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
March 31, 1999 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. ( )
As of March 31, 1999, the issuer had 15,551 units of limited partnership
interest outstanding.
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
INDEX
-----
<TABLE>
<CAPTION>
PAGE NO.
--------
PART I: FINANCIAL INFORMATION
- ------- ---------------------
<S> <C>
Balance Sheets -
March 31, 1999 and December 31, 1998 3
Statements of Operations -
Three Months Ended March 31, 1999 and 1998 4
Statements of Cash Flows -
Three Months Ended March 31, 1999 and 1998 5
Statements of Partners' (Deficit) Capital -
Three Months Ended March 31, 1999 and 1998 6
Notes to Financial Statements 7 - 17
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
----------------------------------
OPERATIONS 18 - 21
----------
PART III: FINANCIAL DATA SCHEDULE
- --------- -----------------------
</TABLE>
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<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
BALANCE SHEETS
--------------
March 31, 1999 and December 31, 1998
------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
ASSETS ---- ----
- ------
<S> <C> <C>
Property, at cost:
Land $ 777,709 $ 777,709
Buildings and improvements 10,774,134 10,774,134
Furniture and fixtures 973,753 973,753
------------ -----------
12,525,596 12,525,596
Less accumulated depreciation 5,881,113 5,772,493
------------ -----------
Property, net 6,644,483 6,753,103
Cash 223,453 387,827
Investments in mutual funds 1,407,564 1,390,598
Escrow deposits 354,832 272,310
Accounts receivable, net of allowance for
doubtful accounts of $223,206 and
$203,157, respectively 16,395 7,812
Accounts receivable - affiliates 115,305 103,210
Mortgage costs, net of accumulated
amortization of $77,409 and $59,577 131,098 148,930
Leasing commissions, net of accumulated
amortization of $135,405 and $134,931 1,099 1,573
Other assets 37,322 48,554
----------- -----------
Total Assets $ 8,931,551 $ 9,113,917
=========== ===========
LIABILITIES AND PARTNERS' (DEFICIT)
- -----------------------------------
Liabilities:
Mortgages payable $ 4,967,336 $ 4,970,797
Accounts payable and accrued expenses 184,084 150,707
Accrued interest 58,008 36,249
Security deposits and prepaid rents 129,714 118,612
----------- -----------
Total Liabilities 5,339,142 5,276,365
----------- -----------
Partners' (Deficit) Capital:
General partners (47,682) (40,328)
Limited partners 3,640,091 3,877,880
----------- ---------
Total Partners' (Deficit) 3,592,409 3,837,552
----------- ---------
Total Liabilities and
Partners' (Deficit) $ 8,931,551 $ 9,113,917
=========== ===========
</TABLE>
See notes to financial statements
-3-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
Three Months Ended March 31, 1999 and 1998
------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1999 1998
---- ----
<S> <C> <C>
Income:
Rental $ 576,791 $ 476,848
Interest and other income 68,663 239,161
Total income ---------- ----------
645,454 716,009
---------- ----------
Expenses:
Property operations 526,747 249,915
Interest:
To affiliates -- 27,118
Other 108,272 104,164
Depreciation and amortization
Partnership operations: 126,926 126,928
To affiliates 41,838 26,860
Other 86,814 76,913
---------- ----------
Total expenses 890,597 611,898
---------- ----------
Net (loss) income $ (245,143) $ 104,111
========== ==========
(Loss) income per limited partnership unit $ (15.29) $ 6.49
========== ==========
Distributions per limited partnership unit $ -- $ --
========== ==========
Weighted average number of
limited partnership units 15,551 15,551
outstanding ========== ==========
</TABLE>
See notes to financial statements
-4-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
Three Months Ended March 31, 1999 and 1998
------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1999 1998
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net (loss) income $(245,143) $104,111
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating
activities:
Depreciation and amortization 126,926 126,454
Changes in operating assets and liabilities:
Cash - security deposits -- (54,665)
Investment in money market account (16,966) 993,997
Escrow deposits (82,522) 12,292
Accounts receivable (8,583) (2,115)
Leasing commissions -- --
Other assets 11,232 22,321
Accounts payable and accrued expenses 33,377 (228)
Accrued interest 21,759 89
Security deposits and prepaid rent 11,102 (13,498)
--------- ---------
Net cash (used in) provided by operating activities (148,818) 1,188,758
--------- ---------
Cash flow from investing activities:
Capital expenditures -- (7,750)
Accounts receivable - affiliates (12,095) --
--------- ---------
Net cash used in investing activities (12,095) (7,750)
--------- ---------
Cash flows from financing activities:
Accounts payable - affiliates -- (12,467)
Principal payments on mortgages and notes (3,461) (1,626,114)
Proceeds from mortgage refinancing -- 360,765
Mortgage costs -- --
--------- -----------
Net cash used in financing activities (3,461) (1,277,816)
--------- -----------
(Decrease) in cash (164,374) (96,808)
Cash - beginning of period 387,827 857,649
--------- -----------
Cash - end of period $ 223,453 $ 760,841
========= ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 86,513 $ 131,193
========= ===========
</TABLE>
See notes to financial statements
-5-
<PAGE>
REALMARKPROPERTY INVESTORS LIMITED PARTNERSHIP III
--------------------------------------------------
STATEMENTS OF PARTNERS' (DEFICIT) CAPITAL
-----------------------------------------
Three Months Ended March 31, 1999 and 1998
------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
General Limited Partners
Partners
Amount Units Amount
------ ----- ------
<S> <C> <C> <C>
Balance, January 1, 1998 $ (37,625) 15,551 $ 3,965,289
Net income 3,123 -- 100,988
----------- ----------- -----------
Balance, March 31, 1998 $ (34,502) 15,551 $ 4,066,277
=========== =========== ===========
Balance, January 1, 1999 $ (40,328) 15,551 $ 3,877,880
Net loss (7,354) -- (237,789)
----------- ----------- -----------
Balance, March 31 ,1999 $ (47,682) 15,551 $ 3,640,091
=========== =========== ===========
</TABLE>
See notes to financial statements
-6-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Three Months Ended March 31, 1999 and 1998
------------------------------------------
(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 three months ended March
31, 1999 and 1998 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 certain services rendered and reimbursement for
certain expenses incurred on behalf of the Partnership.
-7-
<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.
-8-
<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 March 31, 1999.
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
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.
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 limited partners.
4. ACQUISITION AND DISPOSITION OF RENTAL PROPERTY
----------------------------------------------
In August 1984 the Partnership acquired a 112 unit apartment complex
(Bryn Mawr) located in Ypsilanti, Michigan for a purchase price of
$1,833,554, which included $134,857 in acquisition fees. In 1985 the
acquisition fees related to the purchase of Bryn Mawr were reduced by
$18,600 and reallocated to properties by the Partnership that year.
In August 1986 the Bryn Mawr Apartments were sold for $3,110,000. The
net cash proceeds of approximately $667,000 from the sale were
distributed to the investors on a pro rata basis. The Partnership
recognized a gain for financial statement purposes of $1,475,313. For
income tax purposes, the gain will be recognized under the installment
sale method.
-9-
<PAGE>
ACQUISITION AND DISPOSITION OF RENTAL PROPERTY (CONTINUED)
-----------------------------------------------------------
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 will
be recognized under the installment sale method.
In June 1985 the Partnership acquired a 200 unit apartment complex
(Williamsburg South Apartments) in Atlanta, Georgia for a purchase price
of $5,138,745, which included acquisition fees of $368,745.
In August 1985 the Partnership acquired a 38,500 square foot office
complex (Perrymont) in Pittsburgh, Pennsylvania for a purchase price of
$2,078,697, which included acquisition fees of $168,697.
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.
-10-
<PAGE>
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.
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.
-11-
<PAGE>
INVESTMENT IN JOINT VENTURES (CONTINUED)
-----------------------------------------
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. The
Partnership now owns 100% of the Inducon Amherst property. The property
began to be consolidated into the Partnership's financial statements
beginning November 1, 1997.
6. MORTGAGES PAYABLE
-----------------
Inducon Amherst
---------------
A mortgage with a balance of $1,837,287 and $1,856,129 at March 31, 1999
and 1998, 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.
Ambassador Towers (formerly Cedar Ridge)
----------------------------------------
A mortgage with a balance of $3,130,049 at both March 31, 1999 and 1998,
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 March 31, 1999), 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 above mortgages are secured by the properties to which they relate.
-12-
<PAGE>
MORTGAGES PAYABLE (CONTINUED)
------------------------------
The aggregate maturities of the mortgages for each of the next five
years and thereafter are as follows:
Year Amount
---- ------
1999 $ 69,107
2000 71,674
2001 77,927
2002 84,726
2003 92,119
Thereafter 4,575,244
-----------
TOTAL $ 4,970,797
===========
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 March
31, 1999 on Ambassador Towers and Inducon Amherst approximate their
carrying values of $3,130,049 and $1,837,287, respectively, as the
mortgages were obtained recently.
-13-
<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, provided
such amount is not in excess of the competitive rate for the same
geographic area. These fees totaled $21,600 and $26,860 for the three
months ended March 31, 1999 and 1998, 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 three months
ended March 31, 1999 and 1998.
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 $115,305 at March 31, 1999.
The balance due is payable on demand. Interest charged on amounts due
from affiliates is accrued at the rate of 11% per annum compounded
quarterly based on the average outstanding balance.
-14-
<PAGE>
RELATED PARTY TRANSACTIONS (CONTINUED)
---------------------------------------
Accounts payable - affiliates amounted to $23,240 at March 31, 1998. The
payable represents fees due to the general partner or to affiliates of
the general partner. Interest charged on amounts due affiliates was
accrued at the rate of 11% per annum compounded quarterly based on the
average outstanding balance.
Pursuant to the terms of the Partnership agreement, the corporate
general partner charges the Partnership for reimbursement of certain
costs and expenses incurred on behalf of or in connection with the
Partnership. These charges were for the Partnership's allocated share of
costs and expenses related to, among other things, partnership
accounting, partner communication and relations, and disposition of
properties. Certain expenses are allocated based on total assets, number
of partners and number of units, respectively.
Computer service charges for the Partnership are paid or accrued to an
affiliate of the General Partner based, in part, upon the number of
apartment units and complexes. Such amounts totaled $1,335 and $8,295
for the three months ended March 31, 1999 and 1998, 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.
-15-
<PAGE>
INCOME TAXES (CONTINUED)
-------------------------
The reconciliation of net loss for the three month periods ended March
31, 1999 and 1998 as reported in the statements of operations, and as
would be reported for tax purposes respectively, is as follows:
March 31, March 31,
1999 1998
---- ----
Net (loss) income -
Statement of operations $(245,143) $104,111
(Add to) deduct from:
Difference in depreciation 30,000 (22,660)
Difference in amortization -- 2,115
Non-deductible expenses (90,000) 12,467
Difference in loss of joint venture -- --
--------- --------
Net (loss) income for tax purposes $(305,143) $ 96,033
========= ========
-16-
<PAGE>
INCOME TAXES (CONTINUED)
The reconciliation of partner's (deficit) capital at March 31, 1999 and
December 31, 1998 as reported in the balance sheets, and as reported for
tax purposes, is as follows:
March 31, December 31,
1999 1998
---- ----
Partner's Capital -
balance sheet $ 3,592,409 $ 3,837,552
Add to (deduct from):
Accumulated difference in
depreciation (4,239,360) (4,269,360)
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 (416,749) (326,749)
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 $ 2,115,024 $ 2,420,167
=========== ===========
-17-
<PAGE>
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
Liquidity and Capital Resources
-------------------------------
Although the Partnership showed a significant cash shortfall for the
first three months of 1999, management believes there is sufficient cash
to complete scheduled capital improvements and maintenance at the three
properties remaining in the Partnership, while also funding the
properties' operating activities. Management continues to be optimistic
that expenses will decrease as tighter control is being exercised over
expenditures. Management is also focusing its efforts heavily on ways to
increase operating revenue.
The General Partner began substantial capital improvement work at the
Perrymont Office Building, including re-facing the exterior of the
building, resealing of the parking lot, replacement of hallway
carpeting, redecorating of all common area restrooms, and new signage.
Work is expected to cost approximately $270,000 and be completed during
the fall of 1999. It is believed 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.
There were no distributions for the three month periods ended March 31,
1999 and 1998. The Partnership has been using the cash generated from
operations and the sales which took place in 1996 and 1997 to complete
necessary capital improvements (both capitalizable and
non-capitalizable) and deferred and routine maintenance at the remaining
properties in the Partnership. Additionally, in April 1998, management
used cash from the Partnership to satisfy the mortgage on the Perrymont
Building; this action not only avoided foreclosure procedings, but also
led to a sizable discount from the lender which resulted in an
extraordinary gain totaling $318,213 recognized for financial statement
purposes during the year ended December 31, 1998. The General Partner
hopes to resume distributions in the future, although it is not certain
when the Partnership will be in such a position.
-18-
<PAGE>
Liquidity and Capital Resources (Continued)
-------------------------------------------
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 began 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 quarter ended March 31, 1999, the Partnership's net loss was
$245,143 or $15.29 per limited partnership unit. Net income for the
quarter ended March 31, 1998 amounted to $104,111 or $6.49 per unit.
-19-
<PAGE>
Results of Operations (continued):
-----------------------------------
Partnership revenue for the quarter ended March 31, 1999 totaled
$645,454, a decrease of approximately $71,000 from the 1998 amount of
$716,009. Total rental revenue increased almost $100,000, while interest
and other income decreased by approximately $171,000. Rental revenue
increased primarily due to increased occupancy at Ambassador Towers. At
March 31, 1999, occupancy at this complex was almost 92%; this complex
has seen a steady increase in its occupancy due to various "new and
innovative" ideas for services which are now being provided to
residents, such as a van service to local shopping plazas, etc., dry
cleaning and travel services. Vacancies at Ambassador Towers decreased
by approximately 32% or $27,000 between the three months ended March 31,
1999 and 1998. The Perrymont Office Building has also begun to see an
increase in occupancy. Net rental income for this property has increased
approximately 17% or $15,000 between the quarters ended March 31, 1999
and 1998. Management believes that scheduled improvements to the
properties will continue to result in increased occupancies and
hopefully improved cash flow by the end of 1999. The decrease in
interest and other income is primarily the result of an estimated gain
of approximately $135,000 recorded at March 31, 1998 due to the
satisfaction of the Perrymont mortgage.
For the three months ended March 31, 1999, Partnership expenses amounted
to $890,597, increasing approximately $279,700 from the same 1998
quarter amount which totaled $611,898. Property operations expenses
increased by approximately 110% between the three months ended March 31,
1999 and 1998 when they totaled $526,747 and $249,915, respectively. The
majority of this increase is attributed to the installation of new
carpeting, cabinets, appliances, wallpaper, mirrors, etc. in various
apartments throughout Ambassador Towers. The increase in these expenses
at Ambassador Towers totaled approximately $115,000 between the three
months ended March 31, 1999 and 1998. Additionally, increased payroll
and associated expenses resulting from more repairs and maintenance at
the properties being completed by on-site personnel contributed to the
increased property operations expenses. Finally, increased contracted
service expenses were also incurred during the three month period ended
March 31, 1999 as a result of work being done to follow management's
plan for physical improvements to the properties. Depreciation and
amortization expense remained virtually the same between the three
months ended March 31, 1999 and 1998.
-20-
<PAGE>
Results of Operations (continued):
-----------------------------------
Partnership operational expenses paid to affiliates increased by
approximately $15,000 between the quarters ended March 31, 1999 and
1998. This increase was the result of increased accounting and portfolio
management expenses charged and/or incurred on behalf of the Partnership
by the General Partners and/or one of its affiliates. Other Partnership
operational costs also increased when comparing the three month periods
ended March 31, 1999 and 1998; this increase totaled approximately
$10,000 and was due to increased advertising and legal expenses incurred
by the Partnership. Management expects to see higher than average (i.e.,
higher than "normally" expected) maintenance expenses and payroll in the
next several months as the properties continue to undergoing physical
improvements, many of which are being done by in-house labor, such as
painting.
On a tax basis, the partnership had a loss of $305,143 or $19.03 per
limited partner unit for the three month period ended March 31, 1999
versus a taxable income of $96,033 or $5.99 per unit for the three month
period ended March 31, 1998.
-21-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
PART II
-------
OTHER INFORMATION
-----------------
Item 1 - Legal Proceedings
--------------------------
The Partnership is not a party to, nor are any of the Partnership's
properties subject to any material pending legal proceedings other than
ordinary, routine litigation incidental to the Partnership's business.
Items 2, 3, 4 and 5
-------------------
Not applicable.
Item 6 - Exhibits and reports on Form 8-K
-----------------------------------------
None.
-22-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, and in the capacities and on the
dates indicated.
REALMARK PROPERTY INVESTORS
LIMITED PARTNERSHIP III
By: /s/ Joseph M. Jayson June 24, 1999
--------------------- -------------
Joseph M. Jayson, Date
Individual General Partner and
Principal Financial Officer
-23-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Realmark Property Limited Investors Partnership III for
the three months ended March 31, 1999, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 223,453
<SECURITIES> 1,407,564
<RECEIVABLES> 354,906
<ALLOWANCES> 223,206
<INVENTORY> 0
<CURRENT-ASSETS> 2,155,970
<PP&E> 12,525,596
<DEPRECIATION> 5,881,113
<TOTAL-ASSETS> 8,931,551
<CURRENT-LIABILITIES> 371,806
<BONDS> 4,967,336
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,931,551
<SALES> 0
<TOTAL-REVENUES> 645,454
<CGS> 0
<TOTAL-COSTS> 890,597
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 108,272
<INCOME-PRETAX> (245,143)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (245,143)
<EPS-BASIC> (15.29)
<EPS-DILUTED> 0
</TABLE>
