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 September 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 33-8105
STAMFORD TOWERS LIMITED PARTNERSHIP
and
STAMFORD TOWERS DEPOSITARY CORP.
(Exact name of registrant as specified in its charter)
Stamford Towers Limited Partnership
is a Delaware limited partnership 13-3392080
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
ATTN: Andre Anderson 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
September 30, December 31,
Assets 1995 1994
Real estate investments, at cost:
Land $ 14,714,483 $ 14,714,483
Buildings and improvements 52,700,969 52,537,022
Tenant improvements 6,631,075 6,618,562
Furniture, fixtures and equipment 372,541 372,541
74,419,068 74,242,608
Less accumulated depreciation (13,978,483) (12,226,266)
60,440,585 62,016,342
Cash and cash equivalents 6,137,884 5,768,902
Restricted cash 91,382 89,294
6,229,266 5,858,196
Accounts receivable 219,508 103,201
Deferred rent receivable 1,912,574 2,381,869
Deferred charges, net of accumulated
amortization of $541,437 in 1995 and
$445,587 in 1994 213,646 309,496
Prepaid expenses, net of accumulated
amortization of $742,779 in 1995 and
$636,235 in 1994 1,505,697 320,021
Total Assets $ 70,521,276 $ 70,989,125
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 1,316,172 $ 857,084
Interest payable 124,036 95,400
Due to affiliates 163,974 159,091
Revolving loan payable 16,483,152 15,407,772
Total Liabilities 18,087,334 16,519,347
Partners' Capital (Deficit):
General Partner (193,645) (173,287)
Limited Partners 52,627,587 54,643,065
Total Partners' Capital 52,433,942 54,469,778
Total Liabilities and Partners' Capital $ 70,521,276 $ 70,989,125
Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1995
General Limited
Partner Partners Total
Balance at December 31, 1994 $ (173,287) $ 54,643,065 $ 54,469,778
Net loss (20,358) (2,015,478) (2,035,836)
Balance at September 30, 1995 $ (193,645) $ 52,627,587 $ 52,433,942
Statements of Operations
Three months ended Nine months ended
September 30, September 30,
Income 1995 1994 1995 1994
Rental $ 1,003,491 $ 644,148 $ 2,235,840 $ 1,871,525
Other 189,363 57,719 256,211 243,633
Interest 80,052 42,606 236,030 124,636
Total Income 1,272,906 744,473 2,728,081 2,239,794
Expenses
Depreciation and
amortization 493,629 729,282 1,954,611 2,183,597
Property operating 564,412 507,895 1,634,422 1,707,291
Interest 344,803 286,200 917,202 902,787
Professional fees 87,810 44,070 154,386 101,833
Partnership service fees 32,448 20,412 75,392 71,567
General and administrative 11,783 7,771 27,904 20,545
Total Expenses 1,534,885 1,595,630 4,763,917 4,987,620
Net Loss $ (261,979) $ (851,157) $(2,035,836) $(2,747,826)
Net Loss Allocated:
To the General Partner $ (2,619) $ (8,511) $ (20,358) $ (27,478)
To the Limited Partners (259,360) (842,646) (2,015,478) (2,720,348)
$ (261,979) $ (851,157) $(2,035,836) $(2,747,826)
Per limited partnership unit
(7,826,300 outstanding) $ (.03) $ (.11) $ (.26) $ (.35)
Statements of Cash Flows
For the nine months ended September 30, 1995 and 1994
Cash Flows from Operating Activities: 1995 1994
Net loss $ (2,035,836) $ (2,747,826)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization 1,954,611 2,183,597
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Restricted cash (2,088) (8,326)
Accounts receivable (116,307) (7,022)
Deferred rent receivable 469,295 (177,767)
Prepaid expenses (1,292,220) (209,361)
Accounts payable and accrued expenses 459,088 (90,944)
Interest payable 28,636 (142,876)
Due to affiliates 4,883 (21,829)
Net cash used for operating activities (529,938) (1,222,354)
Cash Flows from Investing Activities:
Additions to real estate assets (176,460) (59,939)
Net cash used for investing activities (176,460) (59,939)
Cash Flows from Financing Activities:
Borrowings under the revolving loan payable 1,075,380 456,452
Deferred charges 0 (137,622)
Net cash provided by financing activities 1,075,380 318,830
Net increase (decrease) in cash and
cash equivalents 368,982 (963,463)
Cash and cash equivalents at beginning
of period 5,768,902 6,552,078
Cash and cash equivalents at end of period $ 6,137,884 $ 5,588,615
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 888,566 $ 1,045,663
Notes to the Financial Statements
These unaudited interim financial statements should be read in conjunction with
the Stamford Towers Limited Partnership's (the "Partnership") 1994 annual
audited financial statements within Form 10-K.
These unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of September 30, 1995 and the results of operations for the three-
and nine-month periods ended September 30, 1995 and 1994, cash flows for the
nine-month periods ended September 30, 1995 and 1994 and the statement of
changes in partners' capital (deficit) for the nine-month period ended
September 30, 1995. Results of operations for the period are not necessarily
indicative of the results to be expected for the full year.
The following significant events have occurred, subsequent to fiscal year 1994,
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 the 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 of Edlar's affiliate, Feldco,
Inc., in the Project. Edlar was not awarded any amounts on its claims against
the Partnership or Gilbane. The Partnership has entered judgment against both
Edlar and Edward Feldman for the full amount of the arbitration award.
Based on a preliminary investigation by the General Partner, it appears that
Edlar has no significant 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 would appear that his
assets, consisting largely of illiquid real estate investments, are
insufficient to satisfy his substantial outstanding obligations to his
creditors, including the Partnership.
Citicorp Lease
On June 28, 1995, the Partnership executed the First Amendment (the "Citicorp
Lease Amendment") to the lease agreement between the Partnership and Citicorp
North America, Inc. ("Citicorp") dated May 11, 1990 (the "Original Lease") for
approximately 136,000 rentable square feet ("RSF") in the Project's North
Tower. The Citicorp Lease Amendment, which was effective July 1, 1995, (i)
reduces Citicorp's annual rent from $29.50 to $25 per RSF for the initial three
years and to $24 per RSF for the next two years, and (ii) extends the term of
the Original Lease for an additional five years, through June 30, 2006, at an
annual rental rate of $24 per RSF. In addition, there was no tenant
improvement allowance provided by the Partnership to Citicorp in connection
with the Citicorp Lease Amendment. Although the Original Lease was for an
11-year term, expiring June 30, 2001, Citicorp had the option to terminate the
Original Lease as of June 30, 1996 by paying $45 per RSF or approximately $6.1
m illion to the Partnership on or before June 30, 1995. The Citicorp Lease
Amendment ensures Citicorp's continued occupancy at the Project through June
30, 2006.
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 two
parcels of land located in Stamford, Connecticut with two commercial office
buildings (collectively, the "Buildings") constructed thereon containing a
total of 325,416 RSF. Through September 30, 1995, 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 earned on the Partnership's cash balance.
On October 18, 1995, the Partnership executed a 10-year three-month lease with
Consolidated Hydro, Inc. for approximately 8,600 square feet in the Project's
South Tower, increasing the combined occupancy rate in the Buildings from
approximately 46% to 49%. Consolidated Hydro, Inc. will be the first tenant in
the Project's South Tower.
On June 28, 1995, the Partnership executed the Citicorp Lease Amendment to the
Original Lease for approximately 136,000 RSF in the Project's North Tower. The
Citicorp Lease Amendment, which was effective July 1, 1995, (i) reduces
Citicorp's annual rent from $29.50 to $25 per RSF for the initial three years
and to $24 per RSF for the next two years, and (ii) extends the term of the
Original Lease for an additional five years, through June 30, 2006, at an
annual rental rate of $24 per RSF. In addition, there was no tenant
improvement allowance provided by the Partnership to Citicorp in connection
with the Citicorp Lease Amendment. Although the Original Lease was for an
11-year term, expiring June 30, 2001, Citicorp had the option to terminate the
Original Lease as of June 30, 1996 by paying $45 per RSF or approximately $6.1
million to the Partnership on or before June 30, 1995. The Citicorp Lease
Amendment ensures Citicorp's continued occupancy at the Project through June
30, 2006.
In order to meet the Partnership's liquidity requirements during the Project's
leasing phase, on July 19, 1990, the Partnership obtained a $25 million,
seven-year, revolving first mortgage loan (the "First Mortgage Loan") for the
Project from People's Bank, a third-party lender. As of September 30, 1995,
the principal balance totaled $16,483,152, compared to $15,407,772 at December
31, 1994. The increase is attributable to a drawdown on the First Mortgage
Loan to fund costs associated with the Citicorp Lease Amendment.
On February 17, 1994, the Partnership entered into modification of the First
Mortgage Loan with People's Bank (the "Loan Modification") which: (i) reduced
the interest rate from 11.5% to 7.43% for the period February 1, 1994 through
the adjustment date on July 19, 1995, at which time the interest rate was reset
to 9.03%, (ii) reduced the principal balance of the First Mortgage Loan from
$25 million to $24,449,795; and (iii) eliminated the interest reserve line
item. Payments of interest are due monthly in arrears and are paid from the
Partnership's funds. The remaining First Mortgage Loan proceeds available at
September 30, 1995 were $7,966,643 and may continue to be used on an "as
needed" basis to fund all other approved line items.
Cash and cash equivalents was $6,137,884 at September 30, 1995, compared to
$5,768,902 at December 31, 1994. The increase is largely the result of the
funds borrowed under the First Mortgage Loan, less cash flow used for operating
activities.
As of September 30, 1995, the Partnership had deferred rent receivable of
$1,912,574, compared with $2,381,869 at December 31, 1994. Deferred rent
receivable represents rental income which is recognized on a straight-line
basis over the non-cancelable term of the tenants' leases which will not be
received until later periods as a result of rental concessions. The decrease
is primarily associated with concessions related to Citicorp's Original Lease.
Prepaid expenses increased from $320,021 at December 31, 1994 to $1,505,697 at
September 30, 1995. The increase is attributable to prepaid leasing
commissions related to the Citicorp Lease Amendment, partially offset by the
continued amortization of insurance and leasing commissions.
Results of Operations
The Partnership incurred net losses of $261,979 and $2,035,836, respectively,
for the three- and nine-month periods ended September 30, 1995, compared to net
losses of $851,157 and $2,747,826 for the corresponding periods in 1994. The
reduction in the net loss is primarily the result of increased rental income as
a result of the Citicorp Lease Amendment and, to a lesser extent, an increase
in interest income. Rental income for the three- and nine-month periods ended
September 30, 1995 was $1,003,491 and $2,235,840, respectively, compared to
$644,148 and $1,871,525, respectively, for the corresponding periods in 1994.
The increase in rental income was due to the Citicorp Lease Amendment, which
extends the term of the Original Lease through June 30, 2006, resulting in an
extension of the corresponding period during which the associated deferred rent
is amortized. The Citicorp Lease Amendment resulted in an increase in the
rental income recognized under the Citicorp lease from $549,299 to $783,536 per
quarter.
Interest income for the three- and nine-month periods ended September 30, 1995
was $80,052 and $236,030, respectively, compared with $42,606 and $124,636,
respectively, for the corresponding periods in 1994. The increase in interest
income is a result of an increase in the Partnership's cash balance due to the
drawdown on the First Mortgage Loan in July 1995, as well as an increase in the
interest rate earned on the balance. Other income for the three- and
nine-month periods ended September 30, 1995 was $189,363 and $256,211,
respectively, compared to $57,719 and $243,633, respectively, for the
corresponding periods in 1994. The increase in other income is a result of an
increase in tenant reimbursements for construction costs, resulting primarily
from HVAC improvements to Citicorp's space.
Property operating expense for the three- and nine-month periods ended
September 30, 1995, was $564,412 and $1,634,422, respectively, compared with
$507,895 and $1,707,291, respectively, for the corresponding periods in 1994.
The increase in property operating expense from the three-month period ended
September 30, 1994 to the three-month period ended September 30, 1995 is
primarily due to a recalculation of the management fee which resulted in a
retroactive fee charged to the Partnership in July 1995. The decrease in
property operating expense from the nine-month period ended September 30, 1994
to the nine-month period ended September 30, 1995 is primarily due to lower
real estate taxes and lower advertising and promotion expenses. Real estate
taxes were reduced as a result of a reduction in the City of Stamford's real
estate tax rate and a reduction in the assessed value of the South Tower,
partially offset by a slight increase in the assessed value of the North Tower.
Although t he Partnership is contesting the assessed values of the North and
South Towers, there are no assurances that the Partnership will be successful
in obtaining a further reduction in the Project's real estate taxes. Interest
expense on the First Mortgage Loan payable increased due to the additional
borrowings discussed above. Professional fees for the three- and nine-month
periods ended September 30, 1995, were $87,810 and $154,386, respectively,
compared to $44,070 and $101,833, respectively, for the corresponding periods
in 1994. The increase in professional fees is primarily due to legal and
engineering fees associated with the Gilbane litigation incurred in the second
and third quarters of 1995.
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 Project in the sum
of $4,583,481. This amount was subsequently reduced to
$2,650,018 at the request of the Partnership. 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 "Gilbane Action"). The
defendants include the Partnership. Gilbane alleges breach of
various contracts and unfair trade practices and seeks
foreclosure of its mechanic's lien, approximately $2.65 million
in monetary damages, interest, costs, attorneys' fees, punitive
damages, possession of the Project, and the appointment of a
receiver.
On October 21, 1993, the Partnership filed its Answer, Special
Defenses and Counterclaims to Gilbane's Action, which alleged
breach of various contracts, unfair trade practices and slander
of title. On September 13, 1995, the Partnership filed a
Substituted Answer, Special Defenses, Counterclaims, Set-offs
and Recoupment which, in addition to the allegations of its
original counterclaim, brought additional claims of negligence,
breach of warranty, breach of contract, products liability and
unfair trade practices. The Partnership, by way of its
counterclaims, seeks approximately $1.7 million in damages in
addition to interest, costs, punitive damages and attorneys'
fees.
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, monetary damages, and possession of the Project. An
application to discharge Moliterno's mechanic's lien was filed
by the Partnership on April 30, 1993. On September 1, 1995,
the Partnership filed its answer, special defenses and
counterclaims to Moliterno's cross-claim, alleging that
Moliterno was negligent, breached its contract and an implied
warranty, and engaged in unfair trade practices in performing
its work on the Project.
The Partnership, Gilbane and Moliterno (collectively, the
"Parties") participated in the trial of the Gilbane Action over
the course of approximately 20 trial days from September 12 to
November 3, 1995. The evidentiary portion of the trial has
essentially been completed, and the Parties currently are
engaging in post-trial briefing which is not expected to be
completed until the end of 1995. A decision from the trial
court is currently not expected until, at the earliest, the
second quarter of 1996.
Items 2-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter ended September 30, 1995.
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: November 13, 1995
BY: /s/Regina M. Hertl
Name: Regina M. Hertl
Title: President
Date: November 13, 1995
BY: /s/Rocco F. Andriola
Name: Rocco F. Andriola
Title: Director, Chief Financial
Officer and Vice President
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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