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, 2000
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) 392-2974
Former name, former address and former
fiscal year, if changed since last
report: not applicable
Indicate by check mark whether the
registrant (1) has filed all reports
required to be filed by Section 13 or
15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months
(or for such shorter period that the
registrant was required to file such
reports), and (2) has been subject
to such filing
requirements for the past 90 days. Yes
X No
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER REALTY INCOME PARTNERSHIP
III, L.P.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
July 31, October 31,
2000 1999
<S>
<C> <C>
ASSETS
Cash and cash equivalents $ 1,692,111
$ 1,744,447
Real estate held for sale -
9,457,148
Investment in joint venture 104,222
6,962,579
Other assets 99,286
786,466
$ 1,895,619 $
18,950,640
LIABILITES AND PARTNERS'
CAPITAL
Accounts payable and accrued liabilities
$ 279,581
$ 343,550
Distribution payable to General Partners 74,270
-
353,851 343,550
Partners' capital (deficiency):
General partners
(8,596,748)
(8,561,045)
Limited partners ($500 per Unit, 534,020
Units issued)
10,138,516
27,168,135
1,541,768 18,607,090
$
1,895,619
$ 18,950,640
See accompanying notes to consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME PARTNERSHIP III,
L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and nine months ended July 31, 2000
and
1999
<CAPTION>
Three months ended Nine
months ended
July
31,
July
31,
2000
1999
2000
1999
<S> <C> <C>
<C> <C>
Revenues:
Rental $ - $
$ $
Equity in earnings of 1,388,733 35,231
4,363,331
joint venture 7,663,104
Interest 150,148
8,045,430
595,116
Losses on real estate 119,698
Other - 49,799 224,132
118,043
-
(4,900,000
4,350
(49,164) )
(20,803)
4,976 29,361
7,787,152 1,567,877
8,260,605 205,851
Expenses:
Property operating
Depreciation 8,172 440,803
35,144
1,543,032
Amortization - -
-
General and - -
-
669,855
administrative
45,056 52,894
272,439
30,229
261,573
53,228 493,697
307,583
2,504,689
Net income (loss) $
$7,953,02
$(2,298,83
$7,733,92 1,074,180 2
8)
4
Net income (loss)
allocated to: $ $7,914,45
$(2,558,95
Limited partners $7,722,18 966,762 5
4)
General partners 3
11,741 107,418
38,567
260,116
$
$7,953,02
$(2,298,83
$7,733,92 1,074,180 2
8)
4
Net income (loss) per
Unit of limited $ $ $ $
partnership interest 14.46 1.81
14.82 (4.79)
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, 2000
<CAPTION>
Limited
General
Partners
Partners
Total
<S>
<C>
<C> <C>
Partners' capital (deficiency)
at November 1, 1999
$27,168,135
$(8,561,045) $
18,607,090
Net income 7,914,455
38,567
7,953,022
Cash distributions
(24,944,074)
(74,270)
(25,018,344)
Partners' capital (deficiency)
at July 31, 2000
$10,138,516
$(8,596,748) $
1,541,768
See accompanying notes to consolidated
financial statements.
</TABLE>
<PAGE>
DEAN WITTER REALTY INCOME PARTNERSHIP III,
L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended July 31, 2000 and 1999
[CAPTION]
2000
1999
[S]
[C]
[C]
Cash flows from operating activities:
Net income (loss) $ 7,953,022
$
(2,298,838)
Adjustments to reconcile net income (loss) to
net
cash provided by operating
activities:
Losses on real estate 49,164
4,900,000
Depreciation and amortization
- 700,084
Equity in earnings of joint venture
(8,045,430)
(595,116)
Decrease
in other assets 687,180
563,360 (Decrease) increase in
accounts payable and
accrued liabilities
(63,969)
170,394
Net cash provided by operating
activities 579,967 3,439,884
Cash flows from investing activities:
Proceeds from real estate sold
9,472,224
-
Additions to real estate held for
sale
(64,240)
(957,374)
Investments in joint venture
(574,310)
(114,029)
Distributions from joint venture
15,478,097
821,232
Net cash provided by (used in)
investing activities
24,311,771
(250,171)
Cash flows from financing activities:
Cash distributions
(25,018,344) -
Increase in distribution payable to
General Partners 74,270
-
Net cash used in financing
activities (24,944,074)
-
(Decrease) increase in cash and cash
equivalents (52,336)
3,189,713
Cash and cash equivalents at
beginning of
period 1,744,447
1,919,694
Cash and cash equivalents at end of
period
$ 1,692,111
$
5,109,407
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. As of November
16, 1999, the Partnership's last
remaining property investment was
its 44.6% interest in the
partnership ("TPA") which owned
Taxter Corporate Park.
As discussed in Note 3, TPA sold
the
Taxter
property on May 23, 2000, and this
sale has effectuated the
dissolution of the Partnership.
Accordingly, the Partnership
is in the process of
winding up its affairs, and
it plans to distribute the
balance of the Partnership's
cash reserves and terminate by
December 31, 2000. However,
there can be no assurance that
the Partnership can be
terminated by such date.
The financial statements
include, on a consolidated
basis, the accounts of the
Partnership and the two
partnerships which owned the
Glenhardie IV (sold 1998) and
Laurel Lakes (sold September
1999) properties. The
Partnership's interests
in TPA and the partnership
which owned interests in
Chesterbrook Corporate Center
(sold in 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 in 1999, the
losses on real estate in 2000
and 1999, and the gain
on sale of the Taxter property
included in the
equity in earnings of joint
venture in 2000, such
adjustments consist only of
normal recurring accruals.
<PAGE>
DEAN WITTER REALTY INCOME
PARTNERSHIP III, L.P.
Notes to Consolidated Financial
Statements
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, 1999.
Operating results of interim
periods may not be indicative
of the operating results for
the entire year.
2. Real Estate
Pursuant to a Purchase and Sale
Agreement dated as of
February 16, 1999, the
Partnership entered into an
agreement, as amended, to sell
the Westland Crossing
property, for a negotiated sale
price of $10.2 million, to New
Plan Excel Realty Trust, Inc.,
an unaffiliated party. As
permitted by the contract, New
Plan assigned its purchase
rights to its affiliate,
Landamerica Exchange Company.
The closing of the sale took
place on November 16, 1999.
At closing: a) the Partnership
received proceeds of
approximately $9.2 million, net
of closing costs and other
deductions (including $373,800
of capital expenditure
commitments) and $250,000,
which was placed in escrow to
secure the Partnership's
obligations, if any, pursuant
to representations and
warranties in the Agreement;
and b) New Plan discontinued a
lawsuit which it had
commenced against the
Partnership in September 1999
to compel the Partnership to
sell the property to it. The
Partnership received the escrow
deposit, plus interest, in May
2000.
On December 21, 1999, the
Partnership paid, 100% to
Limited Partners, a cash
distribution of $9,190,484
($17.21 per Unit) from the
net proceeds from the
Westland Crossing sale.
In the second quarter of
fiscal 1999, the Partnership
wrote down the net carrying
value of the property to the
amount expected to be
received from the sale
(including the return of the
escrow), resulting in a loss
of approximately $802,000; an
additional $49,000
loss was recognized in fiscal
2000. The losses were
allocated 100% to the Limited
Partners.
<PAGE>
DEAN WITTER REALTY INCOME
PARTNERSHIP
III, L.P.
Notes to Consolidated Financial
Statements
In April 2000, the
Partnership received its
$500,000 escrow deposit, plus
interest, from the 1999 sale
of the Laurel Lakes property.
This deposit was included in
other assets at October 31,
1999.
On June 29, 2000 the
Partnership paid, 100% to
Limited Partners, a cash
distribution (see Note 4)
which included approximately
$812,000 ($1.52 per Unit) from
the receipt of the escrow
deposits relating to the
sales of the Westland
Crossing, Laurel Lake and
Chesterbrook (approximately
$62,000 received in 1999)
properties.
3. Investment in Joint
Venture
Pursuant to a Purchase and Sale
Agreement dated as of April
4, 2000, as amended, on May
23, 2000, TPA sold the land
and buildings which comprise
the Taxter property to a
subsidiary of Mack-
Cali Realty
Corporation (the "Purchaser"),
an unaffiliated party, for a
negotiated sale price of
$42.725 million.In connection
with the sale, TPA acquired
from an
affiliate and conveyed to
the Purchaser certain
interests in the Taxter
property, including interests
that the affiliate had
acquired from KLM Royal Dutch
Airlines, for $6.75 million, in
February 1999. Of the $42.725
million, TPA remitted $6.75
million of the sale proceeds to
the affiliate in connection
with the transaction.
TPA is also owned 40.6% by
Dean Witter Realty Income
Partnership IV, L.P., an
affiliated public partnership,
and 14.8%
by Dean Witter Realty Income
Partnership II, L.P., an
affiliated public partnership.
The purchase price was paid
in cash at closing. At
closing, the Partnership
received approximately $14.8
million representing its
44.6% share of the cash
received by TPA, net of its
share of TPA's closing costs,
the amount of the obligation
owed to the affiliate and
other deductions.
On June 29, 2000, the
Partnership
paid, 100% to Limited
Partners, a cash distribution
(see Note 4) which
included Taxter sale proceeds
of approximately $14.3 million
($26.73 per Unit). The
Partnership retained a portion
of the sale proceeds to cover
any contingencies that may
arise pursuant to the
sale and, if
<PAGE>
DEAN WITTER REALTY INCOME
PARTNERSHIP
III, L.P.
Notes to Consolidated Financial
Statements
required, pay administrative
expenses and liabilities that
may arise while the Partnership
winds up its
affairs. Any sale proceeds
remaining, subsequent to the
payment of any contingencies,
will be distributed to Limited
Partners only.
The Partnership's share of
TPA's gain on sale of the
Taxter property was
approximately $7.6 million;
such gain was allocated 100% to
Limited Partners.
Summarized balance sheets of
TPA are as follows:
July 31,
October 31,
2000
1999 Land and buildings, net
$ -
$15,680,607
Other 479,004
1,670,760
Total assets $ 479,004
$17,351,367
Liabilities $
245,319 $
214,272
Partners' Capital 233,685
17,137,095
Total liabilities and capital
$ 479,004
$17,351,367
<PAGE>
<TABLE>
DEAN WITTER REALTY INCOME
PARTNERSHIP
III, L.P.
Notes to Consolidated Financial
Statements
Summarized income statements of
TPA are as follows: <CAPTION>
Three
months
Nine months
ended July
31,
ended July 31,
2000
1999
2000 1999
<S> <C> <C>
<C>
<C>
Operating Income $
395,751
$1,706,457 $ 3,065,210
$4,705,145
Gain on sale of
real estate 15,551,472
-
15,551,472 -
$15,947,223
$1,706,457 $18,616,682
$4,705,145
Expenses
291,300
1,369,802
2,103,527 3,371,399
Net income
$15,655,923 $
336,655
$16,513,155 $1,333,746
</TABLE>
On March 31, 2000, TPA
reclassified its investment in
the Taxter
property as
real estate held for sale.
Accordingly, since April 1,
2000, TPA has not recorded
depreciation expense on the
building and related
improvements.
4. Cash Reserves Distribution
On June 29, 2000, the
Partnership also distributed,
to Limited Partners only, cash
reserves of approximately
$1.25 per Unit. The cash
reserves distribution totaled
$742,697 with $668,427
distributed to the Limited
Partners and $74,270 payable
to the General Partners. The
General Partners deferred
receipt of their share of the
distribution to ensure
that the Partnership would
have
cash on hand to cover all
liabilities
that may
arise while the Partnership
winds up its affairs. The
amounts deferred were charged
against partner's capital and
recorded as distributions
payable.
On June 29, 2000, the
Partnership's
distributions, to Limited
Partners only, of its share of
the Taxter sale proceeds (see
Note 3), the remaining
proceeds from the sales of the
Chesterbrook, <PAGE>
DEAN WITTER REALTY INCOME
PARTNERSHIP
III, L.P.
Laurel Lakes and Westland
Crossing properties (see Note
2) and Partnership cash
reserves totaled $15,753,590
($29.50 per Unit).
5. Related Party Transactions
In fiscal 1999, an affiliate
of the Managing General
Partner managed the Westland
Crossing and Taxter (through
December 31, 1998) properties.
The Partnership incurred
management fees to the
affiliate of
approximately $36,000 for these
months. This amount is
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. For the nine
months
ended July 31, 2000 and 1999,
the Partnership incurred
approximately $113,000 and
$133,000, 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
On November 16, 1999, the
Partnership sold the Westland
Crossing property. See Note
2 to the consolidated
financial statements.
As of November 16, 1999, the
Partnership's interest in the
Taxter Corporate Park office
property was the
Partnership's sole property
interest. As discussed in
Note 3 to the consolidated
financial statements, the
partnership ("TPA")
which owned the Taxter
property sold the property on
May 23, 2000. The property
was approximately 90% leased at
the time of the sale. The
favorable leasing status and
an improved real estate market
in Westchester, New York, the
location of the Taxter
property, enabled TPA to obtain
an attractive price for the
property.
The Partnership Agreement
provides that the Partnership
shall terminate upon the sale
of the Partnership's last
investment, and that
dissolution shall be effective
on the
day on which the event arises
giving rise to the
dissolution. Accordingly, the
Partnership dissolved pursuant
to the terms of its
Partnership Agreement,
effective May 23, 2000, the
date on which the Taxter
property was sold. By
December 31, 2000, the
Partnership plans to wind up
its affairs, distribute its
remaining cash reserves and
terminate its existence by
filing a certificate of
cancellation in the office of
the Delaware Secretary of
State. There can be no
assurance that the
Partnership will terminate by
December 31, 2000.
As discussed in Notes 2, 3
and 4 to the Consolidated
Financial Statements, during
the nine months ended July 31,
2000, the Partnership paid
distributions of sale
proceeds and Partnership cash
reserves, totaling $46.71 per
Unit, to Limited Partners
only. To cover any
contingencies that may arise
while the Partnership winds
up its affairs, the
Partnership retained a
portion of its share of the
Taxter sale proceeds, and the
General Partners deferred
receipt of their share of the
distribution of Partnership
cash reserves.
<PAGE>
DEAN WITTER REALTY INCOME
PARTNERSHIP
III, L.P.
As of the date of closing of
the sale of the Taxter
property, the Partnership
had commitments to fund
approximately $824,000 for
its share of tenant
improvements and leasing
commissions at the
property. This amount was
deducted
from the
Partnership's share of the sale
proceeds it received at
closing.
During the periods the
Partnership owned its interests
in the Westland Crossing and
Taxter properties, the
properties generated positive
cash flow from
operations. However,
Partnership cash flow from
operations decreased during the
nine months ended July 31,
2000 as compared to 1999 due to
the sales of the Westland
Crossing and Laurel Lakes
(September 1999) shopping
centers.
During the nine months
ended July 31, 2000, the
Partnership's distributions of
cash reserves to Limited
Partners, contributions to TPA
(to fund its share
of tenant improvements and
leasing commissions at the
Taxter property) and capital
expenditures at the
Westland Crossing property
exceeded the Partnership's
distributions received
from TPA (excluding the
distribution of sale
proceeds) and cash provided by
Partnership operations. The
Partnership's cash shortfall
was funded with 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 nine-month
periods ended July 31, 2000
compared to 1999 were
primarily attributable to the
following:
<PAGE>
DEAN WITTER REALTY INCOME
PARTNERSHIP
III, L.P.
The increases in equity in
earnings of joint venture in
2000 are primarily due to the
Partnership's share of the
gain on sale of the Taxter
property (approximately $7.6
million).
The loss on real estate in
2000 resulted from the
November 1999 sale of the
Westland Crossing shopping
center.
The losses on real estate in
1999 resulted
from the sale agreements for
the Westland Crossing and
Laurel Lakes shopping center.
Rental revenues and
property
operating expenses
decreased in 2000, and
depreciation and amortization
expenses were eliminated in
2000 due to the sales of the
Westland Crossing and Laurel
Lakes properties.
Interest revenue increased in
2000 primarily due to
interest earned on the
proceeds from sales of
properties before such
proceeds were distributed to
the Limited Partners.
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 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
i) Reports
on Form 8-K
dated May
23, 2000
disclosing
TPA's sale
of Taxter
Corporate
Park.
<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, 2000 By:
/s/E. Davisson Hardman, Jr.
E.
Dav
iss
on
Har
dma
n,
Jr.
Pre
sid
ent
Date: September 13, 2000 By:
/s/
Ray
mon
d
E.
Koc
h
Ray
mon
d
E.
Koc
h
(Pr
inc
ipa
l
Fin
anc
ial
and
Acc
oun
tin
g
Off
ice
r)
<PAGE>DEAN WITTER REALTY INCOME
PARTNERSHIP III,
L.P.
Quarter Ended
July 31,
2000
Exhibit
Index
Exhibit No.
Description
27 Financial
D
a
t
a
S
c
h
e
d
u
l
e
