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, 1994 Commission file number 0-10494
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(Exact name of registrant as specified in its charter)
Illinois 36-3102608
(State of organization) (IRS 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 . . . . . . . . . . . 15
PART II OTHER INFORMATION
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . 21
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . 23
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1994 AND DECEMBER 31, 1993
(UNAUDITED)
ASSETS
------
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,119,745 2,312,541
Short-term investments (note 1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,386 2,288,265
Rents and other receivables (net of allowance for doubtful
accounts of $1,881,384 and $1,284,059 at
June 30, 1994 and December 31, 1993, respectively) . . . . . . . . . . . . . . . . . . . . 1,204,522 2,230,844
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,230,672 1,636,340
Escrow deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,410,272 1,510,402
------------ -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,097,597 9,978,392
------------ -----------
Mortgage notes receivable (net of reserve for uncollectibility of $527,774, note 5(a)) . . . . 2,067,695 2,067,695
Investment properties, at cost:
Land and leasehold interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,333,011 18,333,011
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196,199,070 193,684,179
------------ -----------
214,532,081 212,017,190
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,944,018 72,509,329
------------ -----------
Total investment properties, net of accumulated depreciation . . . . . . . . . . . . 138,588,063 139,507,861
Investment in unconsolidated ventures, at equity (note 1). . . . . . . . . . . . . . . . . . . 273,812 445,473
Deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,878,841 5,881,001
Accrued rents receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,310,905 3,108,523
Venture partners' deficits in ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,485,502 8,422,186
------------ -----------
$166,702,415 169,411,131
============ ===========
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------
JUNE 30, DECEMBER 31,
1994 1993
------------ -----------
Current liabilities:
Current portion of long-term debt (notes 3(c) and 3(d)). . . . . . . . . . . . . . . . . . . $ 48,213,724 48,194,235
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,541,732 1,587,865
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336,898 741,524
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,773,776 8,712,498
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,122,656 1,437,411
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,988,786 60,673,533
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155,616 184,933
Long-term debt, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,917,429 106,140,597
------------ -----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169,061,831 166,999,063
Deferred gain on sale of investment property (note 5(a)) . . . . . . . . . . . . . . . . . . . 2,067,695 2,067,695
Venture partners' subordinated equity in ventures. . . . . . . . . . . . . . . . . . . . . . . 6,360,043 6,677,585
Partners' capital accounts (deficits) (note 1):
General partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,182,476) (12,004,318)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,116,446) (1,116,446)
------------ -----------
(13,297,922) (13,119,764)
------------ -----------
Limited partners:
Capital contributions, net of offering costs . . . . . . . . . . . . . . . . . . . . . . . 121,935,233 121,935,233
Cumulative net losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (74,356,490) (70,080,706)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (45,067,975) (45,067,975)
------------ -----------
2,510,768 6,786,552
------------ -----------
Total partners' capital accounts (deficits) . . . . . . . . . . . . . . . . . . . . . . (10,787,154) (6,333,212)
------------ -----------
Commitments and contingencies (notes 3, 4, 5, 6 and 7)
$166,702,415 169,411,131
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------- ---------------------------
1994 1993 1994 1993
------------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
Income:
Rental income. . . . . . . . . . . . . . . . . . . . . . . . $ 8,540,319 8,845,119 17,466,140 18,217,570
Interest income. . . . . . . . . . . . . . . . . . . . . . . 44,292 68,994 89,458 122,890
----------- ----------- ---------- ----------
8,584,611 8,914,113 17,555,598 18,340,460
----------- ----------- ---------- ----------
Expenses:
Mortgage and other interest. . . . . . . . . . . . . . . . . 4,840,631 4,975,681 9,569,391 9,584,928
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . 1,761,253 1,645,182 3,434,689 3,290,364
Property operating expenses. . . . . . . . . . . . . . . . . 4,953,142 4,940,199 9,694,753 9,577,571
Professional services. . . . . . . . . . . . . . . . . . . . 87,914 159,118 153,124 231,693
Amortization of deferred expenses. . . . . . . . . . . . . . 239,497 247,598 476,883 495,196
General and administrative . . . . . . . . . . . . . . . . . 81,255 62,620 103,379 91,509
----------- ----------- ---------- ----------
11,963,692 12,030,398 23,432,219 23,271,261
----------- ----------- ---------- ----------
Operating loss . . . . . . . . . . . . . . . . . . . (3,379,081) (3,116,285) (5,876,621) (4,930,801)
Partnership's share of operations of unconsolidated ventures
(note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . (209,609) (37,459) (331,370) 4,266
Venture partners' share of ventures' operations. . . . . . . . 1,069,398 1,021,900 1,754,049 1,494,968
----------- ----------- ---------- ----------
Net loss . . . . . . . . . . . . . . . . . . . . . . $(2,519,292) (2,131,844) (4,453,942) (3,431,567)
=========== =========== ========== ==========
Net loss per limited partnership interest (note 1) . $ (17.59) (14.89) (31.11) (23.96)
=========== =========== ========== ==========
Cash distributions per limited partnership interest. $ -- -- -- --
=========== =========== ========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(UNAUDITED)
<CAPTION>
1994 1993
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (4,453,942) (3,431,567)
Items not requiring (providing) cash or cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,434,689 3,290,364
Amortization of deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 476,883 495,196
Long-term debt - deferred accrued interest . . . . . . . . . . . . . . . . . . . . . . 1,002,806 530,552
Partnership's share of operations of unconsolidated ventures . . . . . . . . . . . . . 331,370 (4,266)
Venture partner's share of venture's operations and gain on sale or disposition of
investment property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. (1,754,049) (1,494,968)
Changes in:
Rents and other receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,026,322 390,007
Escrow deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,130 1,079,158
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405,668 218,313
Accrued rents receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (202,382) 216,465
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (46,133) (551,749)
Unearned rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (404,626) (24,587)
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,061,278 2,187,273
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (314,755) (353,742)
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (29,317) 1,229
------------ -----------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . . 1,633,942 2,547,678
------------ -----------
Cash flows from investing activities:
Net sales and maturities of short-term investments . . . . . . . . . . . . . . . . . . . 2,155,879 1,868,599
Additions to investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,514,891) (3,741,754)
Partnership's contributions to unconsolidated ventures . . . . . . . . . . . . . . . . . (159,518) --
Payment of deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (474,723) (1,505,892)
------------ -----------
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . . . (993,253) (3,379,047)
------------ -----------
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
1994 1993
------------ -----------
Cash flows from financing activities:
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 7,600,000
Principal payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . (206,485) (197,207)
Principal paydown on long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . -- (5,000,000)
Venture partners' contributions to venture . . . . . . . . . . . . . . . . . . . . . . . 373,000 3,197,299
Distributions to venture partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (2,993,630)
------------ -----------
Net cash provided by financing activities. . . . . . . . . . . . . . . . . . . . 166,515 2,606,462
------------ -----------
Net increase in cash and cash equivalents. . . . . . . . . . . . . . . . . . . . $ 807,204 1,775,093
============ ===========
Supplemental disclosure of cash flow information:
Cash paid for mortgage and other interest. . . . . . . . . . . . . . . . . . . . . . . . $ 6,505,307 6,867,103
============ ===========
Non-cash investing and financing activities. . . . . . . . . . . . . . . . . . . . . . . $ -- --
============ ===========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1994 AND 1993
(UNAUDITED)
Readers of this quarterly report should refer to the Partnership's
audited financial statements for the year ended December 31, 1993, which are
included in the Partnership's 1993 Annual Report, as certain footnote
disclosures which would substantially duplicate those contained in such
audited financial statements have been omitted from this report.
(1) BASIS OF ACCOUNTING
The accompanying consolidated financial statements include the accounts
of the Partnership and the following of its ventures (see note 4), Mall of
Memphis Associates ("Mall of Memphis"), 767 Third Avenue Associates ("767
Third Avenue"), Riverfront Office Park Joint Venture ("Riverfront") and
Excelsior Associates, LP ("824 Market Street"). The effect of all
transactions between the Partnership and the ventures has been eliminated.
The equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to the Partnership's interests
in Carlyle/National City Associates ("Carlyle/National City"). Accordingly,
the accompanying consolidated financial statements do not include the accounts
of Carlyle/National City.
The Partnership's records are maintained on the accrual basis of
accounting as adjusted for federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments to reflect the Partnership's
accounts in accordance with generally accepted accounting principles ("GAAP")
and to consolidate the accounts of the ventures described above. Such
adjustments are not recorded on the records of the Partnership. The net
effect of these items is summarized as follows for the six months ended June
30:
<TABLE>
<CAPTION>
1994 1993
--------------------- ---------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net loss . . . . . . . . . $4,453,942 3,004,063 3,431,567 2,389,563
Net loss per limited
partnership interest. . . $ 31.11 20.97 23.96 16.68
========== ========= ========== =========
</TABLE>
The net loss per limited partnership interest ("Interest") is based upon
the Limited Partnership Interests outstanding at the end of each period.
Deficit capital accounts will result, through the duration of the Partnership,
in net gain for financial reporting and income tax purposes.
Statement of Financial Accounting Standards No. 95 requires the
Partnership to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities. The required information has been segregated and accumulated
according to the classifications specified in the pronouncement. Partnership
distributions from unconsolidated ventures are considered cash flow from
operating activities only to the extent of the Partnership's cumulative share
of net earnings. The Partnership records amounts held in U.S. government
obligations at cost, which approximates market. For the purposes of these
statements, the Partnership's policy is to consider all such amounts held with
original maturities of three months or less ($2,029,760 at June 30, 1994 and
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
none at December 31, 1993, respectively) as cash equivalents with any
remaining amounts (generally with original maturities of one year or less)
reflected as short-term investments being held to maturity.
Certain reclassifications have been made to the 1993 consolidated
financial statements to conform with the 1994 presentation.
(2) INVESTMENT PROPERTIES
All investment properties are pledged as security for long-term debt, all
of which are non-recourse to the Partnership. The Partnership continues to
make the scheduled payments on its existing mortgage indebtedness related to
its remaining investment properties, except as described in note 3 below.
(3) LONG-TERM DEBT MODIFICATIONS AND REFINANCINGS
(a) General
As described below, the Partnership is seeking or has received mortgage
note modifications on certain properties. Upon expiration of such
modifications, should the Partnership not seek or be unable to secure new or
additional modifications to the loans, based upon current and anticipated
future market conditions, the Partnership may not commit any significant
additional amounts to these properties. This would likely result in the
Partnership no longer having an ownership (or security) interest in such
properties. Such decisions will be made on a property-by-property basis and
could result in a gain for financial reporting and federal income tax purposes
to the Partnership with no corresponding distributable proceeds. Reference is
made to Note 4 of Notes to Consolidated Financial Statements contained in the
Partnership's 1993 Annual Report.
(b) 767 Third Avenue Office Building
During 1991 and 1992, the leases for approximately 67% of the space at
the 767 Third Avenue office building located in New York, New York expired
(substantially all of which have been released as of June 1994). In order to
reduce debt service payments during the tenant turnover period, the 767 Third
Avenue venture obtained from the existing lender, in May 1992, a replacement
mortgage loan which matures in May 1999 and bears a substantially lower
interest rate (10%) than the original loan (12-3/8%). In connection with the
replacement mortgage loan, 767 Third Avenue was required to fund $8,000,000
into an escrow account for future leasing costs and debt service shortfalls
resulting from anticipated tenant turnover. At the inception of the escrow
agreement, the venture was allowed to reduce the required escrow contributions
by approximately $2,600,000 to reflect that certain leasing costs (described
above) had already been incurred. 767 Third Avenue had been reserving the
property's cash flow beginning with the second quarter of 1990; however, such
amounts were less than the net required reserve. The Partnership's venture
partner loaned $5,000,000 to the venture in order to fund the net escrow
reserve account. In 1993, the reserve account was depleted and the venture
(by way of partner contributions) is funding required leasing costs and debt
service shortfalls. The loan funded by the Partnership's venture partner
earns interest at an adjustable rate (approximately 8% at June 30, 1994) and
provides for repayment of principal and interest out of the available cash
flow from property operations and sale or refinancing proceeds. In June 1993,
the Partnership purchased a 50% interest in the venture partner's loan
including the related accrued interest. Accordingly, the Partnership's 50%
interest in the principal portion of the loan ($2,500,000) and the related
interest has been eliminated in the consolidated financial statements. In
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
conjunction with the agreement with the venture partner to loan the amounts
necessary to fund the escrow account, because the Partnership did not purchase
its share of the $5,000,000 loan by December 31, 1992, the Partnership's
preferential return was removed from the calculation of the allocation of sale
or refinancing proceeds. Because the reserve account has been depleted and
the property is operating at a deficit, the 767 Third Avenue venture intends
to seek refinancing of the mortgage loan. There can be no assurances that any
refinancing can be obtained.
(c) 824 Market Street Office Building
Occupancy at the 824 Market Street office building located in Wilmington,
Delaware is currently 56%. The 824 Market Street venture is aggressively
seeking replacement tenants for the vacant space, however, competition has
risen significantly due to new office building development in the area over
the last few years and to the contraction of tenants in the financial services
industry, resulting in lower effective rental rates. In order to reduce debt
service payments during the tenant turnover period, the venture had negotiated
with the first mortgage lender for a possible modification to the first
mortgage note. Such negotiations have been unsuccessful and the venture has
received notice of default. The lender has informed the venture of its intent
to realize upon its security in the fall of 1994. The 824 Market Street
venture has decided, based upon current and anticipated future market
conditions, not to commit any significant additional amounts to this property.
This will result in the Partnership no longer having an ownership interest in
this property and will result in a gain to the Partnership for financial
reporting and federal income tax purposes with no corresponding distributable
proceeds. As of June 30, 1994, the venture is twenty-four months delinquent
in making the scheduled debt service payments of approximately $3,960,000
under the terms of the first mortgage note. In addition, in connection with
the negotiations, the venture has withheld payment of contingent interest due
related to 1987 through 1989 aggregating $134,525. Accordingly, for financial
reporting purposes, the long-term mortgage note of $12,570,000 has been
reflected as a current liability in the accompanying consolidated financial
statements at June 30, 1994 and December 31, 1993. At the first mortgage
lender's request, beginning March 1993, payments on the second mortgage loan
of approximately $142,000 have also been withheld. As a result, the second
mortgage loan of approximately $945,000 has also been reflected as a current
liability in the accompanying consolidated financial statements at June 30,
1994 and December 31, 1993.
(d) Riverfront Office Building
On August 28, 1990, the Riverfront joint venture acquired additional
financing by way of a $5,800,000 fourth mortgage note in order to fund the
costs associated with leasing vacant space. To date, the joint venture has
received approximately $5,730,000 in proceeds. The balance of the proceeds, a
$70,000 engineering holdback, is payable to the joint venture upon completion
of certain structural repairs. Though physical occupancy at the property has
increased from 73% at June 30, 1993 to 90% at June 30, 1994, average rent
paying occupancy has decreased, due to (i) a major tenant, (that vacated
approximately 25% of the building in July 1992 due to a downsizing of its
operations) continuing to pay rent through the remaining terms of its leases
which expired in April 1993 and (ii) a second major tenant downsizing its
operations by approximately 38,000 square feet or 11% of the building in May
1993 and receiving a rent reduction of approximately 23% on its remaining
leased space. The property began operating at a deficit in 1992 and, as a
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
result, debt service payments since July 1992 were made on a delayed basis.
At June 30, 1994, the February 1993 through June 1994 scheduled debt service
payments totalling approximately $6,617,000 have not been made. Accordingly,
the loan balance of approximately $34,298,000 has been reflected as a current
liability in the consolidated financial statements at June 30, 1994 and
December 31, 1993, respectively. In order to reduce debt service payments,
the joint venture has initiated discussions with the lender to negotiate
possible modifications to the mortgage notes. As of June 30, 1994, the joint
venture has submitted approximately $1,079,000 to the lender as partial
payment of the delinquent amounts. There can be no assurances that any
modification will be obtained. If the joint venture is unable to secure
modifications to the mortgage notes, the joint venture would likely decide,
based upon current and anticipated future market conditions, not to commit any
significant additional amounts to this property. This would result in the
Partnership no longer having an ownership interest in this property and would
result in a gain for financial reporting and Federal income tax purposes to
the Partnership with no corresponding distributable proceeds.
(e) Mall of Memphis
In March 1993, the Mall of Memphis venture finalized additional
financing from the existing mortgage lender to repay renovation costs funded
by the venture. The venture received additional financing of a $9,625,000 ten
year loan at a rate of 10%, of which $7,600,000 was funded at closing. The
Partnership's share of the funding was $4,719,095 (net of closing costs), of
which $1,000,000 was required to be deposited in an escrow account as security
against any currently undiscovered environmental issues. In addition, a
portion of these funds were used to purchase the Partnership's share of a loan
funded by the Partnership's venture partner in the 767 Third Avenue venture,
as further discussed in note 3(b). The remaining funds may be used to fund
current and future Partnership obligations. The venture may be entitled to
additional proceeds of $2,025,000 should the property achieve certain
occupancy levels and debt coverage ratios by September 30, 1994. However, at
this time, it appears unlikely that the venture will qualify for such
additional proceeds by this date. In May, 1994, an affiliate of the General
Partners assumed property management and leasing services. Property
management fees are calculated as 3% of gross receipts (as defined) and
leasing commissions are calculated at a rate, which approximates market, based
on the terms of the related lease. In order to allow the new property
management team an opportunity to meet the qualifications for the additional
loan proceeds, the venture has requested a one-year extension (to September
1995) from the lender. There can be no assurances that such request will be
granted by the lender.
(f) Refinancings
Effective December 27, 1990, the Partnership obtained replacement
mortgage loans from an institutional lender to retire in full satisfaction, at
an aggregate discount, the previously modified existing long-term mortgage
notes secured by the Scotland Yard - Phase I and II, South Point and El Dorado
View apartment complexes. The Partnership sold South Point Apartments in July
1993, as further discussed in note 5(b). Commencing April 1, 1992, the loans
provide for payment of contingent interest equal to 35% of the amount by which
gross receipts attributable to a fiscal year (all as defined) exceed a base
amount. For the fiscal years 1993 and 1992, contingent interest was
approximately $387,000 and $281,000, respectively. As of June 30, 1994, the
Partnership has recorded additional interest expense of approximately $154,000
based on an estimate of the contingent interest due for fiscal year 1994. In
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
the event that these properties are sold before the maturity date of the loan,
the lender is entitled to a prepayment penalty of 6% of the mortgage principal
and, in general, the higher of 65% of the sale proceeds or ten times the
highest contingent interest amount in any of the three full fiscal years
preceding the sale (all as defined) plus additional interest, if any, until
the lender has received an internal rate of return of 13.25% per annum if
prepayment occurs between January 1, 1994 and December 31 1995; 13.75% per
annum if prepayment occurs between January 1, 1996 and December 31, 1987 and
14% per annum thereafter. Accordingly, the Partnership has recorded an
estimate of the minimum internal rate of return as deferred accrued interest
which is included in the balance of long-term debt in the accompanying
consolidated financial statements at June 30, 1994 and December 31, 1993. The
lender has the right to call the remaining loans at any time after January 1,
1996. The lender required the establishment of an escrow account, initially of
approximately $980,000 in the aggregate, to be used towards the purchase of
major capital items at the apartment complexes. Additionally, the lender
required $150,000 of the sale proceeds from South Point Apartments to be added
to the escrow account. As of June 30, 1994, the Partnership has been
reimbursed from the escrow account approximately $647,000 for capital
improvements at the above-referenced apartment complexes.
(4) VENTURE AGREEMENTS
(a) General
The Partnership at June 30, 1994 is a party to five operating joint
venture agreements. In general, the Partnership's venture partners, who are
either the sellers (or their affiliates) of the property investments being
acquired or parties which have contributed an interest in the property being
developed, or were subsequently, admitted to the ventures, make no cash
contributions to the ventures, but their retention of an interest in the
property, through the joint venture, is taken into account in determining the
purchase price of the Partnership's interest, which is determined by arm's-
length negotiations. Under certain circumstances, either pursuant to the
venture agreements or due to the Partnership's obligations as a general
partner, the Partnership may be required to make additional cash contributions
to the ventures.
There are certain risks associated with the Partnership's investments
made through ventures, including the possibility that the Partnership's joint
venture partners in an investment might become unable or unwilling to fulfill
their financial or other obligations, or that such venture partners may have
economic or business interests or goals that are inconsistent with those of
the Partnership.
(b) Carlyle/National City
In July 1983, the Partnership acquired, through Carlyle/National City (a
joint venture with Carlyle Real Estate Limited Partnership-XII), an interest
in an existing thirty-five story office building in Cleveland, Ohio.
The Partnership made an initial contribution of $5,445,257 to
Carlyle/National City. The terms of the Carlyle/National City venture
agreement provide that the capital contributions, annual cash flow, net
proceeds from sale or refinancing and profit or loss will be allocated or
distributed 13.7255% to the Partnership. The Partnership's cash investment in
the property was $3,341,583 after distributions resulting from the increase in
the first mortgage loan.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
In January 1994, the debt service payments under the existing mortgage
for the National City Center Office Building increased from 9-5/8% per annum
to 11-7/8% per annum until the maturity of the loan in December 1995. The
venture reached an agreement with the current mortgage lender to refinance the
existing mortgage effective April 28, 1994, with an interest rate of 8.5% per
annum. The loan will be amortized over 22 years with a balloon payment due on
April 10, 2001. The venture paid a refundable loan commitment fee of
$1,163,524 in 1993 in conjunction with the refinancing. The venture also paid
a prepayment penalty of $580,586, based on the outstanding mortgage balance at
the time of refinancing. In addition, the lender required an escrow account
of approximately $612,000 to be established at the inception of the
refinancing which would be supplemented from time to time for scheduled future
tenant improvements costs at the property. The $1,163,524 refundable loan
commitment fee paid by the venture in 1993 was applied to accrued interest and
the prepayment penalty, with the balance of $238,215 refunded to the venture.
(5) SALES OF INVESTMENT PROPERTIES
(a) Pavillion Towers
During April 1986, the Partnership sold its interest in Am-Car Real
Estate Partnership - I ("Am-Car") (which owns the Pavillion Towers office
complex located in Aurora, Colorado) to its venture partners for $1,000,000 in
cash, promissory notes aggregating $3,750,000 and the venture partners'
assumption of the Partnership's share of the debt encumbering the property.
The two promissory notes of $3,000,000 and $750,000 bear interest at various
rates and are due in April 1996. Beginning in 1991, the Partnership has not
received the scheduled interest payments of $15,000 on the $750,000 note and
as of the date of this report, the Partnership has not received the 1994 or
1993 scheduled interest payment of $60,000 on the $3,000,000 note. Collection
of all past due and future amounts from these notes are considered unlikely;
however, the Partnership is evaluating all of its legal options, including the
possibility of a substantial discounted payment. Due to the uncertainty of
collection of all past due and future amounts from these notes, a $527,774
reserve was established at September 30, 1993 to reduce the mortgage notes
receivable balance to an amount not to exceed the related deferred gain on
sale.
The sale was accounted for by the installment method whereby the gain on
sale of $3,057,695 (net of discount on the promissory notes receivable of
$1,682,305) was recognized as collections of principal were received.
Effective January 1, 1990, the Partnership adopted the cost recovery method of
accounting. The interest received in 1992 and 1991 ($60,000 and $60,000,
respectively) was applied against the outstanding principal balance. No
profit has been recognized in 1994, 1993, 1992 or 1991.
(b) South Point Apartments
On July 29, 1993, the Partnership sold the land, buildings and related
improvements and personal property of the South Point apartments complex
located in Houston, Texas to an unaffiliated buyer at a sales price determined
by arm's-length negotiations. The sales price of the property was $5,600,000
(before closing costs and prorations). A major portion of the sales proceeds
was utilized to retire the related underlying mortgage principal of
$4,455,000. The Partnership received in connection with the sale, after all
fees and expenses, approximately $932,000. Of this amount, the lender was
entitled to approximately $606,000 as participation in the sales proceeds.
From the sale, the Partnership received a net amount of cash of approximately
$326,000, of which $150,000 was required by the lender to be escrowed for the
benefit of the Partnership's other properties financed by the lender, as more
fully discussed in note 3(f). As a result of the sale, the Partnership
recognized in 1993 a gain of $1,433,916 and $3,512,797 for financial reporting
purposes and for federal income tax purposes, respectively.
CARLYLE REAL ESTATE LIMITED PARTNERSHIP - XI
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(6) TRANSACTIONS WITH AFFILIATES
Fees, commissions and other expenses required to be paid by the Partner-
ship to the General Partners and their affiliates as of June 30, 1994 and for
the six months ended June 30, 1994 and 1993 were as follows:
Unpaid at
1994 1993 June 30, 1994
-------- ------- -------------
Property management and
leasing fees. . . . . . . . . $138,886 173,574 --
Insurance commissions. . . . . 12,717 40,350 --
Management fees to corporate
general partner . . . . . . . -- -- 11,936
Reimbursement (at cost) for
out-of-pocket expenses. . . . 4,397 10,495 --
-------- ------- ------
$156,000 224,419 11,936
======== ======= ======
The Corporate General Partner and its affiliates are entitled to
reimbursement for salaries and direct expenses of officers and employees of
the Corporate General Partner and its affiliates relating to the
administration of the Partnership and operation of the Partnership's
investment properties. Such costs aggregated $34,565 for the six months ended
June 30, 1994 and $79,661 for 1993, of which $73,079 was unpaid as of June 30,
1994, all of which has been paid as of the date of this report.
The Corporate General Partner has deferred payment of partnership
management fees as set forth in the above table. In addition, distributions
to the General Partners of the first quarter 1991 net cash flow of the
Partnership, aggregating $7,161, have also been deferred. These amounts do
not bear interest and are expected to be paid in future periods.
(7) COMMITMENTS AND CONTINGENCIES
The Partnership is a defendant in several actions brought against it
arising in the ordinary course of business. It is the belief of the Corporate
General Partner, based on its knowledge of facts and advice of counsel, that
the claims made against the Partnership in such actions will not result in a
material adverse effect on the Partnership's consolidated financial position
or results of operations.
(8) 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, 1994
and for the three and six months ended June 30, 1994 and 1993.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
All references herein to "Notes" are to Notes to Consolidated Financial
Statements filed with this report.
At June 30, 1994, the Partnership and its consolidated ventures had cash
and cash equivalents of approximately $3,120,000. Such funds and short-term
investments of approximately $132,000 are available for future distributions
to partners and for working capital requirements including the Partnership's
portion of the anticipated net cash flow deficits at the 767 Third Avenue
office building and the National City Center office building. The Partnership
and its consolidated ventures have currently budgeted in 1994 approximately
$6,354,000 for tenant improvements and other capital expenditures. The
Partnership's share of such items and its share of such similar items for its
unconsolidated ventures in 1994 is currently budgeted to be approximately
$4,495,000. Actual amounts expended in 1994 may vary depending on a number of
factors including actual leasing activity, results of property operations,
liquidity considerations and other market conditions over the course of the
year. Certain of the Partnership's investment properties and properties in
which the Partnership has a security interest currently operate in overbuilt
markets which are characterized by lower than normal occupancies and/or
reduced rent levels. Such competitive conditions will contribute to the
anticipated net cash flow deficits described above. The sources of capital
for such items and for both short-term and long-term future liquidity and
distributions to partners are expected to be from net cash generated by the
Partnership's investment properties and through the sale of such investments.
The Partnership does not consider the notes receivable arising from the
previous sales of the Partnership's investment properties to be sources of
future liquidity as collections of any past due or future payments on the
Partnership's notes are considered unlikely. Reference is made to Note 5(a).
The Partnership's and its ventures' mortgage obligations are all non-recourse.
Therefore, the Partnership and its ventures are not obligated to pay mortgage
indebtedness unless the related property produces sufficient net cash flow
from operations or sale.
The Partnership currently has adequate cash and cash equivalents to
maintain the operations of the Partnership. However, based upon estimated
operations of certain of the Partnership's investment properties, the
Partnership decided to suspend distributions to the Limited and General
Partners effective as of the second quarter of 1991. In addition, the
Partnership has deferred cash distributions and partnership management fees
related to the first quarter of 1991 as discussed in Note 6. These amounts,
which do not bear interest, are approximately $19,000 and are expected to be
paid in future periods.
As described more fully in Note 3, the Partnership is seeking or has
received mortgage loan modifications on certain of its properties. If the
Partnership is unable to secure new or additional modifications to the loans,
based upon current market conditions, the Partnership may not commit any
significant additional amounts to any of the properties which are incurring,
or in the future do incur, operating deficits or deficits to underlying
mortgage holders. This would result in the Partnership no longer having an
ownership (or security) interest in such properties. Such decisions will be
made on a property-by-property basis and may result in a gain to the
Partnership for financial reporting and federal income tax purposes, with no
corresponding distributable proceeds.
The lender of the long-term mortgage notes secured by the Scotland Yard-
Phase I and II, South Point, and El Dorado View apartment complexes required
the establishment of an escrow account, initially of approximately $980,000 in
the aggregate, to be used towards the purchase of major capital items at the
apartment complexes. Additionally, the lender required $150,000 of the
proceeds from the sale of the South Point Apartments, as more fully discussed
in note 5(b), to be added to the escrow account. As of June 30, 1994, the
Partnership has been reimbursed from the escrow account approximately $647,000
for capital improvements at the above-referenced apartment complexes.
Reference is made to Note 3(f).
767 Third Avenue Office Building
Occupancy at the property is 87% at June 30, 1994, up slightly from 86%
during the previous quarter. The 767 Third Avenue venture is aggressively
marketing the vacant space. The Partnership is obligated to fund its share of
the net cash flow deficits resulting from costs associated with any leasing
activity at the property.
During 1992 and 1991, the leases for approximately 67% of the space at
the 767 Third Avenue office building expired (substantially all of which have
been re-leased as of June 1994). Vacancy rates in Midtown Manhattan (the sub-
market for this property) remain high and the increased competition for
tenants has resulted in lower effective rental rates (contract rates less the
amortization of tenant improvements and free rent concessions). The adverse
market conditions and the negative impact of effective rental rates are
expected to continue over the next few years. While this building is in a
premier location, it has been adversely impacted by the lower effective rental
rates on leasing and by releasing costs. In order to reduce debt service
payments during the tenant turnover period, the 767 Third Avenue venture
obtained from the existing lender, in May 1992, a replacement mortgage loan
bearing a substantially lower interest rate than the original loan. In
connection with the replacement mortgage loan, 767 Third Avenue was required
to fund $8,000,000 into an escrow account in order to fund any future leasing
costs and debt shortfalls resulting from anticipated tenant turnover. At the
inception of the escrow agreement, the venture was allowed to reduce the
required reserve contributions by approximately $2,600,000 to reflect certain
leasing costs that had already been incurred. The Partnership's venture
partner loaned $5,000,000 to the venture in order to fund the net escrow
reserve account. The Partnership purchased a 50% interest in this loan in
June 1993. During the first quarter of 1994, a tenant vacated a portion of
its space (approximately 6,450 square feet or 2% of the building's leasable
space) prior to its lease expiration of January 1997. The venture reached an
agreement with the tenant whereby the lease obligation was terminated in
return for a $800,000 payment to the venture. This space was subsequently
released to a new tenant. In 1993, the reserve account was depleted and the
venture (by way of partner contributions) is funding required leasing costs
and debt service shortfalls. Because the reserve account has been depleted
and the property is operating at a deficit, the 767 Third Avenue venture
intends to seek refinancing of the mortgage loan. There can be no assurances
that any refinancing can be obtained. Reference is made to Note 3(b).
824 Market Street
Occupancy at the 824 Market Street office building located in Wilmington,
Delaware is currently 56%. The 824 Market Street venture is aggressively
seeking replacement tenants for the vacant space, however, competition has
risen significantly due to new office building development in the area over
the last few years and the contraction of tenants in the financial services
industry, resulting in lower effective rental rates. In order to reduce debt
service payments during the tenant turnover period, the venture had negotiated
with the first mortgage lender for a possible modification to the first
mortgage note. Such negotiations have been unsuccessful and the venture has
received notice of default. The lender has informed the venture of its intent
to realize upon its security in the fall of 1994. The 824 Market Street
venture has decided, based upon current and anticipated future market
conditions, not to commit any significant additional amounts to this property.
This will result in the Partnership no longer having an ownership interest in
this property and will result in a gain for financial reporting and federal
income tax purposes to the Partnership with no corresponding distributable
proceeds. As of June 30, 1994, the venture is twenty-four months delinquent
in making the scheduled debt service payments of approximately $3,960,000
under the terms of the note and, in connection with the negotiations, the
venture has withheld payments of contingent interest related to 1987 through
1989 aggregating $134,525. Accordingly, for financial reporting purposes, the
long-term mortgage note of approximately $12,570,000 has been reflected as a
current liability in the accompanying consolidated financial statements at
June 30, 1994 and December 31, 1993. At the first mortgage lender's request,
beginning March 1993, payments of approximately $142,000 on the second
mortgage loan have also been withheld. As a result, the second mortgage loan
of approximately $945,000 has also been reflected as a current liability in
the accompanying consolidated financial statements at June 30, 1994 and
December 31, 1993. Reference is made to Note 3(c).
Riverfront Office Building
On August 28, 1990, the Riverfront joint venture acquired additional
financing by way of a $5,800,000 fourth mortgage note in order to fund the
costs associated with leasing vacant space. To date, the joint venture has
received approximately $5,730,000 in proceeds. The balance of the proceeds, a
$70,000 engineering holdback, is payable to the joint venture upon completion
of certain structural repairs which due to cash flow operations are expected
to be completed by 1996. Though physical occupancy at the property has
increased from 73% at June 30, 1993 to 90% at June 30, 1994, average rent
paying occupancy has decreased, due to (i) a major tenant (that vacated
approximately 25% of the building in July 1992 due to a downsizing of its
operations) continuing to pay rent through the remaining terms of its leases
which expired in April 1993 and (ii) a second major tenant downsizing its
operations by approximately 38,000 square feet or 11% of the building and
receiving a rent reduction of approximately 23% on its remaining leased space.
The property began operating at a deficit in 1992 and, as a result, debt
service payments since July 1992 were made on a delayed basis. At June 30,
1994, the February 1993 through June 1994 scheduled debt service payments
totalling approximately $6,617,000 have not been made. Accordingly, the loan
balance of approximately $34,298,000 has been reflected as a current liability
in the consolidated financial statements at June 30, 1994 and December 31,
1993, respectively. In order to reduce debt service payments, the joint
venture has initiated discussions with the lender to negotiate possible
modifications to the mortgage notes. As of June 30, 1994, the joint venture
has submitted approximately $1,079,000 to the lender as partial payment of the
delinquent amounts. There can be no assurances that any modification will be
obtained. If the joint venture is unable to secure modifications to the
mortgage notes, the joint venture would likely decide, based upon current and
anticipated future market conditions, not to commit any significant additional
amounts to this property. This would result in the Partnership no longer
having an ownership interest in this property and would result in a gain for
financial reporting and Federal income tax purposes to the Partnership with no
corresponding distributable proceeds. Reference is made to Note 3(d).
Mall of Memphis
Although occupancy had been increasing, in order for the Mall of Memphis
to maintain its competitive position in the marketplace, the Mall of Memphis
venture completed a mall renovation in 1991. The renovation costs had been
funded by the venture until additional financing was in place. The
Partnership contributed approximately $2,252,000 in addition to foregoing
their share of 1990 and a portion of the 1991 distributable cash flow from the
property to cover their portion of the renovation costs. In March 1993, the
venture finalized additional financing of a $9,625,000 ten year loan at a rate
of 10%, of which $7,600,000 was funded at closing. The Partnership's share of
the funding was $4,719,095 (net of closing costs). Of the amount funded, the
Partnership was required to deposit $1,000,000 in an escrow account as
security against any currently undiscovered environmental issues. The venture
may be entitled to additional proceeds of $2,025,000 should it achieve certain
occupancy levels and debt coverage ratios. However, at this time it appears
unlikely that the Venture will qualify for such additional proceeds by this
date. In May, 1994, an affiliate of the General Partners assumed property
management and leasing services. Property management fees are calculated as
3% of gross receipts (as defined) and leasing commissions are calculated at a
rate, which approximates market, based on the terms of the related lease. In
order to allow the new property management team an opportunity to meet the
qualifications for the additional loan proceeds, the venture has requested a
one-year extension (to September 1995) from the lender. There can be no
assurances that such request will be granted by the lender. Reference is made
to Note 3(e).
General
There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the Partnership's
venture partner(s) in an investment might become unable or unwilling to
fulfill its (their) financial or other obligations, or that such venture
partner(s) may have economic or business interests or goals that are
inconsistent with those of the Partnership.
Though the economy has recently shown signs of improvement and financing
is generally becoming more available for certain types of higher-quality
properties in healthy markets, real estate lenders are typically requiring a
lower loan-to-value ratio for mortgage financing than in the past. This has
made it difficult for owners to refinance real estate assets at their current
debt levels unless the value of the underlying property has appreciated
significantly. As a consequence, and due to the weakness of some of the local
real estate markets in which the Partnership's properties operate, the
Partnership is taking steps to preserve its working capital. Therefore, the
Partnership is carefully scrutinizing the appropriateness of any discretionary
expenditures, particularly in relation to the amount of working capital it has
available. By conserving working capital, the Partnership will be in a better
position to meet future needs of its properties without having to rely on
external financing sources.
Due to the factors discussed above and the general lack of buyers of real
estate today, it is likely that the Partnership may hold some of its
investment properties longer than originally anticipated in order to maximize
the return to the Limited Partners. Although sale proceeds from the
disposition of the Partnership's remaining assets are expected, in light of
the current severely depressed real estate markets, without a dramatic
improvement in market conditions, the Limited Partners will not receive a full
return of their original investment.
RESULTS OF OPERATIONS
The increase in cash and cash equivalents and the corresponding decrease
in short-term investments at June 30, 1994 as compared to December 31, 1993 is
due primarily to the timing of maturity of the Partnership's investment in
U.S. government obligations.
The decrease in rents and other receivables at June 30, 1994 as compared
to December 31, 1993 is primarily due to (i) a reduction in the 1993 lump-sum
expense recoveries due from tenants resulting from tax refunds received in
1993 at the Mall of Memphis and (ii) to an increase in the provision for
doubtful accounts attributable to the uncertainty of collectibility of amounts
due from certain tenants at 767 Third Avenue and the Riverfront office
building.
The decrease in prepaid expenses at June 30, 1994 as compared to December
31, 1993 is primarily due to the timing of the payment of insurance premiums
at Scotland Yard I & II and El Dorado View Apartments.
The decrease in escrow deposits and the corresponding decrease in accrued
real estate taxes at June 30, 1994 as compared to December 3, 1993 is
primarily due to the timing of real estate tax payments at certain of the
Partnership's investment properties.
The increase in building and improvements at June 30, 1994 as compared to
December 31, 1993 is primarily due to capitalization of tenant leasehold
improvement costs at 767 Third Avenue office building and the Mall of Memphis.
The decrease in investments in unconsolidated ventures at June 30, 1994
as compared to December 31, 1993 and the corresponding decrease in
Partnership's share of operations of unconsolidated ventures for the three and
six months ended June 30, 1994 as compared to the three and six months ended
June 30, 1993 is primarily due to higher interest expense from January to
April 1994 at the Carlyle/National City investment property. (Reference is
made to Note 4(b)).
The increase in the balance of accrued rents receivable at June 30, 1994
as compared to December 31, 1993 is primarily due to the Partnership accruing
rental income for certain major tenant leases at certain investment properties
over the full period of occupancy rather than as due per the terms of their
respective leases.
The increases in venture partners' deficit in venture at June 30, 1994 as
compared to December 31, 1993 and the corresponding increase in venture
partners' share of loss from ventures' operations for the three and six months
ended June 30, 1994 as compared to the three and six months ended June 30,
1993 is primarily due to reduced rental income at the Riverfront office
building, higher interest expense at the Mall of Memphis and an increase in
the provision for doubtful accounts attributable to the uncertainty of
collectibility of amounts due from certain tenants at 767 Third Avenue and the
Riverfront office building.
The decrease in unearned rents at June 30, 1994 as compared to December
31, 1993 is primarily due to the timing of receipt of rental income at certain
of the Partnership's investment properties.
The increase in accrued interest at June 30, 1994 as compared to December
31, 1993 is primarily due to participating interest accruals at Scotland Yard
I & II and El Dorado View Apartments and interest accruals associated with the
non-recourse mortgage loans secured by the 824 Market Street office building
and the Riverfront office building. The Partnership is delinquent in debt
service payments at 824 Market Street and the Riverfront office building, as
more fully described in Notes 3(c) and 3(d).
The decrease in rental income for the three and six months ended June 30,
1994 as compared to the three and six months ended June 30, 1993 is due
primarily to (i) reduced rental income at the Riverfront office building, as
more fully discussed in Note 3(d), (ii) the loss of revenue resulting from the
sale of the South Point Apartments in July 1993, as more fully discussed in
Note 5(b) and (iii) a reduction in the 1993 lump-sum expense recoveries due
from tenants resulting from tax refunds received in 1993 at the Mall of
Memphis. This decrease in partially offset by the receipt of a lease
termination payment in the first quarter of 1994 at the 767 Third Avenue
office building, as more fully discussed above.
The decrease in interest income for the three and six months ended June
30, 1994 as compared to the three and six months ended June 30, 1993 is due
primarily to a decrease in the average balance of U.S. government obligations
in 1994 due to Partnership contributions to fund its share of operating
deficits at 767 Third Avenue and National City Center.
The increase in mortgage and other interest expense for the three and six
months ended June 30, 1994 as compared to the three and six months ended June
30, 1993 is due primarily to additional financing secured by the Mall of
Memphis, as more fully discussed in Note 3(e) and to the accrual of
participation interest at Scotland Yard I & II and El Dorado View Apartments.
This increase is partially offset by the sale of South Point Apartments in
July 1993.
The increase in depreciation for the three and six months ended June 30,
1994 as compared to the three and six months ended June 30, 1993 is due
primarily to tenant leasehold improvement additions at certain of the
Partnership's investment properties.
The decrease in professional services for the three and six months ended
June 30, 1994 as compared to the three and six months ended June 30, 1993 is
due to higher legal fees for collection of receivables and leasing in 1993 at
certain of the Partnership's investment properties.
PART II. OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Reference is made to Notes 3(c) and 3(d) of Notes to Consolidated
Financial Statements and the Liquidity and Capital Resources section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations included with this report for a discussion of the attempts to
obtain modifications of, and the defaults due to delinquency in payment of
interest due on, the mortgage loans with Teachers Insurance and Annuity
Association and Wilmington Savings Fund Society secured by the 824 Market
Street Office Building and the mortgage loan with Teachers Insurance and
Annuity Association secured by the Riverfront Office Building.
<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 investment properties.
<CAPTION>
1993 1994
------------------------------- ------------------------------
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>
1. Scotland Yard Apartments-Phase II
Houston, Texas. . . . . . . . . . . . . . . . . . . 92% 93% 97% 95% 92% 89%
2. South Point Apartments
Houston, Texas (c). . . . . . . . . . . . . . . . . 95% 93% N/A N/A N/A N/A
3. 824 Market Street
Wilmington, Delaware (a). . . . . . . . . . . . . . 42% 46% 46% 49% 42% 56%
4. Mall of Memphis
Memphis, Tennessee. . . . . . . . . . . . . . . . . 88% 90% 90% 91% 88% 85%
5. Riverfront Office Building
Cambridge, Massachusetts (b). . . . . . . . . . . . 80% 73% 72% 85% 89% 90%
6. Scotland Yard Apartments-Phase I
Houston, Texas. . . . . . . . . . . . . . . . . . . 94% 93% 98% 93% 92% 91%
7. El Dorado View Apartments
Houston, Texas. . . . . . . . . . . . . . . . . . . 95% 98% 91% 93% 93% 94%
8. 767 Third Ave. Office Building
New York, New York. . . . . . . . . . . . . . . . . 67% 78% 81% 83% 86% 87%
9. National City Center Office Building
Cleveland, Ohio . . . . . . . . . . . . . . . . . . 96% 96% 96% 96% 94% 94%
<PAGE>
<FN>
- - ---------------
An "N/A" indicates that the property was not owned by the Partnership at
the end of the quarter.
(a) In January 1990, a major tenant began vacating its space; however, the
tenant was obligated to pay rent to the venture through the original terms of
their lease which was due to expire at various dates from December 1990 to
April 1994. The venture terminated the remaining lease obligation during the
first quarter, 1994 in return for a negotiated payment to the venture.
Therefore, this property was leased to 73% at March 31, 1993; 77% at June 30,
1993 and September 30, 1993 and 80% at December 31, 1993.
(b) In July 1992, a major tenant vacated its space; however, the tenant
was obligated to pay rent to the joint venture through the original terms of
its lease which expired in April 1993.
(c) Reference is made to Note 5(b).
</TABLE>
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
Response:
(a) Exhibits:
10-A. Acquisition documents relating to the purchase by the
Partnership of an interest in the 767 Third Avenue Office Building in New
York, New York are hereby incorporated by reference to the Partnership's
Registration Statement on Post-Effective Amendment No. 2 to Form S-11 (File
No. 2-70724) dated May 8, 1981.
10-B. Acquisition documents relating to the purchase by the
Partnership of an interest in the Mall of Memphis in Memphis, Tennessee are
hereby incorporated by reference to the Partnership's Registration Statement
on Post-Effective Amendment No. 2 to Form S-11 (File No. 2-70724) dated May 8,
1981.
10-C. Acquisition documents relating to the purchase by the
Partnership of an interest in the Riverfront Office Building in Cambridge,
Massachusetts are hereby incorporated by reference to the Partnership's
Registration Statement on Post-Effective Amendment No. 3 to Form S-11 (File No
2-70724) dated May 8, 1981.
10-D. Purchase and Sale Agreement between Carlyle Real Estate
Limited Partnership-XI and Centeq Acquisition Inc., dated April 14, 1993, and
exhibits thereto, and the First and Second Amendments to the Purchase and Sale
Agreement, dated May 24, 1993 and June 1, 1993, respectively, are hereby
incorporated by reference to the Partnership's Form 8-K (File No. 0-10494)
dated August 30, 1993.
10-E. Assignment of Purchase and Sale Agreement between Centeq
Acquisition Inc. and Camden Property Trust, dated July 9, 1993 is hereby
incorporated by reference to the Partnership's Form 8-K (File No. 0-10494)
dated August 30, 1993.
10-F. Third Amendment to Purchase and Sale Agreement between Carlyle
Real Estate Limited Partnership-XI and Camden Property Trust, dated July 19,
1993 is hereby incorporated by reference to the Partnership's Form 8-K (File
No. 0-10494) dated August 30, 1993.
10-G Amended and Restated Promissory Note, dated April 30, 1994
between Carlyle/National City Associates and New York Life Insurance Company
relating to the National City Center Office Building is filed herewith.
(b) No Reports on Form 8-K has been filed for the quarter 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 - XI
BY: JMB Realty Corporation
(Corporate General Partner)
By: GAILEN J. HULL
Gailen J. Hull, Senior Vice President
Date: August 12, 1994
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 12, 1994
AMENDED AND RESTATED PROMISSORY NOTE
$58,058,582.21 __________, __________
April __, 1994
FOR VALUE RECEIVED, CARLYLE/NATIONAL CITY ASSOCIATES, an Illinois
general partnership comprised of Carlyle Real Estate Limited
Partnership-XI, an Illinois limited partnership ("Carlyle XI"), and
Carlyle Real Estate Limited Partnership-XII, an Illinois limited
partnership ("Carlyle XII"), having an office at c/o JMB Realty
Corporation, 900 North Michigan Avenue, Chicago, Illinois 60611-1575
("Maker"), promises to pay to the order of NEW YORK LIFE INSURANCE
COMPANY, a New York mutual life insurance company having its principal
office at 51 Madison Avenue, New York, New York 10010 ("Holder"), at
its principal office in New York City, New York, or at such other place
as may be designated in writing by Holder, the principal sum of Fifty
Eight Million Fifty Eight Thousand Five Hundred Eighty Two and 21/100
Dollars ($58,058,582.21) (the "Principal Indebtedness"), in lawful
money of the United States of America, together with interest thereon
at the rate of eight and one-half percent (8.50%) per annum, payable
in monthly installments of principal and interest in the sum of Four
Hundred Eighty Six Thousand Seven Hundred Sixty Seven Dollars
($486,767.00), commencing on the tenth (10th) day of the month next
following the date hereof, and payable on the tenth day (10th) of each
and every month thereafter for seven (7) years, with the last
installment being due and payable on April 10, 2001 (the "Maturity
Date"), at which time the entire unpaid balance together with accrued
and unpaid interest shall be due and payable. Such monthly installments
shall be applied first to the payment of interest and the balance to
the reduction of principal. The first payment of principal and interest
shall be adjusted to provide for interest from the date hereof until
the date of the first payment.
This Note is secured by, among other things, (i) an Ohio Open
End Mortgage and Security Agreement, dated April 14, 1978, as amended
by an Amendment to Mortgage, dated as of November 18, 1980, as modified
by a Modification of Ohio Open End Mortgage and Security Agreement,
dated November 15, 1983, as further modified by a Second Modification
of Ohio Open End Mortgage and Security Agreement, dated the date hereof,
made by Maker to Holder (as so modified and amended, the "Mortgage")
encumbering certain premises situated in the City of Cleveland, County
of Cuyahoga, State of Ohio and known as the National City Center and
the improvements thereon, along with other property more particularly
described in the Mortgage (collectively the "Secured Property"), and
(ii) an Amended and Restated Assignment of Rents, Income, Profits and
Cash Collateral, dated the date hereof, from Maker to Holder. Each
of the documents mentioned in this paragraph and all other documents
either evidencing or further securing the Principal Indebtedness are
collectively referred to herein as the "Loan Documents," and the terms
and provisions of the Loan Documents are hereby fully incorporated
into this Note by this reference. Reference is made to the Loan
Documents for a description of the security for the payment of the
indebtedness evidenced hereby and the rights and obligations of the
Maker and the Holder in respect of such security, but neither such
reference nor any provision of or any action taken in respect of any
Loan Document shall impair Maker's absolute and unconditional obligation
for the payment of the indebtedness evidenced hereby in accordance
with the terms of this Note.
From and after the earlier to occur of (i) an Event of Default
(as defined in the Mortgage) or (ii) maturity of this Note, either
according to its terms or as the result of a declaration of maturity
made by Holder in accordance with the terms hereof, the entire principal
balance remaining unpaid hereunder shall automatically bear an annual
interest rate (in place of the rate hereinabove specified) equal to
thirteen and one-half percent (13.50%) per annum (the "Increased Rate")
unless applicable law requires a lesser such rate, in which event the
maximum rate permitted by law may be charged by Holder.
No privilege is reserved to prepay the Principal Indebtedness
prior to May 10, 1995 (the "Closed Period"). Beginning on May 10,
1995, privilege is reserved by Maker to prepay the entire outstanding
principal balance together with accrued and unpaid interest thereon
to the date of payment on such date or any subsequent monthly
installment date upon not less than ninety (90) days' prior written
notice to Holder of Maker's intention to make such prepayment, provided
there is paid, in addition to interest accrued to the date of such
prepayment, a prepayment charge which shall be equal to the greater
of (a) one percent (1%) of the principal balance prepaid, or (b) the
amount computed by multiplying the principal balance prepaid by the
percentage arrived at by multiplying (i) the difference between 8.50%
and the yield-to-maturity percentage for the U.S. Treasury Note closest
in maturity to the then remaining term of the loan evidenced hereby
as reported in The Wall Street Journal (or, if The Wall Street Journal
is no longer published, some other daily financial publication of
national circulation as selected by Holder) on the fifth (5th) business
day preceding the date of prepayment, by (ii) the quotient (rounded
to the nearest one-hundredth) arrived at by dividing the number of
days from and including the date of prepayment, to the Maturity Date
by 365. Notwithstanding the foregoing, but provided that such
outstanding principal amount shall not be due and payable as a result
of any of the events described in the following paragraph, Maker may
prepay the entire outstanding principal balance together with accrued
interest thereon to the date of payment without a prepayment charge
at any time during the sixty (60) day period immediately preceding
the Maturity Date upon not less than ninety (90) days' prior written
notice to Holder of Maker's intention to make such prepayment.
In the event the outstanding principal balance hereof shall become
due and payable as a result of (a) an Event of Default causing
acceleration under this Note or the Loan Documents, which Event of
Default shall, for purposes of assessing the prepayment charges provided
for herein, be conclusively deemed to be a willful default for purposes
of avoiding the prepayment charges to which Holder is entitled; (b)
the exercise by Maker of any right of redemption or other action to
prevent a foreclosure of the Secured Property; or (c) an acceleration
by Holder as a result of the sale or further encumbrance of the Secured
Property in violation of the applicable provisions of the Mortgage;
then, in such event, Maker shall pay the prepayment charge which would
otherwise be applicable hereunder; or if at that time there is no such
privilege of prepayment (e.g., during the Closed Period), then, to
the extent permitted by law, such prepayment charge shall be calculated
in the same manner as specified above.
Upon breach of any promise made or condition set forth in this
Note or in any of the other Loan Documents, including, without
limitation, a failure to make any payment of any installment of interest
and/or principal as and when the same becomes due and payable (whether
by extension, acceleration, or otherwise), or upon the occurrence of
any other Event of Default, then and in any such event, Holder may,
at its option, declare this Note and the entire outstanding Principal
Indebtedness to be immediately due and payable and collectible then
or thereafter as Holder may elect, regardless of the stated Maturity
Date.
Should the Principal Indebtedness or any part thereof be collected
at law or in equity, or in bankruptcy, receivership, or any other
court proceeding (whether at the trial or appellate level), or should
this Note be placed in the hands of attorneys for collection upon
default, Maker agrees to pay, in addition to the principal, prepayment
charge, interest and any other outstanding amounts due and payable
hereon, and if and to the extent provided by law, all costs of
collecting or attempting to collect this Note and enforcing Holder's
remedies under the Loan Documents, including reasonable attorneys'
fees and expenses, and the same shall constitute additional indebtedness
secured by the Loan Documents.
Maker recognizes that any default in the payment of any installment
of principal and/or interest due hereunder on the date the same is
due will result in loss and additional expense to Holder in servicing
the Principal Indebtedness, handling such delinquent payments and
meeting its other financial obligations, and that the extent of such
loss and additional expenses is extremely difficult and impractical
to ascertain. Maker therefore agrees that in the event any installment
of principal and/or interest due hereunder is not paid on the date
the same is due and payable, without regard to any grace periods, a
late charge of four percent (4%) of the overdue installment of principal
and/or interest shall be paid by Maker and that such amount is a
reasonable estimate of such loss and expense and may be charged by
Holder, at its option, for the purpose of defraying such loss and
expense, unless applicable law requires a lesser such charge, in which
event the maximum rate permitted by such law may be charged by Holder
for said purposes.
The failure of Holder to exercise the option for acceleration
of maturity, foreclosure or any other remedies provided herein or in
the Loan Documents following any default as aforesaid or to exercise
any other option granted to it hereunder, under the Mortgage or under
any of the other Loan Documents, in any one or more instances, or the
acceptance by Holder of partial payments or partial performance, shall
not constitute a waiver of any such default, but such option shall
remain continuously in force. Acceleration of maturity, once claimed
hereunder by Holder, may at its option be rescinded by written
acknowledgement to such effect, but the tender and acceptance of partial
payment or partial performance alone shall not in any way affect or
rescind such acceleration of maturity.
Maker hereby covenants and agrees that, together with and in
addition to the monthly payments of principal and/or interest payable
under the terms of this Note, Maker will deposit with Holder of this
Note or its agent, as directed by Holder, until this Note is fully
paid, installments of insurance premiums and Impositions (as defined
and required in the Mortgage). Amounts held hereunder shall not be
deemed to be trust funds, but may be commingled with the general funds
of Holder, and no interest shall be payable to Maker on such amounts.
It is the intention of Maker and Holder to conform strictly to
the usury laws now or hereafter in force in the State of Ohio, and
any interest payable under this Note, the Mortgage, the other Loan
Documents, and/or any of the other documents or instruments executed
by Maker in connection with the loan made or to be made hereunder shall
be subject to reduction to the amount not in excess of the maximum
non-usurious amount allowed under the usury laws of the State of Ohio
as now or hereafter construed by the courts having jurisdiction over
such matters. If the aggregate of all interest (whether designated
as interest, service charges, points or otherwise) contracted for,
chargeable or receivable under this Note, the Mortgage and any other
Loan Document should exceed the maximum legal rate, it shall be deemed
a mistake and such excess shall be canceled automatically and, if
theretofore paid, shall at the option of Holder either be rebated to
Maker or credited on the outstanding principal amount of this Note,
or, if the Note has been repaid, such excess shall be rebated to Maker.
In the event the Maturity Date is accelerated by reason of any provision
of this Note or by reason of an election by Holder resulting from an
Event of Default under the Loan Documents, voluntary prepayment by
Maker, or otherwise, then earned interest may never include more than
the maximum amount permitted by law, computed from the dates of each
advance of loan proceeds hereunder until payment, and any interest
in excess of the maximum amount permitted by law shall be canceled
automatically and, if theretofore paid, shall at the option of Holder
either be rebated to Maker or credited on the outstanding principal
amount of this Note or, if the Note has been repaid, the excess shall
be rebated to the Maker. This provision shall control every other
provision of all agreements between Maker and Holder.
Maker hereby waives presentment, protest, notice of protest, notice
of dishonor and diligence in collection, and any and all other notices
and matters of a like nature, except for those expressly required by
the Mortgage or this Note. Maker consents to any extension of time
(whether one or more) of payment hereof, release of all or any part
of the security for the payment of this obligation or release of any
person or entity liable for payment of this Note. Any such extension
or release may be made without notice to any such party and without
discharging said party's liability hereunder.
This Note may not be changed orally, but only by an agreement
in writing, signed by the party against whom enforcement of any waiver,
change, modification or discharge is sought.
Maker agrees hereby to waive and renounce any and all homestead
exemption rights against any or all of the debt evidenced hereby or
any renewal or extension thereof.
No failure or delay on the part of Holder in exercising any right,
power or privilege under this Note and no course of dealing between
Maker and Holder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein expressly
provided are cumulative and not exclusive of any rights or remedies
which Holder would otherwise have at law or equity. No notice to or
demand on Maker in any case shall entitle Maker to any other or further
notice or demand in similar or other circumstances or constitute a
waiver of the right of Holder to any other or further action in any
circumstances without notice or demand.
Whenever in this Note one of the parties hereto is named or
referred to, the heirs, legal representatives, successors and assigns
of such party shall be included and all covenants and agreements
contained in this Note by or on behalf of Maker or by or on behalf
of Holder shall bind and inure to the benefit of such party's heirs,
legal representatives, successors and assigns, whether so expressed
or not.
If Maker consists of two (2) or more persons, entities, or persons
and entities, the obligations of each such person and entity comprising
Maker shall be joint and several.
The unenforceability or invalidity of any provision or provisions
of this Note as to any persons or entities or circumstances shall not
render that provision or those provisions unenforceable or invalid
as to any other persons or entities or circumstances, and all provisions
hereof, in all other respects, shall remain valid and enforceable.
Maker acknowledges that the ownership (and the continuation
thereof) of the Secured Property by Maker is of a material nature to
the loan and the making of the loan evidenced by this Note. Therefore,
Maker agrees that in the event of any transfer of all or any part of
the Secured Property or of any interest of a general partner of Maker
that is prohibited by the terms of the Mortgage or any other Loan
Document, howsoever evidenced or occasioned, then, at the option of
Holder, the entire outstanding Principal Indebtedness along with all
accrued interest thereon shall immediately become due and payable.
This Note amends and restates in its entirety, and represents
the unpaid principal balance of the indebtedness evidenced by, the
Prior Note (as hereinafter defined). As used in this Note, the term
"Prior Note" shall mean that certain Promissory Note dated April 14,
1978 made by National City Center Joint Venture (predecessor in interest
to Maker) and payable to the order of National City Bank in the original
principal amount of $50,000,000.00, said Promissory Note having been
assigned to and endorsed in favor of Holder, as subsequently amended
and restated in connection with the advance of additional sums by Holder
to Maker by that certain Mortgage Note, dated November 15, 1983, made
by Maker and payable to the order of Holder in the original principal
sum of $64,258,243.00. All of the liens and security interests created
by the Mortgage and the Assignment of Lessor's Interest in Leases as
described in the Prior Note hereby are renewed, amended and extended
to secure payment of the indebtedness evidenced by this Note. The
execution and delivery of this Note and the Loan Documents is not
intended to and shall not be construed (i) to deem to have repaid or
otherwise discharged any amount of principal of or interest on the
Prior Note, (ii) to effect a novation of or otherwise release the
obligations of Maker under or extinguish the debt evidenced by the
Prior Note, or (iii) to release, cancel, terminate or otherwise impair
the status or priority of all or any part of any lien or security
interest granted to Holder as collateral security for the obligations
of Maker under or in connection with the Prior Note.
In the event of any default by Maker under this Note, the Mortgage
or any other Loan Document, Holder shall have all rights reserved in
this Note, the Mortgage and every other Loan Document and shall have
full recourse to the Secured Property and to the other collateral given
by Maker to secure this Note, provided, however, that any judgment
obtained by Holder in any proceeding to enforce such rights shall be
enforced only against the Secured Property and such other collateral.
Notwithstanding the foregoing, Holder shall not in any way be prohibited
from naming Maker or any of its successors or assigns or any person
holding under or through them as parties to any actions, suits or other
proceedings initiated by Holder to enforce such rights or to foreclose
its mortgage lien or otherwise realize upon any other lien or security
interest created in any other collateral given to secure the payment
of this Note. In addition, the foregoing restriction shall not apply
to, and Maker shall be personally liable for, any losses, damages,
costs and expenses incurred by Holder as a result of (i) any material
misrepresentation (A) by Maker or any person or entity constituting
Maker to induce Holder to advance the principal amount evidenced hereby
or (B) contained in any Loan Document, (ii) fraud committed by Maker
or any person or entity constituting Maker, (iii) application of any
insurance proceeds, condemnation awards, trust funds, or Rents (as
defined in the Mortgage) in a manner which is not in accordance with
the provisions of the Mortgage, (iv) breach of any representation or
warranty contained in subsections 2.03B or C of the Mortgage, (v)
default with respect to any covenant contained in subsection 1.05F
of the Mortgage, (vi) any default with respect to Maker's obligations
to pay Impositions pursuant to Section 1.02 of the Mortgage or to pay
insurance premiums pursuant to Section 1.03 of the Mortgage (provided,
however, that this clause (vi) shall not apply to make such obligations
recourse as to Maker in the event that Maker's default in the payment
of such sums shall result directly from the unavailability of rents,
income or profits from the Secured Property, so long as Maker shall
comply with the requirements set forth in the Mortgage, including
without limitation those contained at Section 1.08E, pertaining to
the use and application of rents, income and profits from the Secured
Property), or (vii) any liability or obligation of Maker pursuant to
the Environmental Indemnity Agreement dated the date hereof from Maker
to Holder.
Notwithstanding the foregoing or any provision to the contrary
in any other Loan Document, no present or future constituent partner
in or agent of Carlyle XI or Carlyle XII, nor any shareholder, partner,
officer, director, employee, trustee, beneficiary or agent of any
corporation, partnership or trust that is or becomes a constituent
partner in Carlyle XI or Carlyle XII, shall be personally liable,
directly or indirectly, under or in connection with any Loan Document,
or any instrument or certificate securing or otherwise executed in
connection with any Loan Document, or any amendments or modifications
to any of the foregoing made at any time or times, heretofore or
hereafter, and Holder hereby waives any such personal liability. For
the purposes of the Loan Documents and such instruments and
certificates, and any such amendments or modifications, neither the
negative capital account of any constituent partner in Carlyle XI or
Carlyle XII nor any obligation of any such partner to restore a negative
capital account or to contribute capital to Carlyle XI or Carlyle XII
or to any other constituent partner therein shall at any time be deemed
to be the property or asset of Carlyle XI, Carlyle XII or any such
other constituent partner, and Holder shall have no right to collect,
enforce or proceed against or with respect to any such negative capital
account or partner's obligation to restore or contribute.
Whenever used, the words "Maker" and "Holder" shall be deemed
to include the respective heirs, successors, assigns and legal
representatives of Maker and Holder.
This Note is to be construed and enforced according to and governed
by the laws of the State of Ohio.
IN WITNESS WHEREOF, Maker has executed this Note on the date first
above written.
"MAKER"
CARLYLE/NATIONAL CITY ASSOCIATES,
an Illinois general partnership
By: Carlyle Real Estate Limited
Partnership-XI, an Illinois
limited partnership, General
Partner
By: JMB Realty Corporation,
a Delaware corporation,
Corporate General Partner
By: ____________________
Name:_______________
Title:______________
Attest: ________________
Name:___________
Title:__________
And: Carlyle Real Estate Limited
Partnership-XII, an Illinois
limited partnership, General
Partner
By: JMB Realty Corporation,
a Delaware corporation,
Corporate General Partner
By: ___________________
Name:______________
Title:_____________
Attest: _______________
Name:__________
Title:_________
