UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-14349
COMMERCIAL DEVELOPMENT FUND 85
Exact name of registrant as specified in its charter
Connecticut 06-1141277
State or other jurisdiction of incorporation I.R.S. Employer Identification No.
3 World Financial Center, 29th Floor, New York, New York 10285
Address of principal executive offices zip code
Registrant's telephone number, including area code: (212) 526-3237
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
Title of Class
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 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (x)
Documents Incorporated by Reference:
Portions of Prospectus dated August 9, 1985 filed with the Securities and
Exchange Commission pursuant to rule 424(b) on August 16, 1985 are incorporated
by reference into Parts I, II, III and IV of this report.
Portions of Parts I, II, III and IV are incorporated by reference to the
Partnership's Annual Report to Unitholders for the year ended December 31, 1994
filed as an exhibit under Item 14.
PART I
Item 1. Business
(a) General Development of Business
Commercial Development Fund 85, A Real Estate Limited Partnership (the
"Partnership") was formed on May 20, 1985 under the Uniform Limited Partnership
Act of the State of Connecticut. The Partnership was originally formed to
acquire, own and operate the following three commercial properties (the
"Properties" or individually a "Property"): Oakbrook Corners, a service center
complex located in Atlanta, Georgia; North Pointe, a four-story office building
located in Greensboro, North Carolina; and Atrium I, a five-story atrium office
building located in Mt. Laurel, New Jersey. Oakbrook Corners was sold on
November 20, 1986 for $9,050,000 resulting in net proceeds to the Partnership
of $8,713,538. North Pointe was sold on October 24, 1994 for $4,900,000
resulting in net proceeds to the Partnership of $4,684,491.
On December 3, 1990 and December 6, 1990, Phoenix sent a notice of resignation
as co-General Partner of the Partnership to CDF85 Real Estate Services Inc.
("RE Services" or the "General Partner"), formerly Shearson Lehman Brothers
Real Estate Services I, Inc. (See Item 10. "Certain Matters Involving
Affiliates of RE Services"), the Partnership's other co-General Partner, and to
the Limited Partners, respectively. The effective date of the resignation was
May 4, 1991. As a result of the resignation of Phoenix, RE Services, as sole
General Partner manages the affairs of the Partnership. Details of Phoenix's
withdrawal are incorporated by reference to Note 1 "Organization" of the Notes
to the Financial Statements.
Additional information regarding the historical development of business is
incorporated by reference to Note 1 "Organization" and Note 3 "Real Estate
Investments" of the Notes to the Financial Statements.
(b) Financial Information About Industry Segment
The Partnership's sole business is the ownership and operation of the Property.
All of the Partnership's revenues, operating profits or losses and assets
relate solely to such industry segment.
(c) Narrative Description of Business
Incorporated by reference to Note 1 "Organization" and Note 3 "Real Estate
Investments" of the Notes to the Financial Statements.
(d) Competition
Incorporated by reference to the section entitled Message to Investors on page
1 of the Partnership's Annual Report to Unitholders for the year ended December
31, 1994 filed as an exhibit under Item 14.
(e) Employees
The Registrant has no employees.
Item 2. Properties
Description of Property and discussion of material leases at the Property
incorporated by reference to the section entitled Message to Investors on page
1 in the Partnership's Annual Report to Unitholders for the year ended December
31, 1994, filed as an exhibit under Item 14, and Note 3 "Real Estate
Investments" of the Notes to the Financial Statements.
Item 3. Legal Proceedings
Neither the Registrant nor any of the Properties is subject to any material
pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of Security Holders during the fourth
quarter of 1994.
PART II
Item 5. Market for Registrant's Limited Partnership Units and Related
Unitholder Matters
(a) Market Information
An established public market for Interests does not exist and is not likely to
develop. Furthermore, the transfer of Interests is subject to certain
limitations. Reference is made to the information contained under the caption
"Risk Factors - No Market for Interests" on page 18 and "Summary of the Limited
Partnership Agreement - Transferability of Interests" on pages 73 and 74 of the
Prospectus dated August 9, 1985.
(b) Holders
As of December 31, 1994, there were 2,821 holders of record, owning an
aggregate of 29,000 Units.
(c) Distributions
Cash distributions paid to the Limited Partners for the two years ended
December 31, 1994 incorporated by reference to the section entitled Message to
Investors on page 1 of the Partnership's Annual Report to Unitholders for the
year ended December 31, 1994 filed as an exhibit under Item 14.
Item 6. Selected Financial Data
Incorporated by reference to page 3 of the Partnership's Annual Report to
Unitholders for the year ended December 31, 1994 filed as an exhibit under Item
14.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
As of December 31, 1994, the Partnership had cash and cash equivalents totaling
$1,048,774, compared with $1,062,569 at December 31, 1993. The $13,795
decrease is primarily attributable to the payment of cash distributions and
tenant and building improvements in excess of cash flow from operations and
proceeds from the sale of North Pointe. The cash and cash equivalents balance
includes a working capital reserve to cover anticipated costs associated with
the lease-up of vacant space at Atrium and future capital expenditures.
On October 24, 1994, the partnership sold North Pointe for a gross sales price
of $4,900,000 to Cone Mills, a major tenant occupying 72% of the property's
leasable area. The partnership received proceeds from the sale in the amount
of $4,684,491 net of selling costs. The Partnership recognized a gain on sale
of $216,998.
Accounts receivable decreased $151,089 from the December 31, 1993 balance of
$180,838 to $29,749 at December 31, 1994. The decrease is primarily due to the
receipt of Atrium's 1991 and 1992 tax abatement and the write-off of North
Pointe's outstanding receivable balance. Deferred rent receivable totaled
$298,572 at December 31, 1994 compared with $614,783 at December 31, 1993. The
decrease is primarily attributable to the amortization of rental concessions
included in certain leases at Atrium and the write-off of North Pointe's
deferred rent receivable balance.
Tenant improvement payables were $91,798 at December 31, 1994 as compared to
$36,544 at December 31, 1993. The increase of $55,254 is the result of a
tenant improvement allowance addition at Atrium which will be paid during the
first quarter of 1995.
Cash distributions totalling $190.64 and $40 per Unit were paid for the years
ended December 31, 1994 and 1993. In addition, a cash distribution in the
amount of $3 per unit for the fourth quarter ended December 31, 1994 was paid
to the Limited Partners on February 9, 1995. After reviewing the Partnership's
operations for 1994, the General Partner determined that an adequate cash
reserve exists to fund anticipated tenant improvements and leasing commission
costs associated with leasing efforts at Atrium, and a cash distribution to the
Limited Partners. The timing and amount of future cash distributions, if any,
will be reviewed quarterly by the General Partner. Future cash distributions
may be reduced or suspended in anticipation of significant lease expirations in
1995 at Atrium. In addition, distributions may become more volatile since the
Partnership has only one remaining property.
Results of Operations
1994 Versus 1993
Operations resulted in net income of $304,624 for the year ended December 31,
1994, as compared to $359,224 for the year ended December 31, 1993. The
decrease reflects lower rental and interest income combined with an increase in
total expenses resulting from write-offs related to the sale of North Pointe
and an increase in bad debt expense. The write-offs consisted of deferred rent
receivable and leasing commissions.
Rental income totaled $2,037,817 for the year ended December 31, 1994, compared
with $2,114,886 for the year ended December 31, 1993. The decrease of $77,069
is attributable to the sale of the North Pointe property. Interest and other
income totaled $57,241 and $120,152 for the years ended December 31, 1994 and
1993, respectively. The decrease of $62,911 is attributable to the accrual in
1993 of Atrium's 1991 and 1992 tax abatement refund.
Property operating expenses totaled $1,097,188 at December 31, 1994, as
compared to $1,189,004 for the year ended December 31, 1993. The decrease of
$91,816 is primarily related to the sale of North Pointe. Bad debt expense
totaled $93,786 for the year ended December 31, 1994 reflecting the reserve for
a tenant's outstanding rent receivable balance at North Pointe.
The lease level at Atrium I as of December 31, 1994 was 86%.
1993 Versus 1992
Operations resulted in net income of $359,224 for the year
ended December 31, 1993, slightly higher than $351,075 for the year ended
December 31, 1992.
Rental income totaled $2,114,886 for the year ended December 31, 1993, compared
with $2,039,472 for the year ended December 31, 1992. The increase is largely
attributable to higher occupancy at North Pointe. Tenant expense
reimbursements totaled $158,237 for the year ended December 31, 1993, compared
with $185,953 for the year ended December 31, 1992. The 15% decrease reflects
a reduction in amounts billed to certain tenants in accordance with their lease
terms. Interest income totaled $28,983 and $31,596 for the years ended
December 31, 1993 and 1992, respectively. The decrease is primarily the result
of lower average cash balances maintained by the Partnership during 1993.
Property operating expenses totaled $1,189,004 for the year ended December 31,
1993, largely unchanged from $1,179,367 for the year ended December 31, 1992.
The slight increase is primarily attributable to higher building maintenance
and repair and utilities in 1993. General and administrative expenses totaled
$89,027 for the year end December 31, 1993 and $101,385 in 1992. The 12%
decrease is primarily attributable to a decline in printing costs which
resulted from cost savings due to the implementation of desktop publishing in
1993.
The lease levels at Atrium I and North Pointe as of December 31, 1993 were 86%
and 91%, respectively.
Item 8. Financial Statements and Supplementary Data
Incorporated by reference to pages 4 to 10 of the Partnership's Annual Report
to Unitholders for the year ended December 31, 1994, filed as an exhibit under
Item 14, and page F-1 of this report.
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partner of the Registrant is CDF85 Real Estate Services Inc. ("RE
Services"), formerly Shearson Lehman Brothers Real Estate Services I, Inc., an
affiliate of Lehman Brothers Inc. ("Lehman"). See the section captioned
"Certain Matters Involving Affiliates of RE Services" for a description of the
sale of certain of Shearson Lehman Brothers, Inc. ("Shearson") domestic retail
brokerage and asset management businesses to Smith Barney, Harris Upham & Co.
Incorporated, which resulted in a change in the general partner's name. Brief
descriptions of the business experience of the directors and officers of the
General Partner are provided below. There is no family relationship among any
of the persons currently serving as directors or officers of the General
Partner.
Certain officers and directors of RE Services are now serving (or in the past
have served) as officers and directors of entities which act as general
partners of a number of real estate limited partnerships that have sought
protection under the provisions of the Federal Bankruptcy Code. The
partnerships that have filed bankruptcy petitions own real estate that has been
adversely affected by the economic conditions in the markets in which that real
estate is located and, consequently, the partnerships sought the protection of
bankruptcy laws to protect the partnership's assets from losses through
foreclosure.
The executive officers and directors of RE Services are listed below.
Name Age Office
Kenneth L. Zakin 47 President and Director
William Caulfield 35 Vice President and Chief Financial Officer
Joseph Donaldson 31 Vice President
Kenneth L. Zakin is a Senior Vice President of Lehman Brothers and has held
such title since November 1988. He is currently a senior manager in Lehman
Brothers' Diversified Asset Group and was formerly group head of the Commercial
Property Division of Shearson Lehman Brothers' Direct Investment Management
Group responsible for the management and restructuring of limited partnerships
owning commercial properties throughout the United States. From January 1985
through November 1988, Mr. Zakin was a Vice President of Shearson Lehman
Brothers Inc. Mr. Zakin is a director of Lexington Corporate Properties, Inc.
He is a member of the Bar of the State of New York and previously practiced as
an attorney in New York City from 1973 to 1984 specializing in the financing,
acquisition, disposition, and restructuring of real estate transactions. Mr.
Zakin is currently an associate member of the Urban Land Institute and a member
of the New York District Council Advisory Services Committee. He r eceived a
Juris Doctor degree from St. John's University School of Law in 1973 and a B.A.
degree from Syracuse University in 1969.
William Caulfield is a Vice President of Lehman Brothers and is responsible for
investment management of commercial real estate in the Diversified Asset Group.
Prior to the Shearson/Hutton merger in 1988, Mr. Caulfield was a Senior Analyst
with E.F. Hutton since October 1986 in Hutton's Partnership Administration
Group. Before joining Hutton, Mr. Caulfield was a Business Systems Analyst at
Eaton Corp. from 1985 to 1986. Prior to Eaton, he was an Assistant Treasurer
with National Westminster Bank USA. Mr. Caulfield holds a B.S. degree in
Finance from St. John's University and an M.B.A. from Long Island University.
Joseph Donaldson serves as a Vice President of Lehman Brothers in its
Diversified Asset Group and has held such position since November 1990. From
October 1988 to October 1990, Mr. Donaldson held the position of Assistant
Manager with the Internal Audit Department of Citibank's Investment Bank.
Prior to that, Mr. Donaldson was employed with Price Waterhouse and Company.
Mr. Donaldson received a B.B.A. in accounting from the University of Georgia
and is a Certified Public Accountant.
Certain Matters Involving Affiliates of RE Services
On July 31, 1993, Shearson sold certain of its domestic retail brokerage and
asset management businesses to Smith Barney, Harris Upham & Co. Incorporated
("Smith Barney"). Subsequent to the sale, Shearson changed its name to Lehman
Brothers Inc. The transaction did not affect the ownership of the
Partnership's General Partner. However, the assets acquired by Smith Barney
included the name "Shearson." Consequently, the Shearson Lehman Real Estate
Services I, Inc. general partner changed its name to CDF85 Real Estate Services
Inc. to delete any reference to "Shearson."
Item 11. Executive Compensation
The General Partner and its Affiliates receive certain fees, commissions, and
reimbursements for expenses incurred as provided for on pages 11 through 15 of
the Prospectus under "Management Compensation." See Exhibit 28a incorporated
herein by reference.
The General Partner is entitled to receive a share of cash distributed when and
as cash distributions are made to Limited Partners and a share of taxable
income or loss, and may be reimbursed for certain out-of-pocket expenses. See
"Item 8. Financial Statements and Supplementary Data," and Note 6 of the Notes
to the Financial Statements. The General Partner's share of cash distributions
for 1994 and 1993 was $96,543 and $61,052, respectively. In addition, the
General Partner was entitled to receive various fees and distributions during
the liquidation stages of the Partnership. Descriptions of such fees,
distribution allocations, and reimbursements are contained on pages 11 through
15 of the Prospectus. See Appendix B incorporated herein by reference.
Officers and directors of the General Partner are employees of Lehman and are
not compensated by the Registrant or the General Partner for services rendered
in connection with the Partnership.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Beneficial Owners
No person (including any "group" as that term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934) is known to the Registrant to be the
beneficial owner of more than five percent of the outstanding voting Interests
as of December 31, 1994.
(b) Security Ownership of Management
No General Partner beneficially owned or owned of record directly or indirectly
any Interests as of December 31, 1994. All officers and directors of the
General Partner together owned less than 1% of the outstanding voting Interests
as of December 31, 1994.
(c) Changes in Control
On May 4, 1991, Phoenix resigned as a general partner of the Partnership.
Discussion is incorporated by reference to Item 1. "General Business."
Item 13. Certain Relationships and Related Transactions
(a) Transactions With Management and Others
Incorporated by reference to Note 5 "Transactions with Related Parties" of the
Notes to the Financial Statements under Item 8.
(b) Certain Business Relationships
There have been no business transactions between any of the Directors and the
Partnership.
(c) Indebtedness of Management
No management person is indebted in any amount to the Partnership.
(d) Transactions With Promoters
There have been no transactions with promoters other than as described above in
(a).
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements:
Report of Independent Auditors (1)
Balance Sheets - At December 31, 1994 and 1993 (1)
Statements of Partners' Capital - For the years ended
December 31, 1994, 1993 and 1992 (1)
Statements of Operations - For the years ended
December 31, 1994, 1993 and 1992 (1)
Statements of Cash Flows - For the years ended
December 31, 1994, 1993 and 1992 (1)
Notes to Financial Statements (1)
Schedule II - Valuation and Qualifying Accounts (1)
(1) Incorporated by reference to the Partnership's Annual Report to
Unitholders for the year ended December 31, 1994, which is
filed as an exhibit under Item 14.
(a)(2) Financial Statement Schedules:
Independent Auditors' Report on Schedules F-1
Schedule III - Real Estate and Accumulated Depreciation F-2
No other schedules are presented because the information is not
applicable or is included in the financial state- ments or
notes thereto.
(a)(3) Exhibits:
(3) Agreement of the Limited Partnership of Commercial Development
Fund 85, A Real Estate Limited Partnership as of October 18, 1985.
Reference is made to Exhibit A of the Prospectus (the "Prospectus")
contained in Amendment No.2 to Registrant's Form S-11 Registration
Statement filed with the Securities and Exchange Commission on August
14, 1985 (the "Registration Statement").
(10)(A) Forms of Management Agreements between the Registrant and the
property managers for property management services. Reference is made
to Exhibit 10a to the Registration Statement.
(10)(B) Form of Subscription Agreement. Reference is made to Exhibit B
of the Prospectus.
(10(C) Settlement Statement dated October 24, 1994 regarding sale of
North Pointe.
(13) Annual Report to the Unitholders for the year ended December
31, 1994
(28)(A) Pages 11-15, 18, 73 and 74 of the Prospectus. Reference is
made to Exhibit 28c to Form 10-K filed on March 28, 1991.
(b)(3) Reports on Form 8-K: No reports on Form 8-K were filed during
the fourth quarter of 1994.
------------------------- SIGNATURES -------------------------
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: March 29, 1995
COMMERCIAL DEVELOPMENT FUND 85
BY: CDF85 Real Estate Services Inc.
General Partner
BY: /s/Kenneth L. Zakin
Name: Kenneth L. Zakin
Title: Director and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
CDF85 REAL ESTATE SERVICES INC.
General Partner
Date: March 29, 1995
BY: /s/Kenneth L. Zakin
Kenneth L. Zakin
Director and President
Date: March 29, 1995
BY: /s/ William Caulfield
William Caulfield
Vice President and
Chief Financial Officer
Date: March 29, 1995
BY: /s/ Joseph Donaldson
Joseph Donaldson
Vice President
INDEPENDENT AUDITORS' REPORT ON SCHEDULES
Under date of February 8, 1995 we reported on the balance sheets of Commercial
Development Fund 85 (a Connecticut limited partnership) as of December 31, 1994
and 1993, and the related statements of operations, partners' capital and cash
flows for each of the years in the three-year period ended December 31, 1994,
as contained in the 1994 annual report to unit holders. These financial
statements and our report thereon are incorporated by reference in the annual
report on Form 10-K for the year 1994. In connection with our audits of the
aforementioned financial statements, we also have audited the related financial
statement schedules as listed in the accompanying index. These financial
statement schedules are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statement
schedules based on our audits.
In our opinion, the financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
KPMG Peat Marwick LLP
Boston, Massachusetts
February 8, 1995
COMMERCIAL DEVELOPMENT FUND 85
(A Connecticut limited partnership)
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1994
Initial Cost to Partnership(A)
Buildings and
Description Encumbrances (1) Land Improvements
Office Building:
Atrium I
Mount Laurel, NJ $ - $ 639,650 $ 9,052,712
$ - $ 639,650 $ 9,052,712
COMMERCIAL DEVELOPMENT FUND 85
(A Connecticut limited partnership)
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1994
Cost Capitalized
Subsequent
To Acquisition
Buildings and
Description Improvements Retirement
Office Building:
Atrium I
Mount Laurel, NJ $ 1,153,731 $(1,164,590)
$ 1,153,731 $(1,164,590)
COMMERCIAL DEVELOPMENT FUND 85
(A Connecticut limited partnership)
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1994
Gross Amount at Which Carried at Close of Period (B)
Buildings and Accumulated
Description Land Improvements Total Depreciation
Office Building:
Atrium I
Mount Laurel, NJ $ 639,650 $9,041,853 $9,681,503 $(2,770,841)
$ 639,650 $9,041,853 $9,681,503 $(2,770,841)
COMMERCIAL DEVELOPMENT FUND 85
(A Connecticut limited partnership)
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1994
Life on which
Depreciation
in Latest
Date of Date Income Statements
Description Construction Acquired is Computed
Office Building:
Atrium I
Mount Laurel, NJ 1985 12/30/85 5 - 35 years
(A) The initial cost to the Partnership represents the original purchase price
of the properties.
(B) The aggregate cost of real estate at December 31, 1994, 1993 and 1992, for
Federal Income tax purposes is $10,658,416, $17,762,425 and $18,001,444,
respectively.
A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended December 31, 1994, 1993 and 1992:
Real Estate investments: 1994 1993 1992
Beginning of year $15,589,380 $15,827,049 $15,669,712
Additions 268,479 170,087 157,337
Less Retirements (94,631) (407,756) -
Less North Pointe Sale (6,081,725) - -
End of year $ 9,681,503 $15,589,380 $15,827,049
Accumulated Depreciation:
Beginning of year $3,787,932 $3,506,089 $2,851,083
Depreciation expense 688,254 689,599 655,006
Less Retirements (94,631) (407,756) -
Less North Pointe Sale (1,610,714) - -
End of year $ 2,770,841 3,787,932 $3,506,089
-------------------------
Exhibit (13)
-------------------------
Commercial Development Fund 85
1994 Annual Report to Unitholders
Commercial Development Fund 85 is a limited partnership formed in 1985 to
invest in, own and operate commercial real estate properties. The
Partnership's original investments were comprised of three commercial
properties. Oakbrook Corners, located in Atlanta, Georgia was sold on November
20, 1986. North Pointe, located in Greensboro, North Carolina, was sold on
October 24, 1994 (See Message to Investors for details). The Partnership's
remaining property is Atrium I, a five-story Class A office building containing
96,746 leasable square feet which is located on Route 73 in Mt. Laurel, New
Jersey.
Administrative Inquiries Performance Inquiries/Form 10-Ks
Address Changes/Transfers The Shareholder Services Group
Service Data Corporation P.O. Box 1527
2424 South 130th Circle Boston, Massachusetts 02104-1527
Omaha, Nebraska 68144 Attn: Financial Communications
(800) 223-3464 (800) 223-3464
Contents
1 Message to Investors
3 Financial Highlights
4 Financial Statements
7 Notes to Financial Statements
11 Independent Auditors' Report
12 Net Asset Valuation
MESSAGE TO INVESTORS
The General Partner is pleased to present the 1994 Annual Report for Commercial
Development Fund 85 (the "Partnership"). Included in this report is
information on the sale of North Pointe and a discussion of operations and our
leasing progress at the Partnership's remaining property, Atrium I.
Sale of North Pointe
During the second quarter of 1994, the General Partner received an unsolicited
offer from Cone Mills, a major tenant at North Pointe, to purchase the
property. A sales contract was negotiated and the property was sold on October
24, 1994 for a gross sales price of $4.9 million, an amount closely
approximating its appraised value as of year-end 1993. After closing costs and
adjustments, cash received by the Partnership totaled $4,767,615 and the
Partnership recognized a gain on sale of $216,998. The Partnership retained
$150,000 of the cash received to fund future leasing activity. The Limited
Partners' share of the remaining sales proceeds, totalling $157.64 per Unit,
was distributed on November 28, 1994.
Cash Distributions
For the year ended December 31, 1994, the Partnership paid cash distributions
to the Limited Partners totaling $183.64 per Unit. Included in this total was
the special distribution discussed above, and a fourth quarter cash
distribution of $3.00 per Unit which was paid on February 9, 1995. Since
inception, Limited Partners have received cash distributions totalling $789.68
per Unit, including return of capital payments in the amount of $505.81 per
Unit which reduced each Limited Partner's Unit size from $1,000 to $494.19. The
timing and amount of future distributions will depend on several factors,
including the adequacy of rental income being generated by current leases and
Partnership cash flow. In addition, distributions may become more volatile
since the Partnership has only one remaining property. Information regarding
the payment of cash distributions over the past two years is provided below.
CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- ------
1993 $10.00 $10.00 $10.00 $10.00 $40.00
1994 $10.00 $10.00 $160.64* $3.00 $183.64
* Includes $157.64 in return of capital resulting from the sale of North
Pointe.
Market Overview
Although certain segments of the real estate industry improved during 1994, the
office market continues to lag in the recovery. However, a reduction in rental
concessions and stabilization of rental rates in many markets indicate that the
commercial office segment is beginning to improve. Furthermore, the national
vacancy rate for commercial office space declined to approximately 16% as of
the fourth quarter of 1994, down from approximately 19% for the same period in
1993. It should be noted that the pace and scope of recovery varies markedly
from region to region and certain areas, including Burlington County where
Atrium I is located, continue to experience vacancy rates above the national
average. In addition, real estate values remain depressed and are not expected
to improve until there is a significant increase in rental rates.
Burlington County, southern New Jersey's primary corporate office market,
continues to be adversely impacted by corporate downsizings and business
consolidations. Despite low rental rates and generous concession packages, the
region has been unable to attract tenants. As a result, the vacancy rate for
Burlington County remains higher than the national average at approximately 22%
as of the fourth quarter of 1994, although the rate is down from approximately
23% at year-end 1993. The Partnership's property is located within the Mount
Laurel-Route 73 corridor submarket which, despite being one of the strongest
markets in southern New Jersey, remains highly competitive. The leasing
environment in the Burlington County area is expected to remain challenging as
these competitive conditions are likely to persist throughout 1995.
Property Update - Atrium I
The General Partner successfully signed a number of new and renewal leases in
1994. The most significant renewal was signed with IBM, which originally held
three leases scheduled to expire in March 1996. Per the terms of the renewal,
IBM executed two new leases and reduced their total leasable area from 36,421
square feet to 23,947 square feet. The smaller lease, totalling 6,837 square
feet, is still scheduled to expire in March 1996. However, the larger lease,
totalling 17,110 square feet, has been extended to March 31, 2001. The leases
with IBM generated $469,930 or about 23% of the Partnership's rental revenue in
1994.
Two leases with Navistar Credit Corporation, representing 18,091 square feet or
approximately 18% of the property's leasable area, generated $271,365 or
approximately 13% of the Partnership's 1994 rental revenue. We are pleased to
report that the leases, which were scheduled to expire on December 31, 1994,
were renewed during the fourth quarter of 1994, for 16,018 square feet. The
new leases are scheduled to expire in December 1999.
Additionally, the General Partner executed two new leases, a lease renewal and
two lease extensions with smaller tenants during the year. As a result, the
property was 86% leased at December 31, 1994, unchanged from the previous year.
Summary
In 1995, the General Partner will focus on improving the occupancy and
operating performance of Atrium I. As discussed in this report, the property
has been adversely impacted by the softening of the Burlington County office
market, and the corresponding decline in commercial real estate values. Since
these conditions are not conducive to a sale of the property at this time, the
General Partners' current strategy is to increase the property's occupancy and
maintain its stable tenant roster in order to position the property for
eventual sale, subject to local market conditions. We will update you on our
progress in future investor reports.
Very truly yours,
CDF85 Real Estate Services Inc.
General Partner
/s/Kenneth L. Zakin
Kenneth L. Zakin
President
March 29, 1995
FINANCIAL HIGHLIGHTS
For the years ended December 31,
1994 1993 1992 1991 1990
Total revenues $2,252,436 $2,393,275 $2,353,169 $2,304,821 $2,156,395
Total expenses 2,164,810 2,034,051 2,002,094 2,177,683 2,231,144
Net income (loss) 304,624 359,224 351,075 127,138 (74,749)
Net income (loss)
per Unit 9.09 10.58 10.37 2.78 (4.11)
Cash distributions
per Unit 183.64(1) 40.00 20.00 -- --
Total assets 8,485,545 13,736,201 14,649,014 14,799,015 14,530,912
(1) Includes a $157.64 return of capital payment resulting from the sale of
North Pointe.
* Total revenues were slightly lower in 1994 primarily due to lower
rental income resulting from the sale of North Pointe and lower interest
income.
* Total expenses increased slightly in 1994 despite lower property
operating expenses largely as a result of the write-off of deferred rent and
leasing commissions relating to the sale of North Pointe and bad debt expense
associated with a tenant's outstanding rent receivable at North Pointe.
* The decrease in total assets is due to the sale of North Pointe and
write-off of related assets on October 24, 1994.
Balance Sheets
December 31, 1994 and 1993
Assets 1994 1993
Land $ 639,650 $ 1,706,744
Buildings and personal property 8,038,682 12,295,973
Tenant improvements 1,003,171 1,586,663
9,681,503 15,589,380
Less-accumulated depreciation (2,770,841) (3,787,932)
6,910,662 11,801,448
Cash and cash equivalents 1,048,774 1,062,569
Accounts receivable, net of allowance of
$24,744 in 1993 29,749 180,838
Prepaid expenses, net of accumulated
amortization of $114,635 in 1994
and $54,127 in 1993 197,788 76,563
Deferred rent receivable 298,572 614,783
Total Assets $ 8,485,545 $13,736,201
Liabilities and Partners' Capital
Liabilities:
Accrued expenses $ 76,354 $ 86,197
Due to affiliate 27,127 12,990
Other payables 12,227 2,072
Tenant improvements payable 91,798 36,544
Total Liabilities 207,506 137,803
Partners' Capital:
General Partner 61,579 117,158
Limited Partners (29,000 units outstanding) 8,216,460 13,481,240
Total Partners' Capital 8,278,039 13,598,398
Total Liabilities and Partners' Capital $ 8,485,545 $13,736,201
Statements of Partners' Capital
For the years ended December 31, 1994, 1993, and 1992
General Limited Total
Partners' Partners' Partners'
Balance at December 31, 1991 $ 90,728 $14,323,686 $14,414,414
Net income 50,304 300,771 351,075
Cash distributions (15,263) (290,000) (305,263)
Balance at December 31, 1992 125,769 14,334,457 14,460,226
Net income 52,441 306,783 359,224
Cash distributions (61,052) (1,160,000) (1,221,052)
Balance at December 31, 1993 117,158 13,481,240 13,598,398
Net income 40,964 263,660 304,624
Cash distributions (96,543) (5,528,440) (5,624,983)
Balance at December 31, 1994 $ 61,579 $ 8,216,460 $ 8,278,039
Statements of Operations
For the years ended December 31, 1994, 1993 and 1992
Income 1994 1993 1992
Rental $ 2,037,817 $ 2,114,886 $ 2,039,472
Tenant expense reimbursements 157,378 158,237 185,953
Interest and other 57,241 120,152 127,744
Total Income 2,252,436 2,393,275 2,353,169
Expenses
Property operating 1,097,188 1,189,004 1,179,367
Depreciation and amortization 723,853 717,876 676,766
Write-offs related to sale of
real estate 126,423 - -
Bad debt expense 93,786 - -
General and administrative 85,270 89,027 101,385
Professional fees 38,290 38,144 44,576
Total Expenses 2,164,810 2,034,051 2,002,094
Income before gain
on real estate sale 87,626 359,224 351,075
Gain on real estate sale 216,998 - -
Net Income $ 304,624 $ 359,224 $ 351,075
Net Income Allocated:
To the General Partner $ 40,964 $ 52,441 $ 50,304
To the Limited Partners 263,660 306,783 300,771
$ 304,624 $ 359,224 $ 351,075
Per limited partnership unit
(29,000 outstanding) $9.09 $10.58 $10.37
Statements of Cash Flows
For the years ended December 31, 1994, 1993 and 1992
Cash Flows from Operating Activities: 1994 1993 1992
Net income $ 304,624 $ 359,224 $ 351,075
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 723,853 717,876 676,766
Gain on real estate sale (216,998) - -
Write-offs related to sale
of real estate 126,423 - -
Increase (decrease) in cash
arising from changes in operating
assets and liabilities:
Accounts receivable 146,245 (86,206) (8,357)
Deferred rent receivable 214,698 233,980 104,081
Prepaid expenses (173,372) (16,258) (78,374)
Accounts payable - related party - - (54,450)
Accrued expenses (9,843) 13,483 (111,135)
Due to affiliate 14,137 (4,010) (3,000)
Other payables 10,155 (60,458) (27,228)
Tenant improvement payable 55,254 - -
Net cash provided by operating
activities 1,195,176 1,157,631 849,378
Cash Flows from Investing
Activities:
Proceeds from sale of real estate 4,684,491 - -
Additions to real estate (268,479) (170,087) (157,337)
Net cash provided by (used for)
investing activities 4,416,012 (170,087) (157,337)
Cash Flows from Financing
Activities:
Cash distributions (5,624,983) (1,221,052) (305,263)
Net cash used for financing
activities (5,624,983) (1,221,052) (305,263)
Net increase (decrease) in cash
and cash equivalents (13,795) (233,508) 386,778
Cash and cash equivalents at
beginning of period 1,062,569 1,296,077 909,299
Cash and cash equivalents at end
of period $ 1,048,774 $ 1,062,569 $ 1,296,077
Supplemental Schedule of Non-cash Investing Activity:
Write-off of fully depreciated
real estate assets $ 94,631 $ 407,756 $ -
Notes to the Financial Statements
December 31, 1994, 1993 and 1992
1. Organization
Commercial Development Fund 85 (a Connecticut limited partnership) (the
"Partnership") was formed on May 20, 1985, under the Uniform Limited
Partnership Act of the State of Connecticut. The Partnership was formed to own
and operate three commercial properties located in Georgia, New Jersey and
North Carolina (the "Properties" or individually a "Property"). The Oakbrook
property located in Georgia was sold during 1986. The General Partners were
originally Shearson Lehman Brothers Real Estate Services I, Inc. (see below), a
Delaware corporation and a wholly owned subsidiary of Lehman Brothers Inc. (see
below), and Phoenix Realty Management, Inc. ("Phoenix"), a Connecticut
corporation and a wholly owned subsidiary of Phoenix Mutual Life Insurance
Company ("Phoenix Mutual"). The Partnership commenced operations on October 9,
1985.
On December 3, 1990 and December 6, 1990, Phoenix notified Shearson and the
Limited Partners, respectively, of its intention to withdraw as a General
Partner of the Partnership. As a result of the withdrawal of Phoenix as a
General Partner of the Partnership, the Partnership was to be dissolved in
accordance with the terms of the Partnership Agreement unless, prior to the
effective date of such withdrawal, Limited Partners holding a majority of the
interests voted to continue the business of the Partnership. On April 12,
1991, Shearson mailed consent solicitation materials to the Limited Partners
seeking their approval to continue the Partnership with Shearson as sole
General Partner. On May 4, 1991, Limited Partners holding 52.29% in Limited
Partnership interests outstanding voted for the continuation of the Partnership
and Phoenix withdrew as a General Partner on this date.
On July 31, 1993, Shearson Lehman Brothers Inc. sold certain of its domestic
retail brokerage and asset management businesses to Smith Barney, Harris Upham
& Co. Incorporated ("Smith Barney"). Subsequent to the sale, Shearson Lehman
Brothers Inc. changed its name to Lehman Brothers Inc. The transaction did not
affect the ownership of the general partner. However, the assets acquired by
Smith Barney included the name "Shearson." Consequently, effective October 22,
1993, Shearson Lehman Brothers Real Estate Services I, Inc. changed its name to
CDF 85 Real Estate Services Inc. to delete any references to "Shearson."
The Partnership will terminate on December 31, 2050, unless dissolved sooner as
provided within the Partnership Agreement.
2. Significant Accounting Policies
Cash Equivalents Cash equivalents, primarily certificates of deposit and
commercial paper, are carried at cost plus accrued interest, which approximates
market. For purposes of the statement of cash flows, the Partnership considers
all short-term investments that have original maturities of three months or
less to be cash equivalents.
Properties Properties are stated at cost, less accumulated depreciation and
amortization. Costs related to the acquisition of the Properties have been
capitalized as part of the costs of those Properties. Tenant improvements are
also capitalized.
Depreciation and amortization on buildings and personal property is provided
over the estimated economic lives of the Properties (26 - 35 years and 5 years,
respectively) using the straight-line method. Tenant improvement and leasing
costs are amortized over the term of the related lease agreements using the
straight-line method.
Rental Income and Deferred Rent The Partnership rents its Properties to
tenants under operating leases with terms of one to seven years. Deferred rent
receivable consists of rental income which is recognized on a straight-line
basis over the lease terms, but will not be received until later periods as a
result of rental concessions and step rents.
Income Taxes The Partnership files Federal and applicable state partnership
income tax returns, which indicate each partner's share of taxable income or
loss to be reported on each partner's individual income tax return. As a
result, no provision for income taxes has been made in the accompanying
financial statements.
Reclassifications Certain balances in the 1993 financial statements have been
reclassified to conform to the 1994 presentation.
3. Partnership Allocations
Allocations of Income and Loss All items of income, gain, loss, deduction and
credit other than that occurring from a sale or refinancing will be allocated
95% to the Limited Partners and 5% to the General Partner, except that all
depreciation shall be allocated to those partnership interests which were
originally sold to those Partners who were subject to Federal income tax at the
time of such sale unless this allocation of depreciation would reduce the
capital accounts of such interests below zero.
Pursuant to the Partnership Agreement, a net gain from the sale or other
disposition of a property shall be allocated 99% to the Limited Partners and 1%
to the General Partner. A net loss shall generally be allocated 99% to the
Limited Partners and 1% to the General Partner, until the Limited Partners'
capital accounts equal zero, thereafter 100% to the General Partner.
Cash Distributions Cash flow from operations, as defined, will be distributed
at the discretion of the General Partner no less than quarterly, 95% to the
Limited Partners and 5% to the General Partner. Distributions of cash flow
from operations will be applied to reduce any unpaid Preferred Return, as
defined in the Partnership Agreement.
All net proceeds from sales or refinancings distributed to the Limited Partners
will be applied first to reduce their unreturned original investment and then
to reduce any unpaid Preferred Return.
As of December 31, 1994, the Partnership had returned $14,668,440 of the
Limited Partners' original capital of $29,000,000, of which $8,712,000 related
to the 1986 sale of Oakbrook, $1,385,000 represented original contributions not
invested in property and $4,571,440 related to the 1994 sale of North Pointe.
The Partnership distributed $5,528,440 and $1,160,000 to the Unit Holders in
1994 and 1993, respectively. In addition, the Partnership distributed $96,543
and $61,052 to the General Partner in 1994 and 1993, respectively. An
additional cash distribution in the amount of $87,000 was paid to the Unit
Holders ($3 per unit) and $4,579 to the General Partner for the quarter ended
December 31, 1994, on February 9, 1995.
4. Real Estate Investments
North Pointe On October 31, 1985, the Partnership acquired North Pointe, a
4-story office building located in Greensboro, North Carolina, containing
approximately 76,000 square feet of net leasable space.
On October 24, 1994, the Partnership sold North Pointe for a gross sales price
of $4,900,000 to Cone Mills, a major tenant occupying 72% of the property's
leasable area. The Partnership received proceeds from the sale $4,684,491 net
of selling costs. The Partnership recognized a gain on sale of $216,998.
Write-offs related to the sale of the property consisted of deferred rent
receivable and leasing costs.
Atrium I On December 30, 1985, the Partnership acquired Atrium I, a 5-story
atrium office building located in Mt. Laurel, New Jersey, containing
approximately 99,000 square feet of net leasable space. At both December 31,
1994 and 1993, the property was approximately 86% leased.
At Atrium I, two of the property's tenants generated 1994 rental revenues in
excess of 10% of the Partnership's 1994 rental revenues. Two leases with
International Business Machines comprise 23,947 square feet or approximately
24% of the property's leasable area and generated $469,930 or about 23% of the
Partnership's rental revenue in 1994. The smaller of the two leases (6,837
s.f.) is scheduled to expire on March 31, 1996, and the larger lease (17,110
s.f.) has been extended until March 31, 2001. Also, two leases with Navistar
Credit Corporation, representing 18,091 square feet or approximately 18% of the
property's leasable area, accounted for $271,365 or approximately 13% of the
Partnership's rental revenues in 1994. Navistar's leases were originally
scheduled to expire on December 31, 1994; the General Partner negotiated a
lease renewal for 16,018 of the 18,091 square feet. The new lease is scheduled
to expire on December 31, 1999.
Also at Atrium I, a tenant that occupied 7,805 square feet, pursuant to a lease
scheduled to expire February 28, 1995, renewed for 6,805 square feet. The new
lease is scheduled to expire February 28, 2000. Throughout 1995, four leases
totaling 13,226 square feet are scheduled to expire. The General Partner has
been in contact with these tenants regarding lease renewals, however, there can
be no assurance that renewals will be executed.
5. Leases The following is a schedule of minimum annual future rental payments
based upon noncancelable leases as of December 31, 1994, assuming no exercise
of tenant renewal options:
1995 $1,314,089
1996 1,004,951
1997 837,529
1998 773,666
1999 787,259
Thereafter 425,870
$5,143,364
Certain leases contain provisions whereby the rent can change annually based
upon changes in the Consumer Price Index. Certain leases also provide that
tenants pay their pro-rata share of any increases in operating expenses over a
base amount.
6. Transactions with Related Parties
Cash and cash equivalents reflected on the Partnership's balance sheet at
December 31, 1994 contains cash that was on deposit with an affiliate of the
General Partner commencing October 5, 1994. Cash reflected on the Partnership's
balance at December 31, 1993 was on deposit with an unaffiliated party.
Under the terms of the Partnership Agreement, the Partnership reimburses the
General Partner, at cost, for the performance of certain administrative
services provided by a third party. For the years ended December 31, 1994 and
1993, costs of such services were $48,373 and $52,972, respectively. At
December 31, 1994 and 1993, $27,127 and $12,990 were due to the General Partner
for the performance of these services.
Pursuant to the Partnership Agreement, the General Partner will receive a
Subordinated Disposition Fee in an amount not to exceed the lesser of (i) one
half of the competitive real estate commission applicable at the date of sale
or (ii) 3% of the sales price of a property for services rendered in connection
with the sales of the Partnership's properties. The fee is payable only after
the Limited Partners have been returned their original investment and any
unpaid Preferred Return. As of December 31, 1994, the Limited Partners have
not been returned all of their original investment.
7. Reconciliation of Financial Statement Net Income and Partners' Capital to
Federal Income Tax Basis Net Income (Loss) and Partners' Capital
Reconciliation of financial statement net income to federal income tax basis
net income (loss):
Year Ended December 31,
1994 1993 1992
Financial statement basis net income $ 304,624 $ 359,224 $ 351,075
Financial statement depreciation
over (under) tax basis depreciation 41,652 (295,750) (64,814)
Financial statement rental income
(over) under tax basis rental income 316,211 233,980 (353,583)
Financial statement bad debt deduction
over (under) tax basis bad debt deduction (69,714) (37,144) 11,668
Financial statement Sec 1231 loss under
tax loss (218,223) - -
Financial statement miscellaneous income
(over) under tax basis miscellaneous income 86,660 (86,454) (94,433)
156,586 (185,368) (501,162)
Federal income tax basis net income (loss) $ 461,210 $ 173,856 $ (150,087)
Reconciliation of financial statement partners' capital to federal income tax
basis partners' capital:
Year Ended December 31,
1994 1993 1992
Financial statement basis partners'
capital $8,278,039 $13,598,398 $14,460,226
Current year financial statement basis
net income over (under) federal income
tax basis net income 156,586 (185,368) (501,162)
Cumulative Federal income tax basis
net income over financial statement
net income 2,650,834 2,836,202 3,337,364
Federal income tax basis partners'
capital $11,085,459 $16,249,232 $17,296,428
Schedule II
Valuation and Qualifying Accounts
December 31, 1994
Balance at Charged to Balance at
Beginning Costs and End of
Description of Period Expenses Deductions Period
Allowance for doubtful accounts:
Year ended December 31, 1992 $50,250 $ - $25,506 $24,744
Year ended December 31, 1993 $24,744 $ - $ - $24,744
Year ended December 31, 1994 $24,744 $ - $24,744 $ -
INDEPENDENT AUDITORS' REPORT
The Partners
Commercial Development Fund 85:
We have audited the accompanying balance sheets of Commercial Development Fund
85 (a Connecticut Limited Partnership) as of December 31, 1994 and 1993, and
the related statements of operations, partners' capital and cash flows for each
of the years in the three-year period ended December 31, 1994. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Commercial Development Fund 85
as of December 31, 1994 and 1993, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1994 in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
February 8, 1994
Comparison of Acquisition Costs to Appraised Value and Determination of Net
Asset Value Per $494.19 Unit at December 31, 1994 (Unaudited)
Acquisition Appraised
Property Date of Acquisition Cost (1) Value (2)
Atrium I 12-30-85 $9,692,362 $6,300,000
Cash and cash equivalents 1,048,774
Accounts receivable 29,749
Prepaid expenses 7,947
7,386,470
Less:
Accrued expenses (76,354)
Due to affiliates (27,127)
Other payables (12,227)
Tenant improvement payable (91,798)
Partnership Net Asset Value (3) $7,178,964
Net Asset Value Allocated:
Limited Partners $7,107,174
General Partners 71,790
$7,178,964
Net Asset Value Per Unit
(29,000 units outstanding) $245.07
(1) Purchase price plus General Partner's acquisition fees.
(2) This represents the Appraised Value at December 31, 1994 which was
determined by an independent property appraisal firm.
(3) The Net Asset Value assumes a hypothetical sale at December 31, 1994 of
the Partnership's property at its appraised value and the distribution of the
proceeds of such sale, combined with the Partnership's cash, after liquidation
of the Partnership's liabilities to the Partners. Real Estate brokerage
commissions payable to the General Partner or others are not determinable at
this time and have not been included in the determination. Since the
Partnership would incur real estate brokerage commissions and other selling
expenses in connection with the sale of its property and other assets, cash
available for distribution to the Partners would be less than the appraised Net
Asset Value.
Limited Partners should note that appraisals are only estimates of current
value and actual values realizable upon sale may be significantly different. A
significant factor in establishing an appraised value is the actual selling
price for properties which the appraiser believes are comparable. Further, the
appraised value does not reflect the actual costs which would be incurred in
selling the property. As a result of these factors and the illiquid nature of
an investment in Units of the Partnership, the variation between the appraised
value of the Partnership's properties and the price at which Units of the
Partnership could be sold is likely to be significant. Fiduciaries of Limited
Partners which are subject to ERISA or other provisions of law requiring
valuation of Units should consider all relevant factors including, but not
limited to Net Asset Value per Unit, in determining the fair market value of an
investment in the Partnership for such purposes.
------------------------ -
Exhibit (10)(C)
-------------------------
SETTLEMENT STATEMENT
PURCHASER: TBC REALTY II CORPORATION
SELLER: COMMERCIAL DEVELOPMENT FUND 85
LENDER: CITICORP LEASING, INC.
PROPERTY: LOT 1, NORTH POINTE CORPORATE CENTER
Greensboro, North Carolina
CLOSING DATE: October 24, 1994
SUMMARY OF BORROWER'S TRANSACTIONS:
GROSS AMOUNT DUE FROM PURCHASER:
Purchase Price $4,900,000.00
Register of Deeds of Guilford County:
Recording Fees 366.00
N.C. Secretary of State:
Filing Fee 8.00
Jefferson-Pilot Title Insurance Company:
Title Insurance Premium 10,800.00
Jefferson-Pilot Title Insurance Company:
Escrow Agent Fee 100.00
Binswanger Company:
Commissions 133,000.00
Cone Mills Corporation:
Reimbursement earnest money deposit 49,000.00
Johnson & Wortley, P.C.:
Attorney fees & expenses 29,000.00
Grogan & Brawner, P.C.:
Attorney fees & expenses 5,800.00
Hunton & Williams:
Attorney fees & expenses 3,100.00
Beck Realty:
Transaction fee 80,000.00
Prepaid Association Dues:
10/25/94 - 12/31/94 1,109.17
Prepaid Fees & Expenses:
10/25/94 - 10/30/94 3,134.09
Citicorp Leasing, Inc.:
Closing Fee ($160,000.00) (POC)
Appraisal ($6,000.00) (POC)
Appraisal Review ($1,500.00) (POC)
Phase I Environment ($2,000.00) (POC)
TOTAL GROSS AMOUNT DUE FROM PURCHASER: $5,215,417.26
AMOUNTS PAID BY OR IN BEHALF OF PURCHASER:
Citicorp Leasing, Inc.:
Loan Proceeds $5,330,500.00
Deposit 49,000.00
1994 City and County Taxes:
Seller's Share (1/1/94 - 10/25/94) 71,663.68
Prepaid Rents:
10/25/94 - 10/30/94 17,064.54
Utilities:
10/1/94 - 10/25/94 (POC)*
Credit from Seller for repairs: 38,000.00
TOTAL PAID BY/FOR BORROWER $5,506,228.22
CASH DUE PURCHASER AT SETTLEMENT $290,810.96
SUMMARY OF SELLER'S TRANSACTION:
GROSS AMOUNT DUE TO SELLER:
Sales Price $4,900,000.00
Prepaid Fees & Expenses:
10/25/94 - 10/30/94 3,134.09
Prepaid Association Dues:
10/25/94 - 12/31/94 1,109.17
TOTAL GROSS AMOUNT DUE SELLER $4,904,243.26
REDUCTIONS IN AMOUNT DUE SELLER:
Register of Deeds of Guilford County:
Excise tax $9,800.00
Jefferson-Pilot Title Insurance Company:
Escrow Agent Fee 100.00
Forsyth Partners:
Commissions (POC)
Latham & Watkins:
Attorney fees & expenses (POC)
1994 City and County Taxes:
Seller's Share (1/1/94 - 10/25/94) 71,663.68
Prepaid Rents:
10/25/94 - 10/30/94 17,064.54
Utilities:
10/1/94 - 10/25/94 (POC)*
Credit to Purchaser for repairs 38,000.00
TOTAL REDUCTION AMOUNT DUE SELLER: $136,628.22
TOTAL CASH DUE SELLER AT SETTLEMENT: $4,767,615.04
Commercial Development Fund '85
c/o Lehman Brothers, Inc.
Three World Financial Center
New York, New York 10285
October 24, 1994
Mr. C. Richard Routh
Director of Real Estate Development
Cornwallis Development Co.
P.O. Box 26540
Greensboro, North Carolina 27415
Re: Sale of One North Pointe Building (the "Property") pursuant to
the Purchase and Sale Agreement dated August 24, 1994 between
Commercial Development Fund '85 ("CDF85") and Cone Mills Corporation
(the "Agreement").
Dear Mr. Routh:
This letter sets forth our understanding regarding the allocation of
escalation rents for the 1994 calendar year in connection with the
above-referenced transaction.
As soon as reasonably possible after the end of the Year, Cornwallis
Development Co. ("Cornwallis") shall collect any and all rent
escalations payable by Tenants (as such term is defined in the
Agreement) for part or all of the 1994 calendar year pursuant to Leases
(as such term is defined in the Agreement) for space at the Property.
Cornwallis shall promptly remit to CDF85 (at the address set forth on
this letterhead) any portion of such rent escalation payments allocable
for the period beginning on January 1, 1994 and ending on October 24,
1994.
Sincerely yours,
Commercial Development Fund '85
By: CDF85 Real Estate Services, Inc.
General Partner
By: /s/William Caulfield
William Caulfield
The undersigned agrees to the foregoing on this 24th day of October, 1994:
Cornwallis Development Co.
By: /s/C. Richard Routh
C. Richard Routh, President
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
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<SECURITIES> 000
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<OTHER-SE> 8,278,039
<TOTAL-LIABILITY-AND-EQUITY> 8,485,545
<SALES> 2,037,817
<TOTAL-REVENUES> 2,252,436
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