FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
June 30, 1997 0-13331
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
(Exact Name of Registrant as specified in its Charter)
Delaware 16-1234990
- -------------------- -----------------------------------
(State of Formation) (IRS Employer Identification No.)
2350 North Forest Road
Suite 12-A
Getzville, New York 14068
(Address of Principal Executive Office)
Registrant's Telephone Number: (716) 636-0280
Indicate by a check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in part III of this Form 10-Q or any
amendment to this Form 10-Q. (X)
As of June 30, 1997, the issuer had 15,551 units of limited partnership interest
outstanding.
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
INDEX
-----
PAGE NO.
--------
PART I: FINANCIAL INFORMATION
- ------- ---------------------
Balance Sheets -
June 30, 1997 and December 31, 1996 3
Statements of Operations -
Three Months Ended June 30, 1997 and 1996 4
Statements of Operations -
Six Months Ended June 30, 1997 and 1996 5
Statements of Cash Flows -
Six Months Ended June 30, 1997 and 1996 6
Statements of Partners' (Deficit) Capital -
Six Months Ended June 30, 1997 and 1996 7
Notes to Financial Statements 8 - 19
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- -------- FINANCIAL CONDITION AND RESULTS OF
----------------------------------
OPERATIONS 20 - 21
----------
-2-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Property, at cost:
Land $ 935,000 $ 935,000
Buildings and improvements 10,032,459 10,032,459
Furniture and fixtures 1,481,974 1,481,974
------------ ------------
12,449,433 12,449,433
Less accumulated depreciation 5,882,255 5,837,777
------------ ------------
Property, net 6,567,178 6,611,656
Investment in joint venture -- 25,156
Cash 1,506,527 1,811,962
Cash - security deposits 5,335 56,086
Escrow deposits 717,970 267,943
Accounts receivable, net of allowance for doubtful
accounts of $643,646 and $584,097, respectively 3,587 69
Mortgage costs, net of accumulated amortization
of $109,763 and $215,272 265,015 18,421
Other assets 84,611 77,928
------------ ------------
Total Assets $ 9,150,223 $ 8,869,221
============ ============
LIABILITIES AND PARTNERS' (DEFICIT)
Liabilities:
Mortgages payable $ 6,772,701 $ 5,431,000
Accounts payable and accrued expenses 459,813 713,233
Accounts payable - affiliates 83,697 208,156
Accrued interest 155,008 100,327
Security deposits and prepaid rents 262,377 289,671
------------ ------------
Total Liabilities 7,733,596 6,742,387
------------ ------------
Deficit investment in joint venture 30,323 --
------------ ------------
Partners' (Deficit) Capital:
General partners (221,884) (199,668)
Limited partners 1,608,188 2,326,502
------------ ------------
Total Partners' (Deficit) 1,386,304 2,126,834
------------ ------------
Total Liabilities and Partners' (Deficit) $ 9,150,223 $ 8,869,221
============ ============
</TABLE>
See notes to financial statements
-3-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
STATEMENTS OF OPERATIONS
Three Months Ended June 30, 1997 and 1996
(Unaudited)
Three Months Three Months
Ended Ended
June 30, June 30,
1997 1996
---- ----
Income:
Rental $ 692,647 $ 1,019,899
Interest and other income 48,094 43,687
----------- -----------
Total income 740,741 1,063,586
----------- -----------
Expenses:
Property operations 242,686 594,105
Interest:
Paid to affiliates 11,595 37,241
Other 722,450 192,180
Depreciation and amortization 21,507 185,774
Administrative:
Paid to affiliates 88,153 75,729
Other 69,280 137,019
----------- -----------
Total expenses 1,155,671 1,222,048
----------- -----------
Loss before allocated loss from joint venture (414,930) (158,462)
Allocated loss from joint venture (16,428) (16,097)
----------- -----------
Net loss $ (431,358) $ (174,559)
=========== ===========
Loss per limited partnership unit $ (26.91) $ (10.89)
=========== ===========
Distributions per limited partnership unit $ -- $ --
=========== ===========
Weighted average number of
limited partnership units
outstanding 15,551 15,551
=========== ===========
See notes to financial statements
-4-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
STATEMENTS OF OPERATIONS
Six Months Ended June 30, 1997 and 1996
(Unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
1997 1996
---- ----
Income:
Rental $ 1,416,594 $ 2,055,648
Interest and other income 111,209 138,490
----------- -----------
Total income 1,527,803 2,194,138
----------- -----------
Expenses:
Property operations 829,669 1,205,978
Interest:
Paid to affiliates 38,005 72,828
Other 964,419 564,730
Depreciation and amortization 47,611 372,676
Administrative:
Paid to affiliates 162,094 145,110
Other 171,056 259,100
----------- -----------
Total expenses 2,212,854 2,620,422
----------- -----------
Loss before allocated loss from joint venture (685,051) (426,284)
Allocated loss from joint venture (55,479) (19,622)
----------- -----------
Net loss $ (740,530) $ (445,906)
=========== ===========
Loss per limited partnership unit $ (46.19) $ (27.81)
=========== ===========
Distributions per limited partnership unit $ -- $ --
=========== ===========
Weighted average number of
limited partnership units
outstanding 15,551 15,551
=========== ===========
See notes to financial statements
-5-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1997 and 1996
(Unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
1997 1996
---- ----
Cash flow from operating activities:
Net loss $ (740,530) $ (445,906)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 47,611 372,676
Loss from joint venture 55,479 19,622
Changes in operating assets and liabilities:
Cash - security deposits 50,751 (811)
Escrow deposits (450,027) --
Accounts receivable (3,518) 12,765
Other assets (6,683) (130,293)
Accounts payable and accrued expenses (253,420) 194,966
Accrued interest 54,681 6,191
Security deposits and prepaid rent (27,294) 44,344
----------- -----------
Net cash (used in) provided by operating activities (1,272,950) 73,554
----------- -----------
Cash flow from investing activities:
Capital expenditures -- 5,975
Distributions from joint venture -- --
----------- -----------
Net cash provided by investing activities -- 5,975
----------- -----------
Cash flows from financing activities:
Cash overdraft -- 104,378
Accounts payable - affiliates (124,459) (75,759)
Principal payments on mortgages and notes (101,236) (108,148)
Proceeds from mortgage refinancing 1,331,162 --
Mortgage costs (137,952) --
----------- -----------
Net cash (used in) provided by financing activities 967,515 (79,529)
----------- -----------
Increase (decrease) in cash (305,435) --
Cash - beginning of period 1,811,962 --
----------- -----------
Cash - end of period $ 1,506,527 $ --
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 909,738 $ 558,539
=========== ===========
See notes to financial statements
-6-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
STATEMENTS OF PARTNERS' (DEFICIT) CAPITAL
Six Months Ended June 30, 1997 and 1996
(Unaudited)
General Limited Partners
Partners --------------------
Amount Units Amount
------ ----- ------
Balance, January 1, 1996 $ (427,399) 15,551 $ 123,243
Net loss (13,377) -- (432,529)
----------- ----------- -----------
Balance, June 30, 1996 $ (440,776) 15,551 $ (309,286)
=========== =========== ===========
Balance, January 1, 1997 $ (199,668) 15,551 $ 2,326,502
Net loss (22,216) -- (718,314)
----------- ----------- -----------
Balance, June 30, 1997 $ (221,884) 15,551 $ 1,608,188
=========== =========== ===========
See notes to financial statements
-7-
<PAGE>
INDUCON JOINT VENTURE - AMHERST
BALANCE SHEETS
June 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Property, at cost:
Land $ 177,709 $ 177,709
Land improvements 246,232 246,232
Buildings and improvements 3,080,843 3,074,733
Equipment 8,466 8,466
Furniture and fixtures 2,101 2,101
----------- -----------
3,515,351 3,509,241
Less accumulated depreciation 1,272,371 1,205,207
----------- -----------
Property, net 2,242,980 2,304,034
Deferred debt expense, net of accumulated
amortization of $4,540 and $293,490, respectively 122,575 23,315
Other assets 89,630 41,665
----------- -----------
Total Assets $ 2,455,185 $ 2,369,014
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Cash overdraft $ 554,713 $ 34,817
Bonds payable -- 1,849,245
Mortgage payable 1,871,873 260,450
Accounts payable and accrued expenses 43,988 128,072
Accounts payable - affiliates 9,820 63,240
----------- -----------
Total Liabilities 2,480,394 2,335,824
----------- -----------
Partners' Capital:
The Partnership (30,323) 25,156
Other joint venturer 5,114 8,034
----------- -----------
Total Partners' Capital (25,209) 33,190
----------- -----------
Total Liabilities and Partners' Capital $ 2,455,185 $ 2,369,014
=========== ===========
</TABLE>
-13-
<PAGE>
INDUCON JOINT VENTURE - AMHERST
STATEMENTS OF OPERATIONS
Six Months Ended June 30, 1997 and 1996
Six Months Six Months
Ended Ended
June 30, June 30,
1997 1996
---- ----
Income:
Rental $ 240,069 $ 223,580
Interest and other income 4,192 4,942
--------- ---------
Total income 244,261 228,522
--------- ---------
Expenses:
Property operations 92,823 49,415
Interest 85,864 93,497
Depreciation and amortization 75,347 85,034
Administrative 48,626 21,230
--------- ---------
Total expenses 302,660 249,176
--------- ---------
Net loss $ (58,399) $ (20,654)
========= =========
Allocation of net loss:
The Partnership $ (55,479) $ (19,621)
Other Joint Venturer (2,920) (1,033)
--------- ---------
$ (58,399) $ (20,654)
========= =========
A reconciliation of the Partnership's investment in the joint venture for the
six month periods ended June 30, 1997 and 1996 is as follows:
1997 1996
---- ----
Investment in joint venture - beginning of period $ 167,321 $ 167,321
Allocated loss (55,479) (19,621)
--------- ---------
Investment in joint venture - end of period $ 111,842 $ 147,700
========= =========
-14-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
NOTES TO FINANCIAL STATEMENTS
Six Months Ended June 30, 1997 and 1996
(Unaudited)
1. GENERAL PARTNER'S DISCLOSURE
----------------------------
In the opinion of the General Partners of Realmark Property Investors
Limited Partnership III, all adjustments necessary for the fair
presentation of the Partnership's financial position, results of
operations, and changes in cash flows for the six months ended June 30,
1997 and 1996 have been made in the financial statements. The financial
statements are unaudited and subject to any year-end adjustments which may
be necessary.
2. FORMATION AND OPERATION OF PARTNERSHIP
--------------------------------------
Realmark Property Investors Limited Partnership III (the "Partnership"), a
Delaware Limited Partnership, was formed November 18, 1983, to invest in a
diversified portfolio of income-producing real estate.
In February 1984 the Partnership commenced the public offering of units of
limited partnership interest. Other than matters relating to organization,
it had no business activities and, accordingly, had not incurred any
expenses or earned any income until the first interim closing (minimum
closing) of the offering which occurred April 26, 1984. All items of income
and expense arose subsequent to this date. On January 31, 1985 the offering
was concluded, at which time 15,551 units of limited partnership interest
were outstanding. The General Partners are Realmark Properties, Inc., a
Delaware corporation, the corporate General Partner, and Mr. Joseph M.
Jayson, the individual General Partner. Joseph M. Jayson is the sole
shareholder of J.M. Jayson & Company, Inc. (JMJ) and Realmark Properties,
Inc. is a wholly-owned subsidiary of J.M. Jayson & Company, Inc.
Under the Partnership agreement, the General Partners and affiliates can
receive compensation for services rendered and reimbursement for expenses
incurred on behalf of the Partnership.
-8-
<PAGE>
FORMATION AND OPERATION OF PARTNERSHIP (CONTINUED)
--------------------------------------------------
Net income or loss arising from the sale or refinancing shall be
distributed first to the limited partners in an amount equivalent to a 7%
return on the average of their adjusted capital contributions, then in an
amount equal to their capital contributions, then an amount equal to an
additional 5% of the average of their adjusted capital contributions after
the general partners receive a disposition fee, then to all partners in an
amount equal to their respective positive capital balances, and finally, in
the ratio of 87% to the limited partners and 13% to the general partners.
Partnership income or loss not arising from sale or refinancing shall be
allocated 97% to the limited partners and 3% to the general partners.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Cash
----
For purposes of reporting cash flows, cash includes the following items:
cash on hand; cash in checking; and money market savings.
Cash - security deposits
------------------------
Cash - security deposits represents cash on deposit in accordance with
terms of a U.S. Department of Housing and Urban Development (HUD)
regulatory agreement for multi-family housing projects under Section
223(f).
Property and depreciation
-------------------------
Depreciation is provided using the straight-line method over the estimated
useful lives of the respective assets. Expenditures for maintenance and
repairs are expensed as incurred, and major renewals and betterments are
capitalized. The Accelerated Cost Recovery System are used to calculate
depreciation expense for tax purposes.
Rental income
-------------
Leases for residential properties have terms of one year or less.
Commercial leases generally have terms of one to five years. Rental income
is recognized on the straight-line method over the term of the lease.
-9-
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------------------
Investment in Joint Venture
---------------------------
The interest in joint venture is accounted for on the equity method.
4. ACQUISITION AND DISPOSITION OF RENTAL PROPERTY
----------------------------------------------
In August 1984 the Partnership acquired a 112 unit apartment complex (Bryn
Mawr) located in Ypsilanti, Michigan for a purchase price of $1,833,554,
which included $134,857 in acquisition fees. In 1985 the acquisition fees
related to the purchase of Bryn Mawr were reduced by $18,600 and
reallocated to properties by the Partnership that year.
In August 1986 the Bryn Mawr Apartments were sold for $3,110,000. The net
cash proceeds of approximately $667,000 from the sale were distributed to
the investors on a pro rata basis. The Partnership recognized a gain for
financial statement purposes of $1,475,313. For income tax purposes, the
gain will be recognized under the installment sale method.
In February 1985 the Partnership acquired a 190 unit apartment complex
(Castle Dore) in Indianapolis, Indiana for a purchase price of $4,601,233,
which included acquisition fees of $414,279.
In February 1985 the Partnership acquired a 208 unit apartment complex
(Parc Bordeaux) in Indianapolis, Indiana for a purchase price of
$2,845,064, which included acquisition fees of $371,233.
In December 1988 the Partnership sold Parc Bordeaux Apartments for a sale
price of $5,300,000 which generated a total net gain for financial
statement purposes of $2,338,067. For income tax purposes, the gain will be
recognized under the installment sale method.
In June 1985 the Partnership acquired a 200 unit apartment complex
(Williamsburg South Apartments) in Atlanta, Georgia for a purchase price of
$5,138,745, which included acquisition fees of $368,745.
In August 1985 the Partnership acquired a 38,500 square foot office complex
(Perrymont) in Pittsburgh, Pennsylvania for a purchase price of $2,078,697,
which included acquisition fees of $168,697.
-10-
<PAGE>
ACQUISITION AND DISPOSITION OF RENTAL PROPERTY (CONTINUED)
----------------------------------------------------------
In October 1985 the Partnership acquired a 130 unit apartment complex
(Pleasant Run) in Cincinnati, Ohio for a purchase price of $3,434,728,
which included acquisition fees of $267,228.
In December 1985 the Partnership acquired a 280 unit apartment complex
(Ambassador Towers, formerly Cedar Ridge) in Monroeville, Pennsylvania for
a purchase price of $6,766,424, which included acquisition fees of
$646,424.
In December 1996, the Partnership sold the Williamsburg South Apartments
and Pleasant Run Farms Apartments for a sales price of $4,831,000 and
$3,350,000, respectively, less related fees of $93,000. The sales generated
a total net gain of $3,501,323 for financial statement purposes.
5. INVESTMENT IN JOINT VENTURES
----------------------------
In April 1985 the Partnership entered into an agreement and formed the
Inducon Joint Venture - Amherst (the Joint Venture), for the primary
purpose of constructing office/warehouse buildings in Erie County, New York
as income producing property. The site is part of the Amherst Foreign Trade
Zone. This is U.S. Customs Territory under federal supervision, where
foreign and domestic merchandise is brought for storage, manufacturing,
salvage, repair, exhibit, repacking, relabeling or re-export. Under the
terms of the joint venture agreement, the Partnership supplied $545,000 of
capital to acquire the land and undertake initial development of Phase I
and $275,000 for Phase II. The other Joint Venturer delivered and completed
on behalf of the Joint Venture all plans, specifications, maps, surveys,
accounting pro-formas for construction, initial leasing and operations, and
cost estimates with respect to development.
Ownership of the Joint Venture is divided equally between the Partnership
and the other Joint Venturer. The Joint Venture agreement provides that the
Partnership will be allocated 95% of any income or loss.
Net cash flow from the Joint Venture is to be distributed as follows:
To the Partnership until has received a return of 7% per annum on its
underwritten syndicated equity. To the extent a 7% return is not received
from year to year, it will accrue and be paid from the next available cash
flow.
-11-
<PAGE>
INVESTMENT IN JOINT VENTURES (CONTINUED)
----------------------------------------
To the other Joint Venturer in an amount equal to that paid to the
Partnership. No amount will accumulate in favor of the other investor.
Any remaining amount will be divided equally.
To the extent there are net proceeds from any sale or refinancing of the
subject property, the proceeds will be paid in the following order of
priority:
To the Partnership to the extent the 7% per annum returned on its
underwritten equity is unpaid.
Next to the Partnership until it has received an overall 9% cumulative
return on its underwritten equity.
Next to the Partnership until it has received an amount equal to its total
underwritten equity, reduced by any prior distribution of sale, financing
or refinancing proceeds.
Next to the Partnership until it has received a cumulative 20% per year
return on its total underwritten equity.
Thereafter any remaining net proceeds will be divided 50% to the
Partnership and 50% to the other joint venturer.
A summary of the assets, liabilities and capital of the joint venture as of
June 30, 1996 and December 31, 1995 and the results of its operations for
the six months ended June 30, 1996 and 1995 is as follows:
-12-
<PAGE>
INDUCON JOINT VENTURE - AMHERST
BALANCE SHEETS
June 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Property, at cost:
Land $ 177,709 $ 177,709
Land improvements 246,232 246,232
Buildings and improvements 3,080,843 3,074,733
Equipment 8,466 8,466
Furniture and fixtures 2,101 2,101
----------- -----------
3,515,351 3,509,241
Less accumulated depreciation 1,272,371 1,205,207
----------- -----------
Property, net 2,242,980 2,304,034
Deferred debt expense, net of accumulated
amortization of $4,540 and $293,490, respectively 122,575 23,315
Other assets 89,630 41,665
----------- -----------
Total Assets $ 2,455,185 $ 2,369,014
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Cash overdraft $ 554,713 $ 34,817
Bonds payable -- 1,849,245
Mortgage payable 1,871,873 260,450
Accounts payable and accrued expenses 43,988 128,072
Accounts payable - affiliates 9,820 63,240
----------- -----------
Total Liabilities 2,480,394 2,335,824
----------- -----------
Partners' Capital:
The Partnership (30,323) 25,156
Other joint venturer 5,114 8,034
----------- -----------
Total Partners' Capital (25,209) 33,190
----------- -----------
Total Liabilities and Partners' Capital $ 2,455,185 $ 2,369,014
=========== ===========
</TABLE>
-13-
<PAGE>
INDUCON JOINT VENTURE - AMHERST
STATEMENTS OF OPERATIONS
Six Months Ended June 30, 1997 and 1996
Six Months Six Months
Ended Ended
June 30, June 30,
1997 1996
---- ----
Income:
Rental $ 240,069 $ 223,580
Interest and other income 4,192 4,942
--------- ---------
Total income 244,261 228,522
--------- ---------
Expenses:
Property operations 92,823 49,415
Interest 85,864 93,497
Depreciation and amortization 75,347 85,034
Administrative 48,626 21,230
--------- ---------
Total expenses 302,660 249,176
--------- ---------
Net loss $ (58,399) $ (20,654)
========= =========
Allocation of net loss:
The Partnership $ (55,479) $ (19,621)
Other Joint Venturer (2,920) (1,033)
--------- ---------
$ (58,399) $ (20,654)
========= =========
A reconciliation of the Partnership's investment in the joint venture for the
six month periods ended June 30, 1997 and 1996 is as follows:
1997 1996
---- ----
Investment in joint venture - beginning of period $ 167,321 $ 167,321
Allocated loss (55,479) (19,621)
--------- ---------
Investment in joint venture - end of period $ 111,842 $ 147,700
========= =========
-14-
<PAGE>
6. MORTGAGES AND NOTES PAYABLE
---------------------------
Castle Dore
-----------
A mortgage with a balance of $2,550,000 at June 30, 1997, providing for
monthly interest payments only, bearing interest at 9.1875%. The note
matures June 1999.
A mortgage of $0 and $,1556,102 at June 30, 1997 and 1996, respectively,
bearing interest at 7.50%. The mortgage provides for annual principal and
interest payments of $216,026 payable in equal monthly installments through
September 1, 2014. The mortgage was fully paid off in May of 1997 when the
mortgage was refinanced.
Williamsburg South
------------------
A 12.85% mortgage which provides for annual principal and interest payments
of $341,602 payable in equal monthly installments through December 1999.
The mortgage had a balance of $0 and $2,412,875 at June 30, 1997 and 1996,
respectively. This property was sold in December of 1996 and the
outstanding balance of the mortgage was paid in full.
Perrymont
---------
A mortgage which provides for interest rates and monthly installments
through December 1998 as follows:
Year Rate Payment
---- ---- -------
1996 - 1998 7.875% $ 9,660 (Principal and interest)
The outstanding balance at June 30, 1997 and 1996 respectively was
$1,259,701 and $1,265,185. Currently payments are not being made on this
mortgage.
Pleasant Run
------------
A 10% mortgage with a balance of $0 and $2,211,259 at June 30, 1997 and
1996, respectively providing for annual principal and interest payments of
$245,349 payable in equal monthly installments, with the remaining balance
due August 1, 1998. This property was sold in December of 1996 and the
outstanding balance of the mortgage was paid in full.
-15-
<PAGE>
MORTGAGES AND NOTES PAYABLE (CONTINUED)
---------------------------------------
Ambassador Towers (formerly Cedar Ridge)
----------------------------------------
A mortgage with a balance of $2,963,000 at June 30, 1997, providing for
monthly interest payments only for the first two years of the mortgage at a
rate of 8.275%. Principal payments will begin in the third year of the
mortgage. The note matures February 2004.
A mortgage with a balance of $0 and $494,542 at June 30, 1997 and 1996,
respectively, bearing interest at 7.75%. The mortgage provides for monthly
principal and interest payments of $8,980 through April 1, 2002. The
mortgage was fully paid off in May of 1997 when the mortgage was
refinanced.
A mortgage with a balance of $ 0 and $1,232,902 at June 30, 1997 and 1996,
respectively, bearing interest at 8.75%. The mortgage provides for monthly
principal and interest payments of $20,455 through October 1, 2003. The
mortgage was fully paid off in May of 1997 when the mortgage was
refinanced.
A mortgage with a balance of $0 and $995,235 at June 30, 1997 and 1996,
respectively which provides for interest payments at prime rate plus 2%
(10.25% at June 30, 1996). The mortgage was originally due in September
1994, but in September 1995 the General Partner negotiated an extension
until May 1996. The mortgage was fully paid off in May of 1997 when the
mortgage was refinanced.
The aggregate maturities of the mortgages for each of the next five years
and thereafter are as follows:
Year Amount
1997 $ 1,259,701
1998 -
1999 2,631,284
2000 94,603
2001 91,498
Thereafter 2,695,615
-------------
TOTAL $ 6,772,701
=============
-16-
<PAGE>
7. RELATED PARTY TRANSACTIONS
--------------------------
Management fees for the management of Partnership's properties are paid to
an affiliate of the General Partner. The management agreement provides for
5% of gross monthly rental receipts of the complex to be paid as fees for
administering the operations of the property. These fees totaled $78,802
and $112,800 for the six months ended June 30, 1997 and 1996, respectively.
According to the terms of the Partnership agreement, the general partners
are entitled to receive a Partnership management fee equal to 7% of net
cash flow (as defined in the Partnership agreement), 2% of which is
subordinated to the limited partners having received an annual cash return
equal to 7% of their adjusted capital contributions. No such fee has been
paid or accrued by the Partnership for the six months ended June 30, 1997
and 1996.
The general partners are also allowed to collect property disposition fees
upon sale of acquired properties. This fee is not to exceed the lesser of
50% of amounts customarily charged in arm's-length transactions by others
rendering similar services for comparable properties or 2.75% of the sales
price. The property disposition fee is subordinate to payments to the
limited partners of a cumulative annual return (not compounded) equal to 7%
of their average adjusted capital balances and to repayment to the limited
partners of an amount equal to their capital contributions.
The general partners have not to date received a disposition fee on the
sale of Bryn Mawr or Parc Bordeaux, as the limited partners have not
received a return of 7% on their average adjusted capital or their original
capital as defined in the Partnership agreement. Once the limited partners
receive their original capital and a 7% return, the general partners will
be entitled to disposition fees of 2.75%.
Accounts payable - affiliates amounted to $83,697 and $1,182,484 at June
30, 1997 and 1996, respectively. The payable represents fees due to the
general partner or to affiliates of the general partner. Interest charged
on amounts due affiliates totaled $38,005 for the six month period ended
June 30, 1997.
-17-
<PAGE>
RELATED PARTY TRANSACTIONS (CONTINUED)
--------------------------------------
Pursuant to the terms of the Partnership agreement, the corporate general
partner charges the Partnership for reimbursement of certain costs and
expenses incurred by the corporate general partner and its affiliates in
connection with the administration of the Partnership. These charges were
for the Partnership's allocated share of costs and expenses such as
payroll, travel and communication, costs related to partnership accounting,
and partner's communication and relations.
Computer service charges for the Partnership are paid or accrued to an
affiliate of the General Partner. The fee is based upon the number of
apartment units and totaled $7,020 for the six months ended June 30, 1997
and 1996.
8. INCOME TAXES
------------
No provision has been made for income taxes since the income or loss of the
Partnership is to be included in the tax returns of the individual
partners.
The tax returns of the Partnership are subject to examination by federal
and state taxing authorities. Under federal and state income tax laws,
regulations and rulings, certain types of transactions may be accorded
varying interpretations and, accordingly, reported Partnership amounts
could be changed as a result of any such examination.
The reconciliation of net loss for the six month periods ended June 30,
1997 and 1996 as reported in the statements of operations, and as would be
reported for tax purposes respectively, is as follows:
June 30, June 30,
1997 1996
---- ----
Net loss -
Statement of operations $ (740,530) $ (445,906)
(Add to) deduct from:
Difference in depreciation ( 50,000) ( 42,882)
Difference in amortization 32,862 32,862
Non-deductible expenses 124,000 125,792
Difference in loss of joint venture 17,000 3,224
----------- ----------
Net loss for tax purposes $ (616,668) $ (326,910)
=========== ===========
-18-
<PAGE>
INCOME TAXES (CONTINUED)
------------------------
The reconciliation of partner's (deficit) capital at June 30, 1997 and
December 31, 1996 as reported in the balance sheets, and as reported for
tax purposes, is as follows:
June 30, December 31,
1997 1996
Partner's Capital -
balance sheet $ 1,386,304 $ 2,126,834
Add to (deduct from):
Accumulated difference in
depreciation (4,284,796) (4,234,796)
Accumulated difference in
amortization 110,280 77,418
Syndication fees and selling
expenses 1,842,060 1,842,060
Gain on sale of property 149,545 149,545
Other non-deductible expenses 684,087 560,087
Difference in book and tax
depreciable cost basis 915,085 915,085
Difference in book and tax
basis of investments (692,573) (709,573)
Other ( 69,286) ( 69,286)
------------ ------------
Partner's Capital (Deficit) -
tax return $ 40,706 $ (2,283,190)
============ ============
-19-
<PAGE>
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Liquidity and Capital Resources
- -------------------------------
Although the Partnership showed a significant cash shortfall for the first six
months of 1997, the shortfall was primarily due to replacement and repair escrow
accounts which were set up as a result of the refinancing of two properties in
the Partnership. These accounts will be used to fund necessary capital
improvement work at the properties. Management is optimistic that expenses will
decrease as continued control is being exercised over expenditures; with more
control over spending now in place, management is focusing on ways to increase
operating revenue through means such as offering rental concessions to increase
occupancies.
The Partnership successfully refinanced two mortgages thus far during 1997. This
resulted in lower debt service payments and reduced interest rates. Management
believes that the effect of the refinancings will be increased cash flow.
There were no distributions for the six month periods ended June 30, 1997 and
1996. The Partnership is currently using the cash generated from operations and
the sales which took place in 1996 to complete necessary capital improvements
and maintenance at the remaining properties in the Partnership. The General
Partner hopes to resume distributions in the near future.
Results of Operations:
- ----------------------
For the quarter ended June 30, 1997, the Partnership's net loss was $431,358 or
$26.91 per limited partnership unit. Net loss for the quarter ended June 30,
1996 amounted to $174,559 or $10.89 per unit. For the six month period ended
June 30, 1997, the net loss was $740,530 or $46.19 per limited partnership unit
as compared to $445,906 or $27.81 per limited partnership unit for the six month
period ended June 30, 1996.
Partnership revenue for the quarter ended June 30, 1997 totaled $740,741, a
decrease of approximately $323,000 from the 1996 amount of $1,063,586. Total
rental revenue dropped over $327,000, which makes up all of the decrease in
total revenue. The majority of the decrease can be attributed to the sales of
Williamsburg South Apartments and Pleasant Run Farms Apartments in December 1996
(i.e., there are two less complexes in the Partnership from which revenue is
generated). Although occupancy levels at Ambassador Towers (formerly Cedar
Ridge) continue to climb during 1997, continued vacancies at Perrymont Office
Building have hurt the Partnership financially. Management has hired a new
manager to oversee the leasing of Perrymont with the hope that the vacant space
will be occupied and revenue producing by the end of 1997.
-20-
<PAGE>
Results of Operations (continued):
- -----------------------------------
For the quarter ended June 30, 1997, Partnership expenses amounted to
$1,155,671, decreasing just over $66,000 from the same 1996 quarter amount. For
the six month period ended June 30, 1997, Partnership expenses decreased by over
$407,000 from the same period in 1996. Once again, a large portion of the
decrease can be attributed to the sale of both Williamsburg South Apartments and
Pleasant Run Farms Apartments in December 1996. Additionally, Castle Dore
Apartments saw slight decreases in payroll and related expenses, repairs and
maintenance and contracted service expenses (resulting from an increased amount
of maintenance work being performed by in-house/on-site personnel). Castle Dore
also saw increased utility costs, primarily gas and electric. Administrative
costs for Castle Dore remained virtually unchanged from those incurred during
the same six month period in 1996. Ambassador Towers also benefited from a
decrease of almost $11,000 in payroll and related expenses and an almost $10,000
decrease in contracted service costs. Ambassador Towers did, however, see an
increase in its repairs and maintenance expenditures resulting from
improvements, such as new carpeting, fresh paint and new appliances being
completed through much of the property. Few significant changes in expenses were
noted at the Perrymont Office Building between the six month periods ended June
30, 1997 and 1996; slight decreases were found in both contracted service costs
and utility expenses.
Inducon Joint Venture - Amherst generated a net loss of $58,399 for the six
month period ended June 30, 1997 with $55,479 of the loss allocated to the
Partnership. For the six months ended June 30, 1996, the Joint Venture loss was
$20,654.
On a tax basis, the partnership had a loss of $616,668 or $38.46 per limited
partner unit for the six month period ended June 30, 1997 versus a tax loss of
$326,910 or $20.39 per unit for the six month period ended June 30, 1996.
-21-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
PART II
-------
OTHER INFORMATION
-----------------
Item 1 - Legal Proceedings
- --------------------------
The Partnership is not a party to, nor are any of the Partnership's properties
subject to any material pending legal proceedings other than ordinary, routine
litigation incidental to the Partnership's business.
Items 2, 3, 4 and 5
- -------------------
Not applicable.
Item 6 - Exhibits and reports on Form 8-K
- -----------------------------------------
None.
-22-
<PAGE>
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.
REALMARK PROPERTY INVESTORS
LIMITED PARTNERSHIP III
By: /s/Joseph M. Jayson August 18, 1997
------------------------------ ------------------------
Joseph M. Jayson, Date
Individual General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: REALMARK PROPERTIES, INC.
Corporate General Partner
/s/Joseph M. Jayson August 18, 1997
------------------------------ ------------------------
Joseph M. Jayson, Date
President and Director
/s/Michael J. Colmerauer August 18, 1997
------------------------------ ------------------------
Michael J. Colmerauer Date
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III FOR
SIX MONTHS ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,506,527
<SECURITIES> 0
<RECEIVABLES> 647,233
<ALLOWANCES> 643,646
<INVENTORY> 0
<CURRENT-ASSETS> 2,318,030
<PP&E> 12,449,433
<DEPRECIATION> 5,882,255
<TOTAL-ASSETS> 9,150,223
<CURRENT-LIABILITIES> 991,218
<BONDS> 6,772,701
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 9,150,223
<SALES> 0
<TOTAL-REVENUES> 1,527,803
<CGS> 0
<TOTAL-COSTS> 2,212,854
<OTHER-EXPENSES> 55,479
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,002,424
<INCOME-PRETAX> (740,530)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (740,530)
<EPS-PRIMARY> (46.19)
<EPS-DILUTED> 0
</TABLE>
