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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, 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 0-13458
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
SEPTEMBER 30, DECEMBER 31,
1996 1995
ASSETS (UNAUDITED) (AUDITED)
Property and improvements, at cost:
Land and improvements $ 2,533,388 $ 2,533,388
Buildings 11,942,917 11,904,091
Tenant improvements 3,254,781 2,872,782
--------------- ---------------
17,731,086 17,310,261
Less accumulated depreciation 7,216,643 6,783,301
--------------- ---------------
Net property and improvements 10,514,443 10,526,960
Equity investment in unconsolidated joint venture 2,752,841 2,679,392
Cash and cash equivalents 785,315 2,052,475
Accounts receivable (net of allowance of $6,194
in 1996 and $6,535 in 1995) 32,000 107,677
Prepaid expenses and other assets 22,770 27,971
Deferred charges, net 478,638 384,586
--------------- ---------------
Total $ 14,586,007 $ 15,779,061
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Accounts payable and accrued expenses (including $66,017
in 1996 and $32,837 in 1995 due to affiliates) $ 355,311 $ 161,220
Tenant security deposits 74,621 86,457
Unearned income 43,626 61,649
--------------- ---------------
Total liabilities 473,558 309,326
--------------- ---------------
Partners' capital (deficit):
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 170,383 165,478
Cumulative cash distributions (172,031) (167,140)
--------------- ---------------
(648) (662)
--------------- ---------------
Limited partners (39,236.25 Units):
Capital contributions, net of offering costs 35,602,279 35,602,279
Cumulative net income 4,186,167 3,700,536
Cumulative cash distributions (25,675,349) (23,832,418)
--------------- ---------------
14,113,097 15,470,397
--------------- ---------------
Total partners' capital 14,112,449 15,469,735
--------------- ---------------
Total $ 14,586,007 $ 15,779,061
=============== ===============
The Notes to Financial Statements are an integral part of these statements.
2
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
Income:
Base rental income $ 568,209 $ 581,382 $ 1,649,325 $ 1,882,795
Other operating income 55,192 63,856 139,672 178,201
Interest income 8,293 22,372 32,748 51,348
------------- ------------- ------------- -------------
631,694 667,610 1,821,745 2,112,344
------------- ------------- ------------- -------------
Expenses:
Property operating expenses 247,849 248,364 678,011 736,453
General and administrative 27,428 26,359 76,637 98,862
Fees and reimbursements to affiliates 48,497 59,941 135,855 191,634
Depreciation and amortization 175,923 260,586 514,155 673,833
------------- ------------- ------------- -------------
499,697 595,250 1,404,658 1,700,782
------------- ------------- ------------- -------------
Net partnership operating income 131,997 72,360 417,087 411,562
Gain on sale of property -- -- -- 83,399
Other income:
Equity interest in joint venture net income 33,696 39,010 73,449 123,142
------------- ------------- ------------- -------------
Net income $ 165,693 $ 111,370 $ 490,536 $ 618,103
============= ============= ============= =============
Net income:
General Partner $ 1,657 $ 1,114 $ 4,905 $ 16,757
Limited partners 164,036 110,256 485,631 601,346
------------- ------------- ------------- -------------
$ 165,693 $ 111,370 $ 490,536 $ 618,103
============= ============= ============= =============
Net income per Unit $ 4.18 $ 2.82 $ 12.38 $ 15.33
============= ============= ============= =============
Cash distribution per Unit $ 5.01 $ 13.71 $ 46.97 $ 21.84
============= ============= ============= =============
The Notes to Financial Statements are an integral part of these statements.
3
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 490,536 $ 618,103
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of property -- (83,399)
Deferred rent credits 14,463 37,633
Depreciation and amortization 514,155 673,833
Equity interest in joint venture net income (73,449) (123,142)
Accounts receivable 75,677 79,506
Accounts payable 196,658 259,760
Other, net (24,658) 81,514
--------------- ---------------
Net cash provided by operating activities 1,193,382 1,543,808
--------------- ---------------
Cash flows from investing activities:
Purchases of property and improvements (422,629) (299,278)
Payment of leasing commissions (189,328) (72,557)
Proceeds from sale of property -- 365,400
Payment of closing costs related to sale of property -- (24,372)
Distribution from joint venture -- 521,600
--------------- ---------------
Net cash provided by (used in) investing activities (611,957) 490,793
--------------- ---------------
Cash flows from financing activities:
Cash distribution to limited partners (1,843,694) (857,484)
Cash distribution to General Partner (4,891) (8,036)
--------------- ---------------
Net cash used in financing activities (1,848,585) (865,520)
--------------- ---------------
Net increase (decrease) in cash and cash equivalents (1,267,160) 1,169,081
Cash and cash equivalents, beginning of year 2,052,475 368,015
--------------- ---------------
Cash and cash equivalents, end of period $ 785,315 $ 1,537,096
=============== ===============
The Notes to 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. Adoption of the Statement in the first quarter of
1996 had 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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
Total income of venture $ 465,585 $ 478,526 $ 1,346,746 $ 1,452,241
Net income of venture 129,203 149,575 281,630 472,168
Venture balance sheet information:
September 30, December 31,
1996 1995
Total assets $ 11,549,208 $ 11,280,276
Total liabilities 739,300 751,999
The Venture paid a distribution to the venturers of $2,000,000 in 1995, of
which the Partnership's share was $521,600.
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:
September 30, December 31,
1996 1995
Deferred leasing commissions $ 1,177,716 $ 988,388
Accumulated amortization (709,007) (628,194)
--------------- ----------------
468,709 360,194
Deferred rent credits 9,929 24,392
--------------- ---------------
$ 478,638 $ 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 Nine Months Ended Unpaid at
September 30, September 30, September 30,
------------- ------------ -------------
1996 1995 1996 1995 1996
---- ---- ---- ---- ----
Partnership management fee(a) $ 20,948 $ 23,727 $ 48,468 $ 103,203 $ 20,948
Property management fee (b)(c) 11,792 13,761 35,156 44,292 7,894
Reimbursement (at cost) of
out-of-pocket expenses 15,757 22,453 52,231 44,139 37,175
------------ ------------- ----------- ------------ ------------
$ 48,497 $ 59,941 $ 135,855 $ 191,634 $ 66,017
============ ============= =========== ============ ============
(a) Includes management fees attributable to the Partnership's 26.08% interest
in the Westford Office Venture.
(b) Does not include management fees attributable to the Partnership's 26.08%
interest in the Westford Office Venture of $3,501 and $3,613 for the three
months ended September 30, 1996 and 1995, respectively, and $10,499 and
$11,026 for the nine months ended September 30, 1996 and 1995,
respectively.
(c) Does not include on-site property management fees earned by independent
management companies of $24,411 and $28,108 for the three months ended
September 30, 1996 and 1995, respectively, and $74,170 and $87,909 for the
nine months ended September 30, 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 EVENT
On November 15, 1996, the Partnership paid a distribution of $215,407 to
limited partners and $2,118 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 September 30, 1996, the Partnership's cash and cash equivalents and the
Partnership's share of cash and cash equivalents from the Westford Office
Venture totaled $785,315 and $461,967, respectively. The Partnership's cash and
cash equivalents 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, the second quarter
cash distribution of $196,576 or $5.01 per Unit on August 15, 1996, and the
third quarter cash distribution of $215,407 or $5.49 per Unit on November 15,
1996. The cash distributions were representative of each 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 third quarter of 1996
totaled approximately $123,000 after $127,000 of leasing commissions and tenant
improvements, (including utilization of $20,000 of cash reserves to cover a
portion of the third quarter leasing cost). A scheduled plumbing project,
budgeted at $33,000, will be completed during the fourth quarter and
approximately $50,000 to $60,000 of leasing costs related to leases signed in
the third quarter will be incurred in the fourth quarter. The 1996 leasing plan
has been completed with no remaining leasing exposure for 1996. The property is
100% occupied at September 30, 1996. During the third quarter, one of the
property's major tenants assigned its lease to a successor company without the
Partnership's consent. The Partnership's property manager is currently reviewing
the situation to ensure that there is no major effect from this change on the
property's operations.
Woodlands Plaza generated $75,000 of adjusted cash from operations for the
third quarter of 1996 after approximately $19,500 of leasing costs and an
addition to cash reserves of $21,000. Two tenants, representing a total of
16,590 square feet, or 23% of net rentable area, renewed during the third
quarter, eliminating the remaining 1996 leasing exposure. The Partnership
estimated another $25,000 of expenditures in the fourth quarter to complete
tenant improvements for third quarter renewing tenants. The property was 98.5%
occupied at September 30, 1996.
At Westford Corporate Center, adjusted cash from operations for the third
quarter was $270,000 ($70,400 attributable to the Partnership's interest). The
property remains 100% occupied. No capital expenditures have been planned for
the year. During the first 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. 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 nine months
ended September 30, 1995, Westside Industrials accounted for approximately
$152,000 of rental income, $17,000 of other income, $81,000 of property
operating expenses, $15,000 of general and administrative expenses and $31,000
of depreciation and amortization. For the three months ended September 30, 1995,
Westside Industrials accounted for approximately $51,000 of rental income,
$7,000 of other income, $27,000 of property operating expenses, $3,000 of
general and administrative expenses and $9,000 of depreciation and amortization.
The following analytical comments have been limited to the Partnership's
remaining properties.
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)
Rental income increased for the three months and decreased for the nine
months ended September 30, 1996, as compared with the same periods in 1995. The
decrease for the nine months was the result of lease termination fees recorded
in the second quarter of 1995 for Woodlands Plaza. Exclusive of the lease
termination fees, rental income increased at Woodlands Plaza for the three and
nine months due to a rise in leased space. Rental income at Lake Point increased
approximately $16,000 and $82,000 for the three and nine months, respectively,
due to 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, and the timing of tenant occupancies during the first quarter of
1995 versus 1996.
The decrease in other income for the three and nine months ended September
30, 1996, as compared with the same periods of 1995, was primarily the result of
lower expense charge-back billings at Woodlands Plaza due to lower property tax
expense coupled with higher base years on 1995 leases.
Interest income decreased for the three and nine months ended September 30,
1996, as compared with the same periods of 1995, due to a lower average cash
balance and a slight decrease in interest rates from the prior year. For a
portion of 1995, the cash balance included funds received from the sale of
Westside building #6 and Woodlands Plaza lease termination fees.
Property operating expenses increased for the three and nine months ended
September 30, 1996. Cleaning and utility expenses increased at Lake Point due to
a change in a tenant's lease upon renewal to a "full service lease" effective
November 1, 1995, and at Woodlands Plaza due to higher occupancy. Offsetting the
expense increase at Woodlands Plaza for the nine months was a decrease in
property tax expense due to lower accrual estimates. Additionally, maintenance
and repairs and management fees decreased at Woodlands Plaza for the nine
months, primarily as a result of nonrecurring maintenance projects in 1995,
including painting of the vending lounge, and management fees earned on lease
termination fees in 1995. Property operating expenses increased for the three
months at Woodlands Plaza as a result of a $20,000 property tax refund received
in the third quarter of 1995.
The decrease in general and administrative for the nine months ended
September 30, 1996, as compared with the same period of 1995, was the result of
a net decrease in the provision for doubtful accounts coupled with a
nonrecurring appraisal fee for Woodlands Plaza in 1995.
The decrease in fees and reimbursements to affiliates for the three and
nine months ended September 30, 1996, as compared with the same periods of 1995,
was due to a decrease in the partnership management fee as a result of a drop in
adjusted cash from operations. Adjusted cash from operations was impacted by a
higher level of capital improvements and leasing costs in 1996 as well as lease
termination fees received in 1995.
Depreciation and amortization decreased for the three and nine months ended
September 30, 1996, as compared with the same periods in 1995, due primarily to
accelerated depreciation and amortization of assets associated with vacated
tenants at Woodlands Plaza 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 gain on sale was the result of the sale of building #6 of the Westside
property in April 1995.
The joint venture net income decreased for the three and nine months ended
September 30, 1996, as compared with the same periods in 1995. Revenue declined
as the result of a lower base rental rate for the replacement tenant of a tenant
that
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)
vacated in December 1995. In the first quarter of 1996, an adjustment was made
that reduced other income because the actual recovery of operating expenses and
taxes from tenants for 1995 was lower than estimated. Property operating
expenses in 1996 increased due to increase in snow removal costs, as a result of
a harsh winter, and costs for an HVAC project. In addition, a landscaping
project capitalized in 1995 was reclassed to an expense account in 1996.
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 At 6/30 At 9/30
1. Woodlands Plaza II
Office Building
St. Louis, Missouri 94% 90% 79% 75% 95% 99% 99%
2. Westside Industrials
(formerly Interpark)
Phoenix, Arizona (a) 80% 100% 100% N/A N/A N/A N/A
3. Lake Point I, II, III
Service Center
Orlando, Florida 100% 100% 100% 98% 100% 100% 100%
4. Westford Corporate Center
Westford, Massachusetts (b) 100% 100% 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.
9
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
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 September 30,
1996.
10
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: November 8, 1996 By: /s/ John D. Carey
---------------- -----------------
John D. Carey, President
(Principal Executive Officer)
Date: November 8, 1996 By: /s/ Josephine C. Donofrio
---------------- -------------------------
Josephine C. Donofrio, Controller
(Principal Accounting Officer)
11