SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1996 Commission file number 33-00152
AMRECORP REALTY FUND III
(Exact name of registrant as specified in its charter)
WISCONSIN 75-2045888
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
6210 Campbell Road Suite 140
Dallas, Texas 75248
(Address of principal executive offices)
Registrant's telephone number, including area code: (214) 380-8000.
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: Y No:
--------- ---------
REGISTRANT IS A LIMITED PARTNERSHIP
1
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TABLE OF CONTENTS
Item 1. Financial Statements
The following Unaudited financial statements are filed herewith:
Consolidated Balance Sheet as of June 30, 1996 and
December 31, 1995.................................................3
Consolidated Statements of Operations for the Three and Six
Months Ended June 30, 1996 and 1995...............................4
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1996 and 1995............................................5
Notes to Consolidated Financial Statement.........................6
Item 2. Results of Operations and Management's Discussion and Analysis of
Financial Condition...............................................7
Liquidity and Capital Resources...................................8
Other Information.................................................9
Signatures........................................................10
The statements, insofar as they relate to the period subsequent to
December 31, 1995, are Unaudited.
2
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN REPUBLIC REALTY FUND III
Condensed Consolidated Balance Sheets
June 30 December 31
1996 1995
(Unaudited)
ASSETS
Real Estate assets, at cost
Land $ 1,000,000 $ 1,000,000
Buildings and improvements 6,084,005 6,084,005
------------ ------------
7,084,005 7,084,005
Less: Accumulated depreciation (2,607,835) (2,479,835)
------------ ------------
Real Estate, net 4,476,170 4,604,170
Cash including cash investments 29,833 35,124
Escrow deposits 95,575 135,501
Capital replacement reserve 0 144,515
Liquidity reserve 78,833 78,833
Other assets 30,160 12,220
------------ ------------
TOTAL ASSETS $ 4,710,571 $ 5,010,363
============ ============
LIABILITIES AND PARTNERS' EQUITY:
LIABILITIES
Mortgage and notes payable $ 3,139,283 $ 3,163,388
Note Payable - Affiliates 119,493 126,510
Real estate taxes payable 46,800 89,159
Security deposits 37,762 34,193
Accounts payable & accrued expenses 35,571 47,783
------------ ------------
Total liabilities 3,378,909 3,461,033
------------ ------------
Partners Capital (Deficit)
Limited Partners 1,472,480 1,688,451
General Partner (140,818) (139,121)
------------ ------------
Total Partners Capital (Deficit) 1,331,662 1,549,330
------------ ------------
Total Liability And Partners Equity $ 4,710,571 $ 5,010,363
============ ===========
See notes to Condensed Consolidated Financial Statements
3
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AMERICAN REPUBLIC REALTY FUND III
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
REVENUES
Rental income $ 352,692 $ 320,329 $ 703,587 $ 630,897
Other property 21,756 16,032 36,469 30,002
--------- --------- --------- ---------
Total revenues 374,448 336,361 740,056 660,899
EXPENSES
Salaries & wages 69,827 77,393 132,703 140,819
Maintenance & repairs 61,945 73,237 127,201 123,609
Utilities 35,379 36,508 71,083 77,949
Real estate taxes 23,400 23,835 46,800 47,835
General administrative 14,632 16,375 30,616 21,161
Contract services 25,024 8,187 44,585 15,386
Insurance 9,169 6,530 275,428 130,223
Interest 211,135 64,998 275,428 130,223
Depreciation and
amortization 64,000 66,926 128,000 133,852
Property management fees 18,367 16,825 37,434 33,044
--------- --------- --------- ---------
Total expenses 532,878 390,814 909,810 737,554
--------- --------- --------- ---------
NET INCOME (LOSS) $(158,430) $ (54,453) $(169,754) $ (76,655)
========= ========== ========== ==========
NET INCOME PER SHARE $ (66.51) $ (22.86) $ (71.27) $ (32.18)
========= ========= ========== =========
See Notes to Condensed Consolidated Financial Statements
4
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AMERICAN REPUBLIC REALTY FUND III
Condensed Consolidated Statement of Cash Flows
Six Months Ended
June 30
-------------------
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITY
Net income (loss) ($169,754) ($ 76,655)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 128,000 124,000
Net Effect of changes in operating accounts
Escrow deposits 39,926 (69,255)
Capital Replacement Reserve 144,515 84,606
Accrued Real estate taxes (42,359) (47,503)
Security deposits 3,569 1,464
Accounts Payable (12,212) 7,011
Other assets (17,940) (3,637)
---------- ----------
Net cash used by operating activities 73,745 20,031
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of mortgage notes payable (24,105) (22,225)
Note payable - Affiliates (7,017) 9,013
Distribution to special limited partner (47,914) (49,998)
---------- ----------
Net cash used by investing activities (79,036) (63,210)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,291) (43,179)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 35,124 72,051
--------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 29,833 $ 28,872
========= ==========
See Notes to Condensed Consolidated Financial Statements
5
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Basis of Presentation:
- ----------------------
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and regula-
tions, although the Partnership believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Partnership's latest annual
report on Form 10-K.
Item 2. RESULTS OF OPERATIONS AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION
Results of Operations
SECOND QUARTER 1996 COMPARED TO SECOND QUARTER 1995
- ---------------------------------------------------
Revenue from property operations increased $ 38,087, or 12.18%, for the second
quarter of 1996, as compared to the 1995 second quarter. Rental income
increased by $ 23,363 or 10.95% due to increases in occupancy and market
rents. Other income increased by $ 5,724 or 33.14% due primarily to increase
in application fees and damage charges. The following table illustrates the
components:
Increase
(Decrease)
----------------
Rental income 32,363
Other property 5,724
----------------
Net Increase (Decrease) 38,087
================
Property operating expenses increased $ 142,064, or 41.14%, for the second
quarter of 1996, as compared to the same period in 1995, primarily due to
increases in contract services, insurance and interest expense.
* Salaries and wages decreased by $ 7,566, or 10.64% due to a cut back
on contract help.
* Maintenance and repairs decreased by $ 11,292, or 20.18% primarily due
to a cut back on interior painting throughout the property.
* General administrative expenses decreased by $ 1,743, or 14.11% due to
a reduction in staff.
* Contract services increased by $ 2,639, or 39.45% due to increase in
insurance premium rates.
* Interest expense increased by $ 146,137, or 347.18% is due to the pay
down of preferred equity.
The following table illustrates the components by category:
6
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Increase
(Decrease)
----------------
Salaries & wages (7,566)
Maintenance & repairs (11,292)
Utilities (1,129)
Real estate taxes (435)
General administrative (1,743)
Contract services 16,837
Insurance 2,639
Interest 146,137
Depreciation and amortization (2,926)
Property management fees 1,542
----------------
Net Increase (Decrease) $ 142,064
SIX MONTHS ENDED SEPTEMBER 1996 COMPARED TO SIX MONTHS ENDED SEPTEMBER 1995
Revenue from property operations increased $ 79,157 or 11.98%, for the first
Six months of 1996, as compared to the first Six months of 1995. The follow-
ing tables illustrates the components:
Increase
(Decrease)
----------------
Rental income 72,690
Other property 6,467
----------------
Net Increase (Decrease) 79,157
================
Property operating expenses increased $ 172,256, or 23.36%, for the first Six
months of 1996, as compared to the same period in 1995.
* General administative expense increased by $ 9,455, or 44.68% due to
the increase in accounting and advertising expenses.
* Contract services increased by $ 29,199, or 189.78% primarily due to
the cable contract for the property.
* Insurance costs increased by $ 2,284, or 16.70% due to an insurance
premium rate increase.
* Interest expense increased by $ 145,205, or 111.50% due to the pay
down of preferred equity.
* Property management fees increased by $ 4,390, or 13.29% due to the
increase in income.
7
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The following table illustrates the components by category:
Increase
(Decrease)
----------------
Salaries & wages $ (8,116)
Maintenance & repairs 3,592
Utilities (6,866)
Real estate taxes (1,035)
General administrative 9,455
Contract services 29,199
Insurance 2,284
Interest 145,205
Depreciation and amortization (5,852)
Property management fees 4,390
----------------
Net Increase (Decrease) $ 172,256
================
8
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LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
On July 31, 1986 the Partnership purchased the Las Brisas Apartments.
The purchase provided for the sellers to receive cash at closing and notes
totaling $660,000. On June 30, 1987 the principal balance totaled $210,000.
In order to obtain the necessary proceeds to finally retire these notes the
General Partners offered 254 Units of the Partnership to two investors at the
price of $200,660. No commissions were taken nor did the General Partners
receive any fees in connection with these interests. The Partnership then
obtained short term financing from Resource Savings Association totaling
$260,000, bearing interest at the rate of 2% over prime and payable quarterly
together with principal payments of $15,000 each. Security for the loan was
provided by a $100,000 certificate of deposit and the personal guaranties of
the Partnership's General Partners. The Resource Savings Association loan
matured December 31, 1983. In September, 1991 Mr. Werra paid $40,750 in
satisfaction of his personal guaranty of the Partnership loan.
The Partnership defaulted in its debt obligations in August, 1988.
The Partnership was forced to seek protection under Chapter 11 of the United
States Bankruptcy Code in December, 1988 when negotiations with Aetna Life
Insurance Company, ("Aetna") the holder of the two underlying first mortgage
notes and Las Brisas Apartments, Ltd. and Abilene Associates, Ltd., the
holders of respective wrap mortgage notes ("Wrap Note Holders") failed to
provide any relief.
The Partnership emerged from bankruptcy on May 15, 1990, having
negotiated a modification of its debt with it's major creditors. In June,
1989 an affiliate of the individual General Partner provided $401,910.77 to
bring the Aetna notes current. At the same time the Wrap Note Holders agreed
to reduced to reduced the payments due on their respective wrap notes in order
to mirror the payments made on the underlying Aetna notes. The term of each
wrap note will be extended from July 31, 1996 to July 1, 2002 and July 1,
2007 respectively. The $401,910.77 note is collateralized by junior mortgage
on the property. In addition, the affiliate has the option to purchase the
wrap notes for $85,000 at any time prior to the respective maturity dates of
the wrap notes.
Commencing on July 1,1992, payments on the notes reverted to the
original amounts of $19,442 and $15,454. During the prior two years the
Partnership deferred $214,460 in debit service payments. The modification gave
the Partnership room to deal with the economic difficulties experienced in the
market at the time.
In February, 1991, Amrecorp Realty Inc., resigned as the Managing
General Partner of the Partnership. As was communicated to all limited
partners, this step was taken in order to minimize any effect that Amrecorp's
financial difficulties might have on the partnership. Management of the
Partnership's assets is performed by Univesco, Inc., a Texas corporation,
Robert J. Werra, President.
On November 12, 1993 the Partnership refinanced the property's secured
debt with a 8.15%, ten year, mortgage loan from Lexington Mortgage Company.
The loan proceeds a Real Estate Mortgage Investment Contract sponsored by
Donaldson, Lufkin & Jenrette. The $3,250,000 mortgage loan provides for
monthly payments of $41,500. based on an amortized schedule of 300 months with
a final payment of the entire remaining principal balance in December, 2003.
The proceeds of this new loan were used to pay off the $2,500,000 and
9
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$2,300,000 mortgage notes which previously held the first mortgage position.
The old first mortgagee provided a discount of approximately ten percent of
the outstanding principal balances of two old notes. The balance of funds
needed to retire the old notes (approximately $100,000) were provided by
Robert J. Werra. In addition Robert J. Werra exercised his option in the
property's wrap mortgage notes. The new lender prohibited subordinate debt.
To meet this requirement the subordinate debt held by Mr. Werra was converted
to a class of equity with the same terms and conditions as it possessed as
debt. The wrap mortgage lender would not agree to the change in status so Mr.
Werra paid $85,000 to complete his purchase of the wrap notes and now holds
an equity position in the partnership as a special limited partner.
The partnership agreement was amended by vote of the limited partners
to include the appointment of a new corporate general partner, LBAL, Inc., A
Texas corporation wholly owned by Robert J. Werra.
10
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Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibit and Reports on Form 8-K
(A)The following documents are filed herewith or incorporated herein by
reference as indicated as Exhibits:
Exhibit Designation Document Description
- ------------------- --------------------
3 Certificate of Limited partner-
ship, as amended, incorporated
by reference to Registration
Statement No.33-00152 effective
November 26, 1985.
4 Limited Partnership Agreement,
incorporated by reference to
Registration Statement
No.33-00152 effective November
26, 1985.
9 Not Applicable
10 None
11 Not Applicable
12 Not Applicable
13 Not Applicable
18 Not Applicable
19 Not Applicable
22 Not Applicable
23 Not Applicable
24 Not Applicable
25 Power of Attorney, incorporated
by reference to Registration
Statement No. 33-00152
effective November 26, 1985.
28 None
11
<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.
AMERICAN REPUBLIC REALTY FUND I
a Wisconsin limited partnership
By: /s/ Robert J. Werra
-------------------
Robert J. Werra,
General Partner
Date: August 7, 1996
--------------
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BOTH
THE JUNE 30, 1996 BALANCE SHEET AND STATEMENT OF INCOME AND EXPENSES
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000776813
<NAME> AMRECORP REALTY FUND III
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 29,833
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 7,084,005
<DEPRECIATION> 2,607,835
<TOTAL-ASSETS> 4,710,571
<CURRENT-LIABILITIES> 35,571
<BONDS> 3,139,283
0
0
<COMMON> 0
<OTHER-SE> 1,331,662
<TOTAL-LIABILITY-AND-EQUITY> 4,710,571
<SALES> 0
<TOTAL-REVENUES> 703,587
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 634,382
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 275,428
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (169,754)
<EPS-PRIMARY> (71.27)
<EPS-DILUTED> 0
</TABLE>
