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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, 1995
Commission file number 33-00152
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required)
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
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 (214) 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, 1995, the Partnership consisted of a corporate general partner,
LBAL, Inc. (wholly owned by Robert J. Werra) and 277 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., a Texas corporation, wholly owned by Robert J.
Werra, ("Univesco") 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 and occupancies 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 and capitalized expenditures have
increased as units are updated and made more competitive in the
market place.
Item 2. Properties
- ---------------------
At December 31, 1995 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
1991 1992 1993 1994 1995
Las Brisas ------ ------ ------ ------ ------
86.6 87.6 89.9 90.3 92.4
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, 1987
aggregate subscriptions totaling $2,128,000 were received
representing 2,382 Interests. 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 1995 and 1994, the Special
Limited Partner received distributions from the Partnership
totaling $170,000 and $75,000, 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 $186
1987 286 30
1988 310
1989 278
1990 231
1991 142
1992
1993 153 162
1994 24
1995 5
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)
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
Limited Partner Units
Outstanding 2,382 2,382 2,382 2,382 2,382
Statement of Operations
Total Revenues $1,390 $1,307 $1,194 $1,088 $992
Net Income (Loss)
before extraordinary
items (30) 20 (218) (183) (250)
Extraordinary Item-
loss on extinguish-
ment of debt 0 0 183 0 190
Net Income (Loss) (30) 20 (35) (183) (60)
Net Income(Loss) per
Limited Partnership
Units (12) 8 (14) (76) (104) (a)
Cash Distributions to
Limited Partners 0 0 0 0 0
Balance Sheet:
Real Estate, net 4,604 4,789 4,965 5,123 5,321
Total Assets 5,010 5,269 5,327 5,192 5,367
Mortgages Payable 3,163 3,209 3,250 4,850 4,850
Partner's Equity
(Deficit) 1,549 1,749 1,804 (244) (62)
(a) 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: 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.
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
========
RESULTS OF OPERATIONS; 1994 VERSUS 1993-
Revenue from property operations for 1994 increased $112,593 or 9.4% as
compared to 1993, principally due to an increase in rents and occupancy
resulting from improvements in the apartment rental markets in Abilene,
Texas.
Property operating expenses for 1994 decreased $124,467 or 8.9 %. Payroll
increases were primarily the result of cost of living increases. Repair and
maintenance expenses increased primarily due to mandated repairs and
reserves as a result of commitments imposed by covenants in refinancing loan
documents and in bringing additional units on line. Interest Expense
decreased by $167,485 from 1993 due to refinancing of the mortgage on
November 12, 1993. The new note is an 8.15%, ten year mortgage loan from
Lexington Mortgage Company. The loan proceeds were obtained through a Real
Estate Mortgage Investment Company sponsored by Donaldson, Lufkin & Jenrette.
The $3,250,000 mortgage loan provides for monthly payments of $25,408 based
on an amortization schedule of 300 months with a final payment of the entire
remaining principal balance on December 1, 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 mortgage provided a discount of approximately ten percent (10%)
of the outstanding balances of the two old notes. The balance of funds needed
to retire the old notes (approximately $100,000) were provided by an
affiliate of the General Partner. Depreciation and amortization expense
increased $10,752 over 1993. The increase is partially due to $71,602 in
improvements, principally appliances and other improvements to apartment
units. Property management fees are paid to an affiliated entity and
represent 4% (5% prior to November 15, 1993), 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 26,554
Utilities (6,122)
Real estate taxes 35
Repairs and maintenance 15,881
General and administrative (9,712)
Interest (167,485)
Property management fee 5,630
Depreciation and amortization 10,752
----------
Total Increase (Decrease) in Operating
Expenses ($124,467)
==========
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, 1995, the Partnership had $35,124 in cash and
cash equivalents as compared to $72,051 as of December 31, 1994.
The net decrease in cash of $36,927 is principally due to the net
loss from operations and distributions on special limited partner
equity (see Note 4 to Consolidated Financial Statements and
Schedule Index contained in Item 8.). Additional uses of cash were
for the property additions described above.
The property is encumbered by a non-recourse mortgage with a
principal balance of $3,163,388 as of December 31, 1995. 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, 2000,
are $48,877, $53,012, $57,498, $62,363 and $67,640, 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 $2,023,233 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 1995 and 1994, the
Special Limited Partner received distributions from the Partnership
totaling $170,000 and $75,000, respectively.
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, 1995 and 1994, and the related statements of
operations, partners' equity (deficit) and cash flows for each
of the three years in the period ended December 31, 1995. 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, 1995 and 1994, and the results
of its operations and its cash flows for each of the three
years in the period ended December 31, 1995, 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.
As discussed in Note 1, during 1995, the Partnership adopted
Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of."
DELOITTE & TOUCHE LLP
Dallas, Texas
February 9, 1996
AMRECORP REALTY FUND III
(A Texas Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
- ---------------------------------------------------------------------------
ASSETS 1995 1994
INVESTMENTS IN REAL ESTATE, AT COST (Note 3):
Land $1,000,000 $1,000,000
Buildings and improvements 6,084,005 6,015,138
----------- -----------
7,084,005 7,015,138
Less accumulated depreciation (2,479,835 (2,226,012)
------------ -------------
4,604,170 4,789,126
CASH AND CASH EQUIVALENTS 35,124 72,051
ESCROW DEPOSITS 135,501 127,666
CAPITAL REPLACEMENT RESERVE (Note 3) 144,515 189,444
LIQUIDITY RESERVE (Note 3) 78,833 78,068
OTHER ASSETS 12,220 12,715
----------- -----------
TOTAL $5,010,363 $5,269,070
============ ============
LIABILITIES AND PARTNERS' EQUITY
MORTGAGE PAYABLE (Note 3) $3,163,388 $3,208,542
ACCRUED INTEREST PAYABLE 21,485 21,791
ACCOUNTS PAYABLE 26,298 39,030
REAL ESTATE TAXES PAYABLE 89,159 95,338
DUE TO AFFILIATES (Note 4) 126,510 124,138
SECURITY DEPOSITS 34,193 31,204
----------- ------------
3,461,033 3,520,043
PARTNERS' EQUITY 1,549,330 1,749,027
----------- ------------
TOTAL $ 5,010,363 $ 5,269,070
============= =============
See notes to financial statements.
AMRECORP REALTY FUND III
(A Texas Limited Partnership)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- ----------------------------------------------------------------------------
1995 1994 1993
INCOME:
Rentals $1,328,532 $1,228,639 $1,131,982
Other 62,391 78,320 62,384
---------- ---------- ----------
Total income 1,390,923 1,306,959 1,194,366
OPERATING EXPENSES:
Payroll 285,826 244,480 217,926
Utilities 156,904 148,223 154,345
Real estate taxes 89,159 95,338 95,303
Repairs and maintenance 229,321 159,523 143,642
General and administrative 76,607 63,473 73,185
Interest 259,434 263,316 430,801
Depreciation and amortization 253,823 247,707 236,955
Management fees (Note 4) 69,546 65,348 59,718
---------- --------- ---------
Total operating expenses 1,420,620 1,287,408 1,411,875
---------- --------- ---------
NET INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM (29,697) 19,551 (217,509)
EXTRAORDINARY ITEM, Gain on forgiveness
of debt (Note 3) 182,796
---------- --------- ---------
NET INCOME (LOSS) (Note 5) ($29,697) $19,551 ($34,713)
========== ========= =========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT:
Income (loss) before extraordinary
item (12.48) 8.13 (90.40)
Gain on forgiveness of debt (75.97)
--------- --------- --------
NET INCOME (LOSS) PER UNIT ($12.48) $8.13 ($14.43)
========= ========= ========
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, 1995, 1994 AND 1993
- -----------------------------------------------------------------------------
Special
General Limited Limited
Partner Partners Partners Total
BALANCE, JANUARY 1, 1993 $45,734 $0 ($290,371) ($244,637)
Contributions (Note 4) 2,268,233 2,268,233
Distributions (Note 4) (184,407) (184,407)
Net loss (347) 0 (34,366) (34,713)
----------- ---------- ---------- ---------
BALANCE, DECEMBER 31, 1993 (139,020) 2,268,233 (324,737) 1,804,476
Distributions (75,000) (75,000)
Net income 196 0 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) 0 (29,400) (29,697)
---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1995 ($139,121) $2,023,233 ($334,782) $1,549,330
========== ========== ========== =========
See notes to financial statements.
AMRECORP REALTY FUND III
(A Texas Limited Partnership)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- ----------------------------------------------------------------------------
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($29,697) $19,551 ($34,713)
Adjustments to reconcile net income
(loss) to cash
provided by operating activities:
Depreciation and amortization 253,823 247,707 236,955
Gain on forgiveness of debt (182,796)
Change in assets and liabilities:
Escrow deposits (7,835) (102,960) (6,480)
Other assets 495 (3,177) (301)
Accrued interest payable (306) (283) (15,605)
Security deposits 2,989 4,369 2,790
Accounts payable (12,732) (16,243) 21,627
Real estate taxes payable (6,179) 95,338 0
--------- --------- ---------
230,255 224,751 56,190
--------- --------- ---------
Net cash provided by operating
activities 200,558 244,302 21,477
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital replacement reserve 44,929 (88,844) (100,600)
Investments in real estate (68,867) (71,602) (78,970)
--------- --------- ---------
Net cash used in investing
activities (23,938) (160,446) (179,570)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgages and notes
payable (45,154) (41,458) (2,985,166)
Net proceeds from (payments on)
amounts due affiliates 2,372 (44,590) 79,307
Liquidity reserve (765) (2,868) (75,200)
Distributions (170,000) (75,000)
Additions to mortgages and notes
payable 3,250,000
---------- --------- ----------
Net cash provided by (used in)
financing activities (213,547) (163,916) 268,941
---------- --------- ----------
NET INCREASE (DECREASE) IN CASH (36,927) (80,060) 110,848
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 72,051 152,111 41,263
---------- --------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $35,124 $72,051 $152,111
========== ========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for
interest $259,740 $263,599 $446,406
========== ========= ==========
Noncash contributions to partnership $ - $ - $2,268,233
========== ========= ==========
Noncash distribution to general
partner $ - $ - $184,407
========== ========= ==========
See notes to financial statements.
AMRECORP REALTY FUND III
(A Texas Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- ---------------------------------------------------------------------
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. The Partnership has adopted
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." Accordingly, 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. The
adoption of SFAS No. 121 did not have a material effect on the
financial statements of the Partnership.
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 $2,854,000 at December 31, 1995.
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.
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, 1995, 1994 and 1993. 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 1995 and 1994, distributions of $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, 1995 and 1994, 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 $3,163,388 and
$3,208,542 as of December 31, 1995 and 1994, respectively, is
collateralized by the investments in real estate.
During 1993, the Partnership repaid the then existing mortgage
notes with proceeds obtained from a $3,250,000, 8.15% mortgage
note and certain contributions by the special limited partners.
As part of this transaction, a gain on forgiveness (net of
direct costs to refinance the debt instruments of $193,710) of
$130,537 was recorded.
Also during 1993, a note payable of $49,477 was forgiven by the
creditor. The entire amount of the note and accrued interest of
$2,782 was recorded as a gain on forgiveness.
The following sets forth the required principal payments due
under the Partnership's mortgage for the next five years and
thereafter:
1996 $48,877
1997 53,012
1998 57,498
1999 62,363
2000 67,640
Thereafter 2,873,998
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, Inc. (Univesco),
an affiliated entity, for the management of its project under
which Univesco receives 4% (5% prior to November 15, 1993) of
the gross revenues from operations as a property management fee.
Beginning November 15, 1993, 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:
1995 1994 1993
Property management fees $55,637 $52,278 $58,225
Partnership fees 13,909 13,070 1,493
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.
The Partnership has been advanced funds from Univesco to pay
operating expenses. In September 1990, the Partnership entered
into a formal note agreement for certain advances in the amount
of $184,407. During 1990, the note was assigned to the general
partner. Effective January 1, 1991, the general partner
relieved the Partnership of its obligation to repay these
amounts, resulting in a gain on forgiveness of debt which, in
accordance with the partnership agreement, was allocated
entirely to the general partner during 1991. As of January 1,
1993, this note was reinstated on the Partnership's financial
statements at a face value of $184,407. The Partnership
accounted for this as a distribution to the general partner. In
November 1993, the general partner assigned this note to the
Partnership, for which the Partnership recorded a contribution
to special limited partner equity with a corresponding decrease
to mortgages and notes payable. No interest expense was
incurred on this note during 1992 or 1993.
In November 1993, an affiliate of the general partner assigned a
$401,911 note payable to the Partnership, for which the
Partnership recorded a contribution to special limited partner
equity with a corresponding decrease in notes payable to
affiliates. During 1993, interest expense incurred on this note
through the date of the assignment was $34,575.
In 1989, the general partner obtained an option to purchase the
underlying wraparound mortgage notes. This option was exercised
in 1993, and the mortgage notes were assigned to the Partnership. The
assignment was recorded as a $1,573,408 contribution to special limited
partner equity with a corresponding decrease to mortgages and notes
payable.
In connection with the November 1993 debt refinancing, the first
special limited partner paid closing costs of approximately
$108,507 on behalf of the Partnership. The Partnership recorded
this transfer as a contribution to special limited partner
equity.
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 1995 would have been as follows:
Net loss per accompanying financial statements $(29,697)
Add - book basis depreciation expense using straight-
line method 253,823
Deduct - income tax basis amortization of loan costs (19,705)
Deduct - income tax basis depreciation expense using
ACRS method (215,404)
--------
Excess of expenses over revenues, accrual income tax
basis $(10,983)
=========
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, 1995.
As of December 31, 1995, 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, 1995
- -----------------------------------------------------------------------------
Initial Cost to Partnership
-----------------------------
Buildings Total Cost
Encum- 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
Abilene, Texas (b) $1,000,000 $5,721,811 $362,194
============= =========== ===========
(continuation of above schedule below)
Gross Amounts at Which
Carried at Close of Year
- -----------------------------------
Buildings
and Accumulated Date of Date
Land Improvements Total Depreciation Construciton Acquired
(c)(d) (c)
Complete at
$1,000,000 $6,084,005 $7,084,005 $2,479,835 date acquired 7/31/86
========== ========== ========== ========== ============== ========
(Continuation of above schedule below)
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, 1995
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, 1995, 1994 and 1993.
Investments in Accumulated
Real Estate Depreciation
BALANCE, JANUARY 1, 1993 $6,864,566 $1,741,350
Additions during the year:
Acquisitions 78,970
Depreciation expense 236,955
----------- ------------
BALANCE, DECEMBER 31, 1993 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
========== ===========
(d)Aggregate cost of real estate for federal income tax purposes is
$5,634,005.
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, 54, 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 May 2, 1983.
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 $300,000 14.79%
Partnership 3301 Biddle Ave. #1101
Interest Wyandette, MI 48192
Juanita L. Werra $100,330 4.71%
5881 Prestonview Blvd.
#143
Dallas, TX 75243
Monty L. Parker $100,330 4.71%
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 $5,000 .23%
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, 1995.
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: /s/Robert J. Werra
------------------------
Robert J. Werra, President
April 10, 1996