<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, 1999
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
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STATE OR OTHER JURISDICTION I.R.S. EMPLOYER IDENTIFICATION NO.
OF INCORPORATION OR ORGANIZATION
1764 San Diego Avenue
San Diego, CA 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
----- -----
<PAGE>
CONAM REALTY INVESTORS 2 L.P.
AND CONSOLIDATED VENTURES
PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
<CAPTION>
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CONSOLIDATED BALANCE SHEETS AT JUNE 30, AT DECEMBER 31,
1999 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in real estate:
Land $ - $ 5,744,972
Buildings and improvements - 23,718,118
------------------------------------
- 29,463,090
Less accumulated depreciation - (13,640,819)
------------------------------------
- 15,822,271
Cash and cash equivalents 609,332 1,220,656
Restricted cash - 345,558
Other assets, net of accumulated amortization
of $0 in 1999 and $323,015 in 1998 15,700 326,486
- --------------------------------------------------------------------------------------------
TOTAL ASSETS $ 625,032 $ 17,714,971
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgages payable $ - $ 11,322,919
Accounts payable and accrued expenses 53,601 287,482
Due to general partner and affiliates - 18,547
Security deposits - 92,096
------------------------------------
Total Liabilities 53,601 11,721,044
------------------------------------
Partners' Capital (Deficit):
General Partner (121,033) (617,296)
Limited Partners (80,000 Units outstanding) 692,464 6,611,223
------------------------------------
Total Partners' Capital 571,431 5,993,927
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TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 625,032 $ 17,714,971
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONAM REALTY INVESTORS 2 L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
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CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
INCOME
Rental $ - $ 1,116,516 $ 327,728 $ 2,241,507
Interest and other 9,087 10,803 87,607 20,171
-----------------------------------------------------------------------
Total Income 9,087 1,127,319 415,335 2,261,678
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EXPENSES
Property operating - 547,139 317,398 1,087,460
Depreciation and amortization - 253,338 42,284 506,676
Interest - 222,416 73,122 445,931
General and administrative 62,375 40,518 82,387 88,573
-----------------------------------------------------------------------
Total Expenses 62,375 1,063,411 515,191 2,128,640
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Income (Loss) from operations (53,288) 63,908 (99,856) 133,038
Gain on sale of properties - - 13,306,236 -
- ----------------------------------------------------------------------------------------------------------------------------
Income before extraordinary items (53,288) 63,908 13,206,380 133,038
Extraordinary loss from debt extinguishment - - (700,223) -
- ----------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (53,288) $ 63,908 $ 12,506,157 $ 133,038
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NET INCOME (LOSS) ALLOCATED:
To the General Partner $ (533) $ 6,391 $ 584,916 $ 13,304
To the Limited Partners (52,755) 57,517 11,921,241 119,734
- ----------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (53,288) $ 63,908 $ 12,506,157 $ 133,038
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- ----------------------------------------------------------------------------------------------------------------------------
PER LIMITED PARTNERSHIP UNIT
(80,000 LIMITED PARTNER UNITS OUTSTANDING)
Income (Loss) from operations $ (0.66) $ 0.72 $ (1.24) $ 1.50
Gain on sale of properties - - 159.00 -
Extraordinary loss from debt extinguishment - - (8.75) -
- ----------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (0.66) $ 0.72 $ 149.01 $ 1.50
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</TABLE>
<TABLE>
<CAPTION>
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CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1999
GENERAL LIMITED
PARTNER PARTNERS TOTAL
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE (DEFICIT) AT DECEMBER 31, 1998 $ (617,296) $ 6,611,223 $ 5,993,927
Net income 584,916 11,921,241 12,506,157
Distributions ($223.00 per Limited Partner Unit) (88,653) (17,840,000) (17,928,653)
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BALANCE (DEFICIT) AT JUNE 30, 1999 $ (121,033) $ 692,464 $ 571,431
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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>
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CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 12,506,157 $ 133,038
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 42,284 506,676
Gain on sale of properties (13,306,236) -
Extraordinary loss from debt extinguishment 700,223 -
Increase (decrease) in cash arising from changes in operating assets and
liabilities:
Fundings to restricted cash - (158,221)
Release of restricted cash 345,558 52,924
Other assets 196,166 (83,225)
Accounts payable and accrued expenses (233,881) 72,343
Due to general partner and affiliates (18,547) 148
Security deposits (92,096) (5,485)
---------------------------------
Net cash provided by operating activities 139,628 518,198
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CASH FLOWS FROM INVESTING ACTIVITIES-
net proceeds from sale of properties 28,500,620 -
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (17,928,653) (200,000)
Mortgage principal payments (11,322,919) (113,768)
---------------------------------
Net cash used in financing activities (29,251,572) (313,768)
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Net increase (decrease) in cash and cash equivalents (611,324) 204,430
Cash and cash equivalents, beginning of period 1,220,656 1,109,506
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 609,332 $ 1,313,936
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION-
Cash paid during the period for interest $ 73,122 $ 445,931
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</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONAM REALTY INVESTORS 2 L.P.
AND CONSOLIDATED VENTURES
- ------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's annual 1998 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, 1999 and the
results of operations for the three and six months ended June 30, 1999 and
1998, cash flow for the six months ended June 30, 1999 and 1998, and the
consolidated statement of partners' capital for the six months ended June 30,
1999. Results for the six months ended June 30, 1999 are not necessarily
indicative of the results to be expected for the full year.
The Partnership has sold its remaining investments in real estate. The sale
and liquidation plan was approved by the Unitholders through a consent
solicitation statement as of January 15, 1999 and the sale of the properties
was completed on January 29, 1999.
For assets sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
reflected in net income for the period.
Within 30 days of the completion of the sale of the properties, the
Partnership declared a cash distribution representing substantially all of
the net proceeds from sale and substantially all of the remaining cash from
operations of the Partnership less an amount for costs and contingencies
associated with the sale and liquidation of the Partnership.
No other significant events have occurred subsequent to fiscal year 1998, 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
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
On February 26, 1999, the Partnership declared cash distributions in the
amounts of $17,840,000 to the Limited Partner Unitholders ($223.00 per Unit)
and $88,653 to the General Partner, which amounts represent substantially all
of the net proceeds from the sale (the "Sale" ) of the Partnership's
remaining investments in real estate ("Properties") together with other
available cash from operations of the Partnership less an amount for costs
associated with the liquidation of the Partnership and other contingencies.
As a result of the Sale and distribution, cash and cash equivalents and other
assets comprise all of the remaining assets of the Partnership. The General
Partner believes that the Partnership has sufficient cash to meet the needs
of the Partnership for any contingencies or costs associated with the Sale
and final liquidation of the Partnership.
As a result of the Sale of the remaining Properties, the only source of
revenue prior to final liquidation will be the interest generated on the
remaining cash balances. The remaining cash is invested in an unaffiliated
highly liquid money market fund.
At June 30, 1999, the Partnership had cash and cash equivalents of $609,332
compared with $1,220,656 at December 31, 1998. The decrease in cash and cash
equivalents is due to the Sale of the Properties and the subsequent
distribution of substantially all of the net proceeds thereof and other
Partnership cash. As required by the Partnership agreement, upon final
liquidation of the Partnership, the general partner is to contribute $177,778
("GP Contribution") to the Partnership, which represents distributions of net
proceeds from Sale or refinancing previously received by the general partner.
Remaining cash available, if any, after the contribution by the General
Partner and the satisfaction of all Partnership obligations will be
distributed pursuant to the Partnership agreement.
RESULTS OF OPERATIONS
Partnership net income (loss) for the three and six months ended June 30,
1999 was ($53,288) and $12,506,157, respectively, compared to net income of
$63,908 and $133,038 for the corresponding periods in fiscal 1998. The
decreased income for the three months ended June 30, 1999 is primarily
attributable to the Sale of the Properties. The increase in income for the
six month period is primarily attributable to the gain on the Sale.
The Partnership generated operating losses for the three and six months ended
June 30, 1999 of $53,288 and $99,856, respectively, compared to operating
income of $63,908 and $133,038, respectively, for the corresponding periods
in fiscal 1998. Total income for the three and six months ended June 30, 1999
totaled $9,087 and $415,335, respectively, compared with $1,127,319 and
$2,261,678, respectively, for the corresponding period in fiscal 1998. The
decreased total income and operating loss for the three and six months ended
June 30, 1999, is primarily attributable to the decrease in rental income
attributable to the Sale on January 29, 1999, partially offset by interest
income earned on the proceeds from the Sale prior to distributions to the
Unitholders and reduced operating expenses.
Total expenses for the three and six months ended June 30, 1999 were $62,375
and $515,191, respectively, compared to $1,063,411 and $2,128,640,
respectively, for the corresponding periods in fiscal 1998. The decrease in
total expenses is primarily attributable to the Sale.
General and administrative expenses for the three and six months ended June
30, 1999 were $62,375 and $82,387, respectively, compared to $40,518 and
$88,573, respectively, for the corresponding periods in fiscal 998. The
decrease in general and administrative expenses for the six months ended June
30, 1999 is primarily attributable to a reduction in printing, mailing and
investor relations exepnses. The increase for the three months ended June 30,
1999 is primarily due to the payment for costs related to the liquidation of
the Partnership.
<PAGE>
YEAR 2000
Due to the consummation of the Sale, the Partnership is no longer engaged in
the operation of real properties or any other business. As a result of the
foregoing, and in view of the General Partner's plan to complete the full
liquidation of the Partnership prior to January 1, 2000, the Partnership has
no exposure to Year 2000 issues.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risks
Due to the consummation of the Sale and the repayment of its mortgage
indebtedness, the Partnership has no exposure to interest rate risk. In
addition, the Partnership is expected to be liquidated during 1999.
PART II - OTHER INFORMATION
ITEMS 1-5. Not applicable
ITEM 6. Exhibits & Reports on Form 8-K
(a) Exhibits
3.1 Amendment, dated January 18, 1999 to Partnership's Amended
and Restated Certificate of Limited Partnership Agreement
(included as, and incorporated herein by reference to,
Exhibit 4.1 to the Partnership's Report on Form 8-K filed on
February 16, 1999).
10.1 Agreement for Purchase and Sale and Joint Escrow
Instructions between Creekside Oaks Joint Venture and DOC
Investors, L.L.C. dated January 26, 1999 with respect to the
Sale of Creekside Oaks (included as, and incorporated herein
by reference to, Exhibit 10.1 to the Partnership's Report on
Form 8-K filed on February 16, 1999).
10.2 Agreement for Purchase and Sale and Joint Escrow
Instructions between Ponte Vedra Beach Village Joint Venture
and DOC Investors, L.L.C. dated January 26, 1999 with
respect to the Sale of Ponte Vedra Beach Village I
Apartments (included as, and incorporated herein by
reference to, Exhibit 10.2 to the Partnership's Report on
Form 8-K filed on February 16, 1999).
10.3 Agreement for Purchase and Sale and Joint Escrow
Instructions between Rancho Antigua Joint Venture and DOC
Investors, L.L.C. dated January 26, 1999 with respect to the
Sale of Rancho Antigua (included as, and incorporated herein
by reference to, Exhibit 10.3 to the Partnership's Report on
Form 8-K filed on February 16, 1999).
10.4 Agreement for Purchase and Sale and Joint Escrow
Instructions between Village at the Foothills (Phase I)
Joint Venture Limited Partnership and Doc Investors, L.L.C.
dated January 26, 1999 with respect to the Sale of Village
at Foothills I Apartments (included as, and incorporated
herein by reference to, Exhibit 10.4 to the Partnership's
Report on Form 8-K filed on February 16, 1999).
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
June 30, 1999.
(27) Financial Data Schedule
<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: August 10, 1999 BY:/s/ DANIEL J. EPSTEIN
------------------------
Daniel J. Epstein
Director, President, and Principal
Executive Officer
Date: August 10, 1999 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 609,332
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 625,032
<CURRENT-LIABILITIES> 53,601
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 571,431
<TOTAL-LIABILITY-AND-EQUITY> 625,032
<SALES> 327,728
<TOTAL-REVENUES> 13,721,571
<CGS> 0
<TOTAL-COSTS> 317,398
<OTHER-EXPENSES> 124,671
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73,122
<INCOME-PRETAX> 13,206,380
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,206,380
<DISCONTINUED> 0
<EXTRAORDINARY> (700,223)
<CHANGES> 0
<NET-INCOME> 12,506,157
<EPS-BASIC> 149.01
<EPS-DILUTED> 149.01
</TABLE>
