13
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
and Exchange Act of 1934
For The Quarter Ended September 30, 2000
Commission File Number 2-96042
CAPITAL BUILDERS DEVELOPMENT PROPERTIES,
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
California 77-0049671
State or other jurisdiction of I.R.S. Employer
organization Identification No.
1130 Iron Point Road, Suite 170, Folsom, California 95630
(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (916)353-0500
Former name, former address and former fiscal year, if changed since
last year:
4700 Roseville Road, Suite 206, North Highlands, California 95660
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 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
<TABLE>
PART 1 - FINANCIAL INFORMATION
Capital Builders Development
Properties
(A California Limited Partnership)
BALANCE SHEETS
<CAPTION>
September 30, December 31,
2000 1999
<S> <C> <C>
ASSETS
Cash and cash equivalents $1,135,259 $23,679
Accounts receivable, net 3,371 58,194
Investment property, held for sale, at
cost, net of accumulated
depreciation and amortization of
$1,470,519 at December 31, 1999 - - - - - 4,514,466
Lease commissions, net of accumulated
amortization of $107,412 at
December 31, 1999 - - - - - 87,948
Other assets, net of accumulated
amortization of $71,538 at
December 31, 1999 - - - - - 79,518
Total assets $1,138,630 $4,763,805
LIABILITIES AND PARTNERS'
CAPITAL/(DEFICIT)
Notes payable $ - - - - - $4,199,057
Loan payable to affiliate - - - - - 104,331
Accounts payable and accrued
liabilities 169,022 489,667
Tenant deposits - - - - - 44,357
Total liabilities $169,022 $4,837,412
Commitments and contingencies
Partners' Capital/(Deficit):
General partner (48,128) (58,560)
Limited partners 1,017,736 (15,047)
Total partners'
capital/(deficit) $969,608 ($73,607)
Total liabilities and partner's
capital/(deficit) $ 1,138,630 $ 4,763,805
See accompanying notes to the financial statements.
</TABLE>
<TABLE>
Capital Builders
Development Properties
(A California Limited
Partnership)
STATEMENTS OF
OPERATIONS
THREE AND NINE MONTHS
ENDED SEPTEMBER 30,
<CAPTION>
2000 1999
Three Nine Three Nine
Months Months Months Months
Ended Ended Ended Ended
<S> <C> <C> <C> <C>
Revenues
Rental and other $145,593 $567,242 $153,801 $403,144
income
Interest income 3,673 4,474 164 1,086
Total revenues 149,266 571,716 153,965 404,230
Expenses
Operating expenses 50,907 126,257 35,258 102,308
Repairs and 15,221 66,164 18,248 63,392
maintenance
Property taxes 9,102 36,873 18,768 45,282
Interest 73,334 304,350 98,926 266,323
General and 21,859 70,881 19,038 66,711
administrative
Depreciation and
amortization 3,036 22,417 10,329 98,041
Total expenses 173,459 626,942 200,567 642,057
Net loss from operations (24,193) (55,226) (46,602) (237,827)
Gain from sale of
investment property 1,098,441 1,098,441 - - - - - - - - -
-
Net income/(loss) 1,074,248 1,043,215 (46,602) (237,827)
Allocated to general
partners 10,742 10,432 (466) (2,378)
Allocated to limited
partners $1,063,506 $1,032,783 ($46,136) ($235,449)
Net income/(loss) per
limited partnership unit $77.14 $74.91 ($3.35) ($17.08)
Average units
outstanding 13,787 13,787 13,787 13,787
See accompanying notes to the financial statements.
</TABLE>
<TABLE>
Capital Builders Development Properties
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER
30,
<CAPTION>
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) $1,043,215) ($237,827)
Adjustments to reconcile net loss
to cash flows used in
operating activities:
Gain from sale of investment property (1,098,441)
Depreciation and amortization 22,417 98,041
Changes in assets and liabilities
Increase in accounts receivable (13,352) (777)
Increase in leasing commissions (45,137) (49,961)
Increase in other assets (714) (4,887)
(Decrease)/Increase in accounts
payable and accrued liabilities (119,118) 92,153
(Decrease)/Increase in tenant
deposits (44,357) 14,316
Net cash used in
operating activities (255,487) (88,942)
Cash flows from investing activities:
Improvements to investment properties (375,651) (169,003)
Net proceeds from sale of building 6,066,821 - - - - -
Net cash provided by/(used in)
investing activities 5,691,170 (169,003)
Cash flows from financing activities:
Payments on notes & loan payables (4,694,123) (321,179)
Proceeds from notes & loan payables 495,066 657,297
Payment of loan fees (20,715) (47,116)
Payment of affiliate loan (109,236) - - - - -
Proceeds on loans payable to affiliate 4,905 - - - - -
Net cash (used in)/provided by
financing activities (4,324,103) 289,002
Net Increase in cash and cash equivalents 1,111,580 31,057
Cash and cash equivalents, beginning of
period 23,679 17,206
Cash and cash equivalents, end of period $1,135,259 $48,263
Supplemental disclosure:
Cash paid for interest $ 304,350 $ 266,323
Non cash investing and financing activity:
Capital improvements financed through
accounts payable and accrued
liabilities $ 132,285 $ 185,675
See accompanying notes to the financial
statements.
</TABLE>
Capital Builders Development Properties
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
ORGANIZATION
A summary of the significant accounting policies applied in the
preparation of the accompanying financial statements follows:
Basis of Accounting
The financial statements of Capital Builders Development Properties
(The "Partnership") are prepared on the accrual basis and therefore
revenue is recorded as earned and costs and expenses are recorded as
incurred. As of August 18, 2000, the Partnership adopted a plan to
dissolve the Partnership at which point the partnership changed
their method of accounting to the liquidation basis.
Organization
Capital Builders Development Properties, a California Limited
Partnership, is owned under the laws of the State of California.
The Managing General Partner is Capital Builders, Inc., a California
corporation (CB).
The Partnership is in the business of real estate development and is
not a significant factor in its industry. The Partnership sold its
remaining investment property on August 30, 2000 (see Note 2 for
further discussion).
Accounting Pronouncements
On December 3, 1999, the Securities Exchange Commission staff issued
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial
Statements (SAB 101). SAB 101 summarizes certain of the staff's
views in applying generally accepted accounting principles to revenue
recognition in financial statements. SAB 101 was adopted on January
1, 2000. Management believes the adoption of SAB 101 did not have a
material impact on the financial statements.
Investment Properties
On July 1, 1999, the Partnership's investment property was
reclassified as a long-lived asset to be disposed of, and was
subsequently sold on August 30, 2000 for $6,400,000. After payment
of commissions and closing costs, the net sale proceeds were
$6,066,821. The net sales proceeds less the investment property
adjusted basis resulted in a gain of $1,098,441.
In accordance with Financial Accounting Standard No. 34,
Capitalization of Interest Cost, interest associated with borrowings
used to fund construction in process have been capitalized in the
amount of $28,615 and $-0-, respectively, for the nine months ended
September 30, 2000 and 1999.
Other Assets
Included in other assets are loan fees, which are amortized over the
life of the related note.
Lease Commissions
Lease commissions are no longer amortized over the related lease
terms due to being an intangible directly related to the investment
property, which was classified as held for sale, and subsequently
sold on August 30, 2000.
Income Taxes
The Partnership does not provide for income taxes since all income
or losses are reported separately on the individual partners' tax
returns.
Revenue Recognition
Rental income is recognized on a straight-line basis over the life
of the lease, which may differ from the scheduled rental payments.
Net Income/(Loss) per Limited Partnership Unit
The net income/(loss) per Limited Partnership unit is computed based
on the weighted average number of units outstanding of 13,787 during
the periods ending September 30, 2000 and 1999.
Statement of Cash Flows
For purposes of the statements of cash flows, the Partnership
considers all short-term investments with a maturity, at date of
purchase, of three months or less to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
NOTE 2 - LIQUIDITY / Distribution of Sales Proceeds
On August 30, 2000, the Partnership's investment property was sold
for a sales price of $6,400,000, and a plan to dissolve the
Partnership was adopted. The net proceeds to the Partnership after
sales commissions and closing costs amounted to $6,066,821. As of
September 30, 2000, the Partnership had paid all of its current
obligations which were due, consisting of $4,803,359 in notes and
affiliate loan payable, $119,118 in accounts payable, and tenant
security deposits of $44,357.
As of September 30, 2000, the Partnership has a remaining cash
balance of $1,135,259. This balance will be used to pay the
Partnership's future obligations of $169,022 (previously contracted
Phase II tenant improvement and construction costs), plus additional
costs incurred during the dissolution of the Partnership.
Management estimates that the remaining cash to be distributed to
the Limited Partners, after all partnership obligations are paid,
will range from $950,000 to $965,000. This distribution is
projected to be made prior to December 31, 2000.
NOTE 3 - RELATED PARTY EXPENSE REIMBURSEMENT AND FEE ARRANGEMENT
The Managing General Partner (Capital Builders, Inc.) and the
Associate General Partners are entitled to reimbursement of expenses
incurred on behalf of the Partnership and property management fees
from the Partnership. The property management fee being charged
prior to sale was 5% of gross rental revenues collected.
All acquisition fees and expenses, all underwriting commissions, and
all offering and organizational expenses which can be paid are
limited to 20% of the gross proceeds from sales of Partnership units
provided the Partnership incurs no borrowing to develop its
properties. However, the Partnership Agreement provided for an
increase to a maximum of 33% of the gross offering proceeds based
upon the total acquisition and development costs, including
borrowing. Since the formation of the Partnership, 27.5% of these
fees were paid to the Partnership's related parties, leaving a
remaining maximum of 5.5% ($379,143) of the gross offering proceeds.
No additional fees (including the subordinated real estate
commissions, the subordinated share of distribution and the
remaining acquisition fees) will be payable based on the sale price
obtained for the assets.
The total management fees paid to the Managing General Partner were
$84,324 (which included deferred fees from prior periods) and $-0-
for the nine months ended September 30, 2000 and 1999, respectively.
Total reimbursement of expenses was $ 65,162 and $67,584,
respectively.
NOTE 4 - INVESTMENT PROPERTIES
The components of the investment property account are as follows:
December 31,
1999
Land $1,353,177
Building and Improvements 3,281,797
Tenant Improvements 577,747
Construction in Progress 772,264
Investment properties, at cost 5,984,985
Less: accumulated depreciation
and amortization -0- (1,470,519)
Investment property, net $ -0- $4,514,466
NOTE 5 - LOAN PAYABLE TO AFFILIATE
The loan payable at December 31, 1999 represents funds advanced to
the Partnership from Capital Builders, Inc. (General Partner).
These funds were utilized to cover negative cash flow from
operations. The loan bore interest at approximately the same rate
charged to the Partnership by a bank for other borrowings (9.25% as
of August 30, 2000) and was payable upon demand. The Partnership
paid this loan and all secured unpaid interest in full on August 30,
2000. Accrued interest of $13,650 and $7,154 was incurred for the
periods ending September 30, 2000 and December 31, 1999,
respectively.
NOTE 6 - NOTES PAYABLE
Notes Payable consist of the following:
Sept. 30, Dec. 31,
2000 1999
Mini-permanent loan with a fixed interest
rate of 9.25%, required monthly principal
and interest payments of $28,689, which
was sufficient to amortize the loan over
25 years. The loan was due April 1,
2002. The note was collateralized by a
First Deed of Trust on Phase I land,
buildings and improvements, and was
guaranteed by the General Partner. $ -0- $3,242,885
Construction loan in the amount of
$1,123,000, which accrued interest at
Prime +1% (Prime as of August 30, 2000
was 9.5%). Interest accrued monthly on
the outstanding balance of the cumulative
construction loan draws. The Note
provided for future draws for con-
struction costs. This loan was secured
by a First Deed of Trust on Phase II land
and improvements, and was guaranteed by
the General Partner. -0- 616,172
A construction loan in the amount of
$190,000 which was due March 1, 2001.
The note required interest only payments
and bore interest at 13.5%. The note was
a Second Deed of Trust on Phase II land
and improvements. A restricted cash
reserve balance was required to be
maintained to service monthly payments
until October 31, 2000. The restricted
cash balance on December 31, 1999 was
$19,362. -0- 190,000
Interim tenant improvement/leasing
commission loan of $150,000 due March 1,
2000, which was paid in full. The note
required interest only payments and bore
interest at 15%. The note was secured by
a Second Deed Of Trust on Plaza de Oro's
Phase I land and improvements. -0- 150,000
Total Notes Payable $ -0- $4,199,057
NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Partnership
in estimating it's fair value disclosures for financial instruments.
Notes payable
The fair value of the Partnership's notes payable are estimated
based on the quoted market prices for the same or similar
issues or on the current rates offered to the Partnership for
debt of the same remaining maturities.
The estimated fair values of the Partnership's financial instruments
are as follows:
December 31,1999
Carrying Estimated
Amount Fair Value
Liabilities
Loan payable
to affiliate $104,331 $104,331
Note payable $3,242,885 $3,242,885
Note payable $616,172 $616,172
Note payable $190,000 $190,000
Note payable $150,000 $150,000
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Partnership is not involved in any litigation.
NOTE 9 - PROSPECTIVE ACCOUNTING PRONOUNCEMENTS
Accounting for Derivative Instruments and Hedging Activity
In June 1998, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133 as
amended is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. Management believes that the
adoption of SFAS No. 133 will not have a material impact on the
financial statements due to the Partnership's inability to invest in
such instruments as stated in the Partnership agreement.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership commenced operations on September 19, 1985 upon the
sale of the minimum number of Limited Partnership Units. The
Partnership's initial source of cash was from the sale of Limited
Partnership Units. Through the offering of Units, the Partnership
raised $6,893,500 (represented by 13,787 Limited Partnership Units).
Cash generated from the sale of Limited Partnership Units was used
to acquire land and for the development of a mixed use commercial
project and a 60% interest in a commercial office project.
During the nine months ended September 30, 2000, cash increased by
$1,111,580. This was primarily the result of net cash provided by
the sale of the Partnership's final investment property.
During the third quarter, the Partnership sold its investment
property and paid all of its current obligations. The remaining cash
from sales proceeds, less any remaining Partnership obligations and
expenses, is projected to be distributed prior to the end of the
fourth quarter.
Results of Operations
During the nine months ended September 30, 2000 as compared to
September 30, 1999, the Partnership's total revenues increased by
$167,486 (41.4%), while its expenses decreased by $15,115 (2.4%), all
resulting in a decrease in net loss from operations of $182,601.
The increase in revenues is due to the increase in occupancy to 93%
from 85% at August 30, 2000 (date investment property was sold) and
September 30, 1999, respectively. Additionally, Phase II began
providing rental income during the second quarter of 2000.
Total expenses decreased for the nine months ended September 30, 2000
as compared to September 30, 1999, due to the net effect of:
a) $23,949 (23.4%) increase in operating expenses due to higher
utility costs incurred for the office building due to an increase in
occupancy;
b) $38,027 (14.3%) increase in interest due to interest incurred
for additional borrowings for Phase II and the additional operating
loan, plus interest accrued on the affiliate loan; and
c) $75,624 (77.1%) decrease in depreciation and amortization due to
depreciation no longer being taken subsequent to the second quarter
1999, as the Partnership's property had been reclassified as a long
lived asset to be disposed of.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
The Partnership does not have a material market risk due to
financial instruments held by the Partnership.
PART II - OTHER INFORMATION
Item 1 - Legal Proceeding
The Partnership is not a party to, nor is
the Partnership's property the subject of, any
material pending legal proceedings.
Item 2 - Not applicable
Item 3 - Not applicable
Item 4 - Not applicable
Item 5 - Not applicable
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - dated August 30, 2000
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has dully caused this report to be signed on its
behalf by the undersigned, hereunto dully authorized.
CAPITAL BUILDERS DEVELOPMENT PROPERTIES
a California Limited Partnership
By: Capital Builders, Inc.
Its Corporate General Partner
Date: November 7, 2000 By:
Michael J. Metzger
President
Date: November, 2000 By:
Kenneth L. Buckler
Chief Financial Officer
