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 August 31, 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: 0-14342
COMMERCIAL PROPERTIES 4, L.P.
(formerly Hutton/GSH Commercial Properties 4 )
(Exact name of registrant as specified in its charter)
Virginia 11-2711361
(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) 526-3237
(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
August 31, November 30,
Assets 1995 1994
Real estate investments, at cost:
Land $ 2,000,000 $ 2,000,000
Buildings and improvements 17,845,860 17,678,184
19,845,860 19,678,184
Less accumulated depreciation (7,142,734) (6,447,519)
12,703,126 13,230,665
Cash and cash equivalents 814,838 711,460
Restricted cash 654,290 424,788
Rent receivable, net of allowance for
doubtful accounts of $16,989 in 1994 88,797 67,880
Prepaid expenses, net of accumulated
amortization of $300,917 in 1995 and
$259,614 in 1994 505,768 506,966
Deferred rent receivable 405,531 373,893
Other assets, net of accumulated
amortization of $32,037 in 1995 and
$18,580 in 1994 204,661 209,493
Total Assets $ 15,377,011 $ 15,525,145
Liabilities and Partners' Capital
Liabilities:
Mortgage note payable $ 2,811,425 $ 2,899,294
Accrued interest payable 18,157 18,725
Accounts payable and accrued expenses 342,115 421,279
Due to affiliates 3,768,685 3,600,702
Total Liabilities 6,940,382 6,940,000
Partners' Capital (Deficit):
General Partners (141,612) (140,127)
Limited Partners 8,578,241 8,725,272
Total Partners' Capital 8,436,629 8,585,145
Total Liabilities and Partners'
Capital $ 15,377,011 $ 15,525,145
Consolidated Statements of Operations
Three months ended Nine months ended
August 31, August 31,
Income 1995 1994 1995 1994
Rent $ 698,272 $ 839,687 $ 1,936,428 $ 2,484,106
Interest 14,432 3,621 38,494 11,007
Other income - - - 9,208
Total Income 712,704 843,308 1,974,922 2,504,321
Expenses
Property operating 314,332 492,251 897,533 1,456,400
Depreciation and
amortization 266,699 421,516 797,493 1,208,133
Interest 107,497 337,719 324,205 955,872
General and administrative 23,515 37,439 104,207 115,145
Bad debt expense - - - 7,941
Provision for loss on
property held for sale - 2,213,393 - 2,213,393
Total Expenses 712,043 3,502,318 2,123,438 5,956,884
Gain (loss) before minority
interest 661 (2,659,010) (148,516) (3,452,563)
Minority interest - (5,708) - (16,254)
Net Gain (Loss) $ 661 $ (2,664,718) $ (148,516) $ (3,468,817)
Net Gain (Loss) Allocated:
To the General Partners $ 7 $ (26,647) $ (1,485) $ (34,688)
To the Limited Partners 654 (2,638,071) (147,031) (3,434,129)
$ 661 $ (2,664,718) $ (148,516) $ (3,468,817)
Per limited partnership
unit (56,341 outstanding) $ .01 $ (46.82) $ (2.61) $ (60.95)
Consolidated Statement of Partners' Capital (Deficit)
For the nine months ended August 31, 1995
General Limited
Partners Partners Total
Balance at November 30, 1994 $ (140,127) $ 8,725,272 $ 8,585,145
Net loss (1,485) (147,031) (148,516)
Balance at August 31, 1995 $ (141,612) $ 8,578,241 $ 8,436,629
Consolidated Statements of Cash Flows
For the nine months ended August 31, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net loss $ (148,516) $ (3,468,817)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 797,493 1,208,133
Provision for loss on property held for sale - 2,213,393
Minority interest - 16,254
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Restricted cash (229,502) (3,811)
Rent receivable (20,917) 93,045
Prepaid expenses and other assets (96,248) (197,633)
Deferred rent receivable (31,638) (104,308)
Accrued interest payable (568) 267,944
Accounts payable and accrued expenses (79,164) 456,804
Due to affiliates 167,983 163,955
Net cash provided by operating activities 358,923 644,959
Cash Flows from Investing Activities:
Additions to real estate (167,676) (578,908)
Net cash used for investing activities (167,676) (578,908)
Cash Flows from Financing Activities:
Mortgage principal payments (87,869) (72,530)
Net cash used for financing activities (87,869) (72,530)
Net increase (decrease) in cash and cash
equivalents 103,378 (6,479)
Cash and cash equivalents at beginning
of period 711,460 121,347
Cash and cash equivalents at end of
period $ 814,838 $ 114,868
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the period for interest $ 166,276 $ 571,795
Supplemental Disclosure of NonCash
Investing Activity
Write off of fully depreciated tenant
improvements during first quarter $ - $ 66,726
Notes to 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 financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of August 31, 1995 and the results of operations for the three and
nine months ended August 31, 1995 and 1994, cash flows for the nine months
ended August 31, 1995 and 1994 and the statement of changes in partners'
capital (deficit) for the nine months ended August 31, 1995. Results of
operations for the periods are not necessarily indicative of the results to be
expected for the full year.
No significant events have occurred subsequent to fiscal year 1994, 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
Since the full amount of units offered was not sold, insufficient funds were
raised to meet the Partnership's commitments with respect to the acquisition
and lease-up of the properties. In order to meet these commitments, the
General Partners have postponed reimbursements of certain fees and expenses.
Funds made available by deferring payment of the acquisition fee at Reflections
at Deerwood Center ("Reflections") have been fully distributed to the Limited
Partners as cash distributions. Cash flow from operations is currently being
utilized primarily to make payments on the principal balance of the mortgage
secured by Crosswest Office Center ("Crosswest") or held in escrow to fund
future mortgage payments as well as tenant improvements at the Property. As a
result, cash distributions are not currently being paid to investors and no
further cash distributions will be made until the Partnership is generating
sufficient cash flow in excess of these requirements.
On November 30, 1994, Reflections was sold and proceeds from the sale, after
payment of Reflections' outstanding mortgage balance and closing costs, were
added to the Partnership's cash reserves.
The Partnership had cash and cash equivalents at August 31, 1995 of $814,838
compared with $711,460 at November 30, 1994. The increase of $103,378 is
primarily attributable to net cash provided by operations exceeding real estate
additions and mortgage principal payments. At August 31, 1995, the Partnership
had a restricted cash balance of $654,290 compared with $424,788 at November
30, 1994. The restricted cash balance at August 31, 1995 consisted of $164,642
reserved to fund real estate taxes at Crosswest and $489,648, representing the
building lockbox escrow, which was set up during the fourth quarter of 1993,
pursuant to Crosswest's amended loan agreement. The Partnership's cash
balance, along with funds generated by operating activities, is expected to
provide sufficient liquidity to enable the Partnership to meet its operating
expenses.
Accounts payable and accrued expenses decreased to $342,115 at August 31, 1995
from $421,279 at November 30, 1994, due primarily to lower accrued property
expenses and the timing of payments for building improvements and leasing
commissions.
Results of Operations
Partnership operations resulted in net income of $661 and a net loss of
$148,516 for the three and nine months ended August 31, 1995, respectively,
compared with net losses of $2,664,718 and $3,468,817 for the corresponding
periods in 1994. The lower net loss for the nine-month period and the change
from net loss to net income for the three-month period in 1995, is primarily
attributable to the sale of Reflections on November 30, 1994. Net losses
attributable to Crosswest for the three and nine months ended August 31, 1994,
were $75,975 and $311,690, respectively. The lower net loss for the nine-month
period and the change from net loss to net income for the three-month period
related to Crosswest is largely due to higher rental income generated at the
property as a result of increased occupancy and higher renewal base rents in
1995.
Rental income totaled $698,272 and $1,936,428 for the three and nine months
ended August 31, 1995, compared with $839,687 and $2,484,106 for the
corresponding periods in 1994. Rental income of $578,600 and $1,596,156
related to Crosswest for the respective 1994 periods. Rental income at
Crosswest increased in 1995 largely due to increased occupancy and increased
renewal base rents. As of August 31, 1995, Crosswest was 99% leased, compared
with 97% as of August 31, 1994.
Interest income totaled $14,432 and $38,494 for the three and nine months ended
August 31, 1995, compared with $3,621 and $11,007 for the corresponding periods
in 1994. The increases in 1995 reflect the Partnership's higher average cash
balance as well as higher interest rates.
Property operating expenses totaled $314,332 and $897,533 for the three and
nine months ended August 31, 1995, compared with $492,251 and $1,456,400 for
the corresponding periods in the previous year. Property operating expenses
related to Crosswest totaled $316,156 and $928,724 for the corresponding
periods in 1994, and remained largely unchanged in 1995. Depreciation and
amortization expense totaled $266,699 and $797,493 for the three and nine-month
periods ended August 31, 1995, compared with $421,516 and $1,208,133 for the
corresponding periods in 1994. Depreciation and amortization expense of
$273,553 and $779,548 related to Crosswest for the respective 1994 periods.
Interest expense totaled $107,497 and $324,205 for the three and nine months
ended August 31, 1995, compared with $337,719 and $955,872 for the
corresponding periods in 1994. Interest expense of $100,718 and $288,414
related to Crosswest for the respective 1994 periods. The increase in 1995 is
largely due to higher accrued interest on amounts owed to affiliates, resulting
from higher prevailing interest rates in 1995.
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 4, L.P. to
delete any reference to "Hutton."
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 period for which this report was filed.
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 4, L.P.
BY: CP4 REAL ESTATE SERVICES INC.
General Partner
Date: October 16, 1995
BY: /s/Kenneth L. Zakin
Name: Kenneth L. Zakin
Title: Director and President
Date: October 16, 1995
BY: /s/William Caulfield
Name: William Caulfield
Title: Vice President and
Chief Financial Officer
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