1
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 20549
FORM 10-Q
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended April 30,
1999
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 governing
instrument)
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
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME
PARTNERSHIP III, L.P.
CONSOLIDATED BALANCE
SHEETS
<CAPTION>
Apri
l
3
0
,
O
c
t
o
b
e
r
3
1
,
1
9
9
9
1
9
9
8
<S>
<C> <C>
ASSETS
Cash and cash equivalents $
3,834,456 $
1,919,694
Real estate, at cost:
Land
-
8,823,904
Buildings and improvements -
55,274,320
Accumulated depreciation
- -
(14,356,686)
Real estate held for sale
45,765,930
Investments in joint ventures
7,247,673
7,095,604
Deferred leasing commissions, net
-
333,488
Other assets
521,892
1,923,155
$57,369,951 $ 61,013,479
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $
15,529 $
274,748
Security deposits
64,553
75,844
80,082
350,592
Partners' capital (deficiency):
General partners
(8,323,533)
(8,476,231)
Limited partners ($500 per Unit, 534,020
Units
issued) 65,613,402
69,139,118
Total partners' capital
57,289,869
60,662,887
$57,369,951 $ 61,013,479
See accompanying notes to consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP III,
L.P.
CONSOLIDATED INCOME STATEMENTS OF OPERATIONS
Three and six months ended April 30, 1999 and
1998
<CAPTION>
Three
months
ended Six months ended
April 30, April 30,
1999
1998 1999 1998
<S> <C> <C>
<C>
<C>
Revenues:
Rental $ $ $
$
Equity in earnings of 1,350,59 1,795,7
2,974,59 4,075,3
joint ventures 7 53 8 86
Interest
Other 236,866 17,254,
444,968 17,865,
Gains (losses) on real 114 015
estate 39,021
68,244
1,717 127,848 197,175
50,164 (4,900,0
32,477 262,698
00)
(4,900,0
9,526,4 00) 15,716,
66 729
(3,271,7 28,736,
(1,362,0 38,117, 99)
658 26) 003
Expenses:
Property operating
Depreciation 624,641 757,221
1,102,22 1,564,3
Amortization 9 13
General and 295,095 378,720
administrative
669,855 1,022,8
15,281 29,396 14
30,229
57,636 227,229
70,920
208,6
79
431,699
992,653 1,392,5
2,010,99 3,089,7
66 2 46
Net (loss) income $(4,264, $27,344
$(3,373, $35,027
452) ,092 018)
,257
Net (loss)income allocated
to: $(4,328, $27,234
$(3,525, $34,768
Limited partners 007) ,797 716)
,671
General partners
63,555 109,295
152,698 258,586
$(4,264, $27,344
$(3,373, $35,027 452)
,092 018) ,257
Net (loss) income per Unit
of limited $ $ $ $
Partnership interest (8.10) 51.00
(6.60) 65.11
See accompanying notes to consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP
III, L.P.
CONSOLIDATED STATEMENT OF PARTNERS'
CAPITAL
Six months ended April 30, 1999
<CAPTION>
Limited General
Partners Partners Total <S>
<C> <C>
<C>
Partners' capital (deficiency)
at November 1, 1998 $
69,139,118
$(8,476,231) $
60,662,887
Net (loss) income
(3,525,716)
152,698
(3,373,018)
Partners' capital (deficiency)
at April 30, 1999 $
65,613,402
$(8,323,533) $
57,289,869
See accompanying notes to consolidated
financial
statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP
III, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended April 30, 1999 and
1998
<CAPTION>
1999 1998 <S>
<C>
<C>
Cash flows from operating activities:
Net (loss) income
$ (3,373,018)
$35,027,257
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
(Losses) gains on real estate
4,900,000 (15,716,729)
Depreciation
669,855
1,022,814
Amortization
30,229
70,920
Equity in earnings of joint ventures
(444,968) (17,865,015)
(Increase) decrease in operating assets:
Deferred expenses
(85,205)
(328,024)
Other assets
972,798
1,046,618
(Decrease)increase in operating
liabilities:
Accounts payable and accrued liabilities
(259,219)
(401,726) Security deposits
(11,291) 10,376
Net cash provided by operating
activities
2,399,181
2,866,491
Cash flows from investing activities:
Additions to real estate and real estate held
for sale (777,318)
(888,674)
Investments in joint ventures
(42,163)
(447,638)
Distributions from joint
ventures 335,062
34,832,259
Proceeds from disposition of real
estate held for
sale
- - 40,487,606
Net cash (used in) provided
by investing activities (484,419)
73,983,553
Cash flows from financing
activities:
Cash distributions
-
(77,376,507)
Increase in cash and cash
equivalents
1,914,762 (526,463)
Cash and cash equivalents at
beginning of period
1,919,694
1,967,110
Cash and cash equivalents at end of
period $ 3,834,456 $ 1,440,647
Supplemental disclosure of non-cash
investing
activities: Reclassification of real
estate to real estate held for sale:
Real estate, at cost
Land
$
8,823,904
- -
Buildings and improvements
56,051,638 -
Accumulated depreciation
(15,026,541) -
Estimated costs of disposition
(4,900,000)
Deferred leasing commissions, net
388,464
- -
Other assets
428,465
- -
Real estate held for sale
$ 45,765,930
- -
See accompanying notes to
consolidated
financial
statements.
</TABLE>
<PAGE>
DEAN WITTER REALTY INCOME
PARTNERSHIP III,
L.P.
Notes to Consolidated Financial Statements
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'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 interests in
Taxter Corporate Park and the
partnership which owns
interests in Chesterbrook
Corporate Center (sold in April
1998) were accounted for using
the equity method.
The Partnership's records are
maintained on the accrual basis
of accounting for financial
reporting and tax reporting
purposes.
Net income (loss) per Unit
of limited partnership
interest 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.
In the opinion of
management, the accompanying
financial statements, which
have not been audited,
include all adjustments
necessary to present fairly the
results
for the interim period.
Except for the
reclassification of real estate
held for
sale and gains (losses) on
real estate (see Note 2), such
adjustments consist only of
normal recurring accruals.
These financial statements
should be read in
conjunction with the annual
financial statements and notes
thereto included
in the Partnership's annual
report on Form 10-K filed
with the Securities and
Exchange Commission for the
year ended October 31, 1998.
Operating results of interim
periods may not be indicative
of the operating results for
the entire
year.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP III,
L.P.
Notes to Consolidated Financial Statements
2. Real Estate
On February 16, 1999, the Partnership
entered into an agreement with New Plan
Excel Realty Trust Inc., an unaffiliated
party, to sell the land and building that
comprise the Westland Crossing retail
property.
As
part of the agreement, Dean Witter
Realty Income Partnership II, L.P., an
affiliate, agreed to sell a retail
property to New Plan. The aggregate
negotiated sales price of the properties
sold was approximately $24.1 million, of
which $10.1 million was allocated in the
agreement to Westland Crossing. The
closing is expected to occur during the
third quarter of fiscal 1999. The
Partnership reclassified the net carrying
value of the Westland Crossing property,
and related
assets of approximately $100,000 to real
estate held for sale as of January 31,
1999.
On June 2, 1999, the Partnership
entered into an agreement with Urban
Investment Group, Inc.,
an unaffiliated party, to sell the land and
building that comprise the Laurel Lakes
Centre property for a negotiated sales
price of $37.5 million. The closing is
expected to occur in the third quarter of
fiscal 1999. The Partnership
reclassified the net carrying value of
the property and related assets
of approximately $716,000 to real estate
held
for sale at April 30, 1999.
The Partnership has commitments to
complete tenant improvements
and pay leasing commissions at
the two properties totaling
approximately $600,000.
The Partnership estimates that
the sales of these two
properties (after deduction
for the tenant improvement
costs and estimated closing
costs) will result in losses
of approximately $4.9 million,
which have been recorded in
(losses) gains on real estate
in the second fiscal quarter.
In accordance with the
Partnership Agreement, the
losses were allocated 100% to
Limited Partners. <PAGE>
DEAN WITTER REALTY INCOME
PARTNERSHIP
III, L.P.
Notes to Consolidated Financial
Statements
3. Investment in Joint Venture
In 1987, the joint venture which owns Taxter Corporate
Park sold a leasehold interest in approximately 20% of
the property's space to KLM. In 1998, KLM accepted a
$6.75 million purchase offer for the leasehold
interest, which the joint venture had the right to
match. The partners of the joint venture believe that
inclusion of the KLM space improves the value and
salability of the property; however, the joint
venturers did not have
sufficient cash to fund the purchase.
Therefore, an affiliate of the Managing
General Partner (the "Affiliate"), as an
accommodation, purchased the leasehold
interest on February 8, 1999 for $6.75
million and assumed the rights
and obligations of KLM thereunder.
On February 4, 1999, the joint venture and
KLM entered into a new lease which allows
KLM to continue to occupy 50% of the space
subject to the leasehold interest. On
February 8, 1999, the Affiliate also
assumed the rights and obligations of the
joint venture under this new lease.
As part of the purchase of the leasehold
interest, the joint venture received an
option to purchase the leasehold
interest and assume the new lease from the
Affiliate for a purchase price of $6.75
million plus any tenant
improvements, leasing commissions
and capital expenditures incurred by
the
Affiliate in connection with the leasehold
interest (collectively, the "Resale Price").
The joint venture also granted the Affiliate an
option to require the joint venture to purchase
the leasehold interest and assume the new
lease for the Resale Price. When the property
is sold,
the joint venture will be obligated to
purchase the leasehold interest and assume the
new lease from the Affiliate for the Resale
Price.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
Notes to Consolidated Financial Statements
4. Related Party Transactions
In fiscal 1998, an affiliate of the Managing
General Partner provided property management
services for five properties (until the sales
of the Holcomb Woods and Glenhardie III and IV
properties in November 1997 and April 1998,
respectively), and for five buildings at the
Chesterbrook Corporate Center (until its sale
in April 1998). In fiscal 1999,
the affiliate managed the Taxter property
through December 1998 and the Westland Crossing
property through January 1999. The Partnership
incurred management fees
to the affiliate of approximately
$110,000 and $129,000 for the six months ended
April 30, 1999 and 1998, 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.
Effective November 1, 1998, the affiliate
reduced its fees for these services because
of the greatly
decreased level of partnership activity.
For
the six months ended April 30, 1999 and
1998, the Partnership
incurred approximately $116,000
and $269,000, respectively, for these
services. These amounts are included
in general and administrative expenses. <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.
As the result of the sales of three
office properties and a
partnership interest during fiscal 1998,
Partnership cash flow from operations
decreased during the six months ended
April 30, 1999 as compared
1998. In February and June 1999,
respectively, the
Partnership entered into agreements
to
sell the
Westland Crossing and Laurel Lakes
retail properties (see Note 2 to the
consolidated
financial statements).
The Taxter joint venture has
also accepted a bid from an
unaffiliated third party to
purchase the Taxter proerty.
The parties involved
are currently
negotiating the terms of a
Purchase and Sales agreement.
There can be no assurance that
any of these properties will be
sold.
Laurel Lakes Centre is located
in a suburb
of Baltimore and Washington,
D.C., where
retail centers continue to
experience
strong competition. The
market vacancy rate is
currently approximately 16%
with stable rental rates.
During the second quarter of
1999, occupancy at the
property remained at
approximately 70%. As of
April 30, 1999, the property
was leased to 25 tenants. No
lease for significant amounts
of space expire until 2005.
<PAGE>
DEAN WITTER REALTY INCOME
PARTNERSHIP
III, L.P.
Notes to Consolidated
Financial Statements
Currently, the overall
vacancy levels in the office
market in Westchester County,
New York, and the west
Westchester submarket in
which Taxter Corporate Park
is located are approximately
18% and 14%, respectively.
During the second quarter of
fiscal 1999, occupancy at the
property decreased from 99%
to 76% primarily because KLM
vacated approximately 10% of
the property's space, another
tenant vacated approximately
7% of the space
and Cityscape, which filed
for bankruptcy protection in
1998, vacated approximately 9%
of the space. Leases
aggregating approximately 39%
of the space expire in 2001.
During the six months ended
April 30, 1999, 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
remainder of fiscal year 1999.
During the six months ended
April 30, 1999, the
Partnership's cash flow from
operations and the
distributions
received from its joint venture
exceeded its capital
expenditures and contributions
to the joint venture.
The Partnership did not pay
any distributions during the
six months ended April 30,
1999. Generally, future cash
distributions will be paid from
proceeds received from the
sale of the Westland
property and the future sales
of the Laurel Lakes and Taxter
properties.
The Taxter joint venture
expects to pay for its share
of the purchase price of the
former KLM leasehold interest
from its share of the proceeds
from the sale of the Taxter
property.
<PAGE>
DEAN WITTER REALTY INCOME
PARTNERSHIP
III, L.P.
Notes to Consolidated Financial
Statements
As of April 30, 1999,
the
Partnership
has
commitments to fund approximately
$199,000 for its share of capital
expenditures and leasing commissions at the
Taxter property. The Partnership, through
DWR Chesterbrook Associates, may also be
required to fund costs of capital
expenditures at the Chesterbrook
property, pursuant to commitments made
prior to its sale, if the aggregate of
such costs, when all projects have been
completed, exceeds the escrow deposit made
in 1998 when the property was sold.
In August 1998, the Partnership signed a
new lease with Michaels Stores, Inc., for
approximately 18% of the space at
Westland Crossing.
As of April 30, 1999, the Partnership
has remaining commitments to fund
approximately $600,000 of capital
expenditures and leasing commissions
relating to the Laurel Lakes and
Westland properties. The Partnership
expects to fund these commitments from
proceeds from the sales of the properties
and cash reserves.
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 may impact liquidity in
a material way.
Operations
Fluctuations in the Partnership's operating
results for the three- and six-month
periods ended April 30, 1999 compared to
1998 were primarily attributable to the
following:
Rental revenues, operating expenses,
general
and
administrative expense and
depreciation
and
amortization decreased during
the threeand six-month periods
primarily due to the sale of
the Holcomb Woods and
Glenhardie III and IV
properties in December 1997
and April 1998, respectively.
The gain on real estate in the
six months ended April 30,
1998 was attributable to the
sale of the Holcomb Woods and
Glenhardie III and IV
properties.
<PAGE>
DEAN WITTER REALTY INCOME
PARTNERSHIP
III, L.P.
Notes to Consolidated Financial
Statements
The loss on real estate in the
six months ended April 30,
1999 was attributable to the
sale agreements for the
Westland Crossing and Laurel
Lakes Centre properties.
The decreases in equity in
earnings of joint ventures
during the periods are
primarily due to the sale of
the Chesterbrook Corporate
Park.
Other income during the six
months ended April 30, 1998
exceeded that in 1999
primarily due to a lease
termination fee of
approximately $110,000 received
at the Glenhardie properties in
fiscal 1998.
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>
DEAN WITTER REALTY INCOME
PARTNERSHIP
III, L.P.
PART II - OTHER INFORMATION
Item 6. Exhibits & Reports on
form 8-K
(a) Exhibits.
An exhibit
index has
been filed
as part of
this Report
on Page E1.
(b) Reports
on Form 8-K
None
<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: June 11, 1999 By:
/s/E.
Davisson Hardman,
Jr.
E.
Dav
iss
on
Har
dma
n,
Jr.
Pre
sid
ent
Date: June 11, 1999 By:
/s/Charles
M. Charrow
Cha
rle
s
Cha
rro
w
Con
tro
lle
r
(Pr
inc
ipa
l
Financial and Accounting
Officer)
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME
PARTNERSHIP
III, L.P. Quarter
Ended April
30, 1999
Exhibit Index
<CAPTION>
Exhibit No.
Description
<S>
<C>
27
Financial
Data Schedule
E1 </TABLE>
<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> 6-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> APR-30-1999
<CASH> 3,834,456
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 57,369,951<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 57,289,869<F2>
<TOTAL-LIABILITY-AND-EQUITY> 57,369,951<F3>
<SALES> 0
<TOTAL-REVENUES> (1,362,026)<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,010,992
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,373,018)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,373,018)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,373,018)
<EPS-BASIC> (6.60)<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash, total assets include real estate held for sale of
$45,765,930 investments in joint venture of $7,247,673 and other assets
of $521,892.
<F2>Other Stockholders' Equity represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of $15,529,
and security deposits of $64,553.
<F4>Total revenue includes rent of $2,974,598, equity in earnings of joint
ventures of $444,968, interest of $68,244, other revenues of $50,164 and
losses on real estate of $4,900,000.
<F5>Represents net income per Unit of limited partnership interest.
</FN>
</TABLE>
