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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant _X_
Filed by a Party other than the Registrant ___
Check the appropriate box:
_X_ Preliminary Proxy Statement ___ Confidential, for Use
of the Commission Only
(as permitted by Rule
14a-6(e)(2))
___ Definitive Proxy Statement
___ Definitive Additional Materials
___ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CORPORATE REALTY INCOME FUND I, L.P.
- ------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
_________________________________________________________________
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
_X_ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
___ $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
___ Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
_________________________________________________________________
(2) Aggregate number of securities to which transaction
applies:
_________________________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
_________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
_________________________________________________________________
(5) Total fee paid:
_________________________________________________________________
___ Fee paid previously with preliminary materials.
_________________________________________________________________
___ Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously.
Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
(1) Amount Previously Paid:
_________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
_________________________________________________________________
(3) Filing Party:
_________________________________________________________________
(4) Date Filed:
_________________________________________________________________
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CORPORATE REALTY INCOME FUND I, L.P.
406 East 85th Street
New York, New York 10028
_________________________________________________________________
PROXY STATEMENT
_________________________________________________________________
WRITTEN CONSENT IN LIEU OF
SPECIAL MEETING OF THE LIMITED PARTNERS
_________________________________________________________________
INTRODUCTION
The accompanying form of proxy is solicited on behalf of the
General Partners of Corporate Realty Income Fund I, L.P. (the
"Partnership") to solicit written consents in lieu of a special
meeting of Limited Partners. Written consents and proxies must be
received by the Partnership before the date on which all votes will
be counted, which date will be the 28th day after the earliest
dated consent is delivered to the Partnership provided, however,
that such date may be extended from time to time by the General
Partners to a date not later than 60 days after such earliest dated
consent is delivered to the Partnership. The Partnership has first
mailed these proxy materials to Limited Partners and Unitholders on
or about _________________, 1995. The Partnership's principal
executive office is located at 406 East 85th Street, New York, New
York 10028. Limited Partners and Unitholders of record at the
close of business on _______________, 1995 (the "Record Date") will
be entitled to vote.
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Proxies in the accompanying form which are properly dated,
executed, and duly returned to the Partnership and not revoked will
be voted as specified and, if executed without specifying a vote,
will be voted in favor of the proposal discussed in this Proxy
Statement. Each proxy granted is revocable and may be revoked at
any time prior to its exercise by obtaining, completing, executing,
and returning an additional proxy indicating the changed vote.
Additional proxies may be obtained by calling the Partnership's
independent proxy solicitation company at 1-800-290-6426. The
Unitholders may vote only by giving a written proxy to SB
Depositary Corp. (the "Assignor Limited Partner"), as required by
the Partnership's agreement of limited partnership (the
"Partnership Agreement") and as discussed below.
As of __________________, 1995, 3,200,000 limited partnership
interests in the Partnership were outstanding with each interest
(an "Interest") entitled to one vote on all matters to be voted
upon. All of the Interests are held by the Assignor Limited
Partner, which issued to the Unitholders depositary units of
limited partnership interest in the Partnership (the "Units"). The
Units represent an assignment of the economic and other rights
attributable to the Interests. As of _________________, 1995,
3,200,000 Units were outstanding, with each Unit entitled to one
vote on all matters to be voted upon, but only by giving a proxy to
the Assignor Limited Partner to vote an Interest. The Assignor
Limited Partner will only vote the Interests held by it
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in accordance with, and to the extent of, Unitholders' proxies.
The persons named in the accompanying proxy will vote on behalf of
the Assignor Limited Partner as instructed by each Limited Partner
and Unitholder with respect to the proposal discussed in this Proxy
Statement.
MATTERS UPON WHICH TO VOTE
The General Partners recommend to the Limited Partners and
Unitholders that they approve a proposal (the "Proposal") to (i)
arrange for secured borrowings, in the form of a credit line
facility or otherwise, (ii) use such financing proceeds to fund the
acquisition and improvement of additional commercial buildings, and
(iii) amend (the "Amendment") the Partnership Agreement to
authorize such transactions. The Amendment will be effective as of
the date the votes are counted if it is approved by the Limited
Partners and Unitholders.
PURPOSE AND EFFECT OF THE PROPOSAL
The Partnership originally intended to finance approximately
50% of the aggregate purchase price of its properties. Having
received net proceeds from its offering of Units totalling
approximately $74,000,000, the Partnership would have been expected
to invest approximately $150,000,000 in commercial and industrial
real properties. However, because of changes in the
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commercial real estate market, the Partnership acquired only six
properties for an aggregate purchase price of approximately
$80,000,000, of which $10,000,000 constituted loan proceeds. The
Proposal restores the General Partners' original authority, now
lapsed, to leverage the Partnership's properties and use the
financing proceeds to acquire additional commercial properties.
All six properties were net leased to single tenants on a
long-term basis. The Partnership anticipated holding such
properties for approximately five to ten years, during which time
it would receive net rental payments from the tenants, after which
it would seek to sell the properties at prices which would
hopefully provide long-term capital appreciation.
The Partnership has endured the bankruptcy of two of its
tenants, the expiration of a third lease and the amendment of
another to avoid an early termination, and declines in the
occupancy and rental rates for commercial properties. The General
Partners have successfully converted properties to multi-tenant
buildings and re-leased all vacated space, but at lower rates than
those paid by the original net lease tenants. In addition, the
rental income from the Partnership's other two properties is
expected to decrease after the expiration of the initial terms of
the existing single-tenant leases. As a result, the Partnership's
rental income from its properties and distributions to Unitholders
have decreased significantly and the Partnership cannot presently
expect to recover its entire investment if it were to sell such
properties. Moreover, because
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of the length of existing leases, the Partnership's properties
would be slow to reflect any improvements in market rents and
property values.
The Proposal is designed to accelerate the Partnership's
participation in any increases in commercial real estate rents and
property values. By using the equity in its properties to finance
the purchase of additional properties, the Partnership would
further diversify its assets and reduce the impact of
underperforming properties on its entire portfolio. The
acquisition of additional properties would also increase the
Partnership's net income and distributions to Unitholders, to the
extent the revenues from such properties exceed operating and
financing costs related to such properties. The General Partners
intend to seek multi-tenant commercial properties which, with
improvements, might achieve higher occupancy and rental rates. If
successful, this policy would further increase the Partnership's
net income and distributions to Unitholders and the net value of
the Partnership's portfolio of properties.
FINANCING TERMS AND EFFECTS
The General Partners have engaged in discussions with a lender
concerning potential terms of secured borrowings to finance the
acquisition and improvement of additional properties. However, the
Partnership has neither sought nor obtained a commitment for any
such financing. The following discussion
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represents the General Partners' expectations regarding such loan
terms. The actual terms of any borrowings may differ from such
expectations, but will be within the limits established by the
Partnership Agreement.
The mortgage financing will be secured by all or most of the
Partnership's properties, including its existing properties. The
indebtedness will be non-recourse, meaning that the lender's
recourse will be limited to the properties which secure the debt;
neither the Partnership nor its Partners and Unitholders will be
liable for any deficiency between the value of the Partnership's
properties and the outstanding indebtedness.
The General Partners expect the financing to be initially
structured as a secured revolving line of credit, against which the
Partnership could draw funds as and when additional properties are
acquired and/or improved. Outstanding amounts drawn by the
Partnership would bear interest at a variable rate determined by
the prime rate or other index announced from time to time by the
lender. In addition to such interest, the lender will receive a
financing fee (computed as a percentage of the credit line
facility) plus payment of its out-of-pocket costs, such as
appraisal, architect, and legal fees. Monthly payments of interest
only will be required until maturity, at which time the entire
principal amount will be due. Such financing would be short-term,
with a probable maturity of only one year, so that the facility
must be extended or refinanced each year.
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The General Partners intend to replace the credit line
facility with a fixed rate mortgage loan after the Partnership has
completed its purchase of additional properties. Any such
financing would likely require monthly payments of principal and
interest until maturity, at which time a substantial balloon
payment of remaining principal would likely be due and payable.
The General Partners expect that any such loan would feature a
short to medium term of approximately three to seven years.
The Partnership's lenders can be expected to impose limiting
conditions on the Partnership's ability to borrow funds. Such
conditions would include debt service coverage (the Partnership's
net income before debt service would have to exceed debt service
payments by a stated multiple) and loan to portfolio value (the
outstanding indebtedness could not exceed a stated percentage of
the value of the Partnership's properties). These limitations are
separate from those imposed by the Partnership Agreement, as
described below.
The General Partners expect to approximate the Partnership's
original intention of a loan to value ratio of 50%. Accordingly,
it is expected that the Partnership's total borrowings will
approximate 50% of the sum of (x) the appraised values of the
Partnership's original six properties plus (y) the purchase price
of additional properties acquired by the Partnership pursuant to
the Proposal. The Partnership is not limited as to borrowing for
any individual property; the aggregate borrowings on all properties
may not exceed an amount equal to the sum of (i) 60%
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of the aggregate purchase price of all properties which are not
refinanced plus (ii) 80% of the aggregate value of all refinanced
properties.
The effects of the Proposal's leveraging are, on the one
hand, to increase the funds available for investment by the
Partnership and, on the other hand, to increase the risk of loss on
a leveraged property. To be profitable, the Partnership's
properties will need to generate cash flow in amounts sufficient to
not only cover operating expenses but also to pay all financing
costs. The higher the rate of interest on the financing, the more
difficult it will be for the Partnership to meet its obligation and
the greater the possibility of default. If the Partnership
defaults on secured indebtedness, the lender may foreclose and the
Partnership could lose its investment in the property.
It is anticipated that the Partnership's mortgage financing
will not provide for the amortization of the entire principal
amount of such loans or a substantial portion thereof prior to
maturity. Such mortgages involve greater risks than mortgages
where the principal amount is amortized over the term of the loan
because the ability of the Partnership to repay the outstanding
principal amount of the balloon loan at maturity may depend upon
the Partnership's ability to obtain adequate refinancing, which
will in turn depend upon economic conditions in general and the
value of the underlying properties in particular. There is no
assurance that the Partnership will be able to replace the credit
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line facility with a fixed rate loan or pay or refinance any
balloon payment mortgage at maturity.
VOTE REQUIRED FOR APPROVAL
Approval of the Proposal, including adoption of the Amendment,
requires the affirmative vote of a majority of the outstanding
Interests.
THE AMENDMENT
The Amendment consists of revisions to Paragraphs 15.2.13, and
15.4.18, and the deletion of Paragraph 15.4.34, of the Partnership
Agreement.
Paragraph 15.2.13 of the Partnership Agreement would be
revised in its entirety, to permit investment of financing proceeds
in additional properties, to read as follows:
"15.2 Powers of the General Partners. The conduct of the
Partnership's business shall be controlled by the General Partners.
The General Partners shall have all authority, rights and powers
conferred by law and those required or appropriate to the
management of the Partnership's business which, by way of
illustration but not by way of limitation, shall, subject only to
the provisions of Paragraph 15.4 following, include the right,
authority and power:
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15.2.13 to reinvest all Cash From Initial Financing and all
Cash from Sales and Refinancings;"
Paragraph 15.4.18 of the Partnership Agreement would be
revised in its entirety, to permit investment of financing proceeds
in additional properties, to read as follows:
"15.4 Limitations. Neither the General Partners nor any
Affiliate shall have the authority to:
15.4.18 reinvest in Property any Adjusted Cash From
Operations;"
Paragraph 15.4.34 of the Partnership Agreement would be
deleted in its entirety, to permit greater amounts of
non-amortizing, balloon payment financing (such financing is
presently limited to 25% of the total purchase price of acquired
properties).
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
The General Partners of the Partnership are 1345 Realty
Corporation (the "Corporate General Partner") and Robert F.
Gossett, Jr. All of the shares of capital stock of the Corporate
General Partner are owned by Mr. Gossett and his wife. The
Proposal may increase the compensation payable to the General
Partners by the Partnership, as discussed below.
The Proposal will not result in any additional acquisition
fees payable to the General Partners because such fees cannot be
paid in connection with the refinancing of the Partnership's
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original six properties. Similarly, the General Partners will not
receive any increased asset management fees because such fees are
determined solely by the investment of net proceeds of the
Partnership's offering of Units (which offering was completed in
1987). However, to the extent the Partnership acquires (and
eventually disposes of) additional properties and thereby increases
its net cash from operations and its net cash from sales of
properties, the General Partners will receive the following
additional compensation: property management fees ranging from 1%
to 6% of gross revenues from the operation of the Partnership's
additional properties depending on the type of property, length and
nature of the lease, and the extent of leasing services performed
by the General Partners; partnership management fees equal to 7% of
any increase in the Partnership's adjusted cash from operations, to
the extent the revenues generated by the Partnership's additional
properties exceed the expenses associated with such properties,
including financing costs; the General Partners' interest as
Partners of the Partnership, equal to 1% of any increase in
distributions to Partners, to the extent such increase is
attributable to operation of the Partnership's additional
properties; and upon the sale of any such additional Partnership
properties, the General Partners will be entitled to 1% of any
distributions of such sale proceeds until the Limited Partners and
Unitholders have received an 8% per annum priority return, then a
property disposition fee in an amount up to 1% of the gross sales
price of
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such additional properties, and, finally, 25% of any remaining
distributions to the Partners and Unitholders from such sales
proceeds.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
As of _______________, 1995, no person was known by the
Partnership to be the beneficial owner of more than five percent
(5%) of the outstanding Units.
As of _______________, 1995, neither of the General Partners
nor any of the directors or officers of the Corporate General
Partner owned any Units of the Partnership.
On November 30, 1994 and effective as of July 1, 1994,
Robert F. Gossett, Jr., the Individual General Partner of the
Partnership, acquired for his own account and for the account of
his wife, Pauline G. Gossett, all of the outstanding capital stock
of the Corporate General Partner of the Partnership. Such capital
stock was acquired from Smith Barney (Delaware) Inc. Mr. Gossett
funded such acquisition from available personal funds, without any
loan proceeds. As a result of such acquisition, Mr. Gossett owns
or controls, directly or indirectly, the entire interest of the
General Partners in the Partnership.
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There are no arrangements, known to the Partnership,
which may at a subsequent date result in a change in control of the
Partnership.
EXPENSE OF SOLICITATION
The cost of preparing this Proxy Statement and all other
costs in connection with this solicitation of proxies is being
borne by the Partnership. In addition to the solicitation of
proxies by use of the mails, the Partnership and the General
Partners and their respective officers and regular employees,
acting on behalf of the Partnership, may solicit proxies by
telephone, telegraph, or personal interview. In addition, the
Partnership has retained D.F. King & Co., Inc., an independent
proxy solicitation company, to aid in the solicitation of proxies,
for which the Partnership will pay an estimated fee of $5,000, plus
expenses. The Partnership will, at its expense, request
custodians, nominees, and fiduciaries to forward proxy soliciting
material to the beneficial owners of Units held of record by such
persons.
[Remainder of page intentionally left blank]
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Your cooperation in giving this matter your immediate
attention and in returning your proxies promptly will be
appreciated.
By Order of the General Partners
1345 REALTY CORPORATION
By Robert F. Gossett, Jr., President
ROBERT F. GOSSETT, JR.
Dated: ___________________, 1995
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CORPORATE REALTY INCOME FUND I, L.P.
406 EAST 85TH STREET
NEW YORK, NEW YORK 10028
PROXY CARD CUSIP NO._____________
PROXY TO SOLICIT WRITTEN CONSENT IN LIEU OF A SPECIAL MEETING OF
LIMITED PARTNERS THIS PROXY IS SOLICITED ON BEHALF OF THE GENERAL
PARTNERS. The undersigned hereby appoints Robert F. Gossett, Jr.
and Madeline Matlak, and each of them, acting on behalf of SB
Depositary Corp., as proxies for the undersigned, with full power
of substitution, to vote all limited partnership interests
("Interests") and all Interests attributable to depositary units of
limited partnership interest ("Units") in Corporate Realty Income
Fund I, L.P. (the "Partnership") which the undersigned is entitled
to vote as Limited Partner or Unitholder of record on
________________, 1995, hereby revoking any proxy or proxies
heretofore given by the undersigned to any person or persons with
respect to such Interests and Units. Said proxies are instructed
to vote as specified in the spaces on the reverse side.
Please sign as name(s) appear(s) hereon.
PROXIES MUST BE DATED
WHEN SIGNED. When signing as attorney,
executor, administrator, trustee or
guardian, the full title of such should be
given.
_____________________Date______________
Signature of Unitholder
_____________________Date______________
Signature if held jointly
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THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED ONLY AS DIRECTED.
IF YOU SIGN, DATE, AND RETURN THIS PROXY WITHOUT SPECIFYING A VOTE,
YOUR INTERESTS AND UNITS WILL BE VOTED FOR THE PROPOSAL.
Receipt is acknowledged of the Proxy Statement relating to this
solicitation.
PROPOSAL - To authorize the FOR __ AGAINST __ ABSTAIN __
Partnership to incur additional
borrowings and use such loan
proceeds to finance the
acquisition and improvement
of other commercial buildings and
to amend the agreement of
limited partnership
of the Partnership to
permit such transactions.
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To The Unitholders:
Enclosed with this letter are a Proxy Statement and Proxy Card
pursuant to which the General Partners of Corporate Realty Income
Fund I, L.P. (the "Partnership") are seeking your authorization to
acquire additional commercial rental properties on behalf of the
Partnership and to mortgage existing Partnership properties to
obtain financing for such acquisitions.
ALL CONSENTS MUST BE RECEIVED WITHIN A 28-DAY PERIOD (UNLESS
EXTENDED). THE GENERAL PARTNERS STRONGLY URGE YOU TO VOTE IN FAVOR
OF SUCH ACTION BY DATING AND SIGNING THE ENCLOSED PROXY CARD AND
MAILING IT BACK IN THE ENCLOSED STAMPED ENVELOPE SO THAT IT REACHES
US WITHIN SUCH PERIOD.
When the Partnership was organized, the General Partners had
the authority and intended to acquire approximately $150 million
worth of properties, using roughly $75 million of debt and $75
million of equity. After acquiring properties at a cost of $80
million (using only $10 million of debt), the General Partners
stopped buying buildings. Thereafter real estate values declined
substantially.
The General Partners feel that the real estate markets are
improving and it is a good time to resume the Partnership's
original acquisition plan. However, the General Partners'
authority to buy more properties and to finance these purchases has
lapsed with the passage of time.
THE PURPOSE OF THIS PROXY IS TO RESTORE TO THE GENERAL PARTNERS
THEIR ORIGINAL AUTHORITY -- NOW LAPSED -- TO FULFILL THE
PARTNERSHIP'S ORIGINAL INVESTMENT GOALS.
Please date and sign the enclosed Proxy Card and return it
today in the stamped envelope provided. It is important that you
take part in this vote -- its outcome could significantly affect
the value of your investment in the Partnership.
If you have any questions, please call the Partnership's proxy
solicitation agent at 1(800)290-6426.
Robert F. Gossett, Jr.,
Individual General Partner
and President, 1345 Realty Corporation,
Corporate General Partner
June __, 1995
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Re: Upcoming Proxy Solicitation
The General Partners of Corporate Realty Income Fund I, L.P.
(the "Partnership") are mailing to Unitholders a Proxy Statement
and Card pursuant to which the General Partners are seeking
authorization to acquire additional commercial rental properties
and to mortgage existing Partnership properties to finance such
acquisitions.
All consents must be received within a 28-day period (unless
extended). The General Partners are seeking your help in getting
the Unitholders to cast their votes by dating and signing the Proxy
Card and mailing it in the enclosed stamped envelope so that it
reaches us within such period.
THE GENERAL PARTNERS STRONGLY RECOMMEND THE PROPOSED ACTION.
The Partnership's original objective was to purchase
approximately $150 million worth of properties, financed with $75
million in equity and $75 million in debt. We raised the necessary
equity and began to buy buildings. After buying six buildings for
a total cost of $80 million (using only $10 million in debt), the
General Partners stopped buying buildings. Thereafter real estate
values declined substantially. In hindsight this low level of debt
allowed the Partnership to better weather this downturn.
All of the Partnership's buildings are currently fully leased
and generate positive cash flows. The Partnership's fourth quarter
1994 distribution was increased to $0.30 per unit from $0.25 per
unit for the previous quarter.
However, the downturn did negatively affect the Partnership's
financial position. Although the General Partners have managed to
fully lease all of the buildings, the current rents are less than
the rents in place when the buildings were purchased.
Consequently, the underlying property values have been reduced from
their original acquisition levels. In addition, because these rent
levels are "locked-in" by leases, these values cannot significantly
increase for the next several years. In short, for the foreseeable
future, the Partnership will not generate the originally expected
level of cash distributions and the properties cannot be sold for
sufficient prices to return the Unitholder's original investment.
The commercial real estate markets have begun an upturn. This
upturn can be seen by the Partnership's own leasing activity. In
1991-92 we leased approximately 97,000 square feet of space at an
average rent of about $11.35 per square foot. In 1993-94 we leased
approximately 265,000 square feet at an average rent of about
$11.80 per square foot. Many business publications have begun to
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discuss the increase in real estate occupancy levels throughout the
United States.
The General Partners believe that now is a good time to resume
the Partnership's original acquisition plan. However, due to the
passage of time, the General Partners no longer have the authority
to buy more properties and to finance these purchases. Therefore
we need Unitholder authorization.
THE AUTHORITY BEING REQUESTED IS THE SAME AUTHORITY THAT THE
GENERAL PARTNERS ORIGINALLY HAD BUT DID NOT EXERCISE DURING THE
DOWNTURN IN COMMERCIAL REAL ESTATE MARKETS.
If authorized, the General Partners intend to buy multi-tenant
office buildings that will generate cash-on-cash returns sufficient
to cover all new debt obligations incurred in connection with their
acquisition. Ideally these buildings should be 75%-80% occupied,
allowing the Partnership to lease the vacant space. This would
increase the property's cash flow and value.
The objective of these new acquisitions is to increase the
Partnership's distributable cash flow and to increase the value of
the Partnership's portfolio so that it can be liquidated at a
profit to the Unitholders.
If you have any questions or want to discuss it further,
please call Bob Gossett at 1(800)633-3392.
Robert F. Gossett, Jr.,
Individual General Partner
and President, 1345 Realty Corporation,
Corporate General Partner
June __, 1995
