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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 SEPTEMBER 30, 1997
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
SEPTEMBER 30, DECEMBER 31,
1997 1996
ASSETS (UNAUDITED) (AUDITED)
<S> <C> <C>
Property and improvements, at cost:
Land and land improvements $ 4,219,576 $ 4,170,151
Buildings 25,607,909 25,569,468
Furniture and fixtures 2,145,748 2,071,051
-------------- --------------
31,973,233 31,810,670
Less accumulated depreciation 12,049,475 11,431,301
-------------- --------------
Net property and improvements 19,923,758 20,379,369
Cash and cash equivalents 824,948 638,965
Accounts receivable (net of allowance of $8,696
in 1997 and $6,497 in 1996) 10,242 11,058
Escrow deposits 241,382 175,298
Other asset 1,000 1,000
Deferred charges, net 992,900 1,131,995
Escrowed debt service funds 506,660 506,660
-------------- --------------
Total $ 22,500,890 $ 22,844,345
============== ==============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Notes and mortgages payable $ 20,563,572 $ 20,807,619
Accounts payable and accrued expenses (including $50,450
in 1997 and $5,978 in 1996 due to affiliates) 295,667 245,094
Tenant security deposits 145,790 151,867
Unearned income 15,577 29,624
-------------- --------------
Total liabilities 21,020,606 21,234,204
-------------- --------------
Partners' capital (deficit):
General Partner:
Capital contributions 1,000 1,000
Cumulative net income 13,534 11,518
Cumulative cash distributions (26,739) (23,426)
-------------- --------------
(12,205) (10,908)
-------------- --------------
Limited partners (24,856 Units):
Capital contributions, net of offering costs 22,408,052 22,408,052
Cumulative net loss (17,688,386) (17,887,925)
Cumulative cash distributions (3,227,177) (2,899,078)
-------------- --------------
1,492,489 1,621,049
-------------- --------------
Total partners' capital 1,480,284 1,610,141
-------------- --------------
Total $ 22,500,890 $ 22,844,345
============== ==============
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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Rental income $ 1,208,227 $ 1,168,116 $ 3,559,350 $ 3,782,365
Other income 34,632 27,372 88,560 100,738
Interest income 18,130 32,627 52,461 114,651
-------------- ------------- -------------- -------------
1,260,989 1,228,115 3,700,371 3,997,754
-------------- ------------- -------------- -------------
Expenses:
Property operating expenses 354,051 348,928 1,002,438 1,095,887
General and administrative 168,248 166,174 519,894 543,232
Fees and reimbursements to affiliates 37,227 22,345 118,243 73,063
Interest expense (includes $-0- and $25,500
in 1996 to affiliates) 366,885 372,609 1,100,972 1,366,070
Depreciation and amortization 194,768 278,435 757,269 832,657
-------------- ------------- -------------- -------------
1,121,179 1,188,491 3,498,816 3,910,909
-------------- ------------- -------------- -------------
Net income from operations 139,810 39,624 201,555 86,845
Gain on sale of property -- -- -- 2,440,258
-------------- ------------- -------------- -------------
Net income $ 139,810 $ 39,624 $ 201,555 $ 2,527,103
============== ============= ============== =============
Net income:
General Partner $ 1,399 $ 396 $ 2,016 $ 115,311
Limited partners 138,411 39,228 199,539 2,411,792
-------------- ------------- -------------- -------------
$ 139,810 $ 39,624 $ 201,555 $ 2,527,103
============== ============= ============== =============
Net income per Unit $ 5.57 $ 1.58 $ 8.03 $ 97.03
============== ============= ============== =============
Cash distribution per Unit $ 6.75 $ -- $ 13.20 $ --
============== ============= ============== =============
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 NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 201,555 $ 2,527,103
Adjustment to reconcile net income to net cash
provided by operating activities:
Gain on sale of property -- (2,440,258)
Depreciation and amortization 757,269 832,657
Accounts receivable 816 (1,735)
Accounts payable and accrued expenses 115,206 (49,993)
Accrued interest payable -- (72,946)
Escrow deposits (66,084) 69,348
Other, net (20,124) (28,919)
---------------- ----------------
Net cash provided by operating activities 988,638 835,257
--------------- ---------------
Cash flows from investing activities:
Purchase of property and improvements (227,196) (338,460)
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 (227,196) 7,413,134
---------------- ---------------
Cash flows from financing activities:
Repayment of notes and mortgage loans (244,047) (8,469,570)
Cash distribution to limited partners (328,099) (6,990)
Cash distribution to General Partner (3,313) --
---------------- ---------------
Net cash used in financing activities (575,459) (8,476,560)
---------------- ----------------
Net increase (decrease) in cash and cash equivalents 185,983 (228,169)
Cash and cash equivalents, beginning of year 638,965 2,481,123
--------------- ---------------
Cash and cash equivalents, end of period $ 824,948 $ 2,252,954
=============== ===============
Supplemental disclosure of cash information:
Interest paid during period $ 1,100,972 $ 1,439,016
=============== ===============
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, 1996 which are included in the
Partnership's 1996 Annual Report, as certain footnote disclosures which would
substantially duplicate those contained in such audited financial statements
have been omitted from this report.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) BASIS OF PRESENTATION: The financial statements have been prepared in
conformity 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. All such adjustments are of
a normal recurring nature. Certain amounts in the 1996 financial statements
have been reclassified to conform to the 1997 presentation.
B) PROPERTY AND IMPROVEMENTS: Property and improvements are either held for
the production of income or held for sale. Property and improvements held
for the production of income are carried at depreciated cost less any
write-downs to fair value. The cost represents the initial purchase price
and subsequent capitalized costs and adjustments, including certain
acquisition expenses. Depreciation is calculated on the straight-line
method based on the estimated useful lives of the various components (5 to
30 years).
Properties are considered held for sale when they are subject to an active
plan to find a buyer and a sale is likely to be completed within one year.
Effective with the implementation of SFAS No. 121, properties held for sale
are carried at the lower of cost or fair value less estimated costs to sell
(through the use of valuation reserves). Properties that are held for sale
are no longer depreciated. As of July 1997, Stonebridge Manor Apartments
was held for sale. Net income from operations for the held for sale
property was $145,054 for the three and nine months ended September 30,
1997.
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.
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2. DEFERRED CHARGES
Deferred charges consist of the following:
September 30, December 31,
1997 1996
<S> <C> <C>
Surety fee - Waterford Apartments mortgage note $ 963,910 $ 963,910
Costs of obtaining financing 765,532 765,532
--------------- ---------------
1,729,442 1,729,442
Accumulated amortization (736,542) (597,447)
--------------- ---------------
$ 992,900 $ 1,131,995
=============== ===============
5
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CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
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<CAPTION>
3. TRANSACTIONS WITH AFFILIATES
An affiliate of the General Partner guaranteed the Partnership's promissory
note payable for an annual fee of 2% on the outstanding balance until the
Partnership retired the note on May 15, 1996.
Other fees and expenses related to the General Partner or its affiliates
are as follows:
Three Months Ended Nine Months Ended Unpaid at
September 30, September 30, September 30,
------------- ------------- -------------
1997 1996 1997 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Property management fees (a) $ 9,362 $ 8,930 $ 27,403 $ 29,915 $ 6,360
Partnership management fees 15,795 -- 48,556 -- 18,718
Reimbursement (at cost) for
out-of-pocket expenses 12,070 13,415 42,284 43,148 25,372
------------ ------------- ----------- ----------- -----------
$ 37,227 $ 22,345 $ 118,243 $ 73,063 $ 50,450
============ ============= =========== =========== ===========
(a) Does not include on-site property management fees earned by independent
property management companies of $52,432 and $50,510 for the three months
ended September 30, 1997 and 1996, respectively, and $153,976 and $163,645
for the nine months ended September 30, 1997 and 1996, respectively. An
affiliate of the General Partner has contracted on-site property management
services on behalf of the Partnership and are paid directly by the
Partnership to the third party companies.
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4. SUBSEQUENT EVENT
On October 23, 1997, the Partnership completed the sale of Stonebridge
Manor Apartments to TGM Realty Corp. #6, a Delaware corporation, for an all cash
gross sales price of $9,800,000. The property had a depreciated cost of
approximately $7,000,000 as of the date of sale. After deducting closing costs,
the Partnership expects to record a gain of approximately $2,600,000.
On November 15, 1997, the Partnership was scheduled to pay a distribution
of $4,688,836 to the limited partners and $1,755 to the General Partner.
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 September 30, 1997, the Partnership had $824,948 in cash and cash
equivalents which was available for working capital requirements, cash
distributions, and the Partnership's cash reserves.
For the three and nine months ended September 30, 1997, the Partnership
generated $191,000 and $555,000, respectively, of cash from operations after
debt service, capital improvements, and adjustments to the Partnership's cash
reserves, "adjusted cash from operations." Overall third quarter cash flow for
the three remaining properties, the Stewart's Glen property was sold in April
1996, was consistent with the first two quarters of 1997. Year-to-date
operations are in line with the 1997 operating plan. Beginning with the first
quarter of 1997, the Partnership resumed the payment of quarterly cash
distributions from operations. The Partnership plans to distribute cash
quarterly to the extent cash is available from operations after debt service,
capital, and changes to cash reserves for liabilities and capital expenditures.
The Partnership paid the first quarter 1997 cash distribution of $160,321 or
$6.45 per Unit on May 15, 1997 and the second quarter 1997 cash distribution of
$167,778 or $6.75 per Unit on August 15, 1997, representative of the adjusted
cash from operations for each quarter. The Partnership will pay a cash
distribution of $4,688,836 or $188.64 per Unit on November 15, 1997 representing
the third quarter's adjusted cash from operations of $6.99 per Unit and the net
proceeds from the sale of Stonebridge Manor Apartments of $181.65 per Unit.
Distributable cash generated from operations may decline in future periods
because of the sale of the Stonebridge Manor property.
Following the strategy developed for the sale of the Stonebridge Manor
Apartments, the Partnership began marketing the property for sale in July. The
property's results have steadily improved since 1990 and the market in which the
property operates has slowly improved. The property has achieved the top rental
rates and occupancy among its competition in the local market, although the
rental rate increases have slowed over the past two years. Economic data
indicates that the market is expected to have continued but slow growth over the
near term. Although interest in real estate investments has been strong over the
past couple of years, very few transactions have occurred in the New Orleans
market. The Partnership considered many factors in deciding to proceed with the
sale including the impending debt maturity of April 1, 1998, the growth in
operating results over the past few years, and the interest in real estate
investments, and the Partnership's short term outlook. On October 23, 1997, the
Partnership sold Stonebridge to TGM Realty Corp. #6 for a gross sales price of
$9,800,000. The property was purchased on November 26, 1985 for a total purchase
price of $10,409,845, including acquisition fees and closing costs. After
deducting closing costs and retirement of the debt balance of approximately
$5,075,000, the Partnership netted approximately $4,500,000. The property had a
depreciated cost of approximately $7,000,000 as of the date of sale. After
deducting closing costs, the Partnership expects to record a gain of
approximately $2,600,000. The Partnership is scheduled to distribute the net
proceeds from the sale to limited partners on November 15, 1997.
RESULTS OF OPERATIONS
Generally, decreases in the income statement accounts for the three and
nine months ended September 30, 1997, as compared with the same periods in 1996,
are the result of the sale of Stewart's Glen Apartments in April 1996. Interest
income decreased due to a lower average cash balance. The average cash balance
for the second quarter of 1996 included the proceeds from the sale of Stewart's
Glen Apartments. The proceeds from the sale were utilized to payoff the
Partnership's unsecured debt on May 15, 1996. Further, a cash distribution to
partners in December 1996 reduced the cash balance. Interest expense decreased
due to the retirement of the Stewart's Glen mortgage note upon sale of the
property in April 1996, and the retirement of the $3,400,000 Mellon Bank
promissory note on May 15, 1996.
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)
Fees and reimbursements to affiliates increased as a result of partnership
management fees earned by an affiliate in connection with the quarterly 1997
cash distributions. The Partnership did not distribute cash from operations for
the first three quarters of 1996. In accordance with SFAS No. 121, assets held
for sale are no longer depreciated, and therefore, because Stonebridge was
held for sale as of July 1997, depreciation and amortization decreased for the
three and nine months ended September 30, 1997, as compared with the same
periods in 1996.
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<CAPTION>
OCCUPANCY
The following is a listing of approximate physical occupancy levels by
quarter for the Partnership's investment properties:
1996 1997
------------------------------------------------- ------------------
At 3/31 At 6/30 At 9/30 At 12/31 At 3/31 At 6/30 At 9/30
------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1. Versailles Village Apartments
Forest Park, Ohio 97% 98% 96% 94% 94% 96% 98%
2. Waterford Apartments
Tulsa, Oklahoma 94% 94% 93% 89% 94% 95% 96%
3. Stonebridge Manor Apartments
New Orleans, Louisiana 97% 97% 95% 97% 97% 97% 96%
4. Stewart's Glen Apts. Phase III
Willowbrook, Illinois (a) 89% N/A N/A N/A N/A N/A N/A
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.
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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 September 30,
1997.
8
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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: November 14, 1997 By: /s/ John D. Carey
------------------ -----------------
John D. Carey, President
(Principal Executive Officer)
Date: November 14, 1997 By: /s/ Josephine C. Donofrio
----------------- -------------------------
Josephine C. Donofrio, Controller
(Principal Accounting Officer)
9
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 824948
<SECURITIES> 0
<RECEIVABLES> 18938
<ALLOWANCES> 8696
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 31973233
<DEPRECIATION> 12049475
<TOTAL-ASSETS> 22500890
<CURRENT-LIABILITIES> 0
<BONDS> 20563572
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 22500890
<SALES> 0
<TOTAL-REVENUES> 3700371
<CGS> 0
<TOTAL-COSTS> 1640575
<OTHER-EXPENSES> 757269
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1100972
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 201555
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 201555
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
