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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 March 31, 2004 Commission file number 33-00152
AMRECORP REALTY FUND III
(Exact name of registrant as specified in its charter)
TEXAS 75-2045888
(State or other jurisdiction of (IRS Employer
incorporation or organization Identification
Number)
2800 N Dallas Pkwy Suite 100
Plano, Texas 75093-5994
(Address of principal executive offices)
Registrant's telephone number, including area code: (972) 836-8000.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes: Y No:
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 March 31, 2004 and
December 31, 2003 Page 3
Consolidated Statements of Operations for the Three Months
Ended March 31, 2004 and 2003 Page 4
Consolidated Statements of Cash Flows for the Three months
Ended March 31, 2004 and 2003 Page 5
Item 2. Results of Operations and Management's Discussion and
Analysis of Financial Condition Page 6
Liquidity and Capital Resources Page 7
Other Information Page 9
Signatures Page 11
The statements, insofar as they relate to the period subsequent
to December 31, 2003 are Unaudited.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Balance Sheets
March 31 December 31,
2004 2003
(Unaudited)
ASSETS
Real Estate assets, at cost
Land $1,000,000 $1,000,000
Buildings and improvements 7,180,636 7,180,636
8,180,636 8,180,636
Less: Accumulated depreciation (5,075,023) (4,983,023)
3,105,613 3,197,613
Cash including cash investments 103,500 19,115
Escrow deposits 25,183 149,208
Deferred Financing Costs 69,599 71,881
Other assets 9,457 29,787
TOTAL ASSETS $3,313,352 $3,467,604
LIABILITIES AND PARTNERS' EQUITY:
LIABILITIES
Mortgage and notes payable $3,981,565 $3,999,545
Note Payable - Affiliates 96 1,338
Real estate taxes payable 18,090 136,892
Security deposits 58,819 57,788
Accounts payable & accrued
expenses 132,818 116,175
4,191,388 4,311,738
Partners Capital (Deficit)
Limited Partners (1,974,091) (1,940,528)
Special Limited Partner 1,251,735 1,251,735
General Partner (155,680) (155,341)
Total Partners Capital (878,036) (844,134)
(Deficit)
Total Liability And Partners
Equity $3,313,352 $3,467,604
See notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Ended
March 31,
REVENUES 2004 2003
Rental income 391,224 $390,882
Other property 25,368 17,814
Total revenues 416,592 408,696
EXPENSES
Salaries & wages 81,434 76,112
Maintenance & repairs 56,317 71,478
Utilities 42,227 48,625
Real estate taxes 37,500 37,500
General administrative 12,739 13,107
Contract services 23,029 23,730
Insurance 20,481 30,624
Interest 61,655 62,463
Depreciation and amortization 94,282 85,282
Property management fees 20,830 20,435
Total expenses 450,494 469,356
NET INCOME (LOSS) ($33,902) ($60,660)
NET INCOME PER SHARE $(14.23) $(25.47)
See Notes to Condensed Consolidated Financial Statements
AMRECORP REALTY FUND III
Condensed Consolidated Statement of Cash Flows
Unaudited
Three Months
Ended
March 31,
2004 2003
CASH FLOWS FROM OPERATING ACTIVITY
Net income (loss) ($33,902) ($60,660)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 92,000 83,000
Net Effect of changes in operating accounts
Escrow deposits 124,025 100,208
Capital replacement reserve 0 284
Accrued real estate taxes (118,802) (112,034)
Security deposits 1,031 (1,763)
Accounts payable 16,643 27,720
Deferred Financing Costs 2,282 30,624
Other assets 20,330 2,282
Net cash provided by operating activities 103,607 69,661
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of mortgage notes payable (17,980) (16,905)
Note payable - affiliates (1,242) 415
Distribution to special limited partner 0 (70,000)
Net cash used by investing activities (19,222) (86,490)
NET INCREASE (DECREASE) IN CASH AND CASH 84,385 (16,829)
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 19,115 23,824
CASH AND CASH EQUIVALENTS, END OF PERIOD $103,500 $6,995
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 MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
Results of Operations
At March 31, 2004 the Partnership owned Las Brisas Apartments, a
376-unit apartment community located at 2010 South Clark Street,
Abilene, Taylor County, Texas 79606. The Partnership purchased a
fee simple interest in Las Brisas Apartments on July 30, 1986.
The property contains approximately 312,532 net rentable square
feet, one clubhouse, and five laundry facilities located on
approximately 19.11 acres of land.
The occupancy of Las Brisas averaged 97.4% during the first
quarter of 2004 as compared to 92.8% for the first quarter of
2003.
FIRST QUARTER 2004 COMPARED TO FIRST QUARTER 2003
Revenue from property operations increased $7,896, or 1.93%, for
the first quarter of 2004, as compared to the first quarter of
2003. Other property income increased $7,554 or 42.4% mainly due
to increased fee collections. The following table illustrates
the components:
Increase Percent
(Decrease) Change
Rental income 342 0.09%
Other property 7,554 42.40%
7,896 1.93%
Property operating expenses: decreased by $18,862 or 4.02% for
the first quarter of 2004 compared to the first quarter of 2003
due primarily to decreased maintenance and repair costs.
Maintenance & repairs decreased $15,161 or 21.21% due to
decreased exterior building maintenance Insurance costs
decreased $10,143 or 33.12% due to lower flood insurance costs.
Utilities decreased $6,398 or 13.16 due to lower electric and gas
consumption. The following table illustrates the components:
Increase Percent
(Decrease) Change
Salaries & wages 5,322 6.99%
Maintenance & repairs (15,161) 21.21%
Utilities (6,398) 13.16%
General administrative (368) 2.81%
Contract services (701) 2.95%
Insurance (10,143) 33.12%
Interest (808) 1.29%
Depreciation and amortization 9,000 10.55%
Property management fees 395 1.93%
Net Increase (Decrease) (18,862) 4.02%
FIRST QUARTER 2003 COMPARED TO FIRST QUARTER 2002
Revenue from property operations increased $19,675, or 6.29%, for
the first quarter of 2003, as compared to the first quarter of
2002. Increased occupancy in the first quarter of 2003 accounted
for the increase in rental income of $29,320 or 9.92%. Other
property income decreased $9,645 or 55.85% mainly due to
decreased fee collections. The following table illustrates the
components:
Three Month Comparison
Increase Percent
(Decrease) Change
Rental income 29,320 9.92%
Other property (9,645) 55.85%
Net Increase 19,675 6.29%
(Decrease)
Property operating expenses: increased by $40,726 or 11.79% for
the first quarter of 2003 compared to the first quarter of 2002
due primarily to increased insurance costs. Insurance increased
$4,593 or 68.65% due to higher premiums and a new flood insurance
policy as required by the new lender. Contract service
increased $3,404 or 47.65% due to higher cable rates for the
property. Maintenance & repairs increased $14,199 or 25.37% due
to roof and carpentry repairs. Utilities increased $9,397 or
25.22% from higher natural gas costs. The following table
illustrates the components:
Increase Percent
(Decrease) Change
Salaries & wages 7,726 10.87%
Maintenance & repairs 14,199 25.37%
Utilities 9,397 25.22%
Real estate taxes 1,749 5.55%
General administrative (68) 0.55%
Contract services 3,404 47.65%
Insurance 4,593 68.65%
Interest (1,260) 2.99%
Property management fees 986 6.05%
Net Increase (Decrease) 40,726 11.79%
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 Partnership's 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 Amrecorp's financial difficulties might have on
the partnership. Management of the Partnership's 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 property's
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 March 31, 2004, the Partnership had $103,500 in cash
and cash equivalents as compared to $19,115 as of December 31,
2003. The net increase in cash of $84,385 was cash flow from
operations.
The property is encumbered by a non-recourse mortgage with a
principal balance of $3,981,565 as of March 31, 2004. 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
$3,169,117.
For the foreseeable future, the Partnership anticipates that
mortgage principal payments (excluding balloon mortgage
payments), improvements and capital expenditures will be funded
by net cash from operations. The primary source of capital to
fund future Partnership acquisitions and balloon mortgage
payments will be proceeds from the sale financing or refinancing
of the Property.
The special limited partner distribution preference arises
from a preferred return on certain special limited partnership
contributions made in prior years in conjunction with the
refinancing of the mortgage debt. The total unpaid amount due to
the special limited partners at March 31, 2004 is approximately
$2,190,000 of which $858,000 is the remaining distribution
preference and $1,332,000 is the original contribution. Any
additional available cash will then be distributed in accordance
with the partnership agreement. During 2003, 2002, and 2001,
distributions of $110,000, $523,560, and $985,408, respectively,
were made to the special limited partners in accordance with this
agreement.
PART II
Other Information
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults upon Senior Securities.
None
Item 4. Submission of Matters to a vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(A) The following documents are filed herewith or incorporated
herein by reference as indicated as Exhibits:
Exhibit Designation Document Description
3 Certificate of Limited Partnership,
Incorporated by reference to
Registration Statement No. 33-00152
Effective November 26, 1985.
4 Certificate of Limited Partnership,
Incorporated by reference to
Registration Statement No. 33-00152
Effective November 26, 1985
9 Not Applicable.
10 None.
11 Not Applicable.
12 Not Applicable.
13 Not Applicable.
18 Not Applicable.
19 Not Applicable.
22 Not Applicable.
23 Not Applicable.
24 Not Applicable.
25 Power of Attorney,
Incorporated by reference to
Registration Statement No. 33-00152
Effective November 26, 1985
28 None.
31.1 Certification Pursuant to
Rules 13a-14 and 15d-14 Under
the Securities Exchange Act of
1934, as Adopted Pursuant to
Section 302 of the Sarbanes-
Oxley Act of 2002, filed
herewith.
32.1 Certification Pursuant to 18
U.S.C. Section 1350, as
Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act
of 2002, filed herewith.
(B) Reports on form 8-K for quarter ended March 31, 2004.
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: May 6, 2004
Exhibit 31.1
CERTIFICATION PURSUANT TO RULES 13a-14 AND 15d-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I Robert J. Werra, Acting Principal Executive Officer and Chief
Financial of Amrecorp Realty Fund III ("the Company"), certify
that:
1. I have reviewed this quarterly report on Form 10-Q of the
Company;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements
made, in light of the circumstances under which such
statements were made, not misleading with respect to the
period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly
report, fairly present in all material respects the
financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented
in this quarterly report;
4. I am responsible for establishing and maintaining
disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the Company and
have:
a. designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under my supervision, to ensure that material
information relating to the company and its consolidated
subsidiaries is made known to me by others within those
entities, particularly for the periods presented in this
quarterly report;
b. designed such internal control over financial reporting,
or caused such internal control over financial reporting
to be designed under my supervision, to provide
reasonable assurance regarding the reliability of
financial reporting and the preparation of financial
statements for external purposes in accordance with
generally accepted accounting principles.
c. evaluated the effectiveness of the Company's disclosure
controls and procedures and presented in this report my
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
CERTIFICATION PURSUANT TO RULES 13a-14 AND 15d-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - continued
d. disclosed in this report any change in the Company's
internal control over financial reporting that occurred
during the Company's most recent fiscal quarter that
has materially affected, or is reasonably likely to
materially affect, the Company's internal control over
financial reporting; and
5. I have disclosed based on my most recent evaluation of
internal control over financial reporting, to the
Company's auditors and Audit Committee of the Board of
Directors (or persons fulfilling the equivalent
function):
a. all significant deficiencies and material weaknesses in
the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the Company's ability to record,
process, summarize, and report financial data; and
b. any fraud, whether or not material, that involves
management or other employees who have a significant
role in the Company's internal control over financial
reporting.
/s/ Robert J. Werra
Robert J. Werra
Acting Principal Executive Officer and Chief Financial
Officer
May 6, 2004
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Amrecorp Realty
Fund III ("the Company") on Form 10-Q for the period ending
March 31, 2004 as filed with the Securities and Exchange
Commission on the date hereof ("the Report"), I, Robert J.
Werra, Acting Principal Executive Officer and Chief
Financial Officer of the Company, certify, pursuant to 18
U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-
Oxley Act of 2002, that:
(1) The report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and results
of operations of the Company.
/s/ Robert J. Werra
Robert J. Werra
Acting Principal Executive Officer and Chief Financial
Officer
October 31, 2003