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 September 30, 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: 0-13341
COMMERCIAL PROPERTIES 3, L.P.
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Exact Name of Registrant as Specified in its Charter
Virginia 11-2680561
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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
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Address of Principal Executive Offices Zip Code
(212) 526-3237
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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 September 30, At December 31,
1996 1995
Assets
Real estate, at cost:
Land $ 5,808,694 $ 5,808,694
Buildings and improvements 30,727,403 31,446,737
36,536,097 37,255,431
Less accumulated depreciation (13,098,392) (12,714,080)
23,437,705 24,541,351
Cash and cash equivalents 1,314,036 2,134,370
Restricted cash 231,545 237,566
Accounts and rent receivable, net of allowance
for doubtful accounts of $38,847 in 1996
and $5,486 in 1995 71,937 64,616
Deferred rent receivable 218,108 230,626
Prepaid leasing costs and other assets, net
of accumulated amortization of $743,792
in 1996 and $900,609 in 1995 595,319 633,476
Total Assets $ 25,868,650 $ 27,842,005
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses 534,737 237,185
Due to affiliates 17,901 28,479
Distributions payable 338,282 563,804
Security deposits payable 215,026 214,388
Total Liabilities 1,105,946 1,043,856
Minority interest 221,337 221,337
Partners' Capital (Deficit):
General Partners (473,516) (402,866)
Limited Partners (109,378 units outstanding) 25,014,883 26,979,678
Total Partners' Capital 24,541,367 26,576,812
Total Liabilities and Partners' Capital $ 25,868,650 $ 27,842,005
Consolidated Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1996
General Limited
Partners Partners Total
Balance at December 31, 1995 $(402,866) $26,979,678 $26,576,812
Net income 4,794 474,607 479,401
Distributions (75,444) (2,439,402) (2,514,846)
Balance at September 30, 1996 $(473,516) $25,014,883 $24,541,367
Consolidated Statements of Operations
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
Income
Rent $1,243,728 $1,231,717 $3,916,969 $3,760,299
Interest 23,105 30,011 53,071 80,178
Total Income 1,266,833 1,261,728 3,970,040 3,840,477
Expenses
Property operating 521,475 584,033 1,701,199 1,684,867
Depreciation and amortization 518,444 544,160 1,556,943 1,716,183
General and administrative 58,094 53,381 199,136 172,940
Bad Debt Expense 33,361 - 33,361 -
Total Expenses 1,131,374 1,181,574 3,490,639 3,573,990
Net Income $ 135,459 $ 80,154 $ 479,401 $ 266,487
Net Income Allocated:
To the General Partners $ 1,355 $ 802 $ 4,794 $ 2,665
To the Limited Partners 134,104 79,352 474,607 263,822
$ 135,459 $ 80,154 $ 479,401 $ 266,487
Per limited partnership unit
(109,378 outstanding) $1.23 $.73 $4.34 $2.41
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1996 1995
Cash Flows From Operating Activities
Net income $ 479,401 $ 266,487
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,556,943 1,716,183
Increase (decrease) in cash arising from changes in
operating assets and liabilities
Restricted cash 6,021 (14,029)
Accounts and rent receivable, net (7,321) (15,614)
Deferred rent receivable 12,518 12,310
Prepaid expenses (139,595) (193,386)
Accounts payable and accrued expenses 297,552 114,021
Due to affiliates (10,578) (8,102)
Security deposits payable 638 6,385
Net cash provided by operating activities 2,195,579 1,884,255
Cash Flows From Investing Activities
Additions to real estate assets (275,545) (323,615)
Net cash used for investing activities (275,545) (323,615)
Cash Flows From Financing Activities
Cash distributions (2,740,368) (837,250)
Net cash used for financing activities (2,740,368) (837,250)
Net increase (decrease) in cash and cash equivalents (820,334) 723,390
Cash and cash equivalents, beginning of period 2,134,370 1,637,501
Cash and cash equivalents, end of period $ 1,314,036 $2,360,891
Supplemental schedule of non-cash investing activity: During the nine months
ended September 30,1996, $1,329,448 of fully depreciated and amortized assets
were written off.
Notes to the Consolidated Financial Statements
The unaudited interim consolidated financial statements should be read in
conjunction with the Partnership's annual 1995 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 September 30, 1996 and the results of operations for
the three and nine months ended September 30, 1996 and 1995, the statements of
cash flows for the nine months ended September 30, 1996 and 1995, and the
statement of partners' capital (deficit) for the nine months ended September
30, 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
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The Partnership had cash and cash equivalents totaling $1,314,036 at September
30, 1996, compared with $2,134,370 at December 31, 1995. The decrease is
primarily due to the payment of a special cash distribution in the amount of
$1,500,000 on March 29, 1996. The Partnership also had restricted cash, which
consists of security deposits, of $231,545 at September 30, 1996, largely
unchanged from December 31, 1995.
Metro Park Executive Center - The General Partners executed two, three-year
lease renewals representing 3,933 square feet during the third quarter of 1996.
As a result, the property remained 81% leased at September 30, 1996. The
General Partners continue to aggressively market the property's vacant space,
however, market conditions in Fort Myers remain highly competitive. One lease
totaling 4,773 square feet or approximately 8% of the property's space, which
was scheduled to expire in December 1996, was extended for ten years. Another
lease for 16,517 square feet can be canceled by the tenant at any time with six
months notice. To date, we have not received notice.
Fort Lauderdale Commerce Center - The property remained 88% leased at September
30, 1996. In October, the General Partners executed a four-year lease renewal
with a tenant occupying 12,370 square feet. One lease, representing 6,000
square feet, expired in October 31, 1996. However, the tenant continues to
occupy its space on a month-to-month basis, while it relocates to smaller
premises.
Three Financial Centre - The General Partners executed two new leases, totaling
2,858 square feet, during the quarter. One tenant executed a five-year lease
renewal and relocated within the property, expanding its total leasable space
to 4,772 square feet. Another tenant renewed its lease for three years and
expanded its premises to 1,066 square feet. As a result, the property was
approximately 93% leased at September 30, 1996. Four leases, representing
5,942 square feet or approximately 5% of the property's leasable space, are
scheduled to expire in December 1996.
Quorum II Office Building - During the third quarter, the General Partners
executed one new lease representing 6,024 square feet. As a result, the
property was 100% leased at September 30, 1996. One tenant occupying 2,594
square feet, whose lease expired in October 1996, continues to lease its space
on a month-to-month basis. Another lease representing 14,175 square feet or
approximately 17% of the property's leasable area is scheduled to expire on
November 30, 1996. This tenant has indicated that it will be vacating its space
at the end of its lease term.
Accounts payable and accrued expenses totaled $534,737 at September 30, 1996
compared with $237,185 at December 31, 1995. The increase is largely due to the
timing of payment of real estate taxes.
A cash distribution in the amount of $3.00 per Unit will be paid to the Limited
Partners in November 1996. This distribution was funded from the Partnership's
third quarter operations and was declared after a review of the Partnership's
anticipated future cash needs and current cash position. The timing and amount
of future cash distributions will be reviewed quarterly by the General
Partners.
Results of Operations
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The Partnership's operations resulted in net income of $135,459 and $479,401
for the three and nine months ended September 30, 1996, respectively, compared
with net income of $80,154 and $266,487 for the three and nine months ended
September 30, 1995, respectively. The increases are primarily attributable to
higher rental income and lower depreciation and amortization expenses.
Rental income totaled $1,243,728 and $3,916,969 for the three and nine months
ended September 30, 1996, respectively, compared with $1,231,717 and $3,760,299
for the comparable periods a year earlier. The increases are largely
attributable to higher average occupancy and rental rates at Quorum II Office
Building and Fort Lauderdale Commerce Center.
Property operating expenses totaled $521,475 and $1,701,199 for the three and
nine months ended September 30, 1996, compared with $584,033 and $1,684,867 for
the comparable 1995 periods. The decrease for the three-month period is
primarily due to the reclassification of certain expenditures in 1996.
Depreciation and amortization declined to $518,444 and $1,556,943 for the three
and nine months ended September 30, 1996 from $544,160 and $1,716,183 for the
three and nine months ended September 30, 1995, respectively, primarily as a
result of the write-down of Quorum II Office Building to its fair market value
at year-end 1995.
As of September 30, 1996, lease levels at each of the Properties were as
follows: Metro Park Executive Center - 81%; Fort Lauderdale Commerce Center -
88%; Three Financial Centre - 93%; and Quorum II Office Building - 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 September 30, 1996.
SIGNATURES
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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: November 13, 1996 BY: /s/ Rocco Andriola
Director, President and Chief
Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Sept-30-1996
<CASH> 1,314,036
<SECURITIES> 000
<RECEIVABLES> 328,892
<ALLOWANCES> 38,847
<INVENTORY> 000
<CURRENT-ASSETS> 2,430,945
<PP&E> 36,536,097
<DEPRECIATION> 13,098,392
<TOTAL-ASSETS> 25,868,650
<CURRENT-LIABILITIES> 1,105,946
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 25,541,367
<TOTAL-LIABILITY-AND-EQUITY> 25,868,650
<SALES> 000
<TOTAL-REVENUES> 3,970,040
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 3,490,639
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 479,401
<INCOME-TAX> 000
<INCOME-CONTINUING> 479,401
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> 479,401
<EPS-PRIMARY> $4.34
<EPS-DILUTED> 000
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