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, 1995
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>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
January 31,
1995 October 31,
(Unaudited) 1994
ASSETS
<S> <C> <C>
Cash and short-term investments, at cost,
which approximates market $ 5,835,901 $ 5,683,026
Real estate, at cost:
Land 21,043,309 21,043,309
Buildings 140,437,409 140,320,824
161,480,718 161,364,133
Accumulated depreciation (31,376,381) (30,244,746)
130,104,337 131,119,387
Investments in joint ventures 55,205,203 54,767,448
Deferred expenses, net 1,161,975 952,951
Other assets 2,955,740 2,827,188
$195,263,156 $195,350,000
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 1,388,281 $ 788,033
Security deposits 235,169 238,537
1,623,450 1,026,570
Partners' capital (deficiency):
General partners (4,651,627) (4,583,254)
Limited partners ($500 per Unit,
534,020 Units issued) 198,291,333 198,906,684
Total partners' capital 193,639,706 194,323,430
$195,263,156 $195,350,000
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED STATEMENTS OF INCOME
Three months ended January 31, 1995 and 1994
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Revenues:
Rental $ 4,119,116 $ 3,781,185
Equity in earnings of joint ventures 817,500 878,576
Interest 52,373 36,944
Other 82,759 76,942
5,071,748 4,773,647
Expenses:
Property operating 1,341,902 1,166,754
Depreciation 1,131,636 1,060,858
Amortization 66,255 41,930
General and administrative 248,901 260,929
2,788,694 2,530,471
Net income $ 2,283,054 $ 2,243,176
Net income per Unit of limited
partnership interest $ 3.85 $ 3.78
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Three months ended January 31, 1995
(Unaudited)
<CAPTION>
Limited General
Partners Partners Total
<S> <C> <C> <C>
Partners' capital (deficiency)
at November 1, 1994 $198,906,684 $(4,583,254) $194,323,430
Net income 2,054,749 228,305 2,283,054
Cash distributions (2,670,100) (296,678) (2,966,778)
Partners' capital (deficiency)
at January 31, 1995 $198,291,333 $(4,651,627) $193,639,706
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended January 31, 1995 and 1994
(Unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,283,054 $ 2,243,176
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,131,636 1,060,858
Amortization 66,255 41,930
Equity in earnings of joint ventures (817,500) (878,576)
(Increase) decrease in operating assets:
Deferred expenses (275,280) (82,432)
Other assets (128,552) 662,571
Increase (decrease) in operating liabilities:
Accounts payable and accrued liabilities 600,248 106,690
Security deposits (3,368) 12,961
Net cash provided by operating activities 2,856,493 3,167,178
Cash flows from investing activities:
Additions to real estate (116,585) (815,809)
Investment in joint ventures (907,594) (341,509)
Distributions from joint ventures 1,287,339 1,477,798
Net cash provided by investing
activities 263,160 320,480
Cash flows from financing activities:
Cash distributions (2,966,778) (2,966,778)
Increase in cash and short-term
investments 152,875 520,880
Cash and short-term investments at beginning
of period 5,683,026 5,238,000
Cash and short-term investments at end
of period $ 5,835,901 $ 5,758,880
<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
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 $129,000 and $136,000
for the three months ended January 31, 1995 and 1994,
respectively.
Another affiliate of the Managing General Partner performs
administrative functions, processes investor transactions and
prepares tax information for the Partnership. For each of the
three months ended January 31, 1995 and 1994, the Partnership
incurred approximately $190,000 for these services.
As of January 31, 1995, the affiliates were owed a total of
approximately $145,500 for these services.
3. Subsequent Event
On February 28, 1995, the Partnership paid a cash distribution
of approximately $5.94 per Unit to the Limited Partners. The
total cash distribution amounted to $3,523,049, with $3,170,744
distributed to the Limited Partners and $352,305 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 has been and may continue to 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.
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 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, 1995, 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, 1995, Partnership cash
flow from operations and distributions received from its joint
ventures exceeded distributions to investors and capital
expenditures. The Partnership expects that such cash flows for the
remainder of 1995 will be sufficient to fund capital expenditures
and cash distributions. The Partnership increased its cash
distribution rate from 4.00% to 4.75% per Unit, beginning with the
first quarter cash distribution paid February 28, 1995.
The Vanguard Group vacated its space in two of the buildings in
fiscal 1994, and will vacate its remaining space at the Chesterbrook
property upon the expiration of its leases in November 1995. In
September 1994, the partnership which owns the property signed
leases with two new tenants to fill a significant portion of the
space vacated to date. The Partnership's share of capital
expenditures which resulted from these new leases during the three
months ended January 31, 1995 was approximately $833,000.
During the three months ended January 31, 1994, the Partnership
also incurred approximately $390,000 of tenant improvements and
leasing commissions on its owned properties.
On February 28, 1995, the Partnership paid the first quarter
distribution of approximately $5.94 per Unit to the Limited
Partners. The total cash distribution amounted to $3,523,049, with
$3,170,744 distributed to the Limited Partners and $352,305 to the
General Partners.
Operations
Fluctuations in the Partnership's operating results for the
three-month period ended January 31, 1995 compared to 1994 are
primarily attributable to the following:
The increase in rental income is primarily due to higher
occupancies at the Glenhardie and Holcomb Woods properties and
increased pass-through income at Laurel Lakes Centre.
The increase in property operating expenses is primarily due to
write-offs of certain uncollectible tenant receivables, and the
pass-through of costs at Laurel Lakes.
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; the current vacancy in this
market is approximately 18%. At January 31, 1995, the property was
88% leased (including one tenant which moved into its space in
February 1995). Two tenants, which occupy approximately 13% of the
property's space, will vacate upon expiration of their leases in
February and May 1995. Other leases on approximately 36% of the
property's space are scheduled to expire during the remainder of
1995 and 1996.
Chesterbrook Corporate Center is located in Valley Forge,
Pennsylvania, a market in which the vacancy rate is currently
approximately 14%. Occupancy at the property at January 31, 1995
was 90%. Vanguard has been 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. Leases for 21% of the space are scheduled to expire
during the remainder of 1995 and 1996.
Glenhardie Corporate Center III and IV are also located in Valley
Forge, Pennsylvania. During the first quarter of 1995, occupancy
remained stable at 80%. No significant leases are scheduled to
expire before 1999.
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 25%. It is unlikely that this vacant space will be
absorbed in the market for several years. During the first quarter
of 1995, occupancy at the property remained stable at 99%. Leases
covering 21% of the property's space expire in 1996.
The Reston market in Virginia, the location of Tech Park Reston,
is currently experiencing a vacancy rate of 16% 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 at the property, expire in 2003. Sprint has the option
to terminate the leases on two of the three buildings beginning in
1997 and 1998.
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
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 95% during the first quarter of
1995. Leases for approximately 10% of the property's space are
scheduled to expire during the remainder of 1995. No other
significant leases are scheduled to 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%. At January 31,
1995, occupancy at the property was 95%. No significant leases are
scheduled to expire before 1997.
Saginaw, Michigan, the location of Fashion Corners, has a vacancy
rate of 12%. During the first quarter of 1995, occupancy increased
from 94% to 96%. Leases totaling 21% of the property's space are
scheduled to expire in 1996.
Construction of a 280,000 square foot "power" retail center has
been proposed for an area near Fashion Corners. If built, this
center will compete with Fashion Corners for larger tenants.
Lansing, Michigan, the location of Delta Center, has a vacancy
rate of approximately 9%. During the first quarter of 1995,
occupancy remained stable at 98%. No significant leases are
scheduled to expire before 2005.
Westland Crossing is situated outside downtown Detroit and is in
an overbuilt market with a current vacancy rate of approximately
17%. During the first quarter of 1995, occupancy at the property
remained stable at 90%. Leases for approximately 33% of the
property's space are scheduled to expire in 1996.
There is significant new space under construction in this market.
When complete, this space will 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 - not applicable.
<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: March 17, 1995 By: /s/E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: March 17, 1995 By: /s/Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and Accounting
Officer)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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-1
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> JAN-31-1995
<CASH> 5,835,901
<SECURITIES> 0
<RECEIVABLES> 1,867,560
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 195,263,156<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 193,639,706<F2>
<TOTAL-LIABILITY-AND-EQUITY> 195,263,156<F3>
<SALES> 0
<TOTAL-REVENUES> 5,071,748<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,788,694
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,283,054
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,283,054
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,283,054
<EPS-PRIMARY> 3.85<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $130,104,337, investment in joint ventures of $55,205,203,
net deferred expenses of $1,161,975 and other assets of $1,088,180.
<F2>Other Stockholders' Equity represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of
$1,388,281, and security deposits of $235,169.
<F4>Total revenue includes rent of $4,119,116, equity in earnings of joint
ventures of $817,500, interest of $52,373 and other revenues of
$82,759.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
