-----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, EUf50XMZm9a6XgH3zsn4Xd0LJgwOMwTco1IqR7y/WbqA+uYWkDrqfYAJfgn7jgq8 0NEyE6EjGcEf7NTNPCbQ7g== 0000763978-00-000003.txt : 20000516 0000763978-00-000003.hdr.sgml : 20000516 ACCESSION NUMBER: 0000763978-00-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 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: 630628 BUSINESS ADDRESS: STREET 1: 1130 IRON POINT ROAD, SUITE 170 STREET 2: C/O CAPITAL BUILDERS INC CITY: FOLSOM STATE: CA ZIP: 95630 BUSINESS PHONE: (916) 353-0500 MAIL ADDRESS: STREET 1: 1130 IRON POINT ROAD, STE 170 STREET 2: SUITE 101 CITY: FOLSOM STATE: CA ZIP: 95630 10-Q 1 15 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For The Quarter Ended March 31, 2000 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. 1130 Iron Point Road, Suite 170, Folsom, California 95630 (Address of Principal executive offices) (Zip Code) Registrant's telephone number, including area code: (916)353-0500 Former name, former address and former fiscal year, if changed since last year: 4700 Roseville Road, Suite 206, 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 I - FINANCIAL INFORMATION Capital Builders Development Properties (A California Limited Partnership) BALANCE SHEETS
March 31, December 31, 2000 1999 ASSETS Cash and cash equivalents $53,220 $23,679 Accounts receivable, net 40,305 58,194 Investment property, held for sale, at cost, net of accumulated depreciation and amortization of $1,470,519 at March 31, 2000 and December 31, 1999 4,542,551 4,514,466 Lease commissions, net of accumulated amortization of $107,412 at March 31, 2000, and December 31, 1999 108,783 87,948 Other assets, net of accumulated amortization of $81,811 and $71,538 at March 31, 2000, and December 31, 1999, respectively 90,476 79,518 Total assets $4,835,335 $4,763,805 LIABILITIES AND PARTNERS' DEFICIT Notes payable $4,675,092 $4,199,057 Loan payable to affiliate 106,755 104,331 Accounts payable and accrued liabilities 128,448 489,667 Tenant deposits 47,211 44,357 Total liabilities $4,957,506 $4,837,412 Commitments and contingencies Partners' Deficit: General partner (59,046) (58,560) Limited partners (63,125) (15,047) Total partners' deficit ($122,171) ($73,607) Total liabilities and partner's deficit $ 4,835,335 $ 4,763,805 See accompanying notes to the financial statements.
Capital Builders Development Properties (A California Limited Partnership) STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31,
2000 1999 Revenues Rental and other income $174,277 $116,456 Interest income 298 547 Total revenues 174,575 117,003 Expenses Operating expenses 38,561 34,493 Repairs and maintenance 32,830 30,664 Property taxes 13,886 14,795 Interest 100,128 85,036 General and administrative 27,462 28,513 Depreciation and amortization 10,274 43,608 Total expenses 223,141 237,109 Net loss (48,566) (120,106) Allocated to general partners (486) (1,201) Allocated to limited partners ($48,080) ($118,905) Net loss per limited partnership unit ($3.49) ($8.62) Average units outstanding 13,787 13,787 See accompanying notes to the financial statements.
Capital Builders Development Properties (A California Limited Partnership) STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31,
2000 1999 Cash flows from operating activities: Net loss ($48,566) ($120,106) Adjustments to reconcile net loss to Cash flow used in operating activities: Depreciation and amortization 10,274 43,608 Changes in assets and liabilities Decrease/(Increase) in accounts 17,889 (561) receivable Increase in leasing commissions (20,835) (9,505) Increase in other assets (515) (1,635) (Decrease)/Increase in accounts payable and accrued liabilities (27,406) 57,234 Increase in tenant deposits 2,854 574 Net cash used in operating activities (66,305) (30,391) Cash flows from investing activities: Improvements to investment properties (361,898) - - - - - Net cash used in investing (361,898) - - - - - Cash flows from financing activities: Proceeds on notes payable 487,198 (10,167) Payments on notes payable (11,163) - - - - - Payment of loan fees (20,715) - - - - - Proceeds on loans payable to affiliate 2,424 27,892 Net cash provided by financing activities 457,744 17,725 Net Increase/(Decrease) in cash 29,541 (12,666) Cash, beginning of period 23,679 17,206 Cash, end of period $53,220 $4,540 Cash paid for interest $ 108,040 $ 81,364 See accompanying notes to the financial statements.
Capital Builders Development Properties (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS March 31, 2000 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. 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. Accounting Pronouncements On December 3, 1999, the Securities Exchange Commission staff issued Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB 101). SAB 101 summarizes certain of the staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. SAB 101 was adopted on January 1, 2000. Management believes the adoption of SAB 101 does not have a material impact on the financial statements. Investment Properties On July 1, 1999, the Partnership's investment property was reclassified as a long-lived asset to be disposed of and is currently listed for sale. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. Subsequent revisions in estimates of fair value less cost to sell are reported as adjustments to the carrying amount, provided that the carrying amount does not exceed the initial carrying amount before an adjustment was made to reflect the decision to sell the asset. As of July 1, 1999, the fair value of the Partnership's investment property less cost to sell exceeded the carrying amount. Therefore, no adjustment was made to the carrying amount. 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. Due to the Partnership's investment property being reclassified as a long lived asset to be disposed of, depreciation expense has not been recorded subsequent to the second quarter of 1999. In accordance with Financial Account Standard No. 34, Capitalization of Interest Cost, interest associated with borrowings used to fund construction in process have been capitalized in the amount of $28,615 and $-0-, respectively, for the three months ended March 31, 2000 and 1999. Other Assets Included in other assets are loan fees, which are amortized over the life of the related note. Lease Commissions Lease commissions are no longer amortized over the related lease terms due to being an intangible directly related to the investment property. 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 per Limited Partnership Unit The net loss per Limited Partnership unit is computed based on the weighted average number of units outstanding of 13,787 during the periods ending March 31, 2000 and 1999. Statement of Cash Flows For purposes of the statements 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 - LIQUIDITY The lease up of Plaza de Oro's existing Phase I and new Phase II pad building has increased the project's overall occupancy to 88% during the first quarter of 2000. This lease-up has improved the Partnership's ability to meet current year obligations, but additional leasing is still required to fully meet its obligations. During the first quarter 2000, the Partnership obtained an additional $300,000 working capital/tenant improvement loan. The proceeds from this loan paid down the $150,000 interim loan, paid shortfall from operations due to negative cash flow during the first quarter, and paid for a portion of building improvements during the first quarter. Due to the property approaching a stabilized occupancy, Management listed the property for sale with an independent brokerage firm on July 1, 1999. The estimated sales proceeds are projected to be in excess of current obligations. There is currently one offer pending at a sales price of $6,400,000, but this offer does not represent a guaranteed sales price. At this time, Management has not finalized a plan for the use of the proceeds from the sale of the property. NOTE 3 - 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 remaining fees would not be payable based on the current listing price of the assets to be disposed of. The total management fees paid to the Managing General Partner were $3,045 and $-0- for the three months ended March 31, 2000 and 1999, respectively. Total reimbursement of expenses was $22,109 and $2,074, respectively. The Partnership has accrued $67,918 of management fees and cost reimbursements as of March 31, 2000. NOTE 4 - INVESTMENT PROPERTIES The components of the investment property account are as follows: March 31, December 31, 2000 1999 Land $1,353,177 $1,353,177 Building and Improvements 3,296,213 3,281,797 Tenant Improvements 578,747 577,747 Construction in Progress 784,933 772,264 Investment properties, at cost 6,013,070 5,984,985 Less: accumulated depreciation and amortization (1,470,519) (1,470,519) Investment property, net $4,542,551 $4,514,466 NOTE 5 - LOAN PAYABLE TO AFFILIATE The loan payable at March 31, 2000 and December 31, 1999 represents funds advanced to the Partnership from Capital Builders, Inc. (General Partner). These funds were utilized to cover negative cash flow from operations. The loan bears interest at approximately the same rate charged to the Partnership by a bank for other borrowings (9.25% as of March 31, 2000) and is payable upon demand. The Partnership accrued interest of $9,451 and $7,154 for the periods ending March 31, 2000 and December 31, 1999, respectively. NOTE 6 - NOTES PAYABLE Notes Payable consist of the following: March 31, December 31, 2000 1999 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. $3,231,722 $3,242,885 Construction loan in the amount of $1,123,000, which accrues interest at Prime +1% (Prime as of March 31, 2000 is 9%) and is due August 19, 2000. Interest accrues monthly on the outstanding balance of the cumulative construction loan draws. The Note provides for future draws of $169,630 for construction costs. This loan is secured by a First Deed of Trust on Phase II land and improvements, and is guaranteed by the General Partner. 953,370 616,172 A construction loan in the amount of $190,000 due March 1, 2001. The note requires interest only payments and bears interest at 13.5%. The note is a Second Deed of Trust on Phase II land and improvements. A restricted cash reserve balance is maintained to service monthly payments until October 31, 2000. The restricted cash balance as of March 31, 2000 and December 31, 1999 was $12,950 and $19,362, respectively. 190,000 190,000 Interim tenant improvement/leasing commission loan of $150,000 due March 1, 2000, which was paid in full. The note required interest only payments and bore interest at 15%. The note was secured by a Second Deed Of Trust on Plaza de Oro's Phase I land and improvements. -0- 150,000 Interim working capital, tenant improvement/leasing commission loan of $300,000 due March 1, 2001. The Note requires interest only payments and bears interest at 15%. The Note is secured by a Second Deed of Trust on Plaza de Oro's Phase I land and improvements. 300,000 -0- Total Notes Payable $4,675,092 $4,199,057 Scheduled principal payments during 2000, 2001, and 2002 are $998,050, $531,071, and $3,145,971, respectively. NOTE 7 - 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: 2000 $ 599,101 2001 594,410 2002 334,154 2003 165,876 2004 165,335 Thereafter 33,041 Total $1,891,917 NOTE 8 - 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 are as follows: March 31, 2000 December 31,1999 Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value Liabilities Loan payable to affiliate $106,755 $106,755 $104,331 $104,331 Note payable $3,231,722 $3,231,722 $3,242,885 $3,242,885 Note payable $953,370 $953,370 $616,172 $616,172 Note payable $190,000 $190,000 $190,000 $190,000 Note payable - - - - - - $150,000 $150,000 Note payable $300,000 $300,000 - - - - - - NOTE 9 - 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 10 - PROSPECTIVE ACCOUNTING PRONOUNCEMENTS 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 as amended is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. 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. 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 three months ended March 31, 2000, cash increased by $29,541. This was the result of net cash provided by financing in the amount of $457,744, which was offset by negative cash flow from operations of $66,305 and net cash used for Phase II building improvements ($361,898). The negative cash flow from operations is primarily the result of the project's remaining vacant space and the leasing commissions paid during the first quarter to lease up a portion of its vacant space. In order to temporarily solve the Partnership's cash flow problem, Management obtained a 12 month, $300,000 interim loan during the first quarter 2000. This loan has allowed the Partnership to pay for Phase I lease-up costs and 2000 operating deficits, and Phase II cost increases. The 9,424 square foot Phase II office/retail building was completed and placed into service April 2000. The building is currently partially occupied by a 6,424 square foot tenant and lease negotiations are in process for an additional 1,500 square foot tenant. Plaza de Oro's Phase I and Phase II were listed for sale on July 1, 1999 with an independent brokerage firm. There has been an offer received in the amount of $6,400,000, but this offer does not represent a guaranteed sales price. The project's current offering price less costs to sell is in excess of the carrying value of the property and the Partnership's current obligations. At this time, Management has not finalized a plan for the use of proceeds from the sale of the property. Results of Operations During the three months ended March 31, 2000 as compared to March 31, 1999, the Partnership's total revenues increased by $57,572 (49.2%), while its expenses decreased by $13,968 (5.9%), all resulting in a decrease in net loss of $71,540. The increase in revenues is primarily due to the increase in Phase I's occupancy to 88% from 60% at March 31, 2000 and 1999, respectively. Total expenses decreased for the three months ended March 31, 2000 as compared to March 31, 1999, due to the net effect of: a) $4,068 (11.8%) increase in operating expenses due to higher utility costs incurred for the office building due to an increase in occupancy; b) $2,166 (7.1%) increase in repair and maintenance due to additional clean-up costs incurred in preparing the property for sale. c) $15,092 (17.7%) increase in interest due to interest accrued on the affiliate loan, plus additional interest paid for the increase in loan proceeds; d) $1,051 (3.7%) decrease in general and administrative due to a cost cutting program; and e) $33,334 (76.4%) decrease in depreciation and amortization due to depreciation no longer being taken subsequent to the second quarter 1999, as the Partnership's property had been reclassified as a long lived asset to be disposed of. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS The Partnership does not have a material market risk due to financial instruments held by the Partnership. The Partnership's variable rate instruments consist of a loan payable to affiliate and a construction loan for Phase II. The total outstanding balance of the loan payable to affiliate at March 31, 2000 was $106,755, while the total outstanding balance of the construction loan was $953,370. 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: May 10, 2000 By: Michael J. Metzger President Date: May 10, 2000 By: Kenneth L. Buckler Chief Financial Officer EX-27 2
5 3-MOS DEC-31-2000 MAR-31-2000 53,220 0 40,305 0 0 93,525 6,013,070 1,470,519 4,835,335 128,448 0 0 0 0 0 4,835,335 0 174,575 0 0 123,013 0 100,128 0 0 0 0 0 0 (48,566) 0 0
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