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 March 31, 2002 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 Pkwy Suite 100
Plano, Texas 75093
(Address of principal executive offices)
Registrant's telephone number, including area code: (972)836-8010.
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 March 31, 2002 and
December 31, 2001 Page 3
Consolidated Statements of Operations for the Three Months
Ended March 31, 2002 and 2001 Page 4
Consolidated Statements of Cash Flows for the Three months
Ended March 31, 2002 and 2001 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, 2001 are Unaudited.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Balance Sheets
March 31, December 31,
2002 2001
(Unaudited)
ASSETS
Real Estate assets, at cost
Land $1,000,000 $1,000,000
Buildings and improvements 6,856,116 6,856,116
7,856,116 7,856,116
Less: Accumulated depreciation (4,362,982) (4,279,982)
3,493,134 3,576,134
Cash including cash investments 73,067 559,647
Restricted Cash 0 0
Escrow deposits 49,330 0
Replacement Reserve 55,247 55,625
Liquidity reserve 0 0
Deferred Financing Costs 89,940 90,136
Other assets 28,833 50,466
TOTAL ASSETS $3,789,551 $4,332,008
LIABILITIES AND PARTNERS' EQUITY:
LIABILITIES
Mortgage and notes payable $4,084,106 $4,100,000
Note Payable - Affiliates 124,221 122,871
Real estate taxes payable 35,751 237
Security deposits 54,338 55,018
Accounts payable & accrued expenses 86,722 59,860
4,385,138 4,337,986
Partners Capital (Deficit)
Limited Partners (707,523) (123,810)
Special Limited Partner 254,823 254,823
General Partner (142,887) (136,991)
Total Partners Capital (Deficit) (595,587) (5,978)
Total Liability And Partners Equity $3,789,551 $4,332,008
See notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Ended
March 31,
REVENUES 2002 2001
Rental income 361,562 $365,333
Other property 27,459 24,882
Total revenues 389,021 390,215
EXPENSES
Salaries & wages 68,386 69,275
Maintenance & repairs 57,279 39,205
Utilities 39,228 51,163
Real estate taxes 35,751 33,750
General administrative 13,175 10,255
Contract services 20,326 15,077
Insurance 26,031 9,988
Interest 63,723 58,437
Depreciation and amortization 85,282 85,926
Property management fees 19,449 19,511
Total expenses 428,630 392,587
NET INCOME (LOSS) (39,609) (2,372)
NET INCOME PER SHARE $(16.63) $(1.00)
See Notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Cash Flows
Unaudited
Three Months
Ended
March 31,
2002 2001
CASH FLOWS FROM OPERATING ACTIVITY
Net income (loss) ($39,609) ($2,372)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 83,000 81,000
Net Effect of changes in operating accounts
Escrow deposits (49,330) 101,307
Capital replacement reserve 378 (20,843)
Deferred Financing Costs 196 0
Accrued real estate taxes 35,514 (105,382)
Security deposits (680) 4,079
Accounts payable 26,862 4,814
Other assets 21,633 9,988
Net cash provided by operating activities 77,964 72,591
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of mortgage notes payable (15,894) (17,786)
Note payable - affiliates 1,350 0
Distribution to special limited partner (550,000) (40,000)
Net cash used by investing activities (564,544) (57,786)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (486,580) 14,805
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 559,647 12,904
CASH AND CASH EQUIVALENTS, END OF PERIOD $73,067 $27,709
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 March 31, 2002 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.
FIRST QUARTER 2002 COMPARED TO FIRST QUARTER 2001
Revenue from property operations decreased $1,194, or 0.38%,
for the first quarter of 2002, as compared to the first
quarter of 2001. Decreased occupancy to 89.3% in the first
quarter of 2002 from 93.4% in the first quarter of 2001
accounted for the decrease in rental income of $3,771 or
0.1.28%. Other property income increased $2,577 or 14.92%
mainly due to increased fee collections. The following
table illustrates the components:
Increase Percent
(Decrease) Change
Rental income (3,771) 1.28%
Other property 2,577 14.92%
Net Increase (1,194) 0.38%
(Decrease)
Property operating expenses: increased by $36,043 or 10.44%
for the first quarter of 2002 compared to the first quarter
of 2001 due primarily to increased insurance costs.
Insurance increased $16,043 or 240% due to higher premiums
and a new flood insurance policy as required by the new
lender. Maintenance & repairs increased $18,074 or 32.3% due
to parking lot repairs done in the first quarter of 2002.
Utilities decreased $11,935 or 32.03%, due to gas cost
decreases. Contract services increased $5,249 or 73.47% due
to increased cable television and lawn care costs.
General and administrative expenses increased $2,920 or
23.64% mainly due to increased advertising costs. The
following table illustrates the components:
Increase Percent
(Decrease) Change
Salaries & wages (889) 1.25%
Maintenance & repairs 18,074 32.30%
Utilities (11,935) 32.03%
Real estate taxes 2,001 6.35%
General administrative 2,920 23.64%
Contract services 5,249 73.47%
Insurance 16,043 239.81%
Interest 5,286 12.56%
Depreciation and amortization (644) 0.99%
Property management fees (62) 0.38%
Net Increase 36,043 10.44%
(Decrease)
FIRST QUARTER 2001 COMPARED TO FIRST QUARTER 2000
Revenue from property operations decreased $1,736, or 0.55%,
for the first quarter of 2001, as compared to the first
quarter of 2000. Decreased occupancy to 93.4% in the first
quarter of 2001 from 96.3% in the first quarter of 2000
accounted for the decrease in rental income of $945 or
0.32%. Other property income decreased $791 or 4.58% mainly
due to decreased fee collections. The following table
illustrates the components:
Increase Percent
(Decrease) Change
Rental income (945) 0.32%
Other property (791) 4.58%
Net Increase (1,736) 0.55%
(Decrease)
Property operating expenses: increased by $7,491 or 2.17%
for the first quarter of 2001 compared to the first quarter
of 2000 due primarily to increased utilities. Utilities
increased $15,007 or 40.28%, due to gas cost increases.
Insurance rose $2,666 or 39.85% from premium increases.
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. General and administrative
expenses decreased $4,223 or 34.18% mainly due to decreased
mailing costs. The following table illustrates the
components:
Increase Percent
(Decrease) Change
Salaries & wages 448 0.63%
Maintenance & repairs (8,766) 15.66%
Utilities 15,007 40.28%
Real estate taxes (3,750) 11.90%
General administrative (4,223) 34.18%
Contract services (1,526) 21.36%
Insurance 2,666 39.85%
Interest (1,277) 3.03%
Depreciation and amortization 9,000 13.86%
Property management fees (88) 0.54%
Net Increase 7,491 2.17%
(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 reduced 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. Management of
the Partnership's assets is performed by Univesco, Inc., a
Texas corporation, Robert J. Werra, CEO.
On November 12, 1993 the Partnership refinanced the
property's 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 $415,000.
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) were 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 assets should be considered for disposal.
At this time, there is no plan to dispose of Las Brisas
Apartments.
As of March 31, 2002, the Partnership had $73,067 in
cash and cash equivalents as compared to $559,647 as of
December 31, 2001. The net decrease in cash of $486,580 was
due to distributions to the special limited partner.
The property is encumbered by a non-recourse mortgage
with a principal balance of $4,084,106 as of March 31, 2002.
During the year ended December 31, 2001, the Partnership
refinanced the mortgage payable. The mortgage payable bears
interest at a rate of 6.18% and is payable in monthly
installments of principal and interest of $25,058 through
December 2011, at which time a lump sum payment of
approximately $3,447,000 is due. This mortgage note is
secured by real estate with a net book value of $3,576,134.
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 $254,823 in Special Limited Partner equity is the
result of previous fundings 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 2002 and 2001, the Special Limited
Partner received distributions from the Partnership totaling
$550,000 and $985,408, respectively.
During the first quarter of 2002, the partnership paid
$550,000 to the special limited partner in partial
satisfaction of the distribution preference due to the
special limited partner, following this payment, the total
distribution preference due to the special limited partners
is approximately $1,368,000 as of March 31, 2002.
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 March 31, 2002.
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: May 1. 2002