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, 1999
------------------
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
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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
--- ---
<PAGE>
2
COMMERCIAL PROPERTIES 1, L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
At September 30, At December 31,
1999 1998
(unaudited) (audited)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Real estate held for sale $ -- $11,352,896
Cash and cash equivalents 16,007,509 2,123,556
Restricted cash 781,000 207,013
Rent receivable, net of allowance for doubtful
accounts of $39,157 in 1999 and $14,072 in 1998 -- 14,956
Other assets 742 20,347
- ----------------------------------------------------------------------------------------
Total Assets $16,789,251 $13,718,768
========================================================================================
Liabilities and Partners' Capital
Liabilities:
Mortgage notes payable $ -- $ 4,339,648
Accounts payable and accrued expenses 77,778 190,003
Due to affiliates -- 4,800
Security deposits payable -- 187,794
Prepaid rent -- 3,143
------------------------------
Total Liabilities 77,778 4,725,388
------------------------------
Minority interest 2,292,786 1,792,861
------------------------------
Partners' Capital (Deficit):
General Partners (600,117) (672,299)
Limited Partners (75,000 units outstanding) 15,018,804 7,872,818
------------------------------
Total Partners' Capital 14,418,687 7,200,519
- ----------------------------------------------------------------------------------------
Total Liabilities and Partners' Capital $16,789,251 $13,718,768
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
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CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(UNAUDITED)
For the nine months ended September 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 72,182 7,145,986 7,218,168
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Balance at September 30, 1999 $(600,117) $15,018,804 $14,418,687
========================================================================================
</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 Nine months ended
September 30, September 30,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Income
Rent $ -- $ 691,620 $ 753,269 $2,042,550
Interest 202,859 24,259 401,017 185,778
-----------------------------------------------------
Total Income 202,859 715,879 1,154,286 2,228,328
- ----------------------------------------------------------------------------------------
Expenses
Property operating -- 232,048 290,421 750,081
Amortization - mortgage costs -- -- 43,187 --
Interest -- 109,039 141,736 331,431
General and administrative 78,945 68,147 268,266 384,689
Bad debt expense (recovery) -- (5,560) 26,580 9,868
-----------------------------------------------------
Total Expenses 78,945 403,674 770,190 1,476,069
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Income before gain on sale of
Real estate assets 123,914 312,205 384,096 752,259
Gain on sale of real estate
assets -- -- 7,333,997 --
- ----------------------------------------------------------------------------------------
Income before minority interest 123,914 312,205 7,718,093 752,259
Minority interest in
consolidated ventures (1,063,519) (110,360) (499,925) (318,123)
- ----------------------------------------------------------------------------------------
Net Income (Loss) $ (939,605) $ 201,845 $7,218,168 $ 434,136
========================================================================================
Net Income (Loss) Allocated:
To the General Partners $ (9,396) $ 2,018 $ 72,182 $ 4,341
To the Limited Partners (930,209) 199,827 7,145,986 429,795
- ----------------------------------------------------------------------------------------
$ (939,605) $ 201,845 $7,218,168 $ 434,136
========================================================================================
Per limited partnership unit
(75,000 outstanding) $ (12.40) $ 2.66 $ 95.28 $ 5.73
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</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 nine months ended September 30,
1999 1998
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income $ 7,218,168 $ 434,136
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Minority interest in consolidated ventures 499,925 318,123
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) (45,133)
Rent receivable, net 14,956 81,028
Other assets 19,605 18,363
Accounts payable and accrued expenses (112,225) 35,478
Due to affiliates (4,800) (6,500)
Security deposits payable (187,794) 6,857
Prepaid rent (3,143) 1,238
---------------------------
Net cash provided by (used for) operating activities (463,292) 843,590
- ----------------------------------------------------------------------------------------
Cash Flows From Investing Activities
Additions to real estate assets held for sale (22,326) (178,239)
Net proceeds from sale of real estate held for sale 18,709,219 --
---------------------------
Net cash provided by (used for) investing activities 18,686,893 (178,239)
- ----------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Cash distributions -- 13,750,000)
Mortgage principal payments (4,339,648) (176,457)
---------------------------
Net cash used for financing activities (4,339,648) (13,926,457)
- ----------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 13,883,953 (13,261,106)
Cash and cash equivalents, beginning of period 2,123,556 15,182,204
- ----------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $16,007,509 $ 1,921,098
========================================================================================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 141,736 $ 331,431
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</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 September 30, 1999 and the results of
operations for the three and nine months ended September 30, 1999 and 1998 and
cash flows for the nine months ended September 30, 1999 and 1998 and the
statement of partners' capital (deficit) for the nine months ended September 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 ("Dawson") and
Watkins Center ("Watkins") 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 and selling costs. On April 9, 1999,
the mortgage notes payable of $4,302,743 were paid from the proceeds of the sale
of Watkins. 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 and $4,926,454 on the sale of Watkins. As a result of these
sales, the Partnership paid a special cash distribution to Limited Partners on
October 20, 1999 totaling $11,822,665 or approximately $157.64 per unit.
<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 and selling costs. On April 9, 1999, the mortgage notes
payable of $4,302,743 were paid from the proceeds of the sale of Watkins Center.
The selling prices were determined by arm's length negotiations between the
Partnership and the Buyer.
As a result of these sales, the Partnership paid a special cash distribution to
the Limited Partners on October 20, 1999, in the amount of $11,822,665 or
approximately $157.64 per unit. Certain funds have been set aside to provide for
the Partnership's ongoing liabilities and expenses through termination. Any cash
remaining after payment of these expenses will be distributed to the Limited
Partners when the Partnership is terminated. The General Partners are currently
in the process of winding up the Partnership's affairs, and expect to terminate
the Partnership during 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 $16,007,509 at
September 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 September 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 $-0- at September 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 $77,778 at September 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 September 30, 1999, from $4,800 at December
31, 1998. Minority interest totaled $2,292,786 at September 30, 1999, compared
to $1,792,861 at December 31, 1998.
Results of Operations
- ---------------------
The Partnership's operations resulted in net income (loss) of ($939,605) and
$7,218,168 for the three and nine months ended September 30, 1999, compared with
$201,845 and $434,136 for the three and nine months ended September 30, 1998.
The increase for the nine month period is mainly due to the gain recognized from
the sale of the Properties in 1999. The net loss for the three month period
ended September 30, 1999 is due to the minority interest allocations that have
been conformed to the tax basis.
Rental income totaled $-0- and $753,269 for the three and nine months ended
September 30, 1999, compared with $691,620 and $2,042,550 for the comparable
period in 1998. The decrease is primarily attributable to the sale of the
Properties in 1999. Interest income totaled $202,859 and $401,017 for the three
and nine months ended September 30, 1999, compared with $24,259 and $185,778 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.
<PAGE>
7
COMMERCIAL PROPERTIES 1, L.P.
AND CONSOLIDATED VENTURES
Property operating expenses totaled $-0- and $290,421 for the three and nine
months ended September 30, 1999, compared with $232,048 and $750,081 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 nine months ended
September 30, 1999 were $78,945 and $268,266, compared with $68,147 and $384,689
for the same period in 1998. The decrease for the 1999 nine-month period was
primarily due to lower administrative costs due to the sale of the Properties.
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 three months ended
September 30, 1999.
<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: November 12, 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> 9-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Sep-30-1999
<CASH> 16,789,251
<SECURITIES> 000
<RECEIVABLES> 000
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 16,789,251
<PP&E> 000
<DEPRECIATION> 000
<TOTAL-ASSETS> 16,789,251
<CURRENT-LIABILITIES> 77,778
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 14,418,687
<TOTAL-LIABILITY-AND-EQUITY> 16,789,251
<SALES> 753,269
<TOTAL-REVENUES> 1,154,286
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 601,874
<LOSS-PROVISION> 26,580
<INTEREST-EXPENSE> 141,736
<INCOME-PRETAX> (115,829)
<INCOME-TAX> 000
<INCOME-CONTINUING> (115,829)
<DISCONTINUED> 000
<EXTRAORDINARY> 7,333,997
<CHANGES> 000
<NET-INCOME> 7,218,168
<EPS-BASIC> 95.28
<EPS-DILUTED> 95.28
</TABLE>
