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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: November 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number: 0-014341
CONAM REALTY INVESTORS 5 L.P.
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EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
<TABLE>
<S> <C>
California 11-2712111
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STATE OR OTHER JURISDICTION OF INCORPORATION I.R.S. EMPLOYER IDENTIFICATION NO.
1764 San Diego Avenue
San Diego, CA 92110 Attn.: Robert J. Svatos 92110-1906
- -------------------------------------------- -----------
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES ZIP CODE
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Registrant's telephone number, including area code (619) 297-6771
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Securities registered pursuant to Section 12(b) of the Act: None
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 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)
Documents Incorporated by Reference:
Portions of Parts I, II, III and IV are incorporated by reference to the
Partnership's Annual Report to Unitholders for the fiscal year ended November
30, 1998.
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PART I
ITEM 1. BUSINESS
(a) GENERAL DESCRIPTION OF BUSINESS AND OBJECTIVES
ConAm Realty Investors 5 L.P., formerly known as Hutton/ConAm Realty
Investors 5 (the "Partnership"), is a California limited partnership formed
on June 28, 1984. ConAm Property Services IV, Ltd. ("CPS IV"), a California
limited partnership, and RI 5 Real Estate Services, Inc. ("RI 5"), a Delaware
corporation, were the original co-general partners of the Partnership. On
January 27, 1998, CPS IV acquired RI 5's co-general partner interest in the
Partnership, effective July 1, 1997, pursuant to a Purchase Agreement between
CPS IV and RI 5 dated August 29, 1997. As a result, CPS IV now serves as the
sole general partner (the "General Partner") of the Partnership. In
conjunction with this transaction, the name of the Partnership was changed
from Hutton/ConAm Realty Investors 5 to ConAm Realty Investors 5 L.P.
The Partnership was organized to engage in the business of acquiring,
operating and holding for investment multifamily residential properties. The
Partnership originally invested in one residential apartment property and two
joint ventures, each of which owned a specified property. As described
below, as of January 29, 1999, all of the Partnership's investments in the
properties have been sold, and the General Partner anticipates that the final
liquidation of the Partnership will be completed in mid-1999.
The Partnership's principal investment objectives with respect to its
interests in real property were:
(1) capital appreciation;
(2) distribution of net cash from operations attributable to rental income;
and
(3) preservation and protection of capital.
Distribution of net cash from operations was the Partnership's objective
during its operational phase, while preservation and appreciation of capital
were the Partnership's long-term objectives. The attainment of the
Partnership's investment objectives was dependent on many factors, including
future economic conditions in the United States as a whole and, in
particular, in the localities in which the Partnership's properties were
located, especially with regard to achievement of capital appreciation.
The Partnership utilized the proceeds of its public offering to acquire three
residential apartment complexes either directly or through investments in
joint ventures, as follows: (1) Lakeview Village at Ponte Vedra, a 240-unit
apartment complex, located in Ponte Vedra Beach, Florida; (2) The Hamptons
at Quail Hollow, a 232-unit apartment complex, located in Charlotte, North
Carolina; and (3) Canterbury Park Apartments, a 96-unit apartment complex,
located in Raleigh, North Carolina. On December 10, 1996, Canterbury Park
was sold to an unaffiliated buyer for $6,387,300.
During its fiscal year ended November 30, 1998, following consideration of
various alternatives available to the Partnership, the General Partner
concluded that a sale of the Partnership's two remaining properties, Lakeview
Village and The Hamptons at Quail Hollow (collectively the "Properties"),
would be in the best interests of the Partnership and the Unitholders.
Throughout much of fiscal 1998, the General Partner, on behalf of the
Partnership, negotiated the terms of a sale of the Properties with Lend Lease
Real Estate Investments, Inc. ("Lend Lease"), on behalf of two pension funds
which are unaffiliated with the General Partner. Once the terms were
negotiated, as required by the Partnership's Second Amended and Restated
Certificate and Agreement of Limited Partnership ("Agreement of Limited
Partnership"), the General Partner solicited the consent of a majority in
interest of the Unitholders to the sale pursuant to a Consent Solicitation
Statement dated December 16, 1998. The requisite consent was obtained on
January 15, 1999, and on January 29, 1999, the Partnership consummated the
sale of the Properties to DOC Investors, L.L.C., a Delaware limited liability
company (the "Purchaser"), for a sales price of $26,000,000 (before selling
costs and prorations). The members of the Purchaser are two pension funds
advised by Lend Lease, which own an aggregate 91% interest in the Purchaser,
and ConAm DOC Affiliates LLC, an affiliate of the General Partner ("ConAm
DOC"), which owns a 9% interest in the Purchaser. ConAm DOC has the potential
to receive up to an additional 18% of the profits of the Purchaser after
certain priority returns to the members of the Purchaser.
The Partnership received approximately $19,482,000 of cash proceeds from the
sale, net of closing costs of approximately $110,000 and repayment of
indebtedness of approximately $6,408,000. All net cash proceeds from the
sale and previously undistributed cash from operations, less an amount the
General Partner determined to set aside for contingencies, were distributed
to the Limited Partners on February 26, 1999.
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The Partnership considers itself to have been engaged in only one industry
segment, real estate investment.
COMPETITION
The Partnership's former real property investments were subject to
competition from similar types of properties in the vicinities in which they
were located. Such former competition increased during the Partnership's
period of ownership of the Properties due principally to the addition of
newly constructed apartment complexes offering increased residential and
recreational amenities. The Properties were also subject to competition from
condominiums and single-family properties especially as potential renters
chose to buy homes especially during periods of low mortgage interest rates.
The Partnership competed with other real estate owners and developers in the
rental and leasing of its Properties by offering competitive rental rates
and, if necessary, leasing incentives. Such competition affected the
occupancy levels and revenues of the Properties. The occupancy level at
Lakeview Village in Florida reflects some seasonality, which is typical in
this market. In some cases, the Properties competed with properties owned by
partnerships affiliated with the General Partner.
For a discussion of market conditions in the areas where the Properties were
located, reference is made to the Partnership's Annual Report to Unitholders
for the fiscal year ended November 30, 1998, which is filed as an exhibit
under Item 14.
EMPLOYEES
The Partnership has no employees. Services are provided by CPS IV and ConAm
Management Corporation ("ConAm Management"), an affiliate of CPS IV. Pursuant
to property management agreements with the Partnership, ConAm Management
provided property management services with respect to the Properties. In
addition, the Partnership retains Brock, Tibbitts & Snell, an unaffiliated
company located in San Diego, California, to provide all accounting and
investor communication functions. During fiscal 1998, Service Data
Corporation, an unaffiliated company, provided transfer agent services for
the Partnership. During February 1999, pursuant to the terms of a sale of
its contracts, Service Data Corporation assigned the transfer agent functions
of the Company to MAVRICC Management Systems, Inc., an unaffiliated company
located in Troy, Michigan. See Item 13, "Certain Relationships and Related
Transactions", for a further description of the service and management
agreements between the Partnership and affiliated entities.
ITEM 2. PROPERTIES
For a description of the Properties owned and operated by the Partnership
during fiscal 1998 and discussion of market conditions in the areas where the
Properties are located, reference is made to the Partnership's Annual Report
to Unitholders for the fiscal year ended November 30, 1998, which is filed as
an exhibit under Item 14. For information on the Partnership's purchase of
the Properties, reference is made to Note 4 of the Consolidated Financial
Statements, included herein by reference to the Partnership's Annual Report
to Unitholders. For information on the sale of the Properties by the
Partnership in January, 1999, reference is made to Item 1 and Note 10 of the
Consolidated Financial Statements, included herein by reference to the
Partnership's Annual Report to Unitholders. Average occupancy rates at each
property are incorporated by reference to Item 7.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not subject to any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year ended November 30, 1998, no
other matters were submitted to a vote of Unitholders through the
solicitation of proxies or otherwise. On December 16, 1998, the Unitholders
were asked to approve a sale of the Partnership's remaining properties. A
majority in interest of the Unitholders approved the sale and the sale was
completed on January 29,1999.
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PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND
RELATED SECURITY HOLDER MATTERS
As of November 30, 1998, the number of Unitholders of record was 2,514.
No established public trading market exists for the Units, and it is not
anticipated that such a market will develop in the future.
Distributions of Net Cash From Operations, when made, are determined by the
General Partner on a quarterly basis, with distributions generally occurring
approximately 45 days after the end of each fiscal quarter. Such
distributions to the Unitholders have been made from net operating income
with respect to the Partnership's investment in the Properties and from
interest on short-term investments. Information on cash distributions paid
by the Partnership for the past two fiscal years is incorporated by reference
to the Partnership's Annual Report to Unitholders for the fiscal year ended
November 30, 1998, which is filed as an exhibit under Item 14. No
distributions was made for the fourth quarter of the fiscal year ended
November 30, 1998 because the General Partner decided to suspend
distributions pending the outcome of the solicitation of the consent of the
Unitholders to the sale of the Properties.
Because of the sale of the Partnership's remaining Properties, no further
quarterly distributions of Net Cash From Operations will be made. The
Partnership distributed $19,402,875 to the Unitholders ($337.50 per Unit) and
$1,340 to the General Partner on February 26, 1999, which amounts are equal
to substantially all of the net proceeds from the sale of the Properties,
together with other available cash of the Partnership, less an amount for
costs associated with the sale and liquidation and other contingencies, net
of expected cash provided by operations through the date of sale, of
approximately $554,000. The final liquidation of the Partnership is expected
to occur in mid-1999, and the remaining funds, if any, will be distributed to
the Unitholders at that time.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference to the Partnership's Annual Report to Unitholders
for the year ended November 30, 1998, which is filed as an exhibit under Item
14.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At November 30, 1998, the Partnership had cash and cash equivalents of
$424,001, which were invested in unaffiliated money market funds, compared
with $1,424,876 at November 30, 1997. The decrease in cash and cash
equivalents reflects mortgage principal payments, additions to real estate
and cash distributions to Partners exceeding cash provided by operating
activities during the fiscal year ended November 30, 1998. The Partnership
also maintains a restricted cash balance that totaled $261,132 at November
30, 1998, largely unchanged from $224,210 at November 30, 1997. The increase
in other assets in fiscal 1998 is primarily attributed to an increase in a
deposit required by the Internal Revenue Service and prepaid selling costs.
Distribution payable decreased to $0 at November 30, 1998, compared to
$359,019 at November 30, 1997. The decrease is primarily attributable to the
decision of the General Partner to suspend distributions pending the outcome
of the solicitation of the consent of the Unitholders to the sale of the
remaining Properties.
Accounts payable and accrued expenses is relatively unchanged and total
$387,989 at November 30, 1998, compared to $388,948 at November 30, 1997.
Security deposits decreased to $73,629 at November 30, 1998, compared to
$89,448 at November 30, 1997. This decrease occurred while occupancy
increased during that same period. This decrease in security deposits
occurred primarily because strong competition has reduced the ability of
property owners to collect refundable security deposits from their tenants.
The Partnership continued to perform various improvements at the Properties
during fiscal 1998 which include the completion of the roof replacements at
Lakeview Village, the majority of which was completed during the period
commencing with the fourth quarter of fiscal 1997 through the second quarter of
fiscal 1998. The approximate cost of replacing the roof was
Page 4
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$800,000 of which $400,000 was funded in fiscal 1998 and $400,000 was funded
in fiscal 1997 from the Partnership's operating cash flow and cash reserves.
During fiscal 1998, the Partnership received insurance proceeds of $254,945
from claims resulting from fire damage to eight units at Lakeview Village.
The insurance proceeds were sufficient to cover the cost of the restoration
work.
As a result of the Partnership's sale of the Properties on January 29, 1999,
all of the Partnership's assets have been converted to cash and cash
equivalents. Pending distribution to the Unitholders as described in Item 5
above, the Partnership's funds have been invested in the Pacific Horizon
Money Market Funds, Prime Fund. The General Partner retained from the
initial distribution an amount it believes is sufficient to provide for
contingencies, and to cover the expenses of operating the Partnership until
final liquidation of the Partnership, including legal and accounting fees.
RESULTS OF OPERATIONS
1998 VERSUS 1997
Partnership operations for the fiscal year ended November 30, 1998 resulted
in net income of $247,691 compared with net income of $2,687,490 in fiscal
1997. The decrease in net income is primarily attributable to a $2,582,641
gain recognized on the sale of Canterbury Park in fiscal 1997. Excluding the
gain, the Partnership generated income from operations of $104,849 for fiscal
1997. The increase in operating income in fiscal 1998 is primarily due to an
increase in rental income and a decrease in property operating costs somewhat
offset by an increase in write-off assets as they were replaced.
Net cash provided by operating activities was $1,000,284 for the fiscal year
ended November 30, 1998 compared to $1,112,952 in fiscal 1997. The decrease
in cash provided by operating activities is primarily attributable to an
increase in other assets.
Rental income for the fiscal year ended November 30, 1998 was $3,970,095
compared with $3,714,870 in fiscal 1997. The increase is primarily due to
relatively stable occupancy at The Hamptons at Quail Hollow and improved
occupancy at Lakeview Village and improved rental rates at both of the
properties partially offset by the sale of Canterbury Park in December of
1996. Interest income totaled $37,894 for the fiscal year ended November 30,
1998 compared to $130,067 in fiscal 1997. The decrease is due to the
Partnership maintaining lower average cash balances in fiscal 1998 than in
fiscal 1997 from proceeds held for the sale of Canterbury Park in fiscal 1997.
Property operating expenses decreased slightly to $2,055,840 for the fiscal
year ended November 30, 1998, as compared $2,123,570 for fiscal 1997. This
decrease is primarily due to the sale of Canterbury Park in December of 1996
and a decrease in property operating expenses at The Hamptons at Quail Hollow.
Write-off of assets increased to $162,037 for fiscal year end November 30,
1998 from $85,000 for fiscal 1997. The increase is due to an increase in
roof replacements at Lakeview Village in fiscal 1998.
1997 VERSUS 1996
Partnership operations for the fiscal year ended November 30, 1997 generated
net income of $2,687,490, compared with net income of $1,017,032 in fiscal
1996. The increase in net income is primarily attributable to a $2,582,641
gain recognized on the sale of Canterbury Park. Excluding the gain, the
Partnership generated income from operations of $104,849. Net cash provided
by operating activities was $1,112,952 for the fiscal year ended November 30,
1997 compared to $2,022,547 in fiscal 1996. The decrease in cash provided
by operating activities is primarily attributable to the sale of Canterbury
Park.
Rental income totaled $3,714,870 for the fiscal year ended November 30, 1997
compared with $4,695,358 in fiscal 1996. The decrease is primarily
attributable to the sale of Canterbury Park, and to a lesser extent, a
decline in rental income at Lakeview Village due to lower occupancy.
Property operating expenses totaled $2,123,570 for the fiscal year ended
November 30, 1997 compared with $2,120,789 in fiscal 1996. The increase is
primarily due to higher rental administrative expenses and parking lot
repairs at Lakeview Village. The increase is also attributable to higher
maintenance expenses and asphalt repairs at the Hamptons at Quail
Page 5
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Hollow. Depreciation and amortization declined from $1,027,524 for the fiscal
year ended November 30, 1996 to $879,851 in fiscal 1997. The decrease is
primarily due to the sale of Canterbury Park and to certain furniture,
fixtures and equipment becoming fully depreciated.
General and administrative expenses increased from $140,163 in fiscal 1996 to
$167,485 in fiscal 1997. The increase is primarily attributable to an
increase in costs associated with Partnership accounting, tax and
administrative services. During the 1997 period, certain expenses incurred
by RI 5, its affiliates, and an unaffiliated third party service provider in
servicing the Partnership, which were voluntarily absorbed by affiliates of
RI 5 in prior periods, were reimbursable to RI 5 and its affiliates.
The average occupancy levels at each of the properties owned for the full
year during the years ended November 30, 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED NOVEMBER 30,
--------------------------------
Property 1998 1997 1996
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<S> <C> <C> <C>
The Hamptons at Quail Hollow 96% 94% 96%
Lakeview Village 94% 88% 96%
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NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued issued SFAS No. 129,
"Disclosure of Information about Capital Structure," SFAS No. 130, "Reporting
Comprehensive Income," and SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." These statements, which are effective
for fiscal years beginning after December 15, 1997, expand or modify
disclosures and, accordingly, will have no impact on the Partnership's
reported financial position, results of operations or cash flows.
YEAR 2000
Due to the consummation of the sale of the Properties in January 1999, the
Partnership is no longer engaged in the operation of real properties or any
other business. As a result of the foregoing, and in view of the General
Partner's plan to complete the full liquidation of the Partnership prior to
January 1, 2000, the Partnership has no exposure to Year 2000 issues.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since the Partnership sold its remaining Properties on January 29, 1999 and
its mortgage indebtedness was repaid, the Partnership has no exposure to
interest rate risk. In addition, the Partnership is expected to be
liquidated during 1999.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference to the Partnership's Annual Report to Unitholders
for the fiscal year ended November 30, 1998, which is filed as an exhibit
under Item 14. Supplementary Data is incorporated by reference to F-1 and
F-2 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective December 1, 1997, the Partnership advised PricewaterhouseCoopers
LLP (formerly Coopers & Lybrand L.L.P.) that it was changing accounting firms
and engaged KPMG LLP.
PricewaterhouseCoopers LLP's report on the consolidated financial statements
for the year ended November 30, 1996 contained no adverse opinion or
disclaimer of opinion and was not qualified as to uncertainty, audit scope or
accounting principles. There had been no disagreements with
PricewaterhouseCoopers LLP on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope procedure.
The decision to change accountants was approved by CPS IV and RI 5, the
General Partners of the Partnership at that time.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Partnership has no officers or directors. CPS IV, as the General Partner
of the Partnership, manages and controls the affairs of the Partnership and
has general responsibility and authority in all matters affecting its
business.
CPS IV is a California limited partnership organized on August 30, 1982. The
sole general partner of CPS IV is Continental American Development, Inc.
("ConAm Development"). The names and positions held by the directors and
executive officers of ConAm Development are set forth below. There are no
family relationships between any officers or directors.
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NAME OFFICE
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Daniel J. Epstein President and Director
E. Scott Dupree Vice President and Director
Robert J. Svatos Vice President and Director
Ralph W. Tilley Vice President
J. Bradley Forrester Vice President
</TABLE>
DANIEL J. EPSTEIN, 59, has been the President and a Director of ConAm
Development and a general partner of Continental American Properties, Ltd.
("ConAm"), an affiliate of CPS IV, since their inception. He is also
Chairman and Chief Executive Officer of ConAm Management. Prior to
organizing ConAm, Mr. Epstein was Vice President and a Director of American
Housing Guild, which he joined in 1969. At American Housing Guild, he was
responsible for the formation of the Multi-Family Division and directed its
development and property management activities. Mr. Epstein holds a Bachelor
of Science degree in Engineering from the University of Southern California.
E. SCOTT DUPREE, 48, is a Senior Vice President and general counsel of ConAm
Management responsible for negotiation, documentation, review and closing of
acquisition, sale and financing proposals. Mr. Dupree also acts as principal
legal advisor on general legal matters ranging from issues and contracts
involving the management company to supervision of litigation and employment
issues. Prior to joining ConAm Management in 1985, he was corporate counsel
to Trusthouse Forte, Inc., a major international hotel and restaurant
corporation. Mr. Dupree holds a B.A. from United States International
University and a Juris Doctorate degree from the University of San Diego.
ROBERT J. SVATOS, 40, is a Senior Vice President and is the Chief Financial
Officer of ConAm Management. His responsibilities include the accounting,
treasury and data processing functions of the organization. Prior to joining
ConAm Management in 1988, he was the Chief Financial Officer for AmeriStar
Financial Corporation, a nationwide mortgage banking firm. Mr. Svatos holds
an M.B.A. in Finance from the University of San Diego and a Bachelor's of
Science degree in Accounting from the University of Illinois. He is a
Certified Public Accountant.
RALPH W. TILLEY, 44, is a Senior Vice President and Treasurer of ConAm
Management. He is responsible for the financial aspects of syndications and
acquisitions, the company's asset management portfolio and risk management
activities. Prior to joining ConAm Management in 1980, he was a senior
accountant with KPMG LLP, specializing in real estate. He holds a Bachelor's
of Science degree in Accounting from San Diego State University and is a
Certified Public Accountant.
J. BRADLEY FORRESTER, 41, is the President of ConAm Management. He is
currently responsible for overseeing all aspects of the operations of the
firm. His primary focus is on new business related activities including
property acquisitions, property development and rehabilitation, and the
acquisition of other property management companies. Prior to joining ConAm,
Mr. Forrester served as Senior Vice President - Commercial Real Estate for
First Nationwide Bank in San Francisco, where he was responsible for a $2
billion problem asset portfolio including bank-owned real estate and
non-performing commercial real estate loans. His past experience includes
significant involvement in real estate development and finance, property
acquisitions and dispositions and owner's representation matters. Prior to
entering the real estate profession, he worked for KPMG LLP in Dallas, Texas.
Mr. Forrester holds a Bachelor of Science degree in Accounting from
Louisiana State University. He received his CPA certification in the State
of Texas.
Page 7
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ITEM 11. EXECUTIVE COMPENSATION
Neither the General Partner nor any of its directors or executive officers
received any compensation from the Partnership. See Item 13 of this report
for a description of certain costs of the General Partner and its affiliates
reimbursed by the Partnership.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of November 30, 1998, no person was known by the Partnership to be the
beneficial owner of more than five percent of the Units of the Partnership.
Neither the General Partner nor any of its executive officers or directors
own any Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CPS IV received $21,119 as the General Partner's allocable share of Net Cash
From Operations with respect to fiscal year ended November 30, 1998.
Pursuant to the Agreement of Limited Partnership of the Partnership, for the
fiscal year ended November 30, 1998, $13,036 of the Partnership's net income
was allocated to CPS IV. For a description of the share of Net Cash From
Operations and the allocation of income and loss to which the General Partner
is entitled, reference is made to Note 3 to the Consolidated Financial
Statements, included in the Partnership's Annual Report to Unitholders for
the fiscal year ended November 30, 1998, which is filed as an exhibit under
Item 14. Effective July 1, 1997, all General Partner allocations were made
solely to CPS IV.
The Partnership entered into property management agreements with ConAm
Management pursuant to which ConAm Management assumed direct responsibility
for day-to-day management of the Properties. It was the responsibility of
ConAm Management to select resident managers, where appropriate, and monitor
their performance. ConAm Management's services also included the
supervision of leasing, rent collection, maintenance, budgeting, employment
of personnel, payment of operating expenses, strategic asset management and
related services. For such services, ConAm Management was entitled to receive
a management fee equal to 5% of gross revenues. A summary of property
management fees earned by ConAm Management during the past three fiscal years
is incorporated by reference to Note 7 to the Consolidated Financial
Statements, included in the Partnership's Annual Report to Unitholders for
the fiscal year ended November 30, 1998, which is filed as an exhibit under
Item 14.
Pursuant to Section 12(g) of the Partnership's Agreement of Limited
Partnership, the General Partner may be reimbursed by the Partnership for
certain of its costs. A summary of amounts paid to the General Partners or
their affiliates during the past three fiscal years is incorporated by
reference to Note 7 to the Consolidated Financial Statements, included in the
Partnership's Annual Report to Unitholders for the fiscal year ended November
30, 1998, which is filed as an exhibit under Item 14.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS:
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PAGE
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Consolidated Balance Sheets - November 30, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(1)
Consolidated Statements of Operations - For the years ended November 30, 1998, 1997 and 1996 .. . . . . . . . . . . .(1)
Consolidated Statements of Partners' Capital - For the years ended November 30, 1998, 1997 and 1996.. . . . . . . . .(1)
Consolidated Statements of Cash Flows - For the years ended November 30, 1998, 1997 and 1996 . . . . . . . . . . . .(1)
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(1)
Independent Auditors' Report .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(1)
Report of Former Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(1)
(a)(2) FINANCIAL STATEMENT SCHEDULE:
Schedule III - Real Estate and Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(F-1)
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(F-2)
Report of Former Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(F-3)
</TABLE>
(1) INCORPORATED BY REFERENCE TO THE PARTNERSHIP'S ANNUAL REPORT TO
UNITHOLDERS FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1998, FILED AS
AN EXHIBIT UNDER ITEM 14.
(a)(3) EXHIBITS:
(4)(A) Second Amended and Restated Agreement of Limited Partnership
(included as, and incorporated herein by reference to, Exhibit A to
the Prospectus of Registrant dated March 27, 1985, contained in
Amendment No. 1 to Registration Statement No. 2-95481 of
Registrant, dated March 27, 1985 (the "Registration Statement")).
(B) Subscription Agreement and Signature Page (included as, and
incorporated herein by reference to, Exhibit 3.1 to Amendment No.
1 to the Registration Statement).
(C) Amendment, dated January 18, 1999 to Partnership's Second Amended
and Restated Certificate and Agreement of Limited Partnership
(included as, and incorporated herein by reference to, Exhibit 4.1
to the Partnership's Report on Form 8-K filed on February 16,
1999).
(10)(A) Documents relating to Lakeview Village.
(A.1) Purchase and Development Agreement, dated January 31, 1984 and
exhibits thereto (included as, and incorporated herein by reference
to, Exhibit 10.2 to Amendment No. 1 to the Registration Statement).
(A.2) Amendments to Purchase and Development Agreement, dated May 31,
1985, July 31, 1985 and August 21, 1985 (included as, and
incorporated herein by reference to, Exhibit (10)(A) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
November 30, 1985 (the "1985 Annual Report")).
Page 9
<PAGE>
(A.3) Amended and Restated Agreement of General Partnership of Lakeview
Village at Ponte Vedra Lakes Joint Venture, dated July 1, 1992
(included as, and incorporated herein by reference to Exhibit 10.2
to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended August 31, 1992).
(A.4) Loan Documents: Promissory Note and Assignment of Rents and Leases
with respect to the refinancing of Lakeview Village, between
Registrant and The Penn Mutual Life Insurance Company (included as,
and incorporated herein by reference to, Exhibit A4 to the
Registrant's 1993 Annual Report on Form 10-K filed on March 30,
1994).
(A.5) Property Management Agreement between Lakeview Village at Ponte
Vedra Lakes Joint Venture and Con Am Management Corporation for the
Lakeview Village property (included as, and incorporated herein by
reference to, Exhibit A5 to the Registrant's 1993 Annual Report on
Form 10-K filed on March 30, 1994).
(A.6) Agreement for Purchase and Sale and Joint Escrow Instructions
between Lakeview Village at Ponte Vedra Lakes Joint Venture and DOC
Investors, L.L.C. dated January 26, 1999 with respect to Lakeview
Village Apartments (included as, and incorporated herein by
reference to, Exhibit 10.2 to the Partnership's Report on Form 8-K
filed on February 16, 1999).
(B) Documents relating to The Hamptons.
(B.1) Purchase and Development Agreement, dated October 9, 1984 and
exhibits thereto (included as, and incorporated herein by reference
to, Exhibit 10.3 to Amendment No. 1 to the Registration Statement).
(B.2) First Amendment to Purchase and Development Agreement, dated
December 12, 1985 (included as, and incorporated herein by
reference to, Exhibit (10)(B) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended November 30, 1986).
(B.3) Real Estate Note, dated October 9, 1984 (filed as, and incorporated
herein by reference to Exhibit (10)(B) to the 1985 Annual Report).
(B.4) Property Management Agreement between The Hamptons Joint Venture
and ConAm Management Corporation for the Hamptons at Quail Hollow
II property (included as, and incorporated herein by reference to,
Exhibit B4 to the Registrant's 1993 Annual Report on Form 10-K
filed on March 30, 1994).
(B.5) Agreement for Purchase and Sale and Joint Escrow Instructions
between The Hamptons Joint Venture and Lend Lease Real Estate
Investments, Inc. dated December 15, 1998, and amendment thereto
and assignment thereof, with respect to Hamptons at Quail Hollow
Apartments (included as, and incorporated herein by reference to,
Exhibit 10.1 to the Partnership's Report on Form 8-K filed on
February 16, 1999).
(C) Documents relating to Canterbury Park:
(C.1) Purchase and Development Agreement, dated September 7, 1984
(included as, and incorporated herein by reference to, Exhibit 10.4
to Amendment No. 1 to the Registration Statement).
(C.2) Amendments to Purchase and Development Agreement, dated April 30,
1985 and June 30, 1985 (included as, and incorporated herein by
reference to, Exhibit (10)(C) to the 1985 Annual Report).
(C.3) Property Management Agreement between Hutton/ConAm Realty Investors
5 and Con Am Management Corporation for the Canterbury Park II
property (included as, and incorporated herein by reference to,
Exhibit C3 to the Registrant's 1993 Annual Report on Form 10-K
filed on March 30, 1994).
(D) Settlement Agreement by and among the Managing Joint Venturers and
the Epoch Joint Venturers, dated July 1, 1992, (included as, and
incorporated herein by reference to, Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
August 31, 1992).
Page 10
<PAGE>
(13) Annual Report to Unitholders for the fiscal year ended November 30,
1998.
(21) List of Subsidiaries - Joint Ventures (included as, and
incorporated herein by reference to, Exhibit (22) to the
Registrant's Annual Report on Form 10-K filed for the fiscal year
ended November 30, 1991).
(27) Financial Data Schedule
(99) Portions of the Prospectus of the Registrant, dated March 27, 1985
(included as, and incorporated herein by reference to, Exhibit 28
to the Registrant's 1987 Annual Report on Form 10-K filed for the
fiscal year ended November 30, 1987).
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed by the Partnership during the
fourth quarter of the fiscal year ended November 30, 1998.
(c) EXHIBITS
See Item 14(a)(3) above.
Page 11
<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.
Dated: February 28, 1999
BY: ConAm Property Services IV, Ltd.
General Partner
BY: Continental American Development, Inc.
General Partner
BY: /s/ Daniel J. Epstein
------------------------------
Name: Daniel J. Epstein
Title: President, Director and
Principal Executive Officer
Page 12
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
CONAM PROPERTY SERVICES IV, LTD.
A General Partner
By: Continental American Development, Inc.
General Partner
Date: February 28, 1999
BY: /s/ Daniel J. Epstein
--------------------------------------
Daniel J. Epstein
Director, President and
Principal Executive Officer
Date: February 28, 1999 BY: /s/ E. Scott Dupree
--------------------------------------
E. Scott Dupree
Vice President and Director
Date: February 28, 1999
BY: /s/ Robert J. Svatos
--------------------------------------
Robert J. Svatos
Vice President and Director
Date: February 28, 1999
BY: /s/ Ralph W. Tilley
--------------------------------------
Ralph W. Tilley
Vice President
Date: February 28, 1999
BY: /s/ J. Bradley Forrester
--------------------------------------
J. Bradley Forrester
Vice President
Page 13
EXHIBIT 13
CONAM REALTY INVESTORS 5 L.P.
1998 ANNUAL REPORT
<PAGE>
- --------------------------------------------------------------------------------
CONAM REALTY INVESTORS 5 L.P.
- --------------------------------------------------------------------------------
ConAm Realty Investors 5 L.P. is a California limited partnership
formed in 1984 to acquire, operate and hold for investment multifamily
residential properties. At November 30, 1998, the Partnership's
portfolio consisted of two apartment properties located in Florida and
North Carolina. On January 29, 1999, with the consent of the
Unitholders, the two remaining properties were sold for a price of
$26,000,000 (before closing costs) and substantially all of the cash,
less a contingency amount, was distributed to the Unitholders.
CONTENTS
1 Message to Investors
2 Performance Summary
3 Financial Highlights
4 Consolidated Financial Statements
7 Notes to the Consolidated Financial Statements
13 Independent Auditors' Report
14 Report of Former Independent Accountants
15 Net Asset Valuation
- --------------------------------------------------------------------------------
ADMINISTRATIVE INQUIRIES PERFORMANCE INQUIRIES/FORM 10-Ks
ADDRESS CHANGES/TRANSFERS Brock Tibbitts and Snell
MAVRICC Management Systems, Inc. 625 Broadway, Suite 911
1845 Maxwell, Suite 101 San Diego, California 92101
Troy, MI 48084-4510
Attn: Financial Communications
248-637-7897 619-232-0365
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
MESSAGE TO INVESTORS
- --------------------------------------------------------------------------------
Presented for your review is the 1998 Annual Report for ConAm Realty Investors 5
L.P. (the "Partnership"). In this report we have included a performance summary
which addresses operations at each of the properties (the "Properties") and the
financial highlights for the year.
We are pleased to announce that the proposed sale of the Partnership's two
remaining Properties to DOC Investors, L.L.C., a Delaware limited liability
company, was approved by a majority in interest of the Unitholders as of January
15, 1999 and that the sale was completed on January 29, 1999. Within 30 days of
the close of the sale of the Properties, a distribution of $337.50 per Unit,
representing the majority of the net proceeds from the sale and other cash from
operations was paid to Unitholders.
CASH DISTRIBUTIONS
The Partnership paid quarterly cash distributions totaling $18.00 per Unit for
the year ended November 30, 1998. The General Partner decided to not make a
fourth quarter distribution pending the outcome of the solicitation of the
consent of the Unitholders to the sale of the Partnership's Properties.
Including the distribution on February 26, 1999, since inception, the
Partnership has paid distributions totaling $722.86 per original $500 Unit.
These distributions include the net proceeds from the sale of the Partnership's
Properties in January 1999 of $336.36 per Unit, and cash from operations of
$1.14 per Unit, both of which were distributed on February 26, 1999.
OPERATIONS OVERVIEW
In 1998, operations at the Partnership's Properties continued to be impacted to
varying degrees by strong competition for residents in the markets where the two
Properties are located. Although population and job growth escalated in both
areas, the addition of several newly constructed complexes to both markets
limited rental rate increases and caused overall vacancy rates to rise in the
market area. As a result of new apartment construction in the Jacksonville area,
several large apartment properties began offering rental concessions to attract
residents. This competition, as well as the effects of extensive roof
replacements at Lakeview Village, contributed to lower than expected average
occupancy at Lakeview Village in 1997. Average occupancy recovered in fiscal
1998 to 94%, from 88% in fiscal 1997. In the Charlotte market, strong economic
growth helped offset the effects of new construction. Average occupancy at The
Hamptons at Quail Hollow increased slightly to 96% in fiscal 1998 from 94% in
fiscal 1997. Rental rates at both Properties increased for the year.
Several interior and exterior repairs were performed at each Property during
1998, including parking lot repairs at Lakeview Village, asphalt repairs at The
Hamptons at Quail Hollow and other routine upgrades. In addition, ongoing roof
replacements at Lakeview Village were completed in the second quarter of fiscal
1998.
SUMMARY
The sale of the Properties on January 29, 1999 represents the first step toward
the liquidation of the Partnership that is expected to be completed in August
1999. A final distribution of remaining Partnership cash, if any, will be made
shortly thereafter.
Very truly yours,
/s/ Daniel J. Epstein
Daniel J. Epstein, President
Continental American Development Inc.
General Partner of ConAm Property Services IV, Ltd.
February 28, 1999
1
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY
- --------------------------------------------------------------------------------
LAKEVIEW VILLAGE PONTE VEDRA BEACH, FLORIDA
Lakeview Village is a 240-unit luxury apartment complex located in an oceanside
residential area of Ponte Vedra Beach, Florida southeast of Jacksonville. The
property reported an average occupancy level of 94% in fiscal 1998, up from 88%
in fiscal 1997. Strong economic growth continued in the Jacksonville area. New
multifamily construction has softened the rental market as reported to you
previously. However, rental rates at Lakeview increased during fiscal 1998. The
property improvements for the year helped to retain the property's competitive
position primarily included the completion of the roof replacements, which
affected the property's occupancy level in fiscal 1997.
THE HAMPTONS AT QUAIL HOLLOW CHARLOTTE, NORTH CAROLINA
The Hamptons at Quail Hollow is a 232-unit apartment community located in
southeastern Charlotte, North Carolina. The property's average occupancy
increased slightly to 96% in 1998, up from 94% in fiscal 1997, and rental rates
increased during fiscal 1998. The general strength of the Charlotte market
prompted a surge in new construction over the last two years. As a result,
competition for residents intensified, and induced some large apartment
properties to offer rental concessions to increase occupancy rates. While new
construction impacted the rate of rental activity in the short term, continued
job and population growth kept this market from becoming significantly
overbuilt.
2
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
For the periods ended November 30, 1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------
DOLLARS IN THOUSANDS, EXCEPT FOR PER UNIT DATA
<S> <C> <C> <C> <C> <C>
Total Income $ 4,008 $ 3,845 $ 4,798 $ 4,583 $ 4,337
Income from operations 248 105 1,017 759 623
Net Income 248 2,687 1,017 759 623
Net Cash Provided by Operating
Activities 1,000 1,113 2,023 1,903 1,799
Long-term Obligations 6,072 6,185 6,299 6,405 6,502
Total Assets at Year End 15,725 17,021 22,053 22,912 23,946
Income from Operations per Limited
Partnership Unit* 4.08 1.19 17.21 12.77 10.46
Net Income per Limited
Partnership Unit* 4.08 46.11 17.21 12.77 10.46
Distributions per Limited
Partnership Unit* 18.00 131.00 30.00 30.00 26.00
* 57,490 UNITS OUTSTANDING
</TABLE>
<TABLE>
<CAPTION>
CASH DISTRIBUTIONS
PER LIMITED PARTNERSHIP UNIT 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Special Distributions* $ -- $107.00
First Quarter $ 6.00 $ 6.00
Second Quarter $ 6.00 $ 6.00
Third Quarter $ 6.00 $ 6.00
Fourth Quarter $ -- $ 6.00
------- -------
TOTAL $ 18.00 $131.00
</TABLE>
Cash distributions were reduced in 1998 due to a suspension of distributions in
the fourth quarter pending the outcome of the solicitation of the consent the
Unitholders to the sale of the Properties.
* On January 24, 1997, the Partnership paid a special cash distribution
totaling $107 per Unit, reflecting a return of capital from the net proceeds
of the December 1996 sale of Canterbury Park.
3
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS AT NOVEMBER 30, AT NOVEMBER 30,
1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in real estate:
Land $ 3,780,687 $ 3,780,687
Buildings and improvements 22,419,500 22,271,530
------------ ------------
26,200,187 26,052,217
Less accumulated depreciation (11,507,294) (10,808,639)
------------ ------------
14,692,893 15,243,578
Cash and cash equivalents 424,001 1,424,876
Restricted cash 261,132 224,210
Other assets, net of accumulated amortization
of $164,087 in 1998 and $131,808 in 1997 347,073 128,814
- ---------------------------------------------------------------------------------
TOTAL ASSETS $ 15,725,099 $ 17,021,478
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------------------------------------------------------
Liabilities:
Mortgage payable $ 6,072,451 $ 6,185,012
Distribution payable -- 359,019
Accounts payable and accrued expenses 387,989 388,948
Due to general partners and affiliates 16,038 15,811
Security deposits 73,629 89,448
------------ ------------
Total Liabilities 6,550,107 7,038,238
------------ ------------
Partners' Capital:
General Partner 182,795 190,878
Limited Partners (57,490 Units outstanding) 8,992,197 9,792,362
------------ ------------
Total Partners' Capital 9,174,992 9,983,240
- ---------------------------------------------------------------------------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 15,725,099 $ 17,021,478
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED NOVEMBER 30, 1998 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME
Rental $3,970,095 $3,714,870 $4,695,358
Interest and other 37,894 130,067 102,810
---------- ---------- ----------
Total Income 4,007,989 3,844,937 4,798,168
---------- ---------- ----------
EXPENSES
Property operating 2,055,840 2,123,570 2,120,789
Depreciation and amortization 884,567 879,851 1,027,524
Interest 475,024 484,182 492,660
General and administrative 172,830 167,485 140,163
Write-off of assets 162,037 85,000 --
Minority interest 10,000 -- --
---------- ---------- ----------
Total Expenses 3,760,298 3,740,088 3,781,136
---------- ---------- ----------
INCOME FROM OPERATIONS 247,691 104,849 1,017,032
Gain on sale of property -- 2,582,641 --
- ----------------------------------------------------------------------------------------------
NET INCOME $ 247,691 $2,687,490 $1,017,032
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
NET INCOME ALLOCATED:
To the General Partner $ 13,036 $ 36,399 $ 27,769
To the Limited Partners 234,655 2,651,091 989,263
- ----------------------------------------------------------------------------------------------
NET INCOME $ 247,691 $2,687,490 $1,017,032
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
PER LIMITED PARTNERSHIP UNIT
(57,490 UNITS OUTSTANDING):
- ----------------------------------------------------------------------------------------------
Income from operations $ 4.08 $ 1.19 $ 17.21
Gain on sale of property -- 44.92 --
- ----------------------------------------------------------------------------------------------
NET INCOME $ 4.08 $ 46.11 $ 17.21
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED NOVEMBER 30, 1998, 1997, AND 1996 GENERAL LIMITED
PARTNER PARTNERS TOTAL
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE AT NOVEMBER 30, 1995 $ 190,066 $15,407,898 $15,597,964
Net income 27,769 989,263 1,017,032
Distributions ($30.00 per Unit) (35,198) (1,724,700) (1,759,898)
- ----------------------------------------------------------------------------------------------
BALANCE AT NOVEMBER 30, 1996 $ 182,637 $14,672,461 $14,855,098
Net income 36,399 2,651,091 2,687,490
Distributions ($131.00 per Unit) (28,158) (7,531,190) (7,559,348)
- ----------------------------------------------------------------------------------------------
BALANCE AT NOVEMBER 30, 1997 $ 190,878 $9,792,362 $9,983,240
Net income 13,036 234,655 247,691
Distributions ($18.00 per Unit) (21,119) (1,034,820) (1,055,939)
- ----------------------------------------------------------------------------------------------
BALANCE AT NOVEMBER 30, 1998 $ 182,795 $8,992,197 $9,174,992
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED NOVEMBER 30, 1998 1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 247,691 $ 2,687,490 $ 1,017,032
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 884,567 879,851 1,027,524
Write-off of assets 162,037 85,000 --
Minority interest 10,000 -- --
Gain on sale of property -- (2,582,641) --
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Fundings to restricted cash (192,762) (180,710) (169,425)
Release of restricted cash 155,840 181,915 163,446
Other assets (250,538) 6,410 (4,968)
Accounts payable and accrued expenses (959) 79,473 (5,063)
Due to general partners and affiliates 227 (3,802) 764
Security deposits (15,819) (40,034) (6,763)
----------- ----------- -----------
Net cash provided by operating activities 1,000,284 1,112,952 2,022,547
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of property -- 6,270,225 --
Additions to real estate (718,585) (325,502) (288,766)
Insurance recovery from fire damage 254,945 -- --
----------- ----------- -----------
Net cash provided by (used in) investing activities (463,640) 5,944,723 (288,766)
- --------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to Partners (1,414,958) (7,640,303) (1,759,898)
Mortgage principal payments (112,561) (114,040) (105,560)
Distribution to minority interest in joint venture (10,000) -- --
----------- ----------- -----------
Net cash used in financing activities (1,537,519) (7,754,343) (1,865,458)
- --------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (1,000,875) (696,668) (131,677)
Cash and cash equivalents, beginning of period 1,424,876 2,121,544 2,253,221
- --------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 424,001 $ 1,424,876 $ 2,121,544
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 435,806 $ 484,182 $ 492,660
- --------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING ACTIVITIES:
Write-off of buildings and improvements $ (315,670) $ (179,000) $ --
Write-off of accumulated depreciation $ 153,633 $ 94,000 $ --
- --------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
Notes to the Consolidated Financial Statements
NOVEMBER 30, 1998, 1997 AND 1996
1. ORGANIZATION
ConAm Realty Investors 5 L.P. (formerly Hutton/ConAm Realty Investors 5) (the
"Partnership") was organized as a limited partnership under the laws of the
State of California pursuant to a Certificate and Agreement of Limited
Partnership (as subsequently amended, the "Partnership Agreement") dated June
28, 1984. The Partnership was formed for the purpose of acquiring and operating
multi-family residential real estate. The general partners of the Partnership
were RI 5 Real Estate Services, Inc. ("RI 5"), an affiliate of Lehman Brothers,
Inc. (see below), and ConAm Property Services IV, Ltd. ("CPS IV"), an affiliate
of Continental American Properties, Ltd. (the "General Partners"). On January
27, 1998, CPS IV acquired RI 5's co general partner interest in the Partnership,
effective July 1, 1997, pursuant to a purchase agreement between CPS IV and RI 5
dated August 29, 1997. As a result, CPS IV now serves as the sole general
partner (the "General Partner") of the Partnership. In conjunction with this
transaction, the name of the Partnership changed from Hutton/ConAm Realty
Investors 5 to ConAm Realty Investors 5 L.P. On January 15, 1999, a majority in
interest of Unitholders agreed to the sell the Partnership's remaining
properties and liquidate the Partnership. The Partnership sold its properties on
January 29,1999 (Note 10) and expects to liquidate during fiscal year 1999.
2. SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
FINANCIAL STATEMENTS The consolidated financial statements are prepared on the
accrual basis of accounting and include the accounts of the Partnership and its
affiliated ventures when the Partnership has a controlling interest in the
ventures. The effect of transactions between the Partnership and its ventures
have been eliminated in consolidation.
INVESTMENTS IN REAL ESTATE Investments in real estate are recorded at cost less
accumulated depreciation and include the initial purchase price of the property,
legal fees, acquisition and closing costs.
Revenue is recognized when earned and expenses (including depreciation) are
recognized when incurred in accordance with generally accepted accounting
principles. Leases are generally for terms of one year or less.
Depreciation is computed using the straight-line method based upon the estimated
useful lives of the properties (25 years). Maintenance and repairs are charged
to operations as incurred. Costs incurred for significant betterments and
improvements are capitalized and depreciated over their estimated useful lives.
For assets sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
reflected in net income for the period.
IMPAIRMENT OF LONG-LIVED ASSETS The Partnership assesses its real estate
investments for impairment whenever events or changes in circumstances indicate
that the carrying amount of the real estate may not be recoverable.
Recoverability of real estate to be held and used is measured by a comparison of
the carrying amount of the real estate to future net cash flows (undiscounted
and without interest) expected to be generated by the real estate. If the real
estate is considered to be impaired, the impairment to be recognized is measured
as the amount by which the carrying amount of the real estate exceeds the fair
value of the real estate. At November 30, 1998, the Partnership's properties
were assets to be held and used as the Partnership did not have the ability to
sell the properties without the approval of a majority of the Unitholders.
7
<PAGE>
OTHER ASSETS Included in other assets are costs incurred in connection with
obtaining financing for the Partnership's properties. Such costs are amortized
over the initial term of the loan on a method which approximates the
effective-interest method.
INCOME TAXES No provision for income taxes has been made in the financial
statements as the liability for such taxes is that of the partners rather than
the Partnership.
CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of highly liquid
short-term investments with original maturities of three months or less.
CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject the
Partnership to a concentration of credit risk principally consist of cash and
cash equivalents and restricted cash in excess of the financial institution's
federally insured limits. The Partnership invests its cash and cash equivalents
and restricted cash with high credit quality federally insured financial
institutions or treasury based money market funds.
RESTRICTED CASH Restricted cash consists of escrow deposits for real estate
taxes and casualty insurance as required by the first mortgage lender on the
Lakeview Village property.
USE OF ESTIMATES Management of the Partnership has made a number of estimates
and assumptions relating to the reporting of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period to prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
3. THE PARTNERSHIP AGREEMENT
The Partnership Agreement provides that net cash from operations, as defined, is
to be distributed quarterly, 98% to the limited partners and 2% to the General
Partners until each limited partner has received an amount equal to an annual 7%
return for such year. Thereafter, net cash from operations is to be distributed
100% to the General Partners until the General Partners have received
distributions for the year (including the 2% distribution described above) equal
to 10% of the aggregate net cash from operations distributed to the partners for
such fiscal year to that point. Any remaining net cash from operations is to be
distributed 90% to the limited partners and 10% to the General Partners.
Net loss and all depreciation is to be allocated 99% to the limited partners and
1% to the General Partners.
Net income is to be allocated as follows:
a. To the extent that net income before depreciation does not exceed the
amount of net cash from operations distributable to the partners with
respect to such fiscal year, net income before depreciation is to be
allocated among the partners, pro rata in accordance with the amount of
net cash from operations distributable to each partner with respect to
such fiscal year to the extent thereof; and
b. To the extent that net income before depreciation exceeds the amount of
net cash from operations distributable to the partners with respect to
such fiscal year, such excess is to be allocated (1) first, 100% to the
General Partners, pro rata, in an amount equal to the excess, if any, of
the General Partners' deficit, if any, in their capital accounts, over an
amount equal to 1% of the aggregate capital contributions to the
Partnership as reduced by the amount of the General Partners' capital
contributions, and (2) second, 99% to the limited partners and 1% to the
General Partners.
8
<PAGE>
For the years ended November 30, 1998 and 1997 net income before depreciation
exceeded net cash from operations distributable to the partners. Pursuant to the
Partnership Agreement and as described in (b)(2) above, this excess was
allocated 99% to the limited partners and 1% to the General Partners.
Net proceeds from sales or refinancing is to be distributed 100% to the limited
partners until each limited partner has received an amount equal to his adjusted
capital investment (as defined in the Partnership Agreement) and an annual,
cumulative 7% return thereon. The balance, if any, is to be distributed 85% to
the limited partners and 15% to the General Partners. Generally, all gain from
sales are to be allocated 99% to the limited partners and 1% to the General
Partners until each limited partner has received an amount equal to his adjusted
capital investment and an annual, non-compounded cumulative 7% return thereon.
Thereafter, gain is to be allocated pro rata to the limited and General
Partners' capital accounts, as reduced by the amount of the net proceeds
distributed from sale or refinancing with respect to such transactions, until
the limited and general partner capital accounts are in a ratio of 85 to 15. The
balance, if any, is to be distributed 85% to the limited partners and 15% to the
General Partners.
Effective July 1, 1997, all General Partner allocations are to be made solely to
CPS IV.
4. INVESTMENTS IN REAL ESTATE
Since inception, the Partnership acquired three residential apartment complexes
either directly or through investments in joint ventures. On December 10, 1996,
the Partnership closed on the sale of one of the properties, Canterbury Park
Apartments ("Canterbury Park"). Canterbury Park sold for $6,387,300 to Burcam
Capital, L.L.C., a North Carolina limited liability company (the "Buyer"), which
is unaffiliated with the Partnership. The transaction resulted in a gain on sale
of Canterbury Park of $2,582,641, which is reflected in the Partnership's
consolidated statements of operations for the year ended November 30, 1997. On
January 24, 1997, the General Partners paid a special distribution of
$6,151,430, representing the net proceeds from the sale of Canterbury Park, to
the limited partners.
The Partnership's remaining properties at November 30, 1998 were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
PROPERTY NAME UNITS LOCATION DATE ACQUIRED PURCHASE PRICE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lakeview Village 240 Ponte Vedra Beach, FL 8/22/85 $12,266,187
The Hamptons at
Quail Hollow 232 Charlotte, NC 5/30/86 11,694,137
- -------------------------------------------------------------------------------------------
</TABLE>
Lakeview Village and The Hamptons were acquired through joint ventures with
unaffiliated developers. To each venture, the Partnership assigned its rights to
acquire the above properties and contributed cash equal to the purchase price of
the properties. The developers did not make an initial capital contribution to
these ventures.
The initial joint venture agreement of The Hamptons substantially provides that:
a. Net cash from operations of The Hamptons is to be distributed 100% to
the Partnership until it has received an annual, noncumulative return of
8% on 118% of its adjusted capital contribution. Any remaining balance
is to be distributed 80% to the Partnership and 20% to the co- venturer.
In October, 1998, distributions from The Hamptons operations resulted in a
$10,000 distribution to the co-venturer.
b. Net income of the joint venture is to be allocated to the Partnership
and the co-venturer basically in accordance with the distribution of net
cash from operations. All losses and depreciation are to be allocated to
the Partnership. Net proceeds from a sale or refinancing of The Hamptons
are to be distributed 100% to the Partnership until it has received an
amount equal to an annual, cumulative 8% return on 118% of its adjusted
capital contribution and an amount equal to 118% of its
9
<PAGE>
adjusted capital contribution. Distributions are to then be made to the
co-venturer until it has received an annual, cumulative 8% return on
$928,000 as reduced by all prior distributions of net cash from
operations and an amount equal to $928,000 as reduced by all prior
distributions of net proceeds from refinancing. Any remaining net
proceeds are to be distributed 80% to the Partnership and 20% to the
co-venturer.
As a result of the distributions made in October, 1998, $10,000 of the joint
venture's net income was allocated to the co-venturer in accordance with the
joint venture agreement.
The joint venture agreement of Lakeview Village substantially provides that:
a. Available cash from operations of Lakeview Village is to be distributed
100% to the Partnership until it has received its annual, noncumulative
preferred return, of $650,000. Any remaining balance is to be distributed
99% to the Partnership and 1% to the General Partner.
b. Net income of Lakeview Village is to be allocated first, proportionately to
partners with negative capital accounts, as defined, until such capital
accounts, as defined, have been increased to zero. Then, to the Partnership
up to the amount of any payments made on account of its preferred return;
thereafter, 99% to the Partnership and 1% to the corporate General
Partners. All net losses are to be allocated first to the partners with
positive capital accounts, as defined, until such accounts have been
reduced to zero, then 99% to the Partnership and 1% to the General Partner.
c. Income from a sale of Lakeview Village is to be allocated to the
Partnership until the Partnership's capital account, as defined, is equal
to the fair market value of the ventures' assets at the date of the
amendment. Any remaining balance is then to be allocated 99% to the
Partnership and 1% to the corporate General Partners. Net proceeds from a
sale or refinancing are to be distributed first to the partners with a
positive capital account balance, as defined; thereafter, 99% to the
Partnership and 1% to the General Partner.
5. MORTGAGE PAYABLE
On October 27, 1993, the maturity date, the Partnership obtained replacement
financing on its Lakeview Village property from The Penn Mutual Life Insurance
Company ("Penn Mutual"), an unaffiliated party. During 1996, Penn Mutual
transferred the mortgage loan to Midland Loan Services, Inc. under the existing
terms. Total proceeds of $6,600,000 were received and are collateralized by a
Mortgage and Security Agreement and an Assignment of Rents and Leases Agreement
encumbering the property. The loan is for a term of seven years and bears
interest at an annual rate of 7.75% requiring monthly installments of principal
and interest based on a 25 year amortization schedule. The proceeds of this
financing along with Partnership cash reserves were used to repay the
outstanding amounts due Aetna Life Insurance Company on the Partnership's prior
mortgage. Partnership cash reserves were also used to pay refinancing expenses
of $184,825 and fund escrows of $355,664. The escrowed funds are available to
pay real estate taxes and insurance. The loan was repaid in full in conjunction
with the sale of Lakeview Village on January 29, 1999 (note 10).
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires that the fair values be disclosed for
the Partnership's financial instruments. The carrying amount of cash and cash
equivalents, distribution payable, accounts payable and accrued expenses, due to
general partner and affiliates, and security deposits are reasonable estimates
of their fair values due to the short-term nature of those instruments.
10
<PAGE>
The carrying amount of the mortgage payable is a reasonable estimate of fair
value based on management's belief that the interest rates and terms of the debt
are comparable to those commercially available to the Partnership in the
marketplace for similar instruments.
7. TRANSACTIONS WITH RELATED PARTIES
The following is a summary of fees earned and reimbursable expenses to the
General Partners and affiliates for the years ended November 30, 1998, 1997 and
1996, and the unpaid portion at November 30, 1998:
<TABLE>
<CAPTION>
EARNED AND
UNPAID AT EARNED
NOVEMBER 30, ----------------------------------
1998 1998 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RI 5 Real Estate Services, Inc.
And affiliates:
Out-of-pocket expenses $ -- $ -- $ 2,393 $ 1,462
ConAm and affiliates:
Property operating salaries -- 339,911 366,685 342,575
Property management fees 16,038 199,651 187,757 234,958
- -----------------------------------------------------------------------------------------------
TOTAL $ 16,038 $539,562 $556,835 $578,995
- -----------------------------------------------------------------------------------------------
</TABLE>
8. RECONCILIATION OF FINANCIAL STATEMENT AND TAX INFORMATION
The following is a reconciliation of the net income for financial statement
purposes to net income for federal income tax purposes for the years ended
November 30, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income per financial statements $ 247,691 $ 2,687,490 $ 1,017,032
Depreciation deducted for tax purposes in excess of depreciation
expense per financial statements (unaudited) -- (7,153) (63,543)
Capital improvement costs capitalized for tax
Purposes not recorded per
Financial statements (unaudited) -- 204,932 --
Tax basis joint venture net income (loss)
in excess of GAAP basis joint
venture net income (unaudited) 102,142 (84,482) (54,848)
Gain on sale of properties
For tax purposes in excess of gain per
Financial statements (unaudited) -- 894,357 --
Other (unaudited) (6,979) 22 6,434
- -------------------------------------------------------------------------------------------------------------------
TAXABLE NET INCOME (UNAUDITED) $ 342,854 $ 3,695,166 $ 905,075
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
The following is a reconciliation of partners' capital for financial statement
purposes to partners' capital for federal income tax purposes as of November 30,
1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Partners' capital per financial statements $ 9,174,992 $ 9,983,240 $ 14,855,098
Adjustment for cumulative difference between
tax basis net income and net income
per financial statements (unaudited) 147,718 52,555 (955,121)
- ------------------------------------------------------------------------------------------------------
PARTNERS' CAPITAL PER INCOME TAX RETURN (UNAUDITED) $ 9,322,710 $ 10,035,795 $ 13,899,977
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
At November 30, 1998, the tax basis of the Partnership's assets was $9,484,789
and the tax basis of the Partnership's liabilities was $162,079. The Partnership
does not consolidate its investment in joint ventures for income tax purposes.
9. DISTRIBUTIONS PAID
Cash distributions, per the consolidated statements of partners' capital, are
recorded on the accrual basis, which recognizes specific record dates for
payments within each fiscal year. The consolidated statements of cash flows
recognize actual cash distributions paid during the fiscal year. The following
table discloses the annual amounts as presented on the consolidated financial
statements:
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
PAYABLE DISTRIBUTIONS DISTRIBUTIONS PAYABLE
BEGINNING OF YEAR DECLARED PAID NOVEMBER 30,
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 $359,019 $1,055,939 $1,414,958 $ --
1997 439,974 7,559,348 7,640,303 359,019
1996 439,974 1,759,898 1,759,898 439,974
- ------------------------------------------------------------------------------------------------
</TABLE>
10. SALE OF PROPERTIES
On January 29, 1999, the Partnership consummated the sale of the Lakeview
Village and The Hamptons at Quail Hollow to DOC Investors, L.L.C., a Delaware
limited liability company, for a sales price of $26,000,000 (before selling
costs and prorations). As required by the Partnership's Partnership
Agreement, the General Partner solicited the consent of a majority in
interest of the Unitholders to the sale pursuant to a Consent Solicitation
Statement dated December 16, 1998. The requisite consent was obtained on
January 15, 1999. The Partnership received approximately $19,482,000 of cash
proceeds from the sale, net of closing costs of approximately $110,000 and
repayment of indebtedness of approximately $6,408,000.
On February 26, 1999, the Partnership distributed $19,402,875 ($337.50 per
Unit) to the Unitholders and $1,340 to the General Partner, out of cash
proceeds from the sale and from Net Cash From Operations, as defined.
12
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The General Partner
ConAm Realty Investors 5 L.P.:
We have audited the accompanying consolidated balance sheets of ConAm Realty
Investors 5 L.P. (a California limited partnership) and consolidated ventures
(the "Partnership"), as of November 30, 1998 and 1997, and the related
consolidated statements of operations, partners' capital, and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As further discussed in Note 10 to the consolidated financial statements, the
Partnership sold substantially all of its assets on January 29, 1999.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ConAm Realty
Investors 5 L.P. and consolidated ventures as of November 30, 1998 and 1997, and
the results of their operations and their cash flows for the years then ended,
in conformity with generally accepted accounting principles.
KPMG LLP
San Diego, California
February 15, 1999, except for the second paragraph
of Note 10 to the consolidated financial statements,
as to which the date is February 26, 1999
13
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF FORMER INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Partners of
ConAm Realty Investors 5 L.P.:
We have audited the consolidated balance sheet of ConAm Realty Investors 5
L.P. (formerly Hutton/ConAm Realty Investors 5), a California Limited
Partnership, and Consolidated Ventures as of November 30, 1996, and the
related consolidated statements of operations, partners' capital (deficit)
and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards 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.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of ConAm Realty Investors 5 L.P., a California Limited Partnership, and
Consolidated Ventures as of November 30, 1996, and the consolidated results
of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 14, 1997
14
<PAGE>
- --------------------------------------------------------------------------------
NET ASSET VALUATION
- --------------------------------------------------------------------------------
COMPARISON OF ACQUISITION COSTS TO NOVEMBER 30, 1998
PROPERTY VALUES AND DETERMINATION OF
NET ASSET VALUE PER UNIT AT NOVEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
ACQUISITION COST
(PURCHASE PRICE
PLUS GENERAL PARTNERSHIP'S
DATE OF PARTNERS' SHARE OF PROPERTY NET ASSET VALUE
PROPERTY ACQUISITION ACQUISITION FEES) VALUE (1) DETERMINATION
- ------------------------------------------ --------------- -------------------- -------------------- ------------------
<S> <C> <C> <C> <C>
Lakeview Village at Ponte Vedra 08-22-85 $ 12,805,899 $ 11,600,000
The Hamptons at Quail Hollow 05-30-86 12,208,679 14,400,000
Aggregate Property Value at 11-30-98 $26,000,000
Less estimated transaction costs in escrow (110,000)
------------------
Sales Proceeds (before repayment or buyer assumption of secured debt) 25,890,000
Cash and cash equivalents (including previously restricted cash) 685,133
Other assets 251,604
------------------
Total assets 26,826,737
------------------
Less:
Secured debt 6,072,451
Prepayment penalty 315,023
Other liabilities 477,656
Contingency amounts (2) 554,115
------------------
Total liabilities 7,419,245
------------------
Partnership Net Asset Value (3) 19,407,492
------------------
Net Asset Value Allocated:
Limited Partners 19,402,875
General Partner 4,617
------------------
19,407,492
------------------
NET ASSET VALUE PER UNIT
(57,490) UNITS OUTSTANDING $337.50
- ---------------------------------------------------------------------------------------------------- ------------------
</TABLE>
(1) Represents the Partnership's share of the fair market value of the
properties as reflected in the purchase and sale agreements pursuant to
which the properties were sold on January 29, 1999. The purchase prices
contained in such agreements were negotiated and agreed to within
approximately 30 days of November 30, 1998.
(2) Includes an amount for estimated future costs related to the sale and
liquidation and an amount the General Partner determined to set aside for
contingencies, net of expected cash provided by operations through the date
of sale.
(3) The Partnership Net Asset Value assumes a sale at November 30, 1998 of all
the Partnership's properties at prices equal to the sales prices set forth
in the purchase and sale agreements described in Note (1), payment of all
Partnership liabilities, and the distribution of the proceeds of such sale
and other Partnership cash, to the Partners.
Since the Partnership sold all of its real property assets in January 1999, is
in dissolution, and is in the process of winding up and liquidating, the
foregoing Partnership Net Asset Value is intended to approximate the liquidation
value of the Partnership and the Net Asset Value Per Unit is intended to
approximate the per Unit amount which is expected to be distributed to the
Limited Partners in connection with the Partnership's liquidation. The Net Asset
Valuation does not take into account the illiquid nature of an investment in the
Units or the fact that at November 30, 1998 a holder of Units would likely not
have been able to sell its Units for the Net Asset Value Per Unit set forth
above. Fiduciaries of Limited Partners which are subject to ERISA or other
provisions of law requiring valuation of Units should consider all relevant
factors, including but not limited to Net Asset Value Per Unit, in determining
the fair market value of the investment in the Partnership for such purpose.
15
<PAGE>
CONAM REALTY INVESTORS 5 L.P.
AND CONSOLIDATED VENTURES
Schedule III - Real Estate and Accumulated Depreciation
November 30, 1998
<TABLE>
<CAPTION>
CONSOLIDATED VENTURES
-----------------------------------------------
LAKEVIEW
VILLAGE THE
RESIDENTIAL PROPERTY: APARTMENTS HAMPTONS TOTAL
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Location Ponte Vedra Charlotte, NC NA
Beach, FL
Construction date 1984-1985 1985-1986 NA
Acquisition date 08-22-85 05-30-86 na
Life on which depreciation in latest
income statements is computed 25 years 25 years na
Encumbrances $ 6,072,451 $ -- $ 6,072,451
Initial cost to Partnership:
Land $ 1,543,406 $ 2,208,781 $ 3,752,187
Buildings and improvements 11,321,843 10,085,246 21,407,089
Write-off of building costs (436,779) (57,891) (494,670)
Costs capitalized subsequent to acquisition --
Land, buildings and improvements 1,293,203 242,378 1,535,581
Gross amount at which
carried at close of period: (1)
Land $ 1,571,906 $ 2,208,781 $ 3,780,687
Buildings and improvements 12,149,767 10,269,733 22,419,500
- -----------------------------------------------------------------------------------------------------------------
13,721,673 12,478,514 26,200,187
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Accumulated depreciation (2) $ 6,186,029 $ 5,321,265 $ 11,507,294
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The aggregate costs for Land, Buildings and Improvements for Federal tax
purposes are $0. (2) The amount of accumulated depreciation for Federal
income tax purposes is $0.
A reconciliaiton of the carrying amount of real estate and accumulated
depreciation for the years ended November 30, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENTS IN REAL ESTATE:
Beginning of period $ 26,052,217 $ 31,693,216 $ 31,404,450
Additions 463,640 325,502 288,766
Dispositions and disposals (315,670) (5,966,501) --
- ----------------------------------------------------------------------------------------------------------------
End of period $ 26,200,187 $ 26,052,217 $ 31,693,216
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
ACCUMULATED DEPRECIATION:
Beginning of period $ 10,808,639 $ 12,154,985 $ 11,159,740
Depreciation expense 852,288 847,571 995,245
Dispositions and disposals (153,633) (2,193,917) --
- ----------------------------------------------------------------------------------------------------------------
End of period $ 11,507,294 $ 10,808,639 $ 12,154,985
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING INDEPENDENT AUDITORS' REPORT.
F-1
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The General Partner
ConAm Realty Investors 5 L.P.:
Under date of February 15, 1999, we reported on the consolidated balance sheets
of ConAm Realty Investors 5 L.P. (a California limited partnership) and
consolidated ventures (the "Partnership") as of November 30, 1998 and 1997, and
the related consolidated statements of operations, partners' capital, and cash
flows for the years then ended, as contained in the 1998 annual report to
Unitholders. These consolidated financial statements and our report thereon are
incorporated by reference in the 1998 annual report on Form 10-K. In connection
with our audits of the aforementioned consolidated financial statements, we also
have audited the related consolidated financial statement schedule. This
consolidated financial statement schedule is the responsibility of the
Partnership's management. Our responsibility is to express an opinion on this
consolidated financial statement schedule based on our audits.
In our opinion, the consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG LLP
San Diego, California
February 15, 1999
F-2
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF FORMER INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Our report on the consolidated financial statements of ConAm Realty Investors 5
L.P. (formerly Hutton/ConAm Realty Investors 5), a California Limited
Partnership, and Consolidated Ventures has been incorporated by reference in
this Form 10-K from the Annual Report to Unitholders of ConAm Realty Investors 5
L.P. for the year ended November 30, 1996. In connection with our audit of such
financial statements, we have also audited the related financial statement
schedule listed in the index of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 14, 1997
F-3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> NOV-30-1998
<CASH> 685,133
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 26,200,187
<DEPRECIATION> 11,507,294
<TOTAL-ASSETS> 15,725,099
<CURRENT-LIABILITIES> 477,636
<BONDS> 6,072,451
0
0
<COMMON> 0
<OTHER-SE> 9,174,992
<TOTAL-LIABILITY-AND-EQUITY> 15,725,099
<SALES> 3,970,095
<TOTAL-REVENUES> 4,007,989
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,285,274
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 475,024
<INCOME-PRETAX> 247,691
<INCOME-TAX> 0
<INCOME-CONTINUING> 247,691
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 247,691
<EPS-PRIMARY> 4.08
<EPS-DILUTED> 4.08
</TABLE>
