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 June 30, 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: 0-13341
COMMERCIAL PROPERTIES 3, L.P.
(formerly Hutton/GSH Commercial Properties 3)
(Exact name of registrant as specified in its charter)
Virginia 11-2680561
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) identification No.)
3 World Financial Center, 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
June 30, December 31,
Assets 1995 1994
Real estate investments, at cost: ---------- ----------
Land $ 6,422,301 $ 6,422,301
Buildings and improvements 39,569,517 39,764,931
45,991,818 46,187,232
Less accumulated depreciation (16,721,239) (16,113,296)
29,270,579 30,073,936
Cash and cash equivalents 2,071,174 1,637,501
Restricted cash 232,232 216,079
Accounts and rent receivable, net of allowance for
doubtful accounts of $5,486 in 1995 and $14,557 in 1994 26,411 28,326
Deferred rent receivable 227,892 235,246
Prepaid expenses and other assets, net of accumulated
amortization of $793,908 in 1995 and $718,547 in 1994 607,724 645,993
---------- ----------
Total Assets $32,436,012 $32,837,081
========== ==========
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 394,436 $ 426,642
Due to affiliates 42,600 50,702
Distributions payable 290,359 281,902
Security deposits 212,718 204,465
Total Liabilities 940,113 963,711
Minority Interest 171,315 171,315
Partners' Capital (Deficit):
General Partners (336,783) (321,732)
Limited Partners 31,661,367 32,023,787
---------- ----------
Total Partners' Capital 31,324,584 31,702,055
---------- ----------
Total Liabilities and Partners' Capital $32,436,012 $32,837,081
========== ==========
Consolidated Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1995
General Limited
Partners Partners Total
-------- ---------- ----------
Balance at December 31, 1994 $(321,732) $32,023,787 $31,702,055
Net income 1,863 184,470 186,333
Distributions (16,914) (546,890) (563,804)
-------- ---------- ----------
Balance at June 30, 1995 $(336,783) $31,661,367 $31,324,584
======== ========== ==========
Consolidated Statements of Operations
Three months ended Six months ended
June 30, June 30,
Income 1995 1994 1995 1994
--------- --------- --------- ---------
Rent $1,255,531 $1,090,821 $2,528,582 $2,134,063
Interest 27,922 8,215 50,167 14,122
Total Income 1,283,453 1,099,036 2,578,749 2,148,185
Expenses
Property operating 533,330 555,281 1,100,834 1,126,127
Depreciation and amortization 568,336 590,551 1,172,023 1,212,213
General and administrative 59,647 61,009 119,559 115,381
Bad debt - 63,153 - 63,153
Total Expenses 1,161,313 1,269,994 2,392,416 2,516,874
Net income (loss) $ 122,140 $ (170,958) $ 186,333 $ (368,689)
========= ========= ========= =========
Net Income (Loss) Allocated:
To the General Partners $ 1,221 $ (1,710) $ 1,863 $ (3,687)
To the Limited Partners 120,919 (169,248) 184,470 (365,002)
$ 122,140 $ (170,958) $ 186,333 $ (368,689)
========= ========= ========= =========
Per limited partnership unit
(109,378 outstanding) $1.11 $(1.55) $1.69 $(3.34)
========= ========= ========= =========
Consolidated Statements of Cash Flows
For the six months ended June 30, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net income (loss) $ 186,333 $ (368,689)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,172,023 1,212,213
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Restricted cash (16,153) (5,501)
Accounts and rent receivable, net 1,915 113,462
Deferred rent receivable 7,354 16,586
Notes receivable - 51,403
Prepaid expenses (71,514) (55,977)
Accounts payable and accrued expenses 118,041 61,104
Due to affiliates (8,102) 2,268
Security deposits payable 8,253 -
Net cash provided by operating activities 1,398,150 1,026,869
Cash Flows from Investing Activities:
Additions to real estate (409,130) (472,379)
Net cash used for investing activities (409,130) (472,379)
Cash Flows from Financing Activities:
Cash distributions (555,347) (225,522)
Net cash used for financing activities (555,347) (225,522)
Net increase in cash and cash equivalents 433,673 328,968
Cash and cash equivalents at beginning of period 1,637,501 734,361
Cash and cash equivalents at end of period $2,071,174 $1,063,329
========= =========
Supplemental Schedule of Non-Cash Investing Activity:
During the quarter ended December 31, 1994, $150,247 of building and tenant
improvements were capitalized and remained unpaid until 1995.
During the quarter ended March 31, 1995, $454,297 of fully depreciated assets
were written off.
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 consolidated financial statements include all adjustments which
are, in the opinion of management, necessary to present a fair statement of
financial position as of June 30, 1995, the results of operations for the three
and six months ended June 30, 1995 and 1994, cash flows for the six months
ended June 30, 1995 and 1994 and the statement of partners' capital (deficit)
for the six months ended June 30, 1995. 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, that
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 totaling $2,071,174 at June 30,
1995 compared with $1,637,501 at December 31, 1994. The increase of $433,673
is due to net cash provided by operating activities in excess of additions to
real estate assets totaling $409,130 and the payment of cash distributions to
partners totaling $555,347. The Partnership had a restricted cash balance of
$232,232 at June 30, 1995, compared with $216,079 at December 31, 1994. The
restricted cash balance is comprised of tenant security deposits. Unexpended
funds and working capital reserves are invested in unaffiliated money market
funds and interest on such invested balances accrues to the benefit of the
Partnership.
At Metro Park Executive Center, the General Partners executed a new lease with
an existing tenant for an additional 4,008 square feet. The tenant now leases
23,345 square feet or approximately 39% of the property's leasable area.
Another tenant, whose lease representing 6,878 square feet was scheduled to
expire in August 1995, extended its lease to July 1997 and downsized to 3,364
square feet. In July 1995, the General Partners executed a five-year lease
renewal with a tenant whose lease expired on July 31, 1995. Two tenants
leasing 5,659 square feet have notified the General Partners of their plans to
vacate the premises upon expiration of their respective leases in August and
September 1995.
At Three Financial Centre, a lease representing 18,854 square feet or
approximately 15% of the property's leasable space expired on May 31, 1995.
The tenant extended its lease to July 31, 1995 at which time it vacated the
premises. However, an existing tenant executed a lease expansion for the
entire space pursuant to a lease scheduled to expire in September 2000. The
tenant now leases 37,352 square feet or approximately 30% of the property's
leasable area. A tenant whose lease representing 3,558 square feet expired on
May 31, 1995 extended its lease to February 1996. Additionally, a tenant whose
lease representing 6,217 square feet was scheduled to expire in October 1995,
also extended its lease to February 1996.
Two leases at Quorum II Office Building expired during the 1995 second quarter.
One tenant, leasing 2,071 square feet, executed a three-year lease renewal,
however, the other tenant, leasing 1,047 square feet, vacated the premises. A
tenant occupying 14,175 square feet pursuant to a lease scheduled to expire in
December 1996 had notified the General Partners of its plans to prematurely
vacate its space in July 1995. However, during the 1995 second quarter, the
tenant informed the General Partners that it would remain at the property. Two
leases totaling 13,691 square feet are scheduled to expire in November and
December of 1995. The General Partners have contacted these tenants regarding
the renewal of their leases, however, it is uncertain whether the tenants will
renew.
At Fort Lauderdale Commerce Center, the General Partners executed a new lease
for 4,000 square feet during the 1995 second quarter, replacing a tenant which
relocated and expanded within the building in the 1995 first quarter. A new
lease was also executed with an existing tenant for 1,860 square feet during
the 1995 second quarter. The tenant now occupies 3,810 square feet.
Additionally, a tenant which renewed and expanded its lease in the 1995 first
quarter, took occupancy of its space in April 1995. As a result, the property
was 88% leased as of June 30, 1995. Five leases representing 17,515 square
feet or approximately 9% of the property's leasable area expired during the
1995 second quarter. Two of these tenants occupying 6,800 square feet executed
lease renewals in June and July of 1995 and negotiations are underway with a
third tenant, occupying 2,620 square feet, to renew its lease. One tenant
occupying 4,095 square feet vacated the premises upon the expiration of its le
ase on June 30, 1995. Another tenant continues to rent on a month-to-month
basis, but has indicated that it will vacate the building in September 1995.
No other leases are scheduled to expire during the remainder of 1995.
The Partnership declared a cash distribution to the Limited Partners of $2.50
per Unit for the quarter ended June 30, 1995, which will be paid on or about
August 17, 1995. The timing and amount of future cash distributions will be
determined quarterly by the General Partners, and will depend on the adequacy
of cash flow and the Partnership's cash reserve requirements. Given the
leasing progress made at the Partnership's properties throughout the first half
of 1995, the General Partners are evaluating the possibility of increasing the
quarterly distribution rate commencing with the 1995 third quarter.
Results of Operations
For the three and six months ended June 30, 1995, the Partnership's operations
resulted in net income of $122,140 and $186,333, respectively, compared to net
losses of $170,958 and $368,689 for the corresponding periods in 1994. The
change from net loss to net income is primarily attributable to an increase in
rental income.
Rental income totaled $1,255,531 and $2,528,582 for the three and six months
ended June 30, 1995 compared to $1,090,821 and $2,134,063 for the respective
periods in 1994. The increase is due to higher average occupancy at Fort
Lauderdale Commerce Center and Three Financial Centre. Interest income totaled
$27,922 and $50,167 for the three and six months ended June 30, 1995 compared
with $8,215 and $14,122 for the comparative periods in 1994. The increases are
primarily attributable to higher cash balances and higher interest rates.
Property operating expenses totaled $533,330 and $1,100,834 for the three and
six months ended June 30, 1995, largely unchanged from $555,281 and $1,126,127
for the respective periods in 1994. Depreciation and amortization decreased to
$568,336 and $1,172,023 for the three and six months ended June 30, 1995,
respectively, from $590,551 and $1,212,213 for the respective periods in 1994.
The decline is primarily attributable to a lower depreciable asset base in
1995.
The Partnership recognized bad debt expense totaling $63,153 for the three and
six months ended June 30, 1994 reflecting the write-off of delinquent rent owed
by a former tenant at Metro Park Executive Center.
As of June 30, 1995, lease levels at each of the properties were as follows:
Metro Park Executive Center - 87%; Fort Lauderdale Commerce Center - 88%; Three
Financial Centre - 92%; Quorum II Office Building - 95%.
PART II OTHER INFORMATION
Items 1-4 Not applicable
Item 5 Shearson Lehman Brothers Inc. sold certain of its domestic retail
brokerage and asset management businesses to Smith Barney, Harris Upham
& Co. Incorporated ("Smith Barney"). The assets acquired by Smith
Barney included the name "Hutton." Consequently, effective August 3,
1995, the name of the Partnership was changed to Commercial Properties
3, L.P. to delete any reference to "Hutton."
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 June 30, 1995
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 3, L.P.
BY: REAL ESTATE SERVICES VII, INC.
General Partner
Date: August 11, 1995 BY: /s/Rocco Andriola
Name: Rocco Andriola
Title: Director, President and Chief
Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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