-----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, EPZrmH1cXZMyKW0fl/dmpEebhEIyx1C0szkqbgYy90h449qI7vC4v711k2GfK3vB EtqYp6GZl/iNK+1XiIkuJA== 0000765923-96-000002.txt : 19960429 0000765923-96-000002.hdr.sgml : 19960429 ACCESSION NUMBER: 0000765923-96-000002 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960426 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: 96551910 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, 1995 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 (sec. 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 (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)(a) Partnership Agreement of TWC Ten, Ltd. was filed as Exhibit 10(b) to Registration Statement No. 2-96767 and is incorporated herein by reference. (b) Partnership Agreement of TWC Eleven, Ltd. was filed as Exhibit 10(c) to Registration Statement No. 2-96767 and is incorporated herein by reference. (c) Amended and Restated Partnership Agreement of Bayport, Ltd. filed as Exhibit b to Registrant's report on Form 8- K, dated July 15, 1985 (Commission File No. 0-18151), is incorporated herein by reference. (d) General Partnership Agreement of TWC Eleven, Ltd. dated as of August 29, 1985. (e) First Amendment to the General Partnership Agreement of TWC Eleven, Ltd. dated as of June 19, 1987. (f) Second Amended and Restated Agreement of Limited Partnership of TWC Ten, Ltd. dated as of July 19, 1993. (g) Partnership Agreement of Braker Lane III Associates was filed as Exhibit 10(a) to Registration Statement No. 2- 96767 and is incorporated herein by reference. (h) Amended and Restated Partnership Agreement of L.S. Braker Associates filed as Exhibit b to Registrants report on Form 8-K dated July 15, 1985 (Commission File No 0-18151) is incorporated herein by reference. (i) Partnership Agreement of Peninsula/DW Associates dated December 27, 1985 filed as Exhibit c to Registrants' report on Form 8-K dated December 27, 1985 (Commission File No 0-18151) is incorporated herein by reference. (j) Amended and Restated Agreement of Limited Partnership of Campus Drive Investment Company, dated as of December 27, 1985. (k) Amended and Restated Agreement of Limited Partnership of Peninsula Office Park, dated as of December 27, 1985. (l) Agreement of Sale, dated August 3, 1995, with respect to the sale of the warehouse and the undeveloped land at Braker Center filed as Exhibit 2 to the Registrant's report on Form 8-K dated September 1, 1995 (Commission File No. 0-18151) and is incorporated herein by reference. (11) Not applicable. (12) Not applicable. (13) Not applicable. (16) Not applicable (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) No Forms 8-K were filed by the Partnership during the last quarter of the period covered by this report. (c) See 3a. above. (d) 1. Financial Statements of TWC Ten Limited Partnership an office building located in Tampa, Florida. Filed herein. 2. Financial Statements of Peninsula Office Park, an office complex located in San Mateo, California. Filed herein. 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 25, 1996 By: /s/E. Davisson Hardman, Jr. E. Davisson Hardman, Jr. President PENINSULA OFFICE PARK (A CALIFORNIA LIMITED PARTNERSHIP) Financial Statements for the Years Ended December 31, 1995, 1994 and 1993 and Independent Auditors' Report INDEPENDENT AUDITORS' REPORT To the Partners of Peninsula Office Park: We have audited the accompanying balance sheet of Peninsula Office Park (a California Limited Partnership) as of December 31, 1995, 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, such financial statements present fairly, in all material respects, the financial position of Peninsula Office Park as of December 31, 1995, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/Deloitte & Touche LLP February 2, 1996 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 each of the years in the two year period ending December 31, 1994. 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 each of the years in the two year period ending December 31, 1994 in conformity with generally accepted accounting principles. /s/KPMG Peat Marwick LLP February 3, 1995
PENINSULA OFFICE PARK (A California Limited Partnership) BALANCE SHEETS ASSETS December 31, 1995 1994 REAL ESTATE INVESTMENT: Land $ 1,492,170 $ 1,492,170 Building and improvements 25,423,834 24,117,308 Furniture and fixtures 377,135 368,754 Total 27,293,139 25,978,232 Less accumulated depreciation (18,701,539) (17,672,462) Net real estate investment 8,591,600 8,305,770 Cash and cash equivalents 1,751,033 1,337,831 Restricted cash 1,461,594 1,741,697 Accounts receivable 373,006 208,644 Step rents receivable 1,743,109 1,795,658 Notes receivable (net of allowance, $610,051 and $558,609 in 1995 and 1994, respectively) 408,169 231,858 Leasing commissions and costs (net of accumulated amortization, $1,063,113 and $1,626,431 in 1995 and 1994, respectively) 1,125,130 965,823 Loan costs (net of accumulated amortization, $1,107,388 and $930,084 in 1995 and 1994, respectively) 131,028 308,332 Other assets 144,015 326,046 TOTAL ASSETS $15,728,684 $15,221,659 LIABILITIES AND PARTNERS' DEFICIT LIABILITIES: Notes payable $ 36,801,971 $36,345,046 Accounts payable and accrued expenses 743,771 230,139 Tenant security deposits 390,757 373,602 Total liabilities 37,936,499 36,948,787 LOSSES IN EXCESS OF INVESTMENT IN ASSOCIATED PARTNERSHIP 2,206,370 2,133,585 PARTNERS' DEFICIT (24,414,185) (23,860,713) TOTAL LIABILITIES AND PARTNERS' DEFICIT $ 15,728,684 $ 15,221,659 See accompanying notes to financial statements.
PENINSULA OFFICE PARK (A California Limited Partnership) STATEMENT OF OPERATIONS Years Ended December 31, 1995 1994 1993 REVENUES: Rental income $6,477,041 $6,039,721 $6,862,264 Other income 263,721 269,136 298,163 Interest income 104,813 160,633 196,233 Total revenues 6,845,575 6,469,490 7,356,660 EXPENSES: Interest expense 3,472,630 3,413,628 3,387,863 Operating 1,737,968 1,802,173 1,552,853 Depreciation and amortization 1,541,425 1,449,439 1,926,401 Real estate taxes 292,044 287,259 282,455 Insurance 147,913 100,776 80,358 Other 134,282 97,008 422,432 Net loss on investment in associated partnership 72,785 93,457 135,948 Total expenses 7,399,047 7,243,740 7,788,310 NET LOSS $ (553,472) $ (774,250) $ (431,650) See accompanying notes to financial statements.
PENINSULA OFFICE PARK (A California Limited Partnership) STATEMENT OF CHANGES IN PARTNERS' DEFICIT YEARS ENDED DECEMBER 31, 1995, 1994 and 1993 BALANCE AT JANUARY 1, 1993 $ (22,464,813) NET LOSS (431,650) BALANCE AT DECEMBER 31, 1993 (22,896,463) NET LOSS (774,250) CAPITAL DISTRIBUTIONS (190,000) BALANCE AT December 31, 1994 (23,860,713) NET LOSS (553,472) BALANCE AT DECEMBER 31, 1995 $ (24,414,185) See accompanying notes to financial statements.
PENINSULA OFFICE PARK (A California Limited Partnership) STATEMENT OF CASH FLOWS Year Ended December 31, 1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(553,472) $(774,250) $(431,650) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 1,541,425 1,449,439 1,926,401 Accrued interest added to notes payable 456,925 - - Equity in net loss of associated partnership 72,785 93,457 135,948 Change in assets and liabilities: Decrease (increase) in restricted cash 280,103 (1,741,697) 100,918 Increase in accounts receivable (111,813) (170,672) (273,317) Decrease (increase) in notes receivable 1,501 77,305 (309,163) Increase in leasing commissions and costs (460,280) (283,443) - Increase other assets (29,852) (21,027) (948,286) Increase (decrease) in accounts payable and accrued expenses 513,632 (184,874) (13,446) Increase in loan costs - (107,978) - Increase in accrued interest payable - 262,876 - Increase in tenant security deposits 17,155 37,860 82,497 Net cash provided by (used in) operating activities 1,728,109 (1,363,004) 269,902 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to buildings and improvements (1,314,907) (1,208,677) (314,946) Proceeds from sales of marketable securities - 3,998,594 - Purchase of marketable securities - - (2,500,000) Net cash provided by (used in) investing activities (1,314,907) 2,789,917 (2,814,946) CASH FLOWS FROM FINANCING ACTIVITIES: Capital distributions - (190,000) - Principal payment of long-term debt - - (159,972) Net cash used in financing activities - (190,000) (159,972) Net increase (decrease) in cash and cash equivalents 413,202 1,236,913 (2,705,016) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,337,831 100,918 2,805,934 CASH AND CASH EQUIVALENTS AT END OF YEAR $1,751,033 $1,337,831 100,918 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - Cash paid during the year for interest $ 3,015,705 $3,150,752 $3,387,863 See accompanying notes to financial statements.
PENINSULA OFFICE PARK (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 1. ORGANIZATION Peninsula Office Park (the "Partnership") was 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 Associate ("DW"), a general partner is allocated the first $6,248,500 of all net losses. (c)The net profit 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)The 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. SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting - The accompanying financial statements have been prepared on the accrual basis of accounting. Cash and cash equivalents include liquid assets purchased with maturities of three months or less. Depreciation and Amortization - Depreciation of building, improvements and furniture and fixtures is computed over the estimated useful lives of the assets. Depreciable lives range from three to 40 years. Tenant improvements, included in buildings and improvements, are amortized over the terms of the respective tenant leases. At least annually, and more often if circumstances dictate, the Partnership evaluates the recoverability of the net carrying value of its real estate. As part of this evaluation, the fair values of each of the properties are estimated (in some cases with the assistance of outside real estate consultants) based on discounted cash flows. The fair values are compared to the properties' carrying amounts in the financial statements. A deficiency in fair value relative to carrying amount is an indication of the need for a writedown due to impairment. In such case, the expected future net cash flows from the property are estimated for a period of approximately five years, along with estimated sales proceeds at the end of the period. If the total of these future undiscounted cash flows were less than the carrying amount of the property, the property would be written down to its fair value, and a loss on impairment recognized by a charge to earnings. The Partnership's accounting policy complies with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of long-lived Assets and for long-lived Assets to be Disposed Of". Because the determination of fair value is based upon projections of future economic events such as property occupancy rates, rental rates, operating costs, inflation, and market capitalization rates which are inherently subjective, the amounts ultimately realized at disposition may differ materially from the net carrying value as of December 31, 1995. The cash flows used to determine fair value and net realizable value are based on good faith estimates and assumptions developed by the General Partner. Unanticipated events and circumstances may occur and some assumptions may not materialize; therefore, actual results may vary from the estimates and the variance may be material. The Partnership may provide writedowns which could be material in subsequent years if real estate markets or local economic conditions change. 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. Rental income is recognized on a straight-line basis over the terms of the respective tenant leases. Rental revenue recognized in excess of rents currently due is reported as step rents receivable in the accompanying balance sheet. 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. Accounting Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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. 3. NOTES PAYABLE The Partnership obtained financing totaling $36,400,000 in 1985 and 1986 with the Equitable Life Assurance Society of the United States ("Equitable"). Although the interest rate is 9.5% for all of the notes, 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 was $456,925 and $262,876 during 1995 and 1994, respectively. In accordance with the security agreements, a security fund is maintained with Equitable. The Partnership is required to deposit into the security fund any positive cash flow generated by the properties as defined in the note agreements. This cash is restricted and 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 was $239,174 and $41,626 during December 31, 1995 and 1994, respectively, and is included in accounts receivable. 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. Details of notes are as follows:
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 $3,413,057 12/1/96 POP #3 B-18669 Monthly interest only 11/20/86 5,350,000 5,370,547 12/1/96 POP #5 B-18683 Monthly interest only 10/27/85 8,650,000 8,832,909 12/1/96 POP #6 B-18684 Monthly interest only 10/27/85 6,500,000 6,637,446 12/1/96 POP #8 B-18670 Monthly interest only 11/20/86 12,500,000 12,548,012 12/1/96 $36,400,000 $36,801,971
The carrying value of the notes payable approximates fair value due to the short period of time until the notes mature. The Partnership expects to be successful in refinancing or obtaining alternative financing for the notes prior to their maturity dates. 4. INVESTMENT IN ASSOCIATED PARTNERSHIP The Partnership has a 53.33% interest in Campus Drive Investment Company ("CDIC"), a California limited 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, 1995, 1994 and 1993 was $72,785, $93,509 and $135,948, respectively. The assets, liabilities and partners' deficit of CDIC are summarized as follows:
December 31, 1995 1994 Assets: Real estate investment, net $ 1,474,971 $1,438,913 Other (including cash of $357,961, $317,727 and $398,181 in 1995, 1994 and 1993, respectively 657,699 590,161 Total assets $ 2,132,670 $2,029,074 Liabilities and Partners' Deficit: Note payable $ 5,361,014 5,294,453 Other liabilities 948,388 774,873 Partners' deficit (4,176,732) (4,040,252) Total liabilities and partners' deficit $ 2,132,670 $2,029,074
Other liabilities includes a payable to the Partnership of $295,400 for a shortfall note made to CDIC and related accrued interest of $105,545. Interest expense related to the shortfall note for 1995 was $24,119. Corresponding amounts are included in the Partnership's note receivable balance as of December 31, 1995 and interest income for 1995. The results of operations for CDIC are summarized below: December 31, 1995 1994 1993 Revenues: Rental $ 968,379 $789,592 $828,661 Other 14,953 57,635 69,939 Total 983,332 847,227 898,660 Expenses: Interest 573,116 552,124 554,303 Operating 268,323 235,211 282,777 Depreciation and amortization 212,090 151,086 238,606 Other 66,283 84,147 75,538 Total 1,119,812 1,022,568 1,151,224 Net loss $ (136,480) $ (175,341) $ (252,624)
5. MANAGEMENT AGREEMENT The Partnership has a management agreement (the "Management Agreement") with William Wilson and Associates ("WA"), 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 1995, 1994 and 1993 were $253,476, $207,698 and $191,868 which is included in operating expenses. The related management fee payable at December 31, 1995 was $17,508. 6. OTHER 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 was $75,306, $753,487 and $251,808 for the years ended December 31, 1995, 1994 and 1993, respectively. The Partnership paid $948,778, $109,178 and $212,465 for the years ended December 31, 1995, 1994 and 1993, respectively to Commercial Interior Contractors ("CIC") for interior improvements. 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 were $115,196, $224,817 and $514,720 for the years ended December 31, 1995, 1994 and 1993, respectively. WWA also leased space from the Partnership and made rental payments of $258,911, and $199,596 during 1995 and 1994, respectively. 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 amounted to $68,152, $59,824 and $65,746 for the years ended December 31, 1995, 1994 and 1993, respectively. The related payable for this fee at December 31, 1995 was $16,609. 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 are as follows: Year ending December 31: 1996 $ 5,967,339 1997 5,387,843 1998 3,621,759 1999 2,273,938 2000 1,517,183 Thereafter 2,036,918 Total $20,804,980
TWC TEN, LTD. (A FLORIDA LIMITED PARTNERSHIP) Financial Statements for the Years Ended December 31, 1995, 1994 and 1993 and Independent Auditors' Report INDEPENDENT AUDITORS' REPORT To the Partners of TWC Ten, Ltd.: We have audited the accompanying balance sheets of TWC Ten, Ltd. (a Florida Limited Partnership) as of December 31, 1995 and 1994 and the related statements of operations, partners' capital (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the management of the Partnership. Our responsibility is to express an opinion on these financial statements based on our audits. 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 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 Partners, 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 financial statements referred to above present fairly, in all material respects, the financial position of TWC Ten, Ltd. at December 31, 1995 and 1994, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. February 16, 1996
TWC TEN, LTD. (A Florida Limited Partnership) BALANCE SHEETS DECEMBER 31, 1995 AND 1994 ASSETS 1995 1994 Cash and cash equivalents $ 200 $ 209,260 Rent receivable, net of allowance for doubtful accounts of $13,505 in 1995 and 1994 (Note 1) 1,249,157 1,438,577 Deferred lease commissions, net of accumulated amortization of $1,494,581 in 1995 and $1,237,871 in 1994 (Note 1) 988,894 631,408 Deferred loan costs, net of accumulated amortization of $493,316 in 1995 and $422,328 in 1994 (Note 1) 94,437 165,425 Organizational costs, net of accumulated amortization of $27,514 in 1995 and $16,278 in 1994 (Note 1) 28,667 39,903 Prepaid expenses and other assets 75,230 112,014 Real estate and improvements (Notes 1 and 2) 19,786,585 20,055,060 $ 22,223,170 $ 22,651,647 LIABILITIES AND PARTNERS' CAPITAL LIABILITIES: Mortgage note payable (Notes 1 and 3) $ 20,000,000 $ 20,000,000 Accounts payable and accrued expenses 496,375 338,218 Accrued interest payable (Note 3) 197,114 141,666 Due to bank 48,304 - Total liabilities 20,741,793 20,479,884 COMMITMENTS AND RELATED PARTY TRANSACTIONS (Notes 4 and 5) - - PARTNERS' CAPITAL (DEFICIT) (Notes 1 and 6): Taylor Simpson Group 5,331,939 6,022,325 Existing Partners (3,850,562) (3,850,562) Total partners' capital 1,481,377 2,171,763 $ 22,223,170 $ 22,651,647 See accompanying notes to financial statements.
TWC TEN, LTD. (A Florida Limited Partnership) STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 1995 1994 1993 RENTAL REVENUES (Notes 1 and 4) $ 4,343,102 $ 4,174,012 $ 3,489,860 OPERATING EXPENSES: Depreciation and amortization (Notes 1 and 2) 1,509,063 1,389,200 1,191,803 Building services 387,605 365,030 381,491 Utilities 376,239 361,862 312,063 Repairs and maintenance 85,022 61,381 130,764 Real estate taxes 652,100 424,816 429,140 Management fees (Note 5) 127,966 125,730 104,784 Administrative and other 173,698 158,093 303,519 Total operating expenses 3,311,693 2,886,112 2,853,564 OPERATING INCOME 1,031,409 1,287,900 636,296 INTEREST EXPENSE, NET 1,677,016 1,694,223 2,718,415 NET LOSS $ (645,607) $ (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, 1995, 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 Capital contribution 509,260 - 509,260 - - - - 509,260 Capital distribution (554,039) - (554,039) - - - - (554,039) Net loss - (645,607) (645,607) - - - - (645,607) Balance, December 31, 1995 $ 6,814,502 $(1,482,563) $(5,331,939) 16,971,626 - $(20,822,188) $(3,850,562) $1,481,377 See accompanying notes to financial statements.
TWC TEN, LTD. (A Florida Limited Partnership) STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 1995 1994 1993 CASH FLOWS PROVIDED FROM (USED IN) OPERATING ACTIVITIES: Net loss $ (645,607) $(406,323) $(2,082,119) Adjustments to reconcile net loss to net cash provided from operating activities: Depreciation and amortization 1,509,063 1,389,200 1,191,803 Provision for doubtful accounts - 11,679 13,550 Cash provided from (used in) changes in: Rent receivable 189,420 226,457 621,509 Deferred lease commissions (614,196) (306,721) (144,181) Deferred loan costs - - (133,198) Organizational costs - - (56,181) Prepaid expenses and other assets 36,784 (17,077) (32,814) Accounts payable and accrued expenses 158,157 (218,343) (1,035,487) Accrued interest payable 55,448 - 161,641 Due to bank 48,304 - - Net cash provided from (used in) operating activities 737,373 678,872 (1,495,477) CASH FLOWS USED IN INVESTING ACTIVITIES: Expenditures for improvements (901,654) (960,537) (447,704) Net cash used in investing activities (901,654) (960,537) (447,704) CASH FLOWS PROVIDED FROM (USED IN) FINANCING ACTIVITIES: Repayments of mortgage note - - (4,607,271) Capital distributions - Taylor Simpson Group (554,039) (431,436) (184,615) Capital contributions - Bayport, Ltd. - - 152,325 Capital contributions - Taylor Simpson Group 509,260 621,428 6,853,904 Net cash (used in) provided from financing activities (44,779) 189,992 2,214,343 Net (decrease) increase in cash and cash equivalents (209,060) (91,673) 271,162 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 209,260 300,933 29,771 CASH AND CASH EQUIVALENTS, END OF YEAR $ 200 $ 209,260 $ 300,933 SUPPLEMENTAL CASH FLOW INFORMATION: The partnership paid interest of approximately $1,700,000 in both 1995 and 1994 and $2,453,000 in 1993. See Note 6 for summary of noncash transactions.
TWC TEN, LTD. ( A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 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, 1995, $5,339,068 has been contributed as an initial capital contribution and $2,645,524 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 the two years, beginning with the year ended December 31, 1993. The return on capital is 8.5% for the year ended December 31, 1995. The return on capital paid to TSG was $554,039, $431,436 and $184,615 for the years ended December 31, 1995, 1994 and 1993, respectively. Cash Equivalents - For purposes of reporting cash flows, cash and cash equivalents include cash on hand, and cash on deposit and short-term investments with original maturities less than 90 days. 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, which is 3 to 15 years. At least annually, and more often if circumstances dictate, the Partnership evaluates the recoverability of the net carrying value of its real estate. As part of this evaluation, the fair values of each of the properties are estimated (in some cases with the assistance of outside real estate consultants) based on discounted cash flows. The fair values are compared to the properties' carrying amounts in the financial statements. A deficiency in fair value relative to carrying amount is an indication of the need for a writedown due to impairment. In such case, the expected future net cash flows from the property are estimated for a period of approximately five years, along with estimated sales proceeds at the end of the period. If the total of these future undiscounted cash flows were less than the carrying amount of the property, the property would be written down to its fair value, and a loss on impairment recognized by a charge to earnings. The Partnership's accounting policy complies with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Because the determination of fair value is based upon projections of future economic events such as property occupancy rates, rental rates, operating costs, inflation, and market capitalization rates which are inherently subjective, the amounts ultimately realized at disposition may differ materially from the net carrying value as of December 31, 1995. The cash flows used to determine fair value and net realizable value are based on good faith estimates and assumptions developed by the General Partner. Unanticipated events and circumstances may occur and some assumptions may not materialize; therefore, actual results may vary from the estimates and the variances may be material. The Partnership may provide write-downs which could be material in subsequent years if real estate markets or local economic conditions change. 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. Fair Value of Financial Instruments - The estimated fair value of amounts reported in the financial statements have been determined by using available market information and appropriate valuation methodologies. The carrying value of all current assets and current liabilities approximates fair value because of their short-term nature. The fair value of long-term investments and long-term debt approximate their carrying value. 2. REAL ESTATE AND IMPROVEMENTS Real estate and improvements at December 31, 1995 and 1994 consists of the following:
1995 1994 Land and improvements $ 3,013,100 $ 3,013,100 Building and improvements 26,031,100 25,129,445 29,044,200 28,142,545 Less accumulated depreciation and amortization (9,257,615) (8,087,485) $ 19,786,585 $ 20,055,060
Depreciation and amortization expense on real estate and improvements was $1,170,130, $1,117,892 and $963,450 for the years ended December 31, 1995, 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. 4. LEASE COMMITMENTS Tenant leases specify minimum rentals and, in some cases, annual fixed increases. Lease terms range from 3 to 10 years. Future minimum rental receipts due for succeeding fiscal years under noncancelable operating leases are as follows:
Year Amount 1996 $ 4,474,149 1997 4,033,821 1998 3,687,134 1999 3,080,514 2000 2,004,744 Thereafter 4,055,109 Total $ 21,335,471
5. RELATED PARTY TRANSACTIONS Interest on shortfall loans was compounded monthly at a rate of prime plus 1% (9.5% at December 31, 1995) 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 $346,400 in 1995, $227,400 in 1994, and $164,300 in 1993. The Wilson Management Company was also reimbursed approximately $92,300, $92,500 and $100,000 in 1995, 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 $195,000 in 1995, $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 1995, 1994 and 1993 totaled $554,039, $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 $407,035 in 1995, $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 $1,092 and $257,845 during 1995 and 1994, respectively. 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 Acrued interest payable 2,331,831 Due to TWC Eleven, Ltd. 813,404 Total noncash activiity $ 7,673,010
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