<PAGE>
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, 1998
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 L.P.
----------------------------------------------------
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
New York 0-13330 11-2673854
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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
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ADDRESS OF PRINCIPAL EXECUTIVE OFFICES ZIP CODE
Registrant's telephone number, including area code (619) 297-6771
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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, 1998.
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PART I
ITEM 1. BUSINESS
(a) GENERAL DESCRIPTION OF BUSINESS AND OBJECTIVES
ConAm Realty Pension Investors L.P., 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 L.P. to
ConAm Realty Pension Investors L.P.
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, 1998, which is filed as an exhibit under Item 14 for
additional information regarding these property sales. Information regarding
the two investments in properties held by the Partnership in fiscal 1998 is
set forth below.
On December 21, 1984, the Partnership funded an equity participating loan in
the amount of $5,200,650 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 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. On March 19, 1998, the Partnership collected $5,673,011
from Southridge as final payment in full of its mortgage loan and interest
receivable. This payment included all principal and interest in the amount of
$5,200,650 and $472,361, respectively, due in accordance with the loan
modification agreement. 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, 1998, which is filed as an
exhibit under Item 14, for more information on the Park View loan.
On September 28, 1984, the Partnership funded an equity participating loan in
the amount of $4,475,250 to Southridge in connection with the purchase by
Southridge of Oaktree Village ("Oaktree Village "), a 160-unit apartment
complex located in Jacksonville, Florida. On September 19, 1997, the
Partnership obtained legal title to Oaktree Village through a deed in lieu of
foreclosure. As a result, Oaktree Village was 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 Village 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, 1998, which is
filed as an exhibit under Item 14.
During its fiscal year ended November 30, 1998, following consideration of
various alternatives available to the Partnership, the General Partner
concluded that a sale of the Partnership's remaining property, Oaktree
Village, would be in the best interests of the Partnership and the
Unitholders. Throughout much of fiscal 1998, the General Partner, on behalf
of the Partnership, negotiated the terms of a sale of Oaktree Village with
Lend Lease Real Estate Investments, Inc. ("Lend Lease"), on behalf of two
pension funds, which are unaffiliated with the General Partner. Once the
terms were negotiated, as required by the Partnership's Amended and Restated
Certificate and Agreement of Limited Partnership, the General Partner
solicited the consent of a majority in interest of the Unitholders to the
sale pursuant to a Consent Solicitation Statement dated December 16, 1998.
The requisite consent was obtained on January 15, 1999, and on January 29,
1999, the Partnership consummated the sale of Oaktree Village to DOC
Investors, L.L.C., a Delaware limited liability company (the "Purchaser"),
for a sales price of $5,800,000 (before selling costs and prorations). The
members of the Purchaser are two pension funds advised by Lend Lease, which
own an aggregate 91% interest in the Purchaser, and ConAm DOC Affiliates LLC,
an affiliate of the General Partner ("ConAm DOC"), which owns a 9% interest
in the Purchaser. ConAm DOC has the potential to receive up to an additional
18% of the profits of the Purchaser after certain priority returns to the
members of the Purchaser.
<PAGE>
The Partnership received approximately $5,759,000 of cash proceeds from the
sale, net of closing costs of approximately $41,000. All net cash proceeds
from the sale, and previously undistributed cash from operations, less an
amount the General Partner determined to set aside for contingencies, were
distributed to the Limited Partners on February 26, 1999.
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 were:
(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 was the Partnership's objective during its operational
phase, while preservation and appreciation of capital were the Partnership's
longer term objectives. Economic conditions in the United States as a whole
and, in particular, in the localities in which the Partnership's investment
properties were located, were important factors to attaining the
Partnership's investment objectives, especially with regard to achievement of
capital appreciation.
The Partnership considers itself to have been engaged in only one industry
segment, real estate investment.
COMPETITION
The Partnership's former real property investment and the property securing
the Partnership's former outstanding mortgage loan were subject to
competition from similar types of properties in the vicinities in which they
are located. Such competition increased during the Partnership's period of
ownership and investment due principally to the addition of the newly
constructed apartment complexes offering increased residential and
recreational amenities. The investment properties were also subject to
competition from condominiums and single-family properties as potential
renters chose to buy homes especially during periods of low mortgage interest
rates. The Partnership competed 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
have competed with other properties owned by partnerships affiliated with the
General Partner.
For discussion of market conditions in the area where Oaktree Village is
located, reference is made to the Partnership's Annual Report to Unitholders
for the fiscal year ended November 30, 1998, which is filed as an exhibit
under Item 14.
EMPLOYEES
The Partnership has no employees. Services are provided by CPS III and ConAm
Management Corporation ("ConAm Management"), an affiliate of CPS III.
Pursuant to a property management agreement with the Partnership, ConAm
Management provided property management services with respect to Oaktree
Village. In addition, the Partnership retains Brock, Tibbitts & Snell, an
unaffiliated company located in San Diego, California, to provide all
accounting and investor communication functions. During fiscal 1998, Service
Data Corporation, an unaffiliated company, provided transfer agent services
for the Partnership. During February 1999, pursuant to the terms of a sale
of its contracts, Service Data Corporation assigned the transfer agent
functions of the Company to MAVRICC Management Systems, Inc., an unaffiliated
company located in Troy, Michigan. See Item 13, "Certain Relationships and
Related Transactions", 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 was owned and operated by
the Partnership during fiscal 1998 and a discussion of market conditions in
the area where the property is located. For information on the acquisition of
the property, 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, 1998, which is filed as an exhibit under Item 14. For
information on the sale of Oaktree Village by the Partnership in January
1999, reference is made to Item 1 and to Note 10 of the Consolidated
Financial Statements, included herein by reference to the Partnership's
Annual Report to Unitholders. Average occupancy rates at the property are
incorporated by reference to Item 7.
<PAGE>
Oaktree Village is a 160-unit apartment complex situated in southeast
Jacksonville, Florida, approximately eight 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 94% as of December of 1998
and offers of up to one month free rent and low security deposits. As
reported previously, several apartment projects were constructed in 1998 and
still more are planned. New construction has softened the market by outpacing
population and job growth and will continue to affect the region as new units
become available. While vacancy rates remained low in 1998, the use of rental
concessions in the Jacksonville submarket has recently increased to attract
and retain tenants in anticipation of the new competition. With this soft
market, reduced non-refundable security deposits and up to one and one-half
months free rent were offered during fiscal 1998 to maintain occupancy.
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, 1998, no
matter was submitted to a vote of security holders through the solicitation
of proxies or otherwise. On December 16, 1998, the Unitholders were asked to
approve a sale of the Partnership's remaining property. A majority in
interest of the Unitholders approved the sale and the sale was completed on
January 29, 1999.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND
RELATED SECURITY HOLDER MATTERS
As of November 30, 1998, the number of Unitholders of record was 5,147.
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 commenced paying
quarterly cash distributions following 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, 1998, which is filed as an exhibit under Item 14. No quarterly
distributions of cash from operations were made for the fiscal year ended
November 30, 1998 because the General Partner decided to suspend
distributions due to the reduced cash flow caused by the sales of Bryn Athyn
and Chaparosa and the collection of the Park View loan. In addition, cash
from operations of Oaktree Village was used to make capital improvements and
increase cash reserves. Furthermore, the General Partner continued to suspend
distributions pending the outcome of the solicitation of the consent of the
Unitholders to the sale of Oaktree Village.
Because of the sale of Oaktree Village, no further quarterly distributions of
net cash from operations will be made. The Partnership distributed $6,424,304
to the Unitholders ($66.58 per Unit) and $27,303 to the General Partner, on
February 26, 1999, which amounts were equal to substantially all of the net
proceeds from the sale of Oaktree Village, together with other available cash
of the Partnership, less an amount for costs associated with the sale and
liquidation and other contingencies, net of expected cash provided by
operations through the date of sale of approximately $222,000. The final
liquidation of the Partnership is expected to occur in mid-1999, and the
remaining funds, if any, will be distributed to the Unitholders at that time.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference to the Partnership's Annual Report to Unitholders
for the year ended November 30, 1998, 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, 1998, the Partnership's investment portfolio consisted of an
apartment property, Oaktree Village, which was acquired by the Partnership on
September 19, 1997 in lieu of foreclosure. On March 19, 1998 the Park View
mortgage loan funded to
<PAGE>
Southridge was repaid in full. The $5,673,011 payment included all principal
and interest in the amount of $5,200,650 and $472,361, respectively, due in
accordance with the loan modification agreement.
As a result of the payoff of the Park View mortgage loan in March 1998, the
Partnership paid a special cash distribution in the amount of $58.52 per Unit
which represented substantially all of the proceeds of both principal and
interest from the payoff of the loan. Through November 30, 1998, cumulative
cash distributions total $718.68 per original $500 Unit. For the fiscal year
ended November 30, 1998, the General Partner decided to suspend quarterly
distributions of cash from operations due to the reduced cash flow caused by
the sales of Bryn Athyn and Chaparosa and the collection of the Park View
loan. In addition, cash from operations of Oaktree Village was used to make
capital improvements and increase cash reserves. Furthermore, the General
Partner continued to suspend distributions pending the outcome of the
solicitation of the consent of the Unitholders to the sale of Oaktree Village.
Accounts payable and accrued expenses declined from $183,988 at November 30,
1997, to $145,501 at November 30, 1998. The decrease is primarily
attributable to the decrease in repairs and maintenance for Oaktree Village
that was unpaid in 1997 and paid in 1998.
At November 30, 1998, the Partnership had cash and cash equivalents of
$773,672 which were invested in unaffiliated money market funds, compared
with $1,029,577 at November 30, 1997. The decrease is primarily attributable
to cash distributions paid by the Partnership in 1998 relating to the pay-off
of the Partnership's mortgage loan investment.
Interest receivable, net of valuation allowance, declined from $449,350 at
November 30, 1997 to $0 at November 30, 1998. The decrease is attributable to
the pay-off of all principal and interest for the mortgage loan investment.
As a result of the Partnership's sale of Oaktree Village on January 29, 1999,
all of the Partnership's assets have been converted to cash and cash
equivalents. Pending distribution to the Unitholders as described in Item 5
above, the Partnership's funds have been invested in the Pacific Horizon
Money Market Funds, Prime Fund. The General Partner retained from the initial
distribution an amount it believes is sufficient to provide for contingencies,
and to cover the expenses of operating the Partnership until final liquidation
of the Partnership, including legal and accounting fees.
RESULTS OF OPERATIONS
1998 VERSUS 1997
Partnership operations for the year ended November 30, 1998 generated net
income of $211,151 compared with net income of $7,222,388 for fiscal 1997.
The decrease in net income is primarily due to the net gain of $6,370,490
recognized from the sales of Chaparosa and Bryn Athyn, partially offset by
lower rental revenues in 1998 as a result of these sales. Excluding the gains
on the sales of Chaparosa and Bryn Athyn, the Partnership generated income
from operations of $211,151 for the fiscal year ended November 30, 1998
compared with $851,898 for fiscal 1997. The primary reason for this decrease
was the sale of Chaparosa and Bryn Athyn in fiscal 1997 partially offset by
taking title to Oaktree Village through a deed in lieu of foreclosure in
September 1997.
Rental income totaled $1,108,901 for the fiscal year ended November 30, 1998
compared with $2,244,670 for fiscal 1997. The decrease was primarily
attributable to the sales of Chaparosa and Bryn Athyn in fiscal 1997
partially off-set by the taking of title to Oaktree Village in the last
quarter of fiscal 1997.
Mortgage interest income increased for the year ended November 30, 1998 to
$133,525 compared with $0 in fiscal 1997. This increase was due to the
payment in full of the mortgage loan to Southridge on March 19, 1998 and the
non-accrual of interest income in fiscal 1997. Interest and other income
totaled $34,393 for the fiscal year ended November 30, 1998 compared to
$203,285 in fiscal 1997. The decrease is due to the Partnership maintaining
higher average cash balances in 1997 compared to 1998, primarily due to the
previously undistributed sales proceeds from the Chaparosa and Bryn Athyn
sales.
Total expenses for the year ended November 30, 1998 were $1,079,566 compared
with $1,614,954 for fiscal 1997. The primary reason for this decrease was the
sale of Chaparosa and Bryn Athyn in fiscal 1997 partially offset by taking
title to Oaktree Village in September 1997.
Property operating expenses decreased to $701,692 for the year ended November
30, 1998, compared with $1,329,354 for fiscal 1997. The decrease was a result
of the sales of Bryn Athyn and Chaparosa during fiscal 1997 and a reduction
in repairs and maintenance expenses relating to Bryn Athyn and Chaparosa
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 after the taking title in September 1997.
General and administrative expenses decreased from $215,461 for the year
ended November 30, 1997 to $185,250 for fiscal 1998. The decrease is
primarily due to lower legal fees, engineering consulting fees, and
partnership administrative expenses in fiscal 1998.
<PAGE>
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.
For the years ended November 30, 1998, 1997 and 1996, average occupancy
levels at the Partnership's properties and at the property securing the
Partnership's equity participation loan were as follows:
<TABLE>
<CAPTION>
Investments in Real Estate 1998 1997 1996
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<S> <C> <C> <C>
Properties:
Oaktree Village Apartments 94% 93% 96%
Bryn Athyn Apartments (sold in fiscal 1997) -- -- 97%
Chaparosa Apartments (sold in fiscal 1997) -- -- 97%
Mortgage Loan Investments:
- --------------------------
Park View Village (loan paid off in fiscal 1998) -- 99% 97%
</TABLE>
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.
YEAR 2000
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Due to the consummation of the sale of Oaktree Village in January 1999, the
Partnership is no longer engaged in the operation of real property or any
other business. As a result of the foregoing, and in view of the General
Partner's plan to complete the full liquidation of the Partnership prior to
January 1, 2000, the Partnership has no exposure to Year 2000 issues.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since the Partnership sold its remaining property on January 29, 1999, the
Partnership has no exposure to interest rate risk. In addition, the
Partnership is expected to be liquidated during 1999.
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, 1998, 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 PricewaterhouseCoopers LLP
(formerly Coopers & Lybrand L.L.P.) that it was changing accounting firms and
engaged KPMG LLP.
PricewaterhouseCoopers LLP's report on the financial statements for the
years ended December 31, 1996 contained no adverse opinion or disclaimer of
opinion and was not qualified as to uncertainty, audit scope or accounting
principles. There had been no disagreements with PricewaterhouseCoopers LLP
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, as 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.
<TABLE>
<CAPTION>
Name Office
---- ------
<S> <C>
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
</TABLE>
DANIEL J. EPSTEIN, 59, has been the President and a Director of ConAm
Development, and a general partner of Continental American Properties, Ltd.
("ConAm"), an affiliate of CPS III, 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, 48, 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.
<PAGE>
ROBERT J. SVATOS, 40, 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, 44, 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 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, 41, 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 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, 1998, no person was known by the Partnership to be the
beneficial owner of more than five percent of the Units of the Partnership.
Daniel J. Epstein, President and a Director of ConAm Development, owns 20
units (approximately 0.0207% of the outstanding Units). Neither the General
Partner nor any other directors or executive officer of ConAm Development
owns any Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
With respect to the fiscal year ended November 30, 1998, the General Partner
received $0 as its allocable share of Net Cash From Operations. Pursuant to
the Certificate and Agreement of Limited Partnership of the Partnership, CPS
III received $56,530 as the General Partner's allocable share of proceeds
from the pay-off of the mortgage loan investment with respect to the fiscal
year ended November 30, 1998. Pursuant to the Certificate and Agreement of
Limited Partnership of the Partnership, for the fiscal year ended November
30, 1998, $2,112 of the Partnership's net income was allocated to 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, 1998, which is filed as an exhibit under Item 14.
The Partnership entered into a property management agreement with ConAm
Management pursuant to which ConAm Management 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, and
related services. For such services, ConAm Management was 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, 1998, which is filed as an exhibit under Item
14.
Southridge, the owner of Park View, entered into a property management
agreement with ConAm Management pursuant to which ConAm Management assumed
direct responsibility for day to day management of Park View. For such
services, during the fiscal year ended November 30, 1998, ConAm Management
earned property management fees of $61,091 from Southridge prior to the
payoff of the mortgage loan.
Pursuant to Section 11(g) of Partnership'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, 1998,
which is filed as an exhibit under Item 14.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a)(1) Financial Statements: Page
---------------------
<S> <C>
Balance Sheets - November 30, 1998 and 1997 ............................................................ (1)
Statements of Operations - For the years ended November 30, 1998, 1997 and 1996 ........................ (1)
Statements of Partners' Capital - For the years ended November 30, 1998, 1997 and 1996 ................. (1)
Statements of Cash Flows - For the years ended November 30, 1998, 1997 and 1996 ........................ (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, 1998, 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 (the "Registration
Statement")).
(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).
(C) Amendment, dated January 18, 1999 to Partnership's Second
Amended and Restated Certificate and Agreement of Limited
Partnership (included as, and incorporated herein by
reference to, Exhibit 4.1 to the Partnership's Report on
Form 8-K filed on February 16, 1999).
(10)(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).
<PAGE>
(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 L.P. 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 L.P. 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 L.P. 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 L.P. 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).
(I) Agreement for Purchase and Sale and Joint Escrow
Instructions between ConAm Realty Pension Investors L.P. and
DOC Investors, L.L.C. dated January 26, 1999 with respect to
the sale of Oaktree Village Apartments (included as, and
incorporated herein by reference to, Exhibit 10.1 to the
Partnership's Report on Form 8-K filed on February 16,
1999).
(13) Annual Report to Unitholders for the fiscal year ended November
30, 1998.
(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
-------------------
No reports on Form 8-K were filed by the Partnership during
the fourth quarter of the fiscal year ended November 30,
1998.
(c) Exhibits
--------
See Item 14(a)(3) above.
</TABLE>
<PAGE>
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: February 28, 1999
BY: ConAm Property Services III, Ltd.
General Partner
BY: Continental American Development, Inc.
General Partner
BY: Daniel J. Epstein
----------------------------------------
Name: Daniel J. Epstein
Title: President, Director and
Principal Executive Officer
Date: February 28, 1999
BY: E. Scott Dupree
----------------------------------------
E. Scott Dupree
Vice President and Director
Date: February 28, 1999
BY: Robert J. Svatos
----------------------------------------
Robert J. Svatos
Vice President and Director
Date: February 28, 1999
BY: Ralph W. Tilley
----------------------------------------
Ralph W. Tilley
Vice President
Date: February 28, 1999
BY: J. Bradley Forrester
----------------------------------------
J. Bradley Forrester
Vice President
<PAGE>
EXHIBIT 13
CONAM REALTY PENSION INVESTORS L.P.
1998 ANNUAL REPORT
<PAGE>
- --------------------------------------------------------------------------------
CONAM REALTY PENSION INVESTORS L.P.
- --------------------------------------------------------------------------------
ConAm Realty Pension Investors L.P. 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. As a result of borrower defaults under such loans, the
Partnership became the direct owner of certain properties which secured
the loans. At November 30, 1998, the Partnership's portfolio consisted
of one apartment property, Oaktree Village, located in Jacksonville,
Florida. On January 29, 1999, with the consent of the Unitholders,
Oaktree Village was sold for a price of $5,800,000 (before closing
costs) and substantially all of the cash, less an amount for
contingencies, was distributed to the Unitholders.
<TABLE>
<CAPTION>
CONTENTS
<C> <S>
1 Message to Investors
2 Performance Summary
3 Financial Highlights
4 Financial Statements
13 Independent Auditors' Report
14 Report of Former Independent Accountants
15 Net Asset Valuation
</TABLE>
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------
ADMINISTRATIVE INQUIRIES PERFORMANCE INQUIRIES/FORM 10-Ks
ADDRESS CHANGES/TRANSFERS Brock Tibbitts and Snell
MAVRICC Management Systems, Inc. 625 Broadway, Suite 911
1845 Maxwell, Suite 101 San Diego, California 92101
Troy, MI 48084-4510 619-232-0365
Attn: Financial Communications
248-637-7897
- ---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
MESSAGE TO INVESTORS
- --------------------------------------------------------------------------------
Presented for your review is the 1998 Annual Report for ConAm Realty
Pension Investors L.P. (the "Partnership"). In this report we have included
a performance summary which addresses operations and the financial
highlights for the year.
We are pleased to announce that the proposed sale of the Partnership's
remaining property, Oaktree Village, to DOC Investors, L.L.C., a Delaware
limited liability company, was approved by the Limited Partners on January
15, 1999 and that the sale was completed on January 29, 1999. Within 30
days of the close of the sale of Oaktree Village, distributions of $66.58
per Unit, representing the majority of the net proceeds from the sale and
other cash from operations, were distributed to Unitholders.
CASH DISTRIBUTIONS
The Partnership paid cash distributions totaling $58.52 per Unit for the
year ended November 30, 1998. Since inception, the Partnership has paid
distributions totaling $785.26 per original $500 Unit. These distributions
include the proceeds from the sale of Oaktree Village in January 1999 of
$61.20 per Unit, and cash from operations of $5.38 per Unit, both of which
were distributed on February 26, 1999.
OPERATIONS OVERVIEW
Operations for the Partnership during fiscal 1998 consisted of the
operation of Oaktree Village and maintenance of the mortgage loan secured
by Park View.
After taking title to Oaktree Village in September 1997, average occupancy
at the property increased from 93% in fiscal 1997 to 94% in fiscal 1998.
While vacancy rates remained low, rent concessions of up to one and
one-half months free rent and reduced non-refundable security deposits were
offered at Oaktree Village in response to competition caused by the
construction of rental units in the area.
With respect to the mortgage loan secured by Park View, in March 1998, the
borrower (Southridge Partners) exercised its discounted payoff option by
paying the Partnership, an aggregate of $5,673,011. This payment included
all principal ($5,200,650) and interest ($472,361) due in accordance with
the loan modification agreement entered into in September 1997.
SUMMARY
The sale of the Property on January 29, 1999 represents the first step
toward the liquidation of the Partnership that is expected to be completed
in August 1999. A final distribution of remaining Partnership cash, if any,
will be made shortly thereafter.
Very truly yours,
/s/ Daniel J. Epstein
Daniel J. Epstein, President
Continental American Development, Inc.
General Partner of ConAm Property Services III, Ltd.
February 28, 1999
<PAGE>
- -------------------------------------------------------------------------------
PERFORMANCE SUMMARY
- -------------------------------------------------------------------------------
OAKTREE VILLAGE
The Partnership obtained title to Oaktree Village in September, 1997,
through a deed in lieu of foreclosure following the borrower's default
under the loan. 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 to allow it to
remain competitive in the market. Oaktree Village reported an average
occupancy level of 93% in fiscal 1997, which was increased to 94% in fiscal
1998.
As we previously reported, in 1997 and 1998, 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 has
softened 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 1998, rental
concessions are being used to attract and retain tenants in anticipation of
the new competition.
<PAGE>
CONAM REALTY PENSION INVESTORS L.P.
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
For the periods ended November 30, 1998 1997 1996 1995 1994
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DOLLARS IN THOUSANDS, EXCEPT FOR PER UNIT DATA
Total Income $ 1,291 $ 2,467 $ 4,052 $ 3,375 $ 3,230
Income from Operations 211 852 1,698 1,189 452
Net Income 211 7,222 1,698 1,189 452
Net Cash Provided by
Operating Activities 93 544 1,929 1,880 1,733
Total Assets at Year End 6,913 12,705 21,466 21,818 22,651
Income from Operations per
Limited partnership unit* 2.17 8.36 16.58 11.55 4.30
Net Income per
Limited Partnership unit* 2.17 73.72 16.58 11.55 4.30
Distributions per
Limited Partnership unit* 58.52 159.48 20.00 20.00 18.00
-------------------------------------------------------------------------------------------------------------------
* 96,490 UNITS OUTSTANDING
</TABLE>
<TABLE>
<CAPTION>
CASH DISTRIBUTIONS
PER LIMITED PARTNERSHIP UNIT
1998 1997
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
First Quarter $ -- $ 2.50
Second Quarter -- 2.50
Third Quarter -- 2.50
Fourth Quarter -- 2.50
Special Distribution* 58.52 149.48
---------------- -------------
TOTAL $ 58.52 $ 159.48
-------------------------------------------------------------------------------------------------------------------
</TABLE>
* On March 27, 1998 the Partnership paid a special cash distribution in
the amount of $58.52 per Unit from the net proceeds of the discounted
payoff of the Park View mortgage loan. On October 31, 1997 the
Partnership paid a special cash distribution in the amount of $149.48
per Unit, from the net proceeds of the sales of Chaparosa and Bryn
Athyn.
No quarterly distributions of cash from operations were made for the fiscal
year ended November 30, 1998 because the General Partner decided to suspend
distributions due to the reduced cash flow caused by the sales of Bryn
Athyn and Chaparosa and the collection of the Park View loan. In addition,
cash from operations of Oaktree Village was used to make capital
improvements and increase cash reserves. Furthermore, the General Partner
continued to suspend distributions pending the outcome of the solicitation
of the consent of the Unitholders to the sale of Oaktree Village.
3
<PAGE>
CONAM REALTY PENSION INVESTORS L.P.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
BALANCE SHEETS AT NOVEMBER 30, AT NOVEMBER 30,
1998 1997
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investment in real estate:
Property:
Land $ 1,200,000 $ 1,200,000
Building and improvements 4,841,693 4,800,000
---------------------------------------
6,041,693 6,000,000
Less accumulated depreciation (220,567) (27,943)
---------------------------------------
5,821,126 5,972,057
Mortgage loan investment -- 5,200,650
---------------------------------------
5,821,126 11,172,707
Cash and cash equivalents 773,672 1,029,577
Interest receivable - deferred, net of valuation allowance
of $1,399,890 in 1997 -- 449,350
Other assets 318,255 53,504
-------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 6,913,053 $ 12,705,138
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
-------------------------------------------------------------------------------------------------------------------
Liabilities:
Distribution payable $ -- $ 253,921
Accounts payable and accrued expenses 145,501 183,988
Due to general partner and affiliates 4,539 4,339
Deferred income - loan modification fees -- 897
Security deposits 26,986 33,625
---------------------------------------
Total Liabilities 177,026 476,770
---------------------------------------
Partners' Capital:
General Partner 132,203 186,621
Limited Partners (96,490 Units outstanding) 6,603,824 12,041,747
---------------------------------------
Total Partners' Capital 6,736,027 12,228,368
-------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 6,913,053 $ 12,705,138
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
CONAM REALTY PENSION INVESTORS L.P.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED NOVEMBER 30, 1998 1997 1996
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Rental $ 1,108,901 $ 2,244,670 $ 2,573,226
Mortgage interest 133,525 -- 822,452
Recovery of valuation allowance -- -- 550,000
Interest and other income 34,393 203,285 85,423
Loan modification fees 13,898 18,897 20,524
------------------------------------------------
Total Income 1,290,717 2,466,852 4,051,625
-------------------------------------------------------------------------------------------------------------------
EXPENSES
Property operating 701,692 1,329,354 1,388,362
Provision for losses -- -- 450,000
Depreciation 192,624 70,139 354,745
General and administrative 185,250 215,461 160,625
------------------------------------------------
Total Expenses 1,079,566 1,614,954 2,353,732
-------------------------------------------------------------------------------------------------------------------
Income from operations 211,151 851,898 1,697,893
Gain on sale of property -- 6,370,490 --
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
NET INCOME $ 211,151 $ 7,222,388 $ 1,697,893
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
NET INCOME ALLOCATED:
To the General Partner $ 2,112 $ 109,105 $ 98,234
To the Limited Partners 209,039 7,113,283 1,599,659
-------------------------------------------------------------------------------------------------------------------
NET INCOME $ 211,151 $ 7,222,388 $ 1,697,893
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
PER LIMITED PARTNERSHIP UNIT
(96,490 UNITS OUTSTANDING):
Income from operations $ 2.17 $ 8.36 $ 16.58
Gain on sale of property -- 65.36 --
-------------------------------------------------------------------------------------------------------------------
NET INCOME $ 2.17 $ 73.72 $ 16.58
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED NOVEMBER 30, 1998, 1997 AND 1996
-------------------------------------------------------------------------------------------------------------------
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------------------------------------------------------------------------------------------------------------------
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 ($159.48 per Unit) (196,981) (15,387,858) (15,584,839)
-------------------------------------------------------------------------------------------------------------------
BALANCE AT NOVEMBER 30, 1997 $ 186,621 $ 12,041,747 $ 12,228,368
Net Income 2,112 209,039 211,151
Distributions ($58.52 per Unit) (56,530) (5,646,962) (5,703,492)
-------------------------------------------------------------------------------------------------------------------
BALANCE AT NOVEMBER 30, 1998 $ 132,203 $ 6,603,824 $ 6,736,027
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
CONAM REALTY PENSION INVESTORS L.P.
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED NOVEMBER 30, 1998 1997 1996
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 211,151 $ 7,222,388 $ 1,697,893
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for losses -- -- 450,000
Recovery of valuation allowance -- -- (550,000)
Depreciation 192,624 70,139 354,745
Gain on sale of property -- (6,370,490) --
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Other assets (264,751) (3,677) (4,467)
Accounts payable and accrued expenses (38,487) (310,007) (5,552)
Due to general partners and affiliates 200 (6,755) 651
Deferred income - loan modification fees (897) (18,897) (20,524)
Security deposits (6,639) (38,995) 6,568
------------------------------------------------
Net cash provided by operating activities 93,201 543,706 1,929,314
-------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of property -- 14,576,562 --
Additions to building and improvements (41,693) (69,990) (59,850)
Collection of mortgage loan and related interest receivable 5,650,000 -- --
------------------------------------------------
Net cash provided by (used for) investing activities 5,608,307 14,506,572 (59,850)
-------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (5,957,413) (15,838,760) (2,031,368)
--------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (255,905) (788,482) (161,904)
Cash and cash equivalents, beginning of period 1,029,577 1,818,059 1,979,963
-------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 773,672 $ 1,029,577 $ 1,818,059
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
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.
-----------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
CONAM REALTY PENSION INVESTORS L.P.
NOTES TO THE FINANCIAL STATEMENTS
NOVEMBER 30, 1998, 1997 AND 1996
1. ORGANIZATION
ConAm Realty Pension Investors L.P. (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 (as subsequently amended,
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, 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. On January 15, 1999, a majority in interest of Unitholders
agreed to sell the Partnership's remaining property and liquidate the
Partnership. The Partnership sold its property on January 29,1999 (see Note
10) and expects to liquidate during fiscal year 1999.
2. SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
MORTGAGE LOAN INVESTMENTS AND INTEREST RECEIVABLE For the years prior to
and including fiscal 1998, the Partnership reviewed, on a periodic basis,
the loans in its portfolio. An allowance for losses was established when
the carrying value of a loan, including deferred interest, exceeded its
fair value (see Note 5). The fair value of the Partnership's loans were
determined by independent appraisals which were performed annually and
include a discounting of estimated future cash flows.
ACCOUNTING FOR MORTGAGE LOAN RECEIVABLE A loan is considered impaired and a
provision for credit losses is recorded 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.
IMPAIRMENT OF LONG-LIVED ASSETS The Partnership assesses 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 as the amount by which the carrying
amount of the real estate exceeds the fair value of the real estate.
At November 30, 1998, Oaktree Village was an asset to be held and used as
the Partnership did not have the ability to sell the property without the
approval of a majority of the Unitholders.
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, 1998, real
estate investments consisted of Oaktree Village, located in Jacksonville,
Florida.
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.
7
<PAGE>
LOAN MODIFICATION FEES Loan modification fees are deferred and recognized
over the applicable extended loan periods, pursuant to the terms of the
loan modification. These fees have been fully amortized (see Note 4).
INTEREST INCOME The Partnership recognized 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. Mortgage interest income was
accrued and paid in 1998. No interest income was accrued in fiscal year
1997 (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 or treasury based money market funds.
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 years ended November 30, 1998 and 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.
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 $56,530 in fiscal 1998 and
$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
8
<PAGE>
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. RPI,
a general partner in the Partnership, and GP Real Estate Services II Inc.,
a general partner in Southridge, are both wholly-owned subsidiaries of
Lehman Brothers. CPS III is 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.
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.
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.
In July 1989, the Partnership obtained ownership of the Bryn Athyn
Apartments 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.
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.
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
9
<PAGE>
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 were in default due to, without limitation, the
failure of Southridge to make the payment of minimum interest due on
January 1, 1997 and 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 did not accelerate
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. As
of November 30, 1997, the property was appraised for $6,000,000.
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.
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.
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 was 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 enabled 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. On March 19, 1998 Southridge Partners
I, exercised its discounted payoff option by paying the Partnership an
aggregate of $5,673,011. This payment included all principal ($5,200,650)
and interest ($472,361) due in accordance with the loan modification
agreement entered into in September 1997. 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:
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
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).
10
<PAGE>
During fiscal 1997, interest income on the mortgage loan investments of
$727,353 was not accrued. During 1998 interest income of $133,525 was
accrued and paid on the mortgage loan investment at payoff of the loan in
accordance with the discounted payoff option.
The following summarizes the activity in the valuation allowance for the
fiscal years ending November 30, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance - beginning of period $ 1,399,890 $ 2,145,176 $ 2,245,176
Provision for interest income -- -- 450,000
Recovery of valuation allowance -- -- (550,000)
Charge-off related to Oaktree
Village foreclosure -- (745,286) --
Payoff (1,399,890) -- --
-------------------------------------------------------------------------------------------------------------------
Balance - end of period $ -- $ 1,399,890 $ 2,145,176
-------------------------------------------------------------------------------------------------------------------
</TABLE>
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, interest receivable, distributions payable,
accounts payable and accrued expenses, due to general partners and
affiliates and security deposits are reasonable estimates of their fair
values due to the short-term nature of those instruments.
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, 1998, 1997
and 1996, and the unpaid portion at November 30, 1998:
<TABLE>
<CAPTION>
EARNED AND
UNPAID AT EARNED
NOVEMBER 30, ----------------------------------------
1998 1998 1997 1996
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RPI Real Estate Inc. and affiliates:
Out-of-pocket expenses $ -- $ -- $ 2,067 $ 3,520
ConAm and affiliates:
Property operating salaries -- 92,177 221,468 240,930
Property management fees 4,539 55,711 115,451 128,970
----------------------------------------------------------------
TOTAL $ 4,539 $ 147,889 $ 338,986 $ 373,420
-------------------------------------------------------------------------------------------------------------------
</TABLE>
Total mortgage interest income consisted of $133,525 in 1998 and $822,452
in 1996, 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, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income per financial statements $ 211,151 $ 7,222,388 $ 1,697,893
Depreciation deducted for tax purposes
(in excess of) less than depreciation
expense per financial statements 17,413 (214,088) 4,040
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) --
Loss for tax purposes from Parkview Village note
in excess of loss per financial statement (1,399,890) -- (100,000)
Loan modification fees, recognized
when received for tax purposes (897) (8,897) (20,524)
-----------------------------------------------------
TAXABLE NET INCOME (LOSS) (UNAUDITED) $(1,172,223) $ 6,630,991 $ 1,581,409
-------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
The following is a reconciliation of partners' capital for financial
statement purposes to partners' capital for federal income tax purposes as
of November 30, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' capital per financial statements $ 6,736,027 $ 12,228,368 $ 20,590,819
Adjustment for cumulative difference
between tax basis net income and net
income per financial statements 5,178,338 6,561,710 7,163,107
-----------------------------------------------------
PARTNERS' CAPITAL PER TAX RETURN (UNAUDITED) $ 11,914,365 $ 18,790,078 $ 27,753,926
-------------------------------------------------------------------------------------------------------------------
</TABLE>
At November 30, 1998, the tax basis of the Partnership's assets was
$12,091,391, and the tax basis of the Partnership's liabilities was
$177,026.
9. DISTRIBUTIONS PAID
Distributions, per the statements of partners' capital, are recorded on the
accrual basis, which recognizes specific record dates for payments within
each fiscal year. The statements of cash flows recognizes actual cash
distributions paid during the fiscal year. The following table discloses
the annual differences as presented in the financial statements:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
PAYABLE DISTRIBUTIONS DISTRIBUTIONS PAYABLE
BEGINNING OF YEAR DECLARED PAID NOVEMBER 30
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 $253,921 $ 5,703,492 $ 5,957,413 $ --
1997 507,842 15,584,839 15,838,760 253,921
1996 507,842 2,031,368 2,031,368 507,842
-------------------------------------------------------------------------------------------------------------------
</TABLE>
10. SALE OF PROPERTY
On January 29, 1999, the Partnership consummated the sale of Oaktree
Village to DOC Investors, L.L.C., a Delaware limited liability company,
for a sales price of $5,800,000 (before selling costs and prorations).
As required by the Partnership's Partnership Agreement, the General
Partner solicited the consent of a majority in interest of the
Unitholders to the sale pursuant to a Consent Solicitation Statement
dated December 16, 1998. The requisite consent was obtained on January
15, 1999. The Partnership received approximately $5,759,000 of cash
proceeds from the sale, net of closing costs of approximately $41,000.
On February 26, 1999, the Partnership distributed $6,424,304 ($66.58 per
Unit) to the Unitholders and $27,303 to the General Partner, out of cash
proceeds from the sale and Net Cash From Operations, as defined.
12
<PAGE>
- -------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- -------------------------------------------------------------------------------
The General Partner
ConAm Realty Pension Investors L.P.:
We have audited the accompanying balance sheets of ConAm Realty Pension
Investors L.P. (a New York limited partnership) as of November 30, 1998
and 1997, and the related statements of operations, partners' capital
and cash flows for the years 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
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.
As further discussed in Note 10 to the financial statements, the
Partnership sold substantially all of its assets on January 29, 1999.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ConAm Realty Pension
Investors L.P. as of November 30, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended, in conformity
with generally accepted accounting principles.
KPMG LLP
San Diego, California
January 29, 1999, except for the second paragraph
of Note 10 to the financial statements,
as to which the date is February 26, 1999
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF FORMER INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Partners of
ConAm Realty Pension Investors L.P.:
We have audited the balance sheet of ConAm Realty Pension Investors L.P.
(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 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 financial statements referred to above present fairly,
in all material respects, the financial position of ConAm Realty Pension
Investors L.P., a New York Limited Partnership, as of November 30, 1996,
and the results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
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 21, 1997
<PAGE>
- -------------------------------------------------------------------------------
NET ASSET VALUATION
- -------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE PER UNIT AT NOVEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
DATE OF PROPERTY NET ASSET VALUE
PROPERTY ACQUISITION VALUE (1) DETERMINATION
------------------------------------------ --------------- --------------------------------------- --------------------
<S> <C> <C> <C>
Oaktree Village 09-19-97 $ 5,800,000
Aggregate Property Value at 11-30-98 $5,800,000
Less estimated transaction costs in escrow (41,000)
------------------
Sales proceeds 5,759,000
Cash and cash equivalents 773,672
Other assets 318,255
------------------
Total assets 6,850,927
------------------
Less:
Liabilities 177,026
Contingency amounts (2) 222,294
------------------
Total liabilities 399,320
------------------
Partnership Net Asset Value (3) 6,451,607
------------------
Net Asset Value Allocated:
Limited Partners 6,424,304
General Partner 27,303
------------------
6,451,607
------------------
NET ASSET VALUE PER UNIT
(96,490) UNITS OUTSTANDING $66.58
---------------------------------------------------------------------------------------------------- ------------------
</TABLE>
(1) Represents the fair market value of Oaktree Village as reflected in
the purchase and sale agreement pursuant to which the property was
sold on January 29, 1999. The purchase price contained in such
agreement was negotiated and agreed to within approximately 30 days
of November 30, 1998.
(2) Includes a provision for estimated future costs related to the sale
and liquidation and an amount the General Partner determined to set
aside for contingencies, net of expected cash provided by operations
through the date of sale.
(3) The Partnership Net Asset Value assumes a sale at November 30, 1998
of all the Partnership's property at prices equal to the sales price
set forth in the purchase and sale agreement described in Note (1),
payment of all Partnership liabilities, and the distribution of the
proceeds of such sale and other Partnership cash, to the Partners.
Since the Partnership sold its real property asset in January 1999, is in
dissolution, and is in the process of winding up and liquidating, the
foregoing Partnership Net Asset Value is intended to approximate the
liquidation value of the Partnership and the Net Asset Value Per Unit is
intended to approximate the per Unit amount which will be distributed to
the Limited Partners in connection with the Partnership's liquidation. The
Net Asset Valuation does not take into account the illiquid nature of an
investment in the Units or the fact that at November 30, 1998 a holder of
Units would likely not have been able to sell their Units for the Net Asset
Value Per Unit set forth above. Fiduciaries of Limited Partners which are
subject to ERISA or other provisions of law requiring valuation 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.
<PAGE>
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
RESIDENTIAL PROPERTY: OAKTREE VILLAGE
PROPERTY OWNED: APARTMENTS
-------------------------------------------------------------------------------------------------------------------
<S> <C>
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
Building and improvements $ 4,800,000
Costs capitalized subsequent to acquisition of
building and improvements $ 41,693
Gross amount at which carried at close of period: (1)
Land $ 1,200,000
Building and improvements 4,841,693
-------------------------------------------------------------------------------------------------------------------
$ 6,041,693
-------------------------------------------------------------------------------------------------------------------
Accumulated depreciation (2) $ (220,567)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(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 $211,575.
A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended November 30, 1998, 1997, and 1996 follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENTS IN REAL ESTATE PROPERTY:
Beginning of period $ 6,000,000 $ 10,509,852 $ 10,450,002
Additions 41,693 6,000,000 59,850
Dispositions -- (10,509,852) --
-------------------------------------------------------------------------------------------------------------------
End of period $ 6,041,693 $ 6,000,000 $ 10,509,852
-------------------------------------------------------------------------------------------------------------------
ACCUMULATED DEPRECIATION:
Beginning of period $ 27,943 $ 2,261,584 $ 1,906,839
Additions 192,624 70,139 354,745
Dispositions -- (2,303,780) --
-------------------------------------------------------------------------------------------------------------------
End of period $ 220,567 $ 27,943 $ 2,261,584
-------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying independent auditors' report.
F-1
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The General Partner
ConAm Realty Pension Investors L.P.:
Under date of January 29, 1999, we reported on the balance sheets of
ConAm Realty Pension Investors L.P. (a New York limited partnership) as
of November 30, 1998 and 1997, and the related statements of operations,
partners' capital, and cash flows for the years then ended, as contained
in the 1998 annual report to Unitholders.
These financial statements and our report thereon are incorporated by
reference in the 1998 annual report on Form 10-K. In connection with our
audits 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
audits.
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 LLP
San Diego, California
January 29, 1999
F-2
<PAGE>
- --------------------------------------------------------------------------------
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 audit 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.
PricewaterhouseCoopers LLP
Hartford, Connecticut
February 21, 1997
F-3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<CASH> 773,672
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 318,255
<PP&E> 6,041,693
<DEPRECIATION> 220,567
<TOTAL-ASSETS> 6,913,053
<CURRENT-LIABILITIES> 177,026
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,736,027
<TOTAL-LIABILITY-AND-EQUITY> 6,913,053
<SALES> 1,108,901
<TOTAL-REVENUES> 1,290,717
<CGS> 0
<TOTAL-COSTS> 701,692
<OTHER-EXPENSES> 377,874
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 211,151
<INCOME-TAX> 0
<INCOME-CONTINUING> 211,151
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 211,151
<EPS-PRIMARY> 2.17
<EPS-DILUTED> 2.17
</TABLE>
