SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended June 30, 1996 Commission file number 0-9484
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - IX
(Exact name of registrant as specified in its charter)
Illinois 36-2875190
(State of organization) (I.R.S. Employer Identification No.)
900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 312/915-1987
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
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . 10
PART II OTHER INFORMATION
Item 5. Other Information. . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 12
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - IX
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
ASSETS
------
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 4,493,559 4,313,536
Interest, rents and other receivables . . . . . . . . . . . . . . . . 71,121 101,935
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 19,325 44,243
------------ -----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . 4,584,005 4,459,714
------------ -----------
Investment property, at cost:
Buildings and improvements. . . . . . . . . . . . . . . . . . . . . . 34,715,014 34,595,424
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . 17,174,158 17,174,158
------------ -----------
Total investment property, net of accumulated depreciation. . . 17,540,856 17,421,266
------------ -----------
Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,486,705 1,621,817
Venture partner's deficit in venture. . . . . . . . . . . . . . . . . . 33,669,060 33,925,042
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . 160,109 151,513
------------ -----------
$ 57,440,735 57,579,352
============ ===========
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . $ 82,413,241 82,670,202
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . 453,695 630,714
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 457,851 418,403
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . 83,324,787 83,719,319
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . 637,899 533,810
------------ -----------
Commitments and contingencies
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 83,962,686 84,253,129
Partners' capital accounts (deficits):
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . . (2,246,592) (2,252,665)
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (897,441) (897,441)
------------ -----------
(3,143,033) (3,149,106)
------------ -----------
Limited partners (55,005 interests):
Capital contributions, net of offering costs. . . . . . . . . . . . 49,689,766 49,689,766
Cumulative net earnings (losses). . . . . . . . . . . . . . . . . . 9,186,287 9,040,534
Cumulative cash distributions . . . . . . . . . . . . . . . . . . . (82,254,971) (82,254,971)
------------ -----------
(23,378,918) (23,524,671)
------------ -----------
Total partners' capital accounts (deficits) . . . . . . . . . . (26,521,951) (26,673,777)
------------ -----------
$ 57,440,735 57,579,352
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - IX
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
1996 1995 1996 1995
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Income:
Rental income . . . . . . . . . . . . . . . . . $ 3,991,825 4,050,881 7,950,007 7,924,839
Interest income . . . . . . . . . . . . . . . . 49,734 69,944 101,319 127,590
----------- ---------- ----------- ----------
4,041,559 4,120,825 8,051,326 8,052,429
----------- ---------- ----------- ----------
Expenses:
Mortgage and other interest . . . . . . . . . . 2,061,585 1,895,349 4,105,608 3,795,207
Depreciation. . . . . . . . . . . . . . . . . . -- 260,422 -- 512,514
Property operating expenses . . . . . . . . . . 1,518,961 1,588,824 3,073,871 3,109,840
Professional services . . . . . . . . . . . . . 16,386 10,440 69,102 11,272
Amortization of deferred expenses . . . . . . . 150,508 136,432 301,016 267,432
General and administrative. . . . . . . . . . . 24,521 20,390 93,921 23,535
----------- ---------- ----------- ----------
3,771,961 3,911,857 7,643,518 7,719,800
----------- ---------- ----------- ----------
Operating earnings (loss) . . . . . . . 269,598 208,968 407,808 332,629
Venture partner's share of
venture's operations. . . . . . . . . . . . . . (140,739) (101,775) (255,982) (146,945)
----------- ---------- ----------- ----------
Net earnings (loss) . . . . . . . . . . $ 128,859 107,193 151,826 185,684
=========== ========== =========== ==========
Net earnings (loss) per
limited partnership interest. . . . . $ 2.25 1.87 2.65 3.24
=========== ========== =========== ==========
Cash distributions per limited
partnership interest. . . . . . . . . $ -- -- -- --
=========== ========== =========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - IX
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 151,826 185,684
Items not requiring (providing) cash or cash equivalents:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 512,514
Amortization of deferred expenses . . . . . . . . . . . . . . . . . . . 301,016 267,432
Venture partner's share of venture's operations . . . . . . . . . . . . 255,982 146,945
Changes in:
Interest, rents and other receivables . . . . . . . . . . . . . . . . . 30,814 136,584
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,918 (11,347)
Accrued rents receivable. . . . . . . . . . . . . . . . . . . . . . . . (8,596) --
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . (177,019) (353,842)
Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,448 (2,012)
Tenant security deposits. . . . . . . . . . . . . . . . . . . . . . . . 104,089 (10,592)
------------ -----------
Net cash provided by (used in) operating activities . . . . . . 722,478 871,366
------------ -----------
Cash flows from investing activities:
Net sales and maturities (purchases) of short-term investments. . . . . . -- (2,738,593)
Additions to investment property. . . . . . . . . . . . . . . . . . . . . (119,590) (455,732)
Payment of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . (165,904) (90,197)
------------ -----------
Net cash provided by (used in) investing activities . . . . . . (285,494) (3,284,522)
------------ -----------
Cash flows from financing activities:
Bank overdraft. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (297,798)
Principal payments on long-term debt. . . . . . . . . . . . . . . . . . . (256,961) (397,551)
------------ -----------
Net cash provided by (used in) financing activities . . . . . . (256,961) (695,349)
------------ -----------
Net increase (decrease) in cash and cash equivalents. . . . . . 180,023 (3,108,505)
Cash and cash equivalents, beginning of year. . . . . . . . . . 4,313,536 4,789,433
------------ -----------
Cash and cash equivalents, end of period. . . . . . . . . . . . $ 4,493,559 1,680,928
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest . . . . . . . . . . . . . . . . $ 4,066,160 3,797,219
============ ===========
Non-cash investing and financing activities . . . . . . . . . . . . . . . $ -- --
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - IX
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(UNAUDITED)
GENERAL
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 1995 which are
included in the Partnership's 1995 Annual Report, as certain footnote
disclosures which would substantially duplicate those contained in such
audited financial statements have been omitted from this report.
The preparation of financial statements in accordance with GAAP
requires the Partnership to make estimates and assumptions that affect the
reported or disclosed amount of 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.
Certain amounts have been reclassified in the 1995 consolidated
financial statements to conform with the 1996 presentation.
Statement of Financial Accounting Standards No. 121 was adopted by the
Partnership on January 1, 1996.
TRANSACTIONS WITH AFFILIATES
There were no fees, commissions and other expenses required to be paid
by the Partnership to the General Partners and their affiliates as of June
30, 1996 and for the six months ended June 30, 1996 and 1995.
CEDARS-SINAI MEDICAL OFFICE COMPLEX
The venture property was refinanced under a long-term debt arrangement
which was scheduled to mature in January 1996. In December 1995, the
venture obtained a non-binding letter of intent to sell the Cedars-Sinai
office building to an unaffiliated prospective buyer. The agreement was
subject to certain conditions including the waiver by the Partnership's
unaffiliated venture partner to exercise its right of first opportunity to
acquire the Partnership's interest in the Cedars-Sinai office building (per
the Cedars-Sinai venture agreement). In January, 1996, the Partnership
gave notice to its venture partner of the letter of intent with the
unaffiliated third party. That notice triggered a 30-day election period
whereby the venture partner had the right to exercise or waive its right of
first opportunity. Pursuant to the venture agreement, if the venture
partner elects to exercise its right of first opportunity, the venture
partner would then have 120 days after making such election to close such
sale. The purchase price of the Partnership's interest would be such as
would produce for the Partnership the same consideration as the sale to the
unaffiliated third party. If the venture partner fails to close such a
sale in the 120 days, the right of first opportunity will be permanently
lost. In February, 1996 the venture partner gave notice to the Partnership
by which it purported to exercise its right of first opportunity subject to
certain terms and conditions. The Partnership believes that the venture
partner does not have the right to attach any conditions to the exercise of
such right. The Partnership is currently in dispute with the venture
partner regarding this issue and is considering its alternatives, including
legal recourse. During the foregoing dispute the unaffiliated third party
determined that it was no longer interested in purchasing the property.
The Partnership has therefore expanded the marketing effort to other
prospective purchasers. In January 1996, the venture obtained a short-term
extension of the mortgage loan's maturity, originally scheduled to mature
on January 14, 1996, to September 30, 1996. The interest rate of the
extended loan was adjusted from 9.11% to 10% per annum and the monthly
payments of approximately $725,000 are based on a 360 month amortization
with the remaining principal balance due at maturity.
Since it is likely that the venture will be unable to sell the
property by the maturity of the mortgage loan (September 30, 1996), the
venture has commenced discussions with the lender to negotiate a further
extension of the maturity. There can be no assurance that such an
extension can be obtained. If the venture is unable to arrange a sale of
the property or an additional extension of the mortgage loan, the lender
could realize upon its security and take title to the property. This would
result in the Partnership no longer having an ownership interest in such
property and result in a gain for financial reporting and Federal income
tax purposes to the Partnership with no corresponding distributable
proceeds. Upon sale or disposition of the property, the Partnership would
likely proceed to terminate its affairs.
The property was classified as held for sale or disposition as of
January 1, 1996 and therefore has not been subject to continued
depreciation. The accompanying consolidated financial statements include
$7,992,459 and $7,977,198 of revenues and $7,480,495 and $7,683,309 of
operating expenses for the six months ended June 30, 1996 and 1995. The
property had a net carrying value of $17,540,856 and $17,421,266 at June
30, 1996 and December 31, 1995.
The East and West Towers of the Cedars-Sinai Medical Office Complex in
Los Angeles, California are 96% and 93% occupied, respectively. In the
remaining portion of 1996 and in 1997, expiration of tenant leases for the
entire property will be approximately 7% and 11%, respectively. There can
be no assurance that the expiring tenant space will be renewed. In
addition, due to a competitive office market in which the property is
located, it is possible that significant costs will be required to re-lease
such space. The Partnership and its consolidated venture have currently
budgeted in 1996 approximately $562,000 for tenant improvements and other
capital expenditures. The Partnerships' share of such items is budgeted to
be approximately $281,000. Such factors are expected to cause the property
to operate at close to a break-even level for such years. In anticipation
of such future costs, cash of approximately $1,700,000 is being reserved by
the Cedars-Sinai venture rather than distributed to the Partnership or the
venture partner.
ADJUSTMENTS
In the opinion of the Corporate General Partner, all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation have been made to the accompanying figures as of June 30, 1996
and for the three and six months ended June 30, 1996 and 1995 assuming that
the Partnership continues as a going concern.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the notes to the accompanying financial
statements for additional information concerning the Partnership's
investment.
During the second quarter some of the Limited Partners in the
Partnership received from an unaffiliated third party an unsolicited tender
offer to purchase up to 2,595 Interests in the Partnership at $50 per
Interest. The Partnership recommended against acceptance of this offer on
the basis that, among other things, the offer price was inadequate. In
June such offer expired with approximately 521 Interests being purchased by
such unaffiliated third party pursuant to such offer. In addition, the
Partnership has, from time to time, received inquires from other third
parties that may consider making offers for Interests, including requests
for the list of Limited Partners in the Partnership. These inquiries are
generally preliminary in nature. There is no assurance that any other
third party will commence an offer for Interests, the terms of any such
offer or whether any such offer, if made, will be consummated, amended or
withdrawn. The board of directors of JMB Realty Corporation ("JMB") the
corporate general partner of the Partnership, has established a special
committee (the "Special Committee") consisting of certain directors of JMB
to deal with all matters relating to tender offers for Interests in the
Partnership, including any and all responses to such tender offers. The
Special Committee has retained independent counsel to advise it in
connection with any potential tender offers for Interests and has retained
Lehman Brothers Inc. as financial advisor to assist the Special Committee
in evaluating and responding to any additional potential tender offers for
Interests. Expenses incurred in connection with the previous tender offer
and additional potential tender offers for Interests are expected to
increase Partnership operating expenses in the third quarter.
There is a possibility that the Partnership will wind up its affairs
in 1996 and cease to continue as a going concern.
After reviewing the remaining property and the marketplace in which it
operates, the General Partners of the Partnership expect to be able to
conduct an orderly liquidation of the remaining asset as quickly as
practicable. Therefore, the affairs of the Partnership are expected to be
wound up no later than 1999 (sooner if the property is sold or disposed of
in the nearer term as discussed above), barring unforeseen economic
developments.
RESULTS OF OPERATIONS
The increase in mortgage and other interest expense for the three and
six months ended June 30, 1996 as compared to the three and six months
ended June 30, 1995 is primarily due to an increased interest rate on the
short-term loan extension related to Cedars-Sinai.
The decrease in depreciation and venture partner's share of venture's
operations for the three and six months ended June 30, 1996 as compared to
the three and six months ended June 30, 1995 is primarily due to the
Cedars-Sinai investment property being classified as held for sale or
disposition and therefore not subject to continued depreciation. The
venture partner's share is offset by the increase in mortgage and other
interest expense as discussed above.
The increase in general and administrative expense for the six months
ended June 30, 1996 as compared to the six months ended June 30, 1995 is
primarily due to the use of independent third parties to perform certain
administrative services for the Partnership.
<TABLE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
OCCUPANCY
The following is a listing of approximate occupancy levels by quarter for the Partnership's remaining
investment property:
<CAPTION>
1995 1996
------------------------------------- ------------------------------
At At At At At At At At
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cedars-Sinai Medical
Office Complex
Los Angeles, California
East Tower. . . . . . . . 95% 95% 98% 96% 95% 96%
West Tower. . . . . . . . 96% 96% 94% 91% 91% 93%
</TABLE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
3-A. The Prospectus of the Partnership dated August 17,
1979, as supplemented on October 17, 1979, December 10, 1979, December 28,
1979, January 28, 1980 and February 27, 1980, filed with the Commission
pursuant to Rules 424(b), is incorporated herein by reference to Exhibit 3-
A of the Partnership's Report on Form 10-K (File No. 0-9484) for December
31, 1992 dated March 19, 1993.
3-B. Amended and Restated Agreement of Limited Partnership
set forth as Exhibit A to the Prospectus, incorporated by reference to the
Partnership's Registration Statement on Form S-11 (File No. 2-63958) dated
August 17, 1979.
4-A. Modification documents relating to the long-term
mortgage note secured by the Cedars-Sinai Medical Office Complex located in
Los Angeles, California are incorporated by reference to the Partnership's
Report on Form 8-K (File No. 0-9484) dated January 15, 1991.
4-B. Extension agreement relating to the long-term mortgage
note secured by the Cedars-Sinai Medical Office Complex located in Los
Angeles, California is incorporated by reference to the Partnership's
Report on Form 10-K (File No. 0-9484) for December 31, 1995 dated March 25,
1996.
10. Acquisition documents relating to the purchase by the
Partnership of an interest in Cedars-Sinai Medical Office Complex located
in Los Angeles, California are incorporated herein by reference to the
Partnership's Registration Statement on Post-Effective Amendment No. 2 to
the Partnership's Prospectus on Form S-11 (File No. 2-63958) dated August
17, 1979.
27. Financial Data Schedule
(b) No reports on From 8-K were required to be filed during the
last quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - IX
BY: JMB Realty Corporation
(Corporate General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: August 9, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.
GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: August 9, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE REGISTRANT'S FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS INCLUDED IN SUCH REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,493,559
<SECURITIES> 0
<RECEIVABLES> 90,446
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,584,005
<PP&E> 34,715,014
<DEPRECIATION> 17,174,158
<TOTAL-ASSETS> 57,440,735
<CURRENT-LIABILITIES> 83,324,787
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (26,521,951)
<TOTAL-LIABILITY-AND-EQUITY> 57,440,735
<SALES> 7,950,007
<TOTAL-REVENUES> 8,051,326
<CGS> 0
<TOTAL-COSTS> 3,374,887
<OTHER-EXPENSES> 163,023
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,105,608
<INCOME-PRETAX> 407,808
<INCOME-TAX> 0
<INCOME-CONTINUING> 151,826
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 151,826
<EPS-PRIMARY> 2.65
<EPS-DILUTED> 2.65
</TABLE>
