UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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: 0-11081
COMMERCIAL PROPERTIES 1, L.P.
(formerly Hutton/GSH Commercial Properties 1)
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Virginia 13-3075804
------------------------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 World Financial Center, 29th Floor, New York, NY
ATTN: Andre Anderson 10285
--------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(212) 526-3237
-----------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Consolidated Balance Sheets
June 30, December 31,
Assets 1995 1994
---------- ----------
Real estate investments, at cost:
Land $ 4,871,718 $ 4,871,718
Buildings and improvements 27,483,165 27,225,346
---------- ----------
32,354,883 32,097,064
Less accumulated depreciation (13,074,387) (12,413,346)
---------- ----------
19,280,496 19,683,718
Cash and cash equivalents 1,222,822 1,068,352
Restricted cash 241,491 162,969
Accounts and rent receivable, net of
allowance for doubtful accounts of $16,003
in 1995 and $51,065 in 1994 78,444 81,493
Prepaid leasing costs, net of accumulated
amortization of $120,998 in 1995
and $67,871 in 1994 493,128 256,178
Note receivable, net of unaccreted discount
of $18,952 in 1995 and $75,808 in 1994 1,481,048 1,424,192
Deferred rent receivable 172,786 126,572
Other assets 95,610 115,609
---------- ----------
Total Assets $23,065,825 $22,919,083
========== ==========
Liabilities and Partners' Capital
Liabilities:
Mortgage notes payable $ 5,082,933 $ 5,169,687
Accounts payable and accrued expenses 228,353 106,717
Due to affiliates 37,521 46,408
Security deposits payable 201,279 170,179
Prepaid rent 32,231 8,295
---------- ----------
Total Liabilities 5,582,317 5,501,286
Minority interest 816,559 840,517
Partners' Capital (Deficit):
General Partners (920,849) (929,816)
Limited Partners 17,587,798 17,507,096
---------- ----------
Total Partners' Capital 16,666,949 16,577,280
---------- ----------
Total Liabilities and Partners' Capital $23,065,825 $22,919,083
========== ==========
Consolidated Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1995
General Limited
Partners Partners Total
-------- ---------- ----------
Balance at December 31, 1994 $(929,816) $17,507,096 $16,577,280
Net income 8,967 80,702 89,669
-------- ---------- ----------
Balance at June 30, 1995 $(920,849) $17,587,798 $16,666,949
======== ========== ==========
Consolidated Statements of Operations
Three months ended Six months ended
June 30, June 30,
Income 1995 1994 1995 1994
--------- --------- --------- ---------
Rent $1,104,052 $ 676,648 $1,970,984 $1,541,786
Interest 44,498 35,663 88,841 72,706
--------- --------- --------- ---------
Total Income 1,148,550 712,311 2,059,825 1,614,492
Expenses
Property operating 402,131 340,854 783,299 671,669
Depreciation and amortization 387,318 331,970 822,377 623,935
Interest 125,391 129,465 251,838 259,888
General and administrative 60,652 60,285 115,120 125,031
Bad debt -- 11,572 21,480 18,740
--------- --------- --------- ---------
Total Expenses 975,492 874,146 1,994,114 1,699,263
Income (loss) before
minority interest 173,058 (161,835) 65,711 (84,771)
Minority interest 1,830 22,752 23,958 25,468
--------- --------- --------- ---------
Net Income (Loss) $ 174,888 $ (139,083) $ 89,669 $ (59,303)
========= ========= ========= =========
Net Income (Loss) Allocated:
To the General Partners $ 8,967 $ (7,978) $ 8,967 $ --
To the Limited Partners 165,921 (131,105) 80,702 (59,303)
--------- --------- --------- ---------
$ 174,888 $ (139,083) $ 89,669 $ (59,303)
Per limited partnership unit
(75,000 outstanding) $2.22 $(1.75) $1.08 $(.79)
========= ========= ========= =========
Consolidated Statements of Cash Flows
For the six months ended June 30, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
---------- ----------
Net income (loss) $ 89,669 $ (59,303)
Adjustments to reconcile net (loss)
income to net cash provided by operating activities:
Depreciation and amortization 822,377 623,935
Accretion of discount on note receivable (56,856) (51,224)
Minority interest in income (loss)
of consolidated ventures (23,958) (25,468)
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Restricted cash (78,522) (77,606)
Accounts and rent receivable 3,049 45,009
Prepaid leasing costs (293,789) (167,823)
Deferred rent receivable (46,214) (28,882)
Other assets 19,999 30,949
Accounts payable and accrued expenses 121,636 94,569
Due to affiliates (8,887) (654)
Security deposits payable 31,100 18,464
Prepaid rent 23,936 (111,786)
---------- ----------
Net cash provided by operating activities 603,540 290,180
Cash Flows from Investing Activities:
Additions to real estate (362,316) (750,361)
---------- ----------
Net cash used for investing activities (362,316) (750,361)
Cash Flows from Financing Activities:
Mortgage principal payments (86,754) (78,704)
---------- ----------
Net cash used for financing activities (86,754) (78,704)
---------- ----------
Net increase (decrease) in cash and cash equivalents 154,470 (538,885)
Cash and cash equivalents at beginning of period 1,068,352 2,063,960
---------- ----------
Cash and cash equivalents at end of period $ 1,222,822 $ 1,525,075
========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 251,838 $ 259,888
========== ==========
Supplemental Disclosure of Non-Cash Investing Activity:
During the first half of 1995, the Partnership wrote-off $104,497 of fully
depreciated tenant improvements.
Notes to the Consolidated Financial Statements
The unaudited consolidated financial statements presented should be read in
conjunction with the Partnership's annual 1994 audited consolidated financial
statements within Form 10-K.
The unaudited consolidated interim financial statements include all adjustments
which are, in the opinion of management, necessary to fairly present the
statement of financial position as of June 30, 1995 and the results of
operations for the three and six months ended June 30, 1995 and 1994, and cash
flows for the six months ended June 30, 1995 and 1994, and the statement of
changes in partners' capital (deficit) for the six months ended June 30, 1995.
Results of operations for the periods are not necessarily indicative of the
results to be expected for the full year.
No significant events have occurred subsequent to fiscal year 1994 which
require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a) (5).
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
-------------------------------
The Partnership's cash and cash equivalents balance was $1,222,822 at June 30,
1995, compared with $1,068,352 at December 31, 1994. The cash and cash
equivalents balance is invested in unaffiliated money market funds and includes
funds held for anticipated tenant improvements and leasing commissions. The
increase of $154,470 from December 31, 1994 is primarily attributable to net
cash provided by operating activities exceeding net cash used for tenant and
building improvements and mortgage principal payments. Additionally, the
Partnership had a restricted cash balance of $241,491 at June 30, 1995,
compared to $162,969 at December 31, 1994 which consisted security deposits and
cash reserved to pay real estate taxes at Watkins Center.
During the first quarter of 1995, the General Partners executed a lease with
Allstate Insurance Company ("Allstate") for 100% of the leasable space at
Swenson Business Park - Building B. The tenant began making rental payments on
April 15, 1995 pursuant to the terms of its lease. Tenant improvements were
completed and Allstate took occupancy of the property in July 1995.
At Maitland Center Office Building A, one tenant leasing 1,056 square feet
pursuant to a lease which expired on March 31, 1995 vacated the premises in
June 1995. One lease representing 6,380 square feet is scheduled to expire in
August 1995. It is uncertain whether the tenant will renew its lease.
At Dawson Business Center, the General Partners executed a new lease,
representing 1,371 square feet, and two lease renewals totaling 1,930 square
feet during the 1995 second quarter. One tenant, whose lease representing
1,920 square feet expired in June 1995, continues to rent on a month-to-month
basis. No other leases are scheduled to expire during the remainder of 1995.
At Watkins Center, the General Partners executed ten new leases totaling 27,425
square feet, five lease renewals totaling 8,415 square feet, and one lease
expansion representing 1,244 square feet. Ten leases totaling 30,576 square
feet are scheduled to expire during the remainder of 1995.
Prepaid leasing costs increased to $493,128 at June 30, 1995 from $256,178 at
December 31, 1994, primarily as a result of leasing commissions and legal fees
relating to the Allstate lease. Deferred rent receivable increased from
$126,572 at December 31, 1994 to $172,786 at June 30, 1995. The increase is
largely attributable to increased occupancy at Watkins and Dawson Business
Centers and Maitland Center Office Building A.
The note receivable increased to $1,481,048 at June 30, 1995 from $1,424,192 at
December 31, 1994, reflecting the accretion of the discount taken by the
Partnership on the $1,500,000 non-interest bearing/profit participation second
subordinated five year note, due August 20, 1995, which the Partnership holds
on the Ridgeway Office Building. At this time, it is uncertain if the borrower
will pay off the loan at maturity or seek to extend the maturity.
Accounts payable and accrued expenses increased to $228,353 at June 30, 1995
from $106,717 at December 31, 1994, reflecting six months of accrued real
estate taxes. Security deposits payable increased to $201,279 at June 30, 1995
from $170,179 at December 31, 1994, reflecting increased occupancy at Watkins
and Dawson Business Centers in the first half of 1995.
As previously reported, cash distributions were suspended beginning with the
second quarter of 1993 to increase the Partnership's cash reserve in order to
fund tenant improvements and leasing costs at the Partnership's properties.
Given the substantial leasing and tenant improvement costs associated with
leasing activity during the first half of 1995, especially at the Swenson
property, and the continued need to replenish Partnership reserves, it is
uncertain whether cash distributions will be reinstated in 1995. The General
Partners will continue to monitor the Partnership's cash flow and future cash
needs to determine when and at what level distributions may resume.
Results of Operations
---------------------
Partnership operations resulted in net income of $174,888 and $89,669 for the
three and six months ended June 30, 1995, respectively, compared to net losses
of $139,083 and $59,303 for the respective periods in 1994. The change from
net loss to net income is primarily attributable to increased rental income.
Rental income totaled $1,104,052 and $1,970,984 for the three and six months
ended June 30, 1995, respectively, compared with $676,648 and $1,541,786 for
the corresponding periods in 1994. The increase in 1995 is largely
attributable to higher rental income at Swenson Business Park - Building B
associated with the execution of the lease for 100% of the building effective
April 15, 1995.
Depreciation expense totaled $387,318 and $822,377 for the three and six months
ended June 30, 1995, respectively, compared with $331,970 and $623,935 for the
respective periods in 1994. The increase is due to tenant improvements
completed during the last three quarters of 1994 of approximately $1,200,000
and the first quarter of 1995 totaling $362,316 which are being depreciated
over the terms of the corresponding leases.
Property operating expenses totaled $402,131 and $783,299 for the three and six
months ended June 30, 1995, respectively, compared with $340,854 and $671,669
for the respective periods in 1994. The increase is mainly due to higher
utilities expense at Maitland Center Office Building A and higher payroll costs
at three of the Partnership's properties. The Partnership incurred bad debt
expense of $0 and $21,480 for the three and six months ended June 30, 1995,
respectively, compared to $11,572 and $18,740 for the respective periods in
1994. The increase in bad debt expense in the six-month period is largely due
to the write-off of uncollectible rent receivable at Watkins Center.
As of June 30, 1995, the lease levels of the Properties were as follows:
Watkins Center - 96%; Dawson Business Center - 87%; Maitland Center Office
Building A - 96%; Swenson Business Park, Building B - 100%.
PART II OTHER INFORMATION
Items 1-4 Not applicable
Item 5 Shearson Lehman Brothers Inc. sold certain of its retail brokerage and
asset management businesses to Smith Barny, Harris Upham & Co.
Incorporated ("Smith Barney"). The assets acquired by Smith Barney
included the name "Hutton." Consequently, effective August 3, 1995,
the name of the Partnership was changed to Commercial Properties 1,
L.P. to delete any reference to "Hutton."
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the three months ended June 30, 1995.
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.
COMMERCIAL PROPERTIES 1, L.P.
BY: CP1 REAL ESTATE SERVICES INC.
General Partner
Date: August 11, 1995
BY: /s/Kenneth L. Zakin
Name: Kenneth L. Zakin
Title: Director and President
Date: August 11, 1995
BY: /s/William Caulfield
Name: William Caulfield
Title: Vice President and Chief
Financial Officer
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