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 May 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 10285
Attention: Andre Anderson
(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
May 31, November 30,
Assets 1995 1994
Investments in real estate:
Land $ 7,220,465 $ 7,220,465
Buildings and improvements 26,561,032 26,508,961
33,781,497 33,729,426
Less accumulated depreciation (11,171,625) (10,629,776)
22,609,872 23,099,650
Cash and cash equivalents 4,319,713 4,213,148
Restricted cash 61,304 57,980
Other assets, net of accumulated
amortization of $98,668 in 1995
and $77,160 in 1994 207,681 242,868
Total Assets $ 27,198,570 $ 27,613,646
Liabilities and Partners' Capital
Liabilities:
Mortgages payable $ 11,527,926 $ 11,598,519
Distribution payable 222,222 311,111
Accounts payable and accrued expenses 194,747 137,709
Due to general partners and affiliates 37,119 38,007
Security deposits 154,728 161,667
Total Liabilities 12,136,742 12,247,013
Partners' Capital (Deficit):
General Partners (803,994) (773,514)
Limited Partners 15,865,822 16,140,147
Total Partners' Capital 15,061,828 15,366,633
Total Liabilities and
Partners' Capital $ 27,198,570 $ 27,613,646
Consolidated Statement of Partners' Capital (Deficit)
For the six months ended May 31, 1995
General Limited
Partners Partners Total
Balance at December 1, 1994 $ (773,514) $ 16,140,147 $ 15,366,633
Net income 13,964 125,675 139,639
Cash distributions (44,444) (400,000) (444,444)
Balance at May 31, 1995 $ (803,994) $ 15,865,822 $ 15,061,828
Consolidated Statements of Operations
Three months ended Six months ended
May 31, May 31,
Income 1995 1994 1995 1994
Rental $ 1,083,953 $ 1,026,825 $ 2,153,786 $ 2,040,217
Interest 59,972 30,683 114,245 66,371
Total Income 1,143,925 1,057,508 2,268,031 2,106,588
Expenses
Property operating 456,542 436,862 968,092 843,821
Depreciation and
amortization 278,280 285,252 563,357 567,219
Interest 263,851 266,905 528,491 534,604
General and administrative 35,674 41,454 68,452 80,131
Total Expenses 1,034,347 1,030,473 2,128,392 2,025,775
Net Income $ 109,578 $ 27,035 $ 139,639 $ 80,813
Net Income Allocated:
To the General Partners $ 10,958 $ 2,703 $ 13,964 $ 8,081
To the Limited Partners 98,620 24,332 125,675 72,732
$ 109,578 $ 27,035 $ 139,639 $ 80,813
Per limited partnership unit
(80,000 outstanding) $ 1.23 $ .30 $ 1.57 $ .91
Consolidated Statements of Cash Flows
For the six months ended May 31, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net income $ 139,639 $ 80,813
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 563,357 567,219
Increase (decrease) in cash arising
from changes in operating
assets and liabilities:
Fundings to restricted cash (76,633) (67,749)
Release of restricted cash
to property operations 73,309 70,000
Other assets 13,679 56,055
Accounts payable and accrued expenses 57,038 50,724
Due to general partners and affiliates (888) 2,851
Security deposits (6,939) 15,122
Net cash provided by operating activities 762,562 775,035
Cash Flows from Investing Activities:
Additions to real estate (52,071) (40,591)
Net cash used for investing activities (52,071) (40,591)
Cash Flows from Financing Activities:
Mortgage borrowings 0 5,500,000
Mortgage principal payments (70,593) (4,470,071)
Distributions (533,333) (2,933,333)
Refund of deposit on mortgage refinancing 0 55,000
Mortgage fees 0 (74,332)
Net cash used for financing activities (603,926) (1,922,736)
Net increase (decrease) in cash
and cash equivalents 106,565 (1,188,292)
Cash and cash equivalents at
beginning of period 4,213,148 5,775,115
Cash and cash equivalents at end of period $ 4,319,713 $ 4,586,823
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 528,491 $ 534,604
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 May 31, 1995 and the results of operations and cash
flows for the six months ended May 31, 1995 and 1994 and the statement of
changes in partners' capital (deficit) for the six months ended May 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):
The Partnership entered into a contract with an institutional buyer to sell
Country Place Village II for $3,890,000. On July 3, 1995, the institutional
buyer provided an additional deposit of $30,000 in connection with the sale.
While there can be no assurance that the sale will be completed, the funds
currently on deposit (totalling $80,000) would be retained by the Partnership
if the sale does not close.
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 May 31, 1995, the Partnership had cash and cash equivalents of $4,319,713,
which were invested in unaffiliated money market funds. The Partnership also
maintains a restricted cash balance, which totaled $61,304 at May 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.
As a result of improving market conditions, the General Partners entered into a
contract with an institutional buyer to sell Country Place Village II for
$3,890,000. On July 3, 1995, the institutional buyer provided a final deposit
in connection with the sale. While there can be no assurance that the sale
will be completed, the funds of $80,000 currently on deposit would be retained
by the Partnership if the sale does not close. Once the sale does close, which
is expected to occur in late July 1995, a portion of the proceeds will be
distributed to the Limited Partners as a return of capital. The exact timing
and amount of this distribution has not been determined.
The loan secured by Country Place Village II was scheduled to mature on July 1,
1995. The General Partners previously determined that it would be in the
Partnership's best interests to pay off this loan due to the likely principal
paydown and significant expenses associated with a refinancing. Consequently,
the Partnership utilized $2,925,099 of its reserves to repay the loan on June
29, 1995.
Accounts payable and accrued expenses were $194,747 at May 31, 1995, compared
with $137,709 for fiscal year end 1994. The increase is primarily attributable
to accruals for real estate taxes to be paid later in the year.
The General Partners declared a cash distribution of $2.50 per Unit for the
quarter ended May 31, 1995, which will be paid to the limited partners on July
17, 1995. The level and timing of future distributions will be reviewed on a
quarterly basis by the General Partners.
Results of Operations
Partnership operations for the three and six months ended May 31, 1995 resulted
in net income of $109,578 and $139,639, respectively, compared with net income
of $27,035 and $80,813 for the corresponding periods in fiscal 1994. After
adding back depreciation and amortization, both non-cash expenses, and
subtracting mortgage amortization, operations generated cash flow of $352,167
and $632,403, respectively, for the three and six months ended May 31, 1995,
compared with cash flow of $279,651 and $589,176 for the corresponding periods
in fiscal 1994. The increase in net income and cash flow for the three and six
months ended May 31, 1995 is primarily attributable to an increase in rental
and interest income, partially offset by an increase in property operating
expenses.
Rental income for the three and six months ended May 31, 1995 totalled
$1,083,953 and $2,153,786, respectively, compared with $1,026,825 and
$2,040,217 for the corresponding periods in fiscal 1994. The increases reflect
higher rental income at all of the Partnership's properties during 1995, due to
increased rental rates in 1995. Interest income for the three and six months
ended May 31, 1995 totalled $59,972 and $114,245, respectively, compared with
$30,683 and $66,371 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 six months ended May 31, 1995 were $1,034,347
and $2,128,392, respectively, compared with $1,030,473 and $2,025,775 for the
corresponding periods in fiscal 1994. The increase in total expenses is due
primarily to an increase in property operating expenses, in particular repair
and maintenance expenses, which increased at three of the Partnership's
properties. The largest increase was at Autumn Heights, primarily reflecting
the cost of painting the buildings' exteriors.
For the three and six months ended May 31, 1995 and 1994, average occupancy
levels at each of the properties were as follows:
Three Months Ended Six Months Ended
May 31, May 31,
Property 1995 1994 1995 1994
Autumn Heights 96% 96% 96% 97%
Ponte Vedra Beach Village II 94% 95% 94% 94%
Skyline Village 95% 97% 96% 97%
Country Place Village II 95% 96% 95% 96%
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and Reports on Form 8-K.
(a) Exhibits: None
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the three month period covered by this report.
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: July 14, 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> 6-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> MAY-31-1995
<CASH> 4,381,017
<SECURITIES> 000
<RECEIVABLES> 000
<ALLOWANCES> 000
<INVENTORY> 000
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<PP&E> 33,781,497
<DEPRECIATION> 11,171,625
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<OTHER-SE> 15,061,828
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<INCOME-PRETAX> 000
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<EXTRAORDINARY> 000
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<NET-INCOME> 139,639
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