Commonwealth Income & Growth Fund V (the “Partnership” or “CIGF5”)
was formed on May 19, 2003 under the Pennsylvania Revised Uniform Limited Partnership
Act. The Partnership offered for sale up to 1,250,000 units of the limited partnership
at the purchase price of $20 per unit (the “Offering”). The Partnership
raised the minimum capital required ($1,150,000) and commenced operations on
March 14, 2005. The Partnership terminated its offering of units on February
24, 2006 with 1,249,951 units ($24,957,862, net of transactions costs of $41,158)
sold.
The Partnership was formed for the purpose of acquiring various types of equipment,
including computer Information Technology and other similar capital equipment.
The Partnership utilized the net proceeds of the offering to purchase information
technology and other similar capital equipment. The Partnership has utilized
retained proceeds and debt financing (not in excess of 30% of the aggregate
cost of the equipment owned or subject to conditional sales contracts by the
Partnership at the time the debt is incurred) to purchase additional equipment.
The Partnership acquires and leases equipment principally to U.S. corporations
and other institutions pursuant to operating leases. The Partnership retains
the flexibility to enter into full payout net leases and conditional sales contracts,
but has not done so. . The Partnership’s principal investment objectives
are to:
acquire, lease and sell equipment to generate revenues from operations sufficient
to provide annual cash distributions to Limited Partners;
preserve and protect Limited Partners’ capital;
use a portion of cash flow and net disposition proceeds derived from the sale,
refinancing or other disposition of equipment to purchase additional equipment;
and
refinance, sell or otherwise dispose of equipment in a manner that will maximize
the proceeds to the Partnership.
The Partnership invests in various types of equipment subject to leases. Our
investment objective is to acquire primarily high technology equipment including,
but not limited to: servers, desktops, laptops, workstations, printers, copiers,
and storage devices. Our General Partner believes that dealing in high technology
equipment is particularly advantageous due to a robust aftermarket. Information
technology has developed rapidly in recent years and is expected to continue
to do so. Technological advances have permitted reductions in the cost of computer
processing capacity, speed, and utility. In the future, the rate and nature
of equipment development may cause equipment to become obsolete more rapidly.
We also acquire high technology medical, telecommunications, and inventory management
equipment. Our General Partner will seek to maintain an appropriate balance
and diversity in the types of equipment acquired. The medical equipment we acquire
may consist of ventilators, IV infusion pumps, long-term acute care beds, CT
scanners, MRIs, flow cytometers, and other medical technology devices. The telecom
equipment we acquire may include Cisco switches, routers, blade switches, wireless
access points, and video conferencing systems. The market for high technology
medical equipment is growing each year. Generally, this type of equipment will
have a longer useful life than information technology equipment. This allows
for increased re-marketability, if it is returned before its economic or announcement
cycle is depleted.
Other Equipment Restrictions. The Partnership generally acquires information
technology, telecommunications, medical technology and inventory management
equipment. The General Partner is also authorized to cause the Partnership to
invest in other types of business-essential capital equipment. The Partnership
may not invest in any of such other types of equipment (i) to the extent that
the purchase price of such equipment, together with the aggregate purchase price
of all such other types of equipment then owned by the Partnership, is in excess
of 25% of the total cost of all of the assets of the Partnership at the time
of the Partnership’s commitment to invest therein and (ii) unless the
General Partner determines that such purchase is in the best economic interest
of the Partnership at the time of the purchase. There can be no assurance that
any equipment investments can be found which meet this standard. Accordingly,
there can be no assurance that investments of this type will be made by the
Partnership.
When evaluating potential lease transactions in which we will invest, the general
partner and the Sponsor’s management team performs a detailed credit and
risk analysis of both the lessee and the lease transaction itself. The risk
of doing business with the potential lessee and the economics of each particular
transaction must both be acceptable to our portfolio management team and to
the CEO of the General Partner, who specifically approves each and every lease
transaction. Some of the criteria we evaluate are described below:
Evaluation of Lessees
The management team will perform a credit analysis (including a review of the
financial statements, credit history and public debt record) of all potential
lessees to determine the lessee’s ability to make payments under the lease.
We focus our investments in investment grade to middle market credits meeting
our minimum acceptable fundamental analysis criteria. These criteria involve
an overall fundamental assessment of the lessee, and application our own proprietary
“rating” model that is tailored to specific economic criteria that
are important to us. In addition to preparing a detailed credit-write up at
the time of initiation of a transaction, we also re-evaluate a lessee’s
credit risk on a monthly basis, and may review interim and annual lessee financial
statements.
Generally, we seek lessees that have annual revenue of at least $10 million,
have positive cash flow, and are not start-up entities, i.e., have been in business
for at least five years. We will also apply a proprietary debt rating analysis
when a Moody’s or Standard & Poor’s rating is not available.
This allows us to create an equivalent, internal rating system without reliance
solely on third-party models and analysis.