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 September 30, 1994
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: 0-13341
HUTTON/GSH COMMERCIAL PROPERTIES 3
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 11-2680561
- - ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) identification No.)
3 World Financial Center, New York, NY 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
September 30, December 31,
Assets 1994 1993
Real estate investments, at cost:
Land $ 6,422,301 $ 6,422,301
Buildings and improvements 39,586,877 39,111,601
46,009,178 45,533,902
Less accumulated depreciation (15,570,532) (13,941,302)
30,438,646 31,592,600
Cash and cash equivalents 1,553,799 734,361
Restricted cash 213,354 212,154
1,767,153 946,515
Accounts and rent receivable, net of allowance for
doubtful accounts of $14,820 in 1994 25,241 141,297
Deferred rent receivable 187,096 98,373
Notes receivable, net of allowance for
doubtful accounts of $14,427 in 1993 - 51,403
Prepaid expenses, net of accumulated amortization of
$613,582 in 1994 and $458,106 in 1993 567,610 604,901
Other assets, net of accumulated amortization of
$49,848 in 1994 and $45,024 in 1993 14,475 19,299
Total Assets $33,000,221 $33,454,388
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 529,232 $ 385,635
Due to affiliates 21,819 32,256
Distributions payable 112,761 112,761
Security deposits 197,300 183,058
Total Liabilities 861,112 713,710
Minority Interest 86,904 86,904
Partners' Capital (Deficit):
General Partners (312,593) (299,811)
Limited Partners (109,378 units outstanding) 32,364,798 32,953,585
Total Partners' Capital 32,052,205 32,653,774
Total Liabilities and Partners' Capital $33,000,221 $33,454,388
Consolidated Statements of Operations
Three months ended Nine months ended
September 30, September 30,
Income 1994 1993 1994 1993
Rent $1,298,179 $1,043,307 $3,432,242 $3,106,126
Interest 15,300 7,124 29,422 21,141
Total Income 1,313,479 1,050,431 3,461,664 3,127,267
Expenses
Property operating 555,555 577,860 1,681,682 1,583,552
Depreciation and amortization 578,831 654,588 1,791,044 1,906,583
General and administrative 58,870 25,933 174,251 156,339
Bad debt 14,820 - 77,973 -
Total Expenses 1,208,076 1,258,381 3,724,950 3,646,474
Net Income/(Loss) $ 105,403 $ (207,950) $ (263,286) $ (519,207)
Net Income/(Loss) Allocated:
To the General Partners $ 1,054 $ (2,080) $ (2,633) $ (5,192)
To the Limited Partners 104,349 (205,870) (260,653) (514,015)
$ 105,403 $ (207,950) $ (263,286) $ (519,207)
Per limited partnership unit
(109,378 outstanding) $ 0.96 $ (1.88) $ (2.38) $ (4.70)
Consolidated Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1994
Limited General Total
Partners' Partners' Partners'
Capital (Deficit) Capital
Balance at December 31, 1993 $32,953,585 $ (299,811) $32,653,774
Net loss (260,653) (2,633) (263,286)
Cash distributions (328,134) (10,149) (338,283)
Balance at September 30, 1994 $32,364,798 $ (312,593) $32,052,205
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1994 and 1993
Cash Flows from Operating Activities: 1994 1993
Net loss $ (263,286) $ (519,207)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,791,044 1,906,583
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Restricted cash (1,200) (2,473)
Accounts and rent receivable 116,056 68,107
Deferred rent receivable (88,723) 32,021
Notes receivable 51,403 40,487
Prepaid expenses (118,185) (193,483)
Accounts payable and accrued expenses 143,597 (33,123)
Due to affiliates (10,437) 3,667
Security deposits 14,242 458
Net cash provided by operating activities 1,634,511 1,303,037
Cash Flows from Investing Activities:
Additions to real estate assets (476,790) (490,861)
Net cash used for investing activities (476,790) (490,861)
Cash Flows from Financing Activities:
Cash distributions (338,283) (623,569)
Net cash used for financing activities (338,283) (623,569)
Net increase in cash and cash equivalents 819,438 188,607
Cash and cash equivalents at beginning of period 734,361 577,374
Cash and cash equivalents at end of period $1,553,799 $ 765,981
Notes to the Consolidated Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1993 audited financial statements within Form 10-K.
The unaudited consolidated financial statements include all adjustments
consisting of only normal recurring accruals which are, in the opinion of
management, necessary to present a fair statement of financial position as of
September 30, 1994 and the results of operations, changes in partners' capital
(deficit), and cash flows for the nine months then ended. Results of
operations for the period are not necessarily indicative of the results to be
expected for the full year.
Certain amounts in the 1993 financial statements have been reclassified to
conform with the 1994 presentation.
No significant events have occurred subsequent to fiscal year 1993, and no
material contingencies exist that require disclosure in this interim report per
Regulation S-X, Rule 10-01, Paragraph (a)(5).
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
The Partnership had cash and cash equivalents totaling $1,553,799 at September
30, 1994, compared with $734,361 at December 31, 1993. The increase of
$819,438 is due to net cash provided by operating activities in excess of
additions to real estate assets totaling $476,790 and the payment of cash
distributions to partners totaling $338,283. The Partnership had a restricted
cash balance of $213,354 at September 30, 1994, compared with $212,154 at
December 31, 1993. Tenant security deposits comprise the restricted cash
balance. Unexpended funds and working capital reserves are invested in
unaffiliated money market funds and interest on such invested balances accrues
to the benefit of the Partnership.
Leases scheduled to expire during the remainder of 1994 and throughout 1995 at
the Partnership's properties are as follows: seven leases representing 39,336
square feet at Quorum II; nine leases totaling 52,437 square feet at Three
Financial Centre; six leases representing 18,204 square feet at Metro Park
Executive Center; and nine leases representing 28,416 square feet at Fort
Lauderdale Commerce Center. The General Partners have approached several of
these tenants regarding renewals and will approach the balance when
appropriate. However, there can be no assurances that renewals will be
executed.
Accounts and rent receivable was $25,241 at September 30, 1994, compared to
$141,297 at December 31, 1993. The decrease is due to the collection of rents
and the write off of uncollectible rent. Deferred rent receivable increased to
$187,096 at September 30, 1994, from $98,373 at December 31, 1993. The
increase is primarily attributable to the effect of straight-lining rental
income from new leases, partially offset by amortizing free rent concessions
included in certain leases. Prepaid expenses were $567,610 at September 30,
1994, compared with $604,901 at December 31, 1993. The decrease is mainly due
to the amortization of leasing commissions. Accounts payable and accrued
expenses increased to $529,232 at September 30, 1994 from $385,635 at year-end
1993. The increase primarily reflects the timing of real estate tax payments.
The General Partners declared a cash distribution to Limited Partners of $1 per
Unit for the quarter ended September 30, 1994. This distribution will be
funded from Partnership operations and sent to Limited Partners on November 15,
1994. This distribution was declared after a review of the Partnership's
operations, anticipated cash requirements and cash position. The timing and
amount of future cash distributions will be determined quarterly by the General
Partners, and will depend on the adequacy of cash flow and the Partnership's
cash reserve requirements.
Results of Operations
For the three months ended September 30, 1994, the Partnership's operations
resulted in net income of $105,403, compared to a net loss of $207,950 for the
corresponding period in 1993. The difference is primarily attributable to an
increase in rental income and a decrease in depreciation and amortization
expense. For the nine months ended September 30, 1994, the Partnership's
operations resulted in a net loss of $263,286, compared to a net loss of
$519,207 for the corresponding period in 1993. The decrease in net loss is
primarily attributable to an increase in rental income, and a decrease in
depreciation and amortization expense.
Rental income totaled $1,298,179 and $3,432,242, for the three and nine months
ended September 30, 1994, respectively, compared to $1,043,307 and $3,106,126,
for the corresponding periods a year earlier. The increases are due to higher
average occupancy and rent escalations at all four of the Partnership's
properties. Interest income was $15,300 and $29,422 for the three and nine
months ended September 30, 1994, compared to $7,124 and $21,141 for the
corresponding periods a year earlier. The increase is due to a larger average
cash balance in 1994.
Property operating expenses totaled $555,555 and $1,681,682, respectively, for
the three and nine months ended September 30, 1994, compared with $577,860 and
$1,583,552 for the corresponding periods a year earlier. The decrease for the
three month period is primarily due to a partial reimbursement of 1993 real
estate taxes for the Fort Lauderdale property resulting from the General
Partner's successful appeal for a tax abatement. The increase for the nine
month period is primarily attributable to an increase in building repairs and
maintenance during 1994, and to increases in insurance premiums. Depreciation
and amortization expense totaled $578,831 and $1,791,044 for the three and nine
months ended September 30, 1994, compared to $654,588 and $1,906,583 for the
corresponding periods a year earlier. The increases are primarily attributable
to the write-off of tenant improvements at all of the Partnership's properties.
As of September 30, 1994, lease levels at each of the properties were as
follows: Metro Park Executive Center - 92%; Fort Lauderdale Commerce Center -
79%; Three Financial Centre - 92%; Quorum II Office Building - 96%.<PAGE>
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on
Form 8-K were filed during the
quarter ended September 30, 1994<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, thereunto duly authorized.
HUTTON/GSH COMMERCIAL PROPERTIES 3
BY: REAL ESTATE SERVICES VII, INC.
General Partner
Date: November 14, 1994 BY: s/Ron Hiram/
----------------------
Name: Ron Hiram
Title: Director and President, Chief
Executive Officer, Chief
Operating Officer and Chief
Financial Officer
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 1,767,153
<SECURITIES> 000
<RECEIVABLES> 227,157
<ALLOWANCES> (14,820)
<INVENTORY> 000
<CURRENT-ASSETS> 582,085
<PP&E> 46,009,178
<DEPRECIATION> (15,570,532)
<TOTAL-ASSETS> 33,000,221
<CURRENT-LIABILITIES> 948,016
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 32,052,205
<TOTAL-LIABILITY-AND-EQUITY> 33,000,221
<SALES> 000
<TOTAL-REVENUES> 3,461,664
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 3,646,977
<LOSS-PROVISION> 77,973
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> (263,286)
<INCOME-TAX> 000
<INCOME-CONTINUING> (263,286)
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (263,286)
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