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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-15748
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)
Telephone Number: (860) 726-6000
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
1
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PART I - FINANCIAL INFORMATION
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
1996 1995
ASSETS (UNAUDITED) (AUDITED)
<S> <C> <C>
Property and improvements, at cost:
Land and improvements $ 9,532,510 $ 9,552,353
Buildings 27,323,577 27,323,577
Tenant improvements 5,257,073 5,257,538
Furniture and fixtures 820,904 820,904
--------------- ---------------
42,934,064 42,954,372
Less accumulated depreciation 13,788,632 13,104,206
--------------- ---------------
Net property and improvements 29,145,432 29,850,166
Cash and cash equivalents 3,397,679 3,227,503
Accounts receivable (net of allowance of $21,902 in 1996
and $15,158 in 1995) 311,977 300,941
Prepaid expenses and other assets 34,751 9,760
Deferred charges, net 453,592 492,190
--------------- ---------------
Total $ 33,343,431 $ 33,880,560
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses (including $49,510
in 1996 and $24,532 in 1995 due to affiliates) $ 330,740 $ 261,013
Tenant security deposits 119,042 113,188
Unearned income 25,615 25,032
Deferred acquisition fees due to affiliates 2,500,000 2,500,000
--------------- ---------------
Total liabilities 2,975,397 2,899,233
--------------- ---------------
Venture partner's equity in joint venture 2,719,145 2,679,392
--------------- ---------------
Partners' capital:
General Partner:
Capital contributions 1,000 1,000
Cumulative net income 50,480 42,670
--------------- ---------------
51,480 43,670
--------------- ---------------
Limited partners (200,000 Units):
Capital contributions, net of offering costs 45,463,209 45,463,209
Cumulative net income 4,997,494 4,224,350
Cumulative cash distributions (22,863,294) (21,429,294)
--------------- ---------------
27,597,409 28,258,265
--------------- ---------------
Total partners' capital 27,648,889 28,301,935
--------------- ---------------
Total $ 33,343,431 $ 33,880,560
=============== ===============
The Notes to Consolidated Financial Statements are an integral part of these statements.
2
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CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Base rental income $ 1,135,463 $ 1,173,687 $ 2,276,030 $ 2,324,451
Other income 214,932 227,966 399,349 457,335
Interest income 37,784 39,635 75,670 81,975
------------- ------------- ------------- -------------
1,388,179 1,441,288 2,751,049 2,863,761
------------- ------------- ------------- -------------
Expenses:
Property operating expenses 395,602 374,382 877,166 806,201
General and administrative 109,541 98,168 215,149 186,133
Fees and reimbursements to affiliates 51,218 38,847 97,449 79,150
Depreciation and amortization 367,043 411,721 740,578 816,703
------------- ------------- ------------- -------------
923,404 923,118 1,930,342 1,888,187
------------- ------------- ------------- -------------
Income inclusive of venture
partner's share of venture operations 464,775 518,170 820,707 975,574
Venture partner's share of venture net income 34,266 41,994 39,753 84,132
------------- ------------- ------------- -------------
Net income $ 430,509 $ 476,176 $ 780,954 $ 891,442
============= ============= ============= =============
Net income:
General Partner $ 4,305 $ 4,761 $ 7,810 $ 8,914
Limited partners 426,204 471,415 773,144 882,528
------------- ------------- ------------- -------------
$ 430,509 $ 476,176 $ 780,954 $ 891,442
============= ============= ============= =============
Net income per Unit $ 2.14 $ 2.35 $ 3.87 $ 4.41
============= ============= ============= =============
Cash distribution per Unit $ 3.42 $ 3.45 $ 7.17 $ 7.95
============= ============= ============= =============
The Notes to Consolidated Financial Statements are an integral part of these statements.
3
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CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 780,954 $ 891,442
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred rent credits 10,596 9,774
Depreciation and amortization 740,578 816,703
Venture partner's share of venture's operations 39,753 84,132
Accounts receivable (11,036) 68,411
Accounts payable 90,459 140,489
Other, net 1,754 (12,263)
--------------- ---------------
Net cash provided by operating activities 1,653,058 1,998,688
--------------- ---------------
Cash flows from investing activities:
Distribution to joint venture partner -- (521,600)
Purchases of property and improvements (17,782) (83,033)
Payment of leasing commissions (28,150) (9,171)
--------------- ---------------
Net cash used in investing activities (45,932) (613,804)
--------------- ---------------
Cash flows from financing activities:
Cash distribution to limited partners (1,436,950) (1,592,030)
--------------- ---------------
Net increase (decrease) in cash and cash equivalents 170,176 (207,146)
Cash and cash equivalents, beginning of year 3,227,503 3,404,809
--------------- ---------------
Cash and cash equivalents, end of period $ 3,397,679 $ 3,197,663
=============== ===============
The Notes to Consolidated Financial Statements are an integral part of these statements.
4
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CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Readers of this quarterly report should refer to CIGNA INCOME REALTY-I
LIMITED PARTNERSHIP'S ("the Partnership") audited financial statements for the
year ended December 31, 1995 which are included in the Partnership's 1995 Annual
Report, as certain footnote disclosures which would substantially duplicate
those contained in such audited financial statements have been omitted from this
report.
1. BASIS OF ACCOUNTING
A) BASIS OF PRESENTATION: The accompanying financial statements were prepared
in accordance with generally accepted accounting principles, and reflect
management's estimates and assumptions that affect the reported amounts. It
is the opinion of management that the financial statements presented
reflect all the adjustments necessary for a fair presentation of the
financial condition and results of operations.
B) RECENT ACCOUNTING PRONOUNCEMENT: 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"). The Statement requires a
writedown to fair value when long-lived assets to be held and used are
impaired. 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 adopted this Statement in the first
quarter of 1996; there was no effect on the Partnership's results of
operations, liquidity and financial condition.
C) CASH AND CASH EQUIVALENTS: Short-term investments with a maturity of three
months or less at the time of purchase are reported as cash equivalents.
2. CONSOLIDATED JOINT VENTURE - SUMMARY INFORMATION
The Partnership owns a 73.92% interest in the Westford Office Venture which
owns the Westford Corporate Center in Westford, Massachusetts. The general
partner of the Partnership's joint venture partner is an affiliate of the
General Partner.
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Venture operations information: Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total income of venture $ 462,588 $ 475,050 $ 881,161 $ 973,715
Net income of venture 131,390 161,021 152,427 322,593
</TABLE>
Venture balance sheet information:
June 30, December 31,
1996 1995
---- ----
Total assets $ 11,427,803 $ 11,280,276
Total liabilities 747,099 751,999
The Venture paid a distribution to the venturers of $2,000,000 in 1995, of
which the Partnership's share was $1,478,400.
5
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CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
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3. DEFERRED CHARGES
Deferred charges consist of the following:
June 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Deferred leasing commissions $ 1,087,158 $ 1,059,008
Accumulated amortization (660,554) (604,402)
--------------- ----------------
426,604 454,606
Deferred rent credits 26,988 37,584
--------------- ---------------
$ 453,592 $ 492,190
=============== ===============
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4. 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.
Other fees and expenses incurred by the Partnership related to the General
Partner or its affiliates are as follows:
Three Months Ended Six Months Ended Unpaid at
June 30, June 30, June 30,
-------- ------- --------
1996 1995 1996 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Property management fees(a)(b) $ 26,727 $ 29,243 $ 56,294 $ 59,015 $ 17,627
Reimbursement (at costs)
for out-of-pocket expenses 24,491 9,604 41,155 20,135 31,883
------------ ------------- ----------- ------------ ------------
$ 51,218 $ 38,847 $ 97,449 $ 79,150 $ 49,510
============ ============= =========== ============ ============
</TABLE>
(a) Included in property management fees is $3,494 and $3,738 for the three
months ended June 30, 1996 and 1995 respectively, and $6,998 and $7,413 for
the six months ended June 30, 1996 and 1995, respectively, attributable to
the venture partner's share of the Westford Office Venture.
(b) Does not include on-site management fees earned by independent property
management companies of $45,918 and $48,428 for the three months ended June
30, 1996 and 1995, respectively, and $97,180 and $98,910 for the six months
ended June 30, 1996 and 1995, respectively. On-site 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.
5. SUBSEQUENT EVENTS
On August 15, 1996, the Partnership paid a distribution of $684,000 to the
limited partners.
6
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CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Partnership's cash and cash equivalents and the
Partnership's share of cash and cash equivalents from the Westford Office
Venture totaled $1,895,525 and $1,110,392, respectively. The Partnership's cash
and cash equivalents were available for working capital requirements, cash
reserves and distributions to partners. The Partnership paid the first quarter
cash distributions of $684,000 or $3.42 per Unit on May 15, 1996 and the second
quarter cash distributions of $684,000 or $3.42 per Unit on August 15, 1996,
representative of each quarter's adjusted cash from operations, inclusive of
adjustments to cash reserves. The Partnership's distributions from operations
for the remainder of the year should reflect actual operating results subject to
changes in reserves for liabilities or leasing risk.
Piedmont Plaza Shopping Center produced adjusted cash from operations for
the second quarter of $189,000 after $21,600 of leasing commissions. During the
quarter, the property signed a lease renewal with Paramount Fitness Club for
14,400 square feet and Weight Watchers, 1,800 square feet, vacated early. The
second quarter's leasing activity resulted in a slight drop in occupancy from
95% to 93.7%. No significant activity is expected for the remainder of the year.
The Partnership plans to hold the property for the short-term to allow the
retail market and K-Mart (the parent company of the property's anchor tenant) to
show signs of improvement. The Partnership also plans to remain open to
opportunities to sell the property if investor interest returns.
At Westford Corporate Center, adjusted cash from operations for the second
quarter was $254,000 ($188,000 attributable to the Partnership's interest). The
property remains 100% occupied. No capital expenditures have been planned for
the year. During the first quarter, a portion of the 1995 capital expenditures
was reimbursed by the tenants. In addition, adjustments were made to reduce
other income (and the portion of account receivable representing 1995 tenant
reimbursement billings) based on the final calculation of actual 1995 tenant
reimbursable operating expenses. As was the case in 1995, the 1996 estimated
billings for tenant expense reimbursement are based on the annual budget.
Adjusted cash from operations at Woodlands Tech for the second quarter was
$59,000 after a $40,000 addition to cash reserves for future leasing costs.
Leasing activity during the quarter was positive. A 4,844 square foot tenant
extended its lease term from May to November and a new tenant signed a lease for
7,522 square feet effective July 1, 1996. No leasing costs were expended during
the quarter. Leasing costs estimates for the remainder of the year have been
revised to $168,000. Goals for the second half of the year include leasing the
10,069 square foot vacancy from the first quarter as well as executing a renewal
with a tenant currently occupying 3,321 square feet. The property has prospects
interested in leasing the current vacant space as well as prospects interested
in the additional space that will be available later this year.
For the second quarter of 1996, Overlook maintained average occupancy of
98% compared with 95% for the same period of the prior year. Year-to-date
occupancy averaged 98% compared with 97% for the same period of the prior year.
Adjusted cash from operations for the second quarter totaled approximately
$281,000 with no capital expenditures. Capital expenditures are expected to
total approximately $20,000 for the year. The market in which Overlook operates
continues to expand, adding high-end multi-family, new single family
developments and retail. Five properties in the North Scottsdale market are
currently in the lease-up phase and competition from home ownership is strong as
single family home development continues to increase. The establishment of
higher rental rate levels for the new projects has allowed the property to
continue to increase rental rates on renewals. No significant changes are
expected for the remainder of the year.
RESULTS OF OPERATIONS
Rental income decreased $38,000 and $48,000 for the three and six months
ended June 30, 1996, as compared with the same periods of 1995. At Woodlands
Tech, lower average occupancy and a $22,000 lease termination fee received in
the
7
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CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
second quarter of 1995 resulted in decreases of approximately $48,000 and
$67,000 in rental income for the three and six months, respectively. A tenant
change at Westford that included a lower base rate contributed approximately
$15,000 and $30,000 to the decrease. Offsetting the decreases were increases at
Overlook of approximately $23,000 and $43,000 for the three and six months,
respectively. Modest rental rate increases and slightly higher average occupancy
accounted for the improvement.
Other income decreased for the three and six months ended June 30, 1996, as
compared with the same periods of 1995. At Westford, a $42,000 adjustment was
recorded in the first quarter for over billing of 1995 expense recoveries to
tenants. In addition, recapture of property taxes has declined due to a lower
assessment.
Interest income decreased for the three and six months ended June 30, 1996,
as compared with the same periods of 1995, due to a slight decrease in interest
rates on short term investments.
Property operating expenses increased for the three and six months ended
June 30, 1996, as compared with the same periods of 1995. In the first quarter,
a harsh winter caused snow removal and maintenance costs to increase at both
Westford and Woodlands Tech. In addition, a landscaping project that was
previously capitalized was reclassed to an expense account at Westford. An HVAC
project at Westford and a tax refund recorded in the second quarter of 1995 at
Woodlands resulted in an increase for the three months ended June 30, 1996.
Partially offsetting the rise in operating expenses was a drop in maintenance
expenses at Piedmont Plaza due to a first quarter 1995 exterior painting
project. In addition, there was a net decrease in operating expenses at Overlook
Apartments as fewer carpet replacements and a reduction in pest control costs
offset higher property tax and utility expenses.
General and administrative expenses increased for the three and six months
ended June 30, 1996, as compared with the previous year, due to an increase in
payroll costs at Overlook Apartments and an increase in advertising to maintain
the property's competitive market position. In addition, Piedmont reported an
increase in the provision for doubtful accounts.
The increase in fees and reimbursements to affiliates for the three and six
months ended June 30, 1996, as compared with the same periods of 1995, was due
to higher reimbursable expenses than the previous year.
The decrease in depreciation and amortization for the three and six months
ended June 30, 1996, as compared with the previous year, was primarily the
result of the expiration of useful lives of certain assets at Overlook
Apartments and Woodlands Tech.
The decrease in the venture partner's share of Venture's operation in 1996,
as compared with 1995, was the result of a decrease in Westford's overall
results as described herein.
8
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CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OCCUPANCY
The following is a listing of approximate physical occupancy levels by quarter for the Partnership's investment properties:
1995 1996
<S> <C> <C> <C> <C> <C> <C>
At 3/31 At 6/30 At 9/30 At 12/31 At 3/31 At 6/30
------- ------- ------- -------- ------- -------
1. Woodlands Tech Center
St. Louis, Missouri 94% 96% 96% 92% 82% 82%
2. Westford Corporate Center
Westford, Massachusetts(a) 100% 100% 100% 100% 100% 100%
3. Piedmont Plaza Shopping Center
Apopka, Florida 95% 95% 95% 95% 95% 94%
4. Overlook Apartments
Scottsdale, Arizona 98% 93% 97% 97% 99% 97%
</TABLE>
(a) See the Notes to Consolidated Financial Statements for information on 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.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedules.
(b) No Form 8-Ks were filed during the three months ended June 30, 1996.
9
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
By: CIGNA Realty Resources, Inc. - Tenth,
General Partner
Date: August 12, 1996 By: /s/ John D. Carey
--------------- -----------------
John D. Carey, President and Controller
(Principal Executive Officer)
(Principal Accounting Officer)
10
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> 6-MOS
<CASH> 3397679
<SECURITIES> 0
<RECEIVABLES> 333879
<ALLOWANCES> 21902
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 42934064
<DEPRECIATION> 13788632
<TOTAL-ASSETS> 33343431
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 33343431
<SALES> 0
<TOTAL-REVENUES> 2751049
<CGS> 0
<TOTAL-COSTS> 1189764
<OTHER-EXPENSES> 780331
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 780954
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 780954
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
