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, 2005 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:
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act).
Yes: No: N
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes: No: N
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, 2005 and
December 31, 2004 Page 3
Consolidated Statements of Operations for the Three and Nine
Months Ended September 30, 2005 and 2004 Page 4
Consolidated Statements of Cash Flows for the Three and Nine
Months Ended September 30, 2005 and 2004 Page 5
Item 2. Results of Operations and Management's Discussion and
Analysis of Financial Condition Page 6
Item 3. Quantitative and Qualitative Disclosures about Market
Risk Page 8
Item 4. Controls and Procedures Page 8
Part II
Liquidity and Capital Resources Page 8
Other Information Page 9
Signatures Page 11
The statements, insofar as they relate to the period subsequent
to December 31, 2004 are Unaudited.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Balance Sheets
September 30, December 31,
2005 2004
(Unaudited)
ASSETS
Real Estate assets, at cost
Land $1,000,000 $1,000,000
Buildings and improvements 7,345,211 7,345,211
8,345,211 8,345,211
Less: Accumulated depreciation (5,621,122) (5,351,122)
2,724,089 2,994,089
Cash including cash 26,871 56,866
investments
Escrow deposits 119,122 136,621
Deferred Financing Costs 55,908 62,753
Other assets 74,525 41,560
TOTAL ASSETS $3,000,515 $3,291,889
LIABILITIES AND PARTNERS' EQUITY:
LIABILITIES
Mortgage and notes payable $3,895,923 $3,944,478
Payable - Affiliates 1,643 1,220
Real estate taxes payable 105,250 140,629
Security deposits 63,575 57,644
Accounts payable & accrued 96,110 58,394
expenses
4,162,501 4,202,365
Partners Capital (Deficit)
Limited Partners (1,923,240) (1,931,645)
Special Limited Partner 916,420 1,176,420
General Partner (155,166) (155,251)
Total Partners Capital (1,161,986) (910,476)
(Deficit)
Total Liability And Partners Equity $3,000,515 $3,291,889
See notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Ended Nine Months Ended
June 30, September 30,
REVENUES 2005 2004 2005 2004
Rental income 442,403 $415,116 $1,291,191 $1,212,374
Other property 28,682 32,590 87,331 86,013
Total revenues 471,085 447,706 1,378,522 1,298,387
EXPENSES
Salaries & wages 85,006 88,185 232,618 243,199
Maintenance & repairs 75,193 62,485 179,044 187,438
Utilities 39,233 47,912 123,476 117,642
Real estate taxes 36,250 36,500 105,250 111,500
General administrative 14,162 14,942 42,556 42,516
Contract services 31,292 26,641 89,372 82,186
Insurance 18,994 29,186 70,212 77,618
Interest 60,345 61,232 181,712 184,331
Depreciation and amortization 92,282 94,282 276,846 282,846
Property management fees 23,574 22,386 68,946 64,920
Total expenses 476,331 483,751 1,370,032 1,394,196
NET INCOME (LOSS) ($5,246) ($36,045) $8,490 ($95,809)
NET INCOME PER SHARE $(2.18) $(14.98) $3.53 $(39.82)
See Notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Cash Flows
Unaudited
Nine Months
Ended
September 30,
2005 2004
CASH FLOWS FROM OPERATING ACTIVITY
Net income (loss) $8,490 ($95,809)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 276,845 282,846
Net Effect of changes in operating accounts
Escrow deposits 17,499 35,812
Accrued real estate taxes (35,379) (26,267)
Security deposits 5,931 (455)
Accounts payable 37,716 4,925
Other assets (32,965) (37,917)
Net cash provided by operating activities 278,137 163,135
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used by investing activities 0 0
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of mortgage notes payable (48,555) (45,652)
Note payable - affiliates 423 (855)
Distribution to special limited partner (260,000) (90,000)
Net cash used by financing activities (308,132) (136,507)
NET INCREASE (DECREASE) IN CASH AND CASH (29,995) 26,628
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 56,866 19,115
CASH AND CASH EQUIVALENTS, END OF PERIOD $26,871 $45,743
See Notes to Condensed Consolidated Financial Statements
Basis of Presentation:
The accompanying unaudited condensed consolidated
financial statements have been prepared by Amrecorp Realty
Fund III (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission. The
financial statements reflect all adjustments that are, in
the opinion of management, necessary to fairly present such
information. All such adjustments are of a normal recurring
nature. Although the Company believes that the disclosures
are adequate to make the information presented not
misleading, certain information and footnote disclosures,
including a description of significant accounting policies
normally included in financial statements prepared in
accordance with accounting principles generally accepted in
the United States of America, have been condensed or omitted
pursuant to such rules and regulations.
These financial statements should be read in conjunction
with the financial statements and notes thereto included in
the Company's 2004 Annual Report on Form 10-K filed with the
Securities and Exchange Commission. The results of
operations for interim periods are not necessarily
indicative of the results for any subsequent quarter or the
entire fiscal year ending December 31, 2005.
Item 2. RESULTS OF OPERATIONS AND MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
Results of Operations
At September 30, 2005 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 97.6% during the third
quarter of 2005 as compared to 97.0% for the third quarter of
2004.
THIRD QUARTER 2005 COMPARED TO THIRD QUARTER 2004
Revenue from property operations increased $23,379, or 5.22%, for
the third quarter of 2005, as compared to the third quarter of
2004. Rental income increased $27,287 or 6.57% due to higher
occupancy. Other property income decreased $3,908 or 11.99%
mainly due to decreased fee collections. The following table
illustrates the components:
Increase Percent
(Decrease) Change
Rental income 27,287 6.57%
Other property (3,908) 11.99%
Net Increase 23,379 5.22%
(Decrease)
Property operating expenses: decreased by $7,420 or 1.53% for the
third quarter of 2005 compared to the third quarter of 2004 due
primarily to decreased insurance costs. Insurance decreased
$10,192 or 34.92% due to decreased flood insurance. Maintenance
and repairs increased $12,708 or 20.34% due to roof and pool
repairs. Utilities decreased $8,679 or 18.11% due to a decrease
in electric consumption. Contract services increased $4,651 or
17.46% due to higher rubbish and cable television costs. The
following table illustrates the components:
Increase Percent
(Decrease) Change
Salaries & wages (3,179) 3.60%
Maintenance & repairs 12,708 20.34%
Utilities (8,679) 18.11%
Real estate taxes (250) 0.68%
General administrative (780) 5.22%
Contract services 4,651 17.46%
Insurance (10,192) 34.92%
Interest (887) 1.45%
Depreciation and amortization (2,000) 2.12%
Property management fees 1,188 5.31%
Net Increase (7,420) 1.53%
(Decrease)
FIRST NINE MONTHS 2005 COMPARED TO FIRST NINE MONTHS 2004
Revenue from property operations increased $80,135, or 6.17%, for
the first nine months of 2005, as compared to the first nine
months of 2004. Rental income increased $78,817 or 6.50% due to
higher occupancy. Other property income increased $1,318 or
1.53% mainly due to increased fee collections. The following
table illustrates the components:
Increase Percent
(Decrease) Change
Rental income 78,817 6.50%
Other property 1,318 1.53%
80,135 6.17%
Property operating expenses: decreased by $24,164 or 1.73% for
the first nine months of 2005 compared to the first nine months
of 2004 due primarily to decreased insurance costs. Insurance
decreased $7,406 or 9.54% due to decreased flood insurance.
Contract services increased $7,186 or 8.74% due to higher rubbish
and cable television costs. Real estate taxes decreased $6,250
or 5.61% due to successful tax appeals. Utilities increased
$5,834 or 4.96% due to higher gas prices. The following table
illustrates the components:
Increase Percent
(Decrease) Change
Salaries & wages (10,581) 4.35%
Maintenance & repairs (8,394) 4.48%
Utilities 5,834 4.96%
Real estate taxes (6,250) 5.61%
General administrative 40 0.09%
Contract services 7,186 8.74%
Insurance (7,406) 9.54%
Interest (2,619) 1.42%
Depreciation and amortization (6,000) 2.12%
Property management fees 4,026 6.20%
Net Increase (Decrease) (24,164) 1.73%
LIQUIDITY AND CAPITAL RESOURCES
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, 2005, the Partnership had $26,871 in
cash and cash equivalents as compared to $56,866 as of December
31, 2004. The net decrease in cash of $29,995 was cash used for
financing.
The property is encumbered by a non-recourse mortgage with a
principal balance of $3,895,923 as of September 30, 2005. 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
$2,994,090.
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 September 30, 2005 is
approximately $1,906,000 of which $975,000 is the remaining
distribution preference and $931,000 is the original
contribution. Any additional available cash will then be
distributed in accordance with the partnership agreement. During
2005, 2004, and 2003, distributions of $260,000, $90,000, and
$110,000, respectively, were made to the special limited partners
in accordance with this agreement.
Item 3 - Quantitative and Qualitative Disclosure about Market
Risk
The Partnership is exposed to interest rate changes
primarily as a result of its real estate mortgages. The
Partnerships interest rate risk management objective is to limit
the impact of interest rate changes on earnings and cash flows
and to lower it's overall borrowing costs. To achieve its
objectives, the Partnership borrows primarily at fixed rates.
The Partnership does not enter into derivative or interest rate
transactions for any purpose.
The Partnerships' activities do not contain material risk
due to changes in general market conditions. The partnership
invests only in fully insured bank certificates of deposits, and
mutual funds investing in United States treasury obligations.
Item 4 - Controls and Procedures
Based on their most recent evaluation, which was completed
within 90 days of the filing of this Form 10-Q, our Acting
Principal Executive Officer and Chief Financial Officer, believe
our disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) are effective. There were not any
significant changes in internal controls or in other factors that
could significantly affect these controls subsequent to the date
of their evaluation, and there has not been any corrective action
with regard to significant deficiencies and material weaknesses.
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.
31.1 Certification Pursuant to
Rules 13a-14 and 15d-14 Under
the Securities Exchange Act of
1934, as Adopted Pursuant to
Section 302 of the Sarbanes-
Oxley Act of 2002, filed
herewith.
32.1 Certification Pursuant to 18
U.S.C. Section 1350, as
Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act
of 2002, filed herewith.
(B) Reports on form 8-K for quarter ended June 30, 2005.
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 2, 2005
Exhibit 31.1
CERTIFICATION PURSUANT TO RULES 13a-14 AND 15d-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I Robert J. Werra, Acting Principal Executive Officer and Chief
Financial of Amrecorp Realty Fund III ("the Company"), certify
that:
1. I have reviewed this quarterly report on Form 10-Q of the
Company;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly
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 quarterly report;
4. I am responsible for establishing and maintaining
disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the Company and
have:
a. designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under my supervision, to ensure that material
information relating to the company and its consolidated
subsidiaries is made known to me by others within those
entities, particularly for the periods presented in this
quarterly report;
b. designed such internal control over financial reporting,
or caused such internal control over financial reporting
to be designed under my supervision, to provide
reasonable assurance regarding the reliability of
financial reporting and the preparation of financial
statements for external purposes in accordance with
generally accepted accounting principles.
c. evaluated the effectiveness of the Company's disclosure
controls and procedures and presented in this report my
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
CERTIFICATION PURSUANT TO RULES 13a-14 AND 15d-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - continued
d. disclosed in this report any change in the Company's
internal control over financial reporting that occurred
during the Company's most recent fiscal quarter that
has materially affected, or is reasonably likely to
materially affect, the Company's internal control over
financial reporting; and
5. I have disclosed based on my most recent evaluation of
internal control over financial reporting, to the
Company's auditors and Audit Committee of the Board of
Directors (or persons fulfilling the equivalent
function):
a. all significant deficiencies and material weaknesses in
the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the Company's ability to record,
process, summarize, and report financial data; and
b. any fraud, whether or not material, that involves
management or other employees who have a significant
role in the Company's internal control over financial
reporting.
/s/ Robert J. Werra
Robert J. Werra
Acting Principal Executive Officer and Chief Financial
Officer
November 2, 2005
Exhibit 32.1
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 Quarterly Report of Amrecorp Realty
Fund III ("the Company") on Form 10-Q for the period ending
September 30, 2005 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
Robert J. Werra
Acting Principal Executive Officer and Chief Financial
Officer
November 2, 2005