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 March 31, 1995
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 March 31, 1995: 2,961,853
NO EXHIBIT INDEX REQUIRED
Page 1 of 16
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Balance Sheets
(In thousands, except units outstanding)
(Unaudited)
March 31, December 31,
1995 1994
---------- ----------
Assets
------
Real estate investments, at cost:
Land $ 2,054 $ 2,045
Buildings and improvements 16,153 16,076
-------- --------
18,207 18,121
Less:
Accumulated depreciation (2,985) (2,901)
-------- --------
Net real estate investments 15,222 15,220
Real estate held for sale, net 4,496 4,558
Other Assets:
Cash and cash equivalents 332 2,604
Receivables 31 15
Deferred loan fees, net of accumulated
amortization of $62 and $44 at March
31, 1995 and December 31, 1994,
respectively 334 352
Deferred leasing commissions, net of
accumulated amortization of $163 and
$161 at March 31, 1995 and December
31, 1994, respectively 8 10
Note receivable from affiliates 1,908 -
Note receivable 125 -
Prepaid expenses 44 69
Deposits 199 199
Other assets 145 158
-------- --------
Total assets $ 22,844 $ 23,185
======== ========
(continued)
Page 2 of 16
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Balance Sheets - continued
(In thousands, except units outstanding)
(Unaudited)
March 31, December 31,
1995 1994
-------- --------
Liabilities and Partners' Equity
--------------------------------
Liabilities:
Notes payable 17,035 17,160
Accounts payable 15 85
Accrued expenses 592 496
Advances from related parties - 60
Deposits and other liabilities 95 95
-------- --------
Total postpetition liabilities 17,737 17,896
-------- --------
Partners' equity:
General partners 431 435
Limited partners, 2,961,853
units outstanding 4,676 4,854
-------- --------
Total partners' equity 5,107 5,289
-------- --------
Total liabilities and partner's
equity $ 22,844 $ 23,185
======== ========
See accompanying notes to consolidated financial statements.
Page 3 of 16
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Operations
(in thousands, except per unit amounts)
(Unaudited)
Three Months Ended
March 31,
----------------------
1995 1994
-------- --------
Revenues:
Rental $ 747 $ 4,040
Interest and other 38 35
-------- --------
Total revenues 785 4,075
-------- --------
Operating expenses (including $21
paid to related parties in 1994
for miscellaneous reimbursements):
Property taxes 46 539
Repairs and maintenance 23 388
Management fees and reimbursed
expenses (paid to related
parties) 101 463
Insurance 9 55
Utilities 28 442
Salaries and wages (including $8
and $198 paid to related parties
in 1995 and 1994, respectively) 9 209
Professional fees 14 329
Depreciation and amortization 167 1,242
Other 20 89
-------- --------
Total operating expenses 417 3,756
-------- --------
Operating income 368 319
(continued)
Page 4 of 16
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Operations - continued
(in thousands, except per unit amounts)
(Unaudited)
Three Months Ended
March 31,
-----------------------
1995 1994
-------- --------
Other income/(expense):
Gain on sale - 1,503
Interest expense (491) (1,304)
Loss on investment in real estate (59) -
------- -------
Income/(loss) before extraordinary item (182) 518
Extraordinary item - (24)
------- -------
Net income/(loss) $ (182) $ 494
======= =======
Income/(loss) before extraordinary
item per limited partnership unit $ (0.06) $ 0.15
Extraordinary item per limited
partnership unit - (0.01)
------- -------
Net income/(loss) per limited
partnership unit $ (0.06) $ 0.14
======= =======
Distributions per limited
partnership unit $ - $ -
======= =======
See accompanying notes to consolidated financial statements.
Page 5 of 16
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Partners' Equity (Deficit)
(in thousands)
For the three months ended March 31, 1995 and 1994
(Unaudited)
Total
General Limited Partners'
Partner Partners Equity
---------- ---------- ----------
Consolidated balance,
December 31, 1993 $ (2,234) $(110,034) $(112,268)
Net income 10 484 494
--------- --------- ---------
Consolidated balance,
March 31, 1994 $ (2,224) $(109,550) $(111,774)
========= ========= =========
Consolidated balance,
December 31, 1994 $ 435 $ 4,854 $ 5,289
Net loss (4) (178) (182)
--------- --------- ---------
Consolidated balance,
March 31, 1995 $ 431 $ 4,676 $ 5,107
========= ========= =========
See accompanying notes to consolidated financial statements.
Page 6 of 16
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
For the Three Months
Ended
March 31,
----------------------
1995 1994
-------- --------
Cash flows from operating activities:
Net income/(loss) $ (182) $ 494
Adjustments to reconcile
net income/(loss) to net
cash provided by (used in)
operating activities:
Depreciation and amortization 167 1,242
Gain on sale - (1,503)
Changes in assets and liabilities:
Decrease in other liabilities - (258)
Decrease in receivables 3 711
Decrease in accounts payable and
accrued expenses (15) (106)
Decrease in advance from related
parties (60) -
Decrease (increase) in other assets 13 (232)
Decrease in prepaid expenses 24 -
Decrease in prepaid incentive
and transaction fees (paid to a
related party) - 286
Increase in deferred leasing
commissions (1) (71)
Increase in accrued interest 42 -
------- -------
Net cash provided by (used in)
operating activities (9) 476
------- -------
(continued)
Page 7 of 16
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows - continued
(in thousands)
(Unaudited)
For the Three Months
Ended
March 31,
----------------------
1995 1994
-------- --------
Cash flows from investing activities:
Decrease in notes receivable - MFCo. - 44,830
Proceeds from sale of real estate - 3,620
Improvements to real estate (86) (193)
Decrease in restricted cash - 5,109
Increase (decrease) in interest
receivable (19) 1,177
Decrease in notes payable - (54,523)
Increase in other notes receivable (2,033) -
-------- --------
Cash provided by (used in) investing
activities (2,138) 20
-------- --------
Cash flows from financing activities:
Principal payments on notes payable (125) (505)
-------- --------
Cash used in financing activities (125) (505)
-------- --------
Net increase (decrease) in cash and
cash equivalents (2,272) 78
Cash and cash equivalents, beginning
of period 2,604 1,506
-------- --------
Cash and cash equivalents, end
of period $ 332 $ 1,584
======== ========
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 450 $ 1,146
======== ========
See accompanying notes to consolidated financial statements.
Page 8 of 16
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1995
(Unaudited)
Note 1. SUMMARY OF ORGANIZATION
-----------------------
Glenborough Partners, A California Limited Partnership is the
successor to 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
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, a plan of reorganization was filed with the Bankruptcy
court which became effective January 24, 1994.
To facilitate the Partnership's holding and transfer of real
property as set forth under the plan of reorganization, two
partnerships were created in February 1994: (i) GPA West, L.P.
("West"); and (ii) GPA Industrial, L.P. ("Industrial"). West and
Industrial are subsidiaries of GPA, Ltd., A California Limited
Partnership ("GPA"), formerly known as GOCO Realty Fund I, and as
such, the financial statements have been consolidated with
Glenborough Partners. The general partners of West and Industrial
are Glenborough Realty Corporation and Robert Batinovich while
the sole limited partner of each of the two partnerships is GPA.
A third subsidiary partnership, GPA Bond L.P.("Bond"), was
created in December 1994 to hold and operate a property purchased
on December 29, 1994. The general partners of Bond are
Glenborough Realty Corporation and Robert Batinovich while the
sole limited partner is GPA.
After the redemption of units as part of the reorganization plan,
the general partners now hold a 2.27% share of the Partnership's
net income or loss and distributions. Conversely, the limited
partners now hold a 97.73% share of the partnership's net income
or loss and distributions.
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 March 31, 1995 and December 31, 1994, and the related
statements of operations, statements of partners' equity
Page 9 of 16
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1995
(Unaudited)
(deficit) and the statements of cash flows for the three months
ended March 31, 1995 and 1994.
Certain items in the 1994 financial statements have been
reclassified to conform to the 1995 financial statement
presentation.
Note 3. REFERENCE TO 1994 AUDITED FINANCIAL STATEMENTS
-----------------------------------------------
These unaudited financial statements should be read in
conjunction with the Notes to Consolidated Financial Statements
included in the 1994 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 held a 2.27% and
1.99% share of the partnership's net income or loss and
distributions in 1995 and 1994, respectively. This percentage is
derived from the general partners' 1% direct interest in GOCO
Realty Fund I and a 1.28% and 0.99% indirect interest through
their 1% general partner interest in Glenborough Partners' 99%
interest in GOCO Realty Fund I in 1995 and 1994, respectively.
For financial reporting purposes, 2,961,853 and 3,411,403
weighted average units were outstanding to limited partners for
the three months ended March 31, 1995 and 1994, respectively.
Net loss per unit in 1995 and 1994 is derived by dividing 97.73%
and 98.01%, respectively of the net loss by the respective
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 10 of 16
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1995
(Unaudited)
All fees and allocated expenses due to Glenborough and included
in the Partnership's operating expenses for the three months
ended March 31, 1995 and 1994 are as follows (in thousands):
Three months ended
March 31,
------------------
1995 1994
-------- --------
Property management fees $ 29 $ 177
Reimbursed general and administrative
expenses 72 286
------ ------
Total management fees and reimbursed
general and administrative expenses $ 101 $ 463
====== ======
In the first quarter of 1995, Glenborough was reimbursed $8,000
for salaries and wages of on-site management, maintenance and
landscape employees.
In the first quarter of 1994: (i) Glenborough was reimbursed
$198,000 for salaries and wages of on-site management,
maintenance and landscape employees and $21,000 for miscellaneous
reimbursements; and (ii) Glenborough was paid $17,000 for leasing
commissions which were capitalized and are amortized over the
terms of the related leases.
Note 6. NOTE RECEIVABLE FROM AFFILIATES
-------------------------------
On March 28, 1995, GPA West purchased a $1,908,000 mortgage note
receivable from California Federal Bank ("CalFed"), secured by a
first deed of trust on a property owned by an affiliate. This
transaction was funded from the proceeds of a 1994 property sale.
The CalFed mortgage note has been modified and converted into a
demand note retroactive to March 28, 1995, bearing interest at
two percentage points plus the prime lending rate (currently 9%)
with principal and interest due when the note is called.
Management anticipates the demand note plus interest will be
repaid by the third quarter of 1995.
Pursuant to the Limited Partnership Agreements, the Managing
General Partner has been allowed the option of investing the
Partnership funds in obligations of other partnerships.
Page 11 of 16
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1995
(Unaudited)
Note 7. NOTE RECEIVABLE
---------------
On February 24, 1995, Glenborough Partners advanced $125,000 to
an unaffiliated partnership in return for a promissory note which
bears interest at a rate of twelve percent (12%) per annum. The
Partnership received a loan fee of $12,500 at the time the funds
were advanced to the affiliate which has been recognized as other
income. Total principal and interest is due on or before maturity
which was originally April 25, 1995, but has been extended to
July 28, 1995.
On April 28, 1995, Glenborough Partners advanced an additional
$60,000 to an unaffiliated partnership for a promissory note
which consists of terms identical to the February 24, 1995 note
above. In addition, the Partnership received a loan fee of $6,000
at the time the funds were advanced to the affiliate which will
be recognized as other income in the second quarter of 1995.
Pursuant to the Limited Partnership Agreements, the Managing
General Partner has been allowed the option of investing the
Partnership funds in obligations of other partnerships.
Note 8. LOSS ON INVESTMENT IN REAL ESTATE
---------------------------------
In order for the Partnership to obtain free and clear title from
Brazos, the previous mortgage holder on the properties known as
the J.I. Case and Navistar buildings, the Partnership made a
$1,000,000 principal paydown on a note payable for an affiliated
partnership. Financing for the J.I.Case and Navistar buildings
was extremely difficult to find in the current market, so as an
inducement for the lender to finance this release price purchase,
the Partnership paid down a portion of an affiliate's note
payable in good faith. In December 1994, the Partnership and the
affiliated partnership, UCT Associates, A California Limited
Partnership ("UCT") agreed that the $1,000,000 paid by the
Partnership and any subsequent payments on behalf of UCT was an
investment in UCT. Coupled with that, Robert Batinovich
contributed his limited partner interest in the profits and
losses of UCT. This gave the Partnership a 45% non-voting limited
partner interest, a 99% allocation of future income and losses,
and an economic interest in any future upside of this property,
without exposure to any loss. This was made possible after
Glenborough waived a portion of its potential transaction fees on
the disposition of properties in 1994.
As of December 31, 1994, the General Partner believes that there
is no real equity in UCT, therefore the $59,000 in additional
costs paid in the first quarter of 1995 on the behalf of UCT was
recognized as a loss on investment in real estate.
Page 12 of 16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
INTRODUCTION
The predecessor partnership commenced operations as of June 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 March 31, 1995 and its results of operations for the
three months ended March 31, 1995 and 1994. 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
The Partnership experienced negative cash flow from operations
during the three months ended March 31, 1995, after debt service
payments and capital and tenant improvements. Short-term
prospects for liquidity and capital resources remain somewhat
problematic since one of the Partnership's current properties,
Rosemead Springs is substantially vacant and is currently in
escrow for sale. Its related $2,500,000 note payable matured in
April 1995, but is in the process of being extended to coincide
with the close of the Rosemead sale escrow. Until Rosemead is
sold, management anticipates that, assuming no new leasing at
Rosemead, the Partnership's near-term cash flow will continue to
be negative.
Once the Rosemead Springs property is successfully sold at its
target asking price, it is projected that the Partnership would
receive proceeds of approximately $400,000, net of the $2,500,000
principal plus interest due on the related note payable.
In February 1995 and April 1995, the Partnership advanced
$125,000 and $60,000, respectively to an unaffiliated partnership
in exchange for promissory notes bearing interest at a rate of
twelve percent (12%) per annum. Both notes mature on July 28,
1995 when principal and cumulative accrued interest are due. Upon
funding these advances, the Partnership received loan fees of 10%
of the amounts advanced.
In March 1995, the Partnership purchased a $1,908,000 mortgage
note receivable from California Federal Bank ("CalFed"), secured
by a first deed of trust on a property owned by an affiliate.
Page 13 of 16
This transaction was funded from the proceeds of a 1994 property
sale. This CalFed mortgage note has been modified and converted
into a demand note retroactive to March 28, 1995, bearing
interest at two percentage points plus the prime lending rate
(currently 9%) with principal and interest due when the note is
called.
The general partner anticipates that the two promissory notes,
the demand note and their related accrued but unpaid interest
will be repaid by the third quarter of 1995. These near liquid
notes coupled with the Partnership's cash and cash equivalent
balance of $332,000 at March 31, 1995, should be sufficient to
meet future operating requirements and cover its March 31, 1995,
$607,000 balance in accounts payable and accrued expenses.
Management is aggressively seeking new tenants and pursuing
renewals of existing leases as they expire for its multi-tenant
buildings, excluding the Rosemead property which is currently in
escrow for sale. The potential buyer has the specific intention
to purchase the property for its own use. However, absent a sale
and dramatic improvement in local economic conditions and demand
for commercial space in and around the Rosemead property,
management anticipates rent concessions and lower effective
rental rates. 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, zoning changes
and changes in tenant's needs.
Management continues to explore other opportunities where it may
invest its capital resources in order to maximize return to
investors. In the meantime, management will continue to make
short-term advances at market interest rates when and wherever
appropriate.
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 May 5, 1995,
distributions remain suspended and at this time, management is
unable to predict when they may be resumed.
RESULTS OF OPERATIONS
Total revenues and operating expenses decreased in all areas
except interest and other revenues during the three months ended
March 31, 1995 compared to the three months ended March 31, 1994
due to the transferring of all but six of the remaining
properties back to the lender in the 1994 bankruptcy
reorganization.
Interest and other revenue increased during the quarter ended
March 31, 1995 over the quarter ended March 31, 1994 resulting
from the $2,033,000 increase in notes receivable from affiliates
discussed above.
Page 14 of 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership is not a party to, nor any of its
assets the subject of any material pending legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K.
No reports on Form 8-K were required to be filed during
this reporting period.
Page 15 of 16
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: May 10, 1995
Page 16 of 16
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
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0
0
<OTHER-SE> 5107
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