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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, 1996
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.
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TABLE OF CONTENTS
PART I PAGE
Item 1. Business 3
Item 2. Properties 6
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
PART II
Item 5. Market for Registrant's Common Equity and Related Security Holder Matters 10
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 8. Financial Statements and Supplementary Data 19
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 42
PART III
Item 10. Directors and Executive Officers of the Registrant 42
Item 11. Executive Compensation 45
Item 12. Security Ownership of Certain Beneficial Owners and Management 45
Item 13. Certain Relationships and Related Transactions 45
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 46
SIGNATURES 49
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 was 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 8 for
further descriptions of the sales.
On January 10, 1997, the Partnership and Glenborough Properties, L.P.
entered into an Agreement of Purchase and Sale (the "Purchase Agreement"). Under
the terms of the Purchase Agreement, Glenborough Properties, L.P. will purchase
all of the real estate assets of the Partnership for an aggregate purchase price
of $14,554,000. Reference is made to Item 7 for a detailed discussion of the
Purchase Agreement and the sale of the Partnership's real estate assets and
subsequent liquidation of the Partnership.
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)
(a) The Partnership did not incur any debt in connection with the acquisition
of these investment properties.
(b) Excludes all broker fees paid at closing.
(c) This table does not reflect purchase price adjustments resulting from
master lease provisions.
(d) Represents net leasable area at acquisition date; net leasable area may
change due to expansion or tenant improvements.
(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.
(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 ("CIR") is the co-venturer. CIR's general partner is an
affiliate of the General Partner. The information shown represents the
Partnership's share of the total investment.
(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. Employment in the St. Louis region grew by 4.3%, a gain of 52,000 new
jobs for 1996. The unemployment rate dropped again in 1996 to 4.7% from 4.8% in
1995, the lowest level in 20 years. The economy is fairly well diversified with
health and education service industries providing the largest number of jobs.
The growth industry appears to be the amusement and recreation industry as 1,400
new jobs were added in 1996. As the gaming industry continues to grow in St.
Louis an additional 8,000 to 10,000 new jobs can be added over the next few
years. The market quality index for St. Louis has dropped slightly from last
year, reflecting in part the uncertainty of Boatmen's Bank, now that it is
merging with NationsBank; McDonnell Douglas now that it is being acquired by
Boeing; and the financial uncertainty of TWA. While the downtown St. Louis
office market continues to struggle to keep its occupancy rate around 88%, the
suburban office markets continue to flourish. The West County market contains
almost 12 million square feet of space (which represents 29% of the metropolitan
area supply) and is 96% leased. The Woodlands submarket of West County, where
Woodlands Plaza II is located, comprises nine buildings containing just under
400,000 square feet and has an occupancy rate of 97.6%. Rents for space
competing with Woodlands Plaza II are in the $15.50 to $17.00 range with tenant
improvement packages in the $3.00 to $10.00 square foot range. Woodlands Plaza
II ended the year 99% occupied, up significantly from the 75% at the close of
1995. Rental rates at Woodlands Plaza II are in line with the market.
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. The industrial market continues to
improve with rising occupancy and rental rates along with strong demand.
Construction in the past several years has been limited to build to suit
properties. The current level of demand and strong market indicators has
recently led to some speculative building activity. In South Orlando, four
speculative bulk distribution centers and one service center project have either
begun construction or announced plans to begin construction over the next twelve
months. Lake Point I, II and III is located in the Southern Orlando service
center market which currently contains approximately 3.6 million square feet of
service center/warehouse space. Vacancy for the submarket dropped from 10% at
the close of 1995 to 7% in 1996 with net absorption reported at over 100,000
square feet.
Lake Point, which has excellent site access and a desirable location close
to the airport within the Lee Vista Center, was ahead of the market at 100%.
Effective rental rates at the property are competitive with the market range of
$5.50 to $9.50 per square foot dependent on grade level or dock-high space.
Effective rents at the property range from approximately $5.25 to $8.50 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. Boston's overall employment
growth slowed to 1.5% in 1996. Job creation in high-technology and mutual funds
have continued, partially offset by layoffs in the manufacturing and banking
industries, resulting in approximately 39,000 new jobs in the Boston area for
1996. The Boston economy continues to exhibit signs of stabilization, including
declining vacancy rates in the retail, office and warehouse markets, a rise in
hotel occupancies, and a drop in the unemployment rate. Growth in the Boston
area is expected to diminish slightly over the next five years with employment
growth averaging 1.2% between 1997 and 2001. Trade employment, which has
expanded by 43,000 jobs over the last three years, will show growth of only
5,700 jobs per year through 2001. The Route 495 North market, which comprises
16.8 million square feet of research & development ("R&D") and office space,
continued to report positive absorption in 1996, with a third quarter 1996
vacancy rate of approximately 12%, including subleased space, down from 1995.
Leasing activity in 1996, totaling more than 950,000 square feet, was dominated
by R&D properties, accounting for 90% of the net absorption. Average asking
rents are approximately $12.75 per square foot for office space, and
approximately $7.00 per square foot on a triple net basis for R&D space.
Approximate occupancy levels for the properties on a quarterly basis are
set forth in the table in Item 2.
5
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.
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 1994, 1995 and 1996. 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.
1994 1995 1996
---- ---- ----
1. Woodlands Plaza II 29% 36% 35%
Office Building
St. Louis, MO
2. Westside Industrials 12% 7% N/A
Phoenix, AZ (a)
3. Lake Point I, II, III 42% 40% 47%
Service Center
Orlando, FL
4. Westford Corporate Center 15% 15% 16%
Westford, MA
(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 and 8 for
information on properties sold by the Partnership. 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
recaptures. 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.
On January 10, 1997, the Partnership entered into the Purchase Agreement to
sell all of the Partnership's real estate assets. Reference is made to Item 7
for a detailed discussion of the Purchase Agreement and the sale of the
Partnership's real estate assets.
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 72,276 square feet of net leasable area.
6
The following table provides information on tenants that occupy 10 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 $189,288 08/01/96- -- --
Services Co. 07/31/01
2. Dun & Bradstreet 11,101 Financial $169,290 07/01/95- 1, 5 year ext. --
Services 06/30/00 option
3. Moseby Year Book 14,048 Online $224,772 02/09/96- 1, 5 year ext. --
Medical 02/28/01 option
Service
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
1997 3 6,897 $101,517 9%
1998 1 2,941 $42,648 4%
1999 3 14,828 $226,476 21%
2000 5 19,742 $304,602 28%
2001 2 25,349 $414,060 38%
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 10 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 $382,515 07/31/87- -- Step up rent,
Insurance Fund 02/28/07 Full service
2. Alpha Flight Services 32,400 Catering $188,508 02/01/89- 1,5 year ext. Step up rent
01/31/99 option
7
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
1997 1 1,836 $16,868 1%
1998 3 22,184 $239,730 22%
1999 3 36,360 $217,848 20%
2000 1 5,040 $42,840 4%
2001 1 4,320 $33,480 3%
2002 1 10,806 $59,348 5%
2006 1 12,278 $109,274 10%
2007 1 27,360 $382,515 35%
8
The following list compares approximate occupancy levels by quarter for the
Partnership's investment properties during 1992, 1993, 1994, 1995 and 1996:
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)
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%
1996
At 03/31 95% N/A 100% 100%
At 06/30 99% N/A 100% 100%
At 09/30 99% N/A 100% 100%
At 12/31 99% N/A 100% 100%
An "N/A" indicates that the property was not owned by the Partnership at the end
of the quarter.
(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.
(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.
9
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 Unitholders during the fourth
quarter of the fiscal year covered by this report. Reference is made to Item 7
for a description of an item currently under consideration by Unitholders for
consent.
PART II
Item 5. Market for Registrant's Common Equity and Related Security Holder
Matters
As of March 3, 1997, there were approximately 3,681 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 does 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 1996 and 1995 as set forth in the following table:
CASH DISTRIBUTION PER UNIT
QUARTER DATE PAID (A) 1996 1995
-------- ------------- ---- ----
1st May 15 $ 4.65 $ 5.01
2nd August 15 5.01 13.71 (c)
3rd November 15 5.49 10.02 (d)
4th February 15 6.69 (b) 37.31 (e)
-------- --------
$ 21.84 $ 66.05
======== ========
(a) Quarterly distributions are paid 45 days following the end of the calendar quarter.
(b) The fourth quarter distribution was paid on March 10, 1997.
(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.
10
Reference is made to Item 6 for information on cash distributions paid to
Limited Partners during 1996, 1995, 1994, 1993, and 1992.
There are no material legal restrictions upon the Partnership's ability to
make distributions in accordance with the provisions of the Partnership
Agreement. Reference is made to Item 7 for a description of the proposed sale of
the Partnership's real estate assets and subsequent liquidation. Reference is
made to the Notes to Financial Statements for a description of payments to the
State of Connecticut on behalf of Limited Partners.
Item 6. Selected Financial Data (a)
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(a Connecticut limited partnership)
December 31, 1996, 1995, 1994, 1993, 1992
(not covered by Report of Independent Accountants)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Total assets (b) $ 14,366,946 $ 15,779,061 $ 15,886,403 $ 18,116,233 $ 18,841,802
Total income 2,456,154 2,761,823 2,338,050 2,600,369 2,649,750
Net income (loss) (c) 661,691 1,173,396 (232,492) 406,434 (2,651,499)
Net income (loss) per Unit (c) 16.70 29.34 (7.08) 10.26 (66.90)
Cash distributions to
limited partners (d) 2,058,341 1,250,072 1,890,411 1,174,738 1,727,963
Cash distributions per Unit (d) 52.46 31.86 48.18 29.94 44.04
(a) The above selected financial data should be read in conjunction with the
financial statements and the related notes appearing herein. On January 10,
1997, the Partnership entered into the Purchase Agreement to sell all of
the Partnership's real estate assets. Reference is made to Item 7 for a
detailed discussion of the Purchase Agreement and the sale of the
Partnership's real estate assets and subsequent liquidation.
(b) Total assets include Partnership's equity investment in joint venture. See
the Notes to Financial Statements 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).
(d) Quarterly distributions are usually paid and recorded in the Partnership's
records 45 days following the end of the calendar quarter. (The fourth
quarter 1996 distribution was paid on March 10, 1997). Cash distributions
to limited partners in 1996 include proceeds from the sale of the remaining
three buildings of Westside Industrials. Included in 1995 and 1994 are the
proceeds from the sale of Buildings #6 and Buildings #1 and #2 of Westside
Industrials, respectively. 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 were charged to limited partner
capital accounts and have not been included as part of the above
presentation.
11
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Except for historical information provided in this Management's Discussion
and Analysis, statements made throughout this document are forward-looking and
contain information about financial results, economic conditions, trends, and
known certainties. The Partnership cautions the reader that actual results could
differ materially from those expected by the Partnership.
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.
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. Reference is made to Item 5 for information on cash
distributions to Limited Partners. Reference is made to Item 8 for a description
of property sales.
On November 8, 1996, the General Partner received an unsolicited
contingency free offer from Koll General Partner Services ("Koll"), on behalf of
the Glenborough Realty Trust Incorporated ("Glenborough"), 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 or $331 per
Unit, an amount equal to approximately 90% of the Partnership's net asset value
as of December 31, 1995 ($366 per Unit adjusted for the sale of the
Partnership's Westside Industrial Property located in Phoenix, Arizona). The
Partnership's net asset value was based, in part, on valuations provided by CII
and on an outside appraisal of the Westford Corporate Center. Both the
Glenborough offer and the net asset value are gross numbers without a reduction
for estimated sales costs. As part of the offer, Glenborough proposed that the
Partnership pay Koll a 2% fee and the Partnership pay its share of closing
costs. In addition Glenborough's offer to purchase the assets of the Partnership
was conditioned upon the simultaneous purchase of the assets of CIR. The General
Partner, on behalf of the Partnership, reviewed and analyzed the Koll offer and
ultimately rejected it because it was based upon outdated valuations of the
Partnership's properties. At that time, CII was in the process of preparing
current valuations, and Koll requested the opportunity to resume discussions
regarding a possible sale at such time as when the new valuations were prepared.
On November 18, 1996, Everest Realty Investors, LLC, a California limited
liability company ("Everest"), initiated a tender offer to Limited Partners to
purchase up to 40% or 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 Limited Partners after any distribution from operations for the third quarter
of 1996 and less any Partnership transfer fees (the "Everest Offer"). The
Partnership recommended that Limited Partners reject the Everest Offer primarily
for two reasons: (1) the General Partner 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 40% of outstanding
Units. In reaching its determination, the General Partner considered a number of
factors, including that the Partnership was negotiating with Glenborough for the
possible sale of all of the real estate assets of the Partnership for a purchase
price which would result in Limited Partners receiving an amount significantly
higher than the Everest Offer price of $275 per Unit.
12
Following the receipt of current valuations from CII, the Partnership
resumed discussions with Koll and Glenborough on December 2, 1996 regarding the
proposed sale of the Partnership's assets. During these negotiations,
Glenborough agreed (i) to limit the purchase to the Partnership's real estate
assets rather than all assets and liabilities, (ii) 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 (iii) 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 Glenborough executed a letter of
intent setting forth an agreement in principle on the terms and conditions of a
sale. On December 12, 1996, the Partnership informed Limited Partners that a
letter of intent had been executed with Glenborough and again recommending the
rejection of the Everest Offer. The Everest Offer expired on December 17, 1996,
and, Limited Partners sold 369.75 Units or 0.94% of the outstanding Units to
Everest.
On January 10, 1997, the Partnership and an affiliate of Glenborough,
Glenborough Properties, L.P. ("Glenborough LP") entered into the Purchase
Agreement. Under the terms of the Purchase Agreement, Glenborough LP will
purchase all of the real estate assets of the Partnership (Lake Point I,II,III
Service Center, Woodlands Plaza II Office Building, and the Partnership's joint
venture interest in the Westford Corporate Center) for an aggregate purchase
price of $14,554,000 (the "Sale").
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, (ii) the requisite approval by the
Partnership's Unitholders and the unitholders of CIR, (iii) the simultaneous
consummation of the purchase by Glenborough LP of the CIR real estate assets,
(iv) Glenborough LP's satisfactory review of real estate surveys and title
reports, (v) the issuance to Glenborough LP by a title company of an Owner's
Title Insurance Policy for each of the properties, and (vi) the delivery by the
Partnership, the Venture and CIR to Glenborough LP of appropriate instruments of
conveyance and certain documents relating to the purchased properties.
The Purchase Agreement contains representations and warranties with respect
to the Partnership and the real estate properties which are generally customary
in a transaction of this type. The Partnership has agreed to indemnify
Glenborough LP from and against all costs, charges and expenses related to (i)
the ownership, management and operation of the properties 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 Glenborough LP to
receive indemnification for breach of certain of the representations and
warranties of the Partnership, Glenborough LP must make a written claim for such
indemnification within one year of the closing. The General Partner will 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.
On January 24, 1997, the Board of Directors of the General Partner
unanimously approved the Sale to Glenborough LP pursuant to the Purchase
Agreement and the Liquidation, and directed that the Sale and 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 liquidation and in recommending that Unitholders
consent thereto was that the Board concluded that the purchase price was a fair
price to the Partnership and that it was an optimal time frame to sell all of
the Partnership's properties.
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 Glenborough LP 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, Glenborough LP 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 Glenborough LP'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
13
to conditions such as an environmental review of the properties, or the ability
of Glenborough LP 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
(i) 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, (ii) all of the Partnership's properties have
relatively stable operations, (iii) real estate capital markets are active, (iv)
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, (v) 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 (vi) the sale of all of the Partnership's
properties is within the original projected ownership time-frame of the
Partnership.
Based on the terms of the Purchase Agreement, the date of the closing will
occur on the 5th calendar day after the Partnership receives consent from the
Partnership's Unitholders and CIR's unitholders, respectively, for the Sale and
subsequent Partnership liquidation. On March 25, 1997, the Partnership sent a
Consent Solicitation Statement to Unitholders of record as of the close of
business on March 3, 1997, in connection with the solicitation of consents (the
"Solicitation") to (i) the proposed sale of all of the real estate assets of the
Partnership to Glenborough LP pursuant to the Purchase Agreement, and (ii) the
dissolution and liquidation of the Partnership thereafter. The Sale must be
approved by at least a majority of the issued and outstanding Units. The
Solicitation expires April 15, 1997, unless extended by the General Partner in
its sole discretion. If the Partnership fails to receive the requisite consents,
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.
Any remaining accounts receivable and accounts payable of the Partnership
after the Sale will be transferred 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 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
transfer of the remaining assets of the Partnership to the General Partner will
be approximately $15,100,000 or an average amount of $386 per Unit. The General
Partner estimates that the Partnership liquidation, including the distribution
of the net proceeds of the Sale along with the net cash value of the remaining
assets of the Partnership to the Unitholders, will be completed within sixty
days after the consummation of the Sale.
The actual amount distributed per Unit may vary from one Unitholder to
another depending on the original admission date of the Limited Partner's Unit.
The date of admission to the Partnership may cause the actual amounts
distributed per Unit to vary among Unitholders. During the Partnership's
offering period Limited Partners were admitted to the Partnership on a monthly
basis and during this period, cash distribution amounts and income and loss
allocations were applied to limited partner's capital accounts monthly,
beginning in the month of admission. In general, the earlier a Limited Partner
was admitted to the Partnership, the more cash distributions the Limited Partner
would have received and the lower a Limited Partner current capital account
balance will be. The liquidating distribution will vary based upon ending
capital account balances. For Units with the earliest possible admission date,
the minimum amount of the distribution has been estimated at approximately $368,
whereas for Units with the latest possible admission date, the distribution has
been estimated to be approximately $419.
The Partnership estimates that the Sale of the Partnership's properties
will result in a tax loss of approximately $3,600,000 to the Partnership or
approximately $91 of tax loss per $1,000 Unit. The Sale, if achieved, will
result in a gain of approximately $1,100,000 to the Partnership under generally
accepted accounting principles.
14
Results of Operations
Results - 1996 Compared with 1995
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),
decreased in 1996 to approximately $1,237,000 versus approximately $1,407,000 in
1995.
Net operating income decreased $91,000 as a result of the sales of the
remaining buildings of Westside Industrials. Buildings #3, 4 and 5, 100%
occupied during 1995, were sold on December 26, 1995. Building #6, vacant during
1995, was sold on April 27, 1995.
Woodlands Plaza's net operating income decreased by approximately $107,000
in 1996 compared with 1995 because of $230,000 of lease termination fees
collected in 1995. Exclusive of lease termination fees, net operating income
increased due to an increase in occupancy.
At Lake Point, net operating income increased approximately $26,000 in
1996. Rental income increased due to the timing of tenant occupancies in 1996
compared with 1995 and the renewal of a tenant in the fourth quarter of 1995
with a higher base rental rate. The renewal was based on a "full service" rate,
which generally means that the tenant pays a higher base rent but has no expense
reimbursement requirement. Cleaning and utility expenses increased as a result
of the "full service" lease. In addition, Lake Point experienced an increase in
the provision for doubtful accounts due to a problem tenant.
The remaining change in net operating income from 1995 to 1996 represents a
decrease in Partnership management fees and interest income offset by an
increase in legal costs. Management fees decreased as a result of a drop in
adjusted cash from operations. Legal and mailing costs were incurred in 1996 in
response to a tender offer. Interest income decreased due to lower interest
rates.
Rental income decreased approximately $199,000 for the year ended December
31, 1996, as compared with 1995, as a result of the sale of the remaining
buildings of Westside Industrials in 1995. Rental income decreased at Woodlands
Plaza by approximately $110,000, primarily as a result of $230,000 of lease
termination fees collected in 1995. Exclusive of the lease termination fees,
rental income increased at Woodlands Plaza due to an increase in occupancy.
Rental income increased $85,000 at Lake Point due to the timing of new tenant
occupancies in 1996 compared with 1995 and the renewal of a tenant in the fourth
quarter of 1995 with new terms, including a higher base rental rate and no
expense reimbursement requirement.
Other income decreased approximately $29,000 for the year ended December
31, 1996, as compared with 1995, after deducting the $24,000 decrease
attributable to the sale of the remaining Westside Industrials buildings. The
decrease was primarily the result of lower expense charge-back billings at
Woodlands Plaza due to lower property tax expense.
Interest income decreased for the year ended December 31, 1996, as compared
with 1995, primarily due to a lower average cash balance and a slight decrease
in interest rates. 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 approximately $7,000 for the year
ended December 31, 1996, as compared with 1995, after considering the $103,000
decrease related to the sale of the remaining Westside Industrials buildings.
Cleaning and janitorial expenses and utility expense 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 increases were decreases in Woodland Plaza's expenses
for: (a) property tax expense due to a lower assessment, (b) maintenance and
repairs as a result of nonrecurring painting projects in 1995, and (c)
management fees (1995 included fees earned on lease termination fees collected
in 1995).
15
General and administrative expense increased approximately $43,000 for the
year ended December 31, 1996, as compared with 1995, after considering the
Westside Industrials' decrease of $30,000. Legal and mailing costs were incurred
in 1996 in response to a tender offer. Lake Point had an increase in the
provision for doubtful accounts because of a tenant that vacated its space. The
tenant subsequently assigned the space to one of its affiliate companies without
the Partnership's permission. The Partnership determined that the replacement
tenant was not appropriate for the center and the tenant was requested to
surrender the space and compensate the Partnership for past due rent as well as
damages to the building. The provision was established due to the unknown
current standing of the tenant or its affiliate. Offsetting a portion of the
increase at Lake Point was a decrease in the provision at Woodlands Plaza as a
result of a recovery of a previously reserved receivable.
The decrease in fees and reimbursements to affiliates for the year ended
December 31, 1996, as compared with 1995, was primarily 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 the lease termination
fees received in 1995. In addition, asset management fees decreased as 1995
included fees relating to Westside Industrials.
Depreciation and amortization decreased approximately $125,000 for the year
ended December 31, 1996, as compared with 1995, excluding the $41,000 decrease
relating to Westside Industrials. The decrease was primarily the result of
accelerated depreciation and amortization of assets associated with vacated
tenants at Woodlands Plaza in 1995. Partially offsetting the decrease was an
increase in amortization at Lake Point due to leasing commissions incurred in
the fourth quarter of 1995 and throughout 1996.
The gains on sale of property in 1995 were the result of the Westside
Industrials sales of building #6 in April 1995 and buildings #3, #4 and #5 in
December 1995.
The net income from joint venture operations decreased for the year ended
December 31, 1996, as compared with 1995. Revenue declined as the result of a
lower base rental rate for the replacement tenant of a tenant that vacated in
December 1995. In 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 an
increase in snow removal costs, as a result of an extreme winter, and costs for
an HVAC project. In addition, a landscaping project capitalized in 1995 was
reclassed to an expense account in 1996.
Results - 1995 Compared with 1994
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 revenues
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.
A majority of the balance of the change in net operating income from 1994
to 1995 represents Partnership management
16
fees and interest income. Management fees are based on adjusted cash from
operations, which increased in 1995.
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
totaling $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.
Inflation
With inflation at a low rate during 1996, 1995, and 1994, 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.
17
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, 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.
18
Item 8. Financial Statements and Supplementary Data
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(a Connecticut limited partnership)
INDEX
PAGE
Report of Independent Accountants 20
Financial Statements:
Balance Sheets, December 31, 1996 and 1995 21
Statements of Operations, For the Years Ended December 31, 1996, 1995 and 1994 22
Statements of Partners' Capital (Deficit), For the Years Ended December 31, 1996, 1995 and 1994 23
Statements of Cash Flows, For the Years Ended December 31, 1996, 1995 and 1994 24
Notes to Financial Statements 25
Schedules:
III - Real Estate and Accumulated Depreciation, December 31, 1996 31
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 33
Financial Statements:
Balance Sheets, December 31, 1996 and 1995 34
Statements of Operations, For the Years Ended December 31, 1996, 1995 and 1994 35
Statements of Partners' Capital, For the Years Ended December 31, 1996, 1995 and 1994 36
Statements of Cash Flows, For the Years Ended December 31, 1996, 1995 and 1994 37
Notes to Financial Statements 38
Schedules:
III - Real Estate and Accumulated Depreciation, December 31, 1996 41
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.
19
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, 1996 and 1995,
and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1996, 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.
As discussed in Notes 1 and 4, on March 25, 1997, the Partnership sent a Consent
Solicitation Statement to the Limited Partners for approval of the sale of all
real estate assets of the Partnership, and the subsequent dissolution and
liquidation of the Partnership.
Price Waterhouse LLP
Hartford, Connecticut
March 27, 1997
20
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Balance Sheets
December 31, 1996 and 1995
ASSETS 1996 1995
Property and improvements, at cost:
Land and improvements $ 2,533,388 $ 2,533,388
Buildings 11,983,616 11,904,091
Tenant improvements 3,258,274 2,872,782
--------------- ---------------
17,775,278 17,310,261
Less accumulated depreciation 7,362,741 6,783,301
--------------- ---------------
Net property and improvements 10,412,537 10,526,960
Equity investment in unconsolidated joint venture 2,794,009 2,679,392
Cash and cash equivalents 595,103 2,052,475
Accounts receivable (net of allowance of $27,143 in 1996
and $6,535 in 1995) 49,788 107,677
Other assets 12,093 27,971
Deferred charges, net 503,416 384,586
--------------- ---------------
Total $ 14,366,946 $ 15,779,061
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Accounts payable and accrued expenses (including $44,611
in 1996 and $32,837 in 1995 due to affiliates) $ 185,114 $ 161,220
Tenant security deposits 66,859 86,457
Unearned income 48,897 61,649
--------------- ---------------
Total liabilities 300,870 309,326
--------------- ---------------
Partners' capital (deficit):
General Partner:
Capital contributions 1,000 1,000
Cumulative net income 172,095 165,478
Cumulative cash distributions (174,149) (167,140)
--------------- ---------------
(1,054) (662)
--------------- ---------------
Limited partners (39,236.25 Units):
Capital contributions, net of offering costs 35,602,279 35,602,279
Cumulative net income 4,355,610 3,700,536
Cumulative cash distributions (25,890,759) (23,832,418)
--------------- ---------------
14,067,130 15,470,397
--------------- ---------------
Total partners' capital 14,066,076 15,469,735
--------------- ---------------
Total $ 14,366,946 $ 15,779,061
=============== ===============
The Notes to Financial Statements are an integral part of these statements.
21
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Statements of Operations
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Income:
Base rental income $ 2,211,208 $ 2,435,302 $ 2,075,169
Other operating income 203,892 257,244 209,731
Interest income 41,054 69,277 53,150
------------- ------------- --------------
2,456,154 2,761,823 2,338,050
------------- ------------- --------------
Expenses:
Property operating expenses 867,608 964,050 981,864
General and administrative 154,928 142,119 151,281
Fees and reimbursements to affiliates 196,670 249,135 181,076
Depreciation and amortization 689,874 856,048 769,621
Loss due to impairment of assets -- -- 835,000
------------- ------------- --------------
1,909,080 2,211,352 2,918,842
------------- ------------- --------------
Net partnership operating income (loss) 547,074 550,471 (580,792)
Other income:
Gain on sale of property -- 464,957 245,873
Equity interest in joint venture net income 114,617 157,968 102,427
------------- ------------- --------------
Net income (loss) $ 661,691 $ 1,173,396 $ (232,492)
============= ============= ==============
Net income (loss):
General Partner $ 6,617 $ 22,266 $ 45,368
Limited partners 655,074 1,151,130 (277,860)
------------- ------------- --------------
$ 661,691 $ 1,173,396 $ (232,492)
============= ============= ==============
Net income (loss) per Unit $ 16.70 $ 29.34 $ (7.08)
============= ============= ==============
Cash distributions per Unit $ 52.48 $ 31.88 $ 48.19
============= ============= ==============
The Notes to Financial Statements are an integral part of these statements.
22
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Statements of Partners' Capital (Deficit)
For the Years Ended December 31, 1996, 1995 and 1994
General Limited
PARTNER PARTNERS TOTAL
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
Cash distributions (7,009) (2,058,341) (2,065,350)
Net income 6,617 655,074 661,691
------------- -------------- --------------
Balance (deficit) at December 31, 1996 $ (1,054) $ 14,067,130 $ 14,066,076
============= ============== ==============
The Notes to Financial Statements are an integral part of these statements.
23
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Statements of Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net income (loss) $ 661,691 $ 1,173,396 $ (232,492)
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 15,297 50,990 43,252
Depreciation and amortization 689,874 856,048 769,621
Equity interest in joint venture net income (114,617) (157,968) (102,427)
Accounts receivable 57,889 (10,328) 38,272
Accounts payable and accrued expenses 26,461 (18,216) (66,507)
Other, net (16,472) 88,662 (35,936)
---------------- ---------------- --------------
Net cash provided by operating activities 1,320,123 1,517,627 1,002,910
---------------- ---------------- --------------
Cash flows from investing activities:
Purchases of property and improvements (466,821) (283,499) (412,099)
Payment of leasing commissions (244,561) (265,056) (79,587)
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 (711,382) 1,427,901 570,314
---------------- ---------------- ---------------
Cash flows from financing activities:
Cash distributions to limited partners (2,059,104) (1,250,633) (1,890,735)
Cash distributions to General Partner (7,009) (10,435) (8,337)
---------------- ---------------- --------------
Net cash used in financing activities (2,066,113) (1,261,068) (1,899,072)
---------------- ---------------- --------------
Net increase (decrease) in cash and cash equivalents (1,457,372) 1,684,460 (325,848)
Cash and cash equivalents, beginning of year 2,052,475 368,015 693,863
---------------- ---------------- --------------
Cash and cash equivalents, end of year $ 595,103 $ 2,052,475 $ 368,015
================ ================ ==============
Supplemental disclosure of non-cash information:
Accrued purchase of property and improvements $ -- $ 1,804 $ 43,019
================ ================ ==============
The Notes to Financial Statements are an integral part of these statements.
24
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Notes to Financial Statements
1. Organization
Connecticut General Equity Properties-I Limited Partnership (the
"Partnership"), a Connecticut limited partnership, was organized in November
1983 to own and operate commercial real estate. The general partner of the
Partnership is Connecticut General Realty Resources, Inc.-Third (the "General
Partner"). On March 25, 1997, the Partnership sent a Consent Solicitation
Statement to the Limited Partners for approval of the sale of all real estate
assets of the Partnership, and the subsequent dissolution and liquidation of the
Partnership.
2. Summary of Significant Accounting Policies
a) Basis of Presentation: The financial statements have been prepared in
conformity with generally accepted accounting principles, and reflect
management's estimates and assumptions that affect the reported amounts.
Actual results could differ from those estimates.
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. Depreciation of assets to be disposed of is prohibited. On January 1,
1996, the Partnership adopted the Statement which had no impact on the
Partnership's results of operations, liquidity and financial condition.
c) Financial Instruments: Financial instruments subject to fair value
disclosure requirements are carried in the financial statements at amounts
that approximate fair value.
d) Property and Improvements: Property and improvements were held for the
production of income at December 31, 1995 and were held for sale as of
December 31, 1996. Property and improvements held for the production of
income are carried at depreciated cost less any write-downs to fair value.
The cost represents the initial purchase price and subsequent capitalized
costs and adjustments, including certain acquisition expenses. Depreciation
on property and improvements is calculated on the straight-line method
based on the estimated useful lives of the real property (15 to 39 years)
and tenant improvements (respective lease terms). Property and improvements
held for sale are carried at the lower of depreciated cost or fair value
less costs to sell and are not depreciated.
e) 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.
f) 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.
g) Other Assets: Other assets include an insurance claim for a compressor
failure at Woodlands Plaza at December 31, 1996 and a receivable from a
tenant at Lake Point for reimbursement of tenant improvement costs at
December 31, 1995.
25
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Notes to Financial Statements - Continued
h) 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.
i) Partners' Capital: Offering costs comprised of sales commissions and other
issuance expenses have been charged to the partners' capital accounts as
incurred.
j) 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.
3. Federal Income Tax Reporting
The principal differences between generally accepted accounting principles
and tax reporting is classification of syndication costs, differences in
depreciation methods and impairment losses. The net effect of the adjustments as
of December 31, 1996, 1995 and 1994, are summarized as follows:
1996 1995 1994
--------------------------- --------------------------- ----------------------------
Financial Tax Financial Tax Financial Tax
REPORTING REPORTING REPORTING REPORTING REPORTING REPORTING
Total assets $ 14,366,946 $ 22,800,520 $ 15,779,061 $ 24,096,319 $ 15,886,403 $ 24,728,396
Partners' capital (deficit):
General Partner (1,054) (27,383) (662) (28,026) (12,493) (24,632)
Limited partners 14,067,130 22,575,981 15,470,397 23,876,718 15,570,102 24,430,553
Net income (loss) (a):
General Partner 6,617 7,652 22,266 7,041 45,368 4,438
Limited partners 655,074 757,604 1,151,130 697,000 (277,860) 439,328
Net income (loss) per Unit (a): 16.70 19.53 29.34 17.76 (7.08) 11.20
(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.
4. Investment Properties
At December 31, 1996, the Partnership owned two commercial properties
directly and a 26.08% interest in another through a joint venture with an
affiliated partnership as follows: Woodlands Plaza II Office Building, St.
Louis, Missouri, Lake Point I, II, III Service Center, Orlando, Florida and
Westford Corporate Center, Westford, Massachusetts. Leases in effect are
generally for a term of three to ten years. No mortgage debt was incurred in the
purchase of the Partnership's properties. The properties were held for sale at
December 31, 1996.
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 (totaling
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. On April 27, 1995, the Partnership sold
26
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Notes to Financial Statements - Continued
building #6 (totaling 12,600 square feet) for a gross sales price of $365,400.
The carrying value of the property was $257,629. After deducting closing costs
of $24,372, the Partnership recorded a gain of $83,399. On December 26, 1995,
the Partnership sold the remaining three buildings, #3, #4 and #5 for a gross
sales price of $1,175,000. The net proceeds to the Partnership were $1,110,590.
The buildings had a carrying value of $729,032 and the Partnership recorded a
gain of $381,558.
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.
On December 10, 1996, the Partnership and Glenborough Realty Trust
Incorporated ("Glenborough") executed a letter of intent setting forth an
agreement in principle on the terms and conditions of a sale of all of the
Partnership property and improvements (Lake Point Service Center, Woodlands
Plaza Office Building, and the Partnership's joint venture interest in the
Westford Corporate Center) for an aggregate purchase price of $14,554,000. On
January 10, 1997, the Partnership and the Glenborough Properties, L.P.
("Glenborough LP"), an affiliate of Glenborough, entered into an Agreement of
Purchase and Sale (the "Purchase Agreement") incorporating the terms and
conditions of the letter of intent.
Based on the terms of the Purchase Agreement, the date of the closing will
occur on the 5th calendar day after the Partnership receives consent from the
Partnership's Limited Partners for the sale of the Partnership's property and
improvements and subsequent Partnership liquidation. On March 25, 1997, the
Partnership sent a Consent Solicitation Statement to Limited Partners. The
Partnership has fixed March 3, 1997 as the record date for determining the
Unitholders entitled to notice of and to consent to the sale, the Purchase
Agreement and the liquidation. The sale must be approved by at least a majority
of the issued and outstanding Units. The Consent Solicitation Statement expires
April 15, 1997.
The Partnership has estimated that the net proceeds from the sale of the
Partnership's property and improvements (after deduction of estimated expenses
of approximately $33,000) when added to the net cash from the transfer of the
remaining assets of the Partnership to the General Partner will be approximately
$15,100,000 or an average amount of $386 per Unit. The Partnership has estimated
that the liquidation will be completed within sixty days after the sale is
completed.
5. 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 general partner of the Partnership's joint venture partner is an affiliate
of the General Partner.
27
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Notes to Financial Statements - Continued
Summary financial information for the Venture as of and for the years ended
December 31, 1996, 1995 and 1994 follows:
1996 1995 1994
---- ---- ----
Total assets $ 11,712,625 $ 11,280,276 $ 12,671,892
Total liabilities 744,867 751,999 749,320
Total income 1,843,202 1,911,290 1,686,829
Net income 439,481 605,705 392,741
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 1996 or 1994.
6. Deferred Charges
Deferred charges at December 31, 1996 and 1995 consist of the following:
1996 1995
---- ----
Deferred leasing commissions $ 1,232,949 $ 988,388
Accumulated amortization (738,628) (628,194)
------------ ------------
494,321 360,194
Deferred rent credits 9,095 24,392
------------ ------------
$ 503,416 $ 384,586
============ ============
7. 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, excluding tenant renewal options
(does not include leases relative to the Partnership's interest in the Westford
Office Venture).
Year ending December 31:
1997 $ 2,160,578
1998 2,026,548
1999 1,611,146
2000 1,261,262
2001 807,674
Thereafter 3,185,111
28
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Notes to Financial Statements - Continued
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
$195,505 in 1996, $244,671 in 1995 and $202,036 in 1994. These amounts are
included as other income in the Statement of Operations.
Generally, a portion of the net leasable area for commercial real estate
properties is occupied by significant tenants (occupying 10 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 - three tenants occupy 50% of net leasable area and
account for 54% of gross rental revenue; Lake Point - two tenants occupy 44% of
net leasable area and account for 52% 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.
8. 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, 1996, 1995 and
1994 are:
1996 1995 1994
---- ---- ----
Partnership management fee(a) $ 80,107 $ 124,050 $ 80,512
Property management fees(b)(c) 47,044 55,633 45,019
Printing 17,626 13,504 11,407
Reimbursement (at cost) for
out of pocket expenses 51,893 55,948 44,138
------------ ------------ ------------
$ 196,670 $ 249,135 $ 181,076
============ ============ ============
(a) Includes management fees attributable to the Partnership's 26.08% interest
in the Westford Office Venture.
(b) Does not include property management fees earned by independent management
companies of $98,900, $112,749 and $95,063 for 1996, 1995 and 1994,
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.
(c) Does not include management fees earned by an affiliate of $14,002, $14,577
and $13,210 attributable to the Partnership's 26.08% interest in the
Westford Office Venture for the years ended December 31, 1996, 1995 and
1994, respectively.
9. Partners' Capital
During 1991, the State of Connecticut enacted income tax legislation, a
part of which affected partnerships. The portfolio income allocations made by
the Partnership to the limited partners are considered Connecticut based income
and are subject to Connecticut tax. The Partnership had elected to pay the tax
due on the limited partners' share of portfolio
29
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Notes to Financial Statements - Continued
income in 1995 and, therefore, paid tax due of $763 directly to the State of
Connecticut in April 1996 for the 1995 Form CT-G Connecticut Group Income Tax
Return. This amount was treated as a reduction of partners' capital and reported
as a distribution in 1995.
10. 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.
11. Subsequent Events
On March 10, 1997, the Partnership paid a cash distribution of $262,492 to
the limited partners and $3,199 to the General Partner.
30
SCHEDULE III
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Real Estate and Accumulated Depreciation
December 31, 1996
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 $ 12,691
Office Building
St Louis, MO
Lake Point I, II, III 1,413,971 6,615,761 2,043,831
Service Center
Orlando, FL
-------------------------------------------------------------------------
Totals $ 2,666,265 $ 13,052,491 $2,056,522
=========================================================================
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 $ 5,442,087 $ 1,279,334 $ 7,701,715
Office Building
St Louis, MO
Lake Point I, II, III 1,553,094 6,541,529 1,978,940 10,073,563
Service Center
Orlando, FL
---------------------------------------------------------------------
Totals $ 2,533,388 $ 11,983,616 $3,258,274 $ 17,775,278
=====================================================================
31
SCHEDULE III
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(a Connecticut limited partnership)
Real Estate and Accumulated Depreciation (continued)
December 31, 1996
Life on Which
Depreciation in Latest
Accumulated Date of Statement of Operations
Description Depreciation (G) Construction Date Acquired is Computed
Woodlands Plaza II $ 3,483,723 1983 10/15/84 2-39 years
Office Building
St Louis, MO
Lake Point I, II, III 3,879,018 1985 07/31/86 2-39 years
Service Center
Orlando, FL
--------------
Totals $ 7,362,741
==============
(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.
(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.
(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.
(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.
(E) The aggregate cost of the real estate owned at December 31, 1996 for
federal income tax purposes is $20,464,732.
(F) Reconciliation of real estate owned:
Description 1996 1995 1994
Balance at beginning of period $ 17,310,261 $ 18,692,756 $ 20,221,872
Additions during period 465,017 242,284 423,118
Reductions during period (C)(D) -- (1,624,779) (1,952,234)
----------------------------------------------------------
Balance at end of period $ 17,775,278 $ 17,310,261 $ 18,692,756
==========================================================
(G) Reconciliation of accumulated depreciation:
Description 1996 1995 1994
Balance at beginning of period $ 6,783,301 $ 6,686,953 $ 6,296,738
Additions during period 579,440 736,049 692,861
Reductions during period (D) -- (639,701) (302,646)
---------------------------------------------------------
Balance at end of period $ 7,362,741 $ 6,783,301 $6,686,953
=========================================================
32
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 19) present fairly, in all material respects, the financial position of
Westford Office Venture (the "Venture") at December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, 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.
As discussed in Notes 1 and 3, on March 25, 1997, Connecticut General Equity
Properties-I Limited Partnership and CIGNA Income Realty-I Limited Partnership
sent Consent Solicitation Statements to their respective Limited Partners for
approval of the sale of all real estate assets of those Partnerships, including
the Venture, and the subsequent dissolution and liquidation of the Venture.
Price Waterhouse LLP
Hartford, Connecticut
March 27, 1997
33
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
Unconsolidated Venture
Westford Office Venture
Balance Sheets
December 31, 1996 and 1995
ASSETS 1996 1995
Property and improvements, at cost:
Land and improvements $ 2,526,235 $ 2,546,078
Buildings 10,716,382 10,716,382
Tenant improvements 1,492,102 1,492,102
-------------- --------------
14,734,719 14,754,562
Less accumulated depreciation 5,237,109 4,726,178
-------------- --------------
Net property and improvements 9,497,610 10,028,384
Cash and cash equivalents 2,050,244 1,055,936
Accounts receivable 27,553 608
Other assets 2,600 2,600
Deferred charges, net 134,618 192,748
-------------- --------------
Total $ 11,712,625 $ 11,280,276
============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses (including $8,959
in 1996 and $8,731 in 1995 due to affiliates) $ 20,195 $ 27,327
Deferred acquisition fees payable to affiliate 724,672 724,672
-------------- --------------
Total liabilities 744,867 751,999
-------------- --------------
Partners' capital:
CGEP:
Capital contributions 4,718,527 4,718,527
Cumulative cash distributions (2,347,200) (2,347,200)
Cumulative net income 422,682 308,065
-------------- --------------
2,794,009 2,679,392
-------------- --------------
CIR:
Capital contributions 13,439,197 13,439,197
Cumulative cash distributions (6,652,800) (6,652,800)
Cumulative net income 1,387,352 1,062,488
-------------- --------------
8,173,749 7,848,885
-------------- --------------
Total partners' capital 10,967,758 10,528,277
-------------- --------------
Total $ 11,712,625 $ 11,280,276
============== ==============
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
Statements of Operations
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Income:
Base rental income $ 1,425,303 $ 1,481,811 $ 1,342,969
Other income 349,728 376,258 288,888
Interest income 68,171 53,221 54,972
------------- ------------- --------------
1,843,202 1,911,290 1,686,829
------------- ------------- --------------
Expenses:
Property operating expenses 711,027 597,935 633,601
General and administrative 67,926 75,097 57,198
Fees and reimbursements to affiliates 53,688 55,895 50,651
Depreciation and amortization 571,080 576,658 552,638
------------- ------------- --------------
1,403,721 1,305,585 1,294,088
------------- ------------- --------------
Net income $ 439,481 $ 605,705 $ 392,741
============= ============= ==============
Net income:
CGEP $ 114,617 $ 157,968 $ 102,427
CIR 324,864 447,737 290,314
------------- ------------- --------------
$ 439,481 $ 605,705 $ 392,741
============= ============= ==============
The Notes to Financial Statements are an integral part of these statements.
35
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
Unconsolidated Venture
Westford Office Venture
Statements of Partners' Capital
For the Years Ended December 31, 1996, 1995 and 1994
CGEP CIR TOTAL
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
Net income 114,617 324,864 439,481
------------- -------------- --------------
Balance at December 31, 1996 $ 2,794,009 $ 8,173,749 $ 10,967,758
============= ============== ==============
The Notes to Financial Statements are an integral part of these statements.
36
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
Unconsolidated Venture
Westford Office Venture
Statements of Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net income $ 439,481 $ 605,705 $ 392,741
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 571,080 576,658 552,638
Accounts receivable (26,945) 277 117,497
Accounts payable and accrued expenses (7,132) 2,679 (33,616)
Other, net 19,843 13,801 (13,463)
------------- ------------- -------------
Net cash provided by operating activities 996,327 1,199,120 1,015,797
------------- ------------- -------------
Cash flows from investing activities:
Purchases of property and improvements -- (44,203) (248,005)
Payment of leasing commissions (2,019) -- (39,758)
------------- ------------- -------------
Net cash used in investing activities (2,019) (44,203) (287,763)
------------- ------------- -------------
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 994,308 (845,083) 728,034
Cash and cash equivalents, beginning of year 1,055,936 1,901,019 1,172,985
------------- ------------- -------------
Cash and cash equivalents, end of year $ 2,050,244 $ 1,055,936 $ 1,901,019
============= ============= =============
The Notes to Financial Statements are an integral part of these statements.
37
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. On March 25,
1997, CGEP and CIR sent Consent Solicitation Statements to the their respective
limited partners for the approval of the sale of all real estate assets of the
Venture, and the subsequent dissolution and liquidation of the Venture.
2. Summary of Significant Accounting Policies
a) Basis of Presentation: The financial statements have been prepared in
conformity with generally accepted accounting principles, and reflect
management's estimates and assumptions that affect the reported amounts.
Actual results could differ from those estimates.
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. Depreciation of assets to be disposed of is prohibited. On January 1,
1996, the Venture adopted the Statement which had no impact on the
Venture's results of operations, liquidity and financial condition.
c) Financial Instruments: Financial instruments subject to fair value
disclosure requirements are carried in the financial statements at amounts
that approximate fair value.
d) Property and Improvements: Property and improvements were held for the
production of income at December 31, 1995 and were held for sale at
December 31, 1996. Property and improvements held for the production of
income are carried at depreciated cost less any write-downs to fair value.
The cost represents the initial purchase price and subsequent capitalized
costs and adjustments, including certain acquisition expenses. Depreciation
on property and improvements is calculated on the straight-line method
based on the estimated useful lives of the real property (15 to 39 years)
and tenant improvements (respective lease terms). Property and improvements
held for sale are carried at the lower of depreciated cost or fair value
less costs to sell and are not depreciated.
e) 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.
f) Deferred Charges: Deferred charges consist of leasing costs which are
amortized using the straight-line method over the respective lease terms.
g) 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.
38
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
Unconsolidated Venture
Westford Office Venture
Notes to Financial Statements - Continued
3. Investment Property
The Venture purchased Westford Corporate Center located in Westford,
Massachusetts, without incurring any long-term debt. The property was held for
sale at December 31, 1996.
The Venture recognized an impairment of asset loss in 1992 of $3,800,000
principally due to a reduction in the estimated holding period.
On December 10, 1996, the Venture and Glenborough Realty Trust Incorporated
("Glenborough") executed a letter of intent setting forth an agreement in
principle on the terms and conditions of a sale of the Venture's property and
improvements for a purchase price of $10,211,625. On January 10, 1997, the
Venture and the Glenborough Properties, L.P. ("Glenborough LP"), an affiliate of
Glenborough, entered into an Agreement of Purchase and Sale (the "Purchase
Agreement") incorporating the terms and conditions of the letter of intent.
Based on the terms of the Purchase Agreement, the date of the closing will
occur on the 5th calendar day after CGEP and CIR receive consent from their
respective limited partners for the sale of the Venture's property and
improvements and subsequent Venture liquidation. On March 25, 1997, CGEP and CIR
sent Consent Solicitation Statements to their respective limited partners. CGEP
and CIR have fixed March 3, 1997 as the record date for determining the
Unitholders entitled to notice of and to consent to the sale, the Purchase
Agreement and the liquidation. The sale must be approved by at least a majority
of the issued and outstanding Units of CGEP and CIR. The Consent Solicitation
Statement expires April 15, 1997.
4. Deferred Charges
Deferred charges at December 31, 1996 and 1995 consist of the following:
1996 1995
---- ----
Deferred leasing costs $ 443,562 $ 441,543
Accumulated amortization (308,944) (248,795)
----------- ----------
$ 134,618 $ 192,748
=========== ==========
5. Leases
The property is leased under leases which are accounted for as operating
leases, having remaining lease terms of less than three years. Following is a
schedule of minimum annual future rentals based upon non-cancelable commercial
leases currently in effect, excluding tenant renewal options:
Year ending December 31:
1997 $1,425,303
1998 1,425,303
1999 356,326
2000 and Thereafter --
39
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
Unconsolidated Venture
Westford Office Venture
Notes to Financial Statements - Continued
Leases generally include provisions for tenants to pay pro rata shares of
increases in operating expenses over base period amounts. During 1996, 1995 and
1994 the Venture earned $349,728, $376,258 and $288,888, 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 10 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 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 totaled approximately $1,000,000 in
1986 of which $724,672 will be payable from sales proceeds.
During 1996, 1995 and 1994, an affiliate of the general partners of the
venturers provided property management services at Westford Corporate Center for
fees totaling $53,688, $55,895 and $50,651, 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
1996, 1995 and 1994, $53,688, $52,957 and $50,646 of fees were paid directly by
the Venture to an unaffiliated on-site property manager.
7. 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.
40
SCHEDULE III
CONNECTICUT GENERAL EQUITY PROPERTIES-I LIMITED PARTNERSHIP
(Unconsolidated Venture)
Westford Office Venture
Real Estate and Accumulated Depreciation
December 31, 1996
Initial Cost Costs Capitalized Subsequent
to Venture (A)(B) to Acquisition (C)(E)
Land and Land Land, Building and
Description Improvements Buildings Improvements
Westford Corporate Center $3,223,875 $13,759,689 $ (2,248,845)
Westford, MA
Gross Amount at Which Carried at Close of Period (D)(F)
Land and Land Building and
Description Improvements Improvements Tenant Improvements Total
Westford Corporate Center $ 2,526,235 $ 10,716,382 $ 1,492,102 $ 14,734,719
Westford, MA
Life on Which
Depreciation in
Latest Statement of
Accumulated Date of Operations is
Description Depreciation (G) Construction Date Acquired Computed
Westford Corporate Center $ 5,237,109 1986 09/11/86 2-39 years
Westford, MA
(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.
(B) The Venture received $245,531 under a Master Lease Agreement, which was
treated as a reduction of initial cost to Venture.
(C) Included in Costs Capitalized Subsequent to Acquisition is an impairment of
assets loss in the amount of $3,800,000.
(D) The aggregate cost of the real estate owned at December 31, 1996 for
federal income tax purposes is $18,534,720.
(E) A portion of the 1995 capital expenditures was reimbursed by the tenants in
1996.
(F) Reconciliation of real estate owned:
Description 1996 1995 1994
Balance at beginning of period $ 14,754,562 $ 14,710,359 $ 14,493,579
Additions during period -- 44,203 216,780
Reductions during period (E) (19,843) -- --
----------------------------------------------------------
Balance at end of period $ 14,734,719 $ 14,754,562 14,710,359
==========================================================
(G) Reconciliation of accumulated depreciation:
Description 1996 1995 1994
Balance at beginning of period $ 4,726,178 $ 4,209,052 $ 3,712,142
Additions during period 510,931 517,126 496,910
----------------------------------------------------------
Balance at end of period $ 5,237,109 $ 4,726,178 $ 4,209,052
==========================================================
41
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
14, 1997 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 September 7, 1993
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
Kenneth Garrett Treasurer April 26, 1996
Josephine C. Donofrio Controller September 23, 1996
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.) and Connecticut General
Corporation (the parent of CIGNA Financial Partners, Inc.).
42
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 54, a Senior Managing Director of CIM, joined Connecticut
General's Investment Operations in 1971 as an Equities 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. He is a Chartered Financial Analyst.
J. ROBERT ANDREWS - DIRECTOR
Mr. Andrews, age 52, is a Managing Director of CIGNA Investment Management
and is one of seven Territorial Managers in the Mortgage Production unit. He
joined CIGNA's Real Estate Division in 1983. Prior to his current assignment, he
was the Head of the Real Estate Acquisitions and Dispositions Department, 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 36, was appointed Chief Financial Officer of CIGNA
Individual Insurance, a division with more than $94 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 13 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
Mr. Carey, age 33, is the President of the General Partner and CIGNA
Financial Partners, Inc. (CFP) and manages the Tax Advantaged Investment unit of
CIGNA Investment Management-Real Estate. Mr. Carey was elected President in
1993, and from 1990 to 1996, he served as the Controller of the General Partner
and CFP, primarily responsible for accounting and financial reporting. Prior to
joining CIGNA Investment Management, he held the position of manager at KPMG
Peat Marwick in the audit department and was a member of the Real Estate Focus
Group. Mr. Carey is a graduate of Central Connecticut State University with a
Bachelor of Science degree and is a Certified Public Accountant.
43
VERNE E. BLODGETT - VICE PRESIDENT, COUNSEL
Mr. Blodgett, age 59, 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 55, is Managing Director and department head responsible
for Acquisitions. 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,
Vice President - Real Estate Production and Managing Director - Asset
Management. He received a Bachelor of Science degree from the U.S. Naval
Academy.
DAVID C. KOPP - SECRETARY
Mr. Kopp, age 51, 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.
KENNETH R. GARRETT - TREASURER
Kenneth R. Garrett, age 40, is Assistant Vice President, Bank
Reconciliation and Services of CIGNA Corporation. In this capacity he manages a
staff responsible for reconciling approximately 500 CIGNA Corporation and
subsidiaries bank accounts, establishing and enforcing signature authority
limits on checks and drafts, working and negotiating with banks for paper based
disbursement services and providing check and draft services to CIGNA's
operating divisions. Kenneth joined the Insurance Company of North America (INA)
in 1988. He has held a number of positions in insurance, finance and strategy
with INA and later with the merged CIGNA Corporation before assuming his current
responsibilities. He received a B.A. degree for Delaware State University and an
M.B.A. in finance from Atlanta University.
JOSEPHINE C. DONOFRIO - CONTROLLER
Ms. Donofrio, age 29, was elected Controller of Tax Advantaged Investments
in 1996. In 1993, Ms. Donofrio joined CIGNA Investment Management - Real Estate
as a member of the Tax Advantaged Investment Unit. Prior to joining CIGNA
Investment Management, Ms. Donofrio was a senior accountant at Kostin, Ruffkess
& Company, LLC. Her experiences include financial and tax reporting for public
and private real estate limited partnership syndications. Ms. Donofrio is a
graduate of the University of Connecticut with a Bachelor of Science Degree. She
is a Certified Public Accountant and a member of the Connecticut Society of
Certified Public Accountants.
44
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.
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.
There exists no arrangement, known to the Partnership, the operation of
which may at a subsequent date result in a change in control of the Partnership.
As of February 14, 1997, 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 9,192 *
J. Robert Andrews (d) 0 1,660 *
David Scheinerman (e) 0 2,153 *
All directors and officers
Group (9) (f) 0 18,873 *
* 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 includes 1,660 shares which 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 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.
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 1996 operations of
$7,009. The General Partner was allocated a share of the Partnership income in
the amount of $6,617 for 1996. 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.
45
CII provided asset management services to the Partnership during 1996 for
the Woodlands Plaza II Office Building 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 1996, CII earned asset management fees
amounting to $47,044 for such services, of which $7,912 was unpaid as of
December 31, 1996. Independent third party property managers earned $98,900 of
management fees, of which $7,808 was unpaid as of December 31, 1996. In 1996,
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 $14,002 for such services. Independent third party property managers
earned $14,002 of fees relating to Westford.
CFP provided partnership management services for the Partnership at fees
calculated at 9% of adjusted cash from operations in any one year. In 1996, CFP
earned partnership management fees amounting to $80,107 for such services, of
which $31,639 was unpaid as of December 31, 1996.
The General Partner and its affiliates may be reimbursed for their direct
expenses incurred in the administration of the Partnership. In 1996, the General
Partner and its affiliates were entitled to reimbursement for such out of pocket
administrative expenses in the amount of $69,519 of which $5,060 was unpaid as
of December 31, 1996.
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
46
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.
(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
47
the sale of Westside Industrial Buildings #3, #4 and #5
closed on December 26, 1995.
(p) Agreement of Purchase and Sale dated January 10, 1997,
between CIGNA Income Realty-I Limited Partnership,
Connecticut General Equity Properties-I Limited
Partnership, and Westford Office Venture, as sellers and
Glenborough Properties, L.P., as purchaser, incorporated
by reference to Annex 1 to the Registrant's Consent
Solicitation Statement on Schedule 14A filed on March 25,
1997.
27 Financial Data Schedules
(b) No reports on Form 8-K were filed during the last quarter of the fiscal
year.
48
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 28, 1997 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 28, 1997
-----------------------------------
R. Bruce Albro, Director
/S/ J. ROBERT ANDREWS Date: March 28, 1997
-----------------------------------
J. Robert Andrews, Director
/S/ DAVID SCHEINERMAN Date: March 28, 1997
-----------------------------------
David Scheinerman, Director
/S/ JOHN D. CAREY Date: March 28, 1997
-----------------------------------
John D. Carey, President
(Principal Executive Officer)
/S/ KENNETH GARRETT Date: March 28, 1997
-----------------------------------
Kenneth Garrett, Treasurer
(Principal Financial Officer)
/S/ JOSEPHINE C. DONOFRIO Date: March 28, 1997
-----------------------------------
Josephine C. Donofrio, Controller
(Principal Accounting Officer)
49