1
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period ended July 31, 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
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<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
July 31, October 31,
1999 1998
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 5,109,407 $
1,919,694
Real estate, at cost:
Land -
8,823,904
Buildings and improvements - 55,274,320
- 64,098,224
Accumulated depreciation -
(14,356,686)
- 49,741,538
Real estate held for sale 45,945,986 -
Investments in joint venture 6,983,517
7,095,604
Deferred leasing commissions, net - 333,488
Other assets 846,125
1,923,155
$58,885,035 $
61,013,479
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 457,837 $
274,748
Security deposits 63,149
75,844
520,986
350,592
Partners' capital (deficiency):
General partners (8,216,115)
(8,476,231)
Limited partners ($500 per Unit, 534,020 Units issued)
66,580,164 69,139,118
Total partners' capital 58,364,049
60,662,887
$58,885,035 $
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 nine months ended July 31, 1999 and 1998
<CAPTION>
Three months ended
Nine months ended
July 31,
July 31,
1999 1998
1999 1998
<S> <C> <C> <C> <C>
Revenues:
Rental $ $ $ $
Equity in earnings of 1,388,73 1,547,4 4,363,33 5,622,8
joint ventures 3 30 1 16
Interest
Other 150,148 794,779 595,116 18,659,
Gains (losses) on real 794
estate 49,799 22,977 118,043
(20,803) 220,152
- 81,966 29,361
344,664
10,807 (4,900,0
00) 15,727,
536
1,567,87 2,457,9 205,851 40,574,
7 59 962
Expenses:
Property operating
Depreciation 440,803 246,819 1,543,03 1,811,1
Amortization - 2 32
General and - 377,929
administrative 669,855 1,400,7
52,894 13,057 43
30,229
269,906 83,977
261,573
701,605
493,697 907,711 2,504,68 3,997,4
9 57
Net income (loss) $ $ $(2,298, $36,577
1,074,18 1,550,2 838) ,505
0 48
Net income (loss)
allocated to: $ $ $(2,558, $36,200
Limited partners 966,762 1,431,4 954) ,109
General partners 38
107,418 260,116 377,396
118,810
$ $ $(2,298, $36,577
1,074,18 1,550,2 838) ,505
0 48
Net income (loss) per Unit
of limited $ $ $ $
partnership interest 1.81 2.68 (4.79) 67.79
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
Nine months ended July 31, 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 (2,558,954) 260,116
(2,298,838)
Partners' capital (deficiency)
at July 31, 1999 $ 66,580,164
$(8,216,115) $ 58,364,049
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine months ended July 31, 1999 and 1998
1999 1998
<S> <C>
<C>
Cash flows from operating activities:
Net income (loss) $ (2,298,838)
$36,577,505
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Losses (gains) on real estate 4,900,000
(15,727,536)
Depreciation 669,855
1,400,743
Amortization 30,229
83,977
Equity in earnings of joint ventures (595,116)
(18,659,794)
(Increase) decrease in operating assets:
Deferred leasing commissions (85,205)
(409,177)
Other assets 648,565
799,892
Increase (decrease) in operating liabilities:
Accounts
payable and
accrued
liabilities
183,089
(90,307)
Security deposits (12,695)
24,564
Net cash provided by operating activities
3,439,884 3,999,867
Cash flows from investing activities:
Additions to real estate and real estate held for sale
(957,374) (908,072)
Investments in joint ventures (114,029)
(589,792)
Distributions from joint ventures 821,232
35,815,672
Proceeds from disposition of real estate held for sale
- - 40,487,606
Net cash (used in) provided by investing activities
(250,171) 74,805,414
Cash flows from financing activities:
Cash distributions -
(78,266,541)
Increase in cash and cash equivalents 3,189,713
538,740
Cash and cash equivalents at beginning of period
1,919,694 1,967,110
Cash and cash equivalents at end of period $ 5,109,407 $
2,505,850
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
56,200,765 -
Accumulated depreciation (15,026,541)
- -
Estimated costs of disposition
(4,900,000) -
Deferred leasing commissions, net 401,114
- -
Other assets 446,744
- -
Real estate held for sale $ 45,945,986
- -
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, sold a retail
property to New Plan. The aggregate negotiated sales
price of the properties was approximately $24.1
million, of which $10.1 million was allocated in the
agreement to Westland Crossing. A condition precedent
to the Westland Crossing closing was not fulfilled, and
therefore the portion of the sale agreement relating to
that property expired in early June. Due to the
passage of time, additional issues regarding the
proposed sale of Westland Crossing have arisen which
the Partnership and New Plan have attempted to resolve.
On September 1, 1999, New Plan filed a lawsuit to
compel the Partnership to sell Westland Crossing to New
Plan. The Partnership believes it is likely that,
until it is resolved, the lawsuit will impair the
Partnership's ability to sell the Westland Crossing
property. It is impossible to predict the effect, if
any, the outcome of the lawsuit might have on the
Partnership's financial statements.
The Partnership reclassified the net carrying value of
the property of approximately $9,400,000 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 September 1999. The
Partnership reclassified the net carrying value of the
property of approximately $35,700,000 and related
assets of approximately $700,000 to real estate held
for sale as of April 30, 1999.
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
Notes to Consolidated Financial Statements
The Partnership has commitments to complete tenant
improvements at the Westland property for approximately
$376,000; there are no significant Partnership
commitments relating to the Laurel Lakes property.
The Partnership wrote down the carrying values of these
two properties to their contracted sales prices, less
the costs of tenant improvement commitments and
estimated closing costs in the second fiscal quarter,
and recognized losses of approximately $4.9 million,
which were recorded in gains (losses) on real estate.
In accordance with the Partnership Agreement, the
losses were allocated 100% to Limited Partners.
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 partners 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
the cost of any tenant improvements, leasing
commissions and capital expenditures incurred by the
Affiliate in connection with the leasehold interest
(collectively, the "Resale
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
Notes to Consolidated Financial Statements
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.
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 manages the
real estate held for sale, and managed the Taxter
property through December 1998. The Partnership
incurred management fees to the affiliate of
approximately $36,000 and $195,000 for the nine months
ended July 31, 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 nine months ended July 31, 1999 and 1998, the
Partnership incurred approximately $133,000 and
$386,000, 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 fiscal 1998 property sales,
Partnership cash flow from operations decreased during
the nine months ended July 31, 1999 as compared to
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).
Westland Crossing is situated outside downtown Detroit
and is in an improving retail market with stable rental
rates. During the nine months ended July 31, 1999,
occupancy at the property remained at approximately at
82%. No leases for a significant amount of space
expire until 2006.
As of July 31, 1999, the Partnership has commitments to
fund approximately $376,000 of capital expenditures and
leasing commissions relating to the Michaels store at
Westland property.
As described in Note 2 to the financial statements, on
September 1, 1999, New Plan Excel Realty Trust, Inc.
filed a lawsuit in the Supreme Court of the State of
New York seeking to compel the Partnership to sell the
Westland Crossing Shopping Center, located in Westland,
Michigan, to New Plan. The Partnership believes it is
likely that, until it is resolved, the lawsuit will
impair the Partnership's ability to sell the Westland
Crossing property.
Laurel Lakes Centre is located in a suburb of Baltimore
and Washington, D.C., and is in a steady retail market
with stable rental rates. During the third quarter of
1999, occupancy at the property remained at
approximately 70%. No leases for significant amounts
of space expire until 2005.
<PAGE>
The partnership which owns the Taxter Corporate Park
(the "Taxter Partnership") has accepted a bid from an
unaffiliated third party to purchase the property, and
the parties are currently negotiating the terms of a
purchase and sale agreement.
There can be no assurance the any of the above-
mentioned properties will be sold.
On February 8, 1999, an affiliate of the Managing
General Partner, as an accommodation to the Taxter
Partnership, purchased the leasehold interest of KLM in
approximately 20% of the property's space. See Note 3
to the consolidated financial statements.
The Taxter Partnership expects to buy the former KLM
leasehold interest at the time the property is sold,
using a portion of the proceeds from the sale of the
Taxter property. As of July 31, 1999, the Partnership
has commitments to fund approximately $135,000 for its
share of tenant improvements and leasing commissions at
the Taxter property.
Currently, the overall vacancy levels in the office
market in Westchester County, New York, and the west
Westchester sub-market in which Taxter Corporate Park
is located are approximately 18% and 14%, respectively.
During the third quarter of fiscal 1999, occupancy at
the property decreased from 76% to 74%. Leases
aggregating approximately 39% of the space expire in
2001.
During the nine months ended July 31, 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 period the Partnership
continues to own its property interests.
During the nine months ended July 31, 1999, the
Partnership's cash flow from operations and the
distributions received from the Taxter Partnership
exceeded its capital expenditures and contributions to
the Taxter Partnership.
The Partnership did not pay any distributions during
the nine months ended July 31, 1999. Generally, future
cash distributions and any remaining capital
expenditures will be paid from cash reserves and from
proceeds received from property sales.
<PAGE>
The Partnership believes that its cash reserves are
adequate for its needs during the remainder of fiscal
1999 and fiscal 2000.
Other assets decreased during the nine-month period
ended July 31, 1999 due to the reclassification of
certain real estate related assets to real estate held
for sale (approximately $450,000) and the amortization
of prepaid real estate taxes at the Laurel Lakes
property (approximately $480,000).
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 nine-month periods ended July 31, 1999
compared to 1998 were primarily attributable to the
following:
Rental revenues, operating expenses, depreciation and
general and administrative expenses decreased during
the nine-month period in 1999 primarily due to the sale
of the Holcomb Woods and Glenhardie III and IV
properties in December 1997 and April 1998,
respectively.
The decrease in equity in earnings of joint ventures
during the nine-month period in 1999 is primarily due
to the sale of the Chesterbrook Corporate Park in April
1998.
Other income decreased during the nine-month period in
1999 primarily due to the receipt, in 1998, of lease
termination fees of approximately $175,000 relating to
the Glenhardie and the Laurel Lakes properties.
The losses on real estate during the nine-month period
in 1999 was attributable to the sale agreements for the
Westland Crossing and Laurel Lakes Centre properties.
The gains on real estate during the nine month period
in 1998 was attributable to the sales of the Holcomb
Woods and Glenhardie properties.
<PAGE>
Property operating expenses increased during the three-
month period in 1999 primarily due to the recovery, in
1998, of approximately $335,000 of rents receivable
from a tenant at the Laurel Lakes property which had
been previously reserved.
There was no depreciation and amortization expenses
recorded during the three-month period in 1999 because
the Laurel Lakes and Westland Crossing properties were
reclassified as real estate held for sale as of April
30, 1999 and January 31, 1999, respectively.
General and administrative expenses decreased during
the three-month period in 1999 due to the reduced fees
described in Note 4 to the consolidated financial
statements.
There were no other individually significant factors
which caused changes in revenues and expenses.
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 1. Legal Proceedings
On September 1, 1999, New Plan Excel Realty Trust, Inc.
filed a lawsuit in the Supreme Court of the State of
New York seeking to compel the Partnership to sell the
Westland Crossing Shopping Center, located in Westland,
Michigan, to New Plan.
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: September 13, 1999 By: /s/E. Davisson Hardman,
Jr.
E. Davisson Hardman, Jr.
President
Date: September 13, 1999 By: /s/Charles M. Charrow
Charles Charrow
Controller
(Principal Financial and
Accounting Officer)
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
Quarter Ended July 31, 1999
Exhibit Index
Exhibit No. Description
27 Financial Data Schedule
E1
<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
accompanyiny unaudited financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> JUL-31-1999
<CASH> 5,109,407
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 58,885,035<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 58,364,049<F2>
<TOTAL-LIABILITY-AND-EQUITY> 58,885,035<F3>
<SALES> 0
<TOTAL-REVENUES> 205,851<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,504,689
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,298,838)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,298,838)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,298,838)
<EPS-BASIC> (4.79)<F5>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash, total assets include real estate held for sale of
$45,945,986 investments in joint venture of $6,983,517 and other assets
of $846,125.
<F2>Other Stockholders' Equity represents partners' capital.
<F3>Liabilities include accounts payable and accrued liabilities of $457,837, and
security deposits of $63,149.
<F4>Total revenue includes rent of $4,363,331 equity in earnings of joint
ventures of $595,116, interest of $118,043, other revenues of $29,361
and losses on real estate of $4,900,000.
<F5>Represents net loss per Unit of limited partnership interest.
</FN>
</TABLE>
