SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1998
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 No. 0-18531
Development Partners III (A Massachusetts Limited Partnership)
(formerly Berry and Boyle Development Partners III)
(Exact name of registrant as specified in its charter)
------
Massachusetts 04-3017036
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer incorporation
or organization) Identification No.)
5110 Langdale Way, Colorado Springs, CO 80906
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(719) 527-0544
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interests
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 and 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>
PART I. FINANCIAL INFORMATION
<PAGE>
<TABLE>
June 30, Decebmer 30,
1998 1997
ASSETS
Assets held for sale/Property, at cost
<S> <C>
Land $ $2,976,101
-
Buildings and improvements 7,648,060
Equipment, furnishings and fixtures - 1,122,596
--------------- ----------------
11,746,757
Less accumulated depreciation - (2,228,967)
--------------- ----------------
9,517,790
Cash and cash equivalents 2,605,935 253,777
Accounts receivable 14,572 5,907
Real estate tax escrow and prepaid - 25,821
expenses
Deposits - 1,950
Deferred expenses, net of accumulated
amortization of $137,841 and $123,914 - 13,927
=============== ================
Total assets $2,620,507 $9,819,172
=============== ================
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Mortgage note payable $ - $6,766,437
Accounts payable and accrued expenses 14,436 163,023
Due to affiliates (Note 7) 4,697 5,370
Tenant security deposits - 23,090
--------------- ----------------
Total liabilities 19,133 6,957,920
Minority Interest - 1,196,756
General Partners' deficit (335) (51,227)
Limited Partners' equity 2,601,710 1,715,723
--------------- ----------------
Total liabilities and $2,620,507 $9,819,172
partners' equity
=============== ================
<PAGE>
(Unaudited)
-------------
Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
Revenue:
<S> <C> <C> <C> <C>
Rental income $224,940 $374,129 $636,657 $387,829
Interest Income 27,660 5,027 30,148 5,922
Gain on sale of property 1,899,836 - 1,899,836 -
--------------- ---------------- -------------- ----------------
$2,152,436 $379,156 $2,566,641 $393,751
Expenses:
Operating Expenses 100,980 169,001 268,885 182,748
Interest 130,631 156,199 284,752 156,862
Depreciation and amortization 7,499 66,684 13,927 66,684
General and administrative 27,459 22,942 56,337 17,877
--------------- ---------------- -------------- ----------------
266,569 414,826 623,901 424,171
--------------- ---------------- -------------- ----------------
Net loss before minority interest 1,885,867 (35,670) 1,942,740 (30,420)
Minority interests' equity in
subsidiary net (income) loss (972,132) 8,154 (1,010,750) 7,995
--------------- ---------------- -------------- ----------------
Net income (loss) $913,735 ($27,516) $931,990 ($22,425)
=============== ================ ============== ================
Net income (loss) allocated to:
General Partners $73,099 ($224) $50,892 ($224)
Basic and diluted per unit of
Investor Limited
Partner interest:
7,401 Units issued $113.58 ($3.00) $119.05 ($3.00)
<PAGE>
Investor Total
General Limited Partners'
Partners Partners Equity
<S> <C> <C> <C>
Balance at December 31, 1996 (47,185) 1,862,467 1,815,282
Cash distributions (2,896) (33,304) (36,200)
Net loss (1,146) (113,440) (114,586)
---------------- -------------- ----------------
Balance at December 31, 1997 (51,227) 1,720,612 1,664,496
Cash distributions - - -
Net income 50,892 881,098 931,990
---------------- -------------- ----------------
Balance at June 30, 1998 ($335) $2,601,710 $2,596,486
================ ============== ================
<PAGE>
(Unaudited)
-------------
Six months ended
June 30,
1998 1997
---- ----
Cash flows from operating activities:
<S> <C> <C>
Interest received $30,148 $5,922
Cash received from rents 604,902 385,243
Administrative expenses (63,895) (27,471)
Rental operations expenses (359,673) (162,062)
Interest paid (310,479) (156,862)
---------------- --------------
Net cash provided by operating activities (98,997) 44,771
Cash flows from investing activities:
Capital Improvements (121,076) (42,695)
Proceeds from sale of property 11,538,703 -
---------------- --------------
Net cash provided (used) by investing 11,417,626 (42,695)
activities
Cash flows from financing activities:
Distributions to partners - (33,305)
Payments on mortgage note payable (6,766,437) (28,801)
Distributions paid to minority interest (2,202,617) -
Cash paid for deposits 1,950 -
Cash paid for prepaid expenses 633 -
---------------- --------------
Net cash provided (used) by financing (8,966,471) (62,106)
activities
---------------- --------------
Net increase (decrease) in cash and cash 2,352,158 (60,030)
equivalents
Cash and cash equivalents at beginning of 253,777 531,778
year
---------------- --------------
Cash and cash equivalents at end of year $2,605,935 $471,748
================ ==============
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
-------------
Reconciliation of net loss to net cash provided by operating activities:
Six months ended
June 30,
1998 1997
<S> <C> <C>
Net income $931,990 ($22,425)
Adjustments to reconcile net income to
net cash
provided by operating activities:
Depreciation and amortization 13,927 66,684
Minority interests' equity in subsidiary 1,010,750 (7,995)
(income) loss
Gain from sale of property (1,899,836) -
Change in assets and liabilities net of
effects
from investing and financing
activities:
Increase in accounts and interest (8,665) -
receivable
Increase (decrease) in real estate 25,188 (25,887)
tax escrow
(Decrease) increase in accounts
payable and accrued expenses (148,587) 34,204
Increase (decrease) in due to (674) 2,776
affiliates
Decrease in rents received in - (3,507)
advance
Increase (decrease) in tenant security (23,090) 921
deposits
---------------- --------------
Net cash provided by operating ($98,997) $44,771
activities
================ ==============
</TABLE>
<PAGE>
PART I
1. Organization of Partnership
Development Partners III (A Massachusetts Limited Partnership) (the
"Partnership"), formerly Berry and Boyle Development Partners III, was formed on
July 11, 1988. GP L'Auberge Communities, L.P., a California Limited Partnership
(formerly Berry and Boyle Management) and Stephen B. Boyle are the General
Partners. In September, 1995, with the consent of Limited Partners holding a
majority of the outstanding Units, as well as the consent of the mortgage
lenders for the Partnership's three properties, Richard G. Berry resigned as a
general partner of the Partnership. Except under certain limited circumstances
upon termination of the Partnership, the General Partners are not required to
make any additional capital contributions. The General Partners or their
affiliates will receive various fees for services and reimbursement for various
organizational, administrative and selling costs incurred on behalf of the
Partnership.
On January 13, 1989 the Securities and Exchange Commission declared the
Partnership's public offering (the "Prospectus") of up to 80,000 units of
Limited Partnership Interests at $500 per unit (the "Units") effective and the
marketing and sale of the Units commenced shortly thereafter. The initial
closing of the offering took place on December 28, 1989 at which time the
holders of 3,048 Units were admitted into the Partnership. The Partnership
continued to admit subscribers monthly thereafter until December 27, 1991, its
last closing date. The Partnership terminated the offering on January 13, 1992
having admitted 289 investors acquiring 7,401 Units totaling $3,700,500.
The Partnership will continue until December 31, 2018, unless earlier terminated
by the sale of all, or substantially all, of the assets of the Partnership, or
as otherwise provided in the Partnership Agreement. The Partnership has sold
substantially all of the assets and is in its final liquidation. Once all
Partnership obligations have been satisfied, the remaining Partnership funds are
anticipated to be distributed to the Limited Partners. It is anticipated that
the Partnership will be wound up by December 31, 1998.
2. Significant Accounting Policies
A. Basis of Presentation
The consolidated financial statements include the accounts of the
Partnership and its subsidiary Casabella Associates. All intercompany
accounts and transactions have been eliminated in consolidation. The
Partnership follows the accrual basis of accounting. Refer to Note 4
regarding the termination of the Casabella Joint Venture.
B. Cash and Cash Equivalents
The Partnership considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents. The
carrying value of cash and cash equivalents approximates fair value. It
is the Partnership's policy to invest cash in income-producing
temporary cash investments. The Partnership mitigates any potential
risk from such concentration of credit by placing investments with high
quality financial institutions.
C. Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
2. Significant Accounting Policies, continued
D. Depreciation
Depreciation is provided for by the use of the straight-line method
over the estimated useful lives as follows:
Buildings and improvements 39-40 years
Equipment, furnishings and fixtures 5-15 years
E. Deferred Expenses
Costs of obtaining or extending the mortgage on Casabella are being
amortized over the mortgage term using the straight-line method, which
approximates the effective interest method. Any unamortized costs
remaining at the date of refinancing are expensed in the year of
refinancing.
F. Income Taxes
The Partnership is not liable for Federal or state income taxes because
Partnership income or loss is allocated to the Partners for income tax
purposes. If the Partnership's tax returns are examined by the Internal
Revenue Service or state taxing authority and such an examination
results in a change in Partnership taxable income (loss), such change
will be reported to the Partners.
G. Rental Income
Leases require the payment of rent in advance, however, rental income
is recorded as earned.
H. Long-Lived Assets
In 1996, the Partnership adopted Statement of Financial Accounting
Standards No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and Assets to be Disposed of." SFAS 121 requires that
long-lived assets be reviewed for impairment whenever events or changes
in circumstances indicate that their carrying value may not be
recoverable. The adoption of SFAS 121 had no effect on reported results
in 1996. As further discussed in Note 9, for the year ended December
31, 1997 the Partnership recorded its property at the lower of carrying
value or net realizable value and has included these amounts as Assets
Held for Sale.
For the period ended June 30, 1998 and 1997, permanent impairment
conditions did not exist at the Partnership's property.
I. New Accounting Standard
In 1997, the Partnership adopted Statement of Financial Accounting
Standards No. 128 (SFAS 128), "Earnings Per Share." This accounting
standard specifies new computation, presentation, and disclosure
requirements for earnings per share to be applied retroactively. Among
other things, SFAS 128 requires presentation of basic and diluted
earnings per share on the face of the income statement. The computation
of basic and diluted earnings per share was based on income available
to the Limited Partners divided by the weighted average number of units
outstanding during the period. The Partnership has no dilutive type
securities. The adoption of SFAS 128 had no effect on the per unit
results previously reported.
3. Cash and cash equivalents
Cash and cash equivalents at June 30, 1998 and 1997 consisted of the following:
June 30, December 31,
1998 1997
Cash on hand $54,162 $167,044
Money market accounts 2,551,773 86,733
-------- -------
$2,605,935 $253,777
========= =======
4. Joint Venture and Property Acquisitions
On September 28, 1990, the Partnership acquired a majority interest in Casabella
Associates, a general partnership comprised of the Partnership, Development
Partners (A Massachusetts Limited Partnership) ("DPI"), formerly Berry and Boyle
Development Partners, and Development Partners II (A Massachusetts Limited
Partnership) ("DPII"), formerly Berry and Boyle Development Partners II.
Casabella Associates was formed to acquire a majority interest in the Casabella
Joint Venture which owns Casabella, a 154-unit residential property located in
Scottsdale, Arizona. Since the Partnership owns a majority interest in Casabella
Associates, the accounts and operations of Casabella Associates (including the
accounts and operations relating to Casabella Associates' majority interest in
the Casabella Joint Venture) have been consolidated into the Partnership.
The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a
Phoenix based residential development, construction and management firm. EWI
also developed the property known as Casabella.
At June 30, 1998, the Partnership, DPI and DPII had contributed $2,500,000,
$400,000 and $1,800,000, respectively, to Casabella Associates. Of the total
contributions, $3,845,154 was used to purchase the majority interest in the
Casabella Joint Venture referred to in the second preceding paragraph and
$500,000 was used to fund an escrow account maintained by the permanent lender.
In addition to the $4,700,000 of cash contributions referred to above, the
Partnership, DPI and DPII collectively incurred $280,930 of acquisition costs
which have been recorded as additional capital contributions to Casabella
Associates.
JANUARY 1, 1996 THROUGH MAY 13, 1996:
Cash distributions and allocations of income and loss from Casabella Associates
are governed by the partnership agreement and are generally based on the ratio
of capital contributed by each of the joint venture partners.
Net cash from operations of the Casabella Joint Venture, to the extent
available, shall be distributed not less often than quarterly with respect to
each fiscal year, as follows:
(A) First, to Associates, an amount equal to a 10.6% per annum
(computed on a simple noncompounded daily basis from the date
of the closing) of their capital investment;
(B) Second, the balance 70% to Associates and 30% to the property
developer.
All losses from operations and depreciation for the Casabella Joint Venture were
allocated 99.5% to Associates and 0.5% to the property developer.
All profits from operations of the Casabella Joint Venture were allocated in
accordance with distributions of net cash from operations; provided, however,
that if any fiscal year has no distributable net cash from operations, profits
will be allocated 99.5% to Associates and 0.5% to the property developer.
4. Joint Venture and Property Acquisitions, continued
In the case of certain capital transactions and distributions as defined in the
Casabella joint venture agreement, the allocation of related profits, losses and
cash distributions, if any, would be different than as described above and would
be affected by the relative balance in the individual partners' capital
accounts.
MAY 14, 1996 THROUGH MAY 22, 1998:
On May 14, 1996, the Partnership and certain affiliates consummated an agreement
with Evans Withycombe Management, Inc. and certain of its affiliates ("EWI")
which separated the interests of EWI and the Partnership, thus affording the
Partnership greater flexibility in the operation and disposition of Casabella.
The Partnership, DPI, and DPII paid $71,009 to EWI ($38,345 of which was the
Partnership's portion) and delivered certain mutual releases. EWI (i)
relinquished its contract to manage Casabella and its option to exercise its
rights to first refusal with regard to the sale of the property and (ii)
assigned all of its interest in the Casabella Joint Venture to the Partnership,
DPII and DPIII (while preserving the economic interest of the venture in these
Joint Ventures), which resulted in the dissolution of the Casabella Joint
Venture.
On May 22, 1998, Casabella was sold pursuant to the terms of a Sale Agreement
and Escrow Instructions (the "Agreement") dated February 4, 1998, as amended.
Casabella was sold to Casabella Condominium Ventures Limited Partnership, a
limited partnership unaffiliated with the Partnership. The purchase price was
$11,700,000, subject to certain customary adjustments and a $120,000 credit to
the purchaser. The Partnership repaid mortgage financing in the approximate
amount of $6,750,400 at closing utilizing a portion of proceeds from the sale.
The net proceeds to Casabella Associates from the sale of Casabella were
approximately $4,570,300 of which the Partnership's share is approximately
$2,431,380.
5. Mortgage Note Payable
All of the property owned by the Partnership is pledged as collateral for the
nonrecourse mortgage note payable pertaining to Casabella in the original
principal amount of $7,320,000. The original maturity date for this note was
July 15, 1997. On July 10, 1997 the lender extended the terms of the mortgage
note for a period of one year. Under the modification agreement, monthly
principal and interest payments of $61,887 and a fixed interest rate of 9.125%
remain unchanged. The terms of the agreement provide for a pre-payment penalty
of 0.5% of the outstanding loan amount in the event the note is paid prior to 60
days before the note becomes due. As discussed in Note 4, the Partnership sold
Casabella and the outstanding mortgage debt of $6,766,437 was paid. There was no
prepayment penalty assessed since the debt was paid within 60 days of maturity.
Accrued interest included in accrued expenses on the Balance Sheets of the
Consolidated Financial Statements at June 30, 1998 and December 31, 1997,
consisted of $ -0- and $25,727, respectively.
<PAGE>
6. Partners' Equity
Under the terms of the Partnership Agreement, as amended, profits are allocated
92% to the Limited Partners and 8% to the General Partners; losses are allocated
99% to the Limited Partners and 1% to the General Partners.
Cash distributions to the partners are governed by the Partnership Agreement and
are made, to the extent available, 92% to the Limited Partners and 8% to the
General Partners.
Gain from the sale of properties is to be allocated as defined in the
Partnership Agreement. The net proceeds on the sale of Casabella of $2.4 million
were allocated as follows. The Limited Partners received 100% of the cash
distribution from sale. The Partnership's share of the gain on sale of Casabella
of $539,128 was allocated as follows. The General Partner received a gain on
sale allocation of approximately $9,631 and the Limited Partners received a gain
on sale allocation of approximately $529,497. These allocations were in
accordance with the terms of the Partnership Agreement.
7. Related Party Transactions
L'Auberge Communities, Inc. is a General Partner of L'Auberge Communities, which
owns a 99% interest in GP L'Auberge Communities, L.P. (formerly Berry and Boyle
Management). Due to affiliates at June 30, 1998 and December 31, 1997 consisted
of $20,407 and $5,370, respectively, of reimbursable costs payable to L'Auberge
Communities, Inc., formerly Berry and Boyle Inc.
For the period ended June 30, 1998 and 1997, general and administrative expenses
included $5,004, and $12,651, respectively, of salary reimbursements paid to the
General Partners for certain administrative and accounting personnel who
performed services for the Partnership.
The officers and principal shareholders of Evans Withycombe, Inc., the developer
of Casabella, together hold a two and one half percent cumulative profit or
partnership voting interest in LP L'Auberge Communities, formerly Berry and
Boyle.
During the six months ended June 30, 1998 and 1997, property management fees of
$25,471 and $30,400, respectively were paid to Residential Services-L'Auberge,
an affiliate of the General Partner. This represents 4% of the rental revenues.
<PAGE>
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements including those concerning the
General Partners' expectations regarding future financial performance and future
events. These forward-looking statements involve significant risk and
uncertainties, including those described herein. Actual results may differ
materially from those anticipated by such forward-looking statements.
Liquidity; Capital Resources
The working capital reserves of the Partnership consist of cash and cash
equivalents and short-term investments. These reserves provide the Partnership
with the necessary liquidity to carry on its day-to-day operations and to make
necessary contributions to Casabella. At June 30, 1998, the Partnership had cash
and cash equivalents of $2,605,935 compared with $253,777 at December 31, 1997.
The aggregate net increase of $2,352,158 in working capital reserves resulted
primarily from the sale proceeds of $11,538,703 offset by the mortgage payoff of
$6,766,437, distributions of $2,202,617 to the minority interest relating to the
sale proceeds, cash required for operations of $98,997 and $121,076 of fixed
asset expenditures.
Subsequently, on August 14, 1998, the Partnership distributed the sale proceeds
from Casabella to the limited partners. The total amount distributed was
$2,412,726 or $326 per interest.
<PAGE>
Results of Operations
The Partnership's operating results for the three months ended June 30, 1998,
consisted of interest earned on short-term investments, general and
administrative expenses, amortization expense and its share of the income (loss)
from Casabella Associates and Casabella. A summary of these operating results
appear below:
<TABLE>
Casabella Partnership Consolidated
Casabella Associates Level Totals
<S> <C> <C> <C> <C>
Revenue $228,566 $22,483 $1,551 $252,600
Gain on sale of property 1,899,836 1,899,836
Expenses:
General and administrative - 819 26,640 27,459
Operations 100,980 - - 100,980
Depreciation and amortization 7,499 - - 7,499
Interest 130,631 - - 130,631
---------------- ------------- -- ------------ ------------
239,110 819 26,640 266,569
---------------- --------------- -------------- --------------
Net loss before minority 1,889,292 21,664 (25,089) 1,885,867
interest
Minority Interests' share of
net (income) loss (972,132) - - (972,132)
---------------- -------------- -------------- --------------
Net income (loss) $917,160 $21,664 ($25,089) $913,735
================ ============== ============ =============
The Partnership's operating results for the three months ended June 30, 1997,
consisted of interest earned on short-term investments, general and
administrative expenses, amortization expense and its share of the income (loss)
from Casabella Associates and Casabella. A summary of these operating results
appear below:
Casabella Partnership Consolidated
Casabella Associates Level Totals
<S> <C> <C> <C> <C>
Revenue $374,129 $2,773 $2,254 $379,156
Expenses:
General and administrative - 2,442 20,500 22,942
Operations 169,001 - - 169,001
Depreciation and amortization 66,684 - - 66,684
Interest 156,199 - - 156,199
----------- ------------- --------------- ----------------
391,884 2,442 20,500 414,826
----------- ------------- --------------- ----------------
Net loss before minority interest (17,755) 331 (18,246) (35,670)
Minority Interests' share of
net (income) loss - 8,154 - 8,154
----------- ------------- --------------- ----------------
Net income (loss) ($17,755) $8,485 ($18,246) ($27,516)
=========== ============= =============== ================
The Partnership's operating results for the six months ended June 30, 1998
consisted of interest earned on short-term investments, general and
administrative expenses, amortization expense and its share of the income (loss)
from Casabella Associates and Casabella. A summary of these operating results
(unaudited) appears below:
Casabella Partnership Consolidated
Casabella Associates Level Totals
<S> <C> <C> <C> <C>
Revenue $640,283 $23,062 $3,460 $ 666,805
Gain on sale of property 1,899,836 1,899,836
Expenses:
General and administrative - 2,144 54,193 56,337
Operations 268,885 - - 268,885
Depreciation and amortization 13,927 - - 13,927
Interest 284,752 - - 284,752
---------------- ------------------- -------------- --------------
567,564 2,144 54,193 623,901
---------------- ------------------- -------------- --------------
Net loss before minority 1,972,555 20,918 (50,733) 1,942,740
interest
Minority Interests' share of
net (income) loss - (1,010,750) - (1,010,750)
---------------- ------------------- -------------- --------------
Net income (loss) $1,972,555 ($1,156,082) ($50,733) $931,990
================ =================== ============== ==============
The Partnership's operating results for the six months ended June 30, 1997
consisted of interest earned on short-term investments, general and
administrative expenses, amortization expense, and its share of the income
(loss) from Casabella Associates and Casabella Joint Venture. A summary of these
operating results (unaudited) appears below:
Casabella Partnership Consolidated
Casabella Associates Level Totals
<S> <C> <C> <C> <C>
Revenue $761,958 $5,620 $5,329 $772,907
Expenses:
General and administrative - 3,908 36,911 40,819
Operations 351,672 77 - 351,749
Depreciation and amortization 133,368 - - 133,368
Interest 313,061 - - 313,061
----------- -------------- --------------- ----------------
798,101 3,985 36,911 838,997
----------- -------------- --------------- ----------------
Net loss before minority (36,143) 1,635 (31,582) (66,090)
interest
Minority Interests' share of
net (income) loss - 16,149 - 16,149
----------- -------------- --------------- ----------------
Net income (loss) ($36,143) $17,784 ($31,582) ($49,941)
=========== ============== =============== ================
</TABLE>
Comparison of 1998 and 1997 Operating Results
Partnership operations for the six months ended June 30, 1998 generated net
income of $931,990 compared with a net loss of $49,941 for the corresponding
period in 1997. The gain on the sale of Casabella was $1,899,836 offset by the
minority interest's share of $1,010,750. Operating revenue decreased by $106,102
or 14%, primarily due to the fact that Casabella was sold on May 22, 1998, thus
only a portion of the quarter is reflected. Likewise, the operating expenses
decreased by $82,864 or 24% due to the sale of the property. General and
administrative expenses increased by $15,518 or 38% primarily due to the legal
costs associated with the sales contract, as well as the consent solicitation
sent to the Limited Partners for the dissolution of the Partnership.
<PAGE>
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PART II - OTHER INFORMATION
-----------------
ITEM 1. Legal Proceedings
Response: None
ITEM 2. Changes in Securities
Response: None
ITEM 3. Defaults Upon Senior Securities
Response: None
ITEM 4. Submission of Matters to a Vote of Security Holders
Response: None
ITEM 5. Other Information
ITEM 6. Exhibits and Reports on Form 8-K
Response: : The Partnership reported the sale of Casabella on
Form 8-K filed on June 4, 1998.
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.
DEVELOPMENT PARTNERS III
(A Massachusetts Limited Partnership)
By: GP L'Auberge Communities, L.P., A California Limited Partnership,
General Partner
By: L'Auberge Communities, Inc., its General Partner
By: ____/s/ Stephen B. Boyle________________
Stephen B. Boyle, President
Date: August 14, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Jun-30-1998
<CASH> 2,605,935
<SECURITIES> 0
<RECEIVABLES> 14,572
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,620,507
<CURRENT-LIABILITIES> 19,133
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,601,375
<TOTAL-LIABILITY-AND-EQUITY> 2,620,507
<SALES> 0
<TOTAL-REVENUES> 2,566,641
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 931,990
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<EPS-DILUTED> 0
</TABLE>
