<PAGE>
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, 1998
or
Transition Report Pursuant to Section 13 of 15(d) of the Securities
----- Exchange Act of 1934
For the transition period from ____ to ____
COMMISSION FILE NUMBER: 0-11769
CONAM REALTY INVESTORS 3 L.P.
-----------------------------
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
California 13-3176625
---------- ----------
STATE OR OTHER JURISDICTION OF I.R.S. EMPLOYER IDENTIFICATION NO.
INCORPORATION OR ORGANIZATION
1764 San Diego Avenue
San Diego, CA 92110 Attn. Robert J. Svatos 92110-1906
- -------------------------------------------- ----------
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES ZIP CODE
(619) 297-6771
--------------
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
--- ---
<PAGE>
CONAM REALTY INVESTORS 3 L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS AT AUGUST 31, AT NOVEMBER 30,
1998 1997
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in real estate:
Land $ 5,817,668 $ 5,817,668
Buildings and improvements 22,506,515 22,465,678
--------------------------------------------
28,324,183 28,283,346
Less accumulated depreciation (11,833,274) (11,223,921)
--------------------------------------------
16,490,909 17,059,425
Cash and cash equivalents 852,951 796,824
Restricted cash 132,846 109,843
Other assets, net of accumulated amortization
of $238,471 in 1998 and $206,209 in 1997 142,026 109,293
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 17,618,732 $ 18,075,385
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------------------------------------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgages payable 8,191,266 8,292,972
Distribution payable 133,333 146,659
Accounts payable and accrued expenses 323,380 218,266
Due to general partner and affiliates 15,397 16,703
Security deposits 101,113 101,198
--------------------------------------------
Total Liabilities 8,764,489 8,775,798
--------------------------------------------
Partners' Capital
General Partner (995,512) (955,059)
Limited Partners (80,000 Units outstanding) 9,849,755 10,254,646
--------------------------------------------
Total Partners' Capital 8,854,243 9,299,587
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TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 17,618,732 $ 18,075,385
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
AUGUST 31, AUGUST 31,
1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME
Rental $ 918,651 $ 881,207 $ 2,733,857 $ 2,677,955
Interest and other 7,465 7,864 12,708 28,965
----------------------------------------------------------------------------
Total Income 926,116 889,071 2,746,565 2,706,920
- --------------------------------------------------------------------------------------------------------------------
EXPENSES
Property operating 455,940 432,699 1,356,044 1,313,253
Depreciation and amortization 229,604 231,094 688,690 689,467
Interest 180,441 183,714 543,843 553,449
General and administrative 39,330 35,812 141,653 124,443
Write-off of assets 44,793 - 61,680 -
----------------------------------------------------------------------------
Total Expenses 950,108 883,319 2,791,910 2,680,612
- --------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (23,992) $ 5,752 $ (45,345) $ 26,308
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) ALLOCATED:
To the General Partner $ (240) $ 575 $ (454) $ 2,631
To the Limited Partners (23,752) 5,177 (44,891) 23,677
- --------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (23,992) $ 5,752 $ (45,345) $ 26,308
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
PER LIMITED PARTNERSHIP UNIT
(80,000 UNITS OUTSTANDING) $ (0.30) $ 0.07 $ (0.56) $ 0.30
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED AUGUST 31, 1998
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE (DEFICIT) AT NOVEMBER 30, 1997 $ (955,059) $ 10,254,646 $ 9,299,587
Net income (loss) (454) (44,891) (45,345)
Distributions ($4.50 per Unit) (39,999) (360,000) (399,999)
- ----------------------------------------------------------------------------------------------------------
BALANCE (DEFICIT) AT AUGUST 31, 1998 $ (995,512) $ 9,849,755 $ 8,854,243
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED AUGUST 31, 1998 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (45,345) $ 26,308
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 688,690 689,467
Write-off of assets 61,680 -
Increase (decrease) in cash arising from changes in operating
assets and liabilities:
Fundings to restricted cash (107,082) (119,936)
Release of restricted cash to property operations 84,079 81,926
Other assets (64,995) 28,127
Accounts payable and accrued expenses 105,114 68,458
Due to general partner and affiliates (1,306) (1,063)
Security deposits (85) (15,268)
----------------------------------
Net cash provided by operating activities 720,750 758,019
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate (203,783) (353,096)
Insurance recovery of real estate additions 54,191 -
----------------------------------
Net cash used for investing activities (149,592) (353,096)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Mortgage principal payments (101,706) (105,234)
Distributions (413,325) (488,889)
----------------------------------
Net cash used for financing activities (515,031) (594,123)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 56,127 (189,200)
Cash and cash equivalents, beginning of period 796,824 1,084,483
- ------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 852,951 $ 895,283
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 483,791 $ 553,449
- ------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
Write-off of buildings and improvements $ (108,755) $ -
Write-off of accumulated depreciation $ (47,075) $ -
- ------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's 1997 Annual Report.
The unaudited interim consolidated financial statements include all normal and
recurring adjustments which are, in the opinion of management, necessary to
present a fair statement of financial position as of August 31, 1998 and the
results of operations for the three and nine months ended August 31, 1998 and
1997, consolidated cash flows for the nine months ended August 31, 1998 and
1997, and the statement of consolidated partners' capital for the nine months
ended August 31, 1998. Results of operations for the periods are not necessarily
indicative of the results to be expected for the full year.
No significant events have occurred subsequent to fiscal year 1997, and no
material contingencies exist, which would require disclosure in this interim
report per Regulation S-X, Rule 10-01, Paragraph (a) (5).
<PAGE>
PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At August 31, 1998, the Partnership had cash and cash equivalents of $852,951
compared with $796,824 at November 30, 1997. The increase in cash and cash
equivalents is due to less cash being used for fixed assets additions, lower
distributions, and the insurance recovery of $54,191 for defective roofing
repairs. The Partnership expects sufficient cash to be generated from operations
to meet its current operating expenses.
The General Partner declared a regular cash distribution of $1.50 per unit for
the quarter ended August 31, 1998 which is to be paid in October, 1998. The
General Partner will determine the amount of future quarterly distributions
based on the Partnership's available cash flow and future cash needs.
RESULTS OF OPERATIONS
Partnership operations for the three and nine months ended August 31, 1998
generated net losses of ($23,992) and ($45,345), respectively, compared with net
income of $5,752 and $26,308, respectively, for the corresponding periods in
fiscal 1997. The decrease for the three months ended August 31, 1998 is
primarily attributable to an increase in property operating expenses and a
write-off of assets of $44,793, partially off-set by an increase in rental
income. The decrease for the nine months ended August 31, 1998 is primarily
attributable to an increase in property operating expenses and general and
administrative expenses and a write-off of assets of $61,680, somewhat offset by
the increase in rental income.
Rental income totaled $918,651 and $2,733,857 for the three and nine months,
respectively, ended August 31, 1998 compared with $881,207 and $2,677,955,
respectively, for the corresponding periods in fiscal 1997 resulting from an
increase in rental income primarily from increased rental rates at Autum Heights
and Ponte Vedra Beach Village II and increased occupancy at Skyline Village.
Property operating expenses for the three and nine months ended August 31, 1998
totaled $455,940 and $1,356,044, respectively, compared with $432,699 and
$1,313,253, respectively, for the corresponding period in fiscal 1997. The
increase for the three months ended August 31, 1998 is due to an increase in
rental administration expenses. The increase for the nine months ended August
31, 1998 is primarily attributable to increased utilities expense.
During the first nine months of fiscal 1998 and 1997, average occupancy levels
at the Partnership's properties were as follows:
<TABLE>
<CAPTION>
PROPERTY 1998 1997
-------------------------------------------------------------------
<S> <C> <C>
Autumn Heights 94% 94%
Ponte Vedra Beach Village II 92% 94%
Skyline Village 94% 90%
-------------------------------------------------------------------
</TABLE>
The decreae in occupancy at Ponte Vedra Beach Village II is due to strong
competition associated with increased construction in Florida. This decrease in
occupancy is off-set by increased rental rates resulting in increased total
rental income. The Tucson market continues to improve from its overbuilt
situation of two years ago, resulting in increased occupancy and total rental
income at Skyline Village, however, rental concessions are still required to
maintain current occupancy levels.
<PAGE>
OTHER INFORMATION
PART II Not applicable
ITEMS 1-5 Exhibits and reports on Form 8-K
ITEMS 6 (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, 1998.
<PAGE>
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 hereunto duly authorized.
CONAM PROPERTY SERVICES IV, LTD.
General Partner of ConAm Realty Investors 3 L.P.
BY: CONTINENTAL AMERICAN DEVELOPMENT, INC.
GENERAL PARTNER
Date: October 13, 1998 BY:/s/ DANIEL J. EPSTEIN
-----------------
Daniel J. Epstein
Director, President, and Principal Executive
Officer
Date: October 13, 1998 BY:/s/ ROBERT J. SVATOS
----------------
Robert J. Svatos
Vice President and Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> AUG-31-1998
<CASH> 985,797
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 28,324,183
<DEPRECIATION> 11,833,274
<TOTAL-ASSETS> 17,618,732
<CURRENT-LIABILITIES> 573,223
<BONDS> 8,191,266
0
0
<COMMON> 0
<OTHER-SE> 8,854,243
<TOTAL-LIABILITY-AND-EQUITY> 17,618,732
<SALES> 2,733,857
<TOTAL-REVENUES> 2,746,565
<CGS> 0
<TOTAL-COSTS> 1,356,044
<OTHER-EXPENSES> 892,023
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 543,843
<INCOME-PRETAX> (45,345)
<INCOME-TAX> 0
<INCOME-CONTINUING> (45,345)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45,345)
<EPS-PRIMARY> (0.56)
<EPS-DILUTED> (0.56)
</TABLE>
