SECURITIES and EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15 (d)
of The Securities Exchange Act of 1934
For the fiscal year ended Commission file number
December 31, 1996 0-7752
CONTINENTAL REAL ESTATE PARTNERS, LTD.
(Exact Name of Registrant as Specified in its
Certificate of Limited Partnership)
Massachusetts 04-2523977
(State of organization) (I.R.S. Employer Identification Number)
Wood Ridge Road
Glen Arbor, Michigan 49636
(Address of principal executive offices) (Zip code)
Formerly:
234 Congress Street
Boston, Massachusetts 02110
(Zip code)
Registrant's Telephone Number (616) 334-5000
Including Area Code
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests (Units)
$500 per Unit -- Minimum Purchase 5 Units
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
The number of limited partnership interests outstanding as of December 31,
1996:
Limited Partnership Units, $500 per unit - 30,004 units
Total Pages: 22
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DOCUMENTS INCORPORATED BY REFERENCE
Form 10-KSB Section Annual Report to Limited
Partners page number
Part I, Item 1 Pages 10 and 11
Part II, Item 5 Pages 7, 11 and 12
Part II, Item 6 Page 2
Part II, Item 7 Pages 3 - 14
Part III, Item 12 Pages 10 and 12
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Part I
Item 1. Description of Business
The purpose of the business to be carried on by the Partnership is to invest
either solely or jointly with others in improved properties and properties
under development which have promise of generating cash flow for the Limited
Partnership, as well as capital growth through debt reduction and
appreciation in real estate values, and to do all things reasonable
incident thereto, including the following: acquire and dispose
of fee ownerships, leaseholds and legal equitable interests in real
estate of all types and descriptions; acquire properties subject to
outstanding leases, mortgages and other prior encumbrances and take and
give purchase money mortgages and other types of junior debt financing;
acquire and give options to purchase properties; purchase and sell real
estate at auction; purchase, sell and finance the purchase and sale of
furniture and equipment; and develop properties for its own account or
in combination with others, including site preparation, the construction
of improvements and other activities to the development process. The
Partnership may not engage in any other business without the prior
written consent of Limited Partners holding more than a majority of the
units.
At December 31, 1996, the Registrant owned a shopping center in Lakeland,
Florida. See Note D to the Financial Statements incorporated by reference
in Item 7, describing lease information.
During the fiscal year ended December 31, 1996, there were no material
changes in the business done or intended to be done by the Registrant.
The real estate industry is highly competitive and the Registrant's
continued ability to meet its fixed and variable obligations will depend
on various factors such as general and local conditions, the supply of and
demand for properties of the type which the Registrant owns, zoning law
changes and local real property tax rates, among others.
Item 2. Description of Property
(a) The following property was owned by the Registrant at December 31, 1996:
Owned Percent
Location Brief Description or Leased Occupied
Lakeland, Lakeland Mall: shopping Owned 0%
Florida center (approximately
370,000 rentable, square
feet). First occupied
in 1971.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
None
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Part II
Item 5. Market for Common Equity and Related Security Holder Matters
Since the Registrant is a Limited Partnership, it has no common stock
outstanding; instead, it has Limited Partnership interests (units). The
initial capital of the Registrant is comprised of: 1) 30,004 Limited
Partnership units representing a $500 investment, per unit; and 2) a
$15,000 investment by the General Partner. At December 31, 1996, there
were 1,361 Limited Partners of record.
Since the initial offering of the units, an established market for the
units has not existed. They are not listed or traded on any exchange.
Dividends are not paid on the Limited Partnership units. See "Statement
of Changes in Partners' Capital" and "Note E - Distribution to Partners"
in the Financial Statements incorporated by reference in Item 7, for
information regarding payment to Partners.
Item 6. Management's Discussion and Analysis of Results of Operations
A report of Management's Discussion and Analysis of Financial Condition
and Results of Operations at December 31, 1996, which appears on page 2 of
the Continental Real Estate Partners, Ltd. Annual Report to Partners for
1996 is incorporated by reference in this Form 10-KSB Annual Report.
Item 7. Financial Statement
The financial statements, together with the report thereon of Dennis,
Gartland & Niergarth, P.C. dated January 17, 1997, appearing on pages 3
through 14 of the Continental Real Estate Partners, Ltd. 1996 Annual
Report to Partners are incorporated by reference in this Form 10-KSB
Annual Report.
Item 8, Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure
None
Part III
Item 9. Directors and Executive Officers of the Registrant
The Registrant has no executive officers. Listed below are the executive
officers of The Bayberry Group, Inc. formerly Continental Equities, Inc.,
General Partner of the Registrant. Such officers serve until the next
annual meeting of the Directors of the General Partner, or until their
successors are duly elected and qualified.
ROBERT A. KURAS (Age 54) is, and has been since January 1, 1975, Chairman
and President of the General Partner. Since 1967, Mr. Kuras has planned,
financed, developed, acquired, managed and sold a number of real estate
projects and has performed realty-related services for a variety of clients.
Mr. Kuras holds a Bachelor of Arts degree from the University of Notre
Dame and a Master of Business Administration degree from Harvard University.
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Item 9. Directors and Executive Officers of the Registrant - Continued
SHIRLEY K. DEBELACK (Age 53) has been employed by affiliates of The Bayberry
Group, Inc. since May of 1974 and was appointed Vice-President and Secretary
of the Corporation in November of 1982. Mrs. Debelack holds a Bachelor of
Arts degree from Michigan State University and has over 20 years experience
in real estate and resort development properties in Michigan.
There are no family relationships between any executive officer and
director of the General Partner of the Registrant listed above.
Item 10. Executive Compensation
The Registrant has no officers, directors, or subsidiaries. During 1996,
the Registrant, paid $49,480 to the General Partner for expense
reimbursement and property management fees. The Registrant has no
directors, officers, or security holders who owns more than 5% of the
units. The Registrant also has no pension, retirement, savings, or
similar plan.
Item 11. Security Ownership of Certain Beneficial Owners and Management
(a) There is no person who owns of record or who is known by the Registrant
to own beneficially more than 5% of the outstanding units.
The item listed below represents a group of related mutual funds which
own partnership units in a fiduciary capacity for its investors, and is
not a beneficial owner of such units.
Title of Class Name and Address Amount of Ownership Percent of Class
Partnership Liquidity Fund 8,465 28.2%
Interests 1900 Powell Street
(Units) Suite 235
Emeryville, CA 94608
(b) The Registrant has no directors or officers and, accordingly, this item
is not applicable.
(c) The Registrant knows of no contractual arrangement by which a change in
control of the Registrant may result at a subsequent date.
Item 12. Certain Relationships and Related Transactions
(a) Transactions with management and others
Fees paid or accrued to the General Partner or affiliates of the General
Partner in accordance with the Partnership Agreement are discussed in Notes
C and F to the Financial Statements, which have been incorporated by
reference in Item 7. During 1996, the General Partner purchased 232
units from the Limited Partners and owned a total of 665 Limited
Partnership units at December 31, 1996.
(b) Certain business relationships
The Registrant has no directors. Therefore, this is not applicable.
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Part IV
Item 13. Exhibits and Reports on Form 8-K
(a) The following documents are filed as part of this report:
Page in
Annual
1. Financial Statements - Report *
Statement of Assets, Liabilities and Partners'
Capital at December 31, 1996 4
Statements of Operations for each of the two years in the
period ended December 31, 1996 5
Statements of Cash Flows for each of the two years in the
period ended December 31, 1996 6
Statements of Changes in Partners' Capital for each
of the two years in the period ended December 31, 1996 7
Notes to Financial Statements 8 - 12
Report of Independent Certified Public Accountants 13
* Incorporated by reference from the indicated
pages of the 1996 Annual Report to Partners
2. Financial Statement Schedules
Not required by Regulation S-B.
(b)Reports on Form 8-K:
None
(c) Exhibits:
3. Articles of Limited Partnership of Continental Real Estate Partners,
Ltd. as amended-- previously filed with the Partnership's Registration
Statement on Form S-11, File No. 2-46282, effective date 2:00 p.m. E.D.S.T.
July 26, 1973 and incorporated herein by reference.
4. Same as Item 14(c)3.
13. Continental Real Estate Partners, Ltd. Annual Report to Partners for
the year ended December 31, 1996.
All other items under Regulation S-K Item 601 are not applicable to the
Registrant.
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<PAGE>
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.
CONTINENTAL REAL ESTATE PARTNERS, LTD.
(Registrant)
By: Robert A. Kuras Date: March 31, 1997
Robert A. Kuras
President, Chairman of the Board
of Directors and Principal Accounting
Officer of The Bayberry Group, Inc.,
General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the Following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: Robert A. Kuras Date: March 31, 1997
Robert A. Kuras
President, Chairman of the Board
of Directors and Principal Accounting
Officer of The Bayberry Group, Inc.,
General Partner
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
CONTINENTAL REAL ESTATE PARTNERS, LTD.
(A Limited Partnership)
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<PAGE>
March 31, 1997
To Our Partners:
For the year ended December 31, 1996, the Partnership had an operating
loss of $307,958 compared to a year prior figure of $364,695. The
reduction in the loss is partially attributable to our having leased a
portion of the parking lot to Lakeland Regional Medical Center for $3,874
per month.
During the last quarter of the year, we continued the process of
talking with parties who expressed an interest in leasing or purchasing
a part of or all of the Lakeland Mall. As we have found in the past, the
vast majority of those parties have neither the capital nor management
expertise to undertake a project of this size. Therefore, our discussions
were not productive.
In our report for the Third Quarter, we addressed fundamental problems
(i.e. declining economic activity and inner city ills) which many feel
characterize the area immediately surrounding the Lakeland Mall. While
we do not see a change in the fundamentals in the area of the magnitude
necessary to influence the marketability of the Partnership=s property,
we are seeing a bit of economic activity. It is occurring at a much
smaller center which is across the street from the Lakeland Mall, of
which portions are being converted from retail to low cost office space.
Although the level of activity which is occurring is encouraging, it is
not yet, in our opinion, large enough to impact the area and enhance the
marketability of the Lakeland Mall. We will, nonetheless, monitor it
with care and see if it gives rise to interest from more qualified prospects.
During the Fourth Quarter, we purchased an additional 195 units in the
Partnership at an average price of $30.00 per unit. A number of partners
have expressed an interest in selling additional units. We are considering
further purchases but have not, as yet, decided to make them.
Sincerely,
Robert A. Kuras
President
Shirley K. Debelack
Treasurer
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<PAGE>
Exhibit 1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Continental Real Estate Partners, Ltd., is a publicly owned limited
partnership engaged in the business of acquiring, owning, operating and
selling improved commercial real estate. The Partnership's sources of
cash, other than net proceeds from the sale or refinancing of partnership
properties, are the net cash flows generated by the properties and interest
earned on short-term investments.
Results of Operations
For the years ended December 31, 1996 and 1995:
The results from continuing operations of the Partnership were losses
of $307,958 and $364,695 for the years ended December 31, 1996 and
1995, respectively. Operating revenues increased $22,303 from 1995
to 1996 primarily due to an increase in month-to-month leases.
Operating expenses decreased $38,898 from 1995 to 1996. Contracted
services decreased significantly. These expenses were incurred
relative to investigating alternative uses for the Mall and to
seek potential purchases of the Mall and most expenses were incurred
in 1995. There were no other significant variances in expenses between
1996 and 1995.
Operating revenues in the future will most likely be stable as the
major tenant is bound by its lease agreement through June 2007 and
the Partnership currently has no plans to terminate this lease
agreement. Both the retail and real estate markets continue to
be soft locally. To the extent no new loans are obtained, debt
retirement will no longer impact results from operations or cash flow.
Depreciation charges will continue to decline unless a major renovation
were to occur in the future. Should a renovation not occur, repairs
and maintenance may increase to maintain the present real estate
in good condition.
Liquidity and Sources of Capital
The liquidity position of the Partnership increased $87,517 for the
year ended December 31, 1996. The net increase was due to cash flow
provided by operations.
In the short-term, the partnership should generate cash flows from
operations. The Partnership's ability to generate cash flows in the
long-term will be dependent upon retention of current tenants and the
ability to keep expenses in line with revenues. Cash flows would be
adversely affected if a major renovation were to take place unless
the same were funded with the proceeds of refinancing.
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<PAGE>
Continental Real Estate Partners, Ltd.
FINANCIAL STATEMENTS
AND REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
December 31, 1996
Dennis, Gartland &
Niergarth, P.C.
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<PAGE>
<TABLE>
Continental Real Estate Partners, Ltd.
STATEMENT OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL
December 31, 1996
<CAPTION>
ASSETS
<S> <C>
Investments in real estate
Land $ 183,581
Land improvements 1,877,263
Buildings and equipment 11,927,766
13,988,610
Less - accumulated depreciation 11,194,873
2,793,737
Cash 1,065,816
Other assets 261,549
$ 4,121,102
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
<S> <C>
LIABILITIES
Unclaimed distribution checks $ 170,164
Accounts payable and accrued expenses 46,311
Liabilities to general partner 2,136,320
2,352,795
PARTNERS' CAPITAL
General partner 380,796
Limited partners - 30,004 units of limited partnership
interest 1,387,511
1,768,307
$ 4,121,102
<FN>
The accompanying notes are an integral part of these financial statements.
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-12-
</TABLE>
<PAGE>
<TABLE>
Continental Real Estate Partners, Ltd.
STATEMENTS OF OPERATIONS
Years ended December 31,
<CAPTION>
1996 1995
<S> <C> <C>
Operating revenue
Rental income $ 439,301 $ 417,078
"Other, principally operating expense
reimbursements" 350 270
439,651 417,348
Operating expenses
Depreciation and amortization 407,264 407,620
Insurance 85,968 78,744
Real estate taxes 72,534 72,615
Contracted services 21,897 65,895
Repairs and maintenance 49,722 49,799
Professional services 38,446 40,135
Utilities 31,354 33,719
Property management fees 26,752 22,046
Commissions 15,228 12,108
Investor communications 5,140 10,702
Other 33,116 32,936
787,421 826,319
Operating loss (347,770) (408,971)
Other income
Interest income 39,812 44,276
NET LOSS $(307,958) $(364,695)
Net loss allocated to:
General partner $ (15,398) $ (18,235)
Limited partners - loss of $(9.75) and $(11.55)
per unit of limited partnership interest
outstanding for 1996 and 1995, respectively (292,560) (346,460)
$(307,958) $(364,695)
The accompanying notes are an integral part of these financial statements.
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-12-
</TABLE>
<PAGE>
<TABLE>
Continental Real Estate Partners, Ltd.
STATEMENTS OF CASH FLOWS
Years ended December 31,
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities
Net loss $(307,958) $(364,695)
Adjustment to reconcile net income to cash
provided by operating activities
Depreciation and amortization 407,264 407,620
Increase in other assets (16,272) (46,502)
Increase (decrease) in accounts payable
and accrued expenses 4,483 (28,155)
Net cash provided (used) by operating activities 87,517 (31,732)
Cash flows from investing activities
Purchase of property and equipment - (3,035)
NET INCREASE (DECREASE) IN CASH 87,517 (34,767)
Balance of cash, beginning of year 808,135 842,902
Balance of cash, end of year $ 895,652 $ 808,135
A reconciliation of the ending balance of cash to the balance sheet is
as follows:
Cash $ 1,065,816 $ 978,299
Unclaimed distribution checks (170,164) (170,164)
$ 895,652 $ 808,135
<FN>
The accompanying notes are an integral part of these financial statements.
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-14-
</TABLE>
<PAGE>
<TABLE>
Continental Real Estate Partners, Ltd.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<CAPTION>
Total
General Limited Partners'
Partner Partners Capital
<S> <C> <C> <C>
Balance, December 31, 1994
($67.54 per unit of limited
partnership interest) $414,429 $2,026,531 $2,440,960
1995 net loss ($11.55 per unit of limited
partnership interest) (18,235) (346,460) (364,695)
Balance, December 31, 1995
($55.99 per unit of limited
partnership interest) 396,194 1,680,071 2,076,265
1996 net loss ($9.75 per unit of limited
partnership interest) (15,398) (292,560) (307,958)
Balance, December 31, 1996
($46.24 per unit of limited
partnership interest) $380,796 $1,387,511 $1,768,307
<FN>
The accompanying notes are an integral part of these financial statements.
-7-
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</TABLE>
<PAGE>
Continental Real Estate Partners, Ltd.
NOTES TO FINANCIAL STATEMENTS
NOTE A - ORGANIZATION AND OPERATIONS
Continental Real Estate Partners, Ltd. (the Partnership) was organized as
a limited partnership under the laws of the Commonwealth of Massachusetts
pursuant to a Partnership Agreement dated November 9, 1972. The
Partnership's sole business is the ownership and operation of the Lakeland
Mall in Lakeland, Florida. The operations of the Partnership will cease
upon the sale of all or substantially all of these assets or upon the
expiration of the term of the Partnership in the year 2003. The
Bayberry Group, Inc. is the general partner of the limited partnership
and has invested $15,000 for a 5% interest in the net profits or losses
of the Partnership. The remaining 95% of the net profits or losses are
allocated to the limited partners in proportion to their share of ownership.
NOTE B - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant policies consistently applied in the
preparation of the accompanying financial statements follows.
Basis of Accounting and Distribution
The accompanying financial statements have been prepared on the accrual
basis of accounting; however, distributions will be made to the limited
partners on the basis of cash available for distribution, if any, as
defined in the Partnership Agreement and at the discretion of the general
partner.
Lease Accounting
The Partnership uses the operating method of accounting for its tenant
leases. Under this method of accounting, revenue from lease transactions
is recognized ratably over the lease period and operations are charged
with depreciation, maintenance costs and other expenses.
Investments in Real Estate
The Partnership capitalizes the initial purchase price of land, land
improvements, buildings and equipment. All expenditures for improvements
are added to the cost of the real estate. Expenditures for maintenance
and repairs after acquisition are charged against income as incurred.
Gains or losses on the sale of any investment in real estate are reflected
in operations in the year of disposition and the cost and related
accumulated depreciation are removed from the accounts.
Depreciation
Depreciation of land improvements, buildings and equipment is computed
using straight-line and declining balance methods. Assets depreciated on
a declining balance method are normally converted to the straight-line
method at such point in their life when the latter method will produce
greater depreciation charges. The range of useful lives over which
depreciation is provided is substantially as follows: land improvements -
10 to 15 years, buildings - 15 to 40 years, and equipment - 3 to 15 years.
Depreciation expense for the years ended December 31, 1996 and 1995,
was $407,264 and $407,620, respectively.
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<PAGE>
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE B - SUMMARY OF ACCOUNTING POLICIES - Continued
Cash and Cash Equivalents
Cash and cash equivalents include savings and checking accounts and
certificates of deposit maturing within three months.
Income Taxes
The Partnership is not subject to Federal income taxes. Instead, the
partners of the Partnership must include in their respective income tax
returns their proportionate share of the earnings or loss of the
Partnership. Accordingly, no provision or credit has been recognized
in the accompanying financial statements for Federal income taxes.
Following is a reconciliation between net loss and taxable loss for the
years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Net loss $(307,958) $(364,695)
Accrued expenses - (34,387)
Tax depreciation under book depreciation 120,700 121,278
Other 785 909
Taxable loss - $(5.90) and $(8.77)
per unit of limited and
Partnership interest for 1996 and
1995, respectively $(186,473) $(276,895)
</TABLE>
The reported value of the Partnership's assets and liabilities exceeded
their tax bases by $2,793,720 and $2,673,020 at December 31, 1996 and 1995,
respectively.
Other Assets
Included in other assets is a leasing commission paid by the Partnership
at the inception of the Wal-Mart lease. The commission is being amortized
using the straight-line method over the life of the lease (20 years).
Accumulated amortization at December 31, 1996 and 1995 was $116,039 and
$103,931, respectively.
Use of Estimates in the Preparation of Financial Statements
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 amounts could differ from those
estimates.
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<PAGE>
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE B - SUMMARY OF ACCOUNTING POLICIES - Continued
Fair Values of Financial Instruments
The Partnership has a number of financial instruments, none of which are
held for trading purposes. The Partnership estimates that the fair value
of all financial instruments at December 31, 1996 does not differ materially
from the aggregate carrying values of its financial instruments recorded in
the accompanying balance sheet. The estimated fair value amounts have been
determined by the Partnership using available market information and
appropriate valuation methodologies. Considerable judgment is necessarily
required in interpreting market data to develop the estimate of fair value
and, accordingly, the estimates are not necessarily indicative of the
amounts that the Partnership could realize in a current market exchange.
NOTE C - FEES TO AFFILIATES
Fees paid or accrued to the general partner or affiliates of the general
partner in accordance with the Property Management Agreement and the
Partnership Agreement for the years ended December 31, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Management fees $26,752 $22,046
Administrative cost reimbursement 18,408 18,408
Payroll, telephone and professional fee
reimbursement 4,320 4,320
$49,480 $44,774
</TABLE>
NOTE D - SIGNIFICANT LEASES AND LEASE INFORMATION
The following table summarizes the more significant leases in effect at
Lakeland Mall at December 31, 1996:
<TABLE>
<CAPTION>
Lease
Tenant Expiration Area in Square Feet
<C> <C> <C>
Wal-Mart June, 2007 103,161
Net leasable area 370,000
</TABLE>
Lease revenues of $412,644 per year from Wal-Mart accounted for 94% and 96%
of rental income at Lakeland Mall for the years ended December 31, 1996 and
1995, respectively. During 1994, Wal-Mart vacated its space. However,
Wal-Mart is still bound by terms of its lease agreement which expires June
2007. The entire mall is currently vacant.
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<PAGE>
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE D - SIGNIFICANT LEASES AND LEASE INFORMATION - Continued
The following is a schedule by year of aggregate minimum future rentals on
noncancellable operating leases for the Partnership's rental properties as
of December 31, 1996:
<TABLE>
<CAPTION>
<S>
Years Ending
December 31,
<C>
1997 $ 482,771
1998 446,180
1999 438,432
2000 438,432
2001 438,432
Later years 2,512,376
$4,756,623
</TABLE>
The Partnership generally does not require security deposits from its
larger regionally or nationally recognized tenants. As collateral for
payments of the rents due from smaller regional or local tenants, the
Partnership strives to obtain personal and/or corporate guarantees.
Should a tenant default under the terms of the lease agreement, payments
of rents due may be pursued through the legal system. For instances where
a corporate or personal guarantee exists, a lien may be placed at the
discretion of the court on any personal property the tenant may own, the
value which may or may not be sufficient to cover rents due. In the case
of a tenant in bankruptcy, the Partnership's recovery may be limited due
to the priority of its claim in relation to that of other creditors.
NOTE E - DISTRIBUTIONS TO PARTNERS
Under the terms of the Partnership Agreement, as described in Article XI(b),
certain distributions shall be made to the limited partners. Annually, the
general partner must determine Cash Available for Distribution, as defined
in the agreement, and make distributions of such cash. Presented below is
the determination of Cash Available for Distribution as of December 31,
1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Cash provided by operations since inception $1,283,784 $1,196,267
Accounts payable and accrued expenses (46,311) (50,580)
Liabilities to general partner (2,136,320) (2,127,568)
Cumulative distributions of cash (3,962,628) (3,962,628)
Cash (deficiency) available for
distribution $(162.03) and $(164.79)
per unit as of December 31, 1996
and 1995, respectively $(4,861,475) $(4,944,509)
</TABLE>
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<PAGE>
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE E - DISTRIBUTIONS TO PARTNERS - Continued
In addition to the Cash Available for Distribution provision, Article V(6)
of the agreement provides for the distribution of net proceeds arising from
the sale of Partnership property. Net proceeds shall be distributable to
the limited partners as soon as feasible unless the general partner
determines that it would be in the best interest of the limited partners
to retain such proceeds or a portion thereof to reduce outstanding mortgage
debt, to make capital improvements or to provide for contingencies.
Accumulated undistributed net proceeds of $4,146,107 at December 31, 1996
have been retained to reduce outstanding mortgage balances and other debts
and make capital improvements.
NOTE F - INCENTIVE FEES
Under the terms of the Partnership Agreement, as described in Article
XII(d)(4), the general partner is entitled to receive an incentive fee
equal to 10% of the net proceeds of any sales or refinancing of a
Partnership property. Payment of the incentive fee is postponed
until the limited partners receive cumulative distributions from any
source equal to 100% of their initial capital contribution plus an amount
equal to the sum of 7% (non-compounded) of their adjusted capital
contributions in each year in which the calculation occurs.
The incentive fees are accrued at December 31, 1996, but payment will be
postponed until such time as the limited partners receive additional cash
distributions aggregating approximately $7,380,320. Distributions in
excess of the limited partners' initial capital contribution have been paid.
From the inception of the Partnership to December 31, 1996, the limited
partners have received cash distributions aggregating $18,964,629.
The incentive fees applicable to the sale of Partnership properties are
as follows:
<TABLE>
<S> <C>
Cedar Ridge - sold in 1979 $ 432,265
Oakland Hills - sold in 1979 127,240
Columbia - sold in 1981 152,593
Oaks II and III - sold in 1981 230,716
Portion of Lakeland property - sold in 1984 25,202
Karcher Mall - sold in 1986 504,768
Briarwood Apartments - sold in 1989 430,108
Interest in Lakeland Mall lease - sold in 1991 224,676
$2,127,568
</TABLE>
NOTE G - CONCENTRATIONS OF CREDIT RISK
The Partnership maintains cash balances at several financial institutions.
Accounts at each institution are insured by the Federal Deposit Insurance
Corporation up to the maximum amount allowed. At December 31, 1996, the
Partnership's uninsured cash balances totaled $471,048. Uninsured balances
may have been higher during the year.
-12-
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<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Bayberry Group, Inc.
Sole General Partner of
Continental Real Estate Partners, Ltd.
We have audited the statement of assets, liabilities and partners'
capital of Continental Real Estate Partners, Ltd. (a Massachusetts limited
partnership) as of December 31, 1996, and the related statements of
operations, cash flows and changes in partners' capital for each of
the years ended December 31, 1996 and 1995. 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 audits 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 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 Continental Real Estate
Partners, Ltd., as of December 31, 1996, and the results of its operations
and cash flows for each of the years ended December 31, 1996 and 1995, in
conformity with generally accepted accounting principles.
January 17, 1997
-13-
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<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000024148
<NAME> CONTINENTAL REAL ESTATE PARTNERS LTD
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,065,816
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 261,549
<PP&E> 13,988,610
<DEPRECIATION> 11,194,873
<TOTAL-ASSETS> 4,121,102
<CURRENT-LIABILITIES> 2,352,795
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,768,307
<TOTAL-LIABILITY-AND-EQUITY> 4,121,102
<SALES> 439,651
<TOTAL-REVENUES> 439,651
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 787,421
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (307,958)
<INCOME-TAX> 0
<INCOME-CONTINUING> (307,958)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (307,958)
<EPS-PRIMARY> (9.75)
<EPS-DILUTED> (9.75)
</TABLE>
