Exhibit 13
ConAm Realty Investors 3 L.P.
1997 ANNUAL REPORT
ConAm Realty Investors 3 L.P. is a California limited partnership formed
in 1983 to acquire, operate and hold for investment multifamily
residential properties. At November 30, 1997, the Partnership's
portfolio consisted of three apartment properties located in Colorado,
Arizona and Florida. Provided below is a comparison of average occupancy
levels for the years ended November 30, 1997 and 1996.
Average Occupancy
Property Location 1997 1996
Autumn Heights Colorado Springs, Colorado 92% 96%
Ponte Vedra Beach
Village II Ponte Vedra Beach, Florida 95% 95%
Skyline Village Tucson, Arizona 97% 93%
Contents
1 Message to Investors
3 Performance Summary
4 Financial Highlights
5 Consolidated Financial Statements
8 Notes to the Consolidated
Financial Statements
13 Independent Auditors' Report and
Report of Former Independent Accountants
15 Net Asset Valuation
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 68144-2596 Attn: Financial Communications
800-223-3464 800-223-3464
Message to Investors
Presented for your review is the 1997 Annual Report for ConAm
Realty Investors 3 L.P. (the "Partnership"). In this report we
discuss general market conditions affecting the Partnership's
three properties (the "Properties"). We have also included a
performance summary which addresses operations at each of the
properties and financial highlights for the year.
This annual report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Actual results could
differ materially from those projected in or contemplated by the
forward-looking statements as a result of a number of factors,
including those identified herein.
Cash Distributions
The Partnership paid cash distributions totaling $6.00 per Unit
for the year ended November 30, 1997, including the fourth
quarter distribution of $1.50 per Unit, which was credited to
your brokerage account or sent directly to you on January 21,
1998. Since inception, the Partnership has paid distributions
totaling $408.50 per original $500 Unit, including $250 per Unit
in return of capital payments. 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.
Operations Overview
Operations at the Properties remained stable in 1997, reflecting
healthy economic conditions, tempered by increased competition
for tenants in the markets where the properties are located. As a
result of new apartment construction in the Jacksonville and
Colorado Springs markets, several large apartment properties have
begun to offer rental concessions to attract tenants. In Tucson,
where Skyline Village is located, many high-end renters opted to
purchase homes due to low interest rates. Despite these trends,
strong economic growth in all three areas helped strengthen multi-
family housing, and the Properties sustained average occupancy
levels at or above 95% in 1997. In addition, the appraised
values of the Properties increased by 4.2% in total when compared
to the prior year.
Several interior and exterior repairs were performed at each
property during 1997, including carpet and flooring replacement
and other routine repairs. In addition, ongoing roof
replacements at Ponte Vedra Beach Village II were completed in
the fourth quarter of 1997, while roof replacements required on
five of the buildings at Autumn Heights commenced in July. These
replacements are anticipated to cost approximately $100,000 and
will be finished by the end of the year. The General Partner
will evaluate the need for capital improvements to increase the
appeal of the Properties and position them for an eventual sale.
The General Partner is continuing to evaluate the sale potential
of the remaining properties and other options with respect to the
Partnership's investments. One of these options includes
refinancing certain loans secured by the Properties in order to
return capital to the limited partners on a tax-free basis and
lock in favorable fixed interest rates. This would also
potentially enhance the future marketability of the Properties,
while enabling the Partnership to take advantage of possible
future property appreciation. The Partnership's ability to sell
the Properties is dependent upon a variety of factors, many of
which are not within the Partnership's control. There can be no
assurance that any specific property or all the properties can be
sold, that particular prices will be achieved, or that the
Properties can be sold within a specific time frame. We will
keep you apprised of our sales efforts in future correspondence.
Summary
We will continue to monitor market conditions to determine the
opportune time to sell the Properties, and are also evaluating a
potential refinance of the Partnership's mortgage obligations.
In the interim, we intend to maximize the performance of the
Properties and further improve their appearance and condition.
We will keep you apprised of significant developments affecting
your investment in future reports.
Very truly yours,
/s/ Daniel J. Epstein
Daniel J. Epstein
President
Continental American Development Inc.
General Partner of ConAm Property Services IV, Ltd.
February 27, 1998
Performance Summary
Autumn Heights Colorado Springs, Colorado
Autumn Heights is a 140-unit apartment complex located in the
southwest section of Colorado Springs. The property reported
stable operations in 1997, although average occupancy declined to
92% in fiscal 1997, down from 96% in fiscal 1996. Due to a
growing population and healthy economy, Colorado Springs is
considered to be one of the fastest growing markets in the
country. Strong market conditions over the last two years,
however, have prompted a rise in new construction of multifamily
properties. The recent addition of several new apartments to the
market has led to increased competition and a decline in rental
rates. As a result, rental income and average occupancy at
Autumn Heights declined slightly from the prior year. The
property requires extensive roof replacements in 1998, which,
when completed, should enhance its overall value.
Ponte Vedra Beach Village II Ponte Vedra Beach, Florida
Ponte Vedra Beach Village II is a 124-unit luxury apartment
complex located in an oceanside residential area to the southeast
of Jacksonville. The property reported an average occupancy
level of 95% in fiscal 1997, unchanged from fiscal 1996.
Property improvements for the year included roof replacements,
carpet replacement and other improvements to increase the
appearance of the property. Favorable market conditions in the
Jacksonville area have led to an increase in new multifamily
construction, with new construction permits issued for
approximately 3,831 new apartment units throughout the year.
Although population and job growth in the Jacksonville area
remains high, continuing construction at this pace could lead to
softness in the market in the future.
Skyline Village Tucson, Arizona
Skyline Village contains 168 units and is located in the
northwest area of Tucson. The property continued to perform well
despite strong competition, and maintained an average occupancy
rate of 97% during 1997, compared to 93% for 1996. Apartment
vacancy rates remain high in this market, but significant
population growth in Tucson over the last few years is slowly
reducing the number of available units. Low interest rates and
affordable home prices have also increased competition by luring
many renters to purchase homes. This competition has led to the
reemergence of rental incentives and other concessions to attract
tenants. Property improvements in 1997 included painting, carpet
replacement and ceiling fan replacement in selected units.
Financial Highlights
Selected Financial Data
For the periods ended November 30, 1997 1996 1995 1994 1993
Dollars in thousands,
except for per unit data
Total Income $ 3,632 $ 3,745 $ 4,203 $ 4,298 $ 4,033
Loss on Sale of Property _ _ (84) _ _
Net Income (loss) (195) 354 85 18 3
Net Cash Provided by
Operating Activities 921 1,205 1,185 1,197 1,154
Long-term Obligations 8,293 8,435 8,565 11,599 10,636
Total Assets at Year End 18,075 18,977 19,650 27,614 30,184
Net Income (loss) per
Limited Partnership Unit* (2.42) 3.98 .87 .20 .03
Distributions per
Limited Partnership Unit* 6.00 10.00 10.00 14.00 8.00
Special Distributions per
Limited Partnership Unit* _ _ 50.00 30.00 -
* 80,000 Units outstanding
Cash Distributions
Per Limited Partnership Unit
1997 1996 1995
Special Distributions* $ _ $ _ $ 50.00
First Quarter 1.50 2.50 2.50
Second Quarter 1.50 2.50 2.50
Third Quarter 1.50 2.50 2.50
Fourth Quarter 1.50 2.50 2.50
Total $ 6.00 $ 10.00 $ 60.00
* On August 22, 1995, the Partnership paid a special cash
distribution totaling $50 per Unit, reflecting a return of
capital from the net proceeds of the July 1995 sale of Country
Place Village II and the remaining proceeds from the sale of
Bernardo Point in 1990.
Cash Distributions were reduced in 1997 due to the decrease in net
cash provided by operating activities, primarily due to the roof
replacements at Autumn Heights and Ponte Vedra Beach Village II.
Consolidated Balance Sheets At November 30, At November 30,
1997 1996
Assets
Investments in real estate:
Land $ 5,817,668 $ 5,817,668
Buildings and improvements 22,465,678 22,326,780
28,283,346 28,144,448
Less accumulated depreciation (11,223,921) (10,510,777)
17,059,425 17,633,671
Cash and cash equivalents 796,824 1,084,483
Restricted cash 109,843 84,934
Other assets, net of accumulated amortization
of $206,209 in 1997 and $163,192 in 1996 109,293 173,569
Total Assets $18,075,385 $18,976,657
Liabilities and Partners' Capital
Liabilities:
Mortgages payable $ 8,292,972 $ 8,434,843
Distribution payable 146,659 222,222
Accounts payable and accrued expenses 218,266 156,786
Due to general partners and affiliates 16,703 15,808
Security deposits 101,198 118,601
Total Liabilities 8,775,798 8,948,260
Partners' Capital (Deficit):
General Partners (955,059) (899,777)
Limited Partners (80,000 Units outstanding) 10,254,646 10,928,174
Total Partners' Capital 9,299,587 10,028,397
Total Liabilities and Partners' Capital $18,075,385 $18,976,657
Consolidated Statements of Operations
For the years ended November 30, 1997 1996 1995
Income
Rental $ 3,593,135 $ 3,688,364 $ 4,027,970
Interest and other 38,921 57,109 174,780
Total Income 3,632,056 3,745,473 4,202,750
Expenses
Property operating 1,838,576 1,581,543 1,912,816
Depreciation and amortization 922,261 908,783 1,047,513
Interest 736,373 748,229 929,646
General and administrative 177,129 152,783 143,378
Write-off of assets 153,200 _ _
Total Expenses 3,827,539 3,391,338 4,033,353
Income (loss) from operations (195,483) 354,135 169,397
Loss on sale of property _ _ (83,992)
Net Income (Loss) $ (195,483) $ 354,135 $ 85,405
Net Income (Loss) Allocated:
To the General Partners $ (1,955) $ 35,413 $ 16,100
To the Limited Partners (193,528) 318,722 69,305
$ (195,483) $ 354,135 $ 85,405
Per limited partnership unit
(80,000 Units outstanding):
Income (loss) from operations $(2.42) $3.98 $1.91
Loss on sale of property _ _ (1.04)
Net Income (Loss) $(2.42) $3.98 $ .87
Consolidated Statements of Partners' Capital (Deficit)
For the years ended November 30, 1997, 1996, and 1995
General Limited
Partners Partners Total
Balance at November 30, 1994 $ (773,514) $16,140,147 $15,366,633
Net income 16,100 69,305 85,405
Distributions ($60.00 per Unit) (88,888) (4,800,000) (4,888,888)
Balance at November 30, 1995 $ (846,302) $11,409,452 $10,563,150
Net income 35,413 318,722 354,135
Distributions ($10.00 per Unit) (88,888) (800,000) (888,888)
Balance at November 30, 1996 $ (899,777) $10,928,174 $10,028,397
Net income (loss) (1,955) (193,528) (195,483)
Distributions ($6.00 per Unit) (53,327) (480,000) (533,327)
Balance at November 30, 1997 $ (955,059) $10,254,646 $ 9,299,587
Consolidated Statements of Cash Flows
For the years ended November 30, 1997 1996 1995
Cash Flows From Operating Activities:
Net income (loss) $ (195,483) $ 354,135 $ 85,405
Adjustments to reconcile net income to
netcash provided by operating activities:
Depreciation and amortization 922,261 908,783 1,047,513
Write-off of assets 153,200 _ _
Loss on sale of property _ _ 83,992
Increase (decrease) in cash arising from
changes in operating assets and
liabilities:
Fundings to restricted cash (128,748) (156,654) (152,988)
Release of restricted cash to property
operations 103,839 132,861 149,827
Other assets 21,259 (25,471) 8,738
Accounts payable and accrued expenses 61,480 (17,938) 16,885
Due to general partners and affiliates 895 798 (2,867)
Security deposits (17,403) 8,725 (51,791)
Net cash provided by operating activities 921,300 1,205,239 1,184,714
Cash Flows From Investing Activities:
Net proceeds from sale of property _ _ 3,832,290
Additions to real estate (458,198) (162,200) (158,367)
Net cash provided by (used for) investing
activities (458,198) (162,200) 3,673,923
Cash Flows From Financing Activities:
Mortgage principal payments (141,871) (130,016) (3,033,660)
Distributions (608,890) (888,888) (4,977,777)
Net cash used for financing activities (750,761) (1,018,904) (8,011,437)
Net increase (decrease) in cash and cash
equivalents (287,659) 24,135 (3,152,800)
Cash and cash equivalents,
beginning of period 1,084,483 1,060,348 4,213,148
Cash and cash equivalents, end of period $ 796,824 $1,084,483 $ 1,060,348
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 736,373 $ 748,229 $ 929,646
Supplemental Disclosure of Non-Cash
Investing Activities:
Write-off of buildings and improvements $ (319,300) $ _ $ _
Write-off of accumulated depreciation $ 166,100 $ _ $ _
Notes to the Consolidated Financial Statements
November 30, 1997, 1996 and 1995
1. Organization
ConAm Realty Investors 3 L.P., (formerly Hutton/ConAm Realty
Investors 3) (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 July 14, 1983. The Partnership
was formed for the purpose of acquiring and operating multi-
family residential real estate. The general partners of the
Partnership were RI 3-4 Real Estate Services, Inc. ("RI 3-4"), an
affiliate of Lehman Brothers, Inc. (see below), and ConAm
Property Services IV, Ltd. ("CPS IV"), an affiliate of
Continental American Properties, Ltd. (the "General Partners").
On January 27, 1998, CPS IV acquired RI 3-4'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,
CPS IV now serves as the sole general partner (the "General
Partner") of the Partnership. In conjunction with this
transaction, the name of the Partnership changed from
Hutton/ConAm Realty Investors 3 to ConAm Realty Investors 3 L.P.
The Partnership will continue until December 31, 2010 unless
sooner terminated pursuant to the terms of the Partnership
Agreement.
2. Significant Accounting Policies and Practices
Financial Statements - The consolidated financial statements are
prepared on the accrual basis of accounting and include the
accounts of the Partnership and its affiliated ventures when the
Partnership has a controlling interest in the ventures. The
effect of transactions between the Partnership and its ventures
have been eliminated in consolidation.
Investments in Real Estate - Investments in real estate are
recorded at cost less accumulated depreciation and include the
initial purchase price of the property, legal fees, acquisition
and closing costs.
Revenue is recognized when earned and expenses (including
depreciation) are recognized when incurred in accordance with
generally accepted accounting principles. 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 (25 years).
Maintenance and repairs are charged to operations as incurred.
Costs incurred for 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 net income for the period.
Impairment of Long-Lived Assets - 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"), requires the Partnership to assess its real estate
investments for impairment whenever events or changes in
circumstances indicate that the carrying amount of the real
estate may not be recoverable. Recoverability of real estate to
be held and used is measured by a comparison of the carrying
amount of the real estate to future net cash flows (undiscounted
and without interest) expected to be generated by the real
estate. If the real estate is considered to be impaired, the
impairment to be recognized is measured by the amount by which
the carrying amount of the real estate exceeds the fair value of
the real estate.
Other Assets - Included in other assets are costs incurred in
connection with obtaining financing for the Partnership's
properties. Such costs are amortized over the initial term of
the loan on a method which approximates the effective-interest
method.
Income Taxes - No provision for income taxes has been made in the
financial statements as the liability for such taxes is that of
the partners rather than the Partnership.
Cash and Cash Equivalents - Cash and cash equivalents consist of
highly liquid short-term investments with original maturities of
three months or less.
Concentration of Credit Risk - Financial instruments which
potentially subject the Partnership to a concentration of credit
risk principally consist of cash and cash equivalents and
restricted cash in excess of the financial institution's
federally insured limits. The Partnership invests its cash and
cash equivalents and restricted cash with high credit quality
federally insured financial institutions.
Restricted Cash - Restricted cash consists of escrows for real
estate taxes as required by the first mortgage lender.
Use of Estimates - Management of the Partnership has made a number
of estimates and assumptions relating to the reporting of assets
and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could
differ from those estimates.
3. The Partnership Agreement
The Partnership Agreement provides that net cash from operations,
as defined, is to be distributed quarterly, 90% to the limited
partners and 10% to the General Partners.
Net loss for any fiscal year is to be allocated 99% to the
limited partners and 1% to general partners. Net income for any
fiscal year will generally be allocated 90% to the limited
partners and 10% to the General Partners.
Net proceeds from sales or refinancing are to be distributed 100%
to the limited partners until each limited partner has received
an amount equal to his adjusted capital value (as defined) and an
annual, non-compounded cumulative 7% return thereon. The
balance, if any, is to be distributed 85% to the limited partners
and 15% to the General Partners. Generally, all gain from sales
is to be allocated in the same manner as net proceeds from sales
or refinancing.
Effective July 1, 1997, all general partner allocations are to be
made solely to CPS IV.
4. Investments in Real Estate
The Partnership owns three residential apartment complexes that
were acquired either directly or through investments in joint
ventures as follows:
Apartment Date Purchase
Property Name Units Location Acquired Price
Autumn Heights 140 Colorado Springs, CO 1/25/85 $ 9,234,438
Skyline Village 168 Tucson, AZ 3/20/85 10,388,068
Ponte Vedra Beach
Village II 124 Jacksonville, FL 8/22/85 6,547,829
On July 20, 1995, the Partnership sold its former property,
Country Place Village II (the "Property") for $3,890,000 to an
institutional buyer (the "Buyer"), which was unaffiliated with
the Partnership. The selling price was determined by arm's
length negotiations between the Partnership and the Buyer. The
Partnership received net proceeds of $3,832,290. The transaction
resulted in a loss on sale for the Property of $83,992 which was
allocated in accordance with the Partnership Agreement. On
August 22, 1995, the General Partners paid a special distribution
of $4,000,000 to the limited partners. The special distribution
was comprised of a portion of the net proceeds from the sale of
the Property and Partnership cash reserves.
Skyline Village and Country Place Village II were acquired
through joint ventures with an unaffiliated developer. 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 developer did not make an initial capital
contribution to these ventures.
In the case of Country Place Village II, the joint venture form
was retained. The Partnership entered into an amended and
restated Agreement of General Partnership, dated as of July 1,
1992 with its two corporate General Partners, RI 3-4 Real Estate
Services, Inc. and ConAm Property Services IV, Ltd. In the case
of Skyline Village, the joint venture was converted to a limited
partnership. The Partnership entered into an amended and
restated Agreement of Limited Partnership, dated as of July 1,
1992 with its two corporate General Partners, RI 3-4 Real Estate
Services, Inc. and ConAm Property Services IV, Ltd., as General
Partners, and the Partnership as the sole limited partner. There
was no interruption in either management or operating activities
of the Partnership as a result of the settlement.
The amended limited partnership and general partnership
agreements of Skyline Village and Country Place Village II
substantially provide that:
a. Available cash from operations is to be distributed 100% to
the Partnership until it has received an annual, non-cumulative
preferred return for Skyline Village and Country Place Village of
$675,000 and $450,000, respectively. Any remaining balance is to
be distributed 99% to the Partnership and 1% to the corporate
General Partners.
b. Net income is to be allocated first, proportionately to
partners with negative capital accounts, as defined, until such
capital accounts have been increased to zero then, to the
Partnership up to the amount of any payments made on account
of its preferred return and thereafter, 99% to the Partnership
and 1% to the corporate General Partners. All net losses are to
be allocated first, to the partners with positive capital
accounts, as defined, until such accounts have been reduced to
zero and then, 99% to the Partnership and 1% to the corporate
General Partners.
c. Income from a sale is to be allocated first, to the Partnership
until the Partnership's capital accounts, as defined, are equal
to the fair market value of the ventures' assets at the date of
the amendment. Then, any remaining balance is to be allocated 99%
to the Partnership and 1% to the corporate General Partners. Net
proceeds from a sale or refinancing are to be distributed first,
to the partners with the positive capital account balance, as
defined; thereafter, 99% to the Partnership and 1% to the corporate
General Partners.
5. Mortgages Payable
The Partnership's first mortgage loans payable are comprised as
follows:
Autumn Heights - On January 6, 1994, the Partnership obtained a
first mortgage loan from John Hancock. Total proceeds of
$5,500,000 were received and are collateralized by a Deed of
Trust, Security Agreement and Fixture Filing with Assignment of
Rents Agreement encumbering the property. The loan is for a term
of seven years and bears interest at an annual rate of 8%
requiring monthly installments of principal and interest based on
a 25 year amortization schedule. The loan requires monthly real
estate tax escrow fundings. The loan matures on January 1, 2001,
upon which time a balloon payment of $4,736,587 and any accrued
interest are due.
Skyline Village - On December 20, 1991, the venture obtained a
first mortgage loan of $3,350,000 from the Penn Mutual Life
Insurance Company ("Penn Mutual") collateralized by a deed of
trust on the land and the improvements, and an assignment of
rents. During 1996, Penn Mutual transferred the first mortgage
loan to GE Capital Asset Management Corp. under the existing
terms. The loan is for a term of seven years and bears interest
at an annual rate of 10.125% requiring monthly installments of
principal and interest. The loan matures on December 31, 1998,
upon which time a balloon payment of $3,054,594 and any accrued
interest are due. Management intends to pursue refinancing
options for this property.
Country Place Village II - On July 15, 1985, the venture obtained
a first mortgage loan of $3,000,000 collateralized by a mortgage
encumbering Country Place Village II. The loan had an initial
term of five years and bore interest at an annual rate of 12.5%
with monthly interest payments only. The loan was extended in
1990 for an additional five years bearing interest at an annual
rate of 10.15% with monthly principal and interest payments. The
mortgage matured in July 1995, with the remaining principal of
$2,900,075 due. On June 29, 1995, the Partnership paid
$2,925,099, representing principal and interest, from cash
reserves to fully satisfy its mortgage obligation on Country
Place Village II.
Annual maturities of mortgage principal at November 30 1997, for
the next four fiscal years are as follows:
Year Amount
1998 $ 154,825
1999 3,161,160
2000 115,411
2001 4,861,576
$8,292,972
6. Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments", requires that the
fair values be disclosed for the Partnership's financial
instruments. The carrying amount of cash and cash equivalents,
distributions payable, accounts payable and accrued expenses, due
to general partners and affiliates and security deposits are
reasonable estimates of their fair values due to the short-term
nature of those instruments.
The carrying amount of the mortgages payable is a reasonable
estimate of fair value based on management's belief that the
interest rates and terms of the debt are comparable to those
commercially available to the Partnership in the marketplace for
similar instruments.
7. Transactions with Related Parties
The following is a summary of fees earned and reimbursable
expenses to the General Partners and affiliates for the years
ended November 30, 1997, 1996 and 1995, and the unpaid portion at
November 30, 1997:
Earned and
Unpaid at
November 30, Earned
Year 1997 1997 1996 1995
RI 3-4 Real Estate Services,
Inc. and affiliates:
Out-of-pocket expenses $ _ $ 2,216 $ 1,125 $ 3,105
ConAm and affiliates:
Property operating salaries _ 258,808 233,653 258,010
Property management fees 16,703 180,111 184,685 203,107
Total $ 16,703 $441,135 $419,463 $464,222
8. Reconciliation of Financial Statement and Tax Information
The following is a reconciliation of consolidated net income for
financial statement purposes to net income (loss) for federal
income tax purposes for the years ended November 30, 1997, 1996
and 1995:
1997 1996 1995
Net income (loss) per financial statements $ (195,483) $ 354,135 $ 85,405
Depreciation deducted for tax purposes
less than (in excess) of depreciation
expense per financial statements 17,787 (143,654) (117,445)
Tax basis gain on sale in excess of
GAAP loss on sale _ _ 852,564
Tax basis joint venture net income
(loss) in excess of GAAP basis joint
venture net loss (72,635) (72,634) (74,889)
Other 13,854 (11,175) 3,951
Taxable net income (loss) (unaudited) $ (236,477) $ 126,672 $749,586
The following is a reconciliation of partners' capital for
financial statement purposes to partners' capital for federal
income tax purposes as of November 30, 1997, 1996 and 1995:
1997 1996 1995
Partners' capital per
financial statements $9,299,587 $10,028,397 $10,563,150
Adjustment for cumulative difference
between tax basis net income (loss) and
net income per financial statements (3,493,754) (3,452,760) (3,225,297)
Partners' capital per income tax
return (unaudited) $5,805,833 $ 6,575,637 $ 7,337,853
At November 30, 1997, the tax basis of the Partnership's assets
was $14,532,746 and the tax basis of the Partnership's
liabilities was $8,726,913.
9. Distributions Paid
Distributions, per the consolidated statements of partners'
capital (deficit), 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 differences as presented on the
consolidated financial statements:
Distributions Distributions
Payable Distributions Distributions Payable
Beginning of Year Declared Paid November 30,
1997 $222,222 $533,327 $608,890 $146,659
1996 222,222 888,888 888,888 222,222
1995 311,111 4,888,888 4,977,777 222,222
Independent Auditors' Report
The General Partner
ConAm Realty Investors 3 L.P.:
We have audited the accompanying consolidated balance sheet of
ConAm Realty Investors 3 L.P. (a California limited partnership)
(formerly Hutton/ConAm Realty Investors 3) and consolidated
ventures (the "Partnership"), as of November 30, 1997, and the
related consolidated statements of operations, partners'
capital(deficit), and cash flows for the year then ended. 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
audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the 1997 consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of ConAm Realty Investors 3 L.P. and
consolidated ventures as of November 30, 1997, and the results of
their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
San Diego, California
February 5, 1998
Report of Former Independent Accountants
To the Partners of
ConAm Realty Investors 3 L.P.:
We have audited the consolidated balance sheet of ConAm Realty
Investors 3 L.P. (formerly Hutton/ConAm Realty Investors 3), a
California limited partnership, and Consolidated Ventures as of
November 30, 1996 and the related consolidated statements of
operations, partners' capital (deficit) and cash flows for each
of the two years in the period ended November 30, 1996. 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 ConAm Realty Investors 3 L.P., a California
limited partnership, and Consolidated Ventures as of November 30,
1996 and 1995, and the consolidated results of their operations
and their cash flows for each of the two years in the period
ended November 30, 1996, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 14, 1997
Net Asset Valuation
Comparison of Acquisition Costs to Appraised Value and
Determination of Net Asset Value Per Unit at November 30, 1997
(Unaudited)
Acquisition Cost
(Purchase Price Partnership's
Plus General Share of
Partners' November 30,
Acquisition 1997 Appraised
Property Date of Acquisition Fees) Value (1)
Autumn Heights 01-25-85 $ 9,687,174 $ 11,500,000
Skyline Village 03-20-85 10,838,195 7,500,000
Ponte Vedra Beach Village II 08-22-85 6,869,917 6,000,000
$27,395,286 $ 25,000,000
Cash and cash equivalents
(including restricted cash) 906,667
Other assets 14,387
25,921,054
Less:
Total liabilities (8,775,798)
Partnership Net Asset Value (2) 17,145,256
Net Asset Value Allocated:
Limited Partners 17,101,433
General Partner 42,823
17,145,256
Net Asset Value Per Unit
(80,000 units outstanding) $ 213.77
(1) This represents the Partnership's share of the November 30,
1997 Appraised Values which were determined by an independent
property appraisal firm.
(2) The Partnership Net Asset Value assumes a hypothetical sale
at November 30, 1997 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
assets and 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 may 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.
Schedule III - Real Estate and Accumulated Depreciation
November 30, 1997
Ponte Vedra Consolidated Venture
Autumn Beach Skyline
Residential Property: Heights Village II Village Total
Location Colorado Jacksonville
Springs,CO FL Tucson,AZ na
Construction date 1983-1985 1984-1985 1984-1985 na
Acquisition date 01-25-85 08-22-85 03-20-85 na
Life on which depreciation
in latest income statements
is computed 25 years 25 years 25 years na
Encumbrances $ 5,181,951 $ _ $3,111,021 $8,292,972
Initial cost to
Partnership:
Land $ 1,581,000 $ 788,000 $3,410,000 $5,779,000
Buildings and
improvements $ 8,123,598 $6,138,289 $7,510,205 $21,772,092
Costs capitalized
subsequent to acquisition:
Land, buildings
and improvements $ 513,166 $ 433,416 $ 104,972 $ 1,051,554
Write-off of buildings
and improvements $ (163,000) $ (156,300) $ _ $ (319,300)
Gross amount at which
carried at close of
period: (1)
Land $ 1,589,840 $ 789,882 $ 3,437,946 $ 5,817,668
Buildings and
improvements 8,464,924 6,413,523 7,587,231 22,465,678
$10,054,764 $7,203,405 $11,025,177 $28,283,346
Accumulated
depreciation(2) $ 4,228,236 $3,043,130 $ 3,952,555 $11,223,921
(1) Represents aggregate cost for both financial reporting for Federal income
tax purposes.
(2) The amount of accumulated depreciation for Federal income tax purposes
is $18,666,499.
A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended November 30, 1997, 1996, and 1995 follows:
1997 1996 1995
Investments in real estate:
Beginning of period $28,144,448 $27,982,248 $33,729,426
Additions 458,198 162,200 158,367
Dispositions and disposals (319,300) _ (5,905,545)
End of period $28,283,346 $28,144,448 $27,982,248
Accumulated depreciation:
Beginning of period $10,510,777 $ 9,645,010 $10,629,776
Depreciation expense 879,244 865,767 1,004,497
Dispositions and disposals (166,100) _ (1,989,263)
End of period $11,223,921 $10,510,777 $9,645,010
Independent Auditors' Report
The General Partner
ConAm Realty Investors 3 L.P.:
Under date of February 5, 1998, we reported on the
consolidated balance sheet of ConAm Realty Investors 3 L.P. (a
California limited partnership) (formerly Hutton/ConAm Realty
Investors 3) and consolidated ventures (the "Partnership") as
of November 30, 1997, and the related consolidated statements
of operations, partnersO capital (deficit), and cash flows for
the year then ended, as contained in the 1997 annual report to
Unitholders. These consolidated financial statements and our
report thereon are incorporated by reference in the 1997
annual report on Form 10-K. In connection with our audit of
the aforementioned consolidated financial statements, we also
have audited the related consolidated financial statement
schedule. This consolidated financial statement schedule is
the responsibility of the Partnership's management. Our
responsibility is to express an opinion on this consolidated
financial statement schedule based on our audit.
In our opinion, the consolidated financial statement schedule,
when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG Peat Marwick LLP
San Diego, California
February 5, 1998
Report of Former Independent Accountants
Our report on the consolidated financial statements of ConAm
Realty Investors 3 L.P. (formerly Hutton/ConAm Realty Investors
3), a California Limited Partnership, and Consolidated Ventures
has been incorporated by reference in this Form 10-K from the
Annual Report to Unitholders of ConAm Realty Investors 3 for the
year ended November 30, 1996. 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 14, 1997
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