United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended August 31, 1996
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: 0-11769
HUTTON/CONAM REALTY INVESTORS 3
Exact Name of Registrant as Specified in its Charter
California 13-3176625
State or Other Jurisdiction of I.R.S. Employer Identification No.
Incorporation or Organization
3 World Financial Center, 29th Floor, 10285
New York, NY Attn: Andre Anderson Zip Code
Address of Principal Executive Offices
(212) 526-3237
Registrant's Telephone Number, Including Area Code
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ____
Consolidated Balance Sheets At August 31, At November 30,
1996 1995
Assets
Investments in real estate:
Land $5,817,668 $5,817,668
Buildings and improvements 22,284,967 22,164,580
28,102,635 27,982,248
Less accumulated depreciation (10,293,576) (9,645,010)
17,809,059 18,337,238
Cash and cash equivalents 1,179,135 1,060,348
Restricted cash 95,609 61,141
Other assets, net of accumulated amortization
of $152,438 in 1996 and $120,176 in 1995 178,050 191,114
Total Assets $19,261,853 $19,649,841
Liabilities and Partners' Capital
Liabilities:
Mortgages payable $8,468,418 $8,564,859
Distribution payable 222,222 222,222
Accounts payable and accrued expenses 190,891 149,215
Due to general partners and affiliates 40,447 40,519
Security deposits 115,896 109,876
Total Liabilities 9,037,874 9,086,691
Partners' Capital (Deficit):
General Partners (880,218) (846,302)
Limited Partners 11,104,197 11,409,452
Total Partners' Capital 10,223,979 10,563,150
Total Liabilities and Partners' Capital $19,261,853 $19,649,841
Consolidated Statement of Partners' Capital (Deficit)
For the nine months ended August 31, 1996
Limited General
Partners Partners Total
Balance at November 30, 1995 $11,409,452 $(846,302) $10,563,150
Net income 294,745 32,750 327,495
Cash distributions (600,000) (66,666) (666,666)
Balance at August 31, 1996 $11,104,197 $(880,218) $10,223,979
Consolidated Statements of Operations
Three months ended Nine months ended
August 31, August 31,
1996 1995 1996 1995
Income
Rental $908,718 $977,296 $2,745,501 $3,131,082
Interest and other 11,184 47,150 46,543 161,395
Total Income 919,902 1,024,446 2,792,044 3,292,477
Expenses
Property operating 386,867 505,094 1,100,374 1,473,186
Depreciation and amortization 227,444 256,865 680,828 820,222
Interest 186,710 212,365 562,242 740,856
General and administrative 41,969 46,093 121,105 114,545
Total Expenses 842,990 1,020,417 2,464,549 3,148,809
Income from operations 76,912 4,029 327,495 143,668
Loss on sale of property _ (83,992) _ (83,992)
Net Income (Loss) $76,912 $(79,963) $327,495 $59,676
Net Income (Loss) Allocated:
To the General Partners $7,691 $ (437) $32,750 $13,527
To the Limited Partners 69,221 (79,526) 294,745 46,149
$76,912 $(79,963) $327,495 $59,676
Per limited partnership unit:
(80,000 outstanding) $.87 $(.99) $3.68 $.58
Consolidated Statements of Cash Flows
For the nine months ended August 31, 1996 1995
Cash Flows From Operating Activities:
Net income $327,495 $ 59,676
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 680,828 820,222
Loss on sale of property _ 83,992
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Fundings to restricted cash (116,782) (114,829)
Release of restricted cash to property operations 82,314 99,539
Other assets (19,198) 15,679
Accounts payable and accrued expenses 41,676 82,011
Due to general partners and affiliates (72) 22,389
Security deposits 6,020 (42,621)
Net cash provided by operating activities 1,002,281 1,026,058
Cash Flows From Investing Activities:
Net proceeds from sale of property _ 3,832,290
Additions to real estate (120,387) (52,071)
Net cash provided by (used for) investing activities (120,387) 3,780,219
Cash Flows From Financing Activities:
Mortgage principal payments (96,441) (3,002,889)
Distributions (666,666) (4,755,555)
Net cash used for financing activities (763,107) (7,758,444)
Net increase (decrease) in cash and cash equivalents 118,787 (2,952,167)
Cash and cash equivalents, beginning of period 1,060,348 4,213,148
Cash and cash equivalents, end of period $1,179,135 $1,260,981
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $562,242 $740,856
Notes to the Consolidated Financial Statements
The unaudited interim consolidated financial statements should be
read in conjunction with the Partnership's annual 1995 audited
consolidated financial statements within Form 10-K.
The unaudited interim consolidated financial statements include
all adjustments which are, in the opinion of management,
necessary to present a fair statement of financial position as of
August 31, 1996 and the results of operations and cash flows for
the nine months ended August 31, 1996 and 1995 and the
consolidated statement of partner's capital (deficit) for the
nine months ended August 31, 1996. Results of operations for the
periods are not necessarily indicative of the results to be
expected for the full year.
No significant events have occurred subsequent to fiscal year
1995, and no material contingencies exist which would require
disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
Part I, Item 2 . Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
At August 31, 1996, the Partnership had cash and cash equivalents
of $1,179,135 that were invested in unaffiliated money market
funds, an increase of $118,787 from the balance at November 30,1995.
The increase is attributable to net cash provided by operating
activities exceeding cash used for distributions, mortgage payments,
and additions to real estate. The Partnership also maintains a
restricted cash balance, which totaled $95,609 at August 31, 1996,
representing real estate tax escrows required under the terms of
the Autumn Heights and Skyline Village loans. Accounts payable
and accrued expenses increased by $41,676 from the corresponding
period in 1995 as a result of real estate tax accruals for 1996,
partially offset by a decrease in audit fees payable due to the
payment of invoices from the prior year. The Partnership expects
sufficient cash to be generated from operations to meet its current
operating expenses.
The General Partners continue to perform various improvements at
the properties which include roof repairs at Autumn Heights and
exterior painting at Skyline Village. Thus far, the roof repairs
at Autumn Heights are complete, with the painting at Skyline
Village currently underway. It is expected that this work will
be finished by the end of the year. The General Partners will
evaluate the need for additional improvement work at the
properties on an ongoing basis.
The General Partners declared a cash distribution of $2.50 per
Unit for the quarter ended August 31, 1996 which will be paid to
investors on or about October 15, 1996. 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.
Results of Operations
Partnership operations for the three and nine months ended
August 31, 1996, resulted in net income of $76,912 and $327,495,
respectively, compared with a net loss of $79,963 and net income
of $59,676, respectively, for the corresponding periods in fiscal
1995. The increases in net income for both periods are due
primarily to reductions in property operating expense,
depreciation and amortization, and interest expense resulting
from the sale of Country Place Village II in July 1995. Also
contributing to the net loss for the three month period and lower
net income for the nine month period in 1995 was the loss
recognized on the sale of the property recorded in the third
quarter of 1995.
Rental income for the three and nine months ended August 31, 1996
was $908,718 and $2,745,501, respectively, compared with $977,296
and $3,131,082, respectively, in the corresponding periods in
fiscal 1995. The decreases reflect the sale of Country Place
Village II and a decrease in occupancy at Skyline Village, and
are partially offset by increases in rental income at two of the
Partnership's other properties due to increased rental rates and,
in the case of Ponte Vedra Beach Village II, an increase in
occupancy. Interest income totaled $11,184 and $46,543 for the
three and nine months ended August 31, 1996, respectively,
compared to $47,150 and $161,395 for the corresponding periods in
fiscal 1995. The decreases are the result of the Partnership
maintaining a lower cash balance in the 1996 periods compared to
the 1995 periods.
Property operating expenses and depreciation and amortization
were lower in the three and nine month periods ended
August 31, 1996 compared to the same periods in fiscal 1995 due
to the July 1995 sale of Country Place Village II. Interest
expense also declined due to the June 1995 repayment of the
Country Place Village II mortgage.
During the first nine months of fiscal 1996 and 1995, average
occupancy levels at each of the properties were as follows:
Property 1996 1995
Autumn Heights 96% 96%
Ponte Vedra Beach Village II 96% 93%
Skyline Village 92% 94%
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form
8-K were filed during the three month period
covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HUTTON/CONAM REALTY INVESTORS 3
BY: RI 3-4 Real Estate Services, Inc.
General Partner
Date: October 14, 1996 BY: /s/ Paul L. Abbott
Director, President, Chief
Executive Officer and
Chief Financial Officer