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, 1996 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 0-15748 CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) Connecticut 06-1094176 (State of Organization) (I.R.S. Employer Identification No.) 900 Cottage Grove Road, South Building Bloomfield, Connecticut 06002 (Address of principal executive offices) Telephone Number: (860) 726-6000 Indicate by checkmark 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 1 PART I - FINANCIAL INFORMATION CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP (A CONNECTICUT LIMITED PARTNERSHIP) BALANCE SHEETS MARCH 31, DECEMBER 31, 1996 1995 ASSETS (UNAUDITED) (AUDITED) Property and improvements, at cost: Land and improvements $ 2,533,388 $ 2,533,388 Buildings 11,904,091 11,904,091 Tenant improvements 3,006,343 2,872,782 --------------- --------------- 17,443,822 17,310,261 Less accumulated depreciation 6,926,458 6,783,301 --------------- --------------- Net property and improvements 10,517,364 10,526,960 Equity investment in unconsolidated joint venture 2,684,879 2,679,392 Cash and cash equivalents 857,317 2,052,475 Accounts receivable (net of allowance of $8,889 in 1996 and $6,535 in 1995) 24,312 107,677 Prepaid expenses and other assets 42,533 27,971 Deferred charges, net 424,641 384,586 --------------- --------------- Total $ 14,551,046 $ 15,779,061 =============== =============== LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) Liabilities: Accounts payable and accrued expenses (including $35,630 in 1996 and $32,837 in 1995 due to affiliates) $ 258,833 $ 161,220 Tenant security deposits 87,857 86,457 Unearned income 55,651 61,649 --------------- --------------- Total liabilities 402,341 309,326 --------------- --------------- Partners' capital (deficit): General Partner: Capital contribution 1,000 1,000 Cumulative net income 166,928 165,478 Cumulative cash distributions (169,248) (167,140) ---------------- ---------------- (1,320) (662) ---------------- ---------------- Limited partners (39,236.25 Units): Capital contributions, net of offering costs 35,602,279 35,602,279 Cumulative net income 3,844,069 3,700,536 Cumulative cash distributions (25,296,323) (23,832,418) ---------------- ---------------- 14,150,025 15,470,397 --------------- --------------- Total partners' capital 14,148,705 15,469,735 --------------- --------------- Total $ 14,551,046 $ 15,779,061 =============== =============== The Notes to Consolidated Financial Statements are an integral part of these statements. 2 CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP (A CONNECTICUT LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (Unaudited) 1996 1995 ---- ---- Income: Base rental income $ 518,198 $ 542,356 Other operating income 53,763 48,430 Interest income 16,196 7,865 --------------- --------------- 588,157 598,651 --------------- --------------- Expenses: Property operating expenses 207,707 240,128 General and administrative 30,886 45,802 Fees and reimbursements to affiliates 41,696 59,082 Depreciation and amortization 168,372 187,438 --------------- --------------- 448,661 532,450 --------------- --------------- Net partnership operating income 139,496 66,201 Other income: Equity interest in joint venture net income 5,487 42,138 --------------- --------------- Net income $ 144,983 $ 108,339 =============== =============== Net income: General Partner $ 1,450 $ 1,083 Limited partners 143,533 107,256 --------------- --------------- $ 144,983 $ 108,339 =============== =============== Net income per Unit $ 3.66 $ 2.73 =============== =============== Cash distribution per Unit $ 37.31 $ 3.12 =============== =============== The Notes to Consolidated Financial Statements are an integral part of these statements. 3 CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP (A DELAWARE LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (Unaudited) 1996 1995 ---- ---- Cash flows from operating activities: Net income $ 144,983 $ 108,339 Adjustments to reconcile net income to net cash provided by operating activities: Deferred rent credits 5,955 11,837 Depreciation and amortization 168,372 187,438 Equity interest in joint venture net income (5,487) (42,138) Accounts receivable 83,365 57,354 Accounts payable 99,417 64,563 Other, net (19,160) 47,018 ---------------- --------------- Net cash provided by operating activities 477,445 434,411 --------------- --------------- Cash flows from investing activities: Purchases of property and improvements (135,365) (73,534) Payment of leasing commissions (71,225) (922) ---------------- --------------- Net cash used in investing activities (206,590) (74,456) ---------------- --------------- Cash flows from financing activities: Cash distribution to limited partners (1,463,905) (122,417) Cash distribution to General Partner (2,108) -- ---------------- ------------- Net cash used in financing activities (1,466,013) (122,417) ---------------- ---------------- Net increase (decrease) in cash and cash equivalents (1,195,158) 237,538 Cash and cash equivalents, beginning of year 2,052,475 368,015 --------------- --------------- Cash and cash equivalents, end of period $ 857,317 $ 605,553 =============== =============== The Notes to Consolidated Financial Statements are an integral part of these statements. 4 CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP (A CONNECTICUT LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (Unaudited) Readers of this quarterly report should refer to the CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP'S ("the Partnership") audited financial statements for the year ended December 31, 1995 which are included in the Partnership's 1995 Annual Report, as certain footnote disclosures which would substantially duplicate those contained in such audited financial statements have been omitted from this report. 1. BASIS OF ACCOUNTING AND SIGNIFICANT ACCOUNTING POLICIES A) BASIS OF PRESENTATION: The accompanying financial statements were prepared in accordance with generally accepted accounting principles, and reflect management's estimates and assumptions that affect the reported amounts. It is the opinion of management that the financial statements presented reflect all the adjustments necessary for a fair presentation of the financial condition and results of operations. B) RECENT ACCOUNTING PRONOUNCEMENT: In 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (the "Statement"). The Statement requires a writedown to fair value when long-lived assets to be held and used are impaired. Long-lived assets to be disposed of, including real estate held for sale, must be carried at the lower of cost or fair value less costs to sell. In addition, the Statement prohibits depreciation of long-lived assets to be disposed. The Partnership adopted this Statement in the first quarter of 1996; there was no effect on the Partnership's results of operations, liquidity and financial condition. C) CASH AND CASH EQUIVALENTS: Short-term investments with a maturity of three months or less at the time of purchase are reported as cash equivalents. 2. UNCONSOLIDATED JOINT VENTURE - SUMMARY INFORMATION The Partnership owns a 26.08% interest in the Westford Office Venture (the "Venture") which owns the Westford Corporate Center in Westford, Massachusetts. The general partner of the Partnership's joint venture partner is an affiliate of the General Partner. Venture operations information: Three Months Ended March 31, 1996 1995 Total income of venture $418,573 $498,665 Net income of venture $21,037 $161,572 Venture balance sheet information: March 31, December 31, 1996 1995 Total assets $11,295,030 $11,280,276 Total liabilities $745,716 $751,999 5 CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP (A CONNECTICUT LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS - CONTINUED (Unaudited) 3. DEFERRED CHARGES Deferred charges consist of the following: March 31, December 31, 1996 1995 Deferred leasing commissions $ 1,059,613 $ 988,388 Accumulated amortization (653,409) (628,194) ---------------- ---------------- 406,204 360,194 Deferred rent credits 18,437 24,392 --------------- --------------- $ 424,641 $ 384,586 =============== =============== 4. TRANSACTIONS WITH AFFILIATES Fees and other expenses incurred by the Partnership related to the General Partner or its affiliates are as follows: Three Months Ended Unpaid at March 31, March 31, --------- --------- 1996 1995 1996 ---- ---- ---- Partnership management fee (a) $ 14,876 $ 35,147 $ 14,876 Property management fee (b)(c) 12,061 12,885 8,203 Reimbursement (at cost) of out-of-pocket expenses 14,759 11,050 12,551 ------------- -------------- ------------- $ 41,696 $ 59,082 $ 35,630 ============= ============== ============= (a) Includes management fees attributable to the Partnership's 26.08% interest in the Westford Office Venture. (b) Does not include management fees of $3,504 and $7,350 attributable to the Partnership's 26.08% interest in the Westford Office Venture for the three months ended March 31, 1996 and 1995, respectively. (c) Does not include on-site property management fees earned by independent management companies of $25,720 and $26,555 for the three months ended March 31, 1996 and 1995, respectively. On-site property management services have been contracted by an affiliate of the General Partner on behalf of the Partnership and are paid directly by the Partnership to the third party companies. 5. SUBSEQUENT EVENTS On May 15, 1996, the Partnership paid a distribution of $182,451 to limited partners and $1,504 to the General Partner. 6 CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP (A CONNECTICUT LIMITED PARTNERSHIP) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES At March 31, 1996, the Partnership's cash and cash equivalents and the Partnership's share of cash and cash equivalents from the Westford Office Venture totaling $857,317 and $321,122, respectively, were available for working capital requirements, cash reserves and distributions to partners. The Partnership paid the first quarter 1996 cash distribution of $182,451 or $4.65 per Unit on May 15, 1996, representative of the quarter's adjusted cash from operations, inclusive of adjustments to cash reserves. The Partnership's distributions from operations for the remainder of the year should reflect actual operating results subject to changes in reserves for liabilities or leasing risk. Lake Point's adjusted cash from operations for the first quarter of 1996 totaled approximately $137,000 after $11,900 of capital improvements and a net $75,000 addition to cash reserves for leasing costs. Based on the level of leasing activity planned at the start of the year, 1996 tenant improvements and leasing commissions will approximate $312,000. Additionally, building improvements are budgeted at $68,000. Leasing costs and building improvements for the year are expected to be funded by cash from operations. The 1996 leasing plan includes renewals representing 23,799 square feet and new leases representing 7,565 square feet. During the first quarter, a new lease representing 2,160 square feet was executed. The planned renewal activity is anticipated to be completed by the end of the third quarter. The property was 100% occupied at March 31, 1996. Woodlands Plaza generated $28,000 of adjusted cash from operations for the first quarter of 1996 after approximately $193,000 of leasing costs and a reduction to cash reserves of $104,000. Mosby Yearbook, 14,048 square feet, signed a lease during December 1995 and took occupancy during February 1996. Leasing costs incurred during the first quarter was predominately the result of the Mosby lease. Lease expirations during 1996 comprise two tenants for a total of 16,590 square feet, or 23% of net rentable area. Both tenants are expected to renew. At Westford Corporate Center, adjusted cash from operations for the first quarter was $208,000 ($54,000 attributable to the Partnership's interest). The property remains 100% occupied. No capital expenditures have been planned for the year. During the quarter, a portion of the 1995 capital expenditures was reimbursed by the tenants. In addition, adjustments were made to reduce other income (and the portion of account receivable representing 1995 tenant reimbursement billings) based on the final calculation of actual 1995 tenant reimbursable operating expenses. As was the case in 1995, the 1996 estimated billings for tenant expense reimbursement are based on the annual budget. RESULTS OF OPERATIONS Generally, decreases in the income statement accounts are the result of the sales of the remaining buildings of Westside Industrials. Buildings #3, 4 and 5, sold on December 26, 1995, were fully occupied in the first quarter of 1995. Building #6, sold on April 27, 1995, was vacant in 1995. For the first quarter of 1995, Westside Industrials accounted for approximately $51,000 of rental income, $5,000 of other income, $29,000 of property operating expenses, $6,000 of general and administrative expenses and $12,000 of depreciation and amortization. The following analytical comments have been limited to the Partnership's remaining properties. Rental income increased by approximately $26,000 for the three months ended March 31, 1996, as compared with the same period in 1995. Rental income at Lake Point increased approximately $43,000 due to the timing of tenant occupancies during the first quarter of 1995 versus 1996, and the renewal of a tenant in the fourth quarter of 1995 with new terms, including a higher base rental rate and a lower expense reimbursement requirement. Offsetting the increase at Lake Point was a decrease at Woodlands Plaza due to the timing of tenant turnover. Space occupied by a tenant during the entire first quarter of 1995 was occupied for only a portion of the first quarter of 1996. 7 CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP (A CONNECTICUT LIMITED PARTNERSHIP) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The increase in other income for the three months ended March 31, 1996, as compared with the same period of 1995, was the result of the timing of tenant occupancies at Lake Point during the first quarter of 1995 versus 1996. New tenants taking occupancy during the first quarter of 1995 moved in later during the quarter than the new tenants taking occupancy during the first quarter of 1996. Interest income increased for the three months ended March 31, 1996, as compared with the same period in 1995, due to a higher average cash balance from the sale of the Westside buildings on December 26, 1995. The sales proceeds were distributed to limited partners on February 15, 1996. The decrease in general and administrative for the three months ended March 31, 1996, as compared with the same period of 1995, was the result of a net decrease in the provision for doubtful accounts. The decrease in fees and reimbursements to affiliates for the three months ended March 31, 1996, as compared with the same period of 1995, was due to a decrease in partnership management fees as a result of a drop in adjusted cash from operations for the quarter. Adjusted cash from operation for the first quarter of 1996 was impacted by a higher level of leasing costs. Depreciation and amortization decreased for the three months ended March 31, 1996, as compared with the same period in 1995, due to accelerated depreciation and amortization of assets associated with vacated tenants at Woodlands in 1995. Partially offsetting the decrease was an increase in depreciation and amortization at Lake Point due to new tenant improvements and leasing commissions incurred during the second quarter of 1995. The joint venture net income decreased for the three months ended March 31, 1996, as compared with the same period in 1995. Revenue declined as the result of a lower base rental rate for the replacement tenant of a tenant that vacated in December 1995. In addition, an adjustment was made in the first quarter of 1996 which reduced other income, as the actual recovery of operating expenses and taxes from tenants for 1995 was lower than estimated. Property operating expenses increased due to a harsh winter causing snow removal, maintenance and utility costs to increase. In addition, a landscaping project that was previously capitalized was reclassed to an expense account. 8 CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP (A CONNECTICUT LIMITED PARTNERSHIP) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) OCCUPANCY The following is a listing of approximate physical occupancy levels by quarter for the Partnership's investment properties: 1995 1996 ------------------------------------------------- ------- At 3/31 At 6/30 At 9/30 At 12/31 At 3/31 ------- ------- ------- -------- ------- 1. Woodlands Plaza II Office Building St. Louis, Missouri 94% 90% 79% 75% 95% 2. Westside Industrials (formerly Interpark) Phoenix, Arizona (a) 80% 100% 100% N/A N/A 3. Lake Point I, II, III Service Center Orlando, Florida 100% 100% 100% 98% 100% 4. Westford Corporate Center Westford, Massachusetts (b) 100% 100% 100% 100% 100% An "N/A" indicates the property was not owned by the Partnership at the end of the quarter. (a) On April 27, 1995, Westside Industrials sold building #6, reducing square footage from 63,080 to 50,480. The remaining three buildings were sold on December 26, 1995. (b) The partnership owns a 26.08% interest in the Westford Office Venture which owns the Westford Corporate Center. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 27 Financial Data Schedules (b) No Form 8-Ks were filed during the three months ended March 31, 1996. 9 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. CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP By: Connecticut General Realty Resources, Inc. - Third, General Partner Date: May 10, 1996 By: /s/ John D. Carey ------------ ----------------- John D. Carey, President and Controller (Principal Executive Officer) (Principal Accounting Officer) 10