<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 June 30, 2000
-------------------------------------------------
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
INDEX
PART I: FINANCIAL INFORMATION PAGE
Item 1 - Financial Statements:
Balance Sheets at June 30, 2000 and
December 31, 1999 3
Statements of Operations for the Three and Six
Months Ended June 30, 2000 and 1999 4
Statements of Partners' Equity for the
Six Months Ended June 30, 2000 and
for the Year Ended December 31, 1999 5
Statements of Cash Flows for the Six
Months Ended June 30, 2000 and 1999 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)
ASSETS
JUNE 30, DECEMBER 31,
2000 1999
----------- -----------
Cash and cash equivalents $ 2,720,665 $ 2,899,090
Restricted cash 89,217 88,844
Other assets 116,089 110,669
Property held for sale 20,689,709 6,924,617
Investment in property:
Land -- 6,355,135
Building and improvements -- 9,717,459
----------- -----------
-- 16,072,594
Less: accumulated depreciation -- 2,967,494
----------- -----------
-- 13,105,100
Investment in joint venture 6,865,751 6,760,170
Deferred expenses, net of accumulated
amortization of $55,611 in 2000
and $816,472 in 1999 97,269 761,854
----------- -----------
Total assets $30,578,700 $30,650,344
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 242,697 $ 205,003
Accounts payable to affiliates 147,063 168,288
----------- -----------
Total liabilities 389,760 373,291
Partners' equity/(deficit):
General partner's (25,591) (67,086)
Limited partners' 30,214,531 30,344,139
----------- -----------
Total partners' equity 30,188,940 30,277,053
----------- -----------
Total liabilities and partners' equity $30,578,700 $30,650,344
=========== ===========
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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income $617,271 $ 648,016 $1,230,620 $1,444,700
Income from joint venture 259,373 224,201 483,186 425,603
Interest income 42,215 66,905 81,832 124,083
Gain on sale of property -- 1,490,192 -- 2,065,783
-------- ---------- ---------- ----------
Total income 918,859 2,429,314 1,795,638 4,060,169
Expenses:
Depreciation -- 152,292 80,540 314,676
General and administrative expenses 63,888 66,923 118,346 148,497
Amortization of deferred expenses 1,213 34,413 32,872 106,440
Property operating expenses 141,188 99,617 214,134 183,849
-------- ---------- ---------- ----------
Total expenses 206,289 353,245 445,892 753,462
-------- ---------- ---------- ----------
Net income $712,570 $2,076,069 $1,349,746 $3,306,707
======== ========== ========== ==========
Allocation of net income:
General Partner $ 38,926 $ 54,864 $ 78,521 $ 104,415
John Hancock Limited Partner -- 111,656 -- 111,656
Investors 673,644 1,909,549 1,271,225 3,090,636
-------- ---------- ---------- ----------
$712,570 $2,076,069 $1,349,746 $3,306,707
======== ========== ========== ==========
Net Income per Unit $ 0.28 $ 0.79 $ 0.53 $ 1.28
======== ========== ========== ==========
</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)
SIX MONTHS ENDED JUNE 30, 2000 AND
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
--------- ------------ ------------
<S> <C> <C> <C>
Partners' equity/(deficit) at January 1, 1999
(2,415,234 Units outstanding) $ (38,068) $ 39,219,654 $ 39,181,586
Less: Cash distributions (207,302) (13,068,321) (13,275,623)
Add: Net income 178,284 4,192,806 4,371,090
--------- ------------ ------------
Partners' equity/(deficit) at December 31, 1999
(2,415,234 Units outstanding) (67,086) 30,344,139 30,277,053
Less: Cash distributions (37,026) (1,400,833) (1,437,859)
Add: Net income 78,521 1,271,225 1,349,746
--------- ------------ ------------
Partners' equity/(deficit) at June 30, 2000
(2,415,234 Units outstanding) $ (25,591) $ 30,214,531 $ 30,188,940
========= ============ ============
</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>
SIX MONTHS ENDED
JUNE 30,
2000 1999
----------- -----------
<S> <C> <C>
Operating activities:
Net income $ 1,349,746 $ 3,306,707
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 80,540 314,676
Amortization of deferred expenses 32,872 106,440
Cash distributions over (under) equity
in income from joint venture (105,581) 24,958
Gain on sale of property -- (2,065,783)
----------- -----------
1,357,577 1,686,998
Changes in operating assets and liabilities:
Increase in restricted cash (373) (5,500)
Decrease/(increase) in other assets (5,420) 107,058
Increase/(decrease) in accounts payable and
accrued expenses 37,694 (28,687)
Increase/(decrease) in accounts payable to affiliates (21,225) 35,109
----------- -----------
Net cash provided by operating activities 1,368,253 1,794,978
Investing activities:
Increases in deferred expenses (108,819) (44,274)
Proceeds from sale of property -- 7,026,439
----------- -----------
Net cash provided by (used in) investing activities (108,819) 6,982,165
Financing activities:
Cash distributed to Partners (1,437,859) (7,130,583)
----------- -----------
Net cash used in financing activities (1,437,859) (7,130,583)
----------- -----------
Net increase/(decrease) in cash and cash equivalents (178,425) 1,646,560
Cash and cash equivalents at beginning of year 2,899,090 5,874,797
----------- -----------
Cash and cash equivalents at end of period $ 2,720,665 $ 7,521,357
=========== ===========
</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 June 30, 2000, the
Partnership consisted of John Hancock Realty Equities, Inc. (the
"General Partner"), a wholly-owned, indirect subsidiary of John Hancock
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 2,222 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.
As initially stated in its Prospectus, it was expected that the
Partnership would be dissolved upon the sale of its last remaining
property, which at that time was expected to be within seven to ten
years following the date such property was acquired by the Partnership.
As of June 30, 2000, the Partnership has four properties remaining in
its portfolio, all of which are listed for sale. Upon the sale of the
last remaining property, the operations of the Partnership will
terminate, and the Partnership will be dissolved, in accordance with
the terms of the Partnership Agreement, as soon as reasonably
practicable.
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 six month period ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2000. 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, 1999.
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.
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)
-------------------------------------------
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.
Property held for sale is recorded at the lower of its carrying amount,
at the time the property is listed for sale, or its fair value, less
cost to sell. Carrying amount includes the property's cost, as
described below, less accumulated depreciation thereon and less any
property write-downs for impairment in value and plus any related
unamortized deferred expenses. Operating results for properties held
for sale are reported on the statement of operations along with the
operations of other investments in property.
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.
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 six months ended June 30, 2000 and 1999
was 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.
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)
-------------------------------------
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.
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 six months ended June 30, 2000 and
1999, and to which the General Partner or its Affiliates are entitled
to reimbursement from the Partnership were $61,236 and $74,063,
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 10.
Accordingly, included in the Statement of Operations for the six months
ended June 30, 2000 and 1999 are $0 and $15,163, respectively,
representing the Partnership's share of costs incurred by the General
Partner and its Affiliates relating to the class action complaint.
Through June 30, 2000, the Partnership has accrued a total of $210,098
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.
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
----------------------
Investment in property at cost, less any write-downs, consists of
managed, fully-operating, commercial real estate as follows:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Palms of Carrollwood Shopping Center -- $10,930,578
Business Center at Pureland -- 5,142,016
---- -----------
-- 16,072,594
Accumulated Depreciation -- (2,967,494)
---- -----------
-- $13,105,100
==== ===========
</TABLE>
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 market 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. PROPERTY HELD FOR SALE
----------------------
During the first quarter of 2000, the Pureland Business Center and the
Palms of Carrollwood Shopping Center were listed for sale and during
December 1999, the Yokohama Tire Warehouse was listed for sale.
Accordingly, these properties are classified as "Property Held for
Sale" on the Balance Sheet at June 30, 2000 at their carrying values,
which are not in excess of their estimated fair values, less selling
costs.
Property held for sale consists of commercial real estate as follows:
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Yokohama Tire Warehouse $ 6,924,617 $6,924,617
Palms of Carrollwood Shopping Center 9,714,280 --
Business Center at Pureland 4,050,812 --
----------- ----------
$20,689,709 $6,924,617
=========== ==========
</TABLE>
7. 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 June 30, 2000, 97.55% has been contributed by the
Affiliated Joint Venture. The Affiliated Joint Venture continues to
hold a 75% interest in QOCC-1 Associates.
10
<PAGE> 11
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
7. INVESTMENT IN JOINT VENTURE(CONTINUED)
--------------------------------------
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 1999, 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.
8. DEFERRED EXPENSES
-----------------
Deferred expenses consist of the following:
<TABLE>
<CAPTION>
Unamortized Unamortized
Balance At Balance At
Description June 30, 2000 December 31, 1999
----------- ------------- -----------------
<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. $97,269 $ 99,696
Tenant improvements were amortized
over the terms of the leases to
which they relate. As of June 30,
2000, the General partner had listed
its three investments in property
for sale. Accordingly, the
unamortized balance is included in
carrying cost of "Properties held
for sale". -- 476,432
Lease Commissions were amortized
over the terms of the leases to
which they relate. As of June 30,
2000, the General Partner had listed
its three investments in property
for sale. Accordingly, the
unamortized balance is included in
carrying cost of "Properties held
for sale". -- 185,726
------- --------
$97,269 $761,854
======= ========
</TABLE>
11
<PAGE> 12
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
9. 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>
Six Months Ended June 30,
2000 1999
---------- ----------
<S> <C> <C>
Net income per Statements of Operations $1,349,746 $3,306,707
Add/(less): Excess of tax gain over book gain
on disposition of assets -- 180,722
Excess of book depreciation
over (under) tax depreciation (267,630) (2,657)
Excess of book amortization
over tax amortization 5,032 62,958
---------- ----------
Net income for federal income tax purposes $1,087,148 $3,547,730
========== ==========
</TABLE>
10. 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.
A settlement agreement was approved by the court on December 22, 1999.
Under the terms of the settlement, the defendants guaranteed certain
minimum returns to class members on their investments and have paid
fees and expenses for class counsel in an amount determined by the
court to be $1.5 million. Payment under the settlement agreement will
have no financial impact on the Partnership.
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 $532,173 in
legal expenses in connection with this matter. Of this amount,
approximately $322,075 relates to the Partnership's own defense and
approximately $210,098 relates to indemnification of the General
Partner and its affiliates for their defense. These expenses are funded
from the operations of the Partnership.
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, 6
and 7 to the Financial Statements included in Item 1 of this Report.
IMPACT OF YEAR 2000
-------------------
The Partnership participated in the Year 2000 remediation project of its parent,
John Hancock Life Insurance Company (John Hancock). By late 1999, John Hancock
and the Partnership completed their Year 2000 readiness plan to address issues
that could result from computer programs written using two digits to define the
applicable year rather than four to define the applicable year and century. As a
result, John Hancock and the Partnership were prepared for the transition to the
Year 2000 and did not experience any significant Year 2000 problems with respect
to mission critical information technology ("IT") or non-IT systems,
applications or infrastructure. During the date rollover to the year 2000, John
Hancock and the Partnership implemented and monitored their millennium rollover
plan and conducted business as usual on Monday, January 3, 2000.
Since January 3, 2000, the information systems, including mission critical
systems which in the event of a Year 2000 failure would have the greatest impact
on operations, have functioned properly. In addition, neither John Hancock nor
the Partnership experienced any significant Year 2000 issues related to
interactions with material business partners. No disruptions have occurred which
impact John Hancock or the partnership's ability to process claims, update
customer accounts, process financial transactions, report accurate data to
management and no business interruptions due to Year 2000 issues have been
experienced. While John Hancock and the Partnership continue to monitor their
systems, and those of material business partners, closely to ensure that no
unexpected Year 2000 issues develop, as of the date of this report neither John
Hancock nor the Partnership have reason to expect any such issues.
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, litigation expenses and indemnification claims,
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 June 30, 2000, the Partnership had $2,720,665 in cash and cash equivalents
and $89,217 in restricted cash.
The Partnership has a working capital reserve with a current balance of
approximately $2,500,000. 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 six months ended June 30, 2000, cash from working capital reserves in
the amount of $108,819 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 a total of
approximately $740,000 of additional leasing costs during the remainder of 2000
at the Palms of Carrollwood and the Business Center at Pureland. The General
Partner anticipates that the current balance in the working capital reserve
should be sufficient to pay such leasing costs.
During the six months ended June 30, 2000, approximately $103,870 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 $424,000 at its properties during the remainder of 2000. These
expenses will be funded from the operations of the Partnership's properties and
may reduce the amount of cash available for distribution during 2000.
Cash in the amount of $1,437,859, generated from the Partnership's operations
during the six months ended March 31, 2000 was distributed to the General
Partner, the John Hancock Limited Partner and the Investors during the six
months ended June 30, 2000. These amounts were distributed in accordance with
the Partnership Agreement and were allocated as follows:
Dist. Cash
From Operations
---------------
Investors $1,400,833
John Hancock Limited Partner --
General Partner 37,026
----------
Total $1,437,859
==========
The Partnership has incurred approximately $532,173 in legal expenses in
connection with the class action lawsuit (see Part II, Item 1 of this Report).
Of this amount, approximately $322,075 relates to the Partnership's own defense
and approximately $210,098 relates to indemnification of the General Partner and
its Affiliates for their defense. These expenses are funded from the operations
of the Partnership.
At June 30, 2000, Palms of Carrollwood was 87% occupied. During the remainder of
2000, no significant leases are scheduled to expire. The General Partner has
secured lease with a 24,000 square foot tenant for an anticipated start date by
October 1, 2000. During the quarter, another tenant representing 10,000 square
feet with a lease expiring in January 2005 announced its intention to close its
store at the property. The General Partner has negotiated a termination payment
of approximately $90,000. The General Partner will continue to offer competitive
leasing packages in an effort to secure new tenants for the remaining vacant
space. Given the current status of the property and due to the existing
favorable market conditions in the Carrollwood, Hillsborough County, Florida
area, the property was listed for sale during March 2000.
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 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 commended 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 and 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
continuous competitive market conditions during 2000 and, therefore will offer
competitive rental rates and concessions in an effort to lease the available
space at the property. At June 30, 2000 Business Center at Pureland was 50%
occupied. Given the current status of the property and the existing supply and
demand conditions in the Bridgeport area, the General Partner listed the
Business Center at Pureland for sale during the first quarter.
The Quince Orchard Corporate Center is leased to Boehringer Mannheim
Pharmaceuticals, Inc. under a ten-year lease which 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
informed the General Partner that it intended to exercise its right to terminate
the lease in June 2000. The subtenant has subsequently vacated the space.
Real estate 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 2000. The General Partner is
actively seeking a tenant (s) for the property and will offer competitive
leasing packages in an effort to secure new tenants for the building. During the
second quarter, the General Partner received unsolicited offers to purchase the
property. The General Partner is in the process of negotiating terms of a
Purchase and Sale Agreement with a prospective buyer as a result of one of these
offers. No assurances can be given that an agreement will be reached with a
prospective buyer.
The Yokohama Tire Warehouse is 100% leased to the Yokohama Tire Corporation
under a lease which expires on March 31, 2006. Under the terms of the lease
agreement, the Yokohama Tire Corporation has one remaining option to purchase
the property on April 1, 2001 for $10,578,173. In addition the tenant has the
option to expand the square footage of the facility up to 220,000 square feet at
any time during the term of the lease. In consideration of the property's strong
leasing position and due to the existing favorable market conditions in the
Louisville Kentucky area, the Yokohama Warehouse was listed for sale by the
General Partner during December 1999. The General Partner is in the process of
negotiating terms of a Purchase and Sale Agreement with a prospective buyer. No
assurances can be given that an agreement will be reached with a prospective
buyer.
The General Partner evaluated the carrying value of each of the Partnership's
properties and its joint venture investment as of December 31, 1999 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 an
impairment in value existed. Based upon such evaluations, the General Partner
determined that no impairment in values existed and, therefore, no write-downs
were recorded as of December 31, 1999.
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.
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)
-------------------------
RESULTS OF OPERATIONS
---------------------
Net income for the six months ended June 30, 2000 was $1,349,746, as compared to
net income of $3,306,707 for the same period in 1999. This decrease is the
result of the inclusion of a non-recurring gain of $2,065,783 from the sales of
the Allmetal and Purina Mills Distribution Buildings during the prior period.
Excluding the results of this gain, net income for the period ended June 30,
2000 increased by $108,822, or 9%, as compared to the prior year. Although
rental income and interest income decreased between periods due to the sales of
the Allmetal and Purina Mills Distribution Buildings, this was offset by a
reduction in depreciation and amortization expense and general and
administrative expenses as discussed below.
Average occupancy for the Partnership's investments was as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30,
2000 1999
---- ----
<S> <C> <C>
Palms of Carrollwood Shopping Center 87% 81%
Quince Orchard Corporate Center (Affiliated Joint Venture) 100% 100%
Yokohama Tire Warehouse 100% 100%
Business Center at Pureland 50% 75%
</TABLE>
Rental income for the period ended June 30, 2000 decreased by $214,080, or 15%,
as compared to the same period during 1998 primarily due to the sales of the
Allmetal and Purina Mills Buildings. Rental income at Palms of Carrollwood
Shopping Center improved in the current period due to higher average occupancy
compared to the prior period. This was offset by lower rental income at the
Business Center at Pureland due to lower occupancy in the current period
compared to the prior period and to the sales mentioned previously.
Interest income for the period ended June 30, 2000 decreased by $42,250, or 34%,
as compared to the same period in 1999 primarily due to the inclusion of net
proceeds from the sales of the Allmetal and Purina Mills Distribution Buildings
in cash available for investment during the prior period from the time of the
sales until the next distribution date to Investors.
Property operating expenses for the period ended June 30, 2000 increased by
$30,285, or 16%, as compared to the same period during 1999. This increase is
primarily due to non-recurring maintenance and repair expenses at the Palms of
Carrollwood Shopping Center during the period which were somewhat offset by
lower expenses due to the sales of the Allmetal and Purina Mills Distirbution
Buildings. Property operating expenses at the Partnership's other properties
were consistent between periods.
Depreciation expense for the period ended June 30, 2000 decreased by $234,136,
or 74%, as compared to the same period during 1999 primarily due to the sale of
the Allmetal Distribution Building in February 1999, and to the reclassification
of the Yokohama Tire Warehouse in December, 1999 and the Business Center at
Pureland and Palms of Carrollwood Shopping Center during the first quarter of
2000 as "Property Held for Sale". Accordingly, no depreciation has been recorded
on these properties since the time that they were listed for sale.
Amortization expense for the period ended June 30, 2000 decreased by $73,568, or
69%, as compared to the same period during 1999 primarily due to the sales and
reclassifications reported above and, accordingly no longer amortizing such
amounts. Also, the acquisition fees paid to the General Partner were fully
amortized at March 31, 1999 and accordingly no amortization expense has been
recorded since that time.
General and administrative expenses for the period ended June 30, 2000 decreased
by $30,151, or 20%, as compared to the same period in 1999, primarily due to a
decrease 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 six months ended June 30, 2000,
and the General Partner anticipates that it will not have a significant impact
during the remainder of 2000.
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)
-------------------------
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:
Six Months Ended June 30,
2000 1999
---------- ----------
Net cash provided by operating
activities (a) $1,368,251 $1,794,978
Net change in operating assets
and liabilities (a) (10,674) (107,980)
---------- ----------
Net cash provided by operations (a) 1,357,577 1,686,998
Increase in working capital reserves -- --
---------- ----------
Cash from operations (b) 1,357,577 1,686,998
Decrease in working capital reserves 116,984 125,186
---------- ----------
Distributable cash from operations (b) $1,474,561 $1,812,184
========== ==========
Allocation to General Partner $ 73,728 $ 90,609
Allocation to John Hancock Limited Partner -- 127,524
Allocation to Investors 1,400,833 1,594,051
---------- ----------
$1,474,561 $1,812,184
========== ==========
(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 third quarter of 2000, the Partnership will make a cash distribution
in the aggregate amount of $737,281 to the General Partner and Limited Partners.
This amount was generated from Distributable Cash from Operations for the three
months ended June 30, 2000 will be allocated as follows:
Dist. Cash
From Operations
---------------
Investors $700,417
John Hancock Limited Partner --
General Partner 36,864
--------
Total $737,281
========
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 two remaining quarters of 2000 will be reduced by
the effect of the sales that have taken place and that may occur during the
remainder of 2000.
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.
A settlement agreement was approved by the court on December 22, 1999.
Under the terms of the settlement, the defendants have guaranteed
certain minimum returns to class members on their investments and paid
fees and expenses to class counsel in an amount determined by the court
to be $1.5 million. These terms of the settlement will have no
financial impact on the Partnership.
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 second quarter of 2000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the second quarter
of 2000.
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 second quarter of 2000.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) There are no exhibits to this report.
(b) There were no Reports on Form 8-K filed during the second quarter
of 2000.
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 August, 2000.
John Hancock Realty Income Fund-III
Limited Partnership
By: John Hancock Realty Equities, Inc.,
General Partner
By: /s/ John M. Garrison
--------------------------------
John M. Garrison, President
By: /s/ Virginia H. Lomasney
--------------------------------
Virginia H. Lomasney, Treasurer
(Chief Accounting Officer)
19
