United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1997
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
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
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 September 30, At December 31,
1997 1996
Assets
Real estate held for sale $19,163,577 $18,511,431
Cash and cash equivalents 433,031 301,658
Restricted cash 273,732 203,626
Rent receivable, net of allowance
for doubtful accounts $28,183 in 1997
and $16,960 in 1996 49,109 19,966
Deferred rent receivable 291,545 215,389
Prepaid leasing costs,
net of accumulated amortization of
$298,213 in 1997 and 1996 468,304 379,758
Other assets 101,478 80,783
Total Assets $20,780,776 $19,712,611
Liabilities and Partners' Capital
Liabilities:
Mortgage notes payable $4,633,391 $4,795,775
Distribution payable _ 416,667
Accounts payable and accrued expenses 208,765 128,984
Due to affiliates 6,500 12,335
Security deposits payable 216,208 198,977
Prepaid rent 72,906 5,517
Total Liabilities 5,137,770 5,558,255
Minority interest 1,084,427 837,392
Partners' Capital (Deficit):
General Partners (805,654) (929,816)
Limited Partners
(75,000 units outstanding) 15,364,23 14,246,780
Total Partners' Capital 14,558,579 13,316,964
Total Liabilities and
Partners' Capital $20,780,776 $19,712,611
Consolidated Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1997
General Limited
Partners Partners Total
Balance at December 31, 1996 $(929,816) $14,246,780 $13,316,964
Net income 149,162 1,342,453 1,491,615
Distributions (25,000) (225,000) (250,000)
Balance at September 30, 1997 $(805,654) $15,364,233 $14,558,579
Consolidated Statements of Operations
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
Income
Rent $1,223,345 $1,109,834 $3,754,691 $3,341,587
Interest 3,158 7,365 9,315 35,390
Total Income 1,226,503 1,117,199 3,764,006 3,376,977
Expenses
Depreciation and amortization _ 449,083 _ 1,318,575
Property operating 468,833 422,580 1,423,262 1,375,875
Interest 114,165 113,364 345,503 356,276
General and administrative 66,226 71,435 229,998 245,535
Bad debt expense 15,292 11,370 26,593 21,076
Total Expenses 664,516 1,067,832 2,025,356 3,317,337
Income before minority
interest 561,987 49,367 1,738,650 59,640
Minority interest in
consolidated ventures (117,594) (1,622) (247,035) (1,483)
Net Income $444,393 $47,745 $1,491,615 $58,157
Net Income Allocated:
To the General Partners $44,439 $41,667 $149,162 $116,66
7
To the Limited Partners 399,954 6,078 1,342,453 (58,510)
$444,393 $47,745 $1,491,615 $58,157
Per limited partnership unit
(75,000 outstanding) $5.33 $.08 $17.90 $(.78)
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1997 1996
Cash Flows From Operating Activities
Net income $1,491,615 $58,157
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation _ 1,213,668
Amortization _ 104,907
Minority interest in consolidated ventures 247,035 1,483
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Restricted cash (70,106) (33,350)
Rent receivable (29,143) 82,244
Deferred rent receivable (76,156) (10,328)
Prepaid leasing costs (88,546) (62,298)
Other assets (20,695) (31,128)
Accounts payable and accrued expenses 79,78 107,846
Due to affiliates (5,835) (9,748)
Security deposits payable 17,231 (2,008)
Prepaid rent 67,389 27,330
Net cash provided by operating activities 1,612,570 1,446,775
Cash Flows From Investing Activities
Additions to real estate assets (652,146) (495,873)
Net cash used for investing activities (652,146) (495,873)
Cash Flows From Financing Activities
Cash distributions (666,667) (2,233,333)
Mortgage principal payments (162,384) (145,275)
Net cash used for financing activities (829,051) (2,378,608)
Net increase (decrease) in cash and cash equivalents 131,373 (1,427,706)
Cash and cash equivalents, beginning of period 301,658 2,040,428
Cash and cash equivalents, end of period $433,031 $612,722
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $345,503 $356,276
Notes to the Consolidated financial statements
The unaudited consolidated interim financial statements should be
read in conjunction with the Partnership's annual 1996 audited
financial statements within Form 10-K.
The unaudited consolidated financial statements include all
normal and reoccurring adjustments which are, in the opinion of
management, necessary to present a fair statement of financial
position as of September 30, 1997 and the results of operations
for the three and nine months ended September 30, 1997 and 1996
and cash flows for the nine months ended September 30, 1997 and 1996
and the statement of partners' capital (deficit) for the
nine months ended September 30, 1997. Results of operations for
the period are not necessarily indicative of the results to be
expected for the full year.
Reclassification. Certain prior year amounts have been
reclassified in order to conform to the current year's
presentation.
The following significant events have occurred subsequent to
fiscal year 1996, and no material contingencies exist which would
require disclosure in this interim report per Regulation S-X,
Rule 10-01, Paragraph (a)(5).
Effective as of January 1, 1997, the Partnership began
reimbursing certain expenses incurred by CP1 Real Estate Services
Inc., its affiliates and an unaffiliated third party service
provider in servicing the Partnership to the extent permitted by
the partnership agreement. In prior years, an affiliate of CP1
Real Estate Services Inc. had voluntarily absorbed these
expenses.
The Partnership has engaged real estate brokerage firms to assist
with its efforts in marketing for sale the Partnership's four
properties. As a result, the properties were reclassified on the
Partnership's balance sheet at December 31, 1996, as "Real estate
held for sale."
Subsequent Event
On November 10, 1997, the Partnership closed on the sale of
Swenson Business Park - Building B to an unaffiliated third party
for total proceeds, before closing adjustments, of $5,650,000.
The Partnership intends to distribute the net proceeds from the
sale in the near future.
Part I, Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
The Partnership has engaged real estate brokerage firms to assist
with its efforts in marketing for sale the Partnership's four
properties. As a result, the properties were reclassified on the
Partnership's balance sheet at December 31, 1996, as "Real estate
held for sale."
On November 10, 1997, the Partnership closed on the sale of
Swenson Business Park - Building B to an unaffiliated third party
for total proceeds, before closing adjustments, of $5,650,000.
As a result of the sale, the General Partners intend to make a
special cash distribution in the near future.
The Partnership accepted one of the offers made for Maitland
Center Office Building A, and the prospective purchaser posted
earnest money of $25,000. However, the prospective purchaser
subsequently withdrew it's offer and the earnest money was paid
to the Partnership. These funds were added to the Partnership's
cash reserves. The General Partners are now evaluating other
offers received for the property and hope to commence
negotiations with the successful bidder in the near future.
The Partnership has received several purchase offers for Watkins
Center and Dawson Business Center which are being evaluated by
the General Partners. It is presently anticipated that the
properties will be sold in the first half of 1998. There can be
no assurance that the properties will be sold within this time
frame, or that any sale, if completed, will result in a
particular price. It should be noted that the mortgage notes
secured by Watkins Center were payable in full on June 10, 1997.
However, in light of the Partnership's efforts to sell the
property, the lender extended the maturity date to December 31,1997
in order to provide sufficient time in which to sell the
property. The General Partners will approach the lender
regarding a further extension of the maturity date, if necessary.
The Partnership had cash and cash equivalents totaling $433,031
at September 30, 1997, compared with $301,658 at
December 31, 1996. The increase is primarily due to net cash
provided by operating activities exceeding the payment of cash
distributions, real estate additions and mortgage principal
payments. 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 $273,732 at September 30, 1997, which consisted of security
deposits and funds reserved for property tax payments.
Rent receivable increased to $49,109 at September 30, 1997, from
$19,966 at December 31, 1996 primarily due to the timing of
rental receipts. Deferred rent receivable totaled $291,545 at
September 30, 1997, compared to $215,389 at December 31, 1996.
The increase largely reflects leases executed in 1996 and 1997.
Prepaid leasing costs, net of accumulated amortization, increased
to $468,304 at September 30, 1997, from $379,758 at December 31,1996,
primarily due to commissions paid for new leases at the
Partnership's properties. Other assets increased to $101,478 at
September 30, 1997, from $80,783 at December 31, 1996, mainly due
to the prepayment of insurance.
Accounts payable and accrued expenses increased to $208,765 at
September 30, 1997, from $128,984 at December 31, 1996, due to
the timing of payments for real estate taxes. Prepaid rent
increased to $72,906 at September 30, 1997, from $5,517 at
December 31, 1996, mainly reflecting prepaid rents received at
Swenson Business Park, Building B. Minority interest totaled
$1,084,427 at September 30, 1997, compared to $837,392 at
December 31, 1996. The increase largely reflects the higher net
income at Watkins Center Joint Venture and Swenson Business Park
- - Building B Joint Venture.
As of September 30, 1997, lease levels at each of the Properties
were as follows: Maitland Center Office Building A - 100%;
Watkins Center - 98%; Dawson Business Center - 98%; Swenson
Business Park - Building B - 100%.
Results of Operations
The Partnership's operations resulted in net income of $444,393
and $1,491,615 for the three and nine months ended September 30, 1997,
respectively, compared with net income of $47,745 and
$58,157 for the three and nine months ended September 30, 1996,
respectively. The increases are primarily attributable to higher
rental income in 1997, and the elimination of depreciation
expense in 1997 as a result of reclassifying the properties as
"Real estate held for sale" commencing December 31, 1996.
Rental income totaled $1,223,345 and $3,754,691 for the three and
nine months ended September 30, 1997, respectively, compared with
$1,109,834 and $3,341,587 for the comparable periods in 1996.
The increases are primarily attributable to higher average
occupancy at Dawson Business Center and Maitland Office Center
Building A, and increased rental rates at Watkins Center.
Interest income totaled $3,158 and $9,315 for the three and nine
months ended September 30, 1997, respectively, compared with
$7,365 and $35,390 for the comparable periods a year earlier.
The decreases are primarily due to lower cash balances in 1997.
Property operating expenses totaled $468,833 and $1,423,262 for
the three and nine months ended September 30, 1997, respectively,
compared with $422,580 and $1,375,875 for the comparable periods a year earlier.
The increase is primarily due to higher repairs and maintenance costs
at Swenson Business Park - Building B and Watkins Center.
Minority interest in consolidated venture totaled $(117,594) and
$(247,035) for the three and nine months ended September 30,1997,
compared with $(1,622) and $(1,483) for the comparable
periods in 1996. The increases mainly reflect net income at
Watkins Center Joint Venture in 1997.
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 - No reports on Form 8-K were
filed during the quarter ended September 30, 1997.
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: November 13, 1997 BY: /s/Jeffrey C.Carter
Director and President
Date: November 13, 1997 BY: /s/Michael T. Marron
Vice President and Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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