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 March 31, 1995
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: 0-11085
HUTTON/CONAM REALTY INVESTORS 2
(Exact name of registrant as specified in its charter)
California 13-3100545
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 World Financial Center, 29th Floor, New York, NY 10285
(Address of principal executive offices) (Zip Code)
(212) 526-3237
(Registrant's telephone number, including area code)
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
Consolidated Balance Sheets
March 31, December 31,
Assets 1995 1994
Investments in real estate:
Land $ 6,797,328 $ 6,797,328
Buildings and improvements 27,444,249 27,258,895
34,241,577 34,056,223
Less- accumulated depreciation (11,973,388) (11,699,378)
22,268,189 22,356,845
Cash and cash equivalents 914,405 1,183,787
Restricted cash 871,445 779,328
Other assets, net of accumulated amortization
of $107,339 in 1995 and $88,397 in 1994 433,222 452,164
Total Assets $ 24,487,261 $ 24,772,124
Liabilities and Partners' Capital
Liabilities:
Mortgages payable $ 14,166,668 $ 14,218,948
Accounts payable and accrued expenses 197,225 106,337
Due to general partners and affiliates 29,634 40,523
Security deposits 133,813 133,210
Distributions payable 200,000 244,445
Total Liabilities 14,727,340 14,743,463
Partners' Capital (Deficit):
General Partners (639,187) (618,500)
Limited Partners 10,399,108 10,647,161
Total Partners' Capital 9,759,921 10,028,661
Total Liabilities and Partners' Capital $ 24,487,261 $ 24,772,124
Consolidated Statement of Partners' Capital (Deficit)
For the three months ended March 31, 1995
General Limited
Partners Partners Total
Balance at January 1, 1995 $ (618,500) $ 10,647,161 $ 10,028,661
Net loss (687) (68,053) (68,740)
Distributions (20,000) (180,000) (200,000)
Balance at March 31, 1995 $ (639,187) $ 10,399,108 $ 9,759,921
Consolidated Statements of Operations
For the three months ended March 31, 1995 and 1994
Income 1995 1994
Rental $ 1,198,104 $ 1,170,235
Interest 14,692 9,367
Total Income 1,212,796 1,179,602
Expenses
Property operating 675,712 543,492
Depreciation and amortization 292,952 290,905
Interest 275,156 279,042
General and administrative 37,716 41,971
Total Expenses 1,281,536 1,155,410
Net Income (Loss) $ (68,740) $ 24,192
Net Income (Loss) Allocated:
To the General Partners $ (687) $ 2,419
To the Limited Partners (68,053) 21,773
$ (68,740) $ 24,192
Per Limited Partnership unit
(80,000 outstanding) $ (.85) $ .27
Consolidated Statements of Cash Flows
For the three months ended March 31, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net income (loss) $ (68,740) $ 24,192
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 292,952 290,905
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Fundings to restricted cash (102,417) (99,801)
Release of restricted cash 10,300 33,999
Other assets 0 1,418
Accounts payable and accrued expenses 90,888 86,792
Due to general partners and affiliates (10,889) (8,860)
Security deposits 603 (364)
Net cash provided by operating activities 212,697 328,281
Cash Flows from Investing Activities:
Additions to real estate (185,354) (2,092)
Net cash used for investing activities (185,354) (2,092)
Cash Flows from Financing Activities:
Distributions paid (244,445) 0
Mortgage principal payments (52,280) (48,393)
Mortgage fees 0 (29,458)
Net cash used for financing activities (296,725) (77,851)
Net increase (decrease) in cash and cash
equivalents (269,382) 248,338
Cash and cash equivalents at beginning of period 1,183,787 558,731
Cash and cash equivalents at end of period $ 914,405 $ 807,069
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 275,156 $ 279,042
Notes to the Consolidated Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1994 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of March 31, 1995 and the results of operations and cash flows for
the three months ended March 31, 1995 and 1994 and the statement of changes in
partners' capital (deficit) for the three months ended March 31, 1995. Results
of operations for the periods are not necessarily indicative of the results to
be expected for the full year.
No significant events have occurred subsequent to fiscal year 1994, and no
material contingencies exist, which require disclosure in this interim report
per Regulation S-X, Rule 10-01, Paragraph (a)(5).
Part 1, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At March 31, 1995, the Partnership had cash and cash equivalents of $914,405
which was invested in unaffiliated money market funds, compared with $1,183,787
at December 31, 1994. The decrease is primarily attributable to cash used for
distributions, mortgage payments and additions to real estate exceeding net
cash provided by operating activities. The Partnership also maintained a
restricted cash balance of $871,445 at March 31, 1995, compared with $779,328
at December 31, 1994. The restricted cash balance represents escrows for
insurance, real estate taxes, and property replacements and repairs, required
under the terms of the current mortgage loans. The General Partners expect
sufficient cash flow to be generated from operations to meet its current
operating expenses and debt service requirements.
Accounts payable and accrued expenses were $197,225 at March 31, 1995 compared
to $106,337 at December 31, 1994. The increase reflects the accrual of real
estate taxes for the first three months of 1995.
Cash distributions to the limited partners were suspended from the first
quarter of 1992 through the second quarter of 1994 in consideration of the
costs related to the refinancing of the Partnership's four mortgage loans.
Although the loans were refinanced in October 1993, cash outlays associated
with the refinancing substantially depleted the Partnership's cash reserve, and
cash distributions remained suspended until the third quarter of 1994, at which
time the General Partners determined that the cash reserve had increased to a
level considered adequate to meet anticipated funding needs. Accordingly,
quarterly cash distributions to investors were reinstated commencing with the
third quarter 1994 distribution in the amount of $2.75 per Unit. The
Partnership's 1995 first quarter cash distribution, in the amount of $2.25 per
Unit, was credited to your brokerage account or sent directly to you on May 16,
1995. Cumulative cash distributions have totaled $301.44 per $500 Unit
including $200 per Unit in return of capital payments. The 50 cent reduction
in the quarterly distribution level is due to a projected decline of
approximately 15% in the Partnership's 1995 cash flow versus 1994. The decline
is primarily the result of greater capital expenditures, and to a lesser extent
the anticipated sale of Country Place Village I. The level and timing of
future distributions will be evaluated on a quarterly basis.
As discussed in the Partnership's 1994 annual report on Form 10-K, the General
Partners have been marketing Country Place Village I and expect to enter into a
sales contract in the very near future. Should the sale close, investors would
receive a return of capital from net sale proceeds. The majority of the
increase in capital expenditures is attributable to Creekside Oaks. Pursuant
to the refinancing of the Creekside Oaks loan, the lender escrowed funds for
various repairs including roofing work and exterior painting. Upon completion
of all work, which is expected to occur sometime in the second or third
quarter, the balance of the repair escrow ($395,338) will be refunded to the
Partnership.
Results of Operations
Partnership operations for the quarter ended March 31, 1995 resulted in a net
loss of $68,740, compared with net income of $24,192 in 1994. After adding
back depreciation and amortization, both non-cash expenses, and subtracting
mortgage amortization, operations generated cash flow of $171,932 for the
quarter ended March 31, 1995, compared with cash flow of $266,704 for the same
period in 1994. The decrease in cash flow and change from net income to net
loss in 1995 is primarily the result of increased property operating expenses.
Rental income totaled $1,198,104 for the quarter ended March 31, 1995 compared
with $1,170,235 for the same period in 1994. The 2% increase in 1995 reflects
higher rental income at four of the properties, primarily due to rental rate
increases instituted over the past year, partially offset by lower occupancy
rates.
Property operating expenses totaled $675,712 for the quarter ended March 31,
1995, compared with $543,492 for the same period in 1994. The increase
primarily reflects higher repair and maintenance expenses at Creekside Oaks and
Rancho Antigua due to exterior painting work. Interest expense totaled
$275,156 for the quarter ended March 31, 1995, compared with $279,042 for the
quarter ended March 31, 1994. The decrease is due to the amortization of the
loan balance.
For the three months ended March 31, 1995 and 1994, average
occupancy levels at each of the properties were as follows:
Three Months Ended
March 31,
Property 1995 1994
Country Place Village I 98% 99%
Creekside Oaks 90% 97%
Ponte Vedra Beach Village I 97% 96%
Rancho Antigua 95% 97%
Village at the Foothills I 95% 97%
PART II OTHER INFORMATION
Items 1-5 Not applicable
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the three month period covered by this report.
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.
HUTTON/CONAM REALTY INVESTORS 2
BY: RI2 REAL ESTATE SERVICES INC.
General Partner
Date: May 12, 1995
BY: /s/ Paul L. Abbott
Name: Paul L. Abbott
Title: Director, President, Chief
Executive Officer and
Chief Financial Officer