<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------------------------------------
For Quarter Ended September 30, 1996
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Commission file number 0-16027
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REAL ESTATE INCOME PARTNERS III, LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3341425
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27611 La Paz Road, P.O. Box A-1, Laguna Niguel, California 92677-0100
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(Address of principal executive offices) (Zip Code)
(714) 643-7700
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 12(g), 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve 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
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REAL ESTATE INCOME PARTNERS III, LIMITED PARTNERSHIP
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
---------------------------------------------
INDEX
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<TABLE>
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets -
September 30, 1996 (Unaudited) and December 31, 1995 . . . . . . . . . . . . . . . . . . 3
Statements of Operations (Unaudited) -
Three and Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . 4
Statements of Cash Flows (Unaudited) -
Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
2
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PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
REAL ESTATE INCOME PARTNERS III, LIMITED PARTNERSHIP
BALANCE SHEETS
----------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
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(Unaudited) (Note)
<S> <C> <C>
ASSETS
- ------
Properties held for sale (net of valuation
allowance of $1,010,000 in 1996 and
$1,000,000 in 1995) $27,210,000 $29,457,000
Investment in Cooper Village Partners 2,903,000 2,916,000
Cash and cash equivalents 860,000 980,000
Accounts receivable (net of allowance for
doubtful accounts of $13,000 in 1996 and
$14,000 in 1995) 26,000 71,000
Accrued rent receivable 799,000 799,000
Prepaid expenses and other assets 628,000 627,000
----------- -----------
$32,426,000 $34,850,000
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Accounts payable and accrued liabilities $ 475,000 $ 448,000
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Partners' capital (deficit):
Limited Partners 32,159,000 34,607,000
General Partner (208,000) (205,000)
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31,951,00 34,402,000
Commitments and contingencies - -
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$32,426,000 $34,850,000
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1995 has been prepared from the
audited financial statements as of that date.
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
REAL ESTATE INCOME PARTNERS III, LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(UNAUDITED)
----------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
- --------
Rental income $1,228,000 $1,304,000 $3,623,000 $3,869,000
Interest income 12,000 20,000 41,000 49,000
Gain/(loss) on disposition
of assets - - (13,000) -
---------- ---------- ---------- ----------
Total revenues 1,240,000 1,324,000 3,651,000 3,918,000
---------- ---------- ---------- ----------
EXPENSES
- --------
Operating expenses 315,000 316,000 900,000 933,000
Real estate taxes 151,000 138,000 451,000 500,000
Depreciation and amortization 32,000 437,000 98,000 1,234,000
General and administrative 201,000 170,000 570,000 558,000
Adjustment to carrying value
of real estate 416,000 - 610,000 -
---------- ---------- ---------- ----------
Total Expenses 1,115,000 1,061,000 2,629,000 3,225,000
---------- ---------- ---------- ----------
Income before equity
in earnings 125,000 263,000 1,022,000 693,000
Equity in earnings of Cooper
Village Partners 47,000 26,000 205,000 86,000
---------- ---------- ---------- ----------
NET INCOME $ 172,000 $ 289,000 $1,227,000 $ 779,000
========== ========== ========== ==========
NET INCOME ALLOCABLE TO:
General Partner $ 2,000 $ 3,000 $ 12,000 $ 8,000
========== ========== ========== ==========
Limited Partners $ 170,000 $ 286,000 $1,215,000 $ 771,000
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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REAL ESTATE INCOME PARTNERS III, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(UNAUDITED)
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<TABLE>
<CAPTION>
Nine Months Ended September 30,
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1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,227,000 $ 779,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 98,000 1,234,000
Equity in earnings of Cooper Village
Partners (205,000) (86,000)
Adjustment to carrying value of real estate 610,000 -
Loss on disposition of assets 13,000 -
Changes in:
Additions to properties held for sale (530,000) -
Accounts receivable 45,000 (30,000)
Accrued rent receivable - (51,000)
Prepaid expenses and other assets (98,000) (44,000)
Accounts payable and accrued liabilities 27,000 84,000
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Net cash provided by operating activities 1,187,000 1,886,000
Cash flows from investing activities:
Investment in real estate 2,153,000 (234,000)
Distributions received from
Cooper Village Partners 218,000 172,000
----------- -----------
Net cash provided by(used in)investing
activities 2,371,000 (62,000)
Cash flows from financing activities:
Distributions (3,678,000) (1,358,000)
----------- -----------
Net cash used in financing activities (3,678,000) (1,358,000)
Net (decrease) increase in cash and
cash equivalents (120,000) 466,000
Cash and cash equivalents, beginning of
period 980,000 1,085,000
----------- -----------
Cash and cash equivalents, end of period $ 860,000 $ 1,551,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
REAL ESTATE INCOME PARTNERS III,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
- -----------------------------------------
(1) Accounting Policies
-------------------
The financial statements of Real Estate Income Partners III, Limited
Partnership (the "Partnership") included herein have been prepared by
the General Partner, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. These
financial statements include all adjustments which are of a normal
recurring nature and, in the opinion of the General Partner, are
necessary for a fair presentation. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted, pursuant to the rules and regulations of the
Securities and Exchange Commission. These financial statements should
be read in conjunction with the financial statements and notes thereto
included in the Partnership's annual report on Form 10-K for the year
ended December 31, 1995.
Earnings Per Unit
The Partnership Agreement does not designate investment interests in
units. All investment interests are calculated on a "percent of
Partnership" basis, in part to accommodate reduced rates on sales
commissions for subscriptions in excess of certain specified amounts.
A Limited Partner who was charged a reduced sales commission or no
sales commission was credited with proportionately larger Invested
Capital and therefore had a disproportionately greater interest in the
capital and revenues of the Partnership than a Limited Partner who
paid commissions at a higher rate. As a result, the Partnership has
no set unit value as all accounting, investor reporting and tax
information is based upon each investor's relative percentage of
Invested Capital. Accordingly, earnings or loss per unit is not
presented in the accompanying financial statements.
Carrying Value of Real Estate
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," ("FAS 121"). This Statement requires that if the
General Partner believes factors are present that may indicate
long-lived assets are impaired, the undiscounted cash flows, before
debt service, related to the assets should be estimated. If these
estimated cash flows are less than the carrying value of the asset,
then impairment is deemed to exist. If impairment exists, the asset
should be written down to the estimated fair value.
6
<PAGE> 7
REAL ESTATE INCOME PARTNERS III,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)
- -----------------------------------------
(1) Accounting Policies (Cont'd.)
-------------------
Further, assets held for sale, including any unrecoverable accrued
rent receivable or capitalized leasing commissions, should be carried
at the lower of carrying value or fair value less estimated selling
costs. Any adjustment to carrying value is recorded as a valuation
allowance against property held for sale. Each reporting period, the
General Partner will review its estimates of fair value, which may be
decreased or increased up to the original carrying value. Finally,
assets held for sale are no longer depreciated. The General Partner
adopted FAS 121 at December 31, 1995 and the adoption did not have a
material impact on the Partnership's operations or financial position,
as prior to December 31, 1995, the Partnership had not had any
properties held for sale.
As noted above, as of December 31, 1995, the General Partner decided
to account for the Partnership's properties as assets held for sale,
assuming an average 12 month holding period, instead of for
investment. Accordingly, the General Partner compared the carrying
value of each property to its appraised value as of January 1, 1996.
If the carrying value of the property and certain related assets was
greater than its appraised value, less selling costs, the General
Partner reduced the carrying value of the property by the difference.
Using this methodology, as of December 31, 1995, the General Partner
determined that Creek Edge Business Center, Flaircentre and NorthTech
had carrying values greater than their appraised values, and therefore
reduced those carrying values by $50,000, $600,000 and $350,000 to
$3,802,000, $2,155,000 and $13,934,000, respectively.
For the three and nine months ended September 30, 1996, the
Partnership spent approximately $416,000 and $610,000, respectively,
related to tenant/building improvements and leasing commissions at
Creek Edge Business Center. Because these expenditures exceeded the
estimate of fair value of that property as of December 31, 1995, the
General Partner adjusted the carrying value of the Partnership's
portfolio by $610,000 for the nine months ended September 30, 1996.
(2) Transactions with Affiliates
----------------------------
The Partnership has no employees and, accordingly, the General Partner
and its affiliates perform services on behalf of the Partnership in
connection with administering the affairs of the Partnership. The
General Partner and affiliates are reimbursed for their general and
administrative costs actually incurred and associated with services
performed on behalf of the Partnership. For the three months ended
September 30, 1996 and 1995, the Partnership incurred approximately
$39,000 and $39,000, respectively, of such expenses. For the nine
months ended September 30, 1996 and 1995, such payments were $106,000
and $122,000 respectively.
7
<PAGE> 8
REAL ESTATE INCOME PARTNERS III,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)
- -----------------------------------------
(2) Transactions with Affiliates Cont'd.
----------------------------
An affiliate of the General Partner provides property management
services with respect to the Partnership's properties and receives a
fee for such services not to exceed 6% of the gross receipts from the
properties under management provided leasing services are performed,
otherwise not to exceed 3%. Such fees amounted to approximately
$47,000 and $49,000, respectively, for the three months ended
September 30, 1996 and 1995, respectively, and $140,000 and $142,000
for the nine months ended September 30, 1996 and 1995, respectively.
In addition, an affiliate of the General Partner received $10,000 and
$26,000 for the three months ended September 30, 1996 and 1995,
respectively, as reimbursement of costs of on-site property management
personnel and other reimbursable costs. For the nine months ended
September 30, 1996 and 1995, such payments were $43,000 and $78,000,
respectively.
As previously reported, on June 24, 1993, the Partnership completed
its solicitation of written consent from its Limited Partners. A
majority in interest of the Partnership's Limited Partners approved
each of the proposals contained in the Information Statement dated May
5, 1993. Those proposals have been implemented by the Partnership as
contemplated by the Information Statement as amendments to the
Partnership Agreement, and are reflected in these financial statements
as such.
The Amended Partnership Agreement provides for the Partnership's
payment to the General Partner of an annual asset management fee equal
to .75% of the aggregate appraised value of the Partnership's
properties as determined by independent appraisal undertaken in
January of each year. Such fees amounted to $54,000 and $60,000 for
the three months ended September 30, 1996 and 1995, respecively, and
for the nine months ended September 30, 1996 and 1995, $170,000 and
$180,000, respectively. In addition, the Amended Partnership
Agreement provides for payment to the General Partner of a leasing fee
for services rendered in connection with leasing space in a
Partnership property after the expiration or termination of leases.
Fees for leasing services for the three months ended September 30,
1996 and 1995 amounted to $17,000 and $0, respectively. For the nine
months ended September 30, 1996 and 1995, such fees amounted to
$43,000 and $23,000, respectively.
In addition to the aforementioned, the General Partner was also paid
$13,000 and $15,000 related to the Partnership's portion (42%) of
asset management fees, property management fees, leasing fees and
reimbursement of on-site personnel and other reimbursable expenses for
Cooper Village Partners for the three months ended September 30, 1996
and 1995, respectively. For the nine months ended September 30, 1996
and 1995, such cost were $44,000 and $45,000 respectively.
8
<PAGE> 9
REAL ESTATE INCOME PARTNERS III,
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)
- -----------------------------------------
(3) Loss on Disposition of Assets
-----------------------------
On June 4, 1996, the Partnership sold Flaircentre, an office complex
composed of 11 one-story buildings in El Monte, California to an
unaffiliated third party. The sales price was $2,300,000 and the net
proceeds of the sale amounted to approximately $2,153,000. In
December 1995, the General Partner had adjusted the carrying value of
the property in accordance with the guidelines of FAS 121, which
resulted in a write-down of $600,000 and an adjusted carrying value
of $2,155,000. The resulting loss on sale, after taking into
consideration all costs of the disposition, amounted to $13,000 as
reflected on the Statement of Operations. The General Partner was not
paid a commission or disposition fee as part of this transaction.
(4) Commitments and Contingencies
-----------------------------
The Partnership is not a party to any pending legal proceedings other
than ordinary routine litigation incidental to its business. It is
the General Partner's belief that the outcome of these proceedings
will not be material to the business or financial condition of the
Partnership.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
-------------------------------
Since completion of its acquisition program in December 1988, the
Partnership has been engaged primarily in the operation of its
properties. The Partnership's objective has been to hold its
properties as long-term investments, although properties may be sold
at any time depending upon the General Partner's judgment of the
anticipated remaining economic benefits of continued ownership.
Working capital is and will be provided principally from the operation
of the Partnership's properties. The Partnership may incur mortgage
indebtedness relating to such properties by borrowing funds primarily
to fund capital improvements or to obtain sale or financing proceeds
for distribution to the Partners.
Certain of the Partnership's properties are not fully leased. The
Partnership is actively marketing the vacant space in these
properties, subject to the competitive environment in each of the
market areas. To the extent the Partnership is not successful in
maintaining or increasing occupancy levels at these properties, the
Partnership's future cash flow and distributions may be reduced.
Quarterly distributions through September 30, 1996 represent cash flow
generated from operations of the Partnership's properties and interest
earned on the Partnership's working capital, net of capital reserve
requirements. In June 1996, the Partnership made a special
distribution
9
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REAL ESTATE INCOME PARTNERS III,
LIMITED PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Liquidity and Capital Resources (Cont'd.)
-------------------------------
of substantially all of the net proceeds from the sale of Flaircentre.
Future cash distributions will be made principally to the extent of:
cash flow attributable to operations; sales of the Partnership's
properties; and, interest earned on the investment of capital
reserves, net of future capital improvements to the Partnership's
properties and an allowance for future capital reserves.
In accordance with the terms of the Partnership Agreement, each year
the Partnership secures an independent appraisal of each of the
Partnership's properties as of January 1. Prior to the January 1,
1995 appraisals, the independent appraiser had estimated each
property's "Investment Value," utilizing a seven to ten-year cash flow
model to estimate value based upon an income approach.
The Amendment to the Partnership Agreement consented to by the Limited
Partners in June 1993 mandated, among other things, that the General
Partner seek a vote of (and provide an analysis and recommendation to)
the Limited Partners no later than December 31, 1996 regarding the
prompt liquidation of the Partnership in the event that properties
with (then) current appraised values constituting at least one-half of
the total (then) current appraised values of all of the Partnership's
properties are not sold or under contract for sale by the end of 1996.
Given that mandate, the General Partner requested that the appraiser
provide an assessment of value that reflects a shorter investment
holding term. Although the General Partner does not currently have a
specific liquidation plan for the Partnership's properties, it
requested that the appraiser assume that the entire portfolio would be
sold over four years, in connection with the January 1995 appraisals
and over three years in connection with the January 1996 appraisals.
Using the shorter-term investment methodology that is consistent with
the mandate of the 1993 Amendment to the Partnership Agreement, the
appraiser estimated the value of the Partnership's properties at
January 1, 1996 to be approximately $33,857,000, or $5,329 per $10,000
original investor subscription.
Over the past year, the General Partner has examined several
alternative methods to achieve the Partnership's goal of selling
properties and liquidating the Partnership at the earliest practicable
time consistent with achieving reasonable value for the Limited
Partners' investment. As explained in the Partnership's May 5, 1993
Information Statement, "achieving reasonable value" has meant for the
Partnership to balance receiving higher sales prices per property than
their 1993 values while at the same time not waiting forever to sell
at a theoretical "top of the market." Alternatives under
consideration by the General Partner may include a property-by-
property liquidation or selling all of the
10
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REAL ESTATE INCOME PARTNERS III,
LIMITED PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Liquidity and Capital Resources (Cont'd.)
-------------------------------
properties as a single portfolio. The General Partner has had
preliminary discussions regarding disposition, in whole or in
part, of the Partnership's properties with various potential
purchasers of some or all of the Partnership's portfolio.
In connection with its consideration of these alternatives, the
General Partner has decided to treat its properties as held for sale
instead of for investment for financial statement purposes. In
accordance 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," the carrying value of these properties was
evaluated to ensure that each property was carried on the
Partnership's Balance Sheet at the lower of cost or fair value less
estimated selling costs. The General Partner estimated fair value for
this purpose based on appraisals performed as of January 1, 1996.
However, fair value can only be determined based upon sales to third
parties, and sales proceeds could differ substantially.
Based upon the General Partner's survey of the current marketplace,
the General Partner believes, in fact, that in the relatively short
term the Partnership's properties could generate sales prices that, in
the aggregate, could be materially less than their aggregate appraised
values based upon an "Investment Value" appraisal model. The amount
of the possible variance between the aggregate appraised values and
potential sales prices cannot be reliably estimated at this time,
because of the numerous variables that could affect the sales prices,
including but not limited to the time frame in which the properties
must be sold, method of sale (property-by-property or single
transaction), prevailing capitalization rates at which comparable
properties are being sold at the time of the Partnership's sales,
constantly changing local market conditions and the state of leasing
negotiations and capital expenditures for the properties at the time
of sale.
On June 4, 1996, the Partnership sold Flaircentre, a complex composed
of 11, one-story office buildings located on 3.7 acres of land in El
Monte, California, to The Evangelical Formosan Church, a California
corporation. The sale price was $2,300,000. Net proceeds of the sale
to the Partnership, after payment of commissions and closing costs,
were approximately $2,153,000. The General Partner was not paid a
commission or disposition fee as part of this transaction.
11
<PAGE> 12
REAL ESTATE INCOME PARTNERS III,
LIMITED PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Results of Operations for the Three Months Ended September 30, 1996
-------------------------------------------------------------------
Compared With the Three Months Ended September 30, 1995 and for the
-------------------------------------------------------------------
Nine Months Ended September 30, 1996 Compared With the Nine Months
------------------------------------------------------------------
Ended September 30, 1995.
-------------------------
The decreases in revenue for the three and nine months ended September
30, 1996, as compared to the corresponding periods in 1995, were
primarily attributable to the loss of rental revenue associated with
the sale of Flaircentre on June 4, 1996. The aforementioned decreases
were partially offset by increased revenue at NorthTech ($72,000),
which resulted from the commencement of International Data Product's
lease effective March 1, 1996.
Interest income resulted from the temporary investment of Partnership
working capital. The decreases for the three and nine months ended
September 30, 1996, as compared to the corresponding periods in 1995,
were attributable to the decreases in the average level of working
capital available for investment during 1996.
On June 4, 1996, the Partnership sold Flaircentre, a complex composed
of 11, one-story office buildings located on 3.7 acres of land in El
Monte, California, to The Evangelical Formosan Church, a California
corporation. The sale price was $2,300,000. Net proceeds of the sale
to the Partnership, after payment of commissions and closing costs,
were approximately $2,153,000. The General Partner was not paid a
commission or disposition fee as part of this transaction.
The decrease in operating expenses for the nine months ended September
30, 1996, as compared to the corresponding period in 1995, was
primarily attributable to the sale of Flaircentre in June 1996.
The increase in real estate taxes for the three months ended
September 30, 1996, as compared to the same period in 1995, was
primarily attributable to a $40,000 refund which was the result of a
successful tax appeal during the third quarter of 1995. That refund
was accounted for as a reduction of 1995 real estate tax expenses.
The decrease in real estate taxes for the nine months ended September
30, 1996, as compared to the corresponding period in 1995, was
primarily attributable to the decrease in real estate taxes at
Flaircentre that resulted from the sale of the property in June 1996.
In addition, at NorthTech, a successful real estate tax appeal
resulted in a $44,000 refund during the second quarter of 1996, which
was offset against the quarter's aggregate real estate tax expenses.
12
<PAGE> 13
REAL ESTATE INCOME PARTNERS III,
LIMITED PARTNERSHIP
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Cont'd.)
Results of Operations for the Three Months Ended September 30, 1996
-------------------------------------------------------------------
Compared With the Three Months Ended September 30, 1995 and the Nine
--------------------------------------------------------------------
Months Ended September 30, 1996 Compared With the Nine Months Ended
-------------------------------------------------------------------
September 30, 1995. (Cont'd.)
-------------------
The decreases in depreciation and amortization expenses for the three
and nine months ended September 30, 1996, as compared to the
corresponding periods in 1995, were attributable to the adoption of
Statement of Financial Accounting Standards, No. 121, "Accounting for
the Impairment of Long-Lived Assets or Long-Lived Assets to Be
Disposed Of," pursuant to which "assets held for sale" are no longer
depreciated.
For the nine months ended September 30, 1996, the carrying value of
the Partnership's portfolio was reduced by $610,000, which is
representative of the amount spent on tenant improvements, leasing
commissions and other related assets at Creek Edge Business Center.
The increases in equity in earnings of Cooper Village Partners for the
three and nine months ended September 30, 1996, as compared to the
corresponding periods in 1995, were primarily attributable to the
Partnership's portion (42%) of depreciation expenses incurred during
1995, of $25,000 and $77,000, respectively. As previously discussed,
the Partnership no longer depreciates its assets due to the adoption
of Financial Accounting Standard No. 121. In addition, during the
nine months ended September 30, 1996, a lease termination settlement
in the amount of $127,000 was collected from The Boston Stores which
was taken into income at the end of the first quarter.
General and administrative expenses for the nine months ended
September 30, 1996 and 1995, included charges of $319,000 and
$326,000, respectively, from the General Partner and its affiliates
for services rendered in connection with administering the affairs of
the Partnership and operating the Partnership's properties. Also
included in general and administrative expenses for the nine months
ended September 30, 1996 and 1995, are direct charges of $251,000 and
$232,000, respectively, relating to audit fees, tax preparation fees,
legal and professional fees, insurance expenses, costs incurred in
providing information to the Limited Partners and other miscellaneous
costs.
The increases in general and administrative expenses for the three and
nine month periods ended September 30, 1996, as compared to the
corresponding periods in 1995, were primarily attributable to the
increases in leasing fees and professional services in 1996.
13
<PAGE> 14
REAL ESTATE INCOME PARTNERS III,
LIMITED PARTNERSHIP
PART II. OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
-----------------
So far as is known to the General Partner, neither the Partnership nor
its properties are subject to any material pending legal proceedings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a) Exhibits:
27 - Financial Data Schedule
b) Reports on Form 8-K:
None filed in quarter ended September 30, 1996
14
<PAGE> 15
REAL ESTATE INCOME PARTNERS III,
LIMITED PARTNERSHIP
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.
REAL ESTATE INCOME PARTNERS III,
LIMITED PARTNERSHIP
By: BIRTCHER/LIQUIDITY By: BIRTCHER INVESTORS,
PROPERTIES a California limited partnership
(General Partner)
By: BIRTCHER INVESTMENTS,
a California general partnership,
General Partner of Birtcher Investors
By: BIRTCHER LIMITED,
a California limited partnership,
General Partner of Birtcher
Investments
By: BREICORP,
a California corporation,
formerly known as Birtcher
Real Estate Inc., General
Partner of Birtcher Limited
Date: November 12, 1996 By: /s/ Robert M. Anderson
-------------------------
Robert M. Anderson
Executive Director
BREICORP
By: LF Special Fund I, L.P.,
a California limited partnership
By: Liquidity Fund Asset Management, Inc.,
a California corporation, General
Partner of LF Special Fund I, L.P.
Date: November 12, 1996 By: /s/ Brent R. Donaldson
----------------------------------
Brent R. Donaldson
President
Liquidity Fund Asset Management,
Inc.
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEETS AND STATEMENTS OF OPERATIONS OF REAL ESTATE INCOME PARTNERS III AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 860,000
<SECURITIES> 0
<RECEIVABLES> 39,000
<ALLOWANCES> 13,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,313,000
<PP&E> 30,113,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 32,426,000
<CURRENT-LIABILITIES> 475,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 31,951,000
<TOTAL-LIABILITY-AND-EQUITY> 32,426,000
<SALES> 0
<TOTAL-REVENUES> 3,856,000
<CGS> 0
<TOTAL-COSTS> 2,019,000
<OTHER-EXPENSES> 610,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,227,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,227,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
