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, 1998 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, 1998 and
December 31, 1997 Page 3
Consolidated Statements of Operations for the Three and Six
Months Ended September 30, 1998 and 1997 Page 4
Consolidated Statements of Cash Flows for the Nine months Ended
September 30, 1998 and 1997 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 10
Signatures Page 11
The statements, insofar as they relate to the period subsequent to
December 31, 1997 are Unaudited.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Balance Sheets
September 30 December 31,
1998 1997
(Unaudited)
ASSETS
Real Estate assets, at cost
Land $1,000,000 $1,000,000
Buildings and improvements 6,279,703 6,279,703
7,279,703 7,279,703
Less: Accumulated depreciation (3,235,392) (3,025,392)
4,044,311 4,254,311
Cash including cash investments 11,785 5,212
Restricted Cash 30,000 30,000
Escrow deposits 90,285 115,612
Replacement Reserve 79,872 54,109
Liquidity reserve 90,503 90,503
Other assets 19,292 17,064
TOTAL ASSETS $4,366,048 $4,566,811
LIABILITIES AND PARTNERS'EQUITY:
LIABILITIES
Mortgage and notes payable $3,018,527 $3,061,499
Note Payable - Affiliates 121,524 128,449
Real estate taxes payable 85,050 107,792
Security deposits 39,427 34,514
Accounts payable & 65,267 59,089
accrued expenses
3,329,795 3,391,343
Partners Capital (Deficit)
Limited Partners (443,756) (330,683)
Special Limited Partner 1,620,231 1,645,231
General Partner (140,222) (139,080)
Total Partners Capital (Deficit) 1,036,253 1,175,468
Total Liability And $4,366,048 $4,566,811
Partners Equity
See notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
REVENUES 1998 1997 1998 1997
_____________________________________________
Rental income $353,463 $348,859 $1,028,357 $1,018,393
Other property 23,661 14,004 54,921 43,999
Total revenues 377,124 362,863 1,083,278 1,062,392
EXPENSES
Salaries & wages 54,537 65,245 177,342 196,846
Maintenance & repairs 80,594 71,228 232,758 200,008
Utilities 34,305 30,950 105,473 101,464
Real estate taxes 28,350 25,800 85,050 77,400
General administrative 24,448 7,025 54,015 24,392
Contract services 23,354 19,445 65,341 59,939
Insurance 7,470 11,453 27,652 29,977
Interest 61,608 62,747 185,698 189,050
Depreciation and amortization 70,000 70,926 210,000 212,778
Property management fees 18,856 18,151 54,164 53,129
Total expenses 403,522 382,970 1,197,493 1,144,983
NET INCOME (LOSS) ($26,398) ($20,107) ($114,215) ($82,591)
NET INCOME PER SHARE $(11.08) $(8.44) $(47.95) $(34.67)
See Notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Cash Flows
Unaudited
Nine Months Ended
September 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITY
Net income (loss) ($114,215) ($82,591)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 210,000 198,000
Net Effect of changes in operating accounts
Escrow deposits 25,327 36,064
Capital replacement reserve (25,763) 65,758
Accrued real estate taxes (22,742) (21,016)
Security deposits 4,913 (2,096)
Accounts payable 6,178 11,254
Other assets (2,228) (15,837)
Net cash provided by operating activities 81,470 189,536
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of mortgage notes payable (42,972) (39,621)
Note payable - affiliates (6,925) 11,534
Distribution to special limited partner (25,000) (200,000)
Net cash used by investing activities (74,897) (228,087)
NET INCREASE (DECREASE) IN CASH AND CASH EQVIVALENTS 6,573 (38,551)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,212 40,820
CASH AND CASH EQUIVALENTS, END OF PERIOD $11,785 $2,269
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, 1998 the Partnership owned Las Brisas Apartments, 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 1998 COMPARED TO FIRST NINE MONTHS 1997
Revenue from property operations increased $20,886, or 1.97%, for the first
nine months of 1998, as compared to the first six months of 1997. Increased
occupancy to 90% in the first nine months of 1998 from 88.6 % in the first
nine months of 1997 accounted for this increase in rental income of $9,964 or
0.98%. Other property income increased $10,922 or 24.82% mainly due to
increased fee collections. The following table illustrates the components:
Increase Per Cent
(Decrease) Change
Rental income 9,964 0.98%
Other property 10,922 24.82%
20,886 1.97%
Property operating expenses: increased by $52,510 or 4.59% for the first nine
months of 1998 compared to the first nine months of 1997 due primarily to
increased maintenance and repairs of $32,750 or 16.37%. General and
administrative expenses increased $29,623 or 121.45% mainly due to
increased legal and credit reporting costs. The following table illustrates
the components:
Increase Per Cent
(Decrease) Change
Salaries & wages (19,504) 9.91%
Maintenance & repairs 32,750 16.37%
Utilities 4,009 3.95%
Real estate taxes 7,650 9.88%
General administrative 29,623 121.45%
Contract services 5,402 9.01%
Insurance (2,325) 7.76%
Interest (3,352) 1.77%
Depreciation and amortization (2,778) 1.31%
Property management fees 1,035 1.95%
Net Increase (Decrease) 52,510 4.59%
THIRD QUARTER 1998 COMPARED TO THIRD QUARTER 1997
Revenue from property operations increased $14,261, or 4.56%, for the third
quarter of 1998, as compared to the third quarter of 1997. Increased
occupancy from 90.0% in the third quarter of 1997 to 93.6% in the third
quarter of 1998 accounted for the increase in rental income of $4,604
or 1.56%. Other property income increased $9,657 or 55.92% mainly due to
increased fee collections. The following table illustrates the components:
Increase Per Cent
(Decrease) Change
Rental income 4,604 1.56%
Other property 9,657 55.92%
Net Increase 14,261 4.56%
(Decrease)
Property operating expenses: increased by $20,552 or 5.95% from the third
quarter of 1997 to the third quarter of 1998 due primarily to increased
general and administrative expenses of $17,423 or 141.03%. The G & A
expenses increased due to higher costs for credit report verifications and
miscellaneous legal expenditures. Insurance costs fell $3,983 or 59.54%
due to lower overall insurance costs at the annual renewal. The following
table illustrates the components:
Increase Per Cent
(Decrease) Change
Salaries & wages (10,708) 15.06%
Maintenance & repairs 9,366 16.74%
Utilities 3,355 9.00%
Real estate taxes 2,550 8.10%
General administrative 17,423 141.03%
Contract services 3,909 54.72%
Insurance (3,983) 59.54%
Interest (1,139) 2.71%
Depreciation and amortization (926) 1.43%
Property management fees 705 4.32%
Net Increase (Decrease) 20,552 5.95%
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. 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 its 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, CEO.
On November 12, 1993 the Partnership refinanced the property's secured
debt with an 8.15%, ten year, mortgage loan from Lexington Mortgage Company.
The $3,250,000 mortgage loan provides for monthly payments of $415,000.
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, 1998, the Partnership had $11,785 in cash and cash
equivalents as compared to $5,212 as of December 31, 1997. The net increase
in cash of $6,573 was due to cash flow from property operations.
The property is encumbered by a non-recourse mortgage with a principal
balance of $3,018,527 as of September 30, 1998. 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 three years
ending December 31, 2002, are $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 ofcapital to fund future Partnership acquisitions and balloon mortgage
payments will be proceeds from the sale financing or refinancing of the
Property.
The $1,620,231 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 1997
and 1996, the Special Limited Partner received distributions from the
Partnership totaling $183,000 and $195,002, respectively.
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, 1998.
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
a Texas limited partnership
By: /s/ Robert J. Werra
Robert J. Werra,
General Partner
Date: November 9, 1998
[ARTICLE] 5
[LEGEND]
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BOTH
THE SEPTEMBER 30, 1998 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
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] SEP-30-1998
[CASH] 11,785
[SECURITIES] 0
[RECEIVABLES] 0
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 0
[PP&E] 7,279,703
[DEPRECIATION] 3,235,392
[TOTAL-ASSETS] 4,366,048
[CURRENT-LIABILITIES] 0
[BONDS] 3,018,527
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 0
[OTHER-SE] 1,036,253
[TOTAL-LIABILITY-AND-EQUITY] 4,366,048
[SALES] 0
[TOTAL-REVENUES] 377,124
[CGS] 0
[TOTAL-COSTS] 0
[OTHER-EXPENSES] 341,914
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 61,608
[INCOME-PRETAX] 0
[INCOME-TAX] 0
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (26,398)
[EPS-PRIMARY] (11.08)
[EPS-DILUTED] 0
</TABLE>
