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 March 31, 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 Depository 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 March 31, At December 31,
1997 1996
Assets
Real estate, at cost:
Land $14,714,483 $14,714,483
Buildings and improvements 52,987,235 52,933,678
Tenant improvements 8,115,273 8,191,558
Furniture, fixtures and equipment 231,953 293,864
76,048,944 76,133,583
Less accumulated depreciation (16,418,721) (16,104,668)
59,630,223 60,028,915
Cash and cash equivalents 5,263,846 5,668,459
Restricted cash 489,345 337,676
Accounts receivable 53,504 80,245
Deferred rent receivable 1,862,731 1,843,289
Deferred charges, net of accumulated amortization
of $733,137 in 1997 and $701,187 in 1996 21,946 53,896
Prepaid expenses, net of accumulated amortization
of $983,726 in 1997 and $934,564 in 1996 1,807,072 1,632,689
Total Assets $69,128,667 $69,645,169
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 2,568,652 $ 2,793,018
Interest payable 134,080 134,080
Due to affiliates 149,921 128,262
Revolving loan payable 17,798,291 17,798,291
Total Liabilities 20,650,944 20,853,651
Partners' Capital (Deficit):
General Partner (233,208) (230,070)
Limited Partners (7,826,300 units outstanding) 48,710,931 49,021,588
Total Partners' Capital 48,477,723 48,791,518
Total Liabilities and Partners' Capital $69,128,667 $69,645,169
Statement of Partners' Capital (Deficit)
For the three months ended March 31, 1997
General Limited
Partner Partners Total
Balance at December 31, 1996 $(230,070) $49,021,588 $48,791,518
Net loss (3,138) (310,657) (313,795)
Balance at March 31, 1997 $(233,208) $48,710,931 $48,477,723
Statements of Operations
For the three months ended March 31, 1997 1996
Income
Rental $1,248,859 $ 806,487
Interest 61,946 69,178
Other 125,770 34,102
Total income 1,436,575 909,767
Expenses
Property operating 684,591 628,610
Depreciation and amortization 533,360 497,267
Interest 402,241 376,900
Professional fees 40,393 48,867
Partnership service fees 63,353 21,352
General and administrative 26,432 11,504
Total expenses 1,750,370 1,584,500
Net Loss $ (313,795) $(674,733)
Net Loss Allocated:
To the General Partner $ (3,138) $(6,748)
To the Limited Partners (310,657) (667,985)
$ (313,795) $(674,733)
Per limited partnership
unit (7,826,300 outstanding) $(.04) $(.09)
Statements of Cash Flows
For the three months ended March 31, 1997 1996
Cash Flows From Operating Activities:
Net loss $(313,795) $(674,733)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 533,360 497,267
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Restricted cash (151,669) (241,460)
Accounts receivable 26,741 11,860
Deferred rent receivable (19,442) 126,258
Prepaid expenses (223,545) (358,175)
Accounts payable and accrued expenses 104,515 (275,660)
Interest payable -- 4,792
Due to affiliates 21,659 (525)
Net cash used for operating activities (22,176) (910,376)
Cash Flows From Investing Activities:
Additions to real estate (382,437) (455,094)
Net cash used for investing activities (382,437) (455,094)
Cash Flows From Financing Activities:
Borrowings under the revolving loan payable -- 434,931
Net cash provided by financing activities -- 434,931
Net decrease in cash and cash equivalents (404,613) (930,539)
Cash and cash equivalents, beginning of period 5,668,459 5,873,982
Cash and cash equivalents, end of period $5,263,846 $4,943,443
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 402,241 $ 372,108
Supplemental Disclosure of Non-Cash Investing Activities:
Write-off of fully depreciated furniture,
fixtures and equipment $ 61,910 $ 84,926
Write-off of fully depreciated tenant improvements 76,285 --
Building improvements funded through accounts payable 44,893 --
Tenant improvements funded through accounts payable 49,985 --
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 normal and
reoccurring adjustments which are, in the opinion of management,
necessary to present a fair statement of financial position as of
March 31, 1997 and the results of operations and cash flows for
the three-month period ended March 31, 1997 and 1996 and the
statement of partners' capital (deficit) for the three-month
period ended March 31, 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.
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 March 31, 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 line items.
The Partnership has been exploring various options with respect
to refinancing its current $18.2 million first mortgage (the
"Mortgage") which matures in August 1997. The General Partner
has executed a commitment with People's Bank, the first mortgage
holder, to modify and extend the Mortgage. It is anticipated
that the transaction will close during the second quarter subject
to the execution of a mortgage modification document.
Cash and cash equivalents totaled $5,263,846 at March 31, 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
operating activities.
Restricted cash at March 31, 1997 totaled $489,345 as compared to
$337,676 at December 31, 1996. The increase is primarily the
result of security deposits received by the Partnership from Life
Extension Institute, a tenant expected to take occupancy of space
in the North Tower in the second quarter of 1997, and Tradition
Financial Services, a tenant in the South Tower.
Accounts receivable were $53,504 and $80,245 at March 31, 1997
and December 31, 1996, respectively. The decrease is mainly
attributable to fewer outstanding rents and reimbursable expenses
at March 31, 1997 in comparison to December 31, 1996.
At March 31, 1997, deferred charges net of accumulated
amortization was $21,946, compared to $53,896 at December 31,
1996. The decrease is the result of amortization of capitalized
fees related to the modification of the revolving loan agreement
with People's Bank.
Prepaid expenses net of accumulated amortization increased to
$1,807,072 at March 31, 1997 from $1,632,689 at December 31,
1996. The increase is primarily attributable to the payment of
the second real estate tax installment for the 1996-1997 fiscal
year and the payment of leasing commissions.
Results of Operations
The Partnership incurred a net loss of $313,795 for the three-
month period ended March 31, 1997 compared with a net loss of
$674,733 for the three-month period March 31, 1996. The lower
net loss is primarily the result of an increase in rental income
due to increased occupancy in the North and South Towers, which
was partially offset by an increase in property operating
expenses.
Rental income totaled $1,248,859 for the three-month period ended
March 31, 1997 compared to $806,487 for the corresponding period
in 1996. The increase is primarily the result of increased
occupancy in the North and South Towers.
For the three-month periods ended March 31, 1997 and 1996,
interest income was $61,946 and $69,178, respectively. The
decrease is primarily due to lower average cash balances
maintained in 1997.
Other income was $125,770 and $34,102 for the three-month period
ended March 31, 1997 and 1996, respectively. 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 $684,591 for the three-
month period ended March 31, 1997 from $628,610 for the three-
month period ended March 31, 1996, primarily due to an increase
in repairs and maintenance, higher cleaning costs as a result of
the higher occupancy rate in both towers, and higher security
expenses in the North Tower. The increase was partially offset
by a reduction in real estate tax expense for both towers and a
decrease in security expenses for the South Tower.
Professional fees totaled $40,393 for the first quarter of 1997
compared with $48,867 for the 1996 period. The decrease is
attributable to lower engineering consulting fees associated with
the Gilbane litigation (See Part II, Item 1), and was partially
offset by an increase in legal fees also associated with the
Gilbane litigation.
For the three-month periods ended March 31, 1997 and 1996,
Partnership servicing fees were $63,353 and $21,352 respectively.
During the 1997 period, certain expenses incurred by the General
Partner, its affiliates, an unaffiliated third party service
provider in servicing the Partnership, which were voluntarily
absorbed by affiliates of the General Partner in prior periods,
were reimbursed to the General Partner and its affiliates.
General and administrative expenses were $26,432 for the three-
month period ended March 31, 1997, compared to $11,504 for the
three-month period ended March 31, 1996. The increase is
primarily 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 March 31,
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.
Feldman's 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. The time within
which creditors may file a complaint for a
determination that a debt of Feldman is not
dischargeable under certain provisions of the
Bankruptcy Code expired on May 5, 1997. Prior to such
expiration, the Partnership served a motion to extend
such time for 45 days so as to have an opportunity to
consider whether circumstances warranted its filing of
such a complaint. The outcome of such proceedings is
not predictable and, in light of various factors
considered by the Partnership, it cannot be expected
that a significant recovery will be made by the
Partnership if it continues its efforts to establish
non-dischargeability of the Partnership's judgment
claim against Feldman.
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 March 31, 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: May 14, 1997 BY: /s/ Rocco Andriola
Name: Rocco Andriola
Title: Director, Chief Financial Officer
and Vice President
Date: May 14, 1997 BY: /s/ Regina M. Hertl
Name: Regina M. Hertl
Title: President
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