FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Nine Months ended March 31, 1995 Commission File Number
2-96042
CAPITAL BUILDERS DEVELOPMENT PROPERTIES,
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
California 77-0049671
State or other jurisdiction I.R.S. employer
of organization identification number
4700 Roseville Road, Suite 101, North Highlands, California 95660
(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (916)331-8080
Former name, former address and former fiscal year, if changed since last
year Not applicable
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 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 ___
PART 1 - FINANCIAL INFORMATION
Capital Builders Development Properties
(A California Limited Partnership)
BALANCE SHEETS
March 31 December 31
1995 1994
ASSETS
Cash and cash equivalents $22,795 $4,899
Accounts receivable, net 181,643 195,973
Investment property, at cost,
net of accumulated depreciation
and amortization of $2,034,015
and $2,029,925 at March 31,
1995, and December 31, 1994,
respectively, and a valuation
allowance of $742,000.
7,807,166 7,944,599
Lease commissions, net of
accumulated amortization of
$72,419 and $89,681 at March
31, 1995 and December 31,1994,
respectively 103,529 113,694
Other assets, net of accumulated
amortization of $59,147 and
$53,668 at March 31, 1995 and
December 31, 1994, respectively 67,343 69,139
Minority Interest 345,754 290,314
Total assets $8,528,230 $8,618,618
LIABILITIES AND PARTNERS' EQUITY
Loan payable to affiliate $1,110,961 $1,010,405
Notes payable 6,701,781 6,699,864
Accounts payable and accrued
liabilities 76,544 117,530
Tenant deposits 99,471 106,309
Total liabilities 7,988,757 7,934,108
Partners' Equity:
General partner (50,979) (50,979)
Limited partners 590,452 735,489
Total partners' equity 539,473 684,510
Commitments and contingencies
Total liabilities and
partners' equity $8,528,230 $8,618,618
<FN>
See accompanying notes to the financial statements.
Capital Builders Development Properties
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,
1995 1994
Revenues
Rental and other income $321,974 $286,324
Interest income 592 312
Total revenues 322,566 286,636
Expenses
Operating expenses 57,819 63,577
Repairs and maintenance 30,512 32,536
Property taxes 24,194 23,920
Interest 197,726 149,148
General and administrative 34,669 34,986
Depreciation and
amortization 158,122 217,079
Total expenses 503,042 521,246
Loss before minority interest (180,476) (234,610)
Minority interest in joint venture (35,440) (31,608)
Net loss (145,037) (203,002)
Allocated to general partners (1,450) (2,030)
Allocated to limited partners ($143,587) ($200,972)
Net loss per limited partnership unit ($10.41) ($14.57)
Average units outstanding 13,787 13,787
<FN>
See accompanying notes to the financial statements.
Capital Builders Development Properties II
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31
1995 1994
Cash flows from operating activities:
Net loss ($145,037) ($203,002)
Adjustments to reconcile net loss
to cash flow used in operating
activities:
Depreciation and amortization 158,122 217,079
Minority interest in joint venture (35,440) (31,608)
Changes in assets and liabilities
Decrease in accounts
receivable 14,330 23,189
Increase in leasing commissions (982) (22,138)
Increase in other assets (3,683) (5,519)
(Decrease)/Increase in accounts
payable and accrued liabilities (40,986) 40,292
Decrease in tenant deposits (6,838) (2,341)
Net cash (used in) provided by
by operating activities (60,514) 17,946
Cash flows from investing activities:
Improvements to investment properties (4,063) (98,874)
Distribution to minority interest (20,000) (5,600)
Net cash used in investing activities (24,063) (104,474)
Cash flows from financing activities:
Proceeds from notes payable, net 1,917 87,180
Proceeds on loans payable
to affiliate 100,556 5,287
Net cash provided byfinancing activities 102,473 92,467
Net increase in cash 17,896 5,939
Cash, beginning of period 4,899 25,219
Cash, end of period $22,795 $31,158
<FN>
See accompanying notes to the financial statements.
Capital Builders Development Properties
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
ORGANIZATION
A summary of the significant accounting policies applied in the preparation
of the accompanying financial statements follows:
Basis of Accounting
The financial statements of Capital Builders Development Properties (The
"Partnership") are prepared on the accrual basis and therefore revenue is
recorded as earned and costs and expenses are recorded as incurred.
Certain prior year amounts have been reclassified to conform to current
year classifications.
Principles of Consolidation
The consolidated financial statements include the accounts of the company
and its majority-owned subsidiary (60 percent), Capital Builders Roseville
Venture. The remaining 40 percent is owned by Capital Builders Development
Properties II, a California Limited Partnership and affiliate of the
Partnership as they have the same General Partner. All significant
intercompany accounts and transactions have been eliminated.
Organization
Capital Builders Development Properties, a California Limited Partnership,
is owned under the laws of the State of California. The Managing General
Partner is Capital Builders, Inc., a California corporation (CB). The
Associate General Partners are: 1) the sole shareholder, President and
Director of CB, 2) four founders of CB, two of which are members of the
Board of Directors.
The Partnership is in the business of acquiring land for developing
commercial properties for lease and eventual sale.
Investment Properties
The Partnership's investment property account consists of commercial land
and buildings that are carried at the lower of cost, net of accumulated
depreciation and amortization, or their net realizable value. Net
realizable value is based upon an appraisal of the property by an
independent appraiser and management's assessment of current market
conditions. Depreciation is provided for in amounts sufficient to relate
the cost of depreciable assets to operations over their estimated service
lives of three to forty years. The straight-line method of depreciation is
followed for financial reporting purposes.
Other Assets
Included in other assets are loan fees. Loan fees are amortized over the
life of the related notes.
Lease Commissions
Lease commissions are being amortized over the related lease terms.
Income Taxes
The Partnership has no provision for income taxes since all income or
losses are reported separately on the individual partners' tax returns.
Net Loss per Limited Partnership Unit
The net loss per limited partnership unit is computed based on the weighted
average number of units outstanding during the year of 13,787 in 1995 and
1994.
Statement of Cash Flows
For purposes of statement of cash flows, the Partnership considers all
short-term investments with a maturity, at date of purchase, of three
months or less to be cash equivalents.
NOTE 2 - RELATED PARTY EXPENSE REIMBURSEMENT AND FEE
ARRANGEMENT
The Managing General Partner (Capital Builders, Inc.) and the Associate
General Partners are entitled to reimbursement of expenses incurred on
behalf of the Partnership and certain fees from the Partnership. These
fees include: a portion of the sales commissions payable by the
partnership with respect to the sale of the Partnership units; an
acquisition fee of up to 12.5 percent of gross proceeds from the sale of
the Partnership units; a property management fee up to 6 percent of gross
revenues realized by the Partnership with respect to its properties; a
subordinated real estate commission of up to 3 percent of the gross sales
price of the properties; and a subordinated 25 percent share of the
Partnership's distributions of cash from sales or refinancing. The
property management fee currently being charged is 5 percent of gross
revenues collected.
All acquisition fees and expenses, all underwriting commissions, and all
offering and organizational expenses which can be paid are limited to 20
percent of the gross proceeds from sales of partnership units provided the
Partnership incurs no borrowing to develop its properties. However, these
fees may increase to a maximum of 33 percent of the gross offering proceeds
based upon the total acquisition and development costs, including
borrowing. Since the formation of the partnership, 27.5% of these fees
were paid to the partnership's related parties, leaving a remaining maximum
of 5.5% ($379,143) of the gross offering proceeds. The ultimate amount of
these costs will be determined once the properties are fully developed and
leveraged.
The total management fees paid to the Managing General Partner were $14,780
and $14,158 for the three months ending March 31, 1995 and 1994,
respectively, while total reimbursement of expenses were $25,236 and
$26,991, respectively.
NOTE 3 - INVESTMENT PROPERTIES
The components of the investment property account at March 31, 1995 and
December 31, 1994 are as follows:
March 31, December 31,
1995 1994
Land $2,641,557 $2,641,557
Building and Improvements 6,308,700 6,308,700
Tenant Improvements 1,632,924 1,766,267
Investment properties, at cost 10,583,181 10,716,524
Less: accumulated depreciation
and amortization (2,034,015) (2,029,925)
valuation allowance (742,000) (742,000)
Investment property, net $ 7,807,166 $ 7,944,599
NOTE 4 - LOAN PAYABLE TO AFFILIATE
The loan payable represents funds advanced to the Roseville Joint Venture
from Capital Builders Development Properties II, a related partnership
which has the same General Partner. The loan bears interest, which is paid
monthly, at approximately the same rate charged to it by a bank for similar
borrowing, which was 10.5 and 7.5 percent March 31, 1995 and 1994,
respectively. Interest expense incurred on the loan was $25,555 and
$15,349 in 1995 and 1994, respectively. The loan is unsecured and is due
and payable on demand.
Notes payable consists of the following:
March 31, December 31,
1995 1994
Construction loan of $3,300,000
with interest at prime plus 2
percent which was modified
effective April 1, 1992 as a new
mini-permanent loan of $3,440,000
due April 1, 1997. The note bears
interest at bank commercial lending
rate (8.5 percent (at March 31,
1995)plus 2.0 percent with a floor
of 8.5 percent and a ceiling of
9.75% as of May 31, 1995. Ceiling
will then increase to 10.75% for
the remaining life of the loan.
The note provides for additional
cash draws as additional lease up
of the project is obtained and
certain expense ratios are
maintained. The note is
collateralized by a first deed of
trust on the land, buildings and
improvements and is guaranteed by
the General Partner. $3,322,581 $3,314,188
Mini-permanent loan of $3,400,000
has been modified effective June
23, 1994 as a new mini-permanent
loan of $3,400,000, due June 25,
1999. The note requires monthly
principal and interest payments and
bears interest at bank prime (9.0
percent at March 31, 1995) plus 1.5
percent with a floor of 6.75
percent. The note is
collateralized by a first deed of
trust on the land, buildings and
improvements, and is guaranteed by
the General Partner. 3,379,200 3,385,676
Total notes payable $6,701,781 $6,699,864
NOTE 6 - RENTAL LEASES
The Partnership leases its properties under long-term non-cancelable
operating leases to various tenants. The facilities are leased through
agreements for rents based on the square footage leased. Minimum annual
base rental payments under theses leases for the years ending December 31
are as follows:
1996 $912,503
1997 588,207
1998 430,496
1999 235,154
2000 and thereafter 342,648
Total $2,509,008
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Partnership is involved in litigation primarily arising in the normal
course of its business. In the opinion of management, the Partnership's
recovery or liability, if any, under any pending litigation would not
materially affect its financial condition or operations.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership commenced operations on September 19, 1985 upon the sale of
the minimum number of Limited Partnership Units. The Partnership's initial
source of cash has been from the sale of Limited Partnership Units.
Through the offering of Units, the Partnership has raised $6,893,500
(represented by 13,787 Limited Partnership Units). Cash generated from the
sale of Limited Partnership Units has been used to acquire land for the
development of an office/industrial project and 60 percent interest in the
development of an office project.
The Partnership's primary current sources of cash are from property rental
income, additional draws on its $3,440,000 mini-permanent loan and loans
from affiliate. As of March 31, 1995, $3,336,000 had been drawn on the
loan, leaving a remaining line of $104,000. The terms of such financing
are described in Note 5 of the Partnership's Financial Statements.
It is the Partnership's investment goal to utilize existing capital
resources for the continued lease up (tenant improvements and leasing
commissions) and the further development of its investment properties.
Funds for these commitments are obtained from property income, additional
advances on the mini-permanent loan, loans from affiliate or existing cash
reserves. The Partnership is expected to incur $104,000 in lease up and
improvement costs which will be funded by additional draws on the mini-
permanent loan. The Partnership's financial resources appear to be adequate
to meet current year obligations and no adverse change in liquidity is
foreseen.
RESULTS OF OPERATIONS
The Partnership's total revenues increased by $35,930 (12.5%) for the three
months ended March 31, 1995 as compared to March 31, 1994, while expenses
also decreased by $18,203 (3.5%) for the same respective period. In
addition, the minority interest in net loss has decreased by $3,832 in 1995
compared to 1994, all resulting in a decrease in net loss of $57,965
(28.5%) for months ended March 31, 1995 as compared to March 31, 1994.
The increase in revenues is due to an increase in occupancy at Plaza de
Oro. Plaza de Oro experienced a lease up of 12,085 square feet of
industrial and 1,241 of office space subsequent to the first quarter of
1994. The majority of this space is still incurring free rent but will
begin receiving rent in the second quarter of 1995.
The decrease in expenses is due to a decrease in deprecation and
amortization of $58,957 (27.2%), a decrease in operating expenses of
$5,758 (9.1%), and a decrease in repairs and maintenance of $2,024 (6.2%).
The decrease in depreciation is due to an adjustment made in the first
quarter of 1994 that resulted from a change in accounting estimate of the
useful life of tenant improvement costs. The decrease in operating
expenses and repairs and maintenance is due to the continued implementation
of cost cutting programs.
The remaining increase in expenses is due to an increase in interest of
$48,578 (32.5%) which is the result of interest rate increases (see Notes 4
and 5) on the affiliate loan and mini-permanent loans. The increase also
is the result of additional draws on both the affiliate loan and mini-
permanent loans.
Item 1 - Legal Proceeding
The Partnership is not a party to, nor is the Partnership's
property the subject of, any material pending legal proceedings.
Item 2 - Not applicable
Item 3 - Not applicable
Item 4 - Not applicable
Item 5 - Not applicable
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has dully caused this report to be signed on its behalf by the
undersigned, hereunto dully authorized.
CAPITAL BUILDERS DEVELOPMENT PROPERTIES
a California Limited Partnership
By: Capital Builders, Inc.
Its Corporate General Partner
Date: May 5, 1995 By: ______________________________________
Michael J. Metzger
President
Date: May 5, 1995 By: ______________________________________
Kenneth L. Buckler
Chief Financial Officer