SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
___ 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 0-15796
Corporate Realty Income Fund I, L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3311993
(State of organization) (I.R.S. Employer
identification No.)
475 Fifth Avenue, 21st Fl, New York, New York 10017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 696-0772
- ---------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
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 of 13
<PAGE>
CORPORATE REALTY INCOME FUND I, L.P.
(a Delaware limited partnership)
Index
Page No.
Part I Financial information 3
Balance Sheets --
June 30, 1999 and December 31, 1998 4
Statements of Operations --
For the three months ended June 30, 1999 and 1998 5
Statements of Operations --
For the six months ended June 30, 1999 and 1998 6
Statements of Cash Flows --
For the six months ended June 30, 1999 and 1998 7
Notes to the Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II Other information 11
Signatures 12
2 of 13
<PAGE>
Part I. Financial Information
Item I. Financial Statements
The summarized financial information contained herein is unaudited; however, in
the opinion of management, all adjustments necessary for a fair presentation of
such financial information have been included.
3 of 13
<PAGE>
CORPORATE REALTY INCOME FUND I, L.P.
(a Delaware limited partnership)
BALANCE SHEETS
June 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS Real estate, at cost:
Land $19,875,846 $19,875,846
Buildings and improvements 96,334,475 95,541,299
Equipment and furniture 78,029 78,029
------------- -------------
116,288,350 115,495,174
Less accumulated depreciation (23,251,478) (21,669,758)
------------- -------------
93,036,872 93,825,416
Cash and cash equivalents at cost,
which approximates market value 299,095 4,115,435
Accounts receivable 442,217 737,617
Due from partners 107,742 95,016
Note receivable, net of unamortized discount of
$40,475 in 1999 and $50,024 in 1998 465,936 524,379
Step rent receivables 2,812,635 2,638,615
Deferred charges, net of accumulated amortization
of $1,176,090 in 1999 and $927,224 in 1998 628,186 829,552
Lease commissions and legal fees, net of accumulated amortization
of $1,901,823 in 1999 and $1,637,425 in 1998 2,688,032 2,726,566
Deposits and other assets 171,692 255,769
------------- -------------
Total assets $100,652,407 $105,748,365
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Mortgage loan payable $44,362,800 $46,930,800
Accounts payable and accrued expenses 1,686,044 2,983,261
Other liabilities 2,133,562 1,382,043
------------- -------------
Total liabilities 48,182,406 51,296,104
------------- -------------
Partners' Capital:
General partners:
Capital contributions 1,000 1,000
Net income 393,449 395,236
Cash distributions (585,236) (567,200)
------------- -------------
(190,787) (170,964)
------------- -------------
Limited partners: ($25 per unit; 4,000,000 units
authorized, 2,983,531 issued and
outstanding in 1999 and 1998)
Capital contributions, net of offering costs 71,724,856 71,724,856
Net income 38,951,325 39,128,241
Cash distributions (58,015,393) (56,229,872)
------------- -------------
52,660,788 54,623,225
------------- -------------
Total partners' capital 52,470,001 54,452,261
------------- -------------
Total liabilities and partners' capital $100,652,407 $105,748,365
============= =============
</TABLE>
See accompanying notes to financial statements.
4 of 13
<PAGE>
CORPORATE REALTY INCOME FUND I, L.P.
(a Delaware limited partnership)
STATEMENTS OF OPERATIONS
For the three months ended June 30, 1999 and 1998
(Unaudited)
1999 1998
---------- ----------
Income:
Rental $3,860,792 $4,413,323
Interest and other income 354,565 32,361
---------- ----------
4,215,357 4,445,684
---------- ----------
Expenses:
Interest 833,835 810,510
Depreciation 790,860 733,554
Amortization 256,632 211,313
Property operating 1,747,784 1,994,212
Management fees 277,031 312,334
General and administrative 180,856 83,499
---------- ----------
4,086,998 4,145,422
---------- ----------
Net income $ 128,359 $ 300,262
========== ==========
Net income allocated:
To the general partners $ 1,284 $ 3,003
To the limited partners 127,075 297,259
---------- ----------
$ 128,359 $ 300,262
========== ==========
Net income per unit of
limited partnership interest $0.04 $0.10
===== =====
See accompanying notes to financial statements.
5 of 13
<PAGE>
CORPORATE REALTY INCOME FUND I, L.P.
(a Delaware limited partnership)
STATEMENTS OF OPERATIONS
For the six months ended June 30, 1999 and 1998
(Unaudited)
1999 1998
----------- -----------
Income:
Rental $ 7,351,882 $ 7,978,623
Interest and other income 618,054 38,559
----------- -----------
7,969,936 8,017,182
----------- -----------
Expenses:
Interest 1,665,854 1,633,756
Depreciation 1,581,720 1,468,866
Amortization 513,264 422,626
Property operating 3,521,566 3,713,965
Management fees 541,395 587,402
General and administrative 324,840 168,643
----------- -----------
8,148,639 7,995,258
----------- -----------
Net Income/(loss) $ (178,703) $ 21,924
=========== ===========
Net income/(loss) allocated:
To the general partners $ (1,787) $ 219
To the limited partners (176,916) 21,705
----------- -----------
$ (178,703) $ 21,924
=========== ===========
Net income/(loss) per unit of limited
partnership interest $(0.06) $0.01
===== =====
See accompanying notes to financial statements.
6 of 13
<PAGE>
CORPORATE REALTY INCOME FUND I, L.P.
(a Delaware limited partnership)
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) $ (178,703) $ 21,924
----------- -----------
Adjustments to reconcile net income/(loss)
to net cash provided by operating
activities:
Depreciation and amortization 2,094,984 1,891,492
Changes in operating assets and liabilities
Decrease (increase) in:
Accounts receivable 295,400 180,061
Due from partners (12,726) 153,926
Notes receivable 58,443 (13,253)
Step rent receivables (174,020) 106,022
Lease commissions and legal fees (225,864) (299,968)
Deferred charges (47,500)
Deposits and other assets 84,077 41,414
Increase (decrease) in:
Accounts payable and accrued expenses (1,297,217) 303,669
Due to partners -- 2,400,000
Other liabilities 751,519 (71,664)
----------- -----------
Total adjustments 1,527,096 4,691,699
----------- -----------
Net cash provided by operating activities 1,348,393 4,713,623
----------- -----------
Cash flows from investing activities:
Acquisition of real estate (793,176) (2,293,909)
----------- -----------
Cash flows from financing activities:
Mortgage paid (2,568,000) (511,200)
Capital repurchase -- (77,401)
Cash distributions to partners (1,803,557) (1,828,108)
----------- -----------
Net cash used in financing activities (4,371,557) (2,416,709)
----------- -----------
Net increase/(decrease) in cash and cash equivalents (3,816,340) 3,005
Cash and cash equivalents at beginning of period 4,115,435 855,840
----------- -----------
Cash and cash equivalents at end of period $ 299,095 $ 858,845
=========== ===========
</TABLE>
See accompanying notes to financial statements.
7 of 13
<PAGE>
CORPORATE REALTY INCOME FUND I, L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
1. General
The accompanying financial statements and related notes should be read in
conjunction with the Partnership's annual report for the year ended December 31,
1998 as certain footnote disclosures which would substantially duplicate those
contained in such audited financial statements have been omitted from this
report.
2. Rental Income
In accordance with the Financial Accounting Standards Board Statement No.
13, "Accounting for Leases," the Partnership recognizes rental income on a
straight-line basis over the fixed term of the lease period. Step rent
receivables represent unbilled future rentals. The following reconciles rental
income received in cash to rental income recognized.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Rental income received in cash $ 3,773,782 $ 4,466,334 $ 7,177,862 $ 8,084,645
Step rent receivables 87,010 (53,011) 174,020 (106,022)
----------- ----------- ----------- -----------
Rental income recognized $ 3,860,792 $ 4,413,323 $ 7,351,882 $ 7,978,623
=========== =========== =========== ===========
</TABLE>
3. Leases
Minimum future rentals under noncancellable operating leases as of June 30,
1999 are as follows:
Year ending December 31
-----------------------
1999 $ 5,597,000
2000 10,634,000
2001 7,961,000
2002 7,101,000
2003 6,757,000
Thereafter 25,069,000
-----------
Total $63,119,000
===========
In addition to the minimum lease amounts, the leases provide for escalation
charges to the tenants for operating expenses and real estate taxes. Escalation
charges have been included in rental income. For the three and six months ended
June 30, 1999 and 1998, escalation charges amounted to $513,503 and $988,389 in
1999 and $567,440 and $1,103,778 in 1998, respectively.
8 of 13
<PAGE>
CORPORATE REALTY INCOME FUND I, L.P.
(a Delaware limited partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
4. Transactions with General Partners and Affiliates
Fees incurred and reimbursable expenses for the three and six months ended
June 30, 1999 are:
Three Six
Months Months
-------- --------
Partnership management fees $ 62,727 $125,454
Property management fees 214,304 415,941
5. Supplemental Disclosure of Cash Flow Information
Cash paid for interest during the six months ended June 30, 1999 and 1998
amounted to $1,665,854 and $1,633,756, respectively.
9 of 13
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
At June 30, 1999, Registrant had cash and receivables of approximately
$741,000 as contrasted to accounts payable and accrued expenses of approximately
$1,686,000. This working capital deficiency of approximately $945,000 is
primarily attributable to a $2,000,000 repayment of principal made in January
1999 on its line of credit loan (the "Loan"), which has reduced Registrant's
monthly debt service requirements. Registrant measures its liquidity by its
ability to generate sufficient cash flow from operations to meet its current
operating and debt service requirements on a short-term and long-term basis.
Registrant's operations have provided this liquidity and are expected to
continue to do so. To the extent additional funds are required, Registrant could
borrow up to an additional $3,200,000 under the Loan.
In March 1999, Gdynia America Line, Inc., a tenant occupying approximately
21,650 square feet (20.3%) in the Tumi Building filed for protection under
Chapter 11 of the U.S. Bankruptcy Code. Polish Ocean Lines, a Polish corporation
owned by the Polish Government, is jointly and severally obligated under this
lease. On or about April 30, 1999, the lease, which required annual rental
payments of approximately $446,000, was rejected in the bankruptcy proceeding.
Registrant instends to instituit suit against Polish Ocean Lines for amounts due
under the remaining eight years term of the lease.
During the quarter ended June 30, 1999, Registrant funded approximately
$793,000 in improvements, primarily consisting of tenant improvements at the
Colorado and New York properties. Registrant continues to invest capital in
improving its New York property with a view to increasing its revenues from real
estate operations and ultimately realizing appreciation in property values.
Registrant will continue to require capital to fund additional tenant
improvements as tenancies turn over at its properties.
The Loan has provided Registrant with available capital to acquire
properties, fund improvements and leasing commissions, repurchase outstanding
Units, and otherwise fund capital requirements. In August 1999, Registrant
obtained mortgage financing in the amount of $32,000,000 secured by its New York
property, the proceeds of which were used to pay down approximately $23,381,000
of the Loan. The balance of the mortgage financing proceeds,after payment of
related loan costs, will be used to fund additional tenant improvements and to
augment working capital. The cost of Registrant's financing ultimately must be
offset by increased property revenues or Registrant's operations and capital
will be compromised.
Results of Operations
Six Months Ended June 30, 1999 versus 1998
In 1998, Registrant accrued substantial lease termination payments from the
Tumi Building in New Jersey, 475 Fifth Avenue in New York, and the American
Color Building in California. As a consequence of these lease terminations and
the bankruptcy of Gdynia America Line, Inc., a tenant in the Tumi Building,
rental revenues in 1999 decreased by 7.9% from 1998. Other income in 1999
aggregating approximately $618,000, consisting primarily of a real estate tax
refund from the New York property and a loan breakup fee, increased total income
to $7,969,936 in 1999, a 0.6% decrease from 1998.
Interest expense increased by 2.0% from 1998 to 1999 because of additional
borrowings in the second half of 1998 and higher interest rates. Depreciation
increased by 7.7% in 1999 from 1998 because of additional capital improvements
made by Registrant. Amortization increased by 21.4% because of additional
leasing commissions, increased loan costs, and a shorter amortization period.
The 5.2% decrease in property operating costs from 1998 to 1999 reflects
vacancies attributable to lease terminations and a tenant bankruptcy as well as
variations in temperature and the timing of maintenance expenditures. Management
fees decreased by 7.8% from 1998 to 1999 owing to the decrease in rental income.
General and administrative expenses increased by 92.6% in 1999 primarily because
of costs related to prospective mortgage financing and a write-off of amounts
owed by former tenants in the New York building.
10 of 13
<PAGE>
Net loss was $(178,703) in 1999 as compared to net income of $21,924 in
1998. Net cash from operations decreased by 71.4% from 1998 to 1999 primarily
because of payments of accounts payable and accrued expenses aggregating
approximately $1,297,000 in 1999 as contrasted to increases in accounts payable
and accrued expenses and amounts due to partners aggregating approximately
$2,704, 000 in 1998
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Three Months Ended June 30, 1999 versus 1998
In 1998, Registrant accrued substantial lease termination payments from the
Tumi Building in New Jersey, 475 Fifth Avenue in New York, and the American
Color Building in California. As a consequence of these lease terminations and
the bankruptcy of Gdynia America Line, Inc., a tenant in the Tumi Building,
rental revenues in 1999 decreased by 12.5% from 1998. Other income in 1999
aggregating approximately $355,000, consisting primarily of a loan breakup fee,
increased total income to $4,215,357 in 1999, a 5.2% decrease from 1998.
Interest expense increased by 2.9% from 1998 to 1999 because of additional
borrowings in the second half of 1998 and higher interest rates. Depreciation
increased by 7.8% in 1999 from 1998 because of additional capital improvements
made by Registrant. Amortization increased by 21.4% because of additional
leasing commissions, increased loan costs, and a shorter amortization period.
The 12.4% decrease in property operating costs from 1998 to 1999 reflects
vacancies attributable to lease terminations and a tenant bankruptcy as well as
variations in temperature and the timing of maintenance expenditures. Management
fees decreased by 11.3% from 1998 to 1999 owing to the decrease in rental
income. General and administrative expenses increased by 116.6% in 1999
primarily because of costs related to prospective mortgage financing and a
write-off of old balances contested by a tenant in the New York building.
Net income was $128,359 in 1999 as compared to $300,262 in 1998, a 57.3%
decrease.
Year 2000 Considerations
Registrant has received assurances from its significant suppliers, large
customers and financial institutions that those parties have appropriate plans
to remediate Year 2000 issues where their systems interface with Registrant's
systems or otherwise impact its operations. Registrant has also replaced its own
computer systems and has conducted a review of any impact on operation of its
buildings and taken any steps it deems necessary to prepare for Year 2000.
However, Registrant has not contacted any of the tenants at its buildings to
inquire as to their state of readiness for Year 2000.
Registrant's costs to remediate Year 2000 concerns has been minimal
(approximately $1,000 or less). None of such costs were incurred in the quarter
ended June 30, 1999 and no additional costs are expected to be incurred.
Registrant does not anticipate any significant impact on its operations
should any of the foregoing systems prove non-compliant for Year 2000 purposes.
A possible scenario of non-compliance would involve a tenant who is rendered
unable or unwilling to make rental payments because of deteriorating financial
condition due to its own failure to remediate Year 2000 concerns. Registrant has
not developed a contingency plan to address this scenario because it believes
the scenario unlikely.
While Registrant believes its planning effort are adequate to address its
Year 2000 concerns, there can be no guarantee that the systems of other
companies on which Registrant's systems and operations rely will be converted on
a timely basis and will not have a material effect on Registrant.
11 of 13
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) None.
(b) No reports on Form 8-K were filed during the quarter in which this report
is filed.
12 of 13
<PAGE>
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.
CORPORATE REALTY INCOME FUND I, L.P
(Registrant)
Date: August 18, 1999 By: Robert F. Gossett, Jr.
-----------------------------------
President, Director
Date: August 18, 1999 By: Pauline G. Gossett
------------------------------------
Secretary
13 of 13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from registrant's
audited financial statements as at and for the year ended December 31, 1998 and
unaudited financial statements as at and for the six months ended June 30, 1999
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-30-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998
<CASH> 299,095 4,115,435
<SECURITIES> 0 0
<RECEIVABLES> 908,153 1,261,996
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,486,682 5,728,216
<PP&E> 116,288,350 115,495,174
<DEPRECIATION> 23,251,478 21,669,758
<TOTAL-ASSETS> 100,652,407 105,748,365
<CURRENT-LIABILITIES> 3,819,606 4,365,304
<BONDS> 44,362,800 46,930,800
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 52,470,001 54,452,261
<TOTAL-LIABILITY-AND-EQUITY> 100,652,407 105,748,365
<SALES> 7,351,882 7,978,623
<TOTAL-REVENUES> 7,969,936 8,017,182
<CGS> 0 0
<TOTAL-COSTS> 5,616,550 5,605,457
<OTHER-EXPENSES> 866,235 756,045
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,665,854 1,633,756
<INCOME-PRETAX> (178,703) 21,924
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (178,703) 21,924
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (178,703) 21,924
<EPS-BASIC> (0.06) 0.01
<EPS-DILUTED> (0.06) 0.01
</TABLE>
