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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
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)
Registrant's telephone number, including area code: (860) 726-6000
Securities registered pursuant to Section 12(b) of the Act:
None
(Title of Each Class)
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
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
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Not applicable.
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1
TABLE OF CONTENTS
PART I PAGE
Item 1. Business 3
Item 2. Properties 6
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8
PART II
Item 5. Market for Registrant's Common Equity and Related Security Holder Matters 8
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 28
PART III
Item 10. Directors and Executive Officers of the Registrant 28
Item 11. Executive Compensation 30
Item 12. Security Ownership of Certain Beneficial Owners and Management 31
Item 13. Certain Relationships and Related Transactions 31
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 32
SIGNATURES 36
2
PART I
ITEM 1. BUSINESS
The registrant, Connecticut General Realty Investors III Limited
Partnership (the "Partnership"), was formed on April 12, 1984, under the Uniform
Limited Partnership Act of the State of Connecticut to invest in primarily
residential and, to a lesser extent, commercial real properties. On July 2,
1984, the Partnership commenced an offering of $25,000,000 (subject to increase
up to $50,000,000) of Limited Partnership Interests (the "Units") at $1,000 per
Unit, pursuant to a Registration Statement on Form S-11 under the Securities Act
of 1933 (Registration No. 2-90944).
The General Partner of the Partnership is CIGNA Realty Resources, Inc.-
Fifth (the "General Partner"), which is an indirect wholly owned subsidiary of
CIGNA Corporation ("CIGNA"), a publicly held corporation whose stock is traded
on the New York Stock Exchange.
A total of 24,856 Units was sold to the public prior to the offering's
termination on July 1, 1986. The holders of 6,480 Units were admitted to the
Partnership in 1984; the holders of 11,519 Units were admitted to the
Partnership in 1985; the holders of the remaining 6,857 Units were admitted to
the Partnership in 1986. From the 24,856 Units sold, the Partnership received
net proceeds of $22,408,052. The holders of Units ("Unit Holders" or "Limited
Partners") of the Partnership will share in the ownership of the Partnership's
real property investments according to the number of Units held. Subsequent to
admittance to the Partnership, no Unit Holder has made any additional capital
contribution. The Partnership is engaged solely in the business of real estate
investment. A presentation of information about industry segments is not
applicable.
The Partnership is engaged in passive activities and therefore investors
are subject to the applicable provisions of the Internal Revenue Code and
Regulations. Losses from "passive activities" (which include any rental
activity) may only offset income from "passive activities". Investors' passive
losses in excess of passive income from all sources are suspended and are
carried over to future years when they may be deducted against passive income
generated by the Partnership in such year (including gain recognized on the sale
of the Partnership's assets) or against passive income derived by investors from
other sources. Any suspended losses remaining subsequent to Partnership
dissolution may be used by investors to offset ordinary income.
The Partnership acquired four residential complexes located in Ohio,
Oklahoma, Louisiana, and Illinois and one shopping center located in Florida. In
order to acquire these properties, the Partnership invested $16,372,438 in cash,
took or assumed $35,684,061 in mortgages, incurred $3,673,982 in acquisition
fees and expenses, established reserves for improvements of $720,000 and
established working capital reserves of $1,242,800.
Pursuant to the Partnership Agreement, the Partnership is required to
terminate on or before December 31, 2017. The Partnership anticipated that prior
to its termination and dissolution, some or all of the Partnership's properties
would be sold, the retention or sale of any property dependent, in part, on the
anticipated remaining economic benefits of continued ownership. It was expected
that most sales would occur after a period of ownership extending from five to
ten years. The Partnership sold the Florida shopping center, Promenades Plaza,
on September 22, 1994. The Partnership completed a sale of its Illinois
apartment complex on April 30, 1996 and the sale of its New Orleans apartment
complex on October 23, 1997. The Partnership estimates that the Partnership's
two remaining properties will be sold by mid-1999. Upon the sale of each of the
properties, the net proceeds will be distributed to limited partners.
In December 1993, the Partnership refinanced the first and second mortgages
encumbering the Waterford Apartments property. The first mortgage, funded with
multifamily housing revenue bonds issued by the Tulsa County Home Finance
Authority, and the second mortgage were replaced with a new first mortgage. The
replacement financing was also funded with newly issued multifamily housing
revenue bonds issued by the Tulsa County Home Finance Authority. As a
requirement of the new financing, the Waterford property had to be classified as
single asset ownership. Since the Partnership owns multiple properties, a new
partnership was created to house the Waterford property as its sole real estate
asset. Waterford Partnership, a general partnership, was organized in the State
of Connecticut with the Partnership as its managing general partner (99.9%
interest) and the General Partner (0.1% interest) as the other general partner.
The interest of the General Partner in the new partnership is held in trust for
the benefit of The Tulsa Corporation, a newly
3
organized Delaware corporation, the stock of which is 100% owned by the
Partnership. The Tulsa Corporation was created with the sole purpose of acting
as the beneficiary of the General Partner's ownership interest in the Waterford
Partnership. The new structure has no economic effect on the Partners nor does
it require any changes in financial reporting for the Partnership.
The Partnership has made the real property investments set forth in the
following table:
Versailles Village Promenades Waterford Stonebridge Stewart's Glen
Apartments Plaza Shopping Apartments Manor Apartments
Forest Park, Center Tulsa, Oklahoma Apartments Phase III
Ohio Port Charlotte, New Orleans, Willowbrook,
Florida (c) Louisiana (d) Illinois (e)
Purchase $5,920,000 $10,486,000 $17,130,000 $11,326,014 $7,194,485
Price (a)
Cash $2,120,000 $5,463,052 $3,441,666 $3,278,235 $2,069,485
Investment
Initial $3,800,000 $5,022,948 $13,688,334 $8,047,779 $5,125,000
Mortgage
Financing (b)
Acquisition $433,986 $1,194,469 $806,350 $742,782 $496,395
Fees and
Expenses
Size 180 units 230,268 sq. ft. 344 units 264 units 104 units
Date of 02/06/85 04/15/85 (sold 10/31/85 11/26/85 (sold 07/24/87 (sold
Purchase 09/22/94) 10/23/97) 04/30/96)
Type of Fee ownership Fee ownership Fee ownership Fee ownership Fee ownership
Ownership subject to subject to subject to subject to subject to
Mortgage Mortgage Mortgage Mortgage Mortgage
================= =================== =================== =================== ==================== ===================
(a) Excludes all broker fees paid at closing. Amounts shown do not reflect
reductions for discounts on related debt or sellers' guarantees which are
adjustments to the recorded purchase price.
(b) Reference is made to the Notes to Financial Statements included in this
annual report for details on debt modifications, the current outstanding
principal balances and a description of the long-term indebtedness secured
by the Partnership's real property investments and to Schedule III for
additional information.
(c) Promenades Plaza added 14,624 square feet subsequent to acquisition. This
property was sold September 22, 1994. Reference is made to the Notes to
Financial Statements for a description of the sale.
(d) This property was sold October 23, 1997. Reference is made to the Notes to
Financial Statements for a description of the sale.
(e) In July 1987, the Partnership acquired a 33% interest in the Phase
III Apartment Venture, a joint venture with the General Partner, which was
established as a temporary vehicle for providing the Partnership with the
means to acquire the property without finalized mortgage arrangements, and,
thereby, avoid being in default under the terms of the purchase agreement.
On December 10, 1987 the Partnership received a commitment for permanent
mortgage financing and, in accordance with the terms of the joint venture
agreement, the Partnership purchased the General Partner's joint venture
interest. Funding of the purchase took place in January 1988. The
information shown represents the Partnership's 100% ownership of the
property. This property was sold April 30, 1996. Reference is made to the
Notes to Financial Statements for a description of the sale.
4
Versailles Village Apartments is located in the City of Forest Park, Ohio,
in the northwest section of Hamilton County, approximately 14 miles outside
downtown Cincinnati. Consistent with national trends, Ohio's economic expansion
is expected to slow considerably over the next several years. Job growth is
expected to average 0.9% per year for the next two to three years, substantially
below the 2.5% annual gains of 1994 through 1996. Population gains have been
relatively weak, averaging 0.3% over the past several years and, are expected to
continue to grow very modestly. Job growth for Greater Cincinnati dropped in
1997 to 1.3% from the 2.4% achieved in both 1995 and 1996. The rate of job
growth over the upcoming year is expected to remain similar to 1997, but is
expected to drop to less than 1.0% by the year 2000. Population growth has
remained steady at an annual increase of 0.6% and is expected to remain stable
into the future.
Both the manufacturing and service employment segments have led to positive
employment trends in Ohio over the past few years. The service sector is
expected to create the majority of the new jobs in Ohio through the year 2000,
following national trends. Business services is expected to dominate new job
growth, as demand for computer and data processing remains strong, as well as
management and engineering services. Although slowing in the past year, growth
in health services is expected to account for one quarter of all new service
jobs. Home health care is expected to account for the fastest growing component
of the health services industry as health organizations move away from hospital
stays to more affordable in-home care. Cincinnati suffered a 2.8% annualized
loss in service employment over the second quarter of 1997, partly due to
widespread cuts in its sizable health industry.
The Cincinnati apartment market has rebounded from the lows experienced in
the early 1990's. Apartment demand is currently outpacing supply. Cincinnati
apartment rents, which have historically been well below national averages, are
expected to increase at slightly better than inflation. Apartment construction
has been fairly active over the past couple of years, and is expected to
continue as long as the local economy remains strong. Cincinnati posted 2,029
apartment unit starts in 1997, ranking 35th out of the top 114 metropolitan
areas (75% of the 1980's annual average of 2,706 and 26% of the peak of 7,920).
In the northwest area where Versailles Village is located, approximately 600
units were constructed in 1996 and 1997. Although the market is absorbing the
new units as they become available, the competition from newer units tends to
limit rate increases. Home ownership continues to compete with the rental market
due to the relative low cost of housing and low interest rates. The Versailles
Village direct competition is comprised of 2,140 units averaging 96% occupancy.
Although the property's competition is newer, Versailles Village competes well
with similar class C and B properties in the submarket. Rates at Versailles
Village are generally lower than the competition due to its age. The property
offers amenities similar to the competition but has much larger floor plans.
Rental rates for two bedroom units are offered at $690 per month in the
submarket and between $570 and $640 at Versailles Village. Versailles Village
has planned to increase rates by approximately 2.1% in 1998. Occupancy at
Versailles Village is in line with the market, averaging 95% to 96%.
Waterford Apartments is located in South Tulsa, Oklahoma. Tulsa posted
strong economic growth in 1997, with employment expanding 3.8%. The short-term
outlook for Tulsa shows that job growth will begin to subside, a 2.5% increase
in 1998 and 1.7% in 1999, because of a slow down in the manufacturing segment.
The services, trade, transportation, communications and public utilities, and
finance, insurance and real estate segments all show continued strong growth.
Strong economic growth has resulted in Tulsa having one of the lowest
unemployment rates nationally. The jobless rate is expected to be 3.1% in 1998,
but is expected to increase to 3.7% by 2002. Tight labor markets will continue
to put an upward pressure on wages, although Tulsa's per capita income remains
below the national average. Tulsa, and Oklahoma, reported a very high number of
bankruptcy cases for 1997, most of which were personal filings. The high rate is
in part due to relatively high consumer debt rates, attributed mostly to credit
card debt.
Home sales in Tulsa grew by 7% in 1997 with the average price also up 7%.
Local markets have been assisted by strong national and regional growth and low
mortgage rates. Tulsa's median home price of $84,000 is still well below the
national average of $124,000. Housing permits are expected to increase rapidly
from 1997's total of 3,400 to 4,200 by the year 2002. The Tulsa apartment market
has also been very active. From 1990 to 1993, multifamily construction was at a
virtual standstill and in 1994, 288 units came into the market in anticipation
of an increased demand. Approximately 1,400 new construction apartment units
were added to the supply in 1997, half of which were low income housing tax
credit properties. Several luxury apartments are expected to be built in 1998,
1,200 units of which are expected to be started by
5
April. The southeast submarket where Waterford is located consists of
approximately 20,080 units. Occupancy in the market, and at Waterford, averaged
94% for 1997 compared with 93% for 1996. Waterford is located only five miles
outside the central business district in a well-maintained, vintage
neighborhood. The property is a Class "A" luxury apartment complex and continues
to hold an advantage over the Tulsa luxury apartment market due to its superior
location. While Waterford's unit sizes are smaller than the competition,
Waterford compensates with mature landscaping, a variety of amenities and a
focus on the upkeep of the units. When compared with the direct competition in
the Tulsa rental market, Waterford's rental rates are above the average. Average
rents for the direct competition are approximately $495 for one bedroom units
and $650 for two bedroom units, while Waterford's average rental rates are
approximately $510 for one bedroom units and $695 for two bedroom units. Even
with the increase in competition, Waterford's rental rates are scheduled to
increase approximately 5% in 1998.
Approximate occupancy levels for the properties on a quarterly basis are
set forth in the table in Item 2.
The Partnership itself has no employees; however, the unaffiliated property
managers engaged by CIGNA Investments, Inc. ("CII", formerly CIGNA Capital
Advisers, Inc.) on behalf of the Partnership maintain on-site staff. For a
description of asset management services provided by CII and the terms of
transactions between the Partnership and affiliates of the General Partner, see
Item 13 and the Notes to Financial Statements.
The following list details gross revenues from operations for each of the
Partnership's investment properties as a percentage of the Partnership's total
gross revenues during 1995, 1996, and 1997. In each year, interest income
accounted for the balance of gross revenues from operations.
1995 1996 1997
---- ---- ----
1. Versailles Village Apartments
Forest Park, OH 20% 23% 26%
2. Waterford Apartments
Tulsa, OK 31% 35% 42%
3. Stonebridge Manor Apartments
New Orleans, LA (a) 28% 32% 31%
4. Stewart's Glen Apartments Phase III
Willowbrook, IL (b) 18% 7% N/A
An "N/A" indicates the property was not owned by the Partnership during the
year.
(a) Stonebridge Manor Apartments was sold on October 23, 1997.
(b) Stewart's Glen Apartments was sold on April 30, 1996.
ITEM 2. PROPERTIES
The Partnership owns directly (subject to existing first mortgage loans)
the properties described in Item 1 herein. The Partnership's properties
generally have lease terms of one year or less. In the opinion of the General
Partner, the Partnership's properties continue to be adequately insured.
6
The following list compares approximate occupancy levels by quarter for the
Partnership's investment properties during 1993, 1994, 1995, 1996 and 1997:
VERSAILLES VILLAGE PROMENADES WATERFORD STONEBRIDGE STEWART'S GLEN
APARTMENTS PLAZA SHOPPING APARTMENTS MANOR APTS. PHASE III
FOREST PARK, OH CENTER TULSA, OK APARTMENTS WILLOWBROOK, IL
PORT CHARLOTTE, FL NEW ORLEANS, LA (C)
(A) (B)
============== =================== =================== =================== =================== ===================
1993
AT 03/31 94% 85% 96% 94% 99%
AT 06/30 97% 84% 95% 95% 99%
AT 09/30 94% 84% 95% 96% 97%
AT 12/31 96% 82% 95% 95% 98%
1994
AT 03/31 94% 82% 88% 96% 100%
AT 06/30 97% 82% 93% 97% 99%
AT 09/30 99% N/A 94% 95% 93%
AT 12/31 96% N/A 83% 97% 98%
1995
AT 03/31 97% N/A 90% 96% 96%
AT 06/30 99% N/A 96% 97% 89%
AT 09/30 96% N/A 98% 96% 98%
AT 12/31 94% N/A 92% 98% 97%
1996
AT 03/31 97% N/A 94% 97% 89%
AT 06/30 98% N/A 94% 97% N/A
AT 09/30 96% N/A 93% 95% N/A
AT 12/31 94% N/A 89% 97% N/A
1997
AT 03/31 94% N/A 94% 97% N/A
AT 06/30 96% N/A 95% 97% N/A
AT 09/30 98% N/A 96% 96% N/A
AT 12/31 94% N/A 92% N/A N/A
============== =================== =================== =================== =================== ===================
An "N/A" indicates that the property was not owned by the Partnership at the end
of the quarter.
(a) Promenades Plaza was sold on September 22, 1994. (b) Stonebridge Manor
Apartments was sold on October 23, 1997. (c) Stewart's Glen Apartments was sold
on April 30, 1996.
7
ITEM 3. LEGAL PROCEEDINGS
Neither the Partnership nor its properties are party to or the subject of
any legal proceedings involving any material exposure.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
As of March 1, 1998, there were approximately 1,123 record Unit Holders.
There is no established public trading market for Units. The General Partner
will not redeem or repurchase the Units.
The Revenue Act of 1987 contains provisions which have an adverse impact on
investors in a "publicly traded partnership" ("PTP"). A PTP is a partnership
whose interests are traded on an established securities market or readily
tradable on a secondary market (or the substantial equivalent thereof). If the
Partnership were classified as a PTP, (i) the Partnership may be taxed as a
corporation and (ii) the passive activity rules of section 469 are applied
separately with respect to items attributable to each publicly traded
partnership. On November 29, 1995, the Internal Revenue Service ("IRS") issued
the Final PTP Regulations under section 1.7704-1. The Final PTP Regulations are
effective for the tax years beginning after December 31, 1995. However, a
transition rule exists for partnerships that were engaged in an activity before
December 4, 1995 and that do not add a substantial new line of business after
that date. The Partnership qualifies for the transition rule and may continue to
rely on Notice 88-75 for guidance through the end of 2005. In Notice 88-75, the
IRS established alternative safe harbors that allow interests in a partnership
to be transferred or redeemed in certain circumstances without causing the
partnership to be characterized as a PTP. Units of the Partnership are not
listed or quoted for trading on an established securities exchange. However,
CIGNA Financial Partners ("CFP") will, upon request, provide a Limited Partner
desiring to sell or transfer Units with a list of secondary market firms which
may provide a means for matching potential sellers with potential buyers of
Units, if any. Frequent sales of Units utilizing these services could cause the
Partnership to be deemed a PTP. The Partnership has adopted a policy prohibiting
transfers of Units in secondary market transactions unless, notwithstanding such
transfers, the Partnership will satisfy at least one of the safe harbors.
Although such a restriction could impair the ability of an investor to liquidate
its investment, the service provided by CFP described above should allow a
certain number of transfers to be made in compliance with the safe harbor.
The Partnership suspended quarterly distributions to Partners as of the
fourth quarter of 1988 to enable it to fund operating deficits from certain of
its properties. Subsequent to the sale of the Partnership's Stewart's Glen
property in April 1996, the Partnership reduced the balance of its cash reserves
to a level deemed sufficient in connection with the Partnership's operations.
Accordingly, on December 15, 1996, the Partnership made a cash distribution of
$1,565,928 or $63 per Unit to Limited Partners of record as of November 30,
1996. The Partnership resumed regular quarterly distributions beginning in 1997.
The Partnership declared quarterly cash distributions to Limited Partners for
1997 as set forth in the following table:
Quarter Date Paid (a) Cash Distribution per Unit
-------- ------------- --------------------------
1st May 15 $ 6.45
2nd August 15 6.75
3rd November 15 188.64 (b)
4th February 15 5.70
---------
$ 207.54
=========
8
(a) Quarterly distributions are paid 45 days following the end of the calendar
quarter.
(b) Includes $181.65 per Unit from the sale of Stonebridge Manor
Apartments.
Reference is made to Item 6 for information on cash distributions paid to
Limited Partners during 1997 and 1996.
There are no material legal restrictions upon the Partnership's ability to
make distributions in accordance with the provisions of the Partnership
Agreement. The Partnership plans to distribute adjusted cash from operations
quarterly to Partners.
ITEM 6. SELECTED FINANCIAL DATA (A)
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
DECEMBER 31, 1997, 1996, 1995, 1994 AND 1993
(NOT COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS)
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Total income $ 4,640,806 $ 5,205,570 $ 5,818,941 $ 6,392,361 $ 6,629,216
Net income (loss) (b) 2,782,080 2,424,325 (210,876) (706,274) (5,783,253)
Net income (loss) per Unit (b) 111.35 92.94 (8.40) (29.12) (233.39)
Total assets 15,132,133 22,844,345 30,739,260 31,005,057 37,830,318
Notes and mortgages payable 15,452,462 20,807,619 29,347,622 29,487,591 35,334,863
Cash distributions to limited partners 5,016,935 1,565,928 -- -- --
Cash distributions per Unit 201.84 63.00 -- -- --
(a) The above selected financial data should be read in conjunction with the
financial statements and the related notes appearing herein.
(b) Included in 1997 is a $2,574,230 gain on sale of property ($2,562,025 to
limited partners or $103.07 per unit). Included in 1996 is a $2,440,258
gain on sale of property ($2,325,815 to limited partners or $93.57 per
unit). Included in 1994 is a $24,837 gain on sale of property (100% to the
General Partner). Included in 1993 is a $5,000,000 loss due to impairment
of assets ($199.15 per Unit) and $76,417 gain on sale of property (100% to
the General Partner).
9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Except for historical information provided in this Management's Discussion
and Analysis, statements made throughout this document are forward-looking and
contain information about financial results, economic conditions, trends, and
known uncertainties. The Partnership cautions the reader that actual results
could differ materially from those expected by the Partnership.
LIQUIDITY AND CAPITAL RESOURCES
On July 2, 1984, the Partnership commenced an offering of $25,000,000
(subject to an increase up to $50,000,000) of limited partnership interests
pursuant to a Registration Statement on Form S-11 under the Securities Act of
1933. The offering terminated on July 1, 1986 and a total of 24,856 Units were
issued by the Partnership and assigned to the public at $1,000 per Unit.
Subsequent to the termination of the offering, no Unit Holder has made any
additional capital contribution. The Partnership will not seek additional
capital contributions from Unit Holders.
After deduction of selling expenses and other offering costs, the
Partnership had $22,408,052 with which to make investments in real properties,
to pay legal fees and other costs (including acquisition fees) related to such
investments for working capital reserves and for capital expenditure reserves. A
portion of the proceeds was utilized to acquire the properties described in Item
1 herein. As of December 31, 1997, the Partnership had two investment properties
remaining, representing approximately 30% of the offering proceeds. The
Partnership is in its final phase, which contemplates the sale of the two
remaining investment properties by mid-1999.
At December 31, 1997, the Partnership had $682,614 in cash and cash
equivalents available for working capital requirements, Partnership cash
reserves, and distributions. The source of capital for both short-term and
long-term future liquidity and distributions is expected to be through cash
generated by the investment properties and from the sale of such properties.
During the first quarter of 1996, the Partnership completed the sale of the
Stewart's Glen Apartments. On May 15, 1996, the Partnership utilized the net
proceeds from the Stewart's Glen sale together with approximately $510,000 from
the Partnership's cash reserves to retire the Partnership's $3,400,000 Mellon
Bank promissory note. As a result of the sale of the Stewart's Glen property and
the payment of the Partnership's promissory note, the Partnership evaluated its
cash reserve level and decided to reduce cash reserves to a level it deemed
sufficient in connection with the Partnership's operations. On December 15,
1996, the Partnership made a cash distribution of $1,565,928 or $63 per Unit to
Limited Partners of record as of November 30, 1996. The distribution was
comprised of a reduction to the original cash reserve balance and an amount
accumulated from adjusted cash from operations. Beginning with the first quarter
of 1997, the Partnership resumed regular quarterly cash distributions.
On October 23, 1997, the Partnership sold the Stonebridge Manor Apartments
to TGM Realty Corp. #6, a Delaware corporation, for an all cash gross sales
price of $9,800,000. After closing costs of approximately $223,733 and payment
of the mortgage of $5,060,146, the Partnership netted $4,516,121. The
Partnership distributed the net sales proceeds, $4,515,000 or $181.65 per Unit,
to limited partners on November 15, 1997. The property had a net book
depreciated cost of $7,002,037 as of the date of sale, resulting in a book gain
of $2,574,230. For tax purposes, the property had a net depreciated cost of
approximately $4,310,826, resulting in a tax gain of $5,265,441 or $207.68 per
Unit.
During 1997, the Partnership's properties (two properties owned throughout
1997 and a third property sold on October 23, 1997) generated net operating
income of $2,646,000 and, in addition, a net loss of $107,000 at the Partnership
level resulted in net operating income of $2,539,000 available for debt service
and capital expenditures. For 1997, net cash flow from operations of the
Partnership totaled $652,000 after debt service of $1,673,000, and capital
improvements of $230,000 (excluding $65,000 accrued from 1996). The Partnership
distributed the net cash flow from operations to Partners forty-five days after
the close of each quarter in 1997. The 1997 distributions from operations
totaled $650,020.
10
Cash distributions from inception through 1996 ranged from $94.80 to
$149.25 per $1,000 Unit, dependent upon the specific limited partner admission
dates. The Partnership distributed an additional $207.54 per Unit for 1997,
therefore, assuming the first admission date, cash distributions from inception
through 1997 total $356.79 per Unit.
Reference is made to Item 1 for a description of the Partnership's
investment properties and a description of the markets in which the properties
operate.
The Partnership's property operational forecasts for 1998 estimate stable
but slightly lower net operating income, due to the sale of the Stonebridge
Manor property. Excluding the Stonebridge Manor property results from 1997 net
operating income, property level net operating income for 1998 is forecast to
increase slightly, approximately 3%. The Partnership plan also anticipates a
slight reduction in capital spending, due to fewer appliance replacements and
roof replacements at Versailles Village. Based on the property operational
forecasts, the Partnership anticipates that 1998 property net operating income
of $1,858,000 will be sufficient to cover planned 1998 capital improvements of
$163,100, debt service of $1,130,000 and Partnership level expenses. The
Partnership plans to continue to pay quarterly cash distributions to Partners in
1998. The adjusted cash from operations is expected to decrease in 1998 due to
the sale of Stonebridge Manor Apartments in the fourth quarter of 1997.
As a result of a general downturn in the economy, and especially real
estate markets during the latter part of the 1980's and early 1990's, the
Partnership has held its investment properties longer than originally
anticipated in order to maximize the recovery of its investments and any
potential for return thereon. The economy and many real estate markets have
recovered. The Partnership has entered the final phase which contemplates the
sale of the remaining investment properties by mid-1999. Based on the current
position of the Partnership, it appears that the Partnership's objective of
capital appreciation will not be achieved. Although the Partnership expects to
continue to distribute cash from operations and the proceeds from the property
sales, the total per Unit cash distributions over the term of the Partnership
will be significantly less than the original per Unit capital contribution. The
Partnership has estimated that the liquidation value of the Partnership's
remaining net assets as of December 31, 1997 approximates $175 per Unit.
RESULTS OF OPERATIONS
RESULTS - 1997 COMPARED WITH 1996
Partnership net operating income (total revenue less property operating
expenses, general and administrative expenses, fees and reimbursements to
affiliates and provision for doubtful accounts) was approximately $2,539,000 for
1997, a decrease from approximately $2,846,000 in 1996. The decrease is mainly
attributable to the sale of Stewart's Glen in April 1996 and Stonebridge Manor
in October 1997. The Stewart's Glen property contributed approximately $198,000
to the partnership net operating income in 1996. The decrease in net operating
income from Stonebridge Manor amounted to approximately $160,000. Excluding the
sold properties, partnership net operating income increased approximately
$51,000. Through the date of sale, Stonebridge Manor posted no significant
fluctuations between 1997 and 1996 operating results.
Generally, decreases in the income statement accounts for 1997, as compared
with 1996, are the result of the sale of Stewart's Glen in April 1996 and the
sale of Stonebridge Manor in October 1997. The sold properties accounted for
$603,889 and $18,227 of the change in rental income and other income,
respectively. The two properties sold accounted for decreases of $175,824,
$85,533, $247,408, and $171,937 in property operating expenses, general and
administrative, interest expense, and depreciation and amortization,
respectively.
Rental income at both Versailles Village and Waterford increased slightly
as the properties raised rents and posted strong occupancies throughout 1997.
Interest income decreased due to a lower average cash balance. The average cash
balance for the second quarter of 1996 included the proceeds from the sale of
Stewart's Glen Apartments. The proceeds from the sale were utilized to payoff
the Partnership's unsecured debt on May 15, 1996. Further, a cash distribution
to partners in December 1996 reduced the cash balance.
11
An increase in general and administrative expenses for the remaining
properties was caused by increases in advertising to maintain occupancy coupled
with an increase in payroll expenses at Waterford. The general and
administrative increase at Waterford was partially offset by a decrease in
similar expenses at Versailles Village. Versailles Village increased its
advertising in 1996 to assist with occupancy and payroll decreased as a result
of a staffing vacancy for a portion of the year. Fees and reimbursements to
affiliates decreased mainly as a result of a drop in partnership management fees
earned in connection with cash distributions from operations. Distributions from
operations were higher in 1996 than in 1997 due to the one-time distribution of
cash reserves (the portion generated by operations) in the fourth quarter of
1996. Interest expense decreased due to the retirement of the $3,400,000 Mellon
Bank promissory note on May 15, 1996.
RESULTS - 1996 COMPARED WITH 1995
Partnership net operating income (total revenue less property operating
expenses, general and administrative expenses, fees and reimbursements to
affiliates and provision for doubtful accounts) was approximately $2,846,000 for
1996, a decrease from approximately $3,348,000 in 1995. Net operating income at
Stewart's Glen decreased approximately $385,000 in 1996 due to the sale of the
property on April 30, 1996. Versailles Village net operating income decreased
approximately $33,000 in 1996 compared with 1995, primarily due to repairs on a
number of HVAC units and a main water line break. Net operating income at
Stonebridge Manor decreased approximately $10,000 in 1996 from 1995. More carpet
replacements, exterior painting and higher payroll costs were partially offset
by a slight increase in average occupancy and rental rates. An increase in
rental rates at Waterford Apartments was partially offset by higher utilities,
real estate taxes and nonroutine maintenance. Net operating income at Waterford
increased approximately $31,000 in 1996 over 1995.
The remaining decrease in the Partnership's 1996 net operating income, as
compared with 1995, resulted from a net increase in fees and reimbursements to
affiliates, a decrease in legal fees, and a decline in other income. The
decrease in management fees to affiliates (due to the Stewart's Glen sale) and
the decrease in reimbursable expenses was more than offset by an increase in
partnership management fees (paid to an affiliate of the General Partner based
on 9% of adjusted cash from operations).
The sale of Stewart's Glen in April 1996 led to a decrease of approximately
$672,000 in rental income for the year ended December 31, 1996, as compared with
1995. Rental income for the remaining properties, Versailles Village,
Stonebridge Manor and Waterford, increased $20,000, $55,000 and $59,000,
respectively. Overall, an increase in rental rates accounted for the
improvement.
Other income decreased approximately $66,000 for the year ended December
31, 1996, as compared with 1995, of which $22,000 was attributable to Stewart's
Glen which was sold in April 1996. The remaining decrease was primarily the
result of percentage rent and tenant expense recapture recorded in 1995 relating
to Promenades Plaza. At the time of the property sale in 1994, the Partnership
set up a receivable for amounts to be received outside the closing. In 1995, the
Partnership received a total of $39,433 in excess of the amount recorded as a
receivable.
Property operating expenses increased approximately $123,000 for the year
ended December 31, 1996, as compared with 1995, exclusive of an approximate
$236,000 decrease related to Stewart's Glen. Versailles Village incurred higher
maintenance and repair expense due to service needed on a number of HVAC units
and a main water line break. An increase in repairs and maintenance at
Stonebridge Manor resulted from exterior painting completed in conjunction with
the roof repair project, an increase in the number of carpet replacements and a
pest control contract entered into at the end of 1995. Maintenance and repair
increased at Waterford as a result of an increase in the cost of preparing
apartments for rent upon a tenant move out, including the additional expense of
replacing wallpaper in units and an increase in carpet replacements. The
increases at Waterford were partially offset by a decrease in landscaping
expenses. Utilities expense was up at Waterford and Versailles Village due to an
increase in usage as well as an increase in rates. At Stonebridge Manor, fewer
corporate apartment rentals led to an increase in utilities expense. Real estate
taxes increased at Waterford and Stonebridge Manor due to higher assessments,
and at Versailles Village due to an increased mill rate.
12
General and administrative expense increased approximately $9,000 for the
year ended December 31, 1996, as compared with 1995, after excluding the
Stewart's Glen decrease of $64,000. Payroll expenses at Stonebridge Manor
increased primarily due to the hiring of new maintenance employees. Advertising
costs for Waterford and Stonebridge Manor were lower as a result of improving
occupancy, and increased at Versailles Village in an effort to increase
occupancy. In addition, legal fees were lower in 1996 than in 1995.
The decrease in provision for doubtful accounts for the year ended December
31, 1996, as compared with 1995, exclusive of Stewart's Glen decrease of
$11,000, was primarily due to fewer collection problems at Waterford.
Interest expense decreased for the year ended December 31, 1996, as
compared with 1995, as a result of the retirement of the $3,400,000 Mellon Bank
promissory note on May 15, 1996 and the retirement of the Stewart's Glen
mortgage note upon the sale of the property in April 1996.
Depreciation and amortization decreased for the year ended December 31,
1996, as compared with 1995, as a result of the Stewart's Glen sale in April
1996.
INFLATION
With inflation at a low rate during 1997, 1996 and 1995, the effect of
inflation and changing prices on current revenue and income from operations has
been minimal.
Any significant inflation in future periods is likely to increase rental
rates (from leases to new tenants or renewals of leases to existing tenants)
assuming no major changes in market conditions. At the same time, it is
anticipated that property operating expenses will be similarly affected.
Assuming no major changes in occupancy levels, increases in rental income are
expected to cover inflation driven increases in the cost of operating the
properties and in property taxes. Inflation may also result in capital
appreciation of the Partnership's investment properties over a period of time as
rental rates and replacement costs of properties increase.
13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
INDEX
PAGE
Report of Independent Accountants 15
Financial Statements:
Balance Sheets, December 31, 1997 and 1996 16
Statements of Operations, For the Years Ended December 31, 1997, 1996 and 1995 17
Statements of Partners' Capital (Deficit), For the Years Ended December 31, 1997, 1996 and 1995 18
Statements of Cash Flows, For the Years Ended December 31, 1997, 1996 and 1995 19
Notes to Financial Statements 20
Schedules:
III - Real Estate and Accumulated Depreciation, December 31, 1997 26
Schedules not filed:
All schedules other than those indicated in the index have been omitted as
the required information is inapplicable or the information is presented in the
financial statements or related notes.
14
Report of Independent Accountants
To the Partners of
Connecticut General Realty Investors III
Limited Partnership
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of Connecticut
General Realty Investors III Limited Partnership at December 31, 1997 and 1996,
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Hartford, Connecticut
February 18, 1998
15
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS 1997 1996
Property and improvements, at cost:
Land and land improvements $ 2,964,303 $ 4,170,151
Buildings 16,618,817 25,569,468
Furniture and fixtures 1,390,985 2,071,051
--------------- ---------------
20,974,105 31,810,670
Less accumulated depreciation 8,112,558 11,431,301
--------------- ---------------
Net property and improvements 12,861,547 20,379,369
Cash and cash equivalents 682,614 638,965
Accounts receivable (net of allowance of $12,907 in 1997 and
$6,497 in 1996) 9,819 11,058
Escrow deposits 144,407 175,298
Other asset 1,000 1,000
Deferred charges, net 926,086 1,131,995
Escrowed debt service funds 506,660 506,660
--------------- ---------------
Total $ 15,132,133 $ 22,844,345
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Notes and mortgages payable $ 15,452,462 $ 20,807,619
Accounts payable and accrued expenses (including $20,550
in 1997 and $5,978 in 1996 due to affiliates) 235,092 245,094
Tenant security deposits 61,350 151,867
Unearned income 13,011 29,624
--------------- ---------------
Total liabilities 15,761,915 21,234,204
--------------- ---------------
Partners' capital (deficit):
General Partner:
Capital contributions 1,000 1,000
Cumulative net income 25,802 11,518
Cumulative cash distributions (28,494) (23,426)
--------------- ---------------
(1,692) (10,908)
--------------- ---------------
Limited partners (24,856 Units):
Capital contributions, net of offering costs 22,408,052 22,408,052
Cumulative net loss (15,120,129) (17,887,925)
Cumulative cash distributions (7,916,013) (2,899,078)
--------------- ---------------
(628,090) 1,621,049
--------------- ---------------
Total partners' capital (deficit) (629,782) 1,610,141
--------------- ---------------
Total $ 15,132,133 $ 22,844,345
=============== ===============
The Notes to Financial Statements are an integral part of these statements.
16
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
---- ---- ----
Income:
Rental income $ 4,439,392 $ 4,932,691 $ 5,470,498
Other income 104,094 123,278 189,499
Interest income 97,320 149,601 158,944
------------- ------------- -------------
4,640,806 5,205,570 5,818,941
------------- ------------- -------------
Expenses:
Property operating expenses 1,278,482 1,452,587 1,565,854
General and administrative 659,864 718,639 773,405
Fees and reimbursements to affiliates 150,853 181,933 108,330
Provision for doubtful accounts 13,026 6,633 23,304
Interest expense (includes $25,500 for 1996
and $68,000 for 1995 to affiliates) 1,378,234 1,749,224 2,227,301
Depreciation and amortization 952,497 1,112,487 1,331,623
------------- ------------- -------------
4,432,956 5,221,503 6,029,817
------------- ------------- -------------
Income (loss) from operations 207,850 (15,933) (210,876)
Gain on sale of property 2,574,230 2,440,258 --
------------- ------------- -------------
Net income (loss) $ 2,782,080 $ 2,424,325 $ (210,876)
============= ============= =============
Net income (loss):
General Partner $ 14,284 $ 114,283 $ (2,108)
Limited partners 2,767,796 2,310,042 (208,768)
------------- ------------- -------------
$ 2,782,080 $ 2,424,325 $ (210,876)
============= ============= =============
Net income (loss) per Unit $ 111.35 $ 92.94 $ (8.40)
============= ============= =============
Cash distributions per Unit $ 201.84 $ 63.00 $ --
============= ============= =============
The Notes to Financial Statements are an integral part of these statements.
17
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
General Limited
Partner Partners Total
Balance (deficit) at December 31, 1994 $ (113,012) $ 1,092,693 $ 979,681
Distributions -- (6,990) (6,990)
Net loss (2,108) (208,768) (210,876)
------------ -------------- --------------
Balance (deficit) at December 31, 1995 (115,120) 876,935 761,815
Distributions (10,071) (1,565,928) (1,575,999)
Net income 114,283 2,310,042 2,424,325
------------ ------------- -------------
Balance (deficit) at December 31, 1996 (10,908) 1,621,049 1,610,141
Distributions (5,068) (5,016,935) (5,022,003)
Net income 14,284 2,767,796 2,782,080
------------ ------------- -------------
Deficit at December 31, 1997 $ (1,692) $ (628,090) $ (629,782)
============ ============= =============
The Notes to Financial Statements are an integral part of these statements.
18
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
---- ---- ----
Cash flows from operating activities:
Net income (loss) $ 2,782,080 $ 2,424,325 $ (210,876)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Gain on sale of property (2,574,230) (2,440,258) --
Depreciation and amortization 952,497 1,112,487 1,331,623
Provision for doubtful accounts 13,026 6,633 23,304
Accounts receivable (11,787) (9,997) 56,266
Escrow deposits 30,891 105,938 (109,971)
Accounts payable 54,631 (128,116) 48,897
Accrued interest payable -- (72,946) --
Other, net (107,130) (13,878) 141,168
--------------- ---------------- ---------------
Net cash provided by operating activities 1,139,978 984,188 1,280,411
--------------- ---------------- ---------------
Cash flows from investing activities:
Proceeds from sale of property 9,800,000 7,853,900 --
Payment of closing costs related to sale of property (223,733) (102,306) --
Purchases of property and improvements (295,436) (454,948) (213,345)
--------------- ---------------- ---------------
Net cash provided by (used in)
investing activities 9,280,831 7,296,646 (213,345)
--------------- ---------------- ---------------
Cash flows from financing activities:
Distribution to limited partners (5,016,935) (1,572,918) (3,672)
Distribution to General Partner (5,068) (10,071) --
Repayment of notes and mortgage loans (5,355,157) (8,540,003) (5,439,969)
Proceeds from notes and mortgage loans -- -- 5,300,000
Payment of financing costs -- -- (105,010)
--------------- ---------------- ---------------
Net cash used in financing activities (10,377,160) (10,122,992) (248,651)
--------------- ---------------- ---------------
Net increase (decrease) in cash and cash equivalents 43,649 (1,842,158) 818,415
Cash and cash equivalents, beginning of year 638,965 2,481,123 1,662,708
--------------- ---------------- ---------------
Cash and cash equivalents, end of year $ 682,614 $ 638,965 $ 2,481,123
=============== ================ ===============
Supplemental disclosure of cash information:
Interest paid during year $ 1,378,234 $ 1,822,170 $ 2,227,301
=============== ================ ===============
Supplemental disclosure of non-cash information:
Accrued purchases of property and improvements $ -- $ 64,633 $ 45,941
=============== ================ ===============
The Notes to Financial Statements are an integral part of these statements.
19
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Connecticut General Realty Investors III Limited Partnership (the
"Partnership"), a Connecticut limited partnership, was organized in April 1984
to own and operate residential and commercial real estate. The general partner
of the Partnership is CIGNA Realty Resources, Inc. - Fifth (the "General
Partner").
In December 1993, the Partnership refinanced the mortgages encumbering its
Oklahoma property, Waterford Apartments. In conformity with the loan
requirements, the property was segregated from the Partnership's remaining
investment properties. The Partnership contributed the real property and
improvements subject to mortgage debt and net working capital to the Waterford
Partnership, a Connecticut general partnership, in exchange for a 99.9% general
partnership interest, and the General Partner contributed $1 in exchange for a
0.1% general partnership interest. The General Partner's interest is held in
trust for the benefit of Tulsa Corporation, the stock of which is 100% owned by
the Partnership.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) BASIS OF PRESENTATION: The financial statements have been prepared in
conformity with generally accepted accounting principles, and reflect
management's estimates and assumptions that affect the reported amounts.
Actual results could differ from those estimates. Certain amounts in the
1996 financial statements have been reclassified to conform to the 1997
presentation.
B) FINANCIAL INSTRUMENTS: Except for Notes and Mortgages Payable, financial
instruments subject to fair value disclosure requirements are carried in
the financial statements at amounts that approximate fair value. For Notes
and Mortgages Payable, the estimate of fair value was based on the quoted
market prices for similar issues or by discounted cash flow analyses which
utilize current interest rates for similar financial instruments with
comparable terms and credit quality.
C) PROPERTY AND IMPROVEMENTS: Property and improvements are either held for
the production of income or held for sale. Property and improvements held
for the production of income are carried at depreciated cost less any
write-downs to fair value. The cost represents the initial purchase price
and subsequent capitalized costs and adjustments, including certain
acquisition expenses. Depreciation is calculated on the straight-line
method based on the estimated useful lives of the various components (5 to
30 years).
Properties are considered held for sale when they are subject to an active
plan to find a buyer and a sale is likely to be completed within one year.
Effective with the implementation of SFAS No. 121, properties held for sale
are carried at the lower of cost or fair value less estimated costs to sell
(through the use of valuation reserves). Properties that are held for sale
are no longer depreciated. As of July 1997, the Partnership held
Stonebridge Manor Apartments for sale and on October 23, 1997, the
Partnership completed the sale. Net income was $153,350 for the period that
the Partnership held Stonebridge Manor Apartments for sale.
D) CASH AND CASH EQUIVALENTS: Short-term investments with a maturity of three
months or less at the time of purchase are generally reported as cash
equivalents.
E) ESCROW DEPOSITS AND ESCROWED DEBT SERVICE FUNDS: Escrow deposits consist of
funds held to pay property taxes and insurance required by the
Partnership's mortgage lenders, and a maintenance escrow required by
Waterford's mortgage lender. Escrowed debt service funds relate to
Waterford and include debt service reserves and a cash collateral reserve.
20
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
F) DEFERRED CHARGES: Deferred charges consist of a surety fee, relating to the
financing of the Waterford Apartments, which is amortized over the ten year
period of the surety, and financing costs for both of the Partnership's
properties, which are amortized over the lives of the respective loans.
G) PARTNERS' CAPITAL: Offering costs, comprised of sales commissions and other
issuance expenses, have been charged to the partners' capital accounts as
incurred.
H) INCOME TAXES: No provision for income taxes has been made as the liability
for such taxes is that of the partners rather than the Partnership.
3. FEDERAL INCOME TAX REPORTING
The principal differences between generally accepted accounting principles and
tax reporting is the classification of offering costs (sales commissions and
other issuance expenses) and the method of depreciation. The net effects of the
differences as of December 31, 1997, 1996 and 1995, are summarized as follows:
1997 1996 1995
----------------------------- ---------------------------- -----------------
Financial Tax Financial Tax Financial Tax
Reporting Reporting Reporting Reporting Reporting Reporting
Total assets $ 15,132,133 $ 11,933,069 $ 22,844,345 $ 17,279,595 $ 30,739,260 $ 25,385,321
Partners' capital
(deficit):
General Partner (1,692) (29,428) (10,908) (126,311) (115,120) (179,084)
Limited partners (628,090) (3,786,838) 1,621,049 (3,799,106) 876,935 (4,387,497)
Net income (loss) (a):
General Partner 14,284 101,951 114,283 62,844 (2,108) (6,147)
Limited partners 2,767,796 5,029,203 2,310,042 2,154,319 (208,768) (608,609)
Net income (loss) per Unit (a) 111.35 202.33 92.94 86.67 (8.40) (24.48)
(a) Included in 1997 is a gain on sale of property of $2,574,230 ($2,562,025 or
$103.07 per Unit to limited partners) for financial reporting purposes and
a gain of $5,265,441 ($5,162,147 or $207.68 per Unit to limited partners)
for tax reporting. Included in 1996 is a gain on sale of property of
$2,440,258 ($2,325,815 or $93.57 per Unit to limited partners) for
financial reporting purposes and a gain of $2,703,671 ($2,635,963 or
$106.05 per Unit to limited partners) for tax reporting.
4. INVESTMENT PROPERTIES
The Partnership purchased four apartment complexes located in Ohio,
Oklahoma, Louisiana and Illinois and one shopping center located in Florida. At
December 31, 1997, the Partnership held for the production of income two
residential properties which were operating with leases in effect generally for
a term of one year or less. As of July 1997, the Partnership was holding the New
Orleans property, Stonebridge Manor Apartments, for sale. On October 23, 1997,
the Partnership completed the sale of Stonebridge Manor Apartments. Each
investment property is pledged as security for its respective non-recourse
long-term debt.
21
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
On January 27, 1993, the Partnership sold an outparcel at the Promenades
Plaza Shopping Center with a net book value of $376,083 for a sales price of
$500,000, netting the Partnership $452,500 after commission and closing costs.
The Partnership recognized a gain on the sale of $76,417 in 1993. On September
22, 1994, the Partnership completed the sale of Promenades Plaza for a gross
sales price of $6,572,000. The property had a carrying value of $6,239,957 (net
of impairment losses of $5,000,000 in 1993 and $700,000 in 1991). After
deducting closing costs of $307,206, the Partnership recorded a gain of $24,837
in 1994.
The Promenades Plaza Shopping Center had leases which provided for
additional rents based upon a percentage of tenant sales over a specified
amount. The amount recorded by the Partnership for such rents in 1995 was
$39,433.
On April 30, 1996, the Partnership completed the sale of Stewart's Glen III
for a gross sales price of $7,853,900. After closing costs and payment of the
first mortgage loan obligation, the Partnership netted $2,890,011. The property
had a carrying value of $5,311,336. After deducting closing costs of $102,306,
the Partnership recorded a gain of $2,440,258.
5. DEFERRED CHARGES
Deferred charges at December 31, 1997 and 1996 consist of the following:
1997 1996
---- ----
Surety fee - Waterford financing $ 963,910 $ 963,910
Financing costs 660,522 765,532
------------- -------------
1,624,432 1,729,442
Accumulated amortization (698,346) (597,447)
------------- -------------
$ 926,086 $ 1,131,995
============= =============
6. NOTES AND MORTGAGES PAYABLE
The Partnership's debt is non-recourse to the Partnership and is secured by
the investment properties. Notes and mortgages payable at December 31, 1997 and
1996 consist of the following:
December 31
-----------
1997 1996
---- ----
8% mortgage note for Versailles Village Apartments. Principal and interest of
$32,416 payable monthly from May 1, 1994 until April 1, 2001, when the balance
of $3,704,876 will be due. $ 3,969,129 $ 4,037,591
Waterford Apartments promissory note financed with industrial revenue bonds.
Non-taxable Series 1993A Bonds; 5.35%; interest only payments of $50,624 12/1/93
to 12/1/2018 due monthly; 10% of principal required in cash collateral account
by 12/1/2003; cash collateral set up at closing with $100,000; additional
contributions to collateral account begin 12/1/98; bond maturity, 12/1/2018. 11,355,000 11,355,000
22
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31
-----------
1997 1996
---- ----
Waterford Apartments promissory note financed with industrial revenue bonds.
Taxable Series 1993B Bonds; 5.75%; interest only payments of $1,917 due monthly
12/1/93 to 12/1/95, principal and interest of $12,750 due monthly 12/1/95 to
6/1/96, $11,605 6/1/96 to 12/1/96, $12,984 12/1/96 to 6/1/97, $11,816 6/1/97 to
12/1/97, $12,338 12/1/97 to 6/1/98, $12,002 6/1/98 to 12/1/98; fully amortized
by 12/1/98. 128,333 263,333
10.15% note for Stonebridge Manor Apartments. Principal and interest of $52,172
payable monthly from May 1, 1995 until March 1, 1998. The note had a maturity
date of April 1, 1998. The property was sold on October 23, 1997 and the note
was retired. -- 5,151,695
--------------- ---------------
Total notes and mortgages payable $ 15,452,462 $ 20,807,619
=============== ===============
The Waterford Apartments mortgage debt consists of two promissory notes
financed with $11,755,000 in industrial bonds issued from the Tulsa County Home
Finance Authority and credit enhanced by AXA Reassurance, SA. The AXA insurance
policy expires on December 1, 2004, however, the Partnership is required to
obtain a new credit enhancer by December 1, 2003. The bonds can be prepaid in
2001 at 102% and at par in 2002 and thereafter.
Five year maturities of long-term debt are summarized as follows:
1998 $ 202,478
1999 80,299
2000 86,963
2001 3,727,722
2002 --
Thereafter 11,355,000
The fair value of notes and mortgages payable was approximately $15,800,000
at December 31, 1997 and $21,200,000 at December 31, 1996. The estimate of fair
value was based on the quoted market prices for similar issues or by discounted
cash flow analysis which utilize current interest rates for similar financial
instruments with comparable terms and credit quality.
7. TRANSACTIONS WITH AFFILIATES
Fees and other expenses incurred by the Partnership related to the General
Partner or its affiliates during the periods ended December 31, 1997, 1996 and
1995 are as follows:
1997 1996 1995
---- ---- ----
Property management fees(a) $ 33,300 $ 38,756 $ 44,461
Partnership management fees 64,272 99,601 --
23
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
Printing 17,101 7,785 10,823
Reimbursement (at cost) for
out-of-pocket expenses 36,180 35,791 53,046
----------- ----------- -----------
$ 150,853 $ 181,933 $ 108,330
=========== =========== ===========
(a) Does not include property management fees earned by independent property
management companies of $192,406, $213,881 and $235,974 for 1997, 1996 and
1995, respectively. Certain property management services have been
contracted by an affiliate of the General Partner on behalf of the
Partnership and are paid directly by the Partnership to the third party
companies.
In addition, the Partnership had third party borrowings outstanding during
1996 and 1995 which were guaranteed by an affiliate of the General Partner for
an annual fee of 2% of the outstanding balance. The note was paid in full on May
15, 1996.
8. SALE OF PROPERTY
On October 23, 1997, the Partnership completed the sale of Stonebridge
Manor Apartments to TGM Realty Corp. #6, a Delaware corporation, for an all cash
gross sales price of $9,800,000. The property had a depreciated cost of
$7,002,037 as of the date of sale. After deducting closing costs of $223,733,
the Partnership recorded a gain of $2,574,230. The Partnership distributed the
net proceeds from the sale to limited partners on November 15, 1997.
9. PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement as amended January 1,
1988, net income or loss and cash distributions from operations, as well as any
net losses arising from the sale or disposition of investment properties, are to
be allocated 1% to the General Partner and 99% to the Limited Partners. Cash
distributions are allocated to the Partners following the receipt by an
affiliate of the General Partner of a partnership management fee of 9% of
"Adjusted Cash From Operations", as defined in the Partnership Agreement.
Distributable cash from the sale or disposition of investment properties
is to be generally allocated in the following order:
o To the Limited Partners up to the amount of their Original Invested
Capital;
o To the General Partner, an additional amount depending upon the
percentage of Gross Proceeds committed to investment in properties;
o To the Limited Partners in an amount, which when added to prior
distributions from operations, equals an 8% cumulative noncompounded
return on their adjusted invested capital;
o To an affiliate of the General Partner as a subordinated disposition
fee; and
o With respect to the remainder, 85% to the Limited Partners and 15% to
the General Partner.
Generally, income from the sale or disposition of investment property is
allocated as follows:
24
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
o To each Partner having a deficit balance in the same ratio of such
balance to the aggregate balance of all Partners;
o To each Partner to the extent of cash distributed from the sale; and
o Any remaining gain, 1% to the General Partner and 99% to the Limited
Partners.
10. SUBSEQUENT EVENT
On February 15, 1998, the Partnership paid a cash distribution of $141,679
to the limited partners and $1,431 to the General Partner.
25
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP SCHEDULE III
(A CONNECTICUT LIMITED PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
Costs
Capitalized
Initial Cost to Partnership (B)(C) Subsequent
to Acquisition
Description of Apartment Land, Building
Complexes by Property Land and Land Furniture and Improvements and
Location Encumbrances (A) Improvements Buildings Fixtures Furniture & Fixtures
Versailles Village Apts. $ 4,100,806 $ 562,000 $ 4,857,554 $ 406,800 $ 968,762
Forest Park, OH
Waterford Apts. 11,744,167 2,085,826 11,343,875 492,765 256,523
Tulsa, OK ----------- ---------- ----------- -------- ----------
Totals $15,844,973 $2,647,826 $16,201,429 $899,565 $1,225,285
=========== ========== =========== ======== ==========
Gross Amount at Which Carried at Close of Period (D)(E)
Description of Apartment
Complexes by Property Land and Land
Location Improvements Buildings Furniture and Fixtures Total
Versailles Village Apts. $ 778,126 $ 5,188,697 $ 828,293 $ 6,795,116
Forest Park, OH
Waterford Apts. 2,186,177 11,430,120 562,692 14,178,989
Tulsa, OK ---------- ----------- ----------
Total $2,964,303 $16,618,817 $1,390,985 $20,974,105
========== =========== ========== ===========
26
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP SCHEDULE III
(A CONNECTICUT LIMITED PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
DECEMBER 31, 1997
Life on Which
Description of Depreciation in Latest
Apartment Statement of
Complexes by Accumulated Date of Operations is
Property Location Depreciation (F) Construction Date Acquired Computed
Versailles Village Apts. $2,958,147 1970 02/06/85 5-30 years
Forest Park, OH
Waterford Apts. 5,154,411 1984 10/31/85 5-30 years
Tulsa, OK ----------
Totals $8,112,558
==========
(A) Encumbrances, which are secured by the Partnership's properties include
accrued interest payable at maturity (See Notes to Financial Statements).
(B) The cost to the Partnership represents the initial purchase price of the
properties including certain acquisition fees and expenses.
(C) The Partnership recorded $774,493 under the guarantee agreement from the
sellers of Waterford, which was treated as a reduction of initial cost.
(D) The aggregate cost of real estate owned at December 31, 1997 for federal
income tax purposes is $21,273,064.
(E) Reconciliation of real estate owned:
Description 1997 1996 1995
Balance at beginning of period $31,810,670 $38,902,618 $38,649,982
Additions during period 230,803 488,210 252,636
Reductions during period (G) (11,067,368) (7,580,158) --
----------- ----------- -----------
Balance at end of period $20,974,105 $31,810,670 $38,902,618
=========== =========== ===========
(F) Reconciliation of accumulated depreciation:
Description 1997 1996 1995
Balance at beginning of period $11,431,301 $12,770,211 $11,629,808
Additions during period 772,880 915,342 1,140,403
Reductions during period (G) (4,091,623) (2,254,252) --
---------- ----------- -----------
Balance at end of period $8,112,558 $11,431,301 $12,770,211
========== =========== ===========
(G) Includes sale of Stonebridge Manor Apartments in 1997 and Stewart's Glen
Apartments Phase III in 1996.
27
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The General Partner of the Partnership, CIGNA Realty Resources, Inc.-
Fifth, a Delaware corporation, is an indirectly, wholly owned subsidiary of
CIGNA Corporation, a publicly held corporation whose stock is traded on the New
York Stock Exchange. The General Partner has responsibility for and control over
the affairs of the Partnership.
The directors and executive officers of the General Partner as of March 1,
1998 are as follows:
Name Office Served Since
R. Bruce Albro Director May 2, 1988
Robert Fair Director March 1, 1998
Philip J. Ward Director May 2, 1988
John D. Carey President September 7, 1993
Verne E. Blodgett Vice President, Counsel April 2, 1990
Joseph W. Springman Vice President, Assistant Secretary September 7, 1993
David C. Kopp Secretary September 29, 1989
Stephen C. Stachelek Treasurer May 20, 1997
Josephine C. Donofrio Controller September 23, 1996
There is no family relationship among any of the foregoing directors or
officers. There are no arrangements or understandings between or among said
officers or directors and any other person pursuant to which any officer or
director was selected as such.
The foregoing directors and officers are also officers and/or directors of
various affiliated companies of CIGNA Realty Resources, Inc. - Fifth, including
CIGNA Financial Partners, Inc. (the parent of CIGNA Realty Resources, Inc. -
Fifth), CIGNA Investments, Inc., CIGNA Corporation (the parent of CIGNA
Investments, Inc.), and Connecticut General Corporation (the parent of CIGNA
Financial Partners, Inc.).
28
The business experience of each of the directors and executive officers of
the General Partner of the Partnership is as follows:
R. BRUCE ALBRO - DIRECTOR
Mr. Albro, age 55, a Senior Managing Director of CIGNA Investment
Management, joined Connecticut General's Investment Operations in 1971 as an
Equities Securities Analyst in Paper, Forest Products, Building and Machinery.
Subsequently, he served as a Research Department Unit Head, as an Assistant
Portfolio Manager, then as Director of Equity Research and a member of the
senior staff of CIGNA Investment Management Company and as a Portfolio Manager
in the Fixed Income area. He then headed the Marketing and Merchant Banking area
for CIGNA Investments, Inc. Prior to his current assignment of Division Head,
Portfolio Management Division, he was an insurance portfolio manager, and prior
to that, he was responsible for Individual Investment Product Marketing. In
addition, Mr. Albro currently serves as President of the CIGNA Funds Group and
other CIGNA affiliated mutual funds. Mr. Albro received a Master of Arts degree
in Economics from the University of California at Berkeley and a Bachelor of
Arts degree in Economics from the University of Massachusetts at Amherst. He is
a Chartered Financial Analyst.
ROBERT FAIR - DIRECTOR
Mr. Fair, age 44, is Managing Director and head of Asset
Management/Dispositions in the Real Estate Division of CIGNA Investment
Management. He joined CIGNA's real estate operations in 1979 and has held a
variety of positions, including regional head apartment property management team
and head of the Asset Management Dispositions unit. Most recently, he was a
leader of a mortgage investment team. Before coming to CIGNA, he was associated
with several major construction firms. Mr. Fair holds a Bachelor of Science
degree from Worcester Polytechnic Institute.
PHILIP J. WARD - DIRECTOR
Mr. Ward, age 49, is Senior Managing Director and Division Head of CIGNA
Investment Management, in charge of the Real Estate Investment Division. He was
appointed to that position in December 1985. Mr. Ward joined Connecticut
General's Mortgage and Real Estate Department in 1971 and became an officer in
1976. Since joining CIGNA, he has held real estate investment assignments in
Mortgage and Real Estate Production and in Portfolio Management. Prior to his
current position, Mr. Ward held assignments in CIGNA Investments, Inc.,
responsible for the Real Estate Production area, CIGNA Realty Advisors, Inc. and
Congen Realty Advisory Company, all wholly-owned subsidiaries of CIGNA and/or
Connecticut General. Mr. Ward has held various positions with the General
Partner. His experience includes all forms of real estate investments, with
recent emphasis on acquisitions and joint ventures. Mr. Ward is a 1970 graduate
of Amherst College with a Bachelor of Arts degree in Economics. He is a member
of the Society of Industrial and Office Realtors, the National Association of
Industrial and Office Parks, the Urban Land Institute and a trustee of the
International Council of Shopping Centers. He is a member of the Board of
Directors of Simon DeBartolo Corporation and Patriot American Hospitality
Corporation.
JOHN D. CAREY - PRESIDENT
Mr. Carey, age 34, is the President of the General Partner and CIGNA
Financial Partners, Inc. (CFP) and manages the Tax Advantaged Investment unit of
CIGNA Investment Management - Real Estate. Mr. Carey was elected President in
1993, and from 1990 to 1996, he served as the Controller of the General Partner
and CFP. Prior to joining CIGNA Investment Management, he held the position of
manager at KPMG Peat Marwick in the audit department and was a member of the
Real Estate Focus Group. Mr. Carey is a graduate of Central Connecticut State
University with a Bachelor of Science degree and is a Certified Public
Accountant.
29
VERNE E. BLODGETT - VICE PRESIDENT, COUNSEL
Mr. Blodgett, age 60, is an Assistant General Counsel of CIGNA. He joined
Connecticut General Life Insurance Company in 1975 as an investment attorney and
held various positions in the Legal Division of Connecticut General Life
Insurance Company prior to his appointment as Assistant General Counsel in 1981.
He has served as CIGNA Investment Counsel, Counsel to CIGNA Individual
Insurance, and is currently a member of the CIGNA Domestic Property and Casualty
Law Department. Mr. Blodgett received a Bachelor of Arts degree from Yale
University and graduated with honors from the University of Connecticut School
of Law. He is a member of the Connecticut and the American Bar Associations.
JOSEPH W. SPRINGMAN - VICE PRESIDENT, ASSISTANT SECRETARY
Mr. Springman, age 56, is Managing Director and department head responsible
for Acquisitions. He joined CIGNA's Real Estate operations in 1970. He has held
positions as an officer or director of several real estate affiliates of CIGNA.
His past real estate assignments have included Development and Engineering,
Property Management, Director - Real Estate Operations, Portfolio Management,
Vice President - Real Estate Production and Managing Director - Asset
Management. He received a Bachelor of Science degree from the U.S. Naval
Academy.
DAVID C. KOPP - SECRETARY
Mr. Kopp, age 52, is Secretary of CIGNA Investments, Inc., Corporate
Secretary of Connecticut General Life Insurance Company and Assistant Corporate
Secretary and Assistant General Counsel, Insurance and Investment Law of CIGNA
Corporation. He also serves as an officer of various other CIGNA Companies. He
joined Connecticut General Life Insurance Company in 1974 as a commercial real
estate attorney and held various positions in the Legal Department of
Connecticut General Life Insurance Company prior to his appointment as Corporate
Secretary in 1977. Mr. Kopp is an honors graduate of Northern Illinois
University and served on the law review at the University of Illinois College of
Law. He is a member of the Connecticut Bar Association and is past President of
the Hartford Chapter, American Society of Corporate Secretaries.
STEPHEN C. STACHELEK - TREASURER
Stephen C. Stachelek, age 40, is Assistant Vice President and Division
Treasurer for CIGNA's Retirement and Investment Services, Investment Management
and Reinsurance Divisions. In this capacity, he manages a staff responsible for
cash and liquidity management, cash accounting, cash receipts and cash
disbursements processing, reconciliation of bank accounts and ensuring that the
Divisions' treasury needs are met for each to effectively conduct its business.
Stephen joined CIGNA in 1988. He held numerous positions in CIGNA's HealthCare
Division before joining the Corporate Treasury function in late 1994. He
received a B.S. degree from Central Connecticut State University, an M.B.A. from
Northeastern University and is a Certified Public Accountant.
JOSEPHINE C. DONOFRIO - CONTROLLER
Ms. Donofrio, age 30, was elected Controller of Tax Advantaged Investments
in 1996. In 1993, Ms. Donofrio joined CIGNA Investment Management - Real Estate
as a member of the Tax Advantaged Investment Unit. Prior to joining CIGNA
Investment Management, Ms. Donofrio was a senior accountant at Kostin, Ruffkess
& Company, LLC. Her experiences include financial and tax reporting for public
and private real estate limited partnership syndications. Ms. Donofrio is a
graduate of the University of Connecticut with a Bachelor of Science Degree. She
is a Certified Public Accountant and a member of the Connecticut Society of
Certified Public Accountants.
ITEM 11. EXECUTIVE COMPENSATION
Officers and directors of the General Partner receive no current or
proposed direct compensation from the Partnership in such capacities. However,
certain officers and directors of the General Partner received compensation from
the General
30
Partner and/or its affiliates (but not from the Partnership) for services
performed for various affiliated entities, which may include services performed
for the Partnership, but such compensation was not material in the aggregate.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No person or group is known by the Partnership to own beneficially more
than 5% of the outstanding Units of interest of the Partnership.
There exists no arrangement, known to the Partnership, the operation of
which may at a subsequent date result in a change in control of the Partnership.
As of March 1, 1998, the individual directors and the directors and
officers, as a group, of the General Partner beneficially owned Partnership
Units and shares of the common stock of CIGNA, parent of the General Partner, as
set forth in the following table:
Units Shares
Beneficially Beneficially Percent
Name Owned(a) Owned(b) of Class
R. Bruce Albro (c) 0 11,125 *
Robert Fair (d) 0 2,773 *
Philip J. Ward (e) 0 16,821 *
All directors and officers
Group (9) (f) 0 37,460 *
* Less than 1% of class
(a) No officer or director of the General Partner possesses a right to acquire
beneficial ownership of additional Units of interest of the Partnership.
(b) The directors and officers have sole voting and investment power over all
the shares of CIGNA common stock they own beneficially.
(c) Shares beneficially owned includes options to acquire 8,281 shares and 933
shares which are restricted as to disposition.
(d) Shares beneficially owned includes options to acquire 1,245 shares and
1,120 shares which are restricted as to disposition.
(e) Shares beneficially owned includes options to acquire 7,780 shares and
1,165 shares which are restricted as to disposition.
(f) Shares beneficially owned by directors and officers include 19,431 shares
of CIGNA common stock which may be acquired upon exercise of stock options
and 7,027 shares which are restricted as to disposition.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The General Partner of the Partnership is generally entitled to receive 1%
of cash distributions, when and as cash distributions are made to the limited
partners, and is generally allocated 1% of profits or losses. In 1997, the
General Partner was entitled to receive distributable cash from operations of
$5,068. The General Partner was allocated a share of Partnership income in 1997
of $14,284 which includes gain from the sale of Stonebridge Manor Apartments of
$12,205. Reference is also made to the Notes to Financial Statements included in
this annual report for a description of such distributions and allocations. The
relationship of the General Partner (and its directors and officers) to its
affiliates is set forth in Item 10 above.
31
CII provided asset management services to the Partnership during 1997 at
fees calculated at 5% of gross revenues from the Versailles Village Apartments,
Waterford Apartments, and Stonebridge Manor Apartments less amounts earned by
independent third party property management companies contracted by CII on
behalf of the Partnership. In 1997, such affiliate earned asset management fees
amounting to $33,300 for such services, of which $3,257 was unpaid as of
December 31, 1997. Non-affiliated third party independent property managers
contracted by CII earned $192,406 of management fees.
CFP provided partnership management services for the Partnership at fees
calculated at 9% of adjusted cash from operations in any one year. The
partnership management fee shall be paid when adjusted cash from operations is
distributed to Limited Partners. In 1997, CFP earned partnership management fees
amounting to $64,272 for such services, of which $14,154 was unpaid as of
December 31, 1997.
The General Partner and its affiliates may be reimbursed for their direct
expenses incurred in the administration of the Partnership. In 1997, the General
Partner and its affiliates were entitled to reimbursement for such out of pocket
expenses in the amount of $53,281, of which $3,139 was unpaid as of December 31,
1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements. See Index to Financial Statements in Item 8.
2. Financial Statement Schedules
(a) Real Estate and Accumulated Depreciation. See Index to
Financial Statements in Item 8.
3. Exhibits
3 Partnership Agreement, incorporated by reference to Exhibit
A to the Prospectus of Registrant, dated July 2, 1984, filed
pursuant to Rule 424(b) under the Securities Act of 1933,
File No. 2-90944.
3(a) Amendment to Partnership Agreement, dated as of July 1,
1985, incorporated by reference to Exhibit 3(a) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1984.
4 Certificate of Limited Partnership, dated April 16, 1984,
incorporated by reference to Exhibit 4 to Form S-11
Registration Statement under the Securities Act of 1933,
File No. 2-90944.
10(a) Acquisition and Disposition Services Agreement, dated
July 2, 1984, between Connecticut General Realty
Investors III Limited Partnership and CIGNA Capital
Advisers, Inc., incorporated by reference to exhibit
10(a) to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1987.
(b) Supervisory Property Management Agreement, dated July 2,
1984, between Connecticut General Realty Investors III
Limited Partnership and CIGNA Capital Advisers, Inc.,
incorporated by reference to exhibit 10(b) to Registrants
Annual Report on Form 10-K for the fiscal year ended
December 31, 1987.
(c) Agreements concerning Certain Capital Contributions, between
Connecticut General Management Resources, Inc. and CIGNA
Realty Resources, Inc.-Fifth, incorporated by reference to
exhibit 10(c) to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1987.
32
(d) Purchase and Sale Agreement, dated as of January 17, 1985,
relating to the Acquisition of Versailles Village
Apartments, incorporated by reference to Exhibit 10(d) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1984.
(e) Bill of Sale and Assignment between Stonebridge Manor, a
Louisiana Partnership in Commendam, and Connecticut General
Realty Investors III Limited Partnership, dated November 26,
1985, relating to the acquisition of the Stonebridge Manor
Apartments, incorporated by reference to Exhibit 10(h) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1985.
(f) Act of Credit Sale and Assumption of Mortgage between
Stonebridge Manor, a Louisiana Partnership in Commendam, and
Connecticut General Realty Investors III Limited Partnership
dated November 26, 1985, relating to the acquisition of the
Stonebridge Manor Apartments, incorporated by reference to
Exhibit 10(i) to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1985.
(g) Purchase and Sale Agreement between Waterford, LTD. and
Connecticut General Realty Investors III Limited
Partnership, dated October 31, 1985, relating to the
acquisition of the Waterford Apartments, incorporated by
reference to Exhibit 10(k) to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1985.
(h) Promissory Note between Connecticut General Realty Investors
III Limited Partnership, as Maker, and Waterford, LTD., as
Payee, dated October 31, 1985, relating to the acquisition
of the Waterford Apartments, incorporated by reference to
Exhibit 10(l) to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1985.
(i) Purchase and Sale Agreement between First Capital Income
Properties Limited, Series V, and Connecticut General Realty
Investors III Limited Partnership, relating to the
acquisition of the Promenades Plaza Shopping Center,
incorporated by reference to Exhibit 10(m) to Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1985.
(j) Mortgage Consolidation and Modification Agreement between
Connecticut General Realty Investors III Limited Partnership
and The Equitable Life Assurance Society of the United
States, dated as of December 10, 1986, relating to the
Promenades Plaza Shopping Center, incorporated by reference
to Exhibit 10(n) to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1986.
(k) Real Estate Purchase Agreement between Willowbrook
Associates II and CIGNA Financial Partners, Inc., relating
to Stewart's Glen Apartments Phase III, dated as of April
14, 1987, incorporated by reference to Exhibit 10(p) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987.
(l) Amendment to Real Estate Purchase Agreement, dated July 20,
1987, between Willowbrook Associates II and Phase III
Apartment Venture, relating to the acquisition of Stewart's
Glen Apartments Phase III, incorporated by reference to
Exhibit 10(s) to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1987.
(m) Management and Leasing Agreement between Phase III Apartment
Venture and Chasewood Properties, effective as of July 24,
1987, incorporated by reference to Exhibit 10(t) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987.
(n) Mortgage, Security Agreement and Financing Statement and
Promissory Note between Connecticut General Realty Investors
III Limited Partnership and Massachusetts Mutual Life
Insurance Company, dated January 25, 1988, relating to
Stewart's Glen Apartments Phase III, incorporated by
reference to Exhibit 10(v) to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1987.
33
(o) Mortgage Note between Connecticut General Realty Investors
III Limited Partnership and the John Hancock Mutual Life
Insurance Co., dated as of August 12, 1988, relating to
Versailles Village Apartments, incorporated by reference to
Exhibit 10(w) to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1988.
(p) Promissory Note between Connecticut General Realty Investors
III Limited Partnership and Aetna Life Insurance Company,
dated March 28, 1990, relating to Stonebridge Manor
Apartments incorporated by reference to Exhibit 10 (p) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989.
(q) Promissory Note between Connecticut General Realty Investors
III Limited Partnership and Mellon Bank National
Association, dated March 28, 1990, relating to Stonebridge
Manor Apartments incorporated by reference to Exhibit 10 (q)
to Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989.
(r) Mortgage and Note Modification Agreement between Connecticut
General Realty Investors III Limited Partnership and The
Equitable Life Assurance Society of the United States, dated
June 30, 1989, relating to Promenades Plaza Shopping Center
incorporated by reference to Exhibit 10 (r) to Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1989.
(s) Promissory Note between Connecticut General Realty Investors
III Limited Partnership and Barnett Bank of Southwest
Florida, dated June 30, 1989, relating to Promenades Plaza
Shopping Center incorporated by reference to Exhibit 10 (s)
to Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989.
(t) Promissory Note between Registrant and John Hancock Mutual
Life Insurance Company, dated March 24, 1994, relating to
Versailles Village Apartments incorporated by reference to
Form 10-Q for the quarter ended March 31, 1994.
(u) Documents and Agreements concerning the December 17, 1993
debt refinance of the Registrant's Waterford Apartments
property with industrial revenue bonds issued by the Tulsa
County Home Finance Authority and credit enhanced by AXA
Reassurance, SA incorporated by reference to Form 10-Q for
the quarter ended March 31, 1994.
(v) Consolidation, Extension, Modification, and Restatement of
Promissory Notes between Registrant and Mellon Bank, N.A.,
dated March 25, 1994 relating to Stonebridge Manor
Apartments and Promenades Plaza Shopping Center incorporated
by reference to Form 10-Q for the quarter ended March 31,
1994.
(w) Contract for Purchase and Sale dated July 19, 1994, First
Amendment to Contract for Purchase and Sale dated August 18,
1994, and Second Amendment to Contract for Purchase and Sale
dated September 21, 1994 between the Registrant and Sterling
Promenades Limited Partnership, a Florida limited
partnership incorporated by reference to Form 8-K dated
September 22, 1994.
(x) Loan Modification Agreement between Connecticut General
Realty Investors III Limited Partnership and Massachusetts
Mutual Life Insurance Company, dated November 1, 1994,
relating to Stewart's Glen Apartments.
(y) Loan Agreement between Connecticut General Realty Investors
III Limited Partnership and Hibernia National Bank, dated
March 29, 1995, relating to Stonebridge Manor Apartments.
34
(z) Agreement of Purchase and Sale for Stewart's Glen I, II and
III dated April 30, 1996 between CIGNA/Willowbrook
Associates Limited Partnership, CIGNA/Willowbrook II
Associates Limited Partnership, Connecticut General Realty
Investors III Limited Partnership and AMLI Residential, L.P.
(aa) Agreement of Purchase and Sale for Stonebridge Manor
Apartments dated October 22, 1997 between the Registrant
and TGM Realty Corp. #6, a Delaware corporation.
27 Financial Data Schedules.
(b) Reports on Form 8-K:
Registrant reported the sale of the Stonebridge Manor Apartments on
Form 8-K dated November 6, 1997.
35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 27, 1998 By: /s/ John D. Carey
-------------------
John D. Carey, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities (with respect to the General Partner) and on the date
indicated.
/s/ R. Bruce Albro Date: March 27, 1998
------------------------------------------
R. Bruce Albro, Director
/s/ Robert Fair Date: March 27, 1998
------------------------------------------
Robert Fair, Director
/s/ Philip J. Ward Date: March 27, 1998
------------------------------------------
Philip J. Ward, Director
/s/ John D. Carey Date: March 27, 1998
------------------------------------------
John D. Carey, President
(Principal Executive Officer)
/s/ Stephen C. Stachelek Date: March 27, 1998
------------------------------------------
Stephen C. Stachelek, Treasurer
(Principal Financial Officer)
/s/ Josephine Donofrio Date: March 27, 1998
------------------------------------------
Josephine Donofrio, Controller
(Principal Accounting Officer)
36