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 September 30, 1997 Commission file number 33-00152
AMRECORP REALTY FUND III
(Exact name of registrant as specified in its charter)
TEXAS 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: (972) 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
TABLE OF CONTENTS
Item 1. Financial Statements
- ------
The following Unaudited financial statements are filed
herewith:
Consolidated Balance Sheet as of September 30, 1997 and
December 31, 1996 Page 3
Consolidated Statements of Operations for the Three
Months Ended September 30, 1997 and 1996 Page 4
Consolidated Statements of Cash Flows for the Three Months
Ended September 30, 1997 and 1996 Page 5
Item 2. Results of Operations and Management's Discussion
- -------
and Analysis of Financial Condition Page 6
Liquidity and Capital Resources Page 8
Other Information Page 9
Signatures Page 10
The statements, insofar as they relate to the period
subsequent to December 31, 1996 are Unaudited.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------------------
AMRECORP REALTY FUND III
Condensed Consolidated Balance Sheets
September 30 December 31,
1997 1996
---- ----
(Unaudited)
ASSETS
Real Estate assets, at cost
Land $1,000,000 $1,000,000
Buildings and improvements 6,198,619 6,198,619
--------- ---------
7,198,619 7,198,619
Less: Accumulated (2,944,375) (2,746,375)
depreciation --------- ---------
4,254,244 4,452,244
Cash including cash 2,269 40,820
investments
Restricted Cash 30,000 30,000
Escrow deposits 78,691 114,755
Replacement Reserve 27,199 92,957
Liquidity reserve 82,588 82,588
Other assets 28,852 13,015
---------- ----------
TOTAL ASSETS $4,503,843 $4,826,379
========== ==========
LIABILITIES AND PARTNERS'
EQUITY:
LIABILITIES
Mortgage and notes payable $3,074,891 $3,114,512
Note Payable - Affiliates 134,319 122,785
Real estate taxes payable 77,400 98,416
Security deposits 32,964 35,060
Accounts payable & 56,683 45,429
accrued expenses
--------- ---------
TOTAL LIABILITIES 3,376,257 3,416,202
--------- ---------
Partners Capital (Deficit)
Limited Partners (360,256) (279,491)
Special Limited Partner 1,628,231 1,828,231
General Partner (140,389) (138,563)
--------- ---------
Total Partners Capital 1,127,586 1,410,177
(Deficit)
--------- ---------
Total Liability And $4,503,843 $4,826,379
Partners Equity
========== ==========
See notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
REVENUES 1997 1996 1997 1996
Rental income $348,859 $356,134 $1,018,393 $1,057,513
Other property 14,004 9,878 43,999 48,555
-------- -------- --------- ---------
Total revenues 362,863 366,012 1,062,392 1,106,068
EXPENSES
Salaries & wages 65,245 61,395 196,846 194,098
Maintenance & repairs 71,228 61,776 200,008 188,977
Utilities 30,950 32,290 101,464 103,374
Real estate taxes 25,800 23,400 77,400 70,200
General 7,025 15,866 24,392 46,482
administrative
Contract services 19,445 23,419 59,939 68,005
Insurance 11,453 8,471 29,977 24,435
Interest 62,747 64,186 189,050 339,612
Depreciation and 70,926 64,000 212,778 192,000
amortization
Property management 18,151 18,679 53,129 56,113
fees
------- ------- --------- ---------
Total expenses 382,970 373,482 1,144,983 1,283,296
------- ------- --------- ---------
NET INCOME (LOSS) ($20,107) ($7,470) ($82,591) ($177,228)
======= ====== ======= ========
NET INCOME PER SHARE $ (8.44) $ (3.14) $ (34.67) $ (74.40)
======= ======= ======== ========
See Notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Cash Flows
Nine Months
Ended
September 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITY
Net income (loss) ($82,591) ($177,228)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 198,000 192,000
Net Effect of changes in operating accounts
Escrow deposits 36,064 (11,527)
Capital replacement reserve 65,758 144,515
Accrued real estate taxes (21,016) (18,959)
Security deposits (2,096) 643
Accounts payable 11,254 9,628
Other assets (15,837) (9,465)
------- -------
Net cash provided by operating activites 189,536 129,607
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of mortgage notes payable (39,621) (36,529)
Note payable - affiliates 11,534 (5,054)
Distribution to special limited partner (200,000) (47,914)
-------- -------
Net cash used by investing activities (228,087) (89,497)
-------- -------
NET INCREASE (DECREASE) IN CASH AND CASH (38,551) 40,110
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 40,820 35,124
------ -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $2,269 $75,234
====== =======
See Notes to Condensed Consolidated Financial Statements
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 regulations, 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
At September 30, 1997 the Partnership owned Las Brisas
Apartment a 376 unit apartment community located at 2010
South Clark Street, Abilene, Taylor County, Texas 79606. The
Partnership purchased a fee simple interest in Las Brisas
Apartments on July 30, 1986. The property contains
approximately 312,532 net rentable square feet, one
clubhouse, and five laundry facilities located on
approximately 19.11 acres of land.
FIRST NINE MONTHS 1997 COMPARED TO FIRST NINE MONTHS 1996
- ---------------------------------------------------------
Revenue from property operations decreased $43,676, or
3.95%, for the first nine months of 1997, as compared to the
first nine months of 1996. Decreased occupancy from 92.5%
in the first nine months of 1996 to 88.4% in the first nine
months of 1997 accounted for this decrease in rental income
of $39,120 or 3.7%. The following table illustrates the
components
Increase Percent
(Decrease) Change
Rental income $(39,120) 3.70%
Other property (4,556) 9.38%
-------- ----
$(43,676) 3.95%
======== ====
Property operating expenses: decreased by $138,313 or 10.78%
for the first nine months of 1997 compared to the first nine
months of 1996 due primarily to decreased interest expense.
General & Administrative decreased by $22,090 or 47.52% .
The lower operating costs were partially offset by increases
in insurance and real estate taxes. The following table
illustrates the components
Increase Percent
(Decrease) Change
Salaries & wages $2,748 1.42%
Maintenance & repairs 11,031 5.84%
Utilities (1,910) 1.85%
Real estate taxes 7,200 10.26%
General administrative (22,090) 47.52%
Contract services (8,066) 11.86%
Insurance 5,542 22.68%
Interest (150,562) 44.33%
Depreciation and 20,778 10.82%
amortization
Property management fees (2,984) 5.32%
--------- -----
Net Increase (Decrease) $(138,313) 10.78%
========= ======
THIRD QUARTER 1997 COMPARED TO THIRD QUARTER 1996
- -------------------------------------------------
Revenue from property operations decreased $3,149, or
1..01%, for the second quarter of 1997, as compared to the
second quarter of 1996. Decreased occupancy from 92.0% in
the third quarter of 1996 to 91% in the third quarter of
1997 accounted for the decrease in rental income of $7,275
or 2.46%. The following table illustrates the components
Increase Percent
(Decrease) Change
--------- ------
Rental income $(7,275) 2.46%
Other property 4,126 23.89%
------- ------
Net Increase $(3,149) 1.01%
(Decrease) ======= ====
Property operating expenses: decreased by $9,488 or 2.75%
from the third quarter of 1996 to third quarter of 1997 due
primarily to decreased general and administrative expenses.
Maintenance and repairs were up $9,452 or 16.89% due to
continued deferred maintenance programs. Contract Services
were down $3,974 or 55.63% due to reduced lawn care
expenses. Insurance costs rose $2,982 or 44.57% due to
higher overall insurance costs at the annual renewal. The
following table illustrates the components
Increase Percent
(Decrease) Change
--------- -------
Salaries & wages $3,850 5.42%
Maintenance & 9,452 16.89%
repairs
Utilities (1,340) 3.60%
Real estate taxes 2,400 7.62%
General (8,841) 71.56%
administrative
Contract services (3,974) 55.63%
Insurance 2,982 44.57%
Interest (1,439) 3.42%
Depreciation and 6,926 10.67%
amortization
Property (528) 3.24%
management fees
------ ------
Net Increase $9,488 2.75%
(Decrease)
======= ======
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
September 30, 1987 the principal balance due 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
Partner 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. 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 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, 1995 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 $3,250,000
mortgage loan provides for monthly payments of $41,5000.
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 $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.
While it is the General Partners primary intention to
operate and manage the existing real estate investment, the
General Partner also continually evaluates this investment
in light of current economic conditions and trends to
determine if this assets should be considered for disposal.
At this time, there is no plan to dispose of Las Brisas
Apartments.
As of September 30, 1997, the Partnership had $2,269
in cash and cash equivalents as compared to $40,820 as of
December 31, 1996. The net decrease in cash of $38,551 is
principally due to distributions to the special limited
partner.
The property is encumbered by a non-recourse mortgage with a
principal balance of $3,074,891 as of September 30, 1997.
The mortgage payable bears interest at 8.15% and is payable
in monthly installments of principal and interest until
December 2003 when a lump-sum payment of approximately
$2,642,000 is due. The required principal reductions for
the five years ending December 31, 2000, are $53,012,
$57,498, $62,363, $67,640 and $73,363 respectively.
For the foreseeable future, the Partnership anticipates that
mortgage principal payments (excluding balloon mortgage
payments), improvements and capital expenditures will be
funded by net cash from operations. The primary source of
capital to fund future Partnership acquisitions and balloon
mortgage payments will be proceeds from the sale financing
or refinancing of the Property.
The $1,628,231 in Special Limited Partner equity is the
result of previous funding for operating deficits and other
partner loans made to the Partnership by a related entity.
These loans were reclassified to equity during 1993. The
Special Limited Partner has first right to all net operating
cash flows and net proceeds from disposals of assets to the
extent of the Special Limited Partners distribution
preference. During 1996 and 1995, the Special Limited
Partner received distributions from the Partnership totaling
$195,002 and $170,000, respectively. During 1997, the
Special Limited Partner received distributions from the
Partnership totaling $200,000.
PART II
Item 1. Legal Proceedings.
None
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. Exhibits 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 Partnership,
incorporated by reference
to Registration Statement
No. 33-00152 effective November 26, 1985.
4 Certificate of Limited Partnership,
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.
(B) Reports on Form 8-K for quarter ended September 30, 1997.
1. None.
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.
AMRECORP REALTY FUND III
LBAL, Ltd., General Partner
By: /s/ Robert J. Werra
-------------------
Robert J. Werra,
President
Date: October 17, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BOTH
THE SEPTEMBER 30, 1997 BALANCE SHEET AND STATEMENT OF INCOME AND EXPENSES
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<NAME> AMRECORP REALTY FUND III
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
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