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, 1997
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 Incorporation or Organization I.R.S. Employer 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 At June 30, At December 31,
1997 1996
Assets
Real estate, at cost:
Land $14,714,483 $14,714,483
Buildings and improvements 53,010,614 52,933,678
Tenant improvements 8,330,629 8,191,558
Furniture, fixtures and equipment 231,953 293,864
76,287,679 76,133,583
Less accumulated depreciation (16,904,931) (16,104,668)
59,382,748 60,028,915
Cash and cash equivalents 5,387,318 5,668,459
Restricted cash 1,102,480 337,676
Accounts receivable 95,062 80,245
Deferred rent receivable 1,799,318 1,843,289
Deferred charges, net of accumulated amortization
of $1,803 in 1997 and $701,187 in 1996 149,638 53,896
Prepaid expenses, net of accumulated amortization
of $1,031,451 in 1997 and $934,564 in 1996 1,644,488 1,632,689
Total Assets $69,561,052 $69,645,169
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 2,619,032 $ 2,793,018
Interest payable 117,575 134,080
Due to affiliates 151,421 128,262
Revolving loan payable 18,491,473 17,798,291
Total Liabilities 21,379,501 20,853,651
Partners' Capital (Deficit):
General Partner (236,170) (230,070)
Limited Partners (7,826,300 units outstanding) 48,417,721 49,021,588
Total Partners' Capital 48,181,551 48,791,518
Total Liabilities and Partners' Capital $69,561,052 $69,645,169
Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1997
General Limited
Partner Partners Total
Balance at December 31, 1996 $(230,070) $49,021,588 $48,791,518
Net loss (6,100) (603,867) (609,967)
Balance at June 30, 1997 $(236,170) $48,417,721 $48,181,551
Statements of Operations
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
Income
Rental $1,192,468 $1,075,210 $2,441,327 $1,881,697
Interest 63,763 60,477 125,709 129,655
Other 90,497 80,872 216,267 114,974
Total income 1,346,728 1,216,559 2,783,303 2,126,326
Expenses
Property operating 600,170 585,201 1,284,761 1,213,811
Depreciation and amortization 557,685 524,353 1,091,045 1,021,620
Interest 378,963 369,460 781,204 746,360
Professional fees 17,235 91,928 57,628 140,795
General and administrative 88,847 35,253 178,632 68,109
Total expenses 1,642,900 1,606,195 3,393,270 3,190,695
Net Loss $ (296,172) $ (389,636) $ (609,967) $(1,064,369)
Net Loss Allocated:
To the General Partner $ (2,962) $ (3,896) $ (6,100) $ (10,644)
To the Limited Partners (293,210) (385,740) (603,867) (1,053,725)
$ (296,172) $ (389,636) $ (609,967) $(1,064,369)
Per limited partnership unit
(7,826,300 outstanding) $(.04) $(.05) $(.08) $(.14)
Statements of Cash Flows
For the six months ended June 30, 1997 1996
Cash Flows From Operating Activities
Net loss $(609,967) $(1,064,369)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation 938,459 881,763
Amortization 152,586 139,857
Increase (decrease) in cash arising from changes in
operating assets and liabilities
Restricted cash (764,804) (246,219)
Accounts receivable (14,817) 30,593
Deferred rent receivable 43,971 36,485
Deferred charges (151,441) --
Prepaid expenses (108,686) (300,027)
Accounts payable and accrued expenses (371,710) (92,750)
Interest payable (16,505) (255)
Due to affiliates 23,159 (384)
Net cash used for operating activities (879,755) (615,306)
Cash Flows From Investing Activities
Additions to real estate (94,568) (964,714)
Net cash used for investing activities (94,568) (964,714)
Cash Flows From Financing Activities
Borrowings under the revolving loan payable 693,182 1,315,609
Net cash provided by financing activities 693,182 1,315,609
Net decrease in cash and cash equivalents (281,141) (264,411)
Cash and cash equivalents, beginning of period 5,668,459 5,873,982
Cash and cash equivalents, end of period $5,387,318 $5,609,571
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest $ 797,709 $ 746,615
Supplemental Disclosure of Non-Cash Investing Activities
Write-off of fully depreciated furniture,
fixtures and equipment $ 61,911 $ 84,926
Write-off of fully depreciated tenant improvements 76,285 --
Write-off of fully amortized mortgage costs 755,083 --
Building improvements funded through accounts payable 27,084 --
Tenant improvements funded through accounts payable 170,640 --
Notes to the Financial Statements
The unaudited financial statements should be read in conjunction
with the Partnership's annual 1996 audited financial statements
within Form 10-K.
The unaudited financial statements include all adjustments which
are, in the opinion of management, necessary to present a fair
statement of financial position as of June 30, 1997 and the
results of operations for the three and six months ended June 30,
1997 and 1996, cash flows for the six months ended June 30, 1997
and 1996, and the statement of partners' capital (deficit) for
the six months ended June 30, 1997. Results of operations for
the period are not necessarily indicative of the results to be
expected for the full year.
Certain prior year amounts have been reclassified in order to
conform to the current year's presentation.
The following significant event has occurred subsequent to fiscal
year 1996, which requires disclosure in this interim report per
Regulation S-X, Rule 10-01, Paragraph (a)(5).
Effective as of January 1, 1997, the Partnership began
reimbursing certain expenses incurred by the General Partner and
its affiliates in servicing the Partnership to the extent
permitted by the partnership agreement. In prior years,
affiliates of the General Partner had voluntarily absorbed these
expenses.
Mortgage Note Payable
On May 15, 1997, the Partnership entered into a second
modification of the First Mortgage Loan with People's Bank (the
"Lender") which extends the maturity date until June 1, 2004 (the
"Modified Mortgage"). The Modified Mortgage is split into two
components: (i) the permanent portion (the "Permanent Portion")
which is comprised of the existing balance of the First Mortgage
Loan, closing costs associated with the Modified Mortgage and any
future drawdowns, and (ii) the development portion (the
"Development Portion") from which the Partnership may request the
drawdown of funds with the Lender's approval to fund the costs of
leasing the Property. At closing, the balance of the Permanent
Portion was $18,491,473 which included recent drawdowns for
leasing costs and the closing costs associated with the Modified
Mortgage and the balance of the Development Portion was
$5,958,322. Annually, any borrowings under the Development
Portion of the Modified Mortgage will be added to the Permanent
Portion and reduce the funds available for future drawdowns by a
commensurate amount. The Permanent Portion currently bears
interest at an initial rate of 7.63% and is amortized over a 25
year period and the Development Portion currently bears interest
at an initial rate of 7.83%. Interest rates on both the
Permanent Portion and the Development Portion are adjusted
annually on June 1, beginning June 1, 1998.
Another condition of the Financing is the establishment of a real
estate tax escrow account set up with People's Bank (the
"Lender") into which monthly deposits equal to 1/12th of the
annual real estate taxes will be made. In addition, a deposit
representing an amount equal to the 10% holdback on the
contested tax years of July 1994 through May 31, 1997 was made
prior to the closing. As of June 30, 1997 the balance in the
real estate tax escrow account was $605,354.
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 constructed thereon containing a
total of 325,416 RSF (the "Project"). Through June 30, 1997, 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.
In order to meet the Partnership's liquidity requirements during
the Project's leasing phase, the Partnership obtained a revolving
first mortgage loan from People's Bank ("People's") in July 1990.
On February 17, 1994, the Partnership entered into a modification
of the loan's terms with People's which, among other things,
reduced the principal balance of the loan from $25 million to
$24,449,795, and eliminated the interest reserve line item.
Another provision of the loan provided that when occupancy at the
Project reached 50% or greater, the interest rate on the loan
would be reduced by 25 basis points. During the first quarter of
1996, the Partnership signed a 10-year lease with Cardmember
Publishing Corporation ("Cardmember Publishing") for
approximately 18,650 square feet in the South Tower. The
Cardmember Publishing lease in the South Tower commenced on March
15, 1996 which brought the Project's overall occupancy to
approximately 54%. Payments of interest are due monthly in
arrears 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 leasing costs.
On May 15, 1997, the Partnership entered into a second
modification of the First Mortgage Loan with People's Bank (the
"Lender") which extends the maturity date until June 1, 2004 (the
"Modified Mortgage"). The Modified Mortgage is split into two
components: (i) the permanent portion (the "Permanent Portion")
which is comprised of the existing balance of the First Mortgage
Loan, closing costs associated with the Modified Mortgage and any
future drawdowns, and (ii) the development portion (the
"Development Portion") from which the Partnership may request the
drawdown of funds with the Lender's approval to fund the costs of
leasing the Property. At closing, the balance of the Permanent
Portion was $18,491,473 which included recent drawdowns for
leasing costs and the closing costs associated with the Modified
Mortgage and the balance of the Development Portion was
$5,958,322. Annually, any borrowings under the Development
Portion of the Modified Mortgage will be added to the Permanent
Portion and reduce the funds available for future drawdowns by a
commensurate amount. The Permanent Portion currently bears
interest at an initial rate of 7.63% and is amortized over a 25
year period and the Development Portion currently bears interest
at an initial rate of 7.83%. Interest rates on both the
Permanent Portion and the Development Portion are adjusted
annually on June 1, beginning June 1, 1998.
Another condition of the Financing is the establishment of a real
estate tax escrow account set up with People's Bank (the
"Lender") into which monthly deposits equal to 1/12th of the
annual real estate taxes will be made. In addition a deposit
representing an amount equal to the 10% holdback on the contested
tax years of July 1994 through May 31, 1997 was made prior to the
closing. As of June 30, 1997 the balance in the real estate tax
escrow account is $605,354.
During the second quarter of 1997, the Partnership signed two
leases for 12,338 square feet of space in the North Tower.
Robert Half will be occupying 3,362 square feet and Member Works,
an existing tenant, expanded by an additional 8,976 square feet.
As a result of this leasing activity, the Property's overall
occupancy increased to 78% as of June 30, 1997, compared to 72%
as of year-end 1996.
The General Partner has decided to commence marketing the
Project for sale. This determination was made after carefully
considering a number of factors including, among others, the
following: the recently improved operating performance of the
Project; the overall health of the economy; the strengthening of
national real estate and capital markets; and a number of
proposals for the new development of buildings in Stamford that,
if completed, would directly compete with the Project.
Although, the Partnership has retained the services of Insignia
Capital Advisors Inc., a nationally recognized real estate
broker, to assist in its marketing efforts, there can be no
assurance that these efforts will result in a sale, or that a
sale, if completed, will result in any particular level of net
sales proceeds. Upon completion of the sale of the Project, the
General Partner intends to dissolve the Partnership and will
make one or more liquidating distributions in accordance with
the terms of the Partnership Agreement. It is anticipated,
however, that certain reserves will need to be maintained for a
period of time following the sale of the Project for certain
contingent liabilities of the Partnership.
Cash and cash equivalents totaled $5,387,318 at June 30, 1997 as
compared to $5,668,459 at December 31, 1996. The decrease was
primarily due to net cash used for real estate additions and net
cash used for operating activities exceeding borrowings from the
revolving first mortgage loan.
Restricted cash at June 30, 1997 totaled $1,102,480 as compared to
$337,676 at December 31, 1996. The increase is primarily the
result of the funding of the real estate tax escrow with People's
Bank as required by the Modified Mortgage, and security deposits
received by the Partnership from Life Extension Institute, a
tenant in the North Tower, and Tradition Financial Services, a
tenant in the South Tower.
Accounts receivable were $95,062 and $80,245 at June 30, 1997 and
December 31, 1996, respectively. The increase is mainly
attributable to higher outstanding rents and reimbursable
expenses at June 30, 1997 in comparison to December 31, 1996.
At June 30, 1997, deferred charges net of accumulated
amortization was $149,638, compared to $53,896 at December 31,
1996. The increase is the result of capitalized fees associated
with the modification of the revolving loan agreement with
People's Bank, offset by amortization of these fees.
At June 30, 1997, interest payable was $117,575, compared to
$134,080 at December 31, 1996. The decrease is the due to a lower
monthly interest rate and amortization of the mortgage in
accordance with the loan modification.
Results of Operations
The Partnership incurred net losses of $296,172 and $609,967,
respectively, for the three and six months ended June 30, 1997, as
compared with net losses of $389,636 and $1,064,369, respectively,
for the corresponding periods in 1996. The reduction in the net
loss is primarily the result of higher rental income due to
increased occupancy at the Project, partially offset by an
increase in general and administrative and property operating
expenses.
Rental income totaled $1,192,468 and $2,441,327, respectively, for
the three and six months ended June 30, 1997, as compared to
$1,075,210 and $1,881,697, respectively, for the corresponding
periods in 1996. The increase is primarily due to the addition of
new tenants to the North Tower and South Tower.
For the three and six months ended June 30, 1997, other income was
$90,497 and $216,267, respectively, compared to $80,872 and
$114,974 for the corresponding periods in 1996. The increase is
the result of higher tenant reimbursements attributable to the
increase in occupancy during the 1997 period and higher
miscellaneous income received by the Partnership as a result of
participating in an energy rebate program.
Property operating expenses increased to $600,170 and $1,284,761,
respectively, for the three and six months ended June 30, 1997
from $585,201 and $1,213,811, respectively, for the corresponding
periods in 1996. The increase is primarily due to higher
occupancy in the South and North Towers resulting in increases in
utilities, cleaning and security costs, and an increase in repairs
and maintenance expense from increased usage of the Project by the
larger tenant base. Interest expense relating to the revolving
loan payable increased to $378,963 and $781,204, respectively, for
the three and six months ended June 30, 1997 from $369,460 and
$746,360, respectively, for the corresponding periods in 1996, due
to a higher revolving loan balance for the comparable periods.
Professional fees totaled $17,235 and $57,628 for the three and
six months ended June 30, 1997 compared with $91,928 and $140,795
for the 1996 periods. The decrease is attributable to lower
engineering consulting fees associated with the Gilbane litigation
(See Part II, Item 1), and lower legal fees associated with
leasing activity in the South Tower during the second quarter of
1996.
For the three and six months ended June 30, 1997, general and
administrative expenses were $88,847 and $178,632, respectively,
compared to $35,253 and $68,109 for the corresponding 1996
periods. During the 1997 periods, certain expenses incurred by
the General Partner, its affiliates and an unaffiliated third
party service provider in servicing the Partnership, which were
voluntarily absorbed by affiliates of the General Partner in prior
periods, were reimbursable to the General Partner and its
affiliates. The increase is also partially the result of
increased costs associated with the printing and mailing of
investor correspondence.
Part II Other Information
Item 1 Legal proceedings.
In February 1991, Gilbane filed a mechanic's lien
against the Property in the sum of $4,583,481. This
amount was subsequently reduced to $2,650,018 at the
request of the Partnership. In August 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 Property, and the appointment of a
receiver.
In October 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. In September
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.
In December 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. In
September 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
Property.
The Partnership, Gilbane and Moliterno (collectively,
the "Parties") participated in the trial of the Gilbane
Action over the course of approximately 20 trial days
in late 1995. A final trial day was held and the
evidentiary portion of the trial was completed in
April 1996. At that time, the court ordered the
Parties to file initial post-trial briefs within three
weeks. Subsequently, Gilbane requested two extensions
of this deadline. The Parties exchanged post trial
briefs in June 1996, followed by reply briefs in July
1996. Under the court's current order, all submissions
to the court have been completed.
In November 1996, Judge Ryan of the Connecticut
Superior Court (the "Court") entered a final judgment
in this proceeding. The judgment awarded Gilbane
$770,070 without interest on one of its claims against
the Partnership and dismissed Gilbane's remaining
claims. The Court also awarded Moliterno $155,000
without interest on its claim against the Partnership.
All remaining claims, including the Partnership's
counterclaims, were dismissed.
Post-judgment motions to alter the judgment were denied
by the Court on March 13, 1997. It is anticipated that
Gilbane may appeal the decision. On April 14, 1997
the Partnership moved to reduce the amount of Gilbane's
mechanic's lien ($2,650,018) to the amount of the award
to Gilbane ($770,070). Gilbane filed an objection on
April 21, 1997 and the Partnership filed a reply on May
8, 1997. The motion should be scheduled for a hearing
before the court shortly.
Given the outcome of the November 1996 judgment, the
Partnership has accrued the Gilbane and Moliterno
awards of $770,070 and $155,000, respectively. The
amounts are currently reflected within accounts payable
and accrued expenses on the Partnership's June 30, 1997
balance sheet.
As previously reported, the Partnership entered into a
development agreement dated September 17, 1986, as
modified (the "Development Agreement"), with an
unaffiliated party, Edlar, Inc. (the "Developer"),
pursuant to which the Developer conveyed to the
Partnership the land in Stamford, Connecticut, which
has been improved with two commercial buildings.
Edward Feldman ("Feldman"), the principal shareholder
of the Developer, had executed a personal guaranty (the
"Guaranty") in favor of the Partnership guaranteeing
the Developer's payment obligations under the
Development Agreement. Following the construction of
such buildings, the Partnership commenced an
arbitration proceeding in January 1989 against the
Developer to resolve various disputes and seeking
certain monetary recoveries. On January 24, 1993, the
arbitration panel issued its decision awarding
approximately $8.1 million to the Partnership, as well
as certain declaratory relief. Subsequently, the
Partnership obtained a judgment from a court of the
State of New York for the full amount of arbitration
award in the sum of approximately $8.1 million against
the Developer and also against Feldman pursuant to his
Guaranty. The General Partner's investigation,
however, indicated that the Developer has no
significant assets from which the arbitration award in
favor of the Partnership could be satisfied. Moreover,
Feldman advised the Partnership that he has no
significant liquid assets with which to satisfy the
judgment against him and that he has outstanding debts
to other creditors of approximately $53 million. The
foregoing information is set forth in the Partnership's
Form 10-K for the fiscal year ended December 31, 1996,
in Item 1 "Business" and Item 3 "Legal Proceedings."
During May 1997, the Partnership learned that on or
about January 21, 1997, Feldman commenced a voluntary
case for liquidation pursuant to chapter 7 of the
United States Bankruptcy Code in the United States
Bankruptcy Court for the Eastern District of New York.
On July 31, 1997, the Partnership filed a Proof of
Claim in the Feldmans' chapter 7 case in the amount of
$11,313,231.76, which includes interest of
approximately $2.7 million on the $8.1 million
judgment. Feldmans' chapter 7 case is jointly
administered with the chapter 7 case of his wife. A
chapter 7 trustee has been appointed for the chapter 7
estates of Feldman and his wife. The summary of the
assets and liabilities filed by Feldman and his wife
with the Bankruptcy Court in their chapter 7 case
indicates that their assets are less than 1.5% of the
scheduled liabilities. Based upon such schedules, it
is likely that after payment of the expenses of the
administration of Feldman's chapter 7 case, little or
no distribution will be made to the Partnership as a
holder of a general unsecured claim.
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 June 30, 1997.
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 13, 1997 BY: /s/Jeffrey C. Carter
Name: Jeffrey C. Carter
Title: Director, President and Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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