FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 2001
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM N/A
--------------------------------------------------
COMMISSION FILE NUMBER 0-18563
----------------------------------------------------------
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-3025607
- ------------------------------- -------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
200 CLARENDON STREET, BOSTON, MA 02116
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(800) 722-5457
- --------------------------------------------------------------------------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
N/A
- --------------------------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
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 [X] No [ ]
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
INDEX
PAGE
PART I: FINANCIAL INFORMATION
Item 1 - Financial Statements:
Balance Sheets at September 30, 2001 and
December 31, 2000 3
Statements of Operations for the Three and Nine
Months Ended September 30, 2001 and 2000 4
Statements of Partners' Equity for the
Nine Months Ended September 30, 2001 and
for the Year Ended December 31, 2000 5
Statements of Cash Flows for the Nine
Months Ended September 30, 2001 and 2000 6
Notes to Financial Statements 7-9
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-12
PART II: OTHER INFORMATION 13
2
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
BALANCE SHEETS
(UNAUDITED)
ASSETS
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------ ----------
Cash and cash equivalents $2,843,082 $6,436,528
---------- ----------
Total assets $2,843,082 $6,436,528
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 48,907 $ 66,605
Accounts payable to affiliates 80,363 125,765
---------- ----------
Total liabilities 129,270 192,370
Partners' equity/(deficit):
General partner's deficit (95,499) (95,400)
Limited partners' equity 2,809,311 6,339,558
---------- ----------
Total partners' equity 2,713,812 6,244,158
---------- ----------
Total liabilities and partners' equity $2,843,082 $6,436,528
========== ==========
See Notes to Financial Statements
3
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ----------------------
2001 2000 2001 2000
------- -------- -------- ----------
Income:
Rental income $ 5,597 $709,560 $ 9,101 $1,940,180
Income/(loss) from joint venture -- (37,062) -- 446,124
Interest income 23,141 43,864 119,261 125,696
Gain/(loss) on sales of property interests -- (91,590) -- (91,590)
------- -------- -------- ----------
Total income 28,738 624,772 128,362 2,420,410
Expenses:
Depreciation -- -- -- 80,540
General and administrative expenses 25,704 86,915 138,270 205,261
Amortization of deferred expenses -- 1,213 -- 34,085
Property operating expenses -- 319,619 -- 533,753
------- -------- -------- ----------
Total expenses 25,704 407,747 138,270 853,639
------- -------- -------- ----------
Net income/(loss) $ 3,034 $217,025 $ (9,908) $1,566,771
======= ======== ======== ==========
Allocation of net income/(loss):
General Partner $ 30 $ 17,812 $ (99) $ 96,333
John Hancock Limited Partner -- -- -- --
Investors 3,004 199,213 (9,809) 1,470,438
------- -------- -------- ----------
$ 3,034 $217,025 $ (9,908) $1,566,771
======= ======== ======== ==========
Net income/(loss) per Unit $ 0.00 $ 0.08 $ 0.00 $ 0.61
======= ======== ======== ==========
See Notes to Financial Statements
4
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND
YEAR ENDED DECEMBER 31, 2000
GENERAL LIMITED
PARTNER PARTNERS TOTAL
------- -------- -----
Partners' equity/(deficit) at January 1, 2000
(2,415,234 Units outstanding) $ (67,086) $ 30,344,139 $ 30,277,053
Less: Cash distributions (147,618) (28,520,955) (28,668,573)
Add: Net income 119,304 4,516,374 4,635,678
--------- ------------ ------------
Partners' equity/(deficit) at December 31, 2000
(2,415,234 Units outstanding) (95,400) 6,339,558 6,244,158
Less: Cash distributions -- (3,520,438) (3,520,438)
Add: Net loss (99) (9,809) (9,908)
--------- ------------ ------------
Partners' equity/(deficit) at September 30, 2001
(2,415,234 Units outstanding) $ (95,499) $ 2,809,311 $ 2,713,812
========= ============ ============
See Notes to Financial Statements
5
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
2001 2000
----------- -----------
Operating activities:
Net income/(loss) $ (9,908) $ 1,566,771
Adjustments to reconcile net income/(loss) to net
cash provided by/(used in) operating activities:
Depreciation -- 80,540
Amortization of deferred expenses -- 34,085
Cash distributions over equity
in income from joint venture -- 253,958
Loss on sales of property interests -- 91,590
----------- -----------
(9,908) 2,026,944
Changes in operating assets and liabilities:
Decrease/(increase) in restricted cash -- 3,160
Decrease/(increase) in other assets -- 4,469
Increase/(decrease) in accounts payable and
accrued expenses (17,698) 182,311
Increase/(decrease) in accounts payable to affiliates (45,402) (42,900)
----------- -----------
Net cash provided by/(used in) operating activities (73,008) 2,173,984
Investing activities:
Increase in deferred expenses -- (137,559)
Proceeds from sales of property interests -- 6,284,623
----------- -----------
Net cash provided by investing activities -- 6,147,064
Financing activities:
Cash distributed to Partners (3,520,438) (2,138,275)
----------- -----------
Net cash used in financing activities (3,520,438) (2,138,275)
----------- -----------
Net increase/(decrease) in cash and cash equivalents (3,593,446) 6,182,773
Cash and cash equivalents at beginning of year 6,436,528 2,899,090
----------- -----------
Cash and cash equivalents at end of period $ 2,843,082 $ 9,081,863
=========== ===========
See Notes to Financial Statements
6
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION OF PARTNERSHIP
John Hancock Realty Income Fund-III Limited Partnership (the "Partnership")
was formed under the Massachusetts Uniform Limited Partnership Act on
November 4, 1988. As of September 30, 2001, the Partnership consisted of
John Hancock Realty Equities, Inc. (the "General Partner"), a wholly-owned,
indirect subsidiary of John Hancock Life Insurance Company; John Hancock
Realty Funding, Inc. (the "John Hancock Limited Partner"); John Hancock
Income Fund-III Assignor, Inc. (the "Assignor Limited Partner"); and 2,193
Unitholders (the "Investors"). The Assignor Limited Partner holds five
Investor Limited Partnership Interests for its own account and 2,415,229
Assignee Units (the "Units"), representing economic and certain other
rights attributable to Investor Limited Partnership Interests in the
Partnership, for the benefit of the Investors. The John Hancock Limited
Partner, the Assignor Limited Partner and the Investors are collectively
referred to as the Limited Partners. The General Partner and the Limited
Partners are collectively referred to as the Partners. The initial capital
of the Partnership was $2,100, representing capital contributions of $1,000
from the General Partner, $1,000 from the John Hancock Limited Partner, and
$100 from the Assignor Limited Partner. The Amended Agreement of Limited
Partnership of the Partnership (the "Partnership Agreement") authorized the
issuance of up to 5,000,000 Units at $20 per unit. During the offering
period, which terminated on February 15, 1991, 2,415,229 Units were sold
and the John Hancock Limited Partner made additional capital contributions
of $3,863,366. There were no changes in the number of Units outstanding
subsequent to the termination of the offering period.
The Partnership was engaged solely in the business of acquiring, holding
for investment and disposing of existing income-producing retail,
industrial and office properties on an all-cash basis, free and clear of
mortgage indebtedness. Although the Partnership's properties were acquired
and held free and clear of mortgage indebtedness, the Partnership was able
to incur mortgage indebtedness under certain circumstances as specified in
the Partnership Agreement.
The latest date on which the Partnership is due to terminate is December
31, 2019, unless it is sooner terminated in accordance with the terms of
the Partnership Agreement. It is expected that, in the ordinary course of
the Partnership's business, as discussed in the following paragraph, the
properties of the Partnership will be disposed of, and the Partnership
terminated, before December 31, 2019.
As initially stated in its Prospectus, it was expected that the Partnership
would be dissolved upon the sale of its last remaining property, which at
that time was expected to be within seven to ten years following the date
such property was acquired by the Partnership. During 2000, the Partnership
sold the last four properties in its portfolio, one of which was held in a
joint venture, resulting in the termination of the operations of the
Partnership. The Partnership will be dissolved, in accordance with the
terms of the Partnership Agreement, as soon as reasonably practicable.
2. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States for interim financial information and with the instructions for Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by accounting principles
generally accepted in the United States for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the nine-month period ended September 30,
2001 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2001. For further information, refer to the
financial statements and footnotes thereto included in the Partnership's
Annual Report on Form 10-K for the year ended December 31, 2000.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results may differ from those
estimates.
7
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. BASIS OF PRESENTATION (CONTINUED)
Cash equivalents are highly liquid investments with maturities of three
months or less when purchased. These investments are recorded at cost plus
accrued interest, which approximates market value.
The net income/(loss) per Unit for the nine months ended September 30, 2001
and 2000 was calculated by dividing the Investors' share of net
income/(loss) by the number of Units outstanding at the end of such
periods.
3. THE PARTNERSHIP AGREEMENT
Distributable Cash from Operations (defined in the Partnership Agreement)
is distributed 5% to the General Partner and the remaining 95% in the
following order of priority: first, to the Investors until they receive a
7% non-cumulative, non-compounded annual cash return on their Invested
Capital (defined in the Partnership Agreement); second, to the John Hancock
Limited Partner until it receives a 7% non-cumulative, non-compounded
annual cash return on its Invested Capital; and third, to the Investors and
the John Hancock Limited Partner in proportion to their respective Capital
Contributions (defined in the Partnership Agreement). However, any
Distributable Cash from Operations which is available as a result of a
reduction in working capital reserves funded by Capital Contributions of
the Investors will be distributed 100% to the Investors.
Cash from a Sale or Financing of a Partnership Property, is first used to
pay all debts and liabilities of the Partnership then due and then to fund
any reserves for contingent liabilities. Cash from Sales or Financings is
then distributed and paid in the following order of priority: first, to the
Investors and the John Hancock Limited Partner, with the distribution made
between the Investors and the John Hancock Limited Partner in proportion to
their respective Capital Contributions, until the Investors and the John
Hancock Limited Partner have received an amount equal to their Invested
Capital; second, to the Investors until they have received, after giving
effect to all previous distributions of Distributable Cash from Operations
and any previous distributions of Cash from Sales or Financings after the
return of their Invested Capital, the Cumulative Return on Investment
(defined in the Partnership Agreement); third, to the John Hancock Limited
Partner until it has received, after giving effect to all previous
distributions of Distributable Cash from Operations and any previous
distributions of Cash from Sales or Financings after the return of its
Invested Capital, the Cumulative return on Investment; fourth, to the
General Partner to pay any Subordinated Disposition Fees then payable
pursuant to Section 6.4 (c) of the Partnership Agreement; and fifth, 99% to
the Investors and the John Hancock Limited Partner and 1% to the General
Partner, with the distribution made between the Investors and the John
Hancock Limited Partner in proportion to their respective Capital
Contributions.
Cash from the sale of the last of the Properties is distributed in the same
manner as Cash from Sales and Financings, except that before any other
distribution is made to the Partners, each Partner shall first receive from
such cash, an amount equal to the then positive balance, if any, in such
Partner's Capital Account after crediting of charging to such account the
profits or losses for tax purposes from such sale. To the extent, if any,
that a Partner is entitled to receive a distribution of cash based upon a
positive balance in its capital account prior to such distribution, such
distribution will be credited against the amount of such cash that Partner
would have been entitle to receive based upon the manner of distribution of
Cash from Sales and Financings, as specified in the previous paragraph.
8
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. THE PARTNERSHIP AGREEMENT (CONTINUED)
Profits for tax purposes from the normal operations of the Partnership for
each fiscal year are allocated to the Partners in the same amounts as
Distributable Cash from Operations for that year. If such profits are less
than Distributable Cash from Operations for any year, they are allocated in
proportion to the amounts of Distributable Cash from Operations for that
year. If such profits are greater than Distributable Cash from Operations
for any year, they are allocated 5% to the General Partner and 95% to the
John Hancock Limited Partner and the Investors, with the allocation made
between the John Hancock Limited Partner and the Investors in proportion to
their respective Capital Contributions. Losses for tax purposes from the
normal operations of the Partnership are allocated 1% to the General
Partner and 99% to the John Hancock Limited Partner and the Investors, with
the allocation made between the John Hancock Limited Partner and the
Investors in proportion to their respective Capital Contributions. However,
all tax aspects of the Partnership's payment of the sales commissions from
the Capital Contributions made by the John Hancock Limited Partner are
allocated 1% to the General Partner and 99% to the John Hancock Limited
Partner, and not to the Investors. Depreciation deductions are allocated 1%
to the General Partner and 99% to the Investors, and not to the John
Hancock Limited Partner.
Profits and Losses from Sales and Financings are generally allocated 99% to
the Limited Partners and 1% to the General Partner.
Neither the General Partner nor any affiliate of the General Partner shall
be liable, responsible or accountable in damages to any of the Partners or
the Partnership for any act or omission of the General Partner or such
affiliate in good faith on behalf of the Partnership within the scope of
the authority granted to the General Partner by the Partnership Agreement
and in the best interest of the Partnership, except for acts or omissions
constituting fraud, negligence, misconduct or breach of fiduciary duty. The
General Partner and its affiliates performing services on behalf of the
Partnership shall be entitled to indemnity from the Partnership for any
loss, damage, or claim by reason of any act performed or omitted to be
performed by the General Partner or such affiliates in good faith on behalf
of the Partnership and in a manner within the scope of the authority
granted to the General Partner by the Partnership Agreement and in the best
interest of the Partnership, except that they shall not be entitled to be
indemnified in respect of any loss, damage, or claim incurred by reason of
fraud, negligence, misconduct, or breach of fiduciary duty. Any indemnity
shall be provided out of and to the extent of Partnership assets only. The
Partnership shall not advance any funds to the General Partner or its
affiliates for legal expenses and other costs incurred as a result of any
legal action initiated against the General Partner or its affiliates by a
Limited Partner in the Partnership.
The General Partner will fund any deficit balance in its capital account in
accordance with the terms of the Partnership Agreement prior to the
dissolution of the Partnership.
4. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
Fees, commissions and other costs incurred or paid by the General Partner
or its Affiliates during the nine months ended September 30, 2001 and 2000,
and to which the General Partner or its Affiliates are entitled to
reimbursement from the Partnership were $39,081 and $101,972, respectively.
These expenses are included in expenses on the Statements of Operations.
Accounts payable to affiliates represents amounts due to the General
Partner or its Affiliates for various services provided to the Partnership,
including amounts to indemnify the General Partner or its Affiliates for
claims incurred by them in connection with their actions as General Partner
of the Partnership. All amounts accrued by the Partnership to indemnify the
General Partner or its affiliates for legal fees incurred by them shall not
be paid unless or until all conditions set forth in the Partnership
Agreement for such payment have been fulfilled.
The General Partner serves in a similar capacity for one other affiliated
real estate limited partnership.
9
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
During the offering period, from February 17, 1989 to February 15, 1991, the
Partnership sold 2,415,229 Units representing gross proceeds (exclusive of the
John Hancock Limited Partner's contribution which was used to pay sales
commissions) of $48,304,580. The proceeds of the offering were used to acquire
investment properties, fund reserves and pay acquisition fees and organizational
and offering expenses.
FORWARD-LOOKING STATEMENTS
In addition to historical information, certain statements contained herein
contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Those statements appear in a number of places in this
Report and include statements regarding the intent, belief or expectations of
the General Partner with respect to, among other things, the prospective sale of
Partnership properties, actions that would be taken in the event of lack of
liquidity, unanticipated leasing costs, repair and maintenance expenses,
litigation expenses and indemnification claims, distributions to the General
Partner and to Investors, the possible effects of tenants vacating space at
Partnership properties, the absorption of existing retail space in certain
geographical areas, and the impact of inflation.
Forward-looking statements involve numerous known and unknown risks and
uncertainties, and they are not guarantees of future performance. The following
factors, among others, could cause actual results or performance of the
Partnership and future events to differ materially from those expressed or
implied in the forward-looking statements: general economic and business
conditions; any and all general risks of real estate ownership, including
without limitation adverse changes in general economic conditions and adverse
local conditions, the fluctuation of rental income from properties, changes in
property taxes, utility costs or maintenance costs and insurance, fluctuations
of real estate values, competition for tenants, uncertainties about whether real
estate sales under contract will close; the ability of the Partnership to sell
its properties; and other factors detailed from time to time in the filings with
the Securities and Exchange Commission.
Readers are cautioned not to place undue reliance on forward-looking statements,
which reflect the General Partner's analysis only as of the date hereof. The
Partnership assumes no obligation to update forward-looking statements. See also
the Partnership's reports to be filed from time to time with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.
LIQUIDITY AND CAPITAL RESOURCES
As initially stated in its Prospectus, it was expected that the Partnership
would be dissolved upon the sale of its last remaining property, which at that
time was expected to be within seven to ten years following the date such
property was acquired by the Partnership. The Partnership sold the last property
in its portfolio, Business Center at Pureland, on December 20, 2000. The sale of
this last remaining property resulted in the termination of the operations of
the Partnership, and the Partnership will be dissolved, in accordance with the
terms of the Partnership Agreement as soon as reasonably practicable. At such
time as all liabilities with respect to the Partnership are resolved, the
General Partner will make a final distribution of net assets to the Limited
Partners, as soon as practicable. No assurances can be given as to whether any
distribution can be made after all liabilities of the Partnership are resolved.
Such final distribution, if any, will result in the liquidation and termination
of the Partnership. At such time of such final distribution, the outstanding
Units will be canceled and, in accordance with federal securities laws, they
will be de-registered with the Securities and Exchange Commission, after which
time the Partnership will no longer be required to file periodic reports with
the Commission.
At September 30, 2001, the Partnership had $2,843,082 in cash and cash
equivalents.
The Partnership has a working capital reserve with a current balance of
approximately $2.7 million. The General Partner anticipates that such amount
will be sufficient to satisfy the Partnership's general liquidity requirements
as the Partnership's business is wound down. The Partnership's liquidity would,
however, be materially adversely affected if there were significant
unanticipated operating and liquidation costs (including but not limited to
litigation expenses). If any or all of these events were to occur, to the extent
that the working capital reserve would be insufficient to satisfy the cash
requirements of the Partnership, it is anticipated that additional funds would
be obtained through a reduction of cash distributions to Investors, bank loans,
or short-term loans from the General Partner or its affiliates.
10
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Cash in the amount of $3,520,438, generated from the Partnership's Distributable
Cash from Sales, Financings or Repayments (as defined in the Partnership
Agreement), was distributed to the Limited Partners during the nine months ended
September 30, 2001. This amount was distributed in accordance with the
Partnership Agreement and was allocated as follows:
Distributable Cash
From Sales
------------------
Investors $3,381,321
John Hancock Limited Partner 139,117
General Partner --
----------
Total $3,520,438
==========
As a result of the disposition by the Partnership of all of its remaining
properties during 2000, the General Partner has determined that it is in the
best interests of the Partnership to retain rather that distribute to Investors,
net cash provided by the Partnership's normal operations in order to fund cash
reserves for contingencies, as is permitted by the Partnership Agreement.
Accordingly, no further cash distributions will be made to the Investors until
the final distribution, if any, as discussed above.
RESULTS OF OPERATIONS
The Partnership generated a net loss of $9,908 for the nine months ended
September 30, 2001, as compared to net income of $1,566,771 for the same period
in 2000, representing a decrease of $1,576,679, or 100%, as compared to the
prior year. This decrease was due to the sales during 2000 of the Yokohama Tire
Warehouse, the Palms of Carrollwood Shopping Center, the Business Center at
Pureland and the Partnership's joint venture interest in the Quince Orchard
Corporate Center.
Average occupancy for the Partnership's investments was as follows:
Nine Months Ended
September 30,
-----------------
2001 2000
---- ----
Palms of Carrollwood Shopping Center N/A 87%
Quince Orchard Corporate Center (Affiliated Joint Venture) N/A 67%
Yokohama Tire Warehouse N/A 100%
Business Center at Pureland N/A 50%
Rental income for the period ended September 30, 2001 decreased by $1,931,079,
or 100%, as compared to the same period during 2000 due to the sales of the
Yokohama Tire Warehouse, the Palms of Carrollwood Shopping Center and the
Business Center at Pureland during the fourth quarter of 2000.
Income from joint venture for the period ended September 30, 2001 decreased by
$446,124, or 100%, as compared to the same period during 2000 due to the sale of
the Partnership's joint venture interest in Quince Orchard Corporate Center in
September 2000.
Property operating expenses for the period ended September 30, 2001 decreased by
$533,753, or 100%, as compared to the same period during 2000. This decrease is
due to the sales of the Yokohama Tire Warehouse, the Palms of Carrollwood
Shopping Center and the Business Center at Pureland during the fourth quarter of
2000.
Depreciation expense for the period ended September 30, 2001 decreased by
$80,540 or 100%, as compared to the same period during 2000, primarily due to
the reclassification of the Business Center at Pureland and Palms of Carrollwood
Shopping Center during the first quarter of 2000 as "Property Held for Sale."
Accordingly, no depreciation was recorded on these properties since the time
that they were listed for sale.
11
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Amortization expense for the period ended September 30, 2001 decreased by
$34,085, or 100%, as compared to the same period during 2000 primarily due to
the reclassifications of properties as reported above. Accordingly, no
amortization expense was recorded on these properties since the time that they
were listed for sale.
General and administrative expenses for the period ended September 30, 2001
decreased by $66,991, or 33%, as compared to the same period in 2000, primarily
due to a decrease in time required by the General Partner in managing the
activities of the Partnership resulting from the sales of properties during
2000.
The General Partner believes that inflation has had no significant impact on the
Partnership's income from operations during the nine months ended September 30,
2001, and the General Partner anticipates that it will not have a significant
impact during the remainder of 2001.
CASH FLOW
The following table provides the calculations of Cash from Operations and
Distributable Cash from Operations, which are calculated in accordance with
Section 17 of the Partnership Agreement:
Nine Months Ended
September 30,
----------------------
2001 2000
-------- ----------
Net cash provided by/(used in) operating activities(a) $(73,008) $2,173,984
Net change in operating assets and liabilities(a) 63,100 (147,040)
-------- ----------
Net cash provided by/(used in) operations(a) (9,908) 2,026,944
Increase in working capital reserves -- --
-------- ----------
Cash from operations(b) (9,908) 2,026,944
Decrease in working capital reserves 9,908 184,897
-------- ----------
Distributable cash from operations(b) $ 0 $2,211,841
======== ==========
Allocation to General Partner $ -- $ 110,592
Allocation to John Hancock Limited Partner -- --
Allocation to Investors -- 2,101,249
-------- ----------
$ -- $2,211,841
======== ==========
(a) Net cash provided by operating activities, net change in operating assets
and liabilities, and net cash provided by operations are as calculated in
the Statements of Cash Flows included in Item 1 of this Report.
(b) As defined in the Partnership Agreement. Distributable Cash from Operations
should not be considered as an alternative to net income (i.e. not an
indicator of performance) or to reflect cash flows or availability of
discretionary funds.
12
JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
There were no changes in securities during the third quarter of 2001.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There were no defaults upon senior securities during the third quarter
of 2001.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders of the
Partnership during the third quarter of 2001.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) There are no exhibits to this report.
(b) There were no Reports on Form 8-K filed during the third quarter
of 2001.
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JOHN HANCOCK REALTY INCOME FUND-III LIMITED PARTNERSHIP
(A MASSACHUSETTS LIMITED PARTNERSHIP)
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, on the 14th day of November, 2001.
John Hancock Realty Income Fund-III
Limited Partnership
By: John Hancock Realty Equities, Inc.,
General Partner
By: /s/ Paul F. Hahesy
-------------------------------
Paul F. Hahesy, President
By: /s/ Janis L. Largesse
-------------------------------
Janis L. Largesse, Treasurer
(Chief Accounting Officer)
14