<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 MARCH 31,1998
or
Transition Report Pursuant to Section 13 of 15(d) of the Securities
- ------- Exchange Act of 1934
For the transition period from to
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COMMISSION FILE NUMBER: 0-11085
CONAM REALTY INVESTORS 2 L.P.
Exact Name of Registrant as Specified in its Charter
California 13-3100545
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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
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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
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<PAGE>
CONAM REALTY INVESTORS 2 L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
AT MARCH 31, AT DECEMBER 31,
1998 1997
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<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 (12,927,435) (12,689,727)
--------------------------------
16,499,201 16,736,909
Cash and cash equivalents 1,342,008 1,109,506
Restricted cash 371,465 342,282
Other assets, net of accumulated amortization of
$ 276,126 in 1998 and $260,496 in 1997 183,119 181,421
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TOTAL ASSETS $ 18,395,793 $ 18,370,118
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LIABILITIES AND PARTNERS' CAPITAL
Mortgage payable 11,498,601 11,554,935
Accounts payable and accrued expenses 211,293 197,443
Due to general partner and affiliates 19,213 18,504
Security deposits 102,228 103,908
Distribution payable 200,000 -
--------------------------------
Total Liabilities 12,031,335 11,874,790
--------------------------------
Partners' Capital (Deficit):
General Partner (580,243) (567,156)
Limited Partners (80,000 Units outstanding) 6,944,701 7,062,484
--------------------------------
Total Partners' Capital 6,364,458 6,495,328
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TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 18,395,793 $ 18,370,118
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- -----------------------------------------------------------------------------------------
</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
FOR THE THREE MONTHS ENDED MARCH 31,
1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C>
INCOME
Rental $ 1,124,991 $ 1,072,556
Interest and other 9,368 12,505
-------------------------------
Total Income 1,134,359 1,085,061
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EXPENSES
Property operating 540,321 509,063
Depreciation and amortization 253,338 252,805
Interest 223,515 227,703
General and administrative 48,055 48,597
-------------------------------
Total Expenses 1,065,229 1,038,168
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NET INCOME $ 69,130 $ 46,893
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NET INCOME ALLOCATED:
To the General Partner $ 6,913 $ 4,689
To the Limited Partners 62,217 42,204
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NET INCOME $ 69,130 $ 46,893
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- -----------------------------------------------------------------------------------------
PER LIMITED PARTNERSHIP UNIT (80,000 UNITS OUTSTANDING)
Net Income $ 0.78 $ 0.53
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- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
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- -----------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 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 6,913 62,217 69,130
Distributions ($2.25 per Unit) (20,000) (180,000) (200,000)
- -----------------------------------------------------------------------------------------
BALANCE (DEFICIT) AT MARCH 31, 1998 $ (580,243) $ 6,944,701 $ 6,364,458
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
</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 THREE MONTHS ENDED MARCH 31, 1998 1997
- -----------------------------------------------------------------------------------------
<S> <S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 69,130 $ 46,893
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 253,338 252,805
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Fundings to restricted cash (82,107) (83,171)
Release of restricted cash 52,924 -
Other assets (17,328) -
Accounts payable and accrued expenses 13,850 127,223
Due to general partner and affiliates 709 22
Security deposits (1,680) (3,313)
-------------------------
Net cash provided by operating activities 288,836 340,459
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CASH FLOWS FROM INVESTING ACTIVITIES-
Additions to real estate - (106,758
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CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions - (200,000)
Mortgage principal payments (56,334) (52,147)
-------------------------
Net cash used for financing activities (56,334) (252,147)
- -----------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 232,502 (18,446)
Cash and cash equivalents, beginning of period 1,109,506 962,290
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,342,008 $ 943,844
- -----------------------------------------------------------------------------------------
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 223,515 $ 227,703
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</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONAM REALTY INVESTORS 2 L.P.
AND CONSOLIDATED VENTURES
----------------------------------------------------------------------------
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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 March 31, 1998 and
the results of operations and cash flows for the three months ended March
31, 1998 and 1997 and the consolidated statement of partners' capital for
the three months ended March 31, 1998. Results of operations for the period
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 March 31, 1998, the Partnership had cash and cash equivalents of $1,342,008
which were invested in unaffiliated 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. The
Partnership also maintains a restricted cash balance which totaled $371,465 at
March 31, 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 March 31, 1998 which will be paid in May, 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 months ended March 31, 1998 generated net
income of $69,130 compared with net income of $46,893 for the corresponding
period in 1997. The increase for the three month period is primarily
attributable to an increase in rental revenues partially offset by an increase
in property operating expenses. Net cash provided by operating activities for
the three months ended March 31, 1998 was $288,836 compared with $340,459 for
the corresponding period in 1997. The decrease is primarily due to more timely
payment of operating expenses partially offset by an increase in net income and
a release of restricted cash funds.
Property operating expenses for the three months ended March 31, 1998 totaled
$540,321 compared with $509,063 for the corresponding period in 1997. The
increase is primarily attributable to repairs and maintenance expense to units
at Rancho Antigua which were being prepared for re-occupancy.
During the first three months of 1998 and 1997, average occupancy levels at the
Partnership's properties were as follows:
<TABLE>
<CAPTION>
Property 1998 1997
-------------------------------------------
<S> <C> <C>
Creekside Oaks 94% 95%
Ponte Vedra Beach Villa 92% 92%
Rancho Antigua 97% 96%
Village at the Foothill 97% 93%
-------------------------------------------
</TABLE>
Occupancy level increases at the Village at Foothills I reflect favorable
economic conditions in the Arizona market.
<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
On February 3, 1998 ConAm Realty Investors 2 L.P. filed a Form 8-K
regarding a change in the general partner ownership and the name
change from Hutton /ConAm Realty Investors 2 to ConAm Realty
Investors 2 L.P.
<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.
CON AM PROPERTY SERVICES II, LTD.
General Partner of ConAm Realty Investors 2 L.P.
BY: CONTINENTAL AMERICAN DEVELOPMENT, INC.
GENERAL PARTNER
Date: May 13, 1998 BY:/s/ DANIEL J. EPSTEIN
-----------------
Daniel J. Epstein
Director, President, and Principal
Executive Officer
Date: May 13, 1998 BY:/s/ ROBERT J. SVATOS
-----------------
Robert J. Svatos
Vice President and Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,713,473
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 29,426,636
<DEPRECIATION> 12,927,435
<TOTAL-ASSETS> 18,395,793
<CURRENT-LIABILITIES> 532,734
<BONDS> 11,498,601
0
0
<COMMON> 0
<OTHER-SE> 6,364,458
<TOTAL-LIABILITY-AND-EQUITY> 18,395,793
<SALES> 1,124,991
<TOTAL-REVENUES> 1,134,359
<CGS> 0
<TOTAL-COSTS> 540,321
<OTHER-EXPENSES> 301,393
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 223,515
<INCOME-PRETAX> 69,130
<INCOME-TAX> 0
<INCOME-CONTINUING> 69,130
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,130
<EPS-PRIMARY> 0.78
<EPS-DILUTED> 0.78
</TABLE>
