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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 2002 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
(Address of principal executive offices)
Registrant's telephone number, including area code: (972) 836-8010.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes: Y No:
REGISTRANT IS A LIMITED PARTNERSHIP
TABLE OF CONTENTS
Item 1. Financial Statements
The following Unaudited financial statements are filed herewith:
Consolidated Balance Sheet as of September 30, 2002 and
December 31, 2001 Page 3
Consolidated Statements of Operations for the Three & Six Months
Ended September 30, 2002 and 2001 Page 4
Consolidated Statements of Cash Flows for the Six months Ended
September 30, 2002 and 2001 Page 5
Item 2. Results of Operations and Managements Discussion
and Analysis of Financial Condition Page 6
Liquidity and Capital Resources Page 7
Other Information Page 8
Signatures Page 10
The statements, insofar as they relate to the period subsequent to
December 31, 2001 are Unaudited.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Balance Sheets
September 30, December 31,
2002 2001
(Unaudited)
ASSETS
Real Estate assets, at cost
Land $1,000,000 $1,000,000
Buildings and improvements 6,856,116 6,856,116
7,856,116 7,856,116
Less: Accumulated depreciation (4,528,982) (4,279,982)
3,327,134 3,576,134
Cash including cash investments 32,869 559,647
Escrow deposits 123,324 0
Replacement Reserve 55,540 55,625
Deferred Financing Costs 85,377 90,136
Other assets 107,516 50,466
TOTAL ASSETS $3,731,760 $4,332,008
LIABILITIES AND PARTNERS' EQUITY:
LIABILITIES
Mortgage and notes payable $4,059,643 $4,100,000
Note Payable - Affiliates 120,322 122,871
Real estate taxes payable 107,836 237
Security deposits 56,027 55,018
Accounts payable & accrued expenses 93,360 59,860
4,437,188 4,337,986
Partners Capital (Deficit)
Limited Partners (811,316) (123,810)
Special Limited Partner 249,823 254,823
General Partner (143,935) (136,991)
Total Partners Capital (Deficit) (705,428) (5,978)
Total Liability And Partners Equity $3,731,760 $4,332,008
See notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
REVENUES 2002 2001 2002 2001
Rental income 391,877 $375,547 $1,125,500 $1,113,626
Other property 26,124 29,903 79,157 82,602
Total revenues 418,001 405,450 1,204,657 1,196,228
EXPENSES
Salaries & wages 78,725 74,690 212,769 206,590
Maintenance & repairs 58,769 51,261 204,036 155,446
Utilities 38,201 39,880 111,180 139,042
Real estate taxes 36,334 33,750 107,836 101,250
General administrative 14,418 15,062 45,942 38,154
Contract services 28,405 28,058 73,390 62,244
Insurance 30,624 10,174 88,776 29,983
Interest 62,849 57,700 189,109 174,210
Depreciation and amortization 85,282 85,926 255,846 257,778
Property management fees 20,893 20,273 60,223 59,814
Total expenses 454,500 416,774 1,349,107 1,224,511
NET INCOME (LOSS) ($36,499) ($11,324) ($144,450) ($28,283)
NET INCOME PER SHARE $(15.32) $(4.75) $(60.64) $(11.87)
See Notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Cash Flows
Unaudited
Nine Months Ended
September 30,
2002 2001
CASH FLOWS FROM OPERATING ACTIVITY
Net income (loss) ($144,450) ($28,283)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 249,000 243,000
Net Effect of changes in operating accounts
Escrow deposits (123,324) 0
Capital replacement reserve 85 3,266
Liquidity Reserve 0 (32,406)
Accrued real estate taxes 107,599 (37,970)
Security deposits 1,009 8,217
Accounts payable 33,500 32,493
Deferred Financing Costs 4,759 0
Other assets (57,050) (10,714)
Net cash provided by operating activities 71,128 177,603
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of mortgage notes payable (40,357) (54,460)
Note payable - affiliates (2,549) 0
Distribution to special limited partner (555,000) (95,000)
Net cash used by investing activities (597,906) (149,460)
NET INCREASE (DECREASE) IN CASH AND CASH (526,778) 28,143
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 559,647 12,904
CASH AND CASH EQUIVALENTS, END OF PERIOD $32,869 $41,047
See Notes to Condensed Consolidated Financial Statements
Basis of Presentation:
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, although
the Partnership believes that the disclosures are adequate
to make the information presented not misleading. It is
suggested that these condensed financial statements be read
in conjunction with the financial statements and notes
thereto included in the Partnership's latest annual report
on Form 10-K.
Item 2. RESULTS OF OPERATIONS AND MANAGEMENTS DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
Results of Operations
At September 30, 2002 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 96.3% during the third
quarter of 2002 as compared to 93.6% for the third quarter
of 2001.
THIRD QUARTER 2002 COMPARED TO THIRD QUARTER 2001
Revenue from property operations increased $12,551, or
4.01%, for the third quarter of 2002, as compared to the
third quarter of 2001. Increased occupancy in the third
quarter of 2002 accounted for the increase in rental income
of $16,330 or 5.53%. Other property income decreased $3,779
or 21.88% mainly due to decreased fee collections. The
following table illustrates the components:
Increase Percent
(Decrease) Change
Rental income 16,330 5.53%
Other property (3,779) 21.88%
Net Increase (Decrease) 12,551 4.01%
Property operating expenses: increased by $37,726 or 10.92%
for the third quarter of 2002 compared to the third quarter
of 2001 due primarily to increased insurance costs.
Insurance increased $20,450 or 305.68% due to higher
premiums and a new flood insurance policy as required by the
new lender. Maintenance & repairs increased $7,508 or 13.42%
due to roof and carpentry repairs. Interest increased
$5,149 or 12.23% on the increased debt after refinancing.
Real estate taxes increased $2,584 or 8.20% from increased
real estate valuations. The following table illustrates the
components:
Increase Percent
(Decrease) Change
Salaries & wages 4,035 5.68%
Maintenance & repairs 7,508 13.42%
Utilities (1,679) 4.51%
Real estate taxes 2,584 8.20%
General administrative (644) 5.21%
Contract services 347 4.86%
Insurance 20,450 305.68%
Interest 5,149 12.23%
Depreciation and amortization (644) 0.99%
Property management fees 620 3.80%
Net Increase (Decrease) 37,726 10.92%
THIRD QUARTER 2001 COMPARED TO THIRD QUARTER 2000
Revenue from property operations increased $7,712, or 2.47%
for the third quarter of 2001, as compared to the third
quarter of 2000. Increased occupancy to 93.6% in the third
quarter of 2001 from 94.0% in the third quarter of 2000
accounted for the increase in rental income of $7,229 or
2.45%. Other property income increased $483 or 2.80% mainly
due to increased fee collections. The following table
illustrates the components:
Increase Percent
Change
Rental income 7,229 2.45%
Other property 483 2.80%
Net Increase (Decrease) 7,712 2.47%
Property operating expenses: decreased by $81,274 or 23.54%
for the third quarter of 2001 compared to the third quarter
of 2000 due primarily to decreases in maintenance and
repairs. Maintenance and repairs decreased $94,888 or
169.55% due to the exterior building maintenance preformed
in 2000. Utilities increased $5,309 or 14.25%, due to gas
cost increases. General and administrative expenses
decreased $3,903 or 31.59% mainly due to decreased mailing
costs and decreased credit-reporting costs. Insurance
decreased $795 or 11.88% with the annual policy renewal
Contract services increased $10,880 or 152.30% due to
increased lawn care and grounds maintenance costs. The
following table illustrates the components:
Increase Percent
(Decrease) Change
Salaries & wages (3,317) 4.67%
Maintenance & repairs (94,888) 169.55%
Utilities 5,309 14.25%
Real estate taxes (2,500) 7.94%
General administrative (3,903) 31.59%
Contract services 10,880 152.30%
Insurance (795) 11.88%
Interest (1,445) 3.43%
Depreciation and amortization 9,000 13.86%
Property management fees 385 2.36%
Net Increase (Decrease) (81,274) 23.54%
LIQUIDITY AND CAPITAL RESOURCES
On July 31, 1986 the Partnership purchased the Las
Brisas Apartments. The purchase provided for the sellers to
receive cash at closing and notes totaling $660,000. On
September 30, 1987 the principal balance due totaled
$210,000. In order to obtain the necessary proceeds to
finally retire these notes the General Partners offered 254
Units of the Partnership to two investors at the price of
$200,660. No commissions were taken nor did the General
Partner receive any fees in connection with these interests.
The Partnership then obtained short term financing from
Resource Savings Association totaling $260,000, bearing
interest at the rate of 2% over prime and payable quarterly
together with principal payments of $15,000 each. Security
for the loan was provided by a $100,000 certificate of
deposit and the personal guaranties of the Partnerships
General Partners. The Resource Savings Association loan
matured December 31,1983. In September, 1991 Mr. Werra paid
$40,750 in satisfaction of his personal guaranty of the
Partnership loan.
The Partnership defaulted in its debt obligations in
August, 1988. The Partnership was forced to seek protection
under Chapter 11 of the United States Bankruptcy Code in
December, 1988 when negotiations with Aetna Life Insurance
Company, (Aetna) the holder of the two underlying first
mortgage notes and Las Brisas Apartments, Ltd. and Abilene
Associates, Ltd., the holders of respective wrap mortgage
notes (Wrap Note Holders) failed to provide any relief.
The Partnership emerged from bankruptcy on May 15,
1990, having negotiated a modification of its debt with its
major creditors. In June, 1989 an affiliate of the
individual General Partner provided $401,910.77 to bring the
Aetna notes current. At the same time the Wrap Note Holders
agreed to reduced the payments due on their respective wrap
notes in order to mirror the payments made on the underlying
Aetna notes. The term of each wrap note will be extended
from July 31, 1995 to July 1, 2002 and July 1, 2007
respectively. The $401,910.77 note is collateralized by
junior mortgage on the property. In addition, the affiliate
has the option to purchase the wrap notes for $85,000 at any
time prior to the respective maturity dates of the wrap
notes.
Commencing on July 1,1992, payments on the notes
reverted to the original amounts of $19,442 and $15,454.
During the prior two years the Partnership deferred $214,460
in debit service payments. The modification gave the
Partnership room to deal with the economic difficulties
experienced in the market at the time.
In February 1991, Amrecorp Realty Inc. resigned as the
Managing General Partner of the Partnership. As was
communicated to all limited partners, this step was taken in
order to minimize any effect that Amrecorps financial
difficulties might have on the partnership. Management of
the Partnerships assets is performed by Univesco, Inc., a
Texas corporation, Robert J. Werra, CEO.
On November 12, 1993 the Partnership refinanced the
properties secured debt with an 8.15%, ten year, mortgage
loan from Lexington Mortgage Company. The $3,250,000
mortgage loan provides for monthly payments of $415,000
based on an amortized schedule of 300 months with a final
payment of the entire remaining principal balance in
December 2003. The proceeds of this new loan were used to
pay off the $2,500,000 and $2,300,000 mortgage notes which
previously held the first mortgage position. The old first
mortgagee provided a discount of approximately ten percent
of the outstanding principal balances of two old notes. The
balance of funds needed to retire the old notes
(approximately $100,000) was provided by Robert J. Werra. In
addition Robert J. Werra exercised his option in the
propertys wrap mortgage notes. The new lender prohibited
subordinate debt. To meet this requirement the subordinate
debt held by Mr. Werra was converted to a class of equity
with the same terms and conditions as it possessed as debt.
The wrap mortgage lender would not agree to the change in
status so Mr. Werra paid $85,000 to complete his purchase of
the wrap notes and now holds an equity position in the
partnership as a Special Limited partner.
The partnership agreement was amended by vote of the
limited partners to include the appointment of a new
corporate general partner, LBAL, Inc., a Texas corporation
wholly owned by Robert J. Werra.
While it is the General Partners primary intention to
operate and manage the existing real estate investment, the
General Partner also continually evaluates this investment
in light of current economic conditions and trends to
determine if this asset should be considered for disposal.
At this time, there is no plan to dispose of Las Brisas
Apartments.
As of September 30, 2002, the Partnership had $32,869
in cash and cash equivalents as compared to $559,647 as of
December 31, 2001. The net decrease in cash of $526,778 was
due to distributions to the special limited partner.
The property is encumbered by a non-recourse mortgage
with a principal balance of $4,059,643 as of September 30,
2002. During the year ended December 31, 2001, the
Partnership refinanced the mortgage payable. The mortgage
payable bears interest at a rate of 6.18% and is payable in
monthly installments of principal and interest of $25,058
through December 2011, at which time a lump sum payment of
approximately $3,447,000 is due. This mortgage note is
secured by real estate with a net book value of $3,576,134.
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 $249,823 in Special Limited Partner equity is the
result of previous funding 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 2002 and 2001, the Special Limited
Partner received distributions from the Partnership totaling
$555,000 and $985,408, respectively.
During the first quarter of 2002, the partnership paid
$550,000 to the special limited partner in partial
satisfaction of the distribution preference due to the
special limited partner, following this payment, the total
distribution preference due to the special limited partners
is approximately $1,759,000 as of September 30, 2002.
PART II
Other Information
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults upon Senior Securities.
None
Item 4. Submission of Matters to a vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(A) The following documents are filed herewith or incorporated herein
by reference as indicated as Exhibits:
Exhibit Designation Document Description
3 Certificate of Limited Partnership,
Incorporated by reference
to Registration Statement No. 33-00152
Effective November 26, 1985.
4 Certificate of Limited Partnership,
Incorporated by reference
to Registration Statement
No. 33-00152
Effective November 26, 1985
9 Not Applicable.
10 None.
11 Not Applicable.
12 Not Applicable.
13 Not Applicable.
18 Not Applicable.
19 Not Applicable.
22 Not Applicable.
23 Not Applicable.
24 Not Applicable.
25 Power of Attorney,
Incorporated by reference
to Registration Statement
No. 33-00152
Effective November 26, 1985
28 None.
(B) Reports on form 8-K for quarter ended September 30, 2002.
1. None
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto
duly authorized.
AMRECORP REALTY FUND III
A Texas limited partnership
By: /s/ Robert J. Werra
Robert J. Werra,
General Partner
Date: November 1. 2002
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Amrecorp
Realty Fund III (the Company) on Form 10-Q for the
period ending September 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof
(the Report), I, Robert J Werra, Principal Executive
Officer and Paul M. Ivanoff Treasurer of the Company,
certify, pursuant to 18 U.S.C. 1350, as adopted pursuant
to 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial condition
and results of operations of the Company.
/s/ Robert J. Werra /s/ Paul M. Ivanoff
Robert J. Werra Paul M. Ivanoff
CEO Univesco, Inc. Treasurer
Univesco, Inc.
Management Agent Management Agent
November 1, 2002