<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
MAY 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
- -------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT MAY 31, AT NOVEMBER 30,
1998 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in real estate:
Land $ 5,817,668 $ 5,817,668
Buildings and improvements 22,458,164 22,465,678
------------------------------------------
28,275,832 28,283,346
Less accumulated depreciation (11,639,646) (11,223,921)
------------------------------------------
16,636,186 17,059,425
Cash and cash equivalents 863,642 796,824
Restricted cash 113,033 109,843
Other assets, net of accumulated amortization
of $227,717 in 1998 and $206,209 in 1997 129,141 109,293
- ----------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 17,742,002 $ 18,075,385
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage payable 8,225,421 8,292,972
Distribution payable 133,333 146,659
Accounts payable and accrued expenses 255,284 218,266
Due to general partner and affiliates 15,310 16,703
Security deposits 101,086 101,198
-----------------------------------------
Total Liabilities 8,730,434 8,775,798
-----------------------------------------
Partners' Capital (Deficit):
General Partner (981,938) (955,059)
Limited Partners (80,000 Units outstanding) 9,993,506 10,254,646
-----------------------------------------
Total Partners' Capital 9,011,568 9,299,587
- ----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 17,742,002 $ 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
<TABLE>
<CAPTION>
THREE MONTHS ENDED MAY 31, SIX MONTHS ENDED MAY 31,
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME
Rental $ 911,646 $ 908,287 $ 1,815,206 $1,796,748
Interest and other 1,869 9,549 5,243 21,101
------------------------------------------------------
Total Income 913,515 917,836 1,820,449 1,817,849
- -------------------------------------------------------------------------------------------------
EXPENSES
Property operating 450,879 460,377 900,104 880,554
Depreciation and amortization 229,366 229,769 459,086 458,373
Interest 181,288 184,489 363,402 369,735
General and administrative 61,493 41,168 102,323 88,631
Write-off of assets - - 16,887 -
------------------------------------------------------
Total Expenses 923,026 915,803 1,841,802 1,797,293
- ------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (9,511) $ 2,033 $ (21,353) $ 20,556
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
NET INCOME (LOSS) ALLOCATED:
To the General Partner $ (95) $ 204 $ (213) $ 2,056
To the Limited Partners (9,416) 1,829 (21,140) 18,500
- ------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (9,511) $ 2,033 $ (21,353) $ 20,556
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
PER LIMITED PARTNERSHIP UNIT
(80,000 UNITS OUTSTANDING) $ (0.12) $ 0.02 $ (0.26) $ 0.23
- -------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED MAY 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) (213) (21,140) (21,353)
Distributions ($3.00 per Unit) (26,666) (240,000) (266,666)
- --------------------------------------------------------------------------------------------------------------
BALANCE (DEFICIT) AT MAY 31, 1998 $ (981,938) $ 9,993,506 $ 9,011,568
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
CONAM REALTY INVESTORS 3 L.P.
AND CONSOLIDATED VENTURES
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED MAY 31, 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (21,353) $ 20,556
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 459,086 458,373
Write-off of assets 16,887 -
Increase (decrease) in cash arising from changes in operating assets and
liabilities:
Fundings to restricted cash (78,269) (79,974)
Release of restricted cash to property operations 75,079 81,926
Other assets (41,356) 6,274
Accounts payable and accrued expenses 37,018 16,547
Due to general partners and affiliates (1,393) (406)
Security deposits (112) (8,432)
------------------------------------------
Net cash provided by operating activities 445,587 494,864
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate (85,417) (233,024)
Insurance recovery of real estate additions 54,191 -
------------------------------------------
Net cash used for investing activities (31,226) (233,024)
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions (279,992) (355,555)
Mortgage principal payments (67,551) (69,387)
------------------------------------------
Net cash used for financing activities (347,543) (424,942)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 66,818 (163,102)
Cash and cash equivalents, beginning of period 796,824 1,084,483
- ------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 863,642 $ 921,381
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 329,123 $ 369,735
- ------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING ACTIVITIES:
Write-off of buildings and improvements $ (38,740) $ -
Write-off of accumulated depreciation $ 21,853 $ -
- ------------------------------------------------------------------------------------------------------------------------------
</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
recurring adjustments which are, in the opinion of management, necessary to
present a fair statement of financial position as of May 31, 1998 and the
results of operations and cash flows for the three and six months ended May 31,
1998 and 1997 and the consolidated statement of partners' capital for the six
months ended May 31, 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 May 31, 1998, the Partnership had cash and cash equivalents of $863,642
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 May 31, 1998 which is to be paid in July, 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 six months ended May 31, 1998 generated
net losses of ($9,511 )and ($21,353), respectively, compared with net income of
$2,033 and $20,556, respectively, for the corresponding periods in fiscal 1997.
The decrease for the three months ended May 31, 1998 is primarily attributable
to an increase in general and administrative expenses partially off-set by an
increase in rental income and a decrease in property operating expense. The
decrease for the six months ended May 31, 1998 is primarily attributable to an
increase in property operating expenses and general and administrative expenses
and a write-off of assets of $16,887 in the first quarter somewhat offset by the
increase in rental income in both periods.
Rental income totaled $911,646 and $1,815,206 for the three and six months,
respectively, ended May 31, 1998 compared with $908,287 and $1,796,748,
respectively, for the corresponding periods in fiscal 1997 resulting from an
increase in rental income primarily from Ponte Vedra Beach Village II as a
result of an increase in occupancy rates.
Property operating expenses for the three and six months ended May 31, 1998
totaled $450,879 and $900,104, respectively, compared with $460,377 and
$880,554, respectively, for the corresponding period in fiscal 1997. The
decrease for the three months ended May 31, 1998 is due to a decrease in rental
administration expenses. The increase for the six months ended May 31, 1998 is
primarily attributable to increased utilities expense.
During the first six 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 93% 91%
Ponte Vedra Beach Village II 94% 93%
Skyline Village 96% 95%
- ----------------------------------------------------------------------------
</TABLE>
The increases at Autumn Heights and Ponte Vedra Beach Village II are primarily
attributable to competitive rents which have been offered to mitigate the strong
competition associated with increased construction in Colorado and Florida,
respectively. The Tucson market is improving from its overbuilt situation of two
years ago, resulting in stable occupancy at Skyline Village, however, rental
concessions are still required to maintain current occupancy levels.
<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: July 13, 1998 BY: /s/ DANIEL J. EPSTEIN
-----------------
Daniel J. Epstein
Director, President, and Principal
Executive Officer
Date: July 13, 1998 BY: /s/ ROBERT J. SVATOS
----------------
Robert J. Svatos
Vice President and Director
<PAGE>
CONAM REALTY INVESTORS 3 L.P.
AND CONSOLIDATED VENTURES
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 May 31, 1998.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> MAY-31-1998
<CASH> 976,675
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 28,275,832
<DEPRECIATION> (11,639,646)
<TOTAL-ASSETS> 17,742,002
<CURRENT-LIABILITIES> 505,013
<BONDS> 8,225,421
0
0
<COMMON> 0
<OTHER-SE> 9,011,568
<TOTAL-LIABILITY-AND-EQUITY> 17,742,002
<SALES> 1,815,206
<TOTAL-REVENUES> 1,820,449
<CGS> 0
<TOTAL-COSTS> 900,104
<OTHER-EXPENSES> 578,296
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 363,402
<INCOME-PRETAX> (21,353)
<INCOME-TAX> 0
<INCOME-CONTINUING> (21,353)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,353)
<EPS-PRIMARY> (0.26)
<EPS-DILUTED> (0.26)
</TABLE>
