-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Z2OtiSGtqg4GmbOIe2cNIzC2TfHd7wT2tG5uFhwnZft0IRZ4EQOrT1Rh9Iidms97 5vAPHbmYP5t86ow4qTpD7w== 0000763978-95-000008.txt : 19950830 0000763978-95-000008.hdr.sgml : 19950830 ACCESSION NUMBER: 0000763978-95-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950829 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAPITAL BUILDERS DEVELOPMENT PROPERTIES /CA/ CENTRAL INDEX KEY: 0000763978 STANDARD INDUSTRIAL CLASSIFICATION: LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES) [6552] IRS NUMBER: 770049671 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15750 FILM NUMBER: 95568278 BUSINESS ADDRESS: STREET 1: 4700 ROSEVILLE RD, STE 101 STREET 2: C/O CAPITAL BUILDERS INC CITY: NORTH HIGHLANDS STATE: CA ZIP: 95660 BUSINESS PHONE: 9163318080 MAIL ADDRESS: STREET 1: 4700 ROSEVILLE ROAD STREET 2: SUITE 101 CITY: NORTH HIGHLANDS STATE: CA ZIP: 95660 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Six Months ended June 30, 1995 Commission File Number: 2-96042 CAPITAL BUILDERS DEVELOPMENT PROPERTIES, A CALIFORNIA LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) State or other jurisdiction of organization: CALIFORNIA I.R.S. Employer Identification No.: 77-0049671 Address of Principal executive offices: 4700 ROSEVILLE ROAD, SUITE 206, NORTH HIGHLANDS, CALIFORNIA 95660 Telephone number, including area code: (916) 331- 8080 Former name, former address and former fiscal year, if changed since last year: 4700 ROSEVILLE ROAD, SUITE 101, NORTH HIGHLANDS, CALIFORNIA 95660 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ PART 1 - FINANCIAL INFORMATION Capital Builders Development Properties (A California Limited Partnership) BALANCE SHEETS
June 30 December 31 1995 1994 ASSETS Cash and cash equivalents $27,184 $4,899 Accounts receivable, net 189,384 195,973 Investment property, at cost, net of accumulated depreciation and amortization of $2,040,398 and $2,029,925 at June 30, 1995 and December 31, 1994, respec- tively, and a valuation allowance of $742,000 7,684,263 7,944,599 Lease commissions, net of accumulated 99,888 113,694 amortization of $68,308 and $89,681 at June 30, 1995 and December 31, 1994, respectively Other assets, net of accumulated amortization of $64,626 and $53,668 at June 30, 1995 and December 31, 1994, respectively 60,603 69,139 Minority Interest 387,291 290,314 Total assets $8,448,613 $8,618,618 LIABILITIES AND PARTNERS' EQUITY Loan payable to affiliate $1,140,298 $1,010,405 Notes payable 6,695,995 6,699,864 Accounts payable and accrued liabilities 96,227 117,530 Tenant deposits 100,148 106,309 Total liabilities 8,032,668 7,934,108 Partners' Equity: General partner (53,665) (50,979) Limited partners 469,610 735,489 Total partners' equity 415,945 684,510 Commitments and contingencies Total liabilities and partners' equity $8,448,613 $8,618,618
STATEMENTS OF OPERATIONS FOR THE MONTHS ENDED JUNE 30,
1995 1995 1994 1994 Three Six Three Six Months Months Months Months Ended Ended Ended Ended Revenues Rental and other income $319,201 $641,175 $305,097 $591,421 Interest income 594 1,186 154 466 Total revenues 319,795 642,361 305,251 591,887 Expenses Operating expenses 57,877 115,696 56,898 120,475 Repairs and maintenance 37,076 67,588 33,024 65,560 Property taxes 24,194 48,388 23,919 47,839 Interest 202,209 399,935 164,402 313,550 General and administrative 18,591 53,260 21,664 56,650 Depreciation and amortization 140,514 298,636 200,884 417,963 Total expenses 480,461 983,503 500,791 1,022,037 Loss before minority interest (160,666) (341,142) (195,540) (430,150) Minority interest in joint venture (37,137) (72,577) (30,340) (61,948) Net loss (123,529) (268,565) (165,200) (368,202) Allocated to general partners (1,235) (2,685) (1,652) (3,682) Allocated to limited partners ($122,294) ($265,880) ($163,548) ($364,520) Net loss per limited partnership unit ($8.87) ($19.29) ($11.86) ($26.43) Average units outstanding 13,787 13,787 13,787 13,787
STATEMENTS OF CASH FLOWS FOR THE MONTHS ENDED JUNE 30,
1995 1995 1994 1994 Three Six Three Six Months Months Months Months Ended Ended Ended Ended Cash flows from operating activities: Net loss ($123,528) ($268,565) ($165,200) ($368,202) Adjustments to reconcile net loss to cash flow used in operating activities: Depreciation and amortization 140,514 298,636 200,884 417,963 Minority interest in joint venture (37,137) (72,577) (30,340) (61,948) Changes in assets and liabilities (Increase)/Decrease in accounts receivable (7,741) 6,589 (28,467) (5,278) Increase in leasing commissions (5,630) (6,612) (10,027) (32,165) (Decrease)/Increase in other assets 1,261 (2,422) (36,672) (42,191) Increase/(Decrease) in accounts payable and accrued liabilities 19,683 (21,303) (42,289) (1,997) Increase/(Decrease) in tenant deposits 677 (6,161) 4,102 1,761 Net cash (used in) provided by operating activities (11,901) (72,415) (108,009) (92,057) Cash flows from investing activities: Improvements to investment properties (2,861) (6,924) (35,907) (134,781) Distribution to minority interest (4,400) (24,400) (20,000) (25,600) Net cash used in investing activities (7,261) (31,324) (55,907) (160,381) Cash flows from financing activities: (Payments)/Proceeds from notes payable, net (5,786) (3,869) 81,723 168,903 Proceeds on loans payable to affiliate 29,337 129,893 92,495 97,782 Net cash provided by financing activities 23,551 126,024 174,218 266,685 Net increase in cash 4,389 22,285 10,302 14,247 Cash, beginning of period 22,795 4,899 29,164 25,219 Cash, end of period $27,184 $27,184 $39,466 $39,466
NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows: Basis of Accounting The financial statements of Capital Builders Development Properties (The "Partnership") are prepared on the accrual basis and therefore revenue is recorded as earned and costs and expenses are recorded as incurred. Certain prior year amounts have been reclassified to conform to current year classifications. Principles of Consolidation The consolidated financial statements include the accounts of the company and its majority-owned subsidiary (60 percent), Capital Builders Roseville Venture. The remaining 40 percent is owned by Capital Builders Development Properties II, a California Limited Partnership and affiliate of the Partnership as they have the same General Partner. All significant intercompany accounts and transactions have been eliminated. Organization Capital Builders Development Properties, a California Limited Partnership, is owned under the laws of the State of California. The Managing General Partner is Capital Builders, Inc., a California corporation (CB). The Associate General Partners are: 1) the sole shareholder, President and Director of CB, 2) four founders of CB, two of which are members of the Board of Directors. The Partnership is in the business of acquiring land for developing commercial properties for lease and eventual sale. Investment Properties The Partnership's investment property account consists of commercial land and buildings that are carried at the lower of cost, net of accumulated depreciation and amortization, or their net realizable value. Net realizable value is based upon an appraisal of the property by an independent appraiser and management's assessment of current market conditions. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives of three to forty years. The straight-line method of depreciation is followed for financial reporting purposes. Other Assets Included in other assets are loan fees. Loan fees are amortized over the life of the related notes. Lease Commissions Lease commissions are being amortized over the related lease terms. Income Taxes The Partnership has no provision for income taxes since all income or losses are reported separately on the individual partners' tax returns. Net Loss per Limited Partnership Unit The net loss per limited partnership unit is computed based on the weighted average number of units outstanding during the year of 13,787 in 1995 and 1994. Statement of Cash Flows For purposes of statement of cash flows, the Partnership considers all short-term investments with a maturity, at date of purchase, of three months or less to be cash equivalents. NOTE 2 - RELATED PARTY EXPENSE REIMBURSEMENT AND FEE ARRANGEMENT The Managing General Partner (Capital Builders, Inc.) and the Associate General Partners are entitled to reimbursement of expenses incurred on behalf of the Partnership and certain fees from the Partnership. These fees include: a portion of the sales commissions payable by the partnership with respect to the sale of the Partnership units; an acquisition fee of up to 12.5 percent of gross proceeds from the sale of the Partnership units; a property management fee up to 6 percent of gross revenues realized by the Partnership with respect to its properties; a subordinated real estate commission of up to 3 percent of the gross sales price of the properties; and a subordinated 25 percent share of the Partnership's distributions of cash from sales or refinancing. The property management fee currently being charged is 5 percent of gross revenues collected. All acquisition fees and expenses, all underwriting commissions, and all offering and organizational expenses which can be paid are limited to 20 percent of the gross proceeds from sales of partnership units provided the Partnership incurs no borrowing to develop its properties. However, these fees may increase to a maximum of 33 percent of the gross offering proceeds based upon the total acquisition and development costs, including borrowing. Since the formation of the partnership, 27.5% of these fees were paid to the partnership's related parties, leaving a remaining maximum of 5.5% ($379,143) of the gross offering proceeds. The ultimate amount of these costs will be determined once the properties are fully developed and leveraged. The total management fees paid to the Managing General Partner were $29,131 and $27,787 for the six months ending June 30, 1995 and 1994, respectively, while total reimbursement of expenses were $45,152 and $54,588, respectively. NOTE 3 - INVESTMENT PROPERTIES The components of the investment property account at June 30, 1995 and December 31, 1994 are as follows:
June 30, December 31, 1995 1994 Land $ 2,641,557 $ 2,641,557 Building and Improvements 6,311,958 6,308,700 Tenant Improvements 1,513,146 1,766,267 Investment properties, at cost 10,466,661 10,716,524 Less: accumulated depreciation and amortization (2,040,398) (2,029,925) valuation allowance (742,000) (742,000) Investment property, net $ 7,684,263 $ 7,944,599
NOTE 4 - LOAN PAYABLE TO AFFILIATE The loan payable represents funds advanced to the Roseville Joint Venture from Capital Builders Development Properties II, a related partnership which has the same General Partner. The loan bears interest, which is paid monthly, at approximately the same rate charged to it by a bank for similar borrowing, which was 10.5 and 8.75 percent June 30, 1995 and 1994, respectively. Interest expense incurred on the loan was $54,893 and $34,132 in 1995 and 1994, respectively. The loan is unsecured and is due and payable on demand.
June 30, December 31, 1995 1994 Construction loan of $3,300,000 with interest at prime plus 2 percent which was modified effective April 1, 1992 as a new mini-permanent loan of $3,440,000 due April 1, 1997. The note bears interest at bank commercial lending rate (8.5 percent at June 30, 1995) plus 2.0 percent with a floor of 8.5 percent and a ceiling of 10.75% for the remaining life of the loan. The note provides for additional cash draws as additional lease up of the project is obtained and certain expense ratios are maintained. The note is collateralized by a first deed of trust on the land, buildings and improvements and is guaranteed by the General Partner. $3,320,840 $3,314,188 Mini-permanent loan of $3,400,000 has been modified effective June 23, 1994 as a new mini-permanent loan of $3,400,000, due June 25, 1999. The note requires monthly principal and interest payments and bears interest at bank prime (9.0 percent at June 30, 1995) plus 1.5 percent with a floor of 6.75 percent. The note is collateralized by a first deed of trust on the land, buildings and improvements, and is guaranteed by the General Partner. 3,375,155 3,385,676 Total notes payable $6,695,995 $6,699,864
NOTE 6 - RENTAL LEASES The Partnership leases its properties under long- term non-cancelable operating leases to various tenants. The facilities are leased through agreements for rents based on the square footage leased. Minimum annual base rental payments under theses leases for the years ending December 31 are as follows: 1996 $ 1,203,233 1997 986,523 1998 640,640 1999 464,399 2000 and thereafter 608,094 Total $ 3,902,889 ======== NOTE 7 - COMMITMENTS AND CONTINGENCIES The Partnership is involved in litigation primarily arising in the normal course of its business. In the opinion of management, the Partnership's recovery or liability, if any, under any pending litigation would not materially affect its financial condition or operations. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources The Partnership commenced operations on September 19, 1985 upon the sale of the minimum number of Limited Partnership Units. The Partnership's initial source of cash has been from the sale of Limited Partnership Units. Through the offering of Units, the Partnership has raised $6,893,500 (represented by 13,787 Limited Partnership Units). Cash generated from the sale of Limited Partnership Units has been used to acquire land for the development of an office/industrial project and 60 percent interest in the development of an office project. The Partnership's primary current sources of cash are from property rental income, additional draws on its $3,440,000 mini-permanent loan and loans from affiliate. As of June 30, 1995, $3,345,000 had been drawn on the loan, leaving a remaining line of $95,000. The terms of such financing are described in Note 5 of the Partnership's Financial Statements. It is the Partnership's investment goal to utilize existing capital resources for the continued lease up (tenant improvements and leasing commissions) and the further development of its investment properties. Funds for these commitments are obtained from property income, additional advances on the mini-permanent loan, loans from affiliate or existing cash reserves. The Partnership is expected to incur $95,000 in lease up and improvement costs which will be funded by additional draws on the mini- permanent loan. The Partnership's financial resources appear to be adequate to meet current year obligations, but due to the increase in interest costs and the loss of a major office tenant at Plaza De Oro (discussed further in MDA's Results of Operations section), there is the possibility of adverse change in the Partnership's liquidity. In order to improve and stabilize the Partnership's financial position management is aggressively marketing Plaza's vacant space and attempting to refinance existing debt. Results of Operations The Partnership's total revenues increased by $50,474 (8.5%) for the six months ended June 30, 1995 as compared to June 30, 1994. Total expenses net of depreciation also increased by $80,793 (13.3%) mainly due to an increase in interest costs, while depreciation expense decreased by $119,327 (28.5%) for the six months ended June 30, 1995 as compared to June 30, 1994. In addition, the minority interest in net loss has decreased by $10,629 (17%) in 1995 compared to 1994, all resulting in a decrease in net loss of $99,637 (27%) for the six months ended June 30, 1995 as compared to June 30, 1994. The increase in revenues is due to an increase in occupancy at Plaza de Oro. During the first six months of 1994 Plaza De Oro experienced an average occupancy of 77%, while in 1995 Plaza's occupancy consisted of 98%. The increase in occupancy was mainly due to the lease up of 12,085 square feet of industrial space during the first quarter of 1995. Subsequent to June 30, 1995, a major tenant in the office building, who occupied approximately 7,193 of rentable space, prematurely terminated their lease, reducing Plaza's occupancy to 88%. Expenses net of depreciation increased for the six months ended June 30, 1995 as compared to June 30, 1994 due to the net effect of: a) $4,779 (4%) decrease in operating expenses due to continual cost cutting programs, b) $3,390 (6%) decrease in general administrative expenses due to improved efficiencies. (see Note 2 for reduction in reimbursed expenses to Managing General Partner), c) $86,385 (27.5%) increase in interest expense due to interest rate increases (see Notes 4 and 5) on the affiliate loan and mini-permanent loans. The increase in interest also is the result of additional draws on the affiliate loan and mini- permanent loans. Management is in the process of attempting to refinance the mini-permanent loans to take advantage of lower fixed rate financing currently available. Total expenses including depreciation decreased by $38,534 for the six months ended June 30, 1995 as compared to June 30, 1994. The decrease was primarily due to a decrease in depreciation expense of $119,327 (28.5%). The reduction of depreciation was the result of tenant improvement costs that were amortized during the first two quarters of 1994 became fully amortized in the third quarter of 1994. Many of the suites who's improvements were fully amortized were either leased or their leases renewed without requiring any major tenant improvement buildout, therefore a minimal amount of depreciation was incurred for these suites in 1995. PART II - OTHER INFORMATION Item 1- Legal Proceeding The Partnership is not a party to, nor is the Partnership's property the subject of, any material pending legal proceedings. Item 2 Not applicable Item 3 Not applicable Item 4 Not applicable Item 5 Not applicable Item 6 Exhibits and Reports on Form 8-K (a) Exhibits - None (b) Reports on Form 8-K - None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has dully caused this report to be signed on its behalf by the undersigned, hereunto dully authorized. CAPITAL BUILDERS DEVELOPMENT PROPERTIES a California Limited Partnership By: Capital Builders, Inc. Its Corporate General Partner Date: August 11, 1995 By: Michael J. Metzger President Date: August 11, 1995 By: Kenneth L. Buckler Chief Financial Officer EX-27 2
5 6-MOS DEC-31-1995 JUN-30-1995 27,184 0 189,384 0 0 216,568 9,724,661 2,040,398 8,448,613 96,227 0 0 0 0 0 8,448,613 0 642,361 0 0 583,568 0 399,935 (268,565) 0 (268,565) 0 0 0 (268,565) 0 0
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