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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, 1996
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)
6210 Campbell Road, Suite 140, Dallas, Texas 75248
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (972) 380-8000
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 3O, 1985 and amended on November 21, 1985. On December 31, 1996,
the Partnership consisted of a corporate general partner, LBAL, Inc.
(wholly owned by Robert J. Werra) and 278 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, wholly owned 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 street 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. In addition, operating expenses have decreased primarily
due to outsourcing of labor costs and non-recurring mandated repairs incurred
in 1995. Capitalized expenditures have increased as units are updated and
made more competitive in the market place.
Item 2. Properties
- ------------------
At December 31, 1996 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 properties are 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 3 to Consolidated Financial
Statements and Schedule Index contained in Item 8.
Occupancy Rates
---------------
Per Cent
--------
1992 1993 1994 1995 1996
Las Brisas 87.60% 89.90% 90.30% 92.40% 91.70%
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, 1996 there were
approximately 278 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 1996 and 1995, the Special Limited
Partner received distributions from the Partnership totaling $195,002 and
$170,000 respectively.
An analysis of 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 30
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
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 Consolidated financial Statements and notes
thereto contained in Item 8.
Year Ended December 31,
(in thousands except unit amounts)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Limited Partner Units Ostanding 2,382 2,382 2,382 2,382 2,382
----- ----- ----- ----- -----
Statement of Operations
Total Revenues $1,472 $1,390 $1,307 $1,194 $1,088
Net Income (Loss) before extraordinary items 56 (30) 20 (218) (183)
Extraordinary Item-gain on forgiveness of debt 0 0 0 183 0
Net Income (Loss) 56 (30) 20 (35) (183)
Limited Partner Net Income(Loss) per Unit 23 (12) 8 (14 ) (76)(a)
Cash Distributions to Limited Partners per Unit 0 0 0 0 0
Balance Sheet:
Real Estate, net 4,452 4,604 4,789 4,965 5,123
Total Assets 4,826 5,010 5,269 5,327 5,192
Mortgages Payable 3,115 3,163 3,209 3,250 4,850
Partner's Equity (Deficit) 1,411 1,549 1,749 1,804 (244)
(a) For Federal Income Tax purposes only income was reallocated in
accordance with 704(b) and 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: 1996 VERSUS 1995 -
Revenue from Property Operations increased $80,842 or 5.81% as
compared to 1995, principally due to an increase in rents resulting
from improvements in the apartment rental markets in Abilene,
Texas.
Increase
(Decrease)
Rental income $67,758
Other 13,084
--------
Net Increase (Decrease) $80,842
==========
Property operating expenses for 1996 decreased $4,704 or 0.33 %. Payroll
decreases were primarily the result outsourcing landscaping labor costs.
Repair and maintenance expenses decreased from 1995 by $33,607 or 14.66%
primarily due to non recurring mandated repairs incurred in 1995. Interest
expense decreased by $3,696 from 1995 due to normal principal amortization.
Utilities increased by $9,273 or 5.91% due primarily to increased cable
costs. Property management fees are paid to an affiliated entity and
represents 4% of gross operating revenues (see Note 4 to Consolidated
Financial Statements and Schedule Index contained in Item 8.) The following
table illustrates the increases or(decreases):
Increase
(Decrease)
------------
Payroll $(17,393)
Utilities 9,273
Real estate taxes 9,257
Repairs and Maintenance (33,607)
General & Administration 14,703
Interest (3,696)
Depreciation and amortization 12,717
Property management fees 4,042
------------
Net Increase (Decrease) $(4,704)
============
RESULTS OF OPERATIONS; 1995 VERSUS 1994-
Revenue from Property Operations increased $83,964 or 6.4% as
compared to 1994, principally due to an increase in rents and
occupancy resulting from improvements in the apartment rental
markets in Abilene, Texas.
Increase
(Decrease)
Rental income $99,893
Other (15,929)
----------
Net Increase (Decrease) $83,964
==========
Property operating expenses for 1995 decreased $133,212 or 10.3 %.
Payroll increases were primarily the result of cost of living
increases and additional uses of contract labor. Repair and
maintenance expenses increased primarily due to mandated repairs
and in bringing additional units on line. Interest expense
decreased by $3,882 from 1994 due to normal principal amortization.
Depreciation and amortization expense increased due to $68,867 in
improvements, principally appliances and other improvements to
apartment units. Property management fees are paid to an affiliated
entity and represents 4% of gross operating revenues (see Note 4 to
Consolidated Financial Statements and Schedule Index contained in
Item 8.) The following table illustrates the increases or
(decreases):
Payroll $41,346
Utilities 8,681
Real estate taxes (6,179)
Repairs and maintenance 69,798
General and administrative 13,134
Interest (3,882)
Depreciation and amortization 6,116
Management fee 4,198
---------
Total Increase (Decrease) in Operating Expenses $133,212
==========
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 assets should
be considered for disposal. At this time, there is no plan to
dispose of Las Brisas Apartments.
As of December 31, 1996, the Partnership had $30,280 in cash and
cash equivalents as compared to $5,124 as of December 31, 1995. The
net increase in cash of $25,156 is principally due to net income
from operations offset by $195,002 in distributions on special
limited partner equity (see Note 4 to Consolidated Financial
Statements and Schedule Index contained in Item 8.)
The property is encumbered by a non-recourse mortgage with a
principal balance of $3,114,512 as of December 31, 1996. The
mortgage payable bears interest at 8.15% and is payable in monthly
installments of principal and interest until December 2003 when a
lump-sum payment of approximately $2,642,000 is due. The required
principal reductions for the five years ending December 31, 2001,
are $53,012, $57,498, $62,363 $67,640 and $73,363, 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 future
Partnership acquisitions and balloon mortgage payments will be
proceeds from the sale financing or refinancing of the Property.
The $1,828,231 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 1996 and 1995, the
Special Limited Partner received distributions from the Partnership
totaling $195,002 and $170,000, respectively.
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
(A TEXAS LIMITED PARTNERSHIP)
ITEM 8 - FINANCIAL STATEMENTS AND SCHEDULE INDEX
- ------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 10
BALANCE SHEETS 11
STATEMENTS OF OPERATIONS 12
STATEMENTS OF PARTNERS' EQUITY (DEFICIT) 13
STATEMENTS OF CASH FLOWS 14
NOTES TO FINANCIAL STATEMENTS 15-18
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION 19-20
INDEPENDENT AUDITORS' REPORT
To the General Partner
and Limited Partners
Amrecorp Realty Fund III
Dallas, Texas
We have audited the balance sheets of Amrecorp Realty Fund III
(a Texas limited partnership) (the "Partnership") as of
December 31, 1996 and 1995, and the related statements of
operations, partners' equity (deficit) and cash flows for each
of the three years in the period ended December 31, 1996. Our
audits also included the financial statement schedule listed in
the index at Item 14(a)(2). These financial statements and the
financial statement schedule are the responsibility of the
Partnership's management. Our responsibility is to express an
opinion on the financial statements and the financial statement
schedule based on our audits.
We conducted our audits in accordance with 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 financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in
all material respects, the financial position of Amrecorp
Realty Fund III at December 31, 1996 and 1995, and the results
of its operations and its cash flows for each of the three
years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. Also, in our
opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
DELOITTE & TOUCHE LLP
Dallas, Texas
February 17, 1997
AMRECORP REALTY FUND III
(A Texas Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
- ---------------------------------------------------------------------------
ASSETS 1996 1995
INVESTMENTS IN REAL ESTATE, AT COST (Note 3):
Land $1,000,000 $1,000,000
Buildings and improvements 6,198,619 6,084,005
----------- -----------
7,198,619 7,084,005
Less accumulated depreciation (2,746,375) (2,479,835)
4,452,244 4,604,170
CASH AND CASH EQUIVALENTS 40,820 5,124
RESTRICTED CASH 30,000 30,000
ESCROW DEPOSITS 114,755 135,501
CAPITAL REPLACEMENT RESERVE (Note 3) 92,957 144,515
LIQUIDITY RESERVE (Note 3) 82,588 78,833
OTHER ASSETS 13,015 12,220
----------- ----------
TOTAL $4,826,379 $5,010,363
========== ==========
LIABILITIES AND PARTNERS' EQUITY
MORTGAGE PAYABLE (Note 3) $3,114,512 $3,163,388
ACCRUED INTEREST PAYABLE 21,153 21,485
ACCOUNTS PAYABLE 24,276 26,298
REAL ESTATE TAXES PAYABLE 98,416 89,159
DUE TO AFFILIATES (Note 4) 122,785 126,510
SECURITY DEPOSITS 35,060 34,193
3,416,202 3,461,033
--------- ---------
PARTNERS' EQUITY 1,410,177 1,549,330
--------- ---------
TOTAL $4,826,379 $5,010,363
========== ==========
See notes to financial statements.
AMRECORP REALTY FUND III
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- -----------------------------------------------------------------------------
1996 1995 1994
INCOME:
Rentals $ 1,396,290 $1,328,532 $ 1,228,639
Other 75,475 62,391 78,320
----------- ---------- -----------
Total income 1,471,765 1,390,923 1,306,959
OPERATING EXPENSES:
Payroll 268,433 285,826 244,480
Utilities 166,177 156,904 148,223
Real estate taxes 98,416 89,159 95,338
Repairs and maintenance 195,714 229,321 159,523
General and administrative 91,310 76,607 63,473
Interest 255,738 259,434 263,316
Depreciation and amortization 266,540 253,823 247,707
Management fees (Note 4) 73,588 69,546 65,348
---------- -------- ---------
Total operating expenses 1,415,916 1,420,620 1,287,408
----------- --------- ---------
NET INCOME (LOSS) (Note 5) $ 55,849 $ (29,697) $ 19,551
========== ========== =========
NET INCOME (LOSS) PER LIMITED PARTNERSHIP
UNIT $ 23.21 $ (12.34) $ 8.13
======== ========== =========
LIMITED PARTNERSHIP UNITS OUTSTANDING 2,382 2,382 2,382
===== ===== =====
See notes to financial statements.
AMRECORP REALTY FUND III
(A Texas Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- -----------------------------------------------------------------------------
Special
General Limited Limited
Partner Partners Partners Total
BALANCE, JANUARY 1, 1994 $ (139,020) $ 2,268,233 $(324,737) $ 1,804,476
Distributions - (75,000) - (75,000)
Net income 196 - 19,355 19,551
---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1994 (138,824) 2,193,233 (305,382) 1,749,027
Distributions - (170,000 - (170,000)
Net loss (297) - (29,400) (29,697)
---------- ---------- ---------- ---------
BALANCE, DECEMBER 31, 1995 (139,121) 2,023,233 (334,782) 1,549,330
Distributions - (195,002) - (195,002)
Net income 558 - 55,291 55,849
BALANCE, DECEMBER 31, 1996 $(138,563) $1,828,231 $(279,491) $1,410,177
========== ========== ========== ==========
See notes to financial statements.
AMRECORP REALTY FUND III
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- -----------------------------------------------------------------------------
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 55,849 $ (29,697) $ 19,551
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation and amortization 266,540 253,823 247,707
Change in assets and liabilities:
Restricted cash (30,000)
Escrow deposits 20,746 (7,835) (102,960)
Other assets (795) 495 (3,177)
Accrued interest payable (332) (306) (283)
Security deposits 867 2,989 4,369
Accounts payable (2,022) (12,732) (16,243)
Real estate taxes payable 9,257 (6,179) 95,338
------- -------- --------
294,261 200,255 224,751
-------- -------- --------
Net cash provided by operating activities 350,110 170,558 244,302
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital replacement reserve 51,558 44,929 (88,844)
Investments in real estate (114,614) (68,867) (71,602)
-------- -------- --------
Net cash used in investing activities (63,056) (23,938) (160,446)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgages and notes payable (48,876) (45,154) (41,458)
Net proceeds from (payments on) amounts
due affiliates (3,725) 2,372 (44,590)
Liquidity reserve (3,755) (765) (2,868)
Distributions (195,002) (170,000) (75,000)
--------- --------- --------
Net cash used in financing activities (251,358) (213,547) (163,916)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH 35,696 (66,927) (80,060)
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 5,124 72,051 152,111
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 40,820 $ 5,124 $ 72,051
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for interest $ 256,070 $ 259,740 $ 263,599
======== ======== =========
See notes to financial statements.
AMRECORP REALTY FUND III
(A TEXAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- -----------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - Amrecorp Realty Fund III (a Texas limited
partnership) (the "Partnership") maintains its books and
prepares its income tax returns using the accrual income tax
basis of accounting. Memo adjustments have been made in
preparing the accompanying financial statements in accordance
with generally accepted accounting principles (see Note 5). The
financial statements include only those assets, liabilities and
results of operations which relate to the business of the
Partnership. The financial statements do not include any
assets, liabilities, revenues or expenses attributable to the
partners' individual activities.
Property and Equipment - Buildings and improvements are
depreciated using the straight-line method over the estimated
useful lives of the assets which are five years for improvements
and 25 years for buildings. 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," Partnership management routinely reviews its
investments for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable.
Syndication Costs - Costs or fees incurred to raise capital for
the Partnership are netted against the respective partners'
equity accounts.
Revenue Recognition - The Partnership has leased substantially
all of its investment in real estate (apartment building) under
operating leases for periods generally less than one year.
Income Taxes - No provision has been made for income taxes,
since these taxes are the responsibility of the individual
partners. For tax purposes, the basis of the Partnership assets
is $2,687,000 at December 31, 1996.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect reported amounts of certain assets, liabilities, revenues
and expenses as of and for the reporting periods. Actual
results may differ from such estimates.
Cash and Cash Equivalents - For purposes of the statement of
cash flows, the Partnership considers all highly liquid
instruments with a remaining maturity at the date of purchase of
three months or less to be cash equivalents. Univesco, Inc.
("Univesco"), an affiliate of the general partner, Robert J.
Werra, and the management agent, maintains a single controlled
disbursement account for all properties managed by Univesco.
Funds are transferred at the time of cash disbursements from the
project's operating account to the controlled disbursement
account to reimburse checks issued.
Restricted Cash - Restricted cash consists of tenant security
deposits which are maintained in a separate account in
accordance with the mortgage agreement.
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. Partnership
management is not aware of any environmental remediation
obligations which would materially affect the operations,
financial position or cash flows of the Partnership.
Reclassification - Certain previous year balances have been
reclasified to conform with current year presentation.
2. PARTNERSHIP
General - The Partnership was formed on August 30, 1985, under
the Texas Uniform Limited Partnership Act, for the purpose of
acquiring, maintaining, developing, operating and selling
buildings and improvements. The Partnership owns and operates
an apartment property 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. An affiliate
of the general partner is the second special limited partner.
An aggregate of 25,000 limited partner units at $1,000 per unit
are authorized, of which 2,382 units were issued and outstanding
during the years ended December 31, 1996, 1995 and 1994. Under
the terms of the partnership agreement, no additional limited
partner 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 outlined above.
Allocation of Net Income (Loss) and Cash - Net income and net
operating cash flow as defined in the 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 10% to the general partner
and 90% 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.
All distributions of net operating cash flow and net proceeds of
the Partnership shall be distributed first to the special
limited partners to satisfy the special limited partner
distribution preference, then to repay any unreturned portion of
their contribution. Any additional available cash will be
distributed in accordance with the partnership agreement.
During 1996, 1995 and 1994, distributions of $195,002, $170,000
and $75,000, respectively, were made to the special limited
partners in accordance with this agreement.
3. MORTGAGE PAYABLE
The mortgage payable at December 31, 1996 and 1995, consisted of
an 8.15% mortgage note which is payable in monthly principal and
interest installments of $25,408 through December 2003, at which
time a lump-sum payment of approximately $2,642,000 is due.
The mortgage payable, which had a balance of $3,114,512 and
$3,163,388 as of December 31, 1996 and 1995, respectively, is
collateralized by the investments in real estate.
The following sets forth the required principal payments due
under the Partnership's mortgage for the next five years and
thereafter:
1997 $ 53,012
1998 57,498
1999 62,363
2000 67,640
2001 73,363
Thereafter 2,800,636
In conjunction with its mortgage payable, the Partnership is
required to fund a liquidity reserve and a capital replacement
reserve. Both reserves are refundable to the Partnership.
4. RELATED PARTY TRANSACTIONS
The Partnership has an agreement with Univesco for the
management of its project under which Univesco receives 4% of
the gross revenues from operations as a property management fee.
In addition, Univesco receives a Partnership fee equal to 1% of
gross revenues from operations to be paid from Excess Property
Income, as defined in the loan agreement. The following
schedule represents the amounts included as management and
Partnership fees recorded by the Partnership:
1996 1995 1994
Property management fees $ 58,870 $ 55,637 $ 52,278
Partnership fees
14,718 13,909 13,070
Upon sale of a property, the Partnership will pay a real estate
commission to the general partner or their 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.
5. 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 principles, the excess
of expenses over revenues for 1996 would have been as follows:
Net income per accompanying financial statements $ 55,849
Add - book basis depreciation expense using straight-line method 266,540
Deduct - income tax basis amortization of loan costs (19,705)
Deduct - income tax basis depreciation expense using ACRS method (229,387)
Deduct - special limited partner distributions (147,086)
------------
Excess of expenses over revenues, accrual income tax basis $ (73,789)
============
6. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107,
"Disclosures About Fair Value of Financial Instruments,"
requires disclosure of the estimated fair values of certain
financial instruments. The 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, short-term receivables,
accounts payable and other liabilities. Real estate and other
assets consist of nonfinancial instruments, which are excluded
from the scope of SFAS No. 107
Management has reviewed the carrying values of its mortgage
payable in connection with interest rates currently available to
the Partnership for borrowings with similar characteristics and
maturities and has determined that its carrying value
approximates its estimated fair value as of December 31, 1996.
As of December 31, 1996, 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
(A Texas Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
- ----------------------------------------------------------------------------
DECEMBER 31, 1996
Initial Cost To Partnership
-----------------------------
Encum- Buildings Total Cost
and Subsequent to
Description brances Land 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
Abiline, Texas
(b) $ 1,000,000 $ 5,721,811 $ 476,808
=========== =========== ==========
Gross Amounts at Which
Carried at Close of year
-------------------------
Buildings
and Accumulated
Description Land Improvements Total Depreciation
(c)(d) (c)
Twenty-eight two
story apartment
Buildings on concrete block
construction with brick veneer,
stucco and wood siding
exterior, and composition
shingled roofs located in
Abilene, Texas
$ 1,000,000 $6,198,619 $ 7,198,619 $ 2,746,375
Date of Construction: Complete at date acquired
Date Acquired: 7/31/96
Life on Which Depreciation Is Computed: (a)
See notes to Schedule III.
AMRECORP REALTY FUND III
(A TEXAS LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 1996
- -----------------------------------------------------------------------------
NOTES TO SCHEDULE III:
(a)See Note 1 to financial statements outlining depreciation methods and
lives.
(b)See description of mortgages and note payable in Note 3 to the
financial statements.
(c)Reconciliation of investments in real estate and accumulated
depreciation for the years ended December 31, 1996, 1995 and 1994.
Investments in Accumulated
Real Estate Depreciation
BALANCE, JANUARY 1, 1994 $ 6,943,536 $ 1,978,305
Additions during the year:
Acquisitions 71,602 -
Depreciation expense - 247,707
--------- ---------
BALANCE, DECEMBER 31, 1994 7,015,138 2,226,012
Additions during the year:
Acquisitions 68,867 -
Depreciation expense - 253,823
--------- ---------
BALANCE, DECEMBER 31, 1995 7,084,005 2,479,835
Additions during the year:
Acquisitions 114,614 -
Depreciation expense - 266,540
--------- ---------
BALANCE, DECEMBER 31, 1996 $ 7,198,619 $ 2,746,375
=========== ===========
(d)Aggregate cost of real estate for federal income tax purposes is
$5,748,619.
Item 9. Disagreements on Accounting and Financial Disclosure
- ------------------------------------------------------------
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, 57, 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
198O, 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 the 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).
The Partnership Agreement allows for a management fee of five percent
(5%) of the gross income from operations. In connection with the new loan
obtained from Lexington Mortgage Company, Univesco, Inc. entered into a
management agreement that pays Univesco, Inc., an affiliated company, four
percent (4%) of the monthly gross income from operations. The Partnership's
obligation to pay an additional one percent (1%) of the monthly gross
income from operations shall be paid by the Partnership from Excess
Property Income, as that term is defined in the Loan Agreement between
Lexington Mortgage Company and the Partnership dated November 12, 1993. 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.
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. The General Partner is
responsible for management of the Partnership, subject to certain
limited democracy rights of the Limited Partners. The following
persons performing functions similar to those of officers and
directors of the partnership own units of limited partnership
interest in the partnership.
Title of Name and Address Amount and Nature Percent of
Class of Beneficial Owner of Beneficial Ownership Class
Limited Robert J. Werra 10 units .42%
Partnership 6210 Campbell Road, Suite 140
Interest 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 18-2O 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 on November 26, 1985 and incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-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 in 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, 1996.
None.
(C) Exhibits
3. Certificate of Limited Partnership,
incorporated by reference to Registration Statement
No. 33-OO152 effective November 26, 1985.
4. Limited Partnership Agreement, incorporated by reference
to Registration Statement No. 33-OO152 effective
November 26, 1985.
9. Not Applicable.
1O. 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-OO152
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:________________________________
Robert J. Werra, President
April 10, 1997