<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 June 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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<PAGE> 2
REAL ESTATE INCOME PARTNERS III, LIMITED PARTNERSHIP
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE MONTHS ENDED JUNE 30, 1996
INDEX
<TABLE>
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Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets -
June 30, 1996 (Unaudited) and December 31, 1995 . . . . . . . . . . . . . 3
Statements of Operations (Unaudited) -
Three and Six Months Ended June 30, 1996 and 1995 . . . . . . . . . . . . 4
Statements of Cash Flows (Unaudited) -
Six Months Ended June 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
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REAL ESTATE INCOME PARTNERS III, LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
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(Unaudited) (Note)
<S> <C> <C>
ASSETS
- ------
Properties held for sale (net of valuation
allowance of $594,000 in 1996 and
$1,000,000 in 1995) $27,161,000 $29,457,000
Investment in Cooper Village Partners 2,940,000 2,916,000
Cash and cash equivalents 937,000 980,000
Accounts receivable (net of allowance for
doubtful accounts of $8,000 in 1996 and
$14,000 in 1995) 68,000 71,000
Accrued rent receivable 775,000 799,000
Prepaid expenses and other assets 510,000 627,000
----------- -----------
$32,391,000 $34,850,000
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Accounts payable and accrued liabilities $ 354,000 $ 448,000
----------- -----------
Partners' capital (deficit):
Limited Partners 32,265,000 34,607,000
General Partner (228,000) (205,000)
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32,037,000 34,402,000
Commitments and contingencies - -
----------- -----------
$32,391,000 $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 Six Months Ended
June 30 June 30
------------------------------- ------------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
- --------
Rental income $1,174,000 $1,303,000 $2,395,000 $2,565,000
Interest income 16,000 14,000 29,000 29,000
Gain/(loss) on disposition
of assets (13,000) - (13,000) -
---------- ---------- ---------- ----------
Total revenues 1,177,000 1,317,000 2,411,000 2,594,000
---------- ---------- ---------- ----------
EXPENSES
- --------
Operating expenses 285,000 307,000 585,000 617,000
Real estate taxes 124,000 180,000 300,000 362,000
Depreciation and amortization 33,000 399,000 66,000 797,000
General and administrative 176,000 190,000 369,000 388,000
Adjustment to carrying value
of real estate 28,000 - 194,000 -
---------- ---------- ---------- ----------
Total Expenses 646,000 1,076,000 1,514,000 2,164,000
---------- ---------- ---------- ----------
Income before equity in earnings 531,000 241,000 897,000 430,000
Equity in earnings of Cooper
Village Partners 45,000 29,000 158,000 60,000
---------- ---------- ---------- ----------
NET INCOME $ 576,000 $ 270,000 $1,055,000 $ 490,000
========== ========== ========== ==========
NET INCOME ALLOCABLE TO:
General Partner $ 6,000 $ 3,000 $ 11,000 $ 5,000
========== ========== ========== ==========
Limited Partners $ 570,000 $ 267,000 $1,044,000 $ 485,000
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
REAL ESTATE INCOME PARTNERS III, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,055,000 $ 490,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 66,000 797,000
Equity in earnings of Cooper Village Partners (158,000) (60,000)
Adjustment to carrying value of real estate 194,000 -
Loss on disposition of assets 13,000 -
Changes in:
Addition to properties held for sale (64,000) -
Accounts receivable 3,000 (42,000)
Prepaid expenses and other assets 51,000 84,000
Accrued rent receivable 24,000 (54,000)
Accounts payable and accrued liabilities (94,000) (49,000)
----------- ----------
Net cash provided by operating activities 1,090,000 1,166,000
Cash flows from investing activities:
Investments in real estate 2,153,000 (195,000)
Distributions received from
Cooper Village Partners 134,000 109,000
----------- ----------
Net cash provided by (used in) investing
activities 2,287,000 (86,000)
Cash flows from financing activities:
Distributions (3,420,000) (862,000)
----------- ----------
Net cash used in financing activities (3,420,000) (862,000)
Net (decrease) increase in cash and
cash equivalents (43,000) 218,000
Cash and cash equivalents, beginning of period 980,000 1,085,000
----------- ----------
Cash and cash equivalents, end of period $ 937,000 $1,303,000
=========== ==========
</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, the General Partner determined that Creek Edge
Business Center, Flaircentre and NorthTech had carrying values greater
than they had appraised values, and therefore reduced their carrying
values by $50,000, $600,000 and $350,000 to $3,802,000, $2,155,000 and
$13,933,000, respectively.
For the six months ended June 30, 1996, the Partnership incurred
$206,000 in tenant and building improvements and leasing commissions
at Creek Edge and the Forum. Since these expenditures had already
been anticipated by the Partnership in 1995 and taken into account in
the third-party appraisals that form the basis of the General
Partner's estimate of the fair market value of the Partnership's
portfolio as of December 31, 1995, the General Partner did not change
its estimate of the fair market value of the portfolio as of June 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
June 30, 1996 and 1995, the Partnership incurred approximately $32,000
and $43,000, respectively, of such expenses. For the six months ended
June 30, 1996 and 1995, such payments were $67,000 and $84,000
respectively.
7
<PAGE> 8
REAL ESTATE INCOME PARTNERS III, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)
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
$44,000 and $45,000, respectively, for the three months ended June 30,
1996 and 1995, respectively, and $93,000 and $92,000 for the six
months ended June 30, 1996 and 1995, respectively. In addition, an
affiliate of the General Partner received $15,000 and $27,000 for the
three months ended June 30, 1996 and 1995, respectively, as
reimbursement of costs of on-site property management personnel and
other reimbursable costs. For the six months ended June 30, 1996 and
1995, such payments were $32,000 and $51,000, 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 for the six months ended June 30,
1996 and 1995, amounted to $116,000 and $120,000, 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 six months ended June 30, 1996 and 1995, amounted to $26,000 and
$23,000, respectively.
In addition to the aforementioned, the General Partner was also paid
$14,000 and $16,000 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 June 30, 1996 and
1995, respectively. For the six months ended June 30, 1996 and 1995,
such cost were $31,000 and $31,000 respectively.
8
<PAGE> 9
REAL ESTATE INCOME PARTNERS III, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - UNAUDITED (Cont'd.)
(3) 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.
Regular distributions through June 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 of substantially all of the net proceeds of the sale of
Flaircentre. Future cash distributions will be made principally to
the extent of cash flow attributable to operations and sales of the
Partnership's properties and interest earned on the investment by
capital reserves, after payment for capital improvements to the
Partnership's properties and providing for capital reserves.
9
<PAGE> 10
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.)
-------------------------------
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 $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 the
Partnership's 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 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.
10
<PAGE> 11
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.)
-------------------------------
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 June 30, 1996
Compared With the Three Months Ended June 30, 1995 and for the Six
Months Ended June 30, 1996 Compared With the Six Months Ended
June 30, 1995
------------------------------------------------------------------
The decrease in revenue for the three months ended June 30, 1996, as
compared to the corresponding period in 1995, was primarily
attributable to the sale of Flaircentre on June 4, 1996, which
resulted in a $62,000 decrease in revenue in 1996. In addition, at
the Forum, operating expense recoveries decreased by $56,000,
primarily because of lower property taxes and the resultant 1995
reconciliation of operating expense recoveries during the second
quarter of 1996, including a $39,000 refund for a tenant overpayment.
The decrease in revenue for the six months ended June 30, 1996 as
compared to the corresponding period in 1995 was attributable to the
following factors: At Flaircentre, revenue decreased by $84,000,
primarily because of lower occupancy and the sale of the property on
June 4, 1996; at the Forum, operating expense recoveries decreased by
$95,000; at Creek Edge, revenue decreased by $51,000, primarily
because Computer Data Products, Inc., lease expired in August 1995 and
was not renewed, and Soultronix terminated it's lease prior to
scheduled expiration in September 1995. The aforementioned decrease
was partially offset by increased revenue at Northtech ($82,000),
primarily a result of the commencement of International Data Products'
lease effective March 1, 1995.
Interest income resulted from the temporary investment of Partnership
working capital. For the six months ended June 30, 1996, interest
income was generally comparable to the same period in 1995.
The decrease in operating expenses for the three months ended June 30,
1996, as compared to the corresponding period in 1995, was primarily
attributable to a decrease in operating expenses at Flaircentre due to
the sale of the property on June 4, 1996 ($12,000). In addition, at
Northtech legal and professional services decreased by $10,000 in
1996.
The decrease in operating expenses for the six months ended June 30,
1996, as compared to the corresponding period in 1995, was primarily
attributable to a decrease in space planning, on-site wages, legal
fees and HVAC repairs and maintenance at Northtech ($37,000).
The decrease in real estate taxes for the three and six months ended
June 30, 1996, as compared to the corresponding periods in 1995, was
primarily attributable to a decrease in real estate tax expense at
Flaircentre due to sale of the property on June 4, 1996. In addition,
at Northtech a successful real estate tax appeal resulted in a $44,000
refund during the second quarter of 1996.
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 June 30, 1996
Compared With the Three Months Ended June 30, 1995 and for the Six
Months Ended June 30, 1996 Compared With the Six Months Ended
June 30, 1995 (Cont'd.)
------------------------------------------------------------------
The decrease in depreciation and amortization for the three and six
months ended June 30, 1996, as compared to the corresponding period in
1995, was 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." As
previously reported, as of December 31, 1995, the General Partner
decided to account for the Partnership's properties as assets held for
sale, which are no longer depreciated.
The Partnership adjusted the carrying value of the portfolio by
$194,000, which is the amount spent on leasing commissions and other
related assets for Creek Edge Business Center.
The increase in equity in earnings of Cooper Village Partners for the
six months ended June 30, 1996, as compared to the corresponding
period in 1995, was primarily attributable to the Partnership's
portion (42%) of a $127,000 lease termination settlement fee collected
from Boston Store in March 1996.
General and administrative expenses for the six months ended June 30,
1996 and 1995, included charges of $209,000 and $227,000,
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 six months ended June
30, 1996 and 1995, are direct charges of $160,000 and $161,000,
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 decrease in general and administrative expenses for the three and
six months ended June 30, 1996, as compared to the corresponding
periods in 1995, was primarily attributable to a decrease in general
and administrative wages, asset management fees and appraisal fees.
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.
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:
Report on form 8-K dated June 7, 1996, regarding the sale of
Flaircentre, a complex composed of 11 one-story office
buildings located on 3.7 acres of land in El Monte, California
for $2,300,000.
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.
<TABLE>
<S> <C> <C>
REAL ESTATE INCOME PARTNERS III
LIMITED PARTNERSHIP
By: BIRTCHER/LIQUIDITY PROPERTIES By: BIRTCHER INVESTORS,
(General Partner) a California limited partnership
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: August 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: August 12, 1996 By: /s/ BRENT R. DONALDSON
-----------------------------
Brent R. Donaldson
President
Liquidity Fund Asset
Management, Inc.
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AND STATEMENT OF OPERATIONS OF REAL ESTATE INCOME PARNTERS III AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 937,000
<SECURITIES> 0
<RECEIVABLES> 76,000
<ALLOWANCES> 8,000
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0
0
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</TABLE>
