UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of
X the Securities Exchange Act of 1934
- ---------
For the Quarterly Period Ended September 30, 1998
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 I.R.S. Employer Identification No.
Incorporation or Organization
3 World Financial Center, 29th Floor,
New York, NY Attn.: Andre Anderson 10285
Address of Principal Executive Offices Zip Code
(212) 526-3183
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 ____
<PAGE>
2
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
At September 30, At December 31,
1998 1997
--------------- --------------
<S> <C> <C>
Assets
Real estate held for sale $11,341,635 $11,163,396
Cash and cash equivalents 1,921,098 15,182,204
Restricted cash 240,671 195,538
Rent receivable, net of allowance for
doubtful accounts of $5,349 in 1998
and $19,183 in 1997 26,939 107,967
Other assets 32,446 50,809
----------- -----------
Total Assets $13,562,789 $26,699,914
=========== ===========
Liabilities and Partners' Capital
Liabilities:
Mortgage notes payable $ 4,401,391 $ 4,577,848
Distribution payable -- 13,750,000
Accounts payable and accrued expenses 142,670 107,192
Due to affiliates -- 6,500
Security deposits payable 190,238 183,381
Prepaid rent 5,362 4,124
----------- -----------
Total Liabilities 4,739,661 18,629,045
----------- -----------
Minority interest 1,689,608 1,371,485
----------- -----------
Partners' Capital (Deficit):
General Partners (718,071) (722,412)
Limited Partners (75,000 units outstanding) 7,851,591 7,421,796
----------- -----------
Total Partners' Capital 7,133,520 6,699,384
----------- -----------
Total Liabilities and Partners' Capital $13,562,789 $26,699,914
=========== ===========
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
For the nine months ended September 30, 1998
General Limited
Partners Partners Total
--------- ---------- ----------
Balance at December 31, 1997 $(722,412) $7,421,796 $6,699,384
Net Income 4,341 429,795 434,136
--------- ---------- ----------
Balance at September 30, 1998 $(718,071) $7,851,591 $7,133,520
========= ========== ==========
</TABLE>
<PAGE>
3
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income
Rent $ 691,620 $1,223,345 $2,042,550 $3,754,691
Interest 24,259 3,158 185,778 9,315
--------- ---------- ---------- ----------
Total Income 715,879 1,226,503 2,228,328 3,764,006
--------- ---------- ---------- ----------
Expenses
Property operating 232,048 468,833 750,081 1,423,262
Interest 109,039 114,165 331,431 345,503
General and administrative 68,147 66,226 384,689 229,998
Bad debt expense (recovery) (5,560) 15,292 9,868 26,593
--------- ---------- ---------- ----------
Total Expenses 403,674 664,516 1,476,069 2,025,356
--------- ---------- ---------- ----------
Income before minority
interest 312,205 561,987 752,259 1,738,650
Minority interest in
consolidated ventures (110,360) (117,594) (318,123) (247,035)
--------- ---------- ---------- ----------
Net Income $ 201,845 $ 444,393 $ 434,136 $1,491,615
========= ========== ========== ==========
Net Income Allocated:
To the General Partners $ 2,018 $ 44,439 $ 4,341 $ 149,162
To the Limited Partners 199,827 399,954 429,795 1,342,453
--------- ---------- ---------- ----------
$ 201,845 $ 444,393 $ 434,136 $1,491,615
========= ========== ========== ==========
Per limited partnership
unit(75,000 outstanding) $ 2.66 $ 5.33 $ 5.73 $ 17.90
====== ====== ====== =======
</TABLE>
<PAGE>
4
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30,
<CAPTION>
1998 1997
------------ ----------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $ 434,136 $1,491,615
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest in consolidated ventures 318,123 247,035
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Restricted cash (45,133) (70,106)
Rent receivable 81,028 (29,143)
Deferred rent receivable -- (76,156)
Prepaid leasing costs -- (88,546)
Other assets 18,363 (20,695)
Accounts payable and accrued expenses 35,478 79,781
Due to affiliates (6,500) (5,835)
Security deposits payable 6,857 17,231
Prepaid rent 1,238 67,389
------------ ----------
Net cash provided by operating activities 843,590 1,612,570
------------ ----------
Cash Flows From Investing Activities
Additions to real estate assets (178,239) (652,146)
------------ ----------
Net cash used for investing activities (178,239) (652,146)
------------ ----------
Cash Flows From Financing Activities
Cash distributions (13,750,000) (666,667)
Mortgage principal payments (176,457) (162,384)
------------ ----------
Net cash used for financing activities (13,926,457) (829,051)
------------ ----------
Net increase (decrease) in cash and
cash equivalents (13,261,106) 131,373
Cash and cash equivalents, beginning of period 15,182,204 301,658
------------ ----------
Cash and cash equivalents, end of period $ 1,921,098 $ 433,031
============ ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 331,431 $ 345,503
============ ==========
</TABLE>
<PAGE>
5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1997 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, 1998 and the
results of operations for the three and nine months ended September 30, 1998
and 1997 and cash flows for the nine months ended September 30, 1998 and 1997
and the statement of partners' capital (deficit) for the nine months ended
September 30, 1998. 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.
<PAGE>
6
Part I, Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
The Partnership is currently marketing for sale the Partnership's two remaining
properties, Watkins Center and Dawson Business Center (the "Properties").
To facilitate the ability to sell the Properties, the Partnership entered into
agreements with its joint venture partner in both Properties on April 8, 1998,
whereby the joint venture partner waived its right of first refusal to buy each
property. The joint venture partner was paid $25,000 for each waiver. It should
be noted that the mortgage notes secured by Watkins Center were payable in full
on June 10, 1998. However, in light of the Partnership's efforts to sell the
property, the lender extended the maturity date to coincide with the scheduled
closing date, in order to promote sufficient time in which to sell the property.
On September 24, 1998, the Partnership entered into an agreement to sell the
Properties to an unaffiliated third party for a gross purchase price of
approximately $18.6 million. However, the buyer subsequently withdrew its offer
during its due diligence review of the Properties and the agreement was
canceled. As a result, the General Partners have resumed efforts to actively
market the Properties for sale.
The Partnership's cash and cash equivalents balance totaled $1,921,098 at
September 30, 1998, compared with $15,182,204 at December 31, 1997. The decrease
is primarily attributable to the payment of a special cash distribution on
February 27, 1998 of the net proceeds received from the sale of Swenson Business
Park Building B (the "Swenson Property") and Maitland Center Office Building A
(the "Maitland Property"). The Partnership's restricted cash balance, which
primarily consists of security deposits and real estate escrow, increased to
$240,671 at September 30, 1998, compared with $195,538 at December 31, 1997, due
to an increase in the real estate escrow account and security deposits at
Watkins Center. Rent receivable, net of allowance for doubtful accounts, totaled
$26,939 at September 30, 1998 compared with $107,967 at December 31, 1997. The
decrease is due to the timing of rental receipts at the remaining Properties.
Accounts payable and accrued expenses totaled $142,670 at September 30, 1998,
compared with $107,192 at December 31, 1997. The increase is primarily due to
the timing of payments for real estate taxes, audit fees, administrative and
other expenses. Due to affiliates decreased to $-0- at September 30, 1998, from
$6,500 at December 31, 1997, primarily reflecting the timing of certain
reimbursement expenses incurred in servicing the Partnership. Minority interest
totaled $1,689,608 at September 30, 1998, compared to $1,371,485 at December 31,
1997. The increase is attributable to the higher net income at the Properties.
In order to fund required capital improvements at the Properties and maintain
adequate cash reserves, cash distributions were suspended beginning with the
1997 second quarter distribution. Following the sale of the Partnership's
Properties, the General Partners will distribute the net proceeds together with
the Partnership's remaining cash reserves (after payment of or provision for,
the Partnership's liabilities and expenses), and dissolve the Partnership.
<PAGE>
7
Results of Operations
The Partnership's operations resulted in net income of $201,845 and $434,136 for
the three and nine months ended September 30, 1998, respectively, compared with
$444,393 and $1,491,615 for the three and nine months ended September 30, 1997,
respectively. The decrease is mainly due to lower rental income in the 1998
periods, as a result of the sale of the Maitland and Swenson Properties, and
higher general and administrative expenses for the 1998 nine-month period.
Rental income totaled $691,620 and $2,042,550 for the three and nine months
ended September 30, 1998, respectively, compared with $1,223,345 and $3,754,691
for the comparable periods in 1997. The decreases are primarily attributable to
the sale of the Maitland and Swenson Properties and lower average occupancy at
Dawson Business Center. Interest income totaled $24,259 and $185,778 for the
three and nine months ended September 30, 1998, respectively, compared with
$3,158 and $9,315 for the comparable periods a year earlier. The increases are
primarily due to higher cash balances maintained by the Partnership during 1998
from sale proceeds of the Maitland and Swenson Properties.
Property operating expenses totaled $232,048 and $750,081 for the three and nine
months ended September 30, 1998, respectively, compared with $468,833 and
$1,432,262 for the same periods in 1997. The decrease is primarily attributable
to the sale of the Maitland and Swenson Properties, as well as lower repairs and
maintenance expenses at the remaining Properties.
General and administrative expenses for the three and nine months ended
September 30, 1998 were $68,147 and $384,689, respectively, compared with
$66,226 and $229,998 for the same periods in 1997. The increase for the
nine-month period was primarily due to higher legal costs relating to the
property sales and, to a lesser extent, professional and miscellaneous expenses,
which were partially offset by lower administrative and postage expenses.
As of September 30, 1998 lease levels at both of the Properties were as follows:
Watkins Center - 92%; Dawson Business Center - 93%.
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, 1998.
<PAGE>
8
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: January 5, 1999 BY: /s/Michael T. Marron
Michael T. Marron
Director, President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Sep-30-1998
<CASH> 2,161,769
<SECURITIES> 000
<RECEIVABLES> 26,939
<ALLOWANCES> 5,349
<INVENTORY> 000
<CURRENT-ASSETS> 2,188,708
<PP&E> 11,341,635
<DEPRECIATION> 000
<TOTAL-ASSETS> 13,562,789
<CURRENT-LIABILITIES> 338,270
<BONDS> 4,401,391
000
000
<COMMON> 000
<OTHER-SE> 7,133,520
<TOTAL-LIABILITY-AND-EQUITY> 13,562,789
<SALES> 2,042,550
<TOTAL-REVENUES> 2,228,328
<CGS> 000
<TOTAL-COSTS> 750,081
<OTHER-EXPENSES> 384,689
<LOSS-PROVISION> 9,868
<INTEREST-EXPENSE> 331,431
<INCOME-PRETAX> 434,136
<INCOME-TAX> 000
<INCOME-CONTINUING> 434,136
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 434,136
<EPS-PRIMARY> 5.73
<EPS-DILUTED> 5.73
</TABLE>
