United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One) Quarterly Report Pursuant to Section 13 or 15(d) of
X the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 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
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State or Other Jurisdiction of I.R.S. Employer Identification No.
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
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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,
1997 1996
Assets
Property:
Land $5,808,694 $5,808,694
Buildings, building improvements and equipment 31,291,280 30,831,532
37,099,974 36,640,226
Less accumulated depreciation (14,678,758) (13,546,913)
-----------------------------
22,421,216 23,093,313
Cash and cash equivalents 1,253,707 1,228,502
Restricted cash 204,215 232,330
Accounts and rent receivable,
net of allowance for doubtful
accounts of $5,444 in 1997 and 1996 14,037 40,090
Deferred rent receivable 95,491 205,718
Prepaid leasing costs and other assets,
net of accumulated
amortization of $662,216
in 1997 and $805,502 in 1996 686,797 563,611
Total Assets $24,675,463 $25,363,564
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 563,924 $249,517
Due to affiliates 27,312 5,941
Distribution payable 338,282 338,282
Security deposits payable 215,273 215,026
Total Liabilities 1,144,791 808,766
Minority Interest 263,477 263,477
Partners' Capital (Deficit):
General Partners (398,606) (368,069)
Limited Partners (109,378 units outstanding) 23,665,801 24,659,390
Total Partners' Capital 23,267,195 24,291,321
Total Liabilities and Partners' Capital $24,675,463 $ 25,363,564
Consolidated Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1997
General Limited
Partners Partners Total
Balance at December 31, 1996 $(368,069) $24,659,390 $24,291,321
Net loss (93) (9,187) (9,280)
Distributions (30,444) (984,402) (1,014,846)
Balance at September 30, 1997 $(398,606) $23,665,801 $23,267,195
Consolidated Statements of Operations
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
Income
Rent $1,252,692 $1,243,728 $3,552,770 $3,916,969
Interest 20,524 23,105 59,954 53,071
Total Income 1,273,216 1,266,833 3,612,724 3,970,040
Expenses
Property operating 572,948 521,475 1,700,482 1,701,199
Depreciation and
amortization 538,877 518,444 1,553,613 1,556,943
General and
administrative 100,718 58,094 367,909 199,136
Bad debt expense _ 33,361 _ 33,361
Total Expenses 1,212,543 1,131,374 3,622,004 3,490,639
Net Income (Loss) $60,673 $135,459 $(9,280) $479,401
Net Income (Loss)
Allocated:
To the General Partners $607 $1,355 $(93) $4,794
To the Limited Partners 60,066 134,104 (9,187) 474,607
-------------------------------------------------------
$60,673 $135,459 $(9,280) $479,401
Per limited partnership unit
(109,378 outstanding) $.55 $1.23 $(.08) $4.34
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1997 1996
Cash Flows From Operating Activities
Net income (loss) $(9,280) $479,401
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 1,384,932 1,379,191
Amortization 168,681 177,752
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Restricted cash 28,115 6,021
Accounts and rent receivable,net 26,053 (7,321)
Deferred rent receivable 110,227 12,518
Prepaid leasing costs and other assets (291,867) (139,595)
Accounts payable and accrued expenses 314,407 297,552
Due to affiliates 21,371 (10,578)
Security deposits payable 247 638
Net cash provided by operating activities 1,752,886 2,195,579
Cash Flows From Investing Activities
Additions to real estate (712,835) (275,545)
Net cash used for investing activities (712,835) (275,545)
Cash Flows From Financing Activities
Cash distributions (1,014,846) (2,740,368)
Net cash used for financing activities (1,014,846) (2,740,368)
Net increase (decrease) in cash and cash equivalents 25,205 (820,334)
Cash and cash equivalents, beginning of period 1,228,502 2,134,370
Cash and cash equivalents, end of period $1,253,707 $1,314,036
Supplemental Disclosure of Non-Cash Operating Activities:
Write-off of fully amortized leasing costs $311,967 $ _
Supplemental Disclosure of Non-Cash Investing Activities:
Write-off of fully depreciated improvements $253,087 $1,329,448
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 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 September 30, 1997 and the results of operations
for the three and nine months ended September 30, 1997 and 1996,
cash flows for the nine months ended September 30, 1997 and 1996,
and the statement of partner's capital (deficit) for
the nine months ended September 30, 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, or the following material contingencies exist
and requires 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 General Partners have decided to commence marketing efforts
to sell all four of the Partnership's properties. Accordingly,
the Partnership intends to engage real estate brokers to assist
in its marketing efforts. However, there can be no assurance
as to when the properties will be sold, or that any sale, if
completed, will result in a particular price.
The Partnership had cash and cash equivalents totaling
$1,253,707 at September 30, 1997, largely unchanged from
$1,228,502 at December 31, 1996. The Partnership also had
restricted cash, which primarily consisted of security
deposits, of $204,215 at September 30, 1997.
Accounts and rent receivable totaled $14,037 at September 30, 1997,
compared to $40,090 at December 31, 1996. The decrease
is primarily due to the receipt of past due rents from tenants at
Fort Lauderdale Commerce Center and Three Financial Centre.
Deferred rent receivable totaled $95,491 at September 30, 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.
Prepaid leasing costs and other assets, net of accumulated
amortization, totaled $686,797 at September 30, 1997, compared
to $563,611 at December 31, 1996. The increase is largely due
to the payment of leasing commissions in connection with new
and renewal leases.
Accounts payable and accrued expenses totaled $563,924 at
September 30, 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 $27,312 at
September 30, 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."
The Partnership's third quarter cash distribution, in the
amount of $3.00 per Unit, will be paid to limited partners on
or about November 20, 1997 and will be funded from Partnership
operations. In light of the decision to begin marketing all
four properties, the Partnership may need to make capital
improvements to better position the properties for sale. In
order to fund these improvements and maintain adequate cash
reserves, it may be necessary to suspend distributions in the
future. It is important to note, however, that as the
properties are sold, the net sales proceeds will be distributed
to the partners.
As of September 30, 1997, lease levels at each of the
Properties were as follows: Metro Park Executive Center - 83%;
Fort Lauderdale Commerce Center -91%; Three Financial Centre - 92%;
and Quorum II Office Building - 94%.
Results of Operations
Rental income totaled $1,252,692 and $3,552,770 for the three
and nine months ended September 30, 1997, respectively,
compared with $1,243,728 and $3,916,969 for the comparable
periods a year earlier. The decrease for the nine-month period
is largely attributable to lower occupancy at Quorum II Office
Building. Additionally, rental income was higher in 1996 due to
the collection of a lease cancellation fee in 1996, and to the
accounting of rental concessions associated with leasing
activity at Three Financial Centre.
Property operating expenses totaled $572,948 and $1,700,482 for
the three and nine months ended September 30, 1997,
respectively, largely unchanged from $521,475 and $1,701,199
for the comparable 1996 periods. Depreciation and amortization
totaled $538,877 and $1,553,613 for the three and nine months
ended September 30, 1997, respectively, largely unchanged from
$518,444 and $1,556,943 for the comparable periods in 1996.
General and administrative expenses for the three and nine
months ended September 30, 1997, were $100,718 and $367,909,
respectively, compared with $58,094 and $199,136 for the same
periods in 1996. During the 1997 periods, 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
reimbursable to Real Estate Services VII, Inc. and its
affiliates. The increase is also due to higher legal costs
relating to litigation with a tenant at Quorum II and
higher postage and printing costs due to tender offer
activity.
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, 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: November 12, 1997 BY: /s/Jeffrey C. Carter
Director, President and
Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Sept-30-1997
<CASH> 1,253,707
<SECURITIES> 000
<RECEIVABLES> 14,037
<ALLOWANCES> 5,444
<INVENTORY> 000
<CURRENT-ASSETS> 2,254,247
<PP&E> 37,099,974
<DEPRECIATION> 14,678,758
<TOTAL-ASSETS> 24,675,463
<CURRENT-LIABILITIES> 1,144,791
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 23,267,195
<TOTAL-LIABILITY-AND-EQUITY> 24,675,463
<SALES> 000
<TOTAL-REVENUES> 3,612,724
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 3,622,004
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> (9,280)
<INCOME-TAX> 000
<INCOME-CONTINUING> (9,280)
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (9,280)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
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