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, 1999
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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
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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
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) 526-3183
--------------
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
COMMERCIAL PROPERTIES 1, L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
At June 30, At December 31,
1999 1998
(unaudited) (audited)
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Real estate held for sale $ -- $11,352,896
Cash and cash equivalents 15,858,810 2,123,556
Restricted cash 781,000 207,013
Rent receivable, net of allowance for doubtful
accounts of $40,652 in 1999 and
$14,072 in 1998 5,750 14,956
Other assets 10,112 20,347
- --------------------------------------------------------------------------------
Total Assets $16,655,672 $13,718,768
================================================================================
Liabilities and Partners' Capital
Liabilities:
Mortgage notes payable $ -- $ 4,339,648
Accounts payable and accrued expenses 68,113 190,003
Due to affiliates -- 4,800
Security deposits payable -- 187,794
Prepaid rent -- 3,143
------------------------------
Total Liabilities 68,113 4,725,388
------------------------------
Minority interest 1,229,267 1,792,861
------------------------------
Partners' Capital (Deficit):
General Partners (590,721) (672,299)
Limited Partners (75,000 units outstanding) 15,949,013 7,872,818
------------------------------
Total Partners' Capital 15,358,292 7,200,519
- --------------------------------------------------------------------------------
Total Liabilities and Partners' Capital $16,655,672 $13,718,768
================================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(UNAUDITED)
For the six months ended June 30, 1999
General Limited
Partners Partners Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1998 $(672,299) $ 7,872,818 $ 7,200,519
Net Income 81,578 8,076,195 8,157,773
- --------------------------------------------------------------------------------
Balance at June 30, 1999 $(590,721) $15,949,013 $15,358,292
================================================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
3
COMMERCIAL PROPERTIES 1, L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended June 30, Six months ended June 30,
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income
Rent $ -- $ 690,731 $ 753,269 $1,350,930
Interest 172,659 22,462 198,158 161,519
--------------------------------------------------------
Total Income 172,659 713,193 951,427 1,512,449
- ----------------------------------------------------------------------------------------------
Expenses
Property operating 92,360 231,204 290,421 518,033
Amortization - mortgage costs 43,187 -- 43,187 --
Interest 35,706 110,488 141,736 222,392
General and administrative 75,937 169,983 189,321 316,542
Bad debt expense 17,989 -- 26,580 15,428
--------------------------------------------------------
Total Expenses 265,179 511,675 691,245 1,072,395
- ----------------------------------------------------------------------------------------------
Income (loss) before gain on sale of
real estate assets (92,520) 201,518 260,182 440,054
Gain on sale of real estate assets 7,333,997 -- 7,333,997 --
- ----------------------------------------------------------------------------------------------
Income before minority interest 7,241,477 201,518 7,594,179 440,054
Minority interest in consolidated
ventures 700,540 (107,633) 563,594 (207,763)
- ----------------------------------------------------------------------------------------------
Net Income $7,942,017 $ 93,885 $8,157,773 $ 232,291
==============================================================================================
Net Income Allocated:
To the General Partners $ 79,420 $ 939 $ 81,578 $ 2,323
To the Limited Partners 7,862,597 92,946 8,076,195 229,968
- ----------------------------------------------------------------------------------------------
$7,942,017 $ 93,885 $8,157,773 $ 232,291
==============================================================================================
Per limited partnership unit
(75,000 outstanding) $ 104.83 $ 1.24 $ 107.68 $ 3.07
- ----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
4
COMMERCIAL PROPERTIES 1, L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the six months ended June 30,
1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $ 8,157,773 $ 232,291
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Minority interest in consolidated ventures (563,594) 207,763
Gain on sale of real estate assets (7,333,997) --
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Restricted cash (573,987) (60,073)
Rent receivable, net 9,206 59,919
Other assets 10,235 6,446
Accounts payable and accrued expenses (121,890) 122,709
Due to affiliates (4,800) (6,500)
Security deposits payable (187,794) 4,134
Prepaid rent (3,143) 1,099
--------------------------
Net cash provided by (used for) operating activities (611,991) 567,788
- --------------------------------------------------------------------------------
Cash Flows From Investing Activities
Additions to real estate held for sale (22,326) (119,752)
Net proceeds from sale of real estate held for sale 18,709,219 --
--------------------------
Net cash provided by (used for) investing activities 18,686,893 (119,752)
- --------------------------------------------------------------------------------
Cash Flows From Financing Activities
Cash distributions -- (13,750,000)
Mortgage principal payments (4,339,648) (116,200)
--------------------------
Net cash used for financing activities (4,339,648) (13,866,200)
- --------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 13,735,254 (13,418,164)
Cash and cash equivalents, beginning of period 2,123,556 15,182,204
- --------------------------------------------------------------------------------
Cash and cash equivalents, end of period $15,858,810 $ 1,764,040
================================================================================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 141,736 $ 222,392
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
5
COMMERCIAL PROPERTIES 1, L.P.
AND CONSOLIDATED VENTURES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The unaudited interim financial statements should be read in conjunction with
Commercial Properties 1, L.P.'s (the "Partnership") annual 1998 audited
consolidated financial statements within Form 10-K.
The unaudited consolidated financial statements include all normal and recurring
adjustments which are, in the opinion of management, necessary to present a fair
statement of financial position as of June 30, 1999 and the results of
operations for the six months ended June 30, 1999 and 1998 and cash flows for
the six months ended June 30, 1999 and 1998 and the statement of partners'
capital (deficit) for the six months ended June 30, 1999. Results of operations
for the period are not necessarily indicative of the results to be expected for
the full year.
The following significant event has occurred subsequent to fiscal year 1998
which requires disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
On April 6, 1999, the Partnership sold Dawson Business Center and Watkins Center
to an unaffiliated partnership, Atlanta North Flexxspace LTD. (the "Buyer"), for
selling prices of $4,676,974 and $14,032,245, respectively, net of closing
adjustments, existing debt and selling costs. The selling prices were determined
by arm's length negotiations between the Partnership and the Buyer and resulted
in gains of $2,407,543 on the sale of Dawson Business Center and $4,926,454 on
the sale of Watkins Center.
As a result of these sales, the General Partners intend to distribute the net
proceeds from the sales together with the Partnership's remaining cash reserves
(after payment of or provision for the Partnership's liabilities and expenses,
and establishment of a reserve for contingencies, if any) during the third
quarter of 1999 and dissolve the Partnership in 1999.
<PAGE>
6
COMMERCIAL PROPERTIES 1, L.P.
AND CONSOLIDATED VENTURES
Part I, Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
- -------------------------------
On April 6, 1999, Commercial Properties 1, L.P., a Virginia limited partnership
(the "Partnership"), sold Dawson Business Center and Watkins Center (the
"Properties") to an unaffiliated partnership, Atlanta North Flexxspace LTD. (the
"Buyer"), for selling prices of $4,676,974 and $14,032,245, respectively, net of
closing adjustments, existing debt and selling costs. The selling prices were
determined by arm's length negotiations between the Partnership and the Buyer.
As a result of these sales, the General Partners intend to distribute the net
proceeds from the sales together with the Partnership's remaining cash reserves
(after payment of or provision for the Partnership's liabilities and expenses,
and establishment of a reserve for contingencies, if any) during the third
quarter of 1999 and dissolve the Partnership in 1999.
In anticipation of the Partnership being dissolved in 1999, the minority
interest allocations have been conformed to the tax basis.
The Partnership's cash and cash equivalents balance totaled $15,858,810 at June
30, 1999, compared with $2,123,556 at December 31, 1998. The increase is
primarily attributable to net proceeds from the sale of the Properties. The
Partnership's restricted cash balance of $781,000 at June 30, 1999 consists of
required escrow deposits in connection with the sale of the Properties, compared
with the balance of $207,013 at December 31, 1998, which primarily consisted of
security deposits and real estate escrow. Rent receivable, net of allowance for
doubtful accounts, totaled $5,750 at June 30, 1999 compared with $14,956 at
December 31, 1998. The decrease is due to the collections of receivables
subsequent to the sale of the Properties and increased bad debt reserves for
anticipated uncollectible accounts.
Accounts payable and accrued expenses totaled $68,113 at June 30, 1999, compared
with $190,003 at December 31, 1998. The decrease is primarily due to the sale of
the Properties, resulting in a decrease in operating expenses. Due to affiliates
decreased to $-0- at June 30, 1999, from $4,800 at December 31, 1998. Minority
interest totaled $3,095,845 at June 30, 1999, compared to $1,792,861 at December
31, 1998. The increase is attributable to the gain on the sale of the
Properties.
On April 9, 1999, the mortgage notes payable of $4,339,648 were paid from the
proceeds of the sale of Watkins Center.
Results of Operations
- ---------------------
The Partnership's operations resulted in net income of $7,942,017 and $8,157,773
for the three and six months ended June 30, 1999, compared with $93,885 and
$232,291 for the three and six months ended June 30, 1998. The increase is
mainly due to the gain recognized from the sale of the Properties in 1999.
Rental income totaled $-0- and $753,269 for the three and six months ended June
30, 1999, compared with $690,731 and $1,350,930 for the comparable period in
1998. The decrease is primarily attributable to the sale of the Properties in
1999. Interest income totaled $172,659 and $198,158 for the three and six months
ended June 30, 1999, compared with $22,462 and $161,519 for the comparable
period a year earlier. The increase is primarily due to higher average cash
balances in 1999 due to the sale of the Properties.
Property operating expenses totaled $92,360 and $290,421 for the three and six
months ended June 30, 1999, compared with $231,204 and $518,033 for the same
period in 1998. The decrease primarily reflects reductions in all operating
expense categories due to the sale of the Properties.
General and administrative expenses for the three and six months ended June 30,
1999 were $75,937 and $189,321, compared with $169,983 and $316,542 for the same
period in 1998. The decrease was primarily due to lower administrative costs due
to the sale of the Properties in 1999.
<PAGE>
7
COMMERCIAL PROPERTIES 1, L.P.
AND CONSOLIDATED VENTURES
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 April 16, 1999, the Partnership filed a Form 8-K reporting
that on April 6, 1999 the Partnership executed a sale of the
Dawson Business Center and Watkins Center.
<PAGE>
8
COMMERCIAL PROPERTIES 1, L.P.
AND CONSOLIDATED VENTURES
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 13, 1999 BY: /s/Michael T. Marron
-----------------------
Name: Michael T. Marron
Title: Director, President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Jun-30-1999
<CASH> 16,639,810
<SECURITIES> 000
<RECEIVABLES> 5,750
<ALLOWANCES> 40,652
<INVENTORY> 000
<CURRENT-ASSETS> 16,645,560
<PP&E> 000
<DEPRECIATION> 000
<TOTAL-ASSETS> 16,655,672
<CURRENT-LIABILITIES> 68,113
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 15,358,292
<TOTAL-LIABILITY-AND-EQUITY> 16,655,672
<SALES> 753,269
<TOTAL-REVENUES> 951,427
<CGS> 000
<TOTAL-COSTS> 290,421
<OTHER-EXPENSES> 232,508
<LOSS-PROVISION> 26,580
<INTEREST-EXPENSE> 141,736
<INCOME-PRETAX> 8,157,773
<INCOME-TAX> 000
<INCOME-CONTINUING> 823,776
<DISCONTINUED> 000
<EXTRAORDINARY> 7,333,997
<CHANGES> 000
<NET-INCOME> 8,157,773
<EPS-BASIC> 107.68
<EPS-DILUTED> 107.68
</TABLE>
