UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: November 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: 0-014341
HUTTON/CONAM REALTY INVESTORS 5
Exact name of Registrant as specified in its charter
California 11-2712111
State or other jurisdiction of incorporation I.R.S. Employer Identification No.
Attention: Andre Anderson
3 World Financial Center, 29th Floor, New York, New York 10285
Address of principal executive offices zip code
Registrant's telephone number, including area code: (212) 526-3237
Securities registered pursuant to Section 12(b) of the Act: None
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 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)
Documents Incorporated by Reference:
Portions of Prospectus of Registrant dated March 27, 1985 (included in
Amendment No. 1 to Registration Statement No. 2-95481 of Registrant, filed
March 27, 1985) are incorporated herein by reference into Part III of this
report.
Portions of Parts I, II, III and IV are incorporated by reference to the
Partnership's Annual Report to Unitholders for the fiscal year ended November
30, 1995.
PART I
Item 1. Business
(a) General Development of Business
Hutton/ConAm Realty Investors 5 (the "Registrant") was organized as a limited
partnership under the laws of the State of California pursuant to a Certificate
and Agreement of Limited Partnership dated June 28, 1984 and filed June 29,
1984, as last amended and restated on August 20, 1985. RI 5 Real Estate
Services, Inc., a Delaware corporation ("RI 5 Services," formerly Hutton Real
Estate Services IX, Inc.), and ConAm Property Services IV, Ltd., a California
limited partnership ("ConAm Services"), are the general partners (together, the
"General Partners") of the Registrant.
Commencing March 27, 1985, the Registrant began offering through E.F. Hutton &
Company Inc., an affiliate of the Registrant, up to a maximum of 120,000 units
of limited partnership interest (the "Units") at $500 per Unit. Investors who
purchased the Units (the "Limited Partners") are not required to make any
additional capital contributions. The Units were registered under the
Securities Act of 1933, as amended, under Registration Statement No. 2-95481,
which Registration Statement was declared effective on March 27, 1985. The
offering of Units terminated on January 23, 1986. Upon termination of the
offering, the Registrant had accepted subscriptions for 57,490 Units for an
aggregate of $28,745,000.
(b) Narrative Description of Business
The Registrant is engaged in the business of acquiring, operating and holding
for investment multifamily residential properties which by virtue of their
location and design and the nature of the local real estate market have the
potential for long-term capital appreciation and generation of current income.
All of the proceeds available for investment in real estate were invested in
one residential apartment property and two joint ventures, each of which owns a
specified property. Funds held as a working capital reserve are invested in
bank certificates of deposit, unaffiliated money market funds or other highly
liquid short-term investments where there is appropriate safety of principal in
accordance with the Registrant's investment objectives and policies.
The Registrant's principal investment objectives with respect to its interests
in real property are:
(1) capital appreciation;
(2) distributions of net cash from operations attributable to rental income;
and
(3) preservation and protection of capital.
Distributions of net cash from operations will be the Registrant's objective
during its operational phase, while preservation and appreciation of capital
continues to be the Registrant's longer-term objectives. The attainment of the
Registrant's investment objectives will depend on many factors, including
future economic conditions in the United States as a whole and, in particular,
in the localities in which the Registrant's properties are located, especially
with regard to achievement of capital appreciation.
From time to time the Registrant expects to sell its real property investments
taking into consideration such factors as the amount of appreciation in value,
if any, to be realized and the possible risks of continued ownership. In
consideration of these factors and improving market conditions, the General
Partners will begin marketing Canterbury Park Apartments in Raleigh, North
Carolina for sale over the next several months. There is no assurance that a
sale will be completed or that any particular price for the property can be
obtained. No property will be sold, financed or refinanced by the Registrant
without the agreement of both General Partners. Proceeds from the sale,
financing or refinancing of properties will not be reinvested and may be
distributed to the Limited Partners and General Partners (sometimes referred to
together herein as the "Partners"), so that the Registrant will, in effect, be
self-liquidating. If deemed necessary, the Registrant may retain a portion of
t he proceeds from any sale, financing or refinancing as capital reserves. As
partial payment for properties sold, the Registrant may receive purchase money
obligations secured by mortgages or deeds of trust. In such cases, the amount
of such obligations will not be included in Net Proceeds From Sale or
Refinancing (distributable to the Partners) until and only to the extent the
obligations are realized in cash, sold or otherwise liquidated.
Since inception, the Registrant has acquired three residential apartment
complexes (collectively, the "Properties") either directly or through
investments in joint ventures. As of November 30, 1995, the Registrant has
interests in the Properties as follows: (1) Lakeview Village at Ponte Vedra
Lakes, a 240-unit apartment complex, located in Ponte Vedra Beach, Florida; (2)
Canterbury Park Apartments, a 96-unit apartment complex, located in Raleigh,
North Carolina; and (3) The Hamptons at Quail Hollow, a 232-unit apartment
complex, located in Charlotte, North Carolina. For further information on each
of the Properties, see Item 2 of this report and Note 4 to the Consolidated
Financial Statements incorporated herein by reference to the Partnership's
Annual Report to Unitholders for the fiscal year ended November 30, 1995 which
is filed as an exhibit under Item 14.
Competition
The Registrant's real property investments are subject to competition from
similar types of properties in the vicinities in which they are located and
such competition has increased since the Registrant's investment in the
Properties due principally to the addition of newly constructed apartment
complexes offering increased residential and recreational amenities. The
investment properties have also been subject to competition from condominiums
and single-family properties especially during periods of low mortgage interest
rates. The Registrant competes with other real estate owners and developers in
the rental and leasing of its Properties by offering competitive rental rates
and, if necessary, leasing incentives. Such competition may have an effect on
the occupancy levels and revenues of the Properties. The occupancy levels at
the property in Florida reflect some seasonality, which is typical in the
market. In some cases, the Registrant may compete with other properties owned
by partnerships affiliated with either General Partner of the Registrant.
For information with respect to market conditions in each of the areas where
the Partnership's Properties are located, please refer to Item 2 below.
Employees
The Registrant has no employees. Services are provided by RI 5 Services, ConAm
Services, ConAm Management Corporation ("ConAm Management"), an affiliate of
ConAm Services, as well as Service Data Corporation and First Data Investor
Services Group, both unaffiliated companies. The Registrant has entered into
management agreements with ConAm Management pursuant to which ConAm Management
provides property management services with respect to the Properties. First
Data Investor Services Group has been retained by the Registrant to provide all
accounting and investor communication functions, while Service Data Corporation
provides transfer agent services. See Item 13 of this report for a further
description of the service and management agreements between the Registrant and
affiliated entities.
Item 2. Properties
Below is a description of the Registrant's Properties and a discussion of
current market conditions in each of the areas where the Properties are
located. For information on the purchase of the Properties, reference is made
to Note 4 to the Consolidated Financial Statements in the Partnership's Annual
Report to Unitholders for the fiscal year ended November 30, 1995, which is
filed as an exhibit under Item 14. Appraised values of the Partnership's real
estate investments are incorporated by reference to the Partnership's Annual
Report to Unitholders. Average occupancy rates at each property are
incorporated by reference to Item 7.
Canterbury Park - Raleigh, North Carolina
This 96-unit apartment community is located in a residential section northwest
of Raleigh's central business district. Conditions in the Raleigh apartment
market remain strong, characterized by low vacancy rates and increasing rental
rates. As of the third quarter of 1995, occupancy in Wake county, where
Canterbury Park is located, stood at approximately 97%, with rental rates
increasing approximately 7% over the past year. Occupancy in Canterbury Park's
submarket was approximately 95% as of September 1995 with rental rates
increasing approximately 6% from the year earlier. The strong market
conditions have spurred new construction and, as of September 1995, eight new
projects were under construction containing a total of 1,852 units. Given the
area's strong economy and healthy absorption, it is not expected that the new
construction will have a materially adverse impact on the apartment market.
Given favorable market conditions, particularly in the Raleigh, North Carolina
area, the General Partners will begin marketing Canterbury Park for sale over
the next several months. There can be no assurances that a sale will be
completed or that any particular price for the property can be obtained.
The Hamptons at Quail Hollow - Charlotte, North Carolina
The Hamptons is a 232-unit apartment community located in the southeast portion
of Charlotte, North Carolina. Conditions in the Charlotte apartment market
continue to be strong as occupancy rates remain high and average rental rates
continue to increase. As of the third quarter of 1995, average occupancy in
the Charlotte apartment market was approximately 97%. In the Southeast
submarket, where The Hamptons is located, occupancy was also approximately 97%.
Given the strong market conditions, several apartment projects are in the
planning or construction phase. The Southeast submarket has approximately
1,526 new apartment units under construction with an additional 1,744 new units
proposed. These new units could have an adverse impact on the market's
occupancy in the short term; however, it is expected that Charlotte's healthy
rate of absorption will be able to accommodate the new construction over the
long run.
Lakeview Village - Ponte Vedra Beach, Florida Lakeview Village is 240-unit
complex located in Ponte Vedra Beach, an ocean-front community situated in
southeast Jacksonville, Florida. The Ponte Vedra Beach area has experienced
notable population growth and limited new construction in recent years,
resulting in strong occupancy for area apartment complexes. A local survey of
the Ponte Vedra Beach area reported an average apartment occupancy rate of 95%
in the fourth quarter of fiscal 1995. The use of rental concessions in the
market is virtually non-existent. Given the strong market conditions, several
apartment projects are in the planning or construction phase. In July 1995,
construction of phase one of a new development containing 240 units was
completed. Phase two of this project, which will contain an additional 178
units, is expected to be completed by the end of 1996. A separate project
containing 252 units is to be built in the Ponte Vedra area and a project with
an additional 200 to 300 units is awaiting permits to be gin construction. All
this construction is expected to intensify competition in the Ponte Vedra area
market.
Item 3. Legal Proceedings
The Registrant is not subject to any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the fiscal year ended November 30, 1995, no matter
was submitted to a vote of Unitholders through the solicitation of proxies or
otherwise.
PART II
Item 5. Market for the Partnership's Limited Partnership Interests and Related
Security Holder Matters
As of November 30, 1995, the number of Unitholders of record was 2,716.
No established public trading market exists for the Units, and it is not
anticipated that such a market will develop in the future.
Distributions of Net Cash From Operations are determined by the General
Partners on a quarterly basis, with distributions generally occurring
approximately 45 days after the end of each quarter. Distributions to the
Limited Partners are made from net operating income with respect to the
Registrant's investment in the Properties and from interest on short-term
investments. Information on cash distributions paid by the Partnership for the
past two fiscal years is incorporated by reference to the Partnership's Annual
Report to Unitholders for the fiscal year ended November 30, 1995, which is
filed as an exhibit under Item 14. Reference is made to Item 7 for a
discussion of the General Partners' expectations for future cash distributions.
Item 6. Selected Financial Data
Incorporated by reference to the Partnership's Annual Report to Unitholders for
the year ended November 30, 1995, which is filed as an exhibit under Item 14.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
At November 30, 1995, the Partnership had cash and cash equivalents of
$2,253,221, which were invested in unaffiliated money market funds, relatively
unchanged from $2,219,395 at November 30, 1994. The Partnership also
maintained a restricted cash balance of $219,436 at November 30, 1995 compared
with $223,328 at November 30, 1994. Restricted cash represents escrows for
insurance premiums and real estate taxes, required under the terms of the
mortgage loan for the Lakeview Village property. The Partnership expects
sufficient cash to be generated from operations to meet its current operating
expenses.
On October 28, 1993, the Partnership obtained replacement financing on its
Lakeview Village property from The Penn Mutual Life Insurance Company, an
unaffiliated party. Total proceeds of $6,600,000 were received and are
collateralized by a Mortgage and Security Agreement and an Assignment of Rents
and Leases Agreement encumbering the property. The loan is for a term of seven
years and bears interest at an annual rate of 7.75% requiring monthly
installments of principal and interest based on a 25-year amortization
schedule. The proceeds of this financing along with Partnership cash reserves
were used to repay the outstanding amounts due Aetna Life Insurance Company on
the Partnership's prior mortgage which totaled $6,711,610. Partnership cash
reserves were also used to pay refinancing expenses of $184,825 and fund
escrows of $355,664. Escrowed funds for real estate taxes and insurance are
required under the terms of the loan and are included in the restricted cash
balance of $219,4 36 and $223,328 at November 30, 1995 and 1994, respectively.
Following the completion of the refinancing in October 1993, the General
Partners reassessed the adequacy of the Partnership's cash reserve and cash
flow from operations and reinstated cash distributions beginning with the
fourth quarter of fiscal 1993. A distribution in the amount of $25.00 per unit
was paid on January 14, 1994, and quarterly distributions of $6.50 per Unit
were paid for each of the four quarters of fiscal 1994. Distributions were
raised to $7.50 in the first quarter of 1995, and remained at this level for
each of the four quarters of fiscal 1995. The level of future distributions
will be evaluated on a quarterly basis and will depend on the Partnership's
operating results and future cash needs.
During the remainder of 1996, the General Partners intend to implement an
extensive improvement program at Lakeview Village and The Hamptons at Quail
Hollow, to upgrade the properties. This program, which includes roof repairs
at Lakeview Village and exterior painting and asphalt repairs at The Hamptons,
is intended to maintain the properties' position within their respective
markets, which are growing increasingly competitive with the addition of new
apartment properties. It is also hoped that these improvements will allow for
greater increases in rental rates, thereby improving the property's revenue and
value, and making it better positioned for eventual sale. It is anticipated
that cash from reserves may be required to fund a portion of the distributions
during 1996 as a result of capital expenditures required at two of the
Partnership's properties.
Given favorable market conditions, particularly in the Raleigh, North Carolina
area, the General Partners will begin marketing Canterbury Park for sale over
the next several months. There can be no assurances that a sale will be
completed or that any particular price for the property can be obtained.
Results of Operations
1995 versus 1994
Partnership operations for the fiscal year ended November 30, 1995 generated
net income of $759,410, compared with net income of $622,853 in fiscal 1994.
Net cash provided by operating activities was $1,902,751 for the fiscal year
ended November 30, 1995 compared to $1,798,897 in fiscal 1994. The increase in
net income and cash flow is primarily attributable to higher rental income.
Rental income totaled $4,471,922 for the fiscal year ended November 30, 1995
compared with $4,268,124 in fiscal 1994. The increase reflects higher rental
income at all three properties, and is primarily attributable to increases in
rental rates at each property during the past year. Interest income totaled
$111,447 for the fiscal year ended November 30, 1995 compared to $68,380 in
fiscal 1994. The increase is the result of the Partnership earning higher
interest rates on its invested cash in 1995 compared to 1994.
Property operating expenses totaled $2,061,086 for the fiscal year ended
November 30, 1995 compared with $1,919,655 in fiscal 1994. The increase is
primarily due to higher repairs and maintenance expenses at The Hamptons and
Lakeview Village. These expenses included exterior painting and roof repairs
at The Hamptons and carpet replacement and floor tiling at Lakeview Village.
1994 versus 1993
Partnership operations for the fiscal year ended November 30, 1994 generated
net income of $622,853, compared with net income of $382,428 in fiscal 1993.
Net cash provided by operating activities was $1,798,897 for the fiscal year
ended November 30, 1994 compared to $1,315,963 in fiscal 1993. The increase in
net income and cash flow is primarily attributable to higher rental income and
a decrease in interest expense due to the Lakeview Village refinancing.
Rental income totaled $4,268,124 for the fiscal year ended November 30, 1994
compared with $4,135,984 in fiscal 1993. The increase reflects higher rental
income at Canterbury Park and The Hamptons at Quail Hollow, and is primarily
attributable to increases in rental rates at each property.
Property operating expenses totaled $1,919,655 for the fiscal year ended
November 30, 1994 compared with $1,900,650 in fiscal 1993. The increase is
primarily due to higher rental administrative expenses (salary, utility, and
insurance expenses) at Canterbury Park. Interest expense totaled $507,772 for
the fiscal year ended November 30, 1994 compared with $646,407 in fiscal 1993.
The decrease is due to the replacement financing on the Lakeview Village
property obtained in October 1993 at a lower rate of interest. General and
administrative expenses totaled $125,710 for the fiscal year ended November 30,
1994 compared with $140,826 in fiscal 1993. The decrease is primarily due to a
reduction in legal and administrative costs incurred in fiscal 1994.
The average occupancy levels at each of the properties for the years ended
November 30, 1995, 1994 and 1993 were as follows:
Twelve Months Ended November 30,
Property 1995 1994 1993
Canterbury Park 97% 97% 98%
The Hamptons at Quail Hollow 96% 97% 96%
Lakeview Village 95% 93% 96%
Item 8. Financial Statements and Supplementary Data
Incorporated by reference to the Partnership's Annual Report to Unitholders for
the fiscal year ended November 30, 1995, which is filed as an exhibit under
Item 14. Supplementary Data is incorporated by reference to pages F-1 to F-4
of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Registrant has no officers or directors. RI 5 Services and ConAm Services,
the co-General Partners of the Registrant, jointly manage and control the
affairs of the Registrant and have general responsibility and authority in all
matters affecting its business.
RI 5 Services
RI 5 Services (formerly Hutton Real Estate Services IX, Inc.) is a Delaware
corporation formed on December 23, 1982, as a wholly-owned subsidiary of LB I
Group Inc. (formerly the E.F. Hutton Group Inc. , the "Hutton Group"). LB I
Group Inc. is now a wholly-owned subsidiary of Lehman Brothers Inc. ("Lehman").
See the section captioned "Certain Matters Involving Affiliates of RI 5
Services" below for a description of the Hutton Group's acquisition by Shearson
Lehman Brothers, Inc. ("Shearson") and the subsequent sale of certain of
Shearson's domestic retail brokerage and asset management businesses to Smith
Barney, Harris Upham & Co. Incorporated ("Smith Barney"), which resulted in a
change in the General Partner's name.
Certain officers and directors of RI 5 Services are now serving (or in the past
have served) as officers or directors of entities which act as general partners
of a number of real estate limited partnerships which have sought protection
under the provisions of the Federal Bankruptcy Code. The partnerships which
have filed bankruptcy petitions own real estate which has been adversely
affected by the economic conditions in the markets in which the real estate is
located and, consequently, the partnerships sought the protection of the
bankruptcy laws to protect the partnerships' assets from loss through
foreclosure. The names and positions held by the directors and executive
officers of RI5 Services are set forth below. There are no family
relationships between any officers or directors.
Name Office
Paul L. Abbott Director, President, Chief Financial
Officer and Chief Executive Officer
Donald E. Petrow Vice President
Kate Hobson Vice President
Paul L. Abbott, 50, is a Managing Director of Lehman. Mr. Abbott joined Lehman
in August 1988, and is responsible for investment management of residential,
commercial and retail real estate. Prior to joining Lehman, Mr. Abbott was a
real estate consultant and a senior officer of a privately held company
specializing in the syndication of private real estate limited partnerships.
From 1974 through 1983, Mr. Abbott was an officer of two life insurance
companies and a director of an insurance agency subsidiary. Mr. Abbott
received his formal education in the undergraduate and graduate schools of
Washington University in St. Louis.
Donald E. Petrow, 39, is a First Vice President of Lehman Brothers Inc. Since
March 1989, he has been responsible for the investment management and
restructuring of various investment portfolios, including but not limited to,
federal insured mortgages, tax exempt bonds, multifamily and commercial real
estate. From November 1981 to February 1989, Mr. Petrow, as Vice President of
Lehman, was involved in investment banking activities relating to partnership
finance and acquisitions. Prior to joining Lehman, Mr. Petrow was employed in
accounting and equipment leasing firms. Mr. Petrow holds a B.S. Degree in
accounting from Saint Peters College and an M.B.A in Finance from Pace
University.
Kate Hobson, 29, is an Assistant Vice President of Lehman and has been a member
of the Diversified Asset Group since 1992. Prior to joining Lehman, Ms. Hobson
was associated with Cushman & Wakefield serving as a real estate accountant
from 1990 to 1992. Prior to that, Ms. Hobson was employed by Cambridge
Systematics, Inc. as a junior land planner. Ms. Hobson received a B.A. degree
in sociology from Boston University in 1988.
ConAm Services
ConAm Services is a California limited partnership organized on August 30,
1982. The sole general partner of ConAm Services is Continental American
Development, Inc. ("ConAm Development"). The names and positions held by the
directors and executive officers of ConAm Development are set forth below.
There are no family relationships between any officers or directors.
Name Office
Daniel J. Epstein President and Director
E. Scott Dupree Vice President/Director
Robert J. Svatos Vice President/Director
Ralph W. Tilley Vice President
J. Bradley Forrester Vice President
Daniel J. Epstein, 56, has been the President and a Director of ConAm
Development and ConAm Management (or its predecessor firm) and a general
partner of Continental American Properties, Ltd. ("ConAm"), an affiliate of
ConAm Services, since their inception. Prior to that time Mr. Epstein was Vice
President and a Director of American Housing Guild, which he joined in 1969.
At American Housing Guild, he was responsible for the formation of the
Multi-Family Division and directed its development and property management
activities. Mr. Epstein holds a Bachelor of Science degree in Engineering from
the University of Southern California.
E. Scott Dupree, 45, is a Vice President and general counsel of ConAm
Management responsible for negotiation, documentation, review and closing of
acquisition, sale and financing proposals. Mr. Dupree also acts as principal
legal advisor on general legal matters ranging from issues and contracts
involving the management company to supervision of litigation and employment
issues. Prior to joining ConAm Management in 1985, he was corporate counsel to
Trusthouse Forte, Inc., a major international hotel and restaurant corporation.
Mr. Dupree holds a B.A. from United States International University and a Juris
Doctorate degree from the University of San Diego.
Robert J. Svatos, 37, is a Vice President and is the Chief Financial Officer of
ConAm Management. His responsibilities include the accounting, treasury and
data processing functions of the organization. Prior to joining ConAm
Management in 1988, he was the Chief Financial Officer for AmeriStar Financial
Corporation, a nationwide mortgage banking firm. Mr. Svatos holds an M.B.A. in
Finance from the University of San Diego and a Bachelor's of Science degree in
Accounting from the University of Illinois. He is a Certified Public
Accountant.
Ralph W. Tilley, 41, is a Vice President and Treasurer of ConAm Management. He
is responsible for the financial aspects of syndications and acquisitions, the
company's asset management portfolio and risk management activities. Prior to
joining ConAm Management in 1980, he was a senior accountant with KPMG Peat
Marwick, specializing in real estate. He holds a Bachelor's of Science degree
in Accounting from San Diego State University and is a Certified Public
Accountant.
J. Bradley Forrester, 38, currently serves as a Senior Vice President of ConAm
Management Corporation. He is responsible for property acquisition and
disposition on a nationwide basis. Additionally, he is involved with the
company's real estate development activities. Prior to joining ConAm, Mr.
Forrester served as Senior Vice President - Commercial Real Estate for First
Nationwide Bank in San Francisco, where he was responsible for a $2 billion
problem asset portfolio including bank-owned real estate and non-performing
commercial real estate loans. His past experience includes significant
involvement in real estate development and finance, property acquisitions and
dispositions and owner's representation matters. Prior to entering the real
estate profession, he worked for KPMG Peat Marwick in Dallas, Texas. Mr.
Forrester holds a Bachelor of Science degree in Accounting from Louisiana State
University. He received his CPA certification in the State of Texas.
Certain Matters Involving Affiliates of RI 5 Services
On July 31, 1993, Shearson sold certain of its domestic retail brokerage and
asset management businesses to Smith Barney. Subsequent to the sale, Shearson
changed its name to "Lehman Brothers Inc." The transaction did not affect the
ownership of the Partnership's General Partners. However, the assets acquired
by Smith Barney included the name "Hutton." Consequently, the Hutton Real
Estate Services general partner changed its name to "RI 5 Real Estate Services,
Inc." and the Hutton Group changed its name to "LB I Group Inc." to delete any
reference to "Hutton."
Item 11. Executive Compensation
Neither of the General Partners nor any of their directors or executive
officers received any compensation from the Registrant. See Item 13 below with
respect to a description of certain costs of the General Partners and their
affiliates reimbursed by the Registrant.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of November 30, 1995, no person was known by the Registrant to be the
beneficial owner of more than five percent of the Units of the Registrant.
Neither of the General Partners nor any of their directors or executive
officers owns any Units.
Item 13. Certain Relationships and Related Transactions
RI 5 Services and ConAm Services each received $17,599 as its allocable share
of Net Cash from Operations with respect to the fiscal year ended November 30,
1995. Pursuant to the Certificate and Agreement of Limited Partnership of the
Registrant, for the fiscal year ended November 30, 1995, $25,193 of the
Registrant's net income was allocated to the General Partners ($10,929 to RI 5
Services and $14,264 to ConAm Services). For a description of the share of Net
Cash from Operations and the allocation of income and loss to which the General
Partners are entitled, reference is made to the discussion under the caption
"Distributions and Allocations" contained on pages 50 through 54 of the
Prospectus of the Registrant dated March 27, 1985 (the "Prospectus") contained
in Amendment No. 1 to Registration Statement No. 2-95481, which discussion is
incorporated herein by reference.
The Registrant has entered into property management agreements with ConAm
Management pursuant to which ConAm Management has assumed direct responsibility
for day-to-day management of the Properties owned by the Registrant or its
joint ventures. It is the responsibility of ConAm Management to select
resident managers and local property managers, where appropriate, and monitor
their performance. ConAm Management's services also include the supervision
of leasing, rent collection, maintenance, budgeting, employment of personnel,
payment of operating expenses, and related services. For such services, ConAm
Management is entitled to receive a management fee as described on pages 33 and
34 of the Prospectus under the caption "Investment Objectives and Policies -
Management of Properties," which description is herein incorporated by
reference. A summary of property management fees earned by ConAm Management
during the past three fiscal years is incorporated by reference to Note 6
"Transa ctions with Related Parties" of the Notes to Consolidated Financial
Statements.
Pursuant to Section 12(g) of the Registrant's Certificate and Agreement of
Limited Partnership, the General Partners and certain affiliates may be
reimbursed by the Registrant for certain costs as described on page 17 of the
Prospectus, which description is incorporated herein by reference thereto.
First Data Investor Services Group, provides partnership accounting and
investor relations services for the Registrant. Prior to May 1993, these
services were provided by an affiliate of a general partner. The Registrant's
transfer agent and certain tax reporting services are provided by Service Data
Corporation. Both First Data Investor Services Group and Service Data
Corporation are unaffiliated companies. A summary of amounts paid to the
General Partners or their affiliates during the past three fiscal years is
incorporated by reference to Note 6 to the Consolidated Financial Statements,
included in the Partnership's Annual Report to Unitholders for the fiscal year
ended November 30, 1995.
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
(a)(1) Financial Statements:
Page
Consolidated Balance Sheets - November 30, 1995 and 1994 (1)
Consolidated Statements of Operations - For the years
ended November 30, 1995, 1994 and 1993 (1)
Consolidated Statements of Partners' Capital - For
the years ended November 30, 1995, 1994 and 1993 (1)
Consolidated Statements of Cash Flows - For the years
ended November 30, 1995, 1994 and 1993 (1)
Notes to Consolidated Financial Statements (1)
Report of Independent Accountants (1)
(a)(2) Financial Statement Schedule:
Schedule III - Real Estate and Accumulated Depreciation (F-1)
Report of Independent Accountants (F-4)
(1) Incorporated by reference to the Partnership's Annual Report to Unitholders
for the fiscal year ended November 30, 1995, filed as Exhibit 13 to this Item
14.
(a)(3) Exhibits:
(4)(A) Second Amended and Restated Agreement of Limited Partnership
(included as, and incorporated herein by reference to, Exhibit A to the
Prospectus of Registrant dated March 27, 1985, contained in Amendment
No. 1 to Registration Statement No. 2-95481 of Registrant, dated March
27, 1985 (the "Registration Statement")).
(B) Subscription Agreement and Signature Page (included as, and
incorporated herein by reference to, Exhibit 3.1 to Amendment No. 1
to the Registration Statement).
(10)(A) Documents relating to Lakeview Village:
(A.1) Purchase and Development Agreement, dated January 31, 1984 and
exhibits thereto (included as, and incorporated herein by reference to,
Exhibit 10.2 to Amendment No. 1 to the Registration Statement).
(A.2) Amendments to Purchase and Development Agreement, dated May 31,
1985, July 31, 1985 and August 21, 1985 (included as, and incorporated
herein by reference to, Exhibit (10)(A) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended November 30, 1985 (the
"1985 Annual Report")).
(A.3) Amended and Restated Agreement of General Partnership
of Lakeview Village at Ponte Vedra Lakes Joint Venture, dated July 1,
1992 (included as, and incorporated herein by reference to Exhibit 10.2
to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
August 31, 1992).
(A.4) Loan Documents: Promissory Note and Assignment of Rents and
Leases with respect to the refinancing of Lakeview Village, between
Registrant and The Penn Mutual Life Insurance Company (included as, and
incorporated herein by reference to, Exhibit A4 to the Registrant's
1993 Annual Report on Form 10-K filed on March 30, 1994).
(A.5) Property Management Agreement between Lakeview Village at Ponte
Vedra Lakes Joint Venture and Con Am Management Corporation for the
Lakeview Village property (included as, and incorporated herein by
reference to, Exhibit A5 to the Registrant's 1993 Annual Report on Form
10-K filed on March 30, 1994).
(B) Documents relating to The Hamptons:
(B.1) Purchase and Development Agreement, dated October 9, 1984 and
exhibits thereto (included as, and incorporated herein by reference to,
Exhibit 10.3 to Amendment No. 1 to the Registration Statement).
(B.2) First Amendment to Purchase and Development Agreement, dated
December 12, 1985 (included as, and incorporated herein by reference
to, Exhibit (10)(B) to the Registrant's Annual Report on Form 10-K for
the fiscal year ended November 30, 1986).
(B.3) Real Estate Note, dated October 9, 1984 (filed as, and
incorporated herein by reference to Exhibit (10)(B) to the 1985 Annual
Report).
(B.4) Property Management Agreement between The Hamptons Joint
Venture and Con Am Management Corporation for the Hamptons at Quail
Hollow II property (included as, and incorporated herein by reference
to, Exhibit B4 to the Registrant's 1993 Annual Report on Form 10-K
filed on March 30, 1994).
(C) Documents relating to Canterbury Park:
(C.1) Purchase and Development Agreement, dated September 7, 1984
(included as, and incorporated herein by reference to, Exhibit 10.4 to
Amendment No. 1 to the Registration Statement).
(C.2) Amendments to Purchase and Development Agreement, dated April
30, 1985 and June 30, 1985 (included as, and incorporated herein by
reference to, Exhibit (10)(C) to the 1985 Annual Report).
(C.3) Property Management Agreement between Hutton/ConAm Realty
Investors 5 and Con Am Management Corporation for the Canterbury Park
II property (included as, and incorporated herein by reference to,
Exhibit C3 to the Registrant's 1993 Annual Report on Form 10-K filed on
March 30, 1994).
(D) Settlement Agreement by and among the Managing Joint Venturers
and the Epoch Joint Venturers, dated July 1, 1992, (included
as, and incorporated herein by reference to, Exhibit 10.1 to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended August 31, 1992).
(13) Annual Report to Unitholders for the fiscal year ended November
30, 1995.
(21) List of Subsidiaries - Joint Ventures (included as, and
incorporated herein by reference to, Exhibit (22) to the Registrant's
Annual Report on Form 10-K filed for the fiscal year ended November 30,
1991).
(27) Financial Data Schedule
(99) Portions of the Prospectus of the Registrant, dated March 27,
1985 (included as, and incorporated herein by reference to,
Exhibit 28 to the Registrant's 1987 Annual Report on Form 10-K
filed for the fiscal year ended November 30, 1987).
(b) Reports on Form 8-K:
No reports on Form 8-K were filed in the fourth quarter of
fiscal 1995.
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.
Date: February 28, 1996
HUTTON/CONAM REALTY INVESTORS 5
BY: RI 5 Real Estate Services Inc.
General Partner
BY: /S/ Paul L. Abbott
Name: Paul L. Abbott
Title: Director, President,
Chief Executive Officer
and Chief Financial Officer
BY: ConAm Property Services IV, Ltd.
General Partner
BY: Continental American Development, Inc.
General Partner
BY: /S/ Daniel J. Epstein
Name: Daniel J. Epstein
Title: President, Director and
Principal Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capabilities and on the dates indicated.
RI 5 REAL ESTATE SERVICES INC.
A General Partner
Date: February 28, 1996
BY: /S/ Paul L. Abbott
Paul L. Abbott
Director, President,
Chief Executive Officer
and Chief Financial Officer
Date: February 28, 1996
BY: /S/ Donald E. Petrow
Donald E. Petrow
Vice President
Date: February 28, 1996
BY: /S/ Kate Hobson
Kate Hobson
Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
CONAM PROPERTY SERVICES IV, LTD.
A General Partner
By: Continental American Development, Inc.
General Partner
Date: February 28, 1996
BY: /S/ Daniel J. Epstein
Daniel J. Epstein
Director and President
Date: February 28, 1996
BY: /S/ E. Scott Dupree
E. Scott Dupree
Vice President/Director
Date: February 28, 1996
BY: /S/ Robert J. Svatos
Robert J. Svatos
Vice President/Director
Date: February 28, 1996
BY: /S/ Ralph W. Tilley
Ralph W. Tilley
Vice President
Date: February 28, 1996
BY: /S/ J. Bradley Forrester
J. Bradley Forrester
Vice President
Hutton/ConAm Realty Investors 5
Exhibit 13
Hutton/ConAm Realty Investors 5
1995 Annual Report
Hutton/ConAm Realty Investors 5 is a California limited partnership formed in
1985 to acquire, operate and hold for investment multifamily housing
properties. At November 30, 1995, the Partnership's portfolio consisted of
three apartment properties. Provided below is a comparison of average
occupancy levels for the years ended November 30, 1995 and 1994.
Average
Occupancy
Property Location 1995 1994
___________________________________________________________________
Canterbury Park Raleigh, North Carolina 97% 97%
The Hamptons
at Quail Hollow Charlotte, North Carolina 96% 97%
Lakeview Village Ponte Vedra Beach, Florida 95% 93%
___________________________________________________________________
Administrative Inquiries Performance Inquiries/Form 10-Ks
Address Changes/Transfers First Data Investor Services Group
Service Data Corporation P.O. Box 1527
2424 South 130th Circle Boston, Massachusetts 02104-1527
Omaha, Nebraska 68144 Attn: Financial Communications
800-223-3464 (select option 1) 800-223-3464 (select option 2)
Contents
1 Message to Investors
2 Performance Summary
3 Financial Highlights
4 Consolidated Financial Statements
7 Notes to Consolidated Financial Statements
13 Report of Independent Accountants
14 Net Asset Valuation
Presented for your review is the 1995 Annual Report for Hutton/ConAm Realty
Investors 5. In this report, we review Partnership operations and discuss
market conditions affecting the Partnership's properties. We have also
included a performance summary highlighting operating results at each of the
properties and financial highlights for the year.
Cash Distributions
The Partnership paid cash distributions totaling $30 per Unit for the year
ended November 30, 1995, including the 1995 fourth quarter distribution of
$7.50 per Unit, which was credited to your brokerage account or sent directly
to you on January 17, 1996. Since inception, the Partnership has paid
distributions totaling $206.36 per original $500 Unit. The level of future
distributions will be evaluated on a quarterly basis and will depend on the
Partnership's operating results and future cash needs. It is anticipated that
cash from reserves may be required to fund a portion of the distributions
during 1996 as a result of the capital expenditures required at two of the
Partnership's properties which are discussed in this report.
Operations Overview
The solid recovery of multifamily housing in most regions of the country began
to level off during 1995. New construction intensified competition in many
areas with building permits for multifamily units up almost 22% in 1995
compared to 1994 levels. In addition, falling interest rates induced many
renters to purchase homes. Despite these trends, strong population and job
growth in the areas where the Partnership's properties are located helped
strengthen multifamily housing, and brought about improved performance at the
Partnership's properties. All three properties sustained average occupancy
rates for the year at or above 95% and recorded higher average rental income
from the prior year.
During 1996, we intend to implement an extensive improvement program at
Lakeview Village and The Hamptons at Quail Hollow to upgrade the properties.
This program, which includes roof repairs at Lakeview Village and exterior
painting and asphalt repairs at The Hamptons, is intended to maintain the
properties' position within their respective markets, which are growing
increasingly competitive with the addition of new apartment properties. It is
also hoped that these improvements will allow for greater increases in rental
rates, thereby improving the properties' revenue and ultimately their sales
value. Updates on the improvements will be included in future correspondence.
Summary
Given favorable market conditions, particularly in Raleigh, North Carolina, the
General Partners will begin marketing Canterbury Park over the next several
months. There can be no assurances that a sale will be completed or that any
particular price for the property can be obtained. In addition, we will
continue to seek to maintain high occupancy levels, implement rental rate
increases as conditions permit, and make property improvements to upgrade the
properties. We will keep you apprised of significant developments affecting
your investment in future reports.
Very truly yours,
/s/Paul L. Abbott /s/Daniel J. Epstein
Paul L. Abbott Daniel J. Epstein
President President
RI 5 Real Estate Services, Inc. Continental American Development Inc.
General Partner of ConAm Property
Services IV, Ltd.
February 28, 1996
Operational Highlights
Canterbury Park - Raleigh, North Carolina.
Canterbury Park, a 96-unit apartment community, achieved an average occupancy
rate of 97% during fiscal 1995, in line with local averages. Rental income was
up 5% during the year, largely due to rental rate increases implemented on
renewal units. Minor property improvements were completed in 1995 including
the replacement of aging carpet in units changing tenancy, and asphalt repair
on the outside grounds. The Raleigh-Durham market continues to strengthen and
vacancy levels remain low, positive trends which were reflected in the
operations at Canterbury Park. The strong market conditions have spurred new
construction and, as of September 1995, eight new projects were under
construction containing a total of 1,852 units. Raleigh's population growth
and the addition of jobs in the area has kept pace with apartment construction
in recent years, and it is not expected that the new construction will have a
materially adverse impact on the apartment market. Given favorable market
conditions, particularly in the Raleigh, North Carolina area, the General
Partners will begin marketing Canterbury Park for sale over the next several
months. There can be no assurances that a sale will be completed or that any
particular price for the property can be obtained.
The Hamptons at Quail Hollow - Charlotte, North Carolina.
This 232-unit apartment complex exhibited stable operations in 1995. The
healthy Charlotte apartment market and economy in general were reflected in The
Hampton at Quail Hollow's consistently high occupancy, which averaged 96% for
the year. In addition, rental rate increases averaging 5% were instituted on
renewal units and total rental income at the property increased 7%. Property
improvements completed during the year included a complete repainting of the
property's exterior and roof repairs. Strong market conditions in the area of
Charlotte where the property is located have resulted in increased construction
activity. There are approximately 1,500 new apartment units under construction
with an additional 1,700 new units proposed. These new units could initially
have an adverse impact on the market's occupancy; however, it is expected that
Charlotte's healthy multifamily market will be able to accommodate the new
construction over the long term.
Lakeview Village - Ponte Vedra Beach, Florida.
Lakeview Village contains 240 units and maintained an average occupancy of 95%
during fiscal 1995, comparable to local area averages. Rental rate increases
during 1995 on most units led to a modest rise in rental income of 3%. During
the year, capital improvements primarily consisted of roof repairs and carpet
replacement. A local survey of the Ponte Vedra Beach area reported an average
apartment occupancy rate of 95% in the fourth quarter of fiscal 1995. The use
of rental concessions in the market is virtually non-existent. Given the
strong market conditions, several apartment projects are in the planning or
construction phase. This construction is expected to intensify competition in
the Ponte Vedra area market.
Selected Financial Data
For the Periods Ended November 30,
(dollars in thousands, except per Unit data)
1995 1994 1993 1992 1991
Total Revenue $ 4,583 $ 4,337 $ 4,201 $ 3,950 $ 3,935
Net Income 759 623 382 243 380
Net Cash Provided by
Operating Activities 1,903 1,799 1,316 1,365 1,311
Long-term Obligations 6,405 6,502 6,593 6,752 6,817
Total Assets at Year End 22,912 23,946 26,007 25,756 26,241
Net Income per
Limited Partnership Unit
(57,490 Units) 12.77 10.46 6.33 4.12 3.78
Distributions per
Limited Partnership Unit
(57,490 Units) 30.00 26.00 25.00 5.65 22.60
- - - Total revenue increased 6% from 1994 to 1995, primarily due to higher
rental income at all three properties as a result of increases in rental rates
and an increase in interest income.
- - - The increase in net income and net cash provided by operating
activities is primarily attributable to the increase in rental income. This
was partially offset by an increase in property operating expenses due to
higher repair and maintenance at The Hamptons and Lakeview Village related
primarily to exterior painting, roof repairs, and carpet and tile replacement.
Quarterly Cash Distributions
Per Limited Partnership Unit
1995 1994
First Quarter 7.50 6.50
Second Quarter 7.50 6.50
Third Quarter 7.50 6.50
Fourth Quarter 7.50 6.50
Total $ 30.00 $ 26.00
Consolidated Balance Sheets
November 30, 1995 and 1994
Assets 1995 1994
Investments in real estate:
Land $ 4,941,450 $ 4,941,450
Buildings and improvements 26,463,000 26,393,023
31,404,450 31,334,473
Less accumulated depreciation (11,159,740) (10,050,009)
20,244,710 21,284,464
Cash and cash equivalents 2,253,221 2,219,395
Restricted cash 219,436 223,328
Other assets, net of accumulated
amortization of $67,249
in 1995 and $34,969 in 1994 194,815 218,518
Total Assets $ 22,912,182 $ 23,945,705
Liabilities and Partners' Capital
Liabilities:
Mortgage payable $ 6,404,612 $ 6,502,325
Distribution payable 439,974 381,311
Accounts payable and accrued expenses 292,734 293,785
Due to general partners and affiliates 40,653 38,643
Security deposits 136,245 131,189
Total Liabilities 7,314,218 7,347,253
Partners' Capital:
General Partners 190,066 200,071
Limited Partners 15,407,898 16,398,381
Total Partners' Capital 15,597,964 16,598,452
Total Liabilities
and Partners' Capital $ 22,912,182 $ 23,945,705
Consolidated Statements of Partners' Capital
For the years ended November 30, 1995, 1994 and 1993
General Limited
Partners Partners Total
Balance at December 1, 1992 $ 219,935 $18,365,062 $18,584,997
Net income 18,490 363,938 382,428
Cash distributions (29,332) (1,437,250) (1,466,582)
Balance at November 30, 1993 209,093 17,291,750 17,500,843
Net income 21,482 601,371 622,853
Cash distributions (30,504) (1,494,740) (1,525,244)
Balance at November 30, 1994 200,071 16,398,381 16,598,452
Net income 25,193 734,217 759,410
Cash distributions (35,198) (1,724,700) (1,759,898)
Balance at November 30, 1995 $ 190,066 $15,407,898 $15,597,964
Consolidated Statements of Operations
For the years ended November 30, 1995, 1994 and 1993
Income 1995 1994 1993
Rental $4,471,922 $4,268,124 $4,135,984
Interest 111,447 68,380 65,007
Total Income 4,583,369 4,336,504 4,200,991
Expenses
Property operating 2,061,086 1,919,655 1,900,650
Depreciation and amortization 1,142,011 1,160,514 1,130,680
Interest 500,508 507,772 646,407
General and administrative 120,354 125,710 140,826
Total Expenses 3,823,959 3,713,651 3,818,563
Net Income $ 759,410 $ 622,853 $ 382,428
Net Income Allocated:
To the General Partners $ 25,193 $ 21,482 $ 18,490
To the Limited Partners 734,217 601,371 363,938
$ 759,410 $ 622,853 $ 382,428
Per limited partnership unit
(57,490 outstanding) $12.77 $10.46 $6.33
Consolidated Statements of Cash Flows
For the years ended November 30, 1995, 1994 and 1993
Cash Flows from
Operating Activities: 1995 1994 1993
Net income $ 759,410 $ 622,853 $ 382,428
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 1,142,011 1,160,514 1,130,680
Increase (decrease) in
cash arising from changes
in operating assets
and liabilities:
Fundings to restricted cash (163,568) (180,298) (370,160)
Release of restricted cash 167,460 166,488 160,642
Other assets (8,577) 12,291 (15,396)
Accounts payable and
accrued expenses (1,051) 8,156 11,981
Due to general partners
and affiliates 2,010 (350) (3,047)
Security deposits 5,056 9,243 18,835
Net cash provided by
operating activities 1,902,751 1,798,897 1,315,963
Cash Flows from
Investing Activities:
Additions to real estate (69,977) (43,530) (132,538)
Net cash used for
investing activities (69,977) (43,530) (132,538)
Cash Flows from Financing Activities:
Distributions (1,701,235) (2,610,515) -
Receipt (payment)
of deposit financing - 278,487 (278,487)
Mortgage fees - (41,131) (184,825)
Mortgage proceeds - - 6,600,000
Mortgage principal
payments (97,713) (90,448) (6,759,513)
Net cash used for
financing activities (1,798,948) (2,463,607) (622,825)
Net increase (decrease)
in cash and cash equivalents 33,826 (708,240) 560,600
Cash and cash equivalents
at beginning of period 2,219,395 2,927,635 2,367,035
Cash and cash equivalents
at end of period $2,253,221 $2,219,395 $2,927,635
Supplemental Disclosure
of Cash Flow Information:
Cash paid during
the period for interest $ 500,508 $ 507,772 $ 646,407
Notes to the Consolidated Financial Statements
For the years ended November 30, 1995, 1994 and 1993
1. Organization
Hutton/ConAm Realty Investors 5 (the "Partnership") was organized as a limited
partnership under the laws of the State of California pursuant to a Certificate
and Agreement of Limited Partnership (the "Partnership Agreement") dated June
28, 1984 and amended and restated August 20, 1985. The Partnership was formed
for the purpose of acquiring and operating certain types of residential real
estate. The General Partners of the Partnership are RI 5 Real Estate Services,
Inc., an affiliate of Lehman Brothers Inc. (see below), and ConAm Property
Services IV, Ltd., an affiliate of Continental American Properties, Ltd (the
"General Partners"). The Partnership will continue until December 31, 2010
unless sooner terminated pursuant to the terms of the Partnership Agreement.
On July 31, 1993, Shearson Lehman Brothers Inc. sold certain of its domestic
retail brokerage and asset management business to Smith Barney, Harris Upham &
Co. Incorporated ("Smith Barney"). Subsequent to the sale, Shearson Lehman
Brothers Inc. changed its name to Lehman Brothers Inc. ("Lehman Brothers").
The transaction did not affect the ownership of the General Partners. However,
the assets acquired by Smith Barney included the name "Hutton." Consequently,
effective October 8, 1993, the Hutton Real Estate Services IX, Inc. General
Partner changed its name to "RI 5 Real Estate Services, Inc".
2. Significant Accounting Policies
Financial Statements. The consolidated financial statements include the
accounts of the Partnership and its affiliated ventures. The effect of
transactions between the Partnership and its ventures have been eliminated in
consolidation.
Real Estate Investments. Real estate investments are recorded at cost less
accumulated depreciation and include the initial purchase price of the
property, legal fees, acquisition and closing costs.
Leases are accounted for under the operating method. Under this method,
revenue is recognized as rentals are earned and expenses (including
depreciation) are charged to operations when incurred. Leases are generally
for terms of one year or less.
Depreciation is computed using the straight-line method based upon the
estimated useful lives of the properties. Maintenance and repairs are charged
to operations as incurred. Significant betterments and improvements are
capitalized and depreciated over their estimated useful lives.
For assets sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts, and any resulting gain or loss is
reflected in income for the period.
Accounting for Impairment. In March 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" ("FAS 121"), which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. FAS 121 also addresses the accounting
for long-lived assets that are expected to be disposed of. The Partnership has
adopted FAS 121 in the fourth fiscal quarter of 1995. Based on current
circumstances, the adoption had no impact on the financial statements.
Other Assets. Included in other assets are deferred mortgage costs incurred in
connection with obtaining financing on one of the Partnership's properties.
Such costs are amortized over the term of the loan.
Offering Costs. Costs relating to the sale of limited partnership units were
deferred during the offering period and charged to the limited partners'
capital accounts upon the consummation of the public offering.
Income Taxes. No provision for income taxes has been made in the financial
statements since income, losses and tax credits are passed through to the
individual partners.
Cash and Cash Equivalents. Cash equivalents consists of short-term highly
liquid investments which have maturities of three months or less from date of
issuance. Cash and cash equivalents include security deposits of $136,245 and
$131,189 at November 30, 1995 and 1994, respectively, the use of which is
restricted under certain state statutes.
Concentration of Credit Risk. Financial instruments which potentially subject
the Partnership to a concentration of credit risk principally consist of cash
and cash equivalents in excess of the financial institutions' insurance limits.
The Partnership invests available cash with high credit quality financial
institutions.
Restricted Cash. Consists of escrows for real estate taxes and casualty
insurance as required by the first mortgage lender on the Lakeview Village
property.
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. The Partnership Agreement
The Partnership Agreement provides that net cash from operations, as defined,
will be distributed quarterly, 98% to the limited partners and 2% to the
General Partners until each limited partner has received an amount equal to an
annual 7% return for such year. Thereafter, net cash from operations will be
distributed 100% to the General Partners until the General Partners have
received distributions for the year (including the 2% distribution described
above) equal to 10% of the aggregate net cash from operations distributed to
the partners for such fiscal year to that point. Any remaining net cash from
operations will be distributed 90% to the limited partners and 10% to the
General Partners.
Net loss and all depreciation will be allocated 99% to the limited partners and
1% to the General Partners.
Net income will be allocated as follows:
(a) To the extent that net income before depreciation does not exceed
the amount of net cash from operations distributable to the partners
with respect to such fiscal year, net income before depreciation shall
be allocated among the partners, pro rata in accordance with the amount
of net cash from operations distributable to each partner with respect
to such fiscal year to the extent thereof; and
(b) To the extent that net income before depreciation exceeds the
amount of net cash from operations distributable to the partners with
respect to such fiscal year, such excess shall be allocated (1) first,
100% to the General Partners, pro rata, in an amount equal to the
excess, if any, of the General Partners' deficits, if any, in their
capital accounts, over an amount equal to 1% of the aggregate capital
contributions to the partnership as reduced by the amount of the
General Partners' capital contributions, and (2) second, 99% to the
limited partners and 1% to the General Partners.
For the years ended November 30, 1995, 1994 and 1993 net income before
depreciation exceeded net cash from operations distributable to the partners by
$109,243, $225,354 and $37,349, respectively. Pursuant to the Partnership
Agreement and as described in (b)(2) above, this excess was allocated 99% to
the limited partners and 1% to the General Partners.
Net proceeds from sales or refinancing will be distributed 100% to the limited
partners until each limited partner has received an amount equal to his
adjusted capital investment (as defined in the Partnership Agreement) and an
annual, cumulative 7% return thereon. The balance, if any, will be distributed
85% to the limited partners and 15% to the General Partners. Generally, all
gain from sales will be allocated 99% to the limited partners and 1% to the
General Partners until each limited partner has received an amount equal to his
adjusted capital investment and an annual, cumulative 7% return thereon.
Thereafter, gain will be allocated pro rata to the limited and General
Partners' capital accounts, as reduced by the amount of the net proceeds
distributed from sale or refinancing with respect to such transactions, until
the limited and general partner capital accounts are in a ratio of 85 to 15.
The balance, if any, is to be distributed 85% to the limited partners and 15%
to the General Partners.
4. Real Estate Investments
Since inception, the Partnership has acquired three residential apartment
complexes either directly or through investments in joint ventures as follows:
Date Purchase
Property Name Units Location Acquired Price
Lakeview Village 240 Ponte Vedra 8/22/85 $12,266,187
Beach, FL
Canterbury Park Apts. 96 Raleigh, NC 11/21/85 5,467,661
The Hamptons 232 Charlotte, NC 5/30/86 11,694,137
Lakeview Village and The Hamptons were acquired through joint ventures with
unaffiliated developers. To each venture, the Partnership assigned its rights
to acquire the above properties and contributed cash equal to the purchase
price of the properties. The developers did not make an initial capital
contribution to these ventures.
The initial joint venture agreements of Lakeview Village and The Hamptons
substantially provide that:
a. Net cash from operations of Lakeview Village will be distributed
100% to the Partnership until it has received an annual, noncumulative
12% return on its adjusted capital contribution. Any remaining balance
will be distributed 60% to the Partnership and 40% to the co-venturer.
Net cash from operations of The Hamptons will be distributed 100% to
the Partnership until it has received an annual, noncumulative return
of 8% on 118% of its adjusted capital contribution. Any remaining
balance will be distributed 80% to the Partnership and 20% to the
co-venturer.
b. Net income of the joint ventures will be allocated to the
Partnership and the co-venturer basically in accordance with the
distribution of net cash from operations. All losses and depreciation
will be allocated to the Partnership.
c. Net proceeds from a sale or refinancing of Lakeview Village will be
distributed 100% to the Partnership until it has received an annual,
cumulative 12% return on its adjusted capital contributions and an
amount equal to 120% of its adjusted capital contributions.
Distributions will then be made 75% to the Partnership and 25% to the
co-venturer, until the Partnership has received an additional 120% of
the Partnership's adjusted capital contribution. Any remaining balance
will be distributed 50% to the Partnership and 50% to the co-venturer.
Net proceeds from a sale or refinancing of The Hamptons will be
distributed 100% to the Partnership until it has received an amount
equal to an annual, cumulative 8% return on 118% of its adjusted
capital contribution and an amount equal to 118% of its adjusted
capital contribution. Distributions will then be made to the
co-venturer until it has received an annual, cumulative 8% return on
$928,000 as reduced by all prior distributions of net cash from
operations and an amount equal to $928,000 as reduced by all prior
distributions of net proceeds from refinancing. Any remaining net
proceeds will be distributed 80% to the Partnership and 20% to the
co-venturer.
The amended joint venture agreement of Lakeview Village substantially provides
that:
a. Available cash from operations of Lakeview Village will be
distributed 100% to the Partnership until it has received its annual,
noncumulative preferred return, of $650,000. Any remaining balance
will be distributed 99% to the Partnership and 1% to the corporate
General Partners.
b. Net income of Lakeview Village will be allocated first,
proportionately to partners with negative capital accounts, as defined,
until such capital accounts, as defined, have been increased to zero.
Then to the Partnership up to the amount of any payments made on
account of its preferred return; thereafter, 99% to the Partnership and
1% to the corporate General Partners. All net losses will be allocated
first to the partners with positive capital accounts, as defined, until
such accounts have been reduced to zero, then 99% to the Partnership
and 1% to the corporate General Partners.
c. Income from a sale of Lakeview Village will be allocated to the
Partnership until the Partnership's capital account, as defined, is
equal to the fair market value of the ventures' assets at the date of
the amendment. Any remaining balance will then be allocated 99% to the
Partnership and 1% to the corporate General Partners. Net proceeds
from a sale or refinancing will be distributed first to the partners
with a positive capital account balance, as defined; thereafter, 99% to
the Partnership and 1% to the corporate General Partners.
5. Mortgage Payable
On May 30, 1986, the Lakeview Village Venture obtained a first mortgage loan of
$7,000,000 collateralized by a mortgage encumbering Lakeview Village. The loan
had a term of seven years and bore interest at an annual rate of 9% with
monthly payments of interest only for the first and second years.
On October 27, 1993, the extended maturity date, the Partnership obtained
replacement financing on its Lakeview Village property from The Penn Mutual
Life Insurance Company, an unaffiliated party. Total proceeds of $6,600,000
were received and are collateralized by a Mortgage and Security Agreement and
an Assignment of Rents and Leases Agreement encumbering the property. The loan
is for a term of seven years and bears interest at an annual rate of 7.75%
requiring monthly installments of principal and interest based on a 25 year
amortization schedule. The proceeds of this financing along with Partnership
cash reserves were used to repay the outstanding amounts due Aetna Life
Insurance Company on the Partnership's prior mortgage. Partnership cash
reserves were also used to pay refinancing expenses of $184,825 and fund
escrows of $355,664. The escrowed funds are applied to the property for real
estate taxes and insurance.
Annual maturities of mortgage note principal over the next five years are as
follows:
Year Amount
1996 $ 105,560
1997 114,038
1998 123,197
1999 133,111
2000 143,780
Thereafter 5,784,926
Total $6,404,612
6. Transactions with Related Parties
The following is a summary of fees earned and reimbursable expenses for the
years ended November 30, 1995, 1994 and 1993, and the unpaid portion at
November 30, 1995:
Unpaid at
November 30, --------Earned-------------
1995 1995 1994 1993
Reimbursement of:
Out-of-pocket expenses $ - $ 2,319 $ 942 $ 2,406
Administrative salaries
and expenses 21,804 48,079 36,841 48,626
Property operating salaries - 336,666 330,588 320,618
Property management fees 18,849 223,720 213,836 206,686
$40,653 $610,784 $582,207 $578,336
The above amounts have been paid and/or accrued to the General Partners and
affiliates as follows:
Unpaid at
November 30, --------Earned-------------
1995 1995 1994 1993
RI 5 Real Estate
Services, Inc. $21,804 $ 50,398 $ 37,783 $ 51,032
ConAm and affiliates 18,849 560,386 544,424 527,304
$40,653 $610,784 $582,207 $578,336
7. Reconciliation of Financial Statement and Tax Information
The following is a reconciliation of the net income for financial statement
purposes to net income for federal income tax purposes for the years ended
November 30, 1995, 1994 and 1993:
1995 1994 1993
Net income per financial statements $759,410 $622,853 $382,428
Depreciation deducted for tax
purposes in excess of
depreciation expense per
financial statements (3,589) (2,189) (4,598)
Tax basis joint venture net
loss in excess of GAAP basis
joint venture net income/(loss) 7,855 14,208 (3,599)
Other 1,655 1,368 2,091
Taxable net income $765,331 $636,240 $376,322
The following is a reconciliation of partners' capital for financial statement
purposes to partners' capital for federal income tax purposes as of November
30, 1995, 1994 and 1993:
1995 1994 1993
Partners' capital per
financial statements $15,597,964 $16,598,452 $17,500,843
Adjustment for cumulative
difference between tax basis
net income and net income
per financial statements (843,546) (849,467) (862,855)
Partners' capital
per tax return $14,754,418 $15,748,985 $16,637,988
8. Distributions Paid
Cash distributions, per the consolidated statements of partners' capital, are
recorded on the accrual basis, which recognizes specific record dates for
payments within each fiscal year. The consolidated statements of cash flows
recognize actual cash distributions paid during the fiscal year. The following
table discloses the annual amounts as presented on the consolidated financial
statements:
Distributions Distributions
Payable Distributions Distributions Payable
Beginning of Year: Declared: Paid: November 30:
1995 $ 381,311 $1,759,898 $1,701,235 $ 439,974
1994 1,466,582 1,525,244 2,610,515 381,311
1993 - 1,466,582 - 1,466,582
To the Partners of
Hutton/ConAm Realty Investors 5:
We have audited the consolidated balance sheets of Hutton/ConAm Realty
Investors 5, a California limited partnership, and Consolidated Ventures as of
November 30, 1995 and 1994 and the related consolidated statements of
operations, partners' capital and cash flows for each of the three years in the
period ended November 30, 1995. These consolidated financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Hutton/ConAm Realty Investors 5, a California limited partnership, and
Consolidated Ventures as of November 30, 1995 and 1994 and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended November 30, 1995 in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 1, 1996
Comparison of Acquisition Costs to Appraised Value and Determination of
Net Asset Value Per $500 Unit at November 30, 1995 (Unaudited)
Acquisition Cost
(Purchase Price Partnership's
Plus General Share of
Date Partners' November 30,
of Acquisition 1995 Appraised
Property Acquisition Fees) Value (1)
Lakeview Village
at Ponte Vedra Lakes 08-22-85 $ 12,805,899 $ 11,700,000
Canterbury Park
Apartments 11-21-85 5,708,260 6,150,000
The Hamptons at
Quail Hollow 05-30-86 12,208,679 13,100,000
Total Appraisal Value
as of November 30, 1995 $ 30,722,838 $ 30,950,000
Cash and cash equivalents 2,472,657
Other assets 36,108
33,458,765
Less:
Total liabilities (7,314,218)
Partnership Net Asset Value (2) $ 26,144,547
Net Asset Value Allocated:
Limited Partners $ 26,144,547
General Partners _
$ 26,144,547
Net Asset Value Per Unit (57,490 units outstanding) $ 454.77
(1) This represents the Partnership's share of the November 30, 1995
Appraised Values which were determined by an independent property appraisal
firm.
(2) The Net Asset Value assumes a hypothetical sale at November 30, 1995 of
all the Partnership's properties at a price based upon their value as a rental
property as determined by an independent property appraisal firm, and the
distribution of the proceeds of such sale, combined with the Partnership's cash
after liquidation of the Partnership's liabilities, to the Partners.
Limited Partners should note that appraisals are only estimates of current
value and actual values realizable upon sale may be significantly different. A
significant factor in establishing an appraised value is the actual selling
price for properties which the appraiser believes are comparable. In addition,
the appraised value does not reflect the actual costs which would be incurred
in selling the properties. As a result of these factors and the illiquid
nature of an investment in Units of the Partnership, the variation between the
appraised value of the Partnership's properties and the price at which Units of
the Partnership could be sold is likely to be significant. Fiduciaries of
Limited Partners which are subject to ERISA or other provisions of law
requiring valuations of Units should consider all relevant factors, including,
but not limited to Net Asset Value per Unit, in determining the fair market
value of the investment in the Partnership for such purposes.
HUTTON/CONAM REALTY INVESTORS 5
and Consolidated Ventures
Schedule III - Real Estate and Accumulated Depreciation
November 30, 1995
Cost Capitalized
Subsequent
Initial Cost to Partnership To Acquisition
Land
Buildings and Buildings and
Description Encumbrances Land Improvements Improvements
Residential
Property:
Partnership
Owned:
Canterbury Park
Apartments
Raleigh, NC $ - $1,160,763 $ 4,614,414 $ 12,323
Consolidated
Ventures:
Lakeview Village
Apartments
Ponte Vedra
Beach, FL 6,404,612 1,543,406 11,321,843 434,582
The Hamptons
Charlotte, NC - 2,208,781 10,085,246 23,092
Total $ 6,404,612 $4,912,950 $26,021,503 $469,997
HUTTON/CONAM REALTY INVESTORS 5
and Consolidated Ventures
Schedule III - Real Estate and Accumulated Depreciation
November 30, 1995
----------Gross Amount at Which Carried
at Close of Period---------
Buildings and Accumulated
Description Land Improvements Total Depreciation
Residential
Property:
Partnership
Owned:
Canterbury
Park
Apartments
Raleigh, NC $1,160,763 $ 4,626,738 $ 5,787,501 $ 1,966,144
Consolidated
Ventures:
Lakeview Village
Apartments
Ponte Vedra
Beach, FL 1,571,906 11,727,924 13,299,830 5,034,701
The Hamptons
Charlotte, NC 2,208,781 10,108,338 12,317,119 4,158,895
$4,941,450 $26,463,000 $31,404,450 $11,159,740
(1) (2)
HUTTON/CONAM REALTY INVESTORS 5
and Consolidated Ventures
Schedule III - Real Estate and Accumulated Depreciation
November 30, 1995
Life on which
Depreciation
in Latest
Date of Date Income Statements
Description Construction Acquired is Computed
Residential Property:
Partnership Owned:
Canterbury Park
Apartments
Raleigh, NC 1984-1985 11/21/85 (3)
Consolidated Ventures:
Lakeview Village
Apartments
Ponte Vedra Beach, FL 1984-1985 08/22/85 (3)
The Hamptons
Charlotte, NC 1985-1986 05/30/86 (3)
(1) Represents aggregate cost for both financial reporting and Federal income
tax purposes.
(2) The amount of accumulated depreciation for Federal income tax purposes is
$15,885,698.
(3) Buildings and improvements - 25 years; personal property - 10 years.
A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended November 30, 1995, 1994 and 1993:
Real Estate investments: 1995 1994 1993
Beginning of year $31,334,473 $31,290,943 $31,158,405
Additions 69,977 43,530 132,538
End of year $31,404,450 $31,334,473 $31,290,943
Accumulated Depreciation:
Beginning of year $10,050,009 $ 8,922,264 $ 7,800,761
Depreciation expense 1,109,731 1,127,745 1,121,503
End of year $11,159,740 $10,050,009 $ 8,922,264
To the Partners of
Hutton/ConAm Realty Investors 5:
Our report on the consolidated financial statements of Hutton/ConAm Realty
Investors 5, a California limited partnership, and Consolidated Ventures has
been incorporated by reference in this Form 10-K from the Annual Report to
unitholders of Hutton/ConAm Realty Investors 5 for the year ended November 30,
1995. In connection with our audits of such financial statements, we have also
audited the related financial statement schedule listed in the index of this
Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 1, 1996