29
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For the fiscal year ended Commission File Number
December 31, 1998 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 incorporation or organization) Identification No.)
4700 Roseville Road, Suite 206, North Highlands, California 95660
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (916) 331-8080
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: Limited
Partnership Units
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. X Yes No
As of December 31, 1998 the aggregate Limited Partnership Units held
by nonaffiliates of the registrant was 13,787. There is no market
for the units.
Documents Incorporated by Reference
Limited Partnership Agreement dated May 1, 1985, filed as Exhibit
3.3, and the Amendment to the Limited Partnership Agreement dated
November 20, 1985 filed as Exhibit 3.4 to Registration Statement No.
2-96042 of Capital Builders Development Properties, A California
Limited Partnership, are hereby incorporated by reference into Part
IV of this Form 10K.
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Capital Builders Development Properties (the "Partnership") is a
publicly held limited partnership organized under the provisions of
the California Revised Limited Partnership Act pursuant to the
Limited Partnership Agreement dated December 13, 1984, as amended and
restated as of May 1, 1985 (the "Agreement"). The Partnership
commenced on January 10, 1985, and shall continue in full force and
effect until December 31, 2020 unless dissolved sooner by certain
events as described in the Agreement. The Managing General Partner
is Capital Builders, Inc., a California Corporation (CB). The
Associate General Partners are the sole shareholder, President and
Director of CB, and four founders of CB.
On September 19, 1985 the Partnership sold 2,468 Limited Partnership
Units for a total of $1,234,000. From September 19, 1985, through
May 1, 1986, the Partnership sold an additional 11,319 units for a
total of 13,787 Units. On May 1, 1986, the Partnership was closed to
capital raising activity with a total of $6,893,500 proceeds raised
from the offering. The General Partners have contributed capital in
the amount of $1,000 to the Partnership for a 1% interest in the
profits, losses, tax credits and distributions of the Partnership.
(b) Financial Information about Industry Segments
The Partnership is in the business of real estate development and is
not a significant factor in its industry. The Partnership's
remaining investment property is located near a major urban area and,
accordingly, competes not only with similar properties in its
immediate area but with hundreds of properties throughout the urban
areas. Such competition is primarily on the basis of locations,
rents, services and amenities. In addition, the Partnership competes
with significant numbers of individuals and organizations (including
similar Partnerships, real estate investment trusts and financial
institutions) with respect to the purchase and sale of land,
primarily on the basis of the prices and terms of such transactions.
(c) Narrative Description of the Business
The Partnership's business objective is to complete the development
of its existing land with a commercial retail building for lease and
eventual sale. The primary investment objective of the Partnership
is to realize capital appreciation from the sale of the Properties
developed by it some three to five years after such Properties have
been placed in service. A secondary investment objective is to
generate cash from the leasing of Partnership Properties pending
their sale for distribution to the Limited Partners, although it is
not presently anticipated that the amount of such cash available for
distribution to the Limited Partners will be significant. Since the
Partnership has not sold its investment properties, it has not
achieved its investment goals as yet. Although investor returns
cannot be accurately determined until the investment properties are
sold, due to the additional time required to lease up the investment
properties, and due to the decline in real estate values during the
California real estate recession, it is anticipated that ultimate
returns will be less than initially projected.
On April 10, 1987, the Partnership entered into a joint venture
called Capital Builders Roseville Venture ("JV") with Capital
Builders Development Properties II ("CBDP II"), a California Limited
Partnership. The Partnership and CBDP II are affiliated as they have
the same General Partner. The Limited Partners of the Partnership
have the ability to replace the General Partner through a majority
vote. The Partnership contributed $1,350,000 resulting in a 60%
interest in the profits, losses and cash distributions of the JV.
CB, the Managing General Partner of the Partnership, had the same
rights and obligations with respect to the JV's operations and
management as it could exercise as Managing General Partner of the
Partnership. The JV was dissolved on May 1, 1997 when CBDP II
purchased CBDP's remaining 60% interest in the JV.
The acquisition of the real estate is consistent with the Partnership
objectives which are to acquire, develop, hold, maintain, lease,
sell, or otherwise dispose of real property within the Western United
States (including the states of California, Oregon, Washington,
Arizona, Nevada, New Mexico, Utah, Colorado, Hawaii, and Alaska),
including without limitation, the acquisition of undeveloped land for
development and construction of research and development, light
industrial, commercial/retail, or office buildings thereon, and the
acquisition of partially completed commercial real property
developments for completion of development.
Although the Associate General Partners, Officers, and Directors of
the Managing General Partners are experienced in real property
operation and management, they also may utilize independent advisors,
agents, and workers, in addition to the Partnership employees, to
assist them in the operation, leasing, maintenance and improvement of
the Partnership's properties.
The Partnership has no full time employees but is managed by CB, the
Managing General Partner.
ITEM 2. PROPERTIES
The Partnership owns 100% equity interest in a property called Plaza
de Oro ("PDO"). PDO is a two phase development. Phase I is a 71,600
square foot mixed-use project consisting of two multi-tenant
buildings. Phase II consists of 42,500 square foot corner pad which
is planned for a 9,860 square foot building. A 6,000 square foot
lease for Phase II is in final negotiations, and once a lease has
been executed a construction loan will be obtained and the
development of Phase II will be completed. PDO maintains adequate
property and general liability insurance.
Additional information about the Partnership's property follows:
Ownership Percentage: 100%
Acquisition Date: December 19, 1985
Location: Rancho Cordova, CA
Present Monthly
Effective Average
Base Rent Per Square Foot: $0.82
Square Footage Mix:
Office 28,820
Industrial 33,825
Retail 8,940
Leased Occupancy at
December 31: 1998 60%
1997 81%
1996 98%
1995 92%
1994 87%
Current Year Depreciation: $208,874
Method of Depreciation: Straight Line
Depreciation Life: 40 Years
Bldg Improvements
Life of Lease
Tenant Improvements
Total cost: $5,132,052
Encumbrances: $3,574,944
Tenant occupying more than
10% of square footage and nature
of business: None
The Partnership's property is held subject to encumbrances which are
more fully described under Note 7 to the Partnership's Financial
Statements included under Item 8 which is incorporated herein by
reference.
Plaza de Oro is being leased to a wide variety of tenants in a
diversity of industries. Leases are typically three to five years in
term and provide for free rent periods, at inception, equal to
approximately one month per three years of a lease term. Some leases
contain options to extend the term of the lease.
The Partnership's investment property is located in a major urban
area and, therefore, must compete with properties of greater and
lesser quality. Such competition is based primarily on rent,
location, services and amenities. The properties are suitable for
their current and anticipated use.
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR REGISTRANT'S LIMITED PARTNERSHIP INTERESTS AND
RELATED SECURITY HOLDER MATTERS
There is no public trading market for the Partnership's Limited
Partnership Units and it is not anticipated that a public trading
market will develop. Furthermore, the Partnership Agreement
prohibits Limited Partners from transferring Limited Partnership
Interests if such transfers would result in the dissolution of the
Partnership for tax purposes under Section 708 of the Internal
Revenue Code.
As of December 31, 1998, there were 1,138 holders and 13,787 Limited
Partnership units outstanding.
ITEM 6. SELECTED FINANCIAL DATA
The following constitutes a summary of selected consolidated
financial data for the following periods (000's omitted except net
loss per Limited Partnership unit):
1998 1997 1996 1995 1994
Revenues $622 $992 $1,341 $1,262 $1,231
Net (Loss) Income ($390) $879 ($394) ($594) ($668)
Net (Loss) Income per
Limited Partnership
Unit ($28) $63 ($28) ($43) ($48)
Total Assets $3,901 $4,219 $8,326 $8,386 $8,619
Notes and Loans Payable $3,599 $3,503 $8,354 $8,102 $7,710
(See ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Year 2000 Issue
The potential impact of the Year 2000 issue on the real estate
industry could be material, as virtually every aspect of the industry
and processing of transactions will be affected. Due to the size of
the task facing the real estate industry, the Partnership may be
adversely affected by the problem, depending on whether it and the
entities with which it does business address this issue successfully.
The impact of Year 2000 issues on the Partnership will then depend not
only on corrective actions that the Partnership takes, but also on the
way in which Year 2000 issues are addressed by governmental agencies,
businesses and other third parties that provide services or data to,
or received services or data from, the Partnership, or whose financial
condition or operational capability is important to the Partnership.
The Partnership's State of Readiness
The Partnership engages the services of third-party software vendors
and service providers for substantially all of its electronic data
processing. Thus, the focus of the Partnership is to monitor the
progress of its primary software providers toward Year 2000 readiness.
The Partnership's Year 2000 program has been divided into phases, all
of them common to all sections of the process: (1) inventorying date-
sensitive information technology and other business systems; (2)
assigning priorities to identified items and assessing the efforts
required for Year 2000 readiness of those determined to be material to
the Partnership; (3) upgrading or replacing material items that are
determined not to be Year 2000 compliant and testing material items;
(4) assessing the status of third party risks; and (5) designing and
implementing contingency and business continuation plans.
In the first phase, the Partnership has conducted a thorough
evaluation of current information technology systems and software.
Non-information technology systems such as climate control systems,
elevators and security equipment has also been surveyed.
In phase two of the process, results from the inventory have been
assessed to determine the Year 2000 impact and what actions are
required to achieve Year 2000 readiness. For the Partnership's
internal systems, application upgrades of software are needed. The
Partnership has opted for a course of action that will result in
upgrading or replacing all critical internal systems.
The third phase includes the upgrading, replacement and/or retirement
of systems, and testing. This stage of the Year 2000 process is
ongoing and is scheduled to be completed by the second quarter of
1999.
The fourth phase, assessing third party risks, includes the process of
identifying and prioritizing critical suppliers and customers at the
direct interface level. This evaluation includes communicating with
the third parties about their plans and progress in addressing Year
2000 issues. The Partnership's management has identified critical
third parties and developed a letter inquiring about their company's
Year 2000 program. These letters will be sent by the end of the first
quarter of 1999.
Contingency Plan
The final phase of the Partnership's Year 2000 program relates to
contingency plans. The Partnership maintains contingency plans in the
normal course of business designed to be deployed in the event of
various potential business interruptions. The Partnership's
contingency plan includes maintaining hard copies of tenant leases,
vendor contracts, and accounting records to ensure the maintenance of
its accounting system and to help facilitate the collection of rents
and payments to vendors during computer interruptions.
Costs
As the Company relies upon third-party software vendors and service
providers for substantially all of its electronic data processing, the
primary cost of the Year 2000 Project has been and will continue to be
the reallocation of internal resources and, therefore, does not
represent incremental expense to the Partnership.
Risks
Failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities
or operations. The Partnership believes that, with the implementation
of new or upgraded business systems and completion of the Year 2000
Project as scheduled, the possibility of significant interruptions of
normal operations due to the failure of those systems will be reduced.
However, the Partnership is also dependent upon the power and
telecommunications infrastructure within the United States. The most
reasonably likely worst case scenario would be that the Partnership
may experience disruption in its operations if any of these third-
party suppliers reported a system failure. Although the Partnership's
Year 2000 Project will reduce the level of uncertainty about the
readiness of its material third-party providers, due to the general
uncertainty over Year 2000 readiness of these third-party suppliers,
the Partnership is unable to determine at this time whether the
consequences of Year 2000 failures will have a material impact.
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 was 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 and for the development of a mixed use
commercial project and a 60% interest in a commercial office project.
During the twelve months ended December 31, 1998, a net increase in
cash of $14,896 was recognized by the Partnership. This was the
result of refinancing Plaza de Oro's land loan ($180,000) with a
$290,000, 12 month, 12.5% interest only loan, which provided
approximately $90,000 in cash reserves during the second quarter.
Since the refinancing, cash reserves have been utilized to make debt
service payments and fund cash used in operating activities.
In November 1998, one of Plaza de Oro's major office tenants filed
Chapter 11 Bankruptcy and vacated its suites totaling 12,052 square
feet. Although the tenant's lease does not expire until January 31,
2001, it is unlikely that any future collections will be received on
the lease. The loss of this tenant will have a significant negative
impact on the Partnership's ability to meet its current obligations.
In order to resolve the Partnership's cash flow problem, Management
plans to acquire a twelve month, $150,000 line of credit from the
property's existing lender, which will fund leasing costs and current
year obligations. Within the next twelve months, Management also
intends to develop the remaining pad building consisting of 9,860
office/retail square feet. Lease terms for this building have been
negotiated with a tenant requiring approximately 6,000 square feet.
Management is awaiting final signature on the lease before a
construction loan is obtained and development commences on the pad
building.
In order to accelerate the re-leasing of the project's existing
vacant space, management has reduced Plaza de Oro's full service
office rent from $1.27/sf to $1.17/sf, and its industrial modified
gross asking rent from $.35/sf to $.30/sf. This rent reduction has
generated one signed office lease for 1,100 square feet, and
negotiations for a 5,000 square foot office lease and a 7,000 square
foot industrial lease.
Management's intentions are to list the project for sale after its
leasing efforts have brought the property's existing buildings back
to a stabilized occupancy (90% to 95% occupied) and subsequent to the
development of the pad building. Once Plaza de Oro has been sold,
the Partnership will be dissolved.
Results of Operations
1998 vs 1997
The Partnership's total revenues decreased by $369,917 (37.3%) for the
twelve months ended December 31, 1998 as compared to December 31,
1997, while expenses also decreased by $250,627 (19.8%) for the same
respective period. In addition, the minority interest in net loss
decreased by $22,806 (100%) in 1998 compared to 1997, and a gain of
$1,127,913 was recognized during the twelve months ended December 31,
1997 from the sale of its 60% interest in the Capital Builders
Roseville Venture, all resulting in a decrease in net income of
$1,270,009 (144.4%) for the twelve months ended December 31, 1998 as
compared to December 31, 1997.
The decrease in revenues is due primarily to the sale of the
Partnership's joint venture interest on May 1, 1997. The sale
decreased reported revenues by $242,630 since the Partnership no
longer owns 60% of the Roseville Joint Venture (Capital Professional
Center), as it did during the twelve months ended December 31, 1997.
The Partnership's remaining property, Plaza de Oro, experienced a
decrease in revenue of $127,288 due to a large decrease in occupancy
amounting to a decrease in rental income of $91,288. Additionally,
the Partnership recognized $36,000 of income during 1997 due to the
refinancing of its permanent loan, in which back-end loan fees which
had been previously amortized over the life of the loan were forgiven
by the Lender. Management is currently working on an aggressive
marketing program and anticipates the lease-up of the project during
the next two quarters.
Total expenses decreased by $250,627 for the twelve months ended
December 31, 1998, as compared to December 31, 1997, primarily due to
the sale of its 60% interest in Capital Builders Roseville Venture on
May 1, 1997. As of December 31, 1998, the Statement of Operations did
not include any joint venture expenses, where as of December 31, 1997,
expenses of $299,645 were included.
The Partnership's remaining property, Plaza de Oro, recognized an
increase in expenses of $48,669 primarily due to the increase of
depreciation and amortization resulting from the accelerated write-off
of tenant improvements and leasing commissions relating to the
premature vacancy of the 12,052 square foot office tenant.
1997 vs 1996
The Partnership's total revenues decreased by $348,619 (26%) in fiscal
year 1997, as compared to fiscal year 1996, while expenses decreased
by $554,369 (30.5%) for the same respective period. In addition, the
minority interest in net loss has decreased by $59,839 (72.4%) in 1997
compared to 1996, and in 1997 a gain from the disposition of the joint
venture of $1,127,913 was incurred, all resulting in a net income of
$879,714 for the fiscal year ended December 31, 1997 as compared to a
loss of $394,110 for the fiscal year ended December 31, 1996.
The decrease in revenues is primarily due to the sale of the
Partnership's joint venture interest on May 1,1997. The sale
decreased reported revenues by $428,895 since only four months of the
joint venture's operations were included in the 1997 Consolidated
Statement of Operations, where as the December 31, 1996 Statement
included twelve months of the joint venture's operations. The
Partnership's remaining property, Plaza de Oro, experienced an
increase in revenues of $80,275 for the twelve months ended December
31, 1997, compared to December 31 1996, due to an increase in average
occupancy.
Total expenses decreased by $554,369 for the twelve months ended
December 31, 1997, as compared to December 31, 1996, due to the sale
on May 1, 1997 of its 60% interest of Capital Builders Roseville
Venture. As of December 31, 1997, the Statement of Operations
included expenses of $299,645 from its joint venture, where as of
December 31, 1996, expenses of $878,135 from its joint venture were
included. The Partnership's remaining property, Plaza de Oro,
recognized an increase in operating expenses of $24,127 during fiscal
year 1997 compared to 1996, primarily due to the recarpeting and
painting of the office building's lobby and other common areas.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Partnership does not have a material market risk due to financial
instruments held by the Partnership. The Partnership's only variable
rate instrument consists of a loan payable to affiliate in the amount
of $24,000.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page Number
INDEPENDENT AUDITORS' REPORT 11
FINANCIAL STATEMENTS
BALANCE SHEETS 12
AS OF DECEMBER 31, 1998 AND 1997
STATEMENTS OF OPERATIONS 13
FOR THE YEARS ENDED
DECEMBER 31, 1998, 1997, and 1996
STATEMENTS OF PARTNERS' 14
EQUITY (DEFICIT) FOR THE YEARS ENDED
DECEMBER 31, 1998, 1997, and 1996
STATEMENTS OF CASH FLOWS 15
FOR THE YEARS ENDED
DECEMBER 31, 1998, 1997, and 1996
NOTES TO FINANCIAL STATEMENTS 16-23
SUPPLEMENTAL SCHEDULES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION 27
Financial schedules not included have been omitted because of the
absence of conditions under which they are required or because the
information is included elsewhere in this report.
Independent Auditors' Report
The Partners
Capital Builders Development Properties:
We have audited the accompanying balance sheets of Capital Builders
Development Properties, a California Limited Partnership, as of
December 31, 1998 and 1997, and the related statements of operations,
partners' equity (deficit) and cash flows for each of the years in
the three-year period ended December 31, 1998. In connection with
our audits of the financial statements, we also have audited the
financial statement schedule as listed in the accompanying index.
These financial statements and financial statement schedule are the
responsibility of the partnership's management. Our responsibility is
to express an opinion on these financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Capital
Builders Development Properties as of December 31, 1998 and 1997, and
the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1998 in conformity
with generally accepted accounting principles. Also in our opinion,
the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.
The accompanying financial statements have been prepared assuming
that the partnership will continue as a going concern. As discussed
in Note 3 to the financial statements, the partnership's negative
cash flow position and significant debt service raise substantial
doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 3. The
financial statements and financial statement schedule do not include
any adjustments that might result from the outcome of this
uncertainty.
Sacramento, California KPMG LLP
February 5, 1999
PART 2 - FINANCIAL INFORMATION
Capita
l
Builde
rs
Develo
pment
Proper
ties
(a
Califo
rnia
Limite
d
Partne
rship)
BALANC
E
SHEETS
<CAPTI
ON>
December December 31
31
1998 1997
ASSETS
Cash $17,206 $2,310
Accoun 68,742 120,152
ts
receiv
able,
net
Invest
ment
proper
ty,
net of
accumulate
d
depreciati
on and
amortizati
on of
$1,404,343
and
$1,227,226
at
December
31, 1998
and 1997, 3,727,709 3,947,695
respective
ly
Lease
Commis
sions,
net of
accumu
lated
amortizati
on of
$99,899
and
$58,098 at
December 34,260 80,188
31, 1998
and 1997,
respective
ly
Other
assets
, net
of
accumu
lated
amortizati
on of
$43,372
and
$17,382 at
December
31, 1998
and
1997, 53,389 68,984
respective
ly
Total Assets $4,219,329
$3,901,306
LIABIL
ITIES
AND
PARTNE
RS'
EQUITY
Notes $3,574,944 $3,503,398
payabl
e
Loan $24,000 - - - -
payabl
e to
affili
ate
Accoun 87,929 88,257
ts
payabl
e and
accrue
d
liabil
ities
Tenant 29,043 51,989
deposi
ts
Total Liabilities 3,715,916 3,643,644
Commit
ments
and
contin
gencie
s
Partne
rs'
Equity
:
General (55,970) (52,067)
Partners
Limited 241,360 627,752
Partners
Total Partners' Equity 185,390 575,685
Total $3,901,306 $4,219,329
Liabilitie
s and
Partners'
Equity
See accompanying notes to the financial statements.
Capital Builders Development
Properties
(a California Limited
Partnership)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
1998 1997 1996
Revenues
Rental and other income $621,770 $991,210 $1,339,355
Interest Income 435 912 1,386
Total revenues 622,205 992,122 1,340,741
Expenses
Operating expenses 151,278 202,125 262,885
Repairs & maintenance 76,256 130,654 140,846
Property taxes 57,673 71,632 97,548
Interest 338,454 472,622 744,438
General and administrative 94,253 89,335 107,306
Depreciation and amortization 294,586 296,759 464,473
Total expenses 1,012,500 1,263,127 1,817,496
Loss before minority interest
and gain from disposition of
Joint Venture (390,295) (271,005) (476,755)
Minority interest in net loss
of Joint Venture - - - - 22,806 82,645
Gain from disposition of Joint
Venture - - - - 1,127,913 - - - -
Net (loss) income (390,295) 879,714 (394,110)
Allocated to General Partners (3,903) 8,797 (3,941)
Allocated to Limited Partners $(386,392) $870,917 $(390,169)
Net (loss) income per Limited
Partnership unit $(28.03) $63.17 $(28.30)
Average units outstanding 13,787 13,787 13,787
See accompanying notes to the financial statements.
CAPITAL BUILDERS DEVELOPMENT PROPERTIES,
a California Limited Partnership
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Total
Partners'
General Limited Equity
Partners Partners (Deficit)
Balance at December 31, 1995 ($56,923) $147,004 $90,081
Net loss (3,941) (390,169) (394,110)
Balance at December 31, 1996 (60,864) (243,165) (304,029)
Net income 8,797 870,917 879,714
Balance at December 31, 1997 (52,067) 627,752 575,685
Net Loss (3,903) (386,392) (390,295)
Balance at December 31, 1998 ($55,970) $241,360 $185,390
See accompanying notes to the financial statements.
Capital Builders Development
Properties
(a California Limited
Partnership)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
1998 1997 1996
Cash flows from operating
activities:
Net (loss) income ($390,295) $879,714 ($394,110)
Adjustments to reconcile net
(loss) income to cash flow
(used in) provided by
operating activities:
Depreciation and amortization 294,586 296,759 464,473
Minority interest in joint
venture - - - - (22,806) (82,645)
Gain from disposition of joint
venture investment - - - - (1,127,913) - - - -
Unpaid interest expense on
loan payable - - - - 55,347 58,702
Changes in assets and
liabilities:
Decrease (Increase) in
accounts receivable 51,410 (19,494) 3,015
Increase in leasing
commissions (1,093) (36,346) (79,663)
Decrease (Increase) in other
assets 2,703 (757) (3,409)
(Decrease) Increase in
accounts payable and
accrued liabilities (328) (12,259) 41,876
(Decrease ) Increase in
tenant deposits (22,946) (11,801) 6,487
Net cash (used in) provided by
operating activities (65,963) 444 14,726
Cash flows from investing
activities:
Improvements to investment
properties (1,588) (83,197) (123,815)
Proceeds from sale of
partnership investment - - - - 14,380 - - - -
Net cash used in investing
activities (1,588) (68,817) (123,815)
Cash flows from financing
activities:
Proceeds on notes payable 110,000 3,530,000 39,954
Payments on notes payable (38,454) (3,425,377) (72,449)
Payment of loan fees (13,099) (83,275) - - - -
Proceeds on loans payable to
affiliate 24,000 - - - - 225,000
Distribution to minority
interest - - - - - - - - (124,480)
Net cash provided by financing
activites 82,447 21,348 68,025
Net increase (decrease) in cash 14,896 (47,025) (41,064)
Cash, beginning of period 2,310 49,335 90,399
Cash, end of period $17,206 $2,310 $49,335
Supplemental disclosure:
Cash paid for interest $338,454 $391,634 $685,739
Non cash investing and financing
activity:
Capital improvements financed
through accounts payable and
accrued liabilities - - - - - - - - $34,576
See accompanying notes to the financial statements.
Capital Builders Development Properties
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998, 1997, AND 1996
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.
Principles of Presentation
The 1996 financial statements include the accounts of the company and
its majority-owned subsidiary (60%), Capital Builders Roseville
Venture. In May 1997 the Partnership sold its 60% interest in
Capital Builders Roseville Venture to its affiliate, Capital Builders
Development Properties II. Capital Builders Development Properties
II, a California Limited Partnership, is an affiliate of the
Partnership as they have the same General Partner, Capital Builders,
Inc. The financial statements represent financial activity on a
consolidated basis until the time of the disposition of the majority-
owned subsidiary. All significant intercompany accounts and
transactions have been eliminated. The General Partner of Capital
Builders Development Properties, Capital Builders, Inc., has no
direct ownership interest in the joint venture, and did not receive
any compensation for the sale of the subsidiary (See Note 2 for
further discussion).
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 Partnership is in the business of real estate development and is
not a significant factor in its industry. The Partnership's
investment properties are located near major urban areas and,
accordingly, compete not only with similar properties in their
immediate areas but with hundreds of properties throughout the urban
areas. Such competition is primarily on the basis of locations,
rents, services and amenities. In addition, the Partnership competes
with significant numbers of individuals or organizations (including
similar companies, real estate investment trusts and financial
institutions) with respect to the purchase and sale of land,
primarily on the basis of the prices and terms of such transactions.
Financial Reporting for Segments of a Business Enterprise
During 1998, the Partnership adopted SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information. SFAS No. 131
establishes standards for the way public business enterprises are to
report information about operating segments in annual financial
statements and requires those enterprises to report selected
information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major
customers. SFAS No. 131 supersedes SFAS No. 14, Financial Reporting
for Segments of a Business Enterprise, but retains the requirement to
report information about major customers. As of December 31, 1998 and
1997, the Partnership did not have any reportable segments under the
provisions of SFAS No. 131.
Investment Properties
Long-lived assets and certain identifiable intangibles are reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets
exceed the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs
to sell.
The Partnership's investment property consists of commercial land,
buildings and leasehold improvements that are carried net of
accumulated depreciation. 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, which are amortized over the
life of the related note.
Lease Commissions
Lease commissions are being amortized over the related lease terms.
Income Taxes
The Partnership does not provide for income taxes since all income or
losses are reported separately on the individual partners' tax
returns.
Revenue Recognition
Rental income is recognized on a straight-line basis over the life of
the lease, which may differ from the scheduled rental payments.
Net (Loss) Income per Limited Partnership Unit
The net (loss) income per Limited Partnership unit is computed based
on the weighted average number of units outstanding during the year
of 13,787 in 1998, 1997, and 1996.
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.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
NOTE 2 - CHANGES IN OPERATIONS AND UNUSUAL ITEMS
In May 1997, the Partnership sold its 60% interest in Capital
Builders Roseville Venture to its affiliate, Capital Builders
Development Properties II. The sale was completed after an
independent property valuation of the joint venture property, Capital
Professional Center. The sale resulted in a net gain of $1,127,913
($81.81 per limited partnership unit) and net cash proceeds of
$14,380. As of December 31, 1997, the Partnership's Statement of
Operations included a net loss of $57,015 from Capital Builders
Roseville Venture, of which $22,806 was allocated to its minority
partner. The transaction did not generate any sales commissions,
transaction fees, changes in management compensation or any other
direct or indirect benefit to the General Partner.
NOTE 3 - LIQUIDITY
In November 1998, one of Plaza de Oro's major office tenants,
occupying 12,052 square feet, filed Chapter 11 Bankruptcy and vacated
its suites. Although the tenant's lease does not expire until
January 31, 2001, it is unlikely that any future collections will be
received on the lease. Unamortized tenant improvement and lease
commission costs related to this tenant were written off during 1998
in the amount of $47,291.
The loss of this tenant will have a significant negative impact on
the Partnership's cash flow, and unless Management is successful in
obtaining additional lease-up and/or additional sources of cash from
refinancing, the Partnership will be unable to meet current year
obligations.
In order to accelerate the releasing of the office building's vacant
space, Management has reduced the asking rent from $1.27/sf to
$1.17/sf and its industrial modified gross asking rent from $.35/sf
to $.30/sf. This rent reduction has already generated one signed
lease for 1,100 square feet, and negotiations for 5,000 and 7,000
square foot leases. Management is also negotiating with the
property's current lender to provide a line of credit which will
enable Management to continue its leasing efforts and provide funding
for operating deficits for the next twelve months.
NOTE 4 - 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 property management fee up to 6%
of gross revenues realized by the Partnership with respect to its
properties; a subordinated real estate commission of up to 3% of the
gross sales price of the properties; and a subordinated 25% share of
the Partnership's distributions of cash from sales or refinancing.
The property management fee currently being charged is 5% of gross
rental revenues collected.
All acquisition fees and expenses, all underwriting commissions, and
all offering and organizational expenses which can be paid are
limited to 20% 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% 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
$7,960, $47,380, and $62,154 for the years ended December 31, 1998,
1997, and 1996, respectively, while total reimbursement of expenses
was $85,552, $97,416, and $114,512, respectively. The Partnership
has accrued $29,789 of management fees during 1998 and will continue
to accrue these fees until all vendor balances are brought current.
NOTE 5 - INVESTMENT PROPERTIES
The components of the investment property account at December 31, are
as follows:
1998 1997
Land $1,353,177 $1,353,177
Building and Improvements 3,289,420 3,287,832
Tenant Improvements 489,455 533,912
Investment properties, at cost 5,132,052 5,174,921
Less: accumulated depreciation
and amortization (1,404,343) (1,227,226)
Investment property, net $3,727,709 $3,947,695
NOTE 6 - LOAN PAYABLE TO AFFILIATE
The loan payable at December 31, 1998 represents funds advanced to
the Partnership from Capital Builders, Inc. (General Partner). These
funds were utilized to fund December 1998 property taxes. The loan
bears interest at approximately the same rate charged to it by a bank
for other borrowings (9.25% as of December 1998) and is payable upon
demand.
NOTE 7 - NOTES PAYABLE
Notes Payable consist of the following at December 31,:
1998 1997
Mini-permanent loan with a fixed interest
rate of 9.25%, requiring monthly principal
and interest payments of $28,689, which is
sufficient to amortize the loan over 25
years. The loan is due April 1, 2002.
The note is collateralized by a First Deed
of Trust on the land, buildings and
improvements, and is guaranteed by the
General Partner. $3,284,944 $3,323,398
Land loan of $180,000 due March 24, 1998
was refinanced with a land loan of
$290,000 due May 1, 1999. The note
requires interest only payments and bears
interest at 12.5%. The note is secured by
Plaza de Oro's separately parceled Phase
II land. 290,000 180,000
Total Notes Payable $3,574,944 $3,503,398
Scheduled principal payments during 1999, 2000, 2001, and 2002 are
$332,166, $46,236, $50,699, and $3,145,843, respectively.
NOTE 8 - LEASES
The Partnership leases its properties under long-term noncancelable
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 these leases for the years
ending December 31 are as follows:
1999 $377,765
2000 329,600
2001 288,950
2002 104,178
Total $1,100,493
NOTE 9 - RECONCILIATION TO INCOME TAX METHOD OF ACCOUNTING
A reconciliation of the net (loss) income as reflected on the
accompanying Statements of Operations to that reflected on the
Federal income tax return for the years ended December 31 is as
follows:
1998 1997 1996
Net (loss) income - Statements
of Operations ($390,295) $879,714 ($394,110)
Adjustments
resulting from:
Difference in depreciation
and amortization 108,868 (413,552) 114,923
Net (loss) income - tax return (281,427) 466,162 (279,187)
Partners' equity - Statements of
Partners' equity (deficit) $185,390 $575,685 ($304,029)
Increases
resulting from:
Difference in depreciation
and amortization and
valuation allowance 1,876,599 1,767,731 2,181,286
Selling expenses for
Partnership units 1,012,108 1,012,108 1,012,108
Partners' equity - tax return $3,074,097 $3,355,524 $2,889,365
Taxable (loss) income per Limited
Partnership unit after
giving effect to the
taxable loss allocated to
the General Partner ($20.21) $33.47 ($20.05)
NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Partnership in
estimating it's fair value disclosures for financial instruments.
Notes payable
The fair value of the Partnership's notes payable are estimated
based on the quoted market prices for the same or similar issues
or on the current rates offered to the Partnership for debt of
the same remaining maturities.
The estimated fair values of the Partnership's financial instruments
as of December 31, are as follows:
1998 1997
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
Liabilities
Loan payable to affiliate $24,000 $24,000 - - - - - -
Note payable $3,284,944 $3,284,944$3,323,398 $3,323,398
Note payable $290,000 $290,000 $180,000 $180,000
NOTE 11 - 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.
NOTE 12 - PROSPECTIVE ACCOUNTING PRONOUNCEMENTS
Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use
In March 1998, the American Society of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use.
SOP 98-1 provides guidance on accounting for the costs of computer
software developed or obtained for internal use. It specifies that
computer software meeting certain characteristics be designated as
internal-use software and sets forth criteria for expensing
capitalizing, and amortizing certain costs related to the development
or acquisition of internal-use software. SOP 98-1 is effective for
fiscal years beginning after December 15, 1998. Management does not
expect that adoption of SOP 98-1 will have a material impact on the
Partnership's financial statements.
Reporting on the Costs of Start-Up Activities
In April 1998, the AICPA issued SOP 98-5, Reporting on the Costs of
Start-Up Activities. SOP 98-5 provides guidance on the financial
reporting of start-up costs and organization costs. It requires costs
of start-up activities and organization costs to be expensed as
incurred. SOP 98-5 is effective for fiscal years beginning after
December 15, 1998. Management does not expect that adoption of SOP 98-
5 will have a material impact on the Partnership's financial
statements.
Accounting for Derivative Instruments and Hedging Activity
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 1999.
Management believes that the adoption of SFAS No. 133 will not have a
material impact on the financial statements due to the Partnership's
inability to invest in such instruments as stated in the Partnership
agreement.
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL
DISCLOSURE
NONE
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors. The Partnership is managed by
Capital Builders, Inc. ("CB"), the Managing General Partner. The
following are the names and other information relating to the
Managing General Partner. No expiration date has been set for the
term during which the Managing General Partner is to serve.
MANAGING GENERAL PARTNER
The Partnership is being managed by CB, the Managing General Partner.
CB is a California corporation organized in May 1978, with its
executive offices at 4700 Roseville Road, Suite 206, North Highlands,
California 95660 [telephone number (916) 331-8080]. To date, CB has
organized ten Partnerships to engage in commercial real estate
development. As the General Partner, CB may be responsible for
certain liabilities that a Partnership it manages is unable to pay.
In addition, CB, in the normal course of business, has guaranteed
certain debt obligations of the Partnerships it sponsored aggregating
$3,284,944.
The officers, directors, and key personnel of CB are as follows:
Name Office
Michael J. Metzger President and Director
Mark Leggio Director
Ellen Wilcox Director
Michael J. Metzger: Mr. Metzger is responsible for the general
management of CB. Mr. Metzger assumed responsibility for the
management of CB in December 1986. He was formerly the Executive
Vice-President of The Elder-Nelson Company (EN) and its subsidiary,
the Elder-Nelson Equities Corporation - affiliated companies which
provided underwriting and administrative services to CB. Prior to
joining EN in 1977, Mr. Metzger was Partner/General Manager for two
years in his family's real estate contracting, development and
syndication business. Mr. Metzger has also had five years of
experience in manufacturing management, and served as an Army Officer
for four years. Mr. Metzger holds a B.S. degree in Business and
Industrial Management as well as a license in Real Estate and former
licenses in Insurance and Securities.
Ellen Wilcox: Ellen Wilcox is a Registered Investment Advisor in
California and the former Owner/Manager of Wilcox Financial Services.
She is licensed in General Securities and Insurance through
Linsco/Private Ledger, an NASD Registered Broker/Dealer. As an
Investment Advisor and Broker, Ms. Wilcox provides a full range of
investment products and services to individuals and small business
owners. She has been actively providing such services since 1986.
Ms. Wilcox teaches classes on retirement planning, investment
strategies, and basic money management. She is a popular speaker and
lecturer on financial topics and has authored many published articles
and has appeared on several radio shows.
Mark J. Leggio: Mark Leggio is the Owner of Mark J. Leggio, CPA. He
provides tax accounting and business consultation services to a wide
variety of small and mid-size businesses. In addition, he is the
founding shareholder and chief financial officer of Green Planet
Juicery, Inc., located in the Sacramento area. From 1978 to 1995 he
worked for KPMG LLP and was a partner when he left. Mr. Leggio holds
a Bachelor of Science degree in Accounting from the University of
Southern California, where he graduated cum laude.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership does not have any officers or employees and,
therefore, does not pay compensation to such persons. The
Partnership's business is conducted by the Managing General Partner
which is entitled under Article IV of the Partnership Agreement to
receive underwriting commission, acquisition fees, property
management fees, subordinated real estate commission, share of
distribution and an interest in the Partnership. The Managing
General Partner's fees totaled $31,118, of which $7,960 was paid and
$23,158 was accrued in 1998. These fees consisted entirely of
property management fees which are calculated as 5% of gross rental
revenues collected.
In addition to the fees described above, the General Partner is
entitled to reimbursement for out of pocket expenses incurred on
behalf of the Partnership. Such expenses aggregated $85,552 in 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The Managing General Partner contributed $1,000 to the Partnership
Capital accounts, however, no securities were issued in respect
thereof. No person is known to the Partnership to own beneficially
more than 5% of the units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership agreement (see Part IV, Item 14(a)(4) Exhibits) which
was executed in 1985, authorized the compensation set forth below to
be paid to the Managing General Partner and to affiliates of the
Managing General Partner.
During the year ended December 31, 1998 the Managing General Partner
and/or its affiliate received $85,552 for reimbursement of
administrative services and $7,960 for property management and
administrative fees.
PART IV
ITEM 14. EXHIBITS FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
EXHIBIT NUMBER EXHIBIT
(a) 1,2 See Item 8 of this Form 10-K for the Financial
Statements of the Partnership, Notes thereto, and
Supplementary Schedules. An Index to Financial
Statements and Schedules is included and incorporated
herein by reference.
4 Limited Partnership Agreement dated May 1, 1985
filed as exhibit 3.3 and the Amendment to the Limited
Partnership Agreement dated November 20, 1986 filed
as exhibit 3.4 to Registration Statement No. 2-96042
of Capital Builders Development Properties, A
California Limited Partnership are hereby
incorporated by reference.
11 Statement regarding computation of per unit
earnings is not included because the computation can
be clearly determined from the material contained in
this report.
(b) Reports on Form 8-K
The Partnership filed an 8-K dated November 11, 1992.
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.
Capital Builders Development Properties and Subsidiary
A California Limited Partnership
By CAPITAL BUILDERS, INC.,
The Managing General Partner,
For and On Behalf of the
Capital Builders Development Properties
A California Limited Partnership
Michael J. Metzger, President Date
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the date indicated.
Signature Title Date
____________________ Associate General
Michael J. Metzger Partner; President and
Director of Capital
Builders, Inc. ("CB")
____________________ Chief Financial
Kenneth L. Buckler Officer of CB
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
The Partnership has not sent an annual report or proxy statements to
the Limited Partners and does not intend to send a proxy statement to
the Limited Partners. The Partnership will send the Limited Partners
an annual report and will furnish the Commission with copies of the
annual report on or before April 30, 1999.
Capital Builders
Development
Properties
A California
Limited Partnership
SCHEDULE III - REAL
ESTATE AND
ACCUMULATED
DEPRECIATION
December 31,1998
Column A Column B Column C Column D
Cost
Capitalized
Description Encumbrances Initial Cost Subsequent
to
Acquistion
Improve- Carrying
Land (1) ments(1) Costs
Commercial Office
Bldg.
Rancho Cordova $3,574,944 $1,143,165 $3,969,405 $19,482
Balance at
beginning of period
Additions
Sale of Capital
Professional Center
Deletions (2)
Balance at end of
period
Column A Column E
Description Gross
Carrying
Amount at
End of
Period
Buildings &
Improve-
Land ments Total(1)
Commercial Office
Bldg.
Rancho Cordova $1,353,177 $3,778,875 $5,132,052
Column E
Total
1996 1997 1998
Balance at
beginning of period $9,582,274 $9,360,370 $5,174,921
Additions 158,391 48,621 1,588
Sale of Capital
Professional Center - - - (4,172,587) - - -
Deletions (2) (380,295) (61,483) (44,457)
Balance at end of
period $9,360,370 $5,174,921 $5,132,052
Column A Column F Column G Column H Column I
Accumulated Date of Date Deprecia-
Description Depreciation Construction Acquired tion Life
Commercial Office 40 Years
Bldg. (Bldg)
Life of
Rancho Cordova $1,404,343 1987 1985 Lease
(Tenant
Imp.)
Column F
Total
1996 1997 1998
Balance at
beginning of period $2,097,079 $2,107,769 $1,227,141
Additions 390,985 189,977 221,659
Sale of Capital
Professional Center - - - (1,009,122) - - -
Deletions (2) (380,295) (61,483) (44,457)
Balance at end of
period $2,107,769 $1,227,141 $1,404,343
1) Valuation
allowance for
possible investment
loss of $742,000 at
December 31, 1995
was charged against
the cost basis of
the land and
building and
improvements on a
pro rata basis in
accordance with the
the provisions of
SFAS No. 121 which
was adopted on
January 1, 1996.
2) Deletions
represent the write-
off of fully
amortized tenant
improvement costs.