-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G1ArGU7/gWsINRsrHDNlSNzeHXDKDKjO4TJyQ63167PGJGJRxxZotY31tFSTBoYY HtaVBmolDs9cfVdRzwXbgg== 0000763978-97-000004.txt : 19970912 0000763978-97-000004.hdr.sgml : 19970911 ACCESSION NUMBER: 0000763978-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970828 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: SEC FILE NUMBER: 000-15750 FILM NUMBER: 97671630 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 6 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Six Months ended June 30, 1997 Commission File Number 2-96042 CAPITAL BUILDERS DEVELOPMENT PROPERTIES, A CALIFORNIA LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) California 77-0049671 State or other jurisdiction of I.R.S. Employer 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 Former name, former address and former fiscal year, if changed since last year: N/A 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) CONSOLIDATED BALANCE SHEET
June 30, 1997 Dec 31,1996 ASSETS Cash and cash equivalents $ 38,968 $ 49,335 Accounts receivable, net 121,263 135,406 Investment property, at cost, net of accumulated depreciation and amortization of $1,196,820 and $2,107,769 at June 30, 1997 and December 31, 1996, respectively 4,006,339 7,252,601 Lease commissions, net of accumulated amortization of $48,550 and $99,983 at June 30, 1997, and December 31, 1996, respectively 72,719 126,701 Other assets, net of accumulated amortization of $6,276 and $91,673 at June 30, 1997, and December 31, 1996, respectively 77,431 66,404 Minority Interest - - - - - 695,094 Total assets $ 4,316,720 $ 8,325,541 LIABILITIES AND PARTNERS' EQUITY Loan payable to affiliate $ - - - - - $ 1,514,788 Notes payable 3,504,337 6,838,732 Accounts payable & accrued liabilities 42,569 160,718 Tenant deposits 56,524 115,332 Total liabilities $ 3,603,430 $ 8,629,570 Commitments and contingencies Partners' Equity: General partner (50,691) (60,864) Limited partners 763,981 (243,165) Total partners' equity $ 713,290 $ (304,029) Total liabilities & partner's equity $ 4,316,720 $ 8,325,541 See accompanying notes to the financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE MONTHS ENDED JUNE 30,
1997 1996 Three Six Three Six Months Months Months Months Ended Ended Ended Ended Revenues Rental and other $ $ $ 331,310 $ income 291,611 645,802 629,223 Interest income 286 572 302 757 Total revenues 291,897 646,374 331,612 629,980 Expenses Operating expenses 49,729 120,782 63,047 125,939 Repairs and maintenance 27,590 71,084 39,218 71,257 Property taxes 16,144 39,561 24,372 48,744 Interest 124,328 312,251 185,541 369,393 General and administrative 19,984 55,348 22,746 62,410 Depreciation and amortization 74,178 180,747 120,938 242,022 Total expenses 311,953 779,773 455,862 919,765 Loss before minority interest (20,056) (133,399) (124,250) (289,785) Minority interest in joint venture 3,930 22,806 19,731 46,235 Gain from disposition - - - - - - - - - of joint venture 1,127,913 1,127,913 - Net income/(loss) 1,111,787 1,017,320 (104,519) (243,550) Allocated to general 11,118 10,173 (1,045) (2,435) partners Allocated to limited $ $ $ $ partners 1,100,669 1,007,147 (103,474) (241,115) Net income/(loss) per limited $ $ $ $ partnership unit 79.83 73.05 (7.51) (17.50) Average units 13,787 13,787 13,787 13,787 outstanding See accompanying notes to the financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR MONTHS ENDED JUNE 30,
1997 1996 Three Six Three Six Months Months Months Months Ended Ended Ended Ended Cash flows from operating activities: Net income/(loss) $1,111,787 $1,017,320 ($104,519) ($243,550) Adjustments to reconcile net loss to cash flow used in operating activities: Depreciation & 74,178 180,747 120,938 242,022 amortization Minority interest in joint (3,930) (22,806) (19,731) (46,235) venture Gain from Partnership Investment (1,127,913 (1,127,913 - - - - - - - - - - ) ) Unpaid Interest on Loan Payable to Affiliate 24,014 55,347 18,210 18,210 Changes in assets and liabilities: Increase in accounts receivable (34,986) (20,605) (8,581) (7,087) Increase in leasing commissions - - - - - (15,771) (20,788) (43,953) Decrease/(Increase) in other assets 8,838 1,899 (166) 342 (Decrease)/Increase in accounts and accrued liabilities (109,037) (92,523) (46,703) 37,296 Increase/(Decrease) in tenant deposits 186 (7,266) 2,928 (4,913) Net cash (used in)provided by operating activities (56,863) (31,571) (58,412) (47,868) Cash flows from investing activities: Improvements to investment (15,356) (15,464) (36,823) (77,228) properties Proceeds from sale of partnership investment 14,380 14,380 - - - - - - - - - - Net cash used in investing (976) (1,084) (36,823) (77,228) activities Cash flows from financing activities: Payments from notes (12,612) (36,020) (19,904) (38,707) payable Proceeds from notes 141,583 141,583 - - - - - - - - - - payable Payment of loan fees (83,275) (83,275) - - - - - - - - - - Proceeds on loans payable to affiliate - - - - - - - - - - 170,000 170,000 Distribution to minority interest - - - - - - - - - - (68,000) (90,480) Net cash provided by financing activities 45,696 22,288 82,096 40,813 Net decrease in cash (12,143) (10,367) (13,139) (84,283) Cash, beginning of period 51,111 49,335 19,255 90,399 Cash, end of period $38,968 $38,968 $6,116 $6,116 See accompanying notes to the financial statements.
Capital Builders Development Properties (A California Limited Partnership) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1997 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows: Basis of Accounting The consolidated 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%), 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. Investment Properties The Partnership adopted the provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on January 1, 1996. This Statement requires that long-lived assets and certain identifiable intangibles be 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. Adoption of this Statement did not have a material impact on the Partnership's financial position, results of operations, or liquidity. Prior to the adoption of SFAS No. 121, the Partnership recorded a valuation allowance for losses which represented the excess carrying value of individual properties over their estimated net realizable value. During 1996, this valuation allowance was allocated against the cost basis of the land and building and improvements to be consistent with the methodology of SFAS No. 121. 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. 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 Income/(Loss) per Limited Partnership Unit The net income/(loss) per Limited Partnership unit is computed based on the weighted average number of units outstanding during the year of 13,787 in 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 cash proceeds of $51,068. As of June 30, 1997, the Partnership's Consolidated 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 During the second quarter of 1997, Management was successful in its plan to refinance Plaza de Oro's current Note Payable. The new financing consists of a $3,350,000, five year, mini-permanent, 9.25% fixed interest rate loan, secured by Phase I (existing building and improvements), and a $200,000, six month, prime +1.5% variable loan secured by Phase II (undeveloped pad). The new lower interest rate loans will improve the Partnership's ability to generate future cash flow, but future cash flow still remains dependent upon its ability to maintain and improve the occupancy of its investment properties. Additionally, with the land loan becoming due prior to year-end, it will be necessary to refinance or extend the loan prior to year-end. 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 $31,058 and $30,383 for the six months ending June 30, 1997 and 1996, respectively, while total reimbursement of expenses were $52,538 and $57,756, respectively. NOTE 5 - INVESTMENT PROPERTIES The components of the investment property account are as follows: June 30, December 31, 1997 1996 Land $1,353,177 $2,423,706 Building and Improvements 3,271,630 5,802,208 Tenant Improvements 578,352 1,134,456 Investment properties, at cost 5,203,159 9,360,370 Less: accumulated depreciation and amortization (1,196,820) (2,107,769) Investment property, net $4,006,339 $7,252,601 NOTE 6 - 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 was settled in conjunction with the sale of the 60% interest of the Roseville joint venture. The loan bore interest at approximately the same rate charged to it by a bank for other borrowings, which was 8.95% at the time of sale of the joint venture, May 1, 1997 and June 30, 1996, respectively. Interest expense incurred on the loan was $55,347 and $51,839 in 1997 and 1996, respectively. NOTE 7 - NOTES PAYABLE Notes Payable consist of the following at: June 30, December 31, 1997 1996 Construction loan due April 1, 1997 was refinanced with a mini-permanent loan with a fixed interest rate of 9.25%, and 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 collatoralized by a First Deed of Trust on the land, buildings and improvements. $3,341,337 $3,383,141 Mini-permanent loan on joint venture property with a fixed interest rate of 8.24% and requiring monthly principal and interest payments of $27,541, which is sufficient to amortize the loan over 25 years. The loan is due January 1, 2001. The note is collatoralized by a first deed of trust on the land, buildings and improvements. - - - - - 3,455,591 Land/Construction loan of $200,000 due September 24, 1997. The note bears interest at bank prime rate (8.50% at June 30, 1997) plus 1.5% with a 9% floor. The note is secured by Plaza de Oro's separately parceled Phase II land. 163,000 - - - - - Total Notes Payable $3,504,337 $6,838,732 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: 1997 $649,348 1998 564,741 1999 476,363 2000 401,801 2001 212,421 Thereafter 109,614 Total $2,414,288 NOTE 9 - 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. Cash and cash equivalents The carrying amount approximates fair value because of the liquid nature of the instrument. Note payable The fair value of the Partnership's note payable is 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 are as follows: June 30, December 31, 1997 1996 Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value Assets Cash and cash equivalents $38,968 $38,968 $49,335 $49,335 Liabilities Loan payable to affiliate $ - - - $ - - - $1,514,788 (A) Note payable 3,341,337 3,341,337 3,383,141 3,383,141 Note payable 163,000 163,000 3,455,591 3,455,591 (A) It is not practicable to determine the fair value of the loan payable to affiliate due to the related party nature of the arrangement. NOTE 10 - 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 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 six months ending June 30, 1997, the Partnership sold its 60% joint venture interest in Capital Builders Roseville Venture. The Partnership was also successful in refinancing Plaza de Oro's Note Payable, which became due April 1, 1997. The Partnership's sale of its joint venture interest resulted in a $1,127,913 non-cash gain and cash proceeds of $51,068. The refinancing of the Partnership's Note Payable also provided cash proceeds amounting to $141,583. The cash provided by these transactions, along with cash flow from operations, was primarily used to bring its accounts payable current, decreasing accounts payable by $92,523, and was used to pay loan fees of $83,275 for the Partnership's new financing. The remaining cash proceeds were used to finance leasing commissions of $15,771 and tenant improvements of $15,463 for the Partnership's investment properties. It is anticipated that approximately $50,000 in additional tenant improvements and leasing commissions will be incurred during 1997 in order to maintain Plaza de Oro's current 97% occupancy. These costs will be funded by cash reserves and property income. The Partnership's ability to meet current year obligations has improved during 1997 as a result of maintaining Plaza de Oro's occupancy, as well as the refinancing of its current Note Payable as of April 1, 1997. The Partnership appears to be able to meet current year obligations, provided it is successful in refinancing or extending Plaza de Oro's undeveloped pad loan, which was obtained April 1, 1997, but will be due September 24, 1997, as well as having the property maintain its current occupancy rate and income stream. It is Management's plan to actively market and attempt to locate a potential tenant for the undeveloped 9,800 square foot building on Plaza de Oro's Phase II land. If a tenant is identified and a lease is signed, this will allow the Partnership to obtain additional financing, construct the building, and convert the loan to a mini- permanent loan. Management is also searching for new potential lenders and joint venture equity partners to paydown the existing land loan and finance the additional construction costs. Results of Operations The Partnership's total revenues increased by $16,394 (2.6%) for the six months ended June 30, 1997, as compared to June 30, 1996, while expenses decreased by $139,692 (15.2%) for the same respective period. In addition, the minority interest in net loss has decreased by $23,429 (50.7%) 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 an increase in net income of $1,260,870 (517.7%) for the months ended June 30, 1997 as compared to June 30, 1996. The increase in revenues is due primarily to the successful lease-up of Plaza de Oro, which as of June 30, 1997 was 97% occupied. Total expenses decreased by $139,992 for the six months ended June 30, 1997, as compared to June 30, 1996, due to the sale on May 1, 1997 of its 60% interest of Capital Builders Roseville Venture. As of June 30, 1997, the Statement of Operations included expenses of $299,645 from its joint venture, where as of June 30, 1996, expenses of $439,856 from its joint venture were included. As a result of the sale, only four months of the joint venture's operations were included in the June 30, 1997 Consolidated Statement of Operations, where as of June 30, 1996, six months of the joint venture's operations were included. 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 27, 1997 By: Michael J. Metzger President Date: August 27, 1997 By: Kenneth L. Buckler Chief Financial Officer EX-27 2
5 6-MOS DEC-31-1997 JUN-30-1997 38,968 0 121,263 0 0 160,231 5,203,159 1,196,820 4,316,720 42,569 0 0 0 0 0 4,316,720 0 646,374 0 0 467,522 0 312,251 0 0 0 0 0 0 1,017,320 0 0
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