FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED COMMISSION FILE NUMBER
SEPTEMBER 30, 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. (X)
As of September 30, 1999, the issuer had 15,551 units of limited partnership
interest outstanding.
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
INDEX
-----
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I: FINANCIAL INFORMATION
- ------- ---------------------
Balance Sheets -
September 30, 1999 and December 31, 1998 3
Statements of Operations -
Three Months Ended September 30, 1999 and 1998 4
Statements of Operations -
Nine Months Ended September 30, 1999 and 1998 5
Statements of Cash Flows -
Nine Months Ended September 30, 1999 and 1998 6
Statements of Partners' (Deficit) Capital -
Nine Months Ended September 30, 1999 and 1998 7
Notes to Financial Statements 8 - 17
PART II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- -------- FINANCIAL CONDITION AND RESULTS OF
----------------------------------
OPERATIONS 18 - 20
----------
PART III: FINANCIAL DATA SCHEDULE
- --------- -----------------------
</TABLE>
-2-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
BALANCE SHEETS
--------------
September 30, 1999 and December 31, 1998
----------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
ASSETS
- ------
<S> <C> <C>
Property, at cost:
Land and improvements $ 1,155,362 $ 777,709
Buildings and improvements 10,613,266 10,774,134
Furniture, fixtures and vehicle 973,752 973,753
------------ ------------
12,742,380 12,525,596
Less accumulated depreciation 6,098,359 5,772,493
------------ ------------
Property, net 6,644,021 6,753,103
Cash 156,878 387,827
Investments in mutual funds 1,041,049 1,390,598
Escrow deposits 333,979 272,310
Accounts receivable, net of allowance for doubtful
accounts of $344,647 and $203,157, respectively 1,752 7,812
Accounts receivable - affiliates 164,392 103,210
Mortgage costs, net of accumulated amortization
of $113,073 and $59,577 115,434 148,930
Leasing commissions, net of accumulated amortization
of $136,353 and $134,931 151 1,573
Other assets 11,757 48,554
------------ ------------
Total Assets $ 8,469,413 $ 9,113,917
============ ============
LIABILITIES AND PARTNERS' (DEFICIT)
- -----------------------------------
Liabilities:
Mortgages payable $ 4,953,171 $ 4,970,797
Accounts payable and accrued expenses 76,276 150,707
Accrued interest 22,586 36,249
Security deposits and prepaid rents 139,712 118,612
------------ ------------
Total Liabilities 5,191,745 5,276,365
------------ ------------
Partners' (Deficit) Capital:
General partners (57,125) (40,328)
Limited partners 3,334,793 3,877,880
------------ ------------
Total Partners' (Deficit) 3,277,668 3,837,552
------------ ------------
Total Liabilities and Partners' (Deficit) $ 8,469,413 $ 9,113,917
============ ============
</TABLE>
See notes to financial statements
-3-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
Three Months Ended September 30, 1999 and 1998
----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
September 30, September 30,
1999 1998
---- ----
<S> <C> <C>
Income:
Rental $ 602,121 $ 507,471
Interest and other income 65,153 63,332
--------- ---------
Total income 667,274 570,803
--------- ---------
Expenses:
Property operations 401,786 444,935
Interest:
To affiliates (7,042) 10,344
Other 99,883 107,850
Depreciation and amortization 126,927 126,927
Administrative:
To affiliates 47,067 64,983
Other 55,086 65,070
--------- ---------
Total expenses 723,707 820,109
--------- ---------
Net loss $ (56,433) $(249,306)
========= =========
Loss per limited partnership unit $ (3.52) $ (15.55)
========= =========
Distributions per limited partnership unit $ -- $ --
========= =========
Weighted average number of
limited partnership units
outstanding 15,551 15,551
========= =========
</TABLE>
See notes to financial statements
-4-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
Nine Months Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1999 1998
---- ----
<S> <C> <C>
Income:
Rental $ 1,773,230 $ 1,635,472
Interest and other income 204,239 347,298
----------- -----------
Total income 1,977,469 1,982,770
----------- -----------
Expenses:
Property operations 1,488,703 1,213,826
Interest:
To affiliates -- 82,973
Other 310,985 317,705
Depreciation and amortization 380,783 380,783
Administrative:
To affiliates 155,095 133,453
Other 201,787 211,172
----------- -----------
Total expenses 2,537,353 2,339,912
----------- -----------
Net loss $ (559,884) $ (357,142)
=========== ===========
Loss per limited partnership unit $ (34.92) $ (22.28)
=========== ===========
Distributions per limited partnership unit $ -- $ --
=========== ===========
Weighted average number of
limited partnership units
outstanding 15,551 15,551
=========== ===========
</TABLE>
See notes to financial statements
-5-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
Nine Months Ended September 30, 1999 and 1998
---------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1999 1998
---- ----
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (559,884) $ (357,142)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 380,783 380,783
Changes in operating assets and liabilities:
Cash - security deposits -- (1,271)
Escrow deposits (61,669) (137,523)
Accounts receivable 6,060 (77,276)
Leasing commissions -- --
Other assets 36,797 59,980
Accounts payable and accrued expenses (74,431) 162,342
Accrued interest (13,663) 56
Security deposits and prepaid rent 21,100 (69,329)
----------- -----------
Net cash used in operating activities (264,907) (39,380)
----------- -----------
Cash flow from investing activities:
Capital expenditures (216,784) (7,750)
Accounts receivable - affiliates (61,182) (72,360)
Withdrawals from mutual funds investments 349,549 1,177,585
----------- -----------
Net cash provided by investing activities 71,584 1,097,475
----------- -----------
Cash flows from financing activities:
Accounts payable - affiliates -- (35,708)
Principal payments on mortgages and notes (17,626) (1,275,170)
Proceeds from mortgage refinancing -- --
Mortgage costs (20,000) --
----------- -----------
Net cash used in financing activities (37,626) (1,310,878)
----------- -----------
Decrease in cash (230,949) (252,783)
Cash - beginning of period 387,827 799,874
----------- -----------
Cash - end of period $ 156,878 $ 547,091
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 324,648 $ 317,649
=========== ===========
</TABLE>
See notes to financial statements
-6-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
STATEMENTS OF PARTNERS' (DEFICIT) CAPITAL
-----------------------------------------
Nine Months Ended September 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
General Limited Partners
Partners
Amount Units Amount
------ ----- ------
<S> <C> <C> <C> <C>
Balance, January 1, 1998 $ (37,625) 15,551 $ 3,965,289
Net loss (10,714) -- (346,428)
----------- ----------- -----------
Balance, September 30, 1998 $ (48,339) 15,551 $ 3,618,861
=========== =========== ===========
Balance, January 1, 1999 $ (40,328) 15,551 $ 3,877,880
Net loss (16,797) -- (543,087)
----------- ----------- -----------
Balance, September 30, 1999 $ (57,125) 15,551 $ 3,334,793
=========== =========== ===========
</TABLE>
See notes to financial statements
-7-
<PAGE>
REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
Nine Months Ended September 30, 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 nine months ended
September 30, 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 services rendered and reimbursement for
expenses incurred on behalf of the Partnership.
-8-
<PAGE>
FORMATION AND OPERATION OF PARTNERSHIP (CONTINUED)
---------------------------------------------------
Net income or loss arising from the sale or refinancing shall be
distributed first to the limited partners in an amount equivalent to a
7% return on the average of their adjusted capital contributions, then
in an amount equal to their capital contributions, then an amount equal
to an additional 5% of the average of their adjusted capital
contributions after the general partners receive a disposition fee, then
to all partners in an amount equal to their respective positive capital
balances, and finally, in the ratio of 87% to the limited partners and
13% to the general partners.
Partnership income or loss not arising from sale or refinancing shall be
allocated 97% to the limited partners and 3% to the general partners.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash
----
For purposes of reporting cash flows, cash includes the following items:
cash on hand; cash in checking; and money market savings.
Property and Depreciation
-------------------------
Depreciation is provided using the straight-line method over the
estimated useful lives of the respective assets. Expenditures for
maintenance and repairs are expensed as incurred, and major renewals and
betterments are capitalized. The Accelerated Cost Recovery System are
used to calculate depreciation expense for tax purposes.
-9-
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
------------------------------------------ -----------
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.
Investments in Mutual Funds
---------------------------
The investments in mutual funds are stated at fair value, which
approximates cost, at September 30, 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.
-10-
<PAGE>
ACQUISITION AND DISPOSITION OF RENTAL PROPERTY (CONTINUED)
-----------------------------------------------------------
In August 1986 the Bryn Mawr Apartments were sold for $3,110,000. The
net cash proceeds of approximately $667,000 from the sale were
distributed to the investors on a pro rata basis. The Partnership
recognized a gain for financial statement purposes of $1,475,313. For
income tax purposes, the gain was recognized under the installment sale
method.
In February 1985 the Partnership acquired a 190 unit apartment complex
(Castle Dore) in Indianapolis, Indiana for a purchase price of
$3,711,683, which included acquisition fees of $414,279.
In February 1985 the Partnership acquired a 208 unit apartment complex
(Parc Bordeaux) in Indianapolis, Indiana for a purchase price of
$3,845,064, which included acquisition fees of $371,233.
In December 1988 the Partnership sold Parc Bordeaux Apartments for a
sale price of $5,300,000 which generated a total net gain for financial
statement purposes of $2,338,067. For income tax purposes, the gain was
recognized under the installment sale method.
In June 1985 the Partnership acquired a 200 unit apartment complex
(Williamsburg South Apartments) in Atlanta, Georgia for a purchase price
of $5,138,745, which included acquisition fees of $368,745.
In August 1985 the Partnership acquired a 38,500 square foot office
complex (Perrymont) in Pittsburgh, Pennsylvania for a purchase price of
$2,078,697, which included acquisition fees of $168,697.
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.
-11-
<PAGE>
ACQUISITION AND DISPOSITION OF RENTAL PROPERTY (CONTINUED)
-----------------------------------------------------------
In December 1997, the Partnership sold the Castle Dore Apartments for a
sales price of $5,160,000, less related fees of approximately $174,000.
The sale generated a total net gain of $3,095,376 for financial
statement purposes.
5. INVESTMENT IN JOINT VENTURES
----------------------------
In April 1985 the Partnership entered into an agreement and formed the
Inducon Joint Venture - Amherst (the Joint Venture), for the primary
purpose of constructing office/warehouse buildings in Erie County, New
York as income producing property. The site is part of the Amherst
Foreign Trade Zone. This is U.S. Customs Territory under federal
supervision, where foreign and domestic merchandise is brought for
storage, manufacturing, salvage, repair, exhibit, repacking, relabeling
or re-export. Under the terms of the joint venture agreement, the
Partnership supplied $545,000 of capital to acquire the land and
undertake initial development of Phase I and $275,000 for Phase II. The
other Joint Venturer delivered and completed on behalf of the Joint
Venture all plans, specifications, maps, surveys, accounting pro-formas
for construction, initial leasing and operations, and cost estimates
with respect to development.
Ownership of the Joint Venture was divided equally between the
Partnership and the other Joint Venturer. The Joint Venture agreement
provided that the Partnership will be allocated 95% of any income or
loss.
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:
-12-
<PAGE>
INVESTMENT IN JOINT VENTURES (CONTINUED)
-----------------------------------------
To the Partnership to the extent the 7% per annum returned on its
underwritten equity is unpaid.
Next to the Partnership until it had received an overall 9% cumulative
return on its underwritten equity.
Next to the Partnership until it had received an amount equal to its
total underwritten equity, reduced by any prior distribution of sale,
financing or refinancing proceeds.
Next to the Partnership until it had received a cumulative 20% per year
return on its total underwritten equity.
Thereafter any remaining net proceeds were to be divided 50% to the
Partnership and 50% to the other joint venturer.
In November 1997, the Partnership acquired the interest of Delhurst
Corporation, the other joint venture partner, for $55,000. Thereafter,
the Partnership owned 100% of the Inducon Amherst property. The property
began to be consolidated into the Partnership's financial statements
beginning November 1, 1997.
6. MORTGAGES AND NOTES PAYABLE
---------------------------
Inducon Amherst
---------------
A mortgage with a balance of $1,826,534 and $1,846,309 at September 30,
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.
-13-
<PAGE>
MORTGAGES AND NOTES PAYABLE (CONTINUED)
----------------------------------------
Ambassador Towers (Formerly Cedar Ridge)
----------------------------------------
A mortgage with a balance of $3,126,636 and $3,130,049 at September 30,
1999 and 1998, respectively, providing for monthly interest payments
only for the first two years of the mortgage. The interest rate is
8.275% during the first year of the loan and is to be adjusted at the
beginning of the second and seventh loan years to a rate equal to 2.40%
plus the weekly average yield on United States Treasury Securities
(8.25% at September 30, 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 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
September 30, 1999 on Ambassador Towers and Inducon Amherst approximate
their carrying values of $3,126,636 and $1,826,534, respectively, as the
mortgages were obtained recently.
-14-
<PAGE>
8. RELATED PARTY TRANSACTIONS
--------------------------
Management fees for the management of Partnership's properties are paid
to an affiliate of the General Partner. The management agreement
provides for 5% of gross monthly rental receipts of the complex to be
paid as fees for administering the operations of the property. These
fees totaled approximately $79,200 and $71,792 for the nine months ended
September 30, 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 nine months
ended September 30, 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 $164,392 and $72,360 at
September 30, 1999 and 1998, respectively. The balance due is payable on
demand.
-15-
<PAGE>
RELATED PARTY TRANSACTIONS (CONTINUED)
---------------------------------------
Partnership accounting and portfolio management fees, investor services
fees and brokerage fees are allocated based on total assets, the number
of partners, and number of units, respectively. In addition to the
above, other property specific expenses, such as payroll, benefits, etc.
are charged to property operations on the Statement of Operations.
Computer service charges for the Partnership are paid or accrued to an
affiliate of the General Partner. The fee is based upon the number of
apartment units and totaled approximately $4,005 and $6,120 for the nine
months ended September 30, 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.
The reconciliation of net loss for the nine month periods ended
September 30, 1999 and 1998 as reported in the statements of operations,
and as would be reported for tax purposes respectively, is as follows:
<TABLE>
<CAPTION>
September 30, September 30,
1999 1998
---- ----
<S> <C> <C>
Net loss -
Statement of operations $ (559,884) $ (357,142)
(Add to) deduct from:
Difference in depreciation 37,500 (27,000)
Difference in amortization -- --
Non-deductible expenses (150,000) (195,000)
Difference in loss of joint venture -- --
---------- -----------
Net loss for tax purposes $ (672,384) $ (579,142)
========== ===========
</TABLE>
-16-
<PAGE>
INCOME TAXES (CONTINUED)
-------------------------
The reconciliation of partner's (deficit) capital at September 30, 1999
and December 31, 1998 as reported in the balance sheets, and as reported
for tax purposes, is as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
<S> <C> <C>
Partner's Capital -
balance sheet $ 3,277,668 $ 3,837,552
Add to (deduct from):
Accumulated difference in
depreciation (4,231,860) (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 (476,749) (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 $ 1,747,783 $ 2,420,167
=========== ===========
</TABLE>
-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 nine
months of 1999, management is optimistic that with the physical improvements,
which are substantially complete at Ambassador Towers, and the capital
improvements (both capitalizable (i.e., structural) and physical (i.e.,
carpeting and painting)) nearing completion at the Perrymont Office Building,
that cash flow will improve in the coming year. The improvements at Perrymont
are expected to be complete by December 31, 1999 and the estimated cost of all
planned improvements as of this date is $400,000. The planned (and in some
cases, already completed) improvements include, but are not limited to,
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. It is believed that the physical improvements to the exterior of
the building and the common parts of the interior will make the building more
desirable to potential new tenants. Future plans also include the possibility of
adding a conference center with state-of-the- art equipment for use by all
tenants; again, management feels this would offer tenants a facility that other
buildings (i.e., the competition) does not otherwise offer, yet will keep the
rents at this building competitive with others in the immediate area.
There were no distributions for the nine month periods ended September 30, 1999
and 1998. The Partnership continues to use 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 maintenance
at the remaining properties in the Partnership, primarily for the Perrymont
Office Building located in Pittsburgh, PA. Additionally, in April 1998,
management used cash from the Partnership to satisfy the mortgage on the
Perrymont Building; this action not only avoided foreclosure proceedings, 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 near future as the maintenance work planned is expected to
be completed by the end of 1999.
-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 now expected to be
completed by December 1, 1999. 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 December 1, 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 September 30, 1999, the Partnership's net loss was $56,433
or $3.52 per limited partnership unit. Net loss for the quarter ended September
30, 1998 amounted to $249,306 or $15.55 per unit. For the nine month period
ended September 30, 1999, the net loss was $559,884 or $34.92 per limited
partnership unit as compared to $357,142 or $22.28 per limited partnership unit
for the nine month period ended September 30, 1998.
-19-
<PAGE>
Results of Operations (Continued):
- -----------------------------------
Partnership revenue for the quarter ended September 30, 1999 totaled $667,274,
an increase of approximately $96,500 from the 1998 amount of $570,803. An
increase in rental revenue made up virtually the entire increase in total
revenue. The increase is attributed to improved occupancy and collections at
Ambassador Towers (at September 30, 1999, physical occupancy was at
approximately 91.8%). Management is now continuing to concentrate heavily on
increasing occupancy at Perrymont, which has suffered in the past several years
from high vacancies (occupancy has been averaging approximately 75%). As stated
above, management believes that scheduled improvements to the properties will
result in increased occupancies and cash flow in the coming year.
For the quarter ended September 30, 1999, Partnership expenses amounted to
$723,707, decreasing approximately $96,500 from the same 1998 quarter amount
which totaled $820,109. For the nine month period ended September 30, 1999,
Partnership expenses increased by over $197,500 from the same period in 1998.
Total expenses for the nine months ended September 30, 1999 and 1998 were
$2,537,353 and $2,339,912, respectively. There was a significant increase in
property operations expenses primarily due to increased repairs and maintenance
expenses, and associated payroll and related expenses, incurred in an effort to
make the properties more attractive to potential and current renters. For
example, at Ambassador Towers the payroll and related expenses for the first
nine months of 1999 increased approximately $58,000 or 27% when compared to the
first nine months of 1998, while contracted services and deferred maintenance
increased approximately $29,000 or 69% and $97,000 or 86%, respectively, between
the same two periods. Increases in payroll and associated expenses were also
incurred at both Inducon Amherst and Perrymont; such increases were
approximately $11,000 and $13,000, respectively. The increase in payroll at both
of these commercial complexes is the result of on-site personnel being hired to
lease the premises and increased maintenance staff to maintain the
property(ies). Administrative expenses paid to affiliates increased slightly
between the nine months ended September 30, 1999 and 1998 by approximately
$22,000 or 1%; the increase is not attributable to any one item, but rather is
made up of several small increases in such expenses. Depreciation expense and
interest paid to other than affiliates remained virtually unchanged between the
nine months ended September 30, 1999 and 1998. Management expects to see a
continued increase in maintenance expenses and payroll in the next several
months as the properties are finalizing their scheduled physical improvements,
many of which are being done by using in-house labor, such as painting.
On a tax basis, the partnership had a loss of $672,384 or $41.94 per limited
partner unit for the nine month period ended September 30, 1999 versus a tax
loss of $579,142 or $36.12 per unit for the nine month period ended September
30, 1998.
-20-
<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.
-21-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
REALMARK PROPERTY INVESTORS
LIMITED PARTNERSHIP III
By: /s/ Joseph M. Jayson November 11, 1999
--------------------- -----------------
Joseph M. Jayson, Date
Individual General Partner and
Principal Financial Officer
-22-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Realmark Property Investors Limited Partnership III
for the nine months ended September 30, 1999, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 156,878
<SECURITIES> 1,041,049
<RECEIVABLES> 510,791
<ALLOWANCES> 344,647
<INVENTORY> 0
<CURRENT-ASSETS> 1,709,807
<PP&E> 12,742,380
<DEPRECIATION> 6,098,359
<TOTAL-ASSETS> 8,469,413
<CURRENT-LIABILITIES> 238,574
<BONDS> 4,953,171
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,469,413
<SALES> 0
<TOTAL-REVENUES> 1,977,469
<CGS> 0
<TOTAL-COSTS> 2,537,353
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 310,985
<INCOME-PRETAX> (559,884)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (559,884)
<EPS-BASIC> (34.92)
<EPS-DILUTED> 0
</TABLE>
