<PAGE>
United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
----- Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1998
or
----- Transition Report Pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____ to ____
COMMISSION FILE NUMBER: 0-13330
CONAM REALTY PENSION INVESTORS
------------------------------
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
New York 11-2673854
-------- ----------
STATE OR OTHER JURISDICTION OF I.R.S. EMPLOYER IDENTIFICATION NO.
INCORPORATION OR ORGANIZATION
1764 San Diego Avenue
San Diego, CA 92110 Attn. Robert J. Svatos 92110-1906
- -------------------------------------- ----------
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES ZIP CODE
(619) 297-6771
--------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
<PAGE>
CONAM REALTY PENSION INVESTORS
<TABLE>
<CAPTION>
BALANCE SHEETS AT AUGUST 31, AT NOVEMBER 30,
1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in real estate:
Properties:
Land $ 1,200,000 $ 1,200,000
Buildings and improvements 4,816,989 4,800,000
-----------------------------------
6,016,989 6,000,000
Less accumulated depreciation (172,283) (27,943)
-----------------------------------
5,844,706 5,972,057
Mortgage loan investment - 5,200,650
-----------------------------------
5,844,706 11,172,707
Cash and cash equivalents 779,436 1,029,577
Interest receivable - deferred, net of valuation allowance
of $1,399,890 in 1997 - 449,350
Other assets 295,326 53,504
- -------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 6,919,468 $ 12,705,138
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Distribution payable $ - $ 253,921
Accounts payable and accrued expenses 161,080 183,988
Due to general partner and affiliates 4,826 4,339
Deferred income - loan modification fees - 897
Security deposits 27,584 33,625
-----------------------------------
Total Liabilities 193,490 476,770
-----------------------------------
Partners' Capital:
General Partner 132,102 186,621
Limited Partners (96,490 Units outstanding) 6,593,876 12,041,747
-----------------------------------
Total Partners' Capital 6,725,978 12,228,368
- -------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 6,919,468 $ 12,705,138
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
AUGUST 31, AUGUST 31,
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME
Rental $ 282,583 $ 572,813 $ 833,016 $1,920,909
Mortgage interest - 205,613 133,525 616,839
Interest and other income - 41,237 20,759 78,419
Loan modification fees - 5,181 13,898 15,443
-----------------------------------------------------------------------
Total Income 282,583 824,844 1,001,198 2,631,610
- ---------------------------------------------------------------------------------------------------------------------
EXPENSES
Property operating 211,738 338,487 502,303 1,006,607
Provision for losses - 205,613 - 616,839
Depreciation 48,170 - 144,340 42,196
General and administrative 48,617 47,765 153,453 173,733
-----------------------------------------------------------------------
Total Expenses 308,525 591,865 800,096 1,839,375
- ---------------------------------------------------------------------------------------------------------------------
Income (Loss) from operations (25,942) 232,979 201,102 792,235
Gain on sale of property - 1,718,692 - 1,718,692
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NET INCOME (LOSS) $ (25,942) $1,951,671 $ 201,102 $2,510,927
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- ---------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) ALLOCATED:
To the General Partner $ (259) $ 29,674 $ 2,011 $ 55,580
To the Limited Partners (25,683) 1,921,997 199,091 2,455,347
- ---------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (25,942) $1,951,671 $ 201,102 $2,510,927
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
PER LIMITED PARTNERSHIP UNIT
(96,490 UNITS OUTSTANDING) $ (0.27) $ 19.92 $ 2.06 $ 25.45
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED AUGUST 31, 1998
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE AT NOVEMBER 30, 1997 $ 186,621 $ 12,041,747 $ 12,228,368
Net income 2,011 199,091 201,102
Distributions (56,530) (5,646,962) (5,703,492)
- ----------------------------------------------------------------------------------------------------------------------
BALANCE AT AUGUST 31, 1998 $ 132,102 $ 6,593,876 $ 6,725,978
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
<PAGE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED AUGUST 31, 1998 1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 201,102 $ 2,510,927
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for losses - 616,839
Depreciation 144,340 42,196
Gain on sale of property - (1,718,692)
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Interest receivable - deferred, net 449,350 (616,839)
Other assets (241,822) (3,677)
Accounts payable and accrued expenses (22,908) (139,681)
Due to general partner and affiliates 487 (40)
Deferred income - loan modification fees (897) (15,394)
Security deposits (6,041) (44,030)
---------------------------------
Net cash provided by operating activities 523,611 631,609
- --------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of property - 5,689,996
Additions to buildings and improvements (16,989) -
Collection of mortgage loan receivable 5,200,650 -
---------------------------------
Net cash provided by investing activities 5,183,661 5,689,996
- --------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES-
Distributions (5,957,413) (1,015,684)
- --------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (250,141) 5,305,921
Cash and cash equivalents, beginning of period 1,029,577 1,818,059
- --------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 779,436 $ 7,123,980
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
The unaudited interim financial statements should be read in conjunction with
the Partnership's 1997 Annual Report.
The unaudited interim financial statements include all normal and recurring
adjustments which are, in the opinion of management, necessary to present a fair
statement of financial position as of August 31, 1998 and the results of
operations for the three and nine months ended August 31, 1998 and 1997, cash
flows for the nine months ended August 31, 1998 and 1997, and the statement of
partners' capital for the nine months ended August 31, 1998. Results of
operations for the periods are not necessarily indicative of the results to be
expected for the full year.
The following significant events have occurred subsequent to fiscal year 1997,
which require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a) (5).
On March 19, 1998 ConAm Realty Pension Investors received $5,673,011 as final
payment in full of its mortgage loan and interest receivable, from Southridge
Partners I, a New York limited partnership. This payment included all principal
($5,200,650) and interest ($472,361) due in accordance with the loan
modification agreement.
On March 19, 1998, the general partner declared a special cash distribution of
$58.00 per Unit regarding the proceeds received from the repayment of the above
mentioned mortgage loan investment. The distribution was paid on March 27, 1998.
<PAGE>
PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At August 31, 1998, the Partnership had cash and cash equivalents of $779,436
which were invested in money market funds, compared with $1,029,577 at November
30, 1997. The decrease in cash and cash equivalents reflects cash distributions
to partners exceeding cash provided by operating and investing activities during
the first three quarters of fiscal 1998. The increase in other assets is
primarily attributable to amounts due from the state of North Carolina regarding
an overpayment of non-resident withholdings and to an increase in a deposit
required by the Internal Revenue Service. The Partnership expects sufficient
cash to be generated from operations to meet its current operating expenses.
On March 19, 1998, the General Partner declared a special cash distribution of
the net proceeds received from the collection of the mortgage loan and interest
receivable from Southridge Partners I. The distribution was $58.00 per Unit and
was paid on March 27, 1998. The General Partner has suspended distributions this
quarter to make significant capital improvements and increase reserves. The
General Partner will determine the amount of future quarterly distributions
based on the Partnership's available cash flow and future cash needs.
RESULTS OF OPERATIONS
Partnership operations for the three and nine months ended August 31, 1998
generated net loss of ($25,942) and net income of $201,102 respectively,
compared with net income of $1,951,671 and $2,510,927, respectively, for the
corresponding periods in fiscal 1997. The decrease for the three month period is
primarily attributable to a non-recurring gain on sale of the Chaparosa
Apartments recognized in August, 1997. The decrease for the nine month period is
primarily attributable to reduced rental income resulting from the sales of two
properties, Bryn Athyn and Chaparosa Apartments, in September, 1997 and August,
1997, respectively, partially offset by a reduction in property operating
expenses.
Rental income totaled $282,583 and $ 833,016 for the three and nine months ended
August 31, 1998 compared with $572,813 and $1,920,909 for the corresponding
periods in fiscal 1997. The decrease for the three and nine-months periods is
due to the net effect of the sale of Bryn Athyn and Chaparosa Apartments, offset
by the acquisition through a deed in lieu of foreclosure of Oaktree Village
Apartments in September, 1997.
Mortgage interest income totaled $0 and $133,525 for the three and nine months
ended August 31, 1998 compared with $0 and $0, net of provision for losses of
$205,613 and $616,839, for the corresponding periods in fiscal 1997. The
increase is attributable to the collection of interest income earned and of the
Partnership's mortgage loan investment during the six months ended May 31, 1998.
Property operating expenses for the three and nine months ended August 31, 1998
totaled $211,738 and $502,303 compared with $338,487 and $1,006,607 for the
corresponding periods in fiscal 1997. The decrease is attributable to the net
effect resulting from the sales of Bryn Athyn and Chaparosa Apartments, and the
acquisition through a deed in lieu of foreclosure of Oaktree Village Apartments.
During the first nine months of fiscal 1998 and 1997, average occupancy levels
at the Partnership's properties and at the properties securing the Partnership's
loans were as follows:
<TABLE>
<CAPTION>
Investments in Real Estate 1998 1997
-------------------------- ---- ----
<S> <C> <C>
Oaktree Village Apartments 95% -
Bryn Athyn Apartments - 97%
Chaparosa Apartments - 97%
</TABLE>
<PAGE>
PART II OTHER INFORMATION
ITEMS 1-5 Not applicable
ITEMS 6 Exhibits and reports on Form 8-K
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K
On April 6, 1998, ConAm Realty Pension Investors filed a Form 8-K
regarding the collection of $5,673,011 on March 19, 1998 as final
payment in full of its mortgage loan and interest receivable,
from Southridge Partners I, a New York limited partnership. This
payment included all principal ($5,200,650) and interest
($472,361) due in accordance with the loan modification
agreement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CONAM PROPERTY SERVICES III, LTD.
General Partner of ConAm Realty Pension Investors
BY: CONTINENTAL AMERICAN DEVELOPMENT, INC.
GENERAL PARTNER
Date: October 13, 1998 BY:/s/ DANIEL J. EPSTEIN
-----------------
Daniel J. Epstein
Director, President, and Principal
Executive Officer
Date: October 13, 1998 BY:/s/ ROBERT J. SVATOS
----------------
Robert J. Svatos
Vice President and Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> AUG-31-1998
<CASH> 779,436
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 295,326
<PP&E> 6,016,989
<DEPRECIATION> 172,283
<TOTAL-ASSETS> 6,919,468
<CURRENT-LIABILITIES> 193,490
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,725,978
<TOTAL-LIABILITY-AND-EQUITY> 6,919,468
<SALES> 833,016
<TOTAL-REVENUES> 1,001,198
<CGS> 0
<TOTAL-COSTS> 502,303
<OTHER-EXPENSES> 297,793
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 201,102
<INCOME-TAX> 0
<INCOME-CONTINUING> 201,102
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 201,102
<EPS-PRIMARY> 2.06
<EPS-DILUTED> 2.06
</TABLE>
