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, 1999
------------------
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
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COMMERCIAL PROPERTIES 3, L.P.
-----------------------------
Exact Name of Registrant as Specified in its Charter
Virginia 11-2680561
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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) 526-3183
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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
--- ---
<PAGE>
2
COMMERCIAL PROPERTIES 3, L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
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CONSOLIDATED BALANCE SHEETS
At September 30, At December 31,
1999 1998
(unaudited) (audited)
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Real estate assets held for disposition $ 5,847,665 $ 22,429,538
Cash and cash equivalents 4,865,984 2,246,926
Restricted cash 125,306 143,536
Accounts and rent receivable, net of allowance
for doubtful accounts of $96,362 in 1999
and $5,444 in 1998 692 136,156
Prepaid expenses and other assets 19,372 51,093
- --------------------------------------------------------------------------------
Total Assets $10,859,019 $ 25,007,249
================================================================================
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 272,585 $ 512,546
Due to affiliates 79,508 47,930
Prepaid rent 17,929 --
Security deposits 50,306 240,423
------------------------------
Total Liabilities 420,328 800,899
------------------------------
Minority interest 650,150 605,691
------------------------------
Partners' Capital (Deficit):
General Partners (393,924) (255,803)
Limited Partners (109,378 units outstanding) 10,182,465 23,856,462
------------------------------
Total Partners' Capital 9,788,541 23,600,659
- --------------------------------------------------------------------------------
Total Liabilities and Partners' Capital $10,859,019 $ 25,007,249
================================================================================
</TABLE>
<TABLE>
<CAPTION>
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CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(UNAUDITED)
For the nine months ended September 30, 1999
General Limited
Partners Partners Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1998 $ (255,803) $ 23,856,462 $23,600,659
Net Income 83,459 8,262,422 8,345,881
Distributions (221,580) (21,936,419) (22,157,999)
- --------------------------------------------------------------------------------
Balance at September 30, 1999 $ (393,924) $ 10,182,465 $ 9,788,541
================================================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
3
COMMERCIAL PROPERTIES 3, L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income
Rent $ 511,785 $1,531,802 $2,034,641 $4,231,047
Interest 305,624 16,486 718,927 51,827
---------------------------------------------------
Total Income 817,409 1,548,288 2,753,568 4,282,874
- --------------------------------------------------------------------------------
Expenses
Property operating 171,987 579,608 837,280 1,783,596
Depreciation and amortization -- -- -- 1,077,838
General and administrative 124,407 123,863 336,061 279,260
---------------------------------------------------
Total Expenses 296,394 703,471 1,173,341 3,140,694
---------------------------------------------------
Income before minority
interest and gain on
sale of real estate 521,015 844,817 1,580,227 1,142,180
---------------------------------------------------
Minority interest (190,446) (33,098) (65,836) (69,781)
Income before gain on
sale of real estate 330,569 811,719 1,514,391 1,072,399
Gain (loss) on sale of
real estate (108,457) -- 6,831,490 --
- --------------------------------------------------------------------------------
Net Income $ 222,112 $ 811,719 $8,345,881 $1,072,399
================================================================================
Net Income Allocated:
To the General Partners $ 2,221 $ 8,117 $ 83,459 $ 10,724
To the Limited Partners 219,891 803,602 8,262,422 1,061,675
- --------------------------------------------------------------------------------
$ 222,112 $ 811,719 $8,345,881 $1,072,399
================================================================================
Per limited partnership unit
(109,378 outstanding) $ 2.01 $ 7.35 $ 75.54 $ 9.71
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
4
COMMERCIAL PROPERTIES 3, L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the nine months ended September 30,
1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 8,345,881 $ 1,072,399
Adjustments to reconcile net income to
net cash provided by operating activities:
Minority interest 65,836 69,781
Depreciation and amortization -- 1,077,838
Gain on sale of real estate (6,831,490) --
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Restricted cash 18,230 (8,021)
Accounts and rent receivable, net 135,464 25,291
Deferred rent receivable -- 50,521
Prepaid expenses and other assets 31,721 (246,640)
Accounts payable and accrued expenses (239,961) 307,262
Due to affiliates 31,578 (21,170)
Prepaid rent 17,929 (58,937)
Security deposits (190,117) 12,202
--------------------------
Net cash provided by operating activities 1,385,071 2,280,526
- --------------------------------------------------------------------------------
Cash Flows From Investing Activities
Proceeds from sale of real estate 23,874,794 --
Additions to real estate assets held for disposition (461,431) (469,060)
--------------------------
Net cash provided by (used for) investing activities 23,413,363 (469,060)
- --------------------------------------------------------------------------------
Cash Flows From Financing Activities
Cash distributions (22,157,999) (1,465,890)
Cash distribution to minority interest joint venture (21,377) --
--------------------------
Net cash used for financing activities (22,179,376) (1,465,890)
- --------------------------------------------------------------------------------
Net increase in cash and cash equivalents 2,619,058 345,576
Cash and cash equivalents, beginning of period 2,246,926 1,273,014
- --------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 4,865,984 $ 1,618,590
================================================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
5
COMMERCIAL PROPERTIES 3, L.P.
AND CONSOLIDATED VENTURES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The unaudited interim financial statements should be read in conjunction with
Commercial Properties 3, L.P.'s (the "Partnership") annual 1998 audited
consolidated 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 September 30, 1999 and the results of operations and
cash flows for the nine months ended September 30, 1999 and 1998 and the
statement of partners' capital (deficit) for the nine months ended September 30,
1999. Results of operations for the period are not necessarily indicative of the
results to be expected for the full year.
The following significant events have occurred subsequent to fiscal year 1998,
which require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
On January 12, 1999, the Partnership sold Quorum II Office Building ("Quorum")
to an unaffiliated partnership, CMD Realty Investment Fund IV, L.P. ("CMD"), for
a selling price of approximately $7,674,000, net of closing adjustments and
selling costs.
On February 9, 1999, the Partnership sold Metro Park Executive Center ("Metro
Park") to an unaffiliated partnership, Triad Properties Holdings, Ft. Myers, LTD
("TPH"), for a selling price of approximately $3,797,000, net of closing
adjustments and selling costs.
On April 14, 1999, the Partnership sold Fort Lauderdale Commerce Center ("Ft.
Lauderdale") to an unaffiliated partnership, Fort Lauderdale Flexxspace, LTD.
("FLF") for a selling price of approximately $12,512,000, net of closing
adjustments and selling costs.
The selling prices were determined by arm's length negotiations between the
Partnership and the buyers.
As a result of these sales, on September 22, 1999 the Partnership paid a special
cash distribution to the Limited Partners in the amount of $21,936,419, or
$200.56 per Unit and $221,580 to the General Partners.
The General Partners are currently marketing the remaining property, Three
Financial Centre, for sale and have accepted a bid for the sale of the property.
The General Partners have notified the Joint Venture, who has the right of first
refusal on the sale of the property, of this bid. While it is anticipated that a
contract to sell Three Financial Centre will be executed during 1999, there can
be no assurance that the sale will occur within this time frame.
<PAGE>
6
COMMERCIAL PROPERTIES 3, L.P.
AND CONSOLIDATED VENTURES
Part I, Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
- -------------------------------
On January 12, 1999, the Partnership completed the sale of Quorum to an
unaffiliated partnership, CMD, for a selling price of approximately $7,674,000,
net of closing adjustments and selling costs, resulting in a gain of
approximately $2,894,000, which is reflected in the Partnership's consolidated
statement of operations for the nine months ended September 30, 1999.
On February 9, 1999, the Partnership completed the sale of Metro Park to an
unaffiliated partnership, TPH, for a selling price of approximately $3,797,000,
net of closing adjustments and selling costs, resulting in a gain of
approximately $566,000, which is reflected in the Partnership's consolidated
statement of operations for the nine months ended September 30, 1999.
On April 14, 1999, the Partnership sold Ft. Lauderdale to an unaffiliated
partnership, FLF, for a selling price of approximately $12,512,000, net of
closing adjustments and selling costs, resulting in a gain of approximately
$3,372,000 which is reflected in the Partnership's consolidated operations for
the nine months ended September 30, 1999.
The selling prices were determined by arm's length negotiations between the
Partnership and the buyers.
As a result of these sales, on September 22, 1999 the Partnership paid a special
cash distribution to the Limited Partners in the amount of $21,936,419, or
$200.56 per Unit and $221,580 to the General Partners.
The General Partners are currently marketing the remaining property, Three
Financial Centre, for sale and have accepted a bid for the sale of the property.
The General Partners have notified the Joint Venture, who has the right of first
refusal on the sale of the property, of this bid. While it is anticipated that a
contract to sell Three Financial Centre will be executed during 1999, there can
be no assurance that the sale will occur within this time frame. Once this
property is sold, the General Partners will distribute the net proceeds,
together with the Partnership's remaining cash reserves (after payment of a
provision for the Partnership's liabilities and expenses), and dissolve the
Partnership.
In anticipation of the Partnership being dissolved, the minority interest
allocation has been conformed to the tax basis.
The Partnership's real estate has been recorded on the Partnership's September
30, 1999 balance sheet as "Real estate assets held for disposition." Real estate
assets held for disposition at September 30, 1999 totaled $5,847,665.
The Partnership had cash and cash equivalents totaling $4,865,984 at September
30, 1999, compared to $2,246,926 at December 31, 1998. The increase is primarily
due to net cash proceeds from the sale of Quorum, Metro Park and Ft. Lauderdale.
The Partnership also had restricted cash, which consists of escrow funds of
$75,000 from the sale of Ft. Lauderdale and security deposits of $50,306 at
September 30, 1999, down from $143,536 at December 31, 1998, resulting from the
sale of Quorum, Metro Park and Ft. Lauderdale.
Accounts and rent receivable, net of allowance for doubtful accounts, totaled
$692 at September 30, 1999, compared to $136,156 at December 31, 1998. The
decrease is mainly due to the sale of the three properties earlier this year.
Prepaid expenses and other assets totaled $19,372 at September 30, 1999,
compared to $51,093 at December 31, 1998. The decrease is due to prepaid
insurance expiring in the current period and not being renewed due to the sale
of the three properties.
<PAGE>
7
COMMERCIAL PROPERTIES 3, L.P.
AND CONSOLIDATED VENTURES
Accounts payable and accrued expenses totaled $272,585 at September 30, 1999,
compared to $512,546 at December 31, 1998. The decrease is largely due to a
decrease in real estate taxes payable resulting from the sale of Quorum, Metro
Park and Ft. Lauderdale and the timing of invoices and payments.
Security deposits totaled $50,306 at September 30, 1999, compared
to $240,423 at December 31, 1998. The decrease is due to the
sale of Quorum, Metro Park and Ft. Lauderdale.
Results of Operations
- ---------------------
The Partnership's operations resulted in net income of $222,112 and $8,345,881
for the three and nine months ended September 30, 1999, compared to a net income
of $811,719 and $1,072,399 in the corresponding 1998 period. The increase for
the 1999 nine-month period is primarily attributable to the gain on the sale of
Quorum, Metro Park and Ft. Lauderdale, a decrease in depreciation expense due to
the reclassification of the properties as "Real estate assets held for
disposition," and a decrease in property operating expense, offset by lower
rental income in 1999.
Rental income totaled $511,785 and $2,034,641 for the three and nine months
ended September 30, 1999, compared to $1,531,802 and $4,231,047 for the
corresponding period a year ago. The decrease is largely attributable to the
sale of Quorum, Metro Park and Ft. Lauderdale. Interest income totaled $305,624
and $718,927 for the three and nine months ended September 30, 1999, compared to
$16,486 and $51,827 in the corresponding 1998 period. The increase is primarily
attributable to the Partnership's higher average cash balances in 1999.
Property operating expenses totaled $171,987 and $837,280 for the three and nine
months ended September 30, 1999, compared to $579,608 and $1,783,596 for the
same period in 1998. The decrease is primarily due to the sale of Quorum, Metro
Park and Ft. Lauderdale.
Depreciation and amortization expense totaled $-0- for both the three and nine
months ended September 30, 1999, compared with $-0- and $1,077,838 for the
corresponding period in 1998. The Partnership suspended depreciation and
amortization on July 1, 1998, in accordance with Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of."
General and administrative expenses for the three and nine months ended
September 30, 1999 totaled $124,407 and $336,061, compared to $123,863 and
$279,260 for the same period in 1998. The increase for the nine months ended
September 30, 1999 is primarily due to higher administrative and marketing fees
on the sale of the properties.
As of September 30, 1999, the remaining property, Three Financial Centre, was
89% leased.
<PAGE>
8
COMMERCIAL PROPERTIES 3, L.P.
AND CONSOLIDATED VENTURES
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
September 30, 1999.
<PAGE>
9
COMMERCIAL PROPERTIES 3, L.P.
AND CONSOLIDATED VENTURES
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 12, 1999 BY: /s/Michael T. Marron
-----------------------
Name: Michael T. Marron
Title: Director, President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Sep-30-1999
<CASH> 4,865,984
<SECURITIES> 000
<RECEIVABLES> 97,054
<ALLOWANCES> 96,362
<INVENTORY> 000
<CURRENT-ASSETS> 5,011,354
<PP&E> 000
<DEPRECIATION> 000
<TOTAL-ASSETS> 10,859,019
<CURRENT-LIABILITIES> 420,328
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 9,788,541
<TOTAL-LIABILITY-AND-EQUITY> 10,859,019
<SALES> 2,034,641
<TOTAL-REVENUES> 2,753,568
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 1,173,341
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 1,514,391
<INCOME-TAX> 000
<INCOME-CONTINUING> 1,514,391
<DISCONTINUED> 000
<EXTRAORDINARY> 6,831,490
<CHANGES> 000
<NET-INCOME> 8,345,881
<EPS-BASIC> 75.54
<EPS-DILUTED> 75.54
</TABLE>
