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 March 31, 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.
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Exact Name of Registrant as Specified in its Charter
Virginia 13-3075804
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State or Other Jurisdiction I.R.S. Employer Identification No.
of Incorporation or Organization
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,
1997 1996
Assets
Real estate held for sale $18,795,172 $18,511,431
Cash and cash equivalents 272,824 301,658
Restricted cash 248,789 203,626
Rent receivable, net of allowance
for doubtful accounts $30,482 in 1997
and $16,960 in 1996 45,471 19,966
Deferred rent receivable 257,459 215,389
Prepaid leasing costs, net of
accumulated amortization of $298,213
in 1997 and 1996 406,788 379,758
Other assets 51,252 80,783
Total Assets $20,077,755 $19,712,611
Liabilities and Partners' Capital
Liabilities:
Mortgage notes payable $ 4,743,789 $ 4,795,775
Distribution payable 291,667 416,667
Accounts payable and accrued expenses 275,564 128,984
Due to affiliates 22,728 12,335
Security deposits payable 212,238 198,977
Prepaid rent 88,777 5,517
Total Liabilities 5,634,763 5,558,255
Minority interest 946,067 837,392
Partners' Capital (Deficit):
General Partners (950,516) (929,816)
Limited Partners (75,000 units outstanding) 14,447,441 14,246,780
Total Partners' Capital 13,496,925 13,316,964
Total Liabilities and Partners' Capital $20,077,755 $19,712,611
Consolidated Statement of Partners' Capital (Deficit)
For the three months ended March 31, 1997
General Limited
Partners Partners Total
Balance at December 31, 1996 $(929,816) $14,246,780 $13,316,964
Net income 4,300 425,661 429,961
Distributions (25,000) (225,000) (250,000)
Balance at March 31, 1997 $(950,516) $14,447,441 $13,496,925
Consolidated Statements of Operations
For the three months ended March 31, 1997 1996
Income
Rent $1,269,365 $1,119,264
Interest 3,301 17,556
Total income 1,272,666 1,136,820
Expenses
Depreciation and amortization -- 432,236
Property operating 499,016 477,551
Interest 117,309 122,126
General and administrative 104,183 91,046
Bad debt expense 13,522 --
Total expenses 734,030 1,122,959
Income before minority interest 538,636 13,861
Minority interest in consolidated venture (108,675) (1,130)
Net Income $ 429,961 $ 12,731
Net Income (Loss) Allocated:
To the General Partners $ 4,300 $ 33,333
To the Limited Partners 425,661 (20,602)
$ 429,961 $ 12,731
Per limited partnership unit
(75,000 outstanding) $5.68 $(.27)
Consolidated Statements of Cash Flows
For the three months ended March 31, 1997 1996
Cash Flows From Operating Activities
Net income $429,961 $ 12,731
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation -- 397,270
Amortization -- 34,966
Minority interest in income
of consolidated ventures 108,675 1,130
Increase (decrease) in cash arising from changes in
operating assets and liabilities
Restricted cash (45,163) (31,536)
Rent receivable (25,505) 75,117
Deferred rent receivable (42,070) (2,807)
Prepaid leasing costs (27,030) (11,846)
Other assets 29,531 29,371
Accounts payable and accrued expenses 146,580 124,357
Due to affiliates 10,393 (2,961)
Security deposits payable 13,261 (2,466)
Prepaid rent 83,260 (49,973)
Net cash provided by operating activities 681,893 573,353
Cash Flows From Investing Activities
Additions to real estate assets (283,741) (130,421)
Net cash used for investing activities (283,741) (130,421)
Cash Flows From Financing Activities
Cash distributions (375,000) (1,483,333)
Mortgage principal payments (51,986) (47,170)
Net cash used for financing activities (426,986) (1,530,503)
Net decrease in cash and cash equivalents (28,834) (1,087,571)
Cash and cash equivalents, beginning of period 301,658 2,040,428
Cash and cash equivalents, end of period $272,824 $ 952,857
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $117,309 $ 122,126
Notes to the Consolidated Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1996 audited financial statements within Form 10-K.
The unaudited 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 March 31, 1997 and the results of
operations and cash flows for the three months ended March 31, 1997 and 1996
and the statement of partners' capital (deficit) for the three months ended
March 31, 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 confirm to the current year's presentation.
The following significant event 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. and its affiliates 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.
Part I, Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
The General Partners have engaged real estate brokers to assist with the
marketing of the Partnership's properties. The General Partners anticipate
that the sale of the properties will be completed in 1997. It should be noted
that the mortgage notes secured by Watkins Center are payable in full on June
10, 1997. Since a sale of this property will not occur by the maturity date,
the Partnership has requested an extension of such maturity date until year-end
1997 in order to provide sufficient time in which to sell the property. The
lender has verbally agreed to this extension and the Partnership is awaiting
final written approval.
The Partnership had cash and cash equivalents totaling $272,824 at March 31,
1997, compared with $301,658 at December 31, 1996. The decrease is primarily
due to the payment of cash distributions, real estate additions and mortgage
principal payments, exceeding 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 $248,789 at March 31, 1997, which consists of security deposits and
funds reserved for property tax payments.
Rent receivable increased to $45,471 at March 31, 1997, from $19,966 at
December 31, 1996 primarily due to the timing of rental receipts. Deferred
rent receivable totaled $257,459 at March 31, 1997, compared to $215,389 at
December 31, 1996. The increase largely reflects leases executed in 1996 and
1997. Other assets decreased to $51,252 at March 31, 1997, from $80,783 at
December 31, 1996 mainly due to the amortization of prepaid insurance.
Accounts payable and accrued expenses increased to $275,564 at March 31, 1997
from $128,984 at December 31, 1996 due primarily to the timing of the payment
of real estate taxes. Due to affiliates increased to $22,728 at March 31,
1997, from $12,335 at December 31, 1996, primarily reflecting the reimbursement
of certain expenses incurred in servicing the Partnership, as described below
under "Results of Operations." Prepaid rent increased to $88,777 at March 31,
1997, from $5,517 at December 31, 1996 mainly reflecting prepaid rents received
from tenants at Watkins Center and Swenson Business Park, Building B. Minority
interest totaled $946,067 at March 31, 1997, compared to $837,392 at December
31, 1996. The increase largely reflects the higher net income at Watkins
Center Joint Venture.
During the 1997 first quarter, the General Partners executed a new five-year
lease for 6,720 square feet at Dawson Business Center. As a result, the
property was 98% leased at March 31, 1997. Four leases totaling 26,865 square
feet are scheduled to expire during the remainder of 1997. The General
Partners will approach these tenants regarding lease renewals at the
appropriate time.
At Watkins Center, the General Partners executed six new leases totaling 11,770
square feet during the 1997 first quarter. Also, five tenants representing
15,919 square feet renewed their respective leases and two other tenants
renewed their leases and expanded their respective spaces to 3,520 square feet
and 3,250 square feet. However, four tenants totaling 7,930 square feet
vacated the premises during the quarter. As a result, the property was 96%
leased at March 31, 1997. Ten leases totaling 52,906 square feet are scheduled
to expire during the remainder of 1997.
At Maitland Center Office Building, leases with two tenants, totaling 6,182
square feet, expired on March 31, 1997. One of the tenants, representing 3,984
square feet, executed a three- year lease renewal. The other tenant vacated
the building. However, the General Partners executed a new lease for this
space. Additionally, a tenant whose lease representing 1,761 square feet was
scheduled to expire in July 1997 terminated its lease and vacated the premises.
The General Partners also executed a lease with a new tenant for this space. At
March 31, 1997 the property remained 100% leased. A lease representing 1,442
square feet expired on April 30, 1997. The General Partners are currently
negotiating the terms of a lease renewal. Five leases totaling 11,661 square
feet are scheduled to expire during the remainder of 1997 and the General
Partners have commenced negotiating renewals and/or extensions with all of
these tenants.
Over the next few months, the General Partners expect to complete several major
capital improvement projects at each of the properties to better position them
for sale. In anticipation of these additional expenses, the Partnership's 1997
first quarter distribution, which will be paid to limited partners on or about
May 19, 1997, was reduced to $3.00 per Unit. Furthermore, the General Partners
anticipate that it will be necessary to suspend distributions in the future. As
properties are sold, the proceeds will be distributed to the limited partners.
To date limited partners have received cash distributions totaling $338.57 per
original $500 Unit, including $111.17 per Unit in return of capital payments.
Results of Operations
The Partnership's operations resulted in net income of $429,961 for the three
months ended March 31, 1997, compared with $12,731 for the three months ended
March 31, 1996. The increase is mainly due to higher rental income and no
depreciation and amortization expense in 1997.
Rental income totaled $1,269,365 for the three months ended March 31, 1997,
compared with $1,119,264 a year earlier. The increase is primarily
attributable to higher occupancy at Dawson Business Center and increased rental
rates at Watkins Center. Interest income totaled $3,301 for the three months
ended March 31, 1997, compared with $17,556 for the comparable period in 1996.
The decrease is primarily due to lower cash balances in 1997.
Property operating expenses totaled $499,016 for the three months ended March
31, 1997, largely unchanged from $477,551 a year earlier. The Partnership
recorded no depreciation or amortization expense for the three months ended
March 31, 1997 due to the Partnership's properties being held for sale.
General and administrative expenses for the three months ended March 31, 1997
were $104,183 compared to $91,046 for the same period in 1996. During the 1997
period, certain expenses incurred by CP1 Real Estate Services Inc., its
affilaites, and an unaffiliated third party service provider in servicing the
Partnership, which were voluntarily absorbed by affiliates of CP1 Real Estate
Services Inc. in prior periods, were reimbursed to CP1 Real Estate Services
Inc. and its affiliates. Bad debt expense totaled $13,522 for the three months
ended March 31, 1997 compared with $0 for the corresponding period in 1996. The
1997 amount represents reserves for rents receivable associated with tenants at
Watkins Center and Maitland Center Office Building. Minority interest in
consolidated venture totaled $108,675 for the three months ended March 31,
1997, compared to $1,130 a year earlier, mainly representing higher net income
at Watkins Center in 1997.
As of March 31, 1997, lease levels at each of the Properties were as follows:
Watkins Center - 96%; Dawson Business Center - 98%; Maitland Center Office
Building A - 100%; 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 - No reports on Form 8-K were
filed during the quarter ended March 31, 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: May 15, 1997 BY: /s/ Kenneth L. Zakin
Director and President
Date: May 15, 1997 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-31-1997
<PERIOD-END> Mar-31-1997
<CASH> 272,824
<SECURITIES> 000
<RECEIVABLES> 302,930
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 272,824
<PP&E> 18,795,172
<DEPRECIATION> 000
<TOTAL-ASSETS> 20,077,755
<CURRENT-LIABILITIES> 5,422,525
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 13,496,925
<TOTAL-LIABILITY-AND-EQUITY> 20,077,755
<SALES> 000
<TOTAL-REVENUES> 1,272,666
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 603,199
<LOSS-PROVISION> 13,522
<INTEREST-EXPENSE> 117,309
<INCOME-PRETAX> 429,961
<INCOME-TAX> 000
<INCOME-CONTINUING> 429,961
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 429,961
<EPS-PRIMARY> 5.68
<EPS-DILUTED> 5.68
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