FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For the Fiscal Year ended December 31, 2001
Commission file number 33-00152
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
AMRECORP REALTY FUND III
(Exact name of registrant as specified in its charter)
Texas 75-2045888
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
2800 N Dallas Pkwy #100, Plano, Texas 75093
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (972) 836-8000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on which Registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
(Title of Class)
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 .
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained, to the
best of Registrant's knowledge in definitive proxy or information
to Statements incorporated by reference in Part III of the
Form 10-K or any amendment to this Form 10-K.
Documents Incorporated by Reference
The Prospectus dated November 26, 1985 filed pursuant to Rule
424(b) as supplemented pursuant to Rule 424(c) on December 5,
1985.
PART I
Item 1. Business
The Registrant, Amrecorp Realty Fund III, (the
"Partnership"), is a limited partnership organized under the
Texas Uniform Limited Partnership Act pursuant to a Certificate
of Limited Partnership dated August 30, 1985 and amended on
November 21, 1985. On December 31, 2001, the Partnership
consisted of a corporate general partner, LBAL, Inc. (wholly
owned by Robert J. Werra) and 283 limited partners owning 2,382
limited partnership interests at $1,000 per interest. The
distribution of limited partnership interests commenced November
26, 1985 pursuant to a Registration Statement on Form S-11 under
the Securities Act of 1933 (Registration #33-00152) as amended.
The Partnership was organized to acquire a diversified
portfolio of income-producing real properties, primarily
apartments, as well as office buildings, industrial buildings,
and other similar properties
The Partnership intends to continue until December 31, 2015
unless terminated by an earlier sale of its Properties.
Univesco, Inc.("Univesco"), a Texas corporation, controlled
by Robert J. Werra, manages the affairs of the Partnership.
Univesco acts as the managing agent with respect to the
Partnership's Properties. Univesco may also engage other on-site
property managers and other agents, to the extent management
considers appropriate. Univesco and the general partner make all
decisions regarding investments in and disposition of Properties
and has ultimate authority regarding all property management
decisions.
No material expenditure has been made or is anticipated for
either Partnership-sponsored or consumer research and development
activities relating to the development or improvement of
facilities or services provided by the Partnership. There neither
has been, nor are any anticipated, material expenditures required
to comply with any federal, state or local environmental
provisions which would materially affect the earnings or
competitive position of the Partnership.
The Partnership is engaged solely in the business of real
estate investments. Its business is believed by management to
fall entirely within a single industry segment. Management does
not anticipate that there will be any material seasonal affects
upon the operation of the Partnership.
Competition and Other Factors
The majority of the Property's leases are of six to twelve month
terms. Accordingly, operating income is highly susceptible to
varying market conditions. Occupancy and local market rents are
driven by general market conditions which include job creation,
new construction of single and multi-family projects, and
demolition and other reduction in net supply of apartment units.
Rents have generally been increasing in recent years due to the
generally positive relationship between apartment unit supply and
demand in the Partnership's markets. However, the property is
subject to substantial competition from similar and often newer
properties in the vicinity in which they are located. Capitalized
expenditures have increased as units are updated and made more
competitive in the market place.
Item 2. Properties
At December 31, 2001, the Partnership owned Las Brisas Apartment,
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 property is encumbered by a mortgage note payable in monthly
installments of principal and interest through December 31, 2003,
when a lump-sum payment of approximately $2,642,000 is due. For
information regarding the encumbrances to which the property is
subject and the status of the related mortgage loans, see "
Management`s Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources"
contained in Item 7 hereof and Note B to the Financial Statements
and Schedule Index contained in Item 8.
Occupancy Rates
Percent
1997 1998 1999 2000 2001
Las 84.8% 90.7% 95.4% 95.0% 92.7%
Brisas
Item 3. Legal Proceedings
The Partnership is not engaged in any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security
holders during the fourth quarter of the fiscal year.
By virtue of its organization as a limited partnership, the
Partnership has outstanding no securities possessing traditional
voting rights. However, as provided and qualified in the Limited
Partnership Agreement, limited partners have voting rights for,
among other things, the removal of the General Partner and
dissolution of the Partnership.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholders Matters
The Partnerships outstanding securities are in the form of
Limited Partnership Interests ("Interests"). As of December 31,
2001 there were approximately 283 limited partners owning 2,382
interests at $1,000 per interest. A public market for trading
Interests has not developed and none is expected to develop. In
addition, transfer of an Interest is restricted pursuant to the
Limited Partnership Agreement.
The General Partner continues to review the Partnership's ability
to make distributions on a quarter-by-quarter basis, however, no
such distributions have been made to the limited partners in
several years and none are anticipated in the immediate future
due to required debt service payments and the existence of the
Special Limited Partner, Mr. Robert J. Werra. The Special
Limited Partner has first right to all net operating cash flow
and net proceeds from disposals of assets to the extent of the
special limited partner distribution preference. During 2001,
2000 and 1999, the Special Limited Partner received distributions
from the Partnership totaling $985,408, $75,000 and $265,000
respectively.
An analysis of tax income or loss allocated and cash distributed
to Investors per $1,000 unit is as follows:
YEARS INCOME GAIN LOSS CASH DISTRIBUTED
1986 $0 $0 $186 $0
1987 0 0 286 0
1988 0 0 310 0
1989 0 0 278 0
1990 0 0 231 0
1991 0 0 142 0
1992 0 0 0 0
1993 0 153 162 0
1994 24 0 0 0
1995 0 0 5 0
1996 20 0 0 0
1997 0 0 (21) 0
1998 4 0 0 0
1999 72 0 0 0
2000 <1 0 0 0
2001 98 0 0 0
Item 6. Selected Financial Data
The following table sets forth selected financial data regarding
the Partnership's results of operations and financial position as
of the dates indicated. This information should be read in
conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in Item
7 hereof and the financial Statements and notes thereto contained
in Item 8.
Year Ended December 31,
( in thousands except unit and per unit amounts)
2001 2000 1999 1998 1997
Limited Partner Units Outstanding -
Basic 2,382 2,382 2,382 2,382 2,382
Statement of Operations
Total Revenues $1,605 $1,591 $1,588 $1,473 $1,430
Net Income (Loss) 86 (23) 143 3 (52)
Limited Partner Net Income (Loss)
per Unit - Basic 35.68 (9.76) 59.65 1.28 (21.49) (a)
Cash Distributions to Limited 0 0 0 0 0
Partners per Unit - Basic
Balance Sheet:
Real Estate, net 3,576 3,787 3,892 4,109 4,254
Total Assets 4,332 4,123 4,277 4,459 4,567
Mortgages Payable 4,100 2,874 2,941 3,004 3,061
Partners Equity (6) 894 992 1,114 1,175
(a) For Federal Income Tax purposes only income was
reallocated in accordance the regulations promulgated
thereunder of the Internal Revenue Code of 1986 as amended.
Item 7. Management Discussion and Analysis of Financial
Conditions and Results of Operations
This discussion should be read in conjunction with Item 6 -
"Selected Financial Data" and Item 8 - "Financial Statements and
Supplemental Information".
Results of Operations: 2001 VERSUS 2000
Revenue from Property Operations increased $14,252 or 0.9%.
Rental income increased $10,132 or 0.69% as compared to 2000.
Other income increased $4,120 or 3.61% due to increased fee
income from residents. The following table illustrates the
increases or (decreases):
Increase
(Decrease)
Rental income 10,132
Other 4,120
Net Increase 14,252
Property operating expenses for 2001 decreased $95,081 or 5.89%.
Repair and maintenance expenses decreased from 2000 by $134,481
or 49.26% primarily due completion of deferred maintenance items
in 2000. Utilities increased $36,416 or 20.71% due to higher
rates. Real estate taxes increased $6,342 or 4.56% due to higher
assessed valuations. Interest expense decreased by $10,101 from
due to normal principal amortization. Property management fees
are paid to an affiliated entity and represents 5% of gross
operating revenues (see Note 4 to Financial Statements and
Schedule Index contained in Item 8.) The following table
illustrates the increases or (decreases):
Increase
(Decrease)
Payroll (4,505)
Utilities 36,416
Real estate taxes 6,342
Repairs and Maintenance (134,481)
General & Administrative (3,945)
Interest (10,101)
Depreciation and amortization 14,599
Property management fees 713
Administrative Service Fee (119)
Net Increase (95,081)
Results of Operations: 2000 VERSUS 1999
Revenue from Property Operations increased $2,231 or 0.14%.
Rental income decreased $5,916 or 0.39% as compared to 1999.
Other income increased $8,147 or 7.69% due to increased fee
income from residents. The following table illustrates the
increases or (decreases):
Increase
(Decrease)
Rental income $(5,916)
Other 8,147
Net Increase $2,231
Property operating expenses for 2000 increased $169,257 or
11.71%. Repair and maintenance expenses increased from 1999 by
$83,685 or 44.20% primarily due more deferred maintenance
activities performed, including carpentry repairs throughout the
property. Utilities increased $20,007 or 12.84% due to increased
utility consumption and higher rates. Payroll increased $23,157
or 9.2% due to increased salaries. Interest expense decreased by
$5,312 from 1999 due to normal principal amortization. Property
management fees are paid to an affiliated entity and represents
4% of gross operating revenues (see Note 4 to Financial
Statements and Schedule Index contained in Item 8.) The following
table illustrates the increases or (decreases):
Increase
(Decrease)
Payroll $23,157
Utilities 20,007
Real estate taxes 21,858
Repairs and Maintenance 83,685
General & Administrative 11,657
Interest (5,312)
Depreciation and amortization 13,974
Property management fees 112
Administrative Service Fee 119
Net Increase $169,257
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 December 31, 2001, the Partnership had $559,647 in cash and
cash equivalents as compared to $12,904 as of December 31, 2000.
The net increase in cash of $546,743 is principally due to the
refinancing of the apartment community.
The property is encumbered by a non-recourse mortgage with a
principal balance of $4,100,000 as of December 31, 2001. The
mortgage payable bears interest at 6.18% and is payable in
monthly installments of principal and interest until December
2011 when a lump-sum payment of approximately $3,447,000 is due.
The required principal reductions for the five years ending
December 31, 2006, are $48,680, $51,775, $55,067, $58,568 and
$62,292, respectively.
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 the balloon mortgage payment will be proceeds from the sale,
financing or refinancing of the Property.
The $254,823 in Special Limited Partner equity is the result of
previous fundings for operating deficits and other partner loans
made to the Partnership by a related entity. These loans were
reclassified to equity during 1993. The Special Limited Partner
has first right to all net operating cash flows and net proceeds
from disposals of assets to the extent of the Special Limited
Partners distribution preference. During 2001 and 2000, the
Special Limited Partner received distributions from the
Partnership totaling $985,408 and $75,000, respectively.
Item 7a - Quantitative and Qualitative Disclosure about Market Risk
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.
Risk Associated with Forward-Looking Statements Included in this
Form 10-K This Form 10-K contains certain forward-looking
statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of
1934, which are intended to be covered by the safe harbors
created thereby. These statements include the plans and
objectives of management for future operations, including plans
and objectives relating to capital expenditures and
rehabilitation costs on the Properties. The forward-looking
statements included herein are based on current expectations that
involve numerous risks and uncertainties. Assumptions relating
to the foregoing involve judgments with respect to, among other
things, future economic, competitive and market conditions and
future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the
control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could be inaccurate and,
therefore, there can be no assurance that the forward-looking
statements included in this Form 10-K will prove to be accurate.
In light of the significant uncertainties inherent in the forward-
looking statements included herein, the inclusion of such
information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the
Company will be achieved.
AMRECORP REALTY FUND III
FINANCIAL STATEMENTS
AND INDEPENDENT AUDITORS' REPORTS
December 31, 2001 and 2000
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Reports 1
Financial Statements
Balance Sheets as of December 31, 2001 and 2000 3
Statements of Operations for the years ended December 31,
2001, 2000 and 1999 4
Statements of Partners' Equity (Deficit) for the years ended
December 31, 2001, 2000 and 1999 5
Statements of Cash Flows for the years ended December 31,
2001, 2000 and 1999 6
Notes to Financial Statements 7
Schedule III - Real Estate and Accumulated Depreciation 13
All other schedules have been omitted because they are not
applicable, not required or the information has been supplied
in the financial statements or notes thereto.
INDEPENDENT AUDITORS' REPORT
To the General Partner and Limited Partners of
Amrecorp Realty Fund III
We have audited the accompanying balance sheets of Amrecorp
Realty Fund III, a Texas limited partnership (the "Partnership")
as of December 31, 2001 and 2000, and the related statements of
operations, partners' equity (deficit), and cash flows for the
years ended December 31, 2001, 2000 and 1999. These financial
statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with U.S. generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the December 31, 2001 and 2000 financial
statements referred to above present fairly, in all material
respects, the financial position of Amrecorp Realty Fund III as
of December 31, 2001 and 2000, and the results of its operations
and its cash flows for the years ended December 31, 2001, 2000
and 1999 in conformity with U.S. generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. Schedule III for
the year ended December 31, 2001 is presented for the purpose of
complying with the Securities and Exchange Commission's rules and
is not a required part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion,
fairly states, in all material respects, the financial data
required to be set forth therein in relation to the basic
financial statements taken as a whole.
January 22, 2002
Plano, Texas
AMRECORP REALTY FUND III
BALANCE SHEETS
December 31, 2001 and 2000
ASSETS
2001 2000
Investments in real estate at cost
Land $1,000,000 $1,000,000
Buildings, improvements and
furniture and fixtures 6,856,116 6,732,843
7,856,116 7,732,843
Accumulated depreciation (4,279,982) (3,945,734)
3,576,134 3,787,109
Cash and cash equivalents 559,647 12,904
Restricted cash --- 59,000
Escrow deposits --- 138,248
Capital replacement reserve 55,625 10,295
Liquidity reserve --- 100,599
Deferred financing costs, net of accumulated
amortization of $1,141 and $-0-, respectively 90,136 ---
Other assets 50,466 15,073
TOTAL ASSETS 4,332,008 4,123,228
LIABILITIES AND PARTNERS' EQUITY
Mortgage payable 4,100,000 2,873,998
Accrued interest payable 21,115 19,519
Accounts payable 38,745 23,384
Real estate taxes payable 237 139,220
Due to affiliates 122,871 119,299
Security deposits 55,018 54,218
TOTAL LIABILITIES 4,337,986 3,229,638
PARTNERS' EQUITY (5,978) 893,590
TOTAL LIABILITIES AND PARTNERS' EQUITY $4,332,008 $4,123,228
AMRECORP REALTY FUND III
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2001, 2000 and 1999
2001 2000 1999
INCOME
Rentals $1,487,069 $1,476,937 $1,482,853
Other 118,182 114,062 105,915
Total income 1,605,251 1,590,999 1,588,768
OPERATING EXPENSES
Depreciation and amortization 335,389 320,790 306,816
Payroll 270,925 275,430 252,273
Repairs and maintenance 138,546 273,027 189,342
Interest 226,694 236,795 242,107
Utilities 212,248 175,832 155,825
Real estate taxes 145,562 139,220 117,362
General and administrative 100,760 104,705 93,048
Property management fee to affiliate 80,263 79,550 79,438
Administrative service fee to affiliate 9,024 9,143 9,024
Total operating expenses 1,519,411 1,614,492 1,445,235
NET INCOME (LOSS) $85,840 $(23,493) $143,533
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT - BASIC $35.68 $(9.76) $59.65
LIMITED PARTNERSHIP UNITS
OUTSTANDING - BASIC 2,382 2,382 2,382
AMRECORP REALTY FUND III
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the Years Ended December 31, 2001, 2000 and 1999
Special
General Limited Limited
Partner Partners Partners Total
Balance, January 1, 1999 $(139,049) $1,580,231 $(327,632) $1,113,550
Distributions --- (265,000) --- (265,000)
Net income 1,435 --- 142,098 143,533
Balance, December 31, 1999 (137,614) 1,315,231 (185,534) 992,083
Distributions --- (75,000) --- (75,000)
Net income (235) --- (23,258) (23,493)
Balance, December 31, 2000 (137,849) 1,240,231 (208,792) 893,590
Distributions --- (985,408) --- (985,408)
Net loss 858 --- 84,982 85,840
Balance, December 31, 2001 $(136,991) $254,823 $(123,810) $(5,978)
AMRECORP REALTY FUND III
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2001, 2000 and 1999
2001 2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $85,840 $(23,493) $143,533
Adjustments to reconcile net income (loss) to
net cash provided by operations:
Depreciation and amortization 335,389 320,790 306,816
Changes in assets and liabilities:
Restricted cash 59,000 (7,000) (8,000)
Escrow deposits 138,248 6,118 (10,383)
Other assets (35,393) (3,623) 202
Accrued interest payable 1,596 (459) (424)
Security deposits 800 2,776 7,396
Accounts payable 15,361 (9,417) (887)
Due to affiliates 3,572 (3,214) (2,477)
Real estate taxes payable (138,983) 21,859 (652)
Net cash provided by operating
activities 465,430 304,337 435,124
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in real estate (123,273) (215,783) (89,571)
Capital replacement reserve (45,330) 32,633 (14,741)
Net cash used for investing
activities (168,603) (183,150) (104,312)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on mortgages and notes
payable (60,718) (67,640) (62,363)
Proceeds from refinancing 1,286,720 --- ---
Deferred financing costs (91,277) --- ---
Liquidity reserve 100,599 (10,096) 4,755
Distributions (985,408) (75,000) (265,000)
Net cash provided by (used for)
financing activities 249,916 (152,736) (322,608)
Net increase (decrease) in cash
and cash equivalents 546,743 (31,549) 8,204
Cash and cash equivalents at
beginning of period 12,904 44,453 36,249
Cash and cash equivalents at
end of period $559,647 $12,904 $44,453
Supplemental disclosure of cash flow
information:
Cash paid during the year for
interest $224,849 $237,255 $242,531
Noncash financing activity :
Refinancing of mortgage payable $2,813,280 $ --- $ ---
AMRECORP REALTY FUND III
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Amrecorp Realty Fund III (the "Partnership"), a Texas
limited partnership, was formed on August 30, 1985, under
the laws of the state of Texas, for the purpose of
acquiring, maintaining, developing, operating, and selling
buildings and improvements. The Partnership owns and
operates rental apartments in Abilene, Texas. The
Partnership will be terminated by December 31, 2015,
although this date can be extended if certain events occur.
LBAL, Inc., a Texas corporation wholly owned by Mr. Robert
J. Werra, is the general partner. Mr. Werra is the first
special limited partner and third special limited partner.
The second special limited partner is an affiliate of the
general partner.
An aggregate of 25,000 limited partner units at $1,000 per
unit are authorized, of which 2,382 units were outstanding
for each of the three years ended December 31, 2001, 2000
and 1999. Under the terms of the offering, no additional
units will be offered. Effective November 1, 1993, the
partnership agreement was amended to establish a first,
second and third special limited partner status as referred
to above.
Allocation of Net Income (Loss) and Cash
Net income and net operating cash flow, as defined in the
limited partnership agreement, are allocated first to the
limited partners in an amount equal to a distribution
preference (as defined) on capital contributions from the
first day of the month following their capital contribution
and thereafter generally 1% to the general partner and 99%
to the limited partners. Net loss is allocated 1% to the
general partner and 99% to the limited partners.
Net income from the sale of property is allocated first, to
the extent there are cumulative net losses, 1% to the
general partner and 99% to the limited partners; second, to
the limited partners in an amount equal to their
distribution preference as determined on the date of the
partners' entry into the Partnership; and, thereafter, 15%
to the general partner and 85% to the limited partners.
Cash proceeds from the sale of property or refinancing are
allocated first to the limited partners to the extent of
their capital contributions and distribution preference as
determined on the date of the partners' entry into the
Partnership; and, thereafter, 15% to the general partner and
85% to the limited partners.
AMRECORP REALTY FUND III
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
All distributions of net operating cash flow and net
proceeds of the Partnership shall be distributed first to
special limited partners to satisfy the special limited
partner distribution preference, then to repay any
unreturned portion of their contribution. The total
distribution preference due to the special limited partners
is approximately $1,918,000 as of December 31, 2001. Any
additional available cash will then be distributed in
accordance with the partnership agreement. During 2001,
2000 and 1999, distributions of $985,408, $75,000, and
$265,000, respectively, were made to the special limited
partners in accordance with this agreement.
Basis of Accounting
The Partnership maintains its books on the basis of
accounting used for federal income tax reporting purposes.
Memorandum entries have been made to present the
accompanying financial statements in accordance with
generally accepted accounting principles.
Investments in Real Estate and Depreciation
Buildings, improvements, and furniture and fixtures are
recorded at cost and depreciated using the straight-line
method over the estimated useful lives of the assets ranging
from 5 to 27.5 years.
Income Taxes
No provision for income taxes has been made since the
partners report their respective share of the results of
operations on their individual income tax return.
Deferred Financing Costs
Costs incurred to obtain mortgage financing are being
amortized over the life of the mortgage using the straight-
line method.
Revenue Recognition
The Partnership has leased substantially all of its rental
apartments under cancelable leases for periods generally
less than one year. Rental revenue is recognized on a
monthly basis as earned.
Syndication Costs
Costs or fees incurred to raise capital for the Partnership
are netted against the respective partners' equity accounts.
AMRECORP REALTY FUND III
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Cash and Cash Equivalents
The Partnership considers all highly liquid instruments with
a maturity of three months or less to be cash equivalents.
Restricted Cash
Restricted cash consists of tenant security deposits.
Long-Lived Assets
In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting For the Impairment
of Long-Lived Assets and For Long-Lived Assets to be
Disposed Of", the Partnership records impairment losses on
long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the
assets' carrying amount. SFAS No. 121 also addresses the
accounting for long-lived assets that are expected to be
disposed of. Based on current estimates, management does
not believe impairment of operating properties is present.
Computation of Earnings Per Unit
The Partnership has adopted Statement of Financial
Accounting Standards ("SFAS") No.128, "Earnings per Share".
Basic earnings per unit is computed by dividing net income
(loss) attributable to the limited partners' interests by
the weighted average number of units outstanding. Earnings
per unit assuming dilution would be computed by dividing net
income (loss) attributable to the limited partners'
interests by the weighted average number of units and
equivalent units outstanding. The Partnership has no
equivalent units outstanding for any period presented.
Segment Information
The Partnership is in one business segment, the real estate
investments business, and follows the requirements of FAS
131, "Disclosures about Segments of an Enterprise and
Related Information."
AMRECORP REALTY FUND III
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Concentration of Credit Risk
Financial instruments which potentially subject the
Partnership to concentrations of credit risk consist
primarily of cash. The Partnership places its cash with
various financial institutions. The Partnership's exposure
to loss should any of these financial institutions fail
would be limited to any amount in excess of the amount
insured by the Federal Deposit Insurance Corporation and
Securities Investor Protection Corporation. Management does
not believe significant credit risk exists at December 31,
2001.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles 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 revenues
and expenses during that reporting period. Actual results
could differ from those estimates.
Environmental Remediation Costs
The Partnership accrues for losses associated with
environmental remediation obligations when such losses are
probable and reasonably estimable. Accruals for estimated
losses from environmental remediation obligations generally
are recognized no later than completion of the remedial
feasibility study. Such accruals are adjusted as further
information develops or circumstances change. Costs of
future expenditures for environmental remediation
obligations are not discounted to their present value.
Recoveries of environmental remediation costs from other
parties are recorded as assets when their receipt is deemed
probable. Project management is not aware of any
environmental remediation obligations that would materially
affect the operations, financial position or cash flows of
the Project.
Comprehensive Income
Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income, (SFAS 130), requires that
total comprehensive income be reported in the financial
statements. For the years ended December 31, 2001, 2000 and
1999, the Partnership's comprehensive income (loss) was
equal to its net income (loss) and the Partnership does not
have income meeting the definition of other comprehensive
income.
AMRECORP REALTY FUND III
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
NOTE B - MORTGAGE PAYABLE
During the year ended December 31, 2001, the Partnership
refinanced the mortgage payable. The mortgage payable of
$4,100,000 at December 31, 2001, bears interest at a rate of
6.18% and is payable in monthly installments of principal
and interest of $25,058 through December 2011, at which time
a lump sum payment of approximately $3,447,000 is due. This
mortgage note is secured by real estate with a net book
value of $3,576,134.
At December 31, 2001, required principal payments due under
the stated terms of the Partnership's mortgage note payable
are as follows:
2002 $ 48,680
2003 51,775
2004 55,067
2005 58,568
2006 62,292
Thereafter 3,823,618
$4,100,000
NOTE C - RELATED PARTY TRANSACTIONS
The Partnership agreement specifies that certain fees be
paid to the general partner or his designee. An affiliate
of the general partner receives a property management fee
that is approximately 4% of the Partnership's gross
receipts. In addition, a Partnership fee equal to 1% of
gross revenues from operations is to be paid from "Excess
Property Income", as defined in the partnership agreement.
2001 2000 1999
Property management fee $64,210 $63,640 $63,550
Partnership fee 16,053 15,910 15,888
Administrative service fees paid to an affiliate of the
general partner were $9,024, $9,143, and $9,024 for each of
the years ended December 31, 2001, 2000 and 1999,
respectively.
Resulting from the above transactions, amounts due an
affiliate of the general partner as of December 31, 2001,
and 2000, totaled $122,871 and $119,299, respectively.
NOTE D - COMMITMENTS
The Partnership will pay a real estate commission to the
general partner or his affiliates in an amount not exceeding
the lesser of 50% of the amounts customarily charged by
others rendering similar services or 3% of the gross sales
price of a property sold by the Partnership.
AMRECORP REALTY FUND III
NOTES TO FINANCIAL STATEMENTS
December 31, 2001 and 2000
NOTE E - RECONCILIATION OF BOOK TO TAX LOSS (UNAUDITED)
If the accompanying financial statements had been prepared
in accordance with the accrual income tax basis of
accounting rather than generally accepted accounting
principals ("GAAP"), the excess of expenses over revenues
for 2001 would have been as follows:
Net income (loss) per accompanying
financial statements $85,840
Add - book basis depreciation using
straight-line method 334,248
Deduct - income tax basis depreciation
expense using ACRS method 131,332
Deduct - income tax basis amortization
of loan costs 55,772
Excess of revenues over expenses,
accrual income tax basis $232,984
NOTE F - ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value amounts have been
determined using available market information or other
appropriate valuation methodologies that require
considerable judgment in interpreting market data and
developing estimates. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that
the Partnership could realize in a current market exchange.
The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated
fair value amounts.
The fair value of financial instruments that are short-term
or reprice frequently and have a history of negligible
credit losses is considered to approximate their carrying
value. These include cash and cash equivalents, accounts
payable and other liabilities.
Management has reviewed the carrying values of its mortgages
payable and notes payable to related parties in connection
with interest rates currently available to the Partnership
for borrowings with similar characteristics and maturities
and has determined that their estimated fair value would
approximate their carrying value as of December 31, 2001 and
2000.
The fair value information presented herein is based on
pertinent information available to management. Although
management is not aware of any factors that would
significantly affect the estimated fair value amounts, such
amounts have not been comprehensively revalued for purposes
of these financial statements since that date, and
therefore, current estimates of fair value may differ
significantly from the amounts presented herein.
AMRECORP REALTY FUND III
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2001
Initial Cost
to Partnership
Description Encumbrances Land Building Total Cost
and Subsequent to
Improvements Acquisition
Twenty-eight
two-story
apartment
buildings of
concrete block
construction
with brick
veneer stucco
and wood siding
exterior, and
composition
shingled roofs
located in
Abilene,
Texas (b) $1,000,000 $5,721,811 $1,134,305
Gross Amounts at Which
Carried at Close of Year
Buildings
And Accumulated
Land Improvements Total Depreciation
(c)(d) (c)
$1,000,000 $6,856,116 $7,856,116 $4,279,982
Life on Which
Date Is Computed Depreciation
Construction Acquired Is Computed
Complete at
date Acquired 7/31/86 (a)
See notes to Schedule III.
AMRECORP REALTY FUND III
Schedule III - Real Estate and Accumulated Depreciation (Continued)
December 31, 2001
NOTES TO SCHEDULE III:
(a) See Note A to financial statements outlining depreciation methods and
lives.
(b) See description of mortgages and notes payable in Note B to the
financial statements.
(c) The reconciliation of investments in real estate and accumulated
depreciation for the years ended December 31, 2001, 2000 and 1999 is as
follows:
Investments Accumulated
Real Estate Depreciation
Balance, January 1, 1999 $7,427,489 $3,318,128
Acquisitions 89,571 ---
Depreciation expense --- 306,816
Balance, December 31, 1999 7,517,060 3,624,944
Acquisitions 215,783 ---
Depreciation expense --- 320,790
Balance, December 31, 2000
7,732,843 3,945,734
Acquisitions 123,273 ---
Depreciation expense --- 334,248
Balance, December 31, 2001 $7,856,116 $4,279,982
(d) Aggregate cost for federal income tax purposes is $6,406,116.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
On November 6, 1998, an 8-K was filed to disclose the change in
auditors. No financial statements were issued in conjunction with this
filing. The Registrant has not been involved in any disagreements on
accounting and financial disclosure.
PART III
Item 10. Directors and Executive Officer of the Partnership
The Partnership itself has no officers or directors. LBAL, Inc., a
Texas Corporation, which is wholly owned by Robert J. Werra, is the
General Partner of the Partnership.
Robert J. Werra, 63, joined Loewi & Co., Incorporated ("Loewi") in
1967 as a Registered Representative. In 1971, he formed the Loewi real
estate department, and was responsible for its first sales of privately
placed real estate programs. Loewi Realty was incorporated in 1974, as a
wholly owned subsidiary of Loewi & Co., with Mr. Werra as President. In
1980, Mr. Werra, along with three other individuals, formed Amrecorp Inc.
to purchase the stock of Loewi Real Estate Inc., and Loewi Realty. In
1991 Univesco, Inc. became the management agent for the Partnership.
Limited Partners have no right to participate in management of
Partnership.
Item 11. Management Remuneration and Transactions
As stated above, the Partnership has no officers or directors.
Pursuant to the terms of the Limited Partnership Agreement, the General
Partner receives 1% of Partnership income and loss and up to 15% of Net
Proceeds received from sale or refinancing of Partnership properties
(after return of Limited Partner capital contributions and payment of a 6%
Current Distribution Preference thereon).
Univesco, Inc., an affiliate of the General Partner, is entitled to
receive a management fee with respect to the properties actually managed
of 5% of actual gross receipts from a property or an amount competitive in
price or terms for comparable services available from a non-affiliated
persons. The Partnership is also permitted to engage in various
transactions involving affiliates of the General Partner as described
under the caption "Compensation and Fees" at pages 6-8, "Management" at
pages 18-20 and "Allocation of Net Income and Losses and Cash
Distributions" at pages 49-51 of the Prospectus as supplemented,
incorporated in the Form S-11 Registration Statement which was filed with
the Securities and Exchange Commission and made effective on November 26,
1985.
For the Fiscal year ended December 31, 2001, 2000, and 1999, property
management fees earned totaled $80,263, $79,550, and $79,438,
respectively. An additional administration service fee was paid to the
general partner of $9,024, $9,143, and 9,024 for the years ended December
31, 2001, 2000, and 1999 respectively.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a)
Title of Class Name and Address Amount and Nature Percent of
Limited William E. Kreger 300 units 12.59%
Partnership 3301 Biddle Ave. #1101
Interest Wyandette, MI 48192
Juanita L. Werra 127 units 5.33%
5881 Prestonview Blvd.
#143
Dallas, TX 75243
Monty L. Parker 127 units 5.33%
9144 North Silver Brook Lane
Brown Deer, WI 53223
(b) By virtue of its organization as a limited partnership, the
Partnership has no officers or directors. Persons performing functions
similar to those of officers and directors of the Partnership,
beneficially own, the following units of the Partnership as of March 1,
2002.
Title of Name and Address Amount and Nature Percent of
Class of Beneficial Owner of Beneficial Class
Ownership
Limited Robert J. Werra 10 units .42%
Partnership 6210 Campbell Road,
Interest Suite 140
Dallas, TX 75248
(c) There is no arrangement, known to the Partnership, which may, at a
subsequent date, result in a change in control of the Partnership.
Item 13. Certain Relations and Related Transactions
As stated in item 11, the Partnership has no officers or directors.
Pursuant to the terms of the Limited Partnership Agreement, the general
partner receives 1% of partnership income and loss and up to 15%of Net
Proceeds received from the sale or refinancing of Partnership Properties
(after return of Limited Partner capital contributions and payment of a
Current Distribution Preference thereon).
Univesco, Inc. (an affiliate of the General Partner), is entitled to
receive a management fee with respect to the Properties. For residential
Properties (including all leasing and releasing fees and fees for leasing-
related services), the lesser of 5% of gross receipts of the Partnership
from such Properties or an amount which is competitive in price and terms
with other non-affiliated persons rendering comparable services which
could reasonably be made available to the Partnership. The Partnership is
also permitted to engage in various transactions involving affiliates of
the general partner as described under the caption "Compensation and Fees"
at pages 6-8, "Management" at pages 18-20 and "Allocation of Net Income
and Losses and Cash Distributions" at pages 49-51 of the definitive
Prospectus, incorporated in the form S-11 Registration Statement which was
filed with the Securities and Exchange Commission and made effective of
November 26, 1985 and incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 10-
K
(A) 1. Financial Statements
The financial statements of Amrecorp Realty Fund III are
included in Part II, Item 8.
2. Financial Statements and Schedules
All schedules for which provision is made is the applicable
accounting regulations of the Securities and Exchange
Commission are not required under the related instructions,
are inapplicable, or the information is presented in the
financial statements or related notes, and therefore have
been omitted.
3. Exhibits
None.
(B) Reports on Form 8-K for the quarter ended December 31, 2001.
None.
(C) Exhibits
3. Certificate of Limited Partnership, incorporated by
reference to Registration Statement No. 33-00152 effective
November 26, 1985
4. Limited Partnership Agreement, incorporated by reference to
Registration Statement N. 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.
Pursuant to the requirements of Section 13 or 15(d) 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
LBAL, Ltd., General Partner
By: /s/ Robert J. Werra
Robert J. Werra, President
March 20, 2002