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 29, 1996
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
COMMERCIAL PROPERTIES 2, L.P.
----------------------------------------------------
Exact Name of Registrant as Specified in its Charter
Virginia 13-3130258
- --------------------------- ---------------------
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
------------------------
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 February 29, At November 30,
1996 1995
Assets
- -------------------- ---------- ----------
Real estate, at cost:
Land $ 5,216,878 $ 5,216,878
Buildings and improvements 24,494,506 24,673,883
---------- ----------
29,711,384 29,890,761
---------- ----------
Less accumulated depreciation (11,082,035) (11,038,346)
18,629,349 18,852,415
---------- ----------
Restricted cash 161,653 174,919
Cash and cash equivalents 2,535,245 2,461,901
---------- ----------
2,696,898 2,636,820
---------- ----------
Interest other receivables, net of allowance for
doubtful accounts of $7,275 in 1996 and 1995 147,200 146,963
Prepaid expenses, net of accumulated amortization of
$1,079,794 in 1996 and $1,046,680 in 1995 343,027 396,567
Deferred rent receivable 159,096 168,625
---------- ----------
Total Assets $ 21,975,570 $ 22,201,390
========== ==========
Liabilities and Partners' Capital (Deficit)
- ------------------------------------------
Liabilities:
Accounts payable and accrued expenses $ 261,284 $ 199,193
Due to affiliates 56,662 95,543
Distribution payable 429,293 429,293
Security deposits payable 158,467 155,844
---------- ----------
Total Liabilities 905,706 879,873
---------- ----------
Partners' Capital (Deficit):
General Partners (215,873) (213,356)
Limited Partners (100,000 units outstanding) 21,285,737 21,534,873
---------- ----------
Total Partners' Capital 21,069,864 21,321,517
---------- ----------
Total Liabilities and Partners' Capital $ 21,975,570 $ 22,201,390
========== ==========
Consolidated Statement of Partners' Capital (Deficit)
For the three months ended February 29, 1996
General Limited
Partners Partners Total
-------- ---------- ----------
Balance at November 30, 1995 $(213,356) $21,534,873 $21,321,517
Net income 1,776 175,864 177,640
Distributions (4,293) (425,000) (429,293)
-------- ---------- ----------
Balance at February 29, 1996 $(215,873) $21,285,737 $21,069,864
======== ========== ==========
Consolidated Statements of Operations
For the three months ended February 29, and February 28,
Income 1996 1995
- -------------- ------- -------
Rent $873,936 $897,731
Interest 31,642 34,664
Other 818 1,036
------- -------
Total income 906,396 933,431
Expenses
- --------------
Depreciation and amortization 340,939 341,688
Property operating 338,654 332,098
General and administrative - other 29,104 24,533
General and administrative - affiliates 20,059 15,710
------- -------
Total expenses 728,756 714,029
------- -------
Net Income $177,640 $219,402
======= =======
Net Income Allocated:
To the General Partners $ 1,776 $ 2,194
To the Limited Partners 175,864 217,208
------- -------
$177,640 $219,402
Per limited partnership unit ======= =======
(100,000 outstanding) $1.76 $2.17
======= =======
Consolidated Statements of Cash Flows
For the three months ended
February 29, and February 28, 1996 1995
- -------------------------------------------------------------------------------
Cash Flows From Operating Activities
Net income $177,640 $219,402
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 340,939 341,688
Increase (decrease) in cash arising from changes in
operating assets and liabilities
Restricted cash 13,266 (2,871)
Interest and other receivables (237) 1,474
Prepaid expenses 20,426 10,621
Deferred rent receivable 9,529 21,656
Accounts payable and accrued expenses 62,091 17,195
Due to affiliates (38,881) (9,593)
Security deposits payable 2,623 (441)
------- -------
Net cash provided by operating activities 587,396 599,131
- -------------------------------------------------------------------------------
Cash Flows From Investing Activities
Additions to real estate assets (84,759) (97,587)
------- -------
Net cash used for investing activities (84,759) (97,587)
- -------------------------------------------------------------------------------
Cash Flows From Financing Activities
Cash distributions (429,293) (429,293)
------- -------
Net cash used for financing activities (429,293) (429,293)
- -------------------------------------------------------------------------------
Net increase in cash and cash equivalents 73,344 72,251
Cash and cash equivalents, beginning of period 2,461,901 2,524,376
--------- ---------
Cash and cash equivalents, end of period $2,535,245 $2,596,627
========= =========
Supplemental Schedule of Non-Cash Investing Activity
Write-off fully depreciated tenant improvements $264,136 $80,126
========= =========
Notes to the Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1995 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of February 29, 1996 and the results of operations and cash flows
for the three months ended February 29, 1996 and February 28, 1995 and the
statement of changes in partner's capital (deficit) for the three months ended
February 29, 1996. 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 1995, 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 29, 1996 of
$2,535,245, compared to $2,461,901 at November 30, 1995. The increase of
$73,344 is the result of net cash provided by operations in the amount of
$587,396 less cash distributions totaling $429,293 and capital expenditures in
the amount of $84,759. The Partnership also had a restricted cash balance of
$161,653 at February 29, 1996 which is primarily comprised of security
deposits. Prepaid expenses decreased by $53,540 to $343,027 at February 29,
1996 from $396,567 at November 30, 1995, due to the amortization of leasing
commissions and prepaid expenses. The Partnership expects sufficient cash flow
from operations to be generated to meet its current operating requirements.
Accounts payable and accrued expenses totaled $261,284 at February 29, 1996,
compared with $199,193 at November 30, 1995. The increase is largely due to the
accrual of real estate taxes for all three of the Partnership's properties as
well as an increase in prepaid rent. Due to affiliates decreased by $38,881 to
$56,662 at February 29, 1996 from $95,543 at November 30, 1995, due to the
timing of salary reimbursement payments.
At Maitland Center Office Building C, one lease totaling 15,479 square feet, or
approximately 16% of the property's leasable space, was scheduled to expire in
January 1996, but was renewed for a three-year term during the first quarter.
A cash distribution of $4.25 per Unit was declared for the quarter ended
February 29, 1996 and was paid on April 15, 1996. The distribution will be
funded from Partnership operations and was declared after a review of the
Partnership's 1996 first quarter operations, anticipated future cash needs and
current cash position. The timing and amount of future cash distributions will
be determined quarterly by the General Partners.
Results of Operations
- ---------------------
Partnership operations resulted in net income of $177,640 for the three months
ended February 29, 1996 compared with $219,402 for the corresponding period in
fiscal 1995. The lower net income for the 1996 period is primarily
attributable to a decrease in rental income, augmented by a small increase in
property operating expenses.
Rental income totaled $873,936 for the three months ended February 29, 1996,
compared to $897,731 for the three months ended February 28, 1995. The
decrease is primarily attributable to lower occupancy at Two Financial Centre
and lower escalation income at Swenson Business Park-Building C in the 1996
period. Pursuant to the terms of a net lease, the Partnership formerly received
escalation income from Asante, the tenant leasing the Swenson property, in an
amount equal to the costs of maintaining the property. Asante elected to
assume responsibility for the care and maintenance of the property itself, thus
lowering operating expense escalation income. Interest income totaled $31,642
for the three months ended February 29, 1996 compared with $34,664 for the
respective 1995 period, reflecting lower average cash balances in 1996.
Property operating expenses were largely unchanged and totaled $338,654 for the
three months ended February 29, 1996, compared to $332,098 for the three months
ended February 28, 1995.
As of February 29, 1996, lease levels at each of the properties were as
follows: Two Financial Centre - 95%; Maitland Center Office Building C - 97%;
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 -
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the quarter ended February 29, 1996.
On March 15, 1996, based upon, among other things, the
advice of Partnership counsel, Skadden, Arps, Slate,
Meagher & Flom, the General Partners adopted a
resolution that states, among other things, if a Change
of Control (as defined below) occurs, the General
Partners may distribute the Partnership's cash balances
not required for its ordinary course day-to-day
operations. "Change of Control" means any purchase or
offer to purchase more than 10% of the Units that is
not approved in advance by the General Partners. In
determining the amount of the distribution, the General
Partners may take into account all material factors.
In addition, the Partnership will not be obligated to
make any distribution to any partner, and no partner
will be entitled to receive any distribution, until the
General Partners have declared the distribution and
established a record date and distribution date for the
distribution. The Partnership filed a Form 8-K
disclosing this resolution on March 21, 1996.
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 2, L.P.
BY: Real Estate Services VII, Inc.
General Partner
Date: April 12, 1996 BY: /s/ Rocco F. Andriola
President, Director and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> Feb-29-1996
<CASH> 2,535,245
<SECURITIES> 000
<RECEIVABLES> 147,200
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 29,711,384
<DEPRECIATION> 11,082,035
<TOTAL-ASSETS> 21,975,570
<CURRENT-LIABILITIES> 905,706
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 21,069,864
<TOTAL-LIABILITY-AND-EQUITY> 21,975,570
<SALES> 873,936
<TOTAL-REVENUES> 906,396
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 728,756
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 177,640
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 177,640
<EPS-PRIMARY> $1.76
<EPS-DILUTED> 000
</TABLE>
