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, 1998
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 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 March 31, 1998 and December 31, 1997
(in thousands)
March 31, December31,
1998 1997
(unaudited)
Assets
Investments in real estate:
Properties $ 243,741 $ 243,062
Less accumulated depreciation
and amortization (56,209) (54,496)
Total investments in real estate 187,532 188,566
Cash and cash equivalents 11,835 10,883
Rent and other receivables 4,057 3,954
Other 13 13
Total assets $ 203,437 $ 203,416
Liabilities and Partners' Capital
Liabilities:
Investment portfolio fee payable
to related parties $ 1,185 $ 1,168
Accounts payable and accrued expenses 411 463
Accrued property taxes 1,025 782
Security deposits 1,015 979
Unearned income 281 315
Total liabilities 3,917 3,707
Partners' capital (deficiency):
General Partners (69) (67)
Limited Partners 199,589 199,776
Total partners' capital 199,520 199,709
Total liabilities and
partners' capital $ 203,437 $ 203,416
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Income
For the Three Months Ended March 31, 1998 and 1997
(in thousands, except units and per unit amounts)
(unaudited)
Three Months Ended March 31,
1998 1997
Revenue:
Rental $ 7,419 $ 7,059
Interest 128 88
Other income 78 137
7,625 7,284
Expenses:
Property operating 2,427 2,401
Depreciation and amortization 1,713 1,697
Investment portfolio fee-related parties 1,185 1,203
General and administrative 136 161
Bad debt 39 177
5,500 5,639
Net income $ 2,125 $ 1,645
Net income allocated:
To the General Partners $ 21 $ 17
To the Limited Partners 2,104 1,628
$ 2,125 $ 1,645
Weighted average number of limited
partnership units outstanding 12,724,547 12,724,547
Earnings per limited partnership unit $.17 $ .13
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Partners' Capital (Deficiency)
For the Three Months Ended March 31, 1998 and 1997
(in thousands - unaudited)
General Limited
Partners Partners Total
Balance at January 1, 1998 $ (67) $ 199,776 $ 199,709
Distributions (23) (2,291) (2,314)
Net income 21 2,104 2,125
Balance at March 31, 1998 $ (69) $ 199,589 $ 199,520
Balance at January 1, 1997 $ (43) $ 202,213 $ 202,170
Distributions (23) (2,291) (2,314)
Net income 17 1,628 1,645
Balance at March 31, 1997 $ (49) $ 201,550 $ 201,501
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1998 and 1997
(in thousands - unaudited)
Three Months Ended March 31,
1998 1997
Cash flows from operating activities:
Net income $ 2,125 $ 1,645
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,713 1,697
Bad debt expense 39 177
Accrued rental income (29) 3
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Rent and other receivables (113) 96
Investment portfolio fee payable to
related parties 17 8
Accounts payable and accrued expenses (52) (104)
Accrued property taxes 243 276
Security deposits 36 9
Unearned income (34) (32)
Net cash provided by operating
activities 3,945 3,775
Cash flows from investing activities:
Investments in real estate (679) (896)
Net cash used in investing activities (679) (896)
Cash flows from financing activities:
Cash distributions (2,314) (2,314)
Net cash used in financing activities (2,314) (2,314)
Net increase in cash and cash equivalents 952 565
Cash and cash equivalents at beginning
of period 10,883 9,133
Cash and cash equivalents at end of period $11,835 $ 9,698
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, 1997. The financial
data included herein as of December 31, 1997 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 three months ended March 31, 1998, Aetna/AREA and
AREA GP earned fees of $553,674 and $631,002, respectively.
For the similar period of the prior year, Aetna/AREA and
AREA GP earned fees of $499,309 and $703,722, respectively.
3. CASH DISTRIBUTIONS
On or about February 13, 1998, cash distributions paid by
the Partnership aggregated $2,313,554 which related to
operations for the three months ended December 31, 1997.
4. SUBSEQUENT EVENTS
In April 1998, the Partnership declared cash distributions
aggregating $2,313,554 pertaining to the period from January
1, 1998 to March 31, 1998. On or about May 15, 1998
$2,290,418 ($.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, 1997, the Partnership had working capital reserves
("Reserves") of approximately $6,201,000. During the quarter ended
March 31, 1998, the Partnership expended approximately $679,000 for
capital improvements. The Partnership has current Reserves of
approximately $6,724,000, including approximately $1,202,000
retained from operations for the three months ended March 31, 1998.
At March 31, 1998, the Partnership had approximately $1,392,000 of
outstanding commitments for capital improvements and approximately
$5,862,000 of projected capital improvements (collectively the
"Capital Costs") related to existing Investments in Properties.
For the nine months ended December 31, 1998 the Partnership will
fund if needed approximately $6,602,000 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, 1998 increased
approximately $480,000 in comparison to the corresponding period
in 1997, due primarily to an increase in rental revenue. The
rental revenue increase of approximately $360,000 resulted
primarily from higher rents and an increase in occupancy at Town
Center Business Park and higher rents at Summit Village
Apartments. These revenue increases were partially offset by a
decrease in rental revenue at Oakland Pointe Shopping Center,
resulting from decreased occupancy. The decrease in other income
of approximately $59,000 is primarily attributable to the receipt
of a lease termination fee at Town Center Business Park during the
three months ended March 31, 1997. Expenses for the three months
ended March 31, 1998 decreased approximately $139,000 in
comparison to the corresponding period in 1997, primarily as a
result of a decrease in bad debt expense.
The Partnership made cash distributions of $.18 per Unit to
Unitholders for the three months ended March 31, 1998 and 1997.
The Net Asset Value of each of the Partnership's Units, based upon
quarterly independent appraisals, increased to $17.39 at March 31,
1998 from $15.70 at March 31, 1997. The increase in Net Asset
Value per Unit is primarily the result of significant increases in
the appraised values of certain of the Registrant's properties,
including Town Center Business Park, Summit Village Apartments,
Powell Street Plaza, Village Square and 115 & 117 Flanders Road.
Factors contributing to an increase in the appraised value of
Summit Village Apartments included increases in projected market
rents and a reduction in the discount and exit cap rates. The
increase in the appraised value of Town Center Business Park is
primarily due to improved occupancy, increases in market rent
assumptions and lower discount and exit cap rates. Similarly
Powell Street Plaza experienced higher market rents and reduced
discount and exit cap rate parameters. 115 & 117 Flanders Road
increased in appraised value as a result of an increase in
projected market rents in conjunction with a major tenant renewing
its lease at 115 Flanders Road. Based on improving office market
conditions and recent leasing activity at Village Square, the
current appraisal analysis assumed the property would be converted
to office use. As a result of the expected leasing activity there
was a significant increase in the appraised value of Village
Square.
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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<PERIOD-END> MAR-31-1998
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<OTHER-SE> 199,520,000
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