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 July 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 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
Page 1 of 14 <PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
July 31,
1994 October 31,
(Unaudited) 1993
ASSETS
<S> <C> <C>
Cash and short-term investments, at cost,
which approximates market $ 7,000,379 $ 5,238,000
Real estate, at cost:
Land 21,043,309 21,043,309
Buildings and improvements 140,094,132 138,500,302
161,137,441 159,543,611
Accumulated depreciation 29,449,178 26,170,957
131,688,263 133,372,654
Investments in joint ventures 54,579,901 55,509,648
Deferred expenses, net 850,992 670,381
Other assets 2,172,055 2,960,818
$196,291,590 $197,751,501
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 1,142,713 $ 1,054,213
Security deposits 228,272 218,656
1,370,985 1,272,869
Partners' capital (deficiency):
General partners (4,523,535) (4,367,733)
Limited partners ($500 per Unit,
534,020 Units issued) 199,444,140 200,846,365
Total partners' capital 194,920,605 196,478,632
$196,291,590 $ 197,751,501
<FN>
See accompanying notes to consolidated financial statements.
</TABLE> <PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED STATEMENTS OF INCOME
Three and nine months ended July 31, 1994 and 1993
(Unaudited)
<CAPTION>
Three months ended Nine months ended
July 31, July 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenues:
Rental $4,138,850 $4,080,249 $12,101,921 $12,395,476
Equity in earnings of joint ventures 947,963 866,531 2,771,138 2,596,142
Interest 52,756 41,692 126,567 107,661
Other 111,173 18,929 231,852 87,200
5,250,742 5,007,401 15,231,478 15,186,479
Expenses:
Property operating 1,248,491 1,248,255 3,704,135 3,992,322
Depreciation 1,107,997 1,085,631 3,278,221 3,221,674
Amortization 50,809 41,645 144,051 112,719
General and administrative 241,813 244,431 762,764 757,464
2,649,110 2,619,962 7,889,171 8,084,179
Net income $2,601,632 $2,387,439 $ 7,342,307 $7,102,300
Net income per Unit of limited
partnership interest $4.38 $4.02 $12.37 $11.97
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Nine months ended July 31, 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 6,608,076 734,231 7,342,307
Cash distributions (8,010,301) (890,033) (8,900,334)
Partners' capital (deficiency)
at July 31, 1994 $199,444,140 $(4,523,535) $194,920,605
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended July 31, 1994 and 1993
(Unaudited)
<CAPTION>
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,342,307 $ 7,102,300
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 3,278,221 3,221,674
Amortization 144,051 112,719
Equity in earnings of joint ventures (2,771,138) (2,596,142)
(Increase) decrease in operating assets:
Deferred expenses (324,662) (254,778)
Other assets 788,763 1,122,766
Increase in operating liabilities:
Accounts payable and accrued liabilities 88,500 334,297
Security deposits 9,616 45,225
Net cash provided by operating activities 8,555,658 9,088,061
Cash flows from investing activities:
Additions to real estate (1,593,830) (1,892,149)
Investment in joint ventures (763,467) (541,816)
Distributions from joint ventures 4,464,352 4,622,024
Net cash provided by investing activities 2,107,055 2,188,059
Cash flows from financing activities:
Cash distributions (8,900,334) (8,900,334)
Increase in cash and short-term
investments 1,762,379 2,375,786
Cash and short-term investments at beginning
of period 5,238,000 3,336,481
Cash and short-term investments at end
of period $ 7,000,379 $ 5,712,267
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<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, Tech Park
Reston and the partnership which owns interests in
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
At July 31, 1994 and 1993, an affiliate of the Managing
General Partner provided property management services for
eight properties as well as for five buildings at the
Chesterbrook Corporate Center. The Partnership incurred
management fees of approximately $357,000 and $319,000 for
the nine months ended July 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 nine
months ended July 31, 1994 and 1993, the Partnership incurred
approximately $569,000 and $571,000, respectively, for these
services.
As of July 31, 1994, the affiliates were owed a total of
approximately $179,000 for these services.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
Notes to Consolidated Financial Statements
(Unaudited)
3. Subsequent Event
On August 30, 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>
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.
Many real estate markets are stabilizing primarily due to the
continued absence of significant construction activity. However,
the recovery of the office market will be slow because tenant
demand is weak as a result of continued downsizing by many major
corporations. Increased consumer spending has helped the retail
property market although increased interest rates have slowed
spending.
The Partnership's liquidity depends upon its properties' cash
flow from operations, expenditures for tenant improvements and
leasing commissions in connection with the leasing of vacant
space. During the nine months ended July 31, 1994, all of the
Partnership's properties and joint venture interests have
generated positive cash flow from operations, and it is
anticipated that they will continue to do so.
During the nine months ended July 31, 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 nine months ended July 31, 1994, the Partnership
incurred approximately $1,918,000 of tenant improvements and
leasing commissions, primarily relating to the Glenhardie and
Holcomb Woods properties. The Partnership also invested
approximately $763,000, its share of capital expenditures, in 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, Hall Road Crossing and Westland
Crossing properties. The Partnership expects to continue to fund
significant capital expenditures in order to attract new tenants
to these properties. <PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
The Partnership plans to fund its share of certain capital
improvements and security enhancements at the Taxter property in
1994 and 1995.
On August 30, 1994, the Partnership paid the third 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 nine and three-month periods ended July 31, 1994
compared to the comparable periods ended July 31, 1993 are
primarily attributable to the following:
The decrease in rental income for the nine months ended July
31, 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
periods ended July 31, 1994 are primarily attributable to
increased income from the Taxter joint venture as a result of
higher occupancy and lower depreciation charges (due to the
writedown of the property in 1993). These increases were
partially offset by lower rental income from the Chesterbrook
joint venture due to Vanguard vacating one building.
The decrease in property operating expenses for the nine
months ended July 31, 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 third
quarter of 1994, occupancy at the property increased to 80%.
Occupancy was low earlier in 1994 because the building's largest
tenant vacated its space in 1993. Also, a new lease covering 8%
of the property's space was signed in September 1994, and the new
tenant is expected to occupy this space starting November 1994.
No significant leases expire during the remainder of 1994, but
leases of tenants occupying 33% of the space expire in 1995.
Chesterbrook Corporate Center is located in Valley Forge,
Pennsylvania, a market in which the vacancy rate is approximately
14%. Occupancy at the property remained at 84% during the third
quarter of 1994. The remaining Vanguard leases, for 22% of the
property's space, expire between November 1994 and November 1995
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
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 third quarter of 1994,
occupancy at the properties increased to 80%. In August 1994,
a tenant vacated approximately 7% of the property's space. No
other 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 25%, 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 third quarter of 1994, occupancy at the property remained at
99%. No significant leases expire before 1996. One of the
tenants had purchased 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, has 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. Sprint has the option to terminate its leases on
two of the three buildings beginning in 1997.
A summary of the markets in which the Partnership's retail
properties are located and the leasing status of each property
is as follows:
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 16%. However, the property has been able to maintain
relatively stable rental rates and an average occupancy rate of
95% during the nine months ended July 31, 1994. At the end of
July 1994, Hechingers, an anchor tenant which occupies 11% of the
space, vacated the shopping center; however, they will be
replaced before October 31, 1994 with Best Buy at a higher rent.
No significant leases expire until 2005.
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 third quarter of 1994, occupancy at the property
remained at 74%. Occupancy has been low because an anchor tenant
has not been located to replace Children's Palace, which vacated
the premises in 1992 due to its bankruptcy. During the second
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
quarter, Perry Drugs, an anchor tenant, sub-leased its space to
Pet Food Warehouse. This lease expires in 2001; 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 third
quarter of 1994, the property was able to maintain an average
occupancy of 93%. Best Products, an anchor tenant whose lease
expires in 2005, filed for bankruptcy protection in 1991. During
the third quarter of 1994, the tenant successfully emerged from
bankruptcy, and is now current on all rental payments. 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 retail center is under construction near Fashion Corners.
This center as well as a nearby center which recently lost a
large anchor tenant to the new retail 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 third quarter of 1994, occupancy increased slightly
from 97% to 98%. 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%. During the third
quarter of 1994, occupancy at the property remained at 85%. 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 as well as a
nearby center which recently lost a large anchor tenant to the
new retail center may compete with Westland Crossing for 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.
<PAGE>
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.
<PAGE>
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: September 13, 1994 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: September 13, 1994 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Registrant is a limited partnership which invests in real estate and real
estate joint ventures. In accordance with industry practice, its balance
sheet is unclassified. For full information, refer to the accompanying
unaudited financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> JUL-31-1994
<CASH> 7,000,379
<SECURITIES> 0
<RECEIVABLES> 2,003,939
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 196,291,590<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 194,920,605<F2>
<TOTAL-LIABILITY-AND-EQUITY> 196,291,590<F3>
<SALES> 0
<TOTAL-REVENUES> 15,231,478<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,889,171
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,342,307
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,342,307
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,342,307
<EPS-PRIMARY> 12.37<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $131,688,263, investment in joint ventures of $54,579,901,
net deferred expenses of $850,992 and other assets of $168,116.
<F2>Other Stockholders' Equity represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of
$1,142,713, and security deposits of $228,272.
<F4>Total revenue includes rent of $12,101,921, equity in earnings of joint
ventures of $2,771,138, interest of $126,567 and other revenue of $231,852.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
