SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For Quarter Ended September 30, 2001 Commission file number 33-00152
AMRECORP REALTY FUND III
(Exact name of registrant as specified in its charter)
TEXAS 75-2045888
(State or other jurisdiction of (IRS Employer
Incorporation or organization Identification
Number)
2800 N Dallas Parkway Suite 100
Plano, Texas 75093
(Address of principal executive offices)
Registrant's telephone number, including area code: (972)836-8000.
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: Y No:
REGISTRANT IS A LIMITED PARTNERSHIP
TABLE OF CONTENTS
Item 1. Financial Statements
The following Unaudited financial statements are filed herewith:
Consolidated Balance Sheet as of September 30, 2001 and
December 31, 2000 Page 3
Consolidated Statements of Operations for the Three & Nine months
Ended September 30, 2001 and 2000 Page 4
Consolidated Statements of Cash Flows for the Nine months Ended
September 30, 2001 and 2000 Page 5
Item 2. Results of Operations and Management's Discussion and Analysis of
Financial Condition Page 6
Liquidity and Capital Resources
Page 7
Other Information Page 8
Signatures Page 10
The statements, insofar as they relate to the period subsequent to
December 31, 2000 are Unaudited.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Balance Sheets
September 30, December 31,
2001 2000
(Unaudited)
ASSETS
Real Estate assets, at cost
Land $1,000,000 $1,000,000
Buildings and improvements 6,732,843 6,732,843
7,732,843 7,732,843
Less: Accumulated depreciation (4,188,734) (3,945,734)
3,544,109 3,787,109
Cash including cash investments 41,047 12,904
Restricted Cash 59,000 59,000
Escrow deposits 134,982 138,248
Replacement Reserve 42,701 10,295
Liquidity reserve 100,599 100,599
Other assets 25,787 15,073
TOTAL ASSETS $3,948,225 $4,123,228
LIABILITIES AND PARTNERS'
EQUITY:
LIABILITIES
Mortgage and notes payable $2,819,538 $2,873,998
Note Payable - Affiliates 119,299 119,299
Real estate taxes payable 101,250 139,220
Security deposits 62,435 54,218
Accounts payable & accrued expenses 75,396 42,903
3,177,918 3,229,638
Partners Capital (Deficit)
Limited Partners (236,792) (208,792)
Special Limited Partner 1,145,231 1,240,231
General Partner (138,132) (137,849)
Total Partners Capital 770,307 893,590
(Deficit)
Total Liability And Partners Equity $3,948,225 $4,123,228
See notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
REVENUES 2001 2000 2001 2000
Rental income 375,547 $368,318 $1,113,626 $1,110,938
Other property 29,903 29,420 82,602 85,738
Total revenues 405,450 397,738 1,196,228 1,196,676
EXPENSES
Salaries & wages 74,690 78,007 206,590 211,534
Maintenance & repairs 51,261 146,149 155,446 363,596
Utilities 39,880 34,571 139,042 94,833
Real estate taxes 33,750 36,250 101,250 111,250
General administrative 15,062 18,965 38,154 53,303
Contract services 28,058 17,178 62,244 55,334
Insurance 10,174 10,969 29,983 26,119
Interest 57,700 59,145 174,210 178,459
Depreciation and amortization 85,926 76,926 257,778 230,778
Property management fees 20,273 19,888 59,814 59,832
Total expenses 416,774 498,048 1,224,511 1,385,038
NET INCOME (LOSS) ($11,324) ($100,310) ($28,283) ($188,362)
NET INCOME PER SHARE $(4.75) $(42.11) $(11.87) $(79.08)
See Notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Cash Flows
Unaudited
Nine Months Ended
September 30,
2001 2000
CASH FLOWS FROM OPERATING ACTIVITY
Net income (loss) ($28,283) ($188,362)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 243,000 216,000
Net Effect of changes in operating accounts
Restricted Cash 0 (7,000)
Escrow deposits 3,266 44,755
Capital replacement reserve (32,406) 5,132
Liquidity Reserve 0 (4,209)
Accrued real estate taxes (37,970) (6,111)
Security deposits 8,217 2,248
Accounts payable 32,493 (455)
Other assets (10,714) (13,833)
Net cash provided by operating activities 177,603 48,165
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of mortgage notes payable (54,460) (50,211)
Note payable - affiliates 0 10,842
Distribution to special limited partner (95,000) (15,000)
Net cash used by investing activities (149,460) (54,369)
NET INCREASE (DECREASE) IN CASH AND CASH 28,143 (6,204)
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 12,904 44,453
CASH AND CASH EQUIVALENTS, END OF PERIOD $41,047 $38,249
See Notes to Condensed Consolidated Financial Statements
Basis of Presentation:
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, although
the Partnership believes that the disclosures are adequate
to make the information presented not misleading. It is
suggested that these condensed financial statements be read
in conjunction with the financial statements and notes
thereto included in the Partnership's latest annual report
on Form 10-K.
Item 2. RESULTS OF OPERATIONS AND MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
Results of Operations
At September 30, 2001 the Partnership owned Las Brisas
Apartments, a 376-unit apartment community located at 2010
South Clark Street, Abilene, Taylor County, Texas 79606. The
Partnership purchased a fee simple interest in Las Brisas
Apartments on July 30, 1986. The property contains
approximately 312,532 net rentable square feet, one
clubhouse, and five laundry facilities located on
approximately 19.11 acres of land.
THIRD QUARTER 2001 COMPARED TO THIRD QUARTER 2000
Revenue from property operations increased $7,712, or 2.47%
for the third quarter of 2001, as compared to the third
quarter of 2000. Increased occupancy to 93.6% in the third
quarter of 2001 from 94.0% in the third quarter of 2000
accounted for the increase in rental income of $7,229 or
2.45%. Other property income increased $483 or 2.80% mainly
due to increased fee collections. The following table
illustrates the components:
Increase Percent
Change
Rental income 7,229 2.45%
Other property 483 2.80%
Net Increase 7,712 2.47%
(Decrease)
Property operating expenses: decreased by $81,274 or 23.54%
for the third quarter of 2001 compared to the third quarter
of 2000 due primarily to decreases in maintenance and
repairs. Maintenance and repairs decreased $94,888 or
169.55% due to the exterior building maintenance preformed
in 2000. Utilities increased $5,309 or 14.25%, due to gas
cost increases. General and administrative expenses
decreased $3,903 or 31.59% mainly due to decreased mailing
costs and decreased credit-reporting costs. Insurance
decreased $795 or 11.88% with the annual policy renewal
Contract services increased $10,880 or 152.30% due to
increased lawn care and grounds maintenance costs. The
following table illustrates the components:
Increase Percent
(Decrease) Change
Salaries & wages (3,317) 4.67%
Maintenance & repairs (94,888) 169.55%
Utilities 5,309 14.25%
Real estate taxes (2,500) 7.94%
General administrative (3,903) 31.59%
Contract services 10,880 152.30%
Insurance (795) 11.88%
Interest (1,445) 3.43%
Depreciation and amortization 9,000 13.86%
Property management fees 385 2.36%
Net Increase (81,274) 23.54%
(Decrease)
THIRD QUARTER 2000 COMPARED TO THIRD QUARTER 1999
Revenue from property operations decreased $13,936, or
4.46%, for the third quarter of 2000, as compared to the
third quarter of 1999. Decreased occupancy to 94.0% in the
third quarter of 2000 from 97.3 % in the third quarter of
1999 accounted for the decrease in rental income of $13,348
or 4.52%. Other property income decreased $588 or 3.40%
mainly due to decreased fee collections. The following
table illustrates the components:
Increase Percent
(Decrease) Change
Rental income (13,348) 4.52%
Other property (588) 3.40%
Net Increase (13,936) 4.46%
(Decrease)
Property operating expenses: increased by $112,968 or 32.71%
for the third quarter of 2000 compared to the third quarter
of 1999 due primarily to increased maintenance & repairs.
Maintenance and repairs increased $98,293 or 175.63%, due to
major carpentry repairs to the property. Contract services
decreased $5,535 or 77.48% due to reduce lawn care expenses.
Insurance increased $3,647 or 54.51% with the annual policy
renewal. Real estate taxes increased $4,850 or 15.40% due
to higher assessments of the property. Salaries & wages
increased $17,715 or 24.92 due to increased staffing levels
on the property. General and administrative expenses
increased $4,509 or 36.50% mainly due to increased mailing
and postage costs The following table illustrates the
components:
Increase Percent
(Decrease) Change
Salaries & wages 17,715 24.92%
Maintenance & repairs 98,293 175.63%
Utilities 3,284 8.81%
Real estate taxes 4,850 15.40%
General administrative 4,509 36.50%
Contract services (5,535) 77.48%
Insurance 3,647 54.51%
Interest (1,226) 2.91%
Depreciation and amortization (11,853) 18.26%
Property management fees (716) 4.39%
Net Increase 112,968 32.71%
(Decrease)
LIQUIDITY AND CAPITAL RESOURCES
On July 31, 1986 the Partnership purchased the Las
Brisas Apartments. The purchase provided for the sellers to
receive cash at closing and notes totaling $660,000. On
September 30, 1987 the principal balance due totaled
$210,000. In order to obtain the necessary proceeds to
finally retire these notes the General Partners offered 254
Units of the Partnership to two investors at the price of
$200,660. No commissions were taken nor did the General
Partner receive any fees in connection with these interests.
The Partnership then obtained short term financing from
Resource Savings Association totaling $260,000, bearing
interest at the rate of 2% over prime and payable quarterly
together with principal payments of $15,000 each. Security
for the loan was provided by a $100,000 certificate of
deposit and the personal guaranties of the Partnership's
General Partners. The Resource Savings Association loan
matured December 31,1983. In September, 1991 Mr. Werra paid
$40,750 in satisfaction of his personal guaranty of the
Partnership loan.
The Partnership defaulted in its debt obligations in
August, 1988. The Partnership was forced to seek protection
under Chapter 11 of the United States Bankruptcy Code in
December, 1988 when negotiations with Aetna Life Insurance
Company, ("Aetna") the holder of the two underlying first
mortgage notes and Las Brisas Apartments, Ltd. and Abilene
Associates, Ltd., the holders of respective wrap mortgage
notes ("Wrap Note Holders") failed to provide any relief.
The Partnership emerged from bankruptcy on May 15,
1990, having negotiated a modification of its debt with its
major creditors. In June, 1989 an affiliate of the
individual General Partner provided $401,910.77 to bring the
Aetna notes current. At the same time the Wrap Note Holders
agreed to reduce the payments due on their respective wrap
notes in order to mirror the payments made on the underlying
Aetna notes. The term of each wrap note will be extended
from July 31, 1995 to July 1, 2002 and July 1, 2007
respectively. The $401,910.77 note is collateralized by
junior mortgage on the property. In addition, the affiliate
has the option to purchase the wrap notes for $85,000 at any
time prior to the respective maturity dates of the wrap
notes.
Commencing on July 1,1992, payments on the notes
reverted to the original amounts of $19,442 and $15,454.
During the prior two years the Partnership deferred $214,460
in debit service payments. The modification gave the
Partnership room to deal with the economic difficulties
experienced in the market at the time.
In February, 1991, Amrecorp Realty Inc., resigned as
the Managing General Partner of the Partnership. As was
communicated to all limited partners, this step was taken in
order to minimize any effect that Amrecorp's financial
difficulties might have on the partnership. Univesco, Inc.,
a Texas corporation, Robert J. Werra, and CEO perform
management of the Partnership's assets.
On November 12, 1993 the Partnership refinanced the
properties secured debt with an 8.15%, ten year, mortgage
loan from Lexington Mortgage Company. The $3,250,000
mortgage loan provides for monthly payments of $25,408.
based on an amortized schedule of 300 months with a final
payment of the entire remaining principal balance in
December, 2003. The proceeds of this new loan were used to
pay off the $2,500,000 and $2,300,000 mortgage notes, which
previously held the first mortgage position. The old first
mortgagee provided a discount of approximately ten percent
of the outstanding principal balances of two old notes. The
balance of funds needed to retire the old notes
(approximately $100,000) was provided by Robert J. Werra. In
addition Robert J. Werra exercised his option in the
property's wrap mortgage notes. The new lender prohibited
subordinate debt. To meet this requirement the subordinate
debt held by Mr. Werra was converted to a class of equity
with the same terms and conditions as it possessed as debt.
The wrap mortgage lender would not agree to the change in
status so Mr. Werra paid $85,000 to complete his purchase of
the wrap notes and now holds an equity position in the
partnership as a Special Limited partner.
The partnership agreement was amended by vote of the
limited partners to include the appointment of a new
corporate general partner, LBAL, Inc., a Texas corporation
wholly owned by Robert J. Werra.
While it is the General Partners primary intention to
operate and manage the existing real estate investment, the
General Partner also continually evaluates this investment
in light of current economic conditions and trends to
determine if this asset should be considered for disposal.
At this time, there is no plan to dispose of Las Brisas
Apartments.
As of September 30, 2001, the Partnership had $41,047
in cash and cash equivalents as compared to $12,904 as of
December 31, 2000. The net increase in cash of $28,143 was
due to cash flow from operations.
The property is encumbered by a non-recourse mortgage
with a principal balance of $2,819,538 as of September 30,
2001. The mortgage payable bears interest at 8.15% and is
payable in monthly installments of principal and interest
until December 2003 when a lump-sum payment of approximately
$2,642,000 is due. The required principal reductions for
the three years ending December 31, 2003, are $73,363,
$79,571, and $2,721,064 respectively.
For the foreseeable future, the Partnership anticipates
that mortgage principal payments (excluding balloon mortgage
payments), improvements and capital expenditures will be
funded by net cash from operations. The primary source of
capital to fund future Partnership acquisitions and balloon
mortgage payments will be proceeds from the sale financing
or refinancing of the Property.
The $1,145,231 in Special Limited Partner equity is the
result of previous funding for operating deficits and other
partner loans made to the Partnership by a related entity.
These loans were reclassified to equity during 1993. The
Special Limited Partner has first right to all net operating
cash flows and net proceeds from disposals of assets to the
extent of the Special Limited Partners distribution
preference. During 2001, 2000 and 1999, the Special Limited
Partner received distributions from the Partnership totaling
$95,000, $0, and $265,000 respectively.
PART II
Other Information
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults upon Senior Securities.
None
Item 4. Submission of Matters to a vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(A) The following documents are filed herewith or
incorporated herein by reference as indicated as Exhibits:
Exhibit Designation Document Description
3 Certificate of Limited Partnership,
incorporated by reference
to Registration Statement
No. 33-00152 effective November 26,
1985.
4 Certificate of Limited Partnership,
incorporated by reference
to Registration Statement
No. 33-00152 effective November 26,
1985.
9 Not Applicable.
10 None.
11 Not Applicable.
12 Not Applicable.
13 Not Applicable.
18 Not Applicable.
19 Not Applicable.
22 Not Applicable.
23 Not Applicable.
24 Not Applicable.
25 Power of Attorney, incorporated by
reference to Registration Statement
No. 33-00152 effective November 26, 1985
28 None.
(B) Reports on Form 8-K for quarter ended September 30, 2001.
1. None
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.
AMRECORP REALTY FUND III
a Texas limited partnership
By: /s/ Robert J. Werra
Robert J. Werra,
General Partner
Date: November 1. 2001