-----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, EbJ9rFQdJiNlNT3onl96GvCCLpvQGyePYRZxS3Ad+JikQ6lYy+Lk3Jff6rfopc5k sqPDSGl0FldtRVsXYQiuoA== 0000785540-97-000001.txt : 19970401 0000785540-97-000001.hdr.sgml : 19970401 ACCESSION NUMBER: 0000785540-97-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERRY & BOYLE DEVELOPMENT PARTNERS CENTRAL INDEX KEY: 0000785540 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 042895800 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15511 FILM NUMBER: 97569329 BUSINESS ADDRESS: STREET 1: 57 RIVER STREET CITY: WELLESLEY HILLS STATE: MA ZIP: 02181 BUSINESS PHONE: 6172370544 MAIL ADDRESS: STREET 1: 57 RIVER STREET CITY: WELLESLEY HILLS STATE: MA ZIP: 02181 10-K 1 10K FOR THE YEAR ENDED DECEMBER 31, 1996 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the Fiscal Year Ended December 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from __________________ to ________________ Commission File No. 0-15511 Development Partners (A Massachusetts Limited Partnership) (Exact name of registrant as specified in its charter) Massachusetts 04-2895800 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5110 Langdale Way, Colorado Springs, CO 80906 (Address of principal executive offices) (Zip Code) (719) 527-0544 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interests Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 and 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 ] Aggregate market value of voting securities held by non-affiliates: Not applicable, since securities are not actively traded on any exchange. Documents incorporated by reference: None The Exhibit Index is located on page ____ PART I ITEM 1. BUSINESS This form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. Development Partners (A Massachusetts Limited Partnership) (the "Partnership"), formerly Berry and Boyle Development Partners, was formed on October 23, 1985. The General Partners are L'Auberge Realty Advisors (A Massachusetts Limited Partnership), formerly Berry and Boyle Realty Advisors, and GP L'Auberge Communities, L.P., a California Limited Partnership (formerly Berry and Boyle Management). The primary business of the Partnership is to invest in, operate and ultimately dispose of a diversified portfolio of income-producing residential real properties through its joint venture partner interest in such properties. Descriptions of such properties are included below in Item 2. as well as in Note 5 of the Notes to the Consolidated Financial Statements. From time to time, the Partnership expects to sell its properties taking into consideration such factors as the price to be realized, the possible risks of continued ownership and the anticipated advantages to be gained for the partners. Proceeds from the sale, financing or refinancing of the properties will not be reinvested by the Partnership or its joint ventures, but will ultimately be distributed to the partners so that the Partnership will, in effect, be self-liquidating. Under the terms of the various joint venture agreements, the Partnership has control over the decision to sell a property. The success of the Partnership will depend upon factors which are difficult to predict and many of which are beyond the control of the Partnership. Such factors include, among others, general economic and real estate market conditions, both on a national basis and in those areas where the Partnership's investments are located, competitive factors, the availability and cost of borrowed funds, real estate tax rates, federal and state income tax laws, operating expenses (including maintenance and insurance), energy costs, government regulations, and potential liability under and changes in environmental and other laws, as well as the successful management of the properties. On July 3, 1996, the Partnership and certain affiliates consummated an agreement with Highland Properties, Inc. ("Highland"), a Colorado based residential development, construction and management firm and developer of the property known as L'Auberge Broadmoor, which separated the interests of Highland and the Partnership, thus affording the Partnership greater flexibility in the operation and disposition of the property. In consideration of a payment by the Partnership, to Highland totaling $8,683, and delivery of certain mutual releases, Highland (i) relinquished its option to exercise its rights of first refusal with regard to the sale of the property and (ii) assigned all of its interest in the L'Auberge Broadmoor Joint Venture to the Partnership (while preserving the economic interests of the venturer in these Joint Ventures), which resulted in the dissolution of the L'Auberge Broadmoor Joint Venture. Highland may still share in cash flow distributions or proceeds from sales if certain performance levels are met. On-site management of two of the Partnership's properties, L'Auberge Broadmoor ("Broadmoor"), formerly Broadmoor Pines, and L'Auberge Canyon View ("Canyon View), as well as Casabella is currently provided by an affiliate of the General Partners. The terms of such property management services between the Partnership and property managers are embodied in a written management agreement with respect to each property. The property manager in each case receives management fees which are competitive with those obtainable in arm's-length negotiations with independent parties providing comparable services in the localities in which the properties are located. These fees do not exceed 4% of the gross revenues from each property. It is the responsibility of the General Partners to select or approve property managers and to supervise their performance. Property managers are responsible for on-site operations and maintenance, generation and collection of rental income and payment of operating expenses. The difference between rental income and expenses related to operations, including items such as local taxes and assessments, utilities, insurance premiums, maintenance, repairs and improvements, bookkeeping and payroll expenses, legal and accounting fees, property management fees and other expenses incurred, constitute the properties' operating cash flow. The Partnership's administrative expenses are paid out of the Partnership's share of such cash flow from the various joint ventures and from interest income which the Partnership earns on its short-term investments. The Partnership's investments in real estate are also subject to certain additional risks including, but not limited to, (i) competition from existing and future projects held by other owners in the areas of the Partnership's properties, (ii) possible reduction in rental income due to an inability to maintain high occupancy levels, (iii) adverse changes in mortgage interest rates, (iv) possible adverse changes in general economic conditions and adverse local conditions, such as competitive over-bidding, or a decrease in employment or adverse changes in real estate zoning laws, (v) the possible future adoption of rent control legislation which would not permit the full amount of increased costs to be passed on to tenants in the form of rent increases, and (vi) other circumstances over which the Partnership may have little or no control. The Partnership's investments are subject to competition in the rental, lease and sale of similar types of properties in the localities in which the Partnership's real property investments are located, and the Partnership competes with other real property owners and developers in the rental, leasing and sale of such properties. Furthermore, the General Partners of the Partnership are affiliated with other partnerships owning similar properties in the vicinity in which the Partnership's properties are located. In addition, other limited partnerships may be formed by affiliates of the General Partners which will compete with the Partnership. The Partnership considers itself to be engaged in only one industry segment, real estate investment. ITEM 2. PROPERTIES The Partnership owns a majority joint venture interest in the Canyon View Joint Venture, an Arizona joint venture that owns and operates Canyon View, a 168-unit multifamily rental property in Tucson, Arizona, subject to first mortgage financing in the original principal amount of $5,300,000. The Partnership owns and operates Broadmoor, a 108-unit multifamily rental property in Colorado Springs, Colorado, subject to first mortgage financing in the original principal amount of $3,650,000. The ownership of Broadmoor was formerly structured as a Joint Venture of which the Partnership owned a majority interest. With regard to the termination of the Broadmoor Joint Venture, see Note 5 of the Notes to Consolidated Financial Statements. The Partnership also owns a minority interest in Casabella Associates, which owns and operates Casabella, a 154-unit multifamily rental property in Scottsdale, Arizona, subject to first mortgage financing in the original amount of $7,320,000. With regard to the termination of the Casabella Joint Venture, see Note 6 of the Notes to Consolidated Financial Statements. Canyon View On September 29, 1987, the Partnership acquired a majority interest in the Canyon View Joint Venture which owns and operates a 168-unit multifamily rental property located in Tucson, Arizona, known as Canyon View. The Partnership has been designated as the managing joint venture partner and will control all decisions regarding the operation and sale of the property. In accordance with the terms of the purchase agreement and the joint venture agreement, through December 31, 1996, the Partnership has contributed total capital of $6,889,588 to the Canyon View Joint Venture which was used to repay a portion of the construction loan from a third party lender, to pay certain costs related to the refinancing of the permanent loan, to cover operating deficits and to fund certain capital improvements. In addition to the contributions above, the Partnership also incurred $745,902 of property acquisition and organization costs which were subsequently treated as a capital contribution to the joint venture. As of February 25, 1997, the property was 96% occupied, compared to 92% approximately one year ago. At December 31, 1996 and 1995, the market rents for the various unit types were as follows: Unit Type .......... 1996 1995 - -------------------------- ---- ---- One bedroom one bath ..... $725 $725 Two bedroom two bath ..... 810 810 Two bedroom two bath w/den 980 980 Broadmoor On October 12, 1988, the Partnership acquired Broadmoor, a 108-unit multifamily rental property located in Colorado Springs, Colorado, and simultaneously contributed the property to a joint venture comprised of the Partnership and the developer of the property. The Partnership has been designated as the managing joint venture partner and will control all decisions regarding the operation and sale of the property. In accordance with the terms of the purchase agreement and the joint venture agreement, through December 31, 1996, the Partnership has contributed total capital of $6,051,022 to the Broadmoor Pines Joint Venture which was used to repay a portion of the construction loan from a third party lender, to pay certain costs related to the refinancing of the permanent loan, to cover operating deficits incurred during the lease up period and to fund certain capital improvements. In addition to the contributions above, the Partnership also incurred $684,879 of property acquisition and organization costs which were subsequently treated as a capital contribution to the joint venture. As of February 25, 1997, the property was 92% occupied, compared to 86% approximately one year ago. At December 31, 1996 and 1995, the market rents for the various unit types were as follows: Unit Type ......... 1996 1995 - -------------------------- ------ ------ One bedroom two bath w/den $ 875 $ 864 Two bedroom two bath ..... 975 975 Two bedroom two bath w/den 1,175 1,175 Casabella On November 5, 1990, the Partnership purchased an approximate 8% interest in Casabella Associates ("Associates"), a general partnership consisting of the Partnership and two other partnerships affiliated with the General Partners. Under the terms of the purchase, the Partnership contributed $400,000 to Associates. Associates was formed to acquire a majority interest in the Casabella Joint Venture which owns and operates a 154-unit multifamily rental property located in Scottsdale, Arizona, known as Casabella. Associates has been designated as the managing joint venture partner and will control all decisions regarding the operation and sale of the property. In addition to its $400,000 contribution to Associates, the Partnership has incurred $83,668 of acquisition expenses. As of February 25, 1997, the property was 99% occupied, compared to 98% approximately one year ago. At December 31, 1996 and 1995, the market rents for the various unit types were as follows: Unit Type ......... 1996 1995 - -------------------------- ------ ------ One bedroom two bath w/den $ 820 $ 820 Two bedroom two bath ..... 950 943 Two bedroom two bath w/den 1,185 1,170 ITEM 3. LEGAL PROCEEDINGS There are no pending material legal proceedings to which the Partnership or any joint venture in which it owns an interest is a party, or of which any of the properties is subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The transfer of Units is subject to certain limitations contained in the Partnership Agreement. There is no public market for the Units and it is not anticipated that any such public market will develop. The number of holders of Units as of December 31, 1996 was 2,030. Distributions are made to the Partners on a quarterly basis based upon Net Cash from Operations, as calculated under Section 10 of the Partnership Agreement. Total cash distributions to the Limited Partners for 1996 and 1995 were paid as follows: Date of Quarter Ended ... Payment Amount - ------------------ ----------------- -------- March 31, 1995 ... May 15, 1995 $136,541 June 30, 1995 .... August 15, 1995 $136,541 September 30, 1995 November 15, 1995 $ 91,028 December 31, 1995 February 15, 1996 $ 63,719 March 31, 1996 ... May 15, 1996 $ 63,719 June 30, 1996 .... August 15, 1996 $ 63,719 September 30, 1996 November 15, 1996 $ 63,719 December 31, 1996 February 28, 1997 $ 63,719 ITEM 6. SELECTED FINANCIAL DATA The following selected financial data of the Partnership and consolidated subsidiaries has been derived from consolidated financial statements audited by Coopers & Lybrand, LLP, whose reports for the periods ended December 31, 1996, 1995 and 1994 are included elsewhere in the Form 10K and should be read in conjunction with the full consolidated financial statements of the Partnership including the Notes thereto. Year Ended -------------------------------------------------------------------------- ----------------------------------------------------------- 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92 Rental income $2,427,779 $2,444,585 $2,598,360 $2,441,256 $2,199,937 Net income (loss) $(217,956) $54,619 $227,996 $25,664 ($369,802) Net income (loss) allocated to Partners: Limited Partners - Per Unit Aggregate 36,411 Units $(5.93) $1.47 $6.14 $0.69 ($10.05) General Partners $(2,180) $1,092 $4,560 $513 ($3,698) Cash distributions to Partners: Limited Partners - Per Unit Aggregate 36,411 Units $7.00 $13.75 $19.25 $9.50 $5.25 General Partners $5,202 $10,217 $14,304 $7,059 $3,901 Total assets $18,518,721 $19,144,374 $19,675,617 $20,241,217 $20,640,755 Long term obligations $8,615,326 $8,732,151 $8,838,924 $8,935,644 $9,006,141
Long term obligations become due in 1997. The Partnership intends to refinance this debt prior to the due date. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements including those concerning Management's expectations regarding future financial performance and future events. These forward-looking statements involve significant risk and uncertainties, including those described herein. Actual results may differ materially from those anticipated by such forward-looking statements. Liquidity; Capital Resources At the close of the offering on February 26, 1987, the Partnership had admitted 2,033 Limited Partners who contributed capital of $18,205,500 to the Partnership. These offering proceeds, net of organizational and offering costs of $2,730,825, provided $15,474,675 of net proceeds to be used for the purchase of income-producing residential properties, including related fees and expenses, and working capital reserves. The Partnership has expended $14,277,559 to (i) acquire its joint venture interests in the Canyon View Joint Venture, Broadmoor Pines Joint Venture and Casabella Associates, (ii) pay acquisition expenses, including acquisition fees to one of the General Partners, and (iii) pay certain costs associated with the refinancing of the Canyon View and Broadmoor permanent loans. The Partnership distributed $56,437 to the Limited Partners as a return of capital resulting from excess reserves. The remaining net proceeds of $1,140,679 were used to establish initial working capital reserves. These reserves are used periodically to enable the Partnership to meet its various financial obligations including contributions to the various joint ventures that may be required. Through December 31, 1996, $577,499 cumulatively was contributed to the joint ventures for this purpose. In addition to the proceeds generated from the public offering, the Partnership utilized external sources of financing at the joint venture level to purchase properties. The Partnership Agreement limits the aggregate mortgage indebtedness which may be incurred in connection with the acquisition of Partnership properties to 80% of the purchase price of such properties. The Partnership's future ability to generate cash adequate to meet its needs is dependent primarily on the successful operations of its real estate investments. Such ability may also be dependent upon the future availability of bank borrowings, and upon the future refinancing and sale of the Partnership's real estate investments and the collection of any mortgage receivable which may result from such sales. These sources of liquidity will be used by the Partnership for payment of expenses related to real estate operations, debt service and professional and management fees and expenses. Net Cash From Operations and Net Proceeds, if any, as defined in the Partnership Agreement, will then be available for distribution to the Partners in accordance with Section 10 of the Partnership Agreement. The General Partners believe that the current working capital reserves together with projected cash flows for 1997 are adequate to meet the Partnership's operating cash needs in the coming year. With regard to certain balloon payments on existing first mortgage debt on the Partnership's properties, the General Partners do not anticipate having sufficient cash flow to retire this debt. As these mortgage notes payable are due in fiscal 1997, the Partnership will seek to renegotiate these mortgage notes with its existing lenders or seek new sources of financing for these properties on a long term basis. The General Partners believe that existing cash flows from the properties will be sufficient to support a level of borrowing that is at least equal to amounts outstanding as of December 31, 1996. If the general economic climate for real estate in these respective locations were to deteriorate resulting in an increase in interest rates for mortgage financing or a reduction in the availability of real estate mortgage financing or a decline in the market values of real estate it may affect the Partnership's ability to complete these refinancings. The working capital reserves of the Partnership consisted of cash and cash equivalents and short-term investments. Together these amounts provide the Partnership with the necessary liquidity to carry on its day-to-day operations and to make necessary contributions to the various properties. In 1996, the aggregate net decrease in working capital reserves was $431,972. This decrease resulted primarily from cash provided by operations of $200,326 and $40,017 of distributions from Casabella, offset by $287,833 of fixed asset additions, distributions to partners of $260,079 and $116,825 of principal payments on mortgage notes payable In 1995, the aggregate net decrease in working capital reserves was $189,776. This decrease resulted primarily from cash provided by operations of $508,779 and $15,640 of distributions from Casabella, offset by $98,858 of fixed asset additions, distributions to partners of $510,868 and $106,773 of principal payments on mortgage notes payable. For the year ended December 31, 1996, the Partnership's operating results were comprised of its share of the income and expenses from the Canyon View and Broadmoor Pines joint ventures, the Partnership's share of the income from Casabella Associates, as well as partnership level interest income earned on short term investments, reduced by administrative expenses. A summary of these operating results appears below: Canyon Broadmoor Investment Consolidated View Pines Partnership Totals Total revenue $1,212,061 $1,218,002 $29,545 $2,459,608 Expenses: General and administrative 10 0 245,117 245,127 Operations 684,240 477,662 1,161,902 - Depreciation and amortization 251,459 189,993 441,452 - Interest 466,778 347,028 813,806 - Equity in (income) loss from partnership - - 15,277 15,277 ------------- --------------- --------------- ------------- 1,402,487 1,014,683 260,394 2,677,564 ------------- --------------- --------------- ------------- Net income (loss) ($190,426) $203,319 ($230,849) ($217,956) ============= =============== =============== =============
For the year ended December 31, 1995, the Partnership's operating results were comprised of the income and expenses from the Canyon View and Broadmoor Pines joint ventures, the Partnership's share of the income from Casabella Associates, as well as partnership level interest income earned on short term investments, reduced by administrative expenses. A summary of these operating results appears below Canyon Broadmoor Partnership Consolidated View Pines Level Totals Total revenue $1,303,606 $1,141,950 $51,697 $2,497,253 Expenses: General and administrative 7,208 7,021 163,439 177,668 Operations 597,918 422,394 - 1,020,312 Depreciation and amortization 239,665 183,868 - 423,533 Interest 473,776 350,428 - 824,204 Equity in (income) loss from partnership - - (3,083) (3,083) -------------- -------------- --------------- ------------- 1,318,567 963,711 160,356 2,442,634 -------------- -------------- --------------- ------------- Net income (loss) ($14,961) $178,239 ($108,659) $54,619 ============== ============== =============== =============
For the year ended December 31, 1994, the Partnership's operating results were comprised of the income and expenses from the Canyon View and Broadmoor Pines joint ventures, the Partnership's share of the income from Casabella Associates, as well as partnership level interest income earned on short term investments, reduced by administrative expenses. A summary of these operating results appears below: Canyon Broadmoor Partnership Consolidated View Pines Level Totals Total revenue $1,432,466 $1,167,557 $41,302 $2,641,325 Expenses: General and administrative 7,679 7,534 140,286 $155,499 Operations 578,062 425,718 - $1,003,780 Depreciation and amortization 234,919 187,035 - $421,954 Interest 480,210 353,776 - $833,986 Equity in (income) loss from - - (1,890) ($1,890) partnership ------------ ------------------------------------------- 1,300,870 974,063 138,396 2,413,329 ------------ ------------------------ ---------------- Net income (loss) $131,596 $193,494 ($97,094) $227,996 ============ ======================== ================
Comparison of 1996 and 1995 Operating Results: The total revenue decreased by 2% (37,645),of which $20,839 was due to lower interest income. Rental operating expenses increased $141,590 (14%) due primarily to increases in advertising and promotion, salaries and maintenance and repair costs. Transition costs associated with the outsourcing of much of the Partnership's administration work to an administration agent and the relocation of the remaining administration, financial and investor services functions to a more cost efficient location in Colorado Springs, Colorado has temporarily increased the Partnerships costs. Consequently, the general and administrative expenses of the Partnership increased 38% or $67,459 in 1996 as compared with 1995. Included is a one-time cost of the Evans Withycombe termination ($5,681) and the cost of the Highland termination ($8,683) and its related legal cost were incurred in May, June and July of 1996. (Refer to Note 5 and Note 6 of the Notes to Consolidated Financial Statements). Comparison of 1995 and 1994 Operating Results: The total revenue decreased $144,072, or 5% from the prior year, primarily as a result of lower occupancy at Canyon View and Broadmoor. Broadmoor's occupancy declined during the first quarter of 1995 and improved steadily during the remainder of the year. Canyon View occupancy declined as a result of increased competition from newly developed properties in its immediate market area. This lower occupancy existed through most of 1995, but improved to 92% occupancy. Interest income increased $9,703 or 23% in 1995, as a result of higher interest rates earned on money market accounts and short-term investments. General and administrative expenses increased $22,169 or 14%, due primarily to increased salary expense allocations and printing and mailing costs. Fixed asset purchases increased $91,206 from $7,652 in 1994 to $98,858 in 1995 and included such items as carpet, floor tile and other replacements. As a result of the factors described above, distributions to partners decreased $204,347 from $715,215 in 1994 to $510,868 in 1995. Projected 1997 Operating Results: Although there can be no assurance that the Partnership will dispose of any or all of its properties during 1997, consistent with the Partnership's disposition strategy the Partnership will continue to seek to do so. In the event that the Partnership were to dispose of any property during 1997, operating results of the Partnership would vary significantly from those achieved in prior periods. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Appendix A to this Report. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Partnership has no directors or executive officers. Information as to the General Partners is set forth below: L'Auberge Realty Advisors Stephen B. Boyle, age 56, is President, Executive Officer and Director of L'Auberge Communities, Inc. (formerly Berry and Boyle Inc.) and a general partner and co-founder of LP L'Auberge Communities, a California Limited Partnership (formerly Berry and Boyle), a limited partnership formed in 1983 to provide funds to various affiliated general partners of real estate limited partnerships, one of which is GP L'Auberge Communities, L.P. In September 1995, with the consent of Limited Partners holding a majority of the outstanding Units, as well as the consent of the mortgage lenders for the Partnership's three properties, Richard G. Berry resigned as a general partner of the Partnership. GP L'Auberge Communities, L.P. Information as to the directors and executive officers of L'Auberge Communities, Inc., a general partner of GP L'Auberge Communities, L.P., which is a general partner of the Partnership, and its affiliates, is set forth below. There are no familial relationships between or among any officer and any other officer or director. Name Position Stephen B. Boyle See above Earl C. Robertson Executive Vice President and Chief Financial Officer Donna Popke Vice President and Secretary Earl C. Robertson, age 48, has been a senior development officer, partner and consultant in several prominent real estate development companies for over twenty years, including Potomac Investment Associates, developers of planned golf course communities nationwide. Mr. Robertson was also a key member of the management team that developed the nationally acclaimed Inn at the Market in Seattle. He joined L'Auberge Communities, Inc. in June 1995. Donna Popke, age 37, joined L'Auberge Communities, Inc. in July, 1995 and holds the title of Vice President and Secretary. Prior to joining L'Auberge Communities, Inc., Ms. Popke was employed with Olive & Associates in Denver, Colorado in the field of public accounting for six years and later from 1989 to 1995 with David R. Sellon & Company, a Colorado Springs land development company. ITEM 11. EXECUTIVE COMPENSATION None of the General Partners or any of their officers or directors received any compensation from the Partnership. See Item 13 below with respect to a description of certain transactions of the General Partners and their affiliates with the Partnership. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of March 21, 1997, no person of record owned or was known by the General Partners to own beneficially more than 5% of the Partnership's outstanding Units. Neither of the General Partners nor any of their directors and officers owns Units. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During the year ended December 31, 1996, the Partnership paid or accrued remuneration to the General Partners or their affiliates as set forth below. In addition to the information provided herein, certain transactions are described in Notes 8 and 9 in the Notes to Consolidated Financial Statements appearing in Appendix A, which are included in this report and are incorporated herein by reference thereto. Net Cash From Operations distributed during 1996 to the General Partners $5,202 Allocation of Income (Loss) to the General Partners $(2,180) Property management fees paid to an affiliate of the General Partners $103,969 Reimbursements to General Partners $65,879 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1,2 See Page F-2 3 See Exhibit Index contained herein. (b) Reports on Form 8-K The Partnership has not filed, and was not required to file, any reports on Form 8-K during the last quarter of 1996. (c) See Exhibit Index contained herein. (d) See Page F-2. SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) 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. DEVELOPMENT PARTNERS (A Massachusetts Limited Partnership) By: GP L'Auberge Communities, L.P., a California Limited Partnership, General Partner By: L'Auberge Communities, Inc., its General Partner By: ____/s/ Earl C. Robertson________________ Earl C. Robertson, Executive Vice President and Chief Financial Officer Date: March 26, 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. Signature Title Date ___/s/ Stephen B. Boyle _____ Director, President and March 26, 1997 -------------------- STEPHEN B. BOYLE Principal Executive Officer of L'Auberge Communities, Inc. ___/s/ Earl C. Robertson _ Executive Vice President and March 26, 1997 --------------------- EARL C. ROBERTSON Principal Financial Officer of L'Auberge Communities, Inc. APPENDIX A DEVELOPMENT PARTNERS (A Massachusetts Limited Partnership) AND SUBSIDIARIES --------- CONSOLIDATED FINANCIAL STATEMENTS ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION For the Year Ended December 31, 1996 DEVELOPMENT PARTNERS (A Massachusetts Limited Partnership) AND SUBSIDIARIES ------------- INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Accountants F-3 Consolidated Balance Sheets at December 31, 1996 and 1995 F-4 Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994 F-5 Consolidated Statements of Partners' Equity (Deficit) for the years ended December 31, 1996, 1995 and 1994 F-6 Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 F-7 -- F-8 Notes to Consolidated Financial Statements F-9 -- F-17 All Schedules are omitted as they are not applicable, not required, or the information is provided in the financial statements or the notes thereto. Report of Independent Accountants To the Partners of Development Partners (A Massachusetts Limited Partnership): We have audited the accompanying consolidated balance sheets of Development Partners (A Massachusetts Limited Partnership) and subsidiaries of December 31, 1996 and 1995, and the related consolidated statements of operations, partners' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the General Partners of the Partnership. Our responsibility is to express an opinion on these financial statements 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Development Partners (A Massachusetts Limited Partnership) and subsidiaries as of December 31, 1996 and 1995 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. Denver, Colorado February 28, 1997 DEVELOPMENT PARTNERS (A Massachusetts Limited Partnership) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ---------- F-26 DEVELOPMENT PARTNERS (A Massachusetts Limited Partnership) AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 1996 and 1995 --------------- ASSETS Property, at cost 1996 1995 ---- ---- Land $5,114,512 $5,110,277 Buildings and improvements 15,561,584 15,561,584 Equipment, furnishings and fixtures 1,687,793 1,404,195 -------------- ------------- 22,363,889 22,076,056 Less accumulated depreciation (4,741,203) (4,322,133) -------------- ------------- 17,622,686 17,753,923 Cash and cash equivalents 537,735 532,019 Short-term investments 437,688 - Real estate tax escrows 27,976 29,457 Deposits and prepaid expenses 639 4,168 Due from affiliates (Note 9) 20,631 392 Investment in partnership 293,210 348,504 Deferred expenses, net of accumulated amortization of $298,472 and $276,093 15,844 38,223 -------------- ------------- Total assets $18,518,721 $19,144,374 ============== ============= LIABILITIES AND PARTNERS' EQUITY Mortgage notes payable $8,615,326 $8,732,151 Accounts payable 57,602 88,062 Accrued expenses 164,447 171,283 Due to affiliates (Note 9) 10,680 9,210 Rents received in advance 6,158 0 Tenant security deposits 66,305 67,430 -------------- ------------- Total liabilities 8,920,518 9,068,136 Partners' equity 9,598,203 10,076,238 -------------- ------------- Total liabilities and partners' $18,518,721 $19,144,374 equity ============== =============
DEVELOPMENT PARTNERS (A Massachusetts Limited Partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS for the years ended December 31, 1996, 1995 and 1994 ------------- 1996 1995 1994 ---- ---- ---- Revenue: Rental income $2,427,779 $2,444,585 $2,598,360 Interest Income 31,829 52,668 42,965 -------------- -------------- ------------- 2,459,608 2,497,253 2,641,325 Expenses: Operating Expenses 1,161,902 1,020,312 1,003,780 Interest 813,806 824,204 833,986 Depreciation and amortization 441,452 423,533 421,954 General and administrative 245,127 177,668 155,499 Equity in (income) loss from 15,277 (3,083) (1,890) partnership -------------- -------------- ------------- 2,677,564 2,442,634 2,413,329 -------------- -------------- ------------- Net income (loss) ($217,956) $54,619 $227,996 ============== ============== ============= Net income (loss) allocated to: General Partners ($2,180) $1,092 $4,560 Per unit net income (loss) allocated to Investor Limited Partner interest: 36,411 units issued ($5.93) $1.47 $6.14
DEVELOPMENT PARTNERS (A Massachusetts Limited Partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT) for the years ended December 31, 1996, 1995 and 1994 ------------- Investor Total General Limited Partners' Partners Partners Equity Balance at December 31, 1993 ($57,273) $11,076,979 $11,019,706 Cash distributions (14,304) (700,911) (715,215) Net income 4,560 223,436 227,996 -------------- -------------- ------------- Balance at December 31, 1994 (67,017) 10,599,504 10,532,487 Cash distributions (10,217) (500,651) (510,868) Net income 1,092 53,527 54,619 -------------- -------------- ------------- Balance at December 31, 1995 (76,142) 10,152,380 10,076,238 Cash distributions (5,202) (254,877) (260,079) Net income (loss) (2,180) (215,776) (217,956) -------------- -------------- ------------- Balance at December 30, 1996 ($83,524) $9,681,727 $9,598,203 ============== ============== =============
DEVELOPMENT PARTNERS (A Massachusetts Limited Partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended December 31, 1996, 1995 and 1994 ------------- 1996 1995 1994 ---- ---- ---- Cash flows from operating activities: Interest received $39,411 $56,334 $43,454 Cash received from operating revenue 2,432,812 2,428,669 2,595,917 General and administrative expenses (236,943) (178,114) (147,020) Operating expense (1,220,694) (973,492) (970,827) Interest paid (814,260) (824,618) (834,362) -------------------------------------------- Net cash provided by operating 200,326 508,779 687,162 activities Cash flows from investing activities: Purchase of fixed assets (287,833) (98,858) (7,652) Proceeds from maturities of short-term 430,110 542,101 68,482 investments Deposits 0 5,970 (6,065) Distributions from partnership 40,017 15,640 31,450 -------------------------------------------- Net cash provided by investing 182,294 464,853 86,215 activities Cash flows from financing activities: Distributions to partners (260,079) (510,868) (715,215) Principal payments on mortgage note payable (116,825) (106,773) (96,720) -------------- -------------- ------------- Net cash used by financing activities (376,904) (617,641) (811,935) -------------- -------------- ------------- Net increase (decrease) in cash and cash 5,716 355,991 (38,558) equivalents Cash and cash equivalents at beginning of year 532,019 176,028 214,586 -------------- -------------- ------------- Cash and cash equivalents at end of year $537,735 $532,019 $176,028 ============== ============== =============
DEVELOPMENT PARTNERS (A Massachusetts Limited Partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended December 31, 1996, 1995 and 1994 ------------- Reconciliation of net income (loss) to net cash provided by operating activities: 1996 1995 1994 ---- ---- ---- Net income (loss) ($217,956) $54,619 $227,996 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 441,452 423,533 421,954 Equity in (income) loss from partnership 15,277 (3,083) (1,890) Change in assets and liabilities net of effects of investing and financing activities: Decrease (increase) in real estate tax escrow 1,481 (1,342) (168) Decrease in interest receivable 7,575 3,666 4,669 Decrease in prepaid expenses 3,529 821 - Increase in accounts payable and accrued (37,296) 49,412 29,199 expenses (Decrease) increase in due to (from) affiliates (18,769) (1,718) 22,464 (Decrease) increase in rents received in 6,158 (6,483) (3,440) advance Decrease in tenant security deposits (1,125) (9,433) (14,443) -------------- -------------- ------------- Net cash provided by operating $200,326 $509,171 $687,162 activities ============== ============== =============
1. Organization of Partnership: Development Partners (A Massachusetts Limited Partnership), (the "Partnership"), formerly Berry and Boyle Development Partners, was formed on October 23, 1985. GP L'Auberge Communities, L.P., a California Limited Partnership, (formerly Berry and Boyle Management) and Berry and Boyle Realty Advisors ("Advisors") (A Massachusetts Limited Partnership), are the General Partners. A total of 2,033 individual Limited Partners owning 36,411 Units have contributed $18,205,500 of capital to the Partnership. At December 31, 1996, the total number of Limited Partners was 2,030. Except under certain limited circumstances upon termination of the Partnership, the General Partners are not required to make any additional capital contributions. The General Partners or their affiliates will receive various fees for services and reimbursement for various organizational and selling costs incurred on behalf of the Partnership. The Partnership will continue until December 31, 2010, unless earlier terminated by the sale of all or substantially all of the assets of the Partnership, or as otherwise provided in the Partnership Agreement. 2. Significant Accounting Policies: A. Basis of Presentation The consolidated financial statements include the accounts of the Partnership and its subsidiaries: Canyon View Joint Venture and Broadmoor Pines Joint Venture. All intercompany accounts and transactions have been eliminated in consolidation. The Partnership accounts for its investment in Casabella Associates utilizing the equity method of accounting. The Partnership's investment account is adjusted to reflect its pro rata share of profits, losses and distributions from Casabella Associates. Refer to Note 5 regarding the termination of the Broadmoor Pines Joint Venture, and Note 6 regarding the termination of the Casabella Joint Venture. The Partnership follows the accrual method of accounting. B. Cash and Cash Equivalents The Partnership considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value. It is the Partnership's policy to invest cash in income-producing temporary cash investments. The Partnership mitigates any potential risk from such concentration of credit by placing investments with high quality financial institutions. C. Short-term Investments At December 31, 1995, short term investments consisted solely of various forms of U. S. Government backed securities, with an aggregate par value of $440,000, which matured in February, 1996. As of December 31, 1996, there were no short term investments. Investments are recorded at amortized costs which approximates market value. D. Significant Risks and Uncertainties 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. E. Depreciation Depreciation is provided for by the use of the straight-line method over estimated useful lives as follows: Buildings and improvements 40 years Equipment, furnishings and fixtures 5-15 years F. Deferred Expenses Costs of obtaining various mortgages on the properties are being amortized over the mortgage term using the straight line method, which approximates the effective interest method. G. Income Taxes No provision is made for income taxes since the Partners are required to include on their tax returns their pro rata share of the Partnership's taxable income or loss. If the Partnership's tax returns are examined by the Internal Revenue Service or a state taxing authority, and such an examination results in a change in partnership taxable income or loss, such change will be reported to the Partners. H. Rental Income Leases require the payment of rent in advance, however, rental income is recorded as earned. I. Long-Lived Assets The Partnership's long-lived assets include property and equipment. On a quarterly basis, the Partnership evaluates the recoverability of the rental property using undiscounted cash flow from operation. J. Reclassification Certain items in the financial statements for the years ended December 31, 1995, and December 31, 1994, have been reclassified to conform to the 1996 presentation. 3. Property, at Cost: Property, at cost, consisted of the following at December 31, 1996: Initial Cost Costs Capitalized Gross Amount at Which Carried to Partnership Subsequent to at Close of Period Acquisition -------------------------------------- ------------------------------------------------------------------- Buildings Equipment, Buildings Equipment, Buildings Equipment, Property and Furnishings and Furnishings and Furnishings Description Land Improv. & Fixtures Land Improv. & Fixtures Land Improv. & Fixtures Total - ----------------------------------------------------------- ----------------------------------------------------------------------- Canyon View at Ventana, a 168-unit residential rental complex located in Tucson, AZ $2,932,796 $8,591,969 $719,461 $20,181 $10,095 $189,722 $2,952,977 $8,602,064 $909,183 $12,464,224 Broadmoor, a 108-unit residential rental complex located in Colorado Springs, CO 2,148,811 6,891,420 559,282 12,724 68,100 219,328 2,161,535 6,959,520 778,610 9,899,665 -------------------------------------- --------------------------------------------------------------------- $5,081,607 $15,483,389 $1,278,743 $32,905 $78,195 $409,050 $5,114,512 $15,561,584$1,687,793 $22,363,889 ==================================== ======================================================================= Depreciation expense for the years ended December 31, 1996, 1995 and 1994 and accumulated depreciation at December 31, 1996 and 1995 consisted of the following: Depreciation Accumulated Expense Depreciation 1996 1995 1994 1996 1995 -- ---- ---- ---- ---- ----- ---- ---- Buildings and improvements $379,938 $389,282 $389,039 $3,401,069$3,021,131 Equip., furnishings and fixtures 39,132 9,606 8,270 1,340,134 1,301,002 ------------------------------ ------------------------ $419,070 $398,888 $397,309 $4,741,203$4,322,133 ============================== ========================
Each of the properties is encumbered by a nonrecourse mortgage note payable (see Note 7). 4. Cash and Cash Equivalents: Cash and cash equivalents at December 31, 1996 and 1995 consisted of the following: 1996 1995 -------- -------- Cash on hand .......... $326,649 $130,805 Certificate of deposits 211,086 100,000 Money market accounts . ________ 301,214 -------- $537,735 $532,019 ======== ======== 5. Joint Venture and Property Acquisitions: The Partnership has invested in three properties located in Scottsdale and Tucson, Arizona and Colorado Springs, Colorado. The success of the Partnership will depend upon factors which are difficult to predict including general economic and real estate market conditions, both on a national basis and in the areas where the Partnership's investments are located. The Broadmoor Joint Venture was effectively terminated on December 31, 1996. The Partnership has eliminated the minority interest related to this joint venture, as such, the Partnership owns 100% of the underlying assets as of December 31, 1996. Canyon View On September 29, 1987, the Partnership acquired a majority interest in the Canyon View Joint Venture which owns and operates a 168-unit multifamily residential property located in Tucson, Arizona. The Partnership has been designated as the managing joint venture partner and will control all decisions regarding the operation and sale of the property. In accordance with the terms of the purchase agreement and the joint venture agreement, through December 31, 1996, the Partnership has contributed total capital of $6,889,588 to the Canyon View Joint Venture, which was used to repay a portion of the construction loan from a third party lender, to pay certain costs related to the refinancing of the permanent loan, to cover operating deficits incurred during the lease up period and to fund certain capital improvements. In addition, the Partnership funded $745,902 of property acquisition costs which were subsequently treated as a capital contribution to the joint venture. For the years ended December 31, 1996, 1995 and 1994, the Canyon View Joint Venture had a net loss of $190,426 and $14,961 and net income of $131,596, respectively. Net cash from operations (as defined in the joint venture agreement) will be distributed as available to each joint venture partner not less often than quarterly, as follows: First, to the Partnership until it has received an annual non-cumulative 11.25% priority return on its capital contribution for such year. Second, the balance 75% to the Partnership and 25% to the other joint venture partner. Income from operations will be allocated to the Partnership and the other joint venture partner generally in accordance with the distribution of net cash from operations. Losses from operations will generally be allocated 100% to the Partnership. In the case of certain capital transactions and distributions, as defined in the joint venture agreement, the allocation of related profits, losses and cash distributions, if any, would be different than as described above and would be effected by the relative balances in the individual partners' capital accounts. Broadmoor On October 12, 1988, the Partnership acquired L'Auberge Broadmoor ("Broadmoor") (formerly Broadmoor Pines), a 108-unit residential property located in Colorado Springs, Colorado and simultaneously contributed the property to a joint venture comprised of the Partnership and the property developer (the "Broadmoor Pines Joint Venture"). The Partnership owns a majority interest in the Broadmoor Pines Joint Venture and, therefore, the accounts and operations of the Broadmoor Pines Joint Venture have been consolidated into those of the Partnership. The co-venture partner was Highland Properties, Inc. ("Highland"), a Colorado based residential development, construction and management firm. Highland developed the property known as L'Auberge Broadmoor. Through December 31, 1996, the Partnership has made cash payments in the form of capital contributions totaling $6,051,022 and has funded $684,879 of property acquisition costs which were treated as a capital contribution to the joint venture. For the years ended December 31, 1996 1995 and 1994, the Broadmoor Pines Joint Venture had net income of $203,319, $178,239 and $193,494, respectively. The Partnership has been designated the managing joint venture partner of the Broadmoor Pines Joint Venture and will have control over all decisions affecting the Broadmoor Pines Joint Venture and the property. JANUARY 1, 1996, THROUGH JULY 2, 1996 Net cash from operations (as defined in the joint venture agreement) was to be distributed as available to each joint venture partner quarterly, as follows: First, to the Partnership an amount equal to 11.25% per annum, noncumulative (computed daily on a simple noncompounded basis from the date of completion funding) of its respective capital investment, as defined in the joint venture agreement; Second, the balance 80% to the Partnership, and 20% to the property developer. Losses from operations and depreciation for the Broadmoor Pines Joint Venture were allocated 100% to the Partnership. All profits from operations to the extent of cash distributions shall first be allocated to the Partnership and the property developer in the same proportion as the cash distributions. Any remaining profits are allocated 80% to the Partnership and 20% to the property developer. In the case of certain capital transactions and distributions as defined in the joint venture agreement, the allocation of related profits, losses and cash distributions, if any, would be different than as described above and would be effected by the relative balances in the individual partners' capital accounts. JULY 3, 1996, THROUGH DECEMBER 31, 1996 On July 3, 1996, the Partnership and certain affiliates consummated an agreement with Highland Properties, Inc. ("Highland") which separated the interests of Highland and the Partnership, thus affording the Partnership greater flexibility in the operation and disposition of the property. In consideration of a payment by the Partnership, to Highland totaling $8,683, and delivery of certain mutual releases, Highland (i) relinquished its option to exercise its rights of first refusal with regard to the sale of the property and (ii) assigned all of its interest in the L'Auberge Broadmoor Joint Venture to the Partnership (while preserving the economic interests of the venturer in these Joint Ventures), which resulted in the dissolution of the L'Auberge Broadmoor Joint Venture. Highland may still share in cash flow distributions or proceeds from the sale of the property if certain performance levels are met. 6. Investment in Partnership: On November 5, 1990, the Partnership contributed $400,000 to purchase an approximate 8% interest in Casabella Associates, a general partnership among the Partnership, Development Partners II (A Massachusetts Limited Partnership) ("DPII") and Development Partners III (A Massachusetts Limited Partnership) ("DPIII"). In addition to its contribution referred to above, the Partnership incurred $83,668 of acquisition costs, including $41,400 in acquisition fees paid to the General Partners. The difference between the partnership's carrying value of the investment in Casabella Associates and the amount of underlying equity in net assets is $65,345, representing a portion of the acquisition costs stated above that were not recorded on the books of Casabella Associates. On September 28, 1990, Casabella Associates purchased a majority interest in the Casabella I Joint Venture, an Arizona joint venture that owned and operated Casabella Phase I, a 61-unit residential property located in Scottsdale, Arizona. On April 23, 1991, Casabella Associates, acquired a majority interest in the Casabella Joint Venture which owned Casabella Phase II, a 93-unit residential community, located adjacent to Casabella Phase I. On that date, Casabella Associates and EW Casabella I Limited Partnership contributed their interests in the Casabella I Joint Venture to the Casabella Joint Venture. In addition, the permanent lender funded a $7,320,000 permanent loan, the proceeds of which were used to refinance the $2,700,000 loan pertaining to Phase I and, together with cash contributions of Casabella Associates, to repay the construction loan for Phase II. As a result of such transactions, by operation of law, Casabella Joint Venture, which is comprised of Casabella Associates and EW Casabella I Limited Partnership, now owns both Phases I and II of Casabella. Casabella is now managed and operated as one single 154-unit residential community. On June 30, 1992, Casabella Joint Venture refinanced its original $7,320,000 permanent loan using the proceeds of a new first mortgage loan in the amount of $7,300,000. Under terms of the new note, monthly principal and interest payments of $61,887, based on a fixed interest rate of 9.125%, are required over the term of the loan. The balance of the note will be due on July 15, 1997. As this mortgage note payable is due in fiscal 1997, the Partnership of Casabella will seek to renegotiate this mortgage note with its existing lender or seek new sources of financing for this property on a long term basis. The General Partners of Casabella believe that existing cash flows from the property will be sufficient to support a level of borrowing that is at least equal to the amount outstanding as of December 31, 1996. If the general economic climate for real estate in this location were to deteriorate resulting in an increase in interest rates for mortgage financing or a reduction in the availability of real estate mortgage financing or a decline in the market values of real estate it may affect the Partnership's ability to complete this refinancing. The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a Phoenix based residential development, construction and management firm. EWI is also the developer of the Casabella property. During 1996, 1995 and 1994, the Partnership received $40,017, $15,640 and $31,450, respectively, of cash distributions from Casabella Associates. The consolidated balance sheets of Casabella Associates and Casabella Joint Venture at December 31, 1996 and 1995, are summarized as follows: Assets: 1996 1995 ---- ---- Property, plant and equipment $11,453,820 $11,297,805 Accumulated depreciation (1,996,504) (1,752,197) ----------- ----------- Property, plant and equipment, net 9,457,316 9,545,608 Other assets 294,840 889,237 ----------- ----------- Total assets $9,752,156 $10,434,845 ========= ========== Liabilities and partners' equity: Mortgage note payable 6,885,673 6,994,549 Other liabilities 202,487 125,170 ---------- ---------- Total liabilities 7,088,160 7,119,719 Partners' equity 2,663,996 3,315,126 --------- --------- Total liabilities and partners' equity $9,752,156 $10,434,845 ========= ==========
The elements of the consolidated net income (loss) from Casabella Associates and Casabella Joint Venture for the years ended December 31, 1996, 1995 and 1994 are summarized as follows: Income: 1996 1995 1994 ---- ---- ---- Rental income $1,341,037 1,520,905 $1,486,525 Other income 50,811 103,410 88,580 ------------ ----------- ------------ 1,391,848 1,624,315 1,575,105 Expenses and other deductions: General and administrative 6,223 10,200 10,052 Operations 665,878 561,516 521,969 Depreciation and amortization 266,730 375,234 371,172 Interest 633,360 642,857 651,528 ------------ ---------- ----------- 1,572,191 1,589,807 1,554,721 ----------- --------- --------- Net income (loss) ($ 180,343) $ 34,508 ($ 20,384) ============= =========== ==========
7. Mortgage Notes Payable: All of the property owned by the Partnership is pledged as collateral for the mortgage notes payable outstanding at December 31, 1996 and 1995, which consisted of the following: 1996 1995 ---------- ---------- Canyon View $5,074,647 $5,154,887 Broadmoor . 3,540,679 3,577,264 ---------- ---------- $8,615,326 $8,732,151 Canyon View is subject to a nonrecourse first mortgage in the original principal amount of $5,380,000. Under the terms of the note, monthly principal and interest payments of $45,610, based on a fixed interest rate of 9.125%, are required over the term of the loan. The balance of the note will be due on July 15, 1997. Broadmoor is subject to a nonrecourse first mortgage in the principal amount of $3,650,000. Interest only at the rate of 8% was payable monthly for the first three years of the loan term. Commencing on September 15, 1993 monthly payments of $31,980 including principal and interest, at the rate of 9.75%, were payable. The balance of the note is payable on September 15, 1997. Interest included in accrued expenses on the Balance Sheets of the Consolidated Financial Statements at December 31, 1996 and 1995 consisted of $33,678 and $34,132, respectively. As these mortgage notes payable are due in fiscal 1997, the Partnership will seek to renegotiate these mortgage notes with its existing lenders or seek new sources of financing for these properties on a long term basis. The General Partners believe that existing cash flows from the properties will be sufficient to support a level of borrowing that is at least equal to amounts outstanding as of December 31, 1996. If the general economic climate for real estate in these respective locations were to deteriorate resulting in an increase in interest rates for mortgage financing or a reduction in the availability of real estate mortgage financing or a decline in the market values of real estate it may affect the Partnership's ability to complete these refinancings. The principal balance of the mortgage notes payable appearing on the consolidated balance sheets at December 31, 1996 and 1995 approximates the fair value of such notes. 8. Partners' Equity: Under the terms of the Partnership Agreement profits are generally allocated 98% to the Limited Partners and 2% to the General Partners; losses are allocated 99% to the Limited Partners and 1% to the General Partners. Cash distributions to the partners are governed by the Partnership Agreement and are made, to the extent available, 98% to the Limited Partners and 2% to the General Partners. The allocation of the related profits, losses, and distributions, if any, would be different than described above in the case of certain events defined in the Partnership Agreement, such as the sale of an investment property or an interest in a joint venture partnership. 9. Related Party Transactions: Due to affiliates at December 31, 1996 and 1995 consisted of $10,680 and $9,210, respectively, relating to reimbursable costs due to L'Auberge Communities, Inc. Due from affiliates of $20,631, of which $6,802 consisted of expense reimbursements due from Canyon View West, an affiliate of the general partners. In addition, $13,828 of expense reimbursement is due from Lincoln Residential Services, property manager of an affiliate of the general partners. In 1996, 1995 and 1994, general and administrative expenses included $65,879, $75,552 and $63,300, respectively, of salary reimbursements paid to the General Partners for certain administrative and accounting personnel who performed services for the Partnership. During the years ended December 31, 1996, 1995 and 1994, property management fees of $103,969, $121,209 and $129,737, respectively, had been paid to Residential Services-L'Auberge, formerly Berry and Boyle Residential Services, an affiliate of the General Partners of the Partnership. These fees are 4% of rental revenue in 1996 and 5% of the rental revenue in 1995 and 1994. Rental payments of $18,275 were paid by L'Auberge Communities, Inc. to Broadmoor for two employee apartments. EXHIBIT INDEX Exhibit No. (4)(a)(1) Amended and Restated Certificate and Agreement of Limited Partnership (filed as an exhibit to the Partnership's Registration Statement No. 33-02101, filed December 12, 1985 (the "Registration Statement") and incorporated herein by reference). (4)(a)(3) Fifteenth Amendment to the Amended and Restated Certificate and Agreement of Limited Partnership dated October 29, 1990.(filed as Exhibit 4(a)(3) to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference). (4)(b) Form of Subscription Agreement (filed as an exhibit to the Registration Statement and incorporated herein by reference). (10)(a) Development Agreement among the Partnership, Epoch Properties, Inc. and the Canyon View Joint Venture and exhibits thereto (filed as an exhibit to the Registration Statement and incorporated herein by reference). (10)(b) Documents pertaining to the $4,00,000 permanent loan for the Canyon View Joint Venture (filed as an exhibit to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1989 and incorporated herein by reference). (10)(c) Documents pertaining to the $3,650,000 permanent loan for the Broadmoor Pines Joint Venture (filed as an exhibit to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference). (10)(d) Agreement of Joint Venture of Casabella Associates dated September 27, 1990 (filed as Exhibit 10(f) to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference). (10)(e) Property Management Agreement between Broadmoor Pines Joint Venture and Berry and Boyle Residential Services dated August 1, 1990 (filed as Exhibit 10(k) to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1990 and incorporated herein by reference). (10)(f) Documents pertaining to the $7,300,000 permanent loan for Casabella Joint Venture filed as an exhibit to the Annual Report on Form 10K for the year ended December 31, 1991 for Berry and Boyle Development Partners III and incorporated herein by reference. (10)(g) First Amendment to Joint Venture Agreement of L'Auberge Broadmoor Joint Venture and Related Assignment of Joint Venture Interest. (10)(h) Agreement regarding Casabella Joint Venture (10)(i) Property Management Agreement (Canyon View) dated May 15, 1996, between L'Auberge Communities Inc. and Canyon View Joint Venture. (10)(j) Property Management Agreement (Casabella) dated November 1, 1996, between L'Auberge Communities Inc. and Casabella Associates. (27) Financial Data Schedule EX-10.G 2 FDS -- ASSIGNMENT OF JOINT VENTURE INTEREST (L'Auberge Broadmoor) This Assignment of Joint Venture Interest (this "Assignment") is made as of June __, 1996, by and between Highland Properties, Inc., a Colorado corporation (the "Assigning Venturer"), and Development Partners (A Massachusetts Limited Partnership) formerly known as Berry and Boyle Development Partners (A Massachusetts Limited Partnership) (the "L'Auberge Venturer"), with reference to the following: A. The Assigning Venturer and the L'Auberge Venturer are joint venture partners in that certain Colorado joint venture partnership known as Broadmoor Pines Joint Venture (the "Joint Venture") formed pursuant to that certain Joint Venture Agreement of Broadmoor Pines Joint Venture dated October 12, 1988 (as amended, the "Joint Venture Agreement"). B. The Assigning Venturer desires to assign its entire right, title and interest in the Joint Venture to the L'Auberge Venturer, and the L'Auberge Venturer desires to accept such assignment, on the terms and conditions set forth below. NOW, THEREFORE, in consideration of the foregoing and other valuable consideration (the receipt of which is hereby acknowledged), the parties hereto agree as follows: 1. Assignment of Joint Venture Interest. The Assigning Venturer hereby sells, transfers and assigns to the L'Auberge Venturer, and the L'Auberge Venturer hereby accepts from the Assigning Venturer, all of the Assigning Venturer's right, title and interest in and to its interest in the Joint Venture and in, to and under the Joint Venture Agreement, together with any and all rights (including without limitation all rights to distributions and allocations arising from and after the date hereof) incidental thereto (collectively, the "Interest"). By their execution hereof, the Assigning Venturer and the L'Auberge Venturer waive their respective rights to receive notice of the transfer of the Interest, to invoke restrictions on transfer of such Interest and to withhold approval of such transfer. 2. Acceptance of Assignment. Subject to the provisions of Paragraph 3 below, the L'Auberge Venturer hereby accepts such assignment and assumes and agrees to perform and discharge all joint venture partnership obligations of the Assigning Venturer with respect to the Interest as set forth in the Joint Venture Agreement arising from and after the date hereof. 3. Indemnification. (a) The Assigning Venturer hereby agrees to protect, defend, indemnify and hold the L'Auberge Venturer and the Joint Venture harmless from and against any and all losses, claims, expenses (including reasonable attorneys' fees), damages, liabilities or obligations relating to any act or omission of the Assigning Venturer with respect to the Joint Venture, its business or property, including the multi-family residential project which has been constructed thereon, which arose on or before the effective date of this Assignment. (b) The L'Auberge Venturer hereby agrees to protect, defend, indemnify and hold the Assigning Venturer harmless from and against any and all losses, claims, expenses (including reasonable attorneys' fees), damages, liabilities or obligations relating to any act or omission of the L'Auberge Venturer with respect to the Joint Venture, its business or property, including the multi-family residential project which has been constructed thereon, which arises after the effective date of this Assignment. 4. Representations and Warranties of the Assigning Venturer. The Assigning Venturer hereby represents and warrants as follows: (a) The Assigning Venturer has the legal right and power to enter into this Assignment and, as of the date hereof, has valid title to the Interest, free and clear of any liens, claims or encumbrances. (b)The Assigning Venturer has the legal right and power to sell, assign and transfer the Interest to the L'Auberge Venturer without obtaining the consent of any other person, entity or governmental authority. 5. Representations and Warranties of the L'Auberge Venturer. The L'Auberge Venturer hereby represents and warrants as follows: (a) The L'Auberge Venturer has the legal right and power to enter into this Assignment. (b) The L'Auberge Venturer has the legal right and power to accept the assignment of the Interest and to assume the obligations pertaining thereto without obtaining the consent of any other person, entity or governmental authority. 6. General Terms. (a) The Assigning Venturer hereby agrees to execute and deliver, upon the request of the L'Auberge Venturer, any additional documents or instruments which may be necessary or appropriate to effectuate the transfer of the Interest to the L'Auberge Venturer. (b) All representations, warranties, covenants and agreements of the parties contained in this Assignment or any other document referred to herein shall survive the execution and delivery of this Assignment. (c) This Assignment shall be governed by and construed in accordance with the laws of the State of Colorado, without giving effect to the conflict of laws or choice of law rules or laws of such jurisdiction. IN WITNESS WHEREOF, the parties hereto have executed this Assignment effective as of the date and year first set forth above. "L'Auberge Venturer" "Assigning Venturer" DEVELOPMENT PARTNERS HIGHLAND PROPERTIES, INC., (A Massachusetts Limited Partnership), a Colorado corporation formerly known as Berry and Boyle Development Partners, (A Massachusetts Limited Partnership) By: ______________________ Its: ___________________ By: GP L'Auberge Communities, L.P., a California limited partnership By: ______________________ formerly known as Its: ___________________ Berry and Boyle Management, a General Partner By: L'Auberge Communities Inc., a California corporation formerly known as Berry and Boyle Inc., a General Partner of GP L'Auberge Communities, L.P. By: _____________________ Authorized Representative EX-10.H 3 FDS -- AGREEMENT (Casabella) This Agreement is made and entered into as of March 29, 1996, by and among Casabella Joint Venture, an Arizona joint venture partnership (the "Joint Venture"), Casabella Associates, an Arizona joint venture partnership (the "L'Auberge Venturer"), EW Casabella I Limited Partnership, an Arizona limited partnership (the "EW Venturer") and Evans Withycombe Management, Inc., an Arizona corporation ("Manager"), with reference to the following: A. The L'Auberge Venturer and the EW Venturer formed the Joint Venture by entering into that certain Joint Venture Agreement of Casabella Joint Venture dated October 1, 1990 (as amended, the "Joint Venture Agreement"). The Joint Venture owns that certain multi-family residential project (the "Project") located at 10101 North Arabian Trail, Scottsdale, Arizona, and commonly known as Casabella Apartments. Each of the L'Auberge Venturer and the EW Venturer now desires to effectuate the amicable and mutual dissolution and termination of the Joint Venture through an assignment by the EW Venturer of all of its right, title and interest in the Joint Venture to the L'Auberge Venturer on the terms and conditions hereinafter set forth. B. The Joint Venture and Manager entered into those certain Property Management Agreements (as they may have been amended, the "Property Management Agreement") dated December 29, 1989, and October 3, 1990, with respect to the Project whereby the Joint Venture engaged Manager to manage the Project on the terms and conditions more particularly set forth therein. Each of the Joint Venture and Manager now desires to effectuate the termination of the Property Management Agreement on the terms and conditions hereinafter set forth. C. The Project is encumbered by a Deed of Trust and Security Agreement dated June 25, 1993 (the "Deed of Trust"), securing certain indebtedness of the Joint Venture in favor of The Lincoln National Life Insurance Company ("Lender"). Under the provisions of the Deed of Trust, the Joint Venture is required to obtain Lender's consent to the termination of Manager, and the appointment of a successor, as manager of the Project. D. The L'Auberge Venturer has inspected the Project in order to determine the physical, operational and financial condition thereof and acknowledges that it has approved the result of such inspection except as otherwise provided in Paragraph 4(b) below. E. Concurrently herewith, various other entities affiliated with the L'Auberge Venturer and the EW Venturer are entering into other agreements (collectively, the "Other Agreements") pertaining to other joint ventures and containing substantially the same provisions as this Agreement. The Other Agreements and this Agreement are collectively referred to herein as the "Agreements." The parties contemplate that the closings with respect to each of the Agreements shall be conditions concurrent and shall occur simultaneously. NOW, THEREFORE, in consideration of the foregoing, the parties hereto agree as follows: 1. Termination of Property Management Agreement. (a) At the Closing (hereinafter defined), Manager, on the one hand, and the Joint Venture and the L'Auberge Venturer, on the other hand, shall enter into a Termination Agreement in the form attached hereto as Exhibit A and incorporated herein by this reference, and the Joint Venture shall pay to Manager accrued compensation in accordance with the provisions of the Termination Agreement. (b) Prior to the Closing, Manager shall continue to manage the Project in the same manner and with the same quality as the Project has been managed prior to the execution hereof (and in any event in compliance with the terms and conditions of the Property Management Agreement) and shall be entitled to receive a Property Management Fee in accordance therewith. 2. Termination of Right of First Refusal. At the Closing, the EW Venturer shall terminate its right of first refusal with respect to the Project by executing and delivering that certain First Amendment to Joint Venture Agreement of Casabella Joint Venture (the "Amendment"), in the form attached hereto as Exhibit B and incorporated herein by this reference. 3. Assignment of Joint Venture Interest; Dissolution and Termination of Joint Venture. (a) At the Closing, the EW Venturer shall assign all of its right, title and interest in and to its interest in and to the Joint Venture and in, to and under the Joint Venture Agreement to the L'Auberge Venturer by executing and delivering that certain Assignment of Joint Venture Interest (the "Assignment") in the form attached hereto as Exhibit C and incorporated herein by this reference, except as provided in Paragraph 4(a) below. Following such assignment, the EW Venturer shall have no right to participate in any manner in the management or control of the Joint Venture or the Project and shall be released from any liability with respect to the ownership or operation of the Project accruing and arising from and after the Closing, notwithstanding the provisions of Paragraph 3(b) below. (b) Concurrently with such assignment, the L'Auberge Venturer and the Joint Venture, on the one hand, and the EW Venturer, on the other hand, shall execute and deliver that certain Partnership Interest Payment Agreement in the form attached hereto as Exhibit D and incorporated herein by this reference. (c) Immediately following such assignment, the L'Auberge Venturer shall hold one hundred percent (100%) of the interest in the Joint Venture and shall cause the dissolution and termination thereof by filing or recording such documents (including without limitation a Termination of Certificate of Fictitious Name and Notice of Dissolution of Casabella Joint Venture (the "Termination") in the form attached hereto as Exhibit E and incorporated herein by this reference) and/or taking such other steps as may be necessary or appropriate in that regard. 4. Conditions to Closing. (a)No later than the execution of this Agreement, the Joint Venture shall solicit the consent of Lender to the transactions contemplated hereby to the extent that such consent is required under the Deed of Trust. The Joint Venture and the L'Auberge Venturer shall use reasonable efforts (but shall not be required thereby to incur any material cost or expense) to obtain such consent, to furnish Lender with all required financial or other information requested by Lender in connection with such consent and to obtain a written acknowledgment from Lender that the loan with respect to which such consent is being sought will not continue to apply against Lender's lending limit applicable to Evans Withycombe Management, Inc., an Arizona corporation ("EWM"), or its affiliates following the assignment of the EW Venturer's interest in the Joint Venture to the L'Auberge Venturer and the dissolution of the Joint Venture. The Closing shall be subject to receipt of Lender's written consent pursuant to such solicitation for consent and the written consent of Lender and John Hancock Mutual Life Insurance Company ("John Hancock") pursuant to all similar solicitations being made concurrently herewith by various affiliates of the Joint Venture under the Other Agreements. If such consents shall not have been received by the Joint Venture on or before October 1, 1996 (the "Outside Closing Date"), this Agreement shall terminate without liability of any party to the other hereunder on account of such termination; provided, however, that in the event John Hancock shall have failed or refused to give its consent to any of the other transactions under one or more of the Other Agreements on or before the Outside Closing Date but all other conditions to the Closing hereunder shall have been satisfied, the transactions contemplated hereby shall be consummated as set forth elsewhere in this Agreement. (b) Prior to the execution hereof, the Joint Venture has commenced an evaluation of the environmental condition of the Project. The approval by the Joint Venture of the environmental condition of the Project as disclosed in such evaluation shall be a condition to the Closing unless the Joint Venture waives such condition in writing on or before March 31, 1996. Failure by the Joint Venture to approve the evaluation or waive the condition on or before March 31, 1996, in either case in writing, shall be deemed a disapproval and shall result in a termination of this Agreement without liability of any party to the other hereunder on account of such termination. No partial or condition waivers or approvals shall be made or given. In the event such condition is neither satisfied nor waived on or before March 31, 1996, the Joint Venture shall immediately notify Lender thereof and withdraw its request for consent described in Paragraph 4(a) above. 5. Payment of Settlement Amount. At the Closing, the Joint Venture and the L'Auberge Joint Venturer shall pay, or cause to be paid, to the EW Venturer and to Manager an amount (the "Settlement Amount") which shall be equal to the excess of $500,000 over the aggregate of the Settlement Amounts payable to the EW Venturer and Manager so denominated in the Other Agreements; provided, however, that the total amount payable to EWM under all of the Agreements shall be $500,000. The payment of the Settlement Amount shall be made by confirmed wired funds or cashier's check to EWM, as collection agent for the EW Venturer and Manager. The EW Venturer and Manager, by their execution of this Agreement, hereby appoint EWM to act as their agent for purposes of collecting and distributing the Settlement Amount, and EWM, by its execution of this Agreement, hereby accepts such appointment. 6. Mutual Release. At the Closing, the Joint Venture and the L'Auberge Venturer, on the one hand, and the EW Venturer and Manager, on the other hand, shall execute and deliver that certain Mutual Release in the form attached hereto as Exhibit F and incorporated herein by this reference. 7. Closing. (a) The Closing shall take place at the offices of Ryley, Carlock & Applewhite, at 101 North First Avenue, Suite 2700, Phoenix, Arizona 85003, on the third (3rd) business day following the satisfaction of the conditions to the Closing enumerated in Paragraph 4 above (or waiver of the condition in Paragraph 4(b) above if such condition shall have been waived on or before March 31, 1996) or on such earlier date as may be mutually agreeable to the parties hereto. If such conditions are not satisfied or waived on or before the Outside Closing Date, this Agreement and all obligations of the parties hereto shall automatically terminate and be of no further force and effect. (b) At the Closing, the parties shall cause the following to occur: (i) The Joint Venture, the L'Auberge Joint Venturer and Manager shall each execute and deliver the Termination Agreement. (ii) The L'Auberge Venturer and the EW Venturer shall each execute and deliver the Amendment. (iii) The EW Venture and the L'Auberge Venturer shall each execute and deliver the Assignment. (iv) The L'Auberge Venturer shall execute and deliver the Termination for recordation. (v) The EW Venturer and the L'Auberge Venturer shall each execute and deliver the Partnership Interest Payment Agreement. (vi) The Joint Venture and the L'Auberge Venturer shall deliver or cause to be delivered the Settlement Amount to EWM for the benefit of the EW Venturer and Manager. (vii) The Joint Venture, the L'Auberge Venturer, the EW Venturer and Manager shall each execute and deliver the Mutual Release. 8. Representations and Warranties. (a) The L'Auberge Venturer, for itself and the Joint Venture, represents and warrants to the EW Venturer as follows: (i) Each of the recitals set forth above is true and correct. (ii) The L'Auberge Venturer is the Managing Venturer of the Joint Venture and has not assigned, transferred, encumbered or hypothecated all or any portion of its interest in the Joint Venture. (iii) The Joint Venture and the L'Auberge Venturer each has the legal power and authority, by and through those persons executing this Agreement, to enter into this Agreement and to consummate the transactions contemplated hereby, subject to the receipt of the consent of Lender as provided in Paragraph 4 above. (iv) Each of the Agreements contemplated hereby will when executed be a valid and binding obligation of the Joint Venture and the L'Auberge Venturer and will be enforceable in accordance with its terms, subject to and limited by the effect of applicable bankruptcy, insolvency, fraudulent transfer or conveyance, reorganization, receivership, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights of creditors generally. (v) No consent of any person related to or affiliated with the L'Auberge Venturer which is not party to this Agreement, no consent of any governmental authority and no additional consent other than those which have already been or prior to the Closing will be obtained is required to be obtained in connection with or resulting from the execution, delivery or performance of this Agreement or the agreements contemplated hereby by the L'Auberge Venturer. (vi) The L'Auberge Venturer has not filed nor had filed against it a petition in bankruptcy, made an assignment for the benefit of creditors or had a receiver appointed to take custody of all or substantially all of its assets. (b) The EW Venturer and Manager each represent and warrant to the Joint Venture and the L'Auberge Venturer as follows: (i) Each of the recitals set forth above is true and correct. (ii) The EW Venturer has not assigned, transferred, encumbered or hypothecated all or any portion of its interest in the Joint Venture. (iii) Manager and the L'Auberge Venturer each has the legal power and authority, by and through those persons executing this Agreement, to enter into this Agreement and to consummate the transactions contemplated hereby, subject to the receipt of the consent of Lender as provided in Paragraph 4 above. (iv) Each of the Agreements contemplated hereby will when executed be a valid and binding obligation of Manager and the EW Venturer and will be enforceable in accordance with its terms, subject to and limited by the effect of applicable bankruptcy, insolvency, fraudulent transfer or conveyance, reorganization, receivership, moratorium or other similar laws now or hereafter in effect relating to or affecting the rights of creditors generally. (v) No consent of any person related to or affiliated with the EW Venturer or Manager which is not party to this Agreement, no consent of any governmental authority and no additional consent other than those which have already been or prior to the Closing will be obtained is required to be obtained in connection with or resulting from the execution, delivery or performance of this Agreement or the agreements contemplated hereby by the EW Venturer or Manager. (vi) The EW Venturer has not filed nor had filed against it a petition in bankruptcy, made an assignment for the benefit of creditors or had a receiver appointed to take custody of all or substantially all of its assets. (vii) Neither the EW Venturer nor Manager has any actual knowledge of any fact, condition or circumstance related to the physical, environmental, operational and/or financial condition of the Project that has not been disclosed in previous physical, environmental, operational and/or financial reports prepared for or on behalf of, and delivered to, the Joint Venture. Notwithstanding the foregoing sentence, the representations and warranties of Manager and the EW Venturer contained in this subparagraph (vii) shall not be deemed to modify the provisions of the Property Management Agreement between Manager and the Joint Venture or modify the provisions of any development agreement, development obligations agreement or construction agreement relating to the Project between the EW Venturer, on the one hand, and the Joint Venture or the L'Auberge Joint Venturer, on the other hand, including any express or implied warranties or statutes of limitation relating thereto. (c) The representations and warranties set forth herein have been made as of the date hereof and shall be deemed to have been made as of the Closing and shall survive the Closing. 9. General Provisions. (a) Severability. The provisions of this Agreement shall be deemed severable. If any provision hereof shall be found invalid, illegal, void or unenforceable, in whole or in part, the remaining provisions or portions thereof shall remain in full force and effect to the maximum extent permitted by applicable law. To the maximum extent permitted by applicable law, each party hereby waives any provision of law which renders any provision of this Agreement invalid, illegal, void or unenforceable. (b) Governing Law. This Agreement and all relations of the parties in connection herewith shall be governed by and construed in accordance with the laws of the State of Arizona, without giving effect to the conflict of laws or choice of law rules or laws of such jurisdiction. (c) Attorneys' Fees and Costs. In the event any party fails to perform any of its obligations under this Agreement or in the event a dispute arises concerning the meaning or interpretation of any provision of this Agreement, the defaulting party or the party not prevailing in such dispute, as the case may be, shall pay any and all costs and expenses incurred by the other party in enforcing or establishing its rights hereunder, including, without limitation, court costs and reasonable attorneys' fees. The prevailing party shall include, without limitation, (i) a party who dismisses an action in exchange for sums allegedly due, (ii) the party who received performance from the other party where such performance is substantially equivalent to the relief sought in an action, or (iii) the party determined to be the prevailing party by a court of law, and the "party not prevailing" shall be the other party. (d) Successors and Assigns. This Agreement set forth herein shall be binding upon, and inure to the benefit of, any successors and assigns of the parties. (e) Entire Agreement; Modification. This Agreement set forth herein, together with the schedules and exhibits attached hereto, shall constitute the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior negotiations and agreements with respect to the subject matter hereof. This Agreement may be modified only by an instrument in writing duly executed by the party sought to be bound by such modification. (f) Waivers. No breach of any covenant, condition, agreement, warranty or representation made in this Agreement shall be deemed waived unless expressly waived in writing by the party who might assert such breach. Any such waiver may be made in advance or after the right waived has arisen or the breach or default waived has occurred. Any such waiver may be conditional. No such waiver shall be deemed to be a waiver of any other matter, whenever occurring and whether identical, similar or dissimilar to the matter waived. (g) Notices. All notices required or permitted by this Agreement shall be in writing and may be delivered in person (by hand or by messenger or courier service) or may be sent by regular certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission, and shall be deemed sufficiently given if served in a manner specified in this Paragraph 9(g). The address of the L'Auberge Venturer and the Joint Venture for notice purposes shall be as follows: Mr. Stephen B. Boyle Canyon View Apartments 6655 Canyon Crest Drive Tucson, Arizona 85750 Attention: Rental Office Facsimile No.: (520) 577-6703 With a copy to: Hughes Hubbard & Reed 350 South Grand Avenue, Suite 3600 Los Angeles, California 90071-3442 Attention: George A. Furst, Esq. Facsimile No.: (213) 613-2950 The address for the EW Venturer and Manager for notice purposes is as follows: Evans Withycombe Management, Inc. 6991 East Camelback Road, Suite 200A Scottsdale, Arizona 85251 Attention: Stephen Evans Facsimile No.: (602) 423-8843 With a copy to: Ryley, Carlock & Applewhite 101 First Avenue, Suite 2600 Phoenix, Arizona 85003-1973 Attention: Lynn T. Ziolko, Esq. Facsimile No.: (602) 257-9582 Either party may by written notice to the other specify a different address for notice purposes. A copy of all notices required or permitted to be given to either party hereunder shall be concurrently transmitted to such party or parties at such addresses as either party may from time to time hereafter designate by written notice to the other. Any notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given forty-eight (48) hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by U.S. Postal Service Express Mail or overnight courier that guarantees next day delivery shall be deemed given twenty-four (24) hours after delivery of the same to the United States Postal Service or courier. If any notice is transmitted by facsimile transmission or similar means, the same shall be deemed served or delivered upon telephone confirmation of receipt of the transmission thereof, provided that a copy is also delivered by delivery or mail. If any notice is received on a Saturday, Sunday or legal holiday, it shall be deemed received on the next business day. (h) Further Agreements and Assurances. Each party agrees promptly to execute and deliver such other documents and to do such other acts as may be requested by any other party and are in the reasonable judgment of the requesting party necessary or appropriate to effectuate the purposes of this Agreement. (i) Headings; Gender; Number. The headings of the sections and subsections herein are inserted for convenience of reference only and are not intended to be a part of, or to affect the meaning or interpretation of, this Agreement. As used herein and as the context requires, a reference to the male, female or neutral gender includes a reference to each other gender, and a reference to the singular or plural number includes a reference to the other number. (j) Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and each of which shall be deemed to constitute an original. (k) Default; Specific Performance. In the event that a party shall default in the performance of any of its obligations or agreements hereunder, the other party shall be entitled to specific performance of such obligations and agreements by the defaulting party, in addition to any and all other equitable and legal rights and remedies which such non-defaulting party may have. (l) No Admission. The parties hereto have entered into this Agreement and entered into the negotiations that led to this Agreement, solely for the purpose of compromising and settling various matters in dispute among the parties. This Agreement, and the settlement negotiations that led to this Agreement, however, shall not constitute an admission of any liability or responsibility by any party as to any matter relating to the Joint Venture or the Project. (m) Nondisclosure of Terms. Each of the parties hereto hereby agrees not to disclose the terms of this Agreement or the transactions contemplated hereby to any person or entity (other than its respective partners, affiliates, underwriters, agents, advisors, officers or employees who need to know such information for the purpose of entering into and performing the obligations under this Agreement or any other person or entity to whom such disclosure is required by law), except (i) with the prior written consent of each of the other parties hereto, (ii) in connection with any required financial accounting or other required reporting or legal proceedings brought by any of the parties hereto or their respective affiliates to enforce this Agreement or (iii) in compliance with applicable legal requirements. (n) Simultaneous Closing. Notwithstanding anything contained in this Agreement or any of the Other Agreements to the contrary, the Closing shall not occur unless there occurs the simultaneous closing of the transactions described in the Other Agreements. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. CASABELLA JOINT VENTURE, an Arizona joint venture partnership By: Casabella Associates, Managing Venturer By: Development Partners III (A Massachusetts Limited Partnership) By: GP L'Auberge Communities, L.P., a California limited partnership, General Partner By: L'Auberge Communities Inc., General Partner By: ____________________ Stephen B. Boyle President CASABELLA ASSOCIATES, an Arizona joint venture partnership By: Development Partners III (A Massachusetts Limited Partnership) By: GP L'Auberge Communities, L.P., a California limited partnership, General Partner By: L'Auberge Communities Inc., General Partner By: ____________________ Stephen B. Boyle President [signatures continued.] EW CASABELLA I LIMITED PARTNERSHIP, an Arizona limited partnership By: EWI Management, Inc., an Arizona corporation, its general partner By: ________________________ Name: __________________ Title:__________________ EVANS WITHYCOMBE MANAGEMENT, INC., an Arizona corporation formerly known as Evans Withycombe, Inc. By: ____________________________ Name: ______________________ Title:______________________ The undersigned accepts its appointment as collection agent pursuant to Paragraph 5 above: EVANS WITHYCOMBE MANAGEMENT, INC., an Arizona corporation By: Name: Title: EX-10.J 4 FDS -- PROPERTY MANAGEMENT AGREEMENT (Casabella) THIS AGREEMENT is made as of this 1st day of November, 1996, by and between L'AUBERGE COMMUNITIES INC., a California corporation ("Agent"), and CASABELLA ASSOCIATES, an Arizona joint venture partnership ("Owner"), with reference to the following: A. Owner owns certain real property located in Scottsdale, Arizona, as more particularly described on Exhibit "A" attached hereto (the "Site"), upon which 154 apartment units (the "Units") have been constructed. (The Site, Units and all improvements relating to or connected with the Units, together with all appurtenances, fixtures and equipment and all rights and privileges now or hereafter contained in, belonging to or in any way pertaining or beneficial to any of the foregoing, whether or not attached to the Site or the Units, are sometimes hereinafter collectively referred to as the "Property.") B. Agent possesses the organization and skills necessary to discharge its obligations hereunder. C. Owner desires to employ Agent, and Agent desires to be employed by Owner, for the orderly management and operation of the Property on the terms and conditions set forth below. NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows: 1. Appointment of Manager. Owner hereby appoints Agent as Owner's exclusive representative, manager and agent for the purposes of managing, maintaining, and operating the Property for the account of Owner during the term of this Agreement and upon the terms and conditions set forth below. 2. Term. The term of this Agreement shall commence on the date first set forth above (the "Commencement Date") and Agent's obligations ("Agent's Management Obligations") pursuant to this Agreement shall expire in accordance with the provisions of Paragraph 9 below. 3. Agent's Duties. a. Agent agrees to perform the following duties on behalf of Owner: (i) To accept and does hereby accept the management of the Property for the period and upon the terms herein provided, and agrees to furnish the services of its organization for the renting, operating and managing of the Property, and to do and perform any and all things in and about the management, maintenance and operation of the Property customarily performed by agents of similar properties, in a professional, reasonable, effective and efficient manner, subject however to the provisions of Section 3(d) below; (ii) [Intentionally deleted]; (iii) To aid, assist and cooperate in the matter of real property taxes and insurance claim adjustments; (iv) Subject to the provisions of Paragraph 8 below, to care for, place and supervise all insurance coverage; (v) Subject to the provisions of Paragraph 8 below, to render on or before the tenth (10th) day of each calendar month during the term hereof, statements of receipts, expenses and charges for the previous calendar month; (vi) [Intentionally deleted]; (vii) To hire, discharge and supervise all labor and employees ("Project Personnel") required for the operation and maintenance of the Property (exclusive of employees retained to undertake the activities described in Section 3(d) below), it being agreed that all employees shall be deemed to be employees of Agent and not of Owner, and that Agent may perform its duties through its attorneys, agents and employees holding such licenses as may be necessary or appropriate for the performance of such duties, but shall not be responsible for their acts, defaults and negligence if reasonable care has been exercised in their appointment, supervision and retention; (viii) To pay all expenses, including without limitation mortgage payments, real estate and personal property taxes, insurance premiums, licenses, fees and payroll taxes and other obligations of Owner, incurred in connection with the Property during the term of this Agreement, prior to their due dates; (ix) To account for all deposits received from tenants, and the excess of operating revenues over the sum of operating expenses plus reserves established by Owner (or as otherwise approved from time to time by Owner, provided that in any event such amount shall not be less than the amount reasonably sufficient to pay all accounts payable of the Property), to Owner; and (x) To enter into any laundry, laundry machine and/or vending machine leases and other personal property leases. b. Agent shall establish operating procedures and policies necessary to perform Agent's Management Obligations under this Agreement. c. Agent shall be authorized to make contracts for electricity, gas, fuel, water, telephone, sweeping, cleaning and other similar services or such of them as Agent, in its discretion, shall deem advisable. d. Notwithstanding anything contained in this Section 3 or elsewhere in this Agreement to the contrary, Agent shall not be responsible for, nor shall Agent perform, any of the activities described in Arizona Revised Statute ss. 32-2101.32, or any successor statute, which activities require an Arizona real estate broker's or salesperson's license. These activities presently include without limitation renting, offering to rent, or negotiating the rental of real estate and collecting rents for the use of real estate. Owner acknowledges that Agent does not have a real estate license in Arizona. Owner and Agent further acknowledge that any natural person hired to undertake such activities for the Property pursuant to A.R.S. ss. 32-2121.A.7 shall be employed directly by Owner and shall be compensated directly by Owner. 4. Compensation. During the term hereof, Owner agrees to pay to Agent on the first day of each month a management fee (the "Property Management Fee") equal to 4% of rents collected in the preceding month (including forfeited security deposits and nonrefundable deposits and fees) as long as Agent's Management Obligations have not been terminated, as compensation for Agent's management services hereunder. 5. Operating Budget; Accounting. a. Agent shall prepare an operating budget for the Property for each calendar year during the term of this Agreement. Such operating budget shall be prepared in consultation with Owner. b. All monthly accounting functions for the Property, including without limitation rent collection and the processing and payment of accounts payable of the Property but excluding rent collection, shall be the responsibility of Agent at Agent's sole cost and expense. 6. Bank Account. Agent shall establish and maintain a separate trust account in the name of Owner for the deposit of all monies collected from or in connection with the operation of the Property. Agent shall have the authority to draw on this account for any payments which Agent may make solely for the discharge of any liabilities or obligations incurred pursuant to this Agreement, and for the payment of the Property Management Fee, all of which payments shall be subject to the limitations of this Agreement. 7. Records; Reports; Meetings; Remittance. a. Agent shall maintain books of account on all receipts and disbursements incurred in the management and operation of the Property, which records shall, at all reasonable times, be open to inspection by Owner without prior notice. b. During the term of this Agreement, Agent shall furnish to Owner, the following written reports: (i) On a monthly basis, not later than ten (10) days following the end of each calendar month, a detailed cash operating report, showing all receipts and disbursements for the previous month; and (ii) On a monthly basis, not later than ten (10) days following the end of each calendar month, a recapitulation of delinquent rents and a rent roll. c. All net cash flow from operations of the Property, after establishment of Property operating reserves, shall be remitted to Owner by the tenth (10th) day of the following calendar month. 8. Property Personnel; Insurance. a. Subject to the provisions of Paragraph 3(a)(vii) above, Agent shall hire or discharge on behalf of Owner all Property Personnel required for the operation and maintenance of the Property exclusive of employees retained to undertake the activities described in Section 3(d) above. b. Owner shall maintain public liability insurance and have Agent named as an additional insured in all such policies. The maintenance of other insurance in connection with the Property shall be the responsibility of Owner, but, upon the request of Owner, shall be supervised and implemented by Agent, as hereinabove provided. 9. Termination. Agent's Management Obligations may be terminated or modified at any time as provided below: a. If Owner shall sell or otherwise transfer title to the Property (except in connection with a reorganization of Owner): (i) Agent's Management Obligations shall automatically terminate as of the date of closing of such sale or transfer; and (ii) Owner shall pay to Agent any accrued but unpaid Property Management Fees owing to Agent pursuant to this Agreement up to the date of closing of such sale or transfer. b. Either party shall have the right, by giving written notice to the other party, to terminate Agent's Management Obligations without cause effective upon thirty (30) days prior written notice and with cause effective immediately upon delivery. c. In the event Agent's Management Obligations are terminated pursuant to Paragraph 9.b. above, Agent's right to receive the Property Management Fee shall terminate as of the effective date of such termination. For purposes hereof, "cause" shall mean, in addition to any material default or breach by Agent under this Agreement, any act or omission which constitutes negligence, willful malfeasance or fraud. 10. Settlement. Upon the expiration or sooner termination of Agent's Management Obligations, or in the event that, by mutual agreement of the parties, on-site management of the Property is delegated to a third party: a. Agent shall deliver and transfer to Owner or Owner's designee all books, records, agreements, documents and instruments of whatsoever nature pertaining to the Property maintained by Agent on behalf of Owner other than those maintained by Agent in the course of its own day-to-day business, and shall pay over to Owner or its designee all sums arising out of the operation of the Property from the commencement of business operations thereat, including, without limitation, all advance rent, security deposits, unused cleaning fees and the like, less permitted expenses actually paid by such transferring party; b. Owner shall pay to Agent any sums for which Agent is then entitled to reimbursement hereunder, including those which Agent may have theretofore advanced on behalf of Owner and for which Agent shall not have theretofore received reimbursement. 11. Reimbursement. Owner agrees to promptly reimburse Agent for any monies that Agent may advance on behalf of or for the benefit of the Property or Owner if such reimbursement may not reasonably be made from funds from the Property. Notwithstanding the foregoing, Agent shall not be obligated to make any such advances for the benefit of the Property or Owner. 12. Indemnity. Owner hereby indemnifies and agrees to hold Agent harmless from and against any and all suits, claims or costs incurred by Agent in any actions brought by third parties in connection with the management of the Property or this Agreement, and from any liability or injury suffered by third parties in or on the Property, except for any such suits, claims or costs which arise from or relate to any act or omission of Agent or its employees which constitutes negligence, willful malfeasance or fraud, as to which Agent shall indemnify and hold Owner harmless. 13. Notices. All notices required to be given by either party to the other shall be in writing and shall be deemed to have been properly given and delivered when deposited in the United States mail, sent certified or registered, return receipt requested, postage prepaid, or by commercial air courier, addressed to the parties as follows: If to Owner: c/o L'Auberge Communities Inc. 5110 Langdale Way Colorado Springs, Colorado 80906 Attention: Stephen B. Boyle With a copy to: Hughes Hubbard & Reed LLP 350 South Grand Avenue, Suite 3600 Los Angeles, California 90071-3442 Attention: George A. Furst, Esq. If to Agent: L'Auberge Communities Inc. 5110 Langdale Way Colorado Springs, Colorado 80906 Attention: Stephen B. Boyle With a copy to: Hughes Hubbard & Reed LLP 350 South Grand Avenue, Suite 3600 Los Angeles, California 90071-3442 Attention: George A. Furst, Esq. Such notices shall be effective upon delivery if delivered in person and either upon actual receipt or three (3) days after mailing, whichever is earlier, if delivered by mail. 14. Entire Agreement. Except as otherwise specifically set forth herein, this Agreement is the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements between the parties with respect thereto. There have been no representations or warranties by either party to the other except as expressly contained herein. No claim of waiver, modification, consent or acquiescence with respect to any provision of this Agreement shall be made against either party except on the basis of a written instrument executed by or on behalf of such party. 15. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties hereto. Agent may not assign any of its rights, or delegate any of its duties, under this Agreement without the prior written consent of Owner. 16. Exhibits. All Exhibits referred to in this Agreement are expressly incorporated herein by reference as though set forth in full. 17. Paragraph Headings. The headings of the several paragraphs of this Agreement are inserted solely for convenience of reference and are not a part of and are not intended to govern, limit or aid in the construction of any term or provision thereof. 18. Time. Time is of the essence in the performance of this Agreement. 19. Authority. All parties to this Agreement warrant and represent that they have the power and authority to enter into this Agreement in the names, titles and capacities herein stated and on behalf of any entities, persons, estates or firms represented or purported to be represented by such persons, and shall deliver to the other party such corporate resolutions, powers of attorney and such other documents or instruments as shall be reasonably necessary to evidence such authority. 20. Governing Law. This Agreement is to be governed by and construed in accordance with the laws of the State of Arizona. IN WITNESS WHEREOF, the parties hereto have executed this Agreement, effective the day and year first above written. AGENT: OWNER: L'AUBERGE COMMUNITIES INC., CASABELLA ASSOCIATES, a California corporation An Arizona Joint Venture Partnership By: By: Development Partners III Stephen B. Boyle (A Massachusetts Limited Partnership) President By: GP L'Auberge Communities II L.P., a California limited partnership, General Partner By: L'Auberge Communities Inc., General Partner By: ___________________ Stephen B. Boyle President EX-27 5 FDS --
5 YEAR DEC-31-1996 DEC-31-1996 537,735 0 20,631 0 0 0 22,363,889 (4,741,203) 18,518,721 305,192 0 0 0 0 9,598,203 18,518,721 0 2,427,779 0 0 1,863,758 0 813,806 0 0 0 0 0 0 (217,956) 0 0
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