4
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For the fiscal year ended Commission File Number
December 31, 1997 33-4682
CAPITAL BUILDERS DEVELOPMENT PROPERTIES II,
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
California 77-0111643
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4700 Roseville Road, Suite 206, North Highlands, California 95660
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (916)331-8080
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
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 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. X Yes No
As of December 31, 1997 the aggregate Limited Partnership Units
held by nonaffiliates of the registrant was 23,030. There is no
market for the Units.
Documents Incorporated by Reference
Limited Partnership Agreement dated February 6, 1986, filed as
Exhibit 3.3, and the Amendment to the Limited Partnership
Agreement dated May 22, 1986 filed as Exhibit 3.4 to Registration
Statement No. 33-4682 of Capital Builders Development Properties
II, A California Limited Partnership, are hereby incorporated by
reference into Part IV of this Form 10K.
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Capital Builders Development Properties II (the "Partnership") is
a publicly held limited partnership organized under the
provisions of the California Revised Limited Partnership Act
pursuant to the Limited Partnership Agreement dated February 6,
1986, as amended (the "Agreement"). The Partnership commenced on
May 22, 1986 and shall continue in full force and be effective
until December 31, 2021 unless dissolved sooner by certain events
as described in the Agreement. The Managing General Partner is
Capital Builders, Inc., a California Corporation (CB). The
Associate General Partners are the sole shareholder, President
and Director of CB, and four founders of CB.
On October 6, 1986 the Partnership sold 2,407 Limited Partnership
Units for a total of $1,203,500. From October 6, 1986, through
May 21, 1988, the Partnership sold an additional 20,623 Units for
a total of 23,030 Units. On May 21, 1988, the Partnership was
closed to capital raising activity with a total of $11,515,000
proceeds raised from the offering. The General Partners have
contributed capital in the amount of $1,000 to the Partnership
for a 1% interest in the profits, losses, tax credits and
distributions of the Partnership.
(b) Financial Information about Industry Segments
The Partnership is in the business of real estate development and
is not a significant factor in its industry. The Partnership's
investment properties are located near major urban areas and,
accordingly, compete not only with similar properties in their
immediate areas but with hundreds of properties throughout the
urban areas. Such competition is primarily on the basis of
locations, rents, services and amenities. In addition, the
Partnership competes with significant numbers of individuals and
organizations (including similar partnerships, real estate
investment trusts and financial institutions) with respect to the
purchase and sale of land, primarily on the basis of the prices
and terms of such transactions.
(c) Narrative Description of the Business
The Partnership's business objective is to complete the
development of its existing land with light industrial and office
buildings for lease and eventual sale. The primary investment
objective of the Partnership is to realize capital appreciation
from the sale of the Properties developed by it some three to
five years after such Properties have been placed in service. A
secondary investment objective is to generate cash from the
leasing of Partnership Properties pending their sale for
distribution to the Limited Partners, although it is not
presently anticipated that the amount of such cash available for
distribution to the Limited Partners will be significant. Since
the Partnership has not sold its investment properties, it has
not achieved its investment goals as yet. Although investor
returns cannot be accurately determined until the investment
properties are sold, due to the additional time required to lease
up the investment properties, the decline in real estate values
during the California recession, it is anticipated that ultimate
returns will be less than initially projected. Funds obtained by
the Partnership from the sale of Limited Partnership Units have
been used to acquire equity interest in one piece of land for
development and a 40% equity interest in another for development
in accordance with its investment objective.
On April 10, 1987, the Partnership entered into a joint venture
called Capital Builders Roseville Venture ("JV") with Capital
Builders Development Properties ("CBDP"), a California limited
partnership. The Partnership and CBDP are affiliates as they
have the same General Partner, but there are no direct
transactions between the respective Partnerships. The
Partnership contributed $900,000 resulting in a 40% interest in
the profits, losses and cash distributions of the JV. CB, the
Managing General Partner of the Partnership, had the same rights
and obligations with respect to the JV's operations and
management as it could exercise as Managing General Partner of
the Partnership. The JV was dissolved as of May 1, 1997 when the
Partnership purchased the remaining 60% interest in the JV.
The acquisition of the real estate is consistent with the
Partnership objectives which are to acquire, develop, hold,
maintain, lease, sell, or otherwise dispose of real property
within the Western United States (including the states of
California, Oregon, Washington, Arizona, Nevada, New Mexico,
Utah, Colorado, Hawaii, and Alaska), including without
limitation, the acquisition of undeveloped land for development
and construction of research and development, light industrial,
commercial/retail, or office buildings thereon, and the
acquisition of partially completed commercial real property
developments for completion of development.
Although the Associate General Partners, Officers, and Directors
of the Managing General Partners are experienced in real property
operation and management, they also may utilize independent
advisors, agents, and workers, in addition to the Partnership
employees, to assist them in the operation, leasing, maintenance
and improvement of the Partnership's properties.
The Partnership has no full time employees but is managed by CB,
the Managing General Partner.
ITEM 2. PROPERTIES
The Partnership owns 100% equity interest in two properties,
Highlands 80 Commerce Center ("H80") and Capital Professional
Center ("CPC"). H80 is a three phase development. Phase I is a
109,000 square foot office/industrial project consisting of five
multi-tenant buildings. Phase II consists of approximately
45,921 square feet of two, one-story light industrial/office
space buildings and Phase III consists of one 29,000 square foot
office building. The Partnership is currently proceeding with
the development of Phase II, in which one building consisting of
26,141 square feet was completed in early 1997. The remaining
19,780 square foot building of Phase II was completed by February
1998. Remaining Phase II shell development costs are estimated
to be approximately $46,000. Funds for these improvements will
come from existing cash reserves, property income, and additional
borrowings.
CPC is a 40,400 square foot office project consisting of two
multi-tenant buildings which are completely developed and have
achieved a stabilized occupancy.
Additional information about the individual properties follows:
H80 CPC
Ownership Percentage: 100% 100%
Acquisition Date: April 30, 1987Apr 10, 1987 - 40% Ownership
May 1, 1997 - 60% Ownership
Location: North Highlands, CaliforniaRoseville, California
Present Monthly
Effective Average
Base Rent Per Square Foot: $0.84 $1.55
Square Footage Mix:
Office 21,966 40,397
Industrial 113,259
Leased Occupancy at
December 31: 1997 75% 100%
1996 78% 95%
1995 86% 95%
1994 84% 100%
1993 77% 96%
Current Year Depreciation: $288,181 $138,709
Method of Depreciation: Straight Line Straight Line
Depreciation Life: 40 Years 40 Years
Bldg. Improvements Bldg. Improvements
Life of Lease Life of Lease
Tenant Improvements Tenant Improvements
Total cost: $9,685,154 $4,807,887
Encumbrances: $5,542,668 $3,407,704
Additional information about the individual properties follows:
(continued)
Tenant occupying more H80 CPC
than 10% of square
footage and nature of None Coldwell Banker
(Residential
business: (Real Estate
Brokerage)
First American
Title Ins. Co.
USA Properties
(Real Estate Developer)
H80 and CPC are subject to encumbrances which are more fully
described under Note 6 of the Partnership's financial statements
included under Item 8 which is incorporated herein by reference.
Both properties are being leased to a wide variety of tenants in
a diversity of industries. Leases are typically three to five
years in term and provide for free rent periods, at inception,
equal to approximately one-half a month per year of lease term.
Some leases contain options to extend the term of the lease.
The Partnership's investment properties are located in major
urban areas and, therefore, must compete with properties of
greater and lesser quality. Such competition is based primarily
on rent, location, services and amenities. The properties are
suitable for their current and anticipated use.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR REGISTRANT'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS
There is no public trading market for the Partnership's Limited
Partnership Units and it is not anticipated that a public trading
market will develop. Furthermore, the Partnership Agreement
prohibits Limited Partners from transferring Limited Partnership
Interests if such transfers would result in the dissolution of
the Partnership for tax purposes under Section 708 of the
Internal Revenue Code.
As of December 31, 1997, there were 1,715 holders and 23,030
Limited Partnership Units outstanding.
ITEM 6. SELECTED FINANCIAL DATA
The following constitutes a summary of selected consolidated
financial data for the following periods (000's omitted except
net loss per Limited Partnership Unit):
1997 1996 1995 1994 1993
Revenues $1,728 $1,224 $1,208 $1,089 $1,079
Net Loss ($217) ($268) ($583) ($697) ($1,173)
Net Loss per Limited
Partnership Unit($9.33) ($11.54) ($25.05) ($29.97) ($50.41)
Total Assets $13,077 $9,953 $9,934 $8,910 $9,441
Notes and Loans Payable$8,950 $4,928 $4,986 $3,577 $3,598
(See ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership commenced operations on May 22, 1986 upon the
sale of the minimum number of Limited Partnership Units. The
Partnership's initial source of cash was from the sale of Limited
Partnership Units. Through the offering of Units, the
Partnership raised $11,515,000 (represented by 23,030 Limited
Partnership Units). Cash generated from the sale of Limited
Partnership Units was used to acquire land and for the
development of a mixed use commercial project and a 40% interest
in a commercial office project.
The Partnership's primary current sources of cash are from cash
reserves, property rental income and construction financing. As
of December 31, 1997, the Partnership had $254,626 in cash
reserves.
It is the Partnership's investment goal to utilize existing
capital resources for continued leasing operations (tenant
improvements and leasing commissions) and further development of
its investment properties. The Partnership is currently
proceeding with the development of Phase II, consisting of
approximately 45,921 square feet of two, one-story Light
Industrial/Office space buildings. One building of Phase II
consisting of 26,141 square feet was completed, and the remaining
19,780 square foot building was completed by February 1998.
During December 31, 1997, net cash used in investing activities
($1,007,701) was primarily the result of costs incurred for the
shell construction for Highlands 80 Phase II, tenant improvements
for the 11,657 square foot lease at Highlands 80 Phase II, tenant
improvement costs incurred for lease roll-overs at Highlands 80
Phase I, and lease renewals at Capital Professional Center.
These costs were primarily funded with a new construction loan
which provided $677,059 in loan proceeds. The construction loan
provides for future loan draws of $1,602,941 for additional shell
and tenant improvement construction costs for Phase II.
Management anticipates additional tenant improvement costs for
Highlands 80 Phase I in the amount of $129,000 and additional
Highlands 80 Phase II development and tenant improvement costs of
$897,266 to be incurred within the next 12 months. These costs,
along with additional leasing commissions, are expected to be
funded from existing cash reserves, property income, and
additional borrowings.
The Partnership's ability to maintain or improve cash flow is
dependent upon its ability to maintain and improve the occupancy
of its investment properties. The Partnership's financial
resources appear to be adequate to meet current year's
obligations and no adverse change in liquidity is foreseen.
Results of Operations
1997 vs 1996
The Partnership's total revenues increased by $504,199 (41.2%) in
fiscal year 1997 compared to 1996. Total expenses increased by
$512,579 (36.4%) in fiscal year 1997 compared to 1996. In
addition, the loss on the investment in joint venture decreased
by $59,839 (72.4%) in 1997 compared to 1996, all resulting in a
decrease in net loss of $51,459 (19.2%).
The increase in revenues is primarily due to the Partnership's
acquisition of the remaining 60% interest of Capital Builders
Roseville Venture (Capital Professional Center). Since the
purchase on May 1, 1997, property income earned by Capital
Professional Center has been fully recognized by the Partnership.
Prior to the purchase, the Partnership recognized only a 40%
share of net income (loss) from Capital Professional Center as
income/(loss) in Joint Venture. As of the purchase date of May
1, 1997 to December 31, 1997, rental income of $506,743 was
recognized from Capital Professional Center.
While Capital Professional Center has achieved and maintained an
average stabilized occupancy of 96%, Highlands 80 has only
maintained an average 75% occupancy during 1997. It is
management's opinion that Highlands 80's lack of lease-up was due
to a temporary stall in tenant demand for space in the Sacramento
sub-market in which Highlands 80 is located. Management
anticipates that demand will increase during 1998 and that
substantial lease-up will occur at Highlands 80.
Expenses increased for the fiscal year 1997 compared to 1996,
primarily due to the net effect of:
a) The purchase of the 60% interest in Capital Builders Roseville
Venture, resulting in an increase in total expenses of $484,260,
representing expenses of Capital Professional Center during the
Partnership's 100% ownership for the period, May 1, 1997 through
December 31, 1997.
b) $18,376 (12.24%) increase in repairs and maintenance from
Highlands 80 due to major landscape and parking lot repairs of
Phase I, and an increase in landscape maintenance for the newly
developed Phase II.
1996 vs 1995
The Partnership's total revenues increased by $15,982 (1.3%) in
fiscal year 1996 compared to 1995. Total expenses exclusive of
depreciation also increased by $77,828 (7.9%), while depreciation
expense decreased by $297,560 (46.4%) in fiscal year 1996
compared to 1995. In addition, the loss on the investment in
joint venture decreased by $78,610 in 1996 compared to 1995, all
resulting in a decrease in net loss of $314,324 (53.9%) from
fiscal year 1996 to 1995.
The increase in revenues is primarily due to a $35,000 settlement
for past due rent which had been written-off in 1994.
The Sacramento market in which the property is located is
continuing to improve. Vacancy factors are beginning to decline,
while market rents are starting to increase. During the last
quarter of 1996, Highlands 80 recognized a temporary decline in
occupancy due to a large tenant downsizing.
Expenses, exclusive of depreciation, increased for the fiscal
year 1996 compared to 1995, due to the net effect of :
a) $37,565 (15.7%) increase in operating expenses due to the
recognition of $16,944 in bad debt expense, an increase of
project manager supervision costs associated with the development
of Phase II, plus an increase in marketing costs associated with
Phase II,
b) $4,574 (2.9%) decrease in repairs and maintenance due to the
re-carpeting and repainting of the office building's common area
performed during 1995, which exceeded the cost of repainting the
entire project during 1996,
c) $8,189 (12.4%) increase in property taxes due to a tax refund
received in 1995 as a result of a reduction in the property's
assessed value,
d) $15,541 (3.9%) increase in interest costs due to an increase
in the average outstanding loan balance during 1996 (the
additional loan proceeds have and will continue to be used to
fund additional Phase II improvements, see Liquidity and Capital
Resources for further discussion), and
e) $21,107 (16.6%) increase in general and administrative costs
due to an increase in investor services, and legal fees.
Total expenses including depreciation decreased by $219,732
(13.5%) for the fiscal year 1996 compared to 1995. The decrease
was primarily due to a decrease in depreciation expense of
$297,560 (46.4%). The reduction of depreciation was the result
of tenant improvement costs that were amortized during 1995,
became fully amortized during the last quarter of 1995 and the
first quarter of 1996. Many of the suites with fully amortized
improvements were either re-leased or their leases renewed
without requiring any major tenant improvement `, therefore
reducing the recorded amount of amortization taken during fiscal
year 1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page Number
INDEPENDENT AUDITORS' REPORT 10
FINANCIAL STATEMENTS
11
BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
STATEMENTS OF OPERATIONS 12
FOR THE YEARS ENDED
DECEMBER 31, 1997, 1996, AND 1995
STATEMENTS OF PARTNERS' EQUITY 13
FOR THE YEARS ENDED
DECEMBER 31, 1997, 1996, AND 1995
STATEMENTS OF CASH FLOWS 14
FOR THE YEARS ENDED
DECEMBER 31, 1997, 1996, AND 1995
NOTES TO FINANCIAL STATEMENTS 15-22
SUPPLEMENTAL SCHEDULES
SCHEDULE III 26
REAL ESTATE AND ACCUMULATED DEPRECIATION
Financial schedules not included have been omitted because of
the absence of conditions under which they are required or
because the information is included elsewhere in this report.
Independent Auditors' Report
The Partners
Capital Builders Development Properties II:
We have audited the accompanying balance sheets of Capital
Builders Development Properties II, a California Limited
Partnership, as of December 31, 1997 and 1996, and the related
statements of operations, partners' equity and cash flows for
each of the years in the three-year period ended December 31,
1997. In connection with our audits of the financial
statements, we also have audited the financial statement
schedule as listed in the accompanying index. These financial
statements and financial statement schedule are the
responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Capital Builders Development Properties II as of December 31,
1997 and 1996, and the results of its operations and its cash
flows for each of the years in the three-year period ended
December 31, 1997 in conformity with generally accepted
accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
Sacramento, California KPMG Peat
Marwick LLP
February 4, 1998
PART 1 - FINANCIAL INFORMATION
<TABLE>
Capital Builders Development Properties II
(A California Limited Partnership)
BALANCE SHEETS
<CAPTION>
December 31 December 31
1997 1996
<S> <C> <C>
ASSETS
Cash and cash equivalents $254,626 $701,828
Accounts receivable, net 163,738 68,724
Due from joint venture - - - - 1,514,788
Investment property, at cost,
Net of accumulated depreciation of
$2,061,160 and $1,426,812 at
December 31, 1997 and 1996, respectively 12,431,881 7,485,543
Lease commissions, net of accumulated
amortization of $179,388 and $52,498 at
December 31, 1997 and 1996, respectively 162,386 78,635
Other assets, net of accumulated
amortization of $34,606 and $3,885 at
December 31, 1997 and 1996, respectively 64,587 103,815
Total assets $13,077,218 $9,953,333
LIABILITIES AND PARTNERS' EQUITY
Notes payable $8,950,372 $4,928,442
Accounts payable and accrued liabilities 127,777 158,405
Tenant deposits 93,690 48,995
Share of joint venture deficit - - - - 695,094
Total liabilities 9,171,839 5,830,936
Commitments and contingencies
Partners' Equity:
General Partners (56,777) (54,607)
Limited Partners 3,962,156 4,177,004
Total Partners' equity 3,905,379 4,122,397
Total liabilities and Partners'
equity $13,077,218 $9,953,333
See accompanying notes to the financial statements.
</TABLE>
<TABLE>
Capital Builders Development
Properties II
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Revenues
Rental and other income $1,599,917 $1,101,978 $1,051,084
Interest income 128,237 121,977 156,889
Total revenues 1,728,154 1,223,955 1,207,973
Expenses
Operating expenses 368,434 276,165 238,600
Repairs and maintenance 236,623 150,718 155,292
Property taxes 108,220 74,323 66,134
Interest 620,946 416,264 400,723
General and administrative 157,160 148,543 127,436
Depreciation and amortization 430,983 343,774 641,334
Total expenses 1,922,366 1,409,787 1,629,519
Loss before joint venture interest (194,212) (185,832) (421,546)
Loss on investment in joint venture (22,806) (82,645) (161,255)
Net loss (217,018) (268,477) (582,801)
Allocated to General Partners (2,170) (2,685) (5,828)
Allocated to Limited Partners ($214,848) ($265,792) ($576,973)
Net loss per Limited Partnership Unit ($9.33) ($11.54) ($25.05)
Average Units outstanding 23,030 23,030 23,030
See accompanying notes to the financial
statements.
</TABLE>
<TABLE>
Capital Builders Development Properties II
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<CAPTION>
Total
General Limited Partners'
Partners Partners Equity
<S> <C> <C> <C>
Balance at December 31, 1994 ($46,094)$5,019,769$4,973,675
Net Loss (5,828) (576,973) (582,801)
Balance at December 31, 1995 (51,922) 4,442,796 4,390,874
Net loss (2,685) (265,792) (268,477)
Balance at December 31, 1996 (54,607) 4,177,004 4,122,397
Net loss (2,170) (214,848) (217,018)
Balance at December 31, 1997 ($56,777)$3,962,156$3,905,379
See accompanying notes to the financial statements.
</TABLE>
<TABLE>
Capital Builders Development
Properties II
(A California Limited
Partnership)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Cash flows from operating
activities:
Net loss ($217,018) ($268,477) ($582,801)
Adjustments to reconcile
net loss to cash flow (used in)
provided by operating
activities:
Depreciation and amortization 430,983 343,774 641,334
Equity in losses of Joint
Venture 22,806 82,645 161,255
Uncollected interest earned
from Joint Venture (114,046) - - - - (115,684)
Changes in operating assets
and liabilities:
(Increase)/Decrease in
accounts receivable (60,266) 74,902 8,514
Increase in leasing
commissions (88,736) (35,091) (28,785)
Decrease/(Increase) in other
assets 9,204 (2,654) (119,160)
Increase in accounts payable
and accrued liabilities 2,444 85,171 554
Decrease in tenant deposits (6,845) (5,507) (558)
Net cash (used in) provided
by operating activities (21,474) 274,763 (35,331)
Cash flows from investing
activities:
Proceeds from (Investment in)
securities - - - - 1,214,118 (1,214,118)
Acquisition of remaining
joint venture
interest, net of cash
acquired (14,380) - - - - - - - -
Increase in advances to joint
venture - - - - (225,000) (105,000)
Improvements to investment
properties (993,321) (1,091,548) (133,530)
Distributions from joint
venture - - - - 124,480 36,400
Net cash (used in) provided
by investing activities (1,007,701) 22,050 (1,416,248)
Cash flows from financing
activities:
Proceeds from issuance of
debt 677,059 - - - - 1,433,740
Payments of debt (95,086) (57,932) (24,306)
Net cash provided by (used
in) financing activities 581,973 (57,932) 1,409,434
Net (decrease)/increase in cash
& cash equivalents (447,202) 238,881 (42,145)
Cash and cash equivalents,
beginning of period 701,828 462,947 505,092
Cash and cash equivalents, end
of period $254,626 $701,828 $462,947
Supplemental Disclosure of
Acquisition of
Remaining 60% Joint Venture
Interest
Fair Value of Assets Acquired $5,095,204 - - - - - - - -
Fair Value of Liabilities to
outside parties (3,439,957) - - - - - - - -
Fair Value of Affiliate Loan (1,570,134) - - - - - - - -
Net Equity $85,113 - - - - - - - -
Cash paid for 60% interest in
Joint Venture 51,068 - - - - - - - -
Cash Acquired (36,688) - - - - - - - -
Net cash paid for
acquisition $14,380 - - - - - - - -
Cash Paid for Interest $584,613 $416,264 $400,723
See accompanying notes to the financial
statements.
</TABLE>
Capital Builders Development Properties II
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
ORGANIZATION
A summary of the significant accounting policies applied in the
preparation of the accompanying financial statements follows:
Basis of Accounting
The financial statements of Capital Builders Development
Properties II (The "Partnership") are prepared on the accrual
basis of accounting and therefore revenue is recorded as earned
and costs and expenses are recorded as incurred.
Organization
Capital Builders Development Properties II, a California Limited
Partnership, is owned under the laws of the State of California.
The Managing General Partner is Capital Builders, Inc., a
California corporation (CB).
The Partnership is in the business of real estate development and
is not a significant factor in its industry. The Partnership's
investment properties are located near major urban areas and,
accordingly, compete not only with similar properties in their
immediate areas but with hundreds of properties throughout the
urban areas. Such competition is primarily on the basis of
locations, rents, services and amenities. In addition, the
Partnership competes with significant numbers of individuals and
organizations (including similar companies, real estate
investment trusts and financial institutions) with respect to the
purchase and sale of land, primarily on the basis of the prices
and terms of such transactions.
Investment Properties
Long-lived assets and certain identifiable intangibles are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying amount of an
asset to future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceed the fair value of the
assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.
The Partnership's investment property consists of commercial
land, buildings and leasehold improvements that are carried net
of accumulated depreciation. Depreciation is provided for in
amounts sufficient to relate the cost of depreciable assets to
operations over their estimated service lives of three to forty
years. The straight-line method of depreciation is followed for
financial reporting purposes.
Other Assets
Included in other assets are loan fees. Loan fees are amortized
over the life of the related note.
Lease Commissions
Lease commissions are being amortized over the related lease
terms.
Income Taxes
The Partnership has no provision for income taxes since all
income or losses are reported separately on the individual
Partners' tax returns.
Investment in Joint Venture
Equity investments of 20% to 50% are accounted for by the equity
method. Under this method, the investments are recorded at
initial cost and increased or decreased for the Partnership's
share of income and losses, and decreased for distributions (See
Note 5).
Revenue Recognition
Rental income is recognized on a straight-line basis over the
life of the lease, which may differ from the scheduled rental
payments.
Net Loss per Limited Partnership Unit
The net loss per Limited Partnership Unit is computed based on
the weighted average number of Units outstanding during the year
of 23,030 in 1997, 1996 and 1995.
Statement of Cash Flows
For purposes of the statement of cash flows, the Partnership
considers all short-term investments with a maturity, at date of
purchase, of three months or less to be cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
NOTE 2 - RELATED PARTY EXPENSE REIMBURSEMENT AND FEE
ARRANGEMENT
The Managing General Partner (Capital Builders, Inc.) and the
Associate General Partners are entitled to reimbursement of
expenses incurred on behalf of the Partnership and certain fees
from the Partnership. These fees include: a portion of the
sales commissions payable by the Partnership with respect to the
sale of the Partnership Units; an acquisition fee of up to 12.5%
of gross proceeds from the sale of the Partnership Units; a
property management fee up to 6% of gross rental revenues
realized by the Partnership with respect to its properties; a
subordinated real estate commission of up to 3% of the gross
sales price of the properties; and a subordinated 25% share of
the Partnership's distributions of cash from sales or
refinancing. The property management fee currently being charged
is 5% of gross rental revenues collected.
All acquisition fees and expenses, all underwriting commissions,
and all offering and organizational expenses which can be paid
are limited to 20% of the gross proceeds from sales of
Partnership Units provided the Partnership incurs no borrowing to
develop its properties. However, these fees may increase to a
maximum of 33% of the gross offering proceeds based upon the
total acquisition and development costs, including borrowing.
Since the formation of the Partnership, 27.5% of these fees were
paid to the Partnership's related parties, leaving a remaining
maximum of 5.5% ($633,325) of the gross offering proceeds. The
ultimate amount of these costs will be determined once the
properties are fully developed and leveraged.
The total management fees paid to the Managing General Partner
were $78,045, $52,947 and $51,310 for the years ended December
31, 1997, 1996 and 1995, respectively, while total reimbursement
of expenses was $201,441, $176,641 and $151,877, respectively.
The Managing General Partner will reduce its future participation
in proceeds from sales by an amount equal to the loss on the
abandonment of option fees in 1988 ($110,000) and interest on the
amount at a rate equal to that of the borrowed funds rate as
determined by construction or permanent funds utilized by the
Partnership.
NOTE 3 - INVESTMENT PROPERTY
The components of the investment property account at December 31,
are as follows:
1997 1996
Land $4,053,799 $2,622,014
Building and Improvements 9,111,111 5,449,418
Tenant Improvements 1,328,131 840,923
Investment property, at cost 14,493,041 8,912,355
Less: accumulated depreciation
and amortization (2,061,160) (1,426,812)
Investment property, net $12,431,881 $7,485,543
NOTE 4 - DUE FROM JOINT VENTURE
The receivable represents funds advanced to Capital Builders
Roseville Venture. Amounts outstanding earned interest at 8.95%,
approximately the same rate paid for other borrowings. The Note
receivable was settled in connection with the purchase of Capital
Builders Development Properties' 60% joint venture interest. See
Note 5 for further discussion.
NOTE 5 - INVESTMENT IN JOINT VENTURE
The investment in joint venture represents a 40% interest in a
joint venture with Capital Builders Development Properties
(CBDP), a related partnership with the same general partner. In
May 1997, the Partnership purchased the remaining 60% interest in
the joint venture. The purchase was completed after an
independent valuation of the joint venture property, Capital
Professional Center.
The Partnership acquired CBDP's 60% interest for $51,068 in cash,
which was based on CBDP's 60% interest in the joint venture's net
assets. The acquisition has been accounted for using the
purchase method of accounting, and accordingly, the operating
results of Capital Professional Center have been included in the
Partnership's Statement of Operations since the May 1, 1997
acquisition. The purchase price was allocated based on the
estimated fair values of the net assets at the date of
acquisition. As the purchase price approximated the estimated
fair value of the net assets acquired, no goodwill was recorded.
A summary of balance sheet financial information of Capital
Builders Roseville Venture as of December 31, 1996 is as follows:
Assets
Cash $ 23,657
Accounts receivable 33,437
Investment property 3,163,465
Other assets 102,995
Total Assets $ 3,323,554
Liabilities and Equity
Accounts payable and accrued liabilities$ 37,292
Tenant security deposits 53,611
Note payable 3,455,591
Loan payable to affiliate 1,514,788
Partners' Equity/(Deficit)
Capital, CBDP (1,042,634)
Capital, CBDP II (695,094)
Total Liabilities and
Partner's Equity/(Deficit)$ 3,323,554
A summary of operating information of Capital Builders Roseville
Venture follows:
For the Four Months For the Years
Ended April 30, Ended December 31,
1997 1996 1995
Total Revenue $ 242,630 $ 671,525 $612,670
Total Expenses 299,645 878,136 1,015,807
Net (Loss) ($ 57,015) ($ 206,611) ($403,137)
Capital Builders Development
Properties II Share of
Net Loss ($22,806) ($82,645) ($161,255)
The 1997 Net Loss from Capital Builders Roseville Venture
represents activity prior to the May 1, 1997 purchase. The
purchase did not generate any sales commissions, transaction
fees, changes in management compensation, or any other direct or
indirect benefit to General Partner.
NOTE 6 - NOTES PAYABLE
Notes Payable consist of the following at:December 31, 1997 December 31, 1996
A mini-permanent loan of $5,000,000
with a fixed 8.95% interest rate.
The loan requires monthly principal
and interest payments of $41,789
which is sufficient to amortize the
loan over 25 years. The loan is due
October 1, 2002. The note is
collateralized by a First Deed Of
Trust on Highlands 80 Phase I land,
buildings and improvements. $4,865,609 $4,928,442
A construction loan of $2,280,000
with a variable interest rate of
prime plus 1.5% (10% as of December
31, 1997). The loan requires
monthly interest only payments, and
is due March 1, 1999. The note
provides for future draws of
$1,602,941 for shell and tenant
improvement construction costs and
leasing commissions for future lease-
up of Phase II. The note is
collateralized by a First Deed of
Trust on Highlands
80 Phase II land, buildings and
improvements. 677,059 - - - - -
A mini-permanent loan with a fixed
interest rate of 8.24% and requiring
monthly principal and interest
payments of $27,541, which is
sufficient to amortize the loan over
25 years. The loan is due January
1, 2001. The note is collateralized
by a First Deed Of Trust on Capital
Professional Center's land,
buildings
and improvements. $3,407,704 - - - - -
Total Notes Payable $8,950,372 $4,928,442
Scheduled principal payments during 1998, 1999, 2000, 2001 and
2002 are $120,711, $808,629, $143,348, $3,327,894, and
$4,549,790, respectively.
NOTE 7 - LEASES
The Partnership leases its properties under long term
noncancelable operating leases to various tenants. The
facilities are leased through agreements for rents based on the
square footage leased. Minimum annual base rental payments under
these leases for the years ended December 31 are as follows:
1998 $1,455,787
1999 936,657
2000 591,186
2001 442,581
2002 172,825
Total $3,599,036
NOTE 8 - RECONCILIATION TO INCOME TAX METHOD OF ACCOUNTING
A reconciliation of the financial statement method of accounting
to the Federal income tax method of accounting for the years
ended December 31 are as follows:
1997 1996 1995
Net loss - financial ($217,018) (268,477) (582,801)
Adjustments
resulting from:
Book to tax difference in
depreciation and amortization (76,317) 236,810 452,864
Net loss - tax method ($293,335) (31,667) (129,937)
Partners' equity - financial $3,905,379 4,122,397 4,390,874
Increases
resulting from:
Book to tax difference in
depreciation and amortization
and valuation allowance 2,784,844 2,861,161 2,624,351
Selling expenses for
Partnership units 1,713,666 1,713,666 1,713,666
Partners' equity - tax $8,403,889 8,697,224 8,728,891
Taxable loss per Limited
Partnership unit after giving
effect to the taxable loss
allocated to the General Partner ($12.60) (1.36) (5.59)
NOTE 9- FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the
Partnership in estimating its fair value disclosures for
financial instruments.
Cash and cash equivalents
The carrying amount approximates fair value because of the
short maturity of these instruments.
Note payable
The fair value of the Partnership's Notes Payable are
estimated based on the quoted market prices for the same or
similar issues or on the current rates offered to the
Partnership for debt of the same remaining maturities.
The estimated fair values of the Partnership's financial
instruments as of December 31, are as follows:
1997 1996
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
Assets
Cash and cash
equivalents $ 254,626 $254,626 $701,828 $701,828
Due from joint
venture - - - - - - - - $1,514,788 (A)
Liabilities
Note payable $4,865,609 $4,865,609 $4,928,442 $4,928,442
Note payable $677,059 $677,059 - - - - - - - -
Note payable $3,407,704 $3,407,704 - - - - - - - -
(A) It is not practicable to determine the fair value of the Due
from joint venture due to the related party nature of the
arrangement.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
The Partnership is involved in litigation arising in the normal
course of its business. In the opinion of management, the
Partnership's recovery or liability if any, under any pending
litigation would not materially affect its financial condition or
operations.
NOTE 11 - PROSPECTIVE ACCOUNTING PRONOUNCEMENTS
Reporting Comprehensive Income
In June 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No.
130, Reporting Comprehensive Income. SFAS No. 130 is effective
for interim and annual periods beginning after December 15, 1997
and is to be applied retroactively to all periods presented.
SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general
purpose financial statements. It does not, however, specify when
to recognize or how to measure items that make up comprehensive
income. SFAS No. 130 was issued to address concerns over the
practice of reporting elements of comprehensive income directly
in equity. This Statement requires all items that are required
to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is
displayed in equal prominence with the other financial
statements. It does not require a specific format for that
financial statement but requires that an enterprise display an
amount representing total comprehensive income for the period in
that financial statement. Enterprises are required to classify
items of "other comprehensive income" by their nature in the
financial statement and display the balance of other
comprehensive income separately in the equity section of a
statement of financial position. It does not require per share
amounts of comprehensive income to be disclosed. Management does
not expect that adoption of SFAS No. 130 will have a material
impact on the Partnership's financial statements.
Financial Reporting for Segments of a Business Enterprise
In June 1997, the FASB issued SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information. SFAS No. 131
is effective for interim and annual periods beginning after
December 15, 1997 and is to be applied retroactively to all
periods presented. SFAS No. 131 establishes standards for the
way public business enterprises are to report information about
operating segments in annual financial statements and requires
those enterprises to report selected information about operating
segments in interim financial reports issued to shareholders. It
also establishes standards for related disclosures about products
and services, geographic areas, and major customers. SFAS No.
131 supersedes SFAS No. 14, Financial Reporting for Segments of a
Business Enterprise, but retains the requirement to report
information about major customers. Management does not expect
that adoption of SFAS No. 131 will have a material impact on the
Partnership's financial statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND
FINANCIAL DISCLOSURE
NONE
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors. The Partnership is managed by
Capital Builders, Inc. ("CB"), the Managing General Partner. The
following are the names and other information relating to the
Managing General Partner. No expiration date has been set for
the term during which the Managing General Partner is to serve.
MANAGING GENERAL PARTNER
The Partnership is being managed by CB, the Managing General
Partner. CB is a California corporation organized in May 1978,
with its executive offices at 4700 Roseville Road, Suite 206,
North Highlands, California 95660 (telephone number 916-331-
8080). To date, CB has organized ten partnerships to engage in
commercial real estate development. As the General Partner, CB
may be responsible for certain liabilities that a partnership it
manages is unable to pay. In addition, CB, in the normal course
of business, has guaranteed certain debt obligations of the
Partnerships it sponsored aggregating $3,521,000.
The officers, directors, and key personnel of CB are as follows:
Name Office
Michael J. Metzger President and
Director
Mark J. Leggio Director
Ellen Wilcox Director
Michael J. Metzger: Mr. Metzger, 52, is responsible for the
general management of CB. Mr. Metzger assumed responsibility for
the management of CB in December 1986. He was formerly the
Executive Vice President of The Elder-Nelson Company (EN) and its
subsidiary, the Elder-Nelson Equities Corporation - affiliated
companies which provided underwriting and administrative services
to CB. Prior to joining EN in 1977, Mr. Metzger was
Partner/General Manager for two years in his family's real estate
contracting, development and syndication business. Mr. Metzger
has also had five years of experience in manufacturing management
and served as an Army Officer for four years. Mr. Metzger holds
a B.S. degree in Business and Industrial Management as well as
licenses in Real Estate, Securities and Insurance.
Ellen Wilcox: Ellen Wilcox is the Owner/Manager of Wilcox
Financial Services, a Registered Investment Advisor in San Carlos
CA. She is licensed in General Securities and Insurance through
Linsco/Private Ledger, an NASD Registered Broker/Dealer. As an
Investment Advisor and Broker, Ms. Wilcox provides a full range
of investment products and services to individuals and small
business owners. She has been actively providing such services
since 1986. Ms. Wilcox teaches classes on retirement planning,
investment strategies, and basic money management. She is a
popular speaker and lecturer on financial topics, has authored
many published articles, and has appeared on several radio shows.
Mark J. Leggio: Mark Leggio is the Owner of Mark J. Leggio, CPA.
He provides tax accounting and business consultation services to
a wide variety of small and mid-size businesses. In addition, he
is the founding shareholder and chief financial officer of Green
Planet Juicery, Inc., located in the Sacramento area. From 1978
to 1995 he worked for KPMG Peat Marwick and was a partner when he
left. Mr. Leggio holds a Bachelor of Science degree in
Accounting from the University of Southern California, where he
graduated cum laude.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership does not have any officers or employees and,
therefore, does not pay compensation to such persons. The
Partnership's business is conducted by the Managing General
Partner which is entitled under Article IV of the Partnership
Agreement to receive underwriting commissions, acquisition fees,
property management fees, subordinated real estate commission,
share of distribution and an interest in the Partnership. The
Managing General Partner's fees totaled $78,045 in 1997,
consisting entirely of property management fees which are
calculated as 5% of gross rental revenues collected.
In addition to the fees described above, the General Partner is
entitled to reimbursement for out of pocket expenses incurred on
behalf of the Partnership. Such expenses aggregated $201,441 in
1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The Managing General Partner contributed $1,000 to the
Partnership Capital accounts, however, no securities were issued
in respect thereof. No person is known to the Partnership to own
beneficially more than 5% of the Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership agreement (see Part IV, Item 14(a)(4) Exhibits)
which was executed in 1985, authorized the compensation set forth
below to be paid to the Managing General Partner and to
affiliates of the Managing General Partner.
During the year ended December 31, 1997, the Managing General
Partner and/or its affiliate received $201,441 for reimbursement
of administrative services and $78,045 for property management
and administrative fees.
PART IV
ITEM 14. EXHIBITS FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
EXHIBIT
NUMBER EXHIBIT
(a) 1,2 See Item 8 of this Form 10-K for the
Consolidated Financial Statements of the
Partnership, Notes thereto, and Supplementary
Schedules. An index to Financial Statements and
Schedules is included and incorporated herein by
reference.
4 Limited Partnership Agreement dated February
6, 1986 filed as exhibit 3.3 and the Amendment to
the Limited Partnership Agreement dated May 22,
1986, filed as exhibit 3.4 to Registration
Statement No. 2-96042 of Capital Builders
Development Properties II, a California Limited
Partnership are hereby incorporated by reference.
11 Statement regarding computation of per Unit
earnings is not included because the computation
can be clearly determined from the material
contained in this report.
(b) Reports on Form 8-K
The Partnership filed an 8-K dated November 11,
1992.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Capital Builders Development Properties II
a California Limited Partnership
By CAPITAL BUILDERS, INC.,
The Managing General Partner,
For and On Behalf of the
Capital Builders Development Properties II
A California Limited Partnership
President
Michael J. Metzger Date
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and
on the date indicated.
Signature Title Date
Associate General
Michael J. Metzger Partner; President and
Director of Capital Builders,
Inc. ("CB")
Chief Financial
Kenneth L. Buckler Officer of CB
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
The Partnership has not sent an annual report or proxy statements
to the Limited Partners and does not intend to send a proxy
statement to the Limited Partners. The Partnership will send the
Limited Partners an annual report and will furnish the Commission
with copies of the annual report on or before April 30, 1998.
<TABLE>
Capital
Builders
Development
Properties
II
A
California
Limited
Partnership
and
Subsidiary
SCHEDULE
III - REAL
ESTATE AND
ACCUMULATED
DEPRECIATIO
N
12/31/97
<CAPTION>
Column A Column B Column C Column D Column E
<S> <C> <C> <C> <C> <C> <C> <C>
Cost
Captialized
Description Encumbrance Initial Subsequent Gross Carrying Amount
s Cost to at End of Period
Acquistion
Carrying Buildings &
Land (1) Improvement Costs Land(1) Improvement Total (1)
s(1) s(1)
Commercial
Office
Bldg.
Highlands $5,542,668 $2,115,148 $7,519,782 $50,225 $2,622,014 $7,063,140 $9,685,154
80
Roseville $
3,407,704 986,715 3,370,588 89,326 1,431,785 3,376,102 4,807,887
Commercial $8,950,372 $3,101,863 $10,890,370 $139,551 $4,053,799 $10,439,242 $14,493,041
Office
Bldg.
Column E
Total
1995 1996 1997
Balance at $8,831,186 $8,168,305 $8,912,355
beginning
of period
Additions
133,530 1,091,548 5,747,656
Deletions
(2) (796,411) (347,498) (166,970)
Balance at $8,168,305 $8,912,355 $14,493,041
end of
period
Column A Column F Column G Column H Column I
<S> <C> <C> <C> <C>
Accumulated Date of Date Depreciatio
n
Description Depreciatio Constructio Acquired Life
n n
Commercial
Office
Bldg.
Highlands $1,548,023 1987 1987 40 Years
80 (Bldg)
Roseville 1987 1987 40 Years
513,137 (Bldg)
Commercial $2,061,160 Life of
Office Lease
Bldg. (Tenant
Imp.)
Column F
Total
1996 1996 1997
Balance at $1,716,603 $1,474,003 $1,426,812
beginning
of period
Additions (3) (3)
553,811 300,307 801,318
Deletions
(2) (796,411) (347,498) (166,970)
Balance at $1,474,003 $1,426,812 $2,061,160
end of
period
1)
Valuation
allowance
for
possible
investment
loss of
$469,000 at
December
31, 1995
was
charged
against the
cost basis
of the land
and
building
and
improvments
on
a pro
rata basis
in
accordance
with the
provisions
of SFAS No.
121 which
was adopted
on
January 1,
1996.
2)
Deletions
represent
the write-
off of
fully
amortized
tenant
improvement
costs.
3) On May
1, 1997 the
Partnership
purchased
the
remaining
60%
interest in
the Capital
Builders
Roseville
Venture
from CBDP
I. The
acquistion
has been
accounted
for using
the
purchase
method of
accounting.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 254626
<SECURITIES> 0
<RECEIVABLES> 163738
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 418364
<PP&E> 14493041
<DEPRECIATION> 2061160
<TOTAL-ASSETS> 13077218
<CURRENT-LIABILITIES> 127777
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13077218
<SALES> 0
<TOTAL-REVENUES> 1728154
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1301420
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 620946
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (217018)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
