UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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: 0-11085
HUTTON/CONAM REALTY INVESTORS 2
(Exact name of registrant as specified in its charter)
California 13-3100545
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 World Financial Center, 29th Floor, New York, NY
ATTN: Andre Anderson 10285
(Address of principal executive offices) (Zip Code)
(212) 526-3237
(Registrant's telephone number, including area code)
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
Consolidated Balance Sheets
June 30, December 31,
Assets 1995 1994
Investments in real estate:
Land $ 6,797,328 $ 6,797,328
Buildings and improvements 27,458,371 27,258,895
34,255,699 34,056,223
Less accumulated depreciation (12,249,088) (11,699,378)
22,006,611 22,356,845
Cash and cash equivalents 726,941 1,183,787
Restricted cash 916,148 779,328
Other assets, net of
accumulated amortization
of $126,281 in 1995 and $88,397
in 1994 414,280 452,164
Total Assets $ 24,063,980 $ 24,772,124
Liabilities and Partners' Capital
Liabilities:
Mortgages payable $ 14,113,369 $ 14,218,948
Accounts payable and
accrued expenses 239,363 106,337
Due to general partners
and affiliates 39,671 40,523
Security deposits 130,543 133,210
Distribution payable 180,000 244,445
Total Liabilities 14,702,946 14,743,463
Partners' Capital (Deficit):
General Partners (661,176) (618,500)
Limited Partners 10,022,210 10,647,161
Total Partners' Capital 9,361,034 10,028,661
Total Liabilities and
Partners' Capital $ 24,063,980 $ 24,772,124
Consolidated Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1995
General Limited
Partners Partners Total
Balance at January 1, 1995 $ (618,500) $10,647,161 $10,028,661
Net loss (2,676) (264,951) (267,627)
Distributions (40,000) (360,000) (400,000)
Balance at June 30, 1995 $ (661,176) $10,022,210 $ 9,361,034
Consolidated Statements of Operations
Three months ended Six months ended
June 30, June 30,
Income 1995 1994 1995 1994
Rental $1,154,727 $1,151,031 $2,352,831 $2,321,266
Interest 7,684 8,717 22,376 18,084
Total Income 1,162,411 1,159,748 2,375,207 2,339,350
Expenses
Property operating 750,986 544,433 1,426,698 1,087,925
Depreciation
and amortization 294,642 291,104 587,594 582,009
Interest 274,135 278,099 549,291 557,141
General and administrative 41,535 40,888 79,251 82,859
Total Expenses 1,361,298 1,154,524 2,642,834 2,309,934
Net Income (Loss) $ (198,887) $ 5,224 $ (267,627) $ 29,416
Net Income (Loss) Allocated:
To the General Partners $ (1,989) $ 523 $ (2,676) $ 2,942
To the Limited Partners (196,898) 4,701 (264,951) 26,474
$ (198,887) $ 5,224 $ (267,627) $ 29,416
Per Limited
Partnership unit
(80,000 outstanding) $ (2.46) $ .06 $ (3.31) $ .33
Consolidated Statements of Cash Flows
For the six months ended June 30, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net income (loss) $ (267,627) $ 29,416
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation and amortization 587,594 582,009
Increase (decrease) in cash
arising from changes
in operating assets and liabilities:
Fundings to restricted cash (192,996) (197,721)
Release of restricted cash 56,176 80,001
Other assets - (1,083)
Accounts payable and
accrued expenses 133,026 74,857
Due to general partners
and affiliates (852) 1,448
Security deposits (2,667) (2,478)
Net cash provided by operating activities 312,654 566,449
Cash Flows from Investing Activities:
Additions to real estate (199,476) (2,092)
Net cash used for investing activities (199,476) (2,092)
Cash Flows from Financing Activities:
Distributions paid (464,445) -
Mortgage principal payments (105,579) (97,729)
Mortgage fees - (38,462)
Receipt of deposit on mortgage refinancing - 72,058
Net cash used for financing activities (570,024) (64,133)
Net increase (decrease) in
cash and cash equivalents (456,846) 500,224
Cash and cash equivalents at beginning of period 1,183,787 558,731
Cash and cash equivalents at end of period $ 726,941 $1,058,955
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 549,291 $ 557,141
Notes to the Consolidated Financial Statements
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's annual 1994 audited consolidated financial
statements within Form 10-K.
The unaudited consolidated financial statements include all adjustments which
are, in the opinion of management, necessary to present a fair statement of
financial position as of June 30, 1995, and the results of operations and cash
flows for the six months ended June 30, 1995 and 1994 and the statement of
changes in partners' capital (deficit) for the six months ended June 30, 1995.
Results of operations for the periods are not necessarily indicative of the
results to be expected for the full year.
The following significant events have occurred subsequent to fiscal year 1994
which require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
On July 20, 1995, the Partnership closed on the sale of Country Place Village I
to an institutional buyer ( the "Buyer"), which is unaffiliated with the
Partnership. Country Place Village I was sold for $3,665,000, which includes
the assumption of the mortgage payable on Country Place Village I by the Buyer
in the amount of $2,051,078. The transaction resulted in a gain on sale of
approximately $302,000, which will be reflected in the Partnership's Form 10-Q
for the period ended September 30, 1995.
Part 1, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At June 30, 1995, the Partnership had cash and cash equivalents of $726,941
which was invested in unaffiliated money market funds, compared with $1,183,787
at December 31, 1994. The decrease is primarily attributable to cash used for
distributions, mortgage payments and additions to real estate exceeding net
cash provided by operating activities. The Partnership also maintained a
restricted cash balance of $916,148 at June 30, 1995, compared with $779,328 at
December 31, 1994. The restricted cash balance represents escrows for
insurance, real estate taxes, and property replacements and repairs, required
under the terms of the current mortgage loans. The General Partners expect
sufficient cash flow to be generated from operations to meet its current
operating expenses and debt service requirements.
Accounts payable and accrued expenses were $239,363 at June 30, 1995 compared
to $106,337 at December 31, 1994. The increase reflects the accrual of real
estate taxes, for the three Florida properties, for the first six months of
1995.
The sale of Country Place Village I was completed on July 20, 1995. The
property was sold for a gross price of $3,665,000, which included the
assumption by the buyer of the property's mortgage payable in the amount of
$2,051,078. The sale resulted in the Partnership receiving net proceeds of
approximately $1,557,000. In the third quarter, the Partnership will recognize
a gain on sale of approximately $302,000. Following an analysis of the
Partnership's projected capital requirements, the General Partners intend to
distribute the remaining sales proceeds as a return of capital.
The Partnership's 1995 second quarter regular cash distribution, in the amount
of $2.25 per Unit, will be paid on or about August 15, 1995. The General
Partners anticipate that the current level of distributions will be maintained
through year end. Cash distributions, however, will be determined on a
quarterly basis and will be based on cash flow generated by the Partnership.
Pursuant to the refinancing of the Creekside Oaks loan, the lender escrowed
funds for various repairs including roofing work and exterior painting. Upon
completion of all work, which is expected to occur sometime in the third
quarter, the balance of the repair escrow amounting to $395,338 will be
returned to the Partnership.
Results of Operations
Partnership operations for the three and six months ended June 30, 1995
resulted in a net loss of $198,887 and $267,627, respectively, compared with
net income of $5,224 and $29,416 for the corresponding periods in 1994. After
adding back depreciation and amortization, both non-cash expenses, and
subtracting mortgage amortization and additions to real estate, operations
generated cash flow of $28,334 and $214,912 for the three and six months ended
June 30, 1995, compared with cash flows of $246,992 and $511,604 for the same
periods in 1994. The decrease in cash flow and change from net income to net
loss in 1995 is primarily the result of increased property operating expenses.
Rental income for the three and six months ended June 30, 1995 was $1,154,727
and $2,352,831, respectively, compared with $1,151,031 and $2,321,266 for the
corresponding periods in 1994. The increase in 1995 reflects higher rental
income at four of the five properties, primarily due to rental rate increases
instituted over the past year, partially offset by lower occupancy rates.
Property operating expenses for the three and six months ended June 30, 1995
were $750,986 and $1,426,698, respectively, compared with $544,433 and
$1,087,925 for the corresponding periods in 1994. The increase primarily
reflects higher repair and maintenance expenses at Creekside Oaks and Rancho
Antigua due to exterior painting work. Interest expense for the three and six
month periods ended June 30, 1995 was $274,135 and $549,291, respectively,
compared with $278,099 and $557,141 for the corresponding periods in 1994.
For the three and six months ended June 30, 1995 and 1994, average occupancy
levels at each of the properties were as follows:
Three Months Ended Six Months Ended
June 30, June 30,
Property 1995 1994 1995 1994
Country Place Village I 97% 97% 98% 98%
Creekside Oaks 95% 96% 92% 96%
Ponte Vedra Beach Village I 92% 96% 95% 96%
Rancho Antigua 88% 93% 92% 95%
Village at the Foothills I 94% 96% 94% 96%
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
three months ended June 30, 1995.
SIGNATURES
Pursuant to the requirements 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.
HUTTON/CONAM REALTY INVESTORS 2
BY: RI2 REAL ESTATE SERVICES INC.
General Partner
Date: August 11, 1995
BY: /s/ Paul L. Abbott
Name: Paul L. Abbott
Title: Director, President, Chief
Executive Officer and
Chief Financial Officer
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
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<INCOME-PRETAX> 000
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<NET-INCOME> (267,627)
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