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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 YEAR ENDED: DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number: 0-10223
CONAM REALTY INVESTORS 81 L.P.
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EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
California 13-3069026
STATE OR OTHER JURISDICTION OF INCORPORATION I.R.S. EMPLOYER IDENTIFICATION NO.
1764 San Diego Avenue
San Diego, CA 92110 Attn.: Robert J. Svatos 92110-1906
- -------------------------------------------- ----------
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES ZIP CODE
Registrant's telephone number, including area code (619) 297-6771
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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
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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 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,
1998.
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PART I
ITEM 1. BUSINESS
(a) GENERAL DESCRIPTION OF BUSINESS AND OBJECTIVES
ConAm Realty Investors 81 L.P., formerly known as 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, prior to December 31, 1998, three of the properties were
sold and cash distributions representing substantially all of the net
proceeds from sale were distributed to the Unitholders. As of January 29,
1999, all of the Partnership's remaining investments in the properties were
sold and in February 1999, cash distributions representing substantially all
of the net proceeds from sale and cash from operations, less an amount for
the costs to be incurred in liquidating the Partnership, were distributed to
the Unitholders. The General Partner anticipates that the final liquidation
of the Partnership will be completed in mid-1999.
The Partnership's principal investment objectives with respect to its
interests in real property were:
(1) capital appreciation;
(2) distribution of net cash from operations attributable to rental income;
and
(3) preservation and protection of capital.
Distribution of net cash from operations was the Partnership's objective
during its operational phase, while preservation and appreciation of capital
were the Partnership's long-term objectives. The attainment of the
Partnership's investment objectives was dependent on many factors, including
economic conditions in the United States as a whole and, in particular, in
the localities in which the Partnership's properties were located, especially
with regard to achievement of capital appreciation.
The Partnership utilized the net proceeds of its public offering to acquire
five residential apartment complexes either directly or through investments
in joint ventures, as follows: (1) Las Colinas Apartments I & 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 was sold to an unaffiliated
buyer for $3,385,000.
During its year ended December 31, 1998, following consideration of various
alternatives available to the Partnership, the General Partner concluded that
a sale of the Partnership's two remaining properties, Las Colinas I & II and
Tierra Catalina (collectively the "Properties"), would be in the best
interests of the Partnership and the Unitholders. Throughout much of 1998,
the General Partner, on behalf of the Partnership, negotiated the terms of a
sale of the Properties with Lend Lease Real Estate Investments, Inc. ("Lend
Lease"), on behalf of two pension funds which are unaffiliated with the
General Partner. Once the terms were negotiated, as required by the
Partnership's Amended and Restated Certificate and Agreement of Limited
Partnership ("Agreement of Limited Partnership"), the General Partner
solicited the consent of a majority in interest of the Unitholders to the
sale pursuant to a Consent Solicitation Statement dated December 16, 1998.
The requisite consent was obtained on January 15, 1999, and on January 29,
1999, the Partnership consummated the sale of the Properties to DOC
Investors, L.L.C., a Delaware limited liability company (the "Purchaser"),
for a sales price of $22,250,000 (before selling costs and prorations). The
members of the Purchaser are two pension funds advised by Lend Lease, which
own an aggregate 91% interest in the Purchaser, and ConAm DOC Affiliates LLC,
an affiliate of the General Partner ("ConAm DOC"), which owns a 9% interest
in the Purchaser. ConAm DOC has the potential to receive up to an additional
18% of the profits of the Purchaser after certain priority returns are paid
to the members of the Purchaser.
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The Partnership received approximately $12,371,000 of cash proceeds from the
sale, net of closing costs of approximately $1,000 and repayment of
indebtedness of approximately $9,878,000. All net cash proceeds from the
sale and previously undistributed cash from operations, less an amount the
General Partner determined to set aside for contingencies, were distributed
to the Limited Partners on February 26, 1999.
The Partnership considers itself to have been engaged in only one industry
segment, real estate investment.
COMPETITION
The Partnership's real property investments were subject to competition from
similar types of properties in the vicinities in which they were located.
Such former competition increased during the Partnership's period of
ownership of the Properties due principally to the addition of newly
constructed apartment complexes offering increased residential and
recreational amenities. The Properties were also subject to competition from
condominiums and single-family properties, especially as potential renters
chose to buy homes during periods of low mortgage interest rates. The
Partnership competed 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 affected the
occupancy levels and revenues of the Properties. The occupancy level at the
Properties reflects some seasonality, which is typical in these markets. In
some cases, the Properties competed with properties owned by partnerships
affiliated with the General Partner.
For a discussion of market conditions in the areas where the Properties were
located, reference is made to the Partnership's Annual Report to Unitholders
for the year ended December 31, 1998, which is filed as an exhibit under Item
14.
EMPLOYEES
The Partnership has no employees. Services are provided by CPS and ConAm
Management Corporation ("ConAm Management"), an affiliate of CPS. Pursuant
to property management agreements with the Partnership, ConAm Management
provided property management services with respect to the Properties. In
addition, the Partnership retains Brock, Tibbitts & Snell, an accountancy
corporation, an unaffiliated company located in San Diego, California, to
provide accounting and investor communication functions. During 1998,
Service Data Corporation, an unaffiliated company, provided transfer agent
services for the Partnership. In February 1999, pursuant to the terms of a
sale of its contracts, Service Data Corporation assigned the transfer agent
functions of the company to MAVRICC Management Systems, Inc., an unaffiliated
company located in Troy, Michigan. 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 Properties owned and operated by the Partnership
during 1998 and discussion of market conditions in the areas where the
Properties were located, reference is made to the Partnership's Annual Report
to Unitholders for the year ended December 31, 1998, which is filed as an
exhibit under Item 14. For information on the Partnership's purchase of the
Properties, reference is made to Note 4 of the Consolidated Financial
Statements, included herein by reference to the Partnership's Annual Report
to Unitholders. For information on the sale of the Properties by the
Partnership in January 1999, reference is made to Item 1 and Note 10 of the
Consolidated Financial Statements, included herein by reference to the
Partnership's Annual Report to Unitholders. Average occupancy rates at each
property 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
On December 16, 1998, pursuant to a Consent Solicitation Statement, the
Unitholders were asked to approve a sale of the Partnership's remaining
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Properties and the related amendment to the Agreement of Limited Partnership.
A majority in interest of the Unitholders approved the sale and the related
amendment and the sale was completed on January 29, 1999. During the fourth
quarter of the year ended December 31, 1998, no other matters were submitted
to a vote of Unitholders through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND
RELATED SECURITY HOLDER MATTERS
As of December 31, 1998, the number of Unitholders of record was 3,405.
No established public trading market exists for the Units, and it is not
anticipated that such a market will develop in the future.
Distributions of Net Cash From Operations, when made, are determined by the
General Partner on a quarterly basis, with distributions generally occurring
approximately 45 days after the end of each quarter. Such distributions to
the Unitholders have been made from net operating income with respect to the
Partnership's investment in the Properties and from interest on short-term
investments. 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, 1998, which is filed as
an exhibit under Item 14. No distribution was made for the fourth quarter of
the year ended December 31, 1998 because the General Partner decided to
suspend distributions pending the outcome of the solicitation of the consent
of the Unitholders to the sale of the Properties.
Because of the sale of the Partnership's remaining Properties, no further
quarterly distributions of Net Cash From Operations will be made. The
Partnership distributed $13,505,025 to the Unitholders ($172.50 per Unit) and
$142,072 to the General Partner on February 26, 1999, which amounts are equal
to substantially all of the net proceeds from the sale of the Properties,
together with other available cash of the Partnership, less an amount for
costs associated with the sale of the properties, the liquidation of the
Partnership and other contingencies of approximately $475,128, net of
expected cash provided by operations through the date of sale. The final
liquidation of the Partnership is expected to occur in mid-1999, and the
remaining funds, if any, will be distributed to the Unitholders at that time.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference to the Partnership's Annual Report to Unitholders
for the year ended December 31, 1998, 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, 1998, the Partnership had cash and cash equivalents of
$1,578,924 which were invested in unaffiliated money market funds, compared
with $1,388,845 at December 31, 1997. The increase in cash and cash
equivalents reflects the cash provided from operations exceeding mortgage
principal payments and cash distributions to Partners during the year ended
December 31, 1998. The Partnership also maintains a restricted cash balance
that totaled $410,262 at December 31, 1998, largely unchanged from $430,849
at December 31, 1997. The increase in other assets in 1998 is primarily
attributed to an increase in prepaid costs related to the sale of the
Properties.
Distribution payable decreased to $0 at December 31, 1998, compared to
$160,929 at December 31, 1997. The decrease is attributable to the decision
of the General Partner to suspend distributions pending the outcome of the
solicitation of the consent of the Unitholders to the sale of the remaining
Properties.
Accounts payable and accrued expenses totaled $307,101 at December 31, 1998,
compared to $202,484 at December 31, 1997. The increase is primarily due to
the accrued and unpaid costs associated with the sale of the Properties.
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Interest payable increased to $68,837 at December 31, 1998 from $0 at
December 31, 1997 as the debt service payment due on January 1, 1999 was paid
in January 1999 rather than in December as was the case the prior year.
Security deposits decreased to $68,378 at December 31, 1998, compared to
$78,834 at December 31, 1997. This decrease occurred while occupancy
increased during that same period. This decrease in security deposits
occurred primarily because strong competition has reduced the ability of
property owners to collect refundable security deposits from their tenants.
As a result of the Partnership's sale of the Properties on January 29, 1999,
all of the Partnership's assets have been converted to cash and cash
equivalents. Pending distribution to the Unitholders as described in Item 5
above, the Partnership's funds have been invested in the Pacific Horizon
Money Market Funds, Prime Fund. The General Partner retained from the
initial distribution an amount it believes is sufficient to provide for
contingencies, and to cover the expenses of operating the Partnership until
final liquidation of the Partnership, including legal and accounting fees.
RESULTS OF OPERATIONS
1998 VERSUS 1997
Partnership operations for the year ended December 31, 1998
resulted in net income of $193,423 compared with a net loss of $8,210 in
1997. The improvement is primarily due to increased rental rates at both of
the properties and improved occupancy at Tierra Catalina, and slightly lower
property operating and general and administrative expenses.
Rental income for the year ended December 31, 1998 was $3,402,923 compared
with $3,196,975 in 1997. The increase is primarily due to improved occupancy
at Tierra Catalina and improved rental rates at both of the properties.
Interest and other income was $59,998 for the year ended December 31, 1998
compared to $102,512 in 1997. The decrease is primarily due to the
Partnership maintaining lower average cash balances in 1998 than in 1997 and
the cash proceeds held from the sale of Ridge Park during the first quarter
of 1997 before distribution to the Unitholders.
Property operating expenses decreased slightly to $1,497,797 for the year
ended December 31, 1998, as compared with $1,520,450 in 1997. The decrease
is primarily due to lower repairs and maintenance expenses, partially offset
by higher real estate tax expenses for both properties.
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.
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The average occupancy levels at each of the Properties owned during the years
ended December 31, 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
PROPERTY 1998 1997 1996
------------------------------------------------------------------------
<S> <C> <C> <C>
Las Colinas I & II 97% 96% 96%
Tierra Catalina 95% 92% 90%
------------------------------------------------------------------------
</TABLE>
YEAR 2000
Due to the consummation of the sale of the Properties in January 1999, the
Partnership is no longer engaged in the operation of real properties or any
other business. As a result of the foregoing, and in view of the General
Partner's plan to complete the full liquidation of the Partnership prior to
January 1, 2000, the Partnership has no exposure to Year 2000 issues.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since the Partnership sold its remaining Properties on January 29, 1999 and
its mortgage indebtedness was repaid, the Partnership has no exposure to
interest rate risk. In addition, the Partnership is expected to be
liquidated during 1999.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference to the Partnership's Annual Report to Unitholders
for the year ended December 31, 1998, which is filed as an exhibit under Item
14. Supplementary Data is incorporated by reference to F-1 and F-2 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.
(now a part of PricewaterhouseCoopers LLP) that it was changing accounting
firms and engaged KPMG LLP.
Coopers & Lybrand L.L.P.'s report on the consolidated financial statements
for the year ended December 31, 1996 contained no adverse opinion or
disclaimer of opinion and was not qualified as to uncertainty, audit scope or
accounting principles. There had 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 PARTNERSHIP
The Partnership has no officers or directors. CPS, as 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 April 30, 1981. The
general partner of CPS is Continental American Development, Inc. ("ConAm
Development"). The names and positions held by the directors and executive
officers of ConAm Development are set forth below. There are no family
relationships between any officers or directors.
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<TABLE>
<CAPTION>
Name Office
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<S> <C>
Daniel J. Epstein President, Director and Principal Executive Officer
E. Scott Dupree Vice President and Director
Robert J. Svatos Vice President and Director
Ralph W. Tilley Vice President
J. Bradley Forrester Vice President
</TABLE>
DANIEL J. EPSTEIN, 59, has been the President and a Director of ConAm
Development and a general partner of Continental American Properties, Ltd.
("ConAm"), an affiliate of CPS, 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, 48, 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, 40, 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 of
Science degree in Accounting from the University of Illinois. He is a
Certified Public Accountant.
RALPH W. TILLEY, 44, 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 LLP, specializing in real estate. He holds a Bachelor
of Science degree in Accounting from San Diego State University and is a
Certified Public Accountant.
J. BRADLEY FORRESTER, 41, 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,
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. 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 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.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Daniel J. Epstein, the President and a Director of ConAm Development, owns 20
Units (approximately 0.0255% of the outstanding units). Neither the General
Partner nor any of its other affiliates owns any Units.
Based on schedule 13D filed jointly on November 26, 1997 with the Securities
and Exchange Commission, Everest Investors LLC, KM Investments, LLC, Everest
Properties, Inc. and Everest Properties II, LLC hold an aggregate of 4,512
Units, representing approximately 5.8% of the Units. The persons filing the
Schedule 13D deny the existence of a "group" within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, and each such person
disclaims beneficial ownership of the Units held by other persons filing the
Schedule 13D. The address of each person filing the Schedule 13D is 199 South
Los Robles Ave, Suite 440, Pasadena, CA 91101. Except as may be indicated
in this paragraph, no person is known by the Partnership to be the beneficial
owner of more than 5% of the Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CPS received $52,193 as the General Partner's allocable share of Net Cash
From Operations with respect to year ended December 31, 1998. Pursuant to
the Agreement of Limited Partnership of the Partnership, for the year ended
December 31, 1998, $19,342 of the Partnership's net income was allocated to
CPS. For a description of the share of Net Cash From Operations and the
allocation of income and loss to which the General Partner is 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, 1998, which is filed as an exhibit under Item 14. Effective
July 1, 1997, all General Partner allocations were made solely to CPS.
The Partnership entered into property management agreements with ConAm
Management pursuant to which ConAm Management assumed direct responsibility
for day-to-day management of the Properties. It was the responsibility of
ConAm Management to select resident managers, where appropriate, and monitor
their performance. ConAm Management's services also included 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 was entitled to receive a
management fee equal to 5% 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,
included in the Partnership's Annual Report to Unitholders for the year ended
December 31, 1998, which is filed as an exhibit under Item 14.
Pursuant to Section 12(g) of the Partnership's 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 year ended December 31, 1998, which is filed as an
exhibit under Item 14.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
Page
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<S> <C>
Consolidated Balance Sheets - December 31, 1998 and 1997 . . . . (1)
Consolidated Statements of Operations - For the years
ended December 31, 1998, 1997 and 1996 . . . . . . . . . . . . . (1)
Consolidated Statements of Partners' Capital - For the years
ended December 31, 1998, 1997 and 1996.. . . . . . . . . . . . . (1)
Consolidated Statements of Cash Flows - For the years ended
December 31, 1998, 1997 and 1996 . . . . . . . . . . . . . . . . (1)
Notes to the Consolidated Financial Statements . . . . . . . . . (1)
Independent Auditors' Report . . . . . . . . . . . . . . . . . . (1)
Report of Former Independent Accountants . . . . . . . . . . . . (1)
(a)(2) FINANCIAL STATEMENT SCHEDULE:
Schedule III - Real Estate and Accumulated Depreciation . . . . (F-1)
Independent Auditors' Report . . . . . . . . . . . . . . . . . . (F-2)
Report of Former Independent Accountants . . . . . . . . . . . . (F-3)
</TABLE>
(1) INCORPORATED BY REFERENCE TO THE PARTNERSHIP'S ANNUAL REPORT TO UNITHOLDERS
FOR THE YEAR ENDED DECEMBER 31, 1998, FILED AS AN EXHIBIT UNDER ITEM 14.
(a)(3) EXHIBITS:
<TABLE>
<S> <C>
(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).
(C) Amendment, dated January 18, 1999 to the Partnership's
Amended and Restated Certificate and Agreement of Limited
Partnership (included as, and incorporated herein by
reference to, Exhibit 4.1 to the Partnerships Report on Form
8-K filed on February 16, 1999).
(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)).
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(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 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 Form 10-K for the year
ended December 31, 1999 (Commission file No. 0-20223))
(J) Agreement For Purchase and Sale and Joint Escrow Instructions
between RI81 Las Colinas Limited Partnership and DOC
Investors, L.L.C. dated January 26, 1999 with respect to Las
Colinas Apartments I and II (included as, and incorporated
herein by reference to, Exhibit 10.1 to the Partnership's
Report on Form 8-K filed in February 16, 1999.)
(K) Agreement for Purchase and Sale and Joint Escrow Instructions
between Tierra Catalina Limited Partnership and DOC Investors,
L.L.C. dated January 26, 1999 with respect to Tierra Catalina
(included as, and incorporated herein by reference to, Exhibit
10.2 to the Partnership's Report on Form 8-K filed on February
16, 1999).
(13) Annual Report to Unitholders for the year ended December 31,
1998.
(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 filed for the
year ended December 31, 1991).
(27) Financial Data Schedule
(99) Portions of the Prospectus of the 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
filed for the year ended December 31, 1988).
</TABLE>
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed by the Partnership during
the fourth quarter of the year ended December 31, 1998.
9
<PAGE>
(c) EXHIBITS
See Item 14(a)(3) above.
10
<PAGE>
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 30, 1999
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
11
<PAGE>
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 30, 1999
BY: /s/ Daniel J. Epstein
-----------------------------------------
Daniel J. Epstein
Director, President and
Principal Executive Officer
Date: March 30, 1999 BY: /s/ E. Scott Dupree
-----------------------------------------
E. Scott Dupree
Vice President and Director
Date: March 30, 1999
BY: /s/ Robert J. Svatos
-----------------------------------------
Robert J. Svatos
Vice President and Director
Date: March 30, 1999
BY: /s/ Ralph W. Tilley
-----------------------------------------
Ralph W. Tilley
Vice President
Date: March 30, 1999
BY: /s/ J. Bradley Forrester
-----------------------------------------
J. Bradley Forrester
Vice President
12
<PAGE>
EXHIBIT 13
CONAM REALTY INVESTORS 81 L.P.
1998 ANNUAL REPORT
<PAGE>
- -------------------------------------------------------------------------------
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, 1998, the Partnership's
portfolio consisted of two apartment properties located in Arizona. On
January 29, 1999, with the consent of the Unitholders, the two
remaining properties were sold for a price of $22,250,000 (before
closing costs) and substantially all of the cash, less a contingency
amount, was subsequently distributed to the Unitholders on February 26,
1999.
CONTENTS
<TABLE>
<S> <C>
1 Message to Investors
2 Performance Summary
3 Financial Highlights
4 Consolidated Financial Statements
7 Notes to the Consolidated Financial Statements
13 Independent Auditors' Report
14 Report of Former Independent Accountants
15 Net Asset Valuation
</TABLE>
- -------------------------------------------------------------------------------
ADMINISTRATIVE INQUIRIES PERFORMANCE INQUIRIES/FORM 10-Ks
ADDRESS CHANGES/TRANSFERS Brock, Tibbitts and Snell
MAVRICC Management Systems, Inc. 625 Broadway, Suite 911
1845 Maxwell, Suite 101 San Diego, California 92101
Troy, MI 48084-4510
Attn: Financial Communications
248-637-7897 619-232-0365
- -------------------------------------------------------------------------------
<PAGE>
CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES
- -------------------------------------------------------------------------------
MESSAGE TO INVESTORS
- -------------------------------------------------------------------------------
Presented for your review is the 1998 Annual Report for ConAm Realty
Investors 81 L.P. (the "Partnership"). In this report we have included a
performance summary which addresses operations at each of the properties (the
"Properties") and the financial highlights for the year.
We are pleased to announce that the proposed sale of the Partnership's two
remaining Properties to DOC Investors, L.L.C., a Delaware limited liability
company, was approved by a majority in interest of the Unitholders as of
January 15, 1999 and that the sale was completed on January 29, 1999.
Following the close of the sale of the Properties, a distribution of $172.50
per Unit, representing the majority of the net proceeds from the sale and
other cash from operations, was paid to Unitholders on February 26, 1999.
This distribution included the net proceeds from the sale of the
Partnership's Properties in January 1999 of $156.17 per Unit, and cash from
operations of $16.33 per Unit.
CASH DISTRIBUTIONS
The Partnership paid quarterly cash distributions of operating cash flow
totaling $6.00 per Unit for the year ended December 31, 1998. The General
Partner elected not to make a fourth quarter distribution pending the outcome of
the solicitation of the consent of the Unitholders to the sale of the
Partnership's Properties. Including the distribution of sale proceeds and cash
from operations made on February 26, 1999, since inception, the Partnership has
paid distributions totaling $628.05 per original $500 Unit.
OPERATIONS OVERVIEW
In 1998, operations at the Partnership's Properties continued to be impacted to
varying degrees by strong competition for residents. In the Scottsdale and
Tucson areas where the Properties are located, many renters opted to purchase
homes due to low interest rates. Despite this trend, strong economic growth
nonetheless helped strengthen multifamily housing, and the Properties were able
to sustain average occupancy levels at or above 95% in 1998 while increasing
rental rates at both Properties, in part due to the use of rental concessions.
The Tucson market also improved from its overbuilt situation of two years ago,
contributing to the increased occupancy at Tierra Catalina. Although rental
occupancy and rental rates have improved, rental concessions were required to
maintain occupancy levels.
SUMMARY
The sale of the Properties on January 29, 1999 and the initial distribution
of net sales proceeds and cash from operations on February 26, 1999
represented a major step toward the liquidation of the Partnership that
is expected to be completed in August 1999. A final distribution of remaining
Partnership cash, if any, will be made shortly thereafter.
Very truly yours,
/s/ Daniel J. Epstein
Daniel J. Epstein, President
Continental American Development Inc.
General Partner of ConAm Property Services, Ltd.
March 30, 1999
1
<PAGE>
CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES
- -------------------------------------------------------------------------------
PERFORMANCE SUMMARY
- -------------------------------------------------------------------------------
LAS COLINAS I & II SCOTTSDALE, ARIZONA
Las Colinas I & II is a 300-unit apartment community located in Scottsdale
eight miles northeast of Phoenix. Las Colinas I & II reported average
occupancy of 97% in 1998, up from 96% in 1997, and an increase in rental
rates. The Scottsdale apartment market experienced continued strong
competition during 1998 and 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. The Scottsdale market
is experiencing strong job and population growth.
TIERRA CATALINA TUCSON, ARIZONA
Tierra Catalina is a 120-unit apartment community located near the Foothills
region of Tucson. The property maintained an average occupancy rate of 95%
during 1998, an increase from 92% for 1997, in part due to the use of rental
incentives and other concessions in the marketplace to attract residents. The
increase in occupancy as well as an increase in rental rates led to a 7.5%
rise in the property's rental income in 1998. Apartment vacancy rates
generally 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 for residents by encouraging many renters to purchase homes.
2
<PAGE>
CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
For the years ended December 31, 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DOLLARS IN THOUSANDS, EXCEPT FOR
PER UNIT DATA
Total Income $ 3,463 $ 3,299 $ 3,714 4,416 4,760
Gain on Sale of Properties -- -- 1,411 1,485 --
Net Income (Loss) 193 (8) 1,286 1,142 (253)
Net Cash Provided by
Operating Activities 998 722 753 974 949
Long-term Obligations at Year End 9,718 9,830 9,943 11,954 15,601
Total Assets at Year End 12,057 12,495 14,545 16,022 22,497
Net Income (Loss) per
Limited Partnership Unit* 2.22 (.10) 15.53 (1.38) (3.19)
Distributions per Limited Partnership
Unit* 6.00 7.40 8.00 8.00 8.00
Special Distributions per Limited
Partnership Unit* -- 16.50 -- 40.50 --
- --------------------------------------------------------------------------------------------------------------------
* 78,290 UNITS OUTSTANDING
</TABLE>
<TABLE>
<CAPTION>
CASH DISTRIBUTIONS
PER LIMITED PARTNERSHIP UNIT 1998 1997
- --------------------------------------- ------------------ -------------------
<S> <C> <C>
Special Distributions* $ -- $16.50
First Quarter 2.00 1.85
Second Quarter 2.00 1.85
Third Quarter 2.00 1.85
Fourth Quarter -- 1.85
------------------ -------------------
TOTAL $ 6.00 $ 23.90
- --------------------------------------- ------------------ -------------------
</TABLE>
Cash distributions were reduced in 1998 due to a suspension of distributions
in the fourth quarter pending the outcome of the solicitation of the consent
of the Unitholders to the sale of the Properties.
* 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.
3
<PAGE>
CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, AT DECEMBER 31,
1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in real estate:
Land $ 3,630,175 $ 3,630,175
Buildings and improvements 17,984,707 17,975,267
--------------------------------------------
21,614,882 21,605,442
Less accumulated depreciation (11,739,275) (11,022,393)
--------------------------------------------
9,875,607 10,583,049
Cash and cash equivalents 1,578,924 1,388,845
Restricted cash 410,262 430,849
Mortgage fees, net of accumulated amortization
of $321,697 in 1998 and $270,880 in 1997 34,020 84,837
Other assets 158,544 7,162
- ---------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 12,057,357 $ 12,494,742
=========================================================================================================
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------------------------------------------------------------------------------
Liabilities:
Mortgages payable $ 9,718,148 $ 9,830,261
Distribution payable -- 160,929
Accounts payable and accrued expenses 307,101 202,484
Due to general partner and affiliates 14,966 13,797
Interest payable 68,837 --
Security deposits 68,378 78,834
-------------------------------------------
Total Liabilities 10,177,430 10,286,305
-------------------------------------------
Partners' Capital (Deficit):
General Partner (298,566) (265,715)
Limited Partners (78,290 Units outstanding) 2,178,493 2,474,152
-------------------------------------------
Total Partners' Capital 1,879,927 2,208,437
- ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 12,057,357 $ 12,494,742
=========================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Rental $ 3,402,923 $ 3,196,975 $ 3,622,403
Interest and other 59,998 102,512 91,282
---------------------------------------------------
Total Income 3,462,921 3,299,487 3,713,685
---------------------------------------------------
EXPENSES
Property operating 1,497,797 1,520,450 1,817,928
Depreciation and amortization 769,749 769,828 880,445
Interest 830,863 840,832 992,745
General and administrative 169,197 176,587 147,482
Write-off of assets 1,892 -- --
---------------------------------------------------
Total Expenses 3,269,498 3,307,697 3,838,600
---------------------------------------------------
Income (Loss) from operations 193,423 (8,210) (124,915)
Gain on sale of property -- -- 1,410,622
- -------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 193,423 $ (8,210) $ 1,285,707
===================================================================================================================
NET INCOME (LOSS) ALLOCATED:
To the General Partner $ 19,342 $ (82) $ 69,591
To the Limited Partners 174,081 (8,128) 1,216,116
- -------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 193,423 $ (8,210) $ 1,285,707
===================================================================================================================
PER LIMITED PARTNERSHIP UNIT
(78,290 UNITS OUTSTANDING):
Income (Loss) from operations $ 2.22 $ (.10) $ (1.58)
Gain on sale of property -- -- 17.11
- -------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 2.22 $ (.10) $ 15.53
===================================================================================================================
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
- -------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996 GENERAL LIMITED
PARTNER PARTNERS TOTAL
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE (DEFICIT) 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 (DEFICIT) 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 (DEFICIT) AT DECEMBER 31, 1997 $ (265,715) $ 2,474,152 $ 2,208,437
Net income 19,342 174,081 193,423
Distributions ($6.00 per Unit) (52,193) (469,740) (521,933)
- -------------------------------------------------------------------------------------------------------------------
BALANCE (DEFICIT) AT DECEMBER 31, 1998 $ (298,566) $ 2,178,493 $ 1,879,927
===================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 193,423 $ (8,210) $ 1,285,707
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 769,749 769,828 880,445
Gain on sale of properties -- -- (1,410,622)
Write-off of assets 1,892 -- --
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Fundings to restricted cash (405,639) (396,778) (450,460)
Release of restricted cash 426,226 317,373 493,163
Other assets (151,382) 7,130 10,654
Accounts payable and accrued expenses 104,617 25,070 (48,337)
Due to general partner and affiliates 1,169 752 (2,218)
Interest payable 68,837 -- --
Security deposits (10,456) 6,976 (5,575)
-----------------------------------------------------
Net cash provided by operating activities 998,436 722,141 752,757
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate (13,382) -- --
Net proceeds from sale of property -- -- 3,196,264
-----------------------------------------------------
Net cash provided by (used in) investing activities (13,382) -- 3,196,264
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (682,862) (1,961,598) (695,911)
Mortgage principal payments (112,113) (112,775) (2,011,152)
-----------------------------------------------------
Net cash used in financing activities (794,975) (2,074,373) (2,707,063)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 190,079 (1,352,232) 1,241,958
Cash and cash equivalents, beginning of period 1,388,845 2,741,077 1,499,119
- -------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,578,924 $ 1,388,845 $ 2,741,077
===================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 762,026 $ 840,832 $ 992,745
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING ACTIVITIES:
Write-off of buildings and improvements $ (3,942) $ -- $ --
Write-off of accumulated depreciation $ 2,050 $ -- $ --
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES
Notes to the Consolidated Financial Statements
DECEMBER 31, 1998, 1997 AND 1996
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 (as subsequently amended, 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 multi-family 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 was changed from Hutton/ConAm Realty Investors 81 to ConAm
Realty Investors 81 L.P. On January 15, 1999, a majority in interest of
Unitholders agreed to sell the Partnership's remaining properties and
liquidate the Partnership. The Partnership sold its properties on January
29,1999 (Note 10) and expects to liquidate during 1999.
2. SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
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 The Partnership assesses 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 as the amount by which the carrying amount of the real
estate exceeds the fair value of the real estate. At December 31, 1998, the
Partnership's properties were assets to be held and used as the Partnership
did not have the ability to sell the properties without the approval of a
majority of the Unitholders.
7
<PAGE>
CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES
MORTGAGE FEES Mortgage fees are costs incurred in connection with obtaining
financing for the Partnership's properties. Such costs are amortized over the
initial term of the loan on a method which approximates the
effective-interest method.
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.
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 or treasury based money market funds.
RESTRICTED CASH Restricted cash consists of escrow deposits for real estate
taxes and casualty insurance 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 Partner.
Net loss for any fiscal year is to be allocated 99% to the limited partners
and 1% to General Partner. Net income for any fiscal year will generally be
allocated 90% to the limited partners and 10% to the General Partner.
Net proceeds from sales or refinancing are to be distributed 99% to the
limited partners and 1% to the General Partner 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 Partner.
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.
Effective July 1, 1997, all general partner allocations were made solely to
CPS.
4. INVESTMENTS IN REAL ESTATE
The Partnership's two remaining properties at December 31, 1998 were as
follows:
<TABLE>
<CAPTION>
PROPERTY NAME UNITS LOCATION DATE ACQUIRED PURCHASE PRICE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES
Since inception, the Partnership acquired five residential apartment complexes
either directly or through investments in joint ventures. On July 20, 1995, the
Partnership sold Kingston Village and Cedar Bay Village 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 Kingston Village and Cedar Bay Village. 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 Kingston Village and Cedar
Bay Village and Partnership cash reserves.
On November 27, 1996, the Partnership sold Ridge Park 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. Ridge Park 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
Ridge Park. 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 Ridge Park.
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 limited partnership agreements for 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
General Partner.
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 General Partner. 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 General Partner.
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 Partnerships' assets at the date of the amendments. Then, any remaining
balance is to be allocated 99% to the Partnership and 1% to the General Partner.
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 General Partner. Upon dissolution or
termination of the Partnerships, the General Partner is to be required to
contribute an amount equal to the lesser of (i) the excess of 1.01% of the
capital account, as defined, of the Partnership as of the date of the
dissolution or termination over any capital contributions made by the General
Partner; or (ii) the deficit balance, if any, in the General Partner's capital
accounts, as defined.
9
<PAGE>
CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES
5. MORTGAGE 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.
Mortgages payable for Las Colinas I & II and Tierra Catalina at December 31,
1998 are $6,182,567 and $3,535,581, respectively. These mortgages contain
provisions for prepayment penalties if the mortgages are repaid prior to
their maturity date of September 1, 1999. The loans were repaid in full in
conjunction with the sale of Las Colinas I & II and Tierra Catalina on
January 29, 1999 (note 10).
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, due to general partner and affiliates, interest payable,
and security deposits are reasonable estimates of their fair values due to
the short-term nature of those instruments.
The carrying amount of the mortgage payable is a reasonable estimate of 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, 1998, 1997
and 1996, and the unpaid portion at December 31, 1998:
<TABLE>
<CAPTION>
EARNED AND
UNPAID AT
DECEMBER 31, EARNED
------------------ ---------------- ----------------
1998 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RI-81 Real Estate Services Inc. and
affiliates -
Out-of-pocket expenses $4,509 $ 4,509 $4,615 $3,968
ConAm and affiliates:
Property operating salaries -- 234,521 260,841 296,558
Property management fees 14,966 171,226 160,005 181,291
- ------------------------------------------------------------------------------------------------------------------
TOTAL $19,475 $410,256 $425,461 $481,817
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES
8. RECONCILIATION OF FINANCIAL STATEMENT AND TAX INFORMATION
The following is a reconciliation of the net income for financial statement
purposes to net income (loss) for federal income tax purposes for the years
ended December 31, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) per financial statements $ 193,423 $ (8,210) $ 1,285,707
Tax basis partnership net income (loss)
in excess of GAAP basis joint
venture net income (unaudited) 397,234 274,150 (74,666)
Gain on sale of properties
for tax purposes in excess of gain per
financial statements (unaudited) -- -- 1,357,592
Other (unaudited) (20,000) 18,312 (700)
- -------------------------------------------------------------------------------------------------------------------
TAXABLE NET INCOME (UNAUDITED) $ 570,657 $ 284,252 $ 2,567,933
===================================================================================================================
</TABLE>
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, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' capital per financial statements $ 1,879,927 $ 2,208,437 $ 2,860,363
Accrued distribution from sale of property (unaudited) -- -- 1,304,833
Adjustment for cumulative difference between
tax basis net income and net income
per financial statements (unaudited) (2,325,025) (2,702,259) (2,994,721)
- -------------------------------------------------------------------------------------------------------------------
PARTNERS' CAPITAL (DEFICIT) PER INCOME TAX RETURN (UNAUDITED) $ (445,097) $ (493,822) $ 1,170,475
===================================================================================================================
</TABLE>
At December 31, 1998, the tax basis of the Partnership's assets was
$(208,258) and the tax basis of the Partnership's liabilities was $236,839.
The Partnership does not consolidate its investment in joint ventures for
income tax purposes.
9. DISTRIBUTIONS PAID
Cash distributions, per the consolidated statements of partners' capital, are
recorded on the accrual basis, which recognizes specific record dates for
payments within each year. The consolidated statements of cash flows
recognize actual cash distributions paid during the year. The following table
discloses the annual amounts as presented on the consolidated financial
statements:
<TABLE>
<CAPTION>
Distributions Distributions
Payable Distributions Distributions Payable
Beginning of Year Declared Paid December 31,
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 $ 160,929 $ 521,933 $ 682,862 $ --
1997 1,478,811 643,716 1,961,598 160,929
1996 173,978 2,000,744 695,911 1,478,811
- ------------------------------------------------------------------------------------------------------
</TABLE>
10. SALE OF PROPERTIES
On January 29, 1999, the Partnership consummated the sale of the Las Colinas
I & II and Tierra Catalina to DOC Investors, L.L.C., a Delaware limited
liability company, for a sales price of $22,250,000 (before selling costs and
prorations). As required by the Partnership's Partnership Agreement, the
General Partner solicited the consent of a majority in interest of the
Unitholders to the sale pursuant to a Consent
11
<PAGE>
CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES
Solicitation Statement dated December 16, 1998. The requisite consent was
obtained on January 15, 1999. The Partnership received approximately
$12,371,000 of cash proceeds from the sale, net of closing costs of
approximately $1,000 and repayment or assumption of indebtedness of
approximately $9,878,000.
On February 26, 1999, the Partnership distributed $13,505,025 ($172.50 per
Unit) to the Unitholders and $142,072 to the General Partner.
12
<PAGE>
CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES
- -------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- -------------------------------------------------------------------------------
The General Partner
ConAm Realty Investors 81 L.P.:
We have audited the accompanying consolidated balance sheets of ConAm Realty
Investors 81 L.P. (a California limited partnership) and consolidated
ventures (the Partnership), as of December 31, 1998 and 1997, and the related
consolidated statements of operations, partners' capital, and cash flows for
the years 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
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.
As further discussed in Note 10 to the consolidated financial statements, the
Partnership sold substantially all of its assets on January 29, 1999.
In our opinion, the 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, 1998
and 1997, and the results of their operations and their cash flows for the
years then ended, in conformity with generally accepted accounting principles.
KPMG LLP
San Diego, California
March 12, 1999
13
<PAGE>
CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES
- -------------------------------------------------------------------------------
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 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 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 the consolidated results
of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 14, 1997
14
<PAGE>
CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUATION
- ------------------------------------------------------------------------------------------------------------------------
COMPARISON OF ACQUISITION COSTS TO DECEMBER 31, 1998 PROPERTY VALUES AND
DETERMINATION OF NET ASSET VALUE PER UNIT AT DECEMBER 31, 1998 (UNAUDITED)
ACQUISITION COST PARTNERSHIP'S SHARE NET ASSET VALUE
PROPERTY DATE OF ACQUISITION (PURCHASE PRICE PLUS OF PROPERTY DETERMINATION
GENERAL PARTNER'S VALUE (1)
ACQUISITION FEES)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Las Colinas I & II 05-20-81 & 09-23-82 $ 13,326,613 $15,850,000
Tierra Catalina 03-09-84 7,759,670 6,400,000
Aggregate Property Value at 12-31-98 $22,250,000
Less estimated transaction costs in escrow (1,000)
-------------------
Sales proceeds (before repayment of secured debt) 22,249,000
Cash and cash equivalents (including previously restricted cash) 1,989,186
Other assets 158,544
-------------------
Total assets 24,396,730
-------------------
Less:
Secured debt 9,718,148
Other liabilities 459,282
Prepayment penalties 97,075
Contingency amounts (2) 475,128
-------------------
Total liabilities 10,749,633
-------------------
Partnership Net Asset Value (3) 13,647,097
-------------------
Net Asset Value Allocated:
Limited Partners 13,505,025
General Partner 142,072
-------------------
13,647,097
-------------------
NET ASSET VALUE PER UNIT (78,290 UNITS OUTSTANDING) 172.50
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the Partnership's share of the fair market value of the
properties as reflected in the purchase and sale agreements pursuant to
which the properties were sold on January 29, 1999. The purchase prices
contained in such agreements were negotiated and agreed to in December
1998.
(2) Includes an amount for estimated future costs related to the sale of the
properties and liquidation of the Partnership and an amount the General
Partner determined to set aside for contingencies.
(3) The Partnership Net Asset Value assumes a sale at December 31, 1998 of all
the Partnership's properties at prices equal to the sales prices set forth
in the purchase and sale agreements described in Note (1) above, payment of
all Partnership liabilities, and the distribution of the net proceeds of
such sale and other Partnership cash to the Partners.
Since the Partnership sold all of its real property assets in January 1999,
is in dissolution, and is in the process of winding up and liquidating, the
foregoing Partnership Net Asset Value is intended to approximate the
liquidation value of the Partnership and the Net Asset Value Per Unit is
intended to approximate the per Unit amount which is expected to be
distributed to the Limited Partners in connection with the Partnership's
liquidation. The Net Asset Valuation does not take into account the illiquid
nature of an investment in the Units or the fact that at December 31, 1998 a
holder of Units would likely not have been able to sell their Units for the
Net Asset Value Per Unit set forth above. Fiduciaries of Limited Partners
which are subject to ERISA or other provisions of law requiring valuation 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.
15
<PAGE>
CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
<TABLE>
<CAPTION>
LAS COLINAS LAS COLINAS
RESIDENTIAL PROPERTY: APTS I APTS II TIERRA CATALINA TOTAL
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Location Scottsdale, AZ Scottsdale, AZ Tucson, AZ na
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 $ 6,182,567 $ -- $ 3,535,581 $ 9,718,148
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 $ 46,154 $ 83,771
Write-off of buildings
and improvements $ -- $ -- $ (3,942) $ (3,942)
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 6,439,651 17,984,707
- --------------------------------------------------------------------------------------------------------------------------
$ 9,879,844 $ 3,792,054 $ 7,942,984 $ 21,614,882
==========================================================================================================================
Accumulated depreciation $ 5,729,208 $ 2,198,968 $ 3,811,099 $ 11,739,275
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The aggregate costs for Land, Buildings and Improvements for Federal
income tax purposes are $17,984,708.
A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended December 31, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENTS IN REAL ESTATE:
Beginning of period $ 21,605,442 $ 21,605,442 $ 25,243,577
Additions 13,382 -- --
Dispositions and disposals (3,942) -- (3,638,135)
- -----------------------------------------------------------------------------------------
End of period $ 21,614,882 $ 21,605,442 $ 21,605,442
=========================================================================================
ACCUMULATED DEPRECIATION:
Beginning of period $ 11,022,393 $ 10,303,382 $ 11,370,295
Depreciation expense 718,932 719,011 818,734
Dispositions and disposals (2,050) -- (1,885,647)
- -----------------------------------------------------------------------------------------
End of period $ 11,739,275 $ 11,022,393 $ 10,303,382
=========================================================================================
</TABLE>
SEE ACCOMPANYING INDEPENDENT AUDITORS' REPORT.
F-1
<PAGE>
CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES
- -------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- -------------------------------------------------------------------------------
The General Partner
ConAm Realty Investors 81 L.P.:
Under date of March 12, 1999, we reported on the consolidated balance sheets
of ConAm Realty Investors 81 L.P. (a California limited partnership) and
consolidated ventures (the Partnership) as of December 31, 1998 and 1997, and
the related consolidated statements of operations, partners' capital, and
cash flows for the years then ended, as contained in the 1998 annual report
to Unitholders. These consolidated financial statements and our report
thereon are incorporated by reference in the 1998 annual report on Form 10-K.
In connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related consolidated financial statement
schedule III. 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 audits.
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 LLP
San Diego, California
March 12, 1999
F-2
<PAGE>
CONAM REALTY INVESTORS 81 L.P.
AND CONSOLIDATED VENTURES
- -------------------------------------------------------------------------------
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 L.P. for the year ended December 31, 1996. In connection with
our audit 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
F-3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,989,186
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 21,614,882
<DEPRECIATION> (11,739,275)
<TOTAL-ASSETS> 12,057,357
<CURRENT-LIABILITIES> 459,282
<BONDS> 9,718,148
0
0
<COMMON> 0
<OTHER-SE> 1,879,927
<TOTAL-LIABILITY-AND-EQUITY> 12,057,357
<SALES> 3,402,923
<TOTAL-REVENUES> 3,462,921
<CGS> 0
<TOTAL-COSTS> 1,497,797
<OTHER-EXPENSES> 940,838
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 830,863
<INCOME-PRETAX> 193,423
<INCOME-TAX> 0
<INCOME-CONTINUING> 193,423
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 193,423
<EPS-PRIMARY> 2.22
<EPS-DILUTED> 2.22
</TABLE>
