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 May 31, 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: 0-14342
COMMERCIAL PROPERTIES 4, L.P.
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Exact Name of Registrant as Specified in its Charter
Virginia 11-2711361
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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
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 May 31, At November 30,
1996 1995
Assets
Real estate, at cost:
Land $ 2,000,000 $ 2,000,000
Building and improvements 18,061,259 18,027,287
20,061,259 20,027,287
Less accumulated depreciation (7,858,256) (7,380,618)
12,203,003 12,646,669
Cash and cash equivalents 1,410,217 859,541
Restricted cash 505,999 769,775
Rent receivable 100,293 90,685
Prepaid expenses, net of accumulated
amortization of $361,532 in 1996
and $330,548 in 1995 511,882 449,064
Deferred rent receivable 386,960 401,144
Other assets, net of accumulated amortization
of $45,494 in 1996 and $36,523 in 1995 191,204 200,176
Total Assets $15,309,558 $15,417,054
Liabilities and Partners' Capital
Liabilities:
Mortgage note payable $ 2,718,316 $ 2,780,986
Accrued interest payable 17,556 17,961
Accounts payable and accrued expenses 320,189 423,101
Due to affiliates 3,982,967 3,844,167
Total Liabilities 7,039,028 7,066,215
Partners' Capital (Deficit):
General Partners (132,274) (135,482)
Limited Partners (56,341 units outstanding) 8,402,804 8,486,321
Total Partners' Capital 8,270,530 8,350,839
Total Liabilities and Partners'
Capital $15,309,558 $15,417,054
Consolidated Statement of Partners' Capital (Deficit)
For the six months ended May 31, 1996
General Limited
Partners Partners Total
Balance at November 30, 1995 $ (135,482) $8,486,321 $8,350,839
Net income (loss) 3,208 (83,517) (80,309)
Balance at May 31, 1996 $ (132,274) $8,402,804 $8,270,530
Consolidated Statements of Operations
Three months ended May 31, Six months ended May 31,
1996 1995 1996 1995
Income
Rental $ 667,143 $ 613,247 $1,329,290 $1,238,156
Interest 19,078 12,950 37,497 24,062
Total income 686,221 626,197 1,366,787 1,262,218
Expenses
Property operating 287,424 302,608 608,815 583,201
Depreciation and
amortization 275,381 266,848 551,861 530,794
Interest expense 102,216 109,069 208,203 216,708
General and
administrative 37,742 37,918 78,217 80,692
Total expenses 702,763 716,443 1,447,096 1,411,395
Net Loss $ (16,542) $ (90,246) $ (80,309) $ (149,177)
Net Income (Loss)
Allocated:
To the General
Partners $ 1,719 $ (903) $ 3,208 $ (1,492)
To the Limited
Partners (18,261) (89,343) (83,517) (147,685)
$ (16,542) $ (90,246) $ (80,309) $ (149,177)
Per limited
partnership unit
(56,341 outstanding) $(.32) $(1.58) $(1.48) $(2.62)
Consolidated Statements of Cash Flows
For the six months ended May 31, 1996 1995
Cash Flows From Operating Activities
Net loss $ (80,309) $ (149,177)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 481,461 462,538
Amortization 70,400 68,256
Increase (decrease) in cash arising from
changes in operating assets and liabilities
Restricted cash 263,776 (40,791)
Rent receivable (9,608) (10,770)
Prepaid expenses and other assets (124,246) (123,268)
Deferred rent receivable 14,184 (27,969)
Accrued interest payable (405) (18,725)
Accounts payable and accrued expenses (134,936) (77,179)
Due to affiliates 138,800 108,739
Net cash provided by operating activities 619,117 191,654
Cash Flows From Investing Activities
Tenant reimbursements for improvements 36,390 -
Additions to real estate (42,161) (159,019)
Net cash used for investing activities (5,771) (159,019)
Cash Flows From Financing Activities
Mortgage principal payments (62,670) (67,900)
Net cash used for financing activities (62,670) (67,900)
Net increase (decrease) in cash 550,676 (35,265)
Cash and cash equivalents, beginning of period 859,541 711,460
Cash and cash equivalents, end of period $1,410,217 $ 676,195
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest $ 106,759 $ 129,768
Supplemental Disclosure of Non-Cash Investing
Activities
Tenant improvements funded through accounts
payable $ 32,024 $ -
Write-off of fully depreciated tenant
improvements $ 3,823 $ -
Notes to the Consolidated Financial Statements
- ----------------------------------------------
The unaudited financial statements should be read in conjunction with the
Partnership's annual 1995 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 May 31, 1996 and the results of operations for the three and six
months ended May 31, 1996 and 1995, and cash flows for the six months ended May
31, 1996 and 1995, and the statement of changes in partners' capital (deficit)
for the six months ended May 31, 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
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 reimbursement of certain fees and expenses.
Cash flow from operations is being utilized to service the mortgage debt
secured by Crosswest Office Center ("Crosswest"). Pursuant to the terms of the
mortgage loan, cash flow in excess of debt service is held in escrow to fund
future leasing and capital obligations. 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.
The Partnership had cash and cash equivalents at May 31, 1996 of $1,410,217,
compared with $859,541 at November 30, 1995. The increase is primarily
attributable to net cash from operating activities exceeding debt service and
additions to real estate. At May 31, 1996, the Partnership also had a
restricted cash balance of $505,999 compared with $769,775 at November 30,
1995. The decrease reflects the transfer of funds from the building lockbox
escrow account to the Partnership's operating cash account, pursuant to the
terms of the mortgage agreement, in addition to the payment of local real
estate taxes. The restricted cash balance at May 31, 1996 consisted of $40,582
reserved to fund real estate taxes at Crosswest, $425,504 representing the
building lockbox escrow and security deposits of $39,913. Accounts payable and
accrued expenses totaled $320,189 at May 31, 1996 compared with $423,101 at
November 30, 1995. The decrease is primarily attributable to the timing of
payments and required accruals. The Partnership's cash balance, along with
funds generated by operating activities, are expected to provide sufficient
liquidity to enable the Partnership to meet its operating expenses.
At Crosswest Office Center, during the 1996 second quarter, the General
Partners executed a new five-year lease with a tenant for 2,394 square feet.
Additionally, a lease with a tenant, occupying 2,240 square feet, scheduled to
expire in October 1996, was extended for two and a half years. Two leases
representing 1,296 square feet are scheduled to expire during the remainder of
the 1996.
Results of Operations
Partnership operations resulted in a net loss of $16,542 and $80,309, including
depreciation and amortization, for the three and six months ended May 31, 1996,
respectively, compared with a net loss of $90,246 and $149,177 for the three
and six months ended May 31, 1995, respectively. The lower losses for the 1996
periods are primarily attributable to an increase in rental income.
Rental income totaled $667,143 and $1,329,290 for the three and six months
ended May 31, 1996, respectively, compared with $613,247 and $1,238,156 for the
three and six months ended May 31, 1995, respectively. The higher rental
income in 1996 is largely due to an increase in base rent resulting from higher
occupancy and increased rental rates, partially offset by a decrease in
deferred rent. Interest income totaled $19,078 and $37,497 for the three and
six months ended May 31, 1996 compared with $12,950 and $24,062 for the
comparable periods in 1995. The increases reflect the Partnership's higher
cash balance for the 1996 periods.
Property operating expenses were relatively unchanged and totaled $287,424 and
$608,815 for the three and six months ended May 31, 1996, respectively,
compared with $302,608 and $583,201 for the comparable periods in 1995.
As of May 31, 1996, Crosswest was 100% leased, compared to 97% as of May
31,1995.
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 March 15, 1996, based upon, among
other things, the advice of Partnership counsel, Skadden, Arps,
Slate, Meagher & Flom, the General Partner adopted a resolution
that states, among other things, if a Change of Control (as
defined below) occurs, the General Partner may distribute the
Partnership's cash balances not required for its ordinary
course day-to-day operations. "Change of Control" means any
purchase or offer to purchase more than 10% of the Units that
is not approved in advance by the General Partner. In
determining the amount of the distribution, the General Partner
may take into account all material factors. In addition, the
Partnership will not be obligated to make any distribution to
any partner and no partner will be entitled to receive any
distribution until the General Partner has declared the
distribution and established a record date and distribution
date for the distribution. The Partnership filed a Form 8-K
disclosing this resolution on March 21, 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 4, L.P.
BY: CP4 REAL ESTATE SERVICES INC.
General Partner
Date: July 15, 1996 BY: /s/ Kenneth L. Zakin
Director and President
Date: July 15, 1996 BY: /s/William Caulfield
Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> May-31-1996
<CASH> 1,410,217
<SECURITIES> 000
<RECEIVABLES> 100,293
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 20,061,259
<DEPRECIATION> (7,858,256)
<TOTAL-ASSETS> 15,309,558
<CURRENT-LIABILITIES> 337,745
<BONDS> 2,718,316
<COMMON> 000
000
000
<OTHER-SE> 8,270,530
<TOTAL-LIABILITY-AND-EQUITY> 15,309,558
<SALES> 1,329,290
<TOTAL-REVENUES> 1,366,787
<CGS> 000
<TOTAL-COSTS> 608,815
<OTHER-EXPENSES> 630,078
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 208,203
<INCOME-PRETAX> (80,309)
<INCOME-TAX> 000
<INCOME-CONTINUING> (80,309)
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (80,309)
<EPS-PRIMARY> (1.48)
<EPS-DILUTED> (1.48)
</TABLE>
