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 March 31, 2000
___ 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, 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 ___
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<PAGE>
CORPORATE REALTY INCOME FUND I, L.P.
and SUBSIDIARIES
Index
Page No.
--------
Part I Financial information 3
Item 1 Financial Statements 3
Balance Sheets --
March 31, 2000 and December 31, 1999 4
Statements of Operations --
For the three months ended March 31, 2000 and 1999 5
Statements of Cash Flows --
For the three months ended March 31, 2000 and 1999 6
Notes to the Financial Statements 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3 Quantitative and Qualitative Disclosures about Market Risk 11
Part II Other information 12
Item 6 Exhibits and Reports on Form 8-K 12
Signatures 13
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<PAGE>
Part I. Financial Information
Item 1. 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.
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<PAGE>
CORPORATE REALTY INCOME FUND I, L.P.
and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2000 and December 31, 1999
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Real estate, at cost:
Land $ 19,875,846 $ 19,875,846
Buildings and improvements 98,410,292 98,067,344
Equipment and furniture 242,302 242,302
------------- -------------
118,528,440 118,185,492
Less accumulated depreciation (25,248,986) (24,361,971)
------------- -------------
93,279,454 93,823,521
Cash and cash equivalents at cost,
which approximate market value 2,025,196 3,322,319
Accounts receivable 521,729 578,480
Notes receivable, net of unamortized discount of
$29,055 in 2000 and $32,464 in 1999 221,210 244,643
Step rent receivables 2,573,063 2,479,583
Deferred financing costs, net of accumulated amortization
of $1,705,882 in 2000 and $1,625,303 in 1999 884,913 965,492
Lease commissions and legal fees, net of accumulated amortization
of $1,708,647 in 2000 and $1,583,597 in 1999 2,043,362 2,168,412
Escrow deposits 3,135,315 2,866,682
Deposits and other assets 454,386 806,575
------------- -------------
Total assets $ 105,138,628 $ 107,255,707
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Mortgage loan payable $ 55,324,553 $ 55,539,288
Accounts payable and accrued expenses 2,138,978 2,599,574
Due to general partner -- 63,534
Other liabilities 1,159,028 1,031,820
------------- -------------
Total liabilities 58,622,559 59,234,216
------------- -------------
Partners' Capital:
General partners:
Capital contributions 1,000 1,000
Net income 360,942 366,955
Cash distributions (612,268) (603,227)
------------- -------------
(250,326) (235,272)
------------- -------------
Limited partners: ($25 per unit; 4,000,000 units
authorized, 2,983,531 issued and
outstanding in 2000 and 1999)
Capital contributions, net of offering costs 71,724,856 71,724,856
Net income 35,733,109 36,328,418
Cash distributions (60,691,570) (59,796,511)
------------- -------------
46,766,395 48,256,763
------------- -------------
Total partners' capital 46,516,069 48,021,491
------------- -------------
Total liabilities and partners' capital $ 105,138,628 $ 107,255,707
============= =============
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
CORPORATE REALTY INCOME FUND I, L.P.
and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Income:
Rental $ 3,929,360 $ 3,491,090
Lease Cancellation 32,218 --
Interest and other income 61,683 263,489
----------- -----------
4,023,261 3,754,579
----------- -----------
Expenses:
Interest 1,140,917 832,019
Depreciation 887,015 790,860
Amortization 205,629 256,632
Property operating 1,962,303 1,773,782
Management fees 272,098 264,364
General and administrative 156,621 143,984
----------- -----------
4,624,583 4,061,641
----------- -----------
Net loss $ (601,322) $ (307,062)
=========== ===========
Net loss allocated:
To the general partners $ (6,013) $ (3,071)
To the limited partners (595,309) (303,991)
----------- -----------
$ (601,322) $ (307,062)
=========== ===========
Net loss per unit of limited partnership interest $ (0.20) $ (0.10)
=========== ===========
Distribution per unit of limited partnership interest $ 0.30 $ 0.30
=========== ===========
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
CORPORATE REALTY INCOME FUND I, L.P.
and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2000 and 1999
Increase/(Decrease) in Cash
(Unaudited)
2000 1999
----------- -----------
Cash flows from operating activities:
Net loss $ (601,322) $ (307,062)
----------- -----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,092,644 1,047,492
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable 56,751 469,302
Due from partners -- (11,129)
Note receivable 23,433 36,333
Step rent receivables (93,480) (87,010)
Lease commissions and legal fees -- (44,840)
Escrow deposits (268,633) --
Other assets 352,189 (165,518)
Increase (decrease) in:
Accounts payable and accrued expenses (460,596) (373,250)
Other liabilities 127,208 (287,582)
----------- -----------
Total adjustments 829,516 583,798
----------- -----------
Net cash provided by operating activities 228,194 276,736
----------- -----------
Cash flows from investing activities:
Additions to real estate (342,948) (422,951)
----------- -----------
Cash used in investing activities (342,948) (422,951)
----------- -----------
Cash flows from financing activities:
Due to partners (63,534) --
Mortgage payments (214,735) (2,286,000)
Cash distributions to partners (904,100) (904,223)
----------- -----------
Cash used in financing activities (1,182,369) (3,190,223)
----------- -----------
Net decrease in cash and cash equivalents (1,297,123) (3,336,438)
Cash and cash equivalents at beginning of period 3,322,319 4,115,435
----------- -----------
Cash and cash equivalents at end of period $ 2,025,196 $ 778,997
=========== ===========
See accompanying notes to financial statements.
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<PAGE>
CORPORATE REALTY INCOME FUND I, L.P.
and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31,2000
(Unaudited)
1. General
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 2000 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2000.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Registrant Company and Subsidiaries' annual
report on Form 10-K for the year ended December 31, 1999.
In August 1999, the Partnership established two wholly-owned subsidiaries
namely, 475 Fifth Avenue L.P. and 475 Fifth - GP, Inc. 475 Fifth Avenue L.P.,
the interest of which is 99% owned by Registrant and 1% owned by 475 Fifth - GP,
Inc. (The General Partner), acquired ownership of the New York building and
related operations.
The consolidated financial statements include the accounts of the
Partnership and its wholly-owned subsidiaries. All intercompany accounts and
transactions have been eliminated.
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 billed to rental income recognized.
Three Months Ended
-----------------------
2000 1999
---------- ----------
Rental income billed $3,835,880 $3,404,080
Step rent receivables 93,480 87,010
---------- ----------
Rental income recognized $3,929,360 $3,491,090
========== ==========
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<PAGE>
CORPORATE REALTY INCOME FUND I, L.P.
and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
3. Leases
Minimum future rentals under noncancellable operating leases as of March
31, 2000 are approximately as follows:
Year ending December 31
-----------------------
2000 $ 8,915,000
2001 11,414,000
2002 10,485,000
2003 9,230,000
2004 5,998,000
Thereafter 15,900,000
-----------
Total $61,942,000
===========
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 months ended March
31, 2000 and 1999, escalation charges amounted to $521,042 and $474,886,
respectively.
4. Transactions with General Partners and Affiliates
Fees incurred and reimbursable expenses for the three months ended March
31, 2000 are:
Three
Months
--------
Partnership management fees $ 63,287
Property management fees 208,811
5. Supplemental Disclosure of Cash Flow Information
Cash paid for interest during the three months ended March 31, 2000 and
1999 amounted to $1,147,789 and $832,019, respectively.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
At March 31, 2000, Registrant had cash and receivables of approximately
$2,547,000 as contrasted to accounts payable and accrued expenses of
approximately $2,139,000. 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 would need to refinance
its line-of-credit loan (the "Fleet Loan") and/or sell assets.
During the quarter ended March 31, 2000, Registrant funded approximately
$343,000 of building and tenant improvements in New York and San Antonio.
Registrant continues to invest capital in improving its properties with the goal
of increasing revenues from real estate operations and realizing appreciation in
property values. Registrant will continue to need capital to fund additional
tenant improvements as tenancies turn over at its properties.
In August 1999, Registrant's subsidiary acquired ownership of the New York
property and obtained a $32,000,000 fixed rate mortgage loan (the "475 Loan")
secured by that property. The proceeds of the 475 Loan were used to pay down
approximately $23,381,000 of the Fleet Loan, to fund capital improvements and
leasing costs at 475 Fifth Avenue, and to augment working capital.
The 475 Loan and the Fleet Loan have provided Registrant with available
capital to acquire properties, fund improvements and leasing commissions,
repurchase outstanding Units, and otherwise fund capital requirements. The cost
of Registrant's financing ultimately must be offset by increased property
revenues or Registrant's operations and capital will be compromised.
The Fleet Loan matures on September 24, 2000. Registrant anticipates
satisfying the Fleet Loan out of the proceeds of a refinancing and/or a sale of
assets. In April 2000, Registrant signed a non-binding letter of intent to sell
its Boulder, Colorado building for $13,100,000 in cash. The sale, which is
subject to execution of a binding contract and the buyer's due diligence, is
expected to occur in June 2000. Registrant intends to use $10,000,000 of the net
proceeds to pay down the Fleet Loan and the balance to augment working capital.
Cash distribution to Unitholders during the three months ended March
31,2000 aggregated $895,059 or $0.30 per Unit. Registrant intends to maintain
this level of distribution through 2000 and, if possible, thereafter. However,
distributions are subject to suspension or reduction to meet capital
requirements and are also limited by the Fleet Loan to 90% of cash from
operations plus depreciation and amortization.
Results of Operations
Three Months Ended March 31, 2000 versus 1999
Rental income in 2000 increased by 12.6% from 1999 as a result of the
expiration of certain rent abatements in New York and escalations in rental
rates at the New York, New Jersey and Colorado buildings. Other income in 2000
decreased by 76.6% from 1999 due to the receipt during the prior period of a
property tax refund for the New York building.
Interest expense increased by 37.1% because of larger loan balances (only a
portion of the proceeds of the 475 Loan was used to pay down the Fleet Loan) and
higher interest rates. Depreciation increased by 12.2% in 2000 from 1999
primarily because of additional capital improvements made by Registrant at 475
Fifth Avenue, the Tumi Building, and Alamo Towers. Amortization decreased by
19.9% because of the write-off during 1999 of leasing commissions pertaining to
tenants that terminated their leases prior to the end of the lease term at the
TUMI, 475 Fifth Avenue, and Monterey Park buildings. The 10.6% increase in
property operating costs from 1999 to 2000 reflects increased real estate taxes
at the San Antonio and Las Colinas, Texas buildings, certain non-recurring
repairs made to the various buildings and utilities and other operating costs
associated with increased occupancy at certain properties. Management fees
increased by 2.9% from 1999 to 2000 due to increased rental income. General and
administrative expenses increased by 8.8% in 2000 primarily because of costs
related to changing Registrant's transfer agent.
9 of 14
<PAGE>
Results of Operations (continued)
Operations during the three months ended March 31, 2000, therefore,
resulted in a net loss of $601,322 as compared to a net loss of $307,062 in
1999, an increase of 95.8 %. After adjusting for non-cash items (depreciation
and amortization), operations generated cash flows of approximately $491,322 in
the first quarter of 2000 and $740,430 in 1999 (a 33.6% decrease). This decrease
in net cash provided by operating activities is largely attributable to the
increased interest expense and the reduction in other income because of the
one-time property tax refund for the New York building in 1999.
10 of 14
<PAGE>
Item 3: Quantitative and Qualitative Disclosures About Market Risk.
Interest Rates
Registrant's primary market risk exposure is to changes in interest rates
on its mortgage loan borrowings.
Registrant obtained the 475 Loan, a fixed rate debt instrument, to manage
its exposure to fluctuations in market interest rates. Registrant previously
obtained the Fleet Loan, a variable rate debt instrument, to enable it to draw
down funds as needed for capital improvements, tenant improvements, and leasing
commissions on its diverse portfolio of properties. As of March 31, 2000,
Registrant had approximately $23,434,000 of outstanding debt subject to variable
rates (approximately 42% of outstanding debt) and approximately $31,891,000 of
fixed rate indebtedness (approximately 58% of outstanding debt). The average
interest rate on Registrant's debt decreased from 8.22% at December 31, 1999 to
8.12% at March 31, 2000. Registrant does not have any other material
market-sensitive financial instruments. It is not Registrant's policy to engage
in hedging activities for previously outstanding debt instruments or for
speculative or trading purposes.
A change of 1% in the index rate to which Registrant's variable rate debt
is tied would change the annual interest incurred by Registrant by approximately
$234,000, based upon the balances outstanding on variable rate instruments at
March 31, 2000.
11 of 14
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) 27. Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter for which this report
is filed.
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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.
CORPORATE REALTY INCOME FUND I, L.P.
(Registrant)
By: 1345 REALTY CORPORATION
AS CORPORATE GENERAL PARTNER
Date: May 15, 2000 By: Robert F. Gossett, Jr.
----------------------
President
Date: May 15, 2000 By: Pauline G. Gossett
----------------------
Secretary
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<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, 1999 and unaudited financial statements as at and for the three months ended
March 31, 2000 and 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-1999
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 2,025,196 3,322,319
<SECURITIES> 0 0
<RECEIVABLES> 742,939 823,123
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 3,222,521 4,952,017
<PP&E> 118,528,440 118,185,492
<DEPRECIATION> (25,248,986) 24,361,971
<TOTAL-ASSETS> 105,138,628 107,255,707
<CURRENT-LIABILITIES> 3,298,006 3,694,928
<BONDS> 55,324,553 55,539,288
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 46,516,069 48,021,491
<TOTAL-LIABILITY-AND-EQUITY> 105,138,628 107,255,707
<SALES> 3,929,360 3,491,090
<TOTAL-REVENUES> 4,023,261 3,754,579
<CGS> 0 0
<TOTAL-COSTS> 3,327,045 3,085,638
<OTHER-EXPENSES> 156,621 143,984
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,140,917 832,019
<INCOME-PRETAX> (601,322) (307,062)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (601,322) (307,062)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (601,322) (307,062)
<EPS-BASIC> (0.20) (0.10)
<EPS-DILUTED> (0.20) (0.10)
</TABLE>
