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 February 29, 1996
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 I.R.S. Employer Identification No.
of Incorporation or Organization
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 At February 29, At November 30,
1996 1995
Assets ---------- ----------
Investment in real estate:
Land $ 5,817,668 $ 5,817,668
Building and improvements 22,164,580 22,164,580
---------- ----------
27,982,248 27,982,248
---------- ----------
Less accumulated depreciation (9,859,395) (9,645,010)
---------- ----------
18,122,853 18,337,238
---------- ----------
Cash and cash equivalents 1,117,901 1,060,348
Restricted cash 83,385 61,141
Other assets, net of accumulated amortization
of $130,930 in 1996 and $120,176 in 1995 178,419 191,114
---------- ----------
Total Assets $19,502,558 $19,649,841
========== ==========
Liabilities and Partners' Capital
Liabilities:
Mortgages payable $ 8,533,410 $ 8,564,859
Distribution payable 222,222 222,222
Accounts payable and accrued expenses 150,900 149,215
Due to general partners and affiliates 32,002 40,519
Security deposits 110,372 109,876
---------- ----------
Total Liabilities 9,048,906 9,086,691
========== ==========
Partners' Capital (Deficit):
General Partners (857,252) (846,302)
Limited Partners 11,310,904 11,409,452
---------- ----------
Total Partners' Capital 10,453,652 10,563,150
---------- ----------
Total Liabilities and Partners' Capital $19,502,558 $19,649,841
========== ==========
Consolidated Statement of Partners' Capital (Deficit)
For the three months ended February 29, 1996
Limited General
Partners Partners Total
---------- -------- ----------
Balance at November 30, 1995 $11,409,452 $(846,302) $10,563,150
Net income 101,452 11,272 112,724
Distributions (200,000) (22,222) (222,222)
---------- -------- ----------
Balance at February 29, 1996 $11,310,904 $(857,252) $10,453,652
========== ======== ==========
Consolidated Statements of Operations
For the three months ended February 29 and February 28, 1996 1995
Income ------- ---------
Rental income $923,946 $1,069,833
Interest income 12,673 54,273
------- ---------
Total Income 936,619 1,124,106
Expenses
Property operating $365,982 $511,550
Depreciation and amortization 225,139 285,077
Interest 188,112 264,640
General and administrative 44,662 32,778
------- ---------
Total Expenses 823,895 1,094,045
------- ---------
Net Income $112,724 $ 30,061
======= =========
Net Income Allocated:
To the General Partners $ 11,272 $ 3,006
To the Limited Partners 101,452 27,055
------- ---------
$112,724 $ 30,061
Per limited partnership unit: ------- ---------
(80,000 outstanding) $1.27 $.34
===== ====
Consolidated Statements of Cash Flows
For the three months ended February 29 and February 28, 1996 1995
- - -------------------------------------------------------------------------------
Cash Flows From Operating Activities:
Net income $112,724 $30,061
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 225,139 285,077
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Funding to restricted cash (38,257) (64,454)
Release of restricted cash to property operations 16,013 26,229
Other assets 1,941 13,679
Accounts payable and accrued expenses 1,685 31,979
Due to general partners and affiliates (8,517) 381
Security deposits 496 (3,520)
------- -------
Net cash provided by operating activities 311,224 319,432
- - -------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Additions to real estate -- (52,071)
------- -------
Net cash used for investing activities -- (52,071)
- - -------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Mortgage principal payments (31,449) (34,902)
Distributions (222,222) (311,111)
------- -------
Net cash used for financing activities (253,671) (346,013)
- - -------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 57,553 (78,652)
Cash and cash equivalents, beginning of period 1,060,348 4,213,148
--------- ---------
Cash and cash equivalents, end of period $1,117,901 $4,134,496
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest $ 188,112 $ 264,640
--------- ---------
Notes to the Consolidated Financial Statements
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's annual 1995 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 February 29, 1996 and the results of operations and
cash flows for the three months ended February 29, 1996 and February 28, 1995
and the statement of changes in partners' capital (deficit) for the three
months ended February 29, 1996. Results of operations for the period are not
necessarily indicative of the results to be expected for the full year.
No significant events have occurred subsequent to fiscal year 1995, and no
material contingencies exist which would require disclosure in this interim
report per Regulation S-X, Rule 10-01, Paragraph (a)(5).
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
- - -------------------------------
At February 29, 1996, the Partnership had cash and cash equivalents of
$1,117,901, which were invested in unaffiliated money market funds, relatively
unchanged from the balance at November 30, 1995. The Partnership also
maintains a restricted cash balance, which totaled $83,385 at February 29,
1996, 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.
During 1996, the General Partners are implementing an extensive improvement
program to upgrade the properties. This program, which includes roof repairs
at all three properties and asphalt repairs at Autumn Heights and Ponte Vedra
Beach II, is intended to protect each property's position within their
respective markets, which are growing increasingly competitive with the
addition of new apartment properties and position the property for increases in
revenue and market value. These improvements will be funded from the
Partnership's cash reserves.
The General Partners declared a cash distribution of $2.50 per Unit for the
quarter ended February 29, 1996 which will be paid to investors on or about
April 15, 1996. The level of future distributions will be evaluated on a
quarterly basis and will depend on the Partnership's operating results and
future cash needs. It is anticipated that cash from reserves may be required
to fund a portion of the distributions during 1996 as a result of the property
improvements required.
Results of Operations
- - ---------------------
Partnership operations for the three months ended February 29, 1996, resulted
in net income of $112,724 compared with $30,061 in the first quarter of fiscal
1995. The increase in net income for the three months ended February 29, 1996
is due primarily to reductions in property operating expense, depreciation and
amortization, and interest expense resulting from the sale of Country Place
Village II in July 1995. Net cash provided by operating activities was
$311,224 for the three months ended February 29, 1996 virtually unchanged from
$319,432 for the same period in fiscal 1995.
Rental income for the three months ended February 29, 1996 was $923,946
compared with $1,069,833 in the first quarter of fiscal 1995. The decrease
reflects the sale of Country Place Village II, partially offset by increases in
rental income at the three remaining properties due to increased rental rates.
Interest income totaled $12,673 for the three months ended February 29, 1996
compared to $54,273 in the first quarter of fiscal 1995. The decrease is the
result of the Partnership maintaining a lower cash balance in the 1996 period
compared to the 1995 period.
Property operating expenses and depreciation and amortization were lower in the
first quarter of fiscal 1996 compared to the same period in fiscal 1995 due to
the July 1995 sale of Country Place Village II. Interest expense also declined
due to the June 1995 repayment of the Country Place Village II mortgage. During
the first three months of fiscal 1996 and 1995, average occupancy levels at
each of the properties were as follows:
Property 1996 1995
-------- ---- ----
Autumn Heights 97% 96%
Ponte Vedra Beach Village II 96% 94%
Skyline Village 95% 97%
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 March 15, 1996, based upon, among other
things, the advice of Partnership counsel, Skadden, Arps, Slate,
Meagher & Flom, the General Partners adopted a resolution that
states, among other things, if a Change of Control (as defined
below) occurs, the General Partners may distribute the
Partnership's cash balances not required for its ordinary course
day-to-day operations. "Change of Control" means any purchase or
offer to purchase more than 10% of the Units that is not approved
in advance by the General Partners. In determining the amount of
the distribution, the General Partners may take into account all
material factors. In addition, the Partnership will not be
obligated to make any distribution to any partner and no partner
will be entitled to receive any distribution until the General
Partners have declared the distribution and established a record
date and distribution date for the distribution. The Partnership
filed a form 8-K disclosing this resolution on March 21, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HUTTON/CONAM REALTY INVESTORS 3
BY: RI 3-4 Real Estate Services, Inc.
General Partner
Date: April 15, 1996 BY: /s/ Paul L. Abbott
Director, President, Chief Executive
Officer and Chief Financial Officer
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> Feb-29-1996
<CASH> 1,201,286
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
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<PP&E> 27,982,248
<DEPRECIATION> 9,859,395
<TOTAL-ASSETS> 19,502,558
<CURRENT-LIABILITIES> 182,902
<BONDS> 8,533,410
<COMMON> 0
0
0
<OTHER-SE> 10,453,652
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<SALES> 0
<TOTAL-REVENUES> 936,619
<CGS> 0
<TOTAL-COSTS> 365,982
<OTHER-EXPENSES> 269,801
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 188,112
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 112,724
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<EPS-DILUTED> 1.27
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