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 March 31, 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 Number: 0-11081
COMMERCIAL PROPERTIES 1, L.P.
-------------------------------
Exact Name of Registrant as Specified in its Charter
Virginia 13-3075804
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State or Other Jurisdiction of
Incorporation or Organization I.R.S. Employer 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
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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
- - ---------------------------- At March 31, At December 31,
1996 1995
Assets
Real estate, at cost:
Land $ 4,871,718 $ 4,871,718
Buildings and improvements 28,311,409 28,180,988
33,183,127 33,052,706
Less accumulated depreciation (14,040,061) (13,642,791)
19,143,066 19,409,915
Cash and cash equivalents 952,857 2,040,428
Restricted cash 227,898 196,362
Accounts and rent receivable 63,343 138,460
Deferred rent receivable 198,004 195,197
Prepaid leasing costs, net of accumulated
amortization of $192,339 in 1996 and
$172,695 in 1995 420,626 443,745
Other assets 58,194 87,565
Total Assets $ 21,063,988 $ 22,511,672
Liabilities and Partners' Capital
Liabilities:
Mortgage notes payable $ 4,944,680 $ 4,991,850
Distribution payable 333,333 1,483,333
Accounts payable and accrued expenses 225,599 99,941
Due to affiliates 33,487 37,748
Security deposits payable 197,041 199,507
Prepaid rent 13,001 62,974
Total Liabilities 5,747,141 6,875,353
Minority interest 833,694 832,564
Partners' Capital (Deficit):
General Partners (929,816) (929,816)
Limited Partners (75,000 units
outstanding) 15,412,969 15,733,571
Total Partners' Capital 14,483,153 14,803,755
Total Liabilities and Partners'
Capital $ 21,063,988 $ 22,511,672
Consolidated Statement of Partners' Capital (Deficit)
- - ----------------------------------------------------
For the three months ended March 31, 1996
General Limited
Partners Partners Total
Balance at December 31, 1995 $(929,816) $15,733,571 $14,803,755
Net income (loss) 33,333 (20,602) 12,731
Distributions (33,333) (300,000) (333,333)
Balance at March 31, 1996 $(929,816) $15,412,969 $14,483,153
Consolidated Statements of Operations
- - -------------------------------------
For the three months ended March 31, 1996 1995
Income
Rent $ 1,119,264 $ 866,932
Interest 17,556 44,343
Total income 1,136,820 911,275
Expenses
Depreciation and amortization 432,236 435,059
Property operating 477,551 381,168
Interest 122,126 126,447
General and administrative 91,046 54,468
Bad debt expense _ 21,480
Total expenses 1,122,959 1,018,622
Income (loss) before minority interest 13,861 (107,347)
Minority interest in loss of consolidated venture (1,130) 22,128
Net Income (Loss) $ 12,731 $ (85,219)
Net Income (Loss) Allocated:
To the General Partners $ 33,333 $ _
To the Limited Partners (20,602) (85,219)
$ 12,731 $ (85,219)
Per limited partnership unit
(75,000 outstanding) $(.27) $(1.14)
Consolidated Statements of Cash Flows
- - -------------------------------------
For the three months ended March 31, 1996 1995
Cash Flows From Operating Activities
Net income (loss) $ 12,731 $ (85,219)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 432,236 435,059
Accretion of discount on note receivable _ (28,428)
Minority interest in income (loss) of
consolidated ventures 1,130 (22,128)
Increase (decrease) in cash arising from
changes in operating assets and liabilities
Restricted cash (31,536) (45,753)
Accounts and rent receivable 75,117 23,954
Prepaid leasing costs (11,846) (149,324)
Deferred rent receivable (2,807) (25,317)
Other assets 29,371 44,926
Accounts payable and accrued expenses 125,657 27,812
Due to affiliates (4,261) (83,201)
Security deposits payable (2,466) 15,191
Prepaid rent (49,973) 3,121
Net cash provided by operating activities 573,353 110,693
Cash Flows From Investing Activities
Additions to real estate assets (130,421) (21,299)
Net cash used for investing activities (130,421) (21,299)
Cash Flows From Financing Activities
Cash distributions (1,483,333) _
Mortgage principal payments (47,170) (42,849)
Net cash used for financing activities (1,530,503) (42,849)
Net increase (decrease) in cash and cash equivalents (1,087,571) 46,545
Cash and cash equivalents, beginning of period 2,040,428 1,068,352
Cash and cash equivalents, end of period $ 952,857 $ 1,114,897
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 122,126 $ 126,447
Notes to the Financial Statements
- - ----------------------------------
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1995 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of March 31, 1996 and the results of operations and cash flows for
the three months ended March 31, 1996 and 1995 and the statement of changes in
partner's capital (deficit) for the three months ended March 31, 1996. Results
of operations for the period are not necessarily indicative of the results to
be expected for the full year.
No significant events have occurred subsequent to fiscal year 1995, and no
material contingencies exist which would 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 had cash and cash equivalents totaling $952,857 at March 31,
1996, compared with $2,040,428 at December 31, 1995. The decrease is primarily
due to the payment of a cash distribution paid on February 9, 1996, partially
offset by higher net cash provided by operating activities. The cash and cash
equivalents balance includes funds held as a working capital reserve to fund
tenant improvements and leasing commissions, in addition to cash generated from
operations. The Partnership also had a restricted cash balance of $227,898 at
March 31, 1996, which consists of security deposits and funds reserved for
property tax payments.
At March 31, 1996 Maitland Center Office Building A remained 95% leased to
eighteen tenants. One lease representing 2,198 square feet is scheduled to
expire in November of 1996.
At Watkins Center, the General Partners executed eight new leases totaling
12,708 square feet and a 3,420 square foot lease expansion with a tenant which
now leases 5,100 square feet. Four tenants leasing a total of 5,345 square
feet vacated their spaces upon expiration of their respective leases. As a
result, the property was 95% leased at March 31, 1996. Eleven leases totaling
27,278 square feet, representing 7% of the Property's leasable area, are
scheduled to expire during the remainder of 1996.
At Dawson Business Center, the General Partners executed a new three-year lease
for 1,518 square feet, during the quarter. Additionally, a tenant executed a
five-year lease extension and expanded its space by an additional 1,192 square
feet, for a total of 2,825 square feet, and another tenant extended its lease
by three years and expanded its space by 1,440 square feet, for a total of
2,640 square feet. Four tenants, leasing a total of 6,880 square feet, vacated
the premises upon the expiration of their respective leases during the quarter.
As a result, the property was 89% leased at March 31, 1996. Seven leases
totaling 12,050 square feet, or 16% of the Property's leasable area, are
scheduled to expire during the remainder of 1996.
Accounts and rent receivable decreased to $63,343 at March 31, 1996 from
$138,460 at December 31, 1995 due to the timing of rental receipts.
Distribution payable decreased to $333,333 at March 31, 1996, from $1,483,333
at December 31, 1995. The higher December 31, 1995 total reflects the
reinstatement of quarterly cash distributions in the amount of $333,333 in
addition to a special distribution of $1,150,000 representing proceeds received
in full satisfaction of the note receivable on the 965 Ridgelake Office
Building. The Partnership originally held a $6.5 million equity convertible
loan on the 965 Ridgelake Office Building in Memphis, Tennessee. On May 17,
1988, the Partnership exercised its option to convert the debt into equity,
however, the Partnership was able to negotiate a $5 million partial payment,
which was distributed to Limited Partners on October 3, 1990. The remaining
$1.5 million was converted into a non-interest bearing second mortgage which
matured on August 17, 1995. At that time, the borrower was unable to pay the
entire outstanding balance of the loan and initially offered to satisfy the
obligation by paying a substantially discounted amount. Following subsequent
negotiations, and after evaluating various alternatives, including acquiring
the property, an agreement was reached whereby the Partnership received
$1,150,000 in full satisfaction of the loan on December 28, 1995. These
proceeds were distributed to Partners on February 9, 1996.
A cash distribution in the amount of $4.00 per Unit will be paid to the Limited
Partners in May 1996. This distribution will be funded from Partnership
operations and was declared after a review of the Partnership's 1996 first
quarter operations, anticipated future cash needs and current cash position.
Accounts payable and accrued expenses totaled $225,599 at March 31, 1996
compared with $99,941 at December 31, 1995. The increase is largely due to the
timing of real estate taxes payments at all four of the Partnership's
properties.
Results of Operations
- - ----------------------
The Partnership's operations resulted in net income of $12,731 for the three
months ended March 31, 1996, compared with net loss of $85,219 for the three
months ended March 31, 1995. The change from net loss to net income is
primarily attributable to an increase in rental income, partially offset by
higher property operating expenses.
Rental income totaled $1,119,264 for the three months ended March 31, 1996,
compared with $866,932 a year earlier. The increase is primarily attributable
to rental income received from a tenant leasing 100% of Swenson Business Park -
Building B, pursuant to a lease which commenced on April 1995. Interest income
totaled $17,556 for the three months ended March 31, 1996, compared with
$44,343 for the comparable period in 1995. The decrease is primarily due to
lower cash balances in 1996.
Property operating expenses totaled $477,551 for the three months ended March
31, 1996, compared to $381,168 a year earlier. The increase is largely
attributable to higher repair and maintenance expenses at all of the
Partnership's properties, in addition to higher electric utility expenses at
Maitland Center Office Building A and Swenson Business Park - Building B.
General and Administrative expenses totaled $91,046 for the three months ended
March 31, 1996 compared with $54,468 for the same period in 1995. The increase
is largely due to higher appraisal costs and additional postage and mailing
fees associated with the reinstatement of quarterly distributions. Bad debt
expense totaled $0 for the three months ended March 31, 1996 compared with
$21,480 for the corresponding period in 1995. The 1995 amount represents the
full write off of rents receivable associated with three tenants at Watkins
Center.
As of March 31, 1996, lease levels at each of the Properties were as follows:
Watkins Center - 95%; Dawson Business Center - 89%; Maitland Center Office
Building A - 95%; Swenson Business Park, Building B - 100%.
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K
On March 15, 1996, based upon, among other things, the advice of
Partnership counsel, Skadden, Arps, Slate, Meagher & Flom, the
General Partners adopted a resolution that states, among other
things, if a Change of Control (as defined below) occurs, the
General Partners may distribute the Partnership's cash balances
not required for its ordinary course day-to-day operations.
"Change of Control" means any purchase or offer to purchase more
than 10% of the Units that is not approved in advance by the
General Partners. In determining the amount of the distribution,
the General Partners may take into account all material factors.
In addition, the Partnership will not be obligated to make any
distribution to any partner, and no partner will be entitled to
receive any distribution, until the General Partners have
declared the distribution and established a record date and
distribution date for the distribution. The Partnership filed a
Form 8-K disclosing this resolution on March 21, 1996.
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: May 14, 1996 BY: /s/ Kenneth L. Zakin
Director and President
Date: May 14, 1996 BY: /s/ William Caulfield
Vice President and Chief
Financial Officer
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Mar-31-1996
<CASH> 1,180,755
<SECURITIES> 000
<RECEIVABLES> 261,347
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 28,311,409
<DEPRECIATION> 14,040,061
<TOTAL-ASSETS> 21,063,988
<CURRENT-LIABILITIES> 5,747,142
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<COMMON> 000
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000
<OTHER-SE> 14,483,153
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<TOTAL-REVENUES> 1,136,820
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<OTHER-EXPENSES> 1,122,959
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<INCOME-TAX> 000
<INCOME-CONTINUING> 12,731
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 12,731
<EPS-PRIMARY> $.15
<EPS-DILUTED> 000
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