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 [Fee Required]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from _____ to _____
Commission file number: 0-11085
HUTTON/CONAM REALTY INVESTORS 2
Exact name of Registrant as specified in its charter
California
State or other jurisdiction of incorporation or organization
13-3100545 10285
I.R.S. Employer Identification No. Zip Code
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 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
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 July 9, 1982 (included in Amendment
No. 1 to Registration Statement, No. 2-75519, of Registrant filed July 9, 1982)
are incorporated 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 year ended December 31,
1995.
PART I
Item 1. Business
General Development of Business
Hutton/ConAm Realty Investors 2 (the "Registrant" or the "Partnership") is a
California limited partnership in which RI 2 Real Estate Services Inc. ("RI 2
Services", formerly Hutton Real Estate Services V, Inc.), a Delaware
corporation, and ConAm Property Services II, Ltd., a California limited
partnership ("ConAm Services"), are the general partners (together, the
"General Partners").
Commencing July 9, 1982, the Registrant began offering through E.F. Hutton &
Company Inc., of the Registrant, up to a maximum of 80,000 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 (the "Act"), under Registration Statement No. 2-75519, which
Registration Statement was declared effective on July 9, 1982. The offering of
Units was terminated on October 8, 1982. Upon termination of the offering, the
Registrant had accepted subscriptions for 80,000 Units for an aggregate of
$40,000,000.
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 capital appreciation and generation of current income. All of
the proceeds available for investment in real estate were originally invested
in four joint ventures and one limited partnership, each of which owned a
specified property. Funds held as a working capital reserve are invested in
unaffiliated money market funds or other highly liquid short-term investments
where there is appropriate safety in 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 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 have commenced marketing certain of the properties for sale. No
property will be sold, financed or refinanced by the Registrant without the
agreement of both General Partners. Proceeds from any future sale, financing
or refinancing of the properties will not be reinvested and may be distributed
to the Limited Partners and General Partners (sometimes referred to herein as
the "Partners"), so that the Registrant will, in effect, be self-liquidating.
If deemed necessary, the Registrant may retain a portion of the 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.
Originally, the Registrant acquired five residential apartment complexes
(collectively, the "Properties") through investments in joint ventures and one
limited partnership. One of these, Country Place Village I, was sold on July
20, 1995. As of December 31, 1995, the Registrant had interests in the
Properties as follows: (1) Creekside Oaks, a 120-unit apartment complex located
in Jacksonville, Florida; (2) Ponte Vedra Beach Village I, a 122-unit apartment
complex located in Ponte Vedra Beach, Florida; (3) Rancho Antigua, a 220-unit
apartment complex located in the McCormick Ranch area of Scottsdale, Arizona;
and (4) Village at the Foothills I, a 60-unit apartment complex located in
Tucson, Arizona. For a further description 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
year ended December 31, 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
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 affect the
occupancy levels and revenues of the Properties. The occupancy levels at all
four Properties reflect some seasonality, which is also reflected in the
markets. In some cases, the Registrant may compete with other partnerships
affiliated with either General Partner of the Registrant.
For a discussion of current market conditions in each of the areas where the
Partnership's Properties are located, see Item 2 below.
Employees
The Registrant has no employees. General services are performed by RI 2
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 pursuant to which ConAm Management provides
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 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 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 year ended December 31, 1995, which is filed as an exhibit
under Item 14. Average occupancy rates and appraised values of the
Partnership's Properties are incorporated by reference to the Partnership's
Annual Report to Unitholders for the year ended December 31, 1995, which is
filed as an exhibit under Item 14.
Creekside Oaks - Jacksonville, Florida
This 120-unit apartment complex is situated ten miles west of the Intercostal
Waterway in the Baymeadows/Deerwood section of southeast Jacksonville. Market
conditions in the Southeast submarket of Jacksonville remain competitive,
reflecting the lingering effects of prior overbuilding, much of which was
concentrated in this area. The use of rental concessions has diminished in
recent years, and average rental rates in the Southeast submarket increased
1.7% from the second quarter of 1994 to the second quarter of 1995. Average
occupancy increased from 93.3% to 94.3% during the same period. Construction
of new units, relatively dormant in 1992 and 1993, has increased since 1994,
with 373 units permitted in 1994 and 593 units permitted as of June 30, 1995.
The area's favorable demographics (i.e. growing population and job growth), are
expected to absorb the new supply.
Ponte Vedra Beach Village I - Ponte Vedra Beach, Florida
Ponte Vedra Beach Village I is a 122-unit apartment community in southeast
Jacksonville. 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 begin construction. This construction is expected
d to intensify competition in the Ponte Vedra area market.
Rancho Antigua - Scottsdale, Arizona
This 220-unit apartment community is located eight miles northeast of Phoenix
in southwest Scottsdale. The Scottsdale apartment market evidenced strong
competition during 1995, reflecting increasing construction in the area and
notable competition from condominiums and single family houses as affordable
prices and low mortgage rates entice renters to buy. Average vacancy in the
Scottsdale submarket increased from 4.6% as of June 30, 1994 to 5.6% at June
30, 1995, reflecting the addition of recently completed units in the area.
Following a two year lull, construction of new units picked up pace beginning
in 1993 with 1,058 units opened in 1993, 1,533 units opened in 1994 and 2,240
new units within the submarket either under construction or permitted as of
June 30, 1995. While the area's strong population and job growth are likely to
absorb some of this new supply, competition for tenants is expected to remain
strong, affecting area occupancies and limiting rental rate increases in t he
coming year.
Village at the Foothills I - Tucson, Arizona
This 60-unit apartment community is situated in the "foothills" section of
Tucson in the Catalina Foothill submarket. Village at the Foothills I competes
with a number of apartment complexes and condominium developments within the
Tucson area. Tucson's economy began to weaken as population and job growth
slowed during 1995. Despite the economic slowdown, construction of multifamily
properties has increased significantly. As of the third quarter of 1995, 1,123
units were under construction in the Catalina Foothills submarket with an
additional 656 units not yet begun. These units are being added to the 7,226
completed units in the market. There are an additional seven projects planned
for the Catalina Foothills market although all of these projects may not
proceed to construction. In addition, the multifamily market has been
unfavorably impacted by a decline in interest rates which has made home
ownership a viable alternative for renters. As a result, vacancy rates are
beginning to rise and increases in rental rates are moderating. A local survey
of metropolitan Tucson conducted in the fourth quarter of fiscal 1995 showed an
average occupancy rate of 92% among multifamily properties with five or more
units, down from 96% at the same period in 1994.
Three of the Partnership's four properties are encumbered by mortgage loans.
See Note 5 to the Consolidated Financial Statements for a description of such
mortgage financing.
Item 3. 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 one of its
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. As a result, the Partnership dropped its
complaint.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the year ended December 31, 1995, no matter was
submitted to a vote of security holders through the solicitation of proxies or
otherwise.
PART II
Item 5. Market for the Registrant's Limited Partnership Units and Related
Security Holder Matters
As of December 31, 1995, the number of Unitholders of record was 4,235.
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 Flow From Operations, when made, are paid on a
quarterly basis, with distributions generally occurring approximately 45 days
after the end of each quarter. Such distributions have been made primarily
from net operating income with respect to the Registrant's investment in the
Properties and from interest on short-term investments, and partially from
excess cash reserves. Information on cash distributions paid by the
Partnership for the past two years is incorporated by reference to the
Partnership's Annual Report to Unitholders for the year ended December 31,
1995, which is filed as an exhibit under Item 14. 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. 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 December 31, 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 December 31, 1995, the Partnership had cash and cash equivalents of $710,686
which was invested in unaffiliated money market funds, compared with $1,183,787
at December 31, 1994. The decrease is primarily attributable to cash used for
distributions, mortgage payments and additions to real estate, which exceeded
net cash provided by operating activities and proceeds from the sale of Country
Place Village I. The Partnership also maintained a restricted cash balance of
$651,661 at December 31, 1995, compared with $779,328 at December 31, 1994. The
restricted cash balance represents escrows for insurance, real estate taxes,
and property replacements and repairs, required under the terms of the current
mortgage loans. Pursuant to the refinancing of the Creekside Oaks loan, the
lender required funds escrowed for various repairs including roofing work and
exterior painting. Following an inspection of the complete work by the lender,
the balance of the repair escrow will be returned to the Partnership.
The General Partners expect sufficient cash flow to be generated from
operations to meet its current operating expenses and debt service
requirements.
In light of improving market conditions in certain of the areas where the
Partnership's properties are located, the General Partners have begun marketing
some of the properties for sale. On July 20, 1995, Country Place Village I was
sold to an unaffiliated party. The property was sold for a gross price of
$3,665,000, which included the assumption by the buyer of the property's
mortgage payable in the amount of $2,051,078. The sale resulted in the
Partnership receiving net proceeds of approximately $1,522,000. Primarily as a
result of the sale, investments in real estate, other assets and mortgages
payable decreased from December 31, 1994 to December 31, 1995. The Partnership
recognized a gain on sale of $232,402 in the third quarter and on August 17,
1995 paid a special distribution of $1,600,000, or $20.00 per Unit, to the
partners. The special distribution was comprised of net proceeds from the sale
of Country Place Village I and Partnership cash reserves.
Cash distributions to the Limited Partners were suspended from the first
quarter of 1992 through the second quarter of 1994 in consideration of the
costs related to the refinancing of the Partnership's four mortgage loans.
Cash distributions to investors were reinstated commencing with the third
quarter 1994 distribution in the quarterly amount of $2.75 per Unit. This
quarterly level was reduced to $2.25 per Unit commencing with the 1995 first
quarter distribution. The level was reduced due to increased capital
expenditures and, to a lesser extent, the sale of Country Place Village I.
This quarterly level was maintained for the remainder of 1995. The level of
future distributions will be evaluated on a quarterly basis and will be based
on cash flow generated by the Partnership.
On March 15, 1996, based upon, among other things, the advice of Partnership
counsel, Skadden, Arps, Slate, Meagher & Flom, the General Partners adopted a
resolution that states, among other things, if a Change of Control (as defined
below) occurs, the General Partners may distribute the Partnership's cash
balances not required for its ordinary course day-to-day operations. "Change
of Control" means any purchase or offer to purchase more than 10% of the Units
that is not approved in advance by the General Partners. In determining the
amount of the distribution, the General Partners may take into account all
material factors. In addition, the Partnership will not be obligated to make
any distribution to any partner and no partner will be entitled to receive any
distribution until the General Partners have declared the distribution and
established a record date and distribution date for the distribution. The
Partnership filed a Form 8-K disclosing this resolution on March 21, 1996.
Results of Operations
1995 versus 1994
Partnership operations for the year ended December 31, 1995 resulted in a net
loss of $112,522, compared with net income of $37,325 in 1994. As a result of
the sale of Country Place Village I in July 1995, the Partnership realized a
gain of $232,402. Excluding this gain, the Partnership incurred a loss from
operations of $344,924 for the year ended December 31, 1995 compared with
income from operations of $37,325 in 1994. The change from income to loss is
primarily the result of (i) reduced rental income following the sale of Country
Place Village I, (ii) increased property operating expense and, (iii) an
increase in general and administrative expense.
Rental income totaled $4,448,549 for the year ended December 31, 1995 compared
with $4,669,676 in 1994. The decrease is primarily due to the sale of Country
Place Village I in July 1995. This was partially offset by increases in rental
income at Rancho Antigua and Village at the Foothills I, reflecting rate
increases instituted during the year.
Interest income totaled $67,819 for the year ended December 31, 1995 compared
with $48,289 for the year ended December 31, 1994. The increase is primarily
due to higher rates earned on the Partnership's cash balances.
Property operating expenses totaled $2,515,717 for the year ended December 31,
1995, compared with $2,262,915 in 1994. The increase primarily reflects higher
repair and maintenance expenses at Creekside Oaks and Rancho Antigua due
primarily to exterior painting work. Interest expense and depreciation and
amortization expense both decreased from 1994, primarily due to the sale of
Country Place Village I. General and administrative expense totaled $222,881
for the year ended December 31, 1995 compared with $144,052 for the year ended
December 31, 1994. The increases primarily reflect legal expenses due to the
Partnership's response to the offer for the limited partnership units in the
third quarter of 1995. (See Item 3)
1994 versus 1993
Partnership operations for the year ended December 31, 1994 resulted in net
income of $37,325, compared with a net loss of $527,539 in 1993. The change
from net loss to net income in 1994 is primarily the result of increased rental
income and lower interest expense.
Rental income totaled $4,669,676 for the year ended December 31, 1994 compared
with $4,429,975 in 1993. The increase in 1994 reflects higher rental income at
all the properties, primarily due to rental rate increases instituted over the
past year.
Property operating expenses totaled $2,262,915 for the year ended December 31,
1994, compared with $2,069,986 in 1993. The increase primarily reflects higher
expenses at Rancho Antigua as repair and maintenance expense increased due to
carpet replacement, asphalt resealing and general repairs, while rental
administration expenses increased primarily due to higher utilities expense.
Interest expense totaled $1,110,434 for the year ended December 31, 1994,
compared with $1,686,402 in 1993. The decrease is due to lower interest rates
and the reduction of approximately $1.1 million of the principal balances as a
result of the replacement financing secured in late 1993 (see Note 5 of Notes
to the Consolidated Financial Statements included in Exhibit 13 to this report
for a description of the refinancing). General and administrative expenses
totaled $144,052 for the year ended December 31, 1994, compared with $153,236
in 1993. The decrease primarily reflects one-time expenses incurred i n 1993
relating to the attempt at securing a loan for the Village at the Foothills I.
The average occupancy levels at each of the properties for the years ended
December 31, 1995, 1994 and 1993 were as follows:
Twelve Months Ended December 31,
Property 1995 1994 1993
Creekside Oaks 93% 96% 94%
Ponte Vedra Beach Village I 96% 96% 96%
Rancho Antigua 92% 95% 95%
Village at the Foothills I 95% 96% 96%
Item 8. Financial Statements and Supplementary Data
The financial statements are incorporated by reference to the Partnership's
Annual Report to Unitholders for the year ended December 31, 1995, which is
filed as an exhibit under Item 14. Supplementary Data is incorporated by
reference to pages F-1 and 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 2 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 2 Services
RI 2 Services (formerly Hutton Real Estate Services V, Inc.) is a Delaware
Corporation, formed on October 30, 1980, and is an affiliate of Lehman
Brothers, Inc. See the section captioned "Certain Matters Involving Affiliates
of RI 2 Services" 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 was
followed by a change in the general partner's name.
Certain officers and directors of RI 2 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 RI 2
Services are set forth below. There are no family relationships between any
executive officers or directors.
Name Office
Paul L. Abbott Director, President, Chief Financial
Officer and Chief Executive Officer
Donald E. Petrow Vice President
Kate D. Hobson Vice President
Paul L. Abbott, 50, is a Managing Director of Lehman Brothers. Mr. Abbott
joined Lehman Brothers in August 1988, and is responsible for investment
management of residential, commercial and retail real estate. Prior to joining
Lehman Brothers, 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 D. Hobson, 29, is an Assistant Vice President of Lehman Brothers and has
been a member of the Diversified Asset Group since 1992. Prior to joining
Lehman Brothers, 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 executive 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 Chief Financial Officer of ConAm
Management, and has been with the company since 1988. His responsibilities
include the accounting, treasury and data processing functions of the
organization. Mr. Svatos is part of the firm's due diligence team, analyzing a
broad range of projects for ConAm Management's fee client base. Prior to
joining ConAm Management, 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 of Science
degree in Accounting from the University of Illinois. Mr. Svatos 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,
ConAm Management'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 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 2 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 2 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 or their
affiliates reimbursed by the Registrant.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of December 31, 1995, no person was known by the Registrant to be the
beneficial owner of more than five percent of the Units of the Registrant. No
other directors or executive officers of the General Partners own any Units.
Item 13. Certain Relationships and Related Transactions
Pursuant to the Amended and Restated Certificate and Agreement of Limited
Partnership of the Registrant, for the year ended December 31, 1995, $228,953
of Registrant's net income was allocated to the General Partners ($152,636 to
RI 2 Services and $76,317 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 material contained on
pages 78 through 80 of the Prospectus of the Registrant dated July 9, 1982 (
the "Prospectus"), contained in Amendment No. 1 to Registrant's Registration
Statement No. 2-75519, filed July 9, 1982, under the section captioned "Profit
and Losses and Cash Distributions," which section is incorporated herein by
reference thereto.
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. It is the responsibility of ConAm
Management to select resident managers 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 to the Consolidated
Financial Statements included in the Partnership's Annual Report to Unitholders
f or the year ended December 31, 1995, which is filed as an exhibit under Item
14.
Pursuant to Section 12(g) of Registrant's Certificate and Agreement of Limited
Partnership, the General Partners may be reimbursed by the Registrant for
certain of their costs as described on page 16 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 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 December 31, 1995, which is
filed as a n exhibit under Item 14.
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
(a)(1) Financial Statements:
Page
Consolidated Balance Sheets - December 31, 1995 and 1994 (1)
Consolidated Statements of Partners' Capital (Deficit) -
For the years ended December 31, 1995, 1994 and 1993 (1)
Consolidated Statements of Operations -
For the years ended December 31, 1995, 1994 and 1993 (1)
Consolidated Statements of Cash Flows -
For the years ended December 31, 1995, 1994 and 1993 (1)
Notes to the 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 year ended December 31, 1995 filed as an exhibit under Item 14.
(a)(3) Exhibits:
(3)(A) Amended and Restated Certificate and Agreement of Limited
Partnership (included as, and incorporated herein by reference to,
Exhibit A to the Prospectus of Registrant dated July 9, 1982 (the
"Prospectus"), contained in Amendment No. 1 to Registration Statement,
No. 2-75519, of Registrant filed July 9, 1982).
(B) Subscription Agreement and Signature Page (included as, and
incorporated herein by reference to, Exhibit B to the Prospectus).
(10)(A) 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 (Commission File No. 0-11085)).
(B) Amended and Restated Agreement of General Partnership
of Country Place Village I Joint Venture dated as of July 1,
1992 (included as, and incorporated herein by reference to
Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q
(Commission File No. 0-11085)).
(C) Amended and Restated Agreement of General Partnership of
Creekside Oaks Joint Venture dated as of July 1, 1992 (included
as, and incorporated herein by reference to Exhibit 10.3 to the
Registrant's Quarterly Report on Form 10-Q (Commission File No.
0-11085)).
(D) Amended and Restated Agreement of General Partnership of
Ponte Vedra Beach Village I dated July 1, 1992 (included as,
and incorporated herein by reference to Exhibit 10.4 of the
Registrant's Quarterly Report on Form 10-Q (Commission File No.
0-11085)).
(E) Joint Venture Agreement of Rancho Antigua (included as,
and incorporated herein by reference to Exhibit 10(M) to the
Registrant's 1991 Annual Report on Form 10-K for the year ended
December 31, 1991 (Commission File No. 0-11085)).
(F) Amended and Restated Agreement of General Partnership of
Village at the Foothills I Joint Venture Limited Partnership
dated July 1, 1992 (included as, and incorporated herein by
reference to Exhibit 10.5 to the Registrant's Quarterly Report
on Form 10-Q (Commission File No. 0-11085)).
(G) Property Management Agreement between Creekside Oaks Joint
Venture and ConAm Management Corporation for the Creekside Oaks
property (included as, and incorporated herein by reference to
Exhibit 10-G to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993 (Commission File No.
0-11085)).
(H) Property Management Agreement between Ponte Vedra Beach
Joint Venture and ConAm Management Corporation for the Ponte
Vedra Beach Village I property (included as, and incorporated
herein by reference to Exhibit 10-H to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993
(Commission File No. 0-11085)).
(I) Property Management Agreement between Rancho Antigua Joint
Venture and ConAm Management Corporation for the Rancho Antigua
property (included as, and incorporated herein by reference to
Exhibit 10-I to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993 (Commission File No.
0-11085)).
(J) Property Management Agreement between Country Place
Village I Joint Venture and ConAm Management Corporation for
the Country Place Village I property (included as, and
incorporated herein by reference to Exhibit 10-J to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993 (Commission File No. 0-11085)).
(K) Property Management Agreement between Village at the
Foothills I Joint Venture and ConAm Management for the Village
at the Foothills I property (included as, and incorporated
herein by reference to Exhibit 10-K to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993
(Commission File No. 0-11085)).
(L) Loan Documents: Mortgage and Security Agreement,
Promissory Note and Assignment of Rents and Leases with respect
to the refinancing of Country Place Village I, between
Registrant and The Penn Mutual Insurance Company (included as,
and incorporated herein by reference to Exhibit 10-L to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993 (Commission File No. 0-11085)).
(M) Loan Documents: Mortgage and Security Agreement,
Promissory Note and Assignment of Rents and Leases with respect
to the refinancing of Creekside Oaks, between Registrant and
The Penn Mutual Insurance Company (included as, and
incorporated herein by reference to Exhibit 10-M to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993 (Commission File No. 0-11085)).
(N) Loan Documents: Mortgage and Security Agreement,
Promissory Note and Assignment of Rents and Leases with respect
to the refinancing of Ponte Vedra Beach Village I, between
Registrant and The Penn Mutual Insurance Company (included as,
and incorporated herein by reference to Exhibit 10-N to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993 (Commission File No. 0-11085)).
(O) Loan Documents: Deed of Trust and Assignment of Rents
with Security Agreement and Financing Statement with respect to
the refinancing of Rancho Antigua, between Registrant and The
Penn Mutual Insurance Company (included as, and incorporated
herein by reference to Exhibit 10-O to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993
(Commission File No. 0-11085)).
(13) Annual Report to Unitholders for the year ended December 31,
1995.
(21) List of Subsidiaries - Joint Ventures (included as, and
incorporated herein by reference to Exhibit 22 to the Registrant's
Annual Report for the year ended December 31, 1994, on Form 10-K
(Commission File No. 0-11085)).
(27) Financial Data Schedule
(99) Portions of Prospectus of Registrant dated July 9, 1983 (included
as, and incorporated herein by reference to Exhibit 28 of the
Registrant's 1988 Annual Report filed on Form 10-K for the fiscal year
ended December 31, 1988 (Commission File No. 0-11085)).
(b) Reports on Form 8-K:
No reports on Form 8-K were filed in the fourth quarter
of 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.
Dated: March 27, 1996
HUTTON/CONAM REALTY INVESTORS 2
BY: RI 2 Real Estate Services Inc.
General Partner
BY: /S/ Paul L. Abbott
Name: Paul L. Abbott
Title: Director, President, and
Chief Executive Officer
and Chief Financial Officer
BY: ConAm Property Services II, 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 2 REAL ESTATE SERVICES INC.
A General Partner
Date: March 27, 1996
BY: /S/ Paul L. Abbott
Paul L. Abbott
Director, President, and
Chief Executive Officer
and Chief Financial Officer
Date: March 27, 1996
BY: /S/ Donald Petrow
Donald Petrow
Vice President
Date: March 27, 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 II, LTD.
A General Partner
By: Continental American Development, Inc.
General Partner
Date: March 27, 1996 BY: /S/ Daniel J. Epstein
Daniel J. Epstein
Director and President
Date: March 27, 1996
BY: /S/ E. Scott Dupree
E. Scott Dupree
Vice President/Director
Date: March 27, 1996
BY: /S/ Robert J. Svatos
Robert J. Svatos
Vice President/Director
Date: March 27, 1996
BY: /S/ Ralph W. Tilley
Ralph W. Tilley
Vice President
Date: March 27, 1996
BY: /S/ J. Bradley Forrester
J. Bradley Forrester
Vice President