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, 2006 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 June 30, 2006 and
December 31, 2005 Page 3
Consolidated Statements of Operations for the Three and Six
Months Ended June 30, 2006 and 2005 Page 4
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 2006 and 2005 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, 2005 are Unaudited.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Balance Sheets
June 30 December 31,
2006 2005
(Unaudited)
ASSETS
Real Estate assets, at cost
Land $1,000,000 $1,000,000
Buildings and improvements 7,479,441 7,454,441
8,479,441 8,454,441
Less: Accumulated depreciation (5,897,304) (5,715,304)
2,582,137 2,739,137
Cash including cash investments 128,075 23,891
Escrow deposits 78,470 157,525
Deferred Financing Costs 49,062 53,626
Other assets 112,027 37,038
TOTAL ASSETS $2,949,771 $3,011,217
LIABILITIES AND PARTNERS' EQUITY:
LIABILITIES
Mortgage payable $3,855,244 $3,885,910
Payable to affiliates 1,604 620
Real estate taxes payable 79,624 157,649
Security deposits 66,138 65,784
Accounts payable & accrued expenses 52,735 60,009
4,055,345 4,169,972
Partners Capital (Deficit)
Limited Partners (1,866,851) (1,919,501)
Special Limited Partner 915,875 915,875
General Partner (154,598) (155,129)
Total Partners' Capital (1,105,574) (1,158,755)
(Deficit)
Total Liabilities And Partners' Equity $2,949,771 $3,011,217
See notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
REVENUES 2006 2005 2006 2005
Rental income 451,981 $428,289 $891,522 $848,788
Other property 34,407 36,847 73,807 58,649
Total revenues 486,388 465,136 965,329 907,437
EXPENSES
Salaries & wages 99,527 74,392 179,533 147,612
Maintenance & repairs 44,491 58,698 67,633 103,851
Utilities 39,002 41,481 88,165 84,243
Real estate taxes 39,750 34,500 79,500 69,000
General and administrative 22,996 13,666 35,932 28,394
Contract services 33,338 29,946 56,819 58,080
Insurance 24,312 22,032 50,106 51,218
Interest 59,723 60,572 119,630 121,367
Depreciation and amortization 93,282 92,282 186,564 184,564
Property management fees 24,319 23,257 48,266 45,372
Total expenses 480,740 450,826 912,148 893,701
NET INCOME $5,648 $14,310 $53,181 $13,736
NET INCOME PER LIMITITED
PARTNERSHIP UNIT BASIC $2.35 $5.95 $22.10 $5.71
LIMITED PARTNERSHIP UNITS 2,382 2,382 2,382 2,382
OUTSTANDING BASIC
See Notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Cash Flows
Unaudited
Six Months Ended
June 30,
2006 2005
CASH FLOWS FROM OPERATING ACTIVITY
Net income (loss) $53,181 $13,736
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 186,564 184,564
Net Effect of changes in operating accounts
Escrow deposits 79,055 53,460
Accrued real estate taxes (78,025) (71,629)
Security deposits 354 5,177
Accounts payable (7,274) 30,517
Payable to affiliates 984 (2,976)
Other assets (74,989) (51,959)
Net cash provided by operating activities 159,850 160,890
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Real Estate (25,000) 0
Net cash used by investing activities (25,000) 0
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of mortgage notes payable (30,666) (33,725)
Distribution to special limited partner 0 (150,000)
Net cash used by financing activities (30,666) (183,725)
NET INCREASE (DECREASE) IN CASH AND CASH 104,184 (22,835)
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 23,891 56,866
CASH AND CASH EQUIVALENTS, END OF PERIOD $128,075 $34,031
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 "Partnership") 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 Partnership 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 Partnership's 2005 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, 2006.
Item 2. RESULTS OF OPERATIONS AND MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
Results of Operations
At June 30, 2006 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 95.8% during the second
quarter of 2006 as compared to 98.7% for the second quarter of
2005.
SECOND QUARTER 2006 COMPARED TO SECOND QUARTER 2005
Revenue from property operations increased $21,252, or 4.57%, for
the second quarter of 2006, as compared to the second quarter of
2005. Rental income increased $23,692 or 5.53% due to higher
rental rates. Other property income decreased $2,440 or 6.622%
from decreased fee collections. The following table illustrates
the components:
Increase Percent
(Decrease) Change
Rental income 23,692 5.53%
Other property (2,440) 6.62%
Net Increase 21,252 4.57%
(Decrease)
Property operating expenses: increased by $29,914 or 6.64% for
the second quarter of 2006 compared to the second quarter of 2005
due primarily to increased salary and wages. Salaries and wages
increased $25,135 or 33.79% due to additional maintenance
personnel. Maintenance and repairs decreased $14,207 or 24.2%
due to internal maintenance personnel. General and
administrative increased $9,330 or 68.27% due to advertising and
professional fees. Real estate taxes increased $5,250 or 15.22%
due to higher assessed valuations. Insurance increased $2,280 or
10.35% due to increased flood insurance costs. The following
table illustrates the components:
Increase Percent
(Decrease) Change
Salaries & wages 25,135 33.79%
Maintenance & repairs (14,207) 24.20%
Utilities (2,479) 5.98%
Real estate taxes 5,250 15.22%
General & administrative 9,330 68.27%
Contract services 3,392 11.33%
Insurance 2,280 10.35%
Interest (849) 1.40%
Depreciation and amortization 1,000 1.08%
Property management fees 1,062 4.57%
Net Increase 29,914 6.64%
(Decrease)
FIRST SIX MONTHS 2006 COMPARED TO FIRST SIX MONTHS 2005
Revenue from property operations increased $57,892, or 6.38%, for
the first six months of 2006, as compared to the first six months
of 2005. Rental income increased $42,734 or 5.03% due to higher
rental rates. Other property income increased $15,158 or 25.85%
mainly due to increased fee collections. The following table
illustrates the components:
Increase Percent
(Decrease) Change
Rental income 42,734 5.03%
Other property 15,158 25.85%
57,892 6.38%
Property operating expenses: increased by $18,447 or 2.06% for
the first six months of 2006 compared to the first six months of
2005 due primarily to increased salaries. Salaries and wages
increased $31,921 or 21.62% due to additional employees.
Maintenance and repairs decreased $36,218 or 34.87% due to prior
year exterior building maintenance. Real estate taxes increased
$10,500 or 15.22% due to higher assessed valuations. General
and administrative increased $7,538 or 26.55% due to increased
information technology costs. The following table illustrates
the components:
Increase Percent
(Decrease) Change
Salaries & wages 31,921 21.62%
Maintenance & repairs (36,218) 34.87%
Utilities 3,922 4.66%
Real estate taxes 10,500 15.22%
General & administrative 7,538 26.55%
Contract services (1,261) 2.17%
Insurance (1,112) 2.17%
Interest (1,737) 1.43%
Depreciation and amortization 2,000 1.08%
Property management fees 2,894 6.38%
Net Increase (Decrease) 18,447 2.06%
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 June 30, 2006, the Partnership had $128,075 in cash and
cash equivalents as compared to $23,891 as of December 31, 2005.
The net increase in cash of $104,184 was cash flow from
operations.
The property is encumbered by a non-recourse mortgage with a
principal balance of $3,855,244 as of June 30, 2006. 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
$2,582,137.
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 June 30, 2006 is approximately
$1,906,000 of which $990,000 is the remaining distribution
preference and $916,000 is the original contribution. Any
additional available cash will then be distributed in accordance
with the partnership agreement. During 2006, 2005, and 2004,
distributions of $0, $320,000, and $90,000, 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: July 24, 2006
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
Partnership;
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 Partnership
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 Partnership 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 Partnership'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
Partnership's internal control over financial reporting
that occurred during the Partnership's most recent
fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the
Partnership'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
Partnership'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 Partnership'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 Partnership's internal control over
financial reporting.
/s/ Robert J. Werra
Robert J. Werra
Acting Principal Executive Officer and Chief Financial Officer
July 24, 2006
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 Partnership") on Form 10-Q for the period
ending June 30, 2006 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 Partnership.
/s/ Robert J. Werra
Robert J. Werra
Acting Principal Executive Officer and Chief Financial
Officer
July 24, 2006