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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K/A
(AMENDMENT NO. 1)

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)

 

 

x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the fiscal year ended   December 31, 2005

 

 

OR

 

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the transition period from _______ to _______

 

 

Commission File Number: 0-15796


CORPORATE REALTY INCOME FUND I, L. P.


(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware

 

13-3311993


 


(State or Other Jurisdiction of
Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

475 Fifth Avenue, New York, NY

 

10017


 


(Address of Principal Executive Offices)

 

(Zip Code)

 

 

 

Registrant’s telephone number, including area code:     212-696-0701

 

 

 

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class

 

Name of Each Exchange on Which Registered


 


None

 

Not Applicable


Securities registered pursuant to Section 12(g) of the Act:

 

Depositary Units of Limited Partnership


(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes   o

No   x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes   o

No   x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   x

No   o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Yes   o

No   x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes   o

No   x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.
$18,637,583.

Documents Incorporated by Reference in this Form 10-K

          None.



EXPLANATORY NOTE

Corporate Realty Income Fund I, L.P. (“Registrant”) is filing this Amendment No. 1 on Form 10-K/A to its Annual Report on Form 10-K for the fiscal year ended December 31, 2005 solely for the purpose of (i) amending Item 9A. – “Controls and Procedures” to state that Registrant’s disclosure controls and procedures were effective rather than adequate as of the end of the period covered by this report and (ii) amending Item 8. – “Financial Statements and Supplementary Data” by revising the Report of Independent Registered Public Accounting Firm to refer to the “standards of the Public Company Accounting Oversight Board.”

The Amendment does not reflect events occurring after the filing of the original Form 10-K and does not modify or update the disclosure in the original Form 10-K.

ii


CORPORATE REALTY INCOME FUND I, L. P.

Amendment No. 1
To
Annual Report on Form 10-K/A

December 31, 2005

TABLE OF CONTENTS

 

 

PAGE

 

 


PART II

 

1

 

 

 

Item 8.  Financial Statements and Supplementary Data

 

1

 

 

 

Item 9A.  Controls and Procedures

 

3

 

 

 

PART IV

 

4

 

 

 

Item 15.  Exhibits and Financial Statement Schedules

 

4

iii


PART II

Item 8.         Financial Statements and Supplementary Data.

                     See list of Financial Statements and Financial Statement Schedules at page F-2, filed as part of this report.


Quarterly Results of Operations (Unaudited)

 

 

2005

 

 

 


 

 

 

Three Months Ended

 

 

 


 

 

 

March 31

 

June 30

 

Sept. 30

 

Dec. 31

 

 

 



 



 



 



 

 

 

 

(Thousands of dollars, except per unit data)

 

Total revenues

 

$

1,785

 

$

1,951

 

$

2,184

 

$

2,212

 

Total expenses

 

$

2,419

 

$

2,757

 

$

2,538

 

$

2,727

 

Loss from continuing operations

 

$

(634

)

$

(806

)

$

(354

)

$

(515

)

Loss from discontinued operations (1)

 

$

(153

)

$

(857

)

$

(261

)

$

(1,080

)

Net loss

 

$

(787

)

$

(1,663

)

$

(615

)

$

(1,595

)

Net loss per Unit

 

$

(0.26

)

$

(0.55

)

$

(0.20

)

$

(0.53

)


 

 

2004

 

 

 


 

 

 

Three Months Ended

 

 

 


 

 

 

March 31

 

June 30

 

Sept. 30

 

Dec. 31

 

 

 



 



 



 



 

 

 

 

(Thousands of dollars, except per unit data)

 

Total revenues

 

$

2,381

 

$

1,730

 

$

1,826

 

$

1,699

 

Total expenses

 

$

3,000

 

$

2,386

 

$

2,460

 

$

2,483

 

Loss from continuing operations

 

$

(619

)

$

(656

)

$

(634

)

$

(784

)

Income/loss from discontinued operations (1)

 

$

74

 

$

(97

)

$

(411

)

$

(1,261

)

Net loss

 

$

(545

)

$

(753

)

$

(1,045

)

$

(2,045

)

Net loss per Unit

 

$

(0.18

)

$

(0.25

)

$

(0.35

)

$

(0.68

)



(1)

Discontinued operations consist of the results of operations for the Directory Building and the Tumi Building, each of which was classified as “held for sale” in 2004, the Alamo Towers, which was classified as “held for sale” in 2005, and the Mercury Insurance Group Building, which was sold in 2005.  In accordance with its consolidated statement of operations, those results of operations are reflected as discontinued operations for all periods presented.

2


Item 9A.          Controls and Procedures.

          (a)          Evaluation of Disclosure Controls and Procedures

                        Our principal executive officer and principal financial officer has evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this annual report (the “Evaluation Date”).  Based on such evaluation, such officer has concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective.

          (b)          Changes in Internal Controls

                         Since the Evaluation Date, there have not been any significant changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3


PART IV

Item 15.  Exhibits and Financial Statement Schedules.

          (a)(1), (2)

See page F-2.

 


 

 

 

 

Sequential
Page
Number

 

 

 

 


 

(a)(3)

Exhibits:

 

 

 

 

 

 

 

 

3.

Certificate of Limited Partnership, incorporated by reference to Exhibit 4 to Registration Statement No. 33-2258 (the “Registration Statement”).

 

 

 

 

 

 

 

 

4.(a)

Amended and Restated Agreement of Limited Partnership dated as of July 24, 1995, incorporated by reference to Exhibit 4 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1995.

 

 

 

 

 

 

 

 

10.(a)

Property Management Agreement, incor-porated by reference to Exhibit 10B to the Registration Statement.

 

 

 

 

 

 

 

 

(b)

Splitter Agreement dated as of August 9, 1999 between Fleet Bank and Registrant.1

 

 

 

 

 

 

 

 

(c)

Demand Note dated August 9, 1999 made by Registrant.1

 

 

 

 

 

 

 

 

(d)

Assignment of Mortgages and Note dated as of August 9, 1999 made by Registrant with respect to 475 Fifth Avenue.1

 

 



1 Incorporated by reference to Exhibits 10 (v), (w), (x), (y), (z), (aa), (bb), and (cc) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999.

4


 

(e)

Consolidated and Restated Promissory Note dated August 9, 1999 made by 475 Fifth Avenue Limited Partnership. 1

 

 

 

 

 

 

(f)

Mortgage Consolidation, Assignment of Rents, Security Agreement and Fixture Filing made as of August 9, 1999 by 475 Fifth Avenue Limited Partnership to and for the benefit of Heller Financial, Inc.1

 

 

 

 

 

 

(g)

Letter Agreement dated August 9, 1999 made by Robert F. Gossett, Jr. to and for the benefit of Heller.1

 

 

 

 

 

 

(h)

Manager’s Agreement, Subordination and Consent to Assignment dated as of August 9, 1999 made by Registrant to and for the benefit of Heller.1

 

 

 

 

 

 

(i)

Hazardous Substance Indemnification Agreement dated as of August 9, 1999 made by 475 Fifth Avenue Limited Partnership and Robert F. Gossett, Jr. to and for the benefit of Heller.1

 

 

 

 

 

 

(j)

Lease dated as of November 17, 2000 between Registrant and LightCross, Inc. with respect to the LightCross Building.2

 



2 Incorporated by reference to Exhibit 10 (dd) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000.

5


 

(k)

Purchase and Sale Agreement dated as of September 7, 2004 between Registrant and FSP 5601 Executive Drive Limited Partnership with respect to the Directory Building, incorporated by reference to Exhibit 2 to Registrant’s Current Report on Form 8-K dated September 8, 2004.

 

 

 

 

 

 

(l)

Lease Agreement dated June 16, 2004 between Registrant and Mercury Insurance Services, LLC with respect to the Mercury Insurance Group Building, incorporated by reference to Exhibit 10 to Registrant’s Current Report on Form 8-K dated June 18, 2004.

 

 

 

 

 

 

(m)

Purchase and Sale Agreement dated as of January 28, 2005 between Registrant and Vision Systems Group, Inc. with respect to the Tumi Building, incorporated by reference to Exhibit 2 to Registrant’s Current Report on Form 8-K dated January 31, 2005.

 

 

 

 

 

 

(n)

Amendment to Purchase and Sale Agreement dated as of March 29, 2005 between Registrant and Vision Systems Group, Inc. with respect to the Tumi Building, incorporated by reference to Exhibit 2.1 to Registrant’s Current Report on Form 8-K dated April 25, 2005.

 

6


 

(o)

First Amendment to Amended and Restated Secured Promissory Note dated as of August 9, 2005 between Bank of America, N.A., and Registrant.3

 

 

 

 

 

 

(p)

First Amendment to Amended and Restated Loan Agreement dated as of August 9, 2005 between Bank of America, N.A., and Registrant.3

 

 

 

 

 

 

(q)

Fourth Amendment to Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing dated as of August 9, 2005 between Registrant and Bank of America, N.A., with respect to the Mercury Insurance Group Building.3

 

 

 

 

 

 

(r)

Fourth Amendment to Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated as of August 9, 2005 between Registrant and Bank of America, N.A., with respect to the LightCross Building.3

 

 

 

 

 

 

(s)

Third Amendment to Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated as of August 9, 2005 between Registrant and Bank of America, N.A., with respect to the Alamo Towers.3

 

 

 

 

 

 

(t)

Control Account Agreement dated as of August 9, 2005 between Registrant and Bank of America, N.A.3

 



3 Incorporated by reference to Exhibits 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, and 10.7 to Registrant’s Current Report on Form 10-K dated August 9, 2005.

7


 

(u)

Confirmation of Environmental Compliance and Indemnification Agreement dated as of August 9, 2005 between Registrant and Bank of America, N.A.3

 

 

 

 

 

 

(v)

Purchase and Sale Agreement dated as of November 11, 2005 between Registrant and Mercury Casualty Company incorporated by reference to Exhibit 10 to Registrant’s Current Report on Form 8-K, dated November 11, 2005.

 

 

 

 

 

 

(w)

Amendment to Purchase and Sale Agreement dated as of December 22, 2005 between Registrant and Mercury Casualty Company incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K, dated December 22, 2005.

 

 

 

 

 

 

14.1

Code of Ethics of Registrant effective as of January 1, 2004, incorporated by reference to Exhibit 14.1 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003.

 

 

 

 

 

 

31.1

Certification pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934.

 

 

 

 

 

 

32.1

Certification of Principal Executive Officer and Principal Financial Officer Regarding Annual Report pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

 

8


SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

CORPORATE REALTY INCOME FUND I, L.P.

 

(Registrant)

 

 

 

 

 

 

 

By:

1345 REALTY CORPORATION

 

 

as Corporate General Partner

 

 

 

 

 

 

Dated:  July 10, 2006

By:

/s/ Robert F. Gossett, Jr.

 

 


 

 

ROBERT F. GOSSETT, JR.,

 

 

President

 

 

 

 

 

 

Dated:  July 10, 2006

By:

/s/ Robert F. Gossett, Jr.

 

 


 

 

ROBERT F. GOSSETT, JR.

 

 

Individual General Partner


          Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities (with respect to the Corporate General Partner) and on the dates indicated.

 

1345 REALTY CORPORATION

 

 

 

 

 

 

Dated: July 10, 2006

By:

/s/ Robert F. Gossett, Jr.

 

 


 

 

Robert F. Gossett, Jr.

 

 

President, Director

 

 

 

 

 

 

Dated: July 10, 2006

By:

/s/ Pauline G. Gossett

 

 


 

 

Pauline G. Gossett

 

 

Secretary


Report of Independent Registered Public Accounting Firm

To the Partners of
Corporate Realty Income Fund I, L.P.

We have audited the accompanying consolidated balance sheets of Corporate Realty Income Fund I, L.P. (a Delaware limited partnership) and subsidiaries (the “Partnership”) as of December 31, 2005 and 2004 and the related consolidated statements of operations, changes in partners’ capital (deficit) and cash flows for each of the three years in the period ended December 31, 2005.  We have also audited the schedule listed in the accompanying index.  These financial statements and schedule are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedule, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Corporate Realty Income Fund I, L.P. and subsidiaries at December 31, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the schedule presents fairly, in all material respects, the information set forth therein.

/s/ BDO Seidman, LLP

New York, New York
March 24, 2006


CORPORATE REALTY INCOME FUND I, L.P.
and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

 

 

December 31,

 

 

 


 

 

 

2005

 

2004

 

 

 



 



 

ASSETS

 

 

 

 

 

 

 

Real estate, at cost:

 

 

 

 

 

 

 

Land

 

$

7,250,126

 

$

7,250,126

 

Buildings and improvements

 

 

29,855,470

 

 

29,451,977

 

Tenant improvements

 

 

9,607,038

 

 

8,566,202

 

Equipment and furniture

 

 

107,858

 

 

107,858

 

 

 



 



 

 

 

 

46,820,492

 

 

45,376,163

 

Less accumulated depreciation

 

 

(11,915,288

)

 

(10,276,719

)

 

 



 



 

 

 

 

34,905,204

 

 

35,099,444

 

Assets associated with real estate held for sale

 

 

15,689,226

 

 

32,861,792

 

Cash and cash equivalents

 

 

752,059

 

 

287,173

 

Accounts receivable

 

 

226,054

 

 

139,048

 

Deferred rent receivable

 

 

2,250,207

 

 

1,449,739

 

Deferred financing costs, net of accumulated amortization of $528,213 in 2005 and $444,811 in 2004

 

 

305,804

 

 

407,535

 

Lease commissions and deferred legal fees, net of accumulated amortization of $1,425,293  in 2005 and $1,126,781 in 2004

 

 

1,689,814

 

 

1,541,294

 

Escrow deposits

 

 

363,452

 

 

345,177

 

Deposits and other assets

 

 

1,022,147

 

 

869,103

 

 

 



 



 

Total assets

 

$

57,203,967

 

$

73,000,305

 

 

 



 



 

LIABILITIES AND PARTNERS’ CAPITAL

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

2,918,504

 

$

2,933,378

 

Mortgage loans payable

 

 

30,321,986

 

 

30,654,638

 

Due to general partners

 

 

1,282,239

 

 

856,459

 

Other liabilities

 

 

1,058,078

 

 

654,122

 

Obligations associated with real estate held for sale

 

 

1,318,954

 

 

12,937,044

 

 

 



 



 

Total liabilities

 

 

36,899,761

 

 

48,035,641

 

 

 



 



 

Commitments and contingencies

 

 

 

 

 

 

 

Partners’ capital (deficit):

 

 

 

 

 

 

 

General partners:

 

 

 

 

 

 

 

Capital contributions

 

 

1,000

 

 

1,000

 

Accumulated net income

 

 

171,153

 

 

217,758

 

Cash distributions

 

 

(684,596

)

 

(684,596

)

 

 



 



 

 

 

 

(512,443

)

 

(465,838

)

 

 



 



 

Limited partners: ($25 per unit; 4,000,000 units authorized, 2,983,531 issued and outstanding in 2005 and 2004)

 

 

 

 

 

 

 

Capital contributions, net of offering costs

 

 

71,724,856

 

 

71,724,856

 

Accumulated net income

 

 

16,943,836

 

 

21,557,689

 

Accumulated cash distributions

 

 

(67,852,043

)

 

(67,852,043

)

 

 



 



 

 

 

 

20,816,649

 

 

25,430,502

 

 

 



 



 

Total partners’ capital

 

 

20,304,206

 

 

24,964,664

 

 

 



 



 

Total liabilities and partners’ capital

 

$

57,203,967

 

$

73,000,305

 

 

 



 



 

See accompanying notes.

F-2


CORPORATE REALTY INCOME FUND I, L.P.
and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

For the years ended December 31,

 

 

 


 

 

 

2005

 

2004

 

2003

 

 

 



 



 



 

Revenue:

 

 

 

 

 

 

 

 

 

 

Rental

 

$

8,051,470

 

$

7,162,782

 

$

8,236,712

 

Lease cancellation

 

 

—  

 

 

—  

 

 

500,000

 

Interest and other income

 

 

81,236

 

 

473,278

 

 

83,437

 

 

 



 



 



 

 

 

 

8,132,706

 

 

7,636,060

 

 

8,820,149

 

 

 



 



 



 

Expenses:

 

 

 

 

 

 

 

 

 

 

Interest

 

 

2,555,244

 

 

2,589,106

 

 

2,606,241

 

Depreciation

 

 

1,638,569

 

 

1,530,728

 

 

1,504,920

 

Amortization

 

 

400,243

 

 

318,956

 

 

615,018

 

Property operations

 

 

4,159,512

 

 

3,992,767

 

 

3,951,933

 

Management fees - affiliate

 

 

425,780

 

 

392,290

 

 

464,169

 

Professional fees

 

 

835,335

 

 

548,025

 

 

438,579

 

Bad debt expense

 

 

7,848

 

 

530,000

 

 

2,059,239

 

General and administrative

 

 

420,098

 

 

426,984

 

 

415,345

 

 

 



 



 



 

 

 

 

10,442,629

 

 

10,328,856

 

 

12,055,444

 

 

 



 



 



 

Loss from continuing operations

 

 

(2,309,923

)

 

(2,692,796

)

 

(3,235,295

)

Loss from discontinued operations

 

 

(2,350,535

)

 

(1,695,044

)

 

(4,722,553

)

 

 



 



 



 

Net loss

 

$

(4,660,458

)

$

(4,387,840

)

$

(7,957,848

)

 

 



 



 



 

Net loss allocated:

 

 

 

 

 

 

 

 

 

 

General partners

 

$

(46,605

)

$

(43,878

)

$

(79,578

)

Limited partners

 

 

(4,613,853

)

 

(4,343,962

)

 

(7,878,270

)

 

 



 



 



 

 

 

$

(4,660,458

)

$

(4,387,840

)

$

(7,957,848

)

 

 



 



 



 

Net loss per unit of limited partnership interests:

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

 

(0.77

)

 

(0.89

)

 

(1.07

)

Discontinued operations

 

 

(0.78

)

 

(0.56

)

 

(1.57

)

 

 



 



 



 

Net loss per unit of limited partnership interests

 

$

(1.55

)

$

(1.46

)

$

(2.64

)

 

 



 



 



 

See accompanying notes.

F-3


CORPORATE REALTY INCOME FUND I, L.P.
and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL (DEFICIT)

 

 

 

Total

 

General
Partners

 

Limited
Partners

 

 

 



 



 



 

Partners’ capital (deficit) at December 31, 2002

 

$

37,310,352

 

$

(342,382

)

$

37,652,734

 

Net loss

 

 

(7,957,848

)

 

(79,578

)

 

(7,878, 270

)

 

 



 



 



 

Partners’ capital (deficit) at December 31, 2003

 

 

29,352,504

 

 

(421,960

)

 

29,774,464

 

Net loss

 

 

(4,387,840

)

 

(43,878

)

 

(4,343,962

)

 

 



 



 



 

Partners’ capital (deficit) at December 31, 2004

 

 

24,964,664

 

 

(465,838

)

 

25,430,502

 

Net loss

 

 

(4,660,458

)

 

(46,605

)

 

(4,613,853

)

 

 



 



 



 

Partners’ capital (deficit) at December 31, 2005

 

$

20,304,206

 

$

(512,443

)

$

20,816,649

 

 

 



 



 



 

See accompanying notes.

F-4


CORPORATE REALTY INCOME FUND I, L.P.
and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

For the years ended December 31,

 

 

 


 

 

 

2005

 

2004

 

2003

 

 

 



 



 



 

Operating activities:

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(4,660,458

)

$

(4,387,840

)

$

(7,957,848

)

 

 



 



 



 

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

2,905,278

 

 

3,881,941

 

 

4,955,023

 

Bad debt expense

 

 

124,709

 

 

1,123,533

 

 

2,149,495

 

Loss (gain) on sale of real estate

 

 

1,133,676

 

 

65,871

 

 

(45,582

)

Impairment loss

 

 

—  

 

 

—  

 

 

4,530,000

 

Deferred rent receivable

 

 

(763,257

)

 

(425,809

)

 

(777,186

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Decrease (increase) in:

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(116,715

)

 

208,240

 

 

(1,080,072

)

Notes receivable

 

 

4,259

 

 

3,833

 

 

113,961

 

Lease commissions and deferred legal fees

 

 

(526,539

)

 

(785,021

)

 

(1,545,383

)

Escrow deposits

 

 

(49,931

)

 

(222,923

)

 

95,455

 

Deposits and other assets

 

 

(81,413

)

 

54,974

 

 

(44,371

)

Increase (decrease) in:

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

(751,129

)

 

(740,267

)

 

2,549,536

 

Due to general partners

 

 

(593,390

)

 

825,852

 

 

226,936

 

Other liabilities

 

 

281,253

 

 

175,977

 

 

(373,189

)

 

 



 



 



 

Total adjustments

 

 

1,566,801

 

 

4,166,201

 

 

10,754,623

 

 

 



 



 



 

Net cash (used in) provided by operating activities

 

 

(3,093,657

)

 

(221,639

)

 

2,796,775

 

 

 



 



 



 

Investing activities:

 

 

 

 

 

 

 

 

 

 

Decrease (increase) in escrow deposits

 

 

31,656

 

 

(48,171

)

 

231,075

 

Proceeds from sale of real estate

 

 

15,618,290

 

 

15,541,974

 

 

—  

 

Capital and tenant improvements

 

 

(1,877,687

)

 

(1,794,760

)

 

(2,812,040

)

 

 



 



 



 

Net cash provided by (used in) investing activities

 

 

13,772,259

 

 

13,699,043

 

 

(2,580,965

)

 

 



 



 



 

Financing activities:

 

 

 

 

 

 

 

 

 

 

Financing costs

 

 

(141,101

)

 

(24,443

)

 

(55,949

)

Mortgage proceeds

 

 

3,000,000

 

 

—  

 

 

—  

 

Repayments of mortgage loans payable

 

 

(13,072,615

)

 

(13,798,742

)

 

(847,275

)

 

 



 



 



 

Net cash used in financing activities

 

 

(10,213,716

)

 

(13,823,185

)

 

(903,224

)

 

 



 



 



 

Net increase (decrease) in cash and cash equivalents

 

 

464,886

 

 

(345,781

)

 

(687,414

)

Cash and cash equivalents at beginning of year

 

 

287,173

 

 

632,954

 

 

1,320,368

 

 

 



 



 



 

Cash and cash equivalents at end of year

 

$

752,059

 

$

287,173

 

$

632,954

 

 

 



 



 



 

See accompanying notes.

F-5


Corporate Realty Income Fund I, L.P.
and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2005

1.

Organization

 

 

 

Corporate Realty Income Fund I, L.P. (“Partnership”) was formed as a limited partnership on November 25, 1985 under the laws of the State of Delaware. The Partnership was formed for the purpose of acquiring and owning income-producing commercial and industrial real estate properties for lease to others. The Partnership will terminate on December 31, 2010 or sooner, in accordance with the Partnership Agreement.

 

 

 

The general partners of the Partnership are 1345 Realty Corporation, the corporate general partner, and Robert F. Gossett, Jr., the individual general partner.

 

 

 

The initial capital was $1,025 representing capital contributions of $1,000 by the general partners and $25 by the original limited partner. The Partnership commenced operations on June 2, 1986 with the acceptance of subscriptions for 1,082,640 Depositary Units of limited partnership interest (the “Units”). The Partnership has authorized the issuance of up to 4,000,000 Units. The Partnership sold 3,200,000 Units, representing $80,000,000, which completed the offering. Upon the first admittance of the additional limited partners and unitholders, the original limited partner withdrew from the Partnership.

 

 

 

There were no unit redemptions during 2005, 2004 and 2003.

 

 

 

The Partnership is considered one operating segment.

 

 

2.

Summary of Significant Accounting Policies

 

 

 

Basis of Accounting

 

 

 

The consolidated financial statements include the accounts of the Partnership and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.  These financial statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States.

 

 

 

Use of Estimates

 

 

 

The general partners use estimates and assumptions in preparing the consolidated financial statements in conformity with accounting principles generally accepted in the United States.  Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses.  Actual results could differ from those estimates.

F-6


Corporate Realty Income Fund I, L.P.
and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2005 (continued)

 

Revenue Recognition

 

 

 

Rental revenue is recognized on a straight-line basis over the terms of the leases.  The excess of rents recognized over amounts contractually due pursuant to the underlying leases are shown as deferred rent receivable in the accompanying balance sheets.  Accordingly, rental income for the years ended December 31, 2005, 2004 and 2003 includes $763,257, $393,141, and $(531,595), respectively, of income on the straight-line basis over/(under) the actual amount billed.

 

 

 

During 2005, 2004, and 2003, the Partnership wrote off deferred rent receivable of approximately $116,772, $993,330, and $0, respectively, relating to tenant bankruptcies and tenants vacating properties prior to the expiration of their lease terms.  The write-offs, net of termination fees collected from former tenants, are included in bad debt expense in the accompanying consolidated statements of operations and in discontinued operations.

 

 

 

Certain lease agreements provide for reimbursement of real estate taxes, insurance and operating maintenance costs which are recorded on an accrual basis.

 

 

 

Allowance for Doubtful Accounts

 

 

 

The Partnership maintains an allowance for doubtful accounts for estimated losses resulting from the inability of our tenants to make required rent payments.  Management periodically performs a detailed review of amounts due from tenants to determine if accounts receivable balances are impaired based on factors affecting the collectibility of those balances.  Management’s estimates of the allowance for doubtful accounts requires management to exercise significant judgment about the timing, frequency, and severity of collection losses, which affects the allowance and net income.  If the financial condition of a specific tenant were to deteriorate, resulting in an impairment of its ability to make payments, additional allowances may be required. All accounts receivable balances that are determined to be uncollectible are included in the allowance for accounts.  After all attempts to collect a receivable have failed, the receivable is written off against the allowance. The following table summarizes changes in the allowance:


 

 

Year ended December 31,

 

 

 


 

 

 

2005

 

2004

 

2003

 

 

 



 



 



 

Allowance for doubtful accounts, beginning of year

 

$

-0-

 

$

-0-

 

$

-0-

 

Provision for bad debt expense

 

 

7,848

 

 

530,000

 

 

2,059,239

 

Write-offs

 

 

(7,848

)

 

(530,000

)

 

(2,059,239

)

 

 



 



 



 

Allowance for doubtful accounts, end of year

 

$

-0-

 

$

-0-

 

$

-0-

 

 

 



 



 



 

F-7


Corporate Realty Income Fund I, L.P.
and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2005 (continued)

 

Real Estate and Depreciation

 

 

 

Real estate is stated at cost.  The costs of repairs and maintenance are charged to expense as incurred.

 

 

 

Depreciation of buildings, improvements, and equipment and furniture is computed under the straight-line method over the estimated economic useful lives of the assets.  The estimated useful lives by asset category are:


Asset Category

 

 

 

Estimated Useful Life


 

 

 


Building

 

 

 

40 years

Building improvements

 

 

 

26 - 40 years

Tenant improvements

 

 

 

1.5 – 10 years

Furniture and fixtures

 

 

 

10 years


 

 

The Partnership accounts for the impairment or disposal of long-lived assets in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets” (“SFAS 144”).  Long-lived assets are individually evaluated for impairment when conditions exist which may indicate that the sum of expected future cash flows (on an undiscounted basis) is less than its carrying amount.  Upon determination that an impairment has occurred, long-lived assets are reduced to their fair value.

 

 

 

If a property is considered held for sale, an impairment loss is recognized if the fair value of the property, less the estimated cost to sell, is less than the carrying amount of the property.  Depreciation expense ceases once a property is considered held for sale.

 

 

 

Real Estate Held for Sale

 

 

 

The Partnership follows the provisions of SFAS 144.  In accordance with SFAS 144, the Partnership classifies an operating property as held for sale when it determines that the property is available for immediate sale in its present condition and management is reasonably certain that a sale will be consummated.  Operating properties held for sale are carried at the lower of cost or fair value less costs to sell.  When a property is identified by management and a plan for sale, as defined by SFAS 144, has been adopted, the Partnership estimates the fair value, net of selling costs, of such property.  Depreciation and amortization are suspended during the held-for-sale period.  The operations of properties held for sale are reclassified into discontinued operations for all periods presented.

F-8


Corporate Realty Income Fund I, L.P.
and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2005 (continued)

 

In accordance with SFAS 144, when the Partnership sells a property and will not have continuing involvement after disposition, its operations and gain on sale are reported in discontinued operations when the operations and cash flows are clearly distinguished.  Once classified as discontinued operations, these properties are eliminated from ongoing operations.  Prior periods are also restated to reflect the operations of these properties as discontinued operations.

 

 

 

Deferred Financing Costs

 

 

 

Costs incurred in connection with obtaining financing, such as origination fees, commitment fees, legal and other third-party costs, are amortized over the life of the related debt on a straight-line basis which approximates the effective yield method.

 

 

 

Leasing Commissions

 

 

 

Leasing commissions consist of fees and direct costs incurred to initiate and renew operating leases and are amortized on a straight-line basis over the initial lease term or renewal period as appropriate.

 

 

 

Income Taxes

 

 

 

No provision for federal, state or local income taxes has been provided in the financial statements because, as a pass-through entity, the Partnership is generally not subject to income tax.  The tax effects of its activities accrue to the partners.

 

 

 

Cash Equivalents

 

 

 

The Partnership considers all highly liquid financial instruments with a maturity of three months or less when purchased to be cash equivalents.  Cash and cash equivalents, which consist principally of money market funds, are carried at cost which approximates market value.

 

 

 

Fair Value of Financial Instruments

 

 

 

SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. The Partnership’s cash and cash equivalents, accounts receivable, deposits, and accounts payable and accrued expenses are carried at cost, which approximates fair value due to the short maturities of such items.

 

 

 

The carrying value of notes receivable approximates fair value because such notes bear interest at market rates for similar types of notes.

F-9


Corporate Realty Income Fund I, L.P.
and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2005 (continued)

 

It is not practicable to determine the fair value of amounts due to general partners.  The amounts due to the general partners do not bear interest and are not subject to fixed payment terms.

 

 

 

The carrying value of the variable rate mortgage loan payable portion of the Partnership’s debt approximated fair value at December 31, 2004 as such loan was variable rate debt that repriced frequently at terms currently available to the Partnership.  The Partnership repaid in full its variable rate mortgage loan in December 2005.

 

 

 

The fair value of the Partnership’s fixed rate long-term borrowings are estimated using discounted cash flow analysis, based on current borrowing rates for similar types of borrowing arrangements.  The carrying amount and fair value of the Partnership’s fixed rate long-term debt at December 31, 2005 was approximately $30,322,000 and $32,981,000, respectively. The carrying amount and fair value of such debt at December 31, 2004 was approximately $30,655,000 and $33,881,000, respectively.

 

 

 

Reclassification

 

 

 

Certain 2004 and 2003 amounts have been reclassified to conform to the 2005 presentation.  Such reclassifications involve the Directory Building in Las Colinas, Texas and the Tumi Building in South Plainfield, New Jersey, each of which was classified as “held for sale” in 2004, and the Alamo Towers in San Antonio, Texas and the Mercury Insurance Group Building in Oklahoma City, Oklahoma, each of which was classified as “held for sale” in 2005 (see Note 5).  The impact of these discontinued operations on the Partnership’s assets, liabilities, and results of operations is set forth in Note 5.

 

 

3.

Partnership Agreement

 

 

 

The Partnership Agreement provides that profits, losses and distributions shall be allocated 99% to the limited partners and 1% to the general partners.  Sale or refinancing proceeds will generally be distributed 99% to the limited partners and 1% to the general partners until the limited partners have received an amount which, when added to all prior distributions of cash, will equal their original invested capital plus an 8% per annum cumulative noncompounded return. Thereafter, after payment of the subordinated disposition fee to the general partners, as defined in the agreement, proceeds will be distributed 75% to the limited partners and 25% to the general partners.

 

 

 

The Partnership Agreement further provides that net income shall be allocated to each calendar month of the year, and shall be apportioned on a monthly basis to the holders of interests, in the ratio in which the number of interests owned by each limited partner or unitholder on the first day of the month bears to the total number of interests owned by the limited partners and unitholders as of that date.

F-10


Corporate Realty Income Fund I, L.P.
and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2005 (continued)

4.

Investments in Real Estate

 

 

 

LightCross Building

 

 

 

On July 10, 1986, the Partnership purchased the LightCross Building (formerly the Monterey Park Building), an office building located at 2630 Corporate Place, Monterey Park, California, and the 90,000 square feet of underlying land. The property contains approximately 22,250 square feet of net rentable area.

 

 

 

The terms of the agreement with the seller provided for a purchase price, including capitalized closing and related costs, of approximately $4,182,000.

 

 

 

In November 2000, the Partnership entered into a 10-year net lease with LightCross, Inc. for the entire building, which is currently occupied by Kotura, Inc., a successor by merger to LightCross, Inc.  The lease also provides for two five-year renewal options.  Kotura, Inc. has also been granted a right of first offer to purchase the building.

 

 

 

The Directory Building

 

 

 

On October 18, 2004, the Partnership sold the Directory Building for $16,100,000.  The proceeds from the sale of the Directory Building were used to partially pay down the Fleet Loan (Note 9) by $13,000,000 and to augment the Partnership’s working capital, including the funding of leasing commissions and tenant improvements at its properties and reducing accounts payable and accrued expenses.  The Partnership recognized a loss of approximately $66,000 in 2004 on the sale of the Directory Building.  The Partnership purchased the Directory Building, an office building located in Las Colinas, Texas, and the 6.67 acres of underlying land on October 27, 1986.

 

 

 

As a result of its impairment analysis, the Partnership recorded an impairment write-down of approximately $1,895,000 to reduce the carrying amount of the property to fair value at December 31, 2003.

 

 

 

Tumi Building

 

 

 

On April 25, 2005, the Partnership sold the Tumi Building for an adjusted gross sales price of $9,440,000. The Partnership utilized $6,517,500 of the sale proceeds to pay down the Fleet Loan.  The balance of net proceeds have been used to augment the Partnership’s working capital, including the funding of leasing commissions and tenant improvements at its properties and reducing accounts payable and accrued expenses.  The Partnership recognized a loss of approximately $419,000 in 2005 on the sale of the Tumi Building.  The Partnership purchased the Tumi Building, an office building located in South Plainfield, New Jersey, and the five acres of underlying land on December 30, 1986. The property contains approximately 107,900 square feet of net rentable area.

F-11


Corporate Realty Income Fund I, L.P.
and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2005 (continued)

 

As a result of its impairment analysis, the Partnership recorded an impairment write-down of $2,635,000 to reduce the carrying amount of the property to fair value at December 31, 2003.

 

 

 

Mercury Insurance Group Building

 

 

 

On December 29, 2005, the Partnership sold the Mercury Insurance Group Building (formerly the Marathon Oil Building) for an adjusted gross sales price of $6,900,000.  The Partnership utilized approximately $6,079,800 of the sale proceeds to satisfy in full the principal balance and accrued interest of the Bank of America Loan.  The balance of net proceeds are being used to augment the Partnership’s working capital, including the funding of leasing commissions and tenant improvements at its properties and reducing accounts payable and accrued expenses.  The Partnership purchased the Mercury Insurance Group Building, located in Oklahoma City, Oklahoma, and the 6.1 acres of underlying land, on March 21, 1988.  The building contains approximately 91,500 net rentable square feet plus an 8,610 square foot basement.

 

 

 

475 Fifth Avenue

 

 

 

On December 6, 1996 the Partnership purchased an office building and the underlying land, approximately one third of an acre, located at 475 Fifth Avenue, New York, New York (the “New York Building”). The building contains approximately 250,800 net rentable square feet.

 

 

 

The terms of the agreement with the seller provided for a purchase price, including capitalized closing and related costs, of approximately $27,440,000.

 

 

 

As of December 31, 2005, the building was approximately 77.3% leased to various tenants under operating leases with remaining terms ranging from one to thirteen years.

 

 

 

In connection with the early termination of certain tenant leases, the Partnership recognized lease cancellation income of approximately $1,214,000 in the year ended December 31, 2003.

 

 

 

Alamo Towers

 

 

 

On March 17, 1997, the Partnership purchased an office building and the thirteen acres of underlying land located in San Antonio, Texas, for a purchase price, including capitalized closing and related costs, of approximately $12,002,000. The building contains approximately 193,900 net rentable square feet.

F-12


Corporate Realty Income Fund I, L.P.
and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2005 (continued)

 

As of December 31, 2005, the building was approximately 75.5% leased to various tenants under operating leases with remaining terms ranging from one to nine years.

 

 

 

In August 2005, the Partnership made a decision to market the Alamo Towers in San Antonio, Texas for sale.  The Partnership has solicited offers to purchase this property, but has yet to enter into an agreement to sell the property.  There is no assurance that it will be able to sell the Alamo Towers on acceptable terms.

 

 

5.

Discontinued Operations

 

 

 

In January 2004, the Partnership classified the Directory Building in Las Colinas, Texas as “held for sale.” In July 2004, the Partnership classified the Tumi Building in South Plainfield, New Jersey as “held for sale.”  In August 2005, the Partnership classified the Alamo Towers in San Antonio, Texas as “held for sale.”  The Partnership sold the Directory Building in October 2004 and it sold the Tumi Building in April 2005.  In December 2005, the Partnership sold the Mercury Insurance Group Building in Oklahoma City, Oklahoma.  In accordance with SFAS 144, the results of operations for the Directory Building, the Tumi Building, the Alamo Towers, and the Mercury Insurance Group Building are reflected in the consolidated statement of operations as discontinued operations for all periods presented.  The major classes of assets and liabilities of real estate held for sale as of December 31, 2005 and 2004 are as follows:


 

 

December 31,

 

 

 


 

 

 

2005

 

2004

 

 

 



 



 

ASSETS

 

 

 

 

 

 

 

Land

 

$

2,408,000

 

$

6,619,606

 

Buildings and improvements

 

 

14,735,299

 

 

35,396,890

 

Tenant improvements

 

 

2,270,414

 

 

5,155,927

 

Equipment and furniture

 

 

37,556

 

 

91,397

 

Accumulated depreciation

 

 

(4,102,816

)

 

(15,571,096

)

Accounts receivable

 

 

29,480

 

 

7,708

 

Notes receivable

 

 

18,199

 

 

22,459

 

Deferred rent receivable

 

 

—  

 

 

153,983

 

Lease commissions and deferred legal fees

 

 

276,722

 

 

896,914

 

Deposits and other assets

 

 

16,372

 

 

88,004

 

 

 



 



 

Assets associated with real estate held for sale

 

$

15,689,226

 

$

32,861,792

 

 

 



 



 

LIABILITIES

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

917,197

 

$

1,653,450

 

Mortgage loans payable

 

 

—  

 

 

9,739,963

 

Due to general partners

 

 

177,812

 

 

1,196,982

 

Other liabilities

 

 

223,945

 

 

346,649

 

 

 



 



 

Obligations associated with real estate held for sale

 

$

1,318,954

 

$

12,937,044

 

 

 



 



 

F-13


Corporate Realty Income Fund I, L.P.
and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2005 (continued)

 

The following table summarizes the income and expense components that comprise net income from discontinued operations for the years ended December 31, 2005, 2004, and 2003:


 

 

2005

 

2004

 

2003

 

 

 



 



 



 

REVENUE

 

 

 

 

 

 

 

 

 

 

Rental

 

$

3,176,346

 

$

6,540,315

 

$

7,407,373

 

Interest and other income

 

 

81,406

 

 

35,194

 

 

777,287

 

 

 



 



 



 

Total revenue

 

$

3,257,752

 

$

6,575,509

 

$

8,184,660

 

 

 



 



 



 

EXPENSES

 

 

 

 

 

 

 

 

 

 

Interest*

 

$

340,775

 

$

690,445

 

$

769,144

 

Depreciation and amortization

 

 

866,466

 

 

2,032,257

 

 

2,835,085

 

Property operating

 

 

2,876,776

 

 

4,364,685

 

 

4,338,461

 

Management fees - affiliate

 

 

237,830

 

 

443,762

 

 

434,267

 

Bad debt expense

 

 

116,861

 

 

593,533

 

 

90,256

 

General and administrative

 

 

35,903

 

 

80,000

 

 

(90,000

)

Impairment loss

 

 

—  

 

 

—  

 

 

4,530,000

 

 

 



 



 



 

Total expenses

 

$

4,474,611

 

$

8,204,682

 

$

12,907,213

 

 

 



 



 



 

Loss from discontinued operations

 

$

(1,216,859

)

$

(1,629,173

)

$

(4,722,553

)

Loss on sale of real estate

 

 

(1,133,676

)

 

(65,871

)

 

—  

 

 

 



 



 



 

Loss from discontinued operations

 

$

(2,350,535

)

$

(1,695,044

)

$

(4,722,553

)

 

 



 



 



 


6.

Leases

 

 

 

Minimum future rentals from tenants at the Partnership’s properties, including those held for sale, under non-cancelable operating leases as of December 31, 2005 are approximately as follows:


2006

 

$

8,904,000

 

2007

 

 

8,087,000

 

2008

 

 

6,788,000

 

2009

 

 

5,034,000

 

2010

 

 

4,297,000

 

Thereafter

 

 

20,092,000

 

 

 



 

Total

 

$

53,202,000

 

 

 



 



*

Interest expense was allocated to discontinued operations based upon the amount of debt that was required to be repaid upon the consummation of the sale.

F-14


Corporate Realty Income Fund I, L.P.
and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2005 (continued)

 

In addition to the minimum lease amounts, the leases provide for escalation charges to the tenants for operating expenses, electric and real estate taxes. For the years ended December 31, 2005, 2004 and 2003, escalation charges amounting to approximately $901,000, $1,038,000, and $1,223,000, respectively, have been included in rental income.

 

 

7.

Transactions With General Partners and Affiliates

 

 

 

The general partners or their affiliates receive a property management fee equal to either 1% for a long-term net lease or 6% for other types of leases of gross revenue from each property, and a partnership management fee equal to 7% of adjusted cash from operations, as defined, and reimbursement of administrative expenses. The general partners also receive leasing commissions in connection with leasing, re-leasing or leasing related services performed on behalf of the Partnership in connection with the negotiation of tenant leases. Such commissions are computed at a rate equal to 3% of the gross revenues for the first five years of each lease signed where the general partners have performed such leasing services.

 

 

 

Following is a summary of the fees earned and reimbursable expenses for the years ended December 31, 2005, 2004 and 2003:


 

 

 

2005

 

 

2004

 

 

2003

 

 

 



 



 



 

From continuing operations:

 

 

 

 

 

 

 

 

 

 

Partnership management fees

 

$

-0-

 

$

-0-

 

$

1,987

 

Property management fees

 

 

425,780

 

 

392,290

 

 

464,169

 

Administrative expenses

 

 

25,000

 

 

50,000

 

 

50,000

 

 

 



 



 



 

Total from continuing operations:

 

$

450,780

 

$

442,290

 

$

516,156

 

 

 



 



 



 

From discontinued operations:

 

 

 

 

 

 

 

 

 

 

Property management fees

 

$

237,830

 

$

443,762

 

$

432,280

 

 

 



 



 



 


 

There were no leasing commissions charged by the general partners in 2005, 2004 and 2003.  In addition, as of December 31, 2005, the general partners had deferred the receipt of all of the property management fees listed above that are attributable to continuing operations and were still owed an aggregate of $177,812 of the property management fees listed above that are attributable to discontinued operations for 2005 and 2004.  Such unpaid amounts are (i) reflected as amounts due to general partners and (ii) included in obligations associated with real estate held for sale in the accompanying consolidated balance sheets.  The amounts due to the general partners do not bear interest and the general partners have agreed to defer receipt of payment of such fees until such time as the general partners determine that the Partnership has sufficient funds to pay such fees.

F-15


Corporate Realty Income Fund I, L.P.
and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2005 (continued)

8.

Loans Payable

 

 

 

New York Loan

 

 

 

On August 9, 1999, the Partnership obtained a $32,000,000 fixed rate mortgage (the “New York Loan”). The loan is secured by the New York Building, matures on September 1, 2009, and bears interest on the outstanding balance, payable monthly, at a fixed rate of 8.27%. The terms of the note require monthly principal and interest payments of $240,855.  As of December 31, 2005, the outstanding balance of the loan was $30,321,986. The New York Loan can be prepaid in full and not in part, subject to a prepayment penalty. Pursuant to the New York Loan agreement, the Partnership had approximately $363,000 included in escrow deposits on December 31, 2005 of restricted funds for capital improvements, repairs and replacements, and real estate taxes.

 

 

 

Minimum future principal payments pursuant to the Partnership’s loan agreements (excluding discontinued operations) are as follows:


2006

 

$

361,641

 

2007

 

 

393,157

 

2008

 

 

420,201

 

2009

 

 

29,146,987

 

 

 



 

Total

 

$

30,321,986

 

 

 



 


 

Bank of America Loan

 

 

 

On August 9, 2005, the Partnership entered into amended loan documents with Bank of America, N.A., successor by merger to Fleet National Bank, to finance the outstanding balance of the Fleet Loan (approximately $3,104,000) plus an additional $3,000,000 advance for a term expiring on August 15, 2007.  On December 29, 2005, the Partnership repaid the balance of principal and accrued interest in the approximate amount of $6,079,800 of the amended loan (the “Bank of America Loan”) with proceeds from the sale of the Mercury Insurance Group Building (see Note 4).

 

 

 

Borrowings under the Bank of America Loan bore interest monthly at a rate, selected at the option of the Partnership at the time of the associated borrowing, based on (i) the prime rate plus .50% or (ii) the applicable LIBOR rate plus 2%.  The Bank of America Loan required monthly payments of interest plus principal payments equal to approximately $12,200.

 

 

 

The average rate of interest during 2005, 2004, and 2003 was approximately 5.31%, 3.46%, and 3.27%, respectively.

F-16


Corporate Realty Income Fund I, L.P.
and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2005 (continued)

9.

Supplemental Disclosure of Cash Flow Information


 

 

 

2005

 

 

2004

 

 

2003

 

 

 



 



 



 

Cash paid during the year for interest

 

$

2,932,715

 

$

3,310,348

 

$

3,384,159

 

 

 



 



 



 


10.

Employee Savings Plan

 

 

 

During 1997, the Partnership established an employee savings plan (the “Plan”) in accordance with Section 401(k) of the Internal Revenue Code. The Plan permits eligible employees to make contributions through salary reductions.  For the years ended December 31, 2005, 2004 and 2003, the Partnership made contributions of $38,365, $45,260, and $37,100, respectively, to the Plan.

 

 

11.

Earnings and Distributions per Limited Partnership Unit

 

 

 

Basic earnings per limited partnership unit amounts were computed based on 2,983,531 (2005, 2004 and 2003) weighted average limited partnership units outstanding.

 

 

 

For each of the three years ended December 31, 2005, there were no partnership unit equivalents and, in accordance with the provisions of SFAS No. 128, dilutive earnings per limited partnership unit for the three years ended December 31, 2005 was computed based on the weighted average limited partnership units outstanding.

 

 

 

Distributions paid per limited partnership unit were $.00, $.00, and $.00 for the years ended December 31, 2005, 2004, and 2003, respectively.

F-17


Corporate Realty Income Fund I, L.P.
and Subsidiaries
Schedule III—Real Estate and Accumulated Depreciation
December 31, 2005

 

 

 

 

 

Initial Cost (B)

 

Costs
Capitalized
Subsequent to
Acquisition

 

Gross Amount at Which
Carried at Close of Period

 

 

 

 

 

 


 


 


 

Description

 

Encumbrances
(A)

 

Land

 

Building
and
Improvements

 

Building and
 Improvements

 

Land

 

Building
and
Improvements

 


 



 



 



 



 



 



 

Office Building Monterey Park, CA

 

$

—  

 

$

1,762,126

 

$

2,459,141

 

$

1,651,420

 

$

1,762,126

 

$

4,110,561

 

Office Building San Antonio, TX (E)

 

 

—  

 

 

2,408,000

 

 

9,636,883

 

 

7,406,386

 

 

2,408,000

 

 

17,043,269

 

Office Building New York, NY

 

 

30,321,986

 

 

5,488,000

 

 

21,951,998

 

 

13,507,807

 

 

5,488,000

 

 

35,459,805

 

 

 



 



 



 



 



 



 

 

 

$

30,321,986

 

$

9,658,126

 

$

34,048,022

 

$

22,565,613

 

$

9,658,126

 

$

56,613,635

 

 

 



 



 



 



 



 



 


Description

 

Total
(C)

 

Accumulated
Depreciation
(D)

 

Date of
Construction

 

Date
Acquired

 

Life on Which
Depreciation Is
Computed

 


 



 



 



 



 



 

Office Building Monterey Park, CA

 

$

5,872,687

 

$

(1,906,098

)

 

1985

 

 

7/10/1986

 

 

5 to 40 years

 

Office Building San Antonio, TX (E)

 

 

19,451,269

 

 

(4,102,816

)

 

1975/1981

 

 

3/17/1997

 

 

5 to 40 years

 

Office Building New York, NY

 

 

40,947,805

 

 

(10,009,190

)

 

1927

 

 

12/6/1996

 

 

5 to 40 years

 

 

 



 



 

 

 

 

 

 

 

 

 

 

 

 

$

66,271,761

 

$

(16,018,104

)

 

 

 

 

 

 

 

 

 

 

 



 



 

 

 

 

 

 

 

 

 

 

F-18


Corporate Realty Income Fund I, L.P.
and Subsidiaries
Schedule III – Real Estate and Accumulated Depreciation
December 31, 2005 (continued)

Notes:

 

 

(A)

Encumbrances consist of a mortgage loan secured only by the New York property.

 

 

(B)

The initial cost to the Partnership represents the original purchase price of the properties net of purchase price adjustments, including amounts incurred subsequent to acquisition which were contemplated. The initial cost includes the purchase price paid by the Partnership and acquisition fees and expenses.

 

 

(C)

Reconciliation Summary of Transactions – Real Estate Owned


 

 

Years ended December 31,

 

 

 


 

 

 

2005

 

2004

 

2003

 

 

 



 



 



 

Balance at beginning of year

 

$

92,639,984

 

$

117,821,243

 

$

119,539,203

 

Net additions during the year

 

 

1,877,687

 

 

1,794,759

 

 

2,812,040

 

Cost of real estate sold

 

 

(28,245,910

)

 

(26,976,018

)

 

—  

 

Impairment of long-lived assets

 

 

—  

 

 

—  

 

 

(4,530,000

)

 

 



 



 



 

Balance at close of year

 

$

66,271,761

 

$

92,639,984

 

$

117,821,243

 

 

 



 



 



 

The aggregate cost of land, buildings and improvements for federal income tax purposes at December 31, 2005 was approximately $66,905,448.

(D)

Reconciliation Summary of Transactions – Accumulated Depreciation


 

 

Years ended December 31

 

 

 


 

 

 

2005

 

2004

 

2003

 

 

 



 



 



 

Balance at beginning of year

 

$

25,847,815

 

$

34,462,877

 

$

30,792,711

 

Depreciation charged to expense

 

 

2,265,129

 

 

2,753,111

 

 

3,670,166

 

Accumulated depreciation of real estate sold

 

 

(12,094,840

)

 

(11,368,173

)

 

 

 

 



 



 



 

Balance at close of year

 

$

16,018,104

 

$

25,847,815

 

$

34,462,877

 

 

 



 



 



 


(E)

The San Antonio, Texas property was classified as “held for sale” in August 2005.  The assets and liabilities associated with real estate held for sale in the consolidated balance sheets relate to this property.

F-19