance.
Item 3. Legal Proceedings
There are no material pending legal proceedings to which the Partnership is
a party or to which its property is subject.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for the Partnership's Units of Limited Partnership Interests
and Related Security Holder Matters
There is no public market for the Units, and it is not anticipated that a
public market for the Units will develop. Transferability of Units is subject to
substantial restrictions, including limitations contained in the Partnership's
Amended and Restated Agreement of Limited Partnership (the "Partnership
Agreement"), included as an Exhibit to the Prospectus and incorporated herein by
reference. As of March 1, 1996, 701 limited partners held 7,300 Units.
Cash distributions, if any, to be distributed to the partners of the
Partnership are described at pages 21-22 in the Prospectus and such description
is incorporated herein by reference. Distributions for 1995 and 1994 were paid
quarterly in the annual amounts set forth under Item 6. Selected Financial Data.
The General Partner maintains a policy that the only cash distributions
made to Partnership's limited partners are distributions of "net cash receipts,"
as defined on page A-4 of the Prospectus, which definition is incorporated
herein by reference (other than distributions of proceeds from the sale of
Partnership property or the liquidation of the Partnership). The total net cash
receipts of the Partnership from inception through December 31, 1995 were
$4,510,462. Of that amount, $4,362,904 has been distributed to the Partnership's
limited partners through December 31, 1995, and $9,954 was subsequently
distributed in January 1996 with respect to the quarter ended December 31, 1995.
Except for the July 1, 1994 distribution, which included $2,692,897 of the
proceeds from the sale of Mallard: (i) all distributions to partners have been
funded by current year net cash receipts and undistributed net cash receipts
from prior years; (ii) all distributions have been made on a quarterly basis;
and (iii) none of the distributions represent the return to the partners of any
part of their original investments.
On or about July 15, 1994, the Partnership distributed $2,775,022 to
its Limited Partners, including $2,692,897 of net sales proceeds and $82,125 of
second quarter cash flow, representing a distribution of $380.14 for each Unit
of limited partnership interest owned. The Partnership also distributed $830 of
second quarter cash flow to the General Partner; however, the General Partner
received no proceeds from the sale of Mallard Green.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total revenues $ 2,177 $ 249,101 $ 476,263 $ 505,090 $ 538,348
Share of joint
venture income $ 14,093 $ 16,292 $ 7,842 $ 32,331 $ --
Net income
(loss) $ (704,736) $ (408,670) $ 92,573 $ 186,340 $ 149,866
Net income (loss)
per Unit $ (95.57)(1) $ (55.70)(1) $ 12.24(1) $ 25.44(1) $ 23.55(1)
Cash distributions
per Unit $ 6.05 (1) $ 404.64 (1) $ 43.74(1) $ 39.67(1) $ 65.04(1)
Total Assets at
end of period $ 1,518,327 $ 2,276,820 $ 5,717,410 $ 5,964,150 $ 5,736,872
Long-term debt $ -- $ -- $ -- $ -- $ --
</TABLE>
1. Based upon net income allocated to, and cash distributions to, the limited
partners and the weighted average number of Units outstanding of 7,300 during
1995, 1994 and 1993, 7,210 during 1992, and 6,192 during 1991.
The above selected financial data should be read in conjunction with
the financial statements for the Partnership appearing in Item 8. Financial
Statements and Supplementary Data and Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition, Liquidity and Capital Resources
The Partnership's only remaining interest in real estate is a 14.18%
interest in the Willowbrook Joint Venture, which owns the Willowbrook
Apartments. Consequently, the Partnership's primary remaining source of
operating cash flow will be distributions from The Willowbrook Joint Venture.
Cash on hand on December 31, 1995 was $122,873 as compared to $116,337
on December 31, 1994. These funds, along with future operating cash flow, will
be utilized for working capital needs and for distributions to the limited
partners.
The Partnership's net cash flow from operations was $51,148 for 1995 as
compared to $133,357 for 1994 and $275,004 for 1993. The decrease in net cash
flow from operations for 1995 and 1994 is attributable to a decrease in cash
received from rentals partially offset by a corresponding decrease in cash paid
for operating expenses as a result of the sale of Mallard Green Apartments
("Mallard Green") on July 1, 1994.
The Willowbrook Joint Venture's net cash flow from operations was $786,393
for 1995 as compared to $816,941 for 1994 and $700,012 for 1993. The decrease in
cash flow from operations for 1995, as compared to 1994, was due to a decrease
in cash received from rentals, interest and other income. The increase in cash
flow from operations in 1994 as compared to 1993, was primarily due to an
increase in cash received from rentals combined with an increase in other income
and a decrease in cash paid for operating expenses.
The General Partner believes that the Partnership's current and future
cash flows will be sufficient to meet the Partnership's liquidity requirements
over the next twelve months and the foreseeable future, absent unanticipated
operating cost increases or adverse market conditions.
As of December 31, 1995, the Partnership had paid all outstanding amounts
owed to the General Partner and its affiliates. As of December 31, 1995, The
Willowbrook Joint Venture, however, owed a total of approximately $326,000 to
Allstate Management Corp., an affiliate of the General Partner, for reimbursable
costs and accrued and unpaid property management fees. The payment of such
amounts will be made from The Willowbrook Joint Venture's cash flow when
available and from the proceeds of any sales or refinancing of the assets of The
Willowbrook Joint Venture.
During 1995, one elevator was replaced at a cost of $22,857; air
conditioning equipment was purchased at a cost of $18,422 and other capital
improvements were made at a cost of $11,833. These amounts are reflected in the
Statement of Cash Flows as cash paid for investing activities. In addition,
common area hallways were recarpeted in 1995. Major projects planned for 1996 at
The Willowbrook Apartments, at an estimated total cost of $188,000, include the
replacement of carpets and tiles, the resurfacing of the parking lot and the
painting of certain hallways. Funding for these projects will be provided by the
Willowbrook Joint Venture's operating cash flow. It is not anticipated that
these projects will cause any increase in the realty taxes at The Willowbrook
Apartments.
Results of Operations
Until the sale of Mallard Green, the Partnership earned revenues primarily
from rental income from Mallard Green. Revenues from the Willowbrook Apartments
are not included in Partnership's revenues.
No rental income was recorded in 1995. Rental income was $240,573 in 1994
as compared to $468,295 in 1993. The decrease in 1995 from 1994 and in 1994 from
1993 is attributable to the sale of Mallard Green on July 1, 1994.
Operating expenses were $2,402 for 1995, $121,577 for 1994 and $242,056 for
1993. The decrease in 1995 and in 1994 was due to the sale of Mallard Green.
The Partnership had a loss before depreciation and amortization of $695,220
in 1995 and $351,578 in 1994 and income before depreciation and amortization of
$198,661 in 1993. The increased loss in 1995 over 1994 was primarily due to an
impairment loss on the Partnership's investment in the Willowbrook Joint Venture
in order to reflect the Partnership's investment in the Willowbrook Joint
Venture at the lower of cost or market and the write-off of deferred costs
offset by a loss on the sale of Mallard Green incurred in 1994 and the
elimination of operating expenses in 1995, partially offset by the elimination
of rental income and by legal and accounting fees incurred during 1995 in
connection with efforts to sell the Willowbrook Apartments. The decrease from
income before depreciation and amortization in 1993, to a loss in 1994, is
primarily attributable to the decrease in rental income due to the sale of
Mallard Green and to the loss on the sale incurred in 1994, partially offset by
the corresponding decrease in operating expenses.
Rental income for the Willowbrook Apartments, as operated by the
Willowbrook Joint Venture, was $2,013,638 in 1995, as compared to $2,013,518 in
1994 and $1,928,002 in 1993. Other income was $34,414 in 1995 as compared to
$48,416 in 1994 and $34,772 in 1993. Interest income was $1,051 in 1995 as
compared to $3,032 in 1994 and $5,135 in 1993.
Rental income for 1995 was virtually unchanged from 1994. A slight
improvement in occupancy rates was essentially offset by a slight decrease in
rental rates. The increase in rental income for 1994 as compared to 1993 was
primarily due to an increase in occupancy. The increase in other income from
1993 to 1994 and the decrease from 1994 to 1995 is primarily attributable to a
$17,000 refund of health benefit overpayments received in 1994. Interest income
decreased in 1994 and 1995 due to lower cash balances being maintained.
The average effective rental rates for the Willowbrook Apartments were
$7,180 in 1995, $7,218 in 1994 and $7,270 in 1993. The average occupancy was
93.9% in 1995, 93.3% in 1994 and 88.7% in 1993.
Operating expenses for the Willowbrook Apartments for 1995 were $1,225,052
as compared to $1,219,161 for 1994 and $1,186,441 for 1993. The slight increase
in 1995 over 1994 was primarily due to increases in advertising expenses and
repairs and maintenance, substantially offset by a decrease in real estate taxes
resulting from a reduction in the property tax rates from the period ended June
30, 1994 to the period ended June 30, 1995. The increase in operating expenses
for 1994 over 1993 was primarily due to increases in salaries and wages, repairs
and maintenance and utilities, partially offset by decreases in advertising and
marketing expenses and decreases in real estate taxes from the period ended June
30, 1993 to the period ended June 30, 1994.
The Willowbrook Joint Venture's income before depreciation and amortization
was $810,034 for 1995 as compared to $822,943 for 1994 and $759,619 for 1993.
The decrease in income before depreciation and amortization in 1995 as compared
to 1994 is due to a decrease in other income combined with increases in
operating expenses and professional services, partially offset by a decrease in
general and administrative expenses. The increase in income before depreciation
and amortization in 1994 as compared to 1993 is due to increases in rental and
other income, partially offset by increases in operating expenses.
Item 8. Financial Statements and Supplementary Data.
INDEX
Page
Report of Independent Certified Public F-1
Accountants for Clover Income
Properties III, L.P.
Clover Income Properties III, L.P. Balance F-2
Sheets as of December 31, 1995 and 1994
Clover Income Properties III, L.P. Statements F-3
of Operations for each of the three years in the
period ended December 31, 1995
Clover Income Properties III, L.P. Statements F-4
of Partners' Capital for each of the three years
in the period ended December 31, 1995
Clover Income Properties III, L.P. Statements F-5
of Cash Flows for each of the three years
in the period ended December 31, 1995
Clover Income Properties III, L.P. Summary F-7
of Significant Accounting Policies
Clover Income Properties III, L.P. Notes F-9
to Financial Statements
Report of Independent Certified Public F-17
Accountants for The Willowbrook Joint Venture
The Willowbrook Joint Venture Balance F-18
Sheets as of December 31, 1995 and 1994
The Willowbrook Joint Venture Statements of F-19
Income for each of the three years in the
period ended December 31, 1995
The Willowbrook Joint Venture Statements of F-20
Partners' Capital for each of the three years
in the period ended December 31, 1995
The Willowbrook Joint Venture Statements of F-21
Cash Flows for each of the three years
in the period ended December 31, 1995
The Willowbrook Joint Venture Summary F-23
of Significant Accounting Policies
The Willowbrook Joint Venture Notes F-24
to Financial Statements
Financial Statement Schedules
Clover Income Properties III, LP Schedule F-28
III Real estate and accumulated depreciation
for each of the three years in the period ended
December 31, 1995
The Willowbrook Joint Venture Schedule III F-29
Real estate and accumulated depreciation
for each of the three years in the period ended
December 31, 1995
[LETTERHEAD OF BDO SEIDMAN, LLP]
Report of Independent Certified Public Accountants
Clover Income Properties III, L.P.
Merchantville, New Jersey
We have audited the accompanying balance sheets of Clover Income Properties III,
L.P. (a Delaware limited partnership) as of December 31, 1995 and 1994, and the
related statements of operations, partners' capital and cash flows for each of
the three years in the period ended December 31, 1995. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Clover Income Properties III,
L.P. as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
BDO Seidman, LLP
BDO SEIDMAN, LLP
January 30, 1996, except
for Note 3 which is
February 7, 1996
Clover Income Properties III, L.P.
Balance Sheets
- - --------------------------------------------------------------------------
December 31, 1995 1994
- - --------------------------------------------------------------------------
Assets
Cash $ 122,873 $ 116,337
Other deferred costs, less accumulated
amortization of $26,169 in 1994 - 199,831
Investment in The Willowbrook
Joint Venture, at market in 1995 and 1994 1,395,454 1,960,652
- - --------------------------------------------------------------------------
$ 1,518,327 $ 2,276,820
- - --------------------------------------------------------------------------
- - --------------------------------------------------------------------------
December 31, 1995 1994
- - --------------------------------------------------------------------------
Liabilities and Partners' Capital
Liabilities
Accrued expenses $ 19,500 $ 18,250
Due to affiliates - 10,395
- - --------------------------------------------------------------------------
Total liabilities 19,500 28,645
- - --------------------------------------------------------------------------
Partners' capital
General partner (deficiency) (44,927) (37,433)
Limited partners 1,543,754 2,285,608
- - --------------------------------------------------------------------------
Total partners' capital 1,498,827 2,248,175
- - --------------------------------------------------------------------------
$ 1,518,327 $ 2,276,820
- - --------------------------------------------------------------------------
See accompanying summary of significant accounting policies and notes to
financial statements.
Clover Income Properties III, L.P.
Statements of Operations
- - --------------------------------------------------------------------------------
Year ended December 31, 1995 1994 1993
- - --------------------------------------------------------------------------------
Revenues
Rental income $ - $ 240,573 $ 468,295
Interest income 2,177 7,098 6,725
Other income - 1,430 1,243
- - --------------------------------------------------------------------------------
Total revenues 2,177 249,101 476,263
- - --------------------------------------------------------------------------------
Expenses
Impairment loss, investment in Joint
Venture 472,947 - -
Impairment loss, deferred costs 190,315 - -
Operating expenses (including affiliate
transactions of $18,442 in 1994 and
$41,385 in 1993) 2,402 121,577 242,056
Depreciation and amortization 9,516 57,092 106,088
Professional services 42,421 21,242 29,368
General and administrative 3,405 7,795 14,020
- - --------------------------------------------------------------------------------
Total expenses 721,006 207,706 391,532
- - --------------------------------------------------------------------------------
Operating (loss) income (718,829) 41,395 84,731
(Loss) on the sale of investment property - (466,357) -
Share of income from The Willowbrook
Joint Venture 14,093 16,292 7,842
- - --------------------------------------------------------------------------------
Net (loss) income $ (704,736) $ (408,670) $ 92,573
- - --------------------------------------------------------------------------------
Net (loss) income per limited partnership
unit $ (95.57) $ (55.70) $ 12.24
- - --------------------------------------------------------------------------------
See accompanying summary of significant accounting policies and notes to
financial statements.
Clover Income Properties III, L.P.
Statements of Partners' Capital
- - --------------------------------------------------------------------------------
General Limited
Partner Partners Total
- - --------------------------------------------------------------------------------
Balance, December 31, 1992 $ (32,769) $ 5,876,049 $ 5,843,280
Partners' distributions, $43.74
per limited partnership unit (3,225) (319,275) (322,500)
Net income 3,225 89,348 92,573
- - --------------------------------------------------------------------------------
Balance, December 31, 1993 (32,769) 5,646,122 5,613,353
Partners' distributions, $404.64
per limited partnership unit (2,636) (2,953,872) (2,956,508)
Net (loss) (2,028) (406,642) (408,670)
- - --------------------------------------------------------------------------------
Balance, December 31, 1994 (37,433) 2,285,608 2,248,175
Partners' distributions, $6.05
per limited partnership unit (447) (44,165) (44,612)
Net (loss) (7,047) (697,689) (704,736)
- - --------------------------------------------------------------------------------
Balance, December 31, 1995 $ (44,927) $ 1,543,754 $ 1,498,827
- - --------------------------------------------------------------------------------
See accompanying summary of significant accounting policies and notes to
financial statements.
Clover Income Properties III, L.P.
Statements of Cash Flows
- - --------------------------------------------------------------------------------
Year ended December 31, 1995 1994 1993
- - --------------------------------------------------------------------------------
Operating activities
Cash received from rentals $ - $ 208,201 $ 478,126
Cash paid for operating expenses (57,373) (189,716) (313,014)
Interest income received 2,177 7,098 6,725
Other income received - 1,430 1,243
Distributions received from The
Willowbrook Joint Venture 106,344 106,344 101,924
- - --------------------------------------------------------------------------------
Net cash provided by operating activities 51,148 133,357 275,004
- - --------------------------------------------------------------------------------
Investing activities
Proceeds from sale of Mallard Green - 2,700,000 -
Settlement costs paid from sale of Mallard Green - (28,813) -
Investment in The Willowbrook Joint Venture - (1,360) (10,198)
- - --------------------------------------------------------------------------------
Net cash provided (used) by investing
activities - 2,669,827 (10,198)
- - --------------------------------------------------------------------------------
Financing activities
Partners' distributions (44,612) (2,956,508) (322,500)
- - --------------------------------------------------------------------------------
Net increase (decrease) in cash 6,536 (153,324) (57,694)
Cash, at beginning of year 116,337 269,661 327,355
- - --------------------------------------------------------------------------------
Cash, at end of year $ 122,873 $ 116,337 $ 269,661
- - --------------------------------------------------------------------------------
See accompanying summary of significant accounting policies and notes to
financial statements.
Clover Income Properties III, L.P.
Statements of Cash Flows
- - --------------------------------------------------------------------------------
Year ended December 31, 1995 1994 1993
- - --------------------------------------------------------------------------------
Reconciliation of net (loss) income to net
cash provided by operating activities
Net (loss) income $ (704,736) $ (408,670) $ 92,573
- - --------------------------------------------------------------------------------
Adjustments
Impairment loss, investment in Joint
Venture 472,947 - -
Impairment loss, deferred costs 190,315 - -
Depreciation and amortization 9,516 57,092 106,088
Share of income from The Willowbrook
Joint Venture (14,093) (16,292) (7,842)
Distributions received from The
Willowbrook Joint Venture 106,344 106,344 101,924
Net loss on the sale of investment
property - 466,357 -
Decrease (increase) in rents receivable - 1,022 (897)
Decrease (increase) in prepaid expenses - 2,621 (29)
Decrease in utility deposits - 295 -
Increase (decrease) in accounts payable
and accrued expenses 1,250 (12,845) 6,961
(Decrease) increase in prepaid rents - (7,794) 6,653
(Decrease) increase in tenants' security
deposits - (25,600) 4,075
(Decrease) in due to affiliates (10,395) (29,173) (34,502)
- - --------------------------------------------------------------------------------
Total adjustments 755,884 542,027 182,431
- - --------------------------------------------------------------------------------
Net cash provided by operating activities $ 51,148 $ 133,357 $ 275,004
- - --------------------------------------------------------------------------------
See accompanying summary of significant accounting policies and notes to
financial statements.
Clover Income Properties III, L.P.
Summary of Significant Accounting Policies
- - --------------------------------------------------------------------------------
Rental Revenue
Rental revenue is recognized when earned, net of concessions and vacancies.
Capitalization and Amortization of Certain Costs
At December 31, 1995, deferred costs, representing acquisition fees paid to an
affiliate, have been written off (see Note 4). For the years ended December 31,
1995 and prior, deferred costs were amortized over a two hundred and eighty five
month period using the straight-line method.
Income Taxes
The Partnership has not provided for federal income taxes, since all income and
losses are to be allocated to the partners for inclusion in their respective tax
returns. The Partnership files a state composite tax return on behalf of its
non-resident partners and remits any taxes due. The tax returns, the status of
the Partnership as such for tax purposes and the amount of allocable Partnership
income or loss are subject to examination by the Internal Revenue Service. If
such examinations result in changes with respect to the Partner- ship status or
in changes to allocable Partnership income or loss, the tax liability of the
partners could be changed accordingly.
Investment Property and Depreciation
The investment property was recorded at cost.
Depreciation was provided over the estimated useful lives of the various assets
using the straight-line method. The estimated lives were 40 years for apartment
buildings and twelve years for furniture and fixtures for financial reporting
and income tax purposes. Maintenance and repair costs were charged to expense as
incurred. Significant betterments and improvements were capitalized.
Clover Income Properties III, L.P.
Summary of Significant Accounting Policies
- - --------------------------------------------------------------------------------
Net (Loss) Income and Distributions Per Partnership Unit
Net (loss) income and distributions per limited partnership unit are computed
from the date of the closing of the Minimum Offering (October 31, 1989) based
upon net (loss) income and distributions allocated to the limited partners and
the weighted average number of limited partnership units outstanding. Per unit
information has been computed based on 7,300 weighted average limited
partnership units.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assump- tions
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.
Clover Income Properties III, L.P.
Notes to Financial Statements
- - --------------------------------------------------------------------------------
1. Organization and Basis of Accounting
Clover Income Properties III, L.P. ("CIP III") is a limited partnership which
was formed on November 30, 1988, in the State of Delaware for the purpose of
acquiring, operating and holding, directly or indirectly, residential real
estate for investment purposes. Leases primarily have a term of one year or
less. The general partner of the Partnership is Crown Management Corporation
(Crown), a wholly-owned subsidiary of Clover Financial Corporation.
CIP III's records are maintained on the accrual basis of accounting as adjusted
for federal income tax reporting purposes. The accompanying financial statements
have been prepared from such records after making appropriate adjustments, where
applicable, to reflect the Partnership's accounts on the accrual basis of
accounting according to generally accepted accounting principles (GAAP).
Depreciation of the property owned by The Willowbrook Joint Venture for
financial reporting purposes is provided using the straight-line method over the
estimated useful lives of the assets, while alternative methods are used for
federal income tax purposes. The net effect of these items is summarized as
follows:
December 31, 1995 1994
- - --------------------------------------------------------------------------------
GAAP Tax Basis GAAP Tax Basis
- - --------------------------------------------------------------------------------
Total assets $ 1,518,327 $ 2,317,290 $ 2,276,820 $ 2,376,292
- - --------------------------------------------------------------------------------
Partners' capital $ 1,498,827 $ 2,297,790 $ 2,248,175 $ 2,347,646
- - --------------------------------------------------------------------------------
Clover Income Properties III, L.P.
Notes to Financial Statements
- - --------------------------------------------------------------------------------
Reconciliation of (loss) income per financial statement to (loss) income per
Federal income tax return is as follows:
Year ended December 31, 1995 1994 1993
- - --------------------------------------------------------------------------------
Reconciling items
Net (loss) income per
financial statement $ (704,736) $ (408,670) $ 92,573
Depreciation (13,704) (13,762) (13,762)
Impairment loss, investment
in Joint Venture currently not
deductible for tax purposes 472,947 - -
Impairment loss, deferred costs
currently not deductible for
tax purposes 190,315 - -
Additional income from The
Willowbrook Joint Venture
resulting from different
depreciation methods 49,933 49,933 49,933
- - --------------------------------------------------------------------------------
Net (loss) income per federal
income tax return $ (5,245) $ (372,499) $ 128,744
- - --------------------------------------------------------------------------------
2. Sale of Investment Property
On July 1, 1994, CIP III sold the Mallard Green Apartments ("Mallard Green"), a
76 unit garden-style residential apartment complex located outside the city
limits of Charlotte, North Carolina, together with all related improvements and
intangible and tangible property to United Dominion Realty Trust, Inc. (the
"Purchaser") for a cash purchase price of $2,700,000. The purchaser is not
affiliated with the Partnership. A loss of $466,357 (the same as for tax
purposes) has been included in operations for the year ended December 31, 1994.
Clover Income Properties III, L.P.
Notes to Financial Statements
- - --------------------------------------------------------------------------------
3. Investment in The Willowbrook Joint Venture
On April 8, 1992, CIP III acquired a 14.18% interest in The Willowbrook Joint
Venture for $2,200,000 in cash based on an independently appraised value of
$15,650,000 as of February 11, 1992. The Joint Venture was The Willowbrook
Apartments, a 299 unit midrise apartment complex located in Baltimore, Maryland.
On February 7, 1996, the Willowbrook Joint Venture entered into an agreement of
sale with Berwind Properties Group, Inc. and First Montgomery Properties, Ltd.
Under the terms of the agreement, the Joint Venture will sell the Willowbrook
Apartments (including land), all related improvements and tangible and
intangible property for $10,500,000 less a $315,000 credit for capital
improvements.
The sale is contingent upon, among other things, the approval by a majority of
the limited partners of CIP, CIP II and CIP III. If the sale is approved by a
majority of the limited partners and all the other conditions to the sale are
met, the sale will be completed.
Concurrent with the sale of The Willowbrook Apartments, all assets of the Joint
Venture will be liquidated. The net proceeds will be distributed to its owners
(CIP, CIP I and CIP II) and the Joint Venture dissolved.
Upon receipt of distribution from the Joint Venture, the limited partnership
will then liquidate the net assets, distribute the proceeds and be dissolved.
Due to the proposed sale of the Willowbrook Apartments and subsequent
liquidation of the Partnership, CIP III has reflected its investment in the
Joint Venture at the lower of cost or market. Market value is based on the cash
proceeds (net of settlement costs) from the sale of the Willowbrook Apartments
after allocation of these proceeds to CIP, CIP II and CIP III. At December 31,
1995, the charge to operations amounting to $472,947 has been reflected as an
impairment loss in the statement of operations.
A summary of the Joint Venture's financial statements is as follows:
December 31, 1995 1994
- - --------------------------------------------------------------------------------
Other assets $ 322,078 $ 331,731
Investment property held for sale,
net of accumulated depreciation 9,396,753 9,858,484
- - --------------------------------------------------------------------------------
$ 9,718,831 $10,190,215
- - --------------------------------------------------------------------------------
Clover Income Properties III, L.P.
Notes to Financial Statements
- - --------------------------------------------------------------------------------
December 31, 1995 1994
- - --------------------------------------------------------------------------------
Liabilities (including $326,293
in 1995 and $326,240
in 1994 to affiliates) $ 403,359 $ 419,934
Capital
Clover Income Properties, L.P. 3,671,476 3,866,638
Clover Income Properties II, L.P. 3,671,476 3,866,638
Clover Income Properties III, L.P. 1,972,520 2,037,005
- - --------------------------------------------------------------------------------
$ 9,718,831 $10,190,215
- - --------------------------------------------------------------------------------
Year ended December 31, 1995 1994 1993
- - --------------------------------------------------------------------------------
Revenues $ 2,049,103 $ 2,064,966 $ 1,967,909
Expenses 1,753,912 1,754,265 1,716,800
- - --------------------------------------------------------------------------------
Net income $ 295,191 $ 310,701 $ 251,109
- - --------------------------------------------------------------------------------
Depreciation on the Willowbrook Property has been provided on a straight-line
basis over the estimated useful lives of the various assets as follows:
Apartment buildings 25 years
Furniture and fixtures 12 years
The Joint Venture made distributions to the Partnership in the amount of
$106,344 during 1995 and 1994. The distributions represent 14.18% of the total
distributions made by The Willowbrook Joint Venture.
The investment in The Willowbrook Joint Venture prior to the impairment loss of
$472,947 at December 31, 1995, at equity of $1,868,401 and $1,960,652 for 1994,
includes the additional costs of the Partnership's share of the investment in
the Joint Venture over the Partnership's share of the net book value of the
Joint Venture on April 1, 1992 less amortization. The amount by which the
Partnership's share of the investment in the Joint Venture exceeds the
Partnership's share of the net book value of the Joint Venture is $651,576. This
amount has been allocated to land and building in the amounts of $75,452 and
$576,124, respectively. The excess costs allocable to the building are amortized
over the remaining estimated useful
Clover Income Properties III, L.P.
Notes to Financial Statements
- - --------------------------------------------------------------------------------
life of the building on April 1, 1992 which is 20 years and 9 months. Therefore,
the amount of investment, at equity, reflected here does not correspond to the
Partnership's capital account balance in the Joint Venture due to the adjustment
for amortization as indicated above.
4. Deferred Costs
Due to the adjustment of the investment in Joint Venture to market value, it is
likely that the value of the deferred costs has been significantly impaired and
recovery seems doubtful. Therefore, the costs have been written off in the
current year and have been reflected as an impairment loss in the Company's
statement of operations.
5. Partnership Agreement
Pursuant to the terms of the Partnership Agreement, the net losses through
October 1989 were allocated 1% to the initial limited partner and 99% to the
general partner. After the sale of the Minimum Offering and the admission of
additional limited partners to the Partnership, all items of income, gain and
loss and distributions of cash are allocated as follows:
Net income of the Partnership from operations will be allocated as follows:
(a) first, if the Partnership made net cash receipts distributions with
respect to such period, an amount of net income up to the amount of such
net cash receipts distributions shall be allocated among the partners
in the same proportions as such net cash receipts distributions were
distributed provided, however, that if the total amount of net income is
less than the amount of net cash receipts distributions for such a
period, an amount of net income equal to the amount of net cash receipts
distributions distributed to the general partner and all remaining net
income shall be allocated to the limited partners,
(b) second, to those partners having deficit balances in their capital
accounts in proportion to and to the extent of such deficits,
(c) third, to those partners, if any, who have received cumulative net cash
receipts distributions in the current and prior periods in an amount in
excess of the cumulative amount of net income allocated to such partners
in proportion to and to the extent of any such excess and,
Clover Income Properties III, L.P.
Notes to Financial Statements
- - --------------------------------------------------------------------------------
(d) fourth, the balance, if any, shall be allocated 10% to the general
partner and 90% to the limited partners in proportion to their relative
ownership of units.
Net income or gain realized by the Partnership on a sale shall be allocated in
the following order of priority:
(a) first, to the partners with negative capital account balances,
proportionately based on the respective negative balances in their
capital accounts until each such partner has a zero capital account
balance,
(b) second, to the limited partners until the capital account balance of each
limited partner equals his adjusted capital contribution, as determined
without reduction for any sale or refinancing proceeds distributed or to
be distributed for the current period,
(c) third, to the limited partners until the capital account of each limited
partner equals the sum of the priority returns distributed or to be
distributed to the limited partners and the amount described in
subparagraph (b),
(d) fourth, 85% to all limited partners and 15% to the limited partners
entitled to receive additional returns until the capital account of each
limited partner entitled to receive additional returns equals the sum of
the additional return distributed or to be distributed to such limited
partner and the amount described in subparagraph (c), and, then,
(e) any remaining amounts of net income or gain shall be allocated 15% to the
general partner and 85% to the limited partners in proportion to their
relative ownership of units.
Net losses of the Partnership shall be allocated 1% to the general partner and
99% to the limited partners, in accordance with their relative ownership of
units.
Net cash receipts shall, to the extent determined by the general partner, be
distributed first until the priority distributions (a 7.0% annual noncompounded
cumulative return on the adjusted capital contributions) have been fully paid,
1% to the general partner and 99% to the limited partners. Any remaining net
cash receipts shall be distributed 10% to the general
Clover Income Properties III, L.P.
Notes to Financial Statements
- - --------------------------------------------------------------------------------
partner and 90% to the limited partners. Sale or refinancing proceeds shall be
distributed first to the limited partners in an amount equal to their adjusted
capital contributions, second, in an amount of the priority returns payable (a
12% annual noncompounded cumulative return on their adjusted capital
contributions), third, 85% to all limited partners and 15% to the limited
partners entitled to receive additional returns (a noncompounded, cumulative
annual return with a range of 13.0% to 14.0% which is determined by partnership
subscription dates) until the limited partners so entitled have received their
additional returns, and fourth, any remaining proceeds to be distributed 15% to
the general partner and 85% to the limited partners.
6. Transactions With Affiliates
Clover or its affiliates are entitled to reimbursement for administrative
services rendered to the Partnership, direct expenses of Partnership opera-
tions, and goods and services used by and for the Partnership.
As compensation for property management services performed by an affiliate of
the general partner with respect to the Property, prior to its sale on July 1,
1994, the affiliate was entitled to a management fee in an amount not to exceed
5% of gross revenues.
Transactions with affiliates are summarized below:
Reimbursable
Management Costs and
Fees Advances Total
- - --------------------------------------------------------------------------------
Amount payable at
January 1, 1993 $ 52,262 $ 21,808 $ 74,070
Incurred during 1993 24,101 31,418 55,519
Payments during 1993 (46,176) (43,845) (90,021)
- - --------------------------------------------------------------------------------
Amount payable at
December 31, 1993 30,187 9,381 39,568
Incurred during 1994 11,716 14,521 26,237
Payments during 1994 (33,508) (21,902) (55,410)
- - --------------------------------------------------------------------------------
Clover Income Properties III, L.P.
Notes to Financial Statements
- - --------------------------------------------------------------------------------
Reimbursable
Management Costs and
Fees Advances Total
- - --------------------------------------------------------------------------------
Amount payable at
December 31, 1994 $ 8,395 $ 2,000 $ 10,395
Incurred during 1995 - 3,405 3,405
Payments during 1995 (8,395) (5,405) (13,800)
- - --------------------------------------------------------------------------------
Amount payable at
December 31, 1995 $ - $ - $ -
- - --------------------------------------------------------------------------------
7. Subsequent Distributions
In January 1996, the Partnership made cash distributions of $99 to the general
partner and $9,855 to the limited partners.
Report of Independent Certified Public Accountants
The Willowbrook Joint Venture
Merchantville, New Jersey
We have audited the accompanying balance sheets of The Willowbrook Joint Venture
as of December 31, 1995 and 1994, and the related statements of income,
partners' capital, and cash flows for each of the three years in the period
ended December 31, 1995. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of The Willowbrook Joint Venture
as of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
January 30, 1996, except
for Note 2, which is
February 7, 1996
The Willowbrook Joint Venture
Balance Sheets
December 31, 1995 1994
Assets
Cash (including $34,868 in 1995
and $46,394 in 1994 of cash
held for security deposits) $ 176,362 $ 193,081
Rents receivable 7,602 868
Prepaid expenses 137,014 136,682
Utility deposit 1,100 1,100
Investment property held for sale,
net of accumulated depreciation 9,396,753 9,858,484
---------- ---------
$9,718,831 $10,190,215
========== ===========
December 31, 1995 1994
Liabilities and Partners' Capital
Liabilities
Accounts payable $ - $ 17,447
Accrued expenses 36,956 26,563
Tenants' security deposits 32,222 40,748
Prepaid rents 7,888 8,936
Due to affiliates 326,293 326,240
---------- ---------
Total liabilities 403,359 419,934
---------- ---------
Commitment
Partners' capital
Clover Income Properties, L.P. 3,671,476 3,866,638
Clover Income Properties II, L.P. 3,671,476 3,866,638
Clover Income Properties III, L.P. 1,972,520 2,037,005
---------- ---------
Total partners' capital 9,315,472 9,770,281
---------- ---------
$9,718,831 $10,190,215
========== ===========
See accompanying summary of significant accounting policies and notes to
financial statements.
The Willowbrook Joint Venture
Statements of Income
Year ended December 31, 1995 1994 1993
Revenues
Rental income $2,013,638 $2,013,518 $1,928,002
Other income 34,414 48,416 34,772
Interest income 1,051 3,032 5,135
---------- ---------- ----------
Total revenues 2,049,103 2,064,966 1,967,909
---------- ---------- ----------
Expenses
Depreciation and amortization 514,843 512,242 508,510
Operating expenses (including
affiliate transactions of $17,905
in 1995, $112,445 in 1994 and
$115,451 in 1993) 1,225,052 1,219,161 1,186,441
Professional services 14,017 11,173 12,068
General and administrative, affiliates - 11,689 9,781
---------- ---------- ----------
Total expenses 1,753,912 1,754,265 1,716,800
---------- ---------- ----------
Net income $ 295,191 $ 310,701 $ 251,109
========== ========== ==========
See accompanying summary of significant accounting policies and notes to
financial statements.
The Willowbrook Joint Venture
Statements of Partners' Capital
Clover Clover Clover
Income Income Income
Properties, Properties Properties
L.P. II, L.P. III, L.P. Total
---------- ---------- ---------- ----------
Balance, January 1, 1993 $4,220,846 $4,220,846 $2,154,052 $10,595,744
Capital contributions 30,836 30,836 10,197 71,869
Net income 107,751 107,751 35,607 251,109
Partners' distributions (308,405) (308,405) (101,924) (718,734)
---------- ---------- ---------- ----------
Balance, December 31, 1993 4,051,028 4,051,028 2,097,932 10,199,988
Capital contributions 4,116 4,116 1,360 9,592
Net income 133,322 133,322 44,057 310,701
Partners' distributions (321,828) (321,828) (106,344) (750,000)
---------- ---------- ---------- ----------
Balance, December 31, 1994 3,866,638 3,866,638 2,037,005 $9,770,281
Capital contributions - - - -
Net income 126,666 126,666 41,859 295,191
Partners' distributions (321,828) (321,828) (106,344) (750,000)
Balance, December 31, 1995 $3,671,476 $3,671,476 $1,972,520 $9,315,472
========== ========== ========== ==========
See accompanying summary of significant accounting policies and notes to
financial statements.
The Willowbrook Joint Venture
Statements of Cash Flows
Year ended December 31, 1995 1994 1993
Operating activities
Cash received from rentals $2,005,856 $2,020,702 $1,926,352
Interest income received 1,051 3,032 5,135
Other income received 34,414 48,416 34,772
Cash paid for operating expenses (1,254,928) (1,255,209) (1,266,247)
---------- ---------- ----------
Net cash provided by operating activities 786,393 816,941 700,012
---------- ---------- ----------
Investing activities
Cash paid for investment property (53,112) (62,265) (94,426)
---------- ---------- ----------
Financing activities
Partners' distributions (750,000) (750,000) (718,734)
Partners' contributions - 9,592 71,869
---------- ---------- ----------
Net cash (used) in financing activities (750,000) (740,408) (646,865)
---------- ---------- ----------
Net (decrease) increase in cash (16,719) 14,268 (41,279)
Cash, at beginning of year 193,081 178,813 220,092
---------- ---------- ----------
Cash, at end of year $ 176,362 $ 193,081 $ 178,813
========== ========== ==========
See accompanying summary of significant accounting policies and notes to
financial statements.
The Willowbrook Joint Venture
Statements of Cash Flows
Year ended December 31, 1995 1994 1993
Reconciliation of net income to net cash
provided by operating activities
Net income $ 295,191 $ 310,701 $ 251,109
--------- --------- ---------
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization 514,843 512,242 508,510
(Increase) decrease in rents receivable (6,734) 2,428 (1,929)
(Increase) decrease in prepaid expenses (332) 15,508 320
(Decrease) increase in accounts payable (17,447) (11,091) 9,308
Increase (decrease) in accrued expenses 10,393 526 (2,146)
(Decrease) in tenants' security deposits (8,526) (5,816) (15,874)
(Decrease) increase in prepaid rents (1,048) 4,756 279
Increase (decrease) in due to affiliates 53 (12,313) (49,565)
--------- --------- ---------
Total adjustments 491,202 448,903 503,368
--------- --------- ---------
Net cash provided by operating activities $ 786,393 $ 816,941 $ 700,012
========= ========= =========
See accompanying summary of significant accounting policies and notes to
financial statements.
The Willowbrook Joint Venture
Summary of Significant Accounting Policies
Income Taxes
The Joint Venture has not provided for income taxes, since all income and
losses are to be allocated to the partners for inclusion in their respective tax
returns. The tax returns, the status of the Joint Venture as such for tax
purposes and the amount of allocable Joint Venture income or loss are subject
to examination by the Internal Revenue Service. If such examinations result
in changes with respect to the joint venture status or in changes to allocable
Joint Venture income or loss, the tax liability of the partners could be
changed accordingly.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assump-
tions 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.
The Willowbrook Joint Venture
Notes to Financial Statements
1. Organization and Basis of Accounting
The Willowbrook Joint Venture ("Joint Venture") was formed on December 17, 1987,
by Clover Income Properties, L.P. (CIP) and Clover Income Properties II, L.P.
(CIP II) for the purpose of acquiring, operating and holding the Willowbrook
Apartments. Leases primarily have a term of one year or less. The life of the
joint venture was initially set at 20 years.
On April 8, 1992, Clover Income Properties III, L.P. ("CIP III") acquired a
14.18% interest in the Joint Venture for $2,200,000 in cash, effective April 1,
1992, from CIP and CIP II, which reduced their respective ownership interest in
the Joint Venture from 50% to 42.91% each. The life of the Joint Venture was
extended for an additional 8 years, at that time.
The Joint Venture's records are maintained on the accrual basis of accounting as
adjusted for Federal income tax reporting purposes. The accompanying financial
statements have been prepared from such records after making appropriate
adjustments, where applicable, to reflect the Joint Venture's accounts on the
accrual basis of accounting according to generally accepted accounting
principles (GAAP). Depreciation for financial reporting purposes is provided
using the straight-line method over the estimated useful lives of the assets,
while alternative methods are used for Federal income tax purposes. The net
effect of this difference is summarized as follows:
December 31, 1995 1994
------------------------- -------------------------
GAAP Tax Basis GAAP Tax Basis
----------- ----------- ----------- -----------
Total assets $ 9,718,831 $11,481,249 $10,190,215 $11,809,659
=========== =========== =========== ===========
Partners' capital $ 9,315,472 $11,077,891 $ 9,770,281 $11,389,717
=========== =========== =========== ===========
The Willowbrook Joint Venture
Notes to Financial Statements
Reconciliation of income per financial statement to income per Federal income
tax return is as follows:
Year ended December 31, 1995 1994 1993
-------- -------- --------
Net income per financial
statements $295,191 $310,701 $251,109
Reconciling item
Depreciation 142,983 142,571 142,571
-------- -------- --------
Tax basis income $438,174 $453,272 $393,680
======== ======== ========
2. Investment Property Held for Sale
On December 17, 1987, the Joint Venture acquired the Willowbrook Apartments (the
Property), a mid-rise apartment complex comprising 299 apartment units contained
in eight five-story buildings. The complex is located in Baltimore, Maryland.
On February 7, 1996, the Joint Venture entered into an agreement of sale with
Berwind Properties Group, Inc. and First Montgomery Properties, Ltd. Under the
terms of the agreement, the Joint Venture will sell The Willowbrook Apartments
(including land), all related improvements and tangible and intangible property
for $10,500,000 less a $315,000 credit for capital improvements.
The sale is contingent upon, among other things, the sale of all of the
properties owned by affiliates of Clover Financial Corporation which are also
under agreement of sale with Berwind and First Montgomery. Clover Financial
Corporation is the parent company of the general partner of CIP, CIP II and CIP
III. The sale must be approved by a majority of the limited partners of CIP,
CIP II and CIP III. Upon sale of The Willowbrook Apartments, all assets of the
Joint Venture will be liquidated. The net proceeds will then be distributed to
its owners (CIP, CIP II and CIP III) and the Joint Venture dissolved.
The Willowbrook Joint Venture
Notes to Financial Statements
The following is a summary of investment property held for sale:
December 31, 1995 1994
----------- -----------
Land $ 1,421,205 $ 1,421,205
Apartment buildings 11,006,247 10,980,891
Furniture and fixtures 1,004,545 976,789
----------- -----------
13,431,997 13,378,885
Less accumulated depreciation (4,035,244) (3,520,401)
----------- -----------
$ 9,396,753 $ 9,858,484
=========== ===========
Depreciation on the property has been provided on a straight-line basis over
the estimated useful lives of the various assets as follows:
Apartment buildings 25 years
Furniture and fixtures 12 years
Maintenance and repair expenses are charged to expense as incurred. Significant
betterments and improvements are capitalized and depreciated over their useful
lives.
3. Transactions with Affiliates
Effective February 21, 1995, NPI-CL Management, L.P. ("NPI") which is
unaffiliated with the Partners, replaced an affiliate of the Partners as
Property Manager. Until that time, the property was managed by the affiliate
pursuant to a management agreement which provided for an annual fee not to
exceed 5% of the gross revenues from the Property.
The general partner of CIP, CIP II, and CIP III and their affiliates are
entitled to reimbursement for administrative services rendered to the Joint
Venture, direct expenses of operations and goods and services used by and for
the Joint Venture.
The Willowbrook Joint Venture
Notes to Financial Statements
Transactions with affiliates are summarized below:
Management Reimbursable
Fees Costs Total
--------- --------- ---------
Amount payable at
January 1, 1993 $334,953 $53,165 $388,118
Incurred during 1993 98,313 26,919 125,232
Payments during 1993 (114,616) (60,181) (174,797)
--------- --------- ---------
Amount payable at
December 31, 1993 318,650 19,903 338,553
Incurred during 1994 102,734 21,400 124,134
Payments during 1994 (102,252) (34,195) (136,447)
Amount payable at
December 31, 1994 319,132 7,108 326,240
Incurred during 1995 12,750 5,155 17,905
Payments during 1995 (12,750) (5,102) (17,852)
--------- --------- ---------
Amount payable at
December 31, 1995 $ 319,132 $ 7,161 $ 326,293
========= ========= =========
4. Subsequent Distributions
In January 1996, the Joint Venture made cash distributions of $26,819, $26,819
and $8,862 to Clover Income Properties, L.P., Clover Income Properties II, L.P.
and Clover Income Properties III, L.P., respectively.
<TABLE>
<CAPTION>
Cost Capitalized
Initial Cost Subsequent to Acquisition
-------------------------- -------------------------
Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements
- - ----------- ------------ ---------- ------------- ---- -------------
<S> <C> <C> <C> <C> <C>
76-unit garden apartment complex
located in Charlotte, North
Carolina None $363,597 $3,111,700 $- $35,379
</TABLE>
(A) The aggregate cost for federal income tax purposes is equal to the amount
at which the real estate is carried for financial reporting purposes.
(B) Reconciliation of real estate:
1995 1994 1993
----------- ----------- -----------
Balance, at beginning of year $ - $ 3,510,676 $ 3,506,941
Dispositions during year:
Cost of real estate sold - (3,510,676) -
Additions during year:
Improvements, etc. - - -
----------- ----------- -----------
Balance, at end of year $ - $ - $ 3,510,676
=========== =========== ===========
(C) Reconciliation of accumulated
depreciation:
Balance, at beginning of year $ - $ 325,555 $ 236,316
Depreciation expense - 47,577 89,239
Accumulated depreciation--
disposal of assets - (373,132) -
----------- ----------- -----------
Balance, at end of year $ - $ - $ 325,555
=========== =========== ===========
Schedule III
Clover Income Properties III, L.P.
Schedule of Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Gross Amount at Which
Carried at December 31, 1995 (A) Life on Which
- - ------------------------------------------------------------ Depreciation Has
Buildings and Date of Date Been Computed
Land Improvements Total (B) Depreciation (C) Construction Acquired in 1994
- - ---------- ------------- ----------- ---------------- ------------ -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
$ - $ - $ - $ - 1985 4/2/90 12-40 years
</TABLE>
<TABLE>
<CAPTION>
Cost Capitalized
Initial Cost Subsequent to Acquisition
-------------------------- -------------------------
Buildings and Buildings and
Description Encumbrances Land Improvements Land Improvements
- - ----------- ------------ ---------- ------------- ---- -------------
<S> <C> <C> <C> <C> <C>
299-unit mid-rise apartment complex
located in Baltimore, Maryland None $1,421,205 $11,289,276 $- $721,516
</TABLE>
(A) The aggregate cost for federal income tax purposes is equal to the amount
at which the real estate is carried for financial reporting purposes, plus
the additional stepped up basis due to a Section 754 election in the amount
of $556,439.
(B) Reconciliation of real estate:
1995 1994 1993
----------- ----------- -----------
Balance, at beginning of year $13,378,885 $13,316,620 $13,222,194
Additions during year:
Improvements, etc. 53,112 62,265 94,426
----------- ----------- -----------
Balance, at end of year $13,431,997 $13,378,885 $13,316,620
=========== =========== ===========
(C) Reconciliation of accumulated
depreciation:
Balance, at beginning of year $ 3,520,401 $ 3,008,159 $ 2,499,649
Depreciation expense 514,843 512,242 508,510
----------- ----------- -----------
Balance, at end of year $ 4,035,244 $ 3,520,401 $ 3,008,159
=========== =========== ===========
Schedule III
The Willowbrook Joint Venture
Schedule of Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Gross Amount at Which
Carried at December 31, 1995 (A) Life on Which
- - ------------------------------------------------------------ Depreciation Has
Buildings and Date of Date Been Computed
Land Improvements Total (B) Depreciation (C) Construction Acquired in 1994
- - ---------- ------------- ----------- ---------------- ------------ -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
$1,421,205 $12,010,792 $13,431,997 $4,035,244 1966 12/17/87 12-25 years
</TABLE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partner has the sole right to manage the business of the
Partnership and make any and all decisions with respect thereto. The limited
partners are allowed to vote or consent only in limited circumstances as
permitted by the Delaware Revised Uniform Limited Partnership Act and as
specifically set forth in the Partnership Agreement. The General Partner has
ultimate authority in all Partnership business decisions.
The General Partner has the right to delegate management functions and
to exercise sole discretion in selecting properties in which to invest. Limited
partners have no right to participate in the management of the Partnership, or
in the selection of investment properties.
The General Partner is a New Jersey corporation which is a wholly-owned
subsidiary of Clover Financial Corporation ("Clover"), a New Jersey corporation
which has engaged, directly and indirectly, in real estate ownership and
operation since 1972. The officers and directors of the General Partner are
Donald N. Love, Steven R. Zalkind, Diane P. Duggan and Stanley E. Borucki, all
of whom are also officers and/or directors of Clover. In addition, Messrs. Love
and Zalkind are the majority shareholders of Clover.
Various relationships of the Partnership to the General Partner and its
affiliates are described at pages 13-15 of the Prospectus, which description is
incorporated herein by reference.
The executive officers and directors of the General Partner and Clover
are as follows:
Position Age Position
-------- --- --------
Donald N. Love 57 President, Director
Steven R. Zalkind 53 Vice-President, Director
Diane P. Duggan 53 Secretary
Stanley E. Borucki 42 Treasurer
Mr. Love has been President and a director of the General Partner
since its formation in 1986, and he is President and a director of Clover and
various affiliates of Clover. Mr. Love has been associated with Clover since
1971 Mr. Love holds a B.S. degree in Business Administration from Temple
University.
Mr. Zalkind has been Vice President and a director of the General
Partner since its formation in 1988, and he is Vice President and a director of
Clover and various affiliates of Clover. Mr. Zalkind has been associated with
Clover since May 1985.
Ms. Duggan has been Secretary of the General Partner since its
formation in 1988, and she serves as Secretary of Clover and various affiliates
of Clover. Ms. Duggan has been associated with Clover since 1973 and has served
as an officer of Clover and its affiliates since 1982.
Mr. Borucki has served as Treasurer of the General Partner since May
1990, and he serves as Treasurer of various affiliates of Clover. He has been
the Assistant Treasurer of Clover since 1988. Mr. Borucki joined Clover as a
staff accountant in 1977, and he served as the Controller of Clover from 1984 to
1988. Mr. Borucki is a Certified Public Accountant.
All of the directors and executive officers of the General Partner are
elected annually to the offices set forth above to hold office until their
successors are duly elected and qualified.
Item 11. Executive Compensation
The executive officers and directors of the General Partner receive no
current or proposed direct compensation for serving in such capacities. The
General Partner received acquisition fees for services rendered in connection
with the selection and acquisition of direct or indirect interests in properties
and the General Partner is entitled to receive a share of cash distributions.
Such fees and distributions are described generally under the caption
"Compensation and Fees" at pages 12-14 and under the caption "Allocations of
Profits and Losses and Cash Distributions" on pages 25-28 of the Prospectus and
at pages A-11 to A-16 of the Partnership Agreement, included as an Exhibit to
the Prospectus, which descriptions are incorporated herein by reference.
Effective February 21, 1995, NPI, which is unaffiliated with the General
Partner, replaced Allstate Management Corp., an affiliate of the General
Partner, as the property manager of The Willowbrook Apartments. See Item 1.
Business.
The Partnership is permitted to engage in various transactions
involving the General Partner and its affiliates as described under the captions
"Compensation and Fees" at pages 12-14 and "Conflicts of Interests" at pages
15-18 of the Prospectus and "Rights, Authority, Powers, Responsibilities and
Duties of the General Partner" at pages A-21 to A-28 of the Partnership
Agreement, included as an Exhibit to the Prospectus, which descriptions are
incorporated herein by reference.
The General Partner and its affiliates may be reimbursed by the
Partnership for the actual costs advanced by them for offering and
organizational expenses paid to unaffiliated parties, materials used by the
Partnership and obtained from unaffiliated parties, administrative services, and
direct expenses of Partnership operations.
Reference is also made to Notes 6 of the Notes to the Partnership's
Financial Statements and Note 3 of the Notes to The Willowbrook Joint Venture's
Financial Statements under Item 8. Financial Statements and Supplementary Data,
which contain information on the amounts of acquisition fees, reimbursements for
costs advanced on behalf of the Partnership which were actually earned by the
General Partner and its affiliates and actually paid by the Partnership.
Reference is made to the Statements of Partners' Capital (Deficiency) in the
Partnership's Financial Statements and to Note 6 of the Notes to the
Partnership's Financial Statements under Item 8. Financial Statements and
Supplementary Data, which contain information on the amount of cash
distributions actually made by the Partnership to the General Partner.
Item 12. Security Ownership of Certain Beneficial Owners and Management
No person (including any "group" as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934) is known to the Partnership to
be the beneficial owner of more than five percent of the outstanding Units as of
March 7, 1996.
As of March 7, 1996, the directors of the General Partner and the
directors and officers of the General Partner as a group owned, directly or
indirectly, the following number of Units of the Partnership:
Amount and nature
of Beneficial Percentage
Name Ownership of Units Interest
- - ---- ------------------ --------
Donald N. Love 13 *
Dianne P. Duggan 6 *
All directors and
officers as a group
(4 persons) 19 *
- - -------------------
* Less than one percent
All the outstanding shares of the Common Stock of the General Partner
are owned by Clover as discussed under Item 10. Directors and Executive Officers
of the Registrant.
Item 13. Certain Relationships and Related Transactions.
Since January 1, 1995, there were no significant transactions or
business relationships with the General Partner or its affiliates, and none are
currently proposed, other than those described in Item 11. Executive
Compensation. CIP and CIP II are both publicly syndicated limited partnerships,
the general partner of each of which is a wholly owned subsidiary of Clover. The
officers and directors of the general partners of CIP and CIP II are the same
persons as the officers and directors of the General Partner.
As of December 31, 1995, the Partnership was not indebted to Clover and
its affiliates. The Willowbrook Joint Venture (in which the Partnership has a
14.18% ownership interest) was indebted to Clover and its affiliates in the
aggregate amount of $326,293, including reimbursable costs incurred and accrued
and unpaid property management fees.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on 8-K.
(a) The following documents are filed as part of this report:
(1) Financial statements. See Index to Financial Statements
under Item 8. Financial Statements.
(2) Financial statement schedules. See Index to Financial
Statements under Item 8. Financial Statements.
(3) Exhibits.
* 3.1 Certificate of Limited Partnership (Exhibit 3.1
to the registrant's Registration Statement, No.
33-26129 filed with the Commission on December 16, 1988
[the "Registration Statement"]).
* 3.2 Amended and Restated Agreement of Limited
Partnership dated October 31, 1989 (Exhibit 3.2 to the
registrant's Annual Report on Form 10-K for the year
ended December 31, 1991 (the "1991 Form 10-K")).
*10.1 Agreement of Purchase and Sale dated March 30,
1990 between Mallard Green Limited Partnership and the
registrant for the Mallard Green Apartments (Exhibit
10.6 to Post-Effective Amendment No. 4 to the
Registration Statement filed with the Commission on
April 17, 1990).
*99.1 The Prospectus of the Partnership dated March 30,
1989, as filed with the Commission pursuant to Rule
424(b) (3) on April 24, 1989, and included in Amendment
No. l to the Registration Statement.
*99.2 Supplement No. 5 dated April 25, 1990 to the
Prospectus incorporating and superseding Supplements
Nos. l, 2, 3 and 4, as filed with the Commission
pursuant to Rules 424 (b) (3) and 424(c) on May 2, 1990
and included in Post-Effective Amendment No. 4 filed
with the Commission on April 17, 1990.
*99.3 Supplement No. 6 dated March 27, 1991 to the
Prospectus and Supplement No. 5 included in
Post-Effective Amendment No. 5 filed with the
Commission on March 12, 1991.
*99.4 The Partnership's Current Report on Form 8-K
filed with the Commission on March 4, 1996.
- - -------------------
* Incorporated by reference.
(b) No reports on Form 8-K were filed during the fourth quarter
of 1995.
------------------------------
Pursuant to the Partnership Agreement and certain undertakings in the
Registration Statement, the registrant is obligated to provide an Annual Report
to limited partners of the Partnership on or before April 30, 1995. The
Partnership will furnish copies of such report to the Commission when it is sent
to the limited partners.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CLOVER INCOME PROPERTIES III, L.P.
CROWN MANAGEMENT CORPORATION,
General Partner
Date: March 27, 1996 By: /s/ Donald N. Love
-----------------------------
Donald N. Love, President
Date: March 27, 1996 By: /s/ Stanley E. Borucki
-----------------------------
Stanley E. Borucki, Treasurer
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 in the capacities and on the dates indicated.
Date: March 27, 1996 /s/ Donald N. Love
------------------------------------------
Donald N. Love, Director and
President of Crown Management Corporation,
the General Partner
Date: March 27, 1996 /s/ Steven R. Zalkind
------------------------------------------
Steven R. Zalkind, Director
and Vice-President of
Crown Management Corporation,
the General Partner
