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 March 31, 1997
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.
---------------------------------
Exact Name of Registrant as Specified in its Charter
Virginia 11-2680561
- --------------------------- --------------
State or Other Jurisdiction I.R.S. Employer Identification No.
of Incorporation or Organization
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 March 31, At December 31,
1997 1996
Assets
Property:
Land $ 5,808,694 $ 5,808,694
Buildings, building improvements
and equipment 30,681,879 30,831,532
36,490,573 36,640,226
Less accumulated depreciation (13,778,613) (13,546,913)
22,711,960 23,093,313
Cash and cash equivalents 1,365,615 1,228,502
Restricted cash 225,943 232,330
Accounts and rent receivable, net
of allowance for doubtful accounts
of $5,444 in 1997 and $5,444 in 1996 101,048 40,090
Deferred rent receivable 166,298 205,718
Prepaid leasing costs and other assets,
net of accumulated amortization of $549,044
in 1997 and $805,502 in 1996 564,477 563,611
---------- ----------
Total Assets $25,135,341 $25,363,564
========== ==========
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 349,692 $ 249,517
Due to affiliates 32,516 5,941
Distribution payable 338,282 338,282
Security deposits 205,642 215,026
---------- ----------
Total Liabilities 926,132 808,766
---------- ----------
Minority interest 263,477 263,477
Partners' Capital (Deficit):
General Partners (378,290) (368,069)
Limited Partners (109,378 units outstanding) 24,324,022 24,659,390
---------- ----------
Total Partners' Capital 23,945,732 24,291,321
---------- ----------
Total Liabilities and Partners' Capital $25,135,341 $25,363,564
========== ==========
Consolidated Statement of Partners' Capital (Deficit)
For the three months ended March 31, 1997
General Limited
Partners Partners Total
-------- ---------- ----------
Balance at December 31, 1996 $(368,069) $24,659,390 $24,291,321
Net loss (73) (7,234) (7,307)
Distributions (10,148) (328,134) (338,282)
-------- ---------- ----------
Balance at March 31, 1997 $(378,290) $24,324,022 $23,945,732
======== ========== ==========
Consolidated Statements of Operations
For the three months ended March 31, 1997 1996
Income
Rental $1,178,689 $1,375,776
Interest 18,654 27,541
--------- ---------
Total income 1,197,343 1,403,317
Expenses
Property operating 552,168 612,466
Depreciation and amortization 505,760 512,306
General and administrative 146,722 70,101
--------- ---------
Total expenses 1,204,650 1,194,873
--------- ---------
Net Income (Loss) $ (7,307) $ 208,444
========= =========
Net Income (Loss) Allocated:
To the General Partners $ (73) $ 20,844
To the Limited Partners (7,234) 187,600
--------- ---------
$ (7,307) $ 208,444
========= =========
Per limited partnership unit
(109,378 outstanding) $(.07) $1.72
========= =========
Consolidated Statements of Cash Flows
For the three months ended March 31, 1997 1996
Cash Flows From Operating Activities
Net income (loss) $ (7,307) $ 208,444
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 450,251 453,337
Amortization 55,509 58,969
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Restricted cash 6,387 (2,363)
Accounts and rent receivable, net (60,958) (66,376)
Deferred rent receivable 39,420 (13,926)
Prepaid leasing costs and other assets (56,375) (18,276)
Accounts payable and accrued expenses 100,175 70,905
Due to affiliates 26,575 (8,479)
Security deposits payable (9,384) (601)
------- -------
Net cash provided by operating activities 544,293 681,634
Cash Flows From Investing Activities
Additions to real estate (68,898) (91,161)
------- -------
Net cash used for investing activities (68,898) (91,161)
Cash Flows From Financing Activities
Cash distributions (338,282) (2,041,149)
------- ---------
Net cash used for financing activities (338,282) (2,041,149)
------- ---------
Net increase (decrease) in cash and cash equivalents 137,113 (1,450,676)
------- ---------
Cash and cash equivalents, beginning of period 1,228,502 2,134,370
--------- ---------
Cash and cash equivalents, end of period $1,365,615 $ 683,694
========= =========
Supplemental Disclosure of Non-Cash Investing Activities:
Write-off of fully depreciated improvements $ 218,551 $ 0
========= =========
Notes to the Consolidated Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1996 audited financial statements within Form 10-K.
The unaudited 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 March 31, 1997 and the results of
operations and cash flows for the three months ended March 31, 1997 and 1996
and the statement of partner's capital (deficit) for the three months ended
March 31, 1997. Results of operations for the period are not necessarily
indicative of the results to be expected for the full year.
Reclassification. Certain prior year amounts have been reclassified in order
to conform to the current year's presentation.
The following significant event has occurred subsequent to fiscal year 1996,
and no material contingencies exist which would require disclosure in this
interim report per Regulation S-X, Rule 10-01, Paragraph (a)(5):
Effective as of January 1, 1997, the Partnership began reimbursing certain
expenses incurred by Real Estate Services VII, Inc. and its affiliates in
servicing the Partnership to the extent permitted by the partnership agreement.
In prior years, affiliates of the Real Estate Services VII, Inc. general
partner had voluntarily absorbed these expenses.
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 $1,365,615 at March 31,
1997, compared with $1,228,502 at December 31, 1996. The increase is primarily
due to cash flows from operating activities exceeding additions to real estate
and cash distributions. The Partnership also had restricted cash, which
primarily consists of security deposits, of $225,943 at March 31, 1997, largely
unchanged from December 31, 1996.
Metro Park Executive Center - During the first quarter, the General Partners
executed a new three-year lease for 1,856 square feet. Another tenant whose
lease was scheduled to expire in February 1997 executed a lease renewal during
this period. As a result, the property was 83% leased at March 31, 1997. Four
leases totaling 21,685 square feet or approximately 36% of the property's space
are scheduled to expire during the remainder of 1997, including one lease for
16,517 square feet. The General Partners have commenced negotiations with
these tenants, however, it is not yet clear what the outcome will be.
Fort Lauderdale Commerce Center - The General Partners executed two new leases
for 14,336 square feet during the quarter. However, a tenant representing 6,844
square feet terminated its lease and vacated the building. As a result, the
property was 89% leased at March 31, 1997. Four leases totaling 21,040 square
feet are scheduled to expire during the remainder of 1997.
Three Financial Centre - A tenant leasing 4,747 square feet pursuant to a lease
that expired on January 31, 1997, vacated its space. As a result, the property
was 91% leased at March 31, 1997. One additional lease totaling 1,741 square
feet is scheduled to expire in June 1997.
Quorum II Office Building - Leases with three tenants, totaling 20,937 square
feet, expired during the 1997 first quarter. One tenant renewed its lease but
reduced its space from 9,761 square feet to 2,574 square feet and another
tenant vacated its space. The third tenant, representing 6,740 square feet, is
negotiating a renewal and expansion and, in the interim, continues to lease its
space on a month-to-month basis. As a result, the property was 66% leased at
March 31, 1997. Three additional leases totaling 4,740 square feet are
scheduled to expire during the remainder of 1997.
Accounts and rent receivable totaled $101,048 at March 31, 1997, compared to
$40,090 at December 31, 1996. The increase is primarily due to past due rents
from tenants at Fort Lauderdale Commerce Center and Three Financial Centre.
Deferred rent receivable totaled $166,298 at March 31, 1997, compared to
$205,718 at December 31, 1996. The decrease is largely due to the amortization
of deferred rent associated with older leases at all of the Partnership's
properties.
Accounts payable and accrued expenses totaled $349,692 at March 31, 1997
compared with $249,517 at December 31, 1996. The increase is largely due to
the timing of payments of real estate taxes. Due to affiliates increased to
$32,516 at March 31, 1997, from $5,941 at December 31, 1996, primarily
reflecting the reimbursement of certain expenses incurred in servicing the
Partnership, as described below under "Results of Operations."
A cash distribution in the amount of $3.00 per Unit will be paid to the Limited
Partners in May 1997. This distribution was funded from the Partnership's
first 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
The Partnership's operations resulted in a net loss of $7,307 for the three
months ended March 31, 1997 compared to net income of $208,444 for the three
months ended March 31, 1996. The change from net income to net loss is
primarily attributable to lower rental income and increased general and
administrative expenses.
Rental income totaled $1,178,689 for the three months ended March 31, 1997
compared to $1,375,776 a year earlier. The decrease is largely attributable to
lower occupancy at Quorum II Office Building. Interest income totaled $18,654
for the three months ended March 31, 1997 compared to $27,541 a year ago. The
decrease is primarily attributable to the Partnership's lower average cash
balances in 1997.
Property operating expenses totaled $552,168 for the three months ended March
31, 1997, compared to $612,466 for the comparable 1996 period. The decrease is
primarily due to lower grounds maintenance expenses at Fort Lauderdale Commerce
Center and Three Financial Centre, and lower cleaning costs at Quorum II Office
Building. Depreciation and amortization totaled $505,760 for the three months
ended March 31, 1997, largely unchanged from $512,306 for the three months
ended March 31, 1996.
General and administrative expenses for the three months ended March 31, 1997
were $146,722, compared to $70,101 for the same period in 1996. During the
1997 period, certain expenses incurred by Real Estate Services VII, Inc., its
affiliates, and an unaffiliated third party service provider in servicing the
Partnership, which were voluntarily absorbed by affiliates of Real Estate
Services VII, Inc. in prior periods, were reimbursed to Real Estate Services
VII, Inc. and its affiliates.
As of March 31, 1997, lease levels at each of the Properties were as follows:
Metro Park Executive Center - 83%; Fort Lauderdale Commerce Center - 89%;
Three Financial Centre - 91%; and Quorum II Office Building - 66%.
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 March 31, 1997.
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: May 15, 1997 BY: /s/ Rocco Andriola
Director, President and Chief Financial Officer
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<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Mar-31-1997
<CASH> 1,365,615
<SECURITIES> 000
<RECEIVABLES> 101,048
<ALLOWANCES> 5,444
<INVENTORY> 000
<CURRENT-ASSETS> 1,692,606
<PP&E> 36,490,573
<DEPRECIATION> 13,778,613
<TOTAL-ASSETS> 25,135,341
<CURRENT-LIABILITIES> 926,132
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 23,945,732
<TOTAL-LIABILITY-AND-EQUITY> 25,135,341
<SALES> 000
<TOTAL-REVENUES> 1,197,343
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 1,204,650
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> (7,307)
<INCOME-TAX> 000
<INCOME-CONTINUING> (7,307)
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (7,307)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
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