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 March 31, 1998
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.
Exact Name of Registrant as Specified in its Charter
Virginia 11-2680561
State or Other Jurisdiction of
Incorporation or Organization I.R.S. Employer 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
At March 31, At December 31,
1998 1997
Assets
Property:
Land $ 5,808,694 $ 5,808,694
Buildings, building improvements
and equipment 31,359,870 31,133,800
37,168,564 36,942,494
Less accumulated depreciation (15,397,331) (14,910,677)
21,771,233 22,031,817
Cash and cash equivalents 1,322,629 1,273,014
Restricted cash 219,199 222,883
Accounts and rent receivable, net of
allowance for doubtful accounts of
$5,444 in 1998 and 1997 142,770 80,601
Deferred rent receivable 115,243 152,030
Prepaid leasing costs and other assets,
net of accumulated amortization of
$724,994 in 1998 and $664,496 in 1997 675,256 704,043
Total Assets $24,246,330 $24,464,388
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 435,260 $ 437,027
Due to affiliates 52,496 55,270
Distribution payable 563,804 338,282
Prepaid rent -- 58,937
Security deposits 222,199 222,883
Total Liabilities 1,273,759 1,112,399
Minority interest 398,996 370,936
Partners' Capital (Deficit):
General Partners (356,283) (340,932)
Limited Partners
(109,378 units outstanding) 22,929,858 23,321,985
Total Partners' Capital 22,573,575 22,981,053
Total Liabilities and
Partners' Capital $24,246,330 $24,464,388
Consolidated Statement of Partners' Capital (Deficit)
For the three months ended March 31, 1998
General Limited
Partners Partners Total
Balance at December 31, 1997 $ (340,932) $23,321,985 $22,981,053
Net Income 1,563 154,763 156,326
Distributions (16,914) (546,890) (563,804)
Balance at March 31, 1998 $ (356,283) $22,929,858 $22,573,575
Consolidated Statements of Operations
For the three months ended March 31, 1998 1997
Income
Rental $ 1,382,802 $ 1,178,689
Interest 17,937 18,654
Total income 1,400,739 1,197,343
Expenses
Property operating 579,272 552,168
Depreciation and amortization 547,152 505,760
General and administrative 89,929 146,722
Total expenses 1,216,353 1,204,650
Net income (loss) before minority interest 184,386 (7,307)
Minority interest (28,060) --
Net Income (Loss) $ 156,326 $ (7,307)
Net Income (Loss) Allocated:
To the General Partners 1,563 (73)
To the Limited Partners 154,763 (7,234)
$ 156,326 $ (7,307)
Per limited partnership unit
(109,378 outstanding) $ 1.41 $ (0.07)
Consolidated Statements of Cash Flows
For the three months ended March 31, 1998 1997
Cash Flows From Operating Activities
Net income (loss) $ 156,326 $ (7,307)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Minority interest 28,060 --
Depreciation and amortization 547,152 505,760
Increase (decrease) in cash arising from
changes in operating assets and liabilities
Restricted cash 3,684 6,387
Accounts and rent receivable, net (62,169) (60,958)
Deferred rent receivable 36,787 39,420
Prepaid leasing costs and other assets (31,711) (56,375)
Accounts payable and accrued expenses (1,767) 100,175
Due to affiliates (2,774) 26,575
Distribution payable 222,522 --
Prepaid rent (58,937) --
Security deposits payable (684) (9,384)
Net cash provided by operating activities 839,489 544,293
Cash Flows From Investing Activities
Additions to real estate (226,070) (68,898)
Net cash used for investing activities (226,070) (68,898)
Cash Flows From Financing Activities
Cash distributions (563,804) (338,282)
Net cash used for financing activities (563,804) (338,282)
Net increase in cash and cash equivalents 49,615 137,113
Cash and cash equivalents, beginning of period 1,273,014 1,228,502
Cash and cash equivalents, end of period $1,322,629 $1,365,615
Supplemental Disclosure of Non-Cash Investing Activities:
Write-off of fully depreciated improvements $ -- $ 218,551
Notes to the Consolidated Financial Statements
The unaudited interim financial statements should be read in
conjunction with the Partnership's annual 1997 audited financial
statements within Form 10-K.
The unaudited 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
March 31, 1998 and the results of operations and cash flows for
the three months ended March 31, 1998 and 1997 and the statement
of partner's capital (deficit) for the three months ended March
31, 1998. Results of operations for the period are not
necessarily indicative of the results to be expected for the full
year.
Certain prior year amounts have been reclassified in order to
conform to the current year's presentation.
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).
Part I, Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
The General Partners have commenced marketing the properties for
sale and are in the process of selecting real estate brokers to
assist in their marketing efforts. There can be no assurance as
to when the properties will be sold, or that any sale, if
completed, will result in a particular price.
The Partnership had cash and cash equivalents totaling $1,322,629
at March 31, 1998, compared to $1,273,014 at December 31, 1997.
The increase is primarily due to net cash provided by operating
activities exceeding net cash used for investing activities and
cash distributions. The Partnership also had restricted cash,
which primarily consists of security deposits, of $219,199 at
March 31, 1998, largely unchanged from $222,883 at December 31,
1997.
Accounts and rent receivable totaled $142,770 at March 31, 1998,
compared to $80,601 at December 31, 1997. The increase is mainly
due to the timing of rental payments. Deferred rent receivable
totaled $115,243 at March 31, 1998, compared to $152,030 at
December 31, 1997. The decrease is largely due to the
amortization of deferred rent associated with older leases at all
of the Partnership's properties.
Prepaid rent decreased to $0 at March 31, 1998, compared to
$58,937 at December 31, 1997 primarily due to the timing of
rental payments.
A cash distribution in the amount of $5.00 per Unit will be paid to the Limited
Partners on or about May 22, 1998. This distribution will be funded from the
Partnership's first quarter operations and was declared after a review of the
Partnership's 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
The Partnership's operations resulted in net income of $156,326,
compared to a net loss of $7,307 for the three months ended March
31, 1997. The change from net loss to net income is primarily
attributable to higher rental income.
Rental income totaled $1,382,802 for the three months ended March
31, 1998, compared to $1,178,689 for the corresponding period a
year ago. The increase is largely attributable to higher
occupancy at Quorum II Office Building, Metro Park Executive
Center and Three Financial Centre. Interest income totaled
$17,937 for the three months ended March 31, 1998, compared to
$18,654 a year ago. The slight decrease is primarily
attributable to the Partnership's lower average cash balances in
1998.
Property operating expenses totaled $579,272 for the three months
ended March 31, 1998, compared to $552,168 for the three months
ended March 31, 1997. The increase is primarily due to higher
real estate taxes at Quorum II Office Building and Fort
Lauderdale Commerce Center. Depreciation and amortization
totaled $547,152 for the three months ended March 31, 1998,
compared to $505,760 for the three months ended March 31, 1997.
The increase is mainly due to building and tenant improvements
completed during 1997 and the first quarter of 1998.
General and administrative expenses for the three months ended
March 31, 1998 were $89,929, compared to $146,722 for the same
period in 1997. The decrease is primarily due to lower
administrative, postage, printing, legal and professional
expenses.
As of March 31, 1998, lease levels at each of the Properties were
as follows: Metro Park Executive Center - 86%; Fort Lauderdale
Commerce Center - 86%; Three Financial Centre - 94%; and Quorum
II Office Building - 94%.
Part II Other Information
Items 1-5 Not applicable.
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 three months ended March 31, 1998.
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: May 14, 1998 BY: /s/ Jeffrey C. Carter
Director, President and Chief
Financial Officer
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