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 June 30, 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 June 30, 2002 and
December 31, 2001 Page 3
Consolidated Statements of Operations for the Three
& Six Months Ended June 30, 2002 and 2001 Page 4
Consolidated Statements of Cash Flows for the Six
months Ended June 30, 2002 and 2001 Page 5
Item 2. Results of Operations and Managements 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
June 30, 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 depeciation (4,445,982) (4,279,982)
3,410,134 3,576,134
Cash including cash investments 10,614 559,647
Escrow deposits 86,326 0
Replacement Reserve 55,896 55,625
Deferred Financing Costs 87,658 90,136
Other assets 84,815 50,466
TOTAL ASSETS $3,735,443 $4,332,008
LIABILITIES AND PARTNERS' EQUITY:
LIABILITIES
Mortgage and notes payable $4,071,969 $4,100,000
Note Payable - Affiliates 122,124 122,871
Real estate taxes payable 71,502 237
Security deposits 54,246 55,018
Accounts payable & accrued expenses 84,531 59,860
4,404,372 4,337,986
Partners Capital (Deficit)
Limited Partners (775,182) (123,810)
Special Limited Partner 249,823 254,823
General Partner (143,570) (136,991)
Total Partners Capital (668,929) (5,978)
(Deficit)
Total Liability And Partners Equity $3,735,443 $4,332,008
See notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Operations
(Unaudited)
Three Six
Months Ended Months Ended
June 30, June 30,
REVENUES 2002 2001 2002 2001
Rental income 372,061 $372,746 $733,623 $738,079
Other property 25,574 27,817 53,033 52,699
Total revenues 397,635 400,563 786,656 790,778
EXPENSES
Salaries & wages 65,658 62,625 134,044 131,900
Maintenance & repairs 87,988 64,980 145,267 104,185
Utilities 33,751 47,999 72,979 99,162
Real estate taxes 35,751 33,750 71,502 67,500
General administrative 18,349 12,837 31,524 23,092
Contract services 24,659 19,109 44,985 34,186
Insurance 32,121 9,821 58,152 19,809
Interest 62,537 58,073 126,260 116,510
Depreciation and amortization 85,282 85,926 170,564 171,852
Property management fees 19,881 20,030 39,330 39,541
Total expenses 465,977 415,150 894,607 807,737
NET INCOME (LOSS) ($68,342) ($14,587) ($107,951) ($16,959)
NET INCOME PER SHARE $(28.69) $(6.12) $(45.32) $(7.12)
See Notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Cash Flows
Unaudited
Six Months
Ended June 30,
2001 2000
CASH FLOWS FROM OPERATING ACTIVITY
Net income (loss) ($107,951) ($16,959)
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation and amortization 166,000 162,000
Net Effect of changes in operating accounts
Escrow deposits (86,326) 77,086
Capital replacement reserve (271) (11,607)
Accrued real estate taxes 71,265 (71,632)
Security deposits (772) 5,711
Accounts payable 24,671 36,558
Deferred Financing Costs 2,478 0
Other assets (34,349) (28,051)
Net cash provided by operating activities 34,745 153,106
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of mortgage notes payable (28,031) (35,936)
Note payable - affiliates (747) 0
Distribution to special limited partner (555,000) (55,000)
Net cash used by investing activities (583,778) (90,936)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (549,033) 62,170
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 559,647 12,904
CASH AND CASH EQUIVALENTS, END OF PERIOD $10,614 $75,074
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 MANAGEMENTS DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
Results of Operations
At June 30, 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.
SECOND QUARTER 2002 COMPARED TO SECOND QUARTER 2001
Revenue from property operations decreased $2,928, or 0.94%,
for the second quarter of 2002, as compared to the second
quarter of 2001. Decreased occupancy to 91.9% in the second
quarter of 2002 from 92.4% in the second quarter of 2001
accounted for the decrease in rental income of $685 or
0.23%. Other property income decreased $2,243 or 12.99%
mainly due to decreased fee collections. The following
table illustrates the components:
Increase Percent
(Decrease) Change
Rental income (685) 0.23%
Other property (2,243) 12.99%
Net Increase (2,928) 0.94%
(Decrease)
Property operating expenses: increased by $50,827 or 14.72%
for the second quarter of 2002 compared to the second
quarter of 2001 due primarily to increased insurance costs.
Insurance increased $22,300 or 333.33% due to higher
premiums and a new flood insurance policy as required by the
new lender. Maintenance & repairs increased $23,008 or
41.11% due to parking lot and various maintenance projects.
Utilities decreased $14,248 or 38.24%, due to gas cost
decreases. Contract services increased $5,550 or 77.69% due
to increased cable television and lawn care costs.
General and administrative expenses increased $5,512 or
44.62% mainly due to real estate tax appeals and increased
credit reporting costs. The following table illustrates the
components:
Increase Percent
(Decrease) Change
Salaries & wages 3,033 4.27%
Maintenance & repairs 23,008 41.11%
Utilities (14,248) 38.24%
Real estate taxes 2,001 6.35%
General administrative 5,512 44.62%
Contract services 5,550 77.69%
Insurance 22,300 333.33%
Interest 4,464 10.61%
Depreciation and amortization (644) 0.99%
Property management fees (149) 0.91%
Net Increase 50,827 14.72%
(Decrease)
SECOND QUARTER 2001 COMPARED TO SECOND QUARTER 2000
Revenue from property operations decreased $6,424, or 2.05%
for the second quarter of 2001, as compared to the second
quarter of 2000. Decreased occupancy to 92.4% in the second
quarter of 2001 from 96.4% in the second quarter of 2000
accounted for the decrease in rental income of $3,596 or
1.22%. Other property income decreased $2,828 or 16.38%
mainly due to decreased fee collections. The following
table illustrates the components:
Increase Percent
(Decrease) Change
Rental income (3,596) 1.22%
Other property (2,828) 16.38%
Net Increase (6,424) 2.05%
(Decrease)
Property operating expenses: decreased by $86,744 or 25.12%
for the second quarter of 2001 compared to the second
quarter of 2000 due primarily to decreases in maintenance
and repairs. Maintenance and repairs decreased $104,496 or
186.72% due to the exterior building maintenance preformed
in 2000. Utilities increased $23.893 or 64.12%, due to gas
cost increases. General and administrative expenses
decreased $7,023 or 56.85% mainly due to decreased mailing
costs and decreased credit-reporting costs. Insurance rose
$1,993 or 29.79% with the annual policy renewal Contract
services decreased $2,444 or 34.21% due to reduced cable
television and lawn care expenses. The following table
illustrates the components:
Increase Percent
(Decrease) Change
Salaries & wages (2,075) 2.92%
Maintenance & repairs (104,496) 186.72%
Utilities 23,893 64.12%
Real estate taxes (3,750) 11.90%
General administrative (7,023) 56.85%
Contract services (2,444) 34.21%
Insurance 1,993 29.79%
Interest (1,527) 3.63%
Depreciation and amortization 9,000 13.86%
Property management fees (315) 1.93%
Net Increase (86,744) 25.12%
(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 Partnerships
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 Amrecorps financial
difficulties might have on the partnership. Management of
the Partnerships assets is performed by Univesco, Inc., a
Texas corporation, Robert J. Werra, CEO.
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 $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) was provided by Robert J. Werra. In
addition Robert J. Werra exercised his option in the
propertys 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 June 30, 2002, the Partnership had $10,614 in
cash and cash equivalents as compared to $559,647 as of
December 31, 2001. The net decrease in cash of $549,033 was
due to distributions to the special limited partner.
The property is encumbered by a non-recourse mortgage
with a principal balance of $4,071,969 as of June 30, 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 $249,823 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 2002 and 2001, the Special Limited
Partner received distributions from the Partnership totaling
$555,000 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 $1,774,000 as of June 30, 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 June 30, 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: August 1. 2002