<PAGE>
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 30,1998
or
- ---- Transition Report Pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____ to ____
COMMISSION FILE NUMBER: 0-11085
CONAM REALTY INVESTORS 2 L.P.
-----------------------------
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
CALIFORNIA 13-3100545
---------- ----------
STATE OR OTHER JURISDICTION OF I.R.S. EMPLOYER IDENTIFICATION NO.
INCORPORATION OR ORGANIZATION
1764 San Diego Avenue
San Diego, Ca Attn. Robert J. Svatos 92110-1906
- ------------------------------------- ----------
Address of Principal Executive Offices Zip Code
(619) 297-6771
--------------
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
---- ----
<PAGE>
CONAM REALTY INVESTORS 2 L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS AT JUNE 30, AT DECEMBER 31,
1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in real estate:
Land $ 5,744,972 $ 5,744,972
Buildings and improvements 23,681,664 23,681,664
----------------------------------
29,426,636 29,426,636
Less accumulated depreciation (13,165,144) (12,689,727)
----------------------------------
16,261,492 16,736,909
Cash and cash equivalents 1,313,936 1,109,506
Restricted cash 447,579 342,282
Other assets, net of accumulated amortization
of $291,755 in 1998 and $260,496 in 1997 233,387 181,421
- -----------------------------------------------------------------------------------------------
TOTAL ASSETS $ 18,256,394 $ 18,370,118
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgages payable 11,441,167 11,554,935
Distribution payable 200,000 -
Accounts payable and accrued expenses 269,786 197,443
Due to general partner and affiliates 18,652 18,504
Security deposits 98,423 103,908
----------------------------------
Total Liabilities 12,028,028 11,874,790
----------------------------------
Partners' Capital (Deficit):
General Partner (593,852) (567,156)
Limited Partners (80,000 Units outstanding) 6,822,218 7,062,484
----------------------------------
Total Partners' Capital 6,228,366 6,495,328
- -----------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 18,256,394 $ 18,370,118
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONAM REALTY INVESTORS 2 L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME
Rental $ 1,116,516 $ 1,065,221 $ 2,241,507 $ 2,137,777
Interest and other 10,803 9,632 20,171 22,137
------------------------------------------------------------------------
Total Income 1,127,319 1,074,853 2,261,678 2,159,914
- -----------------------------------------------------------------------------------------------------------------------------
EXPENSES
Property operating 547,139 559,322 1,087,460 1,068,385
Depreciation and amortization 253,338 254,001 506,676 506,806
Interest 222,416 226,686 445,931 454,389
General and administrative 40,518 54,726 88,573 103,323
------------------------------------------------------------------------
Total Expenses 1,063,411 1,094,735 2,128,640 2,132,903
- -----------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 63,908 $ (19,882) $ 133,038 $ 27,011
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) ALLOCATED:
To the General Partner $ 6,391 $ (1,988) $ 13,304 $ 2,701
To the Limited Partners 57,517 (17,894) 119,734 24,310
- -----------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 63,908 $ (19,882) $ 133,038 $ 27,011
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
PER LIMITED PARTNERSHIP UNIT
(80,000 UNITS OUTSTANDING)
NET INCOME (LOSS) $ 0.72 $ (0.22) $ 1.50 $ 0.30
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1998
GENERAL LIMITED
PARTNER PARTNERS TOTAL
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE (DEFICIT) AT DECEMBER 31, 1997 $ (567,156) $ 7,062,484 $ 6,495,328
Net income 13,304 119,734 133,038
Distributions ($4.50 per Unit) (40,000) (360,000) (400,000)
- -----------------------------------------------------------------------------------------------------------------------------
BALANCE (DEFICIT) AT JUNE 30, 1998 $ (593,852) $ 6,822,218 $ 6,228,366
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONAM REALTY INVESTORS 2 L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 133,038 $ 27,011
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 506,676 506,806
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Fundings to restricted cash (158,221) (159,691)
Release of restricted cash 52,924 51,250
Other assets (83,225) -
Accounts payable and accrued expenses 72,343 106,695
Due to general partner and affiliates 148 (62)
Security deposits (5,485) (3,638)
------------------------------
Net cash provided by operating activities 518,198 528,371
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES-
Additions to real estate - (267,991)
- ----------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (200,000) (200,000)
Mortgage principal payments (113,768) (105,310)
------------------------------
Net cash used for financing activities (313,768) (305,310)
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 204,430 (44,930)
Cash and cash equivalents, beginning of period 1,109,506 962,290
- ----------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,313,936 $ 917,360
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION-
Cash paid during the period for interest $ 445,931 $ 454,389
- ----------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's annual 1997 audited consolidated financial
statements within Form 10-K.
The unaudited interim consolidated financial statements include all normal
and recurring adjustments which are, in the opinion of management, necessary
to present a fair statement of financial position as of June 30, 1998 and the
results of operations and cash flows for the three and six months ended June
30, 1998 and 1997 and the consolidated statement of partners' capital for the
six months ended June 30, 1998. Results of operations are not necessarily
indicative of the results to be expected for the full year.
No significant events have occurred subsequent to the year ended December 31,
1997, and no material contingencies exist, which would require disclosure in
this interim report per Regulation S-X, Rule 10-01, Paragraph (a) (5).
<PAGE>
CONAM REALTY INVESTORS 2 L.P.
AND CONSOLIDATED VENTURES
PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Partnership had cash and cash equivalents of $1,313,936
which were invested in money market funds, compared with $1,109,506 at December
31, 1997. The increase is attributable to net cash provided by operating
activities exceeding cash used for mortgage principal payments and
distributions. The Partnership also maintains a restricted cash balance which
totaled $447,579 at June 30, 1998 compared to $342,282 at December 31, 1997.
The restricted cash funds represent escrows for insurance and real estate taxes
required under the terms of the current mortgage loans. The Partnership expects
sufficient cash to be generated from operations to meet its current operating
expenses.
The General Partner declared a regular cash distribution of $2.25 per Unit for
the quarter ended June 30, 1998 which will be paid in August, 1998. The General
Partner will determine the amount of future quarterly distributions based on the
Partnership's available cash flow and future cash needs.
RESULTS OF OPERATIONS
Partnership operations for the three and six months ended June 30, 1998
generated net income of $63,908 and $133,038 compared with a net loss of
($19,882) and net income of $27,011 for the corresponding periods in 1997. The
increase for the three month period ended June 30, 1998 is primarily
attributable to an increase in rental revenues and a decrease in property
operating expenses and general and administrative expenses. The increase for
the six month period ended June 30, 1998 is primarily attributable to an
increase in rental revenues and a decrease in general and administrative
expenses partially offset by an increase in property operating expenses.
Property operating expenses for the three and six months ended June 30, 1998
totaled $547,139 and $1,087,460 compared with $559,322 and $1,068,385 for the
corresponding periods in 1997. The decrease for the three month period is
primarily attributable to reduced repair and maintenance expenses at Ponte Vedra
Beach Village I. The increase for the six month period is due to an increase in
repair and maintenance expenses at Creekside Oaks, Rancho Antigua and Village
at the Foothills I partially offset by a decrease in repair and maintenance
expenses at Ponte Vedra Beach Village I and an increase in utility expenses at
all properties.
During the first six months of 1998 and 1997, average occupancy levels at the
Partnership's properties were as follows:
PROPERTY 1998 1997
-----------------------------------------------------
Creekside Oaks 96% 95%
Ponte Vedra Beach Village I 93% 91%
Rancho Antigua 96% 94%
Village at the Foothills I 97% 93%
-----------------------------------------------------
<PAGE>
CONAM REALTY INVESTORS 2 L.P.
AND CONSOLIDATED VENTURES
PART II OTHER INFORMATION
ITEMS 1-5 Not applicable
ITEMS 6 Exhibits
(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, 1998.
<PAGE>
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 hereunto duly authorized.
CONAM PROPERTY SERVICES II, LTD.
General Partner of ConAm Realty Investors 2 L.P.
BY: CONTINENTAL AMERICAN DEVELOPMENT, INC.
GENERAL PARTNER
Date: July 30, 1998 BY: /s/ DANIEL J. EPSTEIN
---------------------------------
Daniel J. Epstein
Director, President, and Principal Executive Officer
Date: July 30, 1998 BY: /s/ ROBERT J. SVATOS
---------------------------
Robert J. Svatos
Vice President and Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,761,515
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 29,426,636
<DEPRECIATION> 13,165,144
<TOTAL-ASSETS> 18,256,394
<CURRENT-LIABILITIES> 586,861
<BONDS> 11,441,167
0
0
<COMMON> 0
<OTHER-SE> 6,228,366
<TOTAL-LIABILITY-AND-EQUITY> 18,256,394
<SALES> 2,241,507
<TOTAL-REVENUES> 2,261,678
<CGS> 0
<TOTAL-COSTS> 1,087,460
<OTHER-EXPENSES> 595,249
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 445,931
<INCOME-PRETAX> 133,038
<INCOME-TAX> 0
<INCOME-CONTINUING> 133,038
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 133,038
<EPS-PRIMARY> 1.50
<EPS-DILUTED> 1.50
</TABLE>
