<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED March 31, 1999
--------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM N/A
--------------------------------------------------
COMMISSION FILE NUMBER 0-18563
----------------------------------------------------------
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Massachusetts 04-3025607
- ----------------------------------- -------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
200 Clarendon Street, Boston, MA 02116
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(800) 722-5457
- --------------------------------------------------------------------------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
N/A
- --------------------------------------------------------------------------------
(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 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
Yes X No
--- ---
<PAGE> 2
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
INDEX
PART I: FINANCIAL INFORMATION PAGE
Item 1 - Financial Statements:
Balance Sheets at March 31, 1999 and
December 31, 1998 3
Statements of Operations for the Three
Months Ended March 31, 1999 and 1998 4
Statements of Partners' Equity for the
Three Months Ended March 31, 1999 and
for the Year Ended December 31, 1998 5
Statements of Cash Flows for the Three
Months Ended March 31, 1999 and 1998 6
Notes to Financial Statements 7-12
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 13-17
PART II: OTHER INFORMATION 18
2
<PAGE> 3
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
MARCH 31, DECEMBER 31,
1999 1998
---- ----
<S> <C> <C>
Cash and cash equivalents $ 4,758,226 $ 5,874,797
Restricted cash 79,541 79,541
Other assets 267,395 348,339
Property held for sale 3,456,208 1,504,448
Investment in property:
Land 7,097,135 7,667,535
Building and improvements 18,327,680 21,960,686
------------ ------------
25,424,815 29,628,221
Less: accumulated depreciation 4,938,222 5,633,631
------------ ------------
20,486,593 23,994,590
Investment in joint venture 6,984,176 7,036,529
Deferred expenses, net of accumulated
amortization of $1,786,627 in 1999 and
$1,718,411 in 1998 778,653 959,492
------------ ------------
Total assets $ 36,810,792 $ 39,797,736
============ ============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 313,958 $ 383,720
Accounts payable to affiliates 229,295 232,430
------------ ------------
Total liabilities 543,253 616,150
Partners' equity/(deficit):
General partner's (64,025) (38,068)
Limited partners' 36,331,564 39,219,654
------------ ------------
Total partners' equity 36,267,539 39,181,586
------------ ------------
Total liabilities and partners' equity $ 36,810,792 $ 39,797,736
============ ============
</TABLE>
See Notes to Financial Statements
3
<PAGE> 4
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
---------- ----------
<S> <C> <C>
Income:
Rental income $ 796,684 $ 907,535
Income from joint venture 201,402 191,122
Interest income 57,178 32,894
Gain on sale 575,591 --
---------- ----------
Total income 1,630,855 1,131,551
Expenses:
Depreciation 162,384 207,416
General and administrative expenses 81,574 56,219
Amortization of deferred expenses 72,027 87,456
Property operating expenses 84,232 59,776
---------- ----------
Total expenses 400,217 410,867
---------- ----------
Net income $1,230,638 $ 720,684
========== ==========
Allocation of net income:
General Partner $ 49,551 $ 48,953
John Hancock Limited Partner -- 73,443
Investors 1,181,087 598,288
---------- ----------
$1,230,638 $ 720,684
========== ==========
Net Income per Unit $ .49 $ .25
========== ==========
</TABLE>
See Notes to Financial Statements
4
<PAGE> 5
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1999 AND
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
------- -------- -----
<S> <C> <C> <C>
Partners' equity/(deficit) at January 1, 1998
(2,415,234 Units outstanding) $ (52,449) $ 39,304,074 $ 39,251,625
Less: Cash distributions (192,201) (3,651,827) (3,844,028)
Add: Net income 206,582 3,567,407 3,773,989
------------ ------------ ------------
Partners' equity/(deficit) at December 31, 1998
(2,415,234 Units outstanding) (38,068) 39,219,654 39,181,586
Less: Cash distributions (75,508) (4,069,177) (4,144,685)
Add: Net income 49,551 1,181,087 1,230,638
------------ ------------ ------------
Partners' equity/(deficit) at March 31, 1999
(2,415,234 Units outstanding) $ (64,025) $ 36,331,564 $ 36,267,539
============ ============ ============
</TABLE>
See Notes to Financial Statements
5
<PAGE> 6
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
---- ----
<S> <C> <C>
Operating activities:
Net income $ 1,230,638 $ 720,684
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 162,384 207,416
Amortization of deferred expenses 72,027 87,456
Cash distributions over equity
in income from joint venture 52,354 68,116
Gain on sale of property (575,591) --
----------- -----------
941,812 1,083,672
Changes in operating assets and liabilities:
Increase in restricted cash -- (1,583)
Decrease in other assets 80,944 26,982
Increase/(decrease) in accounts payable and
accrued expenses (69,762) 41,445
Increase (decrease) in accounts payable to affiliates (3,135) 1,052
----------- -----------
Net cash provided by operating activities 949,858 1,151,568
Investing activities:
Proceeds from sale of property 2,080,039 --
Increase in deferred expenses (1,784) (6,660)
----------- -----------
Net cash provided by (used in) investing activities 2,078,255 (6,660)
Financing activities:
Cash distributed to Partners (4,144,685) (961,006)
----------- -----------
Net cash used in financing activities (4,144,685) (961,006)
----------- -----------
Net increase (decrease) in cash and cash equivalents (1,116,571) 183,902
Cash and cash equivalents at beginning of year 5,874,797 2,505,729
----------- -----------
Cash and cash equivalents at end of period $ 4,758,226 $ 2,689,631
=========== ===========
</TABLE>
See Notes to Financial Statements
6
<PAGE> 7
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION OF PARTNERSHIP
John Hancock Realty Income Fund-III Limited Partnership (the
"Partnership") was formed under the Massachusetts Uniform Limited
Partnership Act on November 4, 1988. As of March 31, 1999, the
Partnership consisted of John Hancock Realty Equities, Inc. (the "General
Partner"), a wholly-owned, indirect subsidiary of John Hancock Mutual
Life Insurance Company; John Hancock Realty Funding, Inc. (the "John
Hancock Limited Partner"); John Hancock Income Fund-III Assignor, Inc.
(the "Assignor Limited Partner"); and 2,294 Unitholders (the
"Investors"). The Assignor Limited Partner holds five Investor Limited
Partnership Interests for its own account and 2,415,229 Assignee Units
(the "Units"), representing economic and certain other rights
attributable to Investor Limited Partnership Interests in the
Partnership, for the benefit of the Investors. The John Hancock Limited
Partner, the Assignor Limited Partner and the Investors are collectively
referred to as the Limited Partners. The General Partner and the Limited
Partners are collectively referred to as the Partners. The initial
capital of the Partnership was $2,100, representing capital contributions
of $1,000 from the General Partner, $1,000 from the John Hancock Limited
Partner, and $100 from the Assignor Limited Partner. The Amended
Agreement of Limited Partnership of the Partnership (the "Partnership
Agreement") authorized the issuance of up to 5,000,000 Units at $20 per
unit. During the offering period, which terminated on February 15, 1991,
2,415,229 Units were sold and the John Hancock Limited Partner made
additional capital contributions of $3,863,366. There were no changes in
the number of Units outstanding subsequent to the termination of the
offering period.
The Partnership is engaged solely in the business of acquiring, holding
for investment and disposing of existing income-producing retail,
industrial and office properties on an all-cash basis, free and clear of
mortgage indebtedness. Although the Partnership's properties were
acquired and are held free and clear of mortgage indebtedness, the
Partnership may incur mortgage indebtedness under certain circumstances
as specified in the Partnership Agreement.
The latest date on which the Partnership is due to terminate is December
31, 2019, unless it is sooner terminated in accordance with the terms of
the Partnership Agreement. It is expected that, in the ordinary course of
the Partnership's business, the properties of the Partnership will be
disposed of, and the Partnership terminated, before December 31, 2019.
2. SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1999. For further information, refer to the financial
statements and footnotes thereto included in the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1998.
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 revenue and expenses
during the reporting period. Actual results may differ from those
estimates.
The Partnership maintains its accounting records and recognizes rental
revenue on the accrual basis.
Cash equivalents are highly liquid investments with maturities of three
months or less when purchased. These investments are recorded at cost
plus accrued interest, which approximates market value. Restricted cash
represents funds restricted for tenant security deposits.
Investments in property are recorded at cost less any property
write-downs for impairment in value. Cost includes the initial purchase
price of the property plus acquisition and legal fees, other
miscellaneous acquisition costs, and the cost of significant
improvements.
7
<PAGE> 8
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Partnership measures impairment in value in accordance with Financial
Accounting Standards Board Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets to Be Disposed Of" ("Statement 121").
Statement 121 requires impairment losses to be recorded on long-lived
assets used in operations where indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amounts.
Depreciation has been provided on a straight-line basis over the
estimated useful lives of the various assets: thirty years for the
buildings and five years for related improvements. Maintenance and
repairs are charged to operations as incurred.
Investment in joint venture is recorded using the equity method.
Acquisition fees for the joint venture investment have been deferred and
are amortized on a straight-line basis over a period of thirty-one and a
half years. Other deferred acquisition fees are amortized on a
straight-line basis over a period of eighty-four months. Capitalized
tenant improvements and lease commissions are amortized on a
straight-line basis over the terms of the leases to which they relate.
No provision for income taxes has been made in the financial statements
as such taxes are the responsibility of the individual Partners and not
of the Partnership.
The net income per Unit for the three months ended March 31, 1999 and
1998 is calculated by dividing the Investors' share of net income by the
number of Units outstanding at the end of such periods.
3. THE PARTNERSHIP AGREEMENT
Distributable Cash from Operations (defined in the Partnership Agreement)
is distributed 5% to the General Partner and the remaining 95% in the
following order of priority: first, to the Investors until they receive a
7% non-cumulative, non-compounded annual cash return on their Invested
Capital (defined in the Partnership Agreement); second, to the John
Hancock Limited Partner until it receives a 7% non-cumulative,
non-compounded annual cash return on its Invested Capital; and third, to
the Investors and the John Hancock Limited Partner in proportion to their
respective Capital Contributions (defined in the Partnership Agreement).
However, any Distributable Cash from Operations which is available as a
result of a reduction in working capital reserves funded by Capital
Contributions of the Investors will be distributed 100% to the Investors.
Profits for tax purposes from the normal operations of the Partnership
for each fiscal year are allocated to the Partners in the same amounts as
Distributable Cash from Operations for that year. If such profits are
less than Distributable Cash from Operations for any year, they are
allocated in proportion to the amounts of Distributable Cash from
Operations for that year. If such profits are greater than Distributable
Cash from Operations for any year, they are allocated 5% to the General
Partner and 95% to the John Hancock Limited Partner and the Investors,
with the allocation made between the John Hancock Limited Partner and the
Investors in proportion to their respective Capital Contributions. Losses
for tax purposes from the normal operations of the Partnership are
allocated 1% to the General Partner and 99% to the John Hancock Limited
Partner and the Investors, with the allocation made between the John
Hancock Limited Partner and the Investors in proportion to their
respective Capital Contributions. However, all tax aspects of the
Partnership's payment of the sales commissions from the Capital
Contributions made by the John Hancock Limited Partner are allocated 1%
to the General Partner and 99% to the John Hancock Limited Partner, and
not to the Investors. Depreciation deductions are allocated 1% to the
General Partner and 99% to the Investors, and not to the John Hancock
Limited Partner.
8
<PAGE> 9
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. THE PARTNERSHIP AGREEMENT (CONTINUED)
Neither the General Partner nor any affiliate of the General Partner
shall be liable, responsible or accountable in damages to any of the
Partners or the Partnership for any act or omission of the General
Partner or such affiliate in good faith on behalf of the Partnership
within the scope of the authority granted to the General Partner by the
Partnership Agreement and in the best interest of the Partnership, except
for acts or omissions constituting fraud, negligence, misconduct or
breach of fiduciary duty. The General Partner and its affiliates
performing services on behalf of the Partnership shall be entitled to
indemnity from the Partnership for any loss, damage, or claim by reason
of any act performed or omitted to be performed by the General Partner or
such affiliates in good faith on behalf of the Partnership and in a
manner within the scope of the authority granted to the General Partner
by the Partnership Agreement and in the best interest of the Partnership,
except that they shall not be entitled to be indemnified in respect of
any loss, damage, or claim incurred by reason of fraud, negligence,
misconduct, or breach of fiduciary duty. Any indemnity shall be provided
out of and to the extent of Partnership assets only. The Partnership
shall not advance any funds to the General Partner or its affiliates for
legal expenses and other costs incurred as a result of any legal action
initiated against the General Partner or its affiliates by a Limited
Partner in the Partnership.
4. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
Fees, commissions and other costs incurred or paid by the General Partner
or its Affiliates during the three months ended March 31, 1999 and 1998,
and to which the General Partner or its Affiliates are entitled to
reimbursement from the Partnership were $38,793 and $36,970,
respectively.
The Partnership provides indemnification to the General Partner and its
Affiliates for any acts or omissions of the General Partner or such
Affiliate in good faith on behalf of the Partnership, except for acts or
omissions constituting fraud, negligence, misconduct or breach of
fiduciary duty. The General Partner believes that this indemnification
applies to the class action complaint described in Note 9. Accordingly,
included in the Statement of Operations for the three months ended March
31, 1999 and 1998 are $12,191 and $3,462, respectively, representing the
Partnership's share of costs incurred by the General Partner and its
Affiliates relating to the class action complaint. Through March 31,
1999, the Partnership has accrued a total of $190,502 as its share of the
costs incurred by the General Partner and its Affiliates resulting from
this matter.
Accounts payable to affiliates represents amounts due to the General
Partner or its Affiliates for various services provided to the
Partnership, including amounts to indemnify the General Partner or its
Affiliates for claims incurred by them in connection with their actions
as General Partner of the Partnership. All amounts accrued by the
Partnership to indemnify the General Partner or its affiliates for legal
fees incurred by them shall not be paid unless or until all conditions
set forth in the Partnership Agreement for such payment have been
fulfilled.
The General Partner serves in a similar capacity for two other affiliated
real estate limited partnerships.
5. INVESTMENT IN PROPERTY
Investment in property at cost, less any write-downs, consists of
managed, fully-operating, commercial real estate as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
<S> <C> <C>
Palms of Carrollwood Shopping Center $10,930,578 $10,930,578
Yokohama Tire Warehouse 9,352,221 9,352,221
Purina Mills Distribution Building 4,203,406 4,203,406
Allmetal Distribution Building -- --
Business Center at Pureland 5,142,016 5,142,016
----------- -----------
$29,628,221 $29,628,221
=========== ===========
</TABLE>
9
<PAGE> 10
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
5. INVESTMENT IN PROPERTY (CONTINUED)
During June 1998, the Allmetal Distribution Building was listed for sale.
Accordingly, this property was classified as "Property Held for Sale" on
the Balance Sheet at December 31, 1998 at its carrying value, which was
not in excess of its estimated fair value, less selling costs. On
February 25, 1999, the Partnership sold the Allmetal Distribution
Building and received net sales proceeds of $2,080,039, after deductions
for commissions and selling expenses. This transaction generated a
non-recurring gain of $575,591, representing the difference between the
net sales price and the property's carrying value of $1,504,448.
The real estate market is cyclical in nature and is materially affected
by general economic trends and economic conditions in the market where a
property is located. As a result, determination of real estate values
involves subjective judgments. These judgments are based on current
market conditions and assumptions related to future market conditions.
These assumptions involve, among other things, the availability of
capital, occupancy rates, rental rates, interest rates and inflation
rates. Amounts ultimately realized from each property may vary
significantly from the values presented and the differences could be
material. Actual market values of real estate can be determined only by
negotiation between the parties in a sales transaction.
6. INVESTMENT IN JOINT VENTURE
On December 28, 1988, the Partnership invested $75,000 to acquire a 0.5%
interest in JH Quince Orchard Partners (the "Affiliated Joint Venture"),
a joint venture between the Partnership and John Hancock Realty Income
Fund-II Limited Partnership ("Income Fund-II"). The Partnership had an
initial 0.5% interest and Income Fund-II had an initial 99.5% interest in
the Affiliated Joint Venture.
Pursuant to the partnership agreement of the Affiliated Joint Venture,
the Partnership had the option, exercisable prior to December 31, 1990,
to increase its investment and interest in the Affiliated Joint Venture
to 50%. During the second quarter of 1989, the Partnership exercised such
option and Income Fund-II transferred a 49.5% interest in the Affiliated
Joint Venture to the Partnership for cash in the aggregate amount of
$7,325,672. The Partnership has held a 50% interest in the Affiliated
Joint Venture since the second quarter of 1989.
On December 28, 1988, the Affiliated Joint Venture contributed 98% of the
invested capital of, and acquired a 75% interest in, QOCC-1 Associates,
an existing partnership which owns and operates the Quince Orchard
Corporate Center, a three-story office building and related land and
improvements located in Gaithersburg, Maryland. The partnership agreement
of QOCC-1 Associates provides that the Affiliated Joint Venture
contribute 95% of any required additional capital contributions. Of the
cumulative total invested capital in QOCC-1 Associates at March 31, 1999,
97.55% has been contributed by the Affiliated Joint Venture. The
Affiliated Joint Venture continues to hold a 75% interest in QOCC-1
Associates.
Net cash flow from QOCC-1 Associates is distributed in the following
order of priority: (i) to the payment of all debts and liabilities of
QOCC-1 Associates and to fund reserves deemed reasonably necessary; ii),
to the partners in proportion to their respective invested capital until
each has received a 9% return on invested capital and iii) the balance,
if any, to the partners in proportion to their interests. Prior to 1996,
QOCC-1 Associates had not provided the partners with a return in excess
of 9% on their invested capital. During 1998, 1997 and 1996, the partners
received returns on invested capital of approximately 12%.
Income and gains of QOCC-1 Associates, other than the gains allocated
arising from a sale other similar event with respect to the Quince
Orchard Corporate Center, are allocated in the following order of
priority: i) to the partners who are entitled to receive a distribution
of net cash flow, pro rata in the same order and amounts as such
distributions are made and ii) the balance, if any, to the partners, pro
rata in accordance with their interests.
10
<PAGE> 11
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
7. DEFERRED EXPENSES
Deferred expenses consist of the following:
<TABLE>
<CAPTION>
Unamortized Unamortized
Balance At Balance At
March 31, December 31,
Description 1999 1998
----------- ----------- -----------
<S> <C> <C>
$152,880 of acquisition fees for
investment in the Affiliated Joint
Venture. This amount is amortized
over a period of 31.5 years $103,336 $104,549
$1,002,755 of tenant improvements. These
amounts are amortized over the terms
of the leases to which they relate 497,645 519,358
$336,024 of lease commissions. These
amounts are amortized over the terms
of the leases to which they relate 177,672 297,241
$1,073,621 of acquisition fees paid to the
General Partner. This amount is amortized
over a period of eighty-four months -- 38,344
-------- --------
$778,653 $959,492
======== ========
</TABLE>
8. FEDERAL INCOME TAXES
A reconciliation of the net income reported in the Statements of
Operations to the net income reported for federal income tax purposes is
as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
---- ----
<S> <C> <C>
Net income per Statements of Operations $1,230,638 $ 720,684
Add/(less): Excess of book depreciation 40,149 34,798
over tax depreciation
Excess of book amortization
over tax amortization 30,706 46,546
Other income -- 3,847
---------- ----------
Net income for federal income tax purposes $1,301,493 $ 805,875
========== ==========
</TABLE>
11
<PAGE> 12
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
9. CONTINGENCIES
In February 1996, a putative class action complaint was filed in the
Superior Court in Essex County, New Jersey by a single investor in a
limited partnership affiliated with the Partnership. The complaint named
as defendants the Partnership, the General Partner, certain other
Affiliates of the General Partner, and certain unnamed officers,
directors, employees and agents of the named defendants. The plaintiff
sought unspecified damages stemming from alleged misrepresentations and
omissions in the marketing and offering materials associated with the
Partnership and two limited partnerships affiliated with the Partnership.
On March 18, 1997, the court certified a class of investors who were
original purchasers in the Partnership.
The Partnership and the other defendants have answered the complaint
denying the material allegations and raising numerous affirmative
defenses. Discovery has commenced, and the Partnership and other
defendants have produced documents relating to the plaintiff's claims. No
depositions are scheduled. The court has heard the defendants' motion to
dismiss certain claims on grounds of the expiration of the statutes of
limitations and has stated it intends to hold a further hearing on that
matter to determine whether the case can be resolved by the disposition
of certain claims. The Partnership and the other defendants intend to
move to decertify the class and for summary judgment dismissing the
breach of contract claims.
The Partnership provides indemnification to the General Partner and its
Affiliates for acts or omissions of the General Partner in good faith on
behalf of the Partnership, except for acts or omissions constituting
fraud, negligence, misconduct or breach of fiduciary duty. The General
Partner believes that this indemnification applies to the class action
complaint described above.
The Partnership has incurred an aggregate of approximately $477,000 in
legal expenses in connection with this matter. Of this amount,
approximately $286,000 relates to the Partnership's own defense and
approximately $191,000 relates to indemnification of the General Partner
and its affiliates for their defense. These expenses are funded from the
operations of the Partnership.
At the present time, the General Partner can not estimate the aggregate
amount of legal expenses and indemnification claims to be incurred and
their impact on the Partnership's Financial Statements, taken as a whole.
Accordingly, no provision for any liability which could result from the
eventual outcome of these matters has been made in the accompanying
financial statements. However, while it is still too early to estimate
potential damages, they could possibly be material.
12
<PAGE> 13
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
During the offering period, from February 17, 1989 to February 15, 1991, the
Partnership sold 2,415,229 Units representing gross proceeds (exclusive of the
John Hancock Limited Partner's contribution which was used to pay sales
commissions) of $48,304,580. The proceeds of the offering were used to acquire
investment properties, fund reserves and pay acquisition fees and organizational
and offering expenses. These investments are described more fully in Notes 5 and
6 to the Financial Statements included in Item 1 of this Report.
IMPACT OF YEAR 2000
The General Partner and John Hancock Mutual Life Insurance Company, the General
Partner's ultimate parent (together, "John Hancock") along with the Partnership,
have developed a plan to modify or replace significant portions of the
Partnership's computer information and automated technologies so that its
systems will function properly with respect to the dates in the year 2000 and
thereafter. The Partnership presently believes that with modifications to
existing systems and conversions to new technologies, the year 2000 will not
pose significant operational problems for its computer systems. However, if
certain modifications and conversions are not made, or are not completed timely,
the year 2000 issue could have an adverse impact on the operations of the
Partnership.
John Hancock as early as 1994 had begun assessing, modifying and converting the
software related to its significant systems and has initiated formal
communications with its significant business partners and customers to determine
the extent to which John Hancock's interface systems are vulnerable to those
third parties' failure to remediate their own year 2000 issues. While John
Hancock is developing alternative third party processing arrangements as it
deems appropriate, there is no guarantee that the systems of other companies on
which the Partnership's systems rely will be converted timely or will not have
an adverse effect on the Partnership's systems.
The Partnership expects the project to be substantially complete by early 1999.
This completion target was derived utilizing numerous assumptions of future
events, including availability of certain resources and other factors. However,
there can be no guarantee that this completion target will be achieved.
FORWARD-LOOKING STATEMENTS
In addition to historical information, certain statements contained herein
contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Those statements appear in a number of places in this
Report and include statements regarding the intent, belief or expectations of
the General Partner with respect to, among other things, the prospective sale of
Partnership properties, repayment of mortgage loans, actions that would be taken
in the event of lack of liquidity, unanticipated leasing costs, repair and
maintenance expenses, distributions to the General Partner and to Investors, the
possible effects of tenants vacating space at Partnership properties, the
absorption of existing retail space in certain geographical areas, and the
impact of inflation.
Forward-looking statements involve numerous known and unknown risks and
uncertainties, and they are not guarantees of future performance. The following
factors, among others, could cause actual results or performance of the
Partnership and future events to differ materially from those expressed or
implied in the forward-looking statements: general economic and business
conditions; any and all general risks of real estate ownership, including
without limitation adverse changes in general economic conditions and adverse
local conditions, the fluctuation of rental income from properties, changes in
property taxes, utility costs or maintenance costs and insurance, fluctuations
of real estate values, competition for tenants, uncertainties about whether real
estate sales under contract will close; the ability of the Partnership to sell
its properties; and other factors detailed from time to time in the filings with
the Securities and Exchange Commission.
Readers are cautioned not to place undue reliance on forward-looking statements,
which reflect the General Partner's analysis only as of the date hereof. The
Partnership assumes no obligation to update forward-looking statements. See also
the Partnership's reports to be filed from time to time with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.
13
<PAGE> 14
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Partnership had $4,758,226 in cash and cash equivalents
and $79,541 in restricted cash.
The Partnership has a working capital reserve with a current balance of
approximately 3.5% of the offering proceeds. The General Partner anticipates
that such amount will be sufficient to satisfy the Partnership's general
liquidity requirements. The Partnership's liquidity would, however, be
materially adversely affected if there were a significant reduction in revenues
or significant unanticipated operating costs (including but not limited to
litigation expenses), unanticipated leasing costs or unanticipated capital
expenditures. If any or all of these events were to occur, to the extent that
the working capital reserve would be insufficient to satisfy the cash
requirements of the Partnership, it is anticipated that additional funds would
be obtained through a reduction of cash distributions to Investors, bank loans,
short-term loans from the General Partner or its affiliates, or the sale or
financing of Partnership investments.
During the three months ended March 31, 1999, cash from working capital reserves
in the aggregate amount of $1,784 was used for the payment of leasing costs
incurred at the Palms of Carrollwood Shopping Center ("Palms of Carrollwood")
property. The General Partner anticipates that the Partnership will incur an
aggregate of approximately $875,000 of additional leasing costs during the
remainder of 1999, substantially all of which would be incurred at Palms of
Carrollwood. The General Partner anticipates that the current balance in the
working capital reserve should be sufficient to pay such leasing costs.
During the three months ended March 31, 1999, approximately $6,100 of cash
generated from the Partnership's operations was used to fund non-recurring
maintenance and repair expenses incurred at the Palms of Carrollwood and
Business Center at Pureland properties. The General Partner anticipates that the
Partnership will incur additional non-recurring repair and maintenance expenses
of approximately $88,000 at its properties during the remainder of 1999. These
additional expenses will be funded from the operations of the Partnership's
properties and are not expected to have a significant impact on the
Partnership's liquidity.
Cash in the amount of $4,144,685, generated from the Partnership's operations
and the sale of the Stone Container Building, was distributed to the General
Partner, the John Hancock Limited Partner and the Investors during the three
months ended March 31, 1999. These amounts were distributed in accordance with
the Partnership Agreement and were allocated as follows:
<TABLE>
<CAPTION>
DIST. CASH DIST. CASH FROM
FROM OPERATIONS SALES OR FINANCINGS
--------------- -------------------
<S> <C> <C>
Investors $1,328,376 $2,439,381
John Hancock Limited Partner 106,270 195,151
General Partner 75,508 -
---------- ----------
Total $1,510,154 $2,634,532
========== ==========
</TABLE>
The Partnership has incurred approximately $477,000 in legal expenses in
connection with the class action lawsuit (see Part II, Item 1 of this Report).
Of this amount, approximately $286,000 relates to the Partnership's own defense
and approximately $191,000 relates to indemnification of the General Partner and
its Affiliates for their defense. These expenses are funded from the operations
of the Partnership.
At the present time, the General Partner cannot estimate the aggregate amount of
legal expenses and indemnification claims to be incurred and their impact on the
Partnership's future operations. Liquidity would, however, be materially
adversely affected by a significant increase in such legal expenses and related
indemnification costs. If such increases were to occur, to the extent that cash
from operations and the working capital reserve would be insufficient to satisfy
the cash requirements of the Partnership, it is anticipated that additional
funds would be obtained through a reduction of cash distributions to Investors,
bank loans, short-term loans from the General Partner or its Affiliates, or the
sale or financing of Partnership properties.
14
<PAGE> 15
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
One of the anchor tenants at the Palms of Carrollwood vacated the property
during June 1995. In July 1995, the General Partner secured a new anchor tenant
to occupy this space under a lease commencing in November 1995. At that time,
three tenants' leases at the Palms of Carrollwood contained clauses that made
reference to the situation in which the former anchor tenant ceased operations
at the property. One of these tenants paid all amounts due under its lease
through the lease's scheduled expiration in February 1997. Each of the other two
tenants reduced their rental payments by 25%. As a result of a settlement
negotiated with the General Partner, one of the other tenants recommenced making
its rental payments at 100% of the contracted amount. The Partnership brought an
action against the other tenant, who had reduced its rental payments during
November 1995, to obtain collection of 100% of the amounts due under the lease
agreement. The tenant claimed that it had the right to pay the reduced rent for
the remainder of the lease term that is until November 2004. During the first
quarter of 1998, this action was heard in a Florida court. The court issued a
judgement and written ruling during the second quarter of 1998, finding that the
tenant had only a limited period of time (approximately six months) during which
it could pay the reduced rent. After that , the tenant must pay the full amount
of rent specified in the lease. A judgment and written ruling were issued during
the second quarter of 1998. The tenant has appealed the ruling. No assurances
can be given that the Partnership will ultimately recover amounts due under the
lease pursuant to the ruling of the court.
At March 31, 1999, Palms of Carrollwood was 81% occupied. During the remainder
of 1999, no significant leases are scheduled to expire. The General Partner will
continue to offer competitive leasing packages in an effort to secure lease
renewals with existing tenants as well as to secure new tenants for the
remaining vacant space.
On February 25, 1999, the Partnership sold the Allmetal Distribution Building to
a non-affiliated buyer for a gross sales price of $2,180,000. After deductions
for commissions and selling expenses, the sale generated net proceeds of
$2,080,039 resulting in a gain of $575,591, representing the difference between
the net sales price and the property's carrying value of $1,504,448.
During January 1999, the General Partner listed the Purina Mills Distribution
Building for sale after securing a long term lease with a single tenant for the
entire building and due to the current favorable conditions in the St. Louis,
Missouri area real estate market.
One of the tenants at the Business Center at Pureland, National Polystyrene
Recycling Co., L.P., ("NPRC") ceased operations and vacated its space during the
fourth quarter of 1997. A replacement tenant was located to occupy this space
during the third quarter of 1998. NPRC's lease obligations were terminated as of
September 30, 1998 in consideration of NPRC paying a lease buyout fee of
approximately $230,000. The new tenant's lease obligations commenced October 1,
1998 for a 32-month term. The other tenant at the Business Center at Pureland,
Forbo Wallcoverings, Inc. ("Forbo") had a lease that was scheduled to expire on
December 31, 1998. However, Forbo requested and the General Partner agreed, to
extend the term of the lease through March 31, 1999. Subsequently, Forbo has
vacated. The Bridgeport, New Jersey real estate market currently has a
relatively high amount of vacant space. In addition, there is a significant
amount of land available for development. The General Partner anticipates
competitive market conditions during 1999 and, therefore, will offer competitive
rental rates and concessions in an effort to lease the available space at the
property.
The Quince Orchard Corporate Center is occupied by Boehringer Mannheim
Pharmaceuticals, Inc. under a ten-year lease that expires in February 2004. The
tenant has two options under the lease agreement, one, to terminate the lease at
the end of its seventy-sixth month of the lease, or June 2000, and, two, to
extend the term of the lease for an additional five- year period. During the
first quarter of 1998, Hoffman-LaRoche, Inc. received approval from the Federal
Trade Commission to acquire Boehringer Mannheim Pharmaceuticals, Inc.
Subsequently, Hoffman-LaRoche vacated and subleased the space. Hoffman-LaRoche
has informed the General Partner that it intends to exercise its right to
terminate the lease in June 2000.
15
<PAGE> 16
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Real estate market conditions in the Washington D.C. area for office space
similar to the Quince Orchard Corporate Center continue to improve. The supply
of such office space has been unable to keep pace with the demand, resulting in
a slight increase in market rents. Further, this condition has given rise to new
real estate development in the area. The General Partner does not anticipate
that this new development will negatively impact the market and, therefore,
expects market conditions to remain favorable through 1999.
The General Partner evaluated the carrying value of each of the Partnership's
properties and its joint venture investment as of December 31, 1998 by comparing
such carrying value to the related property's future undiscounted cash flows and
the then most recent internal appraisal in order to determine whether a
impairment in value existed. Based upon such evaluations, the General Partner
determined that impairment in values existed and, therefore, no write-downs were
recorded as of December 31, 1998.
The General Partner will continue to conduct property valuations, using internal
or independent appraisals, in order to assist in its evaluation of whether an
impairment in value exists on any of the Partnership's properties.
RESULTS OF OPERATIONS
Net income for the period ended March 31, 1999 was $1,230,637, as compared to
net income of $720,684 for the same period in 1998. This increase is the result
of the inclusion of a non-recurring gain of $575,591 from the sale of the
Allmetal Distribution Building during the first quarter of 1999. Excluding the
results of this gain, net income for the period ended March 31, 1999 decreased
by $65,638, or 9%, as compared to the prior year. This is primarily due to the
sales of the Stone Container and Allmetal Distribution Buildings..
Average occupancy for the Partnership's investments was as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
---- ----
<S> <C> <C>
Palms of Carrollwood Shopping Center 81% 81%
Quince Orchard Corporate Center
(Affiliated Joint Venture) 100% 100%
Yokohama Tire Warehouse 100% 100%
Purina Mills Distribution Building 100% 100%
Allmetal Distribution Building -- 100%
Stone Container Building -- 100%
Business Center at Pureland 100% 100%
</TABLE>
Rental income for the period ended March 31, 1999 decreased by $110,850, or 12%,
as compared to the same period during 1998 primarily due to the sale of the
Stone Container and the Allmetal Distribution Buildings. Rental income at the
Partnership's other properties was consistent between periods.
Property operating expenses for the period ended March 31, 1999 increased by
$24,456, or 40%, as compared to the same period during 1998. This increase is
primarily due to non-recurring legal fees and maintenance and repair expense at
the Palms of Carrollwood Shopping Center during the period. Property operating
expenses at the Partnership's other properties were consistent between periods.
Depreciation expense for the period ended March 31, 1999 decreased by $45,032,
or 22% as compared to the same period during 1998 primarily due to the sale of
the Stone Container Building in December of 1998 and to the reclassification of
the Allmetal Distribution Building as "Property Held for Sale" in June of 1998.
Accordingly, no depreciation has been recorded on these properties since the
time that they were listed for sale.
16
<PAGE> 17
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
General and administrative expenses for the period ended March 31, 1999
increased by $25,355, or 45%, primarily due to an increase in legal fees
incurred by the Partnership in connection with the class action complaint (see
Part II, Item 1 of this Report). Excluding such legal fees, general and
administrative expenses were consistent between periods.
The General Partner believes that inflation has had no significant impact on the
Partnership's income from operations during the three months ended March 31,
1999, and the General Partner anticipates that it will not have a significant
impact during the remainder of 1999.
CASH FLOW
The following table provides the calculations of Cash from Operations and
Distributable Cash from Operations, which are calculated in accordance with
Section 17 of the Partnership Agreement:
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
---- ----
<S> <C> <C>
Net cash provided by operating
activities (a) $ 949,858 $ 1,151,579
Net change in operating assets
and liabilities (a) (8,047) 67,896
----------- -----------
Net cash provided by operations (a) 941,811 1,083,672
Increase in working capital reserves (77,413) (122,666)
Cash from operations (b) 864,398 961,006
Decrease in working capital reserves -- --
----------- -----------
Distributable cash from operations (b) $ 864,398 $ 961,006
=========== ===========
Allocation to General Partner $ 43,220 $ 48,050
Allocation to John Hancock Limited Partner 60,828 67,626
Allocation to Investors 760,350 845,330
----------- -----------
$ 864,398 $ 961,006
=========== ===========
</TABLE>
(a) Net cash provided by operating activities, net change in operating
assets and liabilities, and net cash provided by operations are as
calculated in the Statements of Cash Flows included in Item 1 of
this Report.
(b) As defined in the Partnership Agreement. Distributable Cash from
Operations should not be considered as an alternative to net
income (i.e. not an indicator of performance) or to reflect cash
flows or availability of discretionary funds.
During the second quarter of 1999, the Partnership will make a cash distribution
in the aggregate amount of $2,925,071 to the General Partner, the John Hancock
Limited Partner and the Investors. Of this amount, $864,398 was generated from
Distributable Cash from Operations for the three months ended March 31, 1999 and
$2,060,673 was generated from Distributable Cash from Sales, Financings and
Repayments as a result of the sale of the Allmetal Distribution Building during
the quarter. These amounts will be allocated as follows:
<TABLE>
<CAPTION>
DIST. CASH DIST. CASH FROM
FROM OPERATIONS SALES OR FINANCINGS
--------------- -------------------
<S> <C> <C>
Investors $760,350 $1,908,031
John Hancock Limited Partner 60,828 152,642
General Partner 43,220 --
-------- ----------
Total $864,398 $2,060,673
======== ==========
</TABLE>
The source of future cash distributions is dependent upon cash generated by the
Partnership's properties and the use of working capital reserves. The General
Partner currently anticipates that the Partnership's Distributable Cash from
Operations during each of the three remaining quarters of 1999 will be reduced
by the effect of the sales that have taken place and that may occur during 1999.
17
<PAGE> 18
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In February 1996, a putative class action complaint was filed in the
Superior Court in Essex County, New Jersey by a single investor in a
limited partnership affiliated with the Partnership. The complaint
named as defendants the Partnership, the General Partner, certain other
affiliates of the General Partner, and certain unnamed officers,
directors, employees and agents of the named defendants.
The plaintiff sought unspecified damages stemming from alleged
misrepresentations and omissions in the marketing and offering
materials associated with the Partnership and two limited partnerships
affiliated with the Partnership. The complaint alleged, among other
things, that the marketing materials for the Partnership and the
affiliated limited partnerships did not contain adequate risk
disclosures.
On March 18, 1997, the court certified a class of investors who were
original purchasers in the Partnership. The certification order should
not be construed as suggesting that any member of the class is entitled
to recover, or will recover, any amount in the action.
The Partnership and the other defendants have answered the complaint,
denying the material allegations and raising numerous affirmative
defenses. Discovery has commenced, and the Partnership and other
defendants have produced documents relating the plaintiff's claims. No
depositions are scheduled. The court has heard the defendants' motion
to dismiss certain claims on grounds of the expiration of the statutes
of limitations and has stated it intends to hold a further hearing on
that matter to determine whether the case can be resolved by the
disposition of certain claims. The Partnership and the other defendants
intend to move to decertify the class and for summary judgment
dismissing the breach of contract claims.
The General Partner believes the allegations are totally without merit
and intends to vigorously contest the action.
There are no other material pending legal proceedings, other than
ordinary routine litigation incidental to the business of the
Partnership, to which the Partnership is a party or to which any of its
properties is subject.
ITEM 2. CHANGES IN SECURITIES
There were no changes in securities during the first quarter of 1999.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the first quarter
of 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders of the
Partnership during the first quarter of 1999.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) There are no exhibits to this report.
(b) A Report on Form 8-K was filed during the first quarter of 1999,
on February 25, 1999.
18
<PAGE> 19
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS 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, on the 14th day of May, 1999.
John Hancock Realty Income Fund-III
Limited Partnership
By: John Hancock Realty Equities, Inc.,
General Partner
By: /s/ William M. Fitzgerald
--------------------------------
William M. Fitzgerald, President
By: /s/ Virginia H. Lomasney
-------------------------------
Virginia H. Lomasney, Treasurer
(Chief Accounting Officer)
19
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000842741
<NAME> JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,837,767
<SECURITIES> 0
<RECEIVABLES> 267,395
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,105,162
<PP&E> 25,424,815
<DEPRECIATION> 4,938,222
<TOTAL-ASSETS> 36,810,792
<CURRENT-LIABILITIES> 543,253
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 36,267,539
<TOTAL-LIABILITY-AND-EQUITY> 36,810,792
<SALES> 0
<TOTAL-REVENUES> 1,630,855
<CGS> 0
<TOTAL-COSTS> 153,601
<OTHER-EXPENSES> 246,616
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,230,638
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,230,638
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,230,638
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
</TABLE>
