ITEM 1. BUSINESS
The Registrant, Dean Witter Realty Income Partnership III, L.P. (the "Partnership"), is a limited partnership formed in August 1985 under the Uniform Limited Partnership Act of the State of Delaware for the purpose of investing primarily in income-producing office, industrial and retail properties.
The Managing General Partner of the Partnership is Dean Witter Realty Income Properties III Inc. (the "Managing General Partner"), a Delaware corporation which is wholly owned by Dean Witter Realty Inc. ("Realty"). The Associate General Partner is Dean Witter Realty Income Associates III, L.P. (the "Associate General Partner"), a Delaware limited partnership, the general partner of which is the Managing General Partner. The Managing General Partner manages and controls all aspects of the business of the Partnership. The terms of transactions between the Partnership and its affiliates are set forth below in Note 8 to the consolidated financial statements included in Item 8 and in Item 13.
The Partnership issued 534,020 units of limited partnership interest (the "Units") with gross proceeds from the offering of $267,010,000. The offering has been terminated and no additional Units will be sold.
The proceeds from the offering were used to make equity investments in six office properties and five retail properties (three of which were sold in fiscal 1996) which were acquired without mortgage debt. The properties are described in Item 2
ITEM 2. PROPERTIES
The Partnership's principal offices are located at Two World Trade Center, New York, New York 10048. The Partnership has no other offices.
As of October 31, 1996, the Partnership owned directly or through a partnership interest the following eight property interests, none of which is encumbered by indebtedness. Generally, the leases pertaining to the properties provide for pass-throughs to the tenants of their pro-rata share of certain operating expenses. In the opinion of the Managing General Partner, all of the properties are adequately covered by insurance.
1. The remaining general partnership ("GP") interest is held by the Managing General Partner.
2. The remaining GP interests are held by Dean Witter Realty Income Partnership II, L.P. (14.8%) and Dean Witter Realty Income Partnership IV, L.P. (40.6%), affiliates of the Partnership. The total cost of the property was $51.8 million
3. The remaining GP interest is held by Dean Witter Realty Income Partnership IV, L.P. The total cost of the property was $57.6 million. The property was sold on December 31, 1996. See Note 6 to the Consolidated Financial Statements in Item 8.
4. The remaining GP interests are owned Dean Witter Realty Income Partnership IV, L.P. (41.2%) and an affiliate of the Managing General Partner (32.1%). The total cost of the property was $121.3 million.
Each property was built with on-site parking facilities.
In the first quarter of fiscal 1996, the Partnership sold the Delta Center, Hall Road Crossing and Fashion Corners shopping centers (the "Shopping Centers Sold"). See Note 4 to the Consolidated Financial Statements.
In fiscal 1996, the Partnership recorded a loss on impairment on its Glenhardie and Holcomb Woods properties of approximately $4.7 million and $7.7 million repectively. See Note 4 to the Consolidated Financial Statements.
An affiliate of the Partnership is the property manager for Laurel Lakes Centre, Taxter Corporate Park, and Westland Crossing and the co-property manager for the Glenhardie buildings and five buildings at the Chesterbrook Corporate Center.
Further information relating to the Partnership's properties is included in Item 7 and footnotes 4, 5 and 6 to the consolidated financial statements in Item 8.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
On December 27, 1995, a purported class action lawsuit (the "Grigsby Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner and Associate General Partner), Realty, Dean Witter Reynolds Inc. ("DWR") and others as defendants was filed in Superior Court in California. The complaint alleged fraud, negligent misrepresentation, intentional and negligent breach of fiduciary duty, unjust enrichment and related claims and sought compensatory and punitive damages in unspecified amounts and injunctive and other equitable relief. The defendants removed the case to the United States District Court for the Southern District of California. Pursuant to an order of the U.S. District Court for the southern District of California entered May 24, 1996, the Grigsby Action was transferred to the U.S. District Court for the Southern District of New York.
On February 14, 1996, a purported class action lawsuit (the "Schectman Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, Dean Witter, Discover & Co. ("DWD") and DWR as defendants was filed in the Chancery Court of Delaware for New Castle County (the "Delaware Chancery Court"). On February 23, 1996, a purported class action lawsuit (the "Dosky Action") naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, DWD, DWR and others as defendants was filed in the Delaware Chancery Court. On February 29, 1996, a purported class action lawsuit (the "Segal Action') naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, DWR, DWD and others as defendants was filed in the Delaware Chancery Court. On March 13, 1996, a purported class action lawsuit (the "Young Action") naming the partnership, other unidentified limited partnerships, DWD, DWR and others as defendants was filed in the Circuit Court for Baltimore City in Baltimore, Maryland. The defendants removed the Young Action to the United States District Court for the District of Maryland.
Thereafter, the Schectman Action, the Dosky Action and the Segal Action were consolidated in a single action (the "Consolidated Action") in the Delaware Chancery Court. The Young Action was dismissed without prejudice. The plaintiffs in the Young Action and the Grigsby Action joined the Consolidated Action. The Grigsby Action remains stayed indefinitely subject to being reopened for good cause.
On October 7, 1996, the plaintiffs in the Consolidated Action filed a First Consolidated and Amended Class Action Complaint naming various public real estate partnerships sponsored by Realty (including the Partnership and its Managing General Partner), Realty, DWD, DWR and others as defendants. This complaint alleges breach of fiduciary duty and seeks an accounting of profits, compensatory damages in an unspecified amount, possible liquidation of the Partnership under a receiver's supervision and other equitable relief. The defendants filed a motion to dismiss this complaint on December 10, 1996.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year to a vote of Unit holders.
PART II.
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
An established public trading market for the Units does not exist, and it is not anticipated that such a market will develop in the future. Accordingly, information as to the market value of a Unit at any given date is not available. However, the Partnership does allow its limited partners (the "Limited Partners") to transfer their Units if a suitable buyer can be located.
As of January 22, 1997, there were 36,960 holders of limited partnership interests.
The Partnership is a limited partnership and, accordingly, does not pay dividends. It does, however, make quarterly distributions of cash to its partners. Pursuant to the partnership agreement, distributable cash, as defined, is paid 90% to the Limited Partners and 10% to the general partners (the "General Partners").
During the year ended October 31, 1996, the Partnership paid quarterly cash distributions aggregating $87.98 per Unit (including $66.40 of proceeds from the Shopping Centers Sold). Total distributions were $48,260,574, with $46,980,410 distributed to the Limited Partners and $1,280,164 to the General Partners. The distribution of proceeds from the Shopping Centers Sold was paid 100% to the Limited Partners. During the year ended October 31, 1995, the Partnership paid quarterly cash distributions aggregating $13,535,925, with $12,182,332 distributed to Limited Partners and $1,353,593 to the General Partners.
On November 27, 1996, the Partnership paid the fourth quarter distribution of $4.85 per Unit to the Limited Partners. The total cash distribution amounted to $2,877,774, with $2,589,997 distributed to the Limited Partners and $287,777 to the General Partners.
The Partnership anticipates making regular distributions to its partners in the future.
Sale or financing proceeds will be distributed, to the extent available, first, to each Limited Partner, until there has been a return of the Limited Partner's capital contribution plus cumulative distributions of distributable cash and sale or financing proceeds in an amount sufficient to provide a 9% cumulative annual return on the Limited Partner's adjusted capital contribution. Thereafter, any remaining sale or financing proceeds will be distributed 85% to the Limited Partners and 15% to the General Partners after the Managing General Partner receives a brokerage fee, if earned, of up to 3% of the selling price of any equity investment.
Taxable income generally will be allocated in the same proportions as distributions of distributable cash or sale or financing proceeds (except that the General Partners must be allocated at least 1% of taxable income from the sale or financing). In the event there is no distributable cash or sale or financing proceeds, taxable income will be allocated 90% to the Limited Partners and 10% to the General Partners. Any tax loss will be allocated 90% to the Limited Partners and 10% to the General Partners.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA The following sets forth a summary of the selected financial data for the Partnership:
Independent Auditors' Report
To The Partners of Dean Witter Realty Income Partnership III, L.P.:
We have audited the accompanying consolidated balance sheets of Dean Witter Realty Income Partnership III, L.P. and consolidated partnerships (the "Partnership") as of October 31, 1996 and 1995 and the related consolidated statements of operations, partners' capital, and cash flows for each of the three years in the period ended October 31, 1996. Our audits also included the financial statement schedule listed in the index at Item 8.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Various public partnerships sponsored by Realty (including the Partnership and its Managing General Partner) are defendants in purported class action lawsuits pending in state and federal courts. The complaints allege a number of claims, including breach of fiduciary duty, fraud and misrepresentation, and seek an accounting of profits, compensatory and other damages in an unspecified amount, possible liquidation of the Partnership under a receiver's supervision and other equitable relief. The defendants are vigorously defending these actions. It is impossible to predict the effect, if any, the outcome of these actions might have on the Partnership's financial statements.
PART III.
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership is a limited partnership which has no directors or officers.
The directors and executive officers of the Managing General Partner are as follows: Position with the Name Managing General Parnter
William B. Smith Chairman of the Board of Directors E. Davisson Hardman, Jr. President and Director Lawrence Volpe Controller and Director Ronald T. Carman Secretary and Director
All of the directors have been elected to serve until the next annual meeting of the shareholder of the Managing General Partner or until their successors are elected and qualify. Each of the executive officers has been elected to serve until his successor is elected and qualifies.
William B. Smith, age 53, is a Managing Director of Dean Witter Realty Inc. and has been with Dean Witter Realty Inc. since 1982. He is an Executive Vice President of Dean Witter Reynolds Inc.
E. Davisson Hardman, Jr., age 47, is a Managing Director of Dean Witter Realty Inc. and has been with Dean Witter Realty Inc. since 1982.
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
Lawrence Volpe, age 49, is a Director and the Controller of Dean Witter Realty Inc. He is a Senior Vice President and Controller of Dean Witter Reynolds Inc., which he joined in 1983.
Ronald T. Carman, age 45, is a Director and the Secretary of Dean Witter Realty Inc. He is a Senior Vice President and Associate General Counsel of Dean Witter, Discover & Co. and Dean Witter Reynolds Inc., which he joined in 1984.
There is no family relationship among any of the foregoing persons.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The General Partners are entitled to receive cash distributions, when and as cash distributions are made to the Limited Partners, and a share of taxable income or tax loss. Descriptions of such distributions and allocations are in Item 5 above. The General Partners received cash distributions of $1,280,164, $1,353,593, and $1,186,712 during the years ended October 31, 1996, 1995 and 1994, respectively.
The General Partners and their affiliates were paid certain fees and reimbursed for certain expenses. Information concerning such fees and reimbursements is contained in Note 9 to the Consolidated Financial Statements in Item 8 above.
The directors and officers of the Partnership's Managing General Partner received no remuneration from the Partnership.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person is known to the Partnership to be the beneficial owner of more than five percent of the Units.
(b) The directors and executive officers of the Managing General Partner own the following Units as of December 31, 1996:
* Own, by virtue of ownership of limited partnership interests in the Associate General Partner, less than 1% of the Units of the Partnership. DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As a result of their being partners of a limited partnership which is the Limited Partner of the Associate General Partner, certain current and former officers and directors of the Managing General Partner also own indirect partnership interests in the Partnership. The Partnership Agreement of the Partnership provides that cash distributions and allocations of income and loss to the General Partners shall be distributed or allocated 50% to the Managing General Partner and 50% to the Associate General Partner. The General Partners' share of cash distributions and income or loss is described in Item 5 above.
All of the outstanding shares of common stock of the Managing General Partner are owned by Realty, a Delaware corporation which is a wholly-owned subsidiary of Dean Witter, Discover & Co. The general partner of the Associate General Partner is the Managing General Partner. The limited partner of the Associate General Partner is LSA 86 L.P., a Delaware limited partnership. Realty and certain current and former officers and directors of the Managing General Partner are partners of LSA 86 L.P. Additional information with respect to the directors and executive officers and compensation of the Managing General Partner and affiliates is contained in Items 10 and 11 above.
The General Partners and their affiliates were paid certain fees and reimbursed for certain expenses. Information concerning such fees and reimbursements is contained in Note 8 to the Consolidated Financial Statements in Item 8 above. The Partnership believes that the payment of fees and the reimbursement of expenses to the General Partners and their affiliates are on terms as favorable as would be obtained from unrelated third parties.
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
PART IV.
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report:
1. Financial Statements (see Index to Financial Statements filed as part of Item 8 of this Annual Report).
2. Financial Statement Schedules (see Index to Financial Statements filed as part of Item 8 of this Annual Report).
3. Exhibits
(3)(a) Certificate of Limited Partnership included in the Registration Statement Number 33-1912 is incorporated by reference.
(3)(b) Amended and Restated Agreement of Limited Partnership dated as of February 11, 1986 set forth in Exhibit A to the Prospectus in the Registration Statement Number 33-1912 is incorporated herein by reference.
(4)(a) Certificate of Limited Partnership included in the Registration Statement Number 33-1912 is incorporated by reference.
(4)(b) Amended and Restated Agreement of Limited Partnership dated as of February 11, 1986 set forth in Exhibit A to the Prospectus included in the Registration Statement Number 33-1912 is incorporated herein by reference.
(10)(a) Purchase and Sale Agreements for properties purchased were filed as Exhibits to Form 8-K on June 27, 1986, December 29, 1986, December 29, 1986, December 29, 1986, December 29, 1986, December 30, 1986, December 30, 1986, June 1, 1987, December 7, 1987, and December 15, 1987 and are incorporated herein by reference.
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
(b) Purchase and Sale Agreement, dated October 19, 1995 between Dean Witter Realty Income Partnership II, L.P., Midway Crossing Limited Partnership, Dean Witter Realty Income Partnership III, L.P., Genesee Crossing Limited Partnership, Farmington/9 Mile Associates, a Michigan Limited Partnership, Hampton Crossing Associates, Rochester Hills Limited Partnership, Dean Witter Realty Yield Plus, L.P. and New Plan Realty Trust (including Exhibit J thereto) filed as exhibit to Form 8-K on December 11, 1995 and incorporated herein by reference.
(c) First Amendment to Agreement of Purchase and Sale by and between Dean Witter Realty Income Partnership II, L.P., Midway Crossing Limited Partnership, Dean Witter Realty Income Partnership III, L.P., Genesee Crossing Limited Partnership, Farmington/9 Mile Associates, a Michigan Limited Partnership, Hampton Crossing Associates, Rochester Hills Limited Partnership, Dean Witter Realty Yield Plus, L.P. and New Plan Realty Trust (including Exhibit J thereto) filed as exhibit to Form 8-K on December 11, 1995 and incorporated herein by reference.
(d) Purchase and Sale Agreement between Technology Park Associates, Dean Witter/Technology Park II Associates, L.P., and Sprint Communications Company, L.P. a Delaware Limited Partnership filed as exhibit 2 to the Registrant's Report on Form 8-K on December 31, 1996 and incorporated herein by reference.
(21) Subsidiaries: Park Six Associates, a Pennsylvania limited partnership. Laurel Vincent Place Associates, a Maryland limited partnership.
(b) No Forms 8-K were filed by the Partnership during the last quarter of the period covered by this report.
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
SIGNATURES
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.
DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
By: Dean Witter Realty Income Properties III Inc. Managing General Partner
By:/s/E. Davisson Hardman, Jr. Date: January 29, 1997 E. Davisson Hardman, Jr. President
By: /s/Lawrence Volpe Date: January 29, 1997 Lawrence Volpe Controller (Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
DEAN WITTER REALTY INCOME PROPERTIES III INC. Managing General Partner
/s/William B. Smith Date: January 29, 1997 William B. Smith Chairman of the Board of Directors
/s/E. Davisson Hardman, Jr. Date: January 29, 1997 E. Davisson Hardman, Jr. Director
/s/Lawrence Volpe Date: January 29, 1997 Lawrence Volpe Director
/s/Ronald T. Carman Date: January 29, 1997 Ronald T. Carman Director DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P.
Year Ended October 31, 1996
Exhibit Index
Exhibit No.
27 Financial Data Schedule
E1