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, 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: 0-11763
-------
COMMERCIAL PROPERTIES 2, L.P.
-----------------------------
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, 29th Floor,
New York, NY Attn: Andre Anderson 10285
- -------------------------------------- -----
Address of Principal Executive Offices Zip Code
(212) 526-3183
--------------
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 2, L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS At February 28, At November 30,
1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Assets
Real estate assets held for disposition $7,320,091 $7,222,460
Cash and cash equivalents 1,566,940 1,446,089
Restricted cash 21,652 21,386
Rent and other receivables 290,000 291,360
Prepaid expenses 5,498 10,997
- -------------------------------------------------------------------------------
Total Assets $9,204,181 $8,992,292
===============================================================================
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 226,995 $ 258,394
Due to affiliates 89,267 67,910
Security deposits payable 18,528 18,528
----------------------------
Total Liabilities 334,790 344,832
----------------------------
Partners' Capital (Deficit):
General Partners (146,740) (148,959)
Limited Partners (100,000 units outstanding) 9,016,131 8,796,419
----------------------------
Total Partners' Capital 8,869,391 8,647,460
- -------------------------------------------------------------------------------
Total Liabilities and Partners' Capital $9,204,181 $8,992,292
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
For the three months ended February 28, 1999
General Limited
Partners Partners Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at November 30, 1998 $(148,959) $8,796,419 $8,647,460
Net income 2,219 219,712 221,931
- -------------------------------------------------------------------------------
Balance at February 28, 1999 $(146,740) $9,016,131 $8,869,391
===============================================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
3
COMMERCIAL PROPERTIES 2, L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended February 28,
1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Income
Rental $417,434 $ 615,353
Interest 13,926 230,607
Other 30,023 9,921
-----------------------
Total Income 461,383 855,881
- -------------------------------------------------------------------------------
Expenses
Property operating 161,400 308,212
General and administrative - other 56,697 55,276
General and administrative - affiliates 21,355 8,298
-----------------------
Total Expenses 239,452 371,786
- -------------------------------------------------------------------------------
Operating Income 221,931 484,095
Gain on sale of real estate assets -- 3,232,132
- -------------------------------------------------------------------------------
Net Income $221,931 $3,716,227
===============================================================================
Net Income Allocated:
To the General Partners $ 2,219 $ 37,162
To the Limited Partners 219,712 3,679,065
- -------------------------------------------------------------------------------
$221,931 $3,716,227
===============================================================================
Per limited partnership unit
(100,000 outstanding) $ 2.20 $ 36.79
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
4
COMMERCIAL PROPERTIES 2, L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended February 28, 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 221,931 $ 3,716,227
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of real estate assets -- (3,232,132)
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Restricted cash (266) 45,073
Rent and other receivables 1,360 41,982
Prepaid expenses 5,499 14,153
Accounts payable and accrued expenses (31,399) 15,394
Due to affiliates 21,357 (26,000)
Security deposits payable -- (36,424)
---------------------------
Net cash provided by operating activities 218,482 538,273
- -------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Proceeds from sale of property -- 8,762,318
Additions to real estate (97,631) (290,239)
---------------------------
Net cash provided by investing activities (97,631) 8,472,079
- -------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Cash distributions -- (19,543,165)
---------------------------
Net cash used for financing activities -- (19,543,165)
- -------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 120,851 (10,532,813)
Cash and cash equivalents, beginning of period 1,446,089 11,803,602
- -------------------------------------------------------------------------------
Cash and cash equivalents, end of period $1,566,940 $ 1,270,789
===============================================================================
Supplemental Disclosure of Non-Cash Operating Activities:
In connection with the sale of Maitland Center Office Building C, deferred rent
receivable, and prepaid leasing commission in the amounts of $50,555 and
$65,899 were netted against Gain on sale of real estate assets.
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
5
COMMERCIAL PROPERTIES 2, L.P.
AND CONSOLIDATED VENTURES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's annual 1998 audited consolidated financial
statements within Form 10-K.
The unaudited consolidated financial statements include all normal and
reoccurring adjustments which are, in the opinion of management, necessary to
present a fair statement of financial position as of February 28, 1999 and the
results of operations and cash flows for the three months ended February 28,
1999 and 1998 and the statement of partners' capital (deficit) for the three
months ended February 28, 1999. Results of operations for the period are not
necessarily indicative of the results to be expected for the full year.
<PAGE>
6
COMMERCIAL PROPERTIES 2, 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
- -------------------------------
The General Partners have engaged a real estate brokerage firm to assist with
the efforts in marketing for sale the Partnership's sole remaining property, Two
Financial Centre (the "Property"). While it is currently anticipated that the
Property will be sold and the Partnership liquidated in 1999, there can be no
assurance that the Property will be sold within this time frame, or that any
sale, if completed, will result in a particular price.
The Partnership had cash and cash equivalents at February 28, 1999 of $1,566,940
compared with $1,446,089 at November 30, 1998. The increase is primarily due to
cash provided by operations exceeding cash used for additions to real estate
assets. At February 28, 1999 rent and other receivables amounted to $290,000,
largely unchanged from $291,360 at November 30, 1998. The balance principally
represents tax prepayments made pursuant to IRS Section 444 requirements which
are expected to be recovered. Accounts payable and accrued expenses amounted to
$226,995 at February 28, 1999, compared to $258,394 at November 30, 1998. The
decrease is primarily due to lower payables at the Property.
The Property was 91% leased as of February 28, 1999, up from 84% on November 30,
1998. During this period the General Partners executed lease agreements for
15,651 square feet of vacated space. The General Partners continue to
aggressively market the remaining space and will negotiate renewals as leases
expire.
On December 19, 1997, the Partnership closed on the sale of Maitland Center
Office Building C (the "Maitland Property"). The Maitland Property was sold for
net proceeds of $8,762,317 to CMD Realty Investment Fund III, L.P., an Illinois
Limited Partnership (the "Buyer"), which is unaffiliated with the Partnership.
The selling price was determined by arm's length negotiations between the
Partnership and the Buyer. The transaction resulted in a gain on sale of
$3,232,132.
On February 18, 1998, the Partnership paid a special cash distribution to
Limited Partners totaling $195.39 per Unit. The distribution included the net
proceeds received from the sales of the Maitland Property in the amount of
$87.62 per Unit and the Swenson Property in the amount of $103.52 per Unit, plus
cash flow from operations generated during the three months ended November 30,
1997 in the amount of $4.25 per Unit. In order to fund required capital
improvements at the remaining Property and maintain adequate cash reserves, cash
distributions were suspended beginning with the 1998 first quarter distribution.
Once the remaining Property is sold, the General Partners will distribute the
net proceeds together with the Partnership's remaining cash reserves (after
payment of or provision for, the Partnership's liabilities and expenses), and
dissolve the Partnership.
Results of Operations
- ---------------------
Partnership operations resulted in net income of $221,931 for the three months
ended February 28, 1999, compared with $3,716,227 for the three months ended
February 28, 1998. This is primarily due to a gain on the sale of the Maitland
Property of $3,232,132 in the 1998 period. Excluding this gain, operating income
totaled $484,095 for the three months ended February 28, 1998, compared to
operating income of $221,931 for the three month period ended February 28, 1999.
The decrease in operating income reflects decreased interest income, due to the
Partnership's higher average cash balance in 1998.
Primarily as a result of the sale of the Maitland Property, rental income and
property operating expense decreased from the three months ended February 28,
1998 to the corresponding period in 1999.
<PAGE>
7
COMMERCIAL PROPERTIES 2, L.P.
AND CONSOLIDATED VENTURES
Interest income totaled $13,926 for the three months ended February 28, 1999,
compared with $230,607 for the three months ended February 28, 1998. The
decrease for the three-month period reflects the Partnership's higher average
cash balance in the first quarter of 1998 due to proceeds received from the sale
of the Swenson and Maitland Properties.
General and administrative expenses (other) for the three months ended February
28, 1999 were $56,697, compared with $55,276 for the three months ended February
28, 1998.
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
February 28, 1999.
<PAGE>
8
COMMERCIAL PROPERTIES 2, 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 2, L.P.
BY: Real Estate Services VII, Inc.
General Partner
Date: April 14, 1999
BY: /s/Michael T. Marron
-------------------------------------
Name: Michael T. Marron
Title: President and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Nov-30-1999
<PERIOD-END> Feb-28-1999
<CASH> 1,588,592
<SECURITIES> 000
<RECEIVABLES> 290,000
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 000
<DEPRECIATION> 000
<TOTAL-ASSETS> 9,204,181
<CURRENT-LIABILITIES> 334,790
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 8,869,391
<TOTAL-LIABILITY-AND-EQUITY> 9,204,181
<SALES> 417,434
<TOTAL-REVENUES> 461,383
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 239,452
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 221,931
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 221,931
<EPS-PRIMARY> 2.20
<EPS-DILUTED> 2.20
</TABLE>
