<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the Quarterly Period Ended JUNE 30, 2000
Commission File Number 0-10673
REAL ESTATE ASSOCIATES LIMITED III
(A California Limited Partnership)
I.R.S. Employer Identification No. 95-3547611
9090 WILSHIRE BLVD., SUITE 201
BEVERLY HILLS, CALIF. 90211
Registrant's Telephone Number,
Including Area Code (310) 278-2191
Indicate by check mark whether the registrant (1) has filed all documents and
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve 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 [ ]
<PAGE> 2
REAL ESTATE ASSOCIATES LIMITED III
(A CALIFORNIA LIMITED PARTNERSHIP)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, June 30, 2000 and December 31, 1999..................1
Statements of Operations,
Six and Three Months Ended June 30, 2000 and 1999 .............2
Statement of Partners' Equity (Deficiency),
Six Months Ended June 30, 2000 ................................3
Statements of Cash Flows,
Six Months Ended June 30, 2000 and 1999 .......................4
Notes to Financial Statements .......................................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ..........................11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................13
Item 6. Exhibits and Reports on Form 8-K..................................13
Signatures ..............................................................14
</TABLE>
<PAGE> 3
REAL ESTATE ASSOCIATES LIMITED III
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
ASSETS
<TABLE>
<CAPTION>
2000
(Unaudited) 1999
----------- -----------
<S> <C> <C>
INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2) $ 988,213 $ 894,213
CASH AND CASH EQUIVALENTS (Note 1) 5,583,169 5,571,366
DUE FROM NAPICO (Note 4) -- 2,144
----------- -----------
TOTAL ASSETS $ 6,571,382 $ 6,467,723
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Accounts payable $ 6,305 $ 6,161
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 4)
PARTNERS' EQUITY (DEFICIENCY):
General partners (133,326) (134,361)
Limited partners 6,698,403 6,595,923
----------- -----------
6,565,077 6,461,562
----------- -----------
TOTAL LIABILITIES AND PARTNERS'
EQUITY $ 6,571,382 $ 6,467,723
=========== ===========
</TABLE>
The accompanying notes are integral part of these financial statements.
1
<PAGE> 4
REAL ESTATE ASSOCIATES LIMITED III
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Six months Three months Six months Three months
ended ended ended ended
June 30, 2000 June 30, 2000 June 30, 1999 June 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INTEREST AND OTHER INCOME $ 143,958 $ 76,582 $ 96,974 $ 59,365
--------- --------- --------- ---------
OPERATING EXPENSES:
Legal and accounting 67,416 33,000 78,298 44,084
Management fees - general partner (Note 3) 64,646 32,322 88,494 44,247
Administrative (Notes 2 and 3) 37,000 25,765 69,257 31,735
--------- --------- --------- ---------
Total operating expenses 169,062 91,087 236,049 120,066
--------- --------- --------- ---------
LOSS FROM OPERATIONS (25,104) (14,505) (139,075) (60,701)
COST RELATED TO SALE OF LIMITED
PARTNERSHIP INTEREST (Note 2) (379,348)
DISTRIBUTIONS FROM LIMITED
PARTNERSHIPS RECOGNIZED AS
INCOME (Note 2) 34,619 -- 63,664 45,552
EQUITY IN INCOME OF LIMITED
PARTNERSHIPS AND AMORTI-
ZATION OF ACQUISITION
COSTS (Note 2) 94,000 47,000 110,000 55,000
--------- --------- --------- ---------
NET INCOME (LOSS) $ 103,515 $ 32,495 $(344,759) $ 39,851
========= ========= ========= =========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP INTEREST (Note 1) $ 9 $ 5 $ (30) $ 5
========= ========= ========= =========
</TABLE>
The accompanying notes are integral part of these financial statements.
2
<PAGE> 5
REAL ESTATE ASSOCIATES LIMITED III
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
---------- ---------- ----------
<S> <C> <C> <C>
PARTNERSHIP INTERESTS 11,456
==========
EQUITY (DEFICIENCY),
January 1, 2000 $ (134,361) $6,595,923 $6,461,562
Net Income for the six months
ended June 30, 2000 1,035 102,480 103,515
---------- ---------- ----------
EQUITY (DEFICIENCY),
June 30, 2000 $ (133,326) $6,698,403 $6,565,077
========== ========== ==========
</TABLE>
The accompanying notes are integral part of these financial statements.
3
<PAGE> 6
REAL ESTATE ASSOCIATES LIMITED III
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 103,515 $ (344,759)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Equity in income of limited partnerships and
amortization of acquisition costs (94,000) (110,000)
Decrease in due from affiliates 2,144
Decrease in interest and other payables 144 (307,390)
------------ ------------
Net cash provided by (used in) operating activities 11,803 (762,149)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales proceeds -- 1,950,530
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to partners -- (6,950,531)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 11,803 (5,762,150)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,571,366 11,331,803
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,583,169 $ 5,569,653
============ ============
</TABLE>
The accompanying notes are integral part of these financial statements.
4
<PAGE> 7
REAL ESTATE ASSOCIATES LIMITED III
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The information contained in the following notes to the financial
statements is condensed from that which would appear in the annual
audited financial statements; accordingly, the financial statements
included herein should be reviewed in conjunction with the financial
statements and related notes thereto contained in the Real Estate
Associates Limited III (the "Partnership") annual report for the year
ended December 31, 1999. Accounting measurements at interim dates
inherently involve greater reliance on estimates than at year end. The
results of operations for the interim period presented are not
necessarily indicative of the results for the entire year.
In the opinion of the Partnership, the accompanying unaudited financial
statements contain all adjustments (consisting primarily of normal
recurring accruals) necessary to present fairly the financial position as
of June 30, 2000 and the results of operations and changes in cash flows
for the six and three months then ended.
The general partners have a 1 percent interest in profits and losses of
the Partnership. The limited partners have the remaining 99 percent
interest which is allocated in proportion to their respective individual
investments. National Partnership Investments Corp. (NAPICO) is the
corporate general partner of the Partnership. Casden Properties Inc. owns
a 95.25% economic interest in NAPICO, with the balance owned by Casden
Investment Corporation ("CIC"). CIC, which is wholly owned by Alan I.
Casden, owns 95% of the voting common stock of NAPICO.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
METHOD OF ACCOUNTING FOR INVESTMENT IN LIMITED PARTNERSHIPS
The investment in limited partnerships is accounted for on the equity
method. Acquisition, selection and other costs related to the acquisition
of the projects are capitalized as part of the investment account, and
are being amortized on a straight line basis over the estimated lives of
the underlying assets, which is generally 30 years.
5
<PAGE> 8
REAL ESTATE ASSOCIATES LIMITED III
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET INCOME (LOSS) PER LIMITED PARTNERSHIP INTEREST
Net income (loss) per limited partnership interest was computed by
dividing the limited partners' share of net income (loss) by the number
of limited partnership interests outstanding during the year. The number
of limited partnership interests was 11,456 for the periods presented.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and bank certificates of
deposit with an original maturity of three months or less. The
Partnership has its cash and cash equivalents on deposit primarily with
two high credit quality institutions. Such cash and cash equivalents are
in excess of the FDIC insurance limit.
INCOME TAXES
No provision has been made for income taxes in the accompanying financial
statements since such taxes, if any, are the liability of the individual
partners
IMPAIRMENT OF LONG-LIVED ASSETS
The Partnership reviews long-lived assets to determine if there has been
any permanent impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable. If
the sum of the expected future cash flows is less than the carrying
amount of the assets, the Partnership recognizes an impairment loss.
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
The Partnership holds limited partnership interests in 12 limited
partnerships. The limited partnerships as of June 30, 2000 own
residential low income rental projects consisting of 1,181 apartment
units. The mortgage loans of these projects are payable to or insured by
various governmental agencies.
The Partnership, as a limited partner, is entitled to between 94.9
percent and 99 percent of the profits and losses of the limited
partnerships. The Partnership is also entitled to 99.9 percent of the
profits and losses of REA. REA holds a 99 percent interest in the limited
partnership in which it has invested.
6
<PAGE> 9
REAL ESTATE ASSOCIATES LIMITED III
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
Equity in losses of limited partnerships is recognized in the financial
statements until the limited partnership investment account is reduced to
a zero balance. Losses incurred after the limited partnership investment
account is reduced to zero are not recognized.
Distributions from limited partnerships are recognized as a reduction of
capital until the investment balance has been reduced to zero. Subsequent
distributions received are recognized as income.
The following is a summary of the investment in limited partnerships for
the six months ended June 30, 2000:
<TABLE>
<S> <C>
Balance, beginning of period $ 894,213
Amortization of acquisitions costs (2,000)
Equity in income of limited partners 96,000
---------
Balance, end of period $ 988,213
=========
</TABLE>
The following are unaudited combined estimated statements of operations
for the six and three months ended June 30, 2000 and 1999 for the limited
partnerships in which the Partnership has investments:
<TABLE>
<CAPTION>
Six months Three months Six months Three months
ended ended ended ended
June 30, 2000 June 30, 2000 June 30,1999 June 30, 1999
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
REVENUES
Rental and other $ 3,262,000 $ 1,631,000 $ 4,112,000 $ 2,056,000
----------- ----------- ----------- -----------
EXPENSES
Depreciation 632,000 316,000 816,000 408,000
Interest 894,000 447,000 1,120,000 560,000
Operating 1,892,000 946,000 2,230,000 1,115,000
----------- ----------- ----------- -----------
3,418,000 1,709,000 4,166,000 2,083,000
----------- ----------- ----------- -----------
NET LOSS $ (156,000) $ (78,000) $ (54,000) $ (27,000)
=========== =========== =========== ===========
</TABLE>
7
<PAGE> 10
REAL ESTATE ASSOCIATES LIMITED III
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
NAPICO, or one of its affiliates, is the general partner and property
management agent for certain of the limited partnerships included above.
Under recent adopted law and policy, the United States Department of
Housing and Urban Development ("HUD") has determined not to renew the
Housing Assistance Payment ("HAP") Contracts on a long term basis on the
existing terms. In connection with renewals of the HAP Contracts under
such new law and policy, the amount of rental assistance payments under
renewed HAP Contracts will be based on market rentals instead of above
market rentals, which was generally the case under existing HAP
Contracts. The payments under the renewed HAP Contracts are not expected
to be in an amount that would provide sufficient cash flow to permit
owners of properties subject to HAP Contracts to meet the debt service
requirements of existing loans insured by the Federal Housing
Administration of HUD ("FHA") unless such mortgage loans are
restructured. In order to address the reduction in payments under HAP
Contracts as a result of this new policy, the Multi-family Assisted
Housing Reform and Affordability Act of 1997 ( "MAHRAA"), which was
adopted in October 1997, provides for the restructuring of mortgage loans
insured by the FHA with respect to properties subject to the Section 8
program. Under MAHRAA, an FHA-insured mortgage loan can be restructured
into a first mortgage loan which will be amortized on a current basis and
a low interest second mortgage loan payable to FHA which will only be
payable on maturity of the first mortgage loan. This restructuring
results in a reduction in annual debt service payable by the owner of the
FHA-insured mortgage loan and is expected to result in an insurance
payment from FHA to the holder of the FHA-insured loan due to the
reduction in the principal amount. MAHRAA also phases out project-based
subsidies on selected properties serving families not located in rental
markets with limited supply, converting such subsidies to a tenant-based
subsidy.
On September 11, 1998, HUD issued interim regulations implementing MAHRAA
and final regulations are expected to be issued in 2000.
When the HAP Contracts are subject to renewal, there can be no assurance
that the local limited partnerships in which the Partnership has an
investment will be permitted to restructure its mortgage indebtedness
under MAHRAA. In addition, the economic impact on the Partnership of the
combination of the reduced payments under the HAP Contracts and the
restructuring of the existing FHA-insured mortgage loans under MAHRAA is
uncertain.
8
<PAGE> 11
REAL ESTATE ASSOCIATES LIMITED III
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
On December 30, 1998, after obtaining the consents of the limited
partners, the Partnership sold its limited partnership interests in 20
local limited partnerships to subsidiaries of Casden Properties Inc. The
sale resulted in cash proceeds to the Partnership of $1,950,000 which was
collected in 1999. In March 1999, the Partnership made cash distributions
of $6,881,025 to the limited partners and $69,505 to the general
partners, which included using proceeds from the sale of the partnership
interests.
NOTE 3 - MANAGEMENT FEE AND EXPENSES DUE TO GENERAL PARTNER
Under the terms of the Restated Certificate and Agreement of Limited
Partnership, the Partnership is obligated to NAPICO for an annual
management fee approximately equal to .4 percent of the invested assets.
Invested assets are defined as the costs of acquiring project interests,
including the proportionate amount of the mortgage loans related to the
Partnership's interests in the capital accounts of the respective
partnership. The management fee incurred for the six months ended June
30, 2000 and 1999 was approximately $64,646 and $88,494, respectively.
The Partnership reimburses NAPICO for certain expenses. The reimbursement
paid to NAPICO was approximately $5,937 and $8,244 for the six months
ended June 30, 2000 and 1999, respectively, and is included in
administrative expenses.
NOTE 4 - CONTINGENCIES
On August 27, 1998, two investors holding an aggregate of eight units of
limited partnership interests in the Partnership and two investors
holding an aggregate of five units of limited partnership interest in
Real Estate Associates Limited VI (another affiliated partnership in
which NAPICO is the managing general partner) commenced an action in the
United States District Court for the Central District of California
against the Partnership, NAPICO and certain other affiliated entities.
The complaint alleges that the defendants breached their fiduciary duty
to the limited partners of certain NAPICO managed partnerships and made
materially false and misleading statements in the consent solicitation
statements sent to the limited partners of such partnerships relating to
approval of the transfer of partnership interests in limited
partnerships, owning certain of the properties, to Casden Properties
Inc., which was organized by an affiliate of NAPICO. The plaintiffs seek
equitable relief, as well as compensatory damages and litigation related
costs. On August 4, 1999, one investor holding one unit of limited
partnership interest in Housing Programs Limited (another affiliated
partnership in which NAPICO is the managing general partner) commenced a
virtually identical action in the United States District Court for the
Central District of California against the Partnership, NAPICO and
certain other affiliated entities. The managing general partner
9
<PAGE> 12
REAL ESTATE ASSOCIATES LIMITED III
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
NOTE 4 - CONTINGENCIES (CONTINUED)
of such NAPICO managed partnerships and the other defendants believe that
the plaintiffs' claims are without merit and are contesting the actions
vigorously.
The corporate general partner of the Partnership is involved in various
lawsuits arising from transactions in the ordinary course of business. In
the opinion of management and the corporate general partner, the claims
will not result in any material liability to the Partnership.
NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about
Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments. The carrying amount of assets
and liabilities reported on the balance sheets that require such
disclosure approximates fair value due to their short-term maturity.
10
<PAGE> 13
REAL ESTATE ASSOCIATES LIMITED III
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary sources of funds include interest income earned
from investing available cash and distributions from limited partnerships
in which the Partnership has invested. It is not expected that any of the
local limited partnerships in which the Partnership has invested will
generate cash flow sufficient to provide for distributions to limited
partners in any material amount. The Partnership made a distributions to
investors in June 30, 2000, previously using proceeds from the
disposition of its investments in certain limited partnerships.
RESULTS OF OPERATIONS
Partnership revenues consist primarily of interest income earned on
certificates of deposit and other temporary investment of funds not
required for investment in local partnerships.
Operating expenses consist primarily of recurring general and
administrative expenses and professional fees for services rendered to
the Partnership. In addition, an annual Partnership management fee in an
amount equal to .4 percent of investment assets is payable to the
corporate general partner.
The Partnership accounts for its investments in the local limited
partnerships on the equity method, thereby adjusting its investment
balance by its proportionate share of the income or loss of the local
limited partnerships. Losses incurred after the limited partnership
investment account is reduced to zero are not recognized in accordance
with the equity accounting method.
Distributions received from limited partnerships are recognized as return
of capital until the investment balance has been reduced to zero or to a
negative amount equal to future capital contributions required.
Subsequent distributions received are recognized as income. Overall
distributions from limited partnerships continue to be favorable. This
primarily is due, to improved operating results at several of the
properties.
Except for certificates of deposit and money market funds, the
Partnership's investments are entirely interests in other limited
partnerships owning government assisted projects. Funds temporarily not
required for such investments in projects are invested in certificate of
deposit and money market funds which provide substantial amounts of
interest as reflected in the statement of operations. These investments
are converted to cash to meet obligations as they arise. The Partnership
intends to continue investing available funds in this manner.
11
<PAGE> 14
REAL ESTATE ASSOCIATES LIMITED III
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Under recent adopted law and policy, the United States Department of
Housing and Urban Development ("HUD") has determined not to renew the
Housing Assistance Payment ("HAP") Contracts on a long term basis on the
existing terms. In connection with renewals of the HAP Contracts under
such new law and policy, the amount of rental assistance payments under
renewed HAP Contracts will be based on market rentals instead of above
market rentals, which was generally the case under existing HAP
Contracts. The payments under the renewed HAP Contracts are not expected
to be in an amount that would provide sufficient cash flow to permit
owners of properties subject to HAP Contracts to meet the debt service
requirements of existing loans insured by the Federal Housing
Administration of HUD ("FHA") unless such mortgage loans are
restructured. In order to address the reduction in payments under HAP
Contracts as a result of this new policy, the Multi-family Assisted
Housing Reform and Affordability Act of 1997 ( "MAHRAA"), which was
adopted in October 1997, provides for the restructuring of mortgage loans
insured by the FHA with respect to properties subject to the Section 8
program. Under MAHRAA, an FHA-insured mortgage loan can be restructured
into a first mortgage loan which will be amortized on a current basis and
a low interest second mortgage loan payable to FHA which will only be
payable on maturity of the first mortgage loan. This restructuring
results in a reduction in annual debt service payable by the owner of the
FHA-insured mortgage loan and is expected to result in an insurance
payment from FHA to the holder of the FHA-insured loan due to the
reduction in the principal amount. MAHRAA also phases out project-based
subsidies on selected properties serving families not located in rental
markets with limited supply, converting such subsidies to a tenant-based
subsidy.
On September 11, 1998, HUD issued interim regulations implementing MAHRAA
and final regulations are expected to be issued in 2000.
When the HAP Contracts are subject to renewal, there can be no assurance
that the local limited partnerships in which the Partnership has an
investment will be permitted to restructure its mortgage indebtedness
under MAHRAA. In addition, the economic impact on the Partnership of the
combination of the reduced payments under the HAP Contracts and the
restructuring of the existing FHA-insured mortgage loans under MAHRAA is
uncertain.
On December 30, 1998, after obtaining the consents of the limited
partners, the Partnership sold its limited partnership interests in 20
local limited partnerships to subsidiaries of Casden Properties Inc. The
sale resulted in cash proceeds to the Partnership of $1,950,530 which was
collected in 1999. In March 1999, the Partnership made cash distributions
of $6,881,025 to the limited partners and $69,505 to the general
partners, which included using proceeds from the sale of the partnership
interests.
12
<PAGE> 15
REAL ESTATE ASSOCIATES LIMITED III
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2000
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 27, 1998, two investors holding an aggregate of eight units of
limited partnership interests in the Partnership and two investors
holding an aggregate of five units of limited partnership interest in
Real Estate Associates Limited VI (another affiliated partnership in
which NAPICO is the managing general partner) commenced an action in the
United States District Court for the Central District of California
against the Partnership, NAPICO and certain other affiliated entities.
The complaint alleges that the defendants breached their fiduciary duty
to the limited partners of certain NAPICO managed partnerships and made
materially false and misleading statements in the consent solicitation
statements sent to the limited partners of such partnerships relating to
approval of the transfer of partnership interests in limited
partnerships, owning certain of the properties, to Casden Properties
Inc., which was organized by an affiliate of NAPICO. The plaintiffs seek
equitable relief, as well as compensatory damages and litigation related
costs. On August 4, 1999, one investor holding one unit of limited
partnership interest in Housing Programs Limited (another affiliated
partnership in which NAPICO is the managing general partner) commenced a
virtually identical action in the United States District Court for the
Central District of California against the Partnership, NAPICO and
certain other affiliated entities. The managing general partner of such
NAPICO managed partnerships and the other defendants believe that the
plaintiffs' claims are without merit and are contesting the actions
vigorously.
The corporate general partner is involved in various lawsuits. None of
these are related to REAL III.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are required per the provision of Item 6 of regulation
S-K and no reports on Form 8-K were filed during the quarter ended
June 30, 2000.
13
<PAGE> 16
REAL ESTATE ASSOCIATES LIMITED III
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REAL ESTATE ASSOCIATES LIMITED III
(a California limited partnership)
By: National Partnership Investments Corp.
General Partner
/s/ BRUCE NELSON
----------------------------------------
Bruce Nelson
President
Date: August 21, 2000
----------------------------------------
/s/ PAUL PATIERNO
----------------------------------------
Paul Patierno
Chief Financial Officer
Date: August 21, 2000
----------------------------------------
14
