UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period ended April 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission File Number 0-18146
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3293754
(State of organization) (IRS Employer Identification No.)
2 World Trade Center, New York, NY 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 392-1054
Former name, former address and former fiscal year, if changed since last
report: not applicable
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 X No
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
April 30,
1994 October 31,
(Unaudited) 1993
-------------- -------------
ASSETS
<S> <C> <C>
Cash and short-term investments, at cost,
which approximates market $ 5,602,516 $ 5,238,000
Real estate, at cost:
Land 21,043,309 21,043,309
Buildings and improvements 139,724,568 138,500,302
___________ ___________
160,767,877 159,543,611
Accumulated depreciation 28,341,181 26,170,957
___________ ___________
132,426,696 133,372,654
Investments in joint ventures 55,327,662 55,509,648
Deferred expenses, net 771,223 670,381
Other assets 2,391,619 2,960,818
___________ ___________
$196,519,716 $197,751,501
___________ ___________
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 998,413 $ 1,054,213
Security deposits 235,552 218,656
___________ ___________
1,233,965 1,272,869
___________ ___________
Partners' capital (deficiency):
General partners (4,487,021) (4,367,733)
Limited partners ($500 per Unit,
534,020 Units issued) 199,772,772 200,846,365
____________ ____________
Total partners' capital 195,285,751 196,478,632
____________ ____________
$196,519,716 $ 197,751,501
____________ ____________
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
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DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED STATEMENTS OF INCOME
Three and six months ended April 30, 1994 and 1993
(Unaudited)
<CAPTION>
Three months ended Six months ended
April 30, April 30,
_________________________ __________________________
1994 1993 1994 1993
__________ ___________ ____________ __________
<S> <C> <C> <C> <C>
Revenues:
Rental $4,181,886 $4,131,896 $7,963,071 $8,315,227
Equity in earnings of joint ventures 944,599 792,236 1,823,175 1,729,611
Interest 36,867 38,882 73,811 65,969
Other 43,737 20,414 120,679 68,271
_________ _________ __________ __________
5,207,089 4,983,428 9,980,736 10,179,078
_________ _________ __________ __________
Expenses:
Property operating 1,288,890 1,425,509 2,455,644 2,744,067
Depreciation 1,109,366 1,061,425 2,170,224 2,136,043
Amortization 51,312 36,880 93,242 71,074
General and administrative 260,022 257,685 520,951 513,033
_________ _________ __________ _________
2,709,590 2,781,499 5,240,061 5,464,217
_________ _________ __________ _________
Net income $2,497,499 $2,201,929 $4,740,675 $4,714,861
_________ _________ __________ __________
Net income per Unit of limited
partnership interest $4.21 $3.71 $7.99 $7.95
____ ____ ____ ____
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
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DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Six months ended April 30, 1994
(Unaudited)
<CAPTION>
Limited General
Partners Partners Total
_____________ ____________
<S> <C> <C> <C>
Partners' capital (deficiency)
at November 1, 1993 $200,846,365 $(4,367,733) $196,478,632
Net income 4,266,607 474,068 4,740,675
Cash distributions (5,340,200) (593,356) (5,933,556)
__________ ________ __________
Partners' capital (deficiency)
at April 30, 1994 $199,772,772 $(4,487,021) $195,285,751
____________ ___________ ____________
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
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DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended April 30, 1994 and 1993
(Unaudited)
<CAPTION>
1994 1993
____________ _____________
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,740,675 $ 4,714,861
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 2,170,224 2,136,043
Amortization 93,242 71,074
Equity in earnings of joint ventures (1,823,175) (1,729,611)
(Increase) decrease in operating assets:
Deferred expenses (194,084) (73,025)
Other assets 569,199 1,042,926
(Decrease) increase in operating liabilities:
Accounts payable and accrued liabilities (55,800) 77,528
Security deposits 16,896 36,091
__________ ___________
Net cash provided by operating activities 5,517,177 6,275,887
__________ ___________
Cash flows from investing activities:
Additions to real estate (1,224,266) (239,728)
Investment in joint ventures (644,920) (316,107)
Distributions from joint ventures 2,650,081 3,320,515
___________ ____________
Net cash provided by investing
activities 780,895 2,764,680
___________ ____________
Cash flows from financing activities:
Cash distributions (5,933,556) (5,933,556)
____________ ___________
Increase in cash and short-term
investments 364,516 3,107,011
Cash and short-term investments at beginning
of period 5,238,000 3,336,481
____________ ____________
Cash and short-term investments at end
of period $ 5,602,516 $ 6,443,492
____________ ____________
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
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DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
Notes to Consolidated Financial Statements
(Unaudited)
1. The Partnership
Dean Witter Realty Income Partnership III, L.P. (the
"Partnership") is a limited partnership organized under the laws
of the State of Delaware on August 30, 1985. The Partnership's
fiscal year ends on October 31.
The financial statements include the accounts of the
Partnership, Part Six Associates and Laurel-Vincent Place
Associates Limited Partnership on a consolidated basis. The
Partnership's interest in Taxter Corporate Park and the
partnerships which own interests in Tech Park Reston and
Chesterbrook Corporate Center are accounted for on the equity
method.
The Partnership's records are maintained on the accrual basis of
accounting for financial reporting and tax reporting purposes.
Net income per Unit of limited partnership amounts are
calculated by dividing net income allocated to Limited Partners,
in accordance with the Partnership Agreement, by the weighted
average number of Units outstanding.
In the opinion of management, the accompanying unaudited
financial statements reflect all adjustments necessary to
present fairly the results for the interim period.
2. Related Party Transactions
An affiliate of the Managing General Partner provided property
management services for eight properties as of April 30, 1994
(six properties as of April 30, 1993) as well as for five
buildings at the Chesterbrook Corporate Center. The Partnership
incurred management fees of approximately $247,000 and $221,000
for the six months ended April 30, 1994 and 1993, respectively.
Another affiliate of the Managing General Partner performs
administrative functions, processes investor transactions and
prepares tax information for the Partnership. For the six
months ended April 30, 1994 and 1993, the Partnership incurred
approximately $379,000 and $382,000 respectively, for these
services.
As of April 30, 1994, the affiliates were owed a total of
approximately $177,000 for these services.
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DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
Notes to Consolidated Financial Statements
(Unaudited)
3. Subsequent Event
On May 26, 1994, the Partnership paid a cash distribution of
$5.00 per Unit to the Limited Partners. The total cash
distribution amounted to $2,966,778, with $2,670,100 distributed
to the Limited Partners and $296,678 to the General Partners.<PAGE>
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DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Capital Resources
The Partnership raised $267,010,000 in a public offering of
534,020 units which was terminated in 1987. The Partnership has no
plans to raise additional capital.
The Partnership has purchased eight properties and has made three
investments in partnerships on an all-cash basis. The Partnership's
acquisition program has been completed. No additional investments
are planned.
Real estate, in general, has been negatively affected by a major
cyclical downturn. The downturn has been caused by a variety of
factors, including an oversupply of office and retail properties,
continued downsizing by many major corporations and lack of credit
availability for real estate financings and purchases.
These factors have contributed to a general decrease in market
rental rates, an increase in vacancy rates and an increase in
concessions such as free rent and tenant improvement expenditures
for both new and existing tenants. As a result, there has been an
overall decline in the liquidity and market values of real estate
investments.
Real estate markets are generally divided into sub-markets by
geographic location and property type. Not all sub-markets have
been affected equally by the above factors.
The Partnership's liquidity also depends upon cash flow from
operations of its properties, expenditures for tenant improvements
and leasing commissions in connection with the leasing of vacant
space. During the six months ended April 30, 1994, all of the
Partnership's properties generated positive cash flow from
operations, and it is anticipated that they will continue to do so.
During the six months ended April 30, 1994, Partnership cash flow
from operations and distributions received from joint ventures
exceeded distributions to investors and capital expenditures. The
Partnership expects that for the remainder of 1994, capital
expenditures and cash distributions will be funded from operating
cash flows, distributions from joint ventures and existing cash
reserves. The Partnership had reduced its distribution rate
beginning with the 1992 fourth quarter distribution paid November
1992 in order to accumulate such cash reserves.
During the six months ended April 30, 1994, the Partnership
incurred approximately $1,418,000 of tenant improvements and leasing
commissions, primarily relating to the Glenhardie and Holcomb Woods
properties. The Partnership also invested approximately $645,000,
its share of capital expenditures, at the Taxter and Chesterbrook
joint ventures.
The Vanguard Group, the largest tenant in the Chesterbrook joint
venture, vacated its space at one of the buildings in November 1993
and will vacate its remaining space upon the expiration of its
leases between November 1994 and November 1995. Also, there is a
significant amount of vacant space at the Holcomb Woods, Glenhardie
and Hall Road Crossing properties. The Partnership expects to fund
significant capital expenditures in order to attract new tenants to
these properties. In addition, the Partnership plans to fund its
share of certain capital improvements and security enhancements at
the Taxter property in 1994.
On May 26, 1994, the Partnership paid the second quarter
distribution of $5.00 per Unit to the Limited Partners. The total
cash distribution amounted to $2,966,778, with $2,670,100
distributed to the Limited Partners and $296,678 to the General
Partners.
Operations
Significant fluctuations in the Partnership's operating results
for the six and three-month periods ended April 30, 1994 compared to
the comparable periods ended April 30, 1993 are primarily
attributable to the following:
The decrease in rental income for the six months ended April 30,
1994 is primarily due to lower occupancies at the Glenhardie and
Holcomb Woods properties. This decrease was partially offset by an
increase in rent at Fashion Corners from a new anchor tenant which
moved in at the end of the second quarter of 1993.
The increases in equity in earnings of joint ventures for the six
and three months ended April 30, 1994 is primarily attributable to
increased income from the Taxter joint venture as a result of lower
depreciation charges (due to the writedown of the property in 1993)
offset by lower rental income from the Chesterbrook joint venture
due to Vanguard vacating one building.
The decrease in property operating expenses for the six and three
months ended April 30, 1994 is primarily due to lower costs incurred
at the Glenhardie and Holcomb Woods properties in 1994.
A summary of the markets in which the Partnership's office
properties are located and the leasing status of each property is as
follows:
The office market in suburban Atlanta, the location of Business
Park at Holcomb Woods, is improving. During the second quarter of
1994, occupancy at the property increased slightly from 76% to 77%
after increasing from 68% to 76% during the first quarter.
Occupancy remains low because space vacated by the building's
largest tenant in 1993 has not been re-leased. No significant
leases expire before 1995.
Chesterbrook Corporate Center is located in Valley Forge,
Pennsylvania, a market in which the vacancy rate is currently 15%.
Occupancy at the property in the second quarter of 1994 remained
stable at 84% after decreasing from 97% to 84% during the first
quarter. The remaining Vanguard leases, for 22% of the property's
space, expire between November 1994 and November 1995 and are not
expected to be renewed. Vanguard is vacating its space to move into
its own newly-constructed space in this market. This and other new
construction in the Valley Forge area will cause the office market
to deteriorate further. The leases of the other major tenant at the
property (occupying 25% of the space) expire in 1998.
Glenhardie Corporate Center III and IV are also located in Valley
Forge, Pennsylvania. During the second quarter of 1994, occupancy
at the properties decreased slightly from 79% to 78% after
increasing from 55% to 79% during the first quarter of 1994. In May
1994, occupancy increased to 89%. Leases on approximately 20% of
the properties' space expire in 1994; thereafter, no significant
leases expire before 1998.
The office market in Westchester County, New York, the location
of Taxter Corporate Park, has experienced a significant decline.
The current vacancy level in this market is approximately 27%, as
many major tenants in the market are consolidating their operations.
It is unlikely that this vacant space will be absorbed in this
market for several years. During the second quarter of 1994,
occupancy at the property increased slightly from 97% to 99%. No
significant leases expire before 1996. One of the tenants owns a
long-term leasehold interest in approximately 20% of the space at
the property; this tenant does not pay rent, but is responsible for
its share of real estate taxes and certain operating expenses.
The Reston market in Virginia, the location of Tech Park Reston,
is currently experiencing a vacancy rate of 12% due to the
contraction of the high-tech and defense firms which are the major
tenants in the market. The leases with Sprint Communications, the
sole tenant, expire in 2003, but Sprint has the option to terminate
the leases on two of the three buildings beginning in 1997.
Retail properties throughout the country have been adversely
affected by overbuilding and the financial weakness of several large
and midsize retailers. Although many of the anchor tenants in the
Partnership's retail properties have signed long-term leases, they
may face increasing competition from large specialty or discount
retail stores. This increased competition could also affect the
performance of smaller tenants.
Laurel Lakes Centre is located in a suburb of Baltimore and
Washington, D.C. Retail centers in this market have generally
experienced lower net rental rates and, currently, a vacancy rate of
approximately 16%. However, the property's design, location and
tenant mix has enabled it to retain relatively stable rental rates
and maintain an average occupancy rate of 96% during the first and
second quarters of 1994. No significant leases expire until 2005.
Hechingers, an anchor tenant, vacated the shopping center as of May
31, 1994 and was replaced with Best Buy at a significantly higher
rent.
The Partnership owns four shopping centers in Michigan. Sterling
Heights, the location of Hall Road Crossing, is currently a strong
and expanding market with a vacancy rate of 5%. During the second
quarter of 1994, occupancy at the property decreased from 78% to
74%. Occupancy has been low because an anchor tenant has not been
located to replace Children's Palace, an anchor tenant which vacated
the premises in 1992 due to its bankruptcy. During the second
quarter, Perry Drugs, an anchor tenant whose lease expires in 1996,
sub-leased its space to Pet Food Warehouse. The leases of the other
anchor tenants expire in 1997 and 2004.
Saginaw, Michigan, the location of Fashion Corners, is an
improving market with a vacancy rate of 6%. During the first and
second quarters of 1994, occupancy remained stable at 94%. Best
Products, an anchor tenant whose lease expires in 2005, filed for
bankruptcy protection in 1991. It is anticipated that a plan of
reorganization will be confirmed in 1994 and under this plan, the
tenant will remain at the center until its scheduled lease
termination in 2005. The leases of the other anchor tenants expire
in 1996, 2009 and 2013.
A retail center is under construction near Fashion Corners. This
center may compete with Fashion Corners for larger tenants.
Lansing, Michigan, the location of Delta Center, is a strong and
stable market with a vacancy rate of approximately 6%. During the
second quarter of 1994, occupancy increased from 83% to 97% because
a replacement was found for an anchor tenant which had previously
vacated its space. The leases of the other anchor tenants at the
property expire in 1995, 2005, 2006 and 2013.
Westland Crossing is situated outside downtown Detroit and is in
an overbuilt market. Several large retailers left their locations
during the first quarter of 1994; as a result, the vacancy
rate in this market is currently 14%. Occupancy at the property
decreased from 94% to 87% due to several smaller tenants vacating
their space during the second quarter of 1994. The leases of the
anchor tenants expire in 1996 and 2006.
A 110,000 square foot retail center is under construction near
Westland Crossing. When complete, this center may compete with
Westland Crossing for small tenants.
Inflation
Inflation has been consistently low during the period presented
in the financial statements and, as a result, has not had a
significant effect on the operations of the Partnership or its
properties.
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DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - not applicable.
Item 2. Changes in Securities - not applicable.
Item 3. Defaults upon Senior Securities - not applicable.
Item 4. Submission of Matters to a Vote of Security Holders - not
applicable.
Item 5. Other Information - not applicable.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - not applicable.
b) Reports on Form 8-K - Report dated May 10, 1994 of the
valuation per Unit of Limited Partnership Interest at
December 31, 1993.
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DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
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.
Dean Witter Realty Income
Partnership III, L.P.
By: Dean Witter Realty Income
Properties III Inc.
Managing General Partner
Date: June 14, 1994 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: June 14, 1994 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and Accounting
Officer)
