CAPITAL REALTY INVESTORS III LTD PARTNERSHIP, 10-Q, 1997-07-22

CAPITAL REALTY INVESTORS III LTD PARTNERSHIP
10-Q, 1997-07-22
REAL ESTATE

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<PAGE>

FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the Quarter Ended June 30, 1997
-------------

Commission file number 0-11962
-------

CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP
--------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Maryland 52-1311532
- ----------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

11200 Rockville Pike, Rockville, Maryland 20852
- ----------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)

(301) 468-9200
--------------------------------------------------------------------------
(Registrant's telephone number, including area code)

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 and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No

Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

Class Outstanding at June 30, 1997
- ------------------------- ----------------------------------
(Not applicable) (Not applicable)
<PAGE>

CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

INDEX TO FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 1997

Page
----

PART I. Financial Information (Unaudited)

Item 1. Financial Statements

Consolidated Balance Sheets - June 30, 1997
and December 31, 1996 . . . . . . . . . . . . . 1

Consolidated Statements of Operations - for
the three and six months ended June 30, 1997
and 1996 . . . . . . . . . . . . . . . . . . . . 2

Consolidated Statements of Cash Flows - for
the six months ended June 30, 1997
and 1996 . . . . . . . . . . . . . . . . . . . . 3

Notes to Consolidated Financial Statements . . . . 4

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . 15

PART II. Other Information

Item 3. Defaults Upon Senior Securities . . . . . . . . . . 24

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 24

Signature . . . . . . . . . . . . . . . . . . . . . . . . 25

Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . 26
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------

CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Investments in partnerships $ 20,907,651 $ 24,383,751
Investment in partnership held for sale 3,406,856 --
Cash and cash equivalents 4,199,996 3,942,254
Acquisition fees, principally paid to related parties, net of
accumulated amortization of $434,532 and $475,794, respectively 535,891 572,045
Property purchase costs, net of accumulated amortization of
$410,105 and $425,423, respectively 531,091 550,713
Other assets 84,635 78,199
------------ ------------
Total assets $ 29,666,120 $ 29,526,962
============ ============

LIABILITIES AND PARTNERS' DEFICIT

Due on investments in partnerships, net of unamortized discount on
purchase money notes of $6,718,092 and $8,394,548, respectively $ 18,964,548 $ 19,552,892
Accrued interest payable 42,003,020 43,663,393
Accounts payable and accrued expenses 108,508 94,221
Consulting fees payable to related parties 42,500 42,500
------------ ------------
Total liabilities 61,118,576 63,353,006
------------ ------------
Commitments and contingencies

Partners' capital (deficit):
Capital paid-in:
General Partners 2,000 2,000
Limited Partners 60,001,500 60,001,500
------------ ------------
60,003,500 60,003,500

Less:
Accumulated distributions to partners (2,288,681) (2,288,681)
Offering costs (6,156,933) (6,156,933)
Accumulated losses (83,010,342) (85,383,930)
------------ ------------
Total partners' deficit (31,452,456) (33,826,044)
------------ ------------
Total liabilities and partners' deficit $ 29,666,120 $ 29,526,962
============ ============
</TABLE>

The accompanying notes are an integral part
of these consolidated financial statements.

-1-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------

CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30,
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Share of income from partnerships $ 455,166 $ 600,693 $ 806,253 $ 5,392,680
------------ ------------ ------------ ------------
Other revenue and expenses:

Revenue:
Interest and other income 51,797 43,669 101,866 89,659
------------ ------------ ------------ ------------
Expenses:
Interest 1,629,961 1,862,629 3,600,371 3,971,262
Management fee 75,000 75,000 150,000 150,000
General and administrative 138,394 44,372 177,806 87,571
Professional fees 23,673 26,349 47,661 53,241
Amortization 16,274 16,866 32,548 33,732
------------ ------------ ------------ ------------
1,883,302 2,025,216 4,008,386 4,295,806
------------ ------------ ------------ ------------
Total other revenue and expenses (1,831,505) (1,981,547) (3,906,520) (4,206,147)
------------ ------------ ------------ ------------
(Loss) income before gain on disposition
of investment in partnership (1,376,339) (1,380,854) (3,100,267) 1,186,533
Gain on disposition of investment in partnership -- -- -- 2,043,167
------------ ------------ ------------ ------------
(Loss) income before extraordinary gain from
extinguishment of debt (1,376,339) (1,380,854) (3,100,267) 3,229,700
Extraordinary gain from extinguishment of debt -- -- 5,473,855 3,015,210
------------ ------------ ------------ ------------
Net (loss) income (1,376,339) (1,380,854) 2,373,588 6,244,910
Accumulated losses, beginning of period (81,634,003) (80,509,727) (85,383,930) (88,135,491)
------------ ------------ ------------ ------------
Accumulated losses, end of period $(83,010,342) $(81,890,581) $(83,010,342) $(81,890,581)
============ ============ ============ ============
(Loss) income allocated to General Partners (1.51%) $ (20,783) $ (20,851) $ 35,841 $ 94,298
============ ============ ============ ============
(Loss) income allocated to Initial and Special Limited
Partners (1.49%) $ (20,507) $ (20,575) $ 35,367 $ 93,049
============ ============ ============ ============
(Loss) income allocated to Additional Limited Partners (97%) $ (1,335,049) $ (1,339,428) $ 2,302,380 $ 6,057,563
============ ============ ============ ============
(Loss) income per unit of Additional Limited Partnership
Interest based on 60,000 units outstanding $ (22.25) $ (22.32) $ 38.37 $ 100.96
============ ============ ============ ============
</TABLE>

The accompanying notes are an integral part
of these consolidated financial statements.

-2-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------

CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the six months ended
June 30,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,373,588 $ 6,244,910

Adjustments to reconcile net income to net cash used in
operating activities:
Share of income from partnerships (806,253) (5,392,680)
Amortization of deferred costs 32,548 33,732
Amortization of discount on purchase money notes 1,676,456 1,776,214
Gain on disposition of investment in partnership -- (5,058,377)
Extraordinary gain on extinguishment of debt (5,473,855) --
Payment of purchase money note interest (210,433) (2,975,593)

Changes in assets and liabilities:
(Increase) decrease in other assets (6,436) 428
Increase in accrued interest payable 1,923,915 2,195,050
Increase in accounts payable and accrued expenses 14,287 109,745
------------ ------------
Net cash used in operating activities (476,183) (3,066,571)
------------ ------------

Cash flows from investing activities:
Receipt of distributions from partnerships 898,725 9,114,627
Proceeds from disposition of investment in partnership -- 3,292,471
------------ ------------
Net cash provided by investing activities 898,725 12,407,098
------------ ------------
Cash flows from financing activities:
Pay-off of purchase money notes and related interest (164,800) (8,235,000)
Distribution paid to additional limited partners -- (579,000)
------------ ------------
Net cash used in financing activities (164,800) (8,814,000)
------------ ------------

Net increase in cash and cash equivalents 257,742 526,527

Cash and cash equivalents, beginning of period 3,942,254 2,897,013
------------ ------------
Cash and cash equivalents, end of period $ 4,199,996 $ 3,423,540
============ ============
</TABLE>

The accompanying notes are an integral part
of these consolidated financial statements.

-3-
<PAGE>
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

In the opinion of C.R.I., Inc. (CRI), the Managing General Partner, the
accompanying unaudited consolidated financial statements contain all adjustments
of a normal recurring nature necessary to present fairly the consolidated
financial position of Capital Realty Investors-III Limited Partnership (the
Partnership) as of June 30, 1997 and December 31, 1996, and its consolidated
results of operations for the three and six months ended June 30, 1997 and 1996
and its consolidated cash flows for the six months ended June 30, 1997 and 1996.

These unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in consolidated financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. While the Managing General Partner believes that
the disclosures presented are adequate to make the information not misleading,
it is suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes included in
the Partnership's Annual Report filed on Form 10-K for the year ended
December 31, 1996.

Certain amounts in the 1996 financial statements have been reclassified to
conform to the 1997 presentation.

2. INVESTMENTS IN PARTNERSHIPS

The Partnership's obligations with respect to its investments in Local
Partnerships, in the form of purchase money notes having a principal balance of
$25,563,096 (exclusive of unamortized discount on purchase money notes of
$6,718,092) plus accrued interest of $41,969,044 as of June 30, 1997, are
payable in full upon the earliest of: (i) sale or refinancing of the respective
Local Partnership's rental property; (ii) payment in full of the respective
Local Partnership's permanent loan; or (iii) maturity. Purchase money notes in
an aggregate principal amount of $1,726,070 and $2,100,000 matured on January 1,
1996 and May 1, 1996, respectively, as discussed below. Purchase money notes
having a principal balance of $1,365,000 and $1,700,000 mature on July 1, 1997
and December 31, 1997, respectively, as discussed below. The remaining purchase
money notes mature from 1998 to 2015. The purchase money notes are generally
secured by the Partnership's interest in the respective Local Partnerships.
There is no assurance that the underlying properties will have sufficient
appreciation and equity to enable the Partnership to pay the purchase money
notes' principal and accrued interest when due. If a purchase money note is not
paid in accordance with its terms, the Partnership will either have to
renegotiate the terms of repayment or risk losing its partnership interest in
the Local Partnership. The Managing General Partner is continuing to
investigate possible alternatives to reduce the Partnership's long-term debt
obligations. These alternatives include, among others, retaining the cash
available for distribution to meet the purchase money note requirements, buying
out certain purchase money notes at a discounted price, extending the due dates
of certain purchase money notes, or refinancing the respective properties'
underlying debt and using the Partnership's share of the proceeds to pay off or
buy down certain purchase money note obligations.

Interest expense on the Partnership's purchase money notes for the three
and six months ended June 30, 1997 was $1,629,961 and $3,600,371, respectively,
and $1,862,629 and $3,971,262 for the three and six months ended June 30, 1996,

-4-
<PAGE>
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. INVESTMENTS IN PARTNERSHIPS - Continued

respectively. Amortization of the imputed interest on purchase money notes
increased interest expense during the three and six months ended June 30, 1997
by $675,235 and $1,676,456, respectively, and by $847,144 and $1,776,214 during
the three and six months ended June 30, 1996, respectively. The accrued
interest on the purchase money notes of $41,969,044 and $43,629,417 as of June
30, 1997 and December 31, 1996, respectively, is due on the respective maturity
dates of the purchase money notes or earlier, in some instances, if the
pertinent Local Partnership has distributable net cash flow, as defined in the
relevant Local Partnership agreements.

As of June 30, 1997 and December 31, 1996, the Partnership's obligations
with respect to its investment in Local Partnerships included $119,544 due to
local general partners, plus accrued interest on these obligations of $33,976.

Purchase money notes relating to the following properties matured in 1996:

Property Principal Amount Maturity Date
-------- ---------------- -------------
<S> <C> <C>
Briar Crest I $ 525,050 January 1, 1996(A)
Briar Crest II 415,920 January 1, 1996(A)
Briar Hills 458,100 January 1, 1996(A)
Indian Hills 327,000 January 1, 1996(B)
Park Heights Tower 2,135,000 January 1, 1996(C)
Village Squire I & II 3,660,000 March 1, 1996(D)
Village Squire III 2,440,000 March 1, 1996(D)
Cedar Valley 2,100,000 May 1, 1996(E)

</TABLE>

(A) The Partnership defaulted on its purchase money notes relating to
Briar Crest I, Briar Crest II and Briar Hills on January 1, 1996 when
the notes matured and were not paid. On April 1, 1997, the
Partnership and the purchase money note holders entered agreements
extending the purchase money note maturity dates until January 1,
2002. In connection with the extension agreements, on April 10, 1997,
the Partnership made principal payments of $55,000, $54,800 and
$55,000 relating to the purchase money notes of Briar Crest I, Briar
Crest II and Briar Hills, respectively. Additionally, the Partnership
paid $30,243, $34,391 and $36,380 to reimburse the purchase money note
holders and related entities for Low Income Housing Preservation and
Resident Homeownership Act of 1990 (LIHPRHA) processing and legal fees
previously incurred on behalf of Briar Crest I, Briar Crest II and
Briar Hills, respectively. The LIHPRHA program is discussed further
below. Pursuant to the extension agreements, the Partnership will
make interest payments on the purchase money notes from 70% of all
annual cash flow distributions received from the related Local
Partnerships to the purchase money note holders. The Partnership did
not receive any cash flow distributions from the related Local
Partnerships for the six months ended June 30, 1997 and 1996,
respectively.

-5-
<PAGE>
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. INVESTMENTS IN PARTNERSHIPS - Continued

(B) The Partnership defaulted on its purchase money notes relating to
Indian Hills Townhouses, Limited (Indian Hills) on January 1, 1996
when the notes matured and were not paid. The default amount included
principal and accrued interest of $327,000 and $477,973, respectively.
As of July 22, 1997, principal and interest totalling $327,000 and
$547,236, respectively, were due. The Managing General Partner and
the purchase money note holders have reached an agreement in principle
to extend the purchase money notes for five years. As of July 22,
1997, the parties are drafting extension documents reflecting this
agreement. There is no assurance that a final agreement will be made
on these extension documents. As such, there is no assurance that the
Partnership will be able to retain its interest in Indian Hills. The
purchase money notes relating to Indian Hills are nonrecourse and
secured solely by the Partnership's interest in the Local Partnership.
As of June 30, 1997, the carrying amount of the Partnership's
investment in Indian Hills exceeds the amount of nonrecourse
indebtedness. Should the Partnership be unable to retain its interest
in Indian Hills, the Partnership's exposure to loss is limited to this
excess, which at June 30, 1997, was approximately $789,000.
Additionally, should the Partnership be unable to retain its interest
in Indian Hills, the Partnership's investments in partnerships would
be reduced by the Partnership's basis in Indian Hills, which as of
June 30, 1997, was approximately 8% of the total investments in
partnerships.

(C) On January 5, 1994 the local general partners of Park Heights filed a
notice of intent to participate under the LIHPRHA program. On
February 2, 1996, the local general partners of Park Heights sold the
property to a non-profit entity. The sale of the property generated
net proceeds to the Partnership of approximately $1.27 million. The
proceeds were net of $2.135 million used to retire, at a discount, the
Partnership's purchase money note obligation with respect to the
property. The sale provided proceeds to the Partnership in excess of
its investment in the Local Partnership, and resulted in a net
financial statement gain in 1996 of approximately $5.1 million, of
which approximately $3 million resulted from the retirement of the
purchase money note obligation with respect to the property. The
federal tax gain was approximately $7.1 million. On April 30, 1996,
the Partnership distributed $579,000 (or $9.65 per Additional Limited
Partner unit) to the Additional Limited Partners. The Managing
General Partner is retaining all of the Partnership's remaining
undistributed net sale proceeds for the possible repayment, prepayment
or purchase of the outstanding purchase money notes relating to other
Local Partnerships. The General Partner and/or its affiliates earned
net fees of $117,028 for its services relating to the sale of the
property. As of July 17, 1997, $42,500 of these fees have not been
paid.

-6-
<PAGE>
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. INVESTMENTS IN PARTNERSHIPS - Continued

The refinancing proceeds received by the Partnership exceeded the
Partnership's investment in the respective Local Partnerships by
approximately $4.1 million, and is included in share of income from
partnerships in the consolidated statements of operations.

(E) The Partnership defaulted on its purchase money notes relating to
Cedar Valley on May 1, 1996 when the notes matured and were not paid.
The default amount included principal and accrued interest of
$2,100,000 and $3,166,710, respectively. On May 2, 1996, the
noteholders demanded payment on the purchase money notes. The
Managing General Partner began negotiations with the noteholders to
extend the purchase money notes until 1998. The noteholders rejected
this offer and the parties agreed to extend the purchase money notes
until January 1997. On January 16, 1997, the purchase money
noteholders foreclosed on the Partnership's interest in Cedar Valley.
As a result of the foreclosure on the Partnership's interest in Cedar
Valley, the purchase money noteholders assumed ownership of the
Partnership's interest in the Local Partnership. The Partnership's
loss of ownership interest in Cedar Valley did not impact the
Partnership's financial condition because the related purchase money
notes are nonrecourse and secured solely by the Partnership's interest
in Cedar Valley. The Partnership's investment in Cedar Valley had
previously been reduced to zero as a result of losses from the Local
Partnership during prior years. Acquisition fees and property
purchase costs relating to Cedar Valley were fully amortized as of
December 31, 1996, in order to record the investment at its net
realizable value. The release of the Partnership's purchase money
note obligation as a result of the Partnership's loss of ownership
interest in Cedar Valley resulted in a net financial statement gain of
approximately $5.5 million during 1997. The federal tax gain is
estimated to be approximately $5.8 million.

In September 1994, the Partnership modified purchase money notes totaling
$1,365,000 relating to Bartley Manor, Village Square and Village Green. In
accordance with the modification agreement, the Partnership paid an aggregate of
$100,000 in accrued interest, and the maturity dates for the notes were extended
from February 1994 to July 1, 1997. On July 1, 1997, the Partnership defaulted
on the purchase money notes relating to these Local Partnerships when the notes
matured and were not paid. The default amounts included principal and accrued
interest as follows:

Principal Accrued Interest
Property Amount July 1, 1997
-------- --------- ----------------
<S> <C> <C>
Bartley Manor $ 700,000 $1,111,857
Village Green 275,000 439,120
Village Square 390,000 634,379

</TABLE>

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<PAGE>
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. INVESTMENTS IN PARTNERSHIPS - Continued

The Managing General Partner and the purchase money note holders have
reached an agreement to extend the purchase money notes until October 1, 1999.

Purchase money notes in the aggregate principal amount of $1.7 million
relating to Winchester Gardens are due to mature December 31, 1997. The
Managing General Partner anticipates negotiating with the purchase money note
holders of Winchester Gardens for a five year extension on the related purchase
money notes. There is no assurance that an agreement will be reached. Due to
the uncertainty of a satisfactory resolution with the purchase money noteholders
related to Winchester Gardens, there is no assurance that the Partnership will
be able to retain its interest in this Local Partnership. The uncertainty about
the continued ownership of the Partnership's interest in this Local Partnership
does not impact the Partnership's financial condition because the related
purchase money notes are nonrecourse and secured solely by the Partnership's
interest in the respective Local Partnerships. Should the investment in
Winchester Gardens not produce sufficient value to satisfy the related purchase
money notes, the Partnership's exposure to loss is limited since the amount of
the nonrecourse indebtedness exceeds the carrying amount of the investment in
and advances to the Local Partnership. Thus, even a complete loss of this
investment would not have a material impact on the operations of the
Partnership.

In September 1995, HUD sold the mortgage of New Fifth Lakewood Associates
Limited Partnership (Walden Apartments) to a new mortgagee. As a result, Walden
Apartments is no longer subject to HUD regulatory requirements. On September
13, 1996, the local managing general partner of Walden Apartments received an
offer from a third party to purchase the property. The local managing general
partner rejected this offer due to the fact that it did not meet the criteria
recommended by the Managing General Partner. Thereafter, the local managing
general partner received an improved offer, and a purchase agreement was signed
effective February 17, 1997. On July 2, 1997, Walden Apartments sold the
property, a 396-unit apartment complex located in Schaumberg, Illinois. The
sale of the property generated net cash proceeds to the Partnership of
approximately $4.6 million at closing. On July 9, 1997, the Partnership
received $158,538 representing the release of funds held in security deposit and
insurance accounts related to Fifth Lakewood. Additionally, on July 11, the
Partnership received $431,437 representing the release of the property's real
estate tax escrows. The Partnership anticipates that additional funds may be
received related to the closing out of the property's remaining accounts. The
proceeds received at and subsequent to closing are in excess of the
Partnership's investment in the Local Partnership and will result in a net
financial statement gain of approximately $1.8 million. The federal tax gain is
estimated to be approximately $9 million.

The Rolling Green at Milford (Rolling Green) property received a mortgage
loan increase from its lender in June 1996 to pay for replacing the roof, which
suffered extensive damage caused by microorganisms. The property remained
approximately 97% leased during the roof work, which was completed during 1996.
The Managing General Partner is currently negotiating an extension on the
purchase money notes related to Rolling Green. The purchase money notes, which
aggregate a principal amount of $2,250,000, are due to mature on August 31,
1998. In connection with the proposed extension of the purchase money notes,
the Managing General Partner, the local managing general partner and the
purchase money note holders are jointly exploring various options to refinance
the MHFA and HUD Section 236 interest rate subsidized mortgage loan related to

-8-
<PAGE>
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. INVESTMENTS IN PARTNERSHIPS - Continued

this property. There is no assurance that the noteholders will agree to an
extension on the purchase money notes, or that a refinancing of the mortgage
loan will be obtained.

Some of the rental properties owned by the Local Partnerships have
mortgages which are federally insured under Section 236 or Section 221(d)(3)of
the National Housing Act, as amended. LIHPRHA, which provided property owners
with restricted opportunities to sell low income housing, ended effective
September 30, 1996. However, HUD received approximately $175 million to fund
sales of qualifying properties under the LIHPRHA program during the federal
government's fiscal year 1997, which began October 1, 1996. Continued funding
of the LIHPRHA program after fiscal year 1997 is uncertain. There is no
assurance that a sale of any properties that previously qualified under the
LIHPRHA program will occur.

Some of the rental properties owned by the Local Partnerships are financed
by state housing agencies. The Managing General Partner has been working to
develop strategies to sell or refinance certain properties pursuant to programs
developed by these agencies or other potential buyers. These programs may
include opportunities to sell the property to a qualifying purchaser who would
agree to maintain the property as low to moderate income housing in perpetuity,
or to refinance the property, or to obtain supplemental financing. The Managing
General Partner continues to monitor certain state housing agency programs
and/or programs provided by certain lenders, to ascertain whether the properties
would qualify within the parameters of a given program and whether these
programs would provide an appropriate economic benefit to the limited partners
of the Partnership.

Some of the rental properties owned by the Local Partnerships are dependent
on the receipt of project-based Section 8 Rental Housing Assistance Payments
(HAP) provided by the U.S. Department of Housing and Urban Development (HUD)
pursuant to HAP contracts. In 1995 and 1996, HUD released its Reinvention
Blueprint and a revision to its Reinvention Blueprint which contained proposals
that have come to be known as "Mark-to-Market". Congress, HUD and the Clinton
Administration continue to struggle with the Mark-to-Market initiative. This
initiative was intended to deal with HUD's increasing burden of funding HAP
contracts. Under the initiative, HUD would eliminate the project-based subsidy
and provide the residents with "sticky vouchers" which would allow residents to
move to other developments should they so choose. The initiative will impact
those properties that have HAP contracts with shorter terms than that of the
underlying property mortgage. For instance, some properties may have a 20-year
HAP contract while the underlying mortgage has a 40-year term. In the interim,
Congress has authorized one-year extensions for properties with HAP contracts
expiring during the government's fiscal year 1997, which began October 1, 1996.
In light of recent political scrutiny of appropriations for HUD programs, a one
year extension of Section 8 HAP contracts expiring during the government's
fiscal year 1998 is possible, however, such an extension as well as continued
funding of annual renewals for Section 8 HAP contracts expiring after fiscal
year 1998 is uncertain. The Section 8 HAP contracts for the following
properties expire during the government's fiscal year 1998:

-9-
<PAGE>
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. INVESTMENTS IN PARTNERSHIPS - Continued

Units
Authorized for Expiration of
Number of Rental Assistance Section 8
Property Rental Units Under Section 8 HAP Contract
-------- ------------ ----------------- -------------
<S> <C> <C> <C>
Bartley Manor 70 69 05/31/98
Briar Crest I 53 53 06/30/98
Briar Crest II 49 49 06/30/98
Briar Hills 50 33 09/30/98
Glen Agnes 149 149 01/27/98
Greeley Manor 128 119 10/31/97
Highland Manor 111 111 05/21/98
Indian Hills 40 24 09/30/98
Meadow Lanes Apartments 118 24 10/01/97
Southmoor Townhouse 40 8 08/31/98
Tyee Apartments 100 56 07/31/98
Village Green 36 36 06/30/98
Village Square 48 48 06/30/98
Winchester Gardens Apartments 206 202 08/31/98
Woodside Village 180 114 09/30/98

</TABLE>

With the potential elimination of the HAP contracts, there is no assurance
that these rental properties would be able to maintain the rental income and
occupancy levels necessary to pay operating costs and debt service.

With the ending of the LIHPRHA program and with the uncertainty surrounding
renewals of expiring Section 8 HAP contracts, the Managing General Partner is
developing new strategies to deal with the ever changing environment of
affordable housing policy. Section 236 and Section 221(d)(3) properties that
are in the 18th year of their mortgages may be eligible for pre-payment of the
mortgage. Properties with expiring Section 8 HAP contracts may become
convertible to market-rate apartment properties. Currently, there are a few
lenders that will provide financing either to prepay the existing mortgage or
provide additional funds to allow the property to convert to market rate units.
Where opportunities exist, the Managing General Partner will continue to work
with the Local Partnerships to develop a strategy that makes economic sense for
all parties involved.

The following are combined statements of operations for the thirty-three
and thirty-four Local Partnerships in which the Partnership has invested as of
June 30, 1997 and 1996, respectively. The 1996 statements contain information
on the Park Heights property through the date of sale. Additionally, the 1997
statements contain information on the Cedar Valley property through the date of
foreclosure. These statements are compiled from information supplied by the
management agents of the projects and are unaudited.

-10-
<PAGE>
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. INVESTMENTS IN PARTNERSHIPS - Continued

COMBINED STATEMENTS OF OPERATIONS

(Unaudited)
<TABLE>
<CAPTION>

For the three months ended For the six months ended
June 30, June 30,
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Rental revenue $ 8,196,123 $ 8,361,649 $ 16,432,469 $ 16,529,681
Other 404,404 477,808 762,453 897,842
------------ ------------ ------------ ------------
8,600,527 8,839,457 17,194,922 17,427,523
------------ ------------ ------------ ------------
Expenses:
Operating 5,053,974 5,089,031 10,198,326 10,160,706
Interest 1,873,934 1,766,358 3,751,338 3,534,379
Depreciation and amortization 1,356,716 1,392,680 2,726,813 2,802,993
------------ ------------ ------------ ------------
8,284,624 8,248,069 16,676,477 16,498,078
------------ ------------ ------------ ------------
Net income $ 315,903 $ 591,388 $ 518,445 $ 929,445
============ ============ ============ ============

</TABLE>

As of June 30, 1997 and December 31, 1996, the Partnership's share of
cumulative losses to date for eleven of the thirty-three and thirty-four Local
Partnerships, respectively, exceeds the amount of the Partnership's investments
in these Local Partnerships by $12,323,239 and $12,026,985, respectively. As the
Partnership has no further obligation to advance funds or provide financing to
these Local Partnerships, the excess losses have not been reflected in the
accompanying consolidated financial statements.

3. RELATED-PARTY TRANSACTIONS

In accordance with the terms of the Partnership Agreement, the Partnership
is obligated to reimburse the Managing General Partner for its direct expenses
in managing the Partnership. The Partnership paid $23,733 and $48,355 for the
three and six months ended June 30, 1997, respectively, and $32,716 and $67,770
for the three and six months ended June 30, 1996, respectively, as direct
reimbursement of expenses incurred on behalf of the Partnership. Such expenses
are included in the statement of operations as general and administrative
expenses. Additionally, the Partnership is obligated to pay an annual incentive
management fee (the Management Fee) after all other expenses of the Partnership
are paid. The Partnership paid the Managing General Partner a Management Fee of
$75,000 and $150,000, for the three and six months ended June 30, 1997 and 1996,
respectively.

The Managing General Partner and/or its affiliates may receive a fee of not
more than 2% of the sales price of an investment in a Local Partnership or the

-11-
<PAGE>
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

3. RELATED-PARTY TRANSACTIONS - Continued

property it owns, payable under certain conditions upon the sale of an
investment in a Local Partnership or the property it owns. The payment of the
fee is subject to certain restrictions, including the achievement of a certain
level of sales proceeds and making certain minimum distributions to limited
partners. The Managing General Partner and/or its affiliates earned net fees
for services relating to the sale of Park Heights of $117,028 on February 2,
1996. As of July 17, 1997, $42,500 of these fees have not been paid.

4. CONTINGENCIES

In 1990, CRI, as Managing General Partner of the Partnership and various
other entities, subcontracted certain property-level asset management functions
for certain properties to Capital Management Strategies, Inc. (CMS). Among
these properties were properties owned by some of the Local Partnerships in
which the Partnership invested. CMS was formed by Martin C. Schwartzberg, a
nominal general partner of the Partnership and a former stockholder of CRI, when
he retired from CRI and its related businesses as of January 1, 1990. Mr.
Schwartzberg agreed not to act as a general partner with respect to any of the
CRI-sponsored partnerships, including this Partnership, and has not done so
since that time. In late 1995, a dispute arose between CRI and CMS over the
funding level of the 1996 contract for CMS. On November 9, 1995, CRI filed a
complaint against CMS to determine the proper amount of fees to be paid in 1996
under the asset management agreement. CMS answered on January 10, 1996, but
asserted no counterclaims.

Thereafter, Mr. Schwartzberg launched a hostile consent solicitation to be
designated as managing general partner of approximately 125 private partnerships
sponsored by CRI. On January 18, 1996, Mr. Schwartzberg and CMS filed a
complaint in the Circuit Court of Montgomery County, Maryland (the Circuit
Court), against CRI and Messrs. Dockser and Willoughby (who are general partners
of the Partnership) alleging, among other things, that CRI and Messrs. Dockser
and Willoughby breached the asset management agreement pursuant to which Mr.
Schwartzberg's company, CMS, agreed to perform limited functions related to
property-level issues for a portion of CRI's subsidized housing portfolio
(including some of the properties in which the Partnership invested), by
reducing the proposed budget for 1996. The Partnership was not named as a
defendant in this action. Messrs. Dockser and Willoughby entered an answer
denying all of Mr. Schwartzberg's claims. On February 6, 1996, CRI terminated
the CMS contract for cause. (CRI subsequently retained an independent asset
management company to perform functions previously performed by CMS.) Mr.
Schwartzberg and CMS responded to the contract termination by filing a motion
for injunctive relief in the Circuit Court, asking the court to enjoin CRI from
terminating the contract. In a ruling issued on February 12, 1996, the Circuit
Court, among other things, refused to grant the injunction requested by CMS. On
February 12, 1996, the Circuit Court also issued a memorandum opinion and order
enjoining CMS and Mr. Schwartzberg from disclosing information made confidential
under the asset management agreement.

-12-
<PAGE>
CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

4. CONTINGENCIES - Continued

this Partnership and his interest will become that of a Special Limited Partner.
As of July 17, 1997, CRI and Mr. Schwartzberg were unable to agree on the
language of various provisions of the definitive agreement and have agreed to
submit the open issues to arbitration. The Partnership is not a party to the
arbitration proceeding.

-13-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------

Capital Realty Investors-III Limited Partnership's (the Partnership)
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains information that may be considered forward looking. This
information contains a number of risks and uncertainties, as discussed herein
and in the Partnership's Annual Report filed on Form
10-K, that could cause actual results to differ materially.

Financial Condition/Liquidity
-----------------------------

The Partnership's liquidity, with cash resources of $4,199,996 (or
approximately $67.90 per Additional Limited Partner unit) and $3,942,254 (or
approximately $63.73 per Additional Limited Partner unit) as of June 30, 1997
and December 31, 1996, respectively, along with anticipated future cash
distributions from the Local Partnerships, is expected to meet its current and
anticipated operating cash needs. As of July 17, 1997, there are no material
commitments for capital expenditures.

-14-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

Purchase money notes relating to the following properties matured in 1996:

</TABLE>

-15-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

investment in Indian Hills exceeds the amount of nonrecourse
indebtedness. Should the Partnership be unable to retain its interest
in Indian Hills, the Partnership's exposure to loss is limited to this
excess, which at June 30, 1997, was approximately $789,000.
Additionally, should the Partnership be unable to retain its interest
in Indian Hills, the Partnership's investments in partnerships would
be reduced by the Partnership's basis in Indian Hills, which as of
June 30, 1997, was approximately 8% of the total investments in
partnerships.

(D) On March 1, 1996, the local general partner of Village Squire I & II
and Village Squire III refinanced the loans secured by first mortgages
on the respective properties. On March 1, 1996, proceeds provided to
the Partnership from the refinancings, along with an advance of
approximately $560,000 from existing Partnership cash resources, were
used to pay off the related purchase money note obligations. This
advance was subsequently repaid by the Local Partnership during 1996.
The refinancing proceeds received by the Partnership exceeded the
Partnership's investment in the respective Local Partnerships by
approximately $4.1 million, and is included in share of income from
partnerships in the consolidated statements of operations.

-16-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

Valley, the purchase money noteholders assumed ownership of the
Partnership's interest in the Local Partnership. The Partnership's
loss of ownership interest in Cedar Valley did not impact the
Partnership's financial condition because the related purchase money
notes are nonrecourse and secured solely by the Partnership's interest
in Cedar Valley. The Partnership's investment in Cedar Valley had
previously been reduced to zero as a result of losses from the Local
Partnership during prior years. Acquisition fees and property
purchase costs relating to Cedar Valley were fully amortized as of
December 31, 1996, in order to record the investment at its net
realizable value. The release of the Partnership's purchase money
note obligation as a result of the Partnership's loss of ownership
interest in Cedar Valley resulted in a net financial statement gain of
approximately $5.5 million during 1997. The federal tax gain is
estimated to be approximately $5.8 million.

Principal Accrued Interest
Property Amount July 1, 1997
-------- --------- ----------------
<S> <C> <C>
Bartley Manor $ 700,000 $1,111,857
Village Green 275,000 439,120
Village Square 390,000 634,379

</TABLE>

The Managing General Partner and the purchase money note holders have
reached an agreement to extend the purchase money notes until October 1, 1999.

-17-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

money notes, the Partnership's exposure to loss is limited since the amount of
the nonrecourse indebtedness exceeds the carrying amount of the investment in
and advances to the Local Partnership. Thus, even a complete loss of this
investment would not have a material impact on the operations of the
Partnership.

In September 1995, HUD sold the mortgage of New Fifth Lakewood Associates
Limited Partnership (Walden Apartments) to a new mortgagee. As a result, Walden
Apartments is no longer subject to HUD regulatory requirements. On September
13, 1996, the local managing general partner of Walden Apartments received an
offer from a third party to purchase the property. The local managing general
partner rejected this offer due to the fact that it did not meet the criteria as
recommended by the Managing General Partner. Thereafter, the local managing
general partner received an improved offer, and a purchase agreement was signed
effective February 17, 1997. On July 2, 1997, Walden Apartments sold the
property, a 396-unit apartment complex located in Schaumberg, Illinois. The
sale of the property generated net cash proceeds to the Partnership of
approximately $4.6 million at closing. On July 9, 1997, the Partnership
received $158,538 representing the release of funds held in security deposit and
insurance accounts related to Fifth Lakewood. Additionally, on July 11, the
Partnership received $431,437 representing the release of the property's real
estate tax escrows. The Partnership anticipates that additional funds may be
received related to the closing out of the property's remaining accounts. The
proceeds received at and subsequent to closing are in excess of the
Partnership's investment in the Local Partnership and will result in a net
financial statement gain of approximately $1.8 million. The federal tax gain is
estimated to be approximately $9 million.

The Partnership closely monitors its cash flow and liquidity position in an
effort to ensure that sufficient cash is available for operating requirements.
For the six months ended June 30, 1997, the receipt of distributions from Local
Partnerships was adequate to support operating cash requirements.

Results of Operations
---------------------

The Partnership's net loss for the three months ended June 30, 1997
decreased from the corresponding period in 1996 primarily due to decreased
interest expense due to the amortization of imputed interest. Partially
offsetting the decrease in the Partnership's net loss was a decrease in share of
income from partnerships principally due to increased interest expense incurred
by Village Squire I & II and Village Squire III during 1997 due to the
refinancing of the mortgages relating to these properties during 1996. Also
partially offsetting the decrease in Partnership's net loss was an increase in
general and administrative expenses primarily due to LIHPRHA processing fees
which were paid by the Partnership in connection with the extensions of the
purchase money notes related to Briar Crest I, Briar Crest II and Briar Hills,
as previously discussed.

The Partnership's net income for the six months ended June 30, 1997
decreased from the corresponding period in 1996 primarily as a result of a
decrease in share of income from partnerships principally due to the receipt of
refinancing proceeds during 1996 from the Village Squire I & II and Village
Squire III mortgages which were in excess of the Partnership's investments in
the respective Local Partnerships, as discussed above. Contributing to the
decrease in the Partnership's net income was the gain on disposition of the

-18-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

Partnership's investment in Park Heights during 1996, as discussed above, and an
increase in general and administrative expenses, as discussed above. Partially
offsetting the decrease in the Partnership's net income was an increase in
extraordinary gain from extinguishment of debt related to the Cedar Valley
foreclosure, and a decrease in interest expense due to the amortization of
imputed interest and due to the pay-off of the Village Squire I & II, Village
Squire III and Park Heights purchase money notes during 1996, as discussed
above.

For financial reporting purposes, the Partnership, as a limited partner in
the Local Partnerships, does not record losses from the Local Partnerships in
excess of its investment. As a result, the Partnership's recognized income for
the three and six months ended June 30, 1997 did not include losses of $144,951
and $296,254, respectively, compared to excluded losses of $205,864 and $411,727
for the three and six months ended June 30, 1996, respectively.

-19-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

-20-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

</TABLE>

No other significant changes in the Partnership's operations have taken
place during this period.

General
-------

-21-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

he retired from CRI and its related businesses as of January 1, 1990. Mr.
Schwartzberg agreed not to act as a general partner with respect to any of the
CRI-sponsored partnerships, including this Partnership, and has not done so
since that time. In late 1995, a dispute arose between CRI and CMS over the
funding level of the 1996 contract for CMS. On November 9, 1995, CRI filed a
complaint against CMS to determine the proper amount of fees to be paid in 1996
under the asset management agreement. CMS answered on January 10, 1996, but
asserted no counterclaims.

Following subsequent litigation, none of which involved the Partnership, on
June 12, 1996, Mr. Schwartzberg, CRI and others entered an agreement (which
contemplates the execution of a subsequent definitive agreement) to resolve the
disputes between CRI and CMS. The Partnership was not a signatory to the
agreement. As part of the resolution, Mr. Schwartzberg withdrew any derogatory
statements he made about CRI and its principals. Upon execution of the
definitive agreement, Mr. Schwartzberg shall withdraw as a General Partner of
this Partnership and his interest will become that of a Special Limited Partner.
As of July 17, 1997, CRI and Mr. Schwartzberg were unable to agree on the
language of various provisions of the definitive agreement and have agreed to
submit the open issues to arbitration. The Partnership is not a party to the
arbitration proceeding.

-22-
<PAGE>
PART II. OTHER INFORMATION
-----------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------

The Partnership defaulted on its purchase money notes relating to Indian
Hills Townhouses, Limited (Indian Hills) on January 1, 1996 when the notes
matured and were not paid. The default amount included principal and accrued
interest of $327,000 and $477,973, respectively. As of July 22, 1997, principal
and interest totalling $327,000 and $547,236, respectively, were due. The
Managing General Partner and the purchase money note holders have reached an
agreement in principle to extend the purchase money notes for five years. As of
July 22, 1997, the parties are drafting extension documents reflecting this
agreement. There is no assurance that a final agreement will be made on these
extension documents. As such, there is no assurance that the Partnership will
be able to retain its interest in Indian Hills. The purchase money notes
relating to Indian Hills are nonrecourse and secured solely by the Partnership's
interest in the Local Partnership. As of June 30, 1997, the carrying amount of
the Partnership's investment in Indian Hills exceeds the amount of nonrecourse
indebtedness. Should the Partnership be unable to retain its interest in Indian
Hills, the Partnership's exposure to loss is limited to this excess, which at
June 30, 1997, was approximately $789,000. Additionally, should the Partnership
be unable to retain its interest in Indian Hills, the Partnership's investments
in partnerships would be reduced by the Partnership's basis in Indian Hills,
which as of June 30, 1997, was approximately 8% of the total investments in
partnerships.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------

No reports on Form 8-K were filed with the Commission during the quarter
ended June 30, 1997.

All other items are not applicable.

-23-
<PAGE>

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

CAPITAL REALTY INVESTORS-III
LIMITED PARTNERSHIP
(Registrant)

By: C.R.I., Inc.
Managing General Partner

July 22, 1997 By:
- ----------------------- ------------------------------
Date Susan R. Campbell
Executive Vice President and
Chief Operating Officer

Signing on behalf of the
Registrant and as Acting
Chief Accounting Officer,
Principal Financial and
Principal Accounting Officer

-24-
<PAGE>

EXHIBIT INDEX
-------------

Exhibit Method of Filing
- ------- -----------------------------

27 Financial Data Schedule Filed herewith electronically

-25-

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE SECOND QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH 10-Q.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,199,996
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 29,666,120
<CURRENT-LIABILITIES> 0
<BONDS> 60,967,568
0
0
<COMMON> 0
<OTHER-SE> (31,452,456)
<TOTAL-LIABILITY-AND-EQUITY> 29,666,120
<SALES> 0
<TOTAL-REVENUES> 908,119
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 408,015
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,600,371
<INCOME-PRETAX> (3,100,267)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,100,267)
<DISCONTINUED> 0
<EXTRAORDINARY> 5,473,855
<CHANGES> 0
<NET-INCOME> 2,373,588
<EPS-PRIMARY> 38.37
<EPS-DILUTED> 38.37

</TABLE>