- ------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
Commission file number 0-15748
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 06-1149695
(State of Organization) (I.R.S. Employer Identification No.)
900 Cottage Grove Road, South Building
Bloomfield, Connecticut 06002
(Address of principal executive offices)
Registrant's telephone number, including area code: (860) 726-6000
Securities registered pursuant to Section
12(b) of the Act:
None
(Title of Each Class)
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 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
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Not applicable.
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<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
PART I PAGE
Item 1. Business 3
Item 2. Properties 7
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for Registrant's Common Equity and Related Security Holder Matters 11
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 13
Item 8. Financial Statements and Supplementary Data 18
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 33
PART III
Item 10. Directors and Executive Officers of the Registrant 33
Item 11. Executive Compensation 36
Item 12. Security Ownership of Certain Beneficial Owners and Management 36
Item 13. Certain Relationships and Related Transactions 36
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 37
SIGNATURES 39
</TABLE>
2
<PAGE>
PART I
ITEM 1. BUSINESS
The Registrant, CIGNA Income Realty-I Limited Partnership (the
"Partnership"), was formed on October 15, 1985, under the Delaware Revised
Uniform Limited Partnership Act for the purpose of acquiring, operating, holding
for investment and disposing of industrial and office buildings, retail and
service center space and, to a lesser extent, residential properties. On
February 4, 1986, the Partnership commenced an offering of $35,000,000 (subject
to increase up to $50,000,000) of Limited Partnership Interests (the "Units") at
$250 per Unit, pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933 (Registration No. 33-1818).
The General Partner of the Partnership is CIGNA Realty Resources,
Inc.-Tenth (the "General Partner"), which is an indirect wholly owned subsidiary
of CIGNA Corporation, a publicly held corporation whose stock is traded on the
New York Stock Exchange.
The offering terminated on December 1, 1987, with a total of 200,000 Units
having been sold to the public. The holders of 110,042 Units representing 64,146
non-taxable and 45,896 taxable Units were admitted to the Partnership in 1986;
the holders of the remaining 89,958 Units, representing 51,109 non-taxable and
38,849 taxable Units, were admitted to the Partnership in 1987. From the 200,000
Units sold, the Partnership received net proceeds of $45,463,209. The holders of
units ("Unit Holders" or "Limited Partners") of the Partnership share in the
ownership of the Partnership's real property investments according to the number
of Units held. Subsequent to admittance to the Partnership, no Unit Holder has
made any additional capital contribution. The Partnership is engaged solely in
the business of real estate investment. A presentation of information about
industry segments is not applicable.
The Partnership is engaged in passive activities and therefore its
investors are subject to the applicable provisions of the Internal Revenue
Service Code and Regulations. Losses from "passive activities" (which include
any rental activity) may only offset income from "passive activities".
Investors' passive losses in excess of passive income from all sources are
suspended and are carried over to future years when they may be deducted against
passive income generated by the Partnership in such year (including gain
recognized on the sale of the Partnership's assets) or against passive income
derived by investors from other sources. Any suspended losses remaining
subsequent to Partnership dissolution may be used by investors to offset
ordinary income.
The Partnership has acquired three commercial properties (including one
owned through a joint venture) located in Missouri, Massachusetts and Florida,
and one residential property located in Arizona. In order to acquire the
properties, the Partnership, which purchased its properties for all cash,
invested a total of $41,254,243 and paid $179,539 in acquisition expenses and
fees to non-affiliates. In conjunction with these purchases, the Partnership
owes acquisition fees of $2,500,000 to an affiliate of the General Partner.
Pursuant to the limited partnership agreement of the Partnership ("Partnership
Agreement"), the fees are payable from adjusted cash from operations
subordinated to a 6% non-cumulative, non-compounded annual return to Limited
Partners on their adjusted invested capital or, if necessary, from cash from
property sales. To date, no such fees have been paid and the General Partner
expects payment to be made as properties are sold.
Pursuant to the Partnership Agreement, the Partnership is required to
terminate on or before December 31, 2014. The Partnership anticipated that prior
to its termination and dissolution, some or all of the Partnership's properties
would be sold, the retention or sale of any property dependent, in part, on the
anticipated remaining economic benefits of continued ownership. It was expected
that most sales would occur after a period of ownership extending from nine to
twelve years.
3
<PAGE>
<TABLE>
<CAPTION>
The Partnership has made the real property investments set forth in the
following table:
<S> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
PURCHASE ACQUISITION
NAME, TYPE OF PROPERTY AND PRICES (A)(B)(C) FEES AND DATE OF TYPE OF
LOCATION EXPENSES (D) SIZE(E) PURCHASE OWNERSHIP
- -----------------------------------------------------------------------------------------------------------------------------------
1. Woodlands Tech Center $ 7,820,000 $605,586 98,400 07/03/86 100% fee
St. Louis, MO sq. ft. simple
interest
- -----------------------------------------------------------------------------------------------------------------------------------
2. Westford Corporate Center $12,598,206 $733,542 162,835 11/01/86 73.92%
Westford, MA (f) sq. ft. fee simple
interest
- -----------------------------------------------------------------------------------------------------------------------------------
3. Piedmont Plaza $10,636,037 $640,406 147,750 05/01/87 100% fee
Shopping Center sq. ft. simple
Apopka, FL interest
- -----------------------------------------------------------------------------------------------------------------------------------
4. Overlook Apartments $10,200,000 $700,005 224 units 10/14/88 100% fee
Scottsdale, AZ simple
interest
===================================================================================================================================
<FN>
(a) Excludes all broker fees.
(b) The Partnership did not incur any debt in connection with the acquisition
of investment properties.
(c) The table does not reflect purchase price adjustments resulting from earnout
and master lease provisions.
(d) Pursuant to the Partnership Agreement, acquisition fees to affiliates will
be paid from adjusted cash from operations or, if necessary, from cash from
property sales.
(e) Represents net leasable area at acquisition date except for Piedmont Plaza;
current net leasable area may vary due to completion of tenant finish.
Piedmont Plaza added 21,052 square feet subsequent to acquisition.
(f) The Partnership owns a 73.92% interest in the Westford Joint Venture
Partnership (the "Venture") which owns the Westford Corporate Center.
Connecticut General Equity Properties-I Limited Partnership, an affiliated
partnership, is the co-venturer. The financial information shown represents
the Partnership's share of the total investment. Reference is made to the
Notes to Consolidated Financial Statements for a description of the joint
venture partnership through which the Partnership participates in this real
property investment.
</TABLE>
4
<PAGE>
Woodlands Tech is located in the Northwestern St. Louis service center market.
Overall, the St. Louis economy saw continued growth through 1995, albeit at a
slightly slower pace than in 1994. During the year, St. Louis added
approximately 34,000 new jobs and unemployment fell to a twenty-year low of
4.8%. While the manufacturing sector continued to decline, the service sector,
including computer services, health and tourism, grew by approximately 3.3% for
the year. The defense industry was also helped by a $1.8 billion contract from
the United States Air Force awarded to McDonnell Douglas, the largest defense
manufacturer and employer in the state. The submarket, consisting of 29
buildings totalling 964,709 square feet, ended 1995 at 93% occupancy. The
submarket reported negative absorption in 1995 as tenants moved back to
Chesterfield Valley to buildings that have been renovated since the 1993 floods.
The negative absorption may repeat again in 1996. As in the office market,
smaller service center spaces of up to 8,000 square feet are plentiful, while
spaces over 15,000 square feet are scarce and can command higher rental rates.
Overall, rates were relatively flat for the year, ranging between $6 and $11 per
square foot for comparable properties. The majority of comparable properties
with a large percentage of office space is leasing in the $8.00 to $8.50 per
square foot range. Woodlands Tech is leasing at rates comparable to the
competition. Tenant finish packages are still readily available in the service
center market in the range of $3 to $20 per square foot. Existing rollover
spaces can typically be improved within the lower end of the scale. Existing
space that has 30% to 60% finish will require $2 to $6 per square foot and space
which has a higher percentage of finish requires $5 to $10 per square foot.
Westford Corporate Center is located in the Boston submarket known as the
Northwest Corridor, between Routes I-128 and I-495. During 1995, metropolitan
Boston experienced continued job growth due to the strengthened economy.
Out-migration trends have finally reversed and over one-half of the jobs lost
during the 1989-1992 recession have been regained. Nearly two-thirds of all new
jobs are in the service sector, including computer software, engineering, and
research and health care. Overall, manufacturing employment continues to
decline, although the computer hardware industry has finally turned around. The
market in which Westford competes contains approximately 16.8 million square
feet of space with a 19% vacancy rate. Absorption through the end of 1995
totalled approximately 1,177,300 square feet. Westford maintained its 100%
occupancy level in 1995. Rents for R&D space held steady during the year in the
$5.75 to $7 per square foot range. Rents and occupancy levels in the market will
move up slowly as the market works through an estimated one to two year supply
of available R&D space.
The Piedmont Plaza is located in Apopka, Florida, north of Orlando in
northwest Orange County. Apopka experienced population growth of approximately
2% in 1995. The median income for the area is approximately $50,000 and
single-family home prices range from $60,000 to $120,000. The major industry in
Apopka is agriculture. Because of Apopka's affordable housing and its convenient
location on the axis of two main roads, Route 4 and State Road 436, many
residents work in downtown Orlando. However, while the property is located
approximately 20 miles outside Orlando and its major theme parks, including Walt
Disney World, it doesn't significantly benefit from the tourism trade.
In general, the retail environment was turbulent in 1995. Total retail
sales for 1995 were up only 3%; apparel sales were down. The Christmas season
proved to be very weak for many retailers. The 1995 retail market has been
affected by an over-supply of space combined with cautious consumer behavior.
Retail bankruptcies in general, and for apparel companies in particular, are
showing big increases. Most retailers have moved to value pricing, although most
have not made the transition profitably. Leasing decisions for both retailers
and shopping center owners have been postponed because of mergers, acquisitions,
reformatting, bankruptcy, and management reorganizations. The cost to attract
quality tenants continues to escalate at three times the inflation rate.
Effective rents, after tenant improvement amortization, have decreased for
virtually all retail product types. Current trends suggest a future drop in the
total demand for retail space and an intense competition for the consumer's
dollar. Poorly conceived retail centers will close or adopt alternative uses
with the stronger, more dominant centers capturing a greater market share and
better financial performance. All successful retailers and retail sites will
offer a high-grade blend of goods and services at value prices. Retailers will
be attempting to achieve success by efficiencies in distribution, inventory
control, better use of technology and better management.
5
<PAGE>
Piedmont's submarket changed very little in 1995. Strip centers, in
particular, remained overbuilt with approximately 1.6 million square feet of
retail space housed in twenty-one centers, twelve of which are anchored by two
or more tenants. The strip center market had a 20% vacancy rate for unanchored
centers and a 15% vacancy rate for anchored centers. Piedmont was 95% occupied
at year end, ahead of the market. Due to the overbuilt conditions, rental rates
remained flat at approximately $6 per square foot for unanchored space to $10 to
$13 per square foot for anchored facilities. Pass through costs averaged $2.75
per square foot. Piedmont was in line with the market at $6 to $8 per square
foot for space in the back of the center to $9 to $12 per square foot in the
more visible and easily accessed areas. Concessions of one month free rent per
lease year were the norm. There was no new construction in 1995 and none is
planned for the next two years.
Overlook Apartments is located in Scottsdale, Arizona, approximately 20
miles outside downtown Phoenix. During 1995, Phoenix enjoyed continued
in-migration trends with the addition of approximately 50,000 residents and
20,000 new jobs. Scottsdale saw its population grow by 5% in 1995, and this
trend is expected to continue through the end of the decade. Unemployment was
under 3% in 1995, one of the lowest in the nation. Job growth in 1995 was
strong, particularly in the service sector, retail trade and the financial
industry. The tourism industry was also a major contributor to the local economy
during the year. Scottsdale remains targeted as a "hot spot" for development,
particularly for single-family residential communities. The median income in
Scottsdale approaches $50,000 and new homes in this upscale market range from
approximately $90,000 to $300,000.
The North Scottsdale apartment submarket, which contains approximately
7,300 units, expects an additional 1,300 to come online in 1996. The Adobe Ranch
submarket, in which Overlook directly competes, contains 1,446 units, 218 of
which came online in 1995. This market consists of six luxury apartment
complexes and is extremely competitive. During 1996, an additional 534 units are
scheduled to be added to the Adobe submarket. The average rent at Overlook
during the year was $573 per month, slightly ahead of the competition. The
addition of new units in the North Scottsdale market does not compete directly
with Overlook, but will keep rental rates increases at approximately 3% over the
coming year and continue to encourage the use of concessions through the end of
1996. The rent growth continues to be possible as a result of the upscale new
apartment inventory creating a high rental base for the area. While other
complexes offer a wider range of amenities, Overlook competes within its market
through its desirable location with mountain views, excellent on-site service,
and professionally landscaped grounds. During 1995, the property had average
occupancy of 96%, slightly below the prior year but in line with the market.
Approximate occupancy levels for the properties on a quarterly basis are
set forth in the table in Item 2.
The Partnership itself has no employees; however, the unaffiliated property
managers engaged by CIGNA Investments, Inc. ("CII", formerly CIGNA Capital
Advisers, Inc.) on behalf of the Partnership maintain on-site staff. For a
description of asset management services provided by CII and the terms of
transactions between the Partnership and affiliates of the General Partner, see
Item 13 below and the Notes to Consolidated Financial Statements.
6
<PAGE>
The following list details gross revenues for each of the Partnership's
investment properties as a percentage of the Partnership's total gross revenues
during 1993, 1994 and 1995. Excluded from this calculation is the joint venture
partner's share of the gross revenues of the Westford joint venture. In each
year, interest income accounted for the balance of gross revenues.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1993 1994 1995
---- ---- ----
1. Woodlands Tech Center
St. Louis, MO 21% 17% 16%
2. Westford Corporate Center
Westford, MA 22% 24% 27%
3. Piedmont Plaza Shopping Center
Apopka, FL 23% 26% 23%
4. Overlook Apartments
Scottsdale, AZ 33% 31% 31%
</TABLE>
ITEM 2. PROPERTIES
The Partnership owns the properties described in Item l herein. The lease
terms at the commercial properties generally range from three to twenty years.
Most of the leases contain provisions for one or more of the following:
automatic escalation, common area maintenance recapture and recapture for
operating expenses and taxes. See the Notes to Consolidated Financial Statements
for information regarding minimum future rentals under existing leases and
operating expense reimbursements. The residential property generally has lease
terms of one year or less. In the opinion of the General Partner, the
Partnership's properties are adequately insured.
Woodlands Tech Center is a single-story suburban office/warehouse located
in West St. Louis County. The building was completed in 1986 and purchased by
the Partnership on July 3, 1986. The 7.6 acre site contains a net leasable area
of approximately 97,383 square feet. The space layout includes up to 24 suites
(which may be combined) ranging in size from 2,521 to 16,848 square feet.
Ceiling heights are 8'6" in the office space and 12' in the service center
space. All spaces are served by either a dock high or grade level track door.
The spaces have separate HVAC units and are fully sprinklered.
<TABLE>
<CAPTION>
The following table provides information on tenants that occupy ten percent
or more of Woodland Tech Center's net leasable area:
<S> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
TENANT SQUARE PRINCIPAL BASE RENT PER LEASE RENEWAL OTHER
FOOTAGE BUSINESS ANNUM DATES OPTION INFORMATION
====================================================================================================================================
1. Honeywell, Inc. 16,848 Computer $153,864 01/01/91- -- --
Manufacturer 08/31/97
- ------------------------------------------------------------------------------------------------------------------------------------
2. ALTECH of 10,069 Computer $67,968 02/01/93- 1, 1 year --
Ladue, Inc. Sales/Leasing 01/31/96 ext. option
====================================================================================================================================
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
The following table provides lease expiration information relative to
Woodlands Tech Center:
<S> <C> <C> <C> <C>
===============================================================================================================
YEAR NUMBER OF LEASES SQUARE FOOTAGE ANNUALIZED BASE PERCENTAGE OF TOTAL
EXPIRING RENT ANNUALIZED BASE
RENT
- ---------------------------------------------------------------------------------------------------------------
1996 6 36,303 $274,296 39%
- ---------------------------------------------------------------------------------------------------------------
1997 3 28,725 $229,296 32%
- ---------------------------------------------------------------------------------------------------------------
1998 4 13,297 $114,552 16%
- ---------------------------------------------------------------------------------------------------------------
1999 2 7,976 $60,372 9%
- ---------------------------------------------------------------------------------------------------------------
2000 1 3,560 $28,476 4%
===============================================================================================================
<FN>
The Westford property consists of two 2-story R&D/office buildings
containing 163,247 square feet of net rentable area (81,623 square feet each).
The property is located in Westford, Massachusetts, at the interchange of Boston
Road and Interstate 495. The construction consists of steel frame with an
exterior masonry finish. Each building has features that include sprinklers,
variable air volume HVAC, two passenger elevators and security systems.
</TABLE>
<TABLE>
<CAPTION>
The following table provides information on tenants that occupy ten percent
or more of Westford Corporate Center's net leasable area:
<S> <C> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
TENANT SQUARE PRINCIPAL BASE RENT LEASE RENEWAL OTHER
FOOTAGE BUSINESS PER ANNUM DATES OPTION INFORMATION
- -----------------------------------------------------------------------------------------------------------------------------------
1. Cascade 81,615 Communications $486,535 10/01/93- 1, 3 year ext. --
Communication 03/31/99 option
Corporation
- -----------------------------------------------------------------------------------------------------------------------------------
2. Sentry 81,632 Insurance $938,768 03/27/92- 1, 5 year ext. --
Insurance 03/26/99 option
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
The following table provides lease expiration information relative to
Westford Corporate Center:
<S> <C> <C> <C> <C>
===================================================================================================================
YEAR NUMBER OF LEASES SQUARE FOOTAGE ANNUALIZED BASE PERCENTAGE OF TOTAL
EXPIRING RENT ANNUALIZED BASE RENT
- -------------------------------------------------------------------------------------------------------------------
1999 2 163,247 $1,425,303 100%
===================================================================================================================
</TABLE>
Piedmont Plaza is a one level, two-anchor, neighborhood strip shopping
center built in 1985. One anchor, Albertson's Supermarket, owns their store and
parking and is not a tenant. Small shop square footage ratio to total center is
27% (38% of owned gross leasable area). The property contains net leasable area
of 150,700 square feet. The property is located in Apopka, Florida, in northwest
Orange County, on a major commuter route (Semoran Boulevard) but with limited
visibility of small shop space from the main road. There is also an additional
enclosed area created for the Builder's Square garden center and lumber yard.
8
<PAGE>
<TABLE>
<CAPTION>
The following table provides information on tenants that occupy ten percent
or more of Piedmont Plaza's net leasable area:
<S><C> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
TENANT SQUARE PRINCIPAL BASE RENT PER LEASE RENEWAL OTHER
FOOTAGE BUSINESS ANNUM DATES OPTION INFORMATION
===================================================================================================================================
1. Builder's Square 107,400 Home $590,700 09/01/92- 10, 5 year Percentage
Improvement 08/31/12 ext. options rent
Retailer
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
The following table provides lease expiration information relative to
Piedmont Plaza:
<S> <C> <C> <C> <C>
=================================================================================================================
YEAR NUMBER OF LEASES SQUARE FOOTAGE ANNUALIZED BASE PERCENTAGE OF TOTAL
EXPIRING RENT ANNUALIZED BASE RENT
- -----------------------------------------------------------------------------------------------------------------
1996 4 17,800 $94,379 11%
- -----------------------------------------------------------------------------------------------------------------
1997 2 3,350 $28,743 3%
- -----------------------------------------------------------------------------------------------------------------
1998 2 2,400 $24,144 3%
- -----------------------------------------------------------------------------------------------------------------
1999 3 5,350 $64,780 7%
- -----------------------------------------------------------------------------------------------------------------
Thereafter 4 114,100 $679,800 76%
=================================================================================================================
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
The following table compares approximate occupancy levels by quarter for
the Partnership's investment properties during 1991, 1992, 1993, 1994 and 1995:
<S> <C> <C> <C> <C>
========================================================================================================================
WOODLANDS TECH WESTFORD PIEDMONT PLAZA OVERLOOK
CENTER CORPORATE CENTER SHOPPING CENTER APARTMENTS
ST. LOUIS, MO WESTFORD, MA (A) APOPKA, FL SCOTTSDALE, AZ
========================================================================================================================
1991
- -----------------
AT 03/31 76% 10% 27% 89%
AT 06/30 76% 10% 25% 90%
AT 09/30 74% 10% 25% 98%
AT 12/31 82% 10% 19% 94%
- ------------------------------------------------------------------------------------------------------------------------
1992
- -----------------
AT 03/31 82% 60% 16% 95%
AT 06/30 85% 60% 17% 92%
AT 09/30 85% 60% 87% 90%
AT 12/31 90% 60% 89% 98%
- ------------------------------------------------------------------------------------------------------------------------
1993
- -----------------
AT 03/31 100% 60% 91% 99%
AT 06/30 100% 60% 91% 91%
AT 09/30 100% 60% 91% 96%
AT 12/31 95% 75% 92% 99%
- ------------------------------------------------------------------------------------------------------------------------
1994
- -----------------
AT 03/31 95% 75% 92% 99%
AT 06/30 100% 85% 94% 97%
AT 09/30 94% 100% 93% 99%
AT 12/31 94% 100% 95% 98%
- ------------------------------------------------------------------------------------------------------------------------
1995
- -----------------
AT 03/31 94% 100% 95% 98%
AT 06/30 96% 100% 95% 93%
AT 09/30 96% 100% 95% 97%
AT 12/31 92% 100% 95% 97%
========================================================================================================================
<FN>
(a) See the notes to Consolidated Financial Statements for a description of the
joint venture partnership through which the Partnership has made this real
property investment. The Partnership owns a 73.92% interest in the joint
venture which owns the property.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
Neither the Partnership nor its properties are party to or the subject of
any legal proceedings involving any material exposure.
10
<PAGE>
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 the fiscal year covered by this report.
PART II
ITEM 5.MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS
As of December 31, 1995, there were approximately 3,944 record Unit
Holders. There is no established public trading market for Units. The General
Partner will not redeem or repurchase the Units.
The Revenue Act of 1987 adopted provisions which have an adverse impact on
investors in a "publicly traded partnership" ("PTP"). A PTP is a partnership
whose interests are traded on an established securities market or readily
tradable on a secondary market (or the substantial equivalent thereof). If the
Partnership were classified as a PTP, (i) the Partnership may be taxed as a
corporation, and (ii) the passive activity rules of section 469 are applied
separately with respect to items attributable to each publicly traded
partnership. On November 29, 1995, the Internal Revenue Service ("IRS") issued
the Final PTP Regulations under section 1.7704-1. The Final PTP Regulations are
effective for the tax years beginning after December 31, 1995. However, a
transition rule exists for partnerships that were engaged in an activity before
December 4, 1995 and that do not add a substantial new line of business after
that date. The Partnership qualifies for the transition rule and may continue to
rely on Notice 88-75 for guidance through the end of 2005. In Notice 88-75, the
IRS established alternative safe harbors that allow interests in a partnership
to be transferred or redeemed in certain circumstances without causing the
partnership to be characterized as a PTP. Units of the Partnership are not
listed or quoted for trading on an established securities exchange. However,
CIGNA Financial Partners ("CFP") will, upon request, provide a Limited Partner
desiring to sell or transfer Units with a list of secondary market firms which
may provide a means for matching potential sellers with potential buyers of
Units, if any. Frequent sales of Units utilizing these services could cause the
Partnership to be deemed a PTP. The Partnership has adopted a policy prohibiting
transfers of Units in secondary market transactions unless, notwithstanding such
transfers, the Partnership will satisfy at least one of the safe harbors.
Although such a restriction could impair the ability of investors to liquidate
their investment, the service provided by CFP described above should allow a
certain number of transfers to be made in compliance with the safe harbor.
<TABLE>
<CAPTION>
The Partnership declared quarterly cash distributions to Limited Partners
for 1995 and 1994 as set forth in the following table:
<S> <C> <C> <C>
Cash Distribution per Unit
Quarter Date Paid 1995 1994
-------- --------- ---- ----
1st May 15 $ 3.45 $ 3.12
2nd August 15 3.75 3.12
3rd November 15 3.75 3.12
4th February 15 3.75 4.50
-------- --------
$ 14.70 $ 13.86
======== ========
<FN>
(a) Quarterly distributions are paid 45 days following the end of the calendar quarter.
Reference is made to Item 6 for information on cash distributions paid to
Limited Partners during 1995, 1994, 1993, 1992, and 1991.
</TABLE>
There are no material legal restrictions upon the Partnership's ability to
make distributions in accordance with the provisions of the Partnership
Agreement. The Partnership intends to continue its policy of making quarterly
distributions of distributable cash from operations. Reference is made to the
Notes to Consolidated Financial Statements for a description of payments to the
State of Connecticut on behalf of Limited Partners and charged to Limited
Partner capital accounts.
11
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA (A)
<TABLE>
<CAPTION>
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
DECEMBER 31, 1995, 1994, 1993, 1992 AND 1991
(NOT COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS)
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Total income (b) $ 5,174,279 $ 5,019,967 $ 4,289,754 $ 3,462,774 $ 3,102,718
Net income (loss) (c) 1,702,991 1,244,897 954,378 (6,219,956) (99,127)
Net income (loss) per Unit (c) 8.43 6.16 4.72 (30.79) (0.49)
Total assets (b) 31,201,168 32,525,759 33,782,661 35,176,295 44,162,951
Cash distributions to Limited
Partners (d) 3,090,000 2,472,000 2,400,000 2,562,000 1,248,000
Cash distributions per Unit (d) 15.45 12.36 12.00 12.81 6.24
<FN>
(a) The above selected financial data should be read in conjunction with the
consolidated financial statements and the related notes herein. Reference
is made to the Notes to Consolidated Financial Statements for a description
of payments to the State of Connecticut on behalf of Limited Partners.
These payments are charged to Limited Partner capital accounts and have not
been included as part of the above presentation.
(b) Total income excludes the venture partner's share of income and total
assets exclude venture partner's equity interest. See the Notes to
Consolidated Financial Statements for a description of the joint venture.
(c) Includes losses due to impairment of assets of $280,000 ($1.39 per Unit) in
1994 and $6,408,960 ($31.72 per Unit) in 1992, net of the venture partner's
share.
(d) Quarterly distributions are paid and recorded in the Partnership's records
as distributions 45 days following the close of the calendar quarter.
</TABLE>
12
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On February 4, 1986, the Partnership commenced an offering of $35,000,000
(subject to increase up to $50,000,000) of limited partnership interests
pursuant to a Registration Statement on Form S-11 under the Securities Act of
1933. The offering terminated on December 1, 1987 and a total of 200,000 Units
were issued by the Partnership and assigned to the public at $250 per interest.
Subsequent to the termination of the offering, no Unit Holder has made any
additional capital contribution. The Partnership does not expect to seek
additional capital contributions.
After deducting selling expenses and other offering costs, the Partnership
had $45,463,209 with which to make investments in real property, to pay other
costs related to such investments and for working capital reserves. A portion of
the proceeds was utilized to acquire the properties described in Item 1 herein.
Acquisition fees to affiliates in the amount of $2,500,000 will be paid from
adjusted cash from operations after priority distributions to limited partners,
or if necessary, from cash from sale proceeds. To date, no such fees have been
paid and the General Partner expects payment to be made as properties are sold.
The Partnership did not incur any mortgage debt in connection with the
acquisition of the properties. The Partnership does not intend to incur mortgage
indebtedness at any time during the term of the Partnership.
At December 31, 1995, the Partnership's cash and cash equivalents,
excluding the joint venture's cash and cash equivalents, totalled $2,171,567.
The Partnership's share of cash and cash equivalents from the Westford Office
Venture was $780,548. Cash and cash equivalents were available for working
capital requirements, cash reserves, and distributions to Limited Partners.
Reference is made to Item 5 for information on cash distributions to Limited
Partners for 1995. Cash distributions for 1995 reflected the Partnership's
actual cash from operations after capital improvements, leasing commissions,
Partnership expenses and adjustments to cash reserves. The Partnership expects
to continue its practice of making quarterly cash distributions. Distributable
cash from operations is subject to changes in cash reserves for liabilities or
leasing risk. Based on property operational plans for 1996, the General Partner
estimates the Partnership will produce positive cash flow from operations after
capital improvements, leasing costs and Partnership expenses.
Reference is made to Item 1 for a description of the Partnership's
investment properties and a description of the markets in which the properties
operate. Reference is made to Item 2 for information on the properties'
significant tenants and lease expirations.
Subsequent to the opening of Piedmont Plaza's new anchor's store in the
third quarter of 1992, Piedmont has achieved a stabilized occupancy in the 95%
range. As of December 31, 1994, the property's net operating income had also
stabilized as a result of the new anchor, Builder's Square. The Builder's Square
lease carries a guarantee from its corporate parent, K-Mart. The property
continued to maintain a 95% occupancy throughout 1995, with minimal leasing
activity and capital costs. In 1993, it was determined that the Partnership
would realize the maximum value of Piedmont Plaza with a sale after income
stabilization. During the third quarter of 1995, CII marketed Piedmont Plaza for
sale. The marketing effort produced some offers, one of which the Partnership
elected to pursue. After a due diligence period, the potential purchaser
declined to continue with the purchase. CII revisited the other offers, none of
which proceeded beyond a letter of intent. Real estate investors have turned
very cautious toward K-Mart and retail in general as many retailers are working
through financial difficulties, consolidations, or changes in operating
philosophies. The Partnership and CII intend to re-evaluate the property's sales
price and to continue to pursue a sale if the anticipated realizable sales value
is equivalent or greater than the estimated remaining economic benefits of
continued ownership over a relatively short holding period. For 1996, no
significant leasing activity is planned, and capital improvements and leasing
costs are estimated to be minimal.
13
<PAGE>
Westford Corporate Center is owned by a joint venture partnership in which
the Partnership owns a 73.92% equity investment. Adjusted cash from operations
at Westford Corporate Center for 1995 was $1,155,000 ($854,000 attributable to
the Partnership's interest) after capital expenditures of $44,000. During the
year one of the two existing tenants expanded into space vacated by a former
tenant. The property remains at 100% occupancy. Cash flow from operations in
1996 is expected to be similar to 1995, with no capital expenditures planned. A
sale of the Westford property, 73.92% owned through a joint venture, may be held
off until the existing tenants' leases reach expiration and are renewed or the
space is leased to new tenants in 1999 or 2000.
Adjusted cash from operations at Woodlands Tech for 1995 was $465,000 after
capital improvements and leasing commissions of $93,000. The property began 1995
with physical occupancy of 94%, and by May 31, 1995, had obtained 100% physical
occupancy. During June 1995, a tenant representing 3,854 square feet vacated
early, paying a $22,000 termination fee. In November, an existing tenant which
had expanded in April, decided to vacate the expansion space and agreed to a
termination fee $16,455. In December, a new tenant took occupancy of
approximately 3,700 square feet. The property ended the year with physical
occupancy of 92%. Leasing exposure for 1996 totals 36,303 square feet or 37% of
the net leasable area, of which 8,165 square feet is expected to be renewed (22%
of the 1996 exposure). The property has planned new leasing in 1996 totalling
17,591 square feet, or 49% of the 1996 exposure. Leasing costs for the new lease
in December 1995 and expected 1996 leasing activity have been estimated to be
approximately $267,000, to be funded by cash flow from operations. Leasing
exposure for 1997, currently 28,725 square feet representing 29% of the net
leasable area, also presents a challenge. Leasing activity for 1996 and 1997 is
not expected to require capital beyond the funding provided by cash flow from
operations. The Partnership's long term strategy includes a sale in
approximately three years after the property's operations have been stabilized
from the 1996 and 1997 leasing activity.
Overlook has provided consistently strong results for the Partnership
throughout 1995. Adjusted cash from operations for 1995 totalled approximately
$987,000 after $16,000 of capital improvements. The market in which Overlook
operates has continued to add new upscale apartments to the inventory, creating
a high rental base for the area and allowing the property to raise rates again
during 1995. Rental rates will continue to edge up in 1996 as renewals and
turnover occur. The Partnership's strategy for the property includes a holding
period of approximately three years.
RESULTS OF OPERATIONS
Partnership net operating income, (total revenue less property operating
expenses, general and administrative expenses, fees and reimbursements to
affiliates and provision for doubtful accounts) inclusive of the venture
partner's share of Venture, increased in 1995 to approximately $3,449,000
compared to approximately $3,288,000 in 1994. Continued strong occupancy at
Piedmont and Westford and modest rent increases at Overlook more than offset
decreased rental income at Woodlands Tech Center.
At Piedmont Plaza, net operating income decreased approximately $130,000 as
1994 included a $100,000 bankruptcy claim settlement from the former anchor
tenant. In addition, the property collected disputed expense recoveries in 1994
from the anchor tenant relating to 1992 and 1993. The decrease is partially
offset by slightly higher occupancy in 1995.
A tenant at Westford Corporate Center expanded in April and September of
1994. As a result, Westford's net operating income increased approximately
$248,000 for 1995 versus 1994.
At Woodlands Tech Center net operating income increased approximately
$6,000 in 1995. Slight decreases in occupancy and rental rates were more than
offset by approximately $13,000 of 1993 and 1994 property tax refunds received
in 1995.
Increased revenues at Overlook Apartments, due to higher rental rates in
1995, were partially offset by a rise in expenses for property taxes, insurance,
carpet replacements and pest control service. The result was an approximate
14
<PAGE>
$9,000 increase in net operating income in 1995 as compared to 1994.
The balance of the increase in Partnership net operating income for 1995
was due primarily to increased interest income due to increased rates.
RESULTS - 1995 COMPARED WITH 1994
Base rental income increased approximately $238,000 for the year ended
December 31, 1995, as compared with 1994. Slightly higher occupancy at Piedmont
Plaza led to an increase in rental income of approximately $37,000. At Westford
Corporate Center, rent from a tenant's expansions in April and September of 1994
largely contributed to the approximate $139,000 increase. Rental income at
Overlook Apartments increased approximately $69,000 as a result of modest rental
rate increases. Tenant turnover has resulted in an approximate $7,000 decrease
in rental income at Woodlands Tech.
Other income decreased approximately $74,000 for the year ended December
31, 1995, as compared to 1994. Piedmont reported a $156,000 decrease as 1994
included a bankruptcy claim settlement from the former anchor tenant. In
addition, Piedmont collected expense recoveries in 1994 from the current anchor
tenant for 1992 and 1993. At Westford, a tenant's expansion led to additional
expense recovery income of approximately $87,000 for the year.
Interest income increased for the year ended December 31, 1995, as compared
to 1994, due to an increase in interest rates on short term investments.
Overall, property operating expenses increased for the year ended December
31, 1995, as compared to 1994. Insurance costs for each of the properties rose
slightly in 1995 over 1994. Repairs and maintenance expense increased at
Piedmont Plaza as a result of an exterior painting project, and at Overlook
Apartments due to a greater number of carpet replacements and expanded pest
control service. Westford's expenses dropped as less was spent on snowplowing
and elevator repairs. Expense savings at Westford were partially offset by an
increase in management fees (earned as a percentage of collected revenues). An
increase in property taxes at Overlook was offset by decreases at Westford
(reduced assessment) and Woodlands Tech (1993 and 1994 tax refunds recorded in
1995).
The decrease in general and administrative expenses for the year ended
December 31, 1995, as compared with the previous year, was primarily the result
of a second quarter 1994 agreement with Piedmont's anchor tenant for the
reimbursement of sales tax paid by the Partnership on rental income. The
reimbursement received from the tenant was netted directly against the sales tax
payment, which had been previously recorded as general and administrative
expense.
The increase in provision for doubtful accounts was primarily related to
the collectibility of expense reimbursements from the anchor tenant of Piedmont
Plaza.
The joint venture operations improved for the year ended December 31, 1995,
as compared with 1994, due to a tenant's expansions in the second and third
quarters of 1994.
The decrease in depreciation and amortization for the year ended December
31, 1995, as compared with 1994, was due to the expiration of useful lives of
certain assets at Woodlands Tech, Piedmont and Overlook in 1995 and accelerated
depreciation and amortization associated with vacated tenants at Woodlands Tech
in 1994. The decrease was partially offset by additional depreciation from
tenant improvements and leasing commissions associated with a 1994 tenant
expansion at Westford.
RESULTS - 1994 COMPARED WITH 1993
Base rental income increased approximately $340,000 for the year ended
December 31, 1994, as compared with
15
<PAGE>
1993. The turnover of tenants and signing of new leases increased rents by
approximately $23,000 at Piedmont Plaza and decreased rents at Woodlands Plaza
by approximately $42,000. The decrease at Woodlands was partially offset by the
receipt in 1994 of a lease termination fee of approximately $22,000. At Westford
Corporate Center, rent from a 24,585 square foot lease executed in the third
quarter of 1993 and the tenant's subsequent 15,507 and 25,054 square foot
expansions on April 1, 1994 and September 1, 1994, respectively, added
approximately $221,000 to the increase. Rental income at Overlook Apartments
increased approximately $116,000 as a result of rental rate increases, averaging
5% upon renewal or turnover, and a reduction in concessions as the market
strengthened.
Other income increased approximately $464,000 for the year ended December
31, 1994, as compared to 1993. Piedmont reported a $300,000 increase,
principally related to expense recoveries from the anchor tenant and a
bankruptcy claim settlement from the former anchor tenant. Westford posted an
approximate $158,000 increase due primarily to expense charge-back billings
relating to the newly leased space.
Interest income increased for the year ended December 31, 1994, as compared
to 1993, due to an increase in the Partnership's average cash balance and higher
interest rates on short term investments.
Property operating expenses increased for the year ended December 31, 1994,
as compared to 1993. Piedmont's repair and maintenance expense increased as a
result of the replacement of water and sewer meters, partially offset by a
decrease in roof repairs. Property taxes at Piedmont increased slightly as a
result of an increase in assessed value. Westford had an increase in cleaning,
maintenance and management fee expenses, and, due to the extreme winter, spent
substantially more on snowplowing in early 1994. Property taxes at Westford
decreased as a result of a successful property tax appeal (fiscal year is July
1, 1993 to June 30, 1994). The tax appeal resulted in a decrease to the assessed
value and a refund which was received and posted to second quarter results.
Repairs and maintenance expense at Overlook Apartments increased due to carpet
and refrigerator compressor replacement expenditures and a painting and vinyl
replacement project.
The provision for doubtful accounts in 1993 related to a collection of
expense reimbursements problem at Piedmont Plaza.
Depreciation and amortization for the year ended December 31, 1994, as
compared with 1993, increased as a result of new tenant improvements and leasing
commissions at Westford and Woodlands and accelerated depreciation and
amortization of assets associated with vacated tenants at Woodlands.
In 1994 the Partnership recorded an impairment loss relative to Piedmont
Plaza due to estimated future cash flow declines reflecting a change in the
estimated holding period.
The joint venture operations improved for the year ended December 31, 1994,
as compared with 1993, due to a new tenant taking occupancy in the fourth
quarter of 1993 and its subsequent expansions in the second and third quarters
of 1994.
INFLATION
With inflation at a low rate during 1995, 1994 and 1993, the effect of
inflation and changing prices on current revenue and income from operations has
been minimal.
Any significant inflation in future periods is likely to increase rental
rates (from leases to new tenants or renewals of leases to existing tenants)
assuming no major changes in market conditions. At the same time, it is
anticipated that property operating expenses will be similarly affected.
Assuming no major changes in occupancy levels, increases in rental income are
expected to cover inflation driven increases in the cost of operating the
properties and in property taxes. Inflation may also contribute to capital
appreciation of the Partnership's investment properties over a period of time as
rental rates and replacement costs of properties increase.
16
<PAGE>
The escalation clauses and recapture provisions that exist on certain
leases at Woodlands Tech Center, Westford Corporate Center and Piedmont Plaza
offer the Partnership some protection against inflation.
Escalation clauses dilute the increases in operating expenses due to
inflation. As operating expenses attributable to inflation increase, so will the
escalation revenues due to the Partnership, offsetting, at least in part, the
increase in total expenses. The recapture provisions protect the Partnership
from rising costs of common area maintenance as well as taxes and other
operating expenses by passing through, at least partially, these increases to
the lessees.
17
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
INDEX
<S> <C>
PAGE
Report of Independent Accountants 19
Financial Statements:
Consolidated Balance Sheets, December 31, 1995 and 1994 20
Consolidated Statements of Operations, For the Years Ended December 31, 1995, 1994 and 1993 21
Consolidated Statements of Partners' Capital, For the Years Ended December 31, 1995, 1994 and 1993 22
Consolidated Statements of Cash Flows, For the Years Ended December 31, 1995, 1994 and 1993 23
Notes to Financial Statements 24
Schedules:
III - Real Estate and Accumulated Depreciation, December 31, 1995 31
Schedules not filed:
All schedules other than those indicated in the index have been omitted as
the required information is inapplicable or the information is presented in the
financial statements or related notes.
</TABLE>
18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
CIGNA Income Realty-I Limited Partnership
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of CIGNA Income
Realty-I Limited Partnership at December 31, 1995 and 1994, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Hartford, Connecticut
February 16, 1996
19
<PAGE>
<TABLE>
<CAPTION>
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<S> <C> <C>
ASSETS 1995 1994
------ ---- ----
Property and improvements, at cost:
Land and improvements $ 9,552,353 $ 9,492,296
Buildings 27,323,577 27,310,597
Tenant improvements 5,257,538 5,168,282
Furniture and fixtures 820,904 820,904
--------------- ---------------
42,954,372 42,792,079
Less accumulated depreciation 13,104,206 11,635,309
--------------- ---------------
Net property and improvements 29,850,166 31,156,770
Cash and cash equivalents 3,227,503 3,404,809
Accounts receivable (net of allowance of $15,158 in
1995 and $725 in 1994) 300,941 375,506
Prepaid expenses and other assets 9,760 20,614
Deferred charges, net 492,190 611,084
--------------- ---------------
Total $ 33,880,560 $ 35,568,783
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses (including $24,532
in 1995 and $20,526 in 1994 due to affiliates) $ 261,013 $ 211,187
Tenant security deposits 113,188 108,426
Unearned income 25,032 14,252
Deferred acquisition fees due to affiliates 2,500,000 2,500,000
--------------- ---------------
Total liabilities 2,899,233 2,833,865
--------------- ---------------
Venture partner's equity in joint venture 2,679,392 3,043,024
--------------- ---------------
Partners' capital:
General Partner:
Capital contributions 1,000 1,000
Cumulative net income 42,670 25,640
--------------- ---------------
43,670 26,640
--------------- ---------------
Limited partners (200,000 Units):
Capital contributions, net of offering costs 45,463,209 45,463,209
Cumulative net income 4,224,350 2,538,389
Cumulative cash distributions (21,429,294) (18,336,344)
--------------- ---------------
28,258,265 29,665,254
--------------- ---------------
Total partners' capital 28,301,935 29,691,894
--------------- ---------------
Total $ 33,880,560 $ 35,568,783
=============== ===============
The Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<S> <C> <C> <C>
1995 1994 1993
---- ---- ----
Income:
Base rental income $ 4,632,760 $ 4,394,632 $ 4,054,590
Other income 869,720 943,355 479,468
Interest income 170,263 121,905 89,689
------------- ------------- -------------
5,672,743 5,459,892 4,623,747
------------- ------------- -------------
Expenses:
Property operating expenses 1,619,142 1,588,395 1,484,361
General and administrative 395,160 419,267 427,975
Fees and reimbursements to affiliates 189,643 161,006 154,472
Provision for doubtful accounts 19,412 3,519 13,794
Depreciation and amortization 1,588,427 1,660,381 1,568,450
Loss due to impairment of assets -- 280,000 --
------------- ------------- -------------
3,811,784 4,112,568 3,649,052
------------- ------------- -------------
Income inclusive of venture
partner's share of venture operations 1,860,959 1,347,324 974,695
Venture partner's share of venture income (157,968) (102,427) (20,317)
------------- -------------- -------------
Net income $ 1,702,991 $ 1,244,897 $ 954,378
============= ============= =============
Net income:
General Partner $ 17,030 $ 12,449 $ 9,544
Limited partners 1,685,961 1,232,448 944,834
------------- ------------- -------------
$ 1,702,991 $ 1,244,897 $ 954,378
============= ============= =============
Net income per Unit $ 8.43 $ 6.16 $ 4.72
============= ============= =============
Cash distributions per Unit $ 15.46 $ 12.37 $ 12.01
============= ============= =============
The Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<S> <C> <C> <C>
General Limited
Partner Partners Total
Balance at December 31, 1992 $ 4,647 $ 32,363,554 $ 32,368,201
Cash distributions -- (2,401,552) (2,401,552)
Net income 9,544 944,834 954,378
----------- -------------- --------------
Balance at December 31, 1993 14,191 30,906,836 30,921,027
Cash distributions -- (2,474,030) (2,474,030)
Net income 12,449 1,232,448 1,244,897
----------- -------------- --------------
Balance at December 31, 1994 26,640 29,665,254 29,691,894
Cash distributions -- (3,092,950) (3,092,950)
Net income 17,030 1,685,961 1,702,991
----------- -------------- --------------
Balance at December 31, 1995 $ 43,670 $ 28,258,265 $ 28,301,935
=========== ============== ==============
The Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<S> <C> <C> <C>
1995 1994 1993
---- ---- ----
Cash flows from operating activities:
Net income $ 1,702,991 $ 1,244,897 $ 954,378
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred rent credits 19,877 30,682 5,588
Provision for doubtful accounts 19,412 3,519 13,794
Depreciation and amortization 1,588,427 1,660,381 1,568,450
Loss due to impairment of assets -- 280,000 --
Venture partner's share of venture's operations 157,968 102,427 20,317
Accounts receivable 55,153 (62,328) (157,448)
Accounts payable and accrued expenses 31,124 (13,283) 5,309
Other, net 26,396 3,713 39,403
--------------- -------------- --------------
Net cash provided by operating activities 3,601,348 3,250,008 2,449,791
--------------- -------------- --------------
Cash flows from investing activities:
Distribution to joint venture partner (521,600) -- --
Purchases of property and improvements (144,511) (330,303) (288,267)
Payment of leasing commissions (20,513) (90,862) (73,314)
--------------- -------------- --------------
Net cash used in investing activities (686,624) (421,165) (361,581)
--------------- -------------- --------------
Cash flows from financing activities:
Cash distributions to limited partners (3,092,030) (2,473,552) (2,403,507)
--------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents (177,306) 355,291 (315,297)
Cash and cash equivalents, beginning of year 3,404,809 3,049,518 3,364,815
--------------- -------------- --------------
Cash and cash equivalents, end of year $ 3,227,503 $ 3,404,809 $ 3,049,518
=============== ============== ==============
Supplemental disclosure of non-cash information:
Accrued purchase of property and improvements $ 17,782 $ -- $ 31,225
=============== ============== ==============
The Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
23
<PAGE>
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF ACCOUNTING
The General Partner of CIGNA Income Realty-I Limited Partnership (the
"Partnership") is CIGNA Realty Resources, Inc.-Tenth (the "General Partner"), an
indirect wholly owned subsidiary of CIGNA Corporation. The Partnership is a
Delaware limited partnership which owns and operates three commercial properties
(including one owned through a joint venture) located in Missouri, Massachusetts
and Florida, and one residential property located in Arizona.
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.
The accompanying consolidated financial statements include the accounts of
the Partnership and its consolidated venture, Westford Office Venture. The
effect of all transactions between the Partnership and the consolidated venture
has been eliminated.
The Partnership's records are maintained on the accrual basis of accounting
for financial reporting purposes and are adjusted for federal income tax
reporting. The net effects of the adjustments as of December 31, 1995, 1994 and
1993, principally relating to the classification of syndication costs,
impairment losses and differences in depreciation methods, are summarized as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1995 1994 1993
---- ---- ----
Financial Tax Financial Tax Financial Tax
Reporting Reporting Reporting Reporting Reporting Reporting
Total assets $ 33,880,560 $ 43,233,774 $ 35,568,783 $ 44,459,133 $ 36,723,258 $ 45,291,922
Partners' capital:
General Partner 43,670 120,103 26,640 101,973 14,191 85,261
Limited partners 28,258,265 40,233,704 29,665,254 41,531,782 30,906,836 42,351,326
Net income (a):
General Partner 17,030 18,130 12,449 16,712 9,544 10,184
Limited partners 1,685,961 1,794,872 1,232,448 1,654,486 944,834 1,008,241
Net income (loss) 8.43 15.18- 6.16 14.59- 4.72 11.43-
per Unit(a)(b) .52 (.34) (3.64)
<FN>
(a) Included in 1994 is $280,000 ($1.39 per Unit) of losses due to impairment
of assets for financial reporting.
(b) For tax reporting only, all depreciation is allocated 1% to the General
Partner and 99% to the taxable limited partners in accordance with the
Partnership Agreement. The two amounts on a per Unit basis presented for
1995, 1994 and 1993 for tax reporting represent the differing allocations
to nontaxable and taxable limited partners.
</TABLE>
24
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) PROPERTY AND IMPROVEMENTS: Property and improvements are recorded at cost
less accumulated depreciation. The cost represents the initial purchase
price, subsequent capitalized costs and adjustments, including certain
acquisition expenses and impairment losses. Amounts received under master
lease agreements from the sellers of the properties have been treated as a
reduction of purchase price. Payments to the seller of the Woodlands Tech
Center under an earnout provision have been treated as an increase in
purchase price.
Depreciation on property and improvements is calculated on the
straight-line method based on the estimated useful lives of the real
property (15 to 39 years), tangible personal property (7 years) and
tenant improvements (respective lease terms). Maintenance and repair
expenses are charged to operations as incurred.
As a result of inherent changes in market values of real estate property
and improvements, the Partnership reviews potential impairment annually.
The undiscounted future cash flows for each property, as estimated by the
Partnership, are compared to the net book value. If the carrying value is
greater than the sum of the estimated future undiscounted cash flows, and
deemed other than temporary, an impairment loss is recorded.
In 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" (the
"Statement"). Under the Statement, entities should continue to compare
the sum of the expected undiscounted future net cash flows to the
carrying value of the asset. If an impairment exists, the Statement
requires a writedown to fair value. Long-lived assets to be disposed of,
including real estate held for sale, must be carried at the lower of cost
or fair value less costs to sell. In addition, the Statement prohibits
depreciation of long-lived assets to be disposed. The Partnership will
adopt this Statement in the first quarter of 1996; the effect on the
Partnership's results of operations, liquidity and financial condition
can not be estimated.
B) CASH AND CASH EQUIVALENTS: Short-term investments with a maturity of three
months or less at the time of purchase are generally reported as cash
equivalents.
C) DEFERRED CHARGES: Deferred charges consist of leasing commissions and
rental concessions that are being amortized using the straight-line method
over the respective lease terms.
D) PARTNERS' CAPITAL: Offering costs comprised of sales commissions and other
issuance expenses have been charged to the partners' capital accounts as
incurred.
E) INCOME TAXES: No provision for income taxes has been made as the liability
for such taxes is that of the partners rather than the Partnership.
F) BASIS OF PRESENTATIONS: Certain amounts in the 1993 and 1994 financial
statements have been reclassified to conform with the 1995 presentation.
3. INVESTMENT PROPERTIES
The Partnership has acquired, either directly or through a joint venture, two
commercial office complexes, one shopping plaza and one apartment complex
located in Missouri, Massachusetts, Florida and Arizona, respectively. Leases in
effect are generally for a term of twenty years or less for the commercial
properties, and for one year or less for the residential property. No mortgage
debt was incurred in the purchases.
25
<PAGE>
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
During 1995, the Partnership attempted to sell its shopping center property,
Piedmont Plaza. After a marketing period and the completion of due diligence by
potential buyers, the Partnership did not sell the property. The Partnership is
currently reevaluating Piedmont Plaza's sale strategy and, therefore, the
property's sale status is uncertain as of December 31, 1995.
With respect to the Partnership's accounting policy for impairment of assets,
the Partnership recognized impairment of asset losses in 1994 and 1992. In 1994,
the Partnership recorded an impairment of $280,000 relative to Piedmont Plaza
due to a reduction in the estimated holding period. In 1992, the Partnership
recorded impairments of $3,600,000 and $3,800,000 relative to Piedmont Plaza and
Westford Corporate Center, respectively. At Piedmont, estimated future cash
flows declined reflecting changes in estimated potential revenue from future
leasing. As a result of the oversupply of space and the continued downward
pressure on rental rates in the market which Piedmont operates, expected future
rental rates would be renewed and/or renegotiated at lower rates. At Westford,
the estimated holding period was reduced.
4. DEFERRED CHARGES
<TABLE>
<CAPTION>
Deferred charges at December 31, 1995 and 1994 consist of the following:
<S> <C> <C>
1995 1994
---- ----
Deferred leasing commissions $ 1,059,008 $ 1,038,495
Accumulated amortization (604,402) (484,872)
------------- -------------
454,606 553,623
Deferred rent credits 37,584 57,461
------------- -------------
$ 492,190 $ 611,084
============= =============
</TABLE>
5. VENTURE AGREEMENTS
The Partnership acquired a 73.92% interest in the Westford Office Venture
(the "Venture"), which owns the Westford Corporate Center in Westford,
Massachusetts. The remaining equity interest in the Venture is held by
Connecticut General Equity Properties-I Limited Partnership, an affiliated
limited partnership.
<TABLE>
<CAPTION>
Summary financial information for the Venture as of and for the years ended
December 31, 1995, 1994 and 1993 follows:
<S> <C> <C> <C>
1995 1994 1993
---- ---- ----
Total assets $ 11,280,276 $ 12,671,892 $ 12,343,992
Total liabilities 751,999 749,320 814,161
Total income 1,911,290 1,686,829 1,280,650
Net income 605,705 392,741 77,904
<FN>
Pursuant to the Joint Venture Agreement, net income or loss, cash
distributions from operations, net income and distributable cash from the sale
or disposition of the property are generally allocated to the venturers in
accordance
26
<PAGE>
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
with their percentage capital contributions. Percentage interests are subject to
change if any future contributions made by the venturers to the Venture are
disproportionate to their percentage interests.
The Venture paid a distribution to the venturers of $2,000,000 in 1995, of
which the Partnership's share was $1,478,400. No distributions were made by the
Venture in 1994 or 1993.
</TABLE>
6. LEASES
All of the commercial properties have leases currently in effect which have
been accounted for as operating leases. The majority have terms which range from
three to five years. Following is a schedule of minimum annual future rentals
based upon non-cancelable leases currently in effect, assuming no exercise of
tenant renewal options.
Year ending December 31:
1996 $2,853,884
1997 2,589,842
1998 2,323,081
1999 1,128,158
2000 689,292
Thereafter 7,195,138
Certain of the leases contain escalation and expense recapture clauses
which provide that tenants will pay their pro rata share of any increases in
common area maintenance, taxes and other operating expenses over base period
amounts. The Partnership earned $751,338 in 1995, $807,628 in 1994 and, $367,523
in 1993 as a result of such provisions. These amounts are included in other
income on the Statement of Operations.
Generally, a portion of the net leasable area for commercial real estate
properties is occupied by significant tenants (occupying ten percent or more of
net leasable area). Significant tenant information for the Partnership's
investment properties, including the property owned through a joint venture, is
as follows: Woodlands Tech - two tenants occupy 28% of net leasable area and
account for 30% of gross rental revenue; Piedmont Plaza - one tenant occupies
71% of net leasable area and accounts for 66% of gross rental revenue; Westford
- - two tenants occupy 100% of the net leasable area and account for 100% of gross
rental revenue. Any loss of a significant tenant could have a material adverse
effect on the Partnership's results of operations. Although an uncertainty
exists relative to the replacement of a tenant upon early termination, the
revenue effect of an early termination of a significant tenant is tempered by
the potential for termination fees, and is therefore not likely to be material
to the Partnership's liquidity or financial condition.
7. TRANSACTIONS WITH AFFILIATES
An affiliate of the General Partner provided investment property
acquisition services to the Partnership for fees of $2,500,000 which will be
payable from adjusted cash from operations after priority distributions to the
Partners or, if necessary, from sales proceeds.
27
<PAGE>
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
Fees and other expenses related to the General Partner or its affiliates
during the periods ended December 31, 1995, 1994 and 1993 are as follows:
<S> <C> <C> <C>
1995 1994 1993
---- ---- ----
Property management fee (a)(b) $ 116,633 $ 109,952 $ 108,042
Printing 10,609 10,127 12,382
Reimbursement (at cost) for
out of pocket expenses 62,401 40,927 34,048
----------- ------------ -----------
$ 189,643 $ 161,006 $ 154,472
=========== ============ ===========
<FN>
(a) Does not include property management fees earned by independent property
management companies of $194,007, $187,062 and $168,037 for 1995, 1994 and
1993 respectively. Certain property management services have been
contracted by an affiliate of the General Partner on behalf of the
Partnership and are paid directly by the Partnership to the third party
companies.
(b) In 1995, 1994 and 1993, $14,577, $13,210 and $9,351, respectively, was
attributable to the joint venture partner's share of the Venture.
</TABLE>
8. PARTNERS' CAPITAL
During 1991, the State of Connecticut enacted income tax legislation, a
part of which affects partnerships. The portfolio income allocations made by the
Partnership to the limited partners are considered Connecticut based income and
subject to Connecticut tax. The Partnership has elected to pay the tax due on
the limited partners' share of portfolio income and, therefore, paid tax due of
$2,030 directly to the State of Connecticut in April 1995 for the 1994 Form CT-G
Connecticut Group Income Tax Return. The Partnership also accrued the 1995
estimated payment of $2,950 as of December 31, 1995. These amounts were treated
as reductions of partners' capital and reported as distributions in the
accompanying financial statements.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of the Partnership's financial instruments at December 31, 1995. Statement of
Financial Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments", defines the fair value of a financial instrument as the
amount at which the instrument could be exchanged in a current transaction
between willing parties.
<TABLE>
<S> <C> <C>
Carrying Fair
Amount Value
ASSETS:
Cash and cash equivalents $3,227,503 $3,227,503
Accounts receivable, net 300,941 300,941
Other assets 9,760 9,760
</TABLE>
28
<PAGE>
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<S> <C> <C>
Carrying Fair
Amount Value
LIABILITIES:
Accounts payable and accrued expenses $ 261,013 $ 261,013
Deferred acquisition fees due to affiliates 2,500,000 2,028,536
<FN>
The carrying amounts shown in the table are included in the balance sheet under
the indicated captions.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash, Accounts receivable, Other assets, and Accounts payable and accrued
expenses: The carrying amounts approximate fair value because of the short
maturity of those instruments.
Deferred acquisition fees due to affiliates: The fair value was estimated
by discounting cash flows over the estimated holding periods of the
investment properties using a market rate.
</TABLE>
10. PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net income or loss
before depreciation and cash distributions from operations are to be allocated
1% to the General Partner and 99% to the Limited Partners. All depreciation in
each taxable year shall be allocated 1% to the General Partner and 99% to the
taxable Limited Partners. Cash distributions from operations are generally
allocated in the following order:
o To the Limited Partners until each Limited Partner has received
aggregate distributions in respect of the fiscal year of the
Partnership equal to 6% non-cumulative and non-compounded on Adjusted
Invested Capital, as defined in the Partnership Agreement;
o To the General Partner until it has received aggregate distributions in
respect of the fiscal year of the Partnership equal to 1%
non-cumulative and non-compounded of the sum of all amounts distributed
to the Limited Partners and all amounts received by the General Partner
as described herein;
o To the General Partner or its Affiliates in an amount equal to any
subordinated fees which remain unpaid;
o To an affiliate of the General Partner as a subordinated incentive
management fee in an amount generally equal to 9% of adjusted cash from
operations, but only after the Partners have received their priority
distributions; and
o With respect to the remainder, 99% to the Limited Partners and 1% to
the General Partner.
Generally net income or loss from the sale or disposition of investment
properties is to be allocated in the following order:
o To each Partner having a deficit balance in the same ratio of such
balance to the aggregate balance of all Partners;
29
<PAGE>
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
o To the Partners who received allocations of depreciation in the same
ratio as the amount of such depreciation previously allocated;
o To the Partners to the extent of, and in proportion to, the amount of
cash distributions from sales to be received by each, other than the
return of original invested capital; and
o To the Partners in proportion to the cash from sales distributed in
the return of original invested capital.
Distributable cash from the sale or disposition of investment properties is
to be generally allocated in the following order:
o To the General Partner or its affiliates in an amount equal to any
acquisition fees which remain unpaid;
o To the Limited Partners until each Limited Partner has received
aggregate distributions equal to his original invested capital;
o To the Limited Partners until each Limited Partner has received
distributions in an aggregate amount which shall be equal to a 10% per
annum cumulative non-compounded return on his adjusted invested
capital;
o To an affiliate of the General Partner in payment of a subordinated
disposition fee in an amount equal to the lesser of 3% of the gross
sales price of the property or one-half of the normal and competitive
rate charged for similar services by unaffiliated parties; and
o With respect to the remainder, 85% to the Limited Partners and 15% to
the General Partner.
11. SUBSEQUENT EVENTS
On February 15, 1996, the Partnership paid a cash distribution of $750,000
to the limited partners.
30
<PAGE>
<TABLE>
<CAPTION>
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP SCHEDULE III
(A DELAWARE LIMITED PARTNERSHIP
AND CONSOLIDATED VENTURE)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
====================================================================================================================
Costs Capitalized
Initial Cost to Partnership (A)(B) Subsequent to
Acquisition (C)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Land, Building
Description Land and Land Buildings Furniture and Improvements and
Improvements Fixtures Furniture & Fixtures
- --------------------------------------------------------------------------------------------------------------------
Woodlands Tech Center 1,245,400 $ 6,090,171 $ -- $ 1,336,051
St. Louis, MO
Westford Corporate Center (G) 3,223,875 13,759,689 -- (2,229,002)
Westford, MA
Piedmont Plaza Shopping Center 4,367,093 6,201,165 -- (1,282,755)
Apopka, FL
Overlook Apartments 2,932,103 6,462,901 788,608 59,073
Scottsdale, AZ
- --------------------------------------------------------------------------------------------------------------------
Totals $11,768,471 $32,513,926 $ 788,608 $ (2,116,633)
====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=====================================================================================================================
Gross Amount at Which Carried at Close of Period (D)(E)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Description Land and Land Buildings and Tenant Furniture and
Improvements Improvements Improvements Fixtures Total
- ---------------------------------------------------------------------------------------------------------------------
Woodlands Tech Center $1,245,400 $ 6,159,375 $1,266,847 $ -- $ 8,671,622
St. Louis, MO
Westford Corporate Center (G) 2,546,078 10,716,382 1,492,102 -- 14,754,562
Westford, MA
Piedmont Plaza Shopping Center 2,801,996 3,984,918 2,498,589 -- 9,285,503
Apopka, FL
Overlook Apartments 2,958,879 6,462,902 -- 820,904 10,242,685
Scottsdale, AZ
- ---------------------------------------------------------------------------------------------------------------------
Totals $9,552,353 $27,323,577 $5,257,538 $ 820,904 $42,954,372
=====================================================================================================================
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP SCHEDULE III
(A DELAWARE LIMITED PARTNERSHIP
AND CONSOLIDATED VENTURE)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
==================================================================================================================
<S> <C> <C> <C> <C>
Life on Which
Depreciation in Latest
Accumulated Statement of Operations
Description Depreciation (F) Date of Construction Date Acquired is Computed
- ------------------------------------------------------------------------------------------------------------------
Woodlands Tech Center $ 3,044,027 1986 07/03/86 2-39 years
St. Louis, MO
Westford Corporate 4,726,178 1986 11/01/86 2-39 years
Center (G)
Westford, MA
Piedmont Plaza 2,579,616 1985 05/01/87 2-39 years
Shopping Center
Apopka, FL
Overlook Apartments 2,754,385 1988 10/14/88 7-27.5 years
Scottsdale, AZ
- ------------------------------------------------------------------------------------------------------------------
Totals $13,104,206
==================================================================================================================
<FN>
(A) The cost to the Partnership represents the initial purchase price of the
properties including certain acquisition fees and expenses. In accordance
with the Partnership Agreement, all properties were acquired without
incurring any long-term debt.
(B) The Partnership received $516,550, $245,531, $173,232 and $371,389 from the
sellers of Woodlands Tech Center, Westford Corporate Center, Piedmont Plaza
and Overlook Apartments, respectively, under master lease agreements, which
were treated as a reduction of initial cost. The Partnership paid $308,589
under an earnout agreement with the sellers of Woodlands Tech Center, which
was treated as an addition to initial cost.
(C) Includes impairment losses in 1994 relative to Piedmont Plaza in the amount
of $280,000 and in 1992 relative to Piedmont Plaza and Westford Corporate
Center in the amounts of $3,600,000 and $3,800,000, respectively.
(D) The aggregate cost of the real estate owned at December 31, 1995 for federal income tax purposes is $50,634,373.
</TABLE>
<TABLE>
<CAPTION>
(E) Reconciliation of real estate owned:
<S> <C> <C> <C>
=================================================================================================
Description 1995 1994 1993
=================================================================================================
Balance at beginning of period $42,792,079 $42,773,001 $42,453,509
Additions during period 162,293 299,078 319,492
Reductions during period (C) -- (280,000) --
- -------------------------------------------------------------------------------------------------
Balance at end of period $42,954,372 $42,792,079 $42,773,001
=================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(F) Reconciliation of accumulated depreciation:
<S> <C> <C> <C>
=================================================================================================
Description 1995 1994 1993
=================================================================================================
Balance at beginning of period $11,635,309 $10,115,121 $8,652,572
Additions during period 1,468,897 1,520,188 1,462,549
- -------------------------------------------------------------------------------------------------
Balance at end of period $13,104,206 $11,635,309 $10,115,121
=================================================================================================
<FN>
(G) Includes ownership interest of the venture partner.
</TABLE>
32
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The General Partner of the Partnership, CIGNA Realty Resources, Inc.-Tenth,
a Delaware corporation, is an indirect, wholly owned subsidiary of CIGNA
Corporation, a publicly held corporation whose stock is traded on the New York
Stock Exchange. The General Partner has responsibility for and control over the
affairs of the Partnership.
The directors and executive officers of the General Partner as of February
15, 1996, are as follows:
<TABLE>
<CAPTION>
Name Office Served Since
<S> <C> <C>
R. Bruce Albro Director May 2, 1988
David Scheinerman Director July 25, 1995
Philip J. Ward Director May 2, 1988
John D. Carey President, Controller September 7, 1993
September 4, 1990
Verne E. Blodgett Vice President, Counsel April 2, 1990
Joseph W. Springman Vice President, Assistant Secretary September 7, 1993
David C. Kopp Secretary September 29, 1989
Marcy F. Blender Treasurer August 1, 1994
</TABLE>
There is no family relationship among any of the foregoing directors or
officers. There are no arrangements or understandings between or among said
officers or directors and any other person pursuant to which any officer or
director was selected as such.
The foregoing directors and officers are also officers and/or directors of
various affiliated companies of CIGNA Realty Resources, Inc.-Tenth, including
CIGNA Financial Partners, Inc. (the parent of CIGNA Realty Resources,
Inc.-Tenth), CIGNA Investments, Inc., CIGNA Corporation (the parent of CIGNA
Investments, Inc.) and Connecticut General Corporation (the parent of CIGNA
Financial Partners, Inc.).
33
<PAGE>
The business experience of each of the directors and executive officers of
the General Partner of the Partnership is as follows:
R. BRUCE ALBRO - DIRECTOR
Mr. Albro, age 53, a Senior Managing Director of CIGNA Investment
Management (CIM), joined Connecticut General's Investment Operations in 1971 as
a Securities Analyst in Paper, Forest Products, Building and Machinery.
Subsequently, he served as a Research Department Unit Head, as an Assistant
Portfolio Manager, then as Director of Equity Research and a member of the
senior staff of CIGNA Investment Management Company and as a Portfolio Manager
in the Fixed Income area. He then headed the Marketing and Merchant Banking area
for CII. Prior to his current assignment of Division Head, Portfolio Management
Division, he was an insurance portfolio manager, and prior to that, he was
responsible for Individual Investment Product Marketing. In addition, Mr. Albro
currently serves as President of the CIGNA Funds Group and other CIGNA
affiliated mutual funds. Mr. Albro received a Master of Arts degree in Economics
from the University of California at Berkeley and a Bachelor of Arts degree in
Economics from the University of Massachusetts at Amherst.
DAVID SCHEINERMAN - DIRECTOR
Mr. Scheinerman, age 35, was appointed Chief Financial Officer of CIGNA
Individual Insurance, a division with more than $77 billion of life insurance in
force, in July of 1995. Mr. Scheinerman has served in various actuarial and
business management capacities with CIGNA. In 1991 he was appointed Vice
President and Pricing Actuary for CIGNA HealthCare. He has more than 12 years of
financial management experience and has served as Chief Financial Officer of
Crusader Insurance PLC, a CIGNA subsidiary life company in the United Kingdom.
Mr. Scheinerman holds a BA in Mathematics from Rice University and an MBA from
the University of Pennsylvania Wharton School of Business. He is a fellow of the
Society of Actuaries and a member of the American Academy of Actuaries.
PHILIP J. WARD - DIRECTOR
Mr. Ward, age 47, is Senior Managing Director and Division Head of CIGNA
Investment Management (CIM), in charge of the Real Estate Investment Division of
CIM. He was appointed to that position in December 1985. Mr. Ward joined
Connecticut General's Mortgage and Real Estate Department in 1971 and became an
officer in 1976. Since joining the company he has held real estate investment
assignments in Mortgage and Real Estate Production and in Portfolio Management.
Prior to his current position, Mr. Ward held assignments in CIGNA Investments
Inc., responsible for the Real Estate Production area, CIGNA Realty Advisors,
Inc. and Congen Realty Advisory Company, all wholly-owned subsidiaries of CIGNA
Corporation and/or Connecticut General. Mr. Ward has held various positions with
the General Partner. His experience includes all forms of real estate
investments, with recent emphasis on acquisitions and joint ventures. Mr. Ward
is a 1970 graduate of Amherst College with a Bachelor of Arts degree in
Economics. He is a member of the Society of Industrial and Office Realtors, the
National Association of Industrial and Office Parks, the Urban Land Institute
and the International Council of Shopping Centers. He is a member of the Board
of Directors of DeBartolo Realty Corporation.
34
<PAGE>
JOHN D. CAREY - PRESIDENT, CONTROLLER
Mr. Carey, age 32, joined CIGNA Investment Management-Real Estate as
Controller of Tax Advantaged Investments in 1990. In September 1993, Mr. Carey
was appointed President. Prior to joining CIGNA Investment Management, he held
the position of manager at KPMG Peat Marwick LLP in the audit department and was
a member of the Real Estate Focus Group. His experiences include accounting and
financial reporting for public and private real estate limited partnership
syndications. Mr. Carey is a graduate of Central Connecticut State University
with a Bachelor of Science Degree and is a Certified Public Accountant.
VERNE E. BLODGETT - VICE PRESIDENT, COUNSEL
Mr. Blodgett, age 58, is an Assistant General Counsel of CIGNA Corporation.
He joined Connecticut General Life Insurance Company in 1975 as an investment
attorney and has held various positions in the Legal Division of Connecticut
General Life Insurance Company prior to his appointment as Assistant General
Counsel in 1981. Mr. Blodgett received a Bachelor of Arts degree from Yale
University and graduated with honors from the University of Connecticut School
of Law. He is a member of the Connecticut and the American Bar Associations.
JOSEPH W. SPRINGMAN - VICE PRESIDENT, ASSISTANT SECRETARY
Mr. Springman, age 54, is Managing Director and department head responsible
for asset management. He joined CIGNA's Real Estate operations in 1970. He has
held positions as an officer or director of several real estate affiliates of
CIGNA. His past real estate assignments have included Development and
Engineering, Property Management, Director, Real Estate Operations, Portfolio
Management and Vice President, Real Estate Production. Prior to assuming his
asset management post, Mr. Springman was responsible for production of real
estate and mortgage investments. He received a Bachelor of Science degree from
the U.S. Naval Academy.
DAVID C. KOPP - SECRETARY
Mr. Kopp, age 50, is Secretary of CII, Corporate Secretary of Connecticut
General Life Insurance Company and Assistant Corporate Secretary and Assistant
General Counsel, Insurance and Investment Law of CIGNA Corporation. He also
serves as an officer of various other CIGNA Companies. In August of 1995, he
also assumed responsibility as chief compliance officer for CIGNA HealthCare, a
division of CIGNA Corporation. He joined Connecticut General Life Insurance
Company in 1974 as a commercial real estate attorney and held various positions
in the Legal Department of Connecticut General Life Insurance Company prior to
his appointment as Corporate Secretary in 1977. Mr. Kopp is an honors graduate
of Northern Illinois University and served on the law review at the University
of Illinois College of Law. He is a member of the Connecticut Bar Association
and is Past President of the Hartford Chapter, American Society of Corporate
Secretaries.
MARCY F. BLENDER - TREASURER
Marcy F. Blender, age 39, is Assistant Vice President, Bank Resources of
CIGNA Corporation. In this capacity she is responsible for bank relationship
management, bank products and services, bank compensation and control, and bank
exposure management. Marcy joined Insurance Company of North America (INA) in
1979. She has held a variety of financial and investment positions with INA and
later with the merged CIGNA Corporation before assuming her current
responsibilities in 1992. She received a BA degree from Rutgers University and
an MBA from Drexel University. She is a Certified Public Accountant.
35
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Officers and directors of the General Partner receive no current or
proposed direct compensation from the Partnership in such capacities. However,
certain officers and directors of the General Partner received compensation from
the General Partner and/or its affiliates (but not from the Partnership) for
services performed for various affiliated entities, which may include services
performed for the Partnership, but such compensation was not material in the
aggregate.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No person or group is known by the Partnership to own beneficially more
than 5% of the outstanding Units of interest of the Partnership.
There exists no arrangement, known to the Partnership, the operation of
which may at a subsequent date result in a change in control of the Partnership.
As of February 15, 1996, the individual directors, and the directors and
officers as a group, of the General Partner beneficially owned Partnership Units
and shares of the common stock of CIGNA, parent of the General Partner, as set
forth in the following table:
<TABLE>
<S> <C> <C> <C>
Units Shares
Beneficially Beneficially Percent of
Name Owned(a) Owned(b) Class
R. Bruce Albro (c) 0 6,653 *
David Scheinerman 0 0 *
Philip J. Ward (d) 0 16,491 *
All directors and officers
Group (8) (e) 0 29,994 *
* Less than 1% of class
<FN>
(a) No officer or director of the General Partner possesses a right to acquire
beneficial ownership of additional Units of interest of the Partnership.
(b) The directors and officers have sole voting and investment power over all
the shares of CIGNA common stock they own beneficially.
(c) Shares beneficially owned includes options to acquire 4,487 shares and
1,432 shares which are restricted as to disposition.
(d) Shares beneficially owned includes options to acquire 8,826 shares and
2,400 shares which are restricted as to disposition.
(e) Shares beneficially owned by directors and officers include 15,318 shares
of CIGNA common stock which may be acquired upon exercise of stock options
and 8,126 shares which are restricted as to disposition.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The General Partner of the Partnership is generally entitled to receive l%
of cash distributions, subordinated to a priority distribution of 6%
non-cumulative, non-compounded return to the limited partners on their adjusted
invested capital and l% of profits or losses. In 1995, the General Partner
received no cash distributions and a share of the Partnership's net income of
$17,030. Reference is also made to the Notes to Consolidated Financial
Statements included in this annual report for a description of such
distributions and allocations. The relationship of the General Partner (and its
directors and officers) to its affiliates is set forth in Item 10.
36
<PAGE>
CII provided asset management services to the Partnership during 1995 for
the Woodlands Tech Center, Westford Corporate Center and Piedmont Plaza at fees
calculated at 6% of gross revenues collected less amounts earned by independent
third party property management companies contracted by CII on behalf of the
Partnership. For Overlook Apartments fees are calculated at 5% of gross revenues
collected less amounts earned by independent third party property management
companies contracted by CII on behalf of the Partnership. In 1995, CII earned
asset management fees amounting to $116,633 for such services, of which $18,670
was unpaid as of December 31, 1995. Independent third party property managers
earned $194,007 of management fees, of which $11,350 was unpaid as of December
31, 1995.
A nonrecurring acquisition fee for evaluating and selecting real property
to be acquired equal to the lesser of (1) 5% of the Gross Proceeds from sales of
Units, or (2) the normal and customary charges by third parties for such
services, is to be paid to CII. To date, no such fees have been paid since no
payment is due until priority distributions have been paid as described above. A
subordinated incentive management fee of 9% of adjusted cash from operations
will be payable to CII, but only after the limited partners have received their
priority distributions as described above, the General Partner has received its
1% distribution described above and acquisition fees have been paid.
The General Partner and its affiliates may be reimbursed for their direct
expenses incurred in the administration of the Partnership. In 1995, the General
Partner and its affiliates were entitled to reimbursement for such out of pocket
expenses in the amount of $73,010 of which $5,863 was unpaid as of December 31,
1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements. See Index to Financial Statements in
Item 8.
2. Financial Statement Schedules
(a) Real Estate and Accumulated Depreciation. See Index
to Financial Statements in Item 8.
3. Exhibits
3 Partnership Agreement, incorporated by reference to
Exhibit A to the Prospectus of Registrant, dated October
15, 1985, as amended, filed pursuant to Rule 424(b) under
the Securities Act of 1933, File No. 33-1818.
4 Certificate of Limited Partnership dated October 11, 1985,
as filed October 15, 1985, incorporated by reference to
Exhibit 4 to Form S-11 Registration Statement under the
Securities Act of 1933, File No. 33-1818.
10 (a) Acquisition and Disposition Services Agreement, dated
as of February 4, 1986, between CIGNA Income Realty-I
Limited Partnership and CIGNA Capital Advisers, Inc.,
incorporated by reference to Exhibit 10(a) to Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1987.
(b) Supervisory Property Management Agreement, dated as of
February 4, 1986, between CIGNA Income Realty-I Limited
Partnership and CIGNA Capital Advisers, Inc., incorporated
by reference to Exhibit 10(b) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1987.
37
<PAGE>
(c) Agreements concerning Certain Capital Contributions, dated
as of February 3, 1986, between CIGNA Financial Partners,
Inc. and CIGNA Realty Resources, Inc.-Tenth, incorporated
by reference to Exhibit 10(c) to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1987.
(d) Real Estate Purchase Agreement relating to Woodlands Tech
Center (including, as Exhibit I, the Master Lease
Agreement between CIGNA Income Realty-I Limited
Partnership, as landlord, and Turco Development Company,
as master tenant) dated July 3, 1986, between Registrant,
as purchaser, and Turco Development Company, as seller,
incorporated by reference to Exhibit 10(a) to Current
Report on Form 8-K dated July 3, 1986.
(e) Real Estate Purchase Agreement dated September 10, 1986,
between Westford Office Venture, as purchaser, and Robert
M. Doyle and Ian S. Gillespie as Trustees of Westford
Office Center Trust, as seller, incorporated by reference
to Exhibit 10(f) to Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1986.
(f) Amended and Restated Joint Venture Agreement between
Registrant and Connecticut General Equity Properties-I
Limited Partnership dated as of November l, 1986, relating
to the acquisition of the Westford Corporate Center,
incorporated by reference to Exhibit 10(g) to Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1986.
(g) Management Agreement dated September 10, 1986, between
Westford Office Venture and Codman Management Co.,
incorporated by reference to Exhibit 10(h) to Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1986.
(h) Real Estate Purchase Agreement dated December 5, 1986,
between Piedmont Plaza Partnership and Piedmont Plaza,
Ltd. relating to the acquisition of Piedmont Plaza
Shopping Center, incorporated by reference to Exhibit
10(j) to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1987.
(i) Real Estate Purchase Agreement relating to Overlook
Apartments (including, as Exhibit 4.3.11, the Management
and Leasing Agreement between CIGNA Income Realty-I
Limited Partnership and Brentwood - Doramus, Inc.) dated
February 22, 1988, between Registrant, as purchaser, and
TCR-Adobe Ranch I Limited Partnership, as seller,
incorporated by reference to Exhibit 10(k) to Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1988.
27 Financial Data Schedules
(b) No reports on Form 8-K were filed during the last quarter of the
fiscal year.
38
<PAGE>
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.
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
By: CIGNA Realty Resources, Inc.-Tenth,
General Partner
Date: March 26, 1996 By: /s/ John D. Carey
-------------------
John D. Carey, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities (with respect to the General Partner) and on the date
indicated.
/s/ R. Bruce Albro Date: March 26, 1996
------------------------------------------
R. Bruce Albro, Director
/s/ David Scheinerman Date: March 26, 1996
------------------------------------------
David Scheinerman, Director
/s/ Philip J. Ward Date: March 26, 1996
------------------------------------------
Philip J. Ward, Director
/s/ John D. Carey Date: March 26, 1996
------------------------------------------
John D. Carey, President, Controller
(Principal Executive Officer)
(Principal Accounting Officer)
/s/ Marcy F. Blender Date: March 26, 1996
------------------------------------------
Marcy F. Blender, Treasurer
(Principal Financial Officer)
39
<PAGE>
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