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 May 31, 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 of --------------
Incorporation or Organization I.R.S. Employer Identification No.
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 May 31, At November 30,
1996 1995
Assets
Real estate, at cost:
Land $ 5,216,878 $ 5,216,878
Building and improvements 24,536,714 24,673,883
29,753,592 29,890,761
Less accumulated depreciation (11,387,041) (11,038,346)
18,366,551 18,852,415
Restricted cash 160,302 174,919
Cash and cash equivalents 2,624,531 2,461,901
2,784,833 2,636,820
Rent and other receivables, net of
allowance for doubtful accounts of
$7,275 in 1996 and 1995 138,008 146,963
Prepaid expenses, net of accumulated
amortization of $1,112,171 in 1996
and $1,046,680 in 1995 297,103 396,567
Deferred rent receivable 148,031 168,625
Total Assets $ 21,734,526 $ 22,201,390
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 254,725 $ 199,193
Due to affiliates 59,195 95,543
Distribution payable 429,293 429,293
Security deposits payable 154,965 155,844
Total Liabilities 898,178 879,873
Partners' Capital (Deficit):
General Partners (218,208) (213,356)
Limited Partners (100,000 units outstanding) 21,054,556 21,534,873
Total Partners' Capital 20,836,348 21,321,517
Total Liabilities and Partners' Capital $ 21,734,526 $ 22,201,390
Consolidated Statement of Partners' Capital (Deficit)
For the six months ended May 31, 1996
General Limited
Partners Partners Total
Balance at November 30, 1995 $ (213,356) $21,534,873 $21,321,517
Net income 3,734 369,683 373,417
Distributions (8,586) (850,000) (858,586)
Balance at May 31, 1996 $ (218,208) $21,054,556 $20,836,348
Consolidated Statements of Operations
Three months ended May 31, Six months ended May 31,
1996 1995 1996 1995
Income
Rental $902,313 $896,280 $1,776,249 $1,794,011
Interest 32,216 40,150 63,858 74,814
Other 978 1,098 1,796 2,134
Total income 935,507 937,528 1,841,903 1,870,959
Expenses
Property operating 344,864 374,912 683,518 707,010
Depreciation and
amortization 337,383 348,153 678,322 689,841
General and administrative
- other 27,487 27,762 56,591 52,295
General and administrative
- affiliates 29,996 21,021 50,055 36,731
Total expenses 739,730 771,848 1,468,486 1,485,877
Net Income $195,777 $165,680 $ 373,417 $ 385,082
Net Income Allocated:
To the General Partners $ 1,958 $ 1,657 $ 3,734 $ 3,851
To the Limited Partners 193,819 164,023 369,683 381,231
$195,777 $165,680 $ 373,417 $ 385,082
Per limited partnership
unit (100,000 outstanding) $1.94 $1.64 $3.70 $3.81
Consolidated Statements of Cash Flows
For the six months ended May 31, 1996 1995
Cash Flows From Operating Activities
Net income $ 373,417 $ 385,082
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 678,322 689,841
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Restricted cash 14,617 (8,652)
Rent and other receivables 8,955 (10,999)
Prepaid expenses 33,973 17,784
Deferred rent receivable 20,594 35,645
Accounts payable and accrued expenses 55,532 57,045
Due to affiliates (36,348) (4,322)
Security deposits payable (879) (441)
Net cash provided by operating activities 1,148,183 1,160,983
Cash Flows From Investing Activities
Additions to real estate assets (126,967) (158,763)
Net cash used for investing activities (126,967) (158,763)
Cash Flows From Financing Activities
Cash distributions (858,586) (732,323)
Net cash used for financing activities (858,586) (732,323)
Net increase in cash and cash equivalents 162,630 269,897
Cash and cash equivalents, beginning of period 2,461,901 2,524,376
Cash and cash equivalents, end of period $ 2,624,531 $ 2,794,273
Supplemental Schedule of Non-Cash Investing
Activities
Write-off of fully depreciated tenant improvements $ 264,136 $ 80,126
Notes to the Consolidated Financial Statements
The unaudited 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 May 31, 1996 and the results of operations for the three and six
months ended May 31, 1996 and 1995, cash flows for the six months ended May 31,
1996 and the statement of changes in partners' capital (deficit) for the six
months ended May 31, 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 May 31, 1996 of $2,624,531,
compared to $2,461,901 at November 30, 1995. The increase is the result of net
cash provided by operations in the amount of $1,148,183 less cash distributions
totaling $858,586 and capital expenditures in the amount of $126,967. The
Partnership also had a restricted cash balance of $160,302 at May 31, 1996
which is primarily comprised of security deposits. Prepaid expenses decreased
to $297,103 at May 31, 1996 from $396,567 at November 30, 1995, primarily due
to the amortization of leasing commissions and prepaid insurance. The
Partnership expects sufficient cash flow from operations to be generated to
meet its current operating requirements.
Accounts payable and accrued expenses totaled $254,725 at May 31, 1996,
compared with $199,193 at November 30, 1995. The increase is largely due to
the accrual of real estate taxes for Maitland Center Office Building C and Two
Financial Centre. Due to affiliates decreased by $36,348 to $59,195 at May 31,
1996 from $95,543 at November 30, 1995, mainly due to the timing of salary
reimbursement payments.
At Two Financial Centre, a tenant leasing a total of 13,993 square feet, or
approximately 10% of the property's leasable area, has provided notice that it
will be vacating its space upon the scheduled expiration of its lease in
December 1996. In anticipation of this vacancy, the General Partners have begun
to aggressively market the space. Additionally, in June 1996, a new five-year
lease was executed representing 5,388 square feet, which has increased the
current lease level to 99%.
A cash distribution of $4.25 per Unit was declared for the quarter ended May
31, 1996 and was paid on July 15, 1996. The distribution was funded from
Partnership operations and was declared after a review of the Partnership's
1996 second 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 $195,777 and $373,417 for the
three and six months ended May 31, 1996, respectively, compared with $165,680
and $385,082 for the corresponding periods in fiscal 1995. The higher net
income for the three-month period in 1996 is primarily attributable to lower
property operating expenses, while the lower net income for the six-month
period in 1996 is primarily attributable to lower rental and interest income.
Rental income totaled $902,313 and $1,776,249 for the three and six months
ended May 31, 1996, compared with $896,280 and $1,794,011 for the three and six
months ended May 31, 1995. The slight decrease for the six-month period in 1996
is primarily attributable to lower occupancy at Two Financial Centre and lower
escalation income at Swenson Business Park-Building C. 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 $32,216 and $63,858 for the three
and six months ended May 31, 1996 compared with $40,150 and $74,814 for the
respective 1995 periods, reflecting lower average cash balances in 1996.
Property operating expenses totaled $344,864 and $683,518 for the three and six
months ended May 31, 1996 compared with $374,912 and $707,010 for the
respective 1995 periods. The decreases for the 1996 periods are primarily
attributable to lower janitorial and repair and maintenance expenditures.
As of May 31, 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
(a) Reports on Form 8-K - 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 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: July 15, 1996 BY: /s/ Rocco F. Andriola
President, Director and
Chief Financial Officer
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<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> May-31-1996
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<RECEIVABLES> 138,008
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<DISCONTINUED> 000
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