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[FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934[NO FEE REQUIRED]
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 I.R.S. Employer Identification No.
incorporation or organization
3 World Financial Center, 29th Floor
New York, NY ATTN: Andre Anderson 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, 1995
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, 1989 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.
The General Partners of the Partnership were originally Shearson Lehman
Brothers Real Estate Services I, Inc. (see below), a Delaware corporation and
an affiliate 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"). 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") and to the Limited Partners. 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.
(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 4 "Real Estate
Investments" of the Notes to the Financial Statements.
(d) Competition
Incorporated by reference to the section entitled "Message to Investors" in the
Partnership's Annual Report to Unitholders for the year ended December 31, 1995
filed as an exhibit under Item 14.
(e) Employees
The Registrant has no employees.
Item 2. Properties
Description of Property and material leases incorporated by reference to the
section entitled "Message to Investors" and Note 4 "Real Estate Investments" of
the Notes to the Financial Statements in the Partnership's Annual Report to
Unitholders for the year ended December 31, 1995 filed as an exhibit under Item
14.
Item 3. Legal Proceedings
Neither the Registrant nor the Property 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 1995.
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, 1995, the number of holders of Units was 2,810.
(c) Distributions
Cash distributions paid to the Limited Partners for the two years ended
December 31, 1995 incorporated by reference to the section entitled "Message to
Investors" in the Partnership's Annual Report to Unitholders for the year ended
December 31, 1995 filed as an exhibit under Item 14.
Item 6. Selected Financial Data
Incorporated by reference to the section entitled "Financial Highlights" in the
Partnership's Annual Report to Unitholders for the year ended December 31, 1995
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, 1995, the Partnership had cash and cash equivalents totaling
$676,893, compared with $1,048,774 at December 31, 1994. The $371,881 decrease
is primarily attributable to the payment of cash distributions and tenant and
building improvements in excess of cash flow from operations in 1995. 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 I 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 totaled $45,962 at December 31, 1995, compared to $29,749
at December 31, 1994. The increase primarily reflects the timing of rental
payments. Prepaid expenses totaled $159,429 at December 31, 1995, compared to
$197,788 at December 31, 1994. The decrease is largely the result of the
amortization of leasing commissions.
Deferred rent receivable totaled $141,390 at December 31, 1995 compared with
$298,572 at December 31, 1994. The decrease is mainly due to the amortization
of rental concessions and step rents included in certain leases at Atrium I.
Tenant improvements payable totaled $36,544 at December 31, 1995 compared to
$91,798 at December 31, 1994. The decrease of $55,254 is as a result of the
timing of payments for tenant improvements at Atrium I.
The General Partner declared cash distributions totaling $12 per Unit for the
year ended December 31, 1995. Included in this total is a cash distribution in
the amount of $3 per unit which was paid to the Limited Partners on February 9,
1996. After reviewing the Partnership's operations for the fourth quarter of
1995, 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 fund 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.
On February 15, 1996, based upon, among other things, the advice of Partnership
counsel, Skadden, Arps, Slate, Meagher & Flom, the General Partner adopted a
resolution that states, among other things, if a Change of Control (as defined
below) occurs, the General Partner may distribute the Partnership's cash
balances not required for its ordinary course day-to-day operations. "Change
of Control" means any purchase or offer to purchase more than 10% of the Units
that is not approved in advance by the General Partner. In determining the
amount of the distribution, the General Partner may take into account all
material factors. In addition, the Partnership will not be obligated to make
any distribution to any partner and no partner will be entitled to receive any
distribution until the General Partner has declared the distribution and
established a record date and distribution date for the distribution. The
Partnership filed a form 8-K disclosing this resolution on February 23, 1996.
Results of Operations
1995 Versus 1994
- ----------------
As a result of the sale of North Pointe during the fourth quarter of 1994, the
Partnership's results of operations for the year ended December 31, 1995 are
not comparable to the corresponding period in 1994. Operations resulted in net
income of $10,669 for the year ended December 31, 1995 compared with $304,624
for the year ended December 31, 1994. The decrease primarily reflects the sale
of North Pointe.
Rental income totaled $1,210,977 for the year ended December 31, 1995, compared
to $2,037,817 for the year ended December 31, 1994, of which $1,204,285 related
to Atrium I. Tenant expense reimbursements decreased by $41,512 to $115,866
for the year ended December 31, 1995 from $157,378 for the year ended December
31, 1994, as a result of the sale of North Pointe. Interest and other income
totaled $94,741 for the year ended December 31, 1995, compared to $57,241 for
the year ended December 31, 1994. The increase at Atrium I is largely
attributable to the receipt of a lease termination payment in 1995.
Property operating expenses totaled $829,542 for the year ended December 31,
1995, compared to $1,097,188 for the year ended December 31, 1994, of which
$756,264 related to Atrium I. The increase at Atrium I is primarily due to
repairs and maintenance completed during 1995 and to legal fees related to the
real estate tax appeal. Depreciation and amortization totaled $456,171 for the
year ended December 31, 1995, compared to $723,853 for the year ended December
31, 1994, of which $440,429 related to Atrium I. The increase at Atrium I is
primarily due to a higher depreciable asset base at Atrium I resulting from
tenant and building improvements completed during 1995.
Bad debt expenses totaled $13,880 for the year ended December 31, 1995 compared
with $93,786 for the year ended December 31, 1994. The decrease of $79,906
primarily reflects the 1995 amount related to a tenant at Atrium I, while the
1994 balance represented a reserve for outstanding rent, escalation and tenant
receivables associated with a tenant at North Pointe.
The lease level at Atrium I as of December 31, 1995 was 84%.
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%.
Item 8. Financial Statements and Supplementary Data
Incorporated by reference to the Partnership's Annual Report to Unitholders for
the year ended December 31, 1995, which is filed as an exhibit under Item 14.
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 Office
------------ -----------
Kenneth L. Zakin President and Director
William Caulfield Vice President and Chief Financial Officer
Joseph Donaldson Vice President
Kenneth L. Zakin, 48, is a Senior Vice President of Lehman Brothers Inc. 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 a member of the Real Estate Lender's
Association and is currently an associate member of the Urban Land Institute
and a member o f the New York District Council Advisory Services Committee. He
received 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, 36, is a Vice President of Lehman Brothers Inc. 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 - C.W. Post Campus.
Joseph Donaldson, 32, serves as a Vice President of Lehman Brothers Inc. 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 "Transactions
with Related Parties" of the Notes to the Financial Statements. The General
Partner's share of cash distributions for 1995 and 1994 was $18,316 and
$96,543, 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 Brothers
Inc. 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 Certain 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 Units as of
December 31, 1995.
(b) Security Ownership of Management
No officer or director of the General Partners beneficially owned or owned of
record directly or indirectly any Units of the Registrant as of December 31,
1995.
(c) Changes in Control
None
Item 13. Certain Relationships and Related Transactions
(a) Transactions With Management and Others
Incorporated by reference to Note 6 "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.
First Data Investor Services Group (formerly "The Shareholder Services Group")
("FDISG") provides partnership accounting and investor relations services for
the Registrant. Prior to May 1993, these services were provided by an
affiliate of a general partner. The Registrant's transfer agent and certain
tax reporting services are provided by Service Data Corporation ("SDC"). Both
FDISG and SDC are unaffiliated companies. Disclosure relating to amounts paid
to the General Partner or their affiliates during the past three years is
incorporated by reference to Note 6 "Transactions With Related Parties" of
Notes to the Financial Statements contained in the Partnership's Annual Report
to Unitholders for the year ended December 31, 1995 filed as an exhibit under
Item 14.
(c) Indebtedness of Management
No management person is indebted in any amount to the Partnership.
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, 1995 and 1994 (1)
Statements of Partners' Capital - For the years ended
December 31, 1995, 1994 and 1993 (1)
Statements of Operations - For the years ended
December 31, 1995, 1994 and 1993 (1)
Statements of Cash Flows - For the years ended
December 31, 1995, 1994 and 1993 (1)
Notes to the Financial Statements (1)
(1) Incorporated by reference to the Partnership's Annual Report to
Unitholders for the year ended December 31, 1995, which is filed as an
exhibit under Item 14.
(a)(2) Financial Statement Schedule:
Independent Auditors' Report on Schedule F-1
Schedule III - Real Estate and Accumulated Depreciation F-2
(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. Reference is made to Exhibit 10c to Form 10-K for the year
ended December 31, 1994.
(13) Annual Report to the Unitholders for the year ended December 31,
1995
(27) Financial Data Schedule
(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 1995.
-------------------------
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 28, 1996
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 28, 1996
BY: /s/Kenneth L. Zakin
Kenneth L. Zakin
Director and President
Date: March 28, 1996
BY: /s/ William Caulfield
William Caulfield
Vice President and
Chief Financial Officer
Date: March 28, 1996
BY: /s/ Joseph Donaldson
Joseph Donaldson
Vice President
INDEPENDENT AUDITORS' REPORT ON SCHEDULES
The Partners
Commercial Development Fund 85:
Under date of February 15, 1996 we reported on the balance sheets of Commercial
Development Fund 85 (a Connecticut limited partnership) as of December 31, 1995
and 1994, and the related statements of operations, partners' capital and cash
flows for each of the years in the three-year period ended December 31, 1995,
as contained in the 1995 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 1995. In connection with our audits of the
aforementioned financial statements, we also have audited the related financial
statement schedule as listed in the accompanying index. This financial
statement schedule is the responsibility of the Partnership's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, the financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG Peat Marwick LLP
Boston, Massachusetts
February 15, 1996
COMMERCIAL DEVELOPMENT FUND 85
(A Connecticut limited partnership)
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
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
Cost Capitalized
Subsequent
To Acquisition
---------------
Buildings and
Description Improvements Retirement
Office Building:
Atrium I
Mount Laurel, NJ $1,680,299 $(1,430,317)
$1,680,299 $(1,430,317)
COMMERCIAL DEVELOPMENT FUND 85
(A Connecticut limited partnership)
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
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 $9,302,694 $9,942,344 $(2,911,280)
$ 639,650 $9,302,694 $9,942,344 $(2,911,280)
COMMERCIAL DEVELOPMENT FUND 85
(A Connecticut limited partnership)
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
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 property.
(B) The aggregate cost of real estate at December 31, 1995, 1994 and 1993, for
Federal Income tax purposes is $11,792,664, $10,658,416 and $17,762,425,
respectively.
A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended December 31, 1995, 1994 and 1993:
Real Estate investments: 1995 1994 1993
Beginning of year $9,681,503 $15,589,380 $15,827,049
Additions 526,568 268,479 170,087
Less Retirements (265,727) (94,631) (407,756)
Less North Pointe Sale -- (6,081,725) --
End of year $9,942,344 $ 9,681,503 $15,589,380
Accumulated Depreciation:
Beginning of year $2,770,841 $ 3,787,932 $ 3,506,089
Depreciation expense 406,166 688,254 689,599
Less Retirements (265,727) (94,631) (407,756)
Less North Pointe Sale -- (1,610,714) --
End of year $2,911,280 $ 2,770,841 $ 3,787,932
-------------------------
Exhibit (13)
-------------------------
Commercial Development Fund 85
1995 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 and North Pointe, located in Greensboro, North Carolina, was
sold on October 24, 1994. The Partnership's remaining property is Atrium I
(the "Property"), a five-story Class A office building containing 96,746
leasable square feet which is located on Route 73 in Mt. Laurel, New Jersey.
The Property was 84% leased at December 31, 1995, compared with 86% at December
31, 1994.
Administrative Inquiries Performance Inquiries/Form 10-Ks
Address Changes/Transfers First Data Investor Services Group
Service Data Corporation P.O. Box 1527
2424 South 130th Circle Boston, Massachusetts 02104-1527
Omaha, Nebraska 68144-2596 Attn: Financial Communications
800-223-3464 (select option 1) 800-223-3464 (select option 2)
---------- Message to Investors ----------
Presented for your review is the 1995 Annual Report for Commercial Development
Fund 85 (the "Partnership"). During 1995, the Partnership's sole remaining
property, Atrium I, reported continued stable operations. Despite persistently
strong competition for tenants in the Burlington County market, we were able to
retain and attract new tenants during the year. This report includes an
overview of the market conditions affecting the Property as well as an update
on leasing activity and selected financial highlights for the year.
Cash Distributions
For the year ended December 31, 1995, the Partnership paid cash distributions
to the Limited Partners totaling $12.00 per Unit. Included in this total was
the fourth quarter cash distribution of $3.00 per Unit which was paid on
February 9, 1996. Since inception, Limited Partners have received cash
distributions totaling $801.68 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. 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
1994 $10.00 $10.00 $160.64* $ 3.00 $183.64
1995 $ 3.00 $ 3.00 $ 3.00 $ 3.00 $ 12.00
* Includes $157.64 in return of capital resulting from the sale of North
Pointe.
Market Overview
Although still lagging behind other sectors of real estate, the commercial
office market showed signs of improvement during 1995, particularly in the
suburban office sector. However, demand for office space still varies widely
from region to region as corporate layoffs persist and prospective tenants
continue to be extremely selective in their choice of location. Moreover,
despite the resurgence of investment in other segments of the real estate
industry, lenders continue to be selective in providing capital for commercial
office properties.
The Burlington County office market, where Atrium I is located, continues to be
adversely impacted by these factors. The vacancy rate for the county remained
among the nation's highest, at approximately 19% as of the 1995 fourth quarter,
largely unchanged from 21% for the same period in 1994. Although the Mount
Laurel - Route 73 submarket, where the Property is located, is the strongest
market within Burlington County, it has been difficult to attract tenants,
despite competitive rental rates and generous concession packages. These
conditions are expected to continue throughout 1996 and, as a result, we
anticipate continued difficulty in leasing the property's vacant space.
Property Update
During the year, the General Partner executed three new leases totaling 3,844
square feet and renewed two leases with tenants which also took additional
space in the building. One tenant added 5,130 square feet to the space it
previously occupied, and the other added 4,904 square feet. The property was
84% leased at December 31, 1995, compared to 86% at December 31, 1994.
Six leases with three tenants generated in excess of 10% of the Partnership's
rental income. The first tenant leases 23,947 square feet pursuant to two
leases which generated approximately $296,000 or 24% of the Partnership's
rental income in 1995. One of the leases, totaling 17,110 square feet, is
scheduled to expire in March 2001, while the other lease, totaling 6,837 square
feet, expired on March 31, 1996. The tenant has already vacated this space.
The second tenant leases 16,023 square feet pursuant to two leases which
generated approximately $283,000 or 23% of the Partnership's rental income in
1995. Both of these leases are scheduled to expire in December 1999. The
third tenant leases 9,507 square feet pursuant to two leases which generated
approximately $150,000 or 12% of the Partnership's rental income. These leases
are scheduled to expire in February 1997.
One major lease representing 11,674 square feet or approximately 12% of the
property's total leasable area, is scheduled to expire in September 1996. The
General Partner has been in contact with the tenant regarding a renewal of its
lease, however, there can be no assurance that a renewal will be executed.
Summary
In the upcoming year, we will continue our efforts to increase occupancy and
improve the operating performance of Atrium I to ensure that the property is
well positioned for eventual sale once the Southern New Jersey office market
improves. We expect these efforts to be challenging due to highly competitive
market conditions which are likely to persist throughout 1996. We will keep
you apprised of the General Partner's progress in future investor reports.
Very truly yours,
CDF85 Real Estate Services Inc.
General Partner
/s/Kenneth L. Zakin
Kenneth L. Zakin
President
March 28, 1996
---------- Financial Highlights ----------
For the years ended December 31,
1995 1994 1993 1992 1991
Total income $1,421,584 $2,252,436 $2,393,275 $2,353,169 $2,304,821
Total expenses 1,410,915 2,164,810 2,034,051 2,002,094 2,177,683
Gain on real
estate sale(1) -- 216,998 -- -- --
Net income 10,669 304,624 359,224 351,075 127,138
Total assets 8,054,738 8,485,545 13,736,201 14,649,014 14,799,015
Net income (loss)
per Unit (0.35) 9.09 10.58 10.37 2.78
Cash distributions
per Unit 12.00 183.64(2) 40.00 20.00 --
(1) Gain resulting from the sale of North Pointe.
(2) Includes a $157.64 return of capital payment resulting from the sale of
North Pointe.
The above selected financial data should be read in conjunction with the
financial statements and related notes included in this report.
- - The decrease in total income, total expenses, and net income is primarily
attributable to the Partnership's lower rental income resulting from the sale
of North Pointe on October 24, 1994. Excluding North Pointe, rental income
totaled $1,210,977 at December 31, 1995 versus $1,204,285 the prior year.
Net Asset Value
In accordance with the Partnership Agreement, the General Partner annually
obtains an appraisal of the Partnership's Property and uses the appraised value
to compute the net asset value of the Partnership's Units. The calculation of
net asset value assumes a hypothetical sale of the Partnership's Property at
its appraised value and the distribution of the net proceeds of such sale,
together with the Partnership's working capital, to the Partners. Consistent
with prior practice, the net asset value is computed by dividing the total
value of the Partnership's assets by the total number of Units outstanding.
This average per Unit value was $218.36 per $494.19 Unit as of December 31,
1995.
Pursuant to the Partnership Agreement, distributions to individual unit holders
upon a liquidation of the Partnership will vary from distributions of proceeds
from a sale or refinancing of a property when the Partnership is not
liquidating. Distributions from a sale or refinancing when the Partnership is
not liquidating will generally be distributed equally to each Unit held by
Limited Partners. In a liquidation, however, distributions are made in
proportion to positive capital account balances which vary for the Units
depending upon whether a Unit was originally issued to a taxable or a tax
exempt investor. Assuming a hypothetical liquidation of December 31, 1995, the
amount distributable to an average taxable Unit would be approximately $133 per
Unit, and the amount distributable to a non-taxable Unit would be approximately
$456 per Unit. Upon liquidation of the Partnership, taxable investors would be
able to use suspended passive losses on this investment, to the extent that the
y are available, to offset taxable income or gain.
The calculation of net asset value does not take into account numerous other
factors which would determine the actual value received for individual Units,
such as the timing of the property sale and distribution of related proceeds,
as well as the actual values realizable upon a sale of the property. In
addition, as a result of these factors and the lack of a public market for the
resale of Units, the price at which Units may be resold is likely to be
significantly different from the computed net asset value per Unit.
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 the investment in the Partnership for such purposes.
---------- Financial Statements ----------
Balance Sheets
December 31, 1995 and 1994
Assets 1995 1994
Land $ 639,650 $ 639,650
Buildings and personal property 8,158,131 8,038,682
Tenant improvements 1,144,563 1,003,171
9,942,344 9,681,503
Less-accumulated depreciation (2,911,280) (2,770,841)
7,031,064 6,910,662
Cash and cash equivalents 676,893 1,048,774
Accounts receivable 45,962 29,749
Prepaid expenses, net of accumulated
amortization of $164,640 in 1995
and $114,635 in 1994 159,429 197,788
Deferred rent receivable 141,390 298,572
Total Assets $ 8,054,738 $ 8,485,545
Liabilities and Partners' Capital
Liabilities:
Accrued expenses $ 70,619 $ 76,354
Due to affiliate 13,000 27,127
Other payables 12,227 12,227
Tenant improvements payable 36,544 91,798
Total Liabilities 132,390 207,506
Partners' Capital:
General Partner 64,105 61,579
Limited Partners (29,000 units outstanding) 7,858,243 8,216,460
Total Partners' Capital 7,922,348 8,278,039
Total Liabilities and Partners' Capital $ 8,054,738 $ 8,485,545
Statements of Partners' Capital
For the years ended December 31, 1995, 1994, and 1993
General Limited
Partner Partners Total
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
Net income 20,842 (10,173) 10,669
Cash distributions (18,316) (348,044) (366,360)
Balance at December 31, 1995 $ 64,105 $ 7,858,243 $ 7,922,348
Statements of Operations
For the years ended December 31, 1995, 1994 and 1993
Income 1995 1994 1993
Rental $1,210,977 $2,037,817 $2,114,886
Tenant expense reimbursements 115,866 157,378 158,237
Interest and other 94,741 57,241 120,152
Total Income 1,421,584 2,252,436 2,393,275
Expenses
Property operating 829,542 1,097,188 1,189,004
Depreciation and amortization 456,171 723,853 717,876
Write-offs related to sale of real estate -- 126,423 --
Bad debt expense 13,880 93,786 --
General and administrative 75,103 85,270 89,027
Professional fees 36,219 38,290 38,144
Total Expenses 1,410,915 2,164,810 2,034,051
Income before gain on sale of real estate 10,669 87,626 359,224
Gain on sale of real estate -- 216,998 --
Net Income $ 10,669 $ 304,624 $ 359,224
Net Income (Loss) Allocated:
To the General Partner $ 20,842 $ 40,964 $ 52,441
To the Limited Partners (10,173) 263,660 306,783
$ 10,669 $ 304,624 $ 359,224
Per limited partnership unit
(29,000 outstanding) $(.35) $9.09 $10.58
Statements of Cash Flows
For the years ended December 31, 1995, 1994 and 1993
Cash Flows from Operating Activities: 1995 1994 1993
Net income $ 10,669 $ 304,624 $ 359,224
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 456,171 723,853 717,876
Gain on sale of real estate -- (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 (16,213) 146,245 (86,206)
Deferred rent receivable 157,182 214,698 233,980
Prepaid expenses (11,646) (173,372) (16,258)
Accrued expenses (5,735) (9,843) 13,483
Due to affiliate (14,127) 14,137 (4,010)
Other payables -- 10,155 (60,458)
Tenant improvements payable (55,254) 55,254 --
Net cash provided by operating activities 521,047 1,195,176 1,157,631
Cash Flows from Investing Activities:
Proceeds from sale of real estate -- 4,684,491 --
Additions to real estate (526,568) (268,479) (170,087)
Net cash provided by (used for)
investing activities (526,568) 4,416,012 (170,087)
Cash Flows from Financing Activities:
Cash distributions (366,360) (5,624,983) (1,221,052)
Net cash used for financing activities (366,360) (5,624,983) (1,221,052)
Net decrease in cash and cash equivalents (371,881) (13,795) (233,508)
Cash and cash equivalents at
beginning of period 1,048,774 1,062,569 1,296,077
Cash and cash equivalents at end of period $ 676,893 $1,048,774 $1,062,569
Supplemental Schedule of Non-cash Investing Activity:
Write-off of fully depreciated
tenant improvements $ 265,727 $ 94,631 $ 407,756
Notes to the Financial Statements
December 31, 1995, 1994 and 1993
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 Oakbrook property, located in Georgia, was sold during
1986 and the North Pointe property, located in North Carolina, was sold during
1994. The Partnership's remaining property (the "Property") is located in New
Jersey. 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.
On February 15, 1996, based upon, among other things, the advice of Partnership
counsel, Skadden, Arps, Slate, Meagher & Flom, the General Partner adopted a
resolution that states, among other things, if a Change of Control (as defined
below) occurs, the General Partner may distribute the Partnership's cash
balances not required for its ordinary course day-to-day operations. "Change
of Control" means any purchase or offer to purchase more than 10% of the Units
that is not approved in advance by the General Partner. In determining the
amount of the distribution, the General Partner may take into account all
material factors. In addition, the Partnership will not be obligated to make
any distribution to any partner and no partner will be entitled to receive any
distribution until the General Partner has declared the distribution and
established a record date and distribution date for the distribution. The
Partnership filed a form 8-K disclosing this resolution on February 23, 1996.
2. Significant Accounting Policies
Basis of Accounting - The accompanying financial statements have been prepared
on the accrual basis of accounting in accordance with generally accepted
accounting principles. Revenues are recognized as earned and expenses are
recorded as obligations are incurred.
Property - The property is stated at cost, less accumulated depreciation and
amortization. Costs related to the acquisition of the Property have been
capitalized as part of the costs of this Property. Tenant improvements are
also capitalized.
Depreciation and amortization on buildings and personal property is provided
over the estimated economic life of the Property (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.
Accounting for Impairment - In March 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" ("FAS 121"), which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. FAS 121 also addresses the accounting
for long-lived assets that are expected to be disposed of. The partnership
adopted FAS 121 in the fourth quarter of 1995. Based on current circumstances,
the adoption of FAS 121 had no impact on the financial statements.
Cash Equivalents Cash equivalents - consist of short-term, highly liquid
investments with maturities of three months or less from the date of issuance.
The carrying amount approximates fair value because of the short maturity of
these instruments.
Concentration of Credit Risk - Financial instruments which potentially subject
the Partnership to a concentration of credit risk principally consist of cash
in excess of the financial institutions' insurance limits. The Partnership
invests available cash with high credit quality financial institutions.
Rental Income and Deferred Rent - The Partnership rents its Property 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.
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.
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, 1995, 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 $348,044 and $5,528,440 to the Unit Holders in 1995
and 1994, respectively. In addition, the Partnership distributed $18,316 and
$96,543 to the General Partner in 1995 and 1994, 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,
1995, in the first quarter of 1996.
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 97,000 square feet of net leasable space. At both December 31,
1995 and 1994, the property was approximately 84% and 86% leased, respectively.
At Atrium I, three of the property's tenants generated 1995 rental revenues in
excess of 10% of the Partnership's 1995 rental revenues. Two leases with
International Business Machines comprise 23,947 square feet or approximately
25% of the property's leasable area and generated $296,000 or about 24% of the
Partnership's rental revenue in 1995. The smaller of the two leases (6,837
s.f.) is scheduled to expire on March 31, 1996, and will not be renewed. The
larger lease (17,110 s.f.) has been extended until March 31, 2001. In
addition, two leases with Navistar Credit Corporation, representing 16,023
square feet or approximately 16% of the property's leasable area, accounted for
$283,000 or approximately 23% of the Partnership's rental revenues in 1995.
These leases are scheduled to expire on December 31, 1999. In addition, two
leases with Janney Montgomery Scott comprise 9,507 square feet or approximately
10% of the property's leasable space. These leases produced $150,000 or
approximately 12% of the Partnership's rental revenues in 1995 and are
scheduled to expire February 12, 1997.
Finally, one lease with Lion Communications accounted for 11,674 square feet or
approximately 12% of the property's leasable space. This lease represented
approximately 12% of the Partnership's rental revenues in 1995 and is scheduled
to expire in 1996. As a result, the General Partner has been in contact with
this tenant regarding lease renewal, however, there can be no assurance that a
renewal will be executed.
5. Leases
The following is a schedule of minimum annual future rental payments based upon
noncancelable leases as of December 31, 1995, assuming no exercise of tenant
renewal options:
1996 $1,246,306
1997 1,027,744
1998 959,917
1999 954,826
2000 506,846
Thereafter 497,232
---------
$5,192,871
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
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, 1995 and
1994, costs of such services were $46,650 and $48,373, respectively. At
December 31, 1995 and 1994, $13,000 and $27,127 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, 1995, the Limited Partners have
not been returned all of their original investment.
Certain cash accounts reflected on the Partnership's balance sheets at December
31, 1995 and 1994 were on deposit with an affiliate of the General Partner.
7. Reconciliation of Financial Statement Net Income and Partners' Capital to
Federal Income Tax Basis Net Income and Partners' Capital
Reconciliation of financial statement net income to federal income tax basis
net income:
Year Ended December 31,
1995 1994 1993
Financial statement basis net income $ 10,669 $ 304,624 $ 359,224
Financial statement depreciation
over (under) tax basis depreciation (51,803) 41,652 (295,750)
Financial statement rental income under
tax basis rental income 157,181 316,211 233,980
Financial statement bad debt deduction
under tax basis bad debt deduction -- (69,714) (37,144)
Financial statement Sec 1231 loss under
tax loss -- (218,223) --
Financial statement miscellaneous income
(over) under tax basis miscellaneous income 137 86,660 (86,454)
105,515 156,586 (185,368)
Federal income tax basis net income $ 116,184 $ 461,210 $ 173,856
Reconciliation of financial statement partners' capital to federal income tax
basis partners' capital:
Year Ended December 31,
1995 1994 1993
Financial statement basis
partners' capital $ 7,922,348 $ 8,278,039 $13,598,398
Current year financial statement basis
net income over (under) federal income
tax basis net income 105,515 156,586 (185,368)
Cumulative Federal income tax basis
net income over financial statement
net income 2,807,420 2,650,834 2,836,202
Federal income tax basis
partners' capital $10,835,283 $11,085,459 $16,249,232
Because many types of transactions are susceptible to varying interpretations
under Federal and State income tax laws and regulations, the amounts reported
above may be subject to change at a later date upon final determination by the
respective taxing authorities.
---------- 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, 1995 and 1994, and
the related statements of operations, partner's capital and cash flows for each
of the years in the three-year period ended December 31, 1995. 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 disclosure 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, 1995 and 1994, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1995 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
February 15, 1996
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 676,893
<SECURITIES> 000
<RECEIVABLES> 45,962
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 9,942,344
<DEPRECIATION> (2,911,280)
<TOTAL-ASSETS> 8,054,738
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<BONDS> 000
<COMMON> 000
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000
<OTHER-SE> 7,922,348
<TOTAL-LIABILITY-AND-EQUITY> 8,054,738
<SALES> 1,210,977
<TOTAL-REVENUES> 1,421,584
<CGS> 000
<TOTAL-COSTS> 829,542
<OTHER-EXPENSES> 581,373
<LOSS-PROVISION> 000
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<INCOME-PRETAX> 10,669
<INCOME-TAX> 000
<INCOME-CONTINUING> 10,669
<DISCONTINUED> 000
<EXTRAORDINARY> 000
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<NET-INCOME> 10,669
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