10-K/A 1 de103100-10ka.txt AMENDED ANNUAL REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended October 31, 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 its charter) 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) 392-2974 -------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- None None Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interest ------------------------------------- (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 [ ] No [X] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] State the aggregate market value of the voting stock held by non-affiliates of the registrant. N/A DOCUMENTS INCORPORATED BY REFERENCE None PART I. The registrant is filing this Annual Report on Form 10-K/A because it inadvertently failed to file the Form 10-Q for the period ended April 30, 2000 during the 12 months preceding the original filing of the Report. Accordingly, this Report indicates on the cover page that in the 12 months preceding the filing of its original Report, the registrant did not file all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934. The registrant has since filed the report. 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 7 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 all of which were acquired without mortgage debt. As of May 23, 2000, the Partnership had sold all of its property investments. The Partnership Agreement provides that the Partnership shall terminate upon the sale of the Partnership's last property 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 Taxter Corporate Park, the last property investment, was sold. As soon as possible in fiscal year 2001, the Partnership plans to wind up its affairs, distribute the previously undistributed property sale proceeds and cash reserves, and terminate its existence by filing a certificate of cancellation in the office of the Delaware Secretary of State. The Partnership considered its business to include one industry segment, investment in real property. Financial information regarding the Partnership is in the Partnership's consolidated financial statements in Item 8 below. The Partnership has no employees. All of the Partnership's business is conducted in the United States. 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, 2000, the Partnership did not own any property investments. In November 1999, the Partnership sold the Westland Crossing Shopping Center, which is located in Westland, Michigan. In May 2000, the partnership which owned the Taxter Corporate Park sold the property, which is located in Westchester, New York. An affiliate of the Partnership was the property manager for Taxter Corporate Park until December 31, 1998, and was the property manager for Westland Crossing until it was sold. Further information relating to the Partnership's properties is included in Item 7 and footnotes 4 and 5 to the consolidated financial statements in Item 8. ITEM 3. LEGAL PROCEEDINGS ------ ----------------- None. 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. 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 December 31, 2000, there were 33,226 holders of limited partnership interests. The Partnership is a limited partnership and, accordingly, does not pay dividends. It does, however, make 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"). Sale 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 proceeds in an amount sufficient to provide a 9% cumulative annual return on the Limited Partner's adjusted capital contribution. Thereafter, any remaining sale 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. As discussed in Item I, the Partnership plans to make its final distribution of previously undistributed sale proceeds and cash reserves in fiscal year 2001. During the year ended October 31, 2000, the Partnership paid cash distributions aggregating $46.71 per Unit (including (a) approximately $17.53 per Unit from the net proceeds from the sale of the Westland Crossing property, (b) $26.73 per Unit from the Partnership's share of the net proceeds from the sale of the Taxter Corporate Park property, and (c) $1.05 per Unit from previously undistributed proceeds from the sales of the Chesterbrook and Laurel Lakes properties). Total distributions were $25,027,093, with $24,944,074 distributed to Limited Partners and $83,019 payable to the General Partners. The General Partners deferred receipt of their share of the cash reserve distributions to ensure that the Partnership would have cash on hand to cover all liabilities that may arise while the Partnership winds up its affairs. During the year ended October 31, 1999, the Partnership paid cash distributions aggregating $73.79 per Unit (including $67.13 of proceeds from the sale of the Laurel Lakes property). Total distributions were $39,800,512, with $39,405,337 distributed to Limited Partners and $395,175 to the General Partners. The distributions of proceeds from the sales of the Partnership's property interests in both years were paid 100% to the Limited Partners. Taxable income generally will be allocated in the same proportions as distributions of distributable cash or sale proceeds (except that the General Partners must be allocated at least 1% of taxable income from sales). In the event there is no distributable cash or sale 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. SELECTED FINANCIAL DATA ------ ----------------------- The following sets forth a summary of selected financial data for the Partnership:

1 Revenues and net income include the Partnership's share of the gain from the sale of the Taxter property and the loss from the sale of the Westland Crossing property. 2 Revenues and net loss include the loss from the sale of the Laurel Lakes property and the net loss also includes the impairment write-down of the Westland Crossing property. 3 Revenues and net income include the gains from the sales of the Holcomb Woods and Glenhardie III and IV properties, and the Partnership's share of the gain from the sale of the Chesterbrook property. 4 Revenues and net income include the Partnership's share of the gain from the sale of the Tech Park property. 5 Revenues and net loss include the effect of the sale of the Delta Center, Fashion Corners and Hall Road Crossing shopping centers. Net loss also includes losses on impairment of the Glenhardie and Holcomb Woods properties of $4.7 million and $7.7 million, respectively. 6 Distributions paid to limited partners include returns of capital per Unit of limited partnership interest of $37.04, $73.79, $82.26, $49.95 and $87.98, for the years ended October 31, 2000, 1999,1998, 1997 and 1996 respectively, calculated as the excess of cash distributed per Unit over accumulated earnings per Unit not previously distributed. 7 Includes distributions of proceeds from sales of real estate as follows: 2000-$45.31; 1999-$67.13; 1998-$140.15; 1997-$31.55; and 1996-$66.40. The above financial data should be read in conjunction with the consolidated financial statements and the related notes in Item 8. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ----------------------------------------------------------------------- Liquidity and Capital Resources ------------------------------- The Partnership raised $267,010,000 in a public offering of 534,020 Units which was terminated in 1987. The Partnership has no plans to raise additional capital. The Partnership purchased, directly or through a partnership interest, six office properties and five retail properties. No additional investments are planned. In fiscal year 2000, the Partnership's last two property investments, Westland Crossing and Taxter Corporate Park, were sold on November 16, 1999 and May 23, 2000, respectively (see Notes 4 and 5 to the consolidated financial statements). The Partnership Agreement provides that the Partnership shall terminate upon the sale of the Partnership's last property 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. As soon as possible in fiscal year 2001, the Partnership plans to wind up its affairs, distribute previously undistributed sale proceeds and cash reserves, and terminate its existence by filing a certificate of cancellation in the office of the Delaware Secretary of State. As discussed in Item 5, during the year ended October 31, 2000, the Partnership paid distributions of sale proceeds and Partnership cash reserves, totaling $46.71 per Unit, to Limited Partners only. To cover any contingencies that may arise while the Partnership winds up its affairs, the Partnership retained a portion of its share of the Taxter sale proceeds, and the General Partners deferred receipt of their share of the distribution of Partnership cash reserves. Because of the sales of the Taxter, Westland Crossing and Laurel Lakes (September 1999) properties, Partnership cash flow from operations decreased in fiscal year 2000 as compared to 1999. In fiscal year 2000, the Partnership's distributions of cash reserves to Limited Partners, contributions to fund its share of tenant improvements and leasing commissions at the Taxter property, capital expenditures at the Westland Crossing property and cash used in operating activities exceeded the Partnership's distributions received from the Taxter joint venture (excluding the distribution of sale proceeds). The Partnership's cash shortfall was funded with cash reserves. Other assets were eliminated in 2000 as a result of the sale of the Westland Crossing property and because of the receipt of a $500,000 escrow deposit relating to the sale of the Laurel Lakes property (see Note 4 to the consolidated financial statements). 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 year ended October 31, 2000 compared to 1999 and for the year ended October 31, 1999 compared to 1998 were primarily attributable to the following: The increase in equity in earnings of joint venture in 2000 compared to 1999 is primarily due to the Partnership's share of the gain on sale of the Taxter property (approximately $7.7 million). Equity in earnings of joint ventures was higher in 1998 than in 1999 primarily because the Chesterbrook Corporate Park property was sold at a gain in April 1998. The Partnership's share of such gain was $17.0 million. The loss on sale of real estate in 2000 resulted from the November 1999 sale of the Westland Crossing shopping center. The loss on sale of real estate in 1999 resulted from the September 1999 sale of the Laurel Lakes shopping center. The gains on sale of real estate in 1998 resulted from the sales of the Holcomb Woods (approximately $6.2 million in November 1997) and Glenhardie ($9.5 million in April 1998) properties. Rental revenues and property operating expenses decreased in 2000, and amortization expenses were eliminated in 2000 due to the sales of the Westland Crossing and Laurel Lakes properties. Rental revenues and amortization expenses decreased in 1999 compared to 1998 primarily due to the above-mentioned sale of properties in 1999 and 1998. Property operating expenses increased in 1999 compared to 1998 primarily because a $300,000 increase in bad debt expense at the Laurel Lakes property in 1999 was greater than the decrease in expenses caused by the sale of properties in 1999 and 1998. Other income was higher in 1998 than in 1999 primarily because the Partnership received lease termination fees at the Glenhardie and Laurel Lakes properties in 1998. Depreciation expenses were eliminated in 2000, and decreased in 1999, because the Partnership ceased recording such expenses on properties sold when they were classified to real estate held for sale. The 1999 loss on impairment of real estate was caused by the writedown of the Westland Crossing property (and related assets) to its expected sale price, net of closing costs and other deductions. General and administrative expenses decreased in 1999 compared to 1998 primarily due to the decreased level of Partnership activities resulting from the sales of properties. 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 consolidated financial statements and, as a result, has not had a significant effect on the operations of the Partnership or its properties. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ---------------------------------------------------------- Not applicable. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------------------------------------------- DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. INDEX (a) Financial Statements Independent Auditors' Report Consolidated Balance Sheets at October 31, 2000 and 1999 Consolidated Statements of Operations for the years ended October 31, 2000, 1999 and 1998 Consolidated Statements of Partners' Capital for the years ended October 31, 2000, 1999 and 1998 Consolidated Statements of Cash Flows for the years ended October 31, 2000, 1999, and 1998 Notes to Consolidated Financial Statements (b) Financial Statement Schedules III. Real Estate and Accumulated Depreciation All schedules other than those indicated above have been omitted because either the required information is not applicable or the information is shown in the consolidated financial statements or notes thereto. 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, 2000 and 1999 and the related consolidated statements of operations, partners' capital and cash flows for each of the three years in the period ended October 31, 2000. Our audits also included the financial statement schedule listed in the Index at Item 8. These financial statements and financial statement schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 consolidated financial statements present fairly, in all material respects, the financial position of Dean Witter Realty Income Partnership III, L.P. and consolidated partnerships as of October 31, 2000 and 1999 and the results of their operations and their cash flows for each of the three years in the period ended October 31, 2000 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note 1 to the consolidated financial statements, during the year ended October 31, 2000 the Partnership sold its remaining property investments, which effectuated the dissolution of the Partnership. The Partnership is in the process of winding up its affairs, and it plans to distribute the Partnership's previously undistributed sale proceeds and cash reserves, and terminate. /s/Deloitte & Touche LLP DELOITTE & TOUCHE LLP New York, New York January 16, 2001 DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. CONSOLIDATED BALANCE SHEETS As of October 31, 2000 and 1999 2000 1999 -------------------------------------------------------------------------------- ASSETS Cash and cash equivalents $ 1,614,341 $ 1,744,447 Real estate held for sale - 9,457,148 Investments in joint venture 41,090 6,962,579 Other assets - 786,466 -------------------------------------------------------------------------------- $ 1,655,431 $ 18,950,640 ================================================================================ LIABILITIES AND PARTNERS' CAPITAL Accounts payable and accrued liabilities $ 241,686 $ 343,550 Distribution payable to General Partners 83,019 - -------------------------------------------------------------------------------- 324,705 343,550 -------------------------------------------------------------------------------- Partners' capital (deficiency): General partners (8,621,309) (8,561,045) Limited partners ($500 per Unit, 534,020 Units issued) 9,952,035 27,168,135 -------------------------------------------------------------------------------- Total partners' capital 1,330,726 18,607,090 -------------------------------------------------------------------------------- $ 1,655,431 $ 18,950,640 ================================================================================ See accompanying notes to consolidated financial statements. DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS For the years ended October 31, 2000, 1999 and 1998

See accompanying notes to consolidated financial statements. DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL For the years ended October 31, 2000, 1999 and 1998

See accompanying notes to consolidated financial statements. DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended October 31, 2000, 1999 and 1998

DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended October 31, 2000, 1999 and 1998 (continued)

See accompanying notes to consolidated financial statements. 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 is managed by Dean Witter Realty Income Properties III Inc. (the "Managing General Partner"). The Partnership's fiscal year ends on October 31. In 1986 and 1987, the Partnership issued 534,020 units of limited partnership interest (the "Units") for $267,010,000. No additional Units will be sold. The proceeds of the offering were used to make investments in income-producing office, industrial and retail properties which were not encumbered by debt. In fiscal year 2000, the Partnership's last two property investments, Westland Crossing and Taxter Corporate Park, were sold on November 16, 1999 and May 23, 2000, respectively (see Notes 4 and 5). The sale of the Taxter property on May 23, 2000 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 Partnership's previously undistributed sale proceeds and cash reserves, and terminate in fiscal year 2001. 2. Summary of Significant Accounting Policies ------------------------------------------ The financial statements include the accounts of the Partnership, Part Six Associates (owner of the Glenhardie IV property) and Laurel-Vincent Place Associates Limited Partnership (owner of the Laurel Lakes property) on a consolidated basis. The Partnership owned a 99.9% General Partnership interest in Part Six Associates until the sale of Glenhardie IV in April 1998 and owned a 99.999% General Partnership interest in Laurel-Vincent Place Associates Limited Partnership until the sale of the Laurel Lakes property in September 1999. The remaining interests in these partnerships were held by the Managing General Partner. DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The equity method of accounting has been applied to the Partnership's 44.6% general partnership interest in the partnership ("TPA") which owned Taxter Corporate Park, and its 26.7% general partnership interest in the partnership ("DWCA") which owned interests in Chesterbrook Corporate Center (sold in April 1998). The Partnership's records are maintained on the accrual basis of accounting for financial reporting and tax purposes. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents consist of cash and highly liquid investments with maturities, when purchased, of three months or less. The carrying value of real estate included the purchase price paid by the Partnership and acquisition fees and expenses. Costs of improvements to the properties were capitalized, and repairs were expensed. Depreciation was recorded on the straight-line method. The Partnership stopped recording depreciation on a property when it was reclassified as held for sale. At least annually, and more often if circumstances dictated, the Partnership evaluated the recoverability of the net carrying value of its real estate (including that held by its joint ventures) and any related assets. As part of this evaluation, the Partnership assessed, among other things, whether there had been a significant decrease in the market value of any of its properties. If events or circumstances indicated that the net carrying value of a property was not recoverable, the expected future net cash flows from the property were estimated for a period of approximately five years (or a shorter period if the Partnership expected that the property would be disposed of sooner), along with estimated sales proceeds at the end of the period. If the total of these future undiscounted cash flows was less than DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS the carrying amount of the property, the property was written down to its fair value as determined (in some cases with the assistance of outside real estate consultants) based on discounted cash flows, and a loss on impairment recognized by a charge to earnings. The cash flows used to evaluate the recoverability of the assets and to determine fair value were based on good faith estimates and assumptions developed by the Managing General Partner. Deferred leasing commissions were amortized over the applicable lease terms. Rental income was accrued on a straight-line basis over the terms of the leases. Accruals in excess of amounts payable by tenants pursuant to their leases (resulting from rent concessions or rents which periodically increased over the term of a lease) were recorded as receivables and included in other assets. Net income (loss) per Unit 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. No provision for income taxes has been made in the financial statements, since the liability for such taxes is that of the partners rather than the Partnership. For income tax purposes, Partnership results are reported for the calendar year. The accounting policies used for tax reporting purposes differed from those used for financial reporting as follows: a) depreciation was calculated using accelerated methods; (b) rental income was recognized based on the payment terms in the applicable leases; and (c) writedowns for impairment of real estate were not deductible. In addition, offering costs were treated differently for tax and financial reporting purposes. The tax basis of the Partnership's assets and liabilities is approximately $25.4 million higher than the amounts reported for financial statement purposes. DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. Partnership Agreement --------------------- The Partnership Agreement provides that distributable cash, as defined, will be paid 90% to the Limited Partners and 10% to the General Partners. Sale 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 proceeds in an amount sufficient to provide a 9% cumulative annual return on the Limited Partner's adjusted capital contribution. Thereafter, any remaining sale 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 is allocated in the same proportion as distributions of distributable cash or sale proceeds (except that the General Partners must be allocated at least 1% of taxable income from sales). In the event there is no distributable cash or sale proceeds, taxable income is 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. Distributions paid to Limited Partners include returns of capital per Unit of limited partnership interest of $37.04, $73.79, and $82.26 for the years ended October 31, 2000, 1999 and 1998, respectively, calculated as the excess of cash distributed per Unit over accumulated earnings per Unit not previously distributed. 4. Real Estate Sold ---------------- Pursuant to a Purchase and Sale Agreement (the "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. As part of the Agreement, Dean Witter Realty Income Partnership II, L.P., an affiliate of the Partnership, sold a property to DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS New Plan. The aggregate purchase price of the properties sold was approximately $24.2 million, of which $10.2 million was allocated in the Agreement to the Westland Crossing property. The closing of the sale of Westland Crossing took place on November 16, 1999. At closing: a) the Partnership received proceeds of approximately $9.1 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, plus interest, in May 2000. In fiscal 1999, the Partnership wrote down the net carrying value of the Westland Crossing property to the amount expected to be received from its sale (including the return of the escrow), resulting in an impairment loss of approximately $802,000. An additional loss on the sale of approximately $160,000 was recognized in fiscal 2000. The losses were allocated 100% to the Limited Partners. At October 31, 1999, the property was classified as real estate held for sale. On September 24, 1999, the Partnership sold the Laurel Lakes property to an unaffiliated party for $37.5 million, and recognized a loss of approximately $4.6 million. The purchase price was paid in cash, and the Partnership received proceeds, net of closing costs and other deductions, of approximately $35.9 million. Pursuant to the sale agreement, an escrow of $500,000 was established to secure the Partnership's obligations, if any, pursuant to representations and warranties in the sale agreement. In April 2000, the Partnership received its $500,000 escrow deposit, plus interest, from the sale of the Laurel Lakes property. This deposit was included in other assets at October 31, 1999. On April 1, 1998, the Partnership sold, to an unaffiliated entity, the land and buildings which comprise the Glenhardie Corporate Center III and IV properties ("Glenhardie III and DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS IV"). In the same sale, an affiliated partnership sold its interest in the remaining properties at Glenhardie Corporate Center, and DWCA sold its interests in the Chesterbrook Corporate Center. The aggregate price of the property interests sold was approximately $168 million, of which approximately $22.1 million was allocated to Glenhardie III and IV, and approximately $126.1 million (of which the Partnership's share was approximately $33.7 million) was allocated to the Chesterbrook Corporate Center. The purchase price was paid in cash at closing. The Partnership received proceeds, net of closing costs and other deductions, of approximately $22 million and $33.4 million, respectively, for the sale of Glenhardie III and IV and its share of the proceeds from the sale of the Chesterbrook interests. Pursuant to the sale agreement for the Glenhardie and Chesterbrook properties, escrows were established for the costs of certain building improvements and tenant improvements. In addition to payment of the purchase price, at closing the purchaser deposited into these escrows approximately $3.9 million, of which approximately $2.3 million related to the Chesterbrook Corporate Center (none of the escrow related to Glenhardie III and IV). DWCA did not include the amount of the escrowed sale proceeds in its calculation of the gain on the sale of the property because of the uncertainty of its realization. During 1999, approximately $363,000 was returned to DWCA from the escrow and in settlement of various property operating matters. The Partnership's share of this amount, approximately $97,000, was recorded in equity in earning of joint ventures in 1999. On November 7, 1997, the Partnership sold the Holcomb Woods property to an unaffiliated party for approximately $19.1 million. The purchase price was paid in cash, and the Partnership received proceeds, net of closing costs, of approximately $18.7 million. As of October 31, 2000, the Partnership had distributed all of the net proceeds from property sales 100% to Limited Partners. 5. Investments in Joint Ventures ----------------------------- Taxter Corporate Park, Westchester County, New York DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Pursuant to a Purchase and Sale Agreement dated as of April 4, 2000, as amended, on May 23, 2000, TPA sold the land and buildings which comprise the Taxter property 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 remitted $6.75 million of the sale proceeds to the affiliate in connection with the transaction. The purchase price was paid in cash at closing. At closing, the Partnership received approximately $14.9 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. In 2000, the Partnership paid, 100% to Limited Partners, cash distributions which included Taxter sale proceeds of approximately $14.3 million ($26.73 per Unit). The Partnership retained 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 while the Partnership winds up its affairs. Any sale proceeds remaining, subsequent to the payment of any contingencies, will be distributed to Limited Partners only. The Partnership's share of TPA's gain on sale of the Taxter property was approximately $7.7 million; such gain was allocated 100% to Limited Partners. 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 partners of TPA each receive cash flow and profits and losses according to their ownership interests. DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Summarized balance sheet information of TPA is as follows: October 31, ------------------------------------------------------------------------------- 2000 1999 ------------------------------------------------------------------------------- Land and buildings, net $ - $15,680,607 Other 103,101 1,670,760 ------------------------------------------------------------------------------- Total assets $ 103,101 $17,351,367 =============================================================================== Liabilities $ 10,968 $ 214,272 Partners' capital 92,133 17,137,095 ------------------------------------------------------------------------------- Total liabilities and partners' capital $ 103,101 $17,351,367 =============================================================================== Summarized income statements of TPA are as follows: Years ended October 31, 2000 1999 1998 ----------------------------------------------------------------------------- Gain on sale of real estate $ 15,700,138 $ - $ - Rental income 3,056,084 5,860,022 5,158,170 Other income 10,398 45,245 67,779 ----------------------------------------------------------------------------- 18,766,620 5,905,267 5,225,949 ----------------------------------------------------------------------------- Property operating expenses 1,775,441 3,054,679 2,455,628 Depreciation and amortization 349,669 1,238,539 1,241,470 ----------------------------------------------------------------------------- 2,125,110 4,293,218 3,697,098 ----------------------------------------------------------------------------- Net income $ 16,641,510 $ 1,612,049 $ 1,528,851 ============================================================================= DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Chesterbrook Corporate Center, Valley Forge, Pennsylvania The property was sold in April, 1998 (see Note 4). DWCA was also owned 41.2% by Dean Witter Realty Income Partnership IV, L.P. and 32.1% by an affiliate of the Managing General partner. The partners received cash flow and profits and losses according to their ownership interests. Summarized results of operations of the Chesterbrook joint venture are as follows: Years ended October 31, 2000 1999 1998 ------------------------------------------------------------------------------ Rental income $ - $ - $ 5,797,344 Gain on sale of property - 363,375 63,770,914 Other income - - 44,301 ------------------------------------------------------------------------------ - 363,375 69,612,559 ------------------------------------------------------------------------------ Property operating expenses - - 1,873,518 Depreciation and amortization - - 860,360 ------------------------------------------------------------------------------ - - 2,733,878 ------------------------------------------------------------------------------ Net income $ - $ 363,375 $66,878,681 ============================================================================== DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Activity in investments in joint ventures is as follows:

The accounting policies of TPA and DWCA are the same as those of the Partnership. 6. Cash Reserves Distribution -------------------------- In 2000, the Partnership distributed, to Limited Partners only, cash reserves of approximately $1.40 per Unit. The cash reserves distribution totaled $830,193 with $747,174 distributed to the Limited partners and $83,019 payable to the General Partners. The General Partners deferred receipt of their share of the distribution to ensure that the Partnership would have cash on hand to cover all liabilities that may arise while the Partnership winds up its affairs. The amounts deferred were charged against partner's capital and recorded as distributions payable. In 2000, the Partnership's distributions, to Limited Partners only, of net proceeds from the sale of the Westland Crossing property (see Note 4), the Partnership's share of the Taxter sale proceeds (see Note 5), the remaining proceeds from the sales of the Chesterbrook and Laurel Lakes properties (see Note 4), and Partnership cash reserves totaled $24,944,074 ($46.71 per Unit). DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. Related Party Transactions -------------------------- In fiscal 1999, an affiliate of the Managing General Partner managed the real estate held for sale, and managed the Taxter property through December 1998. The affiliate also provided property management services for the Holcomb Woods and Glenhardie properties, and for five buildings at the Chesterbrook Corporate Center until the sale of each of the properties in fiscal 1998. The Partnership incurred management fees to the affiliate of approximately $107,000 and $223,000 for the years ended October 31, 1999 and 1998, respectively. These amounts are included in property operating expenses. Another affiliate of the Managing General Partner performs administrative functions, processes investor transactions and prepares tax information for the Partnership. For the years ended October 31, 2000, 1999, and 1998, the Partnership incurred approximately $84,000, $150,000, and $503,000, respectively, for these services. These amounts are included in general and administrative expenses. The 2000 fees are also included in accounts payable and accrued liabilities as of October 31, 2000. 8. Summary of Quarterly Results (Unaudited) ---------------------------------------- Net Income (Loss) Per Unit of limited partnership Revenue (Loss) Net Income (Loss) interest -------------- ----------------- ------------------- 2000 January 31 $ 218,502 $ 35,498 $ 0.05 April 30 254,951 183,600 0.31 July 31 7,787,152 7,733,924 14.46 October 31 (29,759) (202,293) (0.35) -------------- ----------------- ------------------- Total $ 8,230,846 $ 7,750,729 $ 14.47 ============== ================= =================== 1999 January 31 $ 1,909,773 $ 891,434 $ 1.50 April 30 (3,271,799) (4,264,452) (8.10) July 31 1,567,877 1,074,180 1.81 October 31 1,648,750 43,553 (0.01) -------------- ----------------- ------------------- Total $ 1,854,601 $ (2,255,285) $ (4.80) ============== ================= =================== DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE --------------------------------------------------------------- None. PART III. 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 Partner ---- ----------------------------------- William B. Smith Chairman of the Board of Directors E. Davisson Hardman, Jr. President 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 57, has been an Advisory Director of Morgan Stanley Dean Witter & Co., Inc. since July 2000. From June 1997 until July 2000, Mr Smith was a Managing Director of Morgan Stanley & Co., Inc. and co-head of Morgan Stanley Realty Incorporated. Prior to June 1997, Mr. Smith was an Executive Vice President of Dean Witter Reynolds Inc., and Director of its Investment Banking Department for more than five years. E. Davisson Hardman, Jr., age 51, has been a Managing Director of Morgan Stanley Asia, Ltd. since June 1997. For more than five years before June 1997, Mr. Hardman was a Managing Director of Dean Witter Realty Inc. Ronald T. Carman, age 49, has been an Assistant Secretary of Morgan Stanley Dean Witter & Co. since June 1997 and a Managing Director of Morgan Stanley & Co. Inc. since July 1998. Previously, he was a Senior Vice President and Associate General Counsel of Dean Witter Reynolds Inc., which he joined in 1984. There is no family relationship among any of the foregoing persons. 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 $395,175 and $431,370 during the years ended October 31, 1999 and 1998, respectively. The General Partners deferred receipt of $83,019, their share of the fiscal 2000 cash reserve distributions, to ensure that the Partnership would have cash on hand to cover all liabilities that may arise while the Partnership winds up its affairs. 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 7 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. 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, 2000: Amount and Title of Name of Nature of Class Beneficial Owner Beneficial Ownership ------------ ---------------------- -------------------- Limited All directors and * Partnership executive officers of Interests the Managing General Partner, as a group * Own, by virtue of ownership of limited partnership interests in the Associate General Partner, less than 1% of the Units of the Partnership. 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 Dean Witter Realty Inc. ("Realty"), a Delaware corporation which is a wholly-owned subsidiary of Morgan Stanley Dean Witter & 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 7 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. 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 of 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 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 are incorporated herein by reference. (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 is 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 is 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 is incorporated herein by reference. (e) Purchase and Sale Agreement, dated as of October 1, 1997, First Amendment to Purchase and Sale Agreement dated as of October 15, 1997 and Second Amendment to Purchase and Sale Agreement dated as of October 27, 1997 between Dean Witter Realty Income Partnership III, L.P., as Seller and LPC Commercial Services, Inc. as Purchaser, filed as Exhibit 2 to the Registrant's Report on Form 8-K on November 7, 1997 is incorporated herein by reference. (f) Purchase and Sale Agreement, dated as of February 10, 1998, between DWR Chesterbrook Associates, Glenhardie Corporation, Dean Witter Realty Income Partnership II, L.P., the Partnership and Part Six Associates, as Sellers, and FV Office Partners, L.P. as Purchaser, filed as Exhibit 2(a) to the Registrant's Report on Form 8-K on April 1, 1998 and is incorporated herein by reference. (g) Assignment and Option Agreement dated February 8, 1999 between Taxter Park Associates and DW Taxter Special Corp., filed as an Exhibit to the Registrant's Report on Form 10-Q for the period ended January 31, 1999, is incorporated herein by reference. (h) Purchase and Sale Agreement, dated as of June 2, 1999, between Laurel-Vincent Place Associates L.P., as Seller and Urban Investment Group, Inc., as Purchaser, filed as Exhibit 2 to the Registrant's Report on Form 8-K on September 24, 1999 is incorporated herein by reference. (i) Purchase and Sale Agreement, dated as of February 16, 1999 between the Partnership and Dean Witter Realty Income Partnership II L.P., as Seller and New Plan Excel Realty Trust, Inc. as Purchaser, filed as Exhibit 2 to the Registrant's Report on Form 8-K on November 16, 1999 is incorporated herein by reference. (j) (I) Purchase and Sale Agreement Dated as of April 4, 2000, First Amendment to Purchase and Sale Agreement Dated as of May 3, 2000, Second Amendment to Purchase and Sale Agreement Dated as of May 11, 2000, Third Amendment to Purchase and Sale Agreement Dated as of May 17, 2000, Fourth Amendment to Purchase and Sale Agreement Dated as of May 18, 2000, all between Taxter Park Associates as Seller, DW Taxter Special Corp. as sublandlord and Mack-Cali Realty Acquisition Corp. as Purchaser, (II) Termination, Assignment and Recognition Agreement as of May 23, 2000 between Taxter Park Associates, DW Taxter Special Corp., Mack-Cali Realty Acquisition Corp. and KLM Royal Dutch Airlines and (III) Termination Agreement as of May 23, 2000 between Taxter Park Associates and DW Taxter Special Corp., all filed as Exhibits to the Registrant's Report on Form 8-K on May 23, 2000 are 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. SCHEDULE III ------------ DEAN WITTER REALTY INCOME PARTNERSHIP III, L.P. Real Estate and Accumulated Depreciation October 31, 2000 (A) Reconciliation of real estate owned at October 31:

(B) Reconciliation of accumulated depreciation:

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: June 14, 2001 -------------------------------------------- E. Davisson Hardman, Jr. President By: /s/ Raymond E. Koch Date: June 14, 2001 -------------------------------------------- Raymond E. Koch 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: June 14, 2001 ----------------------------------------- William B. Smith Chairman of the Board of Directors /s/ E. Davisson Hardman, Jr. Date: June 14, 2001 ----------------------------------------- E. Davisson Hardman, Jr. Director /s/ Ronald T. Carman Date: June 14, 2001 ----------------------------------------- Ronald T. Carman Director

DEAN WITTER REALTY INCOME PARTNERSHIP III LP 10-K/A