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: March 31, 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
incorporation or organization) (Identification No.)
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 30 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 March 31, 1996 and December 31, 1995
(in thousands)
March 31, December 31,
1996 1995
(unaudited)
Assets
Investments in real estate:
Properties $242,732 $241,742
Less write-down of property
for permanent impairment (4,408) (4,408)
Less accumulated depreciation
and amortization (42,895) (41,152)
Total investments in real estate 195,429 196,182
Cash and cash equivalents 8,914 8,971
Rent and other receivables 4,189 4,168
Other 13 13
Total assets $208,545 $209,334
Liabilities and Partners' Capital
Liabilities:
Investment portfolio fee payable
to related parties $ 1,215 $ 1,212
Accounts payable and accrued expenses 361 451
Accrued property taxes 1,063 815
Security deposits 844 824
Unearned income 168 225
Other liabilities 116 1
Total liabilities 3,767 3,528
Partners' capital (deficiency):
General Partners (17) 85
Limited Partners 204,795 205,721
Total partners' capital 204,778 205,806
Total liabilities and partners' capital $208,545 $209,334
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Income
For the Three Months Ended March 31, 1996 and 1995
(in thousands, except units and per unit amounts)
(unaudited)
Three Months Ended
March 31,
1996 1995
Revenue:
Rental $ 7,014 $ 6,922
Interest 88 87
Other income 103 56
7,205 7,065
Expenses:
Property operating 2,427 2,254
Depreciation and amortization 1,775 1,735
Investment portfolio fee - related parties 1,215 1,207
General and administrative 139 192
Bad debt 271 80
5,827 5,468
Net income $ 1,378 $ 1,597
Net income allocated:
To the General Partners $ 14 $ 16
To the Limited Partners 1,364 1,581
$ 1,378 $ 1,597
Weighted average number of limited
partnership units outstanding 12,724,547 12,724,547
Earnings per limited partnership unit $ .11 $ .12
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Partners' Capital (Deficiency)
For the Three Months Ended March 31, 1996 and 1995
(in thousands - unaudited)
General Limited
Partners Partners Total
Balance at January 1, 1996 $ 85 $205,721 $205,806
Distributions (116) (2,290) (2,406)
Net income 14 1,364 1,378
Balance at March 31, 1996 $ (17) $204,795 $204,778
Balance at January 1, 1995 $ 79 $214,318 $214,397
Capital contributions 23 ------ 23
Distributions (23) (2,290) (2,313)
Net income 16 1,581 1,597
Balance at March 31, 1995 $ 95 $213,609 $213,704
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1996 and 1995
(in thousands - unaudited)
Three Months Ended
March 31,
1996 1995
Cash flows from operating activities:
Net income $ 1,378 $ 1,597
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,775 1,735
Bad debt expense 271 80
Accrued rental income (31) (54)
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Rent and other receivables (261) 10
Investment portfolio fee payable to related parties 3 19
Accounts payable and accrued expenses (90) (82)
Accrued property taxes 248 268
Security deposits 20 1
Unearned income (57) (15)
Other liabilities (1) 1
Net cash provided by operating activities 3,255 3,560
Cash flows from investing activities:
Investments in real estate (1,022) (735)
Net cash used in investing activities (1,022) (735)
Cash flows from financing activities:
Cash distributions (2,290) (2,313)
Capital contributions ----- 23
Net cash used in financing activities (2,290) (2,290)
Net (decrease) increase in cash and cash equivalents (57) 535
Cash and cash equivalents at beginning of period 8,971 9,373
Cash and cash equivalents at end of period $ 8,914 $ 9,908
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
recognized at December 31, 1995. 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 three months ended
March 31, 1996, Aetna/AREA and AREA GP earned fees of
$486,190 and $729,284, respectively. For the similar period
of the prior year, Aetna/AREA and AREA GP earned fees of
$482,948 and $724,421, respectively.
4. CAPITAL CONTRIBUTIONS/DISTRIBUTIONS
On or about February 15, 1996, cash distributions paid to
Unitholders by the Partnership aggregated $2,290,418 which
related to operations for the three months ended December
31, 1995. The General Partners were not entitled to their
portion of the distributions of $23,135 for the same
period. At March 31, 1996, it was determined that this
distribution and the distributions aggregating $92,542,
which were uncollected by the General Partners, during
1995 became distributable within the provisions of the
Partnership's Revised Limited Partnership Agreement. A
distribution payable to the General Partners of $115,678
is included in these consolidated financial statements as
of March 31, 1996.
5. SUBSEQUENT EVENTS
In April 1996, the Partnership declared cash distributions
aggregating $2,313,553 ($.18 per Unit) pertaining to the
three months ended March 31, 1996, which is to be
distributed on or about May 15, 1996, when the General
Partners will also receive a distribution payable of
$115,678 for General Partners' distributions withheld during
1995 and the first quarter of 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 $4,500,000. During the quarter ended
March 31, 1996, the Partnership expended approximately $1,023,000
for capital improvements. The Partnership has current Reserves of
approximately $4,133,000, including approximately $656,000 retained
from cash generated from operations for the three months ended
March 31, 1996. At March 31, 1996, the Partnership had
approximately $264,000 of outstanding commitments for capital
improvements and approximately $3,758,000 of projected capital
improvements (collectively the "Capital Costs") related to existing
Investments in Properties of which for 1996 the Partnership will
fund if needed approximately $3,691,000 from 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 from operating cash flow to its Reserves. 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 three months ended March 31, 1996 decreased
approximately $219,000 in comparison to the corresponding period in
1995, due to an increase primarily from property operating and bad
debt expenses. An increase in rental revenue of approximately
$92,000 from the corresponding period in 1995 resulted from
increases in rental revenue at several of the properties. These
increases were partially offset by decreases in rental revenue, as
a result of decreases in occupancy, at both Village Square Shopping
Center and 117 Flanders Road. The increase in other income is
mostly attributable to receipt of a lease termination fee at Powell
Street Plaza.
Property operating expenses for the three months ended March 31,
1996 increased approximately $173,000 in comparison to the
corresponding period in 1995 as a result of increases in operating
expenses, primarily snow removal expenses due to harsh winter
conditions at certain retail and office/industrial properties. The
decrease in general and administrative expenses is a result of
overaccrued costs in 1995 and lower rates for unit tracking. Based
on an analysis performed on each property it was necessary to
increase the allowance for doubtful accounts at certain properties,
including approximately $83,700 related to a tenant that vacated
Village Square and approximately $105,600 related to a number of
small tenants in bankruptcy and or vacating Cross Pointe Centre.
In addition, Town Center Business Park incurred a bad debt expense
of approximately $67,900 due primarily to the write-off a tenant
receivable.
The Partnership made cash distributions of $.18 per Unit to
Unitholders for the three months ended March 31, 1996 and 1995.
The Net Asset Value of each of the Partnership's Units, based upon
quarterly independent appraisals, increased to $15.29 at March 31,
1996 from $15.19 at March 31, 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 Cross Pointe Centre, Powell
Street and Summit Village Apartments. The increase in appraised
value of Cross Pointe Centre is a result of improved occupancy in
conjunction with a stronger tenant mix, including an expansion of a
proven anchor tenant and a reduced vacancy allowance. Powell
Street Plaza's increase in appraised value is primarily due to an
increase in percentage rent, with stable cash flow and modest lease
expirations projected over the next few years. The increase in the
appraised value of Summit Village Apartments is a result of an
increase in projected market rents. These value increases were
partially offset by a decrease in value at Oakland Pointe Shopping
Center due to an increase in the vacancy and capital assumptions in
conjunction with changes in pricing as a result of expected
departures for three major tenants.
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: May 13, 1996 BY: /s/ Paul L. Abbott
Name: Paul L. Abbott
Title: President, Chief Executive Officer,
and Chief Financial Officer
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