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, 1997
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
State or Other Jurisdiction of 13-3176625
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 August 31, At November 30,
1997 1996
Assets
Investments in real estate:
Land $ 5,817,668 $ 5,817,668
Buildings and improvements 22,679,876 22,326,780
28,497,544 28,144,448
Less accumulated depreciation (11,167,982) (10,510,777)
17,329,562 17,633,671
Cash and cash equivalents 895,283 1,084,483
Restricted cash 122,944 84,934
Other assets, net of accumulated
amortization of $195,454 in 1997
and $163,192 in 1996 113,180 173,569
Total Assets $18,460,969 $18,976,657
Liabilities and Partners' Capital
Liabilities:
Mortgages payable $ 8,329,609 $ 8,434,843
Distribution payable 133,333 222,222
Accounts payable and accrued expenses 225,244 156,786
Due to general partners and affiliates 14,745 15,808
Security deposits 103,333 118,601
Total Liabilities 8,806,264 8,948,260
Partners' Capital (Deficit):
General Partners (937,146) (899,777)
Limited Partners 10,591,851 10,928,174
Total Partners' Capital 9,654,705 10,028,397
Total Liabilities and
Partners' Capital $18,460,969 $18,976,657
Consolidated Statement of Partners' Capital (Deficit)
For the nine months ended August 31, 1997
General Limited
Partners Partners Total
Balance at November 30, 1996 $ (899,777) $10,928,174 $10,028,397
Net income 2,631 23,677 26,308
Cash distributions (40,000) (360,000) (400,000)
Balance at August 31, 1997 $ (937,146) $10,591,851 $ 9,654,705
Consolidated Statements of Operations
Three months ended Nine months ended
August 31, August 31,
1997 1996 1997 1996
Income
Rental $ 881,207 $ 908,718 $2,677,955 $2,745,501
Interest and other 7,864 11,184 28,965 46,543
Total Income 889,071 919,902 2,706,920 2,792,044
Expenses
Property operating 432,699 386,867 1,313,253 1,100,374
Depreciation and
amortization 231,094 227,444 689,467 680,828
Interest 183,714 186,710 553,449 562,242
General and administrative 35,812 41,969 124,443 121,105
Total Expenses 883,319 842,990 2,680,612 2,464,549
Net Income $ 5,752 $ 76,912 $ 26,308 $ 327,495
Net Income Allocated:
To the General Partners $ 575 $ 7,691 $ 2,631 $ 32,750
To the Limited Partners 5,177 69,221 23,677 294,745
$ 5,752 $ 76,912 $ 26,308 $ 327,495
Per limited partnership unit:
(80,000 outstanding) $.07 $.87 $.30 $3.68
Consolidated Statements of Cash Flows
For the nine months ended August 31, 1997 1996
Cash Flows From Operating Activities:
Net income $ 26,308 $ 327,495
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 689,467 680,828
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Fundings to restricted cash (119,936) (116,782)
Release of restricted cash to
property operations 81,926 82,314
Other assets 28,127 (19,198)
Accounts payable and accrued expenses 68,458 41,676
Due to general partners and affiliates (1,063) (72)
Security deposits (15,268) 6,020
Net cash provided by operating activities 758,019 1,002,281
Cash Flows From Investing Activities:
Additions to real estate (353,096) (120,387)
Net cash used for investing activities (353,096) (120,387)
Cash Flows From Financing Activities:
Mortgage principal payments (105,234) (96,441)
Distributions (488,889) (666,666)
Net cash used for financing activities (594,123) (763,107)
Net increase (decrease) in cash and
cash equivalents (189,200) 118,787
Cash and cash equivalents, beginning of period 1,084,483 1,060,348
Cash and cash equivalents, end of period $ 895,283 $1,179,135
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 553,449 $ 562,242
Notes to the Consolidated Financial Statements
The unaudited interim consolidated financial statements should be
read in conjunction with the Partnership's annual 1996 audited
consolidated financial statements within Form 10-K.
The unaudited interim consolidated financial statements include
all normal and reoccurring adjustments which are, in the opinion
of management, necessary to present a fair statement of financial
position as of August 31, 1997 and the results of operations for
the three and nine months ended August 31, 1997 and 1996, cash
flows for the nine months ended August 31, 1997 and 1996, and the
statement of partners' capital (deficit) for the nine months
ended August 31, 1997. Results of operations for the periods are
not necessarily indicative of the results to be expected for the
full year.
Certain prior year amounts have been reclassified in order to
conform to the current year's presentation.
No significant events have occurred subsequent to fiscal year
1996, and no material contingencies exist, which would require
disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
On August 29, 1997 ConAm Property Services IV, Ltd. ("CPS IV"), a
co-general partner of the Partnership, executed a contract to
acquire RI 3-4 Real Estate Services Inc.'s co-general partner
interest in the Partnership. As a result, upon the closing of
this transaction, CPS IV will become the sole general partner of
the Partnership. See Part II, Item 5 of this 10-Q for additional
information.
Part I, Item 2 . Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
At August 31, 1997, the Partnership had cash and cash equivalents
of $895,283 that were invested in unaffiliated money market
funds, a decrease from $1,084,483 at November 30, 1996. The
decrease is primarily attributable to a decrease in net cash
provided by operating activities, as well as an increase in
additions to real estate, as discussed below. The Partnership
also maintains a restricted cash balance, which totaled $122,944
at August 31, 1997, an increase from $84,934 at November 30,
1996. The increase in restricted cash is attributable to
payments made for real estate tax escrows required under the
terms of the Autumn Heights and Skyline Village loans. Accounts
payable and accrued expenses totaled $225,243 at August 31,1997,
an increase from $156,786 at November 30, 1996. The increase is
primarily due to real estate tax accruals for Ponte Vedra Beach
Village II and Skyline Village. The Partnership expects
sufficient cash to be generated from operations to meet its
current operating expenses.
The General Partners continue to perform various improvements at
the properties which include roof repairs at Autumn Heights and
Ponte Vedra Beach Village II and exterior painting at Skyline
Village. It is expected that work at both properties will be
finished by the end of the year. The General Partners will
evaluate the need for additional improvement work at the
properties on an ongoing basis.
The General Partners declared a cash distribution of $1.50 per
Unit for the quarter ended August 31, 1997 which will be paid
to investors on or about October 22, 1997. 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.
Results of Operations
Partnership operations for the three and nine months ended August
31, 1997 resulted in net income of $5,752 and $26,308,
respectively, compared with $76,912 and $327,495, for the
corresponding periods in fiscal 1996. The decreases in net
income for both periods are due primarily to a decrease in rental
income and an increase in property operating expenses.
Rental income for the three and nine months ended August 31, 1997
was $881,207 and $2,677,955, respectively, compared with $908,718
and $2,745,501, in the corresponding periods in fiscal 1996. The
decrease primarily reflects lower occupancy at all three
properties. Interest and other income totaled $7,864 and $28,965
for the three and nine months ended August 31, 1997,
respectively, compared to $11,184 and $46,543 for the
corresponding periods in fiscal 1996. The decrease is the result
of the Partnership maintaining a lower cash balance in the 1997
periods compared to the 1996 periods.
Property operating expenses for the three and nine months ended
August 31, 1997 were $432,699 and $1,313,253, respectively,
compared with $386,867 and $1,100,374, in the corresponding
periods in 1996. The increase is primarily attributable to an
increase in repair and maintenance work in connection with the
roof repairs at Ponte Vedra Beach Village II and Autumn Heights.
During the first nine months of fiscal 1997 and 1996, average
occupancy levels at each of the properties were as follows:
Property 1997 1996
Autumn Heights 94% 96%
Ponte Vedra Beach Village II 94% 96%
Skyline Village 90% 92%
Part II Other Information
Items 1-4 Not applicable.
Item 5 Other Information
ConAm Property Services IV, Ltd. ("CPS IV") and RI 3-4
Real Estate Services Inc.'s ("RI 3-4") have served as
co-general partners of the Partnership since its inception.
On August 29, 1997, CPS IV executed a contract to acquire
RI 3-4's co-general partner interest in the Partnership.
As a result, upon the closing of this transaction CPS IV
will become the sole general partner of the Partnership.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K
were filed during the quarter ended August 31, 1997.
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: October 15, 1997 BY: /s/ Doreen D. Odell
---------------------------
Director, President, Chief
Executive Officer and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Nov-30-1997
<PERIOD-END> Aug-31-1997
<CASH> 1,018,227
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 28,497,544
<DEPRECIATION> 11,167,982
<TOTAL-ASSETS> 18,460,969
<CURRENT-LIABILITIES> 476,655
<BONDS> 8,329,609
<COMMON> 0
0
0
<OTHER-SE> 9,654,705
<TOTAL-LIABILITY-AND-EQUITY> 18,460,969
<SALES> 0
<TOTAL-REVENUES> 2,706,920
<CGS> 0
<TOTAL-COSTS> 1,313,253
<OTHER-EXPENSES> 813,910
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 553,449
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,308
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
