<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------------ -------------
For Quarter Ended September 30, 1997 Commission File No. 0-21444
AFG Investment Trust C
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3157232
- ------------------------------ ----------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
88 Broad Street, Boston, MA 02110
- -------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 854-5800
-----------------------
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report.)
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
----- ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court 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 No
----- ------
<PAGE>
AFG INVESTMENT TRUST C
FORM 10-Q
INDEX
PAGE
-----
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statement of Financial Position at September 30, 1997
and December 31, 1996......................................... 3
Statement of Operations for the three and nine months
ended September 30, 1997 and 1996............................. 4
Statement of Cash Flows for the nine months ended
September 30, 1997 and 1996................................... 5
Notes to the Financial Statements.............................. 6-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 12-17
PART II. OTHER INFORMATION:
Items 1-6....................................................... 18
2
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AFG INVESTMENT TRUST C
STATEMENT OF FINANCIAL POSITION
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................................... $11,874,866 $10,634,493
Restricted cash..................................................................... 12,011,598 --
Rents receivable.................................................................... 1,025,623 2,139,372
Accounts receivable--affiliate...................................................... 676,462 6,484,537
Equipment at cost, net of accumulated depreciation of $48,732,516 and $43,782,922 at
September 30, 1997 and December 31, 1996, respectively............................ 65,794,022 35,868,028
Organization costs, net of accumulated amortization of $4,833 and $4,083 at
September 30, 1997 and December 31, 1996, respectively............................ 167 917
----------- -----------
Total assets.................................................................... $91,382,738 $55,127,347
----------- -----------
----------- -----------
LIABILITIES AND PARTICIPANTS' CAPITAL
Notes payable....................................................................... $45,801,266 $19,084,751
Accrued interest.................................................................... 148,833 188,983
Accrued liabilities................................................................. 22,500 23,985
Accrued liabilities--affiliate...................................................... 154,206 264,123
Deferred rental income.............................................................. 157,972 209,535
Cash distributions payable to participants.......................................... 451,805 302,484
----------- -----------
Total liabilities............................................................... 46,736,582 20,073,861
----------- -----------
Participants' capital (deficit):
Managing Trustee.................................................................. (157,325) (103,527)
Special Beneficiary............................................................... (1,275,631) (861,348)
Class A Beneficiary Interests (2,011,014 Interests; initial purchase price of $25
each)........................................................................... 31,866,638 36,018,361
Class B Beneficiary Interests (3,024,740 Interests; initial purchase price of $5
each)........................................................................... 14,212,474 --
----------- -----------
Total participants' capital..................................................... 44,646,156 35,053,486
----------- -----------
Total liabilities and participants' capital..................................... $91,382,738 $55,127,347
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
AFG INVESTMENT TRUST C
STATEMENT OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
---------------------- ------------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
---------- ---------- ----------- -----------
Income:
Lease revenue................................................. $3,875,875 $5,097,913 $11,933,449 $15,712,736
Interest income............................................... 321,611 79,947 730,878 177,062
Loss on sale of equipment..................................... (567,125) (67,351) (356,822) (598,749)
---------- ---------- ----------- -----------
Total income................................................ 3,630,361 5,110,509 12,307,505 15,291,049
---------- ---------- ----------- -----------
Expenses:
Depreciation and amortization................................. 3,276,517 3,780,959 9,710,932 11,659,346
Interest expense.............................................. 284,830 434,711 886,502 1,320,246
Equipment management fees--affiliate.......................... 168,713 202,279 505,854 622,979
Operating expenses--affiliate................................. 258,492 165,336 486,986 279,681
---------- ---------- ----------- -----------
Total expenses.............................................. 3,988,552 4,583,285 11,590,274 13,882,252
---------- ---------- ----------- -----------
Net income (loss)............................................... $ (358,191) $ 527,224 $ 717,231 $ 1,408,797
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Net income (loss)
per Class A Beneficiary Interest.............................. $ -- $ 0.24 $ 0.32 $ 0.64
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
per Class B Beneficiary Interest.............................. $ (0.12) $ -- $ (0.12) $ --
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Cash distributions declared
per Class A Beneficiary Interest.............................. $ 1.73 $ 0.35 $ 2.55 $ 0.98
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
per Class B Beneficiary Interest.............................. $ 0.13 $ -- $ 0.13 $ --
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statemets.
4
<PAGE>
AFG INVESTMENT TRUST C
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from (used in) operating activities:
Net income............................................................................... $ 717,231 $ 1,408,797
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization........................................................ 9,710,932 11,659,346
Loss on sale of equipment............................................................ 356,822 598,749
Changes in assets and liabilities
Decrease (increase) in:
rents receivable..................................................................... 1,113,749 1,356,421
accounts receivable--affiliate....................................................... 5,808,075 (293,955)
Increase (decrease) in:
accrued interest..................................................................... (40,150) (136,754)
accrued liabilities.................................................................. (1,485) (1,250)
accrued liabilities--affiliate....................................................... (109,917) 83,466
deferred rental income............................................................... (51,563) 7,034
------------ ------------
Net cash from operating activities................................................. 17,503,694 14,681,854
------------ ------------
Cash flows from (used in) investing activities:
Purchase of equipment.................................................................. (38,887,683) (1,805,100)
Proceeds from equipment sales.......................................................... 778,820 4,284,841
------------ ------------
Net cash from (used in) investing activities....................................... (38,108,863) 2,479,741
------------ ------------
Cash flows from (used in) financing activities:
Proceeds from capital contributions.................................................... 15,123,700 --
Payment of offering costs.............................................................. (151,237) --
Proceeds from notes payable............................................................ 31,951,256 8,581,221
Principal payments--notes payable...................................................... (7,118,876) (14,125,616)
Distributions paid..................................................................... (5,947,703) (2,094,112)
------------ ------------
Net cash from (used in) financing activities....................................... 33,857,140 (7,638,507)
------------ ------------
Net increase in cash and cash equivalents and restricted cash............................ 13,251,971 9,523,088
Cash and cash equivalents at beginning of period......................................... 10,634,493 279,116
------------ ------------
Cash and cash equivalents and restricted cash at end of period........................... $ 23,886,464 $ 9,802,204
------------ ------------
------------ ------------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest............................................... $ 926,652 $ 1,457,000
------------ ------------
------------ ------------
Supplemental disclosure of non-cash investing and financing activities:
See Note 4 to the financial statements herein.
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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AFG INVESTMENT TRUST C
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
NOTE 1--BASIS OF PRESENTATION
The financial statements presented herein are prepared in conformity with
generally accepted accounting principles and the instructions for preparing
Form 10-Q under Rule 10-01 of Regulation S-X of the Securities and Exchange
Commission and are unaudited. As such, these financial statements do not
include all information and footnote disclosures required under generally
accepted accounting principles for complete financial statements and,
accordingly, the accompanying financial statements should be read in
conjunction with the footnotes presented in the 1996 Annual Report. Except as
disclosed herein, there has been no material change to the information
presented in the footnotes to the 1996 Annual Report.
In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary to present fairly the financial
position at September 30, 1997 and December 31, 1996 and results of
operations for the three and nine month periods ended September 30, 1997 and
1996 have been made and are reflected.
NOTE 2--CASH
At September 30, 1997, the Trust had $23,780,000 invested in reverse
repurchase agreements secured by U.S. Treasury Bills or interests in U.S.
Government securities.
NOTE 3--REVENUE RECOGNITION
Rents are payable to the Trust monthly, quarterly or semi-annually and no
significant amounts are calculated on factors other than the passage of time.
Rents from Reno Air, Inc. ("Reno Air"), as provided for in the lease agreement,
are adjusted monthly for changes in the London Inter-Bank Offered Rate
("LIBOR"). Future rents from Reno Air, included below, reflect the most recent
LIBOR effected rental payment. The leases are accounted for as operating leases
and are noncancellable. Rents received prior to their due dates are deferred.
Future minimum rents of $29,435,878 are due as follows:
For the year ending September 30, 1998 $14,844,287
1999 5,402,102
2000 3,009,467
2001 2,157,534
2002 2,027,510
Thereafter 1,994,978
-----------
Total $29,435,878
-----------
-----------
During August 1997, the Trust acquired a 50.6% proportionate ownership
interest in a Boeing 767-300ER aircraft leased by Scandinavian Airlines
System (the "SAS Aircraft")--See Note 4 herein. The Trust will receive
approximately $4,132,000 of rental revenue during the year ending September
30, 1998 and $1,033,000 in the year ending September 30, 1999. Scandinavian
Airlines System has two one year renewal options in place which will commence
following the expiration of the primary lease term on December 29, 1998. If
the options are exercised, the renewal rental payments will be the lesser of
90% of the primary lease term rents or the then current fair market value
rents for such equipment.
6
<PAGE>
AFG INVESTMENT TRUST C
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 4--EQUIPMENT
The following is a summary of equipment owned by the Trust at September
30, 1997. In the opinion of Equis Financial Group Limited Partnership
("EFG"), the acquisition cost of the equipment did not exceed its fair market
value.
REMAINING
LEASE TERM EQUIPMENT
EQUIPMENT TYPE (MONTHS) AT COST
- ------------------------------------------------ ------------- -------------
Aircraft........................................ 3-63 $ 47,400,169
Computers & peripherals......................... 0-27 11,314,334
Retail store fixtures........................... 0-24 11,112,212
Manufacturing................................... 15-71 10,328,381
Locomotives..................................... 33-78 9,179,510
Materials handling.............................. 0-65 9,079,377
Construction & mining........................... 0-39 7,958,503
Commercial printing............................. 3 3,542,761
Communications.................................. 3-8 2,004,394
Research & test................................. 0-13 1,667,223
Tractors and heavy duty trucks.................. 0-6 285,299
Furniture & fixtures............................ 1-11 239,785
Trailers/intermodal containers.................. 7 229,361
Photocopying.................................... 0-9 118,652
Energy systems.................................. 0 63,900
Medical......................................... 11 2,206
Miscellaneous................................... 12 471
------------- -------------
Total equipment cost............................ 114,526,538
Accumulated depreciation........................ (48,732,516)
-------------
Equipment, net of accumulated depreciation...... $ 65,794,022
-------------
-------------
On February 5, 1996, the Trust concluded the sale of its interest in a
Boeing 747-SP to the lessee, United Air Lines, Inc., ("United"). The Trust
recognized a net loss of $1,313,122 in connection with this transaction, of
which $880,717 was recognized as Write-Down of Equipment in 1995. The
remainder of $432,405 was recognized as a loss on sale of equipment on the
accompanying financial statements for the nine month period ended September
30, 1996. In addition to lease rents, the Trust received net sale
proceeds of $4,048,779 from United for the aircraft.. In March 1996, the Trust
acquired an 8.86% ownership interest in an aircraft leased to Reno Air, Inc.
(the "Reno Aircraft"), pursuant to the reinvestment provisions of the Trust
Agreement, at a cost of $1,239,741. To acquire its interest in the Reno
Aircraft, the Trust obtained leveraging of $997,888 from a third-party lender
and utilized cash of $241,853 from the sale of the United Aircraft. Additional
cash proceeds of $565,359 were utilized during the nine months ended September
30, 1996 to acquire certain construction and mining and other equipment. In
August 1997, the Trust acquired a 50.6% ownership interest in the SAS Aircraft,
pursuant to the reinvestment provisions of the Trust Agreement, at a cost of
$30,895,171. To acquire the interest in the SAS Aircraft, the Trust obtained
leveraging of $25,654,667 from a third-party lender and utilized cash of
$5,240,504. Various other equipment, having a cost of $7,992,512 was acquired in
1997 using cash of $1,695,923 and leveraging of $6,296,589.
7
<PAGE>
AFG INVESTMENT TRUST C
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
During August 1997, the Trust and another EFG-sponsored investment
program exchanged certain locomotives for a proportionate interest in certain
other locomotives. The Trust's original locomotives had a cost and net book
value of $4,819,218 and $3,151,503, respectively, and had associated
indebtedness of $1,235,989 at the time of the exchange. The replacement
locomotives were recorded at their estimated fair value of $4,574,485 and the
Trust assumed associated debt of $3,120,127. The exchange resulted in the
recognition of a net loss, for financial statement purposes, of $461,153.
At September 30, 1997, the Trust's equipment portfolio included equipment
having a proportionate original cost of $59,469,686, representing
approximately 52% of total equipment cost.
At September 30, 1997, the cost and net book value of equipment held for
sale or re-lease was approximately $636,000 and $116,000, respectively. The
Managing Trustee is actively seeking the sale or re-lease of all equipment
not on lease. In addition, the summary above also includes equipment being
leased on a month-to-month basis.
NOTE 5--RELATED PARTY TRANSACTIONS
All operating expenses incurred by the Trust are paid by EFG on behalf of
the Trust and EFG is reimbursed at its actual cost for such expenditures.
Fees and other costs incurred during each of the nine month periods ended
September 30, 1997 and 1996, which were paid or accrued by the Trust to EFG
or its Affiliates, are as follows:
1997 1996
----- ----
Reimbursement of offering costs.................... $ 151,237 $ --
Equipment acquisition fees......................... 1,121,158 52,473
Equipment management fees.......................... 505,854 622,979
Administrative charges............................. 62,148 15,750
Reimbursable operating expenses due to
third parties.................................... 424,838 263,931
------------ ----------
Total........................................ $ 2,265,235 $ 955,133
------------ ----------
------------ ----------
All rents and proceeds from the sale of equipment are paid directly to
either EFG or to a lender. EFG temporarily deposits collected funds in a
separate interest-bearing escrow account prior to remittance to the Trust. At
September 30, 1997, the Trust was owed $676,462 by EFG for such funds. These
funds were remitted to the Trust in October 1997.
NOTE 6--NOTES PAYABLE
Notes payable at September 30, 1997 consisted of installment notes of
$45,801,266 payable to banks and institutional lenders. The notes bear
interest rates ranging between 5.1% and 14.46%, except for one note which
bears a fluctuating interest rate based on LIBOR (5.66% at September 30,
1997) plus a margin. All of the installment notes are non-recourse and are
collateralized by the equipment and assignment of the related lease payments.
Generally, the installment notes will be fully amortized by noncancellable
rents. However, the Trust has balloon payment obligations at the expiration
of the primary lease terms related to the Reno Aircraft, certain rail
equipment and the SAS Aircraft of $282,421, $2,867,081 and $22,704,268,
8
<PAGE>
AFG INVESTMENT TRUST C
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
respectively. In addition, the Managing Trustee expects to use a portion of
the Trust's available cash to retire certain indebtedness. The carrying
amount of notes payable approximates fair value at September 30, 1997.
The annual maturities of the notes payable are as follows:
For the year ending September 30, 1998 $8,793,276
1999 26,277,885
2000 5,119,456
2001 1,730,036
2002 1,745,058
Thereafter 2,135,555
-----------
Total $45,801,266
-----------
-----------
NOTE 7--PROFIT AND LOSS ALLOCATION AND DISTRIBUTION OF DISTRIBUTABLE CASH
Effective for the third quarter of 1997, the allocation of net income or
loss, for financial statement purposes, and distributions of distributable
cash are made to each Participant in accordance with the Trust Agreement, as
Amended. (see Note 9).
NOTE 8--LEGAL PROCEEDINGS
On July 27, 1995, EFG, on behalf of the Trust and other EFG-sponsored
investment programs, filed an action in the Commonwealth of Massachusetts
Superior Court Department of the Trial Court in and for the County of
Suffolk, for damages and declaratory relief against a lessee of the Trust,
National Steel Corporation ("National Steel"), under a certain Master Lease
Agreement ("MLA") for the lease of certain equipment. EFG is seeking the
reimbursement by National Steel of certain sales and/or use taxes paid to the
State of Illinois and other remedies provided by the MLA. On August 30, 1995,
National Steel filed a Notice of Removal which removed the case to the United
States District Court, District of Massachusetts. On September 7, 1995,
National Steel filed its Answer to EFG's Complaint along with Affirmative
Defenses and Counterclaims, seeking declaratory relief and alleging breach of
contract, implied covenant of good faith and fair dealing and specific
performance. EFG filed its Answer to these counterclaims on September 29,
1995. Though the parties have been discussing settlement with respect to this
matter for some time, to date, the negotiations have been unsuccessful.
Notwithstanding these discussions, EFG recently filed an Amended and
Supplemental Complaint alleging a further default by National Steel under the
MLA and EFG recently filed a request for Summary Judgment on all claims and
counterclaims. The matter remains pending before the Court. The Trust has not
experienced any material losses as a result of this action.
On June 24, 1997, four plaintiffs (the "Plaintiffs") owning limited partner
units or beneficiary interests in eight investment programs sponsored by EFG
filed a lawsuit, as a derivative action, on behalf of the Trust and 27 other
investment programs (collectively, the "Nominal Defendants") in the Superior
Court of the Commonwealth of Massachusetts for the County of Suffolk against EFG
and certain of EFG's affiliates, including the Managing Trustee of the Trust and
four other wholly-owned subsidiaries of EFG which are the general partner or
managing trustee of one or more of the investment programs, (collectively, the
"Managing Defendants"), and certain other entities and individuals that have
control of the Managing Defendants and the Nominal Defendants (the "Controlling
Defendants"). The Plaintiffs assert claims of breach of fiduciary duty, breach
of contract, unjust enrichment, and equitable relief and seek various remedies,
including compensatory and punitive damages to be determined at trial.
9
<PAGE>
AFG INVESTMENT TRUST C
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The Managing Trustee and EFG are in the early stages of evaluating the
nature and extent of the claims asserted in this lawsuit and cannot predict its
outcome with any degree of certainty. However, based upon all of the facts
presently being considered by management, the Managing Trustee and EFG do not
believe that any likely outcome will have a material adverse effect on the
Trust. The Managing Trustee, EFG and their affiliates intend to vigorously
defend against the lawsuit.
NOTE 9--ISSUANCE OF CLASS B INTERESTS
On October 26, 1996, the Trust filed a Solicitation Statement with the
United States Securities and Exchange Commission (the "SEC") which
subsequently was sent to the Beneficiaries pursuant to Regulation 14A of
Section 14 of the Securities Exchange Act. The Solicitation Statement sought
the consent of the Beneficiaries to a proposed amendment (the "Amendment") to
the Amended and Restated Declaration of Trust (the "Trust Agreement") which
would (i) amend the provisions of the Trust Agreement governing the
redemption of Beneficiary Interests to permit the Trust to offer to redeem
outstanding Beneficiary Interests at such times, in such amounts, in such
manner and at such prices as the Managing Trustee might determine from time
to time, in accordance with applicable law; and (ii) add a provision to the
Trust Agreement that would permit the Trust to issue, at the discretion of
the Managing Trustee and without further consent or approval of the
Beneficiaries, an additional class of security with such designations,
preferences and relative, participating, optional or other special rights,
powers and duties as the Managing Trustee might affix. The funds obtained
through the issuance of such a security would be used by the Trust to (a)
expand redemption opportunities for Beneficiaries without using Trust funds
which might otherwise be available for cash distributions; and (b) make a
special one-time cash distribution to the Beneficiaries.
Pursuant to the Trust Agreement, the adoption of the Amendment required
the consent of the Beneficiaries holding more than 50% in the aggregate of
the Beneficiary Interests held by all Beneficiaries. A majority of
Beneficiary Interests, representing 1,215,771 or 60.5% of all Beneficiary
Interests, voted in favor of the Amendment; 174,315 or 8.7% of all
Beneficiary Interests voted against the Amendment; and 49,787 or 2.5% of all
Beneficiary Interests abstained. Approximately 72% of all Beneficiary
Interests participated in the vote. Accordingly, the Trust Agreement was
amended.
On February 12, 1997, the Trust filed a Registration Statement on Form
S-1 with the SEC, which became effective June 10, 1997. The Registration
Statement covered the issuance and sale of a new class of beneficiary
interests in the Trust (the "Class B Interests"). The characteristics of the
Class B Interests, associated risk factors and other matters of importance to
the Beneficiaries and purchasers of the Class B Interests were set forth in a
Prospectus sent to the Beneficiaries. On July 17, 1997, the offering closed
and on July 18, 1997 the Trust issued 3,024,740 Class B Interests at $5.00
per interest, thereby generating $15,123,700 in aggregate Class B capital
contributions. Class A Beneficiaries purchased 5,520 Class B Interests,
generating $27,600 of aggregate capital contributions, and the Special
Beneficiary, EFG, purchased 3,019,220 Class B Interests, generating
$15,096,100 of such aggregate capital contributions.
Subsequently, EFG transferred its Class B Interests to a special-purpose
company, Equis II Corporation, a Delaware corporation. EFG also transferred
its ownership of AFG ASIT Corporation, the Managing Trustee of the Trust, to
Equis II Corporation. As a result, Equis II Corporation has voting control of
the Trust through its ownership of the majority of all of the Trust's
outstanding voting interests, as well as its ownership of AFG ASIT
Corporation. Equis II Corporation is controlled by EFG's President and Chief
Executive Officer, Gary D. Engle. Accordingly, control of the Managing
Trustee did not change as a result of the foregoing transactions.
As described in the Prospectus for the offering of the Class B Interests,
the Managing Trustee used a portion of the net cash proceeds realized from
the offering of the Class B Interests to pay a one-time special cash
10
<PAGE>
AFG INVESTMENT TRUST C
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
distribution of approximately $1.47 per Class A Beneficiary Interest to the
Class A Beneficiaries of the Trust. The Managing Trustee declared and paid
this special cash distribution, aggregating $2,960,865 to the Class A
Beneficiaries on August 15, 1997.
NOTE 10--OFFER TO REDEEM CLASS A INTERESTS
On August 7, 1997, the Trust commenced an offer to purchase up to 45% of
the outstanding Class A Beneficiary Interests of the Trust by filing a Form
13E-4, Issuer Tender Offer Statement, with the SEC and distributing to the
Class A Beneficiaries information (the "Tender Documents") concerning the
offer. On October 10, 1997, the Trust used $2,291,567 of the net proceeds
realized from the offering of the Class B Interests to purchase 218,661 of
the Class A Beneficiary Interests tendered as a result of the offer.
11
<PAGE>
AFG Investment Trust C
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Certain statements in this quarterly report that are not historical fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and are subject to a variety of
risks and uncertainties. There are a number of important factors that could
cause actual results to differ materially from those expressed in any
forward-looking statements made herein. These factors include, but are not
limited to, the ability of EFG to collect all rents due under the attendant
lease agreements and to successfully remarket the Trust's equipment upon the
expiration of such leases.
Three and nine months ended September 30, 1997 compared to the three and nine
months ended September 30, 1996:
Overview
As an equipment leasing trust, AFG Investment Trust C (the "Trust") was
organized to acquire a diversified portfolio of capital equipment subject to
lease agreements with third parties. The Trust was designed to progress
through three principal phases: acquisitions, operations, and liquidation.
During the operations phase, a period of approximately six years, all
equipment in the Trust's portfolio will progress through various stages.
Initially, all equipment will generate rental revenues under primary term
lease agreements. During the life of the Trust, these agreements will expire
on an intermittent basis and equipment held pursuant to the related leases
will be renewed, re-leased or sold, depending on prevailing market conditions
and the assessment of such conditions by EFG to obtain the most advantageous
economic benefit. Over time, a greater portion of the Trust's original
equipment portfolio will become available for remarketing and cash generated
from operations and from sales or refinancings will begin to fluctuate.
Ultimately, all equipment will be sold and the Trust will be dissolved. The
Trust's operations commenced in 1992.
Results of Operations
For the three and nine months ended September 30, 1997, the Trust
recognized lease revenue of $3,875,875 and $11,933,449, respectively,
compared to $5,097,913 and $15,712,736 for the same periods in 1996. The
decrease in lease revenue from 1996 to 1997 is attributable principally to
the sale of the Trust's interest in a vessel (which generated approximately
$362,134 of gross quarterly rents in 1996) to the lessee in December 1996 and
primary lease term expirations. In the near-term, lease revenue is expected
to increase, due to reinvestment of available proceeds in other equipment,
including cash proceeds realized from the Trust's sale of its interest in a
Boeing 747-SP aircraft leased to United Airlines, Inc. (the "United
Aircraft") in February 1996, as discussed below and the net proceeds
resulting from the Trust's sale of its interest in the vessel. Over time,
the level of lease revenue will decline due to the expiration of the Trust's
lease agreements.
The Trust's equipment portfolio includes certain assets in which the
Trust holds a proportionate ownership interest. In such cases, the remaining
interests are owned by EFG or an affiliated equipment leasing program
sponsored by EFG. Proportionate equipment ownership enables the Trust to
further diversify its equipment portfolio by participating in the ownership
of selected assets, thereby reducing the general levels of risk which could
result from a concentration in any single equipment type, industry or lessee.
The Trust and each affiliate individually report, in proportion to their
respective ownership interests, their respective shares of assets,
liabilities, revenues, and expenses associated with the equipment.
Interest income for the three and nine months ended September 30, 1997
was $321,611 and $730,878, respectively, compared to $88,422 and $97,115 for
the same periods in 1996. Interest income was generated
12
<PAGE>
AFG Investment Trust C
FORM 10-Q
PART I. FINANCIAL INFORMATION
from temporary investment of available cash in short-term money market
instruments. Interest income was higher in the three and nine months ended
September 30, 1997 than in the same periods in 1996 due to interest earned on
sale proceeds associated with the aircraft and vessel, discussed above. The
amount of future interest income is expected to fluctuate in relation to
prevailing interest rates and the collection of lease revenue and equipment
sales proceeds.
During August 1997, the Trust and another EFG-sponsored investment
program exchanged certain locomotives for a proportionate interest in certain
other locomotives. The Trust's original locomotives had a cost and net book
value of $4,819,218 and $3,151,503, respectively, and had associated
indebtedness of $1,235,989 at the time of the exchange. The replacement
locomotives were recorded at their estimated fair value of $4,574,485 and the
Trust assumed associated debt of $3,120,127. The exchange resulted in the
recognition of a net loss, for financial statement purposes, of $461,156.
On February 5, 1996, the Trust concluded the sale of its interest in a
Boeing 747-SP to the lessee, United Air Lines, Inc., ("United"). The Trust
recognized a net loss of $1,313,122 in connection with this transaction, of
which $880,717 was recognized as Write-Down of Equipment in 1995. The
remainder of $432,405 was recognized as a loss on sale of equipment on the
accompanying Statement of Operations for the nine months ended September 30,
1996. In addition to lease rents, the Trust received net sale proceeds of
$4,048,779 from United for the aircraft. The Managing Trustee actively
pursued the reinvestment of all such proceeds in other equipment during the
third quarter of 1997 resulting in the acquisition of a 50.6% ownership
interest in an aircraft (the "SAS Aircraft") at an aggregate cost to the
Trust of $30,895,171. To acquire the interest in the SAS Aircraft, the Trust
obtained long-term financing of $25,654,667 from a third party lender and
utilized cash of $5,240,504. Reinvestment during 1996 included the
acquisition of an 8.86% ownership interest in an aircraft (the "Reno
Aircraft") at an aggregate cost to the Trust of $1,239,741. To acquire its
interest in the Reno Aircraft, the Trust obtained long-term financing of
$997,888 from a third-party lender and utilized cash proceeds of $241,853
from the sale of the United Aircraft. During the three and nine months ended
September 30, 1996, the Trust sold other equipment having a net book value of
$224,944 and $402,406, respectively, to existing lessees and third parties.
These sales resulted in net losses for financial statement purposes, of
$67,351 and $166,344, respectively.
It cannot be determined whether future sales of equipment will result in
a net gain or net loss to the Trust, as such transactions will be dependent
upon the condition and type of equipment being sold and its marketability at
the time of sale. In addition, the amount of gain or loss reported for
financial statement purposes is partly a function of the amount of
accumulated depreciation associated with the equipment being sold.
The ultimate realization of residual value for any type of equipment is
dependent upon many factors, including EFG's ability to sell and re-lease
equipment. Changing market conditions, industry trends, technological
advances and many other events can converge to enhance or detract from asset
values at any given time. EFG attempts to monitor these changes in order to
identify opportunities which may be advantageous to the Trust and to maximize
total cash returns for each asset.
The total economic value realized upon final disposition of each asset is
comprised of all primary lease term revenue generated from that asset,
together with its residual value. The latter consists of cash proceeds
realized upon the asset's sale in addition to all other cash receipts
obtained from renting the asset on a re-lease, renewal or month-to-month
basis. The Trust classifies such residual rental payments as lease revenue.
Consequently, the amount of gain or loss reported in the financial statements
is not necessarily indicative of the total residual value the Trust achieved
from leasing the equipment.
Depreciation and amortization expense for the three and nine months ended
September 30, 1997 was $3,276,517 and $9,710,932, respectively, compared to
$3,780,959 and $11,659,346 for the same periods in 1996.
13
<PAGE>
AFG Investment Trust C
FORM 10-Q
PART I. FINANCIAL INFORMATION
For financial reporting purposes, to the extent that an asset is held on
primary lease term, the Trust depreciates the difference between (i) the cost
of the asset and (ii) the estimated residual value of the asset on a
straight-line basis over such term. For purposes of this policy, estimated
residual values represent estimates of equipment values at the date of
primary lease expiration. To the extent that an asset is held beyond its
primary lease term, the Trust continues to depreciate the remaining net book
value of the asset on a straight-line basis over the asset's remaining
economic life.
Interest expense was $284,830 and $886,502, or 7.3% and 7.4% of lease
revenue for the three and nine months ended September 30, 1997, respectively,
compared to $434,711 and $1,320,246, or 8.5% and 8.4% of lease revenue for
the same periods in 1996. The Managing Trustee expects to use a portion of
the Trust's available cash to retire indebtedness and will continue to reduce
the balance of notes payable through the application of rent receipts to
outstanding debt. Accordingly, interest expense will decline in amount and
as a percentage of lease revenue as the principal balance of notes payable is
reduced.
Management fees were 4.4% and 4.2% of lease revenue for the three and
nine months ended September 30, 1997, respectively, compared to 4% of lease
revenue for each of the same periods in 1996. Management fees are based on
5% of gross lease revenue generated by operating leases and 2% of gross lease
revenue generated by full payout leases.
Operating expenses consist principally of administrative charges,
professional service costs, such as accounting, insurance and legal fees, as
well as printing, distribution and remarketing expenses. Collectively,
operating expenses represented 6.7% and 4.1% of lease revenue for the three
and nine months ended September 30, 1997, respectively, compared to 3.2% and
1.8% of lease revenue for of the same periods in 1996. The increase in
operating expenses from 1996 to 1997 was due primarily to professional
service costs incurred in connection with the Solicitation and Registration
Statements described in Note 9 to the accompanying financial statements and
an increase in administrative charges. The amount of future operating
expenses cannot be predicted with certainty; however, such expenses are
usually higher during the acquisition and liquidation phases of a trust.
Other fluctuations typically occur in relation to the volume and timing of
remarketing activities.
Liquidity and Capital Resources and Discussion of Cash Flows
The Trust by its nature is a limited life entity which was established
for specific purposes described in the preceding "Overview". As an equipment
leasing program, the Trust's principal operating activities derive from asset
rental transactions. Accordingly, the Trust's principal source of cash from
operations is provided by the collection of periodic rents. These cash
inflows are used to satisfy debt service obligations associated with
leveraged leases, and to pay management fees and operating costs. For the
nine months ended September 30, 1997, operating activities generated net cash
inflows of $11,391,360, after reductions for equipment sale proceeds of
$2,265,436 received in connection with the sale of the vessel and debt
proceeds of $3,846,898 which relate to the leveraging of certain rail
equipment in the Trust's portfolio. These sale and debt proceeds were due
from EFG at December 31, 1996 and received by the Trust in January 1997. For
the nine months ended September 30, 1996, the Trust generated net cash
inflows from operating activities of $14,681,854. Over time, renewal,
re-lease and equipment sale activities will cause the Trust's primary-term
lease revenue and corresponding sources of operating cash to decline.
Overall, expenses associated with rental activities, such as management fees,
and net cash flow from operating activities will decline as the Trust
experiences a higher frequency of remarketing events.
The Trust's equipment is leased by a number of creditworthy,
investment-grade companies and, to date, the Trust has not experienced any
material collection problems and has not considered it necessary to provide
14
<PAGE>
AFG Investment Trust C
FORM 10-Q
PART I. FINANCIAL INFORMATION
an allowance for doubtful accounts. Notwithstanding a positive collection
history, there is no assurance that all future contracted rents will be
collected or that the credit quality of the Trust's lessees will be
maintained. Collection risk could increase in the future, particularly as
the Trust remarkets its equipment and enters re-lease agreements with
different lessees. The Managing Trustee will continue to evaluate and
monitor the Trust's experience in collecting accounts receivable to determine
whether a future allowance for doubtful accounts may become appropriate.
Ultimately, the Trust will dispose of all assets under lease. This will
occur principally through sale transactions whereby each asset will be sold
to the existing lessee or to a third party. Generally, this will occur upon
expiration of each asset's primary or renewal/re-lease term. In certain
instances, casualty or early termination events may result in the disposal of
an asset. Such circumstances are infrequent and usually result in the
collection of stipulated cash settlements pursuant to terms and conditions
contained in the underlying lease agreements.
Cash expended for equipment acquisitions and cash realized from asset
disposal transactions are reported under investing activities on the
accompanying Statement of Cash Flows. The Trust expended $38,887,683 and
$1,805,100 during the nine months ended September 30, 1997 and 1996,
respectively, to acquire equipment pursuant to the reinvestment provisions of
the Trust Agreement. Acquisitions for the nine months ended September 30,
1997 include the SAS Aircraft discussed previously and an equipment basis
adjustment of $1,884,139 related to the lease exchange described in Note 4 to
the accompanying financial statements. During the nine months ended
September 30, 1997, the Trust realized net sale proceeds of $778,820 compared
to $4,284,841 (including the proceeds from the United sale) for the same
period in 1996. Future inflows of cash from asset disposals will vary in
timing and amount and will be influenced by many factors including, but not
limited to, the frequency and timing of lease expirations, the type of
equipment being sold, its condition and age, and future market conditions.
The Trust obtained long-term financing in connection with certain
equipment leases. The origination of such indebtedness and the subsequent
repayments of principal are reported as components of financing activities.
Cash inflows of $31,951,256 and $8,581,221 in 1997 and 1996, respectively,
resulted from leveraging a portion of the Trust's equipment portfolio with
third-party lenders (see Results of Operations). Each note payable is
recourse only to the specific equipment financed and to the minimum rental
payments contracted to be received during the debt amortization period (which
period generally coincides with the lease rental term). As rental payments
are collected, a portion or all of the rental payment is used to repay the
associated indebtedness. In the near-term, the amount of cash used to repay
debt obligations is expected to increase as a result of leveraging obtained
in connection with the acquisition of reinvestment equipment. In addition,
the Managing Trustee expects to use a portion of the Trust's available cash
to retire certain indebtedness. Thereafter, the amount of indebtedness will
decline as the principal balance of notes payable is reduced through the
collection and application of rents. However, the Trust has balloon payment
obligations of $282,421, $2,867,081 and $22,704,268 at the expiration of the
primary lease terms related to the Reno Aircraft, certain rail equipment and
the SAS Aircraft, respectively.
For financial reporting purposes, the Managing Trustee and the Special
Beneficiary each has accumulated a capital deficit at September 30, 1997.
This is the result of aggregate cash distributions to these Participants
being in excess of their aggregate capital contributions ($1,000 each) and
their respective allocations of financial statement net income or loss.
Ultimately, the existence of a capital deficit for the Managing Trustee or
the Special Beneficiary for financial reporting purposes is not indicative of
any further capital obligations to the Trust by either the Managing Trustee
or the Special Beneficiary. For income tax purposes, income is allocated
first to those Participants having negative tax capital account balances so
as to eliminate any such balances. In accordance with the Trust Agreement,
upon the dissolution of the Trust, the Managing Trustee will be required to
contribute to the Trust an amount equal to any negative balance which may
exist in the Managing Trustee's tax capital account. No such requirement
exists with respect to the Special Beneficiary. At December 31, 1996, the
Managing Trustee had a positive tax capital account balance.
15
<PAGE>
AFG Investment Trust C
FORM 10-Q
PART I. FINANCIAL INFORMATION
At September 30, 1997, the Trust had aggregate future minimum lease
payments of $29,435,878 from contractual lease agreements (see Note 3 to the
financial statements), which will be used to amortize the principal balance
of notes payable (see Note 6 to the financial statements). Additional cash
inflows will be realized from future remarketing activities, such as lease
renewals and equipment sales, the timing and extent of which cannot be
predicted with certainty. This is because the timing and extent of equipment
sales is often dependent upon the needs and interests of the existing
lessees. Some lessees may choose to renew their lease contracts, while
others may elect to return the equipment. In the latter instances, the
equipment could be re-leased to another lessee or sold to a third party.
Accordingly, as the Trust matures and a greater level of its equipment assets
become available for remarketing, the cash flows of the Trust will become
less predictable. In addition, the Trust will have cash outflows to satisfy
interest on indebtedness and to pay management fees and operating expenses.
Ultimately, the Trust is expected to meet its future disbursement obligations
and to distribute any excess of cash inflows over cash outflows to the
Participants in accordance with the Trust Agreement. However, several
factors, including month-to-month lease extensions, lessee defaults,
equipment casualty events, and early lease terminations could alter the
Trust's anticipated cash flows as described herein and in the accompanying
financial statements and result in fluctuations to the Trust's periodic cash
distribution payments.
On February 12, 1997, the Trust filed a Registration Statement on Form
S-1 with the SEC, which became effective June 10, 1997. The Registration
Statement covered the issuance and sale of a new class of beneficiary
interests in the Trust (the "Class B Interests"). The characteristics of the
Class B Interests, associated risk factors and other matters of importance to
the Beneficiaries and purchasers of the Class B Interests were set forth in a
Prospectus sent to the Beneficiaries. On July 17, 1997, the offering closed
and on July 18, 1997 the Trust issued 3,024,740 Class B Interests at $5.00
per interest, thereby generating $15,123,700 in aggregate Class B capital
contributions. Class A Beneficiaries purchased 5,520 Class B Interests,
generating $27,600 of aggregate capital contributions, and the Special
Beneficiary, EFG, purchased 3,019,220 Class B Interests, generating
$15,096,100 of such aggregate capital contributions. The Trust incurred
costs in the amount of $151,237 in connection with this offering.
Subsequently, EFG transferred its Class B Interests to a special-purpose
company, Equis II Corporation, a Delaware corporation. EFG also transferred
its ownership of AFG ASIT Corporation, the Managing Trustee of the Trust, to
Equis II Corporation. As a result, Equis II Corporation has voting control
of the Trust through its ownership of a majority of all of the Trust's
outstanding voting interests, as well as its ownership of AFG ASIT
Corporation. Equis II Corporation is controlled by EFG's President and Chief
Executive Officer, Gary D. Engle. Accordingly, control of the Managing
Trustee did not change as a result of the foregoing transactions.
As described in the Prospectus for the offering of the Class B Interests,
the Managing Trustee used a portion of the net cash proceeds realized from
the offering of the Class B Interests to pay a one-time special cash
distribution to the Class A Beneficiaries of the Trust. The Managing Trustee
declared and paid this special cash distribution of approximately $1.47 per
Class A Beneficiary Interest, aggregating $2,960,865, to Class A
Beneficiaries on August 15, 1997.
On August 7, 1997, the Trust commenced an offer to purchase up to 45% of
the outstanding Class A Beneficiary Interests of the Trust by filing a Form
13E-4, Issuer Tender Offer Statement, with the SEC and distributing to the
Class A Beneficiaries information (the "Tender Documents") concerning the
offer. On October 10, 1997, the Trust used $2,291,567 of the net proceeds
realized from the offering of the Class B Interests to purchase 218,661 of
the Class A Beneficiary Interests tendered as a result of the offer.
Cash distributions paid to the Participants consist of both a return of
and a return on capital. Cash distributions do not represent and are not
indicative of yield on investment. Actual yield on investment cannot be
16
<PAGE>
AFG Investment Trust C
FORM 10-Q
PART I. FINANCIAL INFORMATION
determined with any certainty until conclusion of the Trust and will be
dependent upon the collection of all future contracted rents, the generation
of renewal and/or re-lease rents, and the residual value realized for each
asset at its disposal date. Future market conditions, technological changes,
the ability of EFG to manage and remarket the assets, and many other events
and circumstances, could enhance or detract from individual asset yields and
the collective performance of the Trust's equipment portfolio.
It is the intention of the Managing Trustee to maintain a cash
distribution level that is consistent with the operating cash flows of the
Trust and to optimize the long-term value of the Trust. A distribution level
that is higher than the Trust's operating cash flows could compromise the
Trust's working capital position, as well as its ability to refurbish or
upgrade equipment in response to lessee requirements or other market
circumstances. Accordingly, in order to better align monthly cash
distributions with the Trust's operating cash flows, the Managing Trustee
reduced the level of monthly cash distributions from an annualized rate of
$2.52 per Class A Beneficiary Interest (the rate established and paid from
the Trust's inception through September 1995) to an annualized rate of $1.26
per Class A Beneficiary Interest commencing in October 1995. In October
1996, the Managing Trustee increased the annualized distribution rate to
$1.64 per Class A Beneficiary Interest and expects that the Trust will be
able to sustain this distribution rate throughout 1997. For the Class B
Beneficiaries, the Managing Trustee established an annualized distribution of
$0.66 per Class B Beneficiary Interest commencing in August 1997. The
Managing Trustee expects to maintain this distribution throughout 1997.
Future distributions, with respect to Class B Interests, will be subordinate
to certain distributions to Class A Interests.
The nature of the Trust's principal cash flows gradually will shift from
rental receipts to equipment sale proceeds as the Trust matures. As this
occurs, the Trust's cash flows will become more volatile in that certain of
the Trust's equipment leases will be renewed and certain of its assets will
be sold. In some cases, the Trust may be required to expend funds to
refurbish or otherwise improve the equipment being remarketed in order to
make it more desirable to a potential lessee or purchaser. The Trust's
Advisor, EFG, and the Managing Trustee will attempt to monitor and manage
these events to maximize the residual value of the Trust's equipment and will
consider these factors, in addition to the collection of contractual rents,
the retirement of scheduled indebtedness and the Trust's future working
capital and equipment requirements, in establishing future cash distribution
rates. Ultimately, the Beneficiaries should expect that cash distribution
rates will fluctuate over the long term as a result of future remarketing
activities.
Cash distributions to the Managing Trustee, the Special Beneficiary, and
the Beneficiaries are declared and generally paid within fifteen days
following the end of each month. The payment of such distributions is
presented as a component of financing activities. For the nine months ended
September 30, 1997, the Trust declared total cash distributions of
Distributable Cash From Operations and Distributable Cash From Sales and
Refinancings of $6,097,024. In accordance with the Trust Agreement, the
Beneficiaries were allocated 90.75% of these distributions, or $5,533,049
($5,127,669 to Class A Beneficiaries and $405,380 to Class B Beneficiaries);
the Special Beneficiary was allocated 8.25% or $503,005; and the Managing
Trustee was allocated 1%, or $60,970.
17
<PAGE>
AFG Investment Trust C
FORM 10-Q
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Response: Refer to Note 8 to the financial statements
herein.
Item 2. Changes in Securities
Response:
On July 18, 1997, the Trust issued 3,024,740 Class B
Interests at $5.00 per interest, generating
$15,123,700 in aggregate Class B capital
contributions. Class A Beneficiaries purchased 5,520
Class B Interests, generating $27,600 of such
aggregate capital contributions, and the Special
Beneficiary, EFG, purchased 3,019,220 Class B
Interests, generating $15,096,100 of such aggregate
capital contributions. Subsequently, EFG transferred
its Class B Interests to a special-purpose company,
Equis II Corporation. (See Note 9 to the
accompanying financial statements.)
The Trust Agreement grants limited voting rights to
the Class A Beneficiaries and Class B Beneficiaries.
However, each Class A Beneficiary and Class B
Beneficiary is entitled to cast one vote for each
Interest owned by him or her. Equis II Corporation
has voting control of the Trust through its ownership
of its Class B Interests.
Future cash distributions with respect to the Class B
Interests will be subordinate to certain
distributions with respect to the Class A Interests.
Item 3. Defaults upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6(a). Exhibits
Response: None
Item 6(b). Reports on Form 8-K
Response: None
18
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the registrant and in the capacity
and on the date indicated.
AFG Investment Trust C
By: AFG ASIT Corporation, a Massachusetts
corporation and the Managing Trustee of
the Registrant.
By: /s/ Michael J. Butterfield
-------------------------------------------
Michael J. Butterfield
Treasurer of AFG ASIT Corporation
(Duly Authorized Officer and
Principal Accounting Officer)
Date: November 14, 1997
-------------------------------------------
By: /s/ Gary M. Romano
-------------------------------------------
Gary M. Romano
Clerk of AFG ASIT Corporation
(Duly Authorized Officer and
Principal Financial Officer)
Date: November 14, 1997
--------------------------------------------
19
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 23,886,464
<SECURITIES> 0
<RECEIVABLES> 1,702,085
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,588,549
<PP&E> 114,526,538
<DEPRECIATION> 48,732,516
<TOTAL-ASSETS> 91,382,738
<CURRENT-LIABILITIES> 935,316
<BONDS> 45,801,266
0
0
<COMMON> 0
<OTHER-SE> 44,646,156
<TOTAL-LIABILITY-AND-EQUITY> 91,382,738
<SALES> 0
<TOTAL-REVENUES> 12,307,505
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,703,772
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 886,502
<INCOME-PRETAX> 717,231
<INCOME-TAX> 0
<INCOME-CONTINUING> 717,231
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 717,231
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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