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, 1997
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
of 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 At June 30, At December 31,
1997 1996
Assets
Investments in real estate:
Land $ 5,744,972 $ 5,744,972
Buildings and improvements 23,793,635 23,525,644
29,538,607 29,270,616
Less accumulated depreciation (12,349,881) (11,874,334)
17,188,726 17,396,282
Cash and cash equivalents 917,360 962,290
Restricted cash 425,709 317,268
Other assets, net of accumulated amortization
of $229,236 in 1997 and $197,977 in 1996 212,681 243,940
Total Assets $18,744,476 $18,919,780
Liabilities and Partners' Capital
Liabilities:
Mortgages payable $11,664,393 $11,769,703
Accounts payable and accrued expenses 234,505 127,810
Due to general partners and affiliates 17,869 17,931
Security deposits 102,715 106,353
Distribution payable --- 200,000
Total Liabilities 12,019,482 12,221,797
Partners' Capital (Deficit):
General Partners (562,428) (565,129)
Limited Partners (80,000 units outstanding) 7,287,422 7,263,112
Total Partners' Capital 6,724,994 6,697,983
Total Liabilities and Partners' Capital $18,744,476 $18,919,780
Consolidated Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1997
General Limited
Partners Partners Total
Balance at December 31, 1996 $ (565,129) $ 7,263,112 $ 6,697,983
Net income 2,701 24,310 27,011
Balance at June 30, 1997 $ (562,428) $ 7,287,422 $ 6,724,994
Consolidated Statements of Operations
Three months Six months
ended June 30, ended June 30,
1997 1996 1997 1996
Income
Rental $1,065,221 $1,078,453 $2,137,777 $2,142,991
Interest 8,327 24,773 20,832 35,632
Other 1,305 3,244 1,305 3,244
Total Income 1,074,853 1,106,470 2,159,914 2,181,867
Expenses
Property operating 559,322 528,915 1,068,385 1,055,119
Depreciation
and amortization 254,001 251,166 506,806 502,112
Interest 226,686 230,638 454,389 462,217
General and administrative 54,726 54,698 103,323 102,447
Total Expenses 1,094,735 1,065,417 2,132,903 2,121,895
Net Income (Loss) $ (19,882) $ 41,053 $ 27,011 $ 59,972
Net Income (Loss) Allocated:
To the General Partners $ (1,988) $ 4,105 $ 2,701 $ 5,997
To the Limited Partners (17,894) 36,948 24,310 53,975
$ (19,882) $ 41,053 $ 27,011 $ 59,972
Per limited partnership unit
(80,000 outstanding) $(.22) $.46 $.30 $.67
Consolidated Statements of Cash Flows
For the six months ended June 30, 1997 1996
Cash Flows From Operating Activities:
Net income $ 27,011 $ 59,972
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 506,806 502,112
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Fundings to restricted cash (159,691) (159,236)
Release of restricted cash 51,250 411,928
Other assets --- 5,900
Accounts payable and accrued expenses 106,695 110,454
Due to general partners and affiliates (62) (2,107)
Security deposits (3,638) 578
Net cash provided by operating activities 528,371 929,601
Cash Flows From Investing Activities:
Additions to real estate (267,991) (43,999)
Net cash used for investing activities (267,991) (43,999)
Cash Flows From Financing Activities:
Distributions (200,000) (390,000)
Mortgage principal payments (105,310) (97,481)
Net cash used for financing activities (305,310) (487,481)
Net increase (decrease) in cash and cash equivalents (44,930) 398,121
Cash and cash equivalents, beginning of period 962,290 710,686
Cash and cash equivalents, end of period $ 917,360 $1,108,807
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 454,389 $ 462,217
Notes to the Consolidated Financial Statements
The unaudited consolidated financial statements should be read in conjunction
with the Partnership's annual 1996 audited consolidated financial statements
within Form 10-K.
The unaudited interim consolidated financial statements include all adjustments
consisting of only normal recurring accruals which are, in the opinion of
management, necessary to present a fair statement of financial position as of
June 30, 1997 and the results of operations for the three and six months ended
June 30, 1997 and 1996, cash flows for the six months ended June 30, 1997 and
1996 and the statement of partner's capital (deficit) for the six months ended
June 30, 1997. 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 1996 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, 1997, the Partnership had cash and cash equivalents of $917,360,
compared with $962,290 at December 31, 1996. The decrease is attributable to
cash used for real estate additions and mortgage principal payments. The
Partnership also maintains a restricted cash balance, which totaled $425,709 at
June 30, 1997, compared with $317,268 at December 31, 1996. The increase is
primarily due to payments made to escrow accounts for real estate taxes. The
Partnership expects sufficient cash to be generated from operations to meet its
current operating expenses and debt service requirements.
As of August 1997, repairs have been substantially completed at Ponte Vedra
Beach Village I to address existing roof problems that were aggravated by
severe tropical rainstorms in late 1996. In order to pay the cost of the
repairs, which totaled approximately $400,000, the General Partners temporarily
suspended quarterly cash distributions beginning with the first quarter 1997
distribution which would have been paid on or about May 15, 1997. In future
quarters, the General Partners will assess the Partnership's ability to
reinstate cash distributions based on the Partnership's operating results and
future cash needs.
Accounts payable and accrued expenses totaled $234,505 at June 30, 1997
compared with $127,810 at December 31, 1996. The increase is primarily due to
differences in the timing of payments and accruals of real estate taxes between
the two periods.
Results of Operations
Partnership operations for the three and six months ended June 30, 1997
resulted in a net loss of $19,882 and net income of $27,011, respectively,
compared to net income of $41,053 and $59,972 for the corresponding periods of
1996. The decreases for both periods are primarily attributable to a decrease
in interest income and an increase in property operating expenses. Net cash
provided by operating activities was $528,371 for the six months ended June 30,
1997, compared to $929,601 for the same period in 1996. The decrease is
primarily due to the release of the remaining funds from Creekside Oaks'
replacement reserve to the Partnership during the second quarter of 1996 upon
completion of certain improvements required by the mortgagee.
Rental income for the three and six months ended June 30, 1997 was $1,065,221
and $2,137,777, respectively, compared to $1,078,453 and $2,142,991 for the
corresponding periods in 1996. Rental income for the second quarter of 1997 was
largely unchanged from a year earlier, as decreases in rental income at Ponte
Vedra Beach Village I and Village at the Foothills were largely offset by
increases at Creekside Oaks and Rancho Antigua.
Property operating expenses totaled $559,322 and $1,068,385 for the three and
six months ended June 30, 1997, respectively, compared to $528,915 and
$1,055,119 for the corresponding periods in 1996. The increases for both
periods are primarily due to an increase in repairs and maintenance expense at
Ponte Vedra Beach Village I and Rancho Antigua, and an increase in advertising
expenses related to each of the Partnership's four properties during the 1997
periods.
General and administrative expenses totaled $54,726 and $103,323 for the three
and six months ended June 30, 1997, respectively, compared to $54,698 and
$102,447 for the corresponding periods in 1996. During the 1997 periods,
certain expenses incurred by an unaffiliated third party service provider in
servicing the Partnership, which were voluntarily absorbed by affiliates of RI
2 Real Estate Services, Inc. in prior periods, were reimbursable to RI 2 Real
Estate Services Inc. and its affiliates.
During the first six months of 1997 and 1996, average occupancy levels at each
of the properties were as follows:
Property 1997 1996
Creekside Oaks 95% 95%
Ponte Vedra Beach Village I 91% 96%
Rancho Antigua 94% 95%
Village at the Foothills I 93% 92%
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,
1997.
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, 1997 BY:/s/ Paul L. Abbott
Director, President, Chief
Executive Officer and
Chief Financial Officer
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<PERIOD-END> Jun-30-1997
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