SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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/ X / Quarterly Report Under Section 13 or 15 (d) of the
- ---- Securities Exchange Act of 1934
For the quarter ended: March 31, 2000
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OR
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/ / 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.
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(Exact name of registrant as specified in its charter)
Delaware 11-2827907
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
242 Trumbull Street, Hartford, Connecticut 06103-1212
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 275-2178
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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 --- ---
<PAGE>
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. The results of operations for the
three months ended March 31, 2000 are not necessarily indicative of the
results to be expected for the full year.
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<PAGE>
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Balance Sheets
As of March 31, 2000 and December 31, 1999
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(unaudited)
--------- -----------
Assets
- ------
<S> <C> <C>
Investments in real estate:
Properties held for investment $146,736 $163,469
Less accumulated depreciation
and amortization (36,250) (41,679)
-------- --------
110,486 121,790
Properties held for sale (net of accumulated
depreciation of $1,966 and $2,972) 12,599 15,696
-------- --------
Total investments in real estate 123,085 137,486
Cash and cash equivalents 38,095 10,419
Rent and other receivables 2,928 3,171
Other 13 13
-------- --------
Total assets $164,121 $151,089
======== ========
Liabilities and Partners' Capital
- ---------------------------------
Liabilities:
Investment portfolio fee payable
to related parties $ 914 $ 967
Accounts payable and accrued expenses 309 635
Accrued property taxes 445 537
Unearned income 244 195
Security deposits 597 683
-------- --------
Total liabilities 2,509 3,017
-------- --------
Partners' capital (deficiency):
General Partners (448) (584)
Limited Partners 162,060 148,656
-------- --------
Total partners' capital 161,612 148,072
-------- --------
Total liabilities and partners' capital $164,121 $151,089
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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<PAGE>
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Income
For the Three Months Ended March 31, 2000 and 1999
(in thousands, except units and per unit amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
2000 1999
--------- --------
<S> <C> <C>
Revenue:
Rental $ 6,223 $ 7,810
Interest 350 145
Other income 89 70
------- -------
6,662 8,025
------- -------
Expenses:
Property operating 1,908 2,459
Depreciation and amortization 1,306 1,629
Investment portfolio fee - related parties 914 1,237
General and administrative 224 191
Bad debt 52 83
------- -------
4,404 5,599
------- -------
Legal expenses - litigation - 2,472
Gain on sale of properties 13,595 1,211
------- -------
Net income $15,853 $ 1,165
======= =======
Net income allocated:
To the General Partners $ 159 $ 12
To the Limited Partners 15,694 1,153
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$15,853 $ 1,165
======= =======
Weighted average number of limited
partnership units outstanding 12,724,54 12,724,547
========= ==========
Earnings per limited partnership unit $ 1.23 $ .09
========= ==========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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<PAGE>
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Partners' Capital (Deficiency)
For the Three Months Ended March 31, 2000 and 1999
(in thousands - unaudited)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
-------- -------- ---------
<S> <C> <C> <C>
Balance at January 1, 2000 $(584) $148,656 $148,072
Distributions (23) (2,290) (2,313)
Net income 159 15,694 15,853
----- -------- --------
Balance at March 31, 2000 $(448) $162,060 $161,612
===== ======== ========
Balance at January 1, 1999 $(171) $189,513 $189,342
Distributions (49) (4,836) (4,885)
Net income 12 1,153 1,165
----- -------- --------
Balance at March 31, 1999 $(208) $185,830 $185,622
===== ======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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<PAGE>
AETNA REAL ESTATE ASSOCIATES, L.P.
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2000 and 1999
(in thousands - unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net income $15,853 $ 1,165
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,306 1,629
Gain on sale of properties (13,595) (1,211)
Bad debt expense 52 83
Accrued rental income 60 94
Increase (decrease) in cash arising from changes in operating
assets and liabilities:
Rent and other receivables 131 (58)
Investment portfolio fee payable to related parties (53) 5
Accounts payable and accrued expenses (326) 32
Accrued litigation costs - 2,400
Accrued property taxes (92) 165
Unearned income 49 41
Security deposits (86) (78)
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Net cash provided by operating activities 3,299 4,267
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Cash flows from investing activities:
Net proceeds from sale of property 27,909 6,712
Investments in real estate (1,219) (1,168)
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Net cash provided by investing activities 26,690 5,544
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Cash flows from financing activities:
Cash distributions (2,313) (2,314)
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Net cash used in financing activities (2,313) (2,314)
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Net increase in cash and cash equivalents 27,676 7,497
Cash and cash equivalents at beginning of period 10,419 12,597
------- -------
Cash and cash equivalents at end of period $38,095 $20,094
======= =======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
-6-
<PAGE>
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, 1999. The financial data included herein as of December 31,
1999 has been drawn from the consolidated financial statements of the
Partnership which were audited by PricewaterhouseCoopers LLP.
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 2.25% per annum of net asset value. The applicable percentage,
for the purpose of calculating this fee, declines to 1.75% per annum for
Investments in Properties held by the Partnership more than 10 years but
less than 15 years, and to 1.5% per annum for Investments in Properties
held more than 15 years. These rates became effective on March 15, 1999.
Prior to March 15, 1999, each of these rates were .25% higher. The
current rates will decrease another .25% per annum as of June 19, 2001.
For the three months ended March 31, 2000, Aetna/AREA and AREA GP earned
fees of $456,964 and $456,964, respectively. For the three months ended
March 31, 1999, Aetna/AREA and AREA GP earned fees of $577,533 and
$659,399, respectively.
3. SALE OF INVESTMENTS IN REAL ESTATE
On January 19, 2000, Windmont Apartments was sold to an unaffiliated
party. The gross sales price of $10,310,000 was $310,000 greater than the
property's appraised value. After closing costs and adjustments
aggregating approximately $211,000 and $97,000, respectively, net cash
proceeds to the Partnership were approximately $10,002,000. Gain on the
sale included in these consolidated financial statements is approximately
$4,322,000 for the three months ended March 31, 2000.
On February 22, 2000, Lincoln Square Apartments was sold to an
unaffiliated party. The gross sales price of $18,050,000 was $1,050,000
greater than the property's appraised value. After closing costs and
adjustments aggregating approximately $240,000 and $720,000, respectively,
net cash proceeds to the Partnership were approximately $17,090,000. Gain
on the sale included in these consolidated financial statements is
approximately $9,273,000 for the three months ended March 31, 2000.
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<PAGE>
4. CASH DISTRIBUTIONS
On or about March 7, 2000, cash distributions paid by the Partnership
aggregated $2,313,554 which related to operations for the three months
ended December 31, 1999.
5. SUBSEQUENT EVENTS
On April 10, 2000, the Partnership paid a special cash distribution of
$26,991,463 from the sales proceeds of Windmont Apartments and Lincoln
Square Apartments.
In May 2000, the Partnership declared additional distributions of
$2,313,554 pertaining to operations for the period from January 1, 2000 to
March 31, 2000.
On May 4, 2000, 344 Bonnie Circle, one of three buildings at Westgate
Distribution Center was sold to an unaffiliated party for a gross sales
price of $5,050,000. After closing costs and adjustments, net cash
proceeds to the Partnership were approximately $4,903,000. Gain on sale of
approximately $2,322,000 will be recognized in the consolidated financial
statements for the quarter ended June 30, 2000.
6. NEW ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commissions issued Staff
Accounting Bulletin Number 101, "Revenue Recognition in Financial
Statements" ("SAB 101"). SAB 101 requires that a lessor defer recognition
of percentage rents until a specified gross sales target is achieved by
the lessee. The Partnership has accrued interim percentage rent as the
lessee's sales targets were met or the achievement of the sales targets
became probable. The Partnership will adopt SAB 101 effective for the
quarter ending June 30, 2000, when there will be no effect on net income.
Had the Partnership adopted SAB 101 as of March 31, 2000 percentage rent
income of approximately $95,000 would have been deferred to the quarter
ended June 30, 2000
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
- -------------------------------
At December 31, 1999, the Registrant had working capital reserves ("Reserves")
of approximately $5.6 million. During the quarter ended March 31, 2000, the
Registrant expended approximately $1.2 million for capital improvements. After
cash distributions from the sale proceeds (see Note 5 to Consolidated Financial
Statements), the Registrant had current Reserves of approximately $7.1 million
as of March 31, 2000. The Registrant had approximately $.8 million of
outstanding commitments for capital improvements and approximately $2.8 million
of projected capital improvements (collectively the "Capital Costs") related to
existing Investments in Properties as of March 31, 2000. For the nine months
ended December 31, 2000 the Registrant will fund, if needed, approximately $3.4
million 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 Registrant expects to fund
Capital Costs throughout 2000 from existing Reserves and the retention of a
portion of cash generated from operations. To ensure that the Registrant 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 Costs 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, 2000 increased approximately
$14,688,000 in comparison to the corresponding period in 1999, resulting
primarily from gains on sales of properties, and no litigation-related legal
expenses for the three months ended March 31, 2000. Rental revenue decreased
approximately $1,587,000 primarily as a result of the sales of properties,
partially offset by increases in rents at Powell Street Plaza and Summit Village
Apartments. Interest income increased approximately $205,000 as a result of
temporary increases in cash balances due to the sales of properties. Property
operating expenses decreased approximately $551,000 and depreciation and
amortization decreased approximately $323,000, both primarily the result of
property sales. Investment portfolio fees decreased approximately $323,000, the
result of the distribution of sales proceeds and lower investment portfolio fee
rates.
The Registrant paid cash distributions of $.18 per Unit to Unitholders for the
three months ended March 31, 2000 and 1999.
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<PAGE>
The Net Asset Value of each of the Registrant's Units, based upon quarterly
independent appraisals, decreased to $16.41 at March 31, 2000 from $18.14 at
March 31, 1999. The decrease in Net Asset Value per Unit is primarily
attributable to the distribution of sales proceeds of $3.25 per unit, partially
offset by significant increases in the appraised values of certain of the
Registrant's properties, including Summit Village Apartments, Village Square and
Oakland Pointe Shopping Center. The increase in appraised value of Summit
Village is a result of an increase in projected market rents. The increase in
the appraised value of Village Square and Oakland Pointe Shopping Center is
primarily due to improved occupancy and increases in market rent assumptions.
Leasing at Village Square has improved with the conversion from retail to
primarily office use.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
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<PAGE>
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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<PAGE>
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 15, 2000 BY: /s/Mark J. Marcucci
-------------------------------
Mark J. Marcucci
President & Director
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 38,095,000
<SECURITIES> 000
<RECEIVABLES> 3,283,000
<ALLOWANCES> 355,000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 161,301,000
<DEPRECIATION> 38,216,000
<TOTAL-ASSETS> 164,121,000
<CURRENT-LIABILITIES> 000
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 161,612,000
<TOTAL-LIABILITY-AND-EQUITY> 164,121,000
<SALES> 6,223,000
<TOTAL-REVENUES> 6,662,000
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 4,404,000
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 15,853,000
<EPS-BASIC> 1.23
<EPS-DILUTED> 000
</TABLE>
