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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, 1996
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 0-14466
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Connecticut 06-1115374
(State of Organization) (I.R.S. Employer Identification No.)
900 Cottage Grove Road, South Building
Bloomfield, Connecticut 06002
(Address of principal executive offices)
Telephone Number: (860) 726-6000
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
1
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PART I - FINANCIAL INFORMATION
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
BALANCE SHEETS
JUNE 30, DECEMBER 31,
1996 1995
ASSETS (UNAUDITED) (AUDITED)
----------- ---------
<S> <C> <C>
Property and improvements, at cost:
Land and land improvements $ 4,156,666 $ 6,119,148
Buildings 25,371,506 30,577,342
Furniture and fixtures 2,005,068 2,206,128
--------------- ---------------
31,533,240 38,902,618
Less accumulated depreciation 10,971,608 12,770,211
--------------- ---------------
Net property and improvements 20,561,632 26,132,407
Cash and cash equivalents 2,072,410 2,481,123
Accounts receivable (net of allowance of $7,118
in 1996 and $8,671 in 1995) 5,602 7,694
Escrow deposits 157,373 281,236
Prepaid insurance 26,227 --
Other asset 1,000 1,000
Deferred charges, net 1,230,567 1,329,140
Escrowed debt service funds 506,660 506,660
--------------- ---------------
Total $ 24,561,471 $ 30,739,260
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Notes and mortgages payable $ 20,945,898 $ 29,347,622
Accounts payable and accrued expenses (including $32,185
in 1996 and $10,001 in 1995 due to affiliates) 194,417 361,508
Accrued interest payable (including $8,500 in 1996 and
$17,000 in 1995 due to affiliates) 8,500 72,946
Tenant security deposits 143,098 169,396
Unearned income 20,264 25,973
--------------- ---------------
Total liabilities 21,312,177 29,977,445
--------------- ---------------
Partners' capital (deficit):
General Partner:
Capital contributions 1,000 1,000
Cumulative net loss 12,150 (102,765)
Cumulative cash distributions (13,355) (13,355)
--------------- ---------------
(205) (115,120)
--------------- ---------------
Limited partners (24,856 Units)
Capital contributions, net of offering costs 22,408,052 22,408,052
Cumulative net loss (17,825,403) (20,197,967)
Cumulative cash distributions (1,333,150) (1,333,150)
--------------- ---------------
3,249,499 876,935
--------------- ---------------
Total partners' capital 3,249,294 761,815
--------------- ---------------
Total $ 24,561,471 $ 30,739,260
=============== ===============
The Notes to Financial Statements are an integral part of these statements.
2
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<CAPTION>
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Rental income $ 1,223,518 $ 1,358,357 $ 2,608,768 $ 2,676,876
Other income 31,374 72,147 73,366 107,960
Interest income 41,955 37,776 82,024 69,073
------------- -------------- -------------- -------------
1,296,847 1,468,280 2,764,158 2,853,909
------------- -------------- -------------- -------------
Expenses:
Property operating expenses 389,567 389,142 751,302 759,125
General and administrative 180,945 201,156 367,234 392,484
Fees and reimbursements to affiliates 26,418 21,160 50,718 44,579
Interest expense (includes $8,500 and
$25,500 for 1996 and $17,000 and
$34,000 for 1995 to affiliates) 442,754 561,331 993,461 1,109,595
Depreciation and amortization 277,640 334,060 554,222 661,304
------------- -------------- -------------- -------------
1,317,324 1,506,849 2,716,937 2,967,087
------------- -------------- -------------- -------------
Income (loss) from operations (20,477) (38,569) 47,221 (113,178)
Gain on sale of property 2,440,258 -- 2,440,258 --
------------- -------------- -------------- -------------
Net income (loss) $ 2,419,781 $ (38,569) $ 2,487,479 $ (113,178)
============= ============== ============== =============
Net income (loss):
General Partner $ 114,238 $ (386) $ 114,915 $ (1,132)
Limited partners 2,305,543 (38,183) 2,372,564 (112,046)
------------- -------------- -------------- -------------
$ 2,419,781 $ (38,569) $ 2,487,479 $ (113,178)
============= ============== ============== =============
Net income (loss) per Unit $ 92.75 $ (1.54) $ 95.45 $ (4.51)
============= ============== ============== =============
The Notes to Financial Statements are an integral part of these statements.
3
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<CAPTION>
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,487,479 $ (113,178)
Adjustment to reconcile net loss to net cash
provided by operating activities:
Gain on sale of property (2,440,258)
Depreciation and amortization 554,222 661,304
Accounts receivable 2,092 76,040
Accounts payable and accrued expenses (114,160) 25,019
Accrued interest payable (64,446) 615
Escrow deposits 123,863 (62,144)
Other, net (58,234) 112,564
--------------- ---------------
Net cash provided by operating activities 490,558 700,220
--------------- ---------------
Cash flows from investing activities:
Purchase of property and improvements (242,151) (105,723)
Proceeds from sale of property 7,853,900 --
Payment of closing costs related to sale of property (102,306) --
--------------- ---------------
Net cash provided by (used in) investing activities 7,509,443 (105,723)
--------------- ---------------
Cash flows from financing activities:
Proceeds from mortgage loan -- 5,300,000
Repayment of notes and mortgage loans (8,401,724) (5,356,585)
Payment of financing costs -- (105,010)
Cash distribution for limited partners (6,990) (3,672)
--------------- ---------------
Net cash used in financing activities (8,408,714) (165,267)
--------------- ---------------
Net increase (decrease) in cash and cash equivalents (408,713) 429,230
Cash and cash equivalents, beginning of year 2,481,123 1,662,708
--------------- ---------------
Cash and cash equivalents, end of period $ 2,072,410 $ 2,091,938
=============== ===============
Supplemental disclosures of cash information:
Interest paid during period $ 1,057,907 $ 1,108,980
=============== ===============
The Notes to Financial Statements are an integral part of these statements.
4
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CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Readers of this quarterly report should refer to CONNECTICUT GENERAL REALTY
INVESTORS III LIMITED PARTNERSHIP'S (the "Partnership") audited financial
statements for the year ended December 31, 1995 which are included in the
Partnership's 1995 Annual Report, as certain footnote disclosures which would
substantially duplicate those contained in such audited financial statements
have been omitted from this report.
1. BASIS OF ACCOUNTING
A) BASIS OF PRESENTATION: The accompanying financial statements were prepared
in accordance with generally accepted accounting principles, and reflect
management's estimates and assumptions that affect the reported amounts. It
is the opinion of management that the financial statements presented
reflect all the adjustments necessary for a fair presentation of the
financial condition and results of operations.
B) RECENT ACCOUNTING PRONOUNCEMENT: In 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" (the "Statement"). The Statement requires a
writedown to fair value when long-lived assets to be held and used are
impaired. Long-lived assets to be disposed of, including real estate held
for sale, must be carried at the lower of cost or fair value less costs to
sell. In addition, the Statement prohibits depreciation of long-lived
assets to be disposed. The Partnership adopted the Statement in the first
quarter of 1996. No depreciation was recorded in 1996 for Stewart's Glen
III which was sold on April 30, 1996.
C) CASH AND CASH EQUIVALENTS: Short term investments with a maturity of three
months or less at the time of purchase are reported as cash equivalents.
2. NOTES AND MORTGAGES PAYABLE
In March 1996, the mortgage note for Stewart's Glen III was extended from
April 1, 1996 to May 1, 1996 with an option for an additional extension to July
1, 1996 subject to certain conditions including the execution of a purchase and
sale agreement, in order for the Partnership to complete a sale of the property.
On April 30, 1996, the Partnership completed the sale of Stewart's Glen III and
retired the related mortgage note. The Partnership's $3,400,000 promissory note
was paid in full on May 15, 1996.
3. SALE OF INVESTMENT PROPERTY
On April 30, 1996, the Partnership completed the sale of Stewart's Glen III
to AMLI Residential Properties, L.P. for a gross sales price of $7,853,900.
After closing costs and payment of the first mortgage loan obligation, the
Partnership netted approximately $2,890,000. For book purposes, the property had
a carrying value of approximately $5,311,000 and the Partnership recorded a gain
of $2,440,258. The Partnership utilized the net proceeds from the sale and the
Partnership's cash and cash equivalents to retire the Partnership's $3,400,000
promissory note on May 15, 1996.
5
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CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTED TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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<CAPTION>
4. DEFERRED CHARGES
Deferred charges consist of the following:
June 30, December 31,
1996 1995
--------------- ---------------
<S> <C> <C>
Surety fee - Waterford Apartments mortgage note $ 963,910 $ 963,910
Costs of obtaining financing 765,532 845,127
--------------- ---------------
1,729,442 1,809,037
Accumulated amortization (498,875) (479,897)
--------------- ----------------
$ 1,230,567 $ 1,329,140
=============== ===============
</TABLE>
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<CAPTION>
5. TRANSACTIONS WITH AFFILIATES
The Partnership's promissory note payable was guaranteed by an affiliate of
the General Partner for an annual fee of 2% on the outstanding balance until the
note was retired on May 15, 1996.
Other fees and expenses related to the General Partner or its affiliates are as follows:
Three Months Ended Six Months Ended Unpaid at
June 30, June 30, June 30,
-------- ------- --------
1996 1995 1996 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Property management fee (a) $ 9,580 $ 11,066 $ 20,985 $ 21,575 $ 5,797
Reimbursement (at cost) for
out-of-pocket expenses 16,838 10,094 29,733 23,004 26,388
------------ ------------- ----------- ------------ ------------
$ 26,418 $ 21,160 $ 50,718 $ 44,579 $ 32,185
============ ============= =========== ============ ============
</TABLE>
(a) Does not include on-site property management fees earned by independent
property management companies of $52,899 and $58,804 for the three months ended
June 30, 1996 and 1995, respectively, and $113,135 and $115,057 for the six
months ended June 30, 1996 and 1995, respectively. On-site property management
services have been contracted by an affiliate of the General Partner on behalf
of the Partnership and are paid directly by the Partnership to the third party
companies.
6
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CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Partnership had $2,072,000 in cash and cash
equivalents which was available for working capital requirements, cash
distributions, and the Partnership's cash reserves.
During the first quarter, the Partnership executed a letter of intent for
the sale of the Stewart's Glen Apartments to AMLI Residential, L.P. To complete
the sale, the Partnership arranged a short-term extension of the Stewart's Glen
mortgage maturity date. The Partnership completed the sale on April 30, 1996 for
a gross sales price of $7,853,900. After closing costs and payment of the first
mortgage, the Partnership netted approximately $2,890,000. The property sale
generated a book gain of $2,440,258.
On May 15, 1996, the Partnership utilized the net proceeds from the
Stewart's Glen sale together with approximately $510,000 from the Partnership's
cash reserves to retire the Partnership's $3,400,000 Mellon Bank promissory
note.
The portfolio generated positive adjusted cash from operations after debt
service, capital improvements and partnership expenses for the three months
ended June 30, 1996 of approximately $34,000 and year-to-date of approximately
$234,000. The Partnership's properties have generated sufficient net operating
income to cover debt service, partnership expenses, and the substantial increase
in capital expenditures year-to-date. The Partnership expects that cash from
operations for the remainder of the year will also be sufficient to cover all
necessary expenditures for partnership expenses, capital expenditures, and debt
service.
As a result of the sale of the Stewart's Glen property and the payment of
the Partnership's promissory note, the Partnership may now be in a position to
reduce cash reserves to a level deemed sufficient in connection with the
Partnership's operations. The Partnership will consider making a cash
distribution to reduce cash reserves in the near future. The Partnership expects
that to the extent cash is available from operations in future quarters, the
Partnership will be in a position to resume regular quarterly distributions.
RESULTS OF OPERATIONS
Generally, decreases in operating income and expenses are the result of the
sale of Stewart's Glen III on April 30, 1996. The following analytical comments
have been limited to the Partnership's three remaining properties.
Higher average occupancy and an increase in rental rates at Waterford
Apartments and Stonebridge Manor led to increases in rental income of
approximately $15,000 at each property for the three months and $53,000 and
$37,000, respectively, for the six months ended June 30, 1996, as compared with
the same periods of 1995. Rental income at Versailles Village was flat for the
three months and increased $5,000 for the six months ended June 30, 1996 due to
a modest rate increase.
Other income decreased $33,000 and $31,000 for the three and six months
ended June 30, 1996, respectively, as compared with the same periods of 1995 for
the remaining properties. The decrease was primarily the result of collecting
approximately $35,000 in the second quarter of 1995 for additional 1994 expense
recapture and percentage rent from tenants at Promenades Plaza.
Interest income increased for the three and six months ended June 30, 1996,
as compared with the same periods of 1995, due to a higher average cash balance.
7
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CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Property operating expenses increased $42,000 and $37,000 for the three and
six months ended June 30, 1996, respectively, as compared with the same periods
of 1995 for the remaining properties. Maintenance expense increased for the
second quarter at Stonebridge primarily due to pest control treatments and at
Waterford due to a wallpapering project. At Stonebridge and Waterford, the cost
of preparing apartments increased due to higher tenant turnover. Utility expense
increased at all of the properties due to a harsh winter coupled with rate
increases at Waterford and Versailles and fewer corporate apartments at
Stonebridge.
General and administrative expenses decreased $6,000 and $10,000 for the
three and six months ended June 30, 1996, respectively, as compared with the
same periods of 1995 for the remaining properties. Advertising costs decreased
at Waterford and Stonebridge and increased at Versailles, reflective of changes
in occupancy. A net decrease in the provision for doubtful accounts also
attributed to the decrease for the six months ended June 30, 1996. Partially
offsetting these decreases was an increase in payroll at Stonebridge primarily
due to the hiring of new maintenance employees.
The increase in fees and reimbursements to affiliates for the three and six
months ended June 30, 1996, as compared with the same periods of 1995, was due
to higher reimbursable expenses than the previous year.
The decrease in interest expense of $47,000 and $44,000 for the three and
six months ended June 30, 1996, respectively, as compared with 1995 for the
remaining properties, was primarily the result of the retirement of the
$3,400,000 Mellon Bank promissory note on May 15, 1996.
Depreciation and amortization increased $3,000 and $13,000 for the three
and six months ended June 30, 1996, respectively, as compared with the previous
year for the remaining properties. The increase was primarily the result of
amortization costs related to the April 1, 1995 refinancing of Stonebridge
Manor's first mortgage.
<TABLE>
<CAPTION>
OCCUPANCY
The following is a listing of approximate physical occupancy levels by
quarter for the Partnership's investment properties:
1995 1996
------------------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
At 3/31 At 6/30 At 9/30 At 12/31 At 3/31 At 6/30
1. Versailles Village Apartments
Forest Park, Ohio 97% 99% 96% 94% 97% 98%
2. Waterford Apartments
Tulsa, Oklahoma 90% 96% 98% 92% 94% 94%
3. Stonebridge Manor Apartments
New Orleans, Louisiana 96% 97% 96% 98% 97% 97%
4. Stewart's Glen Apts. Phase III
Willowbrook, Illinois (a) 96% 89% 98% 97% 89% N/A
</TABLE>
An N/A indicates that the property was not owned by the partnership at the end
of the quarter.
(a) Stewart's Glen III was sold April 30, 1996.
8
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CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
PART II- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedules.
(b) No Form 8-Ks were filed during the three months ended June 30, 1996.
9
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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.
CONNECTICUT GENERAL REALTY INVESTORS III
LIMITED PARTNERSHIP
By: CIGNA Realty Resources, Inc. - Fifth,
General Partner
Date: August 14, 1996 By: /s/ John D. Carey
---------------- -----------------
John D. Carey, President and Controller
(Principal Executive Officer)
(Principal Accounting Officer)
10
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> 6-MOS
<CASH> 2072410
<SECURITIES> 0
<RECEIVABLES> 12720
<ALLOWANCES> 7118
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 31533240
<DEPRECIATION> 10971608
<TOTAL-ASSETS> 24561471
<CURRENT-LIABILITIES> 0
<BONDS> 20945898
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 24561471
<SALES> 0
<TOTAL-REVENUES> 2764158
<CGS> 0
<TOTAL-COSTS> 1169254
<OTHER-EXPENSES> (1886036)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 993461
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 2487479
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2487479
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
