SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|X| Preliminary proxy statement
|_| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
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(Name of Registrant as Specified in Its Charter)
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
|_| No fee required.
|X| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
The filing fee is based on the aggregate cash to be received by the
Registrant from the proposed sale of assets, which the Registrant
believes will be $14,554,000
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(4) Proposed maximum aggregate value of transaction:
$14,554,000
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(5) Total Fee paid:
$2,910.80
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|X|Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid: $2,910.80
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(2) Form, schedule or registration statement no.:
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(3) Filing party: CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED
PARTNERSHIP
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(4) Date filed: January 15, 1997
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Set forth the amount on which the filing fee is calculated and state how it
was determined.
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PRELIMINARY COPY
[LETTERHEAD OF CONNECTICUT GENERAL
EQUITY PROPERTIES-I LIMITED PARTNERSHIP]
March __, 1997
Dear Limited Partners:
Enclosed for your consideration are a Consent Solicitation Statement
dated March , 1997 (the "Solicitation Statement"), and a form for indicating
whether or not you wish to grant your consent (the "Consent Form") with respect
to the solicitation (the "Solicitation") by Connecticut General Realty
Resources, Inc.-Third, the general partner (the "General Partner") of
Connecticut General Equity Properties-I Limited Partnership (the "Partnership"),
on behalf of the Partnership of consents from registered holders ("Unitholders")
of units of limited partnership interests in the Partnership (the "Units") with
respect to (i) the proposed sale (the "Sale") of all of the real estate assets
of the Partnership to Glenborough Properties, L.P. pursuant to an Agreement of
Purchase and Sale dated as of January 10, 1997 (the "Purchase Agreement"), and
(ii) the dissolution and liquidation of the Partnership thereafter (the
"Liquidation").
Upon consummation of the Sale, the Partnership will receive $14,554,000
in cash consideration. After the consummation of the Sale, the Partnership
intends to liquidate and distribute to Unitholders (A) the net proceeds of the
Sale, after deducting expenses of the Sale (estimated at a maximum amount of
$33,000), together with (B) the net cash value of the remaining Partnership
assets. Based on the sum of items (A) and (B) above and by dividing this amount
by the number of Units issued and outstanding as of the Record Date (as defined
in the Solicitation Statement), the General Partner currently estimates that
such distribution will equal an average amount of approximately $386 per $1,000
Unit. There can, however, be no assurances that this will be the actual amount
distributed to Unitholders. Furthermore, as more fully described in the enclosed
Solicitation Statement, the actual amount distributed per Unit may vary from one
Unitholder to another depending on the date of the Unitholder's admission to the
Partnership. See the discussion under the caption entitled "LIQUIDATION OF
PARTNERSHIP; DISTRIBUTION OF PROCEEDS" in the enclosed Solicitation Statement.
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To date, based on the first admission date, the Partnership has
distributed $209 per $1,000 Unit from previous property sales and $508 per
$1,000 Unit from operations and cash reserves.
The General Partner of the Partnership recommends that Unitholders
consent to the Sale, the Purchase Agreement and the Liquidation.
The Solicitation will expire at 5:00 p.m., Eastern Standard Time, on
April , 1997 (the "Expiration Date"), unless the General Partner, in its sole
discretion, extends the period during which the Solicitation is open. Consent
Forms may be revoked at any time until the Expiration Date, but may not be
revoked thereafter.
If you desire to consent to the Sale, the Purchase Agreement and the
Liquidation, you should so indicate by marking the appropriate box on the
Consent Form included herewith, and completing, signing, dating and delivering
the Consent Form to the Partnership by mail in the self-addressed, postage-paid
envelope enclosed for that purpose, by overnight courier or by facsimile at the
address or facsimile number set forth below and on the Consent Form prior to
5:00 p.m., Eastern Standard Time, on the Expiration Date, all in accordance with
instructions contained in the Solicitation Statement and the Consent Form.
This letter merely summarizes certain of the terms of the Solicitation
as set forth in the Solicitation Statement and is qualified by the information
set forth therein; accordingly, you are urged to read the enclosed Solicitation
Statement in its entirety.
YOUR PROMPT ACTION IS REQUESTED. PLEASE NOTE THAT THE SOLICITATION WILL
EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE, UNLESS
EXTENDED BY THE GENERAL PARTNER IN ITS SOLE DISCRETION. ACCORDINGLY, IN ORDER TO
COUNT, THE ENCLOSED CONSENT FORM MUST BE RECEIVED BY THE PARTNERSHIP PRIOR TO
5:00 P.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE.
Any inquiries you may have with respect to the Solicitation or any
request for additional copies of the Solicitation documents should be addressed
to the Partnership at CGEP, 900 Cottage Grove Road, S-313, Hartford, Connecticut
06152-2313; Telephone
Number: (800) 255-5876; Facsimile Number: (860) 726-4166.
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Sincerely,
CONNECTICUT GENERAL EQUITY
PROPERTIES-I LIMITED PARTNERSHIP
By: Connecticut General Realty Resources,
Inc.-Third, General Partner
By: ___________________________________
John D. Carey, President
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PRELIMINARY COPY
CONNECTICUT GENERAL EQUITY PROPERTIES-I
LIMITED PARTNERSHIP
CONSENT SOLICITATION STATEMENT
INTRODUCTION
This Consent Solicitation Statement (this "Statement") is being
furnished to holders ("Unitholders") of record of units ("Units") of limited
partnership interests in Connecticut General Equity Properties-I Limited
Partnership (the "Partnership"), as of the close of business on March 3, 1997
(the "Record Date"), in connection with the solicitation (this "Solicitation")
of consents, upon the terms and subject to the conditions of this Statement and
the accompanying form of consent (the "Consent Form"), by Connecticut General
Realty Resources, Inc.-Third, the general partner of the Partnership (the
"General Partner"), on behalf of the Partnership, to (i) the proposed sale of
all of the real estate assets of the Partnership to Glenborough Properties, L.P.
(the "Purchaser") pursuant to an Agreement of Purchase and Sale dated as of
January 10, 1997, between the Partnership and the Purchaser (the "Purchase
Agreement"), the text (excluding the schedules and exhibits thereto) of which is
attached as Annex 1 hereto and incorporated herein by reference (the sale of all
of the Partnership's real estate assets and the other transactions contemplated
by the Purchase Agreement are hereinafter referred to collectively as the
"Sale"), and (ii) the dissolution and liquidation of the Partnership thereafter
(the "Liquidation").
Upon consummation of the Sale, the Partnership will receive $14,554,000
in cash consideration. After the consummation of the Sale, the Partnership
intends to liquidate and distribute to Unitholders (A) the net proceeds of the
Sale , after deducting expenses of the Sale (estimated at a maximum amount of
$33,000), together with (B) the net cash value of the remaining Partnership
assets. Based on the sum of items (A) and (B) above and by dividing this amount
by the number of Units issued and outstanding as of the Record Date, the General
Partner currently estimates that such distribution will equal an average amount
of approximately $386 per $1,000 Unit. There can, however, be no assurances that
this will be the actual amount distributed to Unitholders. Furthermore, as more
fully described under the caption entitled "LIQUIDATION OF PARTNERSHIP;
DISTRIBUTION OF PROCEEDS" the actual amount distributed per Unit may vary from
one Unitholder to another depending on the date of the Unitholder's admission to
the Partnership.
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To date, based on the first admission date, the Partnership has
distributed $209 per $1,000 Unit from previous property sales and $508 per
$1,000 Unit from operations and cash reserves. See "LIQUIDATION OF PARTNERSHIP;
DISTRIBUTION OF PROCEEDS."
This Statement, and the enclosed Consent Form are being first mailed to
Unitholders of the Partnership on or about March , 1997.
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This Statement, including the Purchase Agreement attached hereto,
contain important information which should be read before any decision is made
with respect to the Solicitation. All statements in this Statement are qualified
in their entirety by reference to the Purchase Agreement attached hereto as
Annex 1 (excluding schedules and exhibits). Unitholders are urged also to read
the text of the Purchase Agreement.
The General Partner of the Partnership recommends that Unitholders
consent to the Sale, the Purchase Agreement and the Liquidation.
THIS SOLICITATION FOR CONSENT FORMS WILL EXPIRE AT 5:00 P.M. EASTERN
STANDARD TIME, ON APRIL , 1997 (THE "EXPIRATION DATE"), UNLESS EXTENDED BY THE
GENERAL PARTNER IN ITS SOLE DISCRETION. CONSENT FORMS MAY BE REVOKED AT ANY TIME
UNTIL THE EXPIRATION DATE, BUT MAY NOT BE REVOKED THEREAFTER.
Questions and requests for assistance or additional copies of the
Solicitation documents may be directed to the General Partner at the
Partnership's principal executive office at 900 Cottage Grove Road, S-313,
Hartford, Connecticut 06152-2313; Telephone Number: (800) 255-5876; Facsimile
Number: (860) 726-4166.
DESCRIPTION OF THE TERMS OF THE SOLICITATION
Purpose of Solicitation
Upon the terms and subject to the conditions set forth in this
Statement and in the accompanying Consent Form, the General Partner on behalf of
the Partnership is soliciting consents from Unitholders for the purpose of
approving the proposed Sale, the Purchase Agreement and the Liquidation. See
"DESCRIPTION OF THE TERMS OF THE PURCHASE AGREEMENT", "DESCRIPTION OF THE SALE",
and "LIQUIDATION OF PARTNERSHIP; USE OF PROCEEDS."
The cost of preparing, assembling, printing and mailing this Statement
and the enclosed Consent Form, and the cost of soliciting Consent Forms, will be
borne by the Partnership. Solicitation of the Consent Forms will be made
initially by mail. In addition to solicitation by mail, Consent Forms may also
be solicited personally, by telephone, by facsimile or by telegraph by
directors, officers or other regular employees of the General Partner. No
additional compensation will be paid to directors, officers or other regular
employees of the General Partner for such services.
Expiration Date; Extension; Amendment
This Statement is furnished in connection with the solicitation of
Consent Forms by the General Partner to the Sale as contemplated by the Purchase
Agreement and the Liquidation. This Solicitation for Consent Forms will expire
at 5:00 p.m., Eastern Standard Time, on the
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Expiration Date, unless extended by the General Partner in its sole discretion.
The Partnership expressly reserves the right, in the sole discretion of the
General Partner, (i) to extend the Expiration Date, from time to time, until the
Requisite Consents (as defined below) have been obtained, and (ii) to amend, at
any time or from time to time before the Requisite Consents are obtained, the
terms of this Solicitation. As promptly as practicable following any such
extension or amendment, notice thereof shall be given by the Partnership to each
Unitholder in writing.
Record Date; Requisite Consents
The Partnership has fixed the close of business on March 3, 1997 (the
"Record Date"), as the Record Date for determining the Unitholders entitled to
notice of and to consent to the Sale, the Purchase Agreement and the
Liquidation. Only Unitholders on the Record Date or their duly designated
proxies may execute and deliver a Consent Form. As of the Record Date, there
were 39,037 whole Units outstanding held by approximately 3,665 holders of
record, and 199.25 fractional Units outstanding held by approximately 418
holders of record. Holders of whole units are entitled to one vote per whole
Unit, and holders of fractional Units are entitled to a proportional vote equal
to their fractional interest.
The Sale and the Liquidation must be approved by at least a majority of
the issued and outstanding Units. Unitholder consent is required in connection
with the Sale and the Liquidation because the Partnership Agreement dated as of
November 14, 1983, pursuant to which the Partnership was formed (as amended,
supplemented or otherwise modified from time to time, the "Partnership
Agreement") requires the consent (the "Requisite Consents") of the holders of a
majority of the issued and outstanding Units, for both (i) the disposition of
"substantially all of" the Partnership's assets, and (ii) the dissolution and
liquidation of the Partnership.
Units represented by "broker non-votes" (i.e., units held in record
name by brokers or nominees as to which (i) an executed Consent Form has not
been received from the beneficial owners or persons entitled to Consent, (ii)
the broker or nominee does not have discretionary voting authority under
applicable rules or the instrument under which it serves in such capacity, or
(iii) the recordholder has indicated on the Consent Form or has otherwise
notified the Partnership that it does not have authority to vote the Units with
respect to the Sale, the Purchase Agreement and the Liquidation) will not be
included in the vote totals, and therefore will have no effect on this
Solicitation.
If the Partnership fails to receive the Requisite Consents on or before
the Expiration Date, or any extension thereof, then the Partnership will
continue with its present objective of maximizing the return to Unitholders by
actively managing and operating its properties over a short holding period. In
that event, the Partnership's properties will be sold individually as previously
planned. See "DESCRIPTION OF THE SALE."
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Consent Procedures
UNITHOLDERS WHO DESIRE TO CONSENT TO THE SALE, THE PURCHASE AGREEMENT
AND THE LIQUIDATION SHOULD SO INDICATE BY MARKING THE APPROPRIATE BOX ON THE
CONSENT FORM INCLUDED HEREWITH, AND COMPLETING, SIGNING, DATING AND DELIVERING
THE CONSENT FORM TO THE PARTNERSHIP BY MAIL IN THE SELF-ADDRESSED, POSTAGE-PAID
ENVELOPE ENCLOSED FOR THAT PURPOSE, BY OVERNIGHT COURIER OR BY FACSIMILE AT THE
ADDRESS OR FACSIMILE NUMBER SET FORTH ABOVE AND ON THE CONSENT FORM, ALL IN
ACCORDANCE WITH THE INSTRUCTIONS CONTAINED HEREIN AND THEREIN. A UNITHOLDER MUST
CONSENT TO EACH OF THE SALE, THE PURCHASE AGREEMENT AND THE LIQUIDATION IF IT
WISHES TO GRANT ITS CONSENT.
All Consent Forms that are properly completed, signed and delivered to
the Partnership and not properly revoked (See "Revocation of Instructions"
below) prior to the Expiration Date, will be given effect in accordance with the
specifications thereof. If a Consent Form is delivered and none of the "CONSENT"
nor the "DOES NOT CONSENT" nor the "ABSTAIN" box is marked with respect to the
Sale, the Purchase Agreement and the Liquidation, but the Consent Form is
otherwise properly completed and signed, the Unitholder will be deemed to have
consented to each of the Sale, the Purchase Agreement and the Liquidation.
Consent Forms should be executed in exactly the same manner as the
name(s) in which ownership of the Units is registered. If the Units to which a
Consent Form relates are held by two or more joint holders, all such holders
should sign the Consent Form. If a Consent Form is signed by a trustee, partner,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary, agency or representative capacity, such
person must so indicate when signing and must submit with the Consent Form
evidence satisfactory to the Partnership of authority to execute the Consent
Form.
The execution and delivery of a Consent Form will not affect a
Unitholder's right to sell or transfer the Units. All Consent Forms received by
the Partnership (and not properly revoked) prior to the Expiration Date will be
effective notwithstanding a record transfer of such Units subsequent to the
Record Date, unless the Unitholder revokes such Consent Form prior to 5:00 p.m.,
Eastern Standard Time, on the Expiration Date by following the procedures set
forth under "Revocation of Instructions" below.
All questions as to the validity, form and eligibility (including time
of receipt) regarding the consent procedures will be determined by the General
Partner in its sole discretion, which determination will be conclusive and
binding. The Partnership reserves the right to reject any or all Consent Forms
that are not in proper form. The Partnership also reserves the right to waive
any defects, irregularities or conditions of delivery as to particular Consent
Forms. Unless waived, all such defects or irregularities in connection with
deliveries
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of Consent Forms must be cured within such time as the General Partner
determines. Neither the General Partner nor any of its affiliates or any other
persons shall be under any duty to give any notification of any such defects or
irregularities or waivers, nor shall any of them incur any liability for failure
to give such notification. Deliveries of Consent Forms will not be deemed to
have been made until any irregularities or defects therein have been cured or
waived. The interpretations of the terms and conditions of this Solicitation by
the General Partner shall be conclusive and binding.
Revocation of Instructions
Any Unitholder who has delivered a Consent Form to the Partnership may
revoke the instructions set forth in such Consent Form by delivering to the
General Partner a written notice of revocation prior to 5:00 p.m., Eastern
Standard Time, on the Expiration Date. In order to be effective, a notice of
revocation of the instructions set forth in a Consent Form must (i) contain the
name of the person who delivered the Consent Form, (ii) be in the form of a
subsequent Consent Form marked either as "CONSENT" or "DOES NOT CONSENT" or
"ABSTAIN", as the case may be, (iii) be signed by the Unitholder thereof in the
same manner as the original signature on the Consent Form, and (iv) be received
by the General Partner prior to 5:00 p.m., Eastern Standard Time, on the
Expiration Date at its address set forth on the Consent Form. A purported notice
of revocation that lacks any of the required information, is dispatched to an
improper address or is not received in a timely manner will not be effective to
revoke the instructions set forth in a Consent Form previously given. A
revocation of the instructions set forth in a Consent Form can only be
accomplished in accordance with the foregoing procedures. No Unitholder may
revoke the instructions set forth in a Consent Form after 5:00 p.m., Eastern
Standard Time, on the Expiration Date.
No Dissenting Unitholders' Rights
Under the Connecticut Uniform Limited Partnership Act and under the
Partnership Agreement, Unitholders do not have dissenter's appraisal rights in
connection with the Sale and the Purchase Agreement.
DESCRIPTION OF THE TERMS OF THE PURCHASE AGREEMENT
Parties to the Purchase Agreement
The Purchase Agreement has been entered into between the Partnership,
Westford Office Venture, and CIGNA Income Realty-I Limited Partnership, a
Delaware limited partnership ("CIR"), as sellers, and the Purchaser, as
purchaser. Pursuant to the Purchase Agreement, the Partnership, Westford Office
Venture and CIR have each agreed to sell all of their respective real estate
assets to the Purchaser.
The Partnership is a Connecticut limited partnership with its principal
executive office at 900 Cottage Grove Road, S-313, Hartford, Connecticut
06152-2313; Telephone Number (860) 726-6000. For a description of the
Partnership and its properties see the Partnership's
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Annual Report on Form 10-K for the fiscal year ended December 31, 1995 (the
"Partnership's 10-K"), a copy of which is being mailed to Unitholders together
with this Statement and is incorporated herein by reference.
Westford Office Venture is a Connecticut general partnership between
the Partnership and CIR which owns the Westford Corporate Center in Westford,
Massachusetts. The Partnership owns a 26.08% interest in the Westford Office
Venture. CIR owns the remaining 73.92% interest in the Westford Office Venture.
The Purchaser is a California limited partnership with an address at
400 South El Camino Real, San Mateo, California 94402-1708; Telephone Number:
(415) 343-9300. To the Partnership's knowledge, Glenborough Realty Trust Inc.
("Glenborough") is the 1% general partner and 90.6% limited partner of the
Purchaser. Glenborough is a self-administered and self-managed real estate
investment trust with a diversified portfolio of properties including
industrial, office, multi-family, retail and hotel properties. In addition,
three associated companies of Glenborough control similarly diversified
portfolios. Combined, the portfolios encompass approximately 11 million square
feet and are spread among 22 states throughout the country.
Assets Transferred
The Purchase Agreement provides that at the closing of the Sale (the
"Closing") the Partnership will transfer and convey to the Purchaser all of the
real estate assets of the Partnership, which consist primarily of the Woodlands
Plaza Office Building in St. Louis, Missouri, the Lake Point I, II, III Service
Center in Orlando, Florida, and the Partnership's joint venture interest in the
Westford Corporate Center in Westford, Massachusetts, and certain other related
assets (the "Purchased Assets"). The Purchase Agreement also provides that the
Purchaser is acquiring all of the real estate assets of CIR, including CIR's
joint venture interest in the Westford Corporate Center (the "CIR Assets"). The
Purchaser's obligation to purchase the Purchased Assets is conditioned upon the
simultaneous purchase of the CIR Assets because the Purchaser would not agree to
purchase the Partnership's properties without simultaneously purchasing CIR's
properties. The Purchaser's acquisition strategy is to purchase all of the
Purchased Assets and the CIR Assets, thereby providing it with ownership of a
mix of property types, locations, leasing risk, rates of return, etc.; a
purchase of either the Partnership Assets or the CIR Assets, without the other,
would not have provided an acceptable mix from the Purchaser's standpoint, nor
would it afford the necessary critical mass of asset value to justify the
transaction. The General Partner has recommended approval of the Sale, including
this condition, because it believes that the terms of the Sale are beneficial to
the Partnership and its Unitholders. The general partner of CIR is an affiliate
of the General Partner of the Partnership. The General Partner believes that the
total purchase price for all of the Purchased Assets and the CIR Assets is
apportioned fairly among the separate properties based upon such properties'
market values, that there is no disproportionate advantage either to the
Partnership or to CIR, and any possible conflict between the interests of the
Partnership and CIR have been avoided.
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The Purchaser is not acquiring any of the accounts receivable relating
to the Purchased Assets existing as of the Closing Date or cash reserves or
other similar assets of the Partnership such as prepaid expenses, if any, in an
approximate aggregate net amount of $636,000 (based on the Partnership's
financial statements set forth in the Partnership's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996, including the Partnership's
interest in the Westford Office Venture; there has been no material change in
the financial condition of the Partnership since September 30, 1996). Any
remaining accounts receivable and accounts payable of the Partnership relating
to the Purchased Assets after the Sale will be transferred as of the Closing
Date to the General Partner for an amount equal to the face value of such
accounts receivable less the amount of such accounts payable being assumed by
the General Partner. The net cash from the sale of these assets to the General
Partner will be distributed to Unitholders along with the net proceeds of the
Sale (after deducting expenses of the Sale in the maximum amount of
approximately $33,000). See "LIQUIDATION OF PARTNERSHIP; DISTRIBUTION OF
PROCEEDS."
Purchase Price
The purchase price for the Purchased Assets is $14,554,000, $145,540 of
which has been deposited by the Purchaser in escrow with Chicago Title Company,
and the remainder of which will be paid in cash at the Closing. In addition, the
Purchaser has agreed to pay all closing costs relating to the Sale, including a
brokerage fee payable to Koll General Partner Services ("Koll") in an
approximate amount of $247,631, except for the Partnership's legal fees and
similar expenses, which the General Partner estimates to be no more than
approximately $33,000.
The purchase price represents an apportionment, based upon the
respective market values of the Purchased Assets and the CIR Assets (determined
in the manner described below), of the aggregate purchase price for all of the
Purchased Assets and the CIR Assets of $44,204,000. This method of apportionment
was used to avoid any conflict between the respective interests of the
Partnership and CIR.
The purchase price for the Purchased Assets is based upon a percentage
of the aggregate market values of the Purchased Assets as determined by
valuations conducted by CIGNA Investments Inc.("CII"), an affiliate of the
General Partner and the general partner of CIR, and the management company that
operates the Purchased Assets and the CIR Assets. CII has had 50 years'
experience in the evaluation and management of commercial real estate and
currently manages properties with an aggregate value estimated at more than $5.2
billion throughout the United States. As part of its management services, CII
performs valuations of the Partnership's properties on an annual basis. For a
description of the relevant negotiations between the Partnership and the
Purchaser regarding the purchase price, see "DESCRIPTION OF THE SALE."
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Assumption of Liabilities
From and after the Closing Date, the Purchaser will assume all
obligations of the Partnership relating to the Purchased Assets, including
obligations under leases.
Closing and Conditions to Closing
The Purchase Agreement provides that the Closing will occur on or
before February 17, 1997; provided, however, that if the Partnership and CIR
have not by that date received the approval of the Partnership's Unitholders and
CIR's unitholders, respectively, to the transactions contemplated by the
Purchase Agreement, the date of the Closing will be extended until the 5th
calendar day after such approvals have been obtained (the "Closing Date").
Under the Purchase Agreement, the consummation of the Sale is subject
to the satisfaction of the following conditions: (i) the approval of the Sale
and the Liquidation by the Board of Directors of the General Partner and the
Board of Directors of the general partner of CIR (which approvals were given
unanimously by both boards on January 24, 1997), (ii) the requisite approval by
the Partnership's Unitholders and the unitholders of CIR, (iii) the simultaneous
consummation of the purchase by the Purchaser of the CIR Assets, (iv) the
Purchaser's satisfactory review of real estate surveys and title reports with
respect to the Purchased Assets and the CIR Assets, (v) the issuance to the
Purchaser by a title company of an Owner's Title Insurance Policy for each of
the properties contained in the Purchased Assets and the CIR Assets, and (vi)
the delivery by the Partnership, Westford Office Venture and CIR to the
Purchaser of appropriate instruments of conveyance and certain documents
relating to the Purchased Assets and the CIR Assets. The Purchaser is obligated
to procure the real estate surveys and title reports referred to in clause (iv)
above by February 10, 1997, and to review such documents and state any
objections it may have within 10 days after receipt thereof. It is not a
condition to the Closing that the Purchaser obtain financing.
Representations and Warranties; Covenants; Engineering and Environmental Audit
The Purchase Agreement contains representations and warranties with
respect to the Partnership and the Purchased Assets which are generally
customary in a transaction of this type. The Partnership has also covenanted,
among other things, to grant to the Purchaser access to the Purchased Assets
during the period prior to the Closing, and to allow the Purchaser to conduct an
engineering audit and a Phase I environmental audit of the Purchased Assets.
Such audits are not, however, conditions to the Closing. The Purchaser has
agreed to indemnify the Partnership for all liabilities, damages and expenses
imposed upon the Partnership in connection with such audits and the entry upon
the Partnership's properties by the Purchaser's employees, agents and
independent contractors.
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Indemnification
The Partnership has agreed to indemnify the Purchaser from and against
all costs, charges and expenses related to (i) the ownership, management and
operation of the Purchased Assets prior to the Closing Date, and (ii) the breach
of any of the representations and warranties of the Partnership contained in the
Purchase Agreement. In order for the Purchaser to receive indemnification for
breach of certain of the representations and warranties of the Partnership, the
Purchaser must make a written claim for such
indemnification within one year of the Closing. The General Partner shall be
solely responsible for any indemnity obligation arising under the Purchase
Agreement relating to the breach of any of the representations and warranties of
the Partnership contained in the Purchase Agreement.
The Purchaser has agreed to indemnify the Partnership from and against
all costs, charges and expenses related to the ownership, management and
operation of the Purchased Assets after the Closing Date.
Termination
The Purchase Agreement will terminate if (i) prior to the Closing, all
or a substantial portion of the Purchased Assets or the CIR Assets are condemned
and the Purchaser elects to cancel the Agreement; (ii) prior to the Closing, all
or a substantial portion of the Purchased Assets or the CIR Assets are damaged,
and any party elects to cancel the Agreement; (iii) the Purchaser does not
receive written notice within 90 days after the date of the Purchase Agreement
that the Sale and the other transactions contemplated by the Purchase Agreement
have been approved by the Unitholders and the holders of units in CIR, and the
Purchaser elects to cancel the Purchase Agreement; or (iv) the Sale and the
other transactions contemplated by the Purchase Agreement are not consummated on
or before the Closing Date (unless such failure to Close is due to some act or
omission of the Partnership, in which case, the Purchaser may extend the Closing
Date, or the Closing Date is extended by the mutual agreement of the parties).
The Purchase Agreement provides that, if the Partnership complies with
all covenants and conditions contained in the Purchase Agreement and is ready,
wiling and able to convey the Purchased Assets to the Purchaser, and the
Purchaser fails to consummate the Sale (i.e., is in default), then the
Partnership shall be entitled to retain the escrow deposit of $145,540 plus
interest thereon, and also to receive from the Purchaser the additional sum of
$145,540, as liquidated damages. If that occurs, the
-10-
Partnership will distribute the $291,080 (after deducting expenses incurred by
the Partnership in respect of the Sale) to Unitholders, and will continue with
its present objective of maximizing the return to Unitholders by actively
managing and operating its properties over a shore holding period. In that
event, the Partnership's properties will be sold individually as previously
planned. See "DESCRIPTION OF THE SALE."
Regulatory Requirements
There are no federal or state regulatory requirements which must be
complied with, nor are there any such governmental consents or approvals that
must be obtained, in connection with the Sale and the other transactions
contemplated by the Purchase Agreement. There are certain regulatory
requirements under the laws of the State of Connecticut which must be complied
with in connection with the Liquidation, principally the winding up of the
affairs of the Partnership and the filing of a Certificate of Cancellation
(cancelling the Partnership's Certificate of Limited Partnership) with the
Secretary of State of Connecticut in accordance with the Connecticut Uniform
Limited Partnership Act. These regulatory requirements will be complied with at
the time of the Liquidation.
DESCRIPTION OF THE SALE
-11-
Background and Reasons for the Transaction
On November 8, 1996, the Partnership received an unsolicited offer from
Koll, on behalf of the Purchaser, to purchase all of the assets and liabilities
of the Partnership as reflected in the Partnership's June 30, 1996 balance sheet
for a purchase price of $13,000,000. The proposed purchase price in the
Purchaser's original offer to purchase all of the assets and liabilities of the
Partnership was equal to ninety percent (90%) of the Partnership's net asset
value as of December 31, 1995 (before deducting expenses relating to the Sale,
and adjusted for the sale of the Partnership's Westside Industrial Property
located in Phoenix, Arizona) as determined by the Partnership, based, in part,
on valuations provided by CII and on an outside appraisal of the Westford
Corporate Center. The Purchaser's offer to purchase the assets of the
Partnership was conditioned upon the simultaneous purchase of the assets of CIR.
The following discussion of two offers to purchase Units made by two
related entities is included because the second of these offers was made at the
time that the Partnership was involved in negotiations with Koll. On or about
May 28, 1996, Everest Investors 3, LLC ("Everest 3"), solicited Unitholders to
purchase up to 1,925 of the Units at a purchase price of $160 per Unit, less the
amount of any distributions per Unit, if any, made by the Partnership to
Unitholders after April 30, 1996. This offer expired by its terms on June 28,
1996 and, to the Partnership's knowledge, Unitholders sold 784.8 Units to
Everest 3 pursuant to this offer.
On or about November 18, 1996, Everest Realty Investors, LLC, a California
limited liability company and affiliate of Everest 3 ("Everest"), initiated a
tender offer to Unitholders to purchase up to 15,695 of the Units at a purchase
price of $275 per Unit, less the amount of any distributions per Unit, if any,
made by the Partnership to Unitholders after any distribution from operations
for the third quarter of 1996 and less any Partnership transfer fees (the
"Everest Offer"). The Partnership recommended that Unitholders reject the
Everest Offer primarily for two reasons: (1) the Partnership believed that the
price of $275 per Unit, less certain amounts, was inadequate, and (2) the
Everest Offer was limited to 15,695 Units, representing only approximately forty
percent (40%) of outstanding Units. In reaching its determination, the
Partnership considered a number of factors, including that the Partnership was
negotiating with the Purchaser for the possible sale of all of the real estate
assets of the Partnership for a purchase price which would result in Unitholders
receiving an amount significantly greater than the Everest Offer price of $275
per Unit.
-12-
Throughout this period, the General Partner, on behalf of the
Partnership, engaged in negotiations with the Purchaser regarding the proposed
sale of the Partnership's assets. During these negotiations, the Purchaser
agreed (1) to limit the purchase to the Partnership's real estate assets rather
than all assets and liabilities, (2) to increase its purchase price from its
original offer of $13,000,000 for all of the Partnership's assets and
liabilities to $14,554,000 for the Partnership's real estate assets only (the
increase in the purchase price was based on market valuations conducted by CII
as of December, 1996), and (3) to assume certain transaction costs, including a
brokerage fee payable to Koll in an approximate amount of $247,631.
On December 10, 1996, the Partnership and the Purchaser executed a
letter of intent setting forth an agreement in principle on the terms and
conditions of the Sale. On or about December 12, 1996, the Partnership sent a
second letter to Unitholders informing them that a letter of intent had been
executed with the Purchaser (and enclosing a copy of such letter of intent) and
once again recommending the rejection of the Everest Offer. The Everest Offer
expired by its terms on December 17, 1996, and, to the Partnership's knowledge,
Unitholders sold 441 Units to Everest pursuant to the Everest Offer.
On January 10, 1997, the Partnership and the Purchaser entered into the
Purchase Agreement. Under the terms of the Purchase Agreement, the Purchaser
will purchase all of the real estate assets of the Partnership for an aggregate
purchase price of $14,554,000.
At its inception in 1983, the Partnership estimated that its properties
would be sold after a period of ownership of nine to twelve years. The
Partnership has previously sold the Courtyard Shopping Center in Villa Park,
Illinois, on January 11, 1990, and the Westside Industrial Property in Phoenix,
Arizona, which was sold in parts, the last such sale having been completed on
December 26, 1995. Of the Partnership's remaining properties, the Woodlands
Plaza Office Building in St. Louis, Missouri, has been held by the Partnership
for 12 years and has been previously identified by the General Partner as a
candidate for a possible sale in 1997, and the Lake Point I, II and III Service
Center in Orlando, Florida, has been held by the Partnership for 10 years and
has been previously identified by the General Partner as a candidate for a
possible sale in 1997 or 1998. The General Partner has previously identified the
Westford Corporate Center in Westford, Massachusetts, which has been held by the
Westford Office Venture for 10 years, for sale in 1999 or 2000.
After acquisition, the Partnership's properties experienced a decrease
in market value due to a substantial weakening of the markets for commercial
real estate where these properties are located and United States real estate
markets in general. Although the markets
-13-
in which these properties operate and real estate markets in general have
improved from the bottom of the cycle which occurred after their acquisition by
the Partnership, these markets have proven to be volatile over time.
Furthermore, it is an optimal time-frame for the sale of the Partnership's
properties because (1) the operations of all the properties are relatively
stable, (2) the real estate capital markets are active, (3) Woodlands Plaza
Office Building and Lake Point I, II, III Service Center have relatively low
leasing risk with major tenant rollover scheduled in 3 to 5 years, and (4)
because the Westford Corporate Center has two tenants, each accounting for fifty
percent of the space, and the leases of both tenants expire at the same time in
1999, the property would have to be held until the current tenants renew or new
leases are signed to realize the maximum value of this property. While the
Partnership anticipates that it would be able to find tenants to lease the space
in the Westford Corporate Center given the present state of the market, there is
a risk that it would take time and/or an investment in improvements in order to
do so. As previously discussed in the Partnership's 10-K, if the Westford
Corporate Center is not sold at this time, it will mostly likely have to be held
by the Westford Office Venture until after 1999 or 2000 at which time new leases
for this property are expected to be obtained. In addition, In addition, the
owner of an adjacent parcel, formerly occupied by a gas station, has requested
permission from the Partnership to permit to access the property to install up
to three shallow monitoring wells to collect groundwater samples to determine
whether contamination has occurred from the migration of gasoline spilled on
the adjacent parcel.
LIQUIDATION OF PARTNERSHIP; DISTRIBUTION OF PROCEEDS
The General Partner estimates that the net proceeds from the Sale
(after deduction of estimated expenses of the Sale in a maximum amount of
$33,000) when added to the net cash from the sale of the remaining assets of the
Partnership to the General Partner in an estimated minimum amount of
approximately $636,000 (based on the Partnership's financial statements set
forth in the Partnership's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, including the Partnership's interest in the Westford Office
Venture; there has been no material change in the financial condition of the
Partnership since September 30, 1996), will be approximately $15,100,000, or an
average amount of $386 per Unit. This amount was determined by adding the net
proceeds of the Sale together with the net cash of the sale of the remaining
assets of the Partnership and dividing this amount by the number of issued and
outstanding Units.
The actual amount distributed per Unit may vary from one Unitholder to
another depending on the date of the Unitholder's admission to the Partnership.
The date of admission to the Partnership may cause the actual amounts
-14-
distributed per Unit to vary among Unitholders because Unitholders with
different admission dates will have different capital account balances. During
the Partnership's offering period limited partners were admitted to the
Partnership from time to time on a monthly basis. During this period, cash
distributions were made and income and loss were allocated to limited partner's
capital accounts beginning as of their respective admission dates. In general,
the earlier a limited partner was admitted to the Partnership, the lower the
amount of the liquidation distribution will be because such limited partner's
capital account balance will have been reduced by more cash distributions (which
were not fully offset by corresponding income allocations) and therefore will be
lower than the capital accounts of limited partners admitted at later dates. For
example, for a limited partner admitted on May 14, 1984, the earliest possible
admission date, the minimum amount of the distribution will be approximately
$368, whereas for a limited partner admitted on December 2, 1985, the latest
possible admission date, the maximum amount of the distribution will be
approximately $419.
Any remaining accounts receivable and accounts payable of the
Partnership relating to the Purchased Assets after the Sale will be transferred
as of the Closing Date to the General Partner for an amount equal to the face
value of such accounts receivable less the amount of such accounts payable being
assumed by the General Partner.
The Partnership intends to liquidate within sixty (60) days after the
consummation of the Sale and distribute the net proceeds of the Sale , along
with the net cash value of the remaining assets of the Partnership to the
Unitholders. There can be no assurances, however, that the liquidation of the
Partnership will take place within the estimated time frame. It is possible that
it will take more time than was initially estimated to wind up the affairs of
the Partnership and dissolve, but it is the Partnership's intention to do so
within the sixty-day period or soon thereafter.
After the Closing and pending the distribution to Unitholders, the
proceeds of the Sale will be held by the Partnership in short-term,
interest-bearing liquid investments. The Partnership has an investment account
with Fleet Bank, pursuant to which Fleet Bank in its discretion invests the
Partnership's funds on a daily basis in repurchase agreements.
General Partner Recommendation
On January 24, 1997, the Board of Directors of the General Partner
unanimously approved the Sale to the Purchaser pursuant to the Purchase
Agreement and the Liquidation, and directed that the Sale and the Liquidation be
submitted to the Partnership's Unitholders for consent with the recommendation
that Unitholders consent. The principal factors taken into consideration by the
Board in approving the Sale and the Liquidation and in recommending that
Unitholders consent thereto was that the Board concluded that the purchase price
-15-
was a fair price to the Partnership and that it was an optimal time frame to
sell all of the Purchased Assets . The Board concluded it was a fair price based
on a number of factors. First, the purchase price was arrived at by arm's length
negotiations, during the course of which the Purchaser agreed to increase the
price from $13,000,000 for all of the Partnership's assets and liabilities to
$14,554,000 for only the Partnership's real estate assets (the Partnership's
non-real estate assets, including accounts receivable and cash and cash
equivalents on hand, will be liquidated and the proceeds distributed to
Unitholders). Second, in addition to paying the increased purchase price, the
Purchaser agreed to pay Koll's brokerage fee of approximately $247,631 and to
assume all closing costs, except for the Partnership's legal fees and expenses
which are estimated at a maximum amount of $33,000. Third, because the
Purchaser's obligation to purchase under the Purchase Agreement is subject to
fewer conditions than is often the case, the General Partner believes that it is
far less likely that the Sale would not be consummated than is often the case.
For example, the Sale is not subject to conditions such as an environmental
review of the properties, or the ability of the Purchaser to obtain satisfactory
financing. Fourth, the purchase price represents a high percentage of market
value (as determined by CII). Finally, the sale of all of the Partnership's
properties at one time reduces transaction costs and administrative expenses, as
well as future market risks. Although the sale of all of the Partnership's
properties at one time reduces transaction costs, it is possible that if the
properties were sold on an individual basis, the Partnership could realize a
higher or lower return.
The timing of the Sale is advantageous, the Board concluded, because
(1) the markets in which the Partnership's properties operate have recovered
substantially from the bottom of the cycle which occurred after their
acquisition by the Partnership, (2) all of the Partnership's properties have
relatively stable operations, (3) real estate capital markets are active, (4)
Woodlands Plaza Office Building and Lake Point I, II, III Service Center have
relatively low leasing risk with major tenant rollover scheduled in 3 to 5 years
and the Partnership had previously identified both of these properties for a
possible sale in 1997, (5) as previously noted in the Partnership's 10-K, if the
Westford Corporate Center is not sold at this time, such property would most
likely have to be held by the Westford Office Venture until after 1999 or 2000
at which time new leases for this property are expected to be obtained, and (6)
the sale of all of the Partnership's properties is within the original projected
ownership time-frame of the Partnership.
For the foregoing reasons, the General Partner of the Partnership has
approved the Sale and the Liquidation and recommends that Unitholders consent to
the Sale, the Purchase Agreement and the subsequent Liquidation.
ACCOUNTING TREATMENT
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The transactions contemplated by the Purchase Agreement will be
accounted for as a sale of assets. The Partnership estimates that the Sale of
the Purchased Assets will result in a tax loss of approximately $3,600,000 to
the Partnership or approximately $91 per $1,000 Unit.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain federal income tax
consequences arising from the consummation of the Sale and Liquidation. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury regulations thereunder, administrative rulings, and judicial
authority, all as of the date of this Statement. All of the foregoing are
subject to change, and any such change could affect the continuing accuracy of
this summary. Due to the complexity of the tax issues involved, this summary
does not discuss all aspects of federal income taxation that may be relevant to
a particular Unitholder in light of such Unitholder's specific circumstances or
to certain types of Unitholders subject to special treatment under the federal
income tax laws, such as foreign persons, dealers in securities, banks,
insurance companies and tax-exempt entities, nor does it describe any aspects of
state, local, foreign or other tax laws. UNITHOLDERS SHOULD CONSULT THEIR
RESPECTIVE TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO EACH SUCH
UNITHOLDER OF THE SALE AND LIQUIDATION.
Under current federal income tax law, a partnership is not a taxable
entity and incurs no federal income tax liability. Instead, each partner is
required to take into account his, her or its allocable share of the
partnership's items of income, gain, loss, deduction and credit in computing
his, her or its own income tax liability. The distribution of cash by a
partnership generally is not a separate taxable event. The foregoing tax
treatment, however, depends entirely upon the Partnership's classification as a
partnership (rather than an association taxable as a corporation) for federal
income tax purposes. Although no independent investigation has been made for
this purpose, the summary herein assumes, and the General Partner believes, that
the Partnership has been and will continue to be properly classified as a
partnership for federal income tax purposes. Since its formation, the
Partnership has taken the federal income tax reporting position that it is a
partnership for federal income tax purposes.
Sale of Assets
The General Partner expects that the Sale will result in a net loss to
the Partnership for federal income tax purposes. The loss from the Sale will be
allocated among the Unitholders in accordance with the Partnership Agreement and
will decrease each Unitholder's adjusted basis in its respective Units. Because
the Partnership uses an accrual-method of accounting, the transfer of the
Partnership's accounts receivable and accounts payable to the General Partner in
exchange for their "net cash value" (i.e., the excess of the face amount of the
accounts receivable over the face amount of the accounts payable) should not
have federal
-17-
income tax consequences to the Unitholders since the accounts receivable and
accounts payable should already have been taken into account for federal income
tax purposes when they accrued.
The Purchased Assets are real property used in a trade or business. The
character of gain or loss from the sale or exchange of such property is governed
by Section 1231 of the Code ("Section 1231"). Gain or loss from the sale of
Section 1231 assets is generally treated as capital gain or ordinary loss. As
noted above, the General Partner expects the Sale to result in a net loss for
federal income tax purposes, which will be characterized as a Section 1231 loss.
A Unitholder's allocable share of the Section 1231 loss will be combined with
any other Section 1231 gains or losses of such Unitholder, regardless of whether
such gains or losses relate to the Unitholder's investment in the Partnership,
for the taxable year of the Sale. If, after combining all of a Unitholder's
Section 1231 gains and losses from all activities and investments in a taxable
year, such Unitholder has a net Section 1231 gain, such gain generally will be
treated as a capital gain and can be reduced by capital losses (if any) realized
by a Unitholder from the sale of exchange of capital assets. On the other hand,
a net Section 1231 loss generally is treated as an ordinary loss. In addition, a
net Section 1231 gain (that would otherwise be treated as capital gain) may be
converted into ordinary income if, in any of the five previous taxable years, a
Unitholder had a net Section 1231 loss which was not offset by a succeeding
year's net Section 1231 gain. Thus, the tax treatment to each Unitholder from
the Sale will depend on the overall tax situation of each such Unitholder.
Section 469 of the Code provides special rules for the treatment of
income and loss realized by individuals, trusts, estates and certain
corporations from "passive activities." A passive activity, for these purposes,
generally includes any rental activity. Therefore, a Unitholder's distributive
share of Partnership income or loss is generally treated as income or loss from
a passive activity. Losses from passive activities, to the extent they exceed
income from all such activities (exclusive of interest, dividends, royalties and
similar items, which are referred to as "portfolio income"), generally may not
be deducted against other income of the taxpayer, including wages, active
business income and portfolio income. Such losses, referred to as "suspended
losses," are carried forward and treated as deductions from passive activities
in later taxable years. However, if a taxpayer disposes of its entire interest
in a passive activity in a fully taxable transaction (i.e., in which all
realized gains and losses are recognized) during the taxable year, any suspended
losses may be used to offset both passive and nonpassive income. The
Partnership's sale of all its assets and subsequent liquidation and distribution
of available cash to the Unitholders generally will constitute a complete
disposition by a Unitholder of its interest in the Partnership. As a result, the
excess of (x) the sum of any loss from the Partnership for the taxable year in
which the Sale occurs, suspended losses carried over from prior years and any
loss realized on the Sale, over (y) net income or gain for such taxable year
from any other passive activities of the Unitholder will not be treated as a
loss from a passive activity. Thus, any loss reportable by a Unitholder as a
result of the transactions contemplated herein and any suspended losses, if any,
from prior taxable years attributable to the Partnership can be used by a
Unitholder to offset passive and nonpassive income.
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Distributions of Cash in Liquidation
Except as discussed below, a distribution of cash by the Partnership to
the Unitholders would not be a separate taxable event.
Upon the distribution of cash by the Partnership pursuant to the
Liquidation, a Unitholder will recognize additional gain to the extent that the
sum of the cash received is greater than the adjusted tax basis in its Units. To
the extent that the sum of the cash so received is less than a Unitholder's
adjusted tax basis in its Units, a Unitholder will recognize additional loss.
The Partnership has no Partnership nonrecourse liabilities, a reduction in which
would otherwise be treated as the payment of additional cash. In general, a
Unitholder's basis in its Units is equal to the amount of cash contributed by
the Unitholder to the Partnership or the amount paid by the Unitholder for Units
if purchased other than from the Partnership, (a) increased by income and gain
allocated to such Units and by the Unitholder's proportionate share of
Partnership liabilities and (b) decreased by losses allocated and distributions
made with respect to such Units. For this purpose, a Unitholder's adjusted basis
in Units would be increased by its share of any gain, and reduced by its share
of any loss, recognized upon the disposition of the Partnership's assets. Gain
or loss recognized by a Unitholder from distributions in liquidation of the
Partnership generally will be characterized as capital gain or loss. Such
capital gain or loss will be long-term if the Unitholder's holding period for
its Units is more than one year. In addition, capital losses can be used by a
Unitholder to reduce net Section 1231 gains that have not otherwise been
recharacterized as ordinary income and net capital gains from all other sources
that are realized in the taxable year.
Characterization of Transaction as a Sale by Unitholders of their Units
It is possible that the Internal Revenue Service (the "IRS") will
challenge the federal income tax treatment of the transaction as discussed above
under "Sale of Assets" and "Distributions of Cash in Liquidation." In some
cases, the courts have held that a partnership's sale of its assets as a "going
concern" or an "ongoing business" should be treated as a sale of the partners'
interest in the partnership. However, it is not clear for this purpose what
constitutes a "going concern" or an "ongoing business," particularly in
situations in which the partnership does not sell all of its assets. A sale of a
partner's interest in a partnership is generally treated as a sale of a capital
asset with gain or loss thereon characterized as capital gain or capital loss.
If the IRS were to assert that the Sale and Liquidation constituted a sale by
the Unitholders of their Units, and a court were to uphold such determination,
any loss realized by a Unitholder on such sale would be a capital loss, and
would only be available to offset capital gain and, in the case of non-corporate
Unitholders, $3,000 of ordinary income. Subject to certain limitations, excess
capital losses can be used to offset capital gain and ordinary income in other
taxable years. For federal income tax purposes, the General Partner intends to
report the Sale and Liquidation as a sale of the Partnership's assets followed
by a distribution of the cash proceeds in liquidation of the Partnership. There
can be, however, no assurance that this treatment will not be challenged by the
IRS, and if so challenged, that this treatment would prevail before a court.
-19-
SELECTED FINANCIAL DATA
The following selected historical financial data for the Partnership
for each of the years in the five year period ended December 31, 1995, have been
derived from the Partnership's financial statements, which have been audited by
Price Waterhouse LLP, independent accountants. The data for the quarters ended
September 30, 1995, and September 30, 1996 have been derived from unaudited
financial statements appearing in the Partnership's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996, and which, in the opinion of the
General Partner, includes all adjustments, consisting only of normal
adjustments, necessary for the fair statement of the results for the unaudited
periods. The selected financial data are qualified in their entirety by and
should be read in conjunction with the Partnership's financial statements and
related notes appearing in the Partnership's 10-K, and in the Partnership's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996.
Quarter Ended Fiscal Year Ended December 31 (a)
------------- ---------------------------------
September September
30, 1996 30, 1995 1995 1994 1993 1992 1991
Total assets (b) $14,586,007 $15,917,214 $15,779,061 $15,886,403 $18,841,802 $23,231,572
$18,116,233
Total income 1,821,745 2,112,344 2,761,823 2,338,050 2,600,369 2,649,750 2,736,543
Net income (loss)
(c) 490,536 618,103 1,173,396 (232,492) 406,434 (2,651,499) 230,926
Net income (loss)
per Unit (c) 12.38 15.33 29.34 (7.08) 10.26 (66.90) 5.83
Cash distributions to
limited partners (d)
215,407 393,149 1,250,072 1,890,411 1,174,738 1,727,963 1,040,549
Cash distributions
per Unit (d) 5.49 10.02 31.86 48.18 29.94 44.04 26.52
(a) Reference is made to Notes to Financial Statements in the Partnership's
10-K for a description of payments to the State of Connecticut on behalf
of limited partners. These payments are charged to limited partners
capital accounts and have not been included as part of the above
presentation.
(b) Total assets includes Partnership's equity investment in the joint
venture. See the Notes to Financial Statements in the Partnership's 10-K
for a description of the joint venture.
(c) Included in 1995 is a gain on sale of property of $464,957 ($449,775 to
limited partners or $11.46 per Unit). Included in 1994 and 1992 are losses
due to impairment of assets of $835,000 ($21.07 per Unit) and $2,791,040
($70.42 per Unit), respectively. Included in 1994 is a gain on sale of
property of $245,873 ($195,721 to limited partners or $4.99 per Unit).
-20-
(d) Quarterly distributions are paid 45 days following the end of the calendar
quarter. Cash distributions to limited partners in 1995 include proceeds
from the sale of Building #6 of Westside Industrials. Included in 1994 are
the proceeds from the sale of Buildings #1 and #2 of Westside Industrials.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Outstanding Voting Securities; Record Date
As of the Record Date, there were 39,037 whole Units and
199.25 fractional Units outstanding, which represent all of the voting
securities of the Partnership. Each whole Unit is entitled to one vote, and each
fractional Unit is entitled to a proportional vote equal to the fractional
interest. Only Unitholders of record as of the Record Date, will be entitled to
notice of and to execute and deliver a Consent Form.
Security Ownership of Certain
Beneficial Owners and Management
The following table sets forth, as of the Record Date, the
beneficial ownership of Units of the Partnership and the shares of common stock
of CIGNA Corporation, the indirect parent corporation of the General Partner, of
the individual directors and officers of the General Partner, and all of the
directors and officers as a group.
CIGNA
Units Shares
Beneficially Beneficially Percent
Name and Address Owned (a) Owned (b) of Class
R. Bruce Albro (c) 0 9,192 *
900 Cottage Grove Road
Hartford, Connecticut 06152
J. Robert Andrews (d) 0 1,660 *
900 Cottage Grove Road
Hartford, Connecticut 06152
David C. Scheinerman (e) 0 2,152.846 *
900 Cottage Grove Road
Hartford, Connecticut 06152
John D. Carey (d) 0 154 *
900 Cottage Grove Road
Hartford, Connecticut 06152
Verne E. Blodgett (d) 0 1,015 *
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900 Cottage Grove Road
Hartford, Connecticut 06152
Joseph W. Springman (f) 0 3,484 *
900 Cottage Grove Road
Hartford, Connecticut 06152
David C. Kopp (d) 0 1,115 *
900 Cottage Grove Road
Hartford, Connecticut 06152
Kenneth Garrett (d) 0 100 *
900 Cottage Grove Road
Hartford, Connecticut 06152
Josephine Donofrio 0 0 *
900 Cottage Grove Road
Hartford, Connecticut 06152
All directors and
officers group (9)(g) 0 18,872.544 *
* Less than 1% of class
(a) No officer or director of the General Partner possesses a right to acquire
beneficial ownership of additional Units of interest of the Partnership.
(b) The directors and officers have sole voting and investment power over all
the shares of CIGNA common stock they own beneficially.
(c) Shares beneficially owned includes options to acquire 6,056 shares and
1,318 shares which are restricted as to disposition.
(d) Shares beneficially owned are restricted as to disposition.
(e) Shares beneficially owned includes options to acquire 345 shares and 1,599
shares which are restricted as to disposition.
(f) Shares beneficially owned includes options to acquire 1,035 shares and
1,660 shares which are restricted as to disposition.
(g) Shares beneficially owned by directors and officers include 7,436 shares
of CIGNA common stock which may be acquired upon exercise of stock options
and 8,621 shares which are restricted as to disposition.
-22-
There are no Unitholders holding five percent (5%) or more of the
Partnership's issued and outstanding Units. None of the Partnership, CIR, the
General Partner, the general partner of CIR, nor any of the officers and
directors of the General Partner have any relationship with the Purchaser.
MARKET FOR UNITS; DISTRIBUTIONS
There is no established public trading market for the Units.
The Partnership declared quarterly cash distributions to
Unitholders for 1991 through the third quarter of 1996 as set forth in the
following table:
Cash Distribution Per Unit
Qtr. Date Paid(a) 1996 1995 1994 1993 1992 1991
- ---- ------------ ---- ---- ---- ---- ---- ----
1st May 15 $ 4.65 $ 5.01 $ 7.50 $ 8.10 $ 12.51 $ 6.50
2nd August 15 5.01 13.71(c) 32.01(b) 7.50 12.51 6.50
3rd November 15 5.49 10.02(d) 5.01 6.99 12.51 6.51
4th February 15 N/A 37.31(e) 3.12 3.66 7.35 6.51
--------- ----- --------- ------- --------
$15.15 $66.05 $47.64 $26.25 $ 44.88 $26.02
(a) Quarterly distributions are paid 45 days following the end of the calendar quarter.
(b) Includes $27.00 per Unit from a partial sale of Westside Industrials.
(c) Includes $8.70 per Unit from a partial sale of Westside Industrials.
(d) Includes $4.84 per Unit from a lease termination fee received at Woodlands Plaza II.
(e) Includes $28.31 per Unit from the sale of the remainder of Westside Industrials.
OTHER MATTERS
There are no other matters other than as set forth in this
Statement for which Consent Forms are being solicited.
INCORPORATION BY REFERENCE
The following documents, which have been previously filed by
the Partnership with the Securities and Exchange Commission, are hereby
incorporated herein by reference:
(1) The Partnership's 10-K;
(2) The information set forth in Part 1 of the
Partnership's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996; and
-23-
(3) All other reports filed pursuant to Sections 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, since the end of the
fiscal year covered by the Annual Report referred to in (1) above.
Pursuant to the regulations of the Securities and Exchange
Commission, the Partnership will provide to each Unitholder of record on the
Record Date, without charge and upon written or oral request of such person,
copies all reports (excluding exhibits) filed pursuant to Sections 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, since the end of the
fiscal year covered by the Annual Report in (1) above.
A copy of the Partnership's 10-K, and a copy of the
Partnership's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996, are being sent to Unitholders concurrently with this Statement.
CONNECTICUT GENERAL EQUITY
PROPERTIES-I LIMITED PARTNERSHIP
By: Connecticut General Realty
Resources, Inc.-Third, General Partner
By:
-----------------------------------
John D. Carey, President
March , 1997
-24-
CONNECTICUT GENERAL EQUITY
PROPERTIES-I LIMITED PARTNERSHIP
CONSENT FORM REGARDING SALE OF ASSETS, PURCHASE AGREEMENT AND
LIQUIDATION
The undersigned, a holder of units ("Units") of limited partnership
interests in Connecticut General Equity Properties-I Limited Partnership (the
"Partnership"), hereby
o CONSENTS o DOES NOT CONSENT oABSTAINS
(i) to the sale of all of the real estate assets of the Partnership (the "Sale")
pursuant to an Agreement of Purchase and Sale dated as of January 10, 1997,
between the Partnership, Westford Office Venture, CIGNA Income Realty-I Limited
Partnership, and Glenborough Properties, L.P. (the "Purchase Agreement"), (ii)
the Purchase Agreement, and (iii) the dissolution and liquidation of the
Partnership (the "Liquidation") as described in the Partnership's Consent
Solicitation Statement dated March , 1997 (the "Solicitation Statement"). The
units represented by this Consent will be voted in accordance with the election
specified by the holder named below. If no election is specified, any otherwise
properly completed and signed consent form will be deemed to be a consent to
each of the Sale, the Purchase Agreement and the Liquidation. By execution
hereof, the undersigned acknowledges receipt of the Solicitation Statement.
This Consent is solicited by the General Partner on behalf of the
Partnership.
The Partnership reserves the right to waive any conditions to, or
modify the terms of, the Solicitation (as defined in the Solicitation
Statement).
A Consent Form given, if effective, will be binding upon the holder of
the Units who gives such Consent Form and upon any subsequent transferees of
such Units, subject only to revocation by the delivery of a written notice of
revocation by the Unitholder, executed and filed in the manner and within the
time period described in the Solicitation Statement.
In order to count, this Consent Form must be received by the
Partnership prior to 5:00 p.m., Eastern Standard Time, on April , 1997.
This fully completed and executed consent form should be sent by mail
in the self-addressed, postage-paid envelope enclosed for that purpose, or by
overnight courier, or by facsimile, to the Partnership, as follows:
If delivered by mail or by courier, to: If delivered by telecopier, to:
CGEP CGEP
900 Cottage Grove Road, S-313 Facsimile Number: (860) 726-4166
Hartford, Connecticut 06152-2313 Telephone Number: (800) 255-5876
THIS CONSENT FORM CONTINUES AND
MUST BE SIGNED ON THE SECOND PAGE
CONNECTICUT GENERAL EQUITY
PROPERTIES-I LIMITED PARTNERSHIP
Please sign your name below exactly in the same manner as the name(s)
in which ownership of the Units is registered. When Units are held by two or
more joint holders, all such holders should sign. When signing as
attorney-in-fact, executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by the
President or other authorized officer. If a partnership, please sign in
partnership name by an authorized person.
Date: _____________, 1997
Signature
Name (Please Print)
Signature if held jointly
Name (Please Print)
-2-
Annex 1
AGREEMENT OF PURCHASE AND SALE
BETWEEN
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
AND
CONNECTICUT GENERAL EQUITY PROPERTIES-I
LIMITED PARTNERSHIP
AND
WESTFORD OFFICE VENTURE,
AS SELLERS,
AND
GLENBOROUGH PROPERTIES, L.P.,
AS PURCHASER
==============================================================================
## NY28/MCKEJ/75515.21
TABLE OF CONTENTS
Page
1. Property...................................................................................... 1
2. Purchase Price and Deposits................................................................... 2
3. Failure to Close.............................................................................. 3
4. Closing and Transfer of Title................................................................. 3
4.1 Closing.............................................................................. 3
4.2 Closing Procedure.................................................................... 4
4.3 Purchaser's Performance.............................................................. 6
4.4 Evidence of Authority; Miscellaneous................................................. 6
5. Prorations of Rents, Taxes, etc............................................................... 7
6. Purchaser Inspections, Contingencies, and Elections........................................... 9
6.1 Document Inspection.................................................................. 9
6.2 Physical Inspection.................................................................. 10
6.3 Survey Contingency................................................................... 11
6.4 Title Contingency.................................................................... 11
6.5 Election With Respect to Contracts and Agreements.................................... 13
7. Loss due to Casualty or Condemnation.......................................................... 13
7.1 Loss Due to Condemnation............................................................. 13
7.2 Loss Due to Casualty................................................................. 14
8. Operation of the Property..................................................................... 14
9. Broker........................................................................................ 15
10. Representations and Warranties................................................................ 16
10.1 Limitations on Representations and Warranties........................................ 16
10.2 Representations and Warranties....................................................... 16
10.3 Seller's Knowledge................................................................... 19
10.4 Survival............................................................................. 20
11. Indemnification............................................................................... 20
11.1 The Sellers' Indemnification......................................................... 20
11.2 Purchaser's Indemnification.......................................................... 21
12. Assignment.................................................................................... 22
13. Notices....................................................................................... 22
i
## NY28/MCKEJ/75515.21
14. Expenses...................................................................................... 23
15. Miscellaneous................................................................................. 24
15.1 Successors and Assigns............................................................... 24
15.2 Gender............................................................................... 24
15.3 Captions............................................................................. 24
15.4 Construction......................................................................... 24
15.5 Entire Agreement..................................................................... 24
15.6 Recording............................................................................ 24
15.7 No Continuance....................................................................... 24
15.8 Time of Essence...................................................................... 25
15.9 Original Document.................................................................... 25
15.10 Governing Law........................................................................ 25
15.11 Acceptance of Offer.................................................................. 25
15.12 Confidentiality...................................................................... 25
15.13 Surviving Covenants.................................................................. 25
15.14 Approval............................................................................. 26
ii
## NY28/MCKEJ/75515.21
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE is made by and between CIGNA
INCOME REALTY-I LIMITED PARTNERSHIP, a Delaware limited partnership ("CIR"),
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP, a Connecticut
limited partnership ("CGEP"), and WESTFORD OFFICE VENTURE, a Connecticut general
partnership ("WOV") (each, individually a "Seller," and collectively, the
"Sellers"), and GLENBOROUGH PROPERTIES, L.P., a California limited partnership
("Purchaser"), as of the "Effective Date" (as defined below).
1. PROPERTY
Each Seller hereby agrees to sell, and Purchaser hereby agrees to buy,
all of the following property: (a) the real property described in Schedule 1.1
hereto and indicated on said Schedule 1.1 as being sold by such Seller, together
with all and singular easements, covenants, agreements, rights, privileges,
tenements, hereditaments and appurtenances thereunto now or hereafter belonging
or appertaining thereto (each, a "Land Parcel," and collectively, the "Land");
(b) any and all buildings (collectively, the "Buildings") and other improvements
of every kind located in, on and over each Land Parcel (with respect to a
particular Land Parcel, "Individual Improvements," and collectively, the
"Improvements"); (c) all tenant leases relating to each of the Individual
Improvements, being the leases referred to respectively on the Rent Rolls
attached hereto as Schedule 1.2 and all guarantees thereof, (each Land Parcel,
together with the Individual Improvements and the tenant leases related thereto,
is referred to herein as an "Individual Real Property"; all such Individual Real
Properties are referred to herein, collectively, as the "Real Property"); and
(d) all fixtures, equipment, and other personal property, both tangible and
intangible, including, but not limited to, the contracts listed in Schedule 1.3,
excluding only the leasing brokerage agreements, property management agreements
and other contracts that Purchaser elects to exclude by written notice to the
Sellers pursuant to Section 6.5 hereof, and the following items, to the extent
of the respective Seller's right, title and interest thereto, and to the extent
assignable by such Seller without obtaining the consent thereto by any
third-party: all general intangibles relating to design, development, operation,
management and use of each Individual Real Property, all certificates of
occupancy, zoning variances, building, use or other permits, approvals,
authorizations, licenses and consents obtained from any governmental authority
in connection with the development, use, operation or management of each
Individual Real Property, any telephone numbers and listings used in connection
with the operation of each Individual Real Property and the leasing thereof,
goodwill in connection with each Individual Real Property, any data concerning
tenants of each Individual Real Property to the extent related to the Real
Property, all soils tests, engineering reports, architectural drawings, plans
and specifications relating to all or any portion of each Individual Real
Property, all payment and performance bonds or warranties or guarantees relating
to each Individual Real Property, trade names, fictitious business names, and
other source and business identifiers, including, but not limited to, the names
set forth on Schedule 1.4 hereto, owned by each Seller and contained in or
related to any of the
Individual Improvements being sold by such Seller (with respect to an Individual
Real Property, "Individual Personal Property," and collectively, the "Personal
Property") (collectively, an Individual Real Property and the Individual
Personal Property related thereto are sometimes referred to herein as an
"Individual Property;" collectively, the Real Property and the Personal Property
are sometimes referred to herein as the "Property").
It shall be a condition to Purchaser's obligation hereunder to purchase any
Individual Property that each Seller shall consummate the Closing with respect
to all of its Individual Properties.
2. PURCHASE PRICE AND DEPOSITS
The purchase price which the Purchaser agrees to pay and the Sellers
agree to accept for the Property shall be the sum of Forty-Four Million Two
Hundred Four Thousand Dollars ($44,204,000) (hereinafter referred to as the
'Purchase Price"), subject to adjustment as provided in Section 5 hereof,
payable as follows:
(a) An earnest money deposit (the "Deposit") of Four Hundred Forty-Two
Thousand Forty Dollars ($442,040), in cash, to be deposited by Purchaser with
Chicago Title Company at its office located at 700 South Flower Street, Suite
900, Los Angeles, California 90017 (the "Escrow Holder"), upon delivery of three
(3) executed copies of this Agreement to Escrow Holder, such amount to be held
in escrow by Escrow Holder, and deposited in an interest-bearing account; and
(b) The balance of the Purchase Price shall be paid at time of Closing
by wire transfer of immediately available Federal funds through the Escrow
Holder, with the transfer of funds to the Sellers to be completed on the day of
the Closing.
Schedule 2.1 hereto indicates the portion of the Purchase Price
allocated to each Individual Property (each, an "Allocated Portion of the
Purchase Price"); provided, however, that such allocation is intended solely for
the purposes of Paragraphs 6.4, 7.1 and 7.2 hereof and Exhibit A-3 hereto, and
shall not be binding on the parties for any other purpose whatsoever.
The Deposit and all interest earned thereon shall be paid to the
Sellers at the Closing as a credit against the Purchase Price. Purchaser shall
provide the Escrow Holder with its tax identification number, and all interest
shall be for Purchaser's account for tax purposes.
In addition to the Deposit, Purchaser shall deposit three (3) fully
executed copies of this Agreement with the Escrow Holder immediately after all
parties have executed it. The date of such deposit shall be acknowledged by the
Escrow Holder on all copies, and such date shall be the "Effective Date" of this
Agreement. The Escrow Holder shall retain one copy of this Agreement and deliver
one copy hereof to each of Purchaser and the Sellers.
3. FAILURE TO CLOSE
IF THE SELLERS HAVE COMPLIED WITH ALL OF THE COVENANTS AND CONDITIONS
CONTAINED HEREIN AND ARE READY, WILLING AND ABLE TO CONVEY THE PROPERTY IN
ACCORDANCE WITH THIS AGREEMENT AND PURCHASER FAILS TO CONSUMMATE THIS AGREEMENT
AND TAKE TITLE BY REASON OF A DEFAULT ON PURCHASER'S PART, THEN THE PARTIES
HERETO RECOGNIZE AND AGREE THAT THE DAMAGES THAT THE SELLERS WILL SUSTAIN AS A
RESULT THEREOF WILL BE SUBSTANTIAL, BUT DIFFICULT IF NOT IMPOSSIBLE TO
ASCERTAIN. THEREFORE, THE PARTIES AGREE THAT, IN THE EVENT OF PURCHASER'S
DEFAULT AS AFORESAID, THE SELLERS SHALL, AS THEIR SOLE REMEDY, (A) RETAIN THE
DEPOSIT PLUS INTEREST EARNED THEREON, AND (B) BE ENTITLED TO RECOVER FROM BUYER
CASH IN THE AMOUNT OF FOUR HUNDRED FORTY-TWO THOUSAND FORTY DOLLARS ($442,040),
AS LIQUIDATED DAMAGES, AND NO PARTY SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS
WITH RESPECT TO ANY OTHER UNDER THIS AGREEMENT, EXCEPT FOR THE SURVIVING
COVENANTS (HEREINAFTER DEFINED). THE SELLERS ACKNOWLEDGE AND AGREE THAT THE SUM
OF (A) THE DEPOSIT PLUS INTEREST EARNED THEREON, AND (B) $442,040, IS A
REASONABLE ESTIMATE OF AND BEARS A REASONABLE RELATIONSHIP TO THE DAMAGES THAT
WOULD BE SUFFERED AND COSTS INCURRED BY THE SELLERS AS A RESULT OF HAVING
WITHDRAWN THE PROPERTY FROM SALE AND THE FAILURE OF CLOSING TO OCCUR DUE TO A
DEFAULT BY PURCHASER UNDER THIS AGREEMENT AND (2) PURCHASER SEEKS TO LIMIT ITS
LIABILITY UNDER THIS AGREEMENT TO THE AMOUNT OF THE SUM OF (A) THE DEPOSIT PLUS
INTEREST EARNED THEREON, AND (B) $442,040, IN THE EVENT THIS AGREEMENT IS
TERMINATED AND THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT DOES NOT CLOSE DUE
TO A DEFAULT BY PURCHASER HEREUNDER.
PURCHASER Sellers
Initials: __________ ___________
-----------
-----------
- -------------- --------------------- ---------------------
4. CLOSING AND TRANSFER OF TITLE
4.1 CLOSING
The parties hereto agree to conduct a closing of this sale (the "Closing")
at 8:00 A.M. P.S.T., on or before February 17, 1997; provided, however, that if
CIR and CGEP have not obtained the Limited Partner Approvals (as defined in
Paragraph 15.14) by February 10, 1997, then, subject to the provisions of
Paragraph 15.14, the date of the Closing shall be extended until the fifth (5th)
calendar day after such Limited Partner Approvals have been obtained (the
"Closing Date"), in the office of the Escrow Holder located at 700 South Flower
Street, Suite 900, Los Angeles 90017, or at such other place as may be agreed
upon by the parties hereto. This Agreement shall terminate if transfer of title
is not completed by the Closing Date (unless such failure to close is due to the
Sellers' default, the date for Closing is extended pursuant to any provision
hereof, including, without limitation, the matters described in Sections 6.3,
6.4, 6.5 and Section 7 hereof, or the date for Closing is extended by agreement
of the parties, which agreement shall be confirmed in writing).
4.2 CLOSING PROCEDURE
With respect to each Individual Property, the Seller that owns such
Individual Property shall execute and deliver or cause to be delivered either to
Escrow Holder or Purchaser on or before the Closing (or such earlier date as
specifically provided below for any particular item), each of the following
items:
(a) a deed, in the appropriate form attached hereto as Exhibit A-1
through A-4, depending on the state where the Individual Property is located,
duly acknowledged and proper for recording, conveying such Individual Property
to Purchaser, subject, however, to (i) (A) such easements, rights of way,
encumbrances, liens, covenants, restrictions, or other matters of record as
shall have been approved by Purchaser pursuant to Section 6.4, and (B) such
matters shown on the Survey (as defined in Section 6.3) of such Individual Real
Property as shall have been approved by Purchaser pursuant to Section 6.3, (ii)
taxes not yet due and payable, (iii) the rights of lessees and licensees of
space in the Individual Improvements included in such Individual Property at the
time of Closing (to the extent shown on the Rent Roll for such Individual
Improvements, which Rent Roll shall have been approved by Purchaser), and (iv)
any encumbrances created or permitted by the terms of this Agreement approved by
such Seller and Purchaser;
(b) a Bill of Sale in the form attached hereto as Exhibit B, dated as
of the date of Closing conveying to Purchaser any and all Individual Personal
Property pertaining to such Individual Real Property;
(c) an Assignment and Assumption of Leases in the form attached hereto
as Exhibit C dated the date of Closing, assigning all of the landlord's right,
title and interest in and to any tenant and other leases covering all or any
portion of such Individual Real Property;
(d) Tenant Notification Agreements (the "Tenant Notices"), dated the
date of the Closing of such Individual Property and complying with applicable
statutes in order to relieve such Seller of liability for tenant security
deposits (provided the security deposits are paid to Purchaser), notifying the
tenants of such Individual Real Property that such Individual Property has been
sold to Purchaser and directing the tenants to pay rentals to Purchaser (or
Purchaser's designated agent);
(e) the originals of all leases and such Seller's complete tenant
files with respect to current tenants of such Individual Real Property,
including all subleases, lease modifications, license agreements, tenant
improvement construction contracts, move-in leases, financial statements on all
tenants, credit reports on all tenants, names and phone numbers of tenant
contacts, and other correspondence with tenants, all to the extent in such
Seller's or its property manager's possession, all agreements for the payments
of any leasing commissions which have not been paid in full, and, to the extent
in such Seller's possession or under such Seller's control, as-built plans and
specifications, maintenance and service and any other contracts that are to be
assumed, and such Seller's complete files with respect to the maintenance of
such Individual Property, including correspondence with service providers to the
extent in such Seller's or its property manager's possession, all licenses,
permits and certificates of occupancy of such Individual Property or such
Individual Improvements to the extent the same are in such Seller's or its
property manager's possession or control;
(f) at least five (5) days prior to Closing, tenant estoppel
certificates on the form attached hereto as Exhibit D and consistent with the
information contained in the respective Rent Rolls, executed by such tenants of
such Individual Real Properties as are set forth on Schedule 4.1 attached
hereto;
(g) such Seller's certification as to those matters which would be
covered in a tenant estoppel certificate for any lease for which an estoppel
certificate is not obtained from a tenant prior to Closing;
(h) an updated Rent Roll for such Individual Real Property, in the
form of the Rent Rolls attached hereto as Schedule 1.2, dated within fifteen
(15) days of the date of the Closing;
(i) Federal and, to the extent applicable, State affidavits that
Seller in not a "foreign person" in the forms attached as Exhibit E-1 and E-2,
respectively;
(j) a master key or duplicate key for all locks in such Individual
Improvements;
(k) to the extent in the possession of such Seller or such Seller's
property management company, all maintenance records, all engineering records
and reports (e.g., soils, compaction, concrete tests, structural, mechanical
systems), and any environmental studies, sprinkler or other life safety system
reports or testing certifications with respect to such Individual Real Property;
(l) a list of the amount of all tenant security deposits;
(m) accounts receivable report as of a date no earlier than December
10, 1996;
(n) any letters of intent (executed or otherwise) with prospective
tenants;
(o) historical financials, including balance sheets and income
statements for prior three (3) years;
(p) year-to-date operating statements;
(q) to the extent in the possession of such Seller or such Seller's
property management company, copies of real estate tax bills (including special
assessments) for prior five (5) years, including evidence of payment;
(r) all site or plot plans for such Individual Real Property in the
possession of such Seller or its property manager;
(s) any unrecorded reciprocal easement agreements with respect to such
Individual Real Property in the possession of such Seller or its property
manager;
(t) to the extent in the possession of such Seller or such Seller's
property management company, any warranties or guaranties in effect with respect
to such Individual Real Property or any component thereof (e.g. roof, HVAC);
(u) to the extent in the possession of such Seller or such Seller's
property management company, copies of utility bills for the Property for the
past three (3) years;
(v) copies of all billings to tenants for the past three (3) years for
utilities, taxes, insurance and other CAM charges, together with the supporting
calculations of the same; and
(w) complete and correct copies of all consents described in Paragraph
10.2(e).
With respect to items (e), (j) and (m) through (w) listed above, each
Seller shall be deemed to have delivered such items to Purchaser with respect to
a particular Individual Property owned by such Seller when such Seller has
caused such items to be packaged and, after two (2) business days' written
notice to Purchaser, made available for Purchaser to pick up at the office of
the property manager for such Individual Property (which property manager shall
be identified by name and address in such written notice of such Seller).
Notwithstanding any of the foregoing, Purchaser agrees that with respect to the
Individual Real Property identified on Schedule 1.1 as Westford Corporate
Center, items (e), (j) and (m) through (w) shall be deemed timely delivered if
delivered to Purchaser within two (2) business days after the Closing.
4.3 PURCHASER'S PERFORMANCE
At the Closing, Purchaser will cause the Purchase Price to be
delivered to the Escrow Holder, will execute and deliver the Tenant Notices, the
Assignment and Assumption of Leases, and the Bill of Sale for each of the
Individual Properties.
4.4 EVIDENCE OF AUTHORITY; MISCELLANEOUS
Both parties will deliver to the Escrow Holder and each other such
evidence or documents as may reasonably be required by the Escrow Holder or any
hereto evidencing the power and authority of the Sellers and Purchaser and the
due authority of, and execution and
delivery by, any person or persons who are executing any of the documents
required hereunder in connection with the sale of the Property. Both parties
will execute and deliver such other documents as are reasonably required to
effect the intent of this Agreement.
5. PRORATIONS OF RENTS, TAXES, ETC.
Real estate taxes for the year of Closing and any bond or assessment
which is a lien against any Individual Real Property (or which is pending and
may become a lien against any Individual Real Property) shall be prorated as of
12:01 A.M. on Closing Date either using actual tax or assessment figures or, if
actual figures are not available, then using as a basis for said proration the
most recent assessed value of such Individual Real Property multiplied by the
current tax or assessment rate, with a subsequent cash adjustment to be made
between Purchaser and the respective Seller when actual tax or assessment
figures are available. Personal property taxes, annual permit, license or
inspection fees, sewer charges, amounts payable under any contract or agreement
that will be continued after the Closing, and other expenses normal to the
operation and maintenance of the Property shall also be prorated as of the date
of Closing. Rents that have been collected for the month of the Closing and for
subsequent months will be prorated at the Closing, effective as of the date of
the Closing. Such rents shall be deemed to include, without limitation,
percentage rents, escalation charges for real estate taxes, parking charges,
common area expenses, marketing fund charges, operating expenses, maintenance
escalation rents or charges, cost-of-living increases or other charges of a
similar nature, if any, and any additional charges and expenses payable under
tenant leases (whether such collection occurs prior to, on or after the date of
the Closing). After the Closing, Purchaser shall have the exclusive right to
enforce claims for rents and all other obligations due and owing under the
Leases and terminate any Leases as Purchaser, in its sole discretion, deems
appropriate. With regard to rents that are delinquent as of the date of the
Closing, (i) no proration will be made at the Closing, (ii) Purchaser will make
a good faith effort after the Closing to collect the rents in the usual course
of Purchaser's operation of the Property, and (iii) Purchaser will apply all
rents collected first to the current rents and the excess amount, if any, shall
be applied to the delinquent rent owed to the Sellers. It is agreed, however,
that Purchaser will not be obligated to institute any lawsuit or other
collection procedures or terminate any lease to collect delinquent rents. Rents
collected by Purchaser after the Closing Date, to which a Seller is entitled,
shall be promptly paid to such Seller. To the extent delinquent rents or other
amounts are collected by Purchaser, Purchaser may deduct from the amount owed to
the Sellers an amount equal to the out-of-pocket third-party collection costs
actually incurred by Purchaser in collecting such rents and other amounts. As of
the Closing Date, Purchaser shall be entitled to a credit for any tenant
deposits under the leases, and the Sellers shall retain the same. Final readings
on all gas, water and electric meters shall be made as of the date of Closing,
if possible. If final readings are not possible, gas, water and electricity
charges will be prorated based on the most recent period for which costs are
available. Any Seller that has made any deposits with utility companies shall be
entitled to seek a refund of such deposits and shall be solely responsible for
recovering the same. Purchaser shall be responsible for making all arrangements
for the continuation of utility services. After the Closing, Purchaser will
assume full responsibility for all security deposits and advance rental deposits
of current tenants of the Real Property currently held by the Sellers, which
items will be itemized by the Sellers and transferred and credited to Purchaser
at the Closing. At the Closing, the Sellers shall deliver to Purchaser all
letters of credit and other collateral given to any Seller or any of such
Seller's affiliates or predecessors-in-interest pursuant to any of the leases,
less any portions thereof applied in accordance with the respective lease
(together with a statement regarding such applications).
If any tenants for any Individual Real Property are required to pay
percentage rents, escalation charges for real estate taxes, parking charges,
marketing fund charges, operating expenses, maintenance escalation rents or
charges, cost-of-living increases or other charges of a similar nature
("Additional Rents") and such Additional Rents are not finally adjusted between
the landlord and tenant under any lease until after the Closing, then Purchaser
shall submit to the applicable Seller within sixty (60) days after such
Additional Rents are finally adjusted with any tenant, a supplemental statement
(the "Supplemental Statement") to the extent such Additional Rents have been
finally adjusted between Purchaser and such tenant, containing a calculation of
the prorations of such Additional Rents, prepared based on the principles set
forth in this Section 5, provided that in making such adjustment, (i) the
parties shall exclude any Additional Rents arising from increased real property
taxes for such Individual Real Property to the extent such increase is the
result of Purchaser's purchase of the Property, and (ii) no amount of Additional
Rent found to be owing to Purchaser from any tenant shall be offset against any
amount of Additional Rent found to be owed by Purchaser to any other tenant
unless such amount owed to Purchaser is actually collected by Purchaser. To the
extent the Supplemental Statement indicates that one party is entitled to any
amounts under this paragraph, the other party shall pay such sum to such party
within thirty (30) days after the delivery of the Supplemental Statement.
Notwithstanding anything to the contrary contained in this Section 5,
(i) if the amount of the real property taxes and assessments payable with
respect to any Individual Real Property for any period prior to Closing is
determined to be more than the amount of such real property taxes and
assessments that is prorated herein (in the case of the current year) or that
was paid by the applicable Seller (in the case of any prior year), due to a
reassessment of the value of such Individual Real Property or otherwise, such
Seller and Purchaser shall promptly adjust the proration of such real property
taxes and assessments after the determination of such amounts, and such Seller
shall pay to Purchaser any increase in the amount of such real property taxes
and assessments applicable to any period prior to Closing; provided, however,
that such Seller shall not be required to pay to Purchaser any portion of such
increase which is payable by tenants of such Individual Real Property under
their respective leases; and (ii) if the amount of the real property taxes and
assessments payable with respect to any Individual Real Property for any period
prior to Closing is determined to be less than the amount of such real property
taxes and assessments that is prorated herein (in the case of the current year)
or that was paid by the applicable Seller (in the case of any prior year), due
to an appeal of the taxes by such Seller, a reassessment of the value of such
Individual Real Property or otherwise, such Seller and Purchaser shall promptly
adjust the proration of such real property taxes and assessments after the
determination of such amounts, and (a) Purchaser shall pay to such Seller any
refund received by Purchaser representing such a decrease in the amount of such
real property taxes and assessments applicable to any period prior to Closing;
provided, however, that Purchaser shall not be required to pay to such Seller
any portion of such refund which is payable to tenants of such Individual Real
Property under their respective leases; and (b) Seller shall be entitled to
retain any refund received by such Seller representing such a decrease in the
amount of such real property taxes and assessments applicable to any period
prior to Closing; provided, however, that such Seller shall pay to Purchaser
that portion of any such refund that is payable to tenants of such Individual
Real Property under their respective leases.
A separate closing statement shall be prepared for each Individual
Property by Escrow Holder, and approved by Buyer and the respective Seller,
showing in detail the prorations for such Individual Property. All prorations
shall be based on a 365-day year.
6. PURCHASER INSPECTIONS, CONTINGENCIES, AND ELECTIONS
6.1 DOCUMENT INSPECTION
With respect to each Individual Real Property, the Seller that owns
such Individual Real Property shall deliver to Purchaser for Purchaser's review
the following items at the following times:
(a) promptly after the Effective Date, current operating and capital
budgets;
(b) promptly after the Effective Date, copies of all service,
maintenance, management or other operations contracts and copies of all
correspondence with such service providers, to the extent in such Seller's or
its property manager's possession;
(c) promptly after the Effective Date, a list of any tenants with rent
pre-paid more than 30 days in advance; and
(d) promptly after the Effective Date, the most recent leasing status
report from leasing broker, and monthly thereafter until the Closing, updated
versions of the same.
Purchaser acknowledges that before execution of this Agreement each
Seller has made available for Purchaser's review the standard lease form used by
such Seller with respect to its respective Individual Real Properties.
Purchaser agrees that if for any reason the Closing is not
consummated, Purchaser will immediately return to the Sellers all materials
furnished to Purchaser pursuant to this Section 6.1.
Purchaser acknowledges and agrees that notwithstanding the Sellers'
obligations under this Section 6.1 to make the items listed in this Section 6.1
available for Purchaser's inspection, such obligations of the Sellers do not
create any condition to Purchaser's obligations hereunder to purchase the
Property.
Purchaser shall have the right to inspect each Seller's files relating
to such Seller's Individual Real Properties before and after the Closing for
such period of time as is necessary for Purchaser to prepare an "8-K" filing and
an "8-K/A" filing relating to this transaction with the United States Securities
and Exchange Commission; provided, however, that such period of time shall not
extend beyond the ninetieth (90th) calendar day following the Closing. Each
Seller shall cooperate generally with Purchaser in preparing such "8-K" and
"8-K/A" filings; provided, however, that such cooperation of the Sellers shall
not be deemed to imply any representation or warranty by any Seller regarding
the adequacy or accuracy of any information included in such filings.
6.2 PHYSICAL INSPECTION
In addition to the items set forth in Section 6.1, the Sellers have
made, and prior to the Closing will continue to make, the Property available for
inspection by Purchaser and Purchaser shall, at Purchaser's risk, be entitled to
conduct an engineering and a Phase I environmental audit of each Individual Real
Property and in connection therewith, to undertake such physical inspection of
such Individual Real Property as Purchaser deems appropriate. Such inspection
shall be conducted at reasonable times upon reasonable oral or written notice to
the applicable Seller's property manager. Such Seller shall have the right to
designate a representative to accompany Purchaser's employees, agents, and
independent contractors on any such inspections. Notwithstanding any of the
foregoing, Purchaser shall not be entitled to conduct a Phase II environmental
audit of any Individual Property without the prior written consent of the
applicable Seller, which consent shall not be unreasonably withheld or delayed.
Consent to any Phase II environmental audit shall be expressly conditioned on
the applicable Seller's approval, not to be unreasonably withheld or delayed, of
(i) the person or persons proposed by Purchaser to perform such audit, and (ii)
the nature and extent of the actions to be taken in the performance of such
audit.
Purchaser hereby agrees to pay, protect, defend, indemnify and save
each Seller harmless against all liabilities, obligations, claims (including
mechanic's lien claims), damages, penalties, causes of action, judgments, costs
and expenses (including, without limitation, attorneys' fees and expenses)
imposed upon, incurred by or asserted against such Seller in connection with or
arising out of the entry upon any Individual Real Property by Purchaser's
employees, agents or independent contractors and the actions of such persons on
such Individual Real Property. In the event any part of any Individual Property
is damaged or excavated by Purchaser, its employees, agents or independent
contractors, Purchaser agrees in the event its purchase hereunder is not
consummated, to make such additional payments to the Seller that owns such
Individual Property as may be reasonably required to return such Individual
Property to its condition immediately prior to such damage or excavation or, at
such Seller's option, to cause such work reasonably required to return such
Individual Property to its condition immediately prior to such damage or
excavation to be done. Notwithstanding any provision to the contrary herein,
Purchaser's obligations under this subparagraph shall survive the expiration or
termination of this Agreement, and shall survive Closing.
Purchaser acknowledges and agrees that notwithstanding the Sellers'
obligations under this Section 6.2 to make the Property available for inspection
by Purchaser, such obligations of the Sellers do not create any condition to
Purchaser's obligations hereunder to purchase the Property.
6.3 SURVEY CONTINGENCY
Purchaser's obligation to purchase the Property is subject to its
review and approval, within the ten (10) day period provided below, of a current
survey of each Individual Real Property by a registered surveyor certified to
Purchaser (each, a "Survey," and collectively, the "Surveys"), which Surveys
Purchaser shall procure within thirty (30) days after the Effective Date, or as
soon thereafter as practicable. Each Survey shall show the location of all
improvements, structures, driveways, parking areas, easements, rights of way,
and any encroachments and shall specify whether the subject Individual Real
Property is within a 100- year flood plain or flood way, and shall contain a
certification of the surveyor satisfactory in form and substance to Purchaser.
Each Survey shall further set forth a legal description of the boundaries of the
subject Individual Real Property in accordance with local practices.
With respect to each Survey, Purchaser shall have until ten (10) days
after its receipt of each Survey and the related Title Report (as defined below)
and copies of all items and documents referred to therein for the applicable
Individual Property to approve or object in writing to such Survey, including
any objection to the boundaries set forth in such Survey and to the legal
description. Any such written notice shall state all of Purchaser's objections
with specificity. Upon receipt of such notice, the Seller that owns the subject
Individual Real Property may, but shall not be obligated to, cure such
objections. If such Seller cures such objections within 15 days, or, if such
objections are such that they cannot be cured within 15 days and such Seller has
commenced curing such objections and thereafter diligently proceeds to perfect
such cure (but in no event beyond 30 days unless agreed to by Purchaser), then
this Agreement shall continue in force and effect, and the Closing Date shall be
adjusted accordingly. If such Seller is unable to, or chooses not to, cure such
objections within the time permitted, this Agreement shall terminate, the
Sellers shall instruct the Escrow Holder to return the Deposit plus all interest
earned thereon to Purchaser, and no party shall have any further obligations
hereunder except for the Surviving Covenants. Notwithstanding the foregoing,
however, Purchaser may waive such objections that such Seller is unable to or
chooses not to cure, and upon receipt by such Seller of such waiver in full from
Purchaser within 10 days of notice from such Seller that it is unable or chooses
not to cure such objections, this Agreement shall remain in full force and
effect with no reduction in the Purchase Price.
If requested by the Sellers, Purchaser will confirm in writing whether
this survey contingency has been satisfied and, if so, the date on which it was
satisfied.
6.4 TITLE CONTINGENCY
Purchaser's obligation to purchase the Property is subject to its
approval, within the time period set forth below, with respect to each
Individual Real Property, of a preliminary title report for an A.L.T.A. Owner's
Title Insurance Policy (Form B, rev. 10/17/70) (each, individually, a "Title
Report," and collectively, the "Title Reports"), dated not earlier than December
1, 1996, issued by the Escrow Holder, and all items and documents referred to in
the Title Report. Purchaser shall procure each such Title Report and the items
and documents referred to therein within thirty (30) days after the Effective
Date, or as soon thereafter as practicable. Each Title Report will commit the
Escrow Holder to issue to Purchaser at the Closing an Owner's Title Policy (as
defined below) relating to the Individual Real Property that is the subject of
such Title Report, in the amount of the applicable Allocated Portion of the
Purchase Price. Upon receipt of each Title Report and accompanying documents by
Purchaser, Purchaser shall have until the date ten (10) days after receipt of
all such items and the related Survey to approve such Title Report or to state
any objections in writing. Such written notice of objection shall state all of
Purchaser's objections with specificity. Upon receipt of such notice, the Seller
that owns the subject Individual Real Property may, but shall not be obligated
to, cure such objection(s); provided that such Seller shall be obligated to
remove any monetary liens of an ascertainable amount other than any lien for
taxes or assessments which are not yet due and payable. If such Seller cures
such objections within 15 days, or, if such objections are such that they cannot
be cured within 15 days and such Seller has commenced curing such objections and
thereafter diligently proceeds to perfect such cure (but in no event beyond 30
days unless otherwise agreed to by Purchaser), then this Agreement shall
continue in full force and effect and the Closing Date shall be adjusted
accordingly. If such Seller is unable or chooses not to cure such objections
within the time permitted, then this Agreement shall terminate, the Sellers
shall instruct the Escrow Holder to return the Deposit plus all interest earned
thereon to Purchaser, and no party shall have any further obligations hereunder
except for the Surviving Covenants. Notwithstanding the foregoing, however,
Purchaser may waive such objections that such Seller is unable or chooses not to
cure within 10 days after receipt of a notice that such Seller is unable or
chooses not to cure such objections, and upon receipt by such Seller of such
waiver in full from Purchaser, this Agreement shall remain in full force and
effect with no reduction in the Purchase Price.
If requested by the Sellers, Purchaser will confirm in writing whether
this title contingency has been satisfied and, if so, the date on which it was
satisfied.
As a condition precedent to Closing, the Escrow Holder shall deliver
to the Purchaser, for each Individual Real Property, an Owner's Title Insurance
Policy (each, an "Owner's Title Policy," and collectively, the "Owner's Title
Policies") dated no earlier than the date of the recording of the Deed conveying
the Individual Real Property insured by such Owner's Title Policy, in the full
amount of the applicable Allocated Portion of the Purchase Price, insuring that
good and indefeasible fee simple title to such Individual Real Property is
vested in Purchaser, together with such endorsements as shall be specified by
Purchaser in its
title approval notice given pursuant to this Section 6.4, and containing no
exceptions to such title other than the standard printed exceptions (provided,
however, that (i) the printed survey exception must be deleted, except for
matters shown on the applicable Survey and either approved by Purchaser or as to
which objection has been waived by Purchaser, (ii) the exception as to ad
valorem taxes shall be limited to taxes for the current and subsequent years,
(iii) there shall be no exception for creditors' rights, and (iv) the exception
for tenants and parties in possession shall be limited to the rights as tenants
only (with no options to purchase or rights of first refusal or first offer to
sell such Individual Real Property to such tenants) of those tenants, licensees,
and occupants shown on the applicable Rent Roll delivered at Closing), those
items listed on Schedule "B" of the applicable Title Report that either were
approved by Purchaser or as to which objection has been expressly waived by
Purchaser, and encumbrances created or permitted by the terms of this Agreement.
If the Escrow Holder cannot deliver the Owner's Title Policies to Purchaser as
described herein, this Agreement shall terminate, the Sellers shall instruct the
Escrow Holder to return the Deposit plus all interest earned thereon to
Purchaser, and no party shall have any further obligations hereunder except for
the Surviving Covenants, except to the extent Escrow Holder's inability to
deliver the Owner's Title Policies is due to any of the Sellers' failure to cure
any title objection which it has agreed to cure pursuant to this Section 6.4.
6.5 ELECTION WITH RESPECT TO CONTRACTS AND AGREEMENTS
The Sellers agree to terminate, effective on or before the day of
Closing, any and all leasing brokerage agreements and property management
agreements relating to the Real Property or any Individual Real Property. With
respect to contracts and agreements other than leasing brokerage agreements and
property management agreements, each Seller shall provide to Purchaser, within
ten (10) days after the Effective Date, with respect to each Individual Property
owned by such Seller, a list of such other contracts and agreements pertaining
to such Individual Real Property. Purchaser shall have fifteen (15) days after
receipt of all such lists to deliver written notice to the Sellers as to which,
if any, of the contracts and agreements described on such lists it elects to
assume, and which, if any, of such contracts and agreements it elects to reject.
7. LOSS DUE TO CASUALTY OR CONDEMNATION
7.1 LOSS DUE TO CONDEMNATION
In the event any condemnation is instituted or any Seller receives
written notice that any condemnation is threatened with respect to (i) all or a
Substantial Portion (as hereinafter defined) of any Individual Real Property
which condemnation shall or would render a Substantial Portion of such
Individual Real Property untenantable, or (ii) any portion of the parking area
of any Individual Real Property, such Seller shall give Purchaser prompt notice
of the same, and Purchaser may, upon written notice to such Seller given within
10 days of receipt of notice of such event, cancel this Agreement, in which
event this Agreement shall terminate, the Sellers shall instruct the Escrow
Holder to return the Deposit plus all interest earned thereon to Purchaser, and
no party shall have any rights or obligations hereunder except for the Surviving
Covenants. In the event that Purchaser does not elect to terminate, or if the
condemnation affects less than a Substantial Portion and does not affect any
parking area, then this Agreement shall remain in full force and effect, and
such Seller shall be entitled to all monies received or collected by reason of
such condemnation prior to Closing. In such event, the transaction hereby
contemplated shall close in accordance with the terms and conditions of this
Agreement except that there will be an abatement of the Purchase Price equal to
the amount of the gross proceeds received by such Seller by reason of such
condemnation prior to Closing; provided, however, that if any separate award is
made for costs and attorney's fees, such Seller shall be entitled to keep such
separate award. If such Seller shall not have received all monies owed it by
reason of such condemnation prior to the Closing, then such Seller shall assign
any interest it has in the pending award to Purchaser. For purposes of this
Section 7.1, a Substantial Portion shall mean a condemnation of any portion of
an Individual Real Property, the value of which portion exceeds five percent
(5%) of the Allocated Portion of the Purchase Price applicable to such
Individual Real Property.
7.2 LOSS DUE TO CASUALTY
In the event of Substantial Loss or Damage (as hereinafter defined) to
any Individual Real Property by fire or other casualty (not resulting from acts
of Purchaser), any party may, or, if the fire or other casualty results from
acts of Purchaser, the applicable Seller may, upon written notice to the other
party given within 10 days of receipt of notice of such event, cancel this
Agreement in which event this Agreement shall terminate, the Sellers shall
instruct the Escrow Holder to return the Deposit plus interest earned thereon to
Purchaser, and no party shall have any rights or obligations hereunder except
for the Surviving Covenants. In the event that no party elects to terminate, or
if the casualty results in less than Substantial Loss or Damage, then this
Agreement shall remain in full force and effect and the Seller that owns such
Individual Real Property shall be entitled to all insurance proceeds received or
collected by reason of such damage or loss, whereupon the transaction hereby
contemplated shall close in accordance with the terms and conditions of this
Agreement except that there will be abatement of the Purchase Price equal to the
amount of the gross proceeds, plus such Seller's deductible, or, in the case of
an uninsured loss, by the cost to repair such damage or loss, provided that such
abatement will be reduced by the amount expended by such Seller in accordance
with Section 8 hereof for restoration of such Individual Real Property following
the casualty, and provided, further, that such abatement will be further reduced
by the amount that the gross proceeds include any separate award for costs
(including preservation costs) and attorney's fees. Alternatively, Purchaser
may, in its discretion, have such Seller repair or replace the damaged Property,
and there shall be no abatement of the Purchase Price in such case. However,
Purchaser shall not be entitled to require such Seller to effect repair or
replacement unless the repair or replacement will take no more than three (3)
months to complete. For purposes of this Section 7.2, "Substantial Loss or
Damage` shall mean loss or damage to the parking and/or any portion of any
Building the cost for repair of which exceeds five percent (5%) of the Allocated
Portion of the Purchase Price applicable to such Individual Real Property.
8. OPERATION OF THE PROPERTY
Between the time of execution of this Agreement and the Closing, each
Seller shall maintain its respective Individual Properties in good condition and
repair, reasonable wear and tear excepted, shall perform all work required to be
done under the terms of any lease or agreement relating to any such Individual
Property, shall timely make all repairs, maintenance and replacement of
equipment or improvements, and shall keep such Individual Properties insured
against casualties on commercially reasonable terms and in commercially
reasonable amounts, the same as though such Seller were retaining such
Individual Properties and at such Seller's sole cost and expense; except that in
the event of a fire or other casualty, damage or loss, such Seller shall have no
duty to repair said damage except as otherwise provided in Section 7.2 of this
Agreement. However, such Seller may repair any such damage with Purchaser's
prior, written approval and may, without Purchaser's approval, repair damage
where such repair is necessary in such Seller's reasonable opinion to preserve
and protect the health and safety of tenants of any such Individual Property or
to preserve any such Individual Property from imminent risk of further damage or
if required to do so by such Seller's insurance carrier. Any such emergency
repairs shall be reported to Purchaser within 24 hours of their commencement and
48 hours of their completion.
Except as provided below, from and after the Effective Date until the
Closing Date, no Seller shall lease any portion of any Individual Real Property
or amend or terminate any existing lease or enter into any other agreements
affecting any Individual Property that will survive the Closing, without first
obtaining Purchaser's written approval, which approval shall not be unreasonably
denied or delayed. Purchaser shall have three (3) business days from the date
any Seller provides Purchaser with a copy of any new lease, modification or
termination of any existing lease, or any other new agreement affecting any
Individual Property, together with any information reasonably requested by
Purchaser regarding such tenant or agreement, to approve or reject such lease,
modification, termination or agreement. If Purchaser fails to respond within
said time period, it shall be deemed to have approved said lease, modification,
termination or agreement, as applicable. Purchaser shall bear the cost of all
tenant improvement allowances and leasing commissions for leases entered into
after the Effective Date until the Closing Date entered into by any Seller with
Purchaser's approval or deemed approved by Purchaser as provided for herein,
unless the sale of the Property is not consummated as contemplated herein.
Notwithstanding the foregoing, the Seller that owns the Individual Real Property
identified on Schedule 1.1 as the "Overlook" project (the "Overlook Project")
may, with respect to any portion thereof, and without first obtaining
Purchaser's written approval, enter into any standard form lease at prevailing
market rates for a term not exceeding twelve (12) months, and/or amend (but not
extend for a term exceeding twelve (12) months) or terminate any existing lease,
provided that in each case such Seller shall exercise prudent business judgment
as if it were retaining the Overlook Project for itself and shall not grant any
concession except in accordance with prevailing market conditions.
No Seller shall actively market any Individual Property for sale or
negotiate the possible sale of any Individual Property with any party other than
Purchaser, unless this Agreement is terminated as provided herein.
9. BROKER
Purchaser and the Sellers represent to each other that they have dealt
with no agent or broker who in any way has participated as a procuring cause of
the sale of the Property, except K/B Realty Advisors ("Broker"). Purchaser shall
pay a commission to Broker at the Closing pursuant to a separate brokerage
agreement between Purchaser and Broker. Purchaser and the Sellers each agree to
defend, indemnify and hold harmless the other for any and all judgments, costs
of suit, attorneys' fees, and other reasonable expenses which the other may
incur by reason of any action or claim against the other by any broker, agent,
or finder with whom the indemnifying party has dealt arising out of this
Agreement or any subsequent sale of any Individual Property to Purchaser except
for the above-described commissions, which shall be paid by Purchaser at the
Closing. The provisions of this Section 9 shall survive the Closing and any
termination of this Agreement.
10. REPRESENTATIONS AND WARRANTIES
10.1 LIMITATIONS ON REPRESENTATIONS AND WARRANTIES
Purchaser hereby agrees and acknowledges that, except as set forth in
Section 10.2 below or in any document delivered by any Seller at Closing,
neither the Sellers, nor any of them, nor any agent, attorney, employee or
representative of the Sellers or any of them has made any representation
whatsoever regarding the subject matter of this sale, or any part thereof,
including (without limiting the generality of the foregoing) representations as
to the physical nature or condition of any Individual Property or the
capabilities thereof, and that Purchaser, in executing, delivering and/or
performing this Agreement, does not rely upon any statement and/or information
to whomever made or given, directly or indirectly, orally or in writing, by any
individual, firm or corporation on behalf of any Seller, except as set forth in
Section 10.2 below or in any document delivered by such Seller at closing.
Purchaser agrees to take the Real Property and the Personal Property "as is," as
of the date hereof, reasonable wear and tear, and minor damage caused by the
removal of any personal property or fixtures not included in this sale,
excepted. EXCEPT AS SET FORTH IN SECTION 10.2 BELOW, NO SELLER MAKES ANY
REPRESENTATION OR WARRANTY AS TO THE PHYSICAL CONDITION OF ANY INDIVIDUAL
PROPERTY OR THE SUITABILITY THEREOF FOR ANY PURPOSE FOR WHICH PURCHASER MAY
DESIRE TO USE IT. EACH SELLER HEREBY EXPRESSLY DISCLAIMS ANY WARRANTIES OF
MERCHANTABILITY AND/OR FITNESS FOR A PARTICULAR PURPOSE AND ANY OTHER WARRANTIES
OR REPRESENTATIONS AS TO THE PHYSICAL CONDITION OF ANY INDIVIDUAL PROPERTY.
PURCHASER, BY ACCEPTANCE OF THE DEED FOR EACH INDIVIDUAL PROPERTY, AGREES THAT
IT HAS INSPECTED SUCH INDIVIDUAL PROPERTY AND ACCEPTS SAME "AS IS" AND "WITH ALL
FAULTS".
10.2 REPRESENTATIONS AND WARRANTIES
Each Seller makes the following representations and warranties with
respect to itself and the Individual Properties being sold by it, and agrees
that Purchaser's obligations under this Agreement are conditioned upon the truth
and accuracy of such representations and warranties, both as of this date and as
of the date of the Closing:
(a) Such Seller (in the case of CIR or CGEP) is a limited partnership,
duly organized, validly existing and in good standing under the laws of Delaware
(in the case of CIR) or Connecticut (in the case of CGEP), and qualified to
transact business and in good standing in each state in which any Individual
Property owned by such Seller is located; and such Seller (in the case of WOV)
is a general partnership, duly organized and validly existing under the laws of
Connecticut;
(b) Such Seller has the requisite partnership power and authority to
enter into this Agreement and convey the Individual Properties it owns to
Purchaser;
(c) Subject to Section 15.14 below, this Agreement has been duly
executed and delivered by such Seller;
(d) Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated by this Agreement, nor the
compliance with the terms and conditions hereof will (i) violate or conflict, in
any material respect, with any statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restrictions of any government,
governmental agency or court to which such Seller is subject, or (ii) to the
best of such Seller's knowledge, result in any material breach or the
termination of any lease, agreement or other instrument or obligation to which
such Seller is a party or by which any Individual Property owned by such Seller
may be subject, or cause a lien or other encumbrance to attach to any such
Individual Property;
(e) All material consents required from any governmental authority or
third party in connection with the execution and delivery of this Agreement by
such Seller or the consummation by such Seller of the transactions contemplated
hereby (other than any third-party consents which may be required in order for
such Seller to assign any licenses, certificates of occupancy, permits,
warranties, guarantees (other than tenant guarantees) in connection with the
Individual Properties owned by such Seller) have been made or obtained or shall
have been made or obtained by the Closing Date.
(f) To the best of such Seller's knowledge, such Seller has received
no notice of any existing, pending or threatened litigation, governmental
investigation, administrative proceeding, condemnation or sale in lieu thereof,
or environmental, zoning or other land use regulation proceedings with respect
to any portion of any Individual Real Property owned by such Seller, except as
noted on Schedule 10.2.1 hereto;
(g) Except for those tenants and licensees in possession of portions
of the Individual Real Properties owned by such Seller under written leases or
license agreements for space in such Individual Real Properties, as shown in the
applicable Rent Rolls, there are no parties in possession of, or claiming any
possession to any portion of any such Individual Real Property as lessees,
tenants at sufferance, licensees, trespassers, sublessees (to the best of such
Seller's knowledge), or otherwise;
(h) The updated Rent Rolls for the Individual Real Properties owned by
such Seller, which shall be delivered at the Closing, will be true, correct and
complete as of the date set forth thereon; no tenant will be entitled to any
rebates, rent concessions, or free rent (other than as reflected in the
estoppels, such Seller's certificates delivered pursuant to Section 4.2(g)
hereof, or, with respect to the Overlook Project, in accordance with prevailing
market conditions at the time such lease is entered into) and no rents due under
any of the tenant or other leases will have been assigned, hypothecated, or
encumbered, to any party except pursuant to documents to be released at Closing;
(i) There are no attachments or executions affecting any Individual
Property owned by such Seller, general assignments for the benefit of creditors,
or voluntary or involuntary proceedings in bankruptcy, pending or, to the best
of such Seller's knowledge, threatened against such Seller;
(j) During the period of such Seller's ownership of each Individual
Property owned by such Seller, such Seller has not itself, and to the best of
such Seller's knowledge no prior owner or current or prior tenant or other
occupant of all or any part of any such Individual Property at any time has,
used Hazardous Materials (hereinafter defined) on, from, or affecting any such
Individual Property in any manner that violates federal, state, or local laws,
ordinances, rules, or regulations governing the use, storage, treatment,
transportation, generation, or disposal of Hazardous Materials (collectively,
the "Environmental Laws"), and to the best of Seller's knowledge no Hazardous
Materials have been disposed of on such Individual Property. "Hazardous
Materials" shall mean any flammable substances, explosives, radioactive
materials, hazardous wastes, toxic substances, pollutants, pollution, or related
materials regulated under any of the Environmental Laws (to the extent any such
substances, materials or wastes exceed permitted concentrations);
Notwithstanding anything contained herein to the contrary, "Hazardous
Materials" shall not include any ordinary use and incidental storage of small
and insignificant amounts of substances reasonably necessary for the regular and
ordinary maintenance of any Individual Property, or consumed in the repair and
ordinary use of common office business machines, nor to gasoline, oil, and other
automotive fluids to the extent that they are contained in the common and
ordinary manner in motor vehicles visiting any Individual Real Property, in each
case provided that the same do not constitute, give rise to, or create any
substantial risk of any violation of any requirements of any Environmental Law.
(k) Except as set forth on Schedule 10.2.2 hereto at the time of
Closing, there will be no outstanding written or oral contracts made by such
Seller for any improvements to any Individual Real Property owned by such Seller
which have not been fully paid for and such Seller shall cause to be discharged
all mechanics' and materialmen's liens arising from any labor or materials
furnished to any such Individual Real Property prior to the time of Closing.
Except as set forth on said Schedule 10.2.2, as of the Closing Date, such Seller
shall have completed all punch-list items with respect to any tenant
improvements constructed by such Seller as landlord under the leases. Except as
set forth on said Schedule 10.2.2, as of the Closing Date, such Seller shall
have paid in full any of landlord's leasing costs or obligations in connection
with the leases, including, but not limited to, any costs incurred by such
Seller in connection with any tenant improvements.
(l) Except as set forth on Schedule 10.2.3 hereto, Seller has not
received any written notice that the use or operation of any Individual Property
owned by such Seller fails to comply in any material respect with any applicable
restrictive covenant, building code, environmental, zoning or land use law, or
any other applicable local, state or federal law or regulation (collectively,
"Laws").
(m) Such Seller has not received notice of any special improvement
district, special use district or special assessment applicable to any
Individual Real Property owned by such Seller.
10.3 SELLER'S KNOWLEDGE
Whenever the term "to the best of such Seller's knowledge" is used in
this Agreement or in any representations and warranties given to Purchaser at
Closing, such knowledge shall be (i) in the case of CIR and the Individual Real
Property identified on Schedule 1.1 as Woodlands Tech Center, the actual
knowledge of John Carey, who is the president of the general partner of CIR, or
Ruth Van Winkle, who is the asset manager assigned to such Individual Real
Property, after review of the files of Cigna Investments, Inc. (which CIR
represents to Purchaser are the relevant files of CIR applicable to such
Individual Real Property) and inquiry of CIR's property managers regarding such
Individual Real Property and each of the matters addressed in the
representations and warranties set forth in Section 10.2; (ii) in the case of
CIR and the Individual Real Property identified on Schedule 1.1 as Piedmont
Plaza Shopping Center, the actual knowledge of John Carey or Sean Williams, who
is the asset manager assigned to such Individual Real Property, after review of
the files of Cigna Investments, Inc. (which CIR represents to Purchaser are the
relevant files of CIR applicable to such Individual Real Property) and inquiry
of CIR's property managers regarding such Individual Real Property and each of
the matters addressed in the representations and warranties set forth in Section
10.2; (iii) in the case of CIR and the Individual Real Property identified on
Schedule 1.1 as the Overlook Apartments, the actual knowledge of John Carey or
Steven Jacobs, who is the asset manager assigned to such Individual Real
Property, after review of the files of Cigna Investments, Inc. (which CIR
represents to Purchaser are the relevant files of CIR applicable to such
Individual Real Property) and inquiry of CIR's property managers regarding such
Individual Real Property and each of the matters addressed in the
representations and warranties set forth in Section 10.2; (iv) in the case of
CGEP and the Individual Real Property identified on Schedule 1.1 as Woodlands
Plaza II, the actual knowledge of John Carey, who is the president of the
general partner of CGEP, or Ruth Van Winkle, who is the asset manager
assigned to such Individual Real Property, after review of the files of Cigna
Investments, Inc. (which CGEP represents to Purchaser are the relevant files of
CGEP applicable to such Individual Real Property) and inquiry of CGEP's property
managers regarding such Individual Real Property and each of the matters
addressed in the representations and warranties set forth in Section 10.2, (v)
in the case of CGEP and the Individual Real Property identified on Schedule 1.1
as Lake Point I, II and III, the actual knowledge of John Carey or Annette
Sanders, who is the asset manager assigned to such Individual Real Property,
after review of the files of Cigna Investments, Inc. (which CGEP represents to
Purchaser are the relevant files of CGEP applicable to such Individual Real
Property) and inquiry of CGEP's property managers regarding such Individual Real
Property and each of the matters addressed in the representations and warranties
set forth in Section 10.2, and (vi) in the case of WOV and the Individual Real
Property identified on Schedule 1.1 as Westford Corporate Center, the actual
knowledge of John Carey, who is the president of the general partner of each of
the general partners of WOV, or Peter Clark, who is the asset manager assigned
to such Individual Real Property (together with John Carey, Ruth Van Winkle,
Sean Williams, Steven Jacobs and Annette Sanders, collectively, the "Key
Personnel"), after review of the files of Cigna Investments, Inc. (which WOV
represents to Purchaser are the relevant files of WOV applicable to such
Individual Real Property) and inquiry of WOV's property managers regarding such
Individual Real Property and each of the matters addressed in the
representations and warranties set forth in Section 10.2.
No Seller shall have any duty to conduct any further inquiry in making
any such representations and warranties, and no knowledge of any other person
shall be imputed to any Key Personnel. Purchaser acknowledges that no Seller is
a hands-on owner, and each Seller employs third-party management to oversee the
daily operations of the Individual Properties owned by such Seller and that each
Seller has limited first-hand information and knowledge pertaining to the daily
operations of the Individual Properties owned by such Seller.
10.4 SURVIVAL
All representations and warranties contained in Section 10.2 will
survive the Closing of this transaction (but only as to the status of facts as
they exist as of the Closing, it being understood that no Seller makes any
representations or warranties which would apply to changes or other matters
occurring after the Closing); provided that such representations and warranties
other than those set forth in Section 10.2 (a), (b), (c), (d), and (e), shall
expire on the date one (1) year from the date of Closing, and no action on such
representations and warranties may be commenced after such expiration.
11. INDEMNIFICATION
11.1 THE SELLERS' INDEMNIFICATION
Each Seller on behalf of itself, its affiliates, its successors and
assigns, and any independent property managers which such Seller has hired to
manage the Individual Properties owned by such Seller does hereby agree to
indemnify and hold Purchaser, its successors and assigns harmless from and
against all costs, charges and expenses related to the ownership, management and
operation of such Individual Properties prior to the Closing Date, but not
thereafter, including, costs (i) for any labor performed on, or materials
furnished to such Individual Properties prior to the Closing Date, (ii) for any
leasing commissions or other fees or commissions due in connection with any
lease renewals or lease extensions which are entered into prior to the Closing
Date, (iii) for compliance with any laws, requirements or regulations of, or
taxes, assessments or other charges due to any governmental authority, but only
to the extent any such liability is attributable to acts, omissions, events or
transactions which first occurred during such Seller's period of ownership of
such Individual Properties, and such liability is caused by any Seller, its
agents, contractors and/or its employees only, and not by any other party or
parties, excluding any and all costs of compliance with presently-existing and
future environmental laws, any environmental remediation costs, and any costs
of, or awards of damages for, damage to the environment to natural resources, or
to any third party (collectively, 'Environmental Compliance"), it being the
intent of this Agreement, as between Purchaser and the Sellers, that neither the
Sellers nor Purchaser provide any contractual indemnification to Purchaser for
such Environmental Compliance, but also that no party intends to release any
other claims with respect to Environmental Compliance, including claims under
CERCLA, (iv) for any other charges or expenses whatsoever pertaining to such
Individual Properties or to the ownership, title, possession, use or occupancy
of such Individual Properties but only to the extent any such liability is
attributable to acts, omissions, events or transactions which first occurred
during such Seller's period of ownership of such Individual Properties, and is
caused by such Seller, its agents, contractors and/or its employees, or (v) for
any breach of the representations or warranties in Section 10.2 hereof.
Notwithstanding the foregoing, Purchaser shall not be entitled to
indemnification by any Seller for any breach of the representations and
warranties of such Seller contained in Section 10.2 hereof (excluding, however,
such Seller's representations and warranties set forth in Section 10.2(a), (b),
(c), (d) and (e)) unless Purchaser makes a written claim for such
indemnification within one (1) year from the Closing Date. Each Seller on behalf
of itself, its affiliates, its successors and assigns, and any independent
property managers which such Seller has hired to manage the Individual
Properties owned by such Seller does hereby agree to indemnify and hold
Purchaser, its successors and assigns harmless from and against all liabilities,
damages, claims, charges, costs and expenses incurred in connection with any
third party claims involving such Individual Properties and which relate to
acts, omissions, events or transactions which occurred prior to the Closing.
11.2 PURCHASER'S INDEMNIFICATION
Purchaser on behalf of itself, its successors and assigns does hereby
agree to indemnify and hold each Seller, its successors and assigns, and any
independent property managers which such Seller has hired to manage the
Individual Properties owned by such Seller, harmless from and against all costs,
charges and expenses relating to the ownership, management and operation of such
Individual Properties from and after the Closing Date, including costs (i) for
any labor performed on, or materials furnished to such Individual Properties
subsequent to the Closing Date, (ii) for any leasing commissions disclosed to
Purchaser prior to the date of this Agreement and due in connection with any
lease renewals or lease extensions which are entered into subsequent to the
Closing Date as described on Schedule 10.2.2 hereto, (iii) for compliance with
any laws, requirements or regulations of, or taxes, assessments, or other
charges due to any governmental authority (excluding Environmental Compliance),
but only to the extent that any such liability is attributable to any acts,
omissions, events or transactions which first occurred during Purchaser's period
of ownership of such Individual Properties, and such liability is caused by
either Purchaser, its agents, contractors and/or its employees only and not by
any other party or parties, or (iv) for any other charges or expenses whatsoever
pertaining to such Individual Properties or to the ownership, title, possession,
use or occupancy of such Individual Properties, but only to the extent any such
liability is attributable to acts, omissions, events or transactions which first
occurred during Purchaser's period of ownership of such Individual Properties,
and is caused by Purchaser, its agents, contractors, and/or its employees.
Purchaser on behalf of itself, its affiliates, its successors and
assigns, and any independent property managers which Purchaser has hired to
manage any of the Individual Properties does hereby agree to indemnify and hold
each Seller, its successors and assigns harmless from and against all
liabilities, damages, claims, charges, costs and expenses incurred in connection
with any third party claims involving any of the Individual Properties and which
relate to acts, omissions, events or transactions which first occur following
the Closing.
The provisions of this Section 11 shall survive the Closing and shall
not be limited by the provisions of Section 10.4 (except that nothing contained
herein is intended to extend the survivability of Section 10.2(j) beyond the
period set forth in Section 10.4).
Except as specifically limited herein, nothing contained in this
Section 11 is in any way intended to limit the rights of the Sellers or
Purchaser to pursue any remedies that may exist at law or in equity against any
unrelated third parties with respect to any liabilities covered by this Section
11.
12. ASSIGNMENT
This Agreement may not be assigned or transferred by Purchaser except
to an affiliate of Purchaser. No assignment shall relieve Purchaser of any of
its obligations under this Agreement.
13. NOTICES
All notices hereunder or required by law shall be sent via United
States Mail, postage prepaid, certified mail, return receipt requested, via any
nationally recognized commercial overnight carrier with provisions for receipt,
or via telecopier followed by written notice as provided for herein, addressed
to the parties hereto at their respective addresses set forth below or as they
have theretofore specified by written notice delivered in accordance herewith:
PURCHASER: Glenborough Properties, L.P.
400 South El Camino Real
San Mateo, CA 94402-1708
Attn: Frank E. Austin, Esq.
Fax#: 415.343.7438
WITH A COPY TO: Morrison & Foerster LLP
425 Market Street
San Francisco, CA 94105
Attn: Craig B. Etlin, Esq.
Fax#: 415.268.7522
SELLERS: CIGNA Income Realty-I Limited Partnership
Connecticut General Equity Properties-I
Limited Partnership
Westford Office Venture
c/o CIGNA Investment Group
900 Cottage Grove Road
Hartford, CT 06152-2311
Attn: Real Estate Investment Department
Asset Management, S-311
Fax#: 860.726.6327
WITH A COPY TO: CIGNA Corporation
Investment Law Department
Mortgage and Real Estate Group, S-215A
900 Cottage Grove Road
Hartford, CT 06152-2215
Attn: Lawrence A. Cox, Esq.
Fax#: 860.726.8446
WITH A COPY TO: Kelley Drye & Warren LLP
101 Park Avenue
New York, NY 10178
Attn: Robert D. Bickford, Jr., Esq.
Fax#: 212.808.7897
Delivery will be deemed complete upon actual receipt or refusal to
accept delivery.
14. EXPENSES
Each Seller shall pay its own attorney's fees and the costs incurred
to repay any liens filed against any Individual Property owned by such Seller
(other than taxes and assessments which are not yet due and payable). Purchaser
shall pay its due diligence expenses, its own attorney's fees, the costs of the
Surveys, and any transfer taxes. Escrow fees, title premiums and all other
closing costs with respect to each Individual Real Property shall be allocated
according to the custom of the county in which such Individual Real Property is
located.
15. MISCELLANEOUS
15.1 SUCCESSORS AND ASSIGNS
All the terms and conditions of this Agreement are hereby made binding
upon the executors, heirs, administrators, successors and permitted assigns of
all parties hereto.
15.2 GENDER
Words of any gender used in this Agreement shall be held and construed
to include any other gender, and words in the singular number shall be held to
include the plural, and vice versa, unless the context requires otherwise.
15.3 CAPTIONS
The captions in this Agreement are inserted only for the purpose of
convenient reference and in no way define, limit or prescribe the scope or
intent of this Agreement or any part hereof.
15.4 CONSTRUCTION
No provision of this Agreement shall be construed by any Court or
other judicial authority against any party hereto by reason of such party's
being deemed to have drafted or structured such provisions.
15.5 ENTIRE AGREEMENT
This Agreement constitutes the entire contract among the parties
hereto and supersedes all prior agreements and understandings between the
parties relating to the subject matter hereof, including, without limitation,
the Letter of Intent dated December 10, 1996, entered into by and between the
Sellers and Purchaser. Aside from this Agreement, there are no other oral or
written promises, conditions, representations, understandings or terms of any
kind as conditions or inducements to the execution hereof and none have been
relied upon by any party.
15.6 RECORDING
The parties agree that this Agreement shall not be recorded. If
Purchaser causes this Agreement or any notice or memorandum thereof to be
recorded, this Agreement shall be null and void at the option of the Sellers.
15.7 NO CONTINUANCE
Purchaser acknowledges that there shall be no assignment, transfer or
continuance of any of Seller's insurance coverage or of any property management
contract.
15.8 TIME OF ESSENCE
Time is of the essence in this transaction.
15.9 ORIGINAL DOCUMENT
This Agreement may be executed by all parties in counterparts in which
event each shall be deemed an original.
15.10 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York. The parties recognize that, since the
Individual Properties are located outside of the State of New York, it may be
necessary for the parties to comply with certain aspects of the laws of the
states in which the Individual Properties are located in order to consummate the
purchase and sale of the Individual Properties pursuant hereto. The parties
agree to comply with such other laws to the extent necessary to consummate the
purchase and sale of the Individual Properties, provided that it is the parties'
intent that the provisions of this Agreement be applied to each Individual
Property in a manner which results in the greatest consistency possible. For
this reason, the parties have agreed that New York law shall govern with respect
to the purchase and sale of each Individual Property pursuant hereto to the
greatest extent possible.
15.11 ACCEPTANCE OF OFFER
This Agreement constitutes the Sellers' offer to sell to Purchaser on
the terms set forth herein and must be accepted by Purchaser by signing three
(3) copies hereof and delivering them to Escrow Holder no later than 5:00 P.M.
E.S.T. on January 17, 1997. If Purchaser has not accepted this Agreement by such
date, then this Agreement and the offer represented hereby shall automatically
be revoked and shall be of no further force or effect.
15.12 CONFIDENTIALITY
Purchaser and the Sellers agree that all documents and information
concerning the Property delivered to Purchaser, the subject matter of this
Agreement, and all negotiations
will remain confidential prior to Closing. Prior to closing, Purchaser and the
Sellers will disclose such information only to those parties required to know
it, including, without limitation, employees of any of the parties, consultants
and attorneys engaged by any of the parties, prospective or existing investors
and lenders, and Purchaser's insurance and reinsurance firms.
15.13 SURVIVING COVENANTS
Notwithstanding any provisions hereof to the contrary, the provisions
of the Second paragraph of Section 6.2 hereof and the provisions of Section 9
hereof (collectively, the "Surviving Covenants") shall survive the closing and
any termination of this Agreement.
15.14 APPROVAL
The Sellers' obligations to perform their respective duties hereunder
are contingent upon the obtaining of (i) all required approvals (the "Limited
Partner Approvals") of the transaction by the respective limited partners of CIR
and CGEP (the "Limited Partners") in accordance with their respective
partnership agreements, and (ii) the approvals of the boards of directors of the
general partners of each of CIR and CGEP (the "Board Approvals"). CIR and CGEP
will each seek such approvals promptly after the Effective Date, and will notify
Purchaser promptly of the decisions of such Limited Partners and boards of
directors. Without limiting the foregoing, CIR and CGEP shall (i) file proxy
materials with respect to the Limited Partner Approvals with the Securities and
Exchange Commission within three (3) business days after the Effective Date, and
(ii) use reasonable efforts to obtain the Limited Partner Approvals within
twenty (20) days after distributing such proxy materials to the Limited
Partners. If the Securities and Exchange Commission does not complete its review
of such proxy materials within thirty (30) days after the Effective Date, or if
Purchaser does not receive written notice from both CIR and CGEP, within ninety
(90) days after the Effective Date, that all of the Board Approvals and Limited
Partner Approvals have been obtained, then Purchaser shall have the right to
terminate this Agreement by giving written notice to the Sellers, which right to
terminate, if not previously exercised, shall itself terminate upon Purchaser's
receipt of written notice from CIR and CGEP that such Board Approvals and
Limited Partner Approvals have been obtained. In the event this Agreement
terminates or is terminated pursuant to this Paragraph 15.14, the Sellers shall
instruct the Escrow Holder to return the Deposit plus all interest earned
thereon to Purchaser, and no party shall have any further rights or duties
hereunder except for the Surviving Covenants.
EXECUTED BY SELLERS this _____ day of January, 1997.
SELLERS: CIGNA INCOME REALTY-I LIMITED
PARTNERSHIP,
a Delaware limited partnership
By: Cigna Realty Resources, Inc.-Tenth,
a Delaware corporation, its General
Partner
By:
John D. Carey
President
CONNECTICUT GENERAL EQUITY PROPERTIES-I
LIMITED PARTNERSHIP,
a Connecticut limited partnership
By: Connecticut General Realty Resources,
Inc.-Third,
a Delaware corporation, its General
Partner
By:
John D. Carey
President
1
## NY28/MCKEJ/75515.21
WESTFORD OFFICE VENTURE
a Connecticut general partnership
By: CIGNA Income Realty-I Limited
Partnership,
a Delaware limited partnership
By: Cigna Realty Resources, Inc.-
Tenth, a Delaware corporation, its
General Partner
By:
John D. Carey
President
By: Connecticut General Equity Properties-I
Limited Partnership,
a Connecticut limited partnership
By: Connecticut General Realty
Resources, Inc.-Third, its
General Partner
By:
John D. Carey
President
EXECUTED BY PURCHASER this _____ day of January, 1997.
PURCHASER: GLENBOROUGH PROPERTIES, L.P.,
a California limited partnership
By: Glenborough Realty Trust Incorporated,
a Maryland corporation, General Partner
By:
Name:
Title:
Receipt of original copies of this Agreement executed by Seller and
Purchaser is acknowledged this _____ day of , 1997.
ESCROW HOLDER: CHICAGO TITLE COMPANY
By:
Name:
Title:
2
## NY28/MCKEJ/75515.21
SCHEDULE 2.1
TO
AGREEMENT OF PURCHASE AND SALE
ALLOCATION OF PURCHASE PRICE
Property Name Location Price
- ------------- -------- -----
Woodlands Tech Center St. Louis, MO $ 4,583,885
Woodlands Plaza II St. Louis, MO 5,400,815
Westford Corporate Center Westford, MA 10,211,625
Piedmont Plaza Shopping Center Apopka, FL 6,353,900
Overlook Apartments Scottsdale, AZ 11,163,720
Lake Point I, II and III Orlando, FL 6,490,055
44,204,000
The above allocation is intended solely for the purposes of Paragraphs
6.4, 7.1 and 7.2 of the Agreement of Purchase and Sale to which this schedule is
attached and Exhibit A- 3 to such agreement, and shall not be binding on the
parties for any other purpose whatsoever.
1
## NY28/MCKEJ/75515.21
Annex 2
- ----------------------------------------------------------------------
- -----------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
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)
Registrant's telephone number, including area code: (860) 726-6000
Securities registered pursuant to Section
12(b) of the Act:
None
(Title of Each Class)
Securities registered pursuant to Section
12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
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
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Not applicable.
TABLE OF CONTENTS
PART I PAGE
Item 1. Business 3
Item 2. Properties 6
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
PART II
Item 5. Market for Registrant's Common Equity and Related Security Holder Matters 9
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 40
PART III
Item 10. Directors and Executive Officers of the Registrant 40
Item 11. Executive Compensation 42
Item 12. Security Ownership of Certain Beneficial Owners and Management 43
Item 13. Certain Relationships and Related Transactions 43
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 44
SIGNATURES 46
2
PART I
ITEM 1. BUSINESS
The Registrant, Connecticut General Equity Properties-I Limited Partnership
(the "Partnership") was formed on November 14, 1983, under the Uniform Limited
Partnership Act of the State of Connecticut for the purpose of acquiring,
operating, holding for investment and disposing of industrial and office
buildings and service center space and, to a lesser extent, residential
properties. On January 31, 1984, the Partnership commenced an offering of
$50,000,000 (subject to increase up to $65,000,000) of Limited Partnership
Interests (the "Units") at $1,000 per Unit, pursuant to a Registration Statement
on Form S-11 under the Securities Act of 1933 (Registration No.
2-87976).
The General Partner of the Partnership is Connecticut General Realty
Resources, Inc.-Third (the "General Partner"), which is an indirect wholly owned
subsidiary of CIGNA Corporation, a publicly held corporation whose stock is
traded on the New York Stock Exchange.
A total of 39,236.25 Units were sold to the public prior to the offering's
termination on December 31, 1985. The holders of 12,314 Units were admitted to
the Partnership in 1984; the holders of 23,381.75 Units were admitted in 1985;
and on January 2, 1986, the holders of the 3,540.5 remaining Units were admitted
to the Partnership. From the 39,236.25 Units sold, the Partnership received net
proceeds of $35,602,279. The holders of Units ("Unit Holders" or "Limited
Partners") of the Partnership share in the ownership of the Partnership's real
property investments according to the number of Units held. Subsequent to
admittance to the Partnership, no Unit Holder has made any additional capital
contribution. The Partnership is engaged solely in the business of real estate
investment.
A presentation of information about industry segments is not applicable.
The Partnership is engaged in passive activities and therefore investors
are subject to the applicable provisions of the Internal Revenue Service Code
and Regulations. Losses from "passive activities" (which include any rental
activity) may only offset income from "passive activities". Investors' passive
losses in excess of passive income from all sources are suspended and are
carried over to future years when they may be deducted against passive income
generated by the Partnership in such year (including gain recognized on the sale
of the Partnership's assets) or against passive income derived by investors from
other sources. Any suspended losses remaining subsequent to Partnership
dissolution may be used by investors to offset ordinary income.
The Partnership acquired five commercial properties (including one owned
through a joint venture) located in Missouri, Arizona, Illinois, Florida and
Massachusetts. In order to acquire the properties, the Partnership, which
purchased its properties for all cash, invested a total of $30,803,712, paid
$2,418,158 in acquisition fees and closing costs, established reserves for
improvements of $1,203,321 and established working capital reserves of
$1,177,088.
Pursuant to the Partnership Agreement, the Partnership is required to
terminate on or before December 31, 2013. The Partnership anticipated that prior
to its termination and dissolution, some or all of the Partnership's properties
would be sold, the retention or sale of any property dependent, in part, on the
anticipated remaining economic benefits of continued ownership. It was expected
that most sales would occur after a period of ownership extending from nine to
twelve years after acquisition. The Partnership sold Courtyard Shopping Center,
located near Chicago in Villa Park, Illinois, on January 11, 1990. The
Partnership sold Westside Industrials located in Phoenix, Arizona as follows:
two of the six buildings (42,480 of the 105,560 square feet) on April 15, 1994;
one additional building (12,600 square feet) on April 27, 1995; and the
remainder of the project on December 26, 1995. Reference is made to Item 7 and
Item 8 for further descriptions of the sales. The General Partner estimates that
the sales of the remaining properties and termination of the Partnership may
occur in the next four to five years.
3
The Partnership has made the real property investments set forth in the
following table:
===================================================================================================================================
Name, Type of Property and PURCHASE PRICE ACQUISITION SIZE (D) DATE OF TYPE OF
Location (A)(B)(C) FEES AND SQ. FT. PURCHASE OWNERSHIP
EXPENSES
- -----------------------------------------------------------------------------------------------------------------------------------
1. Woodlands Plaza II $7,902,880 $498,052 72,465 10-15-84 100% fee simple interest
Office Building
St. Louis, Missouri
- -----------------------------------------------------------------------------------------------------------------------------------
2. Westside Industrials $2,976,000 $350,266 105,560 02-01-85 100% fee simple interest
(formerly Interpark) (sold)
Phoenix, Arizona (e)
- -----------------------------------------------------------------------------------------------------------------------------------
3. Lake Point, I, II, III $9,603,000 $803,929 135,008 07-31-86 100% fee simple interest
Service Center
Orlando, Florida
- -----------------------------------------------------------------------------------------------------------------------------------
4. Westford Corporate $4,321,832 $372,000 162,765 09-11-86 26.08% fee simple
Center, Westford, interest
Massachusetts (f)
- -----------------------------------------------------------------------------------------------------------------------------------
5. Courtyard Shopping $6,000,000 $393,911 57,332 05-10-85 100% fee simple interest
Center (sold)
Villa Park, Illinois(g)
===================================================================================================================================
[FN]
(a) The Partnership did not incur any debt in connection with the acquisition
of these investment properties.
[FN]
(b) Excludes all broker fees paid at closing.
[FN]
(c) This table does not reflect purchase price adjustments resulting from
master lease provisions.
[FN]
(d) Represents net leasable area at acquisition date; net leasable area may
change due to expansion or tenant improvements.
[FN]
(e) The Partnership sold two of the six buildings, representing 42,480 of the
105,560 square feet on April 15, 1994. An additional building, representing
12,600 square feet was sold on April 27, 1995. The remaining three
buildings were sold on December 26, 1995.
[FN]
(f) The Partnership owns a 26.08% interest in the joint venture partnership
which owns the Westford Corporate Center. CIGNA Income Realty-I Limited
Partnership, an affiliated partnership, is the co-venturer. The information
shown represents the Partnership's share of the total investment.
[FN]
(g) The Partnership sold the Courtyard Shopping Center on January 11, 1990.
4
Woodlands Plaza II is located in the West County office market of Greater
St. Louis. Overall, the St. Louis economy saw continued growth through 1995,
albeit at a slightly slower pace than in 1994. During the year, St. Louis added
approximately 34,000 new jobs and unemployment fell to a twenty year low of
4.8%. While the manufacturing sector continued to decline, the service sector,
including computer services, health and tourism, grew by approximately 3.3% for
the year. The defense industry was also helped by a $1.8 billion contract from
the United States Air Force awarded to McDonnell Douglas, the largest defense
manufacturer and employer in the state. Office markets throughout the state were
strong. The West County suburban office market contains a total of approximately
12 million square feet. The West County market had an average occupancy of 95%
during 1995, up slightly from 1994. While the suburban office market is
improving, there are still many alternatives for users in the 15,000 square foot
range. The vacancies in the market create enough significant competition that
the investment requirements for re-leasing space is significant. While West
County markets continue to report positive absorption and rental rates are
improving, tenant improvements remain high as a result of the competitive
choices available. The Woodlands submarket of West County, where Woodlands Plaza
II is located, is comprised of nine buildings containing just under 400,000
square feet. Occupancy in 1995 for the Woodlands submarket remained at 82%.
Woodlands Plaza II ended the year 75% occupied, down from the 92% at the close
of 1994. Average rental rates are estimated to remain level or increase slightly
in 1996. Assisted by the expanding market, the supply of Class A office
buildings has been all but absorbed and rental rates are on the rise. There is
no new construction currently underway, although several developers have
announced that they are ready to begin construction on office buildings that
have already gone through planning and zoning.
The Orlando metropolitan area is expected to sustain its steady growth in
population and employment through the end of the decade. The two main sectors of
growth are the trade and service industries. Lake Point I, II and III is located
in the Southern Orlando service center market which contains approximately 3.7
million square feet of service center/warehouse space. Through 1995, new
construction levels in the market were negligible and occupancy levels rose from
84% at the close of 1994 to 87% in 1995 with net absorption of approximately
175,000 square feet of space. Lake Point, which has excellent site access and a
desirable location close to the airport within the Lee Vista Center, was well
ahead of the market at 98%, up significantly from 89% at year end 1994. Rental
rates at the property are competitive with the market range of $4.75 to $8.50
per square foot dependent on grade level or dock-high space. Rents at the
property range from $5.50 to $7.50 per square foot. Lee Vista Center, a planned
business park, is located approximately ten miles southeast of Orlando's central
business district and approximately one mile north of the Orlando International
Airport. Lake Point, which contains a single story office/industrial space with
loading dock areas, is a unique product within the business park and therefore
has limited direct competition. The business park contains mostly office
buildings but also hotels, a daycare center and restaurants. The Orlando Airport
service center market is made up of mostly warehouse or distribution space. In a
recovering market, any development within Lee Vista Center is likely to be
high-rise office, unlikely competition for Lake Point.
Westford Corporate Center is located in the Boston submarket known as the
Northwest Corridor, between Routes I-128 and I-495. During 1995, metropolitan
Boston experienced continued job growth due to the strengthened economy.
Out-migration trends have finally reversed and over one-half of the jobs lost
during the 1989-1992 recession have been regained. Nearly two-thirds of all new
jobs are in the service sector, including computer software, engineering, and
research and health care. Overall, manufacturing employment continues to
decline, although the computer hardware industry has finally turned around. The
market in which Westford competes contains approximately 16.8 million square
feet of space with a 19% vacancy rate. Absorption through the end of 1995
totalled approximately 1,177,300 square feet. Westford maintained its 100%
occupancy level in 1995. Rents for R&D space held steady during the year in the
$5.75 to $7 per square foot range. Rents and occupancy levels in the market will
move up slowly as the market works through an estimated 1-2 year supply of
available R&D space.
Approximate occupancy levels for the properties on a quarterly basis are
set forth in the table in Item 2.
The Partnership itself has no employees; however, the unaffiliated property
managers engaged by CIGNA Investments, Inc. ("CII", formerly CIGNA Capital
Advisers, Inc.) on behalf of the Partnership maintain on-site staff. For a
description of asset management services provided by CII and the terms of
transactions between the Partnership and affiliates of the General Partner, see
Item 13 and the Notes to Financial Statements.
5
The following list details gross revenues from operations for each of the
Partnership's investment properties as a percentage of the Partnership's total
gross revenues during 1993, 1994 and 1995. Included in this calculation is the
Partnership's interest in the gross revenues of the Westford joint venture. In
each year, interest income accounted for the balance of gross revenues.
1993 1994 1995
---- ---- ----
1. Woodlands Plaza II 31% 29% 36%
Office Building
St. Louis, MO
2. Westside Industrials 15% 12% 7%
Phoenix, AZ (a)
3. Lake Point I, II, III 42% 42% 40%
Service Center
Orlando, FL
4. Westford Corporate Center 11% 15% 15%
Westford, MA
[FN]
(a) The Partnership sold two of the six buildings, representing 42,480 of the
105,560 square feet on April 15, 1994. An additional building, representing
12,600 square feet was sold on April 27, 1995. The remaining three
buildings were sold on December 26, 1995.
ITEM 2. PROPERTIES
The Partnership owns directly and through a joint venture partnership the
properties described in Item 1 herein. Reference is made to Items 1, 7, and 8
for information on properties sold by the Partnership, including sales during
the year ended December 31, 1995. The lease terms on the properties range from
less than one year to ten years, with the majority being three to five years.
Most of the leases contain provisions for one or more of the following:
percentage rent, escalation and common area maintenance recapture. Reference is
made to the Notes to Financial Statements for information regarding minimum
annual future rentals under existing leases and operating expense
reimbursements. In the opinion of the General Partner, the Partnership's
properties continue to be adequately insured.
Woodlands Plaza II is a three-story suburban office structure situated on
Lots 1, 2 and 3 of The Woodlands Business Park located in St. Louis, Missouri.
The building was completed in July 1983 and sold to the Partnership in October
1984. The building design features exterior masonry construction and is divided
into two separate buildings that overlook the Woodlands Lake. The building has
approximately 71,927 square feet of net leasable area.
The following table provides information on tenants that occupy ten percent
or more of Woodland Plaza II's net leasable area.
====================================================================================================================================
TENANT SQUARE PRINCIPAL BASE RENT LEASE RENEWAL OTHER
FOOTAGE BUSINESS PER ANNUM DATES OPTION INFORMATION
====================================================================================================================================
1. Doane Agricultural 11,301 Agriculture $155,808 08/01/91- 1, 5 year ext. --
Services Co. 07/31/96 option
- ------------------------------------------------------------------------------------------------------------------------------------
2. Dun & Bradstreet 11,101 Financial $169,290 07/01/95- 1, 5 year ext. --
Services 06/30/00 option
====================================================================================================================================
6
The following table provides lease expiration information relative to
Woodlands Plaza II.
=================================================================================================================
YEAR NUMBER OF LEASES SQUARE FOOTAGE ANNUALIZED BASE PERCENTAGE OF TOTAL
EXPIRING RENT ANNUALIZED
BASE RENT
- -----------------------------------------------------------------------------------------------------------------
1996 2 16,590 $236,724 30%
- -----------------------------------------------------------------------------------------------------------------
1997 4 8,732 $127,207 16%
- -----------------------------------------------------------------------------------------------------------------
1998 1 2,941 $42,645 5%
- -----------------------------------------------------------------------------------------------------------------
1999 2 8,531 $127,296 16%
- -----------------------------------------------------------------------------------------------------------------
2000 3 15,369 $232,894 30%
- -----------------------------------------------------------------------------------------------------------------
2001 1 1,294 $21,998 3%
=================================================================================================================
Lake Point I, II, III is within Lee Vista Center, a planned business park,
located in the southeast sector of the Orlando, Florida, metropolitan area. Lee
Vista Center is located approximately 10 miles southeast of Orlando's central
business district and approximately 1 mile north of the Orlando International
Airport. The property consists of four single-story office/service buildings and
two single-story office/warehouse buildings containing a total of 135,008 square
feet of gross leasable area.
The following table provides information on tenants that occupy ten percent
or more of Lake Point I, II, III's net leasable area.
====================================================================================================================================
TENANT SQUARE PRINCIPAL BASE RENT LEASE RENEWAL OTHER
FOOTAGE BUSINESS PER ANNUM DATES OPTION INFORMATION
====================================================================================================================================
1. Attorney's Title 27,360 Insurance $373,557 07/31/87- -- Step up rent
Insurance Fund 02/28/07
- ------------------------------------------------------------------------------------------------------------------------------------
2. Alpha Flight Services 32,400 Catering $180,667 02/01/89- 1, 5 year ext. --
01/31/99 option
- ------------------------------------------------------------------------------------------------------------------------------------
3. Krogel Air Freight 14,824 Air Freight $75,602 12/01/95- -- Step up rent
11/30/00
====================================================================================================================================
The following table provides lease expiration information relative to Lake
Point I, II, III.
=================================================================================================================
YEAR NUMBER OF LEASES SQUARE FOOTAGE ANNUALIZED PERCENTAGE OF TOTAL
EXPIRING BASE RENT ANNUALIZED
BASE RENT
- -----------------------------------------------------------------------------------------------------------------
1996 5 29,204 $247,644 21%
- -----------------------------------------------------------------------------------------------------------------
1997 1 1,836 $15,491 1%
- -----------------------------------------------------------------------------------------------------------------
1998 3 22,184 $230,501 20%
- -----------------------------------------------------------------------------------------------------------------
1999 1 32,400 $180,667 16%
- -----------------------------------------------------------------------------------------------------------------
2000 2 19,864 $118,442 10%
- -----------------------------------------------------------------------------------------------------------------
Thereafter 1 27,360 $373,557 32%
=================================================================================================================
7
The following list compares approximate occupancy levels by quarter for the
Partnership's investment properties during 1991, 1992, 1993, 1994 and 1995:
==========================================================================================================================
WOODLANDS PLAZA II WESTSIDE IND. PARK LAKE POINT I, II, III WESTFORD
OFFICE BLDG. PHOENIX, AZ (A) SERVICE CENTER CORPORATE CENTER
ST. LOUIS, MO ORLANDO, FL WESTFORD, MA (B)
==========================================================================================================================
- --------------------------------------------------------------------------------------------------------------------------
1991
- -----------------
AT 03/31 75% 93% 96% 10%
AT 06/30 75% 96% 96% 10%
AT 09/30 82% 93% 91% 10%
AT 12/31 82% 93% 91% 10%
- --------------------------------------------------------------------------------------------------------------------------
1992
- -----------------
AT 03/31 77% 97% 86% 60%
AT 06/30 73% 97% 86% 60%
AT 09/30 84% 97% 85% 60%
AT 12/31 84% 97% 85% 60%
- --------------------------------------------------------------------------------------------------------------------------
1993
- -----------------
AT 03/31 87% 97% 88% 60%
AT 06/30 80% 74% 88% 60%
AT 09/30 90% 67% 94% 60%
AT 12/31 81% 67% 93% 75%
- --------------------------------------------------------------------------------------------------------------------------
1994
- -----------------
AT 03/31 81% 67% 90% 75%
AT 06/30 78% 100% 83% 85%
AT 09/30 84% 85% 89% 100%
AT 12/31 92% 80% 89% 100%
- --------------------------------------------------------------------------------------------------------------------------
1995
- -----------------
AT 03/31 94% 80% 100% 100%
AT 06/30 90% 100% 100% 100%
AT 09/30 79% 100% 100% 100%
AT 12/31 75% N/A 98% 100%
==========================================================================================================================
An "N/A" indicates that the property was not owned by the Partnership at the end
of the quarter.
[FN]
(a) Two of six buildings at Westside Industrials were sold on April 15, 1994,
representing 42,480 of the 105,560 square feet. An additional building,
representing 12,600 square feet was sold on April 27, 1995. The remaining
three buildings were sold on December 26, 1995.
[FN]
(b) See the Notes to Financial Statements for a description of the joint
venture partnership through which the Partnership has made this real
property investment. The Partnership owns a 26.08% interest in the joint
venture which owns the property.
8
ITEM 3. LEGAL PROCEEDINGS
Neither the Partnership nor its properties are party to, or the subject of,
any legal proceedings involving any material exposure.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
As of December 31, 1995, there were approximately 3,858 record Unit
Holders. There is no established public trading market for Units. The General
Partner will not redeem or repurchase Units.
The Revenue Act of 1987 adopted provisions which have an adverse impact on
investors in a "publicly traded partnership" ("PTP"). A PTP is a partnership
whose interests are traded on an established securities market or readily
tradable on a secondary market (or the substantial equivalent thereof). If the
Partnership were classified as a PTP, (i) the Partnership may be taxed as a
corporation and (ii) the passive activity rules of section 469 are applied
separately with respect to items attributable to each publicly traded
partnership. On November 29, 1995, the Internal Revenue Service ("IRS") issued
the Final PTP Regulations under section 1.7704-1. The Final PTP Regulations are
effective for the tax years beginning after December 31, 1995. However, a
transition rule exists for partnerships that were engaged in an activity before
December 4, 1995 and that do not add a substantial new line of business after
that date. The Partnership qualifies for the transition rule and may continue to
rely on Notice 88-75 for guidance through the end of 2005. In Notice 88-75, the
IRS established alternative safe harbors that allow interests in a partnership
to be transferred or redeemed in certain circumstances without causing the
partnership to be characterized as a PTP. Units of the Partnership are not
listed or quoted for trading on an established securities exchange. However,
CIGNA Financial Partners ("CFP") will, upon request, provide a Limited Partner
desiring to sell or transfer Units with a list of secondary market firms which
may provide a means for matching potential sellers with potential buyers of
Units, if available. Frequent sales of Units utilizing these services could
cause the Partnership to be deemed a PTP. The Partnership has adopted a policy
prohibiting transfers of Units in secondary market transactions unless,
notwithstanding such transfers, the Partnership will satisfy at least one of the
safe harbors. Although such a restriction could impair the ability of investors
to liquidate their investment, the service provided by CFP described above
should allow a certain number of transfers to be made in compliance with the
safe harbor.
The Partnership declared quarterly cash distributions to Limited Partners
for 1995 and 1994 as set forth in the following table:
Cash Distribution per Unit
Quarter Date Paid (a) 1995 1994
-------- ------------- ---- ----
1st May 15 $ 5.01 $ 7.50
2nd August 15 13.71 (c) 32.01 (b)
3rd November 15 10.02 (d) 5.01
4th February 15 37.31 (e) 3.12
-------- --------
$ 66.05 $ 47.64
======== ========
<FN>
(a) Quarterly distributions are paid 45 days following the end of the calendar quarter.
<FN>
(b) Includes $27.00 per Unit from a partial sale of Westside Industrials.
<FN>
(c) Includes $8.70 per Unit from a partial sale of Westside Industrials.
<FN>
(d) Includes $4.84 per Unit from a lease termination fee received at Woodlands Plaza II.
<FN>
(e) Includes $28.31 per Unit from the sale of the remainder of Westside Industrials.
9
Reference is made to Item 6 for information on cash distributions paid to
Limited Partners during 1995, 1994, 1993, 1992, and 1991.
There are no material legal restrictions upon the Partnership's ability to
make distributions in accordance with the provisions of the Partnership
Agreement. The Partnership intends to continue its policy of making quarterly
distributions of distributable cash from operations. Reference is made to Notes
to Financial Statements for a description of payments to the State of
Connecticut on behalf of Limited Partners and charged to Limited Partner capital
accounts.
ITEM 6. SELECTED FINANCIAL DATA (A)
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
DECEMBER 31, 1995, 1994, 1993, 1992, 1991
(NOT COVERED BY REPORT OF INDEPENDENT ACCOUNTANTS)
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Total assets (b) $ 15,779,061 $ 15,886,403 $ 18,116,233 $ 18,841,802 $ 23,231,572
Total income 2,761,823 2,338,050 2,600,369 2,649,750 2,736,543
Net income (loss) (c) 1,173,396 (232,492) 406,434 (2,651,499) 230,926
Net income (loss) per Unit (c) 29.34 (7.08) 10.26 (66.90) 5.83
Cash distributions to
limited partners (d) 1,250,072 1,890,411 1,174,738 1,727,963 1,040,549
Cash distributions per Unit (d) 31.86 48.18 29.94 44.04 26.52
<FN>
(a) The above selected financial data should be read in conjunction with the
financial statements and the related notes appearing herein. Reference is
made to Notes to Financial Statements for a description of payments to the
State of Connecticut on behalf of limited partners. These payments are
charged to limited partner capital accounts and have not been included as
part of the above presentation.
<FN>
(b) Total assets includes Partnership's equity investment in joint venture. See
the Notes to Financial Statements for a description of the joint venture.
<FN>
(c) Included in 1995 is a gain on sale of property of $464,957 ($449,775 to
limited partners or $11.46 per unit). Included in 1994 and 1992 are losses
due to impairment of assets of $835,000 ($21.07 per Unit) and $2,791,040
($70.42 per Unit), respectively. Included in 1994 is a gain on sale of
property of $245,873 ($195,721 to limited partners or $4.99 per Unit).
<FN>
(d) Quarterly distributions are paid 45 days following the end of the calendar
quarter. Cash distributions to limited partners in 1995 include proceeds
from the sale of Building #6 of Westside Industrials. Included in 1994 are
the proceeds from the sale of Buildings #1 and #2 of Westside Industrials.
10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On January 31, 1984, the Partnership commenced an offering of $50,000,000
(subject to an increase to $65,000,000) of limited partnership interests
pursuant to a Registration Statement on Form S-11 under the Securities Act of
1933. The offering terminated on December 31, 1985 and a total of 39,236.25
Units were issued by the Partnership and assigned to the public at $1,000 per
interest. Subsequent to the termination of the offering, no Unit Holder has made
any additional capital contribution. The Partnership does not expect to seek
additional capital contributions.
After deduction of selling expenses and other offering costs, the
Partnership had $35,602,279 with which to make investments in real properties,
to pay legal fees and other costs (including acquisition fees) related to such
investments, for working capital reserves and to fund extra lease-up costs. A
portion of the proceeds was utilized to acquire the properties described in Item
1 herein. The Partnership did not incur any debt in connection with the
acquisition of the properties. The Partnership does not intend to incur mortgage
indebtedness relative to the properties at any time during the term of the
Partnership.
At December 31, 1995, the Partnership's cash and cash equivalents and the
Partnership's share of cash and cash equivalents from the Westford Office
Venture totalled $2,052,475 and $275,388, respectively, which were available for
working capital requirements, cash reserves and distributions to partners.
Reference is made to Item 5 for information on cash distributions to Limited
Partners for 1995. Cash distributions for 1995 included sales proceeds from the
two partial sales of Westside Industrials during 1995 and a lease termination
fee received from a significant vacating tenant at Woodlands Plaza II. The
remainder of the cash distributed for 1995 was equivalent to the Partnership's
adjusted cash from operations. The Partnership's cash distributions for 1996 are
expected to reflect actual operating results subject to changes in reserves for
liabilities or leasing risk. Based on property operational plans for 1996, the
General Partner estimates that the Partnership will produce positive cash flow
from operations, net of capital improvements and Partnership expenses.
Reference is made to Item 1 for a description of the Partnership's
investment properties and a description of the markets in which the properties
operate. Reference is made to Item 2 for significant tenant information and
lease information.
Early in 1995, a potential user/owner approached the manager for the
Westside property and offered to buy vacant building #6 (12,600 square feet,
representing 100% of the vacant space at December 31, 1994) at a gross price of
$29 per square foot. On April 27, 1995, the Partnership sold building #6 for a
gross sales price of $365,400. After closing costs and expenses, the Partnership
netted approximately $341,000 which was distributed to Limited Partners along
with the second quarter distribution on August 15, 1995. On December 26, 1995,
the Partnership sold the remainder of the Westside Industrials property
(buildings #3, 4 & 5) to Zimmerman Properties, Inc. for a gross sales price of
$1,175,000. After closing costs and expenses, the Partnership netted
approximately $1,110,600 which was distributed to Limited Partners along with
the fourth quarter distribution on February 15, 1996. Reference is made to Notes
to Financial Statements for a description of the book and tax effects of the
sales.
Lake Point's adjusted cash from operations for the year totalled
approximately $537,000 in 1995 compared with $505,000 in 1994. A significant
amount of leasing led to tenant improvements and leasing commissions of $327,000
for 1995. Lake Point ended 1995 at 98% occupancy, up from 89% at year-end 1994.
During 1995, an early renewal was executed with a tenant occupying 27,360 square
feet, 20% of total space, extending the original maturity date of 1997 to 2007.
Additionally, 14,988 square feet of vacant space was leased and lease renewals
representing 22,120 square feet were executed. For 1996, five leases
representing 29,204 square feet are set to expire, of which 23,799 is scheduled
to be renewed. Of the renewals scheduled, 52% is from one tenant currently
occupying 12,278 square feet. Negotiations to renew the lease are already
underway and are expected to be concluded well in advance
11
of the current expiration date of August 1996. New leasing or expansions are
scheduled to total 7,565 square feet. Based on the leasing planned during 1996,
tenant improvements and leasing commissions have been estimated to approximate
$312,000, to be funded by cash from operations. Additionally roof repairs and a
plumbing project have been estimated at $68,000, also to be funded by cash from
operations.
Woodlands Plaza generated adjusted cash from operations of $487,000 after
$148,000 of leasing commissions, tenant improvements and capital expenditures,
versus a deficit of $9,000 for 1994. An extensive amount of leasing was
completed during 1994 (16,608 square feet of space was leased) and included
approximately $305,000 of leasing costs and capital improvements. Leasing
exposure for 1995 included 24,168 square feet, or 34% of net rentable area,
including an early termination of a 10,319 square foot tenant. Physical
occupancy of 92% at the beginning of the year dropped to 75% by December 31,
1995. During the second quarter of 1995, a lease was signed with Dun &
Bradstreet for 11,101 square feet to replace the 10,319 square feet vacated by
Magnum Mortgage. The Partnership benefited from an early termination fee of
$190,000 collected from Magnum Mortgage. Two leases, accounting for 3,522 square
feet, were renewed during 1995, one new lease for 2,040 square feet was signed
and leases representing 11,741 square feet expired without renewal or
replacement. A new five year lease for 14,048 square feet, not included in
year-end 1995 occupancy, was signed during December 1995 by Mosby Year Book for
occupancy by the second quarter of 1996. Rent will approximate $16 per square
foot with $11 per square foot in tenant improvements. Leasing exposure for 1996,
two tenants representing 16,590 square feet, 23% of total space, and 30% of
gross annual rent, is minimal as both leases are expected to renew with slight
increases in base rent. Commissions and tenant improvements for the two renewals
are estimated to approximate $198,000. In addition, costs for the Mosby Year
Book lease and the two December 1995 renewals are estimated to be funded in 1996
at a total cost of $255,860. Based on current estimates, leasing costs will be
funded by cash from property operations.
Westford Corporate Center is owned by a joint venture partnership in which
the Partnership owns a 26.08% equity investment. Adjusted cash from operations
at Westford Corporate Center for 1995 was $1,155,000 ($301,000 attributable to
the Partnership's interest) after capital expenditures of $44,000. During the
year one of the two existing tenants expanded into space vacated by a former
tenant. The property remains at 100% occupancy. Cash flow from operations in
1996 is expected to be similar to 1995, with no capital expenditures planned.
The Partnership's strategy includes property sales in two to three years
for each of the Partnership's wholly owned properties. The Westford property,
26.08% owned through a joint venture, may have to be held until the existing
tenants' leases reach expiration and are renewed or the space is leased to new
tenants in 1999 or 2000.
RESULTS OF OPERATIONS
Partnership net operating income, (total revenue less property operating
expenses, general and administrative expenses and fees and reimbursements to
affiliates and exclusive of the Partnership's share of the joint venture),
increased in 1995 to approximately $1,407,000 versus approximately $1,024,000 in
1994.
At Lake Point, net operating income increased approximately $150,000 in
1995. The increase was primarily attributable to a rise in rental income
resulting from new leasing activity.
Woodlands Plaza's net operating income increased in 1995 by approximately
$338,000 over 1994, due to a rise in rental income from extensive leasing
activity in the latter half of 1994, and $230,000 of lease termination fees
collected in 1995.
At Westside Industrials, net operating income was lower in 1995 than 1994
by approximately $66,000. Revenues declined in 1995 because of the sale of
buildings #1 and #2 in April 1994 and the loss of three unreplaced tenants in
the second half of 1994 occupying 12,600 square feet. In addition, 1994 revenue
included the residual of a 1993 lease termination fee. Offsetting the decline in
revenue was a reduction in property operating expenses because of the property
sale and because of the nonrecurring exterior painting and landscaping projects
completed in 1994.
12
A majority of the balance of the change in net operating income from 1994
to 1995 represents Partnership management fees and interest income. Management
fees are based on adjusted cash from operations, which increased in 1995.
RESULTS - 1995 COMPARED WITH 1994
Rental income increased by approximately $360,000 for the year ended
December 31, 1995, as compared with 1994, as a result of the tenant changes at
each of the Partnership's properties. Rental income at Woodlands increased
approximately $348,000 for the year due to revenues generated by extensive
leasing activity at the property during 1994 and three lease termination fees
totalling $230,000 received during 1995. At Westside, rental income decreased
approximately $104,000 due to the sale of buildings #1 and #2 in April 1994 and
the loss of unreplaced tenants occupying 12,600 square feet in the latter half
of 1994. In addition, Westside's 1994 revenue included the residual of a 1993
lease termination fee. Rental income at Lake Point increased approximately
$116,000 for the year due to an increase in scheduled rent resulting from
leasing activity.
The increase in other income for the year ended December 31, 1995, as
compared with 1994, was primarily the result of expense charge-back billings to
the new tenants at Lake Point as allowed by the negotiated lease terms.
The increase in interest income for the year ended December 31, 1995, as
compared with 1994, was the result of an increase in interest rates on short
term investments combined with higher average cash balances.
Property operating expenses decreased for the year ended December 31, 1995,
as compared with 1994, as a result of the partial sales of Westside. In
addition, Westside incurred nonrecurring repairs and maintenance costs in 1994
due to exterior painting and landscaping projects. An increase in operating
expenses at Woodlands was primarily due to property management fees (earned as a
percentage of revenues) coupled with expenses for one-time maintenance and space
planning projects. In addition, Woodland's incurred additional utility and
janitorial expenses due to a higher level of occupancy. Woodlands recorded lower
property tax expenses as a result of a successful property tax appeal in 1995.
Property operating expenses increased slightly at Lake Point due to property
management fees (earned as a percentage of revenues).
The increase in fees and reimbursements to affiliates for the year ended
December 31, 1995, as compared to 1994, was primarily due to increased
partnership management fees as a result of an increase in adjusted cash from
operations.
Depreciation and amortization increased for the year ended December 31,
1995, as compared with 1994, due primarily to accelerated depreciation and
amortization of assets associated with vacated tenants at Woodlands and as a
result of new tenant improvements at Lake Point. Partially offsetting the
increase was a decrease in depreciation and amortization expense at Westside due
to the sale of buildings #1 and #2 in April 1994 and building #6 in April 1995.
The gains on sale were the result of the Westside sales of building #6 in
April 1995 and buildings #3, #4 and #5 in December 1995. The sale of buildings
#1 and #2 occurred in April 1994.
The joint venture operations improved for the year ended December 31, 1995,
as compared with 1994, due to a tenant's expansions in the second and third
quarters of 1994.
RESULTS - 1994 COMPARED WITH 1993
Rental income decreased by approximately $203,000 for the year ended
December 31, 1994, as compared with 1993, as a result of the tenant changes
which have decreased rental income at each of the Partnership's properties.
Rental income at Woodlands Plaza decreased approximately $37,000 due to
decreased average occupancy at the property. In addition, during the second
quarter of 1993, a tenant at Woodlands paid a premium to extend their occupancy
beyond the lease expiration date. At Westside Industrials, rental income
decreased approximately $118,000, due to the loss of income from a lease buy-out
negotiated as part of an early termination in 1993, the loss of 7,560 occupied
square feet from the sale of buildings #1 and #2 in April 1994, and the loss of
tenants occupying
13
12,600 square feet in the latter half of 1994. Rental income at Lake Point
decreased approximately $48,000 due to decreased average occupancy and renewal
of several tenants at lower rates in the second quarter of 1994.
Other income decreased approximately $75,000 for the year ended December
31, 1994, as compared with 1993. The decrease was due primarily to lower
recoveries of operating expenses and taxes at Woodlands and Lake Point. The
decrease was expected at Woodlands as base years have taken the place of expense
stops on new and renewed leases in addition to an overall drop in expenses at
the property. The decrease at Lake Point was due to decreased average occupancy.
In addition, 1993 includes a $10,000 forfeited security deposit from the buy-out
agreement at Westside.
The increase in interest income for the year ended December 31, 1994, as
compared with 1993, was the result of an increase in the Partnership's average
cash balance attributable to the net proceeds from the sale of buildings #1 and
#2 of the Westside property and an increase in rates during the year.
Property operating expenses decreased overall as a result of decreases at
Westside and Woodlands for the year ended December 31, 1994, as compared with
1993. The total decrease at Westside was due to lower repairs and maintenance
and property tax costs resulting from the sale of buildings #1 and #2. In
addition, Westside's 1993 results included plumbing expenses and parking lot
lighting. The decrease was partially offset by exterior painting expenditures at
Westside incurred in 1994. The decrease at Woodlands was attributable to
nonrecurring parking lot repairs made during 1993 and decreased utility usage as
a result of occupancy changes in 1994. At Lake Point, real estate taxes
increased in 1994 as a result of an increase in the assessment value and the
mill rate.
Depreciation and amortization decreased for the year ended December 31,
1994, as compared with 1993, due to the expiration of the useful lives of
certain assets.
In 1994 the Partnership recorded impairment losses relative to Woodlands
Plaza and Westside due to estimated future cash flow declines reflecting a
change in the estimated holding period of the Woodlands property and increased
capital expenditures and leasing costs at Westside.
The improvement in operating results by the joint venture property for the
year ended December 31, 1994, as compared with 1993, was due to the new tenant
which took occupancy in October 1993 and its subsequent expansions in April and
September 1994.
The gain on sale was the result of the sale of buildings #1 and #2 of the
Westside property in April 1994.
INFLATION
With inflation at a low rate during 1995, 1994, and 1993, the effect of
inflation and changing prices on current revenue and income from operations has
been minimal.
Any significant inflation in future periods may increase rental rates (from
leases to new tenants or renewals of leases to existing tenants) assuming no
major changes in market conditions. At the same time, it is anticipated that
property operating expenses will be similarly affected. Assuming no major
changes in occupancy levels, increases in rental income are expected to cover
inflation driven increases in the cost of operating the properties and in
property taxes.
Inflation may also contribute to capital appreciation of the Partnership's
investment properties over a period of time as rental rates and replacement
costs of properties increase.
The recapture and escalation clauses that exist on certain of the leases at
each of the Partnership's properties offer the Partnership some protection
against inflation. Escalation clauses offset the increases in operating expenses
under inflation. As operating expenses increase due to inflation so will the
escalation revenues due to the Partnership,
14
offsetting, at least in part, the increase in total expenses. The recapture
provisions protect the Partnership from rising costs of common area maintenance
as well as taxes and other operating expenses by passing these increases
through, at least partially, to the lessees.
15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
INDEX
PAGE
Report of Independent Accountants 17
Financial Statements:
Balance Sheets, December 31, 1995 and 1994 18
Statements of Operations, For the Years Ended December 31, 1995, 1994 and 1993 19
Statements of Partners' Capital (Deficit), For the Years Ended December 31, 1995, 1994 and 1993 20
Statements of Cash Flows, For the Years Ended December 31, 1995, 1994 and 1993 21
Notes to Financial Statements 22
Schedules:
III - Real Estate and Accumulated Depreciation, December 31, 1995 28
Schedules not filed:
All schedules other than those indicated in the index have been omitted as
the required information is inapplicable or the information is presented in the
financial statements or related notes.
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
UNCONSOLIDATED VENTURE
WESTFORD OFFICE VENTURE
INDEX
PAGE
Report of Independent Accountants 30
Financial Statements:
Balance Sheets, December 31, 1995 and 1994 31
Statements of Operations, For the Years Ended December 31, 1995, 1994 and 1993 32
Statements of Partners' Capital, For the Years Ended December 31, 1995, 1994 and 1993 33
Statements of Cash Flows, For the Years Ended December 31, 1995, 1994 and 1993 34
Notes to Financial Statements 35
Schedules:
III - Real Estate and Accumulated Depreciation, December 31, 1995 39
Schedules not filed:
All schedules other than those indicated in the index have been omitted as
the required information is inapplicable or the information is presented in the
financial statements or related notes.
16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Connecticut General Equity Properties-I
Limited Partnership
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of Connecticut
General Equity Properties-I Limited Partnership at December 31, 1995 and 1994,
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Partnership's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Hartford, Connecticut
February 21, 1996
17
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS 1995 1994
------ ---- ----
Property and improvements, at cost:
Land and improvements $ 2,533,388 $ 2,810,237
Buildings 11,904,091 13,002,842
Tenant improvements 2,872,782 2,879,677
--------------- ---------------
17,310,261 18,692,756
Less accumulated depreciation 6,783,301 6,686,953
--------------- ---------------
Net property and improvements 10,526,960 12,005,803
Equity investment in unconsolidated joint venture 2,679,392 3,043,024
Cash and cash equivalents 2,052,475 368,015
Accounts receivable (net of allowance of $6,535 in 1995
and $1,684 in 1994) 107,677 97,349
Prepaid expenses and other assets 27,971 76,872
Deferred charges, net 384,586 295,340
--------------- ---------------
Total $ 15,779,061 $ 15,886,403
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Accounts payable and accrued expenses (including $32,837
in 1995 and $9,324 in 1994 due to affiliates) $ 161,220 $ 220,449
Tenant security deposits 86,457 102,076
Unearned income 61,649 6,269
--------------- ---------------
Total liabilities 309,326 328,794
--------------- ---------------
Partners' capital (deficit):
General Partner:
Capital contributions 1,000 1,000
Cumulative net income 165,478 143,212
Cumulative cash distributions (167,140) (156,705)
--------------- ----------------
(662) (12,493)
--------------- ---------------
Limited partners (39,236.25 Units):
Capital contributions, net of offering costs 35,602,279 35,602,279
Cumulative net income 3,700,536 2,549,406
Cumulative cash distributions (23,832,418) (22,581,583)
--------------- ---------------
15,470,397 15,570,102
--------------- ---------------
Total partners' capital 15,469,735 15,557,609
--------------- ---------------
Total $ 15,779,061 $ 15,886,403
=============== ===============
The Notes to Financial Statements are an integral
part of these statements.
18
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
---- ---- ----
Income:
Base rental income $ 2,435,302 $ 2,075,169 $ 2,278,062
Other operating income 257,244 209,731 284,251
Interest income 69,277 53,150 38,056
------------- ------------- --------------
2,761,823 2,338,050 2,600,369
------------- ------------- --------------
Expenses:
Property operating expenses 964,050 981,864 1,024,209
General and administrative 142,119 151,281 143,965
Fees and reimbursements to affiliates 249,135 181,076 186,304
Depreciation and amortization 856,048 769,621 859,774
Loss due to impairment of assets -- 835,000 --
------------- ------------- --------------
2,211,352 2,918,842 2,214,252
------------- ------------- --------------
Net partnership operating income (loss) 550,471 (580,792) 386,117
Other income:
Gain on sale of property 464,957 245,873 --
Equity interest in joint venture net income 157,968 102,427 20,317
------------- ------------- --------------
Net income (loss) $ 1,173,396 $ (232,492) $ 406,434
============= ============= ==============
Net income (loss):
General Partner $ 22,266 $ 45,368 $ 4,064
Limited partners 1,151,130 (277,860) 402,370
------------- ------------- --------------
$ 1,173,396 $ (232,492) $ 406,434
============= ============= ==============
Net income (loss) per Unit $ 29.34 $ (7.08) $ 10.26
============= ============= ==============
Cash distributions per Unit $ 31.88 $ 48.19 $ 29.95
============= ============= ==============
The Notes to Financial Statements are an integral
part of these statements.
19
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
General Limited
Partner partners Total
Balance (deficit) at December 31, 1992 $ (40,015) $ 18,511,626 $ 18,471,611
Cash distributions (13,573) (1,175,062) (1,188,635)
Net income 4,064 402,370 406,434
------------- -------------- --------------
Balance (deficit) at December 31, 1993 (49,524) 17,738,934 17,689,410
Cash distributions (8,337) (1,890,972) (1,899,309)
Net income (loss) 45,368 (277,860) (232,492)
------------- -------------- --------------
Balance (deficit) at December 31, 1994 (12,493) 15,570,102 15,557,609
Cash distributions (10,435) (1,250,835) (1,261,270)
Net income 22,266 1,151,130 1,173,396
------------- -------------- --------------
Balance (deficit) at December 31, 1995 $ (662) $ 15,470,397 $ 15,469,735
============= ============== ==============
The Notes to Financial Statements are an integral
part of these statements.
20
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
---- ---- ----
Cash flows from operating activities:
Net income (loss) $ 1,173,396 $ (232,492) $ 406,434
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Loss due to impairment of assets -- 835,000 --
Gain on sale of property (464,957) (245,873) --
Deferred rent credits 50,990 43,252 63,085
Depreciation and amortization 856,048 769,621 859,774
Equity interest in joint venture net income (157,968) (102,427) (20,317)
Accounts receivable (10,328) 38,272 (69,517)
Accounts payable and accrued expenses (18,216) (66,507) 21,423
Other, net 88,662 (35,936) 28,531
---------------- ---------------- --------------
Net cash provided by operating activities 1,517,627 1,002,910 1,289,413
---------------- ---------------- --------------
Cash flows from investing activities:
Purchases of property and improvements (283,499) (412,099) (170,503)
Payment of leasing commissions (265,056) (79,587) (62,376)
Proceeds from sale of property 1,540,400 1,115,100 --
Payment of closing costs related to sale of property (85,544) (53,100) --
Distribution from joint venture partnership 521,600 -- --
---------------- ---------------- --------------
Net cash provided by (used in) investing activities 1,427,901 570,314 (232,879)
---------------- ---------------- --------------
Cash flows from financing activities:
Cash distributions to limited partners (1,250,633) (1,890,735) (1,175,156)
Cash distributions to General Partner (10,435) (8,337) (4,604)
---------------- ---------------- --------------
Net cash used in financing activities (1,261,068) (1,899,072) (1,179,760)
---------------- ---------------- --------------
Net increase (decrease) in cash and cash equivalents 1,684,460 (325,848) (123,226)
Cash and cash equivalents, beginning of year 368,015 693,863 817,089
---------------- ---------------- --------------
Cash and cash equivalents, end of year $ 2,052,475 $ 368,015 $ 693,863
================ ================ ==============
Supplemental disclosure of non-cash information:
Accrued purchase of property and improvements $ 1,804 $ 43,019 $ 32,000
================ ================ ==============
The Notes to Financial Statements are an integral
part of these statements.
21
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF ACCOUNTING
The General Partner of Connecticut General Equity Properties-I Limited
Partnership (the "Partnership") is Connecticut General Realty Resources,
Inc.-Third (the "General Partner"), an indirect, wholly owned subsidiary of
CIGNA Corporation. The Partnership is a Delaware limited partnership which owns
and operates three commercial properties (including one owned through a joint
venture) located in Missouri, Florida and Massachusetts. In addition, the
Partnership owned and operated a commercial property located in Arizona, a
portion of which was sold in 1994 with the remainder sold in 1995.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The Partnership's records are maintained on the accrual basis of accounting
for financial reporting purposes and are adjusted for federal income tax
reporting. The net effect of the adjustments as of December 31, 1995, 1994 and
1993, principally relating to the classification of syndication costs,
differences in depreciation methods and impairment losses, are summarized as
follows:
1995 1994 1993
---- ---- ----
Financial Tax Financial Tax Financial Tax
Reporting Reporting Reporting Reporting Reporting Reporting
Total assets $ 15,779,061 $ 24,096,319 $ 15,886,403 $ 24,728,396 $ 18,116,233 $ 26,239,834
Partners' capital (deficit):
General Partner (662) (28,026) (12,493) (24,632) (49,524) (20,733)
Limited partners 15,470,397 23,876,718 15,570,102 24,430,553 17,738,934 25,882,197
Net income (loss) (a):
General Partner 22,266 7,041 45,368 4,438 4,064 6,503
Limited partners 1,151,130 697,000 (277,860) 439,328 402,370 643,807
Net income (loss) per Unit (a): 29.34 17.76 (7.08) 11.20 10.26 16.41
<FN>
(a) Included in 1995 is a gain on sale of property of $464,957 ($449,775 or
$11.46 per Unit to limited partners) for financial reporting purposes and a
loss of $328,484 ($8.29 per Unit) for tax reporting. Included in 1994 is
$835,000 of loss due to impairment of assets for financial reporting only
($21.07 per Unit) and a gain on sale of property of $245,873 ($195,721 or
$4.99 per Unit to limited partners) for financial reporting and a loss of
$80,448 ($2.03 per Unit) for tax reporting.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) PROPERTY AND IMPROVEMENTS: Property and improvements are carried at cost
less accumulated depreciation. The cost represents the initial purchase
price, subsequent capitalized costs and adjustments, including certain
acquisition expenses and impairment losses. Amounts received under master
lease agreements have been treated as a reduction of the related property's
purchase price. Depreciation on the property and improvements is calculated
on the straight-line method based on the estimated useful lives of
buildings and land improvements (15 to 39 years) and tenant improvements
(the respective lease terms). Maintenance and repair expenses are charged
to operations as incurred.
22
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
As a result of inherent changes in market values of real estate property
and improvements, the Partnership reviews potential impairment annually.
The undiscounted future cash flows for each property, as estimated by the
Partnership, is compared to the carrying value. If the carrying value is
greater than the sum of the estimated future undiscounted cash flows, and
deemed other than temporary, an impairment loss is recorded.
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"). Under the Statement, entities should continue to compare the
sum of the expected undiscounted future net cash flows to the carrying
value of the asset. If an impairment exists, the Statement requires a
writedown to the fair value. 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 will adopt this
Statement in the first quarter of 1996; the effect on the Partnership's
results of operations, liquidity and financial condition is not expected to
be material.
B) EQUITY INVESTMENT IN UNCONSOLIDATED JOINT VENTURE: The Partnership uses the
equity method of accounting with respect to its interest in the Westford
Office Venture (the "Venture"), a joint venture partnership with an
affiliated limited partnership.
C) CASH AND CASH EQUIVALENTS: Short-term investments with a maturity of three
months or less at the time of purchase are generally reported as cash
equivalents.
D) PREPAID EXPENSES AND OTHER ASSETS: Other assets include a receivable from a
tenant at Lake Point for reimbursement of tenant improvement costs of
$27,177 and $56,480 at December 31, 1995 and 1994, respectively.
E) DEFERRED CHARGES: Deferred charges consist of leasing commissions and
rental concessions, which are being amortized using the straight-line
method over the respective lease terms.
F) PARTNERS' CAPITAL: Offering costs comprised of sales commissions and other
issuance expenses have been charged to the partners' capital accounts as
incurred.
G) INCOME TAXES: No provision for income taxes has been made as the liability
for such taxes is that of the partners rather than the Partnership.
H) BASIS OF PRESENTATION: Certain amounts in the 1993 and 1994 Financial
Statements have been reclassified to conform to the 1995 presentation.
3. INVESTMENT PROPERTIES
At December 31, 1995, the Partnership owned two commercial properties
directly and a 26.08% interest in another through a joint venture with an
affiliated partnership. The properties are located in Missouri, Florida and
Massachusetts. At December 31, 1995, the properties were operating with leases
in effect generally for a term of three to ten years. No mortgage debt was
incurred in the purchase of the Partnership's properties.
23
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
On January 11, 1990, the Partnership sold the Courtyard Shopping Center for
$6,445,363. The carrying value of the center at the time of sale was $5,666,874.
After deducting closing costs of $233,808, the Partnership recorded a gain on
the sale of $544,681.
On April 15, 1994, the Partnership sold buildings #1 and #2 (totalling
42,480 square feet) of Westside Industrials for $1,115,100. The net proceeds to
the Partnership were $1,062,000 after deducting closing costs. The two buildings
had a carrying value of $816,127 and the Partnership recorded a gain of
$245,873.
With respect to the Partnership's accounting policy for impairment of
assets, the Partnership recognized impairment of asset losses in 1994 and 1992.
In 1994, the Partnership recorded impairments of $600,000 and $235,000 relative
to Woodlands Plaza and Westside, respectively. In 1994, the impairment loss for
Westside was the result of an anticipated decline in estimated future cash flow
resulting from budgeted increases in capital expenditures and leasing costs to
cure current and future vacancies. For Woodlands Plaza, the estimated holding
period of the property was shortened. In 1992, the Partnership recorded
impairments of $1,100,000 and $700,000 relative to Woodlands Plaza and Westside,
respectively. Additionally, in 1992, the Partnership recorded an impairment of
asset loss relative to its joint venture interest in Westford Corporate Center
of $991,040. In 1992, estimated future cash flows declined at Woodlands and
Westside reflecting changes in estimated potential revenue from future leasing.
As a result of the oversupply of space and the continued downward pressure on
rental rates in the markets in which these properties operate, expected future
rental rates would be renewed and/or negotiated to lower rates. At Westford, the
estimated holding period was reduced.
4. VENTURE AGREEMENT
The Partnership has a 26.08% interest in the Westford Office Venture, which
owns the Westford Corporate Center, an office and research/development facility.
The Venture is a joint venture between the Partnership and CIGNA Income Realty-I
Limited Partnership, an affiliated limited partnership.
Summary financial information for the Venture as of and for the years ended
December 31, 1995, 1994 and 1993 follows:
1995 1994 1993
---- ---- ----
Total assets $ 11,280,276 $ 12,671,892 $ 12,343,992
Total liabilities 751,999 749,320 814,161
Total income 1,911,290 1,686,829 1,280,650
Net income 605,705 392,741 77,904
Pursuant to the Joint Venture Agreement, net income or loss, cash
distributions from operations, net income and distributable cash from the sale
or disposition of the property are generally allocated to the venturers in
accordance with their percentage capital contributions. Percentage interests are
subject to change in the future if any additional contributions made by the
venturers to the Venture are disproportionate to their present percentage
interests.
The Venture paid a distribution to the venturers of $2,000,000 in 1995, of
which the Partnership's share was $521,600. No distributions were made by the
Venture in 1994 or 1993.
24
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. DEFERRED CHARGES
Deferred charges at December 31, 1995 and 1994 consist of the following:
1995 1994
---- ----
Deferred leasing commissions $ 988,388 $ 880,435
Accumulated amortization (628,194) (660,477)
------------ ------------
360,194 219,958
Deferred rent credits 24,392 75,382
------------ ------------
$ 384,586 $ 295,340
============ ============
6. LEASES
All of the properties have leases currently in effect which are accounted
for as operating leases. The majority have terms which range from three to five
years. Following is a schedule of minimum annual future rentals based upon
non-cancelable leases currently in effect, assuming no exercise of tenant
renewal options (does not include leases relative to the Partnership's interest
in the Westford Office Venture).
Year ending December 31:
1996 $ 1,784,170
1997 1,451,156
1998 1,296,565
1999 912,899
2000 672,855
Thereafter 3,280,357
Certain of the leases contain provisions whereby tenants pay their pro rata
share of any increases in common area maintenance, taxes and operating expenses
over base period amounts. Pursuant to such provisions, the Partnership earned
$244,671 in 1995, $202,036 in 1994 and $248,679 in 1993. These amounts are
included in other income on the Statement of Operations.
Generally, a portion of the net leasable area for commercial real estate
properties is occupied by significant tenants (occupying ten percent or more of
net leasable area). Significant tenant information for the Partnership's
investment properties, including the property owned through a joint venture, is
as follows: Woodlands Plaza - two tenants occupy 31% of net leasable area and
account for 41% of gross rental revenue; Lake Point - three tenants occupy 55%
of net leasable area and account for 54% of gross rental revenue; Westford - two
tenants occupy 100% of the net leasable area and account for 100% of gross
rental revenue. Any loss of a significant tenant could have a material adverse
effect on the Partnership's results of operations. Although an uncertainty
exists relative to the replacement of a tenant upon early termination, the
revenue effect of an early termination of a significant tenant is tempered by
the potential for termination fees, and is therefore not likely to be material
to the Partnership's liquidity or financial condition.
25
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
7. TRANSACTIONS WITH AFFILIATES
Fees and other expenses incurred by the Partnership related to the General
Partner or its affiliates during the periods ended December 31, 1995, 1994 and
1993 are:
1995 1994 1993
---- ---- ----
Partnership management fee(a) $ 124,050 $ 80,512 $ 88,709
Property management fees(b)(c) 55,633 45,019 53,197
Printing 13,504 11,407 13,036
Reimbursement (at cost) for
out of pocket expenses 55,948 44,138 31,362
------------ ------------ ------------
$ 249,135 $ 181,076 $ 186,304
============ ============ ============
[FN]
(a) Includes management fees attributable to the Partnership's 26.08% interest
in the Westford Office Venture.
[FN]
(b) Does not include property management fees earned by independent management
companies of $112,749, $95,063 and $105,292 for 1995, 1994 and 1993,
respectively. Certain 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.
[FN]
(c) Does not include management fees earned by an affiliate of $14,577, $13,210
and $9,351 attributable to the Partnership's 26.08% interest in the
Westford Office Venture for the years ended December 31, 1995, 1994 and
1993, respectively.
8. PARTNERS' CAPITAL
During 1991, the State of Connecticut enacted income tax legislation, a
part of which affects partnerships. The portfolio income allocations made by the
Partnership to the limited partners are considered Connecticut based income and
subject to Connecticut tax. The Partnership has elected to pay the tax due on
the limited partners' share of portfolio income and, therefore, paid tax due of
$561 directly to the State of Connecticut in April 1995 for the 1994 Form CT-G
Connecticut Group Income Tax Return. The Partnership also accrued the 1995
estimated payment of $763 as of December 31, 1995. These amounts were treated as
reductions of partners' capital and reported as distributions in the
accompanying financial statements.
9. SALE OF INVESTMENT PROPERTY
The sale of the remaining buildings of Westside Industrials was completed
through two separate sales in 1995. On April 27, 1995 the Partnership sold
building #6 (totalling 12,600 square feet) for a gross sales price of $365,400.
The carrying value of the property was $257,629 for financial reporting and
$373,010 for tax reporting. After deducting closing costs of $24,372, the
Partnership recorded a gain of $83,399 for financial reporting and a loss of
$31,982 for tax reporting. On December 26, 1995 the Partnership sold the
remaining three buildings, #3, 4 and 5 (totalling 50,480 square feet), for a
gross sales price of $1,175,000. The carrying value of the property was $729,032
for financial reporting and $1,407,091 for tax reporting. After deducting
closing costs of $61,173 and leasing commissions paid at closing of $3,237, the
Partnership recorded a gain of $381,558 for financial reporting
26
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(A CONNECTICUT LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
and a loss of $296,502 for tax reporting.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," defines the fair value of a financial
instrument as the amount at which the instrument could be exchanged in a current
transaction between willing parties. The carrying amounts of the Partnership's
financial instruments, cash, accounts receivable, other assets, and accounts
payable and accrued liabilities, approximate fair value because of the short
maturity of such instruments.
11. PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net income or loss and
cash distributions from operations, as well as any net losses arising from the
sale or disposition of investment properties are to be allocated 1% to the
General Partner and 99% to the Limited Partners. Cash distributions are
allocated to the Partners following the receipt by an affiliate of the General
Partner of a partnership management fee of 9% of "Adjusted Cash From
Operations", as defined in the Partnership Agreement.
Distributable cash from the sale or disposition of investment properties
is to be generally allocated in the following order:
o To the Limited Partners up to the amount of their Original Invested
Capital;
o To the Limited Partners in an amount which, when added to prior
distributions from operations, equals a 10% cumulative non-compounded
return on their Adjusted Invested Capital;
o To an affiliate of the General Partner as a Subordinated Disposition
Fee; and
o With respect to the remainder, 85% to the Limited Partners and 15% to
the General Partner.
Net income from the sale or disposition of investment properties is to be
generally allocated as follows:
o To each Partner having a deficit balance in his capital account in the
same ratio as such deficit balance bears to the aggregate of deficit
balances of all Partners;
o To the Partners in an amount equal to that distributed to them in
respect of such sale or disposition; and
o With respect to the remainder, 99% to the Limited Partners and 1% to
the General Partner.
12. SUBSEQUENT EVENTS
On February 15, 1996, the Partnership paid a cash distribution of
$1,463,905 to the limited partners and $2,108 to the General Partner.
27
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP SCHEDULE III
(A CONNECTICUT LIMITED PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
===========================================================================================================
Costs
Capitalized Subsequent
Initial Cost to Partnership (A)(B) to Acquisition (C)
----------------------------------------------------------------------------
Land and Land Land, Building and
Description Improvements Buildings Improvements
- -----------------------------------------------------------------------------------------------------------
Woodlands Plaza II $ 1,252,294 $ 6,436,730 $ (154,380)
Office Building
St Louis, MO
Lake Point I, II, III 1,413,971 6,615,761 1,745,885
Service Center
Orlando, FL
- -----------------------------------------------------------------------------------------------------------
Totals $ 2,666,265 $ 13,052,491 $ 1,591,505
===========================================================================================================
===========================================================================================================
Gross Amount at Which Carried at Close of Period (E)(F)
----------------------------------------------------------------------------
Land and Land Building and
Description Improvements Improvements Tenant Improvements Total
- -----------------------------------------------------------------------------------------------------------
Woodlands Plaza II $ 980,294 $ 5,438,878 $ 1,115,472 $ 7,534,644
Office Building
St Louis, MO
Lake Point I, II, III 1,553,094 6,465,213 1,757,310 9,775,617
Service Center
Orlando, FL
- -----------------------------------------------------------------------------------------------------------
Totals $ 2,533,388 $ 11,904,091 $ 2,872,782 $ 17,310,261
===========================================================================================================
28
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP SCHEDULE III
(A CONNECTICUT LIMITED PARTNERSHIP)
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
DECEMBER 31, 1995
======================================================================================================================
Life on Which
Depreciation in Latest
Accumulated Date of Statement of Operations
Description Depreciation (G) Construction Date Acquired is Computed
- ----------------------------------------------------------------------------------------------------------------------
Woodlands Plaza II $ 3,249,907 1983 10/15/84 2-39 years
Office Building
St Louis, MO
Lake Point I, II, III 3,533,394 1985 07/31/86 2-39 years
Service Center
Orlando, FL
- ----------------------------------------------------------------------------------------------------------------------
Totals $ 6,783,301
======================================================================================================================
[FN]
(A) The cost to the Partnership represents the initial purchase price of the
properties including certain acquisition fees and expenses. In accordance
with the Partnership Agreement, all properties were acquired without
incurring any mortgage debt.
[FN]
(B) The Partnership received $475,617 and $1,294,910 from the sellers of
Woodlands Plaza II and Lake Point I, II, III, respectively, under master
lease agreements, which were treated as a reduction of initial cost to the
Partnership.
[FN]
(C) Included in Costs Capitalized Subsequent to Acquisition are impairment of
assets losses for Woodlands Plaza II in the amount of $600,000 for 1994 and
$1,100,000 for 1992.
[FN]
(D) Includes the sale of two of the six buildings at
Westside Industrials during 1994 and the sale of the remaining four
buildings in 1995.
[FN]
(E) The aggregate cost of the real estate owned at December 31, 1995 for
federal income tax purposes is $19,999,715.
[FN]
(F) Reconciliation of real estate owned:
=================================================================================================
Description 1995 1994 1993
=================================================================================================
Balance at beginning of period $ 18,692,756 $ 20,221,872 $20,019,369
Additions during period 242,284 423,118 202,503
Reductions during period (C)(D) (1,624,779) (1,952,234) --
- -------------------------------------------------------------------------------------------------
Balance at end of period $ 17,310,261 $ 18,692,756 $ 20,221,872
=================================================================================================
<FN>
(G) Reconciliation of accumulated depreciation:
=================================================================================================
Description 1995 1994 1993
=================================================================================================
Balance at beginning of period $ 6,686,953 $ 6,296,738 $5,532,115
Additions during period 736,049 692,861 764,623
Reductions during period (D) (639,701) (302,646) --
- -------------------------------------------------------------------------------------------------
Balance at end of period $ 6,783,301 $6,686,953 $ 6,296,738
=================================================================================================
29
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Connecticut General Equity Properties-I
Limited Partnership
In our opinion, the financial statements listed in the accompanying index (see
page 16) present fairly, in all material respects, the financial position of
Westford Office Venture at December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Hartford, Connecticut
February 21, 1996
30
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
UNCONSOLIDATED VENTURE
WESTFORD OFFICE VENTURE
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS 1995 1994
------ ---- ----
Property and improvements, at cost:
Land and improvements $ 2,546,078 $ 2,501,875
Buildings 10,716,382 10,716,382
Tenant improvements 1,492,102 1,492,102
-------------- --------------
14,754,562 14,710,359
Less accumulated depreciation 4,726,178 4,209,052
-------------- --------------
Net property and improvements 10,028,384 10,501,307
Cash and cash equivalents 1,055,936 1,901,019
Accounts receivable 608 885
Prepaid expenses and other assets 2,600 16,401
Deferred charges, net 192,748 252,280
-------------- --------------
Total $ 11,280,276 $ 12,671,892
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses (including $8,731
in 1995 and $9,317 in 1994 due to affiliates) $ 27,327 $ 24,648
Deferred acquisition fees payable to affiliate 724,672 724,672
-------------- --------------
Total liabilities 751,999 749,320
-------------- --------------
Partners' capital:
CGEP:
Capital contributions 4,718,527 4,718,527
Cumulative cash distributions (2,347,200) (1,825,600)
Cumulative net income 308,065 150,097
-------------- --------------
2,679,392 3,043,024
-------------- --------------
CIR:
Capital contributions 13,439,197 13,439,197
Cumulative cash distributions (6,652,800) (5,174,400)
Cumulative net income 1,062,488 614,751
-------------- --------------
7,848,885 8,879,548
-------------- --------------
Total partners' capital 10,528,277 11,922,572
-------------- --------------
Total $ 11,280,276 $ 12,671,892
============== ==============
The Notes to Financial Statements are an integral
part of these statements.
31
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
UNCONSOLIDATED VENTURE
WESTFORD OFFICE VENTURE
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
---- ---- ----
Income:
Base rental income $ 1,481,811 $ 1,342,969 $ 1,121,765
Other income 376,258 288,888 130,370
Interest income 53,221 54,972 28,515
------------- ------------- --------------
1,911,290 1,686,829 1,280,650
------------- ------------- --------------
Expenses:
Property operating expenses 597,935 633,601 608,323
General and administrative 75,097 57,198 54,125
Fees and reimbursements to affiliates 55,895 50,651 35,855
Depreciation and amortization 576,658 552,638 504,443
------------- ------------- --------------
1,305,585 1,294,088 1,202,746
------------- ------------- --------------
Net income $ 605,705 $ 392,741 $ 77,904
============= ============= ==============
Net income:
CGEP $ 157,968 $ 102,427 $ 20,317
CIR 447,737 290,314 57,587
------------- ------------- --------------
$ 605,705 $ 392,741 $ 77,904
============= ============= ==============
The Notes to Financial Statements are an integral
part of these statements.
32
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
UNCONSOLIDATED VENTURE
WESTFORD OFFICE VENTURE
STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
CGEP CIR Total
Balance at December 31, 1992 $ 2,920,280 $ 8,531,647 $ 11,451,927
Net income 20,317 57,587 77,904
------------- -------------- --------------
Balance at December 31, 1993 2,940,597 8,589,234 11,529,831
Net income 102,427 290,314 392,741
------------- -------------- --------------
Balance at December 31, 1994 3,043,024 8,879,548 11,922,572
Net income 157,968 447,737 605,705
Cash distributions (521,600) (1,478,400) (2,000,000)
------------- -------------- --------------
Balance at December 31, 1995 $ 2,679,392 $ 7,848,885 $ 10,528,277
============= ============== ==============
The Notes to Financial Statements are an integral
part of these statements.
33
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
UNCONSOLIDATED VENTURE
WESTFORD OFFICE VENTURE
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993
---- ---- ----
Cash flows from operating activities:
Net income $ 605,705 $ 392,741 $ 77,904
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 576,658 552,638 504,443
Accounts receivable 277 117,497 (118,382)
Accounts payable and accrued expenses 2,679 (33,616) (1,742)
Other, net 13,801 (13,463) 10,017
------------- ------------- -------------
Net cash provided by operating activities 1,199,120 1,015,797 472,240
------------- ------------- -------------
Cash flows from investing activities:
Purchases of property and improvements (44,203) (248,005) (119,429)
Payment of leasing commissions -- (39,758) (41,715)
------------- ------------- -------------
Net cash used in investing activities (44,203) (287,763) (161,144)
------------- ------------- -------------
Cash flows from financing activities:
Cash distribution to venture partners (2,000,000) -- --
------------- ------------- -------------
Net cash used in financing activities (2,000,000) -- --
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents (845,083) 728,034 311,096
Cash and cash equivalents, beginning of year 1,901,019 1,172,985 861,889
------------- ------------- -------------
Cash and cash equivalents, end of year $ 1,055,936 $ 1,901,019 $ 1,172,985
============= ============= =============
Supplemental disclosure of non-cash information:
Accrued purchase of property and improvements $ -- $ -- $ 31,225
============= ============= =============
The Notes to Financial Statements are an integral
part of these statements.
34
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
UNCONSOLIDATED VENTURE
WESTFORD OFFICE VENTURE
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Westford Office Venture (the "Venture") is a joint venture partnership in
which Connecticut General Equity Properties-I Limited Partnership ("CGEP") owns
a 26.08% interest. The remaining 73.92% interest is held by CIGNA Income
Realty-I Limited Partnership ("CIR"), an affiliated limited partnership. The
Venture owns and operates a commercial property, an office and
research/development facility located in Westford, Massachusetts.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) PROPERTY AND IMPROVEMENTS: Property and improvements are carried at cost
less accumulated depreciation. The cost represents the initial purchase
price, subsequent capitalized costs and adjustments, including certain
acquisition expenses and impairment loss. Amounts received under the master
lease agreement from the seller of the Westford Corporate Center were
treated as a reduction of the property purchase price. Depreciation on
property and improvements is calculated on the straight-line method based
on the estimated useful lives of buildings and improvements (15 to 39
years) and tenant improvements (the respective lease terms). Maintenance
and repair expenses are charged to operations as incurred.
As a result of inherent changes in market values of real property, the
Partnership reviews potential impairment annually. The undiscounted future
cash flows for each property, as estimated by the Partnership, is compared
to the carrying value. If the carrying value is greater than the sum of the
estimated future undiscounted cash flows, and deemed other than temporary,
an impairment loss is recognized currently.
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"). Under the Statement, entities should continue to compare the
sum of the expected undiscounted future net cash flows to the carrying
value of the asset. If an impairment exists, the Statement requires a
writedown to the fair value. 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 Venture will adopt this Statement
in the first quarter of 1996; the effect on the Venture's results of
operations, liquidity and financial condition is not expected to be
material.
B) CASH AND CASH EQUIVALENTS: Short-term investments with a maturity of three
months or less at the time of purchase are generally reported as cash
equivalents.
C) DEFERRED CHARGES: Deferred charges consist of leasing costs which are
amortized using the straight-line method over the respective lease terms.
D) INCOME TAXES: No provision for income taxes has been made as the liability
for such taxes is that of the limited partners of the partnership involved
in the Venture.
35
E) BASIS OF PRESENTATION: Certain amounts in the 1993 and 1994 Financial
Statements have been reclassified to conform to the 1995 presentation.
3. INVESTMENT PROPERTY
The Venture purchased Westford Corporate Center located in Westford,
Massachusetts, without incurring any long-term debt.
The Venture recognized an impairment of asset loss in 1992 of $3,800,000
principally due to a reduction in the estimated holding period.
4. DEFERRED CHARGES
Deferred charges at December 31, 1995 and 1994 consist of the following:
1995 1994
---- ----
Deferred leasing costs $ 441,543 $ 441,543
Accumulated amortization (248,795) (189,263)
----------- ----------
$ 192,748 $ 252,280
=========== ==========
5. LEASES
The property is leased under leases which are accounted for as operating
leases, having remaining lease terms of less than four years. Following is a
schedule of minimum annual future rentals based upon non-cancelable commercial
leases currently in effect, assuming no exercise of tenant renewal options:
Year ending December 31:
1996 $ 1,425,303
1997 1,425,303
1998 1,425,303
1999 356,326
2000 and Thereafter --
Leases generally include provisions for tenants to pay pro rata share of
increases in operating expenses over base period amounts. During 1995, 1994 and
1993 the Venture earned $376,258, $288,888 and $130,370, respectively, under
such provisions. These amounts are included in other income on the Statement of
Operations.
Generally, a portion of the net leasable area for commercial real estate
properties is occupied by significant tenants (occupying ten percent or more of
net leasable area). Significant tenant information for the Venture's investment
property is as follows: Two tenants occupy 100% of the net leasable area and
account for 100% of gross rental revenue. Any loss of a significant tenant could
have a material adverse effect on the Venture's results of
36
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
Unconsolidated Venture
Westford Office Venture
Notes to Financial Statements - Continued
operations. Although an uncertainty exists relative to the replacement of a
tenant upon early termination, the revenue effect of an early termination of a
significant tenant is tempered by the potential for termination fees, and is
therefore not likely to be material to the Venture's liquidity or financial
condition.
6. TRANSACTIONS WITH AFFILIATES
An affiliate of the venturers provided investment property acquisition
services in 1986. Fees for such services totalled approximately $1,000,000 in
1986 of which $724,672 will be payable from sales proceeds.
During 1995, 1994 and 1993, an affiliate of the general partners of the
venturers provided property management services at Westford Corporate Center for
fees totalling $55,895, $50,651 and $35,855, respectively. In addition, the
affiliate contracted for on-site property management services with an
unaffiliated third party company on behalf of the Venture. For the years ended
1995, 1994 and 1993, $52,957, $50,646 and $35,949 of fees were paid directly by
the Venture to an unaffiliated on-site property manager.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of the Venture's financial instruments at December 31, 1995. Statement of
Financial Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments", defines the fair value of a financial instrument as the
amount at which the instrument could be exchanged in a current transaction
between willing parties.
Carrying Fair
Amount Value
ASSETS:
Cash and cash equivalents 1,055,936 1,055,936
Accounts receivable 608 608
Other assets 2,600 2,600
LIABILITIES:
Accounts payable and accrued expenses 27,327 27,327
Deferred acquisition fees due to affiliates 724,672 493,200
The carrying amounts shown in the table are included in the balance sheet
under the indicated captions.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Cash, Accounts receivable, Other assets, and Accounts payable and accrued
expenses: The carrying amounts approximate fair value because of the short
maturity of those instruments.
Deferred acquisition fees due to affiliates: The fair value was estimated
by discounting cash flows over the estimated holding period of the
investment property using a market rate.
37
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
Unconsolidated Venture
Westford Office Venture
Notes to Financial Statements - Continued
8. JOINT VENTURE AGREEMENT
Pursuant to the Joint Venture Agreement, results of operations, including
net income or loss and cash distributions, shall generally be allocated to the
venturers in proportion to their percentage capital contributions. However,
certain acquisition-related expenses incurred by each venture partner in
acquiring its interest in the Venture have been recorded in the Venture's books.
The related expense or depreciation of such amounts has been allocated to the
respective venture partner who incurred the expense.
Net income and distributable cash from the sale or disposition of property
shall be allocated in the following order:
o To the venturers having negative capital account balances pro rata in
proportion to their negative capital accounts; and
o To the venturers in an amount necessary so that the capital account
balances of the venturers shall be in proportion to their respective
percentage interests.
38
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP SCHEDULE III
(UNCONSOLIDATED VENTURE)
WESTFORD OFFICE VENTURE
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
=============================================================================================================
Initial Cost Costs Capitalized Subsequent
to Venture (A)(B) to Acquisition (C)
------------------------------------------------------------------------------
Land and Land Land, Building and
Description Improvements Buildings Improvements
=============================================================================================================
Westford Corporate Center $3,223,875 $13,759,689 $ (2,229,002)
Westford, MA
=============================================================================================================
==============================================================================================================
Gross Amount at Which Carried at Close of Period (D)(E)
-------------------------------------------------------------------------------
Land and Land Building and
Description Improvements Improvements Tenant Improvements Total
- --------------------------------------------------------------------------------------------------------------
Westford Corporate Center $ 2,546,078 $ 10,716,382 $ 1,492,102 $ 14,754,562
Westford, MA
==============================================================================================================
==============================================================================================================
Life on Which
Depreciation in
Latest Statement of
Accumulated Date of Operations is
Description Depreciation (F) Construction Date Acquired Computed
- --------------------------------------------------------------------------------------------------------------
Westford Corporate Center $ 4,726,178 1986 09/11/86 2-39 years
Westford, MA
==============================================================================================================
[FN]
(A) The cost to the Venture represents the initial purchase price of the
properties including certain acquisition fees and expenses. In accordance
with the Joint Venture Agreement, the property was acquired without
incurring any mortgage debt.
[FN]
(B) The Venture received $245,531 under a Master Lease Agreement, which was
treated as a reduction of initial cost to Venture.
[FN]
(C) Included in Costs Capitalized Subsequent to Acquisition is an
impairment of assets loss in the amount of $3,800,000.
[FN]
(D) The aggregate cost of the real estate owned at December 31, 1995 for
federal income tax purposes is $18,554,563.
[FN]
(E) Reconciliation of real estate owned:
=================================================================================================
Description 1995 1994 1993
=================================================================================================
Balance at beginning of period $ 14,710,359 $ 14,493,579 $ 14,342,925
Additions during period 44,203 216,780 150,654
- -------------------------------------------------------------------------------------------------
Balance at end of period $ 14,754,562 $ 14,710,359 $ 14,493,579
=================================================================================================
<FN>
(F) Reconciliation of accumulated depreciation:
=================================================================================================
Description 1995 1994 1993
=================================================================================================
Balance at beginning of period $ 4,209,052 $ 3,712,142 $ 3,254,267
Additions during period 517,126 496,910 457,875
- -------------------------------------------------------------------------------------------------
Balance at end of period $ 4,726,178 $ 4,209,052 $ 3,712,142
=================================================================================================
39
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The General Partner of the Partnership, Connecticut General Realty
Resources, Inc.-Third, a Delaware corporation, is an indirect, wholly owned
subsidiary of CIGNA Corporation, a publicly held corporation whose stock is
traded on the New York Stock Exchange. The General Partner has responsibility
for and control over the affairs of the Partnership.
The directors and executive officers of the General Partner as of February
15, 1996 are as follows:
Name Office Served Since
R. Bruce Albro Director May 2, 1988
J. Robert Andrews Director April 2, 1990
David Scheinerman Director July 25, 1995
John D. Carey President, Controller September 7, 1993
September 4, 1990
Verne E. Blodgett Vice President, Counsel April 2, 1990
Joseph W. Springman Vice President, Assistant Secretary September 7, 1993
David C. Kopp Secretary September 29, 1989
Marcy F. Blender Treasurer August 1, 1994
There is no family relationship among any of the foregoing directors or
officers. There are no arrangements or understandings between or among said
officers or directors and any other person pursuant to which any officer or
director was selected as such.
The foregoing directors and officers are also officers and/or directors of
various affiliated companies of Connecticut General Realty Resources,
Inc.-Third, including CIGNA Financial Partners, Inc. (the parent of Connecticut
General Realty Resources, Inc.-Third), CIGNA Investments, Inc., CIGNA
Corporation (the parent of CIGNA Investments, Inc.), Connecticut General
Corporation (the parent of CIGNA Financial Partners, Inc.).
40
The business experience of each of the directors and executive officers of
the General Partner of the Partnership is as follows:
R. BRUCE ALBRO - DIRECTOR
Mr. Albro, age 53, a Senior Managing Director of CIGNA Investment
Management (CIM), joined Connecticut General's Investment Operations in 1971 as
a Securities Analyst in Paper, Forest Products, Building and Machinery.
Subsequently, he served as a Research Department Unit Head, as an Assistant
Portfolio Manager, then as Director of Equity Research and a member of the
senior staff of CIGNA Investment Management Company and as a Portfolio Manager
in the Fixed Income area. He then headed the Marketing and Merchant Banking area
for CII. Prior to his current assignment of Division Head, Portfolio Management
Division, he was an insurance portfolio manager, and prior to that, he was
responsible for Individual Investment Product Marketing. In addition, Mr. Albro
currently serves as President of the CIGNA Funds Group and other CIGNA
affiliated mutual funds. Mr. Albro received a Master of Arts degree in Economics
from the University of California at Berkeley and a Bachelor of Arts degree in
Economics from the University of Massachusetts at Amherst.
J. ROBERT ANDREWS - DIRECTOR
Mr. Andrews, age 51, is a Managing Director of CIGNA Investment Management
and is one of seven senior managers in the Real Estate Investment Division,
heading the Real Estate Acquisition and Dispositions Department. He joined
CIGNA's Real Estate Division in 1983. Prior to his current assignment, he was
the Head of the Tax Advantaged Investment Department; a Vice President - Real
Estate Portfolio Manager for Pension Accounts; one of six Vice President -
Territorial Managers in the Mortgage and Real Estate Acquisition unit and an
Assistant Vice President in the Real Estate Asset Management unit. Prior to
coming to CIGNA, he was the principal of a real estate consulting firm
specializing in domestic and international multi-family residential construction
and development. Prior to forming his own business, Mr. Andrews was an
Acquisition Director and Regional Director of Operations for a publicly owned
(NYSE) real estate development company. He received a Bachelor of Arts degree in
Architecture and a Master of Business Administration degree in Finance and Real
Estate from The Pennsylvania State University.
DAVID SCHEINERMAN - DIRECTOR
Mr. Scheinerman, age 35, was appointed Chief Financial Officer of CIGNA
Individual Insurance, a division with more than $77 billion of life insurance in
force, in July of 1995. Mr. Scheinerman has served in various actuarial and
business management capacities with CIGNA. In 1991 he was appointed Vice
President and Pricing Actuary for CIGNA HealthCare. He has more than 12 years of
financial management experience and has served as Chief Financial Officer of
Crusader Insurance PLC, a CIGNA subsidiary life company in the United Kingdom.
Mr. Scheinerman holds a BA in Mathematics from Rice University and an MBA from
the University of Pennsylvania Wharton School of Business. He is a fellow of the
Society of Actuaries and a member of the American Academy of Actuaries.
JOHN D. CAREY - PRESIDENT, CONTROLLER
Mr. Carey, age 32, joined CIGNA Investment Management-Real Estate as
Controller of Tax Advantaged Investments in 1990. In September 1993, Mr. Carey
was appointed President. Prior to joining CIGNA Investment Management, he held
the position of manager at KPMG Peat Marwick LLP in the audit department and was
a member of the Real Estate Focus Group. His experiences include accounting and
financial reporting for public and private real estate limited partnership
syndications. Mr. Carey is a graduate of Central Connecticut State University
with a Bachelor of Science Degree and is a Certified Public Accountant.
41
VERNE E. BLODGETT - VICE PRESIDENT, COUNSEL
Mr. Blodgett, age 58, is an Assistant General Counsel of CIGNA Corporation.
He joined Connecticut General Life Insurance Company in 1975 as an investment
attorney and has held various positions in the Legal Division of Connecticut
General Life Insurance Company prior to his appointment as Assistant General
Counsel in 1981. Mr. Blodgett received a Bachelor of Arts degree from Yale
University and graduated with honors from the University of Connecticut School
of Law. He is a member of the Connecticut and the American Bar Associations.
JOSEPH W. SPRINGMAN - VICE PRESIDENT, ASSISTANT SECRETARY
Mr. Springman, age 54, is Managing Director and department head responsible
for asset management. He joined CIGNA's Real Estate operations in 1970. He has
held positions as an officer or director of several real estate affiliates of
CIGNA. His past real estate assignments have included Development and
Engineering, Property Management, Director, Real Estate Operations, Portfolio
Management and Vice President, Real Estate Production. Prior to assuming his
asset management post, Mr. Springman was responsible for production of real
estate and mortgage investments. He received a Bachelor of Science degree from
the U.S. Naval Academy.
DAVID C. KOPP - SECRETARY
Mr. Kopp, age 50, is Secretary of CII, Corporate Secretary of Connecticut
General Life Insurance Company and Assistant Corporate Secretary and Assistant
General Counsel, Insurance and Investment Law of CIGNA Corporation. He also
serves as an officer of various other CIGNA Companies. In August of 1995, he
also assumed responsibility as chief compliance officer for CIGNA HealthCare, a
division of CIGNA Corporation. He joined Connecticut General Life Insurance
Company in 1974 as a commercial real estate attorney and held various positions
in the Legal Department of Connecticut General Life Insurance Company prior to
his appointment as Corporate Secretary in 1977. Mr. Kopp is an honors graduate
of Northern Illinois University and served on the law review at the University
of Illinois College of Law. He is a member of the Connecticut Bar Association
and is Past President of the Hartford Chapter, American Society of Corporate
Secretaries.
MARCY F. BLENDER - TREASURER
Marcy F. Blender, age 39, is Assistant Vice President, Bank Resources of
CIGNA Corporation. In this capacity she is responsible for bank relationship
management, bank products and services, bank compensation and control, and bank
exposure management. Marcy joined Insurance Company of North America (INA) in
1979. She has held a variety of financial and investment positions with INA and
later with the merged CIGNA Corporation before assuming her current
responsibilities in 1992. She received a B.A. degree from Rutgers University and
an M.B.A. from Drexel University. She is a Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
Officers and directors of the General Partner receive no current or
proposed direct compensation from the Partnership in such capacities. However,
certain officers and directors of the General Partner received compensation from
the General Partner and/or its affiliates (but not from the Partnership) for
services performed for various affiliated entities, which may include services
performed for the Partnership, but such compensation was not material in the
aggregate.
42
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No person or group is known by the Partnership to own beneficially more
than 5% of the outstanding Units of interest of the Partnership.
As of February 15, 1996, the individual directors and the directors and
officers, as a group, of the General Partner beneficially owned Partnership
Units and shares of the common stock of CIGNA, parent of the General Partner, as
set forth in the following table:
Units Shares
Beneficially Beneficially Percent of
Name Owned(a) Owned(b) Class
R. Bruce Albro (c) 0 6,653 *
J. Robert Andrews (d) 0 1,885 *
David Scheinerman 0 0 *
All directors and officers
Group (8) (e) 0 15,388 *
* Less than 1% of class
<FN>
(a) No officer or director of the General Partner possesses a right to acquire
beneficial ownership of additional Units of interest of the Partnership.
<FN>
(b) The directors and officers have sole voting and investment power over all
the shares of CIGNA common stock they own beneficially.
<FN>
(c) Shares beneficially owned includes options to acquire 4,487 shares and 1,432 shares which are restricted as to
disposition.
<FN>
(d) Shares beneficially owned includes 1,885 shares which are restricted as to disposition.
<FN>
(e) Shares beneficially owned by directors and officers include 6,492 shares of CIGNA common stock which may be
acquired upon exercise of stock options and 7,611 shares which are
restricted as to disposition.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The General Partner of the Partnership is generally entitled to receive 1%
of cash distributions, when and as cash distributions are made to the Limited
Partners, and is generally allocated 1% of profits or losses. The General
Partner was entitled to receive distributable cash from 1995 operations of
$10,435. The General Partner was allocated a share of the Partnership income in
the amount of $22,266 for 1995. Reference is also made to the Notes to Financial
Statements included in this annual report for a description of such
distributions and allocations. The relationship of the General Partner (and its
directors and officers) to its affiliates is set forth in Item 10.
CII provided asset management services to the Partnership during 1995 for
the Woodlands Plaza II Office Building, Westside Industrials and Lake Point
Service Center for fees calculated at 6% of gross revenues collected from the
properties less amounts earned by independent third party property management
companies contracted by CII on behalf of the Partnership. In 1995, CII earned
asset management fees amounting to $55,633 for such services, of which $7,877
was unpaid as of December 31, 1995. Independent third party property managers
earned $112,749 of management fees, of which $7,622 was unpaid as of December
31, 1995. In 1995, CII provided asset management services for the Partnership's
investment in the Westford Office Venture for fees calculated at 6% of gross
revenues collected. CII earned $14,577 for such services. Independent third
party property managers earned $13,811 of fees relating to Westford.
43
CFP provided partnership management services for the Partnership at fees
calculated at 9% of adjusted cash from operations in any one year. In 1995, CFP
earned partnership management fees amounting to $124,050 for such services, of
which $18,910 was unpaid as of December 31, 1995.
The General Partner and its affiliates may be reimbursed for their direct
expenses incurred in the administration of the Partnership. In 1995, the General
Partner and its affiliates were entitled to reimbursement for such out of pocket
administrative expenses in the amount of $69,452 of which $6,050 was unpaid as
of December 31, 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements. See Index to Financial Statements in Item 8.
2. Financial Statement Schedules
(a) Real Estate and Accumulated Depreciation. See Index to
Financial Statements in Item 8.
3. Exhibits
3(a)Partnership Agreement, incorporated by reference to Exhibit A
to the Prospectus of Registrant, dated January 31, 1984, File
No. 2-87976.
3(b) First Amendment to Partnership Agreement, dated March 1,
1985, incorporated by reference to Exhibit 3(b) to
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1985.
4 Certificate of Limited Partnership dated November 9, 1983,
incorporated by reference to Exhibit 4 to Form S-11
Registration Statement under the Securities Act of 1933,
File No. 2-87976.
10(a) Acquisition and Disposition Services Agreement, dated as
of January 31, 1984, between Connecticut General Equity
Properties-I Limited Partnership and CIGNA Capital
Advisers, Inc., incorporated by reference to Exhibit 10(a)
to Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987.
(b) Supervisory Property Management Agreement, dated as of
January 31, 1984, between Connecticut General Equity
Properties-I Limited Partnership and CIGNA Capital
Advisors, Inc., incorporated by reference to Exhibit 10(b)
to Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987.
(c) Agreement concerning Certain Capital Contributions, dated
as of December 30, 1983, between Connecticut General
Management Resources, Inc. and Connecticut General Realty
Resources, Inc.-Third, incorporated by reference to
Exhibit 10(c) to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1987.
(d) Real Estate Purchase Agreement, dated as of July 25, 1984,
relating to the acquisition of Woodlands Plaza II Office
Building, incorporated by reference to Exhibit 10(d) to
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1985.
(e) Bill of Sale and Assignment, dated October 15, 1984,
relating to the acquisition of Woodlands Plaza II Office
Building, incorporated by reference to Exhibit 10(e) to
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1985.
44
(f) Assignment and Assumption Agreement, dated as of January
17, 1985, relating to the acquisition of Interpark
Industrial Park, incorporated by reference to Exhibit
10(f) to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1985.
(g) Real Estate Purchase Agreement between LaSalle National
Bank and Connecticut General Resources, Inc.-Third dated
May 8, 1985, relating to the acquisition of the Courtyard
Shopping Center, incorporated by reference to Exhibit
10(g) to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1985.
(h) Real Estate Purchase Agreement between Crow-Vista #2 and
Connecticut General Equity Properties-I Limited
Partnership dated as of July 31, 1986, relating to the
acquisition of Lake Point I, II, III, incorporated by
reference to Exhibit 10(b) to Current Report on Form 8-K
dated July 31, 1986.
(i) Management and Leasing Agreement between Trammel Crow
Realty Associates, Inc. and Connecticut General Equity
Properties-I Limited Partnership dated as of July 31,
1986, relating to Lake Point I, II, III, incorporated by
reference to Exhibit 10(d) to Current Report on Form 8-K
dated July 31, 1986.
(j) Joint Venture Agreement between CIGNA Income Realty-I
Limited Partnership and Connecticut General Equity
Properties-I Limited Partnership dated as of November 1,
1986, relating to the acquisition of the Westford
Corporate Center, incorporated by reference to Exhibit
10(k) to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1986.
(k) Real Estate Purchase Agreement between Robert M. Doyle and
Ian S. Gillespie, as trustees of Westford Office Center
Trust, and Westford Office Venture, dated as of September
10, 1986, relating to the acquisition of the Westford
Corporate Center, incorporated by reference to Exhibit
10(l) to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1986.
(l) Management Agreement between the Westford Office Venture
and Codman Management Co., dated as of September 10, 1986,
relating to the Westford Corporate Center, incorporated by
reference to Exhibit 10(n) to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1986.
(m) Real Estate Purchase Contract between Solman Brothers
Leasing and Connecticut General Equity Properties-I
Limited Partnership dated as of February 22, 1994,
relating to the sale of Westside Industrial Buildings 1
and 2.
(n) Deposit Receipt and Real Estate Purchase Contract between
JACLS Holding Company and/or Nominee and Connecticut
General Equity Properties-I Limited Partnership dated as
of February 20, 1995, relating to the sale of Westside
Industrial Building #6 closed on April 27, 1995.
(o) Deposit Receipt and Real Estate Purchase Contract between
Zimmerman Properties, Inc. and Connecticut General Equity
Properties-I Limited Partnership dated as of August 2,
1995, relating to the sale of Westside Industrial
Buildings #3, #4 and #5 closed on December 26, 1995.
27 Financial Data Schedules
(b) No reports on Form 8-K were filed during the last quarter of the fiscal
year.
45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: March 25, 1996 By: /s/ John D. Carey
-------------------
John D. Carey, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities (with respect to the General Partner) and on the date
indicated.
/s/ R. Bruce Albro Date: March 25, 1996
------------------------------------------
R. Bruce Albro, Director
/s/ J. Robert Andrews Date: March 25, 1996
------------------------------------------
J. Robert Andrews, Director
/s/ David Scheinerman Date: March 25, 1996
------------------------------------------
David Scheinerman, Director
/s/ John D. Carey Date: March 25, 1996
------------------------------------------
John D. Carey, President, Controller
(Principal Executive Officer)
(Principal Accounting Officer)
/s/ Marcy F. Blender Date: March 25, 1996
------------------------------------------
Marcy F. Blender, Treasurer
(Principal Financial Officer)
Annex 3
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
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.
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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