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, 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: 0-10223
HUTTON/CONAM REALTY INVESTORS 81
(Exact name of registrant as specified in its charter)
California 13-3069026
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 World Financial Center, 29th Floor, New York, NY
Attention: Andre Anderson 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
September 30, December 31,
Assets 1995 1994
Investments in real estate:
Land $ 3,944,195 $ 5,255,820
Buildings and improvements 21,299,382 28,473,477
25,243,577 33,729,297
Less accumulated depreciation (11,157,301) (13,875,550)
14,086,276 19,853,747
Cash and cash equivalents 1,445,577 1,535,391
Restricted cash 572,290 659,076
Mortgage fees, net of accumulated amortization
of $193,451 in 1995 and $202,797 in 1994 246,221 408,014
Other assets 34,301 41,055
Total Assets $ 16,384,665 $ 22,497,283
Liabilities and Partners' Capital
Liabilities:
Mortgages payable $ 11,983,626 $ 15,601,031
Distribution payable 173,978 173,978
Accounts payable and accrued expenses 288,094 183,869
Security deposits 74,609 141,408
Due to general partners and affiliates 42,578 44,814
Total Liabilities 12,562,885 16,145,100
Partners' Capital (Deficit):
General Partners (1,344,898) (1,316,915)
Limited Partners 5,166,678 7,669,098
Total Partners' Capital 3,821,780 6,352,183
Total Liabilities and Partners' Capital $ 16,384,665 $ 22,497,283
Consolidated Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1995
General Limited
Partners Partners Total
Balance at January 1, 1995 $ (1,316,915) $ 7,669,098 $ 6,352,183
Net income 25,120 1,188,951 1,214,071
Cash distributions (53,103) (3,691,371) (3,744,474)
Balance at September 30, 1995 $ (1,344,898) $ 5,166,678 $ 3,821,780
Consolidated Statements of Operations
Three months ended Nine months ended
September 30, September 30,
Income 1995 1994 1995 1994
Rental $ 964,533 $ 1,171,769 $ 3,397,025 $ 3,494,492
Interest 34,460 17,406 82,773 39,587
Total Income 998,993 1,189,175 3,479,798 3,534,079
Expenses
Property operating 549,483 595,624 1,797,212 1,670,982
Interest 399,699 331,540 1,059,073 996,748
Depreciation and
amortization 347,098 306,796 960,199 920,387
General and administrative 74,233 36,857 156,436 118,257
Total Expenses 1,370,513 1,270,817 3,972,920 3,706,374
Loss from operations (371,520) (81,642) (493,122) (172,295)
Gain on sale of properties 1,707,193 0 1,707,193 0
Net Income (Loss) $ 1,335,673 $ (81,642) $ 1,214,071 $ (172,295)
Net Income (Loss) Allocated:
To the General Partners $ 26,336 $ (816) $ 25,120 $ (1,723)
To the Limited Partners 1,309,337 (80,826) 1,188,951 (170,572)
$ 1,335,673 $ (81,642) $ 1,214,071 $ (172,295)
Per limited partnership unit
(78,290 outstanding) $ 16.73 $ (1.03) $ 15.19 $ (2.18)
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net income (loss) $ 1,214,071 $ (172,295)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 960,199 920,387
Gain on sale of properties (1,707,193) 0
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Fundings to restricted cash (458,007) (428,941)
Release of restricted cash to
property operations 544,793 176,571
Other assets 6,754 37,446
Accounts payable and accrued expenses 104,225 126,823
Security deposits (66,799) 696
Due to general partners and affiliates (2,236) (6,429)
Net cash provided by operating activities 595,807 654,258
Cash Flows From Investing Activities:
Net proceeds from sale of properties 6,676,258 0
Net cash provided by investing activities 6,676,258 0
Cash Flows from Financing Activities:
Distributions (3,744,474) (521,933)
Mortgage principal payments (3,617,405) (100,446)
Net cash used for financing activities (7,361,879) (622,379)
Net increase (decrease) in cash and
cash equivalents (89,814) 31,879
Cash and cash equivalents at beginning
of period 1,535,391 1,418,054
Cash and cash equivalents at end of period $ 1,445,577 $ 1,449,933
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 1,059,073 $ 996,748
Notes to the Consolidated Financial Statements
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's annual 1994 consolidated financial
statements within Form 10-K.
The unaudited consolidated financial statements include all adjustments which
are, in the opinion of management, necessary to present a fair statement of
financial position as of September 30, 1995 and the results of operations and
cash flows for the nine months ended September 30, 1995 and 1994 and the
statement of changes in partners' capital (deficit) for the nine months ended
September 30, 1995. Results of operations for the periods are not necessarily
indicative of the results to be expected for the full year.
The following significant events have occurred subsequent to fiscal year 1994,
which require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5):
Sale of Properties
On July 20, 1995, Hutton/ConAm Realty Investors 81 (the "Partnership") closed
on the sale of Kingston Village and Cedar Bay Village (the "Properties").
Kingston Village and Cedar Bay Village sold for $5,370,000 and $1,410,000,
respectively, to an institutional buyer (the "Buyer"), which is unaffiliated
with the Partnership. The selling price was determined by arm's length
negotiations between the Partnership and the Buyer. The Partnership received
net proceeds of $6,676,258 from the transaction of which $3,662,325,
representing outstanding principal, interest, and pre-payment penalties, was
used to fully satisfy the Partnerships mortgage obligations on the Properties.
The transaction resulted in a gain on sale of $1,707,193.
On August 17, 1995, the General Partners paid a special distribution of
$3,170,745 to limited partners. The special distribution was comprised of the
net proceeds from the sale of the Properties and $156,812 from the
Partnership's cash reserves.
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
At September 30, 1995, the Partnership had cash and cash equivalents of
$1,445,577, which were invested in unaffiliated money market funds. The
Partnership also maintains a restricted cash balance, which totaled $572,290 at
September 30, 1995, composed of escrows required by the lender for property
improvements, real estate taxes, and insurance. Pursuant to the terms of the
loans, as costs are incurred for property improvements or when real estate
taxes and insurance are due, reimbursements are made from the escrow accounts
maintained by the lender to the Partnership. The General Partners expect
sufficient cash to be generated from operations to meet the Partnership's
current operating expenses and debt service requirements.
The sale of Kingston Village and Cedar Bay Village was completed on July 20,
1995. Kingston Village and Cedar Bay Village sold for $5,370,000 and
$1,410,000, respectively, to an institutional buyer, which is unaffiliated with
the Partnership. The Partnership received net proceeds of $6,676,258 from the
transaction of which $3,662,325, representing outstanding principal, interest,
and pre-payment penalties, was used to fully satisfy the Partnership's mortgage
obligations on the Properties.
On August 17, 1995, the Partnership paid a special cash distribution of
$3,170,745 or $40.50 per Unit to the limited partners. The special
distribution was comprised of the net proceeds from the sale of the Properties
and $156,812 from the Partnership's cash reserves.
The Partnership's 1995 third quarter distribution, in the amount of $2.00 per
Unit, will be paid on or about November 15, 1995. Cash distributions will be
determined on a quarterly basis and will be based on cash flow generated by the
Partnership.
Results of Operations
Partnership operations for the three and nine months ended September 30, 1995
resulted in net income of $1,335,673 and $1,214,071, respectively, compared
with net losses of $81,642 and $172,295 for the three and nine months ended
September 30, 1994. The change from net loss in 1994 to net income in 1995
reflects the $1.7 million gain on sale of Cedar Bay Village and Kingston
Village. Excluding the gain recognized on the sale of the properties, the
Partnership recognized higher losses from operations in 1995 compared to 1994,
primarily as a result of lower rental income and in the nine-month period and
increased property operating expense. After adding back depreciation and
amortization, both noncash expenses, and subtracting mortgage amortization and
the gain on sale of Cedar Bay Village and Kingston Village, operations
generated cash flow of $(53,247) and $366,163, respectively, for the three and
nine months ended September 30, 1995, compared with cash flow of $190,963 and
$647,646 for the corresponding periods in 1994. The lower cash flow from
operations reflects reduced rental income, higher property operating expenses
and an approximately $120,000 pre-payment penalty associated with the repayment
of the mortgages on Cedar Bay Village and Kingston Village.
Rental income for the three and nine months ended September 30, 1995, was
$964,533 and $3,397,025, respectively, compared with $1,171,769 and $3,494,492
for the corresponding periods in 1994. The decreases in 1995 reflect the sales
of Cedar Bay Village and Kingston Village and lower occupancy rates at the
three remaining properties, partially offset by increased rental rates at the
remaining properties. Interest income totaled $34,460 and $82,773,
respectively, for the three and nine months ended September 30, 1995 compared
with $17,406 and $39,587 for the corresponding periods in 1994. The increases
are due to the Partnership's higher cash balance and higher interest rates in
1995.
Total expenses for the three and nine months ended September 30, 1995 were
$1,370,513 and $3,972,920, respectively, compared with $1,270,817 and
$3,706,374 for the corresponding periods in 1994. Property operating expenses
were $549,483 and $1,797,212, respectively, for the three and nine months ended
September 30, 1995, compared with $595,624 and $1,670,982 for the corresponding
periods in 1994. The decrease for the three-month period reflects the sale of
two of the properties in the portfolio. The increase for the nine-month period
reflects higher repair and maintenance expenses at Las Colinas and Tierra
Catalina, due to exterior painting, landscaping and interior maintenance on
vacated units.
Interest expense for the three and nine months ended September 30, 1995 was
$399,699 and $1,059,073, respectively, compared with $331,540 and $996,748 for
the corresponding periods in 1994. The increases in 1995 primarily reflect the
pre-payment penalties paid on Cedar Bay Village and Kingston Village's mortgage
obligations when the properties were sold in July. General and administrative
expenses for the three and nine months ended September 30, 1995 were $74,233
and $156,436, respectively, compared with $36,857 and $118,257 for the
corresponding periods in 1994. The increases primarily reflect legal expenses
due to work related to the tender offer of the limited partnership shares in
the third quarter of 1995. (See Part II, Item 1, "Legal Proceedings").
For the three and nine month periods ended September 30, 1995 and 1994, average
occupancy levels at each of the properties were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
Property 1995 1994 1995 1994
Las Colinas 92% 93% 93% 95%
Ridge Park 97% 98% 96% 97%
Tierra Catalina 91% 97% 92% 96%
PART II OTHER INFORMATION
Item 1 Legal Proceedings
An offer dated August 3, 1995, was sent by Everest Investors, LLC and
W. Robert Kohorst (collectively, "Everest") to limited partners of the
Partnership to purchase up to 4.9% of their limited partnership
interests for $70 per unit less any distributions paid prior to the
expiration of the offer on September 8, 1995.
On August 16, 1995, the General Partners of the Partnership sent a
letter to limited partners recommending against the offer because the
price was inadequate especially in view of the Net Asset Value of the
units and the capital return that was to be made from the July 20, 1995
sale of the Properties.
On August 29, 1995, the Partnership filed a complaint with the United
States District Court, Central District of California (the "Court")
that Everest's solicitation letter constituted a tender offer which
violated Section 14(e) of the Securities Exchange Act of 1934, which
prohibits false or misleading statements of material fact in connection
with any tender offer.
Additionally, the Partnership requested a Temporary Restraining Order
against Everest until Everest issues a disclosure that complies with
Section 14(e) of the Securities Exchange Act of 1934 and offers
rescission to any limited partners that have tendered their limited
partnership interests.
On August 31, 1995 the Court dismissed the Partnership's request for a
Temporary Restraining Order.
Items 2-5 Not applicable.
Item 6 Exhibits and Reports on Form 8-K.
(a) Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K
On August 4, 1995, a Current Report on Form 8-K was filed reporting the
consummation of the sale of Kingston Village and Cedar Bay Village for
$5,370,000 and $1,410,000, respectively. Such information was provided
in response to Item 2 of Form 8-K.
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 81
BY: RI81 REAL ESTATE SERVICES INC.
General Partner
Date: November 14, 1995
BY: /s/ Paul L. Abbott
Name: Paul L. Abbott
Title: Director, President, Chief
Executive Officer and Chief
Financial Officer