UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: November 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: 0-13330
CONAM REALTY PENSION INVESTORS
formerly known as
HUTTON/CONAM REALTY PENSION INVESTORS
(Exact name of registrant as specified in its charter)
New York 0-13330 11-2673854
State or other jurisdiction Commission IRS Employer
of incorporation File Number Identification No.
1764 San Diego Avenue
San Diego, CA 92110 Attn.: Robert J. Svatos 92110-1906
Address of principal executive offices Zip Code
Registrant's telephone number, including area code (619) 297-6771
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
Title of Class
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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)
Documents Incorporated by Reference:
Portions of Parts I, II, III and IV are incorporated by reference
to the Partnership's Annual Report to Unitholders for the fiscal
year ended November 30, 1997.
PART I
Item 1. Business
(a) General Description of Business and Objectives
This Form 10-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual Results could differ materially from those
projected in or contemplated by the forward-looking statements as a result of a
number of factors, including those identified herein.
ConAm Realty Pension Investors, (formerly known as Hutton/ConAm Realty Pension
Investors), (the "Partnership") is a New York limited partnership formed on
January 23, 1984. ConAm Property Services III, Ltd. ("CPS III"), a California
limited partnership, and RPI Real Estate Services, Inc. ("RPI"), a Delaware
corporation, were the original co-general partners of the Partnership since its
inception. On October 8, 1997, CPS III acquired RPI's co-general partner
interest in the Partnership effective July 1, 1997, pursuant to a Purchase
Agreement between CPS III and RPI dated August 29, 1997. As a result, CPS III
now serves as the sole general partner of the Partnership. In conjunction with
this transaction, the name of the Partnership was changed from Hutton/ConAm
Realty Pension Investors to ConAm Realty Pension Investors.
The Partnership was organized to engage in the business of investing in
multifamily residential rental properties by making equity participating loans
secured by first mortgages or deeds of trust on such properties. The
Partnership originally invested in five equity participating mortgage loans,
one of which was repaid in December 1987. Three of the borrowers defaulted
under the equity participating loans and the Partnership obtained title to the
properties which secured such loans through foreclosure or deeds in lieu of
foreclosure. As a result, the Partnership became an owner and operator of the
properties. During its fiscal year ended November 30, 1997, the Partnership
sold two of the properties, Chaparosa Apartments in Irving, Texas and Bryn
Athyn Apartments in Raleigh, North Carolina, to purchasers unaffiliated with
the Partnership for sale prices of $6.0 million and $9.2 million, respectively.
See Item 7 and Note 4 to the Financial Statements, included in the
Partnership's Annual Report to Unitholders for the fiscal year ended November
30, 1997, which is filed as an exhibit under Item 14 for additional information
regarding these property sales. Information regarding the Partnership's two
remaining investments in property is set forth below.
(1) On September 28, 1984, the Partnership funded an equity participating loan
in the amount of $4,475,250 to Southridge Partners I, ("Southridge"), a
privately offered New York limited partnership, whose general partners are
affiliates of RPI and CPS III, in connection with the purchase by
Southridge of Oaktree Village ("Oaktree"), a 160-unit apartment complex
located in Jacksonville, Florida. On September 19, 1997, the Partnership
obtained legal title to Oaktree through a deed in lieu of foreclosure. As
a result, Oaktree is now recorded as a real estate investment rather than
a mortgage loan investment on the Partnership's balance sheet. For more
information on the defaulted loan and the transfer of ownership of Oaktree
to the Partnership, reference is made to Item 7 and Note 4 to the financial
statements, included in the Partnership's Annual Report to Unitholders for
the fiscal year ended November 30, 1997, which is filed as an exhibit under
Item 14.
(2) On December 21, 1984, the Partnership funded an equity participating loan
in the amount of $5,200,650 to Southridge, in connection with the purchase
by Southridge of Park View Village ("Park View"), a 184-unit apartment
complex located in Winter Park (a suburb of Orlando), Florida. On
September 19, 1997, the Partnership and Southridge signed a definitive
agreement to modify the terms of the loan secured by Park View, which
among other things, allowed for an extension of the maturity date of the
loan and a conditional deferral of debt service payments. Reference is
made to Item 7 and Note 4 to the financial statements, included in the
Partnership's Annual Report to Unitholders for the fiscal year ended
November 30, 1997, which is filed as an exhibit under Item 14, for more
information on the Park View Loan.
Funds held as working capital are invested in bank certificates of deposit,
unaffiliated money market funds or other highly liquid short-term investments
where there is appropriate safety of principal in accordance with the
Partnership's investment objectives and policies.
The Partnership's principal investment objectives with respect to its interests
in real property are:
(1) To participate in the capital appreciation of the various
properties in which it invests;
(2) To provide quarterly cash distributions;
(3) To preserve and protect the capital appreciation of the
properties in which it invests; and
(4) To provide increased cash distributions as the cash flow from
the properties increases.
Distribution of income is the Partnership's objective during its operational
phase, while preservation and appreciation of capital are the Partnership's
longer term objectives. Future economic conditions in the United States as a
whole and, in particular, in the localities in which the Partnership's
investment properties are located, will be important factors to attaining the
Partnership's investment objectives, especially with regard to achievement of
capital appreciation.
The Partnership considers itself to be engaged in only one industry segment,
real estate investment.
Competition
The Partnership's real property investment and the property securing the
Partnership's outstanding mortgage loan are subject to competition from similar
types of properties in the vicinities in which they are located and such
competition has increased since the Partnership's inception due principally to
the addition of the newly constructed apartment complexes offering increased
residential and recreational amenities. The investment properties have also
been subject to competition from condominiums and single-family properties
especially during periods of low mortgage interest rates. The Partnership
competes with other real estate owners, developers and financiers in the rental
and leasing of its properties and the properties securing its outstanding
mortgage loans by offering competitive rental rates and, if necessary, leasing
incentives. In some cases, the Partnership may compete with other properties
owned by partnerships affiliated with the General Partner.
For information with respect to market conditions in the areas where the
Partnership's properties are located, please refer to Item 2 below.
Employees
The Partnership has no employees. Services are provided by CPS III, ConAm
Management Corporation ("ConAm Management"), an affiliate of CPS III, as well
as Service Data Corporation and First Data Investor Services Group, both
unaffiliated companies. ConAm Management provides property management services
with respect to Park View pursuant to an agreement with Southridge, as the
property owner. In addition, the Partnership has entered into a management
agreement with ConAm Management pursuant to which ConAm Management provides
property management services with respect to Oaktree Village. First Data
Investor Services Group had been retained by the Partnership to provide all
accounting and investor communication functions, while Service Data Corporation
provides transfer agent services. Effective December 1, 1997, the accounting
functions of the Partnership have been transferred to the firm of Brock,
Tibbetts, and Snell, an unaffiliated company located in San Diego, California.
See Item 13 of this report and Note 7 to the Financial Statements included in
the Partnership's Annual Report to Unitholders for the fiscal year ended
November 30, 1997, which is filed as an exhibit under Item 14, for a further
description of the service and management agreements between the Partnership
and affiliated entities.
Item 2. Properties
Below is a description of Oaktree Village, which is owned by the Partnership,
and Park View, which secures the Partnership's remaining mortgage loan, and a
discussion of current market conditions in the areas where the properties are
located. For information on the acquisition of the properties and terms of the
mortgage loans, reference is made to Note 4 to the Financial Statements
included in the Partnership's Annual Report to Unitholders for the fiscal year
ended November 30, 1997, which is filed as an exhibit under Item 14. The
appraised value of the Partnership's real estate investment is incorporated by
reference to the Partnership's Annual Report to Unitholders for the fiscal year
ended November 30, 1997. Average occupancy rates at each property are
incorporated by reference to Item 7.
Oaktree Village - Jacksonville, Florida
This 160-unit apartment complex is situated in southeast Jacksonville,
approximately 8 miles from the central business district, in the
Baymeadows/Deerwood community. The Southeast submarket, where Oaktree Village
is located, has experienced notable population growth and limited new
construction in recent years, resulting in strong occupancy for area apartment
complexes. A local survey of the Southeast submarket reported an average
apartment occupancy rate of 96% as of the fourth quarter of 1997. Given the
strong market conditions, several apartment projects are in the planning or
construction phase. During 1997, 2,791 new units were permitted for
construction with an additional 2,000 units permitted to be built in 1998. This
new construction is expected to soften the market by outpacing population and
job growth and will continue to affect the region for the next several months,
as new units become available. While vacancy rates remained low in 1997, the
use of rental concessions in the Jacksonville submarket has recently increased
to attract and retain tenants in anticipation of the new competition.
Park View Village - Winter Park, Florida
This 184-unit apartment complex is located in metropolitan Orlando,
approximately 10 miles northeast of the central business district. The North
Orlando/Winter Park/Maitland submarket, where the property is located,
experienced average occupancy of approximately 99% as of November 30, 1997,
slightly above levels seen in Metro Orlando. New construction in the submarket
continues at a healthy pace, with a net of 412 units added between September
1995 and September 1996, but population growth has kept pace with the new units
coming on line. Over the past five years, the submarket has shown moderate
growth and the average rent per square foot also has increased moderately.
During 1997 the Partnership initiated a renovation project that includes
replacement of balconies, replacing wood siding with vinyl, stair replacement
where required and a complete exterior painting. The renovation project is
scheduled to be completed by the third quarter of 1998 at an estimated
aggregate cost of $400,000.
Item 3. Legal Proceedings
The Partnership is not subject to any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the fiscal year ended November 30, 1997, no matter
was submitted to a vote of security holders through the solicitation of proxies
or otherwise.
PART II
Item 5. Market for the Partnership's Limited Partnership Interests and
Related Security Holder Matters
As of November 30, 1997, the number of Unitholders of record was 5,251.
No established public trading market has developed for the Units, and it is
not anticipated that such a market will develop in the future.
Distributions of adjusted cash from operations are determined by the General
Partner on a quarterly basis, with distributions occurring approximately 45
days after the close of each fiscal quarter. The Partnership has paid
quarterly cash distributions since the initial closing of its public offering
in February 1984. Information on cash distributions paid by the Partnership
for the past two fiscal years is incorporated by reference to the Partnership's
Annual Report to Unitholders for the fiscal year ended November 30, 1997, which
is filed as an exhibit under Item 14. Reference is made to Item 7 for a
discussion of the General Partner's expectations for future cash distributions.
Item 6. Selected Financial Data
Incorporated by reference to the Partnership's Annual Report to Unitholders for
the year ended November 30, 1997, which is filed as an exhibit under Item 14.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
At November 30, 1997, the Partnership's investment portfolio consisted of: (1)
a mortgage loan funded to Southridge Partners I ("Southridge") which is secured
by Park View Village, an apartment property; and (2) an apartment property,
Oaktree Village, which was acquired by the Partnership on September 19, 1997 in
lieu of foreclosure. As discussed below, the Partnership completed the sales
of Chaparosa Apartments on August 6, 1997, and Bryn Athyn Apartments on
September 22, 1997.
Given the improvement in the performance of multifamily real estate and the
improvement in the real estate capital markets which has increased demand by
potential buyers, it was determined that it is in the best interest of the
Partnership to attempt to sell its remaining properties over the next few
years. In keeping with this objective, on August 6, 1997, the Partnership
closed on the sale of Chaparosa Apartments. The property sold for net sales
proceeds of $5,689,996 to Apple Residential Income Trust, Inc., which is
unaffiliated with the Partnership. In addition, on September 22, 1997 the
Partnership sold Bryn Athyn to SCA North Carolina Limited Partnership, which is
unaffiliated with the Partnership, for net sales proceeds of $8,886,566. Both
selling prices were determined by arm's length negotiations between the
Partnership and the respective buyers.
As a result of these sales, on October 31, 1997, the Partnership paid a special
cash distribution in the amount of $150.00 per Unit which represented
substantially all of the net proceeds from the sales. The General Partners
also declared a cash distribution of $2.50 per Unit for the quarter ended
November 30, 1997 which was paid to the limited partners on January 15, 1998.
Including these distributions, cumulative cash distributions total $660.68 per
original $500 Unit. Future quarterly cash distributions from operations may be
reduced, or suspended, to reflect the corresponding reduction in the
Partnership's cash flow as a result of the sales of Chaparosa and Bryn Athyn.
Additionally, future cash distributions will now be dependent on the operations
of Oaktree Village which, as discussed below, was deeded to the Partnership by
the borrower in September 1997, and the Partnership's mortgage loan investment
in Park View Village, the terms of which were modified, as detailed below. In
addition, the Partnership is aware that Southridge is attempting to refinance
the Park View property with an unaffiliated lender.
On January 22, 1997, the Partnership delivered notice of default to Southridge
with respect to the Partnership's loans on Park View Village and Oaktree
Village (the "Loans"). The Partnership indicated, among other things, that the
Loans were in default due to, without limitation, the failure of Southridge to
make: i) the payment of minimum interest due on January 1, 1997; ii) the
required monthly deferred minimum interest payments during 1996 and; iii) the
required contingent interest payments for the first three quarters of 1996 as
required by each of the loan documents. Additionally, the Partnership
indicated that the Loans were in default due to Southridge's failure to
adequately maintain, preserve and protect the condition of Park View Village
and Oaktree Village. The Partnership demanded payment of the amounts due from
Southridge with respect to each of the Loans, however, the Partnership did not
accelerate payment of the outstanding balance of the Loans.
On February 21, 1997, the Partnership executed a Letter of Intent ("LOI") with
Southridge, whereby Southridge's default on the Loans would be resolved. The
LOI called for the borrower to deed over Oaktree Village to the Partnership and
modify the terms of the Park View Village note. On September 19, 1997,
definitive agreements consistent with the terms of the LOI were signed. As a
result, Oaktree Village was deeded to the Partnership. Oaktree's appraised
value as of November 30, 1996, as determined by an independent appraisal, was
$5.7 million. The Park View Village note was modified to provide for an
extension of the maturity date to June 30, 1999, the deferral of debt service
payments for the lesser of twelve months commencing January 1, 1997, or until a
capital improvement reserve account is fully funded with an agreed upon amount,
and the inclusion of a discounted payoff option for the borrower during the
extension periods. The payoff option enables the borrower to pay off the $5.2
million outstanding principal balance of the Park View Village note and any
accrued interest, which totaled approximately $2.3 million at November 30,
1997, for $5.65 million.
Effective December 1, 1996, the Park View Village and Oaktree Village notes
receivable were placed on non-accrual status. The Partnership did not receive
interest payments in the amount of $727,353 that were due from Southridge with
respect to the loans on Park View Village and Oaktree Village during fiscal
1997.
At November 30, 1997, the Partnership had cash and cash equivalents of
$1,029,577 which were invested in unaffiliated money market funds, compared
with $1,818,059 at November 30, 1996. The decrease is primarily attributable
to cash distributions paid by the Partnership in 1997, the decline in rental
income due to the sale of Chaparosa and Bryn Athyn and the reduction in
interest income relating to the Partnership's mortgage loan investments. Net
cash provided by operating activities also declined as a result of the
Partnership not receiving interest payments in 1997 from Southridge with
respect to the Park View and Oaktree loans.
Interest receivable, net of valuation allowance, declined from $1,674,100 at
November 30, 1996 to $449,350 at November 30, 1997. The decrease is primarily
attributable to the foreclosure on the Oaktree loan ,which eliminated interest
receivable relating to the Oaktree loan.
Distribution Payable decreased from $507,842 at November 30, 1996 to $253,921
at November 30, 1997. The decrease is due to the General Partner's decision to
reduce cash distributions due to the decrease in cash flow generated from the
Partnership's mortgage loan investments and to reflect declining cash flow as a
result of property sales.
Accounts payable and accrued expenses declined from $263,985 at November 30,
1996, to $183,988 at November 30, 1997. The decrease is primarily attributable
to the decrease in real estate tax accruals resulting from the sales of Bryn
Athyn and Chaparosa.
Results of Operations
1997 versus 1996
Partnership operations for the year ended November 30, 1997 generated net
income of $7,222,388 compared with net income of $1,697,893 for fiscal 1996.
The increase in net income is primarily due to the net gain of $1,718,692
recognized from the sale of Chaparosa and the net gain of $4,651,799 recognized
from the sale of Bryn Athyn, partially offset by lower rental revenues in 1997
as a result of these sales. Excluding the gains on the sales of Chaparosa and
Bryn Athyn, the Partnership generated income from operations of $851,898 for
the fiscal year ended November 30, 1997.
Rental income totaled $2,244,670 for the fiscal year ended November 30, 1997
compared with $2,573,226 for fiscal 1996. The decrease is primarily
attributable to the sales of Chaparosa and Bryn Athyn. Mortgage interest
income during fiscal 1997 declined from fiscal 1996 due to the non-accrual of
interest income in fiscal 1997. The Partnership did not recognize a recovery
of valuation allowance in 1997 as compared to a recovery of valuation allowance
of $550,000 on the Oaktree loan during 1996. The recovery of valuation
allowance in 1996 was attributable to an increase in the fair market value of
Oaktree, as determined by an independent appraisal conducted in November 1996.
Interest and other income totaled $203,285 for the fiscal year ended November
30, 1997 compared to $85,423 in fiscal 1996. The increase is due to the
Partnership maintaining higher average cash balances in 1997 compared to 1996,
primarily due to the previously undistributed sales proceeds from the Chaparosa
and Bryn Athyn sales.
Total expenses for the year ended November 30, 1997 were $1,614,954 compared
with $2,353,732 for fiscal 1996. The provision for losses for the year ended
November 30, 1997 was $0 compared with $450,000 for the year ended November 30,
1996. The decrease is attributable to the Park View Village note being placed
on non-accrual status effective December 1, 1996. While the fair market value
of Park View increased during 1996, as determined by an independent appraiser,
the Partnership recorded a $450,000 loss provision for the year ended December
31, 1996 to reflect the carrying value of the Park View loan at the discount
payoff amount.
Property operating expenses decreased slightly to $1,329,354 for the year ended
November 30, 1997, compared with $1,388,362 for fiscal 1996. The decrease was
a result of the sales of Bryn Athyn and Chaparosa Apartments during fiscal 1997
and a reduction in repairs and maintenance expenses relating to Bryn Athyn and
Chaparosa Apartments during fiscal 1997 prior to being sold. This decrease was
partially offset by an increase in property operating expenses related to the
Partnership's ownership of Oaktree Village Apartments after the foreclosure in
September 1997.
General and administrative expenses increased from $160,625 for the year ended
November 30, 1996 to $215,461 for fiscal 1997. The increase is primarily due
to higher legal fees, engineering consulting fees, and partnership
administrative expenses in the 1997 period. During the 1997 period, certain
expenses incurred by RPI, its affiliates, and an unaffiliated third party
service provider in servicing the Partnership, which were voluntarily absorbed
by affiliates of RPI in prior periods, were reimbursable to RPI and their
affiliates.
1996 versus 1995
Partnership operations for the year ended November 30, 1996 generated net
income of $1,697,893 compared with net income of $1,188,552 for fiscal 1995.
The increase is primarily due to an increase in rental income, and a $550,000
recovery of valuation allowance in 1996 , partially offset by an increase in
the provision for losses on the Partnership's mortgage loan investments.
Rental income totaled $2,573,226 for the year ended November 30, 1996 compared
with $2,431,302 for fiscal 1995. This increase is attributable to higher
rental rates at the Partnership's wholly-owned properties and increased
occupancy at Bryn Athyn. Mortgage interest income during fiscal 1996 was
unchanged from fiscal 1995. The Partnership recognized a recovery of valuation
allowance of $550,000 on the Oaktree loan during 1996. This was attributable
to an increase in the fair market value of Oaktree, as determined by an
independent appraisal conducted in November 1996. Interest and other income
totaled $85,423 for the fiscal year ended November 30, 1996 compared to
$100,829 in fiscal 1995. The decrease is the result of a reduction in interest
rates and the Partnership maintaining lower cash balances in 1996 compared to
1995.
Total expenses for the year ended November 30, 1996 were $2,353,732 compared
with $2,186,555 for fiscal 1995. The provision for losses for the year ended
November 30, 1996 was $450,000 compared with $300,000 for the year ended
November 30, 1995. While the fair market value of Park View increased during
1996, as determined by an independent appraiser, the Partnership recorded a
$450,000 loss provision for the year ended December 31, 1996 to reflect the
carrying value of the Park View loan at the discount payoff amount. The
provision for loss in 1995 was related to the Park View loan.
Property operating expenses increased slightly to $1,388,362 for the year ended
November 30, 1996 compared with $1,375,079 for fiscal 1995. The increase is
attributable to higher repairs and maintenance expenses at Bryn Athyn,
partially offset by a decline in repairs and maintenance expenses and real
estate taxes at Chaparosa.
General and administrative expenses increased from $140,805 for the year ended
November 30, 1995 to $160,625 for fiscal 1996. The increase is primarily due
to higher audit fees, engineering consulting fees, and partnership
administrative expenses in the 1996 period, partially offset by lower legal
fees.
For the years ended November 30, 1997, 1996 and 1995, average occupancy levels
at the Partnership's properties and at the properties securing the
Partnership's equity participating loans were as follows:
Investments in Real Estate 1997 1996 1995
Properties:
Oaktree Village Apartments 93% 96% 96%
Bryn Athyn Apartments _ 97% 96%
Chaparosa Apartments _ 97% 97%
Mortgage Loan Investments:
Park View Village 99% 97% 95%
New Accounting Pronouncements
The Financial Accounting Standards Board also issued SFAS No. 129, "Disclosure
of Information about Capital Structure," SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information." These statements, which are effective for fiscal years
beginning after December 15, 1997, expand or modify disclosures and,
accordingly, will have no impact on the Partnership's reported financial
position, results of operations or cash flows.
Item 8. Financial Statements and Supplementary Data
Incorporated by reference to the Partnership's Annual Report to Unitholders for
the fiscal year ended November 30, 1996, which is filed as an exhibit under
Item 14. Supplementary Data is incorporated by reference to pages F-1 to F-3
of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Effective December 1, 1997, the Partnership advised Coopers & Lybrand L.L.P.
that it was changing accounting firms and engaged KPMG Peat Marwick LLP.
Coopers & Lybrand L.L.P.'s report on the financial statements for the years
ended December 31, 1996 and December 31, 1995 contained no adverse opinion or
disclaimer of opinion and was not qualified as to uncertainty, audit scope or
accounting principles. There have been no disagreements with Coopers & Lybrand
L.L.P. on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope procedure.
The decision to change accountants was approved by ConAm Property Services III,
Ltd. and RPI Real Estate Services, Inc., the General Partners of the
Partnership at that time.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no officers or directors. CPS III, the General Partner of
the Partnership, manages and controls the affairs of the Partnership and has
general responsibility and authority in all matters affecting its business.
CPS III is a California limited partnership organized on August 30, 1982. The
sole general partner of CPS III is Continental American Development, Inc.
("ConAm Development"). The names and positions held by the directors and
executive officers of ConAm Development are set forth below. There are no
family relationships between any officers or directors.
Name Office
Daniel J. Epstein President and Director
E. Scott Dupree Vice President and Director
Robert J. Svatos Vice President and Director
Ralph W. Tilley Vice President
J. Bradley Forrester Vice President
Daniel J. Epstein, 58, has been the President and a Director of ConAm
Development. and a general partner of Continental American Properties, Ltd.
("ConAm"), an affiliate of ConAm Services, since their inception. He is also
Chairman and Chief Executive Officer of ConAm Management. Prior to that time
Mr. Epstein was Vice President and a Director of American Housing Guild, which
he joined in 1969. At American Housing Guild, he was responsible for the
formation of the Multi-Family Division and directed its development and
property management activities. Mr. Epstein holds a Bachelor of Science degree
in Engineering from the University of Southern California.
E. Scott Dupree, 47, is a Senior Vice President and general counsel of ConAm
Management responsible for negotiation, documentation, review and closing of
acquisition, sale and financing proposals. Mr. Dupree also acts as principal
legal advisor on general legal matters ranging from issues and contracts
involving the management company to supervision of litigation and employment
issues. Prior to joining ConAm Management in 1985, he was corporate counsel to
Trusthouse Forte, Inc., a major international hotel and restaurant corporation.
Mr. Dupree holds a B.A. from United States International University and a Juris
Doctorate degree from the University of San Diego.
Robert J. Svatos, 39, is a Senior Vice President and is the Chief Financial
Officer of ConAm Management since 1988. His responsibilities include the
accounting, treasury and data processing functions of the organization. Prior
to joining ConAm Management in 1988, he was the Chief Financial Officer for
AmeriStar Financial Corporation, a nationwide mortgage banking firm. Mr.
Svatos holds an M.B.A. in Finance from the University of San Diego and a
Bachelor's of Science degree in Accounting from the University of Illinois. He
is a Certified Public Accountant.
Ralph W. Tilley, 43, is a Senior Vice President and Treasurer of ConAm
Management. He is responsible for the financial aspects of syndications and
acquisitions, the company's asset management portfolio and risk management
activities. Prior to joining ConAm Management in 1980, he was a senior
accountant with KPMG Peat Marwick LLP, specializing in real estate. He holds a
Bachelor's of Science degree in Accounting from San Diego State University and
is a Certified Public Accountant.
J. Bradley Forrester, 40, is the President of ConAm Management. He is
currently responsible for overseeing all aspects of the operations of the firm.
His primary focus is on new business related activities including property
acquisitions, property development and rehabilitation, and the acquisition of
other property management companies. Prior to joining ConAm, Mr. Forrester
served as Senior Vice President - Commercial Real Estate for First Nationwide
Bank in San Francisco, where he was responsible for a $2 billion problem asset
portfolio including bank-owned real estate and non-performing commercial real
estate loans. His past experience includes significant involvement in real
estate development and finance, property acquisitions and dispositions and
owner's representation matters. Prior to entering the real estate profession,
he worked for KPMG Peat Marwick LLP in Dallas, Texas. Mr. Forrester holds a
Bachelor of Science degree in Accounting from Louisiana State University. He
received his CPA certification in the state of Texas.
Item 11. Executive Compensation
Neither the General Partner nor any of its directors or executive officers
received any compensation from the Partnership. See Item 13 below with respect
to a description of certain costs of the General Partner reimbursed by the
Partnership.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of November 30, 1997, no person was known by the Partnership to be the
beneficial owner of more than five percent of the Units of the Partnership.
Neither the General Partner nor any of its directors or executive officers owns
any Units.
Item 13. Certain Relationships and Related Transactions
RPI and CPS III received a total of $196,981 as the General Partners' allocable
share of Net Cash from Operations and net sales proceeds with respect to the
fiscal year ended November 30, 1997, pursuant to the Certificate and Agreement
of Limited Partnership of the Partnership. Pursuant to the Certificate and
Agreement of Limited Partnership of the Partnership, for the fiscal year ended
November 30, 1997, $109,105 of the Partnership's income was allocated to RPI
and CPS III. For a description of the share of Net Cash from Operations and
the allocation of income and loss to which the General Partner and former
co-General Partner are entitled, reference is made to Note 7 to the Financial
Statements included in the Partnership's Annual Report to Unitholders for the
fiscal year ended November 30, 1997, which is filed as an exhibit under Item
14.
The Partnership has entered into a property management agreement with ConAm
Management pursuant to which ConAm Management has assumed direct responsibility
for day to day management of Oaktree Village. The services include the
supervision of leasing, rent collection, maintenance, budgeting, employment of
personnel, payment of operating expenses, strategic asset management, etc. For
such services, ConAm Management is entitled to receive a property management
fee equal to 5% of gross revenues. A summary of property management fees
earned by ConAm Management during the past three fiscal years is incorporated
herein by reference to Note 7 to the Financial Statements included in the
Partnership's Annual Report to Unitholders for the fiscal year ended November
30, 1997, which is filed as an exhibit under Item 14.
Southridge, the owner of Park View, has entered into a property management
agreement with ConAm Management pursuant to which ConAm Management has assumed
direct responsibility for day to day management of Park View Village. For such
services, during the twelve months ended November 30, 1997, ConAm Management
earned property management fees aggregating $98,130 from Southridge.
Pursuant to Section 11(g) of Registrant's Certificate and Agreement of Limited
Partnership, the General Partner may be reimbursed by the Partnership for
certain of its costs. A summary of amounts paid to the General Partners or
their affiliates during the past three fiscal years is incorporated by
reference to Note 7 to the Financial Statements included in the Partnership's
Annual Report to Unitholders for the fiscal year ended November 30, 1997, which
is filed as an exhibit under Item 14. PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
(a)(1) Financial Statements: Page
Balance Sheets - November 30, 1997 and 1996 ......................... (1)
Statements of Operations - For the years ended
November 30, 1997, 1996 and 1995 .................................. (1)
Statements of Partners' Capital - For the years ended
November 30,1997, 1996 and 1995 ................................... (1)
Statements of Cash Flows - For the years ended
November 30, 1997, 1996 and 1995 .................................. (1)
Notes to the Financial Statements ................................... (1)
Independent Auditors' Report ........................................ (1)
Report of Former Independent Accountants ............................ (1)
(a)(2) Financial Statement Schedule:
Schedule III - Real Estate and Accumulated Depreciation ....... F-1
Independent Auditors' Report .................................. F-2
Report of Former Independent Accountants ...................... F-3
(1) Incorporated by reference to the Partnership's Annual Report to
Unitholders for the fiscal year ended November 30, 1997, filed as an
exhibit under Item 14.
(a)(3) Exhibits
(4)(A) Certificate and Agreement of Limited Partnership (included as, and
incorporated herein by reference to Exhibit A to the Prospectus of
Registrant dated June 24, 1983, contained in Amendment No. 3 to
Registration Statement No. 2-79116 of Registrant filed June 21, 1983).
(B) Subscription Agreement and Signature Page (included as, and incorporated
herein by reference to, Exhibit 3.1 to Amendment No. 2 to Registration
Statement No. 2-79116 of Registrant filed (June 13, 1983).
(10)(A) Loan Documents (Loan Commitment; Promissory Note; and Mortgage,
Assignment of Rents and Security Agreement) relating to Oaktree
Village, between the Registrant and Southridge Partners I, and the
exhibits thereto (included as, and incorporated herein by reference
to, Exhibit (10)(A) to the Registrant's Annual Report on Form 10-K for
the fiscal year ended November 30, 1984 (the "1984 Annual Report")).
(B) Loan Documents (Loan Commitment; Promissory Note; and Deed of Trust,
Assignment of Rents and Security Agreement) relating to Chaparosa
Apartments, between the Registrant and Southridge Partners I, and the
exhibits thereto (included as, and incorporated herein by reference
to, Exhibit (10)(B) to the 1984 Annual Report).
(C) Loan Documents (Loan Commitment; Promissory Note; and Mortgage,
Assignment of Rents and Security Agreement) relating to Park View
Village (formerly Park View Estates), between the Registrant and
Southridge Partners I, and the exhibits thereto (included as, and
incorporated herein by reference to, Exhibit(10)(C) to the 1984 Annual
Report).
(D) Conveyance Documents relating to Chaparosa Apartments dated
January 31, 1992 (included as, and incorporated herein by reference to,
Exhibit (10)(F) to the Registrant's Annual Report on Form 10-K filed
on February 27, 1992 for the fiscal year ended November 30, 1991).
(E) Property Management Agreement between Hutton/ConAm Realty Pension
Investors and Con Am Management Corporation for the Bryn Athyn
property (included as, and incorporated herein by reference to,
Exhibit 10-E to the Registrant's 1993 Annual Report on Form 10-K
filed on February 28, 1994).
(F) Property Management Agreement between Hutton/ConAm Realty Pension
Investors and Con Am Management Corporation for the Chaparosa
property (included as, and incorporated herein by reference, to Exhibit
10-F to the Registrant's 1993 Annual Report on Form 10-K filed on
February 28, 1994).
(G) Note and Modification Agreement between Southridge Partners I and
Hutton/ConAm Realty Pension Investors dated November 23, 1993
for Park View Village (included as, and incorporated herein by
reference to, Exhibit 10-G to the Registrant's 1993 Annual
Report on Form 10-K filed on February 28, 1994).
(H) Note and Modification Agreement between Southridge Partners I and
Hutton/ConAm Realty Pension Investors dated November 23, 1993
for Oaktree Village (included as, and incorporated herein by
reference to, Exhibit 10-H to the Registrant's 1993 Annual
Report on Form 10-K filed on February 28, 1994).
(13) Annual Report to Unitholders for the fiscal year ended
November 30, 1997.
(27) Financial Data Schedule
(99) Portions of the Prospectus of the Registrant dated June 24, 1983
(included as, and incorporated herein by reference to, Exhibit 28
to the Registrant's 1987 Annual Report on Form 10-K for the fiscal
year ended November 30, 1987).
(b) Reports on Form 8-K
On December 1, 1997, the Partnership filed a Form 8-K reporting
the change in Partnership's Certifying Accountants.
On August 15, 1997, the Partnership filed a Form 8-K disclosing the
sale of Chaparosa Apartments.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: March 2, 1998
BY: ConAm Property Services III, Ltd.
General Partner
BY: Continental American Development, Inc.
General Partner
BY: /s/ Daniel J. Epstein
Name: Daniel J. Epstein
Title: President, Director and
Principal Executive Officer
Date: March 2, 1998
BY: /s/ E. Scott Dupree
E. Scott Dupree
Vice President and Director
Date: March 2, 1998
BY: /s/ Robert J. Svatos
Robert J. Svatos
Vice President and Director
Date: March 2, 1998
BY: /s/ Ralph W. Tilley
Ralph W. Tilley
Vice President
Date: March 2, 1998
BY: /s/ J. Bradley Forrester
J. Bradley Forrester
Vice President
Exhibit 13
ConAm Realty Pension Investors
1997 Annual Report
ConAm Realty Pension Investors
ConAm Realty Pension Investors is a New York limited
partnership formed in 1984 to finance investments for
certain types of residential real estate by making
equity participating loans and equity convertible
loans. At November 30, 1997, the Partnership's
portfolio consisted of an apartment property, Oaktree
Village, located in Jacksonville, Florida, and a
mortgage loan secured by Park View Village, an
apartment property located in Winter Park, Florida.
Provided below is a comparison of average occupancy
levels for the years ended November 30, 1997 and 1996.
Average Occupancy
Property Location 1997 1996
Park View Village* Winter Park, FL 99% 97%
Oaktree Village Jacksonville, FL 93% 96%
* The Partnership holds a mortgage interest in this
property.
Contents
1 Message to Investors
3 Financial Highlights
4 Financial Statements
7 Notes to the Financial Statements
14 Independent Auditors' Report and
Report of Former Independent Accountants
16 Net Asset Valuation
Administrative Inquiries Performance Inquiries/Form 10-Ks
Address Changes/Transfers First Data Investor Services Group
Service Data Corporation P.O. Box 1527
2424 South 130th Circle Boston, Massachusetts 02104-1527
Omaha, Nebraska 68144-2596 Attn: Financial Communications
800-223-3464 800-223-3464
Message to Investors
1997 was an eventful year for the Partnership, with significant developments
occurring with all of the Partnership's wholly-owned properties and mortgage
investments. In this report, we review these developments and discuss our
strategies with the Partnership's remaining two investments. We have also
included an update on operations at each of the properties and financial
highlights for the year.
This annual report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ from those projected in or
contemplated by the forward- looking statements as a result of a number of
factors, including those identified herein.
Cash Distributions
The Partnership paid cash distributions totaling $160.00 per Unit for the year
ended November 30, 1997, including the fourth quarter distribution of $2.50 per
Unit, which was credited to your brokerage account or sent directly to you on
January 15, 1998. Since inception, the Partnership has paid distributions
totaling $660.68 per original $500 Unit, including $356.00 per Unit in return
of capital payments. 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.
Property Sales
The Partnership completed the sales of Chaparosa and Bryn Athyn Apartments in
1997. The Partnership sold Chaparosa Apartments on August 6, 1997, and Bryn
Athyn Apartments on September 22, 1997, resulting in net sales proceeds of
$5,689,996 and $8,887,000 respectively. The Partnership paid a special cash
distribution of $150.00 per Unit from the proceeds of both sales on October 31,
1997.
Park View Village
As reported in previous correspondence, on September 19, 1997, the Partnership
and the borrower of the mortgage loan secured by Park View Village signed a
definitive agreement to modify the defaulted mortgage loan. As a result, the
Park View Village note was modified to provide for an extension of the maturity
date to June 30, 1999, the deferral of debt service payments for the lesser of
twelve months commencing January 1, 1997, or until a capital improvement
reserve account is fully funded with an agreed upon amount, and the inclusion
of a discounted payoff option for the borrower during the extension period. The
payoff option enables the borrower to pay off the $5.2 million outstanding
principal balance of the Park View Village note and any accrued interest, which
totaled approximately $2.3 million at November 30, 1997, for $5.65 million. The
Partnership expects that the loan modification and the temporary deferral of
debt service payments will enable the borrower to maintain consistent interest
payments to the Partnership in the future. In addition, although the loan was
extended to June 30, 1999, the Partnership is aware that the borrower is
currently attempting to refinance the loan with the Partnership, with an
unaffiliated lender, to take advantage of the discounted payoff option.
Oaktree Village
As a result of the agreement signed on September 19, 1997, and to resolve the
borrower's default on the loan secured by the property, Oaktree Village was
deeded to the Partnership. Oaktree's appraised value as of November 30, 1997,
as determined by an independent appraisal, was $6.0 million, an increase from
$5.7 million a year earlier. After acquiring Oaktree Village, the Partnership
completed several interior and exterior repairs, including carpet replacement
and roof repairs, to increase the property's marketability and allow it to
remain competitive in the market. Oaktree Village reported an average
occupancy level of 93% in 1997. In 1997, the Jacksonville market experienced a
significant increase in new construction and the issuance of new construction
permits, partially due to its 1996 ranking as one of the fastest growing labor
markets in the country. This new construction is expected to soften the market
by outpacing population and job growth and will continue to affect the region
for the next several months, as new units become available. While vacancy
rates remained low in 1997, the use of rental concessions in the Jacksonville
submarket has recently increased to attract and retain tenants in anticipation
of the new competition.
The General Partner is continuing to evaluate the sale potential
of Oaktree Village and other options with respect to the property. One of
these options includes refinancing the loan secured by the property in order to
return capital to the limited partners on a tax-free basis and lock in a
favorable fixed interest rate. This would also potentially enhance the future
marketability of Oaktree Village, while enabling the Partnership to take
advantage of possible future property appreciation. The Partnership's ability
to sell the property is dependent upon a variety of factors, many of which are
not within the Partnership's control. There can be no assurance that the
property can be sold, that a particular price will be achieved, or that the
property can be sold within a specific time frame. We will keep you apprised of
our sales efforts in future correspondence.
Outlook
In the coming year, we will continue to maximize the performance of Oaktree
Village. We will also monitor operations at Park View Village, and the
borrower's refinancing efforts, as they affect the Partnership's mortgage loan
investment. We will keep you apprised of significant developments in future
reports.
Very truly yours,
/s/ Daniel J. Epstein
President
Continental American Development, Inc.
General Partner of ConAm Property
Services III, Ltd.
March 2, 1998
Financial Highlights
Selected Financial Data
For the periods ended November 30, 1997 1996 1995 1994 1993
Dollars in thousands, except for
per unit data
- -------------------------------------------------------------------------------
Total Income $ 3,194 $ 4,052 $ 3,375 $ 3,230 $ 3,272
Income from Operations 852 1,698 1,189 452 1,157
Net Income 7,222 1,698 1,189 452 1,157
Net Cash Provided by
Operating Activities 544 1,929 1,880 1,733 1,768
Total Assets at Year End 12,705 21,466 21,818 22,650 23,813
Income from Operations per
Limited partnership unit* 8.36 16.58 11.55 4.30 11.45
Net Income per
Limited Partnership unit* 73.72 16.58 11.55 4.30 11.45
Distributions per
Limited Partnership unit* 160.00 20.00 20.00 18.00 10.00
- -------------------------------------------------------------------------------
* 96,490 units outstanding
Cash Distributions
Per Limited Partnership Unit
- -------------------------------------------------------------------------------
1997 1996 1995
First Quarter $ 2.50 $ 5.00 $ 5.00
Second Quarter 2.50 5.00 5.00
Third Quarter 2.50 5.00 5.00
Fourth Quarter 2.50 5.00 5.00
Special Distribution* 150.00 _ _
Total $160.00 $20.00 $ 20.00
- -------------------------------------------------------------------------------
* On October 31, 1997 the Partnership paid a special cash distribution in the
amount of $150.00 per unit, from the net proceeds of the sale of Chaparosa
and Bryn Athyn Apartments.
Quarterly cash distributions were reduced in 1997 due to the decrease in net
cash provided by operating activities, primarily due to the sales of Chaparosa
and Bryn Athyn.
Balance Sheets At November 30, At November30,
1997 1996
- -------------------------------------------------------------------------------
Assets Investments in real estate:
Properties:
Land 1,200,000 857,669
Buildings and Improvements 4,800,000 4,986,459
6,000,000 5,844,128
Less accumulated depreciation (27,943) (1,567,164)
----------------------------
5,972,057 4,276,964
Mortgage loan investments 5,200,650 9,675,900
11,172,707 13,952,864
Property held for disposition _ 3,971,304
Cash and cash equivalents 1,029,577 1,818,059
Interest receivable - deferred, net of
valuation allowance of $1,399,890 in 1997
and $2,145,176 in 1996 449,350 1,674,100
Other assets 53,504 49,827
- -------------------------------------------------------------------------------
Total Assets $12,705,138 $21,466,154
- -------------------------------------------------------------------------------
Liabilities and Partners' Capital
Liabilities:
Distributions payable $253,921 $507,842
Accounts payable and accrued expenses 183,988 263,985
Due to general partners and affiliates 4,339 11,094
Deferred income - loan modification fees 897 19,794
Security deposits 33,625 72,620
- -------------------------------------------------------------------------------
Total Liabilities 476,770 875,335
- -------------------------------------------------------------------------------
Partners' Capital:
General Partners 186,621 274,497
Limited Partners (96,490 Units outstanding) 12,041,747 20,316,322
- -------------------------------------------------------------------------------
Total Partners' Capital 12,228,368 20,590,819
Total Liabilities and Partners' Capital $12,705,138 $21,466,154
- -------------------------------------------------------------------------------
Statements of Operations
For the years ended November 30, 1997 1996 1995
- -------------------------------------------------------------------------------
Income
Rental $ 2,244,670 $ 2,573,226 $ 2,431,302
Mortgage interest _ 822,452 822,452
Recovery of valuation allowance _ 550,000 _
Interest and other income 203,285 85,423 100,829
Loan modification fees 18,897 20,524 20,524
-----------------------------------
Total Income 2,466,852 4,051,625 3,375,107
- -------------------------------------------------------------------------------
Expenses
Property operating 1,329,354 1,388,362 1,375,079
Provision for losses _ 450,000 300,000
Depreciation and amortization 70,139 354,745 370,671
General and administrative 215,461 160,625 140,805
-----------------------------------
Total Expenses 1,614,954 2,353,732 2,186,555
- -------------------------------------------------------------------------------
Income from operations 851,898 1,697,893 1,188,552
Gain on sale of properties 6,370,490 _ _
- -------------------------------------------------------------------------------
Net Income $7,222,388 $1,697,893 $1,188,552
- -------------------------------------------------------------------------------
Net Income Allocated:
To the General Partners $109,105 $ 98,234 $ 74,254
To the Limited Partners 7,113,283 1,599,659 1,114,298
- -------------------------------------------------------------------------------
$7,222,388 $1,697,893 $1,188,552
- -------------------------------------------------------------------------------
Per limited partnership unit
(96,490 Units outstanding):
Income from operations $8.36 $16.58 $11.55
Gain on sale of properties 65.36 _ _
Net Income $73.72 $16.58 $11.55
- -------------------------------------------------------------------------------
Statement of Partners' Capital
For the years ended November 30, 1997, 1996 and 1995
General Limited
Partners Partners Total
- -------------------------------------------------------------------------------
Balance at November 30, 1994 $305,145 $21,461,965 $21,767,110
Net Income 74,254 1,114,298 1,188,552
Distributions ($20.00 per Unit) (101,568) (1,929,800) (2,031,368)
- -------------------------------------------------------------------------------
Balance at November 30, 1995 $277,831 $20,646,463 $20,924,294
Net Income 98,234 1,599,659 1,697,893
Distributions ($20.00 per Unit) (101,568) (1,929,800) (2,031,368)
- -------------------------------------------------------------------------------
Balance at November 30, 1996 $274,497 $20,316,322 $20,590,819
Net Income 109,105 7,113,283 7,222,388
Distributions ($160.00 per Unit) (196,981) (15,387,858) (15,584,839)
- -------------------------------------------------------------------------------
Balance at November 30, 1997 $186,221 $12,041,747 $12,228,368
- -------------------------------------------------------------------------------
Statements of Cash Flows
For the years ended November 30, 1997 1996 1995
- --------------------------------------------------------------------------------
Cash Flows From Operating Activities:
Net Income $7,222,388 $1,697,893 $1,188,552
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 70,139 354,745 370,671
Gain on sale of properties (6,370,490) _ _
Deferred income - loan
modification fees (18,897) (20,524) (20,524)
Recovery of valuation allowance _ (550,000) _
Provision for losses _ 450,000 300,000
Increase (decrease) in cash arising
from changes in operating assets
and liabilities:
Other assets (3,677) (4,467) 9,087
Accounts payable and accrued expenses (310,007) (5,552) 25,033
Due to general partners and affiliates (6,755) 651 610
Security deposits (38,995) 6,568 6,182
-------------------------------------
Net cash provided by operating activities 543,706 1,929,314 1,879,611
- -------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Net proceeds from sale of properties 14,576,562 _ _
Additions to real estate (69,990) (59,850) _
-------------------------------------
Net cash provided by (used for)
investing activities 14,506,572 (59,850) _
- -------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Distributions (15,838,760) (2,031,368) (2,031,368)
-------------------------------------
Net cash used for financing activities (15,838,760) (2,031,368) (2,031,368)
- -------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (788,482) (161,904) (151,757)
Cash and cash equivalents,
beginning of period 1,818,059 1,979,963 2,131,720
- -------------------------------------------------------------------------------
Cash and cash equivalents,
end of period $1,029,577 $1,818,059 $1,979,963
- -------------------------------------------------------------------------------
Supplemental Disclosure of Non-Cash Investing Activities:
On September 19, 1997, the Partnership obtained legal title to Oaktree Village
through a deed in lieu of foreclosure. The Oaktree Village real estate
investment has been recorded at its fair value ($6,000,000) which includes the
net carrying amount ($5,700,000) of its mortgage loan investment and interest
receivable-deferred, net of valuation allowance ($745,286), assumed accounts
payable and accrued expenses ($230,010) and settlement costs associated with
the acquisition of $69,990.
Notes to the Financial Statements
November 30, 1997, 1996 and 1995
1. Organization
ConAm Realty Pension Investors, (formerly Hutton/ConAm Realty Pension
Investors) (the "Partnership") was organized as a limited partnership under the
laws of the State of New York pursuant to a Certificate and Agreement of
Limited Partnership (the "Partnership Agreement") dated January 23, 1984, as
amended on January 26, 1984. The Partnership was formed for the purpose of
financing investments in certain types of residential real estate by making
equity participating loans and equity convertible loans. The general partners
of the Partnership were RPI Real Estate Services Inc. ("RPI"), an affiliate of
Lehman Brothers Inc. (see below), and ConAm Property Services III, Ltd. ("CPS
III"), an affiliate of Continental American Properties, Ltd (the "General
Partners"). On October 8, 1997, CPS III acquired RPI's co-general partner
interest in the Partnership pursuant to a Purchase Agreement between CPS III
and RPI dated August 29, 1997. As a result, CPS III now serves as the sole
general partner of the Partnership. In conjunction with this transaction, the
name of the Partnership was changed from Hutton/ConAm Realty Pension Investors
to ConAm Realty Pension Investors. The Partnership will continue until
December 31, 2010 unless sooner terminated pursuant to the terms of the
Partnership Agreement.
2. Significant Accounting Policies and Practices
Mortgage Loan Investments and Interest Receivable - The Partnership reviews, on
a periodic basis, the loans in its portfolio. An allowance for losses is
established when the carrying value of a loan, including deferred interest,
exceeds its fair value (see Note 5). The fair value of the Partnership's loans
are determined by independent appraisals which are performed annually and
include a discounting of estimated future cash flows.
Accounting for Mortgage Loan Receivable - In May 1993, the Financial Accounting
Standards Board issued Statement of Accounting Standards No. 114, "Accounting
by Creditors for Impairment of a Loan" ("FAS 114"), as amended by FAS No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures," which states that a loan is considered impaired and a provision
for credit losses is required if it is probable that all amounts of principal
and interest due will not be collected. The measurement of impaired loans is
generally based on the present value of expected future cash flows discounted
at the loan's effective interest rate, except that collateral dependent loans
are measured for impairment based on the observable market value or fair value
of the collateral less estimated selling costs. Effective December 1, 1995,
the Partnership adopted FAS 114.
Impairment of Long-Lived Assets - Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," ("FAS 121") requires the Partnership to assess its
real estate investments for impairment whenever events or changes in
circumstances indicate that the carrying amount of the real estate may not be
recoverable. Recoverability of real estate to be held and used is measured by
a comparison of the carrying amount of the real estate to future net cash flows
(undiscounted and without interest) expected to be generated by the real
estate. If the real estate is considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the real
estate exceeds the fair value of the real estate.
Investments in Real Estate - Investments in real estate consist of properties
acquired through foreclosure proceedings or acceptance of a deed in lieu of
foreclosure, and troubled loans. Such properties are recorded at fair market
value at the date of foreclosure. As of November 30, 1997, real estate
investments consisted of Oaktree Village, located in Jacksonville, Florida. As
of November 30, 1996 real estate investments consisted of the Bryn Athyn
Apartment complex located in Raleigh, North Carolina ("Bryn Athyn") and the
Chaparosa Apartment complex located in Irving, Texas.
Revenue is recognized when earned and expenses (including depreciation) are
recognized when incurred in accordance with generally accepted accounting
principles. Leases are generally for terms of one year or less.
Depreciation is computed using the straight-line method based upon the
estimated useful life of the property (27.5 years). Maintenance and repairs are
charged to operations as incurred. Costs incurred for significant betterments
and improvements are capitalized and depreciated over their estimated useful
lives.
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 income for the period.
Loan Placement Costs - Costs incurred in connection with investments are
recorded as assets and amortized over the applicable loan periods. These costs
have been fully amortized.
Loan Modification Fees - Loan modification fees are deferred and recognized over
the applicable extended loan periods, pursuant to the terms of the loan
modification (see Note 4).
Interest Income - The Partnership recognizes interest income based upon terms of
the respective mortgages. The Park View Village Mortgage Loan was restructured
in 1997 (see Note 4) to allow deferral of debt services payments until certain
events have transpired. No interest income was accrued in the current fiscal
year (see Note 5).
Income Taxes - No provision for income taxes has been made in the financial
statements as the liability for such taxes is that of the partners rather than
the Partnership.
Cash and Cash Equivalents - Cash and cash equivalents consist of highly liquid
short-term investments with original maturities of three months or less.
Concentration of Credit Risk - Financial instruments which potentially subject
the Partnership to a concentration of credit risk principally consist of cash
and cash equivalents in excess of the financial institutions' federally insured
limits. The Partnership invests its available cash and cash equivalents with
high credit quality federally insured financial institutions.
Use of Estimates - Management of the Partnership has made a number of estimates
and assumptions relating to the reporting of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could differ from
those estimates.
3. The Partnership Agreement
The Partnership Agreement provides that net distributable cash, as defined, is
to be distributed, 95% to the limited partners and 5% to the General Partners
until each limited partner has received an amount equal to a 12% non-cumulative
annual return on their adjusted capital value (as defined). The balance, if
any, is to be distributed 90% to the limited partners and 10% to the General
Partners. Effective July 1, 1997, all General Partner distributions were made
solely to CPS III.
Net loss and all depreciation for any fiscal year are to be allocated 99% to
the limited partners and 1% to the General Partners.
Net income before depreciation is to be allocated as follows:
(a)To the extent that net income before depreciation does not exceed the amount
of net distributable cash distributable to the partners with respect to such
fiscal year, net income before depreciation is to be allocated among the
partners, pro rata in accordance with the amount of net distributable cash
distributable to each partner with respect to such fiscal year to the extent
thereof; and
(b)To the extent that net income before depreciation exceeds the amount of net
distributable cash distributable to the partners with respect to such fiscal
year, such excess is to be allocated (1) first, 100% to the General
Partners, pro rata, in an amount equal to the excess, if any, of the General
Partners' deficits, if any, in their capital accounts, over an amount equal
to 1% of the aggregate capital contributions to the Partnership as reduced
by the amount of the General Partners' capital contributions, and (2)
second, 99% to the limited partners and 1% to the General Partners.
For the year ended November 30, 1997, net income before depreciation did not
exceed the amount of net distributable cash. For the year ended November 30,
1996, net income before depreciation exceeded the amount of net distributable
cash by $21,270. For the year ended November 30, 1995, net income before
depreciation did not exceed the amount of net distributable cash. Pursuant to
the Partnership Agreement and as described in (a) above, net income before
depreciation was allocated among the partners pro rata in accordance with the
amount of net distributable cash distributable to each partner.
All residual proceeds are to be distributed 99% to the limited partners and 1%
to the General Partners until each limited partner has received an amount equal
to their adjusted capital value and a 12% cumulative annual return on his
adjusted capital value. The balance, if any, is to be distributed 85% to the
limited partners and 15% to the General Partners. Distributions of residual
proceeds were $14,619,697 in fiscal 1997.
Generally, all gain from sales of investments is to be allocated 99% to the
limited partners and 1% to the General Partners until any negative capital
account balances have been eliminated and each limited partner has received an
amount equal to their adjusted capital value and an amount equal to the excess
of a 12% cumulative annual return on their adjusted capital value over the
amount of any net distributable cash and residual proceeds distributed to such
limited partner. The balance, if any, is to be allocated 85% to the limited
partners and 15% to the General Partners.
4. Mortgage Loan Investments and Investments in Real Estate
Three loans which totaled $15,525,900 were funded to an affiliate, Southridge
Partners I ("Southridge"), a New York limited partnership. The RPI Real Estate
Services Inc. general partner in the Partnership and the GP Real Estate
Services II Inc. general partner in Southridge are both wholly-owned
subsidiaries of Lehman Brothers. CPS III is also an affiliate of ConAm Real
Property Services Corporation, a General Partner of Southridge.
The first loan was funded on September 28, 1984 in the amount of $4,475,250 in
connection with the purchase of Oaktree Village, a 160-unit apartment complex
located in Jacksonville, Florida. The second loan was funded on October 30,
1984 in the amount of $5,850,000 in connection with the purchase of Chaparosa
Apartments, a 170-unit apartment complex located in Irving, Texas. The third
loan was funded on December 21, 1984 in the amount of $5,200,650 in connection
with the purchase of Park View Village, a 184-unit apartment complex located in
Winter Park, Florida.
Originally, each loan was evidenced by a promissory note bearing interest at a
stated rate of 14% per annum collateralized by a first mortgage or trust deed
on the property, due at the earlier of (i) 10 years from the date of funding or
(ii) sale of the property. Each of the loans was payable in fixed monthly
installments of interest only at the rate of 11% per annum with the
differential of 3% paid monthly out of net cash flow, if available. Any
differential interest not paid monthly was to itself bear interest at the rate
of 14%, compounded semi-annually and became due together with the outstanding
principal upon maturity of the loan. In addition to stated interest, the
Partnership would receive contingent interest on each of the Southridge loans
equal to 25% of net cash flow, payable quarterly, and 30% of any appreciation
in value upon the sale of the project.
In connection with the three investments in equity participating first mortgage
loans, the Partnership earned loan origination fees of $465,777, representing
3% of the principal amounts loaned to Southridge. The Partnership incurred loan
placement costs of $504,185 of which $465,777 was paid to the General Partners
for loan placement fees.
During the first quarter of the fiscal year ended November 30, 1988, the
General Partners accepted a request for modification of each of the Southridge
loans submitted by the borrower. Effective April 1, 1988, stated interest was
lowered from 14% to 12% and current interest was lowered from 11% to 8.5%. The
additional interest of 3.5% was payable monthly from any excess cash flow
calculated on a monthly basis. To the extent that stated interest exceeded
monthly installments, such amounts were deferred until the maturity of the
principal and accrued interest at 12% compounded semi-annually. As
consideration for reducing the stated and current interest, final additional
interest, as defined, was increased from 30% to 35% of appreciation in value,
as defined, upon the sale of the project. All other terms and conditions
remained as originally stated.
On November 20, 1985, the Partnership funded an equity participating loan in
the amount of $5,900,000 to Bryn Athyn Investors, Ltd., a Texas limited
partnership unaffiliated with the Partnership, in connection with its purchase
of Bryn Athyn, a 172-unit apartment complex located in Raleigh, North Carolina.
In July 1989, the Partnership obtained ownership of the property through a
foreclosure sale. As a result, Bryn Athyn was recorded as a real estate
investment rather than a mortgage loan investment on the Partnership's balance
sheet.
On September 22, 1997, the Partnership closed the sale of the Bryn Athyn
Apartments to SCA North Carolina Limited Partnership, an unaffiliated company,
for net proceeds totaling $8,886,567 and a gain on sale of approximately $4.65
million.
As of November 30, 1991, the Partnership reclassified its Chaparosa loan
investment into an in-substance real estate investment, at its book value of
approximately $4,169,017. On January 31, 1992, the Partnership obtained legal
title to Chaparosa through a deed in lieu of foreclosure. As of such date, the
Chaparosa real estate investment was recorded in the amount of $3,645,728 and
reflected all final adjustments regarding its acquisition.
On August 6, 1997, the Partnership closed the sale of the Chaparosa Apartments
to Apple Residential Income Trust, Inc., an unaffiliated company, for net
proceeds totaling $5,689,996 and a gain on sale of approximately $1.72 million.
During the second quarter of the fiscal year ended November 30, 1993, the
General Partners agreed to modify the two remaining mortgage loans with Park
View Village and Oaktree Village (the "Loans") with Southridge retroactive to
March 1, 1993. The terms of the modification provided for a three-year
extension of the maturity dates through September 30, 1997 and December 31,
1997 for Oaktree Village and Park View Village, respectively. The stated
interest rate on the Loans was reduced to 8.5%, with excess cash flow generated
by the properties on a monthly basis through 1993 to be applied first to
accrued and unpaid interest and then to principal. Beginning in 1994, excess
cash flow is calculated on an annual basis. In addition, interest ceased to
accrue on the cumulative deferred interest. In consideration the Partnership
earned a loan modification fee equal to 2% of the original loan balance. One
half of the fee, $96,759 was paid at the closing, and the other half will be
due upon either the sale or refinancing of the properties to the extent there
are net proceeds available after repayment of the outstanding debt balance and
selling costs.
On January 22, 1997, the Partnership delivered notice of default to Southridge
with respect to the Partnership's Loans on Park View Village and Oaktree
Village, respectively. The Partnership indicated, among other things, that
the Loans are in default due to, without limitation, the failure of Southridge
to make the payment of minimum interest due on January 1, 1997 and due to its
failure to make the required minimum monthly deferred interest payments during
1996 and the required contingent interest payments for the first three quarters
of 1996 (collectively the "Current Amounts Due") as required by each of the
loan documents. The Partnership had demanded payment of the Current Amounts Due
from Southridge with respect to each of the Loans, however, the Partnership has
not accelerated payment of the outstanding balance of the Loans.
On February 21, 1997, the General Partners executed a Letter of Intent ("LOI")
with Southridge, whereby, Southridge's default status on the Loans would be
resolved. The LOI required the borrower to deed over Oaktree Village to the
Partnership and to modify the terms of the Park View Village note. On
September 19, 1997, definitive agreements were signed consistent with the terms
of the LOI. As a result, Oaktree Village was deeded to the Partnership.
Oaktree's appraised value as of November 30, 1996, as determined by an
independent appraisal, was $5.7 million. In addition, accounts payable and
accrued expenses of $230,010 were assumed and settlement costs associated with
the foreclosure of $69,990 were paid. During the year ended November 30, 1997,
the property was appraised for $6,000,000.
The Park View Village note was modified to provide for an extension of the
maturity date to June 30, 1999, the deferral of debt service payments for the
lesser of twelve months commencing January 1, 1997, or until a capital
improvement reserve account is fully funded with an agreed upon amount, and the
inclusion of a discounted payoff option for the borrower during the extension
periods. The payoff option enables the borrower to pay off the $5.2 million
outstanding principal balance of the Park View Village note and any accrued
interest, which totaled approximately $2.3 million at November 30, 1997, for
$5.65 million. See note 5 for further discussion.
Summarized financial information pertaining to the borrower of the
Partnership's Mortgage Loan Investment in Park View Village for the calendar
years ended December 31, 1997 and 1996, and the Oaktree Village loan in 1996,
is as follows:
1997 1996
- -------------------------------------------------------------------------------
Operating property, net of
accumulated depreciation $ 4,800,000 $ 8,400,000
Total assets 5,100,000 10,100,000
Total liabilities 9,100,000 15,800,000
Rental Income 1,300,000 2,200,000
Net income (loss) from operations 300,000 (560,000)
- -------------------------------------------------------------------------------
5. Interest Receivable and Valuation Allowance
For the years ended November 30, 1997 and 1996, the Park View mortgage loan
investment along with related interest receivable and valuation allowance are
carried at the discounted payoff amount, $5,650,000. The Partnership recorded
a loss provision for the year ended November 30, 1996 of $450,000 to reduce the
net carrying amount of the mortgage loan investment to the discount payoff
amount of $5,650,000 ($5,200,650 of principal and $449,350 of interest
receivable).
For the years ended November 30, 1997 and 1996, the Oaktree mortgage loan
investment, along with related interest receivable and valuation allowance are
carried at $0 and $4,475,250, respectively. For the year ended November 30,
1996, as a result of the increase in the fair value of Oaktree Village, as
determined by an independent appraiser, the Partnership recorded a $550,000
recovery of the valuation allowance.
Effective December 1, 1996, the mortgage loan investments were placed on a
non-accrual status, whereby the accrual of interest was discontinued. During
fiscal 1997, interest income on the mortgage loan investments of $727,353 was
not accrued.
The following summarizes the (recovery) provision for valuation allowance for
the fiscal years ending November 30, 1997, 1996 and 1995:
1997 1996 1995
- -------------------------------------------------------------------------------
Balance - beginning of period $2,145,176 $2,245,176 $1,945,176
Provision for interest income _ 450,000 300,000
Recovery of valuation allowance _ (550,000) _
Charge-off related to Oaktree
Village foreclosure (745,286) _ _
Balance - end of period $1,399,890 $2,145,176 $2,245,176
- -------------------------------------------------------------------------------
6. Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments, " requires that the fair values be disclosed
for the Partnership's financial instruments. The carrying amount of cash and
cash equivalents, distributions payable, accounts payable and accrued expenses,
due to general partners and affiliates and security deposits are reasonable
estimates of other fair values due to the short-term nature of those
instruments.
The combined carrying amount of the mortgage loan investment and the interest
receivable-deferred, net of valuation allowance is equal to the fair value of
the Park View Village property, which collateralizes the loan, as determined by
an independent property appraisal firm.
7. Transactions with Related Parties
The following is a summary of fees earned and reimbursable expenses to the
General Partners and affiliates for the years ended November 30, 1997, 1996 and
1995, and the unpaid portion at November 30, 1997:
Earned and
Unpaid at
November 30, Earned
1997 1997 1996 1995
RPI Real Estate Inc. and affiliates:
Out-of-pocket expenses $ 4,339 $ 2,067 $3,520 $ 1,331
ConAm and affiliates:
Property operating salaries _ 221,468 240,930 249,649
Property management fees _ 115,451 128,970 121,781
Total $ 4,339 $338,986 $373,420 $372,761
Total mortgage interest income consisted of $822,452 in 1996 and 1995, earned
from mortgages to Southridge. No mortgage interest income was accrued in 1997.
See further discussion in Note 5.
8. Reconciliation of Financial Statement and Tax Information
The following is a reconciliation of the net income for financial statement
purposes to net income for federal income tax purposes for the years ended
November 30, 1997, 1996 and 1995:
1997 1996 1995
- ------------------------------------------------------------------------------
Net income per financial statements $ 7,222,388 $ 1,697,893 $ 1,188,552
Depreciation deducted for tax purposes
(in excess of) less than depreciation
expense per financial statements (214,088) 4,040 4,691
Gain on sale of Bryn Athyn and Chaparosa
Apartments per financial statements in
excess of gain for tax purposes (218,940) _ _
Loss on foreclosure on Oaktree Village
Apartments for tax purposes in excess
of loss per financial statements (149,472) _ _
(Recovery) provision for loan losses not
deductible for tax purposes _ (100,000) 300,000
Loan modification fees, recognized
when received for tax purposes (8,897) (20,524) (20,524)
-------------------------------------
Taxable net income (unaudited) $ 6,630,991 $ 1,581,409 $ 1,472,719
- ------------------------------------------------------------------------------
The following is a reconciliation of partners' capital for financial statement
purposes to partners' capital for federal income tax purposes as of November
30, 1997, 1996 and 1995:
1997 1996 1995
- -------------------------------------------------------------------------------
Partners' capital per financial statements $12,228,368 $20,590,819 $20,924,294
Adjustment for cumulative difference
between tax basis net income and net
income per financial statements 6,561,710 7,163,107 7,279,591
-----------------------------------
Partners' capital per tax
return (unaudited) $18,790,078 $27,753,926 $28,203,885
- -------------------------------------------------------------------------------
At November 30, 1997, the tax basis of the Partnership's assets was
$19,265,951, and the tax basis of the Partnership's liabilities was $475,873.
9. Distributions Paid
Distributions, per the statements of partners' capital, are recorded on the
accrual basis, which recognize specific record dates for payments within each
fiscal year. The statements of cash flows recognize actual cash distributions
paid during the fiscal year. The following table discloses the annual
differences as presented in the financial statements:
Distributions Distributions
Payable Distributions Distributions Payable
Beginning of Year Declared Paid November 30,
- -------------------------------------------------------------------------------
1997 $ 507,842 $15,584,839 $15,838,760 $ 253,921
1996 507,842 2,031,368 2,031,368 507,842
1995 507,842 2,031,368 2,031,368 507,842
- -------------------------------------------------------------------------------
Independent Auditors' Report
The General Partner
ConAm Realty Pension Investors:
We have audited the accompanying balance sheet of ConAm Realty Pension
Investors (a New York limited partnership) (formerly Hutton/ConAm Realty
Pension Investors) as of November 30, 1997, and the related statements of
operations, partners' capital and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the 1997 financial statements referred to above present
fairly, in all material respects, the financial position of ConAm Realty
Pension Investors as of November 30, 1997, and the results of its operations
and its cash flows for the year then ended, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
San Diego, California
February 20, 1998
Report of Former Independent Accountants
To the Partners of
ConAm Realty Pension Investors.:
We have audited the balance sheet of ConAm Realty Pension Investors (formerly
Hutton/ConAm Realty Pension Investors), a New York limited partnership as of
November 30, 1996 and the related statements of operations, partners' capital
and cash flows for each of the two years in the period ended November 30, 1996.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ConAm Realty Pension
Investors, a New York limited partnership, as of November 30, 1996 and 1995,
and the results of their operations and their cash flows for each of the two
years in the period ended November 30, 1996, in conformity with generally
accepted accounting principles.
As discussed in Note 2 to the financial statements, the Partnership adopted the
provisions of Statements of Financial Accounting Standards No. 114, "Accounting
by Creditors for Impairment of a Loan", in 1996.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 14, 1997
Net Asset Valuation
Comparison of Acquisition Costs to Appraised Value and Determination of Net
Asset Value Per Unit at November 30, 1997 (Unaudited)
Partnership's
Share of
November 30,
1997 Appraised
Property Date of Acquisition Value (2)
- ---------------------------------------------------------------------------
Oaktree Village 9-19-97 6,000,000 (1)
Mortgage Loan Investment:
Park View Village 5,200,650 (3)
----------
11,200,650
Cash and cash equivalents 1,029,577
Interest receivable, net of valuation allowance 449,350 (3)
Other assets 53,504
----------
12,733,081
Less:
Total liabilities net of deferred income
on loan and modification fees of $896 (475,873)
----------
Partnership Net Asset Value (2) 12,257,208
----------
Net Asset Value Allocated:
Limited Partners 12,246,642
General Partners 10,566
----------
12,257,208
Net Asset Value Per Unit ----------
(96,490 units outstanding) $126.92
- ---------------------------------------------------------------------------
(1) This represents the November 30, 1997 Appraised Value which was
determined by an independent property appraisal firm.
(2) The Partnership Net Asset Value assumes a hypothetical sale or
refinancing of the property underlying the Partnership's first
mortgage loan investment, and the subsequent repayment of these
loans by the respective borrowers, and a hypothetical sale of the
Oaktree Apartments based upon its value as a rental property as
determined by an independent property appraisal firm, and the
distribution of the proceeds of such sale, combined with the
Partnership's cash after liquidation of the Partnership's
liabilities, to the Partners.
(3) The mortgage loan investment of Park View Village and interest
receivable, net of valuation allowance, is carried at the Discount
Payoff Amount of $5,650,000, which is less than the appraised value
of the underlying property at November 30 ,1997.
Limited Partners should note that appraisals are only estimates of current
value and actual values realizable upon sale may be significantly different.
A significant factor in establishing an appraised value is the actual selling
price for properties which the appraiser believes are comparable. In addition,
the appraised value does not reflect the actual costs which would be incurred
in selling the properties. As a result of these factors and the illiquid
nature of an investment in Units of the Partnership, the variation between the
appraised value of the Partnership's properties and the price at which Units
of the Partnership could be sold is likely to be significant. Fiduciaries of
Limited Partners which are subject to ERISA or other provisions of law
requiring valuations of Units should consider all relevant factors, including,
but not limited to Net Asset Value per Unit, in determining the fair market
value of the investment in the Partnership for such purposes.
Schedule III - Real Estate and Accumulated Depreciation
November 30, 1997
Residential Property: Oaktree Village
Property Owned: Apartments
- -----------------------------------------------------------------------------
Location Jacksonville, FL
Construction date 09-28-84
Acquisition date 09-19-97
Life on which depreciation
in latest income statements
is computed 25 years
Encumbrances _
Initial cost to Partnership:
Land $1,200,000
Buildings and
Improvements $4,800,000
Costs capitalized
subsequent to acquisition:
Land, buildings
and improvements $ _
Gross amount at which
carried at close of period:
Land $1,200,000
Buildings and
Improvements 4,800,000
----------
6,000,000
Accumulated depreciation $ (27,943)
- -----------------------------------------------------------------------------
(1) Represents aggregate cost for both financial reporting and Federal income
tax purposes.
(2) The amount of accumulated depreciation for Federal income tax purposes
is $36,364.
A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended November 30, 1997, 1996, and 1995 follows:
1997 1996 1995
- ----------------------------------------------------------------------------
Investments in Real Estate:
Beginning of period $10,509,852 $10,450,002 $10,450,002
Additions 6,000,000 59,850 _
Disposals (10,509,852) _ _
- ----------------------------------------------------------------------------
End of period $6,000,000 $10,509,852 $10,450,002
- ----------------------------------------------------------------------------
Accumulated depreciation:
Beginning of period $2,261,584 $1,906,839 $1,536,168
Additions 70,139 354,745 370,671
Dispositions (2,303,780) _ _
- ----------------------------------------------------------------------------
End of period $27,943 $2,261,584 $1,906,839
- ----------------------------------------------------------------------------
Independent Auditors' Report
The General Partner
ConAm Realty Pension Investors:
Under date of February 20, 1998, we reported on the balance sheet of ConAm
Realty Pension Investors (a New York limited partnership) (formerly
Hutton/ConAm Realty Pension Investors) as of November 30, 1997, and the
related statements of operations, partnersO capital, and cash flows for the
year then ended, as contained in the 1997 annual report to
Unitholders. These financial statements and our report thereon are
incorporated by reference in the 1997 annual report on Form 10-K. In
connection with our audit of the aforementioned financial statements, we
also have audited the related financial statement schedule. This
financial statement schedule is the responsibility of the Partnership's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audit.
In our opinion, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
San Diego, California
February 20, 1998
Report of Former Independent Accountants
Our report on the financial statements of ConAm Realty Pension Investors
(formerly Hutton/ConAm Realty Pension Investors), a New York Limited
Partnership, has been incorporated by reference in this Form 10-K from the
Annual Report to Unitholders of ConAm Realty Pension Investors for the year
ended November 30, 1996. In connection with our audits of such financial
statements, we have also audited the related financial statement schedule
listed in the index of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Nov-30-1997
<PERIOD-END> Nov-30-1997
<CASH> 1,029,577
<SECURITIES> 000
<RECEIVABLES> 1,849,240
<ALLOWANCES> 1,399,890
<INVENTORY> 000
<CURRENT-ASSETS> 53,504
<PP&E> 6,000,000
<DEPRECIATION> 27,943
<TOTAL-ASSETS> 12,705,138
<CURRENT-LIABILITIES> 476,770
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 12,228,368
<TOTAL-LIABILITY-AND-EQUITY> 12,705,138
<SALES> 2,244,670
<TOTAL-REVENUES> 2,466,852
<CGS> 000
<TOTAL-COSTS> 1,329,354
<OTHER-EXPENSES> 285,600
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 851,898
<INCOME-TAX> 000
<INCOME-CONTINUING> 851,898
<DISCONTINUED> 000
<EXTRAORDINARY> 6,370,490
<CHANGES> 000
<NET-INCOME> 7,222,388
<EPS-PRIMARY> 73.72
<EPS-DILUTED> 73.72
</TABLE>
