-----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, KwNYWpEOPLHycbqVrpfKyBG59Hi6BYAaRMcQpVCrSutbPITT6f/8G1XZmCockUX5 WEsoCcxh4kjpWhXeuiCDYg== 0000892626-96-000088.txt : 19960402 0000892626-96-000088.hdr.sgml : 19960402 ACCESSION NUMBER: 0000892626-96-000088 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960401 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARLYLE REAL ESTATE LTD PARTNERSHIP XIII CENTRAL INDEX KEY: 0000711604 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 363207212 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-12791 FILM NUMBER: 96542521 BUSINESS ADDRESS: STREET 1: 900 N MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 3129151987 FORMER COMPANY: FORMER CONFORMED NAME: CARLYLE REAL ESTATE LTD PARTNERSHIP XIV DATE OF NAME CHANGE: 19830504 10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Act of 1934 For the fiscal year ended December 31, 1995 Commission File Number 0-12791 CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (Exact name of registrant as specified in its charter) Illinois 36-3207212 (State of organization)(I.R.S. Employer Identification No.) 900 N. Michigan Ave., Chicago, Illinois60611 (Address of principal executive office)(Zip Code) Registrant's telephone number, including area code 312-915-1987 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered - ------------------- ------------------------------ None None Securities registered pursuant to Section 12(g) of the Act: LIMITED PARTNERSHIP INTERESTS (Title of Class) 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 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 State the aggregate market value of the voting stock held by non-affiliates of the registrant. Not applicable. Documents incorporated by reference: None TABLE OF CONTENTS Page ---- PART I Item 1. Business. . . . . . . . . . . . . . . . 1 Item 2. Properties. . . . . . . . . . . . . . . 8 Item 3. Legal Proceedings . . . . . . . . . . . 10 Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . 10 PART II Item 5. Market for the Partnership's Limited Partnership Interests and Related Security Holder Matters . . . . . . . . 10 Item 6. Selected Financial Data . . . . . . . . 12 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . 20 Item 8. Financial Statements and Supplementary Data. . . . . . . . . . . 30 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . 89 PART III Item 10. Directors and Executive Officers of the Partnership. . . . . . . . . . . 89 Item 11. Executive Compensation. . . . . . . . . 92 Item 12. Security Ownership of Certain Beneficial Owners and Management. . . . 94 Item 13. Certain Relationships and Related Transactions. . . . . . . . . . 95 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . 95 SIGNATURES . . . . . . . . . . . . . . . . . . . . 99 i PART I ITEM 1. BUSINESS Unless otherwise indicated, all references to "Notes" are to Notes to Consolidated Financial Statements contained in this report. The registrant, Carlyle Real Estate Limited Partnership-XIII (the "Partnership"), is a limited partnership formed in late 1982 and currently governed by the Revised Uniform Limited Partnership Act of the State of Illinois to invest in improved income-producing commercial and residential real property. The Partnership sold 366,177.57 limited partnership interests (the "Interests") commencing on June 9, 1983, pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933 (Registration No. 2-81125 and No. 2-87033). A total of 366,177.57 Interests have been sold to the public at $1,000 per Interest. The offering closed on May 22, 1984. No Limited Partner has made any additional capital contribution after such date. The Limited Partners of the Partnership share in their portion of the benefits of ownership of the Partnership's real property investments according to the number of Interests held. The Partnership is engaged solely in the business of the acquisition, operation and sale and disposition of equity real estate investments. Such equity investments are held by fee title, leasehold estates and/or through joint venture partnership interests. The Partnership's real estate investments are located throughout the nation and it has no real estate investments located outside of the United States. A presentation of information about industry segments, geographic regions, raw materials or seasonality is not applicable and would not be material to an understanding of the Partnership's business taken as a whole. Pursuant to the Partnership agreement, the Partnership is required to terminate no later than December 31, 2033. The Partnership is self-liquidating in nature. At sale of a particular property, the net proceeds, if any, are generally distributed or reinvested in existing properties rather than invested in acquiring additional properties. As discussed further in Item 7, the marketplaces in which the portfolio operates and real estate markets in general are in a recovery mode. The Partnership currently expects to conduct an orderly liquidation of most of its remaining investment portfolio as quickly as practicable. As a result, the Partnership currently expects that it will sell or dispose of its remaining investment properties, with the possible exception of its interests in the 237 Park Avenue and the 1290 Avenue of the Americas properties, not later than December 31, 1999, barring any unforeseen economic developments. (Reference is also made to Note 1.) The Partnership has made the real property investments set forth in the following table:
SALE OR DISPOSITION DATE OR IF OWNED AT DECEMBER 31, 1995, NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED AND LOCATION (f) SIZE PURCHASECAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b) - ---------------------- ---------- ------------------------------ --------------------- 1. Copley Place multi-use complex Boston, Massachusetts . 1,220,000 sq.ft. 9/1/83 24% fee ownership of improve- n.r.a. ments and leasehold interest in air rights (through joint venture partnership) (c)(d)(g) 2. 1001 Fourth Avenue Plaza office building Seattle, Washington. . . 678,000 sq.ft. 9/1/83 11/1/93 fee ownership of land and n.r.a. improvements (h) 3. Plaza Tower office building Knoxville, Tennessee . . . 418,000 sq.ft. 10/26/83 4% fee ownership of land and n.r.a. improvements 4. Gables Corporate Plaza office building Coral Gables, Florida . . . . 106,000 sq.ft. 11/15/83 1/5/94 fee ownership of land and n.r.a. improvements (through joint venture partnership) (h) 5. University Park office building Sacramento, California. . . 120,000 sq.ft. 1/16/84 1/10/94 fee ownership of land and n.r.a. improvements (h) SALE OR DISPOSITION DATE OR IF OWNED AT DECEMBER 31, 1995, NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED AND LOCATION (f) SIZE PURCHASECAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b) - ---------------------- ---------- ------------------------------ --------------------- 6. Sherry Lane Place office building Dallas, Texas . 286,000 sq.ft. 12/1/83 6% fee ownership of land and n.r.a. improvements (through joint venture partnerships) 7. Allied Automotive Center Southfield, Michigan. . . . 192,000 sq.ft. 3/30/84 10/10/90 fee ownership of land and n.r.a. improvements (e) 8. Commercial Union Building Quincy, Massachusetts . 172,000 sq.ft. 3/12/84 8/15/91 fee ownership of land and n.r.a. improvements 9. 237 Park Avenue Building New York, New York. . . . 1,140,000 sq.ft. 8/14/84 4% fee ownership of land and n.r.a. improvements (through joint venture partnerships) (c)(g) 10. 1290 Avenue of the Americas Building New York, New York. . . . 2,000,000 sq.ft. 7/27/84 8% fee ownership of land and n.r.a. improvements (through joint venture partnerships) (c)(g) 11. 2 Broadway Building New York, New York. . . . 1,600,000 sq.ft. 8/14/84 9/18/95 fee ownership of land and n.r.a. improvements (through joint venture partnerships) (c) SALE OR DISPOSITION DATE OR IF OWNED AT DECEMBER 31, 1995, NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED AND LOCATION (f) SIZE PURCHASECAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b) - ---------------------- ---------- ------------------------------ --------------------- 12. Long Beach Plaza shopping center Long Beach, California. . . 559,000 sq.ft. 6/22/83 4% fee ownership of land and g.l.a. improvements and leasehold interest in the parking structure (d) 13. Marshalls Aurora Plaza shopping center Aurora (Denver), Colorado. . . . 123,000 sq.ft. 4/1/83 1% fee ownership of land and g.l.a. improvements 14. Old Orchard shopping center Skokie (Chicago), Illinois. . . . 843,000 sq.ft. 4/1/84 8/30/93 fee ownership of land and g.l.a. improvements (through a joint venture partnership) (c)(i) 15. Heritage Park-II Apartments Oklahoma City, Oklahoma. . . . 244 units 7/1/83 3/26/92 fee ownership of land and improvements (through a joint venture partnership) 16. Quail Place Apartments Oklahoma City, Oklahoma. . . . 180 units 7/1/83 3/26/92 fee ownership of land and improvements (through a joint venture partnership) 17. Lake Point Apartments Charlotte, North Carolina. 208 units 9/15/83 12/29/89 fee ownership of land and improvements SALE OR DISPOSITION DATE OR IF OWNED AT DECEMBER 31, 1995, NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED AND LOCATION (f) SIZE PURCHASECAPITAL PERCENTAGE (a) TYPE OF OWNERSHIP (b) - ---------------------- ---------- ------------------------------ --------------------- 18. Eastridge Apartments Tucson, Arizona 456 units 8/23/83 6/30/94 fee ownership of land and improvements (through a joint venture partnership) (e) 19. Rio Cancion Apartments Tucson, Arizona 380 units 8/18/83 3/31/93 fee ownership of land and improvements (e) 20. Bridgeport Apartments Irving, Texas . 312 units 9/30/83 4/2/92 fee ownership of land and improvements 21. Carrollwood Station Apartments Tampa, Florida. 336 units 12/16/83 1% fee ownership of land and improvements (through a joint venture partnership) 22. Greenwood Creek II Apartments Benbrook (Fort Worth), Texas . . . . . 152 units 3/30/84 4/6/93 fee ownership of land and improvements (e) 23. The Glades Apartments Jacksonville, Florida. . . . 360 units 10/9/84 1% fee ownership of land and improvements (through a joint venture partnership) - ----------------------- (a) The computation of this percentage for properties held at December 31, 1995 does not include amounts invested from sources other than the original net proceeds of the public offering as described above and in Item 7. (b) Reference is made to Note 4 and to Note 3 of the Combined Financial Statements of JMB/NYC Office Building Associates and the Schedule III's to the Consolidated Financial Statements and Combined Financial Statements filed with this annual report for the current outstanding principal balances and a description of the long-term mortgage indebtedness secured by certain of the Partnership's real property investments. (c) Reference is made to Note 3 for a description of the joint venture partnership or partnerships through which the Partnership has made this real property investment. (d) Reference is made to Note 8(b) for a description of the leasehold interest, under a ground lease or air-rights lease, in the land or air-rights on which this real property investment is situated. (e) This property has been sold. Reference is made to Note 7 for a description of the sale of such real property investment. (f) Reference is made to Item 8 - Schedule III to the Consolidated Financial Statements and Combined Financial Statements filed with this annual report for further information concerning real estate taxes and depreciation. (g) Reference is made to Item 6 - Selected Financial Data for additional operating and lease expiration data concerning this investment property. (h) The Partnership transferred title to the lender via a deed in lieu of foreclosure. Reference is made to Note 4(b). (i) The venture sold its interest in the property. Reference is made to Note 3(d).
The Partnership's real property investments are subject to competi- tion from similar types of properties (including in certain areas, properties owned or advised by affiliates of the General Partners or properties owned by certain of the joint venture partners) in the respective vicinities in which they are located. Such competition is generally for the retention of existing tenants. Additionally, the Partnership is in competition for new tenants in markets where significant vacancies are present. Reference is made to Item 7 below for a discussion of competitive conditions and capital improvement plans of the Partnership and certain of its significant investment properties. Approximate occupancy levels for the properties are set forth in the table in Item 2 below to which reference is hereby made. The Partnership maintains the suitability and competitiveness of its properties in its markets primarily on the basis of effective rents, tenant allowances and services provided to tenants. In the opinion of the Corporate General Partner of the Partnership, all of the investment properties held at December 31, 1995 are adequately insured. Although there is earthquake insurance coverage for a portion of the value of the Partnership's investment properties, the Corporate General Partner does not believe that such coverage for the entire replacement cost of the investment properties is available on economic terms. Reference is made to Note 8(a) and to Note 4 of Notes to Combined Financial Statements filed with this annual report for a schedule of minimum lease payments to be received in each of the next five years, and in the aggregate thereafter, under leases in effect at certain of the Partnership's properties as of December 31, 1995. The Partnership has certain personnel performing on-site duties at some of the Partnership's properties, none of whom are officers or directors of the Corporate General Partner of the Partnership. The terms of transactions between the Partnership, the General Partners and their affiliates are set forth in Item 11 below to which reference is hereby made for a description of such terms and transactions. ITEM 2. PROPERTIES The Partnership owns directly or through joint venture partnerships the properties or interests in the properties referred to under Item 1 above to which reference is hereby made for a description of said properties. The following is a listing of principal businesses or occupations carried on in and approximate physical occupancy levels by quarter during fiscal years 1995 and 1994 for the Partnership's investment properties owned during 1995:
1994 1995 -------------------------------------------------- At At At At At At At At Principal Business3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31 ---------------------- ---- ---- ----- ---- ---- ----- ----- 1. Marshalls Aurora Plaza shopping center Aurora (Denver), Colorado. . . . . . Retail 89% 89% 89% 96% 94% 94% 92% 92% 2. Carrollwood Station Apartments Tampa, Florida. . . Residential 98% 97% 98% 97% 99% 99% 97% 96% 3. Long Beach Plaza shopping center Long Beach, California. . . . . Retail 57% 54% 51% 51% 55% 53% 53% 55% 4. The Glades Apartments Jacksonville, Florida Residential 94% 96% 97% 92% 87% 94% 96% 95% 5. Sherry Lane Place office building Dallas, Texas . . . Legal and Financial Services98% 97% 96% 99% 98% 99% 97% 97% 6. Copley Place multi-use complex Boston, Massachusetts Retail/Business Machines/Financial Services 93% 75% 78% 70% 73% 73% 88% 86% 1994 1995 -------------------------------------------------- At At At At At At At At Principal Business3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31 ---------------------- ---- ---- ----- ---- ---- ----- ----- 7. Plaza Tower office building Knoxville, Tennessee Financial Services91% 91% 91% 92% 92% 92% 93% 92% 8. 237 Park Avenue Building New York, New York. Advertising/Insurance/ Paper/Real Estate 98% 98% 98% 98% 98% 98% 98% 98% 9. 1290 Avenue of the Americas Building New York, New York. Men's Clothing Financial Services90% 91% 91% 94% 94% 94% 94% 93% 10. 2 Broadway Building New York, New York. Financial Services30% 19% 19% 18% 18% 18% N/A N/A - ----------------- Reference is made to Item 6, Item 7, Note 8 and to Note 4 of Notes to Combined Financial Statements for further information regarding property occupancy, competitive conditions and tenant leases at the Partnership's investment properties. An "N/A" indicates that the property was sold and was not owned by the Partnership or its joint venture at the end of the period.
ITEM 3. LEGAL PROCEEDINGS In February 1996, an action entitled TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA V. CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XIII, JMB REALTY CORPORATION, et. al. was initiated in California Superior Court of Orange County, California. In the proceeding, Teachers Insurance and Annuity Association of America ("Teachers"), as the holder of the mortgage notes secured by the Long Beach Plaza Shopping Center, sought the appointment of a receiver for the benefit of the lender to take exclusive possession, control and operation of the property. Due to declining retail sales at the shopping center and one of its anchor tenant's previously vacating its space, the Partnership has not made all of the scheduled debt service payments on the mortgage notes since June 1993. The Partnership also did not pay the outstanding principal and accrued interest on the first mortgage note at its maturity in August 1995 (combined principal and accrued interest balance at December 31, 1995 was approximately $44,220,000). The Partnership was unable to obtain a long-term modification of the mortgage notes from Teachers, and the Partnership decided not to commit any significant additional amounts to the property. In March 1996, the Court granted Teachers' application and entered an order for a receiver to take exclusive possession, control and operation of the property. Accordingly, the receiver has control of the property and its operations. An affiliate of the General Partners continues as the property manager, at the discretion of the receiver. Title to the property is expected to be transferred to Teachers or its designee in 1996 or 1997. The Partnership is not subject to any other material legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during 1994 and 1995. PART II ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS As of December 31, 1995, there were 38,794 record holders of Interests in the Partnership. There is no public market for Interests and it is not anticipated that a public market for Interests will develop. Upon request, the Corporate General Partner may provide information relating to a prospective transfer of Interests to an investor desiring to transfer his Interests. The price to be paid for the Interests, as well as any other economic aspects of the transaction, will be subject to negotiation by the investor. There are certain conditions and restrictions on the transfer of Interests, including, among other things, the requirement that the substitution of a transferee of Interests as a Limited Partner of the Partnership be subject to the written consent of the Corporate General Partner. The rights of a transferee of Interests who does not become a substituted Limited Partner will be limited to the rights to receive his share of profits or losses and cash distributions from the Partnership, and such transferee will not be entitled to vote such Interests. No transfer will be effective until the first day of the next succeeding calendar quarter after the requisite transfer form satisfactory to the Corporate General Partner has been received by the Corporate General Partner. The transferee consequently will not be entitled to receive any cash distributions or any allocable share of profits or losses for tax purposes until such next succeeding calendar quarter. Profits or losses from operations of the Partnership for a calendar year in which a transfer occurs will be allocated between the transferor and the transferee based upon the number of quarterly periods in which each was recognized as the holder of the Interests, without regard to the results of the Partnership's operations during particular quarterly periods and without regard to whether cash distributions were made to the transferor or transferee. Profits or losses arising from the sale or other disposition of Partnership properties will be allocated to the recognized holder of the Interests as of the last day of the quarter in which the Partnership recognized such profits or losses. Cash distributions to a holder of Interests arising from the sale or other disposition of Partnership properties will be distributed to the recognized holder of the Interests as of the last day of the quarterly period with respect to which such distribution is made. Reference is made to Item 6 below for a discussion of cash distribu- tions made to the Limited Partners. Reference is made to Note 5 for a description of the provisions of the Partnership Agreement relating to cash distributions to the partners. ITEM 6. SELECTED FINANCIAL DATA CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES DECEMBER 31, 1995, 1994, 1993, 1992 AND 1991 (NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
1995 1994 1993 1992 1991 -------------------------- ----------- ------------------------ Total income . . . . .$ 66,763,349 65,969,277 85,193,793 93,609,884 94,185,836 ============ ======================== ======================== Operating loss . . . .$ 23,721,300 25,410,848 30,620,211 37,939,335 35,902,441 Partnership's share of loss from operations of unconsolidated ventures. . . . . . . 6,600,158 6,271,489 22,416,922 8,007,990 13,356,918 Venture partners' share of loss of consolidated ventures' operations. . . . . . (4,588,759) (5,659,744) (2,008,939) (3,376,600) (6,392,827) ------------ ------------------------ ------------------------ Net operating loss . . 25,732,699 26,022,593 51,028,194 42,570,725 42,866,532 Gain on sale or disposition of investment properties, net . . . . . . . . . -- (18,364,792)(11,083,791) (2,132,879) (1,476,395) Partnership's share of (gain) loss on sale of property or interest in property of unconsolidated ventures. . . . . . . 14,789,529 (1,702,082) (7,898,727) -- -- Loss on venture partner's relin- quishment of interest in investment property -- -- -- -- 1,161,626 ------------ ------------------------ ------------------------ Loss before extra- ordinary items. . . . 40,522,228 5,955,719 32,045,676 40,437,846 42,551,763 Extraordinary items. . (15,632,407) (996,126) 141,776 (7,139,936) -- ------------ ------------------------ ------------------------ Net loss . . . . . . .$ 24,889,821 4,959,593 32,187,452 33,297,910 42,551,763 ============ ======================== ======================== 1995 1994 1993 1992 1991 ------------- ------------ ----------- ------------------------ Net loss per Interest (b): Net operating loss .$ 67.47 68.22 133.78 111.62 112.38 Gain on sale or disposition of investment properties, net. . -- (49.66) (29.97) (5.77) (3.99) Share of (gain) loss on sale of property or interest in property of unconsolidated ventures. . . . . . 39.99 (4.60) (21.35) -- -- Loss on venture partner's relin- quishment of interest in investment property. . . . . . -- -- -- -- 3.14 Extraordinary items. (42.27) (2.69) .38 (19.31) -- ------------ ------------------------ ------------------------ Net loss . . . . . .$ 65.19 11.27 82.84 86.54 111.53 ============ ======================== ======================== Total assets . . . . .$307,460,106 333,577,902 374,787,300 489,687,072 530,051,709 Long-term debt . . . .$382,303,505 361,563,239 360,881,897 464,855,926 501,003,779 Cash distributions per Interest (b). . .$ 30.00 -- -- .50 4.25 ============ ======================== ======================== - ------------- (a) The above selected financial data should be read in conjunction with the consolidated financial statements and the related notes appearing elsewhere in this annual report. (b) Cash distributions from the Partnership are generally not equal to Partnership (income) loss for financial reporting or Federal income tax purposes. Each Partner's taxable (income) or loss from the Partnership in each year is equal to his allocable share of the taxable (income) loss of the Partnership, without regard to the cash generated or distributed by the Partnership. Accordingly, cash distributions to the Limited Partners since the inception of the Partnership have not resulted in taxable income to such Limited Partners and have therefore represented a return of capital.
SIGNIFICANT PROPERTY - SELECTED RENTAL AND OPERATING DATA AS OF DECEMBER 31, 1995
Property - -------- Copley Place multi-use complex a) The net rentable square feet ("NRF") occupancy rate and average base rent per square foot (excluding percentage rent) as of December 31 for each of the last five years were as follows: Avg. Annual NRF Base Rent Per December 31, Occupancy Rate Square Foot (1) ------------ --------------- ------------------ 1991. . . . . 84% $26.09 1992. . . . . 92% 25.00 1993. . . . . 93% 25.00 1994. . . . . 70% 29.84 1995. . . . . 86% 24.41 (1) Average annual base rent per square foot is based on NRF occupied as of December 31 of each year.
Base RentScheduled LeaseLease b) Significant Tenants Square FeetPer AnnumExpiration DateRenewal Option(s) ------------------- ---------------------------------------------------- Neiman Marcus 107,922 $1,136,874 1/2014 N/A (Department Store) Bain & Company 116,763 3,835,664 8/2004 N/A (Investments) Massachusetts Registry of Motor Vehicles 128,824 4,025,750 7/1996 N/A
c) The following table sets forth certain information with respect to the expiration of leases for the next ten years at the Copley Place multi-use complex: Annualized Percent of Number of Approx. Total Base Rent Total 1995 Year Ending Expiring NRF of Expiringof Expiring Base Rent December 31, Leases Leases (1)(2) Leases Expiring ------------ --------- -------------------------- ---------- 1996 12 153,632 $4,867,353 19% 1997 16 86,641 1,831,044 7% 1998 12 59,468 1,441,285 6% 1999 12 122,593 2,806,348 11% 2000 18 105,529 2,662,967 10% 2001 16 89,748 2,650,990 10% 2002 12 102,278 2,918,825 11% 2003 6 56,103 1,756,698 7% 2004 19 191,709 8,012,903 31% 2005 22 64,033 2,983,322 12% (1) Excludes leases that expire in 1996 for which renewal leases or leases with replacement tenants have been executed as of March 25, 1996. (2) Includes anchors which lease space but not anchors which own space.
Property - -------- 1290 Avenue of the Americas Office Building a) The net rentable feet ("NRF") occupancy rate and average base rent per square foot as of December 31 for each of the last five years were as follows: Avg. Annual NRF Base Rent Per December 31, Occupancy Rate Square Foot (1) ------------ --------------- --------------- 1991. . . . . 97% $36.25 1992. . . . . 97% 36.94 1993. . . . . 98% 35.78 1994. . . . . 94% 36.93 1995. . . . . 93% 37.32 (1) Average base rent per square foot is based on NRF occupied as of December 31 of each year.
Base RentScheduled LeaseLease b) Significant Tenants Square FeetPer AnnumExpiration DateRenewal Option(s) ------------------- ---------------------------------------------------- None - No single tenant represents 10% or more of the net rentable feet of the property.
c) The following table sets forth certain information with respect to the expiration of leases for the next ten years at the 1290 Avenue of the Americas Office Building: Annualized Percent of Number of Approx. Total Base Rent Total 1995 Year Ending Expiring NRF of Expiringof Expiring Base Rent December 31, Leases Leases (1) Leases Expiring ------------ --------- -------------------------- ---------- 1996 9 221,930 $ 5,196,228 7% 1997 5 44,258 1,950,084 3% 1998 14 239,010 9,334,656 13% 1999 6 78,422 2,871,480 4% 2000 5 7,540 246,804 -- 2001 1 96,700 4,158,096 6% 2002 14 247,390 10,277,412 14% 2003 5 43,607 1,965,444 3% 2004 12 163,190 7,827,036 11% 2005 4 13,990 917,748 1% (1) Excludes leases that expire in 1996 for which renewal leases or leases with replacement tenants have been executed as of March 25, 1996.
Property - -------- 237 Park Avenue Office Building a) The net rentable feet ("NRF") occupancy rate and average base rent per square foot as of December 31 for each of the last five years were as follows: Avg. Annual NRF Base Rent Per December 31, Occupancy Rate Square Foot (1) ------------ --------------- --------------- 1991. . . . . 100% $35.03 1992. . . . . 98% 33.35 1993. . . . . 98% 30.85 1994. . . . . 98% 32.23 1995. . . . . 98% 31.14 (1) Average base rent per square foot is based on NRF occupied as of December 31 of each year.
Base Rent Scheduled LeaseLease b) Significant Tenants Square Feet Per Annum Expiration DateRenewal Option(s) ------------------- ----------- --------- -------------------------------- J. Walter Thompson 456,132 $ 9,529,966 8/2006 N/A Company (Advertising Agency) North American 279,906 10,101,248 8/2001 N/A Reinsurance Company (Insurance Company)
c) The following table sets forth certain information with respect to the expiration of leases for the next ten years at the 237 Park Avenue Office Building: Annualized Percent of Number of Approx. Total Base Rent Total 1995 Year Ending Expiring NRF of Expiringof Expiring Base Rent December 31, Leases Leases (1) Leases Expiring ------------ --------- -------------------------- ---------- 1996 2 5,700 $ 407,640 1% 1997 1 27,110 1,355,496 4% 1998 1 900 432,000 1% 1999 2 28,452 1,147,560 3% 2000 1 3,450 196,656 1% 2001 9 283,001 10,283,328 29% 2002 - -- -- -- 2003 2 21,641 873,420 2% 2004 4 9,693 340,380 1% 2005 2 932 86,988 -- (1) Excludes leases that expire in 1996 for which renewal leases or leases with replacement tenants have been executed as of March 25, 1996.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES Unless otherwise indicated, all reference to "Notes" are to Notes to Consolidated Financial Statements contained in this report. Capitalized terms used herein, but not defined, have the same meanings as used in the Notes. On June 9, 1983, the Partnership commenced an offering of $260,000,000 of Limited Partnership Interests pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933. On October 7, 1983, the Partnership registered an additional $140,000,000 of Limited Partnership Interests. A total of 366,177.57 Interests were sold to the public at $1,000 per interest (fractional interests are due to the Distribution Reinvestment Program) between June 9, 1983 and May 22, 1984 pursuant to a public offering. After deducting selling expenses and other offering costs, the Partnership had approximately $326,000,000 with which to make investments in income-producing commercial and residential real property, to pay legal fees and other costs (including acquisition fees) related to such invest- ments and to satisfy working capital requirements. A portion of the proceeds was utilized to acquire the properties described in Item 1 above. At December 31, 1995, the Partnership and its consolidated ventures had cash and cash equivalents of approximately $5,908,000 and short-term investments of approximately $2,568,000. Approximately $4,600,000 of the cash and cash equivalents are for payment of a portion of the real estate taxes for Copley Place. Remaining amounts are available for debt service payments for the Long Beach Plaza shopping center for working capital requirements and potential leasing and tenant improvement costs at certain of the Partnership's other investment properties as further described below. The Partnership and its consolidated ventures have currently budgeted in 1996 approximately $9,422,000 for tenant improvements and other capital expenditures. The Partnership's share of such items in 1996 is currently budgeted to be $5,520,000. Actual amounts expended in 1996 may vary depending on a number of factors including actual leasing activity, results of property operations, liquidity considerations and other market conditions over the course of the year. The source of capital for such items and for both short-term and long-term future liquidity is expected to be through the net cash generated by the Partnership's investment properties and through the sale or refinancing of such investments as well as the cash and short-term investments currently held by the Partnership and its ventures and escrow deposits required under the terms of certain loan modifications and restricted funds. However, the Partnership does not consider the 1290 Avenue of the Americas and 237 Park Avenue office buildings as well as the Copley Place multi-use complex, the Long Beach Plaza or the Sherry Lane Place office building to be sources of long-term liquidity. In such regard, reference is made to the Partnership's property specific discussions below and also to the Partnership's disclosure of certain property lease expirations in Item 6. The Partnership's and its ventures' mortgage obligations are separate non-recourse loans secured individually by the investment properties and are not obligations of the entire investment portfolio, and the Partnership and its ventures are not personally liable for the payment of the mortgage indebtedness. In February 1995, the Partnership made a sales distribution totalling $11,094,473 (approximately $30 per Interest) out of net sales proceeds (primarily related to the sale of the interest in Old Orchard Shopping Center). Based upon estimated operations of certain of the Partnership's investment properties and on the anticipated requirements of the Partnership to fund its share of leasing and capital improvement costs at these properties, the Partnership suspended operating cash distributions to the Limited and General Partners effective as of the first quarter of 1992. It is important to maintain liquidity in the Partnership in order to provide funds for potential future obligations or for opportunities to preserve or enhance the value of the remaining properties. Future distributions from operations, sales or refinancings will be dependent upon a combination of the current cash flow from the investment properties and the longer term capital requirements of the Partnership. As described more fully in Note 4, the Partnership has received or is negotiating mortgage note modifications (certain of which have expired and others of which expire at various dates commencing November 1996) or refinancings on the Sherry Lane Place office building, Plaza Tower office building, Long Beach Plaza, Carrollwood Apartments, Marshall's Aurora Plaza and Copley Place multi-use complex. For those investment properties where modifications are being sought, or with expired modifications or short-term modifications, if the Partnership is unable to secure new or additional modifications to the loans, based upon current and anticipated market conditions, the Partnership may decide not to commit any significant additional amounts to any of the properties which are incurring, or in the future do incur, operating deficits. This would result in the Partnership no longer having an ownership interest in such property and would generally result in net gain for financial reporting and Federal income tax purposes to the Partnership with no corresponding distributable proceeds. Such decisions would be made on a property-by-property basis. The underlying indebtedness on certain other of the Partnership's investment properties matures and is due and payable commencing in August 1998 and subsequent years (reference is made to Note 4 and to Note 3 of Notes to the Combined Financial Statements). Copley Place Cash deficits and funding requirements are currently allocated equally between the Partnership and the joint venture partner. The joint venture modified the existing first mortgage note effective March 1, 1992. The modification lowered the pay rate from 12% to 9% per annum through August 1993, and to 7-1/2% per annum through August 1998. The contract rate has been lowered to 10% per annum through August 1993 and to 8-1/2% per annum through August 1998. The difference between the contract interest rate on the outstanding principal balance of the loan, including deferred interest, and interest paid at the applicable pay rate (as defined) is added to the principal balance and accrues interest at the contract interest rate. The outstanding principal balance, including the unpaid deferred interest, is due and payable on August 31, 1998. In conjunction with the modification, the lender is now entitled to receive, as additional interest, a minority residual participation of 10% of net proceeds (as defined) from a sale or refinancing after the Partnership and its joint venture partner have recovered their investments (as defined). Any cash flow from the property, after all current capital and leasing expenditures, is being escrowed for the purpose of paying for future capital and leasing requirements. As a result of the debt modification, the property produced cash flow in 1993 and 1994, which has been escrowed for future potential leasing requirements as set forth in the current loan modification. At December 31, 1995, such escrowed funds approximated $4,621,000. In 1994 the property experienced a significant loss in rental income in connection with the expiration of the IBM lease (279,432 square feet) representing 23% of the leasable office space and the John Hancock Property and Casualty Co. lease (97,180 square feet) representing 11.5% of the leasable office space. During 1995, the property was able to lease over 200,000 square feet and to increase the office tower occupancy to 81% by year end. Approximately 129,000 square feet of this space is leased to a tenant with a July 1996 expiration. The joint venture has negotiated an agreement in principle with the tenant to enter into a new lease with a five year term. Finalization of the agreement is subject to documentation acceptable to both parties. Consequently, there can be no assurance that this lease will be finalized. Although the office market in Boston has improved in the last year and rental rates appear to have stabilized, new leases will likely continue to require significant expenditures for lease commissions and tenant improvements prior to tenant occupancy. The joint venture partners decided to pay previously deferred property management fees owed to an affiliate for 1993 and to end the deferment of any subsequent fees incurred. As a result, the venture partners have made total contributions of $1,569,447 of which the Partnership's share was $784,724 in 1994 for the payment of the above mentioned fees. As of December 31, 1995, the aggregate amount of such deferred management fees the venture owes is approximately $304,000. On March 31, 1995, the joint venture received $1,517,994 from a tenant for rental amounts due from previous years. The joint venture used this amount to pay a portion of the accrued interest on the outstanding loan from the joint venture partner, as more fully discussed in Note 3(b). Orchard Associates In the third quarter of 1993, Orchard Associates, in which the Partnership and an affiliated partnership sponsored by the Corporate General Partner each have a 50% interest, sold (through a redemption) its interest in the Old Orchard shopping center (reference is made to Note 3(d)). At the time of redemption, OOUV retained a portion of the Orchard Associates redemption proceeds in order to fund certain contingent amounts which may have been due in the future. In July 1995, OOUV distributed to Orchard Associates a significant portion of its redemption holdback of $2,083,644. As a result, the Partnership received its share of the holdback of $1,041,820. In October 1995, OOUV distributed to Orchard their share of the pre-sale settlement with Federated department stores of $288,452. As a result, Orchard distributed to the Partnership its share of the settlement of $144,226. In February 1996, based on current proration estimates, OOUV distributed to Orchard their share of reserves ($494,000) previously held back by OOUV for potential operating prorations. As a result, Orchard distributed $262,500 to the Partnership representing its share of such excess reserves as well as its share of excess cash that had been held at Orchard. The Partnership currently intends to retain these funds for working capital purposes. OOUV still may earn up to an additional $3,400,000 based upon certain future earnings of the property (as defined), none of which has been earned or received as of the date of this report. JMB/NYC Occupancy at 1290 Avenue of the Americas decreased slightly to 93% during 1995. During the third quarter of 1995, the Joint Venture that owns the building executed a lease with a major insurance company for approximately 506,000 square feet of space in the building, for a fifteen year term with occupancy to commence in 1996. During the fourth quarter of 1994, the Joint Venture that owns the building negotiated an amendment with a tenant, Deutsche Bank Financial Products Corporation, under which the tenant will surrender space on the 12th and 13th floors (137,568 square feet or approximately 7% of the building's leasable space) on or before June 30, 1996. The original lease (as amended) was to terminate on December 31, 2003. The amendment also added space on the 8th and 9th floors (44,360 square feet or approximately 2% of the building's leasable space) which will expire on or before December 31, 1997. In consideration for this amendment, the tenant paid an early termination fee of $29,000,000 to the Joint Venture on December 1, 1994. Occupancy at 237 Park Avenue remained at 98% during 1995. In October 1994, JMB/NYC entered into an agreement (the "Agreement") with the Olympia & York affiliates to resolve certain disputes which are more fully discussed below. Certain provisions of the Agreement were immediately effective and, therefore, binding upon the partners, while others become effective either upon certain conditions being met or upon execution and delivery of final documentation. In general, the parties agreed to: (i) amend the Three Joint Ventures' agreements to eliminate any funding obligation by JMB/NYC for any purpose in return for JMB/NYC relinquishing its rights to approve almost all property management, leasing, sale (certain rights to control a sale would be retained by JMB/NYC through March 31, 2001) or refinancing decisions and the establishment of a new preferential distribution level payable to the Olympia & York affiliates from all future sources of cash, (ii) sell the 2 Broadway Building, and (iii) restructure the first mortgage loan. In anticipation of this sale and in accordance with the Agreement, the unpaid first mortgage indebtedness previously allocated to 2 Broadway was allocated to 237 Park Avenue and 1290 Avenue of the Americas during 1994. A more detailed discussion of these items is contained below and in Note 3(c). As part of the Agreement, in order to facilitate the restructuring, JMB/NYC and the Olympia & York affiliates agreed to file for each of the Three Joint Ventures a pre-arranged bankruptcy plan for reorganization under Chapter 11 of the Bankruptcy Code. In June 1995, the 2 Broadway Joint Ventures filed their pre-arranged bankruptcy plans for reorganization, and in August 1995, the bankruptcy court entered an order confirming their plans of reorganization. In September 1995, the sale of the 2 Broadway Building was completed. Bankruptcy filings for the other Joint Ventures are expected to occur in 1996. JMB/NYC is seeking to incorporate much of the substance of the transactions proposed in the Agreement in the proposed reorganization plans for the other Joint Ventures, although various specifics of the proposed transactions are expected to be changed and there is no assurance such proposed transactions would be substantially incorporated. In particular, the restructuring of their ownership interests in the 237 Park and the 1290 Avenue of the Americas properties by the Olympia & York affiliates and the possible reorganization of the 237 Park Avenue and 1290 ventures discussed below is expected to result in certain changes to the transactions proposed in the Agreement, although the extent of such changes has not been determined. Consequently, there are no assurances that the substance of the transactions contemplated in the Agreement will be finalized. In any event, there would need to be a significant improvement in current market and property operating conditions resulting in a significant increase in the value of the 237 Park Avenue and 1290 Avenue of the Americas properties before JMB/NYC would receive any significant share of future net proceeds from operations, sale or refinancing. The contemplated restructuring of the Joint Ventures' agreements would include the elimination of any funding obligation by JMB/NYC for any purpose. Consequently, in such event, JMB/NYC would recognize, for financial reporting purposes, a gain to the extent of the then current deficit investment balance (which amount was $257,188,201 as of December 31, 1995). In the event that one or more of the transactions proposed in the Agreement are not consummated, JMB/NYC and the Partnership may, among other things, recognize substantial gain for Federal income tax purposes with no corresponding distributable proceeds. In September 1995, the 2 Broadway Joint Ventures concluded the sale of 2 Broadway with a third party for a net purchase price, after commissions and certain other payments but before prorations, of approximately $18,300,000. As a result of this sale, the Partnership recognized, for financial reporting purposes, its share of the loss on the sale of investment property of $14,789,529 (which includes the Partnership's share ($10,113,054) of the write-off of JMB/NYC's remaining investment in the 2 Broadway Joint Ventures), offset by a gain of $15,632,407 which represents the Partnership's share of JMB/NYC's related gain on the forgiveness of indebtedness (as more fully discussed in Note 3(c). In October 1995, certain affiliates of O&Y, including one of the partners in the Joint Ventures, filed for protection from creditors under Chapter 11 of the United States Bankruptcy Code. These affiliates of O&Y are preparing a plan to restructure their ownership interests in the office buildings, including the 237 Park Avenue and 1290 Avenue of the Americas office buildings, which could take the form of one or more real estate investment trusts. Any such restructuring would be subject to the approval of their various creditors and other affiliates of O&Y as well as the bankruptcy court, and would likely result in such creditors collectively obtaining control of such ownership interests. In connection with such restructuring, it is expected that 237 Park Avenue Associates and 1290 Associates will seek reorganization under Chapter 11 of the United States Bankruptcy Code pursuant to a plan agreed upon by their creditors and their partners, including JMB/NYC. Although JMB/NYC has had discussions with the Olympia & York affiliates and certain creditors concerning restructuring proposals and a reorganization of 237 Park Avenue Associates and 1290 Associates, a proposal for the restructuring of the Olympia & York affiliates' ownership interests and a plan for the reorganization of the two Joint Ventures have not been agreed upon. Accordingly, the terms of such restructuring and reorganization and their effect, if consummated, on the Joint Ventures and the Olympia & York affiliates' and JMB/NYC's respective interests therein are subject to change. The Partnership believes that the substance of these proposed transactions will be effected, although changes in the form and structure of the proposed transactions are expected to be required. However, it is possible that one or more of the proposed transactions contemplated by the Agreement may not be effected as a result of such restructuring, which could result in, among other things, JMB/NYC and the Partnership recognizing substantial gain for Federal income tax purposes with no corresponding distributable proceeds. JMB/NYC has had a dispute with the Olympia & York affiliates over the calculation of the effective interest rate with reference to the first mortgage loan, which covered all three properties, for the purpose of determining JMB/NYC's deficit funding obligation, as described more fully in Note 3(c). During the quarter ended March 31, 1993, an agreement was reached between JMB/NYC and the Olympia & York affiliates (the "1993 Agreement") which rescinded the default notices previously received by JMB/NYC and eliminated the operating deficit funding obligation of JMB/NYC for the period January 1, 1992 through June 30, 1993. Pursuant to the 1993 Agreement, during this period, JMB/NYC recorded interest expense at 1-3/4% over the short-term U.S. Treasury obligation rate (subject to a minimum rate of 7% per annum), which is the interest rate on the underlying first mortgage loan. Under the terms of the 1993 Agreement, during this period, the amount of capital contributions that the Olympia & York affiliates and JMB/NYC would have been required to make to the Three Joint Ventures, if the first mortgage loan bore interest at a rate of 12-3/4% per annum (the Olympia & York affiliates' interpretation), became a priority distribution level to the Olympia & York affiliates from the Three Joint Ventures' annual cash flow or net sale or refinancing proceeds. The 1993 Agreement also entitled the Olympia & York affiliates to a 7% per annum return on such unpaid priority distribution level. The 1993 Agreement also provided that, except as specifically agreed otherwise, the parties each reserved all rights and claims with respect to each of the Three Joint Ventures and each of the partners thereof, including, without limitation, the interpretation of or rights under each of the joint venture partnership agreements for the Three Joint Ventures. The term of the 1993 Agreement expired on June 30, 1993. Therefore, effective July 1, 1993, JMB/NYC is recording interest expense at 1-3/4% over the short-term U.S. Treasury obligation rate plus any excess operating cash flow after capital costs of each of the Three Joint Ventures, such sum not to be less than 7% nor exceed a 12-3/4% per annum interest rate. The Olympia & York affiliates continued to dispute this calculation for the period commencing July 1, 1993, and contend that a 12-3/4% per annum fixed rate applies. Certain provisions of the Agreement with the Olympia & York affiliates, when finalized, would resolve the funding obligation dispute. The 237 Park Avenue and the 1290 Avenue of the Americas office buildings currently serve as collateral for the first mortgage loan. A restructuring of the loan now appears likely to depend upon the restructuring of the ownership interests of various affiliates of O&Y in a number of office buildings and the reorganization of the 237 Park Avenue and 1290 ventures as discussed above. Prior to 1996, the lender asserted various defaults under the loan. Commencing in January 1996, the Joint Ventures ceased making monthly debt service payments on the first mortgage loan. In previous negotiations, the Olympia & York affiliates reached an agreement with the first mortgage lender whereby effective January 1, 1993, the Olympia & York affiliates are limited to taking distributions of $250,000 on a monthly basis from the Three Joint Ventures reserving the remaining excess cash flow in a separate interest-bearing account to be used exclusively to meet the obligations of the Three Joint Ventures as approved by the lender. Interest on the first mortgage loan is currently calculated based upon a variable rate related to the short-term U.S. Treasury obligation rate, subject to a minimum rate on the loan of 7% per annum. In the absence of the contemplated restructuring, an increase in the short-term U.S. Treasury obligation rate could result in increased interest payable on the first mortgage loan by the Three Joint Ventures. Should a restructuring of the Joint Ventures providing for the elimination of JMB/NYC's funding obligations in accordance with the Agreement not be finalized, JMB/NYC may decide not to commit any additional amounts to the Three Joint Ventures. In addition, under these circumstances, it is possible that JMB/NYC may determine to litigate these issues with the Olympia & York affiliates. A decision not to commit any additional funds or an adverse litigation result could, under certain circumstances, result in the loss of the interest in the related Joint Ventures. The loss of an interest in a particular Joint Venture could, under certain circumstances, permit an acceleration of the maturity of the related purchase note (each purchase note is secured by JMB/NYC's interest in the related Joint Venture). Under certain circumstances, the failure to repay a purchase note could constitute a default under, and permit an immediate acceleration of, the maturity of the purchase notes for the other Joint Ventures. In such event, JMB/NYC may decide not to repay, or may not have sufficient funds to repay, any of the purchase notes and accrued interest thereon. This could result in JMB/NYC no longer having an interest in any of the related Joint Ventures, which would result in substantial net gain for financial reporting and Federal income tax purposes to JMB/NYC (and through JMB/NYC and the Partnership, to the Limited Partners) with no distributable proceeds. In such event, JMB/NYC would then proceed to terminate its affairs. Long Beach Plaza The Partnership granted several tenants temporary rent relief commencing in 1992. The tenants indicated that, due to the poor sales levels of their stores at the mall, such relief was necessary if they were to continue to operate. The Partnership continued to re-evaluate each tenant's sales level and financial situation and grant, in certain instances, additional relief. Due to declining retail sales at the center along with one of the center's anchor tenants vacating its space in 1991, the Partnership has not remitted all of the scheduled debt service payments since June 1993. The Partnership had initiated discussions with the first mortgage lender regarding a permanent modification of its mortgage loan secured by the property. In December 1994, the lender agreed to extend the maturity of the loan until August 1995. The Partnership has been unable to secure a permanent modification of the first and second notes from the lender. The Partnership has decided not to commit any significant additional amounts to the property. In March 1996, a receiver was appointed for the benefit of the lender. As a result, the Partnership was required to submit to the lender approximately $1,000,000 of prior years' cash generated from the property. Title to the property is expected to be transferred in late 1996 or 1997. Reference is made to Item 3 of this report for a discussion of the receivership proceeding. This will result in the Partnership no longer having an ownership interest in the property and will result in a net gain for financial reporting and Federal income tax purposes with no corresponding distributable proceeds in 1996. (Reference is made to Note 2(b)). Plaza Tower Office Building The mortgage loan secured by the Plaza Tower office building matured November 1, 1994. Subsequently, the Partnership reached an agreement for a short-term extension until January 1, 1995 upon paying a $15,000 extension fee to the existing lender. During 1995, the Partnership reached two agreements with the existing lender for extensions through April 1995 provided the Partnership pay down the principal balance and find an alternative source of financing. The Partnership made principal payments in the amounts of $1,500,000 and $1,100,000 to the existing lender during February and April 1995, respectively, and reached an agreement with a new third party lender to refinance the mortgage note to October 2000. Reference is made to Note 4(b)(4) for the terms of the refinancing. General The affiliates of the Corporate General Partner have deferred certain pre-1993 property management and leasing fees payable to them under the terms of the management agreements in an aggregate amount of approximately $2,877,000 (approximately $8 per Interest) through December 31, 1995. The Partnership paid $10,000,000 of previously deferred fees during February 1995. The current deferred amounts do not bear interest and are payable in future periods. Reference is made to Note 9. A number of the Partnership's investments have been made through joint ventures. There are certain risks associated with these investments, including the possibility that the Partnership's joint venture partners in an investment might become unable or unwilling to fulfill their financial or other obligations or, that such joint venture partners may have economic or business interests or goals that are inconsistent with those of the Partnership. While the real estate markets are recuperating, highly competitive market conditions continue to exist in most locations. As a result, the Partnership continues to conserve its working capital. All expenditures are carefully analyzed and certain capital projects are deferred when appropriate. The Partnership has also sought or is seeking additional loan modifications where appropriate. By conserving working capital, the Partnership will be in a better position to meet the future needs of its properties since the availability of satisfactory outside sources of capital may be limited given the portfolio's current debt levels. After reviewing the remaining properties and their competitive marketplace, the General Partners of the Partnership expect to be able to conduct an orderly liquidation of most of the remaining assets as quickly as practicable. Therefore, it is currently expected that the Partnership will sell or dispose of its remaining investment properties, with the possible exception of the Partnership's interest in the 237 Park Avenue and 1290 Avenue of the Americas properties, no later than 1999 (sooner if the properties are sold or disposed of in the nearer term), barring unforeseen economic developments. As reported previously, the Partnership has held certain of its investment properties longer than originally anticipated in an effort to maximize the return of their investment to the Limited Partners. However, the Partnership's goal of capital appreciation will not be achieved. Moreover, although the Partnership expects to distribute from sale proceeds some portion of the Limited Partners' original capital, without a dramatic improvement in market conditions, the Limited Partners will receive substantially less than half of their original investment. RESULTS OF OPERATIONS The decreases in cash and cash equivalents, short-term investments, amounts due to affiliates and partners' capital and the corresponding increase in buildings and improvements at December 31, 1995 as compared to December 31, 1994 are due primarily to: (a) payment for tenant improvement costs of approximately $2,493,000 primarily relating to the releasing of a portion of a former major tenant's space at Long Beach Plaza and the former IBM space at Copley Place multi-use complex, (b) principal payments of $2,600,000 relating to the refinancing of the mortgage loan secured by the Plaza Tower office building, (c) payment of $10,000,000 for previously deferred property management and leasing fees and (d) distributions to partners of previous sales proceeds of $11,094,473. Reference is made to Notes 4(b)(4), 9 and Item 7. The decrease in rents and other receivables and unearned rents at December 31, 1995 as compared to December 31, 1994 is primarily due to the timing of rental collections, primarily at the Copley Place multi-use complex. The increase in escrow deposits and the decrease in accrued real estate taxes at December 31, 1995 as compared to December 31, 1994 and the decreases in property operating expenses for the year ended December 31, 1995 as compared to the same periods in 1994 and 1993 are due primarily to the decrease in assessed property value for the Copley Place multi-use complex, which lowered the property tax liability for this investment property in 1995. The decrease in property operating expenses is also attributable to the sale of Eastridge Apartments in June 1994 (see Note 7(d)). The increase in venture partners' deficits in ventures at December 31, 1995 as compared to December 31, 1994 is due primarily to the allocation to the venture partner of their allocable share of operating losses being incurred at the Copley Place multi-use complex. The decrease in current portion of long-term debt and the corresponding increase in long-term debt, less current portion at December 31, 1995 as compared to December 31, 1994 is primarily due to the reclassification of the mortgage loan secured by the Plaza Tower office building as a result of its refinancing in April 1995. The increase in long-term debt, less current portion, at December 31, 1995 as compared to December 31, 1994 is also due to the accrual of long-term deferred interest of approximately $8,541,000 on the Copley Place purchase price note. The increase in accounts payable at December 31, 1995 as compared to December 31, 1994 is due primarily to the timing of payments at the Copley Place multi-use complex. The increase in accrued interest at December 31, 1995 as compared to December 31, 1994 is primarily due to the suspension of debt service payments in June 1993 on the long-term mortgage loan secured by Long Beach Plaza. The increase in restricted funds and the corresponding increase in tenant security deposits at December 31, 1995 as compared to December 31, 1994 is due primarily to deposits received from a tenant at Copley Place to be used by the tenant for tenant improvements upon lease renewal. The tenant's current lease expires July 1996. The increase in rental income for the year ended December 31, 1995 as compared to the year ended December 31, 1994 is primarily attributable to the Registry of Motor Vehicles taking occupancy of approximately 129,000 square feet in August of 1995 at Copley Place multi-use complex, partially offset by the loss of IBM and John Hancock as tenants of the Copley Place multi-use complex during April and October 1994, respectively. The decreases in rental income, mortgage and other interest, depreciation, property operating expenses, professional service expenses and amortization for the year ended December 31, 1994 as compared to the year ended December 31, 1993 are due primarily to the lenders taking title to the Gables Corporate Plaza and University Park office buildings and to the sale of the Eastridge Apartments in 1994. The decrease in rental income is also attributable to the expiration of the IBM lease in 1994 at Copley Place multi-use complex, as discussed above. The decrease in interest income for the year ended December 31, 1995 as compared to the year ended December 31, 1994 is due primarily to a lower average balance in short-term investments as a result of the distributions to partners of previous sales proceeds of $11,094,473 and the payment of $10,000,000 for previously deferred property management and leasing fees, partially offset by higher average interest rates in 1995. The increase in interest income for the year ended December 31, 1994 as compared to the year ended December 31, 1993 is due primarily to higher yields and higher average balances held in interest bearing U.S. Government obligations in the subsequent period as a result of the temporary investment of proceeds retained from the sale of Old Orchard Shopping Center in September 1993. The increase is also attributable to interest earned on the capital improvement escrow at Copley Place as discussed above. The increase in mortgage and other interest for the year ended December 31, 1995 as compared to the year ended December 31, 1994 is due primarily to the compounding of interest on the Copley Place purchase price note (see Note 3(b)). The decrease in amortization of deferred expenses for the year ended December 31, 1995 as compared to the year ended December 31, 1994 is due primarily to the sale of Eastridge Apartments in June 1994 (see Note 7(d)). The increase in general and administrative expenses for the year ended December 31, 1995 as compared to the year ended December 31, 1994 and 1993 is attributable primarily to an increase in reimbursable costs to affiliates of the General Partners in 1995 and the recognition of certain additional prior year reimbursable costs to such affiliates. Reference is made to Note 5. The decrease in the Partnership's share of loss from operations of unconsolidated ventures for the years ended December 31, 1994 and 1995 as compared to December 31, 1993 is due primarily to the sale of the Partnership's interest in the Old Orchard shopping center in September 1993 (as more fully discussed in Note 3(d)). The decrease is also attributable to JMB/NYC recording a provision for value impairment at 2 Broadway at December 31, 1993, which reduced the subsequent depreciation expense related to that investment property, partially offset by a decrease in rental income in 1994 at the 2 Broadway Building due to Bear Stearns vacating its space (approximately 11% of the building's leasable space) in April 1994 upon expiration of its lease. The net gain of $18,364,792 on sale or disposition of investment property for the year ended December 31, 1994 consists of a gain of $5,676,413 on the transfer of the University Park office building, a gain (net of venture partner's share) of $7,677,508 on the transfer of Gables Corporate Plaza office building, and a gain of $5,010,871 related to the sale of the Eastridge Apartments (as more fully discussed in Notes 7(d) and 7(f)). The net gain of $11,083,791 for the year ended December 31, 1993 consists of a gain on the sale of the Rio Cancion Apartments of $2,524,958 (see Note 7(b)), a gain on the sale of the Greenwood Creek II Apartments of $1,787,073 (see Note 7(c)), a gain on the transfer of title to the 1001 Fourth Avenue office building of $6,771,760 (see Note 7(e)). The loss on sale of interest in unconsolidated ventures and the extraordinary item for the twelve months ended December 31, 1995 and the related increase in the Partnership's deficit investment in unconsolidated venture at December 31, 1995 as compared to December 31, 1994 is primarily due to the 1995 sale of 2 Broadway (see Note 3(c)) and the related gain on the extinguishment of indebtedness. The gain on sale of interest in unconsolidated venture of $1,702,802 and $7,898,727 at December 31, 1994 and 1993, respectively, is due to the Partnership selling its interest in the Old Orchard Shopping Center and the receipt of certain contingent amounts resulting from the sale. Reference is made to Note 3(d) for a discussion of these transactions. The extraordinary item of $996,126 for 1994 is due to the discounted payoff of the mortgage note secured by the Eastridge Apartments. The extraordinary item for 1993 is the Partnership's share of prepayment penalty of $141,776 relating to the refinancing of the original mortgage note at the Carrollwood Apartments (see Note 4(b)(2)). INFLATION Due to the decrease in the level of inflation in recent years, inflation generally has not had a material effect on rental income or property operating expenses. Inflation is not expected to significantly impact future operations due to the expected liquidation of most of the Partnership's investment properties by 1999. However, to the extent that inflation in future periods would have an adverse impact on property operating expenses, the effect would generally be offset by amounts recovered from tenants as many of the long-term leases at the Partnership's commercial properties have escalation clauses covering increases in the cost of operating and main- taining the properties as well as real estate taxes. Therefore, the effect on operating earnings generally will depend upon whether properties remain substantially occupied. In addition, substantially all of the leases at the Partnership's shopping center investments contain provisions which entitle the property owner to participate in gross receipts of tenants above fixed minimum amounts. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES INDEX Independent Auditors' Report Consolidated Balance Sheets, December 31, 1995 and 1994 Consolidated Statements of Operations, years ended December 31, 1995, 1994 and 1993 Consolidated Statements of Partners' Capital Accounts (Deficits), years ended December 31, 1995, 1994 and 1993 Consolidated Statements of Cash Flows, years ended December 31, 1995, 1994 and 1993 Notes to Consolidated Financial Statements SCHEDULE -------- Consolidated Real Estate and Accumulated DepreciationIII SCHEDULES NOT FILED: All schedules other than the one indicated in the index have been omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes. JMB/NYC OFFICE BUILDING ASSOCIATES AND UNCONSOLIDATED VENTURES INDEX Independent Auditors' Report Combined Balance Sheets, December 31, 1995 and 1994 Combined Statements of Operations, years ended December 31, 1995, 1994 and 1993 Combined Statements of Partners' Capital Accounts (Deficit), years ended December 31, 1995, 1994 and 1993 Combined Statements of Cash Flows, years ended December 31, 1995, 1994 and 1993 Notes to Combined Financial Statements SCHEDULE -------- Combined Real Estate and Accumulated Depreciation III SCHEDULES NOT FILED: All schedules other than the one indicated in the index have been omitted as the required information is inapplicable or the information is presented in the combined financial statements or related notes. INDEPENDENT AUDITORS' REPORT The Partners CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII: We have audited the consolidated financial statements of Carlyle Real Estate Limited Partnership - XIII, a limited partnership, (the Partnership), and consolidated ventures as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the General Partners of the Partnership. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partners of the Partnership, 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 financial position of the Partnership and consolidated ventures at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. As discussed in Note 3(c) to the consolidated financial statements, beginning July 1, 1993, the Partnership and its affiliated partners in JMB/NYC Office Building Associates, L.P. (JMB/NYC) were in dispute with the unaffiliated venture partners in the real estate ventures over the calculation of the effective interest rate with reference to the first mortgage loan, which covers the real estate owned through JMB/NYC's joint ventures. The Partnership's share of disputed interest aggregated $5,635,000, $6,109,000 and $2,386,000 for the years ended December 31, 1995, 1994 and 1993, respectively, and has not been included in Partnership's share of loss from operations of unconsolidated ventures in the accompanying consolidated financial statements. In October 1994, JMB/NYC entered into an agreement (the Agreement) with the unaffiliated venture partners in the real estate ventures which, when effective, would resolve this dispute by providing for interest at the same rate as the first mortgage loan and would eliminate any funding obligations by JMB/NYC. However, as discussed in Note 3(c), there are no assurances that the Agreement will be finalized and become effective. The ultimate outcome of this uncertainty cannot presently be determined. The consolidated financial statements do not include any adjustments that might result from this uncertainty. KPMG PEAT MARWICK LLP Chicago, Illinois March 25, 1996 CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND 1994 ASSETS ------
1995 1994 ------------ ----------- Current assets: Cash and cash equivalents (note 1) . . . . . . . . . . . . $ 5,908,236 9,551,909 Short-term investments (note 1). . . . . . . . . . . . . . 2,568,329 18,959,986 Restricted funds . . . . . . . . . . . . . . . . . . . . . 1,312,240 484,234 Rents and other receivables. . . . . . . . . . . . . . . . 2,963,711 3,115,173 Prepaid expenses . . . . . . . . . . . . . . . . . . . . . 289,250 318,336 Escrow deposits. . . . . . . . . . . . . . . . . . . . . . 6,191,089 6,064,754 ------------ ------------ Total current assets . . . . . . . . . . . . . . . 19,232,855 38,494,392 Investment properties, at cost (notes 2, 3 and 4) - Schedule III: Land and leasehold interests . . . . . . . . . . . . . . 20,935,810 20,935,810 Buildings and improvements . . . . . . . . . . . . . . . 412,286,995 409,040,913 ------------ ------------ 433,222,805 429,976,723 Less accumulated depreciation. . . . . . . . . . . . . . 163,309,553 149,525,406 ------------ ------------ Total investment properties, net of accumulated depreciation. . . . . . . . . 269,913,252 280,451,317 ------------ ------------ Investment in unconsolidated ventures, at equity (notes 1 and 3) 1,459,879 2,451,859 Deferred expenses (note 1) . . . . . . . . . . . . . . . . . 5,261,096 5,151,072 Accrued rents receivable (note 1). . . . . . . . . . . . . . 489,911 514,291 Venture partners' deficits in ventures (note 1). . . . . . . 11,103,113 6,514,971 ------------ ------------ $307,460,106 333,577,902 ============ ============ CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED BALANCE SHEETS - CONTINUED LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS) ----------------------------------------------------- 1995 1994 ------------ ----------- Current liabilities: Current portion of long-term debt (note 4) . . . . . . . . $ 39,666,113 52,006,208 Accounts payable . . . . . . . . . . . . . . . . . . . . . 2,858,162 2,018,276 Amounts due to affiliates (note 9) . . . . . . . . . . . . 4,249,390 14,210,085 Unearned rents . . . . . . . . . . . . . . . . . . . . . . 600,610 618,410 Accrued interest . . . . . . . . . . . . . . . . . . . . . 13,252,892 9,112,566 Accrued real estate taxes. . . . . . . . . . . . . . . . . 1,330,231 1,755,290 ------------ ------------ Total current liabilities. . . . . . . . . . . . . 61,957,398 79,720,835 Tenant security deposits . . . . . . . . . . . . . . . . . . 1,704,872 765,933 Investment in unconsolidated venture, at equity (notes 1, 3 and 10)84,764,207 78,812,861 Long-term debt, less current portion (note 4). . . . . . . . 382,303,505 361,563,239 ------------ ------------ Commitments and contingencies (notes 2, 3, 4, 7 and 8) Total liabilities. . . . . . . . . . . . . . . . . 530,729,982 520,862,868 Venture partners' subordinated equity in venture (note 1). . 329,169 329,785 Partners' capital accounts (deficits) (notes 1 and 5): General partners: Capital contributions. . . . . . . . . . . . . . . . . 1,000 1,000 Cumulative net losses. . . . . . . . . . . . . . . . . (21,515,491) (20,494,612) Cumulative cash distributions. . . . . . . . . . . . . (1,149,967) (1,039,022) ------------ ------------ (22,664,458) (21,532,634) ------------ ------------ Limited partners: Capital contributions, net of offering costs . . . . . 326,224,167 326,224,167 Cumulative net losses. . . . . . . . . . . . . . . . . (486,200,337) (462,331,395) Cumulative cash distributions. . . . . . . . . . . . . (40,958,417) (29,974,889) ------------ ------------ (200,934,587) (166,082,117) ------------ ------------ Total partners' capital (deficits) . . . . . . . . (223,599,045) (187,614,751) ------------ ------------ $307,460,106 333,577,902 ============ ============ See accompanying notes to consolidated financial statements.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ------------ ------------ ------------ Income: Rental income. . . . . . . . . . . . . . . $ 65,729,288 64,648,336 84,609,796 Interest income. . . . . . . . . . . . . . 1,034,061 1,320,941 583,997 ------------ ------------ ------------ 66,763,349 65,969,277 85,193,793 ------------ ------------ ------------ Expenses: Mortgage and other interest. . . . . . . . 38,615,594 37,651,732 50,753,647 Depreciation . . . . . . . . . . . . . . . 13,784,147 13,753,198 18,343,123 Property operating expenses. . . . . . . . 35,234,465 37,293,007 43,065,564 Professional services. . . . . . . . . . . 647,443 547,566 708,403 Amortization of deferred expenses. . . . . 1,421,951 1,525,373 2,410,540 General and administrative . . . . . . . . 781,049 609,249 532,727 ------------ ------------ ------------ 90,484,649 91,380,125 115,814,004 ------------ ------------ ------------ Operating loss. . . . . . . . . . . . 23,721,300 25,410,848 30,620,211 Partnership's share of loss from operations of unconsolidated ventures (notes 1 and 10) 6,600,158 6,271,489 22,416,922 Venture partners' share of loss from consolidated ventures' operations. . . . . (4,588,759) (5,659,744) (2,008,939) ------------ ------------ ------------ Net operating loss . . . . . . . . . 25,732,699 26,022,593 51,028,194 Gain on sale or disposition of investment properties, net of venture partners' share of $2,887,659 in 1994 (notes 4 and 7). . . . . . . . . . . . . . -- (18,364,792) (11,083,791) Partnership's share of (gain) loss on sale of property or interest in property of unconsolidated ventures (note 3(c)(d)). . . . . . . . . . 14,789,529 (1,702,082) (7,898,727) ------------ ------------ ------------ Loss before extraordinary items. . . 40,522,228 5,955,719 32,045,676 CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED 1995 1994 1993 ------------ ------------ ------------ Extraordinary items (notes 3(c) and 4(b)(2)) . . . . . . . . . . . . . . . (15,632,407) (996,126) 141,776 ------------ ------------ ------------ Net loss. . . . . . . . . . . . . . . $ 24,889,821 4,959,593 32,187,452 ============ ============ ============ Net loss per limited partnership interest (note 1): Net operating loss . . . . . . . . . . . $ 67.47 68.22 133.78 (Gain) loss on sale or disposition of investment properties and extinguishment of debt . . . . . . . . -- (49.66) (29.97) Share of (gain) loss on sale of property or interest in property of unconsolidated ventures . . . . . . 39.99 (4.60) (21.35) Extraordinary items. . . . . . . . . . . (42.27) (2.69) .38 ------------ ------------ ------------ Net loss . . . . . . . . . . . . . . . $ 65.19 11.27 82.84 ============ ============ ============ See accompanying notes to consolidated financial statements.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS) YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
GENERAL PARTNERS LIMITED PARTNERS ------------------------------------------------ ----------------------------------------------------- CONTRI- BUTIONS NET NET OF NET CONTRI- EARNINGS CASH OFFERING EARNINGS CASH BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL ------------------------------------------------------------------------------------------ Balance (deficit) Decem- ber 31, 1992. . . .$1,000(18,232,317)(1,039,022)(19,270,339)326,224,167(427,446,645)(29,974,889)(131,197,367) Net loss . . -- (1,432,021) -- (1,432,021) -- (30,755,431) -- (30,755,431) Cash distri- butions ($0 per limited partnership interest) . -- -- -- -- -- -- -- -- ----------------- --------------------------------------------- ----------------------- Balance (deficit) Decem- ber 31, 1993. . . .1,000(19,664,338)(1,039,022)(20,702,360)326,224,167(458,202,076)(29,974,889)(161,952,798) Net earn- ings (loss) -- (830,274) -- (830,274) -- (4,129,319) -- (4,129,319) Cash distri- butions ($0 per limited partnership interest) . -- -- -- -- -- -- -- -- ----------------- --------------------- ----------------------- ----------- ---------- CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS) - CONTINUED GENERAL PARTNERS LIMITED PARTNERS ------------------------------------------------ ----------------------------------------------------- CONTRI- BUTIONS NET NET OF NET CONTRI- EARNINGS CASH OFFERING EARNINGS CASH BUTIONS (LOSS) DISTRIBUTIONS TOTAL COSTS (LOSS) DISTRIBUTIONS TOTAL ------------------------------------------------------------------------------------------ Balance (deficit) Decem- ber 31, 1994. . . .$1,000(20,494,612)(1,039,022)(21,532,634)326,224,167(462,331,395)(29,974,889)(166,082,117) Net earn- ings (loss) -- (1,020,879) -- (1,020,879) -- (23,868,942) -- (23,868,942) Cash distri- butions ($30 per limited partnership interest) . -- -- (110,945) (110,945) -- -- (10,983,528)(10,983,528) ----------------- --------------------- ----------------------- ---------------------- Balance (deficit) Decem- ber 31, 1995. . . .$1,000(21,515,491)(1,149,967)(22,664,458)326,224,167(486,200,337)(40,958,417)(200,934,587) ================= ===================== ======================= ======================= See accompanying notes to consolidated financial statements.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ------------ ------------ ------------ Cash flows from operating activities: Net loss . . . . . . . . . . . . . . . . . $(24,889,821) (4,959,593) (32,187,452) Items not requiring (providing) cash or cash equivalents: Depreciation . . . . . . . . . . . . . . 13,784,147 13,753,198 18,343,123 Amortization of deferred expenses. . . . 1,421,951 1,525,373 2,410,540 Amortization of discount on long-term debt 224,415 116,398 103,298 Long-term debt - deferred accrued interest 11,980,846 10,854,534 13,461,723 Partnership's share of loss from operations of unconsolidated ventures . . . . . . 6,600,158 6,271,489 22,416,922 Venture partners' share of consolidated ventures' operations . . . . . . . . . (4,588,759) (5,659,744) (2,008,939) Gain on sale or disposition of investment properties . . . . . . . . . . . . . . -- (18,364,792) (11,083,791) Extraordinary items. . . . . . . . . . . (15,632,407) (996,126) 141,776 Partnership's share of (gain) loss on sale of property or interest in property of unconsolidated ventures . . . . . . 14,789,529 (1,702,082) (7,898,727) Changes in: Restricted funds . . . . . . . . . . . . (828,006) 54,566 2,319,106 Rents and other receivables. . . . . . . 151,462 596,186 (430,632) Prepaid expenses . . . . . . . . . . . . 29,086 78,773 100,997 Escrow deposits. . . . . . . . . . . . . (126,335) (2,145,872) (634,588) Accrued rents receivable . . . . . . . . 24,380 (27,002) 2,755,732 Accounts payable . . . . . . . . . . . . 839,886 (378,883) 9,591 Unearned rents . . . . . . . . . . . . . (17,800) (151,827) (357,915) Accrued interest . . . . . . . . . . . . 4,140,326 521,403 1,957,457 Accrued real estate taxes. . . . . . . . (425,059) (309,189) 691,017 Amounts due to affiliates. . . . . . . . (9,960,695) (684,374) 26,167 Tenant security deposits . . . . . . . . 938,939 (114,123) (119,739) ------------ ------------ ------------ Net cash provided by (used in) operating activities . . . . . . (1,543,757) (1,721,687) 10,015,666 ------------ ------------ ------------ CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED 1995 1994 1993 ------------ ------------ ------------ Cash flows from investing activities: Cash proceeds from sale of investment properties, net of selling expenses (note 7) . . . . . . . . . . . . . . . . -- 11,781,988 1,220,737 Additions to investment properties . . . . (3,246,082) (1,796,484) (3,188,425) Cash expended in disposition of investment properties. . . . . . . . . . -- (1,014) (55,111) Net sales and maturities (purchases) of short-term investments. . . . . . . . 16,391,657 4,135,915 (18,470,959) Partnership's distributions from unconsolidated ventures. . . . . . . . . 1,186,046 1,702,082 16,978,465 Partnership's contributions to unconsolidated ventures. . . . . . . . . -- (10,000) (983,668) Payment of deferred expenses . . . . . . . (1,531,975) (693,408) (1,030,569) ------------ ------------ ------------ Net cash provided by (used in) investing activities . . . . . . 12,799,646 15,119,079 (5,529,530) ------------ ------------ ------------ Cash flows from financing activities: Proceeds from refinancing of long-term debt 14,900,000 -- 4,253 Principal payments on long-term debt . . . (18,705,089) (10,022,203) (1,789,503) Venture partners' contributions to ventures -- 814,568 33,746 Distributions to limited partners. . . . . (10,983,528) -- -- Distributions to general partners. . . . . (110,945) -- -- ------------ ------------ ------------ Net cash used in financing activities . . . . . . (14,899,562) (9,207,635) (1,751,504) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents . . . . . . (3,643,673) 4,189,757 2,734,632 Cash and cash equivalents, beginning of year. . . . . . . . 9,551,9095,362,152 2,627,520 ------------ ------------ ------------ Cash and cash equivalents, end of year. . . . . . . . . . . $ 5,908,236 9,551,909 5,362,152 ============ ============ ============ Supplemental disclosure of cash flow information: Cash paid for mortgage and other interest. $ 22,733,319 26,150,776 35,628,310 ============ ============ ============ CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED 1995 1994 1993 ------------ ------------ ------------ Non-cash investing and financing activities: Total sales price of investment properties, net of selling expenses. . . . . . . . . $ -- 11,781,988 18,479,297 Mortgage loan payable. . . . . . . . . . . -- -- (17,258,560) ------------ ------------ ------------ Cash sales proceeds from sale of investment properties, net of selling expenses . . . . . . . . . . . $ -- 11,781,988 1,220,737 ============ ============ ============ Proceeds from refinancing of long-term debt . . . . . . . . . . . . . . . . . . $ -- -- 7,455,000 Payoff of long-term debt . . . . . . . . . -- -- (7,160,425) Prepayment penalty . . . . . . . . . . . . -- -- (141,776) Refinancing costs. . . . . . . . . . . . . -- -- (148,546) ------------ ------------ ------------ Proceeds from refinancing of long-term debt . . . . . . . . . $ -- -- 4,253 ============ ============ ============ Contributions payable to unconsolidated venture (note 3(c)). . . . . . . . . . . . $ -- -- 1,200,000 ============ ============ ============ Principal balance due on mortgages payable. $ -- 9,696,126 -- Payment on long-term debt . . . . . . . . . -- (8,700,000) -- ------------ ------------ ------------ Extraordinary items - non-cash gain recognized on forgiveness of indebtedness. . . . . . . . $ -- 996,126 -- ============ ============ ============ See accompanying notes to consolidated financial statements.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 (1) OPERATIONS AND BASIS OF ACCOUNTING The Partnership holds (either directly or through joint ventures) an equity investment portfolio of United States real estate. Business activities consist of rentals to a wide variety of commercial and retail companies, and the ultimate sale or disposition of such real estate. The Partnership currently expects to conduct an orderly liquidation of its remaining investment portfolio and wind up its affairs not later than December 31, 1999. The accompanying consolidated financial statements include the accounts of the Partnership and its consolidated ventures (note 3) - Eastridge Associates Limited Partnership ("Eastridge"), Copley Place Associates ("Copley Place"), Gables Corporate Plaza Associates ("Gables"), Carrollwood Station Associates, Ltd. ("Carrollwood"), Jacksonville Cove I Associates, Ltd. ("Glades") and Sherry Lane Associates ("Sherry Lane"). The effect of all transactions between the Partnership and the ventures has been eliminated. The equity method of accounting has been applied in the accompanying consolidated financial statements with respect to the Partnership's interests in Orchard Associates (note 3(d)) and the Partnership's indirect interest (through Carlyle-XIII Associates, L.P.) in JMB/NYC Office Building Associates, L.P. (("JMB/NYC") note 3(c)) The Partnership records are maintained on the accrual basis of accounting as adjusted for Federal income tax reporting purposes. The accompanying consolidated financial statements have been prepared from such records after making appropriate adjustments to present the Partnership's accounts in accordance with generally accepted accounting principles ("GAAP") and to consolidate the accounts of the ventures as described above. Such GAAP and consolidation adjustments are not recorded on the records of the Partnership. The effect of these items for the years ended December 31, 1995 and 1994 is summarized as follows:
1995 1994 ------------------------------------------------------------ TAX BASIS GAAP BASIS (Unaudited) GAAP BASIS TAX BASIS ------------ ----------- ------------ ----------- Total assets . . . . . . . . . $307,460,106 69,275,776 333,577,902 95,005,745 Partners' capital accounts (deficits) (note 5): General partners. . . . . (22,664,458) (30,958,036) (21,532,634) (30,855,292) Limited partners. . . . . (200,934,587) (263,807,168) (166,082,117) (216,768,786) Net earnings (loss) (note 5): General partners. . . . . (1,020,879) 8,200 (830,274) 3,984,272 Limited partners. . . . . (23,868,942) (36,054,854) (4,129,319) 1,368,982 Net earnings (loss) per limited partnership interest . . . . . . . . . . (65.19) (98.47) (11.27) 3.73 ============ ============ ============ ============
The net loss per limited partnership interest is based upon the limited partnership interests outstanding at the end of the period. Deficit capital accounts will result, through the duration of the Partnership, in net gain for financial reporting and Federal income tax purposes. The preparation of financial statements in accordance with GAAP requires the Partnership to make estimates and assumptions that affect the reported or disclosed amount of 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. Statement of Financial Accounting Standards No. 95 requires the Partnership to present a statement which classifies receipts and payments according to whether they stem from operating, investing or financing activities. The required information has been segregated and accumulated according to the classifications specified in the pronouncement. Partnership distributions from unconsolidated ventures are considered cash flow from operating activities only to the extent of the Partnership's cumulative share of net earnings. In addition, the Partnership records amounts held in U.S. Government obligations at cost, which approximates market. For the purposes of these statements, the Partnership's policy is to consider all such amounts held with original maturities of three months or less ($2,194,000 and $9,724,000 at December 31, 1995 and 1994, respectively) as cash equivalents with any remaining amounts (generally with original maturities of one year or less) reflected as short-term investments being held to maturity. Deferred expenses are comprised principally of leasing fees which are amortized using the straight-line method over the terms stipulated in the related agreements, and commitment fees which are amortized over the related commitment periods. Although certain leases of the Partnership provide for tenant occupancy during periods for which no rent is due and/or increases in minimum lease payments over the term of the lease, the Partnership accrues prorated rental income for the full period of occupancy on a straight-line basis. Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments", requires all entities to disclose the SFAS 107 value of all financial assets and liabilities for which it is practicable to estimate. Value is defined in the Statement as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes the carrying amount of its financial instruments classified as current assets and liabilities (excluding current portion of long-term debt) approximates SFAS 107 value due to the relatively short maturity of these instruments. There is no quoted market value available for any of the Partnership's other instruments. The debt secured by the Long Beach Plaza has been classified by the Partnership as a current liability at December 31, 1995 (see note 2(b)) because of the likely unfavorable resolution of the negotiations with the lender and the debt has now matured. The Partnership considers the disclosure of the SFAS 107 value of such debt to be impracticable. The remaining debt, with a carrying balance of $388,235,264, has been calculated to have an SFAS 107 value of $343,164,324 by discounting the scheduled loan payments to maturity. Due to restrictions on transferability and prepayment, and the inability to obtain comparable financing due to previously modified debt terms or other property specific competitive conditions, the Partnership would be unable to refinance these properties to obtain such assumed debt amounts reported (see note 4). The Partnership has no other significant financial instruments. No provision for state or Federal income taxes has been made as the liability for such taxes is that of the partners rather than the Partnership. However, in certain instances, the Partnership has been or may be required under applicable law to remit directly to the tax authorities amounts representing withholding from distributions paid to partners. (2) INVESTMENT PROPERTIES (a) General The Partnership has acquired, either directly or through joint ventures (note 3), nine apartment complexes, three shopping centers, ten office buildings and a multi-use complex. Fourteen properties have been sold or disposed of by the Partnership as of December 31, 1995. All of the remaining properties owned at December 31, 1995 were operating. The cost of the investment properties represents the total cost to the Partnership or its ventures plus miscellaneous acquisition costs. Significant betterments and improvements are capitalized and depreciated over their estimated useful lives. Maintenance and repair expenses are charged to operations as incurred. Depreciation on the operating properties has been provided over the estimated useful lives of 5 to 30 years using the straight-line method. During March 1995, Statement of Financial Accounting Standards No. 121 ("SFAS 121") "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" was issued. SFAS 121, when effective, will require that the Partnership record an impairment loss on its long- lived assets to be held and used whenever their carrying value cannot be fully recovered through estimated undiscounted future cash flows from operations and sale. The amount of the impairment loss to be recognized would be the difference between the long-lived asset's carrying value and the asset's estimated fair value. Any long-lived assets identified as "to be disposed of" would no longer be depreciated. Adjustments for impairment loss would be made in each period as necessary to report these assets at the lower of carrying value and fair value less costs to sell. In certain situations, such estimated fair value could be less than the existing non- recourse debt which is secured by the property. There would be no assurance that any estimated fair value of these assets would ultimately be obtained by the Partnership in any future sale or disposition transaction. Under the current impairment policy, provisions for value impairment are recorded with respect to investment properties whenever the estimated future cash flows from a property's operations and projected sale are less than the property's net carrying value. The amount of any such impairment loss recognized by the Partnership is limited to the excess, if any, of the property's carrying value over the outstanding balance of the property's non-recourse indebtedness. An impairment loss under SFAS 121 would be determined without regard to the nature or the balance of such non-recourse indebtedness. Upon the disposition of a property with the related extinguishment of the long-term debt for which an impairment loss has been recognized under SFAS 121, the Partnership would recognize, at a minimum, a net gain (comprised of gain on extinguishment of debt and gain or loss on sale or disposition of property) for financial reporting purposes to the extent of any excess of the then outstanding balance of the property's non- recourse indebtedness over the then carrying value of the property, including the effect of any reduction for impairment loss under SFAS 121. The Partnership will adopt SFAS 121 as required in the first quarter of 1996. Based upon the Partnership's current assessment of the full impact of adopting SFAS 121, it is likely that additional provisions for value impairment would be required for the properties owned by the Partnership and its consolidated ventures, or by the Partnership's unconsolidated ventures. Such provisions, including the Partnership's share of such unconsolidated venture provisions, are currently estimated to total approximately $13,100,000 in the first period of implementation of SFAS 121. In addition, upon the disposition of an impaired property, the Partnership would generally recognize more net gain for financial reporting purposes under SFAS 121 than it would have under the Partnership's current impairment policy, without regard to the amount, if any, of cash proceeds received by the Partnership in connection with the disposition. Although implementation of this new accounting statement could significantly impact the Partnership's reported earnings, there would be no impact on cash flows. Further, any such impairment loss would not be recognized for Federal income tax purposes. All investment properties are pledged as security for the long-term debt, for which generally there is no recourse to the Partnership. A portion of the long-term debt on the Copley Place multi-use complex and Gables Corporate Plaza (disposed January 1994) represent mortgage loans which are subordinated to the existing senior mortgage loans. (b) Long Beach Plaza The Partnership purchased Long Beach Plaza located in Long Beach, California for $45,839,458 (net of discount on long-term debt of $10,330,542). In January 1981, Australian Ventures, Inc. ("AVI") signed a 99 year ground and improvement lease at the Long Beach Plaza shopping center located in Long Beach, California for approximately 144,000 square feet. AVI sublet the space to Buffum's Department Store, an affiliate of AVI. In 1991, Buffum's filed for protection from creditors under Chapter 11 of the United States Bankruptcy Code and vacated the leased premises. As a result and pursuant to certain provisions of the ground and improvement lease that, among other things, requires continuous operation of a store at the premises during the lease term, the Partnership sought a termination of the lease and to obtain possession of the premises. In March 1993, the Partnership completed a settlement of its litigation with AVI involving the lease. Under the terms of the settlement, AVI paid the Partnership $550,000, the parties terminated the ground and improvement lease and both parties dismissed their respective claims in the lawsuit with prejudice. The Partnership paid the $550,000 received from AVI to the mortgage lender for the property as scheduled debt service. The Partnership has not remitted all of the scheduled debt service payments since June 1993. Accordingly, the combined balances of the mortgage note and related accrued interest of approximately $44,220,000 at December 31, 1995 and approximately $39,835,000 at December 31, 1994 have been classified as current liabilities in the accompanying consolidated financial statements. The Partnership had initiated discussions with the first mortgage lender regarding a modification of its mortgage loan secured by the property, which was originally due in June 1994. The lender agreed to a short-term loan extension until August 31, 1995. The Partnership has been unable to secure a modification or further extension to the loan. The Partnership has decided not to commit any significant additional amounts to the property. In March 1996, a receiver was appointed for the benefit of the lender. As a result, the Partnership was required to submit to the lender approximately $1,000,000 of prior years' cash generated from the property. Title is expected to be transferred in late 1996 or 1997. This will result in the Partnership no longer having an ownership interest in such property and will result in net gain for financial reporting and Federal income tax purposes to the Partnership with no corresponding distributable proceeds in 1996. (3) VENTURE AGREEMENTS (a) General The Partnership at December 31, 1995 is a party to five operating joint venture agreements. Pursuant to such agreements, the Partnership made initial capital contributions of approximately $152,831,130 (before legal and other acquisition costs and its share of operating deficits as discussed below). In general, the joint venture partners, who are either the sellers (or their affiliates) of the property investments being acquired, or parties which have contributed an interest in the property being developed, or were subsequently admitted to the ventures, make no cash contributions to the ventures, but their retention of an interest in the property, through the joint venture, is taken into account in determining the purchase price of the Partnership's interest, which was determined by arm's-length negotiations. Under certain circumstances, either pursuant to the venture agreements or due to the Partnership's obligations as a general partner, the Partnership may be required to make additional cash contributions to the ventures. The Partnership has acquired, through the above ventures, two apartment complexes, four office buildings, and a multi-use complex. In most instances, the joint venture partners (who were primarily responsible for constructing the properties) contributed any excess of cost over the aggregate amount available from the Partnership contributions and financing and, to the extent such funds exceeded the aggregate costs, were to retain such excesses. Certain of the venture properties have been financed under various long-term debt arrangements as described in Note 4 and Note 5 of Notes to the Combined Financial Statements. The Partnership in certain cases has a cumulative preferred interest in net cash receipts (as defined) from the properties. Such preferential interest relates to a negotiated rate of return on contributions made by the Partnership. After the Partnership receives its preferential return, the venture partner is generally entitled to a non-cumulative return on its interest in the venture; net cash receipts are generally shared in a ratio relating to the various ownership interests of the Partnership and its venture partners. During 1995, 1994 and 1993, two, three and two, respectively, of the ventures' properties produced net cash receipts. In addition, the Partnership in certain cases has preferred positions (related to the Partnership's cash investment in the ventures) with respect to distribution of sale or refinancing proceeds from the ventures. In general, operating profits and losses are shared in the same ratio as net cash receipts; however, if there are no net cash receipts, substantially all profits or losses are allocated to the partners in accordance with their respective economic interest. Physical management of the properties generally was performed by affiliates of the venture partners during the development period and rent-up period. The managers were responsible for cash flow deficits (after debt service requirements). Compensation to the managers during such periods for management and leasing was limited to specified payments made by the ventures, plus any excess net cash receipts generated by the properties during the periods. Thereafter, the management agreements generally provide for an extended term during which the management fee is calculated as a percentage of certain types of cash income from the property. The management agreements are in the extended term for all of the ventures. There are certain risks associated with the Partnership's investments made through joint ventures including the possibility that the Partnership's joint venture partners in an investment might become unable or unwilling to fulfill their financial or other obligations, or that such joint venture partners may have economic or business interests or goals that are inconsistent with those of the Partnership. The terms of certain of the venture agreements are summarized as follows: (b) Copley Place The Partnership acquired in 1983, through a joint venture with the developer, an interest in a portion of Copley Place, a multi-use complex in Boston, Massachusetts. Initially, the Partnership purchased an interest in the complex from the developer for consideration which included a purchase price note secured by the Partnership's interest in the joint venture, which is discussed below. The Partnership has also made total cash contributions of $60,000,000 for its interest in Copley Place Associates. In December 1984, an affiliate of the Corporate General Partner of the Partnership acquired ownership of the joint venture partner (see note 9). The joint venture partner was obligated to fund (through capital contributions and loans, as defined) any deficiency in the Partnership's guaranteed return to 1989 and any operating deficits (as defined). Commencing January 1, 1990, the Partnership was entitled to a preferred return of $6,000,000 per year through December 31, 1991 of any available cash flow. The joint venture partner was obligated through December 31, 1991 to loan amounts to pay for any operating deficits (as defined). The joint venture partner has loaned approximately $13,398,000 through December 31, 1995 to fund its required obligation. The loan accrues interest at the contract rate based on the joint venture partner's line of credit. The line of credit bears interest at a floating rate (currently averaging 7.83% per annum at December 31, 1995). The outstanding principal and accrued interest, if any, are to be repaid from future available cash flow, as defined. During 1995 and 1994, the joint venture paid approximately $1,518,000 and $3,597,000, respectively, of accrued interest on these loans. In addition, the Partnership and the joint venture partner were obligated and have contributed equally towards tenant improvement and other capital costs beginning in 1990. Commencing January 1, 1992, the Partnership and the venture partner are required to equally fund all cash deficits of the property. In addition, commencing January 1, 1992, annual cash flow (as defined) after repayment to the venture partner of operating deficit loans, is to be allocated equally between the Partnership and joint venture partner. In March 1994, the venture partner and the Partnership each contributed $424,980 for the payment of previously deferred management fees for 1993. Operating profits and losses of the joint venture are 50% to the Partnership and 50% to the joint venture partner. The joint venture agreement further provides that, in general, upon any sale or refinancing of the complex the first $60,000,000 of net proceeds will be distributed equally between the Partnership and the joint venture partner. The Partnership will then be entitled to receive an amount equal to any cumulative deficiencies of its annual preferred return of cash flow for 1990 and 1991 (balance at December 31, 1995 is $12,000,000). The Partnership will then be entitled to receive the next $190,000,000 plus an amount equal to certain interest which has been paid or is payable to the developer on its $20,000,000 purchase price note (which at December 31, 1995 has an outstanding balance, including accrued interest at 11.5% per annum, of approximately $78,977,000 (Note 4(a)). The joint venture partner will then be entitled to receive the next $190,000,000 plus an amount equal to certain interest paid to it on the $20,000,000 purchase price note, with any remaining proceeds distributable equally to the Partnership and the joint venture partner. However, the Partnership is obligated to use its share of any sale or refinancing proceeds to satisfy, in full, the purchase price note payable to the joint venture partner. The joint venture modified the existing first mortgage note effective March 1, 1992. The modification lowered the pay rate from 12% to 9% per annum through August 1993 and, at that time, further reduced it to 7-1/2% per annum through August 1998. The contract rate was lowered to 10% per annum through August 1993 and, at that time, further reduced it to 8-1/2% per annum through August 1998. After each monthly payment, the difference between the contract interest rate on the outstanding principal balance on the loan, including the difference between deferred interest and interest paid at the applicable pay rate (as defined), will be added to the principal balance and will accrue interest at the contract interest rate. All outstanding principal, including the unpaid deferred interest, is due and payable on August 31, 1998. In return, the lender will be entitled to receive, as additional interest, a minority residual participation of 10% of net proceeds (if any, as defined) from a sale or refinancing after the Partnership and its joint venture partner have recovered their investments (as defined). No amounts have been required to be accrued for such contingent additional interest as of the date of this report. Any cash flow from the property, after all capital and leasing expenditures, but before payment of a portion of the property management fees, is escrowed for the purpose of paying for future capital and leasing requirements. As a result of the debt modification, the property produced cash flow in 1993 and 1994. This cash flow has been escrowed ($4,621,000 at December 31, 1995) for future potential leasing requirements as set forth in the loan modification. In 1994, the property experienced a significant loss in rental income in connection with the expiration of the IBM lease (279,432 square feet) representing 23% of the leasable office space and the John Hancock Property and Casualty Co. lease (97,180 square feet) representing 11.5% of the leasable office space. During 1995, the property was able to lease over 200,000 square feet and to increase the office tower occupancy to 81% by year end. Approximately 129,000 square feet of this space is leased to a tenant with a July 1996 expiration. The joint venture has negotiated an agreement in principle with the tenant to enter into a new lease with a five year term. Finalization of the agreement is subject to documentation acceptable to both parties. Consequently, there can be no assurance that this lease will be finalized. Although the office market in Boston has improved in the last year and rental rates appear to have stabilized, new leases will likely continue to require significant expenditures for lease commissions and tenant improvements prior to tenant occupancy. An affiliate of the joint venture partner manages the portion of the complex owned by the joint venture, pursuant to an agreement similar to those described in note 3(a). (c) JMB/NYC The Partnership owns, indirectly through Carlyle-XIII Associates, L.P. and JMB/NYC, an interest in (i) the 237 Park Avenue Associates venture which owns a 23-story office building, (ii) the 1290 Associates venture which owns a 44-story office building, and (iii) the 2 Broadway Associates and 2 Broadway Land Co. ventures which sold their 32-story office building in September 1995 as discussed below (together "Three Joint Ventures" and individually a "Joint Venture"). All of the buildings are located in New York, New York. In addition to JMB/NYC, the partners of the Three Joint Ventures include O&Y Equity Company, L.P. and O&Y NY Building Corp. (hereinafter sometimes referred to as the "Olympia & York affiliates"), both of which are affiliates of Olympia and York Developments, Ltd. (hereinafter sometimes referred to as "O&Y"). JMB/NYC is a joint venture among Carlyle-XIII Associates, L.P., Carlyle-XIV Associates, L.P. and Property Partners, L.P. as limited partners and Carlyle Managers, Inc. as the sole general partner. The Partnership is a 20% shareholder of Carlyle Managers, Inc. Related to this investment, the Partnership has an obligation to fund, on demand, $600,000 of additional paid-in capital to Carlyle Managers, Inc. (reflected in amounts due to affiliates in the accompanying financial statements). The Partnership currently holds, indirectly as a limited partner of Carlyle- XIII Associates, L.P., an approximate 25% limited partnership interest in JMB/NYC. The sole general partner of Carlyle-XIII Associates, L.P. is Carlyle Investors, Inc., of which the Partnership is a 20% shareholder. Related to this investment, the Partnership has an obligation to fund, on demand, $600,000 of additional paid-in capital (reflected in amounts due to affiliates in the accompanying financial statements). The general partner in each of JMB/NYC and Carlyle-XIII Associates, L.P. is an affiliate of the Partnership. For financial reporting purposes, the allocation of profits and losses of JMB/NYC to the Partnership is 25%. The terms of the JMB/NYC venture agreement generally provide that JMB/NYC's share of the Three Joint Ventures' annual cash flow, sale or refinancing proceeds, operating and capital costs (to the extent not covered by cash flow from a property) and profit and loss will be distributed to, contributed by or allocated to the Partnership in proportion to its (indirect) share of capital contributions to JMB/NYC. As discussed below, an Agreement (the "Agreement") with the Olympia & York affiliates, when effective, would provide first for allocation of cash flow to the Olympia & York affiliates to the level of certain Preference Amounts, as defined. The Agreement would also, among other things, provide for no further allocation from the Joint Ventures of depreciation, amortization or operating losses and the allocation of operating income from the Joint Ventures only to the extent of cash flow distributions to JMB/NYC. In October 1994, JMB/NYC entered into the Agreement with the Olympia & York affiliates to resolve certain disputes which are more fully discussed below. Certain provisions of the Agreement became immediately effective and, therefore, binding upon the partners, while others become effective upon either certain conditions being met or upon execution and delivery of final documentation. In general, the parties agreed to: (i) amend the Three Joint Ventures' agreements to eliminate any funding obligation by JMB/NYC for any purpose in return for JMB/NYC relinquishing its rights to approve most all property management, leasing, sale (certain rights to control a sale were to be retained by JMB/NYC through March 31, 2001) or refinancing decisions and the establishment of a new preferential distribution level payable to the Olympia & York affiliates from all future sources of cash, (ii) sell the 2 Broadway Building, and (iii) restructure the first mortgage loan. In anticipation of this sale and in accordance with the Agreement, the unpaid first mortgage indebtedness previously allocated to 2 Broadway was allocated to 237 Park Avenue and 1290 Avenue of the Americas during 1994. As part of the Agreement, in order to facilitate the restructuring, JMB/NYC and the Olympia & York affiliates agreed to file for each of the Three Joint Ventures a pre-arranged bankruptcy plan for reorganization under Chapter 11 of the Bankruptcy Code. In June 1995, the 2 Broadway Joint Ventures filed their pre-arranged bankruptcy plans for reorganization, and in August 1995, the bankruptcy court entered an order confirming their plans of reorganization. In September 1995, the sale of the 2 Broadway Building was completed. Bankruptcy filings for the other Joint Ventures are expected to occur in 1996. JMB/NYC is seeking to incorporate much of the substance of the transactions proposed in the Agreement in the proposed reorganization plans for the other Joint Ventures, although various specifics of the proposed transactions are expected to be changed and there is no assurance that such proposed transactions would be substantially incorporated. In particular, the restructuring of their ownership interests in the 237 Park and the 1290 Avenue of the Americas properties by the Olympia & York affiliates and the possible reorganization of the 237 Park Avenue and 1290 ventures discussed below is expected to result in certain changes to the transactions proposed in the Agreement, although the extent of such changes has not been determined. Consequently, there are no assurances that the substance of the transactions contemplated in the Agreement will be finalized. In any event, there would need to be a significant improvement in current market and property operating conditions resulting in a significant increase in the value of the 237 Park Avenue and 1290 Avenue of the Americas properties before JMB/NYC would receive any significant share of future net proceeds from operations, sale or refinancing. The contemplated restructuring of the Joint Ventures' agreements would include the elimination of any funding obligation by JMB/NYC for any purposes. Consequently, in such event, JMB/NYC would recognize, for financial reporting purposes, a gain to the extent of the then current deficit investment balance (which amount was $257,188,201 as of December 31, 1995). In the event that one or more of the transactions proposed in the Agreement are not consummated, JMB/NYC and the Partnership may, among other things, recognize substantial gain for Federal income tax purposes with no corresponding distributable proceeds. In October 1995, certain affiliates of O&Y, including one of the partners in the Joint Ventures, filed for protection from creditors under Chapter 11 of the United States Bankruptcy Code. These affiliates of O&Y are preparing a plan to restructure their ownership interests in various office buildings, including the 237 Park Avenue and 1290 Avenue of the Americas office buildings, which could take the form of one or more real estate investment trusts. Any such restructuring would be subject to the approval of their various creditors and other affiliates of O&Y as well as the bankruptcy court, and would likely result in such creditors collectively obtaining control of such ownership interests. In connection with such restructuring, it is expected that 237 Park Avenue Associates and 1290 Associates will seek reorganization under Chapter 11 of the United States Bankruptcy Code pursuant to a plan agreed upon by their creditors and their partners, including JMB\NYC. Although JMB\NYC has had discussions with the Olympia & York affiliates and certain creditors concerning restructuring proposals and a reorganization of 237 Park Avenue Associates and 1290 Associates, a proposal for the restructuring of the Olympia & York affiliates' ownership interests and a plan for the reorganization of the two Joint Ventures have not been agreed upon. Accordingly, the terms of such restructuring and reorganization and their effect, if consummated, on the Joint Ventures and the Olympia & York affiliates' and JMB\NYC's respective interests therein are subject to change. The Partnership believes that the substance of these proposed transactions will be effected, although changes in the form and structure of the proposed transactions are expected to be required. However, it is possible that one or more of the proposed transactions contemplated by the Agreement may not be effected as a result of such restructuring, which could result in, among other things, JMB/NYC and the Partnership recognizing substantial gain for Federal income tax purposes with no corresponding distributable proceeds. JMB/NYC purchased a 46.5% interest in each of the Three Joint Ventures for approximately $173,600,000, subject to a long-term first mortgage loan which has been allocated among the individual Joint Ventures. A portion of the purchase price is represented by four 12-3/4% promissory notes (the "Purchase Notes") which have an aggregate outstanding principal balance of $33,272,592 and $34,158,225 at December 31, 1995 and December 31, 1994, respectively. Such Purchase Notes, which contain cross-default provisions, and are non-recourse to JMB/NYC, are secured by JMB/NYC's interests in the Three Joint Ventures, and such Purchase Note relating to the purchase of the interest in the ventures owning the 2 Broadway Building is additionally secured by JMB/NYC's interest in $19,000,000 of distributable sale proceeds from the other two Joint Ventures. A default under the Purchase Notes would include, among other things, a failure by JMB/NYC to repay a Purchase Note upon acceleration of the maturity, and could cause an immediate acceleration of the Purchase Notes for the other Joint Ventures. The Purchase Notes provide for monthly interest only payments on the principal and accrued interest based upon the level of distributions payable to JMB/NYC discussed below. If the distributions paid or payable to JMB/NYC are insufficient to cover monthly interest on the Purchase Notes, then the shortfall interest (as defined) accrues and compounds monthly. Interest accruals total $47,164,545 at December 31, 1995 as no payments were made on any of the Purchase Notes during 1995 and 1994. All of the principal and accrued interest on the Purchase Notes is due in 1999 or, if earlier, on the sale or refinancing of the related property. The Agreement with the Olympia & York affiliates, when effective, would provide for an extension of the due dates on the Purchase Notes. It further provides for the cancellation of indebtedness under the 2 Broadway Purchase Notes in excess of $19 million. As discussed more fully below, in September 1995 the 2 Broadway Joint Ventures concluded the sale of the 2 Broadway Building at a price which did not provide any proceeds to JMB/NYC to repay the related Purchase Notes. Consequently, principal and accrued interest on the 2 Broadway Purchase Notes in the amount of $62,529,627 was discharged and $19,000,000 of the 2 Broadway Purchase Notes will be re-allocated and is payable out of JMB/NYC's share of distributable cash flow or sale proceeds, if any, from the other two Joint Ventures. Subsequent to 1991, pursuant to the agreement (the "1993 Agreement") reached in March, 1993 between JMB/NYC and the Olympia & York affiliates, for the period January 1, 1992 to June 30, 1993, as discussed below, gross income was allocable to the Olympia & York affiliates to the extent of the distributions of excess monthly cash flow received for the period with the balance of operating profits or losses allocated 46.5% to JMB/NYC and 53.5% to the Olympia & York affiliates. Beginning July 1, 1993, operating profits or losses, in general, are allocated 46.5% to JMB/NYC and 53.5% to the Olympia & York affiliates. The Agreement with the Olympia & York affiliates, when effective, would provide no further allocation to JMB/NYC of depreciation, amortization or operating losses and the allocation of operating income only to the extent of cash flow distributions, if any, during the remaining term of the Joint Ventures. There were no allocation of depreciation, amortization or operating income or losses to JMB/NYC for Federal income tax purposes in 1994 or 1995. However, JMB/NYC did recognize a loss of $55,357,404 on the sale (as described below) of the 2 Broadway Building for Federal income tax purposes in 1995. Under the terms of the Three Joint Ventures' agreements, the Olympia & York affiliates were obligated to make capital contributions to the Three Joint Ventures to pay any operating deficits (as defined) and to pay a preferred return through December 31, 1991 to JMB/NYC. JMB/NYC did not receive its preferred return for the fourth quarter 1991 and the Olympia & York affiliates applied JMB/NYC's preferred return to 1992 disputed interest calculations (see below). Subsequent to 1991, capital contributions to pay for property operating deficits and other requirements that may be called for under the Three Joint Ventures' agreements are required to be shared 46.5% by JMB/NYC and 53.5% by the Olympia & York affiliates. The O&Y affiliates have alleged that pursuant to the Three Joint Ventures' agreements between the Olympia & York affiliates and JMB/NYC, the effective rate of interest with reference to the first mortgage loan for the purpose of calculating JMB/NYC's share of operating cash flow or deficits after 1991 is as though the rate were fixed at 12- 3/4% per annum (versus the variable short-term U.S. Treasury obligation rate plus 1-3/4% per annum (with a minimum 7%) payable on the first mortgage loan). JMB/NYC believes that, commencing in 1992, the Three Joint Ventures' agreements require an effective rate of interest with reference to the first mortgage loan, based upon each Joint Venture's allocable share of the loan, to be 1-3/4% over the variable short-term U.S. Treasury obligation rate plus any excess monthly operating cash flow after capital costs of each of the Three Joint Ventures, such sum not to be less than a 7% nor to exceed a 12-3/4% per annum interest rate, rather than the 12-3/4% per annum fixed rate that applied prior to 1992. The Olympia & York affiliates have disputed this calculation of interest expense and contended that the 12-3/4% per annum fixed rate applied after 1991. The 1993 Agreement rescinded the default notices previously received by JMB/NYC and eliminated the alleged operating deficit funding obligation of JMB/NYC for the period January 1, 1992 through June 30, 1993. Pursuant to the 1993 Agreement, during this period, JMB/NYC recorded interest expense at the interest rate on the underlying first mortgage loan. Under the terms of the 1993 Agreement, during this period, the amount of capital contributions that the Olympia & York affiliates and JMB/NYC would have been required to make to the Three Joint Ventures, if the first mortgage loan bore interest at a rate of 12-3/4% per annum (the Olympia & York affiliates' interpretation), became a priority distribution level to the Olympia & York affiliates from the Three Joint Ventures' annual cash flow or net sale or refinancing proceeds. The 1993 Agreement also entitled the Olympia & York affiliates to a 7% per annum return on such unpaid priority distribution level. The 1993 Agreement also provided that, except as specifically agreed otherwise, the parties each reserved all rights and claims with respect to each of the Three Joint Ventures and each of the partners thereof, including, without limitation, the interpretation of or rights under each of the joint venture partnership agreements for the Three Joint Ventures. As a result of the above noted agreement with the Olympia & York affiliates, the cumulative priority distribution level payable to the Olympia & York affiliates at December 31, 1995 is approximately $55,000,000. The term of the 1993 Agreement expired on June 30, 1993. Therefore, effective July 1, 1993, JMB/NYC is recording interest expense at 1-3/4% over the variable short-term U.S. Treasury obligation rate plus any excess operating cash flow after capital costs of the Three Joint Ventures, such sum not to be less than 7% nor exceed a 12-3/4% per annum interest rate. The Olympia & York affiliates continued to dispute this calculation and for the period commencing July 1, 1993 contend that the 12-3/4% per annum fixed rate applies. Based upon this interpretation, interest expense for the Three Joint Ventures for the twelve months ended December 31, 1995 was $115,730,680. Based upon the amount of interest determined by JMB/NYC for the twelve months ended December 31, 1995, interest expense for the Three Joint Ventures was $67,258,773. The cumulative effect of recording the interest expense calculated by JMB/NYC is to reduce the losses of the Three Joint Ventures by $121,543,336 (of which the Partnership's share is $14,129,413) for the period July 1, 1993 through December 31, 1995 and to correspondingly reduce what would otherwise be JMB/NYC's funding obligation with respect to the Three Joint Ventures. Certain provisions of the Agreement with the Olympia & York affiliates, when effective, would resolve the funding obligation dispute. In general, the priority distribution level created in the 1993 Agreement and JMB/NYC's alleged funding obligation subsequent to June 30, 1993 would be eliminated in return for the creation of a new preferential distribution level to the Olympia & York affiliates payable from all sources of available cash ("Preference Amount"). Such Preference Amount would be $81,500,000 for 1290 Avenue of the Americas and $38,500,000 million for 237 Park Avenue and both amounts would bear interest at 9% per annum, compounded monthly, retroactively effective May 1, 1994. Net proceeds available, if any, after repayment of the Preference Amounts plus interest, would then be distributable in accordance with the original terms of the Three Joint Ventures' Agreements which provide for, in general, that net proceeds from all sources will be distributable 46.5% to JMB/NYC and 53.3% to the Olympia & York affiliates, subject to, as described above, repayment by JMB/NYC of its remaining Purchase Notes. The terms of the current joint venture partnership agreements between the Olympia & York affiliates and JMB/NYC for the Three Joint Ventures provide, in the event of a dissolution and liquidation of a Joint Venture, that if there is a deficit balance in the tax basis capital account of JMB/NYC, after the allocation of profits or losses and the distribution of all liquidation proceeds, then JMB/NYC generally would be required to contribute cash to the Joint Venture in the amount of its deficit capital account balance. Taxable gain arising from the sale or other disposition of a Joint Venture's property generally would be allocated to the joint venture partner or partners then having a deficit balance in its or their respective capital accounts in accordance with the terms of the joint venture agreement. However, if such taxable gain is insufficient to eliminate the deficit balance in its account in connection with a liquidation of a Joint Venture, JMB/NYC would be required to contribute funds to the Joint Venture (regardless of whether any proceeds were received by JMB/NYC from the disposition of the Joint Venture's property) to eliminate any remaining deficit capital account balance. The Partnership's potential liability for such contribution, if any, would be its share, if any, of the liability of JMB/NYC and would depend upon, among other things, the amounts of JMB/NYC's and the Olympia & York affiliates' respective capital accounts at the time of a sale or other disposition of Joint Venture property, the amount of JMB/NYC's share of the taxable gain attributable to such sale or other disposition of the Joint Venture property and the timing of the dissolution and liquidation of the Joint Venture. Although the amount of such liability could be material, the Limited Partners of the Partnership would not be required to make additional contributions of capital to satisfy such obligation, if any, of the Partnership. The Partnership's deficit investment balance in JMB/NYC as reflected in the balance sheet (aggregating $84,764,207 at December 31, 1995) does not necessarily represent the amount, if any, the Partnership would be required to pay to satisfy a deficit capital account restoration obligation. Under the Agreement with the Olympia & York affiliates, subject to the satisfaction of certain conditions, any deficit capital account funding obligation of JMB/NYC to the Joint Ventures would be eliminated. In September 1995, the 2 Broadway Joint Ventures concluded the sale of 2 Broadway with a third party for a net purchase price, after commissions and certain other payments but before prorations, of approximately $18,300,000. As a result of this sale, the Partnership recognized, for financial reporting purposes, its share of the loss on the sale of investment property of $14,789,529 (which includes the Partnership's share ($10,113,054) of the write-off of JMB/NYC's remaining investment in the 2 Broadway Joint Ventures), offset by a gain of $15,632,407 which represents the Partnership's share of JMB/NYC's related gain on the forgiveness of indebtedness (as more fully discussed above). Such sale did not result in the dissolution and termination of the 2 Broadway Building Joint Ventures for the purposes of the deficit capital account balance computation as described above. Due to the anticipated sale of the 2 Broadway building at a sales price significantly below its original carrying value, net of depreciation, a provision for value impairment was recorded at December 31, 1993 for financial reporting purposes for $192,627,560, which was allocated $136,534,366 and $56,093,194 to the Olympia & York affiliates and JMB/NYC, respectively. Such provision was allocated to the joint venture partners to reflect their respective ownership percentages before the effect of the non-recourse Purchase Notes including accrued interest. The 237 Park Avenue and the 1290 Avenue of the Americas office buildings serve as collateral for the first mortgage loan. Prior to 1996, the lender asserted various defaults under the loan. Commencing in January 1996, the Joint Ventures ceased making monthly debt service payments on the first mortgage loan. A restructuring of the loan now appears likely to depend on the restructuring of the ownership interest of various affiliates of O&Y in a number of office buildings and the reorganization of the 237 Park Avenue and 1290 ventures, as discussed above. The Olympia & York affiliates reached an agreement with the first mortgage lender whereby effective January 1, 1993, the Olympia & York affiliates are limited to taking distributions of $250,000 on a monthly basis from the Three Joint Ventures reserving the remaining excess cash flow in a separate interest- bearing account to be used exclusively to meet the obligations of the Three Joint Ventures as approved by the lender. Interest on the first mortgage loan is currently calculated based upon a variable rate related to the short-term U.S. Treasury obligation rate, subject to a minimum rate on the loan of 7% per annum. Should a restructuring of the Joint Ventures providing for the elimination of JMB/NYC's funding obligations in accordance with the Agreement not be finalized, JMB/NYC may decide not to commit any additional amounts to the Three Joint Ventures. In addition, under these circumstances, it is possible that JMB/NYC may determine to litigate these issues with the Olympia & York affiliates. A decision not to commit any additional funds or an adverse litigation result could, under certain circumstances, result in the loss of JMB/NYC's interest in the related Joint Ventures. The loss of an interest in a particular Joint Venture could, under certain circumstances, permit an acceleration of the maturity of the related Purchase Note (each Purchase Note is secured by JMB/NYC's interest in the related venture). Under certain circumstances, the failure to repay a Purchase Note could constitute a default under, and permit an immediate acceleration of, the maturity of the Purchase Notes for the other Joint Ventures. In such event, JMB/NYC may decide not to repay, or may not have sufficient funds to repay, any of the Purchase Notes and accrued interest thereon. This could result in JMB/NYC no longer having an interest in any of the related Joint Ventures, which would result in substantial net gain for financial reporting and Federal income tax purposes to JMB/NYC (and through JMB/NYC and the Partnership, to the Limited Partners) with no distributable proceeds. In such event, JMB/NYC would then proceed to terminate its affairs. The properties are being managed by an affiliate of the Olympia & York affiliates for a fee equal to 1% of gross receipts. An affiliate of the Olympia & York affiliates performs certain maintenance and repair work and construction of certain tenant improvements at the investment properties. Additionally, the Olympia & York affiliates have lease agreements and occupy approximately 95,000 square feet of space at 237 Park Avenue at rental rates which approximate market. (d) Orchard Associates The Partnership's interest in Old Orchard shopping center (through Orchard Associates and Old Orchard Urban Venture ("OOUV") was sold in September 1993, as described below. At sale, OOUV and an unaffiliated third party contributed the Old Orchard shopping center and $60,366,572 in cash (before closing costs and prorations), respectively, to a newly formed limited partnership. Immediately at closing, the new partnership distributed to OOUV $60,366,572 in cash (before closing costs and prorations) in redemption of approximately 89.5833% of OOUV's interest in the new partnership. OOUV, the limited partner, has retained a 10.4167% interest in the new limited partnership after such redemption. OOUV was also entitled to receive up to an additional $4,300,000 based upon certain events (as defined), all of which was earned and was subsequently received in 1994. Upon receipt, OOUV distributed the $4,300,000 to the respective partners based upon their pre- contribution percentage interests. OOUV still may earn up to an additional $3,400,000 based upon certain future earnings of the property (as defined), none of which has been earned or received as of the date of this report. Contemporaneously with the formation of the new limited partnership, OOUV redeemed Orchard Associates' ("Orchard") interest in OOUV for $56,689,747 (before closing costs and prorations). This transaction has resulted in Orchard having no ownership interest in the property as of the effective date of the redemption agreement. Orchard recognized a gain of $15,797,454 for financial reporting purposes ($7,898,727 allocable to the Partnership) and recognized a gain for Federal income tax reporting purposes of $32,492,776 ($16,246,388 allocable to the Partnership) in 1993. At the time of redemption, OOUV retained a portion of the Orchard Associates redemption proceeds in order to fund certain contingent amounts which may have been due in the future. In July 1995, OOUV distributed to Orchard Associates a significant portion of its redemption holdback of $2,083,644. As a result, the Partnership received its share of the holdback of $1,041,820. In October 1995, OOUV distributed to Orchard its share of the pre-sale settlement with Federated department stores of $288,452. As a result, Orchard distributed to the Partnership its share of the settlement of $144,226. In February 1996, based on current proration estimates, OOUV distributed to Orchard its share of reserves ($494,000) previously held back by OOUV for potential operating prorations. As a result, Orchard distributed $262,500 to the Partnership representing its share of such excess reserves as well as its share of excess cash that had been held at Orchard. The Partnership currently intends to retain these funds for working capital purposes. OOUV and Orchard have also entered into a contribution agreement whereby they have agreed to share future gains and losses which may arise with respect to potential revenues and liabilities from events which predated the contribution of the property to the new venture (including, without limitation the distribution to OOUV of $4,300,000 and the potential future distribution of $3,400,000 as described above) in accordance with their pre-contribution percentage interests. In September 1994, Orchard received its share of the contingent $4,300,000, as discussed above, and distributed to each of the respective partners their 50% share ($1,702,082 to the Partnership) of such amount. The Partnership recognized a gain of $1,702,082 for financial reporting purposes and recognized a gain for Federal income tax purposes in 1994. Upon receipt of all or a portion of the remaining contingent amounts, Orchard and the Partnership would expect to recognize additional gain for Federal income tax and financial reporting purposes in the year of such receipts. However, there can be no assurance that any portion of the remaining contingent amount will be received. (4) LONG-TERM DEBT (a) General In response to operating deficits incurred at certain properties, the Partnership is seeking and/or has received mortgage note modifications on certain properties. Certain of the modifications received have expired and others expire on various dates commencing November 1996. In addition, certain properties have loans with scheduled maturities commencing August 1998. Upon expiration of such modifications or at maturity, should the Partnership or its ventures be unable to secure new or additional modifications to or refinancing of the loans, based upon current and anticipated future market conditions, the Partnership may not commit any significant additional amounts to these properties. This generally would result in the Partnership no longer having an ownership interest in such properties and may result in net gain for financial reporting and Federal income tax purposes without any net distributable proceeds. Such decisions would be made on a property-by-property basis. Long-term debt consists of the following at December 31, 1995 and 1994:
1995 1994 ----------- ----------- 11.5% purchase price note payable to an affiliate; secured by Partnership's interest in the joint venture that owns Copley Place multi-use complex in Boston, Massachusetts; accruing interest through August 31, 1998 when the entire balance is payable (note 3(b)). . . . $ 78,977,399 70,436,336 8% mortgage note (the note has been modified; see note 3(b)) due August 1998; secured by Copley Place multi-use complex in Boston, Massachusetts; balance originally payable in monthly installments of principal and interest of $2,184,042 through September 30, 1993 and $1,306,321 thereafter . . . . . . . . . . . . . . . . . . . . . . . . 216,303,920 212,864,138 9-5/8% mortgage note; secured by the Plaza Tower office building in Knoxville, Tennessee; refinanced in April 1995 by the loan described immediately below; see note 4(b)(4) . . . . -- 17,674,426 9.02% mortgage note; secured by the Plaza Tower office building, payable monthly, interest only, until October 2000 when the principal and any accrued interest is due. . . . . . . . . 14,900,000 -- 8.5% (8% to December 31, 1994) mortgage note; secured by the Sherry Lane Place office building in Dallas, Texas; payable in monthly installments of interest only until April 1, 1998 when the remaining principal balance is payable (as remodified; see note 4(b)(1)) . . . 22,000,000 22,000,000 Contingent interest note; secured by the Sherry Lane Place office building in Dallas, Texas; contingent interest due annually equal to the excess cash flow of the property (as defined); due April 1, 1998. . . . . . 18,158,558 18,498,538 13% mortgage note (in default) secured by the Long Beach Plaza shopping center in Long Beach, California; payable in monthly installments of principal and interest of $372,583 originally due June 27, 1994 and subsequently extended to August 31, 1995 when the remaining principal balance of $33,734,354 was payable; see note 2(b) . . . . . . . . . . . . . . . . . . 33,734,354 33,734,354 1995 1994 ----------- ----------- Other mortgage loans: Long Beach Plaza shopping center, non-interest bearing, (net of $8,834,655 and $8,965,815 unamortized discount at 12% at December 31, 1995 and 1994, respectively), due 2014 . 1,165,345 1,034,185 Marshalls Aurora Plaza shopping center, 12-3/4%; originally payable in monthly installments of principal and interest until November 1, 1996 when the remaining principal balance is payable. (The note has been modified; see note 4(b)(3)) . . . . . 5,601,708 5,890,904 Glades apartment complex, 6.1%, due 2002 . . . . . . . . . 9,737,500 9,860,000 Glades apartment complex, 6% (plus, subsequent to April 1995, 50% of cash flows (as defined)), accruing interest through October 1, 2002 when the entire balance is payable . . . . . . . . . . . . . . . . . . . . . . . 950,262 950,261 Carrollwood apartment complex, 7.45%, due 1998 (refinanced in 1993, see note 4(b)(2)). . . . . . . . . . . . . . . . . . . . 7,042,140 7,227,872 Other; see note 3(b) . . . . . . . . . . . . . . . . . . . 13,398,432 13,398,433 ------------ ----------- Total debt . . . . . . . . . . . . . . . . . . . . 421,969,618 413,569,447 Less current portion of long-term debt . . . . . . 39,666,113 52,006,208 ------------ ----------- Total long-term debt . . . . . . . . . . . . . . . $382,303,505 361,563,239 ============ ===========
Included in the above total long-term debt is $72,714,370 and $60,733,525, for 1995 and 1994, respectively, which represents mortgage interest accrued but not currently payable pursuant to the terms of the various notes. Five year maturities of long-term debt are as follows: 1996. . . . . . . . . . . . . $ 39,666,113 1997. . . . . . . . . . . . . 352,974 1998. . . . . . . . . . . . . 342,058,972 1999. . . . . . . . . . . . . 157,500 2000. . . . . . . . . . . . . 15,067,500 ============ (b) Long-term Debt Modifications (1) Sherry Lane Place Office Building The existing long-term note secured by the Sherry Lane Place office building located in Dallas, Texas was modified effective February 1, 1988 to lower both the contract and payment interest rates. The contract interest rate was reduced to 9% per annum for the period from March 1, 1988 through February 28, 1993 and to 10% per annum for the period from March 1, 1993 through April 1, 1998. Interest only was payable at 6.5% per annum through July 31, 1991, at 8% per annum from August 1, 1991 through July 31, 1994 and at 10% per annum from August 1, 1994 through March 1, 1998. The difference between the contract rate and the interest paid was to be deferred and bore interest at 13.125% per annum from February 1, 1988 through February 28, 1988, at 9% per annum from March 1, 1988 through February 28, 1993 and at 10% per annum from March 1, 1993 through April 1, 1998. In addition, upon the earlier of the subsequent sale of the property or maturity of the note, the lender was entitled to a residual participation equal to 40% of the applicable value (as defined). In November 1993, the Partnership reached an agreement with the current lender to further modify the existing long-term non-recourse mortgage note secured by the property. Under the terms of the remodification, the existing mortgage balance was divided into two notes. The first note of $22,000,000 bears a contract interest rate of 8% per annum for the period retroactive from January 1, 1993 through December 31, 1994, increasing to 8.5% per annum for the period from January 1, 1995 through April 1, 1998. Interest only is payable on the first note at 5.75% per annum for the period retroactive to January 1, 1993 through December 31, 1993, at 8% per annum from January 1, 1994 through December 31, 1994 and at 8.5% per annum from January 1, 1995 through April 1, 1998. The second note, consisting of the remaining unpaid principal and accrued interest, has a zero pay and accrual rate. All excess cash flow above debt service on the first note is to be applied first against accrued interest on the first note and then as contingent interest on the second note (as defined). (2) Carrollwood Apartments In September 1993, the venture refinanced with an unaffiliated third party lender the existing $7,200,000 mortgage loan. The new loan is in the amount of $7,455,000. The venture paid a prepayment penalty relating to the original mortgage of approximately $143,200 in connection with the refinancing. The Partnership recognized its share of approximately $141,700 as an extraordinary loss for financial reporting purposes. In addition, the venture was obligated to establish an escrow account for future capital improvements. The escrow account was initially funded by the Partnership's capital contribution to the venture and is subsequently funded by the operations of the venture. As of the date of this report, the escrow account has approximately $123,000 and no amounts have been withdrawn. (3) Marshall's Aurora Plaza The long-term note secured by the Marshall's Aurora Plaza shopping center located in Aurora, Colorado reached its scheduled maturity in June 1993. The Partnership continued remitting debt service under the original terms of the loans until January 1994, when the Partnership reached an agreement with the current lender to modify and extend the existing long- term note. The modification, which became effective in November 1993, lowered the pay and accrual rates from 12.75% per annum to 8.375% per annum and extended the loan for a three year period to November 1996. Concurrent with the closing of the modification, the Partnership paid down the existing mortgage balance in the amount of $250,000. (4) Plaza Tower The first mortgage loan secured by the property matured on November 1, 1994. The Partnership reached an agreement for a short-term extension until January 1, 1995 and paid an extension fee to the existing lender. During January 1995, the Partnership reached another agreement with the existing lender for an extension until March 31, 1995 provided the Partnership pay down the principal balance by $1,500,000 and find an alternative source of financing. The Partnership continued to remit debt service during this period under the existing loan terms. In April 1995, the Partnership agreed with a new third party lender to refinance approximately $14,900,000 of the existing mortgage note. As such, the Partnership paid the previous mortgage lender another $1,100,000 on the existing mortgage note in order to further extend the loan until the refinancing closed. The refinancing closed in April 1995 and there were no distributable proceeds available. (5) PARTNERSHIP AGREEMENT Pursuant to the terms of the Partnership Agreement, net profits and losses of the Partnership from operations are allocated 96% to the Limited Partners and 4% to the General Partners. Profits from the sale of invest- ment properties are to be allocated to the General Partners to the greatest of (i) 1% of such profits, (ii) the amount of cash distributions to the General Partners, or (iii) an amount which will reduce the General Partners' capital account deficits (if any) to a level consistent with the gain anticipated to be realized from the sale of properties. Losses from the sale of properties are to be allocated 1% to the General Partners. The remaining profits and losses will be allocated to the Limited Partners. The General Partners are not required to make any additional capital contributions except under certain limited circumstances upon termination of the Partnership. Distributions of "Net cash receipts" of the Partnership are allocated 90% to the Limited Partners and 10% to the General Partners (of which 6.25% constitutes a management fee to the Corporate General Partner for services in managing the Partnership). The Partnership Agreement provides that the General Partners shall receive as a distribution of the proceeds (net after expenses and liabilities and retained working capital) from the sale or refinancing of a real property of up to 3% of the selling price of a property, and that the remaining net proceeds for any property sold be distributed 85% to the Limited Partners and 15% to the General Partners. However, prior to such distributions being made, the Limited Partners are entitled to receive 99% of net sale or refinancing proceeds and the General Partners are entitled to receive 1% until the Limited Partners (i) have received cumulative cash distributions from the Partnership's operations which, when combined with net sale or refinancing proceeds previously distributed, equal a 6% annual return on the Limited Partners' average capital investment for each year (their initial capital investment as reduced by net sale or refinancing proceeds previously distributed) and (ii) have received cash distributions of net sale or refinancing proceeds in an amount equal to the Limited Partners' aggregate initial capital investment in the Partnership. If upon the completion of the liquidation of the Partnership and the distribution of all Partnership funds, the Limited Partners have not received the amounts in (i) and (ii) above, the General Partners will be required to return all or a portion of the 1% distribution of net sale or refinancing proceeds described above in an amount equal to such deficiency in payments to the Limited Partners pursuant to (i) and (ii) above. The Limited Partners have not received distributions to the above levels. As of the date of this report, the General Partners have received $123,891 in distributions of net sale proceeds. (6) MANAGEMENT AGREEMENTS - OTHER THAN VENTURES The Partnership has entered into agreements for the operation and management of the investment properties. Such agreements are summarized as follows: The Partnership entered into an agreement with an affiliate of the seller for the operation and management of Marshall's Aurora Plaza, Aurora, Colorado for a management fee calculated at a percentage of certain types of cash income from the property. The Long Beach Plaza in Long Beach, California, Plaza Tower office building in Knoxville, Tennessee, Greenwood Creek II Apartments in Benbrook, Texas, (prior to its sale in April 1993) Rio Cancion Apartments (prior to its sale in March 1993) and Eastridge Apartments in Tucson, Arizona (prior to its sale in June 1994), University Park office building in Sacramento, California, (prior to transferring the property to the lender in January 1994) 1001 Fourth Avenue Plaza office building in Seattle, Washington, (prior to transferring the property to the lender in November 1993), Sherry Lane Place office building in Dallas, Texas, Glades Apartments in Jacksonville, Florida and Gables Corporate Plaza in Coral Gables, Florida (prior to the lender appointing a receiver in May 1993) were managed by an affiliate of the Corporate General Partner until December 1994 for a fee equal to a percentage of defined gross income from the property. In December 1994, one of the affiliated property managers sold substantially all of its assets and assigned its interest in its management contracts to an unaffiliated third party. In addition, certain of the management personnel of the property manager became management personnel of the purchaser and its affiliates. The successor to the affiliated property manager's assets is acting as the property manager of the Plaza Tower office building, Glades Apartments in Jacksonville, Florida and the Sherry Lane office building on the same terms that existed prior to the sale. (7) SALE OR DISPOSITION OF INVESTMENT PROPERTIES (a) Allied Automotive Center On October 10, 1990, the Partnership sold the land, building, and related improvements of the Allied Automotive Center located in Southfield, Michigan for $19,613,121 (in cash before prorations and cost of sale). The sale included the adjacent undeveloped land, building and improvements owned by two other partnerships affiliated with the Corporate General Partner. The Partnership has retained title to a defined 1.9 acre piece of land (the "Parcel"). During the buyer's due diligence investigation, the buyer found traces of contamination located on a portion of the Parcel as well as on a portion of the land owned by the two affiliated selling entities. It was subsequently determined that such contamination was most likely the result of certain activities of the previous owner. As a result, the purchase price was reduced by approximately $682,000 for the Partnership's excluded land. The land may be purchased by the buyer after the environmental clean-up is completed. As a condition of the sale, the Partnership had agreed to conduct investigations to determine all contaminants and to conduct clean-up of any such contaminants. The Partnership was also required to indemnify the buyer from specified potential clean-up related liabilities. If the clean- up is successful, the buyer will purchase the excluded land for $682,000, the purchase price adjustment. In addition, the Partnership has reached an agreement with the previous owner of the Allied Automotive Center, who has agreed to cause such investigation and clean-up to be done at the previous owner's expense. The previous owner has also indemnified the Partnership from specified potential clean-up related liabilities. The Partnership, in cooperation with the previous owner, has approved a plan to clean up the Parcel, and the previous owner has undertaken the clean up and is paying the costs thereof. Recently, the Partnership has been informed that certain regulatory agencies have approved the clean-up of the site and approved the shut down of the clean-up operation. The gain associated with this Parcel, approximately $543,000, will be recognized if and when the closing occurs (currently expected to be during 1996). There can be no assurance that the sale of this Parcel will be consummated on these or any other terms. (b) Rio Cancion Apartments On March 31, 1993, the Partnership sold the land, related improvements, and personal property of the Rio Cancion Apartments, located in Tucson, Arizona for $13,700,000 (before selling costs and prorations) which was paid in cash at closing. In conjunction with the sale, the mortgage note and related accrued interest with a balance of approximately $12,157,000 was satisfied in full. The lender received, as its 25% minority residual participation (as defined), approximately $317,000. The Partnership received net sales proceeds of approximately $809,000. The Partnership recognized a gain from this transaction of $2,524,958 for financial reporting purposes and $7,865,633 for Federal income tax purposes in 1993. (c) Greenwood Creek II Apartments On April 6, 1993, the Partnership transferred title to the existing lender to the land, related improvements, and personal property of the Greenwood Creek II Apartments, located in Benbrook, (Fort Worth) Texas for a transfer price of $100,000 (before selling costs and prorations) in excess of the existing mortgage balance of approximately $3,747,000. The Partnership recognized a gain of $1,787,073 for financial reporting purposes and $1,823,988 for Federal income tax purposes in 1993. (d) Eastridge Apartments On June 30, 1994, the Partnership sold the land, related improvements, and personal property of the Eastridge Apartments, located in Tucson, Arizona for $12,000,000 (before selling costs and prorations) which was paid in cash at closing. The mortgage obligation was satisfied in full prior to the sale date. The Partnership recognized a gain of $5,010,871 for financial reporting purposes and approximately $7,081,000 for Federal income tax purposes in 1994. (e) 1001 Fourth Avenue Plaza The Partnership transferred title to the property to the lender on November 1, 1993. The transfer of the Partnership's ownership interest resulted in a net gain of $6,771,760 for financial reporting purposes and a gain of $27,567,458 for Federal income tax purposes with no corresponding distributable proceeds in 1993. (f) University Park Office Building The Partnership transferred title to the property to the lender in January 1994 which resulted in net gain of approximately $5,676,000 for financial reporting and approximately $6,897,000 for Federal income tax purposes to the Partnership with no corresponding distributable proceeds in 1994. (g) Gables Corporate Plaza Title to the property to the lender was transferred to the lender in 1994 which resulted in net gain of approximately $3,793,000 for Federal income tax purposes without any net distributable proceeds in 1994. (8) LEASES (a) As Property Lessor At December 31, 1995, the Partnership and its consolidated ventures' principal assets are two office buildings, two shopping centers, a multi-use complex and two apartment complexes. The Partnership has determined that all leases relating to these properties are properly classified as operating leases; therefore, rental income is reported when earned and the cost of each of the properties, excluding cost of land, is depreciated over the estimated useful lives. Leases with commercial tenants range in term from one to 30 years and provide for fixed minimum rent and partial reimbursement of operating costs. In addition, leases with shopping center tenants generally provide for additional rent based upon percentages of tenants' sales volumes. With respect to the Partnership's shopping center investments, a substantial portion of the ability of retail tenants to honor their leases is dependent upon the retail economic sector. Apartment complex leases in effect at December 31, 1995 are generally for a term of one year or less and provide for annual rents of approx- imately $4,229,934. Cost and accumulated depreciation of the leased assets are summarized as follows at December 31, 1995: Shopping centers: Cost . . . . . . . . . . $ 52,729,945 Accumulated depreciation (19,483,788) ------------ 33,246,157 ------------ Office buildings: Cost . . . . . . . . . . 71,919,524 Accumulated depreciation (25,665,779) ------------ 46,253,745 ------------ Multi-use complex: Cost . . . . . . . . . . 287,780,754 Accumulated depreciation (110,893,499) ------------ 176,887,255 ------------ Apartment complexes: Cost . . . . . . . . . . 20,792,582 Accumulated depreciation (7,266,487) ------------ 13,526,095 ------------ Total. . . . . . $269,913,252 ============ Minimum lease payments receivable including amounts representing executory costs (e.g., taxes, maintenance, insurance), and any related profit in excess of specific reimbursements, to be received in the future under the above operating commercial lease agreements, are as follows: 1996 . . . . . . . . . . $ 38,933,380 1997 . . . . . . . . . . 34,780,103 1998 . . . . . . . . . . 31,000,695 1999 . . . . . . . . . . 26,209,319 2000 . . . . . . . . . . 21,287,850 Thereafter . . . . . . . 70,521,029 =========== Additional rent based upon percentages of tenants' sales volumes included in rental income aggregated $675,043, $526,850 and $1,804,123 for the years ended December 31, 1995, 1994 and 1993, respectively. (b) As Property Lessee The following lease agreements have been determined to be operating leases: The Partnership owns the leasehold rights to the parking structure adjacent to the Long Beach, California shopping center. The lease has an initial term of 50 years which commenced in 1981 with one 49-year renewal option exercisable by a local municipal authority. The lease provides for annual rental of $745,000, which is subject to decrease based on formulas which relate to the amount of real estate taxes assessed against the shopping center and the parking structure. The rental expense for 1995, 1994 and 1993 under the above operating lease was $633,548, $538,159 and $528,276, respectively, and consisted exclusively of minimum rent. The Copley Place venture has leased the air rights over the Massachusetts Turnpike located beneath the Boston, Massachusetts multi-use complex. The lease has a term of 99 years which commenced in 1978. The total rent due under the terms of the air rights lease was prepaid by the seller and is being amortized over the term of the air rights lease. (9) TRANSACTIONS WITH AFFILIATES In December 1984, Urban Holdings, Inc., an affiliate of the Corporate General Partner of the Partnership, purchased all the outstanding stock of the developer (joint venture partner) and property manager of the Old Orchard shopping center and the Copley Place multi-use complex, and successor entities to the developer and property manager continue in their respective capacities. Consequently, the joint venture partner is an affiliate of the Corporate General Partner and continues to possess all of the rights and obligations granted the original developer under the terms of the respective acquisition and related agreements. The Partnership, pursuant to the Partnership Agreement, is permitted to engage in various transactions involving the Corporate General Partner and its affiliates including the reimbursement for salaries and salary- related expenses of its employees, certain of its officers, and other direct expenses relating to the administration of the Partnership and the operation of the Partnership's investment properties. Fees, commissions and other expenses required to be paid by the Partnership to the General Partners and their affiliates as of December 31, 1995, 1994 and 1993 are as follows:
UNPAID AT DECEMBER 31, 1995 1994 1993 1995 ---------- --------- ---------- -------------- Property management and leasing fees (note 6) . . . . . . . . . . . . $1,459,783 1,195,147 3,001,759 2,877,400 Insurance commissions. . . . . . . 65,185 55,542 214,278 -- Reimbursement (at cost) for accounting services. . . . . . . 164,441 220,159 148,638 -- Reimbursement (at cost) for portfolio management services . . . . . . . . . . . . 74,396 69,775 -- -- Reimbursement (at cost) for legal services . . . . . . . . . 9,267 20,977 30,455 -- Reimbursement (at cost) for other administrative charges and other out-of-pocket expenses . . 208,625 1,372 45,143 91,622 ---------- --------- --------- --------- $1,981,697 1,562,972 3,440,273 2,969,022 ========== ========= ========= ========= The above table reflects that during 1995, the Partnership recognized and paid certain 1994 administrative charges of approximately $91,389 that had not previously been reimbursed.
Payment of certain pre-1993 property management and leasing fees payable under the terms of the management agreements ($2,877,000, approximately $8 per $1,000 interest) at December 31, 1995 has been deferred. All amounts currently payable do not bear interest and are expected to be paid in future periods. All property management fees and leasing fees are being paid currently. In February 1995, the Partnership paid $10,000,000 of previously deferred property management and leasing fees to an affiliate of the General Partner. As more fully discussed in Note 3(c), the Partnership has an obligation to fund, on demand, $600,000 and $600,000 to Carlyle Managers, Inc. and Carlyle Investors, Inc., respectively, of additional paid-in capital (reflected in amounts due to affiliates in the accompanying financial statements). As of December 31, 1995, these obligations bore interest at 5.83% per annum and cumulative interest accrued on these obligations was $171,989. The affiliated joint venture partner was obligated through December 31, 1991 to loan amounts to pay for any operating deficits (as defined) of Copley Place. Through December 31, 1995, the affiliated joint venture partner has loaned approximately $13,398,000 at an interest rate based on its line of credit, which bears interest at a floating rate (averaging 7.83% per annum at December 31, 1995). During 1995, approximately $1,318,000 of interest accrued on these loans, and the joint venture paid approximately $1,518,000 of accrued interest (including a portion accrued from a prior year) on these loans. (See Note 3(b)). Effective October 1, 1995, the Corporate General Partner of the Partnership engaged independent third parties to perform certain administrative services which were previously performed by, and partially reimbursed to, affiliates of the General Partners. Use of such third parties is not expected to have a material effect on the operations of the Partnership. (10) INVESTMENT IN UNCONSOLIDATED VENTURES Summary combined financial information for JMB/NYC and its unconsolidated ventures (note 3(c)) as of and for the years ended December 31, 1995 and 1994 are as follows: 1995 1994 ------------- ------------- Current assets . . . . . . $ 13,898,980 44,191,548 Current liabilities (includes $902,603,491 and $913,398,422 of current portion of long- term debt at December 31, 1995 and December 31, 1994, respectively). . . . . . (930,523,456) (941,725,934) ------------- ------------- Working capital (deficit)(916,624,476) (897,534,386) ------------- ------------- 1995 1994 ------------- ------------- Investment property, net . 649,606,970 718,682,403 Accrued rent receivable. . 52,194,637 51,254,978 Deferred expenses. . . . . 18,168,925 11,698,403 Other liabilities. . . . . (85,039,094) (149,171,447) Venture partners' deficit. 207,040,770 186,256,073 ------------- ------------- Partnership's capital (deficit). . . . . . $ (74,652,268) (78,813,976) ============= ============= Represented by: Invested capital . . . . $ 43,728,411 43,728,411 Cumulative net losses. . (109,006,930) (113,168,638) Cumulative cash distributions. . . . . (9,373,749) (9,373,749) ------------- ------------- $ (74,652,268) (78,813,976) ============= ============= Total income . . . . . . . $ 163,838,267 147,761,499 ============= ============= Expenses applicable to operating loss . . . . . $ 180,511,256 183,850,523 ============= ============= Net loss . . . . . . . . . $ (16,672,989) 36,089,024 ============= ============= Total income and net loss for the year ended December 31, 1995 includes a loss on sale of investment property of $38,214,703, offset by an extraordinary gain on forgiveness of indebtedness of $62,529,627 related to the sale of the 2 Broadway building in September 1995. (Reference is made to note 3(c)). Also, for the year ended December 31, 1993, total income was $168,002,257, expenses applicable to operating loss were $411,977,853 and the net loss was $243,975,596 for JMB/NYC and the unconsolidated ventures. SCHEDULE III CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995
COSTS CAPITALIZED INITIAL COST TO SUBSEQUENT TO GROSS AMOUNT AT WHICH CARRIED PARTNERSHIP (a) ACQUISITION AT CLOSE OF PERIOD (b) --------------------------------------------------------------------------- LAND AND BUILDINGS LAND LAND AND BUILDINGS LEASEHOLD AND BUILDINGS AND LEASEHOLD AND DESCRIPTIONENCUMBRANCE INTEREST IMPROVEMENTS IMPROVEMENTS INTEREST IMPROVEMENTSTOTAL(g) - --------------------------------- -------------------------- ---------- ---------------------- APARTMENT BUILDINGS: Tampa, Florida(d).$ 7,042,1401,092,010 7,408,618 433,123 1,092,010 7,841,7418,933,751 Jacksonville, Florida(d).10,687,762 1,905,940 9,664,038 288,853 1,815,262 10,043,56911,858,831 OFFICE BUILDINGS: Knoxville, Tennessee(e)14,900,000 -- 28,884,725 4,596,689 1,508,417 31,972,99733,481,414 COSTS CAPITALIZED INITIAL COST TO SUBSEQUENT TO GROSS AMOUNT AT WHICH CARRIED PARTNERSHIP (a) ACQUISITION AT CLOSE OF PERIOD (b) --------------------------------------------------------------------------- LAND AND BUILDINGS LAND LAND AND BUILDINGS LEASEHOLD AND BUILDINGS AND LEASEHOLD AND DESCRIPTIONENCUMBRANCE INTEREST IMPROVEMENTS IMPROVEMENTS INTEREST IMPROVEMENTSTOTAL(g) - --------------------------------- -------------------------- ---------- ---------------------- Dallas, Texas(d). .40,158,558 7,902,979 35,029,347 (4,632,014) 6,198,484 32,101,82838,300,312 Southfield, Michigan(f) -- 1,715,373 -- (1,577,575) 139,126 -- 139,126 SHOPPING CENTERS: Long Beach, California.34,899,699 3,801,066 42,765,277 (2,746,934) 3,376,877 40,442,53243,819,409 Aurora, Colorado. . 5,601,708 2,035,721 6,674,891 199,924 2,035,721 6,874,8168,910,537 MULTI-USE COMPLEX: Boston, Massachu- setts (c)(d). . .308,679,751 4,769,913 271,584,219 11,426,622 4,769,913 283,009,512287,779,425 ------------ ---------- ----------------------- ----------- ---------------------- Total .$421,969,61823,223,002 402,011,115 7,988,688 20,935,810 412,286,995433,222,805 ============ ========== ======================= =========== ======================
SCHEDULE III - CONTINUED CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995
LIFE ON WHICH DEPRECIATION IN LATEST STATEMENT OF 1995 ACCUMULATED DATE OF DATE OPERATION REAL ESTATE DESCRIPTION DEPRECIATION(h) CONSTRUCTION ACQUIRED IS COMPUTED TAXES - ----------- ---------------- ------------ ------------------------- ----------- APARTMENT BUILDINGS: Tampa, Florida(d) . . 3,370,861 1984 12/16/83 5-30 years 207,021 Jacksonville, Florida(d) 3,895,626 1985 10/9/84 5-30 years 197,934 OFFICE BUILDINGS: Knoxville, Tennessee(e) 12,315,609 1979 10/26/83 5-30 years 544,188 Dallas, Texas(d). . . 13,350,170 1983 12/1/83 5-30 years 586,527 Southfield, Michigan(f) -- 1974 3/30/84 5-30 years 2,901 SHOPPING CENTERS: Long Beach, California 16,579,880 1982 6/22/83 5-30 years 528,880 Aurora, Colorado. . . 2,903,908 1982 4/1/83 5-30 years 102,923 MULTI-USE COMPLEX: Boston, Massachusetts (c)(d) . . . . . . . 110,893,499 1983 9/1/83 5-30 years 5,977,868 ------------ --------- Total . . . . . . $163,309,553 8,148,242 ============ ========= SCHEDULE III - CONTINUED CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995 - --------------- Notes: (a) The initial cost to the Partnership represents the original purchase price of the properties, including amounts incurred subsequent to acquisition which were contemplated at the time the property was acquired. (b) The aggregate cost of real estate owned at December 31, 1995 for Federal income tax purposes was approximately $85,617,312. (c) Property operated under air rights; see Note 8(b). (d) Properties owned and operated by joint ventures; see Note 3. (e) The Partnership purchased the land underlying Plaza Tower office building in December 1985. (f) Property sold except for a 1.9 acre parcel; see Note 7(a).
SCHEDULE III - CONTINUED CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995
1995 1994 1993 ------------- ------------- ------------- (g) Reconciliation of real estate carrying costs: Balance at beginning of period . . . . . $429,976,723 474,203,190 627,815,579 Additions during period . . . . . . . . . 3,246,082 1,796,484 3,188,425 Reductions during period. . . . . . . . . -- (46,022,951) (156,800,814) ------------ ------------ ------------ Balance at end of period. . . . . . . . . $433,222,805 429,976,723 474,203,190 ============ ============ ============ (h) Reconciliation of accumulated depreciation: Balance at beginning of period. . . . . . $149,525,406 149,914,951 178,425,639 Depreciation expense. . . . . . . . . . . 13,784,147 13,753,198 18,343,123 Reductions during period. . . . . . . . . -- (14,142,743) (46,853,811) ------------ ------------ ------------ Balance at end of period. . . . . . . . . $163,309,553 149,525,406 149,914,951 ============ ============ ============
INDEPENDENT AUDITORS' REPORT The Partners CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XIII: We have audited the combined financial statements of JMB/NYC Office Building Associates, L.P. (JMB/NYC) and unconsolidated ventures as listed in the accompanying index. In connection with our audits of the combined financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These combined financial statements and financial statement schedule are the responsibility of the General Partners of Carlyle Real Estate Limited Partnership-XIII (the Partnership). Our responsibility is to report on these combined financial statements and financial statement schedule based on the results of our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partners of the Partnership, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our report. As discussed in Note 3 of the Partnership's notes to the consolidated financial statements, incorporated by reference in Note 2 of the combined financial statements, beginning July 1, 1993, JMB/NYC was in dispute with the unaffiliated venture partners in the real estate ventures over the calculation of the effective interest rate with reference to the first mortgage loan, which covers the real estate owned through JMB/NYC's joint ventures. The disputed interest aggregated $48,472,000, $52,550,000 and $20,521,000 for the years ended December 31, 1995, 1994 and 1993, respectively, and has not been included in mortgage and other interest in the accompanying combined financial statements. In October 1994, JMB/NYC entered into an agreement (the Agreement) with the unaffiliated venture partners in the real estate ventures which, when effective, would resolve this dispute by providing interest at the same rate as the first mortgage loan and would eliminate any funding obligations by JMB/NYC. However, as discussed in Note 3, there are no assurances that the Agreement will be finalized and become effective. The ultimate outcome of this uncertainty cannot presently be determined. The accompanying combined financial statements and financial statement schedule have been prepared assuming that JMB/NYC and unconsolidated ventures will continue as going concerns. As discussed in Note 3 of the Partnership's notes to consolidated financial statements, incorporated by reference in Note 2 of the combined financial statements, the holder of the first mortgage loan alleged certain defaults under the loan agreements. Also, commencing in January 1996, the real estate ventures ceased making monthly debt service payments on the first mortgage loan. Further, JMB/NYC and the unaffiliated venture partners in the real estate ventures (Continued) have agreed to file, for each of the real estate joint ventures, a pre- arranged bankruptcy plan for reorganization under Chapter 11 of the Bankruptcy Code. Such filings with respect to the 2 Broadway ventures occurred in June of 1995 with the remaining filings expected to occur in 1996. These circumstances raise substantial doubt about JMB/NYC and unconsolidated ventures' ability to continue as going concerns. The General Partners' plans in regard to these matters are also described in Note 3 of the Partnership's notes to the consolidated financial statements. The combined financial statements and financial statement schedule do not include any adjustments that might result from the outcome of this uncertainty. Because of the significance of the uncertainties discussed in the preceding two paragraphs, we are unable to express, and we do not express, an opinion on the accompanying combined financial statements and financial statement schedule. KPMG PEAT MARWICK LLP Chicago, Illinois March 25, 1996 JMB/NYC OFFICE BUILDING ASSOCIATES, L.P. AND UNCONSOLIDATED VENTURES COMBINED BALANCE SHEETS DECEMBER 31, 1995 AND 1994 ASSETS ------
1995 1994 ------------ ----------- Current assets: Cash (including amounts held by property managers) . . . . $ 647,722 1,529,078 Restricted funds (note 1). . . . . . . . . . . . . . . . . 9,356,055 23,929,599 Rents and other receivables (net of allowance for doubtful accounts of $9,455,898 for 1995 and $8,167,305 for 1994 2,378,248 3,234,487 Prepaid expenses . . . . . . . . . . . . . . . . . . . . . 977,891 13,918,412 Escrow deposits. . . . . . . . . . . . . . . . . . . . . . 492,957 1,425,723 Tenant notes receivable. . . . . . . . . . . . . . . . . . 46,107 154,249 Due from the O&Y affiliates (net of allowance for uncollectibility of $15,417,785 at December 31, 1995 and $13,608,787 at December 31, 1994) (note 1) . . . . . . . . . . . . . -- -- -------------- -------------- Total current assets . . . . . . . . . . . . . . . 13,898,980 44,191,548 -------------- -------------- Investment properties, at cost (notes 1, 2 and 3) -- Schedule III: Land . . . . . . . . . . . . . . . . . . . . . . . . . . . 163,939,715 168,798,314 Buildings and improvements . . . . . . . . . . . . . . . . 799,898,096 956,574,507 -------------- -------------- 963,837,811 1,125,372,821 Less accumulated depreciation. . . . . . . . . . . . . . . 314,230,841 406,690,418 -------------- -------------- Total investment properties, net of accumulated depreciation. . . . . . . . . 649,606,970 718,682,403 -------------- -------------- Accrued rents receivable (note 1). . . . . . . . . . . . . . 52,194,637 51,254,978 Deferred expenses (note 1) . . . . . . . . . . . . . . . . . 18,168,925 11,698,403 -------------- -------------- $ 733,869,512 825,827,332 ============== ============== JMB/NYC OFFICE BUILDING ASSOCIATES, L.P. AND UNCONSOLIDATED VENTURES COMBINED BALANCE SHEETS - CONTINUED LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS) ----------------------------------------------------- 1995 1994 -------------- -------------- Current liabilities: Current portion of long-term debt (note 3) . . . . . . . . $ 902,603,491 913,398,422 Accounts payable and accrued expenses. . . . . . . . . . . 5,980,842 4,666,201 Tenant allowances payable. . . . . . . . . . . . . . . . . -- 2,809,707 Accrued interest . . . . . . . . . . . . . . . . . . . . . 5,341,844 5,557,267 Unearned rent (note 4) . . . . . . . . . . . . . . . . . . 16,597,279 13,724,100 Interest payable to the O&Y affiliates . . . . . . . . . . -- 1,570,237 -------------- -------------- Total current liabilities. . . . . . . . . . . . . 930,523,456 941,725,934 Unearned rent (note 4) . . . . . . . . . . . . . . . . . . . 4,109,000 19,704,669 Notes payable (note 5) . . . . . . . . . . . . . . . . . . . 33,272,592 34,158,225 Deferred interest payable (note 5) . . . . . . . . . . . . . 47,164,545 93,853,559 Tenant security deposits . . . . . . . . . . . . . . . . . . 492,957 1,454,994 -------------- -------------- Commitments and contingencies (notes 1 and 2) Total liabilities. . . . . . . . . . . . . . . . . 1,015,562,550 1,090,897,381 Partners' capital accounts (deficits) (note 2): Carlyle-XIII: Capital contributions. . . . . . . . . . . . . . . . . . 43,728,411 43,728,411 Cumulative net losses. . . . . . . . . . . . . . . . . . (109,006,930) (113,168,638) Cumulative cash distributions. . . . . . . . . . . . . . (9,373,749) (9,373,749) -------------- -------------- (74,652,268) (78,813,976) -------------- -------------- Venture partners: Capital contributions. . . . . . . . . . . . . . . . . . 608,901,666 608,851,666 Cumulative net losses. . . . . . . . . . . . . . . . . . (734,057,686) (713,222,989) Cumulative cash distributions. . . . . . . . . . . . . . (81,884,750) (81,884,750) -------------- -------------- (207,040,770) (186,256,073) -------------- -------------- Total partners' capital accounts (deficit) . . . . (281,693,038) (265,070,049) -------------- -------------- $ 733,869,512 825,827,332 ============== ============== See accompanying notes to combined financial statements.
JMB/NYC OFFICE BUILDING ASSOCIATES, L.P. AND UNCONSOLIDATED VENTURES COMBINED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ------------ ------------ ------------ Income: Rental income . . . . . . . . . . . . . . . $138,537,668 147,628,786 167,820,507 Interest income . . . . . . . . . . . . . . 985,675 132,713 181,750 ------------ ------------ ------------ 139,523,343 147,761,499 168,002,257 ------------ ------------ ------------ Expenses: Mortgage and other interest (note 3). . . . 82,954,551 80,871,590 86,030,245 Depreciation. . . . . . . . . . . . . . . . 29,564,205 30,374,278 39,102,045 Property operating expenses . . . . . . . . 56,703,039 62,583,682 66,232,722 Professional services . . . . . . . . . . . 4,404,763 2,491,222 2,314,088 Amortization of deferred expenses . . . . . 2,321,990 2,257,477 2,173,860 Provision for value impairment (note 1) . . -- -- 192,627,560 Provision for doubtful accounts (note 2). . 4,562,708 5,272,274 23,497,333 ------------ ------------ ------------ 180,511,256 183,850,523 411,977,853 ------------ ------------ ------------ Net operating loss . . . . . . . . (40,987,913) (36,089,024) (243,975,596) Loss on sale of investment property (note 2) (38,214,703) -- -- ------------ ------------ ------------ Loss before extraordinary item . . (79,202,616) (36,089,024) (243,975,596) Extraordinary gain on forgiveness of indebtedness (note 2) . . . . . . . . . . . . . . . . . 62,529,627 -- -- ------------ ------------ ------------ Net loss . . . . . . . . . . . . . $(16,672,989) (36,089,024) (243,975,596) ============ ============ ============ See accompanying notes to combined financial statements.
JMB/NYC OFFICE BUILDING ASSOCIATES, L.P. AND UNCONSOLIDATED VENTURES COMBINED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICIT) YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
CARLYLE REAL ESTATE LIMITED VENTURE PARTNERSHIP-XIII PARTNERS ----------------- --------------- Balance at December 31, 1992 . . . . . . . . . . . . . $(50,385,319) 70,045,641 Capital contributions. . . . . . . . . . . . . . . . . 5,000 1,116,010 Net loss . . . . . . . . . . . . . . . . . . . . . . . (22,166,989) (221,808,607) Cash distributions . . . . . . . . . . . . . . . . . . -- (6,257,237) ------------ ------------ Balance at December 31, 1993 . . . . . . . . . . . . . (72,547,308) (156,904,193) Capital contributions. . . . . . . . . . . . . . . . . -- 470,476 Net loss . . . . . . . . . . . . . . . . . . . . . . . (6,266,668) (29,822,356) ------------ ------------ Balance at December 31, 1994 . . . . . . . . . . . . . (78,813,976) (186,256,073) Capital contributions. . . . . . . . . . . . . . . . . -- 50,000 Operating loss . . . . . . . . . . . . . . . . . . . . (6,794,224) (34,193,689) Loss on sale of investment property. . . . . . . . . . (4,676,475) (33,538,228) Extraordinary gain on forgiveness of indebtedness. . . 15,632,407 46,897,220 ------------ ------------ Balance at December 31, 1995 . . . . . . . . . . . . . $(74,652,268) (207,040,770) ============ ============ See accompanying notes to combined financial statements
JMB/NYC OFFICE BUILDING ASSOCIATES, L.P. AND UNCONSOLIDATED VENTURES COMBINED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ------------ ------------ ------------ Cash flows from operating activities: Net loss . . . . . . . . . . . . . . . . . $(16,672,989) (36,089,024) (243,975,596) Items not requiring (providing) cash: Depreciation . . . . . . . . . . . . . . 29,564,205 30,374,278 39,102,045 Amortization of deferred expenses. . . . 2,321,990 2,257,477 2,173,860 Write-off tenant allowances payable. . . -- (1,337,328) -- Provision for value impairment . . . . . -- -- 192,627,560 Provision for doubtful accounts. . . . . 4,562,708 5,272,274 23,497,333 Loss on sale of investment property. . . 38,214,703 -- -- Extraordinary gain on forgiveness of indebtedness . . . . . . . . . . . . . (62,529,627) -- -- Changes in: Rents and other receivables. . . . . . . 856,239 (3,858,448) (4,583,255) Prepaid expenses . . . . . . . . . . . . 12,893,726 (13,461,314) (203,064) Escrow deposits. . . . . . . . . . . . . 932,766 82,320 (24,494) Tenant notes receivable. . . . . . . . . 108,142 85,196 238,882 Accrued rents receivable . . . . . . . . (1,615,968) (885,365) (24,448) Interest payable to the O&Y affiliates . (1,570,237) (3,000,000) 4,570,237 Accounts payable and other accrued expenses 1,428,266 1,173,792 (1,296,990) Accrued interest . . . . . . . . . . . . (215,423) 172,860 (50,248) Unearned rent. . . . . . . . . . . . . . (12,718,177) 31,449,394 97,864 Deferred interest payable. . . . . . . . 14,954,980 15,248,036 13,431,777 Tenant security deposits . . . . . . . . (962,037) (162,518) 133,963 ------------ ------------ ------------ Net cash provided by operating activities. . . . . . . 9,553,267 27,321,630 25,715,426 ------------ ------------ ------------ Cash flows from investing activities: Restricted funds . . . . . . . . . . . . . 14,573,544 (12,291,341) (11,638,258) Additions to investment properties, net of tenant allowances payable . . . . (21,981,262) (646,124) (1,785,586) Cash proceeds from sale of investment property . . . . . . . . . . . . . . . . 18,175,965 -- -- Payment of deferred expenses . . . . . . . (8,648,941) (2,859,836) (1,394,358) ------------ ------------ ------------ Net cash provided by (used in) investing activities. . . . . . . 2,119,306 (15,797,301) (14,818,202) ------------ ------------ ------------ JMB/NYC OFFICE BUILDING ASSOCIATES, L.P. AND UNCONSOLIDATED VENTURES COMBINED STATEMENTS OF CASH FLOWS - CONTINUED 1995 1994 1993 ------------ ------------ ------------ Cash flows from financing activities: Capital contributions. . . . . . . . . . . 50,000 470,476 1,121,010 Advances to the O&Y affiliates . . . . . . (1,808,998) (1,662,503) (1,176,224) Principal payments on long-term debt . . . (10,794,931) (9,642,776) (8,613,592) Distributions to partners. . . . . . . . . -- -- (6,257,237) ------------ ------------ ------------ Net cash used in financing activities. . . . . . . (12,553,929) (10,834,803) (14,926,043) ------------ ------------ ------------ Net increase (decrease) in cash . . (881,356) 689,526 (4,028,819) Cash and cash equivalents, beginning of year . . . . . . . . 1,529,078 839,552 4,868,371 ------------ ------------ ------------ Cash and cash equivalents, end of year . . . . . . . . . . . $ 647,722 1,529,078 839,552 ============ ============ ============ Supplemental disclosure of cash flow information: Cash paid for mortgage and other interest $ 69,785,231 68,450,694 68,078,479 ============ ============ ============ Non-cash investing and financing activities: Retirement of investment property. . $ -- -- 1,896,898 ============ ============ ============ See accompanying notes to combined financial statements.
JMB/NYC OFFICE BUILDING ASSOCIATES AND UNCONSOLIDATED VENTURES NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 (1) OPERATIONS AND BASIS OF ACCOUNTING The accompanying combined financial statements have been prepared for the purpose of complying with Rule 3.09 of Regulation S-X of the Securities and Exchange Commission. The entities included in the combined financial statements are as follows: JMB/NYC Office Building Associates, L.P. ("JMB/NYC") (a) - 237 Park Avenue Associates, L.L.C. (b) - 1290 Associates, L.L.C. (b) - 2 Broadway Associates and 2 Broadway Land Company (b)(c) (a) The Partnership owns an indirect ownership interest in this unconsolidated venture through Carlyle-XIII Associates, L.P. (b) The Partnership owns an indirect ownership interest in these joint ventures through JMB/NYC, an unconsolidated venture. (c) The property owned by these ventures was sold in September 1995. Reference is made to Note 3(c) of the Partnership filed with this annual report. JMB/NYC holds (through joint ventures) an equity investment portfolio of commercial real estate in the city of New York, New York. Business activities consist of rentals to a variety of commercial companies, and the ultimate sale or disposition of such real estate. For purposes of preparing the combined financial statements, the effect of all transactions between JMB/NYC and the Three Joint Ventures has been eliminated. The records of JMB/NYC and the Three Joint Ventures (the "Combined Ventures") are maintained on the accrual basis of accounting as adjusted for Federal income tax reporting purposes. The accompanying combined financial statements have been prepared from such records after making appropriate adjustments to present the Three Joint Ventures' accounts in accordance with generally accepted accounting principles. Such adjustments are not recorded on the records of the Three Joint Ventures. The preparation of financial statements in accordance with GAAP requires the Combined Ventures to make estimates and assumptions that affect the reported or disclosed amount of 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. Statement of Financial Accounting Standards No. 95 requires the Combined Ventures to present a statement which classifies receipts and payments according to whether they stem from operating, investing or financing activities. The required information has been segregated and accumulated according to the classifications specified in the pronouncement. In conjunction with the negotiations with representatives of the first mortgage lender regarding a loan restructure, the Olympia & York affiliates reached an agreement with the first mortgage lender whereby effective January 1, 1993, the Olympia & York affiliates are limited to taking distributions of $250,000 on a monthly basis from the Three Joint Ventures reserving the remaining excess cash flow in a separate-interest bearing account to be used exclusively to meet the obligations of the Three Joint Ventures as approved by the lender. Such reserved amounts of approximately $9,356,000 and $23,930,000, in the aggregate, at December 31, 1995 and 1994, respectively, are classified as restricted funds in the accompanying combined balance sheet. Provisions for value impairment (as discussed more fully in Note 2 of the Partnership's financial statements filed with this annual report) are recorded with respect to the investment properties whenever the estimated future cash flows from a property's operations and projected sale are less than the property's net carrying value. As more fully discussed in Note 3(c) of Carlyle-XIII's financial statements filed with this annual report, due to the agreement for sale of the 2 Broadway building at a sales price significantly below its original carrying value, net of depreciation, (the property was sold in September 1995) the 2 Broadway venture has made a provision for value impairment on such investment property of $192,627,560 during 1993. The provision for value impairment was allocated $136,534,366 and $56,093,194 to the O&Y affiliates and to JMB/NYC, respectively. Such provision was allocated to the partners to reflect their respective ownership percentages before the effect of the non-recourse purchase notes including related accrued interest. Amounts due from the Olympia & York affiliates aggregated $15,417,785 and $13,608,787, respectively at December 31, 1995 and 1994. Due to the financial difficulties of O & Y and its affiliates, as more fully discussed in Note 3(c) of Carlyle XIII filed with this annual report, and the resulting uncertainty of collectibility of these amounts from the Olympia & York affiliates, JMB/NYC has recorded a provision for doubtful accounts for the full receivable amount, $15,417,785 and $13,608,787 at December 31, 1995 and 1994, respectively, which is reflected in the accompanying combined financial statements. Due to the uncertainty of collectibility of amounts due from certain tenants at the Three Joint Venture investment properties, a provision for doubtful accounts of $2,753,710, $3,609,771 and $11,551,049 at December 31, 1995, 1994 and 1993, respectively, is reflected in the accompanying combined financial statements. Deferred expenses are comprised of leasing and renting costs which are amortized using the straight-line method over the terms of the related leases. No provision for State or Federal income taxes has been made as the liability for such taxes is that of the venture partners rather than the ventures. Depreciation on the investment properties has been provided over the estimated useful lives of 5 to 30 years using the straight-line method. Although certain leases of the Three Joint Ventures' investment properties provide for tenant occupancy during periods for which no rent is due, the ventures accrue prorated rental income for the full period of occupancy. In addition, although certain leases provide for step increases in rent during the lease term, the ventures recognize the total rent due on a straight-line basis over the entire lease. Such amounts are reflected in accrued rents receivable in the accompanying combined balance sheets. Straight-line rental income was $1,615,968, $885,365 and $24,448 for the years ended December 31, 1995, 1994 and 1993, respectively. Maintenance and repair expenses are charged to operations as incurred. Significant betterments and improvements are capitalized and depreciated over their estimated useful lives. An affiliate of the joint venture partners perform certain maintenance and repair work and construction of certain tenant improvements at the investment properties. Statement of Financial Accounting Standards No. 107 ("SFAS 107"), "Disclosures about Fair Value of Financial Instruments," requires all entities to disclose the SFAS 107 value of all financial assets and liabilities for which it is practicable to estimate. Value is defined in the Statement as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Combined Ventures believe the carrying amount of its financial instruments classified as current assets and liabilities (excluding current portion of long-term debt) approximates SFAS 107 value due to the relatively short maturity of these instruments. SFAS 107 states that quoted market prices are the best evidence of the SFAS 107 value of financial instruments, even for instruments traded only in thin markets. The first mortgage loan is evidenced by certain bonds which are traded in extremely thin markets. As of December 31, 1995 and through the date of this report, a limited number of bonds have been sold and purchased in transactions arranged by brokers for amounts ranging from approximately $.66 to $.68 on the dollar. Assuming a rate of $.66 on the dollar, the implied SFAS 107 value of the bonds (with an aggregate carrying balance of $902,603,491, in the accompanying combined financial statements) would be approximately $596,000,000. Due to the significant discount at which the bonds are currently trading, the SFAS 107 value of the promissory notes payable and related deferred interest (aggregating $80,437,137) which are effectively subordinated to the repayment of the bonds, would be at a discount significantly greater than that at which the bonds are currently traded. Due to, among other things, the likely inability to obtain comparable financing under current market conditions and other property specific competitive conditions, and the unresolved issues with the venture partners as well as the alleged defaults on the first mortgage loan, the Combined Ventures would likely be unable to refinance these properties to obtain such calculated debt amounts reported (see notes 3 and 5). The Combined Ventures have no other significant financial instruments. (2) VENTURE AGREEMENTS A description of the venture agreements is contained in Note 3(c) of Notes to Financial Statements filed with this annual report. Such note is incorporated herein by reference. (3) LONG-TERM DEBT Long-term debt consists of the following at December 31, 1995 and 1994: 1995 1994 ------------------------ First mortgage loan bearing interest at the short-term U.S. Treasury obligation note rate plus 1-3/4% with a minimum rate on the loan of 7% per annum; allocated among and cross-collaterally secured by the 237 Park Avenue Building, and the 1290 Avenue of the Americas Building; payments of principal and interest based upon a 30-year amortization schedule are due monthly; however, 1995 1994 ------------------------ commencing on a date six months following the attainment of a certain level of annualized cash flow, any interest in excess of 12% per annum may be accrued, to the extent that monthly cash flow is insufficient to pay the full monthly debt service, by adding such deferred amount to the outstanding balance of the loan; the loan is in alleged default at December 31, 1994 and 1995 (Reference is made to Note 3(c) of Notes to Carlyle Real Estate Limited Partner- ship-XIII Financial Statements filed with this annual report as to the calculation of interest rate with reference to this first mortgage loan); the stated maturity of principal (of $857,784,000) and accrued interest is March 1999 . . . . . . . . . . $902,603,491 913,398,422 Less current portion of long-term debt . . . . . . . . 902,603,491 913,398,422 ------------ ----------- Total long-term debt . . $ -- -- ============ =========== The allocation of the first mortgage loan among the joint ventures (which is non-recourse to the joint ventures) is as follows: 1995 1994 ------------------------ 237 Park Avenue Associates . . $360,961,491 365,278,508 1290 Avenue Associates . . . . 541,642,000 548,119,914 ------------------------ $902,603,491 913,398,422 ======================== No amounts have been allocated to 2 Broadway Land Company or 2 Broadway Associates pursuant to the Agreement as more fully discussed in Note 3(c) of the Partnership's financial statements filed with this annual report. (4) LEASES At December 31, 1995, the properties in the combined group consisted of two office buildings. All leases relating to the properties are properly classified as operating leases; therefore, rental income is reported when earned and the cost of each of the properties, excluding the cost of land, is depreciated over the estimated useful lives. Leases with commercial tenants range in term from one to 17 years and provide for fixed minimum rent and partial to full reimbursement of operating costs. Affiliates of the joint venture partners have lease agreements and occupy approximately 95,000 square feet of space at 237 Park Avenue at rental rates which approximate market. During the fourth quarter of 1994, the 1290 Associates venture negotiated an amendment with a tenant at 1290 Avenue of the Americas, Deutsche Bank Financial Products Corporation, under which the tenant will surrender space on the 12th and 13th floors (137,568 square feet or approximately 7% of the buildings leasable space) on or before June 30, 1996. The original lease (as amended) was to terminate on December 31, 2003. The amendment also added space on the 8th and 9th floors (44,360 square feet or approximately 2% of the building's leasable space) which will expire on or before December 31, 1997. In consideration for this amendment, the tenant paid an early termination fee of $29,000,000 to the Joint Venture on December 1, 1994. John Blair & Co. (a tenant at 1290 Avenue of the Americas, which had leased 253,193 square feet or approximately 13% of the building's leasable space) filed for Chapter 11 bankruptcy protection in 1993. Because much of the John Blair space had been subleased, the Joint Venture had been collecting approximately 70% of the monthly rent due from John Blair from the subtenants. Due to the uncertainty regarding the collection of the balance of the monthly rents from John Blair, a provision for doubtful accounts related to rents and other receivables and accrued rents receivable aggregating $7,659,366 was recorded at December 31, 1993 related to this tenant. During the second quarter of 1994, a settlement was reached whereby the Joint Venture received a $7,000,000 lease termination fee which included settlement of past due amounts. In conjunction with the settlement, effective July 1, 1994, John Blair was released from all future lease obligations and the Joint Venture now has direct leases with the original John Blair subtenants. Such subtenants occupy 228,398 square feet or approximately 11% of the building's leasable space. JMB/NYC is amortizing the Deutsche Bank and John Blair lease termination fees over the remaining terms of the amended lease and leases with former subtenants, respectively. Minimum lease payments including amounts representing executory costs (e.g., taxes, maintenance, insurance), and any related profit in excess of specific reimbursements, to be received in the future under the above operating commercial lease agreements, are as follows: 1996. . . . . . .$ 101,790,528 1997. . . . . . . 105,623,514 1998. . . . . . . 101,134,583 1999. . . . . . . 91,277,743 2000. . . . . . . 88,562,774 Thereafter. . . . 562,345,204 -------------- $1,050,734,346 ============== (5) NOTES PAYABLE Notes payable consist of the following at December 31, 1995 and 1994: 1995 1994 ------------ ----------- Promissory notes payable to an affiliate of the unaffiliated venture partners in the Three Joint Ventures, bearing interest at 12.75% per annum; cross- collaterally secured by JMB/NYC's interest in the Three Joint Ventures, one of which is additionally secured by $19,000,000 of distributable proceeds from two of the Three Joint Ventures; interest accrues and is deferred, compounded monthly, until December 31, 1991; monthly payments of accrued interest, based upon the level of distributions 1995 1994 ------------ ----------- to JMB/NYC, thereafter until maturity; principal and accrued interest due March 20, 1999. Accrued deferred interest of $47,164,545 and $93,853,559 is outstanding at December 31, 1995 and 1994, respectively. . . . . . $33,272,592 34,158,225 ----------- ---------- Less current portion of notes payable. . . . . . -- -- ----------- ---------- Long-term notes payable . . . $33,272,592 34,158,225 =========== ========== The allocation of the promissory notes and related deferred interest among the joint ventures is as follows: 1995 1994 ----------- ----------- 237 Park Avenue Associates. . $19,205,193 16,917,580 1290 Associates . . . . . . . 41,515,672 36,570,561 237 Park Avenue Associates and 1290 Associates (note 2). . . . . . . . . . 19,716,272 -- 2 Broadway Land Company . . . -- 3,266,254 2 Broadway Associates . . . . -- 71,257,389 ----------- ----------- $80,437,137 128,011,784 =========== =========== SCHEDULE III JMB/NYC OFFICE BUILDING ASSOCIATES AND UNCONSOLIDATED VENTURES COMBINED REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995
COSTS CAPITALIZED INITIAL COST TO SUBSEQUENT TO GROSS AMOUNT AT WHICH CARRIED UNCONSOLIDATED VENTURES(A)TO ACQUISITION AT CLOSE OF PERIOD (B) -------------------------------------------------------------------------------- BUILDINGS BUILDINGS AND BUILDINGS AND AND DESCRIPTIONENCUMBRANCE(C) LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS TOTAL (E) - ------------------------------------------------------------------------------------ ---------- OFFICE BUILDINGS: New York, New York (237 Park Avenue) . .$360,961,49179,653,996 226,634,894 1,312,776 79,653,996 227,947,670 307,601,666 New York, New York (1290 Avenue of the Americas) .541,642,000 90,952,993 556,434,718 8,848,434 84,285,719 571,950,426 656,236,145 ----------------------- ----------- ---------- ----------- ----------- ----------- Total . .$902,603,491170,606,989 783,069,612 10,161,210 163,939,715 799,898,096 963,837,811 ======================= =========== ========== =========== =========== ===========
SCHEDULE III - CONTINUED JMB/NYC OFFICE BUILDING ASSOCIATES AND UNCONSOLIDATED VENTURES SUPPLEMENTARY INCOME STATEMENT INFORMATION YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
LIFE ON WHICH DEPRECIATION IN LATEST STATEMENT OF 1995 ACCUMULATED DATE OF DATE OPERATION REAL ESTATE DESCRIPTION DEPRECIATION(F) CONSTRUCTION ACQUIRED IS COMPUTED TAXES - ----------- ---------------- ------------ ---------- --------------- ----------- OFFICE BUILDINGS: New York, New York (237 Park Avenue). $ 86,212,869 1981 8/14/84 5-30 years 9,250,111 New York, New York (1290 Avenue of the Americas). . . 228,017,972 1963 7/27/84 5-30 years 19,058,789 ------------ ---------- Total. . . . . . $314,230,841 28,308,900 ============ ========== - ----------------- Notes: (A) The initial cost represents the original purchase price of the property, including amounts incurred subsequent to acquisition which were contemplated at the time the property was acquired. (B) The aggregate cost of real estate owned at December 31, 1995 for Federal income tax purposes was $1,004,958,700. (C) Reference is made to Note 5 of Combined Financial Statements for the current outstanding principal balances and a description of the notes payable secured by JMB/NYC's interests in the Three Joint Ventures which are not included in the amounts stated above. (D) Includes provision for value impairment at 1290 Avenue of the Americas of $50,446,010 recorded September 30, 1992.
SCHEDULE III - CONTINUED JMB/NYC OFFICE BUILDING ASSOCIATES AND UNCONSOLIDATED VENTURES SUPPLEMENTARY INCOME STATEMENT INFORMATION YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (E) Reconciliation of real estate owned:
1995 1994 1993 -------------- -------------- ------------- Balance at beginning of period. . . . . . $1,125,372,821 1,122,949,035 1,316,389,393 Additions during period . . . . . . . . . 19,221,555 2,423,786 601,043 Provision for value impairment. . . . . . -- -- (192,144,503) Sales/retirements during period . . . . . (180,756,565) -- (1,896,898) -------------- ------------- ------------- Balance at end of period. . . . . . . . . $ 963,837,811 1,125,372,821 1,122,949,035 ============== ============= ============= (F) Reconciliation of accumulated depreciation: Balance at beginning of period. . . . . . $ 406,690,418 376,316,140 339,110,993 Depreciation expense. . . . . . . . . . . 29,564,205 30,374,278 39,102,045 Sales/retirements during period . . . . . (122,023,782) -- (1,896,898) -------------- ------------- ------------- Balance at end of period. . . . . . . . . $ 314,230,841 406,690,418 376,316,140 ============== ============= =============
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There were no changes in or disagreements with accountants during fiscal year 1995 and 1994. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP The Corporate General Partner of the Partnership is JMB Realty Corporation ("JMB"), a Delaware corporation. Substantially all of the outstanding shares of JMB are owned by certain of its officers, directors, members of their families and their affiliates. JMB as the Corporate General Partner has responsibility for all aspects of the Partnership's operations, subject to the requirement that sales of real property must be approved by the Associate General Partner of the Partnership, ABPP Associates, L.P. Effective December 31, 1995, ABPP Associates, L.P. acquired all of the partnership interests in Realty Associates-XIII, L.P., the Associate General Partner, and elected to continue the business of Realty Associates-XIII, L.P. ABPP Associates, L.P., an Illinois limited partnership with JMB as its sole general partner, continues as the Associate General Partner. The Associate General Partner shall be directed by a majority in interest of its limited partners (who are generally officers, directors and affiliates of JMB or its affiliates) as to whether to provide its approval of any sale of real property (or any interest therein) of the Partnership. The Partnership is subject to certain conflicts of interest arising out of its relationships with the General Partners and their affiliates as well as the fact that the General Partners and their affiliates are engaged in a range of real estate activities. Certain services have been and may in the future be provided to the Partnership or its investment properties by affiliates of the General Partners, including property management services and insurance brokerage services. In general, such services are to be provided on terms no less favorable to the Partnership than could be obtained from independent third parties and are otherwise subject to conditions and restrictions contained in the Partnership Agreement. The Partnership Agreement permits the General Partners and their affiliates to provide services to, and otherwise deal and do business with, persons who may be engaged in transactions with the Partnership, and permits the Partnership to borrow from, purchase goods and services from, and otherwise to do business with, persons doing business with the General Partners or their affiliates. The General Partners and their affiliates may be in competition with the Partnership under certain circumstances, including, in certain geographical markets, for tenants for properties and/or for the sale of properties. Because the timing and amount of cash distributions and profits and losses of the Partnership may be affected by various determinations by the General Partners under the Partnership Agreement, including whether and when to sell or refinance a property, the establishment and maintenance of reasonable reserves, the timing of expenditures and the allocation of certain tax items under the Partnership Agreement, the General Partners may have a conflict of interest with respect to such determinations. The names, positions held and length of service therein of each director and the executive and certain other officers of the Corporate General Partner of the Partnership are as follows: SERVED IN NAME OFFICE OFFICE SINCE - ---- ------ ------------ Judd D. Malkin Chairman 5/03/71 Director 5/03/71 Chief Financial Officer 2/22/96 Neil G. Bluhm President 5/03/71 Director 5/03/71 Burton E. Glazov Director 7/01/71 Stuart C. Nathan Executive Vice President 5/08/79 Director 3/14/73 A. Lee Sacks Director 5/09/88 John G. Schreiber Director 3/14/73 H. Rigel Barber Chief Executive Officer 8/01/93 Executive Vice President 1/02/87 Glenn E. Emig Executive Vice President 1/01/93 Chief Operating Officer 1/01/95 Gary Nickele Executive Vice President 1/01/92 General Counsel 2/27/84 Gailen J. Hull Senior Vice President 6/01/88 Howard Kogen Senior Vice President 1/02/86 Treasurer 1/01/91 There is no family relationship among any of the foregoing directors or officers. The foregoing directors have been elected to serve a one-year term until the annual meeting of the Corporate General Partner to be held on June 5, 1996. All of the foregoing officers have been elected to serve one-year terms until the first meeting of the Board of Directors held after the annual meeting of the Corporate General Partner to be held on June 5, 1996. There are no arrangements or understandings between or among any of said directors or officers and any other person pursuant to which any director or officer was elected as such. JMB is the Corporate General Partner of Carlyle Real Estate Limited Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX ("Carlyle-IX"), Carlyle Real Estate Limited Partnership-X ("Carlyle-X"), Carlyle Real Estate Limited Partnership-XI ("Carlyle-XI"), Carlyle Real Estate Limited Partnership-XII ("Carlyle-XII"), Carlyle Real Estate Limited Partnership-XIV ("Carlyle-XIV"), Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"), Carlyle Real Estate Limited Partnership-XVI ("Carlyle- XVI"), Carlyle Real Estate Limited Partnership-XVII ("Carlyle-XVII"), JMB Mortgage Partners, Ltd. ("Mortgage Partners"), JMB Mortgage Partners, Ltd.-II ("Mortgage Partners-II"), JMB Mortgage Partners, Ltd.-III ("Mortgage Partners-III"), JMB Mortgage Partners, Ltd-IV ("Mortgage Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus") and Carlyle Income Plus, L.P.-II ("Carlyle Income Plus-II") and the managing general partner of JMB Income Properties, Ltd.-IV ("JMB Income-IV"), JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB Income Properties, Ltd.-VI ("JMB Income-VI"), JMB Income Properties, Ltd.-VII ("JMB Income-VII"), JMB Income Properties, Ltd.-IX ("JMB Income-IX"), JMB Income Properties, Ltd.-X ("JMB Income-X"), JMB Income Properties, Ltd.-XI ("JMB Income-XI"), JMB Income Properties, Ltd.-XII ("JMB Income-XII"), and JMB Income Properties, Ltd.-XIII ("JMB Income-XIII"). JMB is also the sole general partner of the associate general partner of most of the foregoing partnerships. Most of the foregoing directors and officers are also officers and/or directors of various affiliated companies of JMB including Arvida/JMB Managers, Inc. (the general partner of Arvida/JMB Partners, L.P. ("Arvida")), Arvida/JMB Managers-II, Inc. (the general partner of Arvida/JMB Partners, L.P.-II ("Arvida-II")), and Income Growth Managers, Inc. (the corporate general partner of IDS/JMB Balanced Income Growth, Ltd. ("IDS/BIG")). Most of such directors and officers are also partners, directly or indirectly, of certain partnerships which are associate general partners in the following real estate limited partnerships: the Partnership, Carlyle-VII, Carlyle-IX, Carlyle-X, Carlyle-XI, Carlyle-XII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB Income-VI, JMB Income-VII, JMB Income-IX, JMB Income-X, JMB Income-XI, JMB Income-XII, JMB Income-XIII, Mortgage Partners, Mortgage Partners-II, Mortgage Partners-III, Mortgage Partners-IV, Carlyle Income Plus, Carlyle Income Plus-II and IDS/BIG. The business experience during the past five years of each such director and officer of the Corporate General Partner of the Partnership in addition to that described above is as follows: Judd D. Malkin (age 58) is an individual general partner of JMB Income-II, JMB Income-IV and JMB Income-V. Mr. Malkin has been associated with JMB since October, 1969. Mr. Malkin is a director of Urban Shopping Centers, Inc., an affiliate of JMB that is a real estate investment trust in the business of owning, managing and developing shopping centers. He is a Certified Public Accountant. Neil G. Bluhm (age 58) is an individual general partner of JMB Income-II, JMB Income-IV and JMB Income-V. Mr. Bluhm has been associated with JMB since August, 1970. Mr. Bluhm is a director of Urban Shopping Centers, Inc., an affiliate of JMB that is a real estate investment trust in the business of owning, managing and developing shopping centers. He is a member of the Bar of the State of Illinois and a Certified Public Accountant. Burton E. Glazov (age 57) has been associated with JMB since June, 1971 and served as an Executive Vice President of JMB until December 1990. He is a member of the Bar of the State of Illinois and a Certified Public Accountant. Stuart C. Nathan (age 54) has been associated with JMB since July, 1972. Mr. Nathan is a director of Sportmart, Inc., a retailer of sporting goods. He is a member of the Bar of the State of Illinois. A. Lee Sacks (age 62) (President of JMB Insurance Agency, Inc.) has been associated with JMB since December, 1972. John G. Schreiber (age 49) has been associated with JMB since December, 1970 and served as an Executive Vice President of JMB until December 1990. Mr. Schreiber is President of Schreiber Investments, Inc. a company which is engaged in the real estate investing business. He is also a senior advisor and partner of Blackstone Real Estate Partners, an affiliate of the Blackstone Group, L.P. Since 1994, Mr. Schreiber has also served as a Trustee of Amli Residential Property Trust, a publicly- traded real estate investment trust that invests in multi-family properties. He is also a director of Urban Shopping Centers, Inc., an affiliate of JMB that is a real estate investment trust in the business of owning, managing and developing shopping centers as well as a director for a number of investment companies advised or managed by T. Rowe Price Associates and its affiliates. Mr. Schreiber holds a Masters degree in Business Administration from Harvard University Graduate School of Business. H. Rigel Barber (age 46) has been associated with JMB since March, 1982. He holds a J.D. degree from the Northwestern Law School and is a member of the Bar of the State of Illinois. Glenn E. Emig (age 48) has been associated with JMB since December 1979. Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig was Executive Vice President and Treasurer of JMB Institutional Realty Corporation. He holds a Masters degree in Business Administration from Harvard University Graduate School of Business and is a Certified Public Accountant. Gary Nickele (age 43) has been associated with JMB since February, 1984. He holds a J.D. degree from the University of Michigan Law School and is a member of the Bar of the State of Illinois. Gailen J. Hull (age 47) has been associated with JMB since March, 1982. He holds a Masters degree in Business Administration from Northern Illinois University and is a Certified Public Accountant. Howard Kogen (age 60) has been associated with JMB since March, 1973. He is a Certified Public Accountant. ITEM 11. EXECUTIVE COMPENSATION The Partnership has no officers or directors. The Partnership is required to pay a management fee to the Corporate General Partner and the General Partners are entitled to receive a share of cash distributions, when and as cash distributions are made to the Limited Partners, and a share of profits or losses. Reference is made to Notes 5 and 9 for a description of such distributions and allocations. In 1995, the General Partners received distributions of $110,945, and the Corporate General Partner received a management fee. The General Partners received a share of Partnership gains for tax purposes aggregating $8,200 in 1995. The Partnership is permitted to engage in various transactions involving affiliates of the Corporate General Partner of the Partnership, as described in Note 9. The relationship of the Corporate General Partner (and its directors and officers) to its affiliates is set forth above in Item 10. An affiliate of the Corporate General Partner provided property management services during 1995 for the Long Beach Plaza in Long Beach, California and the Copley Place multi-use complex in Boston, Massachusetts, at various fees calculated based upon the gross income from the properties. In 1995, such affiliate earned property management and leasing fees amounting to $1,459,783 for such services. As set forth in the Partnership Agreement, the Corporate General Partner must negotiate such agreements on terms no less favorable to the Partnership than those customarily charged for similar services in the relevant geographical area (but in no event at rates greater than 6% of the gross income from a property), and such agreements must be terminable by either party thereto, without penalty, upon 60 days' notice. Payment of certain pre-1993 property management and leasing fees payable under the terms of the management agreements ($2,877,000, approximately $8 per $1,000 interest) at December 31, 1995 has been deferred. All amounts currently payable do not bear interest and are expected to be paid in future periods. All property management fees and leasing fees are being paid currently. In February 1995, the Partnership paid $10,000,000 of previously deferred property management and leasing fees to an affiliate of the General Partner. JMB Insurance Agency, Inc., an affiliate of the Corporate General Partner, earned insurance brokerage commissions in 1995 aggregating $65,185 in connection with the providing of insurance coverage for certain of the real property investments of the Partnership, all of which was paid at December 31, 1995. Such commissions are at rates set by insurance companies for the classes of coverage provided. The General Partners of the Partnership or their affiliates may be reimbursed for their direct expenses or out-of-pocket expenses and salaries and related salary expenses relating to the administration of the Partnership and the acquisition and operation of the Partnership's real property investments. In 1995, the Corporate General Partner of the Partnership or its affiliates were due reimbursement for such out-of-pocket expenses in the amount of $208,625, of which $91,622 was unpaid at December 31, 1995. The General Partners are also entitled to reimbursements for portfolio management, legal and accounting services. Such costs for 1995 were $74,396, $9,267 and $164,441, respectively, all of which were paid as of December 31, 1995. As more fully discussed in Note 3(c), the Partnership has an obligation to fund, on demand, $600,000 and $600,000 to Carlyle Managers, Inc. and Carlyle Investors, Inc., respectively, of additional paid-in capital (reflected in amounts due to affiliates in the accompanying financial statements). As of December 31, 1995, these obligations bore interest at 5.83% per annum and interest accrued on these obligations was $171,989. The affiliated joint venture partner was obligated through December 31, 1991 to loan amounts to pay for any operating deficits (as defined) of Copley Place. Through December 31, 1995, the affiliated joint venture partner has loaned approximately $13,398,000 at an interest rate based on its line of credit, which bears interest at a floating rate (averaging 7.83% per annum at December 31, 1995). During 1995, approximately $1,318,000 of interest accrued on these loans, and the joint venture paid approximately $1,518,000 of accrued interest (including a portion accrued from a prior year) on these loans.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) No person or group is known by the Partnership to own beneficially more than 5% of the outstanding Interests of the Partnership. (b) The Corporate General Partner, its officers and directors and the Associate General Partner own the following Interests of the Partnership: NAME OF AMOUNT AND NATURE BENEFICIAL OF BENEFICIAL PERCENT TITLE OF CLASS OWNER OWNERSHIP OF CLASS - -------------- ---------- ----------------- -------- Limited Partnership Interests JMB Realty Corporation 5 Interests directly Less than 1% Limited Partnership Interests Corporate General 6.79 Interests directly (1) Less than 1% Partner, its officers and directors and the Associate General Partner as a group (1) Includes 1.79 Interests owned by officers or their relatives for which an officer has investment and voting power as to such Interests so owned. No officer or director of the Corporate General Partner of the Partnership possesses a right to acquire beneficial ownership of Interests of the Partnership. Reference is made to Item 10 for information concerning ownership of the Corporate General Partner. (c) There exists no arrangement, known to the Partnership, the operation of which may at a subsequent date result in a change in control of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS There were no significant transactions or business relationships with the Corporate General Partner, affiliates or their management other than those described in Items 10 and 11 above. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report: (1) Financial Statements (See Index to Financial Statements filed with this annual report). (2) Exhibits. 3.* Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus, and which is hereby incorporated by reference. 4-A. Documents relating to the mortgage loan secured by the 1001 Fourth Avenue Plaza in Seattle, Washington are also hereby incorporated herein by reference to Post-Effective Amendment No. 2 in the Partnership's Registration Statement on Form S-11 (File No. 2-81125) dated June 9, 1983. 4-B. Documents relating to the mortgage loan secured by the Copley Place multi-use complex, in Boston Massachusetts, are also hereby incorporated herein by reference to Post-Effective Amendment No. 2 in the Partnership's Registration Statement on Form S-11 (File No. 2-81125) dated June 9, 1983. 4-C.*Documents relating to the modification of the mortgage loan secured by 1001 Fourth Avenue Plaza are hereby incorporated herein by reference. 4-D.*Documents relating to the modification of the mortgage loan secured by the Copley Place multi-use complex are hereby incorporated herein by reference. 10-A.Acquisition documents relating to the purchase by the Partnership of an interest in the 1001 Fourth Avenue Plaza in Seattle, Washington, are hereby incorporated herein by reference to Post-Effective Amendment No. 2 to the Partnership's Registration Statement on Form S-11 (File No. 2-81125) dated June 9, 1983. 10-B.Acquisition documents relating to the purchase by the Partnership of an interest in the Copley Place multi-use complex in Boston, Massachusetts, are hereby incorporated herein by reference to Post- Effective Amendment No. 2 to the Partnership's Registration Statement on Form S-11 (File No. 2-81125) dated June 9, 1983. 10-C.Documents relating to the sale by the Partnership of an interest in the Allied Automotive Center, in Southfield, Michigan, are hereby incorporated herein by reference to the Partnership's Report on Form 8-K (File No. 0-12791) for October 10, 1990, dated October 30, 1990. 10-D.Documents describing the transferred title of the Partnership's interest in the Commercial Union Office Building to the second mortgage lender, are hereby incorporated herein by reference to the Partnership's Report on Form 8-K (File No. 0-12791) for August 15, 1991, dated September 18, 1991. 10-E.Agreement dated March 25, 1993 between JMB/NYC and the Olympia & York affiliates regarding JMB/NYC's deficit funding obligations from January 1, 1992 through June 30, 1993 is hereby incorporated by reference to the Partnership's Report on Form 10-K (File No. 0-12791) for December 31, 1992, dated March 30, 1993. 10-F.Agreement of Limited Partnership of Carlyle-XIII Associates L.P. is hereby incorporated by reference to the Partnership's Report on Form 10-Q (File No. 0-12791) dated May 14, 1993. 10-G.Documents relating to the sale by the Partnership of its interest in the Rio Cancion Apartments in Tucson, Arizona, are herein incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-12791) for March 31, 1993, dated May 14, 1993. 10-H.Documents relating to the sale by the Partnership of its interest in the Old Orchard Urban Venture are herein incorporated by reference to the Partnership's Report on Form 8-K (File No. 0-12791) for August 30, 1993, dated November 12, 1993. 10-I.Documents describing the transferred title of the Partnership's interest in the 1001 Fourth Avenue Office Building to the first mortgage lender, are hereby incorporated herein by reference to the Partnership's Report on Form 8-K (File No. 0-12791) for November 1, 1993, dated November 12, 1993. 10-J.Second Amended and Restated Articles of Partnership of JMB/NYC Office Building Associates, are hereby incorporated herein by reference to the Partnership's report on Form 10-K (File No. 0- 12791) for December 31, 1993 dated March 28, 1994. 10-K.Amended and Restated Certificate of Incorporation of Carlyle-XIV Managers, Inc., are hereby incorporated herein by reference to the Partnership's report on Form 10-K (File No. 0-12791) for December 31, 1993 dated March 28, 1994. 10-L.Amended and Restated Certificate of Incorporation of Carlyle-XIII Managers, Inc., are hereby incorporated herein by reference to the Partnership's report on Form 10-K (File No. 0-12791) for December 31, 1993 dated March 28, 1994. 10-M.$600,000 demand note between Carlyle-XIII Associates, L.P. and Carlyle Managers, Inc., are hereby incorporated herein by reference to the Partnership's report on Form 10-K (File No. 0-12791) for December 31, 1993 dated March 28, 1994. 10-N.$600,000 demand note between Carlyle-XIII Associates, L.P. and Carlyle Investors, Inc., are hereby incorporated herein by reference to the Partnership's report on Form 10-K (File No. 0- 12791) for December 31, 1993 dated March 28, 1994. 10-O.Settlement Agreement between Gables Corporate Plaza Associates and Aetna Life Insurance Company, are hereby incorporated herein by reference to the Partnership's report on Form 10-K (File No. 0- 12791) for December 31, 1993 dated March 28, 1994. 10-P.Bill of Sale and Grant Deed related to the University Park office building between Carlyle Real Estate Limited Partnership-XIII and California Federal Bank are hereby incorporated by reference to the Partnership's report on Form 10-Q (File No. 0-12791) for March 31, 1994 dated May 11, 1994. 10-Q.Documents relating to the sale by the Partnership of its interest in the Eastridge Apartments in Tucson, Arizona, are herein incorporated by reference to the Partnership's report for June 30, 1994 on Form 8-K (File No. 0-12791) dated August 12, 1994. 10-R.Proposed Restructure of Two Broadway, 1290 Avenue of the Americas and 237 Park Avenue, New York, New York and Summary of Terms dated October 14, 1994, copies of which are herein incorporated by reference to the Partnership's report for December 31, 1994 on Form 10-K (File No. 0-12791) dated March 27, 1995. 10-S.Assumption Agreements dated October 14, 1994 made by 237 Park Avenue Associates and by 1290 Associates in favor and for the benefit of O&Y Equity Company, L.P., O&Y NY Building Corp. and JMB/NYC Office Building Associates, L.P., copies of which are herein incorporated by reference to the Partnership's report for December 31, 1994 on Form 10-K (File No. 0-12791) dated March 27, 1995. 10-T.Assumption Agreements dated October 14, 1994 made by O&Y Equity Company, L.P., and by O&Y NY Building Corp. and by JMB/NYC Office Building Associates, L.P. in favor and for the benefit of 2 Broadway Associates and 2 Broadway Land Company, copies of which are herein incorporated by reference to the Partnership's report for December 31, 1994 on Form 10-K (File No. 0-12791) dated March 27, 1995. 10-U.Amendment No. 1 to the Agreement of Limited Partnership of Carlyle-XIII Associates, L.P. is hereby incorporated by reference to the Partnership's report for March 31, 1995 on Form 10-Q (File No. 0-12791) dated May 11, 1995. 10-V.Amendment No. 1 to the Second Amended and Restated Articles of Partnership of JMB/NYC Office Building Associates, L.P. is hereby incorporated by reference to the Partnership's report for March 31, 1995 on Form 10-Q (File No. 0-12791) dated May 11, 1995. 10-W.Agreement of Sale between 2 Broadway Associates, L.P. and 2 Broadway Acquisition Corp. dated August 10, 1995, a copy of which is filed herewith. 10-X.Agreement of Conversion of 1290 Associates into 1290 Associates, L.L.C. dated October 10, 1995 among JMB/NYC Office Building Associates, L.P., an Illinois limited partnership, O&Y Equity Company, L.P., a Delaware limited partnership and O&Y NY Building Corp., a Delaware corporation, a copy of which is filed herewith. 10-Y.Agreement of Conversion of 237 Park Avenue Associates into 237 Park Avenue Associates, L.L.C., dated October 10, 1995 among JMB/NYC Office Building Associates, L.P., an Illinois limited partnership, O&Y Equity Company, L.P., a Delaware limited partnership and O&Y NY Building Corp., a Delaware corporation, a copy of which is filed herewith. 21. List of Subsidiaries. 24. Powers of Attorney. 27. Financial Data Schedule. Although certain additional long-term debt instruments of the Registrant have been excluded from Exhibit 4 above, pursuant to Rule 601(b)(4)(iii), the Registrant commits to provide copies of such agreements to the SEC upon request. (b) No reports on Form 8-K were filed since the beginning of the last quarter of the period covered by this report. ---------------- * Previously filed as Exhibits 3, 4-C and 4-D, respectively, to the Partnership's Report for December 31, 1992 on Form 10-K to the Securities Exchange Act of 1934 (File No. 0-12791) dated March 30, 1993 are hereby incorporated herein by reference. No annual report or proxy material for the fiscal year 1995 has been sent to the Partners of the Partnership. An annual report will be sent to the Partners subsequent to this filing. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII By: JMB Realty Corporation Corporate General Partner GAILEN J. HULL By: Gailen J. Hull Senior Vice President Date: March 25, 1996 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 and on the dates indicated. By: JMB Realty Corporation Corporate General Partner JUDD D. MALKIN* By: Judd D. Malkin, Chairman and Chief Financial Officer Date: March 25, 1996 NEIL G. BLUHM* By: Neil G. Bluhm, President and Director Date: March 25, 1996 H. RIGEL BARBER* By: H. Rigel Barber, Chief Executive Officer Date: March 25, 1996 GLENN E. EMIG* By: Glenn E. Emig, Chief Operating Officer Date: March 25, 1996 GAILEN J. HULL By: Gailen J. Hull, Senior Vice President Principal Accounting Officer Date: March 25, 1996 By: A. LEE SACKS* A. Lee Sacks, Director Date: March 25, 1996 By: STUART C. NATHAN* Stuart C. Nathan, Executive Vice President and Director Date: March 25, 1996 *By: GAILEN J. HULL, Pursuant to a Power of Attorney GAILEN J. HULL By: Gailen J. Hull, Attorney-in-Fact Date: March 25, 1996 CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII EXHIBIT INDEX Document Incorporated By Reference Page ------------ ---- 3. Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus Yes 4-A. Mortgage loan documents secured by the 1001 Fourth Avenue Plaza Yes 4-B. Mortgage loan documents secured by the Copley Place multi-use complex Yes 4-C. Remodification of mortgage loan documents secured by 1001 Fourth Avenue Plaza Yes 4-D. Remodification of mortgage loan documents secured by Copley Place multi-use complex.Yes 10-A. Acquisition documents related to the 1001 Fourth Avenue Plaza Yes 10-B. Acquisition documents related to the Copley Place multi-use complex Yes 10-C. Documents related to the sale of Allied Automotive Center. Yes 10-D. Documents related to the transferred title of Commercial Union Office BuildingYes 10-E. Agreement relating to JMB/NYC's deficit funding obligations from January 1, 1992 through June 30, 1993. Yes 10-F. Agreement of Limited Partnership of Carlyle-XIII Associates L.P. Yes 10-G. Documents relating to the sale by the Partnership of its interest in the Rio Cancion Apartments Yes 10-H. Documents relating to the sale of its interest in the Old Orchard Urban Venture Yes 10-I. Documents related to the transferred title to the Commercial Union Office Building Yes 10-J. Second Amended and Restated Articles of Partnership of JMB/NYC Office Building Associates Yes 10-K. Amended and Restated Certificate of Incorporation of Carlyle-XIV Managers, Inc. Yes 10-L. Amended and Restated Certificate of Incorporation of Carlyle-XIII Managers, Inc. Yes 10-M. $600,000 demand note between Carlyle-XIII Associates, Ltd. and Carlyle Managers, Inc. Yes CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII EXHIBIT INDEX - CONTINUED Document Incorporated By Reference Page ------------ ---- 10-N. $600,000 demand note between Carlyle-XIII Associates, Ltd. and Carlyle Investors, Inc. Yes 10-O. Settlement Agreement between Gables Corporate Plaza Associates and Aetna Life Insurance Company Yes 10-P. Bill of Sale and Grant Deed related to the University Park office building between Carlyle Real Estate Limited Partnership-XIII and California Federal Bank Yes 10-Q. Documents relating to the sale by the Partnership of its interest in the Eastridge Apartments Yes 10-R. Proposed Restructure of Two Broadway, 1290 Avenue of the Americas and 237 Park Avenue, New York, New York and Summary of Terms dated October 14, 1994 Yes 10-S. Assumption Agreements dated October 14, 1994 made by 237 Park Avenue Associates and by 1290 Associates in favor and for the benefit of O&Y Equity Company, L.P., O&Y NY Building Corp. and JMB/NYC Office Building Associates, L.P. Yes 10-T. Assumption Agreements dated October 14, 1994 made by O&Y Equity Company, L.P., and by O&Y NY Building Corp. and by JMB/NYC Office Building Associates, L.P. in favor and for the benefit of 2 Broadway Associates and 2 Broadway Land Company Yes 10-U. Amendment No. 1 to Carlyle-XIII Associates Yes 10-V. Amendment No. 1 to JMB/NYC Office Building Associates, L.P. Yes 10-W. Agreement of Sale between 2 Broadway Associates, L.P. and 2 Broadway Acquisition Corp. dated August 10, 1995 No 10-X. Agreement of Conversion of 1290 Associates into 1290 Associates, L.L.C. dated October 10, 1995 No 10-Y. Agreement of Conversion of 237 Park Avenue Associates into 237 Park Avenue Associates, L.L.C. dated October 10, 1995 No 21. List of Subsidiaries No CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII EXHIBIT INDEX - CONTINUED Document Incorporated By Reference Page ------------ ---- 24. Powers of Attorney No 27. Financial Data Schedule No - ------------------ * Previously filed as exhibits to the Partnership's Registration Statement on Form S-11 (as amended) under the Securities Exchange Act of 1933 and the Partnership's prior Reports on Form 8-K and Form 10-K of the Securities Exchange Act of 1934. EX-10 2 AGREEMENT OF SALE BETWEEN 2 BROADWAY ASSOCIATES, L.P. AS SELLER, AND 2 BROADWAY ACQUISITION, CORP. AS PURCHASER TABLE OF CONTENTS PAGE ARTICLE I: Sale of the Property . . . . . . . . . . . 1 ARTICLE II: Deposit, Purchase Price and Apportionments 2 2.1 Deposit . . . . . . . . . . . . . . . . . . . . 2 2.2 Purchase Price. . . . . . . . . . . . . . . . . 2 2.3 Prorations. . . . . . . . . . . . . . . . . . . 2 2.4 Tax Reduction Proceedings . . . . . . . . . . . 5 2.5 Closing Expenses. . . . . . . . . . . . . . . . 5 ARTICLE III: Title and Survey . . . . . . . . . . . . 7 3.1 Permitted Exceptions. . . . . . . . . . . . . . 7 3.2 Other Title Matters . . . . . . . . . . . . . . 8 ARTICLE IV: Covenants; Assumption of Brokerage Agreements; Representations. . . . . . . . . . . . . . . . . . . . 9 4.1 Seller's Covenants. . . . . . . . . . . . . . . 9 4.2 Purchaser's Covenants . . . . . . . . . . . . . 11 4.3 Assumption of Brokerage Obligations . . . . . . 12 4.4 Representations . . . . . . . . . . . . . . . . 13 ARTICLE V: The Closing. . . . . . . . . . . . . . . . 13 5.1 Time and Place of Closing . . . . . . . . . . . 13 5.2 Acts to be Performed by Seller. . . . . . . . . 13 5.3 Acts to be Performed by Purchaser . . . . . . . 14 i ARTICLE VI: Conditions Precedent to Purchaser's and Seller's Obligations to close. . . . . . . . . . . 15 6.1 Conditions to Purchaser's Obligations . . . . . 15 6.2 Conditions to Seller's Obligations. . . . . . . 15 6.3 Termination . . . . . . . . . . . . . . . . . . 16 ARTICLE VII: Termination, Default and Remedies. . . . 16 7.1 Permitted Termination . . . . . . . . . . . . . 16 7.2 Default by Seller . . . . . . . . . . . . . . . 16 7.3 Default by Purchaser. . . . . . . . . . . . . . 17 ARTICLE VIII: Miscellaneous . . . . . . . . . . . . . 17 8.1 Casualty and Condemnation . . . . . . . . . . . 17 8.2 Brokerage . . . . . . . . . . . . . . . . . . . 18 8.3 Notices . . . . . . . . . . . . . . . . . . . . 18 8.4 Governing Law . . . . . . . . . . . . . . . . . 20 8.5 Integration; Modification; Waiver . . . . . . . 20 8.6 Counterpart Execution . . . . . . . . . . . . . 20 8.7 Headings; Construction. . . . . . . . . . . . . 21 8.8 Binding Effect; Assignment. . . . . . . . . . . 21 8.9 Exhibits. . . . . . . . . . . . . . . . . . . . 21 8.10 Recordation . . . . . . . . . . . . . . . . . . 21 8.11 Approval. . . . . . . . . . . . . . . . . . . . 22 8.12 Survival. . . . . . . . . . . . . . . . . . . . 22 8.13 Severability. . . . . . . . . . . . . . . . . . 22 8.14 Non-recourse. . . . . . . . . . . . . . . . . . 22 8.15 Seller's Access to Books and Records. . . . . . 22 ii 8.16 No Consequential Damages. . . . . . . . . . . . 23 8.17 Employee Arrangements . . . . . . . . . . . . . 24 8.18 Indemnification . . . . . . . . . . . . . . . . 24 8.19 Third Party Beneficiary . . . . . . . . . . . . 24 Exhibits A. The land B. Title Exceptions C. (Intentionally Omitted) D. (Intentionally Omitted) E. Form of Assumption of Brokerage Agreements F. Schedule of Leases G. Schedule of Contracts H. Form of Deed I. Form of Assignment and Assumption of Ground Lease Agreement J. Form of Assignment of Leases and Contracts K. Form of Bill of Sale L. Form of FIRPTA Affidavit M. Schedule of Employees N. Form of Letter Regarding Assumption of Collective Bargaining Agreements O. Schedule of Collective Bargaining Agreements iii AGREEMENT OF SALE THIS AGREEMENT OF SALE (this "AGREEMENT") is made and entered into as of August 10, 1995 between 2 broadway Associates, L.P., as seller ("SELLER"), and 2 BROADWAY ACQUISITION, CORP., a NY CORP., as purchaser ("Purchaser"). In consideration of the agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser agree as Follows: ARTICLE I: SALE OF PROPERTY Subject to the terms and provisions of the Agreement, Seller agrees to sell to Purchaser, and Purchaser agrees to purchase from Seller, all of the following described property (collectively, the "PROPERTY"): (a) all of Seller's right, title and interest in and to the fee title in that certain parcel of land (the "LAND") located in New York, New York, being described on EXHIBIT A hereto, and the building and other improvements constructed on the Land (the "IMPROVEMENTS") commonly known as 2 Broadway, New York, New York; (b) all of Seller's interest as lessor and all of Seller's interest as lessee, under that certain Lease Agreement dated as of May 28, 1956 between New York Produce Exchange, as landlord, and Frederick A. Pfister and Joseph A. Marone, as tenants, as amended by amendments dated December 30, 1957 and July 31, 1959 or otherwise (the "GROUND LEASE"); (c) all right, title and interest of Seller under all leases and other agreements providing for the occupancy of space in the Improvements (each, a "LEASE"), and all prepaid rentals (to the extent applicable to a period after the Closing Date (as defined in Section 5.1 below) and the security deposits under the Leases (to the extent not applied prior to the Closing Date); (d) subject to the provisions of Sections 2.3 (d), 4.1 (b) and 8.17, to the extent assignable, all right, title and interest of Seller (x) under all agreements relating to the operation or maintenance of the Property including, without limitation, service and maintenance agreements, but excluding any such agreements with affiliates of the Seller or its partners (the "CONTRACTS") and (y) the Collective Bargaining Agreements (as defined in Section 8.17 (c)); (e) all machinery, equipment, fixtures and building supplies, owned by Seller, located in or on the Land or the Improvements, and used in connection with the operation of the Improvements (the "PERSONAL PROPERTY"); (f) subject to the provisions of Section 8.1 below, all right, title and interest, if any, of Seller in and to any land lying in the bed of any highway, street, road or avenue, opened or proposed, in front of or adjoining all or any part of the Land, to the center line thereof, and to any award made, or to be made, in lieu thereof, and in and to any unpaid award for damage to the Land by reason of change of grade of any such highway, street, road or avenue; and (g) all right, title and interest of Seller in and to any easements, rights-of-way, privileges, rights and appurtenances of any kind relating to and for the benefit of the Land and the Improvements, including, without limitation, all development rights, air rights, zoning rights and any adjacent vaults, alleys, strips or gores of land, sidewalks, driveways and parking areas and benefits thereunto belonging and pertaining to the Land and Improvements existing as of the date hereof and at any time hereafter. (h) The parties hereto acknowledge and agree that the value of the Personal Property is DE MINIMIS and no part of the Purchase Price (as hereinafter defined) is applicable thereto. ARTICLE II: DEPOSIT, PURCHASE PRICE AND APPORTIONMENTS 2.1 DEPOSIT. Prior to the execution of this Agreement, Purchaser has deposited the sum of $1,500,000.00 (the "DEPOSIT") with the Title Company (as defined in Section 3.1 below) pursuant to the "Offer for the Purchase of Property known as 2 Broadway, New York, New York" (the "Offer Letter"). The Deposit is being held by the Title Company in an interest bearing account and otherwise in accordance with that certain escrow agreement referred to in the Offer Letter, among the Title Company, Purchaser and Seller as security for the performance by Purchaser of its obligations hereunder. 2.2 PURCHASE PRICE.The purchase price for the Property (the "PURCHASE PRICE") shall be TWENTY MILLION FIVE HUNDRED THOUSAND DOLLARS ($20,500,000.00), which shall be paid as Closing (as defined in Section 5.1 below), plus or minus any net prorations due to Seller or Purchaser, as the case may be, as described in Section 2.4 below, by wire transfer to Seller and/or such other payees as Seller may designate in writing, upon notice given as least two business days prior to the Closing Date (as hereinafter defined). The net Purchase Price shall be paid by (a) the Title Company delivering the amount of the Deposit to Seller and (b) the Purchaser delivering the balance to Seller. 2.3 PRORATIONS. (a) The items described below with respect to the Property shall apportioned between seller and Purchaser and shall be prorated on a per diem basis as of 11:59 p.m. of the day before the Closing Date: (i) annual rents and other fixed charges under the Leases ("FIXED RENT"), as, when and to the extent collected (ii) unfixed charges payable under the Leases (including, without limitation, on account of percentage rental, taxes, porter's wage, operating expenses and electricity) ("UNFIXED RENT"), as when and to the extent collected; (iii)real estate taxes, vault taxes, water charges and sewer rents, if any, n the basis of the fiscal year for which assessed; (iv) assessments, if any; -2- (v) amounts payable under the Contracts assigned to Purchaser. (vi) employees' wages, vacation pay, welfare benefits and payroll taxes; (vii)interest on tenant security deposits if applicable; (viii) building supplies contained in unopened cartons or packages located at the Property (based upon Seller's cost, as set forth in invoices or other proof reasonably satisfactory to Purchaser); and (ix) fees payable in connection with licenses and permits covering the Property or any structures or equipment located thereon. (b) If the closing Date shall occur before the real estate tax rate or assessment is fixed for the tax year in which the Closing date occurs, the apportionment of taxes shall be upon the basis of the tax rate or assessment for the next preceding year applied to the latest assessed valuation and Seller and Purchaser shall readjust real estate taxes promptly upon the fixing of the tax rate or assessment for the tax year in which the closing Date occurs. (c) If there is a water meter(s) on the Property, Seller shall furnish a reading to a date not more than thirty (30) days prior to the Closing Date, and the unfixed meter charge and the unfixed sewer rent, if any, based thereon for the intervening time shall be apportioned on the basis of such last reading. (d) Seller will close all of its accounts relating to the Property with any and all utility companies, and none of the deposits held by such utility companies, whether or not such deposits are assignable shall be assigned to purchaser but shall be the property of, and shall be retained by, Seller. Purchaser shall be responsible for making its own arrangements to open new accounts relating to the Property with any and all utility companies. Seller will cancel all of its insurance covering the Property as of the Closing Date, and Purchaser shall be responsible for obtaining its own insurance coverage. Seller will cancel all its arrangements with its affiliates which provide elevator maintenance and other repair and maintenance services to the Property. (e) Seller and Purchaser shall prepare an agreement (the "PRORATION AGREEMENT") setting forth in reasonable detail the prorations described above and stating the net amount owed to Seller or Purchaser, as the case may be, on account thereof. Seller and Purchaser shall execute and deliver the Proration Agreement as provided in Sections 5.2 and 5.3 below. (f) If a net amount is owed by Seller to Purchaser as set forth in the Proration Agreement, such amount shall be credited against the payment to be made by Purchaser pursuant to Section 2.2 above. If a net amount is owed by Purchaser to Seller as set forth in the Proration Agreement, such amount shall be added to the payments to made by Purchaser pursuant to Section 2.2 above. If the net amount owed by Seller or Purchaser as the case may be, is not determined at least two business days prior to Closing, so as to be included in the Seller's wire instructions contemplated by Section 2.2, such amount shall be paid by certified check payable to the other party or its designee. -3- (g) If any of the items described above cannot be apportioned at the Closing because of the unavailability of information as to the amounts which are to be apportioned or otherwise, or are incorrectly apportioned at Closing or subsequent thereto, such items shall be apportioned or reapportioned, as the case may be, as soon as practicable after the Closing Date or the date such error is discovered, as applicable; provided that, with the exception of any item required to be apportioned pursuant to paragraph (h) below neither party shall have the right to request apportionment or reapportionment of any such item after the first anniversary of the Closing Date. (h) The apportionment of Fixed and Unfixed Rent (collectively, "RENT") and the collection of Rent arrearage shall be subject to the following: (i) If, on the Closing Date, there is any past due Rent owing by any tenant or other party under a Lease (each, a "TENANT") for any period prior to the Closing Date, any Rent received by Purchaser from such Tenant shall be adjusted between Seller and Purchaser as follows: (1) first, to Rent due by such Tenant for the month in which the Closing Date occurs and which shall apportioned in accordance with Section 2.3(a) above, (2) second, to Rent then due and payable by such Tenant for any period after the Closing Date and (3( then, the excess, if any, to past due Rent for the period prior to the Closing Date. Purchaser shall use reasonable efforts to collect such sums. Purchaser grants Seller the right to sue at law on behalf of the landlord) but not to bring any summary dispossess proceeding) to collect past due Rent owed by Tenants as of Closing Date. Any sums received by Purchaser to which Seller is entitled shall be held in trust for Seller on account of said past due Rent payable to Seller, and Purchaser shall remit to Seller any such sums received by Purchaser to which Seller is entitled within five (5) days after receipt thereof. If Seller receives any amounts after the Closing Date which attributable, in whole or in part, to any period from and after the Closing Date, Seller shall remit to Purchaser that portion of the moneys so received by Seller to Purchaser is entitled within five (5) days after receipt thereof. (ii) Unfixed Rents shall be apportioned for the fiscal year for which such Rent is calculated under respective Lease in proportion to the number of days in such fiscal year occurring prior to the Closing Date and the number of days in such fiscal year from and after the Closing Date. If any Unfixed Rent payable under any Lease has not been billed or has not been determined in accordance with the provisions of the respective Lease as of the Closing Date, Purchaser shall bill the same when billable and each party shall cooperate with the other to determine the correct amount of such charges. Seller shall be entitled to all Unfixed Rent (i) relating to fiscal year occurring in its entirety prior to the Closing Date and (ii) relating to a charge or expense incurred prior to the Closing Date but which is not being apportioned pursuant to this Agreement (e.g., overtime HVAC, recoveries of legal fees in Tenant disputes). (iii)All prepaid rentals made under any Lease in respect of periods on or after the Closing Date and security deposits (to the extent required to be returned to the respective Tenant at the expiration of its Lease) shall be delivered to Purchaser at the Closing. Seller shall reasonably cooperate with Purchaser to change the beneficiary on all security deposits that are letters of credit or certificates of deposit to Purchaser. -4- (iv) For the avoidance of doubt, the parties confirm that all amounts due and payable in respect of Leases which have expired or otherwise terminated prior to the Closing Date shall be the sole property of Seller and, notwithstanding anything to the contrary contained herein, Seller may take such actions as it desires to collect such amounts. 2.4 TAX REDUCTION PROCEEDINGS. Seller is hereby authorized to continue any proceeding now pending for the reduction of the assessed valuation of the Property ("TAX PROCEEDINGS") and to initiate any such Tax Proceedings, through the Closing Date. All such proceeding shall be prosecuted by counsel of Seller's choice. Seller shall have the right to withdraw, settle or otherwise compromise any protest or reduction proceeding affecting real estate taxes assessed against the Property (i) for the fiscal period ending June 30, 1995 or any prior fiscal period without the prior consent of Purchaser and (ii) for the fiscal year ending June 30,1996 provided Purchaser shall have consented with respect thereto, which consent shall not be unreasonably withheld or delayed. The amount of any tax refunds (net of attorneys' fees and other costs of obtaining such tax refunds whether incurred prior to or after the day hereof or the Closing Date and net of amounts required to be refunded to tenants (including former tenants)) with respect to any portion of the Property for a tax period in which the Closing Date occurs shall be apportioned between Seller and Purchaser as of the Closing Date. All refunds for prior tax years belong solely to Seller and, upon receipt of Purchaser or its successors or assigns, same shall be immediately paid to Seller. Purchaser shall not make any filings or take any other actions which would prevent Seller from prosecuting Tax Proceedings brought by Seller. 2.5 CLOSING EXPENSES. (a) TITLE AND SURVEY. Purchaser shall bear all costs of obtaining the Title Report and of the premium for an ALTA owner's title policy (1992 form) (the "TITLE POLICY") and survey costs (including costs of updating the Survey (as defined in Section 3.1 below). (b) REAL ESTATE TRANSFER TAX. Seller and Purchaser agree to comply timely with the requirements of Article 31 of the New York Tax Law and the regulations applicable thereto, as the same may be amended from time to time. Seller and Purchaser shall swear to and deliver the return require by said statute and the regulations issued pursuant to the authority thereof (the "RET RETURN"), it being acknowledged by the parties that Seller intends to file an RET Return stating that, pursuant to the provisions of Section 1146(c) of the United States Bankruptcy Code and the Bankruptcy Court's order confirming the Seller's Plan of Reorganization the transfer of the Property pursuant to this Agreement shall be exempt from the Real Estate Transfer Tax imposed by said Article 31. Any Real Estate Transfer Tax which may nevertheless be imposed by said Article 31 shall be paid by Seller. (c) REAL PROPERTY TRANSFER TAX. Seller and Purchaser agree to comply timely with the requirements of Chapter 21 of Title 11 of the Administrative Code of the City of New York and the regulations applicable thereto, as the same may be amended from time to time. Seller and Purchaser shall swear to and deliver the return required by said statute and the regulations issued pursuant to the authority thereof (the "RPT RETURN"), it being acknowledged -5- by the parties that Seller intends to file an RPT Return stating that, pursuant to the provisions of Section 1146(c) of the Bankruptcy Code and the Bankruptcy Court's order confirming the Seller's Plan of Reorganization, the transfer of the Property pursuant to this Agreement shall be exempt from the Real Estate Transfer Tax imposed by said Chapter 21. Any Real Estate Transfer Tax which may nevertheless be imposed by said Chapter 21 shall be paid by Seller. (d) GAINS TAX. (i) Seller and Purchaser agree to comply timely with the requirements of Article 31-B of the Tax Law of the State of New York and the regulations applicable thereto, as the same from time to time may be amended (collectively, the"GAINS TAX LAW") in good faith and in such manner as to avoid any postponement of the Closing; Purchaser agrees to deliver to Seller simultaneously with the execution of this Agreement a duly executed and acknowledged Transferee Questionnaire prepared by Seller. At the Closing, Seller shall deliver or cause to be delivered to the Title Company either (A) an official Statement of No Tax Due, or (B) an official Tentative Assessment and Return (in the case of either (A) or (B), the "GAINS TAX DOCUMENT") accompanied by a bank check payable to the order of the State Tax Commission in the amount of the tax shown to be due thereon. In the event that on the anticipated Closing Date Seller has not obtained the Gains Tax Document, Seller shall be entitled, by notice to Purchaser, to adjourn the closing one or more times for an aggregate period not to exceed sixty (60) days and Purchaser's obligations hereunder shall remain in full force and effect in the meantime. (ii) Without limiting the provisions of Section 8.8 below, if the Purchaser assigns this Agreement to the extent permitted pursuant to said Section 8.8, no assignment of any rights hereunder shall be effective unless Purchaser and each assignee comply timely with the requirements of the Gains Tax Law applicable to the assignment transaction and unless Purchaser and each assignee delivers to Seller and/or the Title Company on or before the Closing Date the applicable items referred to in clauses (A) or (B) of the preceding paragraph (i), all as may be required as a prerequisite to the recording of the Deed (as defined in Section 5.2(a)). Purchaser shall not be entitled to any delay of the Closing Date by reason of Purchaser's obligation to comply timely with the requirements of the Gains Tax Law in the event of any such assignment. (iii)In addition to making the payment and delivering the instruments and documents referred to above in this Section 2.5(d), Seller, Purchaser and any assignee of Purchaser shall timely (A) make any other payments (except that Purchaser shall have no obligation to make any payments other than in its capacity, if any as assignor hereunder) and (B) execute, acknowledge and deliver such further documents and instruments, as may be necessary to comply with the Gains Tax Law. (e) TAX PAYMENTS. Upon Seller's request, made not less than two (2) business days prior to the Closing, Purchaser shall bring to the Closing separate certified or bank check(s) in the amount(s) of the taxes, if any, due with respect to the Real Estate Transfer Taxes as referred to in (b) and (c) above and the Gains Tax Law, if any. The entire amount of taxes due under the Gains Tax Law (excluding any amounts required to be paid as a result of an -6- assignment of this Contract and the entire amount of taxes due with respect to such Real Estate Transfer Taxes shall be credited against the Purchase Price payable at Closing. (f) PROFESSIONAL FEES AND EXPENSES. Seller and Purchaser shall each pay their respective legal, consulting and other professional fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby. (g) RECORDING CHARGES. Purchaser shall pay all recording charges, if any, payable in connection with the recording of the Deed and the Ground Lease Assignment. Each party shall pay all other charges, if any, payable in connection with the recording of any documents delivered by or on behalf of such party. ARTICLE III: TITLE AND SURVEY 3.1 PERMITTED EXCEPTIONS. (a) Purchaser has been furnished with a preliminary title report no. NY941074M (the "TITLE REPORT") with respect to the Property, dated July 12, 1994 and further redated February 3,1995 issued by Commonwealth Land Title Insurance Company (the "TITLE COMPANY"). Seller has caused to be furnished to Purchaser a survey of the Land prepared by Earl B. Lovell-S.P. Belcher, Inc., dated June 5,1959, last redated March 28,1995 (the "SURVEY"). (b) The Property is to be sold and conveyed subject to the following (the "PERMITTED EXCEPTIONS"): (i) the matters set forth on EXHIBIT B hereto and the standard exclusions set forth in Purchaser's title insurance policy; (ii) the state of facts shown on the Survey, and any additional state of facts that an accurate update of the Survey might show provided that such additional facts do not materially and adversely affect the use of the Improvements as an office building; (iii)all laws, ordinances, rules and regulations of the United States, the State of New York, the City of New York or any agency, department, commission, bureau or instrumentality of any of the foregoing having jurisdiction (each, a "GOVERNMENTAL AUTHORITY") affecting the Property, as the same may now exist or may be hereafter modified supplemented or promulgated; (iv) unpaid federal or state inheritance and estate taxes, or unpaid state and local franchise, general corporation and/or income taxes or other monetary liens, provided that, based upon a deposit with the Title Company, an indemnity to the Title Company, the order of a bankruptcy court having jurisdiction, or other assurances by Seller to the Title Company, Seller is able to induce the Title Company to omit such lien or encumbrance as an objection to title or to insure against its collection out of the Property; -7- (v) right, lack of right or restricted right of any owner of the Property to construct and or maintain (and the right of any Governmental Authority to require the removal of) any vault or vaulted area, in or under the streets, sidewalks or other areas abutting the Property and any applicable licensing statute, ordinance and regulation, the terms of any license pertaining thereto and the lien of street, sidewalk or other area vault taxes; (vi) all presently existing and future liens of (A) real estate taxes and (B) water rates, water meter charges, water frontage and sewer taxes, rents ad charges provided that the items set forth in (A) and (B) are apportioned as provided in this Agreement; (vii)all violations of laws, ordinances, orders, requirements or regulations of any Governmental Authority, applicable to the Property whether or not noted in the records of or issued by, any Governmental Authority, existing on the Closing Date; (viii) such matters as the Title Company shall be willing, without special premium, to omit as exceptions to coverage or to except with insurance against collection out of or enforcement against the Property; (ix) any utility company rights, easements and franchises, provided same do not materially and adversely affect the use of the Improvements as on office building; and (x) financing statements covering fixtures, equipment or personal property of existing or past Tenants. 3.2 OTHER TITLE MATTERS. (a) In the event that on the anticipated Closing Date title to the Property shall be subject to liens, encumbrances or other matters which are not Permitted Exceptions, and if Purchaser shall be unwilling to waive the same and to close the transaction contemplated by this Agreement without abatement or reduction of the Purchase Price or credit or allowance of any kind, Seller shall have the right, at Seller's sole election, either (i) to take such action as Seller shall deem advisable to remove, remedy or comply with such liens, encumbrances or objections or (ii) to cancel this Agreement. Seller shall be deemed to have remedied such liens, encumbrances or objections for all purposes of this Agreement and Purchaser shall be obligated to close title hereunder if the Title Company or another title company licensed to do business in New York and selected by Seller will insure Purchaser's title to the Land and Improvements in the amount of the Purchase Price under an ALTA owner's standard form policy (1992 form) subject only to the Permitted Exceptions, and in such case Purchaser shall accept such title insurance and pay the premiums therefor. In the event of Seller' election to take action to remove, remedy or comply with such liens, encumbrances or other objections or if Seller shall have failed to satisfy any other conditio to Closing contained in this Agreement or if Seller for any other reason elects not to close on the scheduled Closing Date, then, in any such instance, Seller shall be entitled, by notice to Purchaser, to adjourn the Closing one or more times for an aggregate period not to exceed ninety (90) days, and Purchaser's obligations hereunder shall remain in full force and effect in the meantime. If for any reason whatsoever (except for Seller's -8- default under paragraph (b) below) Seller shall not have succeeded in removing, remedying or complying with such liens, encumbrances or other objections at the expiration of any such adjournment or if for any reason whatsoever (except as set forth in Section 7.2 below) Seller shall have failed to satisfy any other condition to Closing contained in this Agreement at the expiration of any such adjournment, and, in either case, shall not elect or shall not be entitled to further adjourn the Closing, and if Purchaser shall still be unwilling to waive the same and to consummate the Closing without abatement or reduction of the Purchase Price or credit or allowance of any kind, this Agreement shall be, and be deemed to be, canceled, the Deposit shall be promptly returned to Purchaser, and the parties shall have no further obligations under this Agreement except those which are expressly stated to survive the termination thereof. (b) The acceptance of the Deed (as hereinafter defined) by Purchaser shall be deemed to be a full performance and discharge of every obligation on the part of Seller to be performed under this Agreement, except those, if any, which are specifically stated herein to survive the Closing. If on the closing Date there are any liens or encumbrances affecting the Property subject to which Purchaser is not obligated to accept title, Seller may use any portion of the Purchase Price payable pursuant to Section 2.2 above to satisfy same, provided Seller shall have delivered instruments in recordable form sufficient to release of record any such liens or encumbrances which constitute recorded instruments, together with the cost of recording or filing said instruments, and the Title Company shall agree to omit such lien or encumbrance as an objection to title. Seller shall use good faith efforts to obtain an order from the bankruptcy court having jurisdiction that would enable Seller to transfer title to the Property to Purchaser free and clear of all liens, encumbrances and other matters that are not Permitted Exceptions. During the period between the date hereof and the Closing Date, Seller shall not grant any additional liens to secure debt (other than any mortgage liens it may grant or confirm in connection with the mortgage financing currently encumbering the Property); provided, however, that the creation of involuntary liens against the Property shall not constitute a breach of Seller's obligations under this sentence. (c) Any title insurance Purchaser may obtain with respect to the purchase of the Property shall be obtained from the Title Company, provided the Title Company is willing to issue the same in accordance with the terms hereof. ARTICLE IV: COVENANTS; ASSUMPTION OF BROKERAGE AGREEMENTS; REPRESENTATIONS 4.1 SELLER'S COVENANTS. Seller covenants that during the period between the date hereof and the Closing Date: (a) The Improvements will be maintained in their present condition, subject, however, to normal wear and tear, damage by fire or other casualty; provided, however, in no event will seller be obligate to expend more than $25,000 in the aggregate to make any repairs or replacements to the Improvements. Nothing herein shall be deemed to limit the installation or alteration of tenant improvements. -9- (b) Without the prior written consent of Purchaser (which shall not be unreasonably withheld), Seller shall not enter into any agreement with respect to the use, occupancy, operation or maintenance of the Property and which would be binding on Purchaser, including, without limitation, Leases and employment, management, service, maintenance and union agreements, or amend, renew or extend any such agreement presently in effect in any material respect, (i) unless such new agreement or amendment can be cancelled on not more than thirty (30) days' notice, (ii) except for agreement or amendments required by law or required to perform emergency repairs or improvements, and (iii) except for union agreements. (c) Subject to Section 4.2 (d) and the further provisions of this Section 4.1 (c), Purchaser and its authorized representatives will be given reasonable access to the Property during ordinary business hours, provided that, any such person given access shall be accompanied by a representative of Seller. Purchaser hereby agrees to indemnify and hold Seller harmless from and against any and all claims, liabilities, losses and expenses, including reasonable attorneys' fees, court costs and disbursements, for physical damage to the Property or any other property or personal injury to any person arising out of or incurred in connection with the performance of any such inspection or any other entry onto the Property by Purchaser or its representatives which indemnification shall survive (i) the termination or cancellation of this Agreement for any reason and (ii) the Closing. Purchaser shall maintain or cause to be maintained, at Purchaser's expense, a policy of commercial general liability insurance, with contractual liability covering Purchaser's indemnification obligations contained in this paragraph, and with a combined single limit of not less than $1,000,000 commercial general liability with a $2,000,000 aggregate and $10,000,000 umbrella liability, insuring Purchaser and Seller and Seller's Affiliates, as additional insured, against any injuries or damages to persons or property that may result from or are related to (a) Purchaser's and/or Purchaser's Representatives' entry to the Property, (b) any investigations or other activities conducted thereon, and (c) any and all other activities undertaken by Purchaser and/or Purchaser's Representatives, in such forms and with an insurance company licensed in the State of New York and rated by Best's Insurance Reports and having a rating of not less than A-VII, and deliver a certificate of insurance representing such coverage to Seller prior to the first entry on the Property. As used in this Agreement, the term, the term "SELLER'S AFFILIATES" shall mean any disclosed or undisclosed officer, director, employee, trustee, shareholder, partner, principal, parent, subsidiary or other affiliate of Seller. The term "PURCHASER'S REPRESENTATIVES" shall mean any of Purchaser's directors, officers, employees, affiliates, partners, brokers, agents or other representatives, including, without limitation, attorneys, accountants, contractors, engineers and financial advisors. (d) Seller shall maintain in full force and effect Seller's existing insurance coverage with respect to the Property or substantially similar coverage. (e) Seller shall perform its obligations under the last two sentences of Section 3.2 (b) above. Whenever in this Agreement Seller is required to obtain Purchaser's approval or consent, Purchaser shall, within five (5) business days after request therefore, notify Seller of its -10- approval or disapproval. If Purchaser fails to respond within said five (5) business day period Purchaser shall be deemed to have granted approval or consent. 4.2 PURCHASER'S COVENANTS (a) Purchaser covenants and agrees that Purchaser (i) knows, and has examined, inspected and investigated to the full satisfaction of Purchaser the physical nature and condition of the Property, (ii) has independently investigated, analyzed and appraised the value and profitability of the Property and (iii) has reviewed the Title Report, the Survey and such other documents and materials as Purchaser has deemed advisable. Purchaser acknowledges that, except as specifically set forth in this Agreement neither Seller nor any real estate broker, agent, employee, servant, consultant or representative of Seller has made any representations whatsoever regarding the subject matter of this Agreement or the transaction contemplated hereby, including without limitation, representations as to the physical nature or condition of the Property, zoning laws, building codes, laws and regulations, environmental matters, the violation of any laws, ordinances, rules, regulations or orders of any Governmental Authority, water, sewer or other utilities, rents or other income, expenses applicable to the Property, capital expenditures, leases, existing or future operations of the Property or any other matter or thing affecting or related to the Property or the operation thereof, except as herein specifically set forth, and Purchaser further agrees to accept the Property in its "as is" condition and "with all faults" on the date hereof subject to reasonable wear and tear and, subject to the provisions of Section 8.1 below, loss by casualty or condemnation. In executing, delivering and/or performing this Agreement Purchaser has not relied upon and does not rely upon, and Seller shall not be liable or bound in any manner by, express or implied warranties, guaranties, promises, statements, representations or information pertaining to any of the matters set forth above in this paragraph made or furnished by Seller or by any real estate broker, agent, employee, servant or any other person representing or purporting to represent Seller to whomever made or given, directly or indirectly, verbally or in writing, unless such warranties, guaranties, promises, statements, representations or information are expressly and specifically set forth herein. (b) Purchaser covenants and agrees that neither Purchaser nor Purchaser's Representatives shall make any oral or written contact with any of Seller's tenants, occupants, vendors, employees, consultants or contractors, or any other entity or person affiliated with the Property in any manner concerning the Property prior to the Closing Date without obtaining Seller's prior written consent in each instance. (c) Purchaser expressly acknowledges that, except as expressly set forth in this Agreement, neither Seller, nor any person acting on behalf of Seller, nor any person or entity which prepared or provided any of the "Evaluation Materials" (as such term is defined in the Solicitation of Offers Package pursuant to which this Agreement is being executed), nor any direct or indirect officer, director, partner, shareholder, employee, agent, representative, accountant, advisor, attorney, principal, affiliate, consultant, contractor, successor or assign of any of the foregoing parties (Seller and all of the other parties described in the preceding portions of this sentence (other than Purchaser) shall be referred to herein collectively as the EXCULPATED PARTIES) has made any oral or written representations or warranties, whether expressed or implied, by operation of law or otherwise, with respect to the Property, the zoning and other laws, -11- regulations rules applicable thereto or the compliance by the Property therewith, the revenues and expenses generated by or associated the Property, or any Evaluation Materials. Purchaser further acknowledges that all Evaluation Materials relating to the Property which have been provided by any of the Exculpated Parties have been provided without any warranty or representation, expressed or implied as to their content, suitability for any purpose, accuracy, truthfulness or completeness and Purchaser shall not have any recourse against Seller or any of the other Exculpated Parties in the event of any errors therein or omissions therefrom. Purchaser is acquiring the Property based solely on its own independent investigation and inspection of the Property and not in reliance on any information provided by Seller or any of the other Exculpated Parties, including, without limitation, any information contained in the Evaluation Materials. (d) Purchaser acknowledges that any access it is given to the Property (whether pursuant to Section 4.1 (c) above or otherwise) shall be solely for the purpose of connection with the ownership of the Property after acquisition of same by Purchaser and shall neither be a basis for evaluating the purchase and sale herein agreed to by Purchaser, nor shall it be a contingency or condition to the performance of Purchaser's obligations hereunder. The results of any such access (whether evidencing latent or patent defects in the Property, the existence or nonexistence of any hazardous materials or substances, the tenants of the Property or the leases affecting the Property, economic projections or market studies concerning the Property, any development rights, taxes, bonds, covenants, conditions and restrictions affecting the Property, water or water rights, air quality, topography, drainage, soil, subsoil of the Property, the utilities serving the Property, any zoning, environmental or building laws, rules or regulations affecting the Property, or otherwise disclosing any condition which is undesirable or in violation of any law or governmental rule, regulation, ordinance or order) shall not be grounds for any release of Purchaser's obligations hereunder or the time for the performance of same, any amendment or modification of this Agreement or any abatement in the Purchase Price. Purchaser agrees to indemnify, defend and hold harmless Seller for any and all loss, cost, liability or expense (including, without limitation, attorneys' fees, court costs and disbursements) arising out of any acts or omissions or Purchaser or its agents, contractors or representatives in connection with its access to the Property provided for in this Section. (e) Seller shall not be obligated to pay any sums or perform any work to any portion of the Property including, but not limited to any work which may now or hereafter be required to cause the Property to be in compliance with the requirements of the Americans with Disabilities Act or any other laws. 4.3 ASSUMPTION OF BROKERAGE OBLIGATIONS. At Closing, Purchaser shall assume all of Seller's obligations under paragraph 11 of the brokerage agreement dated December 14, 1990 between O&Y Management Corp. as agent for 2 Broadway Associates and Peter Berkley & Company, Inc. (relating to space leased by Corporate Solutions, Inc.); under paragraph 10 of the brokerage agreement between O&Y Management Corp. as agent for 2 Broadway Associates and Edward S. Gordon Company, Inc. (relating to space leased by RAS Securities) and under paragraph 3 of the brokerage agreement dated as of January 16, 1995 between O&Y Management Corp. as agent for 2 Broadway Associates and Edward S. Gordon Company, Inc. -12- (relating to space leased by Prentice-Hall, Inc.) copies of which brokerage agreements have been furnished to Purchaser. Such assumptions shall be pursuant to an instrument substantially in the form annexed hereto as EXHIBIT E. 4.4 REPRESENTATIONS. (a) Seller represents that the schedule of leases for the Improvements attached as EXHIBIT F hereto is true and correct in all material respects as of the date hereof, provided that to the extent any information set forth thereon conflicts with the provisions of any Lease or other documentation delivered to Purchaser, the rent roll shall be deemed modified to reflect the correct information. (b) Seller represents that the schedule of Contracts set forth as EXHIBIT G hereto is true and correct in all material respects, provided that to the extent any information set forth thereon conflicts with the provisions of any Contract or other documentation delivered to Purchaser, the schedule shall be deemed modified to reflect such correct information. ARTICLE V: THE CLOSING 5.1 TIME AND PLACE OF CLOSING. Subject to the other terms and conditions of this Agreement, including any adjournment rights provided for herein, the (the "CLOSING") of the transactions contemplated hereby shall be held on the fifteenth day after the date hereof (the "CLOSING DATE "), or if such day is not a business day, then on the next succeeding business day. The Closing shall take place at the offices of Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New York, or at such other location in New York, New York as seller may designate upon not less than two (2) business days notice. 5.2 ACTS TO BE PERFORMED BY SELLER. At the Closing, Seller shall deliver or cause to be delivered to Purchaser the following items: (a) a recordable bargain and sale deed without covenants against grantor's acts in New York statutory form (the "DEED"), executed and acknowledged by Seller, in the form attached as EXHIBIT H hereto, conveying to Purchaser the Land and Improvements subject to the Permitted Exceptions and such other liens, encumbrances and other matters as Purchaser may be willing to waive or Seller shall be deemed to have remedied, as described in Section 3.2(a) above; (b) a recordable assignment (the "GROUND LEASE ASSIGNMENT"), without recourse or warranty, in New York statutory form, of Seller's interest as lessor and lessee under the Ground Lease, in the form attached as EXHIBIT I hereto, which shall include Purchaser's assumption of Seller's obligations thereunder accruing from and after the Closing Date and a general release by Purchaser of any claims it may have relating to the Ground Lease against Seller (and its predecessors-in-interest) thereunder; (c) an assignment (the "ASSIGNMENT OF LEASES AND CONTRACTS") of all right, title and interest of Seller under the Leases and Contracts (to the extent assignable) which are in -13- effect on the Closing Date without, recourse or warranty, in the form attached as EXHIBIT J hereto, which shall include Purchaser's assumption of Seller's obligations under the Leases and Contracts accruing from and after the Closing Date; (d) a bill of Sale ("BILL OF SALE") in the form attached as EXHIBIT K hereto, conveying Seller's right title and interest in and to the Personal Property; (e) a nonforeign affidavit in the form of EXHIBIT L hereto, executed by Seller; (f) the Proration Agreement, executed by Seller; (g) all existing surveys, blueprints, drawings, plans and specifications for or with respect to the Property or any part thereof, to the extent in Seller's possession; (h) keys to the Improvements in Seller's possession; (i) the RET Return, the RPT Return and the Gains Tax Document, executed and acknowledged by Seller, together with the payment, if any, required by Section 2.5 above; (j) any instruments required to be executed by Seller under Section 4.3 of this Agreement; (k) such further instruments as may be necessary to record the Deed and the Ground Lease Assignment; (l) a copy of the order of the bankruptcy court having jurisdiction approving the sale of the Property to Purchaser; (m) a letter to Tenants, advising them of the sale to Purchaser and directing them to make all payments to Purchaser or its designee; and (n) an instrument from Seller releasing Purchaser from any claims under the Ground Lease for the period prior to the Closing. 5.3 ACTS TO BE PERFORMED BY PURCHASER. At the Closing, Purchaser shall deliver or cause to be delivered to Seller (or to the Title Company, as so specified): (a) the payment of the Purchase Price to be made in accordance with Section 2.2 above; (b) the Ground Lease Assignment, executed by Purchaser; (c) the Assignment of Leases and Contracts executed by Purchaser; (d) the Proration Agreement, executed by Purchaser; -14- (e) the RET Return, the RPT Return and the Gains Tax Document executed and acknowledged by Purchaser, together with the payments, if any, require by Section 2.5 above; (f) any instruments required to be executed by Purchaser under Sections 2.4, 4.3 and 8.17 of this Agreement. ARTICLE VI: CONDITIONS PRECEDENT TO PURCHASER'S AND SELLER'S OBLIGATIONS TO CLOSE 6.1 CONDITIONS TO PURCHASER'S OBLIGATIONS. Purchaser's obligation to consummate the transactions contemplated hereunder is conditioned upon satisfaction of each of the following conditions at or prior to the Closing (or such earlier date as is specified with respect to a particular condition): (a) Seller shall have made the deliveries required pursuant to Section 5.2 above; (b) Seller shall not have failed to perform or comply in any material respect with any of its agreements, conditions, covenants or obligations in the manner and within the time periods provided under this Agreement, and all of Seller's representations and warranties shall gave been true and correct in all material respects as of the date when made; and (c) the Title Company (or, as Seller's election, another title company licensed to do business in New York) shall gave delivered to Purchaser a commitment to issue the Title Policy, in an amount at least equal to the Purchase Price, insuring Purchaser's fee title to the Land and the Improvements subject only to the Permitted Exceptions and any of the matters waived by Purchaser. 6.2 CONDITIONS TO SELLER'S OBLIGATIONS. Seller's obligation to consummate the transactions contemplated hereunder is conditioned upon the satisfaction of each of the following conditions at or prior to the Closing (or such earlier date as is specified with respect to a particular condition): (a) Purchaser shall have made the deliveries required pursuant to Section 5.3 above; and (b) Purchaser shall not have failed to perform or comply in any material respect with any of its agreements, conditions or obligations in the manner and by the dates and within the time periods provided under this Agreement and all of Purchaser's representations and warranties shall have been true and correct in all material respects as of the date when made. (c) The Title Company shall have delivered the Deposit to Seller. 6.3 TERMINATION. In the event that any of the above conditions are not satisfied by the party to this Agreement (or a third party, as applicable) specified to satisfy such condition at or -15- prior to the Closing (or such earlier date as is specified with respect to a particular condition), then the party to this Agreement whose obligations are conditioned upon the satisfaction of such condition may terminate this Agreement by notice delivered to the other party at or prior to the Closing; provided, however, if the failure to satisfy such condition is due to the default of the party required to satisfy the same, the other party may pursue its remedies under Article VII. In the event of any termination of this Agreement, the lien of the Purchaser against the Property shall wholly cease and, in addition to any other obligations of the parties which are expressly stated herein to survive such termination, the parties' respective obligations to instruct the Title Company to return the Deposit, shall survive. ARTICLE VII: TERMINATION, DEFAULT AND REMEDIES 7.1 PERMITTED TERMINATION. Subject to the provisions of Section 3.2, if this Agreement is terminated (or deemed terminated) by either party pursuant to a right expressly given it to do so hereunder, but not by reason of the default of the other party, then this Agreement shall be deemed, and be, canceled, the Deposit shall be promptly returned to the Purchaser, and the parties shall have no further obligations under this Agreement, except for those which are expressly stated to survive the termination thereof. 7.2 DEFAULT BY SELLER (a) Seller shall be in default hereunder if Seller shall fail to comply with or perform within the time limits and in the manner required in this Agreement in any material respect any covenant, agreement or obligation on its part to be complied with or performed and any condition to the performance by Seller of such obligations have been satisfied. (b) Except as hereinafter specifically provided to the contrary, if Seller shall be in default hereunder, Purchaser (in lieu of prosecuting an action for damages or proceeding with any other legal course of conduct, the right to bring such actions or proceedings being expressly and voluntarily waived by Purchaser, to the extent legally permissible, following and upon advice of its counsel) shall have the right (i) to seek to obtain specific performance of Seller's obligations hereunder, provided that any action for specific performance shall be commenced within sixty (60) days after such default, or (ii) to promptly receive a return of the Deposit. If Purchaser fails to commence an action for specific performance within sixty (60) days after such default, Purchaser's sole remedy shall be to receive a return of the Deposit. Upon such return and delivery, this Agreement shall terminate and neither party hereto shall have any further obligations under this Agreement other than those which ar expressly stated to survive the termination thereof. 7.3 DEFAULT BY PURCHASER. (a) Purchaser shall be in default hereunder if Purchaser shall fail to comply with or perform within the time limits and in the manner required in this Agreement in any material respect any covenant, agreement or obligation on its part to be complied with or performed and any conditions to the performance by Purchaser of its obligations hereunder have been satisfied. In the event of a default by Purchaser hereunder, Seller may terminate this -16- Agreement by notice to Purchaser at or prior to the Closing, in which event Seller shall be entitled to receive the Deposit as liquidated damages in full satisfaction of any claims against Purchaser hereunder; provided, however, that the foregoing shall not limit any claims that Seller may have against Purchaser based on Purchaser's failure to comply with any post- Closing obligation or any instrument delivered at Closing. (b) As an inducement to Seller to enter into this Agreement, Purchaser agrees that notwithstanding anything to the contrary expressly or by implication provided in this Agreement, (i) time shall be of the essence with respect to the performance by Purchaser of its obligations under this Agreement by the dates and within the time periods set forth in this Agreement, (ii) the failure of Purchaser to perform its obligations under this Agreement by the dates and within the time periods set forth in this Agreement shall be a material default under this Agreement, and (iii) Purchaser shall not be entitled to any adjournment(s) of the times or dates by which Purchaser is required to perform its obligations under this Agreement; except that Purchaser may request one or more adjournments of the Closing Date, provided that the aggregate period of time the Closing may be adjourned by reason thereof shall not exceed five (5) business days. ARTICLE VIII: MISCELLANEOUS 8.1 CASUALTY AND CONDEMNATION. Seller and Purchaser each waive the provisions of all applicable laws, ordinances, rules and regulations of any Governmental Authority relating to the occurrence of a casualty or taking by condemnation or right of eminent domain between the date hereof and the Closing including, without limitation, Section 5-1311 of the New York General Obligations Law, and Seller and Purchaser each agree that the provisions of this Section 8.1 shall control in lieu thereof. Seller agrees to give Purchaser prompt notice of any fire or other casualty affecting the Land or the Improvements between the date hereof and the date hereof and the Closing or of any taking by condemnation or right of eminent domain of all or any portion of the Land or the Improvements. If prior to the Closing there shall occur: (a) material damage to the Property caused by fire or other casualty, which for purposes hereof shall be deemed damage which would cost in excess of $5,000,000 to repair and restore to as good a condition as that existing on the day prior to such fire or other casualty, as reasonably estimated by Seller's independent architect or contractor having an office in New York County; or (b) the taking by condemnation or right of eminent domain of more than ten percent (10%) of the rentable area of the Improvements or of such portion of the sidewalk abutting the Property that materially and permanently interferes with access to the Improvements or the use and operation thereof; then in any such event, either party may, at its option, terminate this Agreement by notice to the other given within twenty (20) days after Purchaser has received the notice referred to above (including, in the case of fire or casualty, a written estimate from Seller's architect or engineer reasonably itemizing the amount of damages) but no later than one day before the Closing Date -17- in which event the provisions of Section 7.1 shall be applicable. If such damage or taking is not material or, if material, neither party elects to terminate this Agreement, then the Closing shall take place as provided herein without abatement of the Purchase Price, and there shall be assigned to Purchaser at the Closing all interest of Seller in and to any insurance proceeds or condemnation awards which may be payable and/or Seller shall pay to Purchaser all amount thereof that have been paid to Seller on account of any such occurrence (minus any amounts theretofore expended by Seller towards the cost of repair and restoration or for making the Property safe and secure pending such repair and restoration), plus the amount of any "deductible" provided in Seller's casualty insurance policy. 8.2 BROKERAGE. Purchaser and Seller each represents to the other that it has not dealt with any broker or finder in connection with this Agreement or the transactions contemplated hereby other than Cushman & Wakefield Inc. and NO OTHER BROKER, the party identified as Offeror's Cooperating Broker in paragraph 4 of the Offer Letter. Each party shall indemnify the other and hold the other harmless from any claim, loss, liability, damage, cost or expense (including, without limitation, reasonable attorneys' fees, disbursements and court costs) paid or incurred by such party by reason of any claim to any broker's, finder's or other fee in connection with this Agreement or the transaction contemplated hereby if such claim is based on dealing with the indemnifying party. Seller agrees to pay to the brokers(s) specified in this section such compensation, commissions or charges to which they are entitled pursuant to separate agreements between such parties. The parties' obligations under this Section 8.2 shall survive the termination of this Agreement. 8.3 NOTICES. Any notice or other communication that is required or permitted to be given under the terms of this Agreement (each, a "NOTICE"), shall be in writing and shall be deemed to have been duly given when (a) deposited in the United States mail, postage prepaid for certified or registered mail, with return receipt requested, (b) by overnight courier service, with return receipt requested, or (c) when personally delivered, in each case to the parties hereto at the following addresses or at such other address as any party hereto shall hereafter specify by (10) days' prior Notice given and received in the manner provided in this Section 8.3 to the other parties described in this Section 8.3. If to Seller: c/o Olympia & York Companies (U.S.A.) 237 Park Avenue New York, New York 10017 Attn: Managing Attorney with a copy to: Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, New York 10004 Attention: Joshua Mermelstein, Esq. -18- and to : Weil, Gotshal & Manges 767 5th Avenue New York, New York 10153 Attention: Edward Sutherland, Esq. If to Purchaser: 2 BROADWAY ACQUISITION CORP. 354 5TH AVE. N.Y N.Y 10018 ATTN: JACK BASCH/RANDY SHAPIRO A Notice shall be deemed to have been duly received (and the time period in which a response thereto is required shall commence), (x) if sent by registered or certified mail or by overnight courier, on the date set forth on the return receipt, or (y) if personally delivered, on the date of such delivery. The inability to make delivery because of changed address of which no Notice was given, or rejection or refusal to accept any Notice offered for delivery, shall be deemed to be receipt of the Notice as of the date of such inability to deliver or rejection or refusal to accept. Any Notice may be given by counsel for the party giving same. 8.4 GOVERNING LAW. The laws of the State of New York (without giving effect to any principles of conflicts of laws) shall govern the validity, enforcement and interpretation of this Agreement. 8.5 INTEGRATION: MODIFICATION: WAIVER. This Agreement constitutes the complete and final expression of the agreement of the parties relating to the Property and the transactions contemplated hereby, and supersedes all previous contracts, agreements and understandings of the parties, either oral or written, relating to the Property or the transactions contemplated hereby. This Agreement cannot be modified, or any of the terms hereof waived, except by an instrument in writing executed by the party against whom enforcement of the modification or waiver is sought. Any other documents delivered to Seller in connection with Purchaser's submission of an offer for the purchase of the Property (I.E., confidentiality agreement, request shall remain in full force and effect, and shall survive the termination of this Agreement. In the event any of the provisions of this Agreement conflict with any of the provisions of the [Purchaser Offer], which specifically relate to the terms of this Agreement, then the provisions of this Agreement shall control. 8.6 COUNTERPART EXECUTION. This Agreement may be executed in several counterparts, each of which shall be fully effective as an original and all of which together shall constitute one and the same instrument. 8.7 HEADING: CONSTRUCTION. The headings which have been used throughout this Agreement have been inserted for convenience of reference only and should not be construed in -19- interpreting this Agreement. Words of any gender used in this Agreement shall include any other gender and words in the singular shall include the plural, and vice versa, unless the context requires otherwise. The words "herein", "hereof", "hereunder" and other similar compounds of the words "here" when used in this Agreement shall refer to the entire Agreement and not to any particular provision or section. As used in this Agreement, the term "BUSINESS DAY" means every day other than (i) Saturdays and Sundays, (ii) all days observed by the Federal or New York State governments as legal holidays, (iii) all days on which commercial banks in New York State are required by law to be closed and (iv) the following Jewish holidays: Rosh Hashanah (first day) and Yom Kippur. 8.8 BINDING EFFECT: ASSIGNMENT. (a) The delivery of this Agreement shall not be deemed an offer. This Agreement shall be binding upon and inure to the benefit of Seller and Purchaser, and their respective heirs, personal representatives, successors and permitted assigns upon, and only upon, the execution and exchange of this Agreement by and between Seller and Purchaser. (b) Purchaser may not assign or otherwise transfer this Agreement or any rights hereunder, without first obtaining Seller's written consent thereto which consent Seller may grant or withhold in its sole and absolute discretion. An assignment or transfer of this Agreement shall not relieve the Purchaser named herein of any of its obligations hereunder. Notwithstanding the foregoing, Purchaser shall have the right to assign or otherwise transfer (directly, by transfer of stock or in any other indirect manner) all (but not a portion) of its interest in this Agreement without the prior consent of Seller to an affiliate of Purchaser. As used herein the term "affiliate" means an entity controlled by, or which controls or which is under common control with, Purchaser. Any transfer in violation of the foregoing shall be void and shall be deemed a material breach by Purchaser of its obligations under this Agreement. (c) No assignment by Purchaser of this Agreement pursuant to paragraph (b) above shall be effective unless Purchaser simultaneously notifies Seller of such transfer, the assignee assumes all of the obligations of Purchaser hereunder pursuant to a written instrument in form and substance reasonably satisfactory to the Seller, and Purchaser complies with the requirements of Section 2.5(d)(ii) above. 8.9 EXHIBITS. All references to Exhibits contained herein are references to Exhibits attached hereto, all of which are made a part hereof for all purposes the same as if set forth herein verbatim, it being expressly understood that if any Exhibit attached hereto which is to be executed and delivered at Closing contains blanks, the same shall be completed correctly and in accordance with the terms and provisions contained herein and as contemplated herein prior to or at the time of execution and delivery thereof. 8.10 RECORDATION. Purchaser shall not file or record this Agreement or any copy or memorandum thereof in any recording or register's offices. Any such filing or recording shall constitute a material default hereunder by Purchaser. -20- 8.11 APPROVAL. Whenever a party is required no to unreasonably withhold its consent, and if no specific period of time is set forth in which a response shall be given, such party shall also not unreasonably delay the same. 8.12 SURVIVAL. (a) Except as specifically provided below, none of the provisions of this Agreement shall survive the Closing. (b) The provisions of Section 2.3(g) shall survive the Closing for a period of one year. (c) The provisions of Section 2.3(h)(i) and (ii) and 8.15 shall survive the Closing for a period of two years. (d) The provisions of the following Sections of this Agreement shall survive the Closing for the period of time set forth in the applicable statute of limitations: 2.4, 2.5, 4.1(c), 4.2, and Article VIII (except that the provisions of Section 8.2 shall not survive the Closing). 8.13 SEVERABILITY. If any provision of this Agreement or the application thereof shall be invalid or unenforceable to any extent, then the other provisions of this Agreement shall not be affected thereby and shall be enforced to the greatest extent of the law. 8.14 NON-RECOURSE. Notwithstanding anything herein to the contrary, without limiting any other limitation hereunder with respect to Seller's liability (including those set forth in Article VII), Purchaser agrees that its recourse for the payment and performance of all the obligations and liabilities of the Seller under this Agreement and any instrument executed or delivered in connection therewith shall be limited to the assets of Seller, and no recourse shall be had or suit or claim brought against any direct or indirect partner or shareholder of Seller, or any officer, director, beneficiary, trustee, employee, advisor or consultant of such other party or any such partner or shareholder. 8.15 SELLER'S ACCESS TO BOOKS AND RECORDS. For a period of two (2) years after the Closing, Purchaser shall give Seller and its representatives access, during normal business hours and upon reasonable prior notice to Purchaser, to such books, accounts, records and Leases relating to the Property (including the right, at Seller's expense, to make photostatic copies of same) as are reasonably necessary to enable Seller to verify the rights and obligations of Seller and Purchaser pursuant to Sections 2.3 and 2.4 and to enable Seller to respond to any tax inquiries or audits, including with respect to the Gains Tax Law or to comply with any other obligations to Governmental Authorities. 8.16 NO CONSEQUENTIAL DAMAGES. Notwithstanding anything to the contrary contained herein, neither party to this Agreement shall be liable for any consequential damages incurred by the other party. -21- 8.17 EMPLOYEE ARRANGEMENTS. (a) EMPLOYMENT BY AND BENEFITS OF PURCHASER. Purchaser agrees to offer to employ as of the Closing each employee of the Seller at the Property as of the date hereof listed on EXHIBIT M or any successor to any such employee hired, or transferred to the Property, by Seller prior to the Closing (the "EMPLOYEES") at the wages, hours and working conditions and other terms and benefits as they existed immediately prior to the Closing. (b) PURCHASER TO JOIN REALTY ADVISORY BOARD ON LABOR RELATIONS, INC. As of the Closing , the Purchaser agrees to join the Realty Advisory Board on Labor on Labor Relations, Inc. and to give written notice thereof as required under the Collective Bargaining Agreements (as hereinafter defined). (c) HOURLY EMPLOYEES: COLLECTIVE BARGAINING AGREEMENTS. As of the Closing, Purchaser, as the successor employer to Seller with respect to the Property, will assume and continue all terms and conditions of the collective bargaining agreements listed on EXHIBIT O (the "Collective Bargaining Agreements") applicable to each Employee upon the consummation of the transactions contemplated by this Agreement, will recognize the seniority and vacation status of each of the Employees, will take all required actions with respect to such Collective Bargaining Agreements as may be required by any laws, ordinances, rules and regulations of any Governmental Authority or such Collective Bargaining Agreements and shall assume, pay and perform when due any and all liabilities and obligations of Seller under such Collective Bargaining Agreements to be performed from and after the Closing. Consistent with the foregoing, Purchaser agrees to execute and deliver to Seller a letter, substantially in the form annexed hereto as EXHIBIT N, agreeing to take all steps necessary to effectuate the assumption of the Collective Bargaining Agreements. 8.18 INDEMNIFICATION. Without limiting any of the indemnifications elsewhere set forth in this Agreement or in any of the documents or instruments to be delivered pursuant hereto or in connection herewith, Purchaser shall indemnify and hold seller and its direct and indirect partners and shareholders and its and their officers, directors, beneficiaries, trustees, employees, advisors and consultants from and against all claims, losses, damages, liabilities, costs, expenses (including reasonable attorneys' fees) which any of the foregoing persons or entities may suffer or incur as a result of which arise (directly or indirectly) out of (i) any existing violations of law at the Property or (ii) the ownership or operation of the Property after the Closing Date. 8.19 THIRD PARTY BENEFICIARY. This Agreement is an agreement solely for the benefit of Seller and Purchaser (and their permitted successors and/or assigns) and the parties acknowledge and agree that no other person, party or entity shall have any rights hereunder nor shall any other person, party or entity be entitled to rely upon the terms, covenants and provisions contained herein. -22- IN WITNESS WHEREOF. Seller and purchaser have executed this Agreement as of the date first written above. SELLER: 2 BROADWAY ASSOCIATES, L.P. By: O&Y Building Corp., a general partner By: JOHN A. MOORE Name: John A. Moore Title: Senior Vice President-Finance PURCHASER: 2 BROADWAY ACQUISITION CORP. By: JACK BASCID Name: Jack Bascid Title: Vice President -23- EX-10 3 AGREEMENT OF CONVERSION OF 1290 ASSOCIATES INTO 1290 ASSOCIATES, L.L.C. AGREEMENT, dated as of October 10, 1995, among JMB/NYC Office Building Associates, L.P., an Illinois limited partnership ("INVESTOR"), O&Y Equity Company, L.P., a Delaware limited partnership ("EQUITY"), and O&Y NY Building Corp., a Delaware corporation ("BUILDING"). W I T N E S S E T H: WHEREAS, JMB/NYC Office Building Associates, O & Y Equity Corp., FAME Associates and Olympia & York Holdings Corporation entered into a Second Amended and Restated Agreement of General Partnership of 1290 Associates, a New York general partnership (the "PARTNERSHIP"), dated as of July 27, 1984 (the "ORIGINAL AGREEMENT"), as amended by (i) a First Amendment to Second Amended and Restated Agreement of General Partnership, dated as of December 29, 1986, (ii) a letter agreement dated as of January 1, 1992, (iii) a Second Amendment to Second Amended and Restated Agreement of General Partnership, dated as of January 1, 1994 and (iv) a letter agreement dated October 14, 1994 (the "OCTOBER 1994 LETTER") (as so amended, the "PARTNERSHIP AGREEMENT"); WHEREAS, as of the date hereof, Investor, Equity and Building are the partners of the Partnership; and WHEREAS, the partners of the Partnership desire to convert the Partnership into a New York limited liability company as provided herein. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the parties hereto agree as follows: 1. The Partnership is hereby converted into, and shall hereafter be, a limited liability company (the "LLC") formed under the laws of the State of New York, pursuant to the New York Limited Liability Company Law. The name of the LLC hall be "1290 ASSOCIATES, L.L.C.". The parties hereto shall be the members of the LLC, and their interests in the Partnership are hereby converted into membership interests in the LLC 1 2. The respective interests of the parties hereto as members in the LLC shall be the same as were their respective interests as partners in the Partnership, and their respective rights and obligations as members of the LLC (including, without limitation, their respective Capital Accounts and their respective obligations under Section 8.8 of the Original Agreement) shall be the same were their respective rights and obligations as partners in the Partnership, except, in each case, as provided in Paragraph 3 hereof. 3. The operating agreement of the LLC (the OPERATING AGREEMENT") shall be the Partnership Agreement, modified as follows: (a) The terms "PARTNERSHIP" and "PARTNER" (whether or not capitalized, in the singular and plural forms, and whether used alone or as part of other defined terms) shall be read, respectively, as "LLC" or "MEMBER". (b) The term "CO-PARTNER" shall refer to Equity and Building, collectively. (c) The term "O&Y EQUITY" shall refer to Building. (d) Building and Investor shall be the managers of the LLC (the "MANAGERS") so long as they are Members, and when either ceases to be a Member, its successor-in-interest shall be a Manager; provided that their respective rights, duties, powers and authority with respect to the management and operation of the LLC and its property shall be as set forth in the Partnership Agreement, as modified by the other subparagraphs of this Paragraph 3. (e) All right, power and authority of Co-Partner (and of O&Y Equity), pursuant to the Partnership Agreement (including, without limitation, the October 1994 Letter) and/or applicable law, to make decisions and elections, to exercise options, to give or withhold consents or approvals, and to propose, take or veto any other actions, shall be vested in and exercised by Building alone. Equity shall have no such right, power or authority, and the joinder or consent by Equity shall not be required for any decision of or action by the LLC (or for any decision of or action by Building, or Building and Investor together, on behalf of the LLC). The foregoing provisions of this subparagraph (e) shall not affect the rights, powers or authority of Investor. (f) The bankruptcy (as such term is defined in the Original Agreement) of a Manager shall cause a dissolution of the LLC. However, notwithstanding anything to the contrary that may be required by law in the absence of this subparagraph (f), the 2 bankruptcy of Equity (including, without limitation, the filing by Equity of a voluntary petition under Chapter 11 of Title 11 of the U.S.Code) (i) shall not be a "Dissolution Event" (and is hereby excluded from the events listed in Section 8.1A of the Partnership Agreement), (ii) shall not cause a dissolution of the LLC and (iii) shall not give rise to any rights or options in favor of Investor (and, without limitation, shall not give Investor any of the rights or options described in Section 8.2 of the Original Agreement); and the LLC and its business (and each member's rights and obligations with respect thereto) shall continue, upon the terms of the Operating Agreement, despite such filing. (g) Section 4.2C of the Partnership Agreement shall be deleted in its entirety and replaced by the following: "Section 4.2C. MEMBERS' INTERESTS IN LLC PROFITS FOR PURPOSES OF SECTION 752 OF THE INTERNAL REVENUE CODE. The Members hereby agree that the following shall determine their respective shares of the liabilities of the LLC for purposes of Section 752 of the Internal Revenue Code of 1986, as amended (the "CODE"). (1) CURRENTLY. As of January 1, 1994 and until there shall have occurred a "Material Modification" (as defined in Section 2 hereof) of a liability of the LLC, the Members' respective shares of the liabilities of the LLC pursuant to Section 752 of the Code shall be as follows: (a) As to that portion of the liabilities of the LLC that was reflected on the books of the predecessor to the LLC (such predecessor is herein called the "PARTNERSHIP") immediately prior to the effective date of the Assumption Agreement dated as of October 14, 1994 by the Partnership in favor of Equity, Building and Investor (individually) (the "PARTNERSHIP ASSUMPTION AGREEMENT"): Co-Partner 53.5% Investor 46.5% (b) As to that portion of the liabilities of the LLC that was reflected on the books of the Partnership solely as a result of the Partnership Assumption Agreement, the amount of the liabilities assumed by each Partner in accordance with the terms of the Partnership Assumption Agreement 3 (2) MATERIAL MODIFICATION OF LLC LIABILITIES. The Members agree that, if at any time following the date of this Agreement, there shall occur with respect to a liability of the LLC a "Material Modification" (as hereinafter defined), as of the date of such Material Modification: (x) the provisions of Section 4.2C(1) hereof shall continue to apply to all liabilities of the LLC as to which a Material Modification shall not theretofore have occurred; and (y) with respect to each liability of the LLC as to which a Material Modification shall have occurred (a "MODIFIED LIABILITY"): (a) The Members' respective shares of each such Modified Liability pursuant to Section 1.752-3 (a) (1) and Section 1.752-3(a) (2) of the Regulations shall be computed in accordance with such provisions of the Regulations (as determined by the agreement of Building and Investor); (b) The Members' respective shares of the portion of each such Modified Liability that constitutes an "excess nonrecourse liability" pursuant to Section 1.752-3(a)(3) of the Regulations (as determined by the agreement of Building and Investor) shall be as follows: (i) As to that portion of such Modified Liability that was reflected on the books of the LLC immediately prior to the effective date of the Assumption Agreement: Co-Partner 53.5% Investor 46.5% (ii) As to that portion of such Modified Liability that was reflected on the books of the Partnership solely as a result of the Partnership Assumption Agreement, the amount of such Modified Liability assumed by each Partner in accordance with the terms of the Partnership Assumption Agreement. For purposes of this Section 2, a "MATERIAL MODIFICATION" to a liability shall have occurred if the liability shall have been modified and the terms of the new debt instrument differ 'materially either in kind or in extent' (within the meaning of section 1.1001-1(a) of the 4 Regulations) from the terms of the old debt instrument, as determined by the agreement of Building and Investor." (h) Notwithstanding any contrary provisions of the Partnership Agreement, including, but not limited to, Section 3.2 thereof, before any other distributions of Net Financing Proceeds or Net Sale Proceeds shall be distributed to any Member, all Net Sale Proceeds and Net Financing Proceeds shall be distributed to Investor and Co-Partner in the ratio of their respective Distributive Percentages until the aggregate distributions pursuant to this subparagraph (h) shall amount to $300,000. Any Net Financing Proceeds or Net Sale Proceeds remaining after the foregoing distributions under this subparagraph (h), shall be distributed as provided in the Partnership Agreement. In connection with the foregoing, the parties hereby agree as follows: (1) The Partnership is indebted to Investor in the amount of $89,575 on account of certain legal fees and expenses incurred by Investor prior to September 1, 1994. As consideration for the benefits to Investor under the foregoing provisions of the subparagraph (h), Investor hereby waives its claim for payment of such legal fees and expenses. The foregoing shall not constitute a waiver of or limitation on any other rights or claims of Investor, including, but not limited to, its right to payment for legal fees and expenses incurred subsequent to August 31, 1994. The parties hereto agree that the waiver of such claim by Investor is full and fair consideration for, and has at least equivalent value to, the rights and benefits received by Investor under this subparagraph (h). However, in the event that by non-appealable adjudication of a count of competent jurisdiction, any or all of the rights of Investor as hereinabove set forth in this subparagraph (h) shall be set aside or declared invalid, then Investor's aforesaid waiver of its right to payment for legal fees and expenses shall be automatically cancelled and Investor's right to payment for the same shall be reinstated. (2) Not withstanding any contrary provisions of the Partnership Agreement, including, but not limited to, paragraph 6 of the Summary of Terms attached to the October 1994 Letter, the distributions to Investor pursuant to this subparagraph (h) will not be applied to payment of the "JMB Notes" (as defined in said paragraph 6 of the October 1994 Letter), but instead shall be paid directly to Investor. 4. Except as specifically set forth in this Agreement or in any other written agreement executed by the parties hereto (including, without limitation, the October 1994 Letter), each of the parties hereto reserves all rights and claims with respect to 5 the LLC and each other party hereto arising prior to the date hereof under the Partnership Agreement, and nothing contained in this Agreement shall be deemed to be or to effect a waiver of any such rights or claims. 5. References to the Partnership in the October 1994 Letter (including the Summary of Terms annexed thereto) shall be deemed to refer to the LLC where relevant to the period after the date hereof (and references therein to the Partners and partnership agreement of the Partnership shall, as applied to the LLC, be deemed to refer to the Members and Operating Agreement of the LLC). In addition, with respect to the Summary of Terms, the provisions of paragraphs 3(g) and 3(h) hereof shall apply to, and be included in, any partnership agreement or operating agreement or amendment to an existing partnership agreement or operating agreement for any Partnership, "Conversion Partnership", "New Partnership" or LLC which may be entered into as contemplated by the Summary of Terms (the provisions of said paragraph 3(g) being in lieu of the first sentence of paragraph 2 of Exhibit "A: of the Summary of Terms). Accordingly, and without limitation on the foregoing, the distributions provided in said paragraph 3(h) shall be made prior to any distributions of Net Financing Proceeds or Net Sale Proceeds with respect to the "Preference Amounts" or "New Preference Amounts" or interest thereon. The quoted terms in this Paragraph 5 have the meanings specified in the Summary of Terms. Nothing herein, however, shall affect the terms of the next-to-last paragraph of the October 1994 Letter. 6. This Agreement may be executed in one or more counterparts, each of which shall constitute an original and all of which taken together shall constitute one agreement. 7. No modification or waiver of any of the provisions of this Agreement shall be effective unless the same shall be in writing signed by all of the parties hereto. 6 8. This Agreement shall be governed by the laws of the State of New York. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. JMB/NYC OFFICE BUILDING ASSOCIATES, L.P. By: Carlyle Managers, Inc. General Partner By: Name: Title: O&Y EQUITY COMPANY, L.P. By: O&Y Equity General Partner Corp., General Partner By: Name: Title: O&Y NY BUILDING CORP. By: Name: Title: 7 EX-10 4 AGREEMENT OF CONVERSION OF 237 PARK AVENUE ASSOCIATES INTO 237 PARK AVENUE ASSOCIATES, L.L.C. AGREEMENT, dated as of October 10, 1995, among JMB/NYC Office Building Associates, L.P., an Illinois limited partnership ("INVESTOR"), O&Y Equity Company, L.P., a Delaware limited partnership ("EQUITY"), and O&Y NY Building Corp., a Delaware corporation ("BUILDING"). WITNESSETH: WHEREAS, JMB/NYC Office Building Associates, O&Y Equity Corp., FAME Associates and Olympia & York Holdings Corporation entered into a First Amended and Restated Agreement of General Partnership of 237 Park Avenue Associates, a New York general partnership (the "PARTNERSHIP"), dated as of August 14, 1984 (the "ORIGINAL AGREEMENT"), as amended by (i) a First Amendment to First Amended and Restated Agreement of General Partnership, dated as of December 29, 1986, (ii) a letter agreement dated as of January 1, 1992, (iii) a Second Amendment to First Amended and Restated Agreement of General Partnership, dated as of January 1, 1994 and (iv) a letter agreement dated October 14, 1994 (the "OCTOBER 1994 LETTER") (as so amended, the "PARTNERSHIP AGREEMENT"); WHEREAS, as of the date hereof, Investor, Equity and Building are the partners of the Partnership; and WHEREAS, the partners of the Partnership desire to convert the Partnership into a New York limited liability company as provided herein. NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the parties hereto agree as follows: 1. The Partnership is hereby converted into, and shall hereafter be, a limited liability company (the "LLC") formed under the laws of the State of New York, pursuant to the New York Limited Liability Company Law. The name of the LLC shall be "237 PARK AVENUE ASSOCIATES, L.L.C.". The parties hereto shall be the members of the LLC, and their interests in the Partnership are hereby converted into membership interest in the LLC. 2. The respective interest of the parties hereto as members in the LLC shall be the same as were their respective interests as partners in the Partnership, and their respective rights and obligations as members of the LLC (including, without limitation, their respective Capital Accounts and their respective obligations under Section 8.8 of the Original Agreement) shall be the same as were their respective rights and obligations as partners in the Partnership, except, in each case, as provided in Paragraph 3 hereof. 3. The operating agreement of the LLC (the "OPERATING AGREEMENT") shall be the Partnership Agreement, modified as follows: (a) The terms "PARTNERSHIP" and "PARTNER" (whether or not capitalized, in the singular and plural forms, and whether used alone or as part of other defined terms) shall be read, respectively, as "LLC" and "MEMBER". (b) The term "CO-PARTNER" shall refer to Equity and Building, collectively. (c) The term "O&Y EQUITY" shall refer to Building. (d) Building and Investor shall be the managers of the LLC (the "MANAGERS") so long as they are Members, and when either ceases to be a Member, its successor-in-interest shall be a Manager; provided that their respective rights, duties, powers and authority with respect to the management and operation of the LLC and its property shall be as set forth in the Partnership Agreement, as modified by the other subparagraphs of this Paragraph 3. (e) All right, power and authority of Co-Partner ( and of O&Y Equity), pursuant to the Partnership Agreement (including, without limitation, the October 1994 Letter) and/or applicable law, to make decisions and elections, to exercise options, to give or withhold consents or approvals, and to propose, take or veto any other actions, shall be vested in the exercised by Building alone. Equity shall have no such right, power or authority, and the joinder or consent by Equity shall not be required for any decision of or action by the LLC (or for any decision of or action by Building, or Building and Investor together, on behalf of the LLC). The foregoing provisions of this subparagraph (e) shall not affect the rights, powers or authority of Investor. (f) The bankruptcy (as such term is defined in the Original Agreement) of a Manager shall cause a dissolution of the LLC. However, notwithstanding anything to the contrary that may be required by law in the absence of this subparagraph (f), the bankruptcy of Equity (including, without limitation, the filing by Equity of a voluntary petition under Chapter 11 of Title 11 of the U.S. Code) (i) shall not be a "Dissolution Event" (and is hereby excluded from the events listed in Section 8.1A of the Partnership Agreement), (ii) shall not cause a dissolution of the LLC and (iii) shall not give rise to any rights or options in favor of Investor (and, without limitation, shall not give Investor any of the rights or options described in Section 8.2 of the Original Agreement); and the LLC and its business (and each member's rights and obligations with respect thereto) shall continue, upon the terms of the Operating Agreement, despite such filing. (g) Section 4.2C of the Partnership Agreement shall be deleted in its entirety and replaced by the following: Section 4.2C MEMBERS' INTERESTS IN LLC PROFITS FOR PURPOSES OF SECTION 752 OF THE INTERNAL REVENUE CODE. The Members hereby agree that the following shall determine their respective shares of the liabilities of the LLC for purposes of Section 752 of the Internal Revenue Code of 1986, as amended (the "CODE"). (1) CURRENTLY. As of January 1, 1994 and until there shall have occurred a Material Modification" (as defined in Section 2 hereof) of a liability of the LLC, the Members's respective shares of the liabilities of the LLC pursuant to Section 752 of the Code shall be as follows: (a) As to the portion of the liabilities of the LLC that was reflected on the books of the predecessor the LLC (such predecessor is herein called the "PARTNERSHIP") immediately prior to the effective date of the Assumption Agreement dated as of October 14, 1994 by the Partnership in favor of Equity, Building and Investor (individually) The "PARTNERSHIP ASSUMPTION AGREEMENT"): Co-Partner 53.5% Investor 46.5% (b) As to that portion of the liabilities of the LLC that was reflected on the books of the Partnership solely as a result of the Partnership Assumption Agreement, the amount of the liabilities assumed by each Partner in accordance with the terms of the Partnership Assumption Agreement. (2) MATERIAL MODIFICATION OF LLC LIABILITIES. The Members agree that, if at any time following the date of this Agreement, there shall occur with respect to a liability of the LLC a "Material Modification" (as hereinafter defined), as of the date of such Material Modification: (x) the provisions of Section 4.2C(1) hereof shall continue to apply to all liabilities of the LLC as to which a Material Modification shall not theretofore have occurred; and (y) with respect to each liability of the LLC as to which a Material Modification shall have occurred (a MODIFIED LIABILITY"): (a) The Members' respective shares of each such Modified Liability pursuant to Section 1.752-3 (a)(1) and Section 1.752- 3(a) (2) of the Regulations shall be computed in accordance with such provisions of the Regulations (as determined by the agreement of the Building and Investor); (b) The Members' respective shares of the portion of each such Modified Liability that constitutes an "excess nonrecourse liability" pursuant to Section 1.752-3 (a) (3) of the Regulations (as determined by the agreement of Building and Investor) shall be as follows: (i) As to that portion of such Modified Liability that was reflected on the books of the LLC immediately prior to the effective date of the Assumption Agreement: Co-Partner 53.5% Investor 46.5% (ii) As to that portion of such Modified Liability that was reflected on the books of the Partnership solely as a result of the Partnership Assumption Agreement, the amount of such Modified Liability assumed by each Partner in accordance with the terms of the Partnership Assumption Agreement. For purposes of this Section 2, a "MATERIAL MODIFICATION" to a liability shall have occurred in the liability shall have been modified and the terms of the new debt instrument differ 'materially either in kind or in extent' (within the meaning of Section 1.1001-1(a) of the Regulations) from the terms of the old debt instrument, as determined by the agreement of Building and Investor." (h) Notwithstanding any contrary provisions of the Partnership Agreement, including, but not limited to, Section 3.2 thereof, before any other distributions of Net Financing Process or Net Sale Proceeds shall be distributed to any Member, all Net Sale Proceeds and Net Financing Process shall be distributed to Investor and Co-Partner in the ratio of their respective Distributive Percentages until the aggregate distributions pursuant to this subparagraph (h) shall amount to $200,000. Any Net Financing Process or Net Sale Proceeds remaining after the foregoing distributions under this subparagraph (h), shall be distributed as provided in the Partnership Agreement. In connection with the foregoing, the parties hereby agree as follows: (1) The Partnership is indebted to Investor in the amount of $59,716 on account of certain legal fees and expenses incurred by Investor prior to September 1, 1994. As consideration for the benefits to Investor under the foregoing provisions of this subparagraph (h), Investor hereby waives its claim for payment of such legal fees and expenses. The foregoing shall not constitute waiver of or limitation on any other rights or claims of Investor, including, but not limited to, its right to payment for legal fees and expenses incurred subsequent to August 31, 1994. The parties hereto agree that the waiver of such claim by Investor is full and fair consideration for, and has at least equivalent value to, the rights and benefits received by Investor under this subparagraph (h). However, in the event that by non-appealable adjudication of a court of competent jurisdiction, any or all of the rights of Investor as hereinabove set forth in this subparagraph (h) shall be set aside or declared invalid, then Investor's aforesaid waiver of its right to payment for legal fees and expenses shall be automatically cancelled and Investor's right to payment for the same shall be reinstated. (2) Notwithstanding any contrary provision of the Partnership Agreement, including, but not limited to, paragraph 6 of the Summary of Terms attached to the October 1994 Letter, the distributions to Investor pursuant to this subparagraph (h) will not be applied to payment of the "JMB Notes" (as defined in said paragraph 6 of the October 1994 Letter), but instead shall be paid directly to Investor. 4. Except as specifically set forth in this Agreement or in any other written agreement executed by the parties hereto (including, without limitation, the October 1994 Letter), each of the parties hereto reserves all rights and claims with respect to the LLC and each other party hereto arising prior to the date hereof under the Partnership Agreement, and nothing contained in this Agreement shall be deemed to be or effect a waiver of any such rights or claims. 5. Reference to the Partnership in the October 1994 Letter (including the Summary of Terms annexed thereto) shall be deemed to refer to the LLC where relevant to the period after the date hereof (and references therein to the partners and partnership agreement of the Partnership shall, as applied to the LLC, be deemed to refer to the Members and Operating Agreement of the LLC). In addition, with respect to the Summary of Terms, the provisions of paragraphs 3 (g) and 3 (h) hereof shall apply to, and be included in, any partnership agreement or operating agreement or amendment to an existing partnership agreement or operating agreement for any Partnership, "Conversion Partnership", "New Partnership" or LLC which may be entered into as contemplated by the Summary of Terms (the provisions of said paragraph 3(g) being in lieu of the first sentence of paragraph 2 of Exhibit "A" of the Summary of Terms). Accordingly, and without limitation on the foregoing, the distributions provided in said paragraph 3(h) shall be made prior to any distributions of Net Financing Proceeds or Net Sale Proceeds with respect to the "Preference Amounts" or "New Preference Amounts" or interest thereon. The quoted terms in this Paragraph 5 have the meanings specified in the Summary of Terms. Nothing herein, however, shall affect the terms of the next-to-last paragraph of the October 1994 Letter. 6. This Agreement may be executed in one or more counterparts, each of which shall constitute an original and all of which taken together shall constitute one agreement. 7. No modification or waiver of any of the provisions of this Agreement shall be effective unless the same shall be in writing signed by all of the parties hereto. 8. This Agreement shall be governed by the laws of the State of New York. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. JMB/NYC OFFICE BUILDING ASSOCIATES, L.P. BY: Carlyle Managers, Inc. General Partner By: Name: Stuart Chatman Title: President O&Y EQUITY COMPANY, L.P. By: O&Y Equity General Partner Corp., General Partner By: Name: John A. Moore Title: Senior Vice President - Finance O&Y NY BUILDING CORP. By: Name: John A. Moore Title: Senior Vice President - Finance EX-21 5 EXHIBIT 21 LIST OF SUBSIDIARIES The Partnership is a partner of Sherry Lane Associates, a general partnership which holds title to the Sherry Lane Place Office Building in Dallas, Texas. The Partnership is a partner of Copley Place Associates, a limited partnership which holds title to Copley Place in Boston, Massachusetts. The developer of the property is a partner in the joint venture. The Partnership is a partner of Carrollwood Station Associates, Ltd., a limited partnership which holds title to the Carrollwood Station Apartments in Tampa, Florida. The developer of the property is a partner in the joint venture. The Partnership is a partner of Jacksonville Cove Associates, Ltd., a limited partnership which holds title to The Glades Apartments in Jacksonville, Florida. The developer of the property is a partner in the joint venture. The Partnership is a 20% shareholder in Carlyle Managers, Inc. and 20% shareholder in Carlyle Investors, Inc. Reference is made to Note 3 for a description of the terms of such joint venture partnerships. The Partnership's interest in the joint ventures and the results of its operations are included in the Consolidated Financial Statements of the Partnership filed with this annual report. EX-24 6 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB Realty Corporation, the corporate general partner of CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII, do hereby nominate, constitute and appoint GARY NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any of them, attorneys and agents of the undersigned with full power of authority to sign in the name and on behalf of the undersigned officers a Report on Form 10-K of said partnership for the fiscal year ended December 31, 1995, and any and all amendments thereto, hereby ratifying and confirming all that said attorneys and agents and any of them may do by virtue hereof. IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney the 5th day of February, 1996. H. RIGEL BARBER - ----------------------- H. Rigel Barber Chief Executive Officer GLENN E. EMIG - ----------------------- Glenn E. Emig Chief Operating Officer The undersigned hereby acknowledge and accept such power of authority to sign, in the name and on behalf of the above named officers, a Report on Form 10-K of said partnership for the fiscal year ended December 31, 1995, and any and all amendments thereto, the 5th day of February, 1996. GARY NICKELE ----------------------- Gary Nickele GAILEN J. HULL ----------------------- Gailen J. Hull DENNIS M. QUINN ----------------------- Dennis M. Quinn EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers of JMB Realty Corporation, the corporate general partner of CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII, do hereby nominate, constitute and appoint GARY NICKELE, GAILEN J. HULL, DENNIS M. QUINN or any of them, attorneys and agents of the undersigned with full power of authority to sign in the name and on behalf of the undersigned officers a Report on Form 10-K of said partnership for the fiscal year ended December 31, 1995, and any and all amendments thereto, hereby ratifying and confirming all that said attorneys and agents and any of them may do by virtue hereof. IN WITNESS WHEREOF, the undersigned have executed this Power of Attorney the 5th day of February, 1996. NEIL G. BLUHM - ----------------------- President and Director Neil G. Bluhm JUDD D. MALKIN - ----------------------- Chairman and Chief Financial Officer Judd D. Malkin A. LEE SACKS - ----------------------- Director of General Partner A. Lee Sacks STUART C. NATHAN - ----------------------- Executive Vice President Stuart C. Nathan Director of General Partner A. Lee Sacks The undersigned hereby acknowledge and accept such power of authority to sign, in the name and on behalf of the above named officers, a Report on Form 10-K of said partnership for the fiscal year ended December 31, 1995, and any and all amendments thereto, the 5th day of February, 1996. GARY NICKELE ----------------------- Gary Nickele GAILEN J. HULL ----------------------- Gailen J. Hull DENNIS M. QUINN ----------------------- Dennis M. Quinn EX-27 7
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN SUCH REPORT. 0000711604 CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII 12-MOS DEC-31-1995 DEC-31-1995 5,908,236 2,568,329 10,756,290 0 0 19,232,855 433,222,805 163,309,553 307,460,106 61,957,398 382,303,505 0 0 0 (223,599,045) 307,460,106 65,729,288 66,763,349 0 50,440,563 1,428,492 0 38,615,594 (23,721,300) 0 (25,732,699) (14,789,529) 15,632,407 0 (24,889,821) (65.19) (65.19)
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