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 June 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
INDEX
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 1994 and
December 31, 1993 3
Consolidated Statements of Operations for the three
and six months ended June 30, 1994 and 1993 4
Consolidated Statement of Partners' Capital (Deficit)
for the six months ended June 30, 1994 5
Consolidated Statements of Cash Flows for the six
months ended June 30, 1994 and 1993 6
Notes to the Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II OTHER INFORMATION
Items 1-6 9
Signatures 10
<TABLE>
<CAPTION>
Consolidated Balance Sheets
June 30, December 31,
Assets 1994 1993
<S>
Real estate investments, at cost: <C> <C>
Land $ 6,422,301 $ 6,422,301
Buildings and improvements 39,582,466 39,111,601
46,004,767 45,533,902
Less accumulated depreciation (15,048,038) (13,941,302)
30,956,729 31,592,600
Cash and cash equivalents 1,063,329 734,361
Restricted cash 217,655 212,154
1,280,984 946,515
Accounts and rent receivable 27,835 141,297
Deferred rent receivable 81,787 98,373
Notes receivable, net of allowance for
doubtful accounts of $14,427 in 1993 -- 51,403
Prepaid expenses, net of accumulated
amortization of $558,853 in 1994 and
$458,106 in 1993 560,131 604,901
Other assets, net of accumulated
amortization of $48,240 in 1994 and
$45,024 in 1993 16,083 19,299
Total Assets $ 32,923,549 $ 33,454,388
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 629,797 $ 568,693
Due to affiliates 34,524 32,256
Distributions payable 112,761 112,761
Total Liabilities 777,082 713,710
Minority Interest 86,904 86,904
Partners' Capital (Deficit):
General Partners (310,264) (299,811)
Limited Partners 32,369,827 32,953,585
Total Partners' Capital 32,059,563 32,653,774
Total Liabilities and Partners' Capital $ 32,923,549 $ 33,454,388
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Operations
Three months ended Six months ended
June 30, June 30,
Income 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Rent $ 1,090,821 $ 934,698 $ 2,134,063 $ 2,062,819
Interest 8,215 7,469 14,122 14,017
Total Income 1,099,036 942,167 2,148,185 2,076,836
Expenses
Property operating 555,281 515,493 1,126,127 1,005,692
Depreciation and amortization 590,551 607,564 1,212,213 1,251,995
General and administrative 61,009 72,899 115,381 130,406
Bad debt 63,153 -- 63,153 --
Total Expenses 1,269,994 1,195,956 2,516,874 2,388,093
Net Loss $ (170,958) $ (253,789) $ (368,689) $ (311,257)
Net Loss Allocated:
To the General Partners $ (1,710) $ (2,538) $ (3,687) $ (3,113)
To the Limited Partners (169,248) (251,251) (365,002) (308,144)
$ (170,958) $ (253,789) $ (368,689) $ (311,257)
Per limited partnership
unit (109,378 outstanding) $(1.55) $(2.30) $(3.34) $(2.82)
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1994
Limited General Total
Partners' Partners' Partners'
Capital (Deficit) Capital
<S> <C> <C> <C>
Balance at December 31, 1993 $ 32,953,585 $ (299,811) $ 32,653,774
Net loss (365,002) (3,687) (368,689)
Cash distributions (218,756) (6,766) (225,522)
Balance at June 30, 1994 $ 32,369,827 $ (310,264) $ 32,059,563
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
For the six months ended June 30, 1994 and 1993
Cash Flows from Operating Activities: 1994 1993
<S> <C> <C>
Net loss $ (368,689) $ (311,257)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 1,212,213 1,251,995
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Restricted cash (5,501) (2,129)
Accounts and rent receivable 113,462 82,266
Deferred rent receivable 16,586 13,309
Notes receivable 51,403 22,119
Prepaid expenses (55,977) (150,136)
Accounts payable and accrued expenses 61,104 (123,771)
Due to affiliates 2,268 22,183
Net cash provided by operating activities 1,026,869 804,579
Cash Flows from Investing Activities:
Additions to real estate assets (472,379) (305,319)
Net cash used for investing activities (472,379) (305,319)
Cash Flows from Financing Activities:
Cash distributions (225,522) (510,807)
Net cash used for financing activities (225,522) (510,807)
Net increase (decrease) in cash and cash equivalents 328,968 (11,547)
Cash and cash equivalents at beginning of period 734,361 577,374
Cash and cash equivalents at end of period $ 1,063,329 $ 565,827
</TABLE>
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
June 30, 1994 and the results of operations, changes in partners' capital
(deficit), and cash flows for the six 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 $1,063,329 at
June 30, 1994, compared with $734,361 at December 31, 1993. The increase of
$328,968 is due to net cash provided by operating activities in excess of
additions to real estate assets totaling $472,379 and the payment of cash
distributions to partners totaling $225,522. The Partnership had a restricted
cash balance of $217,655 at June 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.
Accounts and rent receivable was $27,835 at June 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 during the first half of 1994. Deferred rent
receivable decreased to $81,787 at June 30, 1994, from $98,373 at
December 31, 1993. The decrease is primarily attributable to the effect of
amortizing free rent concessions included in certain leases. Prepaid expenses
were $560,131 at June 30, 1994, largely unchanged from $604,901 at year-end
1993. Accounts payable and accrued expenses increased to $629,797 at
June 30, 1994 from $568,693 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 June 30, 1994. This distribution will be funded
from Partnership operations and sent to Limited Partners on August 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 June 30, 1994, the Partnership's operations resulted
in a net loss of $170,958, compared to a net loss of $253,789 for the
corresponding period in 1993. The decrease in net loss is primarily
attributable to an increase in rental income, partially offset by bad debt
expense. For the six months ended June 30, 1994, the Partnership's operations
resulted in a net loss of $368,689, compared to a net loss of $311,257 for the
corresponding period in 1993. The increase in net loss is primarily
attributable to an increase in property operating expenses and, to a lesser
extent, bad debt expense.
Rental income totaled $1,090,821 and $2,134,063, for the three and six months
ended June 30, 1994, respectively, compared to $934,698 and $2,062,819,
respectively, for the three and six months ended June 30, 1993. The increase
is due to higher occupancy at Three Financial Centre and Metro Park Executive
Center, and rent escalations at all four of the Partnership's properties.
Property operating expenses totaled $555,281 and $1,126,127, respectively, for
the three and six months ended June 30, 1994, compared with $515,493 and
$1,005,692, respectively, for the three and six months ended June 30, 1993.
The increase is primarily attributable to an increase in building repairs and
maintenance during 1994. Bad debt expense, reflecting the uncollectibility of
delinquent rent, was $63,153 for the three and six months ended June 30, 1994,
compared to the absence of bad debt expense for the corresponding periods a
year earlier.
As of June 30, 1994, lease levels at each of the properties were as follows:
Metro Park Executive Center - 88%; Fort Lauderdale Commerce Center - 77%; Three
Financial Centre - 91%; Quorum II Office Building - 93%.
PART II OTHER INFORMATION
Items 1-4 Not applicable
Item 5 Other information.
Effective May 20, 1994, American Express Company ("American
Express") distributed to holders of record of American Express,
shares of Lehman Brothers Holdings Inc. ("Lehman Brothers") common
stock. As a result of this transaction, the Real Estate Services
VII, Inc. General Partner, is no longer an affiliate of American
Express. This change is not expected to have any impact on the
Partnership.
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 quarter ended June 30, 1994
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: August 12, 1994
BY: s/Ron Hiram/
------------
Name: Ron Hiram
Title: Director and President, Chief
Executive Officer, Chief
Operating Officer and Chief
Financial Officer
