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
September 30, 1998 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 September 30, 1998, the issuer had 15,551 units of limited partnership
interest outstanding.
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
INDEX
-----
<TABLE>
<CAPTION>
<S> <C>
PAGE NO.
--------
PART I: FINANCIAL INFORMATION
- ------ ---------------------
Balance Sheets -
September 30, 1998 and December 31, 1997 3
Statements of Operations -
Three Months Ended September 30, 1998 and 1997 4
Statements of Operations -
Nine Months Ended September 30, 1998 and 1997 5
Statements of Cash Flows -
Nine Months Ended September 30, 1998 and 1997 6
Statements of Partners' (Deficit) Capital -
Nine Months Ended September 30, 1998 and 1997 7
Notes to Financial Statements 8 - 17
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- ------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS 18 - 19
---------------------------------------------
</TABLE>
-2-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
BALANCE SHEETS
--------------
September 30, 1998 and December 31, 1997
----------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS
- ------
Property, at cost:
Land $ 1,144,862 $ 777,709
Buildings and improvements 10,290,415 10,649,818
Furniture and fixtures 959,752 959,752
---------------- -----------------
12,395,029 12,387,279
Less accumulated depreciation 5,870,582 5,544,716
---------------- -----------------
Property, net 6,524,447 6,842,563
Cash 547,091 799,874
Cash - security deposits 59,047 57,775
Investments in mutual funds 1,330,065 2,507,650
Escrow deposits 393,392 255,869
Accounts receivable, net of allowance for doubtful
accounts of $499,051 and $431,151, respectively 113,218 35,942
Accounts receivable - affiliates 72,360 -
Mortgage costs, net of accumulated amortization
of $181,554 and $128,059 125,223 178,718
Leasing commissions, net of accumulated amortization
of $134,457 and $133,035 2,047 3,469
Other assets 15,281 75,261
---------------- -----------------
Total Assets $ 9,182,171 $ 10,757,121
================ =================
LIABILITIES AND PARTNERS' (DEFICIT)
- ----------------------------------
Liabilities:
Mortgages payable $ 4,941,593 $ 6,216,763
Accounts payable and accrued expenses 355,044 192,702
Accounts payable - affiliates - 35,707
Accrued interest 199,463 199,407
Security deposits and prepaid rents 115,549 184,878
---------------- -----------------
Total Liabilities 5,611,649 6,829,457
---------------- -----------------
Partners' (Deficit) Capital:
General partners (48,339) (37,625)
Limited partners 3,618,861 3,965,289
---------------- -----------------
Total Partners' (Deficit) 3,570,522 3,927,664
---------------- -----------------
Total Liabilities and Partners' (Deficit) $ 9,182,171 $ 10,757,121
================ =================
</TABLE>
See notes to financial statements
-3-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
Three Months Ended September 30, 1998 and 1997
----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
September 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Income:
Rental $ 507,471 $ 1,415,971
Interest and other income 63,332 43,340
--------------- ---------------
Total income 570,803 1,459,311
--------------- ---------------
Expenses:
Property operations 444,935 951,653
Interest:
Paid to affiliates 10,344 33,092
Other 107,850 299,706
Depreciation and amortization 126,927 53,575
Administrative:
Paid to affiliates 64,983 115,733
Other 65,070 194,023
--------------- ---------------
Total expenses 820,109 1,647,782
--------------- ---------------
Loss before allocated loss from joint venture (249,306) (188,471)
Allocated loss from joint venture - (118,583)
--------------- ---------------
Net loss $ (249,306) $ (307,054)
=============== ===============
Loss per limited partnership unit $ (15.55) $ (19.15)
=============== ===============
Distributions per limited partnership unit $ - $ -
=============== ===============
Weighted average number of
limited partnership units
outstanding 15,551 15,551
=============== ===============
</TABLE>
See notes to financial statements
-4-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
Nine Months Ended September 30, 1998 and 1997
---------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Income:
Rental $ 1,635,472 $ 2,108,618
Interest and other income 347,298 91,434
---------------- -----------------
Total income 1,982,770 2,200,052
---------------- -----------------
Expenses:
Property operations 1,213,826 1,194,339
Interest:
Paid to affiliates 82,973 44,687
Other 317,705 1,022,156
Depreciation and amortization 380,783 75,082
Administrative:
Paid to affiliates 133,453 203,886
Other 211,172 263,303
---------------- -----------------
Total expenses 2,339,912 2,803,453
---------------- -----------------
Loss before allocated loss from joint venture (357,142) (603,401)
Allocated loss from joint venture - (135,011)
---------------- -----------------
Net loss $ (357,142) $ (738,412)
================ =================
Loss per limited partnership unit $ (22.28) $ (46.06)
================ =================
Distributions per limited partnership unit $ - $ -
================ =================
Weighted average number of
limited partnership units
outstanding 15,551 15,551
================ =================
</TABLE>
See notes to financial statements
-5-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
Nine Months Ended September 30, 1998 and 1997
---------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (357,142) $ (738,412)
Adjustments to reconcile net loss to net cash (used in)
operating activities:
Depreciation and amortization 380,783 75,082
Loss from joint venture - 135,011
Changes in operating assets and liabilities:
Cash - security deposits (1,271) (1,259)
Escrow deposits (137,523) (344,481)
Accounts receivable (77,276) (3,518)
Leasing commissions - -
Other assets 59,980 (21,481)
Accounts payable and accrued expenses 162,342 (418,907)
Accrued interest 56 55,132
Security deposits and prepaid rent (69,329) (32,809)
---------------- -----------------
Net cash (used in) operating activities (39,380) (1,295,642)
---------------- -----------------
Cash flow from investing activities:
Capital expenditures (7,750) -
Accounts receivable - affiliates (72,360) -
Withdrawals from mutual funds investments 1,177,585 -
---------------- -----------------
Net cash provided by investing activities 1,097,475 -
---------------- -----------------
Cash flows from financing activities:
Accounts payable - affiliates (35,708) (112,215)
Principal payments on mortgages and notes (1,275,170) (126,682)
Proceeds from mortgage refinancing - 1,331,162
Mortgage costs - (137,952)
---------------- -----------------
Net cash (used in) provided by financing activities (1,310,878) 954,313
---------------- -----------------
(Decrease) in cash (252,783) (341,329)
Cash - beginning of period 799,874 1,811,962
---------------- -----------------
Cash - end of period $ 547,091 $ 1,470,633
================ =================
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 317,649 $ 1,011,711
================ =================
</TABLE>
See notes to financial statements
-6-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
STATEMENTS OF PARTNERS' (DEFICIT) CAPITAL
-----------------------------------------
Nine Months Ended September 30, 1998 and 1997
---------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
General Limited Partners
Partners
Amount Units Amount
------ ----- ------
<S> <C> <C> <C>
Balance, January 1, 1997 $ (199,668) 15,551 $ 2,326,502
Net loss (22,152) - (716,260)
------------------ --------------- -----------------
Balance, September 30, 1997 $ (221,820) 15,551 $ 1,610,242
================== =============== =================
Balance, January 1, 1998 $ (37,625) 15,551 $ 3,965,289
Net loss (10,714) - (346,428)
------------------ --------------- -----------------
Balance, September 30, 1998 $ (48,339) 15,551 $ 3,618,861
================== =============== =================
</TABLE>
See notes to financial statements
-7-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Nine Months Ended September 30, 1998 and 1997
---------------------------------------------
(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 nine months ended
September 30, 1998 and 1997 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
------------------------------------------
Use of estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash
----
For purposes of reporting cash flows, cash includes the following items:
cash on hand; cash in checking; and money market savings.
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)
-----------------------------------------------------
Investments in mutual funds
---------------------------
The investments in mutual funds are stated at fair value, which
approximates cost, at September 30, 1998.
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 was 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
$3,711,683, 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
$3,845,064, 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 was
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 November 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 $6,423,391, 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.
In December 1997, the Partnership sold the Castle Dore Apartments for a
sales price of $5,160,000, less related fees of approximately $174,000.
The sale generated a total net gain of $3,095,376 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 was divided equally between the
Partnership and the other Joint Venturer. The Joint Venture agreement
provided that the Partnership will be allocated 95% of any income or
loss.
-11-
<PAGE>
INVESTMENT IN JOINT VENTURES (CONTINUED)
---------------------------------------
Net cash flow from the Joint Venture was to be distributed as follows:
To the Partnership until it 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.
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 was to be divided equally.
To the extent there were net proceeds from any sale or refinancing of
the subject property, the proceeds were to 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 had received an overall 9% cumulative
return on its underwritten equity.
Next to the Partnership until it had 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 had received a cumulative 20% per year
return on its total underwritten equity.
Thereafter any remaining net proceeds were to be divided 50% to the
Partnership and 50% to the other joint venturer.
In November 1997, the Partnership acquired the interest of Delhurst
Corporation, the other joint venture partner, for $55,000. At September
30, 1998, the Partnership owned 100% of the Inducon Amherst property.
The property began to be consolidated into the Partnership's financial
statements beginning November 1, 1997.
-12-
<PAGE>
6. MORTGAGES AND NOTES PAYABLE
---------------------------
Castle Dore
-----------
A mortgage with a balance of $2,550,000 at September 30, 1997, providing
for monthly interest payments only, bearing interest at 9.1875%. The
note was to mature June 1999. This mortgage was refinanced during May
1997. This property was sold in December 1997 and the outstanding
balance of the mortgage was paid in full.
Perrymont
---------
A mortgage which provided for interest rates and monthly installments
through December 1998 as follows:
Year Rate Payment
---- ---- -------
1997 8.5% $ 10,187 (Principal and interest)
The mortgage was scheduled to mature in January 1999. As of December 31,
1997 the property was in default of the mortgage and was assigned a
receiver by the lender. The mortgage obligation was paid in March 1998,
after the lender accepted a discounted pay-off of the mortgage which
resulted in an approximate gain of $210,000 due to the extinguishment of
debt.
Inducon Amherst
---------------
A mortgage with a balance of $1,846,309 and $1,868,706 at September 30,
1998 and 1997, respectively. The mortgage provides for monthly principal
and interest payments of $15,250 at an interest rate of 8.62%. The
balance of the mortgage note is due March 2022.
-13-
<PAGE>
MORTGAGES AND NOTES PAYABLE (CONTINUED)
--------------------------------------
Ambassador Towers (formerly Cedar Ridge)
---------------------------------------
A mortgage with a balance of $3,095,284 and $3,123,461 at September 30,
1998 and 1997, respectively, providing for monthly interest payments
only for the first two years of the mortgage. The interest rate is
8.275% during the first year of the loan and is to be adjusted at the
beginning of the second and seventh loan years to a rate equal to 2.40%
plus the weekly average yield on United States Treasury Securities
(8.25% at September 30, 1998), adjusted to a constant maturity of five
years. Principal payments will begin in the third year of the mortgage.
The note matures February 2004.
The aggregate maturities of the mortgages for each of the next five
years and thereafter are as follows:
Year Amount
---- ------
1998 $ 76,172
1999 72,993
2000 98,990
2001 107,698
2002 117,172
Thereafter 4,484,037
---------------
TOTAL $ 4,957,062
===============
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
Statement of Financial Accounting Standards No. 107 requires disclosure
about fair value of certain financial instruments. The fair value of
accounts receivable, accounts payable, accrued expenses and deposit
liabilities approximate the carrying value due to the short-term nature
of these instruments.
Management has estimated that the fair value of the mortgages at
September 30, 1998 on Ambassador Towers and Inducon Amherst approximate
their carrying values of $3,095,284 and $1,846,309, respectively, as the
mortgages were obtained recently.
-14-
<PAGE>
8. 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 $71,792 and $78,802 for the nine months ended September 30,
1998 and 1997, 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 nine months
ended September 30, 1998 and 1997.
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 receivable - affiliates amounted to $72,360 and $0 at September
30, 1998 and 1997, respectively. The balance due is payable on demand.
Accounts payable - affiliates amounted to $0 and $83,697 at September
30, 1998 and 1997, respectively. The payable represents fees due to the
general partner or to affiliates of the general partner.
-15-
<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 $6,120 and $10,530 for the nine months ended
September 30, 1998 and 1997, respectively.
9. 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 nine month periods ended
September 30, 1998 and 1997 as reported in the statements of operations,
and as would be reported for tax purposes respectively, is as follows:
<TABLE>
<CAPTION>
September 30, September 30,
1998 1997
---- ----
<S> <C> <C>
Net loss -
Statement of operations $ (357,142) $ (738,412)
(Add to) deduct from:
Difference in depreciation ( 27,000) ( 75,000)
Difference in amortization - 49,000
Non-deductible expenses (195,000) 186,000
Difference in loss of joint venture - 25,000
------------ -----------
Net loss for tax purposes $ (579,142) $ (553,412)
============ ===========
</TABLE>
-16-
<PAGE>
INCOME TAXES (CONTINUED)
-----------------------
The reconciliation of partner's (deficit) capital at September 30, 1998
and December 31, 1997 as reported in the balance sheets, and as reported
for tax purposes, is as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
<S> <C> <C>
Partner's Capital -
balance sheet $ 3,570,522 $ 3,927,664
Add to (deduct from):
Accumulated difference in
depreciation (4,413,495) (4,386,495)
Accumulated difference in
amortization 77,418 77,418
Syndication fees and selling
expenses 1,842,060 1,842,060
Gain on sale of property 1,009,847 1,009,847
Other non-deductible expenses (122,275) 72,725
Difference in book and tax
depreciable cost basis 915,085 915,085
Difference in book and tax
basis of investments (596,400) (596,400)
Other (69,286) (69,286)
---------------- ---------------
Partner's Capital -
tax return $ 2,213,476 $ 2,792,618
================ ===============
</TABLE>
-17-
<PAGE>
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
Liquidity and Capital Resources
- -------------------------------
As noted in previous quarters, although the Partnership showed a significant
cash shortfall for the first nine months of 1998, this was primarily due to the
payment in full of the mortgage on the Perrymont Office Building. Cash flow from
operations was much improved over that of the nine month period in the previous
year; this shows the direction in which management feels the Partnership is
going. Management continues to be optimistic that expenses will continue to
decrease as tighter control is being exercised over expenditures; with more
control over spending in place, management continues to focus more of its
efforts on ways to increase operating revenue.
The General Partner has plans to make substantial capital improvements to the
Perrymont Office Building. Work has begun and is expected to continue through
the first quarter of 1999. It is felt that the physical improvements to the
exterior of the building and the common parts of the interior will increase the
curb appeal of the building and therefore attract new tenants. Scheduled work
includes replacement of the entire HVAC system, roof repairs, addition of a new
facade on the front of the building, and redecorating of all common hallways and
bathrooms. Capital improvement work at Ambassador Towers continues with carpets
and appliances being replaced as needed and all common hallways being renovated
with new carpeting, wallpaper and paint. Also scheduled at Ambassador is parking
lot sealing and replacement of several balconies. Management expects to pay for
these projects out of the escrow reserve accounts set up with the lender.
There were no distributions for the nine month periods ended September 30, 1998
and 1997. The Partnership is currently using the cash generated from operations
and the sales which took place in 1996 and 1997 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 September 30, 1998, the Partnership's net loss was
$249,306 or $15.55 per limited partnership unit. Net loss for the quarter ended
September 30, 1997 amounted to $307,054 or $19.15 per unit. For the nine month
period ended September 30, 1998, the net loss was $357,142 or $22.28 per limited
partnership unit as compared to $738,412 or $46.06 per limited partnership unit
for the nine month period ended September 30, 1997.
-18-
<PAGE>
Results of Operations (continued):
- -----------------------------------
Partnership revenue for the quarter ended September 30, 1998 totaled $570,803, a
decrease of approximately $888,000 from the 1997 amount of $1,459,311. A
decrease in rental revenue made up the entire decrease in total revenue. The
decrease is attributed to there being one less complex in the Partnership since
Castle Dore Apartments was sold in December 1997. Also contributing to the
decrease are continuous vacancy problems at Perrymont (occupancy has been
averaging approximately 75%). Although occupancy levels at Ambassador Towers
continued to climb during 1998, continued vacancies at Perrymont Office Building
have hurt the Partnership financially. Management believes that scheduled
improvements to the properties will result in increased occupancies and cash
flow by the end of 1998. The payment of the Perrymont mortgage in full in early
1998 resulted in a gain of approximately $210,000.
For the quarter ended September 30, 1998, Partnership expenses amounted to
$820,109, decreasing just over $827,000 from the same 1997 quarter amount. For
the nine month period ended September 30, 1998, Partnership expenses decreased
by over $463,500 from the same period in 1997. Total expenses for the nine
months ended September 30, 1998 and 1997 were $2,339,912 and $2,803,453,
respectively. A good portion of the decrease in expenses is once again
attributable to the sale in December 1997 of Castle Dore Apartments; no expenses
were recorded in 1998 for this property. Additionally, there was a significant
decrease in interest expense due to the sale and payment in full of the mortgage
on Castle Dore Apartments. Administrative expenses paid to affiliates also saw a
decrease due to less properties in the Partnership; this resulted in less
management fees paid and/or accrued. Depreciation expense increased by over
$305,000 between the nine months ended September 30, 1998 and 1997. This is
primarily due to Inducon Amherst now being reported as a consolidated venture
since the joint venture partner was bought out during 1997. Formerly, Inducon
Amherst was reported as an unconsolidated joint venture. Management continues to
expect to see an increase in maintenance expenses and payroll in the next
several months as the properties are undergoing physical improvements, many of
which are being done by using in-house labor, such as painting.
On a tax basis, the partnership had a loss of $579,142 or $36.12 per limited
partner unit for the nine month period ended September 30, 1998 versus a tax
loss of $553,412 or $34.52 per unit for the nine month period ended September
30, 1997.
-19-
<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.
-20-
<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 November 23, 1998
---------------------- -----------------
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 November 23, 1998
---------------------- -----------------
Joseph M. Jayson, Date
President and Director
/s/ Michael J. Colmerauer November 23, 1998
--------------------------- -----------------
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
the nine months ended September 30, 1998, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 547,091
<SECURITIES> 1,330,065
<RECEIVABLES> 684,629
<ALLOWANCES> 499,051
<INVENTORY> 0
<CURRENT-ASSETS> 2,530,454
<PP&E> 12,395,029
<DEPRECIATION> 5,870,582
<TOTAL-ASSETS> 9,182,171
<CURRENT-LIABILITIES> 670,056
<BONDS> 4,941,593
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 9,182,171
<SALES> 0
<TOTAL-REVENUES> 1,982,770
<CGS> 0
<TOTAL-COSTS> 2,339,912
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 400,678
<INCOME-PRETAX> (357,142)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (357,142)
<EPS-PRIMARY> (22.28)
<EPS-DILUTED> 0
</TABLE>
