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, 1996
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, 1996: 2,961,853
NO EXHIBIT INDEX REQUIRED
Page 1 of 17
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,
1996 1995
---------- ----------
Assets
------
Real estate investments, at cost:
Land $ 483 $ 483
Buildings and improvements 2,781 2,778
-------- --------
3,264 3,261
Less:
Accumulated depreciation (94) (75)
-------- --------
Net real estate investments 3,170 3,186
Real estate held for sale, net 4,315 4,307
Other Assets:
Cash and cash equivalents 488 812
Receivables 22 19
Due from affiliate --- 235
Deferred financing and other fees,
net of accumulated amortization
of $227 and $219 at March 31, 1996
and December 31, 1995, respectively 57 64
Note receivable 9 14
Prepaid expenses and other assets 36 4
Deposits 536 128
Investment in unconsolidated joint
ventures 1,071 1,063
Investment in affiliated partnership --- ---
-------- --------
Total assets $ 9,704 $ 9,832
======== ========
(continued)
Page 2 of 17
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Balance Sheets - continued
(In thousands, except units outstanding)
(Unaudited)
March 31, December 31,
1996 1995
-------- --------
Liabilities and Partners' Equity
--------------------------------
Liabilities:
Notes payable $ 5,035 $ 5,035
Accounts payable and accrued expenses 146 146
Deposits and other liabilities 35 43
-------- --------
Total liabilities 5,216 5,224
-------- --------
Partners' equity:
General partners 417 420
Limited partners, 2,961,853
units outstanding 4,071 4,188
-------- --------
Total partners' equity 4,488 4,608
-------- --------
Total liabilities and partner's
equity $ 9,704 $ 9,832
======== ========
See accompanying notes to consolidated financial statements.
Page 3 of 17
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Operations
(in thousands, except per unit amounts)
(Unaudited)
Three Months Ended
March 31,
----------------------
1996 1995
-------- --------
Revenues:
Rental $ 193 $ 747
Interest and other 5 38
-------- --------
Total revenues 198 785
-------- --------
Expenses:
Operating (including $15 and $37 paid
to affiliates in 1996 and 1995,
respectively) 134 164
General and administrative (including
$55 and $72 paid to affiliates in
1996 and 1995, respectively) 70 86
Depreciation and amortization 27 167
Interest expense 118 491
-------- --------
Total expenses 349 908
-------- --------
Loss before other income/(expenses) (151) (123)
Other income/(expense):
Equity income (loss) on investment
in unconsolidated joint ventures 31 ---
Loss on investment in joint venture --- (59)
-------- --------
Net loss $ (120) $ (182)
======== ========
Net loss per limited partnership unit $ (0.04) $ (0.06)
======== ========
Distributions per limited
partnership unit $ --- $ ---
======== ========
See accompanying notes to consolidated financial statements.
Page 4 of 17
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Partners' Equity (Deficit)
(in thousands)
For the three months ended March 31, 1996 and 1995
(Unaudited)
Total
General Limited Partners'
Partner Partners Equity
---------- ---------- ----------
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
========= ========= =========
Consolidated balance,
December 31, 1995 $ 420 $ 4,188 $ 4,608
Net loss (3) (117) (120)
--------- --------- ---------
Consolidated balance,
March 31, 1996 $ 417 $ 4,071 $ 4,488
========= ========= =========
See accompanying notes to consolidated financial statements.
Page 5 of 17
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
For the Three Months
Ended
March 31,
----------------------
1996 1995
-------- --------
Cash flows from operating activities:
Net loss $ (120) $ (182)
Adjustments to reconcile net loss
to net cash used for operating
activities:
Depreciation and amortization 27 167
Equity (income) loss on investment
in unconsolidated joint ventures (31) ---
Distribution from unconsolidated
joint ventures 23 ---
Changes in assets and liabilities:
Other liabilities (8) ---
Receivables (3) 3
Accounts payable and accrued
expenses --- (15)
Advance from related parties --- (60)
Prepaid expenses and other assets (32) 37
Deferred financing and other fees (1) (1)
Increase in accrued interest --- 42
------- -------
Net cash used for operating activities (145) (9)
------- -------
(continued)
Page 6 of 17
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows - continued
(in thousands)
(Unaudited)
For the Three Months
Ended
March 31,
----------------------
1996 1995
-------- --------
Cash flows from investing activities:
Decrease in amount due from affiliate $ 235 $ ---
Improvements to real estate (11) (86)
Increase (decrease) in interest
receivable --- (19)
Decrease (increase) in other notes
receivable 5 (2,033)
Increase in deposits (408) ---
-------- --------
Cash used for investing activities (179) (2,138)
-------- --------
Net decrease in cash and cash equivalents (324) (2,272)
Cash and cash equivalents, beginning
of period 812 2,604
-------- --------
Cash and cash equivalents, end
of period $ 488 $ 332
======== ========
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 119 $ 450
======== ========
See accompanying notes to consolidated financial statements.
Page 7 of 17
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1996
(Unaudited)
Note 1. SUMMARY OF ORGANIZATION
-----------------------
Glenborough Partners, A California Limited Partnership
("Partners") 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. This partnership
has been renamed GPA Ltd., A California Limited Partnership
("GPA").
The general partners of both Partners and GPA are Glenborough
Corporation, a California corporation (formerly known as
Glenborough Realty Corporation) and Robert Batinovich
(collectively "Glenborough" or "General Partner"). Glenborough
Corporation is the managing general partner of the Partnership.
Glenborough Partners is the sole limited partner of GPA.
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"). 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.
Through December 31, 1995, all three partnerships were
subsidiaries of GPA. The general partners of each of these
partnership's were Glenborough Corporation and Robert Batinovich
while the sole limited partner of each was GPA. On December 31,
1995, the Partnership contributed Industrial and its four
properties to an affiliated partnership, Glenborough Properties,
L.P. (the operating partnership of Glenborough Realty Trust
Incorporated, a real estate investment trust managed by
affiliates of the Partnership) in exchange for 542,333 limited
partnership units. The debt securing the properties owned by
Industrial was assumed by the acquiring partnership. As a
result, Industrial ceased to be a subsidiary at the end of
calendar year 1995.
On September 6, 1995, West made an $1,050,000 investment in an
unconsolidated joint venture, GRC Airport Associates. Since
Page 8 of 17
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1996
(Unaudited)
West's 31% (of current limited partners contributions) investment
in this
joint venture is less than 50%, the Partnership accounts for this
joint venture on an equity method.
Note 2. SIGNIFICANT ACCOUNTING POLICY
-----------------------------
In the opinion of Glenborough 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 (the "Partnership"), at March 31,
1996 and December 31, 1995, and the related statements of
operations, statements of partners' equity (deficit) and the
statements of cash flows for the three months ended March 31,
1996 and 1995.
Certain items in the 1995 financial statements have been
reclassified to conform to the 1996 financial statement
presentation.
Note 3. REFERENCE TO 1995 AUDITED FINANCIAL STATEMENTS
-----------------------------------------------
These unaudited financial statements should be read in
conjunction with the Notes to Consolidated Financial Statements
included in the 1995 audited financial statements.
Note 4. NET LOSS PER LIMITED PARTNERSHIP UNIT
-------------------------------------
Pursuant to the Glenborough Partners and GPA Ltd. 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 GPA Ltd. and a 1.27% indirect interest through their
1.28% general partner interest in Glenborough Partners' 99%
interest in GPA Ltd.
For financial reporting purposes, 2,961,853 weighted average
units were outstanding to limited partners for the three months
ended March 31, 1996 and 1995. Net loss per unit in 1996 and
1995 is derived by dividing 97.73% of the net loss by the
weighted average number of units outstanding to the limited
partners.
Note 5. RELATED PARTY TRANSACTIONS
--------------------------
In accordance with the Limited Partnership and Property
Management Agreements, the Partnership paid its general partner,
Page 9 of 17
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1996
(Unaudited)
Glenborough Corporation ("Glenborough") compensation for services
provided to the Partnership and management of the Partnership's
assets.
Page 10 of 17
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1996
(Unaudited)
All fees and allocated expenses due to Glenborough and included
in the Partnership's operating expenses for the three months
ended March 31, 1996 and 1995 are as follows (in thousands):
Three months ended
March 31,
------------------
1996 1995
-------- --------
Property management fees $ 10 $ 29
Property management
salaries (reimbursed) 5 8
------ ------
Total property management
fees and salaries $ 15 $ 37
====== ======
The Partnership also reimbursed Glenborough for expenses incurred
for services provided to the Partnership such as accounting,
investor services, data processing, duplicating and office
supplies, legal and administrative services, and the actual costs
of goods and materials used for or by the Partnership.
Glenborough was reimbursed $55,000 and $72,000 for such expenses
during the three months ended March 31, 1996 and 1995,
respectively.
Note 6. DEPOSITS
--------
Through March 31, 1996, the Partnership had incurred $24,000 in
costs and $500,000 in purchase deposits for the possible purchase
of a lodging property. In May 1996, the Partnership's offer was
overbid in a bankruptcy court action procedure and $500,000 in
purchase deposits plus accrued interest was refunded to the
Partnership. The Partnership anticipates receiving the remaining
$24,000 plus accrued interest and additional costs incurred
subsequent to March 31, 1996 under a breakup fee to which the
Partnership is partly entitled, which will more than cover the
Partnership's costs incurred.
Note 7. INCOME (LOSS) ON INVESTMENT IN UNCONSOLIDATED JOINT
VENTURES
-------------------------------------------------------
GRC Airport Associates:
On September 6, 1995, the Partnership made a $1,050,000
investment in an unconsolidated joint venture, GRC Airport
Associates. Since the Partnership's 31% (of current limited
partners' contributions) investment in this joint venture is less
Page 11 of 17
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1996
(Unaudited)
than 50%, the Partnership accounts for this joint venture on an
equity method. On October 10, 1995, the joint venture purchased
a 216,000 square foot industrial warehouse in San Bruno,
California for $9,225,000. The Partnership's share of this joint
venture's net income was $31,000 during the three months ended
March 31, 1996.
University Club Tower:
In 1994, the Partnership made a $1,000,000 principal paydown on a
note payable for an affiliated partnership, University Club Tower
("UCT"). This was to assist the Partnership obtaining free and
clear title from Brazos (the previous lender) on the four
buildings acquired by Industrial. Financing for the four
buildings was extremely difficult to find in the 1993/1994 market
so as an inducement for the lender to finance this release price
purchase, the Partnership paid down a porion of UCT's note
payable in good faith.
In December 1994, the Partnership and UCT agreed that the
$1,000,000 paid by the Partnership in 1994 on behalf of UCT would
be an investment in 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 partnership, without exposure to any loss. As such, the
Partnership accounts for this investment in joint venture using
the equity method.
At December 31, 1994, the General Partner believed that there was
no real equity in UCT, therefore the $1,000,000 invested in UCT
in 1994 plus $59,000 in additional costs paid in 1995 on behalf
of UCT were recognized as losses on investment in joint venture
in their respective years. Future losses will be recognized only
to the extent of any income previously recognized.
Note 8. INVESTMENT IN AFFILIATED PARTNERSHIP
------------------------------------
On December 31, 1995, the Partnership contributed Industrial and
its four properties to an affiliated partnership, Glenborough
Properties, L.P. (the operating partnership of Glenborough Realty
Trust Incorporated, a real estate investment trust managed by
affiliates of the Partnership) in exchange for 542,333 limited
partnership units. The debt securing the properties owned by
Industrial was assumed by the acquiring partnership. The net
assets contributed to the operating partnership had a net book
value of zero. Since the Partnership holds a 13% interest in
Glenborough Properties, L.P., the Partnership will account for
its investment using the cost method.
Page 12 of 17
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1996
(Unaudited)
Glenborough Properties, L.P. declared and paid a first quarter
1996 distribution in April 1996, resulting in a cash distribution
to the Partnership of $163,000.
Page 13 of 17
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
INTRODUCTION
The following discussion addresses the Partnership's financial
condition at March 31, 1996 and its results of operations for the
three months ended March 31, 1996 and 1995. 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 December 31, 1995, the Partnership contributed GPA Industrial,
L.P., and its four properties to an affiliated partnership,
Glenborough Properties L.P. (the operating partnership of
Glenborough Realty Trust Incorporated, a real estate investment
trust managed by affiliates of the Partnership) in exchange for
542,333 limited partnership units or 13% of the units in that
partnership. The debt securing the properties owned by GPA
Industrial, L.P. was assumed by the acquiring partnership. As a
result, Industrial ceased to be a subsidiary of the Partnership
at the end of 1995. The net assets contributed to the operating
partnership had a net book value of zero. Since the Partnership
holds a 13% interest in Glenborough Properties, L.P., the
Partnership will account for its investment using the cost
method.
Dependent upon certain events and occurrences, the Partnership s
units in Glenborough Properties, L.P. may in the future be
converted to shares in Glenborough Realty Trust Incorporated. In
the short term, it is projected that Glenborough Properties, L.P.
will make distributions at $1.20 per limited partnership unit for
1996 which would be greater than the cash flow (after debt
service payments) the Partnership would have received had it
retained GPA Industrial L.P. In April 1996, Glenborough
Properties, L.P. declared and paid a first quarter 1996
distribution, resulting in $163,000 to the Partnership.
The Partnership's $488,000 cash and cash equivalent balance at
March 31, 1996 is believed by management to be sufficient to meet
near term operating requirements and cover its March 31, 1996,
$146,000 balance in accounts payable and accrued expenses.
Operationally, management is aggressively seeking new tenants and
pursuing renewals of existing leases as they expire for its
multi-tenant Bond Street Building. Rosemead currently is under
contract to be sold. Absent a sale or 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,
Page 14 of 17
levels of corporate activity, zoning changes and changes in
tenant's needs.
The Partnership's $2,200,000 debt, secured by the Rosemead
property, has matured in the first quarter of 1996 but has been
extended under existing terms until the disposition of the
Rosemead property is completed.
Management has and continues to explore other opportunities where
it may invest its capital resources in order to maximize return
to investors. As of March 31, 1996, the Partnership had incurred
$24,000 in costs and $500,000 in purchase deposits for the
possible purchase of a lodging property. In May 1996, the
Partnership's offer was overbid in a bankruptcy court action
procedure and $500,000 in purchase deposits plus accrued interest
was refunded to the Partnership. The Partnership anticipates
receiving the remaining $24,000 plus accrued interest and
additional costs incurred subsequent to March 31, 1996 under a
breakup fee to which the Partnership is partly entitled, which
will more than cover the Partnership's costs incurred.
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 10, 1996,
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
during the three months ended March 31, 1996 compared to the
three months ended March 31, 1995 due to the contribution of GPA
Industrial and its four properties into an affiliated partnership
at December 31, 1995, as discussed above.
Interest and other revenue decreased during the quarter ended
March 31, 1996 compared to the quarter ended March 31, 1995 due
to the loan fee received by the Partnership for the short-term
loan to an affiliate in 1995.
Operating, general and administrative, and interest expenses
decreased during the three months ended March 31, 1996 compared
to the same period in 1995 due to the contribution of GPA
Industrial and its related properties along with its debt to an
affiliated partnership at December 31, 1995.
Depreciation and amortization has shown a dramatic decrease from
the three months ended March 31, 1995 to the three months ended
March 31, 1996. This is a result of the Partnership's
contribution of GPA Industrial, discussed above, and the ceasing
of depreciation on the Rosemead property while it is held for
sale.
Page 15 of 17
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 16 of 17
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 Corporation,
Robert Batinovich a California corporation,
General Partner (formerly known as
Glenborough Realty Corporation)
its Managing General Partner
By: /s/ Andrew Batinovich
Andrew Batinovich
Chief Executive Officer and
Chairman of the Board
By: /s/ Terri Garnick
Terri Garnick
Chief Financial Officer
Date: May 13, 1996
Page 17 of 17
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