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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, 1997
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,
1997 1996
ASSETS (UNAUDITED) (AUDITED)
Property and improvements, at cost:
Land and improvements $ 9,413,952 $ 9,413,952
Buildings 26,646,297 26,646,297
Tenant improvements 5,396,841 5,317,299
Furniture and fixtures 826,755 826,755
--------------- ---------------
42,283,845 42,204,303
Less accumulated depreciation 14,473,340 14,473,340
--------------- ---------------
Net property and improvements 27,810,505 27,730,963
Cash and cash equivalents 3,518,457 3,496,686
Accounts receivable (net of allowance of $28,614 in 1997
and $40,538 in 1996) 396,524 313,521
Other assets 27,437 7,100
Deferred charges, net 498,897 487,606
--------------- ---------------
Total $ 32,251,820 $ 32,035,876
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses (including $33,711
in 1997 and $27,254 in 1996 due to affiliates) $ 361,266 $ 274,474
Tenant security deposits 93,957 98,871
Unearned income 47,895 57,986
Deferred acquisition fees due to affiliates 2,500,000 2,500,000
--------------- ---------------
Total liabilities 3,003,118 2,931,331
--------------- ---------------
Venture partner's equity in joint venture 2,865,645 2,794,009
--------------- ---------------
Partners' capital:
General Partner:
Capital contributions 1,000 1,000
Cumulative net income 58,101 50,176
--------------- ---------------
59,101 51,176
--------------- ---------------
Limited partners (200,000 Units):
Capital contributions, net of offering costs 45,463,209 45,463,209
Cumulative net income 5,752,041 4,967,445
Cumulative cash distributions (24,891,294) (24,171,294)
--------------- ---------------
26,323,956 26,259,360
--------------- ---------------
Total partners' capital 26,383,057 26,310,536
--------------- ---------------
Total $ 32,251,820 $ 32,035,876
=============== ===============
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, 1997 AND 1996
(Unaudited)
1997 1996
---- ----
Income:
Base rental income $ 1,132,621 $ 1,140,567
Other income 219,833 184,417
Interest income 38,711 37,886
------------- -------------
1,391,165 1,362,870
------------- -------------
Expenses:
Property operating expenses 390,405 481,564
General and administrative 95,446 105,608
Fees and reimbursements to affiliates 41,157 46,231
Depreciation and amortization -- 373,535
------------- -------------
527,008 1,006,938
------------- -------------
Income inclusive of venture partner's
share of venture operations 864,157 355,932
Venture partner's share of venture net income 71,636 5,487
------------- -------------
Net income $ 792,521 $ 350,445
============= =============
Net income:
General Partner $ 7,925 $ 3,505
Limited partners 784,596 346,940
------------- -------------
$ 792,521 $ 350,445
============= =============
Net income per Unit $ 3.92 $ 1.73
============= =============
Cash distribution per Unit $ 3.60 $ 3.75
============= =============
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, 1997 AND 1996
(Unaudited)
1997 1996
---- ----
Cash flows from operating activities:
Net income $ 792,521 $ 350,445
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred rent credits 957 5,298
Depreciation and amortization -- 373,535
Venture partner's share of venture's operations 71,636 5,487
Accounts receivable (83,003) 50,126
Accounts payable 116,792 54,259
Other, net (35,342) 31,646
--------------- ---------------
Net cash provided by operating activities 863,561 870,796
--------------- ---------------
Cash flows from investing activities:
Purchases of property and improvements (109,542) (17,782)
Payment of leasing commissions (12,248) (6,550)
--------------- ---------------
Net cash used in investing activities (121,790) (24,332)
--------------- ---------------
Cash flows from financing activities:
Cash distribution to limited partners (720,000) (750,000)
--------------- ---------------
Net increase in cash and cash equivalents 21,771 96,464
Cash and cash equivalents, beginning of year 3,496,686 3,227,503
--------------- ---------------
Cash and cash equivalents, end of period $ 3,518,457 $ 3,323,967
=============== ===============
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, 1996 which are included in the Partnership's 1996 Annual
Report, as certain footnote disclosures which would substantially duplicate
those contained in such audited financial statements have been omitted from this
report.
1. 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. 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. All such adjustments are of
a normal recurring nature. The accompanying consolidated financial
statements include the accounts of the Partnership and its consolidated
venture, Westford Office Venture. The effect of all transactions between
the Partnership and the consolidated venture has been eliminated.
B) CASH AND CASH EQUIVALENTS: Short-term investments with a maturity of three
months or less at the time of purchase are generally reported as cash
equivalents.
C) OTHER ASSETS: At March 31, 1997, other assets included costs related to
the sale of the properties.
2. INVESTMENT PROPERTIES
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 (The Overlook Apartments ("Overlook"),
Woodlands Tech Center ("Woodlands"), Piedmont Plaza Shopping Center ("Piedmont")
and the Partnership's joint venture interest in the Westford Corporate Center
("Westford JV")) for an aggregate purchase price of $29,650,000. On January 10,
1997, the Partnership and the Glenborough Properties, L.P., 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.
On March 25, 1997, the Partnership sent a Consent Solicitation Statement to
Limited Partners requesting consent to the proposed sale, the Purchase Agreement
and the liquidation. The Consent Solicitation Statement expired April 15, 1997,
and the General Partner received the required majority consent. The sale was
completed on April 29, 1997.
After closing costs of approximately $131,000, the Partnership netted
approximately $29,519,000 (Overlook - $11,110,300, Woodlands - $4,567,300,
Piedmont - $6,319,700, and Westford JV interest - $7,521,700). For book
purposes, the properties had a carrying value of approximately $25,864,000
(Overlook - $7,215,000, Woodlands - $4,772,000, Piedmont - $6,757,000, and
Westford JV interest - $7,120,000) and the Partnership expects to record a net
gain of approximately $3,655,000 (Overlook - $3,895,300, Woodlands - $(204,700),
Piedmont - $(437,300) and Westford JV interest - $401,700). The net gain
inclusive of the Partnership's joint venture partner's interest in Westford JV
is expected to be approximately $3,797,000. To complete the liquidation, the net
proceeds from the sale together with the net cash from the transfer of the
Partnership's remaining assets to the General Partner, will be distributed to
limited partners on or about June 30, 1997. The Partnership will terminate
concurrently with the liquidating distribution.
5
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
3. 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,
1997 1996
Total income of venture $ 464,762 $ 418,573
Net income of venture 274,679 21,037
Venture balance sheet information:
March 31, December 31,
1997 1996
Total assets $ 12,011,717 $ 11,712,625
Total liabilities 769,280 744,867
4. DEFERRED CHARGES
Deferred charges consist of the following:
March 31, December 31,
1997 1996
Deferred leasing commissions $ 1,215,894 $ 1,203,646
Accumulated amortization (719,254) (719,254)
------------ -------------
496,640 484,392
Deferred rent credits 2,257 3,214
------------ ------------
$ 498,897 $ 487,606
============ ============
5. TRANSACTIONS WITH AFFILIATES
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,
1997 1996 1997
---- ---- ----
Property management fees(a)(b) $ 26,324 $ 29,567 $ 22,614
Reimbursement (at costs)
for out-of-pocket expenses 14,833 16,664 11,097
----------- ---------- ----------
$ 41,157 $ 46,231 $ 33,711
=========== ========== ==========
6
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
(a) Included in property management fees is $3,517 and $3,504 for the three
months ended March 31, 1997 and 1996, 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 $44,984 and $51,262 for the three months ended
March 31, 1997 and 1996, 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.
The Partnership owes an affiliate of the General Partner deferred
acquisition fees of $2,500,000 which will be paid upon the Partnership's
liquidation.
6. SUBSEQUENT EVENTS
On May 15, 1997, the Partnership paid the first quarter 1997 distribution
from operations of $720,000 to the limited partners.
7
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, 1997, the Partnership's cash and cash equivalents and the
Partnership's share of cash and cash equivalents from the Westford Office
Venture totaled $3,518,457 and $1,741,702, respectively. The Partnership paid
the first quarter 1997 cash distribution of $720,000 or $3.60 per Unit on May
15, 1997, reflective of the Partnership's adjusted cash from operations for the
three months ended March 31, 1997.
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 (The Overlook Apartments ("Overlook"),
Woodlands Tech Center ("Woodlands"), Piedmont Plaza Shopping Center ("Piedmont")
and the Partnership's joint venture interest in the Westford Corporate Center
("Westford JV")) for an aggregate purchase price of $29,650,000. On January 10,
1997, the Partnership and the Glenborough Properties, L.P., 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.
On March 25, 1997, the Partnership sent a Consent Solicitation Statement to
Limited Partners requesting consent to the proposed sale, the Purchase Agreement
and the liquidation. The Consent Solicitation Statement expired April 15, 1997,
and the General Partner received the required majority consent. The sale was
completed on April 29, 1997.
After closing costs of approximately $131,000, the Partnership netted
approximately $29,519,000 (Overlook - $11,110,300, Woodlands - $4,567,300,
Piedmont - $6,319,700, and Westford JV interest - $7,521,700). For book
purposes, the properties had a carrying value of approximately $25,864,000
(Overlook - $7,215,000, Woodlands - $4,772,000, Piedmont - $6,757,000, and
Westford JV interest - $7,120,000) and the Partnership expects to record a net
gain of approximately $3,655,000 (Overlook - $3,895,300, Woodlands - $(204,700),
Piedmont - $(437,300) and Westford JV interest - $401,700). The net gain
inclusive of the Partnership's joint venture partner's interest in Westford JV
is expected to be approximately $3,797,000. To complete the liquidation, the net
proceeds from the sale together with the net cash from the transfer of the
Partnership's remaining assets to the General Partner, will be distributed to
limited partners on or about June 30, 1997. The Partnership will terminate
concurrently with the liquidating distribution.
RESULTS OF OPERATIONS
Rental income decreased for the three months ended March 31, 1997, as
compared with the same period of 1996, primarily due to a decrease in occupancy
at Overlook Apartments. A new lease at Piedmont, effective January 1, 1997, led
to an increase in Piedmont's rental income, partially offsetting the decline at
Overlook.
Other income increased for the three months ended March 31, 1997, as
compared with the same period of 1996. Other income for the first quarter of
1996 included a $42,000 adjustment for over billing of 1995 expense recoveries
to tenants at Westford.
Property operating expense decreased for the three months ended March 31,
1997, as compared with the same period of 1996. Snow removal and maintenance
costs decreased at Westford and Woodlands Tech as the result of a milder winter
in 1997. A landscaping project that was capitalized in 1995 was reclassified to
an expense account in 1996, increasing maintenance expense at Westford in the
first quarter of 1996. At Overlook Apartments, non-routine maintenance decreased
as the resurfacing of the pool deck was completed in 1996, partially offset by
the replacement of the pool heater in 1997. Insurance expense decreased at
Piedmont Plaza because the property's anchor tenant was allowed to obtain its
own insurance. Also, management fees at Piedmont Plaza decreased due to the
timing of receipts from tenants for expense reimbursements.
8
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
General and administrative expense decreased for the three months ended
March 31, 1997, as compared with the same period of 1996. Payroll costs
decreased at Overlook Apartments due to the timing of hiring a replacement for
the vacant maintenance supervisor position. Piedmont Plaza and Woodlands Tech
reported decreases in the provision for doubtful accounts. Partially offsetting
the decreases in general and administrative expense was a fee for an
environmental site assessment at Westford.
The decrease in fees and reimbursements to affiliates for the three months
ended March 31, 1997, as compared with the same period of 1996, was the result
of lower management fees from Piedmont Plaza (due to timing of tenant receipts)
and lower reimbursable expenses.
Depreciation and amortization were not recorded for the three months ended
March 31, 1997 as the Partnership's properties were held for sale.
The increase in the venture partner's share of Venture's operations in
1997, as compared with 1996, was the result of an increase in Westford's overall
results as described herein.
OCCUPANCY
The following is a listing of approximate physical occupancy levels by
quarter for the Partnership's investment properties:
1996 1997
------------------------------------------------- ---------
At 3/31 At 6/30 At 9/30 At 12/31 At 3/31
------- ------- ------- -------- -------
1. Woodlands Tech Center
St. Louis, Missouri 82% 82% 83% 86% 86%
2. Westford Corporate Center
Westford, Massachusetts(a) 100% 100% 100% 100% 100%
3. Piedmont Plaza Shopping Center
Apopka, Florida 95% 94% 94% 94% 97%
4. Overlook Apartments
Scottsdale, Arizona 99% 97% 92% 91% 93%
(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.
9
CIGNA INCOME REALTY-I LIMITED PARTNERSHIP
(A DELAWARE LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedules.
(b) No Form 8-Ks were filed during the three months ended March 31, 1997.
10
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, 1997 By: /s/ John D. Carey
------------ -----------------
John D. Carey, President
(Principal Executive Officer)
Date: May 14, 1997 By: /s/ Josephine C. Donofrio
------------ -------------------------
Josephine C. Donofrio, Controller
(Principal Accounting Officer)
11