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, 1999 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, 1999 and December 31, 1998
Page 3
Consolidated Statements of Operations for the Three and Nine Months Ended
September 30, 1999 and 1998 Page 4
Consolidated Statements of Cash Flows for the Nine months Ended
September 30, 1999 and 1998 Page 5
Item 2. Results of Operations and Management's Discussion
and Analysis of Financial Condition Page 6
Liquidity and Capital Resources Page 7
Other Information Page 8
Signatures Page 10
The statements, insofar as they relate to the period
subsequent to December 31, 1998 are Unaudited.
Part 1: FINANCIAL INFORMATION
Item 1. Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Balance Sheets
September 30, December
31,
1999 1998
(Unaudited)
ASSETS
Real Estate assets, at
cost
Land $1,000,000 $1,000,000
Buildings and improvements 6,427,489 6,427,489
7,427,489 7,427,489
Less: Accumulated (3,579,128) (3,318,128)
depreciation
3,848,361 4,109,361
Cash including cash 71,197 36,249
investments
Restricted Cash 44,000 44,000
Escrow deposits 99,648 133,983
Replacement Reserve 51,607 28,187
Liquidity reserve 95,258 95,258
Other assets 18,938 11,651
TOTAL ASSETS $4,229,009 $4,458,689
LIABILITIES AND PARTNERS'
EQUITY:
LIABILITIES
Mortgage and notes payable $2,957,393 $3,004,001
Note Payable - Affiliates 2,152 124,990
Real estate taxes payable 88,300 118,013
Security deposits 51,884 44,045
Accounts payable & 50,302 54,090
accrued expenses
3,150,031 3,345,139
Partners Capital (Deficit)
Limited Partners (257,908) (327,632)
Special Limited Partner 1,475,231 1,580,231
General Partner (138,345) (139,049)
Total Partners Capital 1,078,978 1,113,550
(Deficit)
Total Liability And $4,229,009 $4,458,689
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 1999 1998 1999 1998
Rental income $381,666 $353,463 $1,106,525 $1,028,357
Other property 30,008 23,661 79,451 54,921
Total revenues 411,674 377,124 1,185,976 1,083,278
EXPENSES
Salaries & wages 60,292 54,537 169,778 177,342
Maintenance & repairs 47,856 80,594 156,927 232,758
Utilities 31,287 34,305 91,081 105,473
Real estate taxes 31,400 28,350 88,100 85,050
General administrative 14,456 24,448 47,431 54,015
Contract services 22,713 23,354 62,117 65,341
Insurance 7,322 7,470 22,000 27,652
Interest 60,371 61,608 182,062 185,698
Depreciation and 88,779 70,000 236,779 210,000
amortization
Property management 20,604 18,856 59,273 54,164
fees
Total expenses 385,080 403,522 1,115,548 1,197,493
NET INCOME (LOSS) $26,594 ($26,398) $70,428 ($114,215)
NET INCOME PER SHARE $11.16 $(11.08) $29.57 $(47.95)
See Notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Cash Flows
Unaudited
Nine Months
Ended September 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITY
Net income (loss) $70,428($114,215)
Adjustments to reconcile net income (loss) to net
cash
provided by operating activities:
Depreciation and amortization 261,000 210,000
Net Effect of changes in operating accounts
Escrow deposits 34,335 25,327
Capital replacement reserve (23,420)(25,763)
Accrued real estate taxes (29,713)(22,742)
Security deposits 7,839 4,913
Accounts payable (3,788) 6,178
Other assets (7,287) (2,228)
Net cash provided by operating activities 309,394 81,470
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of mortgage notes payable (46,608) (42,972)
Repayment of Note payable affiliates (122,838) (6,925)
Distribution to special limited partner (105,000) (25,000)
Net cash used by investing activities (274,446) (74,897)
NET INCREASE (DECREASE) IN CASH AND CASH 34,948 6,573
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 36,249 5,212
CASH AND CASH EQUIVALENTS, END OF PERIOD $71,197 $11,785
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, 1999 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.
THIRD QUARTER 1999 COMPARED TO THIRD QUARTER 1998
Revenue from property operations increased $34,550, or
11.05%, for the third quarter of 1999, as compared to the
third quarter of 1998. Increased occupancy to 97.0% in the
third quarter of 1999 from 94.0 % in the third quarter of
1998 accounted for the increase in rental income of $28,203
or 9.54%. Other property income increased $6,347 or 36.75%
mainly due to increased fee collections. The following
table illustrates the components:
Increase Per Cent
(Decrease) Change
Rental income 28,203 9.54%
Other property 6,347 36.75%
Net Increase (Decrease) 34,550 11.05%
Property operating expenses: decreased by $18,442 or 5.34%
for the third quarter of 1999 compared to the third quarter
of 1998 due primarily to lower maintenance & repairs (a
reduction of $32,738 or 58.5%). General & Administrative
decreased $9,992 or 80.88% primarily due to reduced legal
expenditures. The following table illustrates the
components:
Increase Per Cent
(Decrease) Change
Salaries & wages 5,755 8.10%
Maintenance & Repairs (32,738) 58.50%
Utilities (3,018) 8.10%
Real estate taxes 3,050 9.68%
General & Administrative (9,992) 80.88%
Contract services (641) 8.97%
Insurance (148) 2.21%
Interest (1,237) 2.94%
Depreciation and Amortization 18,779 28.92%
Property management fees 1,748 10.72%
Net Increase (Decrease) (18,442) 5.34%
(Decrease)
FIRST NINE MONTHS 1999 COMPARED TO FIRST NINE MONTHS 1998
Revenue from property operations increased $102,698 or
9.48%, for the first nine months of 1999, as compared to
the 1998 first nine months . The increase in rental income
of $78,168 or 7.6% is primarily due to higher rental rates
and increased occupancy. Other income increased $24,530 or
44.66% primarily due to increased fee collections. The
following table illustrates the components:
Increase Per Cent
(Decrease) Change
Rental income 78,168 7.60%
Other property 24,530 44.66%
Net Increase (Decrease) 102,698 9.48%
Property operating expenses decreased $81,945 or 6.84%, for
the first nine months of 1999, as compared to the same
period in 1998. This was primarily due to decreased
maintenance and repairs which decreased $75,831 or 32.58%.
General and administrative decreased $6,584 or 12.19%
primarily due to decreased legal fees. Insurance costs
decreased $5,652 or 20.44% primarily due to lower rates as a
result of better than expected loss claims. The following
table illustrates the components by category:
Increase Per Cent
(Decrease) Change
Salaries & wages (7,564) 4.27%
Maintenance & repairs (75,831) 32.58%
Utilities (14,392) 13.65%
Real estate taxes 3,050 3.59%
General administrative (6,584) 12.19%
Contract services (3,224) 4.93%
Insurance (5,652) 20.44%
Interest (3,636) 1.96%
Depreciation and amortization 26,779 12.75%
Property management fees 5,109 9.43%
Net Increase (Decrease) (81,945) 6.84%
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.
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 $25,407.82.
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, 1999, the Partnership had $71,197
in cash and cash equivalents as compared to $36,249 as of
December 31, 1998. The net increase in cash of $34,948 was
due to cash flow from property operations.
The property is encumbered by a non-recourse mortgage with a
principal balance of $2,973,245 as of September 30, 1999.
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, 2001, are $62,363,
$67,640 $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 $1,475,231 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 1999, 1998 and 1997, the Special Limited
Partner received distributions from the Partnership totaling
$105,000; 65,000 and $183,000, respectively.
Year 2000
The Partnership and Management Company have replaced all
data processing systems with the last three years within
year 2000 compliant hardware and software. The Partnership
and Management Company have completed testing of its data
processing systems. While compliance cannot be assured,
the systems tested to date are compliant.
Surveys of financial institutions and vendors used by the
Partnership and Management Company also indicate compliance
to date. The Partnership and Management Company have
prepared contingency plans. These include redundant back-
ups and paper copies of all system reports through 1999.
The Partnership anticipates that it will not incur
significant costs associated with its computers and building
operating systems as it relates to the conversion to the
year 2000.
PART II
Other Information
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, as
amended 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, 1999.
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: October 20, 1999
[ARTICLE] 5
[LEGEND]
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BOTH
THE SEPTEMBER 30, 1999 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-31-1999
[PERIOD-END] SEP-30-1998
[CASH] 71,197
[SECURITIES] 0
[RECEIVABLES] 0
[ALLOWANCES] 0
[INVENTORY] 0
[CURRENT-ASSETS] 0
[PP&E] 7,427,489
[DEPRECIATION] 3,579,128
[TOTAL-ASSETS] 4,229,009
[CURRENT-LIABILITIES] 0
[BONDS] 2,957,393
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 0
[OTHER-SE] 1,078,978
[TOTAL-LIABILITY-AND-EQUITY] 4,229,978
[SALES] 0
[TOTAL-REVENUES] 411,674
[CGS] 0
[TOTAL-COSTS] 0
[OTHER-EXPENSES] 324,709
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 60,371
[INCOME-PRETAX] 0
[INCOME-TAX] 0
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 26,594
[EPS-BASIC] 11.16
[EPS-DILUTED] 0
</TABLE>
