UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-15748
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 06-1149695
(State of Organization) (I.R.S. Employer Identification No.)
900 Cottage Grove Road, South Building
Bloomfield, Connecticut 06002
(Address of principal executive offices)
Telephone Number: (860) 726-6000
Indicate by 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
PART I - FINANCIAL INFORMATION
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
1996 1995
ASSETS (UNAUDITED) (AUDITED)
Property and improvements, at cost:
Land and improvements $ 9,532,510 $ 9,552,353
Buildings 27,323,577 27,323,577
Tenant improvements 5,257,538 5,257,538
Furniture and fixtures 820,904 820,904
--------------- ---------------
42,934,529 42,954,372
Less accumulated depreciation 13,449,544 13,104,206
--------------- ---------------
Net property and improvements 29,484,985 29,850,166
Cash and cash equivalents 3,323,967 3,227,503
Accounts receivable (net of allowance of $20,674 in
1996 and $15,158 in 1995) 250,815 300,941
Prepaid expenses and other assets 22,648 9,760
Deferred charges, net 465,245 492,190
--------------- ---------------
Total $ 33,547,660 $ 33,880,560
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable (including $32,945 in 1996
and $24,532 in 1995 due to affiliates) $ 297,490 $ 261,013
Tenant security deposits 128,078 113,188
Unearned income 34,833 25,032
Deferred acquisition fees due to affiliates 2,500,000 2,500,000
--------------- ---------------
Total liabilities 2,960,401 2,899,233
--------------- ---------------
Venture partner's equity in joint venture 2,684,879 2,679,392
--------------- ---------------
Partners' capital:
General Partner:
Capital contributions 1,000 1,000
Cumulative net income 46,175 42,670
--------------- ---------------
47,175 43,670
--------------- ---------------
Limited partners (200,000 Units):
Capital contributions, net of offering costs 45,463,209 45,463,209
Cumulative net income 4,571,290 4,224,350
Cumulative cash distributions (22,179,294) (21,429,294)
--------------- ---------------
27,855,205 28,258,265
--------------- ---------------
Total partners' capital 27,902,380 28,301,935
--------------- ---------------
Total $ 33,547,660 $ 33,880,560
=============== ===============
The Notes to Consolidated Financial Statements are an
integral part of these statements.
2
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
1996 1995
---- ----
Income:
Base rental income $ 1,140,567 $ 1,150,764
Other income 184,417 229,369
Interest income 37,886 42,340
--------------- ---------------
1,362,870 1,422,473
--------------- ---------------
Expenses:
Property operating expenses 481,564 431,819
General and administrative 105,608 87,965
Fees and reimbursements to affiliates 46,231 40,303
Depreciation and amortization 373,535 404,982
--------------- ---------------
1,006,938 965,069
--------------- ---------------
Income inclusive of venture partner's
share of venture operations 355,932 457,404
Venture partner's share of venture net income 5,487 42,138
--------------- ---------------
Net income $ 350,445 $ 415,266
=============== ===============
Net income:
General Partner 3,505 $ 4,153
Limited partners 346,940 411,113
--------------- ---------------
$ 350,445 $ 415,266
=============== ===============
Net income per Unit $ 1.73 $ 2.06
=============== ===============
Cash distribution per Unit $ 3.75 $ 4.50
=============== ===============
The Notes to Consolidated Financial Statements are an
integral part of these statements.
3
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 350,445 $ 415,266
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred rent credits 5,298 4,887
Depreciation and amortization 373,535 404,982
Venture partner's share of venture operations 5,487 42,138
Accounts receivable 50,126 114,251
Accounts payable 54,259 114,556
Other, net 31,646 (35,383)
--------------- ---------------
Net cash provided by operating activities 870,796 1,060,697
--------------- ---------------
Cash flows from investing activities:
Purchases of property and improvements (17,782) (13,440)
Payment of leasing commissions (6,550) --
--------------- ---------------
Net cash used in investing activities (24,332) (13,440)
--------------- ---------------
Cash flows from financing activities:
Cash distribution to limited partners (750,000) (900,000)
--------------- ---------------
Net increase in cash and cash equivalents 96,464 147,257
Cash and cash equivalents, beginning of year 3,227,503 3,404,809
--------------- ---------------
Cash and cash equivalents, end of period $ 3,323,967 $ 3,552,066
=============== ===============
The Notes to Consolidated Financial Statements are an
integral part of these statements.
4
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Readers of this quarterly report should refer to CIGNA INCOME REALTY-I
LIMITED PARTNERSHIP'S ("the Partnership") audited financial statements for the
year ended December 31, 1995 which are included in the Partnership's 1995 Annual
Report, as certain footnote disclosures which would substantially duplicate
those contained in such audited financial statements have been omitted from this
report.
1. BASIS OF ACCOUNTING
A) BASIS OF PRESENTATION: The accompanying financial statements were prepared
in accordance with generally accepted accounting principles, and reflect
management's estimates and assumptions that affect the reported amounts. It
is the opinion of management that the financial statements presented
reflect all the adjustments necessary for a fair presentation of the
financial condition and results of operations.
B) RECENT ACCOUNTING PRONOUNCEMENT: In 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" (the "Statement"). The Statement requires a
writedown to fair value when long-lived assets to be held and used are
impaired. Long-lived assets to be disposed of, including real estate held
for sale, must be carried at the lower of cost or fair value less costs to
sell. In addition, the Statement prohibits depreciation of long-lived
assets to be disposed. The Partnership adopted this Statement in the first
quarter of 1996; there was no effect on the Partnership's results of
operations, liquidity and financial condition.
C) CASH AND CASH EQUIVALENTS: Short-term investments with a maturity of three
months or less at the time of purchase are reported as cash equivalents.
2. CONSOLIDATED JOINT VENTURE - SUMMARY INFORMATION
The Partnership owns a 73.92% interest in the Westford Office Venture which
owns the Westford Corporate Center in Westford, Massachusetts. The general
partner of the Partnership's joint venture partner is an affiliate of the
General Partner.
Venture operations information: Three Months Ended
March 31,
1996 1995
Total income of venture $418,573 $498,665
Net income of venture $21,037 $161,572
Venture balance sheet information: March 31, December 31,
1996 1995
Total assets $11,295,030 $11,280,276
Total liabilities $745,716 $751,999
5
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
3. DEFERRED CHARGES
Deferred charges consist of the following:
March 31, December 31,
1996 1995
Deferred leasing commissions $ 1,065,558 $ 1,059,008
Accumulated amortization (632,599) (604,402)
---------------- ----------------
432,959 454,606
Deferred rent credits 32,286 37,584
--------------- ---------------
$ 465,245 $ 492,190
=============== ===============
4. TRANSACTIONS WITH AFFILIATES
An affiliate of the General Partner provided investment property
acquisition services to the Partnership for fees of $2,500,000 which will be
payable from adjusted cash from operations after priority distributions to the
Partners or, if necessary, from sales proceeds.
Other fees and expenses incurred by the Partnership related to the General
Partner or its affiliates are as follows:
Three Months Ended Unpaid at
March 31, March 31,
--------- ---------
1996 1995 1996
---- ---- ----
Property management fees (a)(b) $ 29,567 $ 29,772 $ 18,666
Reimbursement (at costs)
for out-of-pocket expenses 16,664 10,531 14,279
------------- -------------- ---------------
$ 46,231 $ 40,303 $ 32,945
============= ============== ===============
(a) Included in property management fees is $3,504 and $3,675 for the three
months ended March 31, 1996 and 1995, respectively, attributable to the
venture partner's share of the Westford Office Venture.
(b) Does not include on-site management fees earned by independent property
management companies of $51,262 and $50,482 for the three months ended
March 31, 1996 and 1995, respectively. On-site property management services
have been contracted by an affiliate of the General Partner on behalf of
the Partnership and are paid directly by the Partnership to the third party
companies.
5. SUBSEQUENT EVENTS
On May 15, 1996, the Partnership paid a distribution of $684,000 to the
limited partners.
6
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Partnership's cash and cash equivalents and the
Partnership's share of cash and cash equivalents from the Westford Office
Venture totaling $2,092,669 and $910,175, respectively, was available for
working capital requirements, cash reserves and distributions to partners. The
Partnership paid the first quarter 1996 cash distribution of $684,000 or $3.42
per Unit on May 15, 1996, representative of the quarter's adjusted cash from
operations, inclusive of adjustments to cash reserves. The Partnership's
distributions from operations for the remainder of the year should reflect
actual operating results subject to changes in reserves for liabilities or
leasing risk.
Piedmont Plaza Shopping Center produced adjusted cash from operations for
the first quarter of $203,000 with no capital improvements. The Partnership
plans to hold the property for the short-term to allow the retail market and
K-Mart (the parent company of the property's anchor tenant) to show signs of
improvement. The Partnership also plans to remain open to opportunities to sell
the property if investor interest returns or if K-Mart exhibits signs of further
weakening.
At Westford Corporate Center, adjusted cash from operations for the first
quarter was $208,000 ($154,000 attributable to the Partnership's interest). The
property remains 100% occupied. No capital expenditures have been planned for
the year. During the quarter, a portion of the 1995 capital expenditures was
reimbursed by the tenants. In addition, adjustments were made to reduce other
income (and the portion of account receivable representing 1995 tenant
reimbursement billings) based on the final calculation of actual 1995 tenant
reimbursable operating expenses. Consistent with 1995, the 1996 estimated
billings for tenant expense reimbursement are based on the annual budget.
Adjusted cash from operations at Woodlands Tech for the first quarter was
$65,000 after a $50,000 addition to cash reserves for leasing costs. First
quarter leasing costs totaled $4,500, with approximately $267,000 planned for
the year. At March 31, 1996, the property was 82% occupied as a tenant occupying
10,069 square feet moved out during the first quarter as expected. In 1996,
leases representing 37% of total space are scheduled to expire.
For the first quarter of 1996, Overlook maintained average occupancy of
99%. Adjusted cash from operations for the first quarter totaled approximately
$269,000 after a $5,000 addition to cash reserves. The market in which Overlook
operates continues to expand, allowing the property to raise rates slightly on
renewals. No significant changes are expected for the remainder of the year.
RESULTS OF OPERATIONS
Rental income decreased for the three months ended March 31, 1996, as
compared with the same period of 1995. A tenant vacancy during the period at
Woodlands Tech and a tenant change that included a lower base rate at Westford
has resulted in decreases to rental income of approximately $18,000 and $15,000,
respectively. Rental income at Overlook Apartments increased approximately
$20,000 as a result of modest rental rate increases.
Other income decreased for the three months ended March 31, 1996, as
compared with the same period of 1995 because of a $42,000 adjustment recorded
at Westford for over billing of 1995 expense recoveries to tenants.
Interest income decreased for the three months ended March 31, 1996, as
compared with the same period of 1995, due to a slight decrease in interest
rates on short term investments.
Property operating expenses increased for the three months ended March 31,
1996, as compared with the same period of 1995. A harsh winter caused snow
removal and maintenance costs to increase at both Westford and Woodlands Tech.
In addition, a landscaping project that was previously capitalized was reclassed
to an expense account at Westford.
7
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Partially offsetting the rise in operating expenses was a drop in maintenance
expenses at Piedmont Plaza due to a 1995 exterior painting project, and a
reduction in pest control costs at Overlook Apartments.
The increase in general and administrative expenses for the three months
ended March 31, 1996, as compared with the previous year, was due to an increase
in advertising at Overlook Apartments to maintain the property's competitive
market position and an increase in payroll costs. Piedmont reported increases in
general and administrative as the result of an increase in the provision for
doubtful accounts and the sales tax clearing account.
The increase in fees and reimbursements to affiliates for the three months
ended March 31, 1996, as compared with the same period of 1995, was due to
higher reimbursable expenses than the previous year.
The decrease in depreciation and amortization for the three months ended
March 31, 1996, as compared with the same period of 1995, was due to the
expiration of useful lives of certain assets at Overlook Apartments, Piedmont
Plaza and Woodlands Tech.
The decrease in the venture partner's share of Venture's operation in 1996,
as compared with 1995, was the result of a decrease in Westford's overall
results as described herein.
8
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OCCUPANCY
The following is a listing of approximate physical occupancy levels by
quarter for the Partnership's investment properties:
1995 1996
------------------------------------------------- -----------
At 3/31 At 6/30 At 9/30 At 12/31 At 3/31
------- ------- ------- -------- -------
1. Woodlands Tech Center
St. Louis, Missouri 94% 96% 96% 92% 82%
2. Westford Corporate Center
Westford, Massachusetts (a) 100% 100% 100% 100% 100%
3. Piedmont Plaza Shopping Center
Apopka, Florida 95% 95% 95% 95% 95%
4. Overlook Apartments
Scottsdale, Arizona 98% 93% 97% 97% 99%
(a) See the Notes to Consolidated Financial Statements for information on the
joint venture partnership through which the Partnership has made this real
property investment. The Partnership owns a 73.92% interest in the joint
venture which owns the property.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedules.
(b) No reports on Form 8-K were filed during the three months ended March
31, 1996.
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
By: CIGNA Realty Resources, Inc. - Tenth,
General Partner
Date: May 14, 1996 By: /s/ John D. Carey
------------ -----------------
John D. Carey, President and Controller
(Principal Executive Officer)
(Principal Accounting Officer)
10