FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended December 31, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934. (NO FEE
REQUIRED)
Commission File Number 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)
<TABLE>
<CAPTION>
<S> <C>
Registrant's Telephone Number: (716) 636-9090
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interest
</TABLE>
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-K or any
amendment to this Form 10-K. ( )
DOCUMENTS INCORPORATED BY REFERENCE
See page 13 for a list of all documents incorporated by reference
1
<PAGE>
PART I
ITEM 1: BUSINESS
- -----------------
The Registrant, Realmark Property Investors Limited Partnership-III (the
"Partnership"), is a Delaware Limited Partnership organized in 1983, pursuant to
an Agreement and Certificate of Limited Partnership (the "Partnership
Agreement"), under the Revised Delaware Uniform Limited Partnership Act. The
Partnership's general partners are Realmark Properties, Inc. (the "Corporate
General Partner"), a Delaware corporation, and Joseph M.
Jayson (the "Individual General Partner").
The Registrant commenced the public offering of its Limited Partnership
Units, registered with the Securities and Exchange Commission under the
Securities Act of 1933 as amended on February 1, 1984, and concluded the
offering on January 31, 1985, having raised a total of $15,551,000 before
deducting sales commissions and expenses of the offering.
The Partnership's primary business and its only industry segment is to
own and operate income-producing real property for the benefit of its partners.
As of December 31, 1998, the Partnership owned one (1) apartment complex with
280 units and two office buildings with 124,960 total square feet of rentable
space. Each of the complexes is managed for the Partnership by Realmark
Corporation, an affiliate of the General Partners.
The Partnership's acquisition and disposition of rental property, as
well as its future plans concerning dispositions, is described in Note 3 to the
financial statements.
Occupancy for each complex as of December 31, 1998, 1997 and 1996 was as
follows:
1998 1997 1996
Ambassador Towers (formerly Cedar Ridge) 81% 80% 90%
Perrymont 75% 68% 63%
Inducon Amherst 82% 91% -
Castle Dore - - 96%
2
<PAGE>
ITEM 1: BUSINESS (Con't.)
- ------- -----------------
For financial statement purposes, the operations of the Partnership's
properties are consolidated. The following chart lists the percentage of total
Partnership revenue generated by each complex for the year indicated:
1998 1997 1996
Ambassador Towers (formerly Cedar Ridge) 65% 51% 32%
Perrymont 16% 11% 5%
Inducon Amherst 19% 3% -
Castle Dore - 35% 24%
Williamsburg South - - 24%
Pleasant Run - - 15%
The business of the Partnership is not seasonal. As of December 31,
1998, the Partnership did not directly employ any persons in a full-time
position. All persons who regularly rendered services on behalf of the
Partnership through December 31, 1998 were employees of the Corporate General
Partner or its affiliates.
This annual report contains certain forward-looking statements
concerning the Partnership's current expectations as to future results. Such
forward-looking statements are contained in Item 7: Management's Discussion and
Analysis of Financial Conditions and Results of Operations. Words such as
"believes", "forecasts", "intends", "possible", "expects", "estimates",
"anticipates" or "plans" and similar expressions are intended to identify
forward-looking statements.
ITEM 2: PROPERTIES
- ------------------
Following is a listing of properties and joint ventures owned by the Partnership
at December 31, 1998:
<TABLE>
<CAPTION>
Name
----
and Location General Character of Property Purchase Date
- ------------ ----------------------------- -------------
<S> <C> <C>
Ambassador Towers Apartment complex; 6 buildings on December 1985
(formerly Cedar 11.6 acres; 280 units. The outstanding
Ridge Apts.) mortgage balance at December 31, 1998
Monroeville, PA was $3,130,049. The mortgage calls for monthly
installments of principal and interest at 8.25%
through maturity at February 2004.
Perrymont Office Bldg. Office building; one building on 2.3 August 1985
Pittsburgh, PA acres; 47,000 square feet. As discussed
in Note 4 to the financial statements
the mortgage obligation was satisfied
in April 1998.
</TABLE>
3
<PAGE>
ITEM 2: PROPERTIES (Con't.)
- ---------------------------
<TABLE>
<CAPTION>
Name
----
and Location General Character of Property Purchase Date
- ------------ ----------------------------- -------------
<S> <C> <C>
Inducon Amherst Four office/warehouse buildings on April 1985
Amherst, NY 4 acres with approximately 84,960
square feet of rentable space. The
outstanding mortgage balance at December 31,
1998 was $1,840,748. The mortgage requires
monthly payments of principal and interest
of $15,250 at a rate of 8.62%. The mortgage
matures March 2022.
</TABLE>
ITEM 3: LEGAL PROCEEDINGS
- -------------------------
The Partnership is not a party to, nor are any of the Partnership's
properties the subject of, any material pending legal proceedings that would
impact the future financial position and operations of the Partnership.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
None.
PART II
-------
ITEM 5: MARKET FOR REGISTRANT'S UNITS OF LIMITED PARTNERSHIP INTEREST
- ---------------------------------------------------------------------
There is currently no established trading market for the units of
Limited Partnership Interest of the Partnership and it is not anticipated that
any will develop in the future.
There were no distributions during the years ended December 31, 1998,
1997 and 1996.
As of December 31, 1998, there were 1,902 record holders of units of
Limited Partnership Interest.
4
<PAGE>
ITEM 6: SELECTED FINANCIAL DATA
- ------- -----------------------
<TABLE>
<CAPTION>
Realmark Properties Investors Limited Partnership-III
-----------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total assets $ 9,113,917 $ 10,757,121 $ 8,869,221 $ 12,403,691 $ 13,195,397
============= ============= ============= ============= =============
Notes payable and
long-term obligations $ 4,970,797 $ 6,216,763 $ 5,431,000 $ 10,276,248 $ 10,492,540
============= ============= ============= ============= =============
- ------------------------------------------------------------------------------------------------------------------
Revenue $ 2,432,298 $ 3,115,179 $ 4,429,043 $ 4,632,199 $ 4,505,896
Expenses 2,840,623 4,196,309 5,357,211 5,931,484 5,549,133
Loss from
joint venture - (213,416) (142,165) (93,698) (164,510)
------------- ------------- ------------- ------------- -------------
Loss from
operations (408,325) (1,294,546) (1,070,333) (1,392,983) (1,207,747)
Gain on sale of property - 3,095,376 3,501,323 - -
Gain on extinguishment
of debt 318,213 - - - -
------------- ------------- ------------- ------------- -------------
Net (loss) income $ (90,112) $ 1,800,830 $ 2,430,990 $ (1,392,983) $ (1,207,747)
============= ============= ============= ============= =============
- ------------------------------------------------------------------------------------------------------------------
Net cash used in
operating activities $ (365,527) $ (749,357) $ (275,818) $ (229,343) $ (406,562)
Proceeds from refinancing - 5,813,000 - - 2,250,000
Principal payments upon
refinancing - (4,803,977) - - (1,987,220)
Principal payments upon
sale - (2,240,764) (4,592,357) - -
Principal payments on
long-term debt (962,518) (554,380) (313,548) (282,015) (243,096)
------------- ------------- ------------- ------------- -------------
Net cash used in
operating activities
less principal payments $ (1,328,045) $ (2,535,478) $ (5,181,723) $ (511,358) $ (386,878)
============= ============= ============= ============= =============
- ------------------------------------------------------------------------------------------------------------------
(Loss) income per limited
partnership unit $ (5.62) $ 105.38 $ 141.68 $ (86.89) $ (75.33)
============= ============= ============= ============= =============
Distributions per limited
partnership unit $ - $ - $ - $ - $ -
============= ============= ============= ============= =============
Weighted average number
of Limited Partnership
units outstanding 15,551 15,551 15,551 15,551 15,551
============= ============= ============= ============= =============
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- -----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Liquidity and Capital Resources
- -------------------------------
Although the Partnership had negative cash flow from operations during
the year ended December 31, 1998, the Partnership has been able, due to the
sales of the three properties in the last two years, to maintain sufficient cash
to enable it to not only fund operating activities, but also to provide for
significant capital improvements at the remaining properties.
In the beginning of April 1998, management satisfied the mortgage on the
Perrymont Building. This mortgage was in default and the lender was threatening
to begin foreclosure procedures. As a result of the payoff of the outstanding
mortgage, the lender gave the Partnership a sizable discount on the mortgage
resulting in an extraordinary gain totaling $318,213 being recognized in 1998
due to this extinguishment of debt.
In January of 1998, a contract for the sale of the Perrymont Office
Building was signed. The contract had a sales price of $1,750,000. The contract
was soon after canceled by the potential buyer and management did not continue
to look for a purchaser for the property. The General Partners feel, however,
that the sale of this property, as well as that of Ambassador Towers, is in the
best interest of the Limited Partners; management plans to again look for
potential buyers through marketing in trade journals, newspapers, etc.
Increasing occupancy, as well as decreasing delinquencies, remains the
major focus of management. Management's plans include considerable renovation
work at Perrymont Office Building including re-facing of the exterior of the
building to give it a more updated appearance, replacement of hallway carpeting,
fresh paint throughout the building, redecorating of all common area restrooms,
and new signage. The work is expected to cost approximately $270,000 and is
anticipated to be complete by mid-July 1999. By improving the physical
appearance of the building, both inside and out, management is hopeful that new
tenants will be attracted to the building.
Low occupancies, required capital improvements due to aging portfolio of
the Partnership and the repayment of a mortgage loan have reduced the
Partnership's cash reserves, however management feels there is still adequate
liquidity and reserves to otherwise pay its expenses. The Partnership made no
distributions during 1998, 1997 or 1996. It is uncertain as to when the
Partnership will be in a position to resume making distributions, although
management is hopeful that a distribution will be made in the coming year once
the capital improvement work scheduled at the properties is either completed or
the full costs may be measured.
Ambassador Towers, since the end of 1998, has seen a significant
improvement in its occupancy (i.e., as of April 1999, occupancy reached
approximately 90%). The success seen by this complex is primarily the result of
new on-site staff who came to this complex from one of the competitors; these
employees came with considerable experience and innovative ideas. The complex
began offering new services to its residents such as a concierge office which
provides dry cleaning services and travel services, and a van service taking
residents to the bank, the post office, the grocery store, etc. Additionally,
the complex offers free cable to all of its residents (rents were increased on a
per unit basis to cover these costs to the complex). Management also feels that
the property has become more attractive to potential renters since the
construction of a plaza containing a large grocery store chain was completed
during 1998 immediately next to the property. All hallways in the building have
been re-carpeted and freshly painted and wallpapered. Carpets and appliances
within units of this complex are being replaced on an as-needed basis; moreover,
new cabinets, countertops and mirrors are being added to units when such
improvements are deemed necessary to rent vacant units or retain current
tenants. Management is optimistic that this complex will continue to see
increased occupancy in the coming year.
6
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- -----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Con't.)
------------------------------------------------------
Liquidity and Capital Resources (Con't.)
- ------------------------------- --------
The three complexes held by this Partnership are all deemed to be in
"good" locations and competitive rental markets. With this in mind, management
continues to monitor its expenses closely while also closely monitoring the
rents charged and services offered by its local competition.
The Partnership has conducted a review of its computer systems to
identify the systems that could be affected by the "year 2000 issue" and has
substantially developed an implementation plan to resolve such issues. The year
2000 issue is the result of computer programs being written using two digits
rather than four digits to define the applicable year. Computer programs that
have time-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities. Management has discussed with outside
independent computer consultants its readiness for the Year 2000. The majority
of the software in use is either "2000 compliant" or will be with little
adaptation and at no significant cost per information provided by their software
providers. Management has also engaged a computer firm to re-write its tax
software making it Year 2000 compliant. This work is scheduled to begin May 1,
1999 and is expected to take three months. Management has a complete inventory
of its computers and feels that the cost of replacing those which will not be
"2000 compliant" will be relatively minor (i.e., most likely under $20,000).
Non-informational systems have also been evaluated and management feels that
there will be little, if any, cost to preparing these for the Year 2000 (i.e.,
most likely under $20,000). Management expects to be fully Year 2000 compliant
with all testing done by September 30, 1999. The Partnership is working on a
contingency plan in the unlikely event that its systems do not operate as
planned. It is management's belief that in the unlikely event that its
informational systems do not operate as planned in the year 2000, all records
could be maintained manually until the problems with its systems are resolved.
Management feels that its external vendors, suppliers and customers, for the
most part, will be unaffected by the Year 2000 as most do not rely on
information systems in their businesses.
Results of Operations:
- ----------------------
For the year ended December 31, 1998, the Partnership incurred a net
loss of $90,112 or $5.62 per limited partnership unit. This loss was after
considering the impact of extraordinary income from the extinguishment of debt
totaling $318,213 or $19.85 per limited partnership unit. For the years ended
December 31, 1997 and 1996, the Partnership had net income of $1,800,830 or
$105.38 per limited partnership unit and $2,430,990 or $141.68 per limited
partnership unit, respectively. The net income in these years was the result of
the gain on the sale of Castle Dore Apartments during 1997, and the gains on the
sales of Williamsburg South and Pleasant Run Apartments in 1996. The Partnership
had a net loss before the gains recognized upon these sales of $1,294,546 and
$1,070,333 for the years ended December 31, 1997 and 1996, respectively.
Partnership revenues for the year ended December 31, 1998 totaled
$2,432,298, consisting of rental income of $2,050,131 and other income, which
includes interest, laundry income, and other miscellaneous sources of income of
$382,167. The decrease in rental revenue from that of the two previous years is
attributed to several factors: 1) in both 1996 and 1997, the Partnership owned
more residential apartment complexes which were reporting income (i.e., in 1997
there was one more complex which reported rental income of approximately
$976,000 and in 1996 there were three more complexes reporting income of
approximately $2,532,000); 2) the low occupancy levels throughout much of the
year at Ambassador Towers; and 3) the recurrent struggle with low occupancy at
Perrymont. Rental revenues in the year ended December 31, 1997 amounted to
$2,828,947 and in the year ended December 31, 1996 totaled $4,004,140.
7
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- -----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Con't.)
------------------------------------------------------
Results of Operations (Con't.):
- -------------------------------
There was a significant amount of other income during the year ended
December 31, 1996, in part due to real estate tax refunds received for tax
appeals at Ambassador Towers. An increase in rental income at Perrymont of
approximately $61,000 or 20% was noted when comparing 1998 and 1997; this is
reflective of the increased, although still low, occupancy at December 31, 1998.
There was also an increase of approximately $96,000 in interest and other income
between the years ended December 31, 1998 and 1997. This increase is the result
of interest income of approximately $89,000 earned on the investment of the
proceeds from the previous year's sale of Castle Dore Apartments.
Partnership expenses for the year ended December 31, 1998 totaled
$2,840,623, a significant decrease from the expenses for the years ended
December 31, 1997 and 1996 which were $4,196,309 and $5,357,211, respectively.
Again, the Partnership has one less property contributing to the total expenses
for 1998 as compared to 1997 and three less properties contributing to the total
expenses when compared to 1996. For the years ended December 31, 1997 and 1996,
expenses related to the properties which were sold totaled approximately
$1,600,000 and $3,049,000, respectively.
The most prominent decrease can be seen in interest-other expense. There
was a decrease of approximately $876,000 or 66% between the years ended December
31, 1998 and 1997 and approximately $715,000 or 61% between the years ended
December 31, 1998 and 1996. This decrease is not only attributable to there
being less properties owned by the Partnership during 1998 as compared to both
1997 and 1996, but also to there no longer being a mortgage on the Perrymont
Office Building; in the beginning of April 1998, management satisfied this
mortgage with the lender giving the Partnership a sizable discount on the
mortgage resulting in an extraordinary gain on extinguishment of debt totaling
$318,213. There was also a large decrease in property operations expenses
totaling approximately $268,000 between 1998 and 1997 and $989,000 between 1998
and 1996. In this case, the decrease is due to there being less properties
reporting expenses in the Partnership. The three properties remaining in the
Partnership at December 31, 1998 generally incurred higher operating expenses
during 1998 with the exception of decreased real estate taxes totaling
approximately $26,000 and decreased utility costs totaling approximately $25,000
incurred by Ambassador Towers. The increased expenses are attributable to
significant non-capitalizable capital improvement work being done at the
properties. Much of the work has been done by on-site personnel which resulted
in higher payroll and associated costs at Ambassador Towers totaling almost
$64,000. Expenses related to new carpeting, paint and appliances increased from
approximately $73,000 in 1997 to over $201,000 in 1998 at Ambassador Towers.
Depreciation and amortization expense decreased drastically from 1997 to 1998
and likewise from 1996 to 1998. These decreases are attributable to the
decreased number of properties in the Partnership in 1998 due to sales which
took place in both 1997 and 1996. Administrative expenses, other than those due
to affiliates, totaled $275,151 for 1998; this is an increase of over $45,500 as
compared to the year ended December 31, 1997 when they totaled $229,622. The
increase is partially due to increased advertising and promotional expenses
incurred by Ambassador Towers totaling approximately $23,000. The decrease in
administrative expenses due to affiliates totaling over $76,000 between 1998 and
1997 and over $184,000 between 1998 and 1996 is primarily due to the sale of
properties during both 1997 and 1996; the Partnership incurred less management
fees due to there being less properties owned by the Partnership.
8
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- -----------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Con't.)
------------------------------------------------------
Results of Operations (Con't.):
- -------------------------------
For the year ended December 31, 1998, the tax basis loss was $372,451 or
$23.23 per limited partnership unit compared to a tax basis income of $2,135,244
or $133.19 per unit for the year ended December 31, 1997 and income of
$2,940,564 or $183.42 per limited partnership unit for the year ended December
31, 1996. The gain for tax purposes resulting from the sale of Castle Dore
Apartments in 1997 totaled $4,003,583. The gain reported in 1996 from the sale
of Williamsburg South and Pleasant Run for tax purposes amounted to $4,467,961.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
The Partnership does not have investments in instruments which are
subject to significant fluctuations in market risk (e.g., derivatives, options
or other interest sensitive instruments).
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ---------------------------------------------------
Listed under Item 14 of the report.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
- -----------------------------------------------------
ON ACCOUNTING AND FINANCIAL DISCLOSURE
--------------------------------------
None.
PART III
--------
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -----------------------------------------------------------
The Partnership, as an entity, does not have any directors or officers.
The Individual General Partner of the Partnership is Joseph M. Jayson. The
directors and executive officers of Realmark Properties, Inc., the Partnership's
Corporate General Partner, as of March 1, 1999, are listed below. Each director
is subject to election on an annual basis.
<TABLE>
<CAPTION>
Title of All Positions Year First
Name Held With the Company Elected Director
- ---- --------------------- ----------------
<S> <C> <C>
Joseph M. Jayson President and Director 1979
Judith P. Jayson Vice President and Director 1979
Michael J. Colmerauer Secretary N/A
</TABLE>
Joseph M. Jayson, President and Director of Realmark Properties, Inc.
and Judith P. Jayson, Vice President and Director of Realmark Properties, Inc.,
are married to each other.
9
<PAGE>
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Con't.)
- -------- -------------------------------------------------- --------
The Director and Executive Officers of the Corporate General Partner and
their principal occupations and affiliations during the last five years or more
are as follows:
Joseph M. Jayson, age 60, is Chairman and Director and sole stockholder
of J.M. Jayson & Company, Inc. and certain of its affiliated companies: U.S.
Apartments LLC, Westmoreland Capital Corporation, Oilmark Corporation and U.S.
Energy Development Corporation. In addition, Mr. Jayson is President and
Director of Realmark Corporation and Realmark Properties, Inc., wholly owned
subsidiaries of J.M. Jayson & Company, Inc. and co-General Partner of Realmark
Properties Investors Limited Partnership, Realmark Properties Investors Limited
Partnership-II, Realmark Properties Investors Limited Partnership-III, Realmark
Properties Investors Limited Partnership-IV, Realmark Properties Investors
Limited Partnership-V, Realmark Properties Investors Limited Partnership-VI A
and Realmark Properties Investors Limited Partnership-VI B. Mr. Jayson has been
engaged in real estate business for the last 36 years and is a Certified
Property Manager as designated by the Institute of Real Estate Management
("I.R.E.M."). Mr. Jayson received a B.S. Degree in Education in 1961 from
Indiana University, a Masters Degree from the University of Buffalo in 1963, and
has served on the Educational Faculty of the Institute of Real Estate
Management. Mr. Jayson has for the last 36 years been engaged in various aspects
of real estate brokerage and investment. He brokered residential properties from
1962 to 1964, commercial and investment properties from 1964 to 1967, and in
1967 left commercial real estate to form his own investment firm. Since that
time, Mr. Jayson and J.M. Jayson & Company, Inc. have formed, or participated in
various ways in forming, over 30 real estate related limited partnerships. For
the past seventeen years, Mr. Jayson and J.M. Jayson & Company, Inc. and an
affiliate have also engaged in developmental drilling for gas and oil.
Judith P. Jayson, age 59, is currently Vice-President and Director of
Realmark Properties, Inc. She is also a Director of the property management
affiliate, Realmark Corporation. Mrs. Jayson has been involved in property
management for the last 27 years and has extensive experience in the hiring and
training of property management personnel and in directing, developing and
implementing property management systems and programs. Mrs. Jayson, prior to
joining the firm in 1973, taught business in the Buffalo, New York high school
system. Mrs. Jayson graduated from St. Mary of the Woods College in Terre Haute,
Indiana, with a degree in Business Administration. Mrs. Jayson is the wife of
Joseph M. Jayson, the Individual General Partner.
Michael J. Colmerauer, 40, is Secretary and in-house legal counsel for
J.M. Jayson & Company, Inc., Realmark Corporation, Realmark Properties, Inc. and
other companies affiliated with the General Partners. He received a Bachelor's
Degree (BA) from Canisius College in 1980 and a Juris Doctors (J.D.) from the
University of Tulsa in 1983. Mr. Colmerauer is a member of the American and Erie
County Bar Association and has been employed by the Jayson group of companies
for the last 15 years.
ITEM 11: EXECUTIVE COMPENSATION
- --------------------------------
No direct remuneration was paid or payable by the Partnership to
directors and officers (since it has no directors or officers) for its fiscal
years ended December 31, 1998, 1997 and 1996 nor was any direct remuneration
paid or payable by the Partnership to directors or officers of Realmark
Properties, Inc., the Corporate General Partner and sponsor for the years ended
December 31, 1998, 1997 and 1996.
10
<PAGE>
ITEM 11: EXECUTIVE COMPENSATION (Con't.)
- ------------------------------- --------
The following table sets forth for the years ended December 31, 1998,
1997 and 1996 the compensation paid by the Partnership, directly or indirectly,
to affiliates of the General Partners:
<TABLE>
<CAPTION>
Entity Receiving Type of
Compensation Compensation 1998 1997 1996
------------ ------------ ---- ---- ----
<S> <C> <C> <C> <C>
Realmark Properties, Inc.
(The Corporate
General Partner) Interest charged on
accounts payable -
affiliates $ 35,048 $ 49,087 $ 149,954
---------------- ---------------- ----------------
Reimbursements for
allocated expenses of the
General Partners:
Investor Service Fees 6,864 17,580 18,746
Brokerage 19,579 15,434 11,936
Portfolio Management
& Accounting Fees 88,774 108,835 147,690
Realmark Corporation Property Management Fees 104,553 150,726 217,095
Computer Service Fees 5,340 8,640 14,040
---------------- ---------------- ----------------
225,110 301,215 409,507
---------------- ---------------- ----------------
Total $ 260,158 $ 350,302 $ 559,461
================ ================ ================
</TABLE>
11
<PAGE>
ITEM 11: EXECUTIVE COMPENSATION (Con't.)
- ------------------------------- --------
The Corporate General Partner is entitled to a continuing Partnership
Management Fee equal to 7% of net cash flow (as defined in the Partnership
Agreement), of which 2% is subordinated to the receipt by the Limited Partners
of a noncumulative annual cash return equal to 7% of the average of their
adjusted capital contributions (as defined in the Partnership Agreement). The
Corporate General Partner is paid its 5% Partnership Management Fee annually as
cash flow allows. The 2% subordinated fee will not be paid or accrued until such
time as the Limited Partners have received their 7% return and payment of the
fee becomes probable. The General Partners are also entitled to 3% of
Distributable Cash (as defined in the Partnership Agreement) and to certain
expense reimbursements with respect to Partnership operations.
The General Partners are allowed to collect property disposition fees
upon the 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 sale 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 a
cumulative amount equal to their capital contributions. The fees earned on the
sale of Bryn Mawr Apartments in 1986 and Parc Bordeau Apartments in 1988 and the
two properties in the current year will not be recorded as a liability in the
Partnership's financial statements until such time as payment is probable.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -----------------------------------------------------------------------
No person is known to the Partnership to own of record or beneficially
more than five percent (5%) of the Units of Limited Partnership Interest of the
Partnership. Excluding the General Partners' interest in the Partnership ($1,000
initial capital contribution), the General Partners as of December 31, 1998
owned no Units of Limited Partnership Interest.
Affiliates of the General Partners own of record or beneficially 284
units of Limited Partnership Interest constituting 1.82% of the Partnership
Interest.
Based upon a review of Forms 3, 4 and 5 and amendments thereto furnished
to the registrant, all reports were filed, however two reports were filed
subsequent to their required due date. These two reports contained a total of
four transactions totaling 26.6 limited partnership units.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------
(a) Transactions with Management and Others
No transactions have occurred between the Partnership and those in the
management of Realmark Properties, Inc. All transactions between the Partnership
and Realmark Properties, Inc. (the Corporate General Partner) and any other
affiliated organization are described in Item 11 of this report and in Note 7 to
the financial statements.
12
<PAGE>
ITEM 14: EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND
- -------- ---------------------------------------------
REPORTS ON FORM 8-K
-------------------
<TABLE>
<CAPTION>
(a) Financial Statements and Schedules.
-----------------------------------
FINANCIAL STATEMENTS PAGE
-------------------- ----
<S> <C>
(i) Independent Auditors' Report 15
(ii) Balance Sheets at December 31, 1998 and 1997 16
(iii) Statements of Operations for the years ended
December 31, 1998, 1997 and 1996 17
(iv) Statements of Partners' Capital (Deficit) for the
years ended December 31, 1998, 1997 and 1996 18
(v) Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 19
(vi) Notes to Financial Statements 20 - 29
FINANCIAL STATEMENT SCHEDULES
-----------------------------
(i) Schedule III - Real Estate and Accumulated Depreciation 30 - 31
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or the notes thereto.
(b) Reports on Form 8-K
-------------------
None
(c) Exhibits
--------
4. Instruments defining the rights of security holder, including
indentures
(a) Certificate of Limited Partners filed with the
Registration Statement of the Registrant Form S-11, filed
November 21, 1983, and subsequently amended incorporated
herein by reference.
13
<PAGE>
ITEM 14: EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND
- ------------------------------------------------------
REPORTS ON FORM 8-K (Con't.)
----------------------------
10. Material contracts
(a) Property Management Agreement with Realmark Corporation
included with the Registration Statement of the Registrant
as filed and amended to date incorporated herein by
reference.
(b) Partnership Agreement included with the Registration
Statement of the Registrant as filed and amended to date
incorporated herein by reference.
27. Financial Data Schedule
(a) Schedule is included herewith.
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Realmark Property Investors Limited Partnership - III:
We have audited the accompanying balance sheets of Realmark Property Investors
Limited Partnership-III as of December 31, 1998 and 1997, and the related
statements of operations, partners' capital (deficit), and cash flows for each
of the three years in the period ended December 31, 1998. Our audits also
included the financial statement schedule listed in the Index at Item 14. These
financial statements and financial statement schedule are the responsibility of
the General Partners. Our responsibility is to express an opinion on the
financial statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
General Partners, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Realmark Property Investors Limited
Partnership-III at December 31, 1998 and 1997, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1998 in conformity with generally accepted accounting principles. Also, in our
opinion, the financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
Buffalo, New York
April 23, 1999
15
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
---------------------------------------------------
BALANCE SHEETS
--------------
DECEMBER 31, 1998 AND 1997
--------------------------
<TABLE>
<CAPTION>
Assets 1998 1997
- ------
----------------- ----------------
<S> <C> <C>
Property, at cost (including assets held for sale, see Note 3):
Land $ 777,709 $ 777,709
Buildings and improvements 10,774,134 10,649,818
Furniture and fixtures 973,753 959,752
---------------- ---------------
12,525,596 12,387,279
Less accumulated depreciation 5,772,493 5,544,716
---------------- ---------------
Property, net 6,753,103 6,842,563
Cash 387,827 857,649
Investments in mutual funds 1,390,598 2,507,650
Trade accounts receivable, net of allowance for doubtful accounts
of $203,157 and $431,151 for 1998 and 1997, respectively 7,812 35,942
Accounts receivable - affiliates 103,210 -
Escrow deposits 272,310 255,867
Other assets 199,057 257,450
---------------- ---------------
Total Assets $ 9,113,917 $ 10,757,121
================ ===============
Liabilities and Partners' (Deficit) Capital
Liabilities:
Mortgages payable $ 4,970,797 $ 6,216,763
Accounts payable and accrued expenses 150,707 192,702
Accounts payable - affiliates - 35,707
Interest payable 36,249 199,407
Security deposits and prepaid rents 118,612 184,878
---------------- ---------------
Total Liabilities 5,276,365 6,829,457
---------------- ---------------
Partners' (deficit) capital:
General partners (40,328) (37,625)
Limited partners 3,877,880 3,965,289
---------------- ---------------
Total Partners' (Deficit) Capital 3,837,552 3,927,664
---------------- ---------------
Total Liabilities and Partners' (Deficit) Capital $ 9,113,917 $ 10,757,121
================ ===============
</TABLE>
See notes to financial statements
16
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
---------------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
Income:
Rental $ 2,050,131 $ 2,828,947 $ 4,004,140
Interest and other 382,167 286,232 424,903
--------------- --------------- ---------------
Total income 2,432,298 3,115,179 4,429,043
--------------- --------------- ---------------
Expenses:
Property operations 1,595,748 1,863,882 2,584,892
Interest:
To affiliates 35,048 49,087 149,954
Other 449,890 1,326,226 1,165,193
Depreciation and amortization 259,676 426,277 609,105
Administrative:
To affiliates 225,110 301,215 409,507
Other 275,151 229,622 438,560
--------------- --------------- ---------------
Total expenses 2,840,623 4,196,309 5,357,211
--------------- --------------- ---------------
Loss before allocated loss from joint venture,
gain on sale of properties and extraordinary gain (408,325) (1,081,130) (928,168)
Allocated loss from joint venture - (213,416) (142,165)
Gain on sale of properties - 3,095,376 3,501,323
Extraordinary gain on extinguishment of debt 318,213 - -
--------------- --------------- ---------------
Net (loss) income $ (90,112) $ 1,800,830 $ 2,430,990
=============== =============== ===============
(Loss) income per limited partnership unit $ (5.62) $ 105.38 $ 141.68
=============== =============== ===============
Distributions per limited partnership unit $ - $ - $ -
=============== =============== ===============
Weighted average number of limited partnership
units outstanding 15,551 15,551 15,551
=============== =============== ===============
</TABLE>
See notes to financial statements
17
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
---------------------------------------------------
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
-----------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
<TABLE>
<CAPTION>
General
Partners Limited Partners
Amount Units Amount
------ ----- ------
<S> <C> <C> <C>
Balance, January 1, 1996 $ (427,399) 15,551 $ 123,243
Net income 227,731 - 2,203,259
--------------- ----------- -----------------
Balance, December 31, 1996 (199,668) 15,551 2,326,502
Net income 162,043 - 1,638,787
--------------- ----------- -----------------
Balance, December 31, 1997 (37,625) 15,551 3,965,289
Net (loss) (2,703) - (87,409)
--------------- ----------- -----------------
Balance, December 31, 1998 $ (40,328) 15,551 $ 3,877,880
=============== =========== =================
</TABLE>
See notes to financial statements
18
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
---------------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
----------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (90,112) $ 1,800,830 $ 2,430,990
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 259,676 426,277 609,105
Amortization of mortgage discounts - 706,399 60,657
Loss from joint venture - 213,416 142,165
Gain on extinguishment of debt (318,213) - -
Gain on sale of properties - (3,095,376) (3,501,323)
Changes in operating assets and liabilities:
Cash - security deposits - 56,086 (2,097)
Trade accounts receivable 28,130 (35,873) 21,169
Other assets 26,413 (116,369) (3,280)
Accounts payable and accrued expenses (41,997) (673,389) (64,743)
Interest payable (163,158) 85,233 11,459
Security deposits and prepaid rents (66,266) (116,591) 20,080
--------------- --------------- ---------------
Net cash used in operating activities (365,527) (749,357) (275,818)
--------------- --------------- ---------------
Cash flows from investing activities:
Property acquisitions (138,234) (147,142) (7,307)
Decrease in escrow deposits (16,443) - -
Proceeds from dispositions of properties - 4,986,608 8,088,000
Buyout of investment in joint venture - (55,000) -
Decrease (increase) investments in mutual funds 1,117,052 (2,507,650) -
--------------- --------------- ---------------
Net cash provided by investing activities 962,375 2,276,816 8,080,693
--------------- --------------- ---------------
Cash flows from financing activities:
Decrease in cash overdraft - - (36,921)
Decrease in accounts payable - affiliates (138,917) (695,651) (1,050,087)
Proceeds from mortgage payable 34,765 - -
Proceeds from mortgage refinancing - 5,813,000 -
Principal payments at mortgage refinancing - (4,803,977) -
Principal payments at sale of property - (2,240,764) (4,592,357)
Principal payments on mortgages (962,518) (554,380) (313,548)
--------------- --------------- ---------------
Net cash used in financing activities (1,066,670) (2,481,772) (5,992,913)
--------------- --------------- ---------------
Net (decrease) increase in cash (469,822) (954,313) 1,811,962
Cash - beginning of year 857,649 1,811,962 -
--------------- --------------- ---------------
Cash - end of year $ 387,827 $ 857,649 $ 1,811,962
=============== =============== ===============
</TABLE>
See notes to financial statements
19
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 and 1996
----------------------------------------------------
1. FORMATION AND OPERATION OF PARTNERSHIP:
--------------------------------------
Realmark Property Investors Limited Partnership-III (the "Partnership"),
a Delaware Limited Partnership, was formed on November 18, 1983, to invest in a
diversified portfolio of income-producing real estate investments.
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 of the public offering of
limited partnership units, which occurred on April 26, 1984. All items of income
and expense arose subsequent to this date. The maximum offering of the
Partnership was $20,000,000 (20,000 units). The offer terminated January 31,
1985 with gross offering proceeds of $15,551,000 (15,551 units). The General
Partners are Realmark Properties, Inc., a wholly-owned subsidiary of J.M. Jayson
& Company, Inc. (JMJ) and Joseph M. Jayson, the Individual General Partner.
Joseph M. Jayson is the sole shareholder of JMJ.
Under the partnership agreement, the general partners and their
affiliates can receive compensation for services rendered and reimbursement for
expenses incurred on behalf of the Partnership (see Note 7).
The partnership agreement also provides that distribution of funds,
revenues, costs and expenses arising from partnership activities, exclusive of
any sale or refinancing activities, are to be allocated 97% to the Limited
Partners and 3% to the General Partners. Net income or losses and proceeds
arising from a sale or refinancing shall be distributed first to the Limited
Partners in amounts equivalent to a 7% return on their average adjusted capital
balances, plus an amount equal to their capital contributions. The Agreement
also provides for payment of property disposition fees to Realmark Properties,
Inc., prior to additional distributions to limited partners in amounts
equivalent to 5% of their average adjusted capital balances. Additional proceeds
shall then be allocated to all partners in amounts equal to their respective
positive capital account balances and the remainder, if any, in the ratio of 87%
to the Limited Partners and 13% to the General Partners. Income and losses from
the sale(s) of properties is to be allocated first to the Limited Partners to
the extent they receive their average adjusted capital balances plus a
preferential return of 7% and an additional 5%; after this, the income is to be
allocated 87% to the Limited Partners and 13% to the General Partners.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
(a) 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.
20
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Continued)
-----------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Con't.):
---------------------------------------------------
(b) Property and Depreciation
-------------------------
Depreciation is provided using the straight-line method over the
estimated useful lives of the respective assets. The estimated useful lives of
the Partnership's assets range from 5 to 25 years. Depreciation expense totaled
$227,696, $232,606 and $449,241 for the years ended December 31, 1998, 1997 and
1996, respectively. For further discussion, see Note 3.
Expenditures for maintenance and repairs are expensed as incurred, and major
renewals and betterments are capitalized.
The Accelerated Cost Recovery System and Modified Accelerated Cost Recovery
System are used to calculate depreciation expense for tax purposes.
(c) 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.
(d) Cash
----
For purposes of reporting cash flows, cash includes the following items:
cash on hand; cash in checking; and money market savings.
(e) Investments in Mutual Funds
---------------------------
The investments in mutual funds are stated at fair value, which
approximates cost, at December 31, 1998.
(f) Comprehensive Income
--------------------
The Partnership has adopted Statement of Financial Accounting Standards
(SFAS) No. 130, Reporting Comprehensive Income. SFAS 130 establishes standards
for reporting and display of comprehensive income and its components in a full
set of general purpose financial statements. Comprehensive income is defined as
"the change in equity of a business enterprise during a period from transactions
and other events and circumstances from non-owner sources". Other than net
income (loss), the Partnership has no other sources of comprehensive income.
21
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Continued)
-----------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Con't.):
---------------------------------------------------
(g) Segment Information
-------------------
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information establishes standards for the way public business enterprises report
information about operating segments in annual financial statements. The
Partnership's only operating segment is the ownership and operation of
income-producing real property for the benefit of its partners.
3. ACQUISITION AND DISPOSITIONS 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 February 1985, the Partnership acquired a 190 unit apartment complex
(Castle Dore), located in Indianapolis, Indiana for a purchase price of
$3,711,683, which included $414,279 in acquisition fees.
In February 1985, the Partnership acquired a 208 unit apartment complex
(Parc Bordeaux), located in Indianapolis, Indiana, for a purchase price of
$3,845,064, which included $371,233 in acquisition fees.
In April 1985, the Partnership entered into an agreement and formed
Inducon Joint Venture Amherst. Under the terms of the joint venture agreement,
the Partnership supplied capital to acquire the land and undertake initial
development to the extent of $545,000 in Phase I and an additional $275,000 on
Phase II.
In June 1985, the Partnership acquired a 200 unit apartment complex
(Williamsburg South Apartments) located in Atlanta, Georgia, for a purchase
price of $4,764,200, which included $368,745 in acquisition fees. In connection
with this acquisition, the Partnership obtained from the seller a Purchase Money
Mortgage in the amount of $3,300,000.
In August 1985, the Partnership acquired an office complex containing
approximately 40,000 net rentable square feet (Perrymont Office Building)
located in Pittsburgh, Pennsylvania, for a purchase price of $2,078,788, which
included $168,697 in acquisition fees.
In November 1985, the Partnership acquired a 130 unit apartment complex
(Pleasant Run Farms) located in Cincinnati, Ohio, for a purchase price of
$3,434,728, which included $267,228 in acquisition fees.
In December 1985, the Partnership acquired a 280 unit apartment complex
(Ambassador Towers, formerly Cedar Ridge) located in Monroeville, Pennsylvania
for a purchase price of $6,423,391, which included $646,424 in acquisition fees.
In August 1986, the Partnership sold the Bryn Mawr Apartments for a sale
price of $3,110,000 which generated a total net gain for financial statement
purposes of $1,475,313. For income tax purposes, the gain was recognized under
the installment method.
22
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Continued)
-----------
3. ACQUISITION AND DISPOSITIONS OF RENTAL PROPERTY (Con't):
-------------------------------------------------------
In December 1988, the Partnership sold the 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 method.
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 November 1997, the Partnership acquired the remaining 50% interest in
Inducon Joint Venture Amherst through a buyout of the other joint venturer. The
Partnership owns 100% of the property.
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
sales generated a total net gain of $3,095,376 for financial statement purposes.
During 1998, management continued its plans to sell the assets of the
Ambassador Towers, as this was determined to be in the best interests of the
investors. The carrying value of the assets were $3,516,633 at December 31,
1998, and the property generated a net loss of $134,630 during the year ended
December 31, 1998.
Financial Accounting Standards Statement No. 121, Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of (the
"Statement") requires that assets to be disposed of, be recorded at the lower of
carrying value or fair value, less costs to sell. The Statement also requires
that such assets not be depreciated during the disposal period, as the assets
will be recovered through sale rather than through operations. In accordance
with this Statement, the long-lived assets of the Ambassador Towers are recorded
at the carrying amount which is the lower of carrying value or fair value less
costs to sell, and have not been depreciated during the disposal period. Fair
value is determined based on estimated future cash flows. Depreciation expense
not recorded for the years ended December 31, 1998, 1997 and 1996 totaled
approximately $222,000, $173,000 and $133,000, respectively.
4. MORTGAGES PAYABLE:
-----------------
The Partnership has the following mortgages payable:
Perrymont
---------
The outstanding mortgage of $1,259,701 at December 31, 1997 was
satisfied in April 1998. The satisfaction of the mortgage resulted in an
extraordinary gain on the extinguishment of debt of $318,213 or $19.85 per
limited partnership unit.
23
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Continued)
-----------
3. MORTGAGES PAYABLE (Con't.):
--------------------------
Ambassador Towers (formerly Cedar Ridge)
----------------------------------------
This mortgage provided for payments of interest only through December
1998. Monthly installments of principal and interest are due through maturity at
February 1, 2004. The interest rate was 8.275% during the first loan year and
was adjusted to 8.25% in 1998. The mortgage had a balance of $3,130,049 and
$3,095,284 at December 31, 1998 and 1997, respectively.
Inducon Amherst
---------------
A mortgage with a balance of $1,840,748 and $1,861,778 at December 31,
1998 and 1997, respectively. The mortgage provides for monthly principal and
interest payments of $15,250 at a rate of 8.62%. The remaining balance is due
March 2022.
The Partnership is currently not in compliance with certain covenants
related to the above mortgages.
The above mortgages are secured by the properties to which they relate.
The aggregate maturities of mortgages, assuming principal payments will
not be accelerated, for each of the next five years and thereafter are as
follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1999 $ 69,107
2000 71,674
2001 77,927
2002 84,726
2003 92,119
Thereafter 4,575,244
----------------
TOTAL $ 4,970,797
================
</TABLE>
24
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Continued)
-----------
5. 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, deposit liabilities approximate
the carrying value due to the short-term nature of these instruments.
Management has estimated that the fair values of the mortgages payable
on Ambassador Towers and Inducon Amherst approximate $3,200,000 and $2,000,000,
respectively, based on current interest rates for mortgages of similar terms.
The carrying values of the mortgages were approximately $3,130,000 and
$1,841,000, respectively, at December 31, 1998.
The terms of these mortgages are described in Note 4.
6. INVESTMENT IN JOINT VENTURE:
- -- ----------------------------
In April 1985, the Partnership entered into an agreement and formed
Inducon Joint Venture Amherst (the 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, manufacture, salvage, repair,
exhibit, repacking, relabeling, and re-export. Under the terms of the Joint
Venture Agreement, the Partnership supplied capital to acquire the land and
undertake initial development, to the extent of $545,000 in Phase I and an
additional $275,000 on Phase II.
The Other Joint Venturer delivered or completed on behalf of the Joint
Venture all plans, specifications, maps, surveys, accounting proformas 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 was to be allocated 95% of any income received or loss
incurred.
In November 1997, the Partnership acquired the interest of Delhurst
Corporation, the other joint venture partner, for $55,000. The Partnership now
owns 100% of the Inducon Amherst property. The results of the property's
operations for the period January 1, 1997 through October 31, 1997 and for the
year ended December 31, 1996 were allocated in accordance with the Joint Venture
agreement.
25
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Continued)
-----------
7. PROPERTY MANAGEMENT FEES AND RELATED PARTY TRANSACTIONS:
-------------------------------------------------------
According to the terms of the Partnership Agreement, the General
Partners are allowed to collect property disposition fees upon the 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 of 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 the Bryn Mawr Apartments or Parc Bordeaux, as the Limited Partners of
the Partnership have not received a return of 7% on their average adjusted
capital or their original capital as defined in the partnership agreement. The
fee earned in the sale of the Bryn Mawr Apartments, Parc Bordeaux Apartments,
Williamsburg South Apartments, Pleasant Run Apartments and Castle Dore
Apartments will not be recorded as liabilities in the partnership financial
statements until such time as payment is probable.
Management fees for the properties are paid to an affiliate of the
General Partners. The management agreement provides for 5% of gross monthly
receipts of the properties to be paid as fees for administering the operations
of the properties. These fees totaled $104,553, $150,726 and $217,095 for the
years ended December 31, 1998, 1997 and 1996, respectively.
Computer service charges for the Partnership are paid or accrued to an
affiliate of the General Partners. The fee is based upon the number of apartment
units and totaled $5,340, $8,640 and $14,040 for the years ended December 31,
1998, 1997 and 1996.
26
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Continued)
-----------
7. PROPERTY MANAGEMENT FEES AND RELATED PARTY TRANSACTIONS (Con't.):
----------------------------------------------------------------
Pursuant to the terms of the partnership agreement, the Corporate
General Partner charged 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 such costs and expenses which include
payroll, legal, rent, depreciation, printing, mailing, travel, and communication
costs related to partnership accounting, partner communication and relations,
property marketing, and refinancing and are included in property operations.
Additionally, Partnership accounting and portfolio management fees, investor
services fees and brokerage fees are allocated based on total assets, number of
partners and number of units, respectively. Such charges totaled $115,217,
$141,849 and $178,372, respectively.
The Corporate General Partner is entitled to a continuing Partnership
Management Fee equal to 7% of net cash flow (as defined in the Partnership
Agreement), of which 2% is subordinated to the receipt by the Limited Partners
of a non-cumulative annual cash return equal to 7% of the average of their
adjusted Capital Contributions (as defined in the Partnership Agreement). The
Corporate General Partner is paid its 5% Partnership Management Fee annually as
cash flow allows. The 2% subordinated fee will not be paid or accrued until such
time as the Limited Partners have received their 7% return and payment of the
fee becomes probable.
No fee was paid for the years ended December 31, 1998, 1997 and 1996.
Accounts receivable from affiliates totaled $103,210 at December 31,
1998.
Accounts payable to affiliates amounted to $35,707 at December 31, 1997.
Interest charged on amounts due affiliates totaled $35,048, $49,087 and $149,954
for the years ended December 31, 1998, 1997 and 1996, and was calculated at a
rate of 11% of the average balance.
All amounts receivable from or payable to affiliates are due upon
demand.
8. LEASES:
------
In connection with its commercial properties, the Partnership has
entered into lease agreements with terms of one to five years. Minimum future
rentals to be received for each of the next five years under noncancelable
operating leases are as follows:
Year Amount
---- ------
1999 $ 476,664
2000 352,299
2001 174,305
2002 96,172
2003 34,079
---------------
Total $ 1,133,519
===============
27
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Continued)
-----------
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 the
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) income for the years ended December 31,
1998, 1997 and 1996, as reported in the statement of operations, and as reported
for tax return purposes is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net (loss) income -
Statements of operations $ (90,112) $ 1,800,830 $ 2,430,990
Add to (deduct from):
Difference in depreciation 117,135 (151,699) (310,146)
Difference in amortization - - 65,724
Difference in gain on sale of properties - 860,302 966,637
Non deductible expenses / non taxable income (399,474) (487,362) (246,668)
Difference in loss of joint venture - 113,173 34,027
--------------- -------------- ---------------
Net (loss) income - tax return purposes $ (372,451) $ 2,135,244 $ 2,940,564
=============== ============== ===============
</TABLE>
28
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Continued)
-----------
9. INCOME TAXES (Con't.):
---------------------
The reconciliation of Partners' Capital for the years ended December 31,
1998, 1997 and 1996, as reported in the balance sheet and as reported for tax
return purposes, is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Partners' Capital - Balance Sheet $3,837,552 $ 3,927,664 $ 2,126,834
Add to (deduct from):
Accumulated difference in depreciation (4,269,360) (4,386,495) (4,234,796)
Accumulated amortization of
mortgage discounts 77,418 77,418 77,418
Syndication fees and selling expenses 1,842,060 1,842,060 1,842,060
Gain on sale of properties 1,009,847 1,009,847 149,545
Other nondeductible expenses /
non taxable income (326,749) 72,725 560,087
Difference in book and tax
depreciable cost basis 915,085 915,085 915,085
Difference in book and tax
basis of investments (596,400) (596,400) (709,573)
Other (69,286) (69,286) (69,286)
---------------- ---------------- ----------------
Partners' Capital - tax return
purposes $ 2,420,167 $ 2,792,618 $ 657,374
================ ================ ================
</TABLE>
10. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
-------------- --------------- --------------
<S> <C> <C> <C>
Cash paid for interest $ 613,048 $1,227,146 $1,153,734
============== =============== ==============
</TABLE>
11. RECLASSIFICATIONS:
-----------------
Certain reclassifications have been made to the 1997 and 1996 balances
to conform with the classifications used in 1998.
29
<PAGE>
SCHEDULE III
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP-III
---------------------------------------------------
REAL ESTATE AND ACCUMULATED DEPRECIATION
----------------------------------------
DECEMBER 31, 1998
-----------------
<TABLE>
<CAPTION>
Initial Cost to Gross amounts at which
Partnership Cost Carried at Close of Period
----------------------------- Capitalized ---------------------------------------------
Property Subsequent to (1)(2)
Description Encumbrances Land Buildings Acquisition Land Buildings Total
----------- ------------ ---- --------- ----------- ---- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Perrymont Office
Bldg.
Pittsburgh, PA $ - $ 100,000 $ 1,978,788 $ 156,205 $ 100,000 $ 2,134,993 $ 2,234,993
Ambassador Towers
(formerly Cedar
Ridge Apts.)
Monroeville, PA 3,130,049 500,000 5,001,729 270,680 500,000 5,272,409 5,772,409
Inducon Amherst
Amherst, NY 1,840,748 177,709 - 3,366,732 177,709 3,366,732 3,544,441
------------ ------------ ------------ ------------ ------------- ------------ ------------
$ 4,970,797 $ 777,709 $ 6,980,517 $ 3,793,617 $ 777,709 $ 10,774,134 $ 11,551,843
============ ============ ============ ============ ============= ============ ============
(RESTUBBED TABLE)
Life on
Which
Depreciation
In Latest
Statement
(3)(4) Of
Accumulated Date of Operations
Depreciation Construction Is Computed
------------ ------------ -------------
Perrymont Office $ 1,081,740 8/85 25 Years
Bldg.
Pittsburgh, PA
Ambassador Towers
(formerly Cedar 2,269,776 12/85 25 Years
Ridge Apts.)
Monroeville, PA
1,464,309 4/85 25 Years
Inducon Amherst ------------
Amherst, NY
$ 4,815,825
============
</TABLE>
30
<PAGE>
SCHEDULE III
- ------------
(Continued)
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
REAL ESTATE AND ACCUMULATED DEPRECIATION
----------------------------------------
DECEMBER 31, 1998
-----------------
(1) Cost for Federal income tax purposes is $11,551,843.
(2) A reconciliation of the carrying amount of land, buildings and improvements
as of December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
Partnership Properties
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of $ 11,427,527 $ 10,967,459 $ 18,648,605
period
Additions 124,316 3,660,348 7,307
Dispositions - (3,200,280) (7,688,453)
----------------- ---------------- ----------------
Balance at end of period $ 11,551,843 $ 11,427,527 $ 10,967,459
================= ================ ================
</TABLE>
(3) A reconciliation of accumulated depreciation for the years ended
December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
Partnership Properties
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period $ 4,593,221 $ 4,371,230 $ 7,061,771
Additions charged to cost and
expenses
during the period 222,604 202,212 449,241
Additions of joint ventures - 1,328,827 -
Dispositions - (1,309,048) (3,139,782)
----------------- ----------------- -----------------
Balance at end of period $ 4,815,825 $ 4,593,221 $ 4,371,230
================= ================= =================
</TABLE>
(4) Balance applies entirely to buildings.
31
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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 05/14/99
--------------------- --------
JOSEPH M. JAYSON, Date
Individual General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below 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 05/14/99
---------------------------- --------
JOSEPH M. JAYSON, Date
President and Director
/s/ Judith P. Jayson 05/14/99
---------------------------- --------
JUDITH P. JAYSON, Date
Director
/s/ Michael J. Colmerauer 05/14/99
---------------------------- --------
MICHAEL J. COLMERAUER Date
Secretary
32
<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 year ended December 31, 1998, and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 387,827
<SECURITIES> 0
<RECEIVABLES> 210,969
<ALLOWANCES> 203,157
<INVENTORY> 0
<CURRENT-ASSETS> 2,360,814
<PP&E> 12,525,596
<DEPRECIATION> 5,772,493
<TOTAL-ASSETS> 9,113,917
<CURRENT-LIABILITIES> 305,568
<BONDS> 4,970,797
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 9,113,917
<SALES> 0
<TOTAL-REVENUES> 2,432,298
<CGS> 0
<TOTAL-COSTS> 2,840,623
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 484,938
<INCOME-PRETAX> (408,325)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 318,213
<CHANGES> 0
<NET-INCOME> (90,112)
<EPS-PRIMARY> (5.62)
<EPS-DILUTED> 0
</TABLE>
