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, 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: 0-14342
COMMERCIAL PROPERTIES 4, L.P.
Exact Name of Registrant as Specified in its Charter
Virginia
State or Other Jurisdiction of 11-2711361
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
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,
1997 1996
Assets
Real estate, at cost:
Land $ 2,000,000 $ 2,000,000
Building and improvements 18,704,303 18,241,490
20,704,303 20,241,490
Less accumulated depreciation (8,731,442) (8,337,153)
11,972,861 11,904,337
Cash and cash equivalents 1,612,979 1,339,034
Restricted cash 468,927 873,891
Rent receivable 71,781 88,910
Prepaid expenses, net of
accumulated amortization
of $456,183 in 1997 and
$423,728 in 1996 534,356 360,341
Deferred rent receivable 339,495 370,148
Other assets, net of accumulated
amortization of $63,137 in 1997
and $54,165 in 1996 174,031 182,233
Total Assets $ 15,174,430 $ 15,118,894
Liabilities and Partners' Capital (Deficit)
Liabilities:
Mortgage note payable $ 2,573,932 $ 2,653,177
Accrued interest payable _ 17,135
Accounts payable and accrued
expenses 472,502 386,616
Due to affiliates 3,996,741 3,863,561
Total Liabilities 7,043,175 6,920,489
Partners' Capital (Deficit):
General Partners (125,479) (128,928)
Limited Partners
(56,341 units outstanding) 8,256,734 8,327,333
Total Partners' Capital 8,131,255 8,198,405
Total Liabilities and
Partners' Capital $ 15,174,430 $ 15,118,894
Consolidated Statement of Partners' Capital (Deficit)
For the six months ended May 31, 1997
General Limited
Partners Partners Total
Balance at November 30, 1996 $ (128,928) $ 8,327,333 $ 8,198,405
Net income (loss) 3,449 (70,599) (67,150)
Balance at May 31, 1997 $ (125,479) $ 8,256,734 $ 8,131,255
Consolidated Statements of Operations
Three months ended May 31, Six months ended May 31,
1997 1996 1997 1996
Income
Rental $ 669,510 $ 667,143 $ 1,386,328 $ 1,329,290
Interest 19,903 19,078 44,606 37,497
Total Income 689,413 686,221 1,430,934 1,366,787
Expenses
Property operating 300,814 287,424 631,787 608,815
Depreciation and
amortization 274,219 275,381 549,359 551,861
Interest expense 101,154 102,216 201,470 208,203
General and administrative 75,199 37,742 115,468 78,217
Total Expenses 751,386 702,763 1,498,084 1,447,096
Net Loss $ (61,973) $ (16,542) $ (67,150) $ (80,309)
Net Income (Loss) Allocated:
To the General Partners $ 1,156 $ 1,719 $ 3,449 $ 3,208
To the Limited Partners (63,129) (18,261) (70,599) (83,517)
$ (61,973) $ (16,542) $ (67,150) $ (80,309)
Per limited partnership unit
(56,341 outstanding) $(1.12) $(.32) $(1.25) $(1.48)
Consolidated Statements of Cash Flows
For the six months ended May 31, 1997 1996
Cash Flows From Operating Activities:
Net loss $ (67,150) $ (80,309)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 479,255 481,461
Amortization 70,104 70,400
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Restricted cash 404,964 263,776
Rent receivable 17,129 (9,608)
Prepaid expenses and other assets (235,917) (124,246)
Deferred rent receivable 30,653 14,184
Accrued interest payable (17,135) (405)
Accounts payable and accrued expenses (25,295) (96,442)
Due to affiliates 133,180 100,306
Net cash provided by operating activities 789,788 619,117
Cash Flows From Investing Activities:
Tenant reimbursements for improvements _ 36,390
Additions to real estate 547,779) (74,185)
Accounts payable - real estate assets 111,181 32,024
Net cash used for investing activities (436,598) (5,771)
Cash Flows From Financing Activities:
Mortgage principal payments (79,245) (62,670)
Net cash used for financing activities (79,245) (62,670)
Net increase in cash and cash equivalents 273,945 550,676
Cash and cash equivalents, beginning of period 1,339,034 859,541
Cash and cash equivalents, end of period $1,612,979 $1,410,217
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $118,424 $106,759
Supplemental Disclosure of Non-Cash Investing
Activities:
Write-off of fully depreciated tenant improvements $ 84,966 $ 3,823
Notes to the Consolidated Financial Statements
The unaudited financial statements should be read in conjunction
with the Partnership's annual 1996 audited consolidated 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
May 31, 1997 and the results of operations for the three and six
months ended May 31, 1997 and 1996, cash flows for the six months
ended May 31, 1997 and 1996 and the statement of changes in
partners' capital (deficit) for the six months ended May 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, or the following material contingencies exist, which
requires disclosure in this interim report per Regulation S-X,
Rule 10-01, Paragraph (a)(5):
Effective as of December 1, 1996, the Partnership began
reimbursing certain expenses incurred by CP4 Real Estate Services
Inc. and its affiliates in servicing the Partnership to the
extent permitted by the partnership agreement. In prior years,
affiliates of CP4 Real Estate Services Inc. had voluntarily
absorbed these expenses.
Part I, Item 2. Management's Discussion and Analysis of Financial
Condition and Results ofOperations
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 have been fully distributed to the
Limited Partners as cash distributions. Cash flow from
operations is currently being utilized to make payments on the
principal balance of the mortgage secured by the Partnership's
remaining property, Crosswest Office Center ("Crosswest"), or
held in escrow to fund future mortgage payments. It is
anticipated that cash distributions to the partners of the
Partnership will remain suspended for the foreseeable future in
light of these funding needs and the Partnership's decision to
market Crosswest for sale in the third quarter of 1997. Any cash
reserves held by the Partnership at the time of sale will be
distributed together with proceeds resulting from such a sale.
The Partnership had cash and cash equivalents at May 31, 1997 of
$1,612,979 compared with $1,339,034 at November 30, 1996. The
increase is primarily attributable to net cash from operating
activities exceeding real estate additions and mortgage principal
payments. Net cash provided by operating activities totaled
$789,788 for the six months ended May 31, 1997 compared with
$619,117 for the six months ended May 31, 1996. The change
primarily reflects the lower net loss, and the timing of
contributions to and withdrawals from restricted cash. At May
31, 1997, the Partnership had a restricted cash balance of
$468,927 compared with $873,891 at November 30, 1996. The
restricted cash balance at May 31, 1997 consisted of $37,041 in
security deposits, $106,251 reserved to fund real estate taxes at
Crosswest and $325,635 representing the building lockbox escrow
which was set up during the fourth quarter of 1993, pursuant to
Crosswest's amended loan agreement. The decrease is primarily
attributable to the payment in 1997 of invoices for building
improvements related to the first floor renovation. 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.
During the quarter, two tenants at Crosswest increased their
space by 1,135 square feet and 563 square feet, respectively, and
extended their leases. In order to provide space for the 1,135
square foot expansion, the General Partners negotiated an early
termination with a tenant occupying 4,542 square feet, and
collected an early termination penalty. As a result of this
leasing activity, Crosswest was 97% leased as of May 31, 1997.
In addition, negotiations continue with a tenant to renew its
lease for 978 square feet, which expired on May 31, 1997. Four
other leases totaling 3,063 square feet are scheduled to expire
during the remainder of 1997.
Rent receivable at May 31, 1997 was $71,781 compared to $88,910
at November 30, 1996. The decrease is mainly due to the timing
of rental payments. Prepaid expenses at May 31, 1997 was
$534,356 compared to $360,341 at November 30, 1996. The increase
is largely due to the payment of 1997 real estate taxes.
Accrued interest payable at May 31, 1997 was $0 compared to
$17,135 at November 30, 1996. The decrease is due to the timing
of mortgage payments on the mortgage note secured by Crosswest.
Accounts payable and accrued expenses totaled $472,502 at May 31,
1997 compared to $386,616 at November 30, 1996. The increase is
primarily a result of the timing of payments for building
improvements.
Results of Operations
Partnership operations resulted in a net loss of $61,973 and
$67,150, including depreciation and amortization, for the three
and six months ended May 31, 1997, respectively, compared with a
net loss of $16,542 and $80,309 for the three and six months
ended May 31, 1996, respectively. The higher loss for the 1997
three-month period is primarily due to higher general and
administrative expenses. The lower net loss for the 1997 six-
month period is primarily attributable to an increase in rental
income, partially offset by an increase in general and
administrative expenses.
Rental income totaled $669,510 and $1,386,328 for the three and
six months ended May 31, 1997, respectively, compared with
$667,143 and $1,329,290 for the three and six months ended May
31, 1996, respectively. The higher rental income in 1997 is
largely due to an increase in base rents and tenant reimbursable
income. Interest income totaled $19,903 and $44,606 for the
three and six months ended May 31, 1997 compared with $19,078 and
$37,497 for the comparable periods in 1996. The increases
reflect the Partnership's higher cash balance for the 1997
periods.
Property operating expenses totaled $300,814 and $631,787 for the
three and six months ended May 31, 1997, respectively, compared
with $287,424 and $608,815 for the comparable periods in 1996.
The slight increase in the six-month period is primarily due to
higher advertising and cleaning costs.
General and administrative expenses for the three and six months
ended May 31, 1997 were $75,199 and $115,468, respectively,
compared with $37,742 and $78,217, respectively, for the same
periods in 1996. During the 1997 period, certain expenses
incurred by CP4 Real Estate Services Inc., its affiliates, and an
unaffiliated third party service provider in servicing the
Partnership, which were voluntarily absorbed by affiliates of CP4
Real Estate Services Inc. in prior periods, were accrued to be
reimbursed to CP4 Real Estate Services Inc. and its affiliates.
As of May 31, 1997, Crosswest was 97% leased, compared to 100% as
of May 31, 1996. In early 1997 the Partnership began converting
an existing first-floor storage area to usable office space,
thereby expanding the Property's total leasable area by
approximately 6,000 square feet. This project was completed
during the second quarter of 1997 and the General Partners are
marketing this space for lease. This space will be included in
future calculations of the Property's total leasable area and, as
such, the Property's lease level may decline until this space is
leased.
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-month period covered by this
report.
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: July 15, 1997 BY: /s/Mark Marcucci
Director and President
Date: July 15, 1997 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-30-1997
<PERIOD-END> May-31-1997
<CASH> 1,612,979
<SECURITIES> 000
<RECEIVABLES> 71,781
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 1,684,760
<PP&E> 20,704,303
<DEPRECIATION> (8,731,442)
<TOTAL-ASSETS> 15,174,430
<CURRENT-LIABILITIES> 472,502
<BONDS> 2,573,932
<COMMON> 000
000
000
<OTHER-SE> 8,131,255
<TOTAL-LIABILITY-AND-EQUITY> 15,174,430
<SALES> 1,386,328
<TOTAL-REVENUES> 1,430,934
<CGS> 000
<TOTAL-COSTS> 631,787
<OTHER-EXPENSES> 664,827
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 201,470
<INCOME-PRETAX> (67,150)
<INCOME-TAX> 000
<INCOME-CONTINUING> (67,150)
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (67,150)
<EPS-PRIMARY> (1.25)
<EPS-DILUTED> (1.25)
</TABLE>
