UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ___________.
COMMISSION FILE NO. 33-98136
CHELSEA GCA REALTY PARTNERSHIP, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 22-3258100
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
103 EISENHOWER PARKWAY, ROSELAND, NEW JERSEY 07068
(Address of principal executive offices - zip code)
(201) 228-6111
(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
--- ---
There are no outstanding shares of Common Stock or voting securities.
<PAGE>
CHELSEA GCA REALTY PARTNERSHIP, L.P.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
Condensed Consolidated Balance Sheets
as of June 30, 1996 and December 31, 1995..................... 2
Condensed Consolidated Statements of Income
for the three and six months ended June 30, 1996 and 1995...... 3
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1996 and 1995................ 4
Notes to Condensed Consolidated Financial Statements............. 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................... 8
Signatures................................................................. 13
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CHELSEA GCA REALTY PARTNERSHIP, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per unit data)
JUNE 30, December 31,
1996 1995
----------- --------------
(Unaudited)
ASSETS
Rental properties:
<S> <C> <C>
Land........................................................ $80,332 $75,224
Depreciable property........................................ 383,207 340,759
------------- --------------
Total rental property............................................ 463,539 415,983
Accumulated depreciation......................................... (47,615) (41,373)
------------- --------------
Rental properties, net........................................... 415,924 374,610
Cash and equivalents............................................. 6,949 3,987
Notes receivable-related parties................................. 8,023 8,129
Deferred costs, net.............................................. 15,457 7,255
Other assets..................................................... 13,637 14,072
------------- --------------
Total assets...................................................... $459,990 $408,053
============= ==============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Unsecured bank line of credit............................... $49,000 -
Secured bank line of credit................................. - $96,000
Notes payable............................................... 99,627 -
Construction payables....................................... 18,660 18,617
Accounts payable and accrued expenses....................... 7,519 5,730
Obligation under capital lease.............................. 9,865 9,845
Distribution payable to unitholders......................... 9,849 9,790
Rent payable................................................ 1,616 1,595
------------- -----------
Total liabilities................................................ 196,136 141,577
Commitments and contingencies....................................
Minority interest................................................. 5,580 5,441
Partners' capital:
General partner units outstanding, 11,781 in 1996
and 11,485 in 1995.......................................... 177,867 176,758
Limited partner units outstanding, 5,347 in 1996
and 5,541 in 1995........................................... 80,407 84,277
------------- --------------
Total partners' capital.......................................... 258,274 261,035
------------- --------------
Total liabilities and partners' capital.......................... $459,990 $408,053
============= ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CHELSEA GCA REALTY, PARNTERSHIP, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(In thousands, except per unit data)
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
REVENUES:
<S> <C> <C> <C> <C>
Base rent............................................. $13,746 $11,426 $26,423 $21,763
Percentage rent....................................... 881 763 1,679 1,097
Expense reimbursements................................ 5,709 5,161 10,854 9,220
Other income.......................................... 593 325 1,028 670
-------- ------ ------- -------
Total revenues.......................................... 20,929 17,675 39,984 32,750
Expenses:
Interest.............................................. 1,848 551 3,426 803
Operating and maintenance............................. 6,073 5,490 11,596 9,698
Depreciation and amortization......................... 3,529 2,966 7,168 5,550
General and administrative............................ 800 724 1,441 1,361
Other................................................. 565 589 1,103 850
-------- ------- ------ -------
12,815 10,320 24,734 18,262
Income before minority interest and extraordinary item.. 8,114 7,355 15,250 14,488
Minority interest....................................... (74) (78) (139) (146)
Net income before extraordinary item.................... 8,040 7,277 15,111 14,342
Extraordinary item-loss on early extinguishment of debt.. - - (902) -
-------- ------ ------- -------
Net income............................................... $8,040 $7,277 $14,209 $14,342
======= ======= ======== ========
Net income:
General Partner........................................ $5,456 $4,836 $ 9,610 $ 9,529
Limited partners....................................... 2,584 2,441 4,599 4,813
------- ------ ------- -------
Total.................................................... $8,040 $7,277 $14,209 $14,342
======= ====== ======= =======
Net income per unit:
General partner (including $0.05 net loss per unit
from extraordinary item in the six months ended
June 30, 1996)....................................... $0.47 $0.44 $0.83 $0.86
Limited partners (including $0.05 net loss per unit
from extraordinary item in the six months ended
June 30, 1996)....................................... $0.47 $0.44 $0.83 $0.86
Weighted average units outstanding:
General partner........................................ 11,610 11,067 11,540 11,063
Limited partners....................................... 5,498 5,592 5,508 5,590
------- ------ ------- ------
Total.................................................... 17,108 16,668 17,048 16,653
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Chelsea GCA Realty Partnership, L.P.
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1996 and 1995
(Unaudited)
(In thousands)
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income............................................ $14,209 $14,342
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 7,168 5,550
Minority interest in net income................... 139 146
Loss on early extinguishment of debt.............. 902 -
Amortization of debt discount..................... 35 -
Other operating activities........................ 24 153
Additions to deferred lease costs................. (1,052) (967)
Changes in assets and liabilities:
Straight line rent receivable................... (887) (685)
Other assets.................................... 1,322 (1,111)
Accounts payable and accrued expenses........... 1,830 (835)
--------- --------
Net cash provided by operating activities............. 23,690 16,593
Cash flows from investing activities
Additions to rental properties........................ (45,612) (46,446)
Additions to deferred development costs............... (6,145) -
Advances to related parties........................... (67) -
Payments from related parties......................... 173 105
-------- --------
Net cash used in investing activities................. (51,651) (46,341)
Cash flows from financing activities
Proceeds from bank line of credit..................... 42,000 43,000
Proceeds from issuance of notes payable............... 99,592 -
Repayments of debt.................................... (89,000) -
Additions to deferred financing costs................. (3,135) (80)
Distributions......................................... (19,625) (17,306)
Net proceeds from sale of units....................... 1,076 -
Other financing activities............................ 15 770
--------- --------
Net cash provided by financing activities............. 30,923 26,384
--------- --------
Net increase (decrease) in cash and equivalents....... 2,962 (3,364)
Cash and equivalents, beginning of period............. 3,987 9,109
--------- --------
Cash and equivalents, end of period................... $6,949 $5,745
========= ========
Supplemental schedule of Non-Cash Investing and Financing Activities:
During 1996, the Operating Partnership acquired property valued at $1.6 million through the issuance of units.
Also during 1996, 250,000 units with a book value of approximately $3.8 million were converted to
common shares.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
CHELSEA GCA REALTY PARTNERSHIP, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
Chelsea GCA Realty Partnership, L.P. (the "Operating Partnership"), which
commenced operations on November 2, 1993, is engaged in the development,
ownership, acquisition, leasing and operation of manufacturers' outlet
centers. As of June 30, 1996, the Operating Partnership operated 17
centers in 9 states (the "Properties") containing approximately 3.3
million square feet of gross leasable area ("GLA"). The Properties are
located near large metropolitan areas including New York, Los Angeles,
San Francisco, Sacramento, Atlanta, Portland (Oregon), Kansas City and
Cleveland, or at or near tourist destinations including the Napa Valley,
Palm Springs and the Monterey Peninsula. The Operating Partnership also
has a number of properties under development. The sole general partner in
the Operating Partnership, Chelsea GCA Realty, Inc. (the "Company"), is a
self-administered and self-managed Real Estate Investment Trust.
Ownership of the Operating Partnership as of June 30, 1996 was as
follows:
General partner 68.8% 11,780,700 units
Limited partners 31.2% 5,347,300 units
-------- -----------
TOTAL 100.0% 17,128,000
The condensed consolidated financial statements of the Operating
Partnership include the accounts of Solvang Designer Outlets ("Solvang"),
a limited partnership in which the Operating Partnership has a 50%
interest and is the sole general partner. As the sole general partner,
the Operating Partnership has the ability to exercise both financial and
operational control over the partnership. Solvang is not material to the
operations or financial position of the Operating Partnership.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for fair presentation have been included. Operating
results for the three and six month periods ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the year
ended December 31, 1996. These financial statements should be read in
conjunction with the consolidated financial statements and accompanying
notes included in the Operating Partnership's Annual Report on Form 10-K
for the year ended December 31, 1995.
Certain prior period balances have been reclassified to conform with
current period presentation.
<PAGE>
2. BANK LINE OF CREDIT
On March 29, 1996, the Operating Partnership replaced its secured
revolving credit facility (the "Secured Facility") with a new, unsecured
$100 million line of credit (the "Unsecured Facility"). The Unsecured
Facility expires March 29, 1998. Interest on the outstanding balance is
payable monthly at the London Interbank Offered Rate plus 1.75%, or the
prime rate, at the Operating Partnership's option. A fee on the unused
portion of the Unsecured Facility is payable quarterly at a rate of 0.25%
per annum. The outstanding balance at June 30, 1996 was $49.0 million,
which approximates fair value. An additional $1.0 million of the
Unsecured Facility was reserved for letters of credit issued to secure
commitments to fund a traffic mitigation plan at a new center.
The Unsecured Facility requires compliance with certain loan covenants
relating to debt service coverage, tangible net worth, cash flow,
earnings, occupancy rate, new development and dividends. The Operating
Partnership has remained in compliance with these covenants since
inception of the facility.
Interest and loan costs of approximately $1.3 million and $2.5 million
were capitalized as development costs during the three and six months
ended June 30, 1996.
3. NOTES PAYABLE
In January 1996, the Operating Partnership completed a $100 million
public debt offering of 7.75% unsecured notes due January 2001 (the
"Notes"), which are guaranteed by the Company. The five-year non-callable
Notes were priced at a discount of 99.952 to yield 7.85% to investors.
Net proceeds from the offering were used to repay substantially all of
the borrowings under the Secured Facility.
4. DISTRIBUTIONS
On June 13, 1996, the Board of Directors of the Company declared a $0.575
per unit cash distribution to unitholders of record on June 28, 1996. The
distribution, totaling $9.9 million, was paid on July 22, 1996.
5. INCOME TAXES
No provision has been made for income taxes in the accompanying
consolidated condensed financial statements since such taxes, if any, are
the responsibility of the individual partners.
6. NET INCOME PER PARTNERSHIP UNIT
Net income per partnership unit is determined by allocating net income to
the general partner and the limited partners based on their weighted
average partnership units outstanding during the respective periods
presented.
7. COMMITMENTS AND CONTINGENCIES
Management has determined that the foundation slab at one of its outlet
centers was installed improperly and will require corrective action, the
cost of which management estimates will be in excess of $1 million.
Management believes such costs may be recoverable from the original
contractor and/or engineers, and that any costs incurred by the Operating
Partnership will not materially affect the financial position, operating
results or liquidity of the Operating Partnership.
The Operating Partnership is not presently involved in any material
litigation nor, to its knowledge, is any material litigation threatened
against the Operating Partnership or its properties, other than routine
litigation arising in the ordinary course of business. Management
believes the costs, if any, incurred by the Operating Partnership related
to this litigation will not materially affect the financial position,
operating results or liquidity of the Operating Partnership.
8. RELATED PARTY INFORMATION
The Operating Partnership recognized lease settlement income of
approximately $99,000 from a related party during the six months ended
June 30, 1996. This amount is included in other income in the
accompanying condensed consolidated financial statements.
9. EXTRAORDINARY ITEM
Deferred financing costs of $0.9 million related to the Secured Facility
replaced in March 1996 have been written off and reflected in the
accompanying financial statements as an extraordinary item.
<PAGE>
CHELSEA GCA REALTY PARTNERSHIP, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the accompanying
unaudited condensed consolidated financial statements and notes thereto. These
financial statements include all adjustments which, in the opinion of
management, are necessary to reflect a fair statement of results for the interim
periods presented, and all such adjustments are of a normal recurring nature.
GENERAL OVERVIEW
The Operating Partnership has grown by increasing rent at its existing centers,
expanding its existing centers, developing new centers and acquiring and
redeveloping centers. The Operating Partnership operated 17 manufacturers'
outlet centers at June 30, 1996 and 1995: the Operating Partnership sold its
smallest center, Page Factory Stores, in December, 1995, and opened a new
center, North Georgia Premium Outlets in May, 1996. The Operating Partnership's
operating gross leasable area (GLA) at June 30, 1996, increased 16.4% to 3.3
million square feet from 2.8 million square feet at June 30, 1995. The GLA added
since July 1, 1995 is detailed in the schedule that follows:
<TABLE>
<CAPTION>
12 Mos Ended 6 Mos Ended 6 Mos Ended
June 30, June 30, December 31,
1996 1996 1995
---------------- --------------- ----------------
GLA ADDED (IN 000'S):
NEW CENTERS OPENED:
<S> <C> <C> <C>
North Georgia................................ 292 292 -
------------ ------------ ------------
TOTAL NEW CENTERS 292 292 -
CENTERS EXPANDED:
Aurora Farms................................. 27 - 27
Woodbury Common.............................. 18 1 17
Napa Factory Stores.......................... 17 - 17
Camarillo Factory Stores..................... 77 - 77
Petaluma..................................... 45 30 15
Other........................................ (3) 1 (4)
------------ ------------ ------------
TOTAL CENTERS EXPANDED 181 32 149
CENTER SOLD:
Page Factory Stores.......................... (14) - (14)
------------ ------------ ------------
Net GLA added during the period.................. 459 324 135
GLA at end of period............................. 3,258 3,258 2,934
<PAGE>
RESULTS OF OPERATIONS
Comparison of the three months ended June 30, 1996 to the three months ended
June 30, 1995.
Net income before minority interest and extraordinary item increased $0.7
million to $8.1 million for the three months ended June 30, 1996 from $7.4
million for the three months ended June 30, 1995. The increase was primarily due
to increases in revenues offset by interest on borrowings and increases in
depreciation and amortization.
Base rentals increased $2.3 million, or 20.3%, to $13.7 million for the three
months ended June 30, 1996 from $11.4 million for the three months ended June
30, 1995 due to expansions, new center openings and higher average rents.
Percentage rents increased $0.1 million to $0.9 million for the three months
ended June 30, 1996, from $0.8 million for the three months ended June 30, 1995.
The increase was primarily due to increases in tenant sales at the Operating
Partnership's larger centers and an increase in tenants contributing percentage
rents.
Expense reimbursements, representing contractual recoveries from tenants of
certain common area maintenance, operating, real estate tax, promotional and
management expenses, increased $0.5 million, or 10.6%, to $5.7 million for the
three months ended June 30, 1996 from $5.2 million for the three months ended
June 30, 1995, due to the recovery of operating and maintenance costs at new and
expanded centers. The average recovery of reimbursable expenses was 94.0% in
1996 and 1995.
Other income increased $0.3 million to $0.6 million for the three months ended
June 30, 1996, from $0.3 million for the three months ended June 30, 1995,
primarily as a result of increased interest and a lease termination settlement
in the 1996 period.
Interest in excess of amounts capitalized increased $1.2 million to $1.8 million
for the three months ended June 30, 1996 from $0.6 million for the three months
ended June 30, 1995 due to the opening of centers and expansions financed during
1995 and 1996.
Operating and maintenance expenses increased $0.6 million, or 10.6%, to $6.1
million for the three months ended June 30, 1996 from $5.5 million for the three
months ended June 30, 1995. The increase was primarily due to costs related to
expansions and new centers.
Depreciation and amortization expense increased $0.5 million, or 19.0%, to $3.5
million for the three months ended June 30, 1996 from $3.0 million for the three
months ended June 30, 1995. The increase was primarily due to costs related to
expansions and new centers.
General and administrative expenses increased $0.1 million, or 10.5%, to $0.8
million for the three months ended June 30, 1996 from $0.7 million for the three
months ended June 30, 1995. The increase was primarily due to increased
personnel and overhead costs.
Other expenses remained flat at $0.6 million for the three months ended June 30,
1996 and 1995.
<PAGE>
Comparison of the six months ended June 30, 1996 to the six months ended June
30, 1995.
Net income before minority interest and extraordinary item increased $0.8
million to $15.3 million for the six months ended June 30, 1996, from $14.5
million for the six months ended June 30, 1995. The increase was primarily due
to increases in revenues offset by interest on borrowings and increases in
depreciation and amortization.
Base rentals increased $4.6 million, or 21.4%, to $26.4 million for the six
months ended June 30, 1996, from $21.8 million for the six months ended June 30,
1995, due to expansions, new center openings and higher average rents.
Percentage rents increased $0.6 million to $1.7 million for the six months ended
June 30, 1996 from $1.1 million for the six months ended June 30, 1995. The
increase was primarily due to increases in tenant sales, expansions at the
Operating Partnership's larger centers and increases in tenants contributing
percentage rents.
Expense reimbursements, representing contractual recoveries from tenants of
certain common area maintenance, operating, real estate tax, promotional and
management expenses, increased $1.7 million, or 17.7%, to $10.9 million for the
six months ended June 30, 1996 from $9.2 million for the six months ended June
30, 1995, due to the recovery of operating and maintenance costs at new and
expanded centers. The average recovery of reimbursable expenses was 93.6% in
1996 compared to 95.1% in 1995.
Other income increased $0.3 million to $1.0 million for the six months ended
June 30, 1996 from $0.7 million for the six months ended June 30, 1995. The
increase was primarily as a result of increased interest and lease termination
settlements in the 1996 period.
Interest in excess of amounts capitalized increased $2.6 million to $3.4 million
for the six months ended June 30, 1996 from $0.8 million for the six months
ended June 30, 1995 due to the opening of centers and expansions financed during
1995 and 1996.
Operating and maintenance expenses increased $1.9 million, or 19.6%, to $11.6
million for the six months ended June 30, 1996 from $9.7 million for the six
months ended June 30, 1995. The increase was primarily due to costs related to
expansions and new centers.
Depreciation and amortization expense increased $1.6 million, or 29.2%, to $7.2
million for the six months ended June 30, 1996 from $5.6 million for the six
months ended June 30, 1995. The increase was primarily due to costs related to
expansions and new centers.
General and administrative expenses remained flat at $1.4 million for the six
months ended June 30, 1996 and 1995.
Other expenses increased $0.2 million to $1.1 million for the six months ended
June 30, 1996 from $0.9 million for the six months ended June 30, 1995. The
increase included additional reserves for bad debts, legal fees and tenant
improvement write-offs.
In March 1996, the Operating Partnership replaced its Secured Facility. Deferred
financing costs of $0.9 million were expensed in connection with the early
retirement of the Secured Facility.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Operating Partnership believes it has adequate financial resources to fund
operating expenses, distributions and planned development and construction
activities. Operating cash flow during 1996 is expected to increase with a full
year of operations of the 606,000 square feet of GLA added during 1995 and
scheduled openings of approximately 675,000 square feet including two new
centers and expansions in 1996. In addition, at June 30, 1996 the Operating
Partnership had $50.0 million available under its Unsecured Facility, access to
the public markets through its debt ($100 million) and the Company's ($200
million) equity shelf registrations, and cash equivalents of $6.9 million.
Operating cash flow is expected to provide sufficient funds for distributions.
In addition, the Operating Partnership anticipates retaining sufficient
operating cash to fund re-tenanting and lease renewal tenant improvement costs,
as well as capital expenditures to maintain the quality of its centers.
Distributions declared and recorded during the six months ended June 30, 1996
were $19.7 million, or $0.575 per unit. The Operating Partnership's distribution
payout ratio as a percentage of net income before depreciation and amortization,
minority interest and extraordinary item ("FFO") was 92.0% during the six months
ended June 30, 1996. The Unsecured Facility limits aggregate distributions to
the lesser of (i) 90% of FFO on an annual basis or (ii) 100% of FFO for any two
consecutive quarters.
In January 1996, the Operating Partnership completed a $100 million public
offering of 7.75% unsecured notes due January 2001 (the "Notes"), which are
guaranteed by the Company. The five-year non-callable Notes were priced at a
discount of 99.592 to yield 7.85% to investors. Net proceeds from the offering
were used to repay substantially all borrowings under the Secured Facility.
In March 1996, the Operating Partnership replaced its Secured Facility with the
new $100 million Unsecured Facility. The Operating Partnership had $50.0 million
available for growth and liquidity at June 30, 1996. Interest on the outstanding
balance is payable monthly at a rate equal to the London Interbank Offered Rate
("LIBOR") plus 1.75%, or the prime rate, at the Operating Partnership's option.
A fee on the unused portion of the Unsecured Facility is payable quarterly at a
rate of 0.25% per annum. The Unsecured Facility can be increased at any time up
to $200 million with the approval of the bank group.
The Operating Partnership is in the process of planning development for 1996,
1997 and beyond. North Georgia Premium Outlets Phase I, a new project containing
292,000 square feet of GLA, opened in May 1996. Another new center, Clinton
Crossing Premium Outlets, containing 271,000 square feet of GLA, is scheduled to
open in late August 1996, and approximately 85,000 square feet of expansions are
under construction and expected to open during the second half of 1996. The
Operating Partnership anticipates development and construction costs of $80
million to $100 million annually. Funding is currently expected from Unsecured
Facility borrowings and other available capital sources.
To achieve planned growth and favorable returns in both the short and long-term,
the Operating Partnership's financing strategy is to maintain a strong, flexible
financial position by: (i) maintaining a conservative level of leverage; (ii)
extending and sequencing debt maturity dates; (iii) managing exposure to
floating interest rates; and (iv) maintaining liquidity. Management believes
these strategies will enable the Operating Partnership to access a broad array
of capital sources, including bank or institutional borrowings and secured and
unsecured debt and equity offerings.
It is the Operating Partnership's policy to limit its borrowings to less than
40% of total market capitalization (defined as the value of outstanding shares
of common stock of the Company on a fully diluted basis including conversion of
Operating Partnership units to common stock, plus total debt). Using a June 30,
1996 closing price of $31.75 per share of common stock of the Company, the
Operating Partnership's ratio of debt to total market capitalization was
approximately 21%.
Net cash provided by operating activities was $23.7 million and $16.6 million
for the six months ended June 30, 1996 and 1995, respectively. The increase was
primarily due to increased operations, decreases in accounts receivable and
increases in accrued interest on the Notes. Net cash used in investing
activities increased $5.3 million for the six months ended June 30, 1996
compared to 1995, primarily as a result of increased development activity. Net
cash provided by financing activities increased $4.5 million primarily due to
the issuance of the Notes, offset by repayment of the Secured Facility.
FUNDS FROM OPERATIONS
Management believes that, to facilitate a clear understanding of the operating
results of the Operating Partnership, FFO should be considered in conjunction
with net income as presented in the condensed consolidated financial statements.
Analysts generally consider FFO an appropriate measure of performance of an
equity real estate investment trust. FFO is generally defined by the National
Association of Real Estate Investment Trusts ("NAREIT") as net income or loss
plus certain non-cash items, primarily depreciation and amortization. FFO should
not be considered an alternative to net income as an indicator of operating
performance or to cash from operations under generally accepted accounting
principles, and is not necessarily indicative of cash available to fund cash
needs.
In March 1995, NAREIT issued a clarification of its definition of FFO. For
illustrative purposes, the following table presents the Operating Partnership's
FFO under both methods of calculation for the six months ended June 30, 1996 and
1995.
New Method Old Method
--------------------------------------------------- ---------------------------------------------------
Three Months Six Months Three Months Six Months
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
1996 1995 1996 1995 1996 1995 1996 1995
------------ ------------- ------------ ------------ ------- -------- --------- -------
Net income before
extraordinary item...... $8,040 $7,277 $15,111 $14,342 $8,040 $7,277 $15,111 $14,342
Add back:
Depreciation and
amortization(1)......... 3,478 2,934 7,065 5,487 3,478 2,934 7,065 5,487
Amortization of
deferred financing
costs and depreciation
of non-real estate
assets................... (269) (198) (656) (275) - - - -
-------- --------- --------- -------- --------- -------- ---------- -------
FFO $11,249 $10,013 $21,520 $19,554 $11,518 $10,211 $22,176 $19,829
======= ========= ======== ======= ======== ======= ========= =======
Weighted average
units outstanding........ 17,108 16,688 17,048 16,653 17,108 16,668 17,048 16,653
________________________________
(1) Excludes depreciation and minority interest attributed to a third-party limited partner's interest in a partnership.
</TABLE>
<PAGE>
CHELSEA GCA REALTY PARTNERSHIP, L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHELSEA GCA REALTY PARTNERSHIP, L.P.
By: /s/ Leslie T. Chao
Leslie T. Chao
Executive Vice President and
Chief Financial Officer
Date: August 9, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,949
<SECURITIES> 0
<RECEIVABLES> 8,023
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 463,539
<DEPRECIATION> 47,615
<TOTAL-ASSETS> 459,990
<CURRENT-LIABILITIES> 0
<BONDS> 148,627
0
0
<COMMON> 0
<OTHER-SE> 258,274
<TOTAL-LIABILITY-AND-EQUITY> 459,990
<SALES> 39,984
<TOTAL-REVENUES> 39,984
<CGS> 0
<TOTAL-COSTS> 24,734
<OTHER-EXPENSES> 1,103
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,426
<INCOME-PRETAX> 15,111
<INCOME-TAX> 0
<INCOME-CONTINUING> 15,111
<DISCONTINUED> 0
<EXTRAORDINARY> (902)
<CHANGES> 0
<NET-INCOME> 14,209
<EPS-PRIMARY> 0.83
<EPS-DILUTED> 0.83
</TABLE>
