<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, 1999
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
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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
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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
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CONAM REALTY INVESTORS 3 L.P.
AND CONSOLIDATED VENTURES
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
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<CAPTION>
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CONSOLIDATED BALANCE SHEETS AT FEBRUARY 28, AT NOVEMBER 30,
1999 1998
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<S> <C> <C>
ASSETS
Investments in real estate:
Land $ - $ 5,817,668
Buildings and improvements - 22,534,407
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- 28,352,075
Less accumulated depreciation - (12,020,027)
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- 16,332,048
Cash and cash equivalents 17,292,809 849,125
Restricted cash - 107,640
Other assets, net of accumulated amortization
of $0 in 1999 and $249,225 in 1998 70,663 143,646
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TOTAL ASSETS $ 17,363,472 $ 17,432,459
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgages payable - 8,151,572
Distribution payable 16,615,037 -
Accounts payable and accrued expenses 180,293 302,618
Due to general partner and affiliates 343 15,684
Security deposits 450 98,029
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Total Liabilities 16,796,123 8,567,903
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Partners' Capital
General Partner 34,796 (995,408)
Limited Partners (80,000 Units outstanding) 532,553 9,859,964
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Total Partners' Capital 567,349 8,864,556
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TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 17,363,472 $ 17,432,459
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</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
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<TABLE>
<CAPTION>
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CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1999 1998
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<S> <C> <C>
INCOME
Rental $ 559,979 $ 903,560
Interest and other 70,887 3,374
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Total Income 630,866 906,934
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EXPENSES
Property operating 369,131 449,225
Depreciation and amortization 131,952 229,720
Interest 119,545 182,114
General and administrative 28,581 40,830
Write-off of assets 10,124 16,887
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Total Expenses 659,333 918,776
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Loss from operations (28,467) (11,842)
Gain on sale of properties 8,346,297 -
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NET INCOME (LOSS) $ 8,317,830 $ (11,842)
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NET INCOME (LOSS) ALLOCATED:
To the General Partner $ 1,045,241 $ (118)
To the Limited Partners 7,272,589 (11,724)
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NET INCOME (LOSS) $ 8,317,830 $ (11,842)
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PER LIMITED PARTNERSHIP UNIT
(80,000 UNITS OUTSTANDING)
Loss from operations $ (13.42) $ (0.15)
Gain on sale of properties 104.33 -
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NET INCOME (LOSS) $ 90.91 $ (0.15)
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</TABLE>
<TABLE>
<CAPTION>
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CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1999
GENERAL LIMITED
PARTNER PARTNERS TOTAL
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<S> <C> <C> <C>
BALANCE (DEFICIT) AT NOVEMBER 30, 1998 $ (995,408) $ 9,859,964 $ 8,864,556
Net income 1,045,241 7,272,589 8,317,830
Distributions ($207.50 per Unit) (15,037) (16,600,000) (16,615,037)
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BALANCE AT FEBRUARY 28, 1999 $ 34,796 $ 532,553 $ 567,349
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</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
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<TABLE>
<CAPTION>
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CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1999 1998
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 8,317,830 $ (11,842)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 131,952 229,720
Write-off of assets 10,124 16,887
Gain on sale of properties (8,346,297) -
Increase (decrease) in cash arising from changes in operating
assets and liabilities:
Fundings to restricted cash (19,344) (17,505)
Release of restricted cash to property operations 126,984 18,600
Other assets 15,463 (7,481)
Accounts payable and accrued expenses (122,325) 44,017
Due to general partner and affiliates (15,341) (1,141)
Security deposits (97,579) (3,354)
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Net cash provided by operating activities 1,467 267,901
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate (90,479) (51,937)
Net proceeds from sale of real estate 24,684,268 -
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Net cash provided by (used in) investing activities 24,593,789 (51,937)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Mortgage principal payments (8,151,572) (24,874)
Distributions - (146,659)
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Net cash used in financing activities (8,151,572) (171,533)
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Net increase in cash and cash equivalents 16,443,684 44,431
Cash and cash equivalents, beginning of period 849,125 796,824
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 17,292,809 $ 841,255
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 179,308 $ 121,501
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SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
Write-off of buildings and improvements $ (22,837) $ (35,183)
Write-off of accumulated depreciation $ 12,713 $ 18,296
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</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's annual 1998 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 February 28, 1999 and the
results of operations and cash flows for the three months ended February 28,
1999 and 1998 and the consolidated statement of partners' capital for the three
months ended February 28, 1999. Results of operations are not necessarily
indicative of the results to be expected for the full year.
The Partnership sold its remaining investments in real estate. The sale and
liquidation plan was approved by the Unitholders through a consent solicitation
statement as of January 15, 1999 and the sale of the properties was completed on
January 29, 1999.
For assets sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
reflected in net income for the period.
Within 30 days of the completion of the sale of the properties, the Partnership
declared a cash distribution representing substantially all of the net proceeds
from sale and substantially all of the remaining assets of the Partnership less
an amount for costs and contingencies associated with the sale and liquidation
of the Partnership.
No other significant events have occurred subsequent to fiscal year 1998, and no
material contingencies exist, which would require disclosure in this interim
report per Regulation S-X, Rule 10-01, Paragraph (a) (5).
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
LIQUIDITY AND CAPITAL RESOURCES
On February 26, 1999, the Partnership declared a cash distribution in the
amounts of $16,600,000 to the Limited Partner Unitholders ($207.50 per Unit)
and $15,037 to the General Partner, which amounts were equal to substantially
all of the net proceeds from the sale (the "Sale" ) of the Partnership's
remaining investments in real estate ("Properties"), together with other
available cash of the Partnership less an amount for costs associated with
the Sale and liquidation and other contingencies. Immediately following the
distribution, the Partnership had cash and cash equivalents of $677,772. The
General Partner believes that the Partnership has sufficient cash to meet the
needs of the Partnership for any contingencies or costs associated with Sale
and the final liquidation of the Partnership.
As a result of the Sale of the remaining Properties, the only source of
revenue prior to final liquidation will be the interest generated on the
remaining cash balances. The remaining cash is invested in an unaffiliated
highly liquid money market fund.
At February 28, 1999, the Partnership had cash and cash equivalents of
$17,292,809 compared with $849,125 at November 30, 1998. The increase in cash
and cash equivalents is due to receipt of the proceeds from the Sale.
Remaining cash available after all obligations have been satisfied, if any,
will be distributed to the Unitholders.
RESULTS OF OPERATIONS
Partnership net income (loss) for the three months ended February 28, 1999 was
$8,317,830 compared to ($11,842) for the corresponding period in fiscal 1998.
The increase for the three months ended February 28, 1999 is primarily
attributable to the gain on the Sale.
For the three months ended February 28, 1999, the Partnership generated
operating losses of ($28,467) compared to ($11,842) for the corresponding
period in fiscal 1998. Rental income totaled $559,979 for the three months
ended February 28, 1999 compared with $903,560 for the corresponding period
in fiscal 1998. Partnership expenses for the three months ended February 28,
1999 totaled $659,333 compared with $918,776 for the corresponding period in
fiscal 1998. For the three months ended February 28, 1999, the increased
operating loss and decreased rental income and partnership expenses are
primarily attributable to the Sale on January 29, 1999.
YEAR 2000
Due to the consummation of the Sale in January 1999, the Partnership is no
longer engaged in the operation of real properties or any other business. As a
result of the foregoing, and in view of the General Partner's plan to complete
the full liquidation of the Partnership prior to January 1, 2000, the
Partnership has no exposure to Year 2000 issues.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risks
Since the Partnership sold its remaining properties on January 29, 1999 and its
mortgage indebtedness was repaid or assumed, the Partnership has no exposure to
interest rate risk. In addition, the Partnership is expected to be liquidated
during 1999.
<PAGE>
PART II - OTHER INFORMATION
ITEMS 1-3. Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
Pursuant to a Consent Solicitation Statement dated December 16,
1998, the Unitholders were asked to approve two proposals as
follows: (i) the sale of all of the Partnership's remaining real
estate investments to DOC Investors, L.L.C. (the "Sale"); and
(ii) an amendment to the Partnership's partnership agreement to
permit sales of Partnership properties to affiliates of the
General Partner if the terms of the sale are approved by the
Unitholders (the "Amendment"). By its terms, the consent
solicitation was to terminate on January 15, 1999, unless such
date was extended by the General Partner for an aggregate of up
to an additional 40 days. Since both the Sale and the Amendment
were approved by the requisite majority-in-interest of the
Unitholders (i.e., at least 40,001 Units) as of January 15, 1999,
the consent solicitation terminated on such date. Upon
termination of the consent solicitation, the results of the
consent solicitation were as follows: (i) With respect to the
Sale 48,849 Units "FOR;" 1,111 Units "AGAINST;" and 498 Units
"ABSTAIN;" and (ii) with respect to the Amendment - 48,208 Units
"FOR;" 1,560 Units "AGAINST;" and 690 Units "ABSTAIN." The
foregoing results do not include any votes received after the
termination of the consent solicitation.
ITEM 5. Not applicable
ITEM 6. Exhibits & Reports on Form 8-K
(a) Exhibits
3.1 Amendment, dated January 18, 1999 to Partnership's
Certificate and Agreement of Limited Partnership (included
as, and incorporated herein by reference to, Exhibit 4.1
to the Partnership's Report on Form 8-K filed on February
16, 1999).
10.1 Agreement for Purchase and Sale and Joint Escrow
Instructions between ConAm Realty Investors 3 LP and Doc
Investors, L.L.C. dated January 26, 1999 with respect to
the Sale of Autumn Heights Apartments (included as, and
incorporated herein by reference to, Exhibit 10.1 to the
Partnership's Report on Form 8-K filed on February 16,
1999).
10.2 Agreement for Purchase and Sale and Joint Escrow
Instructions between ConAm Realty Investors 3 LP and Doc
Investors, L.L.C. dated January 26, 1999 with respect to
the Sale of Ponte Vedra Beach Village II Apartments
(included as, and incorporated herein by reference to,
Exhibit 10.2 to the Partnership's Report on Form 8-K filed
on February 16, 1999).
10.3 Agreement for Purchase and Sale and Joint Escrow
Instructions between Skyline Village Joint Venture Limited
Partnership and Doc Investors, L.L.C. dated January 26,
1999 with respect to the Sale of Skyline Village (included
as, and incorporated herein by reference to, Exhibit 10.3
to the Partnership's Report on Form 8-K filed on February
16, 1999).
(b) Reports on Form 8-K
On February 16, 1999, the Partnership filed a Form 8-K for
the purpose of disclosing the consummation
<PAGE>
of the sale of all of its real property investments on
January 29, 1999 to DOC Investors, L.L.C. No other reports
on Form 8-K were filed during the quarter ended February
28, 1999.
(27) Financial Data Schedule
<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: April 14, 1999 BY:/s/ DANIEL J. EPSTEIN
Daniel J. Epstein
Director, President, and Principal
Executive Officer
Date: April 14, 1999 BY:/s/ ROBERT J. SVATOS
Robert J. Svatos
Vice President and Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> FEB-28-1999
<CASH> 17,292,809
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,363,472
<CURRENT-LIABILITIES> 16,796,123
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 567,349
<TOTAL-LIABILITY-AND-EQUITY> 17,363,472
<SALES> 559,979
<TOTAL-REVENUES> 630,866
<CGS> 0
<TOTAL-COSTS> 369,131
<OTHER-EXPENSES> 170,657
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 119,545
<INCOME-PRETAX> (28,467)
<INCOME-TAX> 0
<INCOME-CONTINUING> (28,467)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,317,830
<EPS-PRIMARY> 90.91
<EPS-DILUTED> 90.91
</TABLE>
