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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-14466
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Connecticut 06-1115374
(State of Organization) (I.R.S. Employer Identification No.)
900 Cottage Grove Road, South Building
Bloomfield, Connecticut 06002
(Address of principal executive offices)
Telephone Number: (860) 726-6000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
1
Part I - Financial Information
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Balance Sheets
September 30, December 31,
1998 1997
Assets (Unaudited) (Audited)
Property and improvements, at cost:
Land and land improvements $ 3,003,903 $ 2,964,303
Buildings 16,656,620 16,618,817
Furniture and fixtures 1,437,605 1,390,985
-------------- --------------
21,098,128 20,974,105
Less accumulated depreciation 8,585,771 8,112,558
-------------- --------------
Net property and improvements 12,512,357 12,861,547
Cash and cash equivalents 656,213 682,614
Accounts receivable (net of allowance of $8,037
in 1998 and $12,907 in 1997) 6,992 9,819
Escrow deposits 148,306 144,407
Other asset 1,000 1,000
Deferred charges, net 803,957 926,086
Escrowed debt service funds 506,660 506,660
-------------- --------------
Total $ 14,635,485 $ 15,132,133
============== ==============
Liabilities and Partners' Deficit
Liabilities:
Notes and mortgages payable $ 15,292,412 $ 15,452,462
Accounts payable and accrued expenses (including $43,135
in 1998 and $20,550 in 1997 due to affiliates) 230,222 235,092
Tenant security deposits 72,852 61,350
Unearned income 16,526 13,011
-------------- --------------
Total liabilities 15,612,012 15,761,915
-------------- --------------
Partners' deficit:
General Partner:
Capital contributions 1,000 1,000
Cumulative net income 26,349 25,802
Cumulative cash distributions (32,508) (28,494)
-------------- --------------
(5,159) (1,692)
-------------- --------------
Limited partners (24,856 Units)
Capital contributions, net of offering costs 22,408,052 22,408,052
Cumulative net loss (15,065,959) (15,120,129)
Cumulative cash distributions (8,313,461) (7,916,013)
-------------- --------------
(971,368) (628,090)
-------------- --------------
Total partners' deficit (976,527) (629,782)
-------------- --------------
Total $ 14,635,485 $ 15,132,133
============== ==============
The Notes to Financial Statements are an integral part of these statements.
2
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
Income:
Rental income $ 816,488 $ 1,208,227 $ 2,410,696 $ 3,559,350
Other income 18,645 34,632 49,052 88,560
Interest income 15,172 18,130 50,908 52,461
-------------- ------------- -------------- -------------
850,305 1,260,989 2,510,656 3,700,371
-------------- ------------- -------------- -------------
Expenses:
Property operating expenses 263,255 354,051 718,646 1,002,438
General and administrative 115,156 168,248 357,676 519,894
Fees and reimbursements to affiliates 31,750 37,227 87,264 118,243
Interest expense 231,411 366,885 697,011 1,100,972
Depreciation and amortization 203,377 194,768 595,342 757,269
-------------- ------------- -------------- -------------
844,949 1,121,179 2,455,939 3,498,816
-------------- ------------- -------------- -------------
Net income $ 5,356 $ 139,810 $ 54,717 $ 201,555
============== ============= ============== =============
Net income:
General Partner $ 53 $ 1,399 $ 547 $ 2,016
Limited partners 5,303 138,411 54,170 199,539
-------------- ------------- -------------- -------------
$ 5,356 $ 139,810 $ 54,717 $ 201,555
============== ============= ============== =============
Net income per Unit $ 0.21 $ 5.57 $ 2.18 $ 8.03
============== ============= ============== =============
Cash distribution per Unit $ 5.04 $ 6.75 $ 15.99 $ 13.20
============== ============= ============== =============
The Notes to Financial Statements are an integral part of these statements.
3
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Statements of Cash Flows
For the Nine Months Ended September 30, 1998 and 1997
(Unaudited)
1998 1997
---- ----
Cash flows from operating activities:
Net income $ 54,717 $ 201,555
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 595,342 757,269
Accounts receivable 2,827 816
Accounts payable and accrued expenses (4,870) 115,206
Escrow deposits (3,899) (66,084)
Other, net 15,017 (20,124)
--------------- ---------------
Net cash provided by operating activities 659,134 988,638
--------------- ---------------
Cash flows from investing activities:
Purchase of property and improvements (124,023) (227,196)
--------------- ---------------
Cash flows from financing activities:
Distribution to limited partners (397,448) (328,099)
Distribution to General Partner (4,014) (3,313)
Repayment of notes and mortgage loans (160,050) (244,047)
--------------- ---------------
Net cash used in financing activities (561,512) (575,459)
--------------- ---------------
Net increase (decrease) in cash and cash equivalents (26,401) 185,983
Cash and cash equivalents, beginning of year 682,614 638,965
--------------- ---------------
Cash and cash equivalents, end of period $ 656,213 $ 824,948
=============== ===============
Supplemental disclosure of cash information:
Interest paid during period $ 697,011 $ 1,100,972
=============== ===============
The Notes to Financial Statements are an integral part of these statements.
4
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Notes to Financial Statements
(Unaudited)
Readers of this quarterly report should refer to CONNECTICUT GENERAL REALTY
INVESTORS III LIMITED PARTNERSHIP'S (the "Partnership") audited financial
statements for the year ended December 31, 1997 which are included in the
Partnership's 1997 Annual Report, as certain footnote disclosures which would
substantially duplicate those contained in such audited financial statements
have been omitted from this report.
1. 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. It
is the opinion of management that the financial statements presented
reflect all the adjustments necessary for a fair presentation of the
financial condition and results of operations. All such adjustments are of
a normal recurring nature.
b) Cash and Cash Equivalents: Short term investments with a maturity of three
months or less at the time of purchase are reported as cash equivalents.
2. Deferred Charges
Deferred charges consist of the following:
September 30, December 31,
1998 1997
Surety fee - Waterford Apartments mortgage note $ 963,910 $ 963,910
Costs of obtaining financing 660,522 660,522
--------------- ---------------
1,624,432 1,624,432
Accumulated amortization (820,475) (698,346)
--------------- ---------------
$ 803,957 $ 926,086
=============== ===============
3. Transactions with Affiliates
Fees and expenses related to the General Partner or its affiliates are as
follows:
Three Months Ended Nine Months Ended Unpaid at
September 30, September 30, September 30,
------------- ------------- -------------
1998 1997 1998 1997 1998
---- ---- ---- ---- ----
Property management fees (a) $ 5,235 $ 9,362 $ 15,264 $ 27,403 $ 3,482
Partnership management fees 12,291 15,795 37,842 48,556 12,291
Reimbursement (at cost) for
out-of-pocket expenses 14,224 12,070 34,158 42,284 27,362
------------ ------------- ----------- ----------- -----------
$ 31,750 $ 37,227 $ 87,264 $ 118,243 $ 43,135
============ ============= =========== =========== ===========
5
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Notes to Financial Statements (Continued)
(Unaudited)
(a) Does not include on-site property management fees earned by independent
property management companies of $36,150 and $52,432 for the three months
ended September 30, 1998 and 1997, respectively, and $106,853 and $153,976
for the nine months ended September 30, 1998 and 1997, respectively.
On-site 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.
4. Subsequent Event
On November 15, 1998, the Partnership paid a distribution of $123,037 to
the limited partners and $1,243 to the General Partner.
6
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(a Connecticut limited partnership)
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 in 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
At September 30, 1998, the Partnership had $656,213 in cash and cash
equivalents which was available for working capital requirements, cash
distributions, and the Partnership's cash reserves. For the three and nine
months ended September 30, 1998, the Partnership generated $124,000 and
$384,000, respectively, of adjusted cash from operations after debt service,
capital improvements, and adjustments to the Partnership's cash reserves.
Year-to-date operations are in line with the 1998 operating plan. The
Partnership expects capital expenditures to be 11% below those planned at the
start of the year. The Partnership paid the first quarter 1998 distribution of
$130,494 or $5.25 per Unit on May 15, 1998 and the Partnership's second quarter
1998 cash distribution of $125,274 or $5.04 per Unit on August 15, 1998. The
Partnership will pay the third quarter distribution of $123,037 or $4.95 per
Unit on November 15, 1998. The distributions represent the respective quarter's
adjusted cash from operations. The Partnership plans to distribute cash
quarterly to the extent cash is available from operations after debt service,
capital, and changes to cash reserves for liabilities and capital expenditures,
until the sale of the Partnership's remaining two properties. The Partnership
plans to market Waterford Apartments for sale in the fourth quarter of 1998 and
Versailles Village in the first quarter of 1999. Current plans assume the sale
of the apartment projects in the first half of 1999. Once the Partnership
completes the sales of the two remaining properties, the Partnership will
distribute the net sales proceeds to the limited partners as part of a complete
liquidation and Partnership termination.
Results of Operations
Decreases were reflected in the statement of operations, except for
depreciation and amortization for the three months ended September 30, 1998, as
the result of the sale of Stonebridge Manor Apartments in October 1997. In
accordance with SFAS No. 121, assets held for sale are no longer depreciated,
and therefore, because Stonebridge Manor Apartments was held for sale as of July
1997, depreciation was not recorded for the three months ended September 30,
1997.
The Partnership's results reflect the following changes relative to the two
remaining properties. At Waterford Apartments, rental income increased 6.3% for
the three and nine months ended September 30, 1998, as compared with the same
periods in 1997, due to an increase in rental rates. An increase in water usage
and higher payroll costs partially offset the increase in revenue, netting an
increase in property net operating income of 4% for the three months and 7.5%
for the nine months ended September 30, 1998. At Versailles Village, strong
occupancy in the first and second quarters of 1998 and an increase in rates led
to higher rental revenue for the nine months ended September 30, 1998. A slight
decrease in occupancy offset the increase in rates resulting in flat rental
revenue at Versailles Village for the third quarter. Property operating expense
increased at Versailles Village for the three and nine months ended September
30, 1998, as compared with the same periods in 1997, due to an increase in
carpet, paint and cleaning expense. In addition, payroll costs (general and
administrative expense) were higher at Versailles Village due to a staffing
vacancy in 1997. As a result of net revenue and expense increases, property net
operating income decreased 3% for the three months and 1% for the nine months
ended September 30, 1998, as compared with the same periods in 1997 at
Versailles Village.
Fees and reimbursements to affiliates decreased because of a drop in the
property management fees (resulting from the sale of Stonebridge Manor), lower
partnership management fees as a result of less cash available for distribution
(resulting from the sale of Stonebridge Manor), and a savings in 1998 on
printing costs.
7
CONNECTICUT GENERAL REALTY INVESTORS III LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Occupancy
The following is a listing of approximate physical occupancy levels by
quarter for the Partnership's investment properties:
1997 1998
------------------------------------------------- ------------------------------
At 3/31 At 6/30 At 9/30 At 12/31 At 3/31 At 6/30 At 9/30
------- ------- ------- -------- ------- ------- -------
1. Versailles Village Apartments
Forest Park, Ohio 94% 96% 98% 94% 97% 100% 94%
2. Waterford Apartments
Tulsa, Oklahoma 94% 95% 96% 92% 94% 97% 94%
3. Stonebridge Manor Apartments
New Orleans, Louisiana (a) 97% 97% 96% N/A N/A N/A N/A
An N/A indicates that the property was not owned by the partnership at the end
of the quarter.
(a) Stonebridge Manor Apartments was sold October 23, 1997.
Part II- Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedules.
(b) No Form 8-Ks were filed during the three months ended
September 30,1998.
8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONNECTICUT GENERAL REALTY INVESTORS III
LIMITED PARTNERSHIP
By: CIGNA Realty Resources, Inc. - Fifth,
General Partner
Date: November 13, 1998 By: /s/ John D. Carey
------------------ --------------------------------------
John D. Carey, President
(Principal Executive Officer)
Date: November 13, 1998 By: /s/ Josephine C. Donofrio
----------------- --------------------------------------
Josephine C. Donofrio, Controller
(Principal Accounting Officer)
9