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, 1995
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
COMMERCIAL PROPERTIES 3, L.P.
(formerly 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, 29th Floor, New York, NY
ATTN: Andre Anderson 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 1995 1994
Real estate investments, at cost:
Land $ 6,422,301 $ 6,422,301
Buildings and improvements 39,634,249 39,764,931
46,056,550 46,187,232
Less accumulated depreciation (17,215,695) (16,113,296)
28,840,855 30,073,936
Cash and cash equivalents 2,360,891 1,637,501
Restricted cash 230,108 216,079
Accounts and rent receivable,
net of allowance for doubtful
accounts of $5,486 in 1995 and
$14,557 in 1994 43,940 28,326
Deferred rent receivable 222,937 235,246
Prepaid expenses and other assets,
net of accumulated amortization of
$843,612 in 1995 and $718,547 in
1994 679,893 645,993
Total Assets $ 32,378,624 $ 32,837,081
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued
expenses $ 540,663 $ 426,642
Due to affiliates 42,600 50,702
Distributions payable 374,931 281,902
Security deposits 210,850 204,465
Total Liabilities 1,169,044 963,711
Minority Interest 171,315 171,315
Partners' Capital (Deficit):
General Partners (346,975) (321,732)
Limited Partners 31,385,240 32,023,787
(109,378 units outstanding)
Total Partners' Capital 31,038,265 31,702,055
Total Liabilities and Partners'
Capital $ 32,378,624 $ 32,837,081
Consolidated Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1995
General Limited
Partners Partners Total
Balance at December 31, 1994 $ (321,732) $ 32,023,787 $ 31,702,055
Net income 2,665 263,822 266,487
Distributions (27,908) (902,369) (930,277)
Balance at September 30, 1995 $ (346,975) $ 31,385,240$ 31,038,265
Consolidated Statements of Operations
Three months ended Nine months ended
September 30, September 30,
Income 1995 1994 1995 1994
Rent $ 1,231,717 $ 1,298,179 $ 3,760,299 $ 3,432,242
Interest 30,011 15,300 80,178 29,422
Total Income 1,261,728 1,313,479 3,840,477 3,461,664
Expenses
Property operating 584,033 555,555 1,684,867 1,681,682
Depreciation and
amortization 544,160 578,831 1,716,183 1,791,044
General and
administrative 53,381 58,870 172,940 174,251
Bad debt - 14,820 - 77,973
Total Expenses 1,181,574 1,208,076 3,573,990 3,724,950
Net income (loss) $ 80,154 $ 105,403 $ 266,487 $ (263,286)
Net Income (Loss)
Allocated:
To the General Partners $ 802 $ 1,054 $ 2,665 $ (2,633)
To the Limited Partners 79,352 104,349 263,822 (260,653)
$ 80,154 $ 105,403 $ 266,487 $ (263,286)
Per limited partnership
unit (109,378
outstanding) $ .73 $ 0.96 $ 2.41 $ (2.38)
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net income (loss) $ 266,487 $ (263,286)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,716,183 1,791,044
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Restricted cash (14,029) (1,200)
Accounts and rent receivable, net (15,614) 116,056
Deferred rent receivable 12,310 (88,723)
Notes receivable - 51,403
Prepaid expenses (193,386) (118,185)
Accounts payable and accrued expenses 114,021 143,597
Due to affiliates (8,102) (10,437)
Security deposits payable 6,385 14,242
Net cash provided by operating activities 1,884,255 1,634,511
Cash Flows from Investing Activities:
Additions to real estate (323,615) (476,790)
Net cash used for investing activities (323,615) (476,790)
Cash Flows from Financing Activities:
Cash distributions (837,250) (338,283)
Net cash used for financing activities (837,250) (338,283)
Net increase in cash and cash equivalents 723,390 819,438
Cash and cash equivalents at beginning of period 1,637,501 734,361
Cash and cash equivalents at end of period $ 2,360,891 $ 1,553,799
Supplemental Schedule of Non-Cash Investing Activity:
During the quarter ended December 31, 1994, $150,247 of building and tenant
improvements were capitalized and remained unpaid until 1995.
During the quarter ended March 31, 1995, $454,297 of fully depreciated assets
were written off.
Notes to the Consolidated Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1994 audited financial statements within Form 10-K.
The unaudited consolidated financial statements include all adjustments which
are, in the opinion of management, necessary to present a fair statement of
financial position as of September 30, 1995, the results of operations for the
three and nine months ended September 30, 1995 and 1994, cash flows for the
nine months ended September 30, 1995 and 1994 and the statement of partners'
capital (deficit) for the nine months ended September 30, 1995. Results of
operations for the period are not necessarily indicative of the results to be
expected for the full year.
No significant events have occurred subsequent to fiscal year 1994, 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 totalling $2,360,891 at September
30, 1995 compared with $1,637,501 at December 31, 1994. The increase of
$723,390 is due to net cash provided by operating activities in excess of
additions to real estate assets and the payment of cash distributions to
partners. The Partnership had a restricted cash balance of $230,108 at
September 30, 1995, compared with $216,079 at December 31, 1994. The
restricted cash balance is comprised of tenant security deposits. 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 payable and accrued expenses increased to $540,663 at September 30,
1995, from $426,642 at December 31, 1994, primarily reflecting nine
months of accrued real estate taxes.
At Metro Park Executive Center, the General Partners executed a three-year
lease with a new tenant for 1,367 square feet. However, two tenants
representing 5,659 square feet vacated the premises upon expiration of their
respective leases in August and September 1995. Reflecting this activity, the
property was 85% leased at September 30, 1995, compared to 87% the previous
quarter. Another tenant occupying 2,820 square feet whose original lease
expired in late 1993 continues to rent on a month-to-month basis. No other
leases are scheduled to expire until the second quarter of 1996.
At Three Financial Centre, a tenant expanded its space by 2,377 square feet
during the quarter. The tenant now occupies 9,190 square feet, pursuant to a
lease scheduled to expire in January 1998. As a result, the property was 94%
leased as of September 30, 1995. The General Partners also executed two lease
renewals totalling 2,864 square feet during the quarter. A tenant whose lease
representing 649 square feet expired in September 1995, will occupy its space
on a month-to-month basis. A tenant exercised its option to expand its space
within the property and extend its lease until November 1999. In order to
accommodate the expansion, the tenant will relocate within the building and
will eventually occupy 12,240 square feet, compared with its original 4,747
square feet. The relocation is expected to be completed in February 1996. No
leases are scheduled to expire through the remainder of 1995.
At Quorum II Office Building, the General Partners executed two new leases
totalling 2,354 square feet during the 1995 third quarter. The tenants took
occupancy of their spaces in October and November 1995. A tenant whose lease
representing 3,930 square feet was scheduled to expire in November 1995,
extended its lease for three years and reduced its space to 3,835 square feet.
A lease totalling 9,761 square feet is scheduled to expire on December 31,
1995. The General Partners have contacted the tenant regarding the renewal of
its lease, however, it is uncertain whether the tenant will renew.
At Fort Lauderdale Commerce Center, the General Partners executed a new lease
totalling 5,200 square feet during the quarter ended September 30, 1995. The
tenant took occupancy of the space in September 1995, replacing the previous
tenant which had prematurely terminated its lease and vacated the premises
during the quarter ended September 30, 1995. The General Partners also executed
a three-year lease renewal representing 2,620 square feet. The tenant, whose
lease had expired in February 1995, had been occupying its space on a
month-to-month basis. A tenant which had been leasing 4,000 square feet on a
month-to-month basis vacated the building in October 1995. Consequently, the
property now has 15,000 square feet of contiguous vacant space, which the
General Partners are aggressively marketing. While a number of prospective
tenants have expressed interest in the space, no assurances can be made that
the space will be leased.
A cash distribution in the amount of $3.25 per Unit will be paid to the Limited
Partners on November 13, 1995, for the quarter ended September 30, 1995. The
distribution level was increased from the previous level of $2.50 per Unit due
to continued stable Partnership operations. The distribution will be funded
from Partnership operations and was declared after a review of the
Partnership's 1995 third quarter operations, anticipated future cash needs and
current cash position. The timing and amount of future cash distributions will
be reviewed quarterly by the General Partners.
Results of Operations
For the three and nine months ended September 30, 1995, the Partnership's
operations resulted in net income of $80,154 and $266,487 respectively,
compared to net income of $105,403 and net loss of $263,286 for the
corresponding periods in 1994. The decrease for the three-month period is
attributable to a decrease in rental revenue and an increase in property
operating expenses, partially offset by an increase in interest income and a
decrease in depreciation expense, while the change from net loss to net income
for the nine-month period is primarily attributable to an increase in rental
income and lower depreciation and amortization.
Rental income totalled $1,231,717 and $3,760,299 for the three and nine months
ended September 30, 1995 compared to $1,298,179 and $3,432,242 for the
respective periods in 1994. The increase for the nine-month period is due to
higher average occupancy at Fort Lauderdale Commerce Center and Three Financial
Centre. Interest income totalled $30,011 and $80,178 for the three and nine
months ended September 30, 1995 compared with $15,300 and $29,422 for the
comparative periods in 1994. The increases are primarily attributable to
higher cash balances and higher interest rates.
Depreciation and amortization totalled $544,160 and $1,716,183 for the three
and nine months ended September 30, 1995, respectively, compared to $578,831
and $1,791,044 for the respective periods in 1994. The decline is primarily
attributable to a lower depreciable asset base in 1995.
The Partnership recognized bad debt expense of $14,820 and $77,973 for the
three and nine months ended September 30, 1994 reflecting the complete
write-off of delinquent rent owed by a former tenant at Metro Park Executive
Center.
As of September 30, 1995, lease levels at each of the properties were as
follows: Metro Park Executive Center - 85%; Fort Lauderdale Commerce Center -
88%; Three Financial Centre - 94%; Quorum II Office Building - 98%.
PART II OTHER INFORMATION
Items 1-4 Not applicable
Item 5 Shearson Lehman Brothers Inc. sold certain of its domestic
retail brokerage and asset management businesses to Smith
Barney, Harris Upham & Co. Incorporated ("Smith Barney"). The
assets acquired by Smith Barney included the name "Hutton".
Consequently, effective August 3, 1995, the name of the
Partnership was changed to Commercial Properties 3, L.P. to
delete any reference to "Hutton".
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on
Form 8-K were filed during the
quarter ended September 30, 1995
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.
COMMERCIAL PROPERTIES 3, L.P.
BY: REAL ESTATE SERVICES VII, INC.
General Partner
Date: November 13, 1995 BY: /s/Rocco Andriola
Name: Rocco Andriola
Title: Director, President and Chief
Financial Officer
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<PERIOD-END> SEP-30-1995
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