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, 1999
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or
Transition Report Pursuant to Section 13 or 15(d) of
- ---------- the Securities Exchange Act of 1934
For the Transition period from to
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Commission File Number: 0-13341
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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
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
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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
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<PAGE>
2
COMMERCIAL PROPERTIES 3, L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
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CONSOLIDATED BALANCE SHEETS
At March 31, At December 31,
1999 1998
(unaudited) (audited)
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<S> <C> <C>
Assets
Real estate assets held for disposition $14,586,196 $22,429,538
Cash and cash equivalents 14,295,907 2,246,926
Restricted cash 47,169 143,536
Accounts and rent receivable, net of allowance
for doubtful accounts of $5,444 in 1999
and 1998 22,147 136,156
Prepaid expenses and other assets 24,577 51,093
- -------------------------------------------------------------------------------
Total Assets $28,975,996 $25,007,249
===============================================================================
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 523,803 $ 512,546
Due to affiliates 101,898 47,930
Prepaid rent 33,069 --
Security deposits 102,044 240,423
-----------------------------
Total Liabilities 760,814 800,899
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Minority interest 688,047 605,691
-----------------------------
Partners' Capital (Deficit):
General Partners (216,538) (255,803)
Limited Partners (109,378 units outstanding) 27,743,673 23,856,462
-----------------------------
Total Partners' Capital 27,527,135 23,600,659
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Total Liabilities and Partners' Capital $28,975,996 $25,007,249
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
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CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(UNAUDITED)
For the three months ended March 31, 1999
General Limited
Partners Partners Total
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<S> <C> <C> <C>
Balance at December 31, 1998 $(255,803) $23,856,462 $23,600,659
Net Income 39,265 3,887,211 3,926,476
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Balance at March 31, 1999 $(216,538) $27,743,673 $27,527,135
===============================================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
3
COMMERCIAL PROPERTIES 3, L.P.
AND CONSOLIDATED VENTURES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended March 31,
1999 1998
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<S> <C> <C>
Income
Rent $1,051,499 $1,382,802
Interest 127,385 17,937
--------------------------
Total Income 1,178,884 1,400,739
- -------------------------------------------------------------------------------
Expenses
Property operating 454,746 579,272
Depreciation and amortization -- 547,152
General and administrative 291,947 89,929
--------------------------
Total Expenses 746,693 1,216,353
--------------------------
Income before minority interest
and gain on sale of real estate 432,191 184,386
--------------------------
Minority interest (82,356) (28,060)
Income before gain on sale of real estate 349,835 156,326
Gain on sale of real estate 3,576,641 --
- -------------------------------------------------------------------------------
Net Income $3,926,476 $ 156,326
===============================================================================
Net Income Allocated:
To the General Partners $ 39,265 $ 1,563
To the Limited Partners 3,887,211 154,763
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$3,926,476 $ 156,326
===============================================================================
Per limited partnership unit
(109,378 outstanding) $ 35.54 $ 1.41
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</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE>
4
COMMERCIAL PROPERTIES 3, L.P.
AND CONSOLIDATED VENTURES
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the three months ended March 31,
1999 1998
- -------------------------------------------------------------------------------
Cash Flows From Operating Activities
Net income $ 3,926,476 $ 156,326
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interest 82,356 28,060
Depreciation and amortization -- 547,152
Gain on sale of real estate (3,576,641) --
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Restricted cash 96,367 3,684
Accounts and rent receivable, net 114,009 (62,169)
Deferred rent receivable -- 36,787
Prepaid leasing costs and other assets 26,516 (31,711)
Accounts payable and accrued expenses 11,257 (1,767)
Due to affiliates 53,968 (2,774)
Distribution payable -- 225,522
Prepaid rent 33,069 (58,937)
Security deposits payable (138,379) (684)
---------------------------
Net cash provided by operating activities 628,998 839,489
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Cash Flows From Investing Activities
Proceeds from sale of real estate 11,526,382 --
Additions to real estate (106,399) (226,070)
---------------------------
Net cash provided by (used for)
investing activities 11,419,983 (226,070)
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Cash Flows From Financing Activities
Cash distributions -- (563,804)
---------------------------
Net cash used for financing activities -- (563,804)
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Net increase in cash and cash equivalents 12,048,981 49,615
Cash and cash equivalents, beginning of period 2,246,926 1,273,014
- -------------------------------------------------------------------------------
Cash and cash equivalents, end of period $14,295,907 $1,322,629
===============================================================================
See accompanying notes to the consolidated financial statements.
<PAGE>
5
COMMERCIAL PROPERTIES 3, L.P.
AND CONSOLIDATED VENTURES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The unaudited interim financial statements should be read in conjunction with
Commercial Properties 3, L.P.`s (the "Partnership")'s annual 1998 audited
consolidated financial statements within Form 10-K.
The unaudited financial statements include all normal and recurring adjustments
which are, in the opinion of management, necessary to present a fair statement
of financial position as of March 31, 1999 and the results of operations and
cash flows for the three months ended March 31, 1999 and 1998 and the statement
of partners' capital (deficit) for the three months ended March 31, 1999.
Results of operations for the period are not necessarily indicative of the
results to be expected for the full year.
The following significant events have occurred subsequent to fiscal year 1998,
which require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
On January 12, 1999, the Partnership sold Quorum II Office Building ("Quorum")
to an unaffiliated partnership, CMD Realty Investment Fund IV, L.P. ("CMD"), for
a selling price of approximately $7,674,000, net of closing adjustments and
selling costs.
On February 9, 1999, the Partnership sold Metro Park Executive Center ("Metro
Park") to an unaffiliated partnership, Triad Properties Holdings, Ft. Myers, LTD
("TPH"), for a selling price of approximately $3,853,000, net of closing
adjustments and selling costs.
On April 14, 1999, the Partnership sold Fort Lauderdale Commerce Center ("Ft.
Lauderdale Commerce Center") to an unaffiliated partnership, Fort Lauderdale
Flexxspace, LTD. ("FLF") for a selling price of approximately $12,548,000, net
of closing adjustments and selling costs.
The selling prices were determined by arm's length negotiations between the
Partnership and the buyers.
The General Partners are currently marketing Three Financial Centre for sale.
While it is anticipated that Three Financial Centre will be sold and the
Partnership dissolved during 1999, there can be no assurance that the sale will
occur within this time frame.
<PAGE>
6
COMMERCIAL PROPERTIES 3, 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
- -------------------------------
On January 12, 1999, the Partnership completed the sale of Quorum to an
unaffiliated partnership, CMD, for a selling price of approximately $7,674,000,
net of closing adjustments and selling costs, resulting in a gain of
approximately $2,956,000, which is reflected in the Partnership's consolidated
statement of operations for the three months ended March 31, 1999.
On February 9, 1999, the Partnership completed the sale of Metro Park to an
unaffiliated partnership, TPH, for a selling price of approximately $3,853,000,
net of closing adjustments and selling costs, resulting in a gain of
approximately $621,000, which is reflected in the Partnership's consolidated
statement of operations for the three months ended March 31, 1999.
On April 14, 1999, the Partnership sold Ft. Lauderdale Commerce Center to an
unaffiliated partnership, FLF, for a selling price of approximately $12,548,000,
net of closing adjustments and selling costs, resulting in a gain of
approximately $3,562,000 which will be reflected in the Partnership's
consolidated operations for the six months ended June 30, 1999.
The selling prices were determined by arm's length negotiations between the
Partnership and the buyers.
The General Partners are currently marketing Three Financial Centre for sale.
While it is anticipated that Three Financial Centre will be sold and the
Partnership dissolved during 1999, there can be no assurance that the sale will
occur within this time frame.
In view of the anticipated sale of the properties, the Partnership's real estate
has been recorded on the Partnership's March 31, 1999 balance sheet as "Real
estate assets held for disposition." Real estate assets held for disposition at
March 31, 1999 totaled $14,586,196.
The Partnership had cash and cash equivalents totaling $14,295,907 at March 31,
1999, compared to $2,246,926 at December 31, 1998. The increase is primarily due
to net cash proceeds from the sale of Quorum and Metro Park. The Partnership
also had restricted cash, which primarily consists of security deposits of
$47,169 at March 31, 1999, down from $143,536 at December 31, 1998, resulting
from the sale of Quorum and Metro Park.
Accounts and rent receivable, net of allowance for doubtful accounts, totaled
$22,147 at March 31, 1999, compared to $136,156 at December 31, 1998. The
increase is mainly due to the timing of rental receipts and the sale of Quorum
and Metro Park.
Prepaid expenses and other assets totaled $24,577 at March 31, 1999, compared to
$51,093 at December 31, 1998. The decrease is due to prepaid insurance expiring
in the current period.
Accounts payable and accrued expenses totaled $523,803 at March 31, 1999,
compared to $512,546 at December 31, 1998. The increase is largely due to the
accrual of legal fees related to the sale of Quorum and Metro Park offset by a
decrease in real estate taxes payable due to the sale of Quorum and Metro Park.
Prepaid rent increased to $33,069 at March 31, 1999, compared to $-0- at
December 31, 1998 primarily due to the timing of rental payments.
<PAGE>
7
COMMERCIAL PROPERTIES 3, L.P.
AND CONSOLIDATED VENTURES
Security deposits totaled $102,044 at March 31, 1999, compared to $240,423 at
December 31, 1998. The decrease is due to the sale of Quorum and Metro Park.
Since inception, the Partnership has paid total cash distributions of $183.81
per original $500 Unit, including $16.00 per Unit in return of capital payments
which have reduced the Unit size from $500 to $484. In consideration of the
Partnership's marketing efforts and the need to fund several capital
improvements at the properties to better position them for sale, quarterly cash
distributions were suspended commencing with the 1998 third quarter distribution
which would have been paid in November. The General Partners intend to
distribute the net proceeds from the sale of Quorum, Metro Park and Ft.
Lauderdale Commerce Center in the second quarter of 1999. 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 a
provision for the Partnership's liabilities and expenses), and dissolve the
Partnership.
Results of Operations
- ---------------------
The Partnership's operations resulted in net income of $3,926,476 for the three
months ended March 31, 1999, compared to a net income of $156,326 in the
corresponding 1998 period. The change is primarily attributable to the gain on
the sale of Quorum and Metro Park and a decrease in depreciation expense due to
the reclassification of the properties as "Real estate assets held for
disposition," offset by higher administrative expenses in 1999.
Rental income totaled $1,051,499 for the three months ended March 31, 1999,
compared to $1,382,802 for the corresponding period a year ago. The decrease is
largely attributable to lower rental income resulting in the sale of Quorum and
Metro Park. Interest income totaled $127,385 for the three months ended March
31, 1999, compared to $17,937 in the corresponding 1998 period. The increase is
primarily attributable to the Partnership's higher average cash balances in 1999
from the proceeds of the sale of Quorum and Metro Park.
Property operating expenses totaled $454,746 for the three months ended March
31, 1999, compared to $579,272 for the same period in 1998. The decrease is
primarily due to the sale of Quorum and Metro Park.
Depreciation and amortization expense totaled $-0- for the three months ended
March 31, 1999, compared with $547,152 for the corresponding period in 1998. The
Partnership suspended depreciation and amortization on July 1, 1998, in
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of."
General and administrative expenses for the three months ended March 31, 1999
totaled $291,947, compared to $89,929 for the same period in 1998. The increase
is primarily due to higher legal fees from the sale of the properties and
marketing fees for the properties.
As of March 31, 1999, lease levels at each of the properties were as follows:
Fort Lauderdale Commerce Center - 88%, and Three Financial Centre - 94%.
<PAGE>
8
COMMERCIAL PROPERTIES 3, L.P.
AND CONSOLIDATED VENTURES
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
-------------------
On January 26, 1999, the Partnership filed a Form 8-K reporting
that on January 12, 1999, the Partnership executed a sale of
Quorum II Office Building.
On February 24, 1999, the Partnership filed a Form 8-K reporting
that on February 9, 1999, the Partnership executed a sale of
Metro Park Executive Center.
On April 25, 1999, the Partnership filed a Form 8-K reporting
that on April 17, 1999, the Partnership executed a sale of Fort
Lauderdale Commerce Center.
<PAGE>
9
COMMERCIAL PROPERTIES 3, 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 3, L.P.
BY: Real Estate Services VII, Inc.
General Partner
Date: May 17, 1999 BY: /s/Michael T. Marron
-----------------------------------------------
Name: Michael T. Marron
Title: Director, President and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Mar-31-1999
<CASH> 14,343,076
<SECURITIES> 000
<RECEIVABLES> 27,591
<ALLOWANCES> 5,444
<INVENTORY> 000
<CURRENT-ASSETS> 14,389,800
<PP&E> 14,586,196
<DEPRECIATION> 000
<TOTAL-ASSETS> 28,975,996
<CURRENT-LIABILITIES> 760,814
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 27,527,135
<TOTAL-LIABILITY-AND-EQUITY> 28,975,996
<SALES> 1,051,499
<TOTAL-REVENUES> 1,178,884
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 746,693
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> 349,835
<INCOME-TAX> 000
<INCOME-CONTINUING> 349,835
<DISCONTINUED> 000
<EXTRAORDINARY> 3,576,641
<CHANGES> 000
<NET-INCOME> 3,926,476
<EPS-PRIMARY> 35.54
<EPS-DILUTED> 35.54
</TABLE>
