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 January 31, 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
(State of organization)
13-3293754
(IRS Employer Identification No.)
2 World Trade Center, New York, NY
(Address of principal executive offices)
10048
(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
Page 1 of 14
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED BALANCE SHEETS
January 31,
1994 October 31,
(Unaudited) 1993
ASSETS
Cash and short-term investments, at cost,
which approximates market $ 5,758,880 $ 5,238,000
Real estate, at cost:
Land 21,043,309 21,043,309
Buildings and improvements 139,316,111 138,500,302
160,359,420 159,543,611
Accumulated depreciation 27,231,815 26,170,957
133,127,605 133,372,654
Investments in joint ventures 55,251,935 55,509,648
Deferred expenses, net 710,883 670,381
Other assets 2,298,247 2,960,818
$197,147,550 $197,751,501
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 1,160,903 $ 1,054,213
Security deposits 231,617 218,656
1,392,520 1,272,869
Partners' capital (deficiency):
General partners
Capital contributions 1,000 1,000
Cumulative net income 6,749,077 6,524,759
Cumulative distributions (11,190,170) (10,893,492)
(4,440,093) (4,367,733)
Limited partners ($500 per Unit,
534,020 Units issued)
Capital contributions, net of
offering costs 241,562,160 241,562,160
Cumulative net income 69,745,732 67,726,874
Cumulative distributions (111,112,769) (108,442,669)
200,195,123 200,846,365
Total partners' capital 195,755,030 196,478,632
$197,147,550 $ 197,751,501
See accompanying notes to consolidated financial statements.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED STATEMENTS OF INCOME
Three months ended January 31, 1994 and 1993
(Unaudited)
1994 1993
Revenues:
Rental $ 3,781,185 $ 4,183,331
Equity in earnings of joint ventures 878,576 937,375
Interest 36,944 27,087
Other 76,942 47,857
4,773,647 5,195,650
Expenses:
Property operating 1,166,754 1,318,558
Depreciation 1,060,858 1,074,618
Amortization 41,930 34,194
General and administrative 260,929 255,348
2,530,471 2,682,718
Net income $ 2,243,176 $ 2,512,932
Net income per Unit of limited
partnership interest $ 3.78 $ 4.24
See accompanying notes to consolidated financial statements.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Three months ended January 31, 1994
(Unaudited)
Limited General
Partners Partners Total
Partners' capital (deficiency)
at November 1, 1993 $200,846,365 $(4,367,733) $196,478,632
Net income 2,018,858 224,318 2,243,176
Cash distributions (2,670,100) (296,678) (2,966,778)
Partners' capital (deficiency)
at January 31, 1994 $200,195,123 $(4,440,093) $195,755,030
See accompanying notes to consolidated financial statements.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended January 31, 1994 and 1993
(Unaudited)
1994 1993
Cash flows from operating activities:
Net income $ 2,243,176 $ 2,512,932
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,060,858 1,074,618
Amortization 41,930 34,194
Equity in earnings of joint ventures (878,576) (937,375)
(Increase) decrease in operating assets:
Deferred expenses (82,432) (32,842)
Other assets 662,571 1,030,972
Increase in operating liabilities:
Accounts payable and accrued liabilities 106,690 202,540
Security deposits 12,961 33,240
Net cash provided by operating activities 3,167,178 3,918,279
Cash flows from investing activities:
Additions to real estate (815,809) (94,958)
Investment in joint ventures (341,509) (153,377)
Distributions from joint ventures 1,477,798 1,980,499
Net cash provided by investing
activities 320,480 1,732,164
Cash flows from financing activities:
Cash distributions (2,966,778) (2,966,778)
Increase in cash and short-term
investments 520,880 2,683,665
Cash and short-term investments at beginning
of period 5,238,000 3,336,481
Cash and short-term investments at end
of period $ 5,758,880 $ 6,020,146
See accompanying notes to consolidated financial statements.
<PAGE>
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 January 31, 1994
(six properties as of January 31, 1993) as well as for five
buildings at the Chesterbrook Corporate Center. The Partnership
incurred management fees of approximately $136,000 and $120,000 for
the three months ended January 31, 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 three months
ended January 31, 1994 and 1993, the Partnership incurred
approximately $190,000 and $192,000 respectively, for these
services.
As of January 31, 1994, the affiliate was owed a total of
approximately $180,000 for these services.
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
Notes to Consolidated Financial Statements
(Unaudited)
3. Subsequent Event
On February 25, 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.
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, a
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 three months ended January 31, 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 three months ended January 31, 1994, Partnership cash
flow from operations and distributions received from joint ventures
exceeded distributions to investors and capital expenditures. The
Partnership expects that such cash flows for the remainder of 1994
will be sufficient to fully fund capital expenditures and cash
distributions.
During the three months ended January 31, 1994, the Partnership
incurred approximately $898,000 of tenant improvements and leasing
commissions, primarily relating to the Glenhardie and Holcomb Woods
properties. The Partnership also invested approximately $342,000,
its share of capital expenditures, primarily at the Taxter joint
venture.
The Vanguard Group, the largest tenant in the Chesterbrook joint
venture, has vacated its space at one of the buildings 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 managing General Partner plans
to make certain capital improvements and security enhancements at
the Taxter property.
On February 25, 1994, the Partnership paid the first 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
Fluctuations in the Partnership's operating results for the
three-month period ended January 31, 1994 compared to the comparable
period ended January 31, 1993 are primarily attributable to the
following:
The decrease in rental income 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 in the second
quarter of 1993.
The decrease in equity in earnings of joint ventures is primarily
attributable to lower rental income at Tech Park and Chesterbrook,
offset by increased income at Taxter as a result of lower
depreciation charges.
The decrease in property operating expenses is primarily due to
lower costs incurred at the Glenhardie, Holcomb Woods and Laurel
Lakes 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, has experienced declines in occupancy due
largely to overbuilding and corporate consolidation; the overall
vacancy level in this market is currently 33%. During the first
quarter of 1994, occupancy increased from 68% to 76%. 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 first quarter of 1994 decreased
from 97% to 84%, primarily because of the departure of Vanguard as
described above. 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 (for 25% of the space) expire in 1998.
Glenhardie Corporate Center III and IV are also located in Valley
Forge, Pennsylvania. During the first quarter of 1994, occupancy
increased from 55% to 79%. Leases on approximately 18% of the
property's 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 the Westchester office market is
approximately 27%, as many major tenants in the market are
consolidating their operations. During the first quarter of 1994,
occupancy at the property remained stable at 97%. 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 occupancy rate of 97% during the first quarter of
1994. No significant leases expire until 2005. However,
Hechingers, an anchor tenant, has announced it will leave the
shopping center in 1994; under the terms of its lease, Hechingers
will continue to pay rent until a replacement tenant is found.
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 first
quarter of 1994, occupancy at the property remained at 78%.
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. The leases of the other
anchor tenants expire in 1996, 1997 and 2004.
Saginaw, Michigan, the location of Fashion Corners, is an
improving market with a vacancy rate of 6%. During the first
quarter 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 early 1994 and under this plan, the tenant will
remain at the center until its scheduled lease termination. The
leases of the other anchor tenants expire in 1996, 2009 and 2013.
A 280,000 square foot "power" retail center is under construction
near Fashion Corners. When complete, this center will 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
first quarter of 1994, occupancy remained stable at 83%. The
occupancy excludes an anchor tenant which vacated its space prior to
the expiration of its lease (which runs until 2005) but will
continue to pay rent on the space until a replacement tenant is
found. The leases of the three other anchor tenants at the property
expire in 1995, 2006 and 2013.
Westland Crossing is situated outside downtown Detroit and is in
an overbuilt market. Several large retailers have left their
locations during the first quarter of 1994; as a result, the vacancy
rate in this market increased from approximately 10% to 14%.
However, occupancy at the property remained stable at 94% during the
first quarter of 1994. The leases of the anchor tenants expire in
1996 and 2006.
An 80,000 square foot retail center is under construction near
Westland Crossing. When complete, this center will 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.
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 - not applicable.
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: March 15, 1994 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: March 15, 1994 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and Accounting
Officer)
