United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1997
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: 0-13329
CONAM REALTY INVESTORS 4, L.P.
formerly known as
HUTTON/CONAM REALTY INVESTORS 4
(Exact name of registrant as specified in its charter)
California 11-2685746
State or Other Jurisdiction of I.R.S Employer Identification No.
Incorporation or Organization
1764 San Diego Avenue 92110-1906
San Diego, CA 92110 Attn.: Robert J. Svatos Zip Code
Address of Principal Executive Offices
(619) 297-6771
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 September 30, At December 31,
1997 1996
Assets
Property:
Land $ 2,153,238 $ 5,627,763
Buildings and improvements 11,015,879 20,448,021
13,169,117 26,075,784
Less accumulated depreciation (5,447,126) (9,754,730)
7,721,991 16,321,054
Property held for disposition 8,013,991 7,358,300
Cash and cash equivalents 9,462,551 2,314,876
Other assets 3,300 15,370
Total Assets $ 25,201,833 $ 26,009,600
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 352,528 $ 108,269
Due to affiliates 14,211 20,443
Distribution payable 7,579,842 533,792
Security deposits payable 102,963 144,220
Total Liabilities 8,049,544 806,724
Partners' Capital:
General Partners _ _
Limited Partners 17,152,289 25,202,876
Total Partners' Capital 17,152,289 25,202,876
Total Liabilities and
Partners' Capital $ 25,201,833 $ 26,009,600
Consolidated Statement of Partners' Capital
For the nine months ended September 30, 1997
General Limited
Partners Partners Total
Balance at December 31, 1996 $ - $ 25,202,876 $ 25,202,876
Net Income 160,138 436,701 596,839
Cash Distributions (160,138) (8,487,288) (8,647,426)
Balance at September 30, 1997 $ - $ 17,152,289 $ 17,152,289
Consolidated Statements of Operations
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
Income
Rental $ 998,355 $ 1,185,400 $ 3,425,855 $3,557,572
Interest 87,496 26,750 142,643 80,122
Other 1,436 _ 6,741 4,295
Total Income 1,087,287 1,212,150 3,575,239 3,641,989
Expenses
Property operating 675,756 624,697 1,994,347 1,877,876
Depreciation 196,464 293,002 589,322 890,415
General and administrative 37,115 58,543 144,787 134,924
Total Expenses 909,335 976,242 2,728,456 2,903,215
Income from operations 177,952 235,908 846,783 738,774
Loss on sale of property (249,944) _ (249,944) _
Net Income (Loss) $ (71,992) $ 235,908 $ 596,839 $ 738,774
Net Income (Loss) Allocated:
To the General Partners $ 53,379 $ 53,379 $ 160,138 $ 160,137
To the Limited Partners (125,371) 182,529 436,701 578,637
$ (71,992) $ 235,908 $ 596,839 $ 738,774
Per limited partnership unit
(128,110 outstanding)
Income from operations $.97 $ 1.42 $5.36 $ 4.51
Loss on sale of property (1.95) _ (1.95) _
Net Income (Loss) $(.98) $ 1.42 $3.41 $4.51
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1997 1996
Cash Flows From Operating Activities:
Net income $ 596,839 $ 738,774
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 589,322 890,415
Loss on sale of property 249,944 _
Increase (decrease) in cash
arising from changes in operating
assets and liabilities:
Other assets 12,070 (3,513)
Accounts payable and accrued
expenses 244,259 352,225
Security deposits payable (41,257) 1,121
Due to affiliates (6,232) 240
Net cash provided by operating activities 1,644,945 1,979,262
Cash Flows From Investing Activities:
Net proceeds from sale of properties 7,108,356 _
Additions to real estate (4,250) (63,655)
Net cash provided by (used for)
investing activities 7,104,106 (63,655)
Cash Flows From Financing Activities:
Distributions (1,601,376) (1,654,754)
Net cash used for financing activities (1,601,376) (1,654,754)
Net increase in cash and cash equivalents 7,147,675 260,853
Cash and cash equivalents, beginning
of period 2,314,876 2,436,356
Cash and cash equivalents,
end of period $ 9,462,551 $ 2,697,209
Notes to the Consolidated Financial Statements
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's annual 1996 audited consolidated financial
statements within Form 10-K.
The unaudited interim consolidated financial statements include all adjustments
consisting of only normal recurring accruals which are, in the opinion of
management, necessary to present a fair statement of financial position as of
September 30, 1997 and the results of operations for the three and nine months
ended September 30, 1997 and 1996, cash flows for the nine months ended
September 30, 1997 and 1996 and the statement of partners' capital for the nine
months ended September 30, 1997. Results of operations for the period are not
necessarily indicative of the results to be expected for the full year.
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
The following significant events occurred subsequent to fiscal
year 1996 which require disclosure in this interim report per Regulation S-X,
Rule 10-01, Paragraph (a)(5). On August 6, 1997, the Partnership sold River
Hill Apartments to an unaffiliated institutional buyer for a sales price of
$7,275,000. The Partnership received net proceeds from the sale totaling
$7,108,356 and the transaction resulted in a loss of $249,944, which is
reflected in the Partnership's consolidated statements of operations for the
nine months ended September 30, 1997. On October 31, 1997, the General
Partners paid a special distribution to Limited Partners representing the net
proceeds from the sale.
The Partnership has entered into a contract for the sale of Pelican Landing
Apartments. Accordingly, Pelican Landing has been reclassified on the
Partnership's balance sheet as "Property held for disposition" at its net book
value.
ConAm Property Services IV, Ltd. ("CPS IV") and RI 3-4 Real Estate Services,
Inc. ("RI 3-4") have served as co-general partners of Hutton/ConAm Realty
Investors 4, (the "Partnership") since its inception. On October 8, 1997, CPS
IV acquired RI 3-4 Real Estate Services, Inc.'s co-general partner interest in
the Partnership pursuant to a Purchase Agreement between CPS IV and RI 3-4
dated August 29, 1997. As a result, upon the closing of this transaction, CPS
IV will now serve as the sole general partner of the Partnership. In
conjunction with this transaction, the name of the Partnership has been changed
from Hutton/ConAm Realty Investors 4 to ConAm Realty Investors 4, L.P. The
purchase of RI 3-4's interest by CPS IV will not affect the Partnership's
operations. See Part II, Item 5 contained herein for addition information.
Part I, Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources Given the performance of the Partnership's
properties, and the improvement in the real estate capital markets which has
increased demand by potential buyers, the General Partners determined that it
is in the best interest of the Partnership to attempt to sell the remaining
properties in an orderly manner over the next few years. However, meeting this
objective will be dependent upon a variety of factors, many of which are not
within the Partnership's control. Consequently, there can be no assurance that
any specific property or all the properties can be sold, that particular prices
will be achieved, or that all the properties can be sold within this time
frame.
We are pleased to report that the Partnership has entered into a contract for
the sale of Pelican Landing. The sale is expected to close on or before
December 31, 1997. Accordingly, Pelican Landing has been reclassified on the
Partnership's balance sheet at September 30, 1997 as "Property held for
disposition." While the General Partners believe that the sale will be
completed, as is customary, the buyer has several opportunities to cancel the
transaction during this period and accordingly, there is no guarantee that the
sale will close.
In keeping with this objective, on August 6, 1997 the Partnership sold River
Hill Apartments to an unaffiliated institutional buyer for a sales price of
$7,275,000. The Partnership received net proceeds from the sale totaling
$7,108,356 and the transaction resulted in a loss of $249,944.
At September 30, 1997, the Partnership had cash and cash equivalents of
$9,462,551, which were invested in unaffiliated money market funds, compared
with $2,314,876 at December 31, 1996. The increase is primarily attributable
to net proceeds received on the sale of River Hill Apartments. The Partnership
expects sufficient cash to be generated from operations to meet its current
operating expenses.
On October 31, 1997, the Partnership paid a special distribution to Limited
Partners in the amount of $58.75 per Unit. A portion of this distribution, in
the amount of $55 per Unit, represented the net proceeds from the sale of River
Hill Apartments. The remaining $3.75 per Unit represented net cash flow from
Partnership operations for the third quarter of 1997. 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. As a result of the sale
of River Hill Apartments, future quarterly cash distributions will be reduced
to reflect the corresponding reduction in the Partnership's cash flow.
Accounts payable and accrued expenses increased from $108,269 at December 31,
1996 to $352,528 at September 30, 1997, primarily as a result of accruals for
real estate taxes for the Partnership's remaining properties. Security
deposits payable decreased from $144,220 at December 31, 1996 to $102,963 at
September 30, 1997, primarily due to the sale of River Hill Apartments on
August 6, 1997.
Results of Operations
Partnership operations for the three months ended September 30, 1997 resulted
in a net loss of $71,992, compared with net income of $235,908 for the
corresponding period in 1996. Partnership operations for the nine months ended
September 30, 1997 resulted in net income of $596,839, compared with net income
of $738,774 for the corresponding period in 1996. The changes for both periods
are primarily attributable to lower rental income due to the sale of River Hill
Apartments on August 6, 1997 and the loss on sale of the property of $249,944,
which was partially offset by a decrease in depreciation expense due to River
Hill Apartments no longer being depreciated following its reclassification as
an asset held for disposition as of December 31, 1996. Net cash provided by
operating activities was $1,644,945 for the nine months ended September 30,
1997, compared with $1,979,262 for the corresponding period in 1996. The
decrease is primarily due to a decrease in rental revenues and an increase in
property expenses, as well as the timing of payments of accrued expenses.
Rental income for the three and nine months ended September 30, 1997 was
$998,355 and $3,425,855, respectively, compared with $1,185,400 and $3,557,572
for the corresponding periods in 1996. The decreases are primarily due to the
sale of River Hill Apartments, which was partially offset by higher rental
revenues at Pelican Landing and Shadowood Village. At Village of the Foothills
II, rental income remained relatively unchanged.
Interest income for the three and nine months ended September 30, 1997 was
$87,496 and $142,643, respectively, compared with $26,750 and $80,122 for the
corresponding periods in 1996. The increases are primarily due to higher cash
balances being maintained by the Partnership due to the receipt of proceeds
from the sale of River Hill Apartments during the third quarter of 1997.
Property operating expenses for the three and nine months ended September 30,
1997 totaled $675,756 and $1,994,347, respectively, compared to $624,697 and
$1,877,876 for the corresponding periods in 1996. The increases for both
periods are primarily attributable to increases in repair and maintenance
expenses at Pelican Landing, Village at Foothills II and Shadowood Village,
higher advertising expenses at Village at Foothills II and Shadowood Village
and higher utilities costs at Shadowood Village during the 1997 periods.
As a result of the reclassification of the River Hill property as held for
disposition as of December 31, 1996 and the subsequent sale of the property on
August 6, 1997, depreciation expense decreased from $293,002 and $890,415 for
the three and nine months ended September 30, 1996, respectively, to $196,464
and $589,322 for the corresponding periods in 1997.
General and administrative expenses for the three and nine months ended
September 30, 1997 were $37,115 and $144,787, respectively, compared to $58,543
and $134,924 for the same periods in 1996. During 1997, certain Partnership
expenses, which were voluntarily absorbed by affiliates of RI 3-4 Real Estate
Services, Inc. in prior periods, were reimbursed to RI 3- 4 Real Estate
Service, Inc. affiliates and will no longer be absorbed by these affiliates.
The change for the three-month period is also attributable to lower legal,
audit, printing and postage costs. The change for the nine-month period is also
due to higher legal, appraisal and printing costs.
During the first nine months of 1997 and 1996, average
occupancy levels at each of the properties were as follows:
Property 1997 1996
Pelican Landing 97% 97%
Shadowood Village 93% 95%
Village at the
Foothills II 93% 94%
Part II Other Information
Items 1-4 Not applicable.
Item 5 Other events.
ConAm Property Services IV, Ltd. ("CPS IV") and RI 3-4 Real
Estate Services, Inc. ("RI 3-4") have served as co-general
partners of the Partnership since its inception. On October 8,
1997, CPS IV acquired RI 3-4's co-general partner interest in
the Partnership pursuant to Purchase Agreement between CPS IV
and RI 3-4 dated August 29, 1997. As a result, CPS IV will now
serve as the sole general partner of the Partnership. In
conjunction with this transaction, the name of the Partnership
has been changed from Hutton/ConAm Realty Investors 4 to ConAm
Realty Investors 4, L.P. The purchase of RI 3-4's interest by
CPS IV will not affect the Partnership's operations.
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 months ended September 30, 1997.
On October 8, 1997, the Partnership filed a Form
8K reporting ConAm Property Services IV, Ltd.'s
acquisition of the RI 3-4 Real Estate Services,
Inc. co-general partner interest and the change
in the name of the Partnership from Hutton/ConAm
Realty Investors 4 to ConAm Realty Investors 4, L.P.
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.
CONAM REALTY INVESTORS 4 L.P.
CONAM PROPERTY SERVICES IV, Ltd
General Partner
BY: CONTINENTAL AMERICAN
DEVELOPMENT, INC.
General Partner
Date: November 14, 1997 BY: /s/ Daniel J. Epstein
Director, President, and Principal
Executive Officer
Date: November 14, 1997 BY: /s/ Robert J. Svatos
Chief Financial Officer