-----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, S8Dwkg6j7mwP4pT/a4QEy3xP3zDQDW5sI8IKAMFcz8ykikOJ9tgIhrCDQKwvZkLP 9YrQpdxNYSB+mXRfA5NIGg== 0001047469-99-007901.txt : 19990302 0001047469-99-007901.hdr.sgml : 19990302 ACCESSION NUMBER: 0001047469-99-007901 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981130 FILED AS OF DATE: 19990301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONAM REALTY INVESTORS 5 L P CENTRAL INDEX KEY: 0000761310 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 112712111 STATE OF INCORPORATION: CA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-14341 FILM NUMBER: 99553947 BUSINESS ADDRESS: STREET 1: 1764 SAN DIEGO AVE STREET 2: ATTN: ROBERT J SVATOS CITY: SAN DIEGO STATE: CA ZIP: 92110-1906 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 5 DATE OF NAME CHANGE: 19920703 10-K 1 10-K 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 For the fiscal year ended: November 30, 1998 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: 0-014341 CONAM REALTY INVESTORS 5 L.P. ---------------------------------------------------- EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER California 11-2712111 ---------- ---------- STATE OR OTHER JURISDICTION OF INCORPORATION I.R.S. EMPLOYER IDENTIFICATION NO. 1764 San Diego Avenue San Diego, CA 92110 Attn.: Robert J. Svatos 92110-1906 - -------------------------------------------- ----------- ADDRESS OF PRINCIPAL EXECUTIVE OFFICES ZIP CODE
Registrant's telephone number, including area code (619) 297-6771 -------------- 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 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 Parts I, II, III and IV are incorporated by reference to the Partnership's Annual Report to Unitholders for the fiscal year ended November 30, 1998. PART I ITEM 1. BUSINESS (a) GENERAL DESCRIPTION OF BUSINESS AND OBJECTIVES ConAm Realty Investors 5 L.P., formerly known as Hutton/ConAm Realty Investors 5 (the "Partnership"), is a California limited partnership formed on June 28, 1984. ConAm Property Services IV, Ltd. ("CPS IV"), a California limited partnership, and RI 5 Real Estate Services, Inc. ("RI 5"), a Delaware corporation, were the original co-general partners of the Partnership. On January 27, 1998, CPS IV acquired RI 5's co-general partner interest in the Partnership, effective July 1, 1997, pursuant to a Purchase Agreement between CPS IV and RI 5 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 was changed from Hutton/ConAm Realty Investors 5 to ConAm Realty Investors 5 L.P. The Partnership was organized to engage in the business of acquiring, operating and holding for investment multifamily residential properties. The Partnership originally invested in one residential apartment property and two joint ventures, each of which owned a specified property. As described below, as of January 29, 1999, all of the Partnership's investments in the properties have been sold, and the General Partner anticipates that the final liquidation of the Partnership will be completed in mid-1999. The Partnership's principal investment objectives with respect to its interests in real property were: (1) capital appreciation; (2) distribution of net cash from operations attributable to rental income; and (3) preservation and protection of capital. Distribution of net cash from operations was the Partnership's objective during its operational phase, while preservation and appreciation of capital were the Partnership's long-term objectives. The attainment of the Partnership's investment objectives was dependent on many factors, including future economic conditions in the United States as a whole and, in particular, in the localities in which the Partnership's properties were located, especially with regard to achievement of capital appreciation. The Partnership utilized the proceeds of its public offering to acquire three residential apartment complexes either directly or through investments in joint ventures, as follows: (1) Lakeview Village at Ponte Vedra, a 240-unit apartment complex, located in Ponte Vedra Beach, Florida; (2) The Hamptons at Quail Hollow, a 232-unit apartment complex, located in Charlotte, North Carolina; and (3) Canterbury Park Apartments, a 96-unit apartment complex, located in Raleigh, North Carolina. On December 10, 1996, Canterbury Park was sold to an unaffiliated buyer for $6,387,300. During its fiscal year ended November 30, 1998, following consideration of various alternatives available to the Partnership, the General Partner concluded that a sale of the Partnership's two remaining properties, Lakeview Village and The Hamptons at Quail Hollow (collectively the "Properties"), would be in the best interests of the Partnership and the Unitholders. Throughout much of fiscal 1998, the General Partner, on behalf of the Partnership, negotiated the terms of a sale of the Properties with Lend Lease Real Estate Investments, Inc. ("Lend Lease"), on behalf of two pension funds which are unaffiliated with the General Partner. Once the terms were negotiated, as required by the Partnership's Second Amended and Restated Certificate and Agreement of Limited Partnership ("Agreement of Limited Partnership"), the General Partner solicited the consent of a majority in interest of the Unitholders to the sale pursuant to a Consent Solicitation Statement dated December 16, 1998. The requisite consent was obtained on January 15, 1999, and on January 29, 1999, the Partnership consummated the sale of the Properties to DOC Investors, L.L.C., a Delaware limited liability company (the "Purchaser"), for a sales price of $26,000,000 (before selling costs and prorations). The members of the Purchaser are two pension funds advised by Lend Lease, which own an aggregate 91% interest in the Purchaser, and ConAm DOC Affiliates LLC, an affiliate of the General Partner ("ConAm DOC"), which owns a 9% interest in the Purchaser. ConAm DOC has the potential to receive up to an additional 18% of the profits of the Purchaser after certain priority returns to the members of the Purchaser. The Partnership received approximately $19,482,000 of cash proceeds from the sale, net of closing costs of approximately $110,000 and repayment of indebtedness of approximately $6,408,000. All net cash proceeds from the sale and previously undistributed cash from operations, less an amount the General Partner determined to set aside for contingencies, were distributed to the Limited Partners on February 26, 1999. The Partnership considers itself to have been engaged in only one industry segment, real estate investment. COMPETITION The Partnership's former real property investments were subject to competition from similar types of properties in the vicinities in which they were located. Such former competition increased during the Partnership's period of ownership of the Properties due principally to the addition of newly constructed apartment complexes offering increased residential and recreational amenities. The Properties were also subject to competition from condominiums and single-family properties especially as potential renters chose to buy homes especially during periods of low mortgage interest rates. The Partnership competed 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 affected the occupancy levels and revenues of the Properties. The occupancy level at Lakeview Village in Florida reflects some seasonality, which is typical in this market. In some cases, the Properties competed with properties owned by partnerships affiliated with the General Partner. For a discussion of market conditions in the areas where the Properties were located, reference is made to the Partnership's Annual Report to Unitholders for the fiscal year ended November 30, 1998, which is filed as an exhibit under Item 14. EMPLOYEES The Partnership has no employees. Services are provided by CPS IV and ConAm Management Corporation ("ConAm Management"), an affiliate of CPS IV. Pursuant to property management agreements with the Partnership, ConAm Management provided property management services with respect to the Properties. In addition, the Partnership retains Brock, Tibbitts & Snell, an unaffiliated company located in San Diego, California, to provide all accounting and investor communication functions. During fiscal 1998, Service Data Corporation, an unaffiliated company, provided transfer agent services for the Partnership. During February 1999, pursuant to the terms of a sale of its contracts, Service Data Corporation assigned the transfer agent functions of the Company to MAVRICC Management Systems, Inc., an unaffiliated company located in Troy, Michigan. See Item 13, "Certain Relationships and Related Transactions", for a further description of the service and management agreements between the Partnership and affiliated entities. ITEM 2. PROPERTIES For a description of the Properties owned and operated by the Partnership during fiscal 1998 and discussion of market conditions in the areas where the Properties are located, reference is made to the Partnership's Annual Report to Unitholders for the fiscal year ended November 30, 1998, which is filed as an exhibit under Item 14. For information on the Partnership's purchase of the Properties, reference is made to Note 4 of the Consolidated Financial Statements, included herein by reference to the Partnership's Annual Report to Unitholders. For information on the sale of the Properties by the Partnership in January, 1999, reference is made to Item 1 and Note 10 of the Consolidated Financial Statements, included herein by reference to the Partnership's Annual Report to Unitholders. Average occupancy rates at each property are incorporated by reference to Item 7. ITEM 3. LEGAL PROCEEDINGS The Partnership is not subject to any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fourth quarter of the fiscal year ended November 30, 1998, no other matters were submitted to a vote of Unitholders through the solicitation of proxies or otherwise. On December 16, 1998, the Unitholders were asked to approve a sale of the Partnership's remaining properties. A majority in interest of the Unitholders approved the sale and the sale was completed on January 29,1999. Page 3 PART II ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS As of November 30, 1998, the number of Unitholders of record was 2,514. 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 From Operations, when made, are determined by the General Partner on a quarterly basis, with distributions generally occurring approximately 45 days after the end of each fiscal quarter. Such distributions to the Unitholders have been made from net operating income with respect to the Partnership's investment in the Properties and from interest on short-term investments. Information on cash distributions paid by the Partnership for the past two fiscal years is incorporated by reference to the Partnership's Annual Report to Unitholders for the fiscal year ended November 30, 1998, which is filed as an exhibit under Item 14. No distributions was made for the fourth quarter of the fiscal year ended November 30, 1998 because the General Partner decided to suspend distributions pending the outcome of the solicitation of the consent of the Unitholders to the sale of the Properties. Because of the sale of the Partnership's remaining Properties, no further quarterly distributions of Net Cash From Operations will be made. The Partnership distributed $19,402,875 to the Unitholders ($337.50 per Unit) and $1,340 to the General Partner on February 26, 1999, which amounts are equal to substantially all of the net proceeds from the sale of the Properties, together with other available cash of the Partnership, less an amount for costs associated with the sale and liquidation and other contingencies, net of expected cash provided by operations through the date of sale, of approximately $554,000. The final liquidation of the Partnership is expected to occur in mid-1999, and the remaining funds, if any, will be distributed to the Unitholders at that time. ITEM 6. SELECTED FINANCIAL DATA Incorporated by reference to the Partnership's Annual Report to Unitholders for the year ended November 30, 1998, 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 November 30, 1998, the Partnership had cash and cash equivalents of $424,001, which were invested in unaffiliated money market funds, compared with $1,424,876 at November 30, 1997. The decrease in cash and cash equivalents reflects mortgage principal payments, additions to real estate and cash distributions to Partners exceeding cash provided by operating activities during the fiscal year ended November 30, 1998. The Partnership also maintains a restricted cash balance that totaled $261,132 at November 30, 1998, largely unchanged from $224,210 at November 30, 1997. The increase in other assets in fiscal 1998 is primarily attributed to an increase in a deposit required by the Internal Revenue Service and prepaid selling costs. Distribution payable decreased to $0 at November 30, 1998, compared to $359,019 at November 30, 1997. The decrease is primarily attributable to the decision of the General Partner to suspend distributions pending the outcome of the solicitation of the consent of the Unitholders to the sale of the remaining Properties. Accounts payable and accrued expenses is relatively unchanged and total $387,989 at November 30, 1998, compared to $388,948 at November 30, 1997. Security deposits decreased to $73,629 at November 30, 1998, compared to $89,448 at November 30, 1997. This decrease occurred while occupancy increased during that same period. This decrease in security deposits occurred primarily because strong competition has reduced the ability of property owners to collect refundable security deposits from their tenants. The Partnership continued to perform various improvements at the Properties during fiscal 1998 which include the completion of the roof replacements at Lakeview Village, the majority of which was completed during the period commencing with the fourth quarter of fiscal 1997 through the second quarter of fiscal 1998. The approximate cost of replacing the roof was Page 4 $800,000 of which $400,000 was funded in fiscal 1998 and $400,000 was funded in fiscal 1997 from the Partnership's operating cash flow and cash reserves. During fiscal 1998, the Partnership received insurance proceeds of $254,945 from claims resulting from fire damage to eight units at Lakeview Village. The insurance proceeds were sufficient to cover the cost of the restoration work. As a result of the Partnership's sale of the Properties on January 29, 1999, all of the Partnership's assets have been converted to cash and cash equivalents. Pending distribution to the Unitholders as described in Item 5 above, the Partnership's funds have been invested in the Pacific Horizon Money Market Funds, Prime Fund. The General Partner retained from the initial distribution an amount it believes is sufficient to provide for contingencies, and to cover the expenses of operating the Partnership until final liquidation of the Partnership, including legal and accounting fees. RESULTS OF OPERATIONS 1998 VERSUS 1997 Partnership operations for the fiscal year ended November 30, 1998 resulted in net income of $247,691 compared with net income of $2,687,490 in fiscal 1997. The decrease in net income is primarily attributable to a $2,582,641 gain recognized on the sale of Canterbury Park in fiscal 1997. Excluding the gain, the Partnership generated income from operations of $104,849 for fiscal 1997. The increase in operating income in fiscal 1998 is primarily due to an increase in rental income and a decrease in property operating costs somewhat offset by an increase in write-off assets as they were replaced. Net cash provided by operating activities was $1,000,284 for the fiscal year ended November 30, 1998 compared to $1,112,952 in fiscal 1997. The decrease in cash provided by operating activities is primarily attributable to an increase in other assets. Rental income for the fiscal year ended November 30, 1998 was $3,970,095 compared with $3,714,870 in fiscal 1997. The increase is primarily due to relatively stable occupancy at The Hamptons at Quail Hollow and improved occupancy at Lakeview Village and improved rental rates at both of the properties partially offset by the sale of Canterbury Park in December of 1996. Interest income totaled $37,894 for the fiscal year ended November 30, 1998 compared to $130,067 in fiscal 1997. The decrease is due to the Partnership maintaining lower average cash balances in fiscal 1998 than in fiscal 1997 from proceeds held for the sale of Canterbury Park in fiscal 1997. Property operating expenses decreased slightly to $2,055,840 for the fiscal year ended November 30, 1998, as compared $2,123,570 for fiscal 1997. This decrease is primarily due to the sale of Canterbury Park in December of 1996 and a decrease in property operating expenses at The Hamptons at Quail Hollow. Write-off of assets increased to $162,037 for fiscal year end November 30, 1998 from $85,000 for fiscal 1997. The increase is due to an increase in roof replacements at Lakeview Village in fiscal 1998. 1997 VERSUS 1996 Partnership operations for the fiscal year ended November 30, 1997 generated net income of $2,687,490, compared with net income of $1,017,032 in fiscal 1996. The increase in net income is primarily attributable to a $2,582,641 gain recognized on the sale of Canterbury Park. Excluding the gain, the Partnership generated income from operations of $104,849. Net cash provided by operating activities was $1,112,952 for the fiscal year ended November 30, 1997 compared to $2,022,547 in fiscal 1996. The decrease in cash provided by operating activities is primarily attributable to the sale of Canterbury Park. Rental income totaled $3,714,870 for the fiscal year ended November 30, 1997 compared with $4,695,358 in fiscal 1996. The decrease is primarily attributable to the sale of Canterbury Park, and to a lesser extent, a decline in rental income at Lakeview Village due to lower occupancy. Property operating expenses totaled $2,123,570 for the fiscal year ended November 30, 1997 compared with $2,120,789 in fiscal 1996. The increase is primarily due to higher rental administrative expenses and parking lot repairs at Lakeview Village. The increase is also attributable to higher maintenance expenses and asphalt repairs at the Hamptons at Quail Page 5 Hollow. Depreciation and amortization declined from $1,027,524 for the fiscal year ended November 30, 1996 to $879,851 in fiscal 1997. The decrease is primarily due to the sale of Canterbury Park and to certain furniture, fixtures and equipment becoming fully depreciated. General and administrative expenses increased from $140,163 in fiscal 1996 to $167,485 in fiscal 1997. The increase is primarily attributable to an increase in costs associated with Partnership accounting, tax and administrative services. During the 1997 period, certain expenses incurred by RI 5, its affiliates, and an unaffiliated third party service provider in servicing the Partnership, which were voluntarily absorbed by affiliates of RI 5 in prior periods, were reimbursable to RI 5 and its affiliates. The average occupancy levels at each of the properties owned for the full year during the years ended November 30, 1998, 1997 and 1996 were as follows:
TWELVE MONTHS ENDED NOVEMBER 30, -------------------------------- Property 1998 1997 1996 -------- ---- ---- ---- The Hamptons at Quail Hollow 96% 94% 96% Lakeview Village 94% 88% 96%
NEW ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board has issued issued SFAS No. 129, "Disclosure of Information about Capital Structure," SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information." These statements, which are effective for fiscal years beginning after December 15, 1997, expand or modify disclosures and, accordingly, will have no impact on the Partnership's reported financial position, results of operations or cash flows. YEAR 2000 Due to the consummation of the sale of the Properties in January 1999, the Partnership is no longer engaged in the operation of real properties or any other business. As a result of the foregoing, and in view of the General Partner's plan to complete the full liquidation of the Partnership prior to January 1, 2000, the Partnership has no exposure to Year 2000 issues. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Since the Partnership sold its remaining Properties on January 29, 1999 and its mortgage indebtedness was repaid, the Partnership has no exposure to interest rate risk. In addition, the Partnership is expected to be liquidated during 1999. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Incorporated by reference to the Partnership's Annual Report to Unitholders for the fiscal year ended November 30, 1998, which is filed as an exhibit under Item 14. Supplementary Data is incorporated by reference to F-1 and F-2 of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Effective December 1, 1997, the Partnership advised PricewaterhouseCoopers LLP (formerly Coopers & Lybrand L.L.P.) that it was changing accounting firms and engaged KPMG LLP. PricewaterhouseCoopers LLP's report on the consolidated financial statements for the year ended November 30, 1996 contained no adverse opinion or disclaimer of opinion and was not qualified as to uncertainty, audit scope or accounting principles. There had been no disagreements with PricewaterhouseCoopers LLP on any matters of accounting principles or practices, financial statement disclosure, or auditing scope procedure. The decision to change accountants was approved by CPS IV and RI 5, the General Partners of the Partnership at that time. Page 6 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP The Partnership has no officers or directors. CPS IV, as the General Partner of the Partnership, manages and controls the affairs of the Partnership and has general responsibility and authority in all matters affecting its business. CPS IV is a California limited partnership organized on August 30, 1982. The sole general partner of CPS IV 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 officers or directors.
NAME OFFICE ---- ------ Daniel J. Epstein President and Director E. Scott Dupree Vice President and Director Robert J. Svatos Vice President and Director Ralph W. Tilley Vice President J. Bradley Forrester Vice President
DANIEL J. EPSTEIN, 59, has been the President and a Director of ConAm Development and a general partner of Continental American Properties, Ltd. ("ConAm"), an affiliate of CPS IV, since their inception. He is also Chairman and Chief Executive Officer of ConAm Management. Prior to organizing ConAm, 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, 48, is a Senior 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, 40, is a Senior Vice President and is the Chief Financial Officer of ConAm Management. His responsibilities include the accounting, treasury and data processing functions of the organization. Prior to joining ConAm Management in 1988, 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's of Science degree in Accounting from the University of Illinois. He is a Certified Public Accountant. RALPH W. TILLEY, 44, is a Senior Vice President and Treasurer of ConAm Management. He is responsible for the financial aspects of syndications and acquisitions, the company's asset management portfolio and risk management activities. Prior to joining ConAm Management in 1980, he was a senior accountant with KPMG LLP, specializing in real estate. He holds a Bachelor's of Science degree in Accounting from San Diego State University and is a Certified Public Accountant. J. BRADLEY FORRESTER, 41, is the President of ConAm Management. He is currently responsible for overseeing all aspects of the operations of the firm. His primary focus is on new business related activities including property acquisitions, property development and rehabilitation, and the acquisition of other property management companies. 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 LLP 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. Page 7 ITEM 11. EXECUTIVE COMPENSATION Neither the General Partner nor any of its directors or executive officers received any compensation from the Partnership. See Item 13 of this report for a description of certain costs of the General Partner and its affiliates reimbursed by the Partnership. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of November 30, 1998, no person was known by the Partnership to be the beneficial owner of more than five percent of the Units of the Partnership. Neither the General Partner nor any of its executive officers or directors own any Units. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS CPS IV received $21,119 as the General Partner's allocable share of Net Cash From Operations with respect to fiscal year ended November 30, 1998. Pursuant to the Agreement of Limited Partnership of the Partnership, for the fiscal year ended November 30, 1998, $13,036 of the Partnership's net income was allocated to CPS IV. For a description of the share of Net Cash From Operations and the allocation of income and loss to which the General Partner is entitled, reference is made to Note 3 to the Consolidated Financial Statements, included in the Partnership's Annual Report to Unitholders for the fiscal year ended November 30, 1998, which is filed as an exhibit under Item 14. Effective July 1, 1997, all General Partner allocations were made solely to CPS IV. The Partnership entered into property management agreements with ConAm Management pursuant to which ConAm Management assumed direct responsibility for day-to-day management of the Properties. It was the responsibility of ConAm Management to select resident managers, where appropriate, and monitor their performance. ConAm Management's services also included the supervision of leasing, rent collection, maintenance, budgeting, employment of personnel, payment of operating expenses, strategic asset management and related services. For such services, ConAm Management was entitled to receive a management fee equal to 5% of gross revenues. A summary of property management fees earned by ConAm Management during the past three fiscal years is incorporated by reference to Note 7 to the Consolidated Financial Statements, included in the Partnership's Annual Report to Unitholders for the fiscal year ended November 30, 1998, which is filed as an exhibit under Item 14. Pursuant to Section 12(g) of the Partnership's Agreement of Limited Partnership, the General Partner may be reimbursed by the Partnership for certain of its costs. A summary of amounts paid to the General Partners or their affiliates during the past three fiscal years is incorporated by reference to Note 7 to the Consolidated Financial Statements, included in the Partnership's Annual Report to Unitholders for the fiscal year ended November 30, 1998, which is filed as an exhibit under Item 14. Page 8 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K (a)(1) FINANCIAL STATEMENTS:
PAGE ---- Consolidated Balance Sheets - November 30, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(1) Consolidated Statements of Operations - For the years ended November 30, 1998, 1997 and 1996 .. . . . . . . . . . . .(1) Consolidated Statements of Partners' Capital - For the years ended November 30, 1998, 1997 and 1996.. . . . . . . . .(1) Consolidated Statements of Cash Flows - For the years ended November 30, 1998, 1997 and 1996 . . . . . . . . . . . .(1) Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(1) Independent Auditors' Report .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(1) Report of Former Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(1) (a)(2) FINANCIAL STATEMENT SCHEDULE: Schedule III - Real Estate and Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(F-1) Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(F-2) Report of Former Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(F-3)
(1) INCORPORATED BY REFERENCE TO THE PARTNERSHIP'S ANNUAL REPORT TO UNITHOLDERS FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1998, FILED AS AN EXHIBIT UNDER ITEM 14. (a)(3) EXHIBITS: (4)(A) Second Amended and Restated Agreement of Limited Partnership (included as, and incorporated herein by reference to, Exhibit A to the Prospectus of Registrant dated March 27, 1985, contained in Amendment No. 1 to Registration Statement No. 2-95481 of Registrant, dated March 27, 1985 (the "Registration Statement")). (B) Subscription Agreement and Signature Page (included as, and incorporated herein by reference to, Exhibit 3.1 to Amendment No. 1 to the Registration Statement). (C) Amendment, dated January 18, 1999 to Partnership's Second Amended and Restated Certificate and Agreement of Limited Partnership (included as, and incorporated herein by reference to, Exhibit 4.1 to the Partnership's Report on Form 8-K filed on February 16, 1999). (10)(A) Documents relating to Lakeview Village. (A.1) Purchase and Development Agreement, dated January 31, 1984 and exhibits thereto (included as, and incorporated herein by reference to, Exhibit 10.2 to Amendment No. 1 to the Registration Statement). (A.2) Amendments to Purchase and Development Agreement, dated May 31, 1985, July 31, 1985 and August 21, 1985 (included as, and incorporated herein by reference to, Exhibit (10)(A) to the Registrant's Annual Report on Form 10-K for the fiscal year ended November 30, 1985 (the "1985 Annual Report")). Page 9 (A.3) Amended and Restated Agreement of General Partnership of Lakeview Village at Ponte Vedra Lakes Joint Venture, dated July 1, 1992 (included as, and incorporated herein by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended August 31, 1992). (A.4) Loan Documents: Promissory Note and Assignment of Rents and Leases with respect to the refinancing of Lakeview Village, between Registrant and The Penn Mutual Life Insurance Company (included as, and incorporated herein by reference to, Exhibit A4 to the Registrant's 1993 Annual Report on Form 10-K filed on March 30, 1994). (A.5) Property Management Agreement between Lakeview Village at Ponte Vedra Lakes Joint Venture and Con Am Management Corporation for the Lakeview Village property (included as, and incorporated herein by reference to, Exhibit A5 to the Registrant's 1993 Annual Report on Form 10-K filed on March 30, 1994). (A.6) Agreement for Purchase and Sale and Joint Escrow Instructions between Lakeview Village at Ponte Vedra Lakes Joint Venture and DOC Investors, L.L.C. dated January 26, 1999 with respect to Lakeview Village Apartments (included as, and incorporated herein by reference to, Exhibit 10.2 to the Partnership's Report on Form 8-K filed on February 16, 1999). (B) Documents relating to The Hamptons. (B.1) Purchase and Development Agreement, dated October 9, 1984 and exhibits thereto (included as, and incorporated herein by reference to, Exhibit 10.3 to Amendment No. 1 to the Registration Statement). (B.2) First Amendment to Purchase and Development Agreement, dated December 12, 1985 (included as, and incorporated herein by reference to, Exhibit (10)(B) to the Registrant's Annual Report on Form 10-K for the fiscal year ended November 30, 1986). (B.3) Real Estate Note, dated October 9, 1984 (filed as, and incorporated herein by reference to Exhibit (10)(B) to the 1985 Annual Report). (B.4) Property Management Agreement between The Hamptons Joint Venture and ConAm Management Corporation for the Hamptons at Quail Hollow II property (included as, and incorporated herein by reference to, Exhibit B4 to the Registrant's 1993 Annual Report on Form 10-K filed on March 30, 1994). (B.5) Agreement for Purchase and Sale and Joint Escrow Instructions between The Hamptons Joint Venture and Lend Lease Real Estate Investments, Inc. dated December 15, 1998, and amendment thereto and assignment thereof, with respect to Hamptons at Quail Hollow Apartments (included as, and incorporated herein by reference to, Exhibit 10.1 to the Partnership's Report on Form 8-K filed on February 16, 1999). (C) Documents relating to Canterbury Park: (C.1) Purchase and Development Agreement, dated September 7, 1984 (included as, and incorporated herein by reference to, Exhibit 10.4 to Amendment No. 1 to the Registration Statement). (C.2) Amendments to Purchase and Development Agreement, dated April 30, 1985 and June 30, 1985 (included as, and incorporated herein by reference to, Exhibit (10)(C) to the 1985 Annual Report). (C.3) Property Management Agreement between Hutton/ConAm Realty Investors 5 and Con Am Management Corporation for the Canterbury Park II property (included as, and incorporated herein by reference to, Exhibit C3 to the Registrant's 1993 Annual Report on Form 10-K filed on March 30, 1994). (D) 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 for the quarter ended August 31, 1992). Page 10 (13) Annual Report to Unitholders for the fiscal year ended November 30, 1998. (21) List of Subsidiaries - Joint Ventures (included as, and incorporated herein by reference to, Exhibit (22) to the Registrant's Annual Report on Form 10-K filed for the fiscal year ended November 30, 1991). (27) Financial Data Schedule (99) Portions of the Prospectus of the Registrant, dated March 27, 1985 (included as, and incorporated herein by reference to, Exhibit 28 to the Registrant's 1987 Annual Report on Form 10-K filed for the fiscal year ended November 30, 1987). (b) REPORTS ON FORM 8-K: No reports on Form 8-K were filed by the Partnership during the fourth quarter of the fiscal year ended November 30, 1998. (c) EXHIBITS See Item 14(a)(3) above. Page 11 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: February 28, 1999 BY: ConAm Property Services IV, 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 Page 12 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 IV, LTD. A General Partner By: Continental American Development, Inc. General Partner Date: February 28, 1999 BY: /s/ Daniel J. Epstein -------------------------------------- Daniel J. Epstein Director, President and Principal Executive Officer Date: February 28, 1999 BY: /s/ E. Scott Dupree -------------------------------------- E. Scott Dupree Vice President and Director Date: February 28, 1999 BY: /s/ Robert J. Svatos -------------------------------------- Robert J. Svatos Vice President and Director Date: February 28, 1999 BY: /s/ Ralph W. Tilley -------------------------------------- Ralph W. Tilley Vice President Date: February 28, 1999 BY: /s/ J. Bradley Forrester -------------------------------------- J. Bradley Forrester Vice President Page 13 EX-13 2 EXHIBIT 13 EXHIBIT 13 CONAM REALTY INVESTORS 5 L.P. 1998 ANNUAL REPORT - -------------------------------------------------------------------------------- CONAM REALTY INVESTORS 5 L.P. - -------------------------------------------------------------------------------- ConAm Realty Investors 5 L.P. is a California limited partnership formed in 1984 to acquire, operate and hold for investment multifamily residential properties. At November 30, 1998, the Partnership's portfolio consisted of two apartment properties located in Florida and North Carolina. On January 29, 1999, with the consent of the Unitholders, the two remaining properties were sold for a price of $26,000,000 (before closing costs) and substantially all of the cash, less a contingency amount, was distributed to the Unitholders. CONTENTS 1 Message to Investors 2 Performance Summary 3 Financial Highlights 4 Consolidated Financial Statements 7 Notes to the Consolidated Financial Statements 13 Independent Auditors' Report 14 Report of Former Independent Accountants 15 Net Asset Valuation - -------------------------------------------------------------------------------- ADMINISTRATIVE INQUIRIES PERFORMANCE INQUIRIES/FORM 10-Ks ADDRESS CHANGES/TRANSFERS Brock Tibbitts and Snell MAVRICC Management Systems, Inc. 625 Broadway, Suite 911 1845 Maxwell, Suite 101 San Diego, California 92101 Troy, MI 48084-4510 Attn: Financial Communications 248-637-7897 619-232-0365 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MESSAGE TO INVESTORS - -------------------------------------------------------------------------------- Presented for your review is the 1998 Annual Report for ConAm Realty Investors 5 L.P. (the "Partnership"). In this report we have included a performance summary which addresses operations at each of the properties (the "Properties") and the financial highlights for the year. We are pleased to announce that the proposed sale of the Partnership's two remaining Properties to DOC Investors, L.L.C., a Delaware limited liability company, was approved by a majority in interest of the Unitholders as of January 15, 1999 and that the sale was completed on January 29, 1999. Within 30 days of the close of the sale of the Properties, a distribution of $337.50 per Unit, representing the majority of the net proceeds from the sale and other cash from operations was paid to Unitholders. CASH DISTRIBUTIONS The Partnership paid quarterly cash distributions totaling $18.00 per Unit for the year ended November 30, 1998. The General Partner decided to not make a fourth quarter distribution pending the outcome of the solicitation of the consent of the Unitholders to the sale of the Partnership's Properties. Including the distribution on February 26, 1999, since inception, the Partnership has paid distributions totaling $722.86 per original $500 Unit. These distributions include the net proceeds from the sale of the Partnership's Properties in January 1999 of $336.36 per Unit, and cash from operations of $1.14 per Unit, both of which were distributed on February 26, 1999. OPERATIONS OVERVIEW In 1998, operations at the Partnership's Properties continued to be impacted to varying degrees by strong competition for residents in the markets where the two Properties are located. Although population and job growth escalated in both areas, the addition of several newly constructed complexes to both markets limited rental rate increases and caused overall vacancy rates to rise in the market area. As a result of new apartment construction in the Jacksonville area, several large apartment properties began offering rental concessions to attract residents. This competition, as well as the effects of extensive roof replacements at Lakeview Village, contributed to lower than expected average occupancy at Lakeview Village in 1997. Average occupancy recovered in fiscal 1998 to 94%, from 88% in fiscal 1997. In the Charlotte market, strong economic growth helped offset the effects of new construction. Average occupancy at The Hamptons at Quail Hollow increased slightly to 96% in fiscal 1998 from 94% in fiscal 1997. Rental rates at both Properties increased for the year. Several interior and exterior repairs were performed at each Property during 1998, including parking lot repairs at Lakeview Village, asphalt repairs at The Hamptons at Quail Hollow and other routine upgrades. In addition, ongoing roof replacements at Lakeview Village were completed in the second quarter of fiscal 1998. SUMMARY The sale of the Properties on January 29, 1999 represents the first step toward the liquidation of the Partnership that is expected to be completed in August 1999. A final distribution of remaining Partnership cash, if any, will be made shortly thereafter. Very truly yours, /s/ Daniel J. Epstein Daniel J. Epstein, President Continental American Development Inc. General Partner of ConAm Property Services IV, Ltd. February 28, 1999 1 - -------------------------------------------------------------------------------- PERFORMANCE SUMMARY - -------------------------------------------------------------------------------- LAKEVIEW VILLAGE PONTE VEDRA BEACH, FLORIDA Lakeview Village is a 240-unit luxury apartment complex located in an oceanside residential area of Ponte Vedra Beach, Florida southeast of Jacksonville. The property reported an average occupancy level of 94% in fiscal 1998, up from 88% in fiscal 1997. Strong economic growth continued in the Jacksonville area. New multifamily construction has softened the rental market as reported to you previously. However, rental rates at Lakeview increased during fiscal 1998. The property improvements for the year helped to retain the property's competitive position primarily included the completion of the roof replacements, which affected the property's occupancy level in fiscal 1997. THE HAMPTONS AT QUAIL HOLLOW CHARLOTTE, NORTH CAROLINA The Hamptons at Quail Hollow is a 232-unit apartment community located in southeastern Charlotte, North Carolina. The property's average occupancy increased slightly to 96% in 1998, up from 94% in fiscal 1997, and rental rates increased during fiscal 1998. The general strength of the Charlotte market prompted a surge in new construction over the last two years. As a result, competition for residents intensified, and induced some large apartment properties to offer rental concessions to increase occupancy rates. While new construction impacted the rate of rental activity in the short term, continued job and population growth kept this market from becoming significantly overbuilt. 2 - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
SELECTED FINANCIAL DATA For the periods ended November 30, 1998 1997 1996 1995 1994 - -------------------------------------------------------------------------------------------------------- DOLLARS IN THOUSANDS, EXCEPT FOR PER UNIT DATA Total Income $ 4,008 $ 3,845 $ 4,798 $ 4,583 $ 4,337 Income from operations 248 105 1,017 759 623 Net Income 248 2,687 1,017 759 623 Net Cash Provided by Operating Activities 1,000 1,113 2,023 1,903 1,799 Long-term Obligations 6,072 6,185 6,299 6,405 6,502 Total Assets at Year End 15,725 17,021 22,053 22,912 23,946 Income from Operations per Limited Partnership Unit* 4.08 1.19 17.21 12.77 10.46 Net Income per Limited Partnership Unit* 4.08 46.11 17.21 12.77 10.46 Distributions per Limited Partnership Unit* 18.00 131.00 30.00 30.00 26.00 * 57,490 UNITS OUTSTANDING
CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT 1998 1997 - -------------------------------------------------------------------------------- Special Distributions* $ -- $107.00 First Quarter $ 6.00 $ 6.00 Second Quarter $ 6.00 $ 6.00 Third Quarter $ 6.00 $ 6.00 Fourth Quarter $ -- $ 6.00 ------- ------- TOTAL $ 18.00 $131.00
Cash distributions were reduced in 1998 due to a suspension of distributions in the fourth quarter pending the outcome of the solicitation of the consent the Unitholders to the sale of the Properties. * On January 24, 1997, the Partnership paid a special cash distribution totaling $107 per Unit, reflecting a return of capital from the net proceeds of the December 1996 sale of Canterbury Park. 3
- --------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS AT NOVEMBER 30, AT NOVEMBER 30, 1998 1997 - --------------------------------------------------------------------------------- ASSETS Investments in real estate: Land $ 3,780,687 $ 3,780,687 Buildings and improvements 22,419,500 22,271,530 ------------ ------------ 26,200,187 26,052,217 Less accumulated depreciation (11,507,294) (10,808,639) ------------ ------------ 14,692,893 15,243,578 Cash and cash equivalents 424,001 1,424,876 Restricted cash 261,132 224,210 Other assets, net of accumulated amortization of $164,087 in 1998 and $131,808 in 1997 347,073 128,814 - --------------------------------------------------------------------------------- TOTAL ASSETS $ 15,725,099 $ 17,021,478 - --------------------------------------------------------------------------------- - --------------------------------------------------------------------------------- LIABILITIES AND PARTNERS' CAPITAL - --------------------------------------------------------------------------------- Liabilities: Mortgage payable $ 6,072,451 $ 6,185,012 Distribution payable -- 359,019 Accounts payable and accrued expenses 387,989 388,948 Due to general partners and affiliates 16,038 15,811 Security deposits 73,629 89,448 ------------ ------------ Total Liabilities 6,550,107 7,038,238 ------------ ------------ Partners' Capital: General Partner 182,795 190,878 Limited Partners (57,490 Units outstanding) 8,992,197 9,792,362 ------------ ------------ Total Partners' Capital 9,174,992 9,983,240 - --------------------------------------------------------------------------------- TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 15,725,099 $ 17,021,478 - --------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. 4
- ---------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED NOVEMBER 30, 1998 1997 1996 - ---------------------------------------------------------------------------------------------- INCOME Rental $3,970,095 $3,714,870 $4,695,358 Interest and other 37,894 130,067 102,810 ---------- ---------- ---------- Total Income 4,007,989 3,844,937 4,798,168 ---------- ---------- ---------- EXPENSES Property operating 2,055,840 2,123,570 2,120,789 Depreciation and amortization 884,567 879,851 1,027,524 Interest 475,024 484,182 492,660 General and administrative 172,830 167,485 140,163 Write-off of assets 162,037 85,000 -- Minority interest 10,000 -- -- ---------- ---------- ---------- Total Expenses 3,760,298 3,740,088 3,781,136 ---------- ---------- ---------- INCOME FROM OPERATIONS 247,691 104,849 1,017,032 Gain on sale of property -- 2,582,641 -- - ---------------------------------------------------------------------------------------------- NET INCOME $ 247,691 $2,687,490 $1,017,032 - ---------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- NET INCOME ALLOCATED: To the General Partner $ 13,036 $ 36,399 $ 27,769 To the Limited Partners 234,655 2,651,091 989,263 - ---------------------------------------------------------------------------------------------- NET INCOME $ 247,691 $2,687,490 $1,017,032 - ---------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- PER LIMITED PARTNERSHIP UNIT (57,490 UNITS OUTSTANDING): - ---------------------------------------------------------------------------------------------- Income from operations $ 4.08 $ 1.19 $ 17.21 Gain on sale of property -- 44.92 -- - ---------------------------------------------------------------------------------------------- NET INCOME $ 4.08 $ 46.11 $ 17.21 - ---------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL FOR THE YEARS ENDED NOVEMBER 30, 1998, 1997, AND 1996 GENERAL LIMITED PARTNER PARTNERS TOTAL - ---------------------------------------------------------------------------------------------- BALANCE AT NOVEMBER 30, 1995 $ 190,066 $15,407,898 $15,597,964 Net income 27,769 989,263 1,017,032 Distributions ($30.00 per Unit) (35,198) (1,724,700) (1,759,898) - ---------------------------------------------------------------------------------------------- BALANCE AT NOVEMBER 30, 1996 $ 182,637 $14,672,461 $14,855,098 Net income 36,399 2,651,091 2,687,490 Distributions ($131.00 per Unit) (28,158) (7,531,190) (7,559,348) - ---------------------------------------------------------------------------------------------- BALANCE AT NOVEMBER 30, 1997 $ 190,878 $9,792,362 $9,983,240 Net income 13,036 234,655 247,691 Distributions ($18.00 per Unit) (21,119) (1,034,820) (1,055,939) - ---------------------------------------------------------------------------------------------- BALANCE AT NOVEMBER 30, 1998 $ 182,795 $8,992,197 $9,174,992 - ---------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. 5
- -------------------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED NOVEMBER 30, 1998 1997 1996 - -------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 247,691 $ 2,687,490 $ 1,017,032 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 884,567 879,851 1,027,524 Write-off of assets 162,037 85,000 -- Minority interest 10,000 -- -- Gain on sale of property -- (2,582,641) -- Increase (decrease) in cash arising from changes in operating assets and liabilities: Fundings to restricted cash (192,762) (180,710) (169,425) Release of restricted cash 155,840 181,915 163,446 Other assets (250,538) 6,410 (4,968) Accounts payable and accrued expenses (959) 79,473 (5,063) Due to general partners and affiliates 227 (3,802) 764 Security deposits (15,819) (40,034) (6,763) ----------- ----------- ----------- Net cash provided by operating activities 1,000,284 1,112,952 2,022,547 - -------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Net proceeds from sale of property -- 6,270,225 -- Additions to real estate (718,585) (325,502) (288,766) Insurance recovery from fire damage 254,945 -- -- ----------- ----------- ----------- Net cash provided by (used in) investing activities (463,640) 5,944,723 (288,766) - -------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to Partners (1,414,958) (7,640,303) (1,759,898) Mortgage principal payments (112,561) (114,040) (105,560) Distribution to minority interest in joint venture (10,000) -- -- ----------- ----------- ----------- Net cash used in financing activities (1,537,519) (7,754,343) (1,865,458) - -------------------------------------------------------------------------------------------------------- Net decrease in cash and cash equivalents (1,000,875) (696,668) (131,677) Cash and cash equivalents, beginning of period 1,424,876 2,121,544 2,253,221 - -------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 424,001 $ 1,424,876 $ 2,121,544 - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest $ 435,806 $ 484,182 $ 492,660 - -------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES: Write-off of buildings and improvements $ (315,670) $ (179,000) $ -- Write-off of accumulated depreciation $ 153,633 $ 94,000 $ -- - --------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS. 6 Notes to the Consolidated Financial Statements NOVEMBER 30, 1998, 1997 AND 1996 1. ORGANIZATION ConAm Realty Investors 5 L.P. (formerly Hutton/ConAm Realty Investors 5) (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 (as subsequently amended, the "Partnership Agreement") dated June 28, 1984. The Partnership was formed for the purpose of acquiring and operating multi-family residential real estate. The general partners of the Partnership were RI 5 Real Estate Services, Inc. ("RI 5"), 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 5's co general partner interest in the Partnership, effective July 1, 1997, pursuant to a purchase agreement between CPS IV and RI 5 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 5 to ConAm Realty Investors 5 L.P. On January 15, 1999, a majority in interest of Unitholders agreed to the sell the Partnership's remaining properties and liquidate the Partnership. The Partnership sold its properties on January 29,1999 (Note 10) and expects to liquidate during fiscal year 1999. 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 The Partnership assesses 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 as the amount by which the carrying amount of the real estate exceeds the fair value of the real estate. At November 30, 1998, the Partnership's properties were assets to be held and used as the Partnership did not have the ability to sell the properties without the approval of a majority of the Unitholders. 7 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 or treasury based money market funds. RESTRICTED CASH Restricted cash consists of escrow deposits for real estate taxes and casualty insurance as required by the first mortgage lender on the Lakeview Village property. 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, 98% to the limited partners and 2% to the General Partners until each limited partner has received an amount equal to an annual 7% return for such year. Thereafter, net cash from operations is to be distributed 100% to the General Partners until the General Partners have received distributions for the year (including the 2% distribution described above) equal to 10% of the aggregate net cash from operations distributed to the partners for such fiscal year to that point. Any remaining net cash from operations is to be distributed 90% to the limited partners and 10% to the General Partners. Net loss and all depreciation is to be allocated 99% to the limited partners and 1% to the General Partners. Net income is to be allocated as follows: a. To the extent that net income before depreciation does not exceed the amount of net cash from operations distributable to the partners with respect to such fiscal year, net income before depreciation is to be allocated among the partners, pro rata in accordance with the amount of net cash from operations distributable to each partner with respect to such fiscal year to the extent thereof; and b. To the extent that net income before depreciation exceeds the amount of net cash from operations distributable to the partners with respect to such fiscal year, such excess is to be allocated (1) first, 100% to the General Partners, pro rata, in an amount equal to the excess, if any, of the General Partners' deficit, if any, in their capital accounts, over an amount equal to 1% of the aggregate capital contributions to the Partnership as reduced by the amount of the General Partners' capital contributions, and (2) second, 99% to the limited partners and 1% to the General Partners. 8 For the years ended November 30, 1998 and 1997 net income before depreciation exceeded net cash from operations distributable to the partners. Pursuant to the Partnership Agreement and as described in (b)(2) above, this excess was allocated 99% to the limited partners and 1% to the General Partners. Net proceeds from sales or refinancing is to be distributed 100% to the limited partners until each limited partner has received an amount equal to his adjusted capital investment (as defined in the Partnership Agreement) and an annual, 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 are to be allocated 99% to the limited partners and 1% to the General Partners until each limited partner has received an amount equal to his adjusted capital investment and an annual, non-compounded cumulative 7% return thereon. Thereafter, gain is to be allocated pro rata to the limited and General Partners' capital accounts, as reduced by the amount of the net proceeds distributed from sale or refinancing with respect to such transactions, until the limited and general partner capital accounts are in a ratio of 85 to 15. The balance, if any, is to be distributed 85% to the limited partners and 15% to the General Partners. Effective July 1, 1997, all General Partner allocations are to be made solely to CPS IV. 4. INVESTMENTS IN REAL ESTATE Since inception, the Partnership acquired three residential apartment complexes either directly or through investments in joint ventures. On December 10, 1996, the Partnership closed on the sale of one of the properties, Canterbury Park Apartments ("Canterbury Park"). Canterbury Park sold for $6,387,300 to Burcam Capital, L.L.C., a North Carolina limited liability company (the "Buyer"), which is unaffiliated with the Partnership. The transaction resulted in a gain on sale of Canterbury Park of $2,582,641, which is reflected in the Partnership's consolidated statements of operations for the year ended November 30, 1997. On January 24, 1997, the General Partners paid a special distribution of $6,151,430, representing the net proceeds from the sale of Canterbury Park, to the limited partners. The Partnership's remaining properties at November 30, 1998 were as follows:
- ------------------------------------------------------------------------------------------- PROPERTY NAME UNITS LOCATION DATE ACQUIRED PURCHASE PRICE - ------------------------------------------------------------------------------------------- Lakeview Village 240 Ponte Vedra Beach, FL 8/22/85 $12,266,187 The Hamptons at Quail Hollow 232 Charlotte, NC 5/30/86 11,694,137 - -------------------------------------------------------------------------------------------
Lakeview Village and The Hamptons were acquired through joint ventures with unaffiliated developers. 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 developers did not make an initial capital contribution to these ventures. The initial joint venture agreement of The Hamptons substantially provides that: a. Net cash from operations of The Hamptons is to be distributed 100% to the Partnership until it has received an annual, noncumulative return of 8% on 118% of its adjusted capital contribution. Any remaining balance is to be distributed 80% to the Partnership and 20% to the co- venturer. In October, 1998, distributions from The Hamptons operations resulted in a $10,000 distribution to the co-venturer. b. Net income of the joint venture is to be allocated to the Partnership and the co-venturer basically in accordance with the distribution of net cash from operations. All losses and depreciation are to be allocated to the Partnership. Net proceeds from a sale or refinancing of The Hamptons are to be distributed 100% to the Partnership until it has received an amount equal to an annual, cumulative 8% return on 118% of its adjusted capital contribution and an amount equal to 118% of its 9 adjusted capital contribution. Distributions are to then be made to the co-venturer until it has received an annual, cumulative 8% return on $928,000 as reduced by all prior distributions of net cash from operations and an amount equal to $928,000 as reduced by all prior distributions of net proceeds from refinancing. Any remaining net proceeds are to be distributed 80% to the Partnership and 20% to the co-venturer. As a result of the distributions made in October, 1998, $10,000 of the joint venture's net income was allocated to the co-venturer in accordance with the joint venture agreement. The joint venture agreement of Lakeview Village substantially provides that: a. Available cash from operations of Lakeview Village is to be distributed 100% to the Partnership until it has received its annual, noncumulative preferred return, of $650,000. Any remaining balance is to be distributed 99% to the Partnership and 1% to the General Partner. b. Net income of Lakeview Village is to be allocated first, proportionately to partners with negative capital accounts, as defined, until such capital accounts, as defined, have been increased to zero. Then, to the Partnership up to the amount of any payments made on account of its preferred return; 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, then 99% to the Partnership and 1% to the General Partner. c. Income from a sale of Lakeview Village is to be allocated to the Partnership until the Partnership's capital account, as defined, is equal to the fair market value of the ventures' assets at the date of the amendment. Any remaining balance is then 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 a positive capital account balance, as defined; thereafter, 99% to the Partnership and 1% to the General Partner. 5. MORTGAGE PAYABLE On October 27, 1993, the maturity date, the Partnership obtained replacement financing on its Lakeview Village property from The Penn Mutual Life Insurance Company ("Penn Mutual"), an unaffiliated party. During 1996, Penn Mutual transferred the mortgage loan to Midland Loan Services, Inc. under the existing terms. Total proceeds of $6,600,000 were received and are collateralized by a Mortgage and Security Agreement and an Assignment of Rents and Leases Agreement encumbering the property. The loan is for a term of seven years and bears interest at an annual rate of 7.75% requiring monthly installments of principal and interest based on a 25 year amortization schedule. The proceeds of this financing along with Partnership cash reserves were used to repay the outstanding amounts due Aetna Life Insurance Company on the Partnership's prior mortgage. Partnership cash reserves were also used to pay refinancing expenses of $184,825 and fund escrows of $355,664. The escrowed funds are available to pay real estate taxes and insurance. The loan was repaid in full in conjunction with the sale of Lakeview Village on January 29, 1999 (note 10). 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, distribution payable, accounts payable and accrued expenses, due to general partner and affiliates, and security deposits are reasonable estimates of their fair values due to the short-term nature of those instruments. 10 The carrying amount of the mortgage 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, 1998, 1997 and 1996, and the unpaid portion at November 30, 1998:
EARNED AND UNPAID AT EARNED NOVEMBER 30, ---------------------------------- 1998 1998 1997 1996 - ----------------------------------------------------------------------------------------------- RI 5 Real Estate Services, Inc. And affiliates: Out-of-pocket expenses $ -- $ -- $ 2,393 $ 1,462 ConAm and affiliates: Property operating salaries -- 339,911 366,685 342,575 Property management fees 16,038 199,651 187,757 234,958 - ----------------------------------------------------------------------------------------------- TOTAL $ 16,038 $539,562 $556,835 $578,995 - -----------------------------------------------------------------------------------------------
8. RECONCILIATION OF FINANCIAL STATEMENT AND TAX INFORMATION The following is a reconciliation of the net income for financial statement purposes to net income for federal income tax purposes for the years ended November 30, 1998, 1997 and 1996:
1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------- Net income per financial statements $ 247,691 $ 2,687,490 $ 1,017,032 Depreciation deducted for tax purposes in excess of depreciation expense per financial statements (unaudited) -- (7,153) (63,543) Capital improvement costs capitalized for tax Purposes not recorded per Financial statements (unaudited) -- 204,932 -- Tax basis joint venture net income (loss) in excess of GAAP basis joint venture net income (unaudited) 102,142 (84,482) (54,848) Gain on sale of properties For tax purposes in excess of gain per Financial statements (unaudited) -- 894,357 -- Other (unaudited) (6,979) 22 6,434 - ------------------------------------------------------------------------------------------------------------------- TAXABLE NET INCOME (UNAUDITED) $ 342,854 $ 3,695,166 $ 905,075 - ------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------
11 The following is a reconciliation of partners' capital for financial statement purposes to partners' capital for federal income tax purposes as of November 30, 1998, 1997 and 1996:
1998 1997 1996 - ------------------------------------------------------------------------------------------------------ Partners' capital per financial statements $ 9,174,992 $ 9,983,240 $ 14,855,098 Adjustment for cumulative difference between tax basis net income and net income per financial statements (unaudited) 147,718 52,555 (955,121) - ------------------------------------------------------------------------------------------------------ PARTNERS' CAPITAL PER INCOME TAX RETURN (UNAUDITED) $ 9,322,710 $ 10,035,795 $ 13,899,977 - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------
At November 30, 1998, the tax basis of the Partnership's assets was $9,484,789 and the tax basis of the Partnership's liabilities was $162,079. The Partnership does not consolidate its investment in joint ventures for income tax purposes. 9. DISTRIBUTIONS PAID Cash distributions, per the consolidated statements of partners' capital, 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 amounts as presented on the consolidated financial statements:
DISTRIBUTIONS DISTRIBUTIONS PAYABLE DISTRIBUTIONS DISTRIBUTIONS PAYABLE BEGINNING OF YEAR DECLARED PAID NOVEMBER 30, - ------------------------------------------------------------------------------------------------ 1998 $359,019 $1,055,939 $1,414,958 $ -- 1997 439,974 7,559,348 7,640,303 359,019 1996 439,974 1,759,898 1,759,898 439,974 - ------------------------------------------------------------------------------------------------
10. SALE OF PROPERTIES On January 29, 1999, the Partnership consummated the sale of the Lakeview Village and The Hamptons at Quail Hollow to DOC Investors, L.L.C., a Delaware limited liability company, for a sales price of $26,000,000 (before selling costs and prorations). As required by the Partnership's Partnership Agreement, the General Partner solicited the consent of a majority in interest of the Unitholders to the sale pursuant to a Consent Solicitation Statement dated December 16, 1998. The requisite consent was obtained on January 15, 1999. The Partnership received approximately $19,482,000 of cash proceeds from the sale, net of closing costs of approximately $110,000 and repayment of indebtedness of approximately $6,408,000. On February 26, 1999, the Partnership distributed $19,402,875 ($337.50 per Unit) to the Unitholders and $1,340 to the General Partner, out of cash proceeds from the sale and from Net Cash From Operations, as defined. 12 - -------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- The General Partner ConAm Realty Investors 5 L.P.: We have audited the accompanying consolidated balance sheets of ConAm Realty Investors 5 L.P. (a California limited partnership) and consolidated ventures (the "Partnership"), as of November 30, 1998 and 1997, and the related consolidated statements of operations, partners' capital, and cash flows for the years 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 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. As further discussed in Note 10 to the consolidated financial statements, the Partnership sold substantially all of its assets on January 29, 1999. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ConAm Realty Investors 5 L.P. and consolidated ventures as of November 30, 1998 and 1997, and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. KPMG LLP San Diego, California February 15, 1999, except for the second paragraph of Note 10 to the consolidated financial statements, as to which the date is February 26, 1999 13 - -------------------------------------------------------------------------------- REPORT OF FORMER INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- To the Partners of ConAm Realty Investors 5 L.P.: We have audited the consolidated balance sheet of ConAm Realty Investors 5 L.P. (formerly Hutton/ConAm Realty Investors 5), 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 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ConAm Realty Investors 5 L.P., a California Limited Partnership, and Consolidated Ventures as of November 30, 1996, and the consolidated results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Hartford, Connecticut February 14, 1997 14 - -------------------------------------------------------------------------------- NET ASSET VALUATION - -------------------------------------------------------------------------------- COMPARISON OF ACQUISITION COSTS TO NOVEMBER 30, 1998 PROPERTY VALUES AND DETERMINATION OF NET ASSET VALUE PER UNIT AT NOVEMBER 30, 1998 (UNAUDITED)
ACQUISITION COST (PURCHASE PRICE PLUS GENERAL PARTNERSHIP'S DATE OF PARTNERS' SHARE OF PROPERTY NET ASSET VALUE PROPERTY ACQUISITION ACQUISITION FEES) VALUE (1) DETERMINATION - ------------------------------------------ --------------- -------------------- -------------------- ------------------ Lakeview Village at Ponte Vedra 08-22-85 $ 12,805,899 $ 11,600,000 The Hamptons at Quail Hollow 05-30-86 12,208,679 14,400,000 Aggregate Property Value at 11-30-98 $26,000,000 Less estimated transaction costs in escrow (110,000) ------------------ Sales Proceeds (before repayment or buyer assumption of secured debt) 25,890,000 Cash and cash equivalents (including previously restricted cash) 685,133 Other assets 251,604 ------------------ Total assets 26,826,737 ------------------ Less: Secured debt 6,072,451 Prepayment penalty 315,023 Other liabilities 477,656 Contingency amounts (2) 554,115 ------------------ Total liabilities 7,419,245 ------------------ Partnership Net Asset Value (3) 19,407,492 ------------------ Net Asset Value Allocated: Limited Partners 19,402,875 General Partner 4,617 ------------------ 19,407,492 ------------------ NET ASSET VALUE PER UNIT (57,490) UNITS OUTSTANDING $337.50 - ---------------------------------------------------------------------------------------------------- ------------------
(1) Represents the Partnership's share of the fair market value of the properties as reflected in the purchase and sale agreements pursuant to which the properties were sold on January 29, 1999. The purchase prices contained in such agreements were negotiated and agreed to within approximately 30 days of November 30, 1998. (2) Includes an amount for estimated future costs related to the sale and liquidation and an amount the General Partner determined to set aside for contingencies, net of expected cash provided by operations through the date of sale. (3) The Partnership Net Asset Value assumes a sale at November 30, 1998 of all the Partnership's properties at prices equal to the sales prices set forth in the purchase and sale agreements described in Note (1), payment of all Partnership liabilities, and the distribution of the proceeds of such sale and other Partnership cash, to the Partners. Since the Partnership sold all of its real property assets in January 1999, is in dissolution, and is in the process of winding up and liquidating, the foregoing Partnership Net Asset Value is intended to approximate the liquidation value of the Partnership and the Net Asset Value Per Unit is intended to approximate the per Unit amount which is expected to be distributed to the Limited Partners in connection with the Partnership's liquidation. The Net Asset Valuation does not take into account the illiquid nature of an investment in the Units or the fact that at November 30, 1998 a holder of Units would likely not have been able to sell its Units for the Net Asset Value Per Unit set forth above. Fiduciaries of Limited Partners which are subject to ERISA or other provisions of law requiring valuation 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 purpose. 15 CONAM REALTY INVESTORS 5 L.P. AND CONSOLIDATED VENTURES Schedule III - Real Estate and Accumulated Depreciation November 30, 1998
CONSOLIDATED VENTURES ----------------------------------------------- LAKEVIEW VILLAGE THE RESIDENTIAL PROPERTY: APARTMENTS HAMPTONS TOTAL - ----------------------------------------------------------------------------------------------------------------- Location Ponte Vedra Charlotte, NC NA Beach, FL Construction date 1984-1985 1985-1986 NA Acquisition date 08-22-85 05-30-86 na Life on which depreciation in latest income statements is computed 25 years 25 years na Encumbrances $ 6,072,451 $ -- $ 6,072,451 Initial cost to Partnership: Land $ 1,543,406 $ 2,208,781 $ 3,752,187 Buildings and improvements 11,321,843 10,085,246 21,407,089 Write-off of building costs (436,779) (57,891) (494,670) Costs capitalized subsequent to acquisition -- Land, buildings and improvements 1,293,203 242,378 1,535,581 Gross amount at which carried at close of period: (1) Land $ 1,571,906 $ 2,208,781 $ 3,780,687 Buildings and improvements 12,149,767 10,269,733 22,419,500 - ----------------------------------------------------------------------------------------------------------------- 13,721,673 12,478,514 26,200,187 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Accumulated depreciation (2) $ 6,186,029 $ 5,321,265 $ 11,507,294 - -----------------------------------------------------------------------------------------------------------------
(1) The aggregate costs for Land, Buildings and Improvements for Federal tax purposes are $0. (2) The amount of accumulated depreciation for Federal income tax purposes is $0. A reconciliaiton of the carrying amount of real estate and accumulated depreciation for the years ended November 30, 1998, 1997 and 1996 follows:
1998 1997 1996 - ---------------------------------------------------------------------------------------------------------------- INVESTMENTS IN REAL ESTATE: Beginning of period $ 26,052,217 $ 31,693,216 $ 31,404,450 Additions 463,640 325,502 288,766 Dispositions and disposals (315,670) (5,966,501) -- - ---------------------------------------------------------------------------------------------------------------- End of period $ 26,200,187 $ 26,052,217 $ 31,693,216 - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- ACCUMULATED DEPRECIATION: Beginning of period $ 10,808,639 $ 12,154,985 $ 11,159,740 Depreciation expense 852,288 847,571 995,245 Dispositions and disposals (153,633) (2,193,917) -- - ---------------------------------------------------------------------------------------------------------------- End of period $ 11,507,294 $ 10,808,639 $ 12,154,985 - ---------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING INDEPENDENT AUDITORS' REPORT. F-1 - -------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- The General Partner ConAm Realty Investors 5 L.P.: Under date of February 15, 1999, we reported on the consolidated balance sheets of ConAm Realty Investors 5 L.P. (a California limited partnership) and consolidated ventures (the "Partnership") as of November 30, 1998 and 1997, and the related consolidated statements of operations, partners' capital, and cash flows for the years then ended, as contained in the 1998 annual report to Unitholders. These consolidated financial statements and our report thereon are incorporated by reference in the 1998 annual report on Form 10-K. In connection with our audits 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 audits. 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 LLP San Diego, California February 15, 1999 F-2 - -------------------------------------------------------------------------------- REPORT OF FORMER INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- Our report on the consolidated financial statements of ConAm Realty Investors 5 L.P. (formerly Hutton/ConAm Realty Investors 5), 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 5 L.P. for the year ended November 30, 1996. In connection with our audit 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 F-3 EX-27 3 EXHIBIT 27
5 12-MOS NOV-30-1998 NOV-30-1998 685,133 0 0 0 0 0 26,200,187 11,507,294 15,725,099 477,636 6,072,451 0 0 0 9,174,992 15,725,099 3,970,095 4,007,989 0 0 3,285,274 0 475,024 247,691 0 247,691 0 0 0 247,691 4.08 4.08
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