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, 2003 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 75093-5994
(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 March 31, 2003 and
December 31, 2002 Page 3
Consolidated Statements of Operations for the Three Months
Ended March 31, 2003 and 2001 Page 4
Consolidated Statements of Cash Flows for the Three months
Ended March 31, 2003 and 2002 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, 2002 are Unaudited.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Balance Sheets
March 31, December 31,
2003 2002
(Unaudited)
ASSETS
Real Estate assets, at cost
Land $1,000,000 $1,000,000
Buildings and improvements 7,044,581 7,044,581
8,044,581 8,044,581
Less: Accumulated depreciation (4,709,464) (4,626,464)
3,335,117 3,418,117
Cash including cash investments 6,995 23,824
Escrow deposits 47,781 147,989
Replacement Reserve 0 284
Deferred Financing Costs 78,727 81,009
Other assets 32,717 63,341
TOTAL ASSETS $3,501,337 $3,734,564
LIABILITIES AND PARTNERS' EQUITY:
LIABILITIES
Mortgage and notes payable $4,034,415 $4,051,320
Note Payable - Affiliates 678 263
Real estate taxes payable 37,500 149,534
Security deposits 53,782 55,545
Accounts payable & accrued expenses 99,200 71,480
4,225,575 4,328,142
Partners Capital (Deficit)
Limited Partners (247,263) (187,210)
Special Limited Partner (338,737) (268,737)
General Partner (138,238) (137,631)
Total Partners Capital (Deficit) (724,238) (593,578)
Total Liability and Partners Equity $3,501,337 $3,734,564
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 $390,882 $361,562
Other property 17,814 27,459
Total revenues 408,696 389,021
EXPENSES
Salaries & wages 76,112 68,386
Maintenance & repairs 71,478 57,279
Utilities 48,625 39,228
Real estate taxes 37,500 35,751
General administrative 13,107 13,175
Contract services 23,730 20,326
Insurance 30,624 26,031
Interest 62,463 63,723
Depreciation and amortization 85,282 85,282
Property management fees 20,435 19,449
Total expenses 469,356 428,630
NET INCOME (LOSS) ($60,660) ($39,609)
NET INCOME PER SHARE $(25.47) $(16.63)
See Notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Cash Flows
Unaudited
Three Months Ended March 31,
2003 2002
CASH FLOWS FROM OPERATING ACTIVITY
Net income (loss) ($60,660) ($39,609)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 83,000 83,000
Net Effect of changes in operating accounts
Escrow deposits 100,208 (49,330)
Capital replacement reserve 284 378
Accrued real estate taxes (112,034) 35,514
Security deposits (1,763) (680)
Accounts payable 27,720 26,862
Deferred Financing Costs 2,282 21,633
Other assets 30,624 196
Net cash provided by operating activities 69,661 77,964
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of mortgage notes payable (16,905) (15,894)
Note payable - affiliates 415 1,350
Distribution to special limited partner (70,000) (550,000)
Net cash used by investing activities (86,490) (564,544)
NET INCREASE (DECREASE) IN CASH AND CASH (16,829) (486,580)
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 23,824 559,647
CASH AND CASH EQUIVALENTS, END OF PERIOD $6,995 $73,067
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, 2003 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.
The occupancy of Las Brisas averaged 92.8% during the first
quarter of 2003 as compared to 89.3% for the first quarter
of 2002.
FIRST QUARTER 2003 COMPARED TO FIRST QUARTER 2002
Revenue from property operations increased $19,675, or
6.29%, for the first quarter of 2003, as compared to the
first quarter of 2002. Increased occupancy in the first
quarter of 2003 accounted for the increase in rental income
of $29,320 or 9.92%. Other property income decreased $9,645
or 55.85% mainly due to decreased fee collections. The
following table illustrates the components:
Three Month Comparison
Increase Percent
(Decrease) Change
Rental income 29,320 9.92%
Other property (9,645) 55.85%
Net Increase (Decrease) 19,675 6.29%
Property operating expenses: increased by $40,726 or 11.79%
for the first quarter of 2003 compared to the first quarter
of 2002 due primarily to increased insurance costs.
Insurance increased $4,593 or 68.65% due to higher premiums
and a new flood insurance policy as required by the new
lender. Contract service increased $3,404 or 47.65% due to
higher cable rates for the property. Maintenance & repairs
increased $14,199 or 25.37% due to roof and carpentry
repairs. Utilities increased $9,397 or 25.22% from higher
natural gas costs. The following table illustrates the
components:
Increase Percent
(Decrease) Change
Salaries & wages 7,726 10.87%
Maintenance & repairs 14,199 25.37%
Utilities 9,397 25.22%
Real estate taxes 1,749 5.55%
General administrative (68) 0.55%
Contract services 3,404 47.65%
Insurance 4,593 68.65%
Interest (1,260) 2.99%
Property management fees 986 6.05%
Net Increase (Decrease) 40,726 11.79%
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 (Decrease) (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 (Decrease) 36,043 10.44%
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
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
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 March 31, 2003, the Partnership had $6,995 in
cash and cash equivalents as compared to $23,824 as of
December 31, 2002. The net decrease in cash of $16,829 was
due to distributions to the special limited partner.
The property is encumbered by a non-recourse mortgage
with a principal balance of $4,034,415 as of March 31, 2003.
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 $3,418,117.
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 special limited partner distribution preference
arises from a preferred return on certain special limited
partnership contributions made in prior years in conjunction
with the refinancing of the mortgage debt. The total unpaid
amount due to the special limited partners at March 31, 2003
is approximately $2,089,000 of which $816,000 is the
remaining distribution preference and $1,273,000 is the
original contribution. Any additional available cash will
then be distributed in accordance with the partnership
agreement. During 2003, 2002, and 2001, distributions of
$70,000, $523,560, and $985,408, respectively, were made to
the special limited partners in accordance with this
agreement.
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, 2003.
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: April 25, 2003
CERTIFICATION
I, Robert J Werra, certify that:
1. I have reviewed this annual report on Form 10-Q of
Amrecorp Realty Fund III;
2. Based on my knowledge, this annual report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made,
in light of the circumstances under which such statements
were made, not misleading with respect to the period covered
by this annual report;
3. Based on my knowledge, the financial statements, and
other financial information included in this annual report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
annual report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries, is
made known to us by others within those entities,
particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within
90 days prior to the filing date of this annual report
(the "Evaluation Date"); and
c) presented in this annual report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have identified
for the registrant's auditors any material weaknesses
in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this annual report whether there were
significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies
and material weaknesses.
Date: April 25, 2003
/s/ Robert J. Werra
General Partner
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Amrecorp Realty
Fund III ("the Company") on Form 10-Q for the year ending
March 31, 2003 as filed with the Securities and Exchange
Commission on the date hereof ("the Report"), I, Robert
J. Werra, Acting Principal Executive Officer and Chief
Financial Officer of the Company, certify, pursuant to 18
U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-
Oxley Act of 2002, that:
(1) The report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial condition
and results of operations of the Company.
/s/ Robert J. Werra
Acting Principal Executive Officer and Chief Financial
Officer
April 25, 2003