UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 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 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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by non-
affiliates of the registrant. N/A
DOCUMENTS INCORPORATED BY REFERENCE
None<PAGE>
PART I.
ITEM 1. BUSINESS.
The Registrant, Dean Witter Realty Income Partnership III, L.P. (the
"Partnership"), is a limited partnership formed in August 1985 under the
Uniform Limited Partnership Act of the State of Delaware for the purpose
of investing primarily in income-producing office, industrial and retail
properties.
The Managing General Partner of the Partnership is Dean Witter
Realty Income Properties III Inc. (the "Managing General Partner"), a
Delaware corporation which is wholly owned by Dean Witter Realty Inc.
("Realty"). The Associate General Partner is Dean Witter Realty Income
Associates III, L.P. (the "Associate General Partner"), a Delaware
limited partnership, the general partner of which is the Managing General
Partner. The Managing General Partner manages and controls all aspects
of the business of the Partnership. The terms of transactions between
the Partnership and its affiliates are set forth below in footnote 8 to
the consolidated financial statements included in Item 8 and in Item 13.
The Partnership issued 534,020 units of limited partnership interest
(the "Units") with gross proceeds from the offering of $267,010,000. The
offering has been terminated and no additional Units will be sold.
The proceeds from the offering were used to make equity investments
in six office properties and five retail properties which were acquired
without mortgage debt. The properties are described in Item 2 below.
As described in Item 7 and the consolidated financial statements in Item
8, the Partnership sold three of the shopping centers in December 1995,
and has entered into an agreement to sell a fourth.
The Partnership considers its business to include one industry
segment, investment in real property. Financial information regarding
the Partnership is in the Partnership's financial statements in Item 8
below.
The Partnership's real property investments are subject to
competition from similar types of properties in the vicinities in which
they are located. Further information regarding competition and market
conditions where the Partnership's properties are located is set forth
in Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
The Partnership has no employees.
All of the Partnership's business is conducted in the United States.
ITEM 2. PROPERTIES.
The Partnership's principal offices are located at Two World Trade
Center, New York, New York 10048. The Partnership has no other offices.
The Partnership owns directly or through a partnership interest the
following eleven property interests, none of which is encumbered by
indebtedness. Generally, the leases pertaining to the properties provide
for pass-throughs to the tenants of their pro-rata share of certain
operating expenses. In the opinion of the Managing General Partner, all
of the properties are adequately covered by insurance.
<TABLE>
<CAPTION>
Year Acquisition Net Rentable Type of Ownership
Completed/ Cost Area of land and
Property and Location Acquired ($000) (000 sq. ft.) Improvements
<S> <C> <C> <C> <S>
Glenhardie III, Valley Forge, PA 1984/1986 $9,646 64 Fee interest
Office Building
Glenhardie IV, Valley Forge, PA 1985/1986 $10,354 64 99.9% General Partner-
Office Building ship interest1
Delta Center, Lansing, MI 1985/1986 $13,582 174 Fee interest
Shopping Center5
Hall Road Crossing, Sterling
Heights, MI 1986/1986,'91,'93 $15,420 176 Fee interest
Shopping Center5
Fashion Corners, Saginaw, MI 1986/1986 $12,974 189 Fee interest
Shopping Center5
Westland Crossing, Westland, MI 1986/1986 $13,225 137 Fee interest
Shopping Center6
Taxter Corporate Park,
Westchester, NY 1987-1988/ $23,063 345 44.6% General Partner-
2 Office Buildings 1986-1988 ship interest2
Business Park at Holcomb Woods,
Roswell, GA 1984/1986 $23,100 244 Fee interest
4 Office Buildings
Laurel Lakes Centre, Laurel, MD 1987/1987 $51,297 466 99.999% General Part-
Shopping Center nership interest1
Technology Park Reston,
Reston, VA 1983-1985/1987 $20,170 374 35.0% General Partner-
3 Office Buildings ship interest3
Chesterbrook Corp. Center,
Valley Forge, PA 1982-1987/1987 $32,430 621 26.7% General Partner-
8 Office Buildings ship interest4
1. The remaining general partnership ("GP") interest is held by the Managing General Partner.
2. The remaining GP interests are held by Dean Witter Realty Income Partnership II, L.P.
(14.8%) and Dean Witter Realty Income Partnership IV, L.P. (40.6%), affiliates of the Partnership. The
total cost of the property was $51.8 million
3. The remaining GP interest is held by Dean Witter Realty Income Partnership IV, L.P. The total
cost of the property was $57.6 million.
4. The remaining GP interests are held by Dean Witter Realty Income Partnership IV, L.P. (41.2%) and
an affiliate of the Managing General Partner (32.1%). The total cost of the property was $121.3 million.
5. Sold subsequent to year-end. See footnote 5 to the consolidated financial statements.
6. Subject to agreement of sale. See footnote 5 to the consolidated
financial statements.
</TABLE>
Each property has been built with on-site parking facilities.
In 1995, the partnership which owns the Chesterbrook Corporate
Center recorded a loss on impairment of the property. The Partnership's
share ($11,524,030) of this loss is included in equity in earnings
(losses) of joint ventures. See note 6 to the consolidated financial
statements.
An affiliate of the Partnership is the property manager for
Laurel Lakes Centre, Taxter Corporate Park, Hall Road Crossing, Delta
Center, Fashion Corners and Westland Crossing and the co-property manager
for the Glenhardie buildings and five buildings at the Chesterbrook
Corporate Center.
Further information relating to the Partnership's properties is
included in Item 7 and footnotes 4, 5 and 6 to the consolidated financial
statements in Item 8.
ITEM 3. LEGAL PROCEEDINGS.
On December 27, 1995, a class action lawsuit naming various
public real estate partnerships sponsored by Realty (including the
Partnership and its Managing General Partner and Associate General
Partner), Realty, Dean Witter Reynolds Inc. and others as defendants was
filed in Superior Court in California. The complaint alleges fraud,
negligent misrepresentation, intentional and negligent breach of
fiduciary duty, unjust enrichment and related claims and seeks
compensatory and punitive damages in unspecified amounts and injunctive
and other equitable relief. The defendants have removed the case to the
United States District Court for the Southern District of California.
The defendants have not yet responded to the complaint. The defendants
intend to vigorously defend the action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted during the fourth quarter of the fiscal
year to a vote of Unit holders.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
An established public trading market for the Units does not
exist, and it is not anticipated that such a market will develop in the
future. Accordingly, information as to the market value of a Unit at any
given date is not available. However, the Partnership does allow its
limited partners (the "Limited Partners") to transfer their Units if a
suitable buyer can be located.
As of January 25, 1996, there were 38,319 holders of limited
partnership interests.
The Partnership is a limited partnership and, accordingly, does
not pay dividends. It does, however, make quarterly distributions of
cash to its partners. Pursuant to the partnership agreement,
distributable cash, as defined, is paid 90% to the Limited Partners and
10% to the general partners (the "General Partners").
During the year ended October 31, 1995, the Partnership paid
quarterly cash distributions aggregating $13,535,925, with $12,182,332
distributed to the Limited Partners and $1,353,593 to the General
Partners. During the year ended October 31, 1994, the Partnership paid
quarterly cash distributions aggregating $11,867,112, with $10,680,400
distributed to Limited Partners and $1,186,712 to the General Partners.
On November 28, 1995, the Partnership paid the fourth quarter
distribution of $5.9375 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.
The Partnership anticipates making regular distributions to its
partners in the future.
Sale or financing proceeds will be distributed, to the extent
available, first, to each Limited Partner, until there has been a return
of the Limited Partner's capital contribution plus cumulative
distributions of distributable cash and sale or financing proceeds in an
amount sufficient to provide a 9% cumulative annual return on the Limited
Partner's adjusted capital contribution. Thereafter, any remaining sale
or financing proceeds will be distributed 85% to the Limited Partners and
15% to the General Partners after the Managing General Partner receives
a brokerage fee of up to 3% of the selling price of any equity
investment.
Taxable income generally will be allocated in the same
proportions as distributions of distributable cash or sale or financing
proceeds (except that the General Partners must be allocated at least 1%
of taxable income from the sale or financing). In the event there is no
distributable cash or sale or financing proceeds, taxable income will be
allocated 90% to the Limited Partners and 10% to the General Partners.
Any tax loss will be allocated 90% to the Limited Partners and 10% to the
General Partners.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA.
The following sets forth a summary of the selected financial data for the
Partnership:
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
For the years ended October 31, 1995, 1994, 1993, 1992 and 1991
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Total revenues $ 8,946,798 $ 20,279,777 $ 7,977,133 $ 20,957,942 $ 21,542,531
Net income (loss) $ (3,564,379)1 $ 9,711,910 $ (3,002,627)2 $ 10,556,999 $ 11,397,429
Net income (loss) per Unit of
limited partnership
interest $ (6.24) $ 16.37 $ (5.06) $ 17.79 $ 19.21
Cash distributions paid
per Unit of limited
partnership interest3 $ 22.81 $ 20.00 $ 20.00 $ 31.25 $ 31.25
Total assets at October 31 $177,988,847 $195,350,000 $197,751,501 $212,527,983 $220,764,686
1. Includes a $1,264,883 writedown of real estate held for sale (see Item 7 and Note 5 to the consolidated
financial statements) and the Partnership's share ($11,524,030) of loss on impairment of the Chesterbrook
property (see Item 7 and Note 6 to the consolidated financial statements).
2. Includes the Partnership's share ($12,411,356) of loss on impairment of the Taxter property (see Item 7
and Note 6 to the consolidated financial statements).
3. Distributions paid to limited partners include returns of capital per Unit of limited partnership interest
of $22.81, $3.63, $20.00, $13.46 and $12.04 for the years ended October 31, 1995, 1994, 1993, 1992 and
1991, respectively, calculated as the excess of cash distributed per Unit over accumulated earnings per
Unit not previously distributed.
Note: The above financial data should be read in conjunction with the consolidated financial statements and
the related notes appearing in Item 8.
/TABLE
<PAGE>
ITEM 7. 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, office
vacancy levels in suburban Philadelphia (the location of Glenhardie III
and IV and Chesterbrook Corporate Center) and Westchester County, New
York (the location of Taxter Corporate Park) remain essentially unchanged
from the prior year as certain large corporations and financial companies
continue to restructure and consolidate their operations. In most
markets, office construction is limited to build-to-suit projects.
Office/research and development properties such as Holcomb Woods are
benefiting from growth in the computer, communications and electronics
industries. At retail properties, the demand for space in 1995 was
generally subdued as a result of sluggish retail sales and competition
from large power centers, discounters and reorganized department stores.
In the fourth fiscal quarter of 1995, the Partnership determined
to sell the Delta Center, Fashion Corners, Hall Road Crossing and
Westland Crossing shopping centers, and entered into an agreement
(amended December 1, 1995) with New Plan Realty Trust, an unaffiliated
party, to sell the shopping centers.
The closing of the sale of the Delta Center, Fashion Corners and
Hall Road Crossing shopping centers, for a negotiated sale price of
approximately $35.5 million (net of closing costs), took place on
December 11, 1995. Pursuant to the agreement, the sale of Westland
Crossing has been delayed and could be cancelled if a replacement tenant
is not obtained, within sixty days from the closing, for an anchor tenant
which will vacate the center upon expiration of its lease on January 31,
1996. It is uncertain whether a replacement tenant can be found.
The aggregate net income from the three shopping centers sold
during the year ended October 31, 1995 was approximately $2.8 million,
and the aggregate cash flow from operations for these properties during
the year ended October 31, 1995 was approximately $4.0 million.
The Partnership's liquidity depends upon cash flow from
operations of its properties and expenditures for tenant improvements and
leasing commissions in connection with the leasing of vacant space. In
1995, all of the Partnership's properties and joint venture interests
generated positive cash flow from operations, and it is anticipated that
they will continue to do so.
In addition, the Partnership's liquidity will be affected by the
sale of the Partnership's properties. In accordance with the provisions
of the Partnership Agreement, the net sales proceeds from the sale of the
three shopping centers of $66.40 per Unit ($35.5 million) will be
distributed to the Limited Partners in February 1996 and represents a
return of invested capital. Because the Partnership has fewer income
producing investments, the Partnership's cash from operations available
for distribution will decline in 1996 and thereafter. Partnership
distributions will also decline in 1996.
In 1995, the Partnership's cash flow from operations and
distributions received from its joint ventures exceeded distributions to
investors. This excess cash flow along with excess Partnership cash
reserves were used to fund capital expenditures, leasing commissions and
contributions to its joint ventures.
In 1995, the Partnership (a) incurred approximately $1,539,000
of tenant improvements and leasing commissions, primarily relating to the
Glenhardie and Holcomb Woods properties; (b) contributed approximately
$1,303,000 for its share of capital expenditures needed to re-lease a
significant portion of vacant space at the Chesterbrook property; and (c)
contributed approximately $506,000, its share of building improvements
and tenant-related capital expenditures, to the Taxter joint venture.
As of October 31, 1995, the Partnership has commitments to fund
approximately $873,000 of tenant improvements and leasing commissions,
primarily relating to the Glenhardie and Holcomb Woods properties, and
commitments to contribute approximately $306,000, its share of capital
expenditures, to the Chesterbrook and Taxter joint ventures.
If the Westland Crossing shopping center is not sold, the
Partnership may incur material capital expenditures to replace the anchor
tenant which is vacating its space in January 1996. Also, the
Partnership may incur material capital expenditures to fill the current
vacant space at Laurel Lakes Centre.
Capital expenditures and leasing commissions are expected to be
funded from excess Partnership cash reserves in 1996.
At the Taxter property, the lease of Fuji Photo USA, Inc., which
occupies approximately 24% of the property's space, was to terminate in
March 1996. However, Fuji has exercised its option to extend its leases
through March 2001, at an effective rent which is approximately equal to
ninety percent of current rental rates in the Westchester market. This
renewal was accomplished without incurring a significant amount of
capital expenditures and leasing commissions. Because market rates have
declined since Fuji signed its original lease, rental revenue and cash
flow from Fuji during the renewal term will be significantly lower than
what the Partnership currently receives. In addition, Fuji will not pay
any rent in the six month period beginning April 1, 1996. As a result
of this renewal, the Partnership expects that cash distributions from the
Taxter Joint Venture will be reduced by approximately $490,000 in 1996
compared to 1995.
The joint venture which owns Tech Park Reston is negotiating a
restructuring of its leases with Sprint Communications, the property's
sole tenant, in which Sprint will give up its early lease termination
options and extend its lease termination dates in exchange for lower rent
beginning in 1996. At present, it is uncertain whether the leases will
be restructured and, if they are, what the effect of the restructuring
on the Partnership's cash flow and income will be.
In 1995, the partnership which owns the Chesterbrook Corporate
Center recorded a loss on impairment of the property. The Partnership's
share ($11,524,030) of this loss is included in equity in earnings
(losses) of joint ventures. See note 6 to the consolidated financial
statements.
The Partnership increased its cash distribution rate from 4.0%
to 4.75% per Unit beginning with the first quarter cash distribution paid
February 28, 1995.
On November 28, 1995, the Partnership paid the fourth quarter
distribution of $5.9375 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.
Except as described above and in the consolidated financial
statements, the Managing General Partner is not aware of any trends or
events, commitments or uncertainties that will impact liquidity in a
material way.
Operations
Fluctuations in the Partnership's operating results for the year
ended October 31, 1995 compared to 1994 and for the year ended October
31, 1994 compared to 1993 are primarily attributable to the following:
The increase in rental income in 1995 compared to 1994 is
primarily due to higher occupancies at the Holcomb Woods, Laurel Lakes
and Hall Road properties and increased pass-through income at Laurel
Lakes, partially offset by reduced pass-through income at the Westland
Crossing and Delta Center properties.
The decrease in equity in earnings (losses) of joint ventures in
1995 compared to 1994 is primarily due to the recognition by the
Partnership of its share (approximately $11.5 million) of the impairment
writedown of the Chesterbrook property. In addition, the equity in
earnings of joint ventures decreased by approximately $349,000 in 1995
compared to 1994, primarily due to higher depreciation and amortization
due to increased capital expenditures at the Chesterbrook and Taxter
properties, and higher operating expenses at the Taxter property. The
increase in 1994 compared to 1993 is primarily attributable to the loss
incurred in 1993 when the Partnership recorded its share ($12,411,356)
of the loss on impairment of the Taxter property. Excluding the 1993
loss, the equity in earnings of joint ventures decreased by approximately
$254,000 in 1994 compared to 1993. This decrease was primarily caused
by lower rental income from the Chesterbrook and Taxter joint ventures.
These decreases were partially offset by lower depreciation charges from
the Taxter joint venture (due to the writedown of the property in 1993).
The increase in property operating expenses in 1995 compared to
1994 is primarily due to increased repair costs at Laurel Lakes Centre,
most of which will be passed through to tenants. The decrease in
property operating expenses for 1994 compared to 1993 is primarily due
to lower real estate taxes incurred at most of the Partnership's
properties in 1994 and lower building services costs at the Partnership's
office buildings.
The increase in depreciation in 1995 compared to 1994 was
primarily due to increased capital expenditures.
The 1995 loss on writedown of real estate held for sale in 1995
is due to the reduction of the carrying values of the Delta Center, Hall
Road Crossing, Fashion Corners and Westland Crossing shopping centers to
their sales price, net of closing costs, as described in Note 5 to the
consolidated financial statements.
A summary of the markets in which the Partnership's office
properties are located and the performance of each property is as
follows:
The office market in suburban Atlanta, the location of Business
Park at Holcomb Woods, has a current vacancy rate of approximately 9%
and rental rates increased 5% to 10% during 1995. An increase in
employment growth from corporate relocations and improvements to
Atlanta's infrastructure are contributing to the area's prosperity. As
a result, some office construction activity is commencing in this market.
During 1995, average occupancy at the property was 81%, and at October
31, 1995, the property was 87% leased to 26 tenants (including one tenant
which moved into its space in December 1995). The leases of Kimberly
Clark (for approximately 12% of the property's space) and Telecorp
Systems (for approximately 19% of the space) expire in fiscal years 1996
and 2001, respectively. The Partnership is currently negotiating a
renewal of its lease with Kimberly Clark. No other significant leases
are scheduled to expire in the near future.
Chesterbrook Corporate Center is located in Valley Forge,
Pennsylvania, a market in which the vacancy rate is approximately 16%.
During 1995, average occupancy at the property was 91%, and at October
31, 1995, the property was 89% leased to 24 tenants (including two
tenants which moved into their space and excluding one tenant which
vacated its space in the first quarter of fiscal 1996). Vanguard, a
former large tenant at the property, recently vacated all of its
remaining 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
Philadelphia Electric company (for approximately 23% of the space), Aetna
Health Plans (for approximately 11% of the space) and Dun and Bradstreet
(for approximately 12% of the space) expire in fiscal years 1998, 2000
and 2000, respectively. No other significant leases are scheduled to
expire in the near future.
Glenhardie Corporate Center III and IV is also located in Valley
Forge, Pennsylvania. During 1995, average occupancy at the property was
83% and at October 31, 1995, the property was 92% leased to 25 tenants
(including one tenant which moved into its space in the first fiscal
quarter of 1996). The leases of Allstate Insurance Company (for
approximately 13% of the property's space), Pilgrim Baxter (for
approximately 13% of the space) and Dean Witter Reynolds (for
approximately 10% of the space) expire in fiscal years 1999, 1999 and
2005, respectively. No other significant leases are scheduled to expire
in the near future.
The decline in the office market in Westchester County, New
York, the location of Taxter Corporate Park, has recently stabilized, and
the current vacancy level in this market is approximately 22%. It is
unlikely that this vacant space will be absorbed in the market for
several years. However, during 1995, and at October 31, 1995, the
property was 98% leased to 24 tenants. KLM Royal Dutch Airlines owns a
long-term leasehold interest in approximately 20% of the space at the
property. As discussed above in "Liquidity and Capital Resources", the
leases of Fuji Photo Film, the other major tenant (for approximately 24%
of the property's space) have been renewed through 2001. Other leases
aggregating approximately 12% of the space are scheduled to expire in
1997.
The Reston market in Virginia, the location of Tech Park Reston,
has a vacancy rate of approximately 10%. The leases with Sprint
Communications, which occupies 100% of the space, expire in 2003. Sprint
has the option to terminate its leases on two of the three buildings (for
approximately 96% of the property's space) beginning in 1997 and 1998.
As discussed above in "Liquidity and Capital Resources", the joint
venture which owns the property is negotiating a modification of its
leases with Sprint.
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%. Many retailers in this market are experiencing
financial difficulties. However, the property's design, location and
tenant mix has enabled it to maintain an average occupancy rate of
approximately 94% in 1995 and relatively stable rental rates. At October
31, 1995, the property was 88% leased to 46 tenants (excluding one tenant
which vacated its space in November 1995). The leases of K-Mart (for
approximately 18% of the property's space), Hoyts Cinemas (for
approximately 10% of the space), Safeway (for approximately 10% of the
space) and Best Buy (for approximately 11% of the space) expire in fiscal
years after 2004. No other significant leases are scheduled to expire
in the near future.
The Partnership owns four shopping centers in Michigan.
Westland Crossing is situated outside downtown Detroit and is in an
overbuilt market with a current vacancy rate of approximately 17%.
A significant amount of new retail space is under construction in this
market. When complete, this space will compete with Westland Crossing
for tenants. During 1995, average occupancy at the property was 89%, and
at October 31, 1995, the property was 85% leased to 20 tenants (excluding
one tenant which vacated its space in December 1995). Marshall's has
announced it will vacate the property upon the expiration of its lease
(for approximately 18% of the property's space) in January 1996. The
lease of Frank's Supercrafts (for approximately 16% of the space) expires
in 2006. Other leases for approximately 12% and 11% of the property's
space expire in 1996 and 1997, respectively. This property is under
contract to be sold.
Sterling Heights, the location of Hall Road Crossing, is
currently a strong and expanding market with a vacancy rate of 5%.
During 1995, average occupancy at the property was 89%, and at October
31, 1995 the property was 95% leased to 15 tenants (including two tenants
which moved into their space in the first fiscal quarter of 1996). This
property was sold in December 1995.
Saginaw, Michigan, the location of Fashion Corners, has a
vacancy rate of approximately 12%. During 1995, and at October 31, 1995,
the property was 95% leased to 21 tenants. This property was sold in
December 1995.
Lansing, Michigan, the location of Delta Center, has a vacancy
rate of approximately 9%. During 1995, average occupancy at the
property was 96%, and at October 31, 1995, the property was 90% leased
to 18 tenants. This property was sold in December 1995.
Inflation
Inflation has been consistently low during the periods 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>
<TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
INDEX
Page
<S> <C>
Independent Auditors' Report 14
Consolidated Balance Sheets at October 31, 1995 and 1994 15
Consolidated Statements of Operations for the years ended
October 31, 1995, 1994 and 1993 16
Consolidated Statements of Partners' Capital for the years
ended October 31, 1995, 1994 and 1993 17
Consolidated Statements of Cash Flows for the years ended
October 31, 1995, 1994 and 1993 18-19
Notes to Consolidated Financial Statements 20-29
Schedule
Real Estate and Accumulated Depreciation III 35-36
All schedules other than those indicated above have been omitted because either
the required information is not applicable or the information is shown in the
consolidated financial statements or notes thereto.
/TABLE
<PAGE>
Independent Auditors' Report
To The Partners of
Dean Witter Realty Income Partnership III, L.P.:
We have audited the accompanying consolidated balance sheets of Dean
Witter Realty Income Partnership III, L.P. and consolidated partnerships
(the "Partnership") as of October 31, 1995 and 1994 and the related
consolidated statements of operations, partners' capital, and cash flows
for each of the three years in the period ended October 31, 1995. Our
audits also included the financial statement schedule listed in the index
at Item 8. These financial statements and financial statement schedule
are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on the financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Dean Witter Realty Income Partnership
III, L.P. and consolidated partnerships as of October 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the
three years in the period ended October 31, 1995 in conformity with
generally accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
/s/Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
January 24, 1996<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED BALANCE SHEETS
October 31, 1995 and 1994
<CAPTION>
1995 1994
ASSETS
<S> <C> <C>
Cash and cash equivalents, at cost,
which approximates market $ 4,687,564 $ 5,683,026
Real estate, at cost:
Land 15,200,000 21,043,309
Buildings and improvements 88,128,571 140,320,824
103,328,571 161,364,133
Accumulated depreciation (22,180,045) (30,244,746)
81,148,526 131,119,387
Real estate held for sale 45,495,628 -
Investments in joint ventures 42,784,835 54,767,448
Deferred leasing commissions, net 968,202 952,951
Other assets 2,904,092 2,827,188
$177,988,847 $195,350,000
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 596,476 $ 788,033
Security deposits 169,245 238,537
765,721 1,026,570
Partners' capital (deficiency):
General partners (6,166,797) (4,583,254)
Limited partners ($500 per Unit,
534,020 Units issued) 183,389,923 198,906,684
Total partners' capital 177,223,126 194,323,430
$ 177,988,847 $ 195,350,000
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended October 31, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Revenues:
Rental $16,677,181 $16,027,787 $16,197,353
Equity in earnings (losses) of joint
ventures (8,222,327) 3,651,193 (8,505,971)
Interest 234,446 186,333 151,874
Other 257,498 414,464 133,877
8,946,798 20,279,777 7,977,133
Expenses:
Property operating 5,381,373 5,018,380 5,355,247
Depreciation 4,565,589 4,378,952 4,397,065
Amortization 277,901 197,129 185,134
General and administrative 1,021,431 973,406 1,042,314
Loss on writedown of real estate
held for sale 1,264,883 - -
12,511,177 10,567,867 10,979,760
Net income (loss) $(3,564,379) $ 9,711,910 $(3,002,627)
Net income (loss) allocated to:
Limited partners $(3,334,429) $ 8,740,719 $(2,702,364)
General partners (229,950) 971,191 (300,263)
$(3,564,379) $ 9,711,910 $(3,002,627)
Net income (loss) per Unit of limited
partnership interest $(6.24) $16.37 $(5.06)
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
For the years ended October 31, 1995, 1994 and 1993
<CAPTION>
Limited General
Partners Partners Total
<S> <C> <C> <C>
Partners' capital (deficiency)
at October 31, 1992 $214,229,129 $(2,880,758) $211,348,371
Net loss (2,702,364) (300,263) (3,002,627)
Cash distributions (10,680,400) (1,186,712) (11,867,112)
Partners' capital (deficiency)
at October 31, 1993 200,846,365 (4,367,733) 196,478,632
Net income 8,740,719 971,191 9,711,910
Cash distributions (10,680,400) (1,186,712) (11,867,112)
Partners' capital (deficiency)
at October 31, 1994 198,906,684 (4,583,254) 194,323,430
Net loss (3,334,429) (229,950) (3,564,379)
Cash distributions (12,182,332) (1,353,593) (13,535,925)
Partners' capital (deficiency)
at October 31, 1995 $183,389,923 $(6,166,797) $177,223,126
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended October 31, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(3,564,379) $ 9,711,910 $ (3,002,627)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 4,565,589 4,378,952 4,397,065
Amortization 277,901 197,129 185,134
Equity in (earnings) losses of joint ventures 8,222,327 (3,651,193) 8,505,971
Loss on writedown of real estate held for sale 1,264,883 - -
(Increase) decrease in operating assets:
Deferred leasing commissions (517,660) (479,699) (398,050)
Other assets (410,290) 133,630 595,807
Increase (decrease) in operating liabilities:
Accounts payable and accrued liabilities (15,805) (266,180) 47,744
Security deposits (20,402) 19,881 45,513
Net cash provided by operating activities 9,802,164 10,044,430 10,376,557
Cash flows from investing activities:
Additions to real estate (1,021,987) (2,125,685) (1,979,673)
Investment in joint ventures (1,816,036) (1,234,388) (643,451)
Distributions from joint ventures 5,576,322 5,627,781 6,015,198
Net cash provided by investing activities 2,738,299 2,267,708 3,392,074
Cash flows from financing activities:
Cash distributions (13,535,925) (11,867,112) (11,867,112)
Increase (decrease) in cash and short-term investments (995,462) 445,026 1,901,519
Cash and cash equivalents at beginning of year 5,683,026 5,238,000 3,336,481
Cash and cash equivalents at end of year $ 4,687,564 $ 5,683,026 $ 5,238,000
(Cont'd)
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended October 31, 1995, 1994 and 1993
(Continued)
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Supplemental disclosure of non-cash investing activities:
Reclassification of real estate held for sale
and writeoff of related assets and liabilities:
Real estate, at cost
Land $ 5,843,309 $ - $ -
Buildings and improvements 52,939,906 - -
Accumulated depreciation (12,355,956) - -
Real estate, net 46,427,259 - -
Deferred leasing commissions 224,508 - -
Other assets 333,386
Accounts payable (175,752) - -
Tenant security deposits (48,890) - -
Loss on writedown of real estate held for sale (1,264,883) - -
Real estate held for sale $ 45,495,628 $ - $ -
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
October 31, 1995, 1994 and 1993
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
in 1985. The Partnership is managed by Dean Witter Realty Income
Properties III Inc. (the "Managing General Partner"). The Partnership's
fiscal year ends on October 31.
In 1986 and 1987, the Partnership issued 534,020 units of limited
partnership interest (the "Units") for $267,010,000. No additional Units
will be sold. The proceeds of the offering were used to make investments
in income-producing office, industrial and retail properties which were
not encumbered by debt.
2. Summary of Significant Accounting Policies
The financial statements include the accounts of the Partnership, Part
Six Associates (owner of Glenhardie IV) and Laurel-Vincent Place
Associates Limited Partnership (owner of the Laurel Lakes Centre) on a
consolidated basis. The Partnership owns a 99.9% and 99.999% general
partnership interest in Part Six Associates and Laurel-Vincent Place
Associates Limited Partnership, respectively. The remaining interests
in these partnerships are held by the Managing General Partner.
The Partnership's 44.6% general partnership interest in Taxter Corporate
Park, 35% general partnership interest in Tech Park Reston and 26.7%
general partnership interest in 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 purposes. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
The carrying value of real estate includes the purchase price paid by the
Partnership and acquisition fees and expenses. Costs of improvements to
the properties are capitalized, and repairs are expensed. Depreciation
is recorded on the straight-line method.
At least annually, and more often if circumstances dictate, the
Partnership evaluates the recoverability of the net carrying value of its
real estate. As part of this evaluation, the fair values of each of the
properties are estimated (in some cases with the assistance of outside
real estate consultants) based on discounted cash flows. The fair values
are compared to the properties' carrying amounts in the financial
statements. A deficiency in fair value relative to carrying amount is
an indication of the need for a writedown due to impairment. In such
case, the expected future net cash flows from the property are estimated
for a period of approximately five years, along with estimated sales
proceeds at the end of the period. If the total of these future
undiscounted cash flows were less than the carrying amount of the
property, the property would be written down to its fair value, and a
loss on impairment recognized by a charge to earnings. The Partnership's
accounting policy complies with Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of".
Because the determination of fair value is based upon projections of
future economic events such as property occupancy rates, rental rates,
operating cost inflation and market capitalization rates which are
inherently subjective, the amounts ultimately realized at disposition may
differ materially from the net carrying value as of October 31, 1995.
The cash flows used to determine fair value and net realizable value are
based on good faith estimates and assumptions developed by the Managing
General Partner. Unanticipated events and circumstances may occur and
some assumptions may not materialize; therefore actual results may vary
from the estimates and the variances may be material. The Partnership
may provide additional write-downs, which could be material, in
subsequent years if real estate markets or local economic conditions
change.
Deferred leasing commissions are amortized over the applicable lease
terms.
Rental income is accrued on a straight-line basis over the terms of the
leases. Accruals in excess of amounts payable by tenants pursuant to
their leases (resulting from rent concessions or rents which periodically
increase over the term of a lease) are recorded as receivables and
included in other assets.
Cash and cash equivalents consist of cash and highly liquid investments
with maturities, when purchased, of three months or less.
Net income (loss) per Unit amounts are calculated by dividing net income
(loss) allocated to Limited Partners, in accordance with the Partnership
Agreement, by the weighted average number of Units outstanding.
No provision for income taxes has been made in the financial statements,
since the liability for such taxes is that of the partners rather than
the Partnership.
For income tax purposes, Partnership results are reported for the
calendar year. The accounting policies used for tax reporting purposes
differ from those used for financial reporting as follows: (a)
depreciation is calculated using accelerated methods; (b) rental income
is recognized based on the payment terms in the applicable leases; and
(c) writedowns for impairment of real estate are not deductible. In
addition, offering costs are treated differently for tax and financial
reporting purposes. The tax basis of the Partnership's assets and
liabilities is approximately $34.6 million higher than the amounts
reported for financial statement purposes.
3. Partnership Agreement
The Partnership Agreement provides that distributable cash, as defined,
will be paid 90% to the Limited Partners and 10% to the General Partners.
Sale or financing proceeds will be distributed, to the extent available,
first, to each Limited Partner, until there has been a return of the
Limited Partner's capital contribution plus cumulative distributions of
distributable cash and sale or financing proceeds in an amount sufficient
to provide a 9% cumulative annual return on the Limited Partner's
adjusted capital contribution. Thereafter, any remaining sale or
financing proceeds will be distributed 85% to the Limited Partners and
15% to the General Partners after the Managing General Partner receives
a brokerage fee of up to 3% of the selling price of any equity
investment.
Taxable income generally is allocated in the same proportions as
distributions of distributable cash or sale or financing proceeds (except
that the General Partners must be allocated at least 1% of taxable income
from the sale or financing). In the event there is no distributable cash
or sale or financing proceeds, taxable income is allocated 90% to the
Limited Partners and 10% to the General Partners. Any tax loss will be
allocated 90% to the Limited Partners and 10% to the General Partners.
Distributions paid to Limited Partners include returns of capital per
Unit of limited partnership interest of $22.81, $3.63 and $20.00 for the
years ended October 31, 1995, 1994 and 1993, respectively, calculated as
the excess of cash distributed per Unit over accumulated earnings per
Unit not previously distributed.
<PAGE>
<TABLE>
4. Real Estate Investments
The location, year of acquisition and net carrying values of the properties
are as follows:
<CAPTION>
Years of October 31,
Property Acquisition 1995 1994
<S> <C> <C> <C>
Glenhardie III and IV
Valley Forge, PA 1986 $ 16,886,539 $ 17,451,287
Delta Center
Lansing, MI 1986 - 11,727,540
Hall Road Crossing
Sterling Heights, MI 1986,'91,'93 - 13,350,164
Fashion Corners
Saginaw, MI 1986 - 11,224,815
Westland Crossing
Westland, MI 1986 - 11,515,810
Holcomb Woods
Roswell, GA 1986 20,311,695 20,702,311
Laurel Lakes Centre
Laurel, MD 1987 43,950,292 45,147,460
$ 81,148,526 $131,119,387
</TABLE>
The net carrying values of the Delta Center, Hall Road Crossing, Fashion
Corners and Westland Crossing shopping centers have been reclassified to
real estate held for sale. See note 5.
5. Real Estate Held for Sale
In the fourth fiscal quarter of 1995, the Partnership determined to sell
the Delta Center, Fashion Corners, Hall Road Crossing and Westland
Crossing shopping centers, which in the aggregate consist of
approximately 676,000 rentable square feet, and, in October 1995, entered
into an agreement (amended December 1, 1995) with New Plan Realty Trust,
an unaffiliated party, to sell the shopping centers.
As part of the agreement, two affiliated public partnerships, Dean Witter
Realty Income Partnership II, L.P. and Dean Witter Realty Yield Plus,
L.P., also agreed to sell certain shopping centers owned by them.
The closing of the sale of the Delta Center, Fashion Corners and Hall
Road Crossing shopping centers, for a negotiated sale price of
approximately $35.5 million (net of closing costs), took place on
December 11, 1995.
Pursuant to the agreement, the sale of the Westland Crossing shopping
center has been delayed and could be cancelled if a replacement tenant
is not obtained, within sixty days from the closing, for an anchor tenant
which will vacate the center upon expiration of its lease on January 31,
1996. It is uncertain whether a replacement tenant can be found.
Because of the sale, the net carrying values of the three centers sold
and Westland Crossing have been reclassified to real estate held for sale
at October 31, 1995 and have been reduced to approximately $45.5 million
(the sales price net of closing costs), resulting in a loss on writedown
of real estate held for sale of approximately $1,265,000 during the year
ended October 31, 1995. The loss from the writedown of real estate held
for sale was allocated 100% to the Limited Partners, in accordance with
the Partnership Agreement.
The aggregate net income from the three shopping centers sold during the
year ended October 31, 1995 was approximately $2,800,000.
6. Investments in Joint Ventures
Taxter Corporate Park, Westchester County, New York
In 1986, the Partnership purchased a 44.6% partnership interest in the
general partnership which owns the property. Affiliates of the
Partnership, Dean Witter Realty Income Partnership II, L.P., and Dean
Witter Realty Income Partnership IV, L.P., purchased the remaining
interests of 14.8% and 40.6%, respectively.
The partners each receive cash flow and profits and losses according to
their interests.
In fiscal 1993, in accordance with its policies for evaluating the
recoverability of its real estate (which are the same as the
Partnership's), the partnership which owns the property concluded that
the value of the property was impaired. Accordingly, the partnership
which owns the property recorded a loss on impairment of the property of
approximately $27.8 million at October 31, 1993. The Partnership's share
of this loss, approximately $12.4 million, was included in equity in
earnings (loss) of joint venture in 1993.
<PAGE>
<TABLE>
Summarized balance sheet information of the joint venture is as follows:
<CAPTION>
October 31,
1995 1994
<S> <C> <C>
Land and buildings, net $18,575,100 $18,525,138
Other 1,427,047 1,720,405
Total assets $20,002,147 $20,245,543
Liabilities $ 165,593 $ 214,584
Partners' capital 19,836,554 20,030,959
Total liabilities and capital $20,002,147 $20,245,543
</TABLE>
<TABLE>
Summarized results of operations of the joint venture are as follows:
<CAPTION>
Years ended October 31,
1995 1994 1993
<S> <C> <C> <C>
Rental income $ 6,267,312 $ 6,269,934 $ 6,516,950
Other income 92,483 81,301 100,967
6,359,795 6,351,235 6,617,917
Property operating expenses 3,168,141 3,020,235 2,956,814
Depreciation and amortization 1,119,284 991,163 1,576,393
Loss on impairment of real
estate - - 27,828,152
4,287,425 4,011,398 32,361,359
Net income (loss) $ 2,072,370 $ 2,339,837 $(25,743,442)
</TABLE>
Tech Park Reston, Reston, Virginia
In 1987, the Partnership purchased a 35% partnership interest in the
general partnership which owns the property. The remaining 65%
interest in the general partnership is owned by Income Partnership
IV, L.P.
The partners receive cash flow and profits and losses according to their
interests.
<TABLE>
Summarized balance sheet information of the joint venture is as follows:
<CAPTION>
October 31,
1995 1994
<S> <C> <C>
Land and buildings, net $47,735,292 $49,295,259
Other 1,643,614 1,372,378
Total assets $49,378,906 $50,667,637
Total partners' capital $49,378,906 $50,667,637
</TABLE>
Summarized results of operations of the joint venture are as follows:
<TABLE>
<CAPTION>
Years ended October 31,
1995 1994 1993
<S> <C> <C>
Rental income $5,058,016 $5,267,825 $4,999,432
Depreciation 1,576,372 1,576,100 1,576,100
Amortization 106,960 106,960 106,960
Property operating expense 53,532 - -
1,736,864 1,683,060 1,683,060
Net income $3,321,152 $3,584,765 $3,316,372
Chesterbrook Corporate Center, Valley Forge, Pennsylvania
In 1987, the Partnership, Income Partnership IV, and an affiliate of the
Managing General Partner acquired 26.7%, 41.2% and 32.1% interests in the
general partnership which owns the property.
The partners receive cash flow and profits and losses according to their
interests.
The partnership which owns the Chesterbrook property has recently re-leased
a substantial amount of space as a result of the departure of Vanguard,
which had occupied approximately 36% of the property's space. Although
office vacancy levels in the suburban Philadelphia market have been stagnant
for several years, the high quality of the Chesterbrook property has made it
possible to re-lease substantially all of the vacated space. However,
current market rents are lower than previous rents received at the property,
which will result in reduced future cash flow therefrom. Also, because of
its amenities, size and configuration, the Chesterbrook property has been
able to command a rental premium over other properties in the market
(including the Glenhardie Corporate Center); however, this premium has been
substantially eroded because of the continuing high vacancy in the market.
As a result, the general partners of the partnership which owns the
property concluded that there has been a decline in the property's value,
and that the decline is other than temporary. Accordingly, in accordance
with its policy for evaluating the recoverability of its real estate which
is the same as the Partnership's, the partnership which owns the property
recorded a loss on impairment of the property of approximately $43.2 million
at October 31, 1995. The Partnership's share of this loss (approximately
$12.4 million) was included in equity in earnings (losses) of joint ventures
in 1995.
</TABLE>
<TABLE>
Summarized balance sheet information of the joint venture is as follows:
<CAPTION>
October 31,
1995 1994
<S> <C> <C>
Land and buildings, net $ 64,200,000 $107,691,195
Other 3,448,347 2,326,971
Total assets $ 67,648,347 $110,018,166
Liabilities $ 2,184,232 $ 1,689,444
Partners' capital 65,464,115 108,328,722
Total liabilities and capital $ 67,648,347 $110,018,166
</TABLE>
<TABLE>
Summarized results of operations of the joint venture are as follows:
<CAPTION>
Years ended October 31,
1995 1994 1993
<S> <C> <C> <C>
Rental income $ 13,532,187 $13,232,900 $14,629,033
Other income 212,134 (161,469) 49,658
13,744,321 13,071,431 14,678,691
Property operating expenses 4,528,817 4,028,834 4,060,221
Depreciation and amortization 4,664,856 3,975,339 3,821,190
Loss on impairment of real
estate 43,161,160 - -
52,354,833 8,004,173 7,881,411
Net income (loss) $(38,610,512) $ 5,067,258 $ 6,797,280
</TABLE>
<TABLE>
Activity in the Investments in Joint Ventures is as follows:
<CAPTION>
Years ended October 31,
1995 1994 1993
<S> <C> <C> <C>
Investments at beginning
of year $54,767,448 $55,509,648 $69,387,366
Equity in earnings (losses) (8,222,327) 3,651,193 (8,505,971)
Distributions (5,576,322) (5,627,781) (6,015,198)
Contributions 1,816,036 1,234,388 643,451
Investments at end of year $42,784,835 $54,767,448 $55,509,648
</TABLE>
<TABLE>
7. Leases
Minimum future rental income under noncancellable operating leases
(excluding leases at the shopping centers held for sale) as of October 31,
1995 is as follows:
<S> <C>
Year ending October 31:
1996 $ 8,162,241
1997 7,355,423
1998 7,118,205
1999 6,463,212
2000 5,203,833
Thereafter 22,369,374
Total $ 56,672,288
</TABLE>
The Partnership has determined that all leases relating to its properties
are operating leases. The terms range from one to twenty-one years, and
generally provide for fixed minimum rents with rental escalation and/or
expense reimbursement clauses.
8. Related Party Transactions
An affiliate of the Managing General Partner provided property management
services for eight properties in 1995 and 1994 and six properties in
1993, as well as for five buildings at the Chesterbrook Corporate Center
in each year. The Partnership incurred management fees of $466,198,
$459,128 and $449,164 for the years ended October 31, 1995, 1994 and
1993, respectively. These amounts are included in property operating
expenses.
Another affiliate of the Managing General Partner performs administrative
functions, processes investor transactions and prepares tax information
for the Partnership. The Partnership incurred approximately $756,000,
761,000 and $761,000 for these services in each of the years ended
October 31, 1995, 1994 and 1993. These amounts are included in general
and administrative expenses.
As of October 31, 1995, the affiliates were owed a total of approximately
$102,000 for these services.
9. Litigation
On December 27, 1995, a class action lawsuit naming various public real
estate partnerships sponsored by Dean Witter Realty Inc. ("Realty")
(including the Partnership and its Managing General Partner and Associate
General Partner), Realty, Dean Witter Reynolds Inc. and others as
defendants was filed in Superior Court in California. The complaint
alleges fraud, negligent misrepresentation, intentional and negligent
breach of fiduciary duty, unjust enrichment and related claims and seeks
compensatory and punitive damages in unspecified amounts and injunctive
and other equitable relief. The defendants have removed the case to the
United States District Court for the Southern District of California.
The defendants have not yet responded to the complaint. The defendants
intend to vigorously defend the action. It is impossible to predict
what financial exposure the Partnership may have as a result of this
litigation.
10. Subsequent Event
On November 28, 1995, the Partnership paid a cash distribution of $5.9375
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>
<TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Partnership is a limited partnership which has no directors
or officers.
The directors and executive officers of the Managing General
Partner are as follows:
Position with the
Name Managing General Partner
<S> <S>
William B. Smith Chairman of the Board of Directors
E. Davisson Hardman, Jr. President and Director
Lawrence Volpe Controller, Assistant Secretary and
Director
Ronald T. Carman Secretary and Director
</TABLE>
All of the directors have been elected to serve until the next
annual meeting of the shareholder of the Managing General Partner or
until their successors are elected and qualify. Each of the executive
officers has been elected to serve until his successor is elected and
qualifies.
William B. Smith, age 52, is a Managing Director of Dean Witter
Realty Inc. and has been with Dean Witter Realty Inc. since 1982. He is
an Executive Vice President of Dean Witter Reynolds Inc.
E. Davisson Hardman, Jr., age 46, is a Managing Director of
Dean Witter Realty Inc. and has been with Dean Witter Realty Inc. since
1982.
Lawrence Volpe, age 48, is a Director and the Controller of
Dean Witter Realty Inc. He is a Senior Vice President and Controller of
Dean Witter Reynolds Inc., which he joined in 1983.
Ronald T. Carman, age 44, is a Director and the Secretary of
Dean Witter Realty Inc. He is a Senior Vice President and Associate
General Counsel of Dean Witter, Discover & Co. and Dean Witter Reynolds
Inc., which he joined in 1984.
There is no family relationship among any of the foregoing
persons.
ITEM 11. EXECUTIVE COMPENSATION
The General Partners are entitled to receive cash
distributions, when and as cash distributions are made to the Limited
Partners, and a share of taxable income or tax loss. Descriptions of
such distributions and allocations are in Item 5 above. The General
Partners received cash distributions of $1,353,593, $1,186,712 and
$1,186,712 during the years ended October 31, 1995, 1994 and 1993,
respectively.
The General Partners and their affiliates were paid certain
fees and reimbursed for certain expenses. Information concerning such
fees and reimbursements is contained in Note 8 to the Consolidated
Financial Statements in Item 8 above.
The directors and officers of the Partnership's Managing
General Partner received no remuneration from the Partnership.
<TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
(a) No person is known to the Partnership to be the beneficial
owner of more than five percent of the Units.
(b) The directors and executive officers of the Managing
General Partner own the following Units as of December 31, 1995:
Amount and
Title of Name of Nature of
Class Beneficial Owner Beneficial Ownership
<S> <S> <S>
Limited All directors and executive *
Partnership officers of the Managing
Interests General Partner, as a group
* Own, by virtue of ownership of limited partnership interests in the
Associate General Partner, less than 1% of the Units of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
As a result of their being partners of a limited partnership which
is the Limited Partner of the Associate General Partner, certain current
and former officers and directors of the Managing General Partner also
own indirect partnership interests in the Partnership. The Partnership
Agreement of the Partnership provides that cash distributions and
allocations of income and loss to the General Partners shall be
distributed or allocated 50% to the Managing General Partner and 50% to
the Associate General Partner. The General Partners' share of cash
distributions and income or loss is described in Item 5 above.
All of the outstanding shares of common stock of the Managing
General Partner are owned by Realty, a Delaware corporation which is a
wholly-owned subsidiary of Dean Witter, Discover & Co. The general
partner of the Associate General Partner is the Managing General Partner.
The limited partner of the Associate General Partner is LSA 86 L.P., a
Delaware limited partnership. Realty and certain current and former
executive officers and directors of the Managing General Partner are
partners of LSA 86 L.P. Additional information with respect to the
directors and executive officers and compensation of the Managing General
Partner and affiliates is contained in Items 10 and 11 above.
The General Partners and their affiliates were paid certain fees and
reimbursed for certain expenses. Information concerning such fees and
reimbursements is contained in Note 8 to the Consolidated Financial
Statements in Item 8 above. The Partnership believes that the payment
of fees and the reimbursement of expenses to the General Partners and
their affiliates are on terms as favorable as would be obtained from
unrelated third parties.<PAGE>
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) The following documents are filed as part of this Annual Report:
1. Financial Statements (see Index to Financial Statements filed
as part of Item 8 of this Annual Report).
2. Financial Statement Schedules (see Index to Financial
Statements filed as part of Item 8 of this Annual Report).
3. Exhibits
(2) Not applicable
(3)(a) Certificate of Limited Partnership included in the
Registration Statement Number 33-1912 is incorporated by
reference.
(3)(b) Amended and Restated Agreement of Limited Partnership dated
as of February 11, 1986 set forth in Exhibit A to the
Prospectus in the Registration Statement Number 33-1912 is
incorporated herein by reference.
(4)(a) Certificate of Limited Partnership included in the
Registration Statement Number 33-1912 is incorporated by
reference.
(4)(b) Amended and Restated Agreement of Limited Partnership dated
as of February 11, 1986 set forth in Exhibit A to the
Prospectus included in the Registration Statement Number
33-1912 is incorporated herein by reference.
(6) Not applicable
(7) Not applicable
(9) Not applicable.
(10)(a) Agreement of Purchase and Sale by and between Dean Witter
Realty Income Partnership II, L.P., Midway Crossing Limited
Partnership, Dean Witter Realty Income Partnership III,
L.P., Genesee Crossing Limited Partnership, Farmington/9
Mile Associates, a Michigan Limited Partnership, Hampton
Crossing Associates, Rochester Hills Limited Partnership,
Dean Witter Realty Yield Plus, L.P. and New Plan Realty
Trust filed as exhibit 1 to the Registrant's Report on Form
8-K dated December 11, 1995 and incorporated herein by
reference.
(10)(b) First Amendment to Agreement of Purchase and Sale by and
between Dean Witter Realty Income Partnership II, L.P.,
Midway Crossing Limited Partnership, Dean Witter Realty
Income Partnership III, L.P., Genesee Crossing Limited
Partnership, Farmington/9 Mile Associates, a Michigan
Limited Partnership, Hampton Crossing Associates, Rochester
Hills Limited Partnership, Dean Witter Realty Yield Plus,
L.P. and New Plan Realty Trust filed as exhibit 2 to the
Registrant's Report on Form 8-K dated December 11, 1995 and
incorporated herein by reference.
(11) Not applicable.
(12) Not applicable.
(14) Not applicable.
(16) Not applicable
(21) Subsidiaries: Part Six Associates, a Pennsylvania limited
partnership.
Laurel Vincent Place Associates, a Maryland
limited partnership.
(24) Not applicable.
(27) Financial Data Schedule
(28) Not applicable.
(99) Not applicable.
(b) Reports on Forms 8-K - Report dated October 19, 1995 with
regard to the Partnership's agreement to sell certain of its
shopping centers.
(c) See Paragraph (a)(3) above.
(d) See Paragraph (a)(2) above.
<PAGE>
</TABLE>
<TABLE>
SCHEDULE III
<CAPTION>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
Real Estate and Accumulated Depreciation
December 31, 1995
Initial cost to Partnership (A)
Building and
Description Land Improvements Total
<S> <C> <C> <C>
Glenhardie III & IV
Valley Forge, PA $2,000,000 $18,805,786 $20,805,786
Holcomb Business
Park Roswell, GA 5,400,000 18,675,322 24,075,322
Laurel Lakes Centre
Laurel, MD 7,800,000 45,536,882 53,336,882
$15,200,000 $ 83,017,990 $ 98,217,990
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at which
Carried at End of Period (B)
Cost
Capitalized
Subsequent to Building and
Description Acquisition Land Improvements Total
<S> <C> <C> <C> <C>
Glenhardie III & IV
Valley Forge, PA $2,439,618 $2,000,000 $21,245,404 $23,245,404
Holcomb Business Park
Roswell, GA 2,158,760 5,400,000 20,834,082 26,234,082
Laurel Lakes Centre
Laurel, MD 512,203 7,800,000 46,049,085 53,849,085
$5,110,581 $15,200,000 $ 88,128,571 $103,328,571
</TABLE>
<TABLE>
<CAPTION>
Life on which
Depreciation
in Latest Income
Accumulated Date of Date Statement is
Description Depreciation(C) Construction Acquired Computed
<S> <C> <C> <S>
Glenhardie III & IV
Valley Forge, PA $6,358,865 1984-1985 June 1986 up to 40 years
Holcomb Business Park
Roswell, GA 5,922,387 1984 December 1986 up to 40 years
Laurel Lakes Centre
Laurel, MD 9,898,793 1987 June 1987 up to 40 years
$22,180,045
/TABLE
<PAGE>
<TABLE>
SCHEDULE III (CONTINUED)
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
Notes:
(A) The initial cost includes the purchase price paid by the Partnership and acquisition fees and
expenses. There is no difference between cost for financial reporting purposes and cost for
federal income tax purposes.
<CAPTION>
(B) Reconciliation of real estate owned
at October 31: 1995 1994 1993
<S> <C> <C> <C>
Balance at beginning of period $161,364,133 $159,543,611 $158,786,622
Additions (deletions) during period:
Purchases - - 1,508,748
Improvements 1,021,987 2,125,685 470,925
Write-offs due to lease expirations (274,334) (305,163) (1,222,684)
Reclass to real estate held for sale (58,783,215) - -
Balance at end of period $103,328,571 $161,364,133 $159,543,611
(C) Reconciliation of accumulated depreciation:
Balance at beginning of period $ 30,244,746 $ 26,170,957 $ 22,996,576
Depreciation expense 4,565,589 4,378,952 4,397,065
Write-offs due to lease expirations (274,334) (305,163) (1,222,684)
Reclass to real estate held for sale (12,355,956) - -
Balance end of period $ 22,180,045 $ 30,244,746 $ 26,170,957
/TABLE
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/E. Davisson Hardman, Jr. Date: January 29, 1996
E. Davisson Hardman, Jr.
President
By: /s/Lawrence Volpe Date: January 29, 1996
Lawrence Volpe
Controller
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
DEAN WITTER REALTY INCOME PROPERTIES III INC.
Managing General Partner
/s/William B. Smith Date: January 29, 1996
William B. Smith
Chairman of the Board of Directors
/s/E. Davisson Hardman, Jr. Date: January 29, 1996
E. Davisson Hardman, Jr.
Director
/s/Lawrence Volpe Date: January 29, 1996
Lawrence Volpe
Director
/s/Ronald T. Carman Date: January 29, 1996
Ronald T. Carman
Director
<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
audited financial statements.
</LEGEND>
<CIK> 0000784161
<NAME> DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<CASH> 4,687,564
<SECURITIES> 0
<RECEIVABLES> 1,958,416
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 177,988,847<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 177,223,126<F2>
<TOTAL-LIABILITY-AND-EQUITY> 177,988,847<F3>
<SALES> 0
<TOTAL-REVENUES> 8,946,798<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12,511,177
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,564,379)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,564,379)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,564,379)
<EPS-PRIMARY> (6.24)<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include net investments
in real estate of $81,148,526, real estate held for sale of $45,495,628,
investment in joint ventures of $42,784,835, net deferred expenses
of $968,202 and other assets of $945,676.
<F2>Other Stockholders' Equity represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of
$596,476, and security deposits of $169,245.
<F4>Total revenue includes rent of $16,677,181, equity in earnings of joint
ventures of $(8,222,327), interest of $234,446 and other revenues of
$257,498.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
