10-Q 1 realmarkiii_10q.txt QUARTERLY REPORT FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 2001 Commission File Number: 0-13331 REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III --------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 16-1234990 -------------------------- ------------------------------------- (State of organization) (IRS Employer Identification No.) 2350 North Forest Road, Suite 12A,Getzville, New York 14068 ------------------------------------------------------------ (Address of principal executive offices) (716) 636-0280 -------------- (Registrant's telephone number) Indicate by a 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 [ ] Part I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets -------------------------------------

Condensed Consolidated Statements of Operations -----------------------------------------------

2 Condensed Consolidated Statements of Cash Flows -----------------------------------------------

Notes to Financial Statements September 30, 2001 and 2000 Organization ------------ Realmark Property Investors Limited Partnership - III (the Partnership), a Delaware limited partnership, was formed on November 18, 1983, to invest in a diversified portfolio of income-producing real estate investments. The general partners are Realmark Properties, Inc. (the corporate general partner) and Joseph M. Jayson (the individual general partner). Joseph M. Jayson is the sole shareholder of J.M. Jayson & Company, Inc. Realmark Properties, Inc. is a wholly-owned subsidiary of J.M. Jayson & Company, Inc. Under the partnership agreement, the general partners and their affiliates can receive compensation for services rendered and reimbursement for expenses incurred on behalf of the Partnership. Basis of Presentation --------------------- The accompanying interim financial statements have been prepared in accordance with generally accepted accounting principles and, in the opinion of management, contain all necessary adjustments for a fair presentation. The Partnership's significant accounting policies are set forth in its December 31, 2000 Form 10-K. The interim financial statements should be read in conjunction with the financial statements included in that Form 10-K. The interim results should not be considered indicative of the annual results. Certain reclassifications of prior period numbers may have been made to conform to the current period presentation. Property and Equipment ---------------------- At September 30, 2001, the Partnership owned and operated two commercial buildings (Perrymont and Inducon Amherst) and an apartment complex (Ambassador Towers). All of the properties are being actively marketed for sale and, therefore, are not being depreciated. Depreciation not recorded for the three and nine months ended September 30, 2001 was approximately $117,000 and $350,000, respectively. Subsequent to September 30, 2001, on October 18, 2001, the Partnership sold Ambassador Towers to an unaffiliated entity, for cash of $8,650,000, resulting 3 in a net gain of approximately $5 million. After satisfaction of the $3,046,000 mortgage loan on the property and payment of closing costs, the proceeds available to the Partnership are approximately $5.1 million. Those proceeds will be used to satisfy the remaining liabilities related to the property and to make a distribution to the limited partners. On a pro forma basis, if the sale of Ambassador Towers had occurred on September 30, 2001, the Partnership's balance sheet on that date would have shown: an increase in cash and equivalents from $.5 to $5.6 million; decreases in property of $3.2 million and in mortgage loans of $3.0 million; and an increase in partnership capital of approximately $5.0 million. If the property had been sold on January 1, 2000, the pro forma results of operations for the year ended December 31, 2000 would have been a net loss of $389,000, resulting from decreases in revenue and expense of $1,949,000 and $1,981,000, respectively. For the nine months ended September 30, 2001, the pro forma net loss would have been $239,000, resulting from decreases in revenue and expense of $1,529,000 and $1,262,000, respectively. All of the foregoing pro forma operating data excludes the gain on the disposition of the property and simply reflects the elimination of Ambassador Tower's operating accounts from the consolidated historical results. Contingency ----------- The Partnership, as a nominal defendant, the General Partners of all of the Realmark Partnerships and the officers and directors of the Corporate General Partner, as defendants, were served with a Summons and Complaint on April 7, 2000 in a class and derivative lawsuit instituted by Ira Gaines and on August 8, 2000 in a class and derivative lawsuit instituted by Sean O'Reilly and Louise Homburger, each in Supreme Court, County of Erie, State of New York (the"Court"). In September 2000, the Court signed an order consolidating these lawsuits. The consolidated lawsuit alleges claims of mismanagement and improper use of partnership funds relating to the Realmark Partnerships. The consolidated lawsuit seeks declaratory relief, unspecified damages, a receiver, an order liquidating the partnership, punitive damages, attorneys' fees and related relief. While the defendants deny any liability and have vigorously defended this lawsuit, on August 29, 2001, the parties entered into a Stipulation of Settlement (the "Agreement"). On October 4, 2001, the Court issued an "Order Preliminarily Approving Settlement" that, among other things, calls for a hearing on November 21, 2001 to determine whether the Agreement should be approved by the Court. The Agreement provides, among other things, that: * $1 million of the amount owed to the General Partners and/or their affiliates by Realmark Property Investors Limited Partnership IV be forgiven. * The payable to the General Partners and/or their affiliates by Realmark Property Investors Limited Partnership VI-A at March 31, 2001, in the amount of $481,598, cease to accrue interest. * All of the Realmark Partnerships' properties be disposed of within 360 days of the hearing order. The consolidated financial statements do not include any adjustments that might result from the outcome of this matter, pending the action of the Court. Current Accounting Pronouncements --------------------------------- Statements of Financial Accounting Standards Nos. 138 and 133, which concern accounting for derivative instruments and hedging activities, became effective for the Partnership on January 1, 2001 and did not have any effect on the Partnership's financial statements. 4 PART I - Item 2. Management's Discussion and Analysis of Financial Condition ----------------------------------------------------------- and Results of Operations ------------------------- Liquidity and Capital Resources ------------------------------- The Partnership's cash position for the first nine months of 2001 remained steady, ranging from $500,000 to $600,000. However, insufficient cash was generated by operations to fund capital improvements and debt payments. While there were no cash distributions to partners in the nine months ended September 30, 2001, there was a distribution in the last quarter of 2000. A distribution is planned for November 2001. Results of Operations --------------------- For the three and nine months ended September 30, 2001, the Partnership's operations, which exclude depreciation charges, produced a net loss of $36,500 and net income of $27,800, respectively, as compared to net income before depreciation in the same 2000 periods of $18,000 and $35,000. In the quarter ended September 30, 2001, rental income decreased because of vacancy increases at both commercial properties, while Ambassador's rents increased. In the nine month period, Ambassador's rent revenue increased almost $60,000, but that was more than offset by rent decreases of approximately $50,000 at Perrymont and $54,000 at Inducon. Increases in common area maintenance charges at Inducon and fee increases at Ambassador, somewhat offset by a decrease in interest income, led to the increase in other income in the nine months ended September 30, 2001. Thus, total income decreased slightly in the nine month period and decreased 2% in the third quarter. Property operations expense increased $22,000 in the quarter ended September 30, 2001, and decreased $22,000 in the 2001 nine month period. Repairs and maintenance expense decreased in both the 2001 periods because of the absence of major redecorating projects at Perrymont and Ambassador. In both the quarter and nine months ended September 30, 2001, that cost reduction was offset by increases in maintenance payroll and real estate taxes at Ambassador; higher utility costs at Perrymont and higher real estate taxes at Inducon. Partnership administrative expenses to affiliates increased by approximately $31,000 in the quarter ended September 30, 2001 and $54,000 in the nine month period, primarily because of higher property management fees and an allocation revision. Other administrative expense increased $6,000 in the third quarter and decreased $22,000 in the nine months because of professional fee variances. PART I - Item 3. Quantitative and Qualitative Disclosures About Market Risk ---------------------------------------------------------- The Partnership's cash equivalents are short term, interest bearing bank accounts and its mortgage loans are fixed-rate. It has not entered into any derivative contracts. Therefore, it has no market risk exposure. 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. REALMARK PROPERTY INVESTORS LIMITED PARTNERHIP III November 14, 2001 /s/ Joseph M. Jayson ----------------- -------------------------------- Date Joseph M. Jayson, Individual General Partner and Principal Financial Officer 5

REALMARK PROPERTY INVESTORS LTD PARTNERSHIP III 10-Q