United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended March 31, 1996
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition period from ______ to ______
Commission File Number: 0-14349
COMMERCIAL DEVELOPMENT FUND 85
--------------------------------
Exact Name of Registrant as Specified in its Charter
Connecticut 06-1141277
------------ --------------
State or Other Jurisdiction of
Incorporation or Organization I.R.S. Employer Identification No.
3 World Financial Center, 29th Floor,
New York, NY Attn: Andre Anderson
- - --------------------------------------- 10285
Address of Principal Executive Offices -------
Zip Code
(212) 526-3237
-----------------
Registrant's Telephone Number, Including Area Code
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Balance Sheets
- - --------------- At March 31, At December 31,
1996 1995
Assets
Land $ 639,650 $ 639,650
Buildings and personal property 8,159,675 8,158,131
Tenant improvements 784,622 1,144,563
9,583,947 9,942,344
Less accumulated depreciation (2,611,072) (2,911,280)
6,972,875 7,031,064
Cash and cash equivalents 682,989 676,893
Accounts receivable 43,258 45,962
Prepaid expenses, net of accumulated
amortization of $174,678 in 1996
and $164,640 in 1995 176,348 159,429
Deferred rent receivable 113,224 141,390
Total Assets $ 7,988,694 $ 8,054,738
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 94,359 $ 70,619
Due to affiliates 13,056 13,000
Other payables 12,239 12,227
Tenant improvements payable 36,544 36,544
Total Liabilities 156,198 132,390
Partners' Capital:
General Partner 64,589 64,105
Limited Partners (29,000 units
outstanding) 7,767,907 7,858,243
Total Partners' Capital 7,832,496 7,922,348
Total Liabilities and Partners' Capital $ 7,988,694 $ 8,054,738
Statement of Partners' Capital
- - --------------------------------
For the three months ended March 31, 1996
Limited General
Partners Partner Total
Balance at December 31, 1995 $7,858,243 $ 64,105 $7,922,348
Net income (loss) (3,336) 5,063 1,727
Cash distributions (87,000) (4,579) (91,579)
Balance at March 31, 1996 $7,767,907 $ 64,589 $7,832,496
Statements of Operations
- - -------------------------
For the three months ended March 31, 1996 1995
Income
Rental $ 334,711 $ 311,840
Tenant expense reimbursements (2,938) 41,019
Interest and other 8,747 15,200
Total Income 340,520 368,059
Expenses
Property operating 196,335 165,365
Depreciation and amortization 109,578 114,720
General and administrative 20,729 20,044
Professional fees 12,151 7,823
Total Expenses 338,793 307,952
Net Income $ 1,727 $ 60,107
Net Income (Loss) Allocated:
To the General Partner $ 5,063 $ 8,162
To the Limited Partners (3,336) 51,945
$ 1,727 $ 60,107
Per limited partnership unit
(29,000 outstanding) $(.12) $1.79
Statements of Cash Flows
- - -------------------------
For the three months ended March 31, 1996 1995
Cash Flows From Operating Activities
Net income $ 1,727 $ 60,107
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 109,578 114,720
Increase (decrease) in cash arising from
changes in operating assets and liabilities
Accounts receivable 2,704 9,621
Deferred rent receivable 28,166 15,127
Prepaid expenses (26,957) 3,406
Accounts payable and accrued expenses 23,740 (30,146)
Due to affiliates 56 (18,127)
Other payables 12 _
Net cash provided by operating activities 139,026 154,708
Cash Flows From Investing Activities
Additions to real estate (41,351) (10,965)
Net cash used for investing activities (41,351) (10,965)
Cash Flows From Financing Activities
Cash distributions (91,579) (91,579)
Net cash used for financing activities (91,579) (91,579)
Net increase in cash and cash equivalents 6,096 52,164
Cash and cash equivalents, beginning of period 676,893 1,048,774
Cash and cash equivalents, end of period $ 682,989 $ 1,100,938
Supplemental Schedule of Non-cash Investing Activity:
Write-off of fully depreciated tenant improvements $ 399,748 $ _
Notes to the Financial Statements
- - ----------------------------------
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1995 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of March 31, 1996 and the results of operations and cash flows for
the three months ended March 31, 1996 and 1995 and the statement of partners'
capital for the three months ended March 31, 1996. Results of operations for
the period are not necessarily indicative of the results to be expected for the
full year.
No significant events have occurred subsequent to fiscal year 1995, and no
material contingencies exist which would require disclosure in this interim
report per Regulation S-X, Rule 10- 01, Paragraph (a)(5).
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
- - -------------------------------
At March 31, 1996, the Partnership had cash and cash equivalents totaling
$682,989 relatively unchanged from $676,893 at December 31, 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.
Atrium I was 85% leased at March 31, 1996, compared to 84% at March 31, 1995.
As previously reported, a tenant leasing 6,837 square feet vacated its space
upon expiration of its lease on March 31, 1996. During the quarter, one tenant
executed a six year lease renewal and expanded its space by an additional 1,953
square feet, and now leases a total of 11,460 square feet. Another tenant
extended its lease for four years and decreased its space by 1,535 square feet
for a total of 4,770 square feet. Additionally, on April 15, 1996 an existing
tenant extended its lease for an additional five years and took an additional
9,419 square feet. This tenant now occupies 13,833 square feet. A lease with
a tenant representing 11,674 square feet or approximately 12% of the Property's
total leasable area, is scheduled to expire in September 1996.
Deferred rent receivable totaled $113,224 at March 31, 1996 compared with
$141,390 at December 31, 1995. The decrease is primarily attributable to the
amortization of rental concessions and step rents included in certain leases at
Atrium I.
Accounts payable and accrued expenses increased to $94,359 at March 31, 1996
from $70,619 at December 31, 1995. The increase is primarily attributable to
the timing of the payment of property operating expenses.
After reviewing the Partnership's operations for the 1996 first quarter, 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.
Accordingly, a cash distribution in the amount of $3 per Unit will be paid to
Limited Partners in May 1996. As a result of an expected increase in
tenant improvement expenses and leasing commissions associated with several
recent lease renewals and expansions, and the possibility that a new 8,000
square foot lease may be executed in the near-term, the General Partner will
find it necessary to suspend distributions beginning with the second quarter of
1996.
Results of Operations
- - ---------------------
Operations resulted in net income of $1,727 for the three months ended March
31, 1996 compared with $60,107 for the same period in 1995. The decrease is
primarily attributable to lower tenant expense reimbursements and higher
property operating expenses, partially offset by higher rental income.
Rental income increased to $334,711 for the three months ended March 31, 1996
from $311,840 for the respective period in 1995, primarily due to higher rental
rates and average occupancy. Due to a decrease in utility reimbursements and
the timing of payments from tenants, the Property was required to issue a
credit totaling $2,938 for the three months ended March 31, 1996, versus
collecting $41,019 in tenant reimbursements for the comparable period in 1995.
Property operating expenses consist primarily of on-site personnel expenses,
utility costs, repair and maintenance costs, property management fees,
insurance and real estate taxes. Property operating expenses totaled
$196,335 for the three months ended March 31, 1996 compared to $165,365 for the
same period in 1995. The increase is primarily attributable to higher snow
removal and electric utility expenses during the unusually harsh winter season.
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K -
On 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-today 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.
SIGNATURES
------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMMERCIAL DEVELOPMENT FUND 85
BY: CDF85 Real Estate Services Inc.
General Partner
Date: May 15, 1996 BY: /s/ Kenneth L. Zakin
Director and President
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