SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended
June 30, 1998 Commission file number 0-16253
JMB MORTGAGE PARTNERS, LTD. - III
(Exact name of registrant as specified in its charter)
Illinois 36-3346551
(State of organization) (IRS Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
Indicate by 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 [ ]
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 12
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
ASSETS
------
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . $ 804,061 17,310,928
Interest, rents and other receivables. . . . . . . . . . . . . . . . . . . 90,609 137,298
------------ ------------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . 894,670 17,448,226
------------ ------------
$ 894,670 17,448,226
============ ============
<PAGE>
JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS
------------------------------------------
JUNE 30, DECEMBER 31,
1998 1997
------------- -----------
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44,339 107,806
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 44,339 107,806
------------ ------------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,339 107,806
------------ ------------
Venture partner's equity in venture. . . . . . . . . . . . . . . . . . . . . 155,176 5,118,998
Partners' capital accounts:
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings . . . . . . . . . . . . . . . . . . . . . . . . 4,314,798 4,323,591
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . . . (4,270,750) (4,053,291)
------------ ------------
45,048 271,300
------------ ------------
Limited partners (65,237.69 interests):
Capital contributions, net of offering costs. . . . . . . . . . . . . . 57,758,561 57,758,561
Cumulative net earnings . . . . . . . . . . . . . . . . . . . . . . . . 39,429,686 39,508,818
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . . . (96,538,140) (85,317,257)
------------ ------------
650,107 11,950,122
------------ ------------
Total partners' capital accounts . . . . . . . . . . . . . . . . . . 695,155 12,221,422
------------ ------------
$ 894,670 17,448,226
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
1998 1997 1998 1997
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income:
Interest income. . . . . . . . . . . . . . . . . . $ 5,456 371,793 109,138 898,414
Rental income. . . . . . . . . . . . . . . . . . . -- 401,078 -- 793,254
----------- ---------- ---------- ----------
5,456 772,871 109,138 1,691,668
----------- ---------- ---------- ----------
Expenses:
Property operating expenses. . . . . . . . . . . . 7,617 122,309 30,151 247,618
Mortgage investment servicing fees . . . . . . . . -- 7,500 -- 15,000
Professional services. . . . . . . . . . . . . . . 7,550 23,705 41,771 48,278
Amortization of deferred expenses. . . . . . . . . -- 1,001 -- 4,338
General and administrative . . . . . . . . . . . . 60,865 118,961 129,483 186,114
----------- ---------- ---------- ----------
76,032 273,476 201,405 501,348
----------- ---------- ---------- ----------
(70,576) 499,395 (92,267) 1,190,320
Venture partner's share of
venture's operations . . . . . . . . . . . . . . . 2,328 (94,738) 4,342 (188,357)
----------- ---------- ---------- ----------
Net earnings (loss). . . . . . . . . . . . $ (68,248) 404,657 (87,925) 1,001,963
=========== ========== ========== ==========
Net earnings (loss) per limited
partnership interest . . . . . . . . . . $ (.94) 5.21 (1.21) 14.27
=========== ========== ========== ==========
Cash distributions per limited
partnership interest . . . . . . . . . . $ -- 10.00 172.00 330.00
=========== ========== ========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (87,925) 1,001,963
Items not requiring cash or cash equivalents:
Amortization of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . -- 4,338
Venture partner's share of venture's operations. . . . . . . . . . . . . . . . (4,342) 188,357
Changes in:
Interest, rents and other receivables. . . . . . . . . . . . . . . . . . . . . 46,689 119,133
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (63,467) (12,577)
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . -- (71,847)
Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . -- (77,748)
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 2,307
------------ ------------
Net cash provided by (used in) operating activities. . . . . . . . . . . (109,045) 1,153,926
------------ ------------
Cash flows from investing activities:
Additions to investment property . . . . . . . . . . . . . . . . . . . . . . . . -- (148,480)
Payment of deferred costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (21,342)
------------ ------------
Net cash provided by (used in) investing activities. . . . . . . . . . . -- (169,822)
------------ ------------
Cash flows from financing activities:
Distributions to venture partner . . . . . . . . . . . . . . . . . . . . . . . . (4,959,480) (866,604)
Distributions to limited partners. . . . . . . . . . . . . . . . . . . . . . . . (11,220,883) (21,528,437)
Distributions to general partners. . . . . . . . . . . . . . . . . . . . . . . . (217,459) (71,181)
------------ ------------
Net cash provided by (used in) financing activities. . . . . . . . . . . (16,397,822) (22,466,222)
------------ ------------
Net increase (decrease) in cash
and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . (16,506,867) (21,482,118)
Cash and cash equivalents,
beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . 17,310,928 28,588,948
------------ ------------
Cash and cash equivalents,
end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 804,061 7,106,830
============ ============
<PAGE>
JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
1998 1997
------------ -----------
Supplemental disclosure for cash flow information:
Cash paid for mortgage and other interest. . . . . . . . . . . . $ -- --
============ ============
Non-cash investing and financing activities. . . . . . . . . . . $ -- --
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
(UNAUDITED)
GENERAL
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the fiscal year ended December 31, 1997,
which are included in the Partnership's 1997 Annual Report, as certain
footnote disclosures which would substantially duplicate those contained in
such audited financial statements have been omitted from this report.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of 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.
TRANSACTIONS WITH AFFILIATES
The Partnership, pursuant to the Partnership Agreement, is permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments. Fees, commissions and other
expenses required to be paid by the Partnership to the General Partners and
their affiliates as of June 30, 1998 and for the six months ended June 30,
1998 and 1997 were as follows:
Unpaid at
June 30,
1998 1997 1998
-------- ------ -------------
Mortgage investment
servicing fees . . . . . . . . $ -- 15,000 --
Property management fees . . . . -- 51,731 --
Reimbursement (at cost) for
salary and salary-related
expenses related to the
on-site and other costs
for the Partnership and
its investment properties . . . 39,454 18,362 32,957
-------- ------- ------
$ 39,454 85,093 32,957
======== ======= ======
The General Partners had deferred payment of certain of their
distributions of prior net cash flow from the Partnership and all of their
subordinated portion of sales and repayment proceeds, pursuant to the
subordination requirements of the Partnership Agreement. Such
subordination requirements will not be attained over the remaining
operating period of the Partnership. All amounts currently payable do not
bear interest.
<PAGE>
NORTH RIVERS MARKET SHOPPING CENTER
On December 30, 1997, the North Rivers Market Associates venture
("NRMA") sold the land and related improvements of the North Rivers Market
shopping center. The sale price of the property was $14,708,742, which was
received in cash at closing by NRMA (net of selling costs and prorations).
The sale resulted in a gain of approximately $4,640,000 to NRMA for
financial reporting purposes (of which the Partnership's share was
$3,085,285), due in part to the value impairment provision of $2,300,000
recorded by NRMA in 1995. In addition, NRMA recognized a gain on sale of
approximately $2,245,000 for Federal income tax reporting purposes in 1997
(of which the Partnership's share was $1,493,034).
In connection with the sale of this property, as is customary in such
transactions, NRMA agreed to certain representations and warranties, with a
stipulated survival period which expires in late September, 1998. Although
it is not expected, NRMA may ultimately have some liability under such
representations and warranties, which is not to exceed $500,000 (of which
the Partnership's share would be $332,450). It is expected that the
Partnership will make its final distributions and wind up its affairs
during 1998 after the expiration of the survival period, barring unforeseen
circumstances.
As NRMA had committed to a plan to sell the property, the property was
classified as held for sale or disposition as of December 31, 1996, and
therefore, was not subject to continued depreciation.
An affiliate of the General Partners of the Partnership managed the
property under an agreement which provided for a fee computed as 6% of the
gross income of the property. Such property management fees for the six
months ended June 30, 1997 were $51,731.
SHOPPES AT RIVERGATE
In March 1997, the Partnership issued a payoff letter to the borrower
of the loan secured by this property regarding an early repayment of the
mortgage loan at an amount less than what was otherwise due under the terms
of the original mortgage loan. Pursuant to such agreement, on July 16,
1997, the Partnership received $11,600,000, representing payment in full on
the mortgage loan. The payment of the mortgage loan resulted in no gain or
loss for financial reporting purposes in 1997 (as a result of loan loss
provisions totaling approximately $2,227,000 previously recorded by the
Partnership), and resulted in a loss of approximately $3,582,000 for
Federal income tax purposes in 1997.
SELECTED FINANCIAL INFORMATION
Pursuant to the requirements of the Securities and Exchange
Commission, the following is a summary of historical income statement
information for the Shoppes at Rivergate Shopping Center for the six months
ended June 30, 1997. Such property secured the participating first
mortgage investment made by the Partnership which was retired at a discount
by the borrower as discussed above.
1998 1997
---------- ---------
Total revenues. . . . . . . . . . . . $ -- 917,800
========== =========
Net income (loss) . . . . . . . . . . $ -- 163,100
========== =========
ADJUSTMENTS
In the opinion of the Corporate General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of June 30, 1998
and for the three and six months ended June 30, 1998 and 1997.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Partnership and its consolidated venture had cash and cash
equivalents of approximately $804,000 at June 30, 1998, which funds,
together with funds expected to be received from the collection of tenant
receivables in connection with 1997 common area expenses at the North
Rivers Market Shopping Center, will be available to pay for the
Partnership's remaining expenses and liabilities and for distributions to
the venture partner, with any remaining amounts expected to be distributed
to the Limited and General Partners, pursuant to the provisions of the
Partnership Agreement, upon the expected liquidation of the Partnership in
late 1998.
Reference is made to the notes to the accompanying consolidated
financial statements for additional information concerning the
Partnership's investments.
During 1996, some of the Holders of Interests in the Partnership
received from unaffiliated third parties unsolicited tender offers to
purchase up to 4.9% of the Interests in the Partnership at prices ranging
between $440 and $500 per Interest. The Partnership recommended against
acceptance of these offers on the basis that, among other things, the offer
prices were inadequate. The board of directors of JMB Realty Corporation
("JMB"), the corporate general partner of the Partnership, has established
a special committee (the "Special Committee") consisting of certain
directors of JMB to deal with all matters relating to tender offers for
Interests in the Partnership, including any and all responses to such
tender offers. The Special Committee has retained independent counsel to
advise it in connection with any potential tender offers for Interests and
has retained Lehman Brothers Inc. as financial advisor to assist the
Special Committee in evaluating and responding to any additional potential
tender offers for Interests.
During 1997, two other unaffiliated third parties made unsolicited
tender offers to some of the Holders of Interests. These offers sought to
purchase up to 4.9% of the Interests in the Partnership at prices ranging
between $200 and $480 per Interest. All of such offers have expired. The
Special Committee recommended against acceptance of these offers on the
basis that, among other things, the offer prices were inadequate. As of
the date of this report, the Partnership is aware that 4.18% of the
outstanding Interests have been purchased by all such unaffiliated third
parties either pursuant to such tender offers or through negotiated
purchases. As the Partnership is currently winding up its affairs and
expects to make a final liquidating distribution in late 1998, it is
unlikely that any further tender offers for Interests will be made.
The affairs of the Partnership are expected to be wound up in 1998,
barring unforeseen economic developments. However, the Partnership's goal
of capital appreciation will not be achieved. Aggregate sale and repayment
distributions received by the Holders of Interests over the entire term of
the Partnership will be less than their original investment.
RESULTS OF OPERATIONS
The decrease in cash and cash equivalents at June 30, 1998 as compared
to December 31, 1997 is due primarily to distributions of approximately
$11,221,000 ($172 per Interest) made to the Limited Partners in February
1998, which included $142 per Interest from the distributions received from
North Rivers Market Associates relating to the December 1997 sale of the
North Rivers Market Shopping Center and $30 per Interest from Partnership
operational cash flow and reserves, including those from offering proceeds.
The Partnership also paid a distribution of $217,459 to the General
Partners, which represented their share of Partnership operational cash
flow and reserves, including those from offering proceeds. The General
Partners will not receive their share of any distribution of proceeds from
<PAGE>
the sale due to subordination requirements of the Partnership Agreement.
An additional decrease in cash and cash equivalents and the decrease in
venture partner's equity in venture at June 30, 1998 as compared to
December 31, 1997 is attributable primarily to distributions of
approximately $4,959,000 made to the venture partner (Mortgage Partners-IV)
of the North Rivers Market Associates venture in 1998.
The decrease in interest income for the three and six months ended
June 30, 1998 as compared to the three and six months ended June 30, 1997
is due primarily to the repayment of the mortgage loan secured by the
Shoppes at Rivergate Shopping Center in July 1997. An additional decrease
in interest income for the three and six months ended June 30, 1998 is due
to the interest earned in 1997 on the temporary investment of the proceeds
from the repayment of the mortgage loans secured by the Franklin Farm
Village Center and the Riverpoint Shopping Center and the sale of the
Spring Hill Fashion Corner during the fourth quarter of 1996.
The decrease in rental income, property operating expenses and venture
partner's share of venture's operations for the three and six months ended
June 30, 1998 as compared to the three and six months ended June 30, 1997
is due primarily to the December 1997 sale of the North Rivers Market
shopping center.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
3-A. The Prospectus of the Partnership dated July 24,
1985, as supplemented January 27, 1986, April 29, 1986, June 11, 1986,
August 14, 1986, September 27, 1986 as filed with the Commission pursuant
to Rules 424(b) and 424(c), is hereby incorporated herein by reference to
the Partnership's Registration Statement on Form S-11 (File No. 2-95948)
dated July 24, 1985.
3-B. Amended and Restated Agreement of Limited
Partnership set forth as Exhibit A to the Prospectus, which is hereby
incorporated herein by reference to the Partnership's Registration
Statement on Form S-11 (File No. 2-95948) dated July 24, 1985.
3-C. Acknowledgement of rights and duties of the General
Partners of the Partnership between AGPP Associates, L.P. (a successor
Associated General Partner of the Partnership) and JMB Realty Corporation
as of December 31, 1995 is hereby incorporated herein by reference to the
Partnership's report for June 30, 1996 on Form 10-Q (File No. 0-16253)
dated August 9, 1996.
10-A. Loan documents related to the Partnership's
participation in the funding of a first mortgage loan secured by the North
Rivers Market Shopping Center located in North Charleston, South Carolina,
are hereby incorporated herein by reference to the Partnership's Form 8-K
(File No. 2-95948) dated September 15, 1987.
10-B. Agreement of Partnership of North Rivers Market
Associates between the Partnership and JMB Mortgage Partners, Ltd. - IV,
dated April 26, 1993 hereby incorporated herein by reference to the
Partnership's report for June 30, 1997 on Form 10-Q (File No. 0-16253)
dated August 8, 1997.
10-C. Real Property Purchase Agreement between North
Rivers Market Associates and KRC Acquisition Corp., dated December 4,
1997.*
10-D. Assignment of Real Property Purchase Agreement from
KRC Acquisition Corp. to Kimco North Rivers 692, Inc., dated December 17,
1997.*
10-E. Letter Agreement between North Rivers Market
Associates and Kimco North Rivers 692, Inc., dated December 29, 1997.*
27. Financial Data Schedule
(b) No reports on Form 8-K have been filed during the last
quarter of the period covered by this report.
- ----------
* Hereby incorporated herein by reference to the
Partnership's Report on Form 8-K (File No. 0-16253) dated December 4, 1997.
<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.
JMB MORTGAGE PARTNERS, LTD. - III
BY: JMB Realty Corporation
(Corporate General Partner)
GAILEN J. HULL
By: Gailen J. Hull,
Senior Vice President
Date: August 12, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.
GAILEN J. HULL
By: Gailen J. Hull
Principal Accounting Officer
Date: August 12, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 804,061
<SECURITIES> 0
<RECEIVABLES> 90,609
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 894,670
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 894,670
<CURRENT-LIABILITIES> 44,339
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 695,155
<TOTAL-LIABILITY-AND-EQUITY> 894,670
<SALES> 0
<TOTAL-REVENUES> 109,138
<CGS> 0
<TOTAL-COSTS> 30,151
<OTHER-EXPENSES> 171,254
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (92,267)
<INCOME-TAX> 0
<INCOME-CONTINUING> (87,925)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (87,925)
<EPS-PRIMARY> (1.21)
<EPS-DILUTED> (1.21)
</TABLE>
