<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 FEBRUARY 28, 1998
or
Transition Report Pursuant to Section 13 of 15(d) of the
- --------- Securities Exchange Act of 1934
For the transition period from to
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COMMISSION FILE NUMBER: 0-11769
CONAM REALTY INVESTORS 3 L.P.
-----------------------------
formerly known as
HUTTON/CONAM REALTY INVESTORS 3
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EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
California 13-3176625
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STATE OR OTHER JURISDICTION I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION IDENTIFICATION NO.
1764 San Diego Avenue
San Diego, Ca. 92110 Attn. Robert J. Svatos 92110-1906
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ADDRESS OF PRINCIPAL EXECUTIVE OFFICES ZIP CODE
(619)-297-6771
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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
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<PAGE>
CONAM REALTY INVESTORS 3 L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS AT FEBRUARY 28, AT NOVEMBER 30,
1998 1997
--------------- ---------------
<S> <C> <C>
ASSETS
Investments in real estate:
Land $ 5,817,668 $ 5,817,668
Buildings and improvements 22,482,432 22,465,678
--------------- ---------------
28,300,100 28,283,346
Less accumulated depreciation (11,424,591) (11,223,921)
--------------- ---------------
16,875,509 17,059,425
Cash and cash equivalents 841,255 796,824
Restricted cash 108,748 109,843
Other assets, net of accumulated amortization
of $216,963 in 1998 and $206,209 in 1997 106,020 109,293
--------------- ---------------
TOTAL ASSETS $ 17,931,532 $ 18,075,385
--------------- ---------------
--------------- ---------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Mortgage payable 8,268,098 8,292,972
Distribution payable 133,333 146,659
Accounts payable and accrued expenses 262,283 218,266
Due to general partners and affiliates 15,562 16,703
Security deposits 97,844 101,198
--------------- ---------------
Total Liabilities 8,777,120 8,775,798
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Partners' Capital (Deficit):
General Partner (968,510) (955,059)
Limited Partners (80,000 Units outstanding) 10,122,922 10,254,646
--------------- ---------------
Total Partners' Capital 9,154,412 9,299,587
--------------- ---------------
TOTAL LIABILITIES AND PARTNERS'
CAPITAL (DEFICIT) $ 17,931,532 $18,075,385
--------------- ---------------
--------------- ---------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONAM REALTY INVESTORS 3 L.P.
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED FEBRUARY 28,
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
INCOME
Rental $ 903,560 $ 888,461
Interest and other 3,374 11,552
---------- ----------
Total Income 906,934 900,013
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EXPENSES
Property operating 449,225 420,177
Depreciation and amortization 229,720 228,604
Interest 182,114 185,246
General and administrative 40,830 47,463
Write-off of assets 16,887 -
---------- ----------
Total Expenses 918,776 881,490
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NET INCOME (LOSS) $ (11,842) $ 18,523
---------- ----------
---------- ----------
NET INCOME (LOSS) ALLOCATED:
To the General Partner $ (118) $ 1,852
To the Limited Partners (11,724) 16,671
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NET INCOME (loss) $ (11,842) $ 18,523
---------- ----------
---------- ----------
PER LIMITED PARTNERSHIP UNIT
(80,000 UNITS OUTSTANDING) $ (0.15) $ 0.21
---------- ----------
</TABLE>
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1998
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
------------ -------------- ------------
<S> <C> <C> <C>
BALANCE AT NOVEMBER 30, 1997 $ (955,059) $ 10,254,646 $ 9,299,587
Net income (loss) (118) (11,724) (11,842)
Distributions ($1.50 per Unit) (13,333) (120,000) (133,333)
------------ -------------- ------------
BALANCE AT FEBRUARY 28, 1998 $ (968,510) $ 10,122,922 $ 9,154,412
------------ -------------- ------------
------------ -------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONAM REALTY INVESTORS 3 L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (11,842) $ 18,523
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 229,720 228,604
Write-off of assets 16,887 -
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Fundings to restricted cash (17,505) (40,003)
Release of restricted cash to property
operations 18,600 -
Other assets (7,481) 5,791
Accounts payable and accrued expenses 44,017 11,318
Due to general partners and affiliates (1,141) (850)
Security deposits (3,354) (10,077)
-------------------------
Net cash provided by operating activities 267,901 213,306
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate (51,937) (87,985)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (146,659) (222,222)
Mortgage principal payments (24,874) (34,315)
-------------------------
Net cash used for financing activities (171,533) (256,537)
- --------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 44,431 (131,216)
Cash and cash equivalents, beginning of period 796,824 1,084,483
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 841,255 $ 953,267
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 121,501 $ 185,246
- --------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING ACTIVITIES:
Write-off of buildings and improvements $ (35,183) $ -
Write-off of accumulated depreciation $ 18,296 $ -
- --------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONAM REALTY INVESTORS 3 L.P.
AND CONSOLIDATED VENTURES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's annual 1997 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 February
28, 1998 and the results of operations and cash flows for the three months
ended February 28, 1998 and 1997 and the consolidated statement of partners'
capital (deficit) for the three months ended February 28, 1998. Results of
operations 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>
CONAM REALTY INVESTORS 3 L.P.
AND CONSOLIDATED VENTURES
PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At February 28, 1998, the Partnership had cash and cash equivalents of
$841,255 which were invested in unaffiliated money market funds, 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 and distributions.
The Partnership's restricted cash balance totaled $108,748 at February 28,
1998 compared to $109,843 at November 30, 1997. 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 February 28, 1998 which is to be paid in April, 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 months ended February 28, 1998 generated
a net loss of $(11,842) compared with net income of $18,523 for the
corresponding period in fiscal 1997. The decrease for the three month period
is primarily attributable to an increase in property operating expenses of
$29,048 and a write-off of assets of $16,887, somewhat offset by the increase
in rental income of $15,099.
Rental income totaled $903,560 for the three months ended February 28, 1998
compared with $888,461 for the corresponding period in fiscal 1997 resulting
from an increase in occupancy rates at Skyline Village and Ponte Vedra Beach
Village II.
Property operating expenses for the three months ended February 28, 1998
totaled $449,225 compared with $420,177 for the corresponding period in
fiscal 1997. The increase is primarily attributable to an increase in repairs
and maintenance expense.
During the first three 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 91% 92%
Ponte Vedra Beach Village II 94% 91%
Skyline Village 97% 93%
</TABLE>
The increases at Ponte Vedra Beach Village II and Skyline Village are
primarily attributable to overall economic growth in Florida and Arizona,
respectively.
<PAGE>
CONAM REALTY INVESTORS 3 L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
OTHER INFORMATION
<S> <C>
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
</TABLE>
On December 15, 1997 ConAm Realty Investors 3 L.P. filed a Form
8-K (amended on December 17, 1997 by Form 8-K/A) regarding its
change of auditors from Coopers & Lybrand L.L.P. to KPMG Peat
Marwick LLP. The response from Coopers & Lybrand L.L.P.
indicated that there were no disagreements on any matters of
accounting principles or practices, financial statement
disclosure, or auditing scope procedure.
On February 3, 1998 ConAm Realty Investors 3 L.P. filed a Form
8-K regarding a change in general partner ownership and the name
change from Hutton/ConAm Realty Investors 3 to ConAm Realty
Investors 3 L.P.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> NOV-30-1997
<PERIOD-END> FEB-28-1998
<CASH> 950,003
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 28,300,100
<DEPRECIATION> (11,424,591)
<TOTAL-ASSETS> 17,931,532
<CURRENT-LIABILITIES> 509,022
<BONDS> 8,268,098
0
0
<COMMON> 0
<OTHER-SE> 9,154,412
<TOTAL-LIABILITY-AND-EQUITY> 17,931,532
<SALES> 903,560
<TOTAL-REVENUES> 906,934
<CGS> 0
<TOTAL-COSTS> 449,225
<OTHER-EXPENSES> 287,437
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 182,114
<INCOME-PRETAX> (11,842)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,842)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,842)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
