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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file no. 0-16851

DEL TACO RESTAURANT PROPERTIES III

a California limited partnership

(Exact name of registrant as specified in its charter)


California (State or other jurisdiction of incorporation or organization)		33-0139247 (I.R.S. Employer Identification Number)

25521 Commercentre Drive Lake Forest, California (Address of principal executive offices)		92630 (Zip Code)

Registrant’s telephone number, including area code: (949) 462-9300

Securities registered pursuant to section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes No X

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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. o

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Form S-11 Registration Statement filed December 30, 1985 are incorporated by reference into Part IV of this report.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X

TABLE OF CONTENTS


PART I
	Item 1. Business
	Item 1A. Risk Factors
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. [Reserved]
PART II
	Item 5. Market for the Partnership’s Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk
	Item 8. Financial Statements and Supplementary Data
PART I. INFORMATION
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
	Item 9A(T). Controls and Procedures
	Item 9B. Other Information
PART III
	Item 10. Directors, Executive Officers, and Corporate Governance
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management
	Item 13. Certain Relationships and Related Transactions, and Director Independence
	Item 14. Principal Accountant Fees and Services
PART IV
	Item 15. Exhibits and Financial Statement Schedules
SIGNATURES
EX-31.1
EX-31.2
EX-32.1

PART I


Item 1.		Business

Del Taco Restaurant Properties III (the Partnership, us, we or our) is a publicly-held limited Partnership organized under the California Uniform Limited Partnership Act. The Partnership’s General Partner is Del Taco LLC, a California limited liability company (Del Taco or the General Partner). The Partnership sold 48,000 units totaling $12 million through an offering of limited partnership units from February 1986 through June 1987. The term of the partnership agreement is until December 31, 2025, unless terminated earlier by means provided in the partnership agreement.

The business of the Partnership is ownership and leasing of restaurants in California to Del Taco. The Partnership acquired land and constructed ten Mexican-American restaurants for long-term lease to Del Taco. Each property is leased for 35 years on a triple net basis. Rent is equal to twelve percent of gross sales of the restaurants. The restaurant originally built in Twentynine Palms was sold in November 1997 and net proceeds from the sale were distributed to the partners. As of December 31, 2009, the Partnership had a total of nine properties leased to Del Taco.

The Partnership has no full time employees. The Partnership agreement assigns full authority for general management and supervision of the business affairs of the Partnership to the General Partner. The General Partner has a one percent interest in the profits or losses and distributions of the Partnership. Limited partners have no right to participate in the day to day management or conduct of the Partnership’s business affairs.


Item 1A.		Risk Factors

None.


Item 2.		Properties

The Partnership acquired ten properties with proceeds obtained from the sale of limited partnership units:


				Date of
		Date of	Restaurant	Commencement of
Address	City, State	Acquisition	Constructed	Operation (1)
Rancho California Plaza	Rancho California, CA	December 23, 1986	60 seat with drive through service window	July 14, 1987

East Vista Way	Vista, CA	February 24, 1987	60 seat with drive through service window	September 10, 1987

4th Street	Perris, CA	June 24, 1987	60 seat with drive through service window	December 16, 1987

Foothill Boulevard	Upland, CA	August 3, 1987	60 seat with drive through service window	January 12, 1988

Plaza at Puente Hills	Industry, CA	May 12, 1987	60 seat with drive through service window	February 24, 1988

Twentynine Palms Highway	Twentynine Palms, CA	December 14, 1987	60 seat with drive through service window	May 17, 1988 (2)

East Valley Boulevard	Walnut, CA	April 29, 1988	60 seat with drive through service window	August 31, 1988

West Sepulveda Boulevard	Los Angeles, CA	July 8, 1988	60 seat with drive through service window	January 12, 1989 (3)

Lassen Street	Chatsworth, CA	January 27, 1989	60 seat with drive through service window	August 21, 1989

Hesperia Road	Victorville, CA	December 29, 1989	100 seat with drive through service window	July 5, 1990

See also Schedule III – Real Estate and Accumulated Depreciation included in Item 8.


Item 2.		Properties — (Continued)

(1)		Commencement of operation is the first date Del Taco, as lessee, operated the facility on the site as a Del Taco restaurant.

(2)		In November 1997, the Twentynine Palms property was sold yielding net proceeds to the Partnership of $278,612.

(3)		The restaurant was subleased to a franchisee of Del Taco and the restaurant operated as a Del Taco restaurant. On December 29, 1999 the franchise agreement for this restaurant expired. Del Taco began operation of this restaurant as a company-managed facility on December 29, 1999.


Item 3.		Legal Proceedings

The Partnership is not a party to any material pending legal proceedings.


Item 4.		[Reserved]

PART II


Item 5.		Market for the Partnership’s Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities

The Partnership sold 48,000 ($12,000,000) limited partnership units during the public offering period ended June 1, 1987 and currently has 1,166 limited partners of record. There is no public market for the trading of the units. Distributions made by the Partnership to the limited partners during the past three fiscal years are described in Note 8 to the Notes to the Financial Statements contained under Item 8.


Item 6.		Selected Financial Data

The selected financial data presented as of and for the years ended December 31, 2009, 2008, 2007, 2006 and 2005, has been derived from the audited financial statements and should be read in conjunction with the financial statements and related notes and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.


Item 6.		Selected Financial Data — (Continued)


	Years Ended December 31,
	2009		2008		2007		2006		2005
Rental revenues	$	1,053,770	$	1,050,381	$	1,044,591	$	1,051,407	$	1,097,579
General and administrative expense		79,945		79,794		79,273		80,994		76,608

Depreciation expense		113,240		113,240		113,240		113,240		113,240

Interest and other income		3,082		9,770		10,367		14,217		8,027

Net income		863,667		867,117		862,445		871,390		915,758
Net income per limited partnership unit		18.09		18.16		18.07		18.25		19.17
Cash distributions per limited partnership unit		20.48		20.58		20.48		20.93		21.12

Total assets		5,456,531		5,565,286		5,679,975		5,808,219		5,940,231

Long-term obligations		577,510		577,510		577,510		577,510		577,510


Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of financial condition, results of operations, liquidity and capital resources, and off balance sheet arrangements and contractual obligations contained within this report on Form 10-K is more clearly understood when read in conjunction with the notes to the financial statements. The notes to the financial statements elaborate on certain terms that are used throughout this discussion and provide information about the Partnership and the basis of presentation used in this report on Form 10-K.

The nine restaurants leased to Del Taco make up all of the income producing assets of the Partnership. Therefore, the business of the Partnership is entirely dependent on the success of the Del Taco as the operator of the restaurants located at our properties. The success of the restaurants is dependent on a large variety of factors, including, but not limited to, consumer demand and preference for fast food, in general, and for Mexican-American food in particular.

Liquidity and Capital Resources

Del Taco Restaurant Properties III (the Partnership or the Company) offered limited partnership units for sale between February 1986 and June 1987. In total, $12 million was raised through the sale of limited partnership units and used to acquire sites, build ten restaurants, pay commissions to brokers and to reimburse Del Taco LLC (the General Partner or Del Taco) for offering costs incurred. In February of 1992, approximately $281,000 raised during the offering but not required to acquire sites and build restaurants was distributed to the limited partners. One restaurant was sold in November 1997.


Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued)

Liquidity and Capital Resources – (Continued)

As described in note 6 to the Notes to the Financial Statements contained under Item 8, the Partnership has a death and disability redemption fund totaling $86,017 at December 31, 2009. Investors should contact the General Partner with all questions regarding the eligibility of a limited partner or the estate of a deceased limited partner to participate in the redemption fund. A limited partner has the right, under certain circumstances involving such limited partner’s death or disability, to tender to the Partnership for redemption all of the units owned of record by such limited partner. The redemption price will be equal to the partners’ capital account balance as of the redemption date. The death and disability fund was established in 1987. The fund was limited to two percent of the gross proceeds from sale of the limited partnership units. Requests for redemption made after the funds in the death and disability fund are depleted will not be accepted.

The Partnership’s only source of cash flow is rental income from the properties from the triple net leases. Such operating income has historically been and is expected to continue to be sufficient to fund the Partnership’s operating expenses. Net cash provided by operating activities in excess of the Partnership’s ongoing needs is distributed to the partners.

Off Balance Sheet Arrangements and Contractual Obligations

None.

Results of Operations

The Partnership owns nine properties that are under long-term lease to Del Taco for restaurant operations.

The following table sets forth rental revenues earned by restaurant by year:


	Years Ended December 31,
	2009		2008		2007
Rancho California Plaza, Rancho California, CA	$	176,565	$	171,811	$	166,049
East Vista Way, Vista, CA		101,276		94,149		89,263
Plaza at Puente Hills, Industry, CA		78,647		81,273		81,376
4th Street, Perris, CA		123,968		130,386		139,922
Foothill Blvd., Upland, CA		128,435		130,619		129,241
East Valley Blvd., Walnut, CA		73,549		74,034		75,892
Lassen Street, Chatsworth, CA		151,600		148,970		146,419
Hesperia Road, Victorville, CA		137,635		143,923		139,957
W. Sepulveda Blvd., Los Angeles, CA		82,095		75,216		76,472

Total	$	1,053,770	$	1,050,381	$	1,044,591


Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued)

Results of Operations – (Continued)

The Partnership earns rental revenues equal to 12 percent of gross sales from the restaurants. The Partnership earned rental revenues of $1,053,770 during the year ended December 31, 2009, which represents an increase of $3,389 from 2008. The changes in rental revenues between 2008 and 2009 are directly attributable to changes in sales levels at the restaurants under lease due to local competitive and industry factors.

The Partnership earned rental revenues of $1,050,381 during the year ended December 31, 2008, which represents an increase of $5,790 from 2007. The changes in rental revenues between 2007 and 2008 are directly attributable to changes in sales levels at the restaurants under lease due to local competitive and industry factors.

The following table breaks down general and administrative expenses by type of expense:

Percentage of Total General and Administrative Expense


	Years Ended December 31,
	2009			2008			2007
Accounting fees		54.93	%		61.27	%		59.82	%
Distribution of information to limited partners		41.16			37.69			38.82
Other		3.91			1.04			1.36

		100.00	%		100.00	%		100.00	%

General and administrative costs increased by $151 from 2008 to 2009. The increase was caused primarily due to increased printing costs and bank charges, partially offset by decreased accounting and tax preparation costs.

General and administrative costs increased by $521 from 2007 to 2008. The increase was caused primarily by the increased costs for annual audit fees.

Depreciation expense was the same in 2009, 2008, and 2007.

Net income decreased by $3,450 from 2008 to 2009 primarily due to the $151 increase in general and administrative expenses and the decrease other income of $6,688, partially offset by the increase in revenues of $3,389.

Net income increased by $4,672 from 2007 to 2008 primarily due to the increase in revenues of $5,790, partially offset by the increase in general and administrative expenses of $521 and the decrease in interest and other income of $597.


Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations — (Continued)

Recent Accounting Pronouncements

None that applies to the Partnership.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of financial condition and results of operations, as well as disclosures included elsewhere in this report on Form 10-K are based upon the Partnership’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Partnership believes the critical accounting policies that most impact the financial statements are described below. A summary of the significant accounting policies of the Partnership can be found in Note 1 to the Financial Statements which is included in Item 8 of this Form 10-K.

Property and Equipment: Property and equipment is stated at cost. Depreciation is computed using the straight-line method over estimated useful lives which are 20 years for land improvements, 35 years for buildings and improvements, and 10 years for machinery and equipment.

The Partnership accounts for property and equipment in accordance with authoritative guidance issued by the Financial Accounting Standards Board that requires long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. In evaluating long-lived assets held for use, an impairment loss is recognized if the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying value of the asset. Once a determination has been made that an impairment loss should be recognized for long-lived assets, various assumptions and estimates are used to determine fair value including, among others, estimated costs of construction and development, recent sales of comparable properties and the opinions of fair value prepared by independent real estate appraisers. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

Revenue Recognition: Rental revenue is recognized based on 12 percent of gross sales of the restaurants for the corresponding period, and is earned at the point of sale.


Item 7A.		Quantitative and Qualitative Disclosures About Market Risk

None.

Report of Independent Registered Public Accounting Firm

To the Partners
Del Taco Restaurant Properties III:

We have audited the accompanying balance sheets of Del Taco Restaurant Properties III (a California Limited Partnership) as of December 31, 2009 and 2008 and the related statements of income, partners’ equity, and cash flows for each of the three years in the period ended December 31, 2009. Our audits also included the financial statement schedule of the Partnership listed in Item 15. These financial statements and financial statement schedule are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, the financial statements referred to above present fairly, in all material respects, the financial position of Del Taco Restaurant Properties III as of December 31, 2009 and 2008 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We were not engaged to examine management’s assessment of the effectiveness of Del Taco Restaurant Properties III’s internal control over financial reporting as of December 31, 2009 included in the accompanying Management’s report on internal control over financial reporting under Item 9A(T) and, accordingly, we do not express an opinion thereon.

/s/ Squar, Milner, Peterson, Miranda & Williamson, LLP

Newport Beach, California

March 10, 2010

DEL TACO RESTAURANT PROPERTIES III

BALANCE SHEETS


	December 31,
	2009			2008
ASSETS
CURRENT ASSETS:
Cash	$	321,805		$	318,322
Receivable from Del Taco LLC		87,661			86,868
Deposits		2,097			1,888

Total current assets		411,563			407,078


RESTRICTED CASH		86,017			86,017


PROPERTY AND EQUIPMENT:
Land and improvements		4,405,966			4,405,966
Buildings and improvements		2,954,959			2,954,959
Machinery and equipment		1,522,922			1,522,922

		8,883,847			8,883,847
Less—accumulated depreciation		3,924,896			3,811,656

		4,958,951			5,072,191


	$	5,456,531		$	5,565,286


LIABILITIES AND PARTNERS’ EQUITY
CURRENT LIABILITIES:
Payable to limited partners	$	70,204		$	64,515
Accounts payable		15,714			15,291

Total current liabilities		85,918			79,806


OBLIGATION TO GENERAL PARTNER		577,510			577,510


PARTNERS’ EQUITY:
Limited partners; 47,261 units outstanding at December 31, 2009 and 2008		4,840,585			4,954,303
General partner-Del Taco LLC		(47,482	)		(46,333	)

		4,793,103			4,907,970


	$	5,456,531		$	5,565,286

See accompanying notes to financial statements.

DEL TACO RESTAURANT PROPERTIES III

STATEMENTS OF PARTNERS’ EQUITY

Years Ended December 31, 2009, 2008, and 2007


	Limited Partners					General
	Units		Amount			Partner			Total
Balance, December 31, 2006		47,261	$	5,184,889		$	(44,004	)	$	5,140,885

Net Income		—		853,821			8,624			862,445

Cash Distributions		—		(969,167	)		(9,789	)		(978,956	)


Balance, December 31, 2007		47,261		5,069,543			(45,169	)		5,024,374

Net Income		—		858,446			8,671			862,445

Cash Distributions		—		(973,686	)		(9,835	)		(978,956	)


Balance, December 31, 2008		47,261		4,954,303			(46,333	)		4,907,970

Net Income		—		855,031			8,636			863,667

Cash Distributions		—		(968,749	)		(9,785	)		(978,534	)


Balance, December 31, 2009		47,261	$	4,840,585		$	(47,482	)	$	4,793,103

See accompanying notes to financial statements.

DEL TACO RESTAURANT PROPERTIES III

STATEMENTS OF CASH FLOWS


	Years Ended December 31,
	2009			2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income	$	863,667		$	867,117		$	862,445
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		113,240			113,240			113,240
Changes in operating assets and liabilities:
Receivable from Del Taco LLC		(793	)		(1,226	)		968
Deposits		(209	)		(234	)		217
Payable to limited partners		5,689			(219	)		(8,612	)
Accounts payable		423			1,934			(3,121	)


Net cash provided by operating activities		982,017			980,612			965,137


CASH FLOWS FROM FINANCING ACTIVITIES:

Cash distributions to partners		(978,534	)		(983,521	)		(978,956	)


Net increase (decrease) in cash		3,483			(2,909	)		(13,819	)

Beginning cash balance		318,322			321,231			335,050


Ending cash balance	$	321,805		$	318,322		$	321,231

See accompanying notes to financial statements.

DEL TACO RESTAURANT PROPERTIES III

NOTES TO FINANCIAL STATEMENTS

NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Partnership: Del Taco Restaurant Properties III, a California limited partnership, (the Partnership) was formed on December 19, 1985, for the purpose of acquiring real property in California for construction of ten Mexican-American restaurants to be leased under long-term agreements to Del Taco LLC (General Partner or Del Taco) for operation under the Del Taco trade name. As of July 5, 1990, all ten restaurants had commenced operation on acquired properties. In November 1997, the Twentynine Palms property was sold yielding net proceeds of $278,612. As of December 31, 2009, Del Taco Restaurant Properties III had nine properties in operation. The term of the partnership agreement is until December 31, 2025 unless terminated earlier by means provided in the partnership agreement.

The Partnership has no full time employees (see Note 4). The Partnership agreement assigns full authority for general management and supervision of the business affairs of the Partnership to the General Partner. The General Partner has a one percent interest in the profits or losses and distributions of the Partnership. Limited partners have no right to participate in the day to day management or conduct of the Partnership’s business affairs.

Distributions are made to the general and limited partners in accordance with the provisions of the partnership agreement (see Note 2).

Basis of Accounting: The Partnership utilizes the accrual method of accounting for transactions relating to the business of the Partnership. The summary of significant accounting policies presented below is designed to assist in understanding the Partnership’s financial statements. Such financial statements and accompanying notes are the representations of the Partnership’s management, who is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (GAAP) in all material respects, and have been consistently applied in preparing the accompanying financial statements.

Property and Equipment: Property and equipment is stated at cost. Depreciation is computed using the straight-line method over estimated useful lives which are 20 years for land improvements, 35 years for buildings and improvements, and 10 years for machinery and equipment.

DEL TACO RESTAURANT PROPERTIES III
NOTES TO FINANCIAL STATEMENTS — CONTINUED

NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued

Income Taxes: No provision has been made for federal or state income taxes on partnership net income, since the Partnership is not subject to income tax. Partnership income is includable in the taxable income of the individual partners as required under applicable income tax laws. Certain items, primarily related to depreciation methods, are accounted for differently for income tax reporting purposes (see Note 7).

Net Income Per Limited Partnership Unit: The net income per limited partnership unit is based on net income attributable to the limited partners (after 1% allocation to the general partner) using the weighted average units outstanding during the periods presented which amounted to 47,261 units for all years presented.

Use of Estimates: The preparation of the financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Revenue Recognition: Rental revenue is recognized based on 12 percent of gross sales of the restaurants for the corresponding period, and is earned at the point of sale.

Concentration of Risk: The nine restaurants leased to Del Taco make up all of the income producing assets of the Partnership and contributed all of the Partnership’s rental revenues for the three years ended December 31, 2009. Therefore, the business of the Partnership is entirely dependent on the success of the Del Taco trade name restaurants that lease the properties.

The Partnership maintains substantially all of its cash and cash equivalents at one major commercial bank. The Federal Depository Insurance Commission’s limits were $250,000 at December 31, 2009 and 2008. At December 31, 2009 and 2008, the Partnership had approximately $423,000 and $425,000, respectively, on deposit at one financial institution.

Fair Value of Financial Instruments: The fair values of cash, accounts receivables, deposits, accounts payable and payables to limited partners approximate the carrying amounts due to their short maturities.

NOTE 2 — PARTNERS’ EQUITY

Pursuant to the partnership agreement, annual partnership net income or loss is allocated one percent to the General Partner and 99 percent to the limited partners. Partnership gains from any sale or refinancing are to be allocated one percent to the General Partner and 99 percent to the limited partners until allocated gains and profits equal losses, distributions and syndication costs, and until each class of limited partners receive their priority return (10 percent) as defined in the partnership agreement. Additional gains are to be allocated 15 percent to the General Partner and 85 percent to the limited partners.

NOTE 3 — OBLIGATION TO GENERAL PARTNER

Under terms of the partnership agreement, the General Partner is entitled to receive a fee in an amount equal to five percent of aggregate capital contributions. The fee shall be for services rendered in connection with site selection and the design and supervision of construction and improvements to acquired properties. This fee shall be earned at the time the services are rendered, but shall not be paid and shall be subordinated to the limited partners’ interests until all restaurants have opened and the limited partners have received certain minimum returns on their investment, as required by the partnership agreement. It is the policy of the Partnership to accrue the site acquisition and development fee as an obligation to the General Partner. No fees were earned for such services during 2009, 2008, and 2007.

DEL TACO RESTAURANT PROPERTIES III
NOTES TO FINANCIAL STATEMENTS — CONTINUED

NOTE 4 — LEASING ACTIVITIES

The Partnership leases certain properties for operation of restaurants to Del Taco on a triple net basis. The leases are for terms of 35 years commencing with the completion of the restaurant facility located on each property and require monthly rentals equal to 12 percent of the gross sales of the restaurants. The leases terminate in the years 2021 to 2024. There is no minimum rental under any of the leases. The Partnership had a total of nine properties leased to Del Taco as of December 31, 2009.

The nine restaurants operated by Del Taco, for which the Partnership is the lessor, had combined, unaudited sales of $8,781,419, $8,753,175, and $8,704,928 and unaudited net losses of $89,807 and $242,109 during the years ended December 31, 2009 and 2008, respectively, and unaudited net income of $24,944 for the year ended December 31, 2007. Net income by restaurant includes charges for general and administrative expenses incurred in connection with supervision of restaurant operations and interest expense and the decrease in net loss from the corresponding period of the prior years primarily relates to increased restaurant revenues and reduced operating expenses partially offset by additional interest expense.

NOTE 5 — RELATED PARTIES

The receivable from Del Taco consists of rent accrued for the months of December 2009 and 2008. The rent receivable was collected in January 2010 and 2009, respectively.

The General Partner received $9,785, $9,835 and $9,789 in distributions relating to its one percent interest in the Partnership for the years ended December 31, 2009, 2008 and 2007, respectively.

Del Taco serves in the capacity of General Partner in other partnerships which are engaged in the business of operating restaurants, and three other partnerships which were formed for the purpose of acquiring real property in California for construction of Mexican-American restaurants for lease under long-term agreements to Del Taco.

The General Partner provides certain minimal managerial and accounting services to the Partnership at no cost.

NOTE 6 — RESTRICTED CASH

At December 31, 2009 and 2008 the Partnership had a restricted cash balance of $86,017. The restricted cash is a death and disability redemption fund. Such fund is maintained in an interest bearing account at a major commercial bank. A limited partner has the right, under certain circumstances involving such limited partner’s death or disability, to tender to the Partnership for redemption all of the units owned of record by such limited partner. The redemption price will be equal to the partners’ capital account balance as of the redemption date. The death and disability fund was established in 1987. The fund was limited to two percent of the gross proceeds from sale of the limited partnership units. Requests for redemption made after the funds in the death and disability fund are depleted will not be accepted.

DEL TACO RESTAURANT PROPERTIES III
NOTES TO FINANCIAL STATEMENTS — CONTINUED

NOTE 7 — INCOME TAXES (UNAUDITED)

The Partnership is not subject to income taxes because its income is taxed directly to the General Partner and limited partners. The reconciling items presented in the table below are the only items that create a difference between the tax basis and reported amounts of the Partnerships assets and liabilities.

A reconciliation of financial statement net income to taxable income for each of the periods is as follows:


	2009		2008		2007
Net income per financial statements	$	863,667	$	867,117	$	862,445

Excess book depreciation		28,170		28,168		27,808


Taxable income	$	891,837	$	895,285	$	890,253

A reconciliation of partnership equity per the financial statements to partners’ equity for tax purposes as of December 31, 2009, is as follows (unaudited):


Partners’ equity per financial statements	$	4,793,103

Issue costs of limited partnership units capitalized for tax purposes		1,741,676

Difference in book vs. tax depreciation		662,824

Other		(107,837	)


Partners’ equity for tax purposes	$	7,089,766

DEL TACO RESTAURANT PROPERTIES III
NOTES TO FINANCIAL STATEMENTS — CONTINUED

NOTE 8 — CASH DISTRIBUTIONS TO LIMITED PARTNERS

Cash distributions paid to limited partners for the three years ended December 31, 2009 were as follows:


	Cash		Weighted		Number of Units
	Distribution per		Average Number		Outstanding at
	Limited Partnership		of Units		the End of
Quarter Ended	Unit		Outstanding		Quarter
December 31, 2006	$	5.38		47,291		47,291
March 31, 2007		4.84		47,261		47,261
June 30, 2007		4.68		47,276		47,261
September 30, 2007		5.58		47,271		47,261

Total paid in 2007	$	20.48


December 31, 2007	$	5.33		47,261		47,261
March 31, 2008		4.66		47,261		47,261
June 30, 2008		5.27		47,261		47,261
September 30, 2008		5.32		47,261		47,261

Total paid in 2008	$	20.58


December 31, 2008	$	5.22		47,261		47,261
March 31, 2009		4.78		47,261		47,261
June 30, 2009		4.90		47,261		47,261
September 30, 2009		5.58		47,261		47,261

Total paid in 2009	$	20.48

Cash distributions per limited partnership unit were calculated based upon the weighted average and cash flow statement units outstanding for each quarter and were paid from operations. Distributions declared in January 2010 for the quarter ended December 31, 2009 amounted to $5.16 per limited partnership unit and were paid in February 2010.

NOTE 9 — RESULTS BY QUARTER (UNAUDITED)


	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Year ended December 31, 2009
Rental revenues	$	248,748	$	267,999	$	272,377	$	264,646
Net income		182,709		225,695		229,572		225,691
Net income per limited partnership unit		3.83		4.73		4.81		4.72

Year ended December 31, 2008
Rental revenues	$	256,889	$	266,067	$	266,973	$	260,452
Net income		187,856		229,800		228,663		220,798
Net income per limited partnership unit		3.94		4.81		4.79		4.62


Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

None


Item 9A(T).		Controls and Procedures

Disclosure controls and procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Treasurer, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognized that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and management necessarily was required to apply its judgment in evaluating the cost–benefit relationship of possible controls and procedures.

In connection with the preparation of this Annual Report on Form 10-K, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Treasurer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Treasurer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Treasurer, as appropriate, to allow timely decisions regarding required disclosures.

Internal control over financial reporting

(a) Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control system is designed to provide reasonable assurance to our management regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. In making its assessment of internal control over financial reporting, management used the criteria set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

		Management has concluded that, as of December 31, 2009, our internal control over financial reporting was effective based on these criteria.

		This annual report does not include an attestation report of the Partnership’s registered public accounting firm regarding the effectiveness of internal control over financial reporting. Pursuant to temporary rules of the Securities and Exchange Commission, such attestation report is not required to be included in this filing; the Partnership is only required to provide management’s report in this annual report.

(b) Changes in internal controls:

There were no significant changes in the Partnership’s internal controls over financial reporting that occurred during our most recent fiscal quarter that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


Item 9B.		Other Information

None.

PART III


Item 10.		Directors, Executive Officers, and Corporate Governance

(a) & (b) Del Taco serves as the Partnership’s sole general partner. Individuals who perform the functions of directors and officers of the Partnership consist of the following officers of Del Taco:


Name	Title	Age
Paul J.B. Murphy, III	Chief Executive Officer		55
James W. Lyons	Chief Development Officer		54
James D. Stoops	Executive Vice President, Operations		57
Janet D. Erickson	Executive Vice President, Purchasing		53
Steven L. Brake	Treasurer		37

Del Taco’s term as general partner will continue indefinitely, subject to the right of a majority in interest of the limited partners to remove and replace it. The above referenced officers of the General Partner will hold office until their resignation or the election or appointment of their successor.

(d) No family relationship exists between any such officer of the General Partner.

(e) The following is an account of the business experience during the past five years of each such officer:


Item 10.		Directors and Executive Officers of the Partnership’s General Partner — (Continued)

Paul J.B. Murphy, III, Chief Executive Officer of Del Taco LLC. Mr. Murphy has served as Chief Executive Officer since February of 2009. He previously served as President and Chief Executive Officer of Einstein Noah Restaurant Group, Inc. (formerly, New World Restaurant Group, Inc.) from October of 2003 to December of 2008.

James W. Lyons, Chief Development Officer of Del Taco LLC. Mr. Lyons has served as Chief Development Officer since September of 2008. He previously served as Chief Operating Officer of Popeyes Chicken and Biscuits (a division of AFC Enterprises, Inc.), from March of 2007 to December of 2007, and as Chief Development Officer of Popeyes Chicken and Biscuits from July of 2004 to March of 2007. Prior to that, he served as Vice President of Development for Domino’s Pizza from 2002 to July of 2004.

James D. Stoops, Executive Vice President, Operations of Del Taco LLC. From 1968 to 1991, Mr. Stoops served in a wide variety of operations positions with Burger King Corporation with increasing levels of responsibility. In 1985, Mr. Stoops was appointed Region Vice President/General Manager for the New York region and served in that position until October of 1990. In January of 1991, he joined Del Taco LLC in his current post.

Janet D. Erickson, Executive Vice President, Purchasing of Del Taco LLC. From 1979 to 1986, Ms. Erickson was with Denny’s Incorporated. She served in the Research and Development department in a variety of positions until 1982 when she was promoted to the position of Purchasing Agent. Ms. Erickson was hired in 1986 as Manager of Contract Purchasing with Carl Karcher Enterprises, a post she held until March 1990 when she became Vice President, Purchasing for Del Taco LLC. Ms. Erickson has a Bachelor of Science degree in Foods and Nutrition from Cal State Polytechnic University in Pomona, California.

Steven L. Brake, Vice President, Treasurer and Controller of Del Taco LLC. Mr. Brake has been Treasurer since March 2007 and previously served as the Corporate Controller of Del Taco LLC from September 2003 to March of 2007. From December 1995 until September 2003 Mr. Brake spent seven years with Arthur Andersen and one year with KPMG LLP in their respective audit departments. Mr. Brake is a licensed certified public accountant and holds a Bachelor of Arts degree in Economics from the University of California, Irvine and an MBA from the Paul Merage School of Business at the University of California, Irvine.

Code of Ethics

The Partnership has no executive officers or any fulltime employees and, accordingly, has not adopted a code of ethics.


Item 11.		Executive Compensation

The Partnership has no executive officers or directors and pays no direct remuneration to any executive officer or director of its General Partner. The Partnership has not issued any options or stock appreciation rights to any executive officer or director of its General Partner, nor does the Partnership propose to pay any annuity, pension or retirement benefits to any executive officer or director of its General Partner. The Partnership has no plan, nor does the Partnership presently propose a plan, which will result in any remuneration being paid to any executive officer or director of the General Partner upon termination of employment.


Item 12.		Security Ownership of Certain Beneficial Owners and Management

(a)		No person of record currently owns more than five percent of limited partnership units of the Partnership, nor was any person known of by the Partnership to own of record and beneficially, or beneficially only, more than five percent of such securities.

(b)		Neither Del Taco LLC, nor any executive officer or director of Del Taco LLC, owns any limited partnership units of the Partnership.

(c)		The Partnership knows of no contractual arrangements, the operation or the terms of which may at a subsequent date result in a change in control of the Partnership, except for provisions in the partnership agreement providing for removal of the General Partner by holders of a majority of the limited partnership units and if a material event of default occurs under the financing agreements of the General Partner.


Item 13.		Certain Relationships and Related Transactions, and Director Independence

(a)		No transactions have occurred between the Partnership and any executive officer or director of its General Partner.

		During 2009, the following transactions occurred between the Partnership and the General Partner pursuant to the terms of the partnership agreement.

	(1)		The General Partner earned $8,636 as its one percent share of the net income of the Partnership.

	(2)		The General Partner received $9,785 in distributions relating to its one percent interest in the Partnership.

(b)		During 2009, the Partnership had no business relationships with any entity of a type required to be reported under this item.

(c)		Neither the General Partner, any director or officer of the General Partner, or any associate of any such person, was indebted to the Partnership at any time during 2009 for any amount.

(d)		Not applicable.

PART IV


Item 15.		Exhibits and Financial Statement Schedules

(a)(1)		Financial Statements

		Included in Part II of this report:

		Report of Independent Registered Public Accounting Firm — Squar, Milner, Peterson, Miranda & Williamson, LLP Balance Sheets Statements of Income Statements of Partners’ Equity Statements of Cash Flows Notes to Financial Statements

(a)(2)		Financial Statement Schedule

		Schedule III — Real Estate and Accumulated Depreciation

		Financial statement schedules other than those referred to above have been omitted because they are not applicable or not required.

(b)		Reports on Form 8-K

		None

(c)		Exhibits required by Item 601 of Regulation S-K:

	1.		Incorporated herein by reference, Restated Agreement of Limited Partnership of Del Taco Restaurant Properties III filed as Exhibit 3.01 to Partnership’s Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on December 30, 1985.

	2.		Incorporated herein by reference, Amendment to Restated Agreement of Limited Partnership of Del Taco Restaurant Properties III.

	3.		Incorporated herein by reference, Form of Standard Lease to be entered into by partnership and Del Taco LLC, as lessee, filed as Exhibit 10.02 to Partnership’s Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on December 30, 1985.

	31.1		Paul J.B. Murphy, III’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	31.2		Steven L. Brake’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	32.1		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

DEL TACO RESTAURANT PROPERTIES III

SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2009


							Cost capitalized		Gross amount at
			Initial cost				subsequent to		which carried at
			to company				acquisition		close of period								Life on which
			Land		Buildings &				Land, buildings &								depreciation in latest
Description			& land		Improve-		Carrying		improvements		Accumulated		Date of		Date		income statement
(All Restaurants)	Encumbrances		improvements		ments		costs		Total		depreciation		construction		acquired		is computed

Rancho California, CA	$	—	$	384,400	$	257,807	$	—	$	642,207		209,566		1986		1986	20 (LI), 35 (BI)
Vista, CA		—		512,130		343,471		—		855,601		279,193		1987		1987	20 (LI), 35 (BI)
Industry, CA		—		627,082		420,566		—		1,047,648		341,863		1987		1987	20 (LI), 35 (BI)
Perris, CA		—		437,522		293,434		—		730,956		238,521		1987		1987	20 (LI), 35 (BI)
Upland, CA		—		281,827		189,014		—		470,841		153,637		1987		1987	20 (LI), 35 (BI)
Walnut, CA		—		340,848		228,597		—		569,445		185,814		1988		1988	20 (LI), 35 (BI)
Los Angeles, CA		—		674,283		452,223		—		1,126,506		367,594		1988		1988	20 (LI), 35 (BI)
Chatsworth, CA		—		642,475		430,890		—		1,073,365		350,260		1989		1989	20 (LI), 35 (BI)
Victorville, CA		—		505,399		338,957		—		844,356		275,530		1989		1989	20 (LI), 35 (BI)


	$	—	$	4,405,966	$	2,954,959	$	—	$	7,360,925	$	2,401,977


			Accumulated
	Restaurants		Depreciation
Balances at December 31, 2006:	$	7,360,925	$	2,062,257
Additions		—		113,240
Retirements		—		—

Balances at December 31, 2007:		7,360,925		2,175,497
Additions		—		113,240
Retirements		—		—

Balances at December 31, 2008:		7,360,925		2,288,737
Additions		—		113,240
Retirements		—		—

Balances at December 31, 2009:	$	7,360,925	$	2,401,977

The aggregate cost basis of Del Taco Restaurant Properties III real estate assets for Federal income tax purposes was $6,139,803 at December 31, 2009.

See accompanying report of independent registered public accounting firm.

EXHIBIT INDEX


Exhibit		Descriptions
	1.	Incorporated herein by reference, Restated Agreement of Limited Partnership of Del Taco Restaurant Properties III filed as Exhibit 3.01 to Partnership’s Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on December 30, 1985.

	2.	Incorporated herein by reference, Amendment to Restated Agreement of Limited Partnership of Del Taco Restaurant Properties III.

	3.	Incorporated herein by reference, Form of Standard Lease to be entered into by partnership and Del Taco LLC, as lessee, filed as Exhibit 10.02 to Partnership’s Registration Statement on Form S-11 as filed with the Securities and Exchange Commission on December 30, 1985.

	31.1	Paul J.B. Murphy, III’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	31.2	Steven L. Brake’s Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	32.1	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


	2009		2008
Audit Fees	$	17,547	$	17,779
Audit-Related Fees		0		0
Tax Fees		0		0
All Other Fees		0		0


Total	$	17,547	$	17,779



Date: March 12, 2010	/s/ Paul J. B. Murphy, III
	Paul J. B. Murphy, III
	Chief Executive Officer


Date: March 12, 2010	/s/ Steven L. Brake
	Steven L. Brake
	Treasurer

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INDEX	PAGE NUMBER

Report of Independent Registered Public Accounting Firm – Squar, Milner, Peterson, Miranda & Williamson, LLP		10

Balance Sheets at December 31, 2009 and 2008		11

Statements of Income for the years ended December 31, 2009, 2008 and 2007		12

Statements of Partners’ Equity for the years ended December 31, 2009, 2008 and 2007		13

Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007		14

Notes to Financial Statements		15-20

Schedule III – Real Estate and Accumulated Depreciation		27


		DEL TACO RESTAURANT PROPERTIES III
		a California limited partnership

		Del Taco LLC
		General Partner

Date March 12, 2010		Paul J. B. Murphy, III Paul J.B. Murphy, III
		Chief Executive Officer

Date March 12, 2010		James W. Lyons James W. Lyons
		Chief Development Officer

Date March 12, 2010		Steven L. Brake Steven L. Brake
		Treasurer

1.		I have reviewed this annual (“report”) on Form 10-K of Del Taco Restaurant Properties III;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a — 15(f) and 15d — 15(f)) for the registrant and have:

	a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

	d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: March 12, 2010		/s/ Paul J. B. Murphy, III Paul J. B. Murphy, III
		Chief Executive Officer


Date: March 12, 2010		/s/ Steven L. Brake Steven L. Brake
		Treasurer