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, 1997
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 06103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 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, 1997 and December 31, 1996
(in thousands)
September 30, December 31,
1997 1996
(unaudited)
_________________________________
Assets
Investments in real estate:
Properties $242,391 $239,889
Less accumulated depreciation
and amortization (52,866) (47,772)
Total investments in real estate 189,525 192,117
Cash and cash equivalents 10,309 9,133
Rent and other receivables 4,180 4,487
Other 13 13
--------------------------------
Total assets $204,027 $205,750
Liabilities and Partners' Capital
Liabilities:
Investment portfolio fee payable
to related parties $ 1,182 $ 1,195
Accounts payable and accrued expenses 382 496
Accrued property taxes 1,135 766
Security deposits 964 934
Unearned income 175 189
Total liabilities 3,838 3,580
________________________________
Partners' capital (deficiency):
General Partners (62) (43)
Limited Partners 200,251 202,213
Total partners' capital 200,189 202,170
--------------------------------
Total liabilities and partners' capital $204,027 $205,750
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Income
For the Three and Nine Months Ended September 30, 1997 and 1996
(in thousands, except units and per unit amounts)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
Revenue:
Rental $ 7,045 $ 7,005 $ 21,294 $ 20,955
Interest 99 60 280 225
Other income 161 105 390 375
7,305 7,170 21,964 21,555
Expenses:
Property operating 2,590 2,426 7,455 7,153
Depreciation and amortization 1,710 1,705 5,119 5,204
Investment portfolio
fee - related parties 1,182 1,240 3,535 3,692
General and administrative 159 168 488 455
Bad debt 98 175 407 546
-------- -------- -------- --------
5,739 5,714 17,004 17,050
-------- -------- -------- --------
Net income $ 1,566 $ 1,456 $ 4,960 $ 4,505
Net income allocated:
To the General Partners $ 16 $ 15 $ 50 $ 45
To the Limited Partners 1,550 1,441 4,910 4,460
-------- -------- -------- --------
$ 1,566 $ 1,456 $ 4,960 $ 4,505
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 $ .12 $ .11 $ .39 $ .35
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Partners' Capital (Deficiency)
For the Nine Months Ended September 30, 1997 and 1996
(in thousands - unaudited)
General Limited
Partners Partners Total
--------- --------- ---------
Balance at January 1, 1997 $ (43) $ 202,213 $ 202,170
Distributions (69) (6,872) (6,941)
Net income 50 4,910 4,960
--------- --------- ---------
Balance at September 30, 1997 $ (62) $ 200,251 $ 200,189
--------- --------- ---------
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
--------- --------- ---------
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1997 and 1996
(in thousands - unaudited)
Nine Months Ended
September 30,
1997 1996
---------------------
Cash flows from operating activities:
Net income $ 4,960 $ 4,505
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 5,119 5,204
Bad debt expense 407 546
Accrued rental income (29) 79
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Rent and other receivables (71) (667)
Investment portfolio fee payable to related parties (13) 28
Accounts payable and accrued expenses (80) (83)
Accrued property taxes 369 286
Security deposits 30 96
Unearned income (14) (151)
Net cash provided by operating activities 10,678 9,843
Cash flows from investing activities:
Investments in real estate (2,561) (2,093)
Net cash used in investing activities (2,561) (2,093)
Cash flows from financing activities:
Cash distributions (6,941) (7,033)
Net cash used in financing activities (6,941) (7,033)
Net increase in cash and cash equivalents 1,176 717
Cash and cash equivalents at beginning of period 9,133 8,971
Cash and cash equivalents at end of period $10,309 $ 9,688
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, 1996. The financial
data included herein as of December 31, 1996 has been drawn
from the consolidated financial statements of the
Partnership which were audited by Coopers & Lybrand L.L.P.
2. 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. The applicable percentage,
for the purpose of calculating this fee, declines to 2% per
annum for Investments in Properties held by the Partnership
more than 10 years but less than 15 years, and to 1.75% per
annum for Investments in Properties held more than 15 years.
For the nine months ended September 30, 1997, Aetna/AREA and
AREA GP earned fees of $1,527,496 and $2,007,515,
respectively. For the similar period of the prior year,
Aetna/AREA and AREA GP earned fees of $1,476,740 and
$2,215,109, respectively.
3. CASH DISTRIBUTIONS
Cash distributions paid to Unitholders during the period
January 1, 1997 to September 30, 1997 by the Partnership
aggregated $6,871,255 which related to operations for the
quarters ended December 31, 1996, March 31, 1997 and June 30, 1997.
Cash distributions paid to the General Partners during the period
January 1, 1997 to September 30, 1997 by the Partnership aggregated
$69,407 which related to operations for the quarters ended
December 31, 1996, March 31, 1997 and June 30, 1997.
4. SUBSEQUENT EVENTS
In October 1997, the Partnership declared cash distributions
aggregating $2,313,554 pertaining to the period from
July 1,1997 to September 30, 1997. On or about November 15, 1997,
$2,290,418 ($.18 per Unit) is to be distributed to the
Limited Partners and $23,136 to the General Partners.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At December 31, 1996, the Partnership had working capital reserves
("Reserves") of approximately $4,752,000. During the nine months
ended September 30, 1997, the Partnership expended approximately
$2,561,000 for capital improvements. The Partnership has current
Reserves of approximately $5,332,000, including approximately
$3,141,000 retained from operations for the nine months ended
September 30, 1997. At September 30, 1997, the Partnership had
approximately $758,000 of outstanding commitments for capital
improvements and approximately $6,240,000 of projected capital
improvements (collectively, the "Capital Costs") related to
existing Investments in Properties. For the three months ended
December 31, 1997 the Partnership will fund if needed approximately
$1,517,000 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 nine months ended September 30, 1997 increased
approximately $455,000 in comparison to the corresponding period
in 1996, due primarily to an increase in rental revenue. An
increase in revenue of approximately $339,000 from the
corresponding period in 1996 resulted primarily from increases in
rental revenue at 115 & 117 Flanders Road, and Three Riverside
Drive due to improved occupancy at these properties. These
increases were partially offset by decreases in rental revenue at
the retail properties. Expenses for the nine months ended
September 30, 1997 decreased approximately $46,000 in comparison
to the corresponding period in 1996 as a result of lower
investment portfolio fees and reduced bad debt expenses,
partially offset by increased property operating expenses. The
majority of the increase in operating expenses occurred at Town
Center Business Park, due to increased repairs and maintenance
and real estate tax expense, and at Lincoln Square Apartments,
due to increased real estate tax expense.
The bad debt expense for the nine months ended September 30, 1997,
represents the write-off of certain tenant receivables and
increases to the allowance for doubtful accounts at certain
properties, including approximately $180,000 related to a tenant
in bankruptcy at Powell Street Plaza.
The Partnership made cash distributions of $.54 per Unit to
Unitholders for the nine months ended September 30, 1997 and
1996.
The Net Asset Value of each of the Partnership's Units, based
upon quarterly independent appraisals, increased to $16.38 at
September 30, 1997 from $15.60 at September 30, 1996. The
increase in Net Asset Value per Unit is primarily the result of
increases in the appraised values of certain of the Partnership's
properties, including significant increases in Summit Village,
Powell Street Plaza, Town Center Business Park, Three Riverside
Drive, and 115 & 117 Flanders Road. The increase in the
appraised value of Summit Village is a result of an increase in
projected market rents. Powell Street Plaza, Town Center
Business Park, Three Riverside Drive, and 115 & 117 Flanders Road
increased in appraised value primarily as a result of improved
occupancy and market rent assumptions. These value increases
were partially offset by decreases in the appraised value of
certain of the Partnership's properties, primarily at Oakland
Pointe Shopping Center due to a decrease in anticipated occupancy
from the expected departure of three major tenants, and a
reduction in the market rent of some space.
Net income for the three months ended September 30, 1997 increased
approximately $110,000 as compared to the corresponding period in
1996. A portion of this increase was attributable to an increase
in other income of approximately $56,000, primarily due to a
refund of prior year real estate taxes received at Powell Street
Plaza. Rental revenue increased approximately $40,000, primarily
due to increased occupancy at 115 & 117 Flanders Road, Town Center
Business Park and Lincoln Square Apartments. These increases in
rental revenue were partially offset by lower rental revenue at
Oakland Pointe Shopping Center, due to a decrease in occupancy,
and Powell Street Plaza as a result of lower overage rents and
reduced expense reimbursements partially due to the refund of
prior year real estate taxes. An increase in property operating
expenses of approximately $164,000 was partially offset by
reductions in bad debt expense of approximately $77,000 and the
investment portfolio fee of approximately $58,000. The most
significant increases in property operating expenses occurred at
Town Center Business Park due primarily to increased repairs and
maintenance.
PART II - OTHER INFORMATION
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8K
(a) Exhibit No. 27 - Financial Data Schedule
(b) None
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<OTHER-SE> 200,189,000
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