FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
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: 33-3657
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
as successor to Glenborough Limited pursuant to Rule 15d-5
-----------------------------------------------------------------
-
(Exact name of Registrant as specified in its charter)
94-3193010
California (successor to 94-2997842)
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 South El Camino Real,
Suite 1100
San Mateo, California 94402
--------------------- ------------
(Address of principal (Zip Code)
executive offices)
(415) 343-9300
-----------------------------
(Registrant's telephone number)
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
--- ---
Total number of units outstanding as of September 30, 1994: 2,961,853
Page 1 of 20
NO EXHIBIT INDEX REQUIRED
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Balance Sheets
(In thousands, except units outstanding)
(Unaudited)
September 30, December 31,
1994 1993
---------- ----------
Assets
------
Real estate investments, at cost:
Land $ 4,465 $ 28,797
Buildings and improvements 33,042 137,956
Net realizable value reserve (8,213) (177)
-------- --------
29,294 166,576
Less:
Accumulated Depreciation (8,325) (42,875)
-------- --------
Net real estate investments 20,969 123,701
Other Assets:
Cash and cash equivalents 339 1,506
Restricted cash - 8,247
Receivable, (including $70
from a related party in 1993) 19 2,276
Advance to a related party 1,000 -
Deferred loan fees 448 2,933
Deferred leasing commissions 10 721
Notes receivable-MFCo., including
premium but net of deferred gain
on roll-out - 44,830
Other notes receivable, net of
discount - 121
Prepaid incentive and transaction
fees (paid to related party) - 623
Other 67 324
-------- --------
Total assets $ 22,852 $ 185,282
======== ========
Page 2 of 20
(continued)
Page 3 of 20
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Balance Sheets - continued
(In thousands, except units outstanding)
(Unaudited)
September 30, December 31,
1994 1993
-------- --------
Prepetition liabilities:
Notes payable, net of discount/
including premium (including
$90 to a related party in
1993) $ - $ 273,762
Accrued interest - 21,237
Accounts payable - 563
Deposits and other liabilities - 726
-------- --------
Total prepetition liabilities - 296,288
-------- --------
Postpetition liabilities:
Notes payable 15,792 381
Accrued interest 108 -
Accrued expenses 289 239
Lease obligation - 167
Deposits and other liabilities 161 475
-------- --------
Total postpetition liabilities 16,350 1,262
-------- --------
Partners' equity (deficit)
General partners 130 (2,234)
Limited partners, 2,961,853 and
3,411,747 units outstanding at
September 30, 1994 and
December 31, 1993, respectively 6,372 (110,034)
-------- --------
Total partners' equity (deficit) 6,502 (112,268)
-------- --------
Total liabilities and partner's
equity (deficit) $ 22,852 $ 185,282
======== ========
See accompanying notes to financial statements.
Page 4 of 20
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Operations
(in thousands, except per unit amounts)
(Unaudited)
<TABLE>
Nine months ended Three months ended
September 30, September 30,
----------------
- -----------------
1994 1993 1994 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Rental $ 5,290 $13,868 $ 672 $ 4,475
Interest and other 172 2,932 76 1,062
------ ------ ------ ------
Total revenues 5,462 16,800 748 5,537
------ ------ ------ ------
Operating expenses (including $32
and $141 paid to related parties
in 1994 and 1993 respectively
for miscellaneous reimbursements):
Property taxes 593 1,629 73 462
Repairs and maintenance 456 1,319 24 471
Management fees and reimbursed
expenses (paid to related
parties) 722 1,418 87 472
Insurance 65 163 10 55
Utilities 466 1,619 15 547
Salaries and wages (including $192
and $563 paid to related parties
in 1994 and 1993, respectively) 206 588 11 179
Professional fees 907 597 353 168
Depreciation and amortization 1,766 4,239 130 1,413
Other 128 438 9 76
------ ------ ------ ------
Total operating expenses 5,309 12,010 712 3,843
------ ------ ------ ------
Operating income 153 4,790 36 1,694
(continued)
Page 5 of 20
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Operations - continued
(in thousands, except per unit amounts)
(Unaudited)
Nine months ended Three months ended
September 30, September 30,
---------------- -----------------
1994 1993 1994 1993
------ ------ ------ ------
Other income and (expense):
Gain on sale 1,503 - - -
Interest expense and
amortization of debt premium
(contractual amount is
$16,282 including premium
amortization for 1993) (2,741) (8,874) (183) (3,184)
------- ------- ------- -------
Loss before extraordinary item (1,085) (4,084) (147) (1,490)
Extraordinary item 119,855 (14) (172) (5)
------- ------- ------- -------
Net income/(loss) $118,770 $ (4,098) $ (319) $ (1,495)
======= ======= ======= =======
Loss before extraordinary item
per limited partnership unit $ (0.33)$ (1.17) $ (0.05) $ (0.43)
Extraordinary item per limited
partnership unit 36.49 (0.01) (0.06) -
------- ------- ------- -------
Net income/(loss) per limited
partnership unit $ 36.16 $ (1.18) $ (0.11) $ (0.43)
======= ======= ======= =======
Distributions per limited
partnership unit $ - $ - $ - $ -
======= ======= ======= =======
See accompanying notes to financial statements.
Page 6 of 20
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Partners' Equity (Deficit)
(in thousands)
For the nine months ended September 30, 1994 and 1993
(Unaudited)
Total
General Limited Partners'
Partner Partners Equity
--------- -------- --------
Consolidated balance,
December 31, 1992 $ (2,107) $(103,803) $(105,910)
Net loss (82) (4,016) (4,098)
--------- --------- ---------
Consolidated balance,
September 30, 1993 $ (2,189) $(107,819) $(110,008)
========= ========= =========
Consolidated balance,
December 31, 1993 $ (2,234) $(110,034) $(112,268)
Net income 2,697 116,073 118,770
--------- --------- ---------
Consolidated balance,
September 30, 1994 $ 463 $ 6,039 $ 6,502
========= ========= =========
See accompanying notes to financial statements.
Page 7 of 20
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
For the Nine Months
Ended
September 30,
----------------------
1994 1993
-------- --------
Cash flows from operating activities:
Net income/(loss) $118,770 $ (4,098)
Adjustments to reconcile
net income/(loss) to net
cash provided by operating
activities:
Notes receivable premium
amortization (accretion) - (17)
Depreciation and amortization 1,766 4,239
Gain on sale (1,503) -
Gain from debt forgiveness (119,855) -
Changes in assets and liabilities:
Increase (decrease) in
other liabilities (294) 22
Increase in receivables
(including $70 from
a related party in 1993) - (169)
Increase in advance to related party (1,000) -
Decrease in accounts payable (569) (163)
Increase (decrease) in accrued expenses 112 (567)
Decrease (increase) in other assets (309) 172
Decrease in prepaid incentive
and transaction fees
(paid to a related party) 348 372
Decrease in legal retainers - 443
Increase in deferred leasing
commissions and loan fees (575) (43)
Increase in accrued interest 108 -
------- -------
Net cash provided by (used in) operating
activities (3,001) 191
------- -------
(continued)
Page 8 of 20
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows - continued
(in thousands)
(Unaudited)
For the Nine Months
Ended
September 30,
----------------------
1994 1993
-------- --------
Cash flows from investing activities:
Proceeds from sale of real estate 1,307 -
Improvements to real estate (326) (518)
Gross increase in restricted cash (35) (509)
Increase in other notes receivable - 700
-------- --------
Cash provided by (used in)
investing activities 946 (327)
-------- --------
Cash flows from financing activities:
Borrowings on notes payable 15,912 201
Principal payments on notes payable
and lease obligations (15,024) (13)
-------- --------
Net cash provided by financing activities 888 188
-------- --------
Net increase (decrease) in cash and
cash equivalents (1,167) 52
Cash (net restricted cash), beginning
of period 1,506 2,232
-------- --------
Cash (net restricted cash), end
of period $ 339 $ 2,284
======== ========
See accompanying notes to financial statements.
Page 9 of 20
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1994
(Unaudited)
Note 1. SUMMARY OF ORGANIZATION
-----------------------
Glenborough Partners, A California Limited Partnership has
succeeded Glenborough Limited, A California Limited Partnership
pursuant to section 15d-5 of the Securities Exchange Act of 1934.
On May 21, 1992, GOCO Realty Fund I, the partnership holding and
operating the Partnership's real property (including its related
debt), filed a petition in the United States Bankruptcy Court for
the Northern District of California for reorganization under
Chapter 11 of the Federal Bankruptcy Code. The Partnership filed
a plan of reorganization with the Bankruptcy court which became
effective January 24, 1994 (see Note 6).
To facilitate the Partnership's holding and transfer of real
property as set forth under the plan of reorganization, two
partnerships were created: (i) GPA West, L.P.; and (ii) GPA
Industrial, L.P.
GPA West, L.P. and GPA Industrial, L.P. are subsidiaries of GOCO
Realty Fund I and as such the financial statements have been
consolidated with Glenborough Partners. The general partners of
GPA West, L.P. and GPA Industrial, L.P. are Glenborough Realty
Corporation and Robert Batinovich while the sole limited partner
of each partnership is GOCO Realty Fund I.
Note 2. SIGNIFICANT ACCOUNTING POLICY
-----------------------------
In the opinion of Glenborough Realty Corporation, the managing
general partner, the accompanying unaudited financial statements
contain all adjustments (consisting of only normal accruals)
necessary to present fairly the financial position of Glenborough
Partners, A California Limited Partnership as successor to
Glenborough Limited pursuant to Rule 15d-5 (the "Partnership"),
at September 30, 1994 and December 31, 1993, and the related
statements of operations for the nine and three months ended
September 30, 1994, statements of partners' equity (deficit) and
the statements of cash flows for the nine months ended
September 30, 1994 and 1993.
As a result of the May 21, 1992 Chapter 11 filing, the
Partnership began recognizing interest income/expense in
accordance with the
Statement of Position 90-7 - Financial Reporting by Entities in
Reorganization under the Bankruptcy Code ("SOP 90-7"), whereby
interest income/expense on secured claims accrue only to the
extent that the value of the underlying collateral exceeds the
principal amount of the secured claim.
Page 10 of 20
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1994
(Unaudited)
In accordance with SOP 90-7, all income and expenses directly
related to the plan of reorganization are expensed as incurred
and are presented net as an extraordinary item. During the first
nine months of 1994, the Partnership incurred professional and
other fees related to the plan of reorganization of $42,000 and
earned interest income on accounts related to the reorganization
of $7,000 on cash balances resulting from the plan of
reorganization. These amounts are recorded as an extraordinary
item.
Certain items in the 1993 financial statements have been
reclassified to conform to the 1994 financial statement
presentation.
Note 3. REFERENCE TO 1993 AUDITED FINANCIAL STATEMENTS
-----------------------------------------------
These unaudited financial statements should be read in
conjunction with the Notes to Consolidated Financial Statements
included in the 1993 audited financial statements.
Note 4. NET LOSS PER LIMITED PARTNERSHIP UNIT
-------------------------------------
Pursuant to the Glenborough Partners and GOCO Realty Fund I
partnership agreements, the general partners hold a 2.27% share
of the partnership's net income or loss and distributions. This
percentage is derived from the general partners' 1% direct
interest in GOCO Realty Fund I and a 0.99% indirect interest
through their 1.28% general partner interest in Glenborough
Partners' 99% interest in GOCO Realty Fund I.
For financial reporting purposes, after the redemption of units
discussed in Note 6, 3,209,622 and 3,413,844 weighted average
units were outstanding to limited partners for the nine months
ended September 30, 1994 and 1993, respectively. The weighted
average units outstanding to limited partners for the three
months ended September 30, 1994 was 2,962,853. Net income (loss)
per unit is derived by dividing 97.73% of the net income (loss)
by the weighted average number of units outstanding to the
limited partners.
Note 5. RELATED PARTY TRANSACTIONS
--------------------------
In accordance with the Limited Partnership, Cash Collateral and
Property Management Agreements, the Partnership paid its general
partner, Glenborough Realty Corporation and its affiliates
(collectively "Glenborough") compensation for services provided
to the Partnership and management of the Partnership's assets.
Page 11 of 20
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1994
(Unaudited)
All fees and allocated expenses due to Glenborough and included
in the Partnership's operating expenses for the nine months ended
September 30, 1994 and 1993 are as follows (in thousands):
Nine months ended
September 30,
------------------
1994 1993
-------- --------
Property management fees $ 222 $ 557
Reimbursed general and administrative
overhead 500 372
------ ------
Total management fees and reimbursed
general and administrative expenses $ 722 $ 929
====== ======
In the first nine months of 1994: (i) Glenborough was reimbursed
$192,000 for salaries and wages of on-site management,
maintenance and landscape employees and $32,000 for miscellaneous
reimbursements; (ii) Glenborough was paid $36,000 for leasing
commissions which were capitalized and are amortized over the
terms of the related leases; and (iii) Glenborough was paid
$962,000 for transaction fees on the reorganization discussed in
Note 6 below.
In the first nine months of 1993: (i) Glenborough was reimbursed
$563,000 for salaries and wages of on-site management,
maintenance and landscape employees and $141,000 for
miscellaneous reimbursements; and (ii) Glenborough was paid
$47,000 for leasing commissions which were capitalized and are
amortized over the terms of its related leases.
Note 6. CHAPTER 11 - PLAN OF REORGANIZATION
-----------------------------------
On May 21, 1992, GOCO Realty Fund I, the partnership holding and
operating the Partnership's real property (including its related
Brazos Debt), filed a petition in the United States Bankruptcy
Court for the Northern District of California for reorganization
under Chapter 11 of the Federal Bankruptcy Code.
On January 13, 1994, GOCO Realty Fund I entered a plan of
reorganization in the United States Bankruptcy Court (the
"Court") for the Northern District of California. The plan was
confirmed by the Court and the plan became effective January 24,
1994.
Page 12 of 20
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1994
(Unaudited)
The following is a brief description of the principal points of
the plan reorganization.
1. The claims of all creditors were satisfied in full.
2. Transfer to Brazos of the Partnership's interest in the
restricted cash and Griffin note receivable.
3. Twelve properties have been transferred into two separate
rollouts, four to Griffin Investments (Phase II Rollout),
and eight to a Griffin affiliate (Phase III Rollout), in
redemption of all of Griffin's (and its affiliates')
448,894 units in Glenborough Partners (which is successor
to Glenborough Limited). These redemptions reduced
Glenborough Partners' outstanding equity securities from
3,410,747 limited partner units to 2,961,853 limited
partner units. Those entities were given options to pay
off Brazos' lien on those properties, at negotiated prices,
or transfer them to Brazos. The options on both the Phase
II and the Phase III Properties were not exercised, and the
properties were transferred to Brazos.
4. GOCO's obligation to deliver the property known as
Burlingame Plaza to Robert Fraser was satisfied through the
payment by GOCO Realty Fund I of $750,000 toward the price
charged by Brazos for release of Burlingame Plaza, which
was then delivered to Mr. Fraser free and clear following
his payment of $150,000 owed by him to GOCO. GOCO paid
this amount over to Brazos against the balance of the
release price.
5. The claims of Brazos were satisfied through a multipart
transaction including the following:
a. Brazos unconditionally released its lien on two
properties; (i) a 50,000-foot industrial facility in
Auburn, California, which was leased to Coherent, Inc.
- the release of this lien occurred on February 4,
1994, as part of a sale of the property to the tenant ;
and (ii) a vacant 95,500 square foot industrial/office
facility in the Stanford Business Park in Palo Alto,
California.
b. GOCO paid Brazos the sum of $500,000, from the Coherent
Auburn sale, discussed below, in return for which
Brazos released its lien on the property known as
Page 13 of 20
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1994
(Unaudited)
Rosemead Springs Business Park in El Monte, California -
this transaction occurred on February 4, 1994.
c. GOCO had an option (exercisable at any time prior to
April 30, 1994) to obtain a release of the Brazos lien
as to any of the remaining properties subject to
Brazos' lien (the "Option Properties") by paying a
negotiated release price to Brazos. The Partnership
exercised its option on a few properties as discussed
in paragraph 4. and 5.b above and 6. below. The
remaining options were not exercised and those
properties were transferred to Brazos in satisfaction
of the remaining balance of Brazos claims in May 1994.
6. GOCO closed the sale of the Coherent Auburn facility to the
tenant for $3,650,000 on February 4, 1994, and applied a
portion of the net proceeds from the sale toward the
payment of the release price for the Rosemead Springs
property referred to in paragraph 5.b., above. Most of the
remaining proceeds were applied toward the partial paydown
of Brazos' discounted lien release price for four of the
Option Properties referred to in paragraph 5.c., above.
The balance of the funds required for the payment of those
release prices were financed through a $12 million loan
obtained by GPA Industrial, L.P. from Heller Financial,
Inc. Such financing was applied to the release of the
liens on the two properties known as the J.I. Case
buildings and the two properties known as the Navistar
buildings. The total release price for these properties
and the Rosemead property was $14,500,000.
7. Included in the above transactions, was $962,000 in net
transaction fees payable to a general partner which was
paid in August 1994.
The impact of the reorganization is $119,880,000 in extraordinary
gain from the forgiveness of debt. The consolidated financial
statements include adjustments that arose from the reorganization
plan.
The ultimate result is (i) GPA West obtaining Coherent Palo Alto
free and clear; (ii) GPA West obtaining Rosemead Springs,
financed through debt of $2,500,000; and (iii) GPA Industrial
obtaining the J.I. Case and Navistar buildings financed through
debt of $12,000,000.
Note 7. NOTES PAYABLE
Page 14 of 20
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1994
(Unaudited)
The two subsidiaries of GOCO Realty Fund I, GPA West, L.P. and
GPA Industrial, L.P. obtained the Rosemead Springs and J.I.
Case/Navistar properties, respectively, in May 1994 through the
payment to Brazos of the negotiated release prices for each of
the properties. This required GPA West, L.P. and GPA Industrial,
L.P. to secure financing.
GPA West, L.P. incurred indebtedness of $2,500,000 to Mid-
Peninsula Bank, secured by Rosemead Springs. The interest rate
on this promissory note payable is two (2) percentage points per
annum over the Mid-Peninsula Bank Base Rate. Regular interest
payments are due monthly until the May 1995 maturity at which
time the entire principal balance and accrued interest are due.
GPA Industrial, L.P. incurred indebtedness of $12,000,000 to
Heller Financial, Inc. secured by the four J.I. Case/Navistar
properties. The interest rate on this promissory note payable is
five (5) percentage points per annum over the three month London
Interbank Offered Rate ("Libor") and is reset the first business
day of each month. Monthly $25,000 principal plus interest
payments are due during the first two years of the loan. In the
third fiscal year of the loan monthly payments increase to
$33,333 principal plus interest. Finally, beginning with the
fourth fiscal year of the loan until the May 2004 maturity,
monthly payments will increase to $41,667 principal plus
interest.
In August 1994, Glenborough Partners borrowed $1,412,000 from an
unaffiliated lender to pay down its tax and audit liability and
the general partner transaction fees on the reorganization
discussed in Note 6 above. The terms of the note include an
interest rate at the bank's prime lending rate, with principal of
$20,000 plus interest payable monthly until maturity of January
5, 1995.
Page 15 of 20
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
INTRODUCTION
The predecessor partnership commenced operations as of September
30, 1986, following its acquisition of 66 real estate projects
subject to non-recourse institutional debt secured by the
projects and certain other assets, subject to certain
liabilities, most of which related to the operation of the
projects. The predecessor partnership acquired the projects and
other assets in exchange for the Units, in an Exchange
Transaction involving 21 limited partnerships and one individual
property owner. At the end of 1993, there was a technical
termination of the predecessor partnership and Glenborough
Partners commenced as successor to Glenborough Limited
(collectively, "the Partnership").
The following discussion addresses the Partnership's financial
condition at September 30, 1994 and its results of operations for
the nine and three months ended September 30, 1994 and 1993.
This information should be read in conjunction with the
Consolidated Financial Statements, notes thereto and other
information contained elsewhere in this report.
LIQUIDITY AND CAPITAL RESOURCES
On May 21, 1992, New West Federal Savings and Loan Association
("New West") filed a judicial foreclosure action in Superior
Court in Orange County. Also on May 21, the Partnership (i)
filed a civil action against New West in Superior Court in San
Mateo County, seeking in excess of $30 million in damages for a
variety of claims, including misrepresentation and breach of
contract, and (ii) filed a petition in the United States
Bankruptcy Court for the Northern District of California for
reorganization under Chapter 11 of the Federal Bankruptcy Code
(see Results of Operations below). The Bankruptcy Court approved
the Partnership as debtor in possession, the continuation of
Glenborough as manager of the Partnership's assets, and an
agreement between the Partnership and New West relating to the
use of cash collateral, as well as ruling on a variety of other
miscellaneous issues. In addition, the Bankruptcy Court approved
the employment of the law firm of Cotchett, Illston and Pitre of
Burlingame, California, as the Partnership's litigation counsel
in its civil action against New West. On December 23, 1992, the
Partnership and New West agreed on the terms of a litigation
moratorium under which virtually all activity in the civil
actions and in the Bankruptcy Court (other than routine matters
relating to day-to-day operations) were suspended while the
parties attempted to negotiate a settlement.
Griffin Investments (formerly MFCo.) had also been carrying on
independent settlement discussions with New West, which could
have potentially led to elimination of the Griffin note
receivable and its related share of the New West debt. However,
Page 16 of 20
those independent negotiations were terminated pending completion
of settlement negotiations between New West and the Partnership.
As a result of the Chapter 11 filing, a cash collateral agreement
was implemented between the Partnership and New West, whereby the
Partnership was required to pay to New West monthly, all but
$50,000 of the funds remaining in the operating cash accounts as
of the last day of the previous month. In accordance with
Statement of Position 90-7 - Financial Reporting by Entities in
Reorganization under the Bankruptcy Code ("SOP 90-7") such
payments have been recognized as interest expense. Net cash paid
to Brazos or its agent for interest pursuant to the cash
collateral agreement was $2,177,000 in the nine months ended
September 30, 1994.
In July of 1993, it was announced that all of the assets of New
West (including the Partnership's loan) had been transferred to
Brazos. Brazos's general partner is Keystone Inc., an affiliate
of the Robert M. Bass organization which owned New West, and
Brazos's principal limited partner is the Federal Deposit
Insurance Corporation.
On November 19, 1993, GOCO and Brazos executed a settlement
agreement, which was incorporated into a Second Amended Plan of
Reorganization (incorporated by reference to Exhibit 2.1 to the
Partnership's Current Report on Form 8-K dated January 24, 1994)
("Amended Plan") for GOCO, which was confirmed by the Court on
January 13, 1994, without opposition from any party, and became
effective on January 24, 1994.
The Amended Plan and settlement had five principal components.
First, Brazos unconditionally released its lien on two
properties: (i) a 50,000-foot industrial facility leased to
Coherent, Inc. in Auburn, California, which was sold to the
tenant as described more fully below; and (ii) a vacant 95,500
square foot industrial/office facility in the Stanford Business
Park in Palo Alto, California, formerly also leased to Coherent.
Second, GOCO acquired Rosemead for $500,000; Third, GOCO had an
option (exercisable at any time prior to April 30, 1994) to
obtain a release of the Brazos lien as to any remaining
properties subject to Brazos's lien by paying a negotiated
release price to Brazos. The Partnership exercised its option on
a few properties as discussed below. Fourth, by April 30, 1994,
GOCO transferred to Brazos, in satisfaction of the balance of
Brazos's claims, any property as to which GOCO had not exercised
the option described above. This transaction actually closed on
May 6, 1994. Fifth, certain properties were transferred by GOCO
to Griffin or a related party in redemption of Griffin's interest
in Glenborough Partners (successor to Glenborough Limited), which
were required to pay negotiated release prices or transfer those
properties to Brazos on or before July 31, 1994. The transfers
were effectively completed by May 31, 1994.
GOCO closed the sale of the Coherent Auburn facility to the
tenant for $3,650,000 on February 4, 1994, and applied a portion
of the net proceeds from the sale toward the payment of the
Page 17 of 20
release price for the Rosemead Springs property. Most of the
remaining proceeds were applied toward Brazos's lien release
price for four properties known as the J.I. Case and Navistar
buildings.
In general, the ability of the Partnership's properties to
perform at the levels originally expected had been adversely
affected by, among other things, (i) the decrease in the
availability of debt financing, due in part to the savings and
loan crisis and government regulations which deter regulated
lenders from real estate lending; and (ii) the nationwide bulk
sales of loans and real estate at prices substantially below
replacement cost. These activities have significantly
contributed to low rental rates in the markets in which the
Partnership owns properties. Management believes that these
activities have already precipitated an ongoing spiral of
declining real estate values, leading to lost collateral value
for otherwise healthy loans, leading to more financial
institution failures, leading to more discounted sales, and so
on. Management also believes that these activities may depress
income property values for many years into the future and will
lengthen the period of time required for the Partnership to
obtain the originally projected return on its properties.
Previous reports have discussed the liquidity and capital
resources problems associated with vacancies by two large
tenants, Solectron and SEEQ. However, pursuant to the Amended
Plan those properties were transferred to an affiliate of
Griffin, and the partnership's claims for delinquent rent have
been transferred to Brazos, so these issues are no longer
pertinent to the Partnership's liquidity and capital resources.
Near-term prospects for liquidity and capital resources are
somewhat problematic, since two of the Partnership's current
properties (Rosemead and the former Coherent facility in Palo
Alto) are either totally or substantially vacant. Management
anticipates that, assuming no new leasing at Rosemead or Palo
Alto, the Partnership's near-term cash flow will be roughly
break-even. In the longer term, assuming a reasonable absorption
of the vacant space at those two properties, the partnership
should achieve a positive cash flow and may anticipate the
restoration of distributions in the future. To facilitate
current financing, the Rosemead and Palo Alto properties were
transferred to a newly-formed subsidiary of GOCO, GPA West, L.P.
Management is aggressively seeking new tenants, particularly for
the Rosemead and Palo Alto properties, and pursuing renewals of
existing leases as they expire. However, absent a dramatic
improvement in nationwide economic conditions and demand for
commercial space, management anticipates a continuation of rent
concessions and lower effective rental rates, as well as higher
tenant delinquencies. As always, the Partnership remains
vulnerable to a variety of other factors beyond the Partnership's
control, that may adversely affect capital resources and
liquidity, such as excess supply in relation to demand, increases
in unemployment, population shifts, levels of corporate activity,
Page 18 of 20
zoning changes, changes in tenant's needs, and bulk sale
activities of the Resolution Trust Corporation as discussed
above.
The Partnership suspended its distributions in 1990 in an attempt
to increase liquidity and capital resources for tenant and
capital improvements, leasing commissions, refinancing costs, and
increasing debt service payments. As of November 7, 1994,
distributions remain suspended and at this time, management is
unable to predict when they may be resumed.
RESULTS OF OPERATIONS
Operating revenue and expenses decreased in all areas except one
during the nine and three months ended September 30, 1994
compared to the nine and three month ended September 30, 1993 due
to the transferring of all but six of the remaining properties
back to Brazos in the second quarter of 1994. The only exception
was professional fees which increased as a result of legal and
tax consulting fees related to the reorganization discussed
above.
Prior to transferring the remaining properties back to Brazos,
rental revenue was lower in 1994 compared to a comparable period
in 1993 due to the loss of a major revenue producing tenant,
Coherent Palo Alto, in May 1993 and an overall decrease in total
average occupancy of all Partnership commercial properties from
80% at March 31, 1993 to 75% at September 30, 1994.
Interest and other revenue also decreased during the period in
1994 through the date of transfer to Brazos compared to the same
period in 1993 due to the transfer of the Partnership's interest
in interest bearing restricted cash accounts and Griffin notes
receivable in January 1994.
Through the date of transfer of properties in 1994, operating
expenses, in total, also decreased when comparing a comparable
period in 1993 largely due to: (i) the utilities expenses related
to the costs associated with maintaining utility services to the
single-tenant facility (Micrel) while it was vacant in 1993; (ii)
the determination in the first quarter of 1993 that a portion of
the outstanding receivable related to a particular tenant, was
uncollectible and charged to bad debt (other expense); and (iii)
a portion of the tenant improvements becoming fully depreciated
in 1993.
Interest expense, recognized only to the extent monthly net cash
payments were made to Brazos pursuant to the SOP 90-7 decreased
during the period prior to transfer in 1994 in relation to the
comparable period in 1993. This decrease is primarily due to the
January 1994 transfer of the Griffin notes receivable, described
above, where the Partnership ceased recognizing interest income
from Griffin and its related interest expense when forwarded to
Brazos.
Page 19 of 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K.
No report on Form 8-K was required to be filed during
this reporting period.
Page 20 of 20
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:
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
By: /s/ Robert Batinovich By: Glenborough Realty
Corporation,
Robert Batinovich its Managing General Partner
General Partner
By: /s/ Robert Batinovich
Robert Batinovich
President and
Chairman of the Board
By: /s/ Andrew Batinovich
Andrew Batinovich
Senior Vice President,
Chief Financial Officer
and Director
Date: November 9, 1994
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:
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
By: By: Glenborough Realty
Corporation,
Robert Batinovich its Managing General Partner
General Partner
By:
Robert Batinovich
President and
Chairman of the Board
By:
Andrew Batinovich
Senior Vice President,
Chief Financial Officer
and Director
Date: November 9, 1994
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