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, 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 of
Incorporation or Organization I.R.S. Employer 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 At May 31, At November 30,
1996 1995
Assets
Investment in real estate:
Land $5,817,668 $5,817,668
Building and improvements 22,224,580 22,164,580
28,042,248 27,982,248
Less accumulated depreciation (10,076,886) (9,645,010)
17,965,362 18,337,238
Cash and cash equivalents 1,167,520 1,060,348
Restricted cash 71,865 61,141
Other assets, net of accumulated amortization
of $141,684 in 1996 and $120,176 in 1995 188,804 191,114
Total Assets $19,393,551 $19,649,841
Liabilities and Partners' Capital
Liabilities:
Mortgages payable $8,501,268 $8,564,859
Distribution payable 222,222 222,222
Accounts payable and accrued expenses 145,592 149,215
Due to general partners and affiliates 40,687 40,519
Security Deposits 114,493 109,876
Total Liabilities 9,024,262 9,086,691
Partners' Capital (Deficit):
General Partners (865,688) (846,302)
Limited Partners 11,234,977 11,409,452
Total Partners' Capital 10,369,289 10,563,150
Total Liabilities and Partners' Capital $19,393,551 $19,649,841
Consolidated Statement of Partners' Capital (Deficit)
For the six months ended May 31, 1996
Limited General
Partners Partners Total
Balance at November 30, 1995 $11,409,452 $(846,302) $10,563,150
Net income 225,525 25,058 250,583
Distributions (400,000) (44,444) (444,444)
Balance at May 31, 1996 $11,234,977 $(865,688) $10,369,289
Consolidated Statements of Operations
Three months ended May 31, Six months ended May 31,
1996 1995 1996 1995
Income
Rental income $912,837 $1,083,953 $1,836,783 $2,153,786
Interest income 22,686 59,972 35,359 114,245
Total Income 935,523 1,143,925 1,872,142 2,268,031
Expenses
Property operating $347,525 $456,542 $713,507 $968,092
Depreciation and amortization 228,245 278,280 453,384 563,357
Interest 187,420 263,851 375,532 528,491
General and administrative 34,474 35,674 79,136 68,452
Total Expenses 797,664 1,034,347 1,621,559 2,128,392
Net Income $137,859 $109,578 $250,583 $139,639
Net Income Allocated:
To the General Partners $13,786 $10,958 $25,058 $13,964
To the Limited Partners 124,073 98,620 225,525 125,675
$137,859 $109,578 $250,583 $139,639
Per limited partnership unit:
(80,000 outstanding) $1.55 $1.23 $2.82 $1.57
Consolidated Statements of Cash Flows
For the six months ended May 31, 1996 1995
Cash Flows From Operating Activities:
Net income $250,583 $139,639
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 453,384 563,357
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Fundings to restricted cash (77,025) (76,633)
Release of restricted cash to property operations 66,301 73,309
Other assets (19,198) 13,679
Accounts payable and accrued expenses (3,623) 57,038
Due to general partners and affiliates 168 (888)
Security deposits 4,617 (6,939)
Net cash provided by operating activities 675,207 762,562
Cash Flows From Investing Activities:
Additions to real estate (60,000) (52,071)
Net cash used for investing activities (60,000) (52,071)
Cash Flows From Financing Activities:
Mortgage principal payments (63,591) (70,593)
Distributions (444,444) (533,333)
Net cash used for financing activities (508,035) (603,926)
Net increase in cash and cash equivalents 107,172 106,565
Cash and cash equivalents, beginning of period 1,060,348 4,213,148
Cash and cash equivalents, end of period $1,167,520 $4,319,713
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $375,532 $528,491
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 May 31, 1996
and the results of operations and cash flows for the six months
ended May 31, 1996 and 1995 and the statement of partner's
capital (deficit) for the six months ended May 31, 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 May 31, 1996, the Partnership had cash and cash equivalents of
$1,167,520 which were invested in unaffiliated money market
funds, an increase of $107,172 from the balance at November 30,
1995. The increase is attributable to net cash provided by
operating activities exceeding cash used for distributions,
mortgage payments, and additions to real estate. The Partnership
also maintains a restricted cash balance, which totaled $71,865
at May 31, 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.
The General Partners have initiated an improvement program which
includes roof repairs at all three properties and asphalt repairs
at Autumn Heights and Ponte Vedra Beach II. The improvement work
is intended to protect the properties' position within their
respective markets, which are growing increasingly competitive
with the addition of new apartment properties, and position the
properties for increases in revenue and market value. Thus far,
the roof repairs at Ponte Vedra Beach II are complete, with the
remaining work currently underway.
The General Partners declared a cash distribution of $2.50 per
Unit for the quarter ended May 31, 1996 which will be paid to
investors on or about July 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 and six months ended May 31,
1996, resulted in net income of $137,859 and $250,583,
respectively, compared with $109,578 and $139,639, respectively,
for the corresponding periods in fiscal 1995. The increases in
net income for both periods are 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
$363,983 and $675,207 for the three and six months ended May 31,
1996, respectively, compared to $443,130 and $762,562,
respectively, for the same periods in fiscal 1995. The decreases
in net cash provided by operating activities are primarily due to
the use of cash for other assets, a decrease in accounts payable,
and the sale of Country Place Village II in July of 1995.
Rental income for the three and six months ended May 31, 1996 was
$912,837 and $1,836,783, respectively, compared with $1,083,953
and $2,153,786, respectively, in the corresponding periods in
fiscal 1995. The decreases reflect the sale of Country Place
Village II, and are partially offset by increases in rental
income at two of the remaining properties due to increased rental
rates. Interest income totaled $22,686 and $35,359 for the three
and six months ended May 31, 1996, respectively, compared to
$59,972 and $114,245 for the corresponding periods in fiscal
1995. The decreases are the result of the Partnership
maintaining a lower cash balance in the 1996 periods compared to
the 1995 periods.
Property operating expenses and depreciation and amortization
were lower in the three and six month periods ended May 31, 1996
compared to the same periods 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 six 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 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 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: July 15, 1996 BY: /s/ Paul L. Abbott
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-30-1996
<PERIOD-END> May-31-1996
<CASH> 1,239,385
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