-----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, QaVfpCbMVoZ2AyfVuSFNg36m1y6WE4m30Xaw+VKXJEbZ+eEuHE4+LcLdYpoppdVV fzsw62MI1Vhc0ecpuxyUpQ== 0000791452-99-000005.txt : 19991117 0000791452-99-000005.hdr.sgml : 19991117 ACCESSION NUMBER: 0000791452-99-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: 99752937 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 18 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 September 30, 1999 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 (Former Address of Principal executive offices) (Zip Code) 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 September December 30, 31, 1999 1998 ASSETS Cash and cash equivalents $22,613 $17,206 Restricted cash 25,650 - - - - - Accounts receivable, net 69,519 68,742 Investment property, held for sale at September 30, 1999 at carrying value, which is less than net realizable value, net of accumulated depreciation and amortization of $1,470,519 and $1,404,343 at September 30, 1999 and December 31, 1998, respectively 4,016,211 3,727,709 Lease commissions, net of accumulated amortization of $107,412 and $99,899 at September 30, 1999, and December 31, 1998, respectively 76,708 34,260 Other assets, net of accumulated amortization of $67,725 and $43,372 at September 30, 1999, and December 31, 1998, respectively 81,040 53,389 Total assets $4,291,741 $3,901,306 LIABILITIES AND PARTNERS' (DEFICIT) EQUITY Notes payable $3,847,782 $3,574,944 Loan payable to affiliate 87,280 24,000 Accounts payable and accrued liabilities 365,757 87,929 Tenant deposits 43,359 29,043 Total liabilities $4,344,178 $3,715,916 Commitments and contingencies Partners' (Deficit) Equity: General partner (58,348) (55,970) Limited partners 5,911 241,360 Total partners' (deficit) equity ($52,437) $185,390 Total liabilities and partner's (deficit) equity $4,291,741 $3,901,306 See accompanying notes to the financial statements.
Capital Builders Development Properties (A California Limited Partnership) STATEMENTS OF OPERATIONS THREE AND NINE MONTHS ENDED SEPTEMBER 30,
1999 1998 Three Nine Three Nine Months Months Months Months Ended Ended Ended Ended Revenues Rental and other income $153,801 $403,144 $166,667 $516,465 Interest income 164 1,086 105 265 Total revenues 153,965 404,230 166,772 516,730 Expenses Operating expenses 35,258 102,308 39,692 117,817 Repairs and maintenance 18,248 63,392 20,216 61,327 Property taxes 18,768 45,282 13,807 42,105 Interest 98,926 266,323 85,482 253,199 General and administrative 19,038 66,711 19,477 69,184 Depreciation and amortization 10,329 98,041 55,627 170,867 Total expenses 200,567 642,057 234,301 714,499 Net loss (46,602) (237,827) (67,529) (197,769) Allocated to general partners (466) (2,378) (675) (1,977) Allocated to limited partners ($46,136) ($235,449) ($66,854) ($195,792) Net loss per limited partnership unit ($3.35) ($17.08) ($4.85) ($14.20) Average units outstanding 13,787 13,787 13,787 13,787 See accompanying notes to the financial statements.
Capital Builders Development Properties (A California Limited Partnership) STATEMENTS OF CASH FLOWS THREE AND NINE MONTHS ENDED SEPTEMBER 30,
1999 1998 Three Nine Three Nine Months Months Months Months Ended Ended Ended Ended Cash flows from operating activities: Net loss ($46,602) ($237,827) ($67,529) ($197,769) Adjustments to reconcile net loss to cash flows used in operating activities: Depreciation and amortization 10,329 98,041 55,627 170,867 Changes in assets and liabilities (Increase)/Decrease in accounts receivable (8,589) (777) (5,874) 2,033 Increase in leasing commissions (8,087) (49,961) (1,092) (1,092) (Increase)/Decrease in other assets (3,786) (4,887) 1,598 3,260 Increase in accounts payable and accrued liabilities 79,645 92,153 24,464 1,912 Increase/(Decrease) in tenant deposits 3,378 14,316 1,104 (9,594) Net cash provided by/(used in) operating activities 26,288 (88,942) 8,298 (30,383) Cash flows from investing activities: Improvements to (135,256) (169,003) - - - - (1,587) investment properties Net cash used in investing activities (135,256) (169,003) - - - - (1,587) Cash flows from financing activities: Payments on notes & loan payables (300,625) (321,179) (9,721) (208,506) Proceeds from notes & loan payables 461,993 657,297 - - - - 290,000 Payment of loan fees (35,532) (47,116) - - - - (13,098) Net cash provided by/(used in financing activities 125,836 289,002 (9,721) 68,396 Net Increase/(Decrease) in cash 16,868 31,057 (1,423) 36,426 Cash, beginning of period 31,395 17,206 40,159 2,310 Cash, end of period $48,263 $48,263 $38,736 $38,736 Supplemental Disclosure: Cash paid for interest $98,926 $266,323 $85,482 $253,199 Non cash and financing activity: Capital Improvements financed through accounts payable and accrued liabilities $185,675 $185,675 - - - - - - - - See accompanying notes to the financial statements.
Capital Builders Development Properties (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999 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. Effective January 1999, the Partnership adopted SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. SOP 98-1 provides guidance on accounting for the costs of computer software developed or obtained for internal use. The adoption of SOP 98-1 did not have a material impact on the Partnership's financial statements. Effective January 1999, the Partnership adopted SOP 98-5, Reporting on the Costs of Start-Up Activities. SOP 98-5 provides guidance on the financial reporting of start-up costs and organization costs. The adoption did not have a material impact on the Partnership's 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 was not recorded during the third quarter of 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 during the quarter ended September 30 of 13,787 in 1999 and 1998. 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 In November 1998, one of the investment property's major office tenants, occupying 12,052 square feet, filed Chapter 11 Bankruptcy and vacated its suites. Although the tenant's lease does not expire until January 31, 2001, it is unlikely that any future collections will be received on the lease. The loss of this tenant has had a significant negative impact on the Partnership's cash flow. During and subsequent to the quarter ended September 30, 1999, Management was successful in re-leasing 11,628 square feet of office space and 7,020 of industrial space which also had become vacant during 1998. Additionally, Management was successful in leasing 6,424 square feet of the 9,424 square foot pad building. The pad building is currently under construction, with an anticipated completion date of December 1999. The additional lease up of Plaza de Oro's existing Phase I and new Phase II pad building has increased the project's overall occupancy to 85%. This additional 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 1999, Management secured a $150,000 interim loan to fund 1999 lease-up costs and a portion of operating expenses in excess of cash provided by operations. Additionally, the General Partner provided an affiliate loan to cover additional operating expenses. During the quarter ended September 30, 1999, Management also obtained construction loans totaling $1,313,000 to cover the development costs of Phase II's 9,424 square foot pad building. 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, but there are no offers pending or guaranteed sales price. 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 $-0- and $7,960 for the nine months ended September 30, 1999 and 1998, respectively, while total reimbursement of expenses was $67,584 and $63,162, respectively. The Partnership has accrued $63,354 of management fees and cost reimbursements as of the period ended September 30, 1999. NOTE 4 - INVESTMENT PROPERTIES The components of the investment property account, are as follows: September 30, December 31, 1999 1998 Land $1,353,177 $1,353,177 Building and Improvements 3,571,089 3,289,420 Tenant Improvements 562,464 489,455 Investment properties, at cost 5,486,730 5,132,052 Less: accumulated depreciation and amortization (1,470,519) (1,404,343) Investment property, net $4,016,211 $3,727,709 NOTE 5 - LOAN PAYABLE TO AFFILIATE The loan payable at September 30, 1999 and December 31, 1998 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 September 1999) and is payable upon demand. NOTE 6 - NOTES PAYABLE Notes Payable consist of the following at: Sept. 30, Dec. 31, 1999 1998 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. $3,253,766 $3,284,944 Land loan of $290,000 due May 1, 1999, which had been extended to September 1, 1999. The note required interest only payments and beared interest at 12.5%. The note was secured by Plaza de Oro's separately parceled Phase II land. - 0 - 290,000 Construction loan in the amount of $1,123,000, which accrues interest at Prime +1% (Prime as of September 30, 1999 is 8.25%) and is due August 19, 2000. Interest accrues monthly on the outstanding balance of the cumulative construction loan draws. This loan is secured by a First Deed of Trust on Phase II land and improvements, and is guaranteed by the General Partner. $254,016 - 0 - 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 September 30, 1999 is $25,650. $190,000 - 0 - Interim tenant improvement/leasing commission loan of $150,000 due March 1, 2000. 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. 150,000 - - - - Total Notes Payable $3,847,782 $3,574,944 Scheduled principal payments during 1999, 2000, 2001, and 2002 are $265,005, $386,236, $50,699, and $3,145,842, 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: 1999 $481,985 2000 552,411 2001 505,290 2002 226,915 Thereafter 56,100 Total $1,822,701 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: September 30, 1999 December 31, 1998 Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value Liabilities: Loan payable to affiliate $87,280 $87,280 $24,000 $24,000 Note payable $3,253,766 $3,253,766 $3,284,944 $3,284,944 Note payable - - - - - - - - $290,000 $290,000 Note payable $254,016 $254,016 - - - - - - - - Note payable $190,000 $190,000 - - - - - - - - Note Payable $150,000 $150,000 - - - - - - - - NOTE 9 - COMMITMENTS AND CONTINGENCIES The Partnership has entered into contracts with Brown Construction (General Contractor) to develop Plaza de Oro's Phase II pad building. The total contract amount is $603,780, of which $185,675 has been incurred as of September 30, 1999. 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 Year 2000 Issue The potential impact of the Year 2000 issue on the real estate industry could be material, as virtually every aspect of the industry and processing of transactions will be affected. Due to the size of the task facing the real estate industry, the Partnership may be adversely affected by the problem, depending on whether it and the entities with which it does business address this issue successfully. The impact of Year 2000 issues on the Partnership will then depend not only on corrective actions that the Partnership takes, but also on the way in which Year 2000 issues are addressed by governmental agencies, businesses and other third parties that provide services or data to, or received services or data from, the Partnership, or whose financial condition or operational capability is important to the Partnership. The Partnership's State of Readiness The Partnership engages the services of third-party software vendors and service providers for substantially all of its electronic data processing. Thus, the focus of the Partnership is to monitor the progress of its primary software providers toward Year 2000 readiness. The Partnership's Year 2000 program has been divided into phases, all of them common to all sections of the process: (1) inventorying date- sensitive information technology and other business systems; (2) assigning priorities to identified items and assessing the efforts required for Year 2000 readiness of those determined to be material to the Partnership; (3) upgrading or replacing material items that are determined not to be Year 2000 compliant and testing material items; (4) assessing the status of third party risks; and (5) designing and implementing contingency and business continuation plans. In the first phase, the Partnership conducted a thorough evaluation of current information technology systems and software. Non- information technology systems such as climate control systems, elevators and security equipment has also been surveyed. In phase two of the process, results from the inventory were assessed to determine the Year 2000 impact and what actions were required to achieve Year 2000 readiness. For the Partnership's internal systems, application upgrades of software are needed. The Partnership has opted for a course of action that will result in upgrading or replacing all critical internal systems. The third phase includes the upgrading, replacement and/or retirement of systems, and testing. This stage of the Year 2000 process is ongoing and is scheduled to be completed during the fourth quarter of 1999. The fourth phase, assessing third party risks, includes the process of identifying and prioritizing critical suppliers and customers at the direct interface level. This evaluation includes communicating with the third parties about their plans and progress in addressing Year 2000 issues. The Partnership's management has identified critical third parties and developed a letter inquiring about their company's Year 2000 program. These letters were sent in April, 1999. Responses received to date indicate all parties expect to be Year 2000 ready prior to December 31, 1999. A second letter has been sent to those parties who did not respond to the first letter. Contingency Plan The final phase of the Partnership's Year 2000 program relates to contingency plans. The Partnership maintains contingency plans in the normal course of business designed to be deployed in the event of various potential business interruptions. The Partnership's contingency plan includes maintaining hard copies of tenant leases, vendor contracts, and accounting records to ensure the maintenance of its accounting system and to help facilitate the collection of rents and payments to vendors during computer interruptions. Costs As the Company relies upon third-party software vendors and service providers for substantially all of its electronic data processing, the primary cost of the Year 2000 Project has been and will continue to be the reallocation of internal resources and, therefore, does not represent incremental expense to the Partnership. Risks Failure to correct a material Year 2000 problem could result in an interruption in, or a failure of, certain normal business activities or operations. The Partnership believes that, with the implementation of new or upgraded business systems and completion of the Year 2000 Project as scheduled, the possibility of significant interruptions of normal operations due to the failure of those systems will be reduced. However, the Partnership is also dependent upon the power and telecommunications infrastructure within the United States. The most reasonably likely worst case scenario would be that the Partnership may experience disruption in its operations if any of these third-party suppliers reported a system failure. Although the Partnership's Year 2000 Project will reduce the level of uncertainty about the readiness of its material third-party providers, due to the general uncertainty over Year 2000 readiness of these third-party suppliers, the Partnership is unable to determine at this time whether the consequences of Year 2000 failures will have a material impact. 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 nine months ended September 30, 1999, a net increase in cash of $31,057 was recognized by the Partnership. This was the result of net cash provided by financing in the amount of $289,002, which was offset by negative cash flow from operations of $88,942, net cash used for Phase I tenant improvements ($48,755) and net cash used for Phase II building improvements ($120,248). The negative cash flow from operations is primarily the result of the project's vacant space and the leasing commissions paid during the second and third quarters to lease up a portion of its vacant space. In order to temporarily solve the Partnership's cash flow problem, Management obtained a 10 month, $150,000 interim loan during the second quarter 1999. This loan has allowed the Partnership to pay for Phase I lease-up costs and 1999 operating deficits. For the period ended and subsequent to September 30, 1999, Management was successful in re-leasing 11,628 square feet of office space, 7,020 square feet of industrial space, and 6,424 square feet of the pad building, which is currently under construction. This lease up will continue to decrease future net losses from operations, but it is still necessary for the property to continue to lease up in order for the Partnership to meet its current obligations. During the third quarter 1999, Management began the development of the remaining pad with a 9,424 square foot office/retail building. Lease terms for this building have been finalized with a tenant requiring approximately 6,424 square feet. Construction loans totaling $1,313,000 have also been obtained during the third quarter of 1999. The initial proceeds from these loans were used to pay off the $290,000 Phase II land loan and paid the initial development costs of the Phase II building. The remaining proceeds should be sufficient to pay for the remaining construction and lease-up costs for the Phase II pad building. Plaza de Oro's Phase I and Phase II were listed for sale on July 1, 1999 with an independent brokerage firm. The project's current asking price less costs to sell is in excess of the carrying value of the property and the Partnership's current obligations. Presently, there are no pending offers or identified buyers; therefore, the final sales prices cannot be determined at this time. Results of Operations During the nine months ended September 30, 1999 as compared to September 30, 1998, the Partnership's total revenues decreased by $112,500 (21.8%), while its expenses decreased by $72,442 (10.1%), all resulting in an increase in net loss of $40,058. The decrease in revenues is primarily due to one of Plaza de Oro's major office tenants, who had occupied 12,052 square feet, filing Chapter 11 Bankruptcy during the fourth quarter of 1998. Total expenses decreased for the nine months ended September 30, 1999 as compared to September 30, 1998, due to the net effect of: a) $15,509 (13.2%) decrease in operating expenses due to lower management fees and utility costs associated with vacant space during 1999; b) $13,124 (5.2%) increase in interest costs due to the additional funds borrowed for operating deficits and the Phase II construction loans; and c) $72,826 (42.6%) decrease in depreciation and amortization primarily due to depreciation no longer being taken as of the third quarter 1999, as the Partnership's property has been reclassified as a long lived asset to be disposed of. Additionally, fewer tenant improvements were in place during 1999 as compared to 1998. During the third quarter ended September 30, 1999 as compared to September 30, 1998, revenues decreased by $12,807 (7.7%), while expenses decreased by $33,734 (14.4%). The decrease in revenue is due to the major office tenant filing for Bankruptcy as previously discussed. Total expenses decreased for the third quarter ended September 30, 1999 as compared to September 30, 1998 due to the net effect of: a) $4,434 (11.2%) decrease in operating expenses due to lower management fees and utility costs associated with vacant space during 1999; b) $13,444 (15.7%) increase in interest costs due to additional funds borrowed for operating deficits and the Phase II construction loans; and c) $45,298 (81.4%) decrease in depreciation due to depreciation no longer taken for long live assets 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 only variable note instrument consists of a loan payable to affiliate in the amount of $87,280. 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: November 10, 1999 By: Michael J. Metzger President Date: November 10, 1999 By: Kenneth L. Buckler Chief Financial Officer EX-27 2
5 9-MOS DEC-31-1999 SEP-30-1999 48,263 0 69,519 0 0 117,782 5,486,730 1,470,519 4,291,741 365,757 0 0 0 0 0 4,291,741 0 404,230 0 0 375,734 0 266,323 0 0 0 0 0 0 (237,827) 0 0
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