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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
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)
Registrant's telephone number, including area code: (860) 726-6000
Securities registered pursuant to Section 12(b) of the Act:
None
(Title of Each Class)
Securities registered pursuant to Section
12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
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
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Not applicable.
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<TABLE>
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TABLE OF CONTENTS
<S> <C> <C>
PART I PAGE
Item 1. Business 3
Item 2. Properties 6
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8
PART II
Item 5. Market for Registrant's Common Equity and Related Security Holder Matters 8
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 8. Financial Statements and Supplementary Data 15
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 29
PART III
Item 10. Directors and Executive Officers of the Registrant 29
Item 11. Executive Compensation 31
Item 12. Security Ownership of Certain Beneficial Owners and Management 32
Item 13. Certain Relationships and Related Transactions 32
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 33
SIGNATURES 37
2
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<PAGE>
PART I
ITEM 1. BUSINESS
The registrant, Connecticut General Realty Investors III Limited
Partnership (the "Partnership"), was formed on April 12, 1984, under the Uniform
Limited Partnership Act of the State of Connecticut to invest in primarily
residential and, to a lesser extent, commercial real properties. On July 2,
1984, the Partnership commenced an offering of $25,000,000 (subject to increase
up to $50,000,000) of Limited Partnership Interests (the "Units") at $1,000 per
Unit, pursuant to a Registration Statement on Form S-11 under the Securities Act
of 1933 (Registration No. 2-90944).
The General Partner of the Partnership is CIGNA Realty Resources, Inc.-
Fifth (the "General Partner"), which is an indirect wholly owned subsidiary of
CIGNA Corporation ("CIGNA"), a publicly held corporation whose stock is traded
on the New York Stock Exchange.
A total of 24,856 Units was sold to the public prior to the offering's
termination on July 1, 1986. The holders of 6,480 Units were admitted to the
Partnership in 1984; the holders of 11,519 Units were admitted to the
Partnership in 1985; the holders of the remaining 6,857 Units were admitted to
the Partnership in 1986. From the 24,856 Units sold, the Partnership received
net proceeds of $22,408,052. The holders of Units ("Unit Holders" or "Limited
Partners") of the Partnership will share in the ownership of the Partnership's
real property investments according to the number of Units held. Subsequent to
admittance to the Partnership, no Unit Holder has made any additional capital
contribution. The Partnership is engaged solely in the business of real estate
investment. A presentation of information about industry segments is not
applicable.
The Partnership is engaged in passive activities and therefore investors
are subject to the applicable provisions of the Internal Revenue Code and
Regulations. Losses from "passive activities" (which include any rental
activity) may only offset income from "passive activities". Investors' passive
losses in excess of passive income from all sources are suspended and are
carried over to future years when they may be deducted against passive income
generated by the Partnership in such year (including gain recognized on the sale
of the Partnership's assets) or against passive income derived by investors from
other sources. Any suspended losses remaining subsequent to Partnership
dissolution may be used by investors to offset ordinary income.
The Partnership acquired four residential complexes located in Ohio,
Oklahoma, Louisiana, and Illinois and one shopping center located in Florida. In
order to acquire these properties, the Partnership invested $16,372,438 in cash,
took or assumed $35,684,061 in mortgages, incurred $3,673,982 in acquisition
fees and expenses, established reserves for improvements of $720,000 and
established working capital reserves of $1,242,800.
Pursuant to the Partnership Agreement, the Partnership is required to
terminate on or before December 31, 2017. The Partnership anticipated that prior
to its termination and dissolution, some or all of the Partnership's properties
would be sold, the retention or sale of any property dependent, in part, on the
anticipated remaining economic benefits of continued ownership. It was expected
that most sales would occur after a period of ownership extending from five to
ten years. The Partnership sold the Florida shopping center, Promenades Plaza,
on September 22, 1994. The Partnership completed a sale of its Illinois
apartment complex on April 30, 1996. The Partnership estimates that the
remainder of the Partnership's properties will be sold during the next two
years. Upon the sale of a particular property, the net proceeds, if any, are
generally distributed, reinvested in existing properties, or held in Partnership
cash reserves rather than invested in acquiring additional properties.
In December 1993, the Partnership refinanced the first and second mortgages
encumbering the Waterford Apartments property. The first mortgage, funded with
multifamily housing revenue bonds issued by the Tulsa County Home Finance
Authority, and the second mortgage were replaced with a new first mortgage. The
replacement financing was also funded with newly issued multifamily housing
revenue bonds issued by the Tulsa County Home Finance Authority. As a
requirement of the new financing, the Waterford property had to be classified as
single asset ownership. Since the Partnership owns multiple properties, a new
partnership was created to house the Waterford property as its sole real estate
asset. Waterford Partnership, a general partnership, was organized in the State
of Connecticut with the Partnership as its managing general partner (99.9%
interest) and the General Partner (0.1% interest) as the other general partner.
The
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interest of the General Partner in the new partnership is held in trust for the
benefit of The Tulsa Corporation, a newly organized Delaware corporation, the
stock of which is 100% owned by the Partnership. The Tulsa Corporation was
created with the sole purpose of acting as the beneficiary of the General
Partner's ownership interest in the Waterford Partnership. The new structure has
no economic effect on the Partners nor does it require any changes in financial
reporting for the Partnership.
The Partnership has made the real property investments set forth in the
following table:
<TABLE>
<CAPTION>
Versailles Village Promenades Waterford Stonebridge Stewart's Glen
Apartments Plaza Shopping Apartments Manor Apartments
Forest Park, Center Tulsa, Oklahoma Apartments Phase III
Ohio Port Charlotte, New Orleans, Willowbrook,
Florida (c) Louisiana Illinois (d)
<S> <C> <C> <C> <C> <C>
Purchase $5,920,000 $10,486,000 $17,130,000 $11,326,014 $7,194,485
Price (a)
Cash $2,120,000 $5,463,052 $3,441,666 $3,278,235 $2,069,485
Investment
Initial $3,800,000 $5,022,948 $13,688,334 $8,047,779 $5,125,000
Mortgage
Financing (b)
Acquisition $433,986 $1,194,469 $806,350 $742,782 $496,395
Fees and
Expenses
Size 180 units 230,268 sq. ft. 344 units 264 units 104 units
Date of 02/06/85 04/15/85 (sold 10/31/85 11/26/85 07/24/87 (sold
Purchase 09/22/94) 04/30/96)
Type of Fee ownership Fee ownership Fee ownership Fee ownership Fee ownership
Ownership subject to subject to subject to subject to subject to
Mortgage Mortgage Mortgage Mortgage Mortgage
================= =================== =================== =================== ==================== ===================
(a) Excludes all broker fees paid at closing. Amounts shown do not reflect
reductions for discounts on related debt or sellers' guarantees which are
adjustments to the recorded purchase price.
(b) Reference is made to the Notes to Financial Statements included in this
annual report for details on debt modifications, the current outstanding
principal balances and a description of the long-term indebtedness secured
by the Partnership's real property investments and to Schedule III for
additional information.
(c) Promenades Plaza added 14,624 square feet subsequent to acquisition. This
property was sold September 22, 1994. Reference is made to the Notes to
Financial Statements for a description of the sale.
(d) In July 1987, the Partnership acquired a 33% interest in the Phase III
Apartment Venture, a joint venture with the General Partner, which was
established as a temporary vehicle for providing the Partnership with the
means to acquire the property without finalized mortgage arrangements, and,
thereby, avoid being in default under the terms of the purchase agreement.
On December 10, 1987 the Partnership received a commitment for permanent
mortgage financing which was acceptable to CIGNA Realty Resources, Inc.-
Fifth. At that time, in accordance with the terms of the joint venture
agreement, the General Partner exercised its right to require the
Partnership to purchase General Partner's entire interest in the joint
venture. Funding of the purchase took place in January 1988. The
information shown represents the Partnership's 100% ownership of the
property. This property was sold April 30, 1996. Reference is made to the
Notes to Financial Statements for a description of the sale.
</TABLE>
4
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Versailles Village Apartments is located in the City of Forest Park, Ohio,
in the northwest section of Hamilton County, approximately 14 miles outside
downtown Cincinnati. The unemployment rate for Greater Cincinnati remains lower
than the national average and employment growth continues to outperform the
nation. A stable, diverse local economy keeps the Greater Cincinnati area from
experiencing dramatic fluctuations in job figures. The region has experienced
expansion in the retail and service sectors while losing some of its
traditionally higher paying manufacturing base. The Greater Cincinnati economy
is expected to remain stable with slight fluctuations. The City of Forest Park
is 35 to 40 years old with a population of approximately 21,000. Forest Park is
an integrated and diversified middle class community with an average household
income of $46,000. Average household income rose 22% and the median price of a
home has increased 16% since 1990. The northwest apartment market contains
approximately 12,000 units, with 250 to 300 units added to the market in 1994
and 1995. The Versailles Village submarket contains approximately 2,600 units
comprising 1,830 units of direct and 770 units of secondary competitors.
Although the property's competition is newer, Versailles Village competes well
with similar Class C and B properties in the submarket. Versailles Village is
well maintained with competitive rents and emphasizes tenant service. The
property offers amenities similar to the competition but has much larger floor
plans. Home ownership is also competing with the rental market due to the
relative low cost of housing and low interest rates. The property's ability to
achieve rate increases depends primarily on the general trends of the market.
Rental rates are averaging $568 per month in the submarket and $552 at
Versailles Village. Versailles has planned to increase rates by approximately
3.6% in 1997. Vacancy at Versailles Village at approximately 4% is in line with
the market vacancy rate of 4% to 6%.
Waterford Apartments is located in South Tulsa, Oklahoma. Job creation in
the Tulsa area continued into 1996. The total number of wage and salary workers
increased by approximately 10,000 during the year. The strongest increase in new
jobs continues to be in the services sector. Unemployment is lower than the
national rate. Tulsa's average household income is much higher than Oklahoma's
average and only slightly below the national average. The cost of living is
relatively low in Tulsa, compared to similar cities in the nation. The average
cost of living in Tulsa was 91.5% of the national average in 1996. In Tulsa,
21.5% of the average household income is required to buy and maintain a home,
compared to other comparable cities where up to 50% of household income is
required. In the single family housing market, 73% of the homes are considered
to be in the price range of median income families. Low interest rates, afford
ability, and a growing economy have contributed to an active single family
market, a strong competitor for the apartment market.
Multifamily construction had been at a virtual standstill since 1990 until
1994 when 288 units came into the market in anticipation of an increased demand.
There are approximately 19,030 units in the southeast submarket where Waterford
is located. Approximately 700 new units were added to the market in 1996 with
another 500 expected for 1997. Occupancy in the market averaged 93% for 1996
compared with 92% for 1995. During the year, Waterford's occupancy averaged 93%,
down slightly from 94% in 1995. Waterford is located only five miles outside the
central business district in a well-maintained, vintage neighborhood. The
property is a Class "A" luxury apartment complex and continues to hold an
advantage over the Tulsa luxury apartment market due to its superior location.
While the sizes of its units are somewhat smaller than the competition, it
compensates with mature landscaping, a variety of amenities and a focus on the
upkeep of the units. When compared with the entire Tulsa rental market,
Waterford's rental rates are above the average, although, due to the smaller
size of the units, Waterford's rental rates are slightly below its immediate
competition. Average rents for the immediate competition are approximately $466
for one bedroom units and $665 for two bedroom units, while Waterford's average
rental rates are approximately $443 for one bedroom units and $650 for two
bedroom units.
Waterford's rental rates are scheduled to increase approximately 3.8% in 1997.
Stonebridge Manor Apartments is located in the Parish of Jefferson in
Gretna, Louisiana. Gretna is located just south of the Mississippi River across
from New Orleans in an area known as the Westbank. Linked to the Central
Business District by two bridges, the Westbank supports the majority of
commercial and industrial activity. The tourism industry continues its steady
growth. Gains, however, are not attributable to gaming, but to the New Orleans
Convention Center. The Center is booked past the year 2000 and is considered one
of the top five locations for conventions in the country. A smaller 50,000
square foot convention center in Jefferson Parish has become a popular
alternative to the heavily booked Center. The gaming industry has proven
profitable for its owners, but has not provided the projected job growth.
Activity in the oil and gas industry has contributed the largest percentage
increase in job creation for Jefferson Parish over the past
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two years. In general, the New Orleans market, and more specifically Jefferson
Parish, is considered stable and has an above average outlook for short term and
long term growth.
Stonebridge Manor Apartments faces a middle class subdivision of single
family homes (averaging 1,800 square feet) with an average price of $80,600 and
is adjacent to a prestigious country club golf course community (averaging 2,900
square feet) with an average price of $185,000. Housing permits are down,
especially in Jefferson Parish where there is a lack of development sites.
Multifamily construction levels remained low. The Stonebridge submarket remains
stable with no new construction and slow increases in occupancy and rental
rates. Based on current conditions, occupancy should remain essentially
unchanged and rental rates should continue to grow moderately. Physical
occupancy at Stonebridge averaged 97% for 1996 while the submarket was 96% and
the direct competition was 97%. The property was also able to exceed the market
with rents averaging $540 per month versus $496 for the property's direct
competition.
Approximate occupancy levels for the properties on a quarterly basis are
set forth in the table in Item 2.
The Partnership itself has no employees; however, the unaffiliated property
managers engaged by CIGNA Investments, Inc. ("CII", formerly CIGNA Capital
Advisers, Inc.) on behalf of the Partnership maintain on-site staff. For a
description of asset management services provided by CII and the terms of
transactions between the Partnership and affiliates of the General Partner, see
Item 13 and the Notes to Financial Statements.
The following list details gross revenues from operations for each of the
Partnership's investment properties as a percentage of the Partnership's total
gross revenues during 1994, 1995, and 1996. In each year, interest income
accounted for the balance of gross revenues from operations.
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
1. Versailles Village Apartments
Forest Park, OH 18% 20% 23%
2. Promenades Plaza Shopping Center
Port Charlotte, FL (a) 14% N/A N/A
3. Waterford Apartments
Tulsa, OK 27% 31% 35%
4. Stonebridge Manor Apartments
New Orleans, LA 24% 28% 32%
5. Stewart's Glen Apartments Phase III
Willowbrook, IL (b) 16% 18% 7%
An "N/A" indicates the property was not owned by the Partnership during the
year.
(a) Promenades Plaza was sold on September 22, 1994.
(b) Stewart's Glen Apartments was sold on April 30, 1996.
</TABLE>
ITEM 2. PROPERTIES
The Partnership owns directly (subject to existing first mortgage loans and
purchase money notes) the properties described in Item 1 herein. The
Partnership's residential properties generally have lease terms of one year or
less. In the opinion of the General Partner, the Partnership's properties
continue to be adequately insured.
6
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The following list compares approximate occupancy levels by quarter for the
Partnership's investment properties during 1992, 1993, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
VERSAILLES VILLAGE PROMENADES WATERFORD STONEBRIDGE STEWART'S GLEN
APARTMENTS PLAZA SHOPPING APARTMENTS MANOR APTS. PHASE III
FOREST PARK, OH CENTER TULSA, OK APARTMENTS WILLOWBROOK, IL
PORT CHARLOTTE, FL NEW ORLEANS, LA
(A)
============== =================== =================== =================== =================== ===================
<S> <C> <C> <C> <C> <C>
1992
AT 03/31 98% 97% 96% 95% 94%
AT 06/30 98% 96% 92% 95% 99%
AT 09/30 93% 96% 98% 98% 97%
AT 12/31 96% 95% 95% 97% 95%
1993
AT 03/31 94% 85% 96% 94% 99%
AT 06/30 97% 84% 95% 95% 99%
AT 09/30 94% 84% 95% 96% 97%
AT 12/31 96% 82% 95% 95% 98%
1994
AT 03/31 94% 82% 88% 96% 100%
AT 06/30 97% 82% 93% 97% 99%
AT 09/30 99% N/A 94% 95% 93%
AT 12/31 96% N/A 83% 97% 98%
1995
AT 03/31 97% N/A 90% 96% 96%
AT 06/30 99% N/A 96% 97% 89%
AT 09/30 96% N/A 98% 96% 98%
AT 12/31 94% N/A 92% 98% 97%
1996
AT 03/31 97% N/A 94% 97% 89%
AT 06/30 98% N/A 94% 97% N/A
AT 09/30 96% N/A 93% 95% N/A
AT 12/31 94% N/A 89% 97% N/A
============== =================== =================== =================== =================== ===================
An "N/A" indicates that the property was not owned by the Partnership at the end
of the quarter.
(a) Promenades Plaza was sold on September 22, 1994.
(b) Stewart's Glen Apartments was sold on April 30, 1996.
</TABLE>
7
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ITEM 3. LEGAL PROCEEDINGS
Neither the Partnership nor its properties are party to or the subject of
any legal proceedings involving any material exposure.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
As of December 31, 1996, there were approximately 1,124 record Unit
Holders. There is no established public trading market for Units. The General
Partner will not redeem or repurchase the Units.
The Revenue Act of 1987 contains provisions which have an adverse impact on
investors in a "publicly traded partnership" ("PTP"). A PTP is a partnership
whose interests are traded on an established securities market or readily
tradable on a secondary market (or the substantial equivalent thereof). If the
Partnership were classified as a PTP, (i) the Partnership may be taxed as a
corporation and (ii) the passive activity rules of section 469 are applied
separately with respect to items attributable to each publicly traded
partnership. On November 29, 1995, the Internal Revenue Service ("IRS") issued
the Final PTP Regulations under section 1.7704-1. The Final PTP Regulations are
effective for the tax years beginning after December 31, 1995. However, a
transition rule exists for partnerships that were engaged in an activity before
December 4, 1995 and that do not add a substantial new line of business after
that date. The Partnership qualifies for the transition rule and may continue to
rely on Notice 88-75 for guidance through the end of 2005. In Notice 88-75, the
IRS established alternative safe harbors that allow interests in a partnership
to be transferred or redeemed in certain circumstances without causing the
partnership to be characterized as a PTP. Units of the Partnership are not
listed or quoted for trading on an established securities exchange. However,
CIGNA Financial Partners ("CFP") will, upon request, provide a Limited Partner
desiring to sell or transfer Units with a list of secondary market firms which
may provide a means for matching potential sellers with potential buyers of
Units, if any. Frequent sales of Units utilizing these services could cause the
Partnership to be deemed a PTP. The Partnership has adopted a policy prohibiting
transfers of Units in secondary market transactions unless, notwithstanding such
transfers, the Partnership will satisfy at least one of the safe harbors.
Although such a restriction could impair the ability of an investor to liquidate
its investment, the service provided by CFP described above should allow a
certain number of transfers to be made in compliance with the safe harbor.
Subsequent to the sale of the Partnership's Stewart's Glen property in
April 1996, the Partnership reduced the balance of its cash reserves to a level
deemed sufficient in connection with the Partnership's operations. Accordingly,
on December 15, 1996, the Partnership made a cash distribution of $1,565,928 or
$63 per Unit to Limited Partners of record as of November 30, 1996. The
Partnership made no cash distributions to its Partners in 1995. The Partnership
suspended quarterly distributions to Partners as of the fourth quarter of 1988
to enable it to fund operating deficits from certain of its properties.
Reference is made to the Notes to Financial Statements for a description of
payments to the State of Connecticut on behalf of Limited Partners that were
charged to Limited Partner capital accounts.
There are no material legal restrictions upon the Partnership's ability to
make distributions in accordance with the provisions of the Partnership
Agreement. To the extent cash is available from operations each quarter, the
Partnership intends to resume regular quarterly distributions beginning in 1997.
Distributions, if declared, will be paid forty-five days after the end of each
quarter.
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ITEM 6. SELECTED FINANCIAL DATA (A)
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
DECEMBER 31, 1996, 1995, 1994, 1993 AND 1992
(NOT COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total income $ 5,205,570 $ 5,818,941 $ 6,392,361 $ 6,629,216 $ 6,649,929
Net income (loss) (b) 2,424,325 (210,876) (706,274) (5,783,253) (625,366)
Net income (loss) per Unit (b) 92.94 (8.40) (29.12) (233.39) (24.91)
Total assets 22,844,345 30,739,260 31,005,057 37,830,318 45,600,754
Notes and mortgages payable 20,807,619 29,347,622 29,487,591 35,334,863 37,221,143
Cash distribution to limited partners 1,565,928 -- -- -- --
Cash distribution per Unit 63.00 -- -- -- --
(a) The above selected financial data should be read in conjunction with the
financial statements and the related notes appearing herein. Reference is
made to the Notes to Financial Statements for a description of payments to
the State of Connecticut on behalf of limited partners. These amounts are
charged to limited partner capital accounts and have not been included in
the above data.
(b) Included in 1996 is a $2,440,258 gain on sale of property ($2,325,815 to
limited partners or $93.57 per unit). Included in 1994 is a $24,837 gain on
sale of property (100% to the General Partner). Included in 1993 is a
$5,000,000 loss due to impairment of assets ($199.15 per Unit) and $76,417
gain on sale of property (100% to the General Partner).
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for historical information provided in this Management's Discussion
and Analysis, statements made throughout this document are forward-looking and
contain information about financial results, economic conditions, trends, and
known certainties. The Partnership cautions the reader that actual results could
differ materially from those expected by the Partnership.
LIQUIDITY AND CAPITAL RESOURCES
On July 2, 1984, the Partnership commenced an offering of $25,000,000
(subject to an increase up to $50,000,000) of limited partnership interests
pursuant to a Registration Statement on Form S-11 under the Securities Act of
1933. The offering terminated on July 1, 1986 and a total of 24,856 Units were
issued by the Partnership and assigned to the public at $1,000 per interest.
Subsequent to the termination of the offering, no Unit Holder has made any
additional capital contribution. The Partnership will not seek additional
capital contributions from Unit Holders.
After deduction of selling expenses and other offering costs, the
Partnership had $22,408,052 with which to make investments in real properties,
to pay legal fees and other costs (including acquisition fees) related to such
investments for working capital reserves and for capital expenditure reserves. A
portion of the proceeds was utilized to acquire the properties described in Item
1 herein.
At December 31, 1996, the Partnership had $638,965 in cash and cash
equivalents available for working capital requirements, Partnership cash
reserves, and distributions. The source of capital for both short-term and
long-term future liquidity and distributions is expected to be through cash
generated by the investment properties and from the sale of such properties.
The Partnership has entered its liquidating stage, which contemplates the
sale of the three remaining investment properties by the end of 1998. During the
first quarter of 1996, 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 property's scheduled
mortgage maturity date of April 1, 1996. The Partnership completed the sale on
April 30, 1996 for a gross sales price of $7,853,900. After closing costs of
$102,306 and payment of the first mortgage of $4,861,583, the Partnership netted
approximately $2,890,000. The property had a net book value of approximately
$5,311,000, resulting in a book gain of approximately $2,440,000. For tax
purposes, the property had a net book value of approximately $5,047,000,
resulting in a tax gain of $2,703,671, or $106.05 per Unit.
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.
As a result of the sale of the Stewart's Glen property and the payment of
the Partnership's promissory note, the Partnership evaluated its cash reserve
level and decided to reduce cash reserves to a level it deemed sufficient in
connection with the Partnership's operations. On December 15, 1996, the
Partnership made a cash distribution of $1,565,928 or $63 per Unit to Limited
Partners of record as of November 30, 1996. The distribution was comprised of a
reduction to the original cash reserve balance and an amount accumulated from
adjusted cash from operations. The Partnership expects that to the extent cash
is available from operations each quarter, the Partnership will resume regular
quarterly distributions in 1997.
During 1996, the Partnership's properties (three properties owned
throughout 1996 and a fourth property sold on April 30, 1996) generated net
operating income of $2,913,000 and, in addition, the Partnership level net loss
was $67,000 for net operating income of $2,846,000 available for debt service
and capital expenditures. For 1996, cash flow from operations of the Partnership
netted to $290,000 after debt service of $2,101,000, and capital improvements of
$455,000 (including $265,000 spent on roof replacements at Stonebridge.) The
majority of the 1996 net cash flow from operations was distributed to Partners
in 1996. The remainder was added to the Partnership's cash reserves for future
distribution.
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Reference is made to Item 1 for a description of the Partnership's
investment properties and a description of the markets in which the properties
operate.
The Partnership's property operational forecasts for 1997 estimate stable
but slightly lower net operating income, due to the sale of the Stewart's Glen
property. Excluding the Stewart's Glen property results from 1996 net operating
income, property level net operating income for 1997 is forecast to increase
slightly, approximately 2%. The Partnership plan also anticipates a reduction in
capital spending, due to the completion of the Stonebridge Manor roof
replacement project, and a reduction to interest expense as a result of the
property sale and payoff of the $3.4 million promissory note. Based on the
property operational forecasts, the Partnership anticipates that 1997 property
net operating income of $2,761,000 will be sufficient to cover planned 1997
capital improvements of $242,000, debt service of $1,770,000 and Partnership
level expenses.
The Partnership's mortgage obligations are nonrecourse. As such, the
mortgage note holders can only look to the property pledged as security for
repayment of the related indebtedness. During the period from December 1993 to
March 1995, the Partnership refinanced each property's mortgage loan in
anticipation of debt maturities and a Partnership liquidation strategy. Based on
current property operations and operational forecasts, the Partnership
anticipates that proceeds from the sales of the Partnership's investment
properties will be sufficient to satisfy the Partnership nonrecourse mortgage
obligations.
On March 31, 1995, the Partnership completed a refinance for the
Stonebridge Manor mortgage debt with Hibernia National Bank. The three year loan
is open for prepayment without penalty beginning April 1, 1997. The Partnership
plans to market Stonebridge Manor for sale in late 1997 in order to repay the
mortgage obligation prior to maturity. Although the Partnership does not
anticipate a problem selling the property, if the Partnership can not obtain an
acceptable price for the property or there is not sufficient investor interest
in the purchase of the property, the Partnership will attempt to refinance the
mortgage debt prior to maturity. Marketing the property for sale in late 1997
should allow enough time to refinance the debt if a sale does not occur. Based
on current projections, cash will be available to distribute to Unit Holders
upon the sale of Stonebridge Manor after repayment of the outstanding mortgage
obligation.
The Waterford property's first mortgage and purchase money note were
refinanced on December 17, 1993 with $11,755,000 in industrial revenue bonds
issued by the Tulsa County Home Finance Authority and credit enhanced by AXA
Reassurance, SA. The new financing is similar to the bond financing which it
replaced and was issued by the same county housing authority. The bond issue
consists of $11,355,000 of tax exempt bonds (Series A Bonds) which mature on
December 1, 2018, and $400,000 in taxable bonds (Series B Bonds) which mature
December 1, 1998. The interest rates on both series are fixed at 5.355% and
5.9455% (inclusive of Trustee fees and administrative costs) for the Series A
and Series B bonds, respectively. The AXA insurance policy expires on December
1, 2004, however, the Partnership is required to obtain a new credit enhancer by
December 1, 2003. The bonds can be prepaid in 2001 at 102% and at par in 2002
and thereafter.
In order to facilitate the low-interest bond backed financing, the
Partnership set up a new ownership structure for the property, with no financial
statement impact on the Partnership. Reference is made to Item 1 for a
description.
The Series A issue has been designed with a cash collateral account rather
than a sinking fund. Upon closing, a $100,000 contribution was made to the cash
collateral account representing a quasi debt service reserve. The cash
collateral account was created to meet lender guidelines which required that 10%
of the bond issue be amortized by the end of the ten year credit enhancement
period. By utilizing a cash collateral account, the Partnership is able to
retain the full amount of the tax-exempt bond issue which may increase the value
of a premium if the property is sold prior to the bonds maturity. Contributions
to the cash collateral account are scheduled to begin on December 1, 1998.
Under the new bond structure, interest only payments of $52,541 were made
monthly to the trustee to service the semi-annual payments due on the bonds
until December 1995 when principal payments began on the Series B bonds. The
$400,000 principal will fully amortize, based on a schedule of bond maturities,
by December 1998.
11
<PAGE>
The Partnership's liquidation strategy includes a sale of the Waterford
property late in 1998 prior to required contributions to the Series A cash
collateral account. Based on current estimates, a sale inclusive of the bond
financing in late 1998 will provide net cash flow to the Partnership for
distribution to Unit Holders.
On March 30, 1994, the Partnership refinanced the Versailles Village
mortgage loan with the existing lender. The terms include a principal balance of
$4,200,000 for seven years at 8% based on a 25 year amortization schedule. The
loan is assumable with approval and payment of a 1% transfer fee. The loan is
pre-payable over the term of the loan at the greater of yield maintenance, tied
to treasuries, or 1% of the outstanding loan balance. The Partnership expects to
sell Versailles Village close to the date of the Waterford sale in late 1998,
possibly subject to the assumable financing. Based on the current projections,
cash will be available to distribute to Unit Holders from the property sale.
As a result of a general downturn in the economy and especially real estate
markets during the latter part of the 1980's and early 1990's, the Partnership
has held its investment properties longer than originally anticipated in order
to maximize the recovery of its investments and any potential for return
thereon. The economy has improved and real estate markets have begun to recover
in most regions. The Partnership has entered the liquidation phase of the
Partnership which includes completing sales of the investment properties by
1998. Based on the current position of the Partnership, it appears that the
Partnership's objective of capital appreciation will not be achieved. Although
the Partnership expects to distribute from the sales proceeds a portion of the
Unit Holders' original capital, the return will be significantly less than their
original investment.
RESULTS OF OPERATIONS
RESULTS - 1996 COMPARED WITH 1995
Partnership net operating income (total revenue less property operating
expenses, general and administrative expenses, fees and reimbursements to
affiliates and provision for doubtful accounts) was approximately $2,845,000 for
1996, a decrease from approximately $3,348,000 in 1995.
Net operating income at Stewart's Glen decreased approximately $385,000 in
1996 due to the sale of the property on April 30, 1996.
Versailles Village net operating income decreased approximately $33,000 in
1996 compared with 1995, primarily due to repairs on a number of HVAC units and
a main water line break.
Net operating income at Stonebridge Manor decreased approximately $10,000
in 1996 from 1995. More carpet replacements, exterior painting and higher
payroll costs were partially offset by a slight increase in average occupancy
and rental rates.
An increase in rental rates at Waterford Apartments was partially offset by
higher utilities, real estate taxes and nonroutine maintenance. Net operating
income increased approximately $31,000 in 1996 over 1995.
The remaining decrease in the Partnership's 1996 net operating income, as
compared with 1995, resulted from a net increase in fees and reimbursements to
affiliates, a decrease in legal fees, and a decline in other income. The
decrease in management fees to affiliates (due to the Stewart's Glen sale) and
the decrease in reimbursable expenses was more than offset by an increase in
partnership management fees (paid to an affiliate of the General Partner based
on 9% of adjusted cash from operations).
The sale of Stewart's Glen in April 1996 led to a decrease of approximately
$672,000 in rental income for the year ended December 31, 1996, as compared with
1995. Rental income for the remaining properties, Versailles Village,
Stonebridge Manor and Waterford, increased $20,000, $55,000 and $59,000,
respectively. Overall, an increase in rental rates accounted for the
improvement.
12
<PAGE>
Other income decreased approximately $66,000 for the year ended December
31, 1996, as compared with 1995, of which $22,000 was attributable to Stewart's
Glen which was sold in April 1996. The remaining decrease was primarily the
result of percentage rent and tenant expense recapture recorded in 1995 relating
to Promenades Plaza. At the time of the property sale in 1994, the Partnership
set up a receivable for amounts to be received outside the closing. In 1995, the
Partnership received a total of $39,433 in excess of the amount recorded as a
receivable.
Property operating expenses increased approximately $123,000 for the year
ended December 31, 1996, as compared with 1995, exclusive of an approximate
$236,000 decrease related to Stewart's Glen. Versailles Village incurred higher
maintenance and repair expense due to service needed on a number of HVAC units
and a main water line break. An increase in repairs and maintenance at
Stonebridge resulted from an exterior painting completed in conjunction with the
roof repair project, an increase in the number of carpet replacements and a pest
control contract entered into at the end of 1995. Maintenance and repair
increased at Waterford as a result of an increase in the cost of preparing
apartments for rent upon a tenant move out, including the additional expense of
replacing wallpaper in units and an increase in carpet replacements. The
increases at Waterford were partially offset by a decrease in landscaping
expenses. Utilities expense was up at Waterford and Versailles due to an
increase in usage as well as an increase in rates. At Stonebridge, fewer
corporate apartment rentals led to an increase in utilities expense. Real estate
taxes increased at Waterford and Stonebridge due to higher assessments, and at
Versailles due to an increased mill rate.
General and administrative expense increased approximately $9,000 for the
year ended December 31, 1996, as compared with 1995, after excluding the
Stewart's Glen decrease of $64,000. Payroll expenses at Stonebridge increased
primarily due to the hiring of new maintenance employees. Advertising costs for
Waterford and Stonebridge were lower as a result of improving occupancy, and
increased at Versailles in an effort to increase occupancy. In addition, legal
fees were lower in 1996 than in 1995.
The decrease in provision for doubtful accounts for the year ended December
31, 1996, as compared with 1995, exclusive of Stewart's Glen decrease of
$11,000, was primarily due to fewer collection problems at Waterford.
Interest expense decreased for the year ended December 31, 1996, as
compared with 1995, as a result of the retirement of the $3,400,000 Mellon Bank
promissory note on May 15, 1996 and the retirement of the Stewart's Glen
mortgage note upon the sale of the property in April 1996.
Depreciation and amortization decreased for the year ended December 31,
1996, as compared with 1995, as a result of the Stewart's Glen sale on April 30,
1996.
RESULTS - 1995 COMPARED WITH 1994
Generally, decreases in the income statement accounts are the result of the
Promenades Plaza sale on September 22, 1994. For the year ended December 31,
1994, Promenades Plaza accounted for approximately $804,000 of rental income,
$117,000 of other income, $303,000 of property operating expenses, $87,000 of
general and administrative expenses, $25,000 of provision for doubtful accounts,
$538,000 of interest expense and $250,000 of depreciation and amortization.
Rental income increased approximately $218,000 for the year ended December
31, 1995, as compared with 1994. Stonebridge Manor rental income increased
approximately $96,000 and Versailles Village rental income increased
approximately $34,000 for the year as a result of rental rate increases.
Stewart's Glen's rental rate increases offset a nominal decline in average
occupancy producing a net increase in rental income of approximately $26,000.
Rental income increased $62,000 at Waterford Apartments due to weak occupancy in
the fourth quarter of 1994.
The increase in other income for the year ended December 31, 1995, as
compared with 1994, resulted from collecting approximately $40,000 in excess of
the 1994 receivable relating to 1994 expense recapture and percentage rent from
tenants at Promenades Plaza.
13
<PAGE>
The increase in interest income for the year ended December 31, 1995, as
compared with 1994, was the result of an increase in interest rates on short
term investments combined with higher average cash balances. In addition,
Waterford earned higher rates on the trust accounts associated with its bond
related financing.
Overall, property operating expenses increased for the year ended December
31, 1995, as compared with 1994, due to a rise in insurance costs at each of the
properties. In addition, Waterford incurred nonroutine maintenance expenditures
for extensive landscaping work and Stewart's Glen completed an exterior staining
project and a greater number of carpet replacements. Stonebridge incurred costs
for dryer vent replacements and fireplace cleaning. Increased costs at
Stonebridge were partially offset by fewer carpet replacements and higher
utility reimbursements from corporate tenants. Expenses decreased at Versailles
as a result of a nonrecurring real estate tax consulting fee in 1994 as well as
a drop in utility usage in 1995 due to the milder winter and a repair of a water
leak.
The increase in general and administrative expense for the year ended
December 31, 1995, as compared with 1994, was the result of increased payroll
related costs at Waterford, Stonebridge and Stewart's Glen. In addition,
advertising costs were increased at Waterford in an effort to increase
occupancy.
The decrease in interest expense for the year ended December 31, 1995, as
compared with 1994, was the result of the November 1, 1994 Stewart's Glen
refinance which decreased the interest rate from 9.94% to 8.55%. In addition,
the March 30, 1994 Versailles Village first mortgage refinance lowered the
interest rate from 10% to 8%.
The increase in depreciation and amortization for the year ended December
31, 1995, as compared with 1994, was primarily the result of amortizing
financing costs of the April 1, 1995 Stonebridge Manor first mortgage refinance.
INFLATION
With inflation at a low rate during 1996, 1995 and 1994, the effect of
inflation and changing prices on current revenue and income from operations has
been minimal.
Any significant inflation in future periods is likely to increase rental
rates (from leases to new tenants or renewals of leases to existing tenants)
assuming no major changes in market conditions. At the same time, it is
anticipated that property operating expenses will be similarly affected.
Assuming no major changes in occupancy levels, increases in rental income are
expected to cover inflation driven increases in the cost of operating the
properties and in property taxes. Inflation may also result in capital
appreciation of the Partnership's investment properties over a period of time as
rental rates and replacement costs of properties increase.
14
<PAGE>
<TABLE>
<CAPTION>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
INDEX
PAGE
<S> <C>
Report of Independent Accountants 16
Financial Statements:
Balance Sheets, December 31, 1996 and 1995 17
Statements of Operations, For the Years Ended December 31, 1996, 1995 and 1994 18
Statements of Partners' Capital (Deficit), For the Years Ended December 31, 1996, 1995 and 1994 19
Statements of Cash Flows, For the Years Ended December 31, 1996, 1995 and 1994 20
Notes to Financial Statements 21
Schedules:
III - Real Estate and Accumulated Depreciation, December 31, 1996 27
Schedules not filed:
All schedules other than those indicated in the index have been omitted as
the required information is inapplicable or the information is presented in the
financial statements or related notes.
15
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Connecticut General Realty Investors III
Limited Partnership
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of Connecticut
General Realty Investors III Limited Partnership at December 31, 1996 and 1995,
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Hartford, Connecticut
February 14, 1997
16
<PAGE>
<TABLE>
<CAPTION>
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS 1996 1995
<S> <C> <C>
Property and improvements, at cost:
Land and land improvements $ 4,170,151 $ 6,119,148
Buildings 25,569,468 30,577,342
Furniture and fixtures 2,071,051 2,206,128
--------------- ---------------
31,810,670 38,902,618
Less accumulated depreciation 11,431,301 12,770,211
--------------- ---------------
Net property and improvements 20,379,369 26,132,407
Cash and cash equivalents 638,965 2,481,123
Accounts receivable (net of allowance of $6,497 in 1996 and
$8,671 in 1995) 11,058 7,694
Ecrow deposits 175,298 281,236
Other asset 1,000 1,000
Deferred charges, net 1,131,995 1,329,140
Escrowed debt service funds 506,660 506,660
--------------- ---------------
Total $ 22,844,345 $ 30,739,260
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Notes and mortgages payable $ 20,807,619 $ 29,347,622
Accounts payable and accrued expenses (including $5,978
in 1996 and $10,001 in 1995 due to affiliates) 245,094 361,508
Accrued interest payable (including $17,000 in 1995
due to affiliates) -- 72,946
Tenant security deposits 151,867 169,396
Unearned income 29,624 25,973
--------------- ---------------
Total liabilities 21,234,204 29,977,445
--------------- ---------------
Partners' capital (deficit):
General Partner:
Capital contributions 1,000 1,000
Cumulative net income (loss) 11,518 (102,765)
Cumulative cash distributions (23,426) (13,355)
--------------- ---------------
(10,908) (115,120)
--------------- ---------------
Limited partners (24,856 Units):
Capital contributions, net of offering costs 22,408,052 22,408,052
Cumulative net loss (17,887,925) (20,197,967)
Cumulative cash distributions (2,899,078) (1,333,150)
--------------- ---------------
1,621,049 876,935
--------------- ---------------
Total partners' capital 1,610,141 761,815
--------------- ---------------
Total $ 22,844,345 $ 30,739,260
=============== ===============
The Notes to Financial Statements are an integral part of these statements.
17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income:
Rental income $ 4,932,691 $ 5,470,498 $ 6,057,080
Other income 123,278 189,499 252,860
Interest income 149,601 158,944 82,421
------------- -------------- ---------------
5,205,570 5,818,941 6,392,361
------------- -------------- ---------------
Expenses:
Property operating expenses 1,452,587 1,565,854 1,792,651
General and administrative 718,639 773,405 824,771
Fees and reimbursements to affiliates 181,933 108,330 93,147
Provision for doubtful accounts 6,633 23,304 50,347
Interest expense (includes $25,500 for 1996,
$68,000 for 1995 and $66,313 for 1994 to affiliates) 1,749,224 2,227,301 2,833,940
Depreciation and amortization 1,112,487 1,331,623 1,528,616
------------- -------------- ---------------
5,221,503 6,029,817 7,123,472
------------- -------------- ---------------
Loss from operations (15,933) (210,876) (731,111)
Gain on sale of property 2,440,258 -- 24,837
------------- -------------- ---------------
Net income (loss) $ 2,424,325 $ (210,876) $ (706,274)
============= ============== ===============
Net income (loss):
General Partner $ 114,283 $ (2,108) $ 17,526
Limited partners 2,310,042 (208,768) (723,800)
------------- -------------- ---------------
$ 2,424,325 $ (210,876) $ (706,274)
============= ============== ===============
Net income (loss) per Unit $ 92.94 $ (8.40) $ (29.12)
============= ============== ===============
Cash distributions per Unit $ 63.00 $ -- $ --
============= ============== ===============
The Notes to Financial Statements are an integral part of these statements.
18
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
General Limited
Partner Partners Total
<S> <C> <C> <C>
Balance (deficit) at December 31, 1993 $ (130,538) $ 1,820,165 $ 1,689,627
Distributions -- (3,672) (3,672)
Net income (loss) 17,526 (723,800) (706,274)
------------ ------------- -------------
Balance (deficit) at December 31, 1994 (113,012) 1,092,693 979,681
Distributions -- (6,990) (6,990)
Net loss (2,108) (208,768) (210,876)
------------- -------------- --------------
Balance (deficit) at December 31, 1995 (115,120) 876,935 761,815
Distributions (10,071) (1,565,928) (1,575,999)
Net income 114,283 2,310,042 2,424,325
------------ ------------- -------------
Balance (deficit) at December 31, 1996 $ (10,908) $ 1,621,049 $ 1,610,141
============ ============= =============
The Notes to Financial Statements are an integral part of these statements.
19
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,424,325 $ (210,876) $ (706,274)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Gain on sale of property (2,440,258) -- (24,837)
Depreciation and amortization 1,112,487 1,331,623 1,528,616
Provision for doubtful accounts 6,633 23,304 50,347
Accounts receivable (9,997) 56,266 68,687
Escrow deposits 105,938 (109,971) (105,835)
Accounts payable (128,116) 48,897 (170,032)
Accrued interest payable (72,946) -- (65,577)
Other, net (13,878) 141,168 (182,709)
--------------- ---------------- ---------------
Net cash provided by operating activities 984,188 1,280,411 392,386
--------------- ---------------- ---------------
Cash flows from investing activities:
Proceeds from sale of property 7,853,900 -- 6,572,000
Payment of closing costs related to sale of property (102,306) -- (307,206)
Purchases of property and improvements (454,948) (213,345) (198,797)
Payment of leasing commissions -- -- (72,502)
--------------- ---------------- ---------------
Net cash provided by (used in)
investing activities 7,296,646 (213,345) 5,993,495
--------------- ---------------- ---------------
Cash flows from financing activities:
Distribution to limited partners (1,572,918) (3,672) (1,683)
Distribution to General Partner (10,071) -- --
Repayment of notes and mortgage loans (8,540,003) (5,439,969) (10,047,272)
Proceeds from notes and mortgage loans -- 5,300,000 4,200,000
Payment of financing costs -- (105,010) (24,251)
--------------- ---------------- ---------------
Net cash used in financing activities (10,122,992) (248,651) (5,873,206)
--------------- ---------------- ---------------
Net increase (decrease) in cash and cash equivalents (1,842,158) 818,415 512,675
Cash and cash equivalents, beginning of year 2,481,123 1,662,708 1,150,033
--------------- ---------------- ---------------
Cash and cash equivalents, end of year $ 638,965 $ 2,481,123 $ 1,662,708
=============== ================ ===============
Supplemental disclosure of cash information:
Interest paid during period $ 1,822,170 $ 2,227,301 $ 2,899,517
=============== ================ ===============
Supplemental disclosure of non-cash information:
Accrued purchases of property and improvements $ 64,633 $ 45,941 $ 6,650
=============== ================ ===============
The Notes to Financial Statements are an integral part of these statements.
20
</TABLE>
<PAGE>
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Connecticut General Realty Investors III Limited Partnership (the
"Partnership"), a Connecticut limited partnership, was organized in April 1984
to own and operate residential and commercial real estate. The general partner
of the Partnership is CIGNA Realty Resources, Inc. - Fifth (the "General
Partner").
In December 1993, the Partnership refinanced the mortgages encumbering its
Oklahoma property. In conformity with the loan requirements, the property was
segregated from the Partnership's remaining investment properties. The
Partnership contributed the real property and improvements subject to mortgage
debt and net working capital to the Waterford Partnership, a Connecticut general
partnership, in exchange for a 99.9% general partnership interest, and the
General Partner contributed $1 in exchange for a 0.1% general partnership
interest. The General Partner's interest is held in trust for the benefit of
Tulsa Corporation, the stock of which is 100% owned by the Partnership.
2. 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.
Actual results could differ from those estimates.
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. Depreciation of assets to be disposed of is prohibited. The adoption
of this Statement had no impact on the Partnership's results of operations,
liquidity and financial condition.
C) FINANCIAL INSTRUMENTS: Except for Notes and Mortgages Payable, financial
instruments subject to fair value disclosure requirements are carried in
the financial statements at amounts that approximate fair value. For Notes
and Mortgages Payable, the estimate of fair value was based on the quoted
market prices for similar issues or by discounted cash flow analyses which
utilize current interest rates for similar financial instruments with
comparable terms and credit quality.
D) PROPERTY AND IMPROVEMENTS: Property and improvements 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 of
property and improvements is calculated on the straight-line method based
on the estimated useful lives of the various components (5 to 30 years).
E) CASH AND CASH EQUIVALENTS: Short-term investments with a maturity of three
months or less at the time of purchase are generally reported as cash
equivalents.
F) ESCROW DEPOSITS AND ESCROWED DEBT SERVICE FUNDS: Escrow deposits consist of
funds held to pay property taxes and insurance required by the
Partnership's mortgage lenders, maintenance escrows required by
Stonebridge Manor's and Waterford's mortgage lenders, and a Stonebridge
Manor utility deposit. Escrowed debt service funds relate to Waterford and
include debt service reserves and a cash collateral reserve.
21
<PAGE>
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
G) DEFERRED CHARGES: Deferred charges consist of a surety fee, relating to the
financing of the Waterford Apartments, which is amortized over the ten year
period of the surety, and financing costs for each of the Partnership's
properties, which are amortized over the lives of the respective loans.
H) PARTNERS' CAPITAL: Offering costs, comprised of sales commissions and other
issuance expenses, have been charged to the partners' capital accounts as
incurred.
I) INCOME TAXES: No provision for income taxes has been made as the liability
for such taxes is that of the partners rather than the Partnership.
3. FEDERAL INCOME TAX REPORTING
The principal differences between generally accepted accounting principles and
tax reporting is the classification of offering costs (sales commissions and
other issuance expenses) and the method of depreciation. The net effects of the
differences as of December 31, 1996, 1995 and 1994, are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------- ---------------------------- -----------------------------
Financial Tax Financial Tax Financial Tax
Reporting Reporting Reporting Reporting Reporting Reporting
<S> <C> <C> <C> <C> <C> <C>
Total assets $ 22,844,345 $ 17,279,595 $ 30,739,260 $ 25,385,321 $ 31,005,057 $ 26,055,282
Partners' capital
(deficit):
General Partner (10,908) (126,311) (115,120) (179,085) (113,012) (172,937)
Limited partners 1,621,049 (3,799,106) 876,935 (4,387,493) 1,092,693 (3,771,899)
Net income (loss) (a):
General Partner 114,283 62,844 (2,108) (6,147) 17,526 (58,056)
Limited partners 2,310,042 2,154,319 (208,768) (608,609) (723,800) (5,747,501)
Net income (loss) per Unit (a) 92.94 86.67 (8.40) (24.48) (29.12) (231.23)
(a) Included in 1996 is a gain on sale of property of $2,440,258 ($2,325,815 or
$93.57 per Unit to limited partners) for financial reporting purposes and a
gain of $2,703,671 ($2,635,963 or $106.05 per Unit to limited partners) for
tax reporting. Included in 1994 is a $24,837 gain on sale of property (100%
to the General Partner) for financial reporting and a loss on sale of
$4,503,525 ($179.37 per Unit) for tax reporting.
</TABLE>
4. INVESTMENT PROPERTIES
The Partnership purchased four apartment complexes located in Ohio,
Oklahoma, Louisiana and Illinois and one shopping center located in Florida. At
December 31, 1996, the Partnership held for the production of income three
residential properties which were operating with leases in effect generally for
a term of one year or less. At January 1, 1996, the Partnership was holding the
Illinois property, Stewart's Glen Apartments Phase III, for sale. On April 30,
1996, the Partnership completed the sale of Stewart's Glen Apartments. Each
investment property is pledged as security for its respective non-recourse
long-term debt.
22
<PAGE>
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
On January 27, 1993, the Partnership sold an outparcel at the Promenades
Plaza Shopping Center with a net book value of $376,083 for a sales price of
$500,000, netting the Partnership $452,500 after commission and closing costs.
The Partnership recognized a gain on the sale of $76,417 in 1993. On September
22, 1994, the Partnership completed the sale of Promenades Plaza for a gross
sales price of $6,572,000. The property had a carrying value of $6,239,957 (net
of impairment losses of $5,000,000 in 1993 and $700,000 in 1991). After
deducting closing costs of $307,206, the Partnership recorded a gain of $24,837.
The Promenades Plaza Shopping Center had leases which provided for
additional rents based upon a percentage of tenant sales over a specified
amount. Amounts earned by the Partnership for such rents in 1995 and 1994 were
$39,433 and $71,669, respectively. Certain of these leases also contained
escalation and expense recapture clauses, which provided that tenants pay their
pro rata share of any increases in common area maintenance, taxes and operating
expenses over base period amounts. The Partnership earned $113,031 in 1994 as a
result of such provisions.
5. DEFERRED CHARGES
Deferred charges at December 31, 1996 and 1995 consist of the following:
1996 1995
---- ----
Surety fee - Waterford financing $ 963,910 $ 963,910
Financing costs 765,532 845,127
------------- -------------
1,729,442 1,809,037
Accumulated amortization (597,447) (479,897)
------------- -------------
$ 1,131,995 $ 1,329,140
============= =============
<TABLE>
<CAPTION>
6. NOTES AND MORTGAGES PAYABLE
Except as noted, the Partnership's debt is non-recourse to the Partnership
and is secured by the investment properties. Notes and mortgages payable at
December 31, 1996 and 1995 consist of the following:
December 31
-----------
1996 1995
---- ----
<S> <C> <C>
8% mortgage note for Versailles Village Apartments. Principal and interest of
$32,416 payable monthly from May 1, 1994 until April 1, 2001, when the balance
of $3,704,876 will be due. $ 4,037,591 $ 4,100,806
Waterford Apartments promissory note financed with industrial revenue bonds.
Non-taxable Series 1993A Bonds; 5.35%; interest only payments of $50,624 12/1/93
to 12/1/2018 due monthly; 10% of principal required in cash collateral account
by 12/1/2003; cash collateral set up at closing with $100,000; additional
contributions to collateral account begin 12/1/98; bond maturity, 12/1/2018. 11,355,000 11,355,000
23
</TABLE>
<PAGE>
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
December 31
-----------
1996 1995
---- ----
<S> <C> <C>
Waterford Apartments promissory note financed with industrial revenue bonds.
Taxable Series 1993B Bonds; 5.75%; interest only payments of $1,917 due monthly
12/1/93 to 12/1/95, principal and interest of $12,750 due monthly 12/1/95 to
6/1/96, $11,605 6/1/96 to 12/1/96, $12,984 12/1/96 to 6/1/97, $11,816 6/1/97 to
12/1/97, $12,338 12/1/97 to 6/1/98, $12,002 6/1/98 to 12/1/98; fully amortized
by 12/1/98. 263,333 389,167
10.15% note for Stonebridge Manor Apartments. Principal and interest of $52,172
payable monthly from May 1, 1995 until March 1, 1998. The balance of all
outstanding principal and unpaid interest will be due at maturity on April 1,
1998. 5,151,695 5,241,066
8.55% mortgage note for Stewart's Glen Apartments Phase III. Interest only at
9.94% payable monthly until February 1, 1991. Principal and interest of $47,306
payable monthly from March 1, 1991, until November 1, 1994, when the note was
modified to 8.55% interest only payments of $34,639 payable monthly from
December 1, 1994 until April 1, 1996, the extended maturity date. The note was
extended to May 1, 1996 in order for the Partnership to complete a sale of the
property. The property was sold on April 30, 1996 and the note was retired. -- 4,861,583
Partnership recourse promissory note dated March 25, 1994 and due March 25,
1997. Interest only payments at 6.6% for the first two years with no prepayment
provision. The interest only payments for the third year was at a floating rate
equal to Mellon Bank's prime rate. The note could be prepaid in full at any time
during the third year. The note, which was guaranteed by an affiliate of the
General Partner, was paid in full on May 15, 1996. -- 3,400,000
------------------- -----------------
Total notes and mortgages payable $ 20,807,619 $ 29,347,622
=================== =================
The Waterford Apartments mortgage debt consists of two promissory notes
financed with $11,755,000 in industrial bonds issued from the Tulsa County Home
Finance Authority and credit enhanced by AXA Reassurance, SA. The AXA insurance
policy expires on December 1, 2004, however, the Partnership is required to
obtain a new credit enhancer by December 1, 2003. The bonds can be prepaid in
2001 at 102% and at par in 2002 and thereafter.
24
</TABLE>
<PAGE>
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Five year maturities of long-term debt are summarized as follows:
1997 $ 304,179
1998 5,253,456
1999 80,299
2000 86,963
2001 3,727,722
Thereafter 11,355,000
The fair value of notes and mortgages payable was approximately $21,200,000
at December 31, 1996 and $29,900,000 at December 31, 1995. The estimate of fair
value was based on the quoted market prices for similar issues or by discounted
cash flow analysis which utilize current interest rates for similar financial
instruments with comparable terms and credit quality.
8. TRANSACTIONS WITH AFFILIATES
Fees and other expenses incurred by the Partnership related to the General
Partner or its affiliates during the periods ended December 31, 1996, 1995 and
1994 are as follows:
1996 1995 1994
---- ---- ----
Property management fees(a) $ 38,756 $ 44,461 $ 45,631
Partnership management fees 99,601 -- --
Printing 5,768 10,823 6,150
Reimbursement (at cost) for
out-of-pocket expenses 37,808 53,046 41,366
----------- ----------- -----------
$ 181,933 $ 108,330 $ 93,147
=========== =========== ===========
(a) Does not include property management fees earned by independent property
management companies of $213,881, $235,974 and $290,347 for 1996, 1995 and
1994, respectively. Certain 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.
In addition, the Partnership's recourse promissory note was guaranteed by
an affiliate of the General Partner for an annual fee of 2% of the outstanding
balance. The note was paid in full on May 15, 1996.
9. PARTNERS' CAPITAL
During 1991, the State of Connecticut enacted income tax legislation, a
part of which affects partnerships. The portfolio income allocations made by the
Partnership to the limited partners are considered Connecticut based income and
subject to Connecticut tax. The Partnership had elected to pay the tax due on
the limited partners' share of portfolio income in 1995 and, therefore, paid tax
due of $6,990 directly to the State of Connecticut in April 1996 for the 1995
Form CT-G Connecticut Group Income Tax Return. This amount was treated as a
reduction of partners' capital and reported as a distribution in 1995.
25
<PAGE>
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
10. SALE OF 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 $2,890,011. The property had a carrying value of $5,311,336
for financial reporting and $5,047,923 for tax reporting. After deducting
closing costs of $102,306, the Partnership recorded a gain of $2,440,258 for
financial reporting and $2,703,671 for tax reporting. 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.
11. PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement as amended January 1,
1988, net income or loss and cash distributions from operations, as well as any
net losses arising from the sale or disposition of investment properties, are to
be allocated 1% to the General Partner and 99% to the Limited Partners. Cash
distributions are allocated to the Partners following the receipt by an
affiliate of the General Partner of a partnership management fee of 9% of
"Adjusted Cash From Operations", as defined in the Partnership Agreement.
Distributable cash from the sale or disposition of investment properties
is to be generally allocated in the following order:
o To the Limited Partners up to the amount of their Original Invested
Capital;
o To the General Partner, an additional amount depending upon the
percentage of Gross Proceeds committed to investment in properties;
o To the Limited Partners in an amount, which when added to prior
distributions from operations, equals an 8% cumulative noncompounded
return on their adjusted invested capital;
o To an affiliate of the General Partner as a subordinated disposition
fee; and
o With respect to the remainder, 85% to the Limited Partners and 15% to
the General Partner.
Generally, income from the sale or disposition of investment property is
allocated as follows:
o To each Partner having a deficit balance in the same ratio of such
balance to the aggregate balance of all Partners;
o To each Partner to the extent of cash distributed from the sale; and
o Any remaining gain, 1% to the General Partner and 99% to the Limited
Partners.
26
<PAGE>
<TABLE>
<CAPTION>
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP SCHEDULE III
(A CONNECTICUT LIMITED PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
Costs
Capitalized
Initial Cost to Partnership (B)(C) Subsequent
to Acquisition
Description of Apartment Land, Building
Complexes by Property Land and Land Furniture and Improvements and
Location Encumbrances (A) Improvements Buildings Fixtures Furniture & Fixtures
<S> <C> <C> <C> <C> <C>
Versailles Village Apts. $ 4,100,806 $ 562,000 $ 4,857,554 $ 406,800 $ 872,831
Forest Park, OH
Waterford Apts. 11,744,167 2,085,826 11,343,875 492,765 171,342
Tulsa, OK
Stonebridge Manor Apts. 5,241,066 1,145,579 8,639,666 624,600 607,832
New Orleans, LA
- -----------------------------------------------------------------------------------------------------------------------------
Totals $21,086,039 $3,793,405 $24,841,095 $1,524,165 $1,652,005
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried at Close of Period (D)(E)
Description of Apartment
Complexes by Property Land and Land
Location Improvements Buildings Furniture and Fixtures Total
<S> <C> <C> <C> <C>
Versailles Village Apts. $ 772,176 $ 5,151,041 $ 775,968 $ 6,699,185
Forest Park, OH
Waterford Apts. 2,139,072 11,404,163 550,573 14,093,808
Tulsa, OK
Stonebridge Manor Apts. 1,258,903 9,014,264 744,510 11,017,677
New Orleans, LA
- ------------------------------------------------------------------------------------------------------------------------
Total $4,170,151 $25,569,468 $2,071,051 $31,810,670
========================================================================================================================
27
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP SCHEDULE III
(A CONNECTICUT LIMITED PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
DECEMBER 31, 1996
Life on Which
Description of Depreciation in Latest
Apartment Statement of
Complexes by Accumulated Date of Operations is
Property Location Depreciation (F) Construction Date Acquired Computed
<S> <C> <C> <C> <C>
Versailles Village Apts. $2,736,552 1970 02/06/85 5-30 years
Forest Park, OH
Waterford Apts. 4,760,295 1984 10/31/85 5-30 years
Tulsa, OK
Stonebridge Manor Apts. 3,934,454 1985 11/26/85 5-30 years
New Orleans, LA
- --------------------------------------------------------------------------------------------------------------------
Totals $11,431,301
====================================================================================================================
(A) Encumbrances, which are secured by the Partnership's properties are net of
discounts and include accrued interest payable at maturity (See Notes to
Financial Statements).
(B) The cost to the Partnership represents the initial purchase price of the properties including certain acquisition fees and
expenses, net of discounts on related debt.
(C) The Partnership recorded $774,493 and $1,172,310 under the guarantee
agreements from the sellers of Waterford and Stonebridge Manor,
respectively, which were treated as a reduction of initial cost.
(D) The aggregate cost of real estate owned at December 31, 1996 for federal income tax purposes is $32,125,874.
</TABLE>
<TABLE>
<CAPTION>
(E) Reconciliation of real estate owned:
Description 1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of period $38,902,618 $38,649,982 $47,529,957
Additions during period 488,210 252,636 205,447
Reductions during period (G) (7,580,158) -- (9,085,422)
- -------------------------------------------------------------------------------------------------
Balance at end of period $31,810,670 $38,902,618 $38,649,982
=================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(F) Reconciliation of accumulated depreciation:
Description 1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of period $12,770,211 $11,629,808 $13,252,478
Additions during period 915,342 1,140,403 1,328,700
Reductions during period (G) (2,254,252) -- (2,951,370)
- -------------------------------------------------------------------------------------------------
Balance at end of period $11,431,301 $12,770,211 $11,629,808
=================================================================================================
(G) Includes sale of Stewart's Glen Apartments Phase III in 1996 and Promenades
Plaza in 1994.
</TABLE>
28
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The General Partner of the Partnership, CIGNA Realty Resources, Inc.-
Fifth, a Delaware corporation, is an indirectly, wholly owned subsidiary of
CIGNA Corporation, a publicly held corporation whose stock is traded on the New
York Stock Exchange. The General Partner has responsibility for and control over
the affairs of the Partnership.
<TABLE>
<CAPTION>
The directors and executive officers of the General Partner as of February
14, 1997 are as follows:
<S> <C> <C>
Name Office Served Since
---- ------
R. Bruce Albro Director May 2, 1988
David Scheinerman Director July 25, 1995
Philip J. Ward Director May 2, 1988
John D. Carey President September 7, 1993
Verne E. Blodgett Vice President, Counsel April 2, 1990
Joseph W. Springman Vice President, Assistant Secretary September 7, 1993
David C. Kopp Secretary September 29, 1989
Kenneth Garrett Treasurer April 26, 1996
Josephine C. Donofrio Controller September 23, 1996
</TABLE>
There is no family relationship among any of the foregoing directors or
officers. There are no arrangements or understandings between or among said
officers or directors and any other person pursuant to which any officer or
director was selected as such.
The foregoing directors and officers are also officers and/or directors of
various affiliated companies of CIGNA Realty Resources, Inc. - Fifth, including
CIGNA Financial Partners, Inc. (the parent of CIGNA Realty Resources, Inc. -
Fifth), CIGNA Investments, Inc., CIGNA Corporation (the parent of CIGNA
Investments, Inc.), and Connecticut General Corporation (the parent of CIGNA
Financial Partners, Inc.).
29
<PAGE>
The business experience of each of the directors and executive officers of
the General Partner of the Partnership is as follows:
R. BRUCE ALBRO - DIRECTOR
Mr. Albro, age 54, a Senior Managing Director of CIM, joined Connecticut
General's Investment Operations in 1971 as an Equities Securities Analyst in
Paper, Forest Products, Building and Machinery. Subsequently, he served as a
Research Department Unit Head, as an Assistant Portfolio Manager, then as
Director of Equity Research and a member of the senior staff of CIGNA Investment
Management Company and as a Portfolio Manager in the Fixed Income area. He then
headed the Marketing and Merchant Banking area for CII. Prior to his current
assignment of Division Head, Portfolio Management Division, he was an insurance
portfolio manager, and prior to that, he was responsible for Individual
Investment Product Marketing. In addition, Mr. Albro currently serves as
President of the CIGNA Funds Group and other CIGNA affiliated mutual funds. Mr.
Albro received a Master of Arts degree in Economics from the University of
California at Berkeley and a Bachelor of Arts degree in Economics from the
University of Massachusetts at Amherst. He is a Chartered Financial Analyst.
DAVID SCHEINERMAN - DIRECTOR
Mr. Scheinerman, age 36, was appointed Chief Financial Officer of CIGNA
Individual Insurance, a division with more than $94 billion of life insurance in
force, in July of 1995. Mr. Scheinerman has served in various actuarial and
business management capacities with CIGNA. In 1991 he was appointed Vice
President and Pricing Actuary for CIGNA HealthCare. He has more than 13 years of
financial management experience and has served as Chief Financial Officer of
Crusader Insurance PLC, a CIGNA subsidiary life company in the United Kingdom.
Mr. Scheinerman holds a BA in Mathematics from Rice University and an MBA from
the University of Pennsylvania Wharton School of Business. He is a fellow of the
Society of Actuaries and a member of the American Academy of Actuaries.
PHILIP J. WARD - DIRECTOR
Mr. Ward, age 48, is Senior Managing Director and Division Head of CIGNA
Investment Management (CIM), in charge of the Real Estate Investment Division of
CIM. He was appointed to that position in December 1985. Mr. Ward joined
Connecticut General's Mortgage and Real Estate Department in 1971 and became an
officer in 1976. Since joining the company he has held real estate investment
assignments in Mortgage and Real Estate Production and in Portfolio Management.
Prior to his current position, Mr. Ward held assignments in CIGNA Investments
Inc., responsible for the Real Estate Production area, CIGNA Realty Advisors,
Inc. and Congen Realty Advisory Company, all wholly-owned subsidiaries of CIGNA
Corporation and/or Connecticut General. Mr. Ward has held various positions with
the General Partner. His experience includes all forms of real estate
investments, with recent emphasis on acquisitions and joint ventures. Mr. Ward
is a 1970 graduate of Amherst College with a Bachelor of Arts degree in
Economics. He is a member of the Society of Industrial and Office Realtors, the
National Association of Industrial and Office Parks, the Urban Land Institute
and the International Council of Shopping Centers. He is a member of the Board
of Directors of Simon DeBartolo Corporation and Wyndham Hotel Corporation.
JOHN D. CAREY - PRESIDENT
Mr. Carey, age 33, is the President of the General Partner and CIGNA
Financial Partners, Inc. (CFP) and manages the Tax Advantaged Investment unit of
CIGNA Investment Management-Real Estate. Mr. Carey was elected President in
1993, and from 1990 to 1996, he served as the Controller of the General Partner
and CFP, primarily responsible for accounting and financial reporting. Prior to
joining CIGNA Investment Management, he held the position of manager at KPMG
Peat Marwick in the audit department and was a member of the Real Estate Focus
Group. Mr. Carey is a graduate of Central Connecticut State University with a
Bachelor of Science degree and is a Certified Public Accountant.
30
<PAGE>
VERNE E. BLODGETT - VICE PRESIDENT, COUNSEL
Mr. Blodgett, age 59, is an Assistant General Counsel of CIGNA Corporation.
He joined Connecticut General Life Insurance Company in 1975 as an investment
attorney and has held various positions in the Legal Division of Connecticut
General Life Insurance Company prior to his appointment as Assistant General
Counsel in 1981. Mr. Blodgett received a Bachelor of Arts degree from Yale
University and graduated with honors from the University of Connecticut School
of Law. He is a member of the Connecticut and the American Bar Associations.
JOSEPH W. SPRINGMAN - VICE PRESIDENT, ASSISTANT SECRETARY
Mr. Springman, age 55, is Managing Director and department head responsible
for Acquisitions. He joined CIGNA's Real Estate operations in 1970. He has held
positions as an officer or director of several real estate affiliates of CIGNA.
His past real estate assignments have included Development and Engineering,
Property Management, Director - Real Estate Operations, Portfolio Management,
Vice President - Real Estate Production and Managing Director - Asset
Management. He received a Bachelor of Science degree from the U.S. Naval
Academy.
DAVID C. KOPP - SECRETARY
Mr. Kopp, age 51, is Secretary of CII, Corporate Secretary of Connecticut
General Life Insurance Company and Assistant Corporate Secretary and Assistant
General Counsel, Insurance and Investment Law of CIGNA Corporation. He also
serves as an officer of various other CIGNA Companies. In August of 1995, he
also assumed responsibility as chief compliance officer for CIGNA HealthCare, a
division of CIGNA Corporation. He joined Connecticut General Life Insurance
Company in 1974 as a commercial real estate attorney and held various positions
in the Legal Department of Connecticut General Life Insurance Company prior to
his appointment as Corporate Secretary in 1977. Mr. Kopp is an honors graduate
of Northern Illinois University and served on the law review at the University
of Illinois College of Law. He is a member of the Connecticut Bar Association
and is past President of the Hartford Chapter, American Society of Corporate
Secretaries.
KENNETH R. GARRETT - TREASURER
Kenneth R. Garrett, age 40, is Assistant Vice President, Bank
Reconciliation and Services of CIGNA Corporation. In this capacity he manages a
staff responsible for reconciling approximately 500 CIGNA Corporation and
subsidiaries bank accounts, establishing and enforcing signature authority
limits on checks and drafts, working and negotiating with banks for paper based
disbursement services and providing check and draft services to CIGNA's
operating divisions. Kenneth joined the Insurance Company of North America (INA)
in 1988. He has held a number of positions in insurance, finance and strategy
with INA and later with the merged CIGNA Corporation before assuming his current
responsibilities. He received a B.A. degree for Delaware State University and an
M.B.A. in finance from Atlanta University.
JOSEPHINE C. DONOFRIO - CONTROLLER
Ms. Donofrio, age 29, was elected Controller of Tax Advantaged Investments
in 1996. In 1993, Ms. Donofrio joined CIGNA Investment Management - Real Estate
as a member of the Tax Advantaged Investment Unit. Prior to joining CIGNA
Investment Management, Ms. Donofrio was a senior accountant at Kostin, Ruffkess
& Company, LLC. Her experiences include financial and tax reporting for public
and private real estate limited partnership syndications. Ms. Donofrio is a
graduate of the University of Connecticut with a Bachelor of Science Degree. She
is a Certified Public Accountant and a member of the Connecticut Society of
Certified Public Accountants.
ITEM 11. EXECUTIVE COMPENSATION
Officers and directors of the General Partner receive no current or
proposed direct compensation from the Partnership in such capacities. However,
certain officers and directors of the General Partner received compensation from
the General
31
<PAGE>
Partner and/or its affiliates (but not from the Partnership) for services
performed for various affiliated entities, which may include services performed
for the Partnership, but such compensation was not material in the aggregate.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No person or group is known by the Partnership to own beneficially more
than 5% of the outstanding Units of interest of the Partnership.
There exists no arrangement, known to the Partnership, the operation of
which may at a subsequent date result in a change in control of the Partnership.
As of February 14, 1997, the individual directors and the directors and
officers, as a group, of the General Partner beneficially owned Partnership
Units and shares of the common stock of CIGNA, parent of the General Partner, as
set forth in the following table:
Units Shares
Beneficially Beneficially Percent
Name Owned(a) Owned(b) of Class
---- -------- -------- --------
R. Bruce Albro (c) 0 9,192 *
David Scheinerman (d) 0 2,153 *
Philip J. Ward (e) 0 12,683 *
All directors and officers
Group (9) (f) 0 29,896 *
* Less than 1% of class
(a) No officer or director of the General Partner possesses a right to acquire
beneficial ownership of additional Units of interest of the Partnership.
(b) The directors and officers have sole voting and investment power over all
the shares of CIGNA common stock they own beneficially.
(c) Shares beneficially owned includes options to acquire 6,056 shares and
1,318 shares which are restricted as to disposition.
(d) Shares beneficially owned includes options to acquire 345 shares and 1,599
shares which are restricted as to disposition.
(e) Shares beneficially owned includes options to acquire 4,630 shares and
1,645 shares which are restricted as to disposition.
(f) Shares beneficially owned by directors and officers include 12,066 shares
of CIGNA common stock which may be acquired upon exercise of stock options
and 8,606 shares which are restricted as to disposition.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The General Partner of the Partnership is generally entitled to receive 1%
of cash distributions, when and as cash distributions are made to the limited
partners, and is generally allocated 1% of profits or losses. In 1996, the
General Partner was entitled to receive distributable cash from operations of
$10,071. The General Partner was allocated a share of Partnership income in 1996
of $114,283 which includes gain from the sale of Stewart's Glen Apartments of
$114,443. Reference is also made to the Notes to Financial Statements included
in this annual report for a description of such distributions and allocations.
The relationship of the General Partner (and its directors and officers) to its
affiliates is set forth in Item 10 above.
32
<PAGE>
CII provided asset management services to the Partnership during 1996 at
fees calculated at 5% of gross revenues from the Versailles Village Apartments,
Waterford Apartments, Stonebridge Manor Apartments and Stewart's Glen Apartments
less amounts earned by independent third party property management companies
contracted by CII on behalf of the Partnership. In 1996, such affiliate earned
asset management fees amounting to $38,756 for such services, of which $5,930
was unpaid as of December 31, 1996. Non-affiliated third party independent
property managers contracted by CII earned $213,881 of management fees, of which
$5,513 was unpaid as of December 31, 1996.
CFP provided partnership management services for the Partnership at fees
calculated at 9% of adjusted cash from operations in any one year. The
partnership management fee shall be paid when adjusted cash from operations is
distributed to Limited Partners. In 1996, CFP was paid partnership management
fees amounting to $99,601 for such services.
The Partnership recourse promissory note, which was paid in full on May 15,
1996, carried a corporate guarantee by CIGNA Corporation. The Partnership
incurred a guarantee fee of $25,500 for 1996.
The General Partner and its affiliates may be reimbursed for their direct
expenses incurred in the administration of the Partnership. In 1996, the General
Partner and its affiliates were entitled to reimbursement for such out of pocket
expenses in the amount of $43,576, of which $48 was unpaid as of December 31,
1996.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements. See Index to Financial Statements in Item 8.
2. Financial Statement Schedules
(a) Real Estate and Accumulated Depreciation. See Index to
Financial Statements in Item 8.
3. Exhibits
3 Partnership Agreement, incorporated by reference to Exhibit
A to the Prospectus of Registrant, dated July 2, 1984, filed
pursuant to Rule 424(b) under the Securities Act of 1933,
File No. 2-90944.
3(a) Amendment to Partnership Agreement, dated as of July 1,
1985, incorporated by reference to Exhibit 3(a) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1984.
4 Certificate of Limited Partnership, dated April 16, 1984,
incorporated by reference to Exhibit 4 to Form S-11
Registration Statement under the Securities Act of 1933,
File No. 2-90944.
10(a) Acquisition and Disposition Services Agreement, dated July
2, 1984, between Connecticut General Realty Investors III
Limited Partnership and CIGNA Capital Advisers, Inc.,
incorporated by reference to exhibit 10(a) to Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1987.
(b) Supervisory Property Management Agreement, dated July 2,
1984, between Connecticut General Realty Investors III
Limited Partnership and CIGNA Capital Advisers, Inc.,
incorporated by reference to exhibit 10(b) to Registrants
Annual Report on Form 10-K for the fiscal year ended
December 31, 1987.
(c) Agreements concerning Certain Capital Contributions, between
Connecticut General Management Resources, Inc. and CIGNA
Realty Resources, Inc.-Fifth, incorporated by reference to
exhibit 10(c) to
33
<PAGE>
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987.
(d) Purchase and Sale Agreement, dated as of January 17, 1985,
relating to the Acquisition of Versailles Village
Apartments, incorporated by reference to Exhibit 10(d) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1984.
(e) Bill of Sale and Assignment between Stonebridge Manor, a
Louisiana Partnership in Commendam, and Connecticut General
Realty Investors III Limited Partnership, dated November 26,
1985, relating to the acquisition of the Stonebridge Manor
Apartments, incorporated by reference to Exhibit 10(h) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1985.
(f) Act of Credit Sale and Assumption of Mortgage between
Stonebridge Manor, a Louisiana Partnership in Commendam, and
Connecticut General Realty Investors III Limited Partnership
dated November 26, 1985, relating to the acquisition of the
Stonebridge Manor Apartments, incorporated by reference to
Exhibit 10(i) to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1985.
(g) Purchase and Sale Agreement between Waterford, LTD. and
Connecticut General Realty Investors III Limited
Partnership, dated October 31, 1985, relating to the
acquisition of the Waterford Apartments, incorporated by
reference to Exhibit 10(k) to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1985.
(h) Promissory Note between Connecticut General Realty Investors
III Limited Partnership, as Maker, and Waterford, LTD., as
Payee, dated October 31, 1985, relating to the acquisition
of the Waterford Apartments, incorporated by reference to
Exhibit 10(l) to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1985.
(i) Purchase and Sale Agreement between First Capital Income
Properties Limited, Series V, and Connecticut General Realty
Investors III Limited Partnership, relating to the
acquisition of the Promenades Plaza Shopping Center,
incorporated by reference to Exhibit 10(m) to Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1985.
(j) Mortgage Consolidation and Modification Agreement between
Connecticut General Realty Investors III Limited Partnership
and The Equitable Life Assurance Society of the United
States, dated as of December 10, 1986, relating to the
Promenades Plaza Shopping Center, incorporated by reference
to Exhibit 10(n) to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1986.
(k) Real Estate Purchase Agreement between Willowbrook
Associates II and CIGNA Financial Partners, Inc., relating
to Stewart's Glen Apartments Phase III, dated as of April
14, 1987, incorporated by reference to Exhibit 10(p) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987.
(l) Amendment to Real Estate Purchase Agreement, dated July 20,
1987, between Willowbrook Associates II and Phase III
Apartment Venture, relating to the acquisition of Stewart's
Glen Apartments Phase III, incorporated by reference to
Exhibit 10(s) to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1987.
(m) Management and Leasing Agreement between Phase III Apartment
Venture and Chasewood Properties, effective as of July 24,
1987, incorporated by reference to Exhibit 10(t) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987.
(n) Mortgage, Security Agreement and Financing Statement and
Promissory Note between Connecticut General Realty Investors
III Limited Partnership and Massachusetts Mutual Life
Insurance Company,
34
<PAGE>
dated January 25, 1988, relating to Stewart's Glen
Apartments Phase III, incorporated by reference to Exhibit
10(v) to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1987.
(o) Mortgage Note between Connecticut General Realty Investors
III Limited Partnership and the John Hancock Mutual Life
Insurance Co., dated as of August 12, 1988, relating to
Versailles Village Apartments, incorporated by reference to
Exhibit 10(w) to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1988.
(p) Promissory Note between Connecticut General Realty Investors
III Limited Partnership and Aetna Life Insurance Company,
dated March 28, 1990, relating to Stonebridge Manor
Apartments incorporated by reference to Exhibit 10 (p) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989.
(q) Promissory Note between Connecticut General Realty Investors
III Limited Partnership and Mellon Bank National
Association, dated March 28, 1990, relating to Stonebridge
Manor Apartments incorporated by reference to Exhibit 10 (q)
to Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989.
(r) Mortgage and Note Modification Agreement between Connecticut
General Realty Investors III Limited Partnership and The
Equitable Life Assurance Society of the United States, dated
June 30, 1989, relating to Promenades Plaza Shopping Center
incorporated by reference to Exhibit 10 (r) to Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1989.
(s) Promissory Note between Connecticut General Realty Investors
III Limited Partnership and Barnett Bank of Southwest
Florida, dated June 30, 1989, relating to Promenades Plaza
Shopping Center incorporated by reference to Exhibit 10 (s)
to Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989.
(t) Promissory Note between Registrant and John Hancock Mutual
Life Insurance Company, dated March 24, 1994, relating to
Versailles Village Apartments incorporated by reference to
Form 10-Q for the quarter ended March 31, 1994.
(u) Documents and Agreements concerning the December 17, 1993
debt refinance of the Registrant's Waterford Apartments
property with industrial revenue bonds issued by the Tulsa
County Home Finance Authority and credit enhanced by AXA
Reassurance, SA incorporated by reference to Form 10-Q for
the quarter ended March 31, 1994.
(v) Consolidation, Extension, Modification, and Restatement of
Promissory Notes between Registrant and Mellon Bank, N.A.,
dated March 25, 1994 relating to Stonebridge Manor
Apartments and Promenades Plaza Shopping Center incorporated
by reference to Form 10-Q for the quarter ended March 31,
1994.
(w) Contract for Purchase and Sale dated July 19, 1994, First
Amendment to Contract for Purchase and Sale dated August 18,
1994, and Second Amendment to Contract for Purchase and Sale
dated September 21, 1994 between the Registrant and Sterling
Promenades Limited Partnership, a Florida limited
partnership incorporated by reference to Form 8-K dated
September 22, 1994.
(x) Loan Modification Agreement between Connecticut General
Realty Investors III Limited Partnership and Massachusetts
Mutual Life Insurance Company, dated November 1, 1994,
relating to Stewart's Glen Apartments.
(y) Loan Agreement between Connecticut General Realty Investors
III Limited Partnership and Hibernia National Bank, dated
March 29, 1995, relating to Stonebridge Manor Apartments.
35
<PAGE>
(z) Agreement of Purchase and Sale for Stewart's Glen I, II and
III dated April 30, 1996 between CIGNA/Willowbrook
Associates Limited Partnership, CIGNA/Willowbrook II
Associates Limited Partnership, Connecticut General Realty
Investors III Limited Partnership and AMLI Residential, L.P.
27 Financial Data Schedules.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the last quarter of the fiscal
year.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 14, 1997 By: /s/ John D. Carey
-------------------
John D. Carey, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities (with respect to the General Partner) and on the date
indicated.
/s/ R. Bruce Albro Date: March 14, 1997
------------------------------------------
R. Bruce Albro, Director
/s/ David Scheinerman Date: March 14, 1997
------------------------------------------
David Scheinerman, Director
/s/ Philip J. Ward Date: March 14, 1997
------------------------------------------
Philip J. Ward, Director
/s/ John D. Carey Date: March 14, 1997
------------------------------------------
John D. Carey, President
(Principal Executive Officer)
/s/ Kenneth Garrett Date: March 14, 1997
------------------------------------------
Kenneth Garrett, Treasurer
(Principal Financial Officer)
/s/ Josephine Donofrio Date: March 14, 1997
------------------------------------------
Josephine Donofrio, Controller
(Principal Accounting Officer)
37
<PAGE>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> YEAR
<CASH> 638965
<SECURITIES> 0
<RECEIVABLES> 17555
<ALLOWANCES> 6497
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<TOTAL-LIABILITY-AND-EQUITY> 22844345
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<TOTAL-REVENUES> 5205570
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<OTHER-EXPENSES> (1327771)
<LOSS-PROVISION> 6633
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