UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 33-8105
STAMFORD TOWERS LIMITED PARTNERSHIP
and
STAMFORD TOWERS DEPOSITARY CORP
(Exact name of registrant as specified in its charter)
Stamford Towers Limited Partnership 13-3392080
is a Delaware limited partnership
Stamford Towers Depositary Corp.
is a Delaware corporation 13-3392081
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) identification No.)
3 World Financial Center, 29th Floor, New York, NY 10285
(Address of principal executive offices) (Zip code)
(212) 526-3237
(Registrant's telephone number, including area code)
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
BALANCE SHEETS
June 30, December 31,
1994 1993
Assets
Land $ 14,714,483 $ 14,714,483
Building and improvements 52,369,560 52,365,750
Tenant improvements 6,617,048 6,590,665
Furniture, fixtures and equipment 372,541 372,541
---------- ----------
74,073,632 74,043,439
Less-accumulated depreciation (10,906,098) (9,585,930)
---------- ---------
63,167,534 64,457,509
Cash and cash equivalents 5,926,517 6,552,078
Restricted cash 94,799 82,592
--------- ---------
6,021,316 6,634,670
Accounts receivable 76,149 70,970
Deferred rent receivable 2,754,217 2,408,725
Deferred charges, net of accumulated
amortization of $381,687 in 1994 and
$322,034 in 1993 373,396 295,427
Prepaid expenses, net of accumulated
amortization of $561,740 in 1994 and
$487,246 in 1993 362,826 461,219
---------- ----------
Total Assets $ 72,755,438 $ 74,328,520
========== ==========
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 808,880 $ 888,450
Interest payable 95,225 142,876
Due to affiliates 158,516 164,160
Revolving loan payable 15,407,772 14,951,320
---------- ----------
Total Liabilities 16,470,393 16,146,806
Partners' Capital (Deficit):
General Partner (155,135) (136,168)
Limited Partners 56,440,180 58,317,882
---------- ----------
Total Partners' Capital 56,285,045 58,181,714
---------- ----------
Total Liabilities and Partners' Capital $ 72,755,438 $ 74,328,520
========== ==========
STATEMENTS OF OPERATIONS
Three months ended Six months ended
June 30, June 30,
1994 1993 1994 1993
Income
Rental $ 623,014 $ 597,930 $ 1,227,377 $ 1,196,343
Interest 41,028 46,679 82,030 93,723
Other 107,137 70,575 185,914 110,951
------- ------ ------- -------
Total Income 771,179 715,184 1,495,321 1,401,017
Expenses
Depreciation and amortization 729,113 712,957 1,454,315 1,425,673
Property operating 580,576 556,307 1,199,396 1,162,954
Interest 283,927 400,860 616,587 789,765
Professional fees 17,857 73,891 57,763 98,852
Partnership service fees 29,459 26,837 51,155 54,900
General and administrative 4,823 7,349 12,774 10,774
--------- --------- --------- ---------
Total Expenses 1,645,755 1,778,201 3,391,990 3,542,918
--------- --------- --------- ---------
Net Loss $ (874,576)$(1,063,017) $ (1,896,669)$ (2,141,901)
======= ========= ========= =========
Net Loss Allocated:
To the General Partner $ (8,746)$ (10,630) $ (18,967) $ (21,419)
To the Limited Partners (865,830) (1,052,387) (1,877,702) (2,120,482)
-------- --------- --------- ---------
$ (874,576)$(1,063,017) $(1,896,669) $ (2,141,901)
======= ========= ========= =========
Per limited partnership unit
(7,826,300 outstanding) $(.11) $(.13) $(.24) $(.27)
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
For the six months ended June 30, 1994
Limited General Total
Partners' Partner's Partners'
Capital Deficit Capital
Balance at December 31, 1993 $ 58,317,882 $ (136,168) $ 58,181,714
Net loss (1,877,702) (18,967) (1,896,669)
--------- ------ ---------
Balance at June 30, 1994 $ 56,440,180 $ (155,135) $ 56,285,045
========== ======= ==========
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1994 and 1993
1994 1993
Cash Flows from Operating Activities:
Net loss $ (1,896,669) $ (2,141,901)
Adjustments to reconcile net loss to
net cash used for operating activities:
Depreciation and amortization 1,454,315 1,425,672
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Restricted cash (12,207) (1,109)
Accounts receivable (5,179) (2,891)
Deferred rent receivable (345,492) (352,790)
Prepaid expenses 23,899 (4,358)
Accounts payable and accrued expenses (79,570) 15,723
Interest payable (47,651) 8,016
Due to affiliates (5,644) (3,826)
------- ------
Net cash used for operating activities (914,198) (1,057,464)
Cash Flows from Investing Activities:
Additions to real estate assets (30,193) (50,482)
------- -------
Net cash used for investing activities (30,193) (50,482)
Cash Flows from Financing Activities:
Borrowings under the revolving loan payable 456,452 808,911
Deferred charges (137,622) 0
------- -------
Net cash provided by financing activities 318,830 808,911
------- -------
Net decrease in cash and cash equivalents (625,561) (299,035)
Cash and cash equivalents at beginning of period 6,552,078 7,291,687
--------- ---------
Cash and cash equivalents at end of period $ 5,926,517 $ 6,992,652
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 664,238 $ 781,749
NOTES TO THE FINANCIAL STATEMENTS
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1993 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments consisting of only
normal recurring accruals which are, in the opinion of management, necessary to
present a fair statement of financial position as of June 30, 1994 and the
results of operations, changes in partners' capital (deficit), and cash flows
for the six months then ended. Results of operations for the period are not
necessarily indicative of the results to be expected for the full year.
Reclassifications. Certain prior year amounts have been reclassified to
conform with the financial statement presentation used in 1994.
The following significant events have occurred, subsequent to fiscal year 1993,
or the following material contingencies exist, and require disclosure in this
interim report per Regulation S-X, Rule 10-01, Paragraph (a)(5).
Contingencies. In late January of 1989, the Partnership initiated an
arbitration proceeding against Edlar, Inc. ("Edlar") in order to establish
Edlar's responsibility for certain cost overruns, delays, expenses and
liquidated damages in connection with the construction phase of Stamford Towers
office project (the "Project"). Subsequently, the arbitration was consolidated
with a separate arbitration between Edlar and the Project's construction
manager, Gilbane Building Company ("Gilbane").
In January 1993, the arbitrators issued their decision which, in substance,
awards the Partnership approximately $8.1 million in damages and costs against
Edlar and awards Gilbane approximately $2.6 million in damages and costs
against Edlar. In addition, the arbitrators ordered Edlar to hold the
Partnership harmless with respect to (i) the mechanic's lien filed by Gilbane
against the Partnership, which is presently the subject of an action in
Connecticut state court and (ii) any similar liens filed by subcontractors who
worked on the Project. The arbitrators further found that the Partnership
properly terminated Edlar under the Development Agreement. That finding has
the effect of eliminating the residual interest in the Project of Edlar's
affiliate, Feldco, Inc. Edlar was not awarded any amounts on its claims
against the Partnership or Gilbane. The Partnership has entered judgement
against both Edlar and Edward Feldman for the full amount of the arbitration
award.
Based on preliminary investigation by the General Partner, it appears that the
Developer has no sufficient assets from which to satisfy the arbitration award.
Moreover, based on the General Partner's discussions with Edward Feldman
concerning his proposal for a non-judicial workout, it appears that his assets,
consisting largely of illiquid real estate investments, are insufficient to
satisfy his substantial outstanding obligations to his creditors, including the
Partnership.
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
- - -------------------------------
The Partnership is currently preserving its funds to lease and operate the
Project which consists of two parcels of land located in Stamford, Connecticut
and two commercial office buildings (the "Buildings") constructed thereon which
contain a total of 325,416 net rentable square feet. Through June 30, 1994,
the Partnership's sources of liquidity have been net proceeds from the public
offering of limited partnership units, rental receipts, proceeds from the
mortgage loan discussed below and interest from the Partnership's cash
balance.
In order to meet the Partnership's liquidity requirements during the Project's
leasing phase, on July 19, 1990, the General Partner closed on a $25 million,
seven-year, non-recourse first mortgage loan for the Project with People's
Bank, a third party lender. As of June 30, 1994, the principal balance
totalled $15,407,772 as compared to a principal balance at December 31, 1993 of
$14,951,320. The increase in the loan balance is due to the draw down of
interest expense for December 1993 and January 1994, and the borrowing of
additional amounts to fund tenant improvements and leasing costs.
On February 17, 1994, the Partnership entered into a Loan Modification with
People's Bank which: (i) reduced the interest rate on the loan from 11.5% to
7.43% commencing February 1, 1994 and continuing until the first adjustment
date on July 19, 1995; (ii) reduced the principal balance of the loan from $25
million to $24,449,795; and (iii) eliminated the interest reserve line item.
Payments of interest after February 1, 1994 may no longer be drawn down from
the available loan proceeds and are required to be paid from the Partnership's
own funds. Loan proceeds may continue to be used on an "as needed" basis to
fund all other approved line items such as advertising, leasing commissions,
tenant improvements and certain approved construction items. The remaining
loan proceeds available for funding at June 30, 1994 were $9,042,023.
Cash and cash equivalents decreased from $6,552,078 at December 31, 1993 to
$5,926,517 at June 30, 1994. The decrease was primarily due to the payment of
semi-annual real estate taxes, the payment of loan modification fees and the
payment of interest on the revolving loan for February 1994 through May 1994.
This decrease was partially offset by additional borrowings on the revolving
loan during the 1994 second quarter.
As of June 30, 1994, the Partnership had deferred rent receivable of $2,754,217
compared with $2,408,725 at December 31, 1993. Deferred rent receivable
represents rental income which is recognized on a straight-line basis over the
non-cancelable term of the tenant leases which will not be received until later
periods as a result of rental concessions. The increase was primarily
associated with concessions related to the Citicorp lease agreement. As of
June 30, 1994, the Partnership had deferred charges of $373,396 compared with
$295,427 at December 31, 1993. The increase is attributable to the
capitalization of fees related to the modification of the revolving loan
agreement.
Prepaid expenses decreased from $461,219 at December 31, 1993 to $362,826 at
June 30, 1994. The decrease is due to the amortization of the Partnership's
insurance premiums and leasing commissions.
The Project currently has five tenants occupying approximately 149,000 rentable
square feet in the North Tower. The Project's largest tenant, Citicorp, leases
136,000 rentable square feet. Pursuant to the lease with Citicorp, the rent
will increase effective July 1, 1994 by approximately $1.5 million per annum
with an additional increase of approximately $950,000 per annum effective July
1, 1995. The increase in rent will substantially improve the Partnership's
cash flow.
Results of Operations
- - ---------------------
For the three and six months ended June 30, 1994, the Partnership incurred net
losses of $874,576 and $1,896,669, respectively, compared with $1,063,017 and
$2,141,901 for the corresponding periods in 1993. The reduced net loss from
1993 to 1994 is primarily the result of increases in rental and other income
from tenants, as well as decreases in interest expense and professional fees.
Rental income for the three and six months ended June 30, 1994 was $623,014 and
$1,227,377, respectively, up slightly from the corresponding periods in 1993
due to rental income received from Dow Jones & Company, Inc. and M.D. Revenues,
Inc. Interest income was $41,028 and $82,030, for the three and six months
ended June 30, 1994, respectively, compared with $46,679 and $93,723 for the
corresponding periods in 1993. The decrease was due to the Partnership's lower
average cash balance during 1994. Other income increased from $70,575 and
$110,951 for the three and six months ended June 30, 1993, respectively, to
$107,137 and $185,914 for the corresponding periods in 1994, reflecting an
increase in tenant reimbursements for electricity and other building costs, as
well as income from cafeteria operations at the Project.
Total expenses for the three and six months ended June 30, 1994 were $1,645,755
and $3,391,990, respectively, compared with $1,778,201 and $3,542,918 for the
corresponding periods in 1993. Interest expense related to the revolving loan
payable for the three and six months ended June 30, 1994 was $283,927 and
$616,587, respectively, compared with $400,860 and $789,765 for the
corresponding periods in 1993. Interest expense on the revolving loan payable
decreased, despite the increase in the outstanding loan balance, because the
modification of the revolving loan agreement, effective February 1, 1994,
lowered the interest rate on the loan from 11.5% to 7.43%. Professional fees
for the three and six months ended June 30, 1994, decreased $56,034 and
$41,089, respectively, from the corresponding periods in 1993, primarily due to
decreased legal fees associated with the resolution of the Gilbane and Edlar
arbitration proceedings.
PART II OTHER INFORMATION
Item 1 Legal proceedings.
On February 1, 1991, the construction manager at the Project,
Gilbane, filed a mechanic's lien against the property in the
sum of $4,583,481. On August 9, 1991, Gilbane commenced an
action entitled Gilbane Building Co. v. Stamford Towers Limited
Partnership, et. al., in the Connecticut Superior Court for the
Judicial District of Stamford/Norwalk at Stamford. The
defendants include the Partnership. Gilbane alleges breach of
various contracts and unfair trade practices and seeks
foreclosure of its mechanic's lien, monetary damages, attorney
fees, punitive damages, possession of the premises, and the
appointment of a receiver. The Partnership expects to
vigorously defend against each of the plaintiff's claims. On
May 17, 1993, at the request of the Partnership, Gilbane
reduced the amount of the lien to $2,650,018.
On September 21, 1993, Gilbane filed a motion for Partial
Summary Judgement as to Liability Only. The Partnership
successfully opposed this motion, and the motion was denied by
the court on November 4, 1993. On October 28, 1993, the
Partnership filed a Motion for Summary Judgement which has not
yet been ruled upon by the court. On October 21, 1993, the
Partnership filed its Answer, Special Defenses and
Counterclaims to Gilbane's action. The Partnership's
Counterclaim against Gilbane alleges breach of various
contracts, unfair trade practices and slander of title. On
November 10, 1993, Gilbane filed its reply to Stamford Towers'
Special Defenses and Answer to Stamford Towers' Counterclaim
and claimed the action to the jury trial list. The parties are
currently engaged in discovery.
On December 31, 1990, a subcontractor of the Project, Moliterno
Stone Sales, Inc. ("Moliterno") filed a mechanic's lien against
the Property in the sum of $155,936. On December 11, 1991,
Moliterno filed a cross-claim against the Partnership in the
Gilbane action. Moliterno seeks foreclosure on its mechanic's
lien and monetary damages, along with possession of the
premises. The Partnership expects to vigorously defend against
Moliterno's claim. As of this date, discovery has not yet
commenced.
Items 2-4 Not applicable.
Item 5 Other Information.
Effective May 20, 1994, American Express Company ("American
Express") distributed to holders of record of American Express,
shares of Lehman Brothers Holdings Inc. ("Lehman Brothers")
common stock. As a result of this transaction, the
Partnership's General Partner is no longer an affiliate of
American Express. This change is not expected to have any
impact on the Partnership.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits - None
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended June 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
STAMFORD TOWERS LIMITED PARTNERSHIP
BY: STAMFORD TOWERS, INC.
General Partner
Date: August 12, 1994
BY: /S/ Ron Hiram
-------------------------------------
Title: Director, Chief Operating
Officer, Chief Financial Officer
and Chief Accounting Officer
Date: August 12, 1994
BY: /S/ Regina M. Hertl
------------------------------------
Title: President
