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 March 31, 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 March 31, 1998 and
December 31, 1997 Page 3
Consolidated Statements of Operations for the Three
Months Ended March 31, 1998 and 1997
Page 4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 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 7 & 8
Other Information Page 9
Signatures Page 10
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
March 31, 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 (3,095,392) (3,025,392)
depreciation --------- ----------
4,184,311 4,254,311
Cash including cash 4,770 5,212
investments
Restricted Cash 30,000 30,000
Escrow deposits 42,208 115,612
Replacement Reserve 74,789 54,109
Liquidity reserve 90,503 90,503
Other assets 17,711 17,064
--------- ----------
TOTAL ASSETS $4,444,292 $4,566,811
LIABILITIES AND PARTNERS'
EQUITY:
LIABILITIES
Mortgage and notes payable $3,047,465 $3,061,499
Note Payable - Affiliates 144,819 128,449
Real estate taxes payable 28,350 107,792
Security deposits 35,340 34,514
Accounts payable & 67,702 59,089
accrued expenses
---------- ----------
3,323,676 3,391,343
---------- ----------
Partners Capital (Deficit)
Limited Partners (384,986) (330,683)
Special Limited Partner 1,645,231 1,645,231
General Partner (139,629) (139,080)
---------- ----------
Total Partners Capital 1,120,616 1,175,468
(Deficit) ---------- ----------
Total Liability And $4,444,292 $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
March 31,
REVENUES 1998 1997
Rental income $330,256 $332,912
Other property 11,763 15,255
Total revenues 342,019 348,167
EXPENSES
Salaries & wages 58,961 56,734
Maintenance & repairs 76,577 56,401
Utilities 38,990 39,576
Real estate taxes 28,350 25,800
General administrative 14,344 14,595
Contract services 17,980 19,068
Insurance 11,453 8,475
Interest 62,189 63,284
Depreciation and 70,926 70,926
amortization
Property management 17,101 17,408
fees
Total expenses 396,871 372,267
------- -------
NET INCOME (LOSS) ($54,852) ($24,100)
======== ========
NET INCOME PER SHARE $(23.03) $(10.12)
======= =======
See Notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Cash Flows
Unaudited
Three Months Ended
March 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITY
Net income (loss) ($54,852) ($24,100)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 70,000 66,000
Net Effect of changes in operating accounts
Escrow deposits 73,404 67,891
Capital replacement reserve (20,680) 29,656
Accrued real estate taxes (79,442) (72,616)
Security deposits 826 1,242
Accounts payable 8,613 2,091
Other assets (647) 8,473
------ ------
Net cash provided by operating activities (2,778) 78,637
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of mortgage notes payable (14,034) (12,940)
Note payable - affiliates 16,370 10,101
------- ------
Net cash used by investing activities 2,336 (2,839)
------- ------
NET INCREASE (DECREASE) IN CASH AND CASH (442) 75,798
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,212 40,820
------- ------
CASH AND CASH EQUIVALENTS, END OF PERIOD $4,770 $116,618
====== =======
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 March 31, 1998 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 THREE MONTHS 1998 COMPARED TO FIRST THREE MONTHS 1997
- -----------------------------------------------------------
Revenue from property operations decreased $6,148, or 1.97%,
for the first three months of 1998, as compared to the
first three months of 1997. Decreased occupancy from
85.3% in the first three months of 1998 to 88.3 % in the
first three months of 1997 accounted for this decrease in
rental income of $2,656 or 0.9%. The following table
illustrates the components:
Increase Percent
(Decrease) Change
Rental income $(2,656) 0.90%
Other property (3,492) 20.22%
------- -----
Net Increase $(6,148) 1.97%
(Decrease)
======= ====
Property operating expenses: increased by $24,604 or 7.12%
for the first three months of 1998 compared to the first
three months of 1997 due primarily to increased maintenance
and repairs expense. The following table illustrates the
components:
Increase Percent
(Decrease) Change
Salaries & wages $ 2,227 3.13%
Maintenance & 20,176 36.05%
repairs
Utilities (586) 1.57%
Real estate taxes 2,550 8.10%
General (251) 2.03%
administrative
Contract services (1,088) 15.23%
Insurance 2,978 44.51%
Interest (1,095) 2.60%
Property (307) 1.88%
management fees
------ ------
Net Increase $24,604 7.12%
(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. 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 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 March 31, 1998, the Partnership had $4,770 in
cash and cash equivalents as compared to $5,212 as of
December 31, 1997. The net decrease in cash of $442 is
principally due to distributions to the special limited
partner.
The property is encumbered by a non-recourse mortgage with a
principal balance of $3,047,465 as of March 31, 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 five years ending December 31, 2002, are $57,498,
$62,363, $67,640, $73,363 and $79,571 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 $1,645,231 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 March 31, 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: April 22, 1998
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 PerCe
nt
(Decreas Chang
e) e
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 Perce
nt
(Decreas Chang
e) e
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)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BOTH
THE MARCH 31, 1998 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,770
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<PP&E> 7,279,703
<DEPRECIATION> 3,095,392
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