-----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, J0IAGIvTy22AHBHbFRqZRf9hCh4q2nCTLPQOyiuLlxjypIEvj3osR8WPXqTfovuw gY5ApjCWLGbmB29f9/FKyQ== 0000928790-98-000041.txt : 19980331 0000928790-98-000041.hdr.sgml : 19980331 ACCESSION NUMBER: 0000928790-98-000041 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980330 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STAMFORD TOWERS LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0000799149 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 133392080 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-16536 FILM NUMBER: 98578239 BUSINESS ADDRESS: STREET 1: 3 WORLD FINANCIAL CENTER 29TH FLOOR STREET 2: C/O SHEARSON LEHMAN BROTHERS INC CITY: NEW YORK STATE: NY ZIP: 10285 BUSINESS PHONE: 212526-323 MAIL ADDRESS: STREET 1: 31 ST JAMES ST STREET 2: 6TH FLOOR CITY: BOSTON STATE: MA ZIP: 02117 FORMER COMPANY: FORMER CONFORMED NAME: SHEARSON LEHMAN DEVELOPMENT FUND I LTD PARTNERSHIP DATE OF NAME CHANGE: 19861015 10-K 1 UNITED STATES 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 For the fiscal year ended December 31, 1997 or Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number: 33-8105 STAMFORD TOWERS LIMITED PARTNERSHIP and STAMFORD TOWERS DEPOSITARY CORP. Exact name of registrant as specified in its charter State or other jurisdiction of incorporation I.R.S. Employer Identification No. or organization Stamford Towers Limited Partnership - Delaware 13-3392080 Stamford Towers Depositary Corp. - Delaware 13-3392081 Attention: Andre Anderson 3 World Financial Center, 29th Floor, New York, New York 10285 Address of principal executive offices Zip Code Registrant's telephone number, including area code: (212) 526-3237 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Depositary Units of Limited Partnership Interest Title of Class Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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 the 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 stock held by non-affiliates of the Registrant - Not Applicable Documents Incorporated by Reference: Portions of Parts I, II, III, IV are incorporated by reference to the Partnership's Annual Report to Unitholders for the year ended December 31, 1997. PART I ITEM 1. Business (a) General Development of Business. Stamford Towers Limited Partnership (the "Partnership") is a Delaware limited partnership which was formed on August 14, 1986. The general partner of the Partnership is Stamford Towers Inc., a Delaware corporation (the "General Partner") and an affiliate of Lehman Brothers Inc. The sole limited partner of the Partnership is Stamford Towers Depositary Corp., a Delaware corporation (the "Assignor Limited Partner") and also an affiliate of Lehman Brothers Inc. The control and management of the Partnership's business and affairs are vested solely in the General Partner. On November 19, 1986, the Partnership began an offering of 7,826,300 depositary units ("Units") representing assignments of the limited partnership interests in the Partnership. The offering was on a "best efforts" basis through Shearson Lehman Brothers Inc. ("Shearson") at a price of $10 per Unit. On June 30, 1987, a supplement to the prospectus for the offering of the Units was issued for the purpose of updating, modifying and amending certain information contained in the original prospectus. On July 30, 1987, the Partnership commenced operations with the acceptance of subscriptions for 4,562,075 Units ($45,620,750). The remaining Units were sold pursuant to eight additional Partnership closings occurring on a monthly basis from August 1987 through March 1988. Net proceeds to the Partnership from the public offering of the Units were $71,808,474, after deducting offering and organizational costs and setting aside funds for a working capital reserve. The Partnership was formed to acquire, construct, develop, own and operate two parcels of land totaling approximately 3.63 acres located in the central business district of Stamford, Connecticut (the "Land") and two commercial office buildings together with ancillary facilities (the "Buildings") constructed thereon which contain 325,416 net rentable square feet (the Land and the Buildings are collectively referred to as the "Property"). See Item 2. The Partnership entered into a development agreement dated September 17, 1986 as modified by a modification dated June 5, 1987 (collectively, the "Development Agreement") with an unaffiliated party, Edlar, Inc., a Delaware corporation (the "Developer"), pursuant to which the Developer agreed to convey the Land to the Partnership and construct the Buildings. Under the terms of the Development Agreement, the Developer was obligated, among other things, to (1) cause substantial completion of the Buildings to occur within 550 days of the commencement of construction (subject to extensions for force majeure work delays and approved change orders), (2) complete construction of the Buildings for a guaranteed maximum cost (including Land and Miscellaneous carrying costs) of $59,384,922 (subject to increases attributable to approved change orders and costs resulting from force majeure work delays) and (3) complete the tenant finish pursuant to a standard work letter for all initial leases entered into prior to the date 550 days after substantial completion of the Buildings, for a guaranteed maximum cost. The Developer, in connection with carrying out its construction obligations under the Development Agreement, entered into a construction management agreement dated May 28, 1987 with Gilbane Building Company ("Gilbane"), a Rhode Island corporation, and assigned a construction supervisor to the Property to work with Gilbane. Edward Feldman, the principal shareholder of the Developer, executed a personal guaranty in favor of the Partnership (the "Guaranty"), guaranteeing the Developer's payment obligations under the Development Agreement, including those relating to failure to complete performance of the work in a timely fashion and funding of cost overruns. In the Guaranty, Mr. Feldman agreed to maintain a personal net worth of at least $15,000,000 for so long as his obligations thereunder remained outstanding. Because of Mr. Feldman's substantial financial commitments with respect to other projects, as well as his substantial contingent liabilities, it was understood that there could be no assurance that Mr. Feldman would be able to make any required payments under the Guaranty. Construction of the Buildings commenced in July 1987. Certificates of Occupancy were not received from the City of Stamford until February 1990, representing a substantial delay from the originally scheduled completion date of February 1989. Moreover, during the course of the construction, substantial cost overruns were incurred. Because the Developer denied responsibility for the delays and overruns, the Partnership commenced an arbitration in January 1989 to resolve the dispute. In the arbitration, the Partnership contended that the Developer was responsible for all cost overruns (except for the cost of three approved change orders which represented a total cost of less than $20,000) incurred in connection with the construction of the buildings. In addition, the Partnership contended that the Developer was obligated to make certain liquidated damage payments as a result of the unjustified delays in the completion of construction, and that the Developer's failure to make those payments entitled the Partnership to terminate the Developer. The Developer, in turn, filed numerous claims against the Partnership principally designed to establish the Partnership's responsibility for the cost overruns incurred on the Property. Because of the delays and cost overruns which occurred in the course of construction of the Buildings, funds in addition to those budgeted were required to complete the construction of the Buildings. Furthermore, due to soft market conditions in Stamford, additional funds have been required to fund increases in the Partnership's leasing budget. Accordingly, on July 19, 1990, the Partnership closed a mortgage loan (the "Financing") with People's Bank ("People's") to provide mortgage financing to the Partnership. The Financing consisted of a $25 million, seven-year, revolving loan payable, secured by a non-recourse first mortgage on the Property. On February 17, 1994, the Partnership entered into a loan modification agreement with People's (the "First Loan Modification"), which reduced the interest rate on the loan, reduced the principal balance and eliminated the interest reserve line item. On May 15, 1997, the Partnership entered into a second modification of the mortgage loan with People's (the "Second Loan Modification") which, among other provisions, extended the maturity date until June 1, 2004, split the mortgage into two components and established certain escrows. For the terms of the First and Second Loan Modifications, see Note 7 to the Financial Statements contained in the Partnership's 1997 Annual Report to Unitholders, incorporated herein by reference to Exhibit 13 in Item 14. As of December 31, 1997, the principal balance of the loan was $18,365,631 plus interest payable of $116,775 for a total balance of $18,482,406. (b) Financial Information About Industry Segments. The Partnership's sole business is the ownership and operation of the Property. All of the Partnership's revenues, operating profit or loss and assets relate solely to its interest as the owner of the Property. (c) Narrative Description of Business. The Partnership's sole business is the ownership and operation of the Property. The principal objectives of the Partnership, in no particular order of priority, are to: (i) provide long-term capital appreciation; (ii) provide cash distributions from operations following lease-up of the Property subsequent to the repayment of the Financing; and (iii) preserve and protect Partnership capital. There can be no assurance that the Partnership will achieve its objectives. During the third quarter of 1997, the General Partner decided to commence marketing the Property for sale. This determination was made after consideration of a number of factors including, among others, the following: the recently improved operating performance of the Property; the overall health of the economy; the strengthening of national real estate and capital markets; and a number of proposals for the new development of buildings in Stamford that, if completed, would directly compete with the Property. On March 17, 1998, the Partnership entered into an agreement to sell the Property (the "Purchase Agreement") to Reckson Operating Partnership, L.P. (the "Buyer"), a Delaware limited partnership unaffiliated with the Partnership. Pursuant to the terms of the Purchase Agreement, the Buyer agreed to acquire the Property for consideration in the amount of $61,315,000 in cash (the "Purchase Price"), subject to adjustments in respect of certain closing costs (the "Sale"). The proposed Sale is subject to the satisfaction of certain conditions. Pursuant to the terms of the Partnership Agreement, Limited Partners holding a majority of limited partnership interests will have the right to disapprove of the Sale. An information statement will be mailed to the Limited Partners shortly detailing information concerning the proposed Sale and subsequent distribution by the Partnership. There can be no assurance that the Sale will be completed. Upon completion of the sale of the Property, the General Partner intends to dissolve the Partnership and will make one or more liquidating distributions in accordance with the terms of the Partnership Agreement. It is anticipated, however, that certain reserves will need to be maintained for a period of time following the sale of the Property for certain contingent liabilities of the Partnership. The Partnership has no employees. Until October 1996, full-time property management services were provided by CB Commercial Real Estate Group Inc. In October 1996, the Partnership changed property management firms to Rostenberg-Doern & Company, which also serves as the Property's exclusive leasing agent. In March 1997, Rostenberg-Doern & Company was acquired by the Edward S. Gordon Co., which is owned by Insignia Financial Group, Inc., and the name of the firm was changed to Insignia/ESG. ITEM 2. Properties The Land has been developed with two architecturally integrated, 11-story, multi-tenant office buildings (comprised of four levels of parking and seven levels of office space), one of which contains approximately 192,939 square feet of rentable floor space (the "North Tower"), and the other of which contains approximately 132,477 square feet of rentable floor space (the "South Tower"). The Partnership owns no real property other than the Land and the Buildings. A 3,000 square foot cafeteria available for the use of all tenants was completed in December 1990 on the 5th floor of the North Tower. Leasing Status The Property's overall occupancy was 79% at December 31, 1997, compared to 72% at December 31, 1996. A breakdown of the Property's tenants, occupied square footage and leasing activity during 1997 is incorporated herein by reference to the "Property Profile" section of the Partnership's 1997 Annual Report to Unitholders contained in Exhibit 13 under Item 14. Citicorp North America, Inc. ("Citicorp") leases approximately 136,000 rentable square feet in the Property's North Tower. For information regarding the lease with Citicorp, refer to Note 5 "Lease Agreement with Citicorp North America, Inc." of the Notes to the Financial Statements of the Partnership's 1997 Annual Report to Unitholders, contained in Exhibit 13 under Item 14. ITEM 3. Legal Proceedings The Partnership had been involved in litigation with the Property's former construction manager, Gilbane Building Company ("Gilbane"), and a subcontractor, Moliterno Stone Sales, Inc. ("Moliterno"). In this suit, Gilbane and Moliterno, respectively, sought $2.65 million and $155,000 in damages, plus interest and other relief. On November 18, 1996, the Connecticut Superior Court (the "Court") awarded Gilbane $770,070 and Moliterno $155,000. All remaining claims, including the Partnership's counterclaims, were dismissed. On October 24, 1997, the Court entered a final judgment containing the foregoing awards and further awarding Gilbane and Moliterno interest and attorneys' fees of approximately $469,000. In December 1997, the Partnership paid $1,171,758 to Gilbane and $200,000 to Moliterno in settlement of all amounts due pursuant to the final judgment. The Partnership entered into a development contract with an unaffiliated party, Edlar, Inc. (the "Developer") which was personally guaranteed by Edward Feldman ("Feldman"). Following construction of the Property, the Partnership commenced an arbitration proceeding in January 1989 against the Developer to resolve various disputes and seeking certain monetary recoveries. On January 24, 1993, the arbitration panel issued its decision awarding approximately $8.1 million to the Partnership, as well as certain declaratory relief. Subsequently, the Partnership obtained a judgment from a court of the State of New York for the full amount of arbitration award in the sum of approximately $8.1 million against the Developer and also against Feldman pursuant to his guaranty. On or about January 21, 1997, Feldman and his wife commenced a voluntary case for liquidation pursuant to chapter 7 of the United States Bankruptcy Code. On July 31, 1997, the Partnership filed a Proof of Claim in the Feldmans' chapter 7 case in the amount of $11,313,232, which includes interest of approximately $2.7 million on the $8.1 million judgment. The summary of the assets and liabilities filed by Feldman and his wife with the Bankruptcy Court in their chapter 7 case indicates that their assets are less than 1.5% of the scheduled liabilities. Based upon such schedules, it is likely that after payment of the expenses of the administration of Feldmans' chapter 7 case, little or no distribution will be made to the Partnership as a holder of a general unsecured claim. ITEM 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of the Unit Holders at a meeting or otherwise during the fourth quarter in the year for which this report is filed. PART II ITEM 5. Market for the Partnership's Limited Partnership Interests and Related Security Holder Matters (a) Market Price Information. There is no established trading market for the Units. The Partnership originally intended to apply to include the Units on NASDAQ or another quoted securities market upon the completion of the lease-up of the Property. However, an application is not anticipated at this time. (b) Holders. As of December 31, 1997, there were 8,535 Unit Holders. (c) Distribution of Net Cash Flow. For information regarding the Partnership's policy with respect to distribution of net cash flow, refer to Note 3 "The Partnership Agreement" of the Notes to the Financial Statements, included in the Partnership's Annual Report for the year ended December 31, 1997, which is filed as an exhibit under Item 14. ITEM 6. Selected Financial Data Set forth below is the selected financial data for the years ended December 31, 1997 1996 1995 1994 1993 Rental Income $ 5,074,594 $ 4,144,475 $ 2,947,857 $ 2,486,730 $ 2,392,211 Interest Income 252,763 256,063 319,278 192,911 182,101 Provision for Loss on Real Estate Held for Disposition (3,310,365) _ _ _ _ Net Loss (4,322,230) (2,660,356) (3,017,904) (3,711,936) (4,387,694) Net Loss per Unit (1) (.55) (.34) (.38) (.47) (.56) Total Assets 64,935,053 69,645,169 69,670,348 70,989,125 74,328,520 Revolving loan payable 18,365,361 17,798,291 16,483,152 15,407,772 14,951,320 (1) Based upon the weighted average number of Units (7,826,300) outstanding at year end. ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources The Partnership is currently preserving its funds to lease and operate two parcels of land located in Stamford, Connecticut with two commercial office buildings constructed thereon containing a total of 325,416 RSF (the "Project"). Through December 31, 1997, the Partnership's sources of liquidity have been net proceeds from the public offering of limited partnership units, rental receipts, proceeds from the mortgage loan discussed below and interest earned on the Partnership's cash balance. In order to meet the Partnership's liquidity requirements during the Project's leasing phase, the Partnership obtained a revolving first mortgage loan from People's Bank ("People's") in July 1990. On February 17, 1994, the Partnership entered into a modification of the loan's terms with People's which, among other things, reduced the principal balance of the loan from $25 million to $24,449,795, and eliminated the interest reserve line item. Another provision of the loan provided that when occupancy at the Project reached 50% or greater, the interest rate on the loan would be reduced by 25 basis points. During the first quarter of 1996, the Partnership signed a 10-year lease with Cardmember Publishing Corporation ("Cardmember Publishing") for approximately 18,650 square feet in the South Tower. The Cardmember Publishing lease in the South Tower commenced on March 15, 1996 which brought the Project's overall occupancy to approximately 54%. Payments of interest are due monthly in arrears and are required to be paid from the Partnership's own funds. Loan proceeds may continue to be used on an "as needed" basis to fund all other approved leasing costs. On May 15, 1997, the Partnership entered into a second modification of the First Mortgage Loan with People's which extends the maturity date until June 1, 2004 (the "Modified Mortgage"). The Modified Mortgage is split into two components: (i) the permanent portion (the "Permanent Portion") which is comprised of the existing balance of the First Mortgage Loan, closing costs associated with the Modified Mortgage and any future drawdowns, and (ii) the development portion (the "Development Portion") from which the Partnership may request the drawdown of funds with People's approval to fund the costs of leasing the Property. At closing, the balance of the Permanent Portion was $18,491,473 which included recent drawdowns for leasing costs and the closing costs associated with the Modified Mortgage and the balance of the Development Portion was $5,958,322. Annually, any borrowings under the Development Portion of the Modified Mortgage will be added to the Permanent Portion and reduce the funds available for future drawdowns by a commensurate amount. The Permanent Portion currently bears interest at an initial rate of 7.63% and is amortized over a 25 year period and the Development Portion currently bears interest at an initial rate of 7.83%. Interest rates on both the Permanent Portion and the Development Portion are adjusted annually on June 1, beginning June 1, 1998. As of December 31, 1997, the principal balance of the loan was $18,365,631 plus interest payable of $116,775 for a total balance of $18,482,406, as compared to a total balance of $17,932,371 as of December 31, 1996. The increase is due to additional borrowings in 1997 to fund tenant improvements relating to new leases signed at the Project. Another condition of the second modification is the establishment of a real estate tax escrow account set up with the Lender into which monthly deposits equal to 1/12th of the annual real estate taxes will be made. In addition, a deposit representing an amount equal to the 10% holdback on the contested tax years of July 1994 through May 31, 1997 was made prior to the closing. As of December 31, 1997 the balance in the real estate tax escrow account was $656,626. The Property's overall occupancy was 79% at December 31, 1997, compared to 72% at December 31, 1996. During the third quarter of 1997, the General Partner decided to commence marketing the Property for sale. This determination was made after consideration of a number of factors including, among others, the following: the improved operating performance of the Property; the overall health of the economy; the strengthening of national real estate and capital markets; and a number of proposals for the new development of buildings in Stamford that, if completed, would directly compete with the Property. On March 17, 1998, the Partnership entered into an agreement to sell the Property (the "Purchase Agreement") to Reckson Operating Partnership, L.P. (the "Buyer"), a Delaware limited partnership unaffiliated with the Partnership. Pursuant to the terms of the Purchase Agreement, the Buyer agreed to acquire the Property for consideration in the amount of $61,315,000 in cash (the "Purchase Price"), subject to adjustments in respect of certain closing costs (the "Sale"). The proposed Sale is subject to the satisfaction of certain conditions. Pursuant to the terms of the Partnership Agreement, Limited Partners holding a majority of limited partnership interests will have the right to disapprove of the Sale. An information statement will be mailed to the Limited Partners shortly detailing information concerning the proposed Sale and subsequent distribution by the Partnership. There can be no assurance that the Sale will be completed. The General Partner intends to dissolve the Partnership and will make one or more liquidating distributions in accordance with the terms of the Partnership Agreement. It is anticipated, however, that certain reserves will need to be maintained for a period of time following the sale of the Property for certain contingent liabilities of the Partnership. In light of the Partnership's marketing efforts, the Partnership's real estate assets, deferred rent receivable and prepaid leasing commissions were reclassified on the balance sheet at September 30, 1997 to "Real estate assets held for disposition." Effective October 1, 1997, the Partnership suspended depreciation and amortization in accordance with the Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." In addition, the partnership recognized a one time expense of $3,310,365 as a provision for loss on real estate held for disposition. Cash and cash equivalents totaled $3,960,408 at December 31, 1997 as compared to $5,668,459 at December 31, 1996. The decrease was primarily due the payment of settlement costs associated with the Gilbane/Moliterno litigation (see Item 3), and to the funding of real estate improvements at the Property. Restricted cash at December 31, 1997 totaled $1,213,209 as compared to $337,676 at December 31, 1996. The increase is primarily the result of the funding of the real estate tax escrow pursuant to the terms of the Modified Mortgage, and security deposits received from new tenants by the Partnership. At December 31, 1997, deferred charges net of accumulated amortization, were $139,336, compared to $53,896 at December 31, 1996. The increase is the result of capitalized fees associated with the Modified Mortgage, offset partially by amortization of these fees. Accounts payable and accrued expenses totaled $1,903,249 at December 31, 1997, compared to $2,793,018 at December 31, 1996. The decrease is primarily attributable to the payment of settlements awarded to Gilbane and Moliterno in December 1997 (see Item 3). The decrease was partially offset by an increase in security deposits received for recent leases signed at the Property. Due to affiliates totaled $80,110 at December 31, 1997, compared to $128,262 at December 31, 1996. The decrease is primarily due to the payment of fees and compensation in connection with the organization, syndication and acquisition services rendered at the inception of the Partnership which had been deferred. Results of Operations 1997 vs. 1996 The Partnership incurred a net loss of $4,322,230 for the year ended December 31, 1997, compared with a net loss of $2,660,356 in 1996. The higher net loss in 1997 is primarily the result of a provision for loss on real estate held for disposition in the amount of $3,310,365 in compliance with Statement of Financial Accounting Standards No. 121. Rental income totaled $5,074,594 for the year ended December 31, 1997, compared to $4,144,475 for the year ended December 31, 1996. The increase is primarily due to the increase in the Property's occupancy. For year ended December 31, 1997, other income was $392,117, compared to $474,457 in 1996. The decrease is primarily due to higher tenant improvement reimbursements in the 1996 period, and was partially offset by an increase in lease payment escalations in the 1997 period due to an increase in occupancy. Total expenses for the year ended December 31, 1997 were $10,041,704 compared with $7,535,351 in 1996. The increase is primarily attributable to the provision for loss on real estate held for disposition. Depreciation and amortization for the year ended December 31, 1997 was $1,633,948, compared to $2,070,391 in 1996. Effective October 1, 1997, the Partnership suspended depreciation and amortization in accordance with the Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Property operating expenses were $2,502,410 for the year ended December 31, 1997, compared to $2,584,730 in 1996. The decrease is primarily attributable to a decline in repairs and maintenance expense, advertising and promotion costs, and real estate taxes. The decrease was partially offset by an increase in cleaning expenses. Settlement costs totaled $446,688 for the year ended December 31, 1997, compared to $925,070 for the year ended December 31, 1996. Amounts in both periods consist of amounts awarded to Gilbane and Moliterno, including interest and attorneys' fees, pursuant to the litigation settlement (see Item 3). Interest expense totaled $1,483,868 for the year ended December 31, 1997, compared with $1,549,523 in 1996. The decrease was due to the lower interest rate on the Modified Mortgage which became effective May 15, 1997. Partnership service fees totaled $282,816 for the year ended December 31, 1997, compared with $115,406 for the year ended December 31, 1996. Effective as of January 1, 1997, the Partnership began reimbursing certain expenses incurred by the General Partner and its affiliates in servicing the Partnership to the extent permitted by the partnership agreement. In prior years, affiliates of the General Partner had voluntarily absorbed these expenses. Such amounts totaled $143,799 for the year ended December 31, 1997. General and administrative expenses totaled $136,685 for the year ended December 31, 1997, compared to $31,707 for the year ended December 31, 1996. During the 1997 period, certain expenses incurred by the General Partner and its affiliates in servicing the Partnership, which were voluntarily absorbed by affiliates of the General Partner in the prior periods, were reimbursable to the General Partner and its affiliates. 1996 vs. 1995 The Partnership incurred a net loss of $2,660,356 for the year ended December 31, 1996 compared with a net loss of $3,017,904 for the year ended December 31, 1995. The reduction in the net loss in 1996 was primarily attributable to the increase in rental income resulting from the addition of new tenants in the South Tower and the Citicorp Lease Extension, partially offset by the accrual of the November 18, 1996 judgment amounts awarded to Gilbane and Moliterno. Rental income increased by 41%, to $4,144,475 in 1996, from $2,947,857 in 1995, primarily due to increased occupancy in the South Tower and a reduction in the amortization of deferred rent relating to the Citicorp Lease Extension. Interest income for the year ended December 31, 1996 was $256,063 as compared to $319,278 for the year ended December 31, 1995. The decrease was the result of the Partnership maintaining lower average cash balances in 1996. Other income increased to $474,457 in 1996 from $331,828 in 1995, primarily due to the reimbursement of tenant improvements in 1996. Total expenses for the year ended December 31, 1996 were $7,535,351 compared with $6,616,867 in 1995. The increase was primarily attributable to the $925,070 judgment awarded to Gilbane and Moliterno and an increase in interest expense and property operating expenses, partially offset by lower depreciation and amortization and professional fees. Depreciation and amortization for the year ended December 31, 1996 was $2,070,391 compared to $2,446,866 in 1995. The decrease in depreciation and amortization was attributable to the Citicorp Lease Extension which extended the length of Citicorp's lease and the corresponding asset life of the tenant improvements. Property operating expenses increased to $2,584,730 from $2,308,093 in 1995, primarily due to increases in utilities, cleaning, security and repairs and maintenance expenses arising from increased occupancy in the South Tower. Interest expense relating to the revolving loan payable increased to $1,549,523 in 1996 from $1,289,309 in 1995. Interest expense increased due to a drawdown in July 1995 to fund leasing commissions associated with the Citicorp Lease Extension, the additional borrowings in 1996 to fund leasing commissions and tenant improvements associated with the new leases in the South Tower and, to a lesser extent, an increase in the average interest rate as discussed above. Professional fees totaled $258,524 in 1996 compared with $434,597 in 1995. The decrease was attributable to lower legal fees in 1996 associated with the Gilbane litigation. ITEM 8. Financial Statements and Supplementary Data Incorporated by reference to the Partnership's Annual Report to Unitholders for the fiscal year ended December 31, 1997, which is filed as an exhibit under Item 14. Supplementary data is incorporated by reference to page F-1 of this report. ITEM 9. Changes in and Disagreements with Accountants 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. The affairs of the Partnership are conducted through the General Partner. Certain officers and directors of the General Partner are now serving (or in the past have served) as officers and directors of entities which act as general partners of a number of real estate limited partnerships which have sought protection under the provisions of the Federal Bankruptcy Code. The partnerships which have filed for bankruptcy petitions own real estate which has been adversely affected by the economic condition in the markets in which the real estate is located and, consequently, the partnerships sought protection of the bankruptcy laws to protect the partnerships' assets from loss through foreclosure. On July 31, 1993, Shearson Lehman Brothers, Inc. ("Shearson") sold certain of its domestic retail brokerage and asset management businesses to Smith Barney, Harris Upham & Co. Incorporated ("Smith Barney"). Subsequent to this sale, Shearson changed its name to Lehman Brothers Inc. ("Lehman"). The transaction did not affect the ownership of the Partnership or the General Partner. Set forth below are the names, positions and offices held, and a brief account of the business experience during the past five years of each Director and Executive Officer of the General Partner and the Assignor Limited Partner as of December 31, 1997. Each such officer and director holds a similar position in the General Partner and the Assignor Limited Partner. Name Office Rocco F. Andriola Director Jeffrey C. Carter Director, President & Chief Financial Officer Timothy E. Needham Vice President Rocco F. Andriola, 39, is a Managing Director of Lehman Brothers in its Diversified Asset Group and has held such position since October 1996. Since joining Lehman in 1986, Mr. Andriola has been involved in a wide range of restructuring and asset management activities involving real estate and other direct investment transactions. From June 1991 through September 1996, Mr. Andriola held the position of Senior Vice President in Lehman's Diversified Asset Group. From June 1989 through May 1991, Mr. Andriola held the position of First Vice President in Lehman's Capital Preservation and Restructuring Group. From 1986 to 1989, Mr. Andriola served as a Vice President in the Corporate Transactions Group of Shearson Lehman Brothers' office of the general counsel. Prior to joining Lehman, Mr. Andriola practiced corporate and securities law at Donovan Leisure Newton & Irvine in New York. Mr. Andriola received a B.A. from Fordham University, a J.D. from New York University School of Law, and an LLM in Corporate Law from New York University's Graduate School of Law. Jeffrey C. Carter, 52, is a Senior Vice President of Lehman Brothers in the Diversified Asset Group. Mr. Carter joined Lehman Brothers in September 1988. From 1972 to 1988, Mr. Carter held various positions with Helmsley-Spear Hospitality Services, Inc. and Stephen W. Brener Associates, Inc. including Director of Consulting Services at both firms. From 1982 through 1987, Mr. Carter was President of Keystone Hospitality Services, an independent hotel consulting and brokerage company. Mr. Carter received his B.S. degree in Hotel Administration from Cornell University and an M.B.A. degree from Columbia University. Timothy E. Needham, 29, is an Assistant Vice President of Lehman Brothers Inc. and assists in the management of commercial real estate in the Diversified Asset Group. Mr. Needham joined Lehman in September 1995. Prior to joining Lehman, Mr. Needham was a consultant with KPMG Peat Marwick LLP in the Banking and Investment Services Group from 1994-1995. Mr. Needham received his master's degree in international management from the American Graduate School of International Management in December 1993. Mr. Needham is currently a candidate for the designation of Chartered Financial Analyst, Level III. ITEM 11. Executive Compensation The Directors and Officers of the General Partner and the Assignor Limited Partner do not receive any salaries or other compensation from the Partnership or the Assignor Limited Partner. The General Partner is entitled to varying percentages of Net Cash Flow distributed in any fiscal year and to varying percentages of the Net Proceeds of capital transactions. See Note 3 "The Partnership Agreement" of the Notes to the Financial Statements, included in the Partnership's Annual Report to Unitholders for the year ended December 31, 1997, which is filed as an exhibit under Item 14. ITEM 12. Security Ownership of Certain Beneficial Owners and Management As of December 31, 1997, the only entity known by the Partnership to be the beneficial owner of more than 5% of the Units was Chrysler Master Pension Trust, U/A/D 5/28/56, 12,000 Chrysler Drive, Highland Park, Michigan, which was the beneficial owner of 450,000 Units or approximately 5.74% of the total outstanding Units. As of December 31, 1997, neither the General Partner nor any of its officers or directors held any Units. ITEM 13. Certain Relationships and Related Transactions The General Partner or its affiliates earned fees and compensation in connection with the syndication, acquisition, and organization services rendered to the Partnership. As of December 31, 1997, $80,110 remained unpaid. Under the terms of the Partnership Agreement, the General Partner and certain affiliates may be reimbursed by the Partnership for certain operational expenses, including but not limited to audit, appraisal, legal and tax preparation fees as well as costs of data processing. Effective as of January 1, 1997, the Partnership began reimbursing certain expenses incurred by the General Partner and its affiliates in servicing the Partnership to the extent permitted by the partnership agreement. In prior years, affiliates of the General Partner had voluntarily absorbed these expenses. Such amounts totaled $143,799 for the year ended December 31, 1997. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a)(1) Financial Statements and Schedules. Page Balance Sheets at December 31, 1997 and 1996 (1) Statements of Partners' Capital (Deficit) for the years ended December 31, 1997, 1996 and 1995 (1) Statements of Operations for the years ended December 31, 1997, 1996 and 1995 (1) Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 (1) Notes to the Financial Statements (1) Report of Independent Auditors (1) (a)(2) Financial Statement Schedule Schedule III - Real Estate and Accumulated Depreciation F-1 All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission have been omitted since (1) the information required is disclosed in the financial statements and the notes thereto; (2) the schedules are not required under the related instructions; or (3) the schedules are inapplicable. (1) Incorporated by reference to the Partnership's Annual Report to Unitholders for the year ending December 31, 1997, filed as an exhibit under Item 14. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the three months ended December 31, 1997. (c) Exhibits Subject to Rule 12b-32 of the Securities and Exchange Act of 1934 regarding incorporation by reference, listed below are the exhibits which are filed as part of this report: 3. The Partnership's Amended and Restated Agreement of Limited Partnership, dated as of November 1, 1986, is hereby incorporated by reference to Exhibit A to the Prospectus contained in Registration Statement No. 33-8105, which registration statement (the "Registration Statement") was declared effective by the SEC on November 19, 1986. 4. The form of Unit Certificate is hereby incorporated by reference to Exhibit 4.1 to the Registration Statement. 10.1 Subscription Agreement and Signature Page is included as Exhibits B and C to the Prospectus contained in the Registration Statement, and is incorporated herein by reference. 10.2 Escrow Agreement between the Partnership and United States Trust Company of New York is hereby incorporated by reference to Exhibit 10.3 to the Registration Statement. 10.3 Property Management Agreement between the Partnership and Feldman Realty relating to the Property is hereby incorporated by reference to Exhibit 10.3 to the Registration Statement. 10.4 Supervisory Leasing and Management Agreement between the Partnership and the Manager relating to the Property is hereby incorporated by reference to Exhibit 10.4 to the Registration Statement. 10.5 Demand Promissory Note from Shearson to the General Partner is hereby incorporated by reference to Exhibit 10.5 to the Registration Statement. 10.6 Contract of Sale, as amended to date, relating to the land portion of the Property and all exhibits thereto is included as Exhibit L to the Development Agreement, and is hereby incorporated herein by reference to Exhibit 10.6 to the Registration Statement. 10.7 Development Agreement between the Developer and the Partnership is hereby incorporated by reference to Exhibit 10.7 to the Registration Statement. 10.8 Guaranty of the Developer's obligations is hereby incorporated by reference to Exhibit 10.8 to the Registration Statement. 10.9 Form of Letter Agreement between Edward Feldman and the Partnership relating to the Guaranty is hereby incorporated by reference to Exhibit 10.9 to the Registration Statement. 10.10 Modification of Development Agreement between the Developer and the Partnership is hereby incorporated by reference to Exhibit 10.10 to the Registration Statement. 10.11 Commitment Letter from Shearson Lehman Brothers Holdings Inc. to the Partnership is hereby incorporated by reference to Exhibit 10.11 to the Registration Statement. 10.12 Agreement Regarding Securities Law Liability between Developer, Feldman Realty & Management Corp., Edward Feldman, Shearson, Registrant and the General Partner is hereby incorporated by reference to Exhibit 10.14 to the Registration Statement. 10.13 Modification of Supervisory Leasing and Management Agreement between the Partnership and the Manager is hereby incorporated by reference to Exhibit 10.15 to the Registration Statement. 10.14 Commercial Revolving Loan Agreement between the Partnership and People's Bank dated July 19, 1990 is hereby incorporated by reference to Exhibit 10.14 to the Partnership's report on Form 10-K for the year ended December 31, 1990. 10.15 Modification of Loan Agreement, Mortgage, Collateral Assignment of Leases and Other Loan Documents, between the Partnership and Peoples Bank, dated February 17, 1994, is hereby incorporated by reference to Exhibit 10.15 to the Partnership's report on Form 10-K for the year ended December 31, 1993. 13. Annual Report to Unitholders for the year ended December 31, 1997. 23. Consent of Ernst & Young LLP, Independent Auditors 27. Financial Data Schedule. 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. STAMFORD TOWERS DEPOSITARY CORP. STAMFORD TOWERS LIMITED PARTNERSHIP BY: Stamford Towers, Inc. General Partner Date: March 30, 1998 BY: /s/ Jeffrey C. Carter Name: Jeffrey C. Carter Title: Director, President and Chief Financial Officer 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 in the capabilities and on the dates indicated. STAMFORD TOWERS, INC. and STAMFORD TOWERS DEPOSITARY CORP. General Partner Date: March 30, 1998 BY: /s/Jeffrey C. Carter Name: Jeffrey C. Carter Title: Director, President and Chief Financial Officer Date: March 30, 1998 BY: /s/Rocco F. Andriola Name: Rocco F. Andriola Title: Director Date: March 30, 1998 BY: /s/Timothy E. Needham Name: Timothy E. Needham Title: Vice President EX-13 2 1997 ANNUAL REPORT TO UNITHOLDERS Exhibit 13 Stamford Towers Limited Partnership 1997 Annual Report Stamford Towers Limited Partnership Stamford Towers Limited Partnership is a Delaware limited partnership formed in 1986 for the purpose of developing, owning and operating two class A office buildings located in Stamford, Connecticut. The two buildings consist of approximately 325,000 square feet of office space, four levels of parking, and space for several retail tenants. Property Profile (at December 31, 1997) North Tower Leasable Area 193,000 square feet Percentage Leased 94% Tenants: Citicorp North America, Inc. 135,909 square feet Millsport, Inc. 10,930 square feet Memberworks Incorporated 8,976 square feet Culinart Inc. 3,353 square feet Life Extension Institute, Inc. 5,688 square feet Telco Holdings, Inc. 5,238 square feet Robert Half International, Inc. 3,362 square feet Sirrom Capital Corporation 3,337 square feet M.D. Revenues, Inc. 2,495 square feet Dow Jones & Company, Inc. 2,101 square feet Tower Connections, Ltd. 500 square feet South Tower Leasable Area 132,000 square feet Percentage Leased 57% Tenants: Learning International, Inc. 36,720 square feet Memberworks Incorporated 18,650 square feet Tradition Financial Services, Inc. 11,605 square feet Consolidated-Hydro, Inc. 8,612 square feet Total Percentage Leased 79% Contents 1 Message to Investors 3 Financial Statements 6 Notes to the Financial Statements 12 Report of Independent Auditors 13 Net Asset Valuation Administrative Inquiries Performance Inquiries/Form 10-Ks Address Changes/Transfers First Data Investor Services Group Service Data Corporation P.O. Box 1527 2424 South 130th Circle Boston, Massachusetts 02104-1527 Omaha, Nebraska 68144-2596 Attn.: Financial Communications 800-223-3464 800-223-3464 Message to Investors Presented for your review is the 1997 Annual Report for Stamford Towers Limited Partnership (the "Partnership"). This letter includes an update on the Partnership's efforts to sell Stamford Towers (the "Property"), an analysis of the Partnership's financial performance during the past year and information on the status of the Partnership's legal proceedings. Also included are the Partnership's audited financial statements for the year ended December 31, 1997. Property Sales Update On March 17, 1998, the Partnership entered into an agreement (the "Purchase Agreement") to sell the Property to Reckson Operating Partnership, L.P., an unaffiliated entity. Pursuant to the terms of the Purchase Agreement, the Buyer agreed to acquire the Property for consideration in the amount of $61,315,000 in cash (the "Purchase Price"), subject to certain closing adjustments (the "Sale"). The proposed Sale is also subject to the satisfaction of certain conditions. Additionally, pursuant to the terms of the Partnership Agreement, Limited Partners holding a majority of limited partnership interests will have the right to disapprove of the Sale. An information statement will be mailed to the Limited Partners shortly detailing information concerning the proposed Sale and subsequent distribution by the Partnership. Assuming the Sale closes on the proposed terms, it is estimated that the Limited Partners will receive distributions in excess of $5.00 per Unit, representing the net proceeds from the Sale and the Partnership's remaining cash reserves, less provisions for any remaining obligations and contingent liabilities. Although there can be no guarantee that the Sale will occur on the terms currently contemplated, we are optimistic that the Sale will close prior to the end of the second quarter of 1998. Leasing Update The Stamford real estate market continued to steadily improve during 1997, resulting in an increase in rental rates and a decrease in rental concessions. During the year, we executed six new leases for a total of 31,988 square feet, bringing overall occupancy to 79% at December 31, 1997, compared to 72% at year-end 1996. The General Partner is currently negotiating with two potential tenants for the remainder of the Property's vacant space. Financial Highlights Years ended December 31, 1997 1996 Rental Income $ 5,074,594 $ 4,144,475 Interest & Other Income 644,880 730,520 Total Income 5,719,474 4,874,995 Property Operating Expenses 2,502,410 2,584,730 Interest Expense 1,483,868 1,549,523 Settlement Costs 446,688 925,070 Professional Fees 244,924 258,524 Depreciation and Other Expenses 2,053,449 2,217,504 Total Expenses 6,731,339 7,535,351 Adjusted Net Loss* $ (1,011,865) $ (2,660,3556) Net Cash Used for Operating Activities (including interest expenses) $ (1,557,204) $ (328,864) * Adjusted net loss is determined by adding back the provision for loss on real estate assets held for disposition, recognized by the Partnership as a one time expense. * Rental income increased 22% due primarily to the increase in the Property's occupancy. * Interest and other income decreased from 1996, reflecting lower tenant improvement reimbursements. This was partially offset by an increase in 1997 in tenant reimbursable income relating to utility usage, which increased due to the Property's higher occupancy. * Property operating expenses remained largely unchanged from 1996, as an increase in cleaning expenses was more than offset by decreases in repairs and maintenance expense, advertising and promotion costs, and real estate taxes. * Interest expense decreased primarily as a result of the completion of the modification of the First Mortgage, which lowered the interest rate. * Settlement costs for both 1996 and 1997 are associated with the settlement of the Gilbane and Moliterno litigation (see below). * The decrease in depreciation and other expenses is primarily due to a reduction in depreciation due to the re-classification of the Property on October 1, 1997 to Real Estate Assets Held for Disposition. Arbitration and Legal Proceedings As previously reported, the Partnership had been involved in litigation with the Property's former construction manager, Gilbane Building Company ("Gilbane"), and a subcontractor, Moliterno Stone Sales, Inc. ("Moliterno"). In December 1997, the Partnership paid $1,171,758 to Gilbane and $200,000 to Moliterno in settlement of all amounts due pursuant to the final judgment. The Partnership entered into a development contract with an unaffiliated party, Edlar, Inc. (the "Developer") which was personally guaranteed by Edward Feldman ("Feldman"). Following construction of the Property, the Partnership commenced an arbitration proceeding in January 1989 against the Developer to resolve various disputes and seeking certain monetary recoveries. On January 24, 1993, the arbitration panel issued its decision awarding approximately $8.1 million to the Partnership, as well as certain declaratory relief. Subsequently, the Partnership obtained a judgment from a court of the State of New York for the full amount of arbitration award in the sum of approximately $8.1 million against the Developer and also against Feldman pursuant to his guaranty. On or about January 21, 1997, Feldman and his wife commenced a voluntary case for liquidation pursuant to chapter 7 of the United States Bankruptcy Code. On July 31, 1997, the Partnership filed a Proof of Claim in the Feldmans' chapter 7 case in the amount of $11,313,232, which includes interest of approximately $2.7 million on the $8.1 million judgment. The summary of the assets and liabilities filed by Feldman and his wife with the Bankruptcy Court in their chapter 7 case indicates that their assets are less than 1.5% of the scheduled liabilities. Based upon such schedules, it is likely that after payment of the expenses of the administration of Feldmans' chapter 7 case, little or no distribution will be made to the Partnership as a holder of a general unsecured claim. Summary We hope to conclude the Sale of the Property during the second quarter. Upon completion of the Sale, the General Partner intends to dissolve the Partnership and will make one or more liquidating distributions to the Limited Partners. In the interim, we will continue to make every effort to lease the remaining vacant space at the Property at competitive market rates. Questions regarding the Partnership's performance should be directed to your Financial Consultant or First Data Investor Services Group. All requests for transfer of ownership or change of address must be submitted in writing to the Partnership's transfer agent, Service Data Corporation, 2424 South 130th Circle, Omaha, Nebraska 68144-2596. Both First Data Investor Services Group and Service Data Corporation can be reached at (800) 223-3464. Very truly yours, Stamford Towers, Inc. General Partner /s/Jeffrey C. Carter Jeffrey C. Carter President March 30, 1998 Balance Sheets At December 31, At December 31, 1997 1996 Assets Real estate, at cost: Land $ _ $14,714,483 Buildings and improvements _ 52,933,678 Tenant improvements _ 8,191,558 Furniture, fixtures and equipment _ 293,864 _ 76,133,583 Less accumulated depreciation _ (16,104,668) _ 60,028,915 Real estate assets held for disposition 59,532,125 _ Cash and cash equivalents 3,960,408 5,668,459 Restricted cash 1,213,209 337,676 Accounts receivable 65,764 80,245 Deferred rent receivable _ 1,843,289 Deferred charges, net of accumulated amortization of $12,667 in 1997 and $701,187 in 1996 139,336 53,896 Prepaid expenses, net of accumulated amortization of $-0- in 1997 and $934,564 in 1996 24,211 1,632,689 Total Assets $64,935,053 $69,645,169 Liabilities and Partners' Capital (Deficit) Liabilities: Accounts payable and accrued expenses $1,903,249 $2,793,018 Interest payable 116,775 134,080 Due to affiliates 80,110 128,262 Revolving loan payable 18,365,631 17,798,291 Total Liabilities 20,465,765 20,853,651 Partners' Capital (Deficit): General Partner (273,292) (230,070) Limited Partners (7,826,300 units outstanding) 44,742,580 49,021,588 Total Partners' Capital 44,469,288 48,791,518 Total Liabilities and Partners' Capital $64,935,053 $69,645,169 Statement of Partners' Capital (Deficit) For the years ended December 31, 1997, 1996 and 1995 General Limited Partner Partners Total Balance at December 31, 1994 $(173,287) $54,643,065 $54,469,778 Net Loss (30,179) (2,987,725) (3,017,904) Balance at December 31, 1995 (203,466) 51,655,340 51,451,874 Net Loss (26,604) (2,633,752) (2,660,356) Balance at December 31, 1996 (230,070) 49,021,588 48,791,518 Net Loss (43,222) (4,279,008) (4,322,230) Balance at December 31, 1997 $(273,292) $44,742,580 $44,469,288 Statements of Operations For the years ended December 31, 1997 1996 1995 Income Rental $5,074,594 $4,144,475 $2,947,857 Interest 252,763 256,063 319,278 Other 392,117 474,457 331,828 Total Income 5,719,474 4,874,995 3,598,963 Expenses Depreciation and amortization 1,633,948 2,070,391 2,446,866 Property operating 2,502,410 2,584,730 2,308,093 Settlement costs 446,688 925,070 _ Provision for loss on real estate held for disposition 3,310,365 _ _ Interest 1,483,868 1,549,523 1,289,309 Professional fees 244,924 258,524 434,597 Partnership service fees 282,816 115,406 104,289 General and administrative 136,685 31,707 33,713 Total Expenses 10,041,704 7,535,351 6,616,867 Net Loss $(4,322,230) $(2,660,356) $(3,017,904) Net Loss Allocated: To the General Partner $(43,222) $(26,604) $(30,179) To the Limited Partners (4,279,008) (2,633,752) (2,987,725) $(4,322,230) $(2,660,356) $(3,017,904) Per limited partnership unit (7,826,300 outstanding) $(0.55) $(.34) $(.38) Statements of Cash Flows For the years ended December 31, 1997 1996 1995 Cash Flows From Operating Activities: Net Loss $(4,322,230) $(2,660,356) $(3,017,904) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation 1,420,092 1,783,769 2,179,559 Amortization 213,856 286,622 267,307 Provision for loss on real estate held for disposition 3,310,365 _ _ Increase (decrease) in cash arising from changes in operating assets and liabilities: Restricted cash (875,533) (246,218) (2,164) Accounts receivable 14,481 (9,193) 32,149 Deferred rent receivable 107,381 12,381 526,199 Prepaid expenses (239,779) (392,148) (1,218,849) Accounts payable and accrued expenses (1,120,380) 886,419 438,889 Interest payable (17,305) 10,044 28,636 Due to affiliates (48,152) (184) 382 Net cash used for operating activities (1,557,204) (328,864) (765,796) Cash Flows From Investing Activities: Additions to real estate (566,184) (1,191,798) (204,504) Net cash used for investing activities (566,184) (1,191,798) (204,504) Cash Flows From Financing Activities: Deferred charges (152,003) _ _ Mortgage principal payments (125,842) _ _ Borrowings under the revolving loan payable 693,182 1,315,139 1,075,380 Net cash provided by financing activities 415,337 1,315,139 1,075,380 Net increase (decrease) in cash and cash equivalents (1,708,051) (205,523) 105,080 Cash and cash equivalents, beginning of year 5,668,459 5,873,982 5,768,902 Cash and cash equivalents, end of year $3,960,408 $5,668,459 $5,873,982 Supplemental Disclosure of Cash Flow Information: Cash paid during the year for interest $1,501,173 $1,539,479 $1,260,673 Supplemental Disclosure of Non-Cash Investing Activities: Write-off of fully depreciated building and improvements $ _ $ 84,926 $ - Write-off of fully depreciated furniture, fixtures, and equipment 61,911 _ _ Write-off of fully depreciated tenant improvements 76,285 _ _ Write-off of fully amortized mortgage costs 755,083 _ _ Building improvements funded through accounts payable 23,216 _ _ Tenant improvements funded through accounts payable $207,395 $ 423,759 $ 155,840 Supplemental Disclosure of Non-Cash Operating Activities In connection with the General Partner's intent to sell the Property in 1997, deferred rent receivable and prepaid leasing commissions in the amounts of $1,735,908 and $1,700,963, respectively, were reclassified to real estate assets held for disposition. Notes to the Financial Statements December 31, 1997, 1996 and 1995 1. Organization and Business Stamford Towers Limited Partnership (the "Partnership"), a Delaware limited partnership, was formed on August 14, 1986 for the purpose of acquiring two parcels of land, aggregating 3.63 acres, located in Stamford, Connecticut and developing, owning and operating two class A office buildings (the "Buildings") to be constructed thereon (collectively the "Property"). The Buildings contain approximately 325,000 square feet of rentable space. The general partner of the Partnership is Stamford Towers, Inc. (the "General Partner"), an affiliate of Lehman Brothers Inc. (see below). Construction of the Buildings commenced in July 1987. However, certificates of occupancy were not received from the City of Stamford until February 6, 1990, representing a substantial delay from the originally scheduled completion date of February 1989. Moreover, during the course of construction, substantial cost overruns were incurred. The Partnership initiated an arbitration proceeding against Edlar, Inc., a Delaware corporation, ("Edlar") in order to establish Edlar's responsibility for certain cost overruns, delays, expenses and liquidated damages in connection with the construction phase of the Property. A detailed discussion is incorporated by reference to Note 9 "Arbitration Proceedings with Developer" contained herein. On July 31, 1993, Shearson Lehman Brothers Inc. sold certain of its domestic retail brokerage and asset management businesses to Smith Barney, Harris Upham & Co. Incorporated. Subsequent to the sale, Shearson Lehman Brothers Inc. changed its name to Lehman Brothers Inc. The transaction did not affect the ownership of the General Partner. The Partnership will terminate on December 31, 2036 unless dissolved sooner as provided within the Agreement. On January 30, 1998, the Partnership executed a letter of intent for the sale of the Property to Reckson Operating Partnership, L.P. for gross proceeds of $61,315,000 (the "Letter of Intent"). On March 17, 1998, the Partnership entered into a purchase and sale agreement substantively in accordance with the terms and conditions specified in the Letter of Intent. The sale is expected to close in the second quarter of 1998. 2. Significant Accounting Policies Real Estate Investments - Real estate investments, which consist of buildings and improvements, tenant improvements and furniture, fixtures and equipment, are recorded at cost less accumulated depreciation. Cost of the buildings includes the initial purchase price of the property plus closing costs, acquisition and legal fees and capital improvements. Depreciation on the buildings and improvements is computed using the straight-line method based on estimated useful lives of 35 years. Tenant improvements are depreciated by the straight-line method over the terms of the related leases. Furniture, fixtures and equipment are depreciated over their estimated useful lives. Real Estate Assets Held for Disposition - Real estate assets held for disposition are carried at the lower of carrying value or fair market value less costs to sell. At September 30, 1997, the Partnership's real estate assets were reclassified as held for disposition and the Partnershipsuspended depreciation and amortization in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("FAS 121"). Contemporaneously, the Partnership recognized a one-time expense of $16,893,005 as provision for loss on real estate held for disposition. However, in light of the pending sale of the Property, the Partnership revised the carrying value of real estate assets held for disposition at December 31, 1997 and provision for loss on real estate held for disposition for the year ended December 31, 1997 was decreased to $3,310,365. Accounting for Impairment - The Partnership adopted the provisions of FAS 121 in the fourth fiscal quarter of 1995. FAS 121 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. FAS 121 also addresses the accounting for long-lived assets that are expected to be disposed of. Cash and Cash Equivalents - Cash and cash equivalents consist of short-term highly liquid investments which have maturities of three months or less from the date of purchase. The carrying value approximates fair value because of the short maturity of these instruments. Restricted Cash - Restricted cash primarily represents cash held in connection with tenant security deposits and mortgage escrows. Offering Costs - Offering costs of $6,454,526 are non-amortizable and have been deducted from the Limited Partners' capital. Deferred Rent Receivable - Deferred rent receivable consisted of rental income which was recognized on a straight-line basis over the non-cancelable portion of the leases which would not have been received until later periods as a result of rental concessions. In connection with the General Partner's intent to sell the Property, deferred rent receivable was reclassified to real estate assets held for disposition. Deferred Charges - Costs incurred in connection with obtaining mortgage financing are included in deferred charges. These costs are amortized over the life of the related mortgage loan. Leasing Commissions - Leasing commissions included in prepaid expenses were being amortized over the term of the non-cancelable portions of the leases. In connection with the General Partner's intent to sell the Property in 1997, leasing commissions were reclassified to real estate assets held for disposition. Income Taxes - No provision for income taxes has been made in the financial statements since such taxes are the responsibility of the individual partners rather than that of the Partnership. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount 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. Fair Value of Financial Instruments - Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" ("FAS 107"), requires that the Partnership disclose the estimated fair values of its financial instruments. Fair values generally represent estimates of amounts at which a financial instrument could be exchanged between willing parties in a current transaction other than in forced liquidation. Fair value estimates are subjective and are dependent on a number of significant assumptions based on management's judgment regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. In addition, FAS 107 allows a wide range of valuation techniques, therefore, comparisons between entities, however similar, may be difficult. 3. The Partnership Agreement Pursuant to the terms of the Partnership Agreement, all net income from operations of the Partnership will be allocated in substantially the same manner as cash distributions from operations. All net losses from operations of the Partnership generally will be allocated 99% to the Limited Partners and 1% to the General Partner. Distributions of net cash flow from operations, if any, as defined in the Partnership Agreement, shall be made to the partners quarterly during each year on the basis of 99% to the Limited Partners and 1% to the General Partner until the Limited Partners have received their Preferred Return (14% per annum), as defined in the Partnership Agreement, and then 90% to the Limited Partners and 10% to the General Partner. Cash distributions from operations will be reduced to the extent of any debt service payable with respect to the financing (see Note 7). Upon sale or an interim capital transaction, net proceeds will be distributed after the close of the calendar quarter in which such a sale or capital transaction occurs. Such net proceeds will first be distributed 99% to the Limited Partners and 1% to the General Partner until the Limited Partners receive their Preferred Return Arrearage and Unrecovered Capital, as defined in the Partnership Agreement, with any remaining proceeds to be distributed 90% to the Limited Partners and 10% to the General Partner. Upon sale or an interim capital transaction, net gains will first be allocated to the extent of net proceeds distributed to the Limited Partners and General Partner from related transactions, then to the Limited Partners and General Partner in proportion to their respective negative balances in their capital accounts; then the remainder of such net gains should be allocated to the extent possible so that the positive balances in the capital accounts of the Limited Partners and the General Partner are in the proportions of 90% and 10%, respectively. Tax losses from sale or an interim capital transaction will be allocated to the Limited Partners and General Partner in proportion to their respective positive balances in their capital accounts after such allocation, the remainder of the tax losses should be allocated to the extent possible so that the negative balances in the capital accounts of the Limited Partners and General Partner are in the proportions of 90% and 10%, respectively. All net gains and tax losses in connection with the sale of all or substantially all of the assets of the Partnership or any other event causing a dissolution of the Partnership shall be allocated in substantially the same manner as net gains and tax losses from sale or an interim capital transaction. If, as a result of the dissolution of the Partnership, the capital account of the General Partner is less than zero, the General Partner shall contribute to the Partnership an amount equal to the lesser of the deficit balance in its capital account or the excess of one and one one-hundredth percent of the total capital contribution of the Limited Partners over the total capital contributions previously made by the General Partner to the Partnership. 4. Transactions with Related Parties Certain cash and cash equivalents were on deposit with an affiliate of the General Partner during a portion of 1996 and all of 1995. As of December 31, 1996 and throughout 1997, no cash and cash equivalents were on deposit with an affiliate of the General Partner or the Partnership. Effective as of January 1, 1997, the Partnership began reimbursing certain expenses incurred by the General Partner and its affiliates in servicing the Partnership to the extent permitted by the partnership agreement. In prior years, affiliates of the General Partner had voluntarily absorbed these expenses. As of December 31, 1997, such amounts paid or accrued totaled $143,799. 5. Lease Agreement with Citicorp North America, Inc. Citicorp North America, Inc. ("Citicorp") leases approximately 136,000 rentable square feet ("RSF") of the North Tower representing 41% of the Property, pursuant to a lease originally scheduled to expire in June 2001 (the "Original Lease"). On June 28, 1995, the Partnership executed the First Amendment (the "Citicorp Lease Extension") to the Original Lease between the Partnership and Citicorp. The Citicorp Lease Extension, which was effective July 1, 1995, (i) reduced Citicorp's annual rent from $29.50 to $25 per RSF for the initial three years and to $24 per RSF for the next two years; (ii) extended the term of the Original Lease for an additional five years, through June 30, 2006, at an annual rental rate of $24 per RSF; and (iii) ensures Citicorp's continued occupancy at the Property through June 30, 2006 (The Original Lease provided an option to terminate the lease after June 30, 1996, subject to certain terms and conditions). As a result of the Citicorp Lease Extension, the Partnership extended the amortization period of the deferred rent relating to the Original Lease through June 30, 2006, effective July 1, 1995. As of December 31, 1997, substantially all of the Citicorp space in the North Tower is occupied by Citicorp and its affiliates. 6. Future Minimum Lease Rental Payments Future minimum rental payments (excluding cancellation penalties) to be received under the non-cancelable portion of the existing operating leases as of December 31, 1997 are as follows: Year Amount 1998 $ 6,701,599 1999 6,661,300 2000 6,653,240 2001 6,653,240 2002 6,388,462 Thereafter 17,343,100 $50,400,941 Terms of the non-cancelable portion of the existing operating leases range from five to ten years. The leases allow for increases in certain property operating expenses to be passed on to the tenants. 7. Mortgage Note Payable On July 19, 1990, the Partnership closed a loan with People's Bank ("People's") to provide mortgage financing to the Partnership (the "First Mortgage Loan"). The First Mortgage Loan was a $25 million, seven year, non-recourse loan with an 11.5% fixed interest rate for the first five years which was set at 3% over the five-year United States treasury security rate at loan closing. On February 17, 1994, the Partnership entered into a modification of the First Mortgage Loan with People's Bank which: (i) reduced the interest rate from 11.5% to 7.43% for the period February 1, 1994 through the adjustment date on July 19, 1995, at which time the interest rate was reset to 9.03%, (ii) reduced the principal balance of the First Mortgage Loan from $25 million to $24,449,795; and (iii) eliminated the interest reserve line item. Pursuant to the terms of the First Mortgage Loan, as modified, when occupancy at the Property reaches 50% or greater, the interest rate on the First Mortgage Loan would be reduced by 25 basis points. During 1996, the Property's occupancy exceeded 50% thus resulting in a 25-basis point reduction in the interest rate. Payments of interest are due monthly in arrears and are paid from the Partnership's funds. Pursuant to the terms of the First Mortgage Loan, as modified, a real estate tax escrow account was established with People's Bank into which monthly deposits equal to 1/12th of the annual real estate taxes will be made. In addition, a deposit representing an amount equal to the 10% holdback on the contested tax years of July 1994 through May 31, 1997 was made prior to the closing. As of December 31, 1997 the balance in the real estate tax escrow account was $656,626. On May 15, 1997, the Partnership entered into a second modification of the First Mortgage Loan with People's Bank which extended the maturity date until June 1, 2004 (the "Modified Mortgage"). The Modified Mortgage is split into two components: (i) the permanent portion (the "Permanent Portion") which is comprised of the existing balance of the First Mortgage Loan, closing costs associated with the Modified Mortgage and any future drawdowns, and (ii) the development portion (the "Development Portion") from which the Partnership may request the drawdown of funds with the Lender's approval to fund the costs of leasing the Property. At closing, the balance of the Permanent Portion was $18,491,473 which included recent drawdowns for leasing costs and the closing costs associated with the Modified Mortgage and the balance of the Development Portion was $5,958,322. Annually, any borrowings under the Development Portion of the Modified Mortgage will be added to the Permanent Portion and reduce the funds available for future drawdowns by a commensurate amount. The Permanent Portion currently bears interest at an initial rate of 7.63% and is amortized over a 25 year period and the Development Portion currently bears interest at an initial rate of 7.83%. Interest rates on both the Permanent Portion and the Development Portion are adjusted annually on June 1, beginning June 1, 1998. Proceeds available at December 31, 1997 under the Development Portion of the Modified Mortgage via drawdown of a credit line were $5,958,322, and may be used on an "as needed" basis to fund certain capital expenditures. Payment of the outstanding principal amount is due at the end of the seven-year term. The Modified Mortgage may be prepaid in whole or in part at any time without penalty. As of December 31, 1997, the principal balance of the Modified Mortgage was $18,365,631 plus interest payable of $116,775 for a total balance of $18,482,406. In 1997, prior to the second modification of the First Mortgage Loan, and 1996, the Partnership drew down on the First Mortgage Loan for tenant improvements in the amounts of $406,175 and $1,315,139, respectively. In 1995, the Partnership drew down $1,075,380 for leasing commissions associated with the Citicorp Lease Extension. Annual principal maturities of the Modified Mortgage over the next five years are as follows: Year Amount 1998 $ 266,508 1999 287,569 2000 310,294 2001 334,816 2002 361,275 Thereafter 16,805,169 $18,365,631 Based on the borrowing rates currently available to the Partnership for mortgage loans with similar terms and average maturities and considering its maturity, the fair value of long- term debt approximates its carrying value. 8. Reconciliation of Net Loss to Tax Loss For the year ended December 31, 1997, net loss reported in the financial statements exceeded the tax loss by $1,861,328. For the year ended December 31, 1996, net loss reported in the financial statements exceeded the tax loss by $703,574. For the year ended December 31, 1995, the net loss reported in the financial statements exceeded the tax loss by $707,321. These differences are due to the differences between the tax basis and financial statement basis of buildings and improvements and the use of accelerated methods of depreciating real estate for tax purposes as compared to the straight-line method used for financial statement purposes. In addition, rental income is recorded on a straight-line basis over the terms of the leases for financial statement purposes, and is reportable for tax purposes when received or receivable. 9. Arbitration Proceedings with the Developer The Partnership entered into a development contract with an unaffiliated party, Edlar, Inc. (the "Developer") which was personally guaranteed by Edward Feldman ("Feldman"). Following construction of the Property, the Partnership commenced an arbitration proceeding in January 1989 against the Developer to resolve various disputes and seeking certain monetary recoveries. On January 24, 1993, the arbitration panel issued its decision awarding approximately $8.1 million to the Partnership, as well as certain declaratory relief. Subsequently, the Partnership obtained a judgment from a court of the State of New York for the full amount of arbitration award in the sum of approximately $8.1 million against the Developer and also against Feldman pursuant to his guaranty. On or about January 21, 1997, Feldman and his wife commenced a voluntary case for liquidation pursuant to chapter 7 of the United States Bankruptcy Code. On July 31, 1997, the Partnership filed a Proof of Claim in the Feldmans' chapter 7 case in the amount of $11,313,232, which includes interest of approximately $2.7 million on the $8.1 million judgment. The summary of the assets and liabilities filed by Feldman and his wife with the Bankruptcy Court in their chapter 7 case indicates that their assets are less than 1.5% of the scheduled liabilities. Based upon such schedules, it is likely that after payment of the expenses of the administration of Feldmans' chapter 7 case, little or no distribution will be made to the Partnership as a holder of a general unsecured claim. 10. Litigation The Partnership had been involved in litigation with the Property's former construction manager, Gilbane Building Company ("Gilbane"), and a subcontractor, Moliterno Stone Sales, Inc. ("Moliterno"). In this suit, Gilbane and Moliterno, respectively, sought $2.65 million and $155,000 in damages, plus interest and other relief. On November 18, 1996, the Connecticut Superior Court (the "Court") awarded Gilbane $770,070 and Moliterno $155,000. All remaining claims, including the Partnership's counterclaims, were dismissed. On October 24, 1997, the Court entered a final judgment containing the foregoing awards and further awarding Gilbane and Moliterno interest and attorneys' fees of approximately $469,000. In December 1997, the Partnership paid $1,171,758 to Gilbane and $200,000 to Moliterno in settlement of all amounts due pursuant to the final judgment. 11. Subsequent Event On March 17, 1998, the Partnership entered into an agreement to sell the Property (the "Purchase Agreement") to Reckson Operating Partnership, L.P. (the "Buyer"), a Delaware limited partnership unaffiliated with the Partnership. Pursuant to the terms of the Purchase Agreement, the Buyer agreed to acquire the Property for consideration in the amount of $61,315,000 in cash (the "Purchase Price"), subject to adjustments in respect of certain closing costs (the "Sale"). The proposed Sale is subject to the satisfaction of certain conditions. Pursuant to the terms of the Partnership Agreement, Limited Partners holding a majority of limited partnership interests will have the right to disapprove of the Sale. An information statement will be mailed to the Limited Partners shortly detailing information concerning the proposed Sale and subsequent distribution by the Partnership. Report of Independent Auditors General and Limited Partners Stamford Towers Limited Partnership We have audited the accompanying balance sheets of Stamford Towers Limited Partnership as of December 31, 1997 and 1996, and the related statements of operations, partners' capital (deficit) and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our 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 management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Stamford Towers Limited Partnership at December 31, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Boston, Massachusetts February 17, 1998, except for Note 1 & Note 11, as to which the date is March 17, 1998 Net Asset Valuation Determination of Net Asset Value Per $10.00 Unit at December 31, 1997 (Unaudited) Partnership's Share of December 31, 1997 Appraised Property Value (1) North Tower $36,789,000 (1) South Tower 24,526,000 (1) Less: Revolving loan payable (18,365,631) 42,949,369 Cash and cash equivalents 3,960,408 Restricted cash 1,213,209 Accounts receivable 65,764 Prepaid expenses 24,211 48,212,961 Less: Total liabilities (1,983,359) Interest payable (116,775) Partnership Net Asset Value (2) $46,112,827 Net Asset Value Allocated: Limited Partners $45,651,699 General Partner 461,128 $46,112,827 Net Asset Value Per Unit (7,826,300 Units outstanding) $5.83 (1) Assumes a sale price of approximately $61,315,000. Amount is split 60/40 between the North and South Towers respectively based upon square footage. The estimated value, based upon recent bids received from prospective third party purchasers, differs from the December 31, 1997 financial statements primarily due to the exclusion of selling costs. (2) The Net Asset Value assumes a hypothetical sale on December 31, 1997 of the Partnership's property at a price based upon its value and the distribution of the proceeds of such sale, combined with the Partnership's cash after payment of the Partnership's liabilities, to the Partners. Limited Partners should note that the above figures are estimates of current value and actual values realizable upon sale may be significantly different. The estimated value does not reflect the actual costs which would be incurred in selling the properties. As a result of these factors and the illiquid nature of an investment in Units, the variation between the estimated value of the Partnership's properties and the price at which Units of the Partnership could be sold may be significant. Fiduciaries of Limited Partners which are subject to ERISA or other provisions of law requiring valuations of Units should consider all relevant factors, including, but not limited to Net Asset Value per Unit, in determining the fair market value of the investment in the Partnership for such purposes. Schedule III - Real Estate and Accumulated Depreciation December 31, 1997 Office Buildings: North Tower South Tower Total Location Stamford, CT Stamford, CT na Construction date began August 1987 August 1987 na Construction date complete February 1990 February 1990 na Acquisition date na na na Life on which depreciation in latest income statements is computed 5 - 35 years 5 - 35 years na Encumbrances $11,019,379 7,346,252 $18,365,631 Initial cost to Partnership (1): Land 8,828,690 5,885,793 14,714,483 Buildings and improvements 31,289,872 20,859,915 52,149,787 Costs capitalized subsequent to acquisition: Land, buildings and improvements 8,540,475 1,833,638 10,374,113 Retirements (333,519) (112,681) (446,200) Gross amount at which carried at close of period (2): Land $8,828,690 5,885,793 $14,714,483 Buildings and improvements 39,496,828 22,580,872 62,077,700 $48,325,518 $28,466,665 $76,792,183 Accumulated depreciation (3) (12,578,280) (4,808,284) (17,386,564) Prepaid Leasing Commissions 1,265,814 435,149 1,700,963 Deferred Rent 1,400,496 335,412 1,735,908 Net write down adjustment (2,003,920) (1,306,445) (3,310,365) Real estate held for sale $36,409,628 $23,122,497 $59,532,125 (1) The initial cost to the Partnership represents the original purchase price of the properties. (2) For Federal income tax purposes, the aggregate cost of real estate at December 31, 1997 and 1996 is $77,476,650 and $76,625,475, respectively. (3) For Federal income tax purposes, the amount of accumulated depreciation at December 31, 1997 and 1996 is $15,144,365 and $13,154,443, respectively. A reconciliation of the carrying amount of real estate and accumulated depreciation for the years ended December 31, 1997, 1996, and 1995 follows: 1997 1996 1995 Real estate investments: Beginning of year $ 76,133,583 $74,602,952 $74,242,608 Additions 796,796 1,615,557 360,344 Retirements (138,196) (84,926) _ Prepaid Leasing Commissions 1,700,963 _ _ Deferred Rent 1,735,908 _ _ Net write down adjustment (3,310,365) _ _ End of year $ 76,918,689 $76,133,583 $74,602,952 Accumulated depreciation: Beginning of year $16,104,668 $14,405,825 $12,226,266 Depreciation expense 1,420,092 1,783,769 2,179,559 Retirements (138,196) (84,926) _ End of year $ 17,386,564 $16,104,668 $14,405,825 EX-23 3 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS Consent of Independent Auditors We consent to the incorporation by reference in this Annual Report (Form 10-K) of Stamford Towers Limited Partnership of our report dated February 17, 1998, except for Note 1 and Note 11 as to which the date is March 17, 1998,included in the 1997 Annual Report of Stamford Towers Limited Partnership. Our audit also included the financial statement schedule of Stamford Towers Limited Partnership listed in Item 14(a). This schedule is the responsibility of the Partnership's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP Boston, Massachusetts March 17, 1998 EX-27 4 FINANCIAL DATA SCHEDULE FOR 1997 YEAR END FORM 10-K STAMFORD TOWERS LIMITED PARTNERSHIP
5 12-mos Dec-31-1997 Dec-31-1997 5,173,617 000 65,764 000 000 000 59,532,125 000 64,935,053 20,465,765 000 000 000 000 44,469,288 64,935,053 5,074,594 5,719,474 000 2,502,410 2,745,061 3,310,365 1,483,868 000 000 (4,322,230) 000 000 000 (4,322,230) (0.55) (0.55)
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