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, 1996
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 I.R.S. Employer Identification No.
of Incorporation or Organization
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 At June 30, At December 31,
1996 1995
Assets ---------- ----------
Investments in real estate:
Land $ 5,744,972 $ 5,744,972
Buildings and improvements 23,486,402 23,442,403
---------- ----------
29,231,374 29,187,375
Less accumulated depreciation (11,402,234) (10,931,382)
---------- ----------
17,829,140 18,255,993
Cash and cash equivalents 1,108,807 710,686
Restricted cash 398,969 651,661
Other assets, net of accumulated amortization
of $166,718 in 1996 and $135,458 in 1995 275,199 312,359
---------- ----------
Total Assets $19,612,115 $19,930,699
========== ==========
Liabilities and Partners' Capital
Liabilities:
Mortgages payable $11,871,023 $11,968,504
Accounts payable and accrued expenses 231,899 121,445
Due to general partners and affiliates 31,842 33,949
Security deposits 106,796 106,218
Distribution payable 210,000 200,000
---------- ----------
Total Liabilities 12,451,560 12,430,116
Partners' Capital (Deficit):
General Partners (519,106) (485,103)
Limited Partners 7,679,661 7,985,686
---------- ----------
Total Partners' Capital 7,160,555 7,500,583
---------- ----------
Total Liabilities and Partners' Capital $19,612,115 $19,930,699
========== ==========
Consolidated Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1996
Limited General
Partners Partners Total
--------- -------- ---------
Balance at December 31, 1995 $7,985,686 $(485,103) $7,500,583
Net income 53,975 5,997 59,972
Distributions (360,000) (40,000) (400,000)
--------- -------- ---------
Balance at June 30, 1996 $7,679,661 $(519,106) $7,160,555
========= ======== =========
Consolidated Statements of Operations
Three months Six months
ended June 30, ended June 30,
1996 1995 1996 1995
Income --------- --------- --------- ---------
Rental $1,078,453 $1,154,727 $2,142,991 $2,352,831
Interest 24,773 7,684 35,632 22,376
Other 3,244 - 3,244 -
--------- --------- --------- ---------
Total Income 1,106,470 1,162,411 2,181,867 2,375,207
Expenses
Property operating 528,915 750,986 1,055,119 1,426,698
Depreciation and amortization 251,166 294,642 502,112 587,594
Interest 230,638 274,135 462,217 549,291
General and administrative 54,698 41,535 102,447 79,251
--------- --------- --------- ---------
Total Expenses 1,065,417 1,361,298 2,121,895 2,642,834
--------- --------- --------- ---------
Net Income (Loss) $ 41,053 $ (198,887) $ 59,972 $ (267,627)
========= ========= ========= =========
Net Income (Loss) Allocated:
To the General Partners $ 4,105 $ (1,989) $ 5,997 $ (2,676)
To the Limited Partners 36,948 (196,898) 53,975 (264,951)
--------- --------- --------- ---------
$ 41,053 $ (198,887) $ 59,972 $ (267,627)
========= ========= ========= =========
Per limited partnership unit
(80,000 outstanding) $.46 $(2.46) $.67 $(3.31)
Consolidated Statements of Cash Flows
For the six months ended June 30, 1996 1995
Cash Flows From Operating Activities: ------- --------
Net income (loss) $ 59,972 $(267,627)
Adjustments to reconcile net income (loss)
to net cash provided by
operating activities:
Depreciation and amortization 502,112 587,594
Increase (decrease) in cash arising
from changes in operating assets
and liabilities:
Fundings to restricted cash (159,236) (192,996)
Release of restricted cash 411,928 56,176
Other assets 5,900 -
Accounts payable and accrued expenses 110,454 133,026
Due to general partners and affiliates (2,107) (852)
Security deposits 578 (2,667)
------- -------
Net cash provided by operating activities 929,601 312,654
Cash Flows From Investing Activities:
Additions to real estate (43,999) (199,476)
------- -------
Net cash used for investing activities (43,999) (199,476)
Cash Flows From Financing Activities:
Distributions (390,000) (464,445)
Mortgage principal payments (97,481) (105,579)
------- -------
Net cash used for financing activities (487,481) (570,024)
Net increase (decrease) in cash and cash equivalents 398,121 (456,846)
--------- ---------
Cash and cash equivalents, beginning of period 710,686 1,183,787
--------- ---------
Cash and cash equivalents, end of period $1,108,807 $ 726,941
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 462,217 $ 549,291
Notes to the Consolidated Financial Statements
The unaudited consolidated financial statements should be read in
conjunction with the Partnership's annual 1995 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,
1996 and the results of operations and cash flows for the six
months ended June 30, 1996 and 1995 and the statement of
partner's capital (deficit) for the six months ended June 30,
1996. Results of operations for the periods are not necessarily
indicative of the results to be expected for the full year.
No significant events have occurred subsequent to fiscal year
1995 and no material contingencies exist, which would require
disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
Part I, Item 2 . Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
At June 30, 1996, the Partnership had cash and cash equivalents
of $1,108,807, which were invested in unaffiliated money market
funds, an increase from $710,686 at December 31, 1995. The
increase is attributable to cash provided by operating activities
exceeding cash used for distributions, mortgage principal
payments, and additions to real estate. The Partnership also
maintains a restricted cash balance, which totaled $398,969 at
June 30, 1996, representing escrows for insurance, and real
estate taxes required under the terms of the current mortgage
loans. Pursuant to the refinancing of the Creekside Oaks loan,
the lender required funds escrowed for various repairs including
roofing work and exterior painting. Following an inspection of
the completed work by the lender, the balance of the repair
escrow, which totaled $354,675 was returned to the Partnership.
The Partnership expects sufficient cash to be generated from
operations to meet its current operating expenses and debt
service requirements.
The General Partners continue to perform various improvements at
the properties. These improvements include unit interior repairs
at each of the four properties, as well as asphalt repairs at
Creekside Oaks, and roof repairs at Ponte Vedra Beach Village I
and Rancho Antigua. Thus far, the asphalt repairs at Creekside
Oaks are complete, with the other work currently underway. It is
expected that this work will be finished by the end of the year.
The General Partners declared a cash distribution of $2.25 per
Unit for the six months ended June 30, 1996 which will be paid to
investors on or about August 15, 1996. The level of future
distributions will be evaluated on a quarterly basis and will
depend on the Partnership's operating results and future cash
needs.
Accounts payable and accrued expenses were $231,899 at June 30,
1996 compared to $121,445 at December 31, 1995 primarily
reflecting accruals for real estate taxes for the two Florida
properties for the first six months of 1996.
Results of Operations
Partnership operations for the three and six months ended June
30, 1996, resulted in net income of $41,053 and $59,972,
respectively, compared with net losses of $198,887 and $267,627,
respectively, for the corresponding periods in 1995. The change
from net loss to net income is due primarily to reductions in
property operating expense, depreciation and amortization, and
interest expense, partially offset by a decrease in rental
income, all resulting primarily from the sale of Country Place
Village I in July 1995. Net cash provided by operating
activities was $929,601 for the six months ended June 30, 1996,
an increase from $312,654 for the same period in 1995. The
increase is primarily attributable to the increase in net income
as discussed above and the release of the remaining funds from
Creekside Oak's replacement reserve upon completion of certain
improvements required by the mortgagee.
Rental income for the three and six months ended June 30, 1996
was $1,078,453 and $2,142,991, respectively, compared with
$1,154,727 and $2,352,831 respectively, for the corresponding
periods in 1995. The decrease reflects the sale of Country Place
Village I, partially offset by increases in rental income at
three of the four remaining properties, as a result of increased
occupancy and rental rates.
Property operating expenses for the three and six months ended
June 30, 1996 were $528,915 and $1,055,119, respectively,
compared with $750,986 and $1,426,698, respectively, for the same
periods in 1995. The decreases are primarily due to the July
1995 sale of Country Place Village I and a decrease in repairs
and maintenance expense at Creekside Oaks and Rancho Antigua,
partially offset by an increase in repairs and maintenance
expense at Ponte Vedra Beach Village I. Depreciation and
amortization decreased to $251,166 and $502,112, respectively for
the three and six months ended June 30, 1996 from $294,642 and
$587,594, respectively, for the corresponding periods in 1995 due
to the sale of Country Place Village I. Interest expense also
declined to $230,638 and $462,217, respectively, for the three
and six months ended June 30, 1996 from $274,135 and $549,291,
respectively, for the same periods in 1995. The decline is
primarily due to the assumption of the Country Place Village I
mortgage by the buyer at the time the sale closed. For the three
and six months ended June 30, 1996, general and administrative
expenses increased to $54,698 and $102,447, respectively, from
$41,535 and $79,251, respectively for the corresponding periods
ending June 30, 1995 primarily as a result of increased legal
fees and higher Partnership administrative expenses. During the
first six months of 1996 and 1995, average occupancy levels at
each of the properties were as follows:
Property 1996 1995
Creekside Oaks 95% 92%
Ponte Vedra Beach Village I 96% 95%
Rancho Antigua 95% 92%
Village at the Foothills I 92% 94%
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the quarter ended June 30, 1996.
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 13, 1996 BY:/s/ Paul L. Abbott
Director, President, Chief
Executive Officer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Jun-30-1996
<CASH> 1,507,776
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 29,231,374
<DEPRECIATION> 11,402,234
<TOTAL-ASSETS> 19,612,115
<CURRENT-LIABILITIES> 580,537
<BONDS> 11,871,023
<COMMON> 0
0
0
<OTHER-SE> 7,160,555
<TOTAL-LIABILITY-AND-EQUITY> 19,612,115
<SALES> 0
<TOTAL-REVENUES> 2,181,867
<CGS> 0
<TOTAL-COSTS> 1,055,119
<OTHER-EXPENSES> 604,559
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 462,217
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,972
<EPS-PRIMARY> .67
<EPS-DILUTED> .67
</TABLE>
