SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-Q
___
/ X / Quarterly Report Under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarter ended: September 30, 1996
OR
___
/___/ Transition Report Under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from: __________________ to
__________________
Commission file number: 0-14986
AETNA REAL ESTATE ASSOCIATES, L.P.
(Exact name of registrant as specified in its charter)
Delaware 11-2827907
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
242 Trumbull Street, Hartford, Connecticut 06156
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 275-2178
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No __
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The summarized financial information contained herein is
unaudited; however, in the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary for a
fair presentation of such financial information have been
included.
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Balance Sheets
As of September 30, 1996 and December 31, 1995
(in thousands)
September 30, December 31,
1996 1995
(unaudited)
Assets
Investments in real estate:
Properties $239,395 $237,334
Less accumulated depreciation
and amortization (46,324) (41,152)
Total investments in real estate 193,071 196,182
Cash and cash equivalents 9,688 8,971
Rent and other receivables 4,210 4,168
Other 13 13
Total assets $206,982 $209,334
Liabilities and Partners' Capital
Liabilities:
Investment portfolio fee payable
to related parties $ 1,240 $ 1,212
Accounts payable and accrued expenses 369 452
Accrued property taxes 1,101 815
Security deposits 920 824
Unearned income 74 225
Total liabilities 3,704 3,528
Partners' capital (deficiency):
General Partners (32) 85
Limited Partners 203,310 205,721
Total partners' capital 203,278 205,806
Total liabilities and partners' capital $206,982 $209,334
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Income
For the Three and Nine Months Ended September 30, 1996 and 1995
(in thousands, except units and per unit amounts)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Revenue:
Rental $ 7,005 $ 6,924 $20,955 $20,757
Interest 60 91 225 270
Other income 105 224 375 366
7,170 7,239 21,555 21,393
Expenses:
Property operating 2,426 2,321 7,153 6,848
Depreciation and amortization 1,705 2,468 5,204 6,008
Investment portfolio
fee - related parties 1,240 1,200 3,692 3,602
General and administrative 168 148 455 524
Bad debt 175 117 546 419
5,714 6,254 17,050 17,401
Net income $ 1,456 $ 985 $ 4,505 $ 3,992
Net income allocated:
To the General Partners 15 10 45 40
To the Limited Partners 1,441 975 4,460 3,952
$ 1,456 $ 985 $ 4,505 $ 3,992
Weighted average number of limited
partnership units outstanding 12,724,547 12,724,547 12,724,547 12,724,547
Earnings per limited partnership unit $ .11 $ .08 $ .35 $ .31
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Partners' Capital (Deficiency)
For the Nine Months Ended September 30, 1996 and 1995
(in thousands - unaudited)
General Limited
Partners Partners Total
Balance at January 1, 1996 $ 85 $205,721 $205,806
Distributions (162) (6,871) (7,033)
Net income 45 4,460 4,505
Balance at September 30, 1996 $ (32) $203,310 $203,278
Balance at January 1, 1995 $ 79 $214,318 $214,397
Capital contributions 69 - 69
Distributions (69) (6,871) (6,940)
Net income 40 3,952 3,992
Balance at September 30, 1995 $119 $211,399 $211,518
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1996 and 1995
(in thousands - unaudited)
Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities:
Net income $ 4,505 $ 3,992
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 5,204 6,008
Bad debt expense 546 419
Accrued rental income 79 (115)
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Rent and other receivables (667) (674)
Investment portfolio fee payable to related parties 28 13
Accounts payable and accrued expenses (83) (74)
Accrued property taxes 286 604
Security deposits 96 22
Unearned income (151) 55
Net cash provided by operating activities 9,843 10,250
Cash flows from investing activities:
Investments in real estate (2,093) (3,303)
Net cash used in investing activities (2,093) (3,303)
Cash flows from financing activities:
Cash distributions (7,033) (6,940)
Capital contributions - 69
Net cash used in financing activities (7,033) (6,871)
Net increase in cash and cash equivalents 717 76
Cash and cash equivalents at beginning of period 8,971 9,373
Cash and cash equivalents at end of period $ 9,688 $ 9,449
AETNA REAL ESTATE ASSOCIATES, L.P.
(a Delaware limited partnership)
Notes to Consolidated Financial Statements
(unaudited)
1. GENERAL
The accompanying financial statements and related notes
should be read in conjunction with the Partnership's annual
report for the year ended December 31, 1995. The financial
data included herein as of December 31, 1995 has been drawn
from the consolidated financial statements of the Partnership
which were audited by Coopers & Lybrand L.L.P.
2. SIGNIFICANT ACCOUNTING POLICIES
Reclassifications
Under Financial Accounting Standards No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, the carrying value of one
investment property was reduced to its estimated fair value
in connection with a permanent impairment write-down of
approximately $4,408,000 recognized at December 31, 1995.
This permanent impairment write-down has been netted against
Properties in 1996 to reflect the new basis. In addition,
the 1995 consolidated balance sheet amount for accumulated
depreciation and amortization related to that property at
the time of impairment of approximately $2,609,000 has been
reclassified to Properties in 1996 to reflect the new basis.
In addition, certain other 1995 consolidated financial
statement items have been reclassified to conform to the
1996 presentation.
3. TRANSACTIONS WITH AFFILIATES
Investment Portfolio Fee
The General Partners are entitled to receive an investment
portfolio fee based on the net asset value of the
Partnership's investments. The fee is payable quarterly, in
arrears, from available cash flow and may not exceed 2.5%
per annum of net asset value. For the nine months ended
September 30, 1996, Aetna/AREA and AREA GP earned fees of
$1,476,740 and $2,215,109, respectively. For the similar
period of the prior year, Aetna/AREA and AREA GP earned fees
of $1,440,956 and $2,161,434, respectively.
4. CAPITAL CONTRIBUTIONS/DISTRIBUTIONS
On or about August 15, 1996, cash distributions paid by the
Partnership aggregated $2,313,554 which related to
operations for the three months ended June 30, 1996. Cash
distributions paid to Unitholders during the period January
1, 1996 to September 30, 1996 by the Partnership aggregated
$6,871,255 which related to operations for the quarters
ended December 31, 1995, March 31, 1996 and June 30, 1996.
Cash distributions paid to the General Partners during the
period January 1, 1996 to September 30, 1996 by the
Partnership aggregated $161,949 which related to operations
for the quarters ended December 31, 1995, March 31, 1996,
and June 30, 1996 and distributions that were withheld by
the Partnership during 1995, which became distributable
within the provisions of the Partnership's Revised Limited
Partnership Agreement.
5. SUBSEQUENT EVENTS
In October 1996, the Partnership declared cash distributions
aggregating $2,313,554 ($.18 per Unit) pertaining to the
three months ended September 30, 1996, which is to be
distributed on or about November 15, 1996.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At December 31, 1995, the Partnership had working capital reserves
("Reserves") of approximately $4,475,000. During the nine months
ended September 30, 1996, the Partnership expended approximately
$2,093,000 for capital improvements. The Partnership has current
Reserves of approximately $5,101,000, including approximately
$2,719,000 retained from cash generated from operations for the
nine months ended September 30, 1996. At September 30, 1996, the
Partnership had approximately $907,000 of outstanding commitments
for capital improvements and approximately $5,692,000 of projected
capital improvements (collectively the "Capital Costs") related to
existing Investments in Properties of which the Partnership will
fund in 1996, if needed, approximately $1,765,000 from its Reserves
for these Capital Costs. These Capital Costs consist primarily of
estimated tenant improvements and leasing commissions for
speculative leasing activity at certain properties, which, based on
activity in the marketplace, may or may not materialize. The
Partnership anticipates funding these Capital Costs from existing
Reserves and through additions to its Reserves from operating cash
flow. To ensure that the Partnership has adequate Reserves to fund
its Capital Costs, the General Partners will continue to review the
Reserves quarterly.
If sufficient capital is not available at the time of a funding of
a Capital Cost, the General Partners will review such Capital Cost
and take such steps as they consider appropriate, including
decreasing future cash distributions from operations, negotiating a
delay or other restructuring of the capital funding requirements
related to an Investment in Properties or borrowing money, as
provided in the Partnership Agreement, on a short-term basis to pay
Capital Costs.
Results of Operations
Net income for the nine months ended September 30, 1996 increased
approximately $513,000, in comparison to the corresponding period
in 1995. Most of this change is attributable to lower depreciation
and amortization expense for Village Square Shopping Center.
During the nine months ended September 30, 1995 approximately
$665,000 of unamortized tenant improvements and leasing commissions
were written-off in connection with a tenant vacating their space.
Year-to-date rental revenue increased approximately $198,000 from
the corresponding period in 1995 as a result of increases in rental
revenue at several properties. The most significant increases
occurred at Cross Pointe Centre and Town Center Business Park, due
to increased occupancy, and at Summit Village as a result of an
increase in rental rates. These increases were partially offset by
certain decreases in rental revenue, as a result of decreases in
occupancy, at 117 Flanders Road, Village Square Shopping Center and
Oakland Pointe.
Property operating expenses for the nine months ended September
30, 1996 increased approximately $305,000 in comparison to the
corresponding period in 1995. The majority of this increase
related to snow removal expenses due to harsh winter conditions at
certain retail and office/industrial properties, higher
landscaping costs at Oakland Pointe Shopping Center, and increased
electricity expenses at certain office/industrial properties as a
result of vacated tenants who were paying 100% of their
electricity expenses. The investment portfolio fee increased
slightly due to an increase in the current value of net assets as
discussed below. The decrease in general and administrative
expenses is primarily a result of overaccrued costs in 1995 and
lower rates charged for Limited Partnership unit tracking in 1996.
Bad debt expenses at the retail properties for the nine months
ended September 30, 1996 aggregated approximately $466,000 for the
write-off of certain tenant receivables and to increase the
allowance for doubtful accounts. Also Town Center Business Park
incurred bad debt expense for the nine months ended September 30,
1996 of approximately $67,000 due to an increase of the allowance
for doubtful accounts.
The Partnership made cash distributions of $.54 per Unit to
Unitholders for the nine months ended September 30, 1996 and
September 30, 1995.
The Net Asset Value of each of the Partnership's Units, based upon
quarterly independent appraisals, increased to $15.60 at September
30, 1996 from $15.10 at September 30, 1995. The increase in Net
Asset Value per Unit is primarily the result of increases in the
appraised values of certain of the Registrant's properties,
including significant increases in Town Center Business Park and
Summit Village Apartments. Town Center Business Park's increase in
appraised value is primarily due to improved occupancy, from 67% to
84%. The increase in the appraised value of Summit Village
Apartments is a result of an increase in projected market rents.
These increases in appraised value were partially offset by a
decrease in value at Oakland Pointe Shopping Center due to a
decrease in anticipated occupancy, resulting from the expected
departure of three major tenants, in conjunction with changes in
the discount and exit capitalization rates, reflecting the
increased risk associated with this property. In addition, during
the three months ending September 30, 1996, Cross Pointe Centre
experienced a decrease in value reflecting financial difficulties
of two of the anchor tenants.
Net income for the three months ended September 30, 1996 increased
approximately $471,000 as compared to the corresponding period in
1995. The decrease in expenses is primarily attributable to lower
depreciation and amortization expense partially offset by the
increase in bad debt expense and property operating expenses, as
discussed above. The most significant increase in rental revenue
occurred at Town Center Business Park and Summit Village Apartments
and was partially offset by decreases at certain retail properties.
The decrease in other income is attributable to receipt of a lease
termination fee at Three Riverside Drive during the three months
ended September 30, 1995.
PART II - OTHER INFORMATION
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8K
(a) None
(b) None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
Aetna Real Estate Associates, L.P.
BY: AREA GP Corporation
General Partner
Date: November 9, 1996 BY: /s/ Paul L. Abbott
Name: Paul L. Abbott
Title: President, Chief
Executive Officer, and
Chief Financial Officer
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