10-Q 1 de-ipiii_10q.txt QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the period ended April 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________. Commission File Number: 0-18146 DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. ----------------------------------------------- (Exact name of registrant as specified in governing instrument) Delaware 13-3293754 --------------------- --------------------------------- (State of organization) (IRS Employer Identification No.) 2 World Trade Center, New York, NY 10048 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 392-1054 -------------- Former name, former address and former fiscal year, if changed since last report: not applicable 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 ------- --------- DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. CONSOLIDATED BALANCE SHEETS PART I - FINANCIAL INFORMATION Item 1. Financial Statements

DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS Three and six months ended April 30, 2000 and 1999

DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL Six months ended April 30, 2000

DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended April 30, 2000 and 1999

DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. Notes to Consolidated Financial Statements 1. The Partnership Dean Witter Realty Income Partnership III, L.P. (the "Partnership") is a limited partnership organized under the laws of the State of Delaware in 1985. The Partnership's fiscal year ends on October 31. As of November 16, 1999, the Partnership's last remaining property investment was its 44.6% interest in the partnership ("TPA") which owned Taxter Corporate Park. As discussed in Note 3, TPA sold the Taxter property on May 23, 2000, and this sale has effectuated the dissolution of the Partnership. Accordingly, the Partnership is in the process of winding up its affairs, and it plans to distribute the balance of the Partnership's cash reserves and terminate by December 31, 2000. However, there can be no assurance that the Partnership can be terminated by such date. The financial statements include the accounts of the Partnership, Part Six Associates and Laurel-Vincent Place Associates Limited Partnership on a consolidated basis. The Partnership's interests in TPA and the partnership which owned interests in Chesterbrook Corporate Center (sold in April 1998) were accounted for using the equity method. The Partnership's records are maintained on the accrual basis of accounting for financial reporting and tax reporting purposes. Net income (loss) per Unit of limited partnership interest amounts are calculated by dividing net income (loss) allocated to Limited Partners, in accordance with the Partnership Agreement, by the weighted average number of Units outstanding. In the opinion of management, the accompanying financial statements, which have not been audited, include all adjustments necessary to present fairly the results for the interim period. Except for the reclassification of real estate held for sale and losses on real estate, such adjustments consist only of normal recurring accruals. These financial statements should be read in conjunction with the annual financial statements and notes thereto included in the DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. Notes to Consolidated Financial Statements Partnership's annual report on Form 10-K filed with the Securities and Exchange Commission for the year ended October 31, 1999. Operating results of interim periods may not be indicative of the operating results for the entire year. 2. Real Estate Pursuant to a Purchase and Sale Agreement dated as of February 16, 1999, the Partnership entered into an agreement, as amended, to sell the Westland Crossing property, for a negotiated sale price of $10.2 million, to New Plan Excel Realty Trust, Inc., an unaffiliated party. As permitted by the contract, New Plan assigned its purchase rights to its affiliate, Landamerica Exchange Company. The closing of the sale took place on November 16, 1999. At closing: a) the Partnership received proceeds of approximately $9.2 million, net of closing costs and other deductions (including $373,800 of capital expenditure commitments) and a $250,000 escrow to secure the Partnership's obligations, if any, pursuant to representations and warranties in the Agreement; and b) New Plan discontinued a lawsuit which it had commenced against the Partnership in September 1999 to compel the Partnership to sell the property to it. The Partnership received the escrow deposit (which was included in other assets at April 30, 2000), plus interest, in May 2000. On December 21, 1999, the Partnership paid 100% to Limited Partners a cash distribution of $9,190,484 ($17.21 per Unit) from the net proceeds from the Westland Crossing sale. In the second quarter of fiscal 1999, the Partnership wrote down the net carrying value of the property to the amount expected to be received from the sale (including the return of the escrow), resulting in a loss of approximately $802,000; an additional $49,000 loss was recognized in fiscal 2000. In accordance with the Partnership Agreement the loss was allocated 100% to the Limited Partners. DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. Notes to Consolidated Financial Statements In April 2000, the Partnership received its $500,000 escrow deposit, plus interest, from the September 1999 sale of the Laurel Lakes property. This deposit was included in other assets at October 31, 1999. The Partnership plans to distribute the proceeds from the escrow receipts to Limited Partners only in June 2000. 3. Investment in Joint Venture Pursuant to a Purchase and Sale Agreement dated as of April 4, 2000, as amended (the "Agreement"), TPA sold the land and buildings which comprise the Taxter property on May 23, 2000 to a subsidiary of Mack-Cali Realty Corporation (the "Purchaser"), an unaffiliated party, for a negotiated sale price of $42.725 million. In connection with the sale, TPA acquired from an affiliate and conveyed to the Purchaser certain interests in the Taxter property, including interests that the affiliate had acquired from KLM Royal Dutch Airlines, for $6.75 million, in February 1999. Of the $42.725 million, TPA will remit $6.75 million of the sale proceeds to the affiliate in connection with the transaction. TPA is also owned 40.6% by Dean Witter Realty Income Partnership IV, L.P., an affiliated public partnership, and 14.8% by Dean Witter Realty Income Partnership II, L.P., an affiliated public partnership. The purchase price was paid in cash at closing. At closing, the Partnership received approximately $14.8 million representing its 44.6% share of the cash received by TPA, net of its share of TPA's closing costs, the amount of the obligation owed to the affiliate and other deductions. The Partnership plans to make a cash distribution of sale proceeds to Limited Partners only in June 2000. The Partnership will retain a portion of the sale proceeds to cover any contingencies that may arise pursuant to the sale and, if required, pay administrative expenses and liabilities that may arise during 2000 while the Partnership winds up its affairs. Any sale proceeds DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. Notes to Consolidated Financial Statements remaining, subsequent to the payment of any contingencies, will be distributed to Limited Partners.

DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. Notes to Consolidated Financial Statements 4. Related Party Transactions In fiscal 1999, an affiliate of the Managing General Partner managed the Westland Crossing property through January 1999 and the Taxter property through December 1998. The Partnership incurred management fees to the affiliate of approximately $56,000 for these months. This amount is included in property operating expense. Another affiliate of the Managing General Partner performs administrative functions, ___ processes investor transactions and prepares tax information for the Partnership. For the six months ended April 30, 2000 and 1999, the Partnership incurred approximately $75,000 and $116,000, respectively, for these services. These amounts are included in general and administrative expenses. DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources On November 16, 1999, the Partnership sold the Westland Crossing property. See Note 2 to the consolidated financial statements. As of November 16, 1999, the Partnership's interest in the Taxter Corporate Park office property was the Partnership's sole property interest. As discussed in Note 3 to the consolidated financial statements, the partnership ("TPA") which owned the Taxter property sold the property on May 23, 2000. The property was approximately 90% leased at the time of the sale. The favorable leasing status and an improved real estate market in Westchester, New York, the location of the Taxter property, enabled TPA to obtain an attractive price for the property. The Partnership Agreement provides that the Partnership shall terminate upon the sale of the Partnership's last investment, and that dissolution shall be effective on the day on which the event arises giving rise to the dissolution. Accordingly, the Partnership dissolved pursuant to the terms of its Partnership Agreement, effective May 23, 2000, the date on which the Taxter property was sold. By December 31, 2000, the Partnership plans to wind up its affairs, distribute its remaining cash reserves and terminate its existence by filing a certificate of cancellation in the office of the Delaware Secretary of State. There can be no assurance that the Partnership will terminate by December 31, 2000. The Partnership plans to make a cash distribution of Taxter sale proceeds to Limited Partners only in June 2000. However, the Partnership will retain a portion of the sale proceeds to cover any contingencies that may arise during 2000 while the Partnership winds up its affairs. Any sale proceeds remaining, subsequent to the payment of any contingencies, will be distributed to Limited Partners. As of April 30, 2000, the Partnership had commitments to fund approximately $824,000 for its share of tenant improvements and leasing commissions at the Taxter property. This amount was deducted from the Partnership's share of the sale proceeds it received at closing. In December 1999, the Partnership paid 100% to Limited Partners a cash distribution from the net proceeds from the sale of the Westland Crossing property. Also, the Partnership plans to distribute the proceeds from the receipts of the Westland Crossing and Laurel Lakes (sold September 1999) escrow deposits to Limited Partners only in June 2000. See Note 2 to the consolidated financial statements, During the three and six month periods ended April 30, 2000, the Taxter property generated positive cash flow from operations. However, Partnership cash flow from operations decreased during the three and six month periods ended April 30, 2000 as compared to 1999 due to the sale of the Westland Crossing and Laurel Lakes shopping centers. During the six months ended April 30, 2000, the Partnership's contributions to TPA (to fund its share of tenant improvements and leasing commissions at the Taxter property) and capital expenditures at the Westland Crossing property exceeded the Partnership's distributions received from TPA and cash provided by operations. The Partnership's cash shortfall was funded with cash reserves. Except as described above and in the consolidated financial statements, the Managing General Partner is not aware of any trends or events, commitments or uncertainties that may impact liquidity in a material way. Operations Fluctuations in the Partnership's operating results for the three-and six-month periods ended April 30, 2000 compared to 1999 were primarily attributable to the following: The loss on real estate in 2000 resulted from the November 1999 sale of the Westland Crossing shopping center. The losses on real estate in 1999 resulted from the sale agreements for the Westland Crossing and Laurel Lakes shopping center. Rental revenues, other revenues and property operating expenses decreased in 2000, and depreciation and amortization expenses were eliminated in 2000 due to the sales of the Westland Crossing property and the Laurel Lakes property. The decrease in equity in earnings of joint ventures during the six-month period in 2000 is primarily due to lower average occupancy (approximately 79% in 2000 compared to 91% in 1999) at the Taxter property. Interest revenue increased during the six months ended April 30, 2000 primarily due to interest earned on the proceeds from the sale of the Westland Crossing property before such proceeds were distributed to the Limited Partners in December 1999. There were no other individually significant factors which caused changes in revenues and expenses. Inflation Inflation has been consistently low during the periods presented in the financial statements and, as a result, has not had a significant effect on the operations of the Partnership or its properties. PART II - OTHER INFORMATION Item 6. Exhibits & Reports on form 8-K (a) Exhibits. An exhibit index has been filed as part of this Report on Page E1. (b) Reports on Form 8-K Report on Form 8-K dated April 25, 2000 disclosing TPA's agreement to sell the Taxter Corporate Park property and the Partnership's plan to pay a cash distribution of sale proceeds. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. By: Dean Witter Realty Income Properties III Inc. Managing General Partner Date: June 14, 2000 By: /s/E. Davisson Hardman, Jr. --------------------------- E. Davisson Hardman, Jr. President Date: June 14, 2000 By: /s/Charles M. Charrow ---------------------------- Charles M. Charrow Controller (Principal Financial and Accounting Officer) DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. Quarter Ended April 30, 2000 Exhibit Index Exhibit No. Description ----------- ----------- 27 Financial Data Schedule

DEAN WITTER REALTY INCOME PARTNERSHIP III LP 10-Q