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, 1999
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,
1999 1998
Assets (Unaudited) (Audited)
Property and improvements, at cost:
Land and land improvements $ 786,516 $ 3,009,898
Buildings 5,212,143 16,661,970
Furniture and fixtures 915,005 1,462,984
-------------- --------------
6,913,664 21,134,852
Less accumulated depreciation 3,316,164 8,693,273
-------------- --------------
Net property and improvements 3,597,500 12,441,579
Cash and cash equivalents 373,017 739,751
Accounts receivable (net of allowance of $0
in 1999 and $8,956 in 1998) 1,387 7,185
Escrow deposits 40,257 143,422
Prepaid insurance 0 --
Other asset 0 1,000
Deferred charges, net 17,598 776,542
Escrowed debt service funds -- 506,660
-------------- --------------
Total $ 4,029,759 $ 14,616,139
============== ==============
Liabilities and Partners' Capital (Deficit)
Liabilities:
Notes and mortgages payable $ 3,835,364 $ 15,249,984
Accounts payable and accrued expenses (including $27,702
in 1999 and $18,906 in 1998 due to affiliates) 135,002 241,892
Tenant security deposits 42,914 82,092
Unearned income 3,175 26,611
-------------- --------------
Total liabilities 4,016,455 15,600,579
-------------- --------------
Partners' capital (deficit):
General Partner:
Capital contributions 1,000 1,000
Cumulative net income 34,696 27,513
Cumulative cash distributions (37,268) (33,751)
-------------- --------------
(1,572) (5,238)
-------------- --------------
Limited partners (24,856 Units)
Capital contributions, net of offering costs 22,408,052 22,408,052
Cumulative net loss (9,869,606) (14,950,756)
Cumulative cash distributions (12,523,570) (8,436,498)
-------------- --------------
14,876 (979,202)
-------------- --------------
Total partners' capital (deficit) 13,304 (984,440)
-------------- --------------
Total $ 4,029,759 $ 14,616,139
============== ==============
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
------------ ------------
1999 1998 1999 1998
---- ---- ---- ----
Income:
Rental income $ 313,267 $ 816,488 $ 1,516,816 $ 2,410,696
Other income 8,147 18,645 40,280 49,052
Interest income 4,227 15,172 42,360 50,908
-------------- ------------- -------------- -------------
325,641 850,305 1,599,456 2,510,656
-------------- ------------- -------------- -------------
Expenses:
Property operating expenses 119,190 263,255 481,180 718,646
General and administrative 45,442 115,156 272,221 357,676
Fees and reimbursements to affiliates 8,698 31,750 54,876 87,264
Interest expense 76,978 231,411 405,937 697,011
Depreciation and amortization 19,892 203,377 139,338 595,342
-------------- ------------- -------------- -------------
270,200 844,949 1,353,552 2,455,939
-------------- ------------- -------------- -------------
Income (loss) from operations 55,441 5,356 245,904 54,717
Gain on sale of property -- -- 4,842,430 --
------------- ------------- -------------- -------------
Net income $ 55,441 $ 5,356 $ 5,088,334 $ 54,717
============== ============= ============== =============
Net income:
General Partner $ 554 $ 53 $ 7,183 $ 547
Limited partners 54,887 5,303 5,081,151 54,170
-------------- ------------- -------------- -------------
$ 55,441 $ 5,356 $ 5,088,334 $ 54,717
============== ============= ============== =============
Net income per Unit $ 2.21 $ 0.21 $ 204.42 $ 2.18
============== ============= ============== =============
Cash distribution per Unit $ 5.04 $ 5.04 $ 164.43 $ 15.99
============== ============= ============== =============
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, 1999 and 1998
(Unaudited)
1999 1998
---- ----
Cash flows from operating activities:
Net income $ 5,088,334 $ 54,717
Adjustment to reconcile net income to net cash
provided by operating activities:
Gain on sale of property (4,842,430) --
Depreciation and amortization 139,338 595,342
Accounts receivable 5,798 2,827
Accounts payable and accrued expenses (106,890) ( 4,870)
Escrow deposits 103,165 ( 3,899)
Other, net (61,614) 15,017
--------------- ---------------
Net cash provided by operating activities 325,701 659,134
--------------- ---------------
Cash flows from investing activities:
Proceeds from sale of property 14,675,000 --
Payment of closing costs related to sale of property (286,215) --
Purchase of property and improvements (82,671) (124,023)
--------------- ---------------
Net cash provided by (used in) investing activities 14,306,114 (124,023)
--------------- ---------------
Cash flows from financing activities:
Proceeds from escrowed debt service funds 506,660 --
Distribution to limited partners (4,087,072) (397,448)
Distribution to General Partner (3,517) (4,014)
Repayment of notes and mortgage loans (11,414,620) (160,050)
--------------- ---------------
Net cash used in financing activities (14,998,549) (561,512)
--------------- ---------------
Net decrease in cash and cash equivalents (366,734) (26,401)
Cash and cash equivalents, beginning of year 739,751 682,614
--------------- ---------------
Cash and cash equivalents, end of period $ 373,017 $ 656,213
=============== ===============
Supplemental disclosure of cash information:
Interest paid during period $ 405,937 $ 697,011
=============== ===============
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, 1998 which are included in the
Partnership's 1998 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,
1999 1998
Surety fee - Waterford Apartments mortgage note $ -- $ 963,910
Costs of obtaining financing 143,660 660,522
--------------- ---------------
143,660 1,624,432
Accumulated amortization (126,062) (847,890)
--------------- ---------------
$ 17,598 $ 776,542
=============== ===============
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
------------ ------------ ------------
1999 1998 1999 1998 1999
---- ---- ---- ---- ----
Property management fees (a) $ -- $ 5,235 $ 5,732 $ 15,264 $ --
Partnership management fees -- 12,291 19,517 37,842 --
Reimbursement (at cost) for
out-of-pocket expenses 8,698 14,224 29,627 34,158 27,702
------------ ------------- ----------- ----------- -----------
$ 8,698 $ 31,750 $ 54,876 $ 87,264 $ 27,702
============ ============= =========== =========== ===========
5
(a) Does not include on-site property management fees earned by independent
property management companies of $16,029 and $36,150 for the three months
ended September 30, 1999 and 1998, respectively, and $68,219 and $106,853
for the nine months ended September 30, 1999 and 1998, 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. Sale of Property
On April 14, 1999, the Partnership completed the sale of its investment in
the Waterford Apartments for a gross sales price of $14,675,000. The purchaser
assumed the bond financing of $11,355,000 as part of the sale. The property had
a depreciated cost of $9,546,354 as of the date of sale. After deducting closing
costs, the Partnership recorded a gain of $4,842,430.
The Partnership has entered into an agreement to sell Versailles Village
Apartments for a gross sales price of $7,200,000. The closing is expected to be
November 15, 1999. The Partnership expects to record a gain of approximately
$3,300,000 based on an estimated depreciated cost of $3,625,000.
5. Subsequent Event
On November 15, 1999, the Partnership paid a distribution of $125,274 to
the limited partners.
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, 1999, the Partnership had $373,017 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, 1999, the Partnership generated $125,274 and $467,406
respectively, of adjusted cash from operations after debt service, capital
improvements, and adjustments to the Partnership's cash reserves. The
Partnership's second quarter 1999 distribution of $125,274 or $5.04 per Unit was
paid on August 13, 1999 and represented the Partnership's second quarter
adjusted cash from operations including an adjustment to cash reserves. The
Partnership plans to distribute cash quarterly to the extent cash is available
from operations after debt service, capital improvements, and changes to cash
reserves for liabilities and capital expenditures, until the sale of the
Partnership's remaining property.
On April 14, 1999, the Partnership completed the sale of its investment in
the Waterford Apartments to Case Ventures, Inc., an Oklahoma Corporation for a
gross sales price of $14,675,000. The purchaser assumed the bond financing of
$11,355,000 as part of the sale. After return of the debt escrows, including
accrued interest, and deducting closing costs, the Partnership netted
approximately $3,614,000. On May 17, 1999, the Partnership distributed the net
proceeds from the sale to limited partners. A gain was recorded for book
purposes of $4,842,430. The Partnership expects to record a gain for tax
purposes.
The Partnership has entered into an Agreement of Purchase and Sale with
Ronald Gottlieb to sell Versailles Village Apartments, the Partnership's sole
remaining investment property. The Agreement of Purchase and Sale states that
the closing will occur on or before November 15, 1999. After estimated closing
costs and payment of the outstanding debt obligation, the Partnership estimates
that it will net approximately $3,100,000 from the sale. The Partnership expects
to record a gain for book and tax purposes. Once the sale of Versailles Village
is complete, the Partnership will liquidate and dissolve. The final liquidating
distribution will include the proceeds from the sale of Versailles Village.
Results of Operations
Generally, decreases in the income statement accounts for 1999, as compared
with 1998, are the result of the sale of Waterford Apartments in April 1999. The
Partnership's sole remaining property, Versailles Village, had improved
operations for both the three and nine months ended September 30, 1999, as
compared with the same periods in 1998.
At Versailles Village, rental income increased $14,429 for the three months
and $28,038 for the nine months ended September 30, 1999, as compared with the
same periods in 1998, due to an increase in rates. Property operating expenses
increased $4,909 for the three months and decrease $1,002 for the nine months
ended September 30, 1999. Balcony and HVAC repairs resulted in an increase to
maintenance expense for the third quarter. Year to date savings in utility
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)
costs, insurance and cleaning more than offset an increase in property taxes
caused by a school levy. The Partnership classified Versailles Village as held
for sale as of August 1, 1999, subsequently, there has been no further
depreciation and amortization expense recorded. There were no significant
fluctuations in other income, general and administrative and interest expense
for Versailles Village for the three and nine months ended September 30, 1999 as
compared with the same periods in 1998.
Fees and reimbursements to affiliates decreased for the three and nine months
ended September 30,1999, as compared with the same periods in 1998, primarily
due to lower partnership management fees as a result of less cash available for
distribution resulting from the sale of Waterford Apartments in April 1999.
There was no depreciation and amortization expense for Waterford in 1999 as the
property was held for sale as of November 1998.
Occupancy
The following is a listing of approximate physical occupancy levels by
quarter for the Partnership's investment properties:
1998 1999
-------------------------------------------------------- ------------------------------
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 97% 100% 94% 94% 99% 96% 95%
2. Waterford Apartments
Tulsa, Oklahoma 94% 97% 94% 95% 90% N/A N/A
An N/A indicates that the property was not owned by the partnership at the end
of the quarter.
(a) Waterford Apartments was sold April 14, 1999.
Part II- Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10 (a) Agreement of Purchase and Sale for Versailles Village Apartments
dated September 10, 1999 between the Registrant and Ronald Gottlieb.
27 Financial Data Schedules.
(b) No form 8-K's were filed during the three months ended September 30,
1999
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 5, 1999 By: /s/ John D. Carey
----------------- ------------------------------------------
John D. Carey, President
(Principal Executive Officer)
Date: November 5, 1999 By: /s/ Randolph K. Rome
---------------- ------------------------------------------
Randolph K. Rome, Controller
(Principal Accounting Officer)
9