-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NS7c1YfyTkDWWFL558jxXYMaS8uyahEU+McxC/XtvZj2AnxoqaKS7DeWbFtV64Gm BuBxRwIlC2OYE3akCL3asw== 0001047469-98-041152.txt : 19981118 0001047469-98-041152.hdr.sgml : 19981118 ACCESSION NUMBER: 0001047469-98-041152 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONAM REALTY INVESTORS 2 L P CENTRAL INDEX KEY: 0000357099 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 133100545 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11085 FILM NUMBER: 98751341 BUSINESS ADDRESS: STREET 1: 3 WORLD FINANCIAL CENTER 29TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10285 BUSINESS PHONE: 2125263237 MAIL ADDRESS: STREET 1: 3 WORLD FINANCIAL CENTER STREET 2: 29TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10285 FORMER COMPANY: FORMER CONFORMED NAME: HUTTON CONAM REALTY INVESTORS 2 DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q 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, 1998 or ------- Transition Report Pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934 For the transition period from ____ to ____ COMMISSION FILE NUMBER: 0-11085 CONAM REALTY INVESTORS 2 L.P. ----------------------------- EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER California 13-3100545 ---------- ---------- STATE OR OTHER JURISDICTION OF I.R.S. EMPLOYER IDENTIFICATION NO. INCORPORATION OR ORGANIZATION 1764 San Diego Avenue San Diego, CA 92110 92110-1906 - -------------------- ----------- ADDRESS OF PRINCIPAL EXECUTIVE OFFICES ZIP CODE (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 ----- ----- CONAM REALTY INVESTORS 2 L.P. AND CONSOLIDATED VENTURES
- ------------------------------------------------------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS AT SEPTEMBER 30, AT DECEMBER 31, 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------- ASSETS Investments in real estate: Land $ 5,744,972 $ 5,744,972 Buildings and improvements 23,681,664 23,681,664 ------------------------------------------- 29,426,636 29,426,636 Less accumulated depreciation (13,402,882) (12,689,727) ------------------------------------------- 16,023,754 16,736,909 Cash and cash equivalents 1,298,970 1,109,506 Restricted cash 521,854 342,282 Other assets, net of accumulated amortization of $307,385 in 1998 and $260,496 in 1997 247,615 181,421 - ------------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 18,092,193 $ 18,370,118 - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND PARTNERS' CAPITAL Liabilities: Mortgages payable 11,382,614 11,554,935 Distribution payable 200,000 - Accounts payable and accrued expenses 386,699 197,443 Due to general partner and affiliates 18,766 18,504 Security deposits 92,286 103,908 ------------------------------------------- Total Liabilities 12,080,365 11,874,790 ------------------------------------------- Partners' Capital (Deficit): General Partner (615,506) (567,156) Limited Partners (80,000 Units outstanding) 6,627,334 7,062,484 ------------------------------------------- Total Partners' Capital 6,011,828 6,495,328 - ------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 18,092,193 $ 18,370,118 - ------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. CONAM REALTY INVESTORS 2 L.P. AND CONSOLIDATED VENTURES
- ---------------------------------------------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1998 1997 1998 1997 - ---------------------------------------------------------------------------------------------------------------------------------- INCOME Rental $ 1,092,226 $ 1,071,005 $ 3,333,733 $ 3,208,782 Interest and other 12,070 18,623 32,241 40,760 ---------------------------------------------------------------------------------- Total Income 1,104,296 1,089,628 3,365,974 3,249,542 - ---------------------------------------------------------------------------------------------------------------------------------- EXPENSES Property operating 595,287 661,158 1,682,747 1,729,543 Depreciation and amortization 253,369 255,279 760,045 762,085 Interest 221,296 225,649 667,227 680,038 General and administrative 50,882 46,470 139,455 149,793 ---------------------------------------------------------------------------------- Total Expenses 1,120,834 1,188,556 3,249,474 3,321,459 - ---------------------------------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) $ (16,538) $ (98,928) $ 116,500 $ (71,917) - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) ALLOCATED: To the General Partner $ (1,654) $ (9,893) $ 11,650 $ (7,192) To the Limited Partners (14,884) (89,035) 104,850 (64,725) - ---------------------------------------------------------------------------------------------------------------------------------- NET INCOME (LOSS) $ (16,538) $ (98,928) $ 116,500 $ (71,917) - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- PER LIMITED PARTNERSHIP UNIT (80,000 UNITS OUTSTANDING) NET INCOME (LOSS) $ (0.19) $ (1.11) $ 1.31 $ (0.81) - ----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 GENERAL LIMITED PARTNER PARTNERS TOTAL - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE (DEFICIT) AT DECEMBER 31, 1997 $ (567,156) $ 7,062,484 $ 6,495,328 Net income 11,650 104,850 116,500 Distributions ($6.75 per Unit) (60,000) (540,000) (600,000) - ---------------------------------------------------------------------------------------------------------------------------------- BALANCE (DEFICIT) AT SEPTEMBER 30, 1998 $ (615,506) $ 6,627,334 $ 6,011,828 - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. CONAM REALTY INVESTORS 2 L.P. AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 1997 - ---------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 116,500 $ (71,917) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 760,044 762,085 Increase (decrease) in cash arising from changes in operating assets and liabilities: Fundings to restricted cash (232,496) (245,218) Release of restricted cash 52,924 53,150 Other assets (113,083) - Accounts payable and accrued expenses 189,256 232,165 Due to general partner and affiliates 262 357 Security deposits (11,622) (2,055) ------------------------------------------- Net cash provided by operating activities 761,785 728,567 - ---------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES- Additions to real estate - (388,231) - ---------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions (400,000) (200,000) Mortgage principal payments (172,321) (159,511) ------------------------------------------- Net cash used for financing activities (572,321) (359,511) - ---------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 189,464 (19,175) Cash and cash equivalents, beginning of period 1,109,506 962,290 - ---------------------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,298,970 $ 943,115 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION- Cash paid during the period for interest $ 667,227 $ 680,038 - ----------------------------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. CONAM REALTY INVESTORS 2 L.P. AND CONSOLIDATED VENTURES - ------------------------------------------------------------------------------- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The unaudited interim consolidated financial statements should be read in conjunction with the Partnership's annual 1997 audited consolidated financial statements within Form 10-K. The unaudited interim consolidated financial statements include all normal and recurring adjustments which are, in the opinion of management, necessary to present a fair statement of financial position as of September 30, 1998 and the results of operations for the three and nine months ended September 30, 1998 and 1997, cash flows for the nine months ended September 30, 1998 and 1997, and the consolidated statement of partners' capital for the nine months ended September 30, 1998. Results of operations are not necessarily indicative of the results to be expected for the full year. No significant events have occurred subsequent to the year ended December 31, 1997, and no material contingencies exist, which would require disclosure in this interim report per Regulation S-X, Rule 10-01, Paragraph (a) (5). CONAM REALTY INVESTORS 2 L.P. AND CONSOLIDATED VENTURES PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES At September 30, 1998, the Partnership had cash and cash equivalents of $1,298,970 which were invested in money market funds, compared with $1,109,506 at December 31, 1997. The increase is attributable to net cash provided by operating activities exceeding cash used for mortgage principal payments and distributions. The Partnership also maintains a restricted cash balance which totaled $521,854 at September 30, 1998 compared to $342,282 at December 31, 1997. The restricted cash funds represent escrows for insurance and real estate taxes required under the terms of the current mortgage loans. The Partnership expects sufficient cash to be generated from operations to meet its current operating expenses. The General Partner declared a regular cash distribution of $2.25 per Unit for the quarter ended September 30, 1998 which will be paid in November, 1998. The General Partner will determine the amount of future quarterly distributions based on the Partnership's available cash flow and future cash needs. The General Partner, on behalf of the Partnership, is negotiating and expects to enter into an agreement for the sale of the Partnership's remaining properties and properties owned by various other limited partnerships affiliated with the General Partner (the "Affiliated Partnerships") to DOC Investors LLC, a Delaware limited liability company to be formed to acquire real property ( the "Purchaser"). An Affiliate of the General Partner will hold a 9% interest in the Purchaser. Consummation of the sale is subject to various conditions, including the execution of definitive documents, the approval of a majority in interest of the Limited Partners, and approval by the limited partners of the Affiliated Partnerships. Accordingly, there can be no assurance that the sale will be consummated. Following satisfaction of applicable securities regulatory requirements, the General Partner will solicit the approval of the Limited Partners to the sale and to a related amendment to the Partnership's agreement of limited partnership by means of a Consent Solicitation Statement. Such Consent Solicitation Statement will set forth the terms and conditions of the proposed sale, the text of the proposed amendment to the Partnership's agreement of limited partnership, and other matters with respect to the sale. If the sale and related amendment are approved, and the other conditions to the sale satisfied, the sale, which is expected to occur before December 31, 1998, would result in distributions approximating the net asset value of the Units and the final liquidation of the Partnership. The terms of the proposed sale are contained in the Preliminary Consent Solicitation Statement filed by the Partnership with the Securities and Exchange Commission pursuant to Section 14(a) of the Securities Exchange Act of 1934 on October 30, 1998. RESULTS OF OPERATIONS Partnership operations for the three and nine months ended September 30, 1998 generated a net loss of ($16,538) and net income of $116,500, for the three and six months ended September 30, 1998. This compares with a net loss of ($98,928) and ($71,917) for the corresponding periods in 1997. The decrease in net loss for the three month period ended September 30, 1998 is primarily attributable to an increase in rental revenues and a decrease in property operating expenses. The increase in net income for the nine month period ended September 30, 1998 is primarily attributable to an increase in rental revenues and a decrease in property operating expenses. Property operating expenses for the three and nine months ended September 30, 1998 totaled $595,287 and $1,682,747 compared with $661,158 and $1,729,543 for the corresponding periods in 1997. The decrease for the three month period is primarily attributable to reduced repair and maintenance expenses at Ponte Vedra Beach Village I. The decrease for the nine month period is due to a decrease in repair and maintenance expenses at Ponte Vedra Beach Village I and Rancho Antigua. CONAM REALTY INVESTORS 2 L.P. AND CONSOLIDATED VENTURES RESULTS OF OPERATIONS - CONTINUED PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS During the first nine months of 1998 and 1997, average occupancy levels at the Partnership's properties were as follows:
PROPERTY 1998 1997 --------------------------------------------------------------- Creekside Oaks 95% 94% Ponte Vedra Beach Village I 92% 93% Rancho Antigua 95% 91% Village at the Foothills I 96% 89% ---------------------------------------------------------------
YEAR 2000 The Partnership has assessed the potential impact of the Year 2000 issue on its computer systems, operating equipment with imbedded microchips and major third party vendors. If the proposed sale of its remaining properties is consummated, the Partnership will liquidate prior to January 1, 2000, and no Year 2000 issues will be presented. In the event that the sale is not consummated, the Partnership has relied on the efforts of ConAm Management Corporation ("ConAm Management"), which has been retained by the Partnership to manage the business and financial operation of the Partnership's properties, to resolve any potential Year 2000 issues. In the course of providing property management services for the Partnership, ConAm Management retained a third party consultant to modify all applicable software to provide for a 4-digit year field. The General Partner believes that the modifications undertaken by ConAm Management related to computer systems are sufficient to address any potential Year 2000 problems and that the impact of the Year 2000 issue will not materially affect the Partnership's operating results or financial condition if the Partnership is not liquidated prior to January 1, 2000. Accordingly, neither ConAm Management nor the Partnership has taken any further actions with respect to the Year 2000 issue related to the computer systems. The Partnership plans to initiate a program to evaluate the Year 2000 readiness of each property's operating equipment with embedded microchips and replace as considered necessary. In the event that the replacement project is not completed by the Year 2000, failure of the property's operating equipment as a result of the Year 2000 issue is not expected to have a significant impact on operations. The Partnership plans to initiate discussion with significant suppliers and other third parties to determine the extent to which the Partnership may be vulnerable to the failure of these parties to address and correct their own Year 2000 issues. However, there can be no guarantee that the systems of other companies that support the Partnership's operations will be timely converted or that a failure by these companies to correct their Year 2000 problems would not have a material adverse effect on the Partnership. At the present time the Partnership does not have a contingency plan in place, in the event of Year 2000 failure related to significant suppliers and other third parties, but plans to create one within the next year. The Partnership currently has no indication that the costs associated with any remedial actions in connection with the Year 2000 related to its operating equipment with imbedded microchips and major third party vendors issue will be material. All costs related to the remediation plan of the computer system were incurred by ConAm Management in connection with their management services. 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 hereunto duly authorized. CONAM PROPERTY SERVICES II, LTD. General Partner of ConAm Realty Investors 2 L.P. BY: CONTINENTAL AMERICAN DEVELOPMENT, INC. GENERAL PARTNER Date: November 13, 1998 BY:/s/ DANIEL J. EPSTEIN ---------------------------------- Daniel J. Epstein Director, President, and Principal Executive Officer Date: November 13, 1998 BY:/s/ ROBERT J. SVATOS ---------------------------------- Robert J. Svatos Vice President and Director 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 hereunto duly authorized. CONAM PROPERTY SERVICES II, LTD. General Partner of ConAm Realty Investors 2 L.P. BY: CONTINENTAL AMERICAN DEVELOPMENT, INC. GENERAL PARTNER Date: November 13, 1998 ------------------------------------- Daniel J. Epstein Director, President, and Principal Executive Officer Date: November 13, 1998 ------------------------------------- Robert J. Svatos Vice President and Director CONAM REALTY INVESTORS 2 L.P. AND CONSOLIDATED VENTURES PART II OTHER INFORMATION ITEMS 1-5 Not applicable ITEMS 6 Exhibits (a) Exhibits - (27) Financial Data Schedule (b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter ended September 30, 1998. EX-27 2 EXHIBIT 27
5 9-MOS DEC-31-1999 JAN-01-1998 SEP-30-1998 1,820,824 0 0 0 0 0 29,426,636 13,402,882 18,092,193 697,751 11,382,614 0 0 0 6,011,828 18,092,193 3,333,733 3,365,974 0 1,682,747 899,500 0 667,227 116,500 0 116,500 0 0 0 116,500 1.31 1.31
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