UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period _____ to _____
Commission file number: 0-10223
CONAM REALTY INVESTORS 81 L.P.
formerly known as
HUTTON/CONAM REALTY INVESTORS 81
Exact name of Registrant as specified in its charter
California 13-3069026
State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization
1764 San Diego Avenue 92110
San Diego, CA Attn: Robert J. Svatos Zip code
Address of principal executive offices
Registrant's telephone number, including area code: (619) 297-6771
Securities registered pursuant to Section 12(b) of the Act: 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 X No
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 the 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)
Documents Incorporated by Reference:
Portions of Parts I, II, III and IV are incorporated by reference to the
Partnership's Annual Report to Unitholders for the year ended December 31,
1997. PART I
Item 1. Business
General Description of Business and Objectives
This Form 10-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and 21E of the Securities Exchange
Act of 1934. Actual results could differ materially from those projected in or
contemplated by the forward-looking statements as a result of a number of
factors, including those identified herein.
ConAm Realty Investors 81 L.P., formerly Hutton/ConAm Realty Investors 81 (the
"Partnership") is a California limited partnership formed on April 30, 1981.
ConAm Property Services Ltd. ("CPS"), a California limited partnership, and RI
81 Real Estate Services Inc. ("RI 81"), a Delaware corporation, were the
original co-general partners of the Partnership. On October 8, 1997, CPS
acquired RI 81's co-general partner interest in the Partnership, effective July
1, 1997, pursuant to a Purchase Agreement between CPS and RI 81 dated August
29, 1997. As a result, CPS now serves as the sole general partner (the
"General Partner") of the Partnership. In conjunction with this transaction,
the name of the Partnership was changed from Hutton/ConAm Realty Investors 81
to ConAm Realty Investors 81 L.P.
The Partnership was organized to engage in the business of acquiring, operating
and holding for investment multi-family residential properties. The Partnership
originally invested in two joint ventures and three limited partnerships, each
of which was formed to own a specified property. As described below, three
properties have been sold. Funds held as a working capital reserve are
invested in unaffiliated money market funds or other highly liquid short-term
investments where there is appropriate safety of principal in accordance with
the Partnership's investment objectives and policies.
The Partnership's principal investment objectives with respect to its interests
in real property are:
(1) capital appreciation;
(2) distributions of net cash from operations attributable to rental
income; and
(3) preservation and protection of capital.
Distribution of net cash from operations is the Partnership's objective during
its operational phase, while preservation and appreciation of capital are the
Partnership's long-term objectives. The attainment of the Partnership's
objectives will depend on many factors, including future economic conditions in
the United States as a whole and, in particular, in the localities in which the
Partnership's properties are located, especially with regard to achievement of
capital appreciation.
From time to time the Partnership expects to sell its real property interests
taking into consideration such factors as the amount of appreciation in value,
if any, to be realized and the possible risks of continued ownership. Proceeds
from any future sale, financing or refinancing of properties will not be
reinvested and may be distributed to the Limited Partners and General Partner
(sometimes referred to together herein as the "Partners"), so that the
Partnership will, in effect, be self-liquidating. If deemed necessary, the
Partnership may retain a portion of the proceeds from any sale, financing or
refinancing as capital reserves. As partial payment for properties sold, the
Partnership may receive purchase money obligations secured by mortgages or
deeds of trust. In such cases, the amount of such obligations will not be
included in Net Proceeds From Sale or Refinancing (distributable to the
Partners) until and only to the extent the obligations are realized in cash,
sold or otherwise liquidated.
Originally, the Partnership utilized the net proceeds of its public offering to
acquire five residential apartment complexes (collectively, the "Properties")
either directly or through investments in joint ventures, as follows: (1) Las
Colinas Apartments I and II, a 300-unit apartment complex located in
Scottsdale, Arizona; (2) Tierra Catalina, a 120-unit apartment complex located
in Tucson, Arizona; (3) Ridge Park, a 100-unit apartment complex located in
Tulsa, Oklahoma; (4) Cedar Bay Village, a 42-unit apartment complex located in
Altamonte Springs, Florida; and (5) Kingston Village, a 120-unit complex
located in Altamonte Springs, Florida. On July 20, 1995, Cedar Bay Village and
Kingston Village were sold to an unaffiliated institutional buyer for
$1,410,622 and $5,370,000, respectively. On November 27, 1996, Ridge Park
Apartments was sold to an unaffiliated institutional investor for $3,385,000.
The Partnership's mortgage loans secured by Las Colinas I and II and Tierra
Catalina were refinanced in August 1992 and mature in September 1999. For
information concerning the Partnership's current mortgage indebtedness, see
Note 5, "Mortgages Payable," of the Notes to the Consolidated Financial
Statements, included in the Partnership's Annual Report to Unitholders for the
year ended December 31, 1997, which is filed as an exhibit under Item 14.
The Partnership considers itself to be engaged in only one industry segment,
real estate investment.
Competition
The Partnership's real property investments are subject to competition from
similar types of properties in the vicinities in which they are located and
such competition has increased since the Partnership's investment in the
Properties due principally to the addition of newly constructed apartment
complexes offering increased residential and recreational amenities. The
Properties have also been subject to competition from condominiums and
single-family properties, especially during periods of low mortgage interest
rates. The Partnership competes with other real estate owners and developers
in the rental and leasing of its Properties by offering competitive rental
rates and, if necessary, leasing incentives. Such competition may affect the
occupancy levels and revenues of the Properties. The occupancy levels at the
Properties reflect some seasonality, which is typical of these markets. In
some cases, Partnership properties may compete with properties owned by other
partnerships affiliated with the General Partner.
For a discussion of current market conditions in the areas where the
Partnership's Properties are located, reference is made to the Partnership's
1997 Annual Report to Unitholders for the year ended December 31, 1997, which
is filed as an exhibit under Item 14.
Employees
The Partnership has no employees. Services are provided by CPS, ConAm
Management Corporation ("ConAm Management"), an affiliate of CPS, as well as
Service Data Corporation and First Data Investor Services Group, both
unaffiliated companies. The Partnership has entered into property management
agreements pursuant to which ConAm Management provides management services with
respect to the Properties. First Data Investor Services Group has been
retained by the Partnership to provide all accounting and investor
communication functions, while Service Data Corporation provides transfer agent
services. Effective January 1, 1998, the accounting functions of the
Partnership have been transferred to the firm of Brock, Tibbetts & Snell, an
unaffiliated company located in San Diego, California. See Item 13, "Certain
Relationships and Related Transactions", for a further description of the
service and management agreements between the Partnership and affiliated
entities.
Item 2. Properties
For a description of the Partnership's Properties and a discussion of current
market conditions in the areas where the Properties are located and appraised
values, reference is made to the Partnership's Annual Report to Unitholders for
the year-ended December 31, 1997, which is filed as an exhibit to Item 14. For
information on the purchase of the Properties, reference is made to Note 4 to
the Consolidated Financial Statements included herein by reference to the
Partnership's Annual Report to Unitholders. Average occupancy rates are
incorporated by reference to Item 7.
Item 3. Legal Proceedings
The Partnership is not subject to any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the year ended December 31, 1997, no matter was
submitted to a vote of security holders through the solicitation of proxies or
otherwise.
PART II
Item 5. Market for the Registrant's Limited Partnership Units and Related
Security Holder Matters
As of December 31, 1997, the number of Unitholders of record was 3,461.
No established public trading market exists for the Units and it is not
anticipated that a market will develop in the future.
Distributions of Net Cash Flow From Operations, when made, are paid on a
quarterly basis, with distributions generally occurring approximately 45 days
after the end of each quarter. Such distributions have been made primarily
from net operating income with respect to the Partnership's investment in the
Properties and from interest on short-term investments, and partially from
excess cash reserves. Information on cash distributions paid by the
Partnership for the past two years is incorporated by reference to the
Partnership's Annual Report to Unitholders for the year ended December 31,
1997, which is filed as an exhibit under Item 14. The level of future
distributions will be evaluated on a quarterly basis and will depend on the
Partnership's operating results and future cash needs. Reference is made to
Item 7 for a discussion of the General Partner's expectations for future cash
distributions.
Item 6. Selected Financial Data
Incorporated by reference to the Partnership's Annual Report to Unitholders for
the year ended December 31, 1997, which is filed as an exhibit under Item 14.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
At December 31, 1997, the Partnership had cash and cash equivalents of
$1,388,845 that were invested in unaffiliated money market funds, compared with
$2,741,077 at December 31, 1996. The decrease is primarily due to cash used
for distributions and mortgage principal payments exceeding cash provided by
operating activities, and a decrease in cash flow from operations due to the
sale of Ridge Park Apartments ("Ridge Park") in November 1996. The Partnership
also maintains a restricted cash balance, which totaled $430,849 at December
31, 1997, an increase from $351,444 at December 31, 1996, representing escrows
for insurance, real estate taxes, and property replacements and repairs,
required under the terms of the current mortgage loans. The increase in
restricted cash is attributable to payments made to the escrow accounts for
real estate taxes and property improvements. The Partnership expects
sufficient cash to be generated from operations to meet its current operating
expenses and debt service requirements.
Distribution payable decreased from $1,478,811 at December 31, 1996 to $160,929
at December 31, 1997. The decrease is primarily attributable to the payment of
the special cash distribution on February 27, 1997, which represented net
proceeds from the sale of Ridge Park in November 1996. The decrease is also
due to a decline in the quarterly distribution level to reflect reduced cash
flow from the remaining properties.
Accounts payable and accrued expenses totaled $202,484 at December 31, 1997,
compared to $177,414 at December 31, 1996. The increase is primarily
attributable to differences in the timing of payments and accruals for audit
fees and appraisal fees, and a change in billing methods for Partnership
administrative services.
The General Partner declared a cash distribution of $1.85 per Unit for the
quarter ended December 31, 1997 which was paid to investors on February 13,
1998. The level of future distributions will be evaluated on a quarterly basis
and will depend on the Partnership's operating results and future cash needs.
The Partnership continues to perform various exterior and interior improvements
at the Partnership's remaining properties, Las Colinas I & II and Tierra
Catalina. These improvements include landscaping, carpet and appliance
replacement in selected units and other repairs to prepare vacant units for
occupancy. Such improvements are funded from the Partnership's cash reserves.
The General Partner will evaluate the need for additional improvement work at
the Properties on an ongoing basis.
The General Partner is continuing to evaluate the sale potential of the
remaining properties and other options with respect to the Partnership's
investments. One of these options includes refinancing the loans secured by
the Properties in order to return capital to the limited partners on a tax-free
basis and lock in favorable fixed interest rates. This would also potentially
enhance the future marketability of the Properties, while enabling the
Partnership to take advantage of possible future property appreciation. The
Partnership's ability to sell the properties is dependent upon a variety of
factors, many of which are not within the Partnership's control. There can be
no assurance that any specific property or all the Properties can be sold, that
particular prices can be achieved, or that the Properties can be sold within a
specific time frame.
Results of Operations
1997 versus 1996
Partnership operations for the year ended December 31, 1997 resulted in a net
loss of $8,210 compared with net income of $1,285,707 in 1996. The change from
net income in 1996 to a net loss in 1997 is attributable to the gain of
$1,410,622 recognized on the sale of Ridge Park during 1996. Excluding the
gain, the Partnership generated a net loss from operations of $124,915 in 1996.
Rental income for the year ended December 31, 1997, was $3,196,975 compared
with $3,622,403 for 1996. The decrease reflects the sale of Ridge Park in
November 1996. Partially offsetting the decrease was an increase in rental
income at Las Colinas and Tierra Catalina due to an increase in rental rates at
both properties and an increase in occupancy at Tierra Catalina. Interest and
other income totaled $102,512 in 1997 compared with $91,282 in 1996. The
increase is attributable to the Partnership maintaining a higher average cash
balance in 1997.
Total expenses for the year ended December 31, 1997 were $3,307,697 compared
with $3,838,600 in 1996. Property operating expenses decreased from $1,817,928
in 1996 to $1,520,450 in 1997, reflecting the decline in operating expenses
primarily resulting from the sale of Ridge Park. Interest expense and
depreciation and amortization also decreased from 1996 to 1997 primarily due to
the sale of Ridge Park.
General and administrative expenses increased from 1996 to 1997 due primarily
to a change in the billing method for certain Partnership administrative
services and an increase in professional consulting fees.
1996 versus 1995
Partnership operations for the year ended December 31, 1996 resulted in net
income of $1,285,707, compared with net income of $1,141,669 in 1995. The
increase in net income in 1996 was attributable to the decline in total
expenses resulting from the sale of Cedar Bay Village and Kingston Village in
July 1995 more than offsetting the corresponding decline in rental income.
Rental income for the year ended December 31, 1996, was $3,622,403 compared
with $4,313,044 for 1995. The decrease reflects the sale of Cedar Bay Village
and Kingston Village in July 1995, the sale of Ridge Park in November 1996 and
lower rental income at Tierra Catalina resulting from a decline in occupancy.
Partially offsetting the decrease was an increase in rental income at Las
Colinas, due to an increase in rental rates and occupancy. Interest and other
income totaled $91,282 in 1996 compared with $102,535 in 1995. The decrease
was attributable to the Partnership maintaining a lower average cash balance in
1996.
Total expenses for the year ended December 31, 1996 were $3,838,600 compared
with $4,759,031 in 1995. Property operating expenses decreased from $2,261,179
in 1995 to $1,817,928 in 1996, reflecting the decline in operating expenses
primarily resulting from the sale of Cedar Bay Village and Kingston Village.
Interest expense and depreciation and amortization also decreased from 1995 to
1996 primarily due to the sale of Cedar Bay Village and Kingston Village.
General and administrative expenses decreased from 1995 to 1996 due primarily
to lower legal fees and audit fees in 1996.
The average occupancy levels at each of the remaining Properties for the years
ended December 31, 1997, 1996 and 1995 were as follows:
Twelve Months Ended December 31,
Property 1997 1996 1995
--------------------------------------------------------
Las Colinas I & II 96% 96% 93%
Tierra Catalina 92% 90% 93%
--------------------------------------------------------
New Accounting Pronouncements
The Financial Accounting Standards Board also issued SFAS No. 129, "Disclosure
of Information about Capital Structure," SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information." These statements, which are effective for years
beginning after December 15, 1997, expand or modify disclosures and,
accordingly, will have no impact on the Partnership's reported financial
position, results of operations or cash flows.
Item 8. Financial Statements and Supplementary Data
Incorporated by reference to the Partnership's Annual Report to Unitholders for
the year ended December 31, 1997, which is filed as an exhibit under Item 14.
Supplementary Data is incorporated by reference to page F-1 of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Effective December 1, 1997, the Partnership advised Coopers & Lybrand L.L.P.
that it was changing accounting firms and engaged KPMG Peat Marwick LLP.
Coopers & Lybrand L.L.P.'s report on the financial statements for the years
ended December 31, 1996 and December 31, 1995 contained no adverse opinion or
disclaimer of opinion and was not qualified as to uncertainty, audit scope or
accounting principles. There have been no disagreements with Coopers & Lybrand
L.L.P. on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope procedure.
The decision to change accountants was approved by CPS and RI 81, the general
partners of the Partnership at that time.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no officers or directors. CPS, the General Partner of the
Partnership, manages and controls the affairs of the Partnership and has
general responsibility and authority in all matters affecting its business.
CPS is a California limited partnership organized on December 11, 1980. The
general partners of CPS are Continental American Development, Inc. ("ConAm
Development") and ConAm Development Corporation ("ConAm Corp.") The names and
positions held by the directors and executive officers of both ConAm
Development and ConAm Corp. are set forth below. There are no family
relationships between any executive officers or directors.
Name Office
Daniel J. Epstein President and Director
E. Scott Dupree Vice President and Director
Robert J. Svatos Vice President and Director
Ralph W. Tilley Vice President
J. Bradley Forrester Vice President
Daniel J. Epstein, 58, has been the President and a Director of ConAm
Development and ConAm Corp. and a general partner of Continental American
Properties, Ltd. ("ConAm"), an affiliate of ConAm Services, since their
inception. He is also Chairman and Chief Executive Officer of ConAm
Management. Prior to organizing ConAm, Mr. Epstein was Vice President and a
Director of American Housing Guild, which he joined in 1969. At American
Housing Guild, he was responsible for the formation of the Multi-Family
Division and directed its development and property management activities. Mr.
Epstein holds a Bachelor of Science degree in Engineering from the University
of Southern California.
E. Scott Dupree, 47, is a Senior Vice President and general counsel of ConAm
Management responsible for negotiation, documentation, review and closing of
acquisition, sale and financing proposals. Mr. Dupree also acts as principal
legal advisor on general legal matters ranging from issues and contracts
involving the management company to supervision of litigation and employment
issues. Prior to joining ConAm Management in 1985, he was corporate counsel to
Trusthouse Forte, Inc., a major international hotel and restaurant corporation.
Mr. Dupree holds a B.A. from United States International University and a Juris
Doctorate degree from the University of San Diego.
Robert J. Svatos, 39, is a Senior Vice President and is the Chief Financial
Officer of ConAm Management. His responsibilities include the accounting,
treasury and data processing functions of the organization. Prior to joining
ConAm Management in 1988, he was the Chief Financial Officer for AmeriStar
Financial Corporation, a nationwide mortgage banking firm. Mr. Svatos holds an
M.B.A. in Finance from the University of San Diego and a Bachelor's of Science
degree in Accounting from the University of Illinois. He is a Certified Public
Accountant.
Ralph W. Tilley, 43, is a Senior Vice President and Treasurer of ConAm
Management. He is responsible for the financial aspects of syndications and
acquisitions, the company's asset management portfolio and risk management
activities. Prior to joining ConAm Management in 1980, he was a senior
accountant with KPMG Peat Marwick LLP, specializing in real estate. He holds a
Bachelor's of Science degree in Accounting from San Diego State University and
is a Certified Public Accountant.
J. Bradley Forrester, 40, is the President of ConAm Management. He is
currently responsible for overseeing all aspects of the operations of the firm.
His primary focus is on new business related activities including property
acquisitions, property development and rehabilitation, and the acquisition of
other property management companies. Prior to joining ConAm in 1994, Mr.
Forrester served as Senior Vice President - Commercial Real Estate for First
Nationwide Bank in San Francisco, where he was responsible for a $2 billion
problem asset portfolio including bank-owned real estate and non-performing
commercial real estate loans for three years. His past experience includes
significant involvement in real estate development and finance, property
acquisitions and dispositions and owner's representation matters. Prior to
entering the real estate profession, he worked for KPMG Peat Marwick LLP in
Dallas, Texas. Mr. Forrester holds a Bachelor of Science degree in Accounting
from Louisiana State University. He received his CPA certification in the
State of Texas.
Item 11. Executive Compensation
Neither the General Partner nor any of its directors or executive officers
received any compensation from the Partnership. See Item 13 of this report for
a description of certain costs of the General Partner and its affiliates
reimbursed by the Partnership.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Except as indicated in this paragraph, no person was known by the Partnership
to be the beneficial owner of more than five percent of the outstanding Units
of the Partnership at March 1, 1998. Based on a Schedule 13D filed jointly
with the Securities and Exchange Commission under the Securities Exchange Act
of 1934 on November 26, 1997 (the Schedule 13D"), Everest Investors LLC
("Investors"), KM Investments, LLC ("KM"), Everest Properties, Inc.
("Properties") and Everest Properties II, LLC ("Properties II"), hold an
aggregate of 4,513 Units, representing approximately 5.8% of the outstanding
Units. The Units are held by Investors as to 3,455 Units, by KM as to 1,048
Units and by Properties as to 10 Units. According to the Schedule 13D,
Properties is the manager of Investors and Properties II is the manager of KM.
Because of such relationships, the Schedule 13D states that Properties and
Properties II ,may be deemed to be beneficial owners of the Units held by
Investors and KM, respectively. The persons filing the Schedule 13D deny the
existence of a "group" within the meaning of Section 13(d)(3) of the Securities
and Exchange Act of 1934 and each such person disclaims beneficial ownership of
Units held by the other persons filing the Schedule 13D. The Schedule 13D
discloses, however, that the individuals who perform management services for
Properties and Properties II are substantially the same and that Investors and
KM have entered into an agreement to share information in connection with the
offer and sale of Units. According to the Schedule 13D, the address of each of
Investors, KM, Properties and Properties II is 199 South Los Robles Avenue,
Suite 440, Pasadena, CA 91101.
The General Partner owns 66 Units, as required by the terms of the
Partnership's public offering of Units. In addition, at March 1, 1998, Daniel
J. Epstein, President and Director of CPS, owned twenty Units. No other
directors or executive officers of the General Partner own any Units.
Item 13. Certain Relationships and Related Transactions
RI 81 and CPS received a total of $64,372 as the General Partners' allocable
share of Net Cash from Operations with respect to the year ended December 31,
1997. Pursuant to the Amended and Restated Certificate and Agreement of
Limited Partnership of the Partnership, for the year ended December 31, 1997,
$82 of the Partnership's net loss was allocated to CPS and RI 81. For a
description of the share of net cash from operations and the allocation of
income and loss to which the General Partner and former co-General Partner are
entitled, reference is made to Note 3 to the Consolidated Financial Statements,
included in the Partnership's annual report to Unitholders for the year ended
December 31, 1997, which is filed as an exhibit under Item 14. Effective July
1, 1997, all General Partner allocations were made solely to CPS.
The Partnership has entered into property management agreements with ConAm
Management pursuant to which ConAm Management has assumed direct responsibility
for day-to-day management of the Properties. It is the responsibility of ConAm
Management to select resident managers and monitor their performance. ConAm
Management's services also include the supervision of leasing, rent collection,
maintenance, budgeting, employment of personnel, payment of operating expenses,
strategic asset management and related services. For such services, ConAm
Management is entitled to receive a management fee of five percent of gross
revenues. A summary of property management fees earned by ConAm Management
during the past three years is incorporated by reference to Note 7 to the
Consolidated Financial Statements, incorporated herein by reference to the
Partnership's Annual Report to Unitholders for the year ended December 31,
1997, which is filed as an exhibit under Item 14.
Pursuant to Section 12(g) of the Partnership's Amended and Restated Certificate
and Agreement of Limited Partnership, the General Partner may be reimbursed by
the Partnership for certain of its costs. A summary of amounts paid to the
General Partners or their affiliates during the past three years is
incorporated by reference to Note 7 to the Consolidated Financial Statements,
included in the Partnership's Annual Report to Unitholders for the fiscal year
ended December 31, 1997, which is filed as an exhibit under Item 14.
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
Page
(a)(1) Financial Statements: Number
------
Consolidated Balance Sheets - December 31, 1997 and 1996 (1)
Consolidated Statements of Operations - For the years ended
December 31, 1997, 1996 and 1995 (1)
Consolidated Statements of Partners' Capital (Deficit) - For the
years ended December 31, 1997, 1996 and 1995 (1)
Consolidated Statements of Cash Flows - For the years ended
December 31, 1997, 1996 and 1995 (1)
Notes to the Consolidated Financial Statements (1)
Independent Auditors' Report (1)
Report of Former Independent Accountants (1)
(a)(3) Financial Statement Schedule:
Schedule III - Real Estate and Accumulated Depreciation F-1
Independent Auditors' Report F-2
Report of Former Independent Accountants F-3
(1) Incorporated by reference to the Partnership's Annual Report to
Unitholders for the year ended December 31, 1997, filed as an exhibit
under Item 14.
(a) (3) Exhibits:
(3) (A) Amended and Restated Certificate and Agreement of Limited Partnership
(included as, and incorporated herein by reference to, Exhibit A to the
Prospectus of Registrant dated June 24, 1981 (the "Prospectus"),
contained in Amendment No. 2 to Registration Statement, No. 2-70331, of
Registrant filed June 24, 1981, (the "Registration Statement"), and in
Amendment No. 1 to Registration Statement, No. 2-73558, of Registrant
filed August 20, 1981).
(B) Subscription Agreement and Signature Page (included as, and
incorporated herein by reference to, Exhibit B to the Prospectus).
(10)(A) Financing Documents relating to Las Colinas I and II (Promissory Note,
Deed of Trust, Assignment of Rents and Leases) (included as, and
incorporated herein by reference to, Exhibit 10-I to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1992
(Commission file No. 0-10223)).
(B) Financing Documents relating to Ridge Park (Promissory Note, Deed of
Trust, Assignment of Rents and Leases) (included as, and incorporated
herein by reference to, Exhibit 10-J to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992 (Commission
file No. 0-10223)).
(c) Financing Documents relating to Tierra Catalina (Promissory Note, Deed
of Trust, Assignment of Rents and Leases) (included as, and
incorporated herein by reference to, Exhibit 10-K to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1992
(Commission file No. 0-10223)).
(D) Settlement Agreement by and among the Managing Joint Venturers and the
Epoch Joint Venturers dated July 1, 1992 (included as, and
incorporated herein by reference to, Exhibit 10.I to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1992 (Commission file No. 0-10223)).
(E) Agreement of Limited Partnership of RI-81 Las Colinas Limited
Partnership dated as of July 1, 1992 (included as, and incorporated
herein by reference to, Exhibit 10.2 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1992
(Commission file No. 0-10223)).
(F) Agreement of Limited Partnership of RI-81 Tierra Catalina Limited
Partnership dated as of July 1, 1992 (included as, and incorporated
herein by reference to, Exhibit 10.3 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1992
(Commission file No. 0-10223)).
(G) Amended and Restated Agreement of Limited Partnership of Ridge Park
Associates Limited Partnership dated as of April 23, 1992 (included
as, and incorporated herein by reference to, Exhibit 10.4 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1992 (Commission file No. 0-10223)).
(H) Property Management Agreement between Hutton/ConAm Realty Investors 81
and ConAm Management Corp. for the Las Colinas I & II properties
(included as, and incorporated herein by reference to Exhibit 10-L to
the Registrant's Annual Report on Form 10-K for the year ended December
31, 1993 (Commission file No. 0-10223)).
(I) Property Management Agreement between Hutton/ConAm Realty Investors 81
and ConAm Management Corp. for the Tierra Catalina property (included
as, and incorporated herein by reference to Exhibit 10-M to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1993 (Commission file No. 0-10223)).
(13) Annual Report to Unitholders for the year ended December 31, 1997.
(21) List of Subsidiaries - Joint Ventures (included as, and incorporated
herein by reference to Exhibit 22 to the Registrant's 1991 Annual
Report on Form 10-K for the year ended December 31, 1991(Commission
file No. 0-10223)).
(27) Financial Data Schedule
(99) Portions of the Prospectus of Registrant dated June 24, 1981 (included
as, and incorporated herein by reference to Exhibit 28 to the
Registrant's 1988 Annual Report on Form 10-K for the year ended
December 31, 1988 (Commission file No. 0-10223)).
(b) Reports on Form 8-K:
On December 15, 1997 the Partnership filed a Form 8-K reporting the
change in Partnership's Certifying Accountants.
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.
Dated: March 25, 1998
BY: ConAm Property Services, Ltd.
General Partner
BY: Continental American Development, Inc.
General Partner
BY: /s/ Daniel J. Epstein
Name: Daniel J. Epstein
Title: President, Director and
Principal Executive 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 in the capacities and on the dates indicated.
CONAM PROPERTY SERVICES, LTD.
A General Partner
By: Continental American Development, Inc.
General Partner
Date: March 25, 1998
BY: /s/ Daniel J. Epstein
Daniel J. Epstein
Director, President and
Principal Executive Officer
Date: March 25, 1998 BY: /s/ E. Scott Dupree
E. Scott Dupree
Vice President and Director
Date: March 25, 1998
BY: /s/ Robert J. Svatos
Robert J. Svatos
Vice President and Director
Date: March 25, 1998
BY: /s/ Ralph W. Tilley
Ralph W. Tilley
Vice President
Date: March 25, 1998
BY: /s/ J. Bradley Forrester
J. Bradley Forrester
Vice President
Exhibit 13
ConAm Realty Investors 81 L.P.
1997 Annual Report
ConAm Realty Investors 81 L.P.
ConAm Realty Investors 81 L.P. is a California limited
partnership formed in 1981 to acquire, operate and hold
for investment multifamily residential properties. At
December 31, 1997, the Partnership's portfolio
consisted of two apartment properties located in
Arizona. Provided below is a comparison of average
occupancy levels for the years ended December 31, 1997
and 1996.
Average Occupancy
Property Location 1997 1996
--------------------------------------------------------------
Las Colinas I & II Scottsdale, Arizona 96% 96%
Tierra Catalina Tucson, Arizona 92% 90%
--------------------------------------------------------------
Contents
1 Message to Investors
3 Financial Highlights
4 Consolidated Financial Statements
7 Notes to the Consolidated
Financial Statements
12 Independent Auditors' Report and
Report of Former Independent Accountants
14 Net Asset Valuation
Administrative Inquiries Performance Inquiries/Form 10-Ks
Address Changes/Transfers First Data Investor Services Group
Service Data Corporation P.O. Box 1527 2424
South 130th Circle Boston, Massachusetts 02104-1527
Omaha, Nebraska 68144-2596 Attn: Financial Communications
800-223-3464 800-223-3464
Message to Investors
Presented for your review is the 1997 Annual Report for ConAm Realty Investors
81 L.P. (the "Partnership"). In this report, we discuss general market
conditions affecting the Partnership's two remaining properties (the
"Properties"). We have also included a performance summary which addresses
operations at each of the properties and financial highlights for the year.
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Actual results could differ from those projected in or
contemplated by the forward- looking statements as a result of a number of
factors, including those identified herein.
Cash Distributions
- ------------------
The Partnership declared cash distributions totaling $23.90 per Unit for the
year ended December 31, 1997, including the fourth quarter distribution of
$1.85 per Unit, which was credited to your brokerage account or sent directly
to you on February 13, 1998. Such amount also includes a special cash
distribution of $16.50, paid on February 24, 1997, representing net proceeds
from the sale of Ridge Park Apartments in December 1996. Since inception, the
Partnership has paid distributions totaling $449.55 per original $500 Unit,
including $254.50 per Unit in return of capital payments. The level of future
distributions will be evaluated on a quarterly basis and will depend on the
Partnership's operating results and future cash needs.
Operations Overview
- -------------------
Operations at the Properties remained stable in 1997, reflecting healthy
economic conditions, tempered by increased competition for tenants in the
markets where the properties are located. As a result of new apartment
construction in the Tucson and Scottsdale markets, some large apartment
properties have begun to offer rental concessions to attract tenants. In both
markets, many high-end renters opted to purchase homes due to low interest
rates. Despite these trends, strong economic growth in Tucson and Scottsdale
helped strengthen multi-family housing, and Tierra Catalina and Las Colinas I
and II sustained average occupancy levels of 92% and 96%, respectively, in
1997. In addition, the appraised values of the Properties increased by 4.0% in
total when compared to the prior year.
Several interior and exterior repairs were performed at each property in 1997,
including landscaping, carpet and appliance replacement in selected units and
other repairs to prepare vacant units for occupancy. The General Partner will
evaluate the need for capital improvements to increase the appeal of the
Properties and position them for eventual sale.
The General Partner continues to evaluate the sale potential of the remaining
properties and other options with respect to the Partnership's investments. One
of these options includes refinancing the loans secured by the Properties in
order to return capital to the limited partners on a tax-free basis and lock in
favorable fixed interest rates. This would also potentially enhance the
future marketability of the Properties, while enabling the Partnership to take
advantage of possible future property appreciation. The Partnership's ability
to sell the Properties is dependent upon a variety of factors, many of which
are not within the Partnership's control. There can be no assurance that any
specific property or all the properties can be sold, that particular prices
will be achieved, or that the Properties can be sold within a specific time
frame. We will keep you apprised of our sales efforts in future
correspondence.
Property Review
- ---------------
Las Colinas I & II
Las Colinas I & II is a 300-unit apartment community located eight miles
northeast of Phoenix in southwest Scottsdale. Las Colinas I and II reported
average occupancy of 96% in 1997, unchanged from 1996, and an increase in
rental income due to an increase in rental rates. The Scottsdale apartment
market experienced continued strong competition during 1997, reflecting high
levels of construction and notable competition from condominiums and single
family houses, as affordable prices and low mortgage rates enticed renters to
buy. Although vacancy rates in Phoenix and the Scottsdale submarket remained
low in 1997, occupancy levels are expected to decline due to the significant
new construction. The Scottsdale market is experiencing strong job and
population growth with over 70,000 new jobs created in the first six months of
1997 and over 100,000 new residents added to the market during the year. This
economic growth should favorably impact the market, and ease competition until
the pace of new construction subsides.
Tierra Catalina
Tierra Catalina is a 120-unit apartment community located near the Foothills
region of Tucson. The property maintained an average occupancy rate of 92%
during 1997, an increase from 90% for 1996. The increase in occupancy as well
as an increase in rental rates led to a 4.2% rise in the property's rental
income. Apartment vacancy rates remain high in this market, but significant
population growth in Tucson over the last few years is slowly reducing the
number of available units. Low interest rates and affordable home prices have
also increased competition by luring many renters to purchase homes. This
competition has led to the reemergence of rental incentives and other
concessions in the marketplace to attract tenants.
Summary
- -------
We will continue to monitor market conditions at the Properties and evaluate a
potential refinance of the Partnership's mortgage obligations. In the interim,
we intend to maximize the performance of the Properties and further improve
their appearance and condition. We will keep you apprised of significant
developments affecting your investment in future reports.
Very truly yours,
/s/ Daniel J. Epstein
Daniel J. Epstein
President
Continental American Development, Inc.
and ConAm Development Corporation,
General Partners of ConAm Property
Services, Ltd.
March 11, 1998
Financial Highlights
Selected Financial Data
For the periods ended December 31, 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------
Dollars in thousands,
except for per unit data
Total Income $ 3,299 $ 3,714 $ 4,416 $ 4,760 $ 4,485
Gain on Sale of Properties _ 1,411 1,485 _ _
Net Income (Loss) (8) 1,286 1,142 (253) (618)
Net Cash Provided by
Operating Activities 722 753 974 949 1,020
Long-term Obligations at Year End 9,830 9,943 11,954 15,601 15,736
Total Assets at Year End 12,495 14,545 16,022 22,497 23,565
Net Income (Loss) per
Limited Partnership Unit* (.10) 15.53 (1.38) (3.19) (7.81)
Distributions per
Limited Partnership Unit* 7.40 8.00 8.00 8.00 3.50
Special Distributions per
Limited Partnership Unit* 16.50 _ 40.50 _ _
- -------------------------------------------------------------------------------
* 78,290 units outstanding
Cash Distributions
Per Limited Partnership Unit
1997 1996
- -------------------------------------------------------------------------------
Special Distributions* $16.50 $ _
First Quarter 1.85 2.00
Second Quarter 1.85 2.00
Third Quarter 1.85 2.00
Fourth Quarter 1.85 2.00
------ ------
Total $23.90 $ 8.00
- -------------------------------------------------------------------------------
* On February 27, 1997, the Partnership paid a special cash distribution
totaling $16.50 per Unit, reflecting net proceeds received from the sale
of Ridge Park Apartments.
Consolidated Balance Sheets At December 31, At December 31,
1997 1996
Assets
Investments in real estate:
Land $ 3,630,175 $ 3,630,175
Buildings and improvements 17,975,267 17,975,267
----------------------------
21,605,442 21,605,442
Less accumulated depreciation (11,022,393) (10,303,382)
----------------------------
10,583,049 11,302,060
Cash and cash equivalents 1,388,845 2,741,077
Restricted cash 430,849 351,444
Mortgage fees, net of accumulated amortization
of $270,880 in 1997 and $220,063 in 1996. 84,837 135,654
Other assets 7,162 14,292
- -------------------------------------------------------------------------------
Total Assets $12,494,742 $14,544,527
- -------------------------------------------------------------------------------
Liabilities and Partners' Capital
Liabilities:
Mortgages payable $ 9,830,261 $ 9,943,036
Distribution payable 160,929 1,478,811
Accounts payable and accrued expenses 202,484 177,414
Security deposits 78,834 71,858
Due to general partners and affiliates 13,797 13,045
----------------------------
Total Liabilities 10,286,305 11,684,164
----------------------------
Partners' Capital (Deficit):
General Partners (265,715) (201,261)
Limited Partners (78,290 Units outstanding) 2,474,152 3,061,624
----------------------------
Total Partners' Capital 2,208,437 2,860,363
- -------------------------------------------------------------------------------
Total Liabilities and Partners' Capital $12,494,742 $14,544,527
- -------------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.
Consolidated Statements of Operations
For the years ended December 31, 1997 1996 1995
Income
Rental $ 3,196,975 $ 3,622,403 $ 4,313,044
Interest and other 102,512 91,282 102,535
-------------------------------------
Total Income 3,299,487 3,713,685 4,415,579
- -------------------------------------------------------------------------------
Expenses
Property operating 1,520,450 1,817,928 2,261,179
Interest 840,832 992,745 1,191,397
Depreciation and amortization 769,828 880,445 1,087,749
General and administrative 176,587 147,482 218,706
-------------------------------------
Total Expenses 3,307,697 3,838,600 4,759,031
- -------------------------------------------------------------------------------
Loss from operations (8,210) (124,915) (343,452)
Gain on sale of properties _ 1,410,622 1,485,121
- -------------------------------------------------------------------------------
Net Income (Loss) $ (8,210) $ 1,285,707 $ 1,141,669
- -------------------------------------------------------------------------------
Net Income (Loss) Allocated:
To the General Partners $ (82) $ 69,591 $ 1,250,091
To the Limited Partners (8,128) 1,216,116 (108,422)
- -------------------------------------------------------------------------------
$ (8,210) $ 1,285,707 $ 1,141,669
- -------------------------------------------------------------------------------
Per limited partnership unit
(78,290 Units outstanding)
Loss from operations $(.10) $(1.58) $(4.34)
Gain on sale of properties _ 17.11 2.96
- -------------------------------------------------------------------------------
Net Income (Loss) $(.10) $15.53 $(1.38)
- -------------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.
Consolidated Statements of Partners' Capital (Deficit)
For the years ended December 31, 1997, 1996 and 1995
General Limited
Partners Partners Total
- -------------------------------------------------------------------------------
Balance at December 31, 1994 $(1,316,915) $7,669,098 $6,352,183
Net income (loss) 1,250,091 (108,422) 1,141,669
Distributions ($48.50 per Unit) (121,389) (3,797,063) (3,918,452)
- -------------------------------------------------------------------------------
Balance at December 31, 1995 (188,213) 3,763,613 3,575,400
Net income 69,591 1,216,116 1,285,707
Distributions ($24.50 per Unit) (82,639) (1,918,105) (2,000,744)
- -------------------------------------------------------------------------------
Balance at December 31, 1996 (201,261) 3,061,624 2,860,363
Net loss (82) (8,128) (8,210)
Distributions ($7.40 per Unit) (64,372) (579,344) (643,716)
- -------------------------------------------------------------------------------
Balance at December 31, 1997 $ (265,715) $2,474,152 $2,208,437
- -------------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.
Consolidated Statements of Cash Flows
For the years ended December 31, 1997 1996 1995
- -------------------------------------------------------------------------------
Cash Flows From Operating Activities:
Net income (loss) $ (8,210) $1,285,707 $1,141,669
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 769,828 880,445 1,087,749
Gain on sale of properties _ (1,410,622) (1,485,121)
Increase (decrease) in cash arising
from changes in operating assets
and liabilities:
Fundings to restricted cash (396,778) (450,460) (536,471)
Release of restricted cash to
property operations 317,373 493,163 801,400
Other assets 7,130 10,654 16,109
Accounts payable and accrued expenses 25,070 (48,337) 16,898
Security deposits 6,976 (5,575) (63,975)
Due to general partners and affiliates 752 (2,218) (4,567)
----------------------------------
Net cash provided by operating activities 722,141 752,757 973,691
- -------------------------------------------------------------------------------
Cash Flows From Investing Activities -
Net proceeds from sale of properties _ 3,196,264 6,555,332
- -------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Distributions (1,961,598) (695,911) (3,918,452)
Mortgage principal payments (112,775) (2,011,152) (3,646,843)
Net cash used for financing activities (2,074,373) (2,707,063) (7,565,295)
- -------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents (1,352,232) 1,241,958 (36,272)
Cash and cash equivalents,
beginning of period 2,741,077 1,499,119 1,535,391
- -------------------------------------------------------------------------------
Cash and cash equivalents, end of period $1,388,845 $2,741,077 $1,499,119
- -------------------------------------------------------------------------------
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 840,832 $ 992,745 $1,191,397
- -------------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.
Notes to the Consolidated Financial Statements
December 31, 1997, 1996 and 1995
1. Organization
ConAm Realty Investors 81 L.P. (formerly Hutton/ConAm Realty Investors 81) (the
"Partnership") was organized as a limited partnership under the laws of the
State of California pursuant to a Certificate and Agreement of Limited
Partnership (the "Partnership Agreement") dated April 30, 1981, as amended and
restated August 31, 1981. The Partnership was formed for the purpose of
acquiring and operating certain types of residential real estate. The general
partners of the Partnership were RI-81 Real Estate Services Inc. ("RI-81"), an
affiliate of Lehman Brothers Inc., and ConAm Property Services, Ltd. ("CPS"),
an affiliate of Continental American Properties, Ltd. (the "General Partners").
On October 8, 1997, CPS acquired RI-81's co-general partner interest in the
Partnership effective July 1, 1997, pursuant to a purchase agreement between
CPS and RI-81 dated August 29, 1997. As a result, CPS now serves as the sole
general partner (the "General Partner") of the Partnership. In conjunction
with this transaction, the name of the Partnership changed from Hutton/ConAm
Realty Investors 81 to ConAm Realty Investors 81 L.P. The Partnership will
continue until December 31, 2010 unless sooner terminated pursuant to the terms
of the Partnership Agreement.
2. Significant Accounting Policies
Financial Statements The consolidated financial statements are prepared on the
accrual basis of accounting and include the accounts of the Partnership and its
affiliated ventures when the Partnership has a controlling interest in the
ventures. The effect of transactions between the Partnership and its ventures
have been eliminated in consolidation.
Investments in Real Estate Investments in real estate are recorded at cost
less accumulated depreciation and include the initial purchase price of the
property, legal fees, acquisition and closing costs.
Revenue is recognized when earned and expenses (including depreciation) are
recognized when incurred in accordance with generally accepted accounting
principles. Leases are generally for terms of one year or less.
Depreciation is computed using the straight-line method based upon the
estimated useful lives of the properties (25 years). Maintenance and repairs
are charged to operations as incurred. Costs incurred for significant
betterments and improvements are capitalized and depreciated over their
estimated useful lives.
For assets sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
reflected in net income for the period.
Impairment of Long-Lived Assets Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" ("FAS 121"), requires the Partnership to assess its
real estate investments for impairment whenever events or changes in
circumstances indicate that the carrying amount of the real estate may not be
recoverable. Recoverability of real estate to be held and used is measured by
a comparison of the carrying amount of the real estate to future net cash flows
(undiscounted and without interest) expected to be generated by the real
estate. If the real estate is considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the real
estate exceeds the fair value of the real estate.
Income Taxes No provision for income taxes has been made in the financial
statements as the liability for such taxes is that of the partners rather than
the Partnership.
Mortgage Fees Included in mortgage fees are deferred mortgage costs incurred
in connection with obtaining financing on the Partnership's properties. Such
costs are amortized over the 7- year term of the applicable loans.
Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid
short-term investments with original maturities of three months or less.
Concentration of Credit Risk Financial instruments which potentially subject
the Partnership to a concentration of credit risk principally consist of cash
and cash equivalents and restricted cash in excess of the financial
institution's federally insured limits. The Partnership invests its cash and
cash equivalents and restricted cash with high credit quality federally insured
financial institutions.
Restricted Cash Restricted cash consists of escrows for insurance, real estate
taxes and property replacement and repairs as required by the first mortgage
lender.
Use of Estimates Management of the Partnership has made a number of estimates
and assumptions relating to the reporting of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could differ from
those estimates.
3. The Partnership Agreement
The Partnership Agreement provides that net cash from operations, as defined,
is to be distributed quarterly, 90% to the limited partners and 10% to the
General Partners.
Net loss for any fiscal year is to be allocated 99% to the limited partners and
1% to General Partners. Net income for any fiscal year will generally be
allocated 90% to the limited partners and 10% to the General Partners.
Net proceeds from sales or refinancing are to be distributed 99% to the limited
partners and 1% to the General Partners until each limited partner has received
an amount equal to its adjusted capital value (as defined) and an annual,
non-compounded cumulative 7% return thereon. The balance, if any, is to be
distributed 85% to the limited partners and 15% to the General Partners. Gain
from sales resulting from mortgage debt in excess of basis is to be allocated
to each partner having a negative capital account balance, pro rata, to the
extent of such negative balance. Thereafter, such gain is to be allocated in
accordance with the distribution of net proceeds from sale or refinancing, with
the balance allocated to the limited partners.
4. Investments in Real Estate
The Partnership owns two residential apartment complexes that were acquired
either directly or through investments in joint ventures as follows:
Apartment Date Purchase
Property Name Units Location Acquired Price
- -------------------------------------------------------------------------------
Las Colinas I & II 300 Scottsdale, AZ 5/20/81 & 9/23/82 $12,831,783
Tierra Catalina 120 Tucson, AZ 3/9/84 7,012,650
- -------------------------------------------------------------------------------
On July 20, 1995, the Partnership sold Kingston Village and Cedar Bay Village
(the "Properties") to an institutional buyer (the "Buyer"), which was
unaffiliated with the Partnership. The selling price was determined by arm's
length negotiations between the Partnership and the Buyer. Kingston Village
and Cedar Bay Village were sold for $5,370,000 and $1,410,000, respectively.
The Partnership received aggregate net proceeds of $6,555,332 from the sales of
which $3,541,400, representing outstanding principal and interest, was used to
fully satisfy the Partnership's mortgage obligations on the Properties. The
sales resulted in a gain on sale of $1,485,121 which included the recognition
of mortgage prepayment penalties of $120,926 and a $101,146 write-off of the
unamortized portion of mortgage fees. The gain was allocated in accordance with
the Partnership Agreement. On August 17, 1995, the Partnership paid a special
distribution of $3,170,745 or $40.50 per Unit to the limited partners. The
special distribution was comprised of the net proceeds from the sale of the
Properties and Partnership cash reserves.
On November 27, 1996, the Partnership sold Ridge Park (the "Property") to Ridge
Park Limited Partnership, an Oklahoma limited partnership ("Ridge Park L.P."),
which is unaffiliated with the Partnership. The selling price was determined
by arm's length negotiations between the Partnership and Ridge Park L.P. The
Property was sold for $3,385,000. The Partnership received net proceeds of
$3,196,264 from the transaction of which $1,902,666, representing outstanding
principal and interest, was used to fully satisfy the Partnership's mortgage
obligation on the Property. The transaction resulted in a gain on sale of
$1,410,622 which included the recognition of mortgage prepayment penalties of
$36,843, and a $33,154 write-off of the unamortized portion of mortgage fees.
The gain was allocated in accordance with the Partnership Agreement. On
February 27, 1997, the Partnership paid a special distribution of $1,291,785
($16.50 per unit) to the limited partners, representing the net proceeds from
the sale of the Property.
Cedar Bay Village, Ridge Park, Kingston Village and Tierra Catalina were
originally acquired through joint ventures with unaffiliated developers. To
each venture, the Partnership contributed the apartment projects as its initial
capital contribution. On March 30, 1984, the co-venturer's interest with
respect to Tierra Catalina was acquired for $400,000.
The joint venture and limited partnership agreements for Cedar Bay Village,
Kingston Village, Ridge Park Associates, Tierra Catalina and Las Colinas
substantially provide that:
a. Available cash from operations is to be distributed 100% to the Partnership
until it has received an annual, non-cumulative preferred return, as
defined. Any remaining balance is to be distributed 99% to the Partnership
and 1% to the corporate General Partners.
b. Net income is to be allocated first, proportionately to partners with
negative capital accounts, as defined, until such capital accounts have
been increased to zero then, to the Partnership up to the amount of any
payments made on account of its preferred return and thereafter, 99% to
the Partnership and 1% to the corporate General Partners. All losses
are to be allocated first, to the partners with positive capital accounts,
as defined, until such accounts have been reduced to zero and then, 99%
to the Partnership and 1% to the corporate General Partners.
c. Income from a sale is to be allocated first, to the Partnership until the
Partnership's capital accounts, as defined, are equal to the fair market
value of the ventures' assets at the date of the amendments. Then, any
remaining balance is to be allocated 99% to the Partnership and 1% to the
corporate General Partners. Net proceeds from a sale or refinancing are to
be distributed first, to the partners with the positive capital account
balance, as defined; thereafter, 99% to the Partnership and 1% to the
corporate General Partners.
5. Mortgages Payable
On August 27, 1992, the Partnership obtained first mortgage loans on Las
Colinas I and II, Tierra Catalina, Kingston Village, Cedar Bay Village, and
Ridge Park properties totaling $15,900,000. The loans, secured by the
respective properties and an assignment of rents and leases, bear interest at
an annual rate of 8.5%. Each of the loans is a non-recourse loan with monthly
payments of principal and interest based on a thirty year amortization schedule
and a seven year term with the balance of the principal due on September 1,
1999. The loans require monthly insurance, real estate tax and property
replacement and repair reserve escrow fundings.
On July 20, 1995, Kingston Village and Cedar Bay Village were sold. A portion
of the sales proceeds, in the amount of $3,662,325, representing outstanding
principal, interest and pre- payment penalties, was used to fully satisfy the
Partnership's mortgage obligations on the Properties.
On November 27, 1996, Ridge Park was sold. A portion of the sales proceeds, in
the amount of $1,939,509 representing outstanding principal, interest and
pre-payment penalties, was used to fully satisfy the Partnership's mortgage
obligation on the Property.
The monthly payment of principal and interest on the remaining outstanding
first mortgage loans is $79,467. Upon maturity of the first mortgage loans, a
balloon payment of $9,619,720 and any accrued interest are due. Additionally,
these mortgages contain provisions for prepayment penalties if the mortgages
are repaid prior to their maturity date of September 1, 1999. Mortgages
payable for Las Colinas I and II and Tierra Catalina at December 31, 1997 are
$6,253,891 and $3,576,370, respectively.
Annual maturities of mortgage principal at December 31, 1997, are as follows:
Year Amount
----------------------------------
1998 122,743
1999 9,707,518
----------------------------------
$9,830,261
----------------------------------
6. Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments", requires that the fair values be disclosed for
the Partnership's financial instruments. The carrying amount of cash and cash
equivalents, restricted cash, distribution payable, accounts payable and
accrued expenses, security deposits and due to general partners and affiliates
are reasonable estimates of their fair values due to the short-term nature of
those instruments.
The carrying amount of the mortgages payable is a reasonable estimate of its
fair value based on management's belief that the interest rates and terms of
the debt are comparable to those commercially available to the Partnership in
the marketplace for similar instruments.
7. Transactions with Related Parties
The following is a summary of fees earned and reimbursable expenses to the
General Partners and affiliates for the years ended December 31, 1997, 1996 and
1995, and the unpaid portion at December 31, 1997:
Earned and
Unpaid at
December 31, Earned
1997 1997 1996 1995
- -------------------------------------------------------------------------------
RI 81 Real Estate Services, Inc.
and affiliates:
Out-of-pocket expenses $ _ $ 4,615 $3,968 $ 2,244
ConAm and affiliates:
Property operating salaries _ 260,841 296,558 394,663
Property management fees 13,797 160,005 181,291 217,706
- -------------------------------------------------------------------------------
Total $13,797 $425,461 $481,817 $614,613
- -------------------------------------------------------------------------------
8. Reconciliation of Financial Statement and Tax Information
The following is a reconciliation of the consolidated net income (loss) for
financial statement purposes to net income for federal income tax purposes for
the years ended December 31, 1997, 1996 and 1995:
1997 1996 1995
- -------------------------------------------------------------------------------
Net income (loss) per financial statements $(8,210) $1,285,707 $1,141,669
Tax basis joint venture net income
(loss) in excess of GAAP basis
joint venture net income (loss)(unaudited) 274,150 (74,666) (443,083)
Gain on sale of properties for tax
purposes in excess of gain per
financial statements (unaudited) _ 1,357,592 2,755,883
Other (unaudited) 18,312 (700) 1,000
- -------------------------------------------------------------------------------
Taxable net income (unaudited) $284,252 $2,567,933 $3,455,469
- -------------------------------------------------------------------------------
The following is a reconciliation of partners' capital for financial statement
purposes to partners' capital (deficit) for federal income tax purposes as of
December 31, 1997, 1996 and 1995:
1997 1996 1995
- -------------------------------------------------------------------------------
Partners' capital per financial statements $2,208,437 $2,860,363 $3,575,400
Accrued distribution from sale of property _ 1,304,833 _
Adjustment for cumulative difference
between tax basis loss and net income
(loss) per financial statements (unaudited) (2,702,259) (2,994,721) (4,276,947)
- -------------------------------------------------------------------------------
Partners' capital (deficit) per
tax return (unaudited) $ (493,822) $1,170,475 $ (701,547)
- -------------------------------------------------------------------------------
At December 31, 1997, the tax basis of the Partnership's assets was $9,941,445
and the tax basis of the Partnership's liabilities was $10,435,267.
9. Distributions Paid
Distributions, per the consolidated statements of partners' capital (deficit),
are recorded on the accrual basis, which recognizes specific record dates for
payments within each calendar year. The consolidated statements of cash flows
recognize actual cash distributions paid during the calendar year. The
following table discloses the annual differences as presented on the
consolidated financial statements:
Distributions Distributions
Payable Distributions Distributions Payable
Beginning of Year Declared Paid December 31,
- -------------------------------------------------------------------------------
1997 $1,478,811 $ 643,716 $1,961,598 $ 160,929
1996 173,978 2,000,744 695,911 1,478,811
1995 173,978 3,918,452 3,918,452 173,978
- -------------------------------------------------------------------------------
Independent Auditors' Report
The General Partner
ConAm Realty Investors 81 L.P.:
We have audited the accompanying consolidated balance sheet of ConAm Realty
Investors 81 L.P. (a California limited partnership) (formerly Hutton/ConAm
Realty Investors 81) and consolidated ventures (the "Partnership"), as of
December 31, 1997, and the related consolidated statements of operations,
partners' capital (deficit), and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the 1997 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ConAm
Realty Investors 81 L.P. and consolidated ventures as of December 31, 1997, and
the results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
San Diego, California
March 3, 1998
Report of Former Independent Accountants
To the Partners of
ConAm Realty Investors 81 L.P.:
We have audited the consolidated balance sheet of ConAm Realty Investors 81
L.P. (formerly Hutton/ConAm Realty Investors 81), a California limited
partnership, and Consolidated Ventures as of December 31, 1996 and the related
consolidated statements of operations, partners' capital (deficit) and cash
flows for each of the two years in the period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of ConAm
Realty Investors 81 L.P., a California limited partnership, and Consolidated
Ventures as of December 31, 1996 and 1995, and the consolidated results of
their operations and their cash flows for each of the two years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 14, 1997
Net Asset Valuation
Comparison of Acquisition Costs to Appraised Value and
Determination of Net Asset Value Per Unit at December 31, 1997 (Unaudited)
Acquisition Cost
(Purchase Price
Plus General
Partners' December 31,
Acquisition 1997 Appraised
Property Date of Acquisition Fees) Value (1)
- ------------------------------------------------------------------------------
Las Colinas I & II 5/20/81 & 9/23/82 $13,326,613 $14,500,000
Tierra Catalina 3/9/84 7,759,670 6,400,000
$21,086,283 20,900,000
Cash and cash equivalents
(including restricted cash) 1,819,694
Other assets 7,162
-----------
22,726,856
Less:
Total liabilities (10,286,305)
-----------
Partnership Net Asset Value (2) $12,440,551
-----------
Net Asset Value Allocated:
Limited Partners $12,258,582
General Partners 181,969
-----------
$12,440,551
-----------
Net Asset Value Per Unit
(78,290 units outstanding) $ 153.90
- ------------------------------------------------------------------------------
(1) This represents the Partnership's share of the December 31, 1997 Appraised
Values which were determined by an independent property appraisal firm.
(2) The Partnership Net Asset Value assumes a hypothetical sale at December
31, 1997 of all the Partnership's properties at a price based upon their
value as a rental property as determined by an independent property
appraisal firm, and the distribution of the proceeds of such sale,
combined with the Partnership's cash after liquidation of the
Partnership's liabilities, to the Partners.
Limited Partners should note that appraisals are only estimates of current
value and actual values realizable upon sale may be significantly different. A
significant factor in establishing an appraised value is the actual selling
price for properties which the appraiser believes are comparable. In addition,
the appraised value does not reflect the actual costs which would be incurred
in selling the properties. As a result of these factors and the illiquid
nature of an investment in Units of the Partnership, the variation between the
appraised value of the Partnership's properties and the price at which Units of
the Partnership could be sold may be significant. Fiduciaries of Limited
Partners which are subject to ERISA or other provisions of law requiring
valuations of Units should consider all relevant factors, including, but not
limited to Net Asset Value per Unit, in determining the fair market value of
the investment in the Partnership for such purposes.
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1997
Residential Property: Las Colinas Las Colinas Tierra
Apts I Apts II Catalina Total
- -------------------------------------------------------------------------------
Location Scottsdale, Scottsdale, Tucson, AZ na
AZ AZ
Construction date 1981 1982 1983, 1984 na
Acquisition date 05-20-81 09-23-82 03-09-84 na
Life on which depreciation
in latest income statements
is computed 25 years 25 years 25 years na
Encumbrances $6,253,891 $ _ $3,576,370 $ 9,830,261
Initial cost to Partnership:
Land $1,582,000 $514,564 $1,497,150 $ 3,593,714
Buildings and
improvements $8,268,721 $3,268,996 $6,403,622 $17,941,339
Costs capitalized
subsequent to acquisition:
Land, buildings
and improvements $ 29,123 $ 8,494 $ 32,772 $ 70,389
Gross amount at which carried
at close of period: (1)
Land $1,611,123 $ 515,719 $1,503,333 $ 3,630,175
Buildings and
improvements 8,268,721 3,276,335 6,430,211 17,975,267
- -------------------------------------------------------------------------------
$9,879,844 $3,792,054 $7,933,544 $21,605,442
- -------------------------------------------------------------------------------
Accumulated depreciation (2) $5,457,315 $2,009,058 $3,556,020 $11,022,393
- -------------------------------------------------------------------------------
(1) Represents aggregate cost for both financial reporting and Federal
income tax purposes.
(2) The amount of accumulated depreciation for Federal income tax
purposes is $17,595,293.
A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended December 31, 1997, 1996, and 1995 follows:
1997 1996 1995
- -------------------------------------------------------------------------------
Investments in real estate:
Beginning of period $21,605,442 $25,243,577 $33,729,297
Dispositions _ (3,638,135) (8,485,720)
- -------------------------------------------------------------------------------
End of period $21,605,442 $21,605,442 $25,243,577
- -------------------------------------------------------------------------------
Accumulated depreciation:
Beginning of period $10,303,382 $11,370,295 $13,875,550
Depreciation expense 719,011 818,734 1,011,400
Dispositions _ (1,885,647) (3,516,655)
- -------------------------------------------------------------------------------
End of period $11,022,393 $10,303,382 $11,370,295
- -------------------------------------------------------------------------------
See accompanying independent auditors' report.
Independent Auditors' Report
The General Partner
ConAm Realty Investors 81 L.P.:
Under date of March 3, 1998, we reported on the consolidated balance sheet
of ConAm Realty Investors 81 L.P. (a California limited partnership) (formerly
Hutton/ConAm Realty Investors 81) and consolidated ventures (the
"Partnership") as of December 31, 1997, and the related consolidated
statements of operations, partners' capital (deficit), and cash flows for
the year then ended, as contained in the 1997 annual report to Unitholders.
These consolidated financial statements and our report thereon are
incorporated by reference in the 1997 annual report on Form 10-K. In
connection with our audit of the aforementioned consolidated financial
statements, we also have audited the related consolidated financial
statement schedule. This consolidated financial statement schedule is the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on this consolidated financial statement schedule based on
our audit.
In our opinion, the consolidated 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.
KPMG Peat Marwick LLP
San Diego, California
March 3, 1998
Report of Former Independent Accountants
Our report on the consolidated financial statements of ConAm Realty Investors
81 L.P. (formerly Hutton/ConAm Realty Investors 81), a California Limited
Partnership, and Consolidated Ventures has been incorporated by reference in
this Form 10-K from the Annual Report to Unitholders of ConAm Realty Investors
81 for the year ended December 31, 1996. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedule listed in the index of this Form 10- K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Dec-31-1997
<CASH> 1,388,845
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 21,605,442
<DEPRECIATION> 11,022,393
<TOTAL-ASSETS> 12,494,742
<CURRENT-LIABILITIES> 456,044
<BONDS> 9,830,261
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0
0
<OTHER-SE> 2,208,437
<TOTAL-LIABILITY-AND-EQUITY> 12,494,742
<SALES> 3,196,975
<TOTAL-REVENUES> 3,299,487
<CGS> 0
<TOTAL-COSTS> 1,520,450
<OTHER-EXPENSES> 946,415
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<NET-INCOME> (8,210)
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