UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-14466
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Connecticut 06-1115374
(State of Organization) (I.R.S. Employer Identification No.)
900 Cottage Grove Road, South Building
Bloomfield, Connecticut 06002
(Address of principal executive offices)
Telephone Number: (203) 726-6000
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
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Balance Sheets
September 30, December 31,
1994 1993
Assets (Unaudited) (Audited)
Property and improvements, at cost:
Land and land improvements $ 6,008,318 $ 9,076,180
Buildings 30,479,803 36,171,902
Furniture and fixtures 2,089,553 2,070,072
Tenant improvements 15,986 211,803
38,593,660 47,529,957
Less accumulated depreciation 11,346,142 13,252,478
Net property and improvements 27,247,518 34,277,479
Cash and cash equivalents 1,932,426 1,150,033
Accounts receivable (net of allowance of $6,261
in 1994 and $79,511 in 1993) 77,756 205,729
Escrow deposits 186,799 65,430
Prepaid expenses and other assets 1,138 569
Deferred charges 1,457,052 1,624,418
Escrowed debt service fund 506,660 506,660
Total $ 31,409,349 $ 37,830,318
Liabilities and Partners' Capital (Deficit)
Liabilities:
Notes and mortgages payable $ 29,517,511 $ 35,334,863
Accounts payable (including $67,331 in 1994 and
$16,124 in 1993 due to affiliates) 498,865 431,395
Accrued interest payable 73,561 138,523
Tenant security deposits 178,275 219,023
Unearned income 20,065 16,887
Total liabilities 30,288,277 36,140,691
Partners' capital (deficit):
General Partner:
Capital contributions 1,000 1,000
Cumulative net loss (99,280) (118,183)
Cumulative cash distributions (13,355) (13,355)
(111,635) (130,538)
Limited partners (24,856 Units)
Capital contributions, net of
offering costs 22,408,052 22,408,052
Cumulative net loss (19,852,857) (19,265,399)
Cumulative cash distributions (1,322,488) (1,322,488)
1,232,707 1,820,165
Total partners' capital 1,121,072 1,689,627
Total $ 31,409,349 $ 37,830,318
The Notes to Financial Statements are an integral part of these statements.
Statements of Operations
(Unaudited)
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
Income:
Rental income $1,566,665 $1,577,843 $4,733,521$4,743,118
Other income 82,206 32,524 219,844 233,460
Interest income 24,412 8,780 53,468 28,706
1,673,283 1,619,147 5,006,833 5,005,284
Expenses:
Property operating expenses 517,545 521,631 1,439,482 1,416,063
General and administrative 223,571 254,527 651,584 708,744
Provision for doubtful
accounts 32,035 34,536 41,812 85,087
Mortgage litigation fees -- 18,850 -- 170,720
Interest expense 849,546 667,343 2,264,098 2,019,171
Depreciation and amortization 387,035 428,154 1,203,249 1,295,609
2,009,732 1,925,041 5,600,225 5,695,394
Loss from operations (336,449) (305,894) (593,392) (690,110)
Gain on sale of property 24,837 -- 24,837 76,417
Net loss $(311,612) $(305,894) $(568,555) $(613,693)
Net income (loss):
General Partner $21,472 $(3,059) $ 18,903 $ 69,516
Limited partners (333,084) (302,835) (587,458) (683,209)
$(311,612) $(305,894) $(568,555) $(613,693)
Net loss per Unit $(13.40) $ (12.19) $ (23.63) $ (27.49)
The Notes to Financial Statements are an integral part of these statements.
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Statements of Cash Flows
For the Nine Months Ended September 30, 1994 and 1993
(Unaudited)
1994 1993
Cash flows from operating activities:
Net loss $(568,555) $(613,693)
Adjustment to reconcile net loss to net cash
provided by operating activities:
Gain on sale of property (24,837) (76,417)
Depreciation and amortization 1,203,249 1,295,609
Provision for doubtful accounts 41,812 85,087
Deferred interest payable -- 61,026
Accounts receivable 86,161 (33,831)
Accounts payable 19,153 183,298
Accrued interest payable (64,962) (102,425)
Other, net (159,508) 49,564
Net cash provided by
operating activities 532,513 848,218
Cash flows from investing activities:
Purchase of property and improvements (149,126) (263,053)
Payment of leasing commissions (22,502) (5,709)
Proceeds from sale of property 6,572,000 452,500
Payment of closing cost related
to sale of property (307,206) --
Net cash provided by investing
activities 6,093,166 183,738
Cash flows from financing activities:
Proceeds from mortgage loan 4,200,000 --
Repayment of notes and mortgage loans (10,017,352) (1,003,523)
Payment of financing costs (24,251) (15,897)
Cash distribution for limited partners (1,683) (1,592)
Net cash used in financing
activities $ (5,843,286) $(1,021,012)
Net increase in cash and cash equivalents 782,393 10,944
Cash and cash equivalents, beginning of year 1,150,033 1,455,494
Cash and cash equivalents, end of period $ 1,932,426 $ 1,466,438
Supplemental disclosures of cash information:
Interest paid during period $ 2,329,060 $ 2,060,570
The Notes to Financial Statements are an integral part of these statements.
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Notes to Financial Statements
(Unaudited)
Readers of this quarterly report should refer to CONNECTICUT GENERAL
REALTY INVESTORS III LIMITED PARTNERSHIP'S (the "Partnership") audited
financial statements for the year ended December 31, 1993 which are
included in the Partnership's 1993 Annual Report, as certain footnote
disclosures which would substantially duplicate those contained in such
audited financial statements have been omitted from this report.
1. Basis of Accounting
a) Basis of Presentation: The accompanying financial statements were
prepared in accordance with generally accepted accounting principles.
It is the opinion of management that the financial statements
presented reflect all the adjustments necessary for a fair
presentation of the financial condition and results of operations.
Certain amounts in the 1993 financial statements have been
reclassified to conform to the 1994 presentation.
b) Cash and Cash Equivalents: Short term investments with a maturity of
three months or less at the time of purchase are reported as cash
equivalents.
2. Investment Properties and Notes and Mortgages Payable
The Promenades Plaza first mortgage loan and recourse promissory note
matured on January 1, 1994. The promissory note was extended until March
25, 1994 at a 4.48% interest rate. The extension date was set to coincide
with the maturity of the Stonebridge Manor recourse promissory note. On
March 25, 1994, the two promissory notes, totalling $3,400,000, were
refinanced for a period of three years. The interest only payments are
fixed at a rate of 6.6% for the fist two years with no prepayment. The
interest only payments for the third year is calculated using a floating
rate based on Mellon Bank's prime rate. During the third year, the note is
prepayable in full at any time. The note will continue to carry a
corporate guarantee from CIGNA.
On May 1, 1994, the Partnership's extension on Promenades' first
mortgage loan expired. As an alternative to payment of the entire loan
balance on May 1, 1994, the Partnership agreed with the first mortgage
lender to pay an additional debt service payment to extend the maturity to
June 1, 1994 while negotiations continued on the sale of the property. The
lender requested an additional debt service payment due June 1, 1994 to
extend the loan an additional month to July 1, 1994. Effective with the
extension payment due June 1, 1994 (May interest due June 1), the
Partnership defaulted. During June, the Partnership executed a contract
with a potential buyer subject to a number of contingencies, including the
buyer's ability to obtain financing and the performance of due diligence.
As a result of the default, the first mortgage lender commenced foreclosure
proceedings. The foreclosure was stayed by the Court due to the pending
sale of the property and the Partnership and the first mortgage lender
entered into a cash collateral agreement. The Court required the
Partnership to complete its sale of the property by October 17, 1994.
On September 22 1994, the Partnership completed the sale of Promenades
Plaza to Sterling Promenades Limited Partnership for a gross sales price of
$6,572,000. After closing costs and payment of the first mortgage loan
obligations, the Partnership netted approximately $261,000. For book
purposes, the property had a carrying value of $6,239,957 (permanent
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(a Connecticut limited partnership)
impairment losses aggregating $7,500,000 recorded in 1992 and 1993) and the
Partnership recorded a gain of $24,837.
Repayment of the $2,500,000 promissory note will not be made from the
sale of Promenades, but from the portfolio's other remaining property
sales. The promissory note is not secured by the Promenades' property but
is a general recourse obligation of the Partnership.
The Versailles Village first mortgage matured in September 1993. The
Partnership received an extension until March 30, 1994, while documents
were finalized on the property's refinance with the existing first mortgage
lender. On March 30, 1994, the refinancing was achieved. The terms
include a principal balance of $4,200,000 for seven years at 8% interest
based on a 25 year amortization schedule. The loan will be assumable with
approval and payment of a 1% transfer fee. The loan will be prepayable
over the term of the loan at the greater of yield maintenance, tied to
treasuries, or 1% of the outstanding loan balance.
3. Deferred Charges
Deferred charges consist of the following:
September 30, December 31,
1994 1993
Surety fee - Waterford Apartments
mortgage note $ 963,910 $ 963,910
Costs of obtaining financing 740,117 893,359
Deferred leasing commissions -- 282,346
1,704,027 2,139,615
Accumulated amortization (246,975) (515,197)
$1,457,052 $1,624,418
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Noted to Financial Statements (Continued)
(Unaudited)
4. Transactions with Affiliates
Fees and other expenses paid or required to be paid by the Partnership
to the General Partner or its affiliates are as follows:
Three Months Ended Nine Months Ended Unpaid at
September 30, September 30, September 30,
1994 1993 1994 1993 1994
Property management
fee (a) $ 96,315 $ 93,031 $ 267,913 $ 259,509 $ 16,395
Promissory notes
guarantee fees 17,000 15,311 49,313 45,936 17,000
Reimbursement (at cost) for
out-of-pocket expenses 12,127 13,120 39,667 40,649 33,936
$ 125,442 $121,462 $356,893 $346,094 $ 67,331
(a) Amounts paid by the affiliate to independent third parties:
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
$83,873 $76,778 $227,168 $222,651
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
At September 30, 1994, the Partnership had $1,932,426 in cash and cash
equivalents which will be used to fund working capital requirements and the
Partnership's reserves. Overall, the portfolio generated positive adjusted
cash from operations after debt service, capital improvements and
partnership expenses for the three and nine months ended September 30,
1994.
The Promenades Plaza first mortgage loan and recourse promissory note
matured on January 1, 1994. The first mortgage note was extended until May
1, 1994 at existing terms to allow time for a sale. The promissory note
was extended until March 25, 1994 at a 4.48% interest rate. The extension
date was set to coincide with the maturity of the Stonebridge Manor
recourse promissory note. On March 25, 1994, the two recourse promissory
notes, totalling $3,400,000 were refinanced for a period of three years.
The interest only payments are at a fixed rate of 6.6% for the first two
years with no prepayment. The interest only payment for the third year is
a floating rate based on Mellon Bank's prime rate. During the third year,
the note is prepayable in full at any time. The note will continue to
carry a corporate guarantee from CIGNA.
On May 1, 1994, the Partnership's extension on Promenades' first
mortgage loan expired. As an alternative to payment of the entire loan
balance on May 1, 1994, the Partnership agreed with the first mortgage
lender to pay an additional debt service payment to extend the maturity to
June 1, 1994 while negotiations continued on the sale of the property. The
lender requested an additional debt service payment due June 1, 1994 to
extend the loan an additional month to July 1, 1994. Effective with the
extension payment due June 1, 1994 (May interest due June 1), the
Partnership defaulted. During June, the Partnership executed a contract
with a potential buyer subject to a number of contingencies, including the
buyer's ability to obtain financing and the performance of due diligence.
As a result of the default, the first mortgage lender commenced foreclosure
proceedings. The foreclosure was stayed by the Court due to the pending
sale of the property and the Partnership and the first mortgage lender
entered into a cash collateral agreement. The Court required the
Partnership to complete its sale of the property by October 17, 1994.
On September 22, 1994, the Partnership completed the sale of Promenades
Plaza to Sterling Promenades Limited Partnership for a gross sales price of
$6,572,000. After closing costs and payment of the first mortgage loan
obligations, the Partnership netted approximately $261,000. For book
purposes, the property had a carrying value of approximately $6,240,000
(permanent impairment losses aggregating $7,500,000 recorded in 1992 and
1993) and the Partnership recorded a gain of approximately $25,000. For
tax purposes, the Partnership has not recorded impairment losses previously
and expects to record a loss on the sale.
Repayment of the $2,500,000 promissory note will not be made from the
sale of Promenades, but from the portfolio's cash from operations other
remaining property sales. The promissory note is not secured by the
Promenades' property but is a general recourse obligation of the
Partnership.
The Versailles Village debt refinance was completed on March 30, 1994
with the property's first mortgage lender. The terms include a principal
balance of $4,200,000 for seven years at 8% based on a 25 year amortization
schedule. The loan will be assumable with approval and payment of a 1%
transfer fee. The loan will be pre-payable over the term of the loan at
the greater of yield maintenance, tied to treasures, or 1% of the
outstanding loan balance.
The difference between the loan at maturity and the net refinance
proceeds of $138,505 was added to the Partnership's reserves. As a
requirement of the refinance, the Partnership set up a tax escrow account
with the mortgage lender and deposited four months of the estimated tax
bill, $32,275, on March 30, 1994.
Each of the apartment properties continue to produce positive results
for the Partnership. Cash generated from property operations will be used
to fund Partnership expenses and supplement reserves. Distributions to
partners will not resume until the Partnership retires the $3,400,000
recourse note obligation.
The Partnership is in the process of refinancing the debt for Stewarts
Glen III with the existing lender. The maturity date will be extended from
February 1995 to April 1996 and the interest rate will be lowered to 8.5%.
The cost of the refinance is expected to be immaterial. The Partnership's
current strategy assumes a sale in early 1996 at debt maturity. Current
strategies for the remaining properties include sales in the 1996 to 1998
time frame.
Results of Operations
Rental income decreased for the three and nine months ended September
30, 1994 as compared with the same periods of 1993. Rental rate increases
implemented in 1993 and 1994 at Stonebridge increased rental income for the
three and nine months ended September 30, 1994, while decreased average
occupancy at Promenades Plaza decreased rental income for the applicable
periods. In addition, rental income at Promenades decreased for the three
months ended September 30, 1994, as compared with the same period of 1993,
due to the sale on September 21, 1994.
Other income decreased for the nine months ended September 30, 1994, as
compared with the same period of 1993, due to the Partnership recording
1992 additional common area maintenance, tax and insurance expense charges
to tenants at Promenades Plaza during 1993. Promenades recorded
approximately $20,000 of income in the first quarter of 1993 for additional
1992 expense billings to the tenants. Other income increased for the three
months ended September 30, 1994, as compared to the same period of 1993 due
to closing adjustments for the tax recapture to be received by the
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
purchaser of Promenades from the tenants. The purchaser is obligated to
remit the Partnership's share after the first of the year. In addition,
estimates for 1993 recapture were lowered during the third quarter of 1993.
The increase in interest income for the three and nine months ended
September 30, 1994, as compared with the same periods of 1993, was the
result of interest earned on trust accounts associated with Waterford's
bond refinancing.
Property operating expenses increased at Stonebridge for the three and
nine months ended September 30, 1994, as compared with the same periods of
1993, due to increased carpet replacements. Expense savings at Versailles
due to prior year third quarter containing expenditures for a painting
project more than offset the current year increase at Stonebridge for the
three months ended September 30, 1994.
The decrease in general and administrative expense for the three and
nine months ended September 30, 1994, as compared with the same periods of
1993, was the result of the absence of non-recurring legal fees recorded in
the second and third quarters of 1993 at Promenades.
The provision for doubtful accounts was the result of collectibility
problems at Promenades Plaza.
Mortgage litigation fees incurred in 1993 were related to the resolution
of Waterford's second mortgage litigation.
The increase in interest expense for the three and nine months ended
September 30, 1994 as compared with 1993, was the result of an increase in
the interest rate to 18% on the first mortgage for Promenades due to the
June 1, 1994 default. In addition, a low effective interest rate in 1993
on Waterford's variable rate bond financing contributed to the decrease.
The variable rate bond financing was replaced with similar fixed rate bond
financing in December 1993. Offsetting a portion of the increase was
savings from the lower rates on the Promenades Stonebridge promissory notes
refinanced during the first quarter of 1994. In addition, the Versailles
Village first mortgage refinance was achieved on March 30, 1994, lowering
the interest rate from 10% to 8%.
The decrease in depreciation and amortization for the three and nine
months ended September 30, 1994, as compared with the same periods of 1993,
was the result of the permanent impairment loss for Promenades in the
fourth quarter of 1993. The increase was partially offset by the write-off
of the unamortized leasing commissions relating to vacated tenants at
Promenades for the three months ended March 31, 1994.
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
The 1994 gain on sale of property was the result of the sale at
Promenades Plaza in September 1994. The 1993 gain on sale of property was
the result of an outparcel sale at Promenades Plaza in January 1993.
Occupancy
The following is a listing of approximate occupancy levels by quarter
for the Partnership's investment properties:
1993 1994
At 3/31 At 6/30At 9/30At 12/31At 3/31 At 6/30 At 9/30
1. Versailles Village Apartments
Forest Park, Ohio 94% 97% 94% 96% 94% 97% 99%
2. Promenades Plaza Shopping Ctr.
Port Charlotte,
Florida (a) 85% 84% 84% 82% 82% 82% NA
3. Waterford Apartments
Tulsa, Oklahoma 96% 95% 95% 95% 88% 93% 94%
4. Stonebridge Manor Apartments
New Orleans, Louisiana 94% 95% 96% 95% 96% 97% 95%
5. Stewart's Glen Apts. Phase III
Willowbrook, Illinois 99% 99% 97% 98% 100% 99% 93%
(a) Promenades Plaza was sold during the third quarter 1994.
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Part II- Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27 Financial Data Schedules.
(b) In a report filed on Form 8-K dated September 22, 1994, the
Partnership reported the sale of Promenades Plaza to
Sterling Promenades Limited Partnership.
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.
CONNECTICUT GENERAL REALTY INVESTORS III
LIMITED PARTNERSHIP
By: CIGNA Realty Resources, Inc. - Fifth,
General Partner
Date: November 14, 1994 By: /s/ John D. Carey
John D. Carey, President and Controller
(Principal Executive Officer)
(Principal Accounting Officer)