-----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, L+ohYSDtCqYwU9gief5MEvcaAC6KYtCNYpPT9laZa7WtfOBAW9K6KxwGzbUvVgyZ a+ZQ9lznYIcqwZtzjQBSsw== 0000892626-97-000078.txt : 19970401 0000892626-97-000078.hdr.sgml : 19970401 ACCESSION NUMBER: 0000892626-97-000078 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 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: 97568953 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, 1996 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, Illinois 60611 (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. . . . . . . . . . . . 15 Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . 24 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . 63 PART III Item 10. Directors and Executive Officers of the Partnership . . . . . . . . . . . . . 63 Item 11. Executive Compensation . . . . . . . . . . . 66 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . 68 Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . 69 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. . . . . . . . . . . 69 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 73 i PART I ITEM 1. BUSINESS Unless otherwise indicated, all references 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. 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") at $1,000 per Interest 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). The offering closed on May 22, 1984. No holder of Interests (hereinafter, "Holder" or "Holder of Interests") has made any additional capital contribution after such date. The Holders of Interests 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 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 indirect 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. The Partnership has made the real property investments set forth in the following table:
SALE OR DISPOSITION DATE OR IF OWNED AT DECEMBER 31, 1996, NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED AND LOCATION (f) SIZE PURCHASE CAPITAL 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)(j) 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 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) (g) 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 (g) SALE OR DISPOSITION DATE OR IF OWNED AT DECEMBER 31, 1996, NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED AND LOCATION (f) SIZE PURCHASE CAPITAL 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) (c) 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 10/10/96 fee ownership of land and n.r.a. (i) improvements (through joint venture partnerships) (c) 10. 1290 Avenue of the Americas Building New York, New York . . . . . 2,000,000 sq.ft. 7/27/84 10/10/96 fee ownership of land and n.r.a. (i) improvements (through joint venture partnerships) (c) 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)(e) SALE OR DISPOSITION DATE OR IF OWNED AT DECEMBER 31, 1996, NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED AND LOCATION (f) SIZE PURCHASE CAPITAL 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)(h) 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, 1996, NAME, TYPE OF PROPERTY DATE OF ORIGINAL INVESTED AND LOCATION (f) SIZE PURCHASE CAPITAL 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 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) (c) 22. Greenwood Creek II Apartments Benbrook (Fort Worth), Texas. . . . . . . 152 units 3/30/84 4/6/93 fee ownership of land and improvements 23. The Glades Apartments Jacksonville, Florida . . . . . 360 units 10/9/84 11/21/96 fee ownership of land and improvements (through a joint venture partnership) (e) - ----------------------- (a) The computation of this percentage for properties held at December 31, 1996 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 the Notes and Schedule III 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 the Notes 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 the Notes 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 or the Partnership's interest in this property has been sold. Reference is made to the Notes 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 filed with this annual report for further information concerning real estate taxes and depreciation. (g) The Partnership transferred title to the lender via a deed in lieu of foreclosure. Reference is made to the Notes. (h) The venture sold its interest in the property. Reference is made to the Notes. (i) The original invested capital percentage for the 237 Park Avenue Building and the 1290 Avenue of the Americas Building was 4% and 8%, respectively. Reference is made to the Notes for a description of the reorganization and restructuring of the Partnership's indirect interests in these investment properties. (j) The Partnership's interest in this property was sold January 23, 1997. Reference is made to the Notes for a description of the sale of such interest.
The Partnership's real property investments are subject to competi- tion from similar types of properties (including in certain areas, properties owned 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. 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, 1996 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. On November 21, 1996, the Partnership sold the land and related improvements of the Glades Apartments. Reference is made to the Notes for further description of the transaction. On January 23, 1997, the Partnership sold its entire partnership interest in Copley Place Associates. Reference is made to the Notes for further description of the transaction. Reference is made to the Notes 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, 1996. The Partnership has no employees other than 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 or owned 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 1996 and 1995 for the Partnership's investment properties owned during 1996:
1995 1996 ------------------------- ------------------------- At At At At At At At At Principal Business 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31 ------------------ ---- ---- ---- ----- ---- ---- ----- ----- 1. Marshalls Aurora Plaza shopping center Aurora (Denver), Colorado . . . . . . . . Retail 94% 94% 92% 92% 95% 96% 96% 96% 2. Carrollwood Station Apartments Tampa, Florida . . . . . Residential 99% 99% 97% 96% 96% 98% 97% 96% 3. Long Beach Plaza shopping center Long Beach, California . . . . . . . Retail 55% 53% 53% 55% 55% 55% 55% 55% 4. The Glades Apartments Jacksonville, Florida. . Residential 87% 94% 96% 95% 92% 93% 93% N/A 5. Sherry Lane Place office building Dallas, Texas. . . . . . Legal and Financial Services 98% 99% 97% 97% 96% 97% 96% 96% 6. Copley Place multi-use complex Boston, Massachusetts (1). . . . . . . . . . . Retail/Business Machines/Financial Services 73% 73% 88% 86% 89% 93% 90% 90% 1995 1996 ------------------------- ------------------------- At At At At At At At At Principal Business 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31 ------------------ ---- ---- ---- ----- ---- ---- ----- ----- 7. Plaza Tower office building Knoxville, Tennessee . . Financial Services 92% 92% 93% 92% 91% 93% 93% 93% 8. 237 Park Avenue Building New York, New York . . . Advertising/Insurance/ Paper/Real Estate 98% 98% 98% 98% 98% 98% 98% * 9. 1290 Avenue of the Americas Building New York, New York . . . Men's Clothing Financial Services 94% 94% 94% 93% 78% 71% 81% * - ----------------- Reference is made to Item 6, Item 7, and to the Notes 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. An "*" indicates that the joint venture which owns the property was restructured. Reference is made to the Notes for further information regarding the reorganized and restructured ventures. (1) The Partnership's interest in this property was sold January 23, 1997 as described more fully in the Notes.
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, 1996 was approximately $47,624,000). 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 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 1995 and 1996. PART II ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS As of December 31, 1996, there were 38,736 record holders of the 366,006.87688 Interests outstanding 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, which may be granted or withheld in its sole and absolute discretion. 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 or have other rights of a Limited Partner. 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 Holders of Interests. The mortgage loans secured by the Sherry Lane office building, Plaza Tower office building and the Copley Place multi-use complex restrict the use by the Partnership of the cash flow from those properties as more fully discussed in the Notes. In addition, the purchase money notes issued by JMB/NYC in connection with its acquisition of interests in the 237 Park Avenue and 1290 Avenue of the Americas investment properties require that any distributions payable to JMB/NYC with respect to such investment properties be applied to reduce the outstanding principal and interest on the purchase notes. Reference is made to the Notes 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, 1996, 1995, 1994, 1993 AND 1992 (NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
1996 1995 1994 1993 1992 ------------- ------------- ----------- ------------ ------------ Total income. . . . . . . $ 69,093,943 66,763,349 65,969,277 85,193,793 93,609,884 ============ ============ ============ ============ ============ Operating earnings (loss) . . . . . . . . . $(40,507,575) (23,721,300) (25,410,848) (30,620,211) (37,939,335) Partnership's share of income (loss) from unconsolidated ventures (including income from restructuring of $78,704,658 in 1996) . . 79,070,546 (6,600,158) (6,271,489) (22,416,922) (8,007,990) Venture partners' share of earnings (loss) from con- solidated ventures' operations . . . . . . . 3,536,251 4,588,759 5,659,744 2,008,939 3,376,600 ------------ ------------ ------------ ------------ ------------ Net operating earnings (loss). . . . . 42,099,222 (25,732,699) (26,022,593) (51,028,194) (42,570,725) Gain (loss) on sale or disposition of investment properties, net of venture partners' share of ($329,169) in 1996 and $2,887,659 in 1994. . . . . . . . . 5,484,249 -- 18,364,792 11,083,791 2,132,879 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 -- ------------ ------------ ------------ ------------ ------------ 1996 1995 1994 1993 1992 ------------- ------------ ----------- ------------ ------------ Earnings (loss) before extraordinary items. . . 47,583,471 (40,522,228) (5,955,719) (32,045,676) (40,437,846) Extraordinary items . . . -- 15,632,407 996,126 (141,776) 7,139,936 ------------ ------------ ------------ ------------ ------------ Net earnings (loss) . . . . . . . . . $ 47,583,471 (24,889,821) (4,959,593) (32,187,452) (33,297,910) ============ ============ ============ ============ ============ Net earnings (loss) per Interest (b): Net operating earnings (loss) . . . . . . . . $ 110.42 (67.47) (68.22) (133.78) (111.62) Gain on sale or disposition of investment properties, net of venture partners' share of ($329,169) in 1996 and $2,887,659 in 1994 . . . . . . . 14.83 -- 49.66 29.97 5.77 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) 19.31 ------------ ------------ ------------ ------------ ------------ Net earnings (loss) . . $ 125.25 (65.19) (11.27) (82.84) (86.54) ============ ============ ============ ============ ============ Total assets. . . . . . . $280,595,580 307,460,106 333,577,902 374,787,300 489,687,072 Long-term debt. . . . . . $384,098,834 382,303,505 361,563,239 360,881,897 464,855,926 Cash distributions per Interest (b) . . . . $ -- 30.00 -- -- .50 ============ ============ ============ ============ ============ - ------------- (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 Holders of Interests since the inception of the Partnership have not resulted in taxable income to such Holders of Interests and have therefore represented a return of capital.
SIGNIFICANT PROPERTIES - SELECTED RENTAL AND OPERATING DATA As of December 31, 1996, only the Long Beach Shopping Center, Copley Place multi-use complex, 1290 Avenue of the Americas and 237 Park Avenue investment properties would be considered by the Partnership to be significant. However, as more fully described in the Notes, the Long Beach property is in receivership, the Copley Place property was sold in January 1997, and the Partnership's interests in 1290 and 237 Park properties were restructured such that the Partnership has virtually no ongoing economic interest. Therefore, selected rental and operating data has not been presented for those properties in this Annual Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES As a result of the public offering of Interests as described in Item 1, the Partnership had approximately $326,000,000 (after deducting selling expenses) and other offering costs 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. In March 1997 some of the Holders of Interests received from a third party unaffiliated with the Partnership an unsolicited offer to purchase up to 17,000 Interests at $10 per Interest. Such offer is scheduled to expire on April 10, 1997. The board of directors of JMB Realty Corporation ("JMB"), the Corporate General Partner, has established a special committee (the "Special Committee") consisting of certain directors of JMB to deal with all matters relating to tender offers for Interests, including any and all responses to such tender offers. The Special Committee has retained independent counsel to advise it in connection with any tender offers for Interests and has retained Lehman Brothers Inc. as financial advisor to assist the Special Committee in evaluating and responding to such tender offers. With respect to the offer for Interests at $10 per Interest, the Special Committee, on behalf of the Partnership, has recommended against acceptance of this offer on the basis that, among other things, the offer price is inadequate. The Partnership has received a request from another unaffiliated third party for the list of Holders of Interests. It is possible that other offers for Interests may be made by unaffiliated third parties in the future, although there is no assurance that any third party will commence an offer for Interests, the terms of any such offer or whether any such offer, if made, will be consummated, amended or withdrawn. At December 31, 1996, the Partnership and its consolidated ventures had cash and cash equivalents of approximately $6,030,000 and short-term investments of approximately $374,000. Approximately $1,403,000 of the cash and cash equivalents are for payment of a portion of the real estate taxes for Copley Place. In January 1997, this amount was expended. Remaining amounts are available 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 1997 approximately $2,489,000 for tenant improvements and other capital expenditures. The Partnership's share of such items in 1997 is currently budgeted to be $2,489,000. Actual amounts expended in 1997 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. In such regard, reference is made to the discussion below and to the Notes regarding the sale of the Partnership's interest in the Copley Place multi-use complex on January 23, 1997. In addition, the Partnership does not consider its indirect interest in JMB/NYC as well as the Long Beach Plaza to be significant sources of liquidity. In such regard, reference is made to the Partnership's property specific discussions below. 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. 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 certain properties, the Partnership had suspended operating cash distributions to the Holders of Interests 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 the Notes, the Partnership has received mortgage note modifications (certain of which have expired and others of which expire at various dates commencing June 1997) or refinancings on the Sherry Lane Place office building, Plaza Tower office building, Carrollwood Apartments and Marshall's Aurora Plaza. If the Partnership is unable to secure as necessary 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. With regard to Long Beach Plaza, the Partnership has been unable to obtain a further modification of the mortgage loan, as more fully described below and in the Notes. 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 $2,822,000 (approximately $8 per Interest) through December 31, 1996. The Partnership paid $10,000,000 of previously deferred fees during February 1995. The currently deferred amounts do not bear interest and are payable in future periods. 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. 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, among other things. 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. In such regard, as of December 31, 1996, all of the Partnership's consolidated investment properties were, or had been previously, classified by the Partnership or its ventures as held for sale or disposition and will no longer be subject to continued depreciation. 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 indirect 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. 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 Holders of Interests. Although the Partnership expects to distribute from sale proceeds some portion of the Holders' original capital, the Holders of Interests are expected to receive substantially less than one-fourth of their original investment from all distributions of sale and refinancing proceeds over the entire term of the Partnership. Copley Place On January 23, 1997, through a series of transactions the Partnership sold its entire partnership interest in Copley Place Associates. The Partnership received approximately $929,000 of net proceeds after repayment of the purchase price note, at a discount, and repayment of its portion of the deficit loans. Reference is made to the Notes for a further description of such sale. This sale will result in a significant gain for financial reporting and Federal income tax purposes in 1997. 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. Old Orchard Urban Venture could have received reimbursement, under certain conditions, of up to an additional $3,400,000 (of which Orchard Associates had a 79.1667 interest) of previously incurred development costs based upon certain future earnings of the property (as defined). In December 1996, the joint venture received a final settlement of $2,450,000 (of which the Partnership share was $969,796) of such development costs related to the sale of the Old Orchard Shopping Center. In 1996, OOUV distributed to Orchard Associates $1,389,210 in proceeds from the settlement of operating prorations. As a result, Orchard Associates distributed $694,605 to the Partnership representing its share of such operating prorations. JMB/NYC In October 1994, the Partnership and its affiliated partners (together with the Partnership, the "Affiliated Partners"), through JMB/NYC, entered into an agreement (the "Agreement") with the affiliates (the "Olympia & York affiliates") of Olympia & York Developments, Ltd. ("O&Y") who were the venture partners in the Joint Ventures which owned 237 Park Avenue, 1290 Avenue of the Americas and 2 Broadway, to resolve certain disputes among the Affiliated Partners and the Olympia & York affiliates. In general, the parties agreed to: (i) restructure the first mortgage loan; (ii) sell the 2 Broadway Building; (iii) reduce or eliminate approval rights of JMB/NYC with respect to virtually all property management, leasing, sale or refinancing; (iv) amend the Joint Ventures' agreements to eliminate any funding obligations by JMB/NYC and (v) establish a new preferential cash distribution level for the Olympia & York affiliates. In accordance with the Agreement and in anticipation of the sale of the 2 Broadway Building, the unpaid first mortgage indebtedness previously allocated to 2 Broadway was allocated in 1994 to 237 Park Avenue and 1290 Avenue of the Americas. As part of the Agreement, JMB/NYC and the Olympia & York affiliates agreed to file a pre-arranged bankruptcy plan for reorganization under Chapter 11 of the Bankruptcy Code in order to facilitate the restructuring of the Joint Ventures between JMB/NYC and the Olympia & York affiliates and the debt encumbering the two properties remaining after the sale of 2 Broadway. 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. Such sale did not result in any distributable proceeds to JMB/NYC or the Olympia and York affiliates. Bankruptcy filings for the Joint Ventures owning the 237 Park Avenue and 1290 Avenue of the Americas properties were made in April 1996, and in August 1996, an Amended Plan of Reorganization and Disclosure Statement (the "Plan") was filed with the Bankruptcy Court for these Joint Ventures. The Plan was accepted by the various classes of debt and equity holders and confirmed by the Court on September 20, 1996 and became effective October 10, 1996 ("Effective Date"). The Plan provides that JMB/NYC has an indirect limited partnership interest which, before taking into account significant preferences to other partners, equals approximately 4.9% of the reorganized and restructured ventures owning 237 Park and 1290 Avenue of the Americas (the "Properties"). Neither O&Y nor any of its affiliates has any direct or indirect continuing interest in the Properties. The new ownership structure gives control of the Properties to a newly-organized real estate investment trust which is owned primarily by holders of the first mortgage debt which encumbered the Properties prior to the bankruptcy. JMB/NYC has, under certain limited circumstances, through January 1, 2001 rights of consent regarding sale of the Properties or the consummation of certain other transactions that significantly reduce indebtedness of the Properties. The restructuring and reorganization discussed above eliminates any potential additional obligation of the Partnership in the future to provide additional funds under its previous joint venture agreements. The Affiliated Partners entered into a joint and several obligation to indemnify, through a date no later than January 2, 2001, the newly formed real estate investment trust to the extent of $25 million to ensure their compliance with the terms and conditions relating to JMB/NYC's indirect limited partnership interest in the restructured and reorganized joint ventures that own the Properties. The Affiliated Partners contributed approximately $7.8 million (of which the Partnership's share was approximately $1.9 million) to JMB/NYC which was deposited into an escrow account as collateral for such indemnification. These funds have been invested in stripped U.S. Government obligations with a maturity date of February 15, 2001. Compliance with the provisions of the indemnification agreement generally deal with impacting the operations of the newly organized real estate investment trust. Compliance, therefore, is within the control of the Affiliated Partners and non-compliance with such provisions by either the Partnership or the Affiliated Partners is highly unlikely. Therefore, it is highly likely that the Partnership's share of the collateral will be returned to it at the termination of the indemnification agreement. The Partnership may either retain for working capital purposes or distribute all or portions of such funds upon return. Long Beach Plaza The Partnership has not remitted all of the scheduled debt service payments for the mortgage loan secured by the Long Beach Plaza Shopping Center 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 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 transfer in 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 gain for financial reporting and Federal income tax purposes with no corresponding distributable proceeds in 1997. Reference is made to the Notes. PLAZA TOWER OFFICE BUILDING In accordance with the terms of the 1995 refinancing of the Plaza Tower Office Building, the Partnership is obligated to deposit into escrow $100,000 annually for five years to cover future tenant improvement obligations pursuant to a lease executed with a major tenant effective April 1996. Should the current tenant lease be terminated or amended such that the Partnership's obligation to the tenant is eliminated, such escrowed funds (plus interest earned thereon) would be released to the Partnership. The property is expected to operate at the break-even level for 1997. This is a result of the Partnership's decision to undertake a modest lobby renovation to be completed by the second quarter of 1997, which is included in the budgeted capital improvements amounts described above. The Partnership believes that this modest renovation is necessary to retain tenants whose leases are expiring in 1997, 1998 and 1999 for 56,679, 51,515 and 76,827 square feet, respectively, or 13%, 12% and 18% of the building, respectively. In addition, the renovation will better position the property with maximum marketing potential for a sale during 1997. SHERRY LANE PLACE All excess cash flow is remitted to the lender as additional debt service on the modified mortgage. Accordingly, the Partnership does not consider this investment to be a source of short-term liquidity. The Partnership has committed to a plan to sell or dispose of Sherry Lane Place office building not later than December 31, 1999. Accordingly, as of December 31, 1996, the Partnership has classified this property as held for sale or disposition in the accompanying consolidated financial statements, and therefore, the property will not be subject to continued depreciation. CARROLLWOOD APARTMENTS In April 1996, the property manager (an affiliate of the Partnership's joint venture partner in the property) of the apartment complex notified the Partnership of potential sub-terranean termite damage at the property. This damage was discovered as a result of a wood replacement project that was undertaken to prepare the property to market for sale. The property manager obtained three competitive bids to repair the damage, each of which totalled approximately $1,400,000 (all bids were received prior to the tear out and reconstruction of the prototype building as discussed below). The exterminating company that had been treating the property for several years was notified of the extensive damage and was negotiating with the property manager and the venture partners its liability regarding the damage. In August 1996, the joint venture, in conjunction with the exterminating company, reached an agreement whereby one of the complex's twenty-seven buildings was chosen as a prototype building to better survey the termite damage. This building was analyzed and repaired at a total cost of $69,430. The joint venture and the exterminating company then commenced negotiating regarding a possible settlement for the entire complex. In December 1996, the exterminating company notified the Partnership of its desire to schedule a mediation between the parties in order to resolve certain disputes regarding the repair costs. On March 19, 1997, the joint venture and the exterminating company settled these issues and agreed on a settlement in principle in the amount of $637,500. Finalization of the settlement is subject to the execution of a definitive agreement by the parties. The joint venture will repair the property in 1997 at a total cost not expected to exceed $700,000. Although the joint venture has recorded for financial reporting purposes a liability for such repair costs, as a matter of prudent accounting practice, no amounts have been recorded as receivable from the exterminating company in the accompanying consolidated financial statements. THE GLADES APARTMENTS On November 21, 1996, the Partnership sold the land and related improvements of the Glades Apartments. The sale price of the land and related improvements was $12,900,000. Reference is made to the Notes for a further description of the sale. MARSHALL'S AURORA PLAZA In February 1996, the Partnership was notified by TJX, the new owner of the Marshall's store, of its intent to sublease or assign its lease as permitted by Marshall's current lease agreement. The Partnership was working with TJX to secure another tenant for its 28,000 square foot store and issued a proposal for a replacement tenant. In May 1996, the Partnership was notified that an agreement in principle was reached between TJX and a national retailer specializing in crafts and hobby supplies, whereby TJX will assign its lease to the national retailer. Subsequently, in February 1997, a sublease was executed between the parties. The new tenant is scheduled to open in May 1997. This transaction is not expected to have an adverse financial impact on the property and the new national retailer's store, when open, is expected to generate additional traffic to the center. RESULTS OF OPERATIONS The aggregate decrease in cash and cash equivalents and short-term investments at December 31, 1996 as compared to December 31, 1995 is primarily due to $1,300,000 in excess cash flow generated at the Copley Place multi-use complex that was held at December 31, 1995 and then subsequently submitted to the lender in 1996 as required by the terms of the loan modification agreement. Additionally, the Partnership contributed approximately $1,900,000 to JMB/NYC pursuant to the terms of the indemnification agreement, partially offset by the proceeds received from the sale of Glades Apartments. The decrease in restricted funds and the corresponding decrease in tenant security deposits at December 31, 1996 as compared to December 31, 1995 is primarily due to a refund of a $1,010,000 security deposit to a large tenant upon the renewal of their lease at Copley Place, partially offset by restricted cash held by the appointed receiver of Long Beach Plaza Shopping Center. The decrease in rents and other receivables at December 31, 1996 as compared to December 31, 1995 is primarily due to the timing of rental collections at the Copley Place multi-use complex. The increase in escrow deposits at December 31, 1996 as compared to December 31, 1995 is primarily due to the excess cash flow being generated from the Copley Place multi-use complex and deposited with the lender as required by the loan modification. The decrease in investment properties at December 31, 1996 as compared to December 31, 1995 is primarily due to the sale of the Glades Apartments in November 1996 and the provisions for value impairment recorded at Long Beach Plaza in 1996. The decrease in investment in unconsolidated ventures, at equity at December 31, 1996 as compared to December 31, 1995 is primarily due to a reduction of the Partnership's paid-in-capital obligation to Carlyle Managers, Inc. and Carlyle Investors, Inc. The increase in venture partners' deficits in ventures at December 31, 1996 as compared to December 31, 1995 is primarily due to the allocation to the venture partner of its share of operating losses being incurred at the Copley Place multi-use complex. The increase in accounts payable at December 31, 1996 as compared to December 31, 1995 is primarily due to a recorded liability at Carrollwood Apartments relating to the estimated repair costs of the subterranean termite damage at the property as discussed above. The increase in unearned rents at December 31, 1996 as compared to December 31, 1995 is primarily due to the timing of receipt of rental income at the Copley Place multi-use complex. The increase in accrued interest at December 31, 1996 as compared to December 31, 1995 is primarily due to the continued suspension of debt service payments on the long-term mortgage loan secured by Long Beach Plaza and the accrual of interest on the deficit loans at the Copley Place multi- use complex. The decrease in the deficit balance of the investment in unconsolidated venture is due to the restructuring of the Partnership's indirect interest in JMB/NYC. The deficit balance of the investment in unconsolidated venture has been adjusted so as to reflect the proportionate exposure to the Partnership under its indemnification as more fully described in the Notes. The increase in long-term debt, less current portion at December 31, 1996 as compared to December 31, 1995 is primarily due to the accrual of long-term deferred interest of approximately $2,749,000 on the Copley Place mortgage note and the accrual of long-term deferred interest of approximately $9,577,000 on the Copley Place purchase price note partly offset by the repayment of the long-term mortgage loan secured by the Glades Apartments upon sale of that property. The decrease in venture partners' subordinated equity in venture at December 31, 1996 as compared to December 31, 1995 is due to the sale of the Glades Apartments in 1996. The increase in rental income for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to higher average occupancy at the Copley Place multi-use complex in 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 decrease in interest income for the year ended December 31, 1996 as compared to the year ended December 31, 1995 and the decrease in interest income for the year ended December 31, 1995 as compared to the year ended December 31, 1994 are primarily due to lower average balances in short-term investments in 1996 and 1995 as a result of the February 1995 distribution to partners of previously undistributed sales proceeds of $11,094,473 and the February 1995 payment of $10,000,000 for previously deferred property management and leasing fees. The increase in mortgage and other interest for the year ended December 31, 1996 as compared to the year ended December 31, 1995 and the increase in mortgage and other interest for the year ended December 31, 1995 as compared to the year ended December 31, 1994 are due to the compounding of interest on the Copley Place purchase price note. The decrease in depreciation expense for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is due to the $13,100,000 value impairment recorded as of January 1, 1996 for the Long Beach Plaza Shopping Center as a result of the uncertainty of the Partnership's ability to recover the net carrying value of the Long Beach Plaza Shopping Center from future operations or sale. It is also due to the suspension of depreciation expense on certain properties sold or considered held for sale or disposition. The increase in property operating expenses for the year ended December 31, 1996 as compared to December 31, 1995 is primarily due to higher real estate taxes (which are partially recoverable from tenants) at the Copley Place multi-use complex, as well as a $700,000 accrual recorded for the repair costs relating to the sub-terranean termite damage at Carrollwood Apartments. In 1996, the city of Boston reevaluated and increased the real estate taxes based on the increase in office occupancy of approximately 15%. The decrease in property operating expenses for the year ended December 31, 1995 as compared to the year ended December 31, 1994 is primarily due 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 professional services for the year ended December 31, 1996 as compared to the year ended December 31, 1995 is primarily due to lower audit and legal fees incurred. The increase in general and administrative expense for the year ended December 31, 1995 as compared to the year ended December 31, 1994 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. The provision for value impairment in the amount of $17,600,000 for the year ended December 31, 1996 is due to the uncertainty of the Partnership's ability to recover the net carrying value of the Long Beach Plaza Shopping Center from future operations or sale. The Partnership's share of income from operations of unconsolidated venture for the year ended December 31, 1996 is primarily due to the restructuring of the Partnership's indirect interests in JMB/NYC. The decrease in venture partners' share of loss from consolidated ventures' operations for the year ended December 31, 1996 as compared to December 31, 1995 is primarily due to improved operations at the Copley Place multi-use complex as a result of higher rental income due to increased average occupancy, partially offset by increased real estate taxes which are only partially recoverable from tenants. The gain of $5,484,249 on the sale or disposition of investment property for the year ended December 31, 1996 is the result of the Partnership's share of gain on sale of the Glades Apartments and the final settlement of OOUV's share of reimbursable development costs related to the sale of Old Orchard Shopping Center which was sold in September 1993. 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. The loss on sale of interest in unconsolidated ventures and the extraordinary item for the year 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 and the related gain on the extinguishment of indebtedness. The gain on sale of interest in unconsolidated venture of $1,702,802 for the year ended 1994 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. The extraordinary item of $996,126 for 1994 is due to the discounted payoff of the mortgage note secured by the Eastridge Apartments. 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, 1996 and 1995 Consolidated Statements of Operations, years ended December 31, 1996, 1995 and 1994 Consolidated Statements of Partners' Capital Accounts (Deficits), years ended December 31, 1996, 1995 and 1994 Consolidated Statements of Cash Flows, years ended December 31, 1996, 1995 and 1994 Notes to Consolidated Financial Statements SCHEDULE -------- Consolidated 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 consolidated 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, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996, 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 the Notes to the consolidated financial statements, in 1996, the Partnership and its consolidated ventures changed their method of accounting for long-lived assets and long-lived assets to be disposed of to conform with Statement of Financial Accounting Standards No. 121. KPMG PEAT MARWICK LLP Chicago, Illinois March 21, 1997 CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1996 AND 1995 ASSETS ------
1996 1995 ------------ ----------- Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 6,030,217 5,908,236 Short-term investments. . . . . . . . . . . . . . . . . . . . . . . 374,085 2,568,329 Restricted funds. . . . . . . . . . . . . . . . . . . . . . . . . . 1,055,386 1,312,240 Rents and other receivables . . . . . . . . . . . . . . . . . . . . 2,576,860 2,963,711 Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 262,562 289,250 Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 11,435,274 6,191,089 ------------ ------------ Total current assets. . . . . . . . . . . . . . . . . . . . 21,734,384 19,232,855 Investment properties, at cost - Schedule III: Land and leasehold interests. . . . . . . . . . . . . . . . . . . -- 20,935,810 Buildings and improvements. . . . . . . . . . . . . . . . . . . . -- 412,286,995 ------------ ------------ -- 433,222,805 Less accumulated depreciation . . . . . . . . . . . . . . . . . . -- 163,309,553 ------------ ------------ Total properties held for investment, net of accumulated depreciation . . . . . . . . . . . . . -- 269,913,252 Properties held for sale or disposition . . . . . . . . . . . . . 238,208,441 -- ------------ ------------ Total investment properties . . . . . . . . . . . . . . . . 238,208,441 269,913,252 Investment in unconsolidated ventures, at equity. . . . . . . . . . . 432,357 1,459,879 Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 5,133,689 5,261,096 Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . 447,345 489,911 Venture partners' deficits in ventures. . . . . . . . . . . . . . . . 14,639,364 11,103,113 ------------ ------------ $280,595,580 307,460,106 ============ ============ CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED BALANCE SHEETS - CONTINUED LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS) ----------------------------------------------------- 1996 1995 ------------ ----------- Current liabilities: Current portion of long-term debt . . . . . . . . . . . . . . . . . $ 39,232,585 39,666,113 Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 3,434,187 2,858,162 Amounts due to affiliates . . . . . . . . . . . . . . . . . . . . . 4,238,789 4,249,390 Unearned rents. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,633,263 600,610 Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . 17,431,535 13,252,892 Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . 1,475,510 1,330,231 ------------ ------------ Total current liabilities . . . . . . . . . . . . . . . . . 67,445,869 61,957,398 Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . 800,941 1,704,872 Investment in unconsolidated venture, at equity . . . . . . . . . . . 4,265,510 84,764,207 Long-term debt, less current portion. . . . . . . . . . . . . . . . . 384,098,834 382,303,505 ------------ ------------ Commitments and contingencies Total liabilities . . . . . . . . . . . . . . . . . . . . . 456,611,154 530,729,982 Venture partners' subordinated equity in venture. . . . . . . . . . . -- 329,169 Partners' capital accounts (deficits): General partners: Capital contributions . . . . . . . . . . . . . . . . . . . . . 1,000 1,000 Cumulative net losses . . . . . . . . . . . . . . . . . . . . . (19,776,680) (21,515,491) Cumulative cash distributions . . . . . . . . . . . . . . . . . (1,149,967) (1,149,967) ------------ ------------ (20,925,647) (22,664,458) ------------ ------------ Limited partners: Capital contributions, net of offering costs. . . . . . . . . . 326,224,167 326,224,167 Cumulative net losses . . . . . . . . . . . . . . . . . . . . . (440,355,677) (486,200,337) Cumulative cash distributions . . . . . . . . . . . . . . . . . (40,958,417) (40,958,417) ------------ ------------ (155,089,927) (200,934,587) ------------ ------------ Total partners' capital (deficits). . . . . . . . . . . . . (176,015,574) (223,599,045) ------------ ------------ $280,595,580 307,460,106 ============ ============ 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, 1996, 1995 AND 1994
1996 1995 1994 ------------ ------------ ------------ Income: Rental income . . . . . . . . . . . . . . . . . . $ 68,293,433 65,729,288 64,648,336 Interest income . . . . . . . . . . . . . . . . . 800,510 1,034,061 1,320,941 ------------ ------------ ------------ 69,093,943 66,763,349 65,969,277 ------------ ------------ ------------ Expenses: Mortgage and other interest . . . . . . . . . . . 39,959,842 38,615,594 37,651,732 Depreciation. . . . . . . . . . . . . . . . . . . 10,267,305 13,784,147 13,753,198 Property operating expenses . . . . . . . . . . . 39,183,796 35,234,465 37,293,007 Professional services . . . . . . . . . . . . . . 323,882 647,443 547,566 Amortization of deferred expenses . . . . . . . . 1,570,746 1,421,951 1,525,373 General and administrative. . . . . . . . . . . . 695,947 781,049 609,249 Provision for value impairment. . . . . . . . . . 17,600,000 -- -- ------------ ------------ ------------ 109,601,518 90,484,649 91,380,125 ------------ ------------ ------------ Operating earnings (loss). . . . . . . . . . (40,507,575) (23,721,300) (25,410,848) Partnership's share of income (loss) from unconsolidated ventures (including income from restructuring of $78,704,658 in 1996). . . . . . . . . . . . . . . . . . . . . 79,070,546 (6,600,158) (6,271,489) Venture partners' share of earnings (loss) from consolidated ventures' operations . . . . . . . . 3,536,251 4,588,759 5,659,744 ------------ ------------ ------------ Net operating earnings (loss) . . . . . . . 42,099,222 (25,732,699) (26,022,593) Gain (loss) on sale or disposition of investment properties, net of venture partners' share of ($329,169) in 1996 and $2,887,659 in 1994 . . . . . . . . . . . . . . . . . . . . . 5,484,249 -- 18,364,792 Partnership's share of gain (loss) on sale of property or interest in property of unconsolidated ventures. . . . . . . . . . . . . . . . . . . . . -- (14,789,529) 1,702,082 ------------ ------------ ------------ Earnings (loss) before extraordinary items. 47,583,471 (40,522,228) (5,955,719) CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED 1996 1995 1994 ------------ ------------ ------------ Extraordinary items . . . . . . . . . . . . . . . . -- 15,632,407 996,126 ------------ ------------ ------------ Net earnings (loss). . . . . . . . . . . . . $ 47,583,471 (24,889,821) (4,959,593) ============ ============ ============ Net earnings (loss) per limited partnership interest: Net operating earnings (loss) . . . . . . . . . $ 110.42 (67.47) (68.22) Gain (loss) on sale or disposition of investment properties and extinguishment of debt. . . . . . . . . . . . 14.83 -- 49.66 Share of gain (loss) on sale of property or interest in property of unconsolidated ventures. . . . . . . . . . -- (39.99) 4.60 Extraordinary items . . . . . . . . . . . . . . -- 42.27 2.69 ------------ ------------ ------------ Net earnings (loss) . . . . . . . . . . . . . $ 125.25 (65.19) (11.27) ============ ============ ============ 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, 1996, 1995 AND 1994
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, 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) ------ ----------- ---------- ----------- ----------- ------------ ----------- ---------- 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) ------ ----------- ---------- ----------- ----------- ------------ ----------- ----------- 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, 1995 . . . . 1,000 (21,515,491) (1,149,967)(22,664,458) 326,224,167 (486,200,337) (40,958,417)(200,934,587) Net earn- ings (loss). -- 1,738,811 -- 1,738,811 -- 45,844,660 -- 45,844,660 ------ ----------- ---------- ----------- ----------- ------------ ----------- ----------- Balance (deficit) Decem- ber 31, 1996 . . . .$1,000 (19,776,680) (1,149,967)(20,925,647) 326,224,167 (440,355,677) (40,958,417)(155,089,927) ====== =========== ========== =========== =========== ============ ======================= 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, 1996, 1995 AND 1994
1996 1995 1994 ------------ ------------ ------------ Cash flows from operating activities: Net earnings (loss) . . . . . . . . . . . . . . . $ 47,583,471 (24,889,821) (4,959,593) Items not requiring (providing) cash or cash equivalents: Depreciation. . . . . . . . . . . . . . . . . . 10,267,305 13,784,147 13,753,198 Amortization of deferred expenses . . . . . . . 1,570,746 1,421,951 1,525,373 Amortization of discount on long-term debt. . . 147,795 224,415 116,398 Long-term debt - deferred accrued interest. . . 12,575,684 11,980,846 10,854,534 Partnership's share of income (loss) from unconsolidated ventures (including income from restructuring of $78,704,658 in 1996). . (79,070,546) 6,600,158 6,271,489 Venture partners' share of consolidated ventures' operations. . . . . . . . . . . . . (3,536,251) (4,588,759) (5,659,744) Gain on sale or disposition of investment properties. . . . . . . . . . . . . . . . . . (5,484,249) -- (18,364,792) Extraordinary items . . . . . . . . . . . . . . -- (15,632,407) (996,126) Partnership's share of (gain) loss on sale of property or interest in property of unconsolidated ventures. . . . . . . . . . -- 14,789,529 (1,702,082) Provision for value impairment. . . . . . . . . 17,600,000 -- -- Changes in: Restricted funds. . . . . . . . . . . . . . . . 256,854 (828,006) 54,566 Rents and other receivables . . . . . . . . . . 356,584 151,462 596,186 Prepaid expenses. . . . . . . . . . . . . . . . 26,688 29,086 78,773 Escrow deposits . . . . . . . . . . . . . . . . (5,439,699) (126,335) (2,145,872) Accrued rents receivable. . . . . . . . . . . . 42,566 24,380 (27,002) Accounts payable. . . . . . . . . . . . . . . . 576,025 839,886 (378,883) Unearned rents. . . . . . . . . . . . . . . . . 1,099,239 (17,800) (151,827) Accrued interest. . . . . . . . . . . . . . . . 4,476,029 4,140,326 521,403 Accrued real estate taxes . . . . . . . . . . . 321,108 (425,059) (309,189) Amounts due to affiliates . . . . . . . . . . . 789,399 (9,960,695) (684,374) Tenant security deposits. . . . . . . . . . . . (846,950) 938,939 (114,123) ------------ ------------ ------------ Net cash provided by (used in) operating activities. . . . . . . . . . 3,311,798 (1,543,757) (1,721,687) ------------ ------------ ------------ CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED 1996 1995 1994 ------------ ------------ ------------ Cash flows from investing activities: Cash proceeds from sale of investment properties, net of selling expenses . . . . . . 1,651,689 -- 11,781,988 Additions to investment properties. . . . . . . . (4,337,187) (3,246,082) (1,796,484) Cash expended in disposition of investment properties . . . . . . . . . . . . . -- -- (1,014) Net sales and maturities (purchases) of short-term investments . . . . . . . . . . . 2,194,244 16,391,657 4,135,915 Partnership's distributions from unconsolidated ventures . . . . . . . . . . . . 1,679,901 1,186,046 1,702,082 Partnership's contributions to unconsolidated ventures . . . . . . . . . . . . (2,009,693) -- (10,000) Payment of deferred expenses. . . . . . . . . . . (1,575,688) (1,531,975) (693,408) ------------ ------------ ------------ Net cash provided by (used in) investing activities. . . . . . . . . . (2,396,734) 12,799,646 15,119,079 ------------ ------------ ------------ Cash flows from financing activities: Proceeds from refinancing of long-term debt . . . -- 14,900,000 -- Principal payments on long-term debt. . . . . . . (793,083) (18,705,089) (10,022,203) Venture partners' contributions to ventures . . . -- -- 814,568 Distributions to limited partners . . . . . . . . -- (10,983,528) -- Distributions to general partners . . . . . . . . -- (110,945) -- ------------ ------------ ------------ Net cash provided by (used in) financing activities. . . . . . . . . . (793,083) (14,899,562) (9,207,635) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents. . . . . . . . . . 121,981 (3,643,673) 4,189,757 Cash and cash equivalents, beginning of year . . . . . . . . . . . 5,908,236 9,551,909 5,362,152 ------------ ------------ ------------ Cash and cash equivalents, end of year . . . . . . . . . . . . . . $ 6,030,217 5,908,236 9,551,909 ============ ============ ============ CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED 1996 1995 1994 ------------ ------------ ------------ Supplemental disclosure of cash flow information: Cash paid for mortgage and other interest . . . . $ 21,830,425 22,733,319 26,150,776 ============ ============ ============ Non-cash investing and financing activities: Reduction in investment in unconsolidated venture $ 800,000 -- -- ============ ============ ============ Reduction in amounts due to affiliates. . . . . $ (800,000) -- -- ============ ============ ============ 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, 1996, 1995 AND 1994 OPERATIONS AND BASIS OF ACCOUNTING GENERAL 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 - 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") in which the Partnership has certain preferential claims and rights as discussed below. The effect of all transactions between the Partnership and the consolidated ventures has been eliminated. The Partnership holds an approximate 25% interest in JMB/NYC Office Building Associates, L.P. ("JMB/NYC") which in turn owns an indirect approximate 4.9% interest in commercial real estate in the city of New York, New York consisting of the 237 Park Avenue and 1290 Avenue of the Americas properties (the "Properties"). The equity method of accounting has been applied in the accompanying financial statements with respect to the Partnership's 25% indirect interest in JMB/NYC through Carlyle XIII Associates, L.P. Accordingly, the financial statements do not include the accounts of JMB/NYC or Carlyle-XIII Associates, L.P. Effective with the confirmation and acceptance of the Amended Plan of Reorganization and Disclosure Statement on October 10, 1996 ("Effective Date"), JMB/NYC accounts for its indirect interest in the Properties on the cost basis of accounting as a result of JMB/NYC converting its ownership interest in the joint ventures which owned the Properties to a limited partner. As a limited partner, JMB/NYC has no future funding obligations (other than that related to a certain indemnification provided in connection with the restructuring) and has no influence or control over the day-to-day affairs of the Partnerships which own the Properties subsequent to the Effective Date. Accordingly, JMB/NYC (and the Partnership) have suspended loss recognition relative to their respective real estate investments and have reversed those previously recognized losses that the Partnership and JMB/NYC are no longer obligated to fund. The Partnership maintains a deficit balance in its investment in unconsolidated venture to reflect its maximum exposure under the indemnification agreement. The share of income from unconsolidated ventures in the accompanying Partnership financial statements includes the respective partnerships' proportionate share of the operations of the Properties through the Effective Date, as well as income from restructuring consisting primarily of the reversal of previously recognized losses as noted above and the adjustments necessary to record the restructuring. JMB/NYC utilized the equity method to account for such investments prior to the Effective Date. 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, 1996 and 1995 is summarized as follows:
1996 1995 ------------------------------ ------------------------------ TAX BASIS TAX BASIS GAAP BASIS (UNAUDITED) GAAP BASIS (UNAUDITED) ------------ ---------- ----------- ---------- Total assets. . . . . . . . . . . . $280,595,580 66,129,981 307,460,106 69,275,776 Partners' capital accounts (deficits): General partners . . . . . . . (20,925,647) (29,981,225) (22,664,458) (30,958,036) Limited partners . . . . . . . (155,089,927) (263,290,961) (200,934,587) (263,807,168) Net earnings (loss): General partners . . . . . . . 1,738,811 976,751 (1,020,879) 8,200 Limited partners . . . . . . . 45,844,660 516,267 (23,868,942) (36,054,854) Net earnings (loss) per limited partnership interest. . . . . . . . . . . . . 125.25 1.41 (65.19) (98.47) ============ ============ ============ ============
The net earnings (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. Certain amounts in the 1995 financial statements have been reclassified to conform with the 1996 presentation. 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 ($5,500,762 and $2,194,000 at December 31, 1996 and 1995, respectively) as cash equivalents, which includes investments in an institutional mutual fund which holds U.S. Government obligations, 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" (as amended), requires certain large public 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, 1996 because the debt has now matured, and a receiver has been appointed for the property for the benefit of the lender. The Partnership considers the disclosure of the SFAS 107 value of such debt to be impracticable. The remaining debt, with a carrying balance of $389,683,191, has been calculated to have an SFAS 107 value of $332,287,787 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. 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. The Partnership has acquired, either directly or through joint ventures, nine apartment complexes, three shopping centers, ten office buildings and a multi-use complex. Fifteen properties have been sold or disposed of by the Partnership as of December 31, 1996. All of the remaining properties owned at December 31, 1996 were operating and held for sale or disposition. The cost of the investment properties represents the total cost to the Partnership or its ventures plus miscellaneous acquisi- tion costs. Depreciation on the properties has been provided over the estimated useful lives of the various components as follows: YEARS ----- Building and Improvements -- straight-line . . 30 Personal property -- straight-line . . . . . . 5 == Significant betterments and improvements are capitalized and depreciated over their estimated useful lives. Maintenance and repair expenses are charged to operations as incurred. 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 in March 1995. The Partnership adopted SFAS 121 as required in the first quarter of 1996. SFAS 121 requires that the Partnership record an impairment loss on its properties to be held for investment whenever their carrying value cannot be fully recovered through estimated undiscounted future cash flows from their operations and sale. The amount of the impairment loss to be recognized would be the difference between the property's carrying value and the property's estimated fair value. The Partnership's policy is to consider a property to be held for sale or disposition when the Partnership has committed to a plan to sell or dispose of such property and active marketing activity has commenced or is expected to commence in the near term or the Partnership has concluded that it may dispose of the property by no longer funding operating deficits or debt service requirements of the property thus allowing the lender to realize upon its security. In accordance with SFAS 121, any properties identified as "held for sale or disposition" are no longer depreciated. Adjustments for impairment loss for such properties (subsequent to the date of adoption of SFAS 121) are made in each period as necessary to report these properties at the lower of carrying value or 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 can be no assurance that any estimated fair value of these properties would ultimately be realized by the Partnership in any future sale or disposition transaction. Under the prior accounting policy, provisions for value impairment were recorded with respect to investment properties whenever the estimated future cash flows from a property's operations and projected sale were less than the property's carrying value. The amount of any such impairment loss recognized by the Partnership was 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 is 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 for financial reporting purposes (comprised of gain on extinguishment of debt and gain or loss on the sale or disposition of property) 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. 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 prior 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 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. The results of operations for consolidated properties classified as held for sale or disposition as of December 31, 1996 or sold or disposed of during the past three years were ($30,174,664), ($14,205,821) and ($17,487,132), respectively, for the years ended December 31, 1996, 1995 and 1994. In addition, the accompanying consolidated financial statements include $0, ($2,399,842) and $7,919,052, respectively, of the Partnership's share of total property operations of $0, ($10,321,904) and $34,060,437 of unconsolidated properties held for sale or disposition as of December 31, 1996 or sold or disposed of in the past three years. 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 represents a mortgage loan which is subordinated to the existing senior mortgage loan. VENTURE AGREEMENTS - GENERAL The Partnership at December 31, 1996 is a party to four 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, one apartment complex, 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 below. 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 1996, 1995 and 1994, two, two and three, 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. INVESTMENT PROPERTIES 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). The Partnership has not remitted all of the scheduled debt service payments for the mortgage loan secured by the Long Beach Plaza Shopping Center since June 1993. Accordingly, the combined balances of the mortgage note and related accrued interest of approximately $47,624,000 at December 31, 1996 and approximately $44,220,000 at December 31, 1995 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 decided not to commit any significant additional amounts to the property. In March 1996, a receiver for the property 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 1997. This will result in the Partnership no longer having an ownership interest in such property and will result in gain for financial reporting and Federal income tax purposes to the Partnership with no corresponding distributable proceeds in 1997. On adoption of SFAS 121 as described above, the Partnership recorded a provision for value impairment of $13,100,000 as of January 1, 1996 to reflect the then estimated fair value of the property based upon the use of an appropriate capitalization rate on the property's net operating income. As of July 1, 1996, the Partnership had committed to a plan to dispose of Long Beach Plaza. Accordingly, the Partnership classified this property as held for sale or disposition in the accompanying consolidated financial statements as of such date, and therefore, the property will not be subject to continuing depreciation. On December 31, 1996, the Partnership recorded an additional provision for value impairment of $4,500,000 to revise the estimated fair value, less costs to sell, of the property based on current net operating income. COPLEY PLACE The Partnership acquired in 1983, through a joint venture ("Copley Place Associates") with the developer, an interest in a portion of Copley Place, a multi-use complex in Boston, Massachusetts. Initially, the Partnership purchased its joint venture 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. The purchase price note (the "Note") with an original balance of $20,000,000, bore interest at 11.5% per annum on a compounded basis. The unpaid balance of the Note at December 31, 1996 was $88,554,145. The Partnership had 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. As a result of such transaction, and subsequent assignments, the Note was held by an affiliate of the Corporate General Partner at December 31, 1996. 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 had loaned approximately $13,648,000 through December 31, 1996 to fund its required obligation. The loans (the "Deficit Loans") accrued interest at the contract rate based on the joint venture partner's line of credit. The line of credit bore interest at a floating rate (averaging 7.57% per annum at December 31, 1996). The outstanding principal and accrued interest were to be repaid from future available cash flow, as defined. During 1996, 1995 and 1994, the joint venture paid approximately $225,000, $1,518,000 and $3,597,000, respectively, of accrued interest on these loans. In May 1996, the venture used approximately $945,000 of Copley Place pre-loan modification cash reserves to repay a 1996 advance of approximately $720,000 from the joint venture partner with the remaining balance applied to accrued interest on the operating deficit loans discussed above. Operating profits and losses of the joint venture were allocated 50% to the Partnership and 50% to the joint venture partner. The joint venture agreement further provided that, in general, upon any sale or refinancing of the complex the first $60,000,000 of net proceeds would be distributed equally between the Partnership and the joint venture partner. The Partnership would 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, 1996 was $12,000,000). The Partnership would then be entitled to receive the next $190,000,000 plus an amount equal to certain interest which had been paid or was payable to the developer and its successors on the Note. The joint venture partner would have been entitled to receive the next $190,000,000 plus an amount equal to certain interest paid to it on the Note, with any remaining proceeds distributable equally to the Partnership and the joint venture partner. However, the Partnership was obligated to use its share of any sale or refinancing proceeds to satisfy, in full, the 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 7-1/2% per annum through August 1998. The contract rate was lowered to 10% per annum through August 1993 and, further reduced 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), was added to the principal balance and accrued interest at the contract interest rate. On September 1, 1996, the joint venture elected to pay mortgage interest using the contract rate of 8.5% rather than the pay rate of 7.5%. All outstanding principal, including the unpaid deferred interest, was due and payable on August 31, 1998. Any cash flow from the property, after all capital and leasing expenditures, but before payment of a portion of the property management fees, was escrowed for the purpose of paying for future capital and leasing requirements. As a result of the debt modification, the property produced cash flow since 1993. This cash flow had been escrowed for future potential leasing requirements as set forth in the loan modification. From and after 1986, substantially all of the joint venture partner's interest in the joint venture was owned by the Corporate General Partner. An affiliate of the Corporate General Partner managed the portion of the complex owned by the joint venture, pursuant to an agreement similar to those described above. During 1996, the Partnership and Copley Place Associates had committed to a plan to sell the property, and therefore, classified the property as held for sale at October 1, 1996. The property was not subject to continued depreciation as of such date. In 1996, the joint venture determined that receivables due from an affiliate were uncollectible. As a result, the joint venture wrote off these amounts in 1996. The Partnership's outstanding obligations on the Note and for the Deficit Loans, and the projected continuing accruals of additional interest on such amounts made it unlikely that the Partnership's interest in Copley Place Associates would ever be sold for an amount which would result in any net proceeds to the Partnership. The Partnership sold its interest on January 23, 1997. In order to provide the Partnership with incentive to consummate the sale of its interest, the joint venture partner, the holder of the Note and the Partnership executed an agreement whereby the net proceeds were distributed in a manner which permitted the Partnership to satisfy its obligations relative to the Note and the Deficit Loans and still realize some modest cash proceeds. In addition, the holder of the Note agreed on a discounted payoff of the Note. In general, the Partnership received $43,900,000 of sale proceeds, of which $34,000,000 was remitted to the holder of the Note as payment in full satisfaction of the Note. As a result, the Partnership was relieved of an approximately $55,000,000 obligation. The Partnership's obligation under the Deficit Loans were next satisfied in full out of the Partnership's remaining sale proceeds. After the repayment of the Note and Deficit Loans, as discussed above, the Partnership's remaining net proceeds amounted to approximately $929,000, all of which was received in cash at closing. The Partnership currently intends to retain these funds as necessary working capital reserves. The effect on the Partnership's consolidated financial statements as a result of the sale will be to eliminate the Partnership's investment in Copley Place Associates and to recognize a gain on sale of the Partnership's interest in the consolidated venture of approximately $126,500,000 for financial reporting purposes in 1997. The Partnership also expects to recognize a gain on the sale of approximately $171,500,000 for Federal income tax purposes in 1997. JMB/NYC JMB/NYC is a limited partnership 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. and related to this investment, the Partnership has an obligation to fund, on demand, $200,000 (reduced from $600,000 during 1996) 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, $200,000 (reduced from $600,000 during 1996) 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%. In October 1994, the Partnership and its affiliated partners (together with the Partnership, the "Affiliated Partners"), through JMB/NYC, entered into an agreement (the "Agreement") with the affiliates (the "Olympia & York affiliates") of Olympia & York Developments, Ltd. ("O&Y") who were the venture partners in the Joint Ventures which owned 237 Park Avenue, 1290 Avenue of the Americas and 2 Broadway, to resolve certain disputes among the Affiliated Partners and the Olympia & York affiliates. In general, the parties agreed to: (i) restructure the first mortgage loan; (ii) sell the 2 Broadway Building; (iii) reduce or eliminate approval rights of JMB/NYC with respect to virtually all property management, leasing, sale or refinancing; (iv) amend the Joint Ventures' agreements to eliminate any funding obligations by JMB/NYC and (v) establish a new preferential cash distribution level for the Olympia & York affiliates. In accordance with the Agreement and in anticipation of the sale of the 2 Broadway Building, the unpaid first mortgage indebtedness previously allocated to 2 Broadway was allocated in 1994 to 237 Park Avenue and 1290 Avenue of the Americas. As part of the Agreement, JMB/NYC and the Olympia & York affiliates agreed to file a pre-arranged bankruptcy plan for reorganization under Chapter 11 of the Bankruptcy Code in order to facilitate the restructuring of the Joint Ventures between JMB/NYC and the Olympia & York affiliates and the debt encumbering the two properties remaining after the sale of 2 Broadway. 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. Such sale did not result in any distributable proceeds to JMB/NYC or the Olympia & York affiliates. Bankruptcy filings for the Joint Ventures owning the 237 Park Avenue and 1290 Avenue of the Americas properties were made in April 1996, and in August 1996, an Amended Plan of Reorganization and Disclosure Statement (the "Plan") was filed with the Bankruptcy Court for these Joint Ventures. The Plan was accepted by the various classes of debt and equity holders and confirmed by the Court on September 20, 1996 and became effective October 10, 1996 ("Effective Date"). The Plan provides that JMB/NYC has an indirect limited partnership interest which, before taking into account significant preferences to other partners, equals approximately 4.9% of the reorganized and restructured ventures owning 237 Park and 1290 Avenue of the Americas. Neither O&Y nor any of its affiliates has any direct or indirect continuing interest in the Properties. The new ownership structure gives control of the Properties to a newly-organized real estate investment trust which is owned primarily by holders of the first mortgage debt which encumbered the Properties prior to the bankruptcy. JMB/NYC has, under certain limited circumstances, through January 1, 2001 rights of consent regarding sale of the Properties or the consummation of certain other transactions that significantly reduce indebtedness of the Properties. The restructuring and reorganization discussed above eliminates any potential additional obligation of the Partnership in the future to provide additional funds under its previous joint venture agreements. The Affiliated Partners entered into a joint and several obligation to indemnify, through a date no later than January 2, 2001, the newly formed real estate investment trust to the extent of $25 million to ensure their compliance with the terms and conditions relating to JMB/NYC's indirect limited partnership interest in the restructured and reorganized joint ventures that own the Properties. The Affiliated Partners contributed approximately $7.8 million (of which the Partnership's share was approximately $1.9 million) to JMB/NYC which was deposited into an escrow account as collateral for such indemnification. These funds have been invested in stripped U.S. Government obligations with a maturity date of February 15, 2001. Compliance with the provisions of the indemnification agreement generally deal with impacting the operations of the newly organized real estate investment trust. Compliance, therefore, is within the control of the Affiliated Partners and non-compliance with such provisions by either the Partnership or the Affiliated Partners is highly unlikely. Therefore, it is highly likely that the Partnership's share of the collateral will be returned to it at the termination of the indemnification agreement. The Partnership may either retain for working capital purposes or distribute all or portions of such funds upon return. 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. OOUV was 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 percentage interests. OOUV could have received reimbursement, under certain conditions, of up to an additional $3,400,000 (of which Orchard Associates had a 79.1667 interest) of previously incurred development costs based upon certain future earnings of the property (as defined). In December 1996, OOUV received a final settlement of $2,450,000 (of which the Partnership's share was $969,796) of such development costs related to the sale of the Old Orchard Shopping Center. 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 Associates its share of the pre-sale settlement with Federated Department Stores of $288,452. As a result, Orchard Associates distributed to the Partnership its share of the settlement of $144,226. In 1996, OOUV distributed to Orchard Associates proceeds of $1,389,210 from the settlement of operating prorations. As a result, Orchard Associates distributed $694,605 to the Partnership representing its share of such operating prorations. The Partnership intends to retain these funds for working capital purposes. OOUV and Orchard Associates had also entered into a contribution agreement whereby they 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 share ($1,702,082 to the Partnership) of such amount. The Partnership recognized a gain of $1,702,082 for financial reporting purposes and Federal income tax purposes in 1994. In December 1996, Orchard received its share of the earn out provision of $2,450,000, as discussed above, and distributed to each of the respective partners their share ($969,796 to the Partnership) of such amount. The Partnership recognized a gain of $870,837 for financial reporting purposes and for Federal income tax purposes in 1996. SHERRY LANE PLACE OFFICE BUILDING 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). The Partnership has committed to a plan to sell or dispose of Sherry Lane Place office building not later than December 31, 1999. Accordingly, as of December 31, 1996, the Partnership has classified this property as held for sale or disposition in the accompanying Consolidated Financial Statements, and therefore, the property will not be subject to continued depreciation. 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. 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 has been 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. In April 1996, the property manager (an affiliate of the Partnership's joint venture partner in the property) of the apartment complex notified the Partnership of potential sub-terranean termite damage at the property. This damage was discovered as a result of a wood replacement project that was undertaken to prepare the property to market for sale. The property manager obtained three competitive bids to repair the damage, each of which totalled approximately $1,400,000 (all bids were received prior to the tear out and reconstruction of the prototype building as discussed below). The exterminating company that had been treating the property for several years was notified of the extensive damage and was negotiating with the property manager and the venture partners its liability regarding the damage. In August 1996, the joint venture, in conjunction with the exterminating company, reached an agreement whereby one of the complex's twenty-seven buildings was chosen as a prototype building to better survey the termite damage. This building was analyzed and repaired at a total cost of $69,430. The joint venture and the exterminating company then commenced negotiating regarding a possible settlement for the entire complex. In December 1996, the exterminating company notified the Partnership of its desire to schedule a mediation between the parties in order to resolve certain disputes regarding the repair costs. On March 19, 1997, the joint venture and the exterminating company settled these issues and agreed on a settlement in principle in the amount of $637,500. Finalization of the settlement is subject to the execution of a definitive agreement by the parties. The joint venture will repair the property in 1997 at a cost not expected to exceed $700,000. Although the joint venture has recorded for financial reporting purposes a liability for such repair costs, as a matter of prudent accounting practice, no amounts have been recorded as receivable from the exterminating company in the accompanying Consolidated Financial Statements. The Partnership has committed to a plan to sell or dispose of Carrollwood Apartments. Accordingly, as of December 31, 1996, the Partnership has classified this property as held for sale or disposition in the accompanying Consolidated Financial Statements, and therefore, the property will not be subject to continued depreciation. 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. The Partnership initiated discussions with the first mortgage lender for a short-term extension of the mortgage loan. The lender agreed to a short-term loan extension until June 2, 1997 with the payment of a loan extension fee (paid on November 1, 1996) equal to 1.25% of the outstanding balance of approximately $5,368,000 or $67,100. As of December 31, 1996, the Partnership has committed to a plan to sell or dispose of Marshall's Aurora Plaza. Accordingly, the Partnership has classified this property as held for sale or disposition in the accompanying Consolidated Financial Statements, and therefore, the property will not be subject to continued depreciation. However, if the Partnership is unable to sell the property by the revised maturity date of the loan (June 2, 1997), the Partnership will seek a further extension of such loan. There can be no assurance that such an extension can be obtained. PLAZA TOWER The first mortgage loan secured by the Plaza Tower office building property matured on November 1, 1994. 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 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. The Partnership has committed to a plan to sell or dispose of Plaza Tower office building. Accordingly, as of December 31, 1996, the Partnership has classified this property as held for sale or disposition in the accompanying Consolidated Financial Statements, and therefore, the property will not be subject to continued depreciation. 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. The Partnership had 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 was to be purchased by the buyer after the environmental clean-up was completed. The Partnership was informed that certain regulatory agencies have approved the clean-up of the site and approved the shut-down of the clean-up operation. On March 12, 1997, the Partnership sold the Parcel for approximately $682,000. The sale of this Parcel will result in gain for financial reporting and Federal income tax purposes in the first quarter of 1997. 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. 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. GABLES CORPORATE PLAZA Title to the property to the lender was transferred to the lender in January 1994 which resulted in net gain of approximately $3,793,000 for Federal income tax purposes without any net distributable proceeds in 1994. THE GLADES APARTMENTS The joint venture had been marketing the Glades Apartments for sale. The property was classified as held for sale or disposition as of April 1, 1996, and therefore, was not subject to continued depreciation. In July 1996, the joint venture signed a letter of intent to sell the property to an unaffiliated third party. On November 21, 1996, the Partnership sold the land and related improvements of the Glades Apartments. The purchaser was not affiliated with the Partnership or its General Partners and the sale price was determined by arm's-length negotiations. The sale price was $12,900,000 (before selling costs). The sale price was represented by the buyer's assumption of the first mortgage loan which, at closing, had an outstanding principal balance of $9,640,000, the payoff of the second mortgage which, at closing, had an outstanding principal balance of $1,187,420, and approximately $298,450 in brokerage commissions and selling expenses in connection with the sale. The balance of the purchase price was paid in cash at closing. The Partnership recognized a gain of $4,616,259 for financial reporting purposes and $8,135,436 for Federal income tax purposes in 1996. LONG-TERM DEBT GENERAL In response to operating deficits incurred at certain properties, the Partnership has received mortgage note modifications on certain properties. Certain of the modifications received have expired and others expire on various dates commencing June 1997. 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 decide not to 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 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, 1996 and 1995:
1996 1995 ----------- ----------- 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 was payable (satisfied in January 1997 at sale). . . . . . . . . . . . . . . . . . . . . . $ 88,554,145 78,977,399 8.5% mortgage note (the note has been modified; 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 through August 31, 1996 and $1,562,215 thereafter (assumed by the purchaser of the property in January 1997). . . . . . . . . . . . . . . . . . . . . . . . . . 219,052,858 216,303,920 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 14,900,000 8.5% 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). . . . . . . . . . . . . . . . . 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 . . . . . . . . . . 18,003,538 18,158,558 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,734,354 33,734,354 1996 1995 ----------- ----------- Other mortgage loans: Long Beach Plaza Shopping Center, non-interest bearing, (net of $8,686,860 and $8,834,655 unamortized discount at 12% at December 31, 1996 and 1995, respectively), due 2014. . . . . . 1,313,140 1,165,345 Marshalls Aurora Plaza Shopping Center, 8.375%; payable in monthly installments of principal and interest until November 1, 1996 and subsequently extended to June 2, 1997 when the remaining principal balance is payable. (The note has been modified) . . . . . . . . 5,282,757 5,601,708 Glades apartment complex, 6.1%, due 2002 (satisfied in November 1996). . . . . . . . . . . . . . . . . . . -- 9,737,500 Glades apartment complex, 6% (plus, subsequent to April 1995, 50% of cash flows (as defined)), originally accruing interest through October 1, 2002 (satisfied in November 1996). . . . . . . . . . . -- 950,262 Carrollwood apartment complex, 7.45%, due August 1998 . . . . . . . . . . . . . . . . . . . . . . . . . 6,842,195 7,042,140 Other (satisfied in January 1997) . . . . . . . . . . . . . . . . . 13,648,432 13,398,432 ------------ ----------- Total debt. . . . . . . . . . . . . . . . . . . . . . . . . 423,331,419 421,969,618 Less current portion of long-term debt. . . . . . . . . . . 39,232,585 39,666,113 ------------ ----------- Total long-term debt. . . . . . . . . . . . . . . . . . . . $384,098,834 382,303,505 ============ ===========
Included in the above total long-term debt is $84,795,053 and $72,714,370 for 1996 and 1995, 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: 1997 . . . . . . . . . . . . . . $ 39,232,585 1998 . . . . . . . . . . . . . . 46,630,153 1999 . . . . . . . . . . . . . . -- 2000 . . . . . . . . . . . . . . 14,900,000 2001 . . . . . . . . . . . . . . -- ============ Due to the sale of Copley Place Associates on January 23, 1997, the above schedule excludes the maturity of long-term debt related to this investment property. PARTNERSHIP AGREEMENT Pursuant to the terms of the Partnership Agreement, net profits and losses of the Partnership from operations are allocated 96% to the Holders of Interests and 4% to the General Partners. Profits from the sale of investment 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 Holders of Interests. 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 Holders of Interests 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 Holders of Interests and 15% to the General Partners. However, prior to such distributions being made, the Holders of Interests are entitled to receive 99% of net sale or refinancing proceeds and the General Partners are entitled to receive 1% until the Holders of Interests (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 Holders' 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 Holders' 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 Holders of Interests 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 Holders of Interests pursuant to (i) and (ii) above. The Holders of Interests have not received and are not expected to receive 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. MANAGEMENT AGREEMENTS 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 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), 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 and the Sherry Lane office building on the same terms that existed prior to the assignment. LEASES - AS PROPERTY LESSOR At December 31, 1996, the Partnership and its consolidated ventures' principal assets are two office buildings, two shopping centers, a multi-use complex and one apartment complex. 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, 1996 are generally for a term of one year or less and provide for annual rents of approx- imately $1,966,000. Cost and accumulated depreciation of the leased assets are summarized as follows at December 31, 1996: Shopping centers: Cost . . . . . . . . . . . . . $ 35,145,235 Accumulated depreciation . . . (20,059,290) ------------ 15,085,945 ------------ Office buildings: Cost . . . . . . . . . . . . . 72,878,267 Accumulated depreciation . . . (27,829,919) ------------ 45,048,348 ------------ Multi-use complex: Cost . . . . . . . . . . . . . 290,724,496 Accumulated depreciation . . . (118,070,415) ------------ 172,654,081 ------------ Apartment complex: Cost . . . . . . . . . . . . 9,061,349 Accumulated depreciation . . . (3,641,282) ------------ 5,420,067 ------------ Total. . . . . . . . . $238,208,441 ============ 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: 1997. . . . . . . . . . . . $14,550,595 1998. . . . . . . . . . . . 10,804,653 1999. . . . . . . . . . . . 8,675,516 2000. . . . . . . . . . . . 6,735,829 2001. . . . . . . . . . . . 5,472,849 Thereafter. . . . . . . . . 14,320,246 =========== Due to the sale of the Partnership's interest in Copley Place Associates on January 23, 1997, the above schedule excludes future lease payments related to this investment property. Additional rent based upon percentages of tenants' sales volumes included in rental income aggregated $725,568, $675,043 and $526,850 for the years ended December 31, 1996, 1995 and 1994, respectively. LEASES - 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 1996, 1995 and 1994 under the above operating lease was $424,783, $633,548 and $538,159, respectively, and consisted exclusively of minimum rent. The Copley Place venture had leased the air rights over the Massachusetts Turnpike located beneath the Boston, Massachusetts multi-use complex. The lease had 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 was being amortized over the term of the air rights lease. 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, 1996, 1995 and 1994 are as follows: UNPAID AT DECEMBER 31, 1996 1995 1994 1996 ---------- --------- --------- ------------ Property management and leasing fees . . . .$1,575,148 1,459,783 1,195,147 2,821,503 Insurance commissions . . 67,579 65,185 55,542 -- Reimbursement (at cost) for accounting services. 23,862 164,441 220,159 6,111 Reimbursement (at cost) for portfolio manage- ment services. . . . . . 40,841 74,396 69,775 8,528 Reimbursement (at cost) for legal services . . . 18,386 9,267 20,977 5,076 Reimbursement (at cost) for administrative charges and other out- of-pocket expenses . . . 91,596 208,625 1,372 52,777 ---------- --------- --------- --------- $1,817,412 1,981,697 1,562,972 2,893,995 ========== ========= ========= ========= Payment of certain pre-1993 property management and leasing fees payable under the terms of the management agreements ($2,822,000, approximately $8 per $1,000 interest) at December 31, 1996 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. Reference is made to the JMB/NYC discussion above regarding the Partnership's 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). These obligations were reduced to $200,000 and $200,000, respectively. As of December 31, 1996, these obligations bore interest at 5.93% per annum and cumulative interest accrued on these obligations was $236,929. The affiliated joint venture partner was obligated through December 31, 1991 to loan amounts (the "Deficit Loans") to pay for any operating deficits (as defined) of Copley Place. Through December 31, 1996, the affiliated joint venture partner had loaned approximately $13,648,000 at an interest rate based on its line of credit, which bore interest at a floating rate (averaging 7.57% per annum at December 31, 1996). During 1996, approximately $1,234,000 of interest accrued on these loans, and the joint venture paid approximately $225,000 of accrued interest (including a portion accrued from a prior year) on these loans. As of January 23, 1997, these Deficit Loans were paid in full as discussed below. The consideration paid by the Partnership for its interest in Copley Place Associates included a purchase price note with an original principal balance of $20,000,000 and bearing interest at 11.5% per annum (the "Note"). The unpaid balance of the Note at December 31, 1996 was $88,554,145 and was payable to an affiliate of the Corporate General Partner, as discussed above. INVESTMENT IN UNCONSOLIDATED VENTURE Summary financial information for JMB/NYC as of and for the years ended December 31, 1996 and 1995 (combined to include its unconsolidated ventures through December 31, 1995) is as follows: 1996 1995 ------------ ------------ Current assets. . . . . . . . . . . . $ 27,859 13,898,980 Current liabilities (includes $902,603,491 of current portion of long-term debt at December 31, 1995) . . . . . . . . . . . . . . . -- (930,523,456) ------------ ------------ Working capital (deficit). . . . . 27,859 (916,624,476) ------------ ------------ Investment property, net. . . . . . . -- 649,606,970 Escrow deposits . . . . . . . . . . . 7,937,459 -- Accrued rent receivable . . . . . . . -- 52,194,637 Deferred expenses . . . . . . . . . . -- 18,168,925 Other liabilities . . . . . . . . . . (91,313,934) (85,039,094) Investment in partnership . . . . . . (25,000,000) -- Venture partners' deficit . . . . . . 79,838,583 207,040,770 ------------ ------------ Partnership's capital (deficit). . $(28,510,033) (74,652,268) ============ ============ Represented by: Invested capital . . . . . . . . . . $ 45,737,708 43,728,411 Cumulative net losses. . . . . . . . (64,873,992) (109,006,930) Cumulative cash distributions . . . . . . . . . . (9,373,749) (9,373,749) ------------ ------------ $(28,510,033) (74,652,268) ============ ============ Total income. . . . . . . . . . . . . $228,184,030 163,838,267 ============ ============ Expenses applicable to operating loss $ 11,202,134 180,511,256 ============ ============ Net income (loss) (including income from restructuring of $220,431,722 in 1996) . . . . . . . . . . . . . . $216,981,896 (16,672,989) ============ ============ During 1996, as a result of the adoption of the Plan, JMB/NYC adopted the cost method of accounting for its investments in unconsolidated ventures. Accordingly, JMB/NYC adjusted its deficit basis in the unconsolidated ventures to the extent of its share of the maximum obligation escrow of $25,000,000. The net income for the year ended December 31, 1996 includes $7,618,056 of income from operations through the Effective Date of which the Partnership's share is $1,904,514. The Partnership's capital (deficit) in JMB/NYC differs from its investment in unconsolidated venture as reflected in the accompanying financial statements due to the Partnership's 1996 reversal of previously recognized losses in JMB/NYC as a result of the restructuring of partnership interests. 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. Also, for the year ended December 31, 1994, total income was $147,761,499, expenses applicable to operating loss were $183,850,523 and the net loss was $36,089,024 for JMB/NYC and the unconsolidated ventures. SCHEDULE III CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996
COSTS CAPITALIZED INITIAL COST TO SUBSEQUENT TO GROSS AMOUNT AT WHICH CARRIED PARTNERSHIP (a) ACQUISITION AT CLOSE OF PERIOD (b) ------------------------- ------------- ----------------------------------- LAND AND BUILDINGS LAND PROVISION LAND AND BUILDINGS ENCUM- LEASEHOLD AND BUILDINGS AND FOR VALUE LEASEHOLD AND DESCRIPTION BRANCE INTEREST IMPROVEMENTS IMPROVEMENTS IMPAIRMENT(g) INTEREST IMPROVEMENTS TOTAL(h) - -------------------- ----------- -------------------------- ----------- ---------- ------------ ---------- APARTMENT BUILDINGS: Tampa, Florida (d). . . . .$ 6,842,1951,092,010 7,408,618 560,720 -- 1,092,010 7,969,338 9,061,348 OFFICE BUILDINGS: Knoxville, Tennessee (e). . . . .14,900,000 -- 28,884,725 5,132,485 -- 1,508,417 32,508,793 34,017,210 COSTS CAPITALIZED INITIAL COST TO SUBSEQUENT TO GROSS AMOUNT AT WHICH CARRIED PARTNERSHIP (a) ACQUISITION AT CLOSE OF PERIOD (b) ------------------------- ------------- ----------------------------------- LAND AND BUILDINGS LAND PROVISION LAND AND BUILDINGS ENCUM- LEASEHOLD AND BUILDINGS AND FOR VALUE LEASEHOLD AND DESCRIPTION BRANCE INTEREST IMPROVEMENTS IMPROVEMENTS IMPAIRMENT(g) INTEREST IMPROVEMENTS TOTAL(h) - -------------------- ----------- -------------------------- ----------- ---------- ------------ ---------- Dallas, Texas (d). .40,003,5387,902,979 35,029,347 (4,209,066) -- 6,198,484 32,524,776 38,723,260 Southfield, Michigan (f). . . . . -- 1,715,373 -- (1,577,575) -- 137,798 -- 137,798 SHOPPING CENTERS: Long Beach, Califor- nia. . . . .35,047,4943,801,066 42,765,277 (2,765,245) (17,600,000) 1,179,046 25,022,052 26,201,098 Aurora, Colorado . .5,282,757 2,035,721 6,674,891 233,525 -- 2,035,721 6,908,416 8,944,137 MULTI-USE COMPLEX: Boston, Massachu- setts (c)(d) . . .321,255,4354,769,913 271,584,219 14,370,364 -- 4,769,912 285,954,584290,724,496 ------------ ---------- ----------- ----------- ----------- ---------- ---------------------- Total . . .$423,331,41921,317,062392,347,077 11,745,208 (17,600,000) 16,921,388 390,887,959407,809,347 ============ ========== =========== ========== =========== ========== ======================
SCHEDULE III - CONTINUED CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996
LIFE ON WHICH DEPRECIATION IN LATEST STATEMENT OF 1996 ACCUMULATED DATE OF DATE OPERATION REAL ESTATE DESCRIPTION DEPRECIATION(i) CONSTRUCTION ACQUIRED IS COMPUTED (h) TAXES - ----------- ---------------- ------------ ---------- --------------- ----------- APARTMENT BUILDINGS: Tampa, Florida (d) . . . 3,641,282 1984 12/16/83 5-30 years 208,007 OFFICE BUILDINGS: Knoxville, Tennessee (e). . . . . . . . . . . 13,389,019 1979 10/26/83 5-30 years 653,406 Dallas, Texas (d). . . . 14,440,900 1983 12/1/83 5-30 years 690,205 Southfield, Michigan (f) -- 1974 3/30/84 5-30 years 3,001 SHOPPING CENTERS: Long Beach, California . 16,925,470 1982 6/22/83 5-30 years 818,166 Aurora, Colorado . . . . 3,133,820 1982 4/1/83 5-30 years 180,892 MULTI-USE COMPLEX: Boston, Massachusetts (c)(d). . . . . . . . . 118,070,415 1983 9/1/83 5-30 years 8,165,830 ------------ ---------- Total. . . . . . . . $169,600,906 10,719,507 ============ ========== SCHEDULE III - CONTINUED CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996 - --------------- 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, 1996 for Federal income tax purposes was approximately $86,168,397. (c) Property operated under air rights prior to its sale on January 23, 1997. (d) Properties owned and operated by joint ventures. (e) The Partnership purchased the land underlying Plaza Tower office building in December 1985. (f) Property sold except for a 1.9 acre parcel. (g) A provision for value impairment of $13,100,000 was recorded January 1, 1996 at the Long Beach Plaza investment property. On December 31, 1996, the Partnership recorded an additional provision for value impairment of $4,500,000, as more fully described in the Notes. (h) During 1996, all the Partnership's remaining investment properties were classified as held for sale or disposition, as more fully described in the Notes.
SCHEDULE III - CONTINUED CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII (A LIMITED PARTNERSHIP) AND CONSOLIDATED VENTURES CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996
1996 1995 1994 ------------- ------------- ------------- (h) Reconciliation of real estate carrying costs: Balance at beginning of period . . . . . . . . . $433,222,805 429,976,723 474,203,190 Additions during period. . . . . . . . . . . . . 4,337,187 3,246,082 1,796,484 Reductions during period . . . . . . . . . . . . (12,150,645) -- (46,022,951) Provisions for value impairment. . . . . . . . . (17,600,000) -- -- ------------ ------------ ------------ Balance at end of period . . . . . . . . . . . . $407,809,347 433,222,805 429,976,723 ============ ============ ============ (i) Reconciliation of accumulated depreciation: Balance at beginning of period . . . . . . . . . $163,309,553 149,525,406 149,914,951 Depreciation expense . . . . . . . . . . . . . . 10,267,305 13,784,147 13,753,198 Reductions during period . . . . . . . . . . . . (3,975,952) -- (14,142,743) ------------ ------------ ------------ Balance at end of period . . . . . . . . . . . . $169,600,906 163,309,553 149,525,406 ============ ============ ============
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 1996 and 1995. 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, directly or indirectly, 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 purchases and sales of real property must be approved by the Associate General Partner of the Partnership, ABPP Associates, L.P. ABPP Associates, L.P., an Illinois limited partnership with JMB as its sole 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 purchase or 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 7, 1997. 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 7, 1997. 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-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.-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.-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-XI, Carlyle-XII, Carlyle-XIV, Carlyle-XV, Carlyle-XVI, Carlyle-XVII, JMB Income-VI, JMB Income-VII, JMB Income-X, JMB Income-XI, JMB Income-XII, JMB Income-XIII, Mortgage Partners-III, Mortgage Partners-IV, Carlyle Income Plus, Carlyle Income Plus-II and IDS/BIG. Certain of such officers are also officers and the sole director of Carlyle Managers, Inc., the sole general partner of JMB/NYC. 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 59) 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. ("USC, 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 59) 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 USC, Inc. He is a member of the Bar of the State of Illinois and a Certified Public Accountant. Burton E. Glazov (age 58) 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 55) 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 63) (President of JMB Insurance Agency, Inc.) has been associated with JMB since December, 1972. John G. Schreiber (age 50) 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 USC, Inc., 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 47) 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 49) 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 44) 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 48) 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 61) 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 Holders of Interests, and a share of profits or losses. Reference is made to the Notes for a description of such distributions and allocations. In 1996, the General Partners received distributions of $0, and the Corporate General Partner received no management fee. The General Partners received a share of Partnership gains for tax purposes aggregating $976,751 in 1996. The Partnership is permitted to engage in various transactions involving affiliates of the Corporate General Partner of the Partnership, as described in the Notes. 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 1996 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 1996, such affiliate earned property management and leasing fees amounting to $1,575,148 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 ($2,822,000, approximately $8 per $1,000 interest) at December 31, 1996 has been deferred. All amounts currently payable do not bear interest and are expected to be paid in future periods. JMB Insurance Agency, Inc., an affiliate of the Corporate General Partner, earned insurance brokerage commissions in 1996 aggregating $67,579 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, 1996. 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 1996, the Corporate General Partner of the Partnership or its affiliates were due reimbursement for such out-of-pocket expenses in the amount of $91,596, of which $52,777 was unpaid at December 31, 1996. The General Partners are also entitled to reimbursements for portfolio management, legal and accounting services. Such costs for 1996 were $40,841, $18,386 and $23,862, respectively, of which $8,528, $5,076 and $6,111, respectively, was unpaid at December 31, 1996. The Partnership had obligations 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). During 1996, these obligations were reduced to $200,000 and $200,000, respectively. As of December 31, 1996, these obligations bore interest at 5.93% per annum and interest accrued on these obligations was $236,929. 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, 1996, the affiliated joint venture partner had loaned approximately $13,648,000 at an interest rate based on its line of credit, which bore interest at a floating rate (averaging 7.57% per annum at December 31, 1996). During 1996, approximately $1,234,000 of interest accrued on these loans, and the joint venture paid approximately $225,000 of accrued interest (including a portion accrued from a prior year) on these loans. As of January 23, 1997, these Deficit Loans were paid in full as discussed above. The consideration paid by the Partnership for its interest in Copley Place Associates included a purchase price note with an original principal balance of $20,000,000 and bearing interest at 11.5% per annum (the "Note"). The unpaid balance of the Note at December 31, 1996 was $88,554,145 and was payable to an affiliate of the Corporate General Partner, as discussed in the Notes.
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-A.* Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus, and which is hereby incorporated by reference. 3-B. Acknowledgement of rights and duties of the General Partners of the Partnership between ABPP Associates, L.P. (a successor Associated General Partner of the Partnership) and JMB Realty Corporation as of December 31, 1995 is hereby incorporated herein by reference to the Partnership's Report for September 30, 1996 on Form 10-Q (File No. 0-12791) dated November 8, 1996. 4-A. 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-B.* 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 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-B. 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-C. 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-D. 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-E. Second Amended and Restated Articles of Partnership of JMB/NYC Office Building Associates, L.P. 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-F. 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-G. 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-H. $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-I. $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-J. 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-K. 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-L. 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-M. 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-N. Agreement of Sale between 2 Broadway Associates, L.P. and 2 Broadway Acquisition Corp. dated August 10, 1995, is hereby incorporated by reference to the Partnership's Report for December 31, 1995 on Form 10-K (File No. 0-12791) dated March 25, 1996. 10-O. 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, is hereby incorporated by reference to the Partnership's Report for December 31, 1995 on Form 10-K (File No. 0-12791) dated March 25, 1996. 10-P. 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, is hereby incorporated by reference to the Partnership's Report for December 31, 1995 on Form 10-K (File No. 0-12791) dated March 25, 1996. 10-Q. Disclosure Statement for the Second Amended Joint Plan of Reorganization of 237 Park Avenue Associates, L.L.C. and 1290 Associates, L.L.C. dated August 9, 1996 is hereby incorporated by reference to the Partnership's Report for September 30, 1996 on Form 10-Q (File No. 0-12791) dated November 8, 1996. 10-R. Consent of Director of Carlyle-XIV Managers, Inc. (known as Carlyle Managers, Inc.) dated October 31, 1996 is filed herewith. 10-S. Consent of Director of Carlyle-XIII, Managers, Inc. (known as Carlyle Investors, Inc.) dated October 31, 1996 is filed herewith. 10-T. Allonge to demand note between Carlyle Real Estate Limited Partnership - XIII and Carlyle Managers, Inc. dated October 31, 1996 is filed herewith. 10-U. Allonge to demand note between Carlyle Real Estate Limited Partnership - XIII and Carlyle Investors, Inc., dated October 31, 1996 is filed herewith. 10-V. Indemnification agreement between Property Partners, L.P., Carlyle-XIII Associates, L.P. and Carlyle-XIV Associates, L.P. dated as of October 10, 1996 is filed herewith. 10-W. Agreement of Limited Partnership of 237/1290 Lower Tier Associates, L.P. dated as of October 10, 1996 is filed herewith. 10-X. Amended and Restated Limited Partnership Agreement of 237/1290 Upper Tier Associates, L.P. dated as of October 10, 1996 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 1996 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 21, 1997 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 21, 1997 NEIL G. BLUHM* By: Neil G. Bluhm, President and Director Date: March 21, 1997 H. RIGEL BARBER* By: H. Rigel Barber, Chief Executive Officer Date: March 21, 1997 GLENN E. EMIG* By: Glenn E. Emig, Chief Operating Officer Date: March 21, 1997 GAILEN J. HULL By: Gailen J. Hull, Senior Vice President Principal Accounting Officer Date: March 21, 1997 By: A. LEE SACKS* A. Lee Sacks, Director Date: March 21, 1997 By: STUART C. NATHAN* Stuart C. Nathan, Executive Vice President and Director Date: March 21, 1997 *By: GAILEN J. HULL, Pursuant to a Power of Attorney GAILEN J. HULL By: Gailen J. Hull, Attorney-in-Fact Date: March 21, 1997 CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII EXHIBIT INDEX Document Incorporated By Reference Page ------------ ---- 3-A. Amended and Restated Agreement of Limited Partnership set forth as Exhibit A to the Prospectus Yes 3-B. Acknowledgement of rights and duties of the General Partners of the Partnership between ABPP Associates, L.P. (a successor Associated General Partner of the Partnership) and JMB Realty Corporation as of December 31, 1995 Yes 4-A. Mortgage loan documents secured by the Copley Place multi-use complex Yes 4-B. Remodification of mortgage loan documents secured by Copley Place multi-use complex. Yes 10-A. Acquisition documents related to the Copley Place multi-use complex Yes 10-B. Documents related to the sale of Allied Automotive Center. Yes 10-C. Agreement of Limited Partnership of Carlyle-XIII Associates L.P. Yes 10-D. Documents relating to the sale of its interest in the Old Orchard Urban Venture Yes 10-E. Second Amended and Restated Articles of Partnership of JMB/NYC Office Building Associates, L.P. Yes 10-F. Amended and Restated Certificate of Incorporation of Carlyle-XIV Managers, Inc. Yes 10-G. Amended and Restated Certificate of Incorporation of Carlyle-XIII Managers, Inc. Yes 10-H. $600,000 demand note between Carlyle-XIII Associates, Ltd. and Carlyle Managers, Inc. Yes 10-I. $600,000 demand note between Carlyle-XIII Associates, Ltd. and Carlyle Investors, Inc. Yes 10-J. 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 CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII EXHIBIT INDEX - CONTINUED Document Incorporated By Reference Page ------------ ---- 10-K. 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-L. Amendment No. 1 to Carlyle-XIII Associates Yes 10-M. Amendment No. 1 to JMB/NYC Office Building Associates, L.P. Yes 10-N. Agreement of Sale between 2 Broadway Associates, L.P. and 2 Broadway Acquisition Corp. dated August 10, 1995 Yes 10-O. Agreement of Conversion of 1290 Associates into 1290 Associates, L.L.C. dated October 10, 1995 Yes 10-P. Agreement of Conversion of 237 Park Avenue Associates into 237 Park Avenue Associates, L.L.C. dated October 10, 1995 Yes 10-Q. Disclosure statement for the Second Amended Joint Plan of Reorganization of 237 Park Avenue Associates, L.L.C. and 1290 Associates, L.L.C. dated August 9, 1996 Yes 10-R. Consent of Director of Carlyle-XIV Managers, Inc. (known as Carlyle Managers, Inc.) dated October 31, 1996 No 10-S. Consent of Director of Carlyle-XIII, Managers, Inc. (known as Carlyle Investors, Inc.) dated October 31, 1996 No 10-T. Allonge to demand note between Carlyle Real Estate Limited Partnership-XIII and Carlyle Managers, Inc. dated October 31, 1996 No 10-U. Allonge to demand note between Carlyle Real Estate Limited Partnership-XIII and Carlyle Investors, Inc., dated October 31, 1996 No 10-V. Indemnification agreement between Property Partners, L.P., Carlyle-XIII Associates, L.P. and Carlyle-XIV Associates, L.P. dated as of October 10, 1996 No CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XIII EXHIBIT INDEX - CONTINUED Document Incorporated By Reference Page ------------ ---- 10-W.** Agreement of Limited Partnership of 237/1290 Lower Tier Associates, L.P. dated as of October 10, 1996 No 10-X.** Amended and Restated Limited Partnership of 237/1290 Upper Tier Associates, L.P. dated as of October 10, 1996 No 21. List of Subsidiaries No 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. ** FILED ON PAPER IN ACCORDANCE WITH RULE 201 OF REGULATION S-T, THESE AGREEMENTS ARE BEING FILED IN PAPER PURSUANT TO A TEMPORARY HARDSHIP EXEMPTION. EX-10.R 2 EXHIBIT 10-R - ------------ (C-XIII) CONSENT OF DIRECTOR OF CARLYLE MANAGERS, INC. The undersigned, being all the directors of Carlyle Managers, Inc., a Delaware corporation (the "Corporation"), acting by written consent pursuant to Section 141(f) of the Delaware General Corporation Law, hereby consent to the adoption of, and do hereby adopt, the following resolutions: WHEREAS, this Corporation is the holder of certain demand notes made by its shareholders in the aggregate original principal amount of $3,000,000 (the "Notes"), as set forth in EXHIBIT A attached hereto; and, WHEREAS, this Corporation desires to make a distribution to its shareholders aggregating $2,000,000, as a return of capital (the "Distribution"); and, WHEREAS, in order to effect the Distribution, the outstanding principal amount of the Notes will be reduced as set forth in such Exhibit A. NOW, THEREFORE, BE IT RESOLVED, that this Corporation make the Distribution, as a return of capital, effective as of the date hereof, to be paid by the reduction of the outstanding principal amount as set forth EXHIBIT A attached hereto; and, FURTHER RESOLVED, that any officer of this Corporation is hereby authorized and directed to effect the Distribution as of the date hereof, to enter into, execute and deliver, or to ratify, any and all documents incidental or related thereto, including without limitation, those documents deemed necessary or appropriate to evidence the reduction in the outstanding principal balances of each of the Notes as set forth herein, and any said officer is hereby authorized and directed to take whatever actions said officer deems reasonably necessary in order to consummate the transaction described or contemplated. Dated: October 31, 1996 STUART C. NATHAN - -------------------- Stuart C. Nathan Being the sole director or Carlyle Managers, Inc., a Delaware corporation. EXHIBIT A --------- Original Principal Principal Payor Date of Note Amount Reduction - ----- -------------- ---------- --------- JMB Realty Corporation March 25, 1993 $ 450,000 $300,000 JMB/Manhattan Associates, Ltd. March 25, 1993 $ 600,000 $400,000 Carlyle Real Estate Limited Partnership-XIII March 25, 1993 $ 600,000 $400,000 Carlyle Real Estate Limited Partnership-XIV March 25, 1993 $1,200,000 $800,000 JMB Service Bureau company (a division of Northbrook Corporation), as successor-in-interest to JMB Holdings Corporation March 25, 1993 $ 150,000 $100,000 EX-10.S 3 EXHIBIT 10-S - ------------ (C-XIII) CONSENT OF DIRECTOR OF CARLYLE INVESTORS, INC. The undersigned, being all the directors of Carlyle Investors, Inc., a Delaware corporation (the "Corporation"), acting by written consent pursuant to Section 141(f) of the Delaware General Corporation Law, hereby consent to the adoption of, and do hereby adopt, the following resolutions: WHEREAS, this Corporation is the holder of certain demand notes made by its shareholders in the aggregate original principal amount of $3,000,000 (the "Notes"), as set forth in EXHIBIT A attached hereto; and, WHEREAS, this Corporation desires to make a distribution to its shareholders aggregating $2,000,000, as a return of capital (the "Distribution"); and, WHEREAS, in order to effect the Distribution, the outstanding principal amount of the Notes will be reduced as set forth in such Exhibit A. NOW, THEREFORE, BE IT RESOLVED, that this Corporation make the Distribution, as a return of capital, effective as of the date hereof, to be paid by the reduction of the outstanding principal amount as set forth EXHIBIT A attached hereto; and, FURTHER RESOLVED, that any officer of this Corporation is hereby authorized and directed to effect the Distribution as of the date hereof, to enter into, execute and deliver, or to ratify, any and all documents incidental or related thereto, including without limitation, those documents deemed necessary or appropriate to evidence the reduction in the outstanding principal balances of each of the Notes as set forth herein, and any said officer is hereby authorized and directed to take whatever actions said officer deems reasonably necessary in order to consummate the transaction described or contemplated. Dated: October 31, 1996 STUART C. NATHAN - -------------------- Stuart C. Nathan Being the sole director or Carlyle Investors, Inc., a Delaware corporation. EXHIBIT A --------- Original Principal Principal Payor Date of Note Amount Reduction - ----- -------------- ---------- --------- JMB Realty Corporation March 25, 1993 $ 450,000 $300,000 JMB/Manhattan Associates, Ltd. March 25, 1993 $ 600,000 $400,000 Carlyle Real Estate Limited Partnership-XIII March 25, 1993 $ 600,000 $400,000 Carlyle Real Estate Limited Partnership-XIV March 25, 1993 $1,200,000 $800,000 JMB Service Bureau company (a division of Northbrook Corporation), as successor-in-interest to JMB Holdings Corporation March 25, 1993 $ 150,000 $100,000 EX-10.T 4 EXHIBIT 10-T - ------------ (C-XIII) ALLONGE TO DEMAND NOTE Reference is made to that certain Demand Note, dated as of March 25, 1993 (the "Note"), made by Carlyle Real Estate Limited Partnership-XIII, an Illinois limited partnership ("Carlyle XIII"), in favor of Carlyle Managers, Inc., a Delaware corporation ("Investors"), in the original principal amount of $600,000. In consideration for the return of capital made by Investors to Carlyle XIII as of the date hereof in the amount of $400,000, the undersigned hereby reduces the outstanding principal balance of the Note to $200,000. Such reduction shall not serve to reduce or cancel any accrued and unpaid interest which may be outstanding on the Note. This Allonge shall be attached to and become a part of the Note. Dated as of October 31, 1996. CARLYLE MANAGERS, INC. a Delaware corporation By:___________________ Its:__________________ Acknowledged and Agreed: CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XIII an Illinois limited partnership By: JMB REALTY CORPORATION, a Delaware corporation Corporate General Partner By:__________________ Its:_________________ EX-10.U 5 EXHIBIT 10-U - ------------ (C-XIII) ALLONGE TO DEMAND NOTE Reference is made to that certain Demand Note, dated as of March 25, 1993 (the "Note"), made by Carlyle Real Estate Limited Partnership-XIII, an Illinois limited partnership ("Carlyle XIII"), in favor of Carlyle Investors, Inc., a Delaware corporation ("Investors"), in the original principal amount of $600,000. In consideration for the return of capital made by Investors to Carlyle XIII as of the date hereof in the amount of $400,000, the undersigned hereby reduces the outstanding principal balance of the Note to $200,000. Such reduction shall not serve to reduce or cancel any accrued and unpaid interest which may be outstanding on the Note. This Allonge shall be attached to and become a part of the Note. Dated as of October 31, 1996. CARLYLE INVESTORS, INC. a Delaware corporation By:___________________ Its:__________________ Acknowledged and Agreed: CARLYLE REAL ESTATE LIMITED PARTNERSHIP-XIII an Illinois limited partnership By: JMB REALTY CORPORATION, a Delaware corporation Corporate General Partner By:__________________ Its:_________________ EX-10.V 6 EXHIBIT 10-V - ------------ (C-XIII) INDEMNIFICATION AGREEMENT THIS INDEMNIFICATION AGREEMENT dated as of the 10 day of October 1996, given by PROPERTY PARTNERS, L.P., CARLYLE - XIII ASSOCIATES, L.P., and CARLYLE - XIV ASSOCIATES, L.P., each a Delaware limited partnership having an office at 900 North Michigan Avenue - 19th floor, Chicago, Illinois 60611 (hereinafter individually referred to as an "Indemnitor" and collectively as the "Indemnitors") to METROPOLIS REALTY TRUST, INC., a Maryland corporation having an office c/o Victor Capital Group, L.P., 885 Third Avenue - 12th Floor, New York, New York 10022, Attn: John Klopp (hereinafter referred to as "Indemnitee"). WITNESSETH: WHEREAS, each Indemnitor is a partner in JMB/NYC Office Building Associates, L.P. ("JMB LP"), an Illinois limited partnership and a member of 237 Park Avenue Associates, LLC and 1290 Associates, LLC (collectively, the "Debtors"), each a New York limited liability company and the obligors under certain notes in the aggregate original principal amount of $970,000,000 issued pursuant to that certain Mortgage Spreader and Consolidation Agreement and Trust Indenture dated as of March 20, 1984 among O&Y Equity Corp., Olympia & Holdings Corporation, FAME Associates, Olympia & York 2 Broadway Land Company, Olympia & York 2 Broadway Company and Manufacturers Hanover Trust Company as Trustee, as supplemented and (the "Indenture"), which encumbers the fee estates of the Debtors in properties known as 237 Park Avenue and 1290 Avenue of the Americas; WHEREAS, the Debtors defaulted under the Indenture beyond the expiration of all applicable notice and cure periods; WHEREAS, the Debtors, JMB LP and Indemnitors requested that the Trustee and the holders of the Existing Notes forbear from exercising their rights to pursue an action to foreclose the Indenture in order to provide the Debtors with an opportunity to file a pre - negotiated plan of reorganization (hereinafter referred to as the "Plan") under the Bankruptcy Code, which Plan provides for, among other things, (i) a transfer of the Properties to the Property Owning Partnerships, (ii) the Lower Tier Partnership to own a 99% interest as a limited partner in each of the Property Owning Partnerships, (iii) the Upper Tier Partnership to own a 5% interest as a limited partner in the Lower Tier Partnership, and (iv) JMB LP to own a 99% interest as a limited partner in the Upper Tier Partnership; WHEREAS, the Trustee and the holders of the Existing Notes were willing to forbear from exercising their rights to pursue an action to foreclose the Indenture and to proceed with the transactions contemplated by the Plan only if the Indemnitors execute and deliver this Indemnification Agreement to the Indemnitee and the Plan and the Agreements of Limited Partnership of the Upper Tier Partnership and the Lower Tier Partnership require that JMB LP cause the Indemnitors to execute and deliver this Indemnity Agreement to the Indemnitee; WHEREAS, the Plan was filed with the Bankruptcy Court on April 23, 1996 and became effective pursuant to an order of the Bankruptcy Court entered on September 20, 1996 and, pursuant to the terms thereof; WHEREAS, the Indemnitors will materially benefit from the consummation of the transactions provided for in the Plan and described above; NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt of which is hereby acknowledged, and in order to induce the Trustee and the holders of the Existing Notes to forbear from exercising their rights as hereinbefore stated and such parties and the Indemnitee to proceed with the transactions contemplated by the Plan, the Indemnitors hereby covenant and agree with the Indemnitee as follows: 1. Capitalized terms used but not defined herein shall have the meanings provided in the Plan. 2. The Indemnitors absolutely and unconditionally agree to indemnify and to hold Indemnitee harmless from and against any and all losses, claims, liabilities, damages, costs or expenses (including, without limitation, reasonable counsel fees) of any nature whatsoever, contingent or otherwise, foreseen or unforeseen, which Indemnitee may or shall incur as a result of any of JMB LP, its officers, directors, partners (including without limitation any Indemnitor), stockholders, agents or affiliates (collectively, the "Controlled Entities") intentionally interfering with, impeding or preventing (including, without limitation, the filing by JMB LP of a voluntary petition under the Bankruptcy Code or any other federal or state bankruptcy or insolvency statute or any Controlled Entity joining in an involuntary petition against JMB LP under the Bankruptcy Code or such other statute) (x) the exercise by the Indemnitee of the Purchase Right (as defined in Section 12.2A of the Lower Tier Partnership Agreement) or (y) any disposition, mortgage, pledge, encumbrance, hypothecation or exchange of the Properties by the Property Owning Partnerships or the Property Owning Partnership Interests (as defined in Lower Tier Partnership Agreement) by the Lower Tier Partnership or the merger or other combination of the Property Owning Partnerships or the Lower Tier Partnership with or into another entity, in accordance with the terms of the Lower Tier Partnership Agreement, provided that such disposition, mortgage, pledge, encumbrance, hypothecation, exchange, merger or other combination does not constitute an Adverse Transaction as defined in the agreement of limited partnership of the Lower Tier Partnership ("Prohibited Actions"), and provided that any such Prohibited Action is not revoked or rescinded within the time period provided in paragraph 3 below. 3. In the event that any Indemnitor or Controlled Entity takes any Prohibited Action (including, without limitation, the filing by or against JMB LP of a petition under the Bankruptcy Code or any other federal or state bankruptcy or insolvency statute), the Indemnitors (x) acknowledge (and Indemnitee, by its acceptance of this Indemnification Agreement, acknowledges) that the damage to be suffered by Indemnitee shall be difficult or impossible to ascertain and (y) if the Prohibited Action is not revoked or rescinded within sixty (60) days after notice by Indemnitee to Indemnitors so as to permit the consummation of the transaction described in clause (x) or (y) of paragraph 2 above unimpeded by any actions by JMB LP or any of the Controlled Entities, absolutely and unconditionally agree to pay to Indemnitee upon demand the Maximum Indemnitors' Liability Amount (as hereinafter defined) as full liquidated damages for, and in satisfaction of, the undersigned's obligations under this Indemnification Agreement, including but not limited to the Indemnitors' obligations under paragraph 2 hereof. The Indemnitor acknowledges and agrees that (and Indemnitee, by its acceptance of this Indemnification Agreement, acknowledges and agrees that) the payment of the Maximum Indemnitors' Liability Amount is a fair and reasonable remedy for Indemnitee if any of the events set forth in paragraph 2 of this Indemnification Agreement shall occur, as any such event will result in Indemnitee incurring damages which cannot now be determined with any degree of certainty. The foregoing shall not limit the remedies Indemnitee may have against any other party, including without limitation, JMB LP and the right of the Indemnitors to seek injunctive relief with respect to the Prohibited Action or specific performance of the underlying obligation. 4. The term "Maximum Indemnitors' Liability Amount" as used in this Indemnification Agreement shall mean an amount equal to $25,000,000, provided that the Maximum Indemnitors' Liability Amount shall be reduced on a dollar for dollar basis for each dollar actually received by Indemnitee in respect of the JMB Collateral (as defined in the Lower Tier Partnership Agreement). 5. The Indemnitors hereby consent that from time to time, before or after the taking of any Prohibited Action by any Indemnitor or Controlled Party, with or without further notice to or assent from the Indemnitors, any security at any time held by or available to Indemnitee with respect to any obligation of JMB LP, or any security at any time held by or available to Indemnitee for any obligation of any other person or party secondarily or otherwise responsible for the compliance by JMB LP of its obligations under the Upper Tier and Lower Tier Partnership Agreements (hereinafter referred to as the "Obligations"), may be exchanged, surrendered or released and any obligation JMB LP, or of any such other person or party, may be changed, altered, renewed, extended, continued, surrendered, compromised, waived or released in whole or in part, or any default with respect thereto waived, and Indemnitee may release, in whole or in part, the JMB Collateral or any balance of any deposit account or credit on its books in favor of JMB LP, or of any such other person or party, and may generally deal with JMB LP or any such security or other person or party as Indemnitee may see fit; and the Indemnitors shall remain bound under this Indemnification Agreement notwithstanding any such exchange, surrender, release, change, alteration, renewal, extension, continuance, compromise, waiver, inaction or other dealing. 6. This is an agreement to pay liquidated damages and not an agreement of collection and Indemnitor further waives any right to require that any action be brought against JMB LP or any other person or party or to require that resort be had to any security or to any balance of any deposit account or credit on the books of Indemnitee in favor of JMB LP or any other person or party. 7. Each reference herein to Indemnitee shall be deemed to include its successors and assigns in whose favor the provisions of this Indemnification Agreement shall also inure. This Indemnification Agreement shall be binding upon, and shall inure to the benefit of, Indemnitee and each Indemnitor and the respective heirs, executors, administrators, legal representatives, successors and assigns of Indemnitee and each Indemnitor; provided, however, that the Indemnitors shall in no event or under any circumstance have the right without obtaining the prior written consent of Indemnitee to assign or transfer the Indemnitors' obligations and liabilities under this Indemnification Agreement, in whole or in part, to any other person, party or entity. 8. The term "Indemnitor" as used herein shall, if this Indemnification Agreement is signed by more than one party, mean the "Indemnitors and each of them" and each undertaking herein contained shall be their joint and several undertaking, provided, however, that in the next succeeding paragraph hereof the term "Indemnitor" shall mean the "Indemnitors or any of them". 9. No delay on the part of Indemnitee in exercising any right or remedy under this Indemnification Agreement or failure to exercise the same shall operate as a waiver in whole or in part of any such right or remedy. No notice to or demand on the Indemnitor shall be deemed to be a waiver of the obligation of the Indemnitor or of the right of Indemnitee to take further action without notice or demand as provided in this Indemnification Agreement. 10. This Indemnification Agreement may only be modified, amended, changed or terminated by an agreement in writing signed by Indemnitee and the Indemnitors. No waiver of any term, covenant or provision of this Indemnification Agreement shall be effective unless given in writing by Indemnitee and if so given by Indemnitee shall only be effective in the specific instance in which given. 11. The indemnitors acknowledge that this Indemnification Agreement and the Indemnitors' obligations under this Indemnification Agreement are and shall at all times continue to be absolute and unconditional in all respects. This Indemnification Agreement sets forth the entire agreement and understanding of Indemnitee and the Indemnitors, and, except as otherwise herein set forth, the Indemnitors absolutely, unconditionally and irrevocably waive any and all right to assert any offset, counterclaim or crossclaim of any nature whatsoever with respect to this Indemnification Agreement or the obligations of the Indemnitors under this Indemnification Agreement or the obligations of any other person or party (including, without limitation, JMB LP) relating to this Indemnification Agreement or the obligations of the Indemnitors hereunder in any action or proceeding brought by Indemnitee to enforce the obligations of the Indemnitors under this Indemnification Agreement. Nothing contained in this paragraph 11 shall limit the right of the Indemnitors to assert a defense or maintain a separate action against Indemnitee with respect to any matter irrespective of whether it relates to this Indemnification Agreement or the obligations of the Indemnitors under this Indemnification Agreement. The Indemnitors acknowledge and Indemnitee, by its acceptance hereof, acknowledges that no oral or other agreements, understandings, representations or warranties exist with respect to this Indemnification Agreement or with respect to the obligations of the Indemnitors under this Indemnification Agreement except as specifically set forth in this Indemnification Agreement or otherwise in writing by Indemnitee and the Indemnitors. 12. THE INDEMNITORS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, AND INDEMNITEE BY ITS ACCEPTANCE OF THIS INDEMNIFICATION AGREEMENT IRREVOCABLY AND UNCONDITIONALLY WAIVES, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THIS INDEMNIFICATION AGREEMENT. 13. If at any time (i) any payment, or portion thereof, made by, or for the account of, the Indemnitors on account of the obligations under this Indemnification Agreement, or (ii) any transaction described in clause (x) or (y) of paragraph 2 hereof, or (iii) the consummation of the transfer of the interest of JMB LP in the Upper Tier Partnership pursuant to the JMB Put Right under Section 7.7 of the partnership agreement of the Upper Tier Partnership or of the interest of the Upper Tier Partnership in the Lower Tier Partnership pursuant to the Put Right under Section 12.2C of the partnership agreement of the Lower Tier Partnership, is set aside by any court or trustee having jurisdiction as a voidable preference, fraudulent transfer or otherwise as being subject to avoidance or recovery under the provisions of the Bankruptcy Code or under any other applicable Federal or state bankruptcy law or similar law, the Indemnitor hereby agrees that this Indemnification Agreement (x) shall continue and remain in full force and effect, or (y) if previously terminated as a result of the Indemnitors having fulfilled its obligations hereunder in full or as a result of Indemnitee having released the Indemnitors from their obligations and liabilities hereunder, shall without further act or instrument be reinstated and shall thereafter remain in full force and effect, in either case with the same force and effect as though such payment or transaction had not been made, and if applicable, as if such previous termination had not occurred. 14. The Indemnitor hereby waives all defenses it may have based upon any election of remedies by Indemnitee which destroys or impairs the Indemnitors' subrogation rights or the Indemnitors' right to proceed against JMB LP or any other person for reimbursement. The foregoing waivers include any requirement of law that Indemnitee exhaust any security for the Obligations before proceeding under this Indemnification Agreement. In addition to the foregoing, the Indemnitors hereby waive and relinquish the following rights and remedies accorded by applicable law to Indenmnitors and agree not to assert or take advantage of any such rights or remedies: (a) any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other person or persons; (b) demand, protest and, except as set forth therein, notice of any kind; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; and (d) any duty on the part of Indemnitee to disclose to the Indemnitors any facts Indemnitee may now or hereafter know about JMB LP, regardless of whether Indemnitee has reason to believe that any such facts materially increase the risk beyond that which the Indemnitor intends to assume or has reason to believe that such facts are unknown to Indemnitors or has a reasonable opportunity to communicate such facts to Indemnitors. 15. Any notice, request or demand given or made under this Indemnification Agreement shall be in writing and shall be hand delivered or sent by Federal Express or other reputable overnight national courier service, and shall be deemed given when received at the following address whether hand delivered or sent by Federal Express or other reputable overnight national courier service: If to Indemnitee: c/o Victor Capital Group, L.P. 885 Third Avenue - 12th Floor New York, New York 10022 Attention: John Klopp With a copy to: Battle Fowler LLP 75 East 55th Street New York, New York 10022 Attention: Kenneth Friedman If to the Indemnitors: 900 North Michigan Avenue - 19th Floor Chicago, IL 60611 Attention: Stuart C. Nathan Gary Nickele With a copy to: Pircher, Nichols & Meeks 1999 Avenue of the Americas Los Angeles, California 90067 Attention: Leo Pircher Each party to this Indemnification Agreement may designate a change of address by notice given to the other party fifteen (15) days prior to the date such change of address is to become effective. 16. This Indemnification Agreement is, and shall be deemed to be, a contract entered into under and pursuant to the laws of the State of New York and shall be in all respects governed, construed, applied and enforced in accordance with the laws of the State of New York. No defense given or allowed by laws of any other state or country shall be interposed in any action or proceeding hereon unless such defense is also given or allowed by the laws of the State of New York. 17. The Indemnitor agrees to submit to personal jurisdiction in the State of New York in any action or proceeding arising out of this Indemnification Agreement and, furtherance of such agreement, the Indemnitor hereby agrees and consents that without limiting other methods of obtaining jurisdiction, personal jurisdiction over the Indemnitor in any such action or proceeding may be obtained within or without the jurisdiction of any federal court located in New York (and any such court shall have jurisdiction over the subject matter hereof) and tat any process or notice of motion or other application to any such court in connection with any such action or proceeding may be served upon the Indemnitor, by registered or certified mail to or by personal service at the last known address of the Indemnitor, whether such address be within or without the jurisdiction of any such court. In addition to and in furtherance of the foregoing, the foregoing, the Indemnitor hereby consents to venue being held in either of the Southern District of New York. 18. This Indemnification Agreement may be executed in one or more counterparts by some or all of the parties hereto, each of which counterparts shall be an original and all of which together shall constitute a single indemnification agreement. The failure of any party listed below to execute this Indemnification Agreement, or any counterpart hereof, shall not relieve the other signatories from their obligations hereunder. 19. Except as set forth in paragraph 13 of this Indemnification Agreement, the obligations and liabilities of the Indemnitors under this Indemnification Agreement shall terminate on the earlier to occur of (i) the date upon which the transactions described in clause (x) of paragraph 2 hereof have been consummated, (ii) the date upon which the Properties have been sold or transferred by the Property Owning Partnerships or the Property Owning Partnership Interests have been sold or transferred by the Lower Tier Partnership in accordance with the provisions of the Lower Tier Partnership Agreement, or (iii) the date upon which the interest of JMB LP in the Upper Tier Partnership or of the Upper Tier Partnership in the Lower Tier Partnership has been transferred pursuant to the JMB Put Right under Section 7.7 of the partnership agreement of the Upper Tier Partnership or the Put Right under Section 12.2C of the partnership agreement of the Lower Tier Partnership. 20. If any term, covenant, condition or provision of this Indemnification Agreement or the application thereof to any circumstance or to the Indemnitors shall be invalid or unenforceable to any extent, the remaining terms, covenants, conditions and provisions of this Indemnification Agreement shall not be effected thereby and shall remain valid and enforceable to the fullest extent permitted by law. 21. Notwithstanding any provision in this Indemnification Agreement, no present or future partner, officer, director or shareholder of the Indemnitors shall have any personal liability under this Indemnification Agreement, provided, however, that the foregoing shall not limit or impair any rights of Indemnitee (i) to enforce this Indemnification Agreement against the Indemnitors and any assets of the Indemnitors, (ii) to seek and enforce other equitable relief against the Indemnitors or against any such partner, officer, director or shareholder, or (iii) to initiate proceedings at law or in equity for the purpose of determining any rights of the Indemnitee hereunder, so long as, in each such case, the same cannot result in in personal liability of any present or future partner, officer, director or shareholder of Indemnitors. IN WITNESS WHEREOF, the Indemnitors have duly executed this Indemnification Agreement the day and year first above set forth. PROPERTY PARTNERS, L.P. By: CARLYLE INVESTORS, INC. as its general partner By: ____________________ Name: Stuart C. Nathan Title: President CARLYLE - XIII ASSOCIATES, L.P. By: CARLYLE INVESTORS, INC. as its general partner By: ______________________________ Name: Stuart C. Nathan Title: President CARLYLE - XIV ASSOCIATES, L.P. By: CARLYLE INVESTORS, INC. as its general partner By: ______________________________ Name: Stuart C. Nathan Title: President EX-10.W 7 EXHIBIT 10-W - ------------- (C-XIII) FILED ON PAPER IN ACCORDANCE WITH RULE 201 OF REGULATION S-T, THESE AGREEMENTS ARE BEING FILED IN PAPER PURSUANT TO A TEMPORARY HARDSHIP EXEMPTION. EX-10.X 8 EXHIBIT 10-X - ------------ (C-XIII) FILED ON PAPER IN ACCORDANCE WITH RULE 201 OF REGULATION S-T, THESE AGREEMENTS ARE BEING FILED IN PAPER PURSUANT TO A TEMPORARY HARDSHIP EXEMPTION. EX-21 9 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 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 the Notes 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 10 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, 1996, 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 22nd day of January, 1997. 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, 1996, and any and all amendments thereto, the 22nd day of January, 1997. 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, 1996, 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 22nd day of January, 1997. 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 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, 1996, and any and all amendments thereto, the 22nd day of January, 1997. GARY NICKELE ----------------------- Gary Nickele GAILEN J. HULL ----------------------- Gailen J. Hull DENNIS M. QUINN ----------------------- Dennis M. Quinn EX-27 11
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN SUCH REPORT. 12-MOS DEC-31-1996 DEC-31-1996 6,030,217 374,085 15,330,082 0 0 21,734,384 238,208,441 0 280,595,580 67,445,869 384,098,834 0 0 0 (176,015,574) 280,595,580 68,293,433 69,093,943 0 51,021,847 1,019,829 17,600,000 39,959,842 (40,507,575) 0 42,099,222 5,484,249 0 0 47,583,471 125.25 125.25
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