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 February 28, 1995
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: 0-11763
HUTTON/GSH COMMERCIAL PROPERTIES 2
(Exact name of registrant as specified in its charter)
Virginia 13-3130258
------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) identification No.)
3 World Financial Center, New York, NY 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
February 28, November 30,
Assets 1995 1994
Land $ 5,216,878 $ 5,216,878
Buildings and improvements 24,430,267 24,412,806
---------- ----------
29,647,145 29,629,684
Less accumulated depreciation (10,136,028) (9,905,013)
---------- ----------
19,511,117 19,724,671
Restricted cash 163,212 160,341
Cash and cash equivalents 2,596,627 2,524,376
---------- ----------
2,759,839 2,684,717
Interest other receivables, net of allowance for
doubtful accounts of $7,275 in 1995 and 1994 99,556 101,030
Prepaid expenses, net of accumulated amortization
of $951,778 in 1995 and $921,231 in 1994 380,051 421,219
Deferred rent receivable 215,693 237,349
---------- ----------
Total Assets $22,966,256 $23,168,986
========== ==========
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 205,443 $ 188,248
Due to affiliates 62,077 71,670
Distribution payable 303,030 429,293
Security deposits payable 163,466 163,907
---------- ----------
Total Liabilities 734,016 853,118
Partners' Capital (Deficit):
General Partners (204,249) (203,413)
Limited Partners 22,436,489 22,519,281
---------- ----------
Total Partners' Capital 22,232,240 22,315,868
---------- ----------
Total Liabilities and Partners' Capital $22,966,256 $23,168,986
========== ==========
Consolidated Statement of Partners' Capital (Deficit)
For the three months ended February 28, 1995
General Limited
Partners Partners Total
----------- ---------- ----------
Balance at November 30, 1994 $ (203,413) $22,519,281 $22,315,868
Net income 2,194 217,208 219,402
Cash distributions (3,030) (300,000) (303,030)
----------- ---------- ----------
Balance at February 28, 1995 $ (204,249) $22,436,489 $22,232,240
=========== ========== ==========
See accompanying notes to consolidated financial statements.
Consolidated Statements of Operations
For the three months ended February 28, 1995 and 1994
Income 1995 1994
- - ------------- ---------- ----------
Rent $ 897,731 $ 830,619
Interest 34,664 31,432
Other 1,036 1,083
---------- ----------
Total Income 933,431 863,134
Expenses
- - -------------
Depreciation and amortization 341,688 335,234
Property operating 332,098 307,218
General and administrative - affiliates 15,710 18,441
General and administrative - other 24,533 23,287
---------- ----------
Total Expenses 714,029 684,180
---------- ----------
Net Income $ 219,402 $ 178,954
========== ==========
Net Income Allocated:
To the General Partners $ 2,194 $ 1,790
To the Limited Partners 217,208 177,164
---------- ----------
$ 219,402 $ 178,954
========== ==========
Per limited partnership unit
(100,000 outstanding) $2.17 $1.77
========== ==========
See accompanying notes to consolidated financial statements.
Consolidated Statements of Cash Flows
For the three months ended February 28, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
---------- ----------
Net income $ 219,402 $ 178,954
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 341,688 335,234
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Restricted cash (2,871) (6,648)
Interest and other receivables 1,474 (9,849)
Prepaid expenses 10,621 (38,450)
Deferred rent receivable 21,656 (2,179)
Accounts payable and accrued expenses 17,195 31,409
Due to affiliates (9,593) (9,628)
Security deposits payable (441) 5,685
---------- ----------
Net cash provided by operating activities 599,131 484,528
Cash Flows from Investing Activities:
Purchase of real estate assets (97,587) (100,170)
Short-term investment -- (27,356)
---------- ----------
Net cash used for investing activities (97,587) (127,526)
Cash Flows from Financing Activities:
Capital distributions (429,293) (429,293)
---------- ----------
Net cash used for financing activities (429,293) (429,293)
Net increase (decrease) in cash and cash equivalents 72,251 (72,291)
Cash and cash equivalents at beginning of period 2,524,376 640,153
---------- ----------
Cash and cash equivalents at end of period $ 2,596,627 $ 567,862
========== ==========
Supplemental Schedule of Non-Cash Investing Activity:
Write-off fully depreciated tenant improvements $ 80,126 $ --
========== ==========
See accompanying notes to consolidated financial statements.
Notes to the Consolidated Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1994 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments consisting of only
normal recurring accruals which are, in the opinion of management, necessary to
present a fair statement of financial position as of February 28, 1995 and the
results of operations, changes in partners' capital (deficit), and cash flows
for the three months then ended. Results of operations for the period are not
necessarily indicative of the results to be expected for the full year.
No significant events have occurred subsequent to fiscal year 1994 and no
material contingencies exist which would require disclosure in this interim
report per Regulation S-X, Rule 10-01, Paragraph (a)(5).
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
The Partnership had cash and cash equivalents at February 28, 1995 of
$2,596,627, compared to $2,524,376 at November 30, 1994. The increase of
$72,251 is the result of net cash provided by operations in the amount of
$599,131, offset by cash distributions totaling $429,293 and capital
expenditures in the amount of $97,587. The Partnership also had a restricted
cash balance of $163,212 at February 28, 1995 which is made up primarily of
security deposits. The Partnership expects sufficient cash flow from
operations to be generated to meet its current operating requirements.
Prepaid expenses totaled $380,051 at February 28, 1995, compared with $421,219
at November 30, 1994. The decrease is primarily attributable to the
amortization of prepaid insurance and leasing commissions.
The General Partners declared a cash distribution of $3.00 per Unit for the
quarter ended February 28, 1995, which will be paid on or about April 17, 1995.
This distribution continues to represent a return of capital from the sale of
Maryland Trade Center in 1989. As previously reported, a portion of the
proceeds at the time of the sale were retained to fund any operating deficits,
tenant improvements and leasing commission required at the Partnership's
remaining properties. The timing and amount of future cash distributions will
depend on several factors, including the adequacy of rental income being
generated by current leases, Partnership cash flow and the ability to re-lease
the space to be vacated at Two Financial Centre.
Commencing with the 1995 first quarter, cash distributions were reduced from
the previous level of $4.25 per Unit to reflect cash flow approximately
generated by Maitland Center Office Building C and Swenson Business Park -
Building C. A major tenant occupying 47,919 square feet at Two Financial
Centre and generating annual revenue of $679,272 will vacate the premises upon
the expiration of its lease on June 30, 1995. Although the General Partners
have initiated an aggressive marketing campaign to re-lease the space, there
can be no assurance that these efforts will result in new lease executions. It
is unlikely that a single tenant can be secured for such a large amount of
space and tenant improvement costs at this property are likely to be higher
than usual as this large block of space is likely to be divided to accommodate
smaller tenants. In anticipation of a decline in revenue and the expected
leasing commissions and tenant improvement costs at this property, the General
Partners believe it was necessary to reduce cash distributions.
Results of Operations
Partnership operations resulted in net income of $219,402 for the three months
ended February 28, 1995, compared with $178,954 for the corresponding period in
1994. The increase in net income is primarily attributable to an increase in
rental revenues as a result of higher rental rates.
Rental income totaled $897,731 for the three months ended February 28, 1995,
compared to $830,619 for the three months ended February 28, 1994. The
increase is primarily attributable to higher rental rates at all of the
Partnership's properties. Interest and other income in the 1995 period
remained relatively unchanged from the comparable 1994 period.
Property operating expenses totaled $332,098 for the three months ended
February 28, 1995, compared to $307,218 for the corresponding 1994 period. The
increase is primarily due to higher insurance premiums at all three properties,
compared to the corresponding 1994 period.
As of February 28, 1995, lease levels at each of the properties were as
follows: Two Financial Centre - 100%; Maitland Center Office Building C - 94%;
and Swenson Business Park, Building C - 100%.
PART II OTHER INFORMATION
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on Form 8-K
were filed during the quarter ended February 28, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: April 13, 1995
HUTTON/GSH COMMERCIAL PROPERTIES 2
BY: Real Estate Services VII, Inc.
General Partner
BY: /s/Rocco F. Andriola
Name: Rocco F. Andriola
Title: Director, President, Chief
Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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