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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, 1997
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, 1997, the Partnership consisted of a corporate general partner,
LBAL, Inc. (wholly owned by Robert J. Werra) and 272 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 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, 1997 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 3 to the Financial Statements and
Schedule Index contained in Item 8.
Occupancy Rates
Per Cent
1993 1994 1995 1996 1997
Las 89.90% 90.30% 92.40% 91.70% 84.80%
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, 1997 there
were approximately 272 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 1997 and 1996, the Special
Limited Partner received distributions from the Partnership
totaling $183,000 and $195,002 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 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
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)
1997 1996 1995 1994 1993
Limited Partner Units 2,382 2,382 2,382 2,382 2,382
Outstanding - Basic
Statement of Operations
Total Revenues $1,430 $1,472 $1,391 $1,307 $1,194
Net Income (Loss) before (52) 56 (30) 20 (218)
extraordinary items
Extraordinary Item-loss on 0 0 0 0 (183)
extinguishment of debt
Net Income (Loss) (52) 56 (30) 20 (35)
Limited Partner Net Income(Loss) (21.49) 23.21 (12.34) 8.13 (14.43) (a)
per Unit - Basic
Cash Distributions to Limited 0 0 0 0 0
Partners per Unit - Basic
Balance Sheet:
Real Estate, net $4,254 $4,452 $4,604 $4,789 $4,965
Total Assets 4,567 4,826 5,010 5,269 5,327
Assets
Mortages Payable 3,061 3,115 3,163 3,209 3,250
Partner's Equity 1,175 1,410 1,549 1,749 1,804
(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: 1997 VERSUS 1996 -
Revenue from Property Operations decreased $41,475 or 2.82% as
compared to 1996, principally due to an increase in vacancy
resulting from increased competition in the apartment rental
markets in Abilene, Texas. The following table illustrates the
increases or (decreases):
Increase
(Decrease)
Rental income $(42,321)
Other 846
Net Decrease $(41,475)
Property operating expenses for 1997 increased $66,083 or 4.67%
Repair and maintenance expenses increased from 1996 by $41,235 or
21.07% primarily due to various preventative maintenance programs.
Real estate taxes increased $9,376 or 9.53% primarily due to an
increase in the assessed valuation of the property. Interest
expense decreased by $3,855 from 1996 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 $439
Utilities 693
Real estate taxes 9,376
Repairs and 41,235
Maintenance
General & 7,822
Administration
Interest (3,885)
Depreciation and 12,477
amortization
Property (2,074)
management fees
Net Increase $66,083
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
Rental income $67,758
Other 13,084
Net Increase $80,842
Property operating expenses for 1996 decreased $4,704 or 0.33 %.
Payroll decreases were primarily the result of outsourcing
landscaping labor costs. Repair and maintenance expenses decreased
from 1995 by $33,607 or 14.66% primarily due to non recurring
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
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 (33,607)
maintenance
General & 14,703
Administration
Interest (3,696)
Depreciation and 12,717
amortization
Property 4,042
management fees
Net Decrease $(4,704)
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, 1997, the Partnership had $5,212 in cash and
cash equivalents as compared to $40,820 as of December 31, 1996.
The net decrease in cash of $35,608 is principally due to the net
loss from operations and $183,000 in distributions on special
limited partner equity (see Note 4 to Financial Statements and
Schedule Index contained in Item 8.)
The property is encumbered by a non-recourse mortgage with a
principal balance of $3,061,499 as of December 31, 1997. 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 $57,498, $62,363 $67,640, $73,363, and $79,571 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 $1,645,231 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 1997 and 1996, the
Special Limited Partner received distributions from the Partnership
totaling $183,000 and $195,002, respectively.
Year 2000
The partnership anticipates that it will not incur any costs
associated with its computers and building operating systems as it
relates to the conversion to the year 2000.
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 1
BALANCE SHEETS 2
STATEMENTS OF OPERATIONS 3
STATEMENTS OF PARTNERS' EQUITY (DEFICIT) 4
STATEMENTS OF CASH FLOWS 5
NOTES TO FINANCIAL STATEMENTS 6-10
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION 11-12
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, 1997 and 1996, and the related statements of
operations, partners' equity (deficit) and cash flows for each
of the three years in the period ended December 31, 1997. Our
audits also included the financial statement schedule listed in
the index at Item 8. 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, 1997 and 1996, and the results
of its operations and its cash flows for each of the three
years in the period ended December 31, 1997, 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
/S/DELOITTE & TOUCHE LLP
Dallas, Texas
February 23, 1998
AMRECORP REALTY FUND III
(A Texas Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS 1997 1996
INVESTMENTS IN REAL ESTATE, AT COST:
Land $1,000,000 $1,000,000
Buildings and improvements 6,279,703 6,198,619
7,279,703 7,198,619
Less accumulated depreciation (3,025,392) (2,746,375)
4,254,311 4,452,244
CASH AND CASH EQUIVALENTS 5,212 40,820
RESTRICTED CASH 30,000 30,000
ESCROW DEPOSITS 115,612 114,755
CAPITAL REPLACEMENT RESERVE 54,109 92,957
LIQUIDITY RESERVE 90,503 82,588
OTHER ASSETS 17,064 13,015
TOTAL $4,566,811 $4,826,379
LIABILITIES AND PARTNERS' EQUITY
MORTGAGE PAYABLE $3,061,499 $3,114,512
ACCRUED INTEREST PAYABLE 20,793 21,153
ACCOUNTS PAYABLE 38,296 24,276
REAL ESTATE TAXES PAYABLE 107,792 98,416
DUE TO AFFILIATES 128,449 122,785
SECURITY DEPOSITS 34,514 35,060
3,391,343 3,416,202
COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY 1,175,468 1,410,177
TOTAL $4,566,811 $4,826,379
See notes to financial statements.
AMRECORP REALTY FUND III
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
INCOME:
Rentals $1,353,969 $1,396,290 $1,328,532
Other 76,321 75,475 62,391
Total income 1,430,290 1,471,765 1,390,923
OPERATING EXPENSES:
Payroll 268,872 268,433 285,826
Utilities 166,870 166,177 156,904
Real estate taxes 107,792 98,416 89,159
Repairs and maintenance 236,949 195,714 229,321
General and administrative 99,132 91,310 76,607
Interest 251,853 255,738 259,434
Depreciation and amortization 279,017 266,540 253,823
Management fees 71,514 73,588 69,546
Total operating expenses 1,481,999 1,415,916 1,420,620
NET INCOME (LOSS) $(51,709) $55,849 $(29,697)
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT - Basic $(21.49) $ 23.21 $(12.34)
LIMITED PARTNERSHIP UNITS OUTSTANDING -
Basic 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, 1997, 1996 AND 1995
Special
General Limited Limited
Partner Partners Partners Total
BALANCE, JANUARY 1, 1995 $(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
Distributions - (183,000) - (183,000)
Net loss (517) - (51,192) (51,709)
BALANCE, DECEMBER 31, 1997 $(139,080)$1,645,231 $(330,683)$1,175,468
See notes to financial statements.
AMRECORP REALTY FUND III
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(51,709) $ 55,849 $ (29,697)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 279,017 266,540 253,823
Change in assets and liabilities:
Restricted cash - - (30,000)
Escrow deposits (857) 20,746 (7,835)
Other assets (4,049) (795) 495
Accrued interest payable (360) (332) (306)
Security deposits (546) 867 2,989
Accounts payable 14,020 (2,022) (12,732)
Real estate taxes payable 9,376 9,257 (6,179)
296,601 294,261 200,255
Net cash provided by operating activities
244,892 350,110 170,558
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital replacement reserve 38,848 51,558 44,929
Investments in real estate (81,084) (114,614) (68,867)
Net cash used in investing activities (42,236) (63,056) (23,938)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgages and notes payable (53,013) (48,876) (45,154)
Net proceeds from (payments on) amounts
due affiliates 5,664 (3,725) 2,372
Liquidity reserve (7,915) (3,755) (765)
Distributions (183,000) (195,002) (170,000)
Net cash used in
financing activities (238,264) (251,358) (213,547)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (35,608) 35,696 (66,927)
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 40,820 5,124 72,051
CASH AND CASH EQUIVALENTS, END OF YEAR $5,212 $40,820 $5,124
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for interest $252,213 $ 256,070 $ 263,599
See notes to financial statements.
AMRECORP REALTY FUND III
(A TEXAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
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. 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 $2,446,000 at
December 31, 1997.
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
an original maturity at the date of purchase of three months or less
to be cash equivalents. Univesco, Inc. ("Univesco"), an affiliate of
the special limited 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.
Computation of Earnings per Unit - The Partnership has adopted
Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share." Comparative earnings per unit data have been
restated to conform to the adoption of this new standard. 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.
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.
Other - SFAS No. 130, "Reporting on Comprehensive Income," was issued
in June 1997 and establishes standards for reporting and presenting
comprehensive income in financial statements. It is effective for
periods beginning after December 15, 1997, and will be adopted by the
Partnership effective January 1, 1998. The Partnership anticipates
the adoption of SFAS No. 130 will not have any impact on its current
disclosures.
Also issued in June 1997 was SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information," which redefines
how operating segments are determined and requires disclosure of
certain financial and descriptive information about a company's
operating segments. SFAS No. 131 may require additional disclosure
by the Partnership and will be effective for the Partnership
beginning January 1, 1998.
SFAS No. 132, "Employers' Disclosures About Pensions and Other
Postretirement Benefits," was issued in February 1998 and revises
disclosures about pension and other postretirement benefit plans. It
is effective for periods beginning after December 15, 1997, and will
be adopted by the Partnership effective January 1, 1998. As the
Partnership does not have any such benefit plans, the adoption will
not have any impact on its current disclosures.
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, 1997, 1996 and 1995. 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 1997, 1996 and
1995, distributions of $183,000, $195,002 and $170,000, respectively,
were made to the special limited partners in accordance with this
agreement.
3. MORTGAGE PAYABLE
The mortgage payable at December 31, 1997 and 1996, 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 $3,061,499 and
$3,114,512 as of December 31, 1997 and 1996, 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:
1998 $57,498
1999 62,363
2000 67,640
2001 73,363
2002 79,571
Thereafter 2,721,064
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:
1997 1996 1995
Property management fees $57,211 $58,870 $55,637
Partnership fees 14,303 14,718 13,909
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 1997 would have been as follows:
Net loss per accompanying financial statements $(51,709)
Add - book basis depreciation expense using straight-line method
279,017
Deduct - income tax basis amortization of loan costs (19,705)
Deduct - income tax basis depreciation expense using ACRS method
(240,898)
Excess of expenses over revenues, accrual income tax basis $(33,295)
6. 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, short-term receivables, accounts payable and
other liabilities.
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, 1997 and 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, 1997
Initial Cost
to Partnership
Buildings,
Improvements, Total Cost
Encum- and Furniture Subsequent To
Description brances Land and Fixtures Acquisition
Twenty-eight two-story apartment
buildings of concrete block
construction on with brick veneer,
stucco and wood siding
exterior, and composition
shingled roofs located in
Abilene, Texas
(b) $1,000,000 $5,721,811 $557,892
Gross Amounts at Which
Carried at Close of Period
Buildings,
Improvemnts,
and Furniture Accumulated
Land and Fixtures Total Depreciation
(c) (d) (c)
$1,000,000 $6,279,703 $7,279,703 $3,025,392
Life on Which
Date of Date Depriciation
Construction Acquired Is Computed
Complete at
date acquired 7/31/86 (a)
See notes to Schedule III.
AMRECORP REALTY FUND III
(A TEXAS LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 1997
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, 1997, 1996 and 1995.
Investments in Accumulated
Real Estate Depreciation
BALANCE, JANUARY 1, 1995 $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
Additions during the year:
Acquisitions 81,084 -
Depreciation expense - 279,017
BALANCE, DECEMBER 31, 1997 $7,279,703 $3,025,392
(d)Aggregate cost of real estate for federal income tax purposes is
$5,829,703.
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, 59, 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).
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.
For the Fiscal year ended December 31, 1997, 1996 and 1995, property
management fees earned totaled $57,211, $58,870 and $55,637, respectively.
An additional administration service fee was paid to the general partner
of $14,303, $14,718 and $13,909 for the years ended December 31, 1997,
1996 and 1995 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. 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 OwnershipClass
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 18-20 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, 1997.
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: _________________________
Robert J. Werra, President
March 30, 1998