UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1995
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: 0-11769
HUTTON/CONAM REALTY INVESTORS 3
(Exact name of registrant as specified in its charter)
California 13-3176625
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) identification No.)
3 World Financial Center, 29th Floor, New York, NY
ATTN: Andre Anderson 10285
(Address of principal executive offices) (Zip code)
(212) 526-3237
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Consolidated Balance Sheets
August 31, November 30,
Assets 1995 1994
Investments in real estate:
Land $ 5,817,668 $ 7,220,465
Buildings and improvements 22,058,284 26,508,961
27,875,952 33,729,426
Less accumulated depreciation (9,428,473) (10,629,776)
18,447,479 23,099,650
Cash and cash equivalents 1,260,981 4,213,148
Restricted cash 73,270 57,980
Other assets, net of accumulated
amortization of $109,422 in 1995 and
$77,160 in 1994 194,927 242,868
Total Assets $ 19,976,657 $ 27,613,646
Liabilities and Partners' Capital
Liabilities:
Mortgages payable $ 8,595,630 $ 11,598,519
Distribution payable 222,222 311,111
Accounts payable and accrued expenses 219,720 137,709
Due to general partners and affiliates 60,396 38,007
Security deposits 119,046 161,667
Total Liabilities 9,217,014 12,247,013
Partners' Capital (Deficit):
General Partners (826,653) (773,514)
Limited Partners 11,586,296 16,140,147
Total Partners' Capital 10,759,643 15,366,633
Total Liabilities and
Partners' Capital $ 19,976,657 $ 27,613,646
Consolidated Statement of Partners' Capital (Deficit)
For the nine months ended August 31, 1995
General Limited
Partners Partners Total
Balance at December 1, 1994 $ (773,514) $ 16,140,147 $ 15,366,633
Net income 13,527 46,149 59,676
Cash distributions (66,666) (4,600,000) (4,666,666)
Balance at August 31, 1995 $ (826,653) $ 11,586,296 $ 10,759,643
Consolidated Statements of Operations
Three months ended Nine months ended
August 31, August 31,
Income 1995 1994 1995 1994
Rental $ 977,296 $ 1,040,341 $ 3,131,082 $ 3,080,558
Interest 47,150 37,145 161,395 103,516
Total Income 1,024,446 1,077,486 3,292,477 3,184,074
Expenses
Property operating 505,094 491,798 1,473,186 1,335,619
Depreciation and amortization 256,865 284,863 820,222 852,082
Interest 212,365 266,168 740,856 800,772
General and administrative 46,093 29,365 114,545 109,496
Total Expenses 1,020,417 1,072,194 3,148,809 3,097,969
Income from operations 4,029 5,292 143,668 86,105
Loss on sale of property (83,992) 0 (83,992) 0
Net Income (Loss) $ (79,963) $ 5,292 $ 59,676 $ 86,105
Net Income (Loss) Allocated:
To the General Partners $ (437) $ 529 $ 13,527 $ 8,610
To the Limited Partners (79,526) 4,763 46,149 77,495
$ (79,963) $ 5,292 $ 59,676 $ 86,105
Per limited partnership unit
(80,000 outstanding) $ (.99) $ .06 $ .58 $ .97
Consolidated Statements of Cash Flows
For the nine months ended August 31, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net income $ 59,676 $ 86,105
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 820,222 852,082
Loss on sale of property 83,992 0
Increase (decrease) in cash arising
from changes in operating assets
and liabilities:
Funding to restricted cash (114,829) (105,746)
Release of restricted cash to
property operations 99,539 93,888
Other assets 15,679 53,516
Accounts payable and accrued expenses 82,011 94,135
Due to general partners and affiliates 22,389 2,642
Security deposits (42,621) 15,978
Net cash provided by operating activities 1,026,058 1,092,600
Cash Flows from Investing Activities:
Net proceeds from sale of property 3,832,290 0
Additions to real estate (52,071) (50,569)
Net cash provided by (used for)
investing activities 3,780,219 (50,569)
Cash Flows from Financing Activities:
Mortgage borrowings 0 5,500,000
Mortgage principal payments (3,002,889) (4,503,445)
Distributions (4,755,555) (3,244,444)
Refund of deposit on mortgage refinancing 0 55,000
Mortgage fees 0 (74,496)
Net cash used for financing activities (7,758,444) (2,267,385)
Net decrease in cash and cash equivalents (2,952,167) (1,225,354)
Cash and cash equivalents at
beginning of period 4,213,148 5,775,115
Cash and cash equivalents at
end of period $ 1,260,981 $ 4,549,761
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 740,856 $ 800,772
Notes to the Consolidated Financial Statements
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's annual 1994 audited consolidated financial
statements within Form 10-K.
The unaudited consolidated financial statements include all adjustments which
are, in the opinion of management, necessary to present a fair statement of
financial position as of August 31, 1995 and the results of operations and cash
flows for the nine months ended August 31, 1995 and 1994 and the statement of
changes in partners' capital (deficit) for the nine months ended August 31,
1995. Results of operations for the periods are not necessarily indicative of
the results to be expected for the full year.
The following significant events have occurred subsequent to fiscal 1994 which
requires disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5):
On July 20, 1995, the Partnership closed on the sale of Country Place Village
II (the "Property"). The Property sold for $3,890,000 to an institutional
buyer (the "Buyer"), which is unaffiliated with the Partnership. The selling
price was determined by arm's length negotiations between the Partnership and
the Buyer. The Partnership received net proceeds of $3,832,290. The
transaction resulted in a loss on sale for the Property of $83,992 which is
reflected in the Partnership's statement of operations for the period ending
August 31, 1995.
On August 22, 1995, the General Partners paid a special distribution of
$4,000,000 to the limited partners. The special distribution was comprised of
the net proceeds from the sale of the Property and $167,710 from the
Partnership's cash reserves.
On June 29, 1995, the Partnership paid $2,925,099, representing principal and
interest, from cash reserves to fully satisfy its mortgage obligation on
Country Place Village II.
Part I, Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
At August 31, 1995, the Partnership had cash and cash equivalents of
$1,260,981, which were invested in unaffiliated money market funds. The
Partnership also maintains a restricted cash balance, which totaled $73,270 at
August 31, 1995, representing real estate tax escrows required under the terms
of the Autumn Heights and Skyline Village loans. The Partnership expects
sufficient cash to be generated from operations to meet its current operating
expenses.
On July 20, 1995, the Partnership closed on the sale of Country Place Village
II for $3,890,000 to an institutional buyer. The Partnership received net
proceeds of $3,832,290. On August 22, 1995, the General Partners made a
special distribution of $4,000,000 or $50 per Unit from proceeds resulting from
the sale and a portion of the Partnership's cash reserves. The General
Partners declared a regular cash distribution of $2.50 per Unit for the quarter
ended August 31, 1995 which will be paid to investors on or about October 16,
1995. As a result of the sale of Country Place Village II, security deposits
payable declined from November 30, 1994 to August 31, 1995.
Mortgages payable declined from $11,598,519 at November 30, 1994 to $8,595,630
at August 31, 1995 primarily due to a June 29, 1995 payment in the amount of
$2,925,099, representing principal and interest, from cash reserves to fully
satisfy the Partnership's mortgage obligation on Country Place Village II, plus
normal amortization of the outstanding balance.
Accounts payable and accrued expenses were $219,720 at August 31, 1995,
compared with $137,709 at November 30, 1994. The increase is primarily
attributable to accruals for real estate taxes to be paid later in the year.
Results of Operations
Partnership operations for the three and nine months ended August 31, 1995
resulted in a net loss of $79,963 and net income of $59,676, respectively,
compared with net income of $5,292 and $86,105 for the corresponding periods in
fiscal 1994. After adding back the loss recognized on the sale of Country
Place Village II and depreciation and amortization, both non-cash expenses, and
subtracting mortgage amortization and additions to real estate, operations
generated cash flow of $144,681 and $809,005, respectively, for the three and
nine months ended August 31, 1995, compared with cash flow of $246,803 and
$795,388 for the corresponding periods in fiscal 1994. The decrease in net
income is primarily attributable to a $83,992 loss recognized on the sale of
Country Place Village II. Without the loss recognized on the sale of the
property, income from operations for the nine-month period increased from 1994
to 1995, primarily as a result of an increase in rental and interest income,
and a reduction in interest expense, partially offset by an increase in
property operating expenses. The decline in cash flow for the three-month
period is primarily attributable to an increase in property operating expense,
partially offset by increases in rental and interest income.
Rental income for the three and nine months ended August 31, 1995 totalled
$977,296 and $3,131,082, respectively, compared with $1,040,341 and $3,080,558
for the corresponding periods in fiscal 1994. The increase for the nine-month
period reflects higher rental income at the Partnership's three remaining
properties during 1995, due to increased rental rates. Interest income for the
three and nine months ended August 31, 1995 totalled $47,150 and $161,395,
respectively, compared with $37,145 and $103,516 for the corresponding periods
in fiscal 1994. Interest income rose due to an increase in the interest rates
earned on the Partnership's cash balance.
Total expenses for the three and nine months ended August 31, 1995 were
$1,020,417 and $3,148,809, respectively, compared with $1,072,194 and
$3,097,969 for the corresponding periods in fiscal 1994. The increase in total
expenses for the nine-month period is due primarily to an increase in property
operating expenses, in particular repair and maintenance expenses, which
increased at two of the Partnership's properties. The largest increase was at
Skyline Village, primarily reflecting the cost of pool and roof repairs.
Partially offsetting the increase in property operating expense were reductions
in depreciation and amortization due to the July 1995 sale of Country Place
Village II and interest expense due to the June 1995 repayment of the Country
Place Village II mortgage.
For the three and nine months ended August 31, 1995 and 1994, average occupancy
levels at each of the properties were as follows:
Three Months Ended Nine Months Ended
August 31, August 31,
Property 1995 1994 1995 1994
Autumn Heights 96% 96% 96% 96%
Ponte Vedra Beach Village II 94% 97% 93% 95%
Skyline Village 94% 94% 94% 96%
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and Reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
On August 4, 1995, a Form 8-K was filed reporting the
consummation of the sale of Country Place Village II for
$3,890,000.
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.
HUTTON/CONAM REALTY INVESTORS 3
BY: RI 3-4 Real Estate Services, Inc.
General Partner
Dated: October 16, 1995
BY: /S/ Paul L. Abbott
Name: Paul L. Abbott
Title: Director, President,
Chief Executive Officer
and Chief Financial Officer
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<ARTICLE> 5
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> AUG-31-1995
<CASH> 1,334,251
<SECURITIES> 000
<RECEIVABLES> 000
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 27,875,952
<DEPRECIATION> 9,428,473
<TOTAL-ASSETS> 19,976,657
<CURRENT-LIABILITIES> 000
<BONDS> 8,595,630
<COMMON> 000
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000
<OTHER-SE> 10,759,643
<TOTAL-LIABILITY-AND-EQUITY> 19,976,657
<SALES> 000
<TOTAL-REVENUES> 3,292,477
<CGS> 000
<TOTAL-COSTS> 1,473,186
<OTHER-EXPENSES> 934,767
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<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 59,676
<EPS-PRIMARY> .58
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