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 August 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 August 31, At November 30,
1996 1995
Assets
Real estate, at cost:
Land $ 5,216,878 $ 5,216,878
Buildings and improvements 24,574,960 24,673,883
29,791,838 29,890,761
Less accumulated depreciation (11,696,403) (11,038,346)
18,095,435 18,852,415
Cash and cash equivalents 1,692,457 2,461,901
Restricted cash 163,226 174,919
1,855,683 2,636,820
Rent and other receivables, net of
allowance for doubtful accounts of
$7,275 in 1996 and 1995 167,348 146,963
Prepaid expenses, net of accumulated
amortization of $1,147,135 in 1996
and $1,046,680 in 1995 371,413 396,567
Deferred rent receivable 137,770 168,625
Total Assets $ 20,627,649 $ 22,201,390
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 365,769 $ 199,193
Due to affiliates 79,202 95,543
Distribution payable 443,687 429,293
Security deposits payable 155,735 155,844
Total Liabilities 1,044,393 879,873
Partners' Capital (Deficit):
General Partners (230,739) (213,356)
Limited Partners (100,000 units
outstanding) 19,813,995 21,534,873
Total Partners' Capital 19,583,256 21,321,517
Total Liabilities and Partners'
Capital $ 20,627,649 $ 22,201,390
Consolidated Statement of Partners' Capital (Deficit)
For the nine months ended August 31, 1996
General Limited
Partners Partners Total
Balance at November 30, 1995 $ (213,356) $21,534,873 $21,321,517
Net income 5,597 554,122 559,719
Distributions (22,980) (2,275,000) (2,297,980)
Balance at August 31, 1996 $ (230,739) $19,813,995 $19,583,256
Consolidated Statements of Operations
Three months ended August 31, Nine months ended August 31,
1996 1995 1996 1995
Income
Rental $ 950,369 $ 804,040 $ 2,726,618 $ 2,598,051
Interest 31,344 39,030 95,202 113,844
Other 2,146 802 3,942 2,936
Total income 983,859 843,872 2,825,762 2,714,831
Expenses
Property operating 398,337 357,886 1,081,855 1,064,896
Depreciation and
amortization 344,326 356,137 1,022,648 1,045,978
General and
administrative - other 26,410 22,084 83,001 74,379
General and
administrative -
affiliates 28,484 27,691 78,539 64,422
Total expenses 797,557 763,798 2,266,043 2,249,675
Net Income $ 186,302 $ 80,074 $ 559,719 $ 465,156
Net Income Allocated:
To the General Partners $ 1,863 $ 801 $ 5,597 $ 4,652
To the Limited Partners 184,439 79,273 554,122 460,504
$ 186,302 $ 80,074 $ 559,719 $ 465,156
Per limited partnership
unit (100,000 outstanding) $1.84 $.79 $5.54 $4.61
Consolidated Statements of Cash Flows
For the nine months ended August 31,
1996 1995
Cash Flows From Operating Activities:
Net income $ 559,719 $ 465,156
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 922,193 954,401
Amortization 100,455 91,577
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Restricted cash 11,693 (12,664)
Rent and other receivables (20,385) (68,058)
Prepaid expenses (75,301) (113,056)
Deferred rent receivable 30,855 44,973
Accounts payable and accrued expenses 166,576 169,441
Due to affiliates (16,341) 17,381
Security deposits payable (109) 1,024
Net cash provided by operating activities 1,679,355 1,550,175
Cash Flows From Investing Activities:
Additions to real estate (165,213) (206,080)
Net cash used for investing activities (165,213) (206,080)
Cash Flows From Financing Activities:
Cash distributions (2,283,586 (1,161,616)
Net cash used for financing activities (2,283,586) (1,161,616)
Net increase (decrease) in cash and cash
equivalents (769,444) 182,479
Cash and cash equivalents, beginning of period 2,461,901 2,524,376
Cash and cash equivalents, end of period $ 1,692,457 $ 2,706,855
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 consolidated financial statements should be read in conjunction
with the Partnership's annual 1995 audited consolidated financial statements
within Form 10-K.
The unaudited consolidated financial statements include all adjustments which
are, in the opinion of management, necessary to present a fair statement of
financial position as of August 31, 1996 and the results of operations for the
three and nine months ended August 31, 1996 and 1995, and cash flows for the
nine months ended August 31, 1996 and 1995, and the statement of partners'
capital (deficit) for the nine months ended August 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 August 31, 1996 of $1,692,457,
compared to $2,461,901 at November 30, 1995. The decrease is the result of
cash distributions in the amount of $2,283,586 and additions to real estate of
$165,213 which were partially offset by net cash provided by operations in the
amount of $1,679,355. The Partnership also had a restricted cash balance of
$163,226 at August 31, 1996 which is primarily comprised of security deposits.
Prepaid expenses decreased to $371,413 at August 31, 1996 from $396,567 at
November 30, 1995, primarily due to the amortization of leasing commissions.
The Partnership expects to generate sufficient cash flow from operations to
meet its current operating requirements.
Accounts payable and accrued expenses totaled $365,769 at August 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 to $79,202 at August 31, 1996
from $95,543 at November 30, 1995, mainly due to the timing of payments for
Partnership administrative expenses.
In June 1996, the General Partners executed a new five-year lease for 5,388
square feet Two Financial Centre. As previously reported, a tenant leasing a
total of 13,993 square feet, or approximately 10% of the property's leasable
area, has indicated 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 been aggressively marketing the space.
On August 15, 1996, the Partnership paid a special cash distribution in the
amount of $10 per Unit which was funded from the Partnership's cash reserves.
In addition, a cash distribution of $4.25 per Unit was declared for the quarter
ended August 31, 1996 and was paid on October 15, 1996. The distribution was
funded from Partnership operations and was declared after a review of the
Partnership's 1996 third 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 $186,302 and $559,719 for the
three and nine months ended August 31, 1996, respectively, compared with
$80,074 and $465,156 for the corresponding periods in fiscal 1995. The higher
net income in 1996 is primarily attributable to higher rental income.
Rental income totaled $950,369 and $2,726,618 for the three and nine months
ended August 31, 1996, compared with $804,040 and $2,598,051 for the three and
nine months ended August 31, 1995. The increase is primarily attributable to
higher average occupancy at both Two Financial Centre and Maitland Center
Office Building C during 1996. Interest income totaled $31,344 and $95,202 for
the three and nine months ended August 31, 1996 compared with $39,030 and
$113,844 for the respective 1995 periods, reflecting lower average cash
balances in 1996.
Property operating expenses totaled $398,337 and $1,081,855 for the three and
nine months ended August 31, 1996 compared with $357,886 and $1,064,896 for the
respective 1995 periods. The slight increases for the 1996 periods are
primarily attributable to higher electric utility costs at Maitland Center
Office Building C.
As of August 31, 1996, lease levels at each of the properties were as follows:
Two Financial Centre - 99%; Maitland Center Office Building C - 99%; 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 August 31, 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: October 14, 1996 BY: /s/ Rocco F. Andriola
President, Director and
Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> August-31-1996
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<SECURITIES> 000
<RECEIVABLES> 167,348
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 29,791,838
<DEPRECIATION> 11,696,403
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<BONDS> 000
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000
000
<OTHER-SE> 19,583,256
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<SALES> 2,726,618
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<CGS> 000
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<INCOME-CONTINUING> 559,719
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 559,719
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