-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, kY+ZfaD1R7za0zkD23m+lSVMxxs63QX3WmBt+5W90tcb2TQdUo1+J6YpM+dC2Dnt Fc9j2s2jWjkDeUmmOmLwcQ== 0000765923-95-000004.txt : 19950414 0000765923-95-000004.hdr.sgml : 19950414 ACCESSION NUMBER: 0000765923-95-000004 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950412 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEAN WITTER REALTY GROWTH PROPERTIES L P CENTRAL INDEX KEY: 0000765923 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 133286866 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-18151 FILM NUMBER: 95528408 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CTR STREET 2: 46TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123921054 MAIL ADDRESS: STREET 1: TWO WORLD TRADE CENTER STREET 2: 46TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10048 10-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file Number 0-18151 DEAN WITTER REALTY GROWTH PROPERTIES, L.P. (Exact name of registrant as specified in governing instrument) Delaware 13-3286866 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2 World Trade Center, New York, NY 10048 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 392-1054 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None Securities registered pursuant to Section 12(g) of the Act: Units of 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 files pursuant to Item 405 of Regulation S-K (229.405 of this chapter) 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 nonaffiliates of the registrant. Not Applicable DOCUMENTS INCORPORATED BY REFERENCE None PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) The following documents are filed as part of this Annual Report: 1. Financial Statements (see Index to Financial Statements filed as part of Item 8 of this Annual Report). 2. Financial Statement Schedule (see Index to Financial Statements filed as part of Item 8 of this Annual Report). 3. Exhibits (2) Not applicable. (3)(a) Amended and Restated Agreement of Limited Partnership dated as of July 12, 1985 set forth in Exhibit A to the Prospectus included in Registration Statement Number 2- 96767 is incorporated herein by reference. (3)(b) Certificate of Limited Partnership dated as of July 12, 1985 incorporated by reference in Registration Statement Number 2-96767 is incorporated herein by reference. (4)(a) Amended and Restated Agreement of Limited Partnership dated as of July 12, 1985 set forth in Exhibit A to the Prospectus included in Registration Statement Number 2- 96767 is incorporated herein by reference. (4)(b) Certificate of Limited Partnership dated as of July 12, 1985 incorporated by reference in Registration Statement Number 2-96767 is incorporated herein by reference. (9) Not applicable. (10) Not applicable. (11) Not applicable. (12) Not applicable. (13) Not applicable. (16) Letter regarding change in certifying accountant. Incorporated by reference in the Partnership's Current Report on Form 8-K dated December 31, 1994. (18) Not applicable. (19) Not applicable. (21) Subsidiaries: TWC Eleven Limited Partnership, a Florida Limited Partnership. L.S. Braker Associates, a Texas Limited Partnership. (22) Not applicable. (23) Not applicable. (24) Not applicable. (27) Financial Data Schedule. (28) Not applicable. (99) Not applicable. (b) Reports on Form 8-K Report dated December 15, 1994 of the change in the Partnership's Independent Auditor for the year ending December 31, 1994. (c) See 3a. above. (d) 1. Financial Statements of TWC Ten Limited Partnership an office building located in Tampa, Florida. To be filed by 10K/A when received from TWC Ten Limited Partnership. 2. Financial Statements of Peninsula Office Park, an office complex located in San Mateo, California. To be filed by 10-K/A when received from Peninsula Office Park. DEAN WITTER REALTY GROWTH PROPERTIES, L.P. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DEAN WITTER REALTY GROWTH PROPERTIES, L.P. By: Dean Witter Realty Growth Properties Inc. Managing General Partner Date: April 12, 1995 By: /s/E. Davisson Hardman, Jr. E. Davisson Hardman, Jr. President TWC TEN, LTD. (A Florida Limited Partnership) Financial Statements for the Years Ended December 31, 1994 and 1993, and Independent Auditors' Report INDEPENDENT AUDITORS' REPORT To the Partners of TWC Ten, Ltd.: We have audited the accompanying balance sheet of TWC Ten, Ltd. (a Florida Limited Partnership) as of December 31, 1994 and the related statements of operations, partners' capital (deficit), and cash flows for the year then ended. These financial statements are the responsibility of the Partners. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of TWC Ten, Ltd. for the year ended December 31, 1993 were audited by other auditors whose report, dated February 4, 1994 expressed an unqualified opinion on those statements. We conducted our audit 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 Partners, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 1994 financial statements referred to above present fairly, in all material respects the financial position of TWC Ten, Ltd. at December 31, 1994, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP /s/Deloitte & Touche LLP Tampa, Florida February 10, 1995 TWC TEN, LTD. (A Florida Limited Partnership)
BALANCE SHEETS DECEMBER 31, 1994 AND 1993 ASSETS 1994 1993 Cash and cash equivalents $ 209,260 $ 300,933 Accounts receivable, net of allowance for doubtful account of $13,505 in 1994 and $33,000 in 1993 1,438,577 1,676,712 Deferred lease commissions, net of accumulated amortization of $1,237,871 in 1994 and $1,048,787 in 1993 631,408 513,771 Deferred loan costs, net of accumulated amortization of $422,328 in 1994 and $351,339 in 1993 165,425 236,414 Organizational costs, net of accumulated amortization of $16,278 in 1994 and $5,042 in 1993 39,903 51,139 Prepaid expenses and other assets 112,014 94,937 Real estate and improvements (Notes 1 and 2) 20,055,060 20,212,415 $22,651,647 $23,086,321 LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) LIABILITIES: Mortgage note payable (Note 3) $20,000,000 $20,000,000 Accounts payable and accrued expenses 338,218 556,561 Accrued interest payable (Note 3) 141,666 141,666 Total liabilities 20,479,884 20,698,227 COMMITMENTS AND RELATED PARTY TRANSACTIONS (Notes 4 and 5) PARTNERS' CAPITAL (DEFICIT) (Note 6): Taylor Simpson Group 6,022,325 6,238,656 Existing Partners (3,850,562) (3,850,562) Total partners' capital (deficit) 2,171,763 2,388,094 $22,651,647 $23,086,321 See accompanying notes to financial statements. /TABLE TWC TEN, LTD. (A Florida Limited Partnership)
STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1994 AND 1993 1994 1993 RENTAL REVENUES (Note 4) $4,174,012 $3,489,860 OPERATING EXPENSES: Building services 365,030 381,491 Utilities 361,862 312,063 Repairs and maintenance 61,381 130,764 Real estate taxes 424,816 429,140 Management fees (Note 5) 125,730 104,784 Administrative and other 158,093 303,519 Total operating expenses 1,496,912 1,661,761 OPERATING INCOME 2,677,100 1,828,099 INTEREST EXPENSE, NET 1,694,223 2,718,415 DEPRECIATION AND AMORTIZATION 1,389,200 1,191,803 NET LOSS $(406,323) $(2,082,119) See accompanying notes to financial statements.
TWC TEN, LTD. (A Florida Limited Partnership) STATEMENTS OF PARTNERS' CAPITAL (DEFICIT) YEARS ENDED DECEMBER 31, 1994 AND 1993
Taylor Simpson Group Existing Partners Allocated Preferred Allocated Total Capital Loss Net Capital Capital Loss Net Net Balance, December 31, 1992 $ - $ - $ - $ 600 $9,145,691 $(19,170,702) $(10,024,411) $(10,024,411) Capital contribution 6,853,904 - 6,853,904 16,971,026 (9,145,691) - 7,825,335 14,679,239 Capital distribution (184,615) - (184,615) - - - - (184,615) Net loss - (430,633) (430,633) - - (1,651,486) (1,651,486) (2,082,119) Balance, December 31, 1993 6,669,289 (430,633) 6,238,656 16,971,626 - (20,822,188) (3,850,562) 2,388,094 Capital contribution 621,428 - 621,428 - - - - 621,428 Capital distribution (431,436) - (431,436) - - - - (431,436) Net loss - (406,323) (406,323) - - - - (406,323) Balance, December 31, 1994 $6,859,281 $(836,956) $6,022,325 $16,971,626 $ - $(20,822,188) $ (3,850,562) $ 2,171,763 See accompanying notes to financial statements.
TWC TEN, LTD. (A Florida Limited Partnership) STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1994 AND 1993
1994 1993 CASH FLOWS PROVIDED FROM (USED IN) OPERATING ACTIVITIES: Net loss $(406,323) $(2,082,119) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 1,389,200 1,191,803 Provision for doubtful accounts 11,679 13,550 Cash provided by (used in) changes in: Accounts receivable 226,457 621,509 Deferred lease commissions (306,721) (144,181) Deferred loan costs - (133,198) Organizational costs - (56,181) Prepaid expenses and other assets (17,077) (32,814) Accounts payable and accrued expenses (218,343) (1,035,487) Accrued interest payable - 161,641 Net cash provided from (used in) operating activities 678,872 (1,495,477) CASH FLOWS USED IN INVESTING ACTIVITIES: Expenditures for improvements (960,537) (447,704) Net cash used in investing activities (960,537) (447,704) CASH FLOWS PROVIDED FROM (USED IN) FINANCING ACTIVITIES: Repayments of mortgage note - (4,607,271) Capital distributions - Taylor Simpson Group (431,436) (184,615) Capital contributions: Bayport, Ltd. - 152,325 Taylor Simpson Group 621,428 6,853,904 Net cash provided from financing activities 189,992 2,214,343 Net decrease (increase) in cash and cash equivalents (91,673) 271,162 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 300,933 29,771 CASH AND CASH EQUIVALENTS, END OF YEAR $209,260 $300,933 The partnership paid interest of approximately $1,700,000 in 1994 and $2,453,000 in 1993. See Note 6 for summary of noncash transactions. See accompanying notes to financial statements.
TWC TEN, LTD. ( A FLORIDA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization - TWC Ten, Ltd., a Florida limited partnership (the "Partnership"), was formed December 30, 1983 to acquire approximately 13 acres of land and to develop and construct an eleven-story 259,513 square foot office building and structured parking deck containing 765 parking spaces (the "Project") in Tampa, Florida. Bayport, Ltd., a partnership in which Dean Witter Realty Growth Properties, L.P. is a substantial general partner, was the majority general partner. The remaining limited partnership interests were held by owners and employees of the Wilson Company ("Wilson Partners"). On July 19, 1993, the Partnership Agreement was amended and restated (the "Amended and Restated Partnership Agreement"). The partners under the new partnership agreement are the original partners (the "Existing Partners") and the Taylor Simpson Group ("TSG"). The partners in TSG are Westrock Realty Associates, L.P., Ltd., as a limited partner and Bayrock Realty Associates, L.P., Ltd., as a general partner. The Amended and Restated Partnership Agreement requires certain capital contributions by the partners. TSG is required, as necessary, to fund up to $9,000,000 of capital contributions. Through December 31, 1994, $5,339,068 has been contributed as an initial capital contribution and $2,136,264 has been contributed as an additional capital contribution. The remaining unfunded balance is to be contributed from time-to-time to fund operating deficits. As of the date of the Amended and Restated Partnership Agreement, the Existing Partners contributed shortfall loans of $1,232,516, additional shortfall loans of $3,295,259, and accrued interest payable thereon of $2,331,831 to the Partnership. They also caused to be discharged $813,404 of amounts payable to TWC Eleven, Ltd. (an Existing Partner) and paid $140,000 of accrued interest payable and $12,325 of accrued expenses on behalf of TWC Ten, Ltd. Profits (losses) are allocated based on the provisions of the Amended and Restated Partnership Agreement. Profits are allocated 20% to the Existing Partners and 80% to TSG until TSG has received an annual return of 12% on the average amount of their unrecovered capital. Once TSG has received 12% return on the average amount of their unrecovered capital, profits are to be allocated 50% to the Existing Partners and 50 % to TSG. Losses are allocated 100% to TSG to the extent of TSG's adjusted capital account. Thereafter, losses are allocated 50% to the Existing Partners and 50% to TSG. The Amended and Restated Partnership also includes a provision whereby TSG is to receive guaranteed payments for three years on the amount of TSG's unrecovered capital. The return on unrecovered capital is 6% for two years, beginning with the year ended December 31, 1993. The return on capital is to 8.5% for the year ending December 31, 1995. The return on capital paid to TSG was $431,436 and $184,615 for the years ended December 31, 1994 and 1993, respectively. Cash Equivalents - For purposes of reporting cash flows, cash and cash equivalents include cash on hand and cash on deposit. Real Estate and Improvements - Real estate and improvements are recorded at cost less accumulated depreciation and amortization. Cost includes land and improvements, direct construction costs, indirect project costs and carrying costs including real estate taxes and interest incurred during the construction period. Depreciation and amortization is computed on the straight-line basis over the estimated useful lives of the assets: building and building improvements, 15 to 40 years; leasehold improvements, primarily over the lives of the related leases, 3 to 15 years. Rental Revenues and Rents Receivable - Rental revenues and rents receivable are recorded in accordance with Statement of Financial Accounting Standards No. 13, "Accounting for Leases," whereby rental revenue is recognized on a straight-line basis by totaling all rents due under the lease, including fixed increases, and dividing by total months of occupancy, including free rent periods. Deferred Lease Commissions - Deferred lease commissions are amortized on a straight-line basis over the lives of the related leases. Organizational Costs - Organizational costs relate to the costs of establishing the Partnership and are amortized on a straight-line basis over 5 years. Deferred Loan Costs - Deferred loan costs related to the construction financing are included in the cost of the building and are amortized on a straight-line basis over the life of the building. Deferred loan costs related to the mortgage payable are being amortized on a straight-line basis over the life of the mortgage. Income Taxes - No income taxes have been provided for in these financial statements as any such taxes, or benefits, are recognized by the individual partners. 2. REAL ESTATE AND IMPROVEMENTS Real estate and improvements at December 31, 1994 and 1993 consists of the following:
1994 1993 Land and improvements $3,013,100 $3,013,100 Building and improvements 25,129,445 24,168,908 28,142,545 27,182,008 Less accumulated depreciation and amortization (8,087,485) (6,969,593) $20,055,060 $20,212,415
Depreciation and amortization expense was $1,117,892 and $963,450 for the years ended December 31, 1994 and 1993, respectively. 3. MORTGAGE NOTE PAYABLE The mortgage note payable, which was refinanced on July 19, 1993, bears interest payable monthly at 8.5%. The mortgage note payable is secured by substantially all real estate and improvements, rents, leases and profits and is due on September 1, 1999. Prior to the refinancing, the mortgage note carried interest at 11.75%. There are no principal payments required to be made on the refinanced mortgage note until the maturity date of September 1, 1999. Principal payments on the mortgage note during 1993 totaled $4,607,271. 4. LEASE COMMITMENTS Tenant leases specify minimum rentals and, in some cases, annual fixed increases. Lease terms range from 3 to 5 years. Future minimum rental receipts due for succeeding fiscal years under noncancelable operating leases are as follows: Year Amount 1995 $3,804,904 1996 3,587,945 1997 2,499,816 1998 2,127,607 1999 1,593,481 Thereafter 1,180,992 Total $14,794,745
5. RELATED PARTY TRANSACTIONS Interest on shortfall loans was compounded monthly at a rate of prime plus 1% until the Partnership Agreement was amended and restated on July 19, 1993. At that time, accrued interest of $2,331,831 was contributed to the Partnership as part of the Existing Partners' additional capital contribution. In December 1988, TWC Eleven, Ltd. paid $829,771 of accrued interest and principal in additional shortfall loans on the Partnership's behalf. The $829,771 was reflected on the Partnership's balance sheet as due to TWC Eleven, Ltd. until July 18, 1993 when $813,404 was contributed to the Partnership as part of the Existing Partners' additional capital contribution. Prior to July 19, 1993, the Partnership had a management agreement with the Wilson Management Company which provided for the payment of 2-1/4% of rental revenue collected and a 4% lease-up fee for all new leases. On July 19, 1993, as part of the Amended and Restated Partnership Agreement, the management agreement was amended whereby the Wilson Management Company will receive 3% of all rental revenue collected, a 4% lease-up fee for all new leases, and monthly reimbursement of $875 for office expenses. Management and lease-up fees were approximately $227,400 in 1994 and $164,300 in 1993. The Wilson Management Company was also reimbursed approximately $92,500 and $100,000 in 1994 and 1993, respectively, primarily for salary costs incurred on behalf of the Partnership. Prior to July 19, 1993, the Partnership had a management agreement with Liberty Street/Bayport, Ltd. which required payment of a fee calculated as a percentage of revenues and based on cash flow. On July 19, 1993, the management agreement with Liberty Street/Bayport, Ltd. was terminated. On August 1, 1993, the Wilson Management Company renewed its 10,806 square-foot lease for five years beginning March 1, 1994. The new lease requires monthly payments of $16,209 until February 28, 1999. Rental revenues earned under this lease agreement were approximately $196,000 in 1994 and $205,000 in 1993. The Amended and Restated Partnership Agreement as of July 19, 1993 requires the Partnership to pay guarantee payments to TSG equaling 6% of TSG's unrecovered capital for two years, beginning with the year ended December 31, 1993. Guaranteed payments to the TSG for 1994 and 1993 totaled $431,436 and $184,615, respectively. Solutions, Inc., an affiliate of The Wilson Company, performed construction work, primarily tenant improvements, on a cost-plus basis totaling approximately $775,687 in 1994 and $575,300 in 1993. Certain amounts of these improvements were reimbursed to the Partnership by tenants. The Wilson Construction Company, an affiliate of The Wilson Company, performed construction work on the base of the office building totaling approximately $257,845 during 1994. No such work was performed during 1993. 6. NONCASH TRANSACTIONS As a result of the Amended and Restated Partnership Agreement, certain debt amounts were converted to capital. These conversions were considered as noncash activities for purposes of the statement of cash flows as of December 31, 1993 as follows: Existing Partners: Shortfall loan $1,232,516 Additional shortfall loan 3,295,259 Accrued interest payable 2,331,831 Due to TWC Eleven, Ltd 813,404 Total noncash activity $7,673,010
PENINSULA OFFICE PARK (a California Partnership) Financial Statements December 31, 1994 (With Independent Auditors Report Thereon) Independent Auditors Report The Partners Peninsula Office Park: We have audited the accompanying balance sheet of Peninsula Office Park (a California Partnership) as of December 31, 1994, and the related statements of operations, changes in partners deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Peninsula Office Park as of December 31, 1994, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/KPMG Peat Marwick KPMG PEAT MARWICK LLP February 3, 1995 PENINSULA OFFICE PARK (a California Partnership) Balance Sheet December 31, 1994
Assets Real estate investment (notes 3 and 6): Land $1,492,170 Building and improvements 24,117,308 Furniture and fixtures 368,754 25,978,232 Less accumulated depreciation (17,672,462) Net real estate investment 8,305,770 Cash and cash equivalents (of which $1,741,697 is restricted (note 3)) 3,079,528 Accounts receivable (notes 3 and 4) 208,644 Step rents receivable 1,795,658 Notes receivable (net of allowance, $558,609) 231,858 Leasing commissions and costs (net of accumulated amortization, $1,626,431) 965,823 Loan costs (net of accumulated amortization, $930,084) 308,332 Other assets 326,046 $ 15,221,659 Liabilities and Partners Deficit Notes payable (note 3) 36,345,046 Accounts payable and accrued expenses (notes 5 and 6) 230,139 Tenant security deposits 373,602 Equity and losses in excess of investment (note 4) 2,133,585 Total liabilities 39,082,372 Partners' deficit (23,860,713) Commitments and contingencies (notes 3, 4, 5 and 6) $ 15,221,659 See accompanying notes to financial statements. /TABLE PENINSULA OFFICE PARK (a California Partnership) Statement of Operations Year ended December 31, 1994 Rental income (notes 3 and 7) 6,039,721 Other income 269,136 Interest income 160,633 Equity in net loss of associated partnership (note 4) (93,457) 6,376,033 Expenses: Operating (notes 5 and 6) 1,802,173 Real estate tax 287,259 Insurance 100,776 Other 97,008 2,287,216 Interest expense (note 3) 3,413,628 Depreciation and amortization 1,449,439 Net loss $ (774,250) See accompanying notes to financial statements. /TABLE
PENINSULA OFFICE PARK (a California Partnership) Statement of Changes in Partners' Deficit Year ended December 31, 1994 Balance at December 31, 1993 $ (22,896,463) Net loss (774,250) Capital distributions (190,000) Balance at December 31, 1994 $ (23,860,713) See accompanying notes to financial statements. /TABLE
PENINSULA OFFICE PARK (a California Partnership) Statement of Cash Flows Year ended December 31, 1994 Cash flows from operating activities: Net loss $ (774,250) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 1,449,439 Equity in net loss of associated partnership 93,457 Change in assets and liabilities: Increase in accounts and step rents receivable (170,672) Decrease in notes receivable 77,305 Increase in leasing commissions and costs (283,443) Increase in loan costs (107,978) Increase in other assets (21,027) Increase in accrued interest payable 262,876 Decrease in accounts payable and accrued expenses (184,874) Increase in tenant security deposits 37,860 Net cash provided by operating activities 378,693 Cash flows from investing activities: Additions to buildings and improvements (1,208,677) Proceeds from sales of marketable securities 3,998,594 Net cash provided by investing activities 2,789,917 Cash flows from financing activities: Capital distributions (190,000) Net cash used in financing activities (190,000) Net increase in cash and cash equivalents 2,978,610 Cash and cash equivalents at beginning of year 100,918 Cash and cash equivalents at end of year $3,079,528 Supplemental disclosure of cash flow information: Cash paid during the year for interest $3,150,752 See accompanying notes to financial statements. /TABLE PENINSULA OFFICE PARK (a California Partnership) Notes to Financial Statements December 31, 1994 (1) Organization Peninsula Office Park (the Partnership) was originally formed on October 1, 1971 as a limited partnership. The Partnership was formed to acquire, own, improve, manage, operate and lease commercial office space in San Mateo, California. Under the Partnership Agreement (the Agreement) amended December 27, 1985, the general partners have a 71.5956% partnership interest and the limited partners have a 28.4044% partnership interest. The Agreement provides, among other things, for the following: (a) Net Cash Flows as defined in the Agreement shall be distributed among the partners in accordance with their partnership interests. (b) The Partnership's income and losses from operations (other than capital transactions) shall be allocated among the partners in accordance with their partnership interests provided Peninsula/DW Associates (DW), a general partner gets allocated the first $6,248,500 of all net losses. (c) The net profits arising from capital transactions shall be allocated among the partners in the following amount and order of priority: (i) Net profits equal to aggregate negative capital accounts of all partners who have negative capital accounts shall be allocated among such partners in proportion to their respective negative capital accounts; then (ii) Any remaining net profits are allocated to the partners in proportion to their respective partnership interests in order to bring their capital account balance up to an amount equal to the amount of proceeds distributed in (c)(i) above; then (iii) Any remaining net profits are allocated to the partners in proportion to their respective partnership interests. (d) The net losses arising from capital transactions shall be allocated among the partners in the following amount and order of priority: (i) Loss equal to the excess of the aggregate positive capital accounts of all partners who have positive capital accounts over the aggregate capital proceeds to be distributed to such partners with respect to (c)(i) above shall be allocated among such partners in proportion to their respective places pursuant to (c)(i) of such excess; and (ii) Any remaining loss shall be allocated among partners in accordance with their partnership interests. (e) Additional capital contributions may be required by the partners to fund cost overruns and certain operating costs in excess of amounts budgeted in the Agreement. (2) Summary of Significant Accounting Policies (a) Basis of Accounting The accompanying financial statements have been prepared on the accrual basis of accounting. (b) Income Taxes No provision for income taxes has been made in the accompanying financial statements as the taxable income or loss of the Partnership is reportable on the returns of the individual partners based on their respective interests in the Partnership. (c) Rental Income Rental income is recognized on a straight-line basis over the terms of the respective tenant leases. (d) Depreciation and Amortization Depreciation of building, improvements and furniture and fixtures is computed over the estimated useful lives of the assets. Tenant improvements, included in buildings and improvements, are amortized over the terms of the respective tenant leases. Leasing commissions and costs are amortized on a straight-line basis over the terms of the respective tenant leases. Loan costs are amortized on a straight- line basis over the terms of the respective loan agreements. (e) Cash and Cash Equivalents For purposes of the statement of cash flows, cash equivalents include liquid assets purchased with maturities of three months or less. (3) Notes Payable The Partnership obtained financing amounting to $36,400,000 on various dates detailed in the table below with the Equitable Life Assurance Society of the United States (Equitable). The notes matured on December 1, 1993 but were not repaid and were therefore in technical default at December 31, 1993. During 1994, the note agreements were modified to waive the technical defaults and extend the maturity date from December 1, 1993 to December 1, 1996. The interest rates were also modified from 9.875% (POP #1 and POP #3) and 9.0% (POP #5, POP #6 and POP #8) to 9.5% effective April 28, 1994 for all notes. Although the current interest rate is 9.5%, only 8.25% is required to be paid on a monthly basis. The difference is compounded into the note balance. The amount compounded into the note balance during 1994 was $262,876. Effective April 28, 1994, the notes secured by POP #1, POP #3 and POP #8 were also modified from monthly principal plus interest payments to monthly interest only payments. In accordance with the security agreements to the Equitable notes payable, a security fund was established in 1994. The original balance deposited with Equitable for the security fund was $1,305,146. The Partnership is also required to deposit into the security fund any positive cash flow generated by the properties as defined in the note agreements. The positive cash flow generated and deposited into the security fund in 1994 was $436,551. The total amount of restricted cash held by Equitable of $1,741,697 is included in the cash and cash equivalents balance. This restricted cash cannot be disbursed without the prior approval of Equitable. The note agreement also requires the Partnership to advance to Equitable, on a monthly basis the amount of property taxes due on the properties. The balance in the property tax impound account as of December 31, 1994 was $41,626. The notes are secured by a first deed of trust in the properties, assignment of rents on the properties, the security fund and the property tax impound account.
Note Inception Original Current Maturity Property number Payment type Date Balance Balance Date POP #1 B-18668 Monthly interest only 11/20/86 $ 3,400,000 3,370,681 12/1/96 POP #3 B-18669 Monthly interest only 11/20/76 5,350,000 5,303,868 12/1/96 POP #5 B-18683 Monthly interest only 10/27/85 8,650,000 8,723,242 12/1/96 POP #6 B-18684 Monthly interest only 10/27/85 6,500,000 6,555,037 12/1/96 POP #8 B-18670 Monthly interest only 11/20/86 12,500,000 12,392,218 12/1/96 $36,400,000 $36,345,046
(4) Investment in Associated Partnership The Partnership has a 53.33% interest in Campus Drive Investment Company (CDIC), a California partnership. The equity method of accounting is used to record the Partnership's investment in CDIC as the partners hold joint control. The Partnership's interest in CDIC's net loss for the year ended December 31, 1994 was $93,457. The assets, liabilities and partners' deficit of CDIC at December 31, 1994 are summarized as follows: Assets: Real estate investment, net $ 1,438,913 Other (including cash of $317,727 of which $194,854 is restricted) 590,161 Total assets $ 2,029,074 Liabilities and Partners' Deficit: Note payable 5,294,453 Other liabilities 774,873 Partners' deficit (4,040,252) Total liabilities and partners' deficit $ 2,029,074
Other liabilities includes a payable to the Partnership of $135,888 for tenant improvement costs expended on behalf of CDIC. The same amount is included in the Partnership's accounts receivable balance as of December 31, 1994. The results of operations for CDIC for the year ended December 31, 1994 are summarized below: Revenues: Rental $ 789,592 Other 57,635 847,227 Expenses: Operating 235,211 Interest 552,124 Depreciation and amortization 151,086 Other 84,147 1,022,568 Net loss $ (175,341)
(5) Management Agreement The Partnership has a management agreement (the Management Agreement) with William Wilson and Associates (WWA), an affiliate of the Partnership, to perform certain duties in connection with the development and operation of the properties owned by the Partnership. The Management Agreement continues on a year-to-year basis. The Partnership is required to pay WWA a management fee of 3% of gross monthly rental receipts as defined in the Management Agreement. Total fees during 1994 amounted to $207,698, which is included in operating expenses. The related management fee payable at December 31, 1994 was $36,159. (6) Related Party Transactions William Wilson III, a partner of the Partnership, has a 3% interest in Webcor Builders, Inc., the general contractor engaged by the Partnership for various tenant improvements. The total cost of these services provided to the Partnership during 1994 was $753,487. The related payable for these services at December 31, 1994 was $3,818. The Partnership paid $109,178 to Commercial Interior Contractors (CIC) for interior improvements during 1994. CIC is a division of WWA. WWA performed maintenance engineering, marketing and promotion, and leasing services for the Partnership. The total cost of these services provided to the Partnership for the year ended December 31, 1994 was $224,817. WWA also leased space from the Partnership and made rental payments of $199,596 during 1994. As specified in the Agreement, the Partnership shall pay RMS/Liberty Street Associates, an affiliate of DW, an investment management fee equal to 1% of the gross income of the Partnership. The total fee during 1994 amounted to $59,842. The related payable for this fee at December 31, 1994 was $10,418. (7) Leases The Partnership's operations consist of the leasing of space in office buildings, in which all of the Partnership's leases are classified as operating leases. The minimum future rental receipts under noncancelable operating leases in effect on December 31, 1994 are as follows: Year ending December 31: 1995 $5,706,280 1996 5,128,021 1997 4,512,097 1998 2,768,202 1999 1,272,254 Thereafter 679,658 $20,066,512
Rental income for the year ended December 31, 1994 includes $89,252 of step rents receivable. -----END PRIVACY-ENHANCED MESSAGE-----